Purplebricks secures £125m investment, but investors remain cautious

Purplebricks has revealed a £125m investment by European publisher Axel Springer as part of a “major strategic advance”, but investors remain cautious about the online estate agent’s foundations.

Its shares fell 10% yesterday to close at 280p last night despite the announcement, and have now lost more than 40% of their value in the last eight weeks.

The weaknesses is being driven by concerns about the robustness of its growth. Yesterday the company was forced to admit that sales in the year to April are expected to be 5% lower than its previous forecast of £98m.

The Solihull-based group said market conditions in the UK during the period have been subdued due to some “underlying macro issues and exacerbated by the recent periods of poor weather” which have resulted in a slower than expected start to the key spring market.

However it will still end its financial year with a year-on-year increase in revenue of around 100%, helped by expansion into Australia and the United States.

Axel Springer’s investment includes a £100m subscription for new shares and gives the publisher an 11.5% stake in the business.

Purplebricks said it will use the investment to accelerate its roll-out in the US, to enter new geographic markets and fund technological innovation and the expansion of its service offering.

Michael Bruce, chief executive of Purplebricks, said: “It is fitting that on the cusp of our four year anniversary we continue to push boundaries and challenge conventional thinking. The strategic partnership with Axel Springer is ground breaking and will propel Purplebricks further towards our strategic goals and global ambition.

“The funds raised will be used to put even more clear blue water between us and our competitors in terms of customer service and bring the Purplebricks offering to new territories.”