TIDMOTMP
RNS Number : 5998P
OnTheMarket plc
11 June 2020
11 June 2020
OnTheMarket plc
("OnTheMarket", the "Company" or the "Group")
FULL-YEAR RESULTS TO 31 JANUARY 2020
Strong operational progress positions the Company to capitalise
on long-term growth opportunities
OnTheMarket plc (AIM: OTMP), the majority agent-owned company
which operates the OnTheMarket.com property portal, today announces
its audited results for the year ended 31 January 2020.
Highlights of the year
Year ended 31 January 2020 2019 Change
Group revenue GBP18.8m GBP14.2m 32%
Adjusted EBITDA(1) GBP(7.1)m GBP(11.7)m GBP4.6m
Loss after tax GBP(11.5)m GBP(14.5)m GBP3.0m
Period-end net cash GBP8.7m GBP15.7m GBP(7.0)m
ARPA(2) GBP122 GBP130 GBP(8)
Average branches listed 12,497 9,460 32%
Total advertisers(3) at 31 Jan 13,364 11,946 12%
Traffic/visits(4) 237m 159m 49%
Average monthly leads per advertiser 96 55 75%
-- Leveraging unique agent-ownership model
o c.65% agent-owned, with over 3,000 agent shareholders
operating c.6,000 branches at 31 January 2020.
o Over 8,000 branches under paying contracts(5) at 31 January
2020.
-- Progress with product roadmap, driven by technology
o Successful rollout of suite of back-office products and new
value-add consumer-facing products in addition to launch of new
homes developments to address wider property market.
o Strategic 20% stake acquisition in Glanty Limited with
"teclet" product supporting agents by automating the lettings
process.
Strategic and operational highlights post year-end
-- At 31 May 2020, total advertisers were 13,605 and agent ownership remained c.65%
o Continued growth in paying customers, with over 9,000 branches
under paying contracts(5) .
o Shares to be issued alongside new contracts signed will
further increase agent shareholder numbers.
-- Measures taken to mitigate impact of COVID-19 and ensure ongoing support for agents
o Protecting the health and jobs of staff through home working
and selective use of the Coronavirus Job Retention Scheme.
o Actions taken to conserve cash and protect the business,
including a 33% listing fee discount for full-tariff paying
customer invoices issued in the three months starting April
2020.
-- Net cash position
o As at 31 May 2020, the Group had net cash of GBP8.8m, and,
excluding deferred creditor payments of GBP2.3m, no borrowings.
-- COVID-19 impact and current trading
o Trading in February and the first half of March was in line
with the Group's expectations.
o However, the COVID-19 pandemic and subsequent government
restrictions had an immediate impact on the ability of our
customers to run their business, with transactions largely
suspended.
o Since the partial relaxation of restrictions on 11 May, the
Group has seen strong increases in weekly new instructions, traffic
and leads against the previously subdued levels. This is despite a
substantial reduction in advertising expenditure.
o In the first week of June, OnTheMarket.com visits were up 260%
compared with the trough experienced during lockdown and up c.15%
versus the first week in March, which was before the impact of the
COVID-19 crisis on the housing market.
o New instructions have recovered to early March levels, whilst
stock levels are up as the backlog of transactions takes time to
complete.
-- Outlook
o Due to the continuing economic uncertainty, financial guidance
remains suspended.
o In the short-term, revenues will be reduced by the support we
are providing our customers through the discounts we have offered
them. Furthermore, the pandemic has impacted our customer
recruitment and slowed the ongoing conversion of customers onto
paying contracts.
o However, the recent uplift in activity, which reflects
increased brand awareness, is encouraging and we remain confident
that we have the right strategy to support our longer-term vision
to become the portal of choice for agent customers and
property-seekers alike.
Clive Beattie, Acting Chief Executive Officer of OnTheMarket,
commented:
"Since our financial year end, the emergence of COVID-19 has
affected all of us and I have great admiration for the exceptional
resilience and dedication of my colleagues during these challenging
times. We have taken swift and decisive actions to protect the
health and safety of our team, to conserve cash and to support
agents so that OnTheMarket is positioned to capitalise in the
future on long-term growth opportunities.
"The year to 31 January 2020 saw the Group deliver a strong
operational performance, which was particularly encouraging given
the challenging property market conditions. It was a year of
progress during which we continued to invest in marketing and
advertising to raise our brand awareness. We increased our paying
agent base, broadened our customer markets with the introduction of
new homes developers and achieved significant growth in portal
visitors and in leads to our property advertiser customers.
"The current crisis has been a catalyst for many agents to
review their portal choices and the value they derive from them. We
have been encouraged by our performance since 11 May, which we
believe reflects increased consumer awareness of, and engagement
with, OnTheMarket.com. Being majority agent-owned, our interests
and those of our agent customers are one and the same and there
remains a clear long-term opportunity for OnTheMarket to gain
market share. We look forward with confidence and a differentiated
proposition that is highly valued by agents looking for sustainably
fair pricing."
1) Adjusted EBITDA is defined as operating loss before finance
costs, taxation, depreciation, amortisation, share-based payments,
specific professional fees and non-recurring items.
2) Average revenue per property advertiser, being revenues due
from property advertisers for a period divided by the average
number of property advertisers for that period. ARPA presented
herein is the average of the monthly ARPAs for the year.
3) Total advertisers are defined as the aggregate of estate and
lettings agent branches and new homes developments listed at
OnTheMarket.com.
4) Visits comprise individual sessions on OnTheMarket.com's web
based portal or mobile applications by users for the period
indicated as measured by Google Analytics.
5) A minority of paying contracts include an initial free period before payment commences.
S
For further information, please contact:
OnTheMarket 0207 353 4200
Clive Beattie, Acting Chief Executive Officer
Tulchan Communications 0207 353 4200
James Macey White
Giles Kernick
Sophie Duckworth
Zeus Capital (Nominated Adviser/Joint Broker) 0203 823 5000
Jamie Peel, Martin Green, Daniel Harris
(Corporate Finance)
John Goold, Benjamin Robertson (Broking)
Shore Capital (Joint Broker) 0207 408 4090
Daniel Bush, John More (Corporate Finance)
Fiona Conroy (Corporate Broking)
Background on OnTheMarket :
OnTheMarket plc, the majority agent-owned company which operates
the OnTheMarket.com property portal, is a leading UK residential
property portal provider.
Its objective is to create value for shareholders and property
advertiser customers by delivering an agent-backed, technology
enabled portal - offering a first-class service to agents and new
homes developers at sustainably fair prices and becoming the go-to
portal for serious property-seekers.
With over 3,000 estate and lettings agent shareholders,
operating c.6,000 offices, OnTheMarket provides a unique
opportunity for agents to participate in the equity value of their
own portal. Agent backing and support enable OnTheMarket to display
"New & exclusive" properties to serious property-seekers 24
hours or more before agents release these properties to other
portals.
Chairman's Statement
I am pleased to report OnTheMarket's full year results to 31
January 2020.
The year presented a number of challenges as agents faced lower
than usual transaction volumes, reduced lettings fee income,
concerns over a possible recession and the uncertainty over Brexit
and the UK political landscape.
A key strategic objective for the year was to convert agents who
had previously joined us on introductory free of charge contracts
onto full-tariff paying contracts and as shareholders in the
Company. Given the market backdrop, this proved more difficult to
achieve and the Group had to adapt its offers accordingly.
Nevertheless, at 31 January 2020 the Group had:
-- 12,470 agent offices listed at OnTheMarket.com;
-- over 8,000 agent offices under paying contracts;
-- c.65% of its shares under agent ownership; and
-- over 3,000 shareholder agent firms operating c.6,000 agent offices.
In addition, in September 2019 we broadened our advertiser
markets with the launch of new homes developments. At 31 January
2020 we had 894 developments listed, including those of leading
developers such as Barratt Developments PLC and Persimmon Plc.
This progress saw us increase our annual revenues by 32% to
GBP18.8m.
In late December 2019, in line with our vision to provide
additional products and services to agents, we made a strategic
investment in Glanty Limited. Its initial product, "teclet", an
automated online lettings platform for agents, is at the early
stages of rollout but has been very well received by early
adopters.
