What’s new. This morning Purplebricks UK 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.
Companies: Purplebricks Group
What’s new. After an encouraging seasonal increase in Purplebricks’ instructions in January and February 2020, activity in recent days has slowed sharply and we see prospects for a prolonged period of low activity during the COVID-19 crisis.
Purplebricks is well capitalised with net cash of £41.6m on 30 October 2019. We expect group cash to be above £31m (i.e. 10p a share) on 30 April 2020 and 2021.
In 2019 management began closing Purplebricks’ Australian and US units. In December 2019 the guidance of less than £14m was repeated, implying 2H costs of under £5m. An adjusted October 2019 net cash of £36m.
Purplebricks interim results, in line with its 7 November update, reveal: Group revenue rose 1.9% to £64.8m on a pro forma basis (i.e. including acquisitions and excluding discontinued) split UK 73%, Canada 27%; UK Revenue fell 2.7% to £47.1m, with instructions down 15% to 32,850 and average revenue per instruction (ARPI) up 12% to £1,353; Canadian revenue rose 16.4% to £17.7m, with transactions down 4% to 20,486 and sellside ARPI up 15% to £728 and buyside ARPI up 19% to £3,595; Group gross profit was flat at £39.4m, with group gross margin 61%, down 130bps mostly due to the growth in buyside revenue in Canada; Adj Group EBITDA fell 48.8% to £4.3m with UK contributing £5.5m, Canada £0.1m and Homeday.de JV a loss of £1.3m; Net operating cash flow from continuing operations was £2.6m; Australia and the US closures going to plan, within £10-14m guidance; Cash at period end £41.6m fell £21.1m since 30 April 2019 (£62.8m) with £11.7m outflow relating to discontinued operations and £4.6m to investment in Homeday.de JV.
Purplebricks’ trading update for the 6 months to 31 October 2019 reveals: “At a Group level, pro forma revenue is expected to be broadly flat relative to the same period last year ... and the Group enjoyed profitable trading in the First Half.”
Purplebricks’ results for the year to 30 April 2019 rose 55% to £136.5m of revenue (above the midpoint of the £130m to £140m revenue range guidance provided in the 21 February and 7 May trading updates)
ReAssure Group plc - The Group is a leading closed book life insurance consolidator in the United Kingdom with 4.3m policies, £68.7 billion of assets under administration on a Post-L&G Illustrative Basis. It is considering a premium listing segment of the main market.
Voyager AIR The Company will focus on the acquisition, leasing and management of primarily widebody aircraft, with asset management services to be provided by Amedeo Limited he IPO will comprise a Placing and Offer for Subscription of Shares to raise up to approximatelyUS$200m·
IMC Exploration Group (NEX: IMCP), focused on acquiring and exploring prospecting licence areas which have high potential for natural resource, is looking to admit its shares to the standard list and will withdraw for the NEX Exchange. TBC
Uniphar, a diversified healthcare services business with a workforce of over 2,000, is looking to join AIM. Raise TBC, expected mid-July 2019
Companies: THR HGM PUR SOS PURP TUNG CDM BIRD AAOG CGNR
Purplebricks has released a trading update, which confirms group revenue for the year to 30 April 2019 will be within the £130m to £140m range guided on 21 February, and also reveals: Purplebricks UK “continues to out-perform” in “challenging” market conditions and in 2019 it will focus on “further profitable growth”; The “Canadian business continues to perform well and [meet] … expectations”; The Australian business has not delivered the “progress the Board expected” and so “has been put into an orderly run down … pending closure”; In the US, “investment in marketing and other overheads” has been “materially scaled back” and a “strategic review” to assess “opportunities and risks” begun; Vic Darvey (previously MD of Moneysupermarket.com Group plc), who joined Purplebricks in January as COO, has been appointed Group CEO; Net cash on 30 April 2019 was at least £62.0m (31/1/19: £71.0m).
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Purplebricks’ trading update reveals subdued trading in challenging market conditions. The Board has reduced the guidance for group revenue for the year to 30 April 2019 from £165m to £175m to £130m to £140m under IFRS15.
Interims reveal profitable growth in the UK driven by volume growth, rising average revenue per transaction, increasing gross profit margins and strong cost controls.
Double-digit growth of instructions has combined with increasing average revenue per instruction to deliver sustainable growth. Despite increased competition & total category media spend, Purplebricks has maintained its leading market position with 74% share of the UK online/hybrid market, and brand awareness (97% aided and 48% unaided).
Purplebricks’ result for the year to 31 March 2018 are remarkably close to our forecasts and average consensus expectations.
This morning Purplebricks has announced the acquisition of Canadian commission-free real estate service network, DuProprio, on a cash free/debt free basis for CAN$51m (£29.3m).
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We note this morning’s announcement from Boohoo Group strongly refuting several allegations made in a short-selling note published yesterday afternoon. In our opinion arguments made in the short selling note are flawed and do not disclose any new or unexpected information about the Group. The unprecedented market backdrop resulting from the COVID-19 crisis has only acted to highlight the strengths of Boohoo’s agile, pure play, e-commerce model and we see current share price weakness as offering an attractive entry point.
