Rightmove plc

Good morning everyone and welcome to the presentation of Rightmove's 2020 full year results. My name is Peter Brooks-Johnson and I'm joined for the first time by Alison Dolan, our CFO, who joined Rightmove in September and she'll introduce herself in a moment. This is today's agenda. I'm going to talk through the highlights of the year. Alison's going to go through some of the more detailed financials and then I'm going to spend some time giving you a little more colour on the housing market and our strategic developments. One can't talk about 2020 without talking about how Rightmove has responded to the threats and risks from COVID-19. As the pandemic struck, we acted swiftly to look after our people, support our customers and protect our liquidity. I'll talk about the first two and Alison will cover the last in her section. All our employees moved seamlessly to working from home on the 17th of March and remain so today. I'd like to say a special thank you to all the Rightmovers who have not only looked out for each other, but our customers as well. Whilst you will be aware of the significant financial support we've offered our customers, I think the practical assistance we offered has also been important. This slide gives you a flavour of the practical assistance the team have delivered over the last year, so I won't repeat it. Moving on to the highlights of 2020. In 2020, COVID-19 upended the lives of everyone across the UK. The Rightmove network effect has emerged stronger than ever as home hunters continue to turn to Rightmove first and customers begin to invest more in our digital solutions to aid their recovery. 2020 was a record year for traffic, with total time spent on the platform of 15.9 billion minutes. 31% higher than 2019 and our enviable competitive position has strengthened. The first half of 2020 wasn't easy for our customers with the temporary suspension of the housing market from the 23rd of March to the 13th of May in England and later in Scotland and Wales. Advertisers on the 31st of December stood at just shy of 19,200 a fall of 3%. Our agency customers have been resilient with numbers rising in the second half of 2020. Testament to their flexibility, our branch based agents have only reduced by just over 200 branches over the course of the year, despite everything thrown at them. The remainder of the drop in customers being the hybrid stock based agents and new homes developments where all the units were sold. As previously announced we offered a 75% discount for all of our estate agent and new homes customers from April to July and continue to support the industry with a 60% discount in August and a 40% discount in September. The impact of that can be seen in the 29% fall in revenue and corresponding fall in profit and EPS. Given the uncertainty which unfolded in the first half of last year, we chose to preserve liquidity and cancel the 2019 final dividend and not declare an interim dividend for 2020. I would like to thank shareholders for their support in this. We remain committed to our capital allocation policy and given the strong trading in the second half of the year, we are resuming our share buyback programme and announcing a final dividend of 4.5p. Beyond our KPIs, we have made much strategic progress so far this year. Rightmove's purpose is to make home moving easier in the UK. We will satisfy our purpose and drive growth through innovation. We continue to innovate in our heartland of property advertising, with the development of the home hunter part of the website, products and packages. And we continue to innovate to help agents be more efficient, Helping agents become more efficient has always been part of our strategy as we see it as a way of helping them reduce their costs, spending a larger proportion of their revenue on property marketing and still being more profitable. And we innovate with data to support our customers too. In 2020 we rolled out new tools to help our estate agent and new homes customers gain vital local insights to make their marketing more efficient. Whilst property advertising will be the core of our growth, we are also innovating to generate future growth. We believe that there is much opportunity in helping home hunters to be transaction ready and have completed phase one of our digital rental journey. And we're looking to the future in the property sales market as well. We're integrating online property auctions on the site. More on all of that later. 2020 has reminded us we're part of a much bigger community, and we've redoubled our efforts to ensure Rightmove is playing its part. We continue to actively reduce our carbon emissions and offset those we cannot avoid, while we are also intending to use our platform for good. Alison will talk a little more about our climate goals later. We deeply believe in opportunity for all, and I'm pleased that some of our longer term actions to reduce our gender pay gap are paying off. But we have much more to do and will not rest until we reach parity. Again, we aim to do more beyond our immediate surroundings, and I'm very excited at our new partnership with the charity Generating Genius, who focus on raising the next generation of STEM leaders from black and ethnic minorities and those from disadvantaged backgrounds. There's much excitement for the future, but this is all built on our strong position today. Before I give a little more colour to what we've seen more recently and our strategic position, I'll hand over to Alison to talk about the numbers in more detail.

