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Good morning, everyone. For those of you who don't know me, I'm Andrew Fisher. I have the great privilege to be Chair of Rightmove. And welcome, and thank you for joining us in -- for the 2022 Results Q&A. As most of you will be aware, in fact, probably all of you today is Peter's last results presentation for Rightmove. And for the past 17 years and actually the last six years as our CEO, Peter has continued to lead our success as a business for which we want to recognize and thank him this morning. I'd also like to thank you for the support and the collaboration that you provided to both Peter and the whole team at Rightmove. And I'm also extremely delighted to welcome Johan Svanstrom, who, as of Monday, will officially succeed Peter as our CEO.

So without further ado, Peter, for the very last time, over to you.

Thank you, Andrew. Good morning, everyone. Hopefully, you've had a chance to see the presentation. I thought maybe I'd take a couple of minutes just to start off with a quick summary of all the words if you haven't quite made it to the end of the presentation. In 2022, we really saw three distinct housing markets. We began the year with a continuation of that frenetic post-lockdown activity of the supply-constrained market. By the start of the second quarter, we began to ease back to a much more normal market and the interest rate shocks of the fourth quarter rapidly knocks that transition, of course, and that caused the market to slow significantly.

I think our results in 2022, again, demonstrate the strength of the Rightmove model in all markets. Underscoring that resilience, we saw standout ARPA growth of GBP125, which is a record absolute amount for a normal year. And I think it's a testament to the innovation over the last two years, which have helped to drive that ARPA growth to higher levels. And as a reminder, we've delivered more new products in the last two years than we have done in the last decade. Over 60% of that ARPA growth again came from customers choosing to upgrade their package or buy more products from us, which I think, again, testament to that innovation.

And we successfully completed the migration of the Optimiser 2015 to Optimiser 2020 package. It's also worth pointing out that 40% of new Optimiser customers continue to come from the essential and enhanced packages and upgrade through the package ladder. And on top of that, the ARPA from Optimiser customers increased by about 7% over the year too, again, just demonstrating the value in our products. Membership was more or less flat in 2021 with a small drop in the number of agents in the second half, offset by an increase in number of developments, particularly in the fourth quarter.

The number of agents we saw leaving the industry in the second half was below recent norms, but the net new number of branches was lower because we saw a slowdown in new branch formation, unsurprising given the nature of the economic outlook in Q4. Those last few months of 2022, I think, provide us a good early indication in -- of the manner in which Rightmove business model responds to a slowing property market, notable rise in new homes ARPA growth rate and developed numbers, offsetting a slight slowdown in the Agency ARPA growth.

Looking forward, I know there are worries about interest rates and inflation, and I have no doubt that there will be some very difficult impacts for a number of people. However, looking at the data, home movers' appetite to move is recovering well. Sales agreed rates as of yesterday were about 11% down on 2019. And sales agreed is about a 3- to 6-month leading indicator of when someone's going to move house. Given that, I think it's not unreasonable to expect transactions in the year to be GBP1 million to GBP1.1 million, which is just below pre-pandemic norms. And the resilience of our model means that we are only impacted by the housing market at the extremes, and I still see no signs of those extremes on the horizon.

And we're seeing that momentum from Q4, particularly in new homes carried forward into 2023. Just a word on innovation, it continues at a pace second half of 2022 alone we launched a new product for our build-to-rent customers. There were more releases of the Lead-to-Keys flow, which means tenants can now search, view, secure, contract and pay their deposits all from a mobile phone. We've also launched a new lead prequalification system, which will help agents cope with the higher lead levels from a busier lettings market.

And further expansion of our mortgage and principle flow, which now means we're encompassing more borrower types, and we're seeing a better-than-expected take-up of the flow by consumers. Looking forward from a right mix perspective, I think we'll probably see broadly stable membership numbers with a small shift from agency branches to new homes developers. And the momentum of that, that momentum at the end of '22 has given us more confidence.

We now expect ARPA growth to be more in the middle of the GBP95 million to GBP105 million range that we've previously spoken about. To add to that, we continue to see healthy growth from our other segment. Before I open up to questions for one last time, I just like to take a moment to say thank you to you all for your support over the last six years and the fascinating debates we've had along the way and also to wish Johan the very best in joining this incredible business.

So over to questions from the room. Will?

Thanks Peter. Three for me and obviously, congrats on the [indiscernible] period as CEO. Firstly, I suppose it's being an earnings season characterized by your online classified peers and yourself talking of the defensiveness of the model and downplaying cyclical concerns, or I suppose, downplaying the potential impact on your business. Mortgage approvals really are quite weak currently. Could you just outline what gives you the confidence that you will get to this transaction number that's supportive of the outlook?

