Purplebricks has delivered a worrying update for investors as sale talks continue at the listed firm.
The tech-led estate agency business said instruction levels did not increase through Q4 FY23 as previously anticipated, with 5,672 compared with 10,964 a year earlier.
It anticipates this to 鈥榩rimarily impact on revenue and EBITDA for FY24鈥� and also said that current offers for the company materially undervalue its share price.
鈥淚n light of the current financial position, the group’s payment processor for ‘pay now’ instructions has exercised its right to withhold a portion of remittances to the group,鈥� it stated. 鈥淭his withholding and level of instructions has impacted the company’s cash position, which as at 30th April 2023 is estimated to have stood at around 拢9.1 million.聽
鈥淭he board now expects that the previously anticipated return to cash generation in early FY24 is unlikely, given the trading performance of the group, and whilst the strategic review and resultant uncertainty around the future of the group remain ongoing.鈥�
It added that its contractual arrangements with its finance provider in relation to its ‘pay later’ offering have now ended and been extended for a short period. 鈥淪hould the group not be able to agree revised terms for the financing to support its pay later offering, or should those terms be disadvantageous to the group or its customers, this would accelerate the Group’s utilisation of its remaining cash reserves,鈥� it added.聽聽
鈥淎ny further increased rate of withholding by the group’s payment processor for pay now instructions would also accelerate the group’s utilisation of its remaining cash reserves.鈥�
Purplebricks is currently in the middle of a high-profile turnaround strategy, which has seen it focus on the most profitable arms of the business and make a raft of cost savings. In February, it also announced that it was up for sale.
鈥淭he board believes it is necessary to conclude the strategic review and the formal sale process promptly and in a manner that provides more certainty around the group’s future ownership that provides the business with access to additional funding and results in a longer term extension to the finance for its pay later offering,鈥� it stated today.
鈥淚n the view of the board, a conclusion to the process is necessary in the interests of shareholder value, and to create greater stability and clarity for the future of the company, its employees, its funding partners and its customers.鈥�
Late last year activist shareholder Adam C Smith narrowly failed to oust Paul Pindar as chairman of Purplebricks and install Harry Hill, the former chairman and CEO of Countrywide and co-founder of Rightmove.