Thanks, Peter. Good morning, everybody. I'm Alison. I'm disappointed not to be able to meet you all in person today, and I look forward to doing that as soon as is possible. I joined Rightmove in September, having spent close to four years at News UK as Chief Strategy Officer, where I was primarily focused on subscription growth for The Times, the integration of the newly purchased wireless group, and the growth of News UK's audio products, particularly its podcast output and plans for the launch of Times Radio. prior to that i spent 15 years at sky where for 12 of those i was group treasurer i did a number of divisional finance director roles including the technology business and the b2b business which i then ran for four years before i left in 2016. there are real similarities between sky business and rightmove the subscribing customers are using our product to market their own business to end consumers and to differentiate themselves from their competitors and our focus was to maximize the value of our proposition to our customers and this was one of the reasons that i was excited to join rightmove it has been a hugely enjoyable six months i've been struck by rightmove's clarity of strategy and ambitions for growth as well as the deep understanding of its market and the businesses of our customers one of the things that i'm really going to value about being out of lockdown is being better able to absorb some of this understanding because not being able to be part of office conversations is one of the things that i found most frustrating about joining a new business during lockdown so i'm looking forward to a more normal second six months Now on to the results. As Peter outlined, revenue for the year very clearly tells the story of the discounts we provided to our customers, in the light of which our performance for the year has been very satisfactory. Revenue fell by £83.6 million, 29% to £205.7 million. The revenue bridge on the right separates out the various elements involved. The customer discounts we provided following the market closure on the 23rd of March totaled £89 million and agency revenues were the biggest component of that drop at close to £70 million. Stripping out the discount, however, underlying ARPA grew, increasing revenues by £13.6 million from a combination of earlier price rises, package upgrades and increased product take-up as customers took advantage of the buoyant market in the second half of the year. New homes developers also spent more on products during the year. The financial impact of a drop in customer numbers was just over 12 million pounds and other revenues, which include our breath businesses and the Van Mildred revenues not included in ARPA grew by about 4 million pounds. The largest of these gains was in third party advertising, which grew by 2.6 million. Other gains included commercial and data services, but the overseas business fell by just over a million pounds due to virus related travel restrictions. Now, there are a lot of moving parts making up the discount in ARPA numbers, the discount in particular, which includes non-ARPA revenues. So if we look at ARPA itself, the underlying trend is a little easier to see. Year-on-year, including the discount, ARPA fell by 28% to £778. However, because 2020 ARPA is so distorted by the effect of the discount and the fact that 2019's 12-month ARPA only included three months of van Mildred revenues, three-month trailing ARPA works better as a year-on-year comparison. By October 2020, the discount had been fully unwound, making the final quarter of 2020 a truer picture for ARPA. And also the final quarter of 2019 included Van Mildred in all three months. So on that basis, three-month trailing ARPA for 2020 grew 2% on 2019. We expect a growth profile for 2021 to look more like 2019's growth, possibly a little softer than the 8% we saw in that year, but not too far off. And December 2020's monthly ARPA of £1,103 is, we think, a pretty good starting base. ARPA growth for 2021 will also be driven more by product growth and package upgrades than it will by price. The cost slide is designed to illustrate the makeup of our cost base and to give you a sense of fixed costs relative to discretionary and variable costs. Just over 50% of our cost base is headcount and 80% of that relates to our sales, customer service and product and platform teams. Marketing is our next most significant cost at approximately 18% of total costs. It's almost all discretionary and we did reduce our marketing spend in 2020 to preserve liquidity. Technology costs represent about 11% of the total. These are all of the costs associated with running the platform and the business. So hosting licenses, traffic costs, et cetera. They are broadly fixed, although there are elements that grow as traffic to our sites grows and that will continue. gna is also about 11 of the total rent staff travel costs associated with referencing and rentals etc depreciation and amortization are low for us as we capitalize so little but represent a further five to six percent The growth in costs over the last three years reflects investment in our sales and product teams and 2020 also includes a full year of Van Mildred costs for the first time. Costs have been relatively steady at about 24% of revenues until 2020 when the increase to 33% is purely a function of reduced revenues in 2020. We did make a number of one-off cost savings during 2020 in the face of significant market volatility and to preserve liquidity. Headcount savings were the most significant and were a mixture of furloughing some staff members, voluntary salary cuts on behalf of senior management and the board, and a pause in recruitment during the early months of the pandemic. In total, headcount savings amounted to £1.9 million and these savings will not be repeated during 2020. Other staff-related expenses such as travel, training and recruitment fees fell by £2 million as people worked from home and were not paying recruiters. We also paused a number of outdoor marketing campaigns while people were at home, generating a saving of £0.7 million. Again, neither of these savings will repeat this year. So, gross savings of £4.6 million, all but £1.4 million of which was offset by an increase in technology spend of £0.7 million, the majority of which was traffic-related. and a full year of van mildred costs the increase for which was two point five million pounds unlike the savings both elements of the cost increase are likely to be with us for twenty twenty one 2021 costs therefore will revert to a more normal profile and there will be an element of catch-up costs in relation to recruitment in particular as we look to fill roles which have been vacant and to do that as quickly as we can. Filling the vacant product development roles is a key focus and will be particularly important in a year in which we will focus on product-led growth. Over the past four years or so, our annual increase in operating costs has been in the order of five to six million pounds per year. You should expect that the two year profile of increases from 2019 to 2021 would be broadly consistent with this. So ignoring the dip in 2020, a roughly 10 to 12 million pound increase between 2019 and 2021. The fall in operating profit of 37% reflects the year's lower revenues and the natural gearing of the business and this has meant operating profit of £135.1 million and an operating margin of 66%. Again for 2021 you should expect to see operating profit returning closer to that of 2019 and a corresponding recovery of margin to 70% or slightly above. From profit to cash, there are a number of new elements to our cash flow this year. We started the year with £36 million on the balance sheet, and although operational cash generation was similar to last year's at 105%, the increase in balance sheet cash at the year end reflects the absence of a dividend and a much reduced share buyback programme for 2020. We ended the year with £97 million of surplus cash and therefore have a couple of announcements for today. Firstly, we intend to continue to maintain higher levels of balance sheet cash than in previous years, approximately £50 million, which was the level at the half year. But we also feel that this is now an appropriate time to resume our share buyback programme, which we will restart in March. and to announce a final dividend for 2020 of 4.5p which will be paid in May. We will aim to end the year with £50 million on the balance sheet once again. We believe that this is an appropriate balance of ensuring additional liquidity to help to withstand any further volatility and our stated policy of returning surplus funds to shareholders which remains unchanged. On the P&L, there is really only one element I would draw your attention to, which is the share-based incentives charge, which is less than 50% of what it was in 2019. This is a function of a downward revision in relation to the assumptions on the extent to which performance conditions will be met for the earnings per share element of the 2018 and 2019 PSP awards. and of the 2019 DSP award. Most of you will probably remember that in 2020 we decided to move away from our previously used underlying operating profit which excludes this IFRS 2 charge and use operating profit instead in our reporting. But we've had more than one conversation on the impact that this has had on consensus, as it's really a charge which is difficult to predict and over which we have little control. So for 2021, we will go back to reporting underlying operating profit and to using it as the performance metric for bonus and share awards for exec directors. On the balance sheet, the only noteworthy change really is the level of cash and money market deposits, which I've explained. Working capital metrics remained remarkably consistent during the pandemic. We saw little to no increase in the level of bad debt. So although we increased our bad debt provision in anticipation of some increase, we've since unwound it again as we didn't need it. Debtor days did slightly increase, reflecting support given to some customers to extend payment terms. we continue to pay our suppliers on the same prompt terms as pre-pandemic with average days payable for trade creditors remaining at around 19 days working capital has also benefited by 18 million pounds from the payment of the corporation tax liability in line with hmrc's changes which require larger businesses to pay tax in the year in which the profit is generated Now on ESG, we have increased our focus on all aspects of ESG during the last year and I will aim to update you at each reporting period on one element of our ESG agenda. I'll start today with the environmental element where there are both some new achievements and new commitments to talk about and where we have set ourselves some ambitious goals for the coming years. I'll talk firstly about these and then tell you some more about the frameworks under which we will report going forward. Rightmove achieved carbon neutrality in 2019, and we have retained that status since then and will do so going forward. That has meant identifying and measuring our emissions and then offsetting them with two specific tree planting schemes, one in the UK and the other in the Amazon. We're obviously happy to have achieved that, but our ambition is to reduce our emissions, not just to offset them. So we have made a renewed push on emissions reduction. outlined in the table on this slide the sustainability accounting standards board categorizes rightmove as an internet media and services business with an already light carbon footprint but challenges to limit the footprint of our data centers and the resource consumption of our mobile staff Our targets therefore focus on limiting power and water consumption for both our offices and our data centres, increasing the proportion of office waste that is recycled and increasing the targets for ultra low emissions vehicles between now and 2028, by which time we aim to ensure that our entire fleet is low emission. We have also signed up to the 1.5 degrees science-based targets initiative and have committed to work with the SEQ bti's scientists to ensure that the targets we have set ourselves are in line with the science behind keeping the planet at no more than 1.5 degrees above pre-industrial levels we look forward to making really meaningful progress as we work towards net zero emissions One of the features that these raters of businesses like about Rightmove is our ability to use our platform and our large audience in a system positive manner, aiming to lift all boats, if you like. For us, this could be about helping to create helpful content for consumers on how to increase the energy efficiency for their homes. And we have offered our help to government on this. We are also working with a number of mortgage lenders on the concept of green mortgages and what improved terms might be possible for borrowers with more energy efficient homes. It's very early days, but we are excited about our ability to be a system positive business in this way and want to play our part in making meaningful change. Lastly, on reporting going forward. Like others, we are preparing for the reporting requirements on the Taskforce of Climate-Related Financial Disclosures, the disclosures and impact assessment modelling required, and will aim to use 2021 to get ready for the formal requirements in 2022. Our board is also keen that we use this year to prepare for the TCFD. They are keenly interested to ensure that our environmental agenda is ambitious and they are being both supportive of our plans and challenging of us to ensure that we are adequately set up to make progress. That's all from me. I'll now hand you back to Peter for a strategy and business update.