Secondly, I suppose a small negative from the outlook was around the margin, which is going to be down year-on-year. Could you help us understand why that's the case? From the webcast, perhaps it was being positioned as conservative, but maybe that's an incorrect observation. And then lastly, you've obviously had your extensive conversations with agents, which has underpinned your confidence of the GBP100 of ARPA growth for the year. How are you thinking about agent ARPA specifically? And how did they react to the price increase discussions?

Okay. So let's start with mortgage approvals. I think the thing that's easy to miss is the mortgage approvals that you might have seen in the last few days, which was the January mortgage approval data is actually based on activity that began in the end of Q4, so November-December time. So what you're seeing is that sort of hangover of the uncertainty flow through into the approvals data -- what gives us confidence and sort of gives me confidence is we're looking at sales agreed yesterday.

We are so fortunate with the amount of data flowing through the platform and it's real-time. So it's that where I say, I think, sales agreed, let's say, sort of 11%, 10%, 11% below 2019. That's real-time data, whereas what you'll be seeing is relatively historic data having to flow through mortgage approval data in a couple of months' time, I think we'll see pickup because that will relate to the activity we're seeing on site now. In terms of margin outcomes, do you want to?

Yes, sure. I mean, Will, I think your two questions are quite linked. So on the components of ARPA growth, and I'll probably answer your agent ARPA question first. If you think about the various components of agent ARPA growth, being pricing upgrades and overspend, I think on the first one, as you know, we're a steady compounder of pricing. Those price conversations in respect of 2023 started in November last year. We've done about a third of the agents now who will be impacted by a price rise this year. And those conversations have gone absolutely as they do in a typical year with no more pushback than we would typically see.

So from a confidence in agent ARPA growth, that piece of it is ticked. I think where we are being slightly conservative and I think you can probably understand it, given the market backdrop is on the assumptions around upgrades and agent overspend. In '22, as Peter said in his opening remarks, we saw the Opti-15 to Opti-20 migration, which clearly won't repeat this year. Having said that, we saw some really good upgrades all the way to Opti both from essential and from enhanced and from new joiners joining directly on Optimiser 2020.

But I think it's right just given the backdrop that we remain cautious, particularly with the 10 months of the year left to play out as to the likely extent of upgrades and overspend for the year, which then flows through into your margin question because on the cost side, we continue to be happy to invest resource behind some of our newer strategic initiatives. And I think that's really important, but you all understand that, that is what is driving the slight dip in the margin. We are a far broader business now than we were back in 2019.

And initiatives like mortgages, like digitizing the tenancy journey, which have slower growth rates right now and then back to mortgages, as you're well aware, revenue went backwards year-on-year, are in a mix of new initiatives alongside commercial real estate, for example, in data services, which are growing at sort of 20% per annum. So continuing to invest behind those initiatives is what will drive medium- and long-term profit growth for us and maintaining that investment while we see slight caution on agent revenues, I think, is absolutely the right thing to do. So guiding to 73% for the year, what might change that upwards would be a change in expectations probably for agent numbers and agent ARPA growth. But for now, that's where we are.

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

Well, so agent ARPA growth grew by GBP123 in '22 as you saw from the deck. I think expectations for this year, we've guided to blended ARPA of about GBP100. The ratio tends to be sort of five parts agents to one part new homes, so somewhere around the GBP70 to GBP80 of agent ARPA for now, and we'll update on how that's going at the interims.

It's Adam Berlin from UBS. Just a couple of questions from me. Just want to ask specifically about the other revenue and the strategic initiatives. Can you give us some sense of how fast that revenue is going to grow in the next few years? And how material you think you're thinking that opportunity is? And once it starts to get going and start to scale in two or three years' time, do you think overall, it's going to be accretive to margins.

So once the revenue starts coming in, the cost base is there and you start seeing the margin go up again or do you have to keep investing and adding cost to grow those revenues. And so ultimately, this is going to be a lower-margin business than it used to be in the medium term? Those are the two questions, please.

Sure. So there are a number of components to that other line and different businesses have very different growth profiles within that line. So I'll start with the strongest driver of growth, which is the commercial real estate business. The past couple of years have seen 15% to 20% growth rates, and we fully expect that, that will continue for the next -- the life of our business plan the next three years. Data service is the same, 15% growth last year, and that is likely to continue and to accelerate as well.

More moderate growth drivers are the overseas business, which has had a drag on it through the pandemic but has grown well this year and in all likelihood will continue to grow as we focus on a couple of -- there are a couple of new things that we're doing within that business. So we'll maintain a growth rate of 10%, 11%. Third-party advertising is the fourth part of what used to be what we call the Breadth businesses. It's an area where we have no particular ambition to grow beyond the GBP5 million or so of revenue that it delivers because we are trying to keep the site of premium user experience and cluttering it with advertising is not something that we plan to do.

