Don’t get me wrong, turning loss-making businesses around is never easy - if it was, all companies would be profitable. That said, common sense, capable management and lots of hard work can go a long way, especially where there is an established brand and many of the issues can be fixed internally. Purplebricks (PURP) might be one such company.
After several years of subpar performance, I think the online estate agent has also reached a major inflexion point. Drawing a line under its simply “not good enough” FY'22 results - which saw adjusted EBITDA come in at an £8.8m loss against a £12.0m profit last year, on sales-23% lower at £70m against £90.9m in FY21.
Admittedly, I may be making a bold call. Yet equally, the key is not to over-complicate matters, and instead focus on what can be controlled. In this regard, recently appointed CEO Helena Marston appears to have grabbed the business by the scruff of the neck.
£13m of annualised savings have already been delivered, headcount is being reduced, new products are being launched, the money-back guarantee is gone, and fees have been lifted by a fifth. It's not exactly rocket science, but nonetheless what’s needed in order for the group to become profitable and cashflow positive by FY24 on revenues back to around £90m.
It's true that the macro headwinds aren’t particularly helpful at the moment. But even as the market gets tougher the early signs are encouraging, with Q1 2033 net property instructions (11k) and sales (£16m) both up on H2 2022 levels. Management is guiding towards turnover of between £67.5m-£72.5m for the full year, with house broker Zeus anticipating a £10m EBITDA loss and year-end net cash of £27.6m (or 9p a share) against £43.2m last year.
If things go to plan, then I could readily see the stock worth at least 1x EV/sales in 12 months’ time, which would hypothetically equate to a 35p-40p a share valuation. Chairman Paul Pindar confidently snapped up 2.5m shares earlier at 14.76p, for a total investment of £369k - patient investors might be tempted to follow suit.