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Agencies & People

Shock announcement as Purplebricks CEO steps down and agency withdraws from Oz

Michael Bruce is to be replaced by COO Vic Darvey who is also considering the future of its US operation, it has been announced.

Nigel Lewis

Purplebricks has revealed this morning that founder Michael Bruce (above) is to leave the business and that it is to close down the company’s struggling Australian operation and consider leaving the US market too.

The news effectively ends the company’s bid to become a global hybrid estate agency.

The shock announcement follows pressure from City investors including fund manager Neil Woodford to turn around the hybrid estate agency after its most recent full-year results revealed rising losses at its US and Australian operations.

Michael Bruce is to step down as CEO with immediate effect and is to be replaced by the company’s 45-year-old Chief Operating Officer Vic Darvey, who joined the company in January from comparison website MoneySupermarket.

The writing has been on the wall for Bruce and its overseas operations since non-exec chairman Paul Pindar (below) was forced to apologise for the company’s performance recently.

Paul Pindar image“With hindsight, our rate of geographic expansion was too rapid and as a result the quality of execution has suffered,” he said.

Purplebricks, which also counts German publisher Axel Springer as a shareholder, has seen its stock slumping more than 64 percent recently and nearly 9 percent so far this year.

Despite the extraordinary news this morning, Purplebricks has revealed that it is sticking to its revenue forecast of £130 to £140 million for its 2019/20 year’s trading.

The news will be a bombshell for its 600 or more local property experts in Australia and the US, many of whom had left roles at traditional estate agencies to join Purplebricks.

May 7, 2019

One comment

  1. No online agent will make a penny profit in 2019, and with 5 large online agents closing or being forced to close since last September, it is likely that those brave online agencies still burning sometimes as much as £1m a month, may well decide enough is enough.

    The fundamental flaw is that estate agency like all business is certainly becoming high tech, but the cost base of a sale is still on average £2,500 to break even, and listing property on portals is not the same as having a sales team selling them.

    So, under-charging clients, relying heavily on tech, and deciding not to have a sales force to ‘sell’ property is always going to result in loss, lack of engagement with the clients and buyers, and an unsustainable business model, always looking for another round of cash from shareholders.

    It costs only 160k to cold start a single traditional estate agent, typically producing 95K revenue in year one, breaking even at the end of year two, (so all seed capital returned) and then making profit year three, and 20 to 28% profit by year 4 onwards. Just think of the tens of millions pumped into Purplebricks, and others, it could have set up a national chain of 120 branches, with the money it has used as cashflow. Many of them would have paid their investment back and actually be paying dividends to shareholders.

    Maybe that is why 96% of estate agents are not purely online. Thoughts?

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