And then when you think about the newer strategic initiatives, mortgages and digitizing the tenancy journey, mortgages, we started out with a fixed fee, which delivered revenues of GBP3.5 million, and then we chose to change the monetization model of that, which impacted, obviously, revenues and impacted the margin over the course of last year and this year and will take us a bit to gain the momentum in that business. But you've heard us talk about long-term revenue potential of GBP20 million to GBP25 million, and we continue to stand behind those projections, but they're unlikely to become that material over the course of the next two to three years. Having said that, think about recovery to the GBP3.5 million of before and beyond adding about GBP1 million a year until about 2025. And then digitizing the tenancy journey already, there's good momentum behind that.

And so the sort of revenue growth will mirror those of the other businesses, 17%, 18%, 19%. Overall, as a category, blended rate of 8% this year, I would expect to see it much higher in '23, 20% or so and accelerating beyond that. So once we're out of this current year, I would expect to see those businesses become margin accretive. Although at some point, I think we should separate some of them out because the different growth profiles makes talking about that as a category long and maybe slightly confusing.

Just a quick questions for me, please. The first one, based on your conversation with agents, do you observe any competitors being more aggressive on prices? And any update that you could give us on the essential extra package? What's the interest there? And was the ambition that will be great? And just in case -- in the case of the market, it's proven to be more [indiscernible] expect. How should we think about the upside potential? Do you see the most upside in the rate of new agent formation or the rate of product adoption and upgrades?

Okay. So let's go through those. In terms of competitors -- when you say competitors, you mean our competitors. I think it feels -- when I talk to them, it feels as if we're in a mode that is a little bit like 2019 again. So some point deals, but no sort of grand campaigns. So that feels good for us. It's what we're used to. In terms of Essential Extra, yeah, there's lots of interest in Essential Extra, but I'm delighted to say people aren't moving to it because they've been jumping straight over it and going straight into Optimiser, which all the outcomes feels like quite a good outcome because the ARPA is quite a lot higher.

So I think it's a great package. Maybe we've set ourselves a target there for when the market is a bit slower. But yeah, it's a good conversation and good that people aren't landing there, they're going beyond. In terms of upside, what might it look like? I think there's -- I think it could be both branch numbers and product uptake. It's quite interesting in the last few weeks we've started to get more very early-stage inquiries from people thinking about setting up agencies. Now the gap between that and turning into someone setting up an agency is variable and it's got a fragile emotional state. So we will sort of have to wait and see what happens with sort of wider announcements as to whether they turn its branch numbers.

But certainly, I could imagine there's a number of people who are waiting to start an agency and are waiting for a little bit of positivity and probably, frankly, a few months with positive news to put the money out. I mean, agents tell me that to open a new branch is something between GBP50,000 and GBP100,000 worth of investment. And if that's typically coming out of your mortgage, you want to be pretty sure about it. So I think we won't see much activity yet on that, but hopeful. The other upside will, of course, be in product upgrade from customers.

It's Pete from Morgan Stanley. Two from me. First on the ARPA numbers and it actually continues on the topic we discussed just now. So what is your visibility into the main reasons behind why agents are upgrading products and then also the ones that are downgrading? Why are they downgrading? Are there some certain products that are -- you see that, okay, like this is the key reason why people are now deciding to upgrade to, let's say, Optimiser?

So upgrades, it's across the product suite, why do people upgrade? Normally to make their businesses more effective. So sometimes we see that as a marketing spend switch from other marketing avenues, no longer offline typically, but from other online avenues. Sometimes it's because they want to win greater market share in their area. Actually, in some cases, it's also defending their market share. So it's normal, the upgrades come for normal reasons.

The interesting thing because we have -- I'm sure you're all bored with me talking about our three sets of products because we have those different products. And within each of those product types, we have a number of products that work in different ways. The exact products mix they choose, there is no -- is unique to them, which I think is one of the real powers of how we've developed pricing over the years. It's a package that absolutely is blended around them.

And you tend to, for example, to give you an example, if you were thinking of expanding your geographical footprint as an agent, so you want to sort of go three streets further to the left or what have you, you would tend to use branding heavily brand first in those areas before you move in with the vendor lead products because vendor lead products don't work, if no one knows who you are. So depending on what you're trying to do, the mix changes, which is where the packages work really well.

In terms of downgrades, we've seen very few packaged downgrades. Typically, the reason for downgrade, when you downgrade, it's economically you lose a lot more products than you save in pounds. So downgrade is usually a sign of early onset cash flow issue for an agent. So that's why we have it. We want to support them, but we don't see very many also because within a package, you can change your products, if you [fancy] changes, you can change your product mix.

