Purplebricks Group Plc: Trading update and Launch of Strategic Review

THIS IS AN ANNOUNCEMENT UNDER RULE 2.4 OF THE CITY CODE ON TAKEOVERS AND MERGERS (THE "CODE") AND IS NOT AN ANNOUNCEMENT OF A FIRM INTENTION TO MAKE AN OFFER UNDER RULE 2.7 OF THE CODE. THERE CAN BE NO CERTAINTY THAT SUCH AN OFFER WILL BE MADE, NOR AS TO THE TERMS ON WHICH ANY OFFER MIGHT BE MADE.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION 596/2014 AS AMENDED AND TRANSPOSED INTO UK LAW IN ACCORDANCE WITH THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("UK MAR").

Purplebricks Group plc

("Purplebricks", the "Company" or the "Group")

Trading Update and Launch of Strategic Review

Purplebricks Group plc (AIM: PURP), the UK's leading tech-led estate agency business, provides an update on trading in respect of the financial year ending 30 April 2023 (“FY23”), and announces the commencement of a strategic review.

Trading Update

Since the Group published its Interim Results on 8 December 2022, implementation of its turnaround plan has continued at pace. A key component of the turnaround plan in Q3 FY23 was the implementation of Purplebricks’ revised go-to-market strategy, which aims to focus resource and investment into the regions which are currently profitable and those where there remains the largest opportunities for market share growth. Implementation has taken place but it has involved more disruption to the sales field than originally envisaged in order to achieve the required cost savings and efficiency improvements. This process has resulted in approximately £1.2m of one-off exceptional costs being incurred in H2 FY23 to date. As a result of this disruption, the instruction numbers achieved in Q3 FY23 were lower than the Board’s previous expectations.

In response to the lower instruction levels, the Board has proactively identified £4m of further annualised cost savings in addition to those communicated at the time of the Interim Results. These additional savings will be achieved by streamlining the lettings business and more conservative investment in the ramp up of the mortgages business. The restructured sales field operation is now benefitting from the leadership of the Group’s new Chief Sales and Marketing Officers, who both joined in January 2023. Purplebricks also implemented a fee increase on 1 February which will increase ARPI going forward.

Notwithstanding the positive operational changes made for the long term health of the business, the impact of lower instruction levels during Q3 FY23 has resulted in the Board revising its expectations for full year performance.

The Group now expects to deliver revenue for FY23 of between £60 million and £65 million, and an adjusted EBITDA loss of between £15 million and £20 million.

As a result of its turnaround plan, the Group continues to expect positive cash generation in early FY24.

Strategic Review

The Board believes that Purplebricks’ business and brand has significant value. The Purplebricks brand benefits from over a decade building best in class brand recognition within the UK estate agency market. The Group, through its turnaround plan, is positioning itself well for the future, having laid the foundations to invest in existing and new revenue streams, such as lettings and financial services, and thereby generate material long term profitability and cash flow.

The Board recognise that the potential of the Group may be better realised under an alternative ownership structure, and has, therefore, decided to conduct a strategic review of the Group’s business (the “Strategic Review”) with the aim of delivering maximum value for shareholders. The Group has appointed Zeus as its Financial Adviser to assist with the Strategic Review. The outcome of the Strategic Review may or may not result in a sale of the Company or some or all of the Group's business and assets.

As a consequence of this announcement, an ‘offer period’ has now commenced in respect of the Company in accordance with the rules of the Code and the attention of shareholders is drawn to the disclosure requirements of Rule 8 of the Code, which are summarised below. The Company is not in talks with any potential offeror and is not in receipt of any approach with regard to a possible offer.

Helena Marston, CEO said:

“We have undertaken a huge amount of work in the last 9 months to improve our sales business, raise standards, establish Purplebricks Financial Services, and stabilise lettings, all of which means the Company has never been in better shape for the future.  Yes, the actions we have taken have caused more short-term disruption to our Q3 performance than anticipated, but we remain confident in returning to positive cash generation in early FY24.  We recognise that our upside potential is not currently reflected in our market valuation, which is why the entire Board has therefore concluded that a strategic review is now in the best interests of all shareholders.”

