REG - OnTheMarket plc - Full-Year Results to 31 January 2022
14/06/2022 07:00
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RNS Number : 7280O OnTheMarket plc 14 June 2022
14 June 2022
ONTHEMARKET PLC
("OnTheMarket", the "Group" or the "Company")
FULL-YEAR RESULTS TO 31 JANUARY 2022
Significant strategic progress in creating a differentiated, tech-enabled
property business
OnTheMarket plc (AIM: OTMP), the majority agent-owned company which operates
the OnTheMarket.com (https://www.onthemarket.com/) property portal, today
announces its audited results for the year ended 31 January 2022.
Highlights of the year
Year ended 31 January 2022 2021 Change
Group revenue £30.4m £23.0m 32%
Adjusted operating profit(1) £2.7m £2.4m 13%
Operating (loss) / profit £(0.6)m £1.2m £(1.8)m
Profit after tax £0.1m £2.7m £(2.6)m
Year-end cash £8.4m £10.7m (21)%
ARPA(2) £188 £142 32%
Average advertisers(3) listed 13,296 13,285 -
Total advertisers at 31 Jan 13,732 12,687 8%
Traffic / visits(4) 283m 267m 6%
Average monthly leads per advertiser 117 117 -
· Revenue and ARPA up 32%, reflecting growth in paying customers,
the migration of customers on discounted rates towards full-tariff contracts,
continued growth in new homes revenues and COVID-19 customer support discounts
that totalled £2.6m in 2021.
· Adjusted operating profit up 13% to £2.7m (2021: £2.4m), in
part reflecting a 80% increase in marketing expenditure to £10.6m (2021:
£5.9m).
· Cash generated from operating activities of £3.7m (2021:
£5.1m), reflecting cash generated by Agents' Mutual Limited ("Agents'
Mutual"), partially offset by investment in Glanty Limited ("Glanty") since
acquisition.
· Strong balance sheet, with year-end cash of £8.4m (31 January
2021: £10.7m) after the acquisition of Glanty, strategic investments and full
furlough scheme repayment in the period, which together represented £2.6m of
cash payments.
· Focus on valuation leads(5), up 58% from FY21, and serious
property-seekers, with site visits up 6% to a record 283m (2021: 267m).
Strategic and corporate developments
OnTheMarket has continued to make significant progress with its strategy of
building a differentiated, technology-enabled property business based on the
following pillars:
· Portal
o A complete refresh of the user experience at OnTheMarket.com, launching
our new website, logo and branding.
o To emphasise that OnTheMarket features thousands of newly listed
properties 24 hours or more before Rightmove or Zoopla every month, 'New &
exclusive' properties, together with properties featured on OnTheMarket.com
and not on either Rightmove or Zoopla ("totally exclusive"), are now labelled
as 'Only With Us'.
· Software solutions
o Completed the acquisition of Glanty. Product development is ongoing, in
particular the development of a CRM system and an associated product targeted
at the sales market, complimenting the teclet lettings product already
available.
o Commercial partnership with Canopy to give all our agency customers the
opportunity for free and unlimited comprehensive tenant referencing check,
potentially saving them thousands of pounds a year.
· Data and market intelligence
o Commercial partnership with Sprift Technologies to provide our customers
with 'best-in-class' data and market intelligence tools and, more recently, a
full-service canvassing and prospecting system.
o Release of our monthly OnTheMarket Property Sentiment Index, with a unique
focus on buyer and seller confidence, determined from consumer responses to
questions with an average response rate of over 120,000 per month.
· Communications and marketing
o A new marketing and communications strategy, with new TV creative to drive
increased levels of consumer awareness amongst serious property seekers and
generate valuation leads for customers.
§ "Get Real About Moving. Get OnTheMarket."
o Commercial media partnership signed with Reach plc, the UK's largest
commercial news publisher, to further boost consumer engagement.
Outlook
· Positive start to FY23 with current trading in line with the
Board's expectations.
· UK residential property markets remain very active, with demand
for properties significantly outweighing supply, notwithstanding a slight
recent rebalancing as the level of new instructions increased.
· The Board believes that the Group's recent operational and
financial progress, together with a substantial, loyal advertiser base,
provides a strong platform for the implementation of its strategy.
Jason Tebb, Chief Executive Officer, commented:
"I am delighted to be reporting a strong set of results which show that 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.
With our strong performance and momentum in the business the future remains
very exciting for OnTheMarket. We are continuing to deliver increased value to
our customers and serious property seekers, with innovative new products and a
refreshed brand.
I would like to thank the OnTheMarket team for their hard work and commitment
to delivering for all of our stakeholders."
Analyst and investor presentations
A presentation will be held at 9.00am today. Please contact
OTM@tulchangroup.com (mailto:OTM@tulchangroup.com) for further information.
The Group will also provide a live presentation relating to the preliminary
results via the Investor Meet Company platform on 21 June 2022 at 5:00pm BST.
Investors can sign up to Investor Meet Company for free and add to
meet ONTHEMARKET PLC via:
https://www.investormeetcompany.com/onthemarket-plc/register-investor
(https://protect-eu.mimecast.com/s/C_YMCgLRmSANX3RUNalVG?domain=investormeetcompany.com)
1) Adjusted operating profit is defined as operating profit before
share-based payments (including charges relating to shares issued for agent
recruitment), 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 profit or loss. Please see the
Financial Review and Key Performance Indicators section below for a
reconciliation of operating profit to adjusted operating loss / profit.
2) Average revenue per property advertiser, being revenues due from
property advertisers before the deduction of non-cash share-based agent
recruitment charges for a period divided by the average number of property
advertisers for that period. ARPA presented herein is the average of the
monthly ARPAs for the year. A property advertiser is a listed agency branch or
a new home development advertising on OnTheMarket.com.
3) Advertisers are either estate and lettings agent branches or new
homes developments listed at OnTheMarket.com.
4) Visits comprise individual sessions on OnTheMarket.com's web-based
portal or mobile applications by users for the period indicated as measured by
Google Analytics.
5) Valuation leads are email requests for a sales or lettings
valuation to an agent.
For further information, please contact:
OnTheMarket 0207 353 4200
Jason Tebb, Chief Executive Officer
Clive Beattie, Chief Financial Officer
Tulchan 0207 353 4200
Communications
Giles Kernick
Oliver Norgate
Barnaby Harrison
Zeus (Nominated Adviser and Joint 0203 829 5000
Broker)
Jamie Peel, Martin Green, James Hornigold
(Investment Banking)
Benjamin Robertson (Corporate Broking)
Shore Capital (Joint 0207 408 4090
Broker)
Daniel Bush, John More (Corporate Finance)
Fiona Conroy (Corporate Broking)
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.
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 'Only With Us' properties which are either exclusive properties
advertised at OnTheMarket.com by customers who do not list their properties
with either Rightmove or Zoopla, or properties listed 24 hours or more before
agents release these properties to Rightmove or Zoopla.
Chairman's Statement
I am pleased to report OnTheMarket's full year results to 31 January 2022.
The year saw positive momentum in the Group's strategy of creating a
differentiated, tech-enabled property business across the broader property
ecosystem. Our vision is to build the business around four key strategic
pillars, namely:
Property portal
Software solutions
Data and market intelligence
Communications and marketing
We have seen significant progress in each of these areas during the year,
which Jason Tebb, Chief Executive Officer, will detail further in his report
below.
The team's achievements are even more impressive as they were delivered in a
year which saw continued macroeconomic uncertainty from the COVID-19 pandemic.
The interests of stakeholders and communities remain the driving factor in our
decision making. The executive team continued its impressive management of the
business in the face of these challenges, and as a measure of their success we
were proud to have been able to repay in full the furlough scheme monies we
had received in 2020.
The Group delivered a strong performance in FY22. Agency revenues benefitted
from the growth in paying customers during the latter part of FY21, which saw
us start FY22 with a higher monthly revenue run rate versus FY21, combined
with the continued migration of customers on discounted rates towards
full-tariff contracts. Our new homes business also showed strong growth in
both developments listed and revenues generated.
In May 2021 we completed the acquisition of Glanty, which operates under our
Software Solutions pillar, offering subscription-based software solutions to
help agents operate more efficiently and effectively, as well as a providing
us with a pipeline of products under development.
Outlook
UK residential property markets remain very active, with demand for properties
significantly outweighing supply. We are committed to supporting our agent and
housebuilder customers with improved and more extensive products and services
that reflect these market conditions, whilst providing consumers with tools
and content that we believe make OnTheMarket.com a must visit site for serious
property seekers. Our aim is to deliver increasing value to all our
stakeholders.
Our people remain our most valuable asset. Once again, I am extremely grateful
to them for their dedication during the year. I would also like to extend my
thanks to our shareholders, customers and suppliers for their ongoing support.
Christopher Bell - Independent Non-Executive Chairman
Chief Executive Officer's Report
I am delighted to be making this statement after my first full year as Chief
Executive Officer of OnTheMarket, and I am pleased to outline the strong
results delivered by the Group and the significant steps we are taking in
creating a differentiated, tech-enabled property business across our four
strategic pillars.
FY22 saw extremely high activity levels in the UK residential property market.
The change in working patterns saw property seekers re-evaluating their
housing wants and needs. This, alongside a highly competitive mortgage market
and low interest rates, created exceptional demand for UK residential
properties during the year.
I have been particularly pleased by the value we are able to provide to our
agent and housebuilder customers as market activity continued apace. FY22 was
a record year for site visits, and we have established our position as a
leading property search site for the most serious property seekers in the UK.
In particular, during the year we sought to provide increasing numbers of
valuation leads to our agent customers to combat the challenging market
conditions they faced, which saw low levels of new property instructions
coming to market. I am pleased to report our valuation leads increased 58%
from FY21.
We have remained committed to our sustainably low listing fees, alongside
first-class service for all stakeholders and we continue to offer a unique
proposition to the industry due to our agent ownership of c60%.
We continue to engage with our agent customers, including my 'listening tour'
of Town Hall events and 1-1 clinics. As a direct result of the conversations
we have had, the most significant changes to our offering since launch in
January 2015 have been implemented. In the last year, we launched a new brand,
a new OnTheMarket website with a completely re-designed user experience, and a
new TV creative. Feedback from our clients demonstrates that these initiatives
have been well received.
Advertiser customers
Agency branches listing at OnTheMarket.com were up 8% to 11,451 as at 31
January 2022 (2021: 10,645). The percentage of agency advertisers on paying
contracts at the year-end was 90% (2021: 93%).
New homes advertiser numbers continued to grow strongly throughout the period,
with 2,281 developments listed at 31 January 2022, up 12% from 2,042 at 31
January 2021. Our objective is to deliver housebuilders increasing value
through access to highly motivated and active property seekers and the
delivery of increasing numbers of high-quality leads. We are pleased with the
progress we have made in this area over the last 12 months.
Total property advertisers were therefore 13,732 on 31 January 2022 (2021:
12,687), an increase of 8%.
Financial performance
Group revenue and ARPA were up 32% to £30.4m and £188, reflecting growth in
paying customers, the migration of customers on discounted rates towards
full-tariff contracts, continued growth in new homes revenues and COVID-19
customer support discounts that totalled £2.6m in 2021.
Average monthly agency ARPA in the year to 31 January 2022 was up 36% to £204
(2021: £150), whilst new homes average monthly ARPA increased to £100, up
20% from £83 in the year to 31 January 2021.
Further details on the Group's financial performance are set out in the
Financial Review and Key Performance Indicators section.