So sounds like there's not like a specific functionality that is really driving agents to upgrading right now, but it's quite broad-based and mixed. Yeah, okay. Then the other second question is kind of similar, but on the kind of membership numbers specifically on agencies. So what's your visibility into the reasons why someone drops off and why someone is joining to the platform? I mean you mentioned that there are like less new agents starting up, but is this based on a third-party data or do you see that in your own data that the mix is changing. So basically, how do you know if someone drops off that they're just exiting the industry or whether they're going with [indiscernible]?

So we can -- you can see Internet activity. So we monitor that. We ask everybody who's leaving the platform, why are they leaving? And so we know whether that's because they're shutting down the branch but keeping their business or whether they're going out of business, things like that. But -- and similarly, with start-ups, and we can monitor internet activity so we're pretty clear what's going on.

It's Andrew here from Barclays. And I would just like to echo Will's comments on congrats, Peter. I've got two. The first one is back to agent health and thinking about '24. I guess the base case clearly if you've got an agent customer base in decent shape after good years in 2021, a blip in the market in Q4 and things are now improving, but interested in the kind of stress test that you've run or kind of extreme events in your language. Like how bad would the market need to be until agents start going out of business, which I guess is when you have a customer and pricing question.

And then the second question is to come back to everyone's favorite word for 2023 ChatGPT and it might be also a question for Johan. But how do you think this plays into property portals on a kind of 5-year plus view? Curious on the kind of [moat] you see around your business, maybe benefit some efficiency engagement that would be helpful and any kind of big picture thinking there?

Okay. So talking about agent health, I especially spent last Saturday with a collection of agents. What's quite interesting and it's easy to miss it. The dynamic most of our customers now do sales and lettings. And lettings absolutely provides a backbone of subscription-like revenue from the managed property book. The other thing that's just started happening in the last -- probably in the last 6 to 8 weeks as rents have gone up, agents are now seeing more tenants move property. So we're actually seeing increased churn in tenancies.

The feeling being some of those are becoming first-time buyers because now they can get a mortgage and the market slowed down enough to allow them to participate, but also people moving -- tenants moving property to manage their outgoings. For agents, that's really good news because churn equals a tenant find fee. So how does -- I wouldn't want to put a number -- how about agents, are pretty resilient and good agents are very resilient. So 80% of our customers have been with us for the last five years where they've seen Brexit, political uncertainty, market shot during pandemic. These are typically well-run, resilient businesses.

It has to get quite extreme. And again, one can reference back to 2008, but it has to get quite extreme before the cash flow bites -- most of our customers are small businesses. So it's typically cash flow first. For the last few years have really helped them. And definitely, I've seen different behavior in this sort of uptick for agents than one we saw in 2007 uptick. They're definitely a bit more conservative and kept more cash in the business. ChatGPT, I think it's quite interesting. And I know it's the machine learning model du jour, but we use machine learning already.

I think machine learning has lots of opportunities in lots of different ways to help the business. I think most of the ways it would probably help will not be visible in the way that we currently manage that. Obviously, ChatGPT is a great tool for sort of enhancing conversational functionality and sharing information. So I'm sure there's some efficiencies that we could gain. Whether I'd be brave enough to go to an agent and say that they could use it? I think they see that sort of people relationship with their core skills. So I think that might be a bit of a slower and harder adoption, which is fair enough.

I think on the cost side, Drew, it could be very AI more generally. I'm not talking ChatGPT per se can be very helpful in taking inefficient cost out and I'm thinking particularly -- we use it already in areas like contract management and storage and just scanning and spotting anomalies, could be very helpful on the customer care side of things as well with just removing inefficient cost out and allowing us to have our people spend more time actually talking to customers. And we have some plans already for that baked into the business plan over the next couple of years. And so beyond that, we'll see how it evolve. And secondly, looking forward to using it to right next year's annual report.

It's Joe Barnet-Lamb from Credit Suisse. Just one for you, Alison. I think on the recorded remarks, you referenced 5% wage inflation for the coming year. I'm just interested how you effectively sort of came to that number. In the previous year, I think you also had a one-off payment for cost of living as well. So the sort of year-on-year actual increase, people are going to get to a lot less than 5%. I'm just interested if you feel that's enough to sort of retain the talents in your business?

Yes. So a couple of things, and this was a conversation just to put it in context that started back in September of last year. So it was that disruptive period when you were hearing a lot about expectations for 10%, 11% or so in the public sector, nurses looking for 19%. Clearly, that was a year-on-year uplift, which we never contemplated. The 5% was a mix of -- in the context of where inflation was at the time, which was broadly 10% what did we think was a fair uplift for our staff.

