25th Feb 2011 07:00
Rightmove plc33 Soho SquareLondonW1D 3QU EMBARGOED UNTIL 7AM 25 FEBRUARY 2011 RIGHTMOVE plc 2010 FULL YEAR RESULTS
Rightmove plc, the UK's number one property website, today announces its Full Year results for the year ended 31 December 2010.
Highlights:
* Revenue(1) increased by 26% to £81.6m (2009: £64.5m)
* Underlying operating profit(1)(2) increased by 39% to £56.6m (2009: £40.6m)
* Underlying operating margin(1)(2) up from 62.9% to 69.4% * Underlying basic earnings per share(1) up 34% to 39.8p from 29.6p * Net cash at 31 December 2010 of £23.1m (2009: £3.4m) * 4.2m shares bought back during 2010 (2009: 1.1m) at an average price of £7.05 (2009: £4.84) * Number of advertisers grew by 2% to 18,042 (2009: 17,664)
* Average revenue per advertiser (ARPA) at £379 per month (2009: £308 per month)
* Proposed final dividend of 9.0p (2009: 7.0p) making a total dividend of 14.0p for the year (2009: 10.0p) * Net consideration for Rightmove's 66.7% stake in the Holiday Lettings business, sold in June 2010, of £20.9m including £5.1m contingent
consideration, representing a seven-fold return on investment since 2007
(1) From continuing operations. Comparative figures have been restated where
necessary to reflect the treatment of Holiday Lettings as a discontinued
operation.
(2) Before share-based payments and NI on share-based incentives.
Ed Williams, Managing Director, said:
"The results we are reporting today demonstrate the confidence that propertyadvertisers have in using Rightmove to achieve their advertising goals onlineover traditional media, helping them cost-effectively reach their targetaudience in this challenging housing market. Rightmove today is considered notsimply a listings portal, but an amphitheatre for the entire property industrywhere we assist our member advertisers in communicating their brand, propertiesand expertise to the British home-moving public."
For more information please contact:
Rightmove Ed Williams or Nick McKittrick Rightmove plc Press Office 0207 087 0605 / 07894 255295
A PDF copy of the 2010 Full Year results can be downloaded from www.rightmove.co.uk/investors.rsp
CHAIRMAN'S STATEMENT
It is my pleasure to present Rightmove plc's results for the year ended 31 December 2010.
2010 marks the tenth anniversary of Rightmove, which has become the place whereUK home hunters find their next home. There is much we take for granted todaywhich was merely an aspiration ten years ago. Today most people in the UK usethe internet to find their next home and the vast majority of those useRightmove. Millions of people use Rightmove every month to look for their nexthome or market their existing home. We serve 18,000 customers, in terms ofadvertisers representing the considerable majority of estate agents, lettingsagents and volume house builders. It is our view that a growing number of homesellers, who are generally buyers as well, are using Rightmove to help themchoose which agent to best market their home.
Rightmove's history
March 2011 marks Rightmove's fifth year as a public company. Each year thatfollowed our initial public offering seems to have included a major change inthe housing market. Often these events have diverted focus from the onlineadvertising market in which we operate and our strong underlying performance,which has seen a continual and substantial improvement except for 2009 when ourunderlying operating profit(2) was essentially flat.In 2006 we withdrew from the prospective market for Home Information Packs whenthe government withdrew its commitment to implement the full terms of itslegislation. 2007 saw the peak of the UK property market, but also with thecollapse and nationalisation of Northern Rock, the downturn of the UK economy.2008 was a disastrous year for the residential property market with more than afifth of estate agency offices forced to close. 2009 surprised us all, not as agood year for the property market, but in terms of how estate agents and housebuilders managed to cut their costs, survive and in some instances thrive.Despite a tough housing market, the progression from 2009 to 2010 hasrepresented the least disruptive period and the greatest continuity in movingfrom one year to another. The comparison of Rightmove's 2010 performance with2009 reveals clearly the strength of our business. This reflects the increasedimportance of the internet for finding one's next home and, for our customers,their choice of how to advertise.
A record year by every measure
2010 was the busiest year in our history. Website traffic grew year on year with page impressions up 17% to 7.6bn, generating record visibility and enquiries for our advertisers.
In terms of financial results, 2010 set new records for organic growth, revenueand profits. We have continued with our commitment to return surplus cash toshareholders and have recorded the strongest share price in our history by awide margin.
The result of a sustained commitment
I want to express my thanks to our customers as well as our employees who continue to put their efforts into making Rightmove the best place for home hunters to find their next home and for property advertisers to reach the widest possible audience.
Financial resultsProfits and earnings per share for 2010 were up strongly on 2009. Underlyingoperating profit(1)(2) was up 39% to £56.6m (2009: £40.6m) driven by strongorganic revenue growth coupled with only a small increase in operating costsyear on year.Underlying basic earnings per share (EPS)(1)(2) was up 34% to 39.8p (2009: 29.6p),although using a normalised tax rate of 28% underlying basic EPS wasup 44%. The increase in underlying EPS was strengthened by the repurchase of4.2m shares at an average price of £7.05 per share during 2010. Due to theshare buy backs being weighted towards the second half of the year, the fullbenefit to the EPS will only be realised in 2011.As at 31 December 2010 the net cash position was £23.1m (2009: £3.4m) with cashboosted by the initial net proceeds of £13.3m on the disposal of the HolidayLettings business.Sale of Holiday LettingsWe sold our 66.7% shareholding in Holiday Lettings (Holdings) Limited in June2010 for a net consideration of £20.9m of which £14.8m has been received incash, £1m is held in Escrow and the balance is contingent consideration.Holiday Lettings has been a very successful business under our three yearperiod of stewardship. We are delighted with our financial returns on ouroriginal £3.1m investment in 2007 and thank founders Ross Elder and Andy Firthfor their excellent contributions.
Dividend
The Board announced that it would increase the interim dividend to 5.0p perordinary share which was paid on 12 November 2010 and to rebalance dividendsbetween the interim and final payments. Consistent with our policy ofincreasing the total dividend for the year in line with underlying operatingprofits, the Board proposes to pay a final dividend of 9.0p per ordinary sharefor a total dividend for the year of 14.0p (2009: 10.0p). The final dividend,subject to shareholder approval, will be paid on 10 June 2011 to members on
theregister on 13 May 2011.The Board of directors
I was delighted to announce the appointment of Peter Brooks-Johnson to the Board as an executive director on 10 January 2011. Peter leads our main operating business, which offers the UK's largest number of property advertisers access to the UK's largest home moving audience. His appointment demonstrates the depth of talent within the business.
My thanks go to the Board more generally for its contribution and support overthe last year. In particular I would like to thank Stephen Shipperley, ourlongest serving Board member, for the soundness of his advice and thecontinuity of his involvement from the earliest days at Rightmove. We wish himwell as he steps down from the Board and acknowledge his personal contributionto growing both his own Connells business and the Rightmove business over thelast decade. For most people either story alone would be a more than fittingtestament to a successful business career.
Annual General Meeting and resolutions
The Board is proposing amendments to the remuneration of the executivedirectors. These changes are seen by the Board as an important next step in ourtransition from a new public company to a more substantial business that is nowable to benefit from additional senior management talent necessary to achieveour growth objectives. Our proposal is to phase these changes in over threeyears, so that the transition will be achieved in full by 2013.
Otherwise, the resolutions being proposed at the Annual General Meeting are similar in nature to resolutions from prior years.
A summary of the business to be conducted is described in the Directors'Report. The Notice of Annual General Meeting will be published in March 2011. Iand the rest of the Board look forward to answering any questions and updatingshareholders further on the development of the business at our Annual GeneralMeeting which will take place at 10am on 4 May 2011 at the offices of UBS Limited at 1 Finsbury Avenue, London, EC2M 2PP.On behalf of shareholders, I would like to thank Ed Williams and his team forthe achievements of the past year. With advertiser numbers holding steady andhealthy growth in average spend per advertiser at the start of the year, and inthe absence of a significant deterioration in the UK housing market, the Boardremains confident of growing the business further in 2011.Scott ForbesChairman
(1) From continuing operations. Comparative figures have been restated where
necessary to reflect the treatment of Holiday Lettings as a discontinued
operation.
(2) Before share-based payments and NI on share-based incentives.
Business and financial review
Rightmove's revenues and profits for 2010 were significantly higher than in anyprevious year in Rightmove's history. Our value to property advertisers flowsfrom the fact that Rightmove is where the majority of people in Britain lookfor their next home. In 2010 activity on our website increased significantlyreaching record levels. Our share of the total online property search marketgrew to an all-time high and our lead over our nearest competitor widened toits greatest ever.
Our advertising base of estate agents, lettings agents and new home developers grew by 2% despite 2010 being another challenging year in the UK property market. We believe that in terms of transaction volumes 2010 will be little different from 2008 and 2009 at around half the historic levels.
Hence, to have increased revenue(1) by 26% and underlying operating profit(1)(2) by 39% year on year, reflects a further increase in the importance ofRightmove to advertisers. This can be seen by the fact that the veryconsiderable majority of the increase in our revenue came from existingcustomers choosing to spend more with us. Sales of our new display advertisingproducts launched at the start of 2010 contributed more than a quarter of theincrease in revenue.Our 2010 results2010 was a record year for Rightmove with profits after tax(1) of £38.5m (2009:£29.1m). Underlying operating profit(1)(2) was up 39% to £56.6m (2009: £40.6m).Organic revenue growth drove the growth in profits with overall revenue(1) of £81.6m (2009: £64.5m), up 26%. Underlying costs(1)(2) only rose 5%, furtherdemonstrating the scalability of the Rightmove business.The above numbers exclude the contribution from Holiday Lettings (HLL). We soldour 66.7% share of the business to TripAdvisor Limited (a subsidiary of ExpediaInc) in June 2010 for a net consideration of £20.9m, representing a seven-foldincrease on our original investment in 2007. The proceeds of this sale havealready been returned to shareholders through our share buy back programme.
What we do and the keys to success
Rightmove's success comes from the value we add to our advertisers, which is itself created primarily by giving them the ability to reach the largest audience of UK home movers in one place.
Our demonstrated ability to out-perform print-based property advertising, as well as clear leadership among internet property sites, is based on:
* the scale of and continued growth in our home hunting audience; * the strength of the Rightmove brand;
* the growing recognition amongst estate agents that they should promote the
value of their brands to win vendor instructions to sell their homes; * the particular need for buyer enquiries in a tough market; * the wider services we provide as an integral part of membership; * our consultative sales and service relationship with our customers; and * measurability of our performance.
The key performance indicators that we monitor include:
MARKET SHARE NUMBER OF ADVERTISERS 82% of the market share of the top 4 UK Total membership at end of 2010 was property websites by pages viewed, same 18,042 (2009: 17,664), up 2% year on as 2009 year Source: Experian Hitwise and Rightmove:
January 2011 and January 2010 PAGE IMPRESSIONS CORPORATE ESTATE AGENTS 7.6 billion page impressions up from 6.5 100% of all of the top 25 corporate billion in 2009 estate agents list their properties with us Source: Rightmove PROPERTIES DISPLAYED NEW HOME DEVELOPERS
1.1 million properties displayed on 92% - 23 out of 25 of the top new Rightmove.co.uk at 31 December 2010, up home developers advertised on
10% year on year Rightmove.co.uk in 2010 ENQUIRIES MOBILE
18.6 million enquiries up from 18.4 222 million mobile page impressions million enquiries in 2009
up 900% on 2009 Sustained investment in serving home huntersHome movers use Rightmove above all because it constitutes the easiest and mostfamiliar way in which to view reliable information about most propertiescurrently available on the market.The quality of the experience we provide to home hunters results not just fromthe scale of our investment in the Rightmove.co.uk website but also theexperience we have built up over more than a decade of designing and providingquality information about properties, accessible through the best search in theproperty sector.
During 2010 we have continued with that investment with key innovations including:
* a new property details page: this includes larger and more photographs and
better floor plans, integrated maps, as well as improved integration with
social networking sites;
* 'draw a search': the ability to plot out an area on a map or aerial
photograph of the specific area in which the home hunter is interested and
to search in their chosen area and thereafter to receive updates of
properties coming to market in that area;
* a generic mobile platform: following the success of our iPhone Application
(launched in 2009) Rightmove has introduced a generic mobile platform to
allow a wide range of other mobile devices to access a 'mobile friendly'
version of the Rightmove site. In addition we launched an iPad Application
coinciding with the European launch of the iPad; and
* the launch of our property-related social networking site Rightmoveplaces
which provides the public with a place to talk about their local
neighbourhoods and what it is like to live there.
Continuing to innovate and invest in the Rightmove website is important to maintaining and strengthening our position as the method of choice for home hunters to look at properties.
Page impressions were up 17% to 7.6bn (2009: 6.5bn). According to Experian Hitwise Rightmove served more pages of property information than all the other 1,400 property websites combined and around ten times that of our nearest competitor.
In recent months we have seen a big increase in the amount of home huntingactivity carried out on mobile devices. This is in addition to the increase inactivity reported above in relation to our website. We believe that the numberof property searches being done on Rightmove's mobile platforms are as great asthe entire number of searches on our nearest competitors' websites. As we start2011, the iPhone Application has been downloaded to over 1m phones and the iPadApplication downloaded 100,000 times. The emergence of tablet computers, ofwhich the iPad is the highest profile, provide a particularly attractiveinterface through which to present property details and we see their futuresuccess as of benefit to Rightmove.
Sustained investment in brand
Rightmove benefits from more than ten years of investment in brand recognition.The results of this sustained investment were highlighted by an independentsurvey which was published in the Sunday Times in January 2011. The survey of1,600 people across Britain who, either had their homes on the market or hadrecently sold, showed that 92% used Rightmove and 69% used Rightmoverepeatedly. We launched our new TV advert, 'safari', around the turn of theyear 2009/10 and have run further campaigns in the spring, early autumn andfrom Christmas 2010 well into 2011. The campaigns appear to have helped furtherboost awareness amongst home movers as well as delivering on our commitment toour advertisers to ensure that their properties get the best exposure.Rightmove's historical investment in brand is a key defence against newentrants or disintermediation by large internet companies. We continue toreceive around four out of five visits to our website from people either typingin the 'Rightmove' name, using our mobile platforms or responding to our emailalerts or unpaid links from other sites. Most of the remainder comes fromorganic search, for which we do not pay. In those rare instances where we dopay for site traffic, it is small scale, short-term and focused on acquiring avery specific audience(e.g. students in specific cities).
Rightmove is an active user of social media sites such as Facebook and Twitter, as one would expect from a major internet brand. Both the redesign of our property details page and the creation of Rightmoveplaces should help us benefit from the social media trend. To date there is no evidence that home hunting activity itself is migrating to social media environments so we see these new media as principally representing opportunities rather than threats.
Support to our advertisersOur programme of free breakfast seminars for agents took us to 27 venues acrossthe UK in 2010. Since we started in 2009, we have now had around 5,000 agentstaking up the invitation to attend these events. The seminars are designed tohelp our members be more successful and demonstrate how they can get the mostfrom their Rightmove membership.
Rightmove's investment in field and telephone account managers allows us to spend time with every customer to help them understand the wider range of benefits to be derived from their Rightmove membership. These include management information and reporting tools, competitor comparisons and reports and marketing material which they can use directly with home sellers and landlords.
In November 2010 we launched a dedicated section of our website specifically tofocus on student lettings. Many of Rightmove's lettings agent customers offerproperties that would be suitable for students and a few exclusively focus onthe student market. By creating a separate part of the site we are making iteasier for students to find what they are looking for and for agents to targeta student audience. As we roll out the service beyond the initial cities wehave focused on, we should also be able to attract some advertisers who wouldnot have previously considered Rightmove as a place to advertise to students.Innovation in advertising productsOver a quarter of the increase in our revenues in 2010 came from products wedid not have in 2009. Our two key new products provide display advertisingservices by which our advertisers can communicate messages about themselves andany offers they may have. As the products are `search-term' based, they allowadvertisers to target geographically local audiences (in a similar but moregranular and flexible way than traditional newspapers). In some cases we haveactually attracted advertising spend that the advertiser had consideredspending in other media such as radio - something that was unthinkable in aworld where Rightmove only offered a property listing service.During 2010 we also made substantial improvements to some existing products.For instance, we replaced the Showcase product with Featured Property. Thereplacement product gives advertisers a large image of the property, increasedprominence of their own logo and automates the process of changing whichproperty is displayed during the month. These changes have made the productsignificantly more effective in generating interest in the properties featured.Taking the year as a whole, 21% of revenue came from spending by our customersabove and beyond that spent on listing properties, as compared to 14% in 2009.In absolute terms spending on these products was up 90% on the previous year.We would expect to see the proportion of total spend accounted for by these andsimilar future products to rise in the coming years.Many of our customers have taken advantage of a scheme we offer, where for acommitment to spend an additional amount every month all year (typically £200per month in 2010) they can select whatever combination of our additionaladvertising products they wish in return for a discount against the individuallist price of the products. Adoption of this scheme has resulted in both asignificant increase in the average spend on Rightmove per advertiser and acontinued high predictability of our income streams.Our focusOur focus has been and remains on the UK online property advertising market. Wesee this focus as a strength of the business and an important contributor toour success.While we believe that Rightmove would be a major beneficiary of any increase inthe number of agents in the market or number of developments being marketed bynew homes developers, that is more a function of improvements in the widerproperty market. Where we apply our greatest focus is on increasing theabsolute amount and the proportion of overall marketing budgets which ourcustomers choose to spend with us. In 2010 the average spend per branch ordevelopment increased by 23%, accounting for the considerable majority of theoverall revenue growth.Uncertainties, threats and risksThe Rightmove business model has proven to be remarkably resilient in theunprecedented downturn in the property market experienced in 2008 and hasdelivered significant growth even in a tough market subsequent to that.Nonetheless the business is inevitably exposed to the general state of thehousing market and particularly to transaction volumes. We do not believe,given the wider state of the economy and the specific challenges of themortgage market, that 2011 will see any substantial increase in transactionvolumes as compared to 2009 and 2010. While further big reductions in thenumber of agents and developers cannot be ruled out, the current very lowlevels of transactions and success of our customers in trading this far throughthe downturn give us some grounds for thinking that membership numbers areunlikely to fall significantly.Some of the future organic revenue growth we hope to achieve is likely to comefrom the creation of new advertising products and therefore depends on ourability to develop attractive and effective new products. However, thereremains substantial opportunity to increase revenue from increased adoption ofthe existing products.From our inception, Rightmove has experienced a regular flow of new entrantsinto the property advertising market whether explicitly seeking to compete withus or not. They have exhibited a range of business models including `free toadvertise'. 2010 was little different from previous years and we have no basisto believe 2011 will be any different.We believe that risks relating to operational failures, to financial and legalexposures, to fraud or embezzlement or from onerous commercial obligations orliabilities are limited. The business has few tangible assets and the majorintellectual assets are tied up in the design and performance of our websiteand in our brand identity, recognition and reputation.Financial positionRevenueRevenue(1) increased in 2010 by £17.0m (up 26%). Almost all the growth camefrom our Agency business with a year on year increase of £16.7m (up 35%).Agency has always been by far our largest business but in 2010 showed a growthin terms of the proportion of our total revenue, being 78% (2009: 73%).Revenue from New Homes developers increased by £0.5m to £15.1m (up 4%) withdevelopment numbers stable in the second half of the year suggesting an end tothe decline that started in the second half of 2008.
Other revenue fell by £0.2m with the entire decline being accounted for by the ending of a three year government contract at the start of 2010.
Margin growth
The underlying operating margin(1)(2) for the year increased from 62.9% to69.4%. Underlying operating costs(1)(2) only increased by £1.1m from £23.9m to£25.0m, which coupled with the significant organic revenue growth, deliveredthe year on year step change in margin. Year ended Year ended Year ended 31 December 2010 31 December 2009 31 December 2008 Underlying operating margin % 69.4% 62.9% 57.8%(1)(2) Bad debtDuring the year the net bad debt charge was £0.6m (2009: £0.2m). The increasein the charge is due to a one-off write off of £0.2m in relation to a mediaagency that went into liquidation and a modest increase in the bad debtprovision.
Taxation
The consolidated tax rate from continuing operations for the year ended31 December 2010 was 26% (2009: 21%). The difference between this and thestandard rate of tax at 28% is mainly attributable to the increase in thedeferred tax asset on share-based incentives due to the increase in the Companyshare price over the year, together with tax relief on share options exercisedduring the year.Share-based payments and national insuranceIn accordance with IFRS 2, a non-cash charge of £1.8m (2009: £1.9m) is includedin the profit or loss representing the amortisation of the fair value ofshare-based incentives granted, including Sharesave options, since 2006.Employer's NationaI Insurance (NI) is being accrued, where applicable, at arate of 13.8% on the potential employee gain on share-based incentives granted.Based on a closing share price at 31 December 2010 of £7.79 this resulted in a charge for the year of £2.7m (2009: £1.3m).Net financial expensesA net financial credit of £0.2m (2009: £0.9m charge) was recorded. Thisreduction reflects a combination of lower interest charges due to the earlyrepayment of the loan with the Bank of Scotland in February 2010, the releaseof an accrual made in 2009 in relation to debt issue costs and interest earnedon positive cash balances held during the year.Earnings per shareBasic earnings per share (EPS)(1) increased 34% to 35.7p (2009: 26.7p) and isbased on profit after taxation and a weighted average of 108.0m ordinary sharesin issue (2009: 109.1m). Underlying EPS(1)(2) increased 34% to 39.8p (2009: 29.6p).Profit on disposal of HLLA profit of £19.5m has been recorded in relation to the trading over the yearand disposal of the Group's 66.7% stake in HLL. This comprises HLL's profitafter tax for the six months to June 2010 of £0.8m plus a profit of £18.7m inrelation to the sale.Statement of financial positionDue to the strong financial performance and cash generation during the year,the Group has further strengthened its balance sheet with total equity of £27.9m at 31 December 2010 (2009: £3.2m).The increase in current trade and other receivables of 27% from £9.4m to £11.9mis in line with revenue growth experienced in the year. Trade and otherpayables increased from £13.9m to £16.0m principally due to an increase in thepotential liability for employer's NI on share-based incentive gains.
Cash flow and net debt Cash generated from operations was £58.8m (2009: £46.2m) and cash flow conversion was in excess of 100%.
Lower interest paid of £0.1m (2009: £0.7m) was offset by increased taxes paidof £12.2m (2009: £10.8m) resulting in net cash from operating activities of £46.5m (2009: £34.7m).
Capital expenditure was £1.2m (2009: £0.3m) reflecting increased investment in database licences and a disk storage solution.
Initial net proceeds of £13.3m were received in relation to the disposal of HLL, which were returned to shareholders via share buy backs.
