Investment expert believes it could remain resilient even if the housing market stalls
Property listing platform Rightmove has reported a 9% increase in total revenue in the first six months of the year.
Total revenue up to June 30, 2022, hit £162.7 million, while underlying operating profit rose 7% to £122.4 million. Rightmove’s average revenue per advertiser also rose 11% to £1,290 per month.
Charlie Huggins, head of equities at investment service Wealth Club, commented that despite growing economic uncertainty towards the end of the year’s first half, Rightmove had seen little reduction in sales activity or demand.
“This is another decent set of results from Rightmove, helped by a housing market that has remained robust,” said Huggins, who added that even if the housing market stalls, Rightmove could remain resilient.
“Rightmove’s revenues aren’t directly linked to the number of houses bought and sold, or even to house prices. Instead, revenue comes from estate agents paying a fixed subscription to list all their properties on its site. As long the estate agent remains in business, they will continue to pay their Rightmove subscription.
“The reality though is that Rightmove’s exceptionally dominant market position means estate agents simply can’t do without it.”
Huggins pointed out that with a market share of 88%, Rightmove is often the first place people go to when looking for a house to buy or rent.
“It has considerable pricing power, and the business model is highly scalable. That translates to exceptionally high operating margins of around 76%, giving the group more ability to shoulder cost increases,” he said.
Rightmove.co.uk was established by Countrywide, Connells, Halifax, and Royal and Sun Alliance in 2000, and was initially free to list with charging introduced in 2002. Rightmove plc floated on the London Stock Exchange in 2006 and is now a FTSE 100 company with a market value of around £5 billion. Last year, the group reported that its revenue exceeded £300 million.
Huggins said that while Rightmove’s business model ought to be relatively well placed to deal with inflation, this doesn’t mean that it is immune to any housing market struggles.
“In a downturn, some customers may go out of business, as we saw during the financial crisis. Rightmove may also be forced to offer discounts to its customers when conditions get really bad, as it did during the pandemic,” he added. “If the housing market goes into a tailspin, Rightmove will feel it, but probably a lot less than estate agents and housebuilders. And if it doesn’t, the group looks well placed to continue growing. There are certainly worse positions to be in.”
