Embargoed until 07.00 on 7 August 2020

Half year results for the six months ended 30 June 2020

Rightmove plc, the UK's largest property portal, today announces its unaudited results for the 6 months ended                   30 June 2020.

Financial Highlights                                                                                                            

·        Revenue down 34% year on year reflecting the impact of the 75% discount support offered to our customers for the period April to June 2020

·        Cash at the end of the period of £50.3m (31 December 2019: cash and deposits £36.3m)

·        Average revenue per advertiser (ARPA) down by 34% on the same period a year ago to £712⁽¹⁾ per month (2019: £1,077)

Operational highlights

·        Membership numbers down 3.3% since the start of the year to 19,158 (31 December 2019: 19,809) reflecting a 3.5% decline in Agency branches, together with a 2.1% fall in New Homes developments. Branch based agents resilient with a decline of 300 (2%) since the start of the year.  Q2 saw a decelerating trend in branch closures with Agency branches and New Homes developments being net positive in June

·       Rightmove's position as the place home hunters turn to first remains strong with market share of time on site  at 88%⁽³⁾  

·      Rightmove is the only place to find virtually the whole of the property market in one place with over 940,000 UK residential properties advertised on Rightmove. The listings lead over any other UK website has widened to over 50%

·     Continued traffic growth with visits up 5% year on year helped by a stronger than expected increase since the reopening of the property market in England in May with time on site and visits in June up over 50% year on year. Time on site averaging 1.1 billion⁽²⁾  minutes per month over the period (2019: 1.1 billion)

·       Reaffirmation of the value of premium packages. Despite market uncertainty the proportion of customers taking either the Enhanced or Optimiser packages grew to 39% (December 2019: 38%), with 400 premium Optimiser 2020 packages sold in 2020, including nearly 100 during lockdown

·       Pace of product development accelerated despite lockdown with 300 software releases, 10% more than a year ago

Current trading and Outlook

Home hunter demand has been strong since our customers started re-opening their businesses from 13 May, supported by changes in consumer needs and the recent announcement of temporary stamp duty holidays across the UK. Since 13 May we have recorded 65 days beating Rightmove's previous traffic record set on 19 February 2020. Between 1 June and 31 July demand for sales properties has been 50% higher than the same period in 2019 with rental demand being over 20% higher.

The positive metrics in June and July allied to the stamp duty holidays give grounds for cautious optimism that housing transaction levels will increase from the low point in Q2. Rightmove data suggests that the significant increase in activity is being driven not only from the pent up demand from the period of lock down, but an increased number of home hunters who have decided to move following the experience of lock down. However, it is too early to assess whether the strength of this positive momentum in the housing market will be maintained against the threat of further lock downs and wider economic slowdown.

The strong demand has led to positive trading momentum since the beginning of June. The number of branch based Estate Agency branches increased in both June and July and the number of products sold to Estate Agents were 7% higher in July 2020 than July 2019.

Rightmove is uniquely placed to benefit from the return to a more normal property market. The strong traffic post the easing of the lockdown and the resilience in product and package adoption through the pandemic illustrate the strength of our network and the value our customers see in our products.

Rightmove's subscription advertising model, together with the strength of our proposition for both customers and consumers now and in the future, supports the Board's continued confidence in the long term prospects for the business.

Given these prospects we confirm our commitment to our long established policy of returning all free cash flow to shareholders through a mix of dividends and share buy backs as soon as prudent.

Peter Brooks-Johnson, Chief Executive Officer, said:

"In recent months Covid-19 has disrupted the lives of everyone across the UK. Our customers have shown incredible resilience and ingenuity to continue to trade through this exceptional period. I am grateful for both their continued support and also their proactive engagement to ensure that home hunters have been well informed and protected. I'm also immensely proud of the Rightmove team for the unerring dedication which has seen Rightmove operate seamlessly throughout this challenging period and offer unprecedented support to the industry through discounts and accelerated innovation.

