Purplebricks Quietly Writes Off Exp…
Hidden among the annual results released by Purplebricks on Tuesday – which saw revenue and profit decline, as well as a scathing assessment from current CEO Helena Marston on the current state of the brand – was a full write-down of its investment of £9.2m in Homeday, a German hybrid agency.
Less well-known than its other (ultimately ill-fated) expansions in Canada, the United States and Australia, the German expansion was announced in October 2018.
At the time, Sky News reported that Purplebricks would enter into a 50-50 partnership with German media giant Axel Springer – the company’s majority shareholder – to form NewCo, a joint venture.
As reported in EAT in October 2018, NewCo spent €25 million to buy a 26% stake in Homeday, a German digital real estate agency that at the time held 50% of the German online real estate market.
Since, Purplebricks has invested more money in its Berlin counterpartwhich followed a similar model of low fees and local property experts that was a hallmark of Purplebricks until recently.
But now he has decided to withdraw from the German operation. In the latest set of annual results, which included a detailed 34-page report on the current state of the business, a section was devoted to investing in Homeday.
“During the year, the Group recognized gains on the reduction of our stake of £1.0m, related to our joint venture partner’s additional investments in Homeday which we chose not to match. These gains partially offset our share of Homeday’s losses for FY22 of £3.3m. Overall, our partner’s share of loss was £2.3m (fiscal year 21: £1.0m, representing a loss share of £3.0m offset by tapering gains of £2.0m),” he said.
“The Group’s investment in Homeday was fully written down as of 30 April 2022, resulting in a charge of £9.2 million at Group level. This reflects continued losses following a significant downturn in the property market German Residential, higher than forecast earlier in FY22, and a reassessment of the discount rate applied to Homeday’s projected future cash flows in line with a more challenging macro outlook. “
He added: “No further investments in Homeday were made during the year and no further investments are currently planned.”
Since its creation in 2012, Purplebricks has not hesitated to expand its operations abroad. It was something that the founding brothers of Bruce held particularly dear. But the businesses didn’t go particularly well.
Purplebricks launched its hybrid business model in Los Angeles in September 2017 and celebrated its first anniversary when entering the Florida real estate market. But less than a year later, it had exited the US market altogether after its losses nearly doubled and he admitted he had spread too quickly.
Following the acquisition of local hybrid agency DuProprio in July 2018 for £29.3m, Purplebricks launched in Canada in January 2019, but with directly employed agents – who at the time were not the MO of the company. However, in July 2020 UK group Purplebricks sold its Canadian business for around £35m, in a bid to bolster UK business. In January of this year, the Purplebricks Canada name disappeared completely, rebranding as FairSquare Group Realty. The Purplebricks name, logo and color scheme have all been removed.
In September 2016, Purplebricks launched Down Under with a fixed price offer of $4,500 in Melbourne and Brisbane. It quickly spread to other Australian states. However, in May 2019 it was announced – the same day it was revealed that Michael Bruce would be leaving the company – that Purplebricks’ Australian operations would close permanently. The company again admitted that its rate of geographic expansion was too fast. It was later described by an Australian housing expert as “cheap and unpleasant”.
It’s not yet known if Purplebricks has pulled out of the Axel Springer joint venture entirely, but all signs point to the German expansion being the latest to be dropped for the struggling brand.