It’s long been said that the US is a graveyard for the ambitions of UK companies, as retailers Marks & Spencer (MKS) and Tesco (TSCO) found to their cost historically, and online estate agent Purplebricks (PURP:AIM) follows that sorry tradition today as its nascent North American business contributes to a big revenue warning.
The shares are currently down 26.5% to 121.1p, paring earlier heavier losses. The company enjoyed a strong start to life as a public company after its 100p IPO in December 2015 but even before today the shares had come under significant pressure amid a less helpful property market backdrop.
The company expects revenue to come in at £130m to £140m for the 12 months to 30 April 2019, compared with guidance of £165m to $175m given at the half year stage in December.
Purplebricks cites a slower response to a US marketing campaign which concluded in January and plans to retrench to the Los Angeles and Florida markets. The Australian business is also struggling with the Canadian arm the one part of the group which is set to meet expectations.
In the UK, where revenue growth will be lower than expected, management at least expect to generate a double-digit margin for the full year.
WHAT IS PURPLEBRICKS DOING ABOUT THE PROBLEMS?
The company has responded to the disappointing performance with the respective heads of the US and UK businesses, Lee Wainwright and Eric Eckardt, leaving the business.
Chief operating officer Vic Darvey, recruited from Moneysupermarket.com (MONY) in January 2019, will take over the UK operation while group CEO Michael Bruce will assume control across the Atlantic.
Several of the brokers which follow the stock have put their recommendations and forecasts under review. Peel Hunt expects a loss of around £50m in the April 2019 financial year compared with the £41.8m it previously forecast.
Peel Hunt analyst Gavin Jago says: 'Given the tough trading backdrop in its key regions and the recent changes to customer propositions in the US and Australia, revenue visibility is low and the-near term growth outlook has weakened.'
Investec's David Amiras says: 'The UK remains the valuation lynchpin, in our view, though international territories with the exception of Canada are likely to be more heavily discounted by the market going forward.'
AJ Bell investment director Russ Mould adds: 'Purplebricks is a classic case of trying to do too much, too fast. Success in the UK gave management confidence they could take over the world. Alas, that has proved nothing more than a pipe dream.'
