Rightmove plc

good morning everyone um for those of you who don't know me i'm andrew fisher i have the great privilege to be chair of rightmove and welcome and thank you for joining us uh in for the 2022 results q a um as most of you will be aware in fact probably all of you today is peter's last results presentation for rightmove and for the past 17 years and actually the last six years as our ceo peter has continued to lead our success as a business for which we want to recognize and thank him this morning i'd also like to thank you uh for the support and the collaboration that you've provided to both peter and the whole team at rightmove and i'm also extremely delighted to welcome johan sunstrom who as of monday will officially succeed peter as our ceo

so without further ado peter for the very last time over to you thank you andrew uh good morning everyone hopefully you've had a chance to see the presentation uh i thought maybe i'd take a couple of minutes just to start off with a quick summary of all the words if you haven't quite made it to the end of the presentation in 2022 we really saw three distinct housing markets we began the year with a continuation of that frenetic post lockdown activity of the supply constraint market. By the start of the second quarter we began to ease back to a much more normal market and the interest rate shocks of the fourth quarter rapidly knocked that transition off course and that caused the market to slow significantly. I think our results in 2022 again demonstrate the strength of the right move model in all markets. underscoring that resilience we saw standout arpa growth of 125 pounds which is a record absolute amount for a normal year and i think it's testament to the innovation of the last two years which have helped drive that arpa growth to higher levels as a reminder we've delivered more new products in the last two years than we have done in the last decade over 60% of that ARPA growth again came from customers choosing to upgrade their package or buy more products from us which I think again testament to that innovation and we successfully completed the migration of the optimizer 2015 to optimizer 2020 package it's also worth pointing out that 40% of new optimizer customers continue to come from the essential and enhanced packages and upgrade through the package ladder and on top of that the ARPA from optimizer customers increased by about 7% over the year too again just demonstrating the value in our products membership was more or less flat in 2021 with a small drop drop in the number of agents in the second half offset by an increase in number of developments particularly in the fourth quarter The number of agents we saw leaving the industry in the second half was below recent norms, but the net new number of branches was lower because we saw a slowdown in new branch formation. Unsurprisingly, unsurprising given the nature of the economic outlook in Q4. Those last few months of 2022, I think, provide us a good early indication of the manner in which Rightmove business model responds to a slowing property market. notable rise in new homes ARPA growth rate and development numbers offsetting a slight slowdown in the agency ARPA growth. Looking forward I know there are worries about interest rates and inflation and I've no doubt that there will be some very difficult impacts for a number of people. However looking at the data home movers appetite to move is recovering well. Sales agreed rates as of yesterday were about 11% down on 2019. And sales agreed is about a three to six month leading indicator of when someone's going to move house. Given that, I think it's not unreasonable to expect transactions in the year to be 1 to 1.1 million, which is just below pre-pandemic norms. And the resilience of our model means that we are only impacted by the housing market at the extremes. And I still see no signs of those extremes on the horizon. And we're seeing that momentum from Q4, particularly in new homes, carried forward into 2023. Just a word on innovation. It continues at a pace. Second half of 2022 alone, we launched a new product for our build to rent customers. There were more releases of the lead to keys flow, which means tenants can now search, view, secure, contract, and pay their deposits all from a mobile phone. We've also launched a new lead pre-qualification system, which will help agents cope with the higher lead levels from a busier lettings market. And further expansion of our mortgage in principle flow, which now means we're encompassing more borrower types and we're seeing a better than expected take up of the flow by consumers. Looking forward from a Rightmove perspective, I think we'll probably see broadly stable membership numbers with a small shift from agency branches to new homes developers. And that momentum at the end of 22 has given us more confidence. We now expect ARPA growth to be more in the middle of the 95 to 105 range that we've previously spoken about. To add to that, we continue to see healthy growth from our other segment.

Before I open up to questions for one last time,

just like to take a moment to say thank you to you all for your support over the last six years and the fascinating debates we've had along the way and also to wish johan the very best and joining this incredible business so over to questions from the room will thanks peter um free from me and obviously congrats on the uh storied uh

period of ceo um firstly i suppose it's been a earning season characterized by your online classified peers and yourself talking of the defensiveness of the model and downplaying cyclical concerns or i suppose downplaying the potential impact on your business mortgage approvals really are quite weak currently could you just outline what gives you the confidence that you will get to this transaction number that's supportive of the outlook um secondly i suppose you know a small negative from the outlook was around the margin which is going to be down year on year could you help us understand why that's the case um from the webcast perhaps it was being positioned as conservative but maybe that's a incorrect observation um and then lastly you've obviously had your extensive conversations with agents uh which has underpinned your confidence of the 100 pounds of arpa growth for the year

