Woodford-backed Purplebricks sees shares slide on £8.2m loss

Its shares slipped over 7% to £3.66 per share on Wednesday morning, as markets digested news of the low-cost estate agent’s loss.

However Purplebricks’ shares have taken off over the last 12 months, more than doubling from £1.47 last December to their current price of £3.70. The company first listed on the London’s Alternative Investment Market (AIM) in December 2015 for £0.95 per share. A year later 2016, its share price was up 47%.

Purplebricks is an online only estate agent that connects prospective buyers with local agents or “experts” via its “hybrid” business model. Boasting no physical branches, it has posed an increasing threat to traditional high street estate agents.

According to its latest set of figures, the firm has grown its online market share to 74%. It has also continued to grow its arsenal of property experts, which rose 107% to 650 in the UK.

Purplebricks is one of the many small firms that heavyweight manager Woodford owns a majority stake in. At 17 November 2017, he owned 28.31% of the firm, according to figures from the Financial Times.

The stock is the third largest holding in his Patient Capital Trust and features in the top 10 of his flagship equity income fund, which has suffered redemptions from several major fund groups over the last several months.

Purplebricks’ half year loss is another setback for the star manager’s Patient Capital Trust, following on the heels of last month’s disappointing news for its largest holding Prothena.

Despite Wednesday’s setback, CEO Michael Bruce declared the group had “a great first half with strong trading, significant strategic progress and substantial operational upgrades”.

He said: “The UK business continues its rapid top line growth, which is driving a strong increase in profits and margin expansion. We continue to win UK market share from traditional operators in what is a challenging market and consolidate our leading position with competing digital and hybrid offerings.”

Whilst it has been an extremely challenging period for the industry as a whole with increased competition, the impact of technology, stamp duty changes and wider macro-economic pressures, Purplebricks has been able to outperform its peers, delivering rapid growth and market share gains.

In particular, Bruce singled out the UK business for continuing to deliver “rapid top line growth” that is driving “a strong increase in profits and margin expansion”.

In the UK, revenue was up 118% to £39.9m for the first six months to 31 October 2017, making up the majority of the firm’s sales. Its total revenue has risen drastically year-on-year rising from £18.7m to £46.8m.

The UK was the only market in which Purplebricks operates not to report a loss over the period, instead posting an operating profit of £3.2m. Its US branch posted the biggest loss of its three regional businesses, which also includes Australia, ending the six months down £6.3m.