Earnings Transcript for RMV.L - Q4 Fiscal Year 2019

Peter Brooks-Johnson: Good morning, everyone, and welcome to the presentation of Rightmove's 2019 results. My name is Pete Brooks-Johnson, and I'm joined by Robyn Perriss, the FD; and Miles Shipside, our housing market analyst. I'd also like to welcome Andrew Fisher, our new Chair, and to those of you on the webcast. I'm going to talk through the highlights of the last 12 months, Robyn is then going to go through the more detailed financials, then I'll spend some time giving you a little bit more color on the housing market and our strategic developments, and we'll finish off with questions from people in the room. So let's move on to the highlights. In 2019, we delivered financially, and more importantly, we delivered a number of strategic initiatives, which set us up for the future. 2019 was a year of uncertainty in the U.K. with 4 Brexit deadlines and the general election. And you'd be right to assume that uncertainty led to a more hesitant housing market, which was more challenging for some of our customers. Advertisers on the 31st of December stood at just over 19,800, which is 3% lower than the 31st of December 2018. But for many customers, it created opportunity, and Rightmove is the place they choose to invest to exploit those opportunities. It's in market conditions like this that one can see the unique position that Rightmove holds and the robustness of our model, with revenue up 8% year-on-year and that - to just shy of £290 million, and that increase flowing through to profit and EPS a shade higher due to our continuing buyback policy. Consistent with our long-established policy, we're increasing our dividend by 11% in line with the EPS growth. You may notice that cash return was slightly down on 2018, which is due to paying for Van Mildert through our - from our free cash flow and a slightly higher cash balance at the end of the year. Beyond our KPIs, we've made much strategic progress this year. Rightmove's purpose is to make home moving easier in the U.K. We'll satisfy our purpose and drive growth through innovation. Not only innovation in property advertising, but also to help agents become more efficient. Whilst property advertising is the core of our growth, we'll also innovate to generate future growth opportunities. And here are the highlights that we've delivered in each of those 3 areas of innovation. We continue to innovate in the heartland of our property advertising. We launched Auto Featured Property in May and already have over 700 branches signed up to the product by the end of the year. In June, we started the early rollout of our next-generation digital marketing product for New Homes developers, Rightmove Active Extension. In November, we launched a new intelligent marketing product for agents, Sold By Me. To assist those agents who are seeing opportunity in the current market and those who are investing for the future, we launched a new super premium package, Optimiser 2020 in November 2019. And we continue to innovate to help agents become more efficient with the full rollout of the new version of the Best Price Guide tool. The Best Price Guide is market-leading and helps agents justify their pricing of properties. The new version contributed to a 10% increase in use with 11 million reports run by agents in 2019. And we launched an Opportunity Manager, which is a new algorithm power tool to help successful agents spot potential vendors in the pool of buyers they already know. And finally, we continue to innovate for growth in the future with a focus on the underserved rental market. We've created 2 more iterations of our Tenant Passport experiment, and tenants created over 40,000 passports. The feedback from that experiment has led us to acquire Van Mildert. And for a number of years, lenders have advertised with us, and we're looking further out with our work in network with Nationwide to investigate how we make the process for applying for mortgage significantly easier for those who want to go direct to a lender. And it will also home hunters more market-aware if they choose a broker. But more on all of this later. There's much excitement for the future, but this is all built on our strong position today. As we announced last year, Robyn will be stepping down at the end of June. So for the last time, I'll hand over to Robyn to talk about what we achieved financially in 2019.