how are you thinking about agent arpa specifically and how did they react to the price increase discussions thanks okay so let's let's start with mortgage approvals um i think the thing that's easy to miss is the mortgage approval that you might have seen in the last few days which was the january mortgage approval data is actually based on activity that began in um the end of q4 so november december time So what you're seeing is that sort of hangover of the uncertainty flow through into the approvals data. What gives us confidence and certainly gives me confidence is we're looking at sales agreed yesterday. We are so fortunate with the amount of data flowing through the platform and it's real time. so it's that where I where I say I think cells agree to say sort of 11 10 11 percent below 2019 that's real-time data whereas what you'll be seeing is relatively historic data having to flow through mortgage approval data in a couple of months time I think we'll see pick up because that will relate to the activity we're seeing on site now in terms of marginality would you like to yeah sure I mean will I think your two questions are quite linked

so on the components of arpa growth and i'll probably answer your agent arpa question first if you think about the various components of agent arpa growth being pricing upgrades and overspend i think on the first one as you know we're a steady compounder of pricing those price conversations in respect of 2023 started in november last year we've done about a third of the agents now who will be impacted by a price rise this year and those conversations have gone absolutely as they do in a typical year with uh with no more pushback than than we would typically see so from a confidence in agent arpa growth that that piece of it is ticked i think where we are being slightly conservative and i think you can probably understand it given the market backdrop is on the assumptions around upgrades and agent overspend in 22 as peter said in his opening remarks we saw the opti 15 to opti 20 migration which clearly won't repeat this year having said that we saw some really good upgrades all the way to opti both from essential and from enhanced and from new joiners joining directly on optimizer 2020. but I think it's right just given the backdrop that we remain cautious particularly with 10 months of the year left to play out as to the likely extent of upgrades and overspend for the year which then flows through into your margin question because on the cost side you know we continue to be happy to invest resource behind some of our newer strategic initiatives and I think that's that's really important but you all understand that that is what is driving the slight dip in the margin we're a far broader business now than we were back in 2019 and initiatives like mortgages like digitizing the tenancy journey which have slower growth rates right now and in fact mortgages as you as you're well aware revenue went backwards year and year are in a mix of of new initiatives alongside commercial real estate for example and data services which are growing at sort of 20 per annum so continuing to invest behind those initiatives is what will drive medium and long-term profit growth for us and maintaining that investment while we see you know slight caution on uh on agent revenues i think is absolutely the right thing to do So guiding to 73% for the year, what might change that upwards would be a change in expectations probably for agent numbers and agent ARPA growth. But for now, that's where we are.

And in terms of the conservatism around the agent ARPA outlook, is there any kind of numbers you can give us around how you see it versus previous years? So we assume a slowdown, any further color that you could provide?

Well, so agent ARPA growth grew by £123 in 2022, as you saw from the deck. I think expectations for this year, we've guided to blended ARPA of about £100. The ratio tends to be sort of five parts agent to one part new homes. So somewhere around the £70 to £80 of agent ARPA for now. And we'll update on how that's going at the interim.

Thanks very much.

hi good morning it's adam berlin from ubs um just a couple of questions from me um just what i asked specifically about the other revenue and the strategic initiatives um can you give us some sense of how fast that revenue is going to grow um in the next few years and how material you think you're thinking that opportunity is and once it starts to get going and starts to scale in two or three years time do you think overall it's going to be accretive to margins so once the revenue starts coming in you know the cost base is there and you start seeing the margin go up again or do you have to keep investing and adding costs to grow those revenues and so you know ultimately this is going to be a lower margin business than it used to be in the medium term so those are the two questions please sure

so there are a number of components to that other line and different businesses have very different growth profiles within that line so I'll start with the strongest driver of growth which is the commercial real estate business the past couple of years have seen 15 to 20 percent growth rates and we fully expect that that will continue for the next the life of our business plan the next the next three years data services the same 15 percent growth last year and that is likely to continue and to accelerate as well more moderate growth drivers are the overseas business which has had a drag on it through the pandemic but has has grown well this year and in all likelihood will continue to grow as we focus on a couple of there are a couple of new things that we're doing within that business so we'll maintain a growth rate of 10 11 third party advertising is the fourth part of what used to be what we called the breath businesses it's an area where we have no particular ambition to grow beyond the five million or so revenue that it delivers because we are trying to keep the site a premium user experience and cluttering it with advertising is not something that we plan to do and then when you think about the newer strategic initiatives mortgages and digitizing the tenancy journey you know mortgages we started out with a fixed fee which delivered revenues of three and a half million and then we chose to change the monetization model of that which impacted obviously revenues and impacted the margin over the course of last year and and this year and will take us a bit to to gain the momentum um in that business but you've heard us talk about long-term revenue potential of 20 to 25 million and we continue to stand behind those projections but they're unlikely to become that material over the course of the next two to three years having said that think about recovery to the three and a half million of before and beyond you know adding about a million pounds a year until about 2025 and then digitizing the tenancy journey already there's good momentum behind that and so the sorts of revenue growth will mirror those of the other businesses 17 18 19 overall as a category blended rate of eight percent this year i would expect to see it much higher in in 23 20 or so and accelerating uh beyond that so once we're out of this current year i would expect to see those businesses become margin accretive although at some point i think we should separate some of them out because the differing growth profiles makes talking about that as a category uh long and um and maybe slightly confusing.