Following the UK general election in December 2019 and the UK's
withdrawal from the EU on 31 January 2020, underlying markets were
showing signs of improvement that we believed would offer the
platform for the next stage in the Group's development. However,
the property market, like many other industries, has been faced
with considerable challenges since the year-end, as a result of the
COVID-19 pandemic.
Governance
After the period end, we made changes to the Board that we
believe will best enable us to continue our progress as a strong,
agent-backed, profitable and technology-enabled business.
On 9 March 2020, the Group announced that Ian Springett, Chief
Executive Officer, had left the business. The Board believed the
time was right to appoint a new Chief Executive Officer to oversee
the next stage in the development of the Group. The Board would
like to extend its thanks to Ian for his contribution to
OnTheMarket's admission to AIM and its growth over the past few
years.
Chief Financial Officer Clive Beattie agreed to take on the
additional role of Acting Chief Executive Officer while the Board
conducted a formal process to appoint a permanent Chief Executive
Officer. This process is ongoing, having been impacted by the
restrictions on movements imposed in response to COVID-19. I would
like to record my thanks to Clive for taking on this role and for
all he has achieved to date under exceptionally challenging
circumstances.
I am also delighted to report that on 27 February 2020 Rupert
Sebag-Montefiore joined as an independent Non-Executive Director
and Chairman of the Remuneration Committee. Rupert has substantial
agency experience, including over 20 years in board roles at
Savills. Rupert brings a deep understanding of the property market
and an invaluable insight into the perspective of estate agents and
housebuilders.
COVID-19
In March 2020, the reality of COVID-19 and the implications for
individuals, businesses and the economy began to be felt . First
and foremost, our deepest sympathy goes out to those who have lost
loved ones. Although it pales in comparison, the implications for
the financial welfare of individuals and businesses is yet to be
fully understood. Our thoughts are with all those suffering on
account of the crisis.
As a Company, OnTheMarket took several measures to support our
staff, to assist our agent customers and to safeguard our business.
Whilst the property market has started to reopen, we are
continuously monitoring the situation to be able to respond to any
changing circumstances.
I am proud of the commitment, professionalism and support that
my colleagues have shown in what have been extraordinarily
difficult circumstances.
I would again like to thank all of them, as well as our
shareholders, customers and suppliers for their continued hard work
and support.
Christopher Bell - Non-Executive Chairman
Acting Chief Executive Officer's Report
It has been difficult to review the past year when life has
changed so quickly and so fundamentally due to COVID-19.
Nevertheless, the year to 31 January 2020 was another year of
operational progress by OnTheMarket, in what were challenging
market conditions. I report on these matters below before returning
to the current crisis and its implications.
We have met or exceeded our expectations on operational KPIs for
listing property advertisers, consumer traffic and leads to our
customers. It is particularly pleasing that we have achieved this
with lower-than-planned cash burn. January 2020 saw the year ending
very well, with record numbers for all three metrics.
However, as we announced in September 2019, due to market
conditions, conversions of agents from short-term introductory free
trial arrangements to long-term full-tariff paying contracts have
been at a slower rate than originally planned. Further details are
provided later in this report.
OnTheMarket.com is now firmly established as a market-leading
portal. At 31 May 2020, we had 13,605 estate and letting agent
branches and new homes developments listed at OnTheMarket.com.
However, there remains significant potential for market share
growth. We will look to capitalise on that opportunity through our
majority agent ownership and commitment to sustainably low listing
fees, aligned to first-class service to customers and consumers,
which provides a differentiated proposition.
Leveraging our unique agent-ownership business model
Agents are the lifeblood of all property portals, providing not
only most of their income but also their essential and most
valuable content - the property listings. As a portal founded as a
mutual by and for agents, alignment with agents' objectives remains
at the centre of our proposition.
OnTheMarket provides a unique opportunity for agents to
participate in the equity value of their own portal. At 31 May
2020, the Company remained c. 65% agent-owned, with over 3,000
estate and lettings agent shareholders operating c.6,000
offices.
The Group also has authority remaining to issue a further 32
million shares to recruit new property advertisers on paying
contracts.
Shares issued to agents are typically subject to lock-in
arrangements to ensure that new shareholders' interests are closely
aligned with those of all other agent and financial investors and
with the long-term success of the Group.
Traffic, leads and consumer engagement
During the year, t he Group continued to deploy significant
funds to multi-channel marketing. In addition to paid search and
other digital marketing, we ran national TV, radio and poster
advertising. An increasing number of visits and leads are generated
by "free" activity, such as email marketing and organic search
activity.
A key theme of our advertising is the "New & exclusive"
properties which many of our agents choose to list at
OnTheMarket.com in advance of listing them on Rightmove or Zoopla.
This proposition holds a significant appeal to active
property-seeking consumers, who are our priority target audience,
as they in turn provide our customers with the highest quality
leads.
Traffic for the year to 31 January 2020 was up 49% to 237m web
and mobile visits (FY19: 159m), including a record month of over
30m in January 2020.
This achievement helped deliver a record number of leads to our
agent and new homes developer customers. Average monthly leads per
advertiser were up 75% to 96 in the year (FY19: 55). Total leads in
January 2020 were up 52% on January 2019, with average leads per
advertiser at 126.
We have also invested in continuously improving the quality of
the user experience on the portal and consumer engagement has
continued to grow. As an indicator of property-seeker engagement,
in January 2020 OnTheMarket sent over 140 million instant property
alert emails to its registered users.
In June 2018, 4 months after our Admission to AIM, a YouGov
survey of all adults recorded our prompted brand awareness at 19%.
Amongst active property-seekers (those surveyed who had moved
within the prior 5 months or who were actively looking to move),
our prompted brand awareness was 27%. Following our marketing
activities, in January 2020 our prompted brand awareness had jumped
to 40% for all adults and to 49% for active "in market"
property-seekers.
Since 2018, OnTheMarket has had a listing agreement with
Facebook Marketplace whereby all our customers can have their sales
and rental properties promoted on Facebook Marketplace at no
additional cost. Along with our Country Life partnership, this
integration is another way in which we are increasing the exposure
of our customers' properties and generating enquiries from "in
market" property-seekers.
Conversions and paying agents
Continued growth in paying agent branches on OnTheMarket.com
remains a priority and is key to our future strategy and
success.
A specific priority in 2019/2020 was to convert agents who had
been on free or discounted short-term introductory contracts to
full-tariff and share-based contracts.
During the year, agents and consumers alike faced many
well-documented headwinds, not least concerns over Brexit, the
economy and the political landscape. This uncertainty made it much
more challenging than anticipated to convert agents onto
full-tariff contracts and we introduced a number of initiatives to
support agents, including a pricing pledge not to increase
full-tariff fees in 2020 and a new range of shorter-term, lower
cost contracts.
At 31 January 2020, 12,470 branches were listed at
OnTheMarket.com. Over 8,000 branches were signed under paying
contracts (including a minority on contracts with an initial free
period before payment commences). This had increased further to
over 9,000 at 31 May 2020.
New homes and non-property advertisers
A key element of the Company's stated growth strategy has been
to address the wider property market, focusing initially on the new
homes developer segment. We have built a dedicated sales team and
have made strong and encouraging progress.
In September 2019, we announced that we had signed a portal
listing and additional advertising products agreement with Barratt
Developments PLC, Britain's largest housebuilder. During the year,
further agreements were signed with other housebuilders, including
Persimmon Plc and Countryside Properties PLC.
At 31 January 2020, 894 developments were being displayed at
OnTheMarket. This had increased to 1,258 by 31 May 2020.
We have also introduced to non-property advertisers the
opportunity to promote themselves and their products and services
to our very large and growing audience of active and engaged
property-seekers. The first sales to such advertisers took place
late in the year, although this is not as yet a material
contributor to Group revenues.
Product development
In March 2019 we launched the first release of our "Market
Appraisal Guide" to support agents with intelligence and branded
materials for appraisal meetings with clients. Accessible via
OnTheMarket Expert, the service has been well received by our
customers.
Our Market Appraisal Guide was followed in September 2019 by the
launch of our new sales and lettings market intelligence suite,
Market Intel, also available within OnTheMarket Expert at no
additional cost. The new and enhanced dashboard calculates
competitor rankings, displays market share performance by "patch"
(location), property type or value and makes it easy for our
customers to see how their properties are performing, as well as
checking phone and email leads.
