Online estate agents Purplebricks suffered losses of £20million after a difficult six-month period which saw it lose market share and become aware of potential liability in its lettings business caused by glitches dating back to 2012.
The property group is trying to turn around the business after its early successes as a tech disruptor proved to be built on shaky foundations.
Purplebricks shares have lost 95% of their value in the past five years and the business that was once worth over £1bn is now valued at just £60m.
His struggles continued through the half to October, although general manager Vic Darvey believes Purplebricks’ performance will improve soon.
He said: “The first half has undoubtedly been a difficult one, with the implementation of a major change to our operating model coinciding with the UK property market seeing a substantial drop in new instructions.
“This momentum has led to a disappointing financial performance, but we are confident that we now have the right levers in place to drive a stronger financial performance going forward.”
Losses for the six months to October amounted to £20.2million. A small operating loss was exacerbated by a £3.6m provision relating to potential claims arising from process issues within its leasing business, a £2.7m impairment of goodwill and a £7.3 million charge related to the derecognition of deferred tax assets.
Revenue for the Solihull-based group fell 7% to £41.3m – although it benefited from revenue made in the previous period – with instructions falling 38% and its market share falling a fifth, at 3.9%.
Purplebricks also faces potentially significant future liability of up to £30m after a problem was recently discovered in its rental business.
It had failed to properly provide legally required documentation to tenants explaining that their deposits had been placed in the National Safeguards Scheme.
If you don’t do this within 30 days of making a deposit, tenants could claim up to three times the value of what they put down on their new home. They can do this up to six years after payment of the deposit.
Darvey said: “Our rental business, although relatively small, has significant potential. We were disappointed with the process issues that we became aware of in our rental business in December.
“These are being fixed and a thorough review of the rental business has been completed in regards to our processes and procedures.”