thank you just a few questions from me please the first one based on your conversation with agents do you observe any competitors being more aggressive on prices and any update that you could give us on the essential extra package what's the interest there and what's the ambition that would be great and just in case in the case of the market is proven to be more resilient than expect how should we think about upside potential do you see the most upside in the rate of new agent formation or

the rates of product adoption and upgrade thank you okay so uh let's go through those uh in terms of competitors when you say competitors you mean our competitors um i think it's it feels when i talk to them it feels as if we're in a in a mode that is a little bit like 2019 again so um some point deals but but no sort of grand campaigns um so that that feels good for us it's what we used to in terms of essential extra yeah there's lots of lots of interest in essential extra but i'm delighted to say people aren't moving to it because they've been jumping straight over it and going straight into optimizer which yeah but if all the outcomes feels like quite a good outcome because the arpa is quite a lot higher so um i think it's a great package maybe we maybe we've set ourselves a target there for when the market's a bit slower uh but yeah it's it's good conversation and good that people aren't landing there they're going beyond in terms of upside what might it look like I think there's a I think it could be both branch numbers and product uptake it's quite interesting in the last few weeks we've started to get more very early stage inquiries from people thinking about setting up agencies now the the gaps between that and it turning into someone setting up an agency is variable and quite it's quite a fragile emotional state so we sort of have to wait and see what what happens with with sort of wider announcements as to whether they turn its branch numbers but but certainly i could imagine there's a number of people who are waiting to start an agency and are waiting for a little bit of positivity and probably frankly a few months with positive news to to put the money money out i mean agents tell me that to open a new branch is something between 50 and 100 000 pounds worth of investment and if that's typically coming out of your mortgage you want to be pretty sure about it so i think we won't see much activity yet on that but hopeful uh the other upside will of course be in in product upgrade uh from customers hey thanks it's pete from morgan stanley two from me uh first on the our part numbers and it actually continues on the topic we discussed just now so

What is your visibility into the main reasons behind why agents are upgrading products and then also the ones that are downgrading Why are they downgrading you are there some certain products that are you see that? Okay, like this is the key reason why people are now Deciding to upgrade to let's say optimizer so upgrades It's across the product suite.

Why do people upgrade and

Normally to make their businesses more effective. So sometimes we see that as a marketing spend switch From other marketing avenues and no longer offline typically but from other online avenues Sometimes it's because they want to win greater market share in their area Actually, in some cases is also defending their market share. So it's normal the upgrades come for normal reasons the interesting thing because we have a i'm sure you're all bored with me talking about our three sets of products because we have those different products and within each of those product types we have a number of products that work in different ways the exact products mix they choose there is no is unique to them which i think is one of the real powers of how we've developed pricing over the years it's a package that absolutely is blended around them and you tend to for example to give you an example if you were thinking of expanding your geographical footprint as a as an agent so you want to go three three streets further to the left or what have you you would tend to use branding heavily brand first in those areas before you move in with the vendor lead products because vendor lead products don't work if no one knows who you are so depending on what you're trying to do that the mix changes which is where the packages work really well in terms of grant downgrades we've seen very few down package downgrades um typically the reason for downgrade when you downgrade it's economically you lose a lot more products than you save in in pounds so downgrade is usually a sign of early onset cash flow issue for an agent so that's why we have it we you know we want to support them but we don't see very many also because within a package you can change your products if your strategy changes you change your product mix

so it sounds like there's not like a specific functionality that is really driving agents to upgrading right now but it's quite broad-based and mixed yeah okay then the other second question is kind of similar but on the kind of membership numbers specifically on agencies so what's your visibility into the reasons why someone drops off and one why someone is joining to the platform i mean you mentioned that there are like less new agents starting up but is this based on like third-party data or do you see that in your own data that the mix is is changing so basically how do you know if someone drops off that they're just exiting the industry or whether they're going with supla so so we can you can see internet activity so we we monitor that um we ask everybody who's leaving the platform why are they leaving and so we know whether that's