OnTheMarket also started to sell new value-adding products to
enable customers to boost the visibility of their brand and their
listings. These products, including enhanced "Spotlight property"
presentation and local area banners on our portal and property
alerts, are bought separately from the contractual listing fee.
As previously stated, the Group has continued to evaluate
opportunities to acquire or partner with businesses, particularly
in the area of property technology, which can offer solutions to
current business problems faced by its customers.
In December 2019 we announced that OnTheMarket had made a
strategic investment for a 20% share in Glanty Ltd ("Glanty"), the
owner and developer of 'teclet', an automated portal for the
lettings industry, designed to reduce overheads and maximise
efficiencies for lettings agents. OnTheMarket also agreed an option
to acquire the remaining 80% of Glanty. OnTheMarket intends to work
with Glanty with a view to offering 'teclet' and potentially
further technology solutions to its customers.
Litigation update
Following the judgement in the Group's favour issued by the
Competition Appeal Tribunal at the Court of Appeal in January 2019,
the Group received payment in July 2019 of a further GBP1.1m in
respect of cost recoveries relating to the litigation between
Agents' Mutual and Gascoigne Halman and Connells Limited.
I am pleased to report that in March 2020 we announced that an
out of court settlement had been concluded between Agents' Mutual
and Gascoigne Halman and Connells Limited. The agreement, the terms
of which are confidential, ends all litigation proceedings between
the parties.
Post period end developments
The UK agency market was under considerable pressure during much
of the year to 31 January 2020 from the uncertainty caused by a
number of economic and political factors.
However, the housing market responded positively with a
so-called "Boris Bounce" to the result of UK general election in
December 2019 and to the removal of some of the Brexit uncertainty
with the UK's exit from the EU on 31 January 2020.
Trading in February and the first half of March was in line with
the Group's expectations. However, the COVID-19 pandemic and the
government's self-isolation and social distancing restrictions had
an immediate and substantial impact on the ability of estate and
lettings agents to run their business. During the lockdown,
transactions in the property market were largely suspended.
To mitigate the impact, the Company announced a series of
measures to provide value and support to agents, to safeguard jobs
within the Group and to conserve cash. These measures included:
-- a 33% discount of fees to agents for 3 months from April
2020. This reduces the cash flow pressure facing agents and is
being given to all OnTheMarket agent customers on full-tariff
listing agreements;
-- selective furloughing of staff under the Coronavirus Job
Retention Scheme, whilst maintaining the Company's core operational
service levels, sales and IT capacity;
-- a voluntary waiver of 20% of remuneration for 3 months by the
Board, the executive management and the majority of other employees
who continued to work remotely;
-- a reduction in temporary and sub-contracted IT workers;
-- the curtailment of discretionary marketing; and
-- agreements with trade creditors and with HMRC to defer payments due.
The measures the Group took were designed to allow revenues to
cover ongoing costs, whilst rescheduling certain creditor payments
to conserve cash in the short-term so as to enable the Group to
provide its agent support measures.
In the short-term, revenues will be reduced by the discount the
Group offered to its paying, full-tariff customers. In addition,
the impact of the crisis on our customers and potential customers
has understandably curtailed customer recruitment and slowed the
ongoing conversion of customers onto paying contracts.
The objective of the mitigating actions was to conserve cash,
through managing future expenditure commitments to be lower than
anticipated revenues, until there was greater clarity on the full
impact of COVID-19. These actions seek to position the Group to be
able to invest once more in business growth once underlying
property markets recover.
Cash position
As at 31 May 2020, the Group had cash of GBP8.8m and, excluding
deferred creditor payments of GBP2.3m, no borrowings. The Directors
have prepared and reviewed cash forecasts and projections for the
Group for the next 12 months in light of the potential
ramifications for Group revenues due to the COVID-19 crisis, among
other factors. They have also conducted sensitivity analyses and
considered scenarios where the impact on future revenues is more
significant and more sustained than currently experienced or
anticipated, together with the mitigating actions they may take in
such circumstances.
Based upon these analyses, the Directors have a reasonable
expectation that the Group has adequate financial resources to
continue its operations for the foreseeable future.
Outlook
The impact of COVID-19 has given rise to a challenging operating
environment for our customers and for ourselves. We acted quickly
and decisively to ensure the safety and wellbeing of our
colleagues. We have also taken measures we believe are necessary to
weather the immediate crisis and to position us to come through
ready to deliver a market-leading, fairly priced portal for the
benefit of our customers and shareholders.
As a result of the ongoing uncertainty, it remains too early to
give guidance on the full potential impact of COVID-19 on the
Group. Whilst the government has relaxed restrictions to allow
property transactions to complete, it is too early to assess the
full impact of changes in consumer behaviour. Our financial
guidance therefore remains suspended until greater clarity
exists.
For property portals, agents provide the core content required
for success. Notwithstanding the current uncertainties, we believe
the property market will recover, as demand for houses continues to
outstrip supply. As it does, with our differentiated proposition
through majority agent ownership, and with the continued support of
agents, we believe we are well placed to enjoy growth and to
deliver long-term value to all our shareholders, agents and
financial investors.
One constant during the current crisis has been the dedication,
professionalism and commitment of my colleagues. I am especially
grateful to them for the support they have given to the Company and
to me during these times of unprecedented challenges. It is a
privilege to make this report on their behalf and their talent and
attitude bode extremely well for the future of the Group.
Clive Beattie - Acting Chief Executive Officer
Financial Review and Key Performance Indicators
During the year ended 31 January 2020 the Group's primary focus
was on converting to paying contracts those agents who joined
initially under free, short-term introductory trial offers. In the
second half, the Group also began listing the properties and
development sites of housebuilders, a key customer target
market.
As a result, we saw an increase in revenues and an increase in
advertisers listing at OnTheMarket.com .
The Group delivered revenue of GBP18.8m in the year ended 31
January 2020, a 32% increase (2019: GBP14.2m), and an adjusted
operating loss of GBP9.2m (2019: GBP13.6m).
At 31 January 2020, the Group had net cash of GBP8.7m (2019:
GBP15.7m). It had GBP8.8m of net cash at 31 May 2020 and, excluding
deferred creditor payments of GBP2.3m, no borrowings.
The reported operating loss of the Group was GBP11.7m (2019:
GBP14.5m) and is further analysed as follows:
2020 2019
GBP'000 GBP'000
Reconciliation of operating loss to adjusted
operating loss:
Operating loss (11,688) (14,544)
Adjustments for:
Share-based management incentives (note
11) 355 (257)
Professional fees (note 5) 1,233 597
Share-based agent recruitment charges (note
5) 921 565
_________ _________
Adjusted operating loss (9,179) (13,639)
_________ _________
The loss per share in the year was 17.99p (2019: 24.02p).
Group operational KPIs were as follows:
-- average monthly ARPA GBP122 (2019: GBP130);
-- average branches listing during the year 12,497 (2019: 9,460);
-- total visits 237.0m (2019: 158.9m); and
-- total advertisers (estate and letting agent branches and new
homes developments) at 31 January 2020 were 13,364 (12,470 and 894
respectively) (2019: 11,946 and nil respectively)
The Group's financial performance is presented in the
Consolidated Income Statement below. The loss for the year
attributable to the owners of the Group was GBP11.5m (2019:
GBP14.5m).
Administrative expenses in 2020 were GBP28.0m (2019: GBP27.8m),
consisting primarily of staff costs and marketing expenditure.
Marketing expenditure was GBP12.0m (2019: GBP14.9m), whilst staff
costs (including temporary workers and consultants) increased to
GBP11.9m (2019: GBP8.8m).
Professional fees of GBP1.3m (net of costs of GBP1.1m awarded)
were incurred in the year (2019: GBP0.6m net of costs of GBP0.2m
awarded), predominantly in relation to the litigation with
Gascoigne Halman Limited (see note 5).
An agent recruitment charge of GBP0.9m (2019: GBP0.6m) was
incurred in relation to share-based charges arising on the issue of
shares to certain new and existing agents following them having
earlier signed new long-term listing agreements to advertise all of
their UK residential sales and letting properties at
OnTheMarket.com.
