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Further signs of volatility at Purplebricks emerged this morning after the company warned of serious problems facing the future and said it was considering a sale.
The struggling online real estate company has provided an update on its transactions for its fiscal year ending April 30, 2023 (“FY23”), announcing the commencement of a strategic review. This means evaluating options, including whether Purplebricks and shareholders benefit from different ownership structures.
Purplebricks claims that while it is currently in an “offering period,” no offers have been made and no negotiations have taken place with potential offerors.
The decline in 2023 forecasts is due to widespread speculation that it lost market share in the third quarter (November to January), according to the company. These were caused by disruptions from implementing plans to achieve the required cost savings (currently £21m) and process changes.
Purplebricks adds that the company is under the authority of the Acquisition Code, so the additional information it can provide is very limited.
Purplebricks said: Summarized below. The Company has not negotiated with potential proposers and has not received any approach regarding potential proposals. “
PB deal update
Since the Group announced its interim results on December 8, 2022, the implementation of its turnaround plan has been on track. A key element of the turnaround plan for the third quarter of 2023 was the implementation of Purplebricks’ revised go-to-market strategy. The strategy aims to focus resources and investments in regions that are currently profitable and where the greatest market share growth opportunities remain. The implementation has taken place, but it has created more disruption to the sales arena than was originally envisioned in order to achieve the necessary cost savings and efficiency improvements. This process has resulted in one-time exception charges of approximately £1.2m to date in the second half of 2023. As a result of this disruption, the number of orders fulfilled in the third quarter of 2023 was below the Board’s previous expectations.
In response to the reduced level of leadership, the Board has proactively identified a further £4m annual cost savings, in addition to those communicated at the time of the interim results. These additional savings will be achieved by streamlining our rental business and making more conservative investments in the launch of our mortgage business. The restructured sales floor operations benefit from the leadership of the Group’s new Chief Sales and Marketing Officer, who joined in January 2023. Purplebricks also implemented a price increase on February 1st, which will increase ARPI going forward.
Despite the positive operational changes implemented for the long-term health of the business, the Board has revised its full-year guidance due to the impact of lower levels of leadership in the third quarter of 2023.
The Group now expects earnings of £60m to £65m in FY23 with an Adjusted EBITDA loss of £15m to £20m.
As a result of the turnaround plan, the Group continues to expect positive cash generation at the beginning of 2024.
PB strategy review
The Board believes the Purplebricks business and brand are of great value. The Purplebricks brand has benefited from over ten years of building best-in-class brand recognition in the UK real estate agency market. Through our turnaround plan, the Group lays the groundwork for investing in existing and new revenue streams such as rentals and financial services, thereby laying the foundation for generating significant long-term profitability and cash flow and looking to the future. well positioned.
The Board recognizes that the Group’s potential may be better realized under alternative ownership structures and therefore seeks to develop strategies for the Group’s businesses with the aim of delivering maximum value to shareholders. decided to conduct a strategic review (“Strategic Review”). The Group has appointed Zeus as financial advisor to assist with its strategic review. The outcome of a strategic review may or may not result in the sale of some or all of our or our Group’s businesses and assets.
As a result of this announcement, an ‘offer period’ will commence with respect to the Company in accordance with the Rules of the Code and the attention of shareholders will be directed to the disclosure requirements of Rule 8 of the Code. This is summarized below. The Company has not negotiated with potential proposers and has not been approached in any way with respect to potential proposals.
CEO Helena Marston said: shaping the future. Yes, the actions we took made our third quarter results more disruptive in the short term than expected, but we are confident that we will return to positive cash generation early in FY24. We recognize that our market value does not currently reflect our potential, and therefore the entire Board has concluded that a strategic review is in the best interests of all our shareholders. It is. “