Following the reopening of the housing market on 13 May housing market activity is at record levels, with evidence of new home hunters coming into the market with changing needs as they reassess their priorities and further incentivised by the temporary stamp duty holiday. Rightmove has extended its lead as the place home hunters turn to first for their move. It's quite incredible that 65 of our record days have been since 13 May. I'm pleased that our customers are choosing to invest in our digital solutions to take advantage of this record demand.

Despite the current strong market we're mindful that potential economic challenges and further Covid restrictions in the second half of the year make it hard to predict how sustained the increase in activity will be.

Rightmove's purpose is to make home moving easier in the UK and the restrictions placed on our daily lives because of Covid have shown the value of the innovations we are delivering to better enable this."

Half Year Statement

Our response to Covid-19

During the pandemic our priorities have been to: protect our people; support our customers; protect our liquidity and continue to make progress against our long-term strategic goals of making home moving easier in the UK by helping consumers to be transaction ready. Much to the credit of our people, we have continued to operate all aspects of our business without interruption and believe we are well placed for the future.

Looking after our people

On 17 March 2020 our employees seamlessly transitioned to working remotely which is a testament to the flexibility and professionalism of the Rightmove team.

Full time working from home brings with it new health and well-being challenges, augmented for many with the additional pressure of home schooling children or caring for relatives. We have supported our people, including those on furlough, through a series of Covid-19 tailored webinars on topics such as home schooling and mental well-being and additional practical support for those working such as an extra ten days' paid leave for those with caring responsibilities. We have also focussed on keeping the connections between teams that are such a key part of the Rightmove culture through regular business updates, including Company-wide 'Town Hall' webinars on a weekly basis.

Whilst our customers closed their offices many continued to work remotely through the lockdown period. Our customer facing teams were on hand to support them wherever possible, and during the period that the housing market was effectively closed (23 March to 13 May), the team made over 50,000 customer contacts to both answer questions and proactively offer support. The Rightmove product and technology team continued to deliver innovation, focused on both the short term needs of our customers, but also pursuing our longer term strategic development goals. In addition, during the lockdown period the team delivered nearly 300 software releases, 10% more than a year ago.

The Board would like to express its thanks for the unerring dedication of our employees and the support they have shown to each other and to our customers during this challenging time.

Supporting our customers

The Government measures taken to contain the spread of Covid-19 have had an unprecedented impact on the UK property market, which was effectively closed from 23 March until 13 May in England, 22 June in Wales and 29 June in Scotland. In the face of this closure, we took action to assist our customers, with a 75% discount for Agency and New Homes customers for April to July, as well as selective support across our other business units. Given that it takes an average of three months for housing transactions to complete, which impacts the cash flows of our agent customers and that it will also take time for agents to build a pipeline of vendors and new sales instructions, we are continuing to support agents in England with a 60% discount in August and a 40% discount in September. Agents in Scotland and Wales will receive a 75% discount in August and a 60% discount in September.

Beyond financial support, we have continued to provide advice and deliver innovative new tools to help the property market function whilst adhering to the social distancing guidelines and minimising unnecessary travel. Practical support includes a new tool which enables customers to securely deliver online viewing videos to home hunters in line with government advice. The integrated tool also offers usage reporting and functionality to make the process of responding to home hunter enquiries quicker and more efficient for agents; bespoke local market data to help agents target resources most efficiently and also to use with home buyers and sellers; consumer webinars and an accompanying consumer advice hub.  Our weekly consumer email update is read by an average of 800,000 home hunters every week; and a series of 54 Covid-19 related webinars for agents have been attended by over 34,000 property professionals from over 5,200 branches.

Our customers have shown incredible resilience and ingenuity. We are grateful for both their continued support and also their proactive engagement to ensure that home hunters have been well informed over this period.

Protecting our liquidity

We took action to protect our liquidity through the decision to cancel the previously announced 2019 final dividend, and the suspension of our share buyback programme from 14 March. We also confirmed our eligibility to access the Government's Covid Corporate Financing Facility (CCFF), and extended the Group's committed revolving loan facility with Barclays Bank plc for 12 months, although no CCFF has been issued and no amounts drawn under the loan facility.

