1st Sep 2006 07:01
Rightmove Plc01 September 2006 INTERIM RESULTS FOR THE 6 MONTHS TO 30 JUNE 2006 Rightmove plc ("Rightmove"), the UK's number one property website, todayannounces interim results for the six months to 30 June 2006. HIGHLIGHTS • Operating profit up 138% to £8.3m (2005: £3.5m) before Home Information Pack project costs, flotation costs and share option charges• Revenue doubled to £15.1m (2005: £7.6m)• Net cash of £5.2m (2005: £3.0m)• Number of advertisers up 53% to 14,680• Average price paid per advertiser per month up 22% to £181• Visits to Rightmove.co.uk up 75% to 15.4m per month and page impressions up 93% to 227.3m per month• Proposed interim dividend of 1.5p per ordinary share OVERVIEW We are pleased to report a strong performance from Rightmove for our firstinterim results as a public company, following flotation on 15 March 2006. Operating profit grew by 138% to £8.3m, before Home Information Pack projectcosts, flotation costs and share option charges. The substantial increase in operating profit was achieved through continuedrapid revenue growth. Revenue, at £15.1m was up 99% for the same period lastyear. Revenue growth was achieved both through increased sales and price rises.The advertising base grew by 53% to 14,680 advertising estate agency, lettingsagency and new homes developments. Average price paid per advertiser increasedby 22% to £181 per month. Operating margins improved despite incremental public company expenses asoverall costs grew at a significantly lower rate than revenue, up 67% at £6.8m. Following a government change to the proposed legislative framework for HomeInformation Packs ("HIPs") announced on 18 July 2006, the Board decided to bothstop development of a HIPs platform and to dispose of a related minorityinterest investment in property search service, TMG Holdings Ltd ("TM").Rightmove had invested approximately £7.0m in developing its HIPs platform andwill incur a further £1.2m of exit costs. The Board intends to pay an interim dividend of 1.5p per ordinary share oncecertain technical conditions (set out below) have been met. ON-LINE ADVERTISING The first six months have seen rapid growth in our on-line advertising businesswith over 5,000 new advertisers subscribing to Rightmove. Growth has beenparticularly strong with estate agency, lettings and new homes advertisersacross all regions of Great Britain. We entered 2006 with a market penetration among estate agents of 62% nationally,and have seen this increase to 74% with strong growth in all areas of thecountry and in all sectors of the market. Among estate agents specialising inthe premium end of the market, the gains have been significant and includeSavills, Knight Frank, Hamptons, Strutt & Parker, Stags and Douglas & Gordon. We no longer see an upper limit of 80% on estate agent market penetration. Thisis evidenced by three out of ten regions having already breached this level,with East Anglia at 87%, closely followed by the South East and East Midlands at86% each. Growth among lettings agents, new home developers and overseas agents has beengreater than estate agents in percentage terms, though this reflects the lowerstarting base. Rental only agents total over 1,523, up from 232 a year ago, newhomes developments total 2,367, up from 1,369, and overseas total 430 comparedto 220 at the end of June 2005. Significant new advertisers amongst new homes developers include George Wimpey,Redrow and David Wilson Homes, taking us to the position where eighteen of thetop twenty developers list some or all their developments on Rightmove.co.uk. During the first half of 2005 the Rightmove service was being sold to new estateagency advertisers at a monthly cost of £195, with existing advertisers paying£150. During the same period this year we have sold to new agents at £250, withexisting advertisers paying £195. Overall across all our customer base theaverage price per customer is £181 per month as at June 2006, up 22% on a yearago. In 2006 Rightmove has regularly been in the top ten UK websites in terms of pageimpressions and has gained market share over our competitors. Amongst the topfour property websites Rightmove accounts for four out of every five pages ofproperty information viewed. HOME INFORMATION PACKS On 26 July 2006, the Board