A total of £29.4m was invested during 2010 in the repurchase of our own shares(2009: £5.5m) whilst a further £13.0m was paid by way of dividends (2009: £10.9m) to the Company's shareholders. Proceeds of £3.9m (2009: £5.4m) were received on the exercise of share options.During 2009, the Group converted its £25.0m revolving loan facility with theBank of Scotland into a five year term loan. In February 2010, a decision wasmade to repay the debt. A total of £22.5m loan repayments were made in the year(2009: £17.2m).Post repayment of the term loan, the Group entered into an agreement withBarclays Bank Plc for a £10.0m uncommitted money market loan. To date no amounthas been drawn under the facility and it has been extended for a further yearuntil February 2012.
Net cash at 31 December 2010 was £23.1m (2009: £3.4m). The Board is confident that with the existing cash resources and banking facilities in place, the Group and the Company will remain cash positive and will have adequate resources to continue in operational existence for the foreseeable future.
The Board's priorities for the usage of cash are: investment in the business;payment of dividends; and the return of excess cash to shareholders via sharebuy backs. The Board believes that future working capital and capitalexpenditure requirements of the business will continue to be low and that thebusiness will be in a position to return surplus capital to shareholders during2011 through a combination of dividends and share buy backs.Current trading and outlookWe started 2011 with record levels of activity on the Rightmove.co.uk website.Almost every day since the first working Monday of the year has seen strongersite traffic than on any other day prior to 2011. January 2011 has seen us senda record number of enquiries to our advertisers. The growth in mobile trafficcontinues to be strong and increases at an even faster rate than for the mainwebsite.Average spend per advertiser started the year very healthily and is expected torise further over the coming months. Overall advertiser numbers are stable, atsimilar levels to late 2010.We believe that trends favouring online advertising will continue to buoyRightmove's own growth prospects despite difficult housing market conditions.Subject to there being no further decline in the UK housing market, the Boardremains confident of making significant progress in growing the businessorganically in 2011.Ed WilliamsManaging DirectorNick McKittrickChief Operating Officer and Finance Director
(1) From continuing operations. Comparative figures have been restated where necessary to reflect the treatment of Holiday Lettings as a discontinued operation.
(2) Before share-based payments and NI on share-based incentives.
DIRECTORS AND OFFICERSScott ForbesChairmanScott was appointed Chairman of Rightmove in July 2005. He is also the ChiefExecutive of Bridge Capital Advisors Ltd, which he founded in 2007, and was adirector of NetJets Management Ltd, a subsidiary of Berkshire Hathaway throughto October 2009. Scott has over 30 years' experience in operations, financeand mergers & acquisitions which includes 15 years at Cendant Corporation whichwas formerly the largest worldwide provider of residential property services.Scott established the Cendant international headquarters in London in 1999 andled this division as Group Managing Director until he joined Rightmove.(Appointed 13 July 2005.)Ed WilliamsManaging DirectorEd joined Rightmove in December 2000 as Managing Director at its inception. Heis also anon-executive director of Trader Media Group, the main brands being Auto Traderand AutoTrader.co.uk, the UK's leading motoring website. His prior experienceis in business strategy and IT consulting with McKinsey & Co, Accenture andJPMorgan. (Appointed 19 December 2000.)Nick McKittrickChief Operating Officer and Finance DirectorNick joined Rightmove in 2000. He led the development of Rightmove's originalwebsite and then went on to build the new homes, lettings and overseasbusinesses. At the start of 2005 Nick became the Managing Director of the mainRightmove.co.uk operating subsidiary, overseeing a trebling of revenue in threeyears. In 2009, he was promoted to the role of Chief Operating Officer andFinance Director. Before joining the Company he worked in Accenture for eightyears in the technology consulting division. (Appointed to the Board 5 March 2004.)Peter Brooks-JohnsonManaging Director, Rightmove.co.ukPeter joined Rightmove in 2006 and developed the Home Information Packs proposition. His focus subsequently shifted to the operation of theRightmove.co.uk website. He then went on to lead, from the beginning of 2008,the estate agency business. Peter was promoted to the role of Managing Directorof Rightmove.co.uk on his appointment to the Board on 10 January 2011 and nowleads the main operating business. Prior to joining Rightmove, Peter was amanaging consultant with Accenture and the Berkeley Partnership. (Appointed
tothe Board 10 January 2011.)Jonathan AgnewNon-executive DirectorJonathan joined the Board in January 2006 as Senior Independent Director. He isChairman of Beazley, The Cayenne Trust and Ashmore Global Opportunities.Jonathan was an investment banker for over 25 years, including being a ManagingDirector of Morgan Stanley and Group Chief Executive of Kleinwort Benson. Hehas been Chairman of Nationwide Building Society, Limit, Gerrard Group and LMSCapital and has served on the Council of Lloyd's. (Appointed 16 January 2006.)(Chairman of the Remuneration Committee and a member of the Audit andNomination Committees.)Colin KempNon-executive DirectorColin was appointed to the Board in July 2007. He is the Network Director forthe Halifax Community Bank following the formation of Lloyds Banking Group inJanuary 2009. With over 30 years' experience in high street retail banking,Colin has worked for HBOS companies since 1979. His roles have included runningthe Retail Contact Centres and heading up the Halifax Employee Share Servicesbusiness, administering employee share plans to over 400 UK companies. BetweenJanuary 2005 and December 2007, Colin was Managing Director of Halifax EstateAgencies Limited. Colin is a Cranfield MBA and an Associate of the CharteredInstitute of Marketing. (Appointed 3 July 2007.)Ashley MartinNon-executive DirectorAshley joined Rightmove in June 2009 as a non-executive director and also asChairman of the Audit Committee, where he provides oversight of the financialreporting practices, internal control environment and compliance with thevarious listed company regulations. He is also a member of the RemunerationCommittee. He qualified as a chartered accountant in 1981 and has a career infinance spanning 30 years. He was previously Finance Director of Rok plc, thebuilding services group, and Group Finance Director of the media servicescompany, Tempus plc. (Appointed 11 June 2009.) (Chairman of the Audit Committee and member of the Remuneration Committee.)Judy VezmarNon-executive DirectorJudy is Chief Executive Officer of LexisNexis International. LexisNexis®, partof the global media group Reed Elsevier PLC, is a leading worldwide provider ofcontent-enabled workflow solutions designed specifically for professionals inthe legal, risk management, corporate, government, law enforcement, accountingand academic markets. Judy is responsible for the International Group and theirexpansion of the range of successful online services to over 100countries. She is based in London. (Appointed 16 January 2006.) (Member ofthe Audit, Remuneration and Nomination Committees.)Liz TaylorCompany SecretaryLiz was appointed Company Secretary of Rightmove in July 2006. She is a Fellowof the Institute of Chartered Secretaries and Administrators and has over 20years' company secretarial experience across a variety of FTSE 250 publiccompanies in the retail, media and property sectors. Prior to joiningRightmove, she was Company Secretary of The Berkeley Group Holdings plc, theholding company of the group engaged in residential and commercial property
development.SENIOR MANAGEMENT TEAMAlex SolomonNew Homes Director
Alex joined Rightmove in 2005 and, having been responsible for the pricing andproducts portfolios, now runs the new homes business. Prior to joiningRightmove he spent six years working as an economist/policy advisor for tradebodies, initially representing the interests of agricultural firms at theNational Farmers' Union and then mortgage firms at the Council of MortgageLenders.Alan GearingManaging Director, Rightmove Property ServicesAlan joined Rightmove in 2006 developing new sources of revenue separate fromproperty advertising. He was appointed as Managing Director of Rightmove'sAutomated Valuation Model division in July 2008. Prior to Rightmove he was afounder of both The Asset Management Group (property disposal and maintenanceservices) and The Inventory Exchange (online inventory and property inspection)and was Managing Director of a 50 branch estate agency chain.Peter ArmstrongBusiness Development DirectorPeter joined Rightmove in 2003 and worked in the new homes business which hethen went on to run from May 2006 to May 2010. Peter has subsequently taken onthe role of business development director. Prior to Rightmove, Peter worked insales and sales management, latterly in directory advertising with Yell.Miles ShipsideCommercial DirectorMiles joined Rightmove as a founding director in 2001 bringing 20 years ofexperience at senior levels in independent estate agency and with HalifaxEstate Agency. He has responsibility for estate agency and media relations,specialising in advising the industry on how the internet is transforming homemoving and the state of the housing market. He qualified as a CharteredSurveyor in 1982.Robyn PerrissFinancial ControllerRobyn joined Rightmove in 2007 and has day-to-day responsibility for thefinancial operations, based out of Milton Keynes, as well as statutoryreporting and the treasury function. She was formerly Group FinancialController at the online media business, Trader Media Group. She qualified as achartered accountant in South Africa with KPMG.Simon HickieHuman Resources DirectorSimon joined Rightmove in 2007 following seven years at Bloomberg LP where hewas responsible for HR operations across Europe, the Middle East and Africa.Prior to moving into HR, he had managed part of Bloomberg's financial researchoperation covering new debt and equity security issuance and mergers &acquisition activity in Europe.
CORPORATE SOCIAL RESPONSIBILITY
Our peopleOur people are our largest resource and our most highly valued asset. We areproud of our people and the mixture of talent and experience that they bringand we depend on their skills and commitment to achieve our objectives.Our cultural style is bolstered by an open and honest communication environmentand by investment in ensuring that all employees have a profound understandingof Rightmove's core values and goals. We achieve this through a combination ofa rigorous selection process, including technical skills testing, an off-siteresidential course to ensure all Rightmovers understand our core values and therole that they perform, ongoing coaching and mentoring, and cross-functionalteam building events involving all employees. In 2010 all executive directors,senior managers and employees attended a series of outdoor team buildingcamping events at Hever Castle. Staff opinions are frequently sought throughregular staff forums with senior managers and employee online surveys.We continue to offer our Rightmover-led training academy designed to provide astructured means for employees to expand and diversify their skills andknowledge and explore new ways of working with one another. Given thespecialised technical nature of the work we do and the services we provide, wealso support ongoing external professional development where appropriate.During 2010 we have explored new ways of ensuring that Rightmovers are aware ofthe additional benefits that they are entitled to access, which have proved tobe a useful retention tool. This is achieved not only via our induction processand intranet but also through benefits fairs. In November 2010, the Company'ssecond Sharesave contract matured allowing employees to benefit from thesuccess of the Company over the last three years. 43% of employees currentlyparticipate in the Sharesave scheme.Rightmove has a strong commitment to equality of opportunity in all ouremployment policies, practices and procedures. We take a proactive approachthroughout our recruitment and selection process to ensure that we attract,hire and retain a diverse and talented workforce and this is kept under closeand regular scrutiny. No existing or potential employee will receive lessfavourable treatment due to their race, creed, nationality, colour, ethnicorigin, age, religion or similar belief, connections with a national minority,sexual orientation, gender, gender reassignment, marital status, membership ornon-membership of a trade union, disability, or any other classification asprescribed by law.Charitable activityWe continue to encourage all our employees to devote time and fundraisingefforts to charitable causes of particular importance to them as individuals.During 2010 a considerable number of staff have been active in raising money orsupporting the fundraising activities of the NSPCC, our nominated charity, anda wide range of other charities.
Environment
Rightmove actively considers its environmental impact. Since our operation isprimarilyoffice-based, the direct environmental impact is relatively low. IndeedRightmove's business creates opportunities to reduce the overall environmentalharm associated with a variety of aspects of the whole home hunting process.Traditional ways of finding a home tend to involve large amounts of paper andprinting, whether in the form of newspaper advertising, property particularsmailed to applicants through the post or leaflet drops by agents. Rightmovereduces the need for print media and the environmental damage that goes withthem. Rightmove takes care to design the layout of property particulars toreduce the total number of pages that need to be printed out in those caseswhere a home hunter does want a physical copy.Enhanced information on properties also reduces the amount of time home hunterswaste in visiting properties that rapidly turn out to be inappropriate. As ahigh proportion of viewings involve a car journey, any reduction in wastedviewings has an environmental benefit. Rightmove has worked hard to increasethe number and size of photographs of each property and has introduced morecomprehensive map searches and aerial photographs which help home hunters toidentify the specific location of a property. The higher the quality of theinformation presented about properties the less carbon footprint is generatedby prospective buyers making wasted journeys.The Rightmove.co.uk website includes functionality for our customers to displayEnergy Performance Certificates which allow prospective buyers to evaluate theenergy efficiency of a property they are considering buying and to identifyopportunities to improve the energy efficiency once they have purchased theproperty.We take the environmental impact of our own operations very seriously. As aninternet-based Group with most staff employed in two office locations, webelieve our own environmental footprint is small and that there are noby-products of our operations which have a clear negative impact on theenvironment. Our staff are encouraged to take proactive steps to address ourenvironmental responsibilities. For instance, we continue to operatecomprehensive recycling schemes which were established in consultation withlocal authorities and recycling partners. As an operator of an online propertyportal, the main environmental impact is the power usage of our data centres.Our procurement policy is to purchase hardware with the best computationalperformance which uses the least electrical power. For example, in the year, wehave completed a partial refresh of our data centre hardware replacing old lessefficient servers with half the number of new efficient units. This refresh hasnot only reduced our electrical power usage, but has allowed us to serve 7.6bnpage impressions to our customers, an increase of 18% above that of 2009.As an online Group, our culture emphasises a paperless environment. We alsorecognise that our responsibilities do not stop just with how we operateinternally - we also encourage all our customers, business partners andsuppliers not to unnecessarily print out emails sent by us in the signature ofall our emails. Moreover in 2008 we introduced e-communications for ourshareholders, including an interactive copy of the annual report to enableinvestors and people with an interest in the Company to print specified pagesthereby reducing the quantity of printed material we distribute. In 2009, weintroduced email invoicing for our new homes developer customers and now have71% of this customer group on paperless billing.Health and safetyThe Group considers the effective management of health and safety to be anintegral part of managing its business. During 2010, we continued our firesafety, first aid and work place safety training. The Group's ongoing policy onhealth and safety is to provide adequate control of the health and safety risksarising from work activities, through further consultation with, and trainingof, employees, the provision and maintenance of plant and equipment, safehandling and use of all substances and the prevention of accidents and causesof ill health. The Group will maintain safe and healthy working conditions foremployees, visitors and contractors, and keep the policy on health and safetyup-to-date with regular reviews and necessary alterations to the policy asrequired.
DIRECTORS' REPORT
The directors submit their report together with the audited financialstatements for Rightmove plc (the Company) and its subsidiary companies (theGroup) for the year ended 31 December 2010. The Company is domiciled in England(registered number 6426485).Principal activitiesThe Group operates in the UK residential property industry connecting people toproperties.Its principal business is the operation of the Rightmove.co.uk website, whichis the UK's largest residential property website. Its customers (estate agents,lettings agents, new homes developers and overseas homes agents and vendors)pay fees for the right to display properties on the Rightmove website, whichprovides home hunters with property details to search.
Further information on the Group's activities within each segment during the year under review and of its prospects can be found in the Business and Financial Review on pages 5 to 11.
The following sections inclusive are incorporated by reference into theDirectors' Report which have been drawn up and presented in accordance with andin reliance upon acceptable English company law and the liabilities of thedirectors in connection with the report shall be subject to the limitations andrestrictions provided by such law:• Business and financial review (pages 5 to 11)• Directors and officers (pages 12 to 13)• Corporate social responsibility (pages 15 to 16)• Corporate governance (pages 21 to 28)• Remuneration report (pages 29 to 45)In compliance with the business review provisions of the Companies Act 2006,within the Business and Financial Review, principal risk factors are discussedunder the section `Uncertainties, Threats and Risks' on page 8. Key performanceindicators are given on page 6 and information on the likely developments ofthe Group under `Current Trading and Outlook' on page 11.
Sale of Holiday Lettings (Holdings) Limited (HLHL)
Rightmove sold the HLHL business to TripAdvisor Limited, a wholly ownedsubsidiary of Expedia Inc, on 21 June 2010. Rightmove acquired its 67% stake inthe business in March 2007 for £3,108,000 and had operated it as a stand-alonebusiness throughout the period of ownership. Net cash consideration toRightmove on completion was £15,185,000 with a further £1,000,000 in Escrow,which together with an estimated £5,104,000 contingent consideration is likelyto take total proceeds for the Group's 67% stake in the business to £20,872,000.Trading results
The Group's underlying operating profit from continuing operations (beforeshare-based payments and National Insurance on share-based incentives) for thefinancial year was £56,563,000 (2009: £40,606,000). Further information on theresults for the Group is set out in the Consolidated Statement of ComprehensiveIncome on page 48 and the supporting Notes and also the Business and FinancialReview on pages 5 to 11.
Dividend
An interim dividend of 5.0p (2009: 3.0p) per ordinary share was paid on12 November 2010 to shareholders on the register of members at the close ofbusiness on 15 October 2010. The directors are recommending a final dividendfor the year of 9.0p (2009: 7.0p) per ordinary share, which together with theinterim dividend of 5.0p, paid in respect of the half year period ended30 June 2010, makes a total for the year of 14.0p (2009: 10.0p), amounting to £14,905,000 (2009: £10,865,000). Subject to shareholders' approval at the AnnualGeneral Meeting on 4 May 2011, the final dividend will be paid on 10 June 2011to shareholders on the register of members at the close of business on 13 May 2011.
The final dividend payment has not been included in trade and other payables as it was not approved before the year end.
Share capitalThe ordinary shares in issue (including 2,505,430 shares held in treasury) atthe year end comprised 114,761,434 (2009: 118,923,411) ordinary shares of £0.01each, being £1,147,000 (2009: £1,189,000). The holders of ordinary shares areentitled to receive dividends as declared from time to time, and are entitledto one vote per share at general meetings of the Company. Movements in theCompany's share capital in the year are shown in Note 23 and Note 24 to thefinancial statements. Information on the Group's share-based incentive schemesis set out in Note 25 to the financial statements. Details of the share-basedincentive schemes for directors are set out in the Remuneration Report on page 42.Share buy backThe Company announced a share buy back programme in June 2007, which continuedduring 2009 and 2010. Of the 15% authority given by shareholders at the 2010Annual General Meeting, a total of 4,161,977 ordinary shares of £0.01 each werepurchased in the year to 31 December 2010, being 3.1% of the shares in issue(excluding shares held in treasury) at the time the authority was granted. Theaverage price paid per share was £7.05 (2009: £4.84) with a total considerationpaid (inclusive of all costs) of £29,564,000 (2009: £5,490,000). Since theintroduction of the new parent Company in January 2008, a total of 17,143,974shares have been purchased of which 2,505,430 have been transferred intotreasury with the remainder having been cancelled. A resolution seeking torenew this authority will be put to shareholders at the Annual General Meetingon 4 May 2011.Shares held in trustAs at 31 December 2010, 6,322,329 (2009: 7,418,874) ordinary shares of £0.01each in the Company were held by The Rightmove Employees' Share Trust (EBT) forthe benefit of Group employees (2009: 7,418,874). These shares had a nominalvalue at 31 December 2010 of £63,000 (2009: £74,000) and a market value of £49,251,000 (2009: £37,428,000). The shares held by the EBT may be used tosatisfy share-based incentives for the Group's employee share plans. During theyear 1,096,545 shares (2009: 1,641,791) shares were transferred to Groupemployees following the exercise of both executive and Sharesave share options.
The terms of the EBT provide that dividends payable on the shares held by the trust are waived.
Substantial shareholdingsAs at the date of this report, the following beneficial interests in 3% or moreof the Company's issued ordinary share capital (excluding shares held intreasury) on behalf of the organisations shown in the table below, had beennotified to the Company pursuant to Rule 5 of the Disclosure and TransparencyRules:Shareholder No. of shares %(1) Baillie Gifford & Co 8,615,294 7.7 Marathon Asset Management LLP 7,835,467 7.0
Cantillon Capital Management LLC 6,830,220 6.1 Caledonia (Private) Investments Pty 6,431,468 5.7Ltd The Rightmove Employees' Share Trust 6,322,329 5.6
AEGON Asset Management (UK) 5,772,199 5.1 Tremblant Partners LP 5,466,506 4.9
Legal & General Investment Management 4,146,797 3.7
Ltd Old Mutual Asset Managers 3,805,926 3.4 BlackRock 3,735,908 3.3
(1) The above percentages are based upon the voting rights share capital (being the shares in issue less shares held in treasury) of 112,256,004.
Directors
The directors of the Company at the year end and as at the date of this reportare named on pages 12 to 13 together with their profiles. Stephen Shipperleyserved on the Board during the year and resigned on 31 December 2010 andtherefore his profile is not included.The Articles of Association of the Company require directors to submitthemselves for re-appointment where they have been a director at each of the preceding two Annual General Meetings and were not appointed or re-appointed by the Company at, or since, either such meeting. Following the changes to the Combined Code in June 2010, all directors who have served during the year and remain a director as at 31 December 2010 will retire at the forthcoming Annual General Meeting. Peter Brooks-Johnson (executive director), will also retire and offer himself for election, this being his first general meeting since hisappointment in January 2011.The Board is satisfied that the directors retiring are qualified forre-appointment by virtue of their skills, experience and contribution to theBoard. Ed Williams, Nick McKittrick and Peter Brooks-Johnson have service agreements with the Company which can be terminated on 12 months notice. The appointments for the non-executive directors, Scott Forbes, Jonathan Agnew,
Colin Kemp, Ashley Martin and Judy Vezmar can be terminated on three months' notice.
The interests of the directors in the share capital of the Company at31 December 2010, the directors' total remuneration for the year and details oftheir service contracts and Letters of Appointment are set out in theRemuneration Report on pages 29 to 45. At 31 December 2010 each of theexecutive directors was deemed to have a non-beneficial interest in 6,322,329ordinary shares of £0.01 each held by the trustees of the EBT.Directors' interests in contractsStephen Shipperley served as non-executive director during the year andresigned from the Board on 31 December 2010. Stephen is Group ExecutiveChairman of Connells Limited, a significant estate agency customer of theGroup. The details of amounts owed by and invoiced to Connells Limited duringthe year are disclosed in the section dealing with Related Party Disclosures inNote 28 to the financial statements on page 84. All transactions are on an armslength basis.Supplier payment policyThe Group and Company's policy concerning creditors is to agree payment termswith its suppliers, ensure the relevant terms of payment are included incontracts and to abide by those terms when it is satisfied that goods orservices have been provided in accordance with the contracts. For the year to31 December 2010, trade creditors on continuing operations represented 32 days(2009: 31 days) of average daily purchases. The Group had £1,033,000 of tradepayables at the year end (2009: £777,000).Contractual arrangementsDue to the nature of the Group's business activities, the Group maintains asmall number of contractual arrangements with external providers of data,software, hardware and web-based services, which are essential to support theoperation of all business segments. However, the loss of one of thesearrangements due to supplier failure would not result in a critical businessfailure, as such services could be sourced from a number of other suppliers.Research and developmentThe Group undertakes research and development expenditure in view of developingnew products and improving the existing property websites. Further details aredisclosed in Note 2 to the financial statements on page 57.
Charitable and political donations The Group and the Company made no charitable contributions or political donations during the year (2009: £nil).