because they're shutting down the branch but keeping their business or whether they're going out of business things like that but and similarly with startups and we can we can monitor internet activity so we're pretty clear what's going on okay thanks thank you uh thanks it's andrew here from barclays and would just like to echo uh will's comments on congrats peter um i've got two the first one is uh back to agent health and thinking about 24. i guess the base case here clearly is you've got an agent customer base in decent shape after good years in 2021 a blip in the market in q4 and things are now improving but interested in the kind of stress tests that you've run or kind of extreme events in in your language like how bad would the market need to be until agents start going out of business which i guess is when you have a customer and pricing question um and then the second question is um to come back to everyone's favorite word for 2023 um chat gpt and it might be also a question for johan but how do you think this plays into property portals on a kind of five-year plus view curious on the kind of note you see how around your business maybe benefits from efficiency engagement but um would be helpful in any kind of big picture thinking there

okay so talking about agent health I spent last Saturday with a collection of agents what's quite interesting and it's easy to miss it the dynamic most of our customers now do sales and lettings and lettings absolutely provides a backbone of subscription like revenue from the managed property book the other thing that's just started happening in the last Probably in the last six to eight weeks as rents have gone up agents are now seeing more tenants Move property. So we're actually seeing increased churn in tenancies the the feeling being some of those are becoming first-time buyers because now they can get a mortgage and The market slowed down enough to allow them to participate but also people moving the tenants moving property to manage their outgoings and for agents that's really good news because churn equals a tenant fines fee so how about i wouldn't want to put a number on it how about agents are pretty resilient and good agents are very resilient so 80 of our customers have been with us for the last five years where they've seen brexit political uncertainty market shock during pandemic these are typically well-run uh resilient businesses it has to get quite extreme you know and again one can reference back to 2008 but it has to get quite extreme before the cash flow bites this most of our customers are small businesses so it's typically cash flow first so the last few years have really helped them and definitely I've seen different behavior in this sort of uptick for agents than one saw in 2007 uptick they're definitely a bit more conservative and kept more cash in the business um chat gpt i think it's kind of interesting and i know it's the uh it's the machine learning model du jour but but we use machine learning already i think machine learning has lots of opportunities in lots of different ways uh to to help the business i think most of the ways it would probably help will will not be visible in the way that we currently you know manage that obviously chat gpt is a great tool for um sort of enhancing conversational functionality and sharing information so i'm sure there's some efficiencies that that we could gain whether i'd be brave enough to go to an agent and say that they could they could use it i think they they see that sort of people relationship as their core skill so i think i think that might be a bit of a slower harder adoption which is fair enough i think on the on the cost side andrew it could be very ai more generally i'm not talking chat gpt per se

can be very helpful in taking inefficient cost out and i'm thinking particularly you know we use it already in areas like contract management and storage and just scanning and and and spotting anomalies could be very helpful on the on the customer care side of things as well with just removing inefficient cost out and allowing us to have our people spend more time actually talking to customers um you know and we have some plans already for that baked into the business plan over the next couple of years and so beyond that you know we'll we'll see how it involves evolve i'm certainly looking forward to using it to write next year's annual report thank you

thanks it's uh joe barnett land from credit three um just one for you allison i think on the the recorded remarks you referenced five percent um wage inflation for the coming year um i'm just interested how you effectively sort of came to that number in the previous year i think you also had a one-off payment for cost of living as well so the sort of year-on-year actual increase people are going to get a lot less than five percent i'm just interested um you feel that's enough to sort of retain the talent within your your business

yeah so a couple of things uh and this was a conversation just to put it in context that started back in september of last year so it was that disrupted period when you know you were hearing a lot about expectations for 10 11 or so in the public sector nurses looking for 19 clearly that was uh a year-on-year uplift which you know which we never contemplated the that the five percent was a mix of in the context of where inflation was at the time, which was broadly 10%. What did we think was a fair uplift for our staff? Beyond the all staff increase, so what we will always do is an annual program of benchmarking particular roles. And that tends to add about 2% or so to the annual wage bill. And so it did exactly that. this year for the five percent in reality was seven um but with some people purely getting getting far beyond five and then the two one-offs were particular to 2022 the we gave everybody a payment of a thousand pounds in october just to help with this that spike in energy bills heading into the winter um and we also brought the effective date of the salary increase forward to october when ordinarily it would have just been on the 1st of january 23 so that added an element for for um 22 that won't repeat in 23 but obviously putting through an inflationary increase across what is now a workforce of close to 700 people of seven percent will add inflation to this year's uh salary bill which again you're seeing part of the effect of that on the margin

And then beyond that, from a headcount perspective, obviously you added heads last year. If you could just give us your views into 23 on that as well.