OnTheMarket's vision
In September 2021, after extensive consultation with our customers and staff,
we unveiled our company's mission statement:
Listening. Innovating. Delivering.
This is our commitment to all our customers and stakeholders and serves to
provide purpose and goals to our team in realising our shared vision.
We are building a differentiated, technology-enabled property business,
providing a suite of tools and services for agents, housebuilders, advertisers
and consumers alike. We aim to offer 'best-in-class' products and platforms
across the broader property ecosystem.
Our vision is structured around four core strategic 'pillars' through which to
drive our future growth. These pillars are being built through a mix of
in-house developments, partnerships with specialist providers and, where
appropriate, strategic acquisitions.
The four pillars are:
1. an engaging and relevant property portal that attracts the
most serious property seekers;
2. software solutions to meet evolving customer needs;
3. the provision of leading data and market intelligence; and
4. a leading communications and marketing capability, both on
behalf of, and in conjunction with, our customers.
1. Property portal
In December 2021 we embarked upon a complete refresh of the user experience
("UX") at OnTheMarket.com, launching our new website, logo and branding.
Following an extensive period of consumer research, customer engagement,
testing and product development, this refresh constitutes the largest ever
upgrade to our features and functionality.
The new user interface and features have been re-designed from the ground up,
with a suite of upgrades, features and improvements. Many of our decisions
were based on suggestions from our agent community or consumers. Improvements
include functionality utilising intuitive search such as Wish List, Help Me
Choose, Travel Time Search and Street Search, as well as UX updates to Ask The
Agent, Reserve Buyers List and Viewing Time Requests. The new functionality
represents one of our core priorities: combining traditional 'tried and
tested' agency principles with modern technological solutions, allowing us to
help our customers operate in the most time-efficient, commercially minded
manner.
To emphasise that OnTheMarket features thousands of newly listed properties 24
hours or more before Rightmove or Zoopla every month, what were called 'New
& exclusive' properties, together with properties featured at
OnTheMarket.com and not on either Rightmove or Zoopla ("totally exclusive"),
are now labelled as 'Only With Us'. A new countdown timer feature has been
added to show consumers how long remains until the Only With Us listing will
be made available on Rightmove or Zoopla. Properties totally exclusive to
OnTheMarket are still labelled as Only With Us, but do not feature the
countdown timer.
The new logo and branding demonstrate an evolution of the original 'map
marker' imagery, representing a more consumer-centric, contemporary approach,
illustrating the continued evolution of OnTheMarket into a property-technology
company. The branding and execution were featured in the new TV advert and
supported the multi-platform campaign that launched in late December 2021.
More on this is outlined under "Communications and Marketing" below.
2. Software solutions
As a technology-enabled property business, OnTheMarket is committed to
continuing to evolve and innovate to meet the needs of our customers and
consumers.
Our strategy is to become an indispensable resource for consumers by providing
exclusive property listings, detailed property data, intuitive tools and
expert content to help make their property journey easier to navigate. We have
adopted a rapid and agile development strategy, driven by consumer behaviours,
and providing intuitive solutions to problems faced by customers or consumers.
In addition to this, we seek to empower agents by developing information-led
solutions that enable them to operate more efficiently and support their
businesses whilst simultaneously generating more high-quality leads and adding
greater value to them.
In May 2021 we completed the acquisition of Glanty. Investment in product
development is ongoing, in particular the development of a CRM system and an
associated product targeted at the sales market, complementing the teclet
lettings product already available. In January 2022 we began a series of
beta-test sessions with agents, and we have recruited a new head of sales with
experience in the CRM space to lead our activities as we launch Glanty's new
products and services.
In May 2021 we also signed a commercial partnership with Canopy, a residential
lettings platform, enabled by open banking and providing tenants with the
ability to report rental payments to the two main UK credit agencies (Experian
and Equifax) to improve their credit history and score. This commercial
partnership gives all of our estate agency customers free, unlimited tenant
referencing, potentially saving them thousands of pounds a year. With the
private rental sector currently estimated to include 4.4 million households in
the UK, this gives us the chance to create higher-quality, pre-qualified leads
and more value for our advertisers. The Canopy partnership was well received,
being praised regularly at our "Town Hall" events, which led us to extend this
arrangement beyond the initial twelve-month period.
With a market in which agents have been experiencing historically low levels
of new property sales and lettings instructions at the forefront of our minds,
we put particular focus on generating high-quality valuation leads for our
customers. As a result, we launched an automated call service partnership with
Callwell to provide agents with real-time connections to potential clients who
use our automated valuation model ("AVM"). These potential vendors represent
very high-quality leads and the ability to connect immediately by phone is a
competitive advantage to agents when securing instructions, with 60% of calls
connected leading to a valuation appointment being booked on the call. We also
released our AgentVal tool, allowing agents to use our AVM within their own
website, free of charge to our customers, and demonstrating that we are
providing increased levels of value to our agents' own websites as well as at
portal level.
Our engagement with our customers through our beta-testing, working groups and
"Town Hall'' events has led to a series of "by popular-demand" improvements on
site, including improved functionality within our back office OnTheMarket
Expert, the addition of lead history information, new labels on site to
improve the user experience (chain free, EV charger, auction), the support of
what3words in a listing description and enrichments to properties with
additional information (EPC, broadband, mobile data). We also introduced a
development display label for our new homes customers, allowing them to
promote listings across a whole development.
In January 2022 we released the functionality for our exclusive agreement with
Autoenhance.ai Limited, providing our customers with its photo enhancement
software services. The image enhancements are designed to display properties
to generate greater customer engagement and therefore more high-quality leads
to our customers. Initially available to those who upload properties manually,
we are currently looking at extending this to those who upload via CRM
software.
Also in January 2022, we announced an exclusive commercial partnership with
Brickflow, the UK's new comparison site for development finance, which will
provide our customer agents with the ability to instantly connect their
property developer clients with lenders and earn significant additional
revenue on land deals. This new partnership with us is a sector-first in the
portal space, offering a valuable service to housebuilders and developers,
whilst also enabling estate agents to offer an additional service to their
land and new homes departments.
3. Data and market intelligence
We have continued to innovate and develop the data-led services that our
clients need to win instructions, convert leads and operate efficiently. Key
feedback raised consistently during our customer engagement has been the
requirement for more data for conducting valuations and the provision of
enhanced market intelligence.
In May 2021 we signed an exclusive commercial partnership with Sprift
Technologies, an award-winning property data specialist. This relationship
benefits our customers with free market appraisal guides which are powered by
the Sprift platform via our own back-office system, OnTheMarket Expert.
The guides provide enhanced data and market intelligence on residential
properties for both sales and lettings, supporting our agent customers in
providing expert valuations and winning new instructions, increasing the value
they receive from listing at OnTheMarket.com.
In January 2022 we extended our partnership with Sprift and announced
exclusive access for our agent and housebuilder customers to Sprift's
prospecting tool, SmartMail. SmartMail is a full-service canvassing and
prospecting system that enables multi-trigger mailings to be sent directly to
specifically targeted properties, including those listed with another agent or
currently not on the market at all.
Agents can use SmartMail to specify which events trigger alerts for specific
homes, for example a newly listed property or one which has been on the market
for a set period of time. Agents can also prospect or canvass for instructions
in specific streets or areas, as well as by type or value.
In July 2021 we released our OnTheMarket Property Sentiment Index. This
monthly report has a unique focus on buyer and seller confidence and mover
attitudes towards mortgage borrowing. The insights contained with the Property
Sentiment Index are determined from consumer responses to questions asked on
the OnTheMarket website, with an average response rate of over 120,000 per
month. OnTheMarket believes this to be the largest monthly consumer sentiment
index to date in terms of attitudes to buying and selling residential property
in the UK. It provides advertisers and consumers with additional market
intelligence to inform their decision making, whilst reinforcing the
OnTheMarket brand as a thought leader in the UK residential property industry.
For our housebuilder customers, we also released lead mapping, supply and
demand intelligence tools and performance comparison reports. These provide
them with enhanced data to better understand the source location of leads, as
well as perform buyer demand analysis by area and track their performance
versus competitors.
4. Communications and marketing
It was important that, in a competitive industry, we are clear with consumers
as to the value of our proposition and the advantages that we offer to the
most serious property seekers, giving them an advantage in their property
search.
As such, we have completely re-engineered our internal and external
communications strategies to both customers and consumers. Using the framework
of a 'professionally informal' approach, we have refreshed our brands' tone of
voice, our use of imagery and our explainer tools, with a focus on simplifying
our messaging.
At the core of this strategy was our new TV creative, which was broadcast for
the first time on 26 December 2021. The aim of the new creative is to make our
brand recognisable whilst driving increased levels of consumer awareness. It
is designed to encourage serious property seekers to visit the site, request a
valuation, set up a property alert and enquire about properties for sale or
rent with the campaign directing consumers' attention to getting serious about
their property search.
"Get Real About Moving. Get OnTheMarket."
In addition to this, the new creative has also been applied to all our digital
display and paid social campaigns. We also refreshed the co-branding marketing
materials, delivering new marketing packs to our agent customers across the
country throughout January 2022. Marketing of our portal by our agent
customers is an effective and low-cost strategy to increase our consumer
exposure further.
In March 2021 the Group announced a commercial media partnership with Reach
plc, the UK's largest commercial news publisher. Reach plc's brands 'reach'
80% of all UK consumers every day, through a suite of mainstream titles. In
working with Reach plc on digital campaigns, we can leverage their coverage of
the consumer market to drive incremental traffic to the OnTheMarket.com
website.
A consistent request from our agent customers was the desire for training and
development programmes for their business. As a direct result of this, in
October 2021 we agreed an exclusive commercial partnership with business
coaching specialists, Property Academy. The relationship provides our full
fee-paying customers with free access to bespoke leadership coaching sessions,
run by industry stalwart and speaker Peter Knight.
In line with OnTheMarket's strategy of building a differentiated,
technology-enabled property business, we announced a partnership with Kremer
Signs in January 2022. Kremer Signs supplies signage to all sectors within the
property industry, including residential, commercial and land and new homes.
They have also developed the Smartboard product and our partnership supplies
our agent customers with Smartboards which are added to for-sale signs and use
QR codes to generate a new type of lead.
We will continue to evolve our brand and the ways we promote it in the current
year.
ESG
OnTheMarket continues to be mindful of the impact its operations and decisions
have on the environment, its staff, communities and all stakeholders.
During FY22 OnTheMarket started working with external climate consultants to
calculate and benchmark our carbon footprint. This will support the
development of OnTheMarket's sustainability strategy aimed at reducing our
business emissions. OnTheMarket has also established a Green Working Group to
generate ideas and engage our people on sustainability.
As part of our ongoing commitment to staff development, we have created a
learning and development platform to improve performance and employee
satisfaction, as well as the introduction of a significant benefits package
available to all.
The welfare and safety of our staff is one of our top priorities and we have
maintained a hybrid working model post-restrictions easing. In December 2021,
an employee engagement group was established to further engage with our staff,
with a view to ensuring their voice is heard at senior management level.
Post year-end developments
On 26 May 2022 at a general meeting of the Company shareholders approved a
resolution for a proposed cancellation of the share premium account that would
provide the Company with greater flexibility to make distributions to
shareholders, should the Board consider it appropriate in the future. Subject
to the approval of the Court, the cancellation is expected to become effective
on 7 July 2022. Further details are set out in note 22.
UK residential property market
There is currently a level of macroeconomic uncertainty in the UK, arising
from the increasing cost of living (particularly energy and food costs) and
rising bank interest rates, which have been put in place to try to curb
inflation. In addition, the ongoing geo-political issues and conflicts are
clearly contributing to this uncertainty.
