Rightmove's shares move up

The number of estate agents advertising with Rightmove has started to stabilise as fewer offices go out of business, although, the overall number of advertisers in the first half was down 13 per cent to 16,874. While the number of estate agents using the site is looking stable at 9,690, growth has come from letting agent listings, up 15 per cent to 3,632, and holiday letting adverts, up 18 per cent to 33,521. By contrast, overseas home advertisers continue to experience tough times, and while home developers may be in less precarious financial shape, this market is still fairly poor.

The average amount spent per advertiser remains stable at around £305m per month, despite the change in mix of advertisers on the Rightmove website towards lower spending areas. Agents continue to take up Rightmove's 'choice' options, which allow advertisers to draw more attention to their properties for a fee. And the company marginally strengthened its dominance of the market by commanding 80 per cent of pages viewed on the four top property websites. This is despite the competitive threat from Google-style property websites.

Management now believes a number of factors, which have dampened average spend, are now unlikely to continue and could even reverse. What's more, costs have dropped significantly to mitigate against the tough trading conditions, which has made the group far more profitable. Indeed, underlying operating profits were down just 4 per cent compared with the 11 per cent drop in revenue. The group also reported strong cash generation and managed to reduce net debt from £23.3m to under £10m.

Numis Securities has made significant upgrades on the back of the results, increasing its full-year pre-tax profit estimate from £32m to £38m, giving EPS of 24.1p. The broker has upgraded its 2010 profit estimate from £34m to £45m, giving EPS of 28.6p (£39.7m and 23.8p in 2008).

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