Robyn Perriss: Thank you, Peter. So turning to detailed financials and starting with revenue. Our revenue is up 8% year-on-year to £289.3 million. In absolute terms, we delivered growth of £21.5 million. If we take a look at the drivers of this, you can see the majority of the growth, £20.2 million, has come through ARPA as a combination of core membership price increases and continued additional product spend deduction, including further penetration of our Optimiser and Enhanced packages, which ended the year at 38% of our Agency customer base. In 2019, our average membership was down in 2018. This is £2.6 million revenue decline due to the number of customers. And our other businesses, as a reminder, these include our overseas, our commercial, our data services and our third-party advertising businesses, they contributed a very healthy £3.9 million of growth. The big driver of this was our Commercial business. It was up £1.6 million year-on-year. That's a growth of 29%. And we also had a contribution for 4 months for our new mortgage partnership with Nationwide. So turning to membership and ARPA. As Peter said, we ended 2019 with our overall membership of 19,809, down 3% since the beginning of the year. We experienced a further loss in our Agency branches in the second half of 2019. We were down 421 branches since the end of June, although the lever rate did moderate in the second half, bringing the overall Agency count to 16,347. Similar to the first half of 2019, these levers typically represented slightly lower subbranches who've been disproportionately affected by slightly more uncertain U.K. housing market and transactions taking longer to complete. Peter will provide more color on the housing market a little later on. This has been offset to a large extent by continued meaningful growth in our New Homes development numbers. They were up 11% to 3,462. That's our highest development count number since 2009. And we continue to be the only place to see virtually the whole of the U.K. property market on our platform. It is probably worth highlighting that, that year-end stock level of 900,000, that's slightly lower than historic levels around 1 million properties as we did experience constrained supply in the second half of 2019. So turning to ARPA. In the second half of 2019, we did see a reduction in discretionary digital and marketing spend by our new home developer customers and an additional product spend by our very large Agency corporate customer as they motivated their spend ahead of key Brexit and election events, and in line with those, lower property stock levels. This led to our overall ARPA growth being up £83 to £1,088. But recognizing that the calculation of ARPA is somewhat complex and that it's an average of averages, we've actually plotted ARPA as a rolling last 12 months, so you'd see on the line graph below, which shows that we made steady progress pretty much throughout 2019, ending on £1,088, and that we've made continued progress in January this year as well. Turning to cost. Our cost increased by £5.1 million, in line with our half year guidance to £69.6 million. The majority of this cost increase, £3.1 million, came through an increase in salaries and wages costs. That is a combination of more headcount as well as general wage inflation. And that cost increase to £5.1 million also includes the cost of Van Mildert for the 3 months post-acquisition. Our underlying operating profit, which, as you know, is the profit before the IFRS 2 charge in share-based payments and the National Insurance in share-based payments, that grew revenue by 8%, £219.7 million. And you can see that we delivered a margin of 75.9%, in line with our 2018 margin. So turning to the profit and loss. It continues to be a very straightforward story with the revenue in profits flowing through to the bottom line. Just a couple of things I'd like to highlight is that the combined IFRS 2 and National Insurance charge this year of £6 million, that's a little higher than the charge in 2018, primarily driven by that National Insurance charge which is calculated based on the year-end share price, and we had a very strong share price performance throughout 2019. The tax charge of £40.5 million, that's at an effective tax rate of 19%, and we continue to expect our tax rates to be in line with the U.K. and active tax rate. I'd also like to take this opportunity to highlight that we've traditionally reported our profit at this level here, underlying operating profit. In accounting speak, this is what's known as an alternative performance measure versus a GAAP measure. And from 2020, we'll be proposing profit at this level here, which is our operating profit level. And this is really based on FRC Best Practice recommendation that companies move to GAAP basis going forward. But also for us, if you - we're starting to see less volatility in those IFRS 2 and NI charges year-on-year. They're pretty comparable. And as a proportion of our overall cost base, they're now a smaller proportion. This is also in line with our new remuneration policy, which will set targets at that operating profit level. So you can see here in terms of overall trends, it doesn't change the picture with both the growth at the underlying operating profit and the operating profit being at 8%. So turning to the balance sheet. The big change on the balance sheet is the acquisition of Van Mildert, which we acquired on the 30th of September 2019. We purchased Van Mildert for an initial cash consideration of £15.9 million and an estimated deferred contingent consideration of £2.4 million, bringing the total consideration to £18.3 million. As part of any acquisition, one has to look at the fair value of the net assets you acquired. And we then identified goodwill as well as separate intangibles on our balance sheet, which has resulted in this balance here, the intangible assets stepping up to £21.9 million because that includes £14.1 million of goodwill and £5.3 million of separate intangible assets in relation to Van Mildert. The other place in our balance sheet you can see Van Mildert is that deferred contingent consideration, which is sitting in the provisions balance. And we've also recognized the deferred tax liability of £900,000 in relation to those intangible assets. So in terms of the overall picture, we then ended up with a net asset balance of £41.3 million, driven by an increase in intangible assets, and as Peter mentioned, the fact we've ended the year with slightly more cash of £36.3 million. So turning to cash flow. Our cash conversion as a proportion of operating profit remains very strong, once again in excess of 100%. And we've continued our policy of returning substantially all our free cash flow to our shareholders. If we take a look at the movements in the year, we've had a small working capital outflow of £800,000. We paid £37.3 million in corporation tax. And another thing I just wanted to flag for 2020 in terms of your models is that HMRC for large businesses have changed the corporation tax rules. They're trying to bring the payments forward closer to the point which you earn your profit. So from 2020, then we will actually have 6 corporation tax installments, being the last 2 for 2019 and 4 for 2020. So that's just worth modeling in your models. Our capital expenditure continues to be modest at £800,000. And as I mentioned earlier, we acquired Van Mildert, the next line there of £15.6 million. It's £15.9 million initial consideration, less £300,000 of cash that was in the business. And we paid £59.9 million in dividends in the year. And as is our way, we've bought back and canceled 16.3 million ordinary shares. They were at an average cost of £5.45, which meant the total cash outflow was £89.2 million. And we've incurred some of these central charges and some other minor expenses, bringing our year-end cash position to £36.3 million, a little higher than a year ago. And as Peter mentioned in the very beginning in the highlights, we today announced an increase in our final dividend of 0.4p. The final dividend will be 4.4p. This brings the full year dividend to 7.2p, an increase of 11%, mirroring our policy which is to pay a progressive dividend and grow our business in line with the growth in earnings per share. So back to Peter.

