TIDMRMV
RNS Number : 7347X
Rightmove Plc
24 February 2017
STRATEGIC REPORT - Highlights
Financial highlights
2016 2015 Change
----------------------------------- ----------- ----------- -------
Revenue GBP220.0m GBP192.1m +15%
Operating profit GBP161.6m GBP137.2m +18%
Underlying operating profit(1) GBP166.2m GBP144.3m +15%
Basic earnings per share 137.9p 114.0p +21%
Underlying earnings per share(2) 142.8p 121.4p +18%
Final dividend 32.0p 27.0p +19%
-- Revenue up 15% year on year with growth across all business areas
-- Underlying operating profit(1) up 15% and operating profit up 18%
-- Underlying earnings per share(2) up 18% and basic earnings per share up 21%
-- GBP131.3m (2015: GBP112.5m) of cash returned to shareholders
through dividends and share buybacks in the year
-- Final dividend of 32.0p (2015: 27.0p) per ordinary share
making a total dividend of 51.0p for the year (2015: 43.0p), up
19%
Operational Highlights
-- Record customer numbers with Agency and New Homes customers up 2% to 20,121
-- 1 million UK residential properties advertised on Rightmove
which is a third(3) more than on any other portal
-- Strong traffic growth with visits up 10% averaging over 120
million visits per month(4) and time on site up 5% to nearly 1
billion minutes per month(4)
-- Average revenue per advertiser (ARPA)(5) up a record GBP88 to GBP842 per month
-- Further product, software and data innovation to make the
property marketplace more efficient and transparent for consumers
and customers alike
(1) Before share-based payments and NI on share-based
incentives
(2) Before share-based payments, NI on share-based incentives
and no related adjustment for tax
(3) Source: AlphaWise, Morgan Stanley Research January 2017
(4) Source: Google Analytics
(5) For Agency and New Homes customers
Nick McKittrick, Chief Executive Officer, said:
"Rightmove continues to be the place that home movers turn to
first, with nearly 1.5 billion visits in 2016, up 10% on last year.
Home movers spent nearly a billion minutes every month searching
and researching homes on Rightmove, the only place you can see
almost the entire UK property market.
Our continued innovation and audience growth is delivering even
greater exposure for our customers' brands and properties. We are
adding further value through our data, advertising products and
productivity tools and by building closer relationships with
customers to support their ambitions. Our customer numbers grew by
2% to reach an all-time high of over 20,100 and with customers
spending more on our products, our revenue increased by 15%.
With consumers and customers becoming increasingly digital our
clear market leadership coupled with the value of our products and
data positions us well for the future."
A PDF copy of the 2016 full year results can be downloaded from
plc.rightmove.co.uk/investors
STRATEGIC REPORT - Chairman's Statement
I am pleased to present Rightmove plc's results for the year
ended 31 December 2016.
Amid the attention devoted to economic and political events on
both a local and world stage this past year, we are proud to say
that Rightmove has once again delivered a set of outstanding
results.
We are not insensitive to the macro-environment, however we
continue to be confident in the strength of our business. Our
confidence is derived from an in-depth knowledge of the market in
which we operate together with the power of our subscription-based
business model, which benefits from strong network effects, and a
relentless focus on continual improvement for both our customers
and consumers.
Our approach has further cemented our position as the UK's
number one property portal with customer numbers reaching a record
high of over 20,100 and our unrivalled audience reaching new highs
too. We are in an enviable position to fulfil our aim of creating a
more transparent and efficient property marketplace and ultimately
making home moving easier in the UK.
Our audience, best in class platforms and significant property
inventory advantage coupled with our focus on innovation at the
core of our business drives our value proposition for the benefit
of both our trade customers and consumers. Property data has always
been at the core of what we do and we are excited about continuing
to harness the power of our data to drive further transparency and
efficiency in the property market, predict market opportunities and
drive success for our customers and consumers.
We are still a relatively young organisation, but during our
progression over the last 16 years we have remained steadfast in
our commitment to serving the housing market and this has
consistently delivered strong results. We are committed to continue
that focused path in a manner that is appropriate for all of our
stakeholders.
Financial results
The strength of our business model and core value proposition
underpin record financial results in 2016. Underlying operating
profit(1) was up 15% to GBP166.2m (2015: GBP144.3m) driven by
strong organic revenue growth of 15% to GBP220.0m (2015: GBP192.1m)
and continued focus on cost control. Underlying basic earnings per
share(2) was up 18% to 142.8p (2015: 121.4p), even greater than the
percentage increase in profits and in part attributable to 2.2m
shares bought back during the year at a cost of GBP88.1m as part of
our policy of returning cash to shareholders.
Returns to shareholders
Our commitment to return excess cash promptly to investors
continues to be as strong as ever. Cash conversion remains in
excess of 100% of operating profit.
In 2016, we returned a further GBP131.3m (2015: GBP112.5m) to
shareholders through dividends and share buybacks bringing our
total cash returned to shareholders since our flotation in March
2006 to over GBP725.0m. We have now bought back 39.7m shares since
we commenced our share buyback programme in 2007 reducing our share
capital by 30%.
Dividend
The Board previously announced that it would increase the
interim dividend to 19p (H1 2015: 16.0p) per ordinary share, which
was paid on 6 November 2016. Consistent with our policy of
increasing the total dividend for the year broadly in line with
earnings, the Board proposes to pay a final dividend of 32.0p
(2015: 27.0p) per ordinary share for a total dividend for the year
of 51.0p (2015: 43.0p), an increase of 19%. The final dividend,
subject to shareholder approval, will be paid on 2 June 2017 to all
shareholders on the register on 5 May 2017.
Corporate governance
One of the Board's responsibilities is ensuring that the Group
applies good governance to facilitate effective management of a
high growth business. As the Company's Chairman I am pleased to
note that the Group is continuing to foster an environment of
entrepreneurial leadership and innovation in a framework of
responsible governance and risk management as set out in the
Corporate Governance Report on pages 31 to 47.
Board changes and Chief Executive Officer succession
After 16 years of leadership, as remarkable for his success as
with the modest way he has achieved it, Nick McKittrick has decided
to retire as Chief Executive Officer and as a Board director at the
forthcoming AGM on 9 May 2017. Nick will remain in the Company
until 30 June 2017 to ensure a smooth transition process.
I speak on behalf of the Board and Rightmove employees when I
say that we will miss Nick on both a personal and professional
level. We have greatly appreciated his contribution to Rightmove's
success and we wish him the very best for the future.
Nick will pass the baton to Peter Brooks-Johnson, our Chief
Operating Officer and Board director since 2011. The Board always
has a focus on long-term succession plans and in Peter we have a
strong, experienced and ready successor who has held positions of
responsibility for nearly every functional area within
Rightmove.
Having completed three full terms, Colin Kemp will retire from
the Board in May 2017. I am grateful for his valuable contribution
and insights over the past nine years, in particular his
championing of the voice of the customer and we wish him well in
his next venture.
On the 30 December 2016 Jacqueline de Rojas joined us as a
non-executive director. Jacqueline is currently Managing Director
UKI - Northern Europe for The Sage Group plc and is a recognised
technology leader in the UK and a passionate advocate for increased
opportunities for women and diversity in both the boardroom and
technology workplace. We look forward to Jacqueline's support in
our continuous quest to deliver innovation to our customers as they
seek to reach the UK's largest home moving audience.
Outlook
The Board and I are grateful for the confidence and support of
all our customers and for the talent and dedication of our
employees. We are clear that our goal is to continue to work
together to position Rightmove as the essential marketplace for
home hunters and for property advertisers to reach by far the
widest possible audience. The Board is confident of continued
success in 2017.
Scott Forbes
Chairman
(1) Before share-based payments and NI on share-based
incentives.
(2) Before share-based payments and NI on share-based incentives
and no related adjustment for tax.
STRATEGIC REPORT - Business model
Rightmove is the UK's number one property portal and the UK's
largest property marketplace. On one side we have the UK's largest
and most engaged property audience and on the other side we have
the largest inventory of properties. We benefit from strong network
effects as our property audience and the properties our customers
advertise create a 'virtuous circle' enhancing the Rightmove value
proposition.
Rightmove is free to the consumer and is where home buyers and
renters turn to first as they can see almost the entire UK property
market in one place. It is equally compelling to home sellers and
landlords to ensure their properties are advertised on Rightmove,
as it is where nearly all home buyers and renters are searching and
researching the market.
Our customers are primarily estate agents, lettings agents and
new homes developers advertising properties for sale and to rent in
the UK. We help to drive their businesses by offering the most
significant and effective exposure for their brand and properties
resulting in the largest source of high quality leads. We also
provide best in class software delivering data, market insight and
tools that inform their decisions and help drive business
efficiencies.
Our principal sources of revenue are the monthly subscription
fees paid by customers to advertise all of their properties and the
fees paid for our additional advertising products and packages. Our
additional advertising products increase a customers' share of
voice and competitiveness. These are critical factors for our
customers and particularly for an agent to help to win the
instruction opportunity to sell or rent a home, which remains the
lifeblood of their business.
As the property industry becomes more digital, Rightmove's
market leading audience and best in class software is becoming even
more valuable to customers. We expect that the majority of our
growth will continue to come through product penetration, pricing
and innovation. We also continue to develop a number of smaller
adjacent businesses such as advertising overseas and commercial
properties and providing property related data and valuation
services.
STRATEGIC REPORT- What makes us excited
Rightmove has been described as a restless innovator and during
the course of this year we made over 4,000 changes to our platforms
both large and small. During 2016 we were delighted to be ranked as
the world's most innovative growth company by Forbes. Our
innovation is focused on the core business and as we successfully
innovate we find even more reasons to believe in the wealth of
opportunities ahead.
The power of data
We have an unrivalled view of the property marketplace. On one
side of the network we are the only place with a whole of market
view and national property database of 1 million current properties
and 40 million historic property records. On the other side of our
network we have consumer data from our 15 million monthly unique
visitors coupled with data from over 10 million registered
users.
Harnessing the power of data enables us to create a better
marketplace and ultimately make home hunting easier for both
consumers and customers. As well as bringing the market together in
one place we achieve this through our software innovation and
tools. Examples of our latest innovations are our Marketing Report
Tool, one of a number of tools available to agents within our
'Rightmove Intel' software, and development of the Outside View,
the data analytics product we acquired this year, which can help
predict when a property is likely to come to market.
The power of data to drive market efficiencies and
transparency
Our Marketing Report Tool tracks and analyses the marketing
performance of a property against similar properties in an area
over time. The tool enables agents to clearly demonstrate their
marketing efforts and expertise to a vendor and is especially
powerful for highlighting when a property is over-priced or would
benefit from a higher profile by purchasing an advertising product
on Rightmove.
Rightmove's Data Services business provides insight, analysis
and risk assessment tools to businesses which are making decisions
around property, particularly in relation to valuation and
investment. Our property comparison and background check toolset is
now the de facto standard for valuers in the surveying industry.
All our tools and services are based on the bedrock of our uniquely
powerful property dataset, providing our customers with constantly
updated property insight and information across the UK.
For example, working closely with our Agency customers the Data
Services team have found a strong positive relationship between the
marketing performance of a property and how close the actual asking
price has been set in comparison to the price predicted by our
Automated Valuation Model (AVM). A key insight from the data is
that if an agent lists a property in line with the AVM price, they
are 40% more likely to be the agent that sells that property.
We are sharing these insights with our customers through our
programme of live and online events and through our customer
experience and account management teams. We will continue to
enhance the valuation data we offer to customers and consumers
where it helps the marketplace to be more transparent and
efficient.
The power of data to predict
The data generated from our whole of market view allied to
artificial intelligence techniques enables us to identify patterns
and trends in consumer behaviour.
On 31 May 2016 we acquired the Outside View, a predictive
analytics business, for net cash consideration of GBP2.0m. The
Outside View developed an algorithm that identifies the properties
most likely to come to market in a local area, so an agent can
target their marketing efforts at those potential vendors. Using
our combined knowhow together with Rightmove's extensive dataset we
have been trialing an enhanced version of the product with
encouraging results and many similarities to our popular Local
Valuation Alert product.
Our data also enables us to predict what is likely to happen in
the property market in the months ahead. We can see the
relationship between key metrics at a local, regional or national
level and notably the way that demand for property on Rightmove is
a lead indicator of property stock levels, the speed of the market,
property prices and ultimately transactions.
For example, our data clearly shows how a cooling in demand on
Rightmove across London at the end of 2014 led to an increase in
stock, increased time on market through to lower price growth rates
into 2015. We saw a similar pattern emerging again at the beginning
of 2016, however this time demand cooling was stronger in the less
expensive London boroughs which can also be seen to ripple through
the other metrics in the same areas.
Real time access to these metrics gives us a unique view of
changes in a market where most other reported data is available
months after changes take place when it is too late to act. This is
key for our customers including our lender customers, where
effective risk management can be supported using market wide
leading indicators that would be otherwise unavailable.
The power to unlock customer innovation
By providing customers with an increasingly powerful online
marketplace at the same time as building closer relationships with
them, we can help customers to innovate and empower their business
models to ultimately make home moving easier. We are enabling new
agency models such as agents which cover smaller local areas,
agents with no high-street premises and agents with self-service
models. We also enable high-street agents to lower overheads and
adapt in the digital marketplace.
The common denominator and lifeblood for all these agency
business models is the need to win the right to sell or let a home
and the fact that Rightmove is critical to their ability to do
this. 85%(4) of people selling their home rank Rightmove as the
most important site for marketing their property.
In association with the leading industry event we will create a
new recognition of excellence in Agency in 2017. This will combine
several measures including analysis of Rightmove data from 25
million agent-consumer interactions and the performance of over 4
million individual property listings. This event will provide a
forum for leading agents to share best practice and
innovations.
We presented our 2016 agent seminar and webinar series focusing
on consistent, targeted marketing in a digital world to over 6,000
of our customers. One of the marketing challenges many of our
customers struggle with is how to find the right audience to target
on social media. Targeting is essential to running effective
campaigns and using what we know about our millions of active
registered users we will be launching a product which enables our
customers to easily target home buyers and sellers on social media
platforms as well as on Rightmove.
We have only just begun
We've helped the UK's property marketplace become more efficient
and transparent by aggregating nearly every property for sale and
to rent in the UK, engaging nearly every UK home mover and by
providing our customers with innovative advertising products and
productivity tools. Our relentless focus is to build on our market
leading position, help our customers compete and succeed and keep
innovating to make home moving easier for consumers and customers
alike.
Average revenue per advertiser (ARPA) growth will continue to be
driven by increased product penetration, pricing and innovation and
is underpinned by the value of our unrivalled audience and data,
our substantial product inventory and our culture and track record
of innovation.
To put the immediate advertising opportunity into context, the
ARPA for newspapers back in 2007 was circa GBP2,500(1) per month
compared to our 2016 ARPA of GBP842 per month and this is before we
consider further growth in marketing spend and the business
efficiencies that customers gain from using Rightmove.
(1) Source: Advertising Association Warc report December
2015
STRATEGIC REPORT - Chief Executive's review
Rightmove, the UK's number one property portal, has delivered
another year of record results. Visits from home movers increased
by 10% and they spent nearly a billion minutes on Rightmove every
month in 2016. Our number of advertisers grew by 2% to reach an
all-time high of over 20,100 and with advertisers spending more on
our products, data and services, our revenue increased by 15% to
GBP220.0m with underlying operating profit(1) up 15% to GBP166.2m
and operating profit up 18% to GBP161.6m.
Our progress is testament to our disciplined focus on the UK
property advertising market and the huge effort 'Rightmovers' have
made to build this business together with our industry customers.
We look forward to delivering further growth as we continue to
shape the UK property market.
Our Strategy
The place consumers 'turn to first' and engage with most
At the core of our strategy is a relentless focus on continual
improvement and innovation to create the most compelling experience
for consumers so that they turn to us first. We will continue to
achieve this by providing consumers with the most up to date,
engaging and comprehensive property content together with the best
search, research and home moving tools to support their home moving
journey.
To that end we launched new search technology in the first half
of the year, leading the way and setting the standard for the
fastest, simplest and richest search experience with more images,
larger images, simplified filtering options and a fully responsive
design ensuring the best possible presentation of content across
all devices. The future is also exciting with our next search
innovation, 'Where can I live', launching in early 2017. This
search identifies the commutable areas home hunters can afford, and
then shows them the properties available in those areas.
We continued to invest in our brand in 2016 with an updated look
and feel and through our 'find your happy' advertising campaign.
This campaign connects with the strong positive emotions that
moving home often generates and reflects our position at the heart
of it. Our brand building focused on national TV through our
partnership with Channel 4 and broke new ground as we delivered
contextual adverts which gave live information on available
properties in locations referred to in Channel 4's property
content. We also continued to add further weight to our presence in
London with TV advertising, additional outdoor media and our
exclusive partnerships with the Evening Standard and Time Out.
More consumers than ever turned to Rightmove in 2016 with nearly
1.5 billion visits across all our platforms, a 10% increase on the
previous year. The growth was driven by mobile and of the nearly 12
billion minutes that consumers spent on Rightmove, two thirds of
time spent was on mobile devices. Our market share of traffic
across both desktop and mobile was 77%(2) with the mobile component
even higher at 81%(2) .
Traffic to our research tools also grew significantly in 2016 as
sellers and landlords turned to Rightmove first to help inform
their decisions. Our research tools, such as sold prices, are by
far the most widely used in the UK and provide the unique benefit
of access to our catalogue of 1 million current properties and 40
million historic property records. Consumers spent over 350 million
minutes using our research tools in 2016 which is up by over 20% on
the previous year.
Traffic to our Overseas property site increased in 2016
suggesting the dream of owning a property abroad for many of the
British public continues to be a popular one. Our overseas site
attracted 1.6 million more unique visitors compared to 2015 and
surpassed 100 million searches for the first time. We now have a
record number of both overseas estate agent and developer customers
advertising more than a quarter of a million properties across the
world with over half of the properties located in the two most
popular countries for British buyers, namely Spain and France.
Our Commercial property advertising business continues to gain
momentum with over 40 million visits in 2016, and an 86% market
share of visits among the top three commercial property portals in
the UK. As a result, more and more commercial agents and landlords
are choosing to advertise with us.
Unrivalled exposure, leads and products for our customers
With traffic to our platforms growing for the 16(th) consecutive
year we continued to increase the exposure for our customers'
brands and properties. This record exposure generated nearly 47
million leads for our customers. This is six percent down on 2015
as the result of less activity in the housing market post the
result of the EU referendum, although still nine percent higher
than 2014.
Our long-established focus on the quality of our leads continues
to stand us in good stead as they convert far more often to
outcomes for our customers. In fact, we generate six(3) times as
many sales and lets for our Agency customers as our nearest
competitor. No wonder, when home sellers and landlords are so much
more likely to find their buyer or tenant on Rightmove compared to
any other portal, that 85%(4) of people selling their home rank
Rightmove as the most important site for marketing their
property.
Winning the right to an instruction to sell or let a property is
critical to an agent's success. Over a million of the email leads
sent by home movers to agents highlighted that they had a property
to sell, each one creating an instruction opportunity for a
customer. These were in addition to the instruction opportunities
that came via our phone leads, which accounted for two-thirds of
all leads. We also delivered nearly 200,000 leads from people
asking for a valuation on their home, for those customers who
bought our Local Valuation Alert product.
We have continued to innovate our products alongside the
development of our new search technology to further increase the
value we deliver to customers. Our property products, Featured
Property and Premium Listings are attracting more attention
following their redesign which focused on making them larger and
more premium. The Featured Agent branding product now gains more
visibility as a larger creative space in the search results that
gives our customers more flexibility to better communicate their
message to the largest home hunting audience in the UK.
There is significant headroom to grow product revenue as we
leverage data to increase the penetration of existing products,
evolve their value and pricing, and continue to innovate and
introduce new products as customers look to invest more to drive
their brand exposure and gain market share. This year ARPA
increased by 12% to GBP842 driven by customers spending more on
products and packages.
Innovation to create a better marketplace
Combining our software and whole of market dataset whilst
supported by our dedicated account management teams, we help
customers drive operational efficiencies and inform their business
decisions. Our focus is on the areas our customers value most,
which in the case of our agents is winning and retaining
business.
For example, whereas previously our customers would have
manually gathered valuation and comparable data, paid for printing
and postage of property or development details and paid a third
party to count 'For Sale' and 'Sold' advertising boards for market
share information, they can now do this electronically with our
software - all included as part of their membership of
Rightmove.
We introduced the next wave of market share analysis tools
within our popular market intelligence software 'Rightmove Intel'
along with the capability for multi-branch agents to easily see
metrics at branch and area levels. We also changed the way that we
report on the performance of properties by moving to the more
complete measure of 'detailed views'. This takes into account all
consumer interactions with properties on all Rightmove platforms
and allows us to better highlight the performance of our additional
products to both customers and consumers.
Our new Marketing Report is based on this new measure and is
proving extremely popular as our customers are already using the
report on over 100,000 properties each month. The overall
engagement and value of our 'Rightmove Intel' software keeps
growing with usage up over 30% year on year. The digitalisation of
the property industry and the efficiencies our software and tools
bring help to reduce the cost per office and have also enabled the
growth in the number of customers. Over the last 12 months our
membership base has grown by 2% to over 20,100 customers.
We care about our customers' business success and building
strong relationships is vital to support their ambitions,
especially in light of the significant digital changes taking
place. To that end we are spending more time with customers than
ever before and making sure that more of our conversations lead to
recommendations that our customers truly value.
In 2017 we plan to evolve our event programme with the
introduction of 'Rightmove Live'. These events will include
speakers from a range of industries covering content applicable to
all small and medium sized businesses, with an objective of
inspiring and motivating the industry. In keeping with an online
culture these events will be filmed and hosted on an 'on demand'
platform, meaning our customers can benefit from this content
irrespective of whether they are able to attend on the day.
Build great teams and continue to make Rightmove a great place
to work
We strive to create one team of Rightmovers with as few barriers
as possible to rapid growth and innovation. We believe that this
comes from a process-light, highly connected organisation with
little constraining hierarchy and bureaucracy. It is about
selecting the right people, giving them the freedom and authority
to innovate and lead with very simple measures, and then guiding
them to succeed. We need every Rightmover to be both individually
empowered and accountable.
We believe in sharing often and early and reinforce this through
events such as 'town halls', stand-ups, team away days and company
days which all share progress, successes and challenges. The
culture is not solely built on events like these, but also from the
everyday small gestures and the care Rightmovers have for one
another. Everything together creates a unique, driven and quirky
environment that we believe results in people feeling there's no
place they'd rather be. By striving to make Rightmove a great place
to work we can attract and retain the best talent and provide the
best service for consumers and customers.
Great talent and passion to perform is not enough to make a
great Rightmover; the way in which we behave towards each other,
our customers and partners is vital. How we go about our work is
central to our recruitment, feedback and personal development
processes. We also have a scheme to allow Rightmovers to recognise
their peers who embody the behaviours we aspire to.
The biggest influence in our restless and inquisitive culture,
of course, comes from our people. Their actions and behaviours
create the sense of belonging and connection and allow the business
to continue to thrive and attract great people. In our 2016 'Have
Your Say' people survey, 95% of Rightmovers think 'Rightmove is a
great place to work.' To recognise employees who have been part of
the journey with Rightmove for ten years we create a gnome in their
image. I'm pleased that for such a young company, over 50 gnomes
have pride of place in our office.
I am proud of the vibrant culture and business we have built
together, I would like to thank everyone for everything they have
done to achieve this and look forward to watching Rightmove's
continued success in the future.
Current trading and outlook
We believe the outlook for the UK online property advertising
market remains positive, despite the uncertainties stemming from
the result of the EU referendum. Consumers and customers are
becoming increasingly digital and therefore spend continues to
transition from traditional advertising channels.
Our clear market leadership coupled with the value of our
products and data positions us well for the future. With average
revenue per advertiser continuing to grow the Board remains
confident of making further progress in 2017 and beyond.
Nick McKittrick
Chief Executive Officer
24 February 2017
(1) Before share-based payments and NI on share-based
incentives
(2) Source: Comscore, December 2016
(3) Source: Independent software provider to the estate agency
industry
(4) Source: The Property Academy 2015 Home Moving Trends
Survey
STRATEGIC REPORT - Operational key performance indicators
We use the metrics set out below to track our operational
performance.
Number of advertisers
Please refer to the Definition
pdf The total number of
http://www.rns-pdf.londonstockexchange.com/rns/7347X_-2 paid for UK estate and
017-2-23.pdf lettings Agency branches
and New Home developments
advertising properties
on Rightmove
2016 performance
+2%
Strategic link
The place consumers
'turn to first' and
engage with most; and
innovation to create
a better marketplace
Risks
1 2 3
-----------------------------------------------------------------------------------------
Source: Rightmove
Average revenue per advertiser (ARPA in GBP per month)
Please refer to the pdf Definition
http://www.rns-pdf.londonstockexchange.com/rns/7347X_-20 Revenue from Agency
17-2-23.pdf and New Home advertisers
in a given month divided
by the total number
of advertisers during
the month, measured
as a monthly average
over the year
2016 performance
+12%
Strategic link
Unrivalled exposure,
leads and products for
our customers
Risks
1 2 3
-----------------------------------------------------------------------------------------
Source: Rightmove
Traffic (time on site measured in billions of minutes)
Please refer to the pdf Definition
http://www.rns-pdf.londonstockexchange.com/rns/7347X_-2017-2-2 Total time measured
3.pdf in billions
of minutes spent on
Rightmove platforms
during the year
2016 performance
+5%
Strategic link
The place consumers
'turn to first' and
engage with most
Risks
2 3 4
----------------------------------------------------------------------------------------
Source: Google Analytics
Employee engagement(1)
Please refer to the pdf Definition
http://www.rns-pdf.londonstockexchange.com/rns/7347X_-20 Based on number of employee
17-2-23.pdf respondents selecting
'agree' or 'strongly
agree' as a response
to this question in
the annual employee
survey
2016 performance
+4% points
Strategic link
Build great teams and
continue to make Rightmove
a great place to work
Risks
5
-------------------------------------------------------------------------------------------
Source: Rightmove
(1) The employee engagement survey was first conducted in 2013
hence only four years of data is presented in the chart above
Risks relevant to our KPIs (read more on pages 18 to 20)
1 Macroeconomic risk - UK housing market downturn
2 Competitive environment
3 New or disruptive technologies and changing consumer behaviours
4 Cyber security and IT systems
5 Securing and retaining the right talent
STRATEGIC REPORT - Financial key performance indicators
We use the metrics set out below to track our financial
performance.
Revenue GBPm 2016 performance
Please refer to the pdf +15%
http://www.rns-pdf.londonstockexchange.com/rns/7347X_-2017-2-23.pdf
Revenue grew strongly
in 2016 up 15%
to GBP220.0m
(2015: GBP192.1m)
with all business
areas experiencing
year on year growth.
Risks
1 2 3 4 5
--------------------------------------------------------------------- ------------------------
Underlying operating profit(1) 2016 performance
GBPm +15%
Please refer to the pdf
http://www.rns-pdf.londonstockexchange.com/rns/7347X_-2017-2-23.pdf Underlying operating
profit(1) before
the impact of the
IFRS2 share-based
payment charge
and National Insurance
on share-based
incentives increased
by 15% to GBP166.2m
(2015: GBP144.3m)
with operating
margin increasing
to 75.5% (2015:
75.1%)
Risks
1 2 3 4 5
--------------------------------------------------------------------- ------------------------
Underlying basic EPS(2) (pence 2016 performance
per ordinary share) +18%
Please refer to the pdf
http://www.rns-pdf.londonstockexchange.com/rns/7347X_-2017-2-23.pdf Underlying basic
EPS(2) increased
by 18% to 142.8p
(2015: 121.4p).
Basic EPS grew
by 21% to 137.9p
(2015:114.0p)
Risks
1 2 3 4 5
--------------------------------------------------------------------- ------------------------
Cash returned to shareholders 2016 performance
GBPm +17%
Please refer to the pdf
http://www.rns-pdf.londonstockexchange.com/rns/7347X_-2017-2-23.pdf During the year
all free cash flow
was returned to
shareholders in
the form of share
buybacks and dividends
with cash returns
totalling GBP131.3m
(2015: GBP112.5m)
Risks
1 2 3 4 5
--------------------------------------------------------------------- ------------------------
STRATEGIC REPORT - Financial review
Revenue
We have experienced another strong year of revenue growth
delivering record revenues of GBP220.0m.
2016 2015 Change
GBPm GBPm
--------------- ------ ------ -------
Agency 168.3 147.1 14%
New Homes 33.9 30.5 11%
Other 17.8 14.5 23%
--------------- ------ ------ -------
Total revenue 220.0 192.1 15%
--------------- ------ ------ -------
Our Agency business was the main contributor to the overall
revenue growth increasing by 14% to GBP168.3m (2015: GBP147.1m).
Agency continues to be our largest business contributing 77% (2015:
77%) of our total revenue. The majority of the revenue increase
came from ARPA growth as a result of the further adoption of
additional advertising products together with increases to core
membership prices. Spending by agents increased across our range of
additional advertising products with healthy adoption of our
Optimiser package which provides the highest value to our
customers.
Revenue from our New Homes business grew by 11% to GBP33.9m
(2015: GBP30.5m) driven by the sale of additional advertising
products, including email campaigns, and by increases to core
membership prices, together with healthy growth in development
numbers, up 10% year on year to 2,659 developments (2015:
2,416).
During 2016 we continued to leverage our brand strength beyond
the main UK residential property business generating strong growth
in our Data Services, Overseas, Commercial and non-property
advertising businesses with year on year revenue up 23% to GBP17.8m
(2015: GBP14.5m).
Underlying operating profit
2016 2015 Change
GBPm GBPm
---------------------- ------- ------- -------
Revenue 220.0 192.1 15%
Underlying operating
costs (53.8) (47.8) 13%
---------------------- ------- ------- -------
Underlying operating
profit 166.2 144.3 15%
Share-based payments (4.1) (3.8) 8%
NI on share-based
incentives (0.5) (3.3) (85%)
---------------------- ------- ------- -------
Operating profit 161.6 137.2 18%
---------------------- ------- ------- -------
Underlying operating profit(1) increased by 15% to GBP166.2m
(2015: GBP144.3m) and underlying operating margin(1) increased to
75.5% (2015: 75.1%). This was driven by continued strong revenue
growth coupled with a slightly lower percentage increase in
underlying operating costs(1) .
Underlying operating costs(1) increased by 13% or GBP6m to
GBP53.8m (2015: GBP47.8m). Of the increase GBP4m related to salary
and associated costs attributable to general wage inflation and an
increased average headcount of 469 (2015: 412), reflecting
investment in sales, customer support and technical heads during
the year and the full year impact of staff recruited during 2015.
Technology costs increased by GBP0.7m in the year due to our
investment in new site search functionality and increased licensing
costs associated with better customer sales and support
platforms.
Underlying operating profit is reported before share-based
payments, which are a significant non-cash charge driven by a
valuation model, and NI on share-based incentives, which is driven
by reference to the Rightmove plc share price and so subject to
volatility, rather than operational activity. The directors
therefore consider underlying operating profit to be the most
appropriate indicator of the performance of the business and year
on year trends.
Share-based payments and National Insurance (NI)
In accordance with IFRS 2, a non-cash charge of GBP4.1m (2015:
GBP3.8m) is reflected in the income statement representing the
amortisation of the fair value of share-based incentives
granted.
NI is being accrued, where applicable, at a rate of 13.8% on the
potential employee gain on
share-based incentives granted. Based on a year on year decrease
in the closing share price from GBP41.25 at 31 December 2015 to
GBP39.03 at 31 December 2016 in respect of the outstanding
share-based incentives granted, together with the realised NI cost
on share-based incentives exercised in the year, there was a charge
of GBP0.5m (2015: GBP3.3m).
Taxation
The consolidated tax rate for the year ended 31 December 2016
was 19.8% (2015: 20.2%). The effective tax rate was slightly lower
than the UK enacted rate of 20.0% due to research and development
relief claimed in relation to previous years.
We are committed to being a responsible tax payer acting in a
straightforward and open manner in all tax matters. The total tax
payable in respect of 2016 was GBP78.5m (2015: GBP75.3m). GBP31.6m
(2015: GBP29.8m) related to corporation tax and Employer's NI borne
by the Group while the remaining
GBP46.9m (2015: GBP45.5m) was collected in respect of payroll
taxes and VAT. The Company currently has no open tax authority
enquiries in respect of any tax and there are no known material tax
risks based on the positions adopted. The Company has therefore not
recognised any uncertain liabilities in relation to estimates of
additional tax which may be due in relation to enquiries.
Earnings per share (EPS)
Underlying basic EPS(2) increased by 18% to 142.8p (2015:
121.4p). Basic EPS increased by 21% to
137.9p (2015: 114.0p). The growth in EPS was mainly driven by
the increase in profitability in the year together with the benefit
from our continued share buyback programme which reduced the
weighted average number of ordinary shares in issue to 94.0m (2015:
96.0m).
Balance sheet
Rightmove's balance sheet at 31 December 2016 showed total
equity of GBP8.0m (2015: GBP6.6m) reflecting growth in profits and
retained earnings less the continued return of capital to
shareholders in the form of share buybacks and dividends during the
year.
Reflecting both revenue growth and strong cash collections,
trade receivables increased by 8% to GBP26.6m (2015: GBP24.6m).
Trade and other payables increased by GBP4.2m to GBP35.8m (2015:
GBP31.6m) due to an increase in deferred revenue in line with
trading. Our deferred tax asset, representing the future tax
benefits from share-based incentives, is marginally higher at
GBP6.9m (2015: GBP6.8m).
Cash flow
Rightmove continues to see strong cash generation and to return
all free cash generated to shareholders. Predictable cash flows
reflect the subscription nature of the business coupled with low
working capital requirements. Cash generated from operating
activities was up 18% to GBP169.2m (2015: GBP143.2m) and operating
cash conversion was once again in excess of 100%.
Tax payments increased to GBP27.8m (2015: GBP26.9m) and GBP0.2m
(2015: GBP0.2m) was paid in relation to bank charges and bank
facility fees resulting in net cash from operating activities of
GBP141.2m (2015: GBP116.1m).
Capital expenditure of GBP1.8m (2015: GBP1.8m) includes
investment in new load balancers to optimise the performance of our
platforms and an upgrade to customer facing software tools used by
our Data Services business. On 31 May 2016 we acquired 100% of The
Outside View Analytics Ltd, a predictive analytics company, for net
cash consideration of GBP2.0m.
Proceeds of GBP0.4m (2015: GBP0.4m) were received on the
exercise of share-based incentives and GBP0.8m (2015: GBP0.5m) was
applied to purchase shares to fund the Rightmove Share Incentive
Plan.
During 2016, GBP88.1m was invested in the repurchase of our own
shares (2015: GBP76.1m) whilst a further GBP43.2m (2015: GBP36.5m)
was paid in dividends reflecting the increased final dividend for
2015 and the 3p increase in the interim dividend this year. This
brings the total cash returned to shareholders in the year to
GBP131.3m (2015: GBP112.5m).
The closing Group cash and money market deposit balance at the
end of the year was GBP17.8m
(2015: GBP12.4m).
Dividends
Consistent with our policy of growing the dividend broadly in
line with the increase in underlying earnings per share, the
directors are recommending a final dividend of 32.0p (2015: 27.0p)
per ordinary share, which together with the interim dividend makes
a total dividend for the year of 51.0p (2015: 43.0p), an increase
of 19%. We are proud to have delivered ten years of successive
dividend growth since Rightmove listed in 2006 and the final
dividend, subject to shareholder approval, will be paid on 2 June
2017 to all shareholders on the register on 5 May 2017.
Robyn Perriss
Finance Director
24 February 2017
(1) Before share-based payments charge of GBP4.1m (2015:
GBP3.8m) and NI charge of GBP0.5m (2015: GBP3.3m) on share-based
incentives.
(2) Before share-based payments charge of GBP4.1m (2016:
GBP3.8m) and NI charge of GBP0.5m (2015: GBP3.3m) on share-based
incentives and no related adjustment for tax.
STRATEGIC REPORT - Risk management
Approach to risk management
The Board has overall responsibility for ensuring that risk is
effectively managed across the Group. The primary method by which
risks are monitored and managed is through the monthly Executive
Committee meetings. The subject of risk is included on each monthly
agenda and any significant new risks or change in status to
existing significant risks is discussed and actions taken as
appropriate.
On a bi-annual basis, risk is reviewed by operational management
across each business area. This review includes a detailed
assessment of identified risks, the likelihood of each risk
occurring and the potential impact, together with controls and
mitigating procedures in place. This information is combined to
form a consolidated risk register which is reported to the
Executive Committee for review and challenge, ahead of final review
and approval by the Board. A nominated Director has responsibility
for each risk. The Board reviewed the risk register at both the
February 2016 and September 2016 Board meetings.
Risk management is reinforced by the Group's continuous process
to design and embed strong internal controls across the business as
we grow, particularly in relation to smaller breadth business
areas. The Audit Committee also receives and analyses regular
reports from management and the outsourced internal audit function
on matters related to risk and control and reviews the timeliness
and effectiveness of corrective action taken by management. The
Audit Committee on behalf of the Board also considers the findings
and recommendations of its external auditor throughout the year to
design and implement effective financial controls.