Our data suggests that, despite these challenges, UK property seekers have to
date not been deterred from moving. The results of our latest Property
Sentiment Index shows that in April 2022, 82% of sellers were confident that
they could complete a sale within three months (the same percentage as in
March and February 2022).
Strong demand from serious buyers remains, with our data showing that in April
2022, 63% of properties in the UK were sold subject to contract within 30 days
of first being advertised for sale.
Buyers are also confident about obtaining the mortgages they need. While there
have been four interest rate rises, taking rates up to 1% from the low of 0.1%
seen during the height of the pandemic, mortgage availability doesn't seem to
be a concern. More than a third of buyers already had a mortgage agreement in
principle in place in April 2022, with only 1% of movers surveyed reported to
be 'very worried' about mortgage availability.
The number of properties newly listed for sale is slowly increasing and
supply/demand economics suggest that, if this continues, housing price growth
will moderate. If there's more choice of properties for sale and buyer numbers
remain consistent, or even start to drop off, there could be a levelling off
in activity and prices.
However, the fundamental lack of housing stock means that values should hold.
While there may be further challenges to come, for now our data shows strong
confidence from both buyers and sellers, which is continuing to fuel the UK
housing market. There are many reasons why people need to move and there are
plenty looking to do so. The challenges of the past two years have ingrained a
sense of positivity in the housing market which shows no signs of slowing. The
'new normal' is a housing market which shows resilience as long as stock
levels continue to improve, and confidence is maintained.
Outlook
I am pleased to report on such strong results as we continue our strategic
transition, building on the solid foundations which were already in place. Our
vision for our future is clear; to become a differentiated, tech-enabled
property business across the four pillars of portal, software, data and market
intelligence and the provision of communications and marketing tools.
I am proud of this evolution of the business and thanks to the extraordinary
efforts of the team we have been able to achieve this transition in just over
12 months. We have a fresh, new and contemporary website, which we believe is
the simplest and most easy-to-use property search site in the UK.
We have delivered a suite of new products, services and functionality to help
our customers operate more effectively and efficiently, whilst focusing on
serious property seekers and valuation opportunities. There is so much more to
come; our roadmap for internal development already extends past the next three
years and we are now used to a pace of change and innovation that was
unimagined a year ago.
Going forwards, our focus will remain on delivering increasing levels of value
to our estate agents, letting agents and housebuilder customers, whilst also
offering innovative solutions to consumers, giving them an advantage in their
property search. In the future, we want all serious property seekers to
consider OnTheMarket an essential tool in their property journey, before
during and after they have moved home. This is an ambitious objective but one
which we are determined to deliver.
The operational and financial progress to 31 January 2022 is a testament to
the strength of the team and of the business. I am also pleased to report that
trading in the first few months of the current financial year is in line with
our expectations. Our rebranded and improved portal, the opportunities arising
from our acquisition of Glanty, our commercial partnerships, our product
development pipeline and our increasing engagement with our supportive
customer base, together provide a strong platform from which to take the next
step in delivering our strategy.
I would like to thank my colleagues for their hard work and commend them for
sharing so enthusiastically in our common vision, to deliver value to all
stakeholders. Together we will work tirelessly to continue to listen, innovate
and deliver.
OnTheMarket's momentum is building, and we are looking to the future with
confidence. But we're only just getting started, there is much more to come.
Jason Tebb - Chief Executive Officer
Financial Review and Key Performance Indicators
The year ended 31 January 2022 saw revenue and ARPA up 32%, reflecting growth
in paying customers, the migration of customers on discounted rates towards
full-tariff contracts, continued growth in new homes revenues and 2021
COVID-19 customer support discounts that totalled £2.6m. The Group delivered
revenue of £30.4m in the year ended 31 January 2022 (2021: £23.0m) and an
adjusted operating profit of £2.7m (2021: £2.4m), up 13%.
At 31 January 2022, the Group had cash of £8.4m and no borrowings (2021:
£10.7m before deferred creditors of £0.4m). Adjusting for cash payments of
£0.4m to repay in full furlough loans, £1.8m incurred in acquiring Glanty
and £0.4m of strategic investments in commercial partners, net cash increased
by £0.3m. This reflects cash generation by Agents' Mutual, offset by
investment in Glanty since acquisition.
The reported operating loss of the Group was £0.6m (2021: reported operating
profit of £1.2m) and is further analysed as follows:
2022 2021
£'000 £'000
Reconciliation of operating (loss)/profit to adjusted operating profit:
Operating (loss)/profit (645) 1,231
Adjustments for:
Share-based employee incentives 467 683
Compensation net of professional fees incurred 211 (941)
Share-based agent recruitment charges 1,586 1,406
Government grant 449 (449)
Payments in relation to loss of office - 304
Staff related costs 106 192
Acquisition related costs 129 -
_________ _________
Operating profit before specific professional 2,303 2,426
fees, share-based payments and non-recurring
items
Non-cash agent recruitment charges within revenues (see notes 2.10 and 4) 404 -
_________ _________
Adjusted operating profit 2,707 2,426
_________ _________
The basic and diluted profit per share in the year were 0.15p and 0.13p
respectively (2021: basic and diluted profit per share were 3.76p and 3.42p
respectively).
Analysis of revenue and ARPA by source
Following the acquisition of Glanty in May 2021 the Group reports revenues
attributable to products and services offered to:
· estate and letting agents;
· new home developers;
· Glanty customers; and
· other, non-property advertiser customers.
Costs, assets and liabilities are not attributed to the different revenue
sources and so segmental reporting under IFRS 8 is not appropriate.
Year ended 31 Jan 2022 2021 Change
Group revenue
- Agency £27.0m £21.2m 27%
- New homes £2.5m £1.5m 67%
- Glanty £0.6m - N/a
- Other £0.3m £0.3m -
- Group £30.4m £23.0m 32%
Average advertisers
- Agency 11,171 11,789 (5)%
- New homes 2,125 1,496 42%
- Group 13,296 13,285 -
ARPA
- Agency £204 £150 36%
- New homes £100 £83 20%
- Group £188 £142 32%
Operational KPIs
Group operational KPIs were as follows:
As at 31 Jan 2022 2021 Change
Total advertisers 13,732 12,687 8%
Agency branches 11,451 10,645 8%
New homes developments 2,281 2,042 12%
· Group ARPA was £188, an increase of 32%, reflecting the growing
number of agents under paying contracts in the year and the migration of
customers on discounted rates towards full-tariff contracts (FY21: £142).
· Site visits were up 6% to an annual record of 283 million (FY21:
267 million).
· Average monthly leads per advertiser were constant at 117 (FY21:
117). Valuation leads increased by 58% in the year, reflecting strong
engagement with property-active consumers.
Income statement
The Group's financial performance is presented in the Consolidated Income
Statement below. The profit for the year attributable to the owners of the
Group was £0.1m (2021: £2.7m).
Administrative expenses in 2022 increased by £7.5m to £28.1m (2021:
£20.6m). This movement is primarily due to decisions taken in 2020 to reduce
costs and conserve cash in light of the COVID-19 pandemic. In particular,
marketing expenditure increased 80% to £10.6m (2021: £5.9m) and staff costs
(including temporary workers and consultants) increased to £11.4m (2021:
£10.0m) as headcount, bonuses and commissions were lower in FY21.
During the year there arose a non-cash charge of £0.5m in relation to share
option awards made to employees (2021: £0.7m). Further details on options
awarded, exercised and forfeited are set out in note 18.
Professional fees of £0.2m were incurred in the year (2021: compensation
received net of professional fees £0.9m), predominantly in relation to the
acquisition of Glanty (see note 11). Additional charges of £0.4m were
recognised arising from the Group's associate holding in Glanty and the
amortisation of acquisition related costs (2021: share of loss of associate
£0.1m).
An agent recruitment charge of £1.6m (2021: £1.4m) was incurred in relation
to non-cash share-based charges arising on the issue of shares to certain new
and existing agents following them having earlier signed new long-term listing
agreements to advertise all of their UK residential sales and letting
properties at OnTheMarket.com.
In FY22, the Group fully repaid the grant income received in FY21 under the
Coronavirus Job Retention Scheme of £0.4m (2021: grant income received
£0.4m).
Statement of financial position
Intangible assets increased to £7.5m (2021: £4.7m), which includes the
acquisition of Glanty's intangible assets at fair value in FY22 of £1.9m.
There was also additional capitalisation of staff and consultant costs
incurred in the ongoing development of OnTheMarket.com and Glanty products,
partially offset by the amortisation charge arising on those costs and on
costs previously capitalised.
Goodwill of £1.5m was recognised within the Group as a result of the
acquisition of Glanty in the year. Goodwill represents the excess of the fair
value of Glanty's purchase consideration over Glanty's net fair value of
identifiable assets and liabilities acquired.
Right of Use Assets increased by £0.5m to £0.7m (2021: £0.2m). This was
because of new motor vehicle leases, a renewal of the leasehold premise in
Agents' Mutual and a new lease from the acquisition of Glanty.
Investments of £0.4m arose in the year, from investment into Insurestreet
Limited, trading as Canopy, and into Property Funding Hub Limited, trading as
Brickflow.
A deferred tax asset of £2.6m (2021: £1.6m) was recognised in the year.
Further details are set out in note 9.
Receivables increased to £5.1m as at 31 January 2022 (2021: £4.8m), mainly
as a result of an increase in prepayments in respect of advertising
expenditure and an increase in trade receivables, partially offset by a fall
in the share-based agent recruitment prepayment. Details on the accounting
treatment for agent shares issued are set out in note 2.9.
Trade and other payables as at the year end rose to £5.6m (2021: £4.9m),
mainly as a result of higher year end payables in relation to staff bonus
accruals and an accrual in respect of future issues of agent recruitment
shares under listing agreements signed with customers, partially offset by a
reduction in VAT payable. Details on the accounting treatment for agent shares
issued are set out in note 2.9.
At the end of the year, the Statement of Financial Position showed total
assets of £26.3m (2021: £22.9m), with the increase primarily due to the
acquisition of Glanty.
Total equity was £18.7m at 31 January 2022 (2021: £16.9m), which reflects
the issue of shares on the acquisition of Glanty. This has been accounted for
under s.612 of the Companies Act 2006 and a merger reserve has been created. A
general meeting was held on the 26 May 2022 at which shareholder approval for
a proposed cancellation of capital was received. As part of the cancellation
of capital, legal advice was received over the classification of reserves that
led to the Group adjusting its reserves in FY22. Reserves of £3.7m,
previously classified as share premium, have now been categorised as other
reserves. See note 21 for further details.
Consolidated Income Statement: year ended 31 January 2022
Notes 2022 2021
£'000 £'000
Revenue 4 30,443 23,028
Administrative expenses 6 (28,140) (20,602)
________ ________
Operating profit before specific professional 2,303 2,426
fees, share-based payments and non-recurring
items
Specific professional fees, share-based payments
and non-recurring items:
Share-based employee incentives 7, 18 (467) (683)
Professional fees net of compensation received 7 (211) 941
Share-based agent recruitment charges 7 (1,586) (1,406)
Government grant (repaid) / received 7 (449) 449
Payments in relation to loss of office 7 - (304)
Staff related costs 7 (106) (192)
Acquisition related costs 11 (129) -
________ ________
Operating (loss) / profit (645) 1,231
Finance income 33 25
Finance expense (11) (22)
Share of loss of associate 15 (122) (94)
Fair value loss on step acquisition 11 (183) -
________ ________
(Loss) / profit before income tax (928) 1,140
Income tax 9 1,036 1,542
________ ________
Profit and total comprehensive income
for the year attributable to owners of the parent 108 2,682
________ ________
Profit per share from continuing Pence Pence
operations
Basic 10 0.15 3.76
Diluted 10 0.13 3.42
The operating profit arises from the Group's continuing operations.
