Rightmove plc (RMV) Earnings Call Transcript & Summary

All right. Good morning. Thank you for coming, everybody, and welcome to the Q&A part. I believe that you have all seen the presentation in the RNS this morning, obviously. So let me just open with saying that we're very proud of a strong set of results for last year. 10% revenue growth, very good drop-through to profit as usual, stable membership, incredible amount of consumers taking to the Rightmove brand and platform. Also, as usual, it was, of course, a market -- property market that started out on the weak side, let's say, quite a lot of anxiety and it really improved throughout the year. In terms of sentiment, the rate stabilizing and anticipation of -- obviously coming down. And we saw that in the indicators of different kinds, and it has really translated into 2024 as well, with everything literally up in the first 6 or 7 weeks of this year in terms of listings being very strong, demand being very strong, sales agreed being very strong, mid-teens. So the sentiment out in the market is good. And obviously, more volumes is generally a good thing. And we'll come back to more of that in terms of predictions. But the outlook for '24 looks good, favorable. And as you know, we continue to really invest in innovation, in products, catering and thriving and literally all kinds of market conditions. So we're hopeful for '24 and definitely the outlook beyond that. But with that, I'm not going to repeat the rest of the presentation. So I think we can jump straight over to Q&A. We have Alison Dolan here, obviously, as well.

Will?

It's Will Packer, BNP Paribas. I got 3 questions. Firstly, we're heading into a period where there's probably going to be a lot more scrutiny on consumer engagement. We can see from the U.S., whether is it a battle going on, there's lots of the debates around what metric to look at, Google, Comscore, Apptopia, Similarweb, visits, minutes spent, bounce rate and there's lots of different things being said. Could you kind of set the scene for us, what you think is the right metric for us to look at or metrics? And where your share stands today and just sort of set the scene for us versus the competitive set? Secondly, the temptation is to talk all about counter-factuals, but just put that to one side and think about if you were to have a new challenger on those key metrics around traffic, agent penetration, et cetera. What changes would concern you? When do we start to get worried about things like leads? And obviously, as an extent to which -- while also in your control, you can change the conversion rate of leads, et cetera. But what changes should we look to as a source of concern? And then finally, when it comes to agent formation, it feels like we've been talking about that for a while and how it's been held back. What do you think the market needs to get back to agent formation? We're through the online agent headwinds, it looks like there's some green shoot of recovery in the end market. Is that sufficient but perhaps through the back end of the year, we could start to see some agent formation or has something structurally changed?

All right. I will start with the first one, okay? And look, indeed, there are a number of different sources when it comes to figuring out traffic out there and some of that we happily leave to you. But obviously, we look at these things very closely across different sources. And generally speaking, it's -- there are 2 things which are important. One is the volume and how we are performing on a volume. And when you -- again, when you sit at a massive amount of volume already, where over 85% of it comes directly to our brand and our platform, seeking out the right new brand. We think it's very, very hard to dislodge that kind of position. The other one is -- so from a quantity perspective, we feel very confident about continuing to have that sort of quantity of leads in the market. And as a matter of fact, we develop more and more consumer products as well and driving engagement. So the Mortgage in Principle is a good example, right? It comes both from the existing traffic, but it was obviously a way to engage further with the traffic and membership that we have on the consumer side, which leads me to the other piece, which is quality. And what you actually get out of that traffic is incredibly important. And we are -- we have talked about and talked about again, the -- a normal sort of factor that we have in terms of that engagement, what it actually produces for customers, somewhere between 5 and 9x the value for customers coming from our consumer base. So we're very good because of the number of products we have, the amount of visibility and data and how we can connect that between consumers and customers. The right time of the cycle, the right of interest, the right time of the process, et cetera. So we feel -- I think your second question was around concern around these pieces. I will flip around and say, the question is how excited we can be about it. We've laid out and our strategy is to build on this strong position in both quantity and quality and actually deepen further all of the product information, the seamless connectivity and ease of doing things between both consumers and customers. So -- we sit in a great position, and our strategy remains very intact. Let's continue to build on that strength, right? I think the -- from a node perspective, it just makes it even harder to try to, in a way, butt in, right? When you have a much smaller traffic, you have lesser quality of that traffic. And when the traffic that you very likely add is also lesser quality, right, because it's not traffic that has sought you out in the first place, the way consumers do with Rightmove.

