A new report by analysts at Swiss bank UBS has warned investors that Rightmove’s revenues will come under pressure as agents’ own profits fall.
UBS has downgraded its rating for Rightmove to ‘sell’ from ‘neutral’, despite raising its target price for shares from 500p to 505p.
Its report says it expects agents’ commissions to remain under pressure “in a weak macro environment and from competition from hybrid agents”.
UBS looked at 17 UK estate companies and said that their profitability was down 25% between 2014 and 2018, meaning they had less to spend on Rightmove.
It specifically noted that some agent chains, including Countrywide, Foxtons and Your Move, “struggled to make any profit at all in 2018”.
The report adds that while online agents offer vendors an upside, it does not think these will add material traction to the market.
The report says that Rightmove could capture 8% of agent revenues by 2018, against 5% in 2018, but also casts doubt on advertiser numbers.
UBS says that for Rightmove to sustain revenue growth of 7-8%, it would have to hike agents’ subscription costs per branch – and it says this cannot be done in current market conditions.
Instead of hiking ARPA (average revenue per advertiser) by £85 a year, Rightmove would have to increase its average charge to agents by £120.
UBS says that “given a weak UK housing market (low price growth, commission rates under pressure, declining volumes), we think this will be challenging”.
The bank does however believe Rightmove can grow its revenues more slowly, at 5% per year – down from 10% last year.
UBS also says that on its own evidence, it believes advertiser numbers in March were 2% lower year on year. Rightmove itself had reported that agency numbers were 2% down by the end of December.
UBS said that “weak advertiser numbers in 2019 could be a catalyst for a de-rating”.
For the current financial year, UBS nevertheless expects a continuing burgeoning in both revenues and profits for Rightmove.
It is forecasting the portal to post revenues of £289.1m, up from £276.8m last year, with EBIT (earnings before interest and tax) of £214.9m, up from £198.6m.
UBS’s note to investors specifically warns on Rightmove’s risks in regard to advertiser numbers; problems in raising its rates to agents given the ‘flat’ market’; and no other revenues likely beyond those from UK agents.
Rightmove’s share price dropped yesterday, falling over 4% during the day but recovering to finish at 535p, a dip of just over 3%.
Separately, UBS also yesterday maintained its ‘sell’ recommendation on Purplebricks shares, which finished almost unchanged at 97p.
Bashing for Rightmove shares as City is concerned over agency numbers
Comments (22)
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More and more agents are leaving RM they will end up with only online agents and OTM wont accept onliners, happy days I hope.
We are leaving Rightmove on Sunday 30th June for that exact reason. Their fees equated to more than OTM, ZPG and our rent put together. Having canvassed several agents who have already left RM, it only confirmed what we have been saying for the past 12 months. They are no longer a genuine property portal supplying quality leads, they are a property reference service. In March 2019, the enquiries we got from RM, which actually lead somewhere amounted to £151 per enquiry.
Rightmove is no longer the juggernaut it once was. As with an oil tanker, which takes 3 miles to come to a stop, we predicted 3-5 years before someone at RM would see what was happening but by then it would be too late.
“We’re Rightmove, we don’t negotiate” which all we’ve heard recently is a sure sign that they have lost touch with their customers, particularly in an industry where all we do all day is negotiate.
Passive profit brought about by sheer arrogance.
Where do I see your listings then? And what do you say to sellers when you explain you do not use RM?
I ask – as I will then put toghether a LinkedIn post as whilst I am a conveyancer I do not like how RM treat their customers.
We left end of Feb. Still selling houses, still letting houses, still getting called out to valuations, still saving £1500 per month 🙂
Come on then lets set up a Facebook page (Boycott Rightmove) get 2000 yeses to doing it together on a set date and I guarantee you 90% that complain wont do it.
We should come off RM… yawn.
This has been an issue for some time, the problem is, you agents are the lifeblood that sails the ‘titanic’ you are their income stream… yet you as agents are all afraid of getting in your row boat and swimming to shore.. nice analogy hey?
