TIDMOTMP
RNS Number : 8503B
OnTheMarket plc
13 October 2020
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
13 October 2020
ONTHEMARKET PLC
("OnTheMarket", "OTM", the "Group" or the "Company")
INTERIM RESULTS FOR THE SIX MONTHSED 31 JULY 2020
CONTINUED OPERATIONAL PROGRESS WITH CLEAR STRATEGY FOR
GROWTH
OnTheMarket plc (AIM: OTMP), the majority agent-owned company
which operates the OnTheMarket.com property portal, today announces
its unaudited interim results for the six months ended 31 July 2020
("H1 20/21").
Highlights
Period ended 31 July 2020 2019 Change
Group revenue GBP10.2m GBP8.0m 28%
Adjusted operating profit / GBP0.8m GBP(6.7)m GBP7.5m
(loss)(1)
Operating profit / (loss) GBP0.7m GBP(7.2)m GBP7.9m
Profit / (loss) after tax GBP0.7m GBP(7.0)m GBP7.7m
Period-end net cash GBP9.8m GBP8.7m(2) GBP1.1m
ARPA(3) GBP124 GBP108 15%
Average advertisers(4) listed 13,592 12,434 9%
Total advertisers at 31 Jul 13,757 12,543 10%
Agency branches at 31 Jul 12,245 12,543 (2)%
New homes developments at 31 1,512 Nil N/a
Jul
Traffic/visits(5) 117m 121m (3)%
Average monthly leads per advertiser 105 94 12%
-- Revenue and ARPA up 28% and 15% respectively, despite
COVID-19 related customer support discounts of GBP1.8m and the
curtailment of contract conversion activity.
-- Group achieves profitability as a result of measures
implemented to reduce costs and conserve cash. In particular,
marketing expenditure was down 67% to GBP2.2m (H1 19/20:
GBP6.6m).
-- Strong balance sheet with period-end net cash of GBP9.8m and,
excluding deferred creditor payments of GBP2.0m, no borrowings (31
January 2020: GBP8.7m and deferred creditors of GBP0.7).
-- Agency branches listed at 31 July 2020 remain robust, despite
COVID-19 giving rise to some cancellations and office closures.
-- 1,512 new home developments listed following the launch of
the new homes offering in September 2019.
-- Traffic and lead growth impacted by the COVID-19 lockdown
restrictions, which effectively suspended UK housing market
activity .
-- As lockdown restrictions were effectively lifted,
year-on-year visits in July 2020 increased 173% to 27.5m and
average leads per advertiser increased 56% to 148.
Post period end strategic and operational highlights:
-- At 30 September 2020, the Group had almost 3,800 estate and
letting agents as shareholders, or under contract to become
shareholders, operating 6,800 offices between them.
-- Targeted, data-driven approach to resumption of marketing
investment to support consumer engagement and lead generation for
advertisers.
-- Continued growth in new home development listings with the
addition of Taylor Wimpey plc's developments to the portal, joining
other leading housebuilders including Barratt Developments PLC,
Persimmon Plc and Bellway plc ; seven of the 10 largest
housebuilders now list at OnTheMarket.
-- Strong cost and cash management maintained. As at 30
September 2020, the Group had net cash of GBP10.3m and, excluding
deferred creditor payments of GBP2.0m, no borrowings.
-- Assuming the UK housing market remains open and active, the
Group expects revenues and costs to increase from H1 20/21 levels
in the second half year to 31 January 2021, as it invests to
enhance service and increase value to customers. The Group expects
to achieve a broadly breakeven adjusted operating profit position
for the full financial year .
-- Following the departure of Ian Springett in March 2020, Jason
Tebb has been appointed as Chief Executive Officer, with effect
from 14 December 2020.
Clive Beattie, Acting Chief Executive Officer of OnTheMarket
plc, commented:
"We started the year strongly with trading in February and the
first half of March in line with management expectations. However,
the first half of the financial year quickly became dominated by
the impact of the COVID-19 pandemic.
"Our focus during the period has been to safeguard employee
well-being, provide value and support to our agent and housebuilder
customers and to manage costs and conserve cash.
"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.
"We continue to believe that our differentiated proposition,
with agents at the heart of our strategy as both customers and
majority shareholders, provides a strong foundation for future
growth. 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.
" I thank all my colleagues for their hard work during what have
been unprecedented and extremely challenging times. Their
professionalism and dedication has enabled us to continue to
deliver value for all of our stakeholders."
Footnotes
1) Adjusted operating loss or profit is defined as operating
loss or profit before share based payments (including charges
relating to shares issued for agent recruitment), share of profit
or loss from associates, 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 loss or profit. Please see the Financial
Review and Key Performance Indicators section below for a
reconciliation of operating loss / profit to adjusted operating
loss / profit.
2) Period-end net cash in the 2019 column is net cash at 31
January 2020. Net cash at 31 July 2019 was GBP8.8m.
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) Visits comprise individual sessions on OnTheMarket's web
based portal or mobile applications by users for the period
indicated as measured by Google Analytics.
6) Unless otherwise stated, all figures refer to the six months
ended 31 July 2020 and comparative figures are for the six months
ended 31 July 2019 ("H1 19/20").