Thank you Alison. I'll start off by briefly covering what happened in the housing market in 2020. The resilience of the housing market will surprise many. Despite being closed for nearly three months, total transactions according to HMRC was still over 1 million, just over 11% down on 2019. The chart on the bottom of this page shows the shape of the transactions post the reopening of the market. The market was strong in the second half of the year. Typically transactions take around three months to complete, but COVID related processing delays extended this to over four months, which can be seen in the slow ramp up of transactions, which continues to build in the fourth quarter. That's a backwards looking view. We're extremely fortunate that by being in the middle of the UK property market, we also have a unique forward looking view. I'll talk through the top chart first. This shows our proprietary view on demand and sales agreed in the market as well as the HMRC transaction data versus 2019. Starting with the most leading indicator, demand. This is the light teal line. This is our measure of the number of unique buyers in the market inquiring about properties. you can see that this has been exceptionally strong since the relaxing of the first lockdown. You may be surprised to see that in reality, the announcement of the stamp duty holidays on the 8th of July didn't materially increase demand. It was already running at 60% over 2019. Quite incredibly, despite the current lockdown, demand is rising and is again at around 30% higher than February last year. Moving on to the next step in the process, shown by the orange line, you can see that the demand translates into sales being agreed around a month to six weeks later. Sales agreed up to the 14th February this year were 20% ahead of the same period in 2019. It's very unlikely that sales being agreed in February will complete in time for the end of the stamp duty holiday, if that happens at the end of March. I'm sure most agents are telling buyers and sellers this, so I think just as the announcement of the holiday didn't significantly change demand, it looks as if buyers are being motivated by more than potential tax saving and continue to want to move house for lifestyle reasons. Our data suggests that there were around 630,000 transactions in the pipeline at the end of January 2021, with one in five of those transactions agreed in July last year still waiting to complete. That's around twice as many as a normal year. So putting the leading indicators alongside those 630,000 transactions, we expect to see strong transaction numbers for at least the first quarter this year. There will inevitably be some transactions which fall through post the stamp duty holiday, whenever that is, and I'd expect a quieter quarter after any announcement. course as a platform right movies only loosely correlated with the housing market and then only at extremes but from our customers point of view we've seen signs of a marginally increased commission rate and prices achieved for properties have also risen so we believe that the agent commission pool would have grown slightly over the last few months but before you get too carried away with the market I'd like to sound a note of caution If you look at the bottom chart, you can see that the available stock has fallen since the start of the year as a result of significantly less stock coming to market. It appears that lockdown is playing a role, with COVID making potential sellers nervous about inviting people into their homes and also the impact of homeschooling, meaning percent potential sellers are preoccupied. There's been a noticeable dip in the listing of family homes. And of course, the lack of choice reinforces this dynamic. A further listing impetus from an extension to the stamp duty holiday may be helpful. Whilst this stock reduction isn't impacting demand at the moment, lack of choice may well slow the market in Q3 if it doesn't start reversing Q2 as we exit lockdown. Whilst I'm cautiously optimistic, regardless of stamp duty deadlines, one must be mindful of a wider economic uncertainty in the rest of 2021. I'm sure you're all familiar with our strategy, but I think it's always an important place to start. In simple terms, we will have the largest audience of home hunters if we continue to deliver a great user experience, leveraging both our 20 years of knowledge, but also keeping pace with modern technology. By combining virtually every home hunter in the UK with our deep relationships with agents, we can deliver products which perform and help our customers to be successful. And by innovating to create a better marketplace, we can create more opportunity for our customers and new opportunities for Rightmove, and we will make home moving in the UK easier for everyone. I'll look at each of the following in turn. I'll lead with home hunters, our package and product sales and ARPA, our cut number of customers i'll then wrap up by looking at some of those new opportunities so starting with our lead with home hunters alongside the record time spent on our platforms for the first time ever we recorded over 2 billion visits in a year which is 31 up on last year And we've just recorded another record with Wednesday the 17th of February being our busiest day ever with over eight and a half million visits in the day. Clearly much of that is attributable to the rapid pickup of the market in the second half of the year. As you can see from the ComScore chart, our market share has increased as consumers have turned to the site they trusted to deliver an impartial view on the marketplace. Rightmove is more than just search. we continue to extend our lead as the place consumers come to research the property market with traffic to our research tools such as sole prices up over 20% on the year and rightmove remains the only place to see more or less the whole of the UK property market in one place taken together I don't think there can be any doubt that rightmove is the place consumers turn to first and engage with most all of this adds up to just one way we deliver value to our customers quality leads which were up 27% year-on-year we delivered a record 51 million leads in the year and continue to be much higher quality than any other lead source It's also pleasing that development work to simplify the process of registering with Rightmove and setting up an instant alert also bore fruit with a record number of home hunters registering with us in 2020. The combination of this record and the rapidly changing marketplace in the second half of the year led to us delivering 24% more alerts than 2019. So not only did home hunters turn to us first, they heard about new properties on the market from us first too. I thought it might be useful to spend a moment talking about how that exposure helps agents win the right to sell a home. Those of you who know Rightmove well will be familiar that an agent's main priority is winning the right to sell a home as that is the route to their future income. Firstly, the leads we deliver are not only a source of tenants and buyers, we also ask buyers if they have a property to sell. On top of that Our products work to help agents from attracting potential sellers to securing that right to sell. Premium Listing was one of our first products launched in February 2007 and we've refined the design over the last 13 years. Premium Listing makes a property stand out by giving it a bigger listing with more photos in the results list agents often use this right at the end of the process to secure the right to sell a property and as you can see agents know it works sold by me is our most recent product product which was launched at the end of 2019 as part of the optimizer 2020 package sold by me operates right at the start of the sales funnel in the consideration phase it highlights the properties which an agent has sold to help them demonstrate their success to potential sellers over half of sellers are looking to move out of an area so where we know a potential sellers home address sold by me uses dynamic targeting to show them properties from an agent who operates in their home area rather than the area in which they're looking of course the majority of the list lifting for an agent's brand is done within the Rightmove site but as you can see from the chart at the bottom we're also driving traffic to agents websites to let potential sellers get to know the agency better and finally we also have products which streamline lead generation for example local valuation alert this is designed to put potential sellers directly in touch with a local agent it effectively allows agents to skip the consideration phase entirely and get straight to trying to win the instruction in the seller's home because we have a whole of market view we can track whether those sellers who are requesting valuations are putting their homes on the market Last year, just looking at properties which actually came to market, Local Valuation Alert introduced sellers who were worth nearly £70 million in commission to agents. By utilising our consistent investment and extensive data, these and all our other products add up to unrivalled exposure for our customers, which in turn underpins our long term ARPA growth. As Alison mentioned, we expect 2021 ARPA growth to be marginally softer than 2019 and we expect it mainly to be driven by product spend. In order to win sellers, agents are aiming to differentiate themselves from their competition and as you can see, that's what our products do. With nearly 40% of our agency customers taking one of our packages, it's important that we maintain the differentiation for those customers. So our strategy is not to significantly grow the proportion of agents who are on a package, but to increase the proportion of customers on our premium package. Starting with the lower enhanced package, you can see the numbers have softened a little. Around 60% of that delta are customers upgrading to optimizer and the remainder fell prey to the difficult trading conditions in 2020 and shut their doors. as I mentioned earlier particularly pleasing has been the continued sales of our super premium package optimizer 2020 with the majority of upgrades coming from customers on the cheaper optimizer 2015 package as you can see from the chart in the bottom right we've seen consistent growth in the second half of last year and that's continued into January with 60 upgrades in the month so moving on to customer numbers As I mentioned earlier, customer numbers fell in the year by 3%. Within that fall, there are only just over 200 fewer branch-based agents. The majority of these were small one-branch agents with very low stock levels and therefore cash reserves. Given their size and the interruption to their cash flow, I think it shows just how resilient estate agents are. The graphs at the bottom of the page give you a sense of the dynamics in the agency market. They show joiners and leavers indexed to 2020. You can see from the graph on the left that in the second half of 2020 we had more joiners than any six month period since the first half of 2015. This was a combination of some of the branches which were mothballed in the first half of the year being unfrozen and also a pick up in the new business attracted by the vibrant market. A note of caution on those new businesses though. We're continuing to see a trend which I suspect is common to most small business categories. The failure rate is around 50% in the first six months. So we shouldn't expect a rapid expansion in branch numbers just yet. Turning to levers. The second half of 2020 again shows the resilience of agents. across the last five years we have only seen fewer agencies leaving the business in the second half in 2015 and 2017 looking forward we've had modest agent growth in January but as earlier I would counsel caution the more established customers who tend to have a higher success rate at opening new branches are rebuilding their balance sheet after 2020 and are therefore hanging back a little In addition, the looming stock challenge makes it more difficult to successfully open a branch. Adding to that, the success rate of those new businesses, I think, suggests that we're likely to be around flat on new branch numbers for the year. Of course, if the stock challenge disappears, it may be different in the second half. As ever, the story with New Home's membership is a little simpler. To remind you, we count each development site as a member in our membership numbers. This graph shows you the number of developments we've counted in our membership numbers as the black line and the number of developers, in other words the companies, as the teal line. Social distancing restrictions means it's been taking longer to build new properties. Developers have worked hard to speed up their development rate whilst keeping their teams safe. and are just now getting back to a supply rate which is similar to pre-pandemic levels. The buoyant market in the second half of the year saw the sales rate outstrip the build rate, hence we saw a reduction in developments listed. Given the current pace of the market, I'd expect the number of developments on the site to continue to fall in the first half of this year, as again, construction may struggle to keep up with demand. Indeed, many developers have already sold most of their planned property completions up to the middle of this year. we've refined our propositions for developments in the pre-marketing phase and i think in the second half of this year we should see development numbers grow a little as the impact of the increased build rate starts to balance supply and demand the audience on rightmove is a vital part of the value we deliver to our customers and we're always looking for ways to improve our home hunter experience the new sold price section and the ground up rebuild of the property details page have been fully rolled out and they're both delivering benefits to all customers and home hunters. The page has also been designed to allow us flexibility to tailor the experience for different property types and to create more bespoke advertising products for our diverse advertisers. I thought I'd give you an insight into three new products we're on track to launch this year which build on the property details page. The first is a new listing specifically aimed at new homes developers. The new product is designed to enable cross-sell and up-sell between properties on a development once a home hunter has found somewhere of interest. It's also designed to make it easier for a home hunter to visualise the whole development, not just the property they're looking at. This product is currently in beta test and we're seeing encouraging results and customer feedback. We will be launching it in April. The second is aimed at enabling more home movers to consider auction as a mechanism for either buying or selling their home. In a traditional auction, the buyer is usually committed to the purchase on the fall of the hammer. In reality, this means that most people who require a mortgage are excluded from considering auction properties because of the potential abortive costs. beyond being able to track an auction at home without the pressure of the auction room conditional online auctions open the auction up to those who need a mortgage to finance the purchase the provision of an upfront sales pack and reservation fee also creates advantages for buyers and sellers with a typical time to complete around half the usual time taken for a private treaty sale and reduced fall throughs we will integrate the auction and current bid information on properties which are being sold in this way critically we're also integrating buyer and seller help information on the listing to ensure both understand the auction process and can determine if it's right for them this is currently in development and we're going to beta test in q2 and finally we're going to leverage the new page to help build to rent operators bill to rent is a rapidly growing segment with strong growth projections Typically, a bill to rent property offers more amenities such as common areas and bills included than you would see in a private rental property. It's therefore more expensive. Our research shows that these properties are attractive to many prospective tenants, but the operators find it difficult to differentiate their proposition to those tenants. Given the market reach of the Rightmove platform, we believe we can help operators communicate more successfully to potential tenants and also help those tenants who might prefer a more complete offer find the perfect match. We expect our bill to rent listing to enter beta test in Q3. I don't expect a noticeable revenue impact in 2021 from these products, but taken together, they will impact 2022. Rightmove is still only between 6% and 7% of a typical agent's revenue. as i said earlier a key part of our strategy is helping our customers become more efficient so that they can afford to spend more on marketing products and still be more profitable one way we do this is by utilizing our whole of market view to provide tools which give unique insights to help drive their businesses forward here are a couple of the tools that we released this year The first is the coming soon tool for new homes developers. It focuses on helping a developer refine the pricing and marketing for a development shortly before launch. It brings together important up-to-date information on the housing market. Of course there are other proxies for this information in the marketplace but critically the information we provide is near real time and whole of market. The lower tool is the lead location tool for agents. Again, this uses our proprietary data about home movers gleaned from the 1.3 billion minutes per month they spend on Rightmove. This maps where people who are looking to move, move to. This is important as it is these people who are thinking of moving who will form potential sellers for their area. as you can see from this real example it's not unusual for the majority of sellers to be moving just outside an agent's area traditional marketing struggles to reach these sellers one of the things which frustrates many proactive agents is that all of their competition will get to know about these potential sellers who are moving out of area at the same time when the seller chooses to contact an agent of course sold by me and local valuation alert can help the agent find out before their competition All of these innovations will help us grow in the near term, but we're also innovating for future growth. Rightmove is about making home moving easier for both property professionals and home movers. Helping home hunters be transaction ready is not only part of our purpose, it will help professionals be more efficient and creates future revenue opportunities for Rightmove. The video viewing tool, which we launched as part of our COVID response, is part of the first phase of work to build a better digital tenant flow. I shared the flow at the top of this slide back in February. It shows the broad phases of the rental flow from search to living in the rental property. As you can see, phase one is now complete, which covers the majority of the journey, bringing together the Rightmove tenant passport, Rightmove's viewings manager and Van Mildert. phase two is in development this year which will bring enhancements to each step and also add in the contracting process and this flow is already creating value for our customers and revenue opportunities for rightmove the whole flow makes the path to rental easier for agent and tenant the first half of the flow has significant efficiency savings for agents online viewing videos bring greater benefits in lettings Given the lower financial commitment, we're beginning to see some tenants willing to commit to a tenancy without a physical viewing. Whilst this is a minority, a greater proportion of tenants are willing to use videos to narrow their search. Typically, half the home hunters who request a video watch it and go on to request a physical viewing. It's a significant opportunity for saving agents and tenants wasted journeys, as we typically generate around 250 tenant inquiries a month for each branch. Following a successful beta, we launched our next version of the tenant passport and viewings manager in November. Since then, over 400 branches have signed up to these free tools. The passport allows agents to simply and easily assess a property's affordability and suitability for a tenant, potentially allowing them to suggest something more suitable. Again, this saves agent time and tenant disappointment. Between November and January, tenants created and shared 40,000 passports. Viewings Manager allows the tenant to request appointment times directly from Rightmove. But it's more than just appointment booking. Once an appointment is confirmed, Viewings Manager coordinates the process, reminding the tenant pre-appointment and gathering feedback and interest after the appointment. tenants requested 18,000 appointments in January alone and early data suggests that the appointment reminders and ease of cancelling appointment reduces no-shows by up to 50% a further significant saving for agents when these three steps are taken together they have enabled some customers to reduce the number of viewings per let by up to 70% we see revenue opportunity in the second half of the flow Referencing is a profitable business and we see much opportunity in bringing more of our data experience to bear in this arena as part of phase two of the digital tenancy journey. Van Mildert Reference Ordering is now fully integrated in Viewings Manager, reducing re-keying and promoting speed. We've begun offering tenant contents insurance directly to tenants after their reference is successful. it's early days but the initial results are positive having a good product offered in the right context at the right time leads to a positive conversion rate and successful reference indicates imminent move content insurance isn't the only product we could offer in this way as we increase our experience in this area of course the more references we deliver the larger number of opportunities we have to offer products to tenants we've got exciting plans this year but it's still early days. Beyond the efficiency benefits we bring to agents and tenants, I think this will become an interesting revenue stream in around three to five years. We've much to do and much ambition. But bringing it back to 2020, let's wrap up with the outlook. The network effects at the heart of our business are stronger than ever with record traffic and leads. at the moment the property market is busier than it's been for at least three years agents continue to recognize the value in our unrivaled audience and our products with upgrades continuing to perform well we are mindful of the uncertain economic backdrop and we are planning modest price rises this year with the strong market and the strong product sales i expect most of our growth in 2021 to be product led however we are cautious for the rest of the year particularly with a lack of stock which may impact branch numbers and the likely fall in development numbers in the first half of the year i'm delighted that today we are announcing a resumption of our capital return policy with the dividend and such share buybacks we have the intention of reducing our cash position to 50 million pounds by the end of 2021 i'd like to thank our shareholders for their support and understanding in 2020 As you can see, there's no slowdown in our ambition or in our long-term outlook. Thank you.

