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Rightmove – endless pricing power keeps margins inflated

Hand holding a model of house; Shutterstock ID 335073380; Purchase Order: -

 

Full year revenue rose 5% to £304.9m compared to 2019. Compared to 2020, revenue’s up 48% because of the discounts handed to estate agents during the pandemic.

Underlying operating profit was also up 5% on 2019, reaching £231m.

The group expects housing market activity to normalise. Rightmove clarified it’s “not materially impacted by the property market cycle other than in the most extreme circumstances”. The housing supply shortage seen in the last year has reduced the number of new estate agents.

A final dividend of 4.8p was announced, taking the total payment to 7.8p.

The shares rose 3.6% following the announcement.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown

“Rightmove is the ultimate lesson in pricing power. Regardless of what’s going on in the wider market, whether it’s up or down, today’s estate agents can ill afford not to advertise on Rightmove. That allows Rightmove to pump up its prices as it so chooses, it also offers insulation from the housing market rollercoaster. It makes money from agents, rather than being too bothered about how many houses are being sold. Running a website also essentially means adding each new customer is costless, feeding into an envious operating margin position of 74%.

That isn’t to say Rightmove is a perfect business. A severe housing market downturn would affect the top line, as it would see estate agents under pressure and potentially needing discounts. Worse still would be an accelerated reduction in the number of operating estate agents. This is already a structural issue, but the decline is tempered at the moment, and one that’s being offset by Rightmove’s ability to increase prices and cross sell a suite of extra products.”

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