To conserve cash and reduce operating costs during the period, from 6 April around one third of the organisation was placed on furlough, predominantly those in customer facing roles, reflecting the reduced activity in the housing market. In recognition of the impact of Covid-19 on our stakeholders, the entire Board and the Group's Senior Leadership Team took a voluntary 20% reduction in salary with effect from 1 April to 31 July. We have also deferred £12m of VAT payments, which must be made before 31 March 2021.

With the reopening of the property market, we had returned all employees from furlough by the end of 31 July 2020. 'Doing the right thing' is central to the Rightmove culture and as the immediate uncertainty of the crisis passes and given our resilience in the year to date we intend to repay the grant from the Coronavirus Job Retention Scheme (CJRS) and we will not be taking the furlough bonus in January next year. We believe that repaying the CJRS grant of £0.7m supports both our brand and our responsibilities to the wider community.

Strategic highlights

Continued strategic innovation

In addition to the rapid response to the pandemic our focus on strategic innovation has continued through the period, with the importance of making the property marketplace more efficient for home hunters and agents throughout the home moving journey highlighted by the Covid-19 restrictions.

In the first half of 2020 we delivered functionality which further increases the appeal of Rightmove to home hunters and will also support future revenue growth as we help consumers become more transaction ready, including mortgage tools and insight and an enhanced version of the property details page

To enhance our reputation as the UK's favourite property research resource a new version of the sold price search launched in April.  The new design responds more quickly, delivers a more flexible experience and contributed to an increase in traffic of over 20% to these pages together with an increase in valuation leads sent to our customers via the Local Valuation Alert product.

A new version of the property details page was rolled out to Overseas properties and entered beta testing for rental properties at the end of July. The new design provides a rich, highly visual experience for home hunters increasing image size by 50% and fully integrates video content on the page. The new page increased home hunter engagement by 40%.

The alpha testing of integrated appointment booking functionality for tenants completed in March. Building on the knowledge gained as part of the Van Mildert acquisition the next version of the appointment booking functionality will begin beta testing in August and will include the next iteration of the Rightmove Tenant Passport.  The appointment booking functionality will allow home hunters to request an appointment electronically whilst enhancing the lead information with the passport details to allow agents to prioritise tenants most likely to pass a reference. Once a viewing is confirmed, tenants will receive automated reminders to help avoid missed appointments and unnecessary journeys for agents. Following the viewing, feedback is automatically gathered from the tenant saving the agent time and offering the home hunter the chance to express their interest in progressing towards tenancy. From the autumn, Agents will be able to seamlessly order a reference from Van Mildert without the need to re-enter applicant details.

Continuing our exploratory partnership with the Nationwide Building Society a number of enhancements have been made to the design and location of Rightmove mortgage calculator tools which has more than doubled home hunter engagement and provided valuable insight that will underpin our future plans.

The place home hunters turn to first

Rightmove brings together the UK's largest and most engaged property audience and the largest inventory of properties in one place.

Rightmove is the place that home hunters turn to first and engage with most when searching, researching and moving home with the market share of time spent in June at 88%. Our lead in available properties for sale has widened with over 50% more properties than any other website in the UK.

During lockdown, home hunters reduced their activity.  Visits in April 2020 were around 60% of those recorded in April 2019, however the recovery in traffic has been particularly strong since 13 May.  June 2020 saw a record 230m visits, over 60% higher than June 2019, helping visits for the last six months reach a new record level, 5% higher than a year ago. The amount of time spent by home hunters has also been encouraging with over 1.5 billion minutes in June, up over 50% year on year. Time on site for the period averaged 1.1 billion minutes per month, unchanged from the prior period.

Being synonymous with home hunting in the UK allows us to provide the most significant and effective exposure for our customers' brands and properties. Telephone and email leads in June were 5.7 million, up 57% year on year, and despite the hiatus during April and May leads for the period were up 3% year on year.

The increased home hunter engagement and our continuous product development increases the value of both our advertising and lead generation products. Leads from our Local Valuation Alert product which introduces agents to potential sellers were up over 20% in the second quarter compared with 2019.

