OnTheMarket’s low cost proposition brought into focus by pandemic

For property search portal OnTheMarket PLC (LON:OTMP), the current financial year was to be an inflexion point.

Prior to coronavirus, it was slated to break-even and ready to challenge the incumbents Rightmove and Zoopla.

The traffic to the site was up 49% year on year and lead generation had grown to a point where it was more than punching its weight against the big boys.

While chief executive Clive Beattie admits the lockdown has “put the brakes on”, it could turn out to be a catalyst for change that will ultimately benefit OnTheMarket.

A groundswell of negativity towards Rightmoves pricing has only been amplified by the outbreak, which has seen estate agents struggle financially.

On that basis, OnTheMarkets low-cost proposition has resonance and is therefore backed by its agents.

“It has really crystallised in our customers minds the differences in the portals,” confirms Clive Beattie, the companys chief financial officer (CFO) and acting chief executive.

Set up in 2015 to challenge the current duopoly (one might even say monopoly with the seeming retreat of Zoopla), the business was conceived as a mutual whereby the estate agents would have a stake in the group.

While it is now listed on the stock market, it is 65%-owned by more than 3,000 agent shareholders operating around 6,000 branches.

And like any growth business, it has had its share of setbacks as anyone who has followed the OnTheMarket story will know.

That said, the results for January 31, which were published last week, reveal a company at a watershed moment.

Striking from a commercial viewpoint was the 49% rise in traffic to 237mln views and the 75% rise in leads per advertiser to 96.

That latter figure had risen to 126 by the end of January, which at that point was a record month for site activity at 30mln views.

Beattie is currently on a virtual investor roadshow and expects to receive a lot of questions over cash burn.

The results revealed the company had £8.8mln in the bank, excluding deferred creditor payments of £2.3mln.

Based on last years performance, that would provide the business with just over a years funding, although it should be noted most of the cash burn was in the first half and had reduced by the year-end.

However, Beattie and the team have some levers they can pull, have trimmed costs and used the governments furlough scheme.

Weathering the storm

So they are confident they can weather the COVID-19 storm.

One of those levers – and it pulled on it early – was marketing spend.

And it has been educational to see the performance of the business without hundreds of thousands a month being invested in attracting would-be buyers to the site.

Interest has come back since the lifting of restrictions around house viewings on May 11, Beattie reports – and with a vengeance.

“Last week was a bumper week for leads and included a 20% rise on pre-COVID levels,” he reveals.

“So, to achieve that level on a very limited advertising spend means we do have a site now that is engaging the consumer and the consumer is returning. The portal is now of a scale and functioning as a portal should.”

Indeed, scale is everything as is being able to offer and demonstrate value in the form of leads.

Key to the ongoing success of OnTheMarket will be its ability to convert estate agents on free or discounted rates toRead More – Source

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