With lockdown almost over, many people are feeling bad that they didn’t put their enforced time at home to better use, by learning Mandarin or some other kind of self-improvement. Luckily, we have data analytics to tell us what we did do — and one of those things was to spend a remarkable amount of time on Rightmove. British people spent a total of 15.9 billion minutes on the property search site in 2020, a 31 per cent increase on the previous year.
That number is even more notable given that the housing market was closed during the first lockdown last year. Since last summer, however, the numbers of house sales and prices have soared. According to the latest Nationwide survey, house prices rose by 10.9 per cent in the year to May, the fastest pace in seven years. The number of transactions reached a record high of 183,000 in March, compared with 42,000 in April 2020.
The frantic pace of buying and selling is expected to ease, with the stamp duty holiday finishing at the end of this month. This will affect estate agents, which make their money by taking a commission on each sale, but what does it mean for Rightmove?
The property portal has a dominant market position, with 90 per cent of the country’s estate agencies using it. It makes its money by charging estate agents and housing developers a monthly fee to advertise on the site. In 2020, the average revenue per advertiser, or ARPA, fell by 28 per cent to £778 a month from £1,088 in 2019, after the company gave its customers 75 per cent off from April to July, then 60 per cent in August and a 40 per cent discount in September. But by December, ARPA had recovered to £1,103 per month. It expects the rate of growth this year to be similar to 2019, when average revenue per advertiser increased by about 8 per cent.
Analysts at UBS said this year that Rightmove could increase its fees by 10 per cent and that more agents would be in a position to pay for additional services, designed to help them to sign up more sellers. As a result, in 2022 there could be “an acceleration in top-line growth and a step up in margins”. UBS rated the shares a “buy”, with a target of 645p.
Rightmove is highly profitable. Its operating margins remained at 66 per cent last year despite the fall in fees and revenues, compared with 74 per cent in 2019. To save cash, the company paused its buyback scheme and cancelled its final 2019 dividend in March last year. However, it paid a final dividend for 2020 of 4.5p a share and restarted the buyback programme in March this year. By comparison, in 2019 the company bought back £148.8 million of shares.
So what are the downsides? The obvious risk is a correction in the British property market and a rise in interest rates. Bank of England officials have warned already against people borrowing unsustainably.
There are also competitors seeking to dislodge Rightmove from its prime location. Michael Bruce, founder of Purplebricks, the online-only estate agent, has set up Boomin as a rival portal and offered a year’s free advertising to agencies that join in the early days.
Rightmove’s shares haven’t regained the heights of 691p reached before the pandemic in February 2020. They are largely flat compared with 12 months ago and have fallen by 8 per cent since the start of 2021 to close at 603½p last night.
Tempus rated Rightmove a “hold” in May last year, since when the shares have risen by 13 per cent. They trade at a price-to-earnings ratio of more than 40 times, based on 2020 earnings, but the ratio falls to 30 times if full-year profits return to 2019 levels this year. Rightmove is not a bargain, but its market-leading position looks secure for now.
Advice Hold
Why Dividend and buyback reinstated amid the property market’s resurgence
Bloomsbury Publishing
The Harry Potter publisher had a positive tale to tell yesterday when it raised its earnings forecast, increased its dividend and announced a special dividend, indicating that demand for its books had not fallen away despite economies around the world reopening.
Bloomsbury Publishing shares jumped by 11.3 per cent to 344p on the news and are up 16 per cent this year. They have added 47 per cent since Tempus recommended buying them in May 2019.
Revenue climbed by 14 per cent to £185.1 million in the year to the end of February, while pre-tax profit increased by 31 per cent to £17.3 million. Revenue in the consumer division, the largest part of the business, rose 22 per cent as readers escaped lockdown by reading fantasy fiction from writers such as Sarah J Maas, as well as turning to books tackling pressing social issues including Reni Eddo-Lodge’s Why I’m No Longer Talking to White People About Race. Cookery and baking books were also among Bloomsbury’s bestsellers.
The publisher emphasised that it expected the reading habit to persist this year even as readers resumed their social lives. The publisher expects to be “comfortably” ahead of market forecasts for revenue of £177.5 million and profit before tax and one-off costs of £17.4 million in this financial year. Analysts at Peel Hunt said that pre-tax profit could be closer to £19.5 million.
The company is seeking to expand its non-consumer division, which publishes academic, professional and special interest titles, because revenues are more predictable and the margins are higher. Digital revenues in the non-consumer division increased by 49 per cent to £12.4 million in the year to the end of February, with 73 per cent more academics signing up to access digital titles as learning moved online during the pandemic.
Shareholders will receive a final dividend of 7.58p, taking the total for the year to 8.86p, and a special dividend of 9.78p. Last year, Bloomsbury paid its final 6.89p dividend in shares to preserve cash.
Advice Buy
Why Cash dividends are back and the earnings outlook is encouraging