Beyond the all staff increase, though, what we will always do is an annual program of benchmarking particular roles. And that tends to add about 2% or so to the annual wage bill. And so it did exactly that this year, so the 5% in reality was 7% but with some people clearly getting far beyond 5%. And then the two one-offs were particular to 2022, we gave everybody a payment of GBP1,000 in October, just to help with that spike in energy bills heading into the winter.

And we also brought the effective date of the salary increase forward to October when ordinarily it would have just been on the January 1, '23. So that added an element for '22 that won't repeat in '23. But obviously, putting through an inflationary increase across what is now a workforce of close to 700 people of 7% will add inflation to this year's salary build, which, again, you're seeing part of the effect of that on the margin.

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

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

Peter, best of luck on your next endeavor. Two questions from me here. Ciaran Donnelly from Liberum. One is on the quantum of investment you've decided to deliver this year. Can you give us an insight into kind of how you felt the quantum you've landed on is the right one? And should we expect that 73% is kind of the trough margin for the business or should we anticipate kind of a multiple year period where we see margins at a relatively depressed level?

And secondly, just on the addressable market opportunity, should we read into your move to accelerate investment in the business as a sign that you see the approach of a ceiling in the core business, i.e., agency ARPA is getting to a point where it might not be kind of high single-digit but maybe mid-single digit going forward, cheers?

So absolutely not to answer your second question first. But that's not the reason that we're doing this. We see very strong opportunities for growth across a number of areas. And so we have the confidence to invest behind those. And whether that is on the commercial side, increasing the bespokeness of the commercial journey and continuing to tailor that search journey more to a commercial real estate world than we have in the past or over here on the mortgages piece continuing to put the right people into that team to accelerate the growth trajectory there.

We will continue to do that because we have confidence that those are areas in which we have credibility to play. They're all linked to our strong core business. They leverage that core business, they leverage our brand. So it's not an enormous investment, I think, is the important point really. You're seeing it coming through in terms of people. That is the nature of the investment that we make. But because they're so strongly and keenly linked to the core business, the magnitude of the investment that we would need to make to spin up a mortgage business is far less than it would be if we were coming to [a cold] where it wasn't a linked to investment.

So the investment that you see, the reason that it's the right investment is because we're very clear about what it is that we need to do in order to go after the revenue and the opportunity that we've identified. The investment typically is people. There's a bit of tech, but really its people to create the products and to manage the site. And I think it's really important that we will continue to do that so that when you look five to six years out, Rightmove is not just a bigger, more diversified business, but each area within the business is contributing to long-term profit growth.

Just a number that I know you quite often asked me for I'm surprised you haven't yet, so I'll give it to you. So if you look at total commission pool, so what's Rightmove's potential total commission pool, we're at about 6%. And just to remind you, in 2019, we were 7.5%. So to give you a sense of runway, it's actually got longer, not shorter. And I think that's really encouraging for the future, as Alison said.

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

So I think -- and well, look, what would I say on long-term margin? Investing as we see appropriate in order to go after these opportunities to us is a more important metric and the long-term profit that, that will deliver than short-term margin. You should not interpret that as meaning that you can expect a year-on-year margin decline. That is not what we're talking about. But there will be investment years like '23 that may require a 1% dip in the margin. And really, the message I want you to take is we will do that. We fully intend to continue to deliver margins in excess of 70%. Having said that, returning to 75%, 76% is not an ambition that we particularly have either as we -- particularly as we get behind these strategic initiatives. So is it the trough, probably broadly, but I'm talking within a 1%, 2% range.

Rahul Chopra from HSBC. I have three questions. One, what is your baseline assumptions for 2023 in terms of housing transactions. And in terms of the stress test, again, if it probably were to decline by 30% to 40% this year, what's your outlook for rest 20% of agents who are probably new in terms of the number of years at Rightmove? What is the risk of closures and the commissions pool in terms of where it goes? That's my first question.

The second, in terms of what upgrades to Optimiser 20, what -- if you can give a sense of -- if it's driven by voluntary or probably doing retirement from Optimiser 2015, any mix of that? And finally, any sense of Rightmove marketing spend versus other marketing spend by agents, obviously more marketing spend towards Rightmove compared to other marketing avenue stage -- any sense of that would be helpful.

Okay. So let's start with asking the marketing question. Frankly, I think it is -- [indiscernible] nearly impossible for transactions to fall 30% to 40%. It's just worth pointing out that in the UK market between 800,000 and 850,000 transactions are what state agents would call the 3 Ds, Debt, Death and Divorce. So those are more or less mandatory transactions. And again, reminding you that back in 2008, when you couldn't get a trans -- you couldn't get a mortgage, we 850. So to fall much below that floor is very, very difficult and say, I can't imagine a situation where that would happen. So we can't really foresee that in terms of our assumptions.