For further information, please contact:
OnTheMarket
Clive Beattie, Acting Chief Executive
Officer 0207 930 0777
Tulchan Communications (Financial PR 0207 353 4200
Adviser) onthemarket@tulchangroup.com
James Macey White
Giles Kernick
William Booth
Zeus Capital (Nominated Adviser/Joint
Broker)
Jamie Peel, Martin Green, Daniel Harris
(Corporate Finance) 0203 829 5000
John Goold, Benjamin Robertson (Broking)
Shore Capital (Joint Broker)
Daniel Bush, John More (Corporate Finance)
Fiona Conroy (Corporate Broking) 0207 408 4090
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 almost 3,800 estate and letting agents as shareholders, or
under contract to become shareholders, operating 6,800 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.
This announcement contains forward-looking statements that are
based on current expectations or beliefs, as well as assumptions
about future events. These forward-looking statements can be
identified by the fact that they do not relate only to historical
or current facts. Forward-looking statements often use words such
as anticipate, target, expect, estimate, intend, plan, goal,
believe, will, may, should, would, could, is confident, or other
words of similar meaning. Undue reliance should not be placed on
any such statements because they speak only as at the date of this
document and, by their very nature, they are subject to known and
unknown risks and uncertainties and can be affected by other
factors that could cause actual results, plans and objectives, to
differ materially from those expressed or implied in the
forward-looking statements. There are a number of factors which
could cause actual results to differ materially from those
expressed or implied in forward-looking statements. The Group
undertakes no obligation to revise or update any forward-looking
statement contained within this announcement, regardless of whether
those statements are affected as a result of new information,
future events or otherwise, save as required by law and
regulations.
Acting Chief Executive Officer's Report
The period began in line with management expectations, however
it was dominated by the onset of the COVID-19 pandemic and
associated public health restrictions, which had a profound impact
on the UK residential property market . As previously announced,
the Group took a number of measures to safeguard employee
well-being, provide value and support to agent and housebuilder
customers and to manage costs and conserve cash. These measures
have proved effective and positioned the Group well for the
future.
In particular, the Group acted decisively before the formal
lockdown restrictions came into place to support customers through
this period of uncertainty by offering full-tariff listing
agreement discounts. Accordingly, revenue growth in the period was
tempered by these discounts, which amounted to GBP1.8m, as well as
by the suspension of activity to convert agents on short-term,
introductory free of charge contracts to paying contracts. Despite
these actions, revenues were up 28% versus the previous half
year.
The measures that were implemented to reduce costs and conserve
cash proved effective. The Group achieved an adjusted operating
profit of GBP0.8m (H1 19/20; adjusted operating loss of GBP6.7m).
This includes a reduction of GBP0.5m in staff costs, which arose
from the utilisation of the Coronavirus Job Retention Scheme and
from voluntary pay waivers by staff, and from a reduction in
marketing expenditure, which was down 67% to GBP2.2m (H1 19/20:
GBP6.6m) in the period. However, it excludes GBP0.3m of government
grant income received under the Coronavirus Job Retention Scheme,
which is treated as a non-recurring item. Adjusted EBITDA (being
adjusted operating profit / (loss) before depreciation and
amortisation) was a profit of GBP2.1m (H1 19/20: loss of GBP5.6m)
and the Group achieved a profit after tax of GBP0.7m (H1 19/20:
loss of GBP7.0m).
Following the easing of national lockdown restrictions in May
2020, and despite a substantial reduction in advertising
expenditure, consumer engagement with OnTheMarket.com has been very
strong and the record leads we have achieved indicate to us that
those consumers most active in the property market visit our
portal. We believe that our "New & exclusive" properties, which
sees many agents choose to list properties on the site in advance
of listing them on Rightmove or Zoopla, together with 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.
During the period, we were also pleased to welcome further
agents as shareholders in the Company. Agents remain at the core of
our strategy, as demonstrated by the discounts we quickly offered
to customers to help mitigate the impact of COVID-19 on their
businesses. However, more than just a short-term response, we
believe our unique offering, combining agent ownership with a
long-term commitment to sustainably fair pricing, sets us apart in
the portals space. We look forward to working further with agents
to provide them with a valued, competitive service and we are
grateful to all those supporting us as customers and
shareholders.
At 30 September 2020, the Group had almost 3,800 estate and
letting agents as shareholders, or under contract to become
shareholders, operating 6,800 offices between them
On 9 March 2020 the Group announced the departure of Ian
Springett, then Chief Executive Officer. On 1 September 2020, the
Group was pleased to announce the appointment of Jason Tebb as
Chief Executive Officer. Jason will start on 14 December 2020,
bringing extensive property and estate agency experience across
digital and physical markets, having been Group COO of Ultimate
Holdings for the last three years, a group of companies,
specialising in property investment and finance, property
management, property development and property technology. Prior to
this, Jason successfully launched, scaled and exited Ivy Gate, an
estate and letting agency, was a Regional Managing Director at Main
Market listed LSL Property Services plc for three years and held
senior management positions at agents Chestertons Limited and
Foxtons Group plc.
Operational Review
COVID-19 gave rise to unique and unprecedented operational
challenges during the period and it was far from "business as
usual".