Thank you, Roberto. Good morning, everyone. I'm joined this morning by Alison Dolan, our CFO, and Myles Shipside, our housing market expert. Hopefully, you've had a chance to see the presentation, but I thought I'd take a couple of minutes to start off with and give you a quick summary of all the words that you may have heard. 2020 was right moves 20th birthday and of course there's not been a year like it in our history covid has upended the lives of everyone in the uk and it's had a tragic impact on many people but from a right move perspective we've emerged stronger the network effects of the hospital business are stronger than ever with record traffic and leads traffic in 2020 was over 30 higher than 2019 and the trend continues into this year with a new record number of visits on the 17th of february with 8.5 million visits in the day and that's all led to our market share of time according to comscore nudging slightly higher that traffic is turning into leads and sales for our customers leads last year were up over 27 percent and quite remarkably transactions according to hmrc were only down 11 percent on 2019. despite the uncertainty around the end of some beauty holiday home hunters continue to want to move and our leading indicator of sales agreed for february 2021 is 20 higher than the 2019 number undoubtedly 2020 was tough for our customers and we offered both financial and practical support as you know both to help them in the short term but also to show empathy at a moment when our customers were hurting which we know from past experience builds a long-term goodwill despite the challenges a branch-based agents were resilient with only around 200 leaving the industry in the year and branch numbers in total being positive in the second half partly as multiple branches were unfrozen and new businesses started up encouraged by the vibrant market the number of new joiners in the second half of the year was the highest in any six month period since the first half of 2015 but looking forward I wouldn't want to get too carried away the lack of available stock and there is of course continuing macro worries and for clarity i don't think the timing of the stamp duty holiday will have much impact on the number of transactions in 2021 i think we'll see a broadly similar branch numbers in 2021 in total and from a new homes perspective i think the combination of the strong demand and relatively slow build rate due to covid safe protocols will see the numbers of new homes development listed fall a little from here we're planning product laid up for growth in 2021 and expect the growth rate to be close to that of 2019. Over a thousand agents have upgraded to optimise the 2020 in the last year and consistent sales, which in consistent sales in the second half of 2021, in the second half of 2021, we've got off to a good start with around 60 upgrades in January. We've also made good progress with our strategic product projects in 2020. Amongst other things, the ground up rebuild of the property details page, which will enable more exciting products in 2021, and we've delivered the first place of the digital tenet jim and finally i'm delighted to say that off the pool in twenty twenty we've restarted our capital return program with a four-and-a-half p dividend today and share buybacks in march so that's it from me over to questions ladies and gentlemen we now begin the question and answer session