There is no recognised income or expense for the year other than the profit
shown above and therefore no separate statement of other comprehensive income
has been presented.
Consolidated Statement of Financial Position: at 31 January 2022
Notes 2022 2021
£'000 £'000
ASSETS
Non-current assets
Goodwill 11,12 1,518 -
Intangible assets 13 7,520 4,685
Property, plant and equipment 96 103
Right-of-use assets 703 180
Investments in associates 15 - 851
Investments 16 405 -
Deferred tax asset 9 2,599 1,558
_________ ________
12,841 7,377
Current assets
Trade and other receivables 5,085 4,793
Cash and cash equivalents 8,412 10,719
_________ _________
13,497 15,512
_________ _________
TOTAL ASSETS 26,338 22,889
_________ _________
LIABILITIES
Current liabilities
Trade and other payables (5,580) (4,934)
Lease liabilities (421) (157)
Provisions 20 (732) (622)
Current tax (12) (16)
_________ _________
(6,745) (5,729)
Non-current liabilities
Lease liabilities (237) (2)
Provisions 20 (203) (258)
Deferred consideration 11 (75) -
Deferred tax liability 9,11 (401) -
_________ _________
(916) (260)
_________ _________
TOTAL LIABILITIES (7,661) (5,989)
_________ _________
NET ASSETS 18,677 16,900
EQUITY ATTRIBUTABLE TO OWNERS OF
THE PARENT
Share capital 19 149 145
Share premium 43,756 47,453
Merger reserve 1,228 (71)
Other reserve 4,473 782
Retained earnings (30,929) (31,409)
_________ _________
TOTAL EQUITY ATTRIBUTABLE TO OWNERS
OF THE PARENT 18,677 16,900
Consolidated Statement of Changes in Equity: year ended 31 January 2022
Share-based payment
Share capital £'000 Share premium £'000 Other reserves £'000 Merger Retained earnings £'000 Total equity £'000
£'000 reserve
£'000
At 1 February 2020 140 46,814 - 701 (71) (34,543) 13,041
Profit for the financial period - - - - - 2,682 2,682
______ ______ ______ ______ ______ ______ ______
Total comprehensive
expense for the period - - - - - 2,682 2,682
______ ______ ______ ______ ______ ______ ______
Transactions with
owners:
Shares issued for agent
recruitment shares 2 639 - 81 - - 722
Shares issued for employee
share options 3 - - - - - 3
Share-based payment
charge on employee options - - 452 - - - 452
Transfer to retained
earnings - - (452) - - 452 -
______ ______ ______ ______ ______ ______ ______
At 31 January 2021 145 47,453 - 782 (71) (31,409) 16,900
______ ______ ______ ______ ______ ______ ______
At 1 February 2021 145 47,453 - 782 (71) (31,409) 16,900
Profit for the financial period - - - - - 108 108
______ ______ ______ ______ ______ ______ ______
Total comprehensive
income for the period - - - - - 108 108
Reserves Reclassification - (3,697) 3,626 71 - -
(See note 31)
Transactions with
owners:
Share consideration for 3 - - - 1,228 - 1,231
Glanty
Costs incurred in issue of shares relating to Glanty - - - (69) - - (69)
Shares issued for agent
recruitment shares 1 - - 134 - - 135
Shares issued for employee
share options - - - - - - -
Share-based payment
charge on employee options - - 372 - - - 372
Transfer to retained
earnings - - (372) - - 372 -
______ ______ ______ ______ ______ ______ ______
At 31 January 2022 149 43,756 - 4,473 1,228 (30,929) 18,677
______ ______ ______ ______ ______ ______ ______
Share capital
Share capital represents the par value of ordinary shares issued by the
Company.
Share premium
Share premium represents the difference between the issue price and the par
value of ordinary shares issued by the Company.
Share-based payment reserve
Share-based payment reserve represents the cumulative share-based payment
expense for the Group's share option schemes.
Other reserves
Other reserves represent movements in share prices from contract date to share
issue date in relation to the issue of agent recruitment shares (see note
2.20).
Merger reserve
Merger reserve represents the difference between the cost of the investment in
a subsidiary undertaking and the equity of that subsidiary acquired, on
consolidation.
Retained earnings
Retained earnings represent the cumulative profit and loss net of
distributions to owners.
Consolidated Statement of Cash Flows: year ended 31 January 2022
2022 2021
£'000 £'000
Cash flows from operating activities
Profit for the year after income tax 108 2,682
Adjustments for:
Income tax (1,036) (1,542)
Finance income (33) (25)
Finance expense 11 22
Amortisation 2,460 2,204
Depreciation 605 388
Agent recruitment expense 1,985 1,406
Share-based payment 372 452
Share of loss of associate 122 94
Fair value loss on step acquisition 183 -
Acquisition related costs 129
_______ _______
Operating cash flows before movements in working capital 4,906 5,681
(Increase) / decrease in trade and other receivables (1,585) 592
(Decrease) in trade and other payables (181) (1,267)
(Decrease) / increase in provisions (34) 72
Tax (paid) / received (9) (7)
_______ _______
Net cash generated from operating activities 3,097 5,071
Cash flows from investing activities
Finance income received 33 25
Acquisition of intangible assets (3,369) (2,192)
Acquisition of tangible assets (49) (26)
Acquisition of subsidiary net of cash acquired (983) -
Acquisition of investment (405) -
Acquisition of associate - (527)
_______ _______
Net cash used in investing activities (4,773) (2,720)
Cash flows from financing activities
Finance expense paid - (18)
Loan Repayment (50) -
Proceeds from issue of shares 1 2
Repayment of lease liabilities (582) (301)
_______ _______
Net cash (used in) financing activities (631) (317)
_______ _______
Net movement in cash and cash equivalents (2,307) 2,034
Cash and cash equivalents at the beginning of the year 10,719 8,685
_______ _______
Cash and cash equivalents at the end of the year 8,412 10,719
_______ _______
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.
Selected notes to the Consolidated Financial Statements: year ended 31 January
2022
1. General information
The principal activity of the Company is that of a holding company. The
principal activities of the Group in the year under review were the provision
of online property portal services to businesses in the estate and lettings
agency industry under the trading name of OnTheMarket.com, and the provision
of software services to UK estate and lettings agents by Glanty under the
trading name teclet.
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. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below. They have been applied
consistently to all periods presented with the addition of IFRS 3: Business
Combinations, further information on which is set out below in notes 2.3, 2.4
and in note 11.
2.1. Basis of preparation
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 January 2022 but is derived from
those accounts. Statutory accounts for 31 January 2021 have been delivered to
the Registrar of Companies and those for 31 January 2022 will be delivered
following the Company's annual general meeting. The auditors have reported on
those accounts: their reports were unqualified, did not draw attention to any
matters by way of emphasis and did not contain statements under s498 (2) or
(3) of the Companies Act 2006.
While the financial information included in this results announcement has been
prepared in accordance with the recognition and measurement criteria of
International Financial Reporting Standards ("IFRS"s), this announcement does
not itself contain sufficient information to comply with IFRSs. The Company
expects to publish full financial statements that comply with IFRSs in June
2021.
Measurement bases
The consolidated financial statements have been prepared under the historical
cost convention. Historical cost is generally based on the fair value of the
consideration given in exchange for assets.
The preparation of the consolidated financial statements in compliance with
adopted IFRS requires the use of certain critical accounting estimates and
management judgements in applying the accounting policies. The significant
estimates and judgements that have been made and their effects are disclosed
in note 3.
2.2. Going concern
The Group made a profit after tax for the year of £0.1m (2021: £2.7m) and as
at 31 January 2022 the Group had a net cash balance of £8.4m (2021: £10.7m).
At 31 May 2022, the Group had cash of £8.2m.
The Directors have prepared and reviewed cash forecasts and projections for
the Group for the next 12 months. They have also conducted sensitivity
analyses and considered scenarios where there is an adverse impact on future
revenues, together with the mitigating actions they may take in such
circumstances, such as a reduction in budgeted discretionary expenditure.
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 the light of this, the Directors consider the going concern basis to be
appropriate to the preparation of these financial statements.
2.3. Business Combinations
The acquisition of subsidiaries is accounted for using the acquisition method.
The consideration transferred is measured at the aggregate of the fair values,
at the date of exchange, of assets given, liabilities incurred or assumed, and
equity instruments issued by the Group in exchange for control of the
acquiree. Costs directly attributable to the business combination are
recognised in the income statement in the period they are incurred. The cost
of a business combination is allocated at the acquisition date by recognising
the acquiree's identifiable assets, liabilities and contingent liabilities
that satisfy the recognition criteria at their fair values at that date.
The acquisition date is the date on which the acquirer effectively obtains
control of the acquiree. Intangible assets are recognised if they meet the
definition of an intangible asset contained in IAS 38 and their fair value can
be measured reliably. The excess of the cost of acquisition over the fair
value of the Group's share of identifiable net assets acquired is recognised
as goodwill.
For business combinations achieved in stages, the Group remeasures its
previously held equity interest in the acquiree at its acquisition date fair
value and recognises the resulting gain or loss, if any, in the Income
Statement as appropriate.
2.4. Goodwill
Goodwill represents the excess of the fair value of purchase consideration
over the net fair value of identifiable assets and liabilities acquired.
Goodwill is recognised as an asset at cost and subsequently measured at cost
less accumulated impairment.
On disposal of a subsidiary, the attributable amount of goodwill is included
in the determination of the profit and loss on disposal.
2.5. Intangible assets
In accordance with IAS 38, "Intangible Assets", expenditure incurred on
research and development is distinguished as relating to a research phase or
to a development phase.
Expenditure on research activities is recognised as an expense in the period
in which it is incurred.
An internally generated intangible asset arising from the development and
enhancement of the online platform, OnTheMarket.com, and associated
applications, or the development and enhancement of Glanty software assets, is
recognised when the development has been deemed technically feasible, the
Group has the intention to complete the development, probable future economic
benefits will occur, the Group has the required funds to complete the
development and when the Group has the ability to measure the expenditure on
the development reliably.
The amount initially recognised for internally generated intangible assets is
the sum of the directly attributable expenditure incurred from the date when
the intangible asset first meets the recognition criteria defined above.
Capitalisation ceases when the asset is brought into use. Where no internally
generated asset can be recognised, development expenditure is recognised in
the income statement in the period in which it is incurred.
Subsequent to initial recognition, internally generated assets are reported at
cost less accumulated amortisation and impairment losses. The amortisation
methods applied are as follows:
Development costs -
Straight-line 4 years
Technology related intangibles -
Straight-line 8 years
Customer related intangibles -
Straight-line 8 years
Those separately identifiable intangible assets acquired at fair value under
the purchase of Glanty are amortised over 8 years, being the period which the
Directors believe best matches the basis of calculation of the fair values at
which they were acquired.
2.6. Impairment of property, plant & equipment, right-of-use assets,
intangible assets and goodwill
The carrying value of property, plant, and equipment, right of use assets and
intangible assets are reviewed at each reporting date to determine whether
there is any indication of impairment. If any such indication exists, the
asset's recoverable amount is estimated. An impairment loss is recognised for
the amount by which the asset's carrying amount exceeds its recoverable
amount.