Financial performance

Revenue

Revenue was impacted by the support we provided to our customers in the face of the significantly reduced property market activity as a result of Covid-19. We provided a 75% discount to our Agency and New Homes customers and selected discounts across our other business units between April and June, with a revenue impact in the period of £50.5m. As a result, revenue declined by 34% year on year to £94.8m (2019: £143.9m). We expect that the further discounts we have provided to our customers in the second half will have a revenue impact of £35m-£37m.

Agency revenue decreased by £38.2m year on year to £66.6m, with the financial impact of the 75% discount offsetting the revenue growth in the first quarter. Encouragingly, the majority of Agency customers maintained their product and package adoption throughout the period, and product spend increased in June following the reopening of the property market. Agency ARPA fell by £338 to £685⁽⁴⁾ (2019: £1,023) per branch per month as a result of the discount provided. Agency customer numbers declined by 580 branches, of which 280 related to a reduction in branch equivalents, being virtual branches based on average property stock levels, and typically applying to hybrid agencies.  Over 90% of our agents are branch based agents who have been resilient over the period. The number of branch based agency members fell by 300 branches, 2% of the total, due primarily to the loss of lower stock and less established agents, who were particularly sensitive to the cash flow impacts of Covid-19.

New Homes revenue declined by £10.5m year on year to £17.3m, also largely driven by the impact of the 75% discount throughout the second quarter. Whilst some developers reduced discretionary spend on our suite of digital advertising products in order to conserve cash flow as property market activity reduced, we have seen a strong return of product spend in May and June as developers resumed site construction and sales and marketing activities. New Homes ARPA fell by £510 to £836⁽⁵⁾ (2019:£1,346) per development per month. The majority of our New Homes customers maintained their presence on Rightmove throughout lockdown, with robust development numbers in the first half of 2020, down only 2.1% since December 2019.

Other revenue, which includes Overseas, Data Services, Commercial and Third Party advertising services, declined by 4% in the first half of 2020 to £10.9m. We supported our Commercial and Overseas customers with discounts of 75% and 50% respectively throughout Q2, and this was partially offset by growth in our Third Party advertising revenues of £1.6m year on year, principally due to our mortgage sponsorship agreement with Nationwide, which commenced in September 2019.

Operating profit

Operating profit declined by 43% to £61.7m (2019: £108.2m) and operating margin was 65.1% (2019: 75.2%). Operating costs decreased by £2.6m to £33.1m (2019: £35.7m) reflecting the following mitigating measures to reduce operating costs and to preserve cash from April 2020:

·   Board and Senior Leadership Team remuneration: In recognition of the impact of Covid-19 on our stakeholders, the entire Board and the Group's Senior Leadership Team took a voluntary 20% reduction in salary with effect from 1 April 2020 to 31 July 2020.

·    Furlough: From 6 April 2020 the Group furloughed around a third of its employees, predominantly in customer facing roles, under the Coronavirus Job Retention Scheme. All employees were brought back from furlough by the end of July 2020. Given the resumption of housing market activity and our performance in the year to date, we have decided to repay the cash received under the furlough scheme of £0.7m by December 2020.

·    Marketing spend: Marketing spend reduced in the period as we deferred planned spend in line with the significant reduction in UK housing market activity experienced in Q2. However, we plan to continue marketing activity over the second half of 2020 as we invest in our biggest ever national television marketing campaign to use the strength of our brand and consumer reach to support property market activity for the benefit of our customers.

·    Discretionary costs: With all employees working remotely at home since late March 2020, travel, accommodation and staff subsistence costs have reduced, resulting in a year on year saving of £0.3m in the period.
 

Costs were also impacted by a reduction in salary costs due to a fall in average headcount (excluding Van Mildert) to 490 (2019: 517) and reduction in other employee costs, offset by increased investment in technology and the inclusion of Van Mildert operating costs.

Full year costs are likely to be slightly more weighted to the second half principally due to the timing of recruitment of additional headcount which had been paused earlier in the year following the reduction in property market activity, and the phasing of marketing campaigns.

