OnTheMarket “delivering on expectations” says Zeus

OnTheMarket plc

OnTheMarket plc (LON:OTMP) full year results to January 2022 are in line with the February trading update:

¨ 32% rise in revenue to £30.4m (FY21: £23.0m);

¨ 12% rise in Group adjusted operating profit to £2.7m (FY21: £2.4m);

¨ Net cash on 31 January 2022 of £8.4m.

Revenue growth was driven by 32% rise in monthly Average Revenue Per Advertiser “ARPA” to £188 (FY21: £142). The average number of advertisers (i.e. Estate Agents, New Home developments) was flat at 13.3k; total number of advertisers at year end rose 8% to 13.7k.

OnTheMarket provided its agents with 58% more valuation leads (e.g. email requests for sales or lettings valuation) and 6% rise in visits (i.e. individual sessions on OnTheMarket.com’s web-based portal or mobile applications by users, as measured by Google Analytics) to 283m visits.

Glanty, acquired via a step-acquisition, contributed £0.6m to revenue and £0.6m loss after tax. If Glanty had been owned for the full year, it would have contributed £0.8m revenue and £1.2m loss after tax. Goodwill of £1.5m assumes 5 year revenue CAGR of 44% and EBITDA margins increase to 40% in perpetuity and a 14% discount rate.

Outlook: Jason Tebb, CEO, reports: “our strategy is working. Having listened and engaged with thousands of agents we are more convinced than ever in our strategy of building a differentiated, tech-enabled property business.” OTM is set to deliver profitable growth.

Zeus view: We expect OTM to deliver combined revenue growth and EBITDA margin of 40% (i.e. “rule of 40”), with 23% EBITDA margin and revenue growth of 17%, driven by:

¨ 6.3% rise in advertisers by Jan 2023, growing average number of advertisers by 6.5%.

¨ 9.0% rise in ARPA to £205, with reported Estate Agent ARPA rising c. 3% from £204 to £211, and New Homes developers ARPA rising 33% to £133 (n.b. in 2H New Homes ARPA rose 17% to £108 from £92 in 1H).

We expect Glanty to contribute to revenue growth and reach cash breakeven in 2023 calendar year. Our forecasts are consistent with an earnout of £4m in 2024 (based on revenue to 12 months to May 2024; capped at £12m), which could be settled in cash or shares.

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We leave our forecasts materially unchanged: 2% cut to revenue and 1% increase to EBITDA. We take this opportunity to set forecast for the years to January 2024 and 2025.

Soon OTM will have “flexibility to pay dividends and/or introduce a share buyback programme”.

Valuation: At 86.5p, with 10p of cash, OTM is trading on 2.0x historic EV/Revenue and 1.7x current year (P/Revenue of 2.3x and 2.0x respectively). Investors confident OnTheMarket will operate to the “rule of 40”, should expect OTMP to trade on over 6x prospective revenue (i.e. c. £216m, which is 263p a share).

Summary financials

Price86.5p
Market Cap£64.8m
Shares in issue75.0m
12m Trading Range75p– 129.0p
Free float95%
Next EventLate July AGM

Financial forecasts

Yr end Jan (£’m)2022A2023E2024E2025E
Revenue30.435.539.443.7
yoy growth (%)32171110
EBITDA5.18.311.213.7
EBITDA margin (%)17232831
Adj. PBT #1.73.96.17.9
Adj. PAT # †1.956.67.9
Avg FD shares (m)81828384
EPS (p) fd. Adj # †3.16.17.99.5
DPS (p)
Net cash8.411.617.724.2
P/E27.614.110.9 9.1
EV/EBITDA12.17.14.83.5
EV/sales21.71.41.1

# including share based compensation & MIP

† tax credits are included in PAT

Source: Audited Accounts and Zeus estimates

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