Risk management framework
Please refer to the pdf
http://www.rns-pdf.londonstockexchange.com/rns/7347X_-2017-2-23.pdf
STRATEGIC REPORT- Principal risks and uncertainties
A description of the principal risks and uncertainties faced by
the Group in 2016, together with the potential impact and
monitoring and mitigating activities is set out in the table
below.
We recognise that the Group is exposed to risks wider than those
listed, however we have disclosed those that we believe are likely
to have the greatest impact on the Group delivering its strategic
objectives and those that have been the subject of discussion at
recent Board and Audit Committee meetings.
Change
from
Key risk and description Impact Monitoring and mitigation prior
year
------------------------------------------------------------ ------------------------------------------------- ------------------------------------------------------------ -------
1 Macroeconomic environment Underperformance as the number of Agents and New
The macroeconomic environment significantly impacts Home developments are a major determinant * Monitoring of housing market leading indicators and
confidence in the UK housing market, impacting of Rightmove's revenue trends in Rightmove membership
transaction levels.
* Substantially fewer housing transactions than the * Continuing to provide the
norm may lead to a reduction in the number of Agent
branches or New Home developments
most significant and effective exposure for customers'
brands and properties, be the largest
* In addition, a contraction in the volume of source of high quality leads and offer value-adding
transactions in the UK housing market could lead to a products and packages and help drive operational
reduction in advertisers' marketing budgets which efficiencies for our customers, thereby embedding the value
could reduce the demand for the Group's property of our membership
advertising products * Communicating the effectiveness of digital media
versus alternative mediums such as print
The potential impact of the result of the EU referendum is * Maintaining a flexible cost base that can respond to
further discussed on page 21 changing conditions
------------------------------------------------------------ ------------------------------------------------- ------------------------------------------------------------ -------
2 Competitive environment This may impact on Rightmove's ability to grow ->
Increased competition from existing competitors or new revenue due to the potential loss of: * Communication of the value of Rightmove membership to
entrants targeting the Group's primary * Audience advertisers
revenue markets
* Advertisers * Continued investment in our account management teams
to ensure we stay close to our customers and local
markets and help our customers run their businesses
* Demand for additional advertising products more efficiently
* Sustained marketing investment in the Rightmove brand
* Sustained investment and innovation in serving both
home hunters and our advertisers
------------------------------------------------------------ ------------------------------------------------- ------------------------------------------------------------ -------
3 New or disruptive technologies and changing consumer Under-performance and impact on Rightmove's ->
behaviours ability to grow revenue due to the potential * Continual improvements to our platforms
Rightmove operates in a fast-moving online marketplace. loss
Failure to innovate or adopt new technologies of:
or failure to adapt to changing customer business models * Audience engagement * Developing our product proposition to meet our
and evolving consumer behaviour may customers' needs and evolving business models
impact the Group's ability to offer the best products and
services to its advertisers and * Advertisers
the best consumer experience. * Significant and ongoing investment in mobile and
tablet platforms
* Demand for additional advertising products
* Large in-house technology team with culture of
innovation
* Innovation lab to develop emerging models and
technologies
* Ongoing monitoring of consumer behaviour and annual
'Hackathons' which allow employees to spend time
during work hours to develop their own online
property related ideas
------------------------------------------------------------ ------------------------------------------------- ------------------------------------------------------------ -------
4 Cyber security and IT systems Any loss of website availability or theft or ->
* Unavailability of the website and other platforms misuse of data held within the Group's databases * Disaster Recovery and Business Continuity Plans in
and IT systems could have both reputational and place, subject to regular review and testing
financial implications for the Group
* Corruption or loss of key data as a result of a
security breach * Use of three data centres to load balance and ensure
optimal performance and business continuity
capability
* Regular backups of key data
* Regular testing of the security of the IT systems and
platforms including penetration testing and
distributed denial of service attack procedures
* Ongoing monitoring of external threats through
updates from external specialists and collaboration
with other online organisations
------------------------------------------------------------ ------------------------------------------------- ------------------------------------------------------------ -------
5 Securing and retaining the right talent The inability to recruit and retain talented ->
Our continued success is dependent on our ability to people could impact our ability to maintain our * Ongoing succession planning and development of future
attract, recruit, retain and motivate financial performance and deliver growth leaders
our highly skilled workforce
When key staff leave or retire, there is a risk
that knowledge or competitive advantage is * Payment of competitive reward, including a blend of
lost short and long-term incentives for senior management
and the ability for all employees to participate in
the success of the Group through the SIP
* Regular staff communication and engagement
* Maintaining the culture of the Group, which generates
significant staff loyalty
------------------------------------------------------------ ------------------------------------------------- ------------------------------------------------------------ -------
->
Increased Decreased Risk unchanged
risk risk
STRATEGIC REPORT - The EU referendum
The result of the UK's EU referendum has increased the level of
macroeconomic uncertainty and could increase the likelihood of the
housing market macroeconomic risks set out on page 19.
In considering the potential implications of the referendum
result on the business the directors considered the following:
-- The Rightmove business is largely subscription based and is
therefore less susceptible to short-term shocks or variations in
the property market or wider economy;
-- Around two-thirds of our estate agency customers also provide
lettings services which may mitigate the impact of any downturn in
the property market on their business; and
-- A reduction in housing market activity increases the
propensity for advertisers to evaluate their marketing spend both
offline and on other portals and we remain confident in the
strength of the Rightmove value proposition.
The directors believe that our strong market position and
relationships with our customers, and the value embedded in our
membership continue to position us well providing that housing
transaction volumes do not take a sharp downward turn.
STRATEGIC REPORT - Viability statement
In accordance with provision C.2.2. of the Code, the directors
have assessed the viability of the Group over a three-year period,
taking into account the Group's current position and the potential
impact of the principal risks and uncertainties set out on pages 18
to 20. Based upon the robust assessment of the principal risks
facing the Group, including those that would threaten its business
model, future performance, solvency or liquidity, the directors
have a reasonable expectation that the Group and the Company will
be able to continue in operation and meet its liabilities as they
fall due over the three-year period to 31 December 2019.
The directors have determined that a three-year period to 31
December 2019 constitutes an appropriate period over which to
provide its viability statement, as the Group operates within the
online digital marketplace, and projections looking out further
than three years become significantly less meaningful in the
context of the fast moving nature of the market. Three years is
also the period considered under the Group's current three-year
strategic plan. The three-year plan is reviewed by the directors at
least annually and is developed on a segment by segment basis using
a bottom up model. The three-year plan makes certain assumptions
about Agency and New Homes customer numbers, ARPA growth and other
ancillary revenue streams and considers the Group's profitability,
cash flows and dividend cover over the period.
The plan is subject to robust downside sensitivity analysis
which involves flexing a number of the main assumptions underlying
the plan. Where appropriate, analysis is carried out to evaluate
the potential financial impact over the period of the Group's
principal risks actually occurring. Furthermore our business model
is structured so that the Group is not overly reliant on a small
customer base with no single customer constituting more than 3% of
Group sales.
Also given our significant free cash flow, our ability to adjust
our discretionary share buyback programme provides long-term
comfort around viability in the face of adverse economic or
competitive conditions.
Whilst this review does not consider all the risks that the
Group may face, the directors consider that this stress-testing
based assessment of the Group's prospects is reasonable in the
circumstances of the inherent uncertainty involved.
STRATEGIC REPORT - Corporate responsibility
Our people
Our people are our most valued asset, they are vital to
Rightmove's success and growth and we are proud of the mixture of
talent and experience they bring. Our open and honest cultural
style comes from our people and the environment we have created
together. We strive to make Rightmove a great place to work and
this enables us to attract and retain the best talent and provide
the best service for both our customers and consumers.
Recruitment
Recruiting the right talent continues to be an important part of
our ability to drive growth. The tightening job market,
particularly in technology skills makes our working environment and
benefits ever more important in attracting the right people.
Referrals from existing employees are a valuable source of new
recruits, typically ensuring a higher quality candidate with a
better cultural fit. All new vacancies are communicated internally
to give our colleagues an opportunity to apply or recommend
someone. In 2016 10% of new employees were introduced to Rightmove
by an existing employee.
We continued our successful partnership with MK College and the
University of Bedford which offers paid internships to design
students for up to six months and provides graduates with valuable
work experience in marketing or design. Five out of six interns who
joined us in 2015 became permanent employees during the year and a
further four interns joined Rightmove in 2016, of whom two are now
permanent. Our intern programme will continue to run in 2017 and so
far we have eight new interns including three from our involvement
with the Prince's Trust, details of which can be found in the
charitable activities section below.
The high quality of our recruiting, supported by long term
commitment from Rightmove employees is key to the success of our
culture. We are proud to have 51 people who have celebrated ten or
more years' service, which represents over 10% of our employees and
which we believe backs up our impressive people survey results.
People development and training
To support our culture of highly connected and empowered
employees every new employee attends two office based 'How
Rightmove fits together' days to introduce them to the business and
our customers. They also attend 'Nexton' an off-site residential
experience to introduce employees to our culture and values.
Beyond induction, Rightmove is committed to investing in our
employees through extensive training and leadership programmes that
are designed to equip them with the necessary skills to perform to
the best of their ability and provide the best possible service to
our customers and consumers.
We have also developed a suite of internal development courses
for our employees covering both technical and non-technical skills
to further invest in our people and in recognition of the benefit
in providing continual professional and personal development for
Rightmovers. In 2016, a new set of customer-focussed training was
rolled out, including how to communicate effectively by email and
telephone.
Employee Benefits
Whilst we believe that being a great place to work helps us
attract the best talent we also reward our employees with a range
of additional benefits.
Rightmove contributes towards a group stakeholder pension plan.
Opt out rates continue to be low and currently 90% of employees are
members of the pension plan. We also offer private healthcare
complemented by a cash plan scheme for all employees.
We want our people to directly benefit from their contribution
to the success of Rightmove. All employees can join the Group's
Save As You Earn Scheme (Sharesave), which allows employees to save
money from their salary with the option to purchase shares at a
discount after three years. In November 2016, the Group's eighth
Sharesave contract matured allowing employees to benefit from the
continued success of the Group over the last three years. 66% of
our employees currently participate in Sharesave.
Following the launch of the Rightmove Share Incentive Plan (SIP)
and initial award of shares in 2015, in January 2016 we made a
further free share award of 50 shares to all qualifying employees.
We have also made a free share award of 50 shares to all qualifying
employees in January 2017.
We also offer flexible working arrangements, supporting part
time working and reduced hours to allow our employees to balance
their work and family commitments.
Engagement
We encourage employees' involvement and place emphasis on
keeping employees informed of the Group's activities through
'townhalls' and business performance updates with senior management
and quarterly sales conferences.
Our employee recognition scheme is based around the 'Rightmove
behaviours', which reflect our unique blend of values and ways of
working. It is an opportunity to nominate colleagues who have
demonstrated these behaviours in action and during 2016 it
continued to prove popular with up to eight awards presented every
two months at our 'townhalls'.
As it is important to know what our employees think, and having
received much valuable feedback in the past, we conduct an annual
'Have your Say' people survey. We are proud of another set of
outstanding results from the survey with highlights including:
-- 90% of respondents think that Rightmove is run on strong values and principles;
-- 95% of respondents think this is a great place to work and
are proud to work for Rightmove; and
-- 97% of respondents are committed to making a real contribution to the success of Rightmove.
Despite the outstanding results, the management team is never
complacent and works hard to improve the employee experience at
Rightmove. An employee engagement score will again form part of the
senior management bonus criteria in 2017, demonstrating the
importance of employees to the continuing success of Rightmove.
Equality and diversity
Rightmove has a firm commitment to equality of opportunity in
all our employment policies, practices and procedures. Our
recruitment and selection processes are geared to selecting the
best candidate regardless of their age, gender, sexuality, full or
part-time status, disability and marital status.
We recognise that a diverse workforce will provide a wide range
of perspectives that promotes innovation and business success.
Drawing on what is unique about individuals adds value to the way
we do business and helps us anticipate and provide what our
customers want from us and what the home hunters want from the
Rightmove platforms.
As at 31 December 2016, our female representation on the Board
was 33%, with three out of nine Board directors being female.
Following the planned retirement of Colin Kemp in May 2017, this
will rise to 38%
The Board continues to focus on the next level of senior
management in order to develop potential within this team to step
up to Board level at the appropriate time. It is also important to
identify and develop potential within the wider organisation with a
view to strengthening the female representation within the senior
management team. In 2016, 18% (2015: 24%) of our senior management
team were female. Rightmove has a small senior management team and
therefore the loss of just one female manager can have a big impact
on female representation in this group. We are proud that the rest
of our workforce now equally represents men and women.
A breakdown by gender of the number of persons who were
directors of Rightmove, senior managers and all other employees as
at 31 December 2016, is set out below:
Please refer to the pdf
http://www.rns-pdf.londonstockexchange.com/rns/7347X_-2017-2-23.pdf
Human rights
Whilst Rightmove does not have a specific human rights policy,
it does have policies covering Equal Opportunities, Anti-slavery
and Anti-bribery that adhere to internationally proclaimed human
rights principles. There is also a gifts and hospitality policy and
an online register to record all gifts and hospitality that are
accepted by employees. This register is reviewed by the Audit
Committee annually.
Charitable activity
We continue to encourage all our employees to devote time and
fundraising efforts to charitable causes that are of particular
importance to them as individuals. During 2016 many of our staff
have been active in raising money or supporting fundraising
activities across a wide range of charities for which Rightmove
matches the donations raised. In 2016 we contributed GBP18,000 to
UK charities through matched funding. Our employees are also able
to donate directly from their monthly salary to any charity or
recognised good cause registered within the UK through the
Charities Trust. This provides a tax efficient means of giving.
In 2016, we contributed GBP49,000 to support customer
initiatives via Agents Giving, where we contribute to the costs of
setting up a charitable activity carried out by our customers, for
example paying for the kit to be used by participants in a charity
run or cycling event. This allows for more of the money raised by
our customers to go directly to the charity through a charitable
sponsorship fund we set up with Agents Giving in 2014. We were
delighted that during 2016, Agents Giving achieved the milestone of
raising over GBP1 million for a number of charitable initiatives
supported by our customers.
In November 2016, we invited ten young people from the Prince's
Trust to attend four weeks' work experience at Rightmove to learn
about the business and the career opportunities on offer. The
experience was very rewarding for the young people who enjoyed the
lively family atmosphere and for the many Rightmovers who were
involved in organising and delivering the work experience. The
collaboration has resulted in three young individuals being offered
a three-month internship within Rightmove. During the year
Rightmove contributed GBP25,000 to the Prince's Trust.
Environment
Rightmove actively considers its environmental impact and we are
conscious of playing our part in tackling climate change. Rightmove
reduces the need for print media and the environmental damage that
goes with it. Rightmove takes care to design the layout of property
particulars to reduce the total number of pages that need to be
printed out in those cases where a home hunter does want a physical
copy.
Enhanced information on properties also reduces the amount of
time home hunters waste in visiting properties that rapidly turn
out to be inappropriate. As a high proportion of viewings involve a
car journey, any reduction in wasted viewings has an environmental
benefit. Rightmove has worked hard to increase the number and size
of photographs of each property, improved the size and added
functionality to property floor plans and has introduced more
comprehensive map searches and aerial photographs which help home
hunters to identify the specific location of a property. Rightmove
has added information on which schools are closest to the
properties listed and the broadband speed for the area, all of
which combined, provides high quality information about properties,
to reduce the carbon footprint generated by prospective buyers
making wasted journeys.
The Rightmove platforms include functionality for our customers
to display Energy Performance Certificates which allow prospective
buyers to evaluate the energy efficiency of a property they are
considering buying and to identify opportunities to improve the
energy efficiency once they have purchased the property.
As an internet-based Group with most staff employed in two
office locations, we believe our own environmental footprint is
small. We encourage our staff to take steps to address our
environmental responsibilities. For instance, we continue to
operate recycling schemes which were established in consultation
with local authorities and recycling partners. All waste bins were
removed from the desks in our London and Milton Keynes offices
which encourages and increases the amount of recycling we do.
As an operator of an online property portal, the main
environmental impact is the power usage of our data centres. Our
procurement policy is to purchase hardware with the best
computational performance which uses the least electrical
power.
We encourage our employees to use alternatives to car travel, by
promoting the use of public transport in particular when travelling
between our two office locations and by encouraging participation
in our Cycle to Work scheme. In 2016 we also introduced the option
for staff entitled to a company car to select hybrid electric cars
as an alternative to petrol or diesel engines.
In 2016, our fuel card provider, Allstar, again partnered with
Forest Carbon to capture the CO(2) emissions from our fleet of
company cars and turn it into new UK woodlands, under the Allstar
Ecopoint scheme. We pay an amount per month per car to capture the
CO(2) from each vehicle and with that Forest Carbon plant woodlands
that are quality assured by the Governments' Woodland Carbon Code
to offset the emissions from each vehicle. We are provided with an
e-certificate annually which shows us how many trees have been
planted for us, as well as their location and how much CO(2) they
are expected to capture.
As an online business, our culture emphasises a paperless
environment. We also recognise that our responsibilities do not
stop with how we operate internally; we encourage all our
customers, business partners and suppliers not to unnecessarily
print out emails sent by us in the signature of all our emails. We
also continue to focus on streamlining processes and replacing
paper-based services with online services and communications,
wherever possible. Steps introduced in recent years include
e-communications to shareholders and online customer membership
forms and product documentation.
Greenhouse gas reporting
The Companies Act 2006 (Strategic Report and Directors' Report)
Regulations 2013 requires all UK quoted companies to report on
their greenhouse gas (GHG) emissions, which are classified as
either direct or indirect and which are divided further into Scope
1, Scope 2 and Scope 3 emissions.
Direct GHG emissions are emissions from sources that are owned
or controlled by Rightmove. Indirect GHG emissions are emissions
that are a consequence of the activities of the Group but that
occur at sources owned or controlled by other entities.
Scope 1 emissions: Direct emissions controlled by the Group
arising from Company cars. Whilst the cars are leased, we are
responsible for the emissions and therefore we report these under
Scope 1.
Scope 2 emissions: Indirect emissions attributable to the Group
due to its consumption of purchased electricity.
Scope 3 emissions: Other indirect emissions associated with
activities that support or supply the Group's operations, we
include emissions arising from our third party run data
centres.
The Group is required to report Scope 1 and 2 emissions for its
reporting year to 31 December 2016. Scope 3 is not yet mandatory,
however the Group has again chosen to report Scope 3 emissions as
it relates to electricity used in data centres, in which the Group
rents space to house and operate various servers, which host our
website platforms.
Rightmove emissions by scope:
Scope Source Tonnes CO(2) e(1) Tonnes CO(2) e(1)
2016 2015
--------- --------------------------- ------------------ ------------------
Scope 1 Company cars 486 492
--------- --------------------------- ------------------ ------------------
Scope 2 Electricity 303 342
--------- --------------------------- ------------------ ------------------
Scope 3 Outsourced - data centres 298 221
--------- --------------------------- ------------------ ------------------
Total 1,087 1,055
-------------------------------------- ------------------ ------------------
(1) UK emissions factors have been used for all data. All
emission factors have been selected from the emissions conversion
factors published annually by Defra.
(https://www.gov.uk/measuring-and-reporting-environmental-impacts-guidance-for-businesses)
(.)
The increase in emissions from our outsourced data centres was
due to a new, larger facility coming online during the year.
Emissions have also been calculated using an 'intensity metric',
which will enable the Group to monitor how well we are controlling
emissions on an annual basis, independent of fluctuations in the
levels of their activity. As Rightmove is a 'people' business, the
most suitable metric is 'Emissions per Employee', based on the
average number of employees during the year. The Group's emissions
per employee are shown in the table below.
Emissions per Employee
Scope Source Tonnes CO(2) e Tonnes CO(2) e
per employee(1) per employee(1)
2016 2015
--------- --------------------------- ----------------- -----------------
Scope 1 Company cars 1.0 1.2
--------- --------------------------- ----------------- -----------------
Scope 2 Electricity 0.6 0.8
--------- --------------------------- ----------------- -----------------
Scope 3 Outsourced - Data Centres 0.6 0.6
--------- --------------------------- ----------------- -----------------
Total 2.2 2.6
-------------------------------------- ----------------- -----------------
(1) Based on 466 (2015: 412) employees taken as the average
number of employees in the Group throughout the year.
Emissions per employee have declined year on year due to an
increase in headcount in areas which have not had a proportionate
impact on emissions, such as the use of company cars or running the
outsourced data centres. We will continue to monitor and look for
ways to improve energy efficiency.
Methodology
We have reported on all of the emission sources required under
the Companies Act 2006 (Strategic Report and Directors' Report)
Regulations 2013. We have used the GHG's Protocol's Operational
Control consolidation method. We do not have responsibility for any
emission sources that are not included in the above
information.
Health and safety
The Group considers the effective management of health and
safety to be an integral part of managing its business. During
2016, we continued our fire safety, first aid and work place safety
training. The Group's ongoing policy on health and safety is to
provide adequate control of the health and safety risks arising
from work activities. This is delivered through further
consultation with, and training of, employees, the provision and
maintenance of plant and equipment, safe handling and use of all
substances and the prevention of accidents and causes of ill
health.
GOVERNANCE - Directors and officers
Scott Forbes
Chairman
Appointment to the Board
13 July 2005
Committee membership
Nomination (Chairman)
Current external commitments
Chairman of Ascential plc
Non-executive director of Travelport Worldwide Limited
Chairman of Innasol Group Limited
Previous roles and relevant experience
Chairman of Orbitz Worldwide until September 2015. Director of
NetJets Management Ltd, a subsidiary of Berkshire Hathaway until
October 2009. Scott has over 35 years' experience in operations,
finance and mergers and acquisitions including 15 years at Cendant
Corporation which was formerly the largest worldwide provider of
residential property services. Scott established Cendant's
international headquarters in London in 1999 and led this division
as Group Managing Director until he joined Rightmove.
Nick McKittrick
Chief Executive Officer
Appointment to the Board
5 March 2004
Current external commitments
None
Previous roles and relevant experience
Nick is one of the co-founding executives of Rightmove and
became Chief Executive Officer in April 2013 having been Chief
Operating Officer since 2005 and additionally Finance Director
since 2009. His prior experience is in technology consulting with
Accenture.
Peter Brooks-Johnson
Chief Operating Officer
Appointment to the Board
10 January 2011
Current external commitments
None
Previous roles and relevant experience
Peter joined Rightmove in 2006 and became Chief Operating
Officer in April 2013 having been Managing Director of
rightmove.co.uk since 2011 and head of the Agency business since
2008. Prior to joining Rightmove, Peter was a management consultant
with Accenture and the Berkeley Partnership.
Robyn Perriss
Finance Director
Appointment to the Board
30 April 2013
Current external commitments
None
Previous roles and relevant experience
Robyn joined Rightmove in 2007 as Financial Controller with
responsibility for day to day financial operations and was promoted
to the Board as Finance Director in April 2013. She was also
Company Secretary from April 2012 to July 2014 and from June to
October 2016. Robyn qualified as a chartered accountant in South
Africa with KPMG and worked in both audit and transaction services.
Prior to joining Rightmove, Robyn was Group Financial Controller at
the online media business, Auto Trader.
Peter Williams
Senior Independent Non-Executive Director
Appointment to the Board
3 February 2014
Committee membership
Remuneration (Chairman), Audit, Nomination
Current external commitments
Chairman of boohoo.com plc
Chairman of Mister Spex GmbH
Non-executive director of U and I plc
Previous roles and relevant experience
Peter was previously senior independent director of ASOS plc and
Sportech plc, Chairman of Jaeger, held non-executive director roles
in Cineworld Group plc, the EMI group, Blacks Leisure Group plc,
JJB Sports plc, GCap Media plc and Capital Radio Group plc. In his
executive career, Peter was Chief Executive at Alpha Group plc and
prior to that, Chief Executive of Selfridges plc where he also
acted as Chief Financial Officer for over ten years.
Ashley Martin
Non-Executive Director
Appointment to the Board
11 June 2009
Committee membership
Audit (Chairman), Nomination
Current external commitments
Non-executive director of Zegona Communications plc
Previous roles and relevant experience
Ashley qualified as a chartered accountant in 1981 and has a
career in finance spanning 35 years. He was previously Global Chief
Financial Officer of Engine Holding LLC and Group Finance Director
of Rok plc, the building services group, and Group Finance Director
of the media services company, Tempus plc.
Colin Kemp
Non-Executive Director
Appointment to the Board
3 July 2007
Committee membership
Remuneration, Nomination
Current external commitments
Non-executive director of Ellis Whittam (Holdings) Limited
Previous roles and relevant experience
With over 30 years' experience in high street retail banking,
Colin worked for Lloyds Banking Group companies since 1979
including two and a half years on the bank's Retail Executive
Committee, before retiring in July 2016. Between January 2005 and
December 2007, he was Managing Director of Halifax Estate Agencies
Limited. Colin is a Cranfield MBA, an Associate of the Chartered
Institute of Marketing and a Visiting Fellow at Cranfield
University.
Rakhi Goss-Custard
Non-Executive Director
Appointment to the Board
28 July 2014
Committee membership
Audit, Remuneration
Current external commitments
Non-executive director of Kingfisher plc
Non-executive director of Schroders plc
Non-executive director of Intu Properties plc
Non-executive director of Be Heard Group plc
Previous roles and relevant experience
Rakhi was previously Director of UK Media at Amazon to June
2014. She held various other senior positions during her 11-year
tenure at Amazon including Media, Entertainment, General
Merchandise and Book divisions as well as Product Development.
Prior to Amazon, Rakhi previously advised Zappos and held strategy
roles at TomTom and Oliver Wyman.
Jacqueline de Rojas
Non-Executive Director
Appointment to the Board
30 December 2016
Current external commitments
Managing Director UKI - Northern Europe of The Sage Group
plc,
President of techUK
Previous roles and relevant experience
Jacqueline has been employed throughout her career by global
blue-chip software companies. Before joining Sage in 2016, she held
senior positions at Citrix, CA Technologies, McAfee and Ascential
Software. She was a non-executive director of Home Retail Group plc
from 2012 to 2016. Jacqueline is an advisor to the Digital Leaders
Technology Group and a passionate advocate for diversity in the
workplace.
Sandra Odell
Company Secretary
Appointment as officer to the Board
1 November 2016
Current external commitments
None
Previous roles and relevant experience
Sandra is a Fellow of the Institute of Chartered Secretaries and
Administrators. Prior to joining Rightmove, Sandra was Company
Secretary of Quintain, the London property developer, and before
that held various senior company secretarial positions in listed
financial services companies.
GOVERNANCE - Corporate governance report
Introduction
The following sections explain how the Company applies the main
provisions set out in the 2014 UK Corporate Governance Code, (the
Code) issued by the Financial Reporting Council (FRC), as required
by the Listing Rules of the Financial Conduct Authority (FCA) and
meets the relevant information provisions of the Disclosure and
Transparency Rules of the FCA.
The statement of corporate governance covers:
-- the structure and role of the Board and its committees;
-- relations with the Company's shareholders and the Annual General Meeting (AGM); and
-- the reports of the Audit Committee and Nomination Committee
including Board effectiveness and evaluation.
The report of the Remuneration Committee is set out separately
in the Directors' Remuneration Report on pages 53 to 84.
The Group's risk management and internal control framework and
the principal risks and uncertainties are described on pages 18 to
20. The Directors' Report on pages 48 to 51 also contains
information required to be included in this statement of corporate
governance.
Statement of compliance
The Code sets out the principles and provisions relating to good
governance of UK listed companies and can be found on the FRC's
website at https://frc.org.uk.
We are pleased to confirm that, for the year under review, the
Company has complied fully with the principles and provisions of
the Code.
The Board's role
The Board is collectively responsible to shareholders for the
overall direction and control of the Group and has the powers and
duties set out in the Companies Act and the Company's Articles of
Association. The Board delegates certain matters to the Board
committees and delegates the day to day operational aspects of the
business to the executive directors.
During the year, the Board has adopted an updated schedule of
matters requiring Board approval. These include approval of:
-- Rightmove's business strategy;
-- the annual business plan;
-- changes to the Group's capital structure;
-- the capital management and dividend policies;
-- the annual and half year results and shareholder communications;
-- major acquisitions and disposals;
-- appointment and removal of officers of the Company; and
-- the system of internal control and risk management.
The key responsibilities and actions carried out by the Board
during the year are set out below:
Responsibility Specific actions and information received
during the year
--------------- -----------------------------------------------------------------------------------------
Strategy The June Approved Presentation
and direction Board meeting the Group's from a media
was devoted budget for analyst on
to Rightmove's 2017 and the online
strategy its three-year classifieds
and included business marketplace
a discussion plan to 2019 and global
of the potential peer benchmarking
influences,
threats and
opportunities
to Rightmove's
business
model arising
from economic,
regulatory
and other
market changes.
Priority
strategic
initiatives
are featured
for monitoring,
analysis
and discussion
at every
Board meeting
throughout
the year
--------------- ------------------- ----------------------- ------------------- ----------------------
Performance Regular market Regular updates Presentations Housing market
monitoring updates and on business from senior updates
reports about performance management
competitive relative providing
landscape to analyst an update
including consensus on Agency
new business forecasts and New Homes
models and and business business
innovation plan performance
and progress
against the
Rightmove
customer
value equation
--------------- ------------------- ----------------------- ------------------- ----------------------
Shareholder Investor Received Presentation Investor
engagement feedback monthly reports from UBS, consultation
received on shareholder Rightmove's eliciting
via the executive composition corporate feedback
directors and analysis broker explaining on the proposed
throughout of significant the key drivers Remuneration
the year, changes to of the Group's Policy received
particularly the shareholder valuation via the Remuneration
post results register Committee
and investor
roadshows
--------------- ------------------- ----------------------- ------------------- ----------------------
Governance Reviewed Reviewed Briefings Consideration
and risk key risks and approved and presentations of Board
appearing the Group's from senior Strategy
on the risk regulatory management Review externally
register. results announcements covering facilitated
Discussed and Annual a wide range by Korn Ferry
changes in Report of topics including
significant including analysis
risks affecting cyber and of relevant
the business information experience
and considered security and skills
emerging risks, corporate on the Board
risks governance to best support
and 2017 the Group's
Received insurance achievement
reports from renewal programme of its strategic
the Audit objectives
Committee
on the findings
of Rightmove
Assurance
--------------- ------------------- ----------------------- ------------------- ----------------------
People Presentations The Audit The Remuneration Monitoring
and values by senior Committee Committee of Group
managers reported reported employee
throughout on Rightmove on the proposed satisfaction
the year Assurance's executive scores across
to ensure review of Remuneration a range of
the Board's employee Policy criteria
exposure incentivisation
to the breadth arrangements
and depth
of talent
supporting
business
growth
--------------- ------------------- ----------------------- ------------------- ----------------------
There are usually seven or eight scheduled Board meetings each
year including one meeting or away day devoted to consideration of
the Group's strategy. Additional meetings can be arranged at short
notice at the request of any director, if required. In addition to
scheduled Board meetings, there is regular informal dialogue
between all directors.
Directors receive Board papers well in advance of meetings to
allow sufficient time for review and consideration. If any director
raises a concern or challenges any aspect of the business conducted
at a Board meeting, the Company Secretary will ensure their
comments are appropriately recorded in the Board minutes. In
addition to formal Board papers, directors receive monthly
management and financial reports on the operational and financial
performance of the business setting out actual and forecast
financial performance against approved budgets and other key
performance indicators. The Board also receives copies of broker
reports and press releases relating to the Group.
Board committees
The Board has established three principal committees, the Audit
Committee, the Remuneration Committee and the Nomination Committee,
to assist it in the execution of its duties. The Chairman of each
Committee reports on the respective Committee's activities at the
subsequent Board meeting.
The Committees' terms of reference are available on the
Company's corporate website, plc.rightmove.co.uk or by request from
the Company Secretary.
Each of the Committees is authorised, at the Company's expense,
to obtain legal or other professional advice to assist in carrying
out its duties. No person other than a Committee member is entitled
to attend the meetings of these Committees, except by invitation of
the Chairman of that Committee.
Current membership of the Committees is shown on page 37. The
composition of these Committees is reviewed regularly, taking into
consideration the recommendations of the Nomination Committee.
Committee Role and terms of Membership Minimum Committee
reference required number of report
under meetings on pages
the terms per year
of reference
-------------- ------------------------------------------------------------ --------------- ----------- ----------
Reviews and reports
to the Board on:
* Group financial reporting;
* the system of internal control and risk management;
* independence and effectiveness of the external audit
process; and
* the internal audit plan, results and effectiveness o
f
Rightmove Assurance, the outsourced internal audit
function. At least
three
members
who should
Recommends the appointment be
of the external auditors independent
to the Board for approval non-executive
Audit by shareholders directors Three 39 - 44
-------------- ------------------------------------------------------------ --------------- ----------- ----------
Makes recommendations
to the Board on:
* the Remuneration Policy and strategy for executive
directors and senior managers;
* long-term incentive arrangements;
* the design and determination of targets under any
performance-related pay scheme; and
* any major changes in employee benefit structures
with the objective
of ensuring that directors
and employees are
incentivised and fairly
rewarded for their
individual contributions
to the Group's overall At least
performance. Careful three
consideration is given members
to the interests of who should
the shareholders and be
to the financial and independent
commercial health non-executive
Remuneration of the Group directors Two 53 - 84
-------------- ------------------------------------------------------------ --------------- ----------- ----------
Undertakes an annual
review of organisation
and succession planning
and ensures that the At least
membership and composition three
of the Board, including members,
the balance of skills, the majority
remains appropriate of whom
should
Makes recommendations be
for the membership independent
of the Board, Audit non-executive
Nomination and Remuneration Committees directors Two 45 - 47
-------------- ------------------------------------------------------------ --------------- ----------- ----------
Board composition
The Board at the date of this report comprises three executive
directors and six non-executive directors, including the Chairman.
The three executive directors are Nick McKittrick (Chief Executive
Officer), Peter Brooks-Johnson (Chief Operating Officer) and Robyn
Perriss (Finance Director). The non-executive directors are Scott
Forbes (Chairman), Peter Williams (Senior Independent Director),
Ashley Martin, Colin Kemp, Rakhi Goss-Custard and Jacqueline de
Rojas.
Biographical details of all directors at the date of this report
appear on pages 27 to 30 and details of Committee membership appear
on page 37.
Consideration of the Board size and composition is kept under
regular review by the Nomination Committee.
Board changes
As part of the organisational changes announced on 24 February
2017, Nick McKittrick, Chief Executive Officer, will retire from
the Board at the next AGM being 9 May 2017, and Peter
Brooks-Johnson (currently Chief Operating Officer) will become the
Chief Executive Officer from that date. Nick McKittrick will remain
with the Company through to 30 June 2017 to ensure a smooth
transition process.
Colin Kemp will also retire from the Board and relevant
Committees with effect from the AGM date, having served nine years
as a non-executive director.
Jacqueline de Rojas joined the Board on 30 December 2016. All
other directors served throughout the year.
Division of responsibilities
The posts of Chairman and Chief Executive Officer are separate
and there are clear written guidelines to support their division of
responsibilities. The key responsibilities of the Board members are
summarised below:
Chairman Responsible for the leadership
and governance of the Board, including:
* ensuring its effectiveness by creating and managing
constructive relationships between the executive and
non-executive directors;
* ensuring there is ongoing and effective communication
between the Board and its key shareholders; and
* with the assistance of the Company Secretary, setting
the Board's agenda and ensuring that adequate time is
available for discussion and effective decision
making, and that directors receive sufficient,
pertinent, timely and clear information.
------------------- -------------------------------------------------------------
Chief Executive Responsible for the day to day
Officer management of the Group, including:
* the operational and financial performance of the
Group;
* developing the Group's objectives and strategy and
following Board approval, the successful execution of
strategy;
* effective and ongoing communication with
shareholders; and
* chairing the Executive Committee.
------------------- -------------------------------------------------------------
Non-executive The role of the non-executive directors
directors is to:
* constructively challenge the executive directors; and
* monitor the delivery of the strategy within the risk
and control framework set by the Board.
The non-executive directors bring
wide and varied commercial experience
and independent judgement to the
Board and the Committees' deliberations.
The breadth of management, financial
and listed company experience of
the non-executive directors is
described in the biographical details
on pages 27 to 30 and demonstrates
a range of business expertise that
provides the right mix of skills
and experience given the size of
the Group.
------------------- -------------------------------------------------------------
Senior Independent The role of the Senior Independent
Director Director is to:
* act in an advisory capacity to the Chairman;
* deputise for the Chairman if required;
* serve as an intermediary for other directors when
necessary;
* be available to shareholders if they have concerns
which they have not been able to resolve through the
normal channels of the Chairman and Chief Executive
Officer or other executive directors for which such
contact is inappropriate; and
* conduct an annual review of the performance of the
Chairman and, in the event it should be necessary,
convening a meeting of the non-executive directors.