As a reminder, if you wish to ask a question, please press star 1 on your telephone. We have the first question from the line on William Packer from Exxon. Please go ahead. Your line is open.

Hi there, it's Will Packer from Exxon BNP Paribas. Thanks for taking my questions. Free from me, please. Firstly, it's encouraging to see a rebound in agent numbers in the second half of the year. and your guide of flat agent numbers for 2021 suggest the stabilization after some uh weaker years could you talk about how you see the structural agency outlook um i suppose you know some would argue that uh consolidation is likely others would argue digital actually reduces barriers to entry and so you could see an acceleration in um estate agency formation as the market recovers so just first question to comment on that dynamic And then secondly, more specifically, does your guidance include any negative impact from consolidation with Countrywide? And final question for me is, Booman published a pretty aggressive email this morning calling you overpriced and not innovative. Could you update us where we are on their launch process and what they're doing differently? How many agents have they signed up? Is there any product differentiation? Thanks very much.

Thanks, Will. So, starting off with my view on structural outlook for agency. I think, I would hope I'm being pretty consistent when I say, what we're going to see, and I totally accept that from the outside of the industry it's a little harder to see, what we're going to see is a continued process where at the very large end, I think we'll see a little bit more consolidation. I'm interested, as I'm sure you are, that we've seen rumors of a few deals in the last few weeks but what's fascinating is it seems to be on the whole it seems to be people looking to buy in to the industry which i think think suggests that there's there's some real positivity about agency for the future and then at the bottom end what what we see so i shouldn't really say boss man at the smaller end what we see is continued fragmentation so what's fascinating in those numbers uh of branches that joined us in the second half was around about 50% of them were entirely new businesses and they're small. These new businesses are small two, three person businesses. At the moment what we're seeing as I noticed in the presentation is sadly around about 50% of them don't survive their first six months which I think is probably pretty usual for SMEs. Obviously as the market gets better that ratio will improve. So I think we're set for digitization to continue to allow you to operate at a smaller level uh interestingly one of one of the guys who used to work at rightmove left a couple of years ago to set up his own agency in essex uh in the last six months so he's a great test case for us his argument was i've been telling agents all these years what to do i'm going to go and prove that i can do it myself um so what he's done actually he set up on his own um using entirely digital methods and opened a small branch because he said it was a projection of confidence and in the last half he's actually recruited two more people because he couldn't keep up with the work himself now I wouldn't want to say that John is every agent and obviously I've got a soft spot for him because he was a good employee but I think that sort of shows the direction of travel I think we'll see more of these very small because they can be nimble so yeah hopefully I'm being consistent I think in the medium term will still see branch numbers rise in total. Talk about booming. So booming, the latest information we have is that booming is possibly going to launch second half of March, would be my best guess. In terms of agent branch sign-ups, not sure. Don't have a number. to hand. I think I would probably conservatively suggest they should do quite well, sign-up agents, because at the moment it's zero cost, zero commitment. So as an agent, why wouldn't you? So I think we should expect that number to be reasonable. I think as ever, thinking about competition, the real challenge for a portal of any sort is actually getting consumers to come to your website. That over 80% of our traffic actually is brand-led. So 80% of our traffic comes to Rightmove because people have either typed Rightmove directly into their browser or typed Rightmove into Google. So you have to offer something different to attract that traffic to your portal. I think Booming have taken quite a different approach at the outset. It appears, again, I'm only going on what I've read, which will be the same as that that you've read, it appears that what they're trying to do is talk about sort of everything to do with the home whether that be whether this sofa will fit in my living room or whether my energy bill can be can be reduced so if you like it's sort of a bit of right move a bit of pinterest and a bit of money supermarket and you switch sort of blended together so it's a really interesting approach i tend to believe the internet prefers specialists

uh... consumers will come for a really clean experience around refocus topic but as ever we will watch carefully and we'll see what they launch thanks peter very useful color can i just follow up and use this as a segway just to hear your latest thoughts on the wider competitive backdrop uh... zoopla obviously launched a pretty aggressive uh... price point or went free for a while uh... have they reverted to normal pricing now uh...

where on the market in their pricing and are you seeing any big shifts in agents among your peers thanks yeah so um what uh as far as i know zipper and our returns to normal pricing uh no particular big shifts uh you're right well for those of you don't remember zipper offered two deals six months free for an agent if uh we if they signed up for i think it was a 24-month contract and nine months free if an agent left or right move and you signed up for a 32-month contract from memory. Well, you can see the impact of that in our numbers. In terms of on the market, I think what we've seen there is on the market have become rational and have really started cutting back on the free deals they were offering people. So you can see that their branch numbers have fallen recently. as as they've they've asked people to pay which which i think makes lots of sense broadly speaking um seeing through the noise actually the competitive dynamic doesn't feel terribly different to this time last year thanks thanks peter you're welcome thank you for your question we have the next question from the line of head and barreling from ubs please go ahead your line is open

Hi, good morning, Peter. Welcome, Allison. Three questions from me. The first question I want to ask is, you know, all the demand indicators you talked about in terms of housing transactions, house prices, agency commissions, all going in the right direction. So why have you been a bit cautious on pricing this year and guiding for kind of our growth below 2019 levels and in such a strong market? So just explain if you could explain your thinking around that. That'd be really helpful. second thing is i wanted to ask you about what scout 24 are doing in terms of a consumer subscription model focused on tendency initially you're obviously not going down that path and you're giving away the tendency passport free and hoping to generate efficiencies why did you not think you could charge consumers in the same way that scout 24 is doing because that program seems to be getting quite a lot of traction in germany and and then the third question i wanted to ask you was about um something you didn't talk so much about in your presentation which is about kind of other lead gen you might be able to do in terms of mortgages um board band and other things that was talked about more in the note this morning um how are you thinking about those issues what progress have you made and will we see any revenue impact in 2021 2022 from those initiatives thanks adam uh so let's talk about arpa first