The restrictions imposed by Government in response to the
COVID-19 pandemic all but closed the UK housing market, placing
substantial stress on the businesses of our customers. Whilst the
Group sought to provide them support through discounts,
nevertheless the impact led to some agency closures and customer
cancellations, as customers were forced to reduce their costs in
the face of the uncertainty that existed at that time. The various
Government support schemes played an essential role in easing the
financial burden on businesses and we, like many of our customers,
utilised the Coronavirus Job Retention Scheme, without which there
would very likely have been a significant number of
redundancies.
As the full lockdown restrictions were eased in May and the UK
housing market reopened, agents and new homes builders saw
extremely high levels of activity. The combination of demand built
up during lockdown and before, a reassessment of housing wants and
needs by many of the British public and the stamp duty relief
introduced by the Chancellor led to significant activity in the
later part of the half-year period to 31 July 2020 and beyond. This
activity undoubtedly eased the financial pressure our customers
were under.
In a further response to COVID-19, the Group choose to suspend
conversion activity in order to support agents given the financial
stress and uncertainty that weighed on their businesses. However,
the implications of the pandemic have given rise to an increased
focus on portal costs and ownership within the estate agency
industry, with many agents expressing their attraction to our
differentiated proposition and majority agent ownership. In
response, we introduced new full-tariff contracts, albeit with an
initial free listing period to September 2020 to provide support
whilst the market recovered, which offered agents shares alongside
their listing agreements. As at 31 July 2020, 581 branches were
contracted under these new agreements.
New homes advertiser numbers continued to grow strongly through
the period, with 1,512 developments listed at 31 July 2020, up 69%
from 894 at 31 January 2020, momentum which continued after the
period-end with the addition of Taylor Wimpey's new home
developments to the portal. Our objective is to deliver
housebuilders increasing value through access to highly-motivated
property seekers and the delivery of incremental high quality
leads.
Whilst traffic and leads were lower in the months of March,
April and May due to the effective suspension of the UK residential
housing market, they were otherwise very strong, indicating high
levels of consumer engagement amongst the property-active
public.
For the six month period overall, visits were down only 3% at
116.6m (H1 19/20: 120.7) and average leads per advertiser per month
were up 12% to 105 (H1 19/20: 94). In July 2020, as property-market
activity increased, visits were up 173% year-on-year at 27.5m and
average leads per advertiser were up 56% year-on-year at 148.
Litigation
On 13 March 2020, the Group was pleased to announce that it had
reached an out of court settlement between Agents' Mutual Limited
and Gascoigne Halman Limited and Connells Limited. The agreement
ended all litigation proceedings between the parties.
Post period-end developments
Having quickly taken the necessary actions to safeguard
employees and support customers as the pandemic took hold, the
Group focussed on actions to allow it to emerge from the crisis in
a strong position to grow the business for the benefit of all
stakeholders.
Whilst the long-term implications of the COVID-19 pandemic are
not yet known, it has become clear that some of the changes to our
way of life and to business practices will undoubtedly continue for
some time. In order to adapt to the new way of working, the Group
undertook a review of its operating practices and procedures. This
review unfortunately led to a limited number of redundancies, but
will allow OnTheMarket to operate efficiently whilst maintaining
high levels of service for advertisers and consumers.
The Group continued to offer discounts to customers during
August and September, totalling a further GBP0.8m. As the UK
residential housing market has reopened, we have begun to engage
with those customers on free listing agreements to ask them to
support our majority-agent owned portal by signing up to a paying
contract. With very competitive rates offering excellent value for
money and a choice of contracts, from full-tariff contracts with
associated share issuance to shorter-term, discounted contracts, we
believe it is essential that agents act over the coming months to
introduce genuine competition into the portals market by supporting
OnTheMarket. Activity in the housing market has rebounded strongly,
but with future uncertainty over the macro-economic environment,
the COVID-19 pandemic has brought into focus the need for a portal
with the interests of its customers at its core and one committed
to sustainably fair pricing. Whilst the Group believes it is now
appropriate to remove firms who have listed under free introductory
contracts, which were effectively extended through lockdown, the
Group will continue to engage with them over the coming months,
asking them to consider the value for money OnTheMarket offers,
alongside the opportunity to become shareholders in the
majority-agent owned portal, and to rejoin under paying contracts.
OnTheMarket has achieved strong consumer engagement and it is
equitable that only paying agents benefit from the leads and
services it provides.
Growth in the number of branches under paying contracts remains
key to the Group's ongoing success and supports increased
investment in service, marketing and product development, to the
benefit of all our agent customers and shareholders.
In our new homes segment we have seen continued growth and were
pleased to reach a listing agreement with Taylor Wimpey plc, one of
the UK's largest housebuilders. We now have 7 of the largest 10 UK
housebuilders listing on OnTheMarket.com, including Barratt
Developments PLC, Persimmon Plc and Bellway plc.
Agency branches listed at 30 September 2020 remain robust,
despite COVID-19 giving rise to some cancellations and office
closures. 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.
As at 30 September 2020, the Group had:
-- 13,472 total advertisers listed, comprising 11,799 agency
branches and 1,673 new homes developments; and
-- over 9,400 agency branches under paying contracts, including
c3.5k branches on discounted rates.
Traffic and leads have remained strong in August and September,
with visits averaging over 26m and leads over 1.9m. To support our
customers we have begun to increase our investment in marketing,
albeit we remain focussed on the need to manage our costs and
conserve cash as far as possible given the uncertain economic
outlook.