------------------- -------------------------------------------------------------
Company Secretary The Company Secretary:
* monitors compliance with appropriate Board
procedures;
* advises the Board on corporate governance matters;
* assists the Chairman in ensuring that all the
directors have full and timely access to relevant
information; and
* assists the Chairman by organising directors'
induction and training programmes.
The Company Secretary also acts
as Secretary to the Audit, Remuneration
and Nomination Committees.
The appointment and removal of
the Company Secretary is a matter
for Board approval.
------------------- -------------------------------------------------------------
Board diversity
We are committed to a Board comprised of directors from
different backgrounds with diverse and relevant experience,
perspectives, skills and knowledge. We believe that diversity,
including gender diversity, amongst directors contributes towards a
high performing and effective Board and business, so we strive to
maintain the optimal balance. We endorse both a meritocratic Board
appointment process and balanced gender representation on the
Board. As at 31 December 2016, 33% of Board members were female and
following the retirement of Nick McKittrick and Colin Kemp as Board
directors in May 2017, this will rise to 43% with 50:50
representation at an executive director level. We remain committed
to recruiting the best people and appropriate talent for the
business and will seek to recruit qualified directors with an ideal
of achieving as near equivalent gender balance on the Board as
possible.
Board independence
The Code provides that the Board should identify in the Annual
Report each non-executive director that it considers to be
independent. That is, to determine whether the director is
independent in character and judgement and whether there are
relationships or circumstances which are likely to affect, or could
appear to affect, the director's judgement.
The Board reviews non-executive director independence on an
annual basis taking into account such factors as their contribution
to unbiased and independent debate during meetings. The Board
considers that there is an appropriate balance between the
executive and non-executive directors and that all non-executive
directors are fully independent of management and independent in
character and judgement. Colin Kemp completed nine years' service
as a non-executive director in July 2016 and will retire following
the 2017 AGM. The Board does not believe that the period from his
nine-year anniversary to his retirement date will impair Colin
Kemp's independence in character or judgement.
To safeguard their independence, a director is not entitled to
vote on any matter in which they may be conflicted or have a
personal interest. Where necessary, directors are required to
absent themselves from a meeting of the Board while such matters
are being discussed. In cases of doubt, the Chairman of the Board
is responsible for determining whether a conflict of interest
exists.
The Chairman is also the Chairman of another publically listed
company. The executive directors do not hold any other
non-executive directorships or commitments requiring disclosure
under the Code.
Board tenure as at 31 December 2016 Balance of directors as at 31 December 2016
Please refer to the pdf
http://www.rns-pdf.londonstockexchange.com/rns/7347X_-2017-2-23.pdf
Re-election to the Board
Directors are appointed and may be removed in accordance with
the Articles of Association of the Company and the provisions of
the Companies Act. All directors are subject to election at the
first AGM following their appointment and in accordance with the
Code, all directors will seek re-election at the 2017 AGM with the
exception of Nick McKittrick and Colin Kemp, who have notified the
Company of their retirement from the Board as at this date.
Board and Committee membership and attendance
The membership of the Committees of the Board and attendance at
Board and Committee meetings for the year under review are set out
in the table below:
Remuneration Audit Nomination
Board Committee Committee Committee
---------------------- ------- ------------- ------------ -----------
Total meetings 7 6 5 2
---------------------- ------- ------------- ------------ -----------
Scott Forbes 7 4(1) - 2
---------------------- ------- ------------- ------------ -----------
Nick McKittrick 7 - - -
---------------------- ------- ------------- ------------ -----------
Peter Brooks-Johnson 7 - - -
---------------------- ------- ------------- ------------ -----------
Robyn Perriss 7 - - -
---------------------- ------- ------------- ------------ -----------
Colin Kemp 7 6 - 2
---------------------- ------- ------------- ------------ -----------
Ashley Martin 7 1(2) 5 2
---------------------- ------- ------------- ------------ -----------
Peter Williams 7 6 5 2
---------------------- ------- ------------- ------------ -----------
Rakhi Goss-Custard 7 6 5 2(3)
---------------------- ------- ------------- ------------ -----------
(1) The Remuneration Committee Chairman invited the Chairman of
the Board to attend all Remuneration Committee meetings.
(2) The Remuneration Committee Chairman invited Ashley Martin to
attend one Remuneration Committee meeting as a guest for
consideration of bonus and long-term incentive plan performance
targets.
(3) Rakhi Goss-Custard was invited to attend two Nomination
Committee meetings on a guest basis.
In addition to the above meetings, the Chairman conducts
meetings with the non-executive directors without the executive
directors being present when required. Peter Williams, the Senior
Independent Director, chaired a meeting of the non-executive
directors at which the performance of the Chairman was also
reviewed, without the presence of the Chairman.
Indemnification of directors
The Articles of Association of the Company allow for a
qualifying third party indemnity provision between the Company and
its directors and officers, which remains in force at the date of
this report. The Group has also arranged directors' and officers'
insurance cover in respect of legal action against the directors.
Neither our indemnity nor the insurance provides cover in the event
that a director is proven to have acted dishonestly or
fraudulently.
The Group has a Dealing Code setting out the process and timing
for dealing in shares, which is compliant with the Market Abuse
Regulation. The Dealing Code applies to all directors, who are
persons discharging managerial responsibility, and other
insiders.
Shareholder relations
The Board is accountable to shareholders for the performance and
activities of the Group and welcomes opportunities to engage with
shareholders.
Within the terms of the regulatory framework, the directors have
conducted regular dialogue with shareholders through ongoing
meetings with institutional investors and research firms to discuss
strategy and operational and financial performance. Contact in the
UK is principally with the Chief Executive Officer and the Finance
Director. The Chairman attends selected investor meetings in the UK
and the USA. The Senior Independent Director is also available to
shareholders if they wish to supplement their communication, or if
contact through the normal channels is inappropriate.
The Board is kept informed of the views and opinions of those
with an interest in the Company's investors through reports from
the Chief Executive Officer and the Finance Director, as well as
reports from the Company's joint brokers, UBS and Numis.
Shareholders are also kept up to date with the Group's
activities through the half year results statement and Annual
Report and the investor relations section of its website, at
plc.rightmove.co.uk, which provides details of all the directors,
the financial calendar, latest news including financial results,
investor presentations and Stock Exchange announcements.
Annual General Meeting
The AGM provides an opportunity for shareholders to vote on
aspects of the Company's business, meet the directors and ask them
questions. The AGM will be held on 9 May 2017 at the offices of UBS
Limited at 5 Broadgate, London EC2M 2QS.
The Company will arrange for the Annual Report and related
papers to be available on the Company's corporate website at
plc.rightmove.co.uk or posted to shareholders (where requested) at
least 20 working days before the AGM.
The Company continues to comply with the Code with the
separation of all resolutions put to shareholders. The Company
proactively encourages shareholders to vote at general meetings by
providing electronic voting for shareholders who wish to vote
online and personalised proxy cards to all shareholders, ensuring
that all votes are clearly identifiable. The Company presently
takes votes at general meetings on a show of hands on the grounds
of practicality, owing to the limited number of shareholders in
attendance. All proxy votes are counted and the level of proxy
votes, including abstentions, lodged for each resolution are
reported after each resolution and published on the Company's
website.
GOVERNANCE- Corporate governance
Audit Committee report
Dear shareholder
I am pleased to present the 2016 report of the Audit Committee
(the Committee).
This report provides an overview of the principal activities of
the Committee and details how it has discharged its
responsibilities during the year.
The Committee is an essential part of Rightmove's governance
framework to which the Board has delegated oversight of the
accounting, financial reporting and internal control processes, the
outsourced internal audit function and the relationship with the
external auditors. The key responsibilities are set out on page 33
of the Corporate Governance Report.
The Committee has completed a detailed programme of work in 2016
in relation to its remit, including challenge and debate in
relation to the outsourced risk and assurance programme delivered
by PricewaterhouseCoopers LLP (PwC), known as Rightmove Assurance,
and ensuring it is embedded throughout the business.
The Committee has also considered a number of new and emerging
business risks and regulatory requirements. These included a review
of the potential impact on Rightmove of changes in the housing
market environment following the UK's decision to leave the EU, and
a review of the requirements of the Finance Bill 2016 in relation
to the Group's tax strategy together with compliance with the
Senior Accounting Officer Regime, and the reporting requirements
under the Modern Slavery Act 2015.
This report also outlines the significant accounting matters
which received our particular focus during the year. It seeks to
explain why the issues are considered significant and together with
the external auditors' report provides additional context for
understanding the Group's accounting policies and financial
statements for the year.
We were delighted to receive communication from the Financial
Reporting Council (FRC) that following a review of our 2015 Annual
Report and financial statements, there were no queries or issues
arising.
Looking forward to the next 12 months, the Committee will
continue to focus on the audit, assurance and risk processes within
the Group, including specific reviews in relation to cyber security
risk, quality of member data and data privacy.
I will be available at the AGM to answer any questions about the
work of the Committee.
A copy of the terms of reference of the Committee can be found
on the Company's website at: plc.rightmove.co.uk.
Ashley Martin
Chairman of the Audit Committee
Composition and attendance at meetings
Committee members Number of meetings attended
------------------------- ----------------------------
Ashley Martin (Chairman
of the Committee) 5
------------------------- ----------------------------
Peter Williams 5
------------------------- ----------------------------
Rakhi Goss-Custard 5
------------------------- ----------------------------
The Committee consists entirely of independent non-executive
directors, the biographical details of whom can be found on pages
27 to 30. There has been no change to the composition of the
Committee during the year. The Board is satisfied that both Ashley
Martin and Peter Williams have recent and relevant financial skills
and experience. Both have professional qualifications with the
Institute of Chartered Accountants of England and Wales. We
consider that every member of the Committee has competence relevant
to Rightmove's business and the sector in which we operate.
The quorum for meetings of the Committee is two members.
Appointments to the Committee are for a period of up to three
years, extendable by no more than two additional three-year
periods, so long as members continue to be independent.
The Finance Director and the Head of Finance are normally
invited to attend the meetings as well as the external auditor,
KPMG and the internal auditor, PwC. Other relevant people from the
business are also invited to attend certain meetings in order to
provide a deeper level of insight into certain key issues and
developments. The Committee regularly meets separately with the
external and internal auditors without others being present.
The Committee Chairman briefs the Board on the matters discussed
at each meeting and minutes of the Committee meetings are
circulated to the Board once approved. The effectiveness of the
operation of the Committee was reviewed as part of the
effectiveness review of the Board and its committees in December
2016, details of which can be found in the Nomination Committee
report on pages 45 to 47. Each Board member responded to key
questions on Board performance and commented generally on the
performance of Board Committees. The Board received positive
feedback on the Committee's performance, in particular, noting the
improved engagement between Rightmove Assurance and the business
during the year.
Financial reporting
The primary role of the Committee in relation to financial
reporting is to review with the assistance of both management and
the external auditor the half year results statement and the Annual
Report and financial statements relating to the Group's financial
performance.
The key significant area of judgement considered by the
Committee in relation to the 2016 Annual Report is revenue
recognition; details of how this was addressed by the Committee are
provided below.
Revenue recognition
The key area of judgement is the timing of revenue recognition
in relation to the billing of subscription fees and additional
products and services and the accounting for any membership offers
to customers with discounted or free periods. This was a prime area
of audit focus with KPMG performing detailed analytical procedures,
including using computer assisted audit techniques, throughout the
year on amounts billed to the two largest customer groups (Agency
and New Homes), together with the billing of Overseas customers.
KPMG investigated anomalies and outliers identified and provided
detailed reporting to the Committee in this regard. The Committee
discussed any reported anomalies highlighted by KPMG ensuring that
adequate explanations were received from management in line with
their business understanding. A separate review of billing and
controls within the non-core revenue streams was also undertaken by
Rightmove Assurance. In addition, the Committee received regular
updates from management discussing current customer offers and
their impact on revenue recognition.
The Committee was satisfied with the explanations provided and
conclusions reached.
Fair balanced and understandable
At the request of the Board, the Committee was asked to consider
whether the 2016 Annual Report and accounts, taken as a whole, is
fair, balanced and understandable and provides the necessary
information for shareholders to assess the Group's performance,
business model and strategy.
The Committee was provided with an early draft of the Annual
Report in order to assess the strategic direction and key messages
being communicated. Feedback was provided by the Committee in
advance of the February Board meeting, highlighting any areas where
the Committee believed further clarity was required. The draft
report was then amended to incorporate this feedback prior to being
tabled at the Board meeting for final comment and approval.
When forming its opinion, the Committee reflected on the
information it had received and its discussions throughout the
year. In particular, the Committee considered:
Is the report
fair? * Is the whole story presented and has any sensitive
material been omitted what should have been included?
* Are key messages in the narrative aligned with the
KPIs and are they reflected in the financial
reporting?
* Is the reporting on the business areas in the
narrative reporting consistent with the financial
reporting in the financial statements?
----------------- -------------------------------------------------------------
Is the report
balanced? * Do you get the same messages when reading the front
end and back end of the Annual Report independently?
* Are the alternative performance measures explained
clearly with appropriate prominence?
* Are the key judgements referred to in the narrative
reporting and significant issues reported in this
Committee Report consistent with disclosures of key
estimation uncertainties and critical judgements set
out in the financial statements?
* How do these compare with the risks that KPMG are
planning to include in their Auditors' Report?
----------------- -------------------------------------------------------------
Is the report
understandable? * Is there a clear and cohesive framework for the
Annual Report?
* Are the important messages highlighted appropriately
throughout the Annual Report?
* Is the Annual Report written in easy to understand
language and are the key messages clearly drawn out?
* Is the Annual Report free of unnecessary clutter?
----------------- -------------------------------------------------------------
Following its review, the Committee is of the opinion that the
2016 Annual Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Group's position, performance, business
model and strategy.
Financial Reporting Council
During the year, Rightmove received a letter from the FRC to
confirm that the Annual Report for the year ended 31 December 2015
had been subject to review by its Conduct Committee, which is
responsible for reviewing and investigating the annual accounts,
directors' and strategic reports of UK public companies. The letter
from the FRC communicated that following this review, no questions
or queries have been raised. The FRC noted that its role was not to
verify information, but to consider compliance with reporting
requirements, and it did not take responsibility for reliance on
its letter by any party.
Internal audit
The Group established an internal audit function during 2015
known as Rightmove Assurance which is outsourced to PwC. The aim of
Rightmove Assurance is to provide independent and objective
assurance on the effectiveness of internal control, risk management
and governance processes. This includes assurance that underlying
controls and processes are working effectively, as well as
specialist reviews that focus on emerging risks in new and evolving
areas of the business.
During the year and in accordance with the approved internal
audit plan, Rightmove Assurance carried out work in the following
areas:
-- financial controls: review of the risks and controls in
relation to the revenue and billing processes within our other
revenue streams, being all business units other than Agency and New
Homes;
-- business continuity planning and Crisis Response: a
comprehensive review and update of plans for the Milton Keynes and
London offices, and testing of business continuity readiness;
-- review of non-financial reporting KPIs: including comparisons
with public reporting by other quoted peers;
-- reward and incentivisation: an assessment of the structure
and philosophy of reward within the Group for employees excluding
directors; and
-- Senior Accounting Officer (SAO) regime: review of Rightmove's
tax risk framework in advance of Rightmove entering the SAO regime
in 2017.
Reports setting out the principal findings of the Rightmove
Assurance reviews and agreed management actions were discussed by
the Committee.
Effectiveness of the internal audit process
The work of Rightmove Assurance has provided a key additional
source of assurance and support to management and the Audit
Committee on the effectiveness of internal controls as well as
providing guidance and recommendations to further enhance the
internal control environment, and provide specialist insight into
areas of change in the business.
The first review by the Committee of the effectiveness of the
Rightmove Assurance function took place in early 2016. The
evaluation was led by the Committee Chairman and included
consideration of stakeholder feedback on the quality of Rightmove
Assurance activity, including from PwC themselves. The evaluation
concluded that Rightmove Assurance had added value to the business
in its first year in providing further assurance on financial
controls and increasing the robustness of the risk review process.
It was also seen as helpful in setting priorities for management
and allowing access to specialist input that Rightmove does not
have in-house. The evaluation had a number of recommendations for
PwC and Rightmove that were incorporated into the 2016 Rightmove
Assurance plan.
External audit
The Committee has primary responsibility for overseeing the
relationship with, and performance of, the external auditor.
KPMG LLP was re-appointed as the Group's auditor in 2013
following an audit tender and in accordance with the EU Audit
Directive implemented in 2016, the Group will be required to put
the external audit contract out to tender by 2023. The external
auditor is required to rotate the audit partner responsible for the
Group audit every five years. The current lead partner, Karen
Wightman, has been in place for four years, and therefore the
Committee and management will work with KPMG to ensure a smooth
transition to a new audit partner, commencing during the 2017 audit
process.
The Committee approved the fees of KPMG for the year as set out
in Note 6 of the financial statements.
Effectiveness of the external audit process
The effectiveness of the external audit process is dependent on
a number of factors. These include the quality, continuity,
experience and training of audit personnel, business understanding,
technical knowledge and the degree of rigour applied in the review
processes of the work undertaken, together with appropriate audit
risk identification at the start of the audit cycle.
The Committee evaluated the effectiveness of the audit process
in addressing these matters together with input from management.
Areas the Committee considered in this review included the quality
of audit planning and execution, engagement with the Committee and
management, quality of reporting and capability and experience of
the audit team. For the 2016 financial year, the Committee was
satisfied that there had been appropriate focus and challenge on
the primary areas of audit risk and concluded that the performance
of KPMG remained efficient and effective.
Non-audit services
The Committee discussed its responsibilities to safeguard audit
objectivity and independence as well as the needs of the business
and agreed that it was practical in certain limited cases for the
auditor to be assigned to other non-audit project work due to their
knowledge and expertise of the business.
The Committee approved an updated non-audit fee policy in
November 2015 in advance of the EU Audit Directive implemented in
June 2016, and adopted by the FRC in its Revised Ethical Standard
2016. Following the introduction of updated FRC guidelines, the
non-audit fee policy has been updated to give management the
authority to incur permitted non-audit fees of up to GBP15,000 in
any financial year without the prior approval of the Committee.
Thereafter all additional fees will be referred to the Committee in
advance, subject to a cap on permitted non-audit fees of 70% of the
average audit fees over the three preceding financial years.
Permitted non-audit services are any services which are not
identified as prohibited services in the FRC Revised Ethical
Standard 2016.
The level of non-audit fees as a proportion of the audit fee has
typically been very low at Rightmove. The non-audit services
provided by KPMG have historically related to tax advisory services
which are now prohibited, and as a result, PwC were appointed as
Rightmove's tax advisors in 2016. Details of the non-audit fee
services provided by KPMG can be found in Note 6 of the financial
statements.
Additional areas of focus of the Committee during 2016
The Committee considers new and emerging risks as the business
and regulatory environment evolves. This resulted in the following
items being discussed by the Committee during 2016:
-- housing market: consideration of the potential impact on
Rightmove of the greater level of uncertainty in the housing market
following the vote to leave the EU;
-- data protection, and use of consumer personal data;
-- Modern Slavery Act 2015: review of the proposed steps to be
taken prior to the publication of a Modern Slavery Act statement
and approval of the draft statement; and
-- consideration of the adoption of IFRS 15 Revenue from
Contracts with Customers on the Group's financial statements.
Internal controls
The Board has overall responsibility for the Group's system of
internal controls and has established a framework of financial and
other controls which is periodically reviewed in accordance with
the FRC Internal Control: Guidance to Directors publication for its
effectiveness.
The Board has taken, and will continue to take, appropriate
measures to ensure that the chances of financial irregularities
occurring are reduced as far as reasonably possible by improving
the quality of information at all levels in the Group, fostering an
open environment and ensuring that financial analysis is rigorously
undertaken. Any system of internal control is designed to manage
rather than eliminate the risk of failure to achieve business
objectives and can only provide reasonable and not absolute
assurance against material misstatement or loss.
The Group's management has established the procedures necessary
to ensure that there is an ongoing process for identifying,
evaluating and managing the significant risks to the Group. These
procedures have been in place for the whole of the financial year
ended 31 December 2016 and up to the date of the approval of these
financial statements and they are reviewed regularly.
The key elements of the system of internal control are:
-- major commercial, strategic, competitive and financial risks
are formally identified, quantified and assessed and discussed with
the executive directors, after which they are considered by the
Board;
-- a comprehensive system of planning, budgeting and monitoring
Group results. This includes monthly management reporting and
monitoring of performance against both budgets and forecasts with
explanations for all significant variances;
-- an organisational structure with clearly defined lines of
responsibility and delegation of authority;
-- clearly defined policies for capital expenditure and
investment, including appropriate authorisation levels, with larger
capital projects, acquisitions and disposals requiring Board
approval;
-- a comprehensive disaster recovery and business continuity plan based upon:
-- co-hosting of the rightmove.co.uk platforms across three
separate locations which is regularly tested and reviewed; and
-- the capability for employees to remote work from home or a
third party location in the event of a loss of one of our premises
which has been tested for the Milton Keynes office during the
year;
-- regular testing of the security of the IT systems and
platforms, regular backups of key data and ongoing threat
monitoring to protect against the risk of cyber attack;
-- a treasury function which manages cash flow forecasts and
cash on deposit and counterparty risk; and
-- whistleblowing and bribery policies of which all employees
are made aware, to enable concerns to be raised either with line
management or, if appropriate, confidentially outside their line
management.
Through the procedures outlined above, the Board, with advice
from the Committee, has considered all significant aspects of
internal control for the year and up to the date of this Annual
Report. No significant failings or weaknesses were identified
during this review. However, had there been any such failings or
weaknesses, the Board confirms that necessary actions would have
been taken to remedy them.
GOVERNANCE - Corporate governance report
Nomination Committee report
Dear shareholder
I am pleased to present the 2016 report of the Nomination
Committee (the Committee).
The Committee's role is to regularly review the structure, size
and composition of the Board with the objective of matching the
evolving skills, knowledge and experience required by the business.
The Committee seeks to optimise the Board's performance and ensure
the continued ability of the Group to compete effectively in the
marketplace, and make recommendations to the Board with regard to
any changes.
A copy of the terms of reference of the Committee can be found
on the Company's website at: plc.rightmove.co.uk. These were
updated during the year with the key responsibilities as
follows:
Board composition and appointments
* Review the structure, size and composition of the
Board and make recommendations on any changes
* Identify and nominate suitable candidates to fill
Board vacancies
* Recommend the membership of the Audit and
Remuneration Committees
------------------------------------- ------------------------------------------------------------
Organisation and succession planning
* Review the organisation and succession plan in order
to identify skills and expertise for the Group to
meet its strategic objectives
* Make recommendations to the Board concerning plans
for succession for both executive and non-executive
directors and, in particular, for the key roles of
Chairman and Chief Executive Officer
------------------------------------- ------------------------------------------------------------
Board evaluation
* Evaluate the performance of the Board both
collectively and individually against agreed
performance criteria
* Determine the level of Board effectiveness based on
the assessment and recommend any actions to improve
performance
------------------------------------- ------------------------------------------------------------
In 2016 the Committee reviewed the organisation and succession
plans, recommended the appointment of a new non-executive director
and conducted an internal Board and Committee evaluation. Further
details of the Board evaluation can be found on pages 46 to 47 of
this report.
Jacqueline de Rojas was appointed as a non-executive director on
30 December 2016, following an external search by Korn Ferry
International (Korn Ferry). The Board currently consists of nine
directors including six non-executive directors, five of which are
considered to be independent.
Following the retirement of Nick McKittrick (Chief Executive
Officer) and Colin Kemp (non-executive director) at the 2017 AGM,
the Board will comprise seven directors (two executive directors
and five non-executive directors).
I will be available at the AGM to answer any questions about the
work of the Committee.
Scott Forbes
Chairman of the Nomination Committee
Composition and attendance at meetings
The following non-executive directors are members of the
Committee. The Committee met twice during the year and attendance
at the meetings is shown below:
Committee members Number of meetings attended
------------------------ ----------------------------
Scott Forbes (Chairman
of the Committee) 2
------------------------ ----------------------------
Peter Williams 2
------------------------ ----------------------------
Ashley Martin 2
------------------------ ----------------------------
Colin Kemp 2
------------------------ ----------------------------
Rakhi Goss-Custard and Nick McKittrick attended both meetings by
invitation.
Membership
The Committee is comprised entirely of non-executive directors,
whose biographical details can be found on pages 27 to 30. As at 31
December 2016 three out of the four members of the Committee were
considered by the Board to be independent. The quorum for meetings
of the Committee is two members. At the request of the Committee
Chairman, the Chief Executive Officer is normally invited to attend
the meeting to discuss the annual organisation and succession
plan.
The Chairman of the Company may not chair the Committee in
connection with any discussion about the appointment of his
successor. In these circumstances, the Senior Independent Director
will take the chair.
Appointments are for a period of up to three years, extendable
by no more than two additional three-year periods, so long as
Committee members continue to be independent.
Principal activities of the Committee during 2016
During the year the Committee has:
-- reviewed the Board composition;
-- reviewed the Board committees' composition;
-- approved the plans for the organisation and succession of the
executive directors and senior management;
-- agreed the process for and considered actions based upon the
findings of the Board evaluation;
-- recommended the appointment of a non-executive director;
-- considered the diversity of the Board and updated the policy
regarding gender diversity on the Board; and
-- conducted an annual review of its terms of reference.
Board induction and training
All new non-executive directors joining the Board undertake a
tailored induction programme to meet their individual needs. This
covers for example: the strategic challenges and opportunities
facing the Group, financial performance, operational activities
(including meeting with members of the senior management team and
spending a day on the road with a sales director meeting our
customers), the role of the Board including the matters reserved to
it for approval, and the responsibilities of the Board Committees.
New directors receive a comprehensive induction pack of corporate
information and a briefing from the Company Secretary covering
corporate governance, Group policies and relevant regulations.
Individual Board members have access to training and can seek
the advice from independent professional advisers, at the Group's
expense, where specific expertise or training is required in
furtherance of their duties.
Board effectiveness and evaluation
The Board is committed to undertaking annual reviews of its own
performance and also the performance of its Committees and
individual directors.
The Committee considered the conclusions of the Board Strategy
Review externally facilitated by Korn Ferry in 2015, and agreed a
candidate profile for a new non-executive director to join the
Board in advance of Colin Kemp's retirement following the 2017 AGM.
The Committee recommended the appointment of Jacqueline de Rojas as
a recognised technology leader with relevant customer engagement
experience and an advocate for increased opportunities for women
and diversity in both the boardroom and technology workplace. The
Committee has also agreed a candidate profile and initiated a
search by Korn Ferry for a non-executive director with suitable
skills and experience to replace Ashley Martin, when he retires
from the Board and as Audit Committee Chairman in May 2018.
The Board has undertaken an internal self-assessment during
2016. Directors were invited to provide feedback via the Company
Secretary on Board and Committee performance and answer key
questions relating to the Board's strengths, improvements during
the year and which business risks and development opportunities
should receive more focus. The Committee and Board discussed the
feedback at the Committee meeting in December 2016 and recommended
a number of actions and areas of focus for the Board during 2017.
It was agreed that the Board has benefited from access to members
of senior management and such interaction should continue at future
board meetings. Additionally, the Board seeks more opportunities to
enhance its understanding of the customer perspective.
The evaluation concluded that the Board and its Committees
continue to operate effectively with strong individual
contributions from executive directors, open, constructive debate
and a good balance of support and challenge from the non-executive
directors.
An internally facilitated review of the performance of the Board
and its Committees will again be conducted during 2017.
GOVERNANCE - Directors' report
The directors submit their report together with the audited
financial statements for the Company and its subsidiary companies
(the Group) for the year ended 31 December 2016.
Rightmove plc (the Company) is incorporated as a public limited
company registered in England number 6426485 with a registered
office at Turnberry House, 30 Caldecotte Lake Drive, Caldecotte,
Milton Keynes MK7 8LE.
Pages 48 to 51, comprise the Directors' Report that has been
drawn up and presented in accordance with English company law and
the liabilities of the directors in connection with the report
shall be subject to the limitations and restrictions provided by
such law.
Strategic Report
The Strategic Report can be found on pages 1 to 26. This report
sets out the development and performance of the Group's business
during the financial year, the position of the Group at the end of
the year and a description of the principal risks and uncertainties
facing the Group.
Dividend
An interim dividend of 19.0p (2015: 16.0p) per ordinary share
was paid in respect of the half year period on 4 November 2016, to
shareholders on the register of members at the close of business
on
7 October 2016. The directors are recommending a final dividend
for the year of 32.0p (2015: 27.0p) per ordinary share, which
together with the interim dividend, makes a total for the year of
51.0p (2015: 43.0p), amounting to GBP29,696,000 (2015:
GBP25,547,000). Subject to shareholders' approval at the Annual
General Meeting (AGM) on 9 May 2017, the final dividend will be
paid on 2 June 2017 to shareholders on the register of members at
the close of business on 5 May 2017.
Share capital
The shares in issue, including 2,271,725 shares held in treasury
(2015: 2,322,314) at the year-end amounted to 95,490,266 (2015:
97,741,977) ordinary shares of GBP0.01, with a nominal value of
GBP954,902 (2015: GBP977,419). The holders of ordinary shares are
entitled to receive dividends as declared from time to time, and
are entitled to one vote per share at general meetings of the
Company. Movements in the Company's share capital and reserves in
the year are shown in Note 22 and Note 23 to the financial
statements. Information on the Group's share-based incentive
schemes is set out in Note 24 to the financial statements. Details
of the share-based incentive schemes for directors are set out in
the Directors' Remuneration Report on pages 53 to 84.
Share buyback
The Company's share buyback programme continued during 2016. Of
the 15% authority given by shareholders at the 2016 AGM, a total of
2,251,711 (2015: 2,251,340) ordinary shares of GBP0.01 each were
purchased in the year to 31 December 2016, being 2.4% (2015: 2.3%)
of the shares in issue (excluding shares held in treasury) at the
time the authority was granted. The average price paid per share
was GBP39.12 (2015: GBP33.79) with a total consideration paid
(excluding all costs) of GBP88,083,000 (2015: GBP76,071,000). Since
the introduction of the new parent company in January 2008, a total
of 36,415,142 shares have been purchased of which 2,271,725 are
held in treasury with the remainder having been cancelled. A
resolution seeking to renew this authority will be put to
shareholders at the AGM on 9 May 2017.
Shares held in trust
As at 31 December 2016, 343,275 (2015: 386,057) ordinary shares
of GBP0.01 each in the Company were held by The Rightmove
Employees' Share Trust (EBT) for the benefit of Group employees.
These shares had a nominal value at 31 December 2016 of GBP3,433
(2015: GBP3,861) and a market value of GBP13,398,000 (2015:
GBP15,925,000). The shares held by the EBT may be used to satisfy
share-based incentives for the Group's employee share plans. During
the year, 50,082 (2015: 184,842) shares were transferred to Group
employees following the exercise of share-based incentives.
Additionally, 20,250 shares were purchased by the EBT for transfer
to the Rightmove Share Incentive Plan Trust (SIP). The terms of the
EBT provide that dividends payable on the shares held by the EBT
are waived.
As at 31 December 2016, 50,150 (2015: 37,800) ordinary shares of
GBP0.01 each in the Company were held by the SIP for the benefit of
Group employees. These shares had a nominal value at 31 December
2016 of GBP502 (2015: GBP378) and a market value of GBP1,957,000
(2015: GBP1,559,000). The shares held by the SIP are awarded as
free shares to eligible employees in January of each year and are
held in trust for a period of three years before an employee is
entitled to take ownership of the shares. During the year, 600
(2015: 500) shares were released early from the SIP in relation to
good leavers and retirees under the SIP rules.
Substantial shareholdings
As at the date of this report, the following beneficial
interests in 3% or more of the Company's issued ordinary share
capital (excluding shares held in treasury) on behalf of the
organisations shown in the table below, had been notified to the
Company pursuant to Rule 5.1 of the Disclosure Guidance and
Transparency Rules. The information provided below was correct as
at the date of notification, where indicated this was not in the
current financial year. It should be noted that these holdings are
likely to have changed since notified to the Company. However,
notification of any change is not required until the next
applicable threshold is crossed.
Shareholder Nature of holding Total voting % of total
rights voting rights(1)
--------------------- ------------------- ------------- ------------------
BlackRock Inc(2) Indirect 7,761,241 8.3%
Contracts for 1,844,685 2.0%
difference(CFD)
Stock Lending 702,740 0.8%
--------------------- ------------------- ------------- ------------------
Marathon Asset
Management
LLP(3) Indirect 5,930,755 6.4%
--------------------- ------------------- ------------- ------------------
Baillie Gifford
& Co(3) Indirect 5,873,614 6.3%
--------------------- ------------------- ------------- ------------------
Axa Investment
Managers SA(3) Indirect 5,510,468 5.9%
--------------------- ------------------- ------------- ------------------
Standard Life Direct 831,055 0.9%
Investments(3)
Indirect 4,000,946 4.3%
--------------------- ------------------- ------------- ------------------
Caledonia (Private)
Investments
Pty Limited(3) Direct 2,905,192 3.1%
--------------------- ------------------- ------------- ------------------
(1) The above percentages are based upon the voting rights share
capital (being the shares in issue less shares held in treasury) of
93,119,831 as at 24 February 2017.
(2) Date of notification was 13 February 2017.
(3) Date of notification preceded the 2016 financial year.
Directors
The directors of the Company as at the date of this report are
named on pages 27 to 30 together with their profiles.
The Articles of Association of the Company require directors to
submit themselves for re-appointment where they have been a
director at each of the preceding two AGMs and were not appointed
or re-appointed by the Company at, or since, either such meeting.
Following the provisions of the UK Corporate Governance Code, all
directors who have served during the year and remain a director as
at 31 December 2016 will retire and offer themselves for
re-election at the forthcoming AGM with the exception of Nick
McKittrick and Colin Kemp, who have notified the Company of their
retirement from the Board as at this date.
Jacqueline de Rojas will offer herself for election, this being
her first AGM following her appointment to the Board as
non-executive director on 30 December 2016.
The Board is satisfied that the directors retiring and standing
for re-election are qualified for re-appointment by virtue of their
skills, experience and contribution to the Board. The executive
directors have service contracts with the Company which can be
terminated on 12 months' notice. The appointments for the
non-executive directors can be terminated on three months'
notice.
The interests of the directors in the share capital of the
Company as at the date of this report, the directors' total
remuneration for the year and details of their service contracts
and Letters of Appointment are set out in the Directors'
Remuneration Report on pages 53 to 84. At the date of this report
all of the executive directors were deemed to have a non-beneficial
interest in 343,275 ordinary shares of GBP0.01 each held by the
EBT.
Research and development
The Group undertakes research and development activity in order
to develop new products and to continually improve the existing
property platforms. Further details are disclosed in Note 2 to the
financial statements on page 98.
Political donations
During the year the Group did not make any donations to any
political party or other political organisation and did not incur
any political expenditure within the meanings of sections 362 to
379 of the Companies Act 2006.
Annual General Meeting
The AGM of the Company will be held at the offices of UBS
Limited at 5 Broadgate, London, EC2M 2QS on 9 May 2017 at 10am. The
Notice of Annual General Meeting will be published in March
2017.
The resolutions being proposed at the 2017 AGM are general in
nature, including the renewal for a further year of the limited
authority of the directors to allot the unissued share capital of
the Company and to issue shares for cash other than to existing
shareholders (in line with the Pre-Emption Group's Statement of
Principles). A resolution will also be proposed to renew the
directors' authority to purchase a proportion of the Company's own
shares. The Company will again seek shareholder approval to hold
general meetings (other than AGMs) at 14 days' notice. Resolutions
will be proposed to renew these authorities, which would otherwise
expire at the 2017 AGM.
Additional items of special business for the 2017 AGM are
resolutions seeking shareholder approval for the Rightmove 2017
Deferred Share Bonus Plan (DSP) and amendment and renewal of the
Rightmove 2008 Sharesave Plan (Sharesave). The DSP has operated
since 2009 as an incentive for executive directors and certain
senior employees, using shares purchased by EBT in the market.
Shareholder approval is required to allow the use of Treasury or
new issue shares. The Sharesave has operated since 2008 and enables
all Rightmove employees to save for three years and purchase shares
in the Company at a discounted price under HMRC approved rules.
Shareholder approval is required to amend and renew the Sharesave
for a further ten years.
Auditor
KPMG LLP has confirmed its willingness to continue in office as
auditor of the Group. In accordance with section 489 of the
Companies Act 2006, separate resolutions for the re-appointment of
KPMG LLP as auditor of the Group and for the Audit Committee to
determine the auditor's remuneration will be proposed at the 2017
AGM.
Audit information
So far as the directors in office at the date of signing of the
report are aware, there is no relevant audit information of which
the auditor is unaware and each such director has taken all
reasonable steps to make themselves aware of any relevant audit
information and to establish that the auditor is aware of that
information.
Greenhouse gas emissions
Our report of greenhouse gas emissions in line with UK mandatory
reporting regulation is provided in the Corporate Responsibility
section of the Strategic Report on pages 25 to 26.