Peter Brooks-Johnson: Thank you, Robyn. I'd like to personally thank Robyn for the all support she's given me over the last 12 years in various roles at Rightmove. Thank you. So before we talk about Rightmove, I thought it might be worthwhile to spend a little while talking about the housing market, as there seems to be lots of noise, and the data does take a little deciphering. As a brief reminder, estate agents are only sensitive to house prices at the margin and have demonstrated great resilience over the years to drops in transaction numbers. I'll spend a little time talking about 2019 and then update you with what we've seen in the first 9 weeks of 2020. This chart shows the number of transactions every year since 2006 according to HMRC. Transactions in 2019 ended up down just 1.4% on 2018. But it was so close to 2018, maybe a surprise to many of you, particularly those of you who remember the data from our interim results. Shortly after those results, HMRC revised all the data for the summer upwards, which has led to this good result. Back in July, I mentioned that we were seeing buyers and sellers hesitating to commit, but hopefully, we would see Brexit certainty and that would accelerate the market. Clearly, that didn't happen last year. The impact of that lack of certainty, we can see them in the bottom here. There was a noticeable slowdown in stock of new listings coming to market in Q3. The lack of stock hasn't hampered transactions in 2019, but it has led to limited choice as we enter 2020, with 10% less available stock on the market compared to a year ago. And this lack of choice may hamper the market if it doesn't correct. Given the transaction numbers are only remarkable for their similarity to 2018 and perhaps the last 5 years, I think it's a reasonable question to ask why up to 6% of Agency branches have left the industry. The answer in the main is cash flow. Buyer hesitancy caused time to fill in the first half of the year to rise by about 10%. To compound this, there's anecdotal evidence that the time taken to complete a transaction when the agent gets paid also increased. While this slowdown in cash flow isn't a particular problem for branches with larger stock, the cash flow impact for those with smaller stock is noticeable, and in some cases, makes the branch uneconomic. The tenant fee ban in June also added pressure on those lower stock branches who had further cash flow impact in their lettings businesses. And it's worth noting, these cash flow impacts apply at a branch level regardless of the size of operation the branch is part of. One can see the impact of that cash flow slowdown in this chart. It's indexed to 2017 to attempt to take out the seasonality, and the bars reflect the lever rate. One can see here the elevated lever rate from the number of branches suffering from cash flow slowdown in Q4 '18 through to the second quarter of 2019. But encouragingly, we've seen that rate slowdown in the second half as agents have adjusted to the new reality. This line is the new start-up rate. And one can see that the tougher cash flow environment actually took 6 to 9 months to impact that new join rate. It carried on despite the cash flow impact having already hit branches who were leaving. If the environment improves, I'd expect a similar lag, a 6- to 9-month lag whilst agents assess the stability of the environment before committing to a new branch or a new business. I think this graph illustrates what's happened to low-stock branches over the last year. It shows the distribution of our sales agent branches by the stock they hold, comparing both December 2018 and December 2019. You can see that lower stock branches have fallen, but beyond 40 properties per branch, the share is increasing. And these numbers reiterate as to why it's a tough time to start the business, which, of course, at start-up has very, very low stock. But with New Homes, this is a different story. This top chart is very similar to the previous chart. It shows the rate of sites sold and new developments coming to market indexed back to 2017. You can see that developers brought forward listings in late '18 and early '19 to combat the sales rate decline that we have seen in early '18. This increased number of outlets had a corresponding impact, raising the sites sold rate through the back half of 2019. In the second half of 2019, the flow was broadly consistent, leading to a small increase in developments listed with us in the second half of 2019, as you can see at the bottom. Given Rightmove's unique position with a real-time whole of market view, I thought I'd share what we've seen in the first 9 weeks of 2020. With the respite from uncertainty, we've seen home mover activity take a step forward. Rightmove had its busiest ever month in January with over 150 million visits a month for the first time ever. Consumers spent nearly 1.2 billion minutes on the sites in January alone. And this trend continues. February 19, 2020 was our single busiest today ever. In fact, our 5 busiest days ever have all been in February 2020. This map shows the demand in January 2020 compared to January 2019, red being demand up 20%, blue being demand down 20%. And as you can see, demand is up nearly everywhere, and it's particularly strong in the previously slower London and Southeast. However, available stock is still lagging behind last year. New listings in January were flat year-on-year. New listings data for February is looking a little bit more encouraging. And you can see this is having effect in firming up house price in the market. Not only our asking price is rising, we're seeing fewer and smaller price reductions than the last 2 years. And from an agent point of view, whilst commission rates are notoriously difficult to measure, the indicators are that agent commissions are at least stable with 2 small surveys in 2019 showing increases of 10-or-so basis points. And the market fundamentals are still strong. Employment levels remain at record highs and mortgage