Annual General MeetingThe Annual General Meeting of the Company will be held at the offices of UBSLimited at 1 Finsbury Avenue, London, EC2M 2PP on 4 May 2011 at 10am.The Board is proposing amendments to the remuneration of the executivedirectors. These changes are seen by the Board as an important next step in ourtransition from a new public company to a more substantial business that is nowable to benefit from additional senior management talent necessary to achievethe Board's ambitious growth objectives. The proposals reflect the ending ofthe incentive arrangements instituted five years ago prior to the Company'sflotation on the London Stock Exchange which have been successful in retainingand motivating the original management team who founded the business ten yearsago. Our proposal is to phase the proposed changes in over three years, so thetransition will be achieved by 2013.Otherwise, the majority of the resolutions being proposed at the 2011 AnnualGeneral Meeting are general in nature including the renewal for a further yearof the limited authority of the directors to allot the unissued share capitalof the Company and to issue shares for cash other than to existingshareholders. A resolution will also be proposed to renew the directors'authority to purchase a proportion of the Company's own shares.One of the items of special business to be addressed at this Annual GeneralMeeting relates to the requirement in the Companies (Shareholders' Rights)Regulations 2009, which came into force on 3 August 2009, that all generalmeetings must be held on not less than 21 clear days' notice unlessshareholders approve a shorter notice period. At the 2010 Annual GeneralMeeting, a resolution was passed allowing the Company to call general meetings(other than Annual General Meetings) on not less than 14 clear days' notice. Asthis authority will expire at the 2011 Annual General Meeting, we will beproposing a resolution to renew this authority.
Auditor
KPMG Audit Plc has confirmed its willingness to continue in office as auditorof the Group. In accordance with section 489 of the Companies Act 2006,separate resolutions for the re-appointment of KPMG Audit Plc as auditor of the Group and for the Audit Committee to determine their remuneration will be proposed at the forthcoming Annual General Meeting.Audit informationSo far as the directors in office at the date of signing of the report areaware, there is no relevant audit information of which the auditors are unawareand each such director has taken all reasonable steps to make themselves awareof any relevant audit information and to establish that the auditors are awareof that information.Responsibility statement of the directors in respect of the annual financialreportWe 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 Directors' Report includes a fair review of the development and performance of the business and the position of the issuer and the
undertakings included in the consolidation taken as a whole, together with
a description of the principal risks and uncertainties that they face.
Signed by the Board:Ed Williams Managing DirectorNick McKittrickChief Operating Officer and Finance Director25 February 2011CORPORATE GOVERNANCEStatement of compliance
The 2008 Combined Code of Corporate Governance (Combined Code) sets out theprinciples and provisions relating to good governance of UK listed companies.In this section we set out how we have applied the principles and complied withthe provisions of the Combined Code during 2010 and explain the reason for onearea of non-compliance.The BoardAt the date of this report, the Board comprises eight directors including theChairman (Scott Forbes), three executive directors (Ed Williams, ManagingDirector, Nick McKittrick, Chief Operating Officer and Finance Director andPeter Brooks-Johnson, Managing Director, Rightmove.co.uk) and fournon-executive directors (Jonathan Agnew, who is the Senior IndependentDirector, Ashley Martin, Judy Vezmar, and Colin Kemp).Colin Kemp has worked for HBOS companies for over 30 years and held theposition as Managing Director of Halifax Estate Agencies Limited (an agencycustomer of the Group) from January 2005 to December 2007. Although the LloydsBanking Group subsequently sold the business in October 2009, in strictapplication of the Combined Code, Colin Kemp is not considered to beindependent. However, the Board considers that Colin Kemp is independent incharacter and in particular continues to challenge rigorously the executivedirectors and the Board as a whole. Whilst the composition of the Board for theyear under review was not in strict compliance with supporting principle B.1.2of the Combined Code in that at least half of the directors (excluding theChairman) are not considered independent non-executive directors, the directorsbelieve that the Board currently operates effectively and that all thenon-executive directors are fully independent of management and that JonathanAgnew, Ashley Martin and Judy Vezmar are free from any business or otherrelationship that could materially interfere with the exercise of theirindependent judgment and advice to the Board.
Ed Williams, Managing Director, is also a non-executive director of Trader Media Group. His remuneration for that position is retained by him and is set out in the Remuneration Report on page 36.
Neither the Chairman nor the other two executive directors hold any other non-executive directorships or commitments disclosable under the Combined Code.
Biographical details of the directors at the date of this report appear on pages 12 and 13.
Directors' remuneration The principles and details of directors' remuneration and contractual arrangements are contained in the Remuneration Report on pages 29 to 45.
Board and committee membership and attendanceIn accordance with the Combined Code, the Articles of Association require alldirectors to seek re-election every three years. In addition all directors are subject to election by shareholders at the first opportunity after their appointment. Following the changes introduced by the Combined Code in June 2010, all directors will seek re-election at the 2011 Annual General Meeting.Peter Brooks-Johnson, who having been appointed since the last Annual GeneralMeeting, will retire from the position as executive director and offer himselffor election.
The membership of the Committees of the Board and attendance at meetings for the year under review are set out in the table below:
Remuneration Audit Nomination Board Committee Committee Committee Total meetings 8 6 4 2 Scott Forbes 8 6(1) N/A 2 Jonathan Agnew 8 6 4 2 Colin Kemp 8 N/A N/A N/A Ashley Martin 8 6 4 N/A Nick McKittrick 8 N/A N/A N/A Stephen Shipperley (2) 5 N/A N/A N/A Judy Vezmar 5 5 4 2 Ed Williams 8 N/A N/A N/A
(1) The Remuneration Committee Chairman has requested that the Chairman of the
Board attend the Remuneration Committee meetings.
(2) Stephen Shipperley resigned on 31 December 2010.
In addition to the above meetings, the Chairman conducts meetings with thenon-executive directors without the executive directors being present whenrequired. Jonathan Agnew, the Senior Independent Director, chaired a meeting ofthe Board at which the performance of the Chairman was also reviewed (withoutthe presence of the Chairman).
Operation of the Board
The Board is responsible to shareholders for the overall direction and controlof the Group. Its key task is to approve strategy, ensuring the successfulimplementation of projects and proposals and monitoring the operatingperformance of the Group in pursuit of its objectives in the interest ofmaximising long-term shareholder value. The Board has adopted a formal scheduleof matters requiring specific approval. These include, amongst other things,the approval of the annual business plan, capital structure, dividend policy,acquisitions and disposals, appointment and removal of officers of the Company,approval of the Half Year and Full Year results, shareholder communication andresponsibility for corporate governance and review of the Group's risks andsystem of internal controls.The Board receives meeting papers one week prior to the meetings to allowsufficient time for detailed review and consideration of the documentsbeforehand. If any director has a concern about any aspect of the businessconducted at any Board meeting, the Company Secretary shall discuss this withthe director concerned and record their concern or comments in the Boardminutes. The Board also receives monthly management and financial reports onthe operational and financial performance of the business setting out actualand forecast financial performance against approved budgets in addition toother key performance indicators. The Board also receives copies of brokerreports and press releases relating to the Group. At least once a year theManaging Director and the senior management team present a strategic review andan annual plan to the Board for review and approval.The Board normally schedules eight meetings each year although meetings can bescheduled at short notice at the request of any director or if required. Inaddition to formal Board meetings, there is regular informal dialogue betweenall directors.
Chairman and Managing Director
There are clear written guidelines to support the division of responsibilitiesat the head of the Company with the roles of the Chairman and Managing Directorseparately held. The Chairman is responsible for the effective conduct of theBoard, for communication with shareholders and for ensuring that each directoruses their skills and experience to the benefit of the Board's decision making.With the assistance of the Company Secretary, the Chairman monitors theinformation provided to the Board to ensure that it is sufficient, pertinent,timely and clear.The Managing Director has day-to-day executive responsibility for the runningof the Group, leading the executive and operational teams in developingstrategies and delivering results against defined targets to enable the Groupto meet its objectives.Board trainingThe breadth of management, financial and listed company experience of thenon-executive directors is described in the biographical details on pages 12and 13, and demonstrates a range of business expertise that provides the rightmix of skills and experience given the size of the Company. There areprocedures in place for individual Board members to receive induction andtraining as appropriate and to seek the advice and services of independentprofessional advisers, at the Company's expense, where specific expertise ortraining is required in the course of their duties.The directors disclose a qualifying third-party indemnity provision between theCompany and its directors and officers as provided by the Articles ofAssociation of the Company, which was in force at the date of this report. TheGroup has also arranged directors' and officers' insurance cover in respect oflegal action against the directors.The Group has set out written policies in compliance with a code of securitiesdealings in relation to the shares and equivalent to the Model Code publishedin the Listing Rules. The code applies to all directors, other personsdischarging managerial responsibility and other relevant employees.Board evaluationThe Board conducted a Board evaluation exercise in quarter four of 2010 whichwas led by the Chairman, assisted by the Company Secretary. All directorscompleted questionnaires inviting feedback on the performance and operation ofthe Board. The results were discussed at the Board meeting in December 2010.The Board concluded that it was operating effectively and agreed a number ofactions and training requirements for the forthcoming year. In addition eachdirector provided feedback on the performance of each of their Board colleagueswhich was collated and communicated at one-to-one meetings conducted by theChairman. At a meeting chaired by Jonathan Agnew, Senior Independent Director,the Board provided input into and reviewed the performance of the Chairman.The Board has agreed to adopt best practice and to organise an externallyfacilitated Board evaluation at least once every three years and will take sometime to review the external market place over the next year to determine anappropriate facilitator and process alternatives with the aim of introducing anexternal evaluation by 2012.Relations with shareholdersThe Board is accountable to shareholders for the performance and activities ofthe Company and the Chairman ensures that effective communication withshareholders takes place.Within the terms of the regulatory framework, the Company has conducted regulardialogue with shareholders through ongoing meetings with institutionalinvestors and research firms to discuss strategy, operating performance andfinancial performance. Contact in the UK is principally with the ManagingDirector and Chief Operating Officer and Finance Director. The Chairman alsoparticipates in the USA biannual investor road shows. In 2010, Jonathan Agnew,the Senior Independent Director, consulted major shareholders on theremuneration policy for the executive directors. He is also available toshareholders if they wish to supplement communication or if contact through thenormal channels is inappropriate.Shareholders are also kept up to date with the Group's activities through theAnnual and Half Year Reports and the investor relations section of its website,which provides details of all the directors, latest news, including financialresults, investor presentations and Stock Exchange announcements.The Board is kept informed of the views and opinions of those with an interestin the Company through reports from the Managing Director and Chief OperatingOfficer and Finance Director as well as reports from the Company's jointbrokers, UBS and Numis. Directors receive notification of any changes in thestatus of substantial shareholders and at each Board meeting an update is givenby the executive directors on the movements in major shareholdings and on theviews and opinions of those with an interest in the Company.
Conflicts of interest In cases of doubt, the Chairman of the Board is responsible for determining whether a conflict of interest exists.
Annual General MeetingAll shareholders are invited to participate in the Company's Annual GeneralMeeting on 4 May 2011 where all directors will be available to answer questionsand will also be available for discussions with shareholders prior to and afterthe meeting.
The Company will arrange for the Annual Report and related papers to be available on the Company's corporate website at www.rightmove.co.uk/ investors.rsp or posted to shareholders (where requested) so as to allow at least 20 working days for consideration before the Annual General Meeting.
The Company also complies with the Combined Code with the separation of allresolutions put to the vote of shareholders. The Company proactively encouragesshareholders to vote at general meetings by providing electronic voting forshareholders who hold their shares through the Crest system and providespersonalised proxy cards to ensure that all votes are clearly identifiable. TheCompany presently takes votes at general meetings on a show of hands on thegrounds of practicality due to the limited number of shareholders inattendance. Votes are taken by a poll at any shareholder meeting where legallyrequired. All proxy votes are counted and the level of proxy votes includingabstentions lodged for each resolution are reported after each resolution andpublished on the Company's website.Board committeesThe Board has established three principal committees, the Audit Committee, theRemuneration Committee and the Nomination Committee, each of which operateswithin written terms of reference approved by the Board. No person other than aCommittee member is entitled to attend the meetings of these Committees, exceptby invitation of the Chairman of that Committee.Remuneration committeeThe Remuneration Committee consists of the three independent non-executivedirectors, Jonathan Agnew (who is Chairman), Judy Vezmar and Ashley Martin. Inaddition, the Remuneration Committee Chairman has requested that the Chairmanof the Board attend the Remuneration Committee meetings. The quorum formeetings of the Remuneration Committee is two members. The RemunerationCommittee will meet at such times as may be necessary but will normally meet atleast twice a year.The purpose of the Remuneration Committee is to ensure that the Company'sexecutive directors and senior executives are properly incentivised and fairlyrewarded for their individual contributions to the Company's overallperformance having due regard to the interests of the shareholders and to thefinancial and commercial health of the Group.
The Remuneration Committee's terms of reference are available on the Company's website, www.rightmove.co.uk/investors.rsp or by request from the Company Secretary.
The Company Secretary acts as Secretary to the Committee. The Chairman of the Remuneration Committee reports to the Board on the Remuneration Committee's behalf after each meeting.
During 2010 the Committee appointed Aon Hewitt Limited (trading as Hewitt New Bridge Street),remuneration consultants, to assist with a review of the remuneration policy and to set the remuneration for the executive directors and senior management from 2011. A detailed report on the Company's remunerationpolicy and the work of the Remuneration Committee is available in the Remuneration Report on pages 29 to 45.Nomination committeeThe Nomination Committee consists of Scott Forbes (who is also Chairman of theBoard), Jonathan Agnew and Judy Vezmar as independent non-executive directors.The quorum for meetings of the Nomination Committee is two members. TheChairman of the Company may not chair the Nomination Committee in connectionwith any discussion about the appointment of his successor to the chairmanshipof the Company. In these circumstances, the Senior Independent Director willtake the chair. Appointments are for a period of up to three years, extendableby no more than two additional three year periods, so long as members continueto be independent.The Nomination Committee meets at such times as may be necessary and normallymeets at least twice a year. The purpose of the Nomination Committee is toconsider and make recommendations to the Board about the composition of theBoard, including proposed appointees, and whether to fill any vacancies thatarise or to change the number of Board members.
The Nomination Committee's terms of reference are available on the Company's website, www.rightmove.co.uk/investors.rsp or by request from the Company Secretary.
During the year the Nomination Committee reviewed the organisation structure,approved the plans for the succession of the executive directors and the seniormanagement team, agreed the process for the Board's annual evaluation togetherwith the changes to the Combined Code and conducted an annual review of itsterms of reference.Audit committeeThe Audit Committee consists of the three independent non-executive directors,Ashley Martin (who is Chairman), Judy Vezmar and Jonathan Agnew. Ashley Martinwas previously the Finance Director of Rok plc and Group Finance Director ofthe media services group Tempus Group plc and, having relevant financial skillsand experience, was appointed to the role of Audit Committee Chairman on hisappointment to the Board in June 2009.The quorum for meetings of the Audit Committee is two members. Appointments tothe Committee are for a period of up to three years, extendable by no more thantwo additional three year periods, so long as members continue to beindependent.The Audit Committee meets at least four times a year and more often ifnecessary. Two of its meetings are prior to the announcement of the Half Yearand Full Year results of the Group, when the external auditor is in attendance.The Company Secretary acts as Secretary to the Committee. The Chief OperatingOfficer and Finance Director and Financial Controller are normally invited toattend the meetings. Colin Kemp, non-executive director is also invited toattend the meetings.The Chairman of the Audit Committee reports to the Board on the AuditCommittee's behalf after each meeting. The Audit Committee assists the Board inthe discharge of its duties concerning the announcement of results, the Annualand Half Year Reports and the maintenance of internal controls. It reviews thescope and planning of the audit and the auditor's findings and considers theGroup's accounting policies and the compliance with those policies andapplicable legal and accounting standards.The Audit Committee has authority to investigate any areas of concern as tofinancial impropriety that arise and to obtain outside legal or otherindependent professional advice in connection therewith. The Audit Committee'sprincipal duties and terms of reference are available on the Company's website,www.rightmove.co.uk/investors.rsp or by request from the Company Secretary.During 2010 the Committee has, amongst other matters, approved the appointmentof the external auditor, fixed their remuneration and reviewed theeffectiveness of the external audit process. The Committee has also consideredthe need for an internal audit function. Given the simplicity of theorganisational structure, the open and accountable culture with clear authoritylimits, the straightforward financial model and systems and the fact that themanagement team and Board conduct regular financial reviews, the Committeerecommended to the Board that an internal audit function was not currentlyappropriate for the business. This decision is kept under regular review.The Committee also discussed its responsibilities to safeguard the auditobjectivity and independence as well as the needs of the business and agreedthat it was practical in many cases for the auditor to be assigned to othernon-audit project work due to their knowledge and expertise of the business.This would usually relate to corporate transaction advice and tax compliance.The Committee agreed a policy that management be given authority to incurnon-audit fees up to 50% of the annual agreed audit and tax fee in anyfinancial year without the prior approval of the Audit Committee. In 2010 thenon-audit fees were £7,000 in relation to other advisory services and are fullydisclosed in Note 6 of the financial statements.The Committee reviewed the Annual and Half Year Reports. The external auditoralso presented the results of their review of the 2009 Full Year and 2010 HalfYear results as well as their audit plan to the Audit Committee. In addition toreceiving reports from the external auditor, members met with the externalauditor without the presence of the executive directors.
The Committee also reviewed the whistleblowing policy (which provides the procedure for staff to report any concerns that they may have independent of management about suspected misconduct without fear of retaliation) and conducted an annual review of its terms of reference.
Internal controlsThe Board has overall responsibility for the Group's system of internalcontrols and has established a framework of financial and other controls, whichis periodically reviewed in accordance with the Turnbull guidance for itseffectiveness.The Board has taken, and will continue to take, appropriate measures to ensurethat the chances of financial irregularities occurring are reduced as far asreasonably possible by continually seeking to improve the quality ofinformation at all levels in the Group, fostering an open environment andensuring that the financial analysis is rigorously applied. Any system ofinternal control is designed to manage rather than eliminate the risk offailure to achieve business objectives and can only provide reasonable and notabsolute assurance against material misstatement or loss.The Group's management has established the procedures necessary to ensure thatthere is an ongoing process for identifying, evaluating and managing thesignificant risks to the Group. These procedures have been in place for thewhole of the financial year ended 31 December 2010 and up to the date of theapproval of the 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, 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 exist,
including appropriate authorisation levels, with larger capital projects,
acquisitions and disposals requiring Board approval;
* a comprehensive disaster recovery plan based upon co-hosting of the
Rightmove.co.uk website across three separate London locations, which is
regularly tested and reviewed;
* a treasury function which manages cash flow forecasts and cash on deposit
and is responsible for monitoring compliance with banking agreements, where
appropriate; and
* a whistleblowing policy of which all employees are made aware, to enable
concerns to be raised either with line management or, if appropriate,
confidentially outside the line management structure.
Through the procedures outlined above, the Board has considered all significant aspects of internal control for the year and up to the date of this Annual Report.
Going concernThe Board is required under the Combined Code to consider whether or not it isappropriate to adopt the going concern basis in preparing the Group and theparent Company financial statements.As part of its normal business practice the Group prepares annual and longerterm financial plans. In addition, a going concern paper was prepared andpresented to the Audit Committee in February 2011 prior to it recommending theapproval of the financial statements and notes to the accounts for the yearended 31 December 2010 to the Board.After reviewing this, the Board has a reasonable expectation that the Group hasadequate resources and banking facilities to continue in operational existencefor the foreseeable future. Accordingly they continue to adopt the goingconcern basis in preparing the financial statements. Further information isprovided in Note 1 to the financial statements.
Statement of directors' responsibilities in respect of the Annual Report and financial statements
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 Companyfinancial statements for each financial year. Under that law they are requiredto prepare the Group financial statements in accordance with IFRSs as adoptedby the EU and applicable law and have elected to prepare the parent Companyfinancial statements on the same basis.Under company law the directors must not approve the financial statementsunless they are satisfied that they give a true and fair view of the state ofaffairs of the Group and parent Company and of their profit or loss for thatperiod. 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 judgments 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 isinappropriate to presume that the Group and the parent Company will continue inbusiness.The directors are responsible for keeping adequate accounting records that aresufficient to show and explain the parent Company's transactions and disclosewith reasonable accuracy at any time the financial position of the parentCompany and enable them to ensure that its financial statements comply with theCompanies Act 2006. They have general responsibility for taking such steps asare reasonably open to them to safeguard the assets of the Group and to preventand detect fraud and other irregularities.
Under applicable law and regulations, the directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply 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.
REMUNERATION REPORT
In line with the requirements of section 420 of the Companies Act 2006, thedirectors present the report on directors' remuneration for the year ended 31 December 2010. This report sets out the policies under which executive andnon-executive directors were remunerated and provides tables of informationshowing details of the remuneration and share interests of all the directors.In accordance with the requirements, the report provides the disclosure in twoparts: information subject to audit and information that is not subject toaudit.
Shareholders will be provided with an opportunity to vote on the Remuneration Report as set out in this Annual Report at the forthcoming Annual General Meeting to be held on 4 May 2011.
Part I
This part of the Remuneration Report is not subject to audit.
The Remuneration Committee
Terms of referenceThe Remuneration Committee's (hereinafter referred to as the Committeethroughout this report) primary role is to make recommendations to the Board asto the Company's broad policy and framework for the remuneration of theexecutive directors, the Chairman of the Board and the Company Secretary. Inaccordance with the Combined Code, the Committee also recommends the structureand monitors the level of remuneration for the first layer of management belowBoard level. The Committee is also aware of and advises on the employee benefitstructures throughout the Company and its subsidiaries and ensures that it iskept aware of any potential business risks arising from remunerationarrangements throughout the Company.
The Committee has formal terms of reference which are reviewed annually and updated as required. These are available on the Company's website at www.rightmove.co.uk/investors.rsp or on request from the Company Secretary.
Membership
The Committee consists of independent non-executive directors, these being atthe date of this report, Jonathan Agnew (Chairman), Ashley Martin and JudyVezmar. Only members of the Committee have the right to attend Committeemeetings. The Chairman of the Committee has however requested that ScottForbes, the Chairman of the Board, attend the meetings except duringdiscussions relating to his own remuneration. The Company Secretary acts as theSecretary of the Committee and normally attends the meetings.
Ed Williams, Managing Director, may also be invited to meetings and the Committee takes into consideration his recommendations regarding the remuneration of his executive colleagues and the first layer of management below Board level. No director is involved in deciding their own remuneration.
The Committee will meet at such times as may be necessary, but normally meetsat least twice a year. During 2010 the Committee met six times and theattendance is shown below: Number of meetingsName of director attended Jonathan Agnew 6 out of 6 Ashley Martin 6 out of 6 Judy Vezmar 5 out of 6AdviceDuring 2010, Aon Hewitt Limited (trading as Hewitt New Bridge Street (HNBS))was engaged by the Committee to review the executive director remunerationpolicy. The Committee and the Board considered that the Company had reached apoint at which it was necessary that the remuneration practice should bebrought into line with more standard practice among FTSE companies. TheCommittee commissioned an independent review by HNBS to assist in itsdetermination of an appropriate future remuneration framework for executivedirectors to apply from 2011.
