Another half year complete, another self-congratulatory press release from Rightmove to its investors, celebrating the gouging of yet more money from its captive customers.
So far in 2024 it’s managed to take an additional 6% from agents and is ‘confident’ that it’ll hit +7-9% before the end of the year. The numbers are so eye-widening that they’ve kind of lost impact, but it’s worth reminding ourselves that one business making a profit of £135.1m on revenues of £192.1m, all in just 6 months – that is not a healthy market, people. Something has gone badly awry when £100m of this profit – over half of it – is just dumped back into shareholders’ pockets via share buybacks, because the company does not know what else to do with it.
Three interesting things to note this time out, however:
£8m acquisition of HomeViews and £3m investment in Coadjute
Rightmove so rarely puts its hand in its pocket to invest in anything innovative, it’s always worth paying attention when it does. HomeViews is a review site for the Build-To-Rent (BTR) sector. It has some neat tech around mapping tenant sentiment towards their accommodation and was becoming a destination for people searching in this sector – hence RM’s need to kill it stone dead. It can be quietly throttled away from view, whilst some of its data is repurposed into the mothership and everyone can get back to searching on Rightmove instead.
Coadjute is interesting, because it’s quite far outside RM’s usual attention radius. Coadjute tries to ensure that the whole property transaction takes place in one specific platform, including conveyancing and mortgages. RM’s interest comes from the latter – Mortgages is one of their three ‘Strategic Growth Areas’ (the others are Commercial and Rental Services). By investing in Coadjute, they’re trying to secure themselves as the mortgage provider of choice inside the system. This is how they move from £2m in mortgage revenues in 2023 to their targeted £25m in 2028.
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That demand has to come from somewhere – and they think Coadjute might just win through. Worth keeping an eye on that business and how it integrates its mortgage offers (particularly) when it starts to push further out into the market.
Profit margin at 68%
It is very, very hard to feel sorry for a business that sees its profit margin dip below 70% for the first time in a decade or so. Therefore I’m not going to. But it does highlight that the investments above – of which only £600k of the HomeViews deal was recognised in this half-year accounts – have had an impact.
The underlying profits are still a tiny bit over 70% but they’re on their way down too, from the 73% of a couple of years ago. It’s still obscene – and, as above, evidence that the portal market is performing terribly – but perhaps it also indicates that RM isn’t quite as relaxed as it has been about its immediate future. The arrival of CoStar in the UK, a company that’s super-aggressive in the States, will be noisier in the second half of this year and, particularly, into 2025.
‘Market share’ static at 86%
Again, everything needs to be qualified by stating that 86% is huge, however they’re measuring it – and they’re using Comscore, which from memory counts something stupid like time-on-site and calculates what percentage of overall minutes are spent on RM versus Zoopla, Primelocation and OnTheMarket (OTM). Anyone that’s used Rightmove ever knows that there is this incredibly pointless interstitial page – the one where you have to mindlessly click past a range of new filters whilst it throws some agent ads at you and charges a fortune for the privilege – and that things like this increase RM’s time-on-site but not in a good way.
Their ‘market share’, therefore, is not 86% but that’s not actually the story – the story is that they’re clearly anticipating that it is going to head downwards soon.
This stat is the first thing that they mention to investors in their ‘Operational Highlights’ and is therefore the one that they consider most important to shout about. Regular viewers will recall that most of the questions at their Investor Day in November were from people wanting to know how they were going to fight off CoStar. This is RM stating categorically that it’s holding the line and seeing no impact (yet).
However, in the interests of future expectation management, they talk of this number as being ‘above 80%’. It’s an odd way to position it, isn’t it? Why not ‘above 85%’ or just give the number? The answer is that RM is expecting some dip in the future. What they want is for analysts to compare this line in the Financial Report with future ones and see that, in 2025 and 2026 and beyond, it still says ‘above 80%’, even if it’s now down to 81%.
Do they see CoStar’s OTM acquisition starting to pay off? Might people get tired, in the age of one-shot discovery in AI, of RM and its pointless, time-consuming interstitial pages (did I mention that already?)? Could the Google-backed Jitty, with its far more intuitive (and fun) search continue to see more traction too?
In the context of another grindingly predictable half year of above-inflation revenue growth, it’s a small canary in a very large coal mine. But it’s there. And if I’m CoStar, Jitty, even Zoopla – I’ll take it.
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