27th Jul 2018 13:28
LONDON (Alliance News) - Despite a stable interim performance from Rightmove PLC, market opinion stands less than optimistic as to how the property website operator will stand tall within the tough UK property market.
Shares in Rightmove were down 1.9% at 4,993.50 pence, making it the worst performer in the FTSE 100 index on Friday.
For the six months to the end of June, the company's pretax profit increased to GBP98.1 million from GBP87.5 million the year before, while revenue grew to GBP131.1 million, up 10% from GBP119.5 million.
This was due to double digit growth in all of its operating segments, with Agency revenue rising by 10% to GBP99.3 million from GBP90.6 million as a result of a higher spend on additional advertising packages and increased membership price increases for half of Rightmove's customers.
New Homes revenue also grew by 10% to GBP21.6 million from GBP19.7 million the prior year, largely through the same reasons as the Agency division, with increased prices and adoption of advertising products, including email campaigns.
The number of developments rose by 2.0% to 2,865 from 2,801 at the end of 2017.
Other revenue, which includes overseas, data services, commercial and advertising services from third parties climbed by 11% to GBP10.2 million from GBP9.2 million.
Average revenue per advertiser increased by GBP76 on the same period a year ago to GBP987 per month.
On the online portal, traffic during the six months increased 5% year-on-year, with an average of 139 million visits per month, the company said. People also spent more time on the site with an average of 1.1 billion minutes a month.
"The continued stable membership numbers and our subscription advertising model, together with the strength of the Rightmove offer for both customers and consumers, give us confidence in delivering expectations for the current year despite muted sentiment towards the UK property market," Chief Executive Officer Peter Brooks-Johnson said.
The company lifted its interim dividend by 14% to 25 pence per share from 22p issued last year.
In relation to Brexit, the company said the decision to leave the EU increased the macroeconomic uncertainty in the housing market leading to fewer transactions. Housing transactions in the first half of 2018 were down 5% compared to the same period the year before. However, the board concluded that there has been no material change to the severity of this risk for the company.
But market analysts have adopted a more bleaker look at how Rightmove can deal with the current market conditions.
Broker Peel Hunt downgraded Rightmove to Reduce from Hold saying the property portal faces increased competition and challenging market conditions, but noted there will be "less potential for earning surprises" in the near term.
Analysts Jessica Pok and Malcolm Morgan said that while Rightmove operationally is strong, the rate of its growth of earnings is slowing down.
Pok and Morgan highlighted that the UK housing market remains challenging due to transactions falling and house prices softening. In addition, margins of traditional agents continues to be squeezed with the competition peers and from 'hybrid' agents, with Peel Hunt naming AIM-listed Purplebricks Group PLC as an example.
AJ Bell, although praising Rightmove as a "resilient business", still focused more on the dangers of competition.
"So far any cracks in the property market haven’t fed through to its numbers. The important metrics in its results are the number of members, UK residential properties advertised on its system, web traffic and average revenue per advertiser. All of them have gone up versus the same period a year ago. But this is a business which clearly cannot afford to be complacent," said investment director Russell Mould.
"For example, membership numbers only grew by a mere 0.5% over the past 12 months to 20,450 agents and developers. Its competitors OnTheMarket and Zoopla are getting stronger, so Rightmove will have to think up new ways to engage with its clients and extract more money from them. It will also have to create new ways to help consumers in their quest to find suitable properties," Mould added.
For the rest of the year, Rightmove expects ARPA growth to be around GBP80 year-on-year, with growth more weighted towards the second half of the year due to the timing of pricing activities in 2018. The company remains confident in delivering full-year expectations.
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