announced its intention to discontinue its HIPsinitiative. In June, the government laid down the regulations to govern the content of HIPs,the regulation of Home Inspectors and the compliance regime as required of itunder the 2004 Housing Act, which set out the requirement for mandatory HIPs.The content of these regulations were broadly favourable to Rightmove. Thesubsequent government announcement on 18 July 2006 stated that Home ConditionReports would be a voluntary rather than mandatory element of HIPs whenintroduced in June 2007. It is also very likely that people will be able tostart marketing properties without actually having a HIP, thereby removing theurgency for an efficiently and reliably produced and delivered solution. The Board considered these changes and concluded that there was no realisticprospect of developing a profitable Rightmove HIPs business. £22m had been allocated to the development of the HIPs proposition, of whichapproximately £7.0m had been spent to the date of our announcement. Exit costsare not expected to exceed £1.2m and will be accounted for in the full yearaccounts. £0.3m of HIPs development costs previously capitalised have beenwritten off in these accounts, together with £0.7m of fixed assets. In January Rightmove invested £3.25m to acquire a 25% stake in TM, a provider ofsearches from local authorities and other bodies. The TM shareholder agreementexplicitly made provision for circumstances in which Rightmove might be unableto order substantial volumes of searches. The four shareholders in TM haveagreed to exercise the exit provisions set out in the agreement. As a result, inthe second half of 2006, Rightmove intends to dispose of its 25% stake to theother shareholders for £3.25m, before costs. DIVIDEND At the time of the flotation we communicated that our intention was to adopt aprogressive dividend policy. Our expectation was that we would make significantinvestment through to June 2007 in our HIPs business. We now find ourselves witha robust cash position, corporation tax credits, the prospects of receipts forthe sale of our shareholding in TM and no major cash outflows relating to theHIPs business. Therefore, the Board intends to stand by its commitment to paydividends when Rightmove's cash position was firmly established. As a consequence, Rightmove intends to pay an interim dividend of 1.5p perordinary share. However due to technical issues concerning the level of the Company'sdistributable reserves (which would impact on our ability to pay dividends), theBoard proposes, subject to shareholder approval, to apply to the High Court fora capital reduction. If granted, this will have the effect of converting asignificant proportion of the share premium account into retained earnings,thereby permitting the payment of an interim dividend. This process is expectedto take place before the end of the year with the dividend being paid as soon asis practicable thereafter. OUTLOOK The Board of Rightmove believe the outlook remains positive as the shiftcontinues away from traditional advertising to the internet. The propertyindustry spends more than £500m annually on advertising in newspapers alone.Though the clear market leader among property web sites, Rightmove only accountsfor around 5% of the property industry spend on newspaper advertising. We will focus all our sales efforts on increasing advertiser numbers and tofocus our technology resources on delivering new advertising products morerapidly than we had originally planned. Many customers have indicated theirdesire to differentiate their Rightmove advertising from their competitors, asthey do in traditional advertising media such as local newspapers. We believe that the second half of 2006 provides Rightmove with everyopportunity to build on the strong first half of the year and to lay thefoundations for further rapid growth in revenue in 2007 and beyond. Scott Forbes Ed WilliamsChairman Group Managing Director1 September 2006 For further information please contact: RightmoveFor Ed Williams, Group Managing Director, and Graham Zacharias, FinanceDirector please contactMaud Rousseau 020 7318 9095 MaitlandNeil Bennett / Brian Hudspith 020 7379 5151 Consolidated income statementfor the six months ended 30 June 2006 Note 6 months 6 months Year ended ended