Zoopla brushes off OnTheMarket challenge in ‘transformational year’

Zoopla this morning announced a ‘transformational’ year with record revenue and profits.

The company also said that it had showed “continuous agency growth since May” and is confident of delivering further growth.

However, its report also refers to a big drop in agency members – standing at 12,702 at the end of September, down from 16,373 a year earlier.

Revenue from UK agents was also hit, standing at £58.3m, down 7%  from £63m the previous year.

Zoopla also said it was charging 11% more per agent advertiser, although revealing that both leads and listings had dropped.

In its results for the year to September 30, it announced a 34% rise in revenue to £107.6m and a 20% rise in profits to £25.4m.

Zoopla bought price comparison business uSwitch in June for £160m. Adjusted EBITDA, earnings after costs, was up 23% to £48.7m. Zoopla said EBITDA had increased following the acquisition.

In this morning’s report, Zoopla said that its property services division “has exhibited robust performance, despite the reduction in the number of UK agency partners following the launch of a new portal operated by Agents’ Mutual at the start of calendar year 2015.

“Agents’ Mutual operates a restrictive practice preventing its members from advertising on more than one of the other more established property portals.”

Zoopla said that traffic to its property platform remained strong, up 4% to 44.7m average monthly visits. However, leads generated for agents were 25.2m during the period, down from 29.2m a year ago. Zoopla said that was down to the group focusing “on the quality of leads and helping its partners win new business.

“The total number of property leads compared to the previous year was impacted by the reduction in UK agency partners and corresponding inventory available.”

The report goes on: “The number of listings featured on the group’s property platform fluctuated throughout the period as a result of the reduction in the number of UK agency partners and teh general shortage of supply in the market.

“As at 30 September 2015, the group had 845,000 property listings advertised (2014: 1.1m).”

CEO Alex Chesterman said: “We have made great progress towards our vision of becoming the consumer champion at the heart of the home with the acquisition of uSwitch, the leading home services comparison platform in the UK.”

He said that the results demonstrated “the Group‘s exceptional value proposition as one of the most cost- effective digital marketing channels for property professionals. Traffic to our property platform remained strong with high levels of user engagement and we recently passed the significant milestone of over seven million downloads of our property apps”.

He said that the comparison services division of Zoopla “outperformed expectations” in the four months since the purchase of uSwitch.

Under a section about principal risks and uncertainties, Zoopla says: “While Agents’ Mutual continues to operate its restrictive advertising provision there is a risk that certain estate agent partners cannot, or choose not to, list on the group’s property services websites”.

Reacting this morning, City analyst William Packer of Exane said that Zoopla’s outlook “as usual is confident”. However, he added that traffic and lead trends are “weak”, reflecting the “continued sizeable loss of inventory”.

However, he said that overall, the numbers announced by Zoopla this morning were “a small positive”, adding “but we expect Agents’ Mutual to remain a significant drag (traffic, inventory, membership, etc.)

“In contrast we expect Rightmove to benefit from increased traffic share and a unique inventory advantage.”

A second analyst, Anthony Codling of Jefferies – the bank which advised Zoopla on its stockmarket flotation last year – said: “Zoopla is leading rather than following the market as it seeks to be the one-stop shop for the home buyer, the Amazon of UK residential, with services ranging across property to tradesmen to utilities.

“In our view, two catalysts are likely to lead to a material re-rating of Zoopla’s shares in the coming months: challenger portal OnTheMarket failing to live up to its own hype of being the UK’s number two portal by January 2016, leading to customers returning to Zoopla, and uSwitch continuing to perform ahead of expectations.”

Originally posted here.

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