Rightmove Releasing Results This Week, What Will They Hold? (Updated)

(Updated 27 August 2008)

On Friday 29th August, Rightmove will be releasing its interim results – ie its half year results for the CY 2008.

Over the last 12 months, the Rightmove share price has more than halved from a 52 week high of GBP6.34 to a current price of GBP2.99.  There are likely to be two key factors driving the nervousness in investors, the first is the current performance of the UK property market and the second is the rise of low cost / no cost competitors.

The UK Property Market

The UK property market is in a great deal of pain.  The number of transactions have fallen and also the average selling price has fallen.  In the UK, estate agents work off an average commission of around 1.7 percent and therefore the decline in volume of transactions combined with the decrease in average sales price, means that competition for sales has increased significantly and some agents have not been able to cope and have therefore left the market.  In fact, this is exacerbated by the fact that anyone can become an estate agent – as there are no licencing or training required.  The net result is that size of the estate agency market is likey to decrease.  The impact on Rightmove, who has claimed up to 80% of agents are using them, is likely to be significant as agents leave the market.  If an agent leaves the market and therefore cancels their Rightmove subscription, this lost revenue comes of the bottom line as there are basically no costs of sales in managing these customers.

Increase in Low Cost / No Cost Competitors

Over the last 12 – 18 months there has been a rise in the number of low cost / no cost competitors.  In the category of low cost competitors, you will find propertyfinder.com, hotproperty.co.uk and findaproperty.co.uk – these sites tend to charge around GBP150 per month compared to GBP400+ for Rightmove.  In the category of no cost competitors, you will find globrix.co.uk, zoomf.com, dothomes.com, and propertylive.co.uk, the soon to be launched site from the National Association of Estate Agents.  The combined impact of this is to provide estate agents who as under pressure with a low cost option to Rightmove.  Now many of these agents may not take up the cheap offer and leave Rightmove, however the investor market will see these low cost / no cost competitors are being able to put pricing pressure on Rightmove and therefore they are probably re-rating the stock appropriately.

Therefore, for the first half of the year i expect revenues to be up a little over the previous half year, however the rate of revenue growth will have slowed.  The key driver of this slowing in revenue growth will a decrease in the number of agents using the service (most likely due to agents going out of business).  This has probably been offset to some extent by price increases.  I assume that strong cost management will see the traditionally strong margins of the business remain stable if not down a litte.  Friday will be an interesting day.

1. Are Things Bad for Rightmove?

   Three interesting pieces of information have come to light in the last couple of weeks concerning rightmove.co.uk. Firstly, rightmove.co.uk reported that it lost 1,300 agents in the first have of the year but offset this loss by signing up 800 new agents. Secondly, a survey conducted by Estate Agency Today said 75% of agents would not renew with rightmove.co.uk and would move to the free sites. Finally, an article in the Telegraph reveals that Rightmove is one of the top 10 shorted stocks with more than GBP 50m staked on the shares continuing to slide. The question is ... does this really mean that Rightmove is in trouble or will they ride through the storm and profitably remain in front? Read on for more ... ...

2. rightmove.co.uk Trial £95 Premium Listing

   A press release from rightmove.co.uk says the UK market leader will be launching a Beta version of its website on 8 June 2009. The Beta site is to trial sellers’ and agents’ response to a publicised suggested retail price of £95 for upgrading their property to its Premium Listing advert for a month....

3. 75% of Agents NOT Will Leave rightmove.co.uk

   An Estate Agency Today story claims that 75% of agents are threatening to quit rightmove. The article stated "an astonishing 75.7% of agents who participated in the Estate Agent Today poll say they will not be renewing their annual subscriptions to Rightmove. A total of 1,230 votes have been cast so far. Of these, 931 (75.7%) say they will not renew while 299 (24.3%) say they will stay with the hugely successful portal, which claims a 90% share of the listings market." Now a couple of comments about the survey. Firstly, anyone can complete the survey - i did and i am not an agent. Therefore there is no way that Estate Agency Today can know that it was agents who completed the survey. Secondly, the survey does not systematically interview agents to find out their true intentions rather it is most likely to be answered by those unhappy with the service and can be bothered to answer the survey. Therefore i am not surprised at the results - however i dont believe them. Read on for more comments ... ...

4. The Real Challenge for rightmove.co.uk

   You just have to spend 10 - 20 min surfing the UK property blog sites to see comments like this "The agents in our area have started talking about withdrawing from rightmove as a whole and going to the free sites, such as globrix, mouseprice, nestoria etc, as rightmove seem to be unwilling to acknowledge the climate and drop their prices. The only way we can encourage rightmove to drop their prices is to work together." On the surface this doesnt look good for rightmove.co.uk. The problem is exacerbated in January when a reported 50 percent of rightmove.co.uk's agents have their annual contracts come up or renewal. What is the likely impact and what should rightmove.co.uk do?...

5. Why rightmove should acquire propertyfinder

   Times are tough in the UK market at the moment and it seems to me that the best value creating play would be a merger of rightmove and propertyfinder and therefore increase the gap between rightmove and the rest of the market....