Purplebricks no longer likely to generate cash in FY24, shares tumble

9th May 2023 08:22

(Sharecast News) - Purplebricks tanked on Tuesday after the estate agent said it no longer expects a return to cash generation in early FY24 and warned that any potential sale of the business would be expected to deliver returns to shareholders "materially below" the current share price.

The company, which launched its formal sale process on 1 March, said it remains in talks with a small number of parties in relation to the sale of some or all of its business and assets.

"Negotiations are ongoing, however, at the current time, the transactions being contemplated, if concluded, would be expected to deliver returns to shareholders materially below the company's current share price," it said.

The company also said that given the expected level of potential returns to shareholders the option of an equity fund raise has been revisited but is still considered to lack the necessary support.

Purplebricks said it is set to have finished the year to the end of April 2023 in line with management expectations. However, it noted that instruction levels did not increase as expected in the fourth quarter, and said this is likely to impact revenue and EBITDA for FY24.

"The 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," it said.

At 1550 BST, the shares were down 65% at 1.90p.

Activist investor Lecram Holdings said in a statement: "This is exactly what we feared would happen without a change in leadership. I question how the company can say that there is no support for an equity raise when neither Lecram nor other significant shareholders have to my knowledge been consulted.

"I can only conclude that the board has granted Axel Springer a de facto veto over strategy, which is likely to be at the expense of other shareholders."

Lecram, which owns a stake of around 5% in Purplebricks, has in the past called for the company's chairman, Paul Pindar, to resign and be replaced with industry veteran Harry Hill.