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Agencies & People

UBS downgrades Purplebricks amid worries over Oz operation and mounting losses

Investment bank also reckons the hybrid agency will have to ask investors for another £100m to cover losses at Oz and US businesses.

Nigel Lewis

purplebricks

Leading investment bank UBS has predicted that the hybrid estate agency’s shares will soon hit £1 each, the price at which it floated in December 2015, and that the company will have to borrow another £100m ‘soon’ to fund its mounting group losses.

UBS has based its prediction largely on the worsening position for Purplebricks in Australia, which the investment bank claims will not break even until 2022, three years later than expected, while its US operation is not likely to break even until 2025.

The investment bank says it expects Purplebricks’ Oz operation to generate revenues of £26 million next year on which it will make a loss of £12 million, while the company’s US operation could lose £53 million.

Losses

The investment update released by UBS analysts says: “Operations in Australia and the US are characterised by having very limited visibility on the businesses’ development and break-even horizon – Australia keeps being postponed and losses in the US are expected to worsen”.

Referring to Purplebricks’ recent decision to alter its up-front model to a more traditional post-sale fee one, the analysts say the move “raised concerns about the future of online agents and the upfront fee model”.

UBS is also concerned that parts of both Australia’s and the UK’s housing market are experiencing tough conditions at the moment, claiming that Purplebricks’ operation has lost momentum and that its market share grab has slowed.

Purplebricks share price has been tumbling over the past 12 months. In May last year its shares were trading at £3.54p but are now exchanging hands at £1.33p.

May 2, 2019

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