So I think just adding to that for me. So clearly, market share, huge as a metric in itself, which is our immense moat, it is one of our key metrics. And to your point about counter-factual and as a new entrant. I mean just sort of maybe stepping back from this a bit and thinking about some of the themes that we've seen over the last few months, there has been a lot of noise about will there -- won't there be a head-to-head marketing battle. And I think some raised eyebrows at our position in that. We market our brand, and we have 20 years of history of consumers turning to Rightmove first. But I think if you actually dig into that, the reason that for us, the biggest return on investment is to continue to innovate for the consumer, is by leveraging that position. We have 86% market share, which gives us a treasure trove of data about what consumers are doing when they come to Rightmove knowing that they have come to us first, not through search. So therefore it would make no sense for us to go off and start buying Google's SEO-driven traffic. We've got the traffic. Now the question is how do we create the most advantage for ourselves by leveraging that traffic. So we know our customers, we know what they're doing on the site. We have a database of over 8 million unique users who have opted in to marketing, close to 8.5 million unique individuals who have chosen to receive marketing from us. Over the last year, we've built up 3 million enhanced profiles. So we now know what their financial status is. We know the time period over which they want to move. We know whether they're an owner, whether they need a mortgage, whether they want to sell, whether they're buying a second home, whether they're moving from being a renter to being a homeowner. We can match all of that permissioned data up with what they're then doing on the site. Whether they have engaged with our Mortgage in Principle process, are they using our Track-a-Property tool. For example, are they using the stamp duty calculator? Where is it that they're looking to move? All of that is data and insights that we can then use to pass on to our agent customers, which is why we can create the sort of outcomes that Johan talked about. 9x more vendor mandates, one, on Rightmove than on our closest competitor, which incidentally is not on the market. 7x more homes rented, 6x more homes sold. All of those outcomes derived from the products that we build and the way the consumers use the site. So why would we [indiscernible] money on tactical marketing campaigns where we can create so much more value by innovating for the consumer, which keeps them on the site, which then maintains those sorts of outcomes for agents. So market share, I think, is absolutely key for us, but clearly leads and the quality of leads are what drives outcomes for agents, and that is also a critical metric for us. But it's engagement stats, right, that we are measuring. It's not traffic numbers because traffic tells you nothing about the quality of the traffic and the quality of the outcome. And then to your point on agent formation, I know we have been talking about that for a while, and we've seen a very different set of market conditions in '23 than we saw in '22 and '21. I would hope that with a more benign macro, '24 would see more new agents having the confidence to set themselves up. But I would say that in agent land because there is such a lag between winning a mandate and that turning to cash, it is still difficult for new agents, while that period remains at 4 to 6 months, to fund yourself throughout that gap. So I think it will probably start slowly even if we are to see more new agents. The recovery from a more benign macro will probably be seen first in development numbers and in agent numbers.

Just a quick follow-up. You talked about 85% number of organic traffic. If we put it another way, how much of that would you buy, any way are you underselling? Because actually, you don't buy 15% of traffic or maybe that's normally you do?

No, we don't.

No. Correct. We started as an over -- and again, we take that as with the indication as consumers are looking actively for us. CRM, e-mails, app notifications and a couple of other smaller sources where we have a relationship already and whereby consumers come in basically fills out the rest, right? It's an extraordinarily small amount of paid in the rest of that.

Kurran...