During the year HNBS also provided services in connection with the valuation of share-based incentive awards (as required by IFRS 2) to the Company and confirmed that, in their view, this service did not present a conflict of interest with the services provided to the Committee.
Remuneration policy
Rightmove's remuneration policy is based on a fundamental belief that growthoriented companies should reward executives with demonstrably lower than marketbase salaries and benefits and higher than market equity rewards contingentupon achieving challenging performance criteria.
The key principles of the Committee's policy are as follows:
* Remuneration arrangements should be designed so as to provide executive
directors with the opportunity to receive a share in the future growth and
development of the Company which is regarded as fair by both other
employees and by shareholders. This approach should allow the Company to
attract and retain the sort of dynamic, self-motivated individuals who are
critical to the future success of the business.
* Executive directors should have significantly below market levels of base
salary, minimal benefits (and only benefits which are made available on the
same basis to all Rightmove employees), and above market levels of variable
pay potential. This arrangement is designed to best align the interests of
the executive directors with the interests of shareholders.
* Remuneration arrangements should be simple to understand and administer.
* Changes to remuneration should be made infrequently and those changes made
each year should, in most instances, be directly linked to the policies
applied to all employees (specifically with regard to rises in base salary
and changes to benefits).
* Executive directors should be principally rewarded for the overall success
of the business for which they have collective responsibility. The Company
has key short-term, medium-term, and long-term strategic goals and executive directors should be incentivised against all these goals. * Executives 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 Rightmove plc shares which are deferred for a further two years from
when the bonus target has been achieved.
2010 Remuneration framework
As disclosed in last year's Remuneration Report, the remuneration framework for executive directors in 2010 was broadly consistent with previous years and comprised:
* Base salaries of £217,239. * No pension provision.
* An annual cash bonus of up to 75% of salary and a deferred share bonus of
up to 125% of salary. The bonus was determined by a mixture of underlying
profit performance and key performance indicators relating to underlying
drivers of long-term revenue growth.
* A grant of share options worth 400% of salary to Ed Williams and 350% of
salary to
Nick McKittrick. Exercise of options will be subject to achieving a mixture
of earnings per share (EPS) and Total Shareholder Return (TSR) performance
targets.
All 2010 bonus targets were met in full. Therefore, a cash bonus of £162,929will be paid to Ed Williams and Nick McKittrick after the announcement of theFull Year results for the year ended 31 December 2010. In addition an award ofdeferred shares in Rightmove plc worth 125% of salary will be granted to EdWilliams and Nick McKittrick respectively under the Deferred Share Plan whichwill be deferred until March 2013. The bonus payment reflects the increase inunderlying operating profit and strong share price performance in the period,the sale of new products to estate agency customers launched at the end of 2009and the retention of all of Rightmove's key customers. The Committee believesthe resulting bonus payment is appropriate in the context of the businessperformance against business targets and relative to prevailing marketconditions in the property and media industries.
Background to and overview of changes to remuneration framework
The Committee believes that the remuneration framework outlined above has beensuccessful in implementing its remuneration policy over recent years. However,it is introducing a number of significant changes to the framework to applyfrom 2011.
There have been two triggers for this decision:
* The current framework has in the past attracted an adverse response from
advisory bodies and some investors, specifically in relation to the high
multiple of salary used for share options, despite the low salaries upon
which this multiple is based.
* As illustrated by the chart below, executive director annual remuneration
at Rightmove is currently substantially out of line with that which would
be expected in a company of its market capitalisation.
The issue particularly relates to the extent to which base salary and benefitsare below market levels. This creates a downward compression on salaries amongthe wider senior management team which affects the Company's ability to recruitexternally in the market place candidates of a suitable calibre and to offersalary progression to strong internal performers.It also means that the basic remuneration package may be potentially incapableof retaining our existing executive directors. To date, this retention risk hasbeen offset by the significant one-off share option grant that the executivedirectors received at flotation in 2006. However, the final tranche of theseoptions vest in March 2011 and will thereafter cease to have a retentive effect.The current situation, while unusual, is far from unique among companies thathave grown very rapidly from small private businesses to major publiccompanies. Indeed the Board has sought to maintain the positive aspects ofsmall high-growth private companies for as long as possible in the publicenvironment. The significant option grant made at flotation has allowed theCompany to operate with a relatively uncompetitive 'ongoing' pay package for anumber of years. However, as that grant ceases to have an impact, the Board andthe Committee now need to restructure pay arrangements so that they are broughtinto line with more standard practice among FTSE companies whilst remainingtrue to the performance driven culture that has been central to Rightmove'sgrowth over the past decade.
The Committee is addressing the above issues through a revised remuneration framework that will apply from 2011. Key features of that framework include:
* The value of fixed pay for executive directors will be raised to a level
where it is approximately 25% below the benchmark for companies of a
similar market capitalisation (rather than being more than 50% below the
market benchmark as is currently the case). * This adjustment will be phased in over a three-year period. * Annual bonus potential, expressed as a percentage of salary, will be
reduced to ensure that the salary increases do not materially increase the
monetary value of bonus that can be earned by the directors.
* Subject to shareholder approval at the Annual General Meeting in May 2011,
the current executive unapproved and approved share option schemes will be
replaced with a Performance Share Plan (PSP) in line with standard practice
among UK public companies. Awards under the plan will be capped at 200% of
base salary.
The Committee is satisfied that, as well as being more market standard, therevised remuneration framework when fully implemented, remains consistent withthe basic principles of its remuneration policy, namely for executive directorsto receive below market levels of fixed pay and above market levels of variablepay potential (to reflect the performance driven culture of the business).
Details of future remuneration framework
The Committee has undertaken a thorough consultation process with majorshareholders and investor bodies and has received widespread support for itsrevised remuneration framework.The Committee is sympathetic to the current environment in which increases inpay potential are often viewed unfavourably. The Committee does not believethat any of the issues raised above are so pressing that all the changes needto be implemented in full immediately. Consequently, the increase in basesalaries will be phased in over three years (2011-2013).The Committee would clearly want to reserve the right to revisit executiveremuneration should the circumstances dictate. However, its intention is toimplement these changes over three years with no further alterations to theremuneration framework during that time.Full details of the revised remuneration framework are outlined below.Base salaryThe Committee has previously agreed that Ed Williams and Nick McKittrick shouldhave equal levels of base salary. It has also agreed that the market benchmarkused to assess their pay should be consistent with this decision, hence the useof a benchmark that is based on the average of pay for a chief executive and afinance director.As outlined above, by 2013 the value of Ed Williams and Nick McKittrick's fixedpay (salary plus benefits) will be adjusted so that it is approximately 25%below the market benchmark. Based on the current market benchmark used by theCommittee (being the FTSE 250 median for the average of CEO/FD roles) and thecurrent minimal benefits received by the directors, this implies a salary levelfor these two directors in 2013 of approximately £360,000.This figure will be subject to annual review by the Committee before the twofurther planned salary increases are implemented in 2012 and 2013 to takeaccount of any significant changes in Rightmove's size and also basic inflation(as represented by the average Rightmove employee salary increase for 2012 and2013). The initial increase towards the salary target was applied from 1 January 2011with Ed Williams and Nick McKittrick's base salaries increasing to £260,000 perannum.Pension and other benefitsThe Group operates a stakeholder pension plan for Rightmove employees underwhich the employer contributes 6% of base salary (to a maximum of £3,000 eachyear) subject to the employee contributing a maximum of 3% of base salary. EdWilliams and Nick McKittrick voluntarily do not participate in thisarrangement. The Company does not contribute to any personal pensionarrangements.
The executive directors are entitled to private medical insurance and to life assurance cover equal to four times base salary.
Annual performance-related bonusThe Committee believes that the annual cash and deferred share bonus schemesalready offer a competitive potential reward. It therefore intends to reducethe directors' bonus potential as a percentage of salary to ensure that themonetary value of the potential bonus is maintained broadly at its currentvalue.Consequently, concurrent with the salary increase outlined above, annual bonuspotential for Ed Williams and Nick McKittrick in 2011 will be reduced from 200% of salary to 175% of salary (up to 65% of salary in cash and 110% of salary in deferred shares). Assuming full implementation of the proposed salary increases, their bonus potential will be reduced further to 125% of salary by 2013.Deferred shares will vest after two years and be potentially forfeitable overthat period.The bonus will, as in previous years, be determined principally (70%) by profitbefore tax performance with targets set in relation to a carefully consideredbusiness plan and requiring significant out-performance of that plan to triggermaximum payments. A significant portion of the bonus (30%) will be determinedby reference to pre-set targets for key performance indicators relating tounderlying drivers of long-term revenue growth.Share awardsSince flotation, the Company has awarded market value share options toexecutive directors and other selected employees designed to align theinterests of employees with the long-term success of the business. However, theCommittee believes that, going forward, awards of performance shares would bemore consistent with general FTSE practice and provide better line of sightbetween performance conditions and executive reward.
Consequently, subject to shareholder approval at the 2011 Annual General Meeting, the existing executive unapproved and approved share option plans will be replaced by the Rightmove PSP. Full details of the proposed PSP are contained in the Notice of Annual General Meeting.
The PSP will permit annual awards of nil cost options or contingent sharesworth up to 200% of salary. Ed Williams and Nick McKittrick will receive anannual award in 2011 of 200% of salary. The level of award is intended toreduce for awards in 2012 and 2013 concurrent with salary increases in thoseyears. Assuming full implementation of the proposed salary increases, theirannual grant is intended to reduce to an award over shares worth 150% of salaryby 2013.Shares will only vest in the event of prior satisfaction of a performancecondition. The Committee has made clear in previous Remuneration Reports thatit believes EPS growth is the most appropriate type of performance conditionfor this particular business at this stage in its development. However, it alsorecognises that a number of shareholders believe it is important for relativeTSR to also be a performance measure in order for there to be a clear alignmentof executive and shareholder interests.Awards to executive directors under the PSP in 2011 will, therefore, be subjectto a mixture of EPS (75% of the awards) and relative TSR (25% of the awards)performance but with the greater weighting on EPS to reflect its particularrelevance to the performance of the business.Relative TSR conditionThe vesting schedule for the relative TSR element of executive directors' 2011PSP awards is set out below. It is consistent with the TSR condition used forprevious grants under the share option scheme. Performance will be measuredover three financial years. TSR performance of the Company % of award vesting relative to the FTSE 250 Index (maximum 25%) Less than the Index 0% Equal to the Index 6.25% 25% higher than the Index 25% Intermediate performance Straight-line vesting
e.g. if the FTSE 250 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 shares to vest.
EPS condition
Rightmove's EPS growth will be measured over a period of three financial years (2011-2013). The EPS figure used will be equivalent to the reported diluted underlying EPS but with a standard tax rate applied (Normalised EPS). This Normalised EPS figure will be disclosed in the Annual Report.
The following vesting schedule will apply for executive directors' awards granted in 2011:
Normalised EPS growth % of award vesting from 2011 to 2013* (maximum 75%) Less than 25% 0% 25% 18.75% 50% 75% Between 25% and 50% Straight-line vesting
*Assuming no change in the enacted corporation tax rate of 27% before the end of the three-year performance period, the benchmark Normalised EPS for the financial year 2010 from which these growth targets will be measured is 37.2p.
The Committee regards these targets as stretching, particularly as the 2010 EPS(the benchmark for the award) is a record high for the Company. However, theCommittee is comfortable that these targets are consistent with Companystrategy and with what the Board regards as an acceptable level of businessrisk.All existing executive share-based incentives can be satisfied from shares heldin the Rightmove Employees' Share Trust (the EBT) and shares held in treasury.It is intended that the 2011 share-based incentive awards would also be settled from shares currently held in the EBT or from shares held in treasury without any requirement to issue further shares.The non-executive directors do not participate in or benefit from any of theCompany's share incentive or bonus plans except that Scott Forbes receivedPre-admission options in consideration for the work involved in the IPO and inaccordance with his contractual agreement on appointment in 2005.Executive directors are also eligible to participate in the Company's employeeSharesave scheme. Ed Williams and Nick McKittrick both contribute the maximumamounts permitted under the scheme which commenced on 1 November 2009 and whichmatures in November 2012. Details are included in the table on page 42.
New executive director
A new executive director, Peter Brooks-Johnson, was appointed to the Board in January 2011. The Committee has approved the following remuneration arrangements for him:
* A base salary for 2011 of £200,000.
* An annual bonus potential of 160% of salary (up to 60% of salary in cash
and 100% of salary in deferred shares) determined principally (70%) by
profit before tax performance with targets set in relation to a carefully
considered business plan and requiring significant out-performance of that
plan to trigger maximum payments. A significant portion of the bonus (30%)
will be determined by reference to pre-set targets for key performance indicators relating to underlying drivers of long-term revenue growth. * A PSP award of 125% of salary subject to the EPS and TSR targets as outlined on page 35. Although exact figures have not been agreed at this stage and will be dependentupon his performance in the role, the basic structure of Peter Brooks-Johnson'sremuneration is anticipated to evolve in a broadly similar manner to that ofthe other directors (as outlined above). This would involve an increase to amore industry standard salary by 2013 without any resulting material impact onthe monetary value of his bonus potential. The latter will require a reductionin his bonus potential as a percentage of salary in 2012 and 2013 (consistentwith the other executive directors).
Shareholding requirement
To be consistent with best practice, a formal share ownership guideline appliesfor executive directors requiring them to retain at least half of any futureshare awards vesting as shares (after selling sufficient shares to meet theexercise price and to pay the tax due) until they have a Rightmove shareholdingworth at least 200% of salary for the Managing Director and 100% of salary forany other executive director. The value of the current shareholdings held bythe executive directors as a percentage of base salary is shown in the table onpage 45.External appointments
With the approval of the Board in each case, executive directors may accept oneexternal appointment as a non-executive director of another public company andretain any fees received.
Ed Williams was appointed as a non-executive director of Trader Media Group in November 2010 and he retains his remuneration for that role. In the year to
31 December 2010 he received fees of £5,000.
Chairman's and non-executive directors' fees
In 2009, the Board decided to increase fees for the Chairman and non-executivedirectors in future years annually, directly in line with the basic level ofpay rise received by employees within the business until such time as it wasconsidered appropriate to conduct a wider review of non-executive director remuneration. Accordingly the Board approved an increase to the fees payable to the Chairman and non-executive directors of 4% per annum. With effect from 1 January 2011, the Chairman is entitled to receive a fee of £104,000 per annum (2010: £100,000). The other non-executive directors are entitled to receive a fee of £41,600 per annum (2010: £40,000) for their basic role and an additional £5,200 fee per annum (2010: £5,000) is paid for the chairing of the Audit and Remuneration Committees. Jonathan Agnew is paid a further £5,200 fee per annum (2010: £5,000) as Senior Independent Director.The non-executive directors' fee levels are within the limits set by theArticles of Association of the Company. The current fee levels for thenon-executive directors with effect from 1 January 2011 are set out in thetable below: Fee Fee Increase in fee year ended 1 January 2011 31 December 2010 Scott Forbes £104,000 £100,000 4% Jonathan Agnew £52,000 £50,000 4% Colin Kemp(1) £41,600 £40,000 4% Ashley Martin £46,800 £45,000 4% Judy Vezmar £41,600 £40,000 4%
(1) Colin Kemp, non-executive director, waives his fee whilst employed by the
Lloyds Banking Group, the fee having been waived in full in 2010 and
continues to be waived as at the date of this report.
Directors' service contracts and non-executive directors' terms of appointment
The Committee's policy on service agreements for executive directors is thatthey should provide for 12 months' notice of termination by the Company and bythe executive. Any proposals for the early termination of the serviceagreements of directors or senior executives are considered by the Committee.
The service agreements for the executive directors (Ed Williams, Nick McKittrick and Peter Brooks-Johnson (appointed on 10 January 2011)) 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.
Scott Forbes' appointment may be terminated by either party giving to the othernot less than three months' notice in writing. The Company may also terminateby making a payment in lieu of notice. Scott Forbes is not contractuallyentitled to any other benefits on termination of his contract other than inrelation to his share options as described in the table on page 42.The Letters of Appointment for Jonathan Agnew, Colin Kemp, Ashley Martin andJudy Vezmar provide for a term of up to two three-year periods (subject tore-election by shareholders) with a notice period of three months on eitherside and also set out the time commitments required to meet the expectations oftheir roles.
Further details of all directors' contracts and Letters of Appointment are summarised on page 40.
Copies are available for inspection on request to the Company Secretary.
Performance graph
The first graph below compares the TSR of Rightmove's shares against the FTSE250 Index for the period from 1 January 2009 to 31 December 2010. Specifically,it illustrates the value of £100 invested in Rightmove's shares and in the FTSE250 Index over that period.This index was chosen as the comparator as Rightmove is a current constituentof this index. It was used as a comparator in the performance conditionapplying to share options granted in 2009 and 2010 and will also be used as thecriteria applied to 25% of the PSP awards to be granted in 2011, subject toapproval of the rules of the PSP by shareholders at the 2011 Annual GeneralMeeting.
Directors' contracts and Letters of Appointment
Date of contract Date of /Letter of Notice Length of service appointment Appointment(1) (months) at 25 February 2011 Executive directors Ed Williams (Managing 19 December 7 February 2006 12 10 years 2 monthsDirector) 2000 Nick McKittrick(2) 5 March 2004 7 February 2006 12 6 years 11 months Peter 10 January 2011 22 February 2011 12 1 monthBrooks-Johnson(3) Non-executive directors Scott Forbes 13 July 2005 21 February 2006 3 5 years 7 months(Chairman) Jonathan Agnew (Senior 16 January 2006 12 December 2005 3 5 years 1 monthIndependent Director) Colin Kemp 3 July 2007 4 December 2007 3 3 years 7 months Ashley Martin 11 June 2009 11 June 2009 3 1 year 8 months Judy Vezmar 16 January 2006 12 December 2005 3 5 years 1 month Former directors Date of resignation
Stephen Shipperley(4) 30 June 2000 1 January 2009 3 31 December 2010
(1) The contracts of employment and the Letters of Appointment for all directors with the exception of Peter Brooks-Johnson (who was appointed to the Board on 10 January 2011) were transferred from Rightmove Group Limited to Rightmove plc with effect from 28 January 2008 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 theBoard on 5 March 2004. His service with the Group at the date of this report is10 years and 2 months.
(3) Peter Brooks-Johnson was appointed to the Board on 10 January 2011. His service with the Group at the date of this report is 5 years and 1 month.
(4) Stephen Shipperley, non-executive director, retired from the Board on 31 December 2010.
Part II (Audited)Directors' remuneration
The remuneration of the directors of the Company during the year for time served as a director is as follows:
2010 Basic 2010 salary / cash bonus Benefits in fees payable(1) kind(2) 2010 total 2009 total £ £ £ £ £ Executive directors Ed Williams (Managing Director) 217,239 162,929 1,083 381,251 366,536(3) Nick McKittrick 217,239 162,929 1,083 381,251 366,490(3) Non-executive directors Scott Forbes 100,000 - - 100,000 90,000 (Chairman) Jonathan Agnew (Senior Independent 50,000 - - 50,000 45,000Director) Colin Kemp(4) - - - - - Ashley Martin 45,000 - - 45,000 22,154(5) Judy Vezmar 40,000 - - 40,000 35,000 Former directors Stephen Shipperley(6) 40,000 - - 40,000 35,000 (1) Bonus relates to the accrued cash payment in respect of the Full Yearresults for the year ended 31 December 2010. In addition to the 2010 cash bonusnoted above an award of deferred shares worth 125% of salary will be granted toEd Williams and Nick McKittrick respectively under the Deferred Share Plan inMarch 2011 and vesting in 2013. The bonus payment reflects the increase inunderlying operating profit and strong share price performance in the year, thesale of new products to estate agency customers launched at the end of 2009 andthe retention of all of Rightmove's key customers. The Committee believes theresulting bonus payment is appropriate in the context of the businessperformance against business targets and relative to prevailing marketconditions in the property and media industries.
(2) Benefits in kind for the executive directors relate to private medical insurance.
(3) On 5 March 2010, Ed Williams and Nick McKittrick were awarded 39,205 and31,364 deferred shares respectively under the Deferred Share Plan which vest in2012. The monetary value of these awards was £261,105 for Ed Williams and £208,884 for Nick McKittrick. The awards related to the bonus in respect of theFull Year Results for the year ended 31 December 2009 and were calculated basedupon a share price of £6.66. The awards are included in the table on page 42.
(4) Colin Kemp waives his fee whilst employed by the Lloyds Banking Group, the fee having been waived in full in 2010 and continues to be waived as at the date of this report.
(5) Ashley Martin was appointed to the Board on 11 June 2009. The fee received in 2009 was from his appointment date to 31 December 2009.
(6) Stephen Shipperley, non-executive director, resigned from the Board on 31 December 2010.
