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OnTheMarket Plc

OnTheMarket plc Q&A: Full year results (LON:OTMP)

OnTheMarket plc (LON:OTMP) Chief Executive Officer Ian Springett caught up with DirectorsTalk for an exclusive interview to discuss the key take-outs from their full year results, creating value for agents, converting trial agents to paying contracts and what investors should look out for.

Q1: Full year 2019 results out yesterday, what are the key take-outs from these results that we should take note of?

A1: Well, this is our first post-IPO year and so it hasn’t been a year for driving up revenue but it has been a year where we have been investing the cash we raised. So, the expectation was material losses as a result of doing that and fairly modest growth in revenue and that is exactly what we delivered.

The results on both those lines are pretty much as expected albeit the loss was lower that perhaps people may have expected. That was a result of the fact that generally having invested in the organisation and the team, and with a big investment in marketing, we were able to deliver what we’ve delivered with rather less spend than we anticipated. So, that meant we finished the year with a higher cash balance than perhaps would have been expected by some.

Q2: The OnTheMarket strategy from IPO was to build up the number of agents using the portal by offering them free trials to recruit them and then convert them to paying contracts when the value could be demonstrated. How have you done on creating value for these agents?

A2: I think we’ve had a great year. Our task was to move the portal from the scale it was at and from the performance it was delivering, which roughly speaking was 5,500 agents paying to list and around 6 million visits per month.

By the end of January, the end of our year, we’d increased the number of agents on the portal to 12,500 and we had quadrupled the number of visits and we had increased by seven fold the number of leads we were generating. So, you can work back from that to say that every agent on the portal was getting considerably more leads from us per branch than we’d started with.

If we look a bit further, so the period beyond January, we announced in May a further record month for both traffic and leads. On a leads per office per month basis we’re now up with and indeed potentially exceeding Zoopla and catching up with Rightmove.

What’s interesting is this is a business where there is only really a fixed stock of enquiries that can be got, portals don’t create them, we just fight to be the channel through which they are delivered. Our proportion of the leads generated by the big three is growing and growing and we estimate that we are up around 33% in the month of May and obviously, we look forward to continuing that progress.

Q3: Now that you have started the conversion of free trial agents to paying contracts, what’s your experience with that so far?

A3: We’re really pleased. We have already moved just about a thousand, in fact I can say today that we are over a thousand mark from free to paying contracts, the majority of those have opted to take our longer term contract which are for 5 or 3 years.

Both of those contracts deliver a new shareholding to the agents who commit, those shares represent roughly 50% of the contract value, if it’s a 5 year deal for instance at £4,000 a year then there would be £10,000 worth of shares issued but calibrated at the IPO price so that that is a fair distribution of the shares. All of those shares are locked in for 5 years, so it’s not about what we are doing today, or certainly what the share price is doing today, it’s about how we can develop and deliver this business going forward. So, we are very pleased with that.

The balance of the contracts that we are issuing are 1 year contracts, this is where agents are not quite ready perhaps to commit to us for that longer term period, maybe uncertainties in their own business. Those contracts have an option that allows the agent at a later date to transfer to one of the 3 or 5 year deals and get a shareholding albeit a lower one.

So, given the market conditions for agents are not the greatest, we think that’s a great start, momentum is continuing, our sales team are very optimistic about carrying that forward for the rest of the year and obviously beyond.

Q4: You’ve said it’s about growing the business going forward, what are the key things that OnTheMarket have to do over the rest of 2019 and what should investors look out for?

A4: I think we clearly need to continue the process of moving to paying contracts for all of the agents who are on the portal and we won’t be announcing that on a frequent or a regular basis because we can’t conduct that activity in public, it’s a negotiation within the industry with individual agent firms and obviously competitors have a vested interest in trying to interfere with the process as well. So, we won’t particularly be making big announcements about it probably until we get to our interim reports in October.

Certainly, investors should look out for more progress on the traffic and the value that we’re delivering because obviously as time goes on, the more value we can deliver to the estate agents, the more brand visibility we can generate, the more likely it is that they will be inclined to support us going forward and hopefully many of them for the long term as so many have already done.

We’re also improving, all the time, our product range, I think I have said to you before our aim is to match the product set that Rightmove currently delivers to agents and, indeed, in due course to better it. That’s to allow agents, should they choose to, to begin migrating away given the price increases and the declining performance of Rightmove in terms of leads generated.

So, announcements about increases in the value we’re delivering in all those respects would be good news and hopefully investors will appreciate that.

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