levels at real term lows. And we still have certainty, at least, for now. All this adds up to the Rightmove's sales agreed data looking positive. Agent's mark a property sale agreed when the deal is agreed but the transaction have yet to complete. That's typically 3 to 6 months before it will appear with the land registry. So using this leading indicator, you can see that the number of sales agreed in January, which these numbers back - index back to 2014, are the highest that we've seen since 2014. And encouragingly, we're seeing sales fall-through rates at their lowest since 2014 as well. Whilst the future looks encouraging for agents, I do need to sound a note of caution in the near term. The slow listing environment in the second half of 2019 will continue to impact low-stock agents who are struggling with cash flow. It will also impact the hybrid agents as they have taken on fewer properties. As we saw earlier, it takes time for confidence to return to new branch - to return, which then leads to new branch openings. Taking these factors into account, I think it's reasonable to expect Rightmove customer numbers in the first half of 2020 to follow a similar path to the second half of 2019. Returning to Rightmove and our strategy, of which I'm sure you're all familiar. Of course, our revenue can be expressed as number of advertisers multiplied by the average revenue per advertiser. And to be clear, we don't control the number of advertisers in the market. However, in all but the extremes of the market, the ARPA is a factor of the value of our products and services. We do, however, influence the number of consumers on our platform on which that value is built. So let's start there. Despite the hesitancy, there's no doubt the latent demand remains in the market and consumers continue to turn to Rightmove first. The number of visits nudged up 2% to over 1.6 billion visits in the year, whilst time on-site per property increased 4%. But the reduction in stock saw total time reduce 1%. We continue to extend our lead as the place consumers come to research the property market using our tools, such as Sold Prices. And traffic of those tools was up 7% on the year. The market share according to Comscore, there's a little explanation if you're not familiar with it, this big step is a result of a Comscore methodology change in the way it measured Zoopla's traffic. They did this in February, and our internal metrics don't suggest there was a material change. Post that methodology change, our share was 87%. In December 2019, our share was 87%. So I think it's reasonable to conclude that our commanding lead remains. All of this adds up to one way we deliver value to our customers, quality leads. The quality and volume of the leads we deliver is a key plank in helping our customers be more efficient by not delivering leads, which waste their time. Whilst the total number of leads was down at over 40 million, the number of leads sent per property listed was up 2% on 2018. But quality leads are only one of the ways we deliver value to our customers. Building on our audience, both our customer groups recognize the value of our products. Those Agency customers who see opportunity have been upgrading to our premium packages, and they do that to compete for an increasing share of motivated sellers. This has led to a record number of agents taking either the Enhanced or Optimiser package. Particularly pleasing was the growth in the more expensive Optimiser. Our New Homes development customers are spending more than ever on our digital marketing solutions. Based on our agent segmentation strategy, we launched our new super premium package, Optimiser 2020 in November. Optimiser 2020 is aimed at those market-leading agents with a higher-than-average property stock per branch. In other words, those agents who are seeing opportunity in the current market. It extends the previous Optimiser package by giving exclusive access to the Sold By Me products and the Opportunity Manager tool. We had nearly 200 agents upgrade in the first 2 months of sales last year, with most of the customers coming from Optimiser 2015, with an average revenue uplift of just over £300 per month. And for our other customers, we're halfway through the communication of our pricing changes for 2020, and everything is progressing according to plan. So let's cover some of that innovation we delivered towards the end of 2019. As I say often, one of the key reasons for an agent to advertise is to attract potential sellers. Typically, they're looking to get into the consideration phase and be one of the 3 agents who are invited out to value that potential seller's home. Influencing sellers early in their thinking is very important. Research by the Property Academy shows that 2/3 of sellers rank - handles properties like mine as one of their top 5 reasons for instructing a state agent. Sold By Me, which, as I said, is exclusively available to Optimiser 2020 agents, showcases the property which an agent has sold on the most viewed page on Rightmove, the search results page. But over half of sellers are looking to move out of an area. So Sold By Me goes further. And where we know a potential seller's home address, the product uses dynamic targeting to show them properties from an agent who operates in their home area. This is an example, I think, of our sort of forensic innovation. So for a customer, typically, agents have no way of speaking to this hidden audience because typically they won't see them in their market because they're moving away. Part of our strategy is to help customers be more efficient so they can spend more money on marketing whilst protecting their margin. Given the market, it's perhaps not surprising we've focused this efficiency drive this year on those customers who are finding opportunity and growing, the higher stock agents. We know they have more leads, and that in itself creates an efficiency headache for them. Our unrivaled knowledge of home hunters allows us to help uncover