REG - OnTheMarket plc - Full Year Results to 31 January 2023
10/07/2023 07:00
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RNS Number : 4135F OnTheMarket plc 10 July 2023
10 July 2023
ONTHEMARKET PLC
("OnTheMarket", the "Group" or the "Company")
FULL-YEAR RESULTS TO 31 JANUARY 2023
DELIVERING RECORD RESULTS AND STRATEGIC PROGRESS WHILST INCREASING VALUE FOR
CUSTOMERS
OnTheMarket plc (AIM: OTMP), the technology-enabled property business which
operates the onthemarket.com property portal, today announces its audited
results for the year ended 31 January 2023.
Highlights of the year
Year ended 31 January 2023 2022* Change
Revenue £34.4m £30.2m 14%
Adjusted EBITDA(1) £8.0m £5.8m 38%
EBITDA(1) £3.8m £2.1m 81%
Adjusted operating profit(2) £4.3m £2.7m 59%
Operating profit / (loss) £0.1m £(1.0)m 110%
Profit / (loss) before tax £0.2m £(1.2)m 117%
Loss after tax £(0.2)m £(0.2)m -
Year-end cash £11.3m £8.4m 35%
ARPA(3) £210 £188 12%
Average advertisers(4) listed 13,086 13,296 -2%
Total advertisers at 31 January 13,210 13,732 -4%
Traffic / visits(5) 244 283 -14%
Average monthly leads per advertiser 105 117 -10%
* Restated - see note 29.
· Record Group revenues and profits with continued strategic
progress.
· Group Revenues up 14% and ARPA up 12%, reflecting growth in
paying customers, strong product sales and continued strong growth in New
Homes (up 60%).
· Adjusted operating profit up 59% to £4.3m (2022: £2.7m) driven
by revenue growth across all income streams.
· Strong balance sheet, with year-end cash of £11.3m and no
borrowings (31 January 2022: £8.4m and no borrowings).
· OnTheMarket Software incurred an impairment charge of £1.5m.
· Cash generated from operating activities of £7.9m representing
operating cash conversion of approximately 99% of adjusted EBITDA.
· Traffic and leads reduced year-on-year reflecting an abnormally
buoyant property market in the first half of the previous year and a strategic
focus on serious property seekers and high-quality leads resulting in a
significant increase in valuation opportunities, up 26% on prior year.
Strategic and corporate developments
OnTheMarket has continued to make significant progress with our strategy of
building a differentiated, technology-enabled property business based on the
following four pillars:
Portal
Continued development of the portal including:
• New valuation tools: Innovative new ways for homeowners to
receive indicative valuations of their homes with 'Video Appraisal' and
'Express Appraisal' from local agents without the need for a face-to-face
appointment.
• WhatsApp integration: Consumers can enquire about sales and
lettings properties via WhatsApp, providing improved response times.
• Additional property search filters: Property searches can be
tailored in greater detail with the addition of filters for auction
properties, flexible office space listings, pet-friendly properties,
accessible properties, student homes and a 'Greener choice' filter which
allows property seekers to search for energy efficient, eco-friendly homes.
Software
Continued development of software with an enhanced suite of products:
• TecLet: A market leading automated pre-tenancy and property
management platform.
• TecCRM: Allows agents to manage prospecting, marketing, and
nurture journeys for sales and lettings agents.
• TecHub: Allows consumers, whether they are a buyer, seller,
landlord or tenant, to transact directly to bring automation and 24/7
transacting to agency businesses.
• TecWeb: Provides agents with a fully interactive website
solution which includes SEO and pay-per-click services.
Data and Market Intelligence
Continued development of our data and market intelligence tools for our agents
and developers:
· Commercial partnership: Working with Sprift Technologies to
provide a full-service canvassing and prospecting system with automated
trigger points.
· OnTheMarket Property Sentiment Index- (PSI): A unique focus on
buyer and seller confidence, derived from consumer responses to questions with
an average response rate of over 80,000 consumers per month.
· Introduced behavioural profiles: Profiling serious property
seekers through our 'Buyer Ready' and 'Rent Ready' journeys, delivering
pre-qualified leads to our customers.
Consumer Communication and Monetisation
Continued development of our consumer marketing strategy:
• TV advertising: FY23 saw our biggest investment yet in TV
advertising showcasing our creative across multiple channels.
• Focus on attracting serious property seekers: 73% of buyers,
who responded to our online survey, reported that they are confident that they
will buy a property in the next 3 months (source: OnTheMarket PSI June 23).
• A comprehensive communications program: Built for those
consumers using our Instant Online Valuation tool to ensure they are
encouraged to contact an OnTheMarket agent at the appropriate time.
• New podcast series: 'OnTheRecord' showcases industry expertise
and thought leadership to customers.
• New TikTok channel: Focused on engaging with serious property
seekers.
Outlook
The Group has seen a positive start to FY24 with current trading in the
year-to-date in line with the Board's expectations.
However, the macro-economic picture remains uncertain with mortgage
affordability, stubborn inflation and the high cost of living all contributing
to a slowdown in housing market activity through Q2 and an expectation of
tougher trading conditions in second half of the year, which may have an
impact on the Group. Cancellations of agent contracts have been higher than
expected; to negate this we continue to diversify our revenue streams with the
ongoing rollout of additional products and services. The recent introduction
of packages will provide even more additional value and mitigate product
cancellations.
The sales market is particularly challenging, with lower levels of new buyer
activity as we move towards the second half of the year. In uncertain times,
some active buyers may decide to 'wait and see'. This impacts levels of new
sales agreed, reducing the value of the agents' under-offer sales pipelines.
The volatility in the mortgage markets in particular is having a negative
effect on transaction numbers. Transactions, rather than average house prices,
are the key metric for estate agents. Whilst it is too early to make any
forecasts, there will undoubtedly be significantly fewer transactions this
year than in the previous two years.
The lettings market is seeing a continuing but levelling decline in new rental
instructions, pushing up average rents. Competition is fierce for lettings
properties, but fewer new tenancies also negatively impacts agents, with a
significant proportion of their monthly income resulting from new lets and the
management of their clients' portfolios.
Despite these headwinds for our customers the Board believes that there is
still growth potential for OnTheMarket this year and continues to expect
growth in revenue and profitability in FY24. The Group's recent operational
and financial progress, together with a substantial, loyal advertiser base,
provides a strong platform for the continued development of its strategy to
become a tech-enabled property business across the entire customer and
consumer ecosystem. The Board therefore retains its confidence in the medium
and long term growth of the Group. February 2023 saw the end of the lock-in
period for the thousands of agents who signed new listing agreements at IPO in
2018. Whilst some agents cancelled their membership at this point, the
majority have continued to support the portal.
Jason Tebb, CEO of OnTheMarket, commented:
"I am delighted to report a strong financial performance with record revenues
and profits. Our ongoing strategic progress continues to enhance our offering
for estate agents, lettings agents and housebuilders, whilst driving the
network effects of the business.
· We continue to develop the portal, delivering high quality leads
from serious property seekers.
· We are making good strategic progress with OnTheMarket Software,
providing solutions for our agents to automate and streamline their own
processes, saving them time and money.
· Our data and market intelligence tools provide insights and
value-add opportunities.
· Our Consumer communications and monetisation plans are taking
shape, with strategies to further build our network effects and generate
additional revenue streams for our business, and our customers.
OnTheMarket was founded by agents to bring more competition into the market
with a promise of long-term, fair and sustainable pricing. We remain focused
on that promise and delivering increased value for our customers at a time
when agents are facing unjustifiable price rises elsewhere.
I would like to thank all our customers for their continued support in
OnTheMarket. This support, and the strength of our platform, provides us with
confidence and excitement for the future.
Now is our time; we have a great platform, great services and more
importantly, supportive customers, many of whom are shareholders of this great
business - we are aligned in our objectives and we are looking forward to
delivering for them."
Analyst presentations
A presentation for analysts will be made from 09:00am today. Please contact
OTM@teneo.com for further information.
The Group will also provide a live presentation relating to the preliminary
results via the Investor Meet Company platform on 18 July 2023 at 18:00.
Investors can sign up to Investor Meet Company for free and add to meet
ONTHEMARKETPLC via:
https://www.investormeetcompany.com/onthemarket-plc/register-investor
1) EBITDA is operating profit before interest, tax, depreciation and
amortisation. Adjusted EBITDA is EBITDA excluding share-based payments
(including charges related to shares issued for agent recruitment), specific
professional fees and non-recurring items. EBITDA and Adjusted EBITDA are
alternative performance measures and should not be considered an alternatives
to IFRS measures, such as revenue or operating profit or loss. See the
consolidated income statement in the financial statements for a reconciliation
of EBITDA to adjusted EBITDA. In addition, note 7 details the adjusting items.
2) Adjusted operating profit is adjusted EBITDA after amortisation and
depreciation. This is an alternative performance measure and should not be
considered an alternative to IFRS measures, such as revenue or operating
profit or loss. See the consolidated statement of profit and loss in the
financial statements for a reconciliation of operating profit to adjusted
operating profit. In addition, note 7 also details what is included in the
adjusting items.
3) 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.
4) Advertisers are either estate and lettings agent branches or New Homes
developments listed at OnTheMarket.com.
5) 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.
For further information, please contact:
OnTheMarket
0207 353 4200
Jason Tebb, Chief Executive Officer
Simon Bullock, Interim Chief Financial Officer
Tom Carter, Chief Financial Officer
Teneo
0207 353 4200
Giles Kernick
Alec Tidbury
Zeus Capital (Nominated Adviser/Joint Broker) 0203 823
5000
Jamie Peel, Martin Green, James Hornigold
(Investment Banking)
Benjamin Robertson (Corporate Broking)
Shore Capital (Joint
Broker)
0207 408 4090
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.
Chair's Statement
I'm delighted to announce another year of progress towards achieving our
strategic aims supported by continued growth in revenues, profit and cash
generation.
In a year that saw unprecedented macro-economic turmoil, OnTheMarket delivered
another year of strong results.
· 14% growth in Revenue;
· 12% increase in ARPA;
· 59% growth in Adjusted Operating Profit (AOP);
· Year-end cash of £11.3m and no borrowings.
Our teams, with Jason's passionate leadership, have continued to focus their
efforts upon the development of our four key pillars for growth. These pillars
will now incorporate an increased focus on monetisation strategies, as
reflected below. We have completed the building phase and now move to the next
exciting stage in our journey; Driving for Growth.
1. Portal - We have built arguably one of the best property search sites
in the UK - delivering more quality leads from serious property seekers.
2. Software - We have developed powerful property software, now
incorporating a full CRM platform, developed in partnership with our agent
customers - encouraging more agents to partner with OnTheMarket.
3. Data and market intelligence - We have a full suite of Data and Market
Intelligence tools for our agent and developer customers, created using our
own extensive data in partnership with Sprift, to provide a unique whole of
market approach. Our customers tell us that we have the best market reports -
providing enhanced value to more agents and developers driving new
instructions.
4. Consumer communication and monetisation - We have created an innovative
marketing strategy focused on Direct Response media - delivering an increasing
number of valuation leads to our agent customers from serious property
seekers.
These four pillars work together and drive the network effects of this
two-sided business, ultimately delivering greater value for our agent and
developer customers, a greater experience for the serious property seekers who
visit OnTheMarket, and greater returns for our agent and institutional
shareholders.
Our agent shareholders remain resolute in continuing to support the evolution
of the portal they envisioned in 2013. The difficult current conditions for
agents makes them even more convinced that a portal offering fair and
sustainable pricing, alongside a growing number of services to increase the
profitability of their own businesses is the correct strategy for their
future.
In February 2023, many of the OnTheMarket agent shareholders reached the end
of their share lock-in and we are pleased that the vast majority have opted to
retain their shares and have also committed to support the growth of
OnTheMarket with continuing listing agreements.
This overwhelmingly demonstrates the continued support for OnTheMarket.
