OnTheMarket plc (AIM: OTMP), the majority agent-owned company which operates the OnTheMarket.com property portal, has announced its unaudited interim results for the six months ended 31 July 2021.
Highlights
| Period ended 31 July | 2021 | 2020 | Change |
| Group revenue | £14.9m | £10.2m | 46% |
| Adjusted operating profit1 | £2.1m | £0.8m | 163% |
| Operating profit | £0.0m | £0.7m | n/a |
| Profit after tax | £0.5m | £0.7m | (29)% |
| Period-end net cash | £9.9m | £10.7m2 | (7)% |
| ARPA3 | £188 | £124 | 52% |
| Average monthly advertisers4 listed | 12,972 | 13,592 | (5)% |
| Period-end advertisers | 13,362 | 12,6875 | 5% |
| Period-end agency branches | 11,198 | 10,6455 | 5% |
| Period-end new homes developments | 2,164 | 2,0425 | 6% |
| Traffic/visits6 | 159m | 117m | 36% |
| Average monthly leads per advertiser | 132 | 105 | 26% |
· Revenue and ARPA up 46% and 52% respectively. Adjusting for COVID-19 H1 20/21 related customer support discounts of £1.8m, revenue and ARPA growth still strong at 24% and 28% respectively.
· Adjusted operating profit increased 163% to £2.1m, despite increases of 105% in marketing expenditure, to £4.5m, and 28% in staff costs, to £4.7m.
· Profit after tax of £0.5m, reduced by non-recurring costs arising from the Glanty acquisition, the repayment of government grants and an increase in non-cash share-based agent recruitment charges.
· Strong balance sheet retained with cash generated from operating activities of £2.6m after repaying CJRS loans of £0.4m (H1 20/21: £2.9m, after receiving CJRS loans of £0.3m). Period-end net cash was £9.9m, with no borrowings (31 January 2021: £10.7m before deferred creditor payments of £0.4m).
· Average monthly advertisers listed were down 5% period on period, reflecting a reduction in H2 20/21 as agents on long-term free of charge contracts were asked to migrate to paying contracts. Since 31 January 2021, agency branches listing have risen 5% and new homes developments listed by 6%.
· Increased branches listed under paying contracts, up 3% since 31 January 2021 to 10,190 at 31 July 2021.
· Continued strong operational performance, with traffic and average monthly leads per advertiser up versus both H1 and H2 20/21.
· Significant progress in strategy to build a differentiated, technology-enabled property business, with the acquisition of Glanty, new commercial partnerships and new website functionality and lead types.
Outlook:
· After a positive first 6 months, the Board now anticipates revenues to be slightly ahead of expectations and adjusted operating profit to be substantially ahead of expectations for the full year to 31 January 2022.
· Demand for residential properties in the UK has remained at very high levels, however sales and lettings instructions remain subdued.
· Rollout of refreshed brand and website planned for H2 21/22 release, designed to further encourage consumer engagement and provide increasing support and competitive advantage to our customers.
· Agents using OnTheMarket.com as their only property listings portal now represent 968 branches, demonstrating our ability to help customers secure instructions and complete transactions, without them needing any other portal subscriptions.
· Encouraging pipeline of new commercial arrangements to further differentiate and add value to our offering.
· Strong balance sheet to support our strategic vision to create a tech-enabled property business across the broader property ecosystem and drive long-term profitable growth.
The Company will be hosting a live presentation open to all existing and potential shareholders via the Investor Meet Company platform at 6:00pm BST on 19 October 2021. Full details of this session will be included in a separate announcement to be released shortly after these interim results are published.
Jason Tebb, Chief Executive Officer of OnTheMarket, commented:
“I am delighted to report that the first half of our year has seen a strong financial performance, operational growth and real progress with our strategic objective of building a differentiated, tech-enabled property business.
Since joining OnTheMarket I have been focussed on engaging with our customers to understand how we can better serve them. Having spoken with hundreds of agents, I am encouraged that they are not only pleased we are listening, but also that the changes we have made to our proposition have been well received.
The first stage of our transition is complete and we see this as the start of a mutually beneficial journey. We will continue to innovate and are actively exploring further new customer product and service offerings. As part of the next stage of our development we are undertaking a review of our branding and proposition to clearly articulate our USPs to serious property seekers and at the same time provide more tools for our agents and housebuilders, continuing to add value to customers and consumers alike.
