Purplebricks shares crash as it issues profit warning

Shares in online estate agent Purplebricks crashed more than 30 per cent on Thursday morning as the company issued a profit warning after a ‘challenging’ period.

The company said strong demand across the housing market had outstripped demand. It now expects to instruct on 22,000 property sales in the six months to 31 October, down nearly 40 per cent on the 35,387 it instructed on last year.

Demand for homes in the countryside and those with gardens has surged since the start of the pandemic. Purplebricks said the continued imbalance in the market is expected to continue into the second half of the financial year.

Demand for homes has outstripped supply during the pandemic, Purplebricks has said

Shares in the company plunged more than 34 per cent to 34.7p this morning and are down 66 per cent in the year to date.

‘Following a stronger period for instructions last year, supply in the market has fallen as we slowly adjust to a below normal level of activity following a period of successive lockdowns and the end of the stamp duty holiday,’ said chief executive Vic Darvey.

‘Our service proposition remains strong and compelling, with properties selling quickly, but the reduced amount of stock coming to the market is proving challenging.’

This year Purplebricks said its agents, which have historically been self-employed, would be moved to full-time contracts.

As a result of these costs alongside fewer instructions, Purplebricks said it expected profits to be lower.

Despite the transition to a different employment model, Purplebricks is facing legal action from Contractors for Justice, who are seeking compensation for former employees who they claim are owed holiday pay and other entitlements.

C4J say their clients could be owed thousands of pounds each, having been disadvantaged by companies engaging them on a self-employed basis ‘despite… directing them day to day as actual employees would be’.

According to C4J, Purplebricks has 600 Local Property Experts, with a rate of churn estimated to be 50 per cent per annum.

‘This could mean that since its launch in 2014 some 2700 ‘LPE’s have worked with that particular organisation plus many more [territory owners],’ C4J said.

‘Most will have previously been designated as self-employed and, based on C4J’s claim, are potentially in line for a pay-out of thousands of pounds each if the claim is successful.’ 

Purplebricks maintains that its contractor practices are legitimate.

Peter Fletcher, spokesperson for C4J today said: ‘Despite only being a matter of days from our initial announcement that we intend to pursue litigation against PurpleBricks, the response from former and current Local Property Experts and Territory Owners has been nothing short of phenomenal and to the extent that we have had to recruit more staff to deal with the inbound enquiries.’

‘The number of Purplebricks agents that have signed up with us now is well into the hundreds and we will be providing a more detailed update in the coming weeks at which point it will be clearer as to when the action itself will formally commence.’

This post first appeared on Dailymail.co.uk