Goodwill is tested for impairment annually and whenever there is an indication
that they might be impaired. An impairment loss is recognised for the amount
by which the carrying value of the asset exceeds its recoverable amount.
If the recoverable amount of an asset (or cash-generating unit) is estimated
to be less than its carrying amount, the carrying amount of the asset (or
cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised as an expense immediately, unless the relevant asset is carried
at a revalued amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the
asset (or cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss
been recognised for the asset (or cash-generating unit) in prior years. A
reversal of an impairment loss is recognised immediately as profit, unless the
relevant asset is carried at a revalued amount, in which case the reversal of
the impairment loss is treated as a revaluation increase.
2.7 Investments in associates in the consolidated financial statements
Associates are entities over which the consolidated entity has significant
influence but not control or joint control.
Investments in associates are accounted for using the equity method.
Under the equity method, the share of the profits or losses of the associate
is recognised in profit or loss and the share of the movements in equity is
recognised in other comprehensive income. Investments in associates are
carried in the statement of financial position at cost plus post acquisition
changes in the consolidated entity's share of net assets of the associate.
Goodwill relating to the associate is included in the carrying amount of the
investment and is neither amortised nor individually tested for impairment.
Dividends received or receivable from associates reduce the carrying amount of
the investment.
When the consolidated entity's share of losses in an associate equals or
exceeds its interest in the associate, including any unsecured long-term
receivables, the Company or consolidated entity does not recognise further
losses, unless it has incurred obligations or made payments on behalf of the
associate.
The consolidated entity discontinues the use of the equity method upon the
loss of significant influence over the associate and recognises any retained
investment at its fair value. Any difference between the associate's carrying
amount, fair value of the retained investment and proceeds from disposal is
recognised in profit or loss.
2.8. Impairment of financial assets
An impairment loss is recognised for the expected credit losses on financial
assets when there is an increased probability that the counterparty will be
unable to settle an instrument's contractual cash flows on the contractual due
dates, a reduction in the amounts expected to be recovered, or both. The
probability of default and expected amounts recoverable are assessed using
reasonable and supportable past and forward-looking information that is
available without undue cost or effort. The expected credit loss is a
probability-weighted amount determined from a range of outcomes and takes into
account the time value of money.
For trade receivables, material expected credit losses are measured by
applying an expected loss rate to the gross carrying amount. The expected loss
rate comprises the risk of a default occurring and the expected cash flows on
default based on the aging of the receivable.
For intercompany loans that are repayable on demand, expected credit losses
are based on the assumption that repayment of the loan is demanded at the
reporting date. If the subsidiary does not have sufficient accessible highly
liquid assets in order to repay the loan if demanded at the reporting date, an
expected credit loss is calculated. This is calculated based on the expected
cash flows arising from the subsidiary, weighted for probability likelihood
variations in cash flows.
2.9. Share-based payments
Employee share schemes
The Group operates equity-settled share-based remuneration plans for its
employees. All goods and services received in exchange for the grant of any
share-based payment are measured at their fair values.
Where employees are rewarded using share-based payments, the fair value of
employees' services is determined indirectly by reference to the fair value of
the equity instruments granted. This fair value is appraised at the grant date
and excludes the impact of non-market vesting conditions (for example
profitability and sales growth targets and performance conditions).
All share-based remuneration is ultimately recognised as an expense in profit
or loss with a corresponding increase to equity. If vesting periods or other
vesting conditions apply, the expense is allocated over the vesting period,
based on the best available estimate of the number of share options expected
to vest.
Non-market vesting conditions are included in assumptions about the number of
options that are expected to become exercisable. Estimates are subsequently
revised if there is any indication that the number of share options expected
to vest differs from previous estimates. Any adjustment to cumulative
share-based compensation resulting from a revision is recognised in the
current period.
The number of vested options ultimately exercised by holders does not impact
the expense recorded in any prior period. Upon exercise of share options, the
proceeds received, net of any directly attributable transaction costs, are
allocated to share capital up to the nominal (or par) value of the shares
issued with any excess being recorded as share premium.
The social security contributions payable in connection with the grant of the
share options are considered an integral part of the grant itself and the
charge will be treated as a cash-settled transaction.
Agent recruitment shares
The Group issues shares to key agents who commit to long-term listing
agreements, in line with its strategy to grow the agent shareholder
base. Shares are issued in return for payment of the nominal share value in
cash and, in some cases historically, in return for share premium in non-cash
consideration relating to the long-term listing agreements signed. Shares are
either issued as soon as practicable after contract commencement or following
the completion of contractual commitments, depending upon the contract terms.
For shares issued as soon as practicable after contract commencement, an agent
recruitment share reserve is credited upon contract commencement (shown within
other reserves in the financial statements) and a prepayment created, based on
the value of the shares at contract date, which is then amortised over the
life of the contract.
In instances where shares are issued after the completion of contract
commitments, amounts are accrued during the life of the contract and the
accrual released and other reserves credited upon issue of the shares. Amounts
are accrued and deducted against revenue over the period in which the fees are
earnt.
Upon the issue of shares to the agents, which predominantly takes place on a
quarterly basis, the nominal value of the shares issued, which is paid in cash
by the agent, is transferred to share capital.
2.10. Revenue
Revenue principally represents the amounts receivable from agency and new
homes customers in respect of listing fees and the sale of products that
provide additional marketing opportunities for customers. Glanty revenues are
predominantly in respect of licence subscriptions and paid development
contracts. The Group also receives revenues from non-property advertisers who
pay for exposure to consumers using the Group's platforms.
Revenue is recognised based upon the transaction price specified in a contract
with a customer. It is recognised at the point when the performance
obligations are satisfied, through providing a customer with access to the
OnTheMarket platforms and / or products or other services.
Further information on the main revenue sources is set out below.
Agency
For listing services, customers pay monthly subscriptions to list their
properties on the OnTheMarket platforms. Contract fees for these services are
predominantly based upon the size (number of branches) of the agent, branch
locations and customer activities (sales, sales and lettings or lettings
only). They vary in length from rolling monthly notice periods to five years,
with agents on discounted rates or short-term introductory free of charge
offers typically on shorter contracts.
Performance obligations are satisfied, and revenue recognised, from the point
at which the customer has access to the platform to allow them to list their
properties. Subscription revenue is spread over the life of the contract.
Agency listing services are typically billed monthly in advance, from the
point the customer gains access to the platforms.
Agent customers have the option to enhance their property listings and
presence through purchasing additional advertising products. For products that
provide enhanced brand exposure over a period of time, revenue is recognised
over the life of the product, from the point the customer gains access to the
product. Invoices for such products are sent on a monthly basis, in arrears.
For products with a one-off usage basis, revenue is recognised at the point in
time or over time depending on the nature in which the customer chooses to
apply and use the product.
Where contracts include an issue of shares to an agent customer following
payment of listing fees, and the shares issued are calculated as a percentage
of the fees paid, the fair value of the shares expected to be awarded is
accrued over the relevant period and treated as a discount to revenues.
New homes
For listing services, customers pay monthly subscriptions to list their
developments on the OnTheMarket platforms. Revenues for these services are
predominantly based upon a monthly fee per development listed. Contracts are
predominantly rolling, and the contract will end when the listed development
is fully sold.
Performance obligations are satisfied, and revenue recognised, from the point
at which the customer has access to the platform to allow them to list their
properties. Subscription revenue is spread over the life of the contract. New
homes listing services are typically billed monthly in arrears, from the point
the customer gains access to the platforms.
New homes customers have the option to enhance their property listings and
presence through purchasing additional advertising products. For products that
provide enhanced brand exposure over a period of time, revenue is recognised
over the life of the product, from the point the customer gains access to the
product. Invoices for such products are sent on a monthly basis, in arrears.
For products with a one-off usage basis, revenue is recognised at the point in
time or over time depending on the nature in which the customer chooses to
apply and use the product.
Glanty
Glanty revenue is derived from the sale of software licences or for the
provision of software development services for customers.
Licence agreements with customers include a pre-defined subscription period
during which the customer is entitled to the usage of the software. The length
of the subscription period varies and might be one, 12, 24, or 36 months.
Performance obligations are satisfied, and revenue recognised, when the
customer has the contractual right to use the software. Revenue is then
recognised on a monthly basis, over the life of the contract, from the point
the customer has the right to access software. Invoices are issued under a
range of billing agreements including monthly, quarterly, in advance and in
arrears.
For paid development work, revenue is recognised on the basis of work
performed over the life of the contract, with billing often based on
contractual milestones within the contracts.
Other
Other revenue principally relates to advertising revenue paid by customers
(not agency or new homes customers) to advertise non-property products on the
OnTheMarket platforms. Performance obligations are met once a customer is
actively advertising on the OnTheMarket platforms. Revenue is recognised from
the point in time in which the customer advertised. Where third parties are
acting as intermediaries between the Group and the advertiser customer, only
net revenues receivable are recognised.
Contract assets and liabilities
Contract assets relate to the Group's rights to consideration for services
that have been provided at the reporting date, predominantly under contracts
invoiced in arrears. Contract assets are transferred to receivables when the
rights to consideration have become unconditional.
Contract liabilities predominantly relate to advance consideration received
from agency customers for listing services, for which revenue is recognised at
a later date, as or when the services are provided.
2.11. Operating segments
An operating segment is a component of the Group that engages in business
activities from which it may earn revenues and incur expenses, including
revenues and expenses that relate to transactions with any of the Group's
other components. An operating segment's operating results, where discrete
financial information is available, are reviewed regularly by the Group's
Chief Executive Officer to make decisions about resources to be allocated to
the segment and assess its performance. Since its acquisition, Glanty has been
accounted for as an operating segment under IFRS 8, distinct from the rest of
the Group.
3. Critical accounting judgements and key sources of estimation
uncertainty
The preparation of the consolidated financial statements requires management
to make judgements, estimates and assumptions concerning the future which
impact the application of accounting policies and reported amounts of assets,
liabilities, income and expenses. The accounting estimates resulting from
these judgements and assumptions seldom equal the actual results but are based
on historical experiences and future expectations.
Critical accounting judgements
The following are the critical judgements, apart from those involving
estimations (which are dealt with separately below), that the directors have
made in the process of applying the Group's accounting policies and that have
the most significant effect on the amounts recognised in the financial
statements;
Revenue recognition
Where customers default on the payment terms of their contracts, management
have made judgements as to whether there is any current intention to pay by
these customers and, where there is judged not to be, the contract is deemed
not to meet the contract recognition criteria under IFRS 15 and hence the
amounts due are not included within revenues. Amounts, if subsequently
received, are recognised as revenue at the time of receipt.
Key sources of estimation uncertainty
Business combinations
Management uses valuation techniques when determining the fair values of
certain assets and liabilities acquired in a business combination (see note
11). In particular, the fair value of contingent consideration is dependent on
the outcome of many variables including the acquiree's future profitability.
Impairment of Goodwill, Intangible Assets and Investments in subsidiaries
Determining whether goodwill, intangible assets or investment in subsidiaries
are impaired requires an estimation of the value in use of the cash-generating
unit to which these have been allocated. The value in use calculation requires
the company to estimate the future cash flows expected to arise from the
cash-generating unit and a suitable discount rate to calculate present value.
Projections are based on both internal and external market information and
reflect past experience as set out in note 12.
Impairment of Company receivables
The Company has intercompany loans to its subsidiaries Agents' Mutual and
Glanty which are repayable on demand. As the subsidiaries did not have
sufficient highly liquid resources to repay the loans at 31 January 2022, an
expected credit loss is calculated under IFRS 9.
