MortgagesFeb 17 2023

Purplebricks considers sale as it ramps up mortgage arm

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Purplebricks considers sale as it ramps up mortgage arm
Today the company commenced an ‘offer period’, but said it is yet to have entered into any talks or have any bids [Ian Forsyth/Bloomberg]
ByRuby Hinchliffe

Online estate agent Purplebricks is considering a sale amid further cuts to the business in a bid to conserve investment in its mortgage business.

This morning (February 17), the company commenced an ‘offer period’, but said it is yet to have entered into any talks or have any bids.

The cuts, also announced this morning, are the result of Purplebricks’ turnaround plan - announced last year - which has cost the company more than it had initially anticipated.

The plan was introduced in an effort to diversify the company’s revenue streams after it recorded a £42mn loss in the year to April 30, 2022, compared to a £7mn profit the year before.

It included the launch of ‘Purplebricks Financial Services’, a new mortgage advice arm, which went live in November.

Up until October, Purplebricks had made annualised cost savings of £17mn.

But in an update today, the company said its implementation of the turnaround plan had “involved more disruption to the sales field than originally envisaged”.

So far, the plan has cost the company £1.2mn. As a result of this disruption, numbers for the business spanning November 2022 to January 2023 were lower than the board’s previous expectations. 

This has led the board to revise its expectations for full-year performance, including a loss of between £15mn and £20mn.

Previously, this loss was expected to fall somewhere between £8.8mn and £11.3mn.

On the sale, Purplebricks said its board recognised the potential of the group may be better realised under an alternative ownership structure.

This has prompted a strategic review of the group’s business, with the appointment of financial adviser Zeus.

The outcome of the strategic review, it said, may or may not result in a sale of the company or some or all of the group's business and assets.

Chief executive Helen Marston said: “We have undertaken a huge amount of work in the last nine months to improve our sales business, raise standards, establish Purplebricks Financial Services, and stabilise lettings, all of which means the company has never been in better shape for the future.  

“Yes, the actions we have taken have caused more short-term disruption to our Q3 performance than anticipated, but we remain confident in returning to positive cash generation in early FY24.  

“We recognise that our upside potential is not currently reflected in our market valuation, which is why the entire board has therefore concluded that a strategic review is now in the best interests of all shareholders.”

Shares in Purplebricks were down nearly 10 per cent today.

When Purplebricks launched its mortgage arm, the company said it had done so “five months ahead of plan”.