Rightmove carry on hitting agents hard

Rightmove on the march!

Rightmove could charge agents an average £2,500 per month per office at some point in the long-term future.

City analysts were briefed after Friday’s results were posted by the portal.

At the briefing, incoming chief executive Peter Brooks-Johnson “sketched out the sustainability of growth to £2,500 longer term”, analyst William Packer reported. The sum of £2,500 is what Rightmove said agents had been spending per month on newspaper advertising in the past.

While it looks as though such a figure could be a long way off, it appears that agents are already paying at the rate of over £1,100 per branch per year on average.

Analysts

Analysts on Friday were told that Rightmove’s target this year is to win another £70 per branch per month.

The Average Revenue Per Advertiser was £842 per month last year – taking the average branch’s average annual spend on Rightmove to over £10,000 for what is thought to be the first time – and for this year is targeted at £912.

Packer, of Exane BNP Paribas, said his own firm is forecasting that Rightmove will be charging £1,000 per branch per month in two years’ time.

The Average Revenue Per Advertiser was £842 per month last year – for the first time taking the average branch’s average annual spend on Rightmove to over £10,000 – and so could end this year at £912 per month with the extra £70.

Packer said that analysts were told of an upside if Optimiser up-sells successfully.

Although Rightmove’s results showed a surge in revenues and profits for last year, the share price fell 245p (6%) to 4000p on Friday.

Packer attributed this largely to the surprise announcement that well-liked CEO Nick McKittrick, 48, is stepping down. He has been with Rightmove since the start 16 years ago, and boss since 2013. He will step down at the AGM in May but will stay on into June “to ensure a smooth transition process”.

Packer described his departure as “a risk”, although also noting that the incoming CEO, Peter Brooks-Johnson, is well-liked, known to investors and has been the effective deputy CEO for some time.

However, Packer also noted two other possible reasons for the City jitters.

One was concern over a drop in leads to “nearly 47m” – down 6% year on year, according to other analysts.

The other reason cited by Packer was a small drop in estate agent members in the second half of the year, down 0.4% from the first half of 2016.

The fall in the number of branches was attributed at the analysts’ briefing to largely just one agent. Packer concluded that this was almost certainly Countrywide.

Flat growth

Estate agency numbers at Rightmove showed flat growth last year, said Packer – ending at 17,462 compared with 17,336 in 2015.

Overall, Packer reported, the tone of the Rightmove briefing to analysts was confident.

Other analysts have also given their verdicts.

Anthony Codling, of Jefferies International, described the results as robust, with the ARPA of £842 still having “further to go”.

Codling said Rightmove continued to deliver margins in excess of 75%, a “super normal profit”.

Codling went on: “So far all challengers have failed. Initiatives such as OnTheMarket suggest that agents are trying to win back control of digital marketing, but as yet the efforts of ‘estate agents collectives’ have had little impact and ironically, the One Other Portal rule has, in our view, only enhanced rather than challenged Rightmove’s dominant position.”

Steve Clayton, of Hargreaves Lansdown, said that the average £842 per month last year meant advertisers were paying £10,100 per year – an increase of 11.7%.

He said Rightmove “thus retain fabulous pricing power, for agents are still getting an enormous bang for their buck and Rightmove’s rivals lack the same depth and breadth of market coverage”.

Yesterday evening, Exane’s Packer said that Rightmove “offers sustainable double digit structual growth”, which he described as a rarity.

In his new update, Packer said: “We see Rightmove, underpinned by its must have status with estate agents, as a key winner from the recent competitive upheaval. Rightmove is also attractively valued relatively to international peers.

“In an industry with strong network effects and high margins, we see a marketing war with existing peers or new entrants as a risk.

“A slowdown in the UK residential property market may result in estate agent members closing or reducing enhanced product spend.”

Carol Lewis

Carol Lewis is a respected property journalist with an enthusiasm for anything to do with property. She is the senior member of the Estate Agents London News journalist team but also writes for other respected magazines and newspapers. Her background is in property, investments and video production. Carol has worked on publicity campaigns for a large number of organisations but now runs this not-for-profit blog. Her main aims are to educate the public and drive up standards in estate agency.

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