From 2020, operating profit is reported on a GAAP basis, including the charge or credit relating to share-based payments and National Insurance on share-based incentives. In accordance with IFRS 2, a non-cash credit of £0.2m (2019: £2.2m charge) was credited to income representing the amortisation of the fair value of share-based incentives granted. The reduction in the charge reflects both a reduction in the quantum of new share-based incentives granted in the period, together with the impact of performance conditions for historical awards for the executive directors which are now unlikely to be met. The full year IFRS 2 charge is estimated to be in the range of £1.0m to £1.3m.

NI is being accrued, where applicable at a rate of 13.8%, on the potential employee gain on share-based incentives. Based on a decline in the closing share price from £6.34 at 31 December 2019 to £5.46 at 30 June 2020 in respect of the outstanding share-based incentives granted, together with the realised NI cost on share-based incentives exercised in the period, there was a credit of £0.1m (2019: £0.6m charge) in the period.

Earnings per share (EPS)
Basic EPS declined by 42% to 5.7p (2019: 9.9p) reflecting the reduction in year on year profit, offset by the benefit of the share buyback programme in place during 2019 and at the start of the year which reduced the weighted average number of ordinary shares in issue to 871.7m (2019: 888.2m).

Cash position and balance sheet liquidity

Throughout the period, the Group was debt free and has continued to see strong cash generation with cash conversion in excess of 100%⁽⁶⁾. Cash generated in the period benefitted from a working capital reduction of £13.7m, primarily due to the reduction in debtors as a result of the discount provided to customers. This benefit is expected to reverse in the second half of the year. The Group's closing cash balance was £50.3m (31 December 2019: cash and money market deposits balance of £36.3m).

The Group has the benefit of a £10.0m committed revolving loan facility with Barclays Bank plc which was agreed on  7 February 2020 and replaced the previous £10.0m committed loan facility with Barclays Bank plc which was terminated on that date. In April 2020 a variation was agreed to the facility to extend the term beyond the original year to 7 February 2022 and introduce a covenant in relation to the ratio of net debt to EBITDA. No amount has been drawn under the facility.

On 27 April 2020 Rightmove received confirmation that it is eligible to access the UK Government's CCFF. Rightmove has not issued any commercial paper under the scheme.

Deferral of indirect taxation (VAT) payments: The UK government announced in March that all UK VAT-registered businesses had the option to defer any VAT payments due between 20 March 2020 and 30 June 2020. Payments must be made on or before 31 March 2021. During the period the Group deferred VAT payments of £12.1m. Given the positive start to the re-opening of the housing market, the Group intends to bring forward the settlement of the VAT deferrals to the end of 2020.

Returns to shareholders

Given the uncertainties caused by the impact of Covid-19, the Board considered it prudent to cancel the proposed final dividend payment of 4.4p per share (£38.5m in total) for the year ended 31 December 2019 in order to preserve cash and strengthen the Group's financial liquidity.

The Board would like to thank our shareholders for their support regarding the dividend cancellation which provided the cash flow headroom and flexibility for the Group to extend financial support to our customers.

The Board recognises the importance of the dividend to our shareholders; however, given that we believe it is in the best long-term interests of the Group and its shareholders that the Agency discount is extended for a further period until the end of September 2020, we have not declared an interim dividend. The Board will consider the appropriateness, quantum and timing of future dividend payments when it has a clearer view of the scale and duration of the impact of Covid-19 on the business.

The Group bought back and cancelled 5.0m ordinary shares (2019: 3.6m shares) in the period at a cost of £30.1m (2019: £18.5m) as part of its ongoing share buyback programme. On 14 March we announced our intention to pause our share buyback programme in order to conserve cash and strengthen our balance sheet.

Our long-term capital allocation policy is unchanged and the Board remains committed to returning substantially all free cash flows to shareholders through a combination of a progressive dividend policy and a share buyback programme.  

Principal risks and uncertainties

The Group's principal risks and uncertainties and a summary of the mitigations for each are set out below.  

Covid-19

The Covid-19 pandemic and measures taken to contain it have had an unprecedented impact on the UK economy and the property market. The business took immediate action to mitigate the impact of the pandemic on the Group, its employees, customers and other stakeholders. Key measures included:

·    Invoking business continuity procedures which have enabled the entire organisation to work remotely, for the safety of our employees and in accordance with Government guidelines. The transition to remote working has had no significant impact on business performance and can continue for as long as is required. We have been trialling a return to the London, Milton Keynes and Newcastle offices for a small number of employees since July, following a full risk assessment.