It's Kurran Aujla from Berenberg. A couple from me. Just in terms of the ARPA range, I think people have picked up in your homes, [ Alison ], that we should expect maybe you'd fallen in the lower end of that range. I guess maybe could you outline a scenario where you, in fact, actually come in the top end of the range or why we should expect you to be in the bottom end of the range? And then secondly, I think agent churn was 11% slightly ticked up from 10% last year. Could you just give us a kind of common theme in terms of why people do leave the platform? Is it that they go out of business or they go to competitors? Or just kind of give us a sense of what is the real driver of that churn?

Yes, sure. So on the ARPA point, first of all, I would remind you that it's a higher range. So this year, we increased the range from what had been GBP 95 to GBP 105 of growth to GBP 110 -- sorry, GBP 100 to GBP 110. So the lower half of that range would have been the upper half of last year's range. But we tend to be reasonably cautious at this stage of the year. Just taking you back to this time last year, we also guided to the bottom half of the GBP 95 to GBP 105 range. And then we increased guidance for ARPA 3x during the year last year. So there is an element of that. We're early in the year, it's an election year. It's difficult to have further visibility on how agents and developers will behave. We are also, of course, coming off the back of very strong growth in '23 with the New Home developers in particular. So just year-on-year growth. Again, it's -- we don't have full visibility on this. What I would say is that -- we have -- we're in the middle of our second of 4 cohorts of agents to go through their annual contract renewal and pricing process. That is all going completely normally. There are 2 more to go, so we'll see that, but it's always difficult at the beginning of the year to know how much discretionary upgrades we will see in discretionary product purchase. So it's nothing more than a bit of caution and the strength of '23's growth that's driving the guidance. And then on churn. So yes, I mean, I don't think I'd call a 1% tick up much of a change in retention. But to the extent that agents leave, it's either agents leaving the market, retiring -- a lot of them are small family businesses, and that is the primary driver. And then sadly, some do go out of business that has always been -- those 2 things have always been the driver of churn. It's very rarely churn from one platform to another. All right. Joe?

Joe Barnet-Lamb from UBS. Maybe firstly for me, so New Home sort of membership slowed a bit at the back end of last year, yet in your sort of remarks, I think you referred to sort of expecting it to be up in '24. So can you give a little bit of color with regards to what's sort of going on there? Then secondly, with regards to the -- maybe start with that one, sorry. If that's okay?

Sure. Yes, you're right. We saw the number of developers at December was lower than the numbers we reported at the half year. And undeniably, we saw a bit of a slowdown, particularly in the fourth quarter. I think development numbers, as I said, they're always quicker to recover when the macro picks up than agent formation. So we would expect to see in a year in which, as Johan said earlier, all of the stats are pointing to a better year for the market than '23 was, we'd expect to see a recovery in development numbers, and that's what's behind the guidance.

And then maybe building off that with regards to the sort of Agency -- sorry, the Agency formation. What is baked into your guidance? So when you say a slight decline in membership, you're still forecasting negative Agency numbers. Is that effectively ongoing churn at the same levels and still low Agency formation? Or are you within that expecting any uptick at all in new agent formation through '24?

So the guidance on agent numbers is net guidance. We will expect to see some joiners, but this is really all about an absence or a lack of new joiners. The leavers -- Agency leavers in '23 and you'll see it in the deck, are actually lower than they were last year. So it's less -- it's about people actually leaving the market and its far more just a question of a -- new agent formation, and that's what's behind the guidance. We would expect to see agent number declines offset by development numbers. But as I say, it's difficult at this stage of the year to know fully how it will play out.

But within the guidance, you're not expecting new agent formation to accelerate through '24?

No. No.

Also, to quickly build on that point. And again, this was in the materials, right? If you look at a couple of years back, there was much, much higher volumes or leavers before pandemic, right? And that's actually come down. So I think it's possibly just a narrowing of the spread between joiners and leavers. But overall, it's a very, very stable picture, one has to remember that. I think the other thing, which is worth mentioning here, and we had it in a couple of places in the deck and also referred to during our Investor Day, there are exciting newer segments of the U.K. property market, so housing associations. You could talk about New Home developers, for example. They typically operate on slightly different budgets, marketing spend levels than many of the professional developers. We have identified that. We've talked to them. We learned. We've just launched a specific package for them. So great strong pickup already with about 50 of them in the bag, right. Similarly, the build-to-rent sector, which is small, only about 2% of the rental market today but predicted to continue to grow very strongly. We think it has a long runway, and it was part of our strategic thinking and engagement already in that sector. That also drove us to join our forces with HomeViews, right? So there's a lot of formation and opportunity from our perspective and actually growth in the market as well. If you look at overall housing options in a way.