As well as targeted investment in traditional marketing
activities, following a review of our marketing strategy we have
also begun trialling new approaches to data analysis which are
designed to improve the effectiveness of our consumer advertising
and hence continue to increase the quantity and quality of our
leads to customers. This will represent an area of ongoing
investment which we hope will provide meaningful results in the
months ahead.
Outlook
The Group's strategy is to provide a first-class property
listings service for property advertisers and property seekers
alike. As consumers have become increasingly engaged with our
portal, we are delivering high numbers of good quality leads to our
customers at very competitive rates.
Our objective now is to continue to grow the number of paying
advertisers by working with agents and housebuilders and
encouraging them to support the portal. Being majority agent owned
and with our customers' interests at the core of our strategy, we
look forward to providing an ever-improving service and product
range to support that mission.
As at 30 September 2020, the Group had net cash of GBP10.3m and,
excluding deferred creditor payments of GBP2.0m, no borrowings.
Cash balances will naturally fluctuate as creditor and tax
payments fall due, but the Company has continued to take a
disciplined approach to managing its cost base and cash position,
including through a significant reduction in marketing expenditure
from late March 2020 to 30 September 2020. Cost management remains
a focus for the Group going forward.
Assuming the UK housing market remains open and active, the
Group expects revenues and costs to increase from H1 20/21 levels
in the second half year to 31 January 2021, as it invests to
enhance service and increase value to customers. The Group expects
to achieve a broadly breakeven adjusted operating profit position
for the full financial year.
The operational and financial progress that the Group has
delivered both during the period and since the period end, in the
face of very challenging market conditions, is a testament to the
strength of our offering and the value we deliver for our
customers. Whilst the Board remains cautious about the
macro-economic environment, we remain confident that the actions we
have taken to steer the business through some of the most difficult
housing market conditions in recent memory have positioned the
Group well for future growth.
I thank all my colleagues for their hard work during what have
been unprecedented and extremely challenging times. Their
professionalism and dedication has enabled us to continue to
deliver value for all of our stakeholders.
Clive Beattie
Acting Chief Executive Officer
Financial Review and Key Performance Indicators
Financial review
Revenue for the period was up 28% at GBP10.2 million (6 months
to 31 July 2019: GBP8.0 million) despite COVID-19 related customer
support discounts of GBP1.8m and the curtailment of contract
conversion activity.
The reported operating profit of the Group was GBP0.7m (6 months
to 31 July 2019: loss of GBP7.2 million) and is further analysed as
follows:
H1 20/21 H1 19/20
GBP'000 GBP'000
Reconciliation of operating profit/(loss)
to adjusted operating profit/(loss):
Operating profit/(loss) 666 (7,167)
Adjustments for:
Share-based employee incentives 416 268
Compensation net of professional fees
incurred (974) (160)
Share-based agent recruitment charges 605 319
Government grant (325) -
Payments in relation to loss of office 304 -
Non-recurring staff related costs 133 -
_________ _________
Adjusted operating profit/( loss) 825 (6,740)
_________ _________
The basic and diluted profit per share in the period were 0.94p
and 0.85p respectively (H1 19/20: basic and diluted loss per share
11.16p).
The Group ended the period with cash of GBP9.8 million and,
excluding deferred creditor payments of GBP2.0m, no borrowings (31
January 2020: GBP8.7 million and deferred creditors of GBP0.7).
Revenue and ARPA by operating segment
Following the launch of the Group's new homes segment in
September 2019, the Group reports revenues separately across its
main operating segments, namely products and services offered
to:
-- the agency segment, comprising estate and letting agents;
-- the new homes segment, comprising new home developers; and
-- the other income segment, comprising non-property advertising income.
Costs are not analysed by segment.
Period ended 31 July 2020 2019 Change
Group revenue
* Agency GBP9.6m GBP8.0m 20%
GBP0.5m nil N/a
* New Homes
GBP0.1m nil N/a
* Other
Average advertisers
* Agency 12,363 12,434 (1)%
1,228 nil N/a
* New Homes
ARPA
* Agency GBP129 GBP108 19%
GBP75 nil N/a
* New Homes
Operational KPIs
Group operational KPIs were as follows:
As at 31 July 2020 2019 Change
Total advertisers 13,757 12,543 10%
Agency branches 12,245 12,543 (2)%
New homes developments 1,512 nil N/a
-- Agency branches listed at 31 July 2020 were marginally lower
year-on-year, with cancellations and office closures higher than
usual during lockdown.
-- ARPA was GBP124, reflecting the growing number of agents
under paying contracts in the period, offset by customer discounts
offered in response to the COVID-19 pandemic (FY 19/20:
GBP108).
-- Visits were 116.6 million (H1 19/20: 120.7 million),
reflecting a decline in visits during the months of March to May
2020 during which the national lockdown was in place. In July 2020
visits were up 173% year-on-year at 27.5m.
-- Average monthly leads per advertiser were 105 (H1 19/20: 94),
reflecting engagement with property-active consumers. In July 2020,
average leads per advertiser were 148, up 56% year-on-year.