Enquiries

The person responsible for arranging for the release of this announcement on behalf of the Company is Dominique Highfield, Chief Financial Officer.

About Purplebricks

Purplebricks is a leading technology-led estate agency business, based in the UK. Purplebricks combines highly experienced and professional Local Property Partners and innovative technology to help make the process of selling, buying or letting more convenient, transparent and cost effective. Purplebricks shares are traded on the London Stock Exchange AIM market.

Appendix - Profit Forecast

The section of this announcement entitled ‘Trading Update’ contains the following statement:

“The Group now expects to deliver revenue for FY23 of between £60 million and £65 million, and an adjusted EBITDA loss of between £15 million and £20 million.“

This statement constitutes a profit forecast for the purposes of Rule 28 of the Code (the “FY23 Profit Forecast”). Set out below is the basis of preparation of the FY23 Profit Forecast and the assumptions on which it is based.

Basis of preparation

The FY23 Profit Forecast has been prepared on a basis consistent with the Group's accounting policies which are in accordance with IFRS. These policies are consistent with those applied in the preparation of the Group's annual results for the year ended 30 April 2022.

Assumptions

The FY23 Profit Forecast is based on the assumptions listed below:

• There will be no material changes to existing prevailing macroeconomic, regulatory or political conditions in the markets and regions in which the Group operates.
• There will be no material adverse events (internal or external to the Group) that will have a significant impact on the Group's financial performance.
• There will be no material change in the availability or cost of mortgage financing for UK property purchasers.
• There will be no material impact on stakeholder relationships arising from the Strategic Review.
• There will be no material change in the Group’s market share or conversion rates as a result of the recently introduced price increase, or other market factors.

Directors' confirmation

The Directors have considered the FY23 Profit Forecast and confirm that it has been properly compiled on the basis of the assumptions set out above and the basis of the accounting used is consistent with the Group's accounting policies.

Important information

This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities whether pursuant to this announcement or otherwise.

This announcement (including any information incorporated by reference in this announcement) contains statements about the Company that are or may be deemed to be forward looking statements. Without limitation, any statements preceded or followed by or that include the words "targets", "plans", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "estimates", "projects" or words or terms of similar substance or the negative thereof, may be forward looking statements.

These forward-looking statements are not guarantees of future performance. Such forward-looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors could cause actual results to differ materially from those projected or implied in any forward-looking statements. Due to such uncertainties and risks, readers should not rely on such forward-looking statements, which speak only as of the date of this announcement. The Company disclaims any obligation or responsibility to update publicly or review any forward-looking or other statements contained in this announcement, except as required by applicable law.

The distribution of this announcement in jurisdictions outside the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about, and observe, such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities law of any such jurisdictions.

Disclosure requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in one per cent. or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified.

An Opening Position Disclosure must contain details of the person’s interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 p.m. (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 p.m. (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in one per cent. or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person’s interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 p.m. (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Panel’s website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel’s Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Rule 2.9 disclosure

For the purposes of Rule 2.9 of the Code, the Company confirms that as at close of business on 16 February 2023, being the last practicable business day prior to the date of this announcement, its issued share capital consisted of 306,806,039 ordinary shares of £0.01 each in issue (the “Ordinary Shares”). The International Securities Identification Number for the Ordinary Shares is GB00BYV2MV74.

Publication on a website

In accordance with Rule 26.1 of the Code, a copy of this announcement will be made available (subject to certain restrictions relating to persons resident in restricted jurisdictions) on Purplebricks’ website at https://www.purplebricksplc.com/investors by no later than 12 noon (London time) on the first business day following the date of this announcement. For the avoidance of doubt, the content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.