Share-based incentives held by the directors and not exercised as at 31 December 2010 Date granted Share-based Granted Exercise Exercised Price at Share-based Vesting Expiry incentives in year price in year date of incentives date(1) date held exercise held at 1 January 31 December 2010 2010 Executive directors Ed Williams 14/3/2006 7,317 - £4.10 - - 7,317(1) Between 13/3/(Managing (Approved) 14/3/ 2016Director) 2009 and 14/3/ 2011 15/3/2006 1,681,412 - £3.35 - - 1,681,412 Between 14/3/ (Unapproved) (1) 15/3/ 2016 2009 and 15/3/ 2011 5/3/2009 373,007(2) - £2.24 - - 373,007 5/3/2012 4/3/2019 (Unapproved) 1/10/2009 2,135 - £4.25 - - 2,135 1/11/ 30/4/ (Sharesave) 2012 2013 5/3/2010 - 130,474(5) £6.66 - - 130,474 5/3/2013 4/3/2020 (Unapproved) 5/3/2010 - 39,205(6) £0.00 - - 39,205 5/3/2012 4/3/2013 (Deferred Share Plan) Total 2,063,871 169,679 - - - 2,233,550 Nick 14/3/2006 7,317 - £4.10 - - 7,317(1) Between 13/3/McKittrick (Approved) 14/3/ 2016 2009 and 14/3/ 2011 15/3/2006 987,047 - £3.35 - - 987,047(1) Between 14/3/ (Unapproved) 15/3/ 2016 2009 and 15/3/ 2011 10/10/2007 75,000(3) - £5.22 - - 75,000 15/3/ 9/10/ (Unapproved) 2011 2017 5/3/2009 279,755(2) - £2.24 - - 279,755 5/3/2012 4/3/2019 (Unapproved) 1/10/2009 2,135 - £4.25 - - 2,135 1/11/ 30/4/ (Sharesave) 2012 2013 5/3/2010 - 114,165(5) £6.66 - - 114,165 5/3/2013 4/3/2020 (Unapproved) 5/3/2010 - 31,364(6) £0.00 - - 31,364 5/3/2012 4/3/2013 (Deferred Share Plan) Total 1,351,254 145,529 - - - 1,496,783 Non-executive director Scott Between Forbes 15/3/2006 15/3/ (Chairman) (Unapproved) 1,138,729 - £3.35 - -
1,138,729(4) 2007 and 14/3/ 15/3/ 2016 2009
(1) 1,981,412 and 987,047 pre-admission options were granted to Ed Williams andNick McKittrick in March 2006 under the Rightmove Unapproved Executive ShareOption Plan and the Rightmove Approved Executive Share Option Plan and vest asto one third of the number of option shares on each of the third, fourth andfifth anniversaries of the date of the option grant. Of the 987,047 unapprovedoptions outstanding for Nick McKittrick as at 31 December 2010, 658,031 optionshave vested and are eligible for exercise. Following the vesting of one thirdof the options in March 2009, Ed Williams exercised 300,000 of the vestedoptions in November 2009. Of the 1,681,412 unapproved options outstanding as at31 December 2010, 1,020,942 have vested and are eligible for exercise. Of the7,317 approved options outstanding as at 31 December 2010, 4,878 options havevested and are eligible for exercise.(2) The options granted on 5 March 2009 are exercisable on 5 March 2012 at anexercise price of £2.24, subject to 100% TSR performance criteria based uponthe performance of Rightmove's shares against the FTSE 250 Index for the periodfrom 1 January 2009 to 31 December 2011.TSR performance of the Company relative 2009 options exercisable to the FTSE 250 Index Less than the Index 0% Equal to the Index 25% 25% higher than the Index 100% Intermediate performance Straight-line vesting
If the FTSE 250 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 of the 2009 options to be exercisable.
(3) The options granted on 10 October 2007 are exercisable on 15 March 2011 atan exercise price of £5.22 subject to the basic EPS per the auditedconsolidated financial statements for the Group for the year ended 31 December2010 being not less than 30p.(4) Pre-admission options granted to Scott Forbes under the RightmoveUnapproved Executive Share Option Plan, vest as to one third of the number ofoption shares on each of the first, second and third anniversaries of the dateof the option grant. All options outstanding as at 31 December 2010 have vestedand are eligible for exercise.
(5) The options granted on 5 March 2010 are exercisable on 5 March 2013 at an exercise price of £6.66 subject to the following performance conditions:
The vesting of 50% of the 2010 award will be dependent on a relative subject TSR performance criteria based upon the performance of Rightmove's shares against the FTSE 250 Index for the period from 1 January 2010 to 31 December 2012.
TSR performance of the Company relative 2010 options exercisable to the FTSE 250 Index (maximum 50%) Less than the Index 0% Equal to the Index 12.5% 25% higher than the Index 50% Intermediate performance Straight-line vesting
If the FTSE 250 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 50% of the options to be exercisable.
The vesting of 50% of the 2010 award will be dependent on the satisfaction ofthe Group's Normalised EPS growth for the period 1 January 2010 to 31 December2012.Normalised EPS growth from 2010 options exercisable 2010 options exercisable 2010 to 2012 up to 200% of salary over 200% of salary 25% 0% 0% 45% In full 0% 65% 0% In full Intermediate performance Straight-line vesting Straight- line vestingAssuming no change in the standard corporation tax rate before the end of thethree-year performance period, the benchmark EPS for the financial year 2009from which these growth targets will be measured is 26.7p.(6) On 5 March 2010, Ed Williams and Nick McKittrick were awarded 39,205 and31,364 deferred shares respectively under the Deferred Share Plan which vest in2012. The monetary value of these awards was £261,105 and £208,884 respectivelyand calculated by reference to a share price of £6.66.
Directors' interests in shares
The interests (both beneficial and family interests) of the directors in office at 31 December 2010 in the share capital of the Company were as follows:
Interests in Interests in ordinary shares of £0.01 share-based incentives At At At At 31 December 2010 1 January 2010 31 December 2010 1 January 2010 Executive directors Ed Williams (Managing 1,374,178 2,407,995 2,233,550 2,063,871Director) Nick 129,000 129,000 1,496,783 1,351,254McKittrick Non-executive directors Scott Forbes (Chairman) 619,300 619,300 1,138,729 1,138,729 Jonathan Agnew (Senior Independent 30,000 30,000 - -Director) Colin Kemp - - - - Ashley Martin 2,060 2,060 - - Judy Vezmar 31,343 31,343 - -
The Company's shares in issue (including 2,505,430 shares held in treasury) asat 31 December 2010 comprised 114,761,434 (2009: 118,923,411) ordinary shares of £0.01 each.The mid-market share price of the Company was £5.04 as at 1 January 2010 andwas £7.79 as at 31 December 2010. The mid-market high and low share prices ofthe Company were £8.30 (28 October 2010) and £4.95 (27 January 2010) respectively in the year.The executive directors are regarded as being interested, for the purposes ofthe Companies Act 2006, in 6,322,329 (2009: 7,418,874) ordinary shares of £0.01each in the Company currently held by the EBT as they are, together with otheremployees, potential beneficiaries of the EBT.
The directors' beneficial holdings represent 2.0% of the Company's shares in issue as at 31 December 2010 (2009: 2.8%) (excluding shares held in treasury).
There have been no changes to the above interests between the year end and the date of this report.
Peter Brooks-Johnson (appointed 10 January 2011) holds 4,543 ordinary shares of £0.01 each in the Company.
The interests of the executive directors in office at 31 December 2010 in theshare capital of the Company as a percentage of basic salary were as follows: Number of shares Value of Value of shares Basic salary held at shares at as a % of basic 31 December 2010 31 December 2010 31 December 2010 salary Executive directors Ed Williams (Managing £217,239 1,374,178 £10,705,000 4,928%Director) Nick £217,239 129,000 £1,005,000 463%McKittrick Jonathan AgnewChairman, Remuneration Committee
25 February 2011
Auditor's Report
Independent auditor's report to the members of Rightmove plc
We have audited the financial statements of Rightmove plc for the year ended 31December 2010 set out on pages 48 to 87. The financial reporting framework thathas been applied in their preparation is applicable law and InternationalFinancial Reporting Standards (IFRSs) as adopted by the EU and, as regards theparent Company financial statements, as applied in accordance with theprovisions of the Companies Act 2006.This report is made solely to the Company's members, as a body, in accordancewith Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has beenundertaken so that we might state to the Company's members those matters we arerequired to state to them in an auditor's report and for no other purpose. Tothe fullest extent permitted by law, we do not accept or assume responsibilityto anyone other than the Company and the Company's members, as a body, for ouraudit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors' Responsibilities Statement set out onpage 28, the directors are responsible for the preparation of the financialstatements and for being satisfied that they give a true and fair view. Ourresponsibility is to audit, and express an opinion on, the financial statementsin accordance with applicable law and International Standards on Auditing (UKand Ireland). Those standards require us to comply with the Auditing PracticesBoard's (APB's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB's website at www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
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 2010 and of
the Group's profit for the year then ended;
* the Group financial statements have been properly prepared in accordance
with 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.
Opinion on other matters prescribed by the Companies Act 2006 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 Directors' Report for the financial year for
which the financial statements are prepared is consistent with the
financial statements; and
* information given in the Corporate Governance Statement set out on pages 21
to 28 with respect to internal control and risk management systems in relation to financial reporting processes and about share capital structures is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following: 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' statement, set out on page 28, in relation to going concern;
* the part of the Corporate Governance Statement on pages 21 to 28 relating
to the Company's compliance with the nine provisions of the June 2008
Combined Code specified for our review; and
* certain elements of the report to shareholders by the Board on directors'
remuneration.
SJ Wardell (Senior Statutory Auditor)for and on behalf of KPMG Audit Plc, Statutory AuditorChartered AccountantsAltius HouseOne North Fourth StreetMilton Keynes, MK9 1NE25 February 2011 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2010 Restated (1) Year ended Year ended 31 December 2010 31 December 2009 Note £000 £000
Continuing operations
Revenue 2 81,556 64,521 Administrative expenses (29,490)
(27,121)
Operating profit before share-based payments and
NI on share-based 56,563 40,606incentives Share-based payments 25 (1,846) (1,896) NI on share-based 25 (2,651) (1,310)incentives Operating profit 6 52,066 37,400 Financial income 8 171 194 Financial credit/ 9 8 (1,086)(expenses) Net financial income/ 179 (892)(expenses) Profit before tax 52,245 36,508 Income tax expense 10 (13,710) (7,420) Profit from continuing 38,535 29,088operations Discontinued operation
Profit from discontinued operation 11 19,467 939(net of income tax) Profit for the year being total comprehensive income 58,002 30,027 Attributable to: Equity holders of the 58,002 30,027Parent Earnings per share (pence) Basic 12 53.69 27.52 Diluted 12 52.08 27.18 Earnings per share - continuing operations (pence)
Basic 12 35.67 26.66 Diluted 12 34.60 26.33 Dividends per share 13 12.00 10.00(pence) Total dividends 13 12,957 10,894 (1) Comparative figures have been restated to reflect the treatment of theHoliday Lettings segment as a discontinued operation. For details refer to Note 11. CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2010 Note 31 December 2010 31 December 2009 £000 £000 Non-current assets Property, plant and 14 1,488 1,393equipment Intangible assets 15 1,463 14,314 Trade and other 17 1,000 -receivables
Contingent consideration 11 667 - Deferred tax assets 22 6,675 2,722 Total non-current assets 11,293 18,429 Current assets Trade and other 17 11,865 9,421receivables
Contingent consideration 11 4,437
-
Cash and cash equivalents 18 23,148 25,893 Total current assets 39,450 35,314 Total assets 50,743 53,743 Current liabilities Loans and borrowings 20 - (5,000) Trade and other payables 19 (15,989) (13,861) Income tax payable 10 (6,890) (5,203) Deferred consideration 11 - (8,909) Provisions 21 - (6) Total current liabilities (22,879) (32,979) Non-current liabilities
Loans and borrowings 20 - (17,500) Deferred tax liabilities 22 - (71) Total non-current liabilities - (17,571) Net assets 27,864 3,193 Equity Share capital 23,24 1,147 1,189 Other reserves 24 285 243 Retained earnings 24 26,432 1,761
Total equity attributable 24 to the equity holders of 27,864 3,193the Parent
The financial statements were approved by the Board of directors on 25 February 2011 and were signed on its behalf by:
Ed WilliamsDirectorNick McKittrickDirector COMPANY STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2010 Note 31 December 2010 31 December 2009 £000 £000 Non-current assets Investments 16 539,304 538,501 Deferred tax assets 22 5,142 1,896 Total non-current assets 544,446 540,397 Current assets Cash and cash equivalents 18 - 5,424 Total current assets - 5,424 Total assets 544,446 545,821 Current liabilities Loans and borrowings 20 - (5,000) Trade and other payables 19 (25,652) (62,933) Total current liabilities (25,652) (67,933) Non-current liabilities Loans and borrowings 20 - (17,500) Total non-current - (17,500)liabilities Net assets 518,794 460,388 Equity Share capital 23,24 1,147 1,189 Other reserves 24 105,960 105,116 Retained earnings 24 411,687 354,083 Total equity attributable 24 to the equity holders of 518,794 460,388the Parent
The financial statements were approved by the Board of directors on 25 February 2011 and were signed on its behalf by:
Ed WilliamsDirectorNick McKittrickDirector CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2010 Note Year ended Year ended 31 December 2010 31 December 2009 £000 £000 Cash flows from operating activities Profit for the year 58,002 30,027 Adjustments for: Depreciation charges 14 575 646 Amortisation charges 15 336 482
Loss on disposal of property, plant 76
94and equipment
Loss on disposal of intangible 1
-assets Financial income 8 (171) (199) Financial (credit)/ expenses 9 (8)
1,088
Share-based payments charge 25 1,846
1,896
Gain on sale of discontinued 11 (18,691)
-
operation (net of income tax)
Income tax expense 10 14,014 7,794 Operating cash flow before changes 55,980 41,828in working capital (Increase)/decrease in trade and (2,734) 3,199other receivables Increase in trade and other 5,585 1,225payables
Increase/(decrease) in provisions 4
(7)
Cash generated from operations 58,835 46,245 Interest paid (136) (744) Income taxes paid (12,198) (10,783) Net cash from operating activities 46,501 34,718 Cash flows from investing activities Interest received 109 206 Acquisition of property, plant and 14 (906) (250)equipment
Acquisition of intangible assets 15 (245)
(28)
Proceeds on disposal of property, 15
-plant and equipment
Disposal of discontinued operation 11
-(net of cash disposed of) 13,284
Net cash from/ (used in) investing 12,257
(72)activities Cash flows from financing activities Dividends paid 13 (12,957) (10,894) Subsidiary dividends paid to 13 (300) (870)minority shareholders Purchase of shares for cancellation 24 (29,358)
(5,452)
Purchase of shares by The Rightmove 24 - (2,401) Employees' Share Trust (EBT) Share related expenses 24 (206) (56) Proceeds on exercise of share 24 3,893 5,408options Repayment of borrowings 20 (22,500) (17,250) Debt issue costs (75) (125) Net cash used in financing (61,503) (31,640)activities
Net (decrease)/increase in cash and cash equivalents (2,745) 3,006 Cash and cash equivalents at 25,893 22,8871 January Cash and cash equivalents at 18 23,148 25,89331 December COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2010 Year ended Year ended Note 31 December 2010 31 December 2009 £000 £000 Cash flows from operating activities Profit/(loss) for the year 24 96,093 (4,315) Adjustments for: Financial income (99,904) (91) Financial expenses 759 1,624 Share-based payments charge 25 1,043 1,063 Income tax credit (1,444) (673) Operating cash flow before changes (3,453) (2,392)in working capital Increase in trade and other 63,112 25,275payables Cash generated from operations 59,659 22,883 Interest paid (69) (669) Net cash from operating activities 59,590 22,214 Cash flows from investing activities Interest received 7 91
Net cash from investing activities 7
91 Cash flows from financing activities Dividends paid 13 (12,957) (10,894) Purchase of shares for cancellation 24 (29,358) (5,452) Share related expenses 24 (206) (38) Repayment of borrowings 20 (22,500) (17,250) Debt issue costs - (125) Net cash used in financing (65,021) (33,759)activities Net decrease in cash and cash (5,424) (11,454)equivalents Cash and cash equivalents at 5,424 16,8781 January Cash and cash equivalents at 18 - 5,42431 December EBT Reverse Share shares Treasury Other acquisition Retained Total capital reserve shares £ reserves reserve earnings equity Note £000 £000 000 £000 £000 £000 £000 At 1 January 2009 1,201 (17,149) (11,917) 93 138 12,125 (15,509) Total comprehensive income Profit for the - - - - - 30,027 30,027year Transactions with owners recorded directly in equity Equity settled 25 share-based - - - - - 1,896 1,896incentives charge Tax in respect of 22 - share-based - - - - incentives 174 174recognised directly in equity Dividends to 13 - - - - - (10,894) (10,894)shareholders Exercise of share 24 - 3,365 - - - 2,043 5,408options Purchase of own 24 - (2,401) - - - - (2,401)shares Cancellation of 24 (12) - - 12 - (5,452) (5,452)own shares Share related 24 - - - - - (56) (56)expenses 1,189 (16,185) (11,917) 105 138 At 29,863 3,19331 December 2009 At 1 January 2010 1,189 (16,185) (11,917) 105 138 29,863 3,193 Total comprehensive income Profit for the - - - - - 58,002 58,002year Transactions with owners recorded directly in equity Equity settled 25 share-based - - - - - 1,846 1,846incentives charge Tax in respect of 22 share-based incentives - - - - - 3,451 3,451recognised directly in equity Dividends to 13 - - - - - (12,957) (12,957)shareholders Exercise of share 24 - 2,248 - - - 1,645 3,893options Cancellation of 24 (42) - - 42 - (29,358) (29,358)own shares Share related 24 - - - - - (206) (206)expenses At 31 December 2010 1,147 (13,937) (11,917) 147 138 52,286 27,864 COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEAR ENDED 31 DECEMBER 2010 Reverse Share Treasury Other acquisition Retained Total capital shares reserves reserve earnings equity Note £000 £000 £000 £000 £000 £000 At 1 January 2009 1,201 (11,917) 751 103,520 384,413 477,968 Total comprehensive income Loss for the year - - - - (4,315) (4,315) Transactions with owners recorded directly in equity Equity settled share-based 25 - - - - 1,063 1,063incentives charge Tax in respect of 22 - - - - 1,223 1,223share-based incentives recognised directly in equity Capital - - 833 - - 833contribution Dividends to 13 - - - - (10,894) (10,894)shareholders Cancellation of own 24 (12) - 12 - (5,452) (5,452)shares Share related 24 - - - - (38) (38)expenses (11,917) At 31 December 2009 1,189 1,596 103,520 366,000 460,388 At 1 January 2010 1,189 (11,917) 1,596 103,520 366,000 460,388 Total comprehensive income Profit for the year - - - - 96,093 96,093 Transactions with owners recorded directly in equity Equity settled share-based 25 - - - - 1,043 1,043incentives charge Tax in respect of 22 share-based incentives - - - - 2,988 2,988recognised directly in equity Capital 24 - - 803 - - 803contribution Dividends to 13 - - - - (12,957) (12,957)shareholders Cancellation of own 24 (42) - 42 - (29,358) (29,358)shares Share related 24 - - - - (206) (206)expenses At 31 December 2010 1,147 (11,917) 2,441 103,520 423,603 518,794
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
1 General informationRightmove plc (the Company) is a company registered in England (Company no.6426485) domiciled in the United Kingdom (UK). The consolidated financialstatements of the Company as at and for the year ended 31 December 2010comprise the Company and its interest in its subsidiaries (together referred toas the Group). Its principal business is the operation of the Rightmove.co.ukwebsite, which is the UK's largest property website.The consolidated financial statements of the Group as at and for the year ended31 December 2010 are available upon request to the Company Secretary from theCompany's registered office at 4th Floor, 33 Soho Square, London, W1D 3QUor from the investor relations website at www.rightmove.co.uk/investors.rsp.Statement of complianceThe consolidated and Company financial statements have been prepared andapproved by the Board of directors in accordance with International FinancialReporting Standards (IFRSs) as adopted by the European Union (Adopted IFRSs)and issued by the International Accounting Standards Board (IASB).
The consolidated financial statements were authorised for issue by the Board of directors on 25 February 2011.
Basis of preparationOn publishing the Company financial statements here together with the Groupfinancial statements, the Company is taking advantage of the exemption in s408of the Companies Act 2006 not to present its individual statement ofcomprehensive income and related notes that form a part of these approvedfinancial statements.On 21 June 2010 the Group disposed of its 66.7% shareholding in HolidayLettings (Holdings) Limited (HLHL), which owned 100% of the shares in thetrading entity Holiday Lettings Limited (HLL), (together referred to as theHoliday Lettings segment) to TripAdvisor Limited. The Group has restated thecomparatives within the consolidated statement of comprehensive income toreflect the Holiday Lettings segment as a discontinued operation following itsdisposal (refer Note 11).
The accounting policies set out below have been consistently applied to all the periods presented, unless otherwise stated.
The financial statements have been prepared on an historical cost basis.
Changes in accounting policiesThe accounting policies applied by the Group in these consolidated financialstatements are in accordance with Adopted IFRSs and except as described beloware the same as those applied by the Group in its consolidated financialstatements as at and for the year ended 31 December 2009.
The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 January 2010: (i) Revised IFRS 3 Business Combinations (2008) incorporates the following changes that may be relevant to the Group's operations:
* The definition of a business has been broadened, which is likely to result
in more acquisitions being treated as business combinations;
* Contingent consideration will be measured at fair value, with subsequent
changes therein recognised in profit or loss;
* Transaction costs, other than share and debt issue costs, will be expensed
as incurred;
* Any pre-existing interest in the acquiree will be measured at fair value
with the gain or loss recognised in profit or loss; and * Any non-controlling (minority) interest will be measured at either fair value, or at its proportionate interest in the identifiable assets and liabilities of the acquiree, on a transaction by transaction basis. Revised IFRS 3 is applied prospectively and as there have been no acquisitionsin the year ended 31 December 2010 there has been no impact on the financialstatements or reported earnings per share.(ii) Amended IAS 27 Consolidated and Separate Financial Statements (2008)requires accounting for changes in ownership interests by the Group in asubsidiary, while maintaining control, to be recognised as an equitytransaction. When the Group loses control of a subsidiary, any interestretained in the former subsidiary will be measured at fair value with the gainor loss recognised in profit or loss. The amendments to IAS 27, which becamemandatory for the Group's 2010 consolidated financial statements, have not hadany impact on the consolidated financial statements.Going concernDuring 2009, the Group converted £25,000,000 of a revolving loan facility intoa five-year term loan. In February 2010 a decision was made to repay the termloan early thereby extinguishing the debt. Post repayment of the term loan, theGroup was debt free and continued to generate significant cash and has net cashbalances of £23,148,000 at 31 December 2010 (2009: £3,393,000).The Group entered into an agreement with Barclays Bank Plc for a £10,000,000uncommitted money market loan on 15 February 2010. No amount was drawn underthis facility during the year and the loan was extended on 11 February 2011 fora further 12 month period.
The Group met all banking covenant requirements in relation to the term loan during the year.
After making enquiries, the Board of directors has a reasonable expectationthat the Group and the Company have adequate resources and banking facilitiesto continue in operational existence for the foreseeable future. Accordingly,the Board of directors continues to adopt the going concern basis in preparingthe annual report and financial statements.Further information regarding the Group's business activities, together withthe factors likely to affect its future development, performance and positionare set out in the Business and Financial Review on pages 5 to 11. Thefinancial position of the Group, its cash flows, liquidity position andborrowing facilities are described in the Financial Position on pages 9 to 11.In addition Note 4 to the financial statements includes the Group's objectives,policies and processes for managing its capital; its financial risk managementobjectives; details of its financial instruments and its exposures to creditrisk and liquidity risk.Capital structureThe Company was incorporated and registered in England and Wales on14 November 2007 under the Companies Act 1985 as a private company limited byshares with the name Rightmove Group Limited, registered no. 6426485. TheCompany was re-registered as a public limited company under the nameRightmove Group plc on 29 November 2007. On 28 January 2008 the Company becamethe holding company of Rightmove Group Limited (formerly Rightmove plc,Company no. 3997679) and its subsidiaries pursuant to a Scheme of Arrangementunder s425 of the Companies Act 1985. The shares in the Company were admittedto trading on the Official List of the London Stock Exchange on 28 January 2008and the Company immediately changed its name to Rightmove plc. Details of theshare capital of the Company are disclosed in Note 23.Basis of consolidationSubsidiaries are entities controlled by the Group. Control exists when theGroup has the power, directly or indirectly, to govern the financial andoperating policies of an entity so as to obtain benefits from its activities.In assessing control, potential voting rights that are currently exercisable orconvertible are taken into account. The financial statements of subsidiariesare included in the consolidated financial statements from the date thatcontrol commences until the date that control ceases.Judgments and estimatesThe preparation of the consolidated financial statements in conformity withAdopted IFRSs requires management to make judgments, estimates and assumptionsthat affect the application of accounting policies and the reported amounts ofassets and liabilities, income and expenses. The estimates and associatedassumptions are based on historical experience and various other factors thatare believed to be reasonable under the circumstances, the results of whichform the basis of making judgments about carrying values of assets andliabilities that are not readily apparent from other sources. Actual resultsmay 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 judgments in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements is included in the following notes:
Note 11 Measurement of the contingent consideration receivable in relation tothe disposal of the Holiday Lettings segment regarding the estimate of futureprofitability
Note 22 Deferred tax assets relating to the rate at which the asset will reverse and the recoverability of the asset
Note 25 Measurement of share-based payments relating to the inputs to the fairvalue models and the estimate of the number of shares that will eventually beissued
2 Significant accounting policies
(a) InvestmentsInvestments in subsidiaries are held at cost less any provision for impairmentin the Parent company financial statements.