The Group's financial performance is presented in the Condensed
Consolidated Income Statement below. The profit for the period
attributable to the owners of the Group was GBP0.7m (H1 19/20: loss
of GBP7.0m).
Administrative expenses have decreased by GBP5.4m to GBP9.4m in
the period to 31 July 2020 (6 months to 31 July 2019: GBP14.8m).
This movement is primarily as a result of cost reduction measures
implemented during the COVID-19 pandemic. In particular, the Group
benefitted from a reduction of GBP0.5m in staff costs during the
period, which arose through utilisation of the Coronavirus Job
Retention Scheme and from voluntary pay waivers by staff, and
marketing expenditure was down 67% to GBP2.2m (H1 19/20:
GBP6.6m).
A charge of GBP0.4m (H1 19/20: GBP0.3m) was incurred in relation
to share-based employee incentives and the movement in the expected
future employer's national insurance charge based on the period-end
share price.
The litigation with Gascoigne Halman Limited and Connells
Limited was settled in the period. Compensation received net of
professional fees incurred was GBP1.0m (H1 19/20: GBP0.2m). Further
details are set out in note 6.
A share-based agent recruitment charge of GBP0.6m (H1 19/20:
GBP0.3m) was incurred in relation to the issue of shares to agents
alongside signing new long-term listing agreements, in line with
the Group's strategy to grow the agent shareholder base. Further
details on these charges and on share options awarded, exercised
and forfeited are set out in note 10.
The Group incurred costs of GBP0.3m in relation to Ian
Springett's termination and of GBP0.1m in relation to the search
for a new permanent Chief Executive Officer. Further details are
set out in note 6.
Intangible assets increased to GBP4.8m (31 January 2020:
GBP4.7m), due to the capitalisation of expenditure on development
activities in relation to the OnTheMarket.com portal.
Receivables fell to GBP5.1m as at 31 July 2020 (31 January 2020:
GBP6.1m), mainly as a result of the release in the period of
prepayments previously recognised for agent shares issued.
Trade and other payables fell to GBP5.7m as at 31 July 2020 (31
January 2020: GBP6.8m). The fall was mainly as a result of a
reduction in marketing costs owing at the period end and a
reduction in the deferred consideration owed to Glanty Limited,
offset by an increase in deferred creditors to GBP2.3m (31 January
2020: nil). In particular, payment of some PAYE, NICs and VAT owed
to HMRC have been deferred as part of the measures the government
introduced to assist companies in dealing with the impact of
COVID-19.
At 31 July 2020, the Statement of Financial Position showed
total assets of GBP21.1m, up from GBP20.9m as at 31 January 2020,
primarily due to an increase in the cash balance. Total equity was
GBP14.2m at 31 July 2020, up from GBP13.0m as at 31 January 2020,
which reflects the profit incurred and the issue of shares.
Condensed Consolidated Income Statement
For the period ended 31 July 2020
Unaudited Unaudited
6 months to 6 months
31 July to
Notes 2020 31 July
GBP'000 2019
GBP'000
Revenue 5 10,241 8,047
Administrative expenses (9,416) (14,787)
________ ________
Operating profit/(loss) before
specific professional fees,
share-based payments and non-recurring
items 825 (6,740)
Specific professional fees, share-based
payments
and non-recurring items: 6
Share-based employee incentives (416) (268)
Compensation net of professional
fees incurred 974 160
Share-based agent recruitment charges (605) (319)
Government grant 325 -
Payments in relation to loss of (304) -
office
Non-recurring staff related costs (133) -
________ ________
Operating profit/(loss) 666 (7,167)
Finance income 14 27
Finance expense (4) (8)
________ ________
Profit/(Loss) before income tax 676 (7,148)
Income tax (12) 189
________ ________
Profit/(Loss) and total comprehensive
loss
for the period attributable to
owners of the parent 664 (6,959)
________ ________
Profit/(Loss) per share from
continuing Pence Pence
operations
Basic 7 0.94 (11.16)
Diluted 7 0.85 (11.16)
The operating profit/(loss) arises from the Group's continuing
operations.
There is no recognised income or expense for the period other
than the loss shown above and therefore no separate statement of
other comprehensive income has been presented.
