29th Feb 2008 07:01
Rightmove Plc29 February 2008 Rightmove plc33 Soho SquareLondonW1D 3QU RIGHTMOVE plc 2007 PRELIMINARY RESULTS Rightmove plc, the UK's number one property website, today announces preliminaryresults for the year ended 31 December 2007. Highlights: • Revenue grew 69% from £33.6m to £56.7m • Underlying profit before tax increased 77% from £17.7m to £31.4m* • Number of advertisers increased by 18% from 16,321 to 19,287 with over 90% of UK estate agents listing on the website • Success of Rightmove Choice - more than one in five customers now uses one or more Rightmove Choice products • Average revenue per advertiser rose 35% to £259 per month at the end of 2007 (2006: £192 per month) • Cash balance as at 31 December 2007 was £11.8m (2006: £14.9m) • Scheme of Arrangement completed in January 2008 creating over £400m of additional distributable reserves • Proposed final dividend of 6.0p, making a total dividend of 8.0p for the year (2006: 4.5p) Notes: * from continuing operations and before share-based payments, NI on share options under issue, flotation and capital reconstruction costs. Ed Williams, Group Managing Director, said: "2007 has been a year of continued success for Rightmove. We now have morecustomers using more of our products as they seek to differentiate themselvesand their properties. Rightmove continues to be the website of choice for homehunters and where vendors expect to see their property advertised. Lookingforward, we expect to make further progress in a tougher environment for thehousing market. Rightmove is a cost effective way for our customers to advertiseand makes an even stronger contribution at times in the cycle when enquiries aremost scarce. The property advertising sector has, to date, seen a much morelimited structural switch from traditional media to the internet. A tougherhousing market means that property advertisers examine the cost effectiveness ofeverything they do and this plays to Rightmove's strengths - the ability toreach by far the largest audience of UK home movers. Rightmove is by far thelargest single source of quality enquiries to property advertisers." For more information please contact: RightmoveFor Ed Williams, Group Managing Director, and GrahamZacharias, Group Finance Director 020 7087 0605 MaitlandNeil Bennett / Brian Hudspith / Charlotte Walsh 020 7379 5151 Introduction from Scott Forbes, Chairman It is my pleasure to present Rightmove plc's financial results for the yearended 31 December 2007. Our first full year as a public company was a year of many achievements.Foremost was the continued delivery of our proven service to home hunters andour property advertisers. The value they associate with Rightmove is evidentfrom their usage of our website, with 320 million visits to the site and one infour people who bought a house last year first seeing it on Rightmove. Currentlynine out of ten homes for sale in the UK are advertised on our website. This year, we have also shown that Rightmove is of value to our advertisers forfar more than simply putting their properties in front of the UK's largestaudience of home movers. Rightmove Choice products, introduced in February 2007,assist our customers in promoting their brands' strengths and differentiatingtheir product. One in five customers has now adopted at least one RightmoveChoice product during the first year of their introduction. In addition, our"best price" guide provides agents with objective evidence to share with theirown customers regarding the correct pricing of their property, of particularimportance in a tougher housing market. We are equally proud of the increasingly important role we play with new homedevelopers. We now count all 25 of the largest new homes developers among ourgrowing customer base. In addition to their adoption of Choice products we havealso introduced a highly targeted email campaign service which has generatedexcellent responses and low customer acquisition costs. Lastly, Rightmove has also quadrupled the size of its holiday lettings businessfollowing the acquisition of a majority stake in Holiday Lettings Limited, thefastest growing major holiday home website in the UK. Financial Results All these achievements are reflected in our full year results, which show a 69%increase in revenue to £56.7m (2006: £33.6m). Healthy operating margins (54%)resulted in significant fall-through to underlying profit before tax whichincreased by 77% to £31.4m (2006: £17.7m)*. Cash balances at the year end were£11.8m (2006: £14.9m) after a total cost on the share buy back programme of£19.5m. These financial results are underpinned by strong performance againstour key metrics. Customer advertisers have increased by 18% to 19,287 (2006:16,321). Despite a tougher housing market in the second half of the yearretention rates have stayed within historical ranges of 91-94%. We havecontinued to increase both the value and number of product offerings we deliverto our members and this has been reflected in turn by a healthy 35% increase intheir average spend with us. The Board announced a 2.0p (2006: 1.5p) per ordinary share interim dividendwhich was paid on 12 October 2007. Based on our continued cash conversioncapabilities, the Board proposes to pay a final dividend of 6.0p per ordinaryshare which, combined with the interim dividend of 2.0p, gives a total dividendfor the year of 8.0p (2006: 4.5p) a 78% increase over last year's comparablepayments and in line with earnings growth. The final dividend, subject toshareholder approval, will be paid on 13 May 2008 to members on the register on11 April 2008. The Company