Yeah, I mean, we are continuing to add heads. We'll add about 50 this year. And as I say, that is a signal of confidence from us that we're continuing to invest in some of the innovation that Peter talked about, but also investing behind the strategic initiatives and with a focus on medium and long-term profit growth. I think it's absolutely the right thing to do as we look to accelerate those business.

Thank you very much.

thanks um and peter best luck in your next endeavor um thanks for your time um two questions for me karen donnelly from liberum um one is on the quantum of investment you've decided to deliver this year um can you give us an insight into kind of how you felt the quantum you've landed on is the right one and should we expect that 73 is kind of the trough margin for the business or should we anticipate kind of a multiple year period where we see margins at a relatively depressed level and secondly secondly um just on the addressable market opportunity should we read into your um move to accelerate investment in the business as a sign that you see um the approach of a ceiling in the core business i.e agency arpa is getting to a point where it it might not be kind of high single digit but maybe mid-single digit going forward cheers

so absolutely not to answer your second question first that's not the reason that we're doing this you know we see we receive very strong opportunities for growth across a number of areas and so we have the confidence to invest behind those and whether that is you know on the commercial side increasing the bespokeness of the commercial journey and continuing to tailor that search journey more to a commercial real estate world than we have in the past or over here on the mortgages piece continuing to put the right people into that team to accelerate the growth trajectory there you know we will continue to do that because we have confidence that those are areas in which we have credibility to play they're all linked to our strong core business they leverage that core business they leverage our brand and you know so it is not it's not an enormous investment I think is the important point really you're seeing it coming through in terms of people that is the nature of the investment that we make but because they're so strongly and keenly linked to the core business the magnitude of the investment that we would need to make to spin up a mortgages business is far less than it would be if we were coming to it cold where it wasn't a linked investment So the investment that you see, the reason that it's the right investment is because we're very clear about what it is that we need to do in order to go after the revenue and the opportunity that we've identified. The investment typically is people. There's a bit of tech, but really it's people to create the products and to manage the site. And I think it's really important that we will continue to do that so that when you look five to six years out,

right move is not just a bigger more diversified business but each area within the businesses is contributing to long-term profit growth it might be a number that i know you quite often ask me for i'm surprised you haven't yet so i'll give it to you so if you look at total um commission pool so what's right moves percentage of the total commission pool we're at about six percent and just to remind you in uh 2019 we were seven and a half percent So to give you a sense of runway, the runway's actually got longer, not shorter. And I think that's really encouraging for the future, as Alison said.

So just one thought, just to clarify, would we say that 73% is trough margin going forward?

So I think, well, look, what would I say on long term margin? Investing as we see appropriate in order to go after these opportunities to us is a more important metric and the long-term profit that that will deliver than short-term margin you should not interpret that as meaning that you can expect a year-on-year margin decline that is not what we're talking about but there will be investment years like 23 that may require a one percent dip in the margin uh and and really the message i want you to take is we will do that we fully intend to continue to deliver margins in excess of 70 percent having said that returning to 75 76 is not an ambition that we particularly have either as we particularly as we get behind these strategic initiatives so is it the trough probably broadly but i'm talking within a one two percent range perfect that's well

hello hi rahul from hbc i have three questions one what is your baseline assumptions for 2023 in terms of housing transactions and in terms of the stress test again if it probably were to decline by 30 to 40 percent this year uh what it have what's your outlook for the rest 20 percent of agents who are probably new in terms of the number of years that right move what are the risk of closures and uh then commissions pool in terms of where it goes that's my first question the second in terms of what the upgrades to optimize it 20 what what if you can give a sense of it was driven by voluntary or probably driven by retirement from optimizer 2015 any mix of that and finally uh any sense of right marketing spend versus other marketing spend by agents obviously more marketing spends towards right move compared to other marketing uh revenue agents have any sense of that will be helpful thank you okay so let's start with the marketing the market question um frankly i think it is

all right dangerous word nearly impossible for transactions to fall 30 to 40 percent it's just worth pointing out that in the uk market between 800 and 850 000 transactions are what estate agents would call the 3ds death debt and divorce So those are more or less mandatory transactions. And again, reminding you that back in 2008 when you couldn't get a mortgage, we had 850. So to fall much below that floor is very, very difficult. I can't imagine a situation where that would happen. So we can't really foresee that in terms of our assumptions. In terms of assumptions, we've assumed that it's a worse than 2019 year. um and i think we're we're probably seeing slightly more encouraging data than we thought we would see remember we put our plan together remember we put our plan together into this october time and certainly i think the macro looks a little bit more encouraging than it did did back then in terms of upgrades to optimizer 40% of the upgrades last year were new to optimizers so they weren't the 15 that was the mix they weren't the 15 to 20 upgrades they were people coming off essential or or enhanced so it's still an extractive package we had about thirteen thousand sorry fifteen thousand that'd be nice isn't it thirteen hundred uh additions to the optimizer package during the year