Fair, balanced and understandable
The Board has concluded that the 2016 Annual Report is fair,
balanced and understandable and provides the necessary information
for shareholders and other readers of the accounts to assess the
Group's position and performance, business model and strategy.
Responsibility statement of the directors in respect of the
annual financial report
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the consolidation
taken as a whole; and
-- the management report required by DTR 4.1.8R (contained in
the Strategic Report and the Directors' Report) includes a fair
review of the development and performance of the business and the
position of the Company and the undertakings included in the Group
taken as a whole, together with a description of the principal
risks and uncertainties they face.
Signed on behalf of the Board:
Nick McKittrick Robyn Perriss
Chief Executive Officer Finance Director
24 February 2017
GOVERNANCE- Statement of directors' responsibilities
The directors are responsible for preparing the Annual Report
and the Group and parent Company financial statements in accordance
with applicable law and regulations.
Company law requires the directors to prepare Group and parent
Company financial statements for each financial year. Under that
law they are required to prepare the Group financial statements in
accordance with IFRSs as adopted by the EU and applicable law and
have elected to prepare the parent company financial statements on
the same basis.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and parent Company and of
their profit or loss for that period. In preparing each of the
Group and parent Company financial statements, the directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with IFRSs as adopted by the EU; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the parent
Company will continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the parent Company and enable them
to ensure that its financial statements comply with the Companies
Act 2006. They have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of the Group
and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also
responsible for preparing a Strategic Report, Directors' Report,
Directors' Remuneration Report and Corporate Governance Statement
that complies with that law and those regulations.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
GOVERNANCE - Directors' remuneration report
Annual statement by the Chairman of the Remuneration
Committee
Dear Shareholder
I am pleased to present our Directors' Remuneration Report for
Rightmove (the Company) together with its subsidiary companies (the
Group) for the year ended 31 December 2016.
The report is divided into two sections, the Remuneration Policy
Report and the Annual Report on Remuneration. As required by the
remuneration regulations, you will be asked to vote separately on
these two reports at our AGM on 9 May 2017. The Remuneration
Policy, which has been subject to review this year by the
Remuneration Committee (the Committee) and consultation with our
shareholders, is set out on pages 57 to 67. This year we have
introduced a section called 'Remuneration at a glance', to provide
our shareholders with a summary of the Company's performance for
2016 and proposed remuneration arrangements for 2017.
Performance and reward
The Committee considers that the remuneration of the executive
directors appropriately and fairly reflects the performance of the
Group. As described in the Strategic Report, our 2016 results show
another year of strong growth in organic revenue and underlying
operating profit(1) . The increase in underlying operating
profit(1) achieved this year is particularly strong in light of
uncertainties influencing the general market place and once again
demonstrates the strength of the Rightmove business model and brand
and the effectiveness of our management team.
In accordance with the Remuneration Policy, the Committee has
reviewed achievement against the bonus plan objectives for 2016 and
recommended an annual bonus payment of 92%. This echoes the strong
growth in revenue and underlying operating profit(1) of 15%, our
continued market leadership in audience and encouraging growth in
Other revenue, albeit not at the maximum opportunity. We were also
delighted that the employee engagement target was met in full.
Overall, performance for the year significantly outperformed the
business plan and the Committee was therefore satisfied that it was
appropriate to pay 92% of the maximum bonus.
Turning to the Group's longer-term performance, which continues
to reflect the successful implementation of its growth strategy
over the last three financial years, the 2014 Performance Share
Plan awards (measuring performance from 1 January 2014 to 31
December 2016) will vest in full in March 2017 as a result of
delivering underlying basic EPS(2) growth of 76% and TSR growth of
53% over the performance period, which exceeded the respective
growth targets set of 70% and FTSE 250 Index +25% over the
three-year period. The Committee tested the performance conditions,
which were set at the beginning of the performance period, and
determined that the Group had outperformed the maximum targets. It
was therefore satisfied that the awards should vest in full.
Remuneration policy
In 2016, the Committee conducted a full review of the executive
Remuneration Policy, which was last approved by shareholders in
2014.
The review indicated that the overall policy, which provides
below market fixed pay (base salary, pension and benefits) and
above market variable pay opportunity (short and long-term
incentives) for outstanding performance, remains fit for purpose in
this dynamic, growth-orientated business. However, this policy has
resulted in levels of fixed pay falling further below market levels
than the Committee felt was appropriate and, as a consequence,
longer term incentives which are broadly in line with the market as
a percentage of salary, have also fallen below market norms. The
Committee therefore considers that an adjustment to levels of fixed
pay is appropriate to ensure that the current policy continues to
effectively reward and incentivise our executive directors and
senior management team to deliver sustainable performance in a
growth-orientated business.
The Committee consulted the Company's major shareholders,
together holding over 50% of Rightmove shares, for their views on
the new policy, including salary proposals for 2017. Our
shareholders were overwhelmingly supportive of the proposed
changes, subject to some useful constructive feedback, which has
been incorporated into the proposed policy. The key elements of the
Remuneration Policy are summarised in 'Remuneration at a glance' on
pages 55 to 56 and detailed in the Remuneration Policy Report on
pages 57 to 67.
Details of the changes to the salaries of the executive
directors are set out on page 69. In summary, increases of 3% in
excess of the average of Rightmove's employees were awarded to the
CEO and COO and an increase of 11.8% above that of the workforce
was awarded to the Finance Director. These increases were
introduced in January 2017 and reflect the increase in size and
complexity of each role and, in the case of the Finance Director,
that on appointment her salary was set significantly below the
Committee's assessment of an appropriate rate for the role and the
performance and capability that she has demonstrated as she has
gained experience in the role.
The proposed Remuneration Policy will also incorporate some
minor modifications to bring it in line with current market and
best practice and is expected to operate for three-years from
shareholder approval in May 2017.
The Committee's objective is to retain a remuneration framework
that rewards and incentivises our management team to deliver
Rightmove's longer term strategy with a clear emphasis on
performance-related pay to reflect the culture of the Group.
Following the proposed changes, the Remuneration Policy will
continue to provide below market levels of fixed pay with above
market levels of variable pay opportunity, subject to the
achievement of challenging performance measures linked to the Group
KPIs. Variable pay is geared toward long-term sustainable
performance, with a high level of annual bonus deferral into
shares, long-term incentive awards and higher share ownership
guidelines.
We are committed to maintaining an open and transparent dialogue
with shareholders. We have valued the engagement with, and support
of, shareholders and we remain focused on disclosing clearly how
much our executive directors earn and how this is linked closely to
performance.
CEO retirement
On 23 February 2017, Nick McKittrick notified the Board of his
intention to retire as a director and Chief Executive Officer
following the AGM on 9 May 2017. A summary of the remuneration
arrangements in relation to his retirement are set out on pages 83
to 84.
Peter Williams
Chairman of the Remuneration Committee
(1) Before share-based payments and NI on share-based
incentives
(2) Before share-based payments and NI on share-based incentives
with no related adjustment for tax
Remuneration at a glance
2016 Financial Revenue Underlying Returns to
Performance operating shareholders
+15% profit before GBP131.3m
tax(1)
+15%
--------------------------- ---------------------------- ----------------------------- ----------------------------
Long-term incentive plan - outcome against maximum
targets: 100%
----------------------------------------------------------------------------------------------------------------------
Earnings Per Share(2) Total Shareholder Return
----------------------------------------------------------- ---------------------------------------------------------
Please refer to the pdf Please refer to the pdf
http://www.rns-pdf.londonstockexchange.com/rns/7347X_-20 http://www.rns-pdf.londonstockexchange.com/rns/7347X_-2017
17-2-23.pdf -2-23.pdf
75% of 2014 Performance 25% of 2014 Performance
Share Plan (PSP) awards Share Plan awards vest
vest on achievement of in line with upper quartile
outstanding three-year relative TSR performance.
EPS growth of 76%.
--------------------------------------------------------- -----------------------------------------------------------
Annual bonus plan - outcome against maximum targets:
92%
----------------------------------------------------------------------------------------------------------------------
Underlying Growth in Growth in Employee survey
operating absolute website Other revenue(3) respondents
profit before visits relative who think
tax(1) to our nearest 'Rightmove
competitor is a great
place to work'
Target: GBP163.8m Target: 50% Target: 30% Target: 95%
Actual: GBP166.2m higher growth growth Actual: 95%
in absolute Actual: 23%
visits than
our nearest
competitor
Actual: Growth
in absolute
visits was
17.75 times
higher than
our nearest
competitor
--------------------------- ---------------------------- ----------------------------- ----------------------------
Pay and performance for 2016
-----------------------------------------------------------------------------------------------------------
Nick McKittrick Peter Brooks-Johnson Robyn Perriss
-------------------------------- -------------------------------- ----------------------- --------------
Salary GBP424,320 GBP355,368 GBP281,112
-------------------------------- -------------------------------- ----------------------- --------------
Benefits & Pension GBP1,973 GBP17,822 GBP14,473
-------------------------------- -------------------------------- ----------------------- --------------
Cash Bonus GBP195,187 GBP163,469 GBP129,312
-------------------------------- -------------------------------- ----------------------- --------------
Deferred Shares GBP292,781 GBP245,204 GBP193,967
-------------------------------- -------------------------------- ----------------------- --------------
Performance GBP1,212,662 GBP1,015,601 GBP803,392
Shares
-------------------------------- -------------------------------- ----------------------- --------------
Total remuneration GBP2,126,923 GBP1,797,465 GBP1,422,256
-------------------------------- -------------------------------- ----------------------- --------------
Shareholder alignment
-----------------------------------------------------------------------------------------------------------
Shareholding Guidelines: Proportion of Shares required
200% of salary variable awards to be retained
for all executive received in shares: on vesting until
directors from 85% of performance-related guidelines met:
2017 pay is awarded 50% of vested
in Rightmove shares Deferred and Performance
shares
---------------------------------- -------------------------------- -------------------------------------
Remuneration Policy 2017 - 2020
-----------------------------------------------------------------------------------------------------------
Policy element Proposed change from 2014
policy
------------------------------------ ---------------------------------------------------------------------
Fixed pay below comparative No change
market median and variable
incentive opportunity
above median
------------------------------------ ---------------------------------------------------------------------
Base salaries executive Increases in base salary
directors receive inflationary capped at 3% above wider
adjustments to salaries workforce increases(4)
in line with all employees
------------------------------------ ---------------------------------------------------------------------
Pension contributions No change
up to 6% of base salary
------------------------------------ ---------------------------------------------------------------------
Annual bonus maximum 125% No change
of salary, with 40% cash
and 60% deferred into
Company shares for two
years
------------------------------------ ---------------------------------------------------------------------
Performance Share Plan No change. The Committee
awards granted at 200% will have discretion to
of salary. No post-vesting introduce post-vesting
holding period holding periods for new
executive directors
------------------------------------ ---------------------------------------------------------------------
Clawback applies to deferred No change
annual bonus awards and
Performance Share Plan
awards
------------------------------------ ---------------------------------------------------------------------
(1) Before share-based payments and NI on share-based
incentives.
(2) Before share-based payments and NI on share-based incentives
with no related adjustment for tax.
(3) Other revenue is all revenue excluding Agency and New
Homes.
(4) A one off increase in the Finance Director's salary of 13.8%
is proposed in 2017 to address her historically low starting salary
level and recognise the capability she has demonstrated as she has
gained experience in that role.
Remuneration Policy Report (unaudited)
Introduction
This report sets out the Company's policy on directors'
remuneration for the forthcoming year and, for subsequent years, as
well as information on remuneration paid to directors for the
financial year ended 31 December 2016. The report has been prepared
in accordance with the Companies Act 2006, the Large and
Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013 (together the Act) and the 2014 UK
Corporate Governance Code (the Code).
In accordance with the Act this report comprises a Policy Report
and an Annual Report on Remuneration. The Remuneration Policy was
approved by shareholders in 2014 and, in compliance with the Act, a
revised Policy Report will be put to a binding shareholder vote at
the 2017 AGM. In practice, however, the Remuneration Committee (the
Committee) has applied some elements of the policy detailed below
from the beginning of 2017 and expects to apply the new policy
throughout the three-year period from and subject to shareholder
approval on 9 May 2017. The Annual Report on Remuneration will be
subject to an advisory vote at the 2017 AGM. The parts of the
report which have been audited have been highlighted.
Remuneration Policy Report (the Policy Report)
This part of the Directors' Remuneration Report sets out the
Remuneration Policy for the Company and has been prepared in
accordance with the Act.
The policy has been developed after taking into account
Rightmove's pay philosophy that our executives should be rewarded
with demonstrably lower than market base salaries and benefits and
higher than market equity rewards contingent upon the achievement
of challenging performance targets in accordance with the 'best
practice' principles set out in the Code and the views of our major
shareholders.
The key principles of the Committee's policy are unchanged and
are as follows:
-- Remuneration arrangements should be simple to explain, understand and administer.
-- Remuneration arrangements should be designed to provide
executive directors with the opportunity to receive a share in the
future growth and development of the Group which is regarded as
fair by both other employees and shareholders. This approach should
allow the Company to attract and retain the dynamic, self-motivated
individuals who are critical to the success of the business.
-- Executive directors should have below market levels of base
salary, minimal benefits (which are made available on the same
basis to all Rightmove employees), but with above market levels of
variable pay potential. This arrangement is designed to align the
interests of the executive directors with the interests of
shareholders and to reflect the dynamic, performance driven culture
of the Group. The Company will generally review market levels of
remuneration for executive directors with the assistance of
external, independent remuneration consultants and consult
shareholders on remuneration policy at least every three years.
-- Executive director remuneration should normally be reviewed
against the market every three years, further changes to
remuneration for the current executives should be made
infrequently. Annual pay reviews for executive directors in
intervening years should, in most instances, be directly linked to
the policies applied to all employees, specifically with regard to
cost of living rises in base salary and changes in benefits.
-- Executive directors should be principally rewarded for the
overall success of the business for which they have collective
responsibility. The Group has key short-term and medium to
long-term goals and executive directors should be incentivised
against these goals.
-- Executive directors should not be able to gain significantly
from short-term successes, which subsequently prove not to be
consistent with growing the overall value of the business. Hence a
majority of any bonus payable in relation to short-term strategic
goals is required to be taken in the form of shares in the Company
which are deferred for a further two years after the bonus target
has been achieved.
The following table provides an overview of the Committee's
Remuneration Policy, which has been designed to reflect the
principles described above:
Remuneration Policy
Purpose and
Element of link to Maximum Performance
remuneration strategy Operation opportunity criteria
---------------- ---------------- ---------------------------------------------------- ------------------ ----------------
Salary To provide a Base salaries are normally reviewed annually. The Directors' The Committee
base salary timing of any change is at the Committee's current salaries considers both
which will discretion and will usually be effective from 1 are set out on individual and
attract and January. page 69. Group
retain high performance in
calibre When considering the executive's eligibility for a These salary a broad context
executives to salary increase, the Committee considers levels will be when
execute the following points: eligible for determining
the Group's * size and responsibilities of the role; increases during base salary
business the period that increases.
strategy. the Remuneration
* individual and Group performance; Policy operates
from the
effective date.
* increases awarded to the wider workforce; and During this time,
salaries may be
increased each
* broader economic and inflationary conditions. year (in
percentage of
salary terms) in
line
Executive directors' remuneration is benchmarked with those of the
against external market data periodically wider workforce
(generally every three years). Relevant market and will be
comparators are selected for comparison, which capped at the
include other companies of a similar size and average workforce
complexity. The Committee considers benchmark increase plus
data, alongside a broad review of the individual's 3%, subject to
skills and experience, performance and the Committee's
internal relativities. consideration of
the overall
salary budget,
individual and
Group performance
and factors in
the wider economy
including
inflation.
Increases beyond
those linked to
the workforce (in
percentage of
salary terms)
will only be
awarded where
there is a change
of incumbent, in
responsibility,
experience or a
significant
increase in the
scale of the role
and/or size,
value and/or
complexity of the
Group.
---------------- ---------------- ---------------------------------------------------- ------------------ ----------------
Benefits To provide The executive directors are enrolled in the Group's The value of Not applicable
simple, private medical insurance scheme and receive benefits may vary
cost-effective, life assurance cover equal to four times base from year to year
employee salary. depending on the
benefits which Additionally, all executive directors are members cost to the
are the same as of the Group's medical cash plan. Company from
those offered third party
to Executive directors will be entitled to receive new providers.
the wider benefits on the same terms as those introduced
workforce. for the whole workforce.
---------------- ---------------- ---------------------------------------------------- ------------------ ----------------
Pension To provide a The Group operates a stakeholder pension plan for 6% of base salary Not applicable
basic, employees under which the employer contributes
cost-effective, 6% of base salary subject to the employee
long-term contributing a minimum of 3% of base salary. The
retirement Company does not contribute to any personal pension
benefit. arrangements.
The Company may introduce a cash alternative to a
pension contribution where this would be
more tax efficient for the individual.
Whilst executives are not obliged to join, the
Company operates a pension salary exchange
arrangement whereby executives can exchange part of
their salary for Company paid pension
contributions. Where executives exchange salary and
this reduces the Company's National Insurance
Contributions the Company credits the full saving
to the executive's pension.
---------------- ---------------- ---------------------------------------------------- ------------------ ----------------
Annual bonus To incentivise The annual bonus comprises a cash award (40% of any Maximum (% The bonus is
including and recognise bonus earned) and a DSP award (60% of salary): determined by
Deferred Share execution of any bonus earned). A greater proportion of the 125% of base and based on
Bonus Plan the business annual bonus may be deferred in future years salary performance
(DSP) strategy on an at the Committee's discretion. against a range
annual basis. Deferred shares will vest after two years and be of key
potentially forfeitable during that period. performance
Rewards the Payments under the annual bonus plan may be subject indicators
achievement of to clawback in the event of a material which will be
annual misstatement of the Group's financial results or selected and
financial and misconduct. weighted to
operational support
objectives. delivery of the
business
strategy.
The primary
bonus metric
will be
profit-based
(e.g.
underlying
operating
profit before
tax)
with targets
set in relation
to a carefully
considered
business plan
and requiring
significant
out-performance
of that plan to
trigger maximum
payments.
A minority of
bonus will also
be earned based
on pre-set
targets drawn
from the
Group's other
key performance
indicators
relating to
underlying
drivers of
long-term
revenue growth.
Details of the
performance
measures used
for the current
year and the
targets set for
the
year under
review and
performance
against them is
provided on
pages 70 and 75
to 77.
25% of the
awards vest for
achieving the
threshold
performance
target. Bonus
is earned on
a linear basis
from threshold
to maximum
performance
levels.
---------------- ---------------- ---------------------------------------------------- ------------------ ----------------
Performance To incentivise The PSP was established in 2011 and permits annual Maximum (% Awards vest
Share Plan and reward awards of nil cost options, contingent salary): 200% of based on
(PSP) executives for shares and forfeitable shares which vest after base salary three-year
the achievement three years subject to continued service and performance
of superior the achievement of challenging performance against
returns to conditions. challenging
shareholders financial
over a The Committee has discretion to introduce a targets for EPS
three-year two-year post-vesting holding period for future and relative
period, and to executive appointments to the Board. TSR
retain key performance.
individuals and A dividend equivalent provision operates enabling
align interests dividends to be paid (in cash or shares) Financial
with on shares at the time of vesting. targets will
shareholders. PSP awards may be subject to clawback in the event determine
of a material misstatement of the Group's vesting in
financial results or misconduct. relation to at
least half of
an award.
25% of the
awards vest for
achieving the
threshold
performance
target. Awards
vest on a
linear
basis from
threshold to
maximum
performance
levels.
The performance
period for
financial
targets and
relative TSR
targets is
three financial
years,
starting with
the year in
which the award
is granted.
---------------- ---------------- ---------------------------------------------------- ------------------ ----------------
All-employee Provides all Executive directors are entitled to participate on Participation None
Sharesave Plan employees with the same terms as all other employees in limits are set by
the opportunity the Group's Sharesave Plan, which has standard HMRC from time to
to become terms. time.
owners in the
Company on
similar terms.
---------------- ---------------- ---------------------------------------------------- ------------------ ----------------
Share Incentive To provide all Executive directors are entitled to participate in Participation in None
Plan (SIP) employees the the SIP on the same terms as all other the SIP is based
opportunity to employees. The SIP has standard terms and currently on HMRC rules.
own shares in only free shares are offered. However, Share awards are
the Company on executive directors routinely forfeit their discretionary and
equal terms. entitlement to any free share awards. made within
the SIP rules.
The Committee may award free shares to employees,
subject to the continued strong Group performance.
Share awards will typically be made annually in
January and will be modest in value, historically
50 shares per employee, although this will differ
with the market value of the shares.
---------------- ---------------- ---------------------------------------------------- ------------------ ----------------
Share ownership To provide Executive directors are required to retain at least Shareholding Not applicable
guidelines alignment half of any share awards vesting or exercised guideline: 200%
between the (after selling sufficient shares to meet the of base salary
executives exercise price and to pay any tax liabilities for all executive
and due) until they have met the shareholding directors.
shareholders. guideline.
The Committee will regularly monitor progress
towards the guideline.
---------------- ---------------- ---------------------------------------------------- ------------------ ----------------
Non-executive To provide a The fees for non-executive directors (including the Fees for the None
directors competitive fee Company Chairman) are reviewed periodically Chairman and
which will (generally every three-years). non-executive
attract and The Committee will consider the Chairman's fee, directors were
retain high whilst the non-executive directors' fee is last reviewed in
calibre considered by the wider Board, excluding the 2015 and are set
individuals and non-executives. out
reflects on page 71.
their relevant Fee levels for each role are determined after
skills and considering the responsibility of the role, Fee increases may
experience. the skills and knowledge required and the expected take place if fee
time commitments. levels are
Periodic benchmarking against relevant market considered to
comparators, reflecting the size and complexity have become out
of the role, is used to provide context when of line with
setting fee levels. the
responsibilities
In exceptional circumstances, where the normal time and time
commitment has been substantially exceeded, commitments of
an additional fee may be paid at the Board's individual roles.
discretion.
Flexibility is
retained to
increase the
above fee levels
in the event that
it is necessary
to recruit a new
Chairman or
non-executive
director of an
appropriate
calibre in future
years.
-------------- ------------------ ---------------------------------------------------- ------------------ ----------------
Business To reimburse Directors may claim reasonable business expenses Expenses vary Not applicable
expenses directors for within the terms of the Group's expenses from year to year
reasonable policy and be reimbursed on the same basis as all according to each
business employees. The Group may reimburse business director's
expenses. expenses which are in future classified as taxable responsibilities,
benefits by HMRC. business activity
and location.
-------------- ------------------ ---------------------------------------------------- ------------------ ----------------
Discretions maintained by the Committee in operating the
incentive plans
The Committee will operate the annual bonus plan, PSP, Sharesave
Plan and SIP according to their respective rules and in accordance
with the Listing Rules and HMRC rules where relevant.
The Committee retains discretion, consistent with market
practice, in a number of regards to the operation and
administration of these plans. These discretions include, but are
not limited to, the following:
-- the selection of participants in the respective plan;
-- the timing of grant of an award (if any) and payments;
-- the size of an award and/or a payment (with limits as described in the table above);
-- the extent of vesting based on the achievement of performance
targets and applicable exercise periods where relevant;
-- how to deal with a change of control (e.g. the timing of
testing performance targets) or restructuring of the Group;
-- determination of a 'good'/'bad' leaver for incentive plan
purposes based on the rules of each plan and the appropriate
treatment chosen including the timing of the delivery of
shares;
-- adjustments (if any) required in certain circumstances (e.g.
rights issues, corporate restructuring events and special
dividends); and
-- the annual review of performance measures, targets and
weightings for the annual bonus plan and PSP from year to year.
The Committee also retains the ability to adjust the targets
and/or set different measures for the annual bonus plan and PSP if
events occur (e.g. a material divestment or acquisition) which
cause it to determine that the conditions are no longer appropriate
and an amendment is required so that the conditions achieve their
original purpose and are not materially less difficult to
satisfy.
Any use of the above discretions would, where relevant, be
detailed in the Annual Report on Remuneration and if appropriate,
the subject of prior communication with the Company's major
shareholders.
For the avoidance of doubt, all previous commitments or
entitlements agreed prior to the approval of this Policy or
appointment to the Board will be permitted to payout on their
original terms or in line with the Policy in force at the time they
were agreed.
Selection of performance measures and how targets are set
The performance metrics that are used for annual bonus and
long-term incentive plans are a subset of the Group's key
performance indicators.
For the annual bonus, underlying operating profit before tax(1)
is the primary performance metric used as it is aligned to the
Group's strategy of delivering profitable growth and is a key
financial performance indicator used within the business.
Consistent with previous years, operating profit is measured on an
underlying basis, to exclude any volatility in relation to the
Company's share price in connection with the IFRS 2 valuation and
National Insurance charge on share-based incentives granted. The
underlying operating profit before tax(1) target is set on a
sliding scale based around the business plan for the year, with 25%
payable for threshold performance.
The annual bonus also considers performance against other
operational metrics, including a traffic market share target,
growth in Other revenue and an employee engagement target, for a
minority of the bonus, with a sliding scale used to determine
performance against each measure.
Market share is a measure of the size and engagement of our
audience and the value which Rightmove brings to our customers and
therefore a challenging target to increase Rightmove's share of
this audience is considered appropriate by the Committee.
The Other revenue target measures growth in revenue from
businesses other than Agency and New Homes. Since some of these
businesses will be at an early stage of development, we consider
growth in revenue rather than in operating profit to be the
appropriate measure and note that this element of the bonus is only
a small proportion of the total bonus opportunity.
For the PSP, awards are subject to a combination of underlying
basic EPS() (EPS) and relative TSR performance conditions. EPS is
considered the most appropriate financial metric for Rightmove at
this stage in its development (since it is the measure of
profitability that is most closely aligned with shareholders'
interests and monitored on an ongoing basis within the business).
The Policy also recognises that relative TSR should also be a
performance measure in order for there to be a clear alignment of
executive and shareholder interests. EPS targets are set based on
sliding scales that take account of internal financial planning and
external analyst forecasts. Only 25% of the EPS element will payout
for threshold performance levels, with the maximum award requiring
substantial out-performance. For TSR, the range of targets measure
how successful the Company is in out-performing the FTSE 350 Index
with 25% of this part of the award vesting at the threshold
performance level, through to full vesting for 25% out-performance
of the Index over the three-year performance period. For historic
PSP awards, performance against the FTSE 250 Index was the selected
measure, however, the Company has resided in the top quartile of
the FTSE 250 for some time and the wider index is now considered
more appropriate for comparison purposes.
Performance targets do not apply to Sharesave or SIP awards
since these awards are structured to encourage employees to become
share-owners and to maintain tax-favoured status the awards must
operate on a consistent basis for all employees.
The Company does not at the present time take account of the
ratio of CEO to employee pay but will keep this under review as
market and best practice develops and as regulations evolve.
How the views of employees are taken into account
The Company has not to date felt it necessary to consult
directly with employees on executive remuneration matters. However,
the Committee is kept aware of pay and employment conditions within
the wider workforce when setting executive directors' remuneration
policy.
Remuneration policy for executive directors compared to other
employees
The Committee will consider the proposed salary budget for the
whole Group when it is deciding on salary increases for executive
directors specifically.
In line with the Company's strategy to keep remuneration simple
and consistent, benefits and pension arrangements provided to
executive directors are the same as those offered to all Group
employees.
The extent to which annual bonuses are offered varies by level
of employee within the Group, with the quantum and performance
metrics used determined by the nature of the role and
responsibilities and market rates at that level.
Long-term incentive awards such as the DSP, are only offered to
senior management as those awards are more heavily weighted towards
performance-related pay and have a stronger visibility on the value
created for shareholders and the reward for participants.
Shareholders' views
The Committee considers it vitally important to maintain open
and transparent communication with the Company's shareholders. The
Committee consulted major shareholders representing over 50% of the
Company's share ownership on proposed changes and continued
suitability of the Remuneration Policy. The shareholders who were
consulted were overwhelmingly supportive of the Policy proposals
and commented constructively in relation to several areas,
including future rises in basic salary and post-vesting holding
periods for long-term incentives. Shareholder feedback was
considered by the Committee and contributed to the development of
the overall Remuneration Policy.
Reward scenarios
The Company's reward policy (as previously outlined) is
illustrated below using three different performance scenarios:
minimum, on-target and maximum:
Please refer to the pdf
http://www.rns-pdf.londonstockexchange.com/rns/7347X_-2017-2-23.pdf
Assumptions:
1. Minimum = fixed pay only (salary + benefits + pension).
2. On-target = 55% payable of the 2017 annual bonus and 62.5%
vesting of the 2017 PSP awards being the midpoint between threshold
vesting of 25% and maximum vesting of 100%.
3. Maximum = 100% payable of the 2017 annual bonus and 100%
vesting of the 2017 PSP awards.
Base salary is as set at 1 January 2017. The value of taxable
benefits is based on the cost of supplying those benefits (using
the cost as disclosed on page 75) for the year ended 31 December
2016. The executive directors have elected not to partcipate in the
Company's pension arrangements.
The executive directors can participate in the Sharesave Plan
and SIP on the same basis as other employees. The value that may be
received under these schemes is subject to tax approved limits. For
simplicity, the value that may be received from participating in
these schemes has been excluded from the above charts.
As required by the regulations no assumption is made as to
future share price growth for reward elements (deferred bonus and
long-term incentives) that are delivered in shares.
Amounts have been rounded to the nearest GBP1,000.
Recruitment and promotion policy
The Committee proposes an executive director's remuneration
package for new appointments in line with the principles outlined
in the table below:
Element of remuneration Policy
------------------------ --------------------------------------------------------------------------------------------
Base salary Base salary levels will be set based on the roles and responsibilities of the individual
together
with their relevant skills and experience, taking into account the market rates for
companies
of comparable size and complexity and internal Company relativities. In some circumstances
(e.g. to reflect an individual's limited experience at a Plc board level) it may be
considered
appropriate to set initial salary levels below the perceived market competitive rate.
Phased
increases, potentially above inflation, may then be offered to achieve the desired market
positioning over time, subject to individual's continued performance and development in the
role.
------------------------ --------------------------------------------------------------------------------------------
Benefits Benefits as provided to current executive directors. Where necessary the Committee may
approve
the payment of relocation expenses to facilitate recruitment, and flexibility is retained
for the Company to pay legal fees and other costs incurred by the individual in relation to
their appointment.
------------------------ --------------------------------------------------------------------------------------------
Pension Defined contributions or a cash alternative at the level provided to current executive
directors.
------------------------ --------------------------------------------------------------------------------------------
Annual bonus An annual bonus would operate in the same manner as outlined for the current executives (as
described above and in the Annual Report on Remuneration), although it would be pro-rated
to reflect the employment period during the bonus year. Flexibility will be retained to set
equivalent objectives for any new executive joining part way through a year.
The maximum bonus potential would not exceed 125% of base salary.
It would be expected that the bonus for a new appointment would be assessed on the same
performance
metrics as that for the current executives on an ongoing basis. However, depending on the
timing and nature of appointment it may be necessary to set tailored performance criteria
for their first bonus plan.
------------------------ --------------------------------------------------------------------------------------------
Long-term incentives A new appointment will be eligible to receive PSP awards as outlined in the policy table.
Share awards may be granted shortly after an appointment (subject to the Company not being
in a close period) and would be measured against the same performance criteria as the
current
executives. However, any award granted outside the normal award and performance cycle may
be pro-rated at the Committee's discretion. The Committee may introduce post-vesting
holding
periods under the PSP for new executives if it considers this an appropriate commitment in
conjunction with the shareholding guidelines.
The ongoing maximum award would not exceed 200% of base salary.
For an internal hire, existing awards would continue over their original vesting period and
remain subject to their terms as at the date of grant.
The new appointment would be eligible to participate in the Sharesave Plan and the SIP
under
the same terms as all other employees.
------------------------ --------------------------------------------------------------------------------------------
Buy-out awards To facilitate an external recruitment, it may be necessary to buy-out remuneration which
would
be forfeited on leaving their previous employer. When determining the quantum and structure
of any buy-out awards the Committee will, as a minimum, take into account the following
factors:
* the form of remuneration (cash or shares);
* timing of expected payment/vesting; and
* expected value (i.e. taking into account the
likelihood of achieving the existing performance
criteria).
Buy-out awards, if used, will be granted using the Company's existing share plans to the
extent
possible, although awards may also be granted outside of these schemes if necessary and as
permitted under the Listing Rules.
------------------------ --------------------------------------------------------------------------------------------
Directors' service contracts and non-executive directors' terms
of appointment
The Committee's policy on service agreements for executive
directors is that they should provide for 12 months' notice of
termination by the Company and by the executive. Any proposals for
the early termination by the Company of the service agreements of
directors, are considered by the Committee.
The service agreements for the executive directors allow for
lawful termination of employment by making a payment in lieu of
notice or by making phased payments over any remaining unexpired
period of notice. The phased payments may be reduced if, and to the
extent that, the executive finds an alternative remunerated
position.
In addition, any statutory entitlements or sums to settle or
compromise claims in connection with the termination would be paid
as necessary. The Company may also provide a contribution toward
reasonable legal fees or outplacement services.
For Nick McKittrick a payment in lieu of notice will be related
to base salary, benefits and projected annual bonus pursuant to the
Group's targets being achieved for the year (pro-rated for any
unexpired period of notice where appropriate). The Committee is
aware that the provision of annual bonus with a payment in lieu of
notice is no longer considered in line with best practice. The
provision within Nick McKittrick's contract is considered a legacy
issue which would not be repeated in any future director's service
contract.
For Peter Brooks-Johnson and Robyn Perriss a payment in lieu of
notice will be restricted to base salary and benefits. In good
leaver circumstances a bonus may be paid at the normal time subject
to achievement of the performance conditions and pro-rating for the
period worked in the year.
For awards granted under the PSP 'good leaver' status may be
determined, in certain prescribed circumstances, such as death, ill
health, disability, redundancy, transfer or sale of the employing
company, or other circumstances at the discretion of the Committee.
If defined as a 'good leaver', awards will remain subject to
performance conditions, which will be measured over the performance
period from grant to the original vesting date, unless the
Committee determine to assess performance from grant to the date of
cessation, and which will be reduced pro-rata to reflect the
proportion of the performance period actually served. The Committee
retains the discretion to disapply time pro-rating in exceptional
circumstances and to accelerate the vesting of awards for 'good
leavers' in the event of death.
For awards granted under the DSP, 'good leaver' status may be
determined for reasons of death, injury, disability, redundancy,
transfer or sale of the employing company or other circumstances at
the discretion of the Committee. If defined as a 'good leaver',
awards will be retained and vest on the original vesting date, save
as above in the event of death, when the Committee has the
discretion to accelerate vesting.
Scott Forbes' appointment may be terminated by either party
giving to the other not less than three months' notice in writing.
The Company may also terminate by making a payment in lieu of
notice. Scott Forbes is not contractually entitled to any other
benefits on termination of his contract.
The Letters of Appointment for the non-executive directors
provide for a term of up to two three-year periods and a possible
further three-year term (subject to re-election by shareholders and
subject to the director remaining independent). The appointments
may be terminated with a notice period of three months on either
side and the Letters of Appointment set out the time commitments
required to meet the expectations of their roles.
Copies are available for inspection on request to the Company
Secretary.
Further details of all directors' contracts and Letters of
Appointment are summarised below:
Date of contract/Letter
Date of appointment of Appointment(1) Notice (months) Length of service at
24 February 2017
------------------------- --------------------- ------------------------ ----------------- -----------------------
Executive directors
------------------------- --------------------- ------------------------ ----------------- -----------------------
Nick McKittrick
(Chief Executive 5 March 2004 7 February 2006 12 12 years 11 months
Officer)(2)
------------------------- --------------------- ------------------------ ----------------- -----------------------
Peter Brooks-Johnson(3) 10 January 2011 22 February 2011 12 6 years 1 month
------------------------- --------------------- ------------------------ ----------------- -----------------------
Robyn Perriss(4) 30 April 2013 1 May 2013 12 3 years 10 months
------------------------- --------------------- ------------------------ ----------------- -----------------------
Non-executive directors
------------------------- --------------------- ------------------------ ----------------- -----------------------
Scott Forbes (Chairman) 13 July 2005 21 February 2006 3 11 years 7 months
------------------------- --------------------- ------------------------ ----------------- -----------------------
Colin Kemp 3 July 2007 4 December 2007 3 9 years 7 months
------------------------- --------------------- ------------------------ ----------------- -----------------------
Ashley Martin 11 June 2009 9 June 2009 3 7 years 8 months
------------------------- --------------------- ------------------------ ----------------- -----------------------
Peter Williams 3 February 2014 3 February 2014 3 3 years 1 month
------------------------- --------------------- ------------------------ ----------------- -----------------------
Rakhi Goss-Custard 28 July 2014 28 July 2014 3 2 years 7 months
------------------------- --------------------- ------------------------ ----------------- -----------------------
Jacqueline de Rojas 30 December 2016 10 October 2016 3 2 months
------------------------- --------------------- ------------------------ ----------------- -----------------------
(1) The service contracts and the Letters of Appointment for all
directors appointed prior to 28 January 2008, were transferred from
Rightmove Group Limited to Rightmove plc with effect from this date
on completion of a Scheme of Arrangement under the Companies Act
1985.