agents - help agents uncover potential sellers within their pool of buyers within the buyers they already know. And using our data, we can predict when a seller is ready to consider instructing an agent. Rightmove is in a unique position as 2/3 of the over 6 million people sending leads have yet to select an agent to send their home - sell their home. And it's important as in a recent survey, nearly 90% of agents missed the seller opportunity in the leads from buyers. Opportunity Manager uses a real-time algorithm to help agents prioritize their work with a simple color code. It also allows them to manage their contact with those prospects and shows them how many of the prospects they're winning and losing. We've been developing the algorithm for 2 years and continue to refine it to ensure it really makes a difference to agents. An Opportunity Manager is a product aimed at those customers with higher stock and therefore more leads. To get even more value out of the tool, it's beneficial to increase the number of potential sellers an agent knows. As such, it encourages agents to buy a number of other Rightmove products, such as Rightmove Discover, our proactive tool which introduces agents to home sellers that the agent may not yet know. Local Valuation Alert, which markets an agent's brand to potential sellers; and also Featured Property, which you may remember, we launched last year to help those agents with large property stocks connect with more buyers. Rightmove is about making home moving easier both for 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 create future revenue opportunities for us. Our main focus to date has been with the rental flow as we still see significant opportunity for efficiency gains and also some learnings which we'll apply in the sales flow. In 2019, as I mentioned, we launched 2 more iterations of the Tenant Passport and filled in by over 40,000 tenants. We've garnered invaluable feedback from tenants and agents. And this led directly to the purchase Van Mildert, a tenant referencing company, to allow us - to allow those benefits of prequalification to flow through to referencing. And we've begun a further trial with the integration of the passport directly in the rental lead flow in Rightmove. In keeping with our relentless development, we're not content to just focus on rentals, and we started exploring the mortgage approval flow with the nationwide building society, looking to build for the longer term. As you might expect of us, both of these opportunities will generate a small amount of revenue and profit in 2020. So focusing in on helping tenants to be transaction-ready. The letting process is inefficient. There are many shared problems for agents and tenants. Typically, there are lack of visibility, duplicate data entry, an overall lack of pace, and perhaps most frustratingly for both, last-minute referencing failures which may mean a lack of home for a tenant and a void period for a landlord with consequences for the agent. As the center of the U.K. property market, Rightmove is in a unique position to create those integration efficiencies whilst generating revenue for us and the agent. This diagram shows the broad phases of the rental flow from search to living in a rental property. It also shows where our product set will evolve to support those phases. It might be worth highlighting the Van Mildert insurance products as for the first time ever for Rightmove, those products not only generate revenue for us, they also generate a commission for the agent. In the longer term, you can see how this product set will benefit various parts of the Rightmove strategy. These first phases will support both our proposition to tenants by making home moving easier for them; and agents, by making the process more efficient. And these latter phases will generate revenue. And finally at the bottom, here's a sample of the activity since we acquired Van Mildert in October last year. We launched a small-scale trial in November 2019 to integrate that pre-referencing - prequalification into the Rightmove lead flow, and at the same time, offering simplified agent and tenant communication. Van Mildert is integrated with most of the major agent software systems now, and we're extending this to Rightmove Plus. And we're deploying our process experience to improve the speed of referencing a tenant. Van Mildert has market-leading landlord insurance products, and we're just starting to deploy our digital marketing expertise to communicate to both agents and landlords. Hopefully, you can see we've much to do and much ambition. But bringing back to 2020, let's wrap up with the outlook. The network effects at the heart of our business remain incredibly strong. The results of this year demonstrate the resilience of our model to the impact of short-term dips in branch numbers, and the value of our products and data to our customers showing through. Looking forward to 2020, we've seen that the housing market has had a strong start, but it will take some months for that optimism to feed through to our customers. In particular, we expect to fall in the number of virtual branches from hybrid agents as a result of the lower listing numbers from the second half of 2019. And we see some continuing impact of the slower cash flow on low-stock agents. As the market improves, we therefore expect a continuation in the trend of flat development numbers. Taken together, I think it's reasonable to assume that customer numbers will follow a similar trajectory to the second half of 2019. However, with our strong innovation delivery in the second half of 2019, we are well positioned when our customers begin to feel more confident. And as Robyn noted, our other businesses grew strongly in 2019. Whilst small, we're confident there's more progress with those businesses. Hopefully, you can see there's no slowing down in our ambition. And we're confident of delivering our full year expectations. Thank you, and over to questions from the room.