ended 31 December 30 June 2006 30 June 2005 2005 £000 £000 £000 Revenue 15,099 7,574 18,199Administrative expenses (13,670) (4,226) (12,825) Operating profit before HIPs, sharebased payments and flotation costs 8,256 3,469 8,657Share based payments (IFRS 2) 4 (794) - -HIPs development costs (4,650) (121) (1,572)Flotation costs (1,383) - (1,711) ---------- ----------- -----------Operating profit 1,429 3,348 5,374 ---------- ----------- -----------Financial income 78 78 189Financial expenses - - (27) ---------- ----------- -----------Net financial income 78 78 162 ---------- ----------- -----------Share of associate profit 7 129 - - Profit before tax 1,636 3,426 5,536Income tax expense 9 (1,137) (1,043) (2,158) ---------- ----------- -----------Profit for the period 499 2,383 3,378 Attributable to:Equity holders 499 2,383 3,378Earnings per ordinary share (pence)Basic 5 0.41 2.03 2.86Diluted 0.40 1.93 2.74 Consolidated statement of recognised income and expensefor the six months ended 30 June 2006 6 months 6 months 12 months ended ended ended 30 June 2006 30 June 2005 31 December 2005 £000 £000 £000Tax in respect of share optionsrecognised directly in equity 3,305 742 1,666 ----------- ----------- -----------Net income recognised directly in equity 3,305 742 1,666Profit for the period 499 2,383 3,378 ----------- ----------- -----------Total recognised income and expense for the period 3,804 3,125 5,044 =========== =========== =========== Reconciliation of movements in shareholders' fundsfor the six months ended 30 June 2006 6 months 6 months 12 months ended ended ended 30 June 2006 30 June 2005 31 December 2005 £000 £000 £000At 1 January 5,622 5,578 5,578Profit for the period 499 2,383 3,378Dividends to shareholders - (5,000) (5,000)Issue of new shares 20,037 - -Own shares held (17,707) - -Capitalisation of distributablereserves to fully pay up bonus issue shares (1,275) - -Notional corporation tax charge recognisedin reserves 1,359 - -Share based payments charge (IFRS 2) 794 - -Tax in respect of share options 3,305 742 1,666 ----------- ----------- -----------Closing shareholders' funds 12,634 3,703 5,622 =========== =========== =========== Consolidated balance sheetas at 30 June 2006 Note 30 June 2006 30 June 2005 31 December 2005 £000 £000 £000Non-current assetsProperty, plant and equipment 998 621 1,137Intangible assets 7 4,737 1,253 2,222Investments 7 185 - -Deferred tax asset 9 3,012 801 1,666 ----------- ----------- -----------Total non-current assets 8,932 2,675 5,025 ----------- ----------- -----------Current assetsTrade and otherreceivables 2,282 992 2,450Income tax receivable 1,585 - -Cash and cash equivalents 5,206 2,971 5,580 ----------- ----------- -----------Total current assets 9,073 3,963 8,030 ----------- ----------- -----------Total assets 18,005 6,638 13,055 ----------- ----------- -----------Current liabilitiesTrade and other payables 6 (5,371) (1,035) (6,674)Income tax payable - (1,900) (692) ----------- ----------- -----------Total current liabilities (5,371) (2,935) (7,366) ----------- ----------- -----------Non current liabilitiesDeferred tax liabilities - - (67) ----------- ----------- -----------Net assets 12,634 3,703 5,622 =========== =========== ===========EquityShare capital 1,327 1 1Share premium 18,711 - -Own shares held (17,707) - -Retained earnings 10,303 3,702 5,621 ----------- ----------- -----------Total equity 12,634 3,703 5,622 =========== =========== =========== Consolidated statement of cash flowsfor the six months ended 30 June 2006 Note 6 months 6 months 12 months ended ended ended 30 June 2006 30 June 2005 31 December 2005 £000 £000 £000Cash flows from operating activitiesProfit for the period 499 2,383 3,378 Adjustments for:Depreciation charges 368 169 261Amortisation charges - - 150Impairment of fixed assets 971 - -Loss on sale of fixed assets - - 5Investment income (129) - -Interest income (78) (78) (189)Interest expense - - 27Share options charge 794 - -Income tax expense 1,137 1,043 2,158 ----------- ----------- -----------Operating profit before changes inworking capital 3,562 3,517 5,790 Decrease/(increase) in trade andother receivables 172 1,304 (153)(Decrease)/increase in trade andother payables (1,305) (131) 4,890Cash generated from operations 2,429 4,690 10,527Income taxes paid (164) - (2,196) ----------- ----------- -----------Net cash from operatingactivities 2,265 4,690 8,331 ----------- ----------- -----------Cash flows from investing activitiesInterest received 78 78 189Acquisition of property, plantand equipment (307) (173) (864) Acquisition of intangible assets (222) (195) (656)Acquisition of investment in associate 7 (3,243) - -Proceeds from sale of property,plant and equipment - - 36 ----------- ----------- -----------Net cash from investingactivities (3,694) (290) (1,295) ----------- ----------- -----------Cash flows from financing activitiesInterest paid - - (27)Dividends paid - (5,000) (5,000)Share issue 1,055 - - ----------- ----------- -----------Net cash from financing activities 1,055 (5,000) (5,027) ----------- ----------- -----------Net (decrease) / increase incash and cash equivalents (374) (600) 2,009 Cash and cash equivalents at1 January 5,580 3,571 3,571 ----------- ----------- -----------Cash and cash equivalents at period end 5,206 2,971 5,580 =========== =========== =========== Notes 1. Basis of preparation This interim financial information has been prepared applying the accountingpolicies and presentation that were applied in the preparation of the company'sfinancial statements for the year ended 31 December 2005. The financial statements are prepared on the historical cost basis. 2. The financial statements for the half year ended 30 June 2006 have not beenaudited, although the auditor, KPMG LLP, has carried out an independent review. The comparative figures for the financial year ended 31 December 2005 areextracted from the company's statutory accounts for that financial year. Thoseaccounts have been reported on by the company's auditors and delivered to theregistrar of companies. The report of the auditors was: (i) unqualified, (ii) did not include a reference to any matters to which the auditors drewattention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the CompaniesAct 1985. 3. Segmental reporting Segmental reporting details are provided below: For the six months ended 30 June 2006 Property HIPs Other Total advertising £000 £000 £000 £000Income statement informationSegmental revenue 15,099 - - 15,099Depreciation and amortisation 261 106 1 368 -------- -------- -------- --------Segmental operating (loss) / profit 6,427 (4,650) (219) 1,558Financial income 78Financial expenses -Income tax expense (1,137) --------Profit for the period 499 ========Balance sheet information Capital expenditure 3,548 207 17 3,772Property, plant and equipment 981 - 17 998Intangible assets 4,401 - 336 4,737 Total assets 17,235 414 356 18,055 Total liabilities (5,136) (227) (8) (5,371) For the six months ended 30 June 2005 Property HIPs Other Total advertising £000 £000 £000 £000Income statement informationSegmental revenue 7,574 - - 7,574Depreciation and amortisation 169 - - 169 -------- -------- -------- --------Segmental operating(loss) / profit 3,516 (121) (47) 3,348Financial income 78Financial expenses -Income tax expense (1,043) --------Profit for the period 2,383 ========Balance sheet information Capital expenditure 185 - 183 368Property, plant and equipment 621 - - 621Intangible assets 1,070 - 183 1,253 Total assets 6,455 - 183 6,638 Total liabilities (2,935) - - (2,935) For the year ended 31 December 2005 Property HIPs Other Total advertising £000 £000 £000 £000Income statement informationSegmental revenue 18,199 - - 18,199Depreciation and amortisation 379 32 - 411 -------- -------- -------- --------Segmental operating (loss) / profit 7,000 (1,572) (54) 5,374Financial income 189Financial expenses (27)Income tax expense (2,158) --------Profit for the year 3,378Balance sheet information ========Capital expenditure 898 902 337 2,137Property, plant and equipment 1,068 69 - 1,137Intangible assets 1,085 801 336 2,222 Total assets 11,849 870 336 13,055 Total liabilities (7,433) - - (7,433) 4. Share based payments In accordance with IFRS 2 a charge of £794,000 (30 June 2005: £Nil) is includedin the income statement, being the amortisation of the value of the shareoptions granted since November 2002. 