During the year there arose a non-cash charge of GBP0.4m in
relation to share option awards made to employees (2019: non-cash
credit of GBP0.3m). Further details on options awarded, exercised
and forfeited are set out in note 11.
Receivables increased to GBP6.1m as at 31 January 2020 (2019:
GBP3.3m), mainly as a result of prepayments recognised for agent
shares issued. Details on the accounting treatment are set out in
note 2.8.
Trade and other payables as at the year-end increased to GBP6.8m
(2019: GBP4.7m) mainly as a result of an increase in listing fees
billed in advance, an increase in trade payables, including
payables resulting from work related to the now settled litigation,
and the deferred consideration due following the Company's
investment in Glanty Limited.
In December 2019, the Group made an investment of GBP1.0m
(including capitalised costs of acquisition) for a 20% share in
Glanty Limited, the owner and developer of an automated portal for
the lettings industry called "teclet". This has been recognised as
an investment in an associate (see note 10). The arrangements also
give the Group a call option to acquire the remaining 80% which
expires on 23 March 2021, as well as a put option to sell the 20%
to an existing shareholder in Glanty Limited for GBP0.8m.
Alongside the investment, the Group raised GBP3.4m gross by way
of a placing of new ordinary shares to investors.
Intangible assets increased to GBP4.7m (2019: GBP3.9m), due to
the capitalisation of staff and consultant costs incurred in the
ongoing development of OnTheMarket.com.
Following the implementation of IFRS 16, the Group recognised a
right-of-use asset of GBP0.4m (2019: GBPnil) in relation to its
leased motor vehicles. A depreciation charge of GBP0.2m (2019:
GBPnil) was recognised in the income statement for FY20 (see notes
2.4 and 8).
At the end of the year, the Statement of Financial Position
showed total assets of GBP21.0m (2019: GBP23.0m) and total equity
of GBP13.0m (2019: GBP17.3m).
During the year the Group had a number of customers who
continued not to pay their contractually committed listing fees,
the majority under contracts that expired on 25 January 2020. The
majority of these had chosen to breach the One Other Portal rule in
their listing agreements and their properties were removed from the
portal some time ago. Under IFRS 15 these amounts are not
recognised as revenues. The Company continues to engage with these
customers and to seek either payment of fees outstanding or to
reach a compromise position such that historic debts are held in
abeyance and potentially waived in the future in return for
entering, and honouring, a new long-term listing agreement with the
Company. As at 31 January 2020, net unrecovered cash amounted to
approximately GBP5.2m (2019: GBP6.8m).
Consolidated Income Statement: year ended 31 January 2020
Notes 2020 2019
GBP'000 GBP'000
Revenue 18,810 14,172
Administrative expenses 4 (27,989) (27,811)
________ ________
Operating loss before specific
professional
fees, share-based payments and
non-recurring
items (9,179) (13,639)
Specific professional fees, share-based
payments
and non-recurring items:
Share-based management incentive 11 (355) 257
Professional fees net of compensation
received 5 (1,233) (597)
Share-based agent recruitment
charges 5 (921) (565)
________ ________
Operating loss (11,688) (14,544)
Finance income 45 85
Finance expense (16) (35)
________ ________
Loss before income tax (11,659) (14,494)
Income tax 192 (6)
________ ________
Loss and total comprehensive
income
for the year attributable to
owners of the parent (11,467) (14,500)
________ ________
Loss per share from continuing Pence Pence
operations
Basic and diluted 7 (17.99) (24.02)
The operating loss arises from the Group's continuing
operations.
There is no recognised income or expense for the year other than
the loss shown above and therefore no separate statement of other
comprehensive income has been presented.
Consolidated Statement of Financial Position: at 31 January
2020
Notes 2020 2019
GBP'000 GBP'000
ASSETS
Non-current assets
Property, plant and equipment 127 130
Right-of-use assets 8 373 -
Intangible assets 9 4,697 3,948
Investments in associates 10 985 -
_________ ________
6,182 4,078
Current assets
Trade and other receivables 6,113 3,286
Cash and cash equivalents 8,685 15,673
_________ ________
14,798 18,959
_________ ________
TOTAL ASSETS 20,980 23,037
_________ ________
LIABILITIES
Current liabilities
Trade and other payables (6,814) (4,730)
Lease liabilities 8 (200) -
Provisions (707) (776)
Current tax (7) (6)
_________ ________
(7,728) (5,512)
Non-current liabilities
Lease liabilities 8 (110) -
Provisions (101) (233)
_________ ________
(211) (233)
_________ ________
TOTAL LIABILITIES (7,939) (5,745)
_________ ________
NET ASSETS 13,041 17,292
EQUITY ATTRIBUTABLE TO OWNERS
OF
THE PARENT
Share capital 12 140 123
Share premium 46,814 40,698
Merger reserve (71) (71)
Other reserve 701 111
Retained earnings (34,543) (23,569)
_________ ________
TOTAL EQUITY ATTRIBUTABLE TO OWNERS
OF THE PARENT 13,041 17,292
Consolidated Statement of Changes in Equity: year ended 31
January 2020
Share-based
Share Share payment Other Merger Retained Total
capital premium GBP'000 reserves reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 February 2018 71 - - (252) (71) (9,413) (9,665)
Loss for the financial
period - - - - - (14,500) (14,500)
______ ______ ______ ______ ______ ______ ______
Total comprehensive
expense for the
period - - - - - (14,500) (14,500)
______ ______ ______ ______ ______ ______ ______
Transactions with
owners:
Shares issued for
placing 36 29,964 - - - - 30,000
Shares issued for
agent recruitment
shares 2 1,895 - - - - 1,897
Shares issued to
extinguish
loan notes 14 10,905 - - - - 10,919
Legal and professional
fees on placing
shares
issued - (1,814) - - - - (1,814)
Transfer to share
premium - (252) - 252 - - -
Agent recruitment
share-
based payment - - - 111 - - 111
Share-based payment
charge on employee
options - - 344 - - - 344
Transfer to retained
earnings - - (344) - - 344 -
______ ______ ______ ______ ______ ______ ______
At 31 January 2019 123 40,698 - 111 (71) (23,569) 17,292
______ ______ ______ ______ ______ ______ ______
At 1 February 2019 123 40,698 - 111 (71) (23,569) 17,292
Loss for the financial
period - - - - - (11,467) (11,467)
______ ______ ______ ______ ______ ______ ______
Total comprehensive
expense for the
period - - - - - (11,467) (11,467)
Transactions with
owners:
Shares issued for
placing 10 3,390 - - - - 3,400
Shares issued for
agent recruitment
shares 6 2,912 - 590 - - 3,508
Shares issued for
employee share options 1 - - - - - 1
Legal and professional
fees on placing
shares
issued (186) - - - - (186)
Share-based payment
charge on employee
options - - 493 - - - 493
Transfer to retained
earnings - - (493) - - 493 -
______ ______ ______ ______ ______ ______ ______
At 31 January 2020 140 46,814 - 701 (71) (34,543) 13,041
______ ______ ______ ______ ______ ______ ______
Share capital
Share capital represents the par value of ordinary shares issued
by the Company.
Share premium
Share premium represents the difference between the issue price
and the par value of ordinary shares issued by the Company.
Share-based payment reserve
Share-based payment reserve represents the cumulative
share-based payment expense for the Group's share option
schemes.
Other reserves
Other reserves represent costs incurred for shares issued in the
placing on Admission and the issue of agent recruitment shares.
Retained earnings
Retained earnings represent the cumulative profit and loss net
of distributions to owners.
Merger reserve
Merger reserve represents the difference between the cost of the
investment in a subsidiary undertaking and the equity of that
subsidiary acquired, on consolidation.
