Purplebricks has delayed publication of its results and warned shareholders that it could be forced to pay up to £9 million in compensation to tenants of its landlords.
The struggling online estate agency said that during an internal review it discovered a regulatory “process issue in how it has been communicating with tenants on behalf of its landlords in relation to deposit registrations”. It added that “further enquiries into this matter are currently being conducted and the communications process is now being corrected”.
The issue could cost Purplebricks between £2 million and £9 million, its early estimates suggest, and it has delayed its half-year results for the six months to October 31, which were due to published tomorrow, while it finalises the provision.
The latest problems sent shares in the company down by 21 per cent, or 6½p, to 25p on Aim, the London Stock Exchange’s junior market. The fall extended losses this year to more 76 per cent, valuing the company at £77 million.
Last month Purplebricks warned that profits would fall short of investors’ expectations, which it blamed on a shortage of homes to sell, hitting its shares by 37 per cent.
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The company was founded in 2012 and has no physical branches. It floated on the market at 100p in December 2015 and peaked above 500p 18 months later.
Analysts at Peel Hunt, the company’s joint house broker, said today that Purplebricks “should be able to absorb” the cost “given that it held net cash of £58 million” at the end of October. “Our target price and estimates remain under review at this stage,” Peel Hunt added.
The Daily Telegraph reported that since the company was founded it has failed to properly serve legally required documents, known as prescribed information, to tenants explaining that their deposits have been put into a national protection scheme. Failure to give tenants the documents within 30 days of the deposit being paid means they can claim back up to three times the value of the deposit, the newspaper said.
The scheme was introduced in 2007 to stop landlords keeping money unfairly and to help manage potential disputes.
A Purplebricks spokesman said that it was an “administrative issue and tenants’ deposits have been secure at all times”.
