Well what’s not to like about the latest pot-pouri of bad news from Purplebricks (PURP)? I start with the basic premis that a company that screws both staff and customers will, in the end, come a cropper – and Purplebricks is such a company. Only an arrogant buffoon such as Neil Woodford could fail to recognise that. So let’s start with the management change...
Three months ago with the company’s US operations failing, the chap in charge Stateside was resigned. Purplebricks founder Michael Bruce was parachuted in to turn that around and was praised for the fecking visionary that he thought he was. Now Bruce too is being resigned with the company admitting that it has screwed up with “sub optimal decisions in allocating capital” ( like sponsoring Scottish rugby?) and has let shareholders down;
So farewell Michael Bruce
only 51% of customers sold their house
which you founded
But you took a grand from all of them in advance
you also screwed the Krauts at Axel Springer
Flogging them stacks of your shares at 360p
And you fooled that Neil Woodford
But Keith’s Mum said anyone can do that
EJ Fund Manager, 37 and counting
Bruce remains one of the three largest shareholders along with Woodford and Axel Springer. How long he will retain that status is open to question. With Woodford now also a forced seller there is one mighty overhang. In terms of trading, we are told that Australia has got so bad that it will be shut down in an orderly manner. That will cost a few bob. Canada - which was forecast to be loss making at this stage - is doing as expected albeit in a property market that is cratering rapidly. In the loss making US, marketing spend is being cut back big time and there is a strategic review underway which may see the operation scaled back materially. Oh dear. No wonder realtors working as Purplebricks agents are walking fast. In the UK we are told that, while the market is challenging, Purplebricks is outperforming and this offers scope for profitable growth. We shall see. As the property market weakens and there becomes a growing awareness of just how rotten this service is (pay a grand up front and we have a 51% chance of selling your home but there is no cash back) this business is not going to do well.
So for the year to 30 April 2019 we are told that group revenue will be within the £130-140 million range it guided to on 21 February 2019. Cash balances as at 30 April 2019 will be not less than £62 million. As a reminder, last July Purplebricks was guiding to revenue of £165-185 million; so earnings visibility/forecasting is clearly dismal. And why cannot it give a more accurate full year sales number? Methinks it could but it does not wish to fess up that it is at the bottom of the range. As to cash, without trade payables/receivables numbers that is a pretty meaningless figure but it does suggest that cashburn since January is running at £3 million a month. Assuming that deferred income at the year end is the same as at the interim stage this implies year end net current assets of £42 million but with the one-off costs in Oz and the US looming and cashburn continuing at £750,000 a week one guesses that the number will fall sharply during the current year. Indeed I wonder if by this time next year net current assets will be positive at all, i.e. will thus company by technically insolvent. At 126p, the market capitalisation is £381 million. For a cash guzzling company with a looming balance sheet black hole and with now two very obvious sellers of vast numbers of shares that is a joke valuation. Keep selling.
Filed under: Purplebricks, Online Blockchain, Rob Terry, Centrica, Imperial Brands, IQE
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