In terms of assumptions, we've assumed that it's a worse than 2019 year. And I think we're probably seeing slightly more encouraging data than we thought we would see. Remember, we put our plan together, remember we put our plan together in sort of October time. And certainly, I think the macro is a little bit more encouraging than it did back then. In terms of upgrades to Optimiser, 40% of the upgrades last year were new to Optimiser, so they weren't the 15, that was the mix. They weren't the 15 to 20 upgrades. They were people coming off essential or enhanced. So it's still an attractive package.

We had about 13,000 -- sorry, 15,000, that would be nice -- 1,300 additions to the Optimiser package during the year, about -- just over 800 of those came from Opti 2015, and the rest was the mix, as Peter said, 300, I think, went direct from Essential, 400 or so from Enhanced and the rest were new joiners who came in directly at the Optimiser 2020 level.

I'm sorry. There was a question about marketing spend?

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

No. So overall marketing spend for agents is probably increasing. It's definitely in the world of art not science, trying to measure it because every agent is different. But I think the overall marketing pool is generally increasing as the other costs decrease. And in terms of our share [indiscernible], if you look back to 2019, our share must have declined because we were at 7.5%, and we're now at 6% of total revenue. So I think that's good news for us because it means there's more for us to go after in terms of these new products and new packages.

Three quick ones from me. The first, going back to mortgages, maybe naively on my part, I kind of felt that you were waiting for end-to-end digital mortgages from a sort of broader pool of providers, whereas reading the statement, it feels like the kind of thinking and what you're going to do there has evolved a bit, and it's a broader offering to agents. So I wonder if you could talk a little bit about how you're thinking in terms of how opportunities shifted.

One point of clarification. In the presentation, you mentioned Lettings revenue GBP45 million of agents' revenue, and then you talk about GBP20 million of ancillary. Is that GBP20 million of ancillary that you're not addressing at the moment that is an opportunity looking forward and these are products you're kind of aspirationally launching over the next few years? And then the final one was just on Track My Property. I mean you've had the tools to be able to do that for probably 10 years, and you've never chosen to do it. Why now?

Okay. Maybe I'll do the first and last and Alison can do the middle one. So mortgages, yeah, I think we've always had -- we said that we would focus with one direct to lender proposition to learn. I think we've learned an awful lot about the mortgage market and also what attracts consumers. And as I think I said in the presentation, I've been delighted we've actually increased -- we've had more mortgages in principle.

It's quite a good thing. Mortgages in principle delivered than we were expecting in the fourth quarter. But we know that director lender is a smaller proportion of consumer desires. So the next step is to work out how we can take that backbone of talking to people at quite a detailed level about mortgages and then hand them off to a broker, probably unlike most people in the room, most consumers, about 85% of consumers don't feel confident enough to decide on their mortgage without advice -- without brokers' advice.

So that's our next step is how do we take that flow and then help people get confident via broker. I think the thinking has evolved a little bit as we've got to know the marketplace better, really excited about how we can get our customers, many of our customers have mortgage brokers. So how can we get them more involved in this flow? I think there's lots that Johan and the team are going to be able to do there, which will be great.

Yes. So on lettings, the GBP45 million that we talk about is the revenue that we generate currently from letting listings. And the extra -- the additional GBP20 million to GBP25 million is the ancillary services around referencing and the insurance products that we've talked about. So there are two separate things, but so overall, growing a lettings business of GBP60 million, GBP65 million.

And finally, Track My Property, you're right. We've had -- actually, we've had the technology for 15 years to do it. So it's based on the market-leading valuation model where we use those values with lenders. So we're very confident about the underlying tech that we have. Why now? I think there's a few reasons. One, we actually think it's good for us as we move towards mortgages and more sort of bespoke personalized journeys with people. It's useful to know a little bit more about them. So there's a real data value to us where previously perhaps there hasn't been.

Secondly, I think the use of these tools is more normalized in the marketplace. We know that initially, these kind of tools of which there are many, these tools were not helping agents and agents were very negative about what they were doing to their ability to pitch for business.

Actually, these tools have become normalized, and I am delighted that when the team have been out looking and testing those tools with both consumers and agents the agents are really welcoming the way the tool has been designed, really carefully designed to help consumers but also stress the limitation of a desktop valuation. It's not the same as an agent's valuation because we want to give our customers value. So I think that's the second part is it's actually become much more part of the world. So it feels like the right moment to step in and do it better than everybody else.

