Purplebricks will wind up its Australian operations, undertake a review of its US business – and its co-founder and chief executive, Michael Bruce, has resigned, in what has been a decisive day for the agency.
Chief operating officer Vic Darvey will replace Mr Bruce (pictured, top) whose decision to step down was with immediate effect.
Non-executive chairman Paul Pinder told shareholders in London today that he was “very conscious that the group’s performance has been disappointing over the last 12 months”.
“With hindsight, our rate of geographic expansion was too rapid and as a result the quality of execution has suffered.
“We have also made suboptimal decisions in allocating capital,” Mr Pinder said. “We will learn from these errors and will not make them again”.
Purplebricks’ share price has plummeted by more than 70 per cent since 2017.
The company’s business models requires that vendors buy a ‘fixed-fee’ service package which covers agent cost related to, amongst other things, advertising and being available for inspections.
Purplebricks didn’t charge a fee upon the sale of a property – which gave it the opportunity to promote itself as a “low cost” and “no commission” alternative to traditional Australian real estate agents.
But in unsuccessful Purplebricks sales campaigns – its customers were vulnerable, as they had forked out more for the agency’s package, than they might have, if they were using a traditional ‘commission-based’ real estate sales method.
Last year in Australia, Purplebricks increased its “fixed-fee”, twice. In October, it charged $8800 per campaign. When it launched in September, 2016, the fixed-fee was $4500.
In the UK and Canada, Purplebricks maintains a market-leading position.
But in the US, where it has been struggling, the group intends to undertake a strategic review and cut investment in expenses, including marketing, to reduce expenditure to sustainable levels.
In Australia, the agency never gained a noteworthy market share, despite substantial advertising.
It also recorded continual losses and kept lowering its revenue forecasts. Last year, the AFR reported in this item about a secret competition amongst Purplebricks’ Australian staff to pressure its clients to accept lower asking prices.
Today, Purplebricks said the returns it could get from Australia were “not sufficient to justify continued investment”.
“Going forward, we have a very clear understanding of the levers available to us to achieve growth,” Mr Pinder said. “We have two outstanding businesses in the UK and Canada, both of which enjoy market-leading positions. We have also made significant progress in the US building a disruptive brand in the real estate market and our proposed strategic review will allow us to determine how we deliver the next phase of growth in a more effective and cost-efficient way.”