NOTES

Rightmove plc (the Company) is a Company registered in England (Company no. 6426485) domiciled in the United Kingdom (UK). The condensed consolidated interim financial statements of the Company as at and for the six months ended 30 June 2017 comprise the Company and its interest in its subsidiaries (together referred to as the Group). Its principal business is the operation of the Rightmove platforms, which have the largest audience of any UK property portal (as measured by time on site).
 

The consolidated financial statements of the Group as at and for the year ended 31 December 2016 are available upon request to the Company Secretary from the Company's registered office at Turnberry House, 30 Caldecotte Lake Drive, Caldecotte, Milton Keynes, MK7 8LE or are available on the corporate website at plc.rightmove.co.uk.

Basis of preparation

This condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

The annual financial statements of Rightmove plc are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU. As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, the condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the company's published consolidated financial statements for the year ended 31 December 2016. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2016.

The condensed consolidated interim financial statements were approved by the Board of directors on 28 July 2017. The half year results for the current and comparative period are unaudited. The auditor, KPMG LLP, has carried out a review of the condensed consolidated interim financial statements and their report is set out at the end of this document.

The comparative figures as at and for the year ended 31 December 2016 are extracted from the Group's statutory accounts for that financial year. Those accounts have been reported on by the auditor and delivered to the Registrar of Companies. The report of the auditor was:
(i) unqualified;
(ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report; and
(iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

The Group's financial risk management objectives and policies are consistent with that disclosed in the consolidated financial statements as at and for the year ended 31 December 2016.

Going concern

Throughout the period, the Group was debt free, has continued to generate significant cash and has cash balances of £13,611,000 at 30 June 2017 (31 December 2016: £13,749,000). The Group also had £4,024,000 (31 December 2016: £4,026,000) of money market deposits.

The agreement with HSBC for a £10,000,000 committed revolving loan facility expired on 9 February 2017. This was replaced with a new 12 month agreement with Barclays Bank Plc for a £10,000,000 committed revolving loan facility that expires on 12 February 2018. To date, no amount has been drawn under this facility.

After making enquiries the Board of directors has a reasonable expectation that the Group and the Company have adequate resources and banking facilities to continue in operational existence for the foreseeable future. Accordingly the Board of directors continues to adopt the going concern basis in preparing these condensed consolidated interim financial statements.

Non-GAAP (Generally Accepted Accounting Principles) performance measures

In the analysis of the Group's financial performance certain information disclosed in the financial statements may be prepared on a non-GAAP basis or has been derived from amounts calculated in accordance with IFRS but is not itself an expressly permitted GAAP measure. These measures are reported in line with how financial information is analysed by management. The key non-GAAP measures presented by the Group are:

• Underlying operating profit - which is defined as operating profit before share-based payments and NI on share-based incentives; and

• Underlying basic EPS - which is defined as profit for the period before share-based payments and NI on share-based incentives, with no related adjustment for tax, divided by the weighted average number of shares in issue for the period.

The Directors believe that these non-GAAP measures provide a more appropriate measure of the Group's business performance as share-based payments, which are a significant non-cash charge are driven by a valuation model, and NI on share-based incentives, is driven by reference to the Rightmove plc share price and so subject to volatility, rather than operational activity. The directors therefore consider underlying operating profit to be the most appropriate indicator of the performance of the business and year-on-year trends. For simplicity no adjustment for tax is made within the calculation of underlying basic EPS. The non-GAAP measures are designed to increase comparability of the Group's financial performance year-on-year.

2   Significant accounting policies

The accounting policies applied by the Group in these condensed consolidated interim financial statements are in accordance with International Financial Reporting Standards as adopted by the European Union (Adopted IFRSs) and are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2016.

The same accounting policies are anticipated to be applied for the year ending 31 December 2017.

IFRS 16 Leases

IFRS 16 Leases was issued in January 2016, although it has not yet been endorsed by the EU. The standard is effective for annual periods beginning on or after 1 January 2019. Early adoption is permitted for entities that apply IFRS 15 Revenue from Contracts with Customers at or before the date of initial application of IFRS 16.

