Onthehouse.com.au seeks to sell unprofitable consumer website after strategic review

It conclusions reached by the board have been touted as avoiding the need to raise capital and dilute the current shareholding, or obtain debt funding.

The board told shareholders:

1. Consumer Online (COD) and Real Estate Solutions (RES) are distinct businesses and there is no compelling inter-dependency between them;

2. As a consequence they need to be managed independently with a focus on an individual strategy for each business;

3. Sharing of data will be by way of license agreements;

4. The new COD subsidiary will have its own Board chaired by onthehouse’s largest shareholder Michael Dempsey and will include current Board member Lisa Hickson;

5. RES generates approximately $9 million in free cash per year and is able to self-fund implementation of its strategy;

6. COD consumes approximately $7 million in cash per year that is currently being funded by the cash generated by RES;

It said both businesses had "significant intrinsic value that is not currently recognised by the market."

Its COD will be developed in a non-listed JV vehicle in which OTH Holdings would maintain an interest, of between 30% and 49%.

The board anticipates JV partners could be one or several of the following:

1. Like businesses that can add experience, technology or other industry assets etc. to the venture; and/or,

2. Venture capital investors or other funders.

"The board believes significant value can be created in this structure without the responsibility of funding the COD business.

"The search for appropriate JV partners has commenced and OTH is currently in discussion with a number of parties," chairman Tony Scotton told shareholders.

The Board expects that the separation strategy will take six months to execute. 

The new company structure, allowing the RES business to develop its potential without the constraints of funding COD, would see the listed company having a stable, profitable core business with a significant investment in the "potential upside of the COD business."

Over recent times activist investors have appeared on its share register and then its board following the abrupt mid-2014 departure of its founding shareholder and chief executive Michael Fredericks. Chris Meehan has been named chief executive officer having been acting chief executive since February. Other recent appointments include Emily Santucci as chief financial officer and Andy Antonini as chief operating officer.

Michael Dempsey who pocketed about $150 million from the sale of Ezidebit, took an 8 per cent stake in onthehouse in December last year.

In 2013 it billed itself as Australia’s third largest real estate portal when it reached one million unique browsers per month. It is now more than three million.  

onthehouse.com.au provides free access to 13.6 million Australian property data sets to its online and mobile visitors, including live sales and rental listings.

But the Consumer Online consumes about $7 million in cash annually triggering recent pre-tax impairment charges of $10.5 million, which led to a $9.1 million half-yearly loss for the company.

The $9.1 million loss for the six months to 31 December 2014 came after reporting a $587,000 profit the year before.

Disregarding the one-off costs, onthehouse posted a $93,000 underlying profit – an 86 per cent drop on the previous year.

onthehouse's total revenue sits at around $13 million - the group’s Real Estate Solutions division at $10.7 million.

The group’s Consumer Online and Data Analytics saw revenue at $2.3 million.