At the end of the financial year we said goodbye to Clive Beattie who had been
our CFO since 2017. We thank Clive for his years of service. Earlier this
month we welcomed Tom Carter as our new CFO. Finally, we thank Simon Bullock
for his expertise and experience as our Interim CFO covering the period
between Clive and Tom, ensuring a seamless handover.
Outlook
After a strong 2022, the UK residential property market is in a state of flux.
A generation of property owners are coming to terms with higher interest
rates, mortgage affordability, record energy prices and high inflation.
Consumer sentiment will continue to be a key factor in the second half of the
year, as will the behaviour of estate agents and housebuilders which may
ultimately affect their decisions on supplier spend levels.
Thus far demand in the housing market remains resolute.
We continue to successfully diversify our revenue and income streams and
remain profitable and cash generative. The first few months of this financial
year have been typified by our continued prudent approach to cost management.
For the reasons given above we consider that the second half of the year will
be more challenging than the first.
People remain at the heart of everything we do and our employees and agent
partners are our most valuable assets. Once again, I am extremely grateful to
each and every one of our strong team of colleagues who have shown great
dedication during the last few years enabling our success.
I would also like to extend my thanks to our customers, suppliers and
shareholders for their ongoing support.
Christopher Bell - Independent Non-Executive Chair
Strategic report: Year ended 31 January 2023
Chief Executive Officer's Review
What a year it has been for OnTheMarket. Continued growth, powered by our
'four pillars' strategy is now delivering a suite of valuable products and
services to our customers. More importantly, our business now brings serious
and tangible competition into the portal marketplace.
The third phase of OnTheMarket's growth plan is complete and we now move to
what we believe will be its most important phase yet.
A reminder of our history:
Phase 1: Build a market leading property portal, bringing more competition
into the market, promising long term, fair and sustainable pricing for its
customers thereby regulating the unfair price increases from competitors -
Completed 2017.
Phase 2: Raise significant investment to fuel rapid growth in consumer traffic
and agent/developer customers, delivering significant customer value and
achieving profit for the first time - Completed 2021.
Phase 3: Diversification, providing further services and products to our loyal
customer base. We truly are now 'more than just a portal' as we make great
progress with our four pillar strategy and as a result we have delivered a 59%
YoY increase in adjusted operating profit - Completed 2022.
It wasn't easy to launch a portal in a marketplace dominated by the incumbents
for so long. We have seen many others come and go, even in the past 12 months.
Yet, despite the challenges of launching, scaling and delivering a profitable
and viable business in this space, OnTheMarket has succeeded, carefully and
systematically. Our unique ownership structure ensures we develop with the
needs of our estate agents and housebuilders at the forefront of our strategy.
We are truly listening to them, my award-winning Town Halls have ensured that
this is what OnTheMarket continues to do; listening, innovating and delivering
for our customers.
It is through this engagement that we successfully achieved revenue growth of
14% and adjusted operating profit growth of 59% this financial year and how we
will continue to grow in the future.
Agents have a finite amount of marketing budget, but we are proving year on
year that agents are prepared to spend more with OnTheMarket. The benefits
from that revenue flow directly back to agents as part of the shareholder
community and it is that unique ownership structure that facilitates our
long-term growth.
Over £400m(1) per annum is spent directly with portals and it is in the
interests of agents and housebuilders that they continue to switch this spend
to OnTheMarket and our four pillar strategy helps us access this.
In a market with high barriers to entry, we believe OnTheMarket continues to
be the only viable option that can provide long term, fair and sustainable
pricing to agents and developers and now, with so much more to offer, we
believe more and more agents will support the portal that has its customers'
best interests at heart.
So, what have we delivered in FY23 and what is in store in Phase 4?
· Paying contracts - More and more agents continue to pay a fair
and sustainable price for our services as discounts unwind.
· Significant growth from new income streams - Our growth in New
Homes developers is impressive with 2,845 developments, 92% of the
developments listed on Rightmove(2). An impressive growth story from a
department which only launched in Q4 2019. We have also developed a suite of
additional products and services which our customers value.
1 Management's estimate based upon the published accounts for Rightmove plc
and Zoopla Limited.
2 Based upon the published accounts for Rightmove plc.
· Strong results despite macro-economic and geopolitical headwinds-
An impressive Group revenue of £34.4m against the backdrop of the ongoing war
in Ukraine and significant economic uncertainty.
We remain excited and committed to our four pillars strategy as they underpin
the strong results this year and will fuel our future growth.
Portal
Continued and sustained development of OnTheMarket.com, to deliver an
innovative 'best-in-class' property search platform delivering high quality
leads from serious property seekers.
Software
Design, develop and deliver software solutions that streamline the estate and
lettings agency workflows with a focus on automation and multi-platform
integrations, saving our customers time and money.
Data and Market Intelligence
Utilising data and market intelligence to help our customers grow their
businesses through the use of innovative tools that deliver deep property
insights and value-add opportunities.
Consumer Communication and Monetisation
Growing brand awareness amongst serious property seekers to drive consumers to
OnTheMarket and supporting our customers with marketing and nurturing tools to
drive their own customer growth.
Portal
The portal is the core of our business and as such it is important we strive
to ensure it remains 'best-in-class'; that's why, following our full brand
refresh in late 2021 ('OnTheMarket 2.0'), the year under review saw us release
a further major upgrade to the OnTheMarket website, '2.1'. Development of the
'2.2' release was completed shortly after year-end and was designed to support
our estate and letting agent customers build their client relationships,
generate leads and develop their pipelines. The releases were a direct result
of our Town Hall listening sessions.
The '2.1' launch in September 2022 included the following enhancements:
- Video Appraisal: Consumers can arrange live virtual valuation appointments
with agents presenting relevant local information and comparable property
prices.
- Express Appraisal: Homeowners can arrange an online appraisal from local
agents without the need of a physical valuation.
- WhatsApp integration: Consumers can enquire about sales and lettings
properties via the messaging service, providing a new type of lead and
improved response times.
- Additional property search filters: Property searches can be tailored in
greater detail with the addition of filters for auction properties, flexible
office space listings, pet-friendly properties, accessible properties, student
homes and a 'Greener choice' filter; which allows property seekers to search
for energy efficient, eco-friendly homes.
The period we are reporting on included development work on our most ambitious
upgrade yet, '2.2'. At its core is the 'MyPlace' dashboard boasting a range of
new functions and UX enhancements, some of which are unique in the UK portal
landscape.
'2.2' also saw the introduction of:
· 'I'm Serious': Property seekers can indicate when they are
serious about moving to create a more tailored search experience and help them
stand out to agents when making an enquiry by providing enhanced
pre-qualification details at the point of contact.
· 'MyLists': Property seekers can now organise and save their
favourite properties, invite family and friends to view, and interact with,
their saved searches. With 'Property Watch', they can also receive alerts
when their saved homes are reduced in price, go under offer, or become
re-available.
· Very Important Places (VIP's): Consumers can now save the
addresses of their VIP's to see how far listings of interest are from these
locations. Distances to saved VIP's will be displayed beneath the details of
properties and are viewable on the map, adding an extra layer of
personalisation to the search.
We continue to make good progress with our focus on serious property seekers
who are actively looking to buy or rent. Our conversion ratio of site visits
to leads was 6.8%, up 4.6% on the prior year.
Software
In September 2022 we were pleased to announce the launch of OnTheMarket
Software, which now includes an enhanced suite of products:
TecLet a market leading automated pre-tenancy and property management
platform.
TecCRM allows agents to manage prospecting, marketing, and nurture journeys to
secure and manage new business whether it be for sales, lettings or both.
TecHub allows consumers, whether they are a buyer, seller, landlord or tenant,
to transact directly with the platforms to bring automation and 24/7
transacting to agency businesses, including interactive conveyancing and sales
progression.
TecWeb provides agents with a fully interactive website solution which
includes SEO and pay per click services. Agents can migrate any specific data
present in their existing website solution, including blogs, news, property
advertising and search functions, with leads being pulled directly into
TecCRM.
As the agents' portal, to now have a CRM as part of the suite of products is
further evidence of our commitment to enhance Group value, with the ultimate
aim to give agents using OnTheMarket Software the benefit of the data insights
gathered on the portal. Few other CRM providers will be able to power an agent
owned CRM with as much insight on serious property seekers active in the
market in real time.
Since acquisition, in May 2021, we have achieved:
· 84% increase in TecLet licences;
· 461% increase in TecCRM licences;
· 84% growth in estate agency branches using OnTheMarket Software.
(source: management figures May 2021 to May 2023)
OnTheMarket Software incurred an impairment charge of £1.5m in the period.
This was as a result of development delays which impacted product delivery,
primarily of TecCRM, which has had an effect on short term revenue forecasts.
A separate project was launched in the period to mitigate this, with a
strategic review which resulted in changes to operational processes and
increased investment. The result of this review was a new strategic plan which
saw the launch of the product suite above.
OnTheMarket Software remains one of the key pillars of our strategy as it not
only will deliver incremental revenue and profitability to the core portal
business, but provides a deeper and long lasting relationship with those
agents who take up the service.
Data and Market Intelligence
We understand the power of data solutions in powering new business
opportunities for our estate agent and housebuilder customers. Our
'best-in-class' Market Appraisal Guide contains some of the most comprehensive
data available, with whole-of-market property comparables, local area
information, transport links and historical transaction information. It is the
'go-to' guide to help our agents demonstrate their expertise and win
instructions and on average they are downloading 8,000 guides per month.
Our exclusive SmartMail product has had significant uptake from estate agents
and housebuilders alike, resulting in an average of 40,000 prospecting letters
sent every month.
Working with our analytics team, we launched a number of bespoke data and
market intelligence reports which provide additional insights and value to our
customers.
Consumer Communication and Monetisation
Consumer communications and marketing remains core to the success of our
business. Encouraging serious home movers and landlords to visit our website
is our primary focus. We know the most valuable customers for our agents and
developers are 'serious property seekers' and FY23 saw our biggest investment
yet in TV advertising, showcasing our creative across multiple channels. We
also expanded our digital content launching a new podcast series, a 'Checking
In' series to showcase our customers expertise in their local market, and our
own TikTok channel.
Our TV and digital activity focused on encouraging serious property seekers to
value their property and receive a sale and rental estimate. As a result of
this highly targeted DRTV (Direct Response TV) and digital strategy, valuation
leads increased by 26% YoY with hundreds of thousands of instant online
valuations delivered using our property valuation tool.
We have built a comprehensive communications strategy for the consumers
valuing their property to ensure we can encourage them to contact an
OnTheMarket agent when they are serious about moving.
Our agent customers are also able to access these leads via a cost-per-lead
service allowing us to offer them exceptional value and ROI.
Phase 4: Driving for Growth
OnTheMarket will aim to be our customers' 'core strategic partner'.
We have never been in a stronger position:
· Our customers continue to support OnTheMarket following the end
of their minimum terms within their contracts. Our agents continue to be
champions and shareholders of the business. There is no stronger vote of
confidence.
· We have developed a fantastic portal, recognised this year in the
'Superbrands' list, which are compiled annually with 3,200 brands across 158
categories assessed for quality, reliability, and distinction - the three
factors that define a true Superbrand.
The building phase is complete (albeit we will never stop improving) and now
it is time for us to drive growth.
OnTheMarket was founded by agents as a procompetitive response to the negative
effects of a duopolistic market. And I am pleased to say that ten years on
from its inception, agents continue to be passionate about the need for
OnTheMarket to continue in this vein, providing real competition.
But now we are much more than that, with the development of our 'four pillars'
we have grown to be more than just a portal - we now have in place the
services needed to be considered as our estate agents and developers' core
strategic partner.
Now we have successfully differentiated our proposition and secured the
commitment of our customer base, we will commence a strategy to increase the
proportion of media spend from our customers, encouraging them to switch spend
from other platforms to further increase their support for OnTheMarket.
We will invest as appropriate to ensure our long-term success and prominent
position in this market for our customers and shareholders.
Now is our time.
Our environment
OnTheMarket continues to be mindful of the impact our operations and decisions
have on the environment, staff, communities and all stakeholders.