Gareth?

Yes. Two from me. You touched on pricing discussions in terms of Kurran's answer but just could you explain a little bit on how that went tail end of last year and into this year? And are you seeing any evidence that agents are kind of trying to use the change of competitive landscape in those negotiations? Or is it just kind of not on the radar for them at this stage? And then secondly, commercial, good momentum on the customer win side, so it would be good to get a little more color around that, but -- and your sort of expectations into next year -- or sorry, into '24, but -- also from a competitive perspective, can you talk a little bit about -- are you seeing any change in how your competitors are acting in that market?

Sure, okay. Well, look, I think as you're aware, we put about 1/3 of the agent base through a price increase every year, and we are very steady and mindful about the magnitude of that increase. And that has long been historical behavior on our part. It has not changed. The conversations, as I say, we're in 2 out of 4, and they are entirely normal. I think most agents will see pricing as a reflection of value. And we remain focused on driving the source of multiples of outcomes for Rightmove's customers as we talked to you about at the CMD. And to reiterate, those outcomes and the multiples, I think, are really impressive, a Rightmove agent subscriber wins 9x more vendor mandates than those of our nearest competitor. 7x more properties rented. 6x more properties sold. The list goes on, there's a whole slide on it in our CMD. And that is the conversation that we have with agents. It's about value. And that remains the case and the conversations haven't changed, and the outcome hasn't changed. With respect to commercial, I mean, yes, we have added some customers, and we've increased ARPA a little bit. I mean our commercial agents continue to see value from listing on the platform because we have the largest share of all of the digital platforms. Zoopla is next, but they are about half the share that we have. And then LoopNet is the third that has been reasonably stable and we set out a picture for you of what that looks like at the CMD, and we've seen very little change. I think it's too early since then, Gareth, really to call out any particular change. Even our own growth as we said, 2024 would be a year of investment for commercial rather than one of any meaningful revenue acceleration. So for us, the progress that we're looking to make actually is in hiring the people that we want to hire to continue to build a bespoke commercial side. So that's what we're focused on.

In terms of the hiring process, that's going well and...

It's going well, yes, it is. I mean, as you know, and Johan talked about this, I think, in November. We've done a lot of work on Rightmove as an employer brand, but we're a really attractive tech employer. And we will add across the business close to 200 heads this year, the vast majority of which -- 3 out of 4 of those will be in the product team. So we are an attractive place to work if you're in tech.

I think across -- just to add on across the strategic growth areas, commercial rental services and the mortgages or financial services, I'd really characterize it as one. It's early from our medium-term ambitions here, but it's truly all guns blazing in the early phases. Great additions to the team, great progress on the product, lots of pathfinding being done and swatted away and good results throughout it as well, on or ahead of our plans as they are.

Rahul?

Rahul from HSBC. I have three questions. In terms of your competitor, they have probably seen uptick in number of agent formation. Could you give us a sense of how the agents are thinking for the uptick in terms of product upgrade result, probably it will be opportunity cost for you, but as a third platform, Are you seeing a bit of less product upgrades and other agents thinking, "Okay, we can have third platform and then let's try it out?" Just wanted to understand your thoughts on that. Second, in terms of the broker channel, I've noticed that you still have only one broker channel [indiscernible]. I mean, obviously, it's probably a bit slower than what you would have thought given the 5,000 plus [indiscernible] showed in CMD. So I just wanted to understand the kind of ramp-up you're seeing in broker channel and what the kind of discussion enters, and when you could see a meaningful ramp up? And final question on marketing margins. I mean, you're talking about 70% margin last year reflecting headcount increase. I'm not sure what is the expected marketing budget you're penciling in for next year, given the [indiscernible] probably -- potentially could we see an upside just for margins? Are you only penciling in higher marketing costs next year?