(2) Nick McKittrick joined the Group in December 2000 and was
appointed to the Board on 5 March 2004. His service with the Group
at the date of this report is 16 years and 2 months.
(3) Peter Brooks-Johnson joined the Group on 9 January 2006 and
was appointed to the Board on 10 January 2011. His service with the
Group at the date of this report is 11 years and 1 month.
(4) Robyn Perriss joined the Group on 1 July 2007 and was
appointed to the Board on 30 April 2013. Her service to the Group
at the date of this report is 9 years and 8 months.
External appointments
With the approval of the Board in each case, executive directors
may accept one external appointment as a non-executive director of
another listed or similar company and retain any fees received.
None of the executive directors currently hold any outside
directorships.
Annual Report on Remuneration
Remuneration Committee role and membership
Terms of reference
The primary role of the Committee is to make recommendations to
the Board as to the Company's overall policy and framework for the
remuneration of the executive directors and the Chairman of the
Board. The remuneration and terms of appointment of the
non-executive directors are determined by the Board as a whole.
In accordance with the Code, the Committee also recommends the
structure and monitors the level of remuneration for the first
layer of management below Board level. The Committee is also aware
of, and advises on, the employee benefit structures throughout the
Group and ensures that it is kept aware of any potential business
risks arising from those remuneration arrangements.
The Committee has formal terms of reference which are reviewed
annually and updated as required. These are available on the
Company's website at plc.rightmove.co.uk or on request from the
Company Secretary.
Membership
The following independent non-executive directors were members
of the Committee during 2016. During the year the Committee met six
times and attendance at the meetings is shown below:
Committee Members Number of meetings attended
-------------------------------------------- ----------------------------
Peter Williams (Chairman of the Committee) 6
-------------------------------------------- ----------------------------
Colin Kemp 6
-------------------------------------------- ----------------------------
Rakhi Goss-Custard 6
-------------------------------------------- ----------------------------
The quorum for meetings of the Committee is two members. The
Committee will meet at such times as may be necessary but will
normally meet at least five times a year. The Company Secretary
acts as Secretary to the Committee.
Only members of the Committee have the right to attend Committee
meetings. The Chairman of the Committee has requested that the
Chairman of the Board attend the meetings except during discussions
relating to his own remuneration. The Chief Executive Officer may
also be invited to meetings and the Committee takes into
consideration his recommendations regarding the remuneration of
executive colleagues and the first layer of management below Board
level. No executive director is involved in deciding their own
remuneration.
External advisors
New Bridge Street (NBS), a trading name of Aon Hewitt (part of
Aon plc), which is a member of the Remuneration Consultants Group
and has signed up to its Code of Conduct, has been retained as the
Committee's remuneration advisor since 2011. The terms of
engagement between the Company and NBS are available from the
Company Secretary on request.
The total fees paid to NBS in respect of services to the
Committee during the year were GBP42,000.
During 2016 NBS also provided services to the Company in
connection with the valuation of share-based incentives (as
required by IFRS 2) and confirmed that, in its view, these services
did not present a conflict of interest with the other services
provided to the Committee. The Committee reviews its relationship
with external advisors on a regular basis and continues to believe
that there are no conflicts of interest.
What has the Committee done during the year?
The Committee met six times during the year to consider and,
where appropriate, approve key remuneration items including the
following:
Pay and incentive plan reviews
-- annual review and approval of executive directors' base salaries and benefits;
-- review of year-end business performance against relevant
performance targets to determine annual bonus payouts and vesting
of long-term incentives;
-- review and approval of appropriate benchmarks and performance
measures for the annual performance related bonus and 2017 PSP
awards to ensure measures are aligned with strategy and that
targets are appropriately stretching;
-- ongoing monitoring of senior management remuneration structures; and
-- approval of share awards granted under the Deferred Share
Bonus Plan (DSP) and the Rightmove Performance Share Plan
(PSP).
Governance and strategy
-- review of the Remuneration Policy for executive directors and
consultation with major shareholders on the proposed policy before
submitting it for shareholder approval at the 2017 AGM;
-- review and approval of the 2016 Directors' Remuneration Report;
-- review of the 2016 AGM voting and feedback from institutional investors;
-- evaluation of the Committee's performance during the year; and
-- review of the Committee's terms of reference.
Application of policy for year ending 31 December 2017
Salaries
The executive directors' salaries for the 2017 financial year
are set out in the table below:
Salary Salary Workforce increase plus
1 January 2017 31 December 2016 Change
---------------------- ----------------- ------------------- ------------------------ --------
Executive directors
---------------------- ----------------- ------------------- ------------------------ --------
Nick McKittrick GBP445,536 GBP424,320 3% 5%
---------------------- ----------------- ------------------- ------------------------ --------
Peter Brooks-Johnson GBP373,136 GBP355,368 3% 5%
---------------------- ----------------- ------------------- ------------------------ --------
Robyn Perriss GBP320,000 GBP281,112 11.8% 13.8%
---------------------- ----------------- ------------------- ------------------------ --------
The 5% increase in Nick McKittrick's and Peter Brooks-Johnson's
salaries represents an increase of 3% above the average workforce
increase of 2% for 2017, primarily to recognise the scale and
complexity of their roles and also to address the relatively low
pay of these executives compared with market norms. Robyn Perriss
has been awarded an additional increase of 11.8% above the average
all employee pay rise to reflect the lower starting salary awarded
on her appointment to the Board in her first role as a Finance
Director and in recognition of the performance and capability she
has demonstrated as she has gained experience in that role. The
salaries remain well below the market median for executives in
comparable companies.
On 24 February 2017 the Company announced the retirement of Nick
McKittrick as Chief Executive Officer and the appointment of Peter
Brooks-Johnson as his successor, with effect from 9 May 2017.
Further details are discussed on pages 83 to 84.
Pension and other benefits
The Group operates a stakeholder pension plan for employees
under which the employer contributes 6% of base salary, subject to
the employee contributing a minimum of 3% of base salary. Peter
Brooks-Johnson and Robyn Perriss participated in the pension plan
during the year. However, the executive directors have chosen not
to participate in this arrangement in future years. The Company
does not contribute to any personal pension arrangements.
The executive directors are enrolled in the Group's private
medical insurance scheme and receive life assurance cover equal to
four times base salary. Additionally, the executive directors are
members of the Group's medical cash plan.
Annual bonus
The annual bonus for the 2017 financial year will be consistent
with the policy detailed on page 59 of the Remuneration Policy
section of this report in terms of maximum bonus opportunity,
deferral and clawback provisions. The mechanism through which the
clawback can be implemented (enabling both the recovery and
withholding of incentive pay) enables the Committee to (i) reduce
the cash bonus earned in a subsequent year and/or reduce
outstanding DSP/PSP share awards (i.e. withholding provisions may
be used to effect a recovery) or (ii) for the Committee to require
that a net of tax balancing cash payment be made to the Company.
The performance measures have been selected to reflect a range of
financial and strategic targets that continue to support the key
objectives of the Group.
The performance measures and weightings will be as follows:
Measure As a % of maximum bonus opportunity
-------------------------------------------- ------------------------------------
Financial targets
Underlying operating profit before tax(1) 65%
-------------------------------------------- ------------------------------------
Strategic targets
Traffic market share(2) 15%
Other revenue(3) 15%
Employee engagement(4) 5%
-------------------------------------------- ------------------------------------
(1) Operating profit before share-based payments and NI on
share-based incentives.
(2) Measured on a time on site basis.
(3) Revenue excluding Agency and New Homes.
(4) Based on the results of the annual employee survey.
In relation to the financial target a challenging sliding scale
will operate with 25% of the maximum bonus opportunity payable at
the threshold underlying operating profit target relative to the
2017 business plan through to 100% becoming payable for significant
outperformance relative to the plan. A greater proportion of the
award will be paid for exceeding on-target performance.
The weighting of all performance measures are unchanged from
2016.
The targets themselves, as they relate to the 2017 financial
year, are deemed to be commercially sensitive. However,
retrospective disclosure of the targets and performance against
them will be provided in next year's Annual Report on Remuneration
to the extent that they do not remain commercially sensitive at
that time.
Long-term incentives
The award levels under the PSP, originally approved in 2014,
remain at 200% of base salary for all executive directors.
Consistent with current market practice and previous years,
awards to the executive directors under the PSP in 2017 will be
subject to a mixture of EPS (75% of awards) and relative TSR (25%
of the awards) performance conditions. The 2017 targets are as
follows:
EPS performance condition
The Group's EPS growth will be measured over the period of three
financial years (2017 to 2019). The EPS figure used will be
equivalent to the Group's basic underlying EPS (before share-based
payments, National Insurance on share-based incentives and no
related adjustment for tax). With a view to ensuring appropriately
stretching but achievable targets are set in light of market
expectations for the Group, the following range of targets will
apply to the 2017 awards:
Underlying basic EPS growth % of award vesting
from 2017 to 2019(1) (maximum 75%)
---------------------------- ----------------------
Less than 20% 0%
---------------------------- ----------------------
20% 18.75%
---------------------------- ----------------------
50% 75%
---------------------------- ----------------------
Between 20% and 50% Straight-line vesting
---------------------------- ----------------------
(1) The benchmark underlying basic EPS for the financial year
2016 from which these targets will be measured is 142.8p.
As in prior years, the targets that are intended to operate for
the 2017 PSP awards were set to be appropriately demanding in light
of the Group's internal planning, external market expectations for
future growth and the current trading environment, the targets are
considered to provide a realistic incentive at the lower end of the
performance range but require exceptional performance to achieve
full vesting. On this basis, the Committee is satisfied that the
range of targets are appropriately demanding, and no less
challenging than the range of targets set for 2016 awards.
Relative TSR performance condition
The vesting schedule for the relative TSR element of executive
directors' 2017 PSP awards is set out below. Relative TSR will be
assessed against the FTSE 350 Index, reflecting the Company's size
in terms of market capitalisation. Performance will be measured
over three financial years.
TSR performance of the Company relative to the FTSE 350 Index(1) % of award vesting
(maximum 25%)
------------------------------------------------------------------ ----------------------
Less than the Index 0%
------------------------------------------------------------------ ----------------------
Equal to the Index 6.25%
------------------------------------------------------------------ ----------------------
25% higher than the Index 25%
------------------------------------------------------------------ ----------------------
Intermediate performance Straight-line vesting
------------------------------------------------------------------ ----------------------
(1) If the FTSE 350 Index's TSR was 50% over the three-year
performance period, then the Company's TSR would
have to be at least 75% for all 25% of the PSP shares to vest.
Chairman and non-executive directors' fees
The Chairman and non-executive fees were last reviewed in a
market context in 2015 and increased to current levels. In line
with our policy they will be reviewed periodically, usually every
three-years, with the next increase anticipated in 2018.
The basic non-executive fee is GBP50,000 with an additional
GBP10,000 fee per annum paid for the chairing of the Audit and
Remuneration Committees and a further GBP5,000 fee paid to the
Senior Independent Director as detailed in the table below:
Annual fee 1 January 2017 Annual fee 31 December 2016
------------------------ -------------------------- ----------------------------
Scott Forbes (Chairman) GBP170,000 GBP170,000
------------------------ -------------------------- ----------------------------
Colin Kemp GBP50,000 GBP50,000
------------------------ -------------------------- ----------------------------
Ashley Martin GBP60,000 GBP60,000
------------------------ -------------------------- ----------------------------
Peter Williams GBP65,000 GBP65,000
------------------------ -------------------------- ----------------------------
Rakhi Goss-Custard GBP50,000 GBP50,000
------------------------ -------------------------- ----------------------------
Jacqueline de Rojas GBP50,000 GBP274(1)
------------------------ -------------------------- ----------------------------
(1) Fee for 2016 is for two days from her appointment on 30
December 2016.
Statement of shareholder voting at AGM
At the AGM on 5 May 2016, 94.91% of shareholders voted in favour
of the Directors' Remuneration Report. The Committee believes this
illustrates the strong level of shareholder support for the
remuneration framework. The table below shows full details of the
voting outcomes for the Directors' Remuneration Report:
Votes % Votes Votes % Votes Votes
for for against against withheld(1)
------------------------- ----------- -------- ---------- --------- -------------
Directors' Remuneration
Report 77,382,308 94.91 4,146,773 5.09 879,511
------------------------- ----------- -------- ---------- --------- -------------
(1) A vote withheld is not a vote in law and is not counted in
the calculation of the proportion of votes cast 'For' and 'Against'
a resolution
In line with the Company's commitment to ongoing dialogue with
its shareholders, meetings are offered, where appropriate, to
understand the reasons for any potential or actual opposition to
the Company's Remuneration Policy. Changes are made to our Policy
where it is considered appropriate to do so.
Review of past performance
Share price performance
In 2016, the Company's share price ended the year at GBP39.03
down 5.4% year on year (the FTSE 250 Index was up 3.7% and the FTSE
350 Index was up 12.5%). On a three-year basis the share price has
increased by 42.4% and has continued to outperform both the FTSE
250 and FTSE 350 Indices over that period as shown in the graphs on
page 73.
Total shareholder return (TSR)
The first graph below compares the TSR of Rightmove's shares
against the FTSE 250 Index and the FTSE 350 Index for the
three-year period from 1 January 2014 to 31 December 2016. TSR is
the product of movements in the share price plus dividends
reinvested on the ex-dividend date. TSR provides a useful, widely
used benchmark to illustrate the Company's performance over the
last three-years. Specifically, it illustrates the value of GBP100
invested in Rightmove's shares and in the FTSE 250 Index and the
FTSE 350 Index over that period.
As required by the Act, the Company's TSR performance is
required to be shown against a recognised broad-based share index.
The FTSE 250 Index was previously chosen as the comparator because
Rightmove was, and continues to be, a constituent of this Index and
it was therefore also the Index used historically for the purposes
of measuring relative performance for PSP awards. From 2016 as
Rightmove continues to be ranked towards the top of that Index in
terms of market capitalisation, it was felt to be more appropriate
to use the FTSE 350 Index for the purpose of comparing TSR
performance and therefore this will be used as the criteria applied
to 25% of the PSP awards to be granted in March 2017.
The graphs below illustrate, for statutory purposes, the TSR of
Rightmove's shares against the FTSE 250 Index and the FTSE 350
Index for the three and eight years to 31 December 2016.
TSR Graph - three years
Please refer to the pdf
http://www.rns-pdf.londonstockexchange.com/rns/7347X_-2017-2-23.pdf
TSR Graph - eight years
Please refer to the pdf
http://www.rns-pdf.londonstockexchange.com/rns/7347X_-2017-2-23.pdf
Total remuneration for the Chief Executive Officer
The table below shows the total remuneration figure for the
Chief Executive Officer over an eight-year performance period. The
total remuneration figure includes the annual bonus and long-term
incentive awards that vested based on performance in those
years.
Annual bonus outturn (% of Long-term incentive outturn
Total single figure maximum) (% of maximum)
Year Executive GBP
-------- ------------------ ---------------------- -------------------------------- ------------------------------
2016 Nick McKittrick 2,126,923 92% 100%
-------- ------------------ ---------------------- -------------------------------- ------------------------------
2015 Nick McKittrick 2,300,349 100% 100%
-------- ------------------ ---------------------- -------------------------------- ------------------------------
2014 Nick McKittrick 1,599,610 70% 92%
2013 Nick McKittrick 2,199,335 85% 100%
Ed Williams(1) 1,531,515 n/a 100%
--------------------------- ---------------------- -------------------------------- ------------------------------
2012 Ed Williams 2,219,882 90% 100%
-------- ------------------ ---------------------- -------------------------------- ------------------------------
2011 Ed Williams 4,934,942 100% 100%
-------- ------------------ ---------------------- -------------------------------- ------------------------------
2010 Ed Williams 652,800 100% -(2)
-------- ------------------ ---------------------- -------------------------------- ------------------------------
2009 Ed Williams 627,641 100% -(2)
-------- ------------------ ---------------------- -------------------------------- ------------------------------
(1) Ed Williams was Chief Executive Officer until his retirement
on 30 April 2013. Nick McKittrick was appointed Chief Executive
Officer at this time.
(2) The table above includes share-based incentive awards in the
period that the associated performance conditions, excluding
service conditions are satisfied. Certain pre-float share option
awards prior to 2006, which had only service conditions and no
performance conditions would have been included in the single
figure remuneration table in the year of grant in accordance with
Schedule 8 of the Act. The table above therefore excludes
GBP4,151,532 and GBP2,026,674 of awards with no performance
conditions, which vested in 2010 and 2009 respectively.
Directors' remuneration (audited)
The information included below up to and including page 82 is
audited.
The remuneration of the directors of the Company during the year
for time served as a director is as follows:
Fixed pay Performance related pay
----------------------------------------------------------- ------------------------------------------------------------------------------
Long-term
Fixed incentives Performance Total remuneration in
Salary/ pay Annual (PSPs)(3) related pay 2016
Fee Benefits(1) Pension subtotal bonus(2) GBP subtotal GBP
GBP GBP GBP GBP
GBP GBP
--------------------------- ------------- --------------- ---------- ---------- ----------- ------------- --------------------------
Executive directors
---------------------------- ------------- --------------- ---------- ---------- ----------- ------------- --------------------------
Nick McKittrick 424,320 1,973 - 426,293 487,968 1,212,662 1,700,630 2,126,923
----------------- --------- ------------- --------------- ---------- ---------- ----------- ------------- --------------------------
Peter
Brooks-Johnson 355,368 1,973 15,849 373,190 408,673 1,015,601 1,424,274 1,797,464
----------------- --------- ------------- --------------- ---------- ---------- ----------- ------------- --------------------------
Robyn Perriss 281,112 1,240 13,233 295,585 323,279 803,392 1,126,671 1,422,256
----------------- --------- ------------- --------------- ---------- ---------- ----------- ------------- --------------------------
Non-executive directors
---------------------------- ------------- --------------- ---------- ---------- ----------- ------------- --------------------------
Scott Forbes 170,000 - - 170,000 - - - 170,000
----------------- --------- ------------- --------------- ---------- ---------- ----------- ------------- --------------------------
Colin Kemp 50,000 - - 50,000 - - - 50,000
----------------- --------- ------------- --------------- ---------- ---------- ----------- ------------- --------------------------
Ashley Martin 60,000 - - 60,000 - - - 60,000
----------------- --------- ------------- --------------- ---------- ---------- ----------- ------------- --------------------------
Peter Williams 65,000 - - 65,000 - - - 65,000
----------------- --------- ------------- --------------- ---------- ---------- ----------- ------------- --------------------------
Rakhi
Goss-Custard 50,000 - - 50,000 - - - 50,000
----------------- --------- ------------- --------------- ---------- ---------- ----------- ------------- --------------------------
Jacqueline de
Rojas 274(4) - - 274 - - - 274
----------------- --------- ------------- --------------- ---------- ---------- ----------- ------------- --------------------------
(1) Benefits in kind for the executive directors relate to
private medical insurance and the medical cash plan.
(2) The annual bonus amount relates to the accrued payment in
respect of the full year results for the year ended 31 December
2016 including the deferred element of 60%.
(3) The value of the nil cost PSPs vesting is calculated by
taking the number of nil cost options expected to vest in March
2017 (including dividend roll up), which are dependent on the
three-year performance period ended 31 December 2016 and
multiplying by the year end closing share price of GBP39.03.
(4) Fee for two days from appointment on 30 December 2016 to
year end.
The remuneration of the directors of the Company during 2015
was:
Fixed pay Performance related pay
---------------- ------------------------------------------------------- -------------------------------------------------------------------
Fixed Long-term Performance Total remuneration in
Salary/ pay Annual incentives related pay 2015
Fee Benefits(1) Pension subtotal bonus(2) (PSPs)(3) subtotal GBP
GBP GBP GBP GBP GBP
GBP GBP
---------------- ----------- ------------- --------------- ---------- ---------- ------------ ------------- --------------------------
Executive directors
----------------------------- ------------- --------------- ---------- ---------- ------------ ------------- --------------------------
Nick McKittrick 408,000 1,931 - 409,931 510,000 1,380,418 1,890,418 2,300,349
---------------- ----------- ------------- --------------- ---------- ---------- ------------ ------------- --------------------------
Peter
Brooks-Johnson 341,700 1,835 22,860 366,395 427,125 1,035,345 1,462,470 1,828,865
---------------- ----------- ------------- --------------- ---------- ---------- ------------ ------------- --------------------------
Robyn Perriss 270,300 1,834 21,816 293,950 337,875 638,399(6) 976,274 1,270,224
---------------- ----------- ------------- --------------- ---------- ---------- ------------ ------------- --------------------------
Non-executive directors
----------------------------- ------------- --------------- ---------- ---------- ------------ ------------- --------------------------
Scott Forbes 117,042 - - 117,042 - - - 117,042
---------------- ----------- ------------- --------------- ---------- ---------- ------------ ------------- --------------------------
Jonathan Agnew 20,632(4) - - 20,632 - - - 20,632
---------------- ----------- ------------- --------------- ---------- ---------- ------------ ------------- --------------------------
Colin Kemp 46,817 - - 46,817 - - - 46,817
---------------- ----------- ------------- --------------- ---------- ---------- ------------ ------------- --------------------------
Ashley Martin 52,669 - - 52,669 - - - 52,669
---------------- ----------- ------------- --------------- ---------- ---------- ------------ ------------- --------------------------
Judy Vezmar 16,506(4) - - 16,506 - - - 16,506
---------------- ----------- ------------- --------------- ---------- ---------- ------------ ------------- --------------------------
Peter Williams 54,410(5) - - 54,410 - - - 54,410
---------------- ----------- ------------- --------------- ---------- ---------- ------------ ------------- --------------------------
Rakhi
Goss-Custard 46,817 - - 46,817 - - - 46,817
---------------- ----------- ------------- --------------- ---------- ---------- ------------ ------------- --------------------------
(1) Benefits in kind for the executive directors relate to
private medical insurance and the medical cash plan.
(2) The annual bonus amount relates to the accrued payment in
respect of the full year results for the year ended 31 December
2015 including the deferred element of 60%.
(3) The value of the nil cost PSPs vesting is calculated by
taking the number of nil cost options expected to vest in March
2016 (including dividend roll up), which are dependent on the
three-year performance period ended 31 December 2015 and
multiplying by the year end closing share price of GBP41.25.
(4) Fee for the year up to retirement from the Board and
Committees at the AGM on 7 May 2015.
(5) Fee includes a pro-rated increase from 7 May 2015 for
appointment as Remuneration Committee Chairman and Senior
Independent Director.
(6) These relate to nil cost PSPs granted to Robyn Perriss prior
to her appointment as director.
Defined contribution pension
The Group operates a stakeholder pension plan for employees
under which the employer contributes 6% of base salary, subject to
the employee contributing a minimum of 3% of base salary. Nick
McKittrick chose not to participate in this arrangement. Peter
Brooks-Johnson and Robyn Perriss were members of the stakeholder
pension plan during 2015 and the Company contributed GBP22,860 and
GBP21,816 that year respectively; both directors elected to
withdraw from the pension plan during 2016 with contributions made
of GBP15,849 and GBP13,233 respectively. The Company does not
contribute to any personal pension arrangements.
How was pay linked to performance in 2016?
Annual bonus plan
The incentive for the financial year ended 31 December 2016 was
in the form of a cash bonus of up to 50% of salary and a DSP bonus
of up to 75% of salary (i.e. 125% in total). The bonus (both cash
and DSP elements) was determined by a mixture of underlying
operating profit performance (65%) and key performance indicators
(35%) relating to underlying drivers of long-term revenue
growth.
When comparing performance against the 2016 bonus targets set,
the Committee determined that 92% of the maximum achievable cash
and DSP bonus should be paid to the executive directors.
Accordingly, a cash bonus of 46% of base salary will be paid to the
executives and 69% of base salary will be granted to the executives
under the DSP, which will be deferred until March 2019. More
details are provided in the table below:
Measure Hurdle As a % of Actual Resulting bonus
maximum bonus performance % achieved
opportunity achieved
---------------- ----------------------------------------------- ---------------- --------------- ----------------
Financial targets
----------------------------------------------------------------------------------------------------------------------
Underlying
operating
profit
achieved:
GBP166.2m
Targets: The 2016
Underlying * GBP153.3m: 25% payout profit
operating represented
profit before growth of 15%
tax(1) * GBP163.8m: 100% payout 65% on 2015 65%
---------------- ----------------------------------------------- ---------------- --------------- ----------------
Strategic targets
----------------------------------------------------------------------------------------------------------------------
Traffic market Growth in absolute visits on 2015 compared to 15% Growth in 15%
share nearest competitor: absolute
* Same absolute growth: 25% payout visits was
17.75 times
higher than
* 50% higher absolute growth: 100% payout our nearest
competitor
---------------- ----------------------------------------------- ---------------- --------------- ----------------
Other 15% Revenue 7%
revenue(2) * Growth of 20%: 25% payout increased from
GBP14.5m to
GBP17.8m, an
* Growth of 30%: 100% payout increase of
23%
---------------- ----------------------------------------------- ---------------- --------------- ----------------
Employee Percentage of respondents to the employee 5% 95% of 5%
engagement (3) survey who say 'Rightmove is a great place to respondents
work': say 'Rightmove
* 90%: 25% payout is a great
place to work'
* 95%: 100% payout
---------------- ----------------------------------------------- ---------------- --------------- ----------------
Total 100% 92%
----------------------------------------------------------------- ---------------- --------------- ----------------
(1) Operating profit before share-based payments and NI on
share-based incentives.
(2) The targets relate to all revenue streams except Agency and
New Homes.
(3) Based on the results of the annual employee survey.
Long-term incentives
The PSP awards granted in March 2014 were subject to EPS (75% of
the awards) and relative TSR (25% of the awards) performance
conditions that related to the three-year period ended 31 December
2016.
The vesting schedule for the relative TSR element of executive
directors' 2014 PSP awards is set out below:
% of award vesting
Relative TSR condition (maximum 25%)
--------------------------- ----------------------
Less than the Index 0%
--------------------------- ----------------------
Equal to the Index 6.25%
--------------------------- ----------------------
25% higher than the Index 25%
--------------------------- ----------------------
Intermediate performance Straight-line vesting
--------------------------- ----------------------
At the end of the performance period, Rightmove's TSR was 53%
compared to 24% for the FTSE 250 Index. As this level of
outperformance is 29% higher than the Index, these options will
vest in full from 3 March 2017.
Rightmove's EPS growth is measured over a period of three
financial years (2014 to 2016). The EPS figure used is equivalent
to Rightmove's reported underlying basic EPS (before share-based
payments, NI on share-based incentives and no related adjustments
for tax) and the vesting schedule is set out below:
Underlying basic EPS growth % of award vesting
from 2014 to 2016 (maximum 75%)
---------------------------- ----------------------
Less than 40% 0%
---------------------------- ----------------------
40% 18.75%
---------------------------- ----------------------
70% 75%
---------------------------- ----------------------
Between 40% and 70% Straight-line vesting
---------------------------- ----------------------
At the end of the performance period, Underlying EPS was 142.8p
which from an Underlying basic EPS base of 81.0p results in growth
of 76%, exceeding the maximum 70% EPS growth target and will result
in full vesting of this part of the award (maximum of 75%) from 3
March 2017.
Share awards granted during the year
On 1 March 2016 Nick McKittrick, Peter Brooks-Johnson and Robyn
Perriss were awarded shares under the PSP, which vest in March
2019, and are subject to a mixture of EPS (75% of the awards) and
relative TSR (25% of the awards) performance with the greater
weighting on EPS to reflect its particular relevance to the
performance of the business.
Executive Basis of grant Number of shares Face value of award(1)
--------------------- -------------------- ----------------- -----------------------
Nick McKittrick 200% of base salary 21,912 GBP848,640
--------------------- -------------------- ----------------- -----------------------
Peter Brooks-Johnson 200% of base salary 18,351 GBP710,736
--------------------- -------------------- ----------------- -----------------------
Robyn Perriss 200% of base salary 14,516 GBP562,224
--------------------- -------------------- ----------------- -----------------------
(1) Based on the average mid-market share price for the three
consecutive days prior to grant, taken from the Daily Official
List, of GBP38.73.
The vesting schedule for the relative TSR element of executive
directors' 2016 PSP awards is set out below. It is consistent with
the TSR condition used for previous grants under the share option
scheme. Performance will be measured over three financial
years.
% of award vesting
Relative TSR condition (maximum 25%)
--------------------------- ----------------------
Less than the Index 0%
--------------------------- ----------------------
Equal to the Index 6.25%
--------------------------- ----------------------
25% higher than the Index 25%
--------------------------- ----------------------
Intermediate performance Straight-line vesting
--------------------------- ----------------------
Rightmove's EPS growth will be measured over a period of three
financial years (2016-2018). The EPS figure used will be equivalent
to the Group's underlying basic EPS (before share-based payments,
NI on share-based incentives and no related adjustments for
tax).
The following vesting schedule will apply for executive
directors' awards granted in 2016:
Underlying basic EPS growth % of award vesting
from 2016 to 2018 (maximum 75%)
------------------------------ ----------------------
Less than 25% 0%
------------------------------ ----------------------
Equal to 25% 18.75%
------------------------------ ----------------------
Equal to or greater than 55% 75%
------------------------------ ----------------------
Between 25% and 55% Straight-line vesting
------------------------------ ----------------------
The benchmark underlying basic EPS for the financial year 2015
from which these targets will be measured is 121.4p.
Share-based incentives held by the directors and not exercised
as at 31 December 2016
Average
Share-based Granted share Share-based
incentives in price incentives
held year/ Exercised at date held at
Date 1 January dividend Exercise in of 31 December Vesting Expiry
granted 2016 roll-up price year exercise 2016 date date
----------------- --------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
Executive directors
--------------------------------------------------------------------------------------------------------------------------------------------------
Nick
McKittrick 5/3/2009
(Unapproved) 279,755 - GBP2.24 - - 279,755 5/3/2012 4/3/2019
--------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
1/10/2012
(Sharesave) 694 - GBP12.95 (694)(5) GBP41.93 - 1/11/2015 30/4/2016
--------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
8/3/2013
(PSP) 32,279 - GBP0.00 - - 32,279 8/3/2016 7/3/2018
--------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
3/3/2014
(DSP) 9,224 - GBP0.00 (9,224)(3) GBP37.49 - 3/3/2016 2/3/2017
--------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
3/3/2014
(PSP) 30,018 - GBP0.00 - - 30,018 3/3/2017 2/3/2019
--------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
1/10/2014
(Sharesave) 456 - GBP19.72 - - 456 1/11/2017 30/4/2018
--------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
2/3/2015
(DSP) 7,546 (-) GBP0.00 - - 7,546 2/3/2017 1/3/2018
--------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
2/3/2015
(PSP) 29,321 (-) GBP0.00 - - 29,321 2/3/2018 1/3/2020
--------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
1/10/2015
(Sharesave) 304 (-) GBP29.60 - - 304 1/11/2018 30/4/2019
--------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
1/3/2016
(DSP) - 7,901(1) GBP0.00 - - 7,901 1/3/2018 28/2/2019
--------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
1/3/2016
(PSP) - 21,912(2) GBP0.00 - - 21,912 1/3/2019 28/2/2021
--------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
Total 389,597 29,813 (9,918) 409,492
---------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
Peter 10/10/2007
Brooks-Johnson (Unapproved) 75,000 - GBP5.22 - - 75,000 15/3/2011 9/10/2017
----------------- --------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
5/3/2009
(Unapproved) 139,286 - GBP2.24 - - 139,286 5/3/2012 4/3/2019
--------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
5/3/2010
(Unapproved) 52,553 - GBP6.66 - - 52,553 5/3/2013 4/3/2020
--------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
2/3/2012
(PSP) 23,951 928 GBP0.00 (24,879)(4) GBP37.49 - 2/3/2015 1/3/2017
--------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
8/3/2013
(PSP) 24,210 - GBP0.00 - - 24,210 8/3/2016 7/3/2018
--------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
3/3/2014
(DSP) 6,918 - GBP0.00 (6,918)(3) GBP37.44 - 3/3/2016 2/3/2017
--------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
3/3/2014
(PSP) 25,140 - GBP0.00 - - 25,140 3/3/2017 2/3/2019
--------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
1/10/2014
(Sharesave) 456 - GBP19.72 - - 456 1/11/2017 30/4/2018
--------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
2/3/2015
(DSP) 6,320 (-) GBP0.00 - - 6,320 2/3/2017 1/3/2018
--------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
2/3/2015
(PSP) 24,556 (-) GBP0.00 - - 24,556 2/3/2018 1/3/2020
--------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
1/10/2015
(Sharesave) 304 (-) GBP29.60 - - 304 1/11/2018 30/4/2019
--------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
1/3/2016
(DSP) - 6,617(1) GBP0.00 - - 6,617 1/3/2018 28/2/2019
--------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
1/3/2016
(PSP) - 18,351(2) GBP0.00 - - 18,351 1/3/2019 28/2/2021
--------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
Total 378,694 25,896 (31,797) 372,793
---------------------------------- ------------ ----------------- ------------ ------------ --------- ------------ ---------- ------------
Robyn
Perriss 8/3/2013
(PSP) 14,928 - GBP0.00 - - 14,928 8/3/2016 7/3/2018
------------------------- ------- ---------- --------- ------- ---------- ----------
3/3/2014
(DSP) 4,353 - GBP0.00 - - 4,353 3/3/2016 2/3/2017
------------------------- ------- ---------- --------- ------- ---------- ----------
3/3/2014
(PSP) 19,887 - GBP0.00 - - 19,887 3/3/2017 2/3/2019
------------------------- ------- ---------- --------- ------- ---------- ----------
1/10/2014
(Sharesave) 912 - GBP19.72 - - 912 1/11/2017 30/4/2018
------------------------- ------- ---------- --------- ------- ---------- ----------
2/3/2015
(DSP) 4,999 (-) GBP0.00 - - 4,999 2/3/2017 1/3/2018
------------------------- ------- ---------- --------- ------- ---------- ----------
2/3/2015
(PSP) 19,425 (-) GBP0.00 - - 19,425 2/3/2018 1/3/2020
------------------------- ------- ---------- --------- ------- ---------- ----------
1/3/2016
(DSP) - 5,234(1) GBP0.00 - - 5,234 1/3/2018 28/2/2019
------------------------- ------- ---------- --------- ------- ---------- ----------
1/3/2016
(PSP) - 14,516(2) GBP0.00 - - 14,516 1/3/2019 28/2/2021
------------------------- ------- ---------- --------- ------- ---------- ----------
Total 64,504 19,750 - 84,254
-------------------------- ------- ---------- --------- ------- ---------- ----------
(1) On 2 March 2016, the executive directors were awarded nil
cost options under the DSP, which vest in March 2018. The average
mid-market share price for the three consecutive preceding days,
used to calculate the number of shares awarded, was GBP38.73.
(2) On 2 March 2016, the executive directors were awarded nil
cost shares under the PSP, which vest in March 2019. Further
details are set out on pages 78 to 79.
(3) The nil cost deferred shares granted under the DSP on 3
March 2014, were exercisable from 3 March 2016 subject to annual
bonus targets which were met in full.
Nick McKittrick exercised 9,224 shares on 16 December 2016 and
sold 4,353 shares at an average market price of GBP37.49 per share
to satisfy the resulting tax liability and retained the balance of
4,871 shares.
Peter Brooks-Johnson exercised 6,918 shares on 16 December 2016
and sold 3,266 shares at an average market price of GBP37.49 per
share to satisfy the resulting tax liability and retained the
balance of 3,652 shares.
(4) On 2 March 2012, the executive directors were awarded nil
cost options under the PSP which vested in 2015 subject to EPS and
relative TSR performance measures, which were met in full. Peter
Brooks-Johnson exercised 24,879 shares (which included a dividend
roll-up of 928 shares) in December 2016, sold 11,743 upon exercise
at an average market price of GBP37.44 to satisfy the resulting tax
liability and retained the balance of 13,136 shares.
(5) In October 2012, Nick McKittrick was granted a Sharesave
option over 694 shares which vested in November 2015 at an exercise
price of GBP12.95. In April 2016, Nick exercised the option in full
and retained the shares.
Dilution
All existing executive share-based incentives can be satisfied
from shares held in the Rightmove Employees' Share Trust (EBT) and
shares held in treasury. It is intended that the 2017 share-based
incentive awards will also be settled from shares currently held in
the EBT or from shares held in treasury without any requirement to
issue further shares.