The calculation is based upon a number of scenarios, ranging from a scenario
which anticipates that Agents' Mutual and Glanty will trade profitably in the
future and that this will allow it to repay the loans in time, to a scenario
under which it is anticipated that the loan will not be fully recovered.
Forecast cash flows under a range of possible outcomes are used to derive a
probability-weighted value for the loans based upon the time taken to repay
the outstanding amount in full. These calculations rely on management
estimates as to the future cash flow forecasts and the probability weightings
assigned. The estimates reflect the views of management at 31 January 2022 and
the future cash flows therefore vary year to year.
Deferred tax
At 31 January 2022 Agents' Mutual had tax losses available to carry forward.
Agents' Mutual was profitable in the year to 31 January 2022 and the Directors
believe it will make taxable profits in the future, against which the tax
losses carried forward will be available to offset future corporation tax
payments. A deferred tax asset has therefore been recognised in respect of
these losses. The amount recognised is based upon the Directors' judgement of
possible taxable profits arising in the foreseeable future. In forming this
judgement, The Directors are required to estimate possible revenues and
profits that may arise and the asset is restricted to forecast profits in the
foreseeable future (see note 9).
4. Revenue
The Group has determined that the Chief Executive Officer is the chief
operating decision maker. Monthly management numbers are reported and issued
to the Chief Executive Officer, which are used to assess the performance of
the business.
Following the acquisition of Glanty in May 2021, the Group reports revenues
attributable to products and services offered to:
· estate and letting agents;
· new home developers;
· other, non-property advertising income; and
· Glanty customers
Revenues for the year ended 31 January 2022 2021 Change
£m £m
Group revenue
- Agency 27.0 21.2 27%
- New homes 2.5 1.5 67%
- Glanty 0.6 - N/a
- Other 0.3 0.3 -
- Total 30.4 23.0 32%
Agency Sales are predominantly billed monthly in advance, and these are
recognised as deferred income. The Group has contract liabilities as follows
in respect of deferred income:
Deferred income as at 31 January 2022 2021 Change
£m £m
Group revenue
- Agency 1.7 1.7 -
- New homes - 0.1 (100%)
- Glanty - - N/a
- Other - - N/a
- Total 1.7 1.8 (6)%
Contract liabilities of £1.8m at 31 January 2021 were recognised as revenue
in the year ended 31 January 2022 (2021: £1.6m).
A proportion of sales in are billed monthly in arrears and are recognised as
accrued income. Accrued income amounted to £0.4m for the year ended 31
January 2022 (2021: £0.2m).
All revenue is generated in the UK for the Group's services.
During the year there was a charge of £0.4m to revenue in relation to shares
that are issued after the completion of contract commitments. These are
amounts that are initially accrued during the life of the contract and the
accrual released and other reserves credited upon issue of the shares. Amounts
are accrued and deducted against revenue over the period in which the fees are
earnt.
5. Operating Segments
The Group determines and presents operating segments based on internal
information that is provided to the Chief Executive Officer, who is the
Group's chief operating decision maker.
The Group's reportable segments are as follows:
· Glanty
· Rest of the Group
Management monitors the business segments at a revenue and operating profit
level separately for the purpose of making decisions about resources to be
allocated and of assessing performance. There was no inter-segment revenue
during the year.
Costs, assets and liabilities are not attributed to the different revenue
sources other than for Glanty and so segmental reporting under IFRS 8 is not
appropriate for the remainder of the Group.
No customer made up more than 10% of Group revenues in the current or prior
years.
Operating profit in relation to the Rest of the Group segment is managed
together and as there are no internal measures of individual segment
profitability, relevant disclosures have been shown under the heading Rest of
the Group in the table below.
Glanty Rest of the Group Group
Year ended 31 January 2022(1) £m £m £m
Revenue 0.6 29.8 30.4
Operating loss(2) (0.5) (0.1) (0.6)
Depreciation & amortisation 0.2 2.9 3.1
(1) Glanty figures are for the period from acquisition on 28 May 2021 to 31
January 2022.
(2) Operating loss is stated after the charge for depreciation and
amortisation.
(3) Assets and liabilities are not separately monitored by segment by the
Chief Operating Decision Maker and therefore not identified above.
6. Administrative expenses
Expenses are comprised of:
2022 2021
£'000 £'000
Depreciation 605 388
Amortisation 2,460 2,204
Staff costs (note 8) 9,509 7,521
Short-term lease expenses 246 732
Advertising expenditure 10,574 5,898
Other administrative expenses 4,746 3,859
________ ________
28,140 20,602
________ ________
7. Specific professional fees, share-based payments and
non-recurring items
2022 2021
£'000 £'000
Share-based employee incentives 467 683
Professional fees net of compensation 211 (941)
Share-based agent recruitment charges 1,586 1,406
Government grant repayment / (received) 449 (449)
Payments in relation to loss of office - 304
Staff related costs 106 192
Acquisition related costs 129 -
________ ________
2,948 1,195
________ ________
Share-based employee incentive charges include employer's national insurance
charge on options exercised in the year as well as the movement in the
expected future employer's national insurance charge based on the year-end
share price. See note 18 for further details.
Professional fees incurred in the period relate predominantly to fees and
expenses in relation to the acquisition of the remaining 80% of Glanty. In the
prior period, compensation net of professional fees incurred were in relation
to litigation which was settled in that period. Compensation related 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.
The government grant costs in the period reflect the repayment of amounts
received in the year to 31 January 2021 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.
Staff related costs in the period relate to costs associated with termination
of employment and professional fees associated with employee share-based
plans. Staff related costs in the prior period 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.
Prepaid acquisition related costs relate to the amortisation of prepayments
for employee services incurred as part of the acquisition of Glanty and
amortised over the three-year period from acquisition.
All of these items have been separately analysed as the Directors believe the
adjusted operating profit calculated and disclosed before accounting for these
amounts provides useful additional information as an alternative performance
measure. However, it should not be considered an alternative to IFRS measures,
such as revenue or operating loss or profit.
8. Employees and Directors
2022 2021
Group £'000 £'000
Staff costs (including Directors) comprise:
Wages and salaries 10,002 7,582
Social security costs 1,199 949
Pension 136 128
________ ________
11,337 8,659
Less staff costs capitalised to intangible assets (1,828) (1,138)
________ ________
Staff costs expensed 9,509 7,521
________ ________
2022 2021
Company £'000 £'000
Staff costs (including Directors) comprise:
Wages and salaries 206 191
Social security costs 25 23
Pension 1 1
________ ________
232 215
________ ________
9. Income tax
2022 2021
£'000 £'000
Current tax:
UK corporation tax on income for year 5 16
________ ________
Total current tax 5 16
Deferred tax:
Origination and reversal of temporary differences (580) (1,558)
Arising from change in enacted tax rate (461) -
________ ________
Income tax credit (1,036) (1,542)
________ ________
Factors affecting tax charge for the year
The tax assessed for the year is different from
the effective rate of corporation tax as explained below: 2022 2021
£'000 £'000
(Loss) / profit before taxation (928) 1,140
________ ________
(Loss) / profit before taxation multiplied by the effective
rate of corporation tax of 19% (2021: 19%) (176) 217
Effects of:
Expenses not deductible for tax purposes 281 209
Depreciation in excess of capital allowances 180 49
Expenditure on intangible assets claimed as incurred (99) 2
Tax losses (utilised in year) / carried forward (181) (461)
Previously unrecognised tax losses (1,041) (1,558)
________ ________
Tax income (1,036) (1,542)
________ ________
Deferred taxes reflected in these financial statements have been measured
using the enacted tax rates at the Balance Sheet date. For UK corporation tax
the enacted rate of 19% was used for periods until 5 April 2023 and the
enacted rate of 25% was used thereafter to measure the net deferred tax asset.
The subsidiary, Agents' Mutual, has trading losses available for carry forward
of £30.2m (2021: £32.4m). Unused tax losses for which no deferred tax asset
has been recognised total £18.9m (2021: £24.2m).
Based upon estimations of profits arising in the foreseeable future, a
deferred tax asset of £2.6m (2021: £1.6m) has been recognised for these
losses. This deferred tax asset comprises temporary differences attributable
to:
2022 2021
£'000 £'000
Amounts recognised in profit or loss:
Employee share-based payments 1,271 1,204
Property, plant and equipment temporary differences 157 116
Development cost temporary differences (1,307) (890)
Losses 2,478 1,128
________ ________
Deferred tax asset 2,599 1,558
________ ________
The movement in the year in the deferred tax asset arising from the Agents'
Mutual losses is as follows:
£'000
Opening balance at 1 February 2021 1,558
Credited to profit and loss
1,041
_____
Closing balance at 31 January 2022 2,599
_____
The subsidiary, Glanty, has trading losses available for carry forward of
£4.8m for which no deferred tax asset has been recognised. The Group has been
implementing its strategic plans for the long-term development of the
business. These plans envisage a period of strong growth in the future,
underpinned by initial investment in product development and roll-out. As a
result of the Group's strategic plans, circumstances with respect to
recoverability of the deferred tax asset in relation to losses carried forward
in the foreseeable future remain uncertain. Consequently, no deferred tax
asset has been recognised. The Group has also not recognised a deferred tax
liability arising on non-current asset timing differences of £321k due to the
availability of tax losses to extinguish this liability.
A deferred tax liability of £401k has been recognised, based upon the
potential tax payable should the Group dispose of the identifiable net assets
acquired upon the acquisition of Glanty. The charge assumes tax at 25% of the
excess of fair value over the tax base of the asset at the acquisition date.
The liability reduces the goodwill arising on the acquisition of Glanty.
10. Earnings per share
Numerators: Earnings attributable to equity
2022 2019
2021 2019
Profit for the year from continuing operations
attributable to owners of the Company £'000 £'000 £'000 £'000
108 2,682
________ ________
Total basic earnings and diluted earnings 108 2,682
________ ________
No. No.
Denominators: Weighted average number of equity shares
Weighted average number of equity shares used in 73,744,914 71,280,183
calculating basic earnings per share
Adjustments for calculating diluted earnings per share: 7,194,021 7,073,784
- options over equity shares
Weighted average number of equity shares used in 80,938,935 78,353,967
calculating diluted earnings per share
_________ _________
108
2021 2019
£'000 £'000
2,682
________
________
Total basic earnings and diluted earnings
108
2,682
________
________
No.
No.
Denominators: Weighted average number of equity shares
Weighted average number of equity shares used in
calculating basic earnings per share
73,744,914
71,280,183
Adjustments for calculating diluted earnings per share:
7,194,021
7,073,784
- options over equity shares
Weighted average number of equity shares used in
calculating diluted earnings per share
80,938,935
78,353,967
_________
_________
11. Acquisition of subsidiary
Glanty is a property technology business which specialises in providing
solutions to the UK residential estate and lettings sectors. It is the owner
and developer of software products and services designed to reduce overheads,
maximise efficiencies and increase revenues for estate and lettings agents.
The acquisition of Glanty was in line with the Group's strategy to create a
tech-enabled property business across the broader property ecosystem.
OnTheMarket made an initial strategic investment for a 20% share in Glanty, in
December 2019. As part of that investment, the Company was granted a call
option under which it had the right, but not the obligation, to enter into a
share purchase agreement to acquire the remaining 80% of Glanty shares. The
call option was exercised on 19 March 2021 and the acquisition of the
remaining 80% of shares in Glanty completed on 28 May 2021. From that date
Glanty has been accounted for as a subsidiary.
