Troubles at Purplebricks continue with an activist investor who has a four per cent share in the firm called on the chairman to region.
The online agency appears in big trouble - its share price has fallen some 85 per cent since it first listed on the London Stock Exchange’s AIM market in 2015, there has been a series of profit warnings, its latest trading statement has been put off until August, and it is still smarting from having failed to follow lettings sector legislation to protect tenants’ deposits.
Now investor Adam Smith, on behalf of Lecram Holdings, has written to Purplebricks chairman Paul Pindar saying “urgent action is now essential to restore the credibility of the company with investors”.
Smith is a new investor - he got involved in Purplebricks in the spring - and if he succeeds in getting a five per cent stake he can request the board convene an extraordinary general meeting to discuss urgent matters.
His letter urges Pindar to step aside and be succeeded by a “replacement with necessary experience and skills to address urgently the company’s continuing cash burn and operating performance within the residential estate agency sector”.
Pindar, a former boss of Capita, has been in place at Purplebricks since 2015.
A Purplebricks spokesperson has told the media: “We sought to meet with Lecram Holdings to discuss their concerns. They declined. It’s disappointing that they chose to go to the media instead rather than engage with us.”
Easily the highest profile problem hitting Purplebricks in recent years has been its lettings division’s failure to safeguard tenant deposits
Back in January - some weeks after the lettings deposit mistake was first revealed - Purplebricks claimed it would cost the company some £3.6m to correct the compliance issues in its rentals division. However, some newspapers and industry commentators suggested it could cost considerably more.
The agency has never revealed how many tenants and landlords were affected by its failure to comply with the law requiring deposits to be placed in a government-backed scheme, nor how long tenancy deposits were held by the agency before they were eventually placed in an approved scheme.
In addition to the speculation over the cost of the deposits error - the Daily Telegraph suggested last year that the bill could be as high as £30m - there was speculation early this year that the whole rentals side of Purplebricks could be sold off. This was denied by the firm.
Then in March Purplebricks announced that its lettings division would follow the pattern of its sales side, and no longer have self-employed local agents in the field. Instead they would all be urged to become employed staff at the agency.
A statement from Purplebricks at the time claimed the move would impact about 30 agents. The firm then said: “The benefits of the new operating model in lettings are expected to mirror those in sales where the move has been well received, resulting in an improved customer experience and better support for the field team” says the company.
Tom Bailey, Purplebricks lettings director, said at that time: “Lettings remains a crucial part of our growth ambitions. Moving to an employed field model will give us a strong platform for our growth and investment ambitions and I am excited to lead the Purplebricks lettings team in the next phase of its growth.”
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Someone is investing in Purplebricks? Not 1st April is it?
Where are the prosecutions ? Are Purple Bricks inviolate ?
Disrupting agency, which averages around a 16% profit margin nationwide, by focusing on price was never going to work. So many disruptors- all taking the old tech approach of undercut and steal market share- to later pivot into profitability. This is the oldest pitch in the book and I'm staggered that investors still fall for it. If you win clients based on price- you will lose those clients the moment you have to address this. So many companies have boomed and busted following this methodology- with only early investors reaping the rewards.
The day a truly tech-first agency launches (with quality tech) at normal market rates Ill know this sector is becoming serious.
Kristjan
Ammazingly l agree with you, however it does seem to be suffering from the latest scam where the managers overpay themselves and eat the profits. Look at the supermarket directors salaries.
Kristjan - true you can only buy the market for a certain period. But the big paradigm shift in residential agency is going to be the digitally enfranchised public doing property themselves. And for those who think it will never happen do you realise that OpenRent this year will list over 250,000 tenancies, which dwarfs any lettings agency brand? When 'OpenSale' is a thing in the residential sales sector - it will be listing an even larger volume of inventory. This is the future. A future led by consumer desire, not by the wants or needs of the sales and lettings industry. Digital is not just shutting shops on the high street, it is a way of life, everything done through the prism of the screen on a smartphone.
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