Directors' interests in shares
The interests (both beneficial and family interests) of the
directors in office at the date of this report in the share capital
of the Company were as follows:
Interests in Interests in
ordinary shares of share-based incentives
GBP0.01
---------------- ---------------------- ----------------------------------------------------------------------------------
PSP & DSP PSP & DSP awards (vested
awards but unexercised) Options (vested but
At (unvested) Options unexercised)
31 At 1 (unvested)
December January
2016 2016
---------------- ---------- ---------- ---------------- -------------------------- ------------ --------------------------
Executive
directors
---------------- ---------- ---------- ---------------- ----------------------------------------
Nick McKittrick 146,592 141,027 96,698 32,279 760 279,755
---------------- ---------- ---------- ---------------- -------------------------- ------------ --------------------------
Peter
Brooks-Johnson 55,146 38,358 80,984 24,210 760 266,839
---------------- ---------- ---------- ---------------- -------------------------- ------------ --------------------------
Robyn Perriss 5,833 5,833 64,061 19,281 912 -
---------------- ---------- ---------- ---------------- -------------------------- ------------ --------------------------
Non-executive
directors
---------------- ---------- ---------- ---------------- ----------------------------------------
Scott Forbes 319,300 319,300 - - - -
---------------- ---------- ---------- ---------------- -------------------------- ------------ --------------------------
Ashley Martin 2,060 2,060 - - - -
---------------- ---------- ---------- ---------------- -------------------------- ------------ --------------------------
Peter Williams 3,728 3,728 - - - -
---------------- ---------- ---------- ---------------- -------------------------- ------------ --------------------------
Colin Kemp 2,500 2,500 - - - -
---------------- ---------- ---------- ---------------- -------------------------- ------------ --------------------------
Rakhi
Goss-Custard 544 - - - - -
---------------- ---------- ---------- ---------------- -------------------------- ------------ --------------------------
Jacqueline de
Rojas - - - - - -
---------------- ---------- ---------- ---------------- -------------------------- ------------ --------------------------
Total 535,703 512,806 241,743 75,770 2,432 546,594
---------------- ---------- ---------- ---------------- -------------------------- ------------ --------------------------
-- The Company's shares in issue (including 2,271,725 shares
held in treasury) as at 31 December 2016 comprised 95,490,266
(2015: 97,741,977) ordinary shares of GBP0.01 each.
-- The closing share price of the Company was GBP39.03 as at 30
December 2016 (the last day of trading in 2016). The lowest and
highest share prices during the year were GBP31.73 and GBP43.02
respectively.
-- The executive directors are regarded as being interested, for
the purposes of the Companies Act 2006, in 343,275 (2015: 386,057)
ordinary shares of GBP0.01 each in the Company currently held by
the EBT as they are, together with other employees, potential
beneficiaries of the EBT.
-- The directors' beneficial holdings represent 0.6% of the
Company's shares in issue as at 31 December 2016 (2015: 0.5%)
(excluding shares held in treasury).
-- There have been no changes to the above interests between the
year-end and the date of this report.
Executive director share ownership guidelines are set out in the
Remuneration Policy Report on page 61. The interests of the
executive directors in office at 31 December 2016 in the share
capital of the Company as a percentage of base salary were as
follows:
Number of shares held Value of Value of shares as a %
Base salary at shares at of base salary
1 January 2017 31 December 2016 31 December 2016
---------------------- ------------------ ----------------------- ------------------ -----------------------
Executive directors
------------------------------------------ ----------------------- ------------------ -----------------------
Nick McKittrick GBP445,536 146,592 GBP5,721,486 1284%
---------------------- ------------------ ----------------------- ------------------ -----------------------
Peter Brooks-Johnson GBP373,136 55,146 GBP2,152,348 576%
---------------------- ------------------ ----------------------- ------------------ -----------------------
Robyn Perriss GBP320,000 5,833 GBP227,662 71%
---------------------- ------------------ ----------------------- ------------------ -----------------------
Percentage increase in the remuneration of the Chief Executive
Officer
The table below shows the movement in the salary, benefits and
annual bonus for the Chief Executive Officer (CEO) between the
current and previous financial year compared to that of the total
amounts for all employees of the Group for each of these elements
of pay.
The CEO's salary increased by 4%, in line with the average
workforce inflationary increase in 2016. The annual bonus of the
CEO decreased by 4% as a result of 92% of the maximum bonus being
achieved in relation to the 2016 bonus targets, compared with a
pay-out of 100% in 2015.
The average salary for all employees increased by 5% due to a 4%
universal cost of living increase in January 2016, together with
the investment in new heads in 2016, primarily being in sales and
technology roles at higher than average salary levels. The increase
in average employee benefits relates to an increase in the cost of
private healthcare from 1 March 2016, together with increased
take-up of BUPA health checks throughout the year.
2016 2015
GBP GBP % change
----------------------------- --------- --------- -----------
Chief Executive Officer
Salary 424,320 408,000 4%
----------------------------- --------- --------- -----------
Benefits 1,973 1,931 2%
----------------------------- --------- --------- -----------
Annual bonus 487,968 510,000 (4)%
----------------------------- --------- --------- -----------
Average of all employees(1)
Salary 45,148 42,883 5%
----------------------------- --------- --------- -----------
Benefits 834 734 14%
----------------------------- --------- --------- -----------
Annual bonus 2,394 2,364 1%
----------------------------- --------- --------- -----------
(1) Excludes the executive directors.
Relative importance of the spend on pay
The table below shows the total pay for all of Rightmove's
employees compared to other key financial indicators. Additional
information on the number of employees, total revenue and
underlying operating profit has been provided for context.
Year ended Year ended
31 December 2016 31 December 2015
% change
-------------------------------------------- ------------------ ------------------ -----------
Employee costs (refer Note 7) GBP27,423,000 GBP23,464,000 17%
-------------------------------------------- ------------------ ------------------ -----------
Dividends to shareholders (refer Note 12) GBP43,206,000 GBP36,469,000 18%
-------------------------------------------- ------------------ ------------------ -----------
Purchase of own shares (refer Note 22) GBP88,083,000 GBP76,071,000 16%
-------------------------------------------- ------------------ ------------------ -----------
Income tax (refer Note 10) GBP32,005,000 GBP27,636,000 16%
-------------------------------------------- ------------------ ------------------ -----------
Average number of employees (refer Note 7) 469 412 14%
-------------------------------------------- ------------------ ------------------ -----------
Revenue GBP219,993,000 GBP192,129,000 15%
-------------------------------------------- ------------------ ------------------ -----------
Underlying operating profit(1) GBP166,240,000 GBP144,271,000 15%
-------------------------------------------- ------------------ ------------------ -----------
(1) Before share-based payments and NI on share-based
incentives.
Retirement arrangements for Nick McKittrick
On 23 February 2017, Nick McKittrick notified the Board of his
intention to retire as a director and Chief Executive Officer
following the AGM on 9 May 2017. His employment with the Group will
end on 30 June 2017 following a handover period to ensure a smooth
transition process.
The Committee determined that he will continue to be paid his
salary and normal package of benefits up to the date of his
departure. He will not receive any bonus for the part of the 2017
financial year worked or be eligible for a PSP award in March 2017,
but will receive a bonus in respect of the 2016 financial year as
set out on page 75. In line with our Policy, 40% of his bonus will
be paid in cash with the balance deferred in shares for a period of
two years.
The Committee also determined that Nick McKittrick will be
treated as a good leaver in relation to his outstanding PSP and DSP
awards, with these awards vesting in line with the relevant plan
rules and the Remuneration Policy set out on pages 57 to 67.
Outstanding PSP awards will also be subject to the achievement of
performance conditions and vest pro-rata in accordance with the
plan rules.
Full details of the remuneration arrangements will be disclosed
in the 2017 Annual Report and the Company will publish a statement
in accordance with Section 430(2B) of the Companies Act following
the AGM.
The remuneration arrangements for Peter Brooks-Johnson who will
replace Nick McKittrick as
Chief Executive Officer will be in line with our Policy and our
recently concluded executive remuneration review. The Committee has
recommended that Peter Brooks-Johnson's basic salary is increased
to GBP445,536 with effect from 9 May 2017 to reflect his role and
responsibilities as Chief Executive Officer. The Committee also
agreed that a further PSP award will be made on 9 May 2017 to bring
his 2017 PSP award in line with his Chief Executive Officer
salary.
GOVERNANCE: Independent auditor's report to the members of
Rightmove plc only
Opinions and conclusions arising from our audit
1 Our opinion on the financial statements is unmodified
We have audited the financial statements of Rightmove plc for
the year ended 31 December 2016 set out on pages 89 to 124. In our
opinion:
-- the financial statements give a true and fair view of the
state of the Group's and of the Parent Company's affairs as at 31
December 2016 and of the Group's profit for the year then
ended;
-- the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU);
-- the Parent Company financial statements have been properly
prepared in accordance with IFRSs as adopted by the EU and as
applied in accordance with the provisions of the Companies Act
2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
2 Our assessment of risks of material misstatement
We summarise below the risks of material misstatement (unchanged
from 2015) that had the greatest effect on our audit, our key audit
procedures to address those risks and our findings from those
procedures in order that the Company's members as a body may better
understand the process by which we arrived at our audit opinion.
Our findings are based on procedures undertaken in the context of
and solely for the purpose of our statutory audit opinion on the
financial statements as a whole and consequently are incidental to
that opinion, and we do not express discrete opinions on separate
elements of the financial statements.
Revenue recognition GBP220.0m (2015: GBP192.1m) Risk vs 2015:
Unchanged
Refer to page 40 (Audit Committee report), page 100 (accounting
policy) and page 105 (financial disclosures)
-- The risk: Revenue primarily consists of subscription fees and
customer spend on additional advertising products in respect of
properties listed on Rightmove platforms and is recognised over the
period of subscription or as additional advertising products are
used. Individual contracts exist with each customer, which include
a variety of differing terms and conditions. Given the variety of
individual contract terms, membership offers some of which include
discounted periods, and that revenue is the most material figure in
the financial statements, we consider a significant risk exists in
relation to revenue recognition; specifically that the billing of
customers is not in line with the contract terms, with resulting
revenue not being recognised appropriately.
-- Our response: Our audit procedures included:
o Revenue controls: Testing the design, implementation and
operating effectiveness of the Group's controls over the billing of
customers in line with contract terms and product usage;
o Analysis of amounts billed: For Agency, New Homes and
Overseas, which covers 95% of revenue recognised in the year, we
performed detailed procedures using computer assisted audit
techniques to analyse the amounts invoiced to customers by product
in order to identify and investigate any anomalies and outliers. We
considered whether amounts invoiced had been recognised as revenue
in the correct accounting period by comparing the period of
subscription or usage of additional advertising products to the
timing of revenue recognition;
o Inspection of significant contracts: For a sample of the
highest revenue generating customers, as well as new customers in
growing revenue streams, we inspected contracts signed in the year,
to assess whether revenue has been recognised in accordance with
the specific contract terms and conditions and relevant accounting
standards;
o Membership campaigns: For new membership offers operated
during the year, we selected a sample of customers from each new
membership offer, inspected the underlying contract and reperformed
the revenue recognition calculations;
o Assessment of deferred revenue: We assessed the
appropriateness of deferred revenue at the period end with
reference to subscription fee billings in December, and specific
product deferrals where amounts are billed in advance but revenue
recognition deferred until use or expiry;
o Inspection of journal entries: We obtained 100% of the
journals posted in respect of revenue and, using computer assisted
audit techniques, analysed these to identify and investigate any
entries which appeared unusual based upon the specific
characteristics of the journal, considering in particular whether
the debit side of the journal entry was as expected, based on our
business understanding; and
o Adequacy of revenue disclosures: We also considered the
adequacy of the Group's accounting policy and disclosures (see
Notes 1, 2 and 5) in respect of revenue recognition, and whether
disclosures properly reflect the risks inherent in recognising
revenue.
-- Our findings:
o Our procedures did not identify weaknesses in the design and
operation of controls that would have required us to expand the
extent of our planned detailed testing;
o Our computer assisted audit techniques did not reveal any
material anomalies or outliers which we were unable to corroborate
and we found that revenue was recognised in line with the period of
subscription or usage of additional advertising products;
o We found that revenue was recognised in line with the
underlying contractual terms in respect of the newly-signed
contracts and membership campaigns selected for testing;
o We found no errors in the Group's calculation of deferred
revenue at the year end;
o Our analysis of unusual journal entries did not reveal any
material anomalies or outliers which we were unable to corroborate;
and
o We found the Group's disclosures to be proportionate in their
description of the judgements made by the Group.
3 Our application of materiality and an overview of the scope of our audit
The materiality for the Group financial statements as a whole
was set at GBP7.0m (2015: GBP6.7m), determined with reference to a
benchmark of Group profit before tax of which it represents 4.3%
(2015: 4.9%).
We reported to the Audit Committee any corrected or uncorrected
identified misstatements exceeding GBP0.35m (2015: GBP0.34m), in
addition to other identified misstatements that warranted reporting
on qualitative grounds. We report misstatements corrected by
management where we believe these will assist the Audit Committee
in fulfilling its governance responsibilities.
The Group audit team also audits the two (2015: one) wholly
owned subsidiaries, Rightmove Group Limited with a component
materiality of GBP5.6m (2015: GBP5.0m) and the wholly owned
subsidiary The Outside View Analytics Limited, acquired in the
year, with a component materiality of GBP25,000. The Group
procedures covered all of the operations of the Group, and
accordingly 100% of total Group revenue; 100% of Group profit
before taxation and 100% of total Group assets were audited.
4 Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion:
-- the part of the Directors' Remuneration Report to be audited
has been properly prepared in accordance with the Companies Act
2006;
-- the information given in the Strategic Report and the
Directors' Report for the financial year is consistent with the
financial statements; and
-- the information given in the Corporate Governance Report set
out on pages 43 to 44 with respect to internal control and risk
management systems in relation to financial reporting processes and
about share capital structures ("the specified Corporate Governance
information") is consistent with the financial statements.
Based solely on the work required to be undertaken in the course
of the audit of the financial statements and from reading the
Strategic Report, the Directors' Report and the Corporate
Governance Report:
-- we have not identified material misstatements in the
Strategic Report, the Directors' Report, or the specified Corporate
Governance information;
-- in our opinion, the Strategic Report and the Directors'
Report have been prepared in accordance with the Companies Act
2006; and
-- in our opinion, the Corporate Governance Report has been
prepared in accordance with rules 7.2.2, 7.2.3, 7.2.5, 7.2.6 and
7.2.7 of the Disclosure Rules and Transparency Rules of the
Financial Conduct Authority.
5 We have nothing to report on the disclosures of principal risks
Based on the knowledge we acquired during our audit, we have
nothing material to add or draw attention to in relation to:
-- the directors' viability statement on page 21, concerning the
principal risks, their management, and, based on that, the
directors' assessment and expectations of the Group's continuing in
operation over the three years to 31 December 2019; or
-- the disclosures in note 1 of the financial statements
concerning the use of the going concern basis of accounting.
6 We have nothing to report in respect of the matters on which
we are required to report by exception
Under ISAs (UK and Ireland) we are required to report to you if,
based on the knowledge we acquired during our audit, we have
identified other information in the annual report that contains a
material inconsistency with either that knowledge or the financial
statements, a material misstatement of fact, or that is otherwise
misleading.
In particular, we are required to report to you if:
-- we have identified material inconsistencies between the
knowledge we acquired during our audit and the directors' statement
that they consider that the annual report and financial statements
taken as a whole is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group's
position and performance, business model and strategy; or
-- the Audit Committee report does not appropriately address
matters communicated by us to the Audit Committee.
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
-- adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the Parent Company financial statements and the part of the
Directors' Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit; or
-- a Corporate Governance Statement has not been prepared by the Company.
Under the Listing Rules we are required to review:
-- the directors' statements, set out on pages 21 and 96 to 97,
in relation to going concern and longer-term viability; and
-- the part of the Corporate Governance Statement on pages 31 to
38 relating to the Company's compliance with the eleven provisions
of the 2014 UK Corporate Governance Code specified for our
review.
We have nothing to report in respect of the above
responsibilities.
Scope and responsibilities
As explained more fully in the Directors' Responsibilities
Statement set out on page 52, the directors are responsible for the
preparation of the financial statements and for being satisfied
that they give a true and fair view. A description of the scope of
an audit of financial statements is provided on the Financial
Reporting Council's website at www.frc.org.uk/auditscopeukprivate.
This report is made solely to the Company's members as a body and
is subject to important explanations and disclaimers regarding our
responsibilities, published on our website at
www.kpmg.com/uk/auditscopeukco2014b, which are incorporated into
this report as if set out in full and should be read to provide an
understanding of the purpose of this report, the work we have
undertaken and the basis of our opinions.
Karen Wightman (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
Altius House
One North Fourth Street
Milton Keynes
MK9 1NE
24 February 2017
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2016
2016 2015
Note GBP000 GBP000
------------------------------------------------------ ----- ---------- ---------
Revenue 5 219,993 192,129
------------------------------------------------------ ----- ---------- ---------
Administrative expenses (58,346) (54,954)
------------------------------------------------------ ----- ---------- ---------
Underlying operating profit 166,240 144,271
Share-based payments 24 (4,142) (3,765)
NI on share-based incentives 24 (451) (3,331)
Operating profit 6 161,647 137,175
------------------------------------------------------ ----- ---------- ---------
Financial income 8 109 112
Financial expenses 9 (209) (183)
------------------------------------------------------ ----- ---------- ---------
Net financial expense (100) (71)
------------------------------------------------------ ----- ---------- ---------
Profit before tax 161,547 137,104
Income tax expense 10 (32,005) (27,636)
------------------------------------------------------ ----- ---------- ---------
Profit for the year being total comprehensive income 129,542 109,468
------------------------------------------------------ ----- ---------- ---------
Attributable to:
Equity holders of the parent 129,542 109,468
------------------------------------------------------ ----- ---------- ---------
Earnings per share (pence)
Basic 11 137.87 114.01
Diluted 11 136.41 112.74
Dividends per share (pence) 12 46.00 38.00
Total dividends 12 43,206 36,469
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016
2016 2015
Note GBP000 GBP000
--------------------------------------------------------------- ------- --------- ---------
Non-current assets
Property, plant and equipment 13 2,288 2,239
Intangible assets 14 3,525 1,383
Deferred tax asset 16 6,942 6,791
--------------------------------------------------------------- ------- --------- ---------
Total non-current assets 12,755 10,413
--------------------------------------------------------------- ------- --------- ---------
Current assets
Trade and other receivables 17 29,924 27,523
Money market deposits 18 4,026 4,000
Cash and cash equivalents 18 13,749 8,418
--------------------------------------------------------------- ------- --------- ---------
Total current assets 47,699 39,941
--------------------------------------------------------------- ------- --------- ---------
Total assets 60,454 50,354
--------------------------------------------------------------- ------- --------- ---------
Current liabilities
Trade and other payables 19 (35,796) (31,618)
Income tax payable (16,256) (11,863)
Provisions 21 (185) -
Total current liabilities (52,237) (43,481)
--------------------------------------------------------------- ------- --------- ---------
Non-current liabilities
Provisions 21 (175) (236)
--------------------------------------------------------------- ------- --------- ---------
Total non-current liabilities (175) (236)
--------------------------------------------------------------- ------- --------- ---------
Total liabilities (52,412) (43,717)
--------------------------------------------------------------- ------- --------- ---------
Net assets 8,042 6,637
--------------------------------------------------------------- ------- --------- ---------
Equity
Share capital 22 955 977
Other reserves 23 477 455
Retained earnings 23 6,610 5,205
--------------------------------------------------------------- ------- --------- ---------
Total equity attributable to the equity holders of the parent 8,042 6,637
--------------------------------------------------------------- ------- --------- ---------
The financial statements were approved by the Board of directors
on 24 February 2017 and were signed on its behalf by:
Nick McKittrick
Director
Robyn Perriss
Director
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016
2016 2015
Note GBP000 GBP000
--------------------------------------------------------------- ------ ---------- ---------
Non-current assets
Investments 15 546,202 544,464
Deferred tax asset 16 3,757 3,581
--------------------------------------------------------------- ------ ---------- ---------
Total non-current assets 549,959 548,045
--------------------------------------------------------------- ------ ---------- ---------
Total assets 549,959 548,045
--------------------------------------------------------------- ------ ---------- ---------
Current liabilities
Trade and other payables 19 (30,152) (36,629)
Total current liabilities (30,152) (36,629)
--------------------------------------------------------------- ------ ---------- ---------
Net assets 519,807 511,416
--------------------------------------------------------------- ------ ---------- ---------
Equity
Share capital 22 955 977
Other reserves 23 113,051 109,631
Retained earnings 23 405,801 400,808
--------------------------------------------------------------- ------ ---------- ---------
Total equity attributable to the equity holders of the parent 519,807 511,416
--------------------------------------------------------------- ------ ---------- ---------
The financial statements were approved by the Board of directors
on 24 February 2017 and were signed on its behalf by:
Nick McKittrick
Director
Robyn Perriss
Director
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2016
2016 2015
Note GBP000 GBP000
-------------------------------------------------------- ------ ---------- ----------
Cash flows from operating activities
Profit for the year 129,542 109,468
Adjustments for:
Depreciation charges 13 1,241 934
Amortisation charges 14 378 361
Financial income 8 (109) (112)
Financial expenses 9 209 183
Share-based payments 24 4,142 3,765
Transaction costs on acquisition of subsidiary 27 42 -
Income tax expense 10 32,005 27,636
-------------------------------------------------------- ------ ---------- ----------
Operating cash flow before changes in working capital 167,450 142,235
Increase in trade and other receivables (2,237) (3,230)
Increase in trade and other payables 3,913 4,140
Increase in provisions 21 124 36
Cash generated from operating activities 169,250 143,181
Financial expenses paid (209) (183)
Income taxes paid (27,807) (26,869)
-------------------------------------------------------- ------ ---------- ----------
Net cash from operating activities 141,234 116,129
-------------------------------------------------------- ------ ---------- ----------
Cash flows from investing activities
Interest received 134 117
Acquisition of property, plant and equipment 13 (1,281) (1,593)
Acquisition of intangible assets 14 (478) (179)
Acquisition of subsidiary (net of cash acquired) 27 (2,088) -
Money market deposits 18 (26) (4,000)
Net cash used in investing activities (3,739) (5,655)
-------------------------------------------------------- ------ ---------- ----------
Cash flows from financing activities
Dividends paid 12 (43,206) (36,469)
Purchase of own shares for cancellation 22 (88,083) (76,071)
Purchase of own shares for share incentive plans 23 (751) (507)
Share-related expenses 22 (497) (615)
Proceeds on exercise of share-based incentives 23 373 401
Net cash used in financing activities (132,164) (113,261)
-------------------------------------------------------- ------ ---------- ----------
Net increase/(decrease) in cash and cash equivalents 5,331 (2,787)
Cash and cash equivalents at 1 January 8,418 11,205
-------------------------------------------------------- ------ ---------- ----------
Cash and cash equivalents at 31 December 18 13,749 8,418
-------------------------------------------------------- ------ ---------- ----------
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2016
Restated
2015
2016 (refer Note 1)
Note GBP000 GBP000
------------------------------------------------------- ------- ---------- ----------------
Cash flows from operating activities
Profit for the year 136,648 123,757
Adjustments for:
Financial income 28 (141,563) (130,263)
Financial expenses 28 527 547
Share-based payments 24 2,404 2,105
Income tax credit (1,074) (1,465)
Operating cash flow before changes in working capital (3,058) (5,319)
Increase in trade and other payables 19 3,058 5,319
Cash generated from operating activities - -
Net decrease in cash and cash equivalents - -
Cash and cash equivalents at 1 January - -
------------------------------------------------------- ------- ---------- ----------------
Cash and cash equivalents at 31 December 18 - -
------------------------------------------------------- ------- ---------- ----------------
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARED 31 DECEMBER 2016
Reverse
Own shares Other reserves acquisition Retained
Share capital held GBP000 reserve earnings Total equity
Note GBP000 GBP000 GBP000 GBP000 GBP000
--------------- ----- -------------- -------------- -------------- -------------- -------------- --------------
At 1 January
2015 1,000 (14,823) 294 138 15,839 2,448
Total
comprehensive
income
Profit for the
year - - - - 109,468 109,468
Transactions
with owners
recorded
directly in
equity
Share-based
payments 24 - - - - 3,765 3,765
Tax credit in
respect of
share-based
incentives
recognised
directly in
equity 10 - - - - 4,135 4,135
Dividends to
shareholders 12 - - - - (36,469) (36,469)
Exercise of
share-based
incentives 23 - 1,268 - - (867) 401
Purchase of
shares for SIP 23 - (507) - - - (507)
Cancellation of
own shares 22 (23) - 23 - (76,071) (76,071)
Share-related
expenses 22 - - - - (533) (533)
--------------- -----
At 31 December
2015 977 (14,062) 317 138 19,267 6,637
--------------- ----- -------------- -------------- -------------- -------------- -------------- --------------
At 1 January
2016 977 (14,062) 317 138 19,267 6,637
Total
comprehensive
income
Profit for the
year - - - - 129,542 129,542
Transactions
with owners
recorded
directly in
equity
Share-based
payments 24 - - - - 4,142 4,142
Tax credit in
respect of
share-based
incentives
recognised
directly in
equity 10 - - - - 5 5
Dividends to
shareholders 12 - - - - (43,206) (43,206)
Exercise of
share-based
incentives 23 - 366 - - 7 373
Purchase of
shares for SIP 23 - (751) - - - (751)
Cancellation of
own shares 22 (22) - 22 - (88,083) (88,083)
Share-related
expenses 22 - - - - (617) (617)
At 31 December
2016 955 (14,447) 339 138 21,057 8,042
--------------- ----- -------------- -------------- -------------- -------------- -------------- --------------
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARED 31 DECEMBER 2016
Reverse
Own shares Other acquisition Retained
Share capital held reserves reserve earnings Total equity
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--- --------------------- -------------- -------------- --------- -------------- -------------- --------------
At 1 January 2015 1,000 (11,917) 6,088 103,520 396,657 495,348
Total comprehensive
income
Profit for the year - - - - 123,757 123,757
Transactions with
owners recorded
directly in equity
Share-based payments 24 - - - - 2,105 2,105
Tax credit in
respect of
share-based
incentives
recognised directly
in equity 10 - - - - 2,482 2,482
Capital contribution 23 - - 1,660 - - 1,660
Dividends to
shareholders 12 - - - - (36,469) (36,469)
Transfer of shares
to SIP - (863) - - - (863)
Exercise of
share-based
incentives - 883 - - (883) -
Cancellation of own
shares 22 (23) - 23 - (76,071) (76,071)
Share-related
expenses 22 - - - - (533) (533)
At 31 December 2015 977 (11,897) 7,771 103,520 411,045 511,416
-------------------- ---- -------------- -------------- --------- -------------- -------------- --------------
At 1 January 2016 977 (11,897) 7,771 103,520 411,045 511,416
Total comprehensive
income
Profit for the year - - - - 136,648 136,648
Transactions with
owners recorded
directly in equity
Share-based payments 24 - - - - 2,404 2,404
Tax credit in
respect of
share-based
incentives
recognised directly
in equity 10 - - - - 24 24
Capital contribution 23 - - 1,738 - - 1,738
Dividends to
shareholders 12 - - - - (43,206) (43,206)
Transfer of shares
to SIP - (517) - - - (517)
Exercise of
share-based
incentives - 258 - - (258) -
Cancellation of own
shares 22 (22) - 22 - (88,083) (88,083)
Share-related
expenses 22 - - - - (617) (617)
At 31 December 2016 955 (12,156) 9,531 103,520 417,957 519,807
-------------------- ---- -------------- -------------- --------- -------------- -------------- --------------
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
1 General information
Rightmove plc (the Company) is a company registered in England
(Company no. 6426485) domiciled in the United Kingdom (UK). The
consolidated financial statements of the Company as at and for the
year ended 31 December 2016 comprise the Company and its interest
in its subsidiaries (together referred to as the Group).
The consolidated financial statements of the Group as at and for
the year ended 31 December 2016 are available upon request to the
Company Secretary from the Company's registered office at Turnberry
House, 30 Caldecotte
Lake Drive, Caldecotte, Milton Keynes, MK7 8LE or are available on the corporate website at plc.rightmove.co.uk.
Statement of compliance
The Group and Company financial statements have been prepared
and approved by the Board of directors in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union (Adopted IFRSs).
The consolidated financial statements were authorised for issue
by the Board of directors on 24 February 2017.
Basis of preparation
On publishing the Company financial statements here together
with the Group financial statements, the Company is taking
advantage of the exemption in s408 of the Companies Act 2006 not to
present its individual statement of comprehensive income and
related notes that form a part of these approved financial
statements.
The accounting policies set out below have been consistently
applied to both years presented, unless otherwise stated.
Following a reassessment of the presentation of the settlement
of dividends and share buybacks by Rightmove Group Limited on
behalf of the Company, the 2015 Company Statement of Cash Flows has
been restated. The restatement decreased cash generated from
operating activities by GBP113,155,000 and decreased cash used in
financing activities by GBP113,155,000 for the year ended 31
December 2015. It has had no impact on net assets as at 1 January
2015 or 31 December 2015, or the net cash flows and profit for the
year ended 31 December 2015. Refer to Note 28 for further details
of inter-group settlement arrangements.
The financial statements have been prepared on an historical
cost basis.
Basis of consolidation
Subsidiaries are entities controlled by the Group. Control
exists when the Group has existing rights that give it the ability
to direct the relevant activities of an entity and has the ability
to affect the returns the Group will receive as a result of its
involvement with the entity. In assessing control, potential voting
rights that are currently exercisable or convertible are taken into
account. The financial statements of subsidiaries are included in
the consolidated financial statements from the date that control
commences until the date that control ceases.
During the year the Group acquired The Outside View Analytics
Ltd ("Outside View"). The results of Outside View have been
consolidated from the date of acquisition, being 31 May 2016.
Details of the acquisition are set out in Note 27.
Changes in accounting policies
The accounting policies applied by the Group in these
consolidated financial statements are in accordance with Adopted
IFRSs and are the same as those applied by the Group in its
consolidated financial statements as at and for the year ended 31
December 2015.
Amendments to IAS 1 were adopted for the first time for the
financial year beginning 1 January 2016. This had no impact on the
Group financial statements.
Going concern
Throughout 2016, the Group was debt free and has continued to
generate significant cash and has an overall positive net asset
position. The Group had net cash balances of GBP13,749,000 at 31
December 2016 (2015: GBP8,418,000). The Group also had GBP4,026,000
of money market deposits (2015: GBP4,000,000).
The agreement with HSBC for a GBP10,000,000 committed revolving
loan facility expired on 9 February 2017. This has been replaced
with a new 12 month agreement with Barclays Bank Plc for a
GBP10,000,000 committed revolving loan facility that expires on 12
February 2018. No amount has been drawn under either facility in
either year.
During the year GBP131,289,000 (2015: GBP112,540,000) of cash
was returned to shareholders via dividends and discretionary share
buy backs.
The Board of directors is confident that with the existing cash
resources and banking facilities in place, coupled with the
strength of the underlying business model, the Group and the
Company will remain cash positive and will have adequate resources
to continue in operational existence for a period of 12 months from
the date of signing these accounts.
1 General information (continued)
Further information regarding the Group's business activities,
together with the factors likely to affect its future development,
performance and position are set out in the Strategic Report on
pages 1 to 26. The financial position of the Group, its cash flows,
liquidity position and borrowing facilities are described on pages
15 to 17. In addition Note 4 to the financial statements includes
the Group's objectives, policies and processes for managing its
capital; its financial risk management objectives; details of its
financial instruments and its exposures to credit risk and
liquidity risk.
Capital structure
The Company was incorporated and registered in England and Wales
on 14 November 2007 under the Companies Act 1985 as a private
company limited by shares with the name Rightmove Group Limited,
registered no. 6426485. The Company was
re-registered as a public limited company under the name
Rightmove Group plc on 29 November 2007. On 28 January 2008 the
Company became the holding company of Rightmove Group Limited
(formerly Rightmove plc, Company no. 3997679) and its subsidiaries
pursuant to a Scheme of Arrangement under s425 of the Companies Act
1985. The shares in the Company were admitted to trading on the
Official List of the London Stock Exchange on 28 January 2008 and
the Company immediately changed its name to Rightmove plc. Details
of the share capital of the Company are disclosed in Note 22.
Judgements and estimates
The preparation of the consolidated and Company financial
statements in conformity with Adopted IFRSs requires management to
make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of
assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making
judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised and in any future
periods, if applicable.
In particular, information about significant areas of estimation
uncertainty and critical judgements in applying accounting policies
that have the most significant effect on the amounts recognised in
the consolidated and Company financial statements is included in
the following notes:
Note 2 (j) Revenue recognition, specifically regarding the
period to which services relate and the recognition of revenue from
membership offers including discounted or free periods.
Notes 16 and 24 The choice of valuation methodology and the
inputs and assumptions used to calculate the initial fair value for
new share-based incentives granted and the rate at which the
related deferred tax asset is measured. The key estimates used in
calculating the fair value of the options are the fair value of the
Company's shares at the grant date, expected share price
volatility, risk-free interest rate, expected dividends, and
weighted average expected life of the instrument. In respect of
share-based incentives granted to employees, the number of
share-based incentives that are expected to vest is based upon
estimates of the number of employees that will forfeit their awards
through leaving the Group and the likelihood of any non-market
performance conditions being satisfied. Management regularly
performs a true-up of the estimate of the number of shares that are
expected to vest; this is dependent on the anticipated number of
leavers.
Non-GAAP (Generally Accepted Accounting Principles) performance
measures
In the analysis of the Group's financial performance certain
information disclosed in the financial statements may be prepared
on a non-GAAP basis or has been derived from amounts calculated in
accordance with IFRS but is not itself an expressly permitted GAAP
measure. These measures are reported in line with how financial
information is analysed by management. The key non-GAAP measures
presented by the Group are:
-- Underlying operating profit - which is defined as operating
profit before share-based payments and National Insurance on
share-based incentives; and
-- Underlying basic EPS - which is defined as profit for the
year before share-based payments and National Insurance, with no
related adjustment for tax, divided by the weighted average number
of shares in issue for the year.
The Directors believe that these non-GAAP measures provide a
more appropriate measure of the Group's business performance as
share-based payments, which are a significant non-cash charge are
driven by a valuation model, and NI on share-based incentives, is
driven by reference to the Rightmove plc share price and so subject
to volatility, rather than operational activity. The directors
therefore consider underlying operating profit to be the most
appropriate indicator of the performance of the business and
year-on-year trends. For simplicity no adjustment for tax is made
within the calculation of underlying basic EPS. The non-GAAP
measures are designed to increase comparability of the Group's
financial performance year-on-year.
2 Significant accounting policies
(a) Investments
Investments in subsidiaries are held at cost less any provision
for impairment in the parent Company financial statements.
(b) Intangible assets
(i) Goodwill
Goodwill arising on a business combination represents the
difference between the fair value of the consideration paid and the
fair value of the net identifiable assets acquired and is included
in intangible assets.
In respect of acquisitions prior to 1 January 2004, goodwill is
included on the basis of its deemed cost, which represents the
amount previously recorded under UK GAAP. The classification and
accounting treatment of business that occurred prior to 1 January
2004 was not reconsidered in preparing the Group's opening IFRS
statement of financial position at 1 January 2004.
Goodwill is stated at cost less any accumulated impairment
losses. Goodwill is tested annually for impairment. This applies to
all goodwill arising both before and after 1 January 2004.
(ii) Research and development
The Group undertakes research and development expenditure in
view of developing new products and improving the existing property
platforms. Expenditure on research activities, undertaken with the
prospect of gaining new technical knowledge and understanding, is
recognised in profit or loss as incurred.
Expenditure on development activities, whereby research findings
are applied to a plan or design for the production of a new product
or substantially enhanced website, is capitalised if the new
product or the enhanced website is technically and commercially
feasible, the Group has sufficient resources to complete
development, future economic benefits are probable and the Group
can measure reliably the expenditure attributable to the intangible
asset during its development. Capitalised costs are held as an
asset in progress until such point that the asset is brought into
use, at which point it is transferred to the appropriate intangible
asset category and amortisation is charged.
The expenditure capitalised includes subcontractors and direct
labour. Capitalised development expenditure is stated at cost less
accumulated amortisation and accumulated impairment losses.
Subsequent expenditure on capitalised intangible assets is
capitalised only when it increases the economic benefits embodied
in the specific asset to which it relates. All other expenditure is
expensed when incurred.
(iii) Computer software and licences
Computer software and externally acquired software licences are
capitalised and stated at cost less accumulated amortisation and
impairment losses. Amortisation is charged from the date the asset
is available for use. Amortisation is provided to write off the
cost less the estimated residual value of the computer software or
licence by equal annual instalments over its estimated useful
economic life as follows:
Computer software 20.0% - 33.3% per annum
Software licences 20.0% - 33.3% per annum
(iv) Market appraisal algorithm
The market appraisal algorithm identified on the acquisition of
the Outside View Analytics Ltd is valued using the reproduction
cost method based on market rate salaries. Amortisation is expensed
in the profit or loss on a straight-line basis over the estimated
useful economic life as follows:
Market appraisal algorithm 33.3% per annum
(c) Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and impairment losses. Depreciation is
provided to write off the cost less the estimated residual value of
property, plant and equipment by equal annual instalments over
their estimated useful economic lives as follows:
Office equipment, fixtures and fittings 20.0% per annum
Computer equipment 20.0% - 33.3% per annum
Leasehold improvements remaining life of the lease
2 Significant accounting policies (continued)
(d) Impairment
The carrying value of property, plant and equipment is reviewed
at each reporting date to determine whether there is any indication
of impairment. If any such indication exists, the asset's
recoverable amount is estimated. An impairment loss is recognised
for the amount by which the asset's carrying amount exceeds its
recoverable amount. The recoverable amount of non-financial assets
is the greater of their fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset. For an asset that does not
generate largely independent cash flows, the recoverable amount is
determined for the cash generating unit to which the asset
belongs.