During 2022, we completed phase 1 of our work with external climate
consultants, calculating our carbon footprint, across scope 1, 2 and 3
emissions, for our pre-Covid (2019/20) base year. We look to use this
benchmark year to support the development of our sustainability strategy aimed
at reducing our business emissions.
We continued the operation of our Green Working Group to engage our people on
sustainability and developing internal training sessions. We also extended
this engagement to discussions with housebuilder customers, inviting them to a
sustainability themed 'Developer Forum'. This discussion fuelled the
development of our 'Greener choice' filter and icon on site, highlighting how
listening is integral to every part of the business.
Our people
Our people are the driving force behind our success. Engaging with and
rewarding them, is a priority for the Group. The last 12 months have seen the
rollout of more staff benefits, including a rewards platform, saving employees
significant amounts on everyday living costs.
Supporting an inclusive work environment is one of my top priorities and I was
pleased to launch our Equality, Diversity and Inclusion (EDI) working group
which has already delivered key recommendations for our internal processes and
engaged with staff on important subjects relating to EDI.
The welfare and safety of our staff is one of our top priorities and we have
maintained a hybrid working model. Our employee engagement program continues,
further engaging with our staff and ensuring their voice is heard at senior
management level.
In May 2023, we proudly announced our recognition as one of the UK's best
employers in The Sunday "Times Best Places to Work 2023". We take immense
pride in our commitment to employee engagement and workplace happiness. With
an impressive overall engagement score of 92%, surpassing the average by 17%,
this achievement highlights our dedication to fostering a positive work
environment. By empowering our talented professionals, we consistently deliver
exceptional service to our valued customers.
Post year-end developments
After an exceptionally strong FY23, the momentum continues apace as we
continue to expand our reach and develop our proposition for all our
customers.
We are focused on providing incremental value to our agents and developers,
charging a fair price for the value received:
· Introduction of 'Packages': A membership package consisting of
listing fees and a suite of additional products. Agents enjoy a discount
compared to buying each product individually which ensures they receive
exceptional value.
· Launch of OnTheMarket Connect: Including a portal-first sales
and lettings data nurturing service (Your Property Services) to help estate
agents generate fresh revenue from their existing database and win more
instructions through valuations.
· SMS alert functionality: Supporting our housebuilders in creating
geo-specific, high impact strategies to alert local consumers to a New Homes
development nearby.
And for our serious property seekers:
· Launch of OnTheMarket Money: A new division providing consumers
with access to financial services and other essential products associated with
the home moving journey. OnTheMarket's first partnership under this new brand
is with London & Country Mortgages (L&C), one of the largest
whole-of-market mortgage brokers in the UK, who will provide consumers with
access to mortgage products and support via the portal.
· Launch of innovative AI tools: The first major portal in the UK
to embrace the AI revolution, benefitting both our customers and property
seekers.
We remain confident in our strategy and the growth prospects of the Group and
excited about the next stage of our journey. None of this would have been
possible without the tireless commitment and dedication of our two hundred
strong team of people - I thank them for a job well done.
Outlook
The Group has seen a positive start to FY24 with current trading in the
year-to-date in line with the Board's expectations.
However, the macro-economic picture remains uncertain with mortgage
affordability, stubborn inflation and the high cost of living all contributing
to a slowdown in housing market activity through Q2 and an expectation of
tougher trading conditions in second half of the year, which may have an
impact on the Group. Cancellations of agent contracts have been higher than
expected; to negate this we continue to diversify our revenue streams with the
ongoing rollout of additional products and services. The recent introduction
of packages will provide even more additional value and mitigate product
cancellations.
The sales market is particularly challenging, with lower levels of new buyer
activity as we move towards the second half of the year. In uncertain times,
some active buyers may decide to 'wait and see'. This impacts levels of new
sales agreed, reducing the value of the agents' under-offer sales pipelines.
The volatility in the mortgage markets in particular is having a negative
effect on transaction numbers. Transactions, rather than average house prices,
are the key metric for estate agents. Whilst it is too early to make any
forecasts, there will undoubtedly be significantly fewer transactions this
year than in the previous two years.
The lettings market is seeing a continuing but levelling decline in new rental
instructions, pushing up average rents. Competition is fierce for lettings
properties, but fewer new tenancies also negatively impacts agents, with a
significant proportion of their monthly income resulting from new lets and the
management of their clients' portfolios.
Despite these headwinds for our customers the Board believes that there is
still growth potential for OnTheMarket this year and continues to expect
growth in revenue and profitability in FY24. The Group's recent operational
and financial progress, together with a substantial, loyal advertiser base,
provides a strong platform for the continued development of its strategy to
become a tech-enabled property business across the entire customer and
consumer ecosystem. The Board therefore retains its confidence in the medium
and long term growth of the Group. February 2023 saw the end of the lock-in
period for the thousands of agents who signed new listing agreements at IPO in
2018. Whilst some agents cancelled their membership at this point, the
majority have continued to support the portal.
Finally, a sincere thank you to our customers, estate agents and
housebuilders, big and small, corporate and independent, and those in-between,
for their unwavering support in launching, scaling and growing this business.
Their partnership at each phase of our growth has been crucial to our
continued success and I look forward to taking the next steps as a Group with
them by our side and passionately supporting our future vision. With their
support, OnTheMarket can change the status quo, challenge the incumbents, and
in doing so change the portal landscape forever.
Jason Tebb - Chief Executive Officer
Strategic report: Year ended 31 January 2023
Financial Review and Key Performance Indicators
The year ended 31 January 2023 saw revenue up 14% and ARPA up 12% reflecting
growth in paying customers, price increases and continued strong growth in New
Homes (up 60%).
The Group delivered revenue of £34.4m in the year ended 31 January 2023
(2022: £30.2m) and an adjusted operating profit of £4.3m (2022: £2.7m), up
59%.
At 31 January 2023, the Group had cash of £11.3m and no borrowings (2022:
£8.4m, no borrowings).
Analysis of revenue and ARPA by source
The Group reports revenues attributable to products and services offered to:
· estate and letting agents;
· new homes developers;
· OnTheMarket Software customers; and
· other, non-property advertiser customers.
Year ended 31 January 2023 Restated Change
2022
Group revenue
- Agency £29.1m £26.8m 9%
- New Homes £4.0m £2.5m 60%
- OnTheMarket Software £1.0m £0.6m 67%
- Other £0.3m £0.3m -
- Group £34.4m £30.2m 14%
ARPA
- Agency £229 £204 12%
- New Homes £132 £100 32%
- Group £210 £188 12%
Operational KPIs
Group operational KPIs were as follows:
As at 31 January 2023 2022 Change
Total advertisers 13,212 13,732 -4%
Agency branches 10,367 11,451 -9%
New Homes developments 2,845 2,281 25%
Average advertisers
- Agency 10,547 11,171 -6%
- New Homes 2,542 2,125 20%
- Group 13,089 13,296 -2%
Income statement
The Group's financial performance is presented in the Consolidated Income
Statement on page 52. The loss for the year attributable to the owners of the
Group was (£0.2m) (2022 restated loss: (£0.2m)).
Adjusted administrative expenses in 2023 increased by £1.7m to £26.8m (2022
restated: £25.1m). This movement is driven by OnTheMarket Software being
part of the Group for a full year compared to only eight months in the prior
year. As a result, staff costs increased by 24% to £11.8m (2022: £9.5m).
Other administrative expenses increased by 30% to £6.0m (2022 restated:
£4.6m). This was offset by a reduction in media spend of 18% to £8.7m (2022:
£10.6m).
The annual Impairment review in respect of Glanty Limited (OnTheMarket
Software) concluded that the Group required an impairment charge of £1.5m to
Goodwill (see note 13).
An agent recruitment charge of £1.4m (2022 restated: £1.7m) 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.
A prior period adjustment was recognised following completion of an internal
review of agents that were entitled to shares. An acceleration of the agent
recruitment charge was required due to incomplete agent charges, incorrect
fair values used at the grant date and incorrect classification of the charge
in line with the Group's accounting policies, see note 29 for further details.
Statement of financial position
As noted above the impairment in respect of OnTheMarket Software reduced
Goodwill to nil at year-end (see note 13).
Intangible assets increased to £8.9m (2022: £7.5m), as a result of
additional capitalisation of staff and consultant costs incurred in the
ongoing development of OnTheMarket.com and OnTheMarket Software products,
partially offset by the amortisation charge arising on those costs and on
costs previously capitalised.
A fair value loss of £0.4m was also taken on the investment in Insurestreet
Limited, trading as Canopy as a result of an assessment of its recoverable
amount compared to the fair value held within the Group.
Right of Use Assets increased by £0.3m to £1.0m (2022: £0.7m). This was due
to the renewal of the Group's premises in Southwark, London.
Following approval from shareholders and the courts, on 23 July 2022 the
cancellation of the Company's share premium account became effective. This
created additional distributable reserves of £44m within the Company. The
cancellation has the effect of creating distributable reserves and, subject to
the financial performance of the Company and the CA 2006 provides 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. No distributions have currently been made or proposed.
Consolidated Income Statement: Year ended 31 January 2023
Restated
Notes 2023 2023 2023 2022 2022 2022
Statutory Adjusting Items (see note 7) Adjusted Statutory Adjusting Items Adjusted
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 4 34,428 358 34,786 30,219 628 30,847
Administration expenses 6 (30,590) 3,837 (26,753) (28,120) 3,045 (25,075)
________ ________ ________ ________ ________ ________
EBITDA 3,838 4,195 8,033 2,099 3,673 5,772
Amortisation 6 (3,081) (3,081) (2,460) (2,460)
Depreciation 6 (633) (633) (605) (605)
Operating profit / (loss) 124 4,195 4,319 (966) 3,673 2,707
Finance income 9 99 33
Finance expense 10 (14) (11)
Share of loss of associate - (122)
Fair value loss on step acquisition - (183)
________ ________ ________ ________ ________ ________
Profit / (loss) before income tax 209 (1,249)
Income Tax 11 (376) 1,036
____ ________ ________ ________ ________ ________
Loss for the year attributable to owners of the parent (167) (213)
2023 2022
Loss per share from continuing operations Restated
Pence Pence
Basic 12 (0.22) (0.29)
Diluted 12 (0.22) (0.29)
The operating profit / (loss) arises from the Group's continuing operations.
Consolidated Statement of Comprehensive Income: Year ended 31 January 2023
2023 2022
£'000 £'000
Loss for the year (167) (213)
Items that will not be reclassified to profit or loss
Fair value loss on equity investment 19 (358) -
Total comprehensive loss for the year (525) (213)
Consolidated Statement of Financial Position at 31 January 2023
Restated * Restated *
Notes 2023 2022 2021
£'000 £'000 £'000
ASSETS
Non-current assets
Goodwill 13 - 1,518 -
Intangible assets 14 8,930 7,520 4,685
Property, plant and equipment 15 99 96 103
Right-of-use assets 16 951 703 180
Investment in associates - - 851
Investments 19 47 405 -
Deferred tax asset 11 1,822 2,599 1,558
________ ________ ________
11,849 12,841 7,377
Current assets
Trade and other receivables 20 4,682 5,375 5,242
Cash and cash equivalents 11,333 8,412 10,719
_________ _________ _________
16,015 13,787 15,961
_________ _________ _________
TOTAL ASSETS 27,864 26,628 23,338
_________ _________ _________
LIABILITIES
Current liabilities
Trade and other payables 21 (6,371) (5,880) (5,216)
Lease liabilities 16 (560) (421) (157)
Provisions 23 (639) (732) (622)
Current tax (7) (12) (16)
_________ _________ _________
(7,577) (7,045) (6,011)
Non-current liabilities
Lease liabilities 16 (364) (237) (2)
Provisions 23 (74) (203) (258)
Deferred consideration 24 (75) (75) -
Deferred tax liability 11 - (401) -
_________ _________ _________
(513) (916) (260)
_________ _________ _________
TOTAL LIABILITIES (8,090) (7,961) (6,271)
_________ _________ _________
NET ASSETS 19,774 18,667 17,067
EQUITY ATTRIBUTABLE TO OWNERS OF
THE PARENT
Share capital 26 151 149 145
Share premium 27 - 43,756 47,453
Merger reserve 1,228 1,228 (71)
Other reserve 6,372 5,264 1,429
Retained earnings 12,023 (31,730) (31,889)
_________ _________ _________
TOTAL EQUITY ATTRIBUTABLE TO OWNERS 19,774 18,667 17,067
OF THE PARENT
* Restated - See note 29.