also seeks to provide value to shareholders by using the significantlevels of cash generated from its operations for share buy backs. In June 2007,we announced a share buy back programme and ultimately acquired 3.3m shares at atotal cost of £19.5m during the period to 31 December 2007. In order to provide the Board with greater flexibility to achieve greaterreturns of capital by way of dividend or share buy backs, we completed a capitalreconstruction in the form of a Scheme of Arrangement on 28 January 2008. Aspreviously announced, shareholders approved the transaction which resulted inthe creation of a new public company but with no change to the Company name,directors, managers or shareholder interests and resulted in a £430m increase indistributable reserves. Notes:* from continuing operations and before share-based payments, NI on share options under issue, flotation and capital reconstruction costs. Annual General Meeting The Annual General Meeting will be held at 12 noon on 6 May 2008 at our officesat 33 Soho Square, London, W1D 3QU. Current Trading and Outlook Our 300 plus hard working Rightmove employees remain committed to providinggreater value added products and services to our customers and home huntersalike. Thus far, our experience in a softening housing market is thatRightmove's proposition is as relevant as ever. Indeed, the tougher the marketthe more essential it is for agents and developers to secure enquiries from homehunters. The subscription business model should provide resilience to a directimpact from falling house prices and declining transaction volumes, thoughRightmove will, in all probability, be operating in an environment where theoverall size of the property advertising market is shrinking. Following a positive start to the current year, the Board remains confident thatdespite a more difficult housing market further significant growth andprofitability of the business will be achieved. Business and Financial Review Ed Williams, Group Managing Director and Graham Zacharias, Group Finance Director 2007 saw Rightmove achieve a landmark of 90% of all estate agents in the UKlisting their property on the Rightmove.co.uk website. We believe we now alsohave three-quarters of lettings only agents and half of all the new homedevelopments currently being actively marketed in the UK. During 2007 on averageover three million different people visited the website each month spending acollective total of 10,116 years* looking at property.Continued strong growth has resulted in underlying profit before tax increasing77% to £31.4m in 2007 (2006: £17.7m)**. Notes:* Source Hitwise January - December 2007** from continuing operations and before share-based payments, NI on share options under issue, flotation and capital reconstruction costs. Keys to success Rightmove's success is the result of our contribution to our advertisers'success. We help our advertisers by providing quality enquiries at asignificantly lower cost than their traditional advertising alternatives. Forestate agents and letting (rental) agents, Rightmove also plays a key role ingenerating new opportunities to win instructions (the right to offer a propertyfor sale or for rent on behalf of the owner). Many home movers and landlords nowexpect their properties to appear on Rightmove's website in order to reach thelargest audience possible. Connecting more people with more property than anyone else We are able to make the contribution that we do to our members' businessesbecause we are the destination of choice for home hunters. In a typical month in2007, between three and four million people visited the website, each averagingmore than one visit a week and spending around 16 minutes on the site each time. In 2007, usage of the Rightmove.co.uk website grew by 23% compared to 2006. Thisgenerated 15 million enquiries tracked through our systems for agents anddevelopers. The growth in visits to our website underscores the fact thatRightmove specifically, and the internet generally, are now a key part of howpeople search for property. Of all people who brought a home last year 72% usedthe internet as part of their search and of them 82% used Rightmove. The key performance indicators that we monitor are: Number of page impressions Number of enquiries that we Number of propertiesin the year grew from 4.0bn delivered increased to 15.0m displayed on(2006) to 4.9bn (2007), up (2007) from 14.2m (2006), up Rightmove.co.uk at22% (+900m) 6% (+800,000) 31 December 2007 was 1,038,000 (2006: 802,000), up 29% (+236,000) While our members value enquiries received, Rightmove often makes its biggestcontributions at times in the cycle when enquiries in general are most scarce.Hence the number of enquiries generated is not an immediate marker of successand although the absolute number may decline in a tougher housing market, thevalue to our members of each enquiry increases. Strong top-line growth Rightmove's profit growth is driven by increased revenue. This has been achievedthrough: • Increased number of advertisers; • Increases in the perceived value our advertisers recognise from their spending with us; and • Increased spend per advertiser. 