ii view: Rightmove growing despite tough markets
Customers of this UK property advertising giant have been battling reduced transactions levels. Is the answer more advertising? We assess prospects.
26th July 2024 11:27
by Keith Bowman from interactive investor
First-half results to 30 June
- Revenue up 7% to £192 million
- Profit up 2% to £131 million
- Interim dividend up 3% to 3.7p per share
- Net cash held of £28 million, down from £39 million in late December
Chief executive Johan Svanstrom said:
"We're pleased to deliver a strong set of H1 results, and to be progressing in executing our plan to build an even more valuable digital platform for the UK property industry.
"On the back of our leading position in the market, we have exciting momentum expanding our products and innovation for consumers and partners and remain confident in Rightmove's long-term prospects."
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ii round-up:
Online property advertiser Rightmove (LSE:RMV) today reported growth in sales and profits as estate agents and new home builders renewed contracts and upgraded ad packages.
Revenue for the six months to late June rose 7% to £192 million, nudging operating profit up 2% to £132 million. An interim dividend of 3.7p per share is up from the 3.6p paid this time last year.
Shares in the FTSE 100 company, which have traded at 500-600p for much of the past two years, remained little changed in UK trading Friday having come into these latest results up almost 4% in the past year. That’s ahead of an 11% retreat for property owner and residential landlord Grainger (LSE:GRI), but behind a 24% improvement for estate agent Savills (LSE:SVS). The FTSE 100 index itself is up 7% over the last 12 months.
Property professionals, such as estate agents, lettings agents and new homes builders, pay a subscription fee to advertise their properties on Rightmove. Average Revenue Per Advertiser (ARPA) during the period rose 6% to £1,497 per month.
Customer numbers, or membership, improved to 19,061 from 18,785 late December, fuelled by growth in rental agency lettings members. New homes builders, or developer numbers dipped to 2,868 from 2,946 six months ago.
Accompanying management comments noted: “With the election now concluded, the property market looks forward to potential interest rate reductions which will further stimulate activity.”
Rightmove left its sales guidance for the current financial year to 31 December 2024 unchanged, reiterating its expectation for growth in revenue of between 7% and 9%.
ii view:
Started in the year 2000, Rightmove today employs around 800 people and is a constituent of the FTSE 100 index. Agency related sales generated its biggest slug of revenues in 2023 at 72%. New home developer demand made up a further 18%, with other businesses such as commercial property, data services, overseas listings, and third-party advertising accounting for the balance of 10%.
For investors, heightened interest rates continue to pressure mortgage affordability. The fall in housing transactions to 1 million in 2023 from 1.5 million in 2021 will have pressured customer or agency numbers, with some having failed. Time spent on its website by consumers fell to 15.4 billion minutes in 2023 from 16.3 billion the year before, while a forecast dividend yield for Rightmove of under 2% compares to over 5% for property owners and REITs Land Securities Group (LSE:LAND) and British Land Co (LSE:BLND).
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On the upside, hopes that interest rate cuts will ease the strain on the UK housing market persist. A diversity of customer types is present, from buyers and renters under agency customers to new home sales from developers. Meanwhile, Rightmove is targeting areas of growth away from its core business, including mortgages, rental services such as digitalising the process and real estate.
In all, and despite ongoing risks, the dominant market position now established by Rightmove plus high margins should continue to reassure, with the latest update likely to please fans of the leading property advertiser.
Positives:
- Strong market position
- Diversity of customers
Negatives:
- Uncertain economic outlook
- Costs generally remain elevated
The average rating of stock market analysts:
Strong hold
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