Robyn Perriss: Just lastly from me before we start the Q&A. I just wanted to take the opportunity to thank the analysts in the room. I very much appreciated your engagement in the story and your support during my time as Finance Director. And post-June, I shall continue to read your coverage with a lot of interest. And James has a microphone. It is important to use the microphone and announce who you are because we do have quite a lot of people on the webcast today.

A - Robyn Perriss: I'll take the first question from Andrew for change.

Andrew Ross: It's Andrew from Barclays. And also, a big thank you from our side, Robyn, for of all of your help over the years. I've got two. First one is maybe, I guess, the standard question to help put some numbers around your commentary on ARPA growth. I think consensus is probably in the high 80s in terms of ARPA going up year-on-year. How should we think about your commentary in relation to that? Then the second question, can you give us a bit more on what you're seeing from Zoopla? It seems like now they've got kind of similar numbers of branches to you guys, I think, spending a bit more on marketing. Or where do you think they are in terms of branches if that's not the case? Spending a bit more on marketing. Kind of what are you seeing from them in the market in terms of getting a bit more aggressive?

Peter Brooks-Johnson: Okay. So I'll answer this. So the first one, ARPA. I think given what we see and our strong innovation delivery at second half last year, I think I would suggest the ARPA being slightly bolder. So it's somewhere between £85 and £95, I think, is how I think we should look at ARPA for this year.

Robyn Perriss: And we also get the full year contribution from Van Mildert, which is why we can embrace that guidance a bit as well.

Andrew Ross: [Indiscernible].

Robyn Perriss: Yes. It's in - most of Van Mildert is in U.K. Agency as a common customer.

Andrew Ross: How much of that is by Van Mildert? And how much is by...

Peter Brooks-Johnson: It's probably around about £10, we think. Zoopla. I think, as you know, Zoopla are spending on marketing. They continue - actually, they sort of returned probably to the levels that we saw a few years ago. So around about £1.5 million, maybe twice as much on marketing spend as us. For those of you who have Comscore access, it's no secret that the Comscore market share hasn't changed following that spend. So I think we continue to see the network effect is unbelievably strong with consumers. And we are back in a world where it perhaps was in 2017 with doubled marketing spend not really moving consumer traffic.

Robyn Perriss: Will Packer?

William Packer: It's Will Packer from Exane BNP Paribas. You've given us some guidance around the H1 for the Agency branches being similar to H2 '19. So can I interpret that as around down 500? Then secondly, if we think about the second half of the year and the better leading indicators towards that, are you thinking of growth, flat, a bit of a decline? Just some color on H2 would be helpful. Secondly, could you talk about the ARPA of the low-stock branches that are exiting the industry? Are they in line with the average, below, higher, et cetera, and the dynamics there? And then finally, on the new home side of the business, should we be concerned that as the market improves, the countercyclical boost that business has received could reduce? And so you could - there could be a period where you see the good news or you see the sort of tougher new home market not offset by the Agency market?

Peter Brooks-Johnson: Okay. Only three questions, Will. You're giving me an easy this time. So firstly, second half customer numbers. I think maybe this week is a great week to suggest that forecasting too far in the future might be a fool's errand. I think it would be at the moment, given what we're seeing, a lot of optimism in the market, that 6- to 9-month lag that we see for agents to get confident before they start spending on a new branch. I think flat is probably a reasonable estimate. And we will have to see. I'd say there's still quite a lot of moving parts to go before we get there. ARPA levers, so those small stock agents who leave the business and leave the industry, typically, they're now around about average or slightly below average ARPA. For those of you who perhaps are slightly new to the story, what we have seen for many years is actually 50% of branches who start fail within their first year. It's not a surprising construct given the barriers to entry in Agency are very low. It's a slightly stark statistic, but one I suspect is shared with many SMEs. So typically, their ARPA is around about average. And on New Homes, certainly, I would expect that, that counter cyclicality of the market continues. I would expect not to see a really strong growth from the New Homes developers. I think we return to slightly more normal periods for them where they push hard on developments that aren't - necessarily got high sales rates and maybe go easier on the developments that are selling well. There is, of course, a possibility of the timing dislocation where that counter cyclicality are mined. But I think that's usual to any hedge, and I don't think these have particular impact on our numbers this year.

