WEEKLY NEWS ROUNDUP – 22/10/2021
A roundup of the week’s top property and proptech news stories in partnership with Proptech-X
- OnTheMarket CEO Jason Tebb leads profitability charge
- Rightmove reports bumper housing market, but for how long?
- What does the new metaverse mean for real estate?
- Millions in back payment may be due to workers. Is it the end for online agents?
OnTheMarket CEO Jason Tebb leads profitability charge
Often it is the case that CEOs joining listed companies have time to work their way in. Jason Tebb, however, did not have that luxury when taking the reins of OnTheMarket in January 2021, following the departure of his predecessor Ian Springett, who left the post in March 2020.
Against a backdrop of the pandemic, lockdowns, and widespread uncertainty across the UK real estate sector, the appointment of Jason Tebb – who at 45 years old seemed a young pair of hands to take on the task – has turned out to be an extremely successful one.
Maybe it is his agency background and knowledge of how agents think, or his tireless agenda of roundhouses and listening to the agents. Whatever it is, OntheMarket has definitely benefitted, moving onwards and upwards in a very short period of time.
It is clear that innovation and collaboration are very much on Mr Tebb’s agenda as he, unlike his predecessor, seems to listen and adapt his strategy.
When he was announced as the new CEO, Jason Tebb said that the business has “solid foundations with strong operational momentum, and there are clear opportunities for growth by working with the estate agent community to develop our differentiated portal offering; build a profitable, sustainable, and technology-led business; and deliver value for our stakeholders.”
It would seem with the half-year results in, he has managed to deliver on these words. The details of the interim half-year results are set out below, courtesy of the Vox Markets Podcast.
· Revenue and ARPA up 46% and 52% respectively. Adjusting for COVID-19 H1 20/21 related customer support discounts of £1.8m, revenue and ARPA growth still strong at 24% and 28% respectively.
· Adjusted operating profit increased 163% to £2.1m, despite increases of 105% in marketing expenditure, to £4.5m, and 28% in staff costs, to £4.7m.
· Profit after tax of £0.5m, reduced by non-recurring costs arising from the Glanty acquisition, the repayment of government grants and an increase in non-cash share-based agent recruitment charges.
· Strong balance sheet retained with cash generated from operating activities of £2.6m after repaying CJRS loans of £0.4m (H1 20/21: £2.9m, after receiving CJRS loans of £0.3m). Period-end net cash was £9.9m, with no borrowings (31 January 2021: £10.7m before deferred creditor payments of £0.4m).
· Average monthly advertisers listed were down 5% period on period, reflecting a reduction in H2 20/21 as agents on long-term free of charge contracts were asked to migrate to paying contracts. Since 31 January 2021, agency branches listing have risen 5% and new homes developments listed by 6%.
· Increased branches listed underpaying contracts, up 3% since 31 January 2021 to 10,190 at 31 July 2021.
· Continued strong operational performance, with traffic and average monthly leads per advertiser up versus both H1 and H2 20/21.
· Significant progress in strategy to build a differentiated, technology-enabled property business, with the acquisition of Glanty, new commercial partnerships and new website functionality and lead types.
Rightmove reports bumper housing market, but for how long?
For two decades I have read with heightened interest the detailed analyses put forth by Rightmove, the UK’s largest real estate portal, which has a huge amount of data given the volume of inventory processed on the site.
Despite the vast wealth of data, it’s always disappointing that Rightmove’s observations are a retrospective review, rather than a prophetic look forward. Regardless, the overview can make for an interesting read.
For those unfamiliar with its overview, it is freely available at the base of the Rightmove landing page each month in the House Price Index section. I’m intrigued to see if interest rates rise and if the steam does come out of the housing market.
The Rightmove index for October seems to be betting the other way.
What does the new metaverse mean for real estate?
Increasingly the word metaverse is entering our daily vernacular. The term refers to the notion of people living in a digital hinterland, an artificially created virtual reality that goes well beyond what we currently think of the internet. But is it a passing fad or will it be with us as we move forward?
