Purplebricks reveals cost of lettings error and slams...

Purplebricks has given its interpretation of how much its lettings sector compliance crisis has cost the company.

Back in December the Daily Telegraph broke the news that Purplebricks had - for an unspecified period of time - failed to properly serve legally-required documents to tenants explaining their deposits had been put into a national protection scheme.

At the same time its then-head of lettings quit with immediate effect. Purplebricks put the financial liability of the error at between £3m and £9m but the Telegraph has said it could be up to £30m.

This morning, in a delayed release of its full-year figures, the agency has given only scant details of the problems and has still not revealed the number of tenancies affected, nor for how long.

Instead it says: “We were disappointed to discover a process issue in our lettings business in December 2021 relating to how we had been communicating with tenants on behalf of landlords about deposit registrations and prescribed information. We acted quickly to assess the extent of any potential claims and made a provision of £3.6m accordingly. We are satisfied that this amount remains appropriate.

“The Board recognised that it was also important to learn from the issue and therefore sought independent third-party assurance in relation to the end-to-end process and controls in the lettings business.

“We have made significant changes in line with recommendations arising from this work, including the introduction of new processes and controls, and retraining our people. We believe that our structure now supports the delivery of our strategic goals whilst providing a better customer experience.

“We have now employed our lettings field team, which enables us to have more control over the customer experience, compliance and capability of our people. I am confident that we will soon have the platform to establish Purplebricks as the lettings agent of choice.”

The overall results package makes dire reading for Purplebricks shareholders at a time when most agencies, including online rivals, are enjoying the end of a lengthy bull market.

Instead Purplebricks has this morning reported revenues down to £70m from £90m in 2021, gross profit down 27 per cent from £57.7m to £42.1m, and the overall loss from total operations hitting £42m.

This contrasts with a profit of £6.8m in 2021.

Total fee income was £63m, down 28 per cent on 2021 and instruction level was 40,141 units, down 31 per cent from 2021.

Average revenue per instruction remained almost static at £1,568, compared to £1,501 in the previous year.

Cash balance stand at £43.2m, down from £74m in 2021.

The new chief executive - Helena Marston, whose appointment was delayed because of background checks on her ‘appropriateness’ for the post, pins much of the blame on marketing.

The full results include this statement from the company: “Although the budget for marketing grew significantly last year, its effectiveness was poor. We moved away from shouting about our low fixed fee and launched the ‘SOLD’ national advertising campaign. We missed the opportunity of communicating our key differentiator in a market that was seeing significant rises in house prices, and where our model could have saved consumers thousands in commission.

“Our approach to marketing will be radically different this year, a change designed to deliver better results. We need to make our marketing investments work harder than ever before to reposition us as the preferred choice for our customers. We will go back to shouting about what makes us great and reminding customers that there is a better, more cost-effective way to sell their homes.

“We will remind them that the ‘cut price’ doesn’t mean a sub-optimal service, but rather the opposite. We will set clear expectations on what it looks like and feels like to be a Purplebricks customer, whether that's online, offline, or on the app, and create a consistent experience that customers want to shout about.”