(b) Intangible assets
(i) GoodwillAll business combinations are accounted for by applying the purchase method.Goodwill that arises upon the acquisition of subsidiaries is included inintangible assets. In respect of business acquisitions that have occurred since1 January 2004, goodwill represents the difference between the cost of theacquisition and the fair value of the net identifiable assets acquired.In respect of acquisitions prior to this date goodwill is included on the basisof its deemed cost, which represents the amount previously recorded under UKGenerally Accepted Accounting Principles (GAAP). The classification andaccounting treatment of business combinations that occurred prior to1 January 2004 were not reconsidered in preparing the Group's opening IFRSstatement of financial position at 1 January 2004.Goodwill is stated at cost less any accumulated impairment losses. Goodwill isno longer amortised but is tested annually for impairment. This applies to allgoodwill arising both before and after 1 January 2004. IFRS 1 permits goodwillon acquisitions made before this date to be brought onto the statement offinancial position at 1 January 2004 at its carrying value under UK GAAP.(ii) Research and developmentThe Group undertakes research and development expenditure in view of developingnew products and improving the existing property websites. Expenditure onresearch activities, undertaken with the prospect of gaining new technicalknowledge and understanding, is recognised in the profit or loss as incurred.Expenditure on development activities, whereby research findings are applied toa plan or design for the production of a new product or substantially enhancedwebsite, is capitalised if the new product or the enhanced website istechnically and commercially feasible and the Group has sufficient resources tocomplete development.
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 licensesComputer software and externally acquired software licenses are capitalised andstated 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 residualvalue of the computer software or license by equal annual instalments over itsestimated useful economic life as follows:Computer software 16.7% - 33.3% per annumSoftware licences 20.0% - 33.3% per annum(iv) Customer relationshipsCustomer relationships are identified on the acquisition of a business andvalued using discounted cash flows based on historical customer attritionrates. Amortisation is expensed in the profit or loss on a straight line basisover the estimated useful economic life as follows:
Customer relationships 16.7% per annum
(c) Property, plant and equipmentProperty, plant and equipment are stated at cost less accumulated depreciationand impairment losses. Depreciation is provided to write off the cost less theestimated residual value of property, plant and equipment by equal annualinstalments over their estimated useful economic lives as follows:
Office equipment, fixtures & fittings 20.0% per annum Computer equipment 20.0% - 33.3% per annum Leasehold improvements life of the lease
(d) ImpairmentThe carrying value of the property, plant and equipment is reviewed at eachreporting date to determine whether there is any indication of impairment. Ifany such indication exists, the asset's recoverable amount is estimated. Animpairment loss is recognised for the amount by which the asset's carryingamount exceeds its recoverable amount. The recoverable amount of non-financialassets 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 totheir present value using a pre-tax discount rate that reflects current marketassessments of the time value of money and the risks specific to the asset. Foran asset that does not generate largely independent cash flows, the recoverableamount is determined for the cash generating unit to which the asset belongs.Intangible assets that have an indefinite useful life and which are notavailable for use are not subject to amortisation but are tested for impairmentannually and whenever there is an indication that they might be impaired. Animpairment loss is recognised for the amount by which the carrying value of theasset exceeds its recoverable amount.Goodwill was tested for impairment at the IFRS transition date; no impairmentwas deemed necessary. An impairment test is performed annually at 31 Decemberon goodwill regardless of the existence of impairment indicators.Investments are assessed for possible impairment when there is an indicationthat the fair value of the investments may be below the Company's carryingvalue. When such a condition is deemed to be other than temporary, the carryingvalue of the investment is written down to its fair value and the amountwritten off is included in profit or loss. In making the determination as towhether a decline is other than temporary, the Company considers such factorsas the duration and extent of the decline, the investee's financial performanceand the Company's ability and intention to retain its investment for a periodthat will be sufficient to allow for any anticipated recovery in theinvestment's market value.(e) Financial instrumentsTrade receivables are recognised at fair value less any impairment loss. Aprovision for impairment of trade receivables is established when there isobjective evidence that the Group will not be able to collect all amounts dueaccording to the original terms of receivables.
Inter-group balances and transactions, and any unrealised income and expenses arising from inter-group transactions, are eliminated in preparing the consolidated financial statements.
Trade payables are recognised at fair value. 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.
All loans and borrowings are initially recognised at cost, being the fair valueof the consideration received net of issue costs associated with borrowings.After initial recognition, loans and borrowings are subsequently measured atamortised cost and any difference between the proceeds and the redemption valueis recognised in the profit or loss over the period of the borrowings using theeffective interest method.The Group uses derivative financial instruments such as foreign currencycontracts to hedge the risk associated with changes in foreign exchange rates.Such derivative financial instruments are initially measured at fair value onthe contract date and are remeasured to fair value at subsequent reportingdates.The fair value of forward exchange contracts is calculated by reference tocurrent forward exchange rates for contracts with similar maturity profiles.The Group does not specifically designate forward exchange contracts as cashflow hedges and gains and losses are recorded directly in profit or loss.(f) Cash and cash equivalentsCash and cash equivalents comprise cash balances and call deposits withoriginal maturities of three months or less. Bank overdrafts that are repayableon demand and form an integral part of the Group's cash management are includedas a component of cash and cash equivalents for the purpose of the statement ofcash flows.(g) ProvisionsA provision is recognised when the Group has a legal or constructive obligationas a result of a past event and it is probable that an outflow of economicbenefits will be required to settle the obligation. If the effect is material,provisions are determined by discounting the expected future cash flows at apre-tax rate that reflects current market assessments of the time value ofmoney and, where appropriate, the risk specific to the liability. The unwindingof the discount is recognised as a finance cost.A provision is maintained in respect of vacant leasehold properties where thelease is considered to be onerous to take account of the net present value ofresidual lease commitments over the remaining term of the lease.
(h) Employee benefits
(i) PensionsThe Group provides access to a stakeholder pension scheme into which employeesmay elect to contribute via salary deduction. Obligations for contributions todefined contribution pension plans are recognised as an employee benefitexpense in the profit or loss when they are due.(ii) Employee share schemesThe share option and deferred share plans allow certain senior management toacquire shares in the Company. An expense is recognised in the profit or loss,with a corresponding increase in equity, over the period to which the employeesbecome unconditionally entitled, on equity settled share-based payment schemesgranted after 7 November 2002 and which had not vested by 1 January 2005.Awards made before this date are not accounted for under IFRS 2, as permittedunder the transitional rules of IFRS 1. For awards made after 7 November 2002and not vested by 1 January 2005, the charge is based on the fair value of theshare-based incentive granted as at the grant date, calculated using an optionpricing model.Fair value is measured using either the Monte Carlo or Black Scholes pricingmodel as is most appropriate for each scheme. Measurement inputs include shareprice on measurement date, exercise price of the instrument, expectedvolatility (based on weighted average historic volatility adjusted for changesexpected due to publicly available information), weighted average expected lifeof the instruments (based on historical experience and general optionbehaviour), expected dividends, and risk-free interest rates (based ongovernment bonds). Service and non-market performance conditions attached tothe awards are not taken into account in determining the fair value.
(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 debited directly to equity.
(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) RevenueRevenue principally represents the amounts, excluding value added tax (VAT),receivable from customers in respect of properties advertised on Groupwebsites. Revenue relating to properties advertised on the website isrecognised in the month to which it relates. Estate agency and overseasbranches are billed in advance with net revenue deferred until the servicecommencement date. The VAT liability is recognised at the point of invoice. Newhomes developers are typically billed monthly in arrears. Where invoices areraised on other than a monthly basis, the amounts are recognised as deferred oraccrued revenue and released to the profit or loss on a monthly basis in linewith the provision of services as stipulated in the contract terms. HLL revenuewas billed in advance. The majority of HLL revenue related to annual contractsalthough some was billed quarterly and half yearly. This revenue was spreadequally over the period until disposal with any deferred revenue held on thestatement of financial position as at the disposal date.(k) Segmental reportingAn operating segment is a component of the Group that engages in businessactivities from which it may earn revenues and incur expenses, includingrevenues and expenses that relate to transactions with any of the Group's othercomponents. An operating segment's operating results are reviewed regularly bythe Group's Managing Director to make decisions about resources to be allocatedto the segment and assess its performance, and for which discrete financialinformation is available.(l) Foreign currency transactionsTransactions in foreign currencies are translated to the respective functionalcurrencies of Group entities at exchange rates at the dates of transactions.Monetary assets and liabilities denominated in foreign currencies at thereporting date are retranslated to the functional currency at the exchange rateat that date. Foreign currency differences arising on retranslation arerecognised in the profit or loss.(m) LeasesOperating lease rentals are charged to the profit or loss on a straight-linebasis over the period of the lease. Where cash is received in exchange forentering into a lease with rates above market value, this upfront payment isdeferred and released on a straight-line basis over the lease term.(n) Financial income and expensesFinancial income comprises interest receivable on cash balances, deposits anddividend income. Interest income is recognised as it accrues, using theeffective interest method. Dividend income is recognised on the date that theGroup's right to receive payment is established.
Financial expenses comprise debt issue costs, interest payable on bank loans and bank charges. Interest payable is recognised on an accruals basis.
(o) National Insurance (NI) on share-based incentivesEmployer's NI is accrued, where applicable, at a rate of 13.8%, whichmanagement expects to be the prevailing rate when share-based incentives areexercised. In the case of share options it is provided on the differencebetween the share price at the reporting date and the average exercise price ofshare options. In the case of deferred shares at nil cost it is provided basedon the share price at the reporting date.(p) TaxationIncome tax on the results for the year comprises current and deferred tax.Income tax is recognised in the profit or loss except to the extent that itrelates to items recognised directly in equity, in which case it is recognisedin equity.Current tax is the expected tax payable on the taxable income for the period,using tax rates enacted or substantially enacted at the reporting date, and anyadjustment to tax payable in respect of previous periods.Deferred tax is provided in respect of temporary differences between thecarrying amounts of assets and liabilities for financial reporting purposes andthe amounts used for taxation purposes. The following temporary differences arenot provided for: the initial recognition of goodwill, the initial recognitionof assets or liabilities that affect neither accounting nor taxable profitother than in a business combination and the differences relating toinvestments in subsidiaries to the extent that they will probably not reversein the foreseeable future. The amount of deferred tax provided is based on theexpected manner of realisation or settlement of the carrying amount of assetsand liabilities, using tax rates enacted or substantially enacted by thereporting 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 ofdeferred tax on share-based payments is to include the income tax effect of thetax deduction in the profit or loss to the value of the income tax charge onthe cumulative IFRS 2 charge. The remainder of the income tax effect of the taxdeduction is recognised in equity.(q) DividendsDividends unpaid at the reporting date are only recognised as a liability (anddeduction to equity) at that date to the extent that they are appropriatelyauthorised and are no longer at the discretion of the Company. Unpaid dividendsthat do not meet these criteria are disclosed in the notes to the financialstatements.(r) Earnings per shareThe Group presents basic, diluted and underlying earnings per share (EPS) datafor its ordinary shares. Basic EPS is calculated by dividing the profit or lossattributable to ordinary shareholders of the Company by the weighted averagenumber of ordinary shares outstanding during the year, adjusted for own sharesheld. Diluted EPS is determined by adjusting the profit or loss attributable toordinary shareholders and the weighted average number of ordinary sharesoutstanding, adjusted for own shares held, for the effects of all potentialdilutive instruments, which comprise share-based incentives granted toemployees. The calculation of underlying EPS is disclosed in Note 12.(s) Discontinued operationsA discontinued operation is a component of the Group's business that representsa separate major line of business or geographical area of operations that hasbeen disposed of or is held for sale or distribution, or is a subsidiaryacquired exclusively with a view to resale. Classification as a discontinuedoperation occurs upon disposal or when the operation meets the criteria to beclassified as held for sale, if earlier. When an operation is classified as adiscontinued operation, the comparative statement of comprehensive income isrestated as if the operation had been discontinued from the start of thecomparative year.
3 IFRSs not yet applied
A number of new standards, amendments to standards and interpretations are notyet effective for the year ended 31 December 2010 and have not been applied inpreparing these consolidated financial statements. None of these is expected tohave a significant effect on the consolidated financial statements of theGroup.
4 Financial risk management
Overview
The Group has exposure to the following risks from its use of financialinstruments: * credit risk * liquidity risk * market risk * operational risk This note presents information about the Group and Company's exposure to eachof the above risks, the Group's objectives, policies and processes formeasuring and managing risk and the Group's management of capital. Furtherquantitative disclosures are included throughout these consolidated financialstatements.The Board of directors has overall responsibility for the establishment andoversight of the Group's risk management framework. The primary method by whichrisks are monitored and managed by the Group is through the monthly ExecutiveManagement Board, where any significant new risks or change in status toexisting risks will be discussed and actions taken as appropriate.The Group's risk management policies are established to identify and analysethe risks faced by the Group, to set appropriate risk limits and controls andto monitor risks and adherence to limits. Risk management policies and systemsare reviewed regularly to reflect changes in market conditions and the Group'sactivities. The Group, through its training and management standards andprocedures, aims to develop a disciplined and constructive control environmentin 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 riskCredit risk is the risk of financial loss to the Group if a customer fails tomeet its contractual obligations.The Group's exposure to credit risk is influenced mainly by the individualcharacteristics of each customer. The Group provides credit to customers in thenormal course of business. The Group provides its services to a wide range ofcustomers in the UK and overseas and therefore believes it has no materialconcentration of credit risk.
More than 94.0% of the Group's 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.
Liquidity riskLiquidity risk is the risk that the Group will encounter difficulties inmeeting the obligations associated with its financial liabilities that aresettled by delivering cash. The Group and Company's approach to managingliquidity is to ensure, as far as possible, that it will always have sufficientliquidity to meet its liabilities when due, under both normal and stressedconditions, without incurring unacceptable losses or risking damage to theGroup's reputation.
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 meetexpected operational expenses excluding the potential impact of extremecircumstances that cannot reasonably be predicted, such as natural disasters.Throughout the year, the Group typically had sufficient cash on demand to meetoperational expenses on continuing operations, before financing activities, fora period of 296 days (2009: 308 days).As at 31 December 2010 the Group had bank borrowings of £nil (2009: £22,500,000). On 10 February 2010 the loan outstanding as at 31 December 2009 was repaid in full without penalty (refer Note 20). Post repayment of the loan the Group entered into an agreement with Barclays Bank Plc for a £10,000,000 uncommitted money market loan. To date no amount has been drawn under this facility. The loan was extended on 11 February 2011 for a further 12 month period.Market riskMarket risk is the risk that changes in market prices such as foreign exchangeand interest rates will affect the Group's income. The objective of market riskmanagement is to manage and control market risk exposures within acceptableparameters, while optimising the return on risk.
Currency risk All of the Group's sales and more than 99.0% of the Group's purchases are Sterling denominated, accordingly it has no currency risk.
Interest rate riskThe Group and Company have no interest bearing financial liabilities. The Groupis exposed to interest rate risk on cash balances and amounts held in Escrow.Operational riskOperational risk is the risk of direct or indirect loss arising from a widevariety of causes associated with the Group's processes, personnel, technologyand infrastructure, and from external factors other than credit, market andliquidity risks such as those arising from legal and regulatory requirementsand generally accepted standards of corporate behaviour. Operational risksarise from all of the Group's operations.The Group's objective is to manage operational risk so as to balance theavoidance of financial losses and damage to the Group's reputation with overallcost effectiveness and to avoid control procedures that restrict initiative andcreativity.The primary responsibility for the development and implementation of controlsto address operational risk is assigned to senior management within eachbusiness unit. This responsibility is supported by the development of overallGroup 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 of contingency plans; * training and professional development; and * risk mitigation, including insurance where this is effective. Capital managementThe Board of directors' policy is to maintain an efficient statement offinancial position with an appropriate level of leverage for the size of thebusiness so as to maintain investor, creditor and market confidence and tosustain future development of the business. The Board of directors considersthat the future working capital and capital expenditure requirements of theGroup will continue to be low and accordingly return on capital measures arenot key performance targets. The Board of directors monitors the spread of theCompany's shareholders as well as underlying earnings per share. The Board ofdirectors has a progressive dividend policy and also monitors the level ofdividends to ordinary shareholders in relation to profit growth.As at 31 December 2010 the directors hold 2.0% (2009: 2.8%) of the ordinaryshare capital of the Company (excluding shares held in treasury). In additionthe executive directors are regarded as being interested, for the purposes ofthe Companies Act 2006, in 5.6% (2009: 6.4%) ordinary shares in the Companycurrently held by the EBT as they are, together with other employees, potentialbeneficiaries of the EBT.
The Company purchases its own shares in the market; the timing of these purchases depends on market conditions. In 2010, 4,161,977 (2009:1,127,462) shares were bought back and were cancelled.
There were no changes in the Group's approach to capital management during theyear. Neither the Company nor any of its subsidiaries are subject to externallyimposed capital requirements.
5 Operating segments
As from 1 January 2009, the Group determines and presents operating segmentsbased on the information that internally is provided to the Managing Director,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 www.rightmove.co.uk; and
* The New Homes segment which provides property advertising services to new
home developers and Housing Associations on www.rightmove.co.uk.
The Other segment which represents activities under the reportable segments threshold, comprises overseas property advertising services on www.rightmove.co.uk and non-property advertising services which include business and information services and Automated Valuation Model services.
Management monitors the business segments at a revenue and trade receivableslevel separately for the purpose of making decisions about resources to beallocated and of assessing performance. All revenues in both years are derivedfrom 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.
Profit or loss segmental disclosures have been made on a continuing operationsbasis. Disclosures in respect of the discontinued Holiday Lettings segment areshown in Note 11.
The Company has no reportable segments.
Operating segments New Sub Agency Homes total Other Central Adjustments Total £000 £000 £000 £000 £000 £000 £000 Year ended 31 December 2010 Revenue 63,795 15,078 78,873 2,683 - - 81,556 Operating - - - - 56,563 (4,497)(2) 52,066profit(1) Depreciation and - - - - (845) - (845)amortisation Financial - - - - 171 - 171income Financial - - - - 8 - 8credit Trade 7,878 2,156 10,034 115 - 40(5) 10,189receivables(4) Other segment - - - - 40,539 15(6) 40,554assets Segment - - - - (22,824) (55)(5)(6) 22,879liabilities Capital - - - - 1,077 74(11) 1,151
expenditure(7)
Year ended 31 December 2009 Revenue 47,096 14,554 61,650 2,871 - - 64,521 Operating - - - - 40,606 (3,206) (3) 37,400profit(1) Depreciation - - - - (1,012) - (1,012)and amortisation Financial - - - - 194 - 194income Financial - - - - (1,086) - (1,086)expenses Trade 5,806 2,131 7,937 209 - 174 (8) 8,320receivables(4) Other segment - - - - 31,731 13,692(9) 45,423assets Segment - - - - (47,666) (2,884) (50,550)liabilities (10) Capital - - - - 229 49(11) 278
expenditure(7) (1) Operating profit is stated after the charge for depreciation andamortisation.(2) Operating profit for the year ended 31 December 2010 does not includeshare-based payments charge (£1,846,000) and NI on share-based incentives (£2,651,000).(3) Operating profit for the year ended 31 December 2009 does not includeshare-based payments charge (£1,896,000) and NI on share-based incentives (£1,310,000).(4) The only segment assets that are separately monitored by the ChiefOperating Decision Maker relate to trade receivables net of any associatedprovision for impairment. All other segment assets are reported on acentralised basis.(5) The adjustments column reflects the reclassification of credit balances inaccounts receivable made on consolidation for statutory accounts purposes.(6) The adjustments column reflects the reclassification of debit balances inaccounts payable made on consolidation for statutory accounts purposes.(7) Capital expenditure consists of additions of property, plant and equipmentand intangible assets (excluding goodwill).(8) The adjustments column reflects the reclassification of credit balances inaccounts receivable made on consolidation for statutory accounts purposes of £97,000 and £77,000 in relation to the discontinued Holiday Lettings segmenttrade receivables.(9) The adjustments column reflects £13,692,000 in respect of other segmentassets, principally goodwill, in relation to the discontinued Holiday Lettingssegment.(10) The adjustments column reflects the reclassification of credit balances inaccounts receivable made on consolidation for statutory accounts purposes of £97,000 and £2,787,000 in relation to the discontinued Holiday Lettings segmentliabilities.(11) The adjustments column reflects capital expenditure of £74,000 (2009: £49,000) in relation to the discontinued Holiday Lettings segment.
Geographic information
In presenting information on the basis of geography, revenue and assets are based on the geographical location of customers.
Year ended 31 December 2010 Year ended 31 December 2009 Group Revenue Trade Revenue Trade £000 Receivables £000 Receivables £000 £000 UK 80,758 10,152 63,797 8,305 Rest of the world 798 37 724 15 81,556 10,189 64,521 8,3206 Operating profit Year ended Year ended 31 December 2010 31 December 2009 £000 £000
Operating profit is stated after charging: Depreciation of property, plant and 575
646equipment
Amortisation of computer software 294
398
Amortisation of customer relationships 42
84 Bad debt impairment charge 567 191 Operating lease rentals Land and buildings 807 899 Other 337 350
Included within depreciation of property, plant and equipment is an amount of £24,000 (2009: £32,000) relating to the discontinued Holiday Lettings segment.
Amortisation of customer relationships relates to the discontinued Holiday Lettings segment in both years.