Consolidated Statement of Cash Flows: year ended 31 January
2020
2020 2019
GBP'000 GBP'000
Cash flows from operating activities
Loss for the year after income tax (11,467) (14,500)
Adjustments for:
Income tax (192) 6
Finance income (45) (85)
Finance expense 16 35
Amortisation 1,856 1,856
Depreciation 273 33
Agent recruitment expense 921 342
(Profit)/loss on disposal of FA - (9)
Share-based payment 493 344
_______ _______
Operating cash flows before movements in
working capital (8,145) (11,978)
Decrease in trade and other receivables (343) (1,224)
Increase in trade and other payables 1,517 1,591
Decrease in provisions (201) (601)
Tax (received)/paid 193 (22)
_______ _______
Net cash used in operating activities (6,979) (12,234)
Cash flows from investing activities
Finance income received 45 85
Acquisition of intangible assets (2,605) (2,150)
Acquisition of tangible assets (37) (155)
Acquisition of associate (418) -
Disposal of property, plant & equipment - 19
_______ _______
Net cash used in investing activities (3,015) (2,201)
Cash flows from financing activities
Finance expense paid (8) (35)
Proceeds from issue of shares 3,400 30,000
Repayment of lease liabilities (200) -
Repayment of borrowings - (1,217)
Expenses incurred for share listing (186) (1,814)
_______ _______
Net cash generated from financing activities 3,006 26,934
_______ _______
Net movement in cash and cash equivalents (6,988) 12,499
Cash and cash equivalents at the beginning
of the year 15,673 3,174
_______ _______
Cash and cash equivalents at the end of the
year 8,685 15,673
_______ _______
Cash and cash equivalents
For the purposes of the statement of cash flows, cash and cash
equivalents comprise cash at bank and in hand. This is consistent
with the presentation in the Statement of Financial Position.
Selected notes to the Consolidated Financial Statements: year
ended 31 January 2020
1. General information
The principal activity of the Company is that of a holding
company. The principal activity for the Group continued to be that
of providing online property portal services to businesses in the
estate and lettings agency industry under the trading name of
OnTheMarket.com.
The Company is a public company limited by shares and it is
incorporated and domiciled in the UK. The address of its registered
office is PO Box 450, 155-157 High Street, Aldershot, GU11 9FZ.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. They
have, unless otherwise stated, been applied consistently to all
periods presented.
2.1. Basis of preparation
The financial information set out above does not constitute the
Company's statutory accounts for the year ended 31 January 2020,
but is derived from those accounts. Statutory accounts for 31
January 2019 have been delivered to the Registrar of Companies and
those for 31 January 2020 will be delivered following the Company's
annual general meeting. The auditors have reported on those
accounts: their reports were unqualified, did not draw attention to
any matters by way of emphasis and did not contain statements under
s498 (2) or (3) of the Companies Act 2006.
While the financial information included in this results
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards ("IFRS"s), this announcement does not itself contain
sufficient information to comply with IFRSs. The Company expects to
publish full financial statements that comply with IFRSs in June
2019.
Measurement bases
The consolidated financial statements have been prepared under
the historical cost convention. Historical cost is generally based
on the fair value of the consideration given in exchange for
assets.
The preparation of the consolidated financial statements in
compliance with adopted IFRS requires the use of certain critical
accounting estimates and management judgements in applying the
accounting policies. The significant estimates and judgements that
have been made and their effects are disclosed in note 3.
2.2. Basis of consolidation
The consolidated financial statements incorporate those of
OnTheMarket plc and all of its subsidiaries (i.e. entities that the
Group controls through its power to govern the financial and
operating policies so as to obtain economic benefits). These are
adjusted, where appropriate, to conform to Group accounting
policies.
All intra-group transactions, balances and unrealised gains on
transactions between Group companies are eliminated on
consolidation. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset
transferred.
2.3. Going concern
The Group made a loss after tax for the year of GBP11.5m (2019:
GBP14.5m) and as at 31 January 2020 the Group had a net cash
balance of GBP8.7m (2019: GBP15.7m). At 31 May 2020, the Group had
a net cash balance of GBP8.8m and, excluding deferred creditor
payments of GBP2.3m, no borrowings.
In March 2020, the Group took actions to reduce costs and
conserve cash in light of the actual and anticipated impact of the
coronavirus crisis. Short-term revenues were reduced by a discount
the Group offered to its paying, full-tariff customers. Further
details on this and the corresponding actions taken to reduce costs
are set out in the Acting Chief Executive Officer's Report. The
objective of those actions was to conserve cash through managing
future expenditure commitments to be lower than anticipated
revenues, until there was greater clarity on the full impact of
COVID-19. Cash management has to date met internal
expectations.
The Directors have prepared and reviewed cash forecasts and
projections for the Group for the next 12 months in light of the
potential ramifications for Group revenues due to the COVID-19
crisis, among other factors. They have also conducted sensitivity
analyses and considered scenarios where the impact on future
revenues is more significant and more sustained than currently
experienced or anticipated, together with the mitigating actions
they may take in such circumstances, such as a reduction in
budgeted discretionary expenditure, a significant proportion of
which relates to advertising and marketing cost that can be reduced
materially at short notice.
Based upon these projections and analyses the Directors have a
reasonable expectation that the Group has adequate financial
resources to continue its operations for the foreseeable future and
to be able to meet its debts as and when they fall due.
In the light of this, the Directors consider the going concern
basis to be appropriate to the preparation of these financial
statements.
2.4. Adoption of new and revised standards and interpretations
Application of new and amended standards
For the preparation of these consolidated financial statements,
the following new or amended standards are mandatory for the first
time for the financial year beginning 1 February 2019.
- Annual Improvements to IFRS standards 2015-2017 cycle was
issued on 12 December 2017 and addresses the following
amendments:
- IFRS 3 "Business combinations" clarifies that an acquirer is
to remeasure the fair value of previously held interests at
acquisition date. The amendment is effective for annual periods
beginning on or after 1 January 2019.
- IFRS 11 "Joint arrangements" states that when a party
subsequently obtains joint control, it must not remeasure its
previously held interest. The amendment is effective for annual
periods beginning on or after 1 January 2019.
- IAS 12 "Income taxes" applies to income tax consequences of
dividends recognised on or after the beginning of the earliest
comparative period presented.
- IAS 23 "Borrowing costs" clarifies that once a qualifying
asset funded through specific borrowings becomes ready for its
intended use or sale, the rate applied on those borrowings is
included in the determination of the capitalisation rate applied to
general borrowings.
The amendments are effective for annual periods beginning on or
after 1 January 2019. No changes have been made in respect of these
amendments as they do not apply to the Group.
- IFRS 16, "Leases", is mandatory for annual reporting periods
beginning on or after 1 January 2019. The Group has initially
adopted IFRS 16, "Leases" from 1 February 2019, replacing the prior
lease guidance including IAS 17.
At inception, the Group assesses whether a contract contains a
lease. This assessment involves the exercise of judgement about
whether the Group obtains substantially all the economic benefits
from the use of that asset, and whether the Group has the right to
direct the use of the asset. Previously all of the Group's leases
were accounted for as operating leases (see note 24 of the annual
report and consolidated financial statements for the year ended 31
January 2019). Under IFRS 16 leases are accounted for on the
right-of-use model. On adoption of IFRS 16, the Group recognised
lease liabilities in relation to leases which had previously been
classified as "operating leases" under the principles of IAS 17,
"Leases". These liabilities were measured at the present value of
the remaining lease payments and discounted using a weighted
average incremental borrowing rate of 2.5%.
The standard permits either a full retrospective or a modified
retrospective approach for the adoption. The Group has adopted the
standard using the modified retrospective approach, with the
right-of-use asset being equal to the lease liability at the point
of original recognition, adjusted for prepaid or accrued lease
payments immediately before the date of initial application.
Therefore, the cumulative impact of the adoption is recognised in
retained earnings as of 1 February 2019 and the comparatives are
not restated. In applying IFRS 16 for the first time, the Group has
used the following practical expedients permitted by the
standard:
o the use of a single discount rate to a portfolio of leases
with reasonably similar characteristics;
o reliance on previous assessments on whether leases are
onerous; and
o the accounting for operating leases with a remaining lease
term of less than 12 months as short-term leases.
IFRS 16 permits lessees to elect not to apply the recognition
requirements to short-term leases and leases for which the
underlying asset is of low value. The Group has elected not to
recognise short-term leases of less than one year at inception and
low value leases which will continue to be reflected in the income
statement. This will be the ongoing policy adopted by the Group.