Consolidated Statement of Changes in Equity year ended 31 January 2023
Share capital £'000 Share premium Other reserves £'000 Merger Retained earnings £'000 Total equity £'000
£'000 reserve
£'000
Equity as at 1 February 2021 as previously stated 145 47,453 782 (71) (31,409) 16,900
Prior Period Adjustment - - 647 - (480) 167
Restated* Equity as at 1 February 2021 145 47,453 1,429 (71) (31,889) 17,067
Loss for the financial period* - - - - (213) (213)
______ ______ ______ ______ ______ ______
Total comprehensive
loss for the period* - - - - (213) (213)
______ ______ ______ ______ ______ ______
Reserves reclassification - (3,697) 3,626 71 - -
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 - 278 - - 279
Share-based payment
charge on employee options - - - - 372 372
______ ______ ______ ______ ______ ______
Restated* Equity as at 149 43,756 5,264 1,228 (31,730) 18,667
31 January 2022
______ ______ ______ ______ ______ ______
At 1 February 2022 149 43,756 5,264 1,228 (31,730) 18,667
Profit for the financial period - - - - (167) (167)
Other comprehensive loss for the financial - - - - (358) (358)
period
______ ______ ______ ______ ______ ______
Total comprehensive - - - - (525) (525)
loss for the period
Transactions with
owners:
Shares issued for agent 2 - 1,108 - - 1,110
recruitment shares
Capital - (43,756) - - 43,756 -
restructuring
Share-based payment - - - - 522 522
charge on employee options
______ ______ ______ ______ ______ ______
At 31 January 2023 151 - 6,372 1,228 12,023 19,774
______ ______ ______ ______ ______ ______
*Restated due to prior year adjustments - see note 29
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.
Other reserves
The other reserve represents the excess over nominal value for equity shares
issued as part of agent recruitment share arrangements (see note 2.19).
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 2023
2023 Restated
2022 *
£'000 £'000
Cash flows from operating activities
Loss for the year after income tax (167) (213)
Adjustments for:
Income tax 376 (1,036)
Finance income (99) (33)
Finance expense 14 11
Amortisation 3,081 2,460
Depreciation 633 605
Agent recruitment expense 1,733 2,306
Share-based payment 522 372
Share of loss of associate - 122
Fair value loss on step acquisition - 183
Goodwill impairment 1,518 -
Acquisition related costs 193 129
_______ _______
Operating cash flows before movements in working capital 7,804 4,906
Increase in trade and other receivables (486) (1,585)
Increase / (decrease) in trade and other payables 842 (181)
Decrease in provisions (222) (34)
Tax (paid) / received 5 (9)
_______ _______
Net cash generated from operating activities 7,943 3,097
Cash flows from investing activities
Finance income received 99 33
Acquisition of intangible assets (4,491) (3,369)
Acquisition of tangible assets (62) (49)
Acquisition of subsidiary net of cash acquired - (983)
Acquisition of investment - (405)
_______ _______
Net cash used in investing activities (4,454) (4,773)
Cash flows from financing activities
Loan repayment - (50)
Proceeds from issue of shares 2 1
Repayment of lease liabilities (570) (582)
_______ _______
Net cash (used in) financing activities (568) (631)
_______ _______
Net movement in cash and cash equivalents 2,921 (2,307)
Cash and cash equivalents at the beginning of the year 8,412 10,719
_______ _______
Cash and cash equivalents at the end of the year 11,333 8,412
_______ _______
* Restated - see note 29.
Notes to the Consolidated Financial Statements year ended 31 January 2023
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 OnTheMarket Software.
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 C/O Almond +
Company Limited, 11 York Street, Manchester, M2 2AW. 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.
2.1. Basis of preparation
These consolidated financial statements have been prepared on a going concern
basis and in accordance with UK-adopted international accounting standards
(IFRS). The financial statements for the year ended 31 January 2023 were
prepared in accordance with UK-adopted International Accounting Standards.
The consolidated financial statements comprise a consolidated income
statement, a consolidated statement of comprehensive income, a consolidated
statement of financial position, a consolidated statement of changes in
equity, a consolidated statement of cash flows and notes. Income and expenses,
excluding the components of other comprehensive income, are recognised in the
consolidated income statement. Other comprehensive income is recognised in the
consolidated statement of comprehensive income and comprises items of income
and expenses (including reclassification adjustments) that are not recognised
in the consolidated income statement, as required or permitted by IFRS.
Reclassification adjustments are amounts reclassified to the income statement
in the current period that were recognised in the current or previous periods.
Transactions with the owners of the Group in their capacity as owners are
recognised in the consolidate statement of changes in equity.
The Group presents the consolidated income statement using the classification
by function of expenses. The Group believes this method provides more useful
information to the users of its financial statements as it better reflects the
way operations are run from a business point of view. The statement of
financial position format is based on a current/non-current distinction.
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. Basis of consolidation
The consolidated financial statements incorporate those of OnTheMarket plc and
all its subsidiaries (i.e., entities that the Group controls through its power
to govern the financial and operating policies to obtain economic benefits).
These are adjusted, where appropriate, to conform to Group accounting
policies.
All intra-group transactions, balances, and unrealised gains on transactions
between Group companies are eliminated on consolidation. Unrealised losses are
also eliminated unless the transaction provides evidence of an impairment of
the asset transferred.
2.3. Reduced disclosures
The figures presented in relation to the Company's financial statements have
been prepared in accordance with FRS 101 Reduced Disclosure Framework ("FRS
101").
In accordance with FRS 101 the following exemptions from the requirements of
IFRS have been applied in the preparation of the Company financial statements
and, where relevant, equivalent disclosures have been made in the consolidated
financial statements of the Group:
· presentation of a Company Cash Flow Statement and related notes;
· disclosure of the objectives, policies and processes for managing
capital;
· inclusion of an explicit and unreserved statement of compliance
with IFRS;
· disclosure of Company key management compensation;
· disclosure of the categories of financial instrument and nature
and extent of risks arising on these financial instruments;
· disclosure of share-based payment expense charge to profit or
loss, reconciliation of opening and closing number and weighted average
exercise price of share options and how the fair value of options granted was
measured;
· related party disclosures in respect of two or more wholly owned
members of the Group;
· disclosure of the future impact of new International Financial
Reporting Standards in issue but not yet effective at the reporting date; and
· disclosures on fair values.
The financial statements of the Company are consolidated within these
financial statements which are publicly available from Companies House, Crown
Way, Cardiff, CF14 3UZ.
2.4. Going concern
The Group made a loss after tax for the year of £0.2m (2022 restated loss:
£0.2m). As at 31 January 2023 the Group had a net cash balance of £11.3m
(2022: £8.4m) and a net asset balance of £19.8m (2022: £18.7m). At 30 June
2023, the Group had cash of £11.4m and no borrowings.
The Directors have prepared and reviewed cash forecasts and projections for
the Group for the 12 months subsequent to the approval of the financial
statements. 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.
2.5. New and revised standards and interpretations
The IASB have issued some amendments to IFRS that become mandatory in a
subsequent accounting period. The Group has evaluated these changes and
assessed that there are no standards that are issued, but not yet effective,
that would be expected to have a material impact on the Group in the current
or future reporting periods nor on foreseeable future transactions.
2.6. Functional and presentation currency
The consolidated financial statements are presented in Pounds Sterling,
rounded to the nearest thousand (£'000), which is also the Group's functional
currency.
2.7. 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.
2.8. 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.
2.9. Property, plant and equipment
All property, plant and equipment are stated at historical cost less
accumulated depreciation and any accumulated impairment losses. Depreciation
is calculated using an appropriate method to allocate their cost amounts to
their residual values over their estimated useful lives, as follows:
Fixtures, fittings, and
equipment Straight line 4 years
2.10. Leases
Right-of-use assets
A right-of-use asset is recognised at commencement of the lease and initially
measured at the amount of the lease liability, plus any incremental costs of
obtaining the lease and any lease payments made at or before the leased asset
is available for use by the Group.
Payments for the right to use an underlying asset are payments for a lease,
regardless of the timing of those payments which may be before the underlying
asset is available for use by the lessee.
The right-of-use asset is subsequently measured at cost less accumulated
depreciation and any accumulated impairment losses. The depreciation methods
applied are as follows:
Lease vehicles
Straight line 3 years
Leased
premises
Straight line over lease term
Lease liabilities
On commencement of a contract (or part of a contract) which gives the Group
the right to use an asset for a period of time in exchange for consideration,
the Group recognises a right-of-use asset and a lease liability unless the
lease qualifies as a 'short-term' lease or a 'low-value' lease.
Short-term leases - Where the lease term is twelve months or less and the
lease does not contain an option to purchase the leased asset, lease payments
are recognised as an expense on a straight-line basis over the lease term.
Leases of low-value assets - For leases where the underlying asset is
'low-value', lease payments are recognised as an expense on a straight-line
basis over the lease term.
Initial measurement of the lease liability
The lease liability is initially measured at the present value of the lease
payments during the lease term discounted using the interest rate implicit in
the lease, or the incremental borrowing rate if the interest rate implicit in
the lease cannot be readily determined.
The lease term is the non-cancellable period of the lease plus extension
periods that the Group is reasonably certain to exercise and termination
periods that the Group is reasonably certain not to exercise.
Lease payments include fixed payments, less any lease incentives receivable,
variable lease payments dependant on an index or a rate and any residual value
guarantees. Variable lease payments are initially measured using the index
or rate when the leased asset is available for use.
Subsequent measurement of the lease liability
Lease liabilities are measured at amortised cost using the effective interest
method. The carrying amounts are remeasured if there is a change in the
following: future lease payments arising from a change in an index, or a rate
used; residual guarantee; lease term; certainty of a purchase option and
termination penalties. When a lease liability is remeasured, an adjustment is
made to the corresponding right-of use asset, or to profit or loss if the
carrying amount of the right-of-use asset is fully written down.
Variable lease payments not included in the measurement of the lease liability
as they are not dependant on an index or rate, are recognised in profit or
loss in the period in which the event or condition that triggers those
payments occurs.
2.11. 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 OnTheMarket 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 4-8 years
Customer related intangibles
Straight-line 8 years
2.12. 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 it's 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.
2.13. Company investments in subsidiaries
Investments by the Company in subsidiary undertakings are stated at cost less
any impairment. Where management identify uncertainty over these investments,
the investment is impaired to an estimate of its net realisable value.
An impairment review is undertaken at each reporting date or more frequently
when there is an indication that the recoverable amount is less than the
carrying amount. Recoverable amount is the higher of fair value less costs to
sell and value-in-use. In assessing value-in-use the estimated future cash
flows of the cash-generating units relating to the investment are discounted
to their present value using a pre-tax discount rate to discount the future
pre-tax cash flows. If the recoverable amount of the cash-generating unit
relating to the investment is estimated to be less than it's carrying amount,
the carrying value of the investment is reduced to its recoverable amount. An
impairment loss is recognised in the income statement in the period in which
it occurs and may be reversed in subsequent periods.
2.14. Financial instruments
Recognition of financial instruments
Financial assets and financial liabilities are recognised when the Group
becomes party to the contractual provisions of the instrument.
Financial assets
Initial and subsequent measurement of financial assets
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and other
short-term deposits held by the Group with maturities of less than three
months.
Trade, Group and other receivables
Trade receivables are initially measured at their transaction price. Group and
other receivables are initially measured at fair value plus transaction
costs.
Other Financial Assets
Other financial assets, including trade investments, are initially measured at
fair value, which is normally the transaction price.