I think it's easy to walk past the fact there's still a lot of uncertainty in the macro economy. I think we're all on a sort of vaccine high, but there is still uncertainty. And when we were thinking about pricing for 2021, that uncertainty was certainly forefront of mind. And we could have led with price this year, but we chose to lead with products for a few reasons. Firstly, product upsell tends to pick up sooner, and it picks up as soon as agents feel confident about their marketplace. And you can see from our numbers in the second half of 2020, we we think that putting on product was a confident agency increase spend more quickly than we would do with with sort of normal pricing around secondly we've got a lot of goodwill in second half of last year and and certainly often to indicate would would show that and we want to be on empathetic to our customers uh... not all of them have been confident just yet was as he as you know that the demanding that's national really strong there are areas and sub markets which are not looking to go to central london particularly notable and actually from a practical point of view a product led strategy really it's great because it adjusts really quickly and really effectively to an uncertain market whereas as you'll remember a pricing strategy takes around four to six months to fully roll out and what would we do if the national housing market shut as it did quite catastrophically in March last year in the middle of that what do you do or if a local area has its housing market struck, there are practical considerations for us. And it's not to say we're not doing some price rise too, it's just less of the mix this year. I suspect that by the end of the year when we look back, we'll be close to the sort of 70-30 product price growth end of the spectrum rather than perhaps where we've been in previous years, which is 50-50. So that was really the logic with going after that. The other thing that's worth noting when you look at ARPA in total is when we talk about ARPA in total that is the blended ARPA between agency and new homes and I think what we'll see in 2021 as I noticed in the presentation new homes developers are sold out pretty much the large ones so we'll see a double impact we'll see a reduction in volume of development listed on site because they're all sold but also fairly rationally and the new homes developers are terribly rational you don't market so hard if you're forward sold and you've sold everything you've built and you guys will note from there from the notes that the plc's put out a lot of them are forward sold until the middle of the year so inevitably you don't market quite so hard so that also feeds into the blended arpa secondly you asked about scout 24 yeah i think it's a really interesting it's a really interesting product we talked to them i sort of i like the idea i think we have to remember the market is different so um p2p sales and the sort of mindset around uh transactions and i know it's rentals but big p2p rentals as well in germany much stronger market so it's i'd never say never it's certainly not on our roadmap right now it's one to keep a watch i have a i have a gut feel and we haven't researched it i have a gut feel that uk tenants would behave quite differently we also of course have to be mindful that the the legislation in the uk around upfront rental fees is different and so that would add complexity if we chose to go into that market what we've chosen to do um to sort of go after a similar a similar theme is all around our digital tenant journey so by by giving the passport upfront which is is free to tenant an agent and viewings manager, which I'm sure you've seen my slides, so I shouldn't talk about it too much, but viewings manager, which really helps efficiency. It also helps, well, we've had feedback from agents that it's reduced no-shows by 50%, and part of that is because the viewings manager reminds tenants to turn up, but part of it is actually feedback from tenants saying they much prefer it, because if they've found somewhere else, they can cancel automatically without actually having to ring up, and obviously being British, we don't like having difficult conversations, so it's much easier to do that from a link. But the monetization for that comes, and it's sort of just playing into your last question, the monetization comes from both referencing, referencing is a profitable business, and obviously that all feeds through, but also what we call in tenant services. So the idea when you move into a rental, you really need to sort out insurance. Many tenants don't realize that they are responsible for insurance, and they think it's covered by the landlord. So that's an interesting conversation. We've helped 7,000 tenants with that. And we are also now starting to talk to them about broadband. As an aside, one of the fascinating things we've learned is that broadband is more important to tenants than water, which probably at the moment makes a lot of sense, doesn't it? Because we're all connected to broadband. So they actually sought out broadband much earlier in the process. So again, we're exploring that. It's early days for us. It's really promising because if you offer a good product at the right moment in the conversation, and of course we've with referencing we know you're going to be moving in as a tenant because the reference has passed and we know the moving date. What we can now experiment with, and it's showing some really promising signs, is when do we start talking to you about broadband? And that's how we know that you have to start talking about broadband before you start talking about insurance because it's much more important and people want to sort it earlier. In terms of mortgages, we continue to work with Nationwide. we have learned so much in the last year you'll remember i described it as an experimental partnership we've learned so much in in the last um 13 14 months and actually this year we're really planning to to push on the thing for me right now is i want to accelerate our learning so not particularly focused on generating revenue from that i don't want to just splatter the site with and i think that would be the way we generate revenue or probably a pretty simple calculator or comparison tool that doesn't feel like us we want to really learn and again we're focused on making the journey more efficient because i think that's how we'll maximize its revenue in the long term i think i'd hope that we see a little bit more revenue in 22 from those activities but probably it's 23 23 24 before they really start to be noticeable in the pml was that

thank you very much thank you for your question we have another question from the line of Natasha brilliant from city please go ahead morning and thank you for taking my questions and I just wanted to come back to offer and pricing I know you said the majority will be product can you just confirm what the underlying price increases for this year and then beyond this year the sort of 70 30 split that you talked about do you expect that to be the new norm um and if so will you need to put more investment into people technology to constantly deliver these products if pricing power starts to fade um second question is on the developers and the development numbers i know previously when we've talked about the cyclicality of this business um there was a thought that maybe even in a more buoyant market actually the developers would continue to advertise clearly they're sort of out of stock at the moment but is there a better way you could perhaps charge them to avoid these lumps and bumps rather than charging on a per development basis some sort of retainer just to try and smooth that revenue stream um and then my final question is just on cash and he talks about maintaining a cash balance of about 50 million um why do you feel that that's necessary and would you go below that for any reason temporarily

thank you you're welcome natasha so uh your first question pricing so what we're doing with our pricing is we're doing um we're expanding our our geographical and stock-based splits so you might remember i think i talked about this last year if you roll back a few years in rightmove we used to charge the same amount regardless of stock level and regardless of location um which wasn't the most efficient way of doing pricing so what we've been doing over the last few years is i think last year it was sort of plus or minus um plus or minus 60 70 quid depending on the area in the country divided the country up into five zones um this year we're expanding that a little bit more so more like plus minus 100 quid and also we're we're just looking at those agents who've got higher stock so can't can't give you some average increase because it doesn't really work like that it's it's very different depending on on customer type and package but that's the sort of sense if you are a customer in those groups you're probably looking at 10 something like that in terms of 70 30 so interestingly i think our growth in 2015 was 70 30 and we we then probably 2019 we would have been 50 50. so it does move around i wouldn't want you to think that 70 30 is now a new normal we we plan it and it changes depending on the market so depending on the market structure it could be it could be anywhere between those two they're probably the end stops of the range and say this year it's probably more likely to be 70 30 but i wouldn't want you to think that it might not be 50 50 next year it doesn't really indicate anything because after all for us um it's all it all looks pretty similar when it when it hits the p l so we we we don't mind we think either model works and it has to what's more important is does it work for our customers so um certainly wouldn't wouldn't want to suggest we've given up on 50 50 i'm sure you'll see it again In terms of developers, yeah, it's an interesting question. We have looked at different models in the past. I actually think this model, the model we have, is a pretty reasonable model for us and our customers. I suppose I can sort of whinge about things, and many people will tell you I'm good at whinging, but actually it is a hedge. It is a semi-hedge because the markets are counter-cyclical. Obviously when agents are having a really good time because the market's great, we do well with agents, but new developers are also doing well because they're selling lots. and and vice versa so i'm probably not terribly minded to change the model because i think that natural hedge you know whilst i have to accept that it it has its down moments it's also um if you look at numbers in say 19 it helps us so actually i think it's a reasonable balance and and what the developers are doing is they're still listing all their stock with us that they have they still spend on marketing they just take away a little bit of discretionary marketing at the top which as I say, I think is entirely rational for them. So yeah, we continue to look at it. I don't think we'll change it. On your past question, perhaps I'll pass to Alison to talk about 50 million.

