Rightmove, which claims to be the UK's leading property website, is attracting record numbers of househunters despite the current uncertain market.
During the six months to the end of June, the number of page impressions on its website jumped by 22% to 3.9bn. March was a record month, said the company, while April included its busiest day ever. With increased advertising spend from estate agents trying to attract customers - average spend per advertiser was up 20% - the company has reported a rise in underlying half year profits to £27.9m and its shares have climbed 5p to 627p.
The company warned that the current economic environment meant there was likely to be little improvement in the housing market this year compared to 2008 and 2009, but its customers had taken actions to try and deal with the downturn and had in most cases been able to trade profitably. Its trading in July and August had been in line with the first half, the company said. It added:
This gives us ground for confidence that revenue will continue on an upward path, given our underlying subscription model, and that our plans for 2011 will deliver further growth in the average spend per advertiser. We do not believe that such an outlook need be materially affected by flat or modest falls in house prices, provided that transaction volumes do not take a sharp downward turn and cause our customers to cease trading.
Google's move to put properties on their maps had made little impact, and indeed Rightmove has now set up a partnership with the search engine.
Rightmove had cash of £22m at the end of the half, boosted by the initial cash proceeds of the sale of Holiday Lettings to a subsidiary of Expedia. Rightmove's two-thirds stake in the business should bring in £19.1m, and analysts believe much of this could be returned to shareholders, given the company's policy in the regard. Roddy Davidson at Altium Securities said:
We intend to increase our 2010 profit forecast by 3-4% to around £54m in response to this morning's update and see good scope for further upgrades if the positive momentum highlighted above is maintained. Dividend prospects/scope for returns to shareholders also represent a key attraction. We reiterate our positive stance and believe recent underperformance has created a buying opportunity.
At Investec, analyst Gareth Davies said:
Overall decent results and no surprise on outlook comments. We think the shares will likely to continue yesterday's strength today on this reassuring performance, having been very weak since early August. At current levels they sit just over 5% below our current target, which we will likely tweak up on any 2011 upgrade today.
Lorna Tilbian at Numis Securities added:
Rightmove has disclosed it expects to receive a total consideration of £19.1m for its 67% stake in Holiday Lettings sold in June. In 2009 Holiday Lettings had revenues of £4.9m and earnings of £1.3m and we expect the group to return the proceeds to shareholders through a buyback that we estimate could be equal to 3% of the group's share capital. There are a number of moving parts in our forecasts. Although we are broadly maintaining our current earnings per share forecasts we highlight that the disposal of Holiday Lettings offsets underlying upgrades of 4% and 5% in 2010 and 2011, respectively. With excellent operational progress demonstrating the strength of the group's business model our target price is raised to 782p and our recommendation remains buy.
