In a trading update, the company said negotiations were “ongoing” but at the current time the transactions being considered were expected to deliver shareholder returns “materially below” the company’s current share price.
“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,” it added.
Purplebricks confirmed earlier this year that it was launching a formal sale process following a strategic review, having ruled out equity fund raising.
The sales process has been ongoing since the start of March, the group said, adding that it had engaged with a “significant number of potential offers” both in outbound and inbound approaches.
The process involved several bidding rounds to ascertain the value offered to shareholders and “ability to deliver certainty” to the group and stakeholders in a “short timeframe”.
Instruction levels down and cash reserves under question
Purplebricks said it had finished the financial year “in line with management expectations”, but instruction levels had not increased as anticipated.
It said that in the Q4 of the last financial year there were around 5,672 instructions, compared to 10,964 in the same period a year prior.
The company continued that this would have an impact on its revenue and EBITDA for the full year.
It added that the group’s payment processor for “pay now” instructions had decided to withhold a portion of remittances to the group.
This consequently has impacted on its cash position, which as of 30 April stood at around £9.1m. It said that any increased rate of withholding would “accelerate” the use of its cash reserves.
The firm said that it is “unlikely” to return to cash generation in the financial year of 2024, which it had previously expected.
The company added that its contractual arrangements with its finance provider in relation to the “pay later” offering ended on 30 April.
It had been extended for a short period previously, with another short-term extension being discussed, while the strategic review is “ongoing”.
Purplebricks said if it could not agree terms to support the pay later offering, or if they were disadvantageous, it would also “accelerate” the group’s use of its remaining cash reserves.
“In light of the above, the board believes it is necessary to conclude the strategic review and the formal sale process promptly and in a manner that provides more certainty around the group’s future ownership, that provides the business with access to additional funding and results in a longer term extension to the finance for its pay later offering.
“In the view of the board, a conclusion to the process is necessary in the interests of shareholder value, and to create greater stability and clarity for the future of the company, its employees, its funding partners and its customers,” it said.