None of this would be possible without the hard work and enthusiasm of my colleagues. I thank all of them and look forward to working with them to deliver value to all of our stakeholders.
With a growing and loyal customer base, strong engagement with serious and active property-seekers, progress against our strategic roadmap and a balance sheet and cash generation to support the Group’s current strategy, the Board looks to the future with confidence.”
Footnotes
1) Adjusted operating profit is defined as operating profit before share based payments (including charges relating to shares issued for agent recruitment), specific professional fees and non-recurring items. This is an alternative performance measure and should not be considered an alternative to IFRS measures, such as revenue or operating profit. Please see the Financial Review and Key Performance Indicators section below for a reconciliation of operating profit to adjusted operating profit.
2) Period-end net cash in the 2020 column is net cash at 31 January 2021. Net cash at 31 July 2020 was £9.8m.
3) Average revenue per property advertiser, being revenues due from property advertisers for a period divided by the number of property advertisers for that period. ARPA presented herein is the average of the monthly ARPAs for the period unless otherwise stated. A property advertiser is a listed agency branch or a new home development advertising on OnTheMarket.com.
4) Advertisers are either estate and lettings agent branches or new home developments listed at OnTheMarket.com.
5) Period-end figures in the 2020 column are at 31 January 2021. Advertisers, agency branches and new home developments as at 31 July 2020 were 13,757, 12,245 and 1,512 respectively.
6) Visits comprise individual sessions on OnTheMarket’s web based portal or mobile applications by users for the period indicated as measured by Google Analytics.
7) Unless otherwise stated, all figures refer to the six months ended 31 July 2021 and comparative figures are for the six months ended 31 July 2020 (“H1 20/21”).
Chief Executive Officer’s Report
The period to 31 July 2021 saw us build on the progress made in the year to 31 January 2021. Our encouraging financial and operational performance sat alongside positive momentum in delivering our vision to create a tech-enabled property business across the broader property ecosystem, structured around four strategic pillars, with the following highlights:
1. Property portal – further growth in paying customers and revenues and increased consumer traffic and leads, alongside the introduction of new lead types.
2. Software solutions – acquisition of the remaining 80% of Glanty and a commercial partnership with Canopy.
3. Data and market intelligence – agreement with Sprift to power ‘best in class’ market appraisal guides to support new instructions for our customers and the launch of the OnTheMarket Property Sentiment Index.
4. Communications and marketing – commercial partnership with Reach plc, the UK’s largest commercial news publisher.
These achievements are all the more impressive as they were delivered within just a few short months against a backdrop of the ongoing COVID-19 pandemic. Stakeholder safety remains our upmost priority. Our staff continue to work from home, save where they choose to attend the office, and these arrangements will remain in place at least to the end of 2021. Meetings with other stakeholders have been predominantly virtual, in line with their preferences. We continue to have the interests of our stakeholders and communities at the heart of our decision making.
Summary of the half-year period
Revenues and ARPA both grew strongly, up 46% and 52% respectively. Adjusting the prior period revenues to add back COVID-19 related customer support discounts of £1.8m, revenue and ARPA growth remained strong at 24% and 28% respectively. This followed the conversion activity undertaken in the second half of the year to 31 January 2021, whereby agents on long-term free of charge contracts were asked to migrate to paying contracts in order to continue listing at OnTheMarket.com. The Group also benefited from an accelerated roll out of agency products, specifically the Group’s Automated Valuation Model.
Whilst the conversion activity led to a reduction in agency branches listing during H2 20/21, we continue to positively engage with those agents who chose not to migrate to paying contracts at that time, as well as those agents who have yet to list with us. We believe the development of our offering and our continued growth in engagement with serious property-seekers make the value agents receive through listing at OnTheMarket.com increasingly compelling.
This has led to an increase in agency branches listing in the current period, up 5% since 31 January 2021 to 11,198. Whilst this increase benefits from one element of our customer acquisition strategy, which is to offer targeted, short-term free of charge listing periods for certain new customers considering listing at OnTheMarket.com, we still enjoyed an increase in total branches listed under paying contracts, up 3% to 10,190 at 31 July 2021. The greater number of agency branches under paying contracts in the period gave rise to strong agency ARPA growth.
