ii view: Rightmove remains resilient in volatile times

Shares in this giant of the UK property industry are down by 17% over the last year. Buy, sell, or hold?

Full-year results to 31 December 2022

• Revenue up 9% to £333 million
• Operating profit up 7% to £241.3 million
• Average revenue per advertiser (ARPA) up 11% to £1,314 per month
• Final dividend of 5.2p per share
• Total dividend for the year up 9% to 8.5p
• Cash held of £40 million, down from £48 million

Chief executive Peter Brooks-Johnson said:

"The softening from the covid-induced frenetic market towards a more normal market earlier in the year was disrupted in the final few months by the unexpected rapid mortgage rate increases. 

“The strength of our results is a reminder of how effective and integral our new and existing products and services are in helping our customers in both faster and slower markets. There's much more to come and exciting plans ahead for Rightmove.”

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ii round-up:

Rightmove (LSE:RMV) operates a major online digital property advertising website.

Property professionals, such as estate agents, lettings agents and new homes builders, pay a subscription fee to advertise their properties on its portal. 

For a round-up of these latest results announced on 3 March, please click here. 

ii view:

Rightmove was established in 2000 and floated on the London Stock Exchange in 2006. Today it employs around 700 people. Time spent on its website has increased from 11.7 billion minutes in 2016 to over 16 billion minutes in 2022.  

Agency customers account for its biggest slug of sales at around 74%. Sales in relation to new homes such as housebuilders like Barratt Developments (LSE:BDEV) and Persimmon (LSE:PSN) account for a further 16%, with other businesses such as commercial property, data services, overseas listings, and third-party advertising making up the balance of 10%

Current Rightmove ambitions include increasing the digitisation of tenants' rental journeys and simplifying the process for them, growing the value of its commercial real estate business, and providing a better experience for people seeking a mortgage.

For investors, rising costs generally for businesses need to be remembered, competitors such as Zoopla are not standing still, while the chief executive of the last six years is stepping down to be replaced by Johan Svanstrom, formerly of Hotels.com and Expedia. That offers some uncertainty, while other property related companies such as warehouse owner Segro (LSE:SGRO) offer an estimated future dividend yield of 4% compared to Rightmove’s 1.6%.  

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On the upside, a more challenging backdrop for the property market may push customers to spend more on advertising, with ARPA up 11% during 2022 to £1,314 per month. A diversity of business types exists from buyers and renters under agency customers to new home sales from developers, while Rightmove's surplus cash generation allowed it to return £198 million to shareholders in 2022 via share buybacks and dividends. 

On balance, demand for Rightmove’s services is proving robust and the current analyst consensus estimate of fair value sat at close to 590p per share. That may be enough for long-term fans of the company to sit tight. 

Positives: 

• Strong market position
• Diversity of customers

Negatives:

• Uncertain economic backdrop
• Costs generally are rising

The average rating of stock market analysts:

Hold