Zoopla Property zigzags after solid final results

Zoopla Property Group said it was continuing to fight back against increasing competition for its website, after losing more than a fifth of its estate agency partners to new rival OnTheMarket.com during the year.

Revenue was confirmed at £107.6m in the year to 30 September were 34% higher than last year and earnings before interest, tax, depreciation and amortisation (EBITDA) climbed 23% to £48.7m, as flagged in a recent pre-close statement.

With pre-tax profits up 20% to £25.4m and adjusted earnings per share up 29% to 8.4p, the residential property search group more than doubled its dividend to 2.5p per share.

Despite the initial wave of losses after the January launch of estate agent-owned OnTheMarket, churn levels were reported to have dropped off since May. Although estate agency partners were down 22% to 12,702 by the year end, Zoopla's property services division returning to positive partner growth since May and have further growth post the year-end.

Over the year, average revenue per advertiser (ARPA) across property services was lifted by 10%, with core UK agency ARPA rising 11%.

Zoopla acquired price comparison site uSwitch in June as a bid to diversify in the face of the extra competition in its core business and it has outperformed management's expectations, with average revenue per lead (ARPL) of £3.08 in the four months since, down from an ARPL of £3.35 for the same period in the prior year. It contributed £27.7m to revenues and EBITDA of £7.8m.

"The Comparison Services division outperformed expectations in the four months since the acquisition of uSwitch, with both the Energy and Communications verticals benefitting from our market-leading position and increasingly competitive consumer deals," chief executive Alex Chesterman said.

Since the year end property membership numbers have grown, with management confident of delivering further membership and ARPA growth, while switching volumes within uSwitch have continued to be strong, especially in energy.

Chesterman said he remained comfortable with market expectations for the 2016 financial year.

Broker Canaccord Genuity said the results statement was broadly reassuring and that the near-term focus for investors was likely to be on agency membership, predicting 6.0% growth in the 2016 financial year.

"The competitive landscape in the Property Services division, and the risk to earnings from competition, are likely to remain the focus of investors in the short term; but Zoopla has now recorded seven consecutive months of agency membership growth. We are encouraged by the ARPA growth in FY15 as well as the continued progress in winning agency membership since the year-end."

Investec analysts retained some caution over concerns of a widening gap in Zoopla’s portal proposition strength versus Rightmove, though noted that the OnTheMarket threat "looks reduced for now given stalling membership/visitor growth".

Shares in Zoopla spiked by more than 3% initially, before a complete reversal saw them down 3% to 231.62p.