New homes advertiser numbers also continued to grow during the period, with 2,164 developments listed at 31 July 2021, up 6% from 2,042 at 31 January 2021 and up 43% on the number listed at 31 July 2020. New homes monthly ARPA increased by 23% to £92 (H1 20/21: £75), notwithstanding a reduction in the need for new homes developers to advertise properties amidst the exceptional demand from buyers in the UK residential market during the period.
Attracting serious property-seekers to visit the portal and then to engage with our customers remains a fundamental part of our offering. We enjoyed strong growth in both traffic and average monthly leads per advertiser, up 36% and 26% respectively, with 159m visits and 132 leads per advertiser per month. Whilst H1 20/21 was impacted by the effective suspension of the property market as a result of the coronavirus pandemic, both of these metrics also represent growth on H2 20/21, a period of intense activity as consumers sought to move as lockdown ended. The ratio of leads to visits suggests our marketing, which is targeted to engage serious property-seekers, has continued to be effective.
We offer consumers engaging with OnTheMarket.com real advantages, perhaps particularly in the current market environment where properties are often going under offer very shortly after listing. Each month we have thousands of properties listed as “New & exclusive”, properties that are available to view at OnTheMarket.com 24 hours or more before they appear on Rightmove or Zoopla.
We also enjoy the support and confidence of agents with 968 branches who list their properties at OnTheMarket.com and no other property portal, up from 700 in March 2021. We believe this is strong evidence of our ability to offer value-for-money property listing services that help these customers secure instructions and complete transactions, by introducing serious and active property-seekers to them. “New & exclusive” properties and properties of agents listing exclusively with OnTheMarket help attract motivated property-seekers, who in turn deliver value to our advertiser customers through the provision of high-quality leads.
The Group achieved an adjusted operating profit of £2.1m (H1 20/21: £0.8m) and a profit after tax of £0.5m (H1 20/21: £0.7m). A strong balance sheet was maintained. Cash generated from operating activities was £2.6m after repaying CJRS loans of £0.4m (H1 20/21: £2.9m after receiving £0.3m of CJRS loans). After costs, consideration and loan repayments totalling £1.8m connected with the acquisition of Glanty, period-end net cash was £9.9m, with no borrowings (31 January 2021: £10.7m before deferred creditor payments of £0.4m).
Strategic developments – the “4 pillars”
1. Property portal
We introduced two new lead types to the site, Ask the Agent and Reserve Buyers List. Both are designed to encourage consumer interaction with estate agents in a different way to the conventional lead generation methods. We are combining ‘good old fashioned’ agency principles with modern technological solutions, solving real world problems for agents in a tangible way. Although only recently launched, both products are generating leads to agents that we believe are incremental to those arising from standard portal listings services.
On 8 October 2021 we signed an exclusive agreement with Autoenhance.ai Limited to provide our customers with its photo enhancement software services in respect of advertised properties. The image enhancements are designed to display properties so as to generate greater consumer engagement and therefore more high quality leads to our customers.
2. Software solutions
In May 2021 we completed the acquisition of the remaining 80% of Glanty Limited that we did not already own. Although it is still very early days, the business has performed in line with our expectations and our focus is on developing software products and platforms to drive engagement between our customers and consumers, as well as generate revenues for the Group. Further details on the acquisition are set out in Note 11.
We entered into a commercial agreement to provide our agency customers with the opportunity for free tenant referencing checks through the Canopy platform, another opportunity to deliver more value and more leads to our customers.
We also launched an automated call service partnership with Callwell to provide agents real time connections to potential clients who use our automated valuation model or request a valuation through our instant valuation tool. These potential vendors represent very high quality leads and the ability to connect immediately by phone a competitive advantage to agents in securing instructions.
3. Data and market intelligence
In May 2021 we signed an exclusive commercial partnership with Sprift Technologies, the award-winning property data specialist. The relationship enables OnTheMarket to provide its customers with free Market Appraisal Guides which are powered by the Sprift platform via OTM Expert. The guides provide enhanced data and market intelligence on residential properties, supporting our agent customers in providing expert valuations and winning new instructions, increasing the value they receive from listing with OnTheMarket.