Condensed Consolidated Statement of Financial Position
At 31 July 2020
Unaudited Audited at
at 31 July 31 January
2020 2020
Notes GBP'000 GBP'000
ASSETS
Non-current assets
Property, plant and equipment 120 127
Right-of-use assets 378 373
Intangible assets 8 4,759 4,697
Investments in associates 9 945 985
________ ________
6,202 6,182
Current assets
Trade and other receivables 2 5,141 6,113
Cash and cash equivalents 9,785 8,685
_________ ________
14,926 14,798
_________ ________
TOTAL ASSETS 21,128 20,980
_________ ________
LIABILITIES
Current liabilities
Trade and other payables (5,683) (6,814)
Lease liabilities (323) (200)
Provisions (501) (707)
Current tax (19) (7)
_________ ________
(6,526) (7,728)
Non-current liabilities
Lease liabilities (17) (110)
Provisions (357) (101)
_________ ________
(374) (211)
_________ ________
TOTAL LIABILITIES (6,900) (7,939)
_________ ________
NET ASSETS 14,228 13,041
EQUITY ATTRIBUTABLE TO OWNERS
OF
THE PARENT
Share capital 2 144 140
Share premium 2 47,006 46,814
Merger reserve (71) (71)
Other reserve 779 701
Retained earnings (33,630) (34,543)
_________ ________
TOTAL EQUITY ATTRIBUTABLE TO OWNERS
OF THE PARENT 14,228 13,041
Condensed Consolidated Statement of Changes in Equity
For the period ended 31 July 2020
Share
Share Share based Other Merger Retained Total
capital premium payment reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as at
1 February 2019 123 40,698 - 111 (71) (23,569) 17,292
Loss for the financial
period - - - - - (6,959) (6,959)
_____ _____ _____ _____ _____ _____ _____
Total comprehensive
expense for the
period - - - - - (6,959) (6,959)
Transactions with
owners:
Shares issued
as agent recruitment
shares 4 1,799 - 303 - - 2,106
Share-based payment
charge on employee
options - - 245 - - - 245
Transfer to retained
earnings - - (245) - - 245 -
_____ _____ _____ _____ _____ _____ _____
Balance as at
31 July 2019 127 42,497 - 414 (71) (30,283) 12,684
____ ____ ____ ____ ____ ____ ____
Balance as at
1 February 2020 140 46,814 - 701 (71) (34,543) 13,041
Profit for the
financial period - - - - - 664 664
_____ _____ _____ _____ _____ _____ _____
Total comprehensive
expense for the
period - - - - - 664 664
Transactions with
owners:
Shares issued
as agent recruitment
shares 1 192 - 78 - - 271
Shares issued
for employee share
options 3 - - - - - 3
Share-based payment
charge on employee
options - - 249 - - - 249
Transfer to retained
earnings - - (249) - - 249 -
_____ _____ _____ _____ _____ _____ _____
Balance as at
31 July 2020 144 47,006 - 779 (71) (33,630) 14,228
_____ _____ _____ _____ _____ _____ _____
The Condensed Consolidated Statement of Changes in Equity for
the comparative period to 31 July 2020 has been amended to align to
the Group's year end 31 January 2020 accounting policies.
Condensed Consolidated Statement of Cash Flows
For the period ended 31 July 2020
Unaudited Unaudited
6 months 6 months
to 31 to 31
July 2020 July 2019
GBP'000 GBP'000
Cash flows from operating activities
Profit/(loss) for the year after income
tax 664 (6,959)
Adjustments for:
Income tax 12 (189)
Finance income (14) (27)
Finance expense 4 8
Agent recruitment expense 605 319
Share-based payment 416 268
Amortisation 1,051 973
Depreciation 183 131
________ ________
Operating cash flows before movements in
working capital 2,921 (5,476)
Decrease/(increase) in trade and other receivables 619 359
(Decrease)/increase in trade and other payables (717) (599)
Increase/(decrease) in provisions 50 (40)
Tax credit received for qualifying research
and development expenditure - 201
________ ________
Net cash inflow/(used) in operating activities 2,873 (5,555)
Cash flows from investing activities
Finance income received 14 27
Acquisition of intangible assets (1,113) (1,245)
Acquisition of property, plant and equipment (182) (10)
Acquisition of associates (see note 9) (358) -
________ ________
Net cash used in investing activities (1,639) (1,228)
Cash flows from financing activities
Finance expense paid (4) (4)
Proceeds from issue of shares 4 4
Lease interest paid - (4)
Repayment of lease liabilities (134) (79)
________ ________
Net cash used in financing activities (134) (83)
________ ________
Net movement in cash and cash equivalents 1,100 (6,866)
Cash and cash equivalents at the beginning
of the period 8,685 15,673
________ ________
Cash and cash equivalents at the end of
the period 9,785 8,807
________ ________
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.
Notes to the Condensed Consolidated Financial Statements
For the period ended 31 July 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. Its
shares are listed on AIM.
2. Significant changes in the current reporting period
As part of its mitigating actions in response to the COVID-19
pandemic, the Group significantly reduced marketing expenditure,
which was down 67% to GBP2.2m (H1 19/20: GBP6.6m).
The Company issued 174,879 ordinary shares on 30 April 2020 and
105,149 ordinary shares on 31 July 2020 to specific agents who had
entered long-term contracts to advertise all of their UK
residential sales and letting properties on OnTheMarket.com. The
shares are accounted for at fair value, being the value of the
shares at the contract commencement, as a prepayment and released
over the life of the contract.
Agent share prepayments of GBP3.5m are reflected in trade and
other receivables for the period to 31 July 2020 (31 January 2020:
GBP3.9m). The fall reflects the release of the prepayments over the
life of the listing contracts the shareholder agents have entered
into.
The company issued 173,317 ordinary shares on 11 February 2020,
200,000 ordinary shares on 30 April 2020, 549,754 ordinary shares
on 8 June 2020, 200,000 ordinary shares on 26 June 2020 and 300,000
ordinary shares on 31 July 2020, in each case following the
exercise of employee options.
3. Basis of preparation of half-year report
The interim results for the six months ended 31 July 2020 have
been prepared on the basis of the accounting policies expected to
be used in the year ended 31 January 2021 OnTheMarket plc Annual
Report and Consolidated Financial Statements and in accordance with
the recognition and measurement principles of International
Financial Reporting Standards as adopted by the European Union
("EU") ("IFRS"). The interim results do not include all the
information and disclosures required in financial statements
prepared in accordance with IFRS and should be read in conjunction
with the accounts for the year ended 31 January 2020.