uh about eight just over 800 of those came from opti 2015 and the rest was a mix as peter said two or three hundred i think went direct from essential 400 or so from enhanced and the rest were new joiners who came in directly at the optimizer 2020 level

I'm sorry, I was questioning about marketing spend.

My final question was in terms of the marketing pool, the total agents' marketing pool for agents, how much of, you know, is there increased proportion being spent on right now? Are you seeing overall squeeze of, you know, marketing spend by agents? That's my question.

No, so overall marketing spend for agents is probably increasing. It's definitely in the world of art, not science, trying to measure it because every agent is different. But I think the overall marketing pool is generally increasing as their other costs decrease. uh and in terms of our share as faith if you look back to 2019 our share must have declined because we were at seven and a half percent and we're now at six percent of total revenue so so i think that's good news for us because it means there's there's more there's more for us to go after in terms of these new products and new packages three quick ones from me

the first going back to mortgages maybe naively on my part i i kind of felt that you were waiting for end-to-end digital mortgages from a sort of broader pool of providers whereas reading the statement it feels like the kind of thinking and what you're going to do there has evolved a bit and it's it's a broader offering to agents so i wonder if you could talk a little bit about how your thinking in terms of opportunities shifted um one point of clarification in the presentation you mentioned lettings revenue 45 million of agents revenue and then you talk about 20 million of ancillary is that 20 million of ancillary that you're not addressing at the moment that is an opportunity looking forward and these are products you're kind of aspirationally launching over the next few years and then the final one was just on track my property i mean you you've had the tools to be able to do that for probably 10 years and you've never chosen to do it why now

okay uh maybe i'll do the the first and last and you can do the middle one so mortgages yeah i think we've always had uh we we said that we would focus with one direct to lender proposition to learn i think we've learned an awful lot about the mortgage market and also what attracts consumers and as i think i said in the presentation i've been delighted we've actually increased we've had more mortgages mortgages in principle it's quite difficult to say mortgages in principle delivered than we were expecting in the fourth quarter but we know that direct to lender is a smaller proportion of consumer desire so the next step is to work out how we can take that backbone of talking to people at quite a detailed level about mortgages and then hand them off to a broker probably unlike most people in the room most consumers about 85% of consumers don't feel confident enough to decide on their mortgage without advice without brokers advice so that's our next step is how do we take that flow and then help people get confident via via broker i think the thinking's evolved a little bit um as we've got to know as we've got to know the marketplace better really excited about how we can get our customers many of our customers have more with brokers so how can we get them more more involved in this flow i think there's lots that johanna and the team are going to be able to do there which which will be great yep there we go so so on lettings the 45

million that we talk about is the revenue that we generate currently from lettings listings and the extra the additional 20 to 25 is the ancillary services around referencing and the insurance products that we've talked about so they're two separate things but so overall growing a lettings business of 60 65 million

and finally track my property you're right we've had to actually we've had the technology for 15 years uh to do it so it's based on it's based on the market leading valuation model where we use those values um with lenders so we're very confident about the the underlying tech that we have why now i think there's a few reasons one we actually think it it's good for us as we move towards mortgages and more sort of bespoke personalized journeys with people it's useful to know a little bit more about them so there's there's a real data value to us where previously perhaps there hasn't been secondly I think the use of these tools is more normalized in the marketplace we know that initially these kind of tools of which there are many these tools were not helping agents and agents were very negative about what they were doing to their to their ability to pitch for business Actually, these tools have become normalized, and I am delighted that when the team has been out looking and testing those tools with both consumers and agents, the agents are really welcoming the way the tool's been designed, really carefully designed to help consumers but also stress the limitation of a desktop valuation. It's not the same as an agent's valuation because we want to give our customers value. So I think that's the second part is it's actually become much more part of the world. So it feels like the right moment to step in and do it better than everybody else.