There are no right-of-use assets or lease liabilities recognised
for these leases and the expense is recognised in the income
statement on a straight line basis. The following reconciliation to
the opening balance for IFRS 16 lease liabilities as at 1 February
2019 is based upon the operating lease obligations at 31 January
2019:
Lease liabilities
GBP'000
Operating lease obligations at 31 January 2019 1,010
Relief option for short-term leases (532)
478
Discounted using the incremental borrowing rate
at 1 February 2019 (10)
Lease liabilities recognised at 1 February 2019 468
-------
The cumulative financial impact of adopting the modified
retrospective approach on the opening balances as at 1 February
2019 is as follows:
At 1 February IFRS 16 At 1 February
2019 (under adjustment 2019 (adjusted)
IAS 17)
GBP'000 GBP'000 GBP'000
Non-current
assets
Right-of-use
assets - 573 573
Current assets
Trade and other
receivables 3,286 (105) 3,181
Current liabilities
Lease liability - (186) (186)
Non-current
liabilities
Lease liability - (282) (282)
A depreciation charge under IFRS 16 of GBP233k was recognised in
the income statement for the year to 31 January 2020, along with
deemed interest of GBP8k. Depreciation on right-of-use assets is
charged to the income statement over the period of the lease
term.
Short-term leases of less than twelve months at inception and
low value leases are charged to the income statement evenly over
the life of the lease. In the year to 31 January 2020, charges of
GBP719k relating to short period and low value leases were included
in operating expenses.
2.5. Leases
Right-of-use assets
A right-of-use asset is recognised at commencement of the lease
and initially measured at the amount of the lease liability, plus
any incremental costs of obtaining the lease and any lease payments
made at or before the leased asset is available for use by the
group.
Payments for the right to use an underlying asset are payments
for a lease, regardless of the timing of those payments which may
be before the underlying asset is available for use by the
lessee.
The right-of-use asset is subsequently measured at cost less
accumulated depreciation and any accumulated impairment losses. The
depreciation methods applied are as follows:
Lease vehicles - Straight line 3 years
Lease liabilities
On commencement of a contract (or part of a contract) which
gives the group the right to use an asset for a period of time in
exchange for consideration, the group recognises a right-of-use
asset and a lease liability unless the lease qualifies as a
'short-term' lease or a 'low-value' lease.
Short-term leases - Where the lease term is twelve months or
less and the lease does not contain an option to purchase the
leased asset, lease payments are recognised as an expense on a
straight-line basis over the lease term.
Leases of low-value assets - Leases where the underlying asset
is 'low-value', lease payments are recognised as an expense on a
straight-line basis over the lease term.
Initial measurement of the lease liability
The lease liability is initially measured at the present value
of the lease payments during the lease term discounted using the
interest rate implicit in the lease, or the incremental borrowing
rate if the interest rate implicit in the lease cannot be readily
determined.
The lease term is the non-cancellable period of the lease plus
extension periods that the group is reasonably certain to exercise
and termination periods that the group is reasonably certain not to
exercise.
Lease payments include fixed payments, less any lease incentives
receivable, variable lease payments dependant on an index or a rate
(such as those linked to LIBOR) and any residual value guarantees.
Variable lease payments are initially measured using the index or
rate when the leased asset is available for use.
Subsequent measurement of the lease liability
The lease liability is subsequently increased for a constant
periodic rate of interest on the remaining balance of the lease
liability and reduced for lease payments.
Interest on the lease liability is recognised in profit or
loss.
Variable lease payments not included in the measurement of the
lease liability as they are not dependent on an index or rate, are
recognised in profit or loss in the period in which the event or
condition that triggers those payments occurs.
2.6. Intangible assets
In accordance with IAS 38, "Intangible Assets", expenditure
incurred on research and development is distinguished as relating
to a research phase or to a development phase.
Expenditure on research activities is recognised as an expense
in the period in which it is incurred.
An internally generated intangible asset arising from the
development and enhancement of the online platform,
OnTheMarket.com, and associated applications is recognised when the
development has been deemed technically feasible, the Group has the
intention to complete the development, probable future economic
benefits will occur, the Group has the required funds to complete
the development and when the Group has the ability to measure the
expenditure on the development reliably.
The amount initially recognised for internally generated
intangible assets is the sum of the directly attributable
expenditure incurred from the date when the intangible asset first
meets the recognition criteria defined above.
Capitalisation ceases when the asset is brought into use. Where
no internally generated asset can be recognised, development
expenditure is recognised in the income statement in the period in
which it is incurred.
Subsequent to initial recognition, internally generated assets
are reported at cost less accumulated amortisation and impairment
losses. Amortisation is charged on a straight-line basis over 4
years from when the asset is first brought into use. The current
intangible assets will be fully amortised in the next 1-4
years.
2.7. Investments in associates in the consolidated financial statements
Associates are entities over which the consolidated entity has
significant influence but not control or joint control.
Investments in associates are accounted for using the equity
method.
Under the equity method, the share of the profits or losses of
the associate is recognised in profit or loss and the share of the
movements in equity is recognised in other comprehensive income.
Investments in associates are carried in the statement of financial
position at cost plus post acquisition changes in the consolidated
entity's share of net assets of the associate. Goodwill relating to
the associate is included in the carrying amount of the investment
and is neither amortised nor individually tested for
impairment.
Dividends received or receivable from associates reduce the
carrying amount of the investment.
When the consolidated entity's share of losses in an associate
equals or exceeds its interest in the associate, including any
unsecured long-term receivables, the consolidated entity does not
recognise further losses, unless it has incurred obligations or
made payments on behalf of the associate.
The consolidated entity discontinues the use of the equity
method upon the loss of significant influence over the associate
and recognises any retained investment at its fair value. Any
difference between the associate's carrying amount, fair value of
the retained investment and proceeds from disposal is recognised in
profit or loss.
2.8. Share-based payments
Employee share schemes
The Group operates equity-settled share-based remuneration plans
for its employees. All goods and services received in exchange for
the grant of any share-based payment are measured at their fair
values.
Where employees are rewarded using share-based payments, the
fair value of employees' services is determined indirectly by
reference to the fair value of the equity instruments granted. This
fair value is appraised at the grant date and excludes the impact
of non-market vesting conditions (for example profitability and
sales growth targets and performance conditions).
All share-based remuneration is ultimately recognised as an
expense in profit or loss with a corresponding increase to equity.
If vesting periods or other vesting conditions apply, the expense
is allocated over the vesting period, based on the best available
estimate of the number of share options expected to vest.
Non-market vesting conditions are included in assumptions about
the number of options that are expected to become exercisable.
Estimates are subsequently revised if there is any indication that
the number of share options expected to vest differs from previous
estimates. Any adjustment to cumulative share-based compensation
resulting from a revision is recognised in the current period.
The number of vested options ultimately exercised by holders
does not impact the expense recorded in any period. Upon exercise
of share options, the proceeds received, net of any directly
attributable transaction costs, are allocated to share capital up
to the nominal (or par) value of the shares issued with any excess
being recorded as share premium.
The social security contributions payable in connection with the
grant of the share options are considered an integral part of the
grant itself and the charge will be treated as a cash-settled
transaction.
Agent recruitment shares
The Group issues shares to key agents who commit to long-term
listing agreements, in line with its strategy to grow the agent
shareholder base. Shares are issued in return for payment of the
nominal share value in cash and, in some cases, in return for share
premium in non-cash consideration relating to the long-term listing
agreements signed.
Upon contract commencement an agent recruitment share reserve is
credited (shown within other reserves in the financial statements)
and a prepayment created, based on the value of the shares, which
is then amortised over the life of the contract. Upon the issue of
shares to the agents, which predominantly takes place on a
quarterly basis, the relevant amount of the balance recorded in
other reserves is transferred to share capital and share premium,
based on the market share price at the date of issue. The
prepayment is adjusted to reflect any increase arising due to a
higher share price at issue compared with contract
commencement.
3. Critical accounting judgements and key sources of estimation uncertainty
The preparation of the consolidated financial statements
requires management to make judgements, estimates and assumptions
concerning the future which impact the application of accounting
policies and reported amounts of assets, liabilities, income and
expenses. The accounting estimates resulting from these judgements
and assumptions seldom equal the actual results but are based on
historical experiences and future expectations.