Some of the emerging property technologies, or technologies that can be applied to property in a new way, are already charting this terrain. Augmented reality and virtual reality, for example, are very much in this space and have been for some time
We’ve also seen past attempts at virtual worlds, with property playing an interesting role. Second Life is an online world populated by avatars where, in the mid-naughties, a Chinese real estate developer bought and sold virtual properties, netting themself a million dollars in real currency. And they weren’t the only person to do so.
Recently, Facebook announced that it is looking to employ 10,000 people to help create a metaverse of its own. Suddenly the alarm bells start to ring in my mind. A paradise for gamers should be a universe open to all and not owned by any single gatekeeping power.
Speaking to The Verge, CEO Mark Zuckerberg said the metaverse is “going to be a big focus, and I think that this is just going to be a big part of the next chapter for the way that the internet evolves after the mobile internet.”
Strangely, with regards to the new hires, they are to be from Europe, specifically, and not the UK. Though, of course, we do have Nick Clegg heading up Facebook’s global affairs, so maybe he will put in a word for our talented techies.
The commercial applications of a metaverse are vast, particularly in real estate, with users able to don headsets and be totally immersed. This could potentially speed the planning, building, selling, leasing and management of buildings. Feasibly it could be applied to any aspect of the property process, that is if Facebook doesn’t gatekeep in its typical fashion.
But Facebook won’t be the only company at it, there is competition in this space. Other tech giants will likely have their eyes on this potentially lucrative gravy train.
We’ll just have to wait and see who does it best.
Millions in back payment may be due to workers. Is it the end for online agents?
There has been much written over the years about online agents, especially Purplebricks, the largest agent by market share. Many online companies have shuttered, and although technology would seem to be the way forward, online agents only hold around 7% of the property market share in the UK.
The big news rocking this sector though is that a legal outfit Contractors For Justice (C4J), has seen the opportunity surrounding the HMRC’s IR35 contractor regulation debacle. And is looking to put a class action lawsuit together for all the workers past and present who work for online agents but are not directly employed.
It is felt that if the action gets to court millions of pounds will need to be refunded to people who thought they were not employees, but now find they were.
These workers will inevitably look to their employer to pay the monies owed to them, and of course, there will potentially be a huge amount due to HMRC plus interest. As yet nothing has been decided one way or the other, but it is telling that after many years Purplebricks pivoted its model from having Local Property Experts who ran their own limited companies – yet solely worked for Purplebricks – to a normal PAYE employed model.
Of all the onliners, only Purplebricks has made a profit; £6.8 million for the current accounting period. Having made losses of £19.2million, £54.9million, £30.08million, and £3.01million in the last four years, totalling a £107.9 million loss.
The significance of an Uber-style upset, where it is ruled that setting up a limited company does not let a big corporation escape the burden of the HMRC requirements, will be a blow to all of the cash strapped onliners who rely upon continued rounds of investment to keep them afloat.
At present, the Purplebricks share price on the Alternative Listed Market is 57.5p, down from 525p in 2017, and even down from its original listing price of 95.5p.
It may have around £70 million in its war chest, but if it gets stung with a huge multi-million bill, and has to now pay for its newly recruited full-time sales force, things will be tight.
Add into this mix it is now refunding fees if it does not sell property, and its annual multi-million media spend to keep it in the public eye, its financial runway could be eaten through in less than 19 months.
The bad news for the other onliners, like YOPA, Strike, Doorsteps, etc., who may or may not have a similar gig economy model, is if the class action is a win for workers, do they have sufficient funds to cover any deficit? If the answer is no, and they also now need to pivot and employ everyone on a PAYE model, would now be a more prudent time to close the online businesses down?
The good news for the solicitors is they are on a great gravy train, asking for £250 upfront from people who feel they may be due compensation, plus 25% of any settlement or 40% of any settlement should the action win.
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