Hi, it's Will Packer from BNP Paribas. Thanks for having me on very quickly. There's been a lot of questions on costs and margin and I suppose implicit in all those questions in a way is to the outlook for other revenue and whether the incremental other revenue is ebitda positive or negative in the medium term with some of your peers there was an assumption on the sales side that it would be positive for ebitda but actually some of these businesses have been lost making could you help us and just give us a medium-term outlook for the other revenue what's a reasonable assumption to have as we kind of grapple with that and then we can think about whether it is positive to profits or not and then the second question would be we've had some weak numbers from new home players typically it's been a counter cyclical benefit to your business you know extending time on site more premium spend is there a point at which that relationship breaks down and actually they become more conservative in their spend if things get really tough what have you seen historically thank you thanks Will

so on other because as I said those businesses are so linked to the core business the incremental investment is a largely people and and B means that they are very high margin businesses so if you took commercial real estate for example it is a small team of sales people who are dedicated to that it isn't even a dedicated team within the product development team so margins in excess of the core business are being delivered by both data services and commercial real estate As a category, once we're out of 23 and I've given you some guidance for 23, you should expect to see that other line increase by about 10 million pounds a year. So already EBITDA accretive. The only area in which additional investment tracks ahead of revenues is on the mortgages and the tenancy side. in the very short term they will be dilutive of the rest of what other is adding over the medium term and I'm talking 2025 onwards there will be both EBITDA they'll certainly be EBITDA accretive they're probably too immaterial from a revenue perspective to really impact the margin for now just to follow up on your new homes question I think it's really interesting and again I think there's a sort of linguistic detail

the difference between number of developments and units that developers are creating building versus those that are selling so actually when one looks at their numbers they tend to talk about sales rates not development rates which is the development rates being much more linked to what we do historically i think probably the closest parallel right now to look at would be 2019 um as a year i think that's a closer year for the developers in terms of their behavior and in 2019 they became cost conscious they didn't they slowed down a little bit on their build rate but but really it was marginal i think if one looks at the the earnings uh statements from them over the last couple of weeks they are typically talking about holding their number of developments ie open developments stable so i think that's really positive for us i don't see that we're getting into the world where they're having to to slow down massively slow down they are very well run complicated businesses where most of them now are very well capitalized so i think short-term blips are less relevant for them and then just the 10 million of growth in other that includes mortgages and the whole thing thanks

sorry extension to will's question so thinking into 24 then we've got let's assume good growth in kind of the core business with end markets kind of okay and then we've got potentially some accelerating growth in other some of which is accretive to ebitda some of which isn't and it isn't quantified so when we think about the profit growth for all of right move into 24 are we thinking that's going to be faster same or less than I appreciate it might be a hard question given you know some change but as it stands today when you wash all this kind of mix through what does it mean for profit growth in a business well as things stand today it will be marginally higher so a percent or so higher than than we're seeing in in 23 is is the expectation

again what would change that it's always the agency business that will have the biggest impact on both revenues and margin you know for this year we're talking about agency revenues which are close to 75 percent of the business so that is the one that will really move the dial and yes the other lines are becoming more material but in the short term what would move the dial would be a change in the agency side that's helpful thank you

and we have some questions online so if i turn to that catherine o'neill city there appears to be a fair amount of agent consolidation in the market what's your view in this over time and implications for right move if any and a second question how do you think the change in epc requirements for landlords from 2025 could impact the resilient lettings market for agents reports suggest more landlords will look to sell due to the burden this creates okay so first of all talk about consolidation i i think

probably answer the second part first in the end it doesn't make that much difference to the right move model we have large agents and small agents of customers that their behaviors are different as you would imagine big companies and small companies behave differently but broadly for us it looks quite similar I think the thing to always point out is of course one hears about consolidation because it's typically medium or larger size companies being becoming bigger one doesn't hear about the startups so there's sort of fragmentation at the bottom end and as technology becomes even more pervasive you can run an agency with fewer people so it's not unusual to have a two-person estate agency now i think that will continue i think net net branch numbers may actually over the medium term increase once we get back to a period of stability um the second part yes there there is this sense that um bands if you're not familiar it's not yet and there's no confirmed date but properties of an epc level band c and above are the only properties that will be able to be rented out by landlords i think it's fairly reasonable to expect that that means some landlords with properties that need enhancing will leave the market i think it's a sensible thing What will it mean for the market? Well, that lettings demand will still be there. I think it will be satisfied both by existing landlords buying newer band C and above properties. Band C is not a terribly high bar. It's a high bar, but not terribly high bar. Plus the business that is working very nicely for us, the sort of build for rent sector, where larger investment funds build typically apartment blocks to be let out. so that's also good news that works very well for us so i think we might see a shift in terms of agents in talking to agents they are mindful of it i think what it means for them actually it's probably net not bad news because what we're seeing is an increasingly regulated uh lettings market which tends to drive private landlords towards agents