We are currently in the process of quantifying the impact of IFRS 16. Based on current and expected future arrangements that fall within IFRS 16, on transition the Group is expecting to recognise material new right-of-use assets and lease liabilities in respect of office premises and company cars. There is expected to be a change to the profile of the Group's expenses as  the straight-line operating lease expense will be replaced with a depreciation charge for right-of-use assets and interest expense on lease liabilities, however this is not expected to be significant.

Judgements and estimates
The preparation of the condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in future periods if applicable.

In particular information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the condensed consolidated financial statements is included in the following notes:
 

Note 3              Revenue recognition, specifically regarding the period to which services relate and the recognition of revenue from membership offers including discounted or free periods.

Notes 4 and 7        The choice of valuation methodology and the inputs and assumptions used to calculate the initial fair value for new share-based incentives granted and the rate at which the related deferred tax asset is measured. The key estimates used in calculating the fair value of the share-based incentives are the fair value of Company's shares at the grant date, expected share price volatility, risk-free interest rate, expected dividends, and weighted average expected life of the instrument. In respect of share-based incentives granted to employees, the number of share-based incentives that are expected to vest is based upon estimates of the number of employees that will forfeit their awards through leaving the Group and the likelihood of any non-market performance conditions being satisfied. Management regularly performs a true-up of the estimate of the number of shares that are expected to vest; this is dependent on the anticipated number of leavers.

 
3   Operating segments

The Group determines and presents operating segments based on internal information that is provided to the Chief Executive Officer, who is the Group's Chief Operating Decision Maker.

The Group's reportable segments are as follows:

·      The Agency segment which provides resale and lettings property advertising services on Rightmove's platforms; and

·      The New Homes segment which provides property advertising services to new home developers and housing associations on Rightmove's platforms.

The Other segment which represents activities under the reportable segments threshold comprises overseas and commercial property advertising services and non-property advertising services which include our third party and consumer services as well as data and valuation services.

Management monitors the business segments at a revenue and trade receivables level separately for the purpose of making decisions about resources to be allocated and of assessing performance. All revenues in all periods are derived from third parties and there are no inter-segment revenues.

Operating costs, financial income, financial expenses and income taxes in relation to the Agency, New Homes and the Other segment are managed on a centralised basis at a Rightmove Group Limited level and as there are no internal measures of individual segment profitability, relevant disclosures have been shown under the heading of Central in the table overleaf. 

(1) Operating profit is stated after the charge for depreciation and amortisation.
(2) Operating profit for the six months ended 30 June 2017 includes share-based payments charge of £2,714,000                                        (30 June 2016: £1,957,000) and NI charge on share-based incentives of £736,000 (30 June 2016: credit of £218,000).
(3) The only segment assets that are separately monitored by the Chief Operating Decision Maker relate to trade receivables net of any associated provision for impairment. All other segment assets are reported on a centralised basis.
(4) These adjustments reflect the reclassification of credit balances in accounts receivable and debit balances in accounts payable made on consolidation for statutory accounts purposes.
(5) Capital expenditure consists of additions of property, plant and equipment and intangible assets (excluding goodwill and intangibles on the acquisition of The Outside View Analytics Limited).
(6) Operating profit for the year ended 31 December 2016 includes share-based payments charge of £4,142,000 and NI charge on share-based incentives of £451,000.

4   Share-based payments
 

The Group operates share-based incentive schemes for executive directors and employees. Since flotation, the Company has awarded share options under the Rightmove Unapproved Executive Share Option Plan (Unapproved Plan) and the Rightmove Approved Executive Share Option Plan (Approved Plan). The Group also operates a Savings Related Share Option Scheme (Sharesave Plan), a Deferred Share Bonus Plan (DSP) and Performance Share Plan (PSP) and in November 2014, the Rightmove Share Incentive Plan (SIP) was established.