·    Providing financial support to our customers in response to the significant reduction in activity in the property market. Property transactions ⁽⁷⁾ which drive our customers' revenue, were down 57% year on year in April and 52% down year on year in May. We provided a discount of 75% of the invoice value for 4 months from April to July for our Agency and New Homes customers and selected support across other business units. The support has been extended with a 60% discount in August and 40% in September for Agency customers, and different arrangements in Wales and Scotland where the property market opened later than in England.

·    Continuing to innovate to ensure that we maximise our value to agents whilst activity in the property market was severely restricted, and to help agents work as effectively as possible during this period. This included new features on the Rightmove platforms such as highlighting properties where online viewing is available and giving agents the ability to deliver video content automatically in response to a Rightmove lead. The frequency of agent webinars has increased, together with advice on the website, to help agents navigate the new restrictions within the property market e.g. for viewings. Rightmove is also providing local market data to agents to provide insight in their area.

·   Preserving cash flow through the cancellation of the previously proposed 2019 final dividend (£38.5m), suspension of the share buyback programme from 14 March, and deferral of indirect taxation (VAT) payments of £12.1m.

·    Furloughing around one third of employees, predominantly in customer facing roles, from 6 April under the Coronavirus Job Retention Scheme. The Group intends to repay the furlough grant following the increase in activity since the property market reopened. The Board and Group's Senior Leadership team took a voluntary 20% reduction in salary with effect from 1 April to 31 July.

·    Ensuring liquidity through confirmation of eligibility to access the Government's CCFF, and extension of the Group's £10.0m committed revolving loan facility for 12 months to 7 February 2022.

The measures that the Government has taken and continues to take in order to contain the pandemic are expected to increase the macroeconomic risk on the business as detailed in the table below in risk 1, and the continued incidence of Covid-19 increases the risk of ensuring the right talent in the business as detailed below in risk 5 due to the increased risk of employee absence due to illness.

Withdrawal from the EU

Following the UK's departure from the European Union on 31 January 2020, the UK is now in a transition period which is due to end on 31^st December 2020. The UK and the EU are currently in discussions regarding the parameters of future trading arrangements. If the UK and the EU are unable to reach an agreement on these arrangements the macroeconomic risk to the business increases as detailed in risk 1.

The Principal Risks and uncertainties remain as set out in detail in the Strategic Report of the 2019 Annual Report.

Next trading update

Our next scheduled reporting date is 26 February 2021 when we will announce our results for the year ending            31 December 2020.

                             
Andrew Fisher                                                                                   Peter Brooks-Johnson

Chairman                                                                                   Chief Executive Officer

7 August 2020

Notes to the half year results for the six months ended 30 June 2020

(1)   Average Revenue per Advertiser (ARPA) is calculated as revenue from Agency and New Homes advertisers in a given month divided by the total number of advertisers during the month, measured as a monthly average over the six month period.

(2)   Source: Google analytics.

(3)   Source: Comscore, June 2020

(4)   Agency ARPA is calculated as revenue from Agency advertisers in a given month divided by the total number of advertisers during the month, measured as a monthly average over the six month period.

(5)   New Homes ARPA is calculated as revenue from New Homes advertisers in a given month divided by the total number of advertisers during the month, measured as a monthly average over the six month period.

(6)   Cash generated from operating activities of £77.3m compared to operating profit as reported in the income statement of £61.7m.

(7)   Source: HMRC transactions for England, Scotland and Wales

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF YEAR REPORT 2020

We confirm that to the best of our knowledge:

The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

The interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed consolidated interim financial statements; and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Group during that period; and any changes in the related party transactions described in the last annual report that could do so.

By order of the Board of directors

                    
Andrew Fisher                                                           Peter Brooks-Johnson

Chairman                                                                       Chief Executive Officer

07 August 2020

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 June 2020
 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION
as at 30 June 2020
 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
for the six months ended 30 June 2020

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
for the six months ended 30 June 2020