2007 saw substantial success in terms of sales. Overall property advertisermembership increased by 18% from 16,321 to 19,287 with 90% of estate agenciesnow using Rightmove. Based on our estimate of the market of approximately 24,750potential advertisers, this represents an increase in our customer base from 64%to 78% of the total addressable UK market. The slowdown in the rate of growth compared to previous years is a consequenceof the high proportion of potential UK property advertisers that are alreadyRightmove members. Notable areas of strong progress in 2007 were among smallernew homes developers and with central London agents. The 92% retention rate was within our historical range of 91-94%. The majorityof the estate agents and lettings agents who left Rightmove did so because theirown business ceased to trade or because there was a significant change in theirbusiness focus. The impact of a tougher housing market was detected in the lastfew months of the year but this has not resulted in a substantial decline inoverall retention. The value that our advertisers place in being a Rightmove member also increasedsignificantly. It was particularly pleasing to see more than one in five of ourcustomers taking up our Rightmove Choice products between launch in February andthe end of December 2007. Overall the average monthly spend per advertiser rosefrom £192 per month at the end of 2006 to £259 per month at the end of 2007, anincrease of 35%. We continued to invest heavily in technology and in our field consultants andcustomer service teams. The level of support we provide, including ourinvestment in helping our customers make the most of the service we providethem, is frequently noted within the industry as a key differentiator betweenRightmove and other advertising companies. More than 5,000 estate agents tookadvantage of the free online learning package we provided to master therequirements of the Home Information Packs (HIPs) legislation which came intoeffect during 2007. Rightmove's cost to its members continues to represent a small proportion of thetotal industry spend on advertising, a total of a little over £50m compared toover £600m across traditional media (based on the Advertising Yearbook 2007 andRightmove estimates of the size of the online property marketing spend). Theconsiderable majority of spending by agents and developers continues to be inlocal and regional newspapers. Driving the business forward Without doubt 2008 has the characteristics of a much tougher housing market.This may or may not lead to absolute falls in house prices. It has howeveralready caused a drop in the number of housing transactions taking place in themarket. Our estate agent and new home developer customers' own business modelsare driven by transaction volumes. These market conditions create opportunities for Rightmove. Our position as acost effective means of generating enquiries from home buyers is firmlyestablished. This is a position which is of more value to our customers when itis hard to sell properties than when there is a list of applicants queuing tosnap up properties as they come onto the market or, in the case of developers,off-plan. Our service also includes a range of reports that allows agents to justify thecorrect pricing of properties to vendors as well as demonstrating what is and isnot currently selling. A range of further Rightmove Choice products has been launched in the firstquarter of 2008. These products have a particular focus on giving our customersthe right type of advertising options for operating successfully in a toughmarket. We expect many of our customers to be faced with difficult choices about howmuch they spend on marketing and where they spend it. Given the significantlyhigher return on investment from advertising with Rightmove relative tonewspaper advertising, we expect a tougher market to see property advertisingspend following the same profile as jobs and cars - a sharp and sustained shiftfrom newspapers to online. As in the past, our successes in 2007 have been achieved as a result of the hardwork and dedication on the part of our employees. I would like to thank them fortheir efforts past and continuing. The high level of take up of our secondSharesave scheme for staff provides a further opportunity for that effort to beacknowledged and rewarded. Financial position Margin growth First Second Year ended First Second Year ended half half 31 December half half 31 December 2007 2007 2007 2006 2006 2006Underlyingoperatingmargin % * 51.9 56.1 54.2 54.7 50.1 52.1 * based upon operating profit from continuing operations and before share-based payments, NI on share options under issue, flotation costs and capital reconstruction costs. The above figures are unaudited. The operating margin for the year increased from 52.1% to 54.2% as a consequenceof strong revenue growth and more modest increases in overheads. On alike-for-like basis, excluding Holiday Lettings Limited, the margin in 2007 was55.3%. Taxation The Group's consolidated tax rate for the year ended 31 December 2007 was 31%(2006: 40%). The difference between this and the standard rate of tax of 30%relates chiefly to non-deductible costs. Share-based payment (IFRS 2) In accordance with IFRS 2, a non-cash charge of £2.3m (2006: £2.2m) is includedin the income statement representing amortisation of the fair value of shareoptions granted, including Sharesave options, since November 2002. Earnings per share Earnings per ordinary share of 15.2p (2006: 3.6p) is based on profit aftertaxation and a weighted average of 123,023,728 shares in issue (2006:122,468,206). Underlying earnings per ordinary share based on continuingoperations and before share-based payments, NI on share options under issue,flotation and capital reconstruction costs was 18.7p (2006: 10.5p). Balance sheet Total shareholders' funds amounted to £12.4m at 31 December 2007 (2006: £16.0m).Non-current assets rose from £4.1m to £11.0m chiefly as a result of goodwillarising on the acquisition of Holiday Lettings Limited. Trade