It's Will Packer from BNP Paribas. Just a lot of questions on costs and margin. And I suppose implicit in all those questions in a way is to the outlook for other revenue and whether the incremental other revenue is EBITDA positive or negative in the medium term with some of your peers, there was an assumption on the sales side that it would be positive for EBITDA, but actually some of these business have been loss-making. Could you help us and just give us a medium-term outlook for the other revenue?

What's a reasonable assumption to have as we kind of grapple that and then we can think about whether it is positive to profits or not? And then the second question would be we've had some weak numbers from new home players. Typically, it's been a countercyclical benefit to your business, extending time on site, more premium spend. Is there a point in which that relationship breaks down and actually they become more conservative in their spend if things get really tough? What have you seen historically?

Thanks Will. So on other, because as I said, those businesses are so linked to the core business. The incremental investment is largely people and [B means] that they are very high-margin businesses. So, if you took commercial real estate, for example, it is a small team of salespeople who are dedicated to that. It isn't even a dedicated team within the project development team. So margins in excess of the core business are being delivered by both data services and commercial real estate.

As a category, once we're out of '23 and I've given you some guidance for '23, you should expect to see that other line increase by about GBP10 million a year so already becoming already EBITDA accretive. The only area in which additional investments tracks ahead of revenues is on the mortgages and the tenancy side. And so in the very short term, they will be dilutive of the rest of what other is adding over the medium term, and I'm talking 2025 onwards there will be both EBITDA -- they'll certainly be EBITDA accretive. They're probably too immaterial from a revenue perspective to really impact the margin for now.

Just to follow up on your new homes question. I think it's really interesting. And again, I think there's a sort of linguistic detail, the difference between number of developments and units that developers are creating building versus those that are selling. So actually, when one looks at their numbers, they tend to talk about sales rates, not development rates, which is -- the development rates being much more linked to what we do. Historically, I think probably the closest parallel right now to look at would be 2019 as a year, I think that's a closer year for the developers in terms of their behavior.

And in 2019, they became cost conscious. They didn't -- they slowed down a little bit on their build rate, but really, it was marginal. I think if one looks at the earnings statements from them over the last couple of weeks. They are typically talking about holding their number of developments, i.e., open developments stable. So I think that's really positive for us. I don't see that we're getting into the world where they're having to slow down, massively slow down. They are very well-run complicated businesses where most of them now are very well capitalized. So I think short-term blips are less relevant for them.

Just the GBP10 million of growth in other, that includes mortgages and the whole?

Andrew, do you have a follow-up?

Sorry, as an extension to Will's question so thinking to '24, then we've got I assume good growth in kind of the core business with end markets kind of okay. And then we've got potentially some acceleration growth in other, some of which is accretive to EBITDA, some of which isn't and isn't quantified. So when we think about the profit growth for all of Rightmove into '24, are we thinking that's going to be faster, same or less than '23? And I appreciate it might be a hard question given some change. But as it stands today, when you watch all this kind of mix through, what does it mean for the profit growth in the business?

Well, as things stand today, it will be marginally higher, so 1% or so higher than we're seeing in '23 is the expectation. Again, what would change that? It's always the agency business that will have the biggest impact on both revenues and margins. For this year, we're talking about agency revenues, which are close to 75% of the business. So that is the one that will really move the dial. And yes, the other lines are becoming more material. But in the short term, what would move the dial it would be a change in the agency side.

We have some questions online. So if I turn to that, Catherine O'Neill of Citi. There appears to be a fair amount of agent consolidation in the market, what's your view on this over time and implications for Rightmove, if any? And the second question, how do you think the change in EPC requirements for landlords from 2025 could impact the resilient lettings market for agents? Reports suggest more landlords will look to sell due to the burden this creates.

Okay. So first of all, talk about consolidation. I think probably answer the second part first. In the end, it doesn't make that much difference to the Rightmove model. We have large agents and small agents of customers. Their behaviors are different, as you would imagine, big companies and small companies behave differently. But broadly for us, it looks quite similar. I think the thing to always point out is, of course, one hears about consolidation because it's typically medium or large so those companies becoming bigger. One doesn't hear about the startups so there's sort of fragmentation at the bottom end.

As technology becomes even more pervasive, you can run an agency with fewer people. So it's not unusual to have a two-person start an agency now. I think that will continue. I think net-net, branch numbers may actually over the medium term increase once we get back to a period of stability. The second part, yes, there is this sense that Band C, if you're not familiar, it's not yet there's no confirmed date, but properties of an EPC level Band C and above are the only properties that will be able to be rented out by landlords.

I think it's fairly reasonable to expect that, that means some landlords with properties that need enhancing will leave the market. I think that seems sensible thing. What would it mean to the market? Well, that lettings demand will still be there. I think it will be satisfied both by existing landlords buying newer Band C and above properties. Band C is not a terribly high bar. It's a high bar but not a terribly high bar, plus the business that is working very nicely for us to sort of build for rent sector where larger investment funds build typically apartment blocks to be let out.