Consideration transferred
The initial consideration of £1,533,477 (the "Initial Consideration")
required to be paid by OnTheMarket under the share purchase agreement was
satisfied by way of the issue of 1,528,832 ordinary shares of 0.2 pence each
in the capital of OnTheMarket in aggregate and a cash payment of £1,512k,
offset by a prepayment arising in respect of bad leaver provisions of £580k.
The Initial Consideration was subject to an adjustment post-completion based
on Glanty's actual net cash/net debt and actual working capital position as at
completion. This has resulted in a reduction in the Initial Consideration of
£147,000, which led to the return to OnTheMarket of 163,154 ordinary shares
of 0.2 pence each in the capital of OnTheMarket. These shares will not be
eligible to be voted and must be cancelled or disposed of within three years.
The shares were cancelled on 2 November 2021.
Contingent earn-out
The purchase agreement includes additional consideration which may become
payable under earn-out arrangements (capped at £12m and payable in shares or
cash at the Company's discretion) and if Glanty receives R&D tax credits
from HMRC which relate to periods prior to completion (capped at £150k). The
Group has calculated the fair value of the contingent consideration based on
probabilities assigned to forecasts based on different assumptions.
The earnout targets are based on Glanty's recurring revenues and EBITDA in the
third-year post completion, the mechanism for determining which is detailed in
the share purchase agreement. The earnout will be payable if third year
revenues exceed £2m and third year EBITDA exceeds £0.5m. Below those levels,
no earnout is paid. If payable, the earnout payable will be 1 times third year
revenues plus 1.5 times third year EBITDA, capped at an aggregate payment of
£12m. Payment of any earnout will be made following the third anniversary of
completion of the call option and allows time for drawing up and agreeing the
relevant accounts on which the earnout is calculated.
The fair value of the consideration for the 80% of Glanty shares acquired is
as follows:
£'000
Fair value of consideration transferred
Cash consideration 932
Share consideration 1,378
R&D tax credit earn out 75
Adjustment to share consideration for net working capital (147)
Fair Value of previously held 20% investment in Glanty 520
________
Total consideration 2,758
________
£'000
Amounts recognised for identifiable net assets
Technology related intangibles 1,482
Customer related intangibles 444
Debtors 72
Cash 19
Deferred Tax Liabilities (401)
Trade and other payables (326)
Bank loan (50)
________
Identifiable net assets 1,240
________
________
Goodwill 1,518
________
Previously held investment in Glanty
On the acquisition date, the Group's 20% investment in Glanty, previously
accounted for as an investment in associate, has been remeasured to fair
value. On that date, a cumulative loss of £0.2m arising from difference in
the fair value of the investment and the carrying value in the accounts at the
acquisition date is recognised in the consolidated income statement as the
fair value loss on step acquisition. The previously held investment is
considered part of what was given up by the Group to obtain control of Glanty.
Accordingly, the fair value of the investment is included in the determination
of goodwill.
Goodwill
Goodwill of £1.5m relates to earnings attributable to future new customers of
the Company, new technologies that may be developed that will
complement/replace the existing suite of products, the highly skilled
assembled workforce (which cannot be separately recognised as an intangible
asset) and an amount for general operational purposes.
Glanty's contribution to the Group results
From the acquisition date to 31 January 2022, Glanty has contributed £0.6m of
revenues and a loss after tax of £0.6m.
Had the acquisition occurred on 1 February 2021, Glanty would have contributed
£0.8m of revenues and a loss after tax of £1.2m. This loss includes £0.6m
of one-off costs in relation to additional payments crystallising prior to the
acquisition by the Company. The Group revenue would have been £30.7m and a
loss after tax of £0.7m.
12. Goodwill
Group
£'000
At 1 February 2021 -
Additions arising on business combinations (see note 11) 1,518
________
At 31 January 2022 1,518
________
Impairment testing for cash generating units containing goodwill
The Group tests the carrying value of assets at the cash-generating unit
Glanty for impairment annually, or more frequently if there are indicators
that assets might be impaired. The review is undertaken by assessing whether
the carrying value of assets is supported by their value-in-use, which is
calculated as the net present value of future cash flows derived from those
assets, using cash flow projections. If an impairment charge is required, this
is allocated first to reduce the carrying amount of any goodwill allocated to
the cash-generating unit (£1.5m) and then to the other assets of the cash
generating unit, but subject to not reducing any asset below its recoverable
amount. The impairment review in respect of Glanty concluded that no
impairment charge was required.
For the impairment review, cash flows were prepared using Board approved
forecasts to 31 January 2025, alongside management projections for a further
two years. The projections demonstrate continued growth in revenue from
existing customers including forecast growth in sales to the Group's listing
agent customer base. Revenue growth in years 4 and 5 are forecast to slow but,
given the early stage that the business is at, revenue growth rates for these
years were still forecast above steady state industry norms. For the
impairment review, a long-term revenue growth rate beyond the 5-year period of
0% has been assumed.
Key assumptions are those to which the recoverable amount of an asset or
cash-generating unit is most sensitive.
The following key assumptions were used in the discounted cash flow model for
Glanty:
- revenue growth in the base model for the years 1-5 is assumed at a
CAGR of 44%;
- EBITDA margins increase to a steady state level of 40% in
perpetuity; and
- 14% pre-tax discount rate.
Revenue growth in the base model is assumed at a CAGR of 44%. Glanty achieved
growth in license revenue of 54% in the prior year. Management believe
continued growth in the base model is achievable in accordance with the
acquisition strategy of Glanty providing additional services for agents listed
on the OnTheMarket.com portal and supports the move of the Group from specific
listing services to a holistic approach towards service and product delivery.
In addition, management believes the projected long term growth rate beyond 5
years of 0% revenue is prudent and justified, based on the maturity of growth
in the business.
During the forecast period Glanty is expected to become profitable and EBITDA
margins increase to a steady state level of 40% in perpetuity. Management
believes this is reflective of a steady state within the industry and reflects
the costs of supporting the business in the long run.
The discount rate of 14% pre-tax reflects management's estimate of the time
value of money and the consolidated entity's weighted average cost of capital
adjusted for Glanty, the risk-free rate and the volatility of the share price
relative to market movements.
Sensitivity
As disclosed in note 3, the directors have made judgements and estimates in
respect of impairment testing of goodwill. The impairment review is highly
sensitive to reasonably possible changes in key assumptions used in the
value-in-use calculations. Should these judgements and estimates not occur the
resulting goodwill carrying amount may decrease. The sensitivities are as
follows:
- Revenue growing less than a CAGR of 25% (with unchanged costs) could
lead to an impairment arising
- EBITDA margin in perpetuity at approximately 21.5% (revenue growth
in line with the base case), could lead to an impairment arising.
13. Intangible assets
Development costs Technology related intangibles Customer related intangibles Total
Group £'000 £'000
£'000
£'000
Cost:
At 1 February 2020 11,355 - - 11,355
Additions - internally developed 2,192 - - 2,192
________ ________ ________ ________
At 31 January 2021 13,547 - - 13,547
Amortisation:
At 1 February 2020 6,658 - - 6,658
Charge for the year 2,204 - - 2,204
________ ________ ________ ________
At 31 January 2021 8,862 - - 8,862
________ ________ ________ ________
Net book value:
At 31 January 2021 4,685 - - 4,685
________ ________ ________ ________
Cost:
At 1 February 2021 13,547 - - 13,547
Acquisition through business combination - 1,482 444 1,926
Additions - internally developed 2,823 546 - 3,369
________ ________ ________ ________
At 31 January 2022 16,370 2,028 444 18,842
Amortisation:
At 1 February 2021 8,862 - - 8,862
Charge for the year 2,258 165 37 2,460
________ ________ ________ ________
At 31 January 2022 11,120 165 37 11,322
________ ________ ________ ________
Net book value:
At 31 January 2022 5,250 1,863 407 7,520
________ ________ ________ ________
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 assets' future economic benefits. The development costs are
amortised from the point at which the asset is ready for use within the
business.
The technology and customer related intangible assets acquired through
business combination acquired through business combination relate to the
development of software by Glanty for teclet lettings and teclet CRM products
and represent the fair value of those assets acquired as part of the Group's
acquisition of Glanty. The fair value costs at acquisition are amortised over
a period of 8 years from the acquisition date, which represents the period
over which the Directors expect the Group to consume the assets' future
economic benefits. Development costs incurred in relation to the technology
related intangibles after acquisition are amortised over 4 years from the
point at which the asset is ready for use within the business.
No material amount was recognised as an expense in the period in relation to
research and development expenditure.
14. Investments in subsidiaries
Subsidiary
undertakings
Company £'000
At 1 February 2020 -
Additions -
________
At 31 January 2021 -
Additions 2,364
________
At 31 January 2022 2,364
________
The Company has the following investments in subsidiary undertakings:
( )
Class of Principal Ownership at 31 Jan Ownership at 31 Jan
shares held(1) activity 2022 2021
Agents' Mutual Limited Member Online property portal services
100% 100%
On The Market (Europe) Limited Ordinary Dormant 100% 100%
Glanty Limited Ordinary Property technology business 100% 20%
(1) Agents' Mutual is a company limited by guarantee and has no shares. The
Company owns the only member interest in Agents' Mutual.
OnTheMarket acquired the remaining 80% of Glanty shares on the 28 May 2021,
see note 11 for further details.
All the above subsidiary undertakings share the same registered office as the
Company apart from Glanty which is registered at 4 Prince Albert Road, London,
NW1 7SN.
On The Market (Europe) Limited is a subsidiary of Agents' Mutual.
15. Investments in associates
£'000
Group
At 1 February 2020 985
Adjustments (40)
Share of after-tax loss (94)
________
At 31 January 2021 851
________
At 1 February 2021 851
Share of after-tax loss (to 28 May 2021) (122)
Fair value loss on step acquisition (183)
Deemed disposal of associate interest in Glanty (546)
________
At 31 January 2022 -
________
As set out in note 11 the Group exercised the call option to acquire the
remaining 80% of shares in Glanty on 28 May 2021, thereby obtaining control
and from which date Glanty has been accounted for as a subsidiary undertaking.
16. Investments
£'000
Group
At 1 February 2021 -
Additions 405
________
At 31 January 2022 405
________
Investment additions comprise £359k of Insurestreet Limited, trading as
Canopy, and £46k into Property Funding Hub Limited, trading as Brickflow.
Both businesses are unlisted companies and the investments were in return for
minority interest share in the equity share capitals. The Group has designated
these investments in equity instruments at FVTOCI as these are investments
that the Group plans to hold in the long term for strategic reasons. No fair
value adjustment was recognised due to proximity of the acquisition to the
year-end date.
17. Provisions
Social security on share options granted
£'000
At 1 February 2020 808
Exercise of share options (156)
Revaluation of employers' social security liability 228
_______
At 31 January 2021 880
Exercise of share options (40)
Revaluation of employers' social security liability 95
_______
At 31 January 2022 935
2022 2021
£'000 £'000
Disclosed as:
Current liability 732 622
Non-current liability 203 258
_______ _______
935 880
The provision for social security on share options granted relates to the
social security charges that will be incurred by the Group when the share
options are exercised. This is calculated based on the options disclosed in
note 18 in respect of the management incentive share option plan and the
employee share scheme. Employer's National Insurance Contributions are
accrued, where applicable, at a rate of 15.05%. The amount accrued is based on
the market value of the shares at the period end after deducting the exercise
price of the share option, adjusted to account for any vesting period related
to ongoing employment.
For the purposes of the provision, it is assumed that options are exercised
once employees can do so in determining whether the liability is current or
non-current. Actual liabilities are triggered on exercise which is at
employees' discretion and may be later than assumed in the above table.