The Group may make an irrevocable election at initial recognition for trade
investments that would otherwise be measured at fair value through profit or
loss to present subsequent changes in fair value in other comprehensive
income. As such, these financial assets are subsequently carried at fair value
and the changes in fair value are recognised in other comprehensive income.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument
is any contract that evidences a residual interest in the assets of the Group
after deducting all of its liabilities.
Initial and subsequent measurement of financial liabilities
Trade, Group and other payables
Trade, Group and other payables are initially measured at fair value net of
direct transaction costs and subsequently measured at amortised cost.
Equity instruments
Equity instruments issued by the Group are recorded at the proceeds received,
net of direct issue costs. Ordinary shares are classified as equity.
Derecognition of financial assets (including write-offs) and financial
liabilities
A financial asset (or part thereof) is derecognised when the contractual
rights to cash flows expire or are settled, or when the contractual rights to
receive the cash flows of the financial asset and substantially all the risks
and rewards of ownership are transferred to another party.
When there is no reasonable expectation of recovering a financial asset it is
derecognised ("written off").
The gain or loss on derecognition of financial assets measured at amortised
cost is recognised in profit or loss.
A financial liability (or part thereof) is derecognised when the obligation
specified in the contract is discharged, cancelled or expires.
Any difference between the carrying amount of a financial liability (or part
thereof) that is derecognised and the consideration paid is recognised in
profit or loss.
2.15. 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 ageing 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.
2.16. Income taxes
Tax currently payable is calculated using the tax rates in force or
substantively enacted at the reporting date. Taxable profit differs from
accounting profit either because some income and expenses are never taxable or
deductible, or because the time pattern on which they are taxable or
deductible differs between tax law and their accounting treatment.
Using the statement of financial position liability method, deferred tax is
recognised in respect of all temporary differences between the carrying value
of assets and liabilities in the consolidated statement of financial position
and the corresponding tax base, with the exception of temporary differences
arising from goodwill or from the initial recognition (other than in a
business combination) of assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit.
Deferred tax is calculated at the tax rates that are expected to apply to the
period when the asset is realised or the liability is settled, based on tax
rates (and tax laws) that have been enacted or substantively enacted by the
reporting date.
Deferred tax assets are recognised only to the extent that the Group considers
that it is probable (i.e. more likely than not) that there will be sufficient
taxable profits available for the asset to be utilised within the same tax
jurisdiction.
Deferred tax assets and liabilities are offset only when there is a legally
enforceable right to offset current tax assets against current tax
liabilities, they relate to the same tax authority and the Group's intention
is to settle the amounts on a net basis.
The tax expense for the period comprises current and deferred tax. Tax is
recognised in profit or loss, except if it arises from transactions or events
that are recognised in other comprehensive income or directly in equity. In
this case, the tax is recognised in other comprehensive income or directly in
equity, respectively. Where tax arises from the initial accounting for a
business combination, it is included in the accounting for the business
combination.
Since the Group is able to control the timing of the reversal of the temporary
difference associated with interests in subsidiaries, associates and joint
arrangements, a deferred tax liability is recognised only when it is probable
that the temporary difference will reverse in the foreseeable future mainly
because of a dividend distribution.
2.17. Government grants
Grants are recognised only when there is reasonable assurance that the Group
will comply with the conditions attached to them and that the grants will be
received. Grants that are receivable as compensation for expenses already
incurred are recognised in profit or loss in the period in which they become
receivable.
2.18. Employee benefits
Defined contribution plans
The Group pays fixed percentage contributions into independent entities in
relation to plans and insurances for individual employees. The Group has no
legal or constructive obligations to pay contributions in addition to its
fixed percentage contributions, which are recognised as an expense in the
period that related employee services are received.
Short-term employee benefits
Short-term employee benefits, including holiday entitlement, are current
liabilities included in pension and other employee obligations, measured at
the undiscounted amount that the Group expects to pay as a result of the
unused entitlement.
Employee Share Schemes
The Group provides equity settled share-based incentive plans allowing
executive directors and other employees to acquire shares in the Company. An
expense is recognised in the income statement, with a corresponding increase
in equity, over the period during which the employees become unconditionally
entitled to acquire equity settled share-based incentives. See note 25 for
details on the different share schemes within the Group.
Fair value at the grant date is measured using either the Monte Carlo or Black
Scholes pricing model as is most appropriate for each scheme. Measurement
inputs include share price on measurement date; exercise price of the
instrument; expected volatility (based on weighted average historic volatility
adjusted for changes expected due to publicly available information); weighted
average expected life of the instruments (based on historical experience and
general option behaviour); expected dividends; and risk-free interest rates
(based on government bonds). Service and non-market performance conditions
attached to the awards are not considered in determining the fair value of the
individual shares awarded.
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).
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.
Employer's NI is accrued, where applicable, at a rate of 13.8%, which
management expects to be the prevailing rate when share based incentives are
exercised. In the case of share options, it is provided on the difference
between the share price at the reporting date and the average exercise price
of share options. In the case of nil cost performance shares and deferred
shares, it is provided based on the share price at the reporting date. The NI
on share-based payments in relation to the exercise of the shares is charged
to the income statement over the vesting period of the award.
Employee Benefit Trust
The Employee Benefit Trust holds shares in the Company and was set up for the
benefit of Group employees. The Employee Benefit Trust purchases the Company's
shares in the market or is gifted these by the Company for use in connection
with the Group's share-based payments arrangements. Once purchased, shares are
not sold back into the market.
2.19. 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.
2.20. Provisions
Where, at the reporting date, the Group has a present obligation (legal or
constructive) as a result of a past event and it is probable that the Group
will settle the obligation, a provision is made in the statement of financial
position. Provisions are made using best estimates of the amount required to
settle the obligation. Changes in estimates are reflected in profit or loss in
the period they arise. Provisions for social security on share options granted
are measured using the fair value of the expected number of share options to
be exercised at the applicable tax rate in use at the measurement date.
2.21. 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. OnTheMarket Software
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.
OnTheMarket Software
OnTheMarket Software 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.
2.22. 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.
2.23. Alternative Performance Measures
In the analysis of the Group's financial performance, certain information
disclosed in the financial statements may be prepared on a non-GAAP basis or
has been derived from amounts calculated in accordance with IFRS but are not
themselves an expressly permitted GAAP measure.
These measures are reported in line with the way in which financial
information is analysed by management and designed to increase comparability
of the Group's year-on-year financial position, based on its operational
activity. APMs should not be viewed in isolation but as supplementary
information to the Groups results. The key alternative performance measures
presented by the Group are:
Adjusted EBITDA
Adjusted EBITDA is operating profit before amortisation, depreciation,
share-based payments, (including charges relating to shares issued for agent
recruitment), specific professional fees and non-recurring items.
Adjusted Operating Profit
Adjusted EBITDA after amortisation and depreciation.
These are alternative performance measures and should not be considered an
alternatives to IFRS measures, such as revenue or operating profit or loss.
The directors believe that adjusting items relate to costs or incomes that
derive from events or transactions that fall within the normal activities of
the Group, but are excluded from the Group's adjusted profit measures,
individually or, if of a similar type in aggregate, due to their size and/or
nature in order to better reflect management's view of the performance of the
Group. These include:
· Share-based payments;
· Agent Recruitment charges;
· Staff related costs associated with termination of employment and
professional fees associated with employee share-based plans;
· Acquisition costs; and
· Goodwill or Intangible asset impairment charges within the Group.
The directors therefore consider adjusted operating profit to be the most
appropriate indicator of the performance of the business and year-on-year
trends.
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
There are no 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.
Key sources of estimation uncertainty
Significant accounting estimates
The preparation of the Group's consolidated financial statements includes the
use of estimates and assumption. The significant accounting estimates with a
significant risk of a material change to the carrying value of assets and
liabilities within the next year in terms of IAS 1, 'Presentation of Financial
Statements', are:
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 at 31 January 2023 the estimate relates entirely
to the OnTheMarket Software CGU. Further details are included in note 13.
Impairment of Company receivables
The Company has intercompany loans to its subsidiaries Agents' Mutual and
OnTheMarket Software which are repayable on demand. As the subsidiaries did
not have sufficient highly liquid resources to repay the loans at 31 January
2023, 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 OnTheMarket Software 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 2023 and the future cash flows therefore
vary year to year.
Deferred tax
At 31 January 2023 Agents' Mutual had tax losses available to carry forward.
Agents' Mutual was profitable in the year to 31 January 2023 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.
In considering their recoverability, the Group assesses the likelihood of
their being recovered within a reasonably foreseeable timeframe, being
typically a minimum of three years, taking into account the future expected
profit profile and business model of the company. Short-term timing
differences are generally recognised ahead of losses and other tax attributes
as being likely to reverse more quickly.
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 11).
4. Revenue
The Group reports revenues attributable to products and services offered to:
· Estate and letting agents
· New home developers
· OnTheMarket Software customers
· Other, non-property advertising income
Restated
Revenues for the year ended 31 January 2023 2022
£m £m
Group revenue
- Agency 29.1 26.8
- New Homes 4.0 2.5
- OnTheMarket Software 1.0 0.6
- Other 0.3 0.3
- Total 34.4 30.2
Agency sales are predominantly billed monthly in advance, and these are
recognised as deferred income. The Group has contract liabilities of £1.7m as
at 31 January 2023 (2022: £1.7m).
Contract liabilities of £1.7m at 31 January 2022 were recognised as
revenue in the year ended 31 January 2023 (2022: £1.8m).
A proportion of sales are billed monthly in arrears (predominantly New Homes)
and are recognised as accrued income. The Group has accrued income of £0.6m
as at 31 January 2023 (2022: £0.4m).
Agency revenue is reduced by £0.4m of agent recruitment charges during the
year (2022: £0.6m).
All revenue is generated in the UK for the Group's services.
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:
· OnTheMarket Software
· 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 OnTheMarket Software 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.
(Restated) (Restated)
OnTheMarket Software Rest of the Group Group
Year ended 31 January 2022 £m £m £m
Revenue 0.6 29.6 30.2
Operating loss(1) (0.5) (0.4) (0.9)
Depreciation & amortisation 0.2 2.9 3.1
OnTheMarket Software Rest of the Group Group
Year ended 31 January 2023 £m £m £m
Revenue 1.0 33.4 34.4
Operating (loss) / profit(1) (1.2) 1.3 0.1
Depreciation & amortisation 0.4 3.3 3.7
(1) Operating (loss) / profit is stated after the charge for depreciation and
amortisation.
(2) Assets and liabilities are not separately monitored by the Chief Operating
Decision Maker and therefore not identified above.
6. Administrative Expenses
2023 2022
£'000 £'000
Operating (loss) / profit is stated after charging:
Short-term lease expenses 69 246
Staff costs (note 8) 11,770 9,509
Advertising expenditure 8,624 10,574
Audit fees payable to the Company's auditor
- audit of Group financial statements 218 132
- audit related assurance services 20 8
Other administrative expenses 6,052 4,606
Adjusting Items (note 7) 3,837 3,045
30,590 28,120
Depreciation of property, plant and equipment and right-of-use assets 633 605
Amortisation of intangible assets 3,081 2,460
34,304 31,185
7. Adjusting Items
Restated
2023 2022
£'000 £'000
Agent share recruitment revenue 358 628
Share-based management incentive 310 467
Professional fees 351 211
Agent recruitment charges 1,375 1,683
Government grant repaid - 449
Staff related costs 90 106
Acquisition related costs 193 129
Goodwill impairment (note 13) 1,518 -
4,195 3,673
Agent share recruitment revenue arises 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 revenue.
Share-based management incentive charges include employer's national insurance
charged on options exercised in the year as well as the movement in the
expected future employer's national insurance charged based upon the year-end
share price. See note 25 for further details.
Professional fees incurred in the year relate to fees and expenses associated
with the recruitment of a new Chief Financial Officer, legal fees relating to
the post IPO lock-in share placement in February 2023 and cancellation of the
share premium account in May 2022.
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.