So that's also good news. That works very well for us. So I think we might see a shift in terms of agents. In talking to agents, they are mindful of it. I think what it means for them actually is probably net, not bad news because what we're seeing is an increasingly regulated lettings market, which tends to drive private landlords towards agents because there's now quite a lot of regulatory admin that has to go on. And if you've got three properties, it's probably not something you do yourself so you use an agent. So they're actually seeing it perhaps as a trend net positive.

Three questions from Silvia Cuneo at Deutsche. Thank you for sharing incremental data on the three types of agency packages, Essential, Enhanced, Optimiser. Can you please comment about the step-up in ARPA each package typically brings on average? Second question, can you share some thoughts about changes in the competitive market? And third, could you comment on recent news regarding one of your largest customers, Purplebricks? And what are your latest views on online hybrid agents more broadly?

Sure. So I'll quickly cover the first question. So the typical uplift from one package to another is about GBP350. I would just add that we quite quickly see agents start to overspend once they've upgraded. I think at the -- I think at the interim of over last year's full year results, we showed you what that looks like. But in terms of the spend the incremental spend required to go from one package to the next, it's about GBP350.

In terms of change in the competitive marketplace, I guess, as I said earlier, it's pretty stable right now in terms of the property advertising marketplace. There's sort of not much change to report beyond what I mentioned earlier, and you can see that from the comScore graph is stable. So it's not much there. Obviously, you wouldn't expect me to comment on any particular customer. But in terms of the hybrid model, I think I've been consistent in saying, I think the hybrid model is a valid model for a subsector of the market. It's an incredibly competitive subset of the market at the moment. And I think we'll continue to see sort of activity there. I think it's really heartening that as is public that people are interested in buying a state agency -- state agency is a hard but good business and there's lots of people who want to be involved, but it is a subsector, which is seeing its own competitive dynamics.

Last question for Sean Kelly from [indiscernible]. Given change in building regulations, many homebuilders are focusing on laying foundations. We're on the beginning development beyond that, which is a bit different from previous years. How do you think this will impact development numbers listed going forward through into 2023? Secondly, on product development; going forward, I appreciate there's a big driver of growth at the moment. Is there any color you can give us on how this is expected to increase or decrease going forward? Third question on a state agency upselling to Optimiser 20, how will the economic pressures from a slowing market affect the smaller agents relative to the larger agent?

Okay. Let me see if I can see those. So develop numbers. I would imagine -- remembering we report a number of developments listed on site. So if you must take slightly longer to sell, that number naturally will increase. As I said earlier, looking at the larger developers who are the vast majority of development in the UK their statements would suggest that they're broadly intending this year to keep the number of developments open at a similar sort of number. Most of those guys because they're bigger developments will have multi phases.

So it's possible that they won't open subsequent phases quite as quickly, which doesn't really impact us at all, but certainly is one way they can respond to that. In terms of product development pace, I think the product development team has evolved leaps and bounds in the last three, four years in terms of the tools, techniques and speed of development, as I said, coming back to that -- that we've released more products in the last two years than the decade previously. That's a lot about [indiscernible]. I think product development is really key to this business and will continue to be an area where I think we will develop, but also a real strength for us that we do everything ourselves.

And the last part -- yeah, small versus large. I think, again, in the end, and this is an unhelpful answer. It's about quality of business and quality of business is not actually -- size is not a particularly good indicator of quality of business. Well-run businesses will continue to succeed running the stage and it's hard. It's a complicated and can be dealing with quite a lot of emotion with homebuyers and sellers. So actually, I think small businesses are pretty well placed. They're also slightly easy because they're more resilient than larger businesses, and they can have more choices. So I don't think we'll see a differential between upgrade rates between them nor indeed a behavioral differential.

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

Sorry, the last two questions from Sean. You noted that the tied to H2 rental market conditions was higher tenant churn was good for letting agents, yet the drop in branches in H2 was primarily driven by letting agents dropping off. Could you just give us some color why?

Yes. So what's happened -- and this goes back actually the tenant fee ban of 2018 to run an economically viable lettings agent, you need to have a reasonable managed portfolio now. So if you're a small lettings business with maybe 50 to 100 properties under management, it is very difficult. And those are those very small branches that we are seeing exit the industry because actually, it's hard to make money now, you can't charge tenants. The churn is really helping those agents, remembering most of our agents now do both lettings and sales -- it's those more aggressive broadly spread businesses that have bigger managed portfolios, and that's -- those are the businesses that are really benefiting. Anymore? That's probably record length. Thank you. Thank you, everyone. Have a good day.