Critical accounting judgements
The following are the critical judgements, apart from those
involving estimations (which are dealt with separately below), that
the directors have made in the process of applying the Group's
accounting policies and that have the most significant effect on
the amounts recognised in the financial statements;
Revenue recognition
A material number of customers have for some time been
defaulting on the payment terms of their contracts. Management have
made judgements as to whether there is any current intention to pay
by these customers and, where there is judged not to be, the
contract is deemed not to meet the contract recognition criteria
under IFRS 15 and hence the amounts due are not included within
revenues.
Investment in associate
The Group acquired 20% of the shares in Glanty Limited during
the year. The terms and conditions of the arrangement include a
call option for the Group to acquire the remaining 80% of shares in
Glanty Limited. The Group therefore must consider whether the
potential voting rights are substantive so that the Group has
control of, and not just significant influence over, Glanty
Limited. This will impact whether Glanty Limited is treated as a
subsidiary or an associate.
In order to determine whether it has power over Glanty Limited,
the Directors are required to consider potential voting rights that
the Company holds and whether these rights are substantive, as
these could give the Group and Company the current ability to
direct the relevant activities of Glanty Limited.
The Directors consider that, despite the Group holding an option
over the remaining 80% of the shares in Glanty Limited, these
potential voting rights are not substantive and therefore the
Directors do not consider that control has been achieved. This is
because the time period for delivery of the remaining shares means
that the Company cannot immediately direct the activities of Glanty
Limited upon exercise of the option. On this basis, the investment
in Glanty Limited has been classified as an investment in an
associate.
Key sources of estimation uncertainty
Impairment of development costs
Development costs are recognised in respect of the online
property portal. These costs are not considered to be impaired due
to the ongoing economic benefit obtained from the portal. In
determining that ongoing economic benefit and determining an
estimate of net realisable value, management is required to make
judgements about the ability to generate revenues and profits from
the portal under existing contracts, many of which are long-term,
as well as judgements about the growth of future revenues and
profits from new paying agent customers.
4. Expenses by nature
Expenses are comprised of:
2020 2019
GBP'000 GBP'000
Depreciation 273 33
Amortisation 1,856 1,856
Staff costs (note 6) 8,901 6,136
Operating lease expense - property - 664
Operating lease expense - other - 177
Short-term lease expenses 719 -
Advertising expenditure 11,985 14,905
Other administrative expenses 4,255 4,040
________ ________
27,989 27,811
________ ________
5. Specific professional fees, share-based payments and non-recurring items
2020 2019
GBP'000 GBP'000
Professional fees 2,290 797
Compensation (1,057) (200)
Agent recruitment charges 921 565
________ ________
2,154 1,162
________ ________
Professional fees incurred were predominantly in relation to
ongoing litigation. The costs relate to one off events that are not
expected to be recurring and they have therefore been classified
separately. Compensation received was in respect of ongoing
litigation.
Agent recruitment charges relate to share-based charges arising
on the issue of shares to agents in return for committing to
long-term listing agreements, in line with the Group's strategy to
grow the agent shareholder base.
6. Employees and Directors
2020 2019
Group GBP'000 GBP'000
Staff costs (including Directors) comprise:
Wages and salaries 9,076 6,727
Social security costs 1,148 824
Pension 132 63
________ ________
10,355 7,614
________ ________
The amounts above include GBP1,454k (2019: GBP1,478k) of staff
costs that have been capitalised to intangible assets.
The average monthly number of persons 2020 2019
employed Number Number
by the Group during the year was:
Non-Executive Directors 2 2
Marketing, sales and administration 111 75
IT 33 31
________ ________
146 108
________ ________
7. Earnings per share
Numerators: Earnings attributable to
equity
2020 2019
GBP'000 GBP'000 2019
Loss for the year from continuing operations GBP'000
attributable to owners of the Company (11,467)
(14,500)
________ ________
Total basic earnings and diluted earnings (11,467) (14,500)
________ ________
No. No.
Denominators: Weighted average number
of equity shares
Basic and diluted 63,742,852 60,371,132
_________ _________
As the Group made a loss for the year there is no dilutive
effect. Instruments that would dilute earnings per share have not
been included as these are anti-dilutive. See share options
disclosed in note 11 for details of instruments.
8. Right-of-use assets and lease liabilities
The Group has lease contracts for motor vehicles.
IFRS 16, "Leases", is effective for annual periods beginning on
or after 1 January 2019 and as such has been adopted by the Group
this financial year.
The amounts presented in the financial statements are as
follows:
Right-of-Use Assets
Motor Vehicles
GBP'000
At 1 February 2019 573
Additions 33
Depreciation charge (233)
________
At 31 January 2020 373
________
Lease Liabilities
Motor Vehicles
GBP'000
At 1 February 2019 468
Lease additions 34
Interest expense 8
Lease payments (200)
________
At 31 January 2020 310
________
Non-current lease liabilities amount to GBP110k and are all due
between 1-5 years.
At year end, the Group had future short-term minimum lease
payments under non-cancellable operating leases in respect of land
and buildings amounting to GBP800k within one year and GBP136k
between one and five years. In the year ended 31 January 2020, a
charge of GBP719k was recognised in respect of short-term
leases.
At 31 January 2020, the Group had GBP104k commitments within one
year and GBP62k commitments between one and five years for leases
that had not commenced at that date.
Note 2.4 shows the reconciliation of the opening balance for
IFRS 16 lease liabilities as at 1 February 2019.
9. Intangible assets
Development
Group costs
GBP'000
Cost:
At 1 February 2018 6,600
Additions - internally developed 2,150
________
At 31 January 2019 8,750
Amortisation:
At 1 February 2018 2,946
Charge for the year 1,856
________
At 31 January 2019 4,802
Net book value:
At 31 January 2019 3,948
________
Cost:
At 1 February 2019 8,750
Additions - internally developed 2,605
________
At 31 January 2020 11,355
Amortisation:
At 1 February 2019 4,802
Charge for the year 1,856
________
At 31 January 2020 6,658
Net book value:
At 31 January 2020 4,697
________
Amortisation is included within administrative expenses in the
income statement.
The development costs relate to those costs incurred in relation
to the development of the Group's online property portal,
OnTheMarket.com. The development costs capitalised above are
amortised over a period of 4 years which represents the period over
which the Directors expect the Group to consume the asset's future
economic benefits. The development costs are amortised from the
point at which the asset is ready for use within the business.
10. Investments in associates
GBP'000
Group and Company
At 31 January -
2019
Additions 985
________
At 31 January
2020 985
________
The Group and Company have the following investments in
associated undertakings:
Class of Nature of Proportion
shares held business of ownership
interest
Glanty Limited Ordinary shares(1) Property services 20%
(1) The Group and Company also hold an option to acquire the
remaining 80%.
Glanty Limited is incorporated in the United Kingdom and its
registered address is 4 Prince Albert Road, London, NW1 7SN.
No share of profit or loss from associate has been recognised on
the basis the associate was not acquired until 21 December 2019 and
the profit or loss from this date to 31 January 2020 is not
material to the Group financial statements. At 31 December 2019,
the date to which Glanty Limited's last accounts were drawn up,
Glanty Limited had total assets of GBP3,107k and total liabilities
of GBP2,150k.
Total consideration amounted to GBP797k, of which GBP230k formed
the initial consideration and had been paid to 31 January 2020.
GBP567k relates to deferred consideration and has been recognised
in other payables. The total amount capitalised of GBP985k includes
directly attributable legal costs of GBP188k.
As part of the agreement, OnTheMarket was granted a call option,
under which it has the right, but not the obligation, to enter into
a share purchase agreement to acquire the remaining shares in
Glanty for an initial consideration of approximately GBP1,500k
(payable in cash or shares at OnTheMarket's option), plus a revenue
and EBITDA based earnout arrangement, alongside the repayment of
approximately GBP1,400k of loans.
The call option is exercisable for a period of 15 months from 23
December 2019, ending on 23 March 2021. Should the call option
lapse, OnTheMarket has a put option to sell its shares to an
existing shareholder of Glanty for GBP797k. The same Glanty
shareholder also has a call option to acquire OnTheMarket's shares
for GBP797k in the event that the Company's call option lapses.