Goodwill and intangible assets that have an indefinite useful
life are not subject to amortisation but are tested for impairment
annually and whenever there is an indication that they might be
impaired. An impairment loss is recognised for the amount by which
the carrying value of the asset exceeds its recoverable amount.
Investments are assessed for possible impairment when there is
an indication that the fair value of the investments may be below
the Company's carrying value. When such a condition is deemed to be
other than temporary, the carrying value of the investment is
written down to its fair value and the amount written off is
included in profit or loss. In making the determination as to
whether a decline is other than temporary, the Company considers
such factors as the duration and extent of the decline, the
investee's financial performance and the Company's ability and
intention to retain its investment for a period that will be
sufficient to allow for any anticipated recovery in the
investment's market value.
(e) Financial instruments
Trade receivables do not carry any interest and are initially
recognised at fair value and subsequently measured at amortised
cost less any impairment loss. A provision for impairment of trade
receivables is established when there is objective evidence that
the Group will not be able to collect all amounts due according to
the receivables' original terms.
Trade payables are not interest bearing and are initially
recognised at fair value and subsequently measured at amortised
cost. Trade payables are classified as current liabilities unless
the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting date.
Money market deposits are initially recorded at fair value and
subsequently measured at amortised cost. They represent deposits
with a maturity of over three months.
Inter-group balances and transactions, and any unrealised income
and expenses arising from inter-group transactions, are eliminated
in preparing the consolidated financial statements.
(f) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call
deposits with original maturities of three months or less.
(g) Provisions
A provision is recognised if, as a result of a past event, the
Group has a present legal or constructive obligation that can be
estimated reliably and it is probable that an outflow of economic
benefits will be required to settle the obligation.
Provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market
assessment of the time value of money and the risks specific to the
liability. The unwinding of the discount is recognised as a finance
cost.
(h) Employee benefits
(i) Pensions
The Group provides access to a stakeholder pension scheme (a
defined contribution pension plan) into which employees may elect
to contribute via salary exchange. Obligations for contributions to
defined contribution pension plans are recognised as an employee
benefit expense in profit or loss when they are incurred.
(ii) Employee share schemes
The Group provides share-based incentive plans allowing
executive directors and other employees to acquire shares in the
Company. An expense is recognised in profit or loss, with a
corresponding increase in equity, over the period during which the
employees become unconditionally entitled to acquire equity settled
share-based incentives.
Fair value at the grant date is measured using either the Monte
Carlo or Black Scholes pricing model as is most appropriate for
each scheme. Measurement inputs include share price on measurement
date, exercise price of the instrument, expected volatility (based
on weighted average historic volatility adjusted for changes
expected due to publicly available information), weighted average
expected life of the instruments (based on historical experience
and general option behaviour), expected dividends, and risk-free
interest rates (based on government bonds). Service and non-market
performance conditions attached to the awards are not taken into
account in determining the fair value.
2 Significant accounting policies (continued)
For share-based incentive awards with non-vesting conditions,
the grant date fair value of the share-based incentives is measured
to reflect such conditions and there is no true-up for differences
between expected and actual outcomes. When either the employee or
the Company chooses not to meet the non-vesting condition, the
failure to meet the non-vesting condition is treated as a
cancellation and the cost that would have been recognised over the
remainder of the vesting period is recognised immediately in profit
or loss.
(iii) Own shares held by The Rightmove Employees' Share Trust
(EBT)
The EBT is treated as an agent of Rightmove Group Limited, and
as such EBT transactions are treated as being those of Rightmove
Group Limited and are therefore reflected in the Group's
consolidated financial statements. In particular, at a consolidated
level, the EBT's purchases of shares in the Company are charged
directly to equity.
(iv) Own shares held by The Rightmove Share Incentive Plan Trust
(SIP)
The SIP is treated as an agent of Rightmove plc, and as such SIP
transactions are treated as being those of Rightmove plc and are
therefore reflected in the Group's consolidated financial
statements. In particular, at a consolidated level, the SIP's
purchases of shares in the Company are charged directly to
equity.
(v) National Insurance (NI) on share-based incentives
Employer's NI is accrued, where applicable, at a rate of 13.8%,
which management expects to be the prevailing rate when share-based
incentives are exercised. In the case of share options, it is
provided on the difference between the share price at the reporting
date and the average exercise price of share options. In the case
of nil cost performance shares and deferred shares, it is provided
based on the share price at the reporting date.
(i) Treasury shares and shares purchased for cancellation
When share capital recognised as equity is repurchased, the
amount of the consideration paid, including directly attributable
costs, is recognised as a deduction from equity. Repurchased shares
are either held in treasury or cancelled.
(j) Revenue
Revenue principally represents the amounts receivable from
customers in respect of membership of the Rightmove platforms.
Agency, New Homes, Overseas and Commercial revenue comprises
subscriptions for core listing fees and amounts paid for additional
advertising products. Contracts for these services are per branch
or branch equivalent for Agency and per development for New Homes.
They vary in length from one month to five years, but are typically
for periods of six to 12 months. Revenue is recognised over the
period of the contract or as advertising products are used.
Membership offers take place from time to time and may include
discounted products and free periods. These are recognised on a
monthly basis over the contract term.
Agency, Overseas and Commercial services are typically billed in
advance with revenue deferred until the service commencement date.
New Homes developers are billed monthly in arrears. Where invoices
are raised on other than a monthly basis, the amounts are
recognised as deferred or accrued revenue and released to the
profit or loss on a monthly basis in line with the provision of
services as stipulated in the contract terms.
Data Services revenue relates to fees generated for data and
valuation services under a variety of contractual arrangements.
Revenue is recognised when the service has been provided. Third
party advertising revenue represents amounts paid in respect of
non-property advertising on the Rightmove platforms and is
recognised in the month in which the service is provided. Consumer
Services revenue principally relates to payment for leads and is
recognised when the lead is generated. Data Services, third party
advertising and Consumer Services revenue is typically billed in
arrears.
(k) Segmental reporting
An operating segment is a component of the Group that engages in
business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to
transactions with any of the Group's other components. An operating
segment's operating results are reviewed regularly by the Group's
Chief Executive Officer to make decisions about resources to be
allocated to the segment and assess its performance and for which
discrete financial information is available.
(l) Leases
Operating lease rentals are charged to profit or loss on a
straight-line basis over the period of the lease. Where cash is
received in exchange for entering into a lease with rates above
market value, this upfront payment is deferred and released on a
straight-line basis over the lease term.
(m) Financial income and expenses
Financial income comprises interest receivable on cash balances,
money market deposits and dividend income. Interest income is
recognised as it accrues, using the effective interest method.
Dividend income is recognised on the date that the Company's right
to receive payment is established.
Financial expenses comprise banking facility fees and bank
charges and the unwinding of the discount on provisions.
2 Significant accounting policies (continued)
(n) Taxation
Income tax on the results for the year comprises current and
deferred tax. Income tax is recognised in profit or loss except to
the extent that it relates to items recognised directly in equity,
in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income
for the period net of any charge or credit posted directly to
equity, using tax rates enacted or substantially enacted at the
reporting date and any adjustment to tax payable in respect of
previous periods.
Deferred tax is provided in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes. The following temporary differences are not provided for:
the initial recognition of goodwill; the initial recognition of
assets or liabilities that affect neither accounting nor taxable
profit other than in a business combination, and the differences
relating to investments in subsidiaries to the extent that they
will probably not reverse in the foreseeable future. The amount of
deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantially enacted by
the reporting date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised.
In accordance with IAS 12, the Group policy in relation to the
recognition of deferred tax on share-based incentives is to include
the income tax effect of the tax deduction in profit or loss to the
value of the income tax charge on the cumulative IFRS 2 charge. The
remainder of the income tax effect of the tax deduction is
recognised in equity.
(o) Dividends
Dividends unpaid at the reporting date are only recognised as a
liability (and deduction to equity) at that date to the extent that
they are appropriately authorised and are no longer at the
discretion of the Company. Unpaid dividends that do not meet these
criteria are disclosed in the notes to the financial
statements.
(p) Earnings per share
The Group presents basic, diluted and underlying basic and
diluted earnings per share (EPS) data for its ordinary shares.
Basic EPS is calculated by dividing the profit or loss attributable
to equity holders of the Company by the weighted average number of
ordinary shares outstanding during the year, adjusted for own
shares held. Diluted EPS is determined by adjusting the profit or
loss attributable to ordinary shareholders and the weighted average
number of ordinary shares outstanding, adjusted for own shares
held, for the effects of all potential dilutive instruments, which
comprise share-based incentives granted to employees. The
calculation of underlying basic and diluted EPS is disclosed in
Note 11.
3 IFRSs not yet applied
A number of new standards, amendments to standards and
interpretations have been issued but are not yet effective for the
year ended 31 December 2016 and have not been applied in preparing
these consolidated financial statements.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 Revenue from Contracts with Customers was issued in 2014
and was endorsed by the EU in 2016. IFRS 15 establishes a
comprehensive framework for determining whether, how much and when
revenue is recognised. It replaces existing revenue recognition
guidance, including IAS 18 Revenue. IFRS 15 is effective for annual
periods beginning on or after 1 January 2018, with early adoption
permitted. The Group plans to adopt IFRS 15 in its financial
statements for the year ending 31 December 2018 and to use the
practical expedients for completed contracts.
At present revenue is recognised either over time where there is
continuing service provided by Rightmove to the customer or at the
point in time when the risks and rewards of ownership transfer to
the customer. Under IFRS 15 revenue will be recognised when
performance obligations are satisfied. For the Group the transfer
of control under IFRS 15 and satisfaction of performance
obligations is over time. We have undertaken a detailed analysis of
the impact of IFRS 15 on the Group which has shown that the
recognition of revenue will be consistent with the transfer of
risks and rewards to the customer under IAS 18. We have concluded
following this assessment that the implementation of IFRS 15 will
not have a significant impact on the Group's consolidated financial
statements.
IFRS 16 Leases
IFRS 16 Leases was issued in January 2016, although it has not
yet been endorsed by the EU. IFRS 16 introduces a single on-balance
sheet lease accounting model for lessees. A lessee recognises a
right-of-use asset representing its right to use the underlying
asset and a corresponding lease liability representing its
obligation to make lease payments. There are optional exemptions
for short-term leases and leases of low value items.
3 IFRSs not yet applied (continued)
IFRS 16 replaces existing leases guidance including IAS 17
Leases, IFRIC 4 Determining whether an Arrangement contains a
Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the
Substance of Transactions Involving the Legal Form of a Lease. The
standard is effective for annual periods beginning on or after 1
January 2019. Early adoption is permitted for entities that apply
IFRS 15 Revenue from Contracts with Customers at or before the date
of initial application of IFRS 16.
The Group has started a detailed assessment to quantify the
impact on its reported assets and liabilities of adoption of IFRS
16. So far, the most significant impact identified is that the
Group will recognise new assets and liabilities for its operating
leases in respect of office premises and company cars. In addition,
the nature of expenses related to those leases will change as the
straight-line operating lease expense will be replaced with a
depreciation charge for right-of-use assets and interest expense on
lease liabilities. The quantitative effect will depend on the
transition method chosen, the extent to which the Group uses the
practical expedients and recognition exemptions, and any additional
leases that the Group enters into. Once the detailed assessment has
been completed in 2017 the Group will confirm its transition date,
approach and related quantitative information.
Other amendments
There are no other new or amended standards expected to have a
significant impact on the Group's consolidated financial
statements.
4 Risk and capital management
Overview
The Group has exposure to the following risks from its use of
financial instruments:
-- credit risk
-- liquidity risk
-- market risk
This note presents information about the Group and Company's
exposure to each of the above risks, the Group's objectives,
policies and processes for measuring and managing risk and the
Group's management of capital. Further quantitative disclosures are
included throughout these consolidated financial statements.
The Board of directors has overall responsibility for the
establishment and oversight of the Group's risk management
framework. The primary method by which risks are monitored and
managed by the Group is through the monthly Executive Management
Board, where any significant new risks or change in status to
existing risks will be discussed and actions taken as
appropriate.
The Group's risk management policies are established to identify
and analyse the risks faced by the Group, to set appropriate risk
limits and controls and to monitor risks and adherence to limits.
Risk management policies and systems are reviewed regularly to
reflect changes in market conditions and the Group's activities.
The Group, through its training and management standards and
procedures, aims to develop a disciplined and constructive control
environment in which all employees understand their roles and
obligations.
The Audit Committee oversees how management monitors compliance
with the Group's internal controls and reviews the adequacy of the
risk management framework in relation to the risks faced by the
Group.
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or banking institution fails to meet its contractual
obligations.
The Group's exposure to credit risk is influenced mainly by the
individual characteristics of each customer. The Group provides
credit to customers in the normal course of business. The Group
provides its services to a wide range of customers in the UK and
overseas and therefore believes it has no material concentration of
credit risk.
More than 90.0% (2015: 90.0%) of the Group's Agency and New
Homes customers pay via monthly direct debit, minimising the risk
of non-payment. The Group establishes an allowance for impairment
that represents its estimate of incurred losses in respect of trade
and other receivables based on individually identified loss
exposures.
The Group's treasury policy is to monitor cash and deposit
balances on a daily basis to ensure that no more than GBP30,000,000
is held with any single institution.
Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulties in meeting the obligations associated with its
financial liabilities that are settled by delivering cash. The
Group and Company's approach to managing liquidity is to ensure, as
far as possible, that it will always have sufficient liquidity to
meet its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage
to the Group's reputation.
4 Risk and capital management (continued)
The Group's revenue model is largely subscription-based, which
results in a regular level of cash conversion allowing it to
service working capital requirements.
The Group and Company ensure that they have sufficient cash on
demand to meet expected operational expenses excluding the
potential impact of extreme circumstances that cannot reasonably be
predicted, such as natural disasters. Throughout the year, the
Group typically had sufficient cash on demand to meet operational
expenses, before financing activities, for a period of 95 days
(2015: 137 days).
The agreement with HSBC for a GBP10,000,000 committed revolving
loan facility expired on 9 February 2017. This has been replaced
with a new 12 month agreement with Barclays Bank Plc for a
GBP10,000,000 committed revolving loan facility that expires on 12
February 2018. No amount has been drawn under either facility in
either year.
Market risk
Market risk is the risk that changes in market prices such as
foreign exchange and interest rates will affect the Group's income.
The objective of market risk management is to manage and control
market risk exposures within acceptable parameters, while
optimising the return on risk.
(i) Currency risk
All of the Group's sales and more than 97.0% (2015: 95.0%) of
the Group's purchases are Sterling denominated, accordingly it has
no significant currency risk.
(ii) Interest rate risk
The Group and Company have no interest bearing financial
liabilities. The Group is exposed to interest rate risk on cash and
money market deposit balances.
Capital management
The Board of directors' policy is to maintain an efficient
statement of financial position so as to maintain investor,
creditor and market confidence and to sustain future development of
the business. The Board of directors considers that the future
working capital and capital expenditure requirements of the Group
will continue to be low and accordingly return on capital measures
are not key performance targets. The Board of directors monitors
the spread of the Company's shareholders as well as underlying
basic EPS.
The Board's policy is to return surplus capital to shareholders
through a combination of dividends and share buybacks.
(i) Dividend policy
The Board of directors has a progressive dividend policy and
monitors the level of dividends to ordinary shareholders in
relation to the growth in underlying basic EPS. The Board has
adopted this policy in order to align shareholder returns with the
underlying growth achieved in the profitability in the Group.
The capacity of the Group to make dividend payments is primarily
determined by the level of available retained earnings in the
Company, after deduction of own shares held, and the cash resources
of the Group. The retained earnings of the Company, after deduction
of own shares held, are GBP405,801,000 (2015: GBP400,808,000) as
set out in the Company statement of changes in shareholders' equity
on page 95. The Group has cash and money market deposits at 31
December 2016 of GBP17,775,000 (2015: GBP12,418,000), the majority
of which are held by the principal operating subsidiary Rightmove
Group Limited. The Group is well positioned to fund its future
dividends given the strong cash generative nature of the business
and in 2016 cash generated from operating activities was
GBP169,250,000 (2015: GBP143,181,000) representing an operating
cash conversion in excess of 100%.
(ii) Share buybacks
The Company purchases its own shares in the market; the timing
of these purchases depends on available free cash flow and market
conditions. In 2016, 2,251,711 (2015: 2,251,340) shares were bought
back and were cancelled at an average price of GBP39.12 (2015:
GBP33.79).
There were no changes in the Group's approach to capital
management during the year. Neither the Company nor any of its
subsidiaries are subject to externally imposed capital
requirements.
Operational risk
Operational risk is the risk of direct or indirect loss arising
from a wide variety of causes associated with the Group's
processes, personnel, technology and infrastructure, and from
external factors other than credit, market and liquidity risks such
as those arising from legal and regulatory requirements and
generally accepted standards of corporate behaviour. Operational
risks arise from all of the Group's operations.
The Group's objective is to manage operational risk so as to
balance the avoidance of financial losses and damage to the Group's
reputation with overall cost effectiveness and to avoid control
procedures that restrict initiative and creativity.
4 Risk and capital management (continued)
The primary responsibility for the development and
implementation of controls to address operational risk is assigned
to senior
management within each business unit. This responsibility is
supported by the development of overall Group standards for the
management of operational risk in the following areas:
-- requirements for appropriate segregation of duties, including
the independent authorisation of transactions;
-- requirements for the reconciliation and monitoring of transactions;
-- compliance with regulatory and other legal requirements;
-- documentation of controls and procedures;
-- requirements for the periodic assessment of operational risks
faced and the adequacy of controls and procedures to address the
risks identified;
-- requirements for reporting of operational losses and proposed remedial action;
-- development and regular testing of business continuity and disaster recovery plans;
-- regular testing of the security of the IT systems and
platforms, regular backups of key data and ongoing threat
monitoring to protect against the risk of cyber attack;
-- training and professional development; and
-- risk mitigation, including insurance where this is effective.
5 Operating segments
The Group determines and presents operating segments based on
internal information that is provided to the Chief Executive
Officer, who is the Group's Chief Operating Decision Maker.
The Group's reportable segments are as follows:
-- The Agency segment which provides resale and lettings
property advertising services on Rightmove's platforms; and
-- The New Homes segment which provides property advertising
services to new home developers and housing associations on
Rightmove's platforms.
The Other segment which represents activities under the
reportable segments threshold, comprises Overseas and Commercial
property advertising services and non-property advertising services
which include our third party advertising and Consumer Services as
well as Data Services. Management monitors the business segments at
a revenue and trade receivables level separately for the purpose of
making decisions about resources to be allocated and of assessing
performance. All revenues in both years are derived from third
parties and there are no inter-segment revenues.
Operating costs, financial income, financial expenses and income
taxes in relation to the Agency, New Homes and the Other segment
are managed on a centralised basis at a Rightmove Group Limited
level and as there are no internal measures of individual segment
profitability, relevant disclosures have been shown under the
heading of Central in the table below.
The Company has no reportable segments.
Agency New Subtotal Other Central Adjustments Total
GBP000 Homes GBP000 GBP000 GBP000 GBP000 GBP000
GBP000
---------------------- -------- -------- ---------- -------- ---------- ------------- ----------
Year ended
31 December
2016
Revenue 168,311 33,893 202,204 17,789 - - 219,993
Operating
profit(1) - - - - 166,240 (4,593)(2) 161,647
Depreciation
and amortisation - - - - (1,619) - (1,619)
Financial
income - - - - 109 - 109
Financial
expenses - - - - (209) - (209)
Trade receivables(3) 19,040 5,266 24,306 2,188 - 139(4) 26,633
Other segment
assets - - - - 33,753 68(5) 33,821
Segment
liabilities - - - - (52,205) (207)(4)(5) (52,412)
Capital
expenditure - - - - 1,759 - 1,759
---------------------- -------- -------- ---------- -------- ---------- ------------- ----------
Year ended
31 December
2015
Revenue 147,102 30,475 177,577 14,552 - - 192,129
Operating
profit(1) - - - - 144,271 (7,096)(2) 137,175
Depreciation
and amortisation - - - - (1,295) - (1,295)
Financial
income - - - - 112 - 112
Financial
expenses - - - - (183) - (183)
Trade receivables(3) 17,184 5,626 22,810 1,654 - 145(4) 24,609
Other segment
assets - - - - 25,742 3(5) 25,745
Segment
liabilities - - - - (43,569) (148)(4)(5) (43,717)
Capital
expenditure - - - - 1,772 - 1,772
---------------------- -------- -------- ---------- -------- ---------- ------------- ----------
(1) Operating profit is stated after the charge for depreciation
and amortisation.
(2) Operating profit does not include share-based payments
charge of GBP4,142,000 (2015: GBP3,765,000) and NI on share-based
incentives charge of GBP451,000 (2015: GBP3,331,000).
(3) The only segment assets that are separately monitored by the
Chief Operating Decision Maker relate to trade receivables net of
any associated provision for impairment. All other segment assets
are reported on a centralised basis.
(4) The adjustments column reflects the reclassification of
credit balances in accounts receivable made on consolidation for
statutory accounts purposes.
(5) The adjustments column reflects the reclassification of
debit balances in accounts payable made on consolidation for
statutory accounts purposes.
Geographic information
In presenting information on the basis of geography, revenue and
assets are based on the geographical location of customers.
2016 2015
Revenue Trade receivables Revenue Trade receivables
Group GBP000 GBP000 GBP000 GBP000
------------------- -------- ------------------ -------- ------------------
UK 214,536 26,124 188,102 24,220
Rest of the world 5,457 509 4,027 389
------------------- -------- ------------------ -------- ------------------
219,993 26,633 192,129 24,609
------------------- -------- ------------------ -------- ------------------
6 Operating profit
2016 2015
GBP000 GBP000
----------------------------------------------- -------- --------
Operating profit is stated after charging:
Employee benefit expense 27,443 23,464
Depreciation of property, plant and equipment 1,241 934
Amortisation of intangibles 378 361
Bad debt impairment charge 437 365
Operating lease rentals
Land and buildings 898 874
Other 549 537
----------------------------------------------- -------- --------
Auditor's remuneration
2016 2015
GBP000 GBP000
-------------------------------------------------------------------------------- -------- --------
Fees payable to the Company's auditor in respect of the audit
Audit of the Company's financial statements 18 15
Audit of the Company's subsidiaries pursuant to legislation 131 90
-------------------------------------------------------------------------------- -------- --------
Total audit remuneration 149 105
-------------------------------------------------------------------------------- -------- --------
Fees payable to the Company's auditor in respect of non-audit related services
Half year review of the condensed financial statements 18 15
Tax compliance services and advisory 1 14
All other services 2 1
-------------------------------------------------------------------------------- -------- --------
Total non-audit remuneration 21 30
-------------------------------------------------------------------------------- -------- --------
7 Employee numbers and costs
The average number of persons employed (including executive
directors) during the year, analysed by category, was as
follows:
2016 2015
Number of employees Number of employees
---------------- --------------------- ---------------------
Administration 448 391
Management 21 21
---------------- --------------------- ---------------------
469 412
---------------- --------------------- ---------------------
The aggregate payroll costs of these persons were as
follows:
2016 2015
GBP000 GBP000
----------------------- -------- --------
Wages and salaries 23,760 20,313
Social security costs 2,793 2,398
Pension costs 870 753
----------------------- -------- --------
27,423 23,464
----------------------- -------- --------
Social security costs do not include a charge of GBP451,000
(2015: GBP3,331,000) relating to NI on share-based incentives which
has been disclosed in the Statement of Comprehensive Income.
8 Financial income
2016 2015
GBP000 GBP000
--------------------------------------------------- --------- --------
Interest income on cash and money market balances 109 112
--------------------------------------------------- --------- --------
9 Financial expenses
2016 2015
GBP000 GBP000
-------------------- -------- ---------
Financial expenses 209 183
-------------------- -------- ---------
10 Income tax expense
2016 2015
GBP000 GBP000
------------------------------------------------------------ -------- --------
Current tax expense
Current year 33,048 27,922
Adjustment to current tax charge in respect of prior years (407) (257)
------------------------------------------------------------ -------- --------
32,641 27,665
------------------------------------------------------------ -------- --------
Deferred tax credit
Origination and reversal of temporary differences (636) (105)
Adjustment to deferred tax in respect of prior years - (1)
Reduction in tax rate - 77
------------------------------------------------------------ -------- --------
(636) (29)
------------------------------------------------------------ -------- --------
Total income tax expense 32,005 27,636
------------------------------------------------------------ -------- --------
Income tax credit recognised directly in equity
2016 2015
GBP000 GBP000
------------------------------------------------------- -------- ---------
Current tax
Share-based incentives (441) (1,876)
------------------------------------------------------- -------- ---------
Deferred tax
Share-based incentives (refer Note 16) 436 (2,408)
Reduction in tax rate - 149
------------------------------------------------------- -------- ---------
436 (2,259)
------------------------------------------------------- -------- ---------
Total income tax credit recognised directly in equity (5) (4,135)
------------------------------------------------------- -------- ---------
Total income tax recognised directly in equity in respect of the
Company was a credit of GBP24,000 (2015: GBP2,482,000 credit).
Reconciliation of effective tax rate
The Group's income tax expense for the year is lower in both
years than the standard rate of corporation tax in the UK of 20.0%
(2015: 20.3%). The differences are explained below:
2016 2015
GBP000 GBP000
------------------------------------------------------------- --------- ---------
Profit before tax 161,547 137,104
Current tax at 20.0% (2015: 20.3%) 32,309 27,764
Reduction in tax rate - 77
Non-deductible expenses 70 46
Share-based incentives 33 7
Adjustment to current tax charge in respect of prior years (407) (257)
Adjustment to deferred tax charge in respect of prior years - (1)
32,005 27,636
------------------------------------------------------------- --------- ---------
The Group's consolidated effective tax rate on the profit of
GBP161,547,000 for the year ended 31 December 2016
is 19.8% (2015: 20.2%).
The difference between the standard rate and effective rate at
31 December 2016 is attributable to a prior year adjustment of 0.3%
(2015: 0.2%) primarily in respect of research and development tax
relief, offset by disallowable expenditure of 0.1% (2015: 0.1%)
11 Earnings per share (EPS)
Weighted average number of ordinary shares
Total earnings
GBP000 Pence per share
----------------------------- -------------------------------------------- ---------------- -----------------
Year ended 31 December 2016
Basic EPS 93,960,353 129,542 137.87
Diluted EPS 94,967,543 129,542 136.41
Underlying basic EPS 93,960,353 134,135 142.76
Underlying diluted EPS 94,967,543 134,135 141.24
Year ended 31 December 2015
Basic EPS 96,014,753 109,468 114.01
Diluted EPS 97,097,566 109,468 112.74
Underlying basic EPS 96,014,753 116,564 121.40
Underlying diluted EPS 97,097,566 116,564 120.05
----------------------------- -------------------------------------------- ---------------- -----------------
Weighted average number of ordinary shares (basic)
2016 2015
Number of shares Number of shares
----------------------------------------------------------------------------- ------------------- ------------------
Issued ordinary shares at 1 January less ordinary shares held by the EBT and
SIP Trust 97,318,120 99,396,818
Less own shares held in treasury at the beginning of the year (2,322,314) (2,505,430)
Effect of own shares purchased for cancellation (1,069,275) (1,034,666)
Effect of share-based incentives exercised 34,560 158,344
Effect of shares purchased by the EBT (738) (313)
Issued ordinary shares at 31 December less ordinary shares held by the EBT
and SIP Trust 93,960,353 96,014,753
----------------------------------------------------------------------------- ------------------- ------------------
Weighted average number of ordinary shares (diluted)
For diluted EPS, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all potentially
dilutive shares. The Group's potential dilutive instruments are in
respect of share-based incentives granted to employees, which will
be settled by ordinary shares held by the EBT, the SIP and shares
held in treasury.
2016 2015
Number of shares Number of shares
------------------------------------------------------- ------------------ ------------------
Weighted average number of ordinary shares (basic) 93,960,353 96,014,753
Dilutive impact of share-based incentives outstanding 1,007,190 1,082,813
94,967,543 97,097,566
------------------------------------------------------- ------------------ ------------------
The average market value of the Group's shares for the purposes
of calculating the dilutive effect of share-based incentives was
based on quoted market prices for the period during which the
share-based incentives were outstanding.
Underlying EPS
Underlying EPS is calculated by taking basic earnings for the
year and adding back the charge for share-based payments and the
charge for NI on share-based incentives but without any adjustment
to the tax charge in respect of these items. A reconciliation of
the basic earnings for the year to the underlying earnings is
presented below:
2016 2015
GBP000 GBP000
---------------------------------- -------- --------
Basic earnings for the year 129,542 109,468
Share-based payments 4,142 3,765
NI on share-based incentives 451 3,331
Underlying earnings for the year 134,135 116,564
---------------------------------- -------- --------
12 Dividends
Dividends declared and paid by the Company were as follows:
2016 2015
Pence per share GBP000 Pence per share GBP000
---------------------------- ---------------- ------- ---------------- -------
2014 final dividend paid - - 22.0 21,162
2015 interim dividend paid - - 16.0 15,307
2015 final dividend paid 27.0 25,442 - -
2016 interim dividend paid 19.0 17,764 - -
---------------------------- ---------------- ------- ---------------- -------
46.0 43,206 38.0 36,469
---------------------------- ---------------- ------- ---------------- -------
After the reporting date a final dividend of 32.0p (2015: 27.0p)
per qualifying ordinary share being GBP29,696,000 (2015:
GBP25,547,000) was proposed by the Board of directors.
The 2015 final dividend paid on 3 June 2016 was GBP25,442,000
being a difference of GBP105,000 compared to that reported in the
2015 Annual Report, which was due to a decrease in the ordinary
shares entitled to a dividend between 31 December 2015 and the
final dividend record date of 6 May 2016.
The 2016 interim dividend paid on 4 November 2016 was
GBP17,764,000 being a difference of GBP172,000 compared to that
reported in the 2016 Half Year Report, which was due to a decrease
in the ordinary shares entitled to a dividend between 30 June 2016
and the interim dividend record date of 7 October 2016.
The terms of the EBT provide that dividends payable on the
ordinary shares held by the EBT are waived. No provision was made
for the final dividend in either year and there are no income tax
consequences.
13 Property, plant and equipment
Office equipment, Computer equipment Leasehold improvements
fixtures & fittings GBP000 GBP000 Total
Group GBP000 GBP000
--------------------------------------- --------------------- ------------------- ----------------------- --------
Cost
At 1 January 2016 769 5,823 451 7,043
Additions 58 1,223 - 1,281
Acquired through a business
combination 2 7 - 9
At 31 December 2016 829 7,053 451 8,333
--------------------------------------- --------------------- ------------------- ----------------------- --------
Depreciation
At 1 January 2016 (586) (4,010) (208) (4,804)
Charge for year (92) (1,091) (58) (1,241)
At 31 December 2016 (678) (5,101) (266) (6,045)
--------------------------------------- --------------------- ------------------- ----------------------- --------
Net book value
At 31 December 2016 151 1,952 185 2,288
--------------------------------------- --------------------- ------------------- ----------------------- --------
At 1 January 2016 183 1,813 243 2,239
--------------------------------------- --------------------- ------------------- ----------------------- --------
Office equipment, Computer equipment Leasehold improvements
fixtures & fittings GBP000 GBP000 Total
Group GBP000 GBP000
--------------------- --------------------- ------------------- ----------------------- --------
Cost
At 1 January 2015 713 4,286 451 5,450
Additions 56 1,537 - 1,593
At 31 December 2015 769 5,823 451 7,043
--------------------- --------------------- ------------------- ----------------------- --------
Depreciation
At 1 January 2015 (506) (3,214) (150) (3,870)
Charge for year (80) (796) (58) (934)
At 31 December 2015 (586) (4,010) (208) (4,804)
--------------------- --------------------- ------------------- ----------------------- --------
Net book value
At 31 December 2015 183 1,813 243 2,239
--------------------- --------------------- ------------------- ----------------------- --------
At 1 January 2015 207 1,072 301 1,580
--------------------- --------------------- ------------------- ----------------------- --------
The Company had no property, plant or equipment in either
year.
14 Intangible assets
Market
Computer Asset appraisal
Goodwill software in algorithm Total
Group GBP000 GBP000 progress GBP000 GBP000
GBP000
----------------------- ----------- ----------- ----------- ----------- ---------
Cost
At 1 January 2016 732 4,364 - - 5,096
Additions - 275 - - 275
Internally generated - - 203 - 203
Acquired through a
business combination 1,733 - - 309 2,042
----------------------- ----------- ----------- ----------- ----------- ---------
At 31 December 2016 2,465 4,639 203 309 7,616
----------------------- ----------- ----------- ----------- ----------- ---------
Amortisation
At 1 January 2016 - (3,713) - - (3,713)
Charge for year - (318) - (60) (378)
----------------------- ----------- ----------- ----------- ----------- ---------
At 31 December 2016 - (4,031) - (60) (4,091)
----------------------- ----------- ----------- ----------- ----------- ---------
Net book value
At 31 December 2016 2,465 608 203 249 3,525
----------------------- ----------- ----------- ----------- ----------- ---------
At 1 January 2016 732 651 - - 1,383
----------------------- ----------- ----------- ----------- ----------- ---------
Goodwill acquired of GBP1,733,000 relates to the goodwill
recognised on the acquisition of The Outside View Analytics Limited
('Outside View'), being intangible assets that are not separately
identifiable under IFRS 3. The goodwill represents value arising
from the skills and knowledge of Outside View's workforce as well
as the ability to develop an enhanced product and service offering
that the Board believe will drive an increase in the quantity and
quality of predictive analytical data services provided to
customers.
The asset in progress consists of capitalised development costs
for a significant upgrade to a customer facing software application
used by our Data Services business. The market appraisal algorithm
relates to the intangible asset recognised on acquisition of
Outside View.
Computer software
Goodwill GBP000 Total
Group GBP000 GBP000
--------------------- ----------- ------------------- ---------
Cost
At 1 January 2015 732 4,185 4,917
Additions - 179 179
--------------------- ----------- ------------------- ---------
At 31 December 2015 732 4,364 5,096
--------------------- ----------- ------------------- ---------
Amortisation
At 1 January 2015 - (3,352) (3,352)
Charge for year - (361) (361)
--------------------- ----------- ------------------- ---------
At 31 December 2015 - (3,713) (3,713)
--------------------- ----------- ------------------- ---------
Net book value
At 31 December 2015 732 651 1,383
--------------------- ----------- ------------------- ---------
At 1 January 2015 732 833 1,565
--------------------- ----------- ------------------- ---------
The Company had no intangible assets in either year.
Impairment testing for cash generating units containing
goodwill
For the purpose of impairment testing, goodwill is allocated to
the Group's Agency segment which represents the lowest level within
the Group at which goodwill is monitored for internal management
purposes, which is not higher than the Group's operating segments
as reported in Note 5.
The carrying value of GBP2,465,000 goodwill, comprises
GBP732,000 of purchased goodwill arising pre-transition to IFRS and
GBP1,733,000 on acquisition of the Outside View. Goodwill arising
from the acquisition of the Outside View has been allocated to the
Agency segment as the revenue expected from the Outside View
product is attributable to Agency customers.
Given the low level of significance of the total goodwill
balance and strong growth in the Agency segment revenue in the
year, with no impairment indicators present, the disclosures as
required by IAS 36 Impairment of Assets have not been made.
15 Investments
The subsidiaries of the Group as at 31 December 2016 are as
follows:
Country of incorporation
Company Nature of business Holding Class of shares
------------------------------- ---------------------------- ------------------------- --------- -----------------
Online property advertising
Rightmove Group Limited England and Wales 100% Ordinary
Property analytics services
The Outside View Analytics England and Wales 100% Ordinary
Ltd
Rightmove.co.uk Limited Dormant England and Wales 100% Ordinary
Rightmove Home Information
Packs Limited Dormant England and Wales 100% Ordinary
------------------------------- ---------------------------- ------------------------- --------- -----------------
All the above subsidiaries are included in the Group
consolidated financial statements. The registered office for all
subsidiaries
of the Group is Turnberry House, 30 Caldecotte Lake Drive,
Caldecotte, Milton Keynes, MK7 8LE.