Boohoo Group has announced the acquisition of the remaining 34% of shares in prettylittlething.com (‘PLT’).
- Terms of the deal: Boohoo Group has acquired the remaining 34% of shares in PLT for initial consideration of £269.8m, comprising cash consideration of £161.9m and share consideration of £108.0 including £54m of share consideration subject to an 18 month lock-up, £54m of share consideration subject to a 24 month lock-up payable on completion. A further £54.0m of contingent consideration is payable if the Group’s share price averages 491p (+46.7% on last night’s closing price) over a six-month period between completion and 14 March 2024. PLTs management team will remain in the Group, with the structure of the share consideration providing strong alignment of management interests with the wider Group shareholder base.
Sale of Fowler Welch
Companies: Dart Group
After launching a £1bn recapitalisation by way of a rights issue at a price with a heavy discount, the UK-based restaurant and (the largest) hospitality group, Whitbread, saw its share price plummet by 13%. The market movement reflects investors’ concern about the uncertain duration of Whitbread’s business downturn.
Whitbread was on our list of issuers likely to be wrongfooted by the crisis the day before the rights issue announcement.
Directorate change: DWF has announced that Andrew Leaitherland will step down as Group CEO and a managing partner of DWF Law LLP and DWF LLP with immediate effect and will be replaced by the Group’s Chairman Sir Nigel Knowles. Sir Nigel has over 40 years of experience in the legal sector and was previously. Global Co-Chairman and Senior Partner of DLA Piper. We believe he has the experience and leadership qualities required to lead the Group through the near-term challenges it faces. Chris Sullivan, Senior Independent Non-Executive Director, has been appointed as interim Chairman.
Companies: DWF Group
Following last week’s trading update, in this note we revisit the progress Inchcape has made, along with the structural benefits it has gained, in focusing its business on its distribution model. Whilst there is no doubt the Group faces pressures at present, we believe it has sufficient liquidity to withstand this crisis within its current banking facilities and see scope for further significant cost savings and efficiencies that should help mitigate current pressures, which we expect hear more on at the H1 results in July.
FY19 was a transformational year, with the addition of seven new hostels to the estate/pipeline and strong growth in Revenue (+26%) and adj EBITDA (+11%) demonstrating that the model can work across European cities. Significant liquidity headroom remains following the RCF extension and £5m overdraft facility recently agreed.
In FY20, prior to COVID-19, management delivered on its four key proof points, including growing group EBITDA and membership at Roadside. The business model is proving resilient during COVID-19 and we have reduced our FY21 EBITDA forecast by only 7% since the outbreak began – much less than most.
Companies: AA Plc
Unsurprisingly, the limited business progression in H1 19/20 and the pandemic outbreak towards the end of the year have resulted in a significant FY profit contraction.
However, the unprecedented pandemic crisis seems to be dragging all the industry to the same starting line, in terms of market transformation. In particular, after the group showed a better than expected cash position after additional RCF and CCFF and substantial cost-savings, this gives new hope to the market.
Companies: Marks And Spencer Group
MMH has provided an update, which confirms it significantly outperformed the market during Q1. During lock down there has been some signs of pent up demand both in aftersales and new/used vehicles with over 3,700 vehicles sold during lock down in addition to the March order book and Q2 order book. We believe MMH has sufficient balance liquidity as well as support from its OEM and banking partners.
Companies: Marshall Motor
Loungers continues to outperform, delivering the scarce trinity of LFL sales growth (5.4%), unit growth (10 openings) and margin growth (40bps). This drove a 22% increase in Revenues and 26% increase in EBITDA in the first half of FY20E.
The travel bans and quarantines due to COVID-19 have had a significant impact on PPHE since mid-March and are likely to continue to do so. We now expect a deeper and longer downturn than previously and a slower recovery, so we reduce our forecasts for occupancy for FY20, while holding our prior EBITDA margin assumptions reflecting cost cutting and a high level of government support on key costs. We downgrade FY20 revenue by c 32% and EBITDA by c 29%. The shares are trading at a c 54% discount to the last-quoted EPRA NAV of 2,546p per share.
Companies: PPHE Hotel Group
FY20 year-end trading update
Boohoo Group has raised £197.7m in new equity as is readies itself to take advantage of M&A opportunities expected to emerge in the global fashion industry over the coming months. Following the fundraise we estimate the Group to have c.£500m in cash, giving it significant firepower to rapidly execute attractive brand acquisitions as they arise.
H1 (to end of March) adj. PBT of £1.2m is in line amidst difficult trading. COVID-19 and closing all stores has seen April’s sales decline 80% y/y. There are promising signs with online sales 3x pre-COVID levels and management is being very pro-active in adapting and re-opening stores, such that the entire estate could be open on a controlled entry basis by the end of June. Liquidity at c.£14m remains comfortable and should rise by £10m in June as additional CLBILS funding becomes available. We move to BUY and present a scenario for FY20E in this note. We will publish formal forecasts when Topps next reports in early July.
Companies: Topps Tiles