Included within operating lease rentals for the year are amounts relating tothe discontinued Holiday Lettings segment of £61,000 (2009: £160,000) for landand buildings and £nil (2009: £nil) for other operating lease rentals.Auditor's remuneration Year ended Year ended 31 December 2010 31 December 2009 £000 £000
Fees payable to the Company's auditor and their associates in respect of the audit Audit of the Company's financial statements 14
20
Audit of the Company's subsidiaries pursuant 102
112to legislation Total audit remuneration 116 132
Fees payable to the Company's auditor in respect of non-audit related services
Tax advisory 4 13 All other services 7 2
Total non-audit remuneration 11
15
Included in the current year's auditor's remuneration for the Company is an amount of £nil (2009: £5,000) relating to the prior year audit.
Included in the non-audit related services is a credit of £5,000 (2009: £nil) relating to the release of an accrual.
7 Employee numbers and costs
The average number of persons employed (including executive directors) during the year, analysed by category, was as follows:
Year ended Year ended 31 December 2010 31 December 2009 Number of Number of employees employees Administration 299 292 Management 13 14 312 306
The aggregate payroll costs of these persons were as follows:
Year ended Year ended 31 December 2010 31 December 2009 £000 £000 Wages and salaries 13,246 12,665 Social security costs 1,532 1,192 Pension costs 251 235 15,029 14,092
Included within employee numbers are 40 (2009: 62) full-time equivalent heads employed by the discontinued Holiday Lettings segment. The payroll costs include amounts of £1,047,000 (2009: £1,722,000) for these employees.
8 Financial income Year ended Year ended 31 December 2010 31 December 2009 £000 £000
Interest income on cash balances from 171
194continuing operations
Interest income on cash balances from -
5discontinued operation (refer Note 11) 171 1999 Financial (credit)/expenses Year ended Year ended 31 December 2010 31 December 2009 £000 £000 Debt issue (credit)/costs (125) 325 Interest expense 52 666 Other financial expenses 65 95 Financial (credit)/expenses from continuing (8) 1,086operations
Other financial expenses from discontinued -
2operation (refer Note 11) (8) 1,08810 Income tax expense Year ended Year ended 31 December 2010 31 December 2009 £000 £000 Current tax expense Current year 14,534 10,273 Adjustment to current tax charge in respect (11) (74)of prior years 14,523 10,199 Deferred tax credit Origination and reversal of temporary (528) (2,405)differences
Adjustment to deferred tax charge in respect 10
-of prior years Reduction in tax rate 9 - (509) (2,405) Total income tax expense 14,014 7,794 Income tax expense from continuing 13,710 7,420operations
Income tax expense from discontinued 304
374operation (refer Note 11) 14,014 7,794
Income tax recognised directly in equity
Year ended Year ended 31 December 2010 31 December 2009 £000 £000 Deferred tax
Equity settled share-based incentives 3,451
174
Total income tax credit recognised directly 3,451
174
in equity
Reconciliation of effective tax rate
The Group's income tax expense for the year is lower (2009: lower) than the standard rate of corporation tax in the UK of 28.0% (2009: 28.0%). The differences are explained below:
Year ended Year ended 31 December 2010 31 December 2009 £000 £000 Profit for the year 58,002 30,027 Total income tax expense 14,014 7,794 Profit excluding income tax 72,016 37,821 10,590
Current tax at 28.0% (2009: 28.0%) 20,164 Exempt income on sale of discontinued (5,232)
-operation Share-based incentives (978) (2,790) Adjustment to current tax charge in respect (11) (74)of prior years Non-deductible expenses 52 54 Reduction in tax rate 9 -
Adjustment to deferred tax charge in respect 10
14of prior years 14,014 7,794The Group's consolidated effective tax rate on the profit of £52,245,000 fromcontinuing operations for the year ended 31 December 2010 is 26.2% (2009: 20.6%). The difference between the standard rate and effective rate on continuing operations at 31 December 2010 is attributable to credits as a result of the increase in the deferred tax asset arising on share-based incentives (0.9%) and corporation tax deductions arising on exercise of share options (1.0%) offset by disallowable expenditure (0.1%).
11 Discontinued Operation
On 21 June 2010 the Group sold its 66.7% shareholding in HLHL, which owned 100%of the shares in the trading entity HLL, to TripAdvisor Limited. The HolidayLettings segment was not previously a discontinued operation or classified as anon-current asset held for sale. Accordingly the comparative statement ofcomprehensive income has been presented to show the discontinued operationseparately from continuing operations. Year ended Year ended 31 December 31 December 2010 2009 £000 £000 Results of discontinued operation Revenue 3,059 4,865 Administrative expenses (1,979) (3,555) Operating profit 1,080 1,310
Financial income (refer Note 8) -
5
Financial expenses (refer Note 9) -
(2) Results from operating 1,080 1,313activities Income tax (refer Note 10) (304) (374) Results from operating activities 776 939(net of income tax)
Gain on sale of discontinued 18,691
-operation
Income tax on gain on sale of
-discontinued operation -
Effect on profit for the year 19,467
939 Earnings per share (pence) Basic 18.02 0.86 Diluted 17.48 0.85
Included in administrative expenses were depreciation and amortisation charges of £66,000 (2009: £116,000).
Year ended Year ended 31 December 31 December 2010 2009 £000 £000
Cash flows from discontinued
operation Net cash from operating 1,856 2,070activities Net cash from/(used in) 13,661 (45)investing activities Net cash used in financing (300) (870)activities Net cash from discontinued 15,217 1,155operation Year ended 31 December 2010 £000
Effect of the disposal on the financial position of the Group Property, plant and equipment (refer Note 14)
(145)
Intangible assets (refer Note 15) (13,059) Trade and other receivables (352) Cash and cash equivalents (1,484) Trade and other payables 3,238 Income tax payable 638 Deferred consideration 8,909 Provisions 10
Deferred tax liabilities (refer Note 22)
64 Net assets disposed of (2,181) Consideration received, satisfied in cash 15,185 Contingent consideration 5,104 Amounts held in Escrow 1,000 Less costs to sell (417) Net consideration 20,872 Consideration received, satisfied in cash
15,185
Cash and cash equivalents disposed of (1,484) Less costs to sell (417) Net cash inflow 13,284The value of the contingent consideration is dependent on the performance ofthe Holiday Lettings segment for the 12 month period from 1 April 2010 to 31 March 2011. The value of the contingent consideration has been revised upwardsfrom £2,917,000 reported as at 30 June 2010 to £5,104,000 based on the actualresults to 31 December 2010 plus the latest business forecast for the threemonth period to 31 March 2011. The first £667,000 of contingent considerationwill be transferred into an Escrow account, in addition to the £1,000,000 ofcompletion proceeds already held in Escrow. The total estimated future cashconsideration is £6,104,000 of which £1,667,000 has been classified asnon-current.Under the terms of the sale agreement the amounts held in Escrow earn interestat Barclays Bank Plc's current interest rate and become available on the fourthanniversary of the completion date of the transaction. No discount has beenapplied as the account is interest bearing.
12 Earnings per share (EPS)
Weighted average number of Continuing Discontinued Total ordinary operations operation earnings Pence per shares £000 £000 £000 share Year ended 31 December 2010 Basic EPS 108,021,339 38,535 19,467 58,002 53.69 Diluted EPS 111,361,386 38,535 19,467 58,002 52.08 Underlying basic 108,021,339 43,032 19,467 62,499 57.86EPS Underlying 111,361,386 43,032 19,467 62,499 56.12diluted EPS Year ended 31 December 2009 Basic EPS 109,100,758 29,088 939 30,027 27.52 Diluted EPS 110,482,567 29,088 939 30,027 27.18 Underlying basic 109,100,758 32,294 939 33,233 30.46EPS Underlying 110,482,567 32,294 939 33,233 30.08diluted EPS
Weighted average number of ordinary shares (basic)
Year ended Year ended 31 December 2010 31 December 2009 Number of shares Number of shares Issued ordinary shares at 1 January less 111,504,537
111,697,173
ordinary shares held by the EBT Effect of own shares held in treasury (2,505,430)
(2,505,430)
Effect of own shares purchased for (1,560,101) (65,260)cancellation Effect of own shares purchased by the EBT -
(331,649)
Effect of share options exercised 582,333
305,924
Weighted average number of ordinary shares (diluted)108,021,339 109,100,758
For diluted EPS, the weighted average number of ordinary shares in issue isadjusted to assume conversion of all potentially dilutive shares. The Group'spotential dilutive instruments are in respect of share-based incentives grantedto employees, which will be settled by ordinary shares held by the EBT and
shares held in treasury. Year ended Year ended 31 December 2010 31 December 2009 Number of shares Number of shares Weighted average number of ordinary shares 108,021,339 109,100,758(basic) Dilutive impact of own shares held by the EBT and shares held in treasury 3,340,047 1,381,809 111,361,386 110,482,567Underlying EPS
Underlying EPS is calculated before the charge for share-based payments and NIon share-based incentives. A reconciliation of the basic earnings for the yearto the underlying earnings is presented below: Year ended Year ended 31 December 2010 31 December 2009 £000 £000 Basic earnings for the year 58,002 30,027 Share-based payments 1,846 1,896 NI on share-based incentives 2,651
1,310
Underlying earnings for the year 62,499 33,23313 Dividends
Dividends declared and paid by the Company were as follows:
2010 2009 Pence per £000 Pence per £000 share share 2008 final dividend - - 7.0 7,615paid 2009 interim - - 3.0 3,279dividend paid 2009 final dividend 7.0 7,586 - -paid 2010 interim 5.0 5,371 - -dividend paid 12.0 12,957 10.0 10,894After the reporting date a final dividend of 9.0p (2009: 7.0p) per qualifyingordinary share being £9,534,000 (2009: £7,630,000) was proposed by the Board ofdirectors.The 2009 final dividend paid on 11 June 2010 was £7,586,000 being a differenceof £44,000 compared to that reported in the 2009 Annual Report which was due toa reduction in the ordinary shares entitled to a dividend between31 December 2009 and the final dividend record date of 14 May 2010.
The 2010 interim dividend paid on 12 November 2010 was £5,371,000 being a difference of £32,000 compared to that reported in the 2010 Half Year Report which was due to a reduction in the ordinary shares entitled to a dividend between 30 June 2010 and the interim dividend record date of 15 October 2010.
The terms of the EBT provide that dividends payable on the ordinary shares heldby the EBT are waived. No provision was made for the final dividend in eitheryear and there are no income tax consequences.
Subsidiary dividends
Dividends of £300,000 (2009: £870,000) were paid in the year by HLHL to minority shareholders. As no minority interest was recognised in the consolidated statement of financial position and the Group consolidated 100% of HLHL's results prior to its disposal, the dividends paid in the year were treated as an addition to goodwill (refer Note 15).
14 Property, plant and equipment
Office equipment, Group fixtures & Computer Leasehold fittings equipment improvements Total £000 £000 £000 £000 Cost At 1 January 2010 784 2,710 47 3,541 Additions 56 748 102 906 Disposals (69) (649) - (718) Disposal of discontinued (37) (141) (47) (225)operation (refer Note 11) At 31 December 2010 734 2,668 102 3,504 Depreciation At 1 January 2010 (441) (1,696) (11) (2,148) Charge for year (103) (451) (21) (575) Disposals 66 561 - 627 Disposal of discontinued 16 48 16 80operation (refer Note 11) At 31 December 2010 (462) (1,538) (16) (2,016) Net book value At 31 December 2010 272 1,130 86 1,488 At 1 January 2010 343 1,014 36 1,393 Office equipment, Group fixtures & Computer Leasehold fittings equipment improvements Total £000 £000 £000 £000 Cost At 1 January 2009 844 3,632 32 4,508 Additions 2 233 15 250 Disposals (62) (1,155) - (1,217) At 31 December 2009 784 2,710 47 3,541 Depreciation At 1 January 2009 (379) (2,242) (4) (2,625) Charge for year (118) (521) (7) (646) Disposals 56 1,067 - 1,123 At 31 December 2009 (441) (1,696) (11) (2,148) Net book value At 31 December 2009 343 1,014 36 1,393 At 1 January 2009 465 1,390 28 1,883
The Company has no property, plant or equipment in either year.
15 Intangible assets Computer Customer Goodwill software relationships TotalGroup £000 £000 £000 £000 Cost At 1 January 2010 13,250 3,012 514 16,776 Additions 300 245 - 545 Disposals - (5) - (5) Disposal of discontinued (12,818) - (514) (13,332)operation (refer Note 11) At 31 December 2010 732 3,252 - 3,984 Amortisation At 1 January 2010 - (2,231) (231) (2,462) Charge for year - (294) (42) (336) Disposals - 4 - 4 Disposal of discontinued - - 273 273operation (refer Note 11) At 31 December 2010 - (2,521) - (2,521) Net book value At 31 December 2010 732 731 - 1,463 At 1 January 2010 13,250 781 283 14,314 Computer Customer Goodwill software relationships TotalGroup £000 £000 £000 £000 Cost At 1 January 2009 9,605 3,200 514 13,319 Additions 3,645 28 - 3,673 Disposals - (216) - (216) At 31 December 2009 13,250 3,012 514 16,776 Amortisation At 1 January 2009 - (2,049) (147) (2,196) Charge for year - (398) (84) (482) Disposals - 216 - 216 At 31 December 2009 - (2,231) (231) (2,462) Net book value At 31 December 2009 13,250 781 283 14,314 At 1 January 2009 9,605 1,151 367 11,123
The Company has 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 operations which represent the lowest level within the Group at which the goodwill is monitored for internal management purposes, which is not higher than the Group's operating segments as reported in Note 5.
The aggregate carrying amounts of goodwill allocated to each unit are asfollows: 31 December 2010 31 December 2009 £000 £000 Holiday Lettings (discontinued) - 12,518 Agency 732 732 732 13,250
The recoverable amount of the HLL cash generating unit in 2009 was based on itsvalue in use. Value in use was determined by discounting the estimated futurecash flows generated from the business and was based on the following keyassumptions:
* Cash flows were projected based on past experience, actual operating
results and the three year business plan;
* Cash flows thereafter were extrapolated into perpetuity applying a growth
rate of 2.0%;
* The key assumption was sales growth rate. In 2009 revenues on a management
accounts basis, before adjusting for deferred revenue, grew by 45.7% year
on year and in the business plan revenues were projected based on
historical growth and future plans for the business; and
* A pre-tax discount rate of 19.6% was applied in determining the recoverable
amount; based on an industry specific weighted average cost of capital.
The carrying value of the £732,000 purchased goodwill in Agency, arising pre-transition to IFRS, is also reviewed annually for impairment. Due to its level of significance the disclosures as required by IAS 36 Impairment of Assets have not been made.
16 Investments
The subsidiaries of the Group as at 31 December 2010 are as follows:
Company Nature of Country of Class of business incorporation Holding shares Rightmove Group Limited Online England and 100% Ordinary advertising Wales Rightmove.co.uk Limited Dormant England and 100% Ordinary Wales Rightmove Home Information Packs Limited Dormant England and 100% Ordinary Wales
All the above subsidiaries are included in the Group consolidated results.The Group disposed of its' holdings in HLHL and HLL during the year (refer Note11).Company 31 December 2010 31 December 2009
Investment in subsidiary undertakings £000
£000 At 1 January 538,501 537,668
Additions - subsidiary equity settled share-based incentives charge (refer 803
833Note 24) At 31 December 539,304 538,501
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 IFRS 2 charge has been split between the Company and Rightmove Group Limited with £803,000 (2009: £833,000) being recognised in the Company accounts as a capital contribution to its subsidiary.
17 Trade and other receivables
Group 31 December 2010 31 December 2009 £000 £000 Trade receivables 10,444 8,405 Less provision for impairment of trade (371) (216)receivables Net trade receivables 10,073 8,189
Amounts owed by related parties (refer 116
131Note 28)
Amounts held in Escrow (refer Note 11) 1,000
-
Prepayments and accrued income 1,577
967 Interest receivable 62 - Other debtors 37 132 Forward exchange contracts - 2 12,865 9,421 Non-current 1,000 - Current 11,865 9,421 12,865 9,421
Exposure to credit and currency risks and impairment losses relating to trade and other receivables are disclosed in Note 29.
Included within net trade receivables at 31 December 2010 is an amount of £nil (2009: £77,000) relating to the discontinued Holiday Lettings segment.
The Company has no trade and other receivables in either year.
18 Cash and cash equivalents
Group Company 31 December 2010 31 December 2009 31 December 2010 31 December 2009 £000 £000 £000 £000 Bank accounts 23,148 932 - - Deposit accounts - 24,961 - 5,424 Cash and cash equivalents in 23,148 25,893 - 5,424the statement of cash flows Cash balances were placed on deposit for various lengths between one day andtwo months during the year and attracted interest at a weighted average rate of0.7% (2009: 0.9%).Included within cash and cash equivalents at 31 December 2010 is an amount of £nil (2009: £562,000) relating to the discontinued Holiday Lettings segment.19 Trade and other payables Group Company 31 December 2010 31 December 2009 31 December 2010 31 December 2009 £000 £000 £000 £000 Trade payables 1,033 777 - - Trade accruals 4,734 2,670 3,047 1,314 Other creditors 240 250 - - Other taxation and social 3,223 2,798 - -security Deferred revenue 6,759 7,347 - - Inter-group - - 22,605 59,763payables Accrued interest on inter-group - - - 1,837payables balance Interest payable - 19 - 19 15,989 13,861 25,652 62,933
Exposure to currency and liquidity risk relating to trade and other payables is disclosed in Note 29.
Included within trade payables at 31 December 2010 is an amount of £nil (2009: £57,000) relating to the discontinued Holiday Lettings segment.
20 Loans and borrowings
In April 2008, the Group entered into a Sterling-denominated revolving loanfacility of £39,750,000 with the Bank of Scotland to support its share buy backprogramme. During 2009, £14,750,000 of the revolving loan facility was repaidout of surplus cash. On 16 April 2009 the Group converted £25,000,000 being thebalance of its revolving loan facility, into a five year term loan. The loanbore interest at LIBOR plus 1.5% together with a mandatory cost applied by thelender and was repayable over five years in 20 equal instalments.The Board of directors agreed to retire the debt with the Bank of Scotlandearly and on 10 February 2010 the outstanding debt of £21,250,000, being thebalance as at 31 December 2009 less a quarterly instalment of £1,250,000 paidin January 2010, was repaid in full. No penalties or break costs were incurredin exiting the facility early.Post repayment of the debt the Group entered into an agreement with BarclaysBank Plc for a £10,000,000 uncommitted money market loan. To date no amount hasbeen drawn under this facility. The loan was extended on 11 February 2011 for afurther 12 month period. Fair value Carrying value Fair value Carrying value 31 December 2010 31 December 2010 31 December 2009 31 December 2009 Group £000 £000 £000 £000 Non-current liabilities Unsecured bank - - 17,500 17,500borrowings Current liabilities Unsecured bank - - 5,000 5,000borrowings - - 22,500 22,500 Cash and cash equivalents (23,148) (23,148) (25,893) (25,893) (refer Note 18) Total net (cash) (23,148) (23,148) (3,393) (3,393)
Analysis of net debt cash flows
1 January 2010 Cash flows 31 December 2010 Group £000 £000 £000 Cash and cash (25,893) 2,745 (23,148)equivalents Interest-bearing loans and borrowings 22,500 (22,500) - Total net (cash) (3,393) (19,755) (23,148) Fair value Carrying value Fair value Carrying value 31 December 2010 31 December 2010 31 December 2009 31 December 2009 Company £000 £000 £000 £000 Non-current liabilities Unsecured bank - - 17,500 17,500 borrowings Current liabilities Unsecured bank - - 5,000 5,000 borrowings - - 22,500 22,500 Cash and cash equivalents - - (5,424) (5,424) (refer Note 18) Total net (cash)/ - - 17,076 17,076debt
Analysis of net debt cash flows
1 January 2010 Cash flows 31 December 2010 Company £000 £000 £000 Cash and cash (5,424) 5,424 -equivalents Interest-bearing loans and borrowings 22,500 (22,500) - Total net debt/(cash) 17,076 (17,076) -21 ProvisionsGroup Property provisions £000 At 1 January 2010 6
Provisions made during the year
4
Provisions disposed of (refer Note 11)
(10) At 31 December 2010 -
The 2009 property provision for lease dilapidations related to the premises occupied by HLL.
The Company has no provisions in either year.
22 Deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Net Assets Liabilities 31 31 31 31 31 31 December December December December December December Group 2010 2009 2010 2009 2010 2009 £000 £000 £000 £000 £000 £000 Equity settled (6,427) (2,524) - - (6,427) (2,524)share-based incentives Property, plant and (161) (150) - 4 (161) (146)equipment Provisions (87) (48) - - (87) (48) Intangible - - - 67 - 67assets Net tax (6,675) (2,722) - 71 (6,675) (2,651)(assets)
The net deferred tax asset of £6,675,000 at 31 December 2010 (2009: £2,651,000) is in respect of share-based incentives, depreciation in excess of capital allowances and provisions.
The deferred tax asset relating to share-based incentives at 31 December 2010is £6,427,000 (2009: £2,524,000). This increase is due to the Company's shareprice increasing from £5.04 at 31 December 2009 to £7.79 at 31 December 2010. Assets Liabilities Net 31 31 31 31 31 31 December December December December December DecemberCompany 2010 2009 2010 2009 2010 2009 £000 £000 £000 £000 £000 £000 Equity settled (5,142) (1,896) - - (5,142) (1,896)share-based incentives Net tax (5,142) (1,896) - - (5,142) (1,896)(assets) The net deferred tax asset of £5,142,000 at 31 December 2010 (2009: £1,896,000)is in respect of share-based incentives. This increase is due to the Company'sshare price increasing from £5.04 at 31 December 2009 to £7.79 at31 December 2010.
Movement in deferred tax during the year:
Disposal of Group Recognised Recognised discontinued 1 January 2010 in income in equity operation 31 December 2010 £000 £000 £000 £000 £000 Equity settled share-based (2,524) (452) (3,451) - (6,427)incentives Property, plant and equipment (146) (8) - (7) (161) Provisions (48) (39) - - (87) Intangible 67 (10) - (57) -assets (2,651) (509) (3,451) (64) (6,675) Recognised in Recognised in Company 1 January 2010 income equity 31 December 2010 £000 £000 £000 £000 Equity settled (1,896) (258) (2,988) (5,142)share-based incentives The Emergency Budget of 22 June 2010 announced a phased reduction in the mainUK corporation tax rate from 28.0% to 24.0% with the first 1.0% reductiontaking effect from 1 April 2011. The first 1.0% reduction was substantivelyenacted for the purposes of IFRS on 20 July 2010. It has not been possible toquantify the full anticipated effect of the announced further 3.0% ratereduction but it is expected to result in a reduction in the Group's futurecurrent tax charge and reduce the Group's deferred tax assets accordinglyresulting in a further charge to income and a debit directly to equity.
The anticipated changes to the capital allowance rules from April 2012 are considered unlikely to have a material impact on the effective rate of tax.