Sure. Hi, Natasha. You should think of it really as a liquidity protection measure and probably a bit of caution in calling an end to the volatility of the last year. Certainly our underlying policy in terms of returning surplus cash to shareholders has not changed and neither has our policy in terms of long-term holding of cash on the balance sheet. I think we are just being mindful of the way that the past year has played out and particularly the third lockdown where there were moments at which it seemed at least likely that the housing market would be closed again. So it's really just a reflection of caution in calling an early end to volatility we're making a start to returning to a more normal balance sheet with the dividend and the resumption of the share buyback and you shouldn't really read anything into the higher levels of cash other than other than you know a bit of caution in preserving some extra liquidity okay that's really helpful thank you to you both thank you

thank you for your question we have the next question from the line of robert bagg from barenberg please go ahead sir your line is open oh hi yeah thanks just uh one follow-up from me actually it's maybe a question for alison if i was to look at the top line growth 2021 versus 2019 um the the growth is coming at zero or next to zero um profitability um obviously been through very strange times so i'm asking a question on is this is this kind of a trend where we should expect growth because you know as you mentioned coming more from product more investment should we expect growth now to to come at lower profitability levels i think allison alluded to a margin more towards the 70 level or is this kind of an abnormal trend and we should expect margins to progress back up to the mid 70s that we're seeing in the past thanks

thanks Robert so I think I mean in terms of the drivers of growth we are seeing growth in in ARPA particularly the agency level of sort of seven percent and you know we've talked this morning about a return to the sort of margins that you saw in in 2019 there is definitely an element of cost catch-up this year and uh if you look at the profile of costs during 2020 you know growth savings of 4.6 million will not repeat this year the majority of them won't repeat this year and and there is an element of catch-up particularly with respect to recruitment which will accelerate some of some of the costs into uh into 2021 i wouldn't necessarily read that as a structural change in the margin of the business if you think about the margin at the agency level which is the primary driver of our margin and how strong that is it takes a large movement in margin elsewhere to really to really make a dent in that so what you're seeing in 21 is an element of cost increases on 2019 which is a combination of lack of savings the lack of the savings that we saw in 2020 the return of a more normal level of annual increases of sort of five to six million which is the levels that we've seen in the past and then an element of catch-up and don't forget that 2020 was the first year in which we saw a full year of van milder costs which will also be included going forward so those are the underlying dynamics of the margin for 21. all right perfect thank you

Thank you for your question. We have the next question from the line of Silvia Cuneo from Deutsche Bank. Please go ahead. Your line is open.

Good morning. Thank you for taking my question. I have just one follow-up for Alison actually on the test return policy. Considering where the cash balance ended in 2020, and considering what your previous policy was to return all excess cash to shareholders, should we think that if you want to get to around the 50 million balance you mentioned, the buyback program in 2021 could be substantially higher than it used to be? Thank you.

uh... just making a funny face at me uh... hi good morning uh... you see i mean clearly the in-year level of of cash generation for twenty one will be similar to previous years yes and we ended the year with just under ninety seven million of cash in the balance sheet so if you take this final dividend which is about forty million plus the in-year cash generation we will you know, potentially needs to accelerate some of the buyback levels that we've seen in the past in order to end the year with 50 million, but that is what we will do. Does that answer the question?

Yes, thank you.

Thanks, Lisa. Thank you for your question. We have another question from the line of Lisa Young from Goldman Sachs. Please go ahead.

Good morning. I just want to follow up on the Alpu growth guidance. You said we'd be mainly led by product this year. Could you maybe give us a bit more color in terms of the main contributors and your assumptions around the package upgrade beneath that? The second question is similar on the Alpa. Would it be possible to get your thoughts around division of ARPA for agents as opposed to new homes. I understand that new homes might be under a bit more pressure. So if you were to compare versus the 2019 level, would you say ARPA growth for agents could be a bit higher and new homes a bit below where it was in 2019? And the third one would be on your comments around the revenue opportunity from referencing contractor and services. could you maybe talk about the sort of roadmap to just sort of tap into that revenue opportunity? How big could that could that be? Is that going to be a contributor for for 2021? Or should we think about maybe more the other years, and the very last one if I can, is it just possible to get your sense of how you think commission polls or agents have changed in 2020? Just to get a bit of a sense of

the underlying health of your of your customers and and how you think that could evolve for for 2021 thank you thanks lisa um so after what's going to drive up growth in 21 i think that's the first question mainly uh as you can see sort of continuing uh optimizer upgrades it's not the only thing, you might remember you can either buy our products as an agent, you can either buy them in a package or you can actually buy them to a valid card but I think the main driver would be those optimizer upgrades so people upgrading potentially from optimizer 2015 which was the old package up to our new super premium package of 2020 and you'll see, we're seeing upgrades at about the 350, 360 level So that makes quite a big difference to ARPA quite quickly if we continue on that path. So that's the majority of the ARPA growth in agency. And yes, in terms of the growth in segmental ARPAs, so New Homes EA, New Homes Agency, sorry, yeah, I think your assumption is broadly correct that we'll see, compared to 2019 at a segmental level, we'll see more coming out of agency than we will out of New Homes. So yes, it's probably the shortest answer possible. And then sort of roadmap from here on that digital tenant journey and journey to more revenue. Think the contribution in 21 will be small, probably similarly. I wouldn't want you guys to be writing any big numbers into your notes for 22, probably even 23. I think it's a sort of three to five year horizon that we're looking at in terms of that journey. um obviously we're sort of laying down the structure of the journey i don't think whilst tenants are moving towards it and i'm actually delighted at that we're seeing from an agent perspective we're seeing up to 70 percent fewer viewings per let which of course is efficient for agents but the other thing that's not often talked about because it's much better for tenants because that means tenants aren't wasting a lot of time and potentially facing disappointment so um but i don't think you should expect a particularly notable revenue contribution through until probably it's probably three to five years from now uh i think that was it was it was it does that answer a question was there something else i've missed yeah just wondering uh your thoughts around the evolution of the commission's agents commission last year and into 2021 yeah good good question sorry for that so what Measuring commission is definitely more of an art than a science because unsurprisingly agents don't publish their commission rates because they're negotiating them. So you have to rely on a few relatively small scale surveys and you have to be a bit careful because extrapolation too hard becomes a false error. So what I think we've seen is that commission has bumped up a little bit. maybe five ten basis points that sort of level so that don't want to get carried away the other thing of course that's happened is that achieved prices has gone up and we continue to see pretty good achieved price growth so all in all i think the net agent commission pool has gone up at a unit basis and then of course This year, I would like to think we'll get back to a more normal transaction run rate. So on a volume basis compared to last year, maybe they'll see a bit more as well. So I think agents are in an okay place, actually, when you take all of that together. And I think it's interesting that we're seeing good agents, actually, some good agents are noticeably pushing their commission up a bit more than five basis points, but probably a reasonable average guess.

miles anything to add on agent permission paul well there's obviously the large positive of sold subject contract pipelines there's obviously the stamp duty that could affect some of that but overall agents reporting to me that their cash flow is very positive thanks paul

Sorry, have we covered that one off now? Is there anything else I missed?

Yeah, no, that's perfect. Thank you very much.

Thank you.

Thank you for your question. We have another question from the line of Gareth Davies from Numis. Please go ahead. Your line is open.

