ii view: Rightmove reports busiest ever January

2020 was a tough year for this property website operator. We assess prospects. 

Full-year results to 31 December 2020

• Revenue down 29% to £207 million
• Operating profit down 37% to £135 million
• Final dividend of 4.5p per share
• Cash held up 166% to £97 million

Chief executive Peter Brooks-Johnson said:

“In a year when we stayed in our homes more than ever before, people continued to turn to Rightmove for their next move and for real-time information, helping us to extend our lead in the market. 

“Digital solutions emerged as even more important to our customers as they navigated the different restrictions and invested in our tools to help them handle the record interest in property from home hunters.

“We remain mindful that 2021 may bring further Covid-related challenges, but we will continue to deliver our strategy to help make home moving easier, delivering the best solutions to our customers   and the most engaging experience for our users."

ii round-up:

Property website operator Rightmove (LSE:RMV) today flagged an optimistic start to 2021 for the UK housing market. 

Traffic on its website hit a new January record, with management expecting Average Revenue Per Advertiser (ARPA) to grow from that seen in the final month of the pandemic hit 2020. 

Rightmove shares fell by more than 4% in UK trading, leaving them down around 10% over the last year, although up by around 50% since March pandemic lows. 

Rightmove, which was founded in 2000, reported a 37% fall in operating profit over 2020 as it slashed fees to aid its estate agent and property developer customers during the initial spring lockdown. 

ARPA fell 28% to £778 per month from £1,088 during 2019. Overall group revenue retreated by nearly a third to £207 million. 

A loss of 425 agency branches and 187 developers led to membership numbers dropping by 3% to 19,197 as of the year end, many due to constrained cash flow under the pandemic. Membership for 2021 is forecast to remain broadly the same. 

The current shortage of new listings is expected by management to correct once the current immediate lockdown is lifted. 

A final dividend payment 4.5p per share is up on the 4.4p per share final payment of 2019, which was later cancelled to conserve £38 million of cash under the pandemic. 

ii view:

The popularity of its property website remains unrivalled. Over one million UK residential properties were advertised on the site over 2020, up from 900,000 in 2019 and more than anywhere else in the UK. Advertising for estate agents has moved increasingly online. Sales of its advertising subscription packages and not housing sale numbers are what is important to Rightmove.

Predictable cash flows reflect the subscription nature of the business coupled with low working capital requirements. However, reducing high street branches through either closure or merger potentially reduces advertising fees going forward. The advent of online estate agents such as Purplebricks (LSE:PURP) also generates low-cost online competition to the traditional branch networks. 

The pandemic caused a complete shutdown of the property market for weeks in 2020. Fee reductions to assist cashflow hit customers impacted both revenues and profits hard. 

For investors, the group’s market leading position makes it impossible to ignore. Strength in the housing market alluded to by housebuilders also offers reassurance, as does a restarting of the dividend payment. But pandemic uncertainty remains a feature for now, and the pending Budget could have implications for housing incentives such as the stamp duty holiday and ‘help to buy.’ In all, and with the share price sat around the consensus analyst fair value estimate of 574p, the share price looks to be up with events. 

Positives: 

• Strong market position
• Cash held up 166% to £97 million

Negatives:

• Estate agent branch numbers under pressure
• Covid-19 uncertainty ongoing

The average rating of stock market analysts:

Hold