Purplebricks falls as housing boom slows
PurPlebricks’ share price crumbled after the online estate agent warned it was running out of houses to sell.
Trading in the six months to the end of October had been ‘challenging’ for the group as the number of homes it had been instructed to sell ‘slowed significantly’ following a boom during the pandemic.
Estate agents cashed in during Covid-19 as a cut to stamp duty, low mortgage rates and demand for green space from urban dwellers working from home sparked an explosion in the market.
However, the buying frenzy has eaten into housing stock, which coupled with the end of the stamp duty holiday and the prospect of interest rate rises has left sellers more hesitant about putting up ‘For Sale’ signs.
The boom has also caused prices to skyrocket, pushing the average cost for a home in the UK above £250,000 for the first time last month, pricing out more first-time buyers. As a result of the lack of supply, Purplebricks expected to conduct 22,000 property sales in the period, a 38pc decline year-onyear. The shortfall was also expected to continue into 2022, with the company’s full-year profits now predicted to be below previous expectations.
‘Our service proposition remains strong and compelling, with properties selling quickly, but the reduced amount of stock coming to the market is proving challenging’, said Purplebricks chief executive Vic Darvey.
Analysts at Peel Hunt were also downbeat, saying the company’s performance was ‘weaker than expected’ and as a result, they predicted Purplebricks would deliver a full-year loss of £2.5m versus previous predictions of a £12m profit. The shares plunged 37.3pc, or 19.6p, to 33p following the update.
The FTse 100 added 0.4pc, or 31.02 points, to 7279.91 while the FTse 250 climbed 1.5pc, or 354.14 points, to 23,471.11.
A decision by the Bank of England to keep its interest rate at 0.1pc appeared to soothe the market’s nerves over imminent rate rises, however, it was bad news for banking stocks as the ultra-low rates will continue to eat into their profit margins.
lloyds fell 4.5pc, or 2.25p, at 48.25p while Natwest dropped 5.6pc, or 12.6p, to 212.3p, barclays fell 4pc, or 8.02p, to 191.5p and Hsbc sank 2.5pc, or 11p, to 433.5p.
Housebuilders, meanwhile, were boosted by the decision, with low interest rates likely to prop up demand for mortgages.
Blue-chip barratt Developments was up 1.9pc, or 12.6p, at 666.2p while Taylor Wimpey rose 2.2pc, or 3.4p to 156.3p and Persimmon added 1.8pc, or 47p, to 2712p.
superdry slipped 7.4pc, or 22p, to 275p as its wholesale business was hit by supply chain disruption. It said despatches were four to six weeks behind schedule, potentially presenting major problems ahead of the crucial Christmas trading season.
Investors were sweet on mid-cap ingredients maker Tate & lyle, which jumped 4.9pc, or 32p, to 681p following a strong set of halfyear results.
For the six months to the end of September, pre-tax profits climbed 20pc to £85m while revenues rose 19pc to £656m.
The figures were boosted by double-digit revenue growth in the company’s food & beverage division thanks to demand for healthier foods from consumers.
Medical tech firm smith & Nephew warned its full-year performance will be at the low end of guidance as its orthopaedics business was hit by supply constraints and Covid-19’s Delta variant.
In the three months to October 2, revenues from the division fell 0.7pc to £377m, but overall revenues across the firm rose 5.5pc to £939m thanks to growth in its sports medicine and wound management businesses. Shares climbed 2.6pc, or 33p to 1325.5p.