In July 2021 we also released our inaugural OnTheMarket Property Sentiment Index, which will be published monthly. The OnTheMarket Property Sentiment Index is unique as it focuses on buyer and seller confidence and mover attitudes towards mortgage borrowing.
The insights contained in the Property Sentiment Index are determined from consumer responses to questions asked on the OnTheMarket website, with an average response rate of over 120,000 per month over the three months prior to launch. OnTheMarket believes this to be the largest monthly consumer sentiment index to date in terms of buying and selling residential property in the UK. It provides advertisers and consumers additional market intelligence to inform their decision making, whilst reinforcing the OnTheMarket brand as leading player in the UK residential property industry.
4. Communications and marketing
In March 2021, we signed a commercial media partnership with Reach plc, the UK’s largest commercial news publisher, to increase our brand exposure and drive consumers to OnTheMarket.com. To date this has resulted in:
– over 12,000 sign ups to our combined newsletter, with coverage in local as well as national titles; and
– over 94 million ad impressions from OnTheMarket prospecting and retargeting display advertising campaigns.
Furthermore, we will soon be launching a bespoke social media tool for our agents and housebuilders to empower them to increase their own local reach via our platform. Testing has been completed on a small number of campaigns for agents and developers and a full roll out is about to commence.
ESG
OnTheMarket continues to be mindful of the impact its operations and decisions have on the environment, staff, communities and other stakeholders.
The Group is reviewing its ESG functions, processes and targets, in order to establish an ESG strategy and framework with appropriate goals and structures to achieve them. Further details will be provided in due course.
For our people, reflecting our ongoing commitment to staff development, we have created a learning and development department to improve performance and satisfaction, just one of the ways we continue to invest in our staff to ensure that we have a productive, motivated and inspired team.
Outlook
The Group performed strongly in H1 21/22, delivering revenues and adjusted operating profits of £14.9m and £2.1m respectively.
Revenue growth in H1 21/22 benefited from agent conversions to paying contracts and an accelerated roll out of agency products, specifically the Group’s Automated Valuation Model, as well as the impact of COVID-19 customer discounts on prior periods. In H2 21/22 the Group will focus on enhancing and demonstrating the value of it’s offering to customers to support future conversion activity to full-tariff contracts. Full-year advertising expenditure is expected to be H2 21/22 weighted, with the rollout of a refreshed brand and website, designed to further encourage consumer engagement and provide increased value to our customers, as well as usual cyclical factors. This increased marketing investment is expected to result in H2 21/22 adjusted operating profit being approximately breakeven.
Trading has continued positively into H2 21/22, with a greater number of agents paying and more listing to trial our offering, and the Board now anticipates revenues for the full year to 31 January 2022 to be slightly ahead of expectations. Adjusted operating profit is expected to be substantially ahead of expectations for the current year, reflecting the Group’s positive operating leverage.
Demand for residential properties in the UK has remained at very high levels, however sales and lettings instructions remain subdued. OnTheMarket will continue to focus on providing increasing value for money, support and competitive advantage to its customers.
We have scoped and agreed a refreshed proposition for our brand and website from the ground up, with the consumer front and centre of everything we do. Alongside new features and innovations, this is designed to further encourage consumer ‘stickiness’ to the site and make OnTheMarket.com an engaging and useful property search tool for serious buyers, sellers, tenants and landlords. Increasing consumer engagement with our portal should ensure we continue to deliver high numbers of good quality leads to our customers at very competitive rates.
We have a number of new commercial partnerships in the pipeline that will add further value to our product offering as well as continuing to differentiate our business as an agent and house builder focused proposition. We are focussed on continuing to improve lead quality to customers, particularly in these times of unprecedented demand.
The Group continues to operate with a strong balance sheet and disciplined cost management remains key. As at 30 September 2021, the Group had net cash of £9.6m and no borrowings.
With the transformation of OnTheMarket to create a tech-enabled property business across the broader property ecosystem underway and accelerating, we are confident that we have a platform from which to drive long-term profitable growth. I have been encouraged by the enthusiasm and support for positive change amongst my colleagues and look forward to working with them to create value for all our stakeholders.
Jason Tebb
Chief Executive Officer