and other receivables increased from £2.9m to £11.2m in part due to thestrong growth in revenue but also as a result of a change in the Value Added Tax(VAT) tax point date. The latter resulted in a requirement to raise the January2008 invoices in December 2007 thereby increasing trade and other receivables asat 31 December 2007 by approximately £4.5m. Other debtors also included blockedcash balances of £0.9m which arose on the capital reconstruction carried out atthe end of 2006. Trade and other payables rose from £5.8m to £14.7m. As a consequence of thechange in VAT tax point date explained above, deferred income increased by £4.5mand other taxation payable by £0.7m. Furthermore costs of £1.3m associated withthe Scheme of Arrangement completed in January 2008 were accrued. Cash flow Net cash at 31 December 2007 was £11.8m (2006: £14.9m) with operating profitconverting into operating cash flow at slightly above 100% as a consequence of abroadly neutral movement in trade working capital, notwithstanding thesignificant growth in sales. A total of £19.5m was invested during 2007 in the repurchase of own shares(2006: £nil) while a further £6.2m was paid out by way of dividends (2006:£1.9m). Capital reconstruction On 30 January 2008, the capital reconstruction of the Group became effectivefollowing approval by the Court. As was outlined in a shareholder circular dated11 December 2007, the object of this exercise was to create additionaldistributable reserves to allow Rightmove to continue its current strategy ofreturning capital to shareholders via dividends and share buy backs, subject tomarket conditions. The costs involved in this exercise amounting to £1.7m have been fully accountedfor in the 2007 results. Current trading and outlook Rightmove continues to be in excellent shape as the website of choice for UKhome hunters to find all available property. From our advertisers' viewpoint,Rightmove remains a small proportion of their marketing spend and delivers adramatically enhanced return on investment compared to alternatives. Our strategy continues to focus on creating and realising the value we bring tothe process of helping people find a home and helping UK property professionalsto be successful in selling homes. This strategy seems all the more relevantduring the stage of the housing market cycle where the real challenge for ourcustomers is that of finding buyers. The outlook for continued growth remains strong. Indeed, good progress has beenachieved in the closing months of 2007, despite the slowdown beginning to biteand we have made a robust start to 2008. The Board is confident of meeting itsexpectations for 2008. CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007 Year ended Year ended 31 December 31 December 2006 2007 Continuing Continuing Discontinued operations operations operations Total Note £000 £000 £000 £000Revenue 56,712 33,626 - 33,626 ------ ------------ -------- --------- --------Administrative (30,285) (19,869) (6,668) (26,537)expenses ------ ------------ -------- --------- -------- Operating profitbefore share-based payments, NI onshare options under 30,746 17,530 (6,668) 10,862issue, flotation and capital reconstruction costs Share-based payments 6 (2,331) (2,168) - (2,168) NI on share optionsunder issue 6 (298) - - - Flotation costs - (1,605) - (1,605) Capital reconstruction 8 (1,690) - - -costs ------ ------------ -------- --------- -------- Operating profit 26,427 13,757 (6,668) 7,089 ------ ------------ -------- --------- --------Financial income 891 322 - 322 Financial expenses (199) (66) - (66) ------ ------------ -------- --------- --------Net financial income 692 256 - 256 ------ ------------ -------- --------- --------Share of associate - (77) - (77)loss ------ ------------ -------- --------- -------- Profit before tax 27,119 13,936 (6,668) 7,268 Income tax expense 3 (8,472) (4,917) 1,993 (2,924) ------ ------------ -------- --------- --------Profit for the year 18,647 9,019 (4,675) 4,344 ------ ------------ -------- --------- --------Attributable to: 18,647 9,019 (4,675) 4,344 Equity holders of theParent ------ ------------ -------- --------- -------- Earnings per share(pence) Basic 4 15.16 7.37 (3.82) 3.55 Diluted 4 14.19 6.86 (3.55) 3.31 CONSOLIDATED AND COMPANY STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR THE YEAR ENDED 31 DECEMBER 2007 Group Group Company Company Year ended Year ended Year ended Year ended 31 December 31 December 31 December 31 December 2007 2006 2007 2006 £000 £000 £000 £000Tax in respect ofshare options recognised directly in equity - 4,681 - 4,681 ----------- ----------- ----------- -----------Net income recogniseddirectly in equity - 4,681 - 4,681Profit for the year 18,647 4,344 18,633 4,344 ----------- ----------- ----------- -----------Total recognisedincome and expense forthe year attributableto equity holders ofthe Parent 18,647 9,025 18,633 9,025 ----------- ----------- ----------- ----------- CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2007 31 December 31 December 2007 2006 Note £000 £000Non-current assetsProperty, plant and equipment 2,042 1,375Intangible assets 7,580 1,471Deferred tax assets 5 1,336 1,241 ------ -------------- --------------Total non-current assets 10,958 4,087 ------ -------------- --------------Current assetsTrade and other receivables 11,202 2,921Income tax receivable 163 163Cash and cash equivalents 11,807 14,881 ------ -------------- --------------Total current assets 23,172 17,965 ------ -------------- --------------Total assets 34,130 22,052 ------ -------------- --------------Current liabilitiesTrade and other payables (14,714) (5,835)Income tax payable (4,413) -Provisions (130) (96) ------ -------------- --------------Total current liabilities (19,257) (5,931) ------ -------------- --------------Non-current liabilitiesDeferred tax liabilities 5 (110) -Deferred consideration 7 (2,328) -Provisions (43) (112) ------ -------------- --------------Total non-current liabilities (2,481) (112) ------ -------------- --------------Net assets 12,392 16,009 ------ -------------- --------------EquityShare capital 1,327 1,327Share premium 105 -Retained earnings 10,960 14,682 ------ -------------- --------------Total equity attributable to the equityholders of the parent 12,392 16,009 ------ -------------- -------------- COMPANY BALANCE SHEET AS AT 31 DECEMBER 2007 31 December 31 December 2007 2006 Note £000 £000Non-current assetsProperty, plant and equipment 2,007 1,375Intangible assets 1,787 1,471Investments 3,108 -Deferred tax assets 5 1,336 1,241 ------ -------------- --------------Total non-current assets 8,238 4,087 ------ -------------- --------------Current assetsTrade and other receivables 10,984 2,921Income tax receivable 163 163Cash and cash equivalents 11,600 14,881 ------ -------------- --------------Total current assets 22,747 17,965 ------ -------------- --------------Total assets 30,985 22,052 ------ -------------- --------------Current liabilitiesTrade and other payables (14,137) (5,835)Income tax payable (4,329) -Provisions (107) (96) ------ -------------- --------------Total current liabilities (18,573) (5,931) ------ -------------- --------------Non-current liabilitiesProvisions (34) (112) ------ -------------- --------------Total non-current liabilities (34) (112) ------ -------------- --------------Net assets 12,378 16,009 ------ -------------- --------------EquityShare capital 1,327 1,327Share premium 105 -Retained earnings 10,946 14,682 ------ -------------- --------------Total equity attributable to the equityholders of the Parent 12,378 16,009 ------ -------------- -------------- CONSOLIDATED STATEMENT OF CASH FLOW FOR THE YEAR ENDED 31 DECEMBER 2007 Year ended Year ended 31 December 31 December 2007 2006 Note £000 £000Cash flows from operating activitiesProfit for the year 18,647 4,344 Adjustments for:Depreciation charges 503 385Amortisation charges 390 304Impairment of tangible and intangible assets - 1,011Loss on sale of investment in associate - 206Investment income - (129)Interest income (891) (322)Interest expense 129 1Share-based payments charge 6 2,331 2,168Income tax expense 3 8,472 2,924 ------ ------------- ------------- Operating profit before changes in workingcapital 29,581 10,892Increase in trade and other receivables (8,023) (471)Increase/(decrease) in trade and other 8,337 (838)payables(Decrease)/increase in provisions (35) 208 ------ ------------- ------------- Cash generated from operations 29,860 9,791Interest paid (3) (1)Income taxes (paid)/received (4,250) 1,259 ------ ------------- ------------- Net cash from operating activities 25,607 11,049 ------ ------------- ------------- Cash flows from investing activitiesInterest received 891 322Acquisition of property, plant and equipment (1,157) (938)Acquisition of intangible assets (643) (249)Acquisition of subsidiary (net of cashacquired) 7 (3,177) -Acquisition of investment in associate 7 - (3,320)Proceeds from sale of investment in associate 7 - 3,243 ------ ------------- ------------- Net cash from investing activities (4,086) (942) ------ ------------- ------------- Cash flows from financing activitiesDividends paid (6,176) (1,861)Purchase of treasury shares (19,362) -New shares issued 105 1,055Proceeds on exercise of share options 838 - ------ ------------- ------------- Net cash from financing activities (24,595) (806) ------ ------------- -------------Net (decrease)/increase in cash and cashequivalents (3,074) 9,301Cash and cash equivalents at 1 January 14,881 5,580 ------ ------------- -------------Cash and cash equivalents at 31 December 11,807 14,881 ------ ------------- ------------- COMPANY STATEMENT OF CASH FLOW FOR THE YEAR ENDED 31 DECEMBER 2007 Year ended Year ended 31 December 31 December 2007 Note £000 2006 £000Cash flows from operating activitiesProfit for the year 18,633 4,344 Adjustments for:Depreciation charges 499 385Amortisation charges 327 304Impairment of property, plant and equipment - 1,011Impairment of investment in associate - 77Interest income (889) (322)Interest expense 3 1Share-based payments charge 6 2,331 2,168Income tax expense 8,401 2,924 ------- ------------- ------------ Operating profit before changes in workingcapital 29,305 10,892Increase in trade and other receivables (8,063) (471)Increase/(decrease) in trade and other 8,302 (838)payables(Decrease)/increase in provisions (67) 208 ------- ------------- ------------ Cash generated from operations 29,477 9,791Interest paid (3) (1)Income taxes (paid)/received (4,167) 1,259 ------- ------------- ------------ Net cash from operating activities 25,307 11,049 ------- ------------- ------------ Cash flows from investing activitiesInterest received 889 322Acquisition of property, plant and equipment (1,131) (938)Acquisition of intangible assets (643) (249)Acquisition of investment in subsidiary (3,108) -Acquisition of investment in associate 7 - (3,320)Proceeds from sale of investment in 7 - 3,243associate ------- ------------- ------------ Net cash from investing activities (3,993) (942) ------- ------------- ------------ Cash flows from financing activitiesDividends paid (6,176) (1,861)Purchase of treasury shares (19,362) -New shares issued 105 1,055Proceeds on exercise of share