Yes, sure. Okay.

I can start with the first one -- sorry, maybe two as well. The story in terms of our product and package uptake is extremely strong. We put in -- and as you probably saw that our own expectations for Opti Edge. We're taking up those numbers. It's started really well out of the gate in the second half and as it just continue to accelerate. And so really, really good reception in the market. No signs of anyone taking a different view on it. And I think you have to consider a little bit where competition is trying or signing up. You've seen the things that have been announced. It's a very, very clear statement around continuing to do business with Rightmove. And then there are some other changes, right? So we have seen nothing on that. I think the second question on mortgages, broker channel, et cetera. Yes, it's early days in terms of getting to the full potential of the broker agent part of this. We are seeing very, very good results, but it's very small. What is important to remember though, or what I would highlight is that the main net flow together with our lender part nationwide is growing extremely strong at the moment. So while rates haven't started to come down yet and the stability or higher for longer might sit there a little bit, given the overall sentiment and the various obvious now sort of pent-up demand from last year coming into the market. We're happy to see the numbers in that one.

And on marketing think, Rahul, I think you've seen sort of steady state spend from us over the last 4, 5 years, about GBP 15-or-so million a year pretty much all on brand. I would say we'll spend maybe GBP 1 million or so more in '24, pretty immaterial change. Yes, remaining largely brand. And all within the margin guidance that you've seen. Marcus?

Marcus Diebel with JPMorgan. Can you come back to this ARPA growth? I don't want to splitting hair too much here, but the market does care. So we basically say we're going to be at the lower end of the ARPA range, but we don't say we're going to be at the lower end of the revenue growth range. So is that just a function of having really enough potential in other areas? I just tried to square -- being cautious on one thing, but not on the group. And I appreciate, again, it's splitting hairs, but the market does care, I think. The second question is for Johan. I guess we all attended Scout's Capital Markets Day. They make a lot out of the homeowner hub, yes? I think what was interesting is that they were revealing that a large percentage of homeowners directly move into conversions and bring listings. So what -- it's early stage, but how does it actually drive your thinking about doing potentially something more and greater initiatives in that area than what Rightmove currently does, that will be interesting.

Okay. Thanks, Marcus. So on the ARPA growth point, I mean I don't want you to make too big a deal of this. It's a higher range. So that's how you square to the revenue piece. It would have been the upper end of last year's range. I think maybe breaking down the number a little bit. If you look at the components of '23's ARPA growth, Agency added GBP 78, New Homes added GBP 312. I mean there was a huge difference in the relative contribution of Agency and New Homes. For '24, I would expect to see a bit more from Agency and less from New Homes because year-on-year growth on that sort of magnitude is just much harder to sustain. Overall, somewhere between -- I mean, our guidance range remains GBP 100 to GBP 110. But as things stand right now, we expect somewhere in the GBP 100 to GBP 105. There's no real impact on revenue because that would have been the upper end of last year's range. And remember that the core business, so Agency and New Homes is the major driver of revenue growth, particularly in '24, which is an investment year.