The Directors have not recognised the fair value of the call and
put option in the balance sheet at 31 January 2020 on the basis the
value ascribed to these is immaterial.
The associate's principal activity is that of property services,
and its initial product "teclet" is designed to automate the
lettings process and bring efficiency gains to agents, landlords
and tenants. The acquisition is considered to be strategic to the
Group's activities, because the associate's principal activities
are the provision of value-added services to customers of the
Group.
11. Share-based payments
Agent recruitment shares
The Group issued agent recruitment shares during the year.
3,258,567 ordinary shares were granted. Fair value was determined
in accordance with the accounting policy set out in note 2.8. The
weighted average fair value of shares granted was GBP1.05.
Management and employee share schemes
The Group operates management and employee equity settled share
schemes. No options over its shares were awarded in the year to 31
January 2020.
The Company has granted share options under its Management
Incentive Plan, its employee share scheme and its Company Share
Option Plan. The unexercised options at the end of the year are
stated below:
Grant date of option Expiry Option exercise Fair 2020 2019
per share value
GBP GBP Number Number
Granted 15 September
2017 2027 nil 1.48 7,467,525 7,940,842
Granted 19 September
2017 2027 nil 1.48 491,137 512,953
Granted 10 October
2017 2027 nil 1.48 14,544 39,998
Granted 20 November
2018 2028 1.65 0.69 639,864 742,913
Granted 4 December
2018 2028 nil 1.13 42,424 42,424
______-__ ______-__
Outstanding at 31
January 8,655,494 9,279,130
The value of employee services provided of GBP493k (2019:
GBP344k) has been charged to the income statement.
Management Incentive Plan
Further details of the management incentive share option plan
are as follows:
Weighted
average
2020 exercise
price
Number GBP
Opening at 1 February 7,789,327 -
Granted - -
Exercised (473,317) -
________ ________
Outstanding at 31 January 7,316,010 -
Exercisable at 31 January 5,756,143 -
These share options expire 10 years after the date of grant and
have a nil exercise price. 173,317 are exercisable on the second
anniversary of admission of the Company to AIM (9 February 2020)
and 1,386,549 are exercisable on the fifth anniversary (9 February
2023). The remaining 5,756,143 options are exercisable immediately,
however any shares arising from exercise are subject to a
restriction on sale such that shares deriving from up to 10% of the
options are available to be sold after the first anniversary of
admission of the Company to AIM (9 February 2019), a further 10%
after the second anniversary (9 February 2020) and the remainder
after the fifth anniversary (9 February 2023). The fair value of
all these options was charged to the profit and loss account in
full in the year to 31 January 2018.
During the year 473,317 options were exercised. The weighted
average share price at exercise was GBP0.995p.
Employee share scheme
Further details of the employee share option plan are as
follows:
Weighted
average
2020 exercise
price
Number GBP
Opening at 1 February 746,890
Forfeited in the period (47,270) -
________ ________
Outstanding at 31 January 699,620 -
Exercisable at 31 January - -
These share options expire 10 years after the date of grant.
Share options granted under this scheme have a nil exercise price
and vest 3 years after the date of grant. The fair value of these
share options is charged to the profit and loss account over the
vesting period. The share options are forfeited should the employee
leave.
Company Share Option Plan
Further details of the company share option plan are as
follows:
Weighted
average
2020 exercise
price
Number GBP
Outstanding at 31 January 742,913 1.65
Forfeited in the period (103,049) 1.65
________ ________
Outstanding at 31 January 639,864 1.65
Exercisable at 31 January - -
These share options expire 10 years after the date of grant.
Share options granted under this scheme have an exercise price of
GBP1.65 and vest 3 years after the date of grant. The fair value of
these share options is charged to the profit and loss account over
the vesting period. The share options are forfeited should the
employee leave.
National Insurance Contributions
National insurance contributions are payable by the Group in
respect of all share-based payment schemes except the Company Share
Option Plan. A provision has been recognised at 13.8%.
The following have been expensed (2019: recognised as income) in
the consolidated income statement:
2020 2019
GBP'000 GBP'000
Share-based payment charge 493 344
Employer's social security on share options (138) (601)
_______ _______
355 (257)
12. Share capital
Share capital issued and fully paid 2020 2019
No. No.
Opening Ordinary shares of GBP0.002
each 61,493,611 35,530,263
Issued in the year 8,589,027 25,963,348
_______ _______
Closing Ordinary shares of GBP0.002
each 70,082,638 61,493,611
2020 2019
GBP'000 GBP'000
Ordinary shares of GBP0.002 each 140 123
All issued shares are fully paid. The holders of ordinary shares
are entitled to receive dividends as declared from time to time and
are entitled to one vote per ordinary share at general meetings of
the Company.
On incorporation, the Company issued 2 ordinary shares of
GBP0.002 each at par.
By a resolution dated 22 December 2017 the Directors are
authorised to issue up to 40,000,000 shares to estate agents in
connection with such agents signing listing agreements with the
Company or its subsidiaries. The Directors confirmed that at most
they will issue 36,363,636 under this authority, which expires on
22 December 2022. As at 31 January 2020, 4,218,860 shares had been
issued under this authority (2019: 960,293) leaving 32,144,776
shares authorised but unissued (2019: 35,403,343).
The Company issued 220,319 ordinary shares on 28 March 2019,
528,122 ordinary shares on 25 April 2019, 1,031,544 ordinary shares
on 31 July 2019, 1,071,035 ordinary shares on 31 October 2019 and
407,547 ordinary shares on 31 January 2020 to certain new and
existing agents following them having earlier signed new long-term
listing agreements to advertise all of their UK residential sales
and letting properties on OnTheMarket.com. These shares were
granted for cash at nominal value and for additional non-cash
consideration. The shares are accounted for as set out in note
2.8.
The Company issued 173,317 ordinary shares on 8 February 2019,
150,000 ordinary shares on 15 February 2019 and a further 150,000
ordinary shares on 28 March 2019, in each case following the
exercise of options by employees.
The Company issued 4,857,143 ordinary shares on 30 December 2019
as part of a placing to fund its investment in its associate,
Glanty Limited (note 10).
Share option scheme
At the year end, there were a total of 8,655,494 (2019:
9,279,130) share options under the Company's share option plans
(note 11), which on exercise can be settled either by the issue of
ordinary shares or by market purchases of existing shares.
13. Controlling parties
The Directors do not consider there to be a single immediate or
ultimate controlling party.
14. Post balance sheet events
Board and management changes
On 27 February 2020 Rupert Sebag-Montefiore joined as an
independent Non-Executive Director and Chairman of the Remuneration
Committee.
On 9 March 2020, the Group announced the termination of
employment of Ian Springett, Chief Executive Officer, with
immediate effect. The Board believed a new CEO would be better able
to oversee the next stage in the development of the Group and its
commitment to becoming a strong, agent-backed, profitable and
technology-enabled business.
Chief Financial Officer Clive Beattie agreed to take on the
additional role of Acting Chief Executive Officer while the Board
conducted a formal process to appoint a permanent Chief Executive
Officer.
Litigation
In March 2020 the Group announced that an out of court
settlement had been concluded between Agents' Mutual and Gascoigne
Halman and Connells Limited. The agreement, the terms of which are
confidential, ends all litigation proceedings between the
parties.
COVID-19
The emergence of the COVID-19 crisis and the restrictions on
movements imposed by the UK government in March 2020 had a
substantial impact on the ability of the Group's customers to run
their businesses.
In light of this, the Group announced a series of measures to
provide value and support to agents, safeguard jobs within the
Group and conserve cash. Further details can be found within the
Post period end developments and Outlook sections of the Acting
Chief Executive Officer's report.
Whilst the effects of the COVID-19 crisis had no impact on the
assets and liabilities of the Group or Company at 31 January 2020,
as a result of the ongoing uncertainty it is too early to give
guidance on the potential impact of COVID-19 on the Group and
Company in the current financial year.
Share issues
Since year end a further 174,879 ordinary shares have been
issued to agents alongside listing agreements and 923,071 ordinary
shares have been issued following the exercise of options by
employees.
There have been no other post balance sheet events.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR ZZGMVLGGGGZM
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June 11, 2020 02:00 ET (06:00 GMT)
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