# Purplebricks sale of Canadian business “strengthens the Group’s financial position” says Zeus Capital

- Link: https://www.directorstalkinterviews.com/purplebricks-sale-of-canadian-business-strengthens-the-groups-financial-position-says-zeus-capital/412842914
- Published: 2020-07-16T07:34:10+01:00
- Author: Amilia Stone

**What’s new:** Yesterday, **Purplebricks Group plc **(LON:PURP) sold their Canadian
business (acquired in July 2018) for all cash proceeds of CAN $60.5m (i.e. £35m 
or 11p a share).

Following the receipt of the proceeds Purplebricks will hold net cash balance of
£66m (21p a share).

> **Vic Darvey, CEO, commented:** “_Over the last 14 months, Purplebricks has reset
> its strategy to give the Company a strong foundation for the next phase of its
> growth. The Company’s hybrid, digitally enabled model is more relevant than ever
> and this simplification of the business will allow management to focus its time
> and the Company’s resources on delivering growth in the core UK market_.”

Purplebricks’ interims to 31 October 2020 will show the Canadian business as discontinued.
Purplebricks is due to report its results to 30 April on 3 August.

**Other news****:** The July RICS monthly survey shows signs that the UK property
market is recovering. The reduction in Stamp Duty on UK property transactions until
March 2021 is helpful. Zoopla shows an encouraging rise in new Purplebricks listings.

Zeus view: This sale simplifies Purplebricks to its core UK operation, strengthens
the Group’s financial position and enables it to invest in its UK business. We make
no changes to our forecasts (see page 2), except to show Canadian business as discontinued
for FY21 and to show the increase in cash.

In our opinion net cash of £66m makes its clear that Purplebricks is exceptionally
well funded, even in the event of another Covid-lockdown.

Investors should be encouraged by that prior to the receipt of £35m proceeds, Purplebricks’
net cash was £31m (_Zeus forecast: £31m of cash on 30 April 2020_).

**Valuation:**At 55p, Purplebricks has an enterprise value (net of £66m of net cash)
of £103m, which is 1.1x reported UK revenue for the year to April 2019, and 10.1x
adj EBITDA.

Obviously Purplebricks’ UK revenue and EBITDA for the years to April 2020 and 2021
will have been disrupted by COVID-19. Investors should look through to Purplebricks’
market share and ability to generate free cashflow.

With COVID-19 dramatically reducing instructions in 1Q21, management has taken action
to preserve cash. This sale enables management to make appropriate investment decisions
during the recovery of the UK residential property market. Many, if not most, of
Purplebricks’ competitors will be at a disadvantage.

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