Reports Of Rightmove’s Demise Have Been Greatly Exaggerated

It is notoriously difficult to make a website based business pay. It’s been 10 years since the ‘tech’ bubble reached its heady heights and since then for every Facebook, Amazon (AMZN) or Google (GOOG) there have been a thousand, glossy, here today, gone tomorrow sites that offered shareholders a financially flawed virtual world of hits, page views, visitors but no profits. The challenge for website owners is to build a brand, create a following, control the marketing budget, capture market share and monetize traffic. Thereafter, site developers need to churn out a steady stream of new ideas and upgraded functionality to keep ahead of the pack.

One of the few UK based web businesses that has succeeded in ‘monetizing’ its site is Rightmove (RMV.L), the UK’s leading property search website. Rightmove was one of the early movers and almost single-handedly changed the landscape for British property buyers and sellers. Through Rightmove buyers no-longer needed to trawl high street estate agents offices on a Saturday morning and suffer key jangling 21 year old agents suggesting viewings on tiny, “full of character” maisonettes overlooking the M1.

Rightmove removed that first painful step. Buyers, online, could surf from house to house, feasting on pictures, maps, descriptions and prices, creating a shortlist, before having to suffer the banter of young estate agents - self-proclaimed property ‘experts’ - still living with mum.

Property bears could be forgiven for nostalgically looking back to those good old days, the long lost era of year-in-year-out double digit price gains. Now, deep into the worst recession in 75 years Rightmove must be struggling? Maybe even on the verge of collapse? After all the UK property market fell flat on its face in 2008 and is still looking at tough times ahead.

I am delighted to confirm reports of Rightmove’s demise have been greatly exaggerated. In fact the latest update from the firm, detailing results for the six months ending 30th June, are most pleasing to the eye, considering how challenging the period has been for the UK property market.

In summary, operating costs have been slashed by 19%. Operating profit has stayed firm, only 4% lower at £19.9m and underlying earnings per share actually rose 13% to 12.8p (2008 11.3p). Perhaps even more impressive is the firm’s net debt which has fallen 58% to £9.9m from £23.3m a year earlier. And for income seekers the interim dividend has been maintained at 3p.

Ed Williams, Group Managing Director, summed up the update ably: “Rightmove has proven its worth in tough times. Customer loyalty, coupled with cost management, mean we have been able to weather these housing market conditions with minimal impact on profitability. Our 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.”

I reached for the firm’s update expecting to see the financial equivalent of a dingy flat on the wrong side of town but have been most pleasantly surprised with a solid Georgian townhouse overlooking the cricket green. How delightful.

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