Okay. And Marcus, on number two, so I think it's -- in a way, it's interesting to see. I think there are a lot of parallels between how we operate and how we think about the future between Scout's and [indiscernible] a wise move. But a lot of good conversations between the companies. And I think if you go back a little bit to our Investor Day and the strategic model that we outlined and how we see tons of opportunity to digitize literally every single little process there is in this industry. On the consumer side, right, we have -- we call out the model called FATML, so find, attract -- sorry, find, afford, transact, move and life cycle. And life cycle, you can call that sort of at the bottom end and that's maybe the home ownership, right? So we're logically moving ourselves down in those steps, right? And we think there's a logical order to do this. However, on -- and that's where you see the strength and how much we're building now around mortgages, for example. We're increasingly build tools to assist the consumers as sort of a home-moving journey assistant. And we get one product example in the presentation as well around [ certain ] acquirers is about how you organize that whole process, a great uptick that will lead to further stickiness, frequency of use, consumer love, which eventually obviously turns into revenue on the customer side. But that's on the sales side of residential. On the rental piece or lettings, our lead to keys proposition actually is already covering large parts of all those steps, right, including homeownership, right, where -- or at least aspects of it, right, where we sell ancillary products as part of that moving into a new tenancy. And that's already a pretty full-deck suite and we're obviously now in full rollout mode of that one. So I would say that there are a lot of alignments and faults in terms of addressing fully all the needs from someone already in their homes. There's more to do in the future. But we see fantastic interest in aspects of that already, which is around, for example, sustainability, energy efficiency, et cetera. We are building various new tools in terms of renovation calculators, right? What kind of value, could you hope to get out of your home if you do X, Y and Z and so forth, either to lower your running costs ongoing or again, get a better price today that you decide to sell. So from some aspects already there, from the more full-blown aspects, more to come, but quite exciting. And then as you know, there are some structural -- last comment to make, there are some structurally quite different aspects of the German market versus the U.K. market, which I think has to do slightly different things from a corporate perspective.

Sean?

Sean Kealy from Panmure Gordon. I'd like to ask on M&A. And what I'm trying to get a sense of here is focus on cash flow. Obviously, first half of the year in HomeViews, which makes sense. Should we expect quite a lot of M&A going forward? How do you choose between buying and partnering? And I guess what I'm really trying to get a sense of here is in terms of the cash flow return to investors over the next couple of years, should we expect more of that cash flow diverted towards M&A than historical returns? Or should we expect it roughly sort of similar policy, but a couple of acquisitions here and there? And what's your risk appetite around that as well?

Do you want to do HomeViews and I'll do the rest?

Yes. Yes, I can do that. So -- well, I'll give the general and absolutely repeated plug, which is our 5-year plans and strategic growth opportunities are made on organic assumptions. The way we see the business, the strength that we have and what we can do on top of it. Next to that, we will, of course, consider are there ways to move faster into one of these growth opportunities, so very much aligned with strategy. But again, that's not really new from the past, like I have only been here a year, so I can't fully talk to it why, but the principle hasn't changed at all. And on HomeViews specifically, I think it was a good example, right? It's really bolt-on or tuck-in phenomenal complementary position next to the one that we have for build-to-rent already with consumer in mind, lots of love for the industry for what HomeViews do, and they will continue to do that and we'll figure out how to offer an even more integrated, even more data-rich set of products to the joint customers from now on.

If I can...

And more broadly on cash, Sean, so shareholders should not expect to see any material change in returns as a results of M&A. Any M&A that we do will be small. I wouldn't characterize HomeViews as the first of the year. There's definitely not a calendar. I mean we'll return close GBP 200 million to shareholders this year across the dividends and the buyback and no real impact from M&A. I mean I would just point to the strength of cash generation in the business. Cash conversion from profit was 104% in '23 and all of it goes back with the exception of some liquidity buffer that we maintain, and that policy remains unchanged.

Perfect. And could I ask a quick follow-up. Just on risk appetite with M&A. So you were sort of looking at all the different start-ups in property in the U.K., and you saw some interesting ones, but maybe not -- interesting could be a success, but maybe slightly higher risk. Would you take a punt? Or would you see how that developed?

We're generally not in the punt-taking business, I would say, as a company and as a general principle. Having said that, I think what we've laid out ourselves is I wouldn't even want to characterize it as in terms of risk. But I would characterize it as in a of general forward lean, we think we can do more from the base that we have, right? And that's why we've announced the investments that we have come out with. Again, a reminder, we think when we add up all the different opportunities, at some unspecified point in time, we're talking about somewhere between GBP 1.5 billion and GBP 2 billion TAM in revenue, right? So there's a lot to go for. Software will continue to eat [ lunch, ] and we're one of the players that should absolutely catalyze that. So it's more in the context of that, considering again, is there a faster route to get capability or knowledge or something that is really interesting, but might have challenges to scale or reach or have distribution, right? And some of those assets, we obviously sit on. So I think it's an openness to it. But again, it's certainly not the default of our plan.

