OnTheMarket
(AIM: OTMP ) results for the six months to 31 July 2020 (‘1H21’) reflected a period of strong cost control exercised by management to deliver a maiden adjusted operating profit for the period of £0.8m and a strong balance sheet with net cash of £9.8m as at the period end.
Operating Highlights
Almost all of the Company’s key performance indicators showed positive year on year progress with the average number of advertiser listings and number of total advertisers using the platform increasing 9% and 10% respectively.
While there are no comparatives, new home listings also reached a milestone with total number of new home listings of 1,512 as the Company signed its first agreement with Taylor Wimpey plc, one of the UK’s largest housebuilders, post period end. The Company now has seven of the largest 10 UK housebuilders listing on the portal including Barratt Developments PLC, Persimmon Plc and Bellway plc.
Towards the end of the period, as lockdown restrictions were effectively lifted through May and June, the Company finished the period particularly strongly with year-on-year visits in July 2020 up 173% to 27.5m and average leads per advertiser increased 56% to 148.
Clive Beattie, Acting Chief Executive Officer of OnTheMarket plc, commented; “We have been particularly pleased with the strong consumer engagement with the portal since the easing of national lockdown restrictions in May, with record leads indicating that those consumers most active in the property market visit OnTheMarket.com.”
Financial Highlights
Total revenue for the period increased 28% to £10.2m (1H20: £8.0m), which was particularly impressive given the support the Company had provided its customers during the period by offering full-tariff listing agreement discounts amounting to approximately to £1.8m, as well as the suspension of activity to convert agents on short-term, introductory free of charge contracts, onto paying contracts.
Notwithstanding the above, strict financial discipline regarding costs demonstrated during the period, which included a reduction of £0.5m in staff costs (which arose from the utilisation of the Coronavirus Job Retention Scheme and from voluntary pay waivers by staff) and a 67% reduction in marketing expenditure to £2.2m (1H20: £6.6m), resulted in a profitable period for the Company – its first profitable period since listing.
Post adjustments, EBITDA was therefore £2.1m (1H20: loss of £5.6m) with adjusted operating profit of £0.8m (1H20; adjusted operating loss of £6.7m) which excludes £0.3m of government grant income received under the Coronavirus Job Retention Scheme, which is treated as a non-recurring item.
Reported profit after tax was £0.7m (1H20: loss of £7.0m) with a balance sheet highlighting net cash of £9.8 million and debt free, excluding deferred creditor payments of £2.0m (FY20: £8.7m with deferred creditors of £0.7m).
Post Period End
The sharp recovery in activity across the buy and rent housing markets, as full lockdown restrictions eased across the UK, experienced toward the end of the period continued through September 2020 and whilst the Company has continued to offer discounts to customers during August and September, it has now begun to engage with those customers on free listing agreements to ask them to sign up to a paying contract. The Group has also started to remove agents who have come to the end of their introductory free listing and chose not to enter a paying contract.
The number of branches under paying contracts clearly remains key to the Group’s ongoing success and supports increased investment in service, marketing and product development, to the benefit of all its agent customers, many of which are also shareholders.
Importantly, the availability of "New & exclusive" listed properties, which sees many agents choose to list properties on the site in advance of listing them on Rightmove or Zoopla, which when positioned together with properties of agents listing exclusively with OnTheMarket is clearly helping attract motivated property-seekers to the portal.
As at 30 September 2020, the Group had 13,472 total advertisers listed, comprising of 11,799 agency branches and 1,673 new homes developments with over 9,400 agency branches under paying contracts.
Importantly, under the unique ownership scheme offered by the Company, almost 3,800 estate and letting agents are now shareholders, or under contract to become shareholders, operating over 6,800 branch offices.
As at 30 September 2020, the Group reported net cash of £10.3m with no borrowings, excluding deferred creditor payments of £2.0m.
Shares in OTMP have more than tripled in value over the past six months - trading off lows of 30p in April to close yesterday at 101.5p
Outlook
The operational and financial progress the Group delivered both during the trading period and since the period end is clearly reflective of the attractive positioning of the Company under its unique ownership model and its flexible operating model under the guidance of its experienced management team.
The Company is now guiding investors to expect both revenues and costs to increase on a sequential basis in the second half year to 31 January 2021 as the Company converts more customers to paying contracts and costs, such as marketing and product and service development, return to more normalised levels.
However, assuming the UK housing market remains open and activity levels remain similar to those experienced up to September 2020, the Board believes the Company remains on track to achieve ‘breakeven at the adjusted operating profit level for the full financial year’.
Looking further ahead, the Board remains confident that the actions taken to ‘steer the business through some of the most difficult housing market conditions in recent memory’ have positioned the Group well for future profitable growth.
Clive Beattie added “Whilst we remain cautious amidst the ongoing uncertainty associated with the COVID-19 pandemic, the actions we have taken, and the demonstrable value we provide our agent customers, gives me continued confidence in the future success of the Company.”