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(Alliance News) - Rightmove PLC's results suggest a business in "transition" and raise "nagging doubts", despite strong growth in profit and sales in 2023.
Shares in Rightmove fell 3.7% to 545.60 pence in London on Friday.
In the year ending December, the London-based online real estate agency said pretax profit climbed 7.7% to GBP259.8 million from GBP241.3 million the year prior.
Underlying operating profit rose 8% to GBP264.6 million from GBP245.4 million. Earnings per share improved 5% to 24.5 pence from 23.4p.
Revenue advanced by 10% to GBP364.3 million from GBP332.6 million as customers continued to upgrade packages and increase usage of digital products.
The improved financial performance was reflected in a 9.4% increase in the dividend to 9.3p per share from 8.5p.
Rightmove said average revenue per advertiser increased 9% to GBP1,431 per month from GBP1,314 in 2022, although total membership reduced 1.2% at 18,785 from 19,014.
The latter reflected a 1% drop in estate agency branches and a 4% fall in new homes developments since the start of the year.
In 2024, Rightmove expects ARPA growth of GBP100 to GBP110, driven by the new Optimiser Edge package, ongoing product uptake and contract renewals, with overall revenue growth of 7% to 9%.
But customer numbers are likely to drop slightly, given the ongoing uncertainty in the macro environment.
Rightmove anticipates an underlying operating margin of 70% in 2024 and said its capital allocation policy remains unchanged.
Analysts at Jefferies said the decline in agency branches was "eye-catching" but was probably expected.
"Notwithstanding, the guidance for further declines in [financial 2024] is probably a negative surprise".
So too the margin guide of around 70%, albeit this is within the signalled range, the broker noted.
"The results confirm what the market probably already appreciated: Rightmove is a business in a period of transition, as its core business faces increased competition and heightened macro pressures, and as its adjacent areas ramp investment".
There was no obvious reason why the shares should respond positively Friday, Jefferies said.
Russ Mould at AJ Bell said despite a strong year in terms of profit, and signs of recovery in the housing market, there are some "nagging worries" for Rightmove.
Being the market leader creates a virtuous circle for the company.
It is a "must-have product" for estate agencies and provides significant pricing power when it comes to securing subscriptions from agencies.
That's why the threat from OnTheMarket – now backed by a big US operator in CoStar – is such a concern for investors, he said.
In December, CoStar Group Inc completed the acquisition of OnTheMarket PLC for GBP99 million.
CoStar said the combination would create a "genuine disruptor" to the established UK market leaders.
Andy Florance, founder & chief executive officer of CoStar, said "the current market leader [Rightmove] has grown complacent focusing on margin over innovation, and pricing ahead of value," he said.
Mould said: "In this context it's no surprise there is some nervousness about Rightmove losing estate agency customers, with a warning of further losses to come".
A key driver of growth is increasing average revenue per advertiser, Mould noted.
"A CoStar-backed OnTheMarket might make it more difficult for Rightmove to pull this lever", he suggested.
By Jeremy Cutler, Alliance News reporter
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