Purplebricks is anticipating “a prolonged period of low activity” during the Coronavirus crisis with 25 instructions a day according to a supportive consultancy.
Zeus Capital, which works closely with Purplebricks, says that the strong start to 2020 has obviously subsided badly thanks to the virus outbreak.
It says - in a statement issued just hours before the government's lockdown statement- that its previous estimate of Purplebricks breaking even in the long term with 120 instructions a day - in normal trading outside the virus period - could be revised down to 100 instructions a day, if the agency’s management reduced costs further.
“We have set our Full Year 2021 forecasts [for the financial year ending early 2021] assuming only 25 instructions a day in the first quarter, but rising in the following three quarters to an annual of 110 instructions a day” says a Zeus statement.
The consultancy adds: “Purplebricks is well capitalised with net cash of £41.6m on 30 October 2019. We expect group cash to be above £31m on 30 April 2020 and 2021 … We expect the Group‘s continuing operations in 2020/21 will be cash generative with strong control over administration costs and media spend.”
Zeus says that it is leaving unchanged its revenue forecasts for Purplebricks’ financial year just ending.
But it has “cut our forecast UK revenue for the year ending 30 April 2021 by 33 per cent to £67.0m and Group revenue by 29 per cent to £97m.”
Late last week a major shareholder in Purplebricks, Toscafund, cut its holding from 12.8 per cent to 9.8 per cent, prompting speculation about the future of the agency.
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Didn't age well!
The only agents left will be the ones who's owner have the deepest pockets.
When a future revenue forecast is cut by 33% it is understandable and apparent that management don't know what to expect, same as 25 new listings a day! Pointless article
25 Instructions a day and NO VIEWINGS! A non-news story.
If you are wanting to put your property on the market then just wait until the fog clears. Simples!
Well what do you know last October I predicted that the 152M that Purplebricks had in the bank in April 2018, would dwindle down to 31M by April 2020. I must be a crystal ball gazer, or maybe a pretty good Real Estate Analyst to have been bang on the money.
So, cash burn 152M in 24 months, is 6.3M cash burn a month, and that is with over 90M of revenue coming in from listings in the UK in 2019. As we know it also held onto over 18M of fee paid upfront from vendors who took their homes off the market in 2019, amazing that none of these complained on Trust Pilot.
Lets do the mathematics, the share price is 34p, it started at 95.5p in December 2015, it used to have a market capitalisation of 1BN now it is now just 103M.
If no properties can be listed for say two months, that is 10M plus cash burn, zero income, money at bank 21M, share price gets hit, market capitalisation gets hit, poor self employed LPE's leave as no income, no sick pay, so I can not see a happy resolution.
Yes Axel Springer can go from holding 27.5% of the company to 30% triggering a play for a controlling interest, and the ToscaFund is cashing in some of its exposure, but who wants to run a company who burns through millions every month? No Olympics so that TV spend like some many wasted opportunities is just going to make things more difficult.
I had always said by Autumn either Axel Springer takes them private, or there is a hostile bid, but as the company has never made a penny profit, or paid a dividend, why spend good cash - on this company - when there are so many other good sound propositions at a low ebb.
Lets see Zeus says that for 365 days the average amount of listing will be 110. That is 40,150 listed properties if they hit that target. Last year they listed 60,000 and generated 90M of revenue. So is it fair to assume as revenue = upfront cost to vendor at point of instruction, 40,150 listings = 1/3 less revenue so 60M? Bearing in mind they have burnt through over 6M a month for the past 2 years?
Second point, if for the first three months, Purplebricks are listing 25 a day, so 25 x 30.4 days x 3 months = 2,280 listings. Then in the next 9 months 9 x 30.4 days, they need to list, 40,150 (their 365 days at 110 instructions a day) minus 2,280 achieved in quarter one, so 37,870 listings in 9 x 30.4 days = 37,870 divided by 274 days = 138 instructions a day.
How likely is that ... an uptick from 25 a day to 138 a day - my thoughts are it is impossible - but then I am just a Proptech Real Estate analyst and what do I know - luckily Zeus are the professionals.
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