Yeah, hi, morning, guys. Just one left from me as well in the context. of the presentation you did earlier online um you mentioned a number of sort of innovations looking forward i think the one that stood out was quite interesting is the move into auctions um certainly felt slightly left field to where where we've seen you go in the past i just wondered if you can expand on the scale of the opportunity kind of how your payment model would work in that environment and and kind of what what's particularly interesting about it

okay uh let's let's start with what's interesting and it might explain the rest of the coin so what's interesting about auctions is i i think i sort of ramble got to be in the presentation what i i suppose that the uk public probably has a vision of auctions as an auction room uh and a person who gathers that in front and the problem the problem for most home buyers is at the moment of course you're committed which means if you need a mortgage you probably don't get involved, because the difficulty is you then have, I think it can be up to 10% deposit, so your aborted fees are quite high, and of course you can't apply for a mortgage or something that is in auction because you don't know if you're going to buy it. So I think it puts people off. What we've seen emerge in the last probably five years is the online conditional auction, and the features of an online conditional auction, and there are a few different suppliers who offer it, there's typically more information up front so as a buyer you can be a bit more confident there's of course the fact that these auctions typically take place over a number of days or a week and you're not under the pressure of an auction room because it's all online so you bid online means that you don't have that or maybe it's just me that would be worried about a twitch meaning you ended up with a two bed terrace in Bolton so that gives consumers more confidence and probably the big thing is it's conditional so those are the benefits to the buyer so if you if you need a mortgage you're more likely to be able to participate as a seller and actually for the agent what's what typically happens and certainly with the our initial partner what we're seeing out of their data is completion is a lot quicker because all that a lot of the legal work has been prepared up front because as an auction property you're a lot more confident that it's going to sell so whereas yeah we're seeing completion at about 56 days from an online conditional auction which is about half the time of a normal um sale so from a seller it's really important because you it's not going to work for everybody because you may well achieve a slightly lower price of course but what you start to do is you start to get certainty of sale which for a number of people not just people in in financial distress it's really important so that's what we've seen happen and this is really emerging over the last five years that's why it's interesting it's not a big portion of the marketplace maybe a couple of percent of transactions and what we've chosen to do we think it because it has advanced use for buyers and sellers because we believe that it's an area that requires clear explanation and say it isn't for everybody we've decided to sort of offer offer this service to uh... if you don't want to provide is that we don't we don't want to change that's not our experience uh... and we will also give a lot of consumer information on the page so not only can they see how to bid and they can see the current bidding time left and that sort of information there's actually a help panel which means they can understand exactly what is what is an auction so in terms of opportunity this I think was the last part of your question difficult to see at the moment so that the current structure is it's pretty much it's an advertising deal but I think it's difficult to see because we don't know whether our participation and sort of sharing information will change the percentage of the market i wouldn't want anyone again i wouldn't want anyone to get sort of massively carried away that suddenly we're going to turn ourselves into an auction provider i don't see it i think it might be a portion of the market and who knows it could grow from a couple of percent a bit and that would be good news for us it's really about us trying to service this part of the market and actually utilize our trusted status because consumers trust us and actually we therefore can supply that sort of impartial information Very good.

Thank you.

Thank you for your question. We have another question from the line Miriam Adisa from Morgan Stanley. Please go ahead. Your line is open.

Hi, good morning, everyone. Thanks for taking my question. Just two left for me. I'm just on just wondering how should we think about the cost base for that developing over time, particularly as we move towards the next stage of development? are there any particular sort of step changes or things that we should be aware of there and how you're sort of thinking about the margin profile of that compared to the core business? And then just on the agents, on hybrid agents, just wondering what you've seen so far in the market and sort of what your expectations are for the new year. Thanks.

Thanks, Miriam. In terms of van Mildred costs, the total cost base is certainly immaterial in the context of our total cost base. It's about 3 million of operating costs and then we amortize about half a million you shouldn't expect to see any increases in that really going forward it may come down a little the majority of it is headcount they've added about 80 heads in total to the overall headcount base of the business so you know that that may change at the margin but it will not be anything significant

I think the journey we're on, we're on this digitising journey in rentals and I think what that means for Van Meldert is over time we're using our data to make their process more efficient and more digital so we can increase volumes without increasing headcount. So our aim would be that the margin profile will look incrementally better as we start to run those changes through. In terms of hybrid agents, I think what we see is again that they are, I mean they're good businesses, they are very prone to new listing numbers because often that's when most of them charge. So that's when their income appears is directly linked to the number of new listings. So what we see with those businesses is that they probably had not a bad second half because new listing numbers were going up. I would imagine that the first half of this year they'll have to pay a little bit more attention because new listing numbers are going down. So I think that's, it's just a slightly different dynamic. I don't think we should get carried away that either it's about to be a total new dorm or the death knell. They just gust a little bit more than a traditional agent because of their charging model.

Does that answer? Yes, that answers it. Thank you. Thanks, Miriam. Thanks, Miriam.

thank you for your question we have another question from the line of henry ross from barclays please go ahead your line is open great thanks and morning all thanks for squeezing me in um i've got two um first wanted to follow up on natasha's question where i think you said that for those agents who are seeing a price increase in 2021 that increases about 10 can you tell us um what percentage of agents are not getting a price increase for this year and there's quite a bit of mix going on there and on top of that what percentage of agents did not get a price increase for 2020 because covert happened at a time where you might have had that conversation so are there a big chunk of agents who have now not seen an increase for for two years that's the first question um i mean the second one is your visibility over that kind of up to eight percent after growth for this year Um at this point how many of your agents have you had the offer conversation with I know it always used to be kind of At the start of the year, but I think it's a bit more spread out now Um, and should we assume that because most of the product growth is optimizer? 2020 for those agents who you've had the conversation with it's pretty much locked in at this point and there's not really room to do better Um, or is it possible that there might be more upsell from those agents as you go through the year?

Thanks Right, uh I'll do the second one first before I forget it. So what we've done, we've had about 20-odd percent of the conversations now for the 2021 price increases. There's lots of 20s in that, aren't there? Yes, 20% of the 2021 conversations. I think that's one of your questions. And then the question about, so if someone's had a price rise, does that, are we sort of locked in on the upper growth? No. actually not. We will continue to see upgrades sort of pre and post price rise conversations. So it doesn't necessarily lock us in to that. I mean obviously it sort of guarantees a floor I suppose, but it doesn't lock us in. So that was that one. In terms of 2021 price rise, I uh i can't remember the exact number but it's the majority the majority won't be seeing a price rise so so that's one of the reasons it'll be it'll be product led and then in 2020 uh i don't have the number in front of me andrew my to to get to your question I think your sort of end point was, does that mean there's loads of customers whose prices won't have gone up in two subsequent years? There won't be many in that category, I think is the answer. I don't have the 2021 number in front of me, I'm afraid.

And is your plan that when you get to, I don't know, August this year and you start to think about the price increase for 22, but we're now going to go back to an across-the-board price increase for everybody?

or maybe it's just too early to know I think it's a good question it's a little early I think as Alison noted a bit earlier on there's still a reasonable amount of uncertainty floating around in our world for all of us isn't there I think after updates and updates as I have to repeat often to myself I think we'll wait and see I don't see a reason that we wouldn't return to a more usual pattern but I think we have to wait and see and see what the environment looks like later in this year

What are you looking for there? Is it the health of agents, or is it kind of competitive dynamics for the question about? Because I would have thought that given the state of the end market, which looks pretty solid, and given what we're hearing about kind of commission rates and the health of agents, P&L, I don't see at this point why there would be much of an uncertainty about your ability to do price for 22. So, yeah, are you just being cautious, or is there something specific you're looking at there?

So, yeah, health of agent. Yeah, I... I'm always a bit cautious. I would agree with everything you said in terms of what I would guess right now, but I think we don't need to make a decision now, so we'll wait and see a little bit. We've obviously got to work out what's going to happen with Sam Dutty, or Rishi's got to work it out, not me. And there are the sort of general macro worries, so let's see how that plans out. But I absolutely agree with everything you said. I don't see a reason today that we wouldn't be doing it.

helpful thank you you're welcome thank you for your question there are no further question at the moment lovely well should we call that a day then everybody there are no more questions uh no sir there are no more questions thank you roberto

right well thank you everybody uh thanks for for coming along and spending 50 minutes with us and uh as ever if you've got any more questions then get in touch with either alice and i directly uh other than that i can only wish you a lovely sunny friday and a lovely weekend