(Reuters) - Purplebricks’ founder and CEO Michael Bruce has quit after the pioneering online estate agent admitted it had chased international growth too quickly, saying it would now exit Australia and review its business in the United States.
Founded by Bruce in Britain in 2014, Purplebricks was one of the fastest growing UK companies due to its policy of not charging traditional moving fees, allowing it to aggressively challenge high-street estate agents.
The company apologized to shareholders on Tuesday for a disappointing performance which resulted in multiple profit warnings in 2018, admitting it had lowered its standards while chasing international expansion.
Bruce, who is the fourth largest shareholder in the company with an 11 percent stake according to Refinitiv Eikon data, will be replaced by chief operating officer Vic Darvey, a former Moneysupermarket.com executive.
“With hindsight, our rate of geographic expansion was too rapid and as a result the quality of execution has suffered,” Non-Executive Chairman Paul Pindar said.
Shares of the AIM-listed company, which is backed by fund manager Neil Woodford and German publisher Axel Springer, fell as much as 10.5 percent and were down 5.2 percent at 128.0 pence by 0900 GMT. The stock has plunged 64 percent in the last year.
Purplebricks entered the United States in 2017, confident of replicating its performance in Britain, where it challenged traditional operators such as Countrywide and Foxtons.
The company spent heavily on marketing in the U.S. but said on Tuesday it had materially cut that investment, as well as other overhead expenses in the country, to bring spending down to a sustainable level.
It is now reviewing whether it can run a “materially scaled back U.S. business” and will update the market in due course.
Purplebricks said market conditions in Australia had become increasingly challenging, while many Britons had been deterred from moving house due to the political gridlock sparked by the UK’s vote to leave the European Union.
“(Purplebricks) tried to expand a little bit too quickly, but clearly the market conditions in the UK and Australia have been less than favorable,” Markets.com analyst Neil Wilson said.
The Australia business made up 14 percent of the company’s revenue in 2018, while the U.S. accounted for 2 percent.
Purplebricks also expanded into continental Europe after forming a joint venture with Axel Springer in October to buy a stake in German online estate agent Homeday, tapping into a fast-growing market.
Additional writing by Kate Holton in London; editing by Gopakumar Warrier and Kirsten Donovan