What’s new: This morning OnTheMarket Plc (LON:OTMP) interim results show:
Average branch numbers listed rose by 32% to 7,788 (post year end they doubled to 11,000), however most were “new introductory free listings” depressing ARPA by 21% to £153 (1H18: £194).
Individual visits to OTM more than doubled to 69.0m (H1 17/18: 33.7m) as measured by Google Analytics.
Group revenue under IFRS15 was flat at £7.0m (H1 17/18: £6.9m).
Administrative expenses tripling to £12.0m, in line with the new growth strategy as the Group invested capital raised in increased marketing expenditure and expansion of the team.
Adj operating loss of £5.0m (1H18: adj profit £2.9m) and operating cash outflow after capex was £6.4m (1H18: £1.6m inflow).
Cash on 31 July 2018 was £24.3m (31 Jan 2018: £3.2m).
Ian Springett, Founder & CEO, said “Compared with February 2018 when our IPO took place, OnTheMarket has doubled offices and properties listed, trebled monthly visit traffic and quadrupled email and telephone leads to agents.” These are the metrics which show OTM has made good progress in building its network and the network effects are working.
We set out in Exhibits 3, 4 & 5 overleaf evidence of the progress OTM is making building market share.
Zeus view: Over the next 6 months OTM’s focus will be on increasing engagement with Agents: proving the value they are delivering to Agents in terms of leads. The network effects are coming through. This will enable OTM’s sales team to convert “new free introductory contracts” to paying contracts in 2019.
Our forecasts (dated 7 June 2018) expect operating cash outflow for FY(Jan)19 of £15.0m and 31 January 2019 cash balance of £14.0m. The £6.4m outflow in 1H suggests management are within their budgets and are on track.
We make no changes to our forecasts, which are set out overleaf (Exhibit 1).
Equity value/office: In our opinion, equity market value per office (i.e. agent branch) is a useful indicator of value. At 139p a share OTM has circa 60% market share and is trading on an equity market cap of £85m, which is £7.8k/office.
In our previous research we observed that “by 2020-21, with the portal delivering an EBIT margin of over 30%, we would expect Onthemarket to trade on over £20k/office, which would be consistent with a fully diluted share price of over 330p a share”.
