Michael Bruce steps down as chief executive after firm admits it grew in US too quickly

This article is more than 1 year old

This article is more than 1 year old

Purplebricks has ousted its chief executive and said it would pull out of Australia and scale back its US business after the online estate agency admitted it had expanded too quickly.

It is understood Michael Bruce, who founded the company in 2012 with his brother Kenny, stepped down after the non-executive chair, Paul Pindar, decided to take action following what he described on Tuesday as a “disappointing” 12 months.

Bruce, who owns 11% of Purplebricks, has been replaced by the chief operating officer, Vic Darvey. Darvey joined the firm in January from MoneySuperMarket, where he was managing director. Bruce will receive his annual salary of £150,000 but will not get a bonus, as disclosed in the latest accounts.

Shares in the company, which does not have any branches, fell 7% after Pindar apologised to shareholders in a trading update for its poor performance and conceded it had made a number of mistakes including over expansion abroad.

Pindar said: “With hindsight, our rate of geographic expansion was too rapid and as a result the quality of execution has suffered. We have also made sub-optimal decisions in allocating capital. We will learn from these errors and will not make them again.”

The company said it would close its Australian division after the market had become tougher. It also admitted to making “some execution errors” in the two-and-a-half years it had been operating in the country.

Purplebricks is also carrying out a strategic review of its business in the US, which it is scaling back operations and cutting spending on marketing.

The company said that although conditions were “challenging” in the UK, it was outperforming the wider market and saw plenty of opportunity for profitable growth.

Purplebricks slashed its revenue forecast in February and announced the sudden departure of its UK and US heads. It stuck to this revised estimate on Tuesday, predicting full-year revenues of between £130m and £140m.

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Shares were worth 100p when the firm floated on London’s junior Aim market in December 2015, and peaked at nearly 500p in July 2017. Since then the shares have slumped about 75% to trade at 126p on Tuesday.

The share price decline has dealt a blow to Woodford Investment Management, led by the well-known City investor Neil Woodford. It is the largest shareholder in the company, with a 28% stake.

Purplebricks, which does not have any branches, charges sellers an upfront fee for advertising their property online and arranging viewings, while traditional estate agents charge after a home is sold.