All share-based incentives are subject to a service condition. Such conditions are not taken into account in the fair value of the service received. The fair value of services received in return for share-based incentives is measured by reference to the fair value of share-based incentives granted. The estimate of the fair value of the share-based incentives is measured using either the Monte Carlo or Black Scholes pricing model as is most appropriate for each scheme.
 

During 2013 the Group amended the rules of the Unapproved Plan to enable such awards to be net settled whereby the number of shares released and sold to satisfy the award is equivalent to the gain due to the option holder. Consequently no proceeds are received on exercise of unapproved share options.

The total share-based payments charge for the six months ended 30 June 2017 relating to all share-based incentive plans was £2,714,000 (2016: £1,957,000).

NI is being accrued, where applicable, at a rate of 13.8%, which management expects to be the prevailing rate when the awards are exercised, based on the share price at the reporting date. The total NI charge for the six months ended 30 June 2017 relating to all awards was £736,000 (2016: credit of £218,000). The share price at 30 June 2017 was £42.50 (30 June 2016: £36.48).

Approved and Unapproved Plans

There has been no award of share options since 5 March 2010.

Performance Share Plan (PSP)

The PSP permits awards of nil cost options or contingent shares which will only vest in the event of prior satisfaction of a performance condition.

34,720 PSP awards were made on 1 March 2017 (the Grant Date) subject to Earnings Per Share (EPS) and Total Shareholders Return (TSR) performance. A further 3,457 awards were made to Peter Brooks-Johnson on 9 May 2017 to bring his 2017 PSP award in line with his Chief Executive Officer salary. Performance for all 2017 awards will be measured over three financial years (1 January 2017 - 31 December 2019). The vesting in March and May 2020 (Vesting Date) of 25% of the 2017 PSP award will be dependent on a relative TSR performance condition measured over a three year performance period and the vesting of the 75% of the 2017 PSP award will be dependent on the satisfaction of an EPS growth target measured over a three year performance period. The PSP awards have been valued using the Monte Carlo model for the TSR element and the Black Scholes model for the EPS element and the resulting charge is being spread over the three year period between Grant Date and Vesting Date.

PSP award holders are entitled to receive dividends accruing between the Grant Date and the Vesting Date and this value will be delivered in shares.

Deferred share bonus plan (DSP)

In March 2009 a DSP was established which allows executive directors and other selected senior management the opportunity to earn a bonus determined as a percentage of base salary settled in nil cost deferred shares. The award of shares under the plan is contingent on the satisfaction of pre-set internal targets relating to underlying drivers of long-term revenue growth (the Performance Period). The right to the shares is deferred for two years from the date of the award (the Vesting Period) and potentially forfeitable during that period should the employee leave employment. The deferred share awards have been valued using the Black Scholes model and the resulting share-based payments charge is being spread evenly over the combined Performance Period and Vesting Period of the shares, being three years.

Following the achievement of 92% of the 2016 internal performance targets, 38,416 nil cost deferred shares were awarded to executives and senior management on 1 March 2017 with the right to the release of the shares deferred until March 2019.

Share Incentive Plan (SIP)

In November 2014, the Group established the Rightmove Share Incentive Plan (SIP). Employees were offered 50 free shares (2016: 50) subject to a three year service period (the Vesting Period), with effect from 1 January 2017. The SIP awards have been valued using the Black Scholes model and the resulting share-based payments charge spread evenly over the Vesting Period of three years. The SIP shareholders are entitled to a dividend paid in cash over the Vesting Period.

The Rightmove Employees' Share Trust (EBT) used surplus cash held by the EBT to purchase 20,000 shares in December 2016 to fund the share requirements of the SIP. These shares were subsequently transferred into the SIP Trust in 2017.

5   Earnings per share (EPS)

Weighted average number of ordinary shares (basic)
 

Weighted average number of ordinary shares (diluted)

For diluted EPS, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive shares. The Group's potential dilutive instruments are in respect of share-based incentives granted to employees, which will be settled by ordinary shares held by the EBT, SIP Trust and shares held in treasury.
 

