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Rightmove shares tumble after revealing deferred payment scheme

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Thu 19 Mar 2020

Rightmove shares tumble after revealing deferred payment scheme

Rightmove shares fell sharply yesterday after it told the stock market of its deferred payment scheme for agents.

Analysts at Jefferies criticised the move, saying that it could damage “Rightmove’s fragile relationship with agents”.

In  yesterday’s announcement to the stock market, Rightmove described “our plans to help support our customers given the current backdrop”, saying that some agents would have cash flow concerns.

Agent numbers do not appear to have fallen at Rightmove so far this year, said the statement: the portal yesterday said that numbers were “in line with commentary made in our recent 2019 full year results”, and said traffic to the portal has continued to be strong.

Rightmove also sought to reassure the City, saying that while it is too early to give guidance on this year’s financial results, “we have a highly cash generative model”.

Rightmove also revealed that all its employees are now working remotely.

CEO Peter Brooks-Johnson said in the update: “At Rightmove we are doing everything in our power to rise to the challenges of COVID-19.

“Our focus, first and foremost, is on protecting the welfare of our employees and our customers.

“We also continue to run the business with a view to delivering long-term sustainable success and remain focused on the interests of all our stakeholders.”

Despite yesterday’s fall in Rightmove’s share price on the announcement, City analyst William Packer of BNP Exane Paribas described the deferred payment scheme as sensible.

In a note to investors, he said that coronavirus was likely to result in a “big hit” to estate agency.

He added: “We think the move to give a payment deferral to agents is a sensible one, prioritising the long-term relationship with agents and helping them through any cash crunch.

“We expect today’s announcements to weigh on Rightmove investor sentiment. That said, we see Rightmove as well placed within a sector context and reiterate our outperform rating. The group is net cash, high margin, defensive subscription models and well placed to prosper once the COVID-19 hit recedes.”

However, Jefferies changed its mind, first welcoming the scheme and then issuing another statement saying “We were too quick on the draw”. It had apparently initially thought that the scheme was a fee cut, not a deferment.

Jefferies analysts said that “what has actually emerged is something more damaging to Rightmove’s fragile relationship with agents”.

Jefferies added: “Rightmove had the opportunity to reset its relationship with agents at this critical moment of national  unity: its chosen act of largesse, we think, will have the opposite effect.”

It also said that the qualifying criteria would “raise some hackles”.

Rightmove’s shares fell by more than 17% on the announcement, but recovered to end the day 7% down at 468p. In early trading today, the shares were down again, by 3.8% to about 451p.