18. Share-based payments
Agent recruitment shares
The Group issued agent recruitment shares during the year. 464,224 ordinary
shares were issued (2021: 742,393). Fair value was determined in accordance
with the accounting policy set out in note 2.9. The weighted average fair
value of shares granted was £0.78 (2021: £0.79).
Management and employee share schemes
The Group operates management and employee equity settled share schemes.
Options over its shares were awarded under the employee share scheme in the
year to 31 January 2022, as set out below.
The Company has granted share options under its Management Incentive Plan, its
employee share scheme and its Company Share Option Plan. The unexercised
options at the end of the year are stated below:
Grant date of option Expiry Option exercise per share Fair value 2022 2021
£ £ Number Number
Granted 15 September 2017 2027 nil 1.48 5,899,454 6,044,454
Granted 19 September 2017 2027 nil 1.48 110,905 225,568
Granted 10 October 2017 2027 nil 1.48 10,909 25,454
Granted 20 November 2018 2028 1.65 0.69 422,317 572,219
Granted 4 December 2018 2028 nil 1.13 42,424 42,424
Granted 10 September 2020 2030 nil 0.77 119,048 119,048
Granted 10 September 2020 2030 nil 0.65 285,714 285,714
Granted 14 December 2020 2030 nil 0.93 379,249 379,249
Granted 19 March 2021 2031 0.95 0.62 212,245 -
Granted 24 August 2021 2031 nil 0.62 1,089,308 -
______-__ ______-__
Outstanding at 31 January 8,571,573 7,694,130
The value of employee services provided of £372k (2021: £452k) has been
charged to the income statement.
Management Incentive Plan
Further details of the management incentive share option plan are as follows:
Weighted average
2022 exercise price
Number £
Opening at 1 February 5,892,939 -
Granted - -
Exercised (60,000) -
________ ________
Outstanding at 31 January 5,832,939 -
Exercisable at 31 January 4,446,389 -
These share options expire 10 years after the date of grant and have a nil
exercise price. 1,386,550 are exercisable on the fifth anniversary (9 February
2023). The remaining 4,446,389 options are exercisable immediately. The fair
value of all these options was charged to the profit and loss account in full
in the year to 31 January 2018.
During the year 60,000 options were exercised. The weighted average share
price at exercise was £0.95.
Employee share scheme
Further details of the employee share option plan are as follows:
Weighted average
2022 exercise price
Number £
Opening at 1 February 1,228,972 -
Granted in the period 1,089,308 -
Exercised in the period (214,208) -
________ ________
Outstanding at 31 January 2,104,072 -
Exercisable at 31 January 230,753 -
These share options expire 10 years after the date of grant. During the year
214,208 options were exercised. The weighted average share price at exercise
was £1.08.
All options granted prior to 1 February 2020 are exercisable at 31 January
2022. Share options granted under this scheme have a nil exercise price.
Details of the options outstanding as at 31 January 2022 and not yet
exercisable are as follows:
· the options were issued pursuant to the Company's Long-Term
Investment Plan;
· they are subject to performance conditions based on the total
shareholder return achieved by the Company relative to the FTSE AIM 100 Index
in the three years prior to the performance period end date and are, save for
limited circumstances, forfeited should the employee leave prior to the
vesting date;
· 119,048 options were granted on 10 September 2020 and vest on 1
February 2023;
· 285,714 options were granted on 10 September 2020 and vest on 10
September 2025; and
· 379,249 options were granted on 14 December 2020 and vest on 14
December 2025.
· 1,089,308 options were granted on 24 August 2021 and vest on 24
August 2026
The options granted were valued using a bespoke Monte-Carlo model. The inputs
used to determine the fair value at the date of grant for FY22 awards were as
follows:
Grant date Options Performance period end date Share price at grant date (£) Exercise price (£) Expected volatility Dividend yield Risk-free interest rate Fair value derived per option (£)
24/08/21 1,089,308 23/08/24 0.97 Nil 35% 0% 0.2% 0.62
As the Company was listed on AIM for a period shorter than the expected life
of some of the options, expected volatility was calculated using both
historical data and looking at a basket of comparable companies.
The fair value of share options under the employee share scheme is charged to
the profit and loss account over the period to vesting. The share options are,
save for limited circumstances, forfeited should the employee leave prior to
this date.
Company Share Option Plan
Further details of the company share option plan are as follows:
Weighted average
exercise price
Number £
Outstanding at 31 January 2021 572,219 1.65
Granted in the period 251,669 0.95
Forfeited in the period (189,326) 1.5
________ ________
Outstanding at 31 January 2022 634,562 1.42
Exercisable at 31 January 2022 422,371 1.65
These share options expire 10 years after the date of grant. Share options
granted under this scheme and exercisable at 31 January 2022 have an exercise
price of £1.65 and vested 3 years after the date of grant. The remaining
share options granted under this scheme have an exercise price of £0.95 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, save for limited circumstances, forfeited should the employee
leave.
For the options issued under the Company Share Option Plan during the current
year, the Black Scholes method was used to value share options. Expected
volatility was determined by reference to historic share prices. The valuation
model inputs used to determine the fair value at the grant date, are as
follows:
Grant date 19/03/2021
Expiry date 19/03/2031
Share price at grant date £0.95
Strike price £0.95
Expected volatility 58.7%
Dividend yield 0%
Risk-free interest rate 0.58%
Fair value at grant date £0.62
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 15.05%.
The following have been expensed in the consolidated income statement:
2022 2021
£'000 £'000
Share-based payment charge 372 452
Employer's social security on share options 95 231
_______ _______
467 683
19. Share capital
Share capital issued and fully paid 2022 2021
No. No.
Opening Ordinary shares of £0.002 each 72,445,046 70,082,638
Issued in the year 2,104,119 2,362,408
_______ _______
Closing Ordinary shares of £0.002 each 74,549,165 72,445,046
2022 2021
£'000 £'000
Ordinary shares of £0.002 each 149 145
All issued shares are fully paid. The holders of ordinary shares are entitled
to receive dividends as declared from time to time and are entitled to one
vote per ordinary share at general meetings of the Company.
On incorporation, the Company issued 2 ordinary shares of £0.002 each at par.
By a resolution dated 22 December 2017 the Directors are authorised to issue
up to 40,000,000 shares to estate agents in connection with such agents
signing listing agreements with the Company or its subsidiaries. The Directors
confirmed that at most they will issue 36,363,636 under this authority, which
expires on 22 December 2022. As at 31 January 2022, 5,425,477 shares had been
issued under this authority (2021: 4,961,253) leaving 30,938,159 shares
authorised but unissued (2021: 31,402,383).
The Company issued 1,528,832 ordinary shares on 1 June 2021 and reduction of
163,154 ordinary shares on 2 November 2021 in respect of the share purchase
agreement of Glanty as set out in note 11. The Consideration Shares are
subject to lock-in arrangements which restrict their sale save in limited
circumstances. 423,589 Consideration Shares are locked-in for 3 years
post-completion and 942,089 Consideration Shares are locked-in for 4 years
post-completion, relating to certain sellers actively involved in the
business. All Consideration Shares are subject to orderly market arrangements
for a further 12 months after the above initial lock-in periods have expired
The Company issued 174,250 ordinary shares on 29 April 2021, 27,302 ordinary
shares on 30 July 2021, 159,963 ordinary shares on 29 October 2021 and 102,709
ordinary shares on 31 January 2022 to certain new and existing agents
following them having earlier signed new long-term listing agreements to
advertise all of their UK residential sales and letting properties on
OnTheMarket.com. These shares were granted for cash at nominal value and for
additional non-cash consideration. The shares are accounted for as set out in
note 2.9.
The Company issued shares following the exercise of options by employees as
follows during the year:
Shares
1 March 2021 38,180
30 March 2021 42,423
29 April 2021 1,939
20 July 2021 36,363
29 October 2021 60,000
12 November 2021 9,091
14 December 2021 1,212
26 January 2022 85,000
_______
274,208
Share option scheme
At the year end, there were a total of 8,571,573 (2021: 7,694,130) share
options under the Company's share option plans (note 18), which on exercise
can be settled either by the issue of ordinary shares or by market purchases
of existing shares. During the year to 31 January 2022, no options were
settled through market purchases by the Employee Benefit Trust (2021: 90,736
options).
20. Controlling parties
The Directors do not consider there to be a single immediate or ultimate
controlling party (2021: none).
21. Reserves reclassifications
Following the receipt of legal advice during a capital reduction process (see
note 22), some opening adjustments have been made to the reserves of the Group
and Company. These adjustments resulted in no material impact on prior year
reported results or net assets.
Agent share issues
In prior years, upon the issue of shares to agents as soon as practicable
following contract commencement in return for the payment of nominal value in
cash only (see note 2.9 for further details), the share premium account was
credited with the excess of the share value over nominal based on the market
share price at the date of issue through the transfer of the relevant amount
of the balance initially recorded in other reserves and, if appropriate, an
additional credit to reflect any increase in share price at issue compared
with contract commencement. In these circumstances, the prepayment initially
created was also increased by the amount of the additional credit.
This policy has been amended in line with the advice received and as set out
in note 2.9. As the shares are issued in return for the payment in cash of
nominal value only, no credit to share premium occurs. A prepayment and a
credit to other reserves, based upon the share price at contract commencement,
are created. Opening adjustments have been which give rise to a transfer from
share premium to other reserves to reflect this revised treatment.
Merger reserve
The amount of £(71)k shown in prior years as a merger reserve in the Group
accounts has been transferred to other reserves as it relates to the
acquisition of Agents' Mutual by the Company but is not deemed to meet the
legal definition of arising upon the assumption of equity control by the
Company, which is necessary for it to be treated as a merger reserve, as
Agents' Mutual is a company limited by guarantee, not share capital.
Other adjustments
In the current year, these financial statements reflect a credit to the Group
merger reserve arising from the acquisition of Glanty. In the Group's
unaudited interim results this was shown as a credit to the share premium
account.
22. Post balance sheet events
Capital restructuring
A General meeting was held on the 26 May 2022 at which shareholder approval
for a proposed cancellation of capital was received. Application has been made
to the Courts and, if approved, this will create additional distributable
reserves of £44m within the Company. These additional distributable reserves
would provide the Company with greater flexibility to pay dividends to
shareholders and/or introduce a share buyback programme, should the Board
consider it appropriate in the future. The expected date that the cancellation
becomes effective is on 7 July 2022.
Employee share scheme
On 3 February 2022 Clive Beattie, Chief Financial Officer, sold 85,000 shares
at 100p per Ordinary Share to meet personal financial obligations, which
included personal taxes arising on the exercise of options.
On 9 May 2022 Clive Beattie, Chief Financial Officer, exercised options over
16,515 shares which were sold at 70p per Ordinary Share on 10 May 2022 to meet
personal financial obligations, which included personal taxes arising on the
exercise of the options.
Share issues
On 21 April 2022 250,000 ordinary shares of 0.2 pence each were admitted to
the AIM market of the London Stock Exchange and issued to the Company's
Employee Benefit Trust to be held to satisfy future exercises of options under
employee share schemes. 9 admitted but unissued shares were cancelled on the
same date.
On 29 April 2022 154,129 ordinary shares of 0.2 pence each were admitted to
the AIM market of the London Stock Exchange and issued to certain agents
following them having earlier signed new long-term listing agreements in
accordance with the strategy set out in the admission document published on 26
January 2018.
There have been no other post balance sheet events.
ENDS
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