# Purplebricks COVID-19 update

- Link: https://www.directorstalkinterviews.com/purplebricks-covid-19-update/412810372
- Published: 2020-03-30T07:28:43+01:00
- Author: Amilia Stone

**What’s new.** This morning **Purplebricks Group PLC** (LON:PURP) has provided 
an “update regarding current trading and the potential impact of COVID-19 and Govt
guidance on the UK housing market.” Key points are:

**1.     ****Purplebricks first priority is health of people and customers**: its
online business model includes “video valuations, virtual viewings, connecting customers
with potential purchasers via Purplebricks online platform.”

**2.     ****Govt restrictions on movement**** are weakening vendor and purchaser
activity**; deferral of completions would have a further negative impact.

**3.     ****Immediate cost-saving measures will materially reduce cash burn** including
suspending TV and radio advertising, reducing online marketing, taking advantage
of the Government Job Retention Scheme.

4.     **Purplebricks currently has net cash of £35m and no debt**.

**Outlook****:** Purplebricks board “believe that our flexible, digitally-led operating
model leaves us positioned for long-term success”.

**Zeus forecasts. **This update is in line with the changes we made to our forecasts
on 23 March, where we expected 30 April cash of £31m (i.e. 10p a share).

We estimate the UK Government recommendation that from 26 March 2020 completions
are delayed until after the lockdown may defer £2m to £3m revenue from FY20 to FY21.

With lower revenues in FY21 we expect management to reduce costs. We estimate current
breakeven is when Purplebricks UK generates 120 instructions a day; after management
cost reductions the breakeven level is closer to 100 instructions a day, when we
expect overheads and media spend to be c £4m a month.

Our FY21 forecasts assume only 25 instructions a day in 1Q but rising in the following
three quarters to an annual of 110 instructions a day (see pages 2 & 3).

**Valuation**

At 39p, Purplebricks Group has an enterprise value (net of our estimate of April
2020 cash of £31m) of £86m, which is 0.76x our FY(Apr)20E Group revenue and 25x 
adj EBITDA. With COVID-19 all but eliminating instructions in 1Q21, we expect management
to take action to preserve cash.

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