OnTheMarket (LON:OTMP), the agent-backed company which operates the OnTheMarket.com property portal, has today announced that it has made a strategic investment for a 20% share in Glanty Ltd, the owner and developer of ‘teclet’, an automated portal for the lettings industry, designed to reduce overheads and maximise efficiencies for lettings agents. OnTheMarket has 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 agent shareholders and customers. This strategic investment is the next step in achieving OnTheMarket’s mission to deliver a market leading, agent backed alternative to Rightmove and Zoopla.
Glanty is a property technology (“prop-tech”) business which specialises in providing solutions to the residential lettings sector. The Glanty team consists of individuals who have previously worked within the estate and lettings agency sector as well as those with experience of defining and delivering software solutions.
Glanty recognised the need for a platform that could support a variety of customer ‘journeys’ and ‘teclet’ was brought to the agency market in 2016. Since then, it has successfully gained small, medium and large estate agency groups as customers.
A key benefit of ‘teclet’ is that it automates a high proportion of the many administrative tasks involved in creating a tenancy and then managing it through to renewal. It also provides online storage and 24-hour access for agents, tenants and landlords to records and documentation relating to their tenancies. ‘teclet’ is also designed to support compliance with the regulatory requirements surrounding tenancy creation and management, providing an audit trail of transactions.
Glanty charges licence fees to agents that use ‘teclet’ but also offers agents the opportunity to earn income by directly presenting tenants and landlords with products and services that they can purchase at appropriate points in the tenancy ‘journey’, which is enabled through API integration with the providers.
Glanty’s revenues for the year to 31 December 2018 were £771,365 (2017: £6,209). The investment being made by OnTheMarket is to fund Glanty’s working capital requirement until the summer of 2021, when it is envisaged that Glanty will be operating at breakeven.
Subscription and Call Option arrangements
OnTheMarket will initially subscribe for new shares representing a 20% equity stake in Glanty (the ‘Subscription Shares’) for a cash consideration of £797,000, spread over 10 months from signing (the ‘Subscription’). OnTheMarket has the right to appoint a director to the board of Glanty.
Separately, OnTheMarket has been granted a call option (the ‘Primary 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 £1.5 million (payable in cash or shares at OnTheMarket’s option) plus a revenue and EBITDA based earnout arrangement. OnTheMarket would also be required to repay loans of approximately £1.4 million. The earnout arrangement could result in maximum deferred consideration of up to £12 million (payable in cash or shares at OnTheMarket’s discretion) and shall be payable if certain revenue and EBITDA targets are met by Glanty at the end of a 3 year period commencing on exercise of the Primary Call Option.
The Primary Call Option is exercisable for a period of 15 months from 23 December 2019, ending on 23 March 2021. Should the Primary Call Option lapse, OnTheMarket has a put option to sell its shares to an existing shareholder of Glanty for £797,000. The same Glanty shareholder also has a call option to acquire OnTheMarket’s shares for £797,000 in the event that the Primary Call Option lapses. These secondary put and call option arrangements only become exercisable in the event that the Primary Call Option lapses and are exercisable for a period of 6 months from such date.
OnTheMarket has the benefit of warranty and indemnity protection as part of the transaction as well as an anti-dilution provision which ensures that its 20% shareholding will be maintained during the Primary Call Option period.
Placing and Director Dealing
OnTheMarket is pleased to announce that alongside the strategic investment, it has raised a total of £3.4 million through a Placing of 4,857,143 new ordinary shares of £0.002 each (the ‘Placing Shares’), at a price of 70p, representing a discount of 7.9% to the closing mid-market price on 20 December 2019, being the latest practicable date prior to this announcement.
The shares have been placed with a combination of existing and new investors. The Placing is being undertaken under authorities approved at the Company’s Annual General Meeting on 16 July 2019 and does not require shareholder approval. The proceeds of the Placing will be used to fund the consideration for the Subscription, the initial consideration payable under the Primary Call Option, should it be exercised, and the fees associated with the Subscription, Primary Call Option and Placing. The Company has chosen to scale back demand and to limit the size of the fundraise undertaken at this time to £3.4 million given the current share price discount to the IPO share price and anticipates that after the fees referenced above have been paid the net amount receivable by the Company will be approximately £3 million.
OnTheMarket’s Chairman, Christopher Bell, has agreed to participate in the Placing and to subscribe for 14,285 Placing Shares. Following this subscription, Christopher Bell has an interest in 44,588 ordinary shares of £0.002 each, representing approximately 0.06% of the enlarged share capital immediately following the Placing.
Application has been made for the 4,857,143 Placing Shares of £0.002 each to be admitted to trading on AIM, and it is expected that admission will become effective on or around 30 December 2019.
Following admission, the total number of ordinary shares and voting rights in the Company will be 69,675,091. The Company does not hold any shares in treasury.
The above figure may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the FCA’s Disclosure Guidance and Transparency Rules.
OnTheMarket is pleased to reiterate its previous guidance, as set out in the announcement of 26 September 2019, that the Company expects to achieve a broadly breakeven adjusted EBITDA position for the financial year to 31 January 2021 with monthly breakeven achieved in Q2/Q3. The Company continues to believe that implementing its current strategy will achieve the strong growth that the Board anticipates over the medium term for the benefit of all stakeholders.
The Company continues to make progress in converting and signing up agents to paying contracts, and, as announced on 10 December 2019, it has now signed up over 3,000 more agents on paying contracts since the time of the Company’s admission to AIM. The Company has also maintained over 12,500 agent offices listing on the OnTheMarket portal.