Staff related costs relate to termination of employment, the associated
professional fees and legal fees to establish an Employee Benefit Trust.
Acquisition related costs represent the amortisation of prepayments for
employee services incurred as part of the acquisition of Glanty Limited
(OnTheMarket Software) and amortised over a three-year period from
acquisition.
Goodwill impairment relates to the OnTheMarket Software cash generating unit
and is explained in detail in note 13.
8. Employees and Directors
2023 2022
Group £'000 £'000
Staff costs (including Directors) comprise:
Wages and salaries 12,317 10,002
Social security costs 1,549 1,199
Pension 167 136
________ ________
14,033 11,337
Less staff costs capitalised to intangible assets (2,263) (1,828)
________ ________
Staff costs expensed 11,770 9,509
________ ________
2023 2022
Company £'000 £'000
Staff costs (including Directors) comprise:
Wages and salaries 226 206
Social security costs 29 25
Pension 1 1
________ ________
256 232
________ ________
2023 2022
The average monthly number of persons employed Number Number
by the Group during the year was:
Non-Executive Directors 3 3
Marketing, sales and administration 136 116
IT 59 52
________ ________
198 171
________ ________
The Non-Executive Directors were the only employees in the Company as they had
service contracts during the year:
2023 2022
Directors' remuneration £'000 £'000
Group
Aggregate emoluments 1,055 1,218
Payment due on loss of office 31 -
Pension contributions 4 4
________ ________
1,090 1,222
________ ________
Highest paid Director 2023 2022
Group £'000 £'000
Aggregate emoluments 313 401
________ ________
One Director, not the highest paid Director, exercised share options during
the year.
Key management personnel compensation
Key management personnel are those persons having authority and responsibility
for planning, directing and controlling the activities of the Group. The Group
considers the Directors to be the only key management personnel. As well as
the emoluments above the Group paid employers national insurance contributions
of £133k (2022: £161k) due in respect of Directors. A charge of £124k
(2022: £49k) was recognised in respect of options awarded to Directors in the
year. Chris Bell, Non-executive Chair, and the Executive Directors receive
payments from the Group into money-purchase pension schemes. Further details
on Directors' remuneration are set out in the Directors' Remuneration Report
within these accounts.
9. Finance income
2023 2022
£'000 £'000
Finance income:
Other interest receivable 99 33
________ ________
10. Finance expense
2023 2022
£'000 £'000
Interest arising on:
Lease liability interest (note 16) 14 11
________ ________
11. Income tax
2023 2022
£'000 £'000
Current tax:
UK corporation tax on income for year - 5
________ ________
Total current tax - 5
Deferred tax:
Origination and reversal of temporary differences 376 (580)
Arising from change in enacted tax rate - (461)
________ ________
Income tax debit/ (credit) 376 (1,036)
________ ________
Factors affecting tax charge for the year
The tax assessed for the year is different from Restated
the effective rate of corporation tax as explained below: 2023 2022
£'000 £'000
Profit / (loss) before taxation 209 (1,249)
________ ________
Profit / (loss) before taxation multiplied by the effective
rate of corporation tax of 19% (2022: 19%) 40 (237)
Effects of:
Expenses not deductible for tax purposes 592 340
Depreciation in excess of capital allowances 62 180
Expenditure on intangible assets claimed as incurred (102) (99)
Tax losses (utilised in year) / carried forward (592) (179)
Previously unrecognised tax losses 101 (1,041)
Origination and reversal of temporary differences 275 -
________ ________
Tax charge / (income) 376 (1,036)
________ ________
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 25% was used.
This net deferred tax asset within the Group comprises temporary differences
attributable to:
2023 2022
£'000 £'000
Employee share-based payments 1,248 1,271
Property, plant and equipment temporary differences 157 157
Development cost temporary differences (1,560) (1,307)
Tax losses 2,377 2,478
________ ________
Deferred tax asset 2,222 2,599
________ ________
Intangible assets (400) (401)
Deferred tax liability (400) (401)
________ ________
Net deferred tax asset 1,822 2,198
________ ________
The movement in the year in the net deferred tax asset arising from the
Agents' Mutual losses and other timing differences is as follows:
£'000
Opening balance at 1 February 2022 2,198
Debited to profit and
loss (376)
_____
Closing balance at 31 January
2023 1,822
_____
The subsidiary, Agents' Mutual Limited, had trading losses available for carry
forward of £26.7m (2022: £30.2m). Unused tax losses for which no deferred
tax asset has been recognised total £16.9m (2022: £18.9m).
The subsidiary, Glanty Limited (OnTheMarket Software), has trading losses
available for carry forward of £6.1m (2022: £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.
12. Loss per share
Numerators: Earnings attributable to equity
Loss for the year from continuing operations 2023 Restated 2019
attributable to owners of the Company £'000
2022 £'000
£'000
Total basic earnings and diluted loss (167) (213)
________ ________
No. No.
Denominators: Weighted average number of equity shares
Weighted average number of equity shares used in 75,000,325 73,744,914
calculating basic earnings per share
Adjustments for calculating diluted earnings per share: 7,986,795 7,194,021
- options over equity shares
Weighted average number of equity shares used in 82,987,120 80,938,935
calculating diluted loss per share
_________ _________
Total basic earnings and diluted loss
(167)
(213)
________
________
No.
No.
Denominators: Weighted average number of equity shares
Weighted average number of equity shares used in
calculating basic earnings per share
75,000,325
73,744,914
Adjustments for calculating diluted earnings per share:
7,986,795
7,194,021
- options over equity shares
Weighted average number of equity shares used in
calculating diluted loss per share
82,987,120
80,938,935
_________
_________
As required by IAS33 (Earnings per Share), the impact of potentially dilutive
options was disregarded for the purposes of calculating diluted loss per share
in the year as the Group was loss making.
13. Goodwill
Group
£'000
At 1 February 2022 1,518
Impairment (1,518)
________
At 31 January 2023 -
________
Impairment testing for the OnTheMarket Software Cash Generating Unit
The Group tests goodwill for impairment at each reporting date. If there are
indicators of impairment, then other intangible assets are also tested.
The impairment 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.
As at 31 January 2023 the impairment assessment relates entirely to the
OnTheMarket Software CGU which is a reportable segment (see note 5).
For the impairment review, cash flows were prepared using Board approved
forecasts to 31 January 2026, alongside management projections for a further
two years. The projections demonstrate continued growth in line with the Board
approved plan, specifically revenue from existing customers including forecast
growth in sales with the Group's listing agent customer base. In addition, a
long-term revenue growth rate beyond the 5-year period of 0% has been assumed.
OnTheMarket Software has made good progress during the year, however trading
performance (specifically software licences) has been lower than expected. A
remediation plan has been put in place and although management consider there
to be significant future value, our current assessment is lower than envisaged
at acquisition.
This resulted in an updated assessment of the key assumptions, which impact
the recoverable amount of the CGU.
The following key assumptions were used in the discounted cash flow model:
- Revenue growth in the base model for the years 1-5 is assumed at a
CAGR of 33% (2022: 44%).
- EBITDA margins increase to a steady state level of 32% (2022: 40%)
in perpetuity; and
- 19 % pre-tax discount rate (2022: 14%).
Revenue growth in the base model is assumed at a CAGR of 33%. OnTheMarket
Software achieved growth in license revenue of 33% in the prior year.
Management believe continued growth in the base model is achievable in
accordance with the acquisition strategy of 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.
During the forecast period OnTheMarket Software is expected to become
profitable and EBITDA margins increase to a steady state level of 32% 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 19% pre-tax reflects management's estimate of the time
value of money and the consolidated entity's weighted average cost of capital
adjusted for the risk-free rate and the volatility of the share price relative
to market movements.
The above assumptions used in the annual review, have resulted in an
impairment charge of £1.5m to Goodwill. This has been recorded as a charge
within the income statement. The recoverable amount is £2.7m.
14. Intangible assets
Development costs Technology related intangibles Customer related intangibles Total
Group £'000 £'000
£'000
£'000
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
________ ________ ________ ________
Cost:
At 1 February 2022 16,370 2,028 444 18,842
Additions - internally developed 3,627 864 4,491
At 31 January 2023 19,997 2,892 444 23,333
________ ________ ________ ________
Amortisation:
At 1 February 2022 11,120 165 37 11,322
Charge for the year 2,607 474 3,081
At 31 January 2023 13,727 639 37 14,403
________ ________ ________ ________
Net book value:
At 31 January 2023 6,270 2,253 407 8,930
________ ________ ________ ________
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 relate to the development of software by OnTheMarket
Software for TecLet lettings and TecLet CRM products and represent the fair
value of those assets acquired as part of the Group's acquisition.
15. Property, plant and equipment
Fixtures, fittings and equipment
£'000
Group
Cost:
At 1 February 2021 318
Additions 49
________
At 31 January 2022 367
Depreciation:
At 1 February 2021 215
Charge for the year 56
________
At 31 January 2022 271
Net book value: ________
At 31 January 2022 96
________
Cost:
At 1 February 2022 367
Additions 62
________
At 31 January 2023 429
Depreciation:
At 1 February 2022 271
Charge for the year 59
________
At 31 January 2023 330
Net book value: ________
At 31 January 2023 99
________
Depreciation is included within administrative expenses in the income
statement.
16. Right-of-use assets and lease liabilities
The Group has lease contracts for motor vehicles and for premises.
The amounts presented in the financial statements are as follows:
Right-of-Use Assets
Motor Leasehold Group
Vehicles Premises
£'000 £'000 £'000
At 1 February 2021 119 61 180
Additions 429 683 1,112
Disposals - (40) (40)
Depreciation charge (176) (373) (549)
_______ _________ _______
At 1 February 2022 372 331 703
Additions - 822 822
Depreciation charge (143) (431) (574)
_______ _________ _______
At 31 January 2023 229 722 951
Lease Liabilities
Motor Leasehold Group
Vehicles Premises
£'000 £'000 £'000
98 61 159
429 683 1,112
- (42) (42)
4 7 11
(202) (380) (582)
_______ _________ _______
329 329 658
- 822 822
7 7 14
(129) (441) (570)
_______ _________ _______
207 717 924
Non-current lease liabilities amount to £364k (2022: £237k) and are all due
between 1-5 years.
Changes in liabilities arising from financing activities relate to lease
liabilities only. The movement during the year in lease liabilities is set out
above. During the year, cash repayments of lease liabilities totalled £570k
(2022: £582k) and cash payments of short-term lease expenses were £69k
(2022: £246k).
17. Investments in subsidiaries
Subsidiary
undertakings
Company £'000
At 1 February 2021 -
Additions 2,364
________
At 31 January 2022 2,364
________
At 31 January 2023 2,364
________
The Company has the following investments in subsidiary undertakings:
( )
Registered Number Class of Principal Ownership at
shares held(1) activity 31 Jan 2023
Agents' Mutual Limited(1) 08381458 Member Online property portal services
100%
Glanty Limited 05562443 Ordinary Property software business 100%
( )
(1) Agents' Mutual is a company limited by guarantee and has no shares. The
Company owns the only member interest in Agents' Mutual.
All the above subsidiary undertakings share the same registered office as the
Company.
On The Market (Europe) Limited was dissolved in 2022 and therefore not
included in the above table.
The following subsidiary companies have taken the exemption from an audit of
individual accounts under s479A-C of the Companies Act 2006 (the Act):
- Agents' Mutual Limited
18. Investments in associates
£'000
Group and Company
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 -
________
At 1 February 2022
-
________
At 31 January 2023 -
________
19. Investments
£'000
Group and Company
At 1 Feb 2021 -
Additions 405
At 1 February 2022 405
Additions -
Fair value adjustment through OCI (358)
________
At 31 January 2023 47
________
The investment balance is comprised of £47k of Property Funding Hub Limited,
trading as Brickflow. This business is an unlisted company and the investment
was in return for minority interest shares in equity. The Group has designated
the investment an equity instrument at FVTOCI as this is an investment that
the Group plans to hold in the long term for strategic reasons.