Pete?

Pete from Morgan Stanley. So one more question on the traffic. Can you give us some kind of rough ballpark like what percentage of your traffic is direct? So not organic, but either comes through the app or comes -- consumers directly type in rightmove.co.uk to that browser, so not through a search engine?

Yes, it's back to the numbers that we talked about before. And again, you have to both consider the different sources, how they're composed. None of them are perfect in a way. And obviously, the interpretation between them. But well over 85% even more if you sort of dismissed the cost of it, right, what we're not paying or on a last-click attribution coming by typing in Rightmove, right? Now how people have passed themselves to that could be, again, a vast proportion of it is typing in directly, a growing number of them are using app, which is a very direct way of accessing it, obviously. Others can indeed be searching, but they come back and actually type in Rightmove as a way to actually use our site.

Kurran Aujla from Berenberg. With a question in regards to New Homes developers' ARPA going forward. So historically -- or what we've seen in 2023, a weaker environment, New Homes developers who spent more on advertising to sweat their inventory even more. But in an improving macro environment, what gives you more confidence that they'll continue to sustain and improve their ARPA spend even further going forward, given sort of an improving environment that -- there's less need to advertise as much?

Yes. So all of the developers continue to list all of their development -- developments with us. And that remained the case even through COVID. And of course, it remained the case last year. What determines the level of spend really from one year to the next is the pace of sales. So if you go back to '21, the structural shortage of housing here means that when demand changes quickly and increases quickly, the developers get very forward sold. They're selling everything off plan. And therefore, despite the fact that the developers continue to list everything, those properties are on our site for a very short period of time. And because our charging model is per development per month. If everything is selling out, for example, within first month, that's one month of revenue, in a year like '23, they were both spending more on product and developments were taking much longer to sell, which meant that on a per development per month basis, revenue from the developers just naturally increased. So in a year where demand starts to pick up again, you would expect to see their need to market reduce. It won't be as acute as it was in '23. So you would expect to see a drop in things like digital e-mail campaigns that they run by us. They just don't need to do that when the pace of sales has increased. They tend to all want to spend on products like the advanced development listing because it showcases their development really well. It -- they want to present their developments in the best possible way, which points to continued use of product. But then the duration of the listing on the site would tend to naturally drop as well. And so those are the drivers of New Homes ARPA in that. Rahul?

I have a follow-up question. In terms of could you discuss like where we would Optimizer Edge in terms of the product penetration versus the previous, are you seeing a similar kind of ramp-up? Or is it probably slower than typical ramp-ups? And could you also touch about optimizer -- sorry, Essential Extra? And also, basically Accelerator package, basically, where are we in terms of kind of product penetration levels and where are you seeing that, please?

Yes, sure. So on Optimizer Edge, I mean, the target that we put out was to get to about 1,200 agents on that pack by the end of 2024. We'll get there more quickly than that, I think, as Johan already said. There's very strong appetite for that package and upgrades have been progressing well. So I would expect to see us report that number more quickly. Essential Extra, and so as a reminder, the rationale for the introduction of that pack was to allow agents on the Essential pack a way of trying different products and encouraging them to use products in a way that agents on Essential don't. It's still very small. We have about 320 agents on the Essential Extra pack, but we don't necessarily see it. That's not a steady state for them, Essential Extra is a steppingstone of the package ladder. And so we will do all we can to encourage them to move up. And then Agent Accelerator, that is a -- there are a couple of hundred agents on that again. And as a reminder, this is an introductory pack for very early-stage agents, bearing in mind that a lot of them go out of business in their first 6 months of operations. So what we do is we allow them to pay per listing in a way that we don't allow agents on the more traditional packages to do typically because they have such low stock and so our package, even the entry package of Essential is a big cash outlay for them. But then by the time they get to 4 or 5 properties to sell economically, it makes more sense for them actually to use one of the more traditional packages. So there will never be more than a couple of 100 agents on Agent Accelerator. But as Johan said, it's a funnel into the other packages and so we're quite happy to allow agents to use it in that way. And of course, we've given all the questions and comments already on agent formation, we want to do everything we can to encourage new agent formation and to help to stay in business for as long as we can.