Underlying EPS is calculated by taking basic earnings for the year and adding back the charge for share-based payments and the charge for NI on share-based incentives but without any adjustment to the tax charge in respect of these items. A reconciliation of the basic earnings for the period to the underlying earnings is presented below:
 

6   Dividends

Company dividends
Dividends declared and paid by the Company were as follows:
 

After the period end an interim dividend of 22.0p (2016: 19.0p) per qualifying ordinary share being £20,219,000 (2016: £17,936,000) was proposed by the Board of directors.

The 2016 final dividend paid on 2 June 2017 was £29,507,000 (2015 final dividend: £25,442,000) being a difference of £(189,000) compared to that reported in the 2016 Annual Report which was due to a decrease in the ordinary shares entitled to a dividend between 31 December 2016 and the final dividend record date of 5 May 2017.

The terms of the EBT provide that dividends payable on the ordinary shares held by the EBT are waived.

No provision was made for the interim dividend in either period and there are no income tax consequences.
 

7   Taxation

The income tax expense of £16,792,000 (2016: £15,942,000) is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year applied to the profit before tax for the six month period. The Group's consolidated effective tax rate for the six months ended 30 June 2017 was 19.2% (2016: 19.8%). The difference between the standard rate of 19.3% and the effective rate at 30 June 2017 is attributable to a prior year adjustment of 0.2% in respect of tax relief, offset by disallowable expenditure of 0.1%.

The deferred tax asset of £7,424,000 (2016: £6,791,000) is presented net on the balance sheet in so far as a right of offset exists. The deferred tax asset of £7,455,000 at 30 June 2017 (2016: £6,840,000) is in respect of equity settled share-based incentives and depreciation in excess of capital allowances. The deferred tax asset arising on equity settled share-based incentives was recognised in profit or loss to the extent that the related equity settled share-based payments charge was recognised in the statement of comprehensive income. The deferred tax liability of £31,000 at 30 June 2017 (2016: £49,000) is in respect of the intangible asset recognised on acquisition of The Outside View Analytics Limited.

A reduction in the UK corporation tax rate from 21% to 20% (effective from 1 April 2015) was substantively enacted on 2 July 2013. Further reductions to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were substantively enacted on                         26 October 2015, and an additional reduction to 17% (effective 1 April 2020) was substantively enacted on 6 September 2016. This will reduce the Group's future tax charge accordingly. The deferred tax asset at 30 June 2017 has been calculated based on the rate of 19% which represents the average expected rate at which this asset will reverse in the future.

8   Trade and other receivables
 

9   Trade and other payables
 

10   Reconciliation of movement in capital and reserves

Share buy back
In June 2007, the Company commenced a share buyback programme to purchase its own ordinary shares. The total number of shares bought back in the six months to 30 June 2017 was 1,039,297 (2016: 1,042,915 shares) representing 1.1% (2016: 1.1%) of the ordinary shares in issue (excluding shares held in treasury). All the shares bought back in the period were cancelled. The shares were acquired on the open market at a total consideration (excluding costs) of £42,490,000 (2016: £40,527,000). The maximum and minimum prices paid were £43.00 (2016: £42.50) and £38.48 (2016: £33.11) per share respectively.
 

Own shares held - £000

Own shares held - number of shares

(a) EBT shares reserve

This reserve represents the cost of own shares acquired by the EBT less any exercises of share-based incentives. No shares were issued as a result of rolled up dividend payments in relation to PSP shares (2016: 97).

At 30 June 2017, the EBT held 292,962 (2016: 361,133) ordinary shares in the Company of £0.01 each, representing 0.3% (2016: 0.4%) of the ordinary shares in issue (excluding shares held in treasury). The market value of the shares held by the EBT at 30 June 2017 was £12,451,000 (2016: £13,174,000).

(b) SIP shares reserve

In November 2014, the Group established the Rightmove SIP Trust SIP. This reserve represents the cost of acquiring shares less any exercises or releases of SIP awards. On 3 January 2017 employees of the Group were offered 50 free shares (4 January 2016: 50) subject to a three year service period.