because there's now quite a lot of regulatory admin that has to go on and if you've got three properties it's probably not something you do yourself so you use an agent so they're actually seeing it perhaps as a trend net positive three questions from sylvia cuno at deutsche um thanks for sharing incremental data on the three types of agency packages essential enhanced optimizer can you please comment about the step up in arpa each package typically brings on average

second question can you share some thoughts about changes in the competitive market and third could you comment on recent news regarding one of your largest customers purple bricks and what are your latest views on online hybrid agents more broadly sure so i'll quickly cover the questions so uh the typical uplift from one package to another is about 350 pounds i would just add that we quite quickly see agents start to overspend once they've upgraded i think at the

think of the interim or last year's full year results we showed you what that looks like but in terms of the spend the incremental spend required to go from one package to the next it's about 350 in terms of change in competitive marketplace I guess as I said earlier it's pretty stable right now in terms of the property advertising marketplace there's sort of not much changed report beyond beyond what I mentioned earlier, and you can see that from the Comscore graph is stable, so not much there. Obviously, you wouldn't expect me to comment on any particular customer, but in terms of the hybrid model, I think I've been consistent in saying I think the hybrid model is a valid model for a subsector of the market. It's an incredibly competitive subset of the market at the moment. uh and i think we'll continue to see sort of activity there i think it's really heartening that as is public that um people are interested in buying estate agencies estate agency is a hard but good business and there's lots of people who want to be involved but it is a sub sector which is seeing its own competitive dynamics

Last question is for Sean Kelly from Pamya. Given change in building regulations, many home builders are focusing on laying foundations around the beginning development. Beyond that, which is a bit different from previous years, how do you think this will impact development numbers listed going forward through into 2023? Secondly, on product development, going forward, appreciate this is a big driver of growth at the moment. Is there any color you can give us on how this is expected to increase or decrease going forward?

third question on a state agency upselling to optimize a 20 how will the economic pressures from a slowing market affect the smaller agents relative to the larger agents okay let me see if I can cancel you know so development numbers I would imagine remembering we report number of developments listed on site so if the elements take slightly longer to sell that number naturally will increase As I said earlier, looking at the larger developers who are the vast majority of development in the UK, their statements would suggest that they're broadly intending this year to keep number of developments open at a similar sort of number. Most of those guys, because they're bigger developments, will have multi-phases. So it's possible that they won't open subsequent phases quite as quickly, which doesn't really impact us at all, but certainly is one way they can respond to that. in terms of product development pace I think the product development team has evolved leaps and bounds in the last three four years in terms of the tools techniques and speed of development as I say coming back to to that that we've released more products in the last two years than the decade previously that's a lot about tools and techniques I think product development is really key to this business and will continue to be an area where i i think we will develop but also a real strength for us that we do everything ourselves um and the last part um regarding economic pressures on smaller agents relative yeah small versus large i think again in the end and this is this is an unhelpful answer it's about quality of business and quality of business is not actually uh size is is not a particularly good indicator of quality of business well-run businesses, will continue to succeed. Running a estate agent is hard. It's a complicated and can be dealing with quite a lot of emotion with home buyers and sellers. So actually I think small businesses are pretty well placed. They're also slightly easier because they're more resilient than larger businesses and they can have more choices. So I don't think we'll see a differential between upgrade rates between them nor indeed a behavioral differential.

Yeah, I'd probably add that the structure, I mean, there was a link to the rate of upgrades. The structure of our packages, I think, works very well to shield us from agents spinning down because the efficiency of their marketing spend decreases as they come down. They start to pay for core listings in a way that they don't at the top packages, and our agents are fully aware of that. And actually, what we see with some of the smaller agents is that they're very digital. That's fair, isn't it? And so they're acutely they're either acutely aware of the structure of the package but also they're they're very attuned to the value that the products the digital products they use of ours the value that that delivers for them so the idea of changing their mix so that they've got less product and they're paying more for core is a bit anathema to them we find

the last two questions for Sean you noted that the tight h2 rental market conditions with higher tenant churn was good for letting agents yet the drop in branches in h2 was primarily driven by letting agents dropping off could you just give us some color why yeah so what happened and this this goes back actually the tenant fee ban of 2018

to run a an economically viable lettings agent you need to have a reasonable managed portfolio now so if you're a small lettings business with maybe 50 to 100 properties under management it is very difficult and those are those very small branches that we are seeing exit the industry because actually it's hard to make money now you can't try to charge tenants the churn is really helping those agents remembering most of our agents now do both lettings and sales it's those more aggressive broadly spread spread businesses that have bigger uh managed portfolios and that's those are the businesses that are really benefiting anymore it's probably record length thank you thank you everyone have a good have a good day