Rightmove defies property gloom

Rightmove's subscription model helped it defy gloom in the housing market with a 49% increase in revenue for the first half of the year.

Morningstar.co.uk Editors 29 August, 2008 | 2:40PM
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The property website reported revenues of £37.8m, up from £25.4m for the six months to 30 June. Pre-tax profits rose 58% to £20.8m as the group increased its average revenue per advertiser by £83 to £317. The interim dividend will be 3p per share, up from 2p last year.

Despite recent surveys from both Nationwide Building Society and the Land Registry suggesting that the housing downturn is getting worse, Rightmove increased its number of advertisers over the period by 5% to 19,301. Page impressions also rose by 15% to 3.1bn.

The group is continuing its share buyback programme and bought back 10.7m shares at a cost of £42m over the period.

The group believes that although the property market will remain tough, a major structural shift is now underway within the UK property advertising industry from print to online, which will help it weather the downturn. That said, the group expects estate agents will continue to leave the sector as conditions toughen and transactions fall.

Scott Forbes, chairman, says: “The Board believes Rightmove's exposure relates first to the number of estate agents who leave the industry and secondly to the viability of new homes developers. These are both driven, above all, by the number of housing transactions. Falls in house prices and increasing levels of repossessions, while generally bad news, should help to restart transaction volumes at some point though we believe that there is little immediate prospect of an improvement.”

The shares rose 0.75p to 317.25p, leaving them trading on around 13x earnings. This would be cheap for the kind of growth on offer, but sentiment is against the company at the moment. Rightmove’s model means that it does not depend on houses being bought and sold to generate revenues, but the market is punishing it nonetheless. For the time being, growth in the lettings and new homes businesses has more than offset any estate agents pulling their advertising. The group is also working to build up its non-UK advertisers and also its home furnishings and other ancillary advertisers. If the news flow from the housing market improves a fraction, the shares could bounce strongly.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Rightmove PLC543.60 GBX3.19

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