The same accounting policies, presentation and methods of
computation are followed in these interim condensed set of
financial statements as have been applied in the Group's latest
annual audited financial statements, with the exception of
segmental reporting of revenues, further information on which is
set out in note 5 below.
The interim results, which were approved by the Directors on 12
October 2020, are unaudited. The interim results do not constitute
statutory financial statements within the meaning of section 434 of
the Companies Act 2006.
Comparative figures for the year ended 31 January 2020 have been
extracted from the statutory accounts for the Group for that
period, which included an emphasis of matter paragraph drawing
attention to the impact of COVID-19 on the wider economy, the
Group's agents and its general business activities. In this
emphasis of matter paragraph, the auditor stated that whilst the
ultimate outcome of the matter cannot be determined, the financial
statements at 31 January 2020 did not require adjustment for the
post year-end effects of COVID-19 and that the audit opinion was
not modified in respect of this matter.
The interim financial report does not include all the notes of
the type normally included in an annual financial report.
Accordingly, this report should be read in conjunction with the
annual report and consolidated financial statements for the period
ended 31 January 2020 and any public announcements made by
OnTheMarket plc during the interim reporting period.
4. Accounting policies
Going concern
The Group made a profit after tax for the period ended 31 July
2020 of GBP0.7m (6 months to 31 July 2019: loss of GBP7.0m). The
Group had a period end net cash balance of GBP9.8m (31 January
2020: GBP8.7m) and, excluding deferred creditors of GBP2.3m, no
borrowings. At 30 September 2020 the Group had a net cash balance
of GBP10.3m and, excluding deferred creditors of GBP2.0m, 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, 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. The ability of management to take such
measures on short notice was illustrated by the GBP4.4m reduction
in marketing expenditure in the current period compared with the
previous half-year, actions that were taken following the
unforeseen impact of COVID-19 on the UK housing market.
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 light of this, the Directors consider the going concern basis
to be appropriate to the preparation of these interim financial
statements.
5. Revenue by operating segment
The Group has determined that the Chief Executive Officer, or
Acting Chief Executive Officer, ("CEO") is the chief operating
decision maker. Monthly management numbers are reported and issued
to the CEO, which are used to assess the performance of the
business.
Following the launch of the Group's new homes segment, the Group
has determined it now has three reportable segments, namely
products and services, including where relevant the provision of
access to its online portal OnTheMarket.com (listing fees), offered
to:
-- the agency segment, comprising estate and letting agents;
-- the new homes segment, comprising new home developers; and
-- the other income segment, comprising non-property advertising income.
Period ended 31 July 2020 2019 Change
Group revenue
* Agency GBP9.6m GBP8.0m 20%
GBP0.5m nil N/a
* New Homes
GBP0.1m nil N/a
* Other
Costs are not analysed by segment.
Within each reporting segment, there is only one major service
provision line. All revenue relates to services transferred over
the term of the listing agreements.
Sales are billed monthly in advance and payments are recognised
as deferred income. The Group has no contract assets but has
contract liabilities as follows in respect of deferred income:
As at 31 July 2020 2019 Change
Deferred income
* Agency GBP1.1m GBP1.6m (31)%
GBP0.03m nil N/a
* New Homes
nil nil N/a
* Other
The fall in deferred income reflects the COVID-19 related
discount offered to full-tariff agent customers, which lowered
deferred income at the period end. Contract liabilities of
GBP1,585k at 31 January 2020 were recognised as revenue in the
period ended 31 July 2020.
All revenue is generated in the UK for this service.
6. Profit and loss information
Profit for the half-year includes the following costs in
relation to specific professional fees, share-based payments and
one off events that are not expected to be recurring:
Unaudited Unaudited
6 months 6 months
to 31 July to 31 July
2020 2019
GBP'000 GBP'000
Share-based employee incentives 416 268
Compensation net of professional fees
incurred (974) (160)
Share-based agent recruitment charges 605 319
Government grant (325) -
Payments in relation to loss of office 304 -
Non-recurring staff related costs 133 -
________ ________
159 427
Share-based employee incentive charges include the movement in
the expected future employer's national insurance charge based on
the period-end share price. See note 10 for further details.
Compensation net of professional fees incurred during the
current period were in relation to litigation which was settled in
the period. Compensation relates to the recovery of litigation
costs.
Agent recruitment charges relate to share-based charges arising
on the issue of shares to agents committing to long-term service
agreements, in line with the Group's strategy to grow the agent
shareholder base.
Government grant income relates to receipts under the
Coronavirus Job Retention Scheme.
Payments in relation to loss of office reflect contractual
compensation to Ian Springett for loss of office and associated
legal costs.
Non-recurring staff related costs relate predominantly to
professional fees paid in relation to the search for a permanent
Chief Executive Officer following Ian Springett's departure from
the Group.
7. Earnings per share
Unaudited Unaudited
6 months 6 months
to 31 July to 31 July
2020 2019
GBP'000 GBP'000
Numerators: Earnings attributable to
equity
Profit/(Loss) for the period from continuing
operations
attributable to owners of the parent
company 664 (6,959)
________ ________
Total basic earnings and diluted earnings 664 (6,959)
No. No.