5. Earnings per share Earnings per ordinary share is based upon profit after taxation and on aweighted average of 120,860,606 shares in issue during the period (30 June 2005:117,893,351). Underlying earnings per ordinary share which is calculated beforethe charge for HIPs development costs, flotation costs and share option chargeswere 4.85p for the six months to 30 June 2006 (6 months to 30 June 2005: 2.09p). 6. Trade and other payables 30 June 2006 30 June 2005 31 December 2005 £000 £000 £000 Trade payables 862 194 1,183Other taxation and social security 1,032 556 957Deferred income from government contract 2,528 - 2,428Other accruals and deferred income 949 285 2,106 ---------- --------- ---------- 5,371 1,035 6,674 ---------- --------- ---------- 7. Acquisitions During the period the company acquired 25% of the ordinary share capital of TMHoldings Limited for a consideration of £3.25m. This gave rise to positivegoodwill of £2.1m and a customer list intangible asset of £1.1m. After thebalance sheet date, and as a result of the discontinuance of the HIPs business,it is no longer considered appropriate to retain this shareholding. Accordingly,this is expected to be disposed of for £3.25m, before costs. 8. Post balance sheet event On 18 July 2006, the Government announced fundamental changes to the contents ofHome Information Packs (HIPs), specifically that the Home Condition Reportwithin the HIP would be voluntary for the foreseeable future. As a consequence,the Board decided to discontinue the HIPs business. Total spend to end July 2006was £7m and exit costs are not expected to exceed £1.2m. In the interim accounts, 2005 capitalised development costs (£0.3m) and the netbook value of fixed assets relating to HIPs (£0.7m) have been written off. Theremaining costs relating to July and August operating expenses (£1.1m) and exitcosts (£1.2m) will be dealt with in the full year accounts. 9. Taxation The group's consolidated effective tax rate for the 6 months ended 30 June 2006is 69% (30 June 2005: 30 %). The difference between this and the standard rateof corporation tax of 30% is mainly due to the high level of expenditure onwhich no tax deduction is available, notably flotation costs and share optioncharges. A significant corporate tax deduction of approximately £21.1m arose on shareoptions exercised in the period. An element of this tax deduction was carriedback to offset the corporation tax liability in respect of the year ended 31December 2005 with a resulting tax refund of £1.6m being expected in the secondhalf of the year. The remaining tax deduction will be set against the forecastedtaxable profits arising for the year ended 31 December 2006 resulting in anoverall tax loss for the year. A deferred tax asset was created for the tax losscarried forward which the directors believe will crystallise in the short term. The deferred tax asset of £3 million was recorded directly in equity and anotional tax charge applied for the period ended 30 June 2006 in line with therequirements of IFRS 2. No corporation tax liability is due at 30 June 2006. Independent review report to Rightmove plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2006 which comprises the primary financialstatements and the related notes 1 to 9. We have read the other informationcontained in the interim report and considered whether it contains any apparentmisstatements or material inconsistencies with the financial information. This report is made solely to the company in accordance with the terms of ourengagement to assist the company in meeting the requirements of the ListingRules of the Financial Services Authority. Our review has been undertaken sothat we might state to the company those matters we are required to state to itin this report and for no other purpose. To the fullest extent permitted by law,we do not accept or assume responsibility to anyone other than the company forour review work, for this report, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the UK. A review consistsprincipally of making enquiries of management and applying analytical proceduresto the financial information and underlying financial data and, based thereon,assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Statements on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly, we donot express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. KPMG LLPChartered AccountantsMilton Keynes1 September 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Rightmove