Robyn Perriss: Joe Barnet-Lamb?

Joseph Barnet-Lamb: Joe Barnet-Lamb from Crédit Suisse. Three. Firstly, the usual question you get with regards to cost into 2020, and particularly with regards Van Mildert. Could you help us understand how much cost that will add? Secondly, you spoke a bit about discretionary spend coming out in H2 '19. Is there any signs in early 2020 that any of that's coming back? Could you give us a little more around that? And then thirdly, on Van Mildert. You spoke about that Van Mildert insurance. It seems like a really interesting product for you guys to help drive revenues to some of your agents. Can you talk about how you could see that product evolving over the future years? Could you see yourself bolting on other areas in which you could aid agent's revenues?

Robyn Perriss: Okay. I'll take the first question on cost. So in terms of guidance, I think essential starting point would be in absolute terms of increase of around £6 million, which would also include - this year, it grew by £5 million to £6 million with Van Mildert as well.

Peter Brooks-Johnson: Okay. So I'll do the next two. So spend coming back. I think as Robyn said, the larger companies actually across both customer segments were very cautious coming into an election. It's not unusual. Every election will see a slowdown. And that slowed them down. They're now starting to be a little bit more positive as they see the numbers. The real challenge for state agents at the moment is winning stock. They say we're still 10% down on stock levels, which, for them, is a really important factor because if they run out stock, then, of course, their income will go down. So we will need everybody to start feeling more confident in selling houses. But they are starting to spend again. Van Mildert insurance, I think, is really interesting for us. At the moment, Van Mildert is really focused. They've got a landlord protection policy sold either direct to landlords or with the agent and the agent under commission. I think it's a great area for us to explore more, Joe. I think it - one has to be straightforward, but it's not an area we know well. And it's one of the reasons for choosing an established provider who could bring with them some knowledge. Our first steps - rather than expanding the product set, our first steps are actually to deploy what we know about digital marketing. And as you imagine, we know quite a lot. So that's our first focus before we start expanding that product set. But I think it will in time produce a nice revenue flow for agents.

Robyn Perriss: Natasha from Citi.

Natasha Brilliant: It's Natasha Brilliant from Citi. Just coming back to the ARPA guidance. If we take the underlying guidance ex Van Mildert, the £75 to £85, how does that split out between sort of pricing and product? If can you give us a bit more color on that. Secondly, if we potentially see some large-scale consolidation within the market of the agents this year, could that have an impact on your business? And then finally, just on the Nationwide agreement. Can you give us a bit more color on how the economics work? And is there potential for similar agents with more lenders? Is that pretty successful?

Robyn Perriss: Let me take the first one. So in terms of the underlying ARPA growth, it was broadly 50% from core price increase and around 50% from products. And I would expect a similar trend, maybe a slight inflection given the strong growth we've had in Optimiser 2020 towards a bit more coming from products in 2020.

Peter Brooks-Johnson: So I presume you're referring to the announced discussions between us and Countrywide. I don't know any more than anybody else in the room. I suspect some of you will probably know more than me. I think there's a number of different forms that sort of arrangement could take if indeed anything happens, and I think we'll need to respond once we understand the shape of any arrangement if it happens. And in terms of Nationwide, I think what's really interesting for us is it's a sponsorship partnership. So we are not involved in writing mortgages. Again, one of the things we know quite a lot about is we know about consumers and helping consumers understand websites and flows. So it's great to work with them. I think what's great about them as a partner, they espouse very similar values to us in terms of the sort of straightforward and fair pricing. And also, they're very open. So we're learning together. As for the future, I think we have to see what happens over the next few years to see how the market develops. A number of you would have heard me say, one of my big concerns in the mortgage space particularly is we're a digital company. Our consumers expect a digital response. So we've steered away from anything where as soon as they click on a button on Rightmove, they get a telephone call because that's not the promise that we're making to our consumers. So right now, there aren't many lenders who could work with us. I think a lot of lenders are working hard to get that functionality, but we have to wait until they can satisfy the promise.

Giles Thorne: It's Giles Thorne from Jefferies. Just coming back to the question of consolidation in the Countrywide and there's no news. I appreciate you don't know what's going to play out yet. But hypothetically, if you did see a vanilla in-market consolidation in the Agency which would naturally bring rationalization and then seeking to reach the pricing power, what is your commercial response?

