ii view: Double-digit growth for Rightmove

Property portal Rightmove sees profits grow and record site visits, but estate agent numbers fall.

Half-year results to 30 June 2019

• Revenue up 10% to £143.9 million
• Operating profit up 10% to £108.2 million
• Half-year dividend up 12% to 2.8p per share

Chief executive Peter Brooks-Johnson said:

"Home hunters continue to turn to Rightmove first to search and research properties in the only place you can see virtually the whole of the UK market. Our restless innovation delivers the fastest and easiest way to 'find your happy' from the 1.1 million UK residential properties on Rightmove."

ii round-up:

Founded in 2000 by the top four corporate estate agencies at the time: Countrywide, Connells, Halifax and Royal and Sun Alliance, today Rightmove (LSE:RMV) is the UK's largest property portal. 

Its paying customers include estate agents, letting agents and new home developers. Its websites had over 1.5 billion visits across in 2018, and for this first half it attracted a record 845 million site visits. 

Rightmove reported broadly positive interim results. Average Revenue Per Advertiser (ARPA) for both its Agency and New Homes businesses rose, with the increase in overall revenue and earnings per share at the upper end of forecasts. The number of new home developments is up 10% since the start of the year at 3,441. 

Less favourably, the number of agency offices fell by 3% to 16,768, reflecting a slowing in housing market activity since the start of the year.

The share price was up less than 1% in afternoon UK stock market trading. 

On the strategic front, and bringing more agent services in house, it has acquired Van Mildert, a tenant referencing and rent guarantee insurance company. 

ii view:

Rightmove retains first mover advantage, and the popularity of its website is proving difficult for competitors to catch, let alone overtake. Advertising for estate agents has shifted increasingly online, with ad fees and not housing sale numbers a key measure of success. Predictable cash flows reflect the subscription nature of the business coupled with low working capital requirements. 

For investors, and as is often the case with online businesses, the correct valuation of the business is a tough call. A one-year forward price/earnings (PE) ratio broadly in line with the 10-year average offers little guidance. Housing market sentiment and the outcome of Brexit will dictate near-term prospects. 

Positives: 

• Strong market position
• Paying dividends

Negatives:

• Brexit and its possible outcomes create uncertainty for home buyers
• Dependency on technology and internal IT systems poses cyber security risk

The average rating of stock market analysts:

Weak hold