During 2023 a fair value adjustment of £358k in relation to Insurestreet
Limited was identified bringing the investment value down to nil.
20. Trade and other receivables
Restated Restated
Current Group Company Group Company
2023 2023 2022 2022
£'000 £'000 £'000 £'000
Trade receivables 1,566 - 1,215 -
Amounts due from Group undertakings - - - 43,814
Other receivables 241 57 227 -
Prepayments and accrued income 2,875 158 3,933 187
_______ _________ _______ _________
4,682 215 5,375 44,001
The aged analysis of trade receivables is shown in note 22.
Included within prepayments is £1.4m (2022 restated: £2.0m) in relation to
prepaid agent recruitment share-based payment charges. Of this, £0.3m (2022
restated: £0.9m) is not due to be recognised in the income statement until
after 12 months. The remaining prepayments relate to insurance, advertising
media commitments and other administrative expenses.
Non-current Group Company Group Company
2023 2023 2022 2022
£'000 £'000 £'000 £'000
Amounts due from Group undertakings - 48,347 - -
_______ _________ _______ _________
- 48,347 - -
21. Trade and other payables
Restated
Group Company Group Company
2023 2023 2022 2022
£'000 £'000 £'000 £'000
Current liabilities
Trade payables 928 120 1,031 22
Social security and other taxes 1,410 46 840 4
Other payables 55 1 29 1
Accruals and deferred income 3,978 336 3,980 58
_________ _________ _________ ________
6,371 503 5,880 85
Included within accruals is £0.7m (2022 restated: £0.7m) in relation to
agent recruitment share-based payment charges
22. Financial instruments and financial risks
Financial risks
The Board has overall responsibility for the determination of the Group's risk
management objectives and policies and, whilst retaining ultimate
responsibility for them, it has delegated the authority for designing and
operating processes that ensure the effective implementation of the objectives
and policies to the Chief Executive Officer. The Board receives monthly
reports from the finance function through which it reviews the effectiveness
of the processes put in place and the appropriateness of the objectives and
policies it sets.
The overall objective of the Board is to set policies that seek to reduce risk
as far as possible without unduly affecting the Group's competitiveness and
flexibility. Further details regarding these policies are set out below:
The Group is exposed through its operations to the following financial risks:
· credit risk; and
· liquidity risk.
In common with all other businesses, the Group is exposed to risks that arise
from its use of financial instruments. This note describes the Group's
objectives, policies and processes for managing those risks and the methods
used to measure them from previous periods unless otherwise stated in this
note.
The financial assets and liabilities of the Group are as follows:
Financial assets
2023 2022
£'000 £'000
Non-current assets at fair value through OCI
Investments 47 405
Current assets at amortised cost
Trade and other receivables 1,807 1,442
Accrued income 557 405
Cash and cash equivalents 11,333 8,412
________ ________
Measured at amortised cost 13,697 10,259
Financial liabilities held at amortised cost
Restated
2023 2022
£'000 £'000
Current liabilities
Trade and other payables 983 1,031
Accrued expenses 2,236 2,235
Lease liabilities 560 658
________ ________
Total financial liabilities measured at amortised cost 3,779 3,924
Credit risk
Credit risk is the risk of financial loss to the Group if a counterparty to a
financial instrument fails to meet its contractual obligations.
The loss allowance on all financial assets is measured by considering the
probability of default.
Trade receivables are considered to be in default when the amount due is
significantly more than the associated credit terms past due, based on an
assessment of past payment practices and the likelihood of such overdue
amounts being recovered.
Trade receivables are written off by the Group when there is no reasonable
expectation of recovery, such as when the counterparty (the agent) is known to
be going bankrupt, or into liquidation or administration. Trade receivables
will also be written off when the amount is more than materially past due.
Expected credit losses are measured using a provisioning matrix based on the
reason the trade receivable is past due or, for current debtors at risk of
recovery. The provision matrix rates are based on actual credit loss
experience over the past 12 months and adjusted, when required, to take into
account current macro-economic factors.
In the prior year the expected loss rate on balances less than 120 days gave
rise to an immaterial loss allowances provision. The expected loss rate on
balances greater than 120 days also gave rise to an immaterial loss allowances
provision.
The credit risk on liquid funds is limited as the funds are held at banks with
high credit ratings assigned by international credit rating agencies.
The following table shows an aged analysis of gross trade receivables for the
Group.
2023 2023 2023 2022
Gross Expected Credit Loss Rate Provision Net
£'000 % £'000 £'000 £'000
0 - 30 days 870 0.9% (8) 862 922
31 - 60 days 340 0.9% (3) 337 147
61 - 90 days 182 0.9% (2) 180 21
91 - 120 days 101 25.0% (25) 76 53
Over 120 days 341 67.5% (230) 111 72
________ ________ ________ ________
1,834 (268) 1,566 1,215
Impairment of Company financial assets
The Company's Group receivables represent trading balances and amounts
advanced to other Group companies with no fixed repayment dates.
The Company determines that credit risk has increased significantly when:
· there are significant actual or expected changes in the operating
results of the Group entity, including declining revenues, profitability or
liquidity management problems; or
· there are existing or forecast adverse changes to the business,
financial or economic conditions that may impact the Group entity's ability to
meet its debt obligations.
The Company has determined that there is no increased credit risk with respect
to the intercompany loan to Agents' Mutual. Management believes the strong
operational progress in the business means its future financial prospects are
less risky and it is judged to be more likely now to generate future profits
to allow it to repay the loan than before. As such the expected credit losses
have been calculated under the 12-month expected credit losses methodology.
The Company has determined that there is increased credit risk with respect to
the intercompany loan to Glanty Ltd as it is currently loss making and
management believes there is a risk in its ability to generate future profits
to allow it to repay the loan. As such the expected credit losses have been
calculated under the lifetime expected credit losses methodology.
Following an impairment review as at 31 January 2023 the intercompany balances
are as follows:
Loan Receivable from Agent's Mutual Loan Receivable Total
from Glanty Ltd
2023 2023 2023
£'000 £'000 £'000
Gross Balance as at 31 Jan 2022 53,374 1,355 54,729
Provision (10,359) (556) (10,915)
_________ _________ _________
Net Balance as at 31 Jan 2022 (restated) 43,015 799 43,814
Gross Balance as at 31 Jan 2023 54,923 1,426 56,349
Provision (6,582) (1,420) (8,002)
_________ _________ _________
Balance as at 31 January 2023 48,341 6 48,347
Impairment reversal of loan receivable from Agents' Mutual
The weighting of the scenarios applied in the expected credit loss provision
reflects the position and prospects of the individual companies. Agents'
Mutual delivered an after-tax profit in the year to 31 January 2023 of £3.1m
(2022: after tax profit of £1.2m). The reversal of impairment for the Agents'
Mutual provision of £3.8m (2022: reversal of £0.5m) is a result of increased
profitability and assessment of future repayment.
Impairment of loan receivable from Glanty
Glanty is currently loss making, the assessment of future repayment is lower
than envisaged at acquisition, this has resulted in an impairment charge in
the year of £0.9m against the Glanty receivable (2022: impairment of £0.6m).
The net increase in the provision of £2.9m is included within the Company's
profit for the year, however it is fully eliminated on Consolidation and has
no impact on the Group's reported financial performance for the year or
financial position at the balance sheet date.
Liquidity risk
Liquidity risk arises from the Group's management of working capital. It is
the risk that the Group will encounter difficulty in meeting its financial
obligations as they fall due.
In order to maintain liquidity to ensure that sufficient funds are available
for ongoing operations and future developments, the Group monitors forecast
cash inflows and outflows on a monthly basis.
The following is an analysis of the maturities of the financial liabilities in
the Statement of Financial Position:
Carrying amount 6 months or less 6-12 months 1 year or more
£'000 £'000 £'000 £'000
2023
Trade and other payables 928 928 - -
Accrued expenses 2,236 2,236 - -
Lease liabilities 924 278 282 364
4,088 3,442 282 364
Carrying amount 6 months or less 6-12 months 1 year
or more
£'000 £'000 £'000 £'000
2022 (restated)
Trade and other payables 1,031 1,031 - -
Accrued expenses 2,235 2,235 - -
Lease liabilities 658 214 207 237
________ ________ ________ ________
3,924 3,480 207 237
All financial liabilities are denominated in Sterling.
Capital risk management
Management considers capital to be the carrying amount of equity. The Group
manages its capital to ensure its obligations are adequately provided for,
while maximising the return to shareholders through the effective management
of its resources.
The Group's objective when managing capital is to safeguard its ability to
continue as a going concern. The Group meets its objective by aiming to
achieve growth which will generate regular and increasing returns to its
shareholders. The principal policies in this regard relate to increasing the
number of paying advertiser customers whilst managing costs, in particular
discretionary costs, to available resources.
The Group deposits cash at bank, which is included in cash and cash
equivalents, with a number of separate financial institutions with appropriate
credit ratings.
Fair values of financial assets and liabilities
The fair value of the Group's financial assets and liabilities are not
materially different from their book values and therefore the Directors
consider no hierarchical analysis is necessary.
23. Provisions
Social security on share options granted
£'000
At 1 February 2021 880
Exercise of share options (40)
Revaluation of employers' social security liability 95
_______
At 31 January 2022 935
Exercise of share options (10)
Revaluation of employers' social security liability (212)
_______
At 31 January 2023 713
2023 2022
£'000 £'000
Disclosed as:
Current liability 639 732
Non-current liability 74 203
_______ _______
713 935
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 26 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 13.8% (2022: 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,
therefore it is not possible to determine the exact timing of outflows.
24. Deferred Consideration
During 2022 the purchase agreement of Glanty Limited (OnTheMarket Software)
included 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 received 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. As at 31 January 2022 a balance
of £75k was recognised on the balance sheet in respect of R&D tax
credits.
The earnout targets are based on Glanty Limited'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.
Following a review of future forecasts it has been determined that no further
provision is required given that the criteria above is not met.
25. Share-based payments
Agent recruitment shares
The Group issued agent recruitment shares during the year. 916,470 ordinary
shares were issued (2022: 464,224). Fair value was determined in accordance
with the accounting policy set out in note 2.19 The weighted average fair
value of the shares granted was £0.76 (2022: £0.78).
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 2023, as set out below.
Grant date of option Expiry Option exercise per share Fair value 2023
£ £ Number
Granted 15 September 2017 2027 nil 1.48 5,850,439
Granted 19 September 2017 2027 nil 1.48 86,360
Granted 10 October 2017 2027 nil 1.48 -
Granted 20 November 2018 2028 1.65 0.69 382,293
Granted 4 December 2018 2028 nil 1.13 42,424
Granted 10 September 2020 2030 nil 0.77 -
Granted 10 September 2020 2030 nil 0.65 -
Granted 14 December 2020 2030 nil 0.93 379,249
Granted 19 March 2021 2031 0.95 0.62 212,133
Granted 24 August 2021 2031 nil 0.62 822,412
Granted 21 March 2022 2032 0.88 0.56 109,327
Granted 21 March 2022 2032 0.86 0.62 21,195
Granted 20 June 2022 2032 nil 0.87 166,302
Granted 20 June 2022 2032 nil 0.87 166,303
Granted 14 July 2022 2032 0.69 0.40 810,224
Granted 1 December 2022 2032 nil 0.44 1,119,998
Outstanding at 31 January 2023 10,168,659
2023 Management Incentive Plan Employee Share Scheme Company Share Option Plan Deferred Bonus Scheme SAYE Total
Opening 1 February 2022 5,832,939 2,104,072 634,562 - - 8,571,573
Granted during the year - 1,119,998 130,522 429,467 821,928 2,501,915
Forfeited during the year - (671,658) (40,136) (96,862) (11,704) (820,360)
Exercised during the year - (84,469) - - - (84,469)
Closing 31 January 2023 5,832,939 2,467,943 724,948 332,605 810,224 10,168,659
Exercisable 4,446,389 17,500 382,293 - - 4,846,182
2022 Management Incentive Plan Employee Share Scheme Company Share Option Plan Deferred Bonus Scheme SAYE Total
Opening 1 February 2021 5,892,939 1,228,972 572,219 - - 7,694,130
Granted during the year - 1,089,308 251,669 - - 1,340,977
Forfeited during the year - - (189,326) - - (189,326)
Exercised during the year (60,000) (214,208) - - - (274,208)
Closing 31 January 2022 5,832,939 2,104,072 634,562 - - 8,571,573
Exercisable 4,446,389 230,753 422,371 - - 5,099,513
The value of employee services provided of £522k (2022: £372k) has been
charged to the income statement.
