BUSINESS FOCUS
Exeter, and Newbury. It also opened a country house department to focus on higher value properties. But the second half of the year was more subdued than the first half, and deceleration seems to have continued this year. The interim results for the six months to
June 2011 showed sales up 6.5 per cent and profit flat, even though rentals (up 10 per cent) stood at a record level The company also generated less cash from operations, though that is partly explained by high investment in new offices. Estate agency transactions were down,
and Dominic Agace, the CEO, commented; “Low volumes are expected to continue, particularly outside London, and we expect this to lead to further branch closures by over-extended companies.” While that won’t help the figures in the short term, it gives Winkworth the opportunity to expand at the expense of weaker independents – the company has already increased its target for new offices this year from eight to 10, and it may even beat that revised figure.
Others are On the up So much for the agencies – obviously the City isn’t happy with the way the economy is going, and is selling out in case the housing market tanks again. That’s not illogical – Alan Collett, Chairman of ARIM, says, “Estate agents have a high dependency on turnover, and turnover for these groups is going to be quite restricted for several more years.” Rightmove hasn’t put a foot wrong
despite demanding conditions; it has managed to increase earnings by a double figure percentage every year for the past five, and is expected to continue growing at 15 to 20 per cent. Perhaps it’s not surprising, then, that it trades on a dizzying 27.6 times earnings – way above any of the quoted agencies. When you analyse the numbers, it’s
obvious that Rightmove’s financial success doesn’t depend on the volume of house sales. The number of advertisers hasn’t changed much in the last eighteen months;
Rightmove hasn’t put a foot wrong, increasing earnings every year and trading at a dizzying 27.6 times earnings.’ rIGhtMOVe
instead, Rightmove has concentrated on increasing the amount each agent spends. In 2010, ARPA (average revenue per advertiser) increased from £308 to £379 a month, and in the first half of this year it increased again to £430, a growth rate of 18 per cent year on year. The relatively new display advertising
product accounted for nearly half the total growth in Rightmove’s revenues. Even developers are spending more; average spend on new developments was up 13 per cent compared to a year ago, with the new development microsite product helping push up returns. Add to that the fact that Rightmove has
continued to increase its commanding market share – up one per cent to 83 per cent – as weaker portals drop out, and it’s easy to see how it has achieved growth despite a poor housing market.
Low volumes are expected to continue but new branches are on the increase with
8-10 per year.’ dOMInIc aGace ceO
24 DECEMBER 2011 PROPERTYdrum
LessOns Learned? So what can we learn by looking at the quoted sector? Well first of all, the fact that the market is still unsettled. The tone of all recent trading statements has been cautious; no-one is willing to call the turn in the market. It’s intriguing that Colliers ‘ fastest growing area in 2010 was Corporate Restructuring – working for lenders and insolvency practitioners in distress situations – which more than trebled its revenues. The City is wary of a double dip hitting the property market, and is keeping valuations low. Any agent wanting to raise funds is going to find life tough. That’s possibly one reason many
firms are focused on cash generation and debt reduction. For instance LSL reduced its debt pile from £20.8m to £4.9m in 2010, despite increasing the dividend by 56 per cent. Savills, too, has increased its net cash pile. Yet alongside that it’s clear that many
players are taking advantage of opportunities in the market to expand their market share. LSL says it increased its market share from 2.7 per cent in the second half of 2009 to 3.5 per cent on a like for like basis; it also added 1.2 per cent additional market share through the acquisition of Halifax Estate Agencies. That’s helped it maintain profitability even
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