At 30 June 2017 the SIP Trust held 68,750 (2016: 50,750) ordinary shares in the Company of £0.01 each, representing 0.07% (2016: 0.05%) of the ordinary shares in issue (excluding shares held in treasury). The market value of the shares held in the SIP Trust at the period end was £2,922,000 (30 June 2016: £1,851,000).

(c) Treasury Shares

This represents the cost of acquiring shares held in treasury less any exercises of share-based incentives. These shares were bought back in 2008 at an average price of £4.76 and may be used to satisfy certain share-based incentive awards. An additional 3,058 shares were issued as a result of rolled up dividend payments in relation to performance shares (2016: 911).

Other reserves

This represents the Capital Redemption Reserve in respect of own shares bought back and cancelled. The movement in other reserves of £10,000 (2016: £10,000) comprises the nominal value of ordinary shares cancelled during the period.
 

Retained earnings

The loss on exercise of share-based incentives is the difference between the value that the shares held by the EBT and treasury shares were originally acquired at and the exercise price at which share-based incentives were exercised during the period.
 

11 Related parties

Inter-group transactions with subsidiaries
During the period Rightmove plc was charged interest of £107,000 (2016: £315,000) by Rightmove Group Limited in respect of balances owing under the inter-group loan agreement dated 30 January 2008. As at 30 June 2017 the balance owing under this agreement was £29,153,000 (2016: £29,279,000) including capitalised interest.

On 30 May 2017 Rightmove Group Limited declared an interim dividend of 55p per ordinary share to the Company. The dividend of £71,170,000 was settled via a reduction in the inter-group loan balance owed by Rightmove plc to Rightmove Group Limited. Rightmove Group Limited also declared a dividend in specie of £741,000 (2016: £517,000), representing the cost of the SIP shares transferred from the EBT to the SIP.

Inter-group transactions between subsidiaries

Following its acquisition on 31 May 2016, The Outside View Analytics Ltd became a related party to Rightmove Group Limited. Since acquisition Rightmove Group Limited has settled liabilities on behalf of The Outside View Analytics Ltd and the balance owing under an inter-group loan agreement dated 13 June 2016 was £23,000 as at 30 June 2017 (2016: nil).

Transactions with key management staff

There were no transactions with key management in any period.

INDEPENDENT REVIEW REPORT TO RIGHTMOVE PLC 

Conclusion 

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 which comprises the Condensed Consolidated Interim Statement of Comprehensive Income, Condensed Consolidated Interim Statement of Financial Position, Condensed Consolidated Interim Statement of Cash Flow and Condensed Consolidated Interim Statement of Changes in Shareholders' Equity and the related explanatory notes. 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").   

Scope of review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.

Directors' responsibilities 

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.  As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the EU.  The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU. 

Our responsibility 

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. 

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the DTR of the UK FCA.  Our review has been undertaken so that we might state to the Company those matters we are required to state to it in 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 for our review work, for this report, or for the conclusions we have reached. 

K Wightman

for and on behalf of KPMG LLP 

Chartered Accountants 

Altius House

One North Fourth Street

Milton Keynes, MK9 1NE  

28 July 2017

ADVISERS AND SHAREHOLDER INFORMATION
 

*Shareholder enquiries
The Company's registrar is Capita Asset Services. They will be pleased to deal with any questions regarding your shareholding or dividends. Please notify them of your change of address or other personal information. Their address details are:

Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU

Capita Asset Services is a trading name of Capita Registrars Limited.

Capita shareholder helpline: 0371 664 0300 (calls cost 10p per minute plus network extras) (Overseas: +44 20 8639 3399)
Email: shareholderenquiries@capita.co.uk

Share portal: www.capitashareportal.com

Through the website of our registrar, Capita Asset Services, shareholders are able to manage their shareholding online and facilities include electronic communications, account enquiries, amendment of address and dividend mandate instructions.