Property portal OnTheMarket (OTMP:AIM) reported a return to profitability as the housing market continued to recover.
The company reported a £0.7 million pre-tax profit for the six months to 31 July, compared to a £7 million pre-tax loss in the same period a year ago. Revenue rose 28% to £10.2 million.
The firm said it managed to swing to profitability thanks to cost-cutting measures and conserving cash, in particular reducing its marketing spend by 67% to £2.2 million.
Period end net-cash stood at £9.8 million, which the firm said has since risen to £10.3 million as at 30 September.
In terms of the company’s key performance indicators, monthly ARPA (average revenue per advertiser) increased by 15% year-on-year to £124 during the half, and total advertiser numbers rose 10% to 13,757.
NEW HOMES GROWTH
Notably, the firm also carried 1,512 new homes listings at 31 July, having only entered the sector in September last year. This area is considered as a promising growth opportunity for firms like OnTheMarket.
By way of an indication of upside potential in this area, Shore Capital analyst Roddy Davidson pointed to Rightmove(RMV), which generated revenues of £56 million (up 20% year-on-year) from new homes listings during 2019 and £17 million during the first half of this year, ‘despite the almost total market shutdown during calendar Q2.’
OnTheMarket said that post period end it has continued to see growth in new home development listings with the addition of Taylor Wimpey (TW.) developments to the portal, joining other leading housebuilders including Barratt Developments (BDEV), Persimmon (PSN) and Bellway (BWY), adding that seven of the 10 largest housebuilders now list at OnTheMarket.
Going forward, assuming the UK housing market remains open and active, OnTheMarket said it expects revenues and costs to increase in the second half year as it invests to ‘enhance service and increase value to customers’, and therefore expects to achieve a ‘broadly breakeven’ adjusted operating profit position for the full year.
BROKER VIEW
Shore Capital’s Davidson said he was ‘encouraged’ by OnTheMarket’s ‘resilient performance, robust financial position and highly proactive approach’ to the challenges created by Covid-19, as well as the ‘strong momentum achieved across several metrics in recent months.’
He added, ‘More broadly, we believe that OnTheMarket’s increasingly compelling and comprehensive offering, potential within the new homes sector, commitment to fair pricing, unique ability to offer equity and the presence of an experienced and entrepreneurial management team all bode well for the future.
‘Notwithstanding ongoing uncertainty around the outlook for the UK property market, we see considerable scope for medium-term organic growth and share price upside.’
Shares in OnTheMarket stayed virtually flat on Tuesday at 101.35p although the stock had risen from 87.5p levels since the start of October. The share price has more than tripled from 30p lows in April.