Denominators: Weighted average number
of equity shares
Basic 70,636,577 62,340,286
Diluted 78,186,896 62,340,286
In periods where the Group made a loss there is no dilutive
effect. Instruments that would dilute earnings per share have not
been included as these are anti-dilutive.
8. Intangible assets
Development
Group Costs
GBP'000
Cost:
At 1 February 2020 11,355
Additions - internally developed 1,113
_______
At 31 July 2020 12,468
Amortisation:
At 1 February 2020 6,658
Charge for the period 1,051
_______
At 31 July 2020 7,709
Net book value:
At 31 July 2020 4,759
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.
9. Investments in associates
GBP'000
Group and Company
At 31 January 2020 985
Adjustments (40)
________
At 31 July 2020 945
________
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 associates has been recognised
on the basis that the Group's share of the after-tax result to 31
July 2020 is not material to the Group financial statements.
Total consideration amounted to GBP797k, of which GBP230k formed
the initial consideration and had been paid to 31 January 2020. A
further GBP358k was paid in the period to 31 July 2020.
Under the terms of the investment, the consideration was to be
reduced by up to GBP40k should Glanty Limited receive a tax credit
for qualifying research and development expenditure. Following the
receipt of a payment in May 2020, the investment was reduced by the
full GBP40k.
At 31 July 2020 GBP169k relates to deferred consideration and
has been recognised in other payables. The total amount capitalised
of GBP945k 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 GBP757k. The same Glanty
shareholder also has a call option to acquire OnTheMarket's shares
for GBP757k 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 July 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.
10. Share-based payments
Agent Recruitment Shares
The Group issued 280,028 agent recruitment shares during the
period. Fair value was determined in accordance with the accounting
policy set out in note 2.18 in the Annual Report and Consolidated
Financial Statements for the year ended 31 January 2020. The
weighted fair value of shares granted was GBP0.689.
Share-based Employee Incentives
The Company has granted no new share options under its
Management Incentive Plan, its employee share scheme or its Company
Share Option Plan in the period.
The unexercised options under these plans are stated below:
Grant date of option Expiry Option Fair 31 Jul 2020 31 Jan
exercise value 2020
per share
GBP GBP Number Number
Granted 15 September
2017 2027 nil 1.48 6,044,454 7,467,525
Granted 19 September
2017 2027 nil 1.48 489,614 491,137
Granted 10 October
2017 2027 nil 1.48 14,544 14,544
Granted 20 November
2018 2028 1.65 0.69 619,288 639,864
Granted 4 December
2018 2028 nil 1.13 42,424 42,424
______-__ ______-__
Total outstanding 7,210,324 8,655,494
The value of employee services provided under all the employee
incentive plans of GBP416k (6 months to 31 July 2019: GBP268k) has
been charged to the income statement.
Management Incentive Plan
Further details of the management incentive share option plan
are as follows:
31 July Weighted
2020 average
exercise
price
Number GBP
Opening at 1 February 2020 7,316,010 -
Granted - -
Exercised (1,423,071) -
________ ________
Outstanding at 31 July 2020 5,892,939 -
Exercisable at 31 July 2020 4,506,389 -
These share options expire 10 years after the date of grant.
Share options granted under this scheme have a nil exercise price.
1,386,550 options are exercisable from 9 February 2023. The
remaining 4,506,389 options are exercisable immediately, however
4,159,645 shares arising from exercise are subject to a restriction
on sale until 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.
Employee share scheme
Further details of the employee share option plan are as
follows:
31 July Weighted
2020 average
exercise
price
Number GBP
Opening at 1 February 2020 699,620 -
Granted in the period - -
Forfeited in the period (1,523) -
________ ________
Outstanding at 31 July 2020 698,097 -
Exercisable at 31 July 2020 - -
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:
31 July Weighted
2020 average
exercise
price
Number GBP
Opening at 1 February 2020 639,864 1.65
Granted in the period - -
Forfeited in the period (20,576) 1.65
________ ________
Outstanding at 31 July 619,288 1.65
Exercisable at 31 July - -
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 forfeit 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% for a total
expense of GBP167k (6 months to 31 July 2019: GBP23k).
The following have been expensed to the consolidated income
statement:
6 months 6 months
to 31 to 31 July
July 2020 2019
GBP'000 GBP'000
Share-based employee incentive payment
charge 249 245
Employer's social security on share options 167 23
_______ _______
416 268
11. Related party relationships and transactions
In the ordinary course of business, the Group has entered into
transactions with Whiteleys Chartered Certified Accountants, a
company controlled by a close family member of Helen Whiteley, an
Executive Director of the Group. Whiteleys Chartered Certified
Accountants provides an outsourced finance function to the Group.
During the period, the Group purchased services amounting to
GBP382k (6 months to 31 July 2019: GBP354k) and at the period end
the Group owed GBP82k (31 July 2019: GBP64k).
12. Post balance sheet events
On 1 September 2020 the Group announced the appointment of Jason
Tebb as Chief Executive Officer, with a date of 14 December 2020 to
commence employment.
There were no other significant post balance sheet events.
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END
IR FLFITILLFLII
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October 13, 2020 02:00 ET (06:00 GMT)
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