2016 2015
Company GBP000 GBP000
-------------------------------------------------------------------- ---------- ----------
Investment in subsidiary undertakings
At 1 January 544,464 542,804
Additions - subsidiary share-based payments charge (refer Note 23) 1,738 1,660
-------------------------------------------------------------------- ---------- ----------
At 31 December 546,202 544,464
-------------------------------------------------------------------- ---------- ----------
In 2008, the Company became the holding company of Rightmove
Group Limited (formerly Rightmove plc, Company no. 3997679) and its
subsidiaries pursuant to a Scheme of Arrangement under s425 of the
Companies Act 1985 by way of a share-for-share exchange. Following
the Scheme of Arrangement, the Company underwent a court-approved
capital reduction. The consolidated assets and liabilities of the
Group immediately after the Scheme were substantially the same as
the consolidated assets and liabilities of the Group immediately
prior to the Scheme.
Following the capital reconstruction in 2008 all employees'
share-based incentives were transferred to the new holding company,
Rightmove plc. In addition certain directors' contracts of
employment were transferred from Rightmove Group Limited to
Rightmove plc, whilst all other employees remained employed by
Rightmove Group Limited. Accordingly the share-based payments
charge has been split between the Company and Rightmove Group
Limited with GBP1,738,000 (2015: GBP1,660,000) being recognised in
the Company accounts as a capital contribution to its
subsidiary.
16 Deferred tax asset
Deferred tax is presented net on the balance sheet in so far as
a right of offset exists. The net deferred tax asset is
attributable to the following:
Group Company
Share-based Property, Market Share-based
incentives plant appraisal incentives
GBP000 and Provisions algorithm Total GBP000
equipment GBP000 GBP000 GBP000
GBP000
------------------------ ------------ ----------- ------------- ----------- --------- ------------
At 1 January
2016 6,509 179 103 - 6,791 3,581
Arising on
business combination - - - (49) (49) -
Recognised
in income 531 73 22 10 636 346
Recognised
directly in
equity (436) - - - (436) (170)
------------------------ ------------ ----------- ------------- ----------- --------- ------------
At 31 December
2016 6,604 252 125 (39) 6,942 3,757
------------------------ ------------ ----------- ------------- ----------- --------- ------------
At 1 January
2015 4,224 197 82 - 4,503 2,667
Recognised
in income 26 (18) 21 - 29 (86)
Recognised
directly in
equity 2,259 - - - 2,259 1,000
------------------------ ------------ ----------- ------------- ----------- --------- ------------
At 31 December
2015 6,509 179 103 - 6,791 3,581
------------------------ ------------ ----------- ------------- ----------- --------- ------------
The increase in the deferred tax asset relating to share-based
incentives at 31 December 2016 is due to fewer exercises of shares
options in 2016 which together with the number of new share scheme
awards has outweighed the reduction in the Company's share price
from GBP41.25 at 31 December 2015 to GBP39.03 at 31 December
2016.
16 Deferred tax asset (continued)
A reduction in the UK corporation tax rate from 21% to 20%
(effective from 1 April 2015) was substantively enacted on
2 July 2013. Further reductions to 19% (effective from 1 April
2017) and to 18% (effective 1 April 2020) were substantively
enacted on 26 October 2015, and an additional reduction to 17%
(effective 1 April 2020) was substantively enacted on
6 September 2016. This will reduce the Group's future current
tax charge accordingly. The deferred tax asset at
31 December 2016 has been calculated at the rate of 19% which
represents the average expected rate at which the net deferred tax
asset will reverse in the future.
17 Trade and other receivables
2016 2015
Group GBP000 GBP000
---------------------------------------------------- ------------ ---------------
Trade receivables 27,061 25,055
Less provision for impairment of trade receivables (428) (446)
---------------------------------------------------- ------------ ---------------
Net trade receivables 26,633 24,609
Prepayments 2,826 2,529
Accrued income 338 301
Interest receivable - 25
Other debtors 127 59
29,924 27,523
---------------------------------------------------- ------------ ---------------
Exposure to credit and currency risks and impairment losses
relating to trade and other receivables are disclosed in Note
26.
The Company has no trade and other receivables in either
year.
18 Cash and deposits
2016 2015
Group GBP000 GBP000
--------------------------- -------- --------
Cash and cash equivalents 13,749 8,418
Money market deposits 4,026 4,000
--------------------------- -------- --------
17,775 12,418
--------------------------- -------- --------
Cash balances with an original maturity of less than three
months were held in current accounts during the year and attracted
interest at a weighted average rate of 0.4% (2015: 0.5%).
The cash at bank balance includes GBP1,848,000 which is
restricted to use in accordance with the deeds of the EBT.
Money market deposits with an original maturity of more than
three months and less than a year, attracted interest at a weighted
average rate of 0.7% (2015: 0.8%).
The Company had cash and cash equivalent balances at 31 December
2016 of GBP180 (2015: GBP148).
19 Trade and other payables
Group Company
2016 2015 2016 2015
GBP000 GBP000 GBP000 GBP000
------------------------------------ -------- -------- -------- --------
Trade payables 1,266 592 - -
Trade accruals 7,644 7,336 4,835 4,721
Other creditors 46 69 - -
Other taxation and social security 9,172 7,428 - -
Deferred revenue 17,668 16,193 - -
Inter-group payables - - 25,317 31,908
35,796 31,618 30,152 36,629
------------------------------------ -------- -------- -------- --------
Exposure to currency and liquidity risk relating to trade and
other payables is disclosed in Note 26.
20 Loans and borrowings
The agreement with HSBC for a GBP10,000,000 committed revolving
loan facility expired on 9 February 2017. This has been replaced
with a new 12 month agreement with Barclays Bank Plc for a
GBP10,000,000 committed revolving loan facility that expires on 12
February 2018. No amount has been drawn under either facility in
either year.
The Company had no loans and borrowings in either year.
21 Provisions
2016 2015
Dilapidations Dilapidations
provision Other Total provision Total
GBP000 GBP000 GBP000 GBP000 GBP000
---------------- -------------- --------- --------- -------------- ---------
At 1 January 236 - 236 200 200
Charged in
the year 36 88 124 36 36
----------------- -------------- --------- --------- -------------- ---------
At 31 December 272 88 360 236 236
----------------- -------------- --------- --------- -------------- ---------
Current 185 - 185 - -
Non-current 87 88 175 236 236
----------------- -------------- --------- --------- -------------- ---------
The lease dilapidations provision is charged throughout the
lives of the leases and is based on an estimated cost to make good
per square foot multiplied by the floor area of each of the
premises.
The Company had no provisions in either year.
22 Share capital
2016 2015
Amount Number Amount Number
GBP000 of shares GBP000 of shares
---------------------------- -------- ------------ -------- ------------
In issue ordinary
shares of GBP0.01
each
At 1 January 977 97,741,977 1,000 99,993,317
Purchase and cancellation
of own shares (22) (2,251,711) (23) (2,251,340)
---------------------------- -------- ------------ -------- ------------
At 31 December 955 95,490,266 977 97,741,977
---------------------------- -------- ------------ -------- ------------
The authorised share capital is 300,000,000 ordinary GBP0.01
shares in both years.
All issued shares are fully paid. The holders of ordinary shares
are entitled to receive dividends as declared from time to time and
are entitled to one vote per ordinary share at general meetings of
the Company.
In June 2007, the Company commenced a share buyback programme to
purchase its own ordinary shares. The total number of shares bought
back in 2016 was 2,251,711 (2015: 2,251,340) representing 2.4%
(2015: 2.4%) of the ordinary shares in issue (excluding shares held
in treasury). All of the shares bought back in both years were
cancelled. The shares were acquired on the open market at a total
consideration (excluding costs) of GBP88,083,000 (2015:
GBP76,071,000). The maximum and minimum prices paid were GBP42.50
(2015: GBP41.44) and GBP33.11 (2015: GBP21.18) per share
respectively. Share-related expenses in relation to stamp duty
charges and broker expenses were GBP617,000 (2015: GBP533,000).
Included within shares in issue at 31 December 2016 are 343,275
(2015: 386,057) shares held by the EBT, 50,150 (2015: 37,800)
shares held by the SIP and 2,271,725 (2015: 2,322,314) shares held
in treasury.
23 Reconciliation of movement in capital and reserves
Group
Own shares held - GBP000
EBT shares reserve SIP shares reserve Treasury shares
GBP000 GBP000 GBP000 Total
GBP000
----------------------------------------------- ------------------- ------------------- ---------------- ---------
Own shares held as at 1 January 2015 (2,906) - (11,917) (14,823)
Shares purchased for SIP (507) - - (507)
Shares transferred to SIP 863 (863) - -
Share-based incentives exercised in the year 378 - 856 1,234
SIP releases in the year - 11 - 11
Increase in shares released from EBT due to
rolled up dividend payments 7 - 16 23
----------------------------------------------- ------------------- ------------------- ---------------- ---------
Own shares held as at 31 December 2015 (2,165) (852) (11,045) (14,062)
----------------------------------------------- ------------------- ------------------- ---------------- ---------
Own shares held as at 1 January 2016 (2,165) (852) (11,045) (14,062)
Shares purchased for SIP (751) - - (751)
Shares transferred to SIP 517 (517) - -
Share-based incentives exercised in the year 107 - 232 339
SIP releases in the year - 17 - 17
Increase in shares released from EBT due to
rolled up dividend payments 1 - 9 10
----------------------------------------------- ------------------- ------------------- ---------------- ---------
Shares held as at 31 December 2016 (2,291) (1,352) (10,804) (14,447)
----------------------------------------------- ------------------- ------------------- ---------------- ---------
Own shares held - number
EBT shares reserve SIP shares reserve Treasury shares Total
number of shares number of shares number of shares number of own shares held
--------------------------- ------------------- ------------------- ------------------ ---------------------------
Own shares held as at 1
January 2015 596,499 - 2,505,430 3,101,929
Shares purchased for SIP 12,700 - - 12,700
Shares transferred to SIP (38,300) 38,300 - -
Share-based incentives
exercised in the year (181,552) - (199,751) (381,303)
Reduction in shares
released due to net
settlement (refer Note
24) - - 19,930 19,930
SIP releases in the year - (500) - (500)
Increase in shares
released from EBT due to
rolled up dividend
payments (3,290) - (3,295) (6,585)
--------------------------- ------------------- ------------------- ------------------ ---------------------------
Own shares held as at 31
December 2015 386,057 37,800 2,322,314 2,746,171
--------------------------- ------------------- ------------------- ------------------ ---------------------------
Own shares held as at 1
January 2016 386,057 37,800 2,322,314 2,746,171
Shares purchased for SIP 20,250 - - 20,250
Shares transferred to SIP (12,950) 12,950 - -
Share-based incentives
exercised in the year (49,985) - (48,750) (98,735)
SIP releases in the year - (600) - (600)
Increase in shares
released from EBT due to
rolled up dividend
payments (97) - (1,839) (1,936)
--------------------------- ------------------- ------------------- ------------------ ---------------------------
Shares held as at 31
December 2016 343,275 50,150 2,271,725 2,665,150
--------------------------- ------------------- ------------------- ------------------ ---------------------------
23 Reconciliation of movement in capital and reserves
(continued)
(a) EBT shares reserve
This reserve represents the cost of own shares acquired by the
EBT less any exercises of share-based incentives. An additional 97
shares were issued as a result of rolled up dividend payments in
relation to performance shares
At 31 December 2016, the EBT held 343,275 (2015: 386,057)
ordinary shares in the Company of GBP0.01 each, representing 0.4%
(2015: 0.4%) of the ordinary shares in issue (excluding shares held
in treasury). The market value of the shares held in the EBT at 31
December 2016 was GBP13,398,000 (2015: GBP15,925,000).
(b) SIP shares reserve (Group and Company)
In November 2014, the Company established the Rightmove Share
Incentive Plan Trust (SIP). This reserve represents the cost of
acquiring shares less any exercises or releases of SIP awards.
Employees of the Group were offered 50 free shares (2015: 50),
subject to a three year service period, with effect from 3 January
2017 (4 January 2016). 600 (2015: 500) shares were released by the
SIP during the year in relation to good leavers and retirees.
12,950 (2015: 38,300) shares were transferred to the SIP reserve
from the EBT.
At 31 December 2016 the SIP held 50,150 (2015: 37,800) ordinary
shares in the Company of GBP0.01 each, representing 0.05% (2015:
0.04%) of the ordinary shares in issue (excluding shares held in
treasury). The market value of the shares held in the SIP at 31
December 2015 was GBP1,957,000 (2015: GBP1,559,000).
(c) Treasury shares (Group and Company)
This represents the cost of acquiring shares held in treasury
less any exercises of share-based incentives. These shares were
bought back in 2008 at an average price of GBP4.76 and may be used
to satisfy certain share-based incentive awards. An additional
1,839 shares were issued as a result of rolled up dividend payments
in relation to performance shares.
Other reserves
This represents the Capital Redemption Reserve in respect of own
shares bought back and cancelled. The movement of GBP22,000 (2015:
GBP23,000) is the nominal value of ordinary shares cancelled during
the year.
Retained earnings
The gain on the exercise of share-based incentives of GBP7,000
(2015: GBP867,000 loss) is the difference between the value that
the shares held by the EBT, SIP and treasury shares were originally
acquired at and the exercise price at which share-based incentives
were exercised or released during the year. Details of share
buybacks and cancellation of shares are included in Note 22.
Company
Reverse acquisition reserve
This reserve resulted from the acquisition of Rightmove Group
Limited by the Company and represents the difference between the
value of the shares acquired at 28 January 2008 and the nominal
value of the shares issued.
Other reserves
Awards relating to share-based incentives made to Rightmove
Group Limited employees have been treated as a deemed capital
contribution. The principal movement in other reserves for the year
comprises GBP1,738,000 (2015: GBP1,660,000) in respect of the
share-based incentives charge for employees of Rightmove Group
Limited.
In addition other reserves include GBP339,000 (2015: GBP317,000)
of Capital Redemption Reserve. A movement of GBP22,000 (2015:
GBP23,000) has been recorded in relation to the nominal value of
ordinary shares cancelled during the year.
24 Share-based payments
The Group and Company operate a number of share-based incentive
schemes for executive directors and employees.
All share-based incentives are subject to a service condition.
Such conditions are not taken into account in the fair value of the
service received. The fair value of services received in return for
share-based incentives is measured by reference to the fair value
of share-based incentives granted. The estimate of the fair value
of the share-based incentives is measured using either the Monte
Carlo or Black Scholes pricing model as is most appropriate for
each scheme.
The Group recognised a total share-based payments charge for the
year of GBP4,142,000 (2015: GBP3,765,000) with a Company charge for
the year of GBP2,404,000 (2015: GBP2,105,000), as set out
below:
Group Company
2016 2015 2016 2015
GBP000 GBP000 GBP000 GBP000
-------------------------------- -------- -------- -------- --------
Sharesave Plan 204 157 4 5
Performance Share Plan
(PSP) 2,755 2,553 1,879 1,580
Deferred Share Bonus Plan
(DSP) 884 917 521 519
Share Incentive Plan (SIP) 299 138 - 1
-------------------------------- -------- -------- -------- --------
Total share-based payments
charge 4,142 3,765 2,404 2,105
-------------------------------- -------- -------- -------- --------
NI on applicable share-based
payment schemes at 13.8% 451 3,331 232 2,605
-------------------------------- -------- -------- -------- --------
A 2% reduction or increase in the employee leaver assumption
(excluding executive directors) for the DSP and the PSP would have
increased/decreased the share-based payments charge in the year by
GBP36,000 (2015: GBP49,000).
Approved and Unapproved Plans
There has been no award of share options for Approved and
Unapproved Plans since 5 March 2010.
2016 2015
Weighted Weighted
average average
Number exercise Number exercise
price price
Group (pence) (pence)
---------------- -------- ---------- ---------- ----------
Outstanding at
1 January 546,527 307.42 663,131 369.53
Exercised - - (116,604) 660.65
Outstanding at
31 December 546,527 307.42 546,527 307.42
---------------- -------- ---------- ---------- ----------
Exercisable at
31 December 546,527 307.42 546,527 307.42
---------------- -------- ---------- ---------- ----------
The weighted average market value per ordinary share for options
exercised in 2016 was nil (2015: GBP37.39).
The options outstanding at 31 December 2016 have an exercise
price in the range of GBP2.24 to GBP6.66 in both years and a
weighted average contractual life of 2.1 years (2015: 3.1
years).
24 Share-based payments (continued)
Sharesave Plan
The Group operates an HMRC Approved Sharesave Plan under which
employees are granted an option to purchase ordinary shares in the
Company at up to 20% less than the market price at invitation, in
three years' time, dependent on their entering into a contract to
make monthly contributions into a savings account over the relevant
period. These funds are used to fund the option exercise. No
performance criteria are applied to the exercise of Sharesave
options. The assumptions used in the measurement of the fair value
at grant date of the Sharesave Plan are as follows:
Employee
turnover
before
Share vesting/
price at non-vesting Fair
grant Exercise Expected Option Risk free Dividend condition value per
date price volatility life rate yield (%) option
Grant date (pence) (pence) (%) (years) (%) (%) (pence)
------------- ---------- ----------- ----------- ------------ ----------- ----------- ------------ -----------
1 October
2012 1577.00 1295.00 34.8 3.0 0.5 1.3 25.0 475.00
1 October
2013 2371.00 1896.00 27.3 3.0 0.7 1.1 25.0 659.00
1 October
2014 2144.00 1972.00 25.3 3.0 1.0 1.4 25.0 430.00
1 October
2015 3639.00 2960.00 24.7 3.0 0.8 1.0 25.0 933.00
1 October
2016 4293.00 3315.00 27.8 3.0 0.4 1.1 25.0 1233.00
------------- ---------- ----------- ----------- ------------ ----------- ----------- ------------ -----------
Expected volatility is estimated by considering historic average
share price volatility at the grant date.
The requirement that an employee has to save in order to
purchase shares under the Sharesave Plan is a non-vesting
condition. This feature has been incorporated into the fair value
at grant date by applying a discount to the valuation obtained from
the Black Scholes pricing model. The discount has been determined
by estimating the probability that the employee will stop saving
based on expected future trends in the share price and past
employee behaviour.
2016 2015
Weighted Weighted
average exercise average exercise
price price
Group Number (pence) Number (pence)
---------------------------- --------- ------------------ --------- ------------------
Outstanding at 1 January 104,019 2273.13 116,032 1733.49
Granted 43,451 3315.00 35,794 2960.00
Forfeited (9,939) 2695.91 (16,406) 1932.63
Exercised (20,598) 1809.87 (31,401) 1244.84
Outstanding at 31 December 116,933 2712.71 104,019 2273.13
---------------------------- --------- ------------------ --------- ------------------
Exercisable at 31 December 4,601 1896.00 2,211 1295.00
---------------------------- --------- ------------------ --------- ------------------
The weighted average market value per ordinary share for
Sharesave options exercised in 2016 was GBP38.34 (2015:
GBP37.27).
The Sharesave options outstanding at 31 December 2016 have an
exercise price in the range of GBP18.96 to GBP33.15
(2015: GBP12.95 to GBP29.60) and a weighted average contractual
life of 2.3 years (2015: 2.4 years).
24 Share-based payments (continued)
Performance Share Plan (PSP)
The PSP permits awards of nil cost options or contingent shares
which will only vest in the event of prior satisfaction of a
performance condition.
89,041 PSP awards were made on 1 March 2016 (the grant date)
subject to EPS and TSR performance. Performance will be
measured over three financial years (1 January 2016 to 31
December 2018). The vesting in March 2019 (vesting date) of 25% of
the 2016 PSP award will be dependent on a relative TSR performance
condition measured over a three year performance period and the
vesting of the 75% of the 2016 PSP award will be dependent on the
satisfaction of an EPS growth target measured over a three year
performance period. PSP award holders are entitled to receive
dividends accruing between the grant date and the vesting date and
this value will be delivered in shares.
The PSP awards have been valued using the Monte Carlo model for
the TSR element and the Black Scholes model for the EPS element and
the resulting share-based payments charge is being spread evenly
over the period between the grant date and the vesting date. The
assumptions used in the measurement of the fair value at grant date
of the PSP awards are as follows:
Employee
turnover
Share before Fair
price Risk vesting/ value
at Exercise Expected Option free Dividend non-vesting per
grant price volatility life rate yield condition option
Grant date date (pence) (%) (years) (%) (%) (%) (pence)
(pence)
------------------------- --------- --------- ------------ -------- -------- ---------- ------------ ---------
8 March 2013
(TSR dependent)(1) 1781.00 nil 27.3 3.0 0.4 0.0 4.8 1003.00
8 March 2013
(EPS dependent)(1) 1781.00 nil n/a 3.0 0.4 0.0 4.8 1781.00
3 March 2014
(TSR dependent)(1)(2) 2688.00 nil 25.3 3.0 1.0 0.0 4.8 1219.00
3 March 2014
(EPS dependent)(1)(2) 2688.00 nil n/a 3.0 1.0 0.0 4.8 2688.00
2 March 2015
(TSR dependent)(1) 3044.00 nil 24.7 3.0 0.8 0.0 5.2 2258.00
2 March 2015
(EPS dependent)(1) 3044.00 nil n/a 3.0 0.8 0.0 5.2 3044.00
1 March 2016
(TSR dependent)(1) 4069.00 nil 27.8 3.0 0.4 0.0 4.4 1985.00
1 March 2016
(EPS dependent)(1) 4069.00 nil n/a 3.0 0.4 0.0 4.4 4069.00
------------------------- --------- --------- ------------ -------- -------- ---------- ------------ ---------
(1) For details of TSR and EPS performance conditions refer to
the Directors' Remuneration Report on pages 53 to 84.
(2) Both the TSR and EPS performance conditions for PSPs with a
grant date of 3 March 2014 have been met in full and 100% of the
awards are expected to vest in March 2017.
Expected volatility is estimated by considering historic average
share price volatility at the grant date.
2016 2015
Group Number Number
---------------------------- --------- ----------
Outstanding at 1 January 388,002 438,365
Granted 89,041 129,645
Forfeited (22,688) -
Exercised (51,403) (180,008)
------------------------------ --------- ----------
Outstanding at 31 December 402,952 388,002
------------------------------ --------- ----------
Exercisable at 31 December 82,467 23,953
------------------------------ --------- ----------
The weighted average market value per ordinary share for options
exercised in 2016 was GBP38.86 (2015: GBP35.19). The weighted
average exercise price was nil in both years.
The PSP awards outstanding at 31 December 2016 have a weighted
average contractual life of 2.7 years (2015: 3.1 years).
24 Share-based payments (continued)
Deferred Share Bonus Plan (DSP)
In March 2009 a DSP was established which allows executive
directors and other selected senior management the opportunity to
earn a bonus determined as a percentage of base salary settled in
nil cost deferred shares. The award of shares under the plan is
contingent on the satisfaction of pre-set internal targets relating
to underlying drivers of long-term revenue growth (the Performance
Period). The right to the shares is deferred for two years from the
date of the award (the Vesting Period) and potentially forfeitable
during that period should the employee leave employment. The
deferred share awards have been valued using the Black Scholes
model and the resulting share-based payments charge is being spread
evenly over the combined Performance Period and Vesting Period of
the shares, being three years.
The assumptions used in the measurement of the fair value of the
deferred share awards are calculated at the date on which the
potential DSP bonus is communicated to directors and senior
management (the grant date) as follows:
Employee
turnover
before
Share vesting/
price at non-
grant Exercise Expected Risk free Dividend vesting Fair value
date price term rate yield condition per share
Grant date Award date (pence) (pence) (years) (%) (%) (%) (pence)
-------------- ---------------- ---------- ---------- ----------- ----------- ---------- ---------- ----------
8 March 2013 3 March 2014 1781.00 nil 3.0 0.4 1.4 5.3 1708.00
3 March 2014 2 March 2015 2688.00 nil 3.0 1.0 1.0 5.6 2605.00
2 March 2015 1 March 2016(1) 3044.00 nil 3.0 0.8 1.2 6.0 2941.00
1 March 2016 - (2) 4069.00 nil 3.0 0.4 1.1 5.7 3942.00
-------------- ---------------- ---------- ---------- ----------- ----------- ---------- ---------- ----------
(1) Following the achievement of 100% of the 2015 internal
performance targets, 36,276 nil cost deferred shares were awarded
to executives and senior management on 1 March 2016 (the Award
Date) with the right to the release of the shares deferred until
March 2018.
(2) Based on the 2016 internal performance targets, the
Remuneration Committee determined that 92% of the maximum award in
respect of the year will be made in March 2017. The number of
shares to be awarded will be determined based on the share price at
the Award Date in March 2017.
2016 2015
Group Number Number
---------------------------- --------- ---------
Outstanding at 1 January 68,309 90,909
Awarded 36,276 33,864
Forfeited (1,677) -
Exercised (26,736) (56,464)
Outstanding at 31 December 76,172 68,309
------------------------------ --------- ---------
Exercisable at 31 December 7,709 -
------------------------------ --------- ---------
The weighted average market value per ordinary share for
deferred shares exercised in 2016 was GBP38.60 (2015: GBP32.42).
The weighted average exercise price was nil in both years.
The DSP awards outstanding at 31 December 2016 have a weighted
average contractual life of 1.5 years (2015: 0.7 years).
24 Share-based payments (continued)
Share Incentive Plan
In 2014, the Group established the Rightmove Share Incentive
Plan Trust (SIP). Employees were offered 50 shares (2015: 100) as a
gift, subject to a three year service period (the Vesting Period).
The SIP awards have been valued using the Black Scholes model and
the resulting share-based payments charge spread evenly over the
Vesting Period of three years. The SIP shareholders are entitled to
dividends paid in cash over the Vesting Period. No performance
criteria are applied to the exercise of SIP options. The
assumptions used in the measurement of the fair value at grant date
of the SIP awards are as follows:
Employee
turnover
before
Share vesting/
price at non-vesting Fair
grant Exercise Expected Option Risk free Dividend condition value per
date price volatility life rate yield (%) option
Grant date (pence) (pence) (%) (years) (%) (%) (pence)
------------- ---------- ----------- ----------- ------------ ----------- ----------- ------------ -----------
1 January
2015 2245.00 nil 24.7 3.0 0.8 nil 45.0 2245.00
1 January
2016 4093.00 nil 27.8 3.0 0.4 nil 45.0 4093.00
------------- ---------- ----------- ----------- ------------ ----------- ----------- ------------ -----------
Expected volatility is estimated by considering historic average
share price volatility at the grant date.
2016 2015
Group Number Number
---------------------------- -------- --------
Outstanding at 1 January 30,200 -
Granted 20,550 38,300
Forfeited (5,850) (7,600)
Released (600) (500)
------------------------------- -------- --------
Outstanding at 31 December 44,300 30,200
-------------------------------
Exercisable at 31 December
- -
-------------------------------
The weighted average market value per ordinary share for SIP
awards released in 2016 was GBP37.90 (2015: GBP34.45). The weighted
average exercise price in both years was nil.
The SIP shares released relate to good leavers and retirements
from the SIP, in accordance with the terms of the Trust.
The SIP options outstanding at 31 December 2016 have a weighted
average contractual life of 1.4 years (2015: 2.0 years).
25 Operating lease commitments
Non-cancellable operating lease rentals are payable as
follows:
2016 2015
Plant & machinery Land & Plant & machinery Land &
GBP000 buildings Total GBP000 buildings Total
Group GBP000 GBP000 GBP000 GBP000
--------------------- ------------ ----------
Less than one year 234 491 725 359 949 1,308
Between one and
five years 157 1,172 1,329 165 1,370 1,535
More than five
years - 3 3 - 296 296
--------------------- ------------ ----------
391 1,666 2,057 524 2,615 3,139
The Company had no operating lease commitments in either
year.
26 Financial instruments
Credit risk
The carrying amount of financial assets represents the maximum
credit exposure. The maximum exposure to credit risk at the
reporting date was:
2016 2015
Group Note GBP000 GBP000
Net trade receivables 17 26,633 24,609
Accrued interest receivable 17 - 25
Other debtors 17 127 59
Cash and cash equivalents 18 13,749 8,418
Money market deposits 18 4,026 4,000
44,535 37,111
The Company had no exposure to credit risk in either year.
The maximum exposure to credit risk for trade receivables at the
reporting date by geographic region was:
2016 2015
Group Note GBP000 GBP000
--------
UK 26,124 24,220
Rest of the world 509 389
17 26,633 24,609
The maximum exposure to credit risk for trade receivables at the
reporting date by type of customer was:
2016 2015
Group Note GBP000 GBP000
------
Property advertisers 25,361 23,055
Other 1,272 1,554
------
17 26,633 24,609
--------------------- ------
The Group's most significant customer accounts for GBP1,589,000
(2015: GBP1,305,000) of the trade receivables carrying amount as at
31 December 2016.
Impairment losses
The ageing of trade receivables at the reporting date was:
2016 2015
Gross Impairment Gross Impairment
Group GBP000 GBP000 GBP000 GBP000
Not past due 24,010 (7) 21,227 (5)
Past due 0 - 30 days 1,876 (70) 2,654 (55)
Past due 30 - 60 days 880 (56) 593 (19)
Past due 60 - 90 days 58 (58) 104 (7)
Past due older 237 (237) 477 (360)
27,061 (428) 25,055 (446)
The movement in the allowance for impairment in respect of trade
receivables during the year was as follows:
2016 2015
Group GBP000 GBP000
--------
At 1 January 446 490
Charged during the year 437 365
Utilised during the year (455) (409)
--------
At 31 December 428 446
--------
The Group has identified specific balances for which it has
provided an impairment allowance on a line by line basis across all
ledgers, in both years. No general impairment allowance has been
provided in either year.
The allowance accounts in respect of trade receivables are used
to record impairment losses unless the Group is satisfied that no
recovery of the amount owing is possible; at that point the amounts
considered irrecoverable are written off against the financial
asset directly.
26 Financial instruments (continued)
Liquidity risk
The contractual maturities of undiscounted financial
liabilities, including undiscounted estimated interest payments, as
at year end were:
Contractual cash flows 6 months
Carrying amount GBP000 or less
Group GBP000 GBP000
At 31 December 2016
Trade payables being non-derivative financial liabilities 1,266 (1,266) (1,266)
At 31 December 2015
Trade payables being non-derivative
financial liabilities 592 (592) (592)
The Company had no non-derivative financial liabilities in
either year.
It is not expected that the cash flows included in the maturity
analysis could occur earlier or at significantly different amounts
and all payables are due within six months of the balance sheet
date.
Currency risk
During 2016 all the Group's sales and more than 97.0% (2015:
95.0%) of the Group's purchases were Sterling denominated and
accordingly it has no significant currency risk.
Interest rate risk
The Group has exposure to interest rate risk on its cash and
money market deposit balances. As at 31 December 2016 the Group had
total cash of GBP13,749,000 (2015: GBP8,418,000) and money market
deposits of GBP4,026,000 (2015: GBP4,000,000).
Fair values
The fair values of all financial instruments in both years are
equal to the carrying values.
27 Acquisition of subsidiary
On 31 May 2016, Rightmove Group Limited acquired the entire
ordinary share capital of The Outside View Analytics Ltd ("Outside
View"), a predictive analytics business. The Outside View have
developed an algorithm to predict which homeowners are most likely
to sell their property in the next 180 days. Rightmove plans to
launch an enhanced version of the product using its combined know
how and unique dataset. The product will help customers to identify
and market to their target audience and will complement the Local
Valuation Alert product. The total cash consideration paid of
GBP2,096,000 excludes acquisition costs of GBP42,000 which have
been recognised as an expense in the period in the Consolidated
Statement of Comprehensive Income.
The following table provides a reconciliation of the amounts
included in the Consolidated Statement of Cash Flows:
2016
Net cash flow on acquisition GBP000
Cash paid for subsidiary (2,096)
Transaction costs on acquisition (42)
Cash acquired 50
Net cash outflow (2,088)
In the seven month period to 31 December 2016, Outside View
contributed revenue of GBP174,000 and profit of GBP80,000 to the
Group's results.
27 Acquisition of subsidiary (continued)
The following table details the fair values of the assets and
liabilities acquired at the date of acquisition:
Carrying values pre-acquisition
GBP000 Fair value adjustments
GBP000 Fair values
Net assets acquired GBP000
Non-current assets
Property, plant and equipment 9 - 9
Intangible assets - market appraisal
technology(2) - 309 309
Current assets
Trade and other receivables(3) 191 (2) 189
Cash and cash equivalents 50 - 50
Current liabilities (145) - (145)
Non-current liabilities
Deferred tax liabilities(2) - (49) (49)
Fair value of net assets acquired 105 258 363
Cash consideration 2,096
Total consideration 2,096
Goodwill(1) 1,733
(1) The goodwill recognised on acquisition represents value
arising from intangible assets that are not separately identifiable
under IFRS 3. These items include the skills and knowledge of the
Outside View's workforce as well as the ability to develop an
enhanced product and service offering that the Board believe will
drive an increase in the quantity and quality of predictive
analytical data services provided to customers.
(2) In addition to the goodwill recognised on consolidation, the
market appraisal algorithm and supporting technology obtained
through the acquisition met the requirements to be separately
identifiable under IFRS 3. The fair value has been obtained by
estimating the cost of independently building similar technology.
The asset will be amortised over its useful economic life of three
years. A deferred tax liability has been recognised in respect of
this asset and will be unwound over the useful economic life.
(3) The receivables acquired (which principally comprised trade
receivables) with a fair value of GBP191,000 had gross contractual
amounts of GBP210,000. The best estimate at acquisition date of the
contractual cash flows not expected to be collected is GBP21,000
resulting in a fair value adjustment of GBP2,000.
28 Related party disclosures
Inter-group transactions with subsidiaries
Under the inter-group loan agreement dated 30 January 2008,
Rightmove Group Limited settles all expenses on behalf of the
Company, including dividends paid to shareholders and share
buybacks and related costs. During the year, the Company was
charged interest of GBP527,000 (2015: GBP547,000) under this
agreement and at 31 December 2016, the inter-group loan balance was
GBP25,317,000 (2015: GBP31,908,000) including capitalised interest
(refer Note 19).
On 30 June 2016 Rightmove Group Limited declared an interim
dividend of 55p per ordinary share to the Company. Additionally, on
13 December 2016, Rightmove Group Limited declared a further
interim dividend of 54p per ordinary share to the Company. The
dividends of GBP141,046,000 (2015: GBP129,400,000) were settled via
a reduction in the inter-group loan balance owed by Rightmove plc
to Rightmove Group Limited. Rightmove Group Limited also declared a
dividend in specie of GBP517,000 (2015: GBP863,000), representing
the cost of the SIP shares transferred from the EBT to the SIP
during the year.
Inter-group transactions between subsidiaries
During the year, following its acquisition on 31 May 2016, the
Outside View became a related party to the Company. Since
acquisition Rightmove Group Limited has settled liabilities on
behalf of the Outside View and the balance owing under an
inter-group loan agreement dated 13 June 2016 was GBP15,000 as at
31 December 2016.
Directors' transactions
There were no transactions with directors in either year other
than those disclosed in the Directors' Remuneration Report.
Information on the emoluments of the directors who served during
the year, together with information regarding the beneficial
interest of the directors in the ordinary shares of the Company is
included in the Directors' Remuneration Report on pages 53 to
84.
During the year, the directors in office in total had gains of
GBP1,566,000 (2015: GBP9,263,000) arising on the exercise of
share-based incentive awards. The total share-based payments charge
in relation to the directors in office was GBP2,404,000 (2015:
GBP2,105,000).
Key management personnel
No other Rightmove employees are considered to meet the
definition of key management personnel other than those disclosed
in the Directors' Remuneration Report on pages 53 to 84.
29 Contingent liabilities
The Group and the Company had no contingent liabilities in
either year.
30 Subsequent events
There have been no subsequent events having a material impact on
the financial statements between 31 December 2016 and the reporting
date.
ADVISERS AND SHAREHOLDER INFORMATION
Contacts Registered office Corporate advisers
Chief Executive Officer: Nick McKittrick Rightmove plc Financial adviser
Chief Operating Officer: Peter Brooks-Johnson Turnberry House UBS Investment Bank
Finance Director: Robyn Perriss 30 Caldecotte Lake Drive Joint brokers
Company Secretary: Sandra Odell Milton Keynes UBS Limited
Website: www.rightmove.co.uk MK7 8LE Numis Securities Limited
Registered in Auditor
England no. 6426485 KPMG LLP
Bankers
Financial calendar 2017 Barclays Bank Plc
2016 full year results 24 February 2017 HSBC Bank plc
Final dividend record date 5 May 2017 Santander UK Plc
Annual General Meeting 9 May 2017 Solicitors
Final dividend payment 2 June 2017 Slaughter and May
Half year results 28 July 2017 Pinsent Masons
Interim dividend 3 November 2017 Registrar
Capita Asset Services*
*Shareholder enquiries
The Company's registrar is Capita Asset Services. They will be
pleased to deal with any questions regarding your shareholding or
dividends. Please notify them of your change of address or other
personal information. Their address details are:
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Capita Asset Services is a trading name of Capita Registrars
Limited.
Capita shareholder helpline: 0371 664 0300 (calls cost 10p per
minute plus network extras) (Overseas: +44 20 8639 3399)
Email: shareholderenquiries@capita.co.uk
Share portal: www.capitashareportal.com
Through the website of our registrar, Capita Asset Services,
shareholders are able to manage their shareholding online and
facilities include electronic communications, account enquiries,
amendment of address and dividend mandate instructions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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