OnTheMarket converts just 1,000 branches from free to paid deals

Figures released from OnTheMarket this morning suggest that its conversion programme for agents shifting from free deals to paid membership is making slow progress.

This conversion is regarded as being critical for the long-term profitability of OTM.

Its statement this morning says: “A total of almost 1,000 branches have been signed under paying contracts since conversion commenced, with an average ARPA [revenue from each branch] of £337 per month. Of these new contracts, 57 per cent are long-term commitments of three or five years with shares and the majority of the balance are on one year contracts with an option to convert to a longer-term contract with shares.”

It adds: “The ongoing growth in paying contracts is key to the group's transition into profitability. The conversion process is using a range of offers which, for selected agents, include long-term agreements which will be accompanied by share issuance. The Directors believe that attractive equity incentives can be provided to new property advertisers joining OnTheMarket.com whilst at the same time enhancing value substantially for existing shareholders. Such equity issuance enables agents to support the only major agent-backed portal with a view to creating a fairly-priced alternative to Rightmove and Zoopla and to share in any increase in the value of the Company. The shares issued to agents are typically subject to lock-in arrangements to ensure that new shareholders’ interests are closely aligned with those of all other agent investors and with the success of the Group."

In the rest of this morning’s figures, OTM also reports that its overall membership stays around the 12,500 mark that it has been reporting for several months. 

The trading statement says: “As at 31 January and 31 May 2019, OnTheMarket had signed listing agreements with UK estate and letting agents with more than 12,500 offices. This reflects continued recruitment of new agents on free trials or straight to paying contracts, offset by agents who have been removed from the portal following the end of their free trial periods.”

Losses before tax increases sizeably to £14,494,000 in 2018 against £12,070,000 in 2017; meanwhile administrative costs rocketed to £13,639,000 last year, up from £3,887,000 the year before.

The portal as £15.7m cash balance at the end of January 2019.

Other information released by the portal today states: 

- as of June 3, the portal displayed over 650,000 UK residential property listings, some 65 per cent of Rightmove’s total and 83 per cent of Zoopla’s;

- in May, a record 25.4m visits were made to the portal, up eight per cent from the previous record in January 2019, and again last month more than 1m people were using its property alerts service and over 100m instant alert emails were sent;

- in May leads per UK residential property advertiser rose to 102 per month;

- OTM says it provides an average 17 leads per month per £100; 

- preparatory work to extend the portal to new home developers has begun.

The statement also included these comments from Ian Springett, chief executive officer of OTM: “The Group's strategy to build strong network effects and deliver increasing value to our agents is working. We are established as one of the leading portals and our progress to date has given us confidence that we can continue to build on this strong start and develop a market-leading, agent-backed alternative to Rightmove and Zoopla. 

"We are benefitting from growing agent support and are strongly positioned to continue our growth in agent offices listing and in agent firms converting to becoming investors alongside long-term paying contracts. The Board believes that with the continued support of agents, we are well placed to deliver long-term value to shareholders."