The Purplebricks Group PLC (LON: PURP) share price crashed 61.6% after revealing that its performance during the financial year ended on 31 April 2023 was in line with management expectations as outlined on 17 February 2023, when the firm initiated a strategic review of its options.
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.
The company revealed that its performance in the last quarter of the financial year was below expectations after securing 5,672 instructions (sales), marking a significant miss compared to the 10,964 sales recorded in Q4 2022.
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YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY
Given its poor performance, Purplebricks now finds itself in a cash crunch with only £9.1 million in cash reserves at the end of the financial year. In addition, the company revealed that its payment processor for ‘pay now’ instructions had exercised their right to withhold some of the remittances paid to the Group.
Purplebricks' cash crunch threatens the company’s ability to continue operating as a going concern since it faces the looming risk of running out of cash. After launching the strategic review of its options in February, the online real estate agent launched a formal sale process on 1 March 2023.
The company has so far received bids from multiple interested buyers. However, it is still negotiating with a small group of bidders about the potential sale of all or some of its assets. The real estate firm reiterated that there are no guarantees that the negotiations will lead to a formal sale.
Purplebricks remains in a challenging financial position after its contract with its finance provider concerning its ‘pay later' offering ended on 30 April 2023. However, the arrangement has been extended for a short period (with a further short-term extension under discussion) while the Group's Strategic Review is ongoing.
If the group cannot agree with its ‘pay later’ provider, this would accelerate the usage of its remaining cash reserves, which are already deficient. The company is now considering an equity capital raise to boost its finances.
Overall, Purplebricks is in a difficult financial position that threatens its existence, and investors should monitor the firm to see how it resolves its predicament.
*This is not investment advice.
Purplebricks share price.
The Purplebricks share price crushed 61.59% to trade at 2.27p, from Friday’s closing price of 5.91p.
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.