Maybe one more point on agent and branch opportunities. I mentioned a few before with housing associations, Agent Accelerator. Also, important to remember the lead-to-key proposition. So with this fuller software suite that we now have, we see an opportunity to go and contract quite a few lettings agencies that have not been the right move historically, typically because they're very small, very local. And again, they have had such strong demand versus the supply in the market that marketing hasn't been the first need. However, running a more efficient operation, particularly if you're small, is of interest. And that's exactly what we built a product for, right? So we see a good opportunity in terms of monetization on the existing lettings agency base, but also actually increasing our base of agencies, particularly in the letting space because of that product, right? And that's been in the works for a couple of years. So I think, yes, another strand of growth. And maybe I foresee the potential question over -- kind of goes across these 2 things, right? Once you remember, I think with ARPA -- ARPA is important. There's no question around that, right? And again, when you bring -- but it's not so much about price, it's about value. If you provide the value, there is value or economic return. And it's exactly what we deliver, and that's why we invest in further product, right? But the other piece around ARPA, I think, as we've outlined, over time, we intend to broaden this business, and we're going to have revenue lines that are not directly attributable from an ARPA perspective. So again, it's -- ARPA is a very meaningful number, and it's a big, big component, I think, for you guys to factor now. But at the end of the day, we want absolute growth in revenue and in profit. And that sort of mix between 90% of the business in the core were directly tied to branches in APRA today and 10% on the rest. We intend to change that, right? We'd like to sort of a 75%, 25% split. And even within core there are going to be other types of elements that are more or less directly or indirectly tied to an ARPA number.

Pete?

It's Pete from Morgan Stanley. Kind of a technical follow-up to what Johan just said. So should we anticipate or expect you to change or add some disclosure in your reporting going forward, especially if there are revenue drivers that may or may not impact ARPA. Basically, the business mix is changing and people at least as far as I know, are still modeling it the old way. So should we expect changes either this year or next?

We've seen a change already in that we now have 3 effective sections to the P&L, which is the core business split between Agency and New Homes, then we're separating out the strategic growth areas. So commercial real estate, mortgages and the non-listing element of rental services. And then we have the other business units which data services and overseas largely. And at the CMD, we gave you indicative 2-year and then subsequent 3-year CAGR guidance levels for revenue growth across all of those, and we continue to stand behind that guidance. But that is the way that we will report going forward. So you'll have a more granular P&L than you've historically had. And with respect to modeling, I would encourage you to change the way you model, which I think for the majority of you has been Agency, New Homes. It was really all about ARPA and customer numbers, which remains fine for the core business. I think you need to think about the non-ARPA elements of rental services, which this year added a couple of million pounds, not into ARPA, but into core revenues. But we'll help you with that going forward. But you do need to, I think, change the way that you have historically modeled the other line and separate out the 3 areas of commercial mortgages and real estate -- sorry, rental services. Use the 2-year CAGR numbers from the CMD deck. They remain valid, I would say, for commercial and [indiscernible] use the bottom end of those -- of that range. With mortgages we've had a phenomenal growth spurt in '23 and expect that to remain the case for '24 the top end. But those ranges remain good. You're probably fine to keep data services and overseas as an other bucket and just to model a percentage growth rate across those component numbers.

I was going to say one more question, but we might be out of time anyway.

And out of questions. Okay.

Thank you very much for all those questions and for coming today. We look forward to continue to drive a great business and talk more as the course rolls on. Thank you.

Thanks, everyone.