Movement in deferred tax during the prior year:
Recognised in Recognised in 31 December Group 1 January 2009 income equity 2009 £000 £000 £000 £000 Equity settled share-based - (2,350) (174) (2,524)incentives Property, plant and (87) (59) - (146)equipment Provisions (7) (41) - (48) Intangible assets 88 (21) - 67 Tax losses (66) 66 - - (72) (2,405) (174) (2,651)
The deferred tax asset arising on equity settled share-based incentives in bothyears was recognised in the profit or loss to the extent that the relatedequity settled share-based incentives charge was recognised in the profit orloss.23 Share capital Ordinary shares of £0.01 each 31 December 2010 31 December 2009 Number of shares Number of shares In issue At 1 January 118,923,411 120,050,873 Purchase and cancellation of own shares (4,161,977) (1,127,462) At 31 December 114,761,434 118,923,411 Authorised - par value £0.01 each 300,000,000
300,000,000
During 2010, 4,161,977 (2009: 1,127,462) ordinary shares were bought back bythe Company and were subsequently cancelled. Further details are disclosed inNote 24.
All issued shares are fully paid.
The holders of ordinary shares are entitled to receive dividends as declaredfrom time to time and are entitled to one vote per share at general meetings ofthe Company.
Included within shares in issue at 31 December 2010 are 6,322,329 ordinary shares (2009: 7,418,874) held by the EBT and 2,505,430 (2009: 2,505,430) held in treasury.
24 Reconciliation of movement in capital and reserves
EBT Reverse Share shares Treasury Other acquisition Retained Total capital reserve shares reserves reserve earnings equityGroup £000 £000 £000 £000 £000 £000 £000 At 1 January 2009 1,201 (17,149) (11,917) 93 138 12,125 (15,509) Profit for the - - - - - 30,027 30,027year Equity settled - - - - - 1,896 1,896share-based incentives charge Tax in respect of - - - - - 174 174share-based incentives recognised directly in equity Dividends to - - - - - (10,894) (10,894)shareholders Exercise of share - 3,365 - - - 2,043 5,408options Purchase of own - (2,401) - - - - (2,401)shares Cancellation of (12) - - 12 - (5,452) (5,452)own shares Share related - - - - - (56) (56)expenses
At 31 December 2009 1,189 (16,185) (11,917) 105 138 29,863
3,193
At 1 January 2010 1,189 (16,185) (11,917) 105 138 29,863
3,193 Profit for the - - - - - 58,002 58,002year Equity settled - - - - - 1,846 1,846share-based incentives charge Tax in respect of - - - - - 3,451 3,451share-based incentives recognised directly in equity Dividends to - - - - - (12,957) (12,957)shareholders Exercise of share - 2,248 - - - 1,645 3,893options Cancellation of (42) - - 42 - (29,358) (29,358)own shares Share related - - - - - (206) (206)expenses
At 31 December 2010 1,147 (13,937) (11,917) 147 138 52,286 27,864
Share buy back
In June 2007, the Company commenced a share buy back programme to purchase itsown ordinary shares. The total number of shares bought back in 2010 was4,161,977 (2009: 1,127,462) representing 3.7% (2009: 1.0%) of the issued sharecapital (excluding shares held in treasury). All of the shares bought back inboth years were cancelled. The shares were acquired on the open market at atotal consideration (excluding costs) of £29,358,000 (2009: £5,452,000). Themaximum and minimum prices paid were £7.73 (2009: £5.00) and £6.09 (2009: £4.71) per share respectively.
EBT shares reserve
This reserve represents the carrying value of own shares held by the EBT.During the year the EBT purchased no shares. 1,096,545 (2009: 1,641,791)options were exercised by Group employees in the year at an average price of £3.55 (2009: £3.29) per ordinary share, which were satisfied by shares held inthe EBT. At 31 December 2010 the EBT held 6,322,329 (2009: 7,418,874) ordinary shares in the Company of £0.01 each, representing 5.6% (2009: 6.4%) of the
ordinary shares in issue (excluding shares held in treasury). The market value of the shares held in the EBT at 31 December 2010 was £49,251,000 (2009: £37,428,000).
Other reserves
The movement on other reserves of £42,000 (2009: £12,000) comprises the nominal value of ordinary shares cancelled during the year.
Retained earningsThe gain on the exercise of share options is the difference between the valuethat the shares held by the EBT were originally acquired at and the price atwhich share options were exercised during the year.Company Reverse Share Treasury Other acquisition Retained Total capital shares Reserves reserve earnings equity £000 £000 £000 £000 £000 £000 At 1 January 2009 1,201 (11,917) 751 103,520 384,413 477,968 Loss for the year - - - - (4,315) (4,315) Dividends to - - - - (10,894) (10,894)shareholders Equity settled share-based incentives - - - - 1,063 1,063charge Tax in respect of - - - - 1,223 1,223share-based incentives recognised directly in equity Capital contribution - - 833 - - 833 Cancellation of own (12) - 12 - (5,452) (5,452)shares Share related expenses - - - - (38) (38) At 31 December 2009 1,189 (11,917) 1,596 103,520 366,000 460,388At 1 January 2010 1,189 (11,917) 1,596 103,520 366,000 460,388 Profit for the year - - - - 96,093 96,093 Dividends to - - - - (12,957) (12,957)shareholders Equity settled share-based incentives - - - - 1,043 1,043charge Tax in respect of - - - - 2,988 2,988 share-based incentives recognised directly in equity Capital contribution - - 803 - - 803 Cancellation of own (42) - 42 - (29,358) (29,358)shares Share related expenses - - - - (206) (206) At 31 December 2010 1,147 (11,917) 2,441 103,520 423,603 518,794Reverse acquisition reserveThis reserve resulted from the acquisition of Rightmove Group Limited by theCompany and represents the difference between the value of the shares acquiredat 28 January 2008 and the nominal value of the shares issued.Other reservesThe principal movement in other reserves for the year comprises £803,000 (2009:£833,000) in respect of the equity settled share-based incentives charge foremployees of Rightmove Group Limited. As the awards relate to shares in theCompany the IFRS 2 charge has been treated as a deemed capital contribution. Inaddition a movement of £42,000 (2009: £12,000) has been recorded in relation tothe nominal value of ordinary shares cancelled during the year.
25 Share-based payments
The Group and Company operate share-based incentive schemes for certain seniormanagement comprising the Rightmove Unapproved Executive Share Option Plan(Unapproved Plan), the Rightmove Approved Executive Share Option Plan (ApprovedPlan) and the Rightmove Deferred Share Bonus Plan (DSB Plan). The Group alsooperates a Savings Related Share Option Scheme (Sharesave Plan).The fair value of services received in return for share-based incentives ismeasured by reference to the fair value of share-based incentives granted. Theestimate of the fair value of the services received is measured using eitherthe Monte Carlo or Black Scholes pricing model as is most appropriate for eachscheme.All share-based incentive schemes are granted under a service condition. Suchconditions are not taken into account in the fair value of the servicereceived. The unapproved executive share option awards granted on 5 March 2010at an exercise price of £6.66 are subject to an equal measure of TSRperformance and growth in EPS. The vesting of 50% of the 2010 award will bedependent on a relative TSR performance condition measured over a three-yearperformance period and the vesting of the other 50% of the 2010 award will bedependent on the satisfaction of an EPS growth target over a three-yearperformance period. The unapproved executive share option awards made on 5March 2009 are subject to a relative TSR performance over a three-yearperformance period, relative to the constituents of the FTSE 250. There are nomarket conditions associated with any other share-based incentives granted.
The IFRS 2 charge for the year relating to employee share-based incentive plans was £1,846,000 (2009: £1,896,000).
The Company charge for the year was £1,043,000 (2009: £1,063,000).
Approved and Unapproved PlansThe assumptions used in the measurement of the fair values at grant date of theApproved and Unapproved Plans are as follows: Share price Employee Fair at Risk turnover value grant Exercise Expected Option free Dividend before perGrant date date price volatility life rate yield vesting option (pence) (pence) (%) (years) (%) (%) (%) (pence) 14 March 2006 413.50 410.00 27.0 7.0 4.5 4.0 16.0 92.00(Approved) 15 March 2006 413.75 335.00 27.0 7.0 4.5 4.0 0.0 116.00(Unapproved) 15 March 2006 413.75 335.00 27.0 6.0 4.5 3.0 16.0 130.00(Unapproved)
12 October 2006 348.00 347.00 27.0 7.0 4.5 4.0 16.0
76.00(Unapproved) 6 September 613.00 597.00 32.0 7.0 5.8 2.0 17.0 228.002007 (Approved) 6 September 613.00 597.00 32.0 7.0 5.8 2.0 17.0 181.002007 (Unapproved)
10 October 2007 525.00 522.00 32.0 6.8 5.8 2.0 17.0
189.00(Unapproved EPS dependent)(1) 5 March 2009 226.75 224.00 50.3 6.5 2.6 4.4 12.0 69.00(Unapproved TSR dependent)(1) 5 March 2010 677.00 666.00 49.0 6.5 3.2 1.5 12.0 267.00(Unapproved TSR dependent)(1) 5 March 2010 677.00 666.00 49.0 6.5 3.2 1.5 12.0 312.00(Unapproved EPS dependent)(1)
(1) For details of TSR and EPS performance conditions refer to Part II of the Remuneration Report on pages 41 to 45.
Expected volatility is estimated by considering historic average share pricevolatility at the grant date. 2010 2009 Group and Company Weighted Weighted average average Number exercise Number exercise price price (pence) (pence) Outstanding at 1 January 6,878,310 330.16 7,305,292 348.66 Granted 440,019 666.00 1,103,948 224.00 Forfeited (145,030) 403.39 (33,146) 596.99 Exercised (1,077,870) 354.63 (1,497,784) 336.24 Outstanding at 31 6,095,430 348.33 6,878,310 330.16December Exercisable at 31 2,925,602 335.56 2,199,400 336.01December
The weighted average market value per ordinary share for executive options exercised in 2010 was £6.98 (2009: £5.44).
The options outstanding at 31 December 2010 have an exercise price in the rangeof £2.24 to £6.66 (2009: £2.24 to £5.97) and a weighted average contractuallife of 6.1 years (2009: 6.8 years).
The IFRS 2 charge for approved and unapproved options for the year ended 31 December 2010 is £1,318,000 (2009: £1,570,000).
The Company charge for the year was £781,000 (2009: £958,000).
NI is accrued, where applicable, at a rate of 13.8%, which management expectsto be the prevailing rate when the share options are exercised, on thedifference between the share price at the reporting date and the averageexercise price of share options. The charge for the year ended 31 December 2010is £2,526,000 (2009: £1,268,000).Sharesave PlanThe Group operates an Her Majesty's Revenue and Customs approved Sharesave Planunder which employees are granted an option to purchase ordinary shares in theCompany 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 contributionsinto a savings account over the relevant period. These funds are used to fundthe option exercise. No performance criteria are applied to the exercise ofSharesave options. The assumptions used in the measurement of the fair value atgrant date of the Sharesave option scheme are as follows: Employee Share turnover price before Fair at Risk vesting/ value grant Exercise Expected Option free Dividend
non-vesting per
date price volatility life rate yield conditions optionGrant (pence) (pence) (%) (years) (%) (%) (%) (pence)date
2 October 2006 345.75 259.00 27.0 3.25 4.5 3.0 16.0 108.00
3 October 2007 525.00 490.00 32.0 3.25 5.8 1.5 84.0 156.00
2 October 2008 253.75 255.00 32.0 3.25 3.0 1.5 25.0 59.00
1 October 2009 545.00 425.00 50.3 3.25 3.5 4.4 25.0 199.00
5 October 2010 745.50 553.00 49.0 3.25 2.3 1.6 25.0 318.00
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 underthe Sharesave option scheme is a non-vesting condition. This feature has beenincorporated into the fair value at grant date by applying a discount to thevaluation obtained from the Black Scholes pricing model. The discount has beendetermined by estimating the probability that the employee will stop savingbased on expected future trends in the share price and employee behaviour.
2010 2009 Group and Company Weighted Weighted average average exercise exercise Number price Number price (pence) (pence) Outstanding at 178,435 364.63 274,993 267.411 January Granted 44,534 553.00 106,527 425.00 Forfeited (27,771) 370.39 (59,078) 278.44 Exercised (18,675) 377.19 (144,007) 259.00 Outstanding at 176,523 409.92 178,435 364.6331 December Exercisable at - - 7,661 259.0031 December
The weighted average market value per ordinary share for Sharesave options exercised in 2010 was £7.01 (2009: £5.21).
The Sharesave options outstanding at 31 December 2010 have an exercise price inthe range of £2.55 to £5.53 (2009: £2.55 to £4.25) and a weighted averagecontractual life of 2.0 years (2009: 2.5 years).
The IFRS 2 charge for Sharesave options for the year ended 31 December 2010 is £88,000 (2009: £139,000).
The Company charge for the year was £2,000 (2009: £3,000).
DSB PlanIn March 2009 a DSB Plan was established which allows certain senior managementthe opportunity to earn a bonus linked as a percentage of base salary settledin deferred shares. The award of shares under the plan is contingent on thesatisfaction 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 theresulting IFRS 2 charge has been spread evenly over the combined Performanceperiod and Vesting period of the shares, being three years.
The IFRS 2 charge for the year ended 31 December 2010 is £440,000 (2009: £187,000).
The Company charge for the year was £260,000 (2009: £102,000).
NI is being accrued, where applicable, at a rate of 13.8%, which managementexpects to be the prevailing rate when the deferred shares are released to theemployees, based on the share price at the reporting date. The charge for theyear ended 31 December 2010 is £125,000 (2009: £42,000).The assumptions used in the measurement of the fair value of the deferred shareawards are calculated at the date on which the potential bonus is communicated to senior management (the Grant date) as follows: Share price Employee Fair at Risk turnover value Grant Exercise Expected Expected free Dividend before perGrant Award date price volatility term rate yield vesting sharedate date (pence) (pence) (%) (years) (%) (%) (%) (pence) 5 March 2009 5 March 2010 226.75 nil n/a 3.0 2.6 4.4 12.0 199.00 5 March 2010 - 677.00 nil n/a 3.0 3.2 1.5 12.0 648.00
Following the achievement of the 2009 internal performance targets, 215,958 deferred shares were awarded to senior management on 5 March 2010 (the Award date) with the right to the release of the shares deferred until March 2012.
26 Operating lease commitments
Non-cancellable operating lease rentals are payable as follows:
31 December 2010 31 December 2009 Group Plant & Plant & machinery Other Total machinery Other Total £000 £000 £000 £000 £000 £000 Less than one 168 781 949 260 967 1,227year Between one and five 185 2,964 3,149 69 3,804 3,873years More than five years - 855 855 - 1,713 1,713 353 4,600 4,953 329 6,484 6,813
Included in operating lease commitments is £nil (2009: £1,100,000) relating to the discontinued Holiday Lettings segment.
The Company has no operating lease commitments in either year.
27 Capital commitments
As at 31 December 2010 the Group had committed to incur capital expenditure of £nil (2009: £nil).
The Company has no capital commitments in either year.
28 Related party disclosures
Inter-group transactions with subsidiaries
During the year the Company was charged interest of £909,000 (2009: £611,000)by Rightmove Group Limited in respect of balances owing under the inter-grouploan agreement dated 30 January 2008.
On 21 December 2010 Rightmove Group Limited declared an interim dividend of 77.2p per ordinary share to the Company. The dividend of £99,897,000 was settled via a reduction in the inter-group loan balance.
As at 31 December 2010 the balance owing under this agreement was £22,605,000 (2009: £61,600,000) including capitalised interest.
Directors' transactions
There were no transactions with directors in either year other than thosedisclosed in the Remuneration Report. Information on the emoluments of thedirectors, who served during the year, together with information regarding thebeneficial interest of the directors in the ordinary shares of the Company isincluded in the Remuneration Report on page 44.Stephen Shipperley, a non-executive director during the year, is also GroupExecutive Chairman of Connells Limited, a significant estate agency customer ofthe Group. During 2009 Connells Limited renewed their membership for a furtherthree years on an arms length basis. The Group's transactions and balances withthis customer for both years were as follows: Year ended Year endedGroup 31 December 2010 31 December 2009 £000 £000 Amounts owed by:
Sequence (UK) Limited (Connells) 70
80 Connells Residential 46 51 116 131 Amounts invoiced to:
Sequence (UK) Limited (Connells) 678
598 Connells Residential 413 327 1,091 925
Included within trade and other receivables is £116,000 due from related parties (2009: £131,000). Trade and other payables include £nil due to related parties (2009: £nil).
Transactions with key management staffThere were no transactions in either year with key management staff.
29 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:
Group Company 31 December 2010 31 December 2009 31 December 2010 31 December 2009 Note £000 £000 £000 £000 Net trade 17 10,073 8,189 - -receivables Amounts owed -by related 17 116 131 - parties Amounts held in Escrow 11,17 1,000 - - - Accrued 17 interest 62 - - -receivable Other debtors 17 37 132 - - Cash and cash 5,424equivalents 18 23,148 25,893 - 34,436 34,345 - 5,424
The maximum exposure to credit risk for trade receivables (including related parties) at the reporting date by geographic region was:
31 December 2010 31 December 2009Group Note £000 £000 UK 10,152 8,305 Rest of the 37 15world 17 10,189 8,320
The maximum exposure to credit risk for trade receivables (including related parties) at the reporting date by type of customer was:
31 December 2010 31 December 2009Group Note £000 £000 Property 10,114 8,123advertisers Other 75 197 17 10,189 8,320
The Group's most significant customer, an Estate Agent, accounts for £600,000 (2009: £306,000) of the trade receivables carrying amount.
Impairment lossesThe ageing of trade receivables (including related parties) at the reportingdate was: 31 December 2010 31 December 2009 Gross Impairment Gross Impairment Group £000 £000 £000 £000 Not past due 7,088 (6) 5,610 (4) Past due 0 - 30 days 1,892 (162) 1,737 (25) Past due 30 - 60 1,355 (160) 951 (11)days Past due 60 - 90 180 (22) 142 (104)days Past due older 45 (21) 96 (72) 10,560 (371) 8,536 (216)
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
31 December 2010 31 December 2009Group £000 £000 At 1 January 216 383 Charged during the 567 191year Utilised during the (412) (358)year At 31 December 371 216
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.
Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated interest payments:
31 December 2010 Group Carrying Contractual 6 months 6-12 amount cash flows or less months 1-2 years 2-5 years £000 £000 £000 £000 £000 £000Non-derivative financial liabilities Trade payables 1,033 (1,033) (1,033) - - -31 December 2009 Group Carrying Contractual 6 months 6-12 amount cash flows or less months 1-2 years 2-5 years £000 £000 £000 £000 £000 £000Non-derivative financial liabilities Unsecured bank 22,500 (22,500) (2,500) (2,500) (5,000) (12,500)borrowings Trade payables 777 (777) (777) - - - 23,277 (23,277) (3,277) (2,500) (5,000) (12,500) Derivative financial liabilities Forward exchange (2) (216) (216) - - -contracts 23,275 (23,493) (3,493) (2,500) (5,000) (12,500)Forward exchange contracts in 2009 related to the discontinued Holiday Lettingssegment.31 December 2010 Company Carrying Contractual 6 months amount cash flows or less 6-12 1-2 years 2-5 years £000 £000 £000 £000 £000 £000 Non-derivative financial liabilities Unsecured bank - - - - - -borrowings 31 December 2009 Company Carrying Contractual 6 months 6-12 amount cash flows or less months 1-2 years 1-2 years £000 £000 £000 £000 £000 £000Non-derivative financial liabilities Unsecured bank 22,500 (22,500) (2,500) (2,500) (5,000) (12,500)borrowings The contractual cash flows in respect of unsecured bank borrowings relate onlyto the principal amount and do not include interest as the loan was repaid infull on 10 February 2010 (refer Note 20).
It is not expected that the cash flows included in the maturity analysis could occur earlier or at significantly different amounts.
Currency riskDuring 2010 all the Group's sales and more than 99.0% of the Group's purchaseswere Sterling denominated and accordingly it has no currency risk.Interest rate riskThe Group and the Company have exposure to interest rate risk on their cashbalances and amounts held in Escrow. As at 31 December 2010 the Group had total cash of £23,148,000 (2009: £25,893,000)and £1,000,000 (2009: £nil) held in Escrow.
In 2009 the Group and the Company had exposure to interest rate risk on the loan facility of £22,500,000 which bore interest at LIBOR plus 1.5%. A change of 1.0% in interest rates would have increased or decreased equity by £265,000.
Fair valuesThe fair values of all financial instruments in both years are set out in thetables below: 31 December 2009 31 December 2010 Group Carrying Carrying amount Fair value amount Fair value £000 £000 £000 £000 Trade and other 12,865 12,865 9,421 9,421receivables Cash and cash 23,148 23,148 25,893 25,893equivalents Trade and other (15,989) (15,989) (13,861) (13,861)payables Loans and - - (22,500) (22,500)borrowings 20,024 20,024 (1,047) (1,047) 31 December 2010 31 December 2009 Company Carrying Carrying amount Fair value amount Fair value £000 £000 £000 £000 Cash and cash - - 5,424 5,424equivalents Trade and other (25,652) (25,652) (62,933) (62,933)payables Loans and borrowings - - (22,500) (22,500) (25,652) (25,652) (80,009) (80,009)30 Contingent liabilities
The Group and the Company had no contingent liabilities in either year.
31 Subsequent events
There have been no subsequent events having a material impact on the financial statements between 31 December 2010 and the reporting date.
ADVISERS AND SHAREHOLDER INFORMATION
Contacts
Managing Director: Ed Williams Chief Operating Officer and Finance Director: Nick McKittrickCompany Secretary: Liz TaylorWebsite: www.rightmove.co.ukRegistered office: Rightmove plc 4th Floor33 Soho SquareLondon W1D 3QURegistered in England no. 6426485Financial calendar 20112010 full year results 25 February 2011Annual General Meeting 4 May 2011Final dividend record 13 May 2011dateFinal dividend payment 10 June 2011Interim Management May, November 2011
Statement
Half year results 3 August 2011Interim dividend November 2011Corporate advisersFinancial adviserUBS Investment BankJoint brokersUBS LtdNumis Securities LtdAuditorKPMG Audit PlcBankersBarclays Bank PLCHSBC Bank PlcSolicitorsSlaughter and MayPinsent MasonsRegistrarCapita registrarsShareholder enquiries
The Company's registrar is Capita Registrars. They will be pleased to deal withany questions regarding your shareholding or dividends. Please notify them ofyour change of address or other personal information. Their address details
are:Capita RegistrarsThe Registry34 Beckenham RoadBeckenhamKent BR3 4TU
Capita Registrars is a trading name of Capita Registrars Limited.
Capita shareholder helpline: 0871 664 0300 (calls cost 10p per minute plusnetwork extras) (Overseas: +44 20 8639 3399)Email: [email protected] portal: www.capitashareportal.comThrough the website of our registrar, Capita Registrars, shareholders are ableto manage their shareholding online and facilities include electroniccommunications, account enquiries, amendment of address and dividend mandateinstructions.
vendorRelated Shares:
Rightmove