If 50% of the people that complained actually did something and left Rightmove, we would start to see Rightmove become more competitive, like zoopla and OTM. The other problem is.. anyone that dares to be so bold, will be koshed by their local competition…’ Joe Bloggs came to value my property yesterday ‘ ‘ Oh Mrs Jones, don’t you know they aren’t on Rightmove’ … WE’RE ALL COMPLAINING ABOUT THE SAME THING AND YET IF SOMEONE IS BRAVE ENOUGH TO BUCK THE TREND – THEY RISK LOSING BUSINESS TO OTHER COMPETITORS THAT ARE STILL PAYING THE EXTORTIONATE FEES!
Can our industry take control of the tools that should aid us instead of dictate us? It’s going to take some very brave people to do so… If we had some respect and integrity in our industry and instructions were won on what you can provide and enhance, rather than by slagging off the competition by what they don’t have or don’t do.. perhaps things would change. unfortunately I think too many dinosaurs in our industry are used to winning instructions in the latter way.
Personally… If I ever set off on my own I’d never sign up to Rightmove. Its a big risk yes, but I truthfully believe motivated buyer and sellers use more than One platform.. RIGHTMOVE IS AN INSTRUCTION GENERATOR THAT COSTS MORE THAN THE AVERAGE OFFICE RENT.
How ironic. I’ve been using a pic of The Titanic in all my tweets about RM.
I think we will all feel grateful if they ONLY increase by £120 a year. Chances are it will be at least that per month.
You are correct – there appears to be an error in the article – it should read £120 per month.
RM reported an ARPA of £1005 per month in the final results published in March. Revenue growth of 7-8%p.a. would require a monthly increase of £85 with current members but, as numbers fall, the increases get steeper.
It is, of course, worse than that for single office independents, as the larger companies tend to have better deals and are more likely to be able to resist increases above inflation.
Things could go badly wrong for RM very quickly, as larger customers also tend to lock themselves into multi-year deals. The price gouging of smaller businesses is not sustainable as eventually they will be forced to switch to cheaper suppliers.
Not so much cheaper suppliers, but suppliers who actually know their customers and want their business.
Wait till the next forecast of agents numbers in their shareholders report – we and many others I know have left in the last six months so expect it to be down. I’d be pretty sure they will blame Brexit, Boris Johnson a Train Strike or maybe the heatwave in Europe – but definitely not because they have had us over a barrel for years and indulged themselves!!
If my Forecast is true the £120 per agent will need to be £150 to hit there growth targets and then maybe then the trickle will become a torrent as agents realise they are better off jumping over board and getting in a life boat while the titanic .,.. whoops I mean Rightmove sinks!!!
How funny we all seem to reference The Titanic. I’ve been using that analagy in my tweets for ages. We leave on Sunday and we can’t wait. Much better service, quality of leads from @onthemarket and @zoopla
Purely anecdotal but I am on rightmove alerts for an area of London where my client buys numerous properties. In the past 12 months I have seen almost nothing pop up through rightmove, whereas most properties listed in that area in years gone by were always listed with rightmove. Alerts via rightmove is now my least productive source of properties. As I am still buying you have to conclude agents are finally becoming less reliant upon them.
I’m hearing more and more stories of agents getting better quality and more productive leads from sources other than RM. An interesting turnabout…..
It’s a fact. In March 2019 our RM enquiries equated to £151 per enquiry that actually materialised into something. Their outdated approach to customer service, their diminishing staff numbers and their sheer arrogance will see them come unstuck.
who are they being listed with mark????
Well I think all of us Agents who give Rightmove the very thing they need to survive are duty bound to assist them in their goal…….
in-fact, I’m thinking of launching a crowd funding campaign for them?
Not “The End” of Rightmove, perhaps the beginning of a reality check for Rightmove.
2020’s Annual Shafting Letters will speak volumes.
All that will happen is the weak industry that is estate agency will pay it.
This is more worrying for onthemarket.
I think we allow them to take over completely. Become a monopoly. And then gov’t might step in and make them charge a lower fairer fee.
Onmarket and zoopla are now just feeding the beast and muddying the waters.
They’re can only be 1 god. Sacrifice your staff and rents for him.