Purplebricks has warned its cash reserves are under threat if its strategic review and sales process isn’t completed soon.
A trading update from the beleaguered online agent this morning revealed that its payment processor for ‘pay now’ instructions has withheld some remittances owed due to the brand’s current financial position.
It said this has impacted its cash positions, which stood at around £9.1m at the end of last month.
The update said the group expects to have finished the financial year ending 30 April in line with management expectations, as announced on 17 February 2023.
However, instruction levels did not increase its fourth quarter as previously anticipated – at 5,672 compared with 10,964 a year before - which is anticipated to “primarily impact” its revenue and profits.
The term of the group's contractual arrangements with its finance provider in relation its 'pay later' offering ended on 30 April 2023 but has been extended for a short period while the group's strategic review is ongoing, Purplebricks said.
The update warned that should 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.”
Purplebricks added: “Any 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.”
The agent said a small number of parties remain in discussions about a takeover but all would currently deliver returns to shareholders “materially below the company's current share price.”
Purplebricks said: “There can be no guarantee that these negotiations will result in any such transaction, and there can also be no certainty on the timings or level of any return to shareholders.
“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. The board with the assistance of its advisers will continue to engage with shareholders to understand their views on the options for the group.”
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Share price has crashed to 2p!
2p or not to 2p that ... well you know the rest, we are below junk bond levels, so things will speed up from here on in, will Axel Springer move or will all be lost?
What we do know is that Purplebricks chose in the end the Countrywide spiral of doom blueprint, get a CEO in who has no expereince, that will end the company quickly. True Purplebricks did not go to Tesco's to get their CEO, they just bumped someone into the limelight from within, but same result. Call it Trussanomics, the city likes capable and proven, hates radical and unproven.
So the new CEO who had zero experience, has accelerated the death of the company she was meant to save. Zara my dog realised that after the super heated 2022 market, instructions in 2023 would fall off a cliff.
Given Purplebricks has a business model based solely on cash upfront at time of listing, a decreasing rate of new inventory means falling revenue. So Purplebricks cash at bank is dwindling at the very point it wants to get a new buyer.
Zara says buying a company that has never made a profit, burns hundreds of millions, and has a flawed business model, especially when interest rates are going skyward and inflation is out of control, is something that only someone with lots of cash who wants a vanity project, that they will quietly close in 18 months when they realise what they bought.
If an investor has £30M lying around talk to me and I will show you what an online agency built with 2023 technology would look, feel and taste like. That is Purplebricks problem, old tech and not much of it, and very few humans, so neither amazon or the Connells group.
My first move like Elon Musk probably would be to put Zara in as interim CEO, she hasa business brain, when not chasing squirrels.
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