Management Incentive Scheme
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 nil options were exercised
(2022: 60,000).
Employee Share Scheme
These share options expire 10 years after the date of grant. During the year
84,469 options were exercised. The weighted average share price at exercise
was £0.70. All options granted prior to 1 February 2020 are exercisable at 31
January 2023. Share options granted under this scheme have a nil exercise
price. Details of the options outstanding as at 31 January 2023 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;
· 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; and
· 1,199,998 options were granted on 1 December 2022 and vest on 1
December 2025.
Company Share Option Plan (CSOP)
These share options expire 10 years after the date of grant. Share options
granted under this scheme have an exercise price of £1.65, £0.95, £0.88
& £0.86 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.
Deferred Bonus Share Plan (DBP)
On 21 June 2022 the company awarded the 429,467 options under the Company's
Deferred Benefit Plan. The options vest in two equal tranches on 20 June 2024
and 20 June 2025, before exercise is possible. All the options have a nil
exercise price and require continued employment, subject to exceptions. The
fair value of awards granted under the Deferred Bonus Share Plan are equal to
the share price on the grant date.
Save as You Earn Scheme (SAYE Scheme)
The Company launched an SAYE scheme offering a saving plan over 3 years for
all eligible employees. Employees were invited to subscribe for options
("Options") over the Company's ordinary shares of £0.002 each in the Company
("Ordinary Shares") which have been granted on 14 July 2022 at an exercise
price of £0.692 in accordance with the terms of the SAYE Scheme. This
represents a discount of 20% from the mid-market closing price for an Ordinary
Share on 17 June 2022, the business date prior to the invitation made to all
eligible employees on 20 June 2022.
A total of 81 employees have participated in the scheme and 821,928 Options
have been granted.
Fair value of Share options granted
Share Scheme Grant Date Options Share Price at grant date (£) Exercise Price (£) Expected Volatility Dividend Yield Risk-free interest rate Fair value derived per option (£)
CSOP 21/03/2022 109,327 0.88 0.88 40% 0% 1.35% 0.56
CSOP 21/03/2022 21,195 0.86 0.86 40% 0% 1.35% 0.62
DBP 21/06/2022 429,467 0.87 nil n/a n/a n/a 0.87
SAYE 14/07/2022 623,208 0.85 0.69 54% 0% 2.1% 0.40
SAYE 14/07/2022 198,720 0.85 0.69 54% 0% 2.1% 0.40
Employee 01/12/2022 1,119,998 0.73 nil 40% 0% 3.2% 0.44
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 13.8% (2022: 15.05%).
The following have been expensed in the consolidated income statement:
2023 2022
£'000 £'000
Share-based payment charge 522 372
Employer's social security on share options (212) 95
_______ _______
310 467
26. Share capital
Share capital issued and fully paid 2023 2022
No. No.
Opening Ordinary shares of £0.002 each 74,549,165 72,445,046
Issued in the year 1,166,461 2,104,119
_______ _______
Closing Ordinary shares of £0.002 each 75,715,626 74,549,165
2023 2022
£'000 £'000
Ordinary shares of £0.002 each 151 149
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.
Total
Balance as at 1 February 2022 74,549,165
Issued in respect of employee share schemes 249,991
Issued to agents 916,470
Balance as at 31 January 2023 75,715,626
Share option scheme
At the year end, there were a total of 10,168,659 (2022: 8,571,573) share
options under the Company's share option plans (note 25), 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 2023, 249,991 options were
settled through market purchases by the Employee Benefit Trust (2022: nil
options).
27. Share Premium cancellation
A General meeting was held on the 26 May 2022 at which shareholder approval
for a proposed cancellation of capital was received. Following approval from
shareholders and the courts, on 23 July 2022 the cancellation of the Company's
share premium account became effective. This created additional distributable
reserves of £44m within the Company.
The cancellation has the effect of creating distributable reserves and,
subject to the financial performance of the Company and the CA 2006 provides
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. No distributions have currently been made or proposed.
28. Retirement benefit schemes
Defined contribution schemes
The Group operates defined contribution pension schemes. The assets of the
schemes are held separately from those of the Group in independently
administered funds. The cost charged represents contributions payable by the
Group to the funds. At the balance sheet date contributions of £30k (2022:
£28k) were outstanding.
2023 2022
£'000 £'000
Contributions payable by the Group for the year 167 136
29. Prior Period Restatement
As part of the Group's admission to the AIM market in prior years, an equity
incentivisation scheme was introduced to encourage agents to join as
shareholders in return for committing to long-term paying contracts. By a
resolution dated 22 December 2017 the Directors were 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. This expired in
December 2022. Shares were 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.
Following an internal review of agents that were entitled to shares as part of
long-term listing agreements, it was identified that an acceleration of the
agent recruitment charge was required in prior periods due to incomplete agent
charges, incorrect fair values used at the grant date and incorrect
classification of the charge in line with the Group's accounting policies.
Impact on prior periods
Group
The restatement corrects the combined errors for two types of agent
recruitment share arrangements. One type impacts prepayments, administrative
costs and other reserves. The other type impacts accruals, revenue and other
reserves. The restatement is set out in the reconciliations below.
Consequently, the consolidated statement of cashflows has been restated as
follows: Profit for the year after income tax reduced from £108k to £(213)k
and Agent recruitment expense increased from £1,985k to £2,306k.
As a result of the changes to the income statement for the period ended 31
January 2022, basic EPS reduced from 0.15p to (0.29)p. Diluted EPS also
reduced to (0.29)p as the potential ordinary shares are antidilutive.
Consolidated Statement of Financial Position extract
Reported as at 31 January 2021 Total Adjustments As at 31 January 2021 (restated)
£000 £000 £000
Non-current assets 7,377 - 7,377
Trade and other receivables 4,793 449 5,242
Other current assets 10,719 - 10,719
Total current assets 15,512 449 15,961
Total assets 22,889 449 23,338
Trade and other payables (4,934) (282) (5,216)
Other current liabilities (795) - (795)
Total Current Liabilities (5,729) (282) (6,011)
Non-current liabilities (260) - (260)
Total Liabilities (5,989) (282) (6,271)
Net Assets 16,900 167 17,067
Other equity 47,527 - 47,527
Other reserves 782 647 1,429
Retained earnings (31,409) (480) (31,889)
Total Equity 16,900 167 17,067
Reported as at 31 January 2022 Total Adjustments As at 31 January 2022 (restated)
£000 £000 £000
Non-current assets 12,841 - 12,841
Trade and Other receivables 5,085 290 5,375
Other current assets 8,412 - 8,412
Total current assets 13,497 290 13,787
Total assets 26,338 290 26,628
Trade and other payables (5,580) (300) (5,880)
Other current liabilities (1,165) - (1,165)
Total Current Liabilities (6,745) (300) (7,045)
Non-current liabilities (916) - (916)
Total Liabilities (7,661) (300) (7,961)
Net Assets 18,677 (10) 18,667
Other equity 45,133 - 45,133
Other reserves 4,473 791 5,264
Retained earnings (30,929) (801) (31,730)
Total Equity 18,677 (10) 18,667
Consolidated Income Statement extract
Reported as at 31 January 2022 Total Adjustments As at 31 January 2022 (restated)
£000 £000 £000
Revenue 30,443 (224) 30,219
Administration expenses (31,088) * (97) (31,185) **
________ ________ ________
Operating loss (645) (321) (966)
Finance income 33 - 33
Finance expense (11) - (11)
Share of loss of associate (122) - (122)
Fair value loss on step acquisition (183) - (183)
________ ________ ________
Loss before income tax (928) (321) (1,249)
Income tax 1,036 - 1,036
________ ________ ________
Profit / (loss) for the year attributable to owners of the parent 108 (321) (213)
Total Comprehensive income/(loss) for the year 108 (321) (213)
* Administration expense £28,140k, adjusting items £2,948k, total £31,088k.
** Administration expense £28,120k, amortisation £2,460k & depreciation
£605k, total £31,185k.
Company
As the shares are issued by the Company for the benefit of its subsidiary,
Agents' Mutual Limited, the restatement impacts Amounts due from Group
undertakings and Other reserves. The restatement is set out in the
reconciliations below.
Company Statement of Financial Position extract
Reported as at 31 January 2021 Total Adjustments As at 31 January 2021 (restated)
£000 £000 £000
Non-current assets 851 - 851
Trade and other receivables 43,011 647 43,658
Other current assets 6,189 - 6,189
Total current assets 49,200 647 49,847
Total assets 50,051 647 50,698
Total liabilities (74) - (74)
Net assets 49,977 647 50,624
Other Equity 47,598 47,598
Other Reserves 782 647 1,429
Retained Earnings 1,597 1,597
Total Equity 49,977 647 50,624
Reported as at 31 January 2022 Total Adjustments As at 31 January 2022 (restated)
£000 £000 £000
Non-current assets 2,814 - 2,814
Trade and other receivables 43,235 766 44,001
Other current assets 5,681 - 5,681
Total assets 48,916 766 49,682
Total assets 51,730 766 52,496
Total liabilities (97) - (97)
Net assets 51,633 766 52,399
Other Equity 45,133 - 45,133
Other Reserves 4,614 790 5,404
Retained Earnings 1,886 (24) 1,862
Total Equity 51,633 766 52,399
30. Controlling parties
The Directors do not consider there to be a single immediate or ultimate
controlling party (2022: none).
31. Related party relationships and transactions
Subsidiaries
Interests in subsidiaries are set out in note 17.
Key management personnel
Disclosures relating to key management personnel are set out in note 8.
Other related party transactions
There were no further related party transactions during the year.
32. Post balance sheet events
Agent share lock in expiry
On 16 February 2023 the "Lock-in Arrangements" whereby agents who had agreed
to retain Ordinary Shares for at least 5 years from the date on which
OnTheMarket shares were admitted to trading on AIM expired. A total of
3,130,675 shares were traded; this number includes the 1,386,550 share options
exercised by Morgan Ross detailed below.
Employee Share Scheme
On 16 February 2023 Morgan Ross exercised options over 1,386,550 ordinary
shares of 0.2 pence each pursuant to an exercise of nil-cost options.
On 3 March 2023 85,000 ordinary shares of 0.2 pence each were issued pursuant
to an exercise of nil-cost options by a former employee.
On 15 May 2023 100,000 ordinary shares of 0.2 pence each were issued pursuant
to an exercise of nil-cost options by a former employee.
On 16 May 2023 17,500 ordinary shares of 0.2 pence each were issued pursuant
to an exercise of nil-cost options by a former employee.
On 19 June 2023 2,528,205 ordinary shares of 0.2 pence each were issued
pursuant to an exercise of nil-cost options by a former employee.
Agent Shares
On 26 April 2023 257,774 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.
EBT share purchase programme
On 3 July 2023 the Board submitted a letter of wishes to the OnTheMarket
Employee Benefit Trust (EBT"). The letter requested that the trustees commence
a market purchase programme of ordinary shares of 0.2 pence each in
OnTheMarket plc (Ordinary Shares) with effect from 10 July 2023. The Company
has made funds available to the EBT to facilitate Ordinary Share purchases.
Such Ordinary Shares repurchased will be used to satisfy existing and future
share-based compensation awards.
Intertrust Employee Benefit Trustee Limited, as trustee of the EBT, will make
market purchases which will be limited in value terms to an aggregate of
£500,000 (exclusive of costs) in total under the purchase programme. The
programme will remain in operation until 30 September 2023, unless extended.
There are no other post balance sheet events.
ENDS
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