options 838 - ------- ------------- ------------ Net cash from financing activities (24,595) (806) ------- ------------- ------------Net (decrease)/increase in cash and cashequivalents (3,281) 9,301Cash and cash equivalents at 1 January 14,881 5,580 ------- ------------- ------------Cash and cash equivalents at 31 December 11,600 14,881 ------- ------------- ------------ Notes to the Preliminary announcement 1 General Information The Group's accounts have been prepared in accordance with InternationalAccounting Standards and International Financial Standards that were effectiveat 31 December 2007 and adopted by the EU. The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 31 December 2007 or 2006. Statutoryaccounts for 2006 have been delivered to the registrar of companies, and thosefor 2007 will be delivered following the Company's Annual General Meeting. Theauditors have reported on those accounts; their reports were (i) unqualified,(ii) did not include references to any matters to which the auditors drewattention by way of emphasis without qualifying their reports and (iii) did notcontain statements under section 237 (2) or (3) of the Companies Act 1985. 2 Segmental reporting The Group does not have geographical segments with all revenue derived fromexternal operations in the UK in both years. Revenue derived outside the UK isnot material in either 2006 or 2007. Due to the discontinuance of the HIPs business in 2006 all activities in thecurrent year relate to the property advertising segment. There were no otherseparately identifiable business segment income statement or balance sheetitems. For the year ended 31 December 2006 Property HIPs Total advertising £000 £000 £000Income statement informationSegmental revenue 33,626 - 33,626Depreciation and amortisation 550 139 689 ---------- ---------- ---------- Segmental results 13,757 (6,668) 7,089Financial income 322 - 322Financial expenses (66) - (66)Income tax expense (4,917) 1,993 (2,924)Share of associate loss (77) - (77) ---------- ---------- ----------Profit for the year 9,019 (4,675) 4,344 ---------- ---------- ---------- Balance sheet informationCapital expenditure 901 286 1,187Property, plant and equipment 1,375 - 1,375Intangible assets 1,471 - 1,471 Total assets 22,052 - 22,052 Total liabilities (5,612) (431) (6,043) ---------- ---------- ---------- Segmental results, total assets and total liabilities for the year ended 31December 2006 included items directly attributable to the segment as well asthose that could be allocated on a reasonable basis. There were nointer-segmental sales in 2006. Segmental capital expenditure during 2006 represented the total cost incurredduring the year to acquire segmental assets that were expected to be used formore than one period. 3 Income tax expense Year ended Year ended 31 December 31 December 2007 2006 £000 £000Current tax expenseCurrent year 9,272 3,544 Deferred tax expenseOrigination and reversal of temporary differences (896) (620)Reduction in tax rate 96 - ------------- ------------- (800) (620)Total income tax expense 8,472 2,924 ------------- ------------- Reconciliation of effective tax rate The income tax expense for the year is higher (2006: higher) than the standardrate of corporation tax in the UK of 30% (2006: 30%). The differences areexplained below: Year ended Year ended 31 December 31 December 2007 2006 £000 £000Profit before tax 27,119 7,268 ------------- -------------Current tax at 30% (2006: 30%) 8,136 2,180Share-based payments (322) 331Non deductible expenses 460 413Change in tax rate 96 -Deferred tax movement in respect of prior years 102 - ------------- ------------- 8,472 2,924 ------------- ------------- During the year, the Company utilised tax losses brought forward of £689,000.These losses arose on the exercise of share options for which no related equitysettled share option charge was recognised. The reduction in the current yeartax charge resulting from the utilisation of these losses has been reflected inretained earnings in accordance with IFRS 2 and thus a notional tax charge of£689,000 has been applied for the year ended 31 December 2007 (2006:£3,544,000). The Group's consolidated effective tax rate for the year ended 31 December 2007is 31% (2006: 40%). The difference between the standard rate and effective rateat 31 December 2007 is attributable mainly to the high level of expenditure onwhich no tax relief is available but which is offset by the increase in theCompany's deferred tax asset arising on share options. 4 Earnings per share Weighted average Per share Number Earnings amount of shares £000 PenceYear ended 31 December 2007Basic EPS 123,023,728 18,647 15.16Diluted EPS 131,431,538 18,647 14.19Underlying basic EPS 123,023,728 22,966 18.67Underlying diluted EPS 131,431,538 22,966 17.47 Year ended 31 December 2006Basic EPS 122,468,206 4,344 3.55Diluted EPS 131,434,219 4,344 3.31Underlying basic EPS 122,468,206 12,792 10.45Underlying diluted EPS 131,434,219 12,792 9.73 Underlying EPS is calculated before the charge for HIP costs, flotation andcapital reconstruction costs, share-based payments and Employer's NationalInsurance (NI) on share options under issue. A reconciliation of the basicearnings for the year to the underlying earnings is presented below: Year ended Year ended 31 December 31 December 2007 2006 £000 £000 Basic earnings for the year 18,647 4,344HIP costs (net of tax) - 4,675Flotation costs - 1,605Capital reconstruction costs 1,690 -Share-based payments 2,331 2,168NI on share options under issue 298 - ------------ ------------Underlying earnings for the year 22,966 12,792 ------------ ------------ 5 Deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: Assets Liabilities Net Year ended Year ended Year ended Year ended Year ended Year ended 31 December 31 December 31 December 31 December 31 December 31 December 2007 2006 2007 2006 2007 2006Group £000 £000 £000 £000 £000 £000 Property, plant and equipment (84) (232) 2 - (82) (232)Tax losses - (689) - - - (689)Intangible assets - - 108 - 108 -Equity settled share options (1,252) (320) - - (1,252) (320) -------- -------- --------- ---------- -------- --------Net tax (assets) (1,336) (1,241) 110 - (1,226) (1,241) -------- -------- --------- ---------- -------- -------- The net deferred tax asset of £1,226,000 at 31 December 2007 (31 December 2006:£1,241,000) is in respect of share options, tax losses brought forward,accelerated capital allowances and intangibles. The deferred tax asset relating to share options at 31 December 2007 is£1,252,000 (31 December 2006: £320,000). This increase is mainly due to theCompany's share price rising from £3.95 at 1 January 2007 to £4.64 at 31 December 2007. Deferred tax assets and liabilities are attributable to the following: Assets Liabilities Net Year ended Year ended Year ended Year ended Year ended Year ended 31 December 31 December 31 December 31 December 31 December 31 December 2007 2006 2007 2006 2007 2006Company £000 £000 £000 £000 £000 £000 Property, plant and equipment (84) (232) - - (84) (232)Tax losses - (689) - - - (689)Equity settled share options (1,252) (320) - - (1,252) (320) --------- --------- --------- --------- --------- ---------Net tax (assets) (1,336) (1,241) - - (1,336) (1,241) --------- --------- --------- --------- --------- --------- Movement in deferred tax during the year: Arising on 1 January Recognised Recognised business 31 December 2007 in income in equity combination 2007Group £000 £000 £000 £000 £000 Property, plant and equipment (232) 147 - 2 (83)Tax losses (689) - 689 - -Intangible assets - (15) - 124 109Equity settled share options (320) (932) - - (1,252) -------- ---------- ---------- --------- ---------- (1,241) (800) 689 126 (1,226) -------- ---------- ---------- --------- ---------- 1 January Recognised Recognised 31 December 2007 in income in equity 2007Company £000 £000 £000 £000 Property, plant and equipment (232) 148 - (84)Tax losses (689) - 689 -Equity settled share options (320) (932) - (1,252) ---------- --------- --------- ---------- (1,241) (784) 689 (1,336) ---------- --------- --------- ---------- The deferred tax asset arising on equity settled share options is recognised inthe income statement to the extent that the related equity settled share optionscharge was recognised in the income statement. 6 Share-based payments The Company operates a share incentive scheme for key management personnel andsenior employees, comprising the Rightmove Unapproved Executive Share OptionPlan (Unapproved Plan) and the Rightmove Approved Executive Share Option Plan(Approved Plan). The Company also operates a Savings Related Share Option Scheme(Sharesave). The fair value of services received in return for share options granted ismeasured by reference to the fair value of share options granted. The estimateof the fair value of the services received is measured based on the BlackScholes model. The contractual life of the options is used as an input into thismodel. All share incentive schemes are granted under a service condition. Suchconditions are not taken into account in the fair value of the servicesreceived. There are no market conditions associated with the above grants. The total charge for the year relating to employee share-based payment plans was£2,331,000 (2006: £2,168,000), all of which related to share options granted in2006 and 2007. NI is being accrued at a rate of 12.8% on the difference between the share priceat the balance sheet date and the average exercise price of share options. Thecharge for the year ended 31 December 2007 was £298,000 (2006: £nil). 7 Acquisitions and disposals On 21 March 2007, the Company acquired 66.7% of the ordinary share capital ofHLL, a provider of online advertising services to owners of holiday rentalproperties, for consideration of £3,216,000, including acquisition costs of£73,000. From the date of acquisition to 31 December 2007 the acquisitioncontributed £1,499,000 to Group revenue and £216,000 to Group profit. If theacquisition had been completed on the first day of the financial year, theacquisition would have contributed £1,968,000 to Group revenue and £381,000 toGroup profit. In terms of the shareholders' agreement, a put and call option exists to acquirethe remaining 33.3%. The earliest opportunity HLL management has to exercise theput option is 30 June 2009 based on the audited accounts for the 12 monthsending 31 December 2008. The deferred consideration element has been recognisedbased on management's best estimate of likely EBIT for the year then ending at amultiple of six times the agreed formula and discounted at a risk-free rate of5.7%. At 31 December 2007, £126,000 has been changed to financial expense representingthe unwinding of the effective interest rate on deferred consideration. Thisresults in a carrying value of £2,328,000 for deferred consideration on thebalance sheet. Carrying values pre- Fair value acquisition adjustments Fair values Note £000 £000 £000Net assets acquiredNon-current assetsProperty, plant and equipment 12 1 13Intangible assets - customerrelationships - 514 514 ------ ---------- ---------- ---------- 12 515 527Current assetsTrade and other receivables 279 (16) 263Cash and cash equivalents 36 - 36 ------ ---------- ---------- ---------- 315 (16) 299 Current liabilities (207) (417) (624) Non-current liabilitiesDeferred tax liabilities (2) (124) (126) ------ ---------- ---------- ---------- Fair value of net assets 118 (42) 76acquired Purchase consideration - cash 3,213Purchase consideration - accrued 3expensesPurchase consideration - deferred 2,202 ------ ---------- ---------- ---------- Total consideration 5,418 ------ ---------- ---------- ---------- Goodwill 5,342 ------ ---------- ---------- ---------- Upon acquisition the revenue recognition policy for HLL was changed to align itwith the existing Group policy. Revenue is principally billed annually inadvance. An adjustment of £422,000 has been reflected in current liabilities torecognise the deferral of revenue over the 12 month contract on a straight linebasis as opposed to the previous upfront recognition policy. Included in the £5,342,000 of goodwill recognised are intangible assets that donot meet the definition of intangible assets under IAS 38. These items includean assembled workforce and operating synergies. Year ended 31 December 2007Net cash flow on acquisition £000 Cash paid for subsidiary (3,213)Cash acquired 36 ------------- Net cash outflow (3,177) ------------- During 2006, the Company acquired 25% of the ordinary share capital of TM for aconsideration of £3,243,000 and acquisition costs of £77,000. This gave rise topositive goodwill of £2,140,000 and an intangible asset relating to customerlists of £1,124,000. The Group's share in the fair value of net assets of theassociate at the date of acquisition was £56,000. As a result of the discontinuance of the HIPs business, it was no longerconsidered appropriate to retain this shareholding. Accordingly, the holding wasdisposed of for £3,243,000 before costs. The sale gave rise to a consolidatedloss on disposal of £206,000. Whilst TM was an associate and before the decisionto sell was made, the results of the associate were equity accounted for. TheGroup recognised a profit of £129,000 representing its share of TM's profit forthat period. The directors decided to present the loss on disposal of £206,000and the share of associate's profit of £129,000 on the face of the incomestatement as share of associate loss of £77,000. 8 Subsequent event On 28 January 2008, Rightmove Group plc (Company no: 6426485) was admitted tothe official list of the London Stock Exchange and became the holding company ofRightmove plc (Company no: 3997679 (the Company)) pursuant to a Scheme ofArrangement under Section 425 of the UK Companies Act 1985 that was previouslyapproved by shareholders on 7 January 2008 and the High Court of Justice inEngland and Wales (the Scheme of Arrangement). Pursuant to the Scheme of Arrangement, the Company's ordinary shareholdersreceived ordinary shares in Rightmove Group plc, each having a nominal value of£3.35 (Rightmove Group Ordinary Shares), in exchange for ordinary shares in theCompany each having a nominal value of £0.01 (Rightmove Ordinary Shares) on aone-for-one basis (at nil cost). The Rightmove Group Ordinary Shares carrysubstantially the same rights as did the Rightmove Ordinary Shares. As a resultof the Scheme of Arrangement, the Company became a wholly-owned subsidiary ofRightmove Group plc. The Rightmove Ordinary Shares were cancelled on 28 January 2008. Rightmove GroupOrdinary Shares were admitted to the Official List of the UK Listing Authorityand to trading on the main market for listed securities of the London StockExchange plc on 28 January 2008. There was no change in the Board of directors, management and corporategovernance arrangements as a result of the Scheme of Arrangement. Theconsolidated assets and liabilities of Rightmove Group plc immediately after theScheme of Arrangement were substantially the same as the consolidated assets andliabilities of the Company immediately prior thereto. Rightmove Group plc was incorporated and registered in England and Wales underthe Companies Act as a private company, Rightmove Group Limited, on 14 November2007 and re-registered as a public limited company on 29 November 2007. Priorto 28 January 2008 Rightmove Group plc had not commenced trading or made anyprofits or trading losses. On 29 January 2008 the High Court of Justice in England and Wales approved areduction of Rightmove Group plc's share capital to take effect on 30 January2008 when the nominal value of each Rightmove Group plc Ordinary Share wasreduced from £3.35 to £0.01 each. This reduction increased the distributablereserves available to Rightmove Group plc to approximately £430m, which the directors of Rightmove Group plc can utilise for future distributions to shareholders. The corporate restructuring will be accounted for as a reverse acquisition.Accordingly, the historical financial statements prior to the reorganisationwill be labelled as those of Rightmove Group plc, but represent the operationsof the Company. After the Scheme of Arrangement, shareholders' equity willrepresent the equity of Rightmove Group plc. All share options granted to directors and employees under the Company'sexisting Executive Share Option and Sharesave plans, prior to the Scheme ofArrangement are exchangeable for share options over shares in Rightmove Groupplc on a one-for-one basis with no change in the terms or conditions. With effect from 28 January 2008 Rightmove Group plc changed its name toRightmove plc. With effect from 28 January 2008, the Company re-registered as aprivate company and changed its name to Rightmove Group Limited. Ends This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Rightmove