Property website Rightmove has shrugged off a tough housing market to promise solid full-year results thanks to growing lettings business and a jump in its share of advertising spend as estate agents cut back on local newspaper promotions.
The company's optimistic outlook was accompanied by fresh indications of stabilisation in the property market. According to HM Revenue & Customs, the number of homes changing hands jumped 17% during July.
Rightmove's group managing director Ed Williams says his business is already growing again "on all major measures whether that is in terms of usage of our website by home hunters, in terms of number of advertisers or in terms of their individual spend with us."
William adds that while jobs and car advertising at local newspapers has been suffering for several years, property advertising had held up well until recently as estate agents focussed on maintaining their local profiles.
But, Williams adds, the property downturn in 2008 -"when the market just dropped off a cliff" - forced agents to make choices over where to spend their limited budgets and many opted to go online.
Rightmove's commercial director Miles Shipside says:
"One of the benefits of the downturn is it has broken a habit of 50 years of advertising in newspapers."
In its results today, the UK's most popular property sites says its share of property advertising spend has "grown substantially" as advertisers cut back on traditional media.
The key now for Rightmove will be keeping that share as advertising budgets start to pick up again.
Reporting a 4% fall in underlying operating profit to £19.9m, Righmove says the number of advertisiers has started to pick up since the start of the year and average spend per advertiser was up 1% from 2008 at £305 per month.
The company adds:
"The advertising customer base has been immensely loyal. We have grown the number of customers since the start of 2009 among estate agents, lettings agents and holiday homes owners."
The number of letting agents using Rightmove since the start of the year is up + 15% to 3,632 as rentals pick up some of the slack from a tough market for sales as mortgage lending remains tight.
Williams, who describes the property market last year as "falling off a cliff", says half of all Rightmove's estate agents now do lettings, up sharply from less than 20% two years ago when the market for sales was much stronger.
The HMRC figures today showed that around 76,000 residential properties were sold for at least £40,000 last month on a seasonally adjusted basis, up from 65,000 in June and the highest figure since May 2008.
Rightmove is cautious about calling a strong recovery for the property market, with Shipside pointing out the picture varies from area to area and cautioning that "it is wrong to say we are back to boom times". He believes that mortgage approval levels and lending levels will be capped for some years. Williams, meanwhile, says the market is unlikely to ever see a return to the 125% mortgages around before the credit crunch.
Rightmove's outlook has lifted its shares 55.4p, or 12.9%, to 483.8p, making them the top gainers in the FTSE 250.
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers comments:
"Rightmove has announced impressively resilient results. The move to online adverting remains at the core of the group's success, whilst management has acted quickly to cut costs. Furthermore, whilst the number of home sales has fallen, advertising in relation to the rental market has clearly counterbalanced the downturn. Finally, the group's brand strength and established market position is proving hard to match, with rivals such as Property Finder recently retreating."
"On the downside, the shares have enjoyed a stellar run over recent months, whilst the valuation is not necessarily cheap when benchmarked on more traditional grounds. Nonetheless, management and the business are proving their worth, with profit forecasts likely to be upgraded and consensus market opinion growing increasingly more favourable."
