Purplebricks has reported a potential risk of litigation to its shareholders.
In its new annual report, listing principal risks and uncertainties, it says: “The group has experienced significant change in leadership, structure and geographical footprint over the course of the last calendar year.
“As a result the group faces an increased risk of loss of talent, knowledge and experience, and also potentially litigation.”
In the last few months would-be estate agency disruptor Purplebricks has experienced considerable disruption itself, including the departures of founders Michael and Kenny Bruce, and the decision to pull out of Australia and the US.
There has also been the sale of the Bruce family’s shares in Purplebricks to Axel Springer, giving it a 26.6% holding in Purplebricks.
However, the bulk of the annual report, which covers the 12 months to the end of this April although it also references events since, sounds an upbeat note.
There is still “considerable headroom to further disrupt the traditional real estate agency markets in both the UK and Canada,” Purplebricks chairman Paul Pindar writes.
He says that exiting the US and Australian markets will “significantly reduce cash burn”.
Pindar says that Purplebricks’ focus will now be on “our profitable UK business” and its Canadian operation.
New chief executive Vic Darvey says that Purplebricks has a “strong and differentiated business model that is hard to replicate”.
He also describes it as having a “stand-out culture” with a focus on people, not just property.
He adds: “We anticipate that the hybrid model will continue to displace traditional agents.”
Darvey goes on: “There is a huge focus on continuing to take share from incumbent traditional operators and extend our market leadership.
“However, there is also a recognition that we need to do things differently, none more so than in product and technology.
“We will be moving to more agile ways of working, instilling strong product principles and an enduring product vision that lays strong foundations for a data-enabled and digitally-enhanced estate agent of the future.”
The annual report confirms the cost to Purplebricks of its failed attempts to enter the US and Australian markets.
Group operating losses rose from £27.8m to £52.3m in the last financial year “arising entirely from non-UK operations,” says chief financial officer James Davies.
In Australia last year, there was an operating loss of £18.8m, and in the US, a loss of £34.1m.
There will be further losses to come: Davies expects total losses and closure costs to be between £6m and £8m in the 2020 financial year in Australia, and between £4m and £6m in the US.
The annual report also confirms the breakdown of the main investors.
Axel Springer has a 26.57% stake; Woodford Investment Management has 19.26%; Merian Global Investors (formerly Old Mutual Global Investors) has 16.6%; Toscafund Asset Management has 10.43%; and Paul Pindar and his wife have 3.53%.
The report also reveals that James Davies was the highest paid director in the 12 months to the end of April, earning a total of £688,000.
Michael Bruce earned £273,000. His termination payments will be disclosed in financial statements for the year ending April 30, 2020.
There will be no dividend for shareholders.
The AGM is on October 3.