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Purplebricks warns on profits but secures new investor

Turnover expected to be five per lower than expected, but Axel Springer is buying in
March 26, 2018

Shares in Purplebricks (PURP) suffered a double-digit fall after the hybrid estate agent warned that profits for the year to 30 April 2018 will be lower than expected. However, this has to be put into perspective - revenue for the year is still expected to be double the previous year.

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Trading at the beginning of 2018 was affected by bad weather that effectively delayed the start of the important spring market, and statistics for the wider market indicate that instructions in the first three weeks of March were down 17 per cent from a year earlier. Additional disruption followed a decision to take around 10 per cent of the salesforce, or local property experts, out of the field entirely in late February/early March to take part in a 10-day training initiative.

Consequently, revenue for the year to April will be around 5 per cent below company-compiled consensus of £98m. However, in the past 10 days Purplebricks has achieved record levels of instructions, with a monthly run rate of nearly 7,000. Trading in both the US and Australia is also on track to meet the company’s expectations for the full year.

Purplebricks has also secured a strategic investment from leading European real estate portal Axel Springer, whereby Axel will invest £125m through the purchase of new shares and shares from founding shareholders, giving it around 11.5 per cent of the issued share capital. The funds will be used to finance an accelerated rollout in the US (around £50m) and entry in new markets. Purplebricks is targeting the $70bn (£49bn) US market where some agents currently charge as much as 7 per cent commission.