Peter Brooks-Johnson: So I think what we've seen before in Agency rationalization is an when an agent with a number of branches reduces its branch footprint, they actually spend more on product because typically they're not reducing their branch footprint to reduce their ambition. They want to put more properties into each branch and reduce their branch costs. So what we see is they spend more on marketing because they need to spread their message wider, and that works well for us. I think it very much depends on the style of the consolidation. And I think in time, we've seen - I've seen all sorts of different things where we've seen branches reduce. In some cases, we've seen branches increase. And a lot of it depends on branch overlap as well and footprints. So different agents, we would tend to call national. But when you look at their detailed branch footprints, they're quite different. One has to do the analysis at quite a detailed level. Remember, in the U.K., it's about 2,500 local markets. So it's quite a detail.

Giles Thorne: Okay. And I had a second question, please. Zoopla says the property nation survey has - that a comfortable majority of agents are going to look to spend more on social media as a digital marketing channel. Is that an existential risk that you recognize or an existential opportunity that you want to embrace? Or what's the right perspective on that?

Peter Brooks-Johnson: So I think we have experience in the space. So we help our New Homes developers. New Homes developers on the whole are larger organizations with very sophisticated marketing team. So they tend to be ahead of the curve in marketing terms. So we actually help our New Homes developers with their targeting on social media because we have the best targeting data in the U.K. because people tell us what they're looking for as opposed to having to work it out. At the moment, we certainly don't see many agents really deploying social media as a tool. If it were to become a tool, I think and I'd say, the experience we have with New Homes gives us a great starting point.

Miriam Adisa: Miriam Adisa from Morgan Stanley. Firstly, if you could just talk a bit about the commercial revenue opportunity. Obviously, you mentioned the acceleration in the second half. Could you just talk a bit about what are the drivers there and how much you sort of think that could accelerate further this year? And then secondly, if you could just talk about the M&A opportunities that you see at the moment. So I mean, last year, you sort of doubled into the Tenant Passport and then you bought Van Mildert. Now you're looking at this - the mortgage market. Is there any potential opportunities in that area or any other spaces that you're seeing?

Robyn Perriss: I'll take the commercial one. So I mean in terms of commercial, that growth pleasingly came from more commercial properties on Rightmove and higher ARPA as well. So we're getting both drivers of growth in the commercial space. It grew by 19%. We've continued to expect strong double-digit growth. So to give you some sizing, that business is now a bit over £7 million today.

Peter Brooks-Johnson: And maybe to give you a sort of semi-tangental answer to your M&A question. The way I think about M&A is it's actually accelerated product development. So why we chose to purchase Van Mildert was we saw that referencing was a key part of our strategy. And we had the choice of either building it or finding people who knew all about it and had been doing it for 10 years that had a brand fit. And we chose that, that was a more efficient route. And I think for anything we do, we would run through the same set of possibilities for any bit of service that we need to expand within our strategy. So it will be on a case-by-case basis.

Robyn Perriss: Are there any more questions in the room? Andrew, final one from you.

Andrew Ross: Just on the Van Mildert. So £10 in the ARPA. What's the assumptions going in there in terms of how many agents you're going to upsell Van Mildert to and how much they'll pay, just to get a sense?

Robyn Perriss: So broadly, I think just in terms of some very high level guidance, I think in terms of revenue, Van Mildert will probably do around £4 million next year. Not all of that goes into the ARPA because what we look at is whether we have a common customer in terms of if it's an existing Rightmove customer and a Van Mildert customer and the overlap is probably around 80%. But of course, there are some products that they have that they sell, for example, to landlords, which are not a common customer. So that revenue would go in. And we've said that we think that's probably around a 25% margin business.

Peter Brooks-Johnson: And maybe just to confuse the matter further, but the referencing business within Van Mildert is a per-tenant business, not a per-agent business. So Van Mildert charge per-tenant reference. So we can't really answer your second question because it's a sort of - it's a slightly different angle.

Andrew Ross: Could you say how many agents will be [indiscernible]?

Peter Brooks-Johnson: We wouldn't normally give that sort of other detail.

Robyn Perriss: Will?

William Packer: It's Will from Exane. Very quick one, I promise. A question that hasn't been asked but you usually get is the penetration of online agents as a share of your stock. Could we just have an update as to where that stands? And secondly, it was a 5% decline in your branch numbers among agents. What was the physical branch decline?

Peter Brooks-Johnson: I can answer the first one. I can't remember the second one, I'll have to get back to you. But in terms of hybrid agents, so those - typically, those agents we charge upfront. The second half of last year, that slower listing environment, I think, has adversely impacted them. So their share has fallen slightly. We've been stable for about 18 months, but we've seen a slight fall in their share in second half. If anyone is interested, I've got the graph if you want to see it.

Robyn Perriss: I think that's all the questions then. So that brings us to the end of the Q&A. Thank you very much for joining us, and for those of you on the webcast today.

Peter Brooks-Johnson: Thank you.