REG - Rightmove Plc - Final Results <Origin Href="QuoteRef">RMV.L</Origin> - Part 3
23/02/2018 07:05
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pages 33
to 36 and demonstrates a range of business expertise that provides the right
mix of skills and experience given the size of the Group.
Senior Independent Director The role of the Senior Independent Director is to:
· act in an advisory capacity to the Chairman;
· deputise for the Chairman if required;
· serve as an intermediary for other directors when necessary;
· be available to shareholders if they have concerns which they
have not been able to resolve through the normal channels of the Chairman and
Chief Executive Officer or other executive directors for which such contact is
inappropriate; and
· conduct an annual review of the performance of the Chairman and,
in the event it should be necessary, convening a meeting of the non-executive
directors.
Company Secretary The Company Secretary:
· monitors compliance with appropriate Board procedures;
· advises the Board on corporate governance matters;
· assists the Chairman in ensuring that all the directors have full
and timely access to relevant information; and
· assists the Chairman by organising directors' induction and
training programmes.
The Company Secretary also acts as Secretary to the Audit, Remuneration and
Nomination Committees.
The appointment and removal of the Company Secretary is a matter for Board
approval.
Board diversity and experience
We are committed to a Board comprised of directors from different backgrounds
with diverse and relevant experience, perspectives, skills and knowledge. We
believe that diversity, including gender diversity, amongst directors
contributes towards a high performing and effective Board and business, so we
strive to maintain the optimal balance. We endorse both a meritocratic Board
appointment process and balanced gender representation on the Board.
At 31 December 2017, 38% of Board members were female and following the
appointment of Lorna Tilbian, that proportion has risen to 44% of Board
members. Following the retirement of Ashley Martin in May the proportion of
female Board members will rise to 50%. We remain committed to recruiting the
best people and appropriate talent for the business whilst seeking to maintain
as near 50:50 gender balance on the Board as possible.
The range of skills and experience the Board considers necessary to deliver
Rightmove's business strategy, and which were identified in the Board Strategy
Review, includes:
· Finance and governance
· Voice of the customer and property market
· Technology and innovation
· Voice of the consumer and retail
· Digital marketing and online media, and
· Corporate transactions.
Board independence
The Code provides that the Board should identify in the Annual Report each
non-executive director that it considers to be independent. That is, to
determine whether the director is independent in character and judgement and
whether there are relationships or circumstances which are likely to affect,
or could appear to affect, the director's judgement.
The Board reviews non-executive director independence on an annual basis
taking into account such factors as their contribution to unbiased and
independent debate during meetings. The Board considers that there is an
appropriate balance between the executive and non-executive directors and that
all non-executive directors are fully independent of management and
independent in character and judgement. Ashley Martin will have completed nine
years' service as a non-executive director in June 2018 and will retire from
the Board following the 2018 AGM. The Nomination Committee carefully
considered the independence of Lorna Tilbian before her appointment to the
Board and details of that process is set out in the Nomination Committee
report on pages 54 to 55.
To safeguard their independence, a director is not entitled to vote on any
matter in which they may be conflicted or have a personal interest. Where
necessary, directors are required to absent themselves from a meeting of the
Board while such matters are being discussed. In cases of doubt, the Chairman
of the Board is responsible for determining whether a conflict of interest
exists.
The Chairman is also the Chairman of two other publically listed companies.
The executive directors do not hold any other non-executive directorships or
commitments requiring disclosure under the Code.
Board tenure as at 31 December 2017
Balance of directors as at 31 December 2017
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(http://www.rns-pdf.londonstockexchange.com/rns/7131F_1-2018-2-22.pdf)
Re-election to the Board
Directors are appointed and may be removed in accordance with the Articles of
Association of the Company and the provisions of the Companies Act. All
directors are subject to election at the first AGM following their appointment
and in accordance with the Code, all directors will seek re-election at the
2018 AGM with the exception of Ashley Martin, who will retire from the Board
on that date.
Board and Committee membership and attendance
The membership of the Committees of the Board and attendance at Board and
Committee meetings for the year under review are set out in the table below:
Board Remuneration Committee Audit Committee Nomination Committee
Total meetings 7 6 5 3
Scott Forbes 7 - - 3
Peter Brooks-Johnson 7 - - -
Robyn Perriss 7 - -
Ashley Martin 7 - 5 3
Peter Williams 7 6 5 3
Rakhi Goss-Custard 7 6 4((1)) 3((2))
Jacqueline de Rojas 7 3((3)) - 2((2))
Andrew Findlay 5((4)) - 3((4)) 2((4))
-
(1) Rakhi Goss-Custard was a member of the Audit Committee until 9 May 2017
and attended two further meetings as a guest.
(2) Rakhi Goss-Custard and Jacqueline de Rojas joined the Nomination Committee
on 9 May 2017 and attended all meetings after that date. Rakhi attended one
meeting before that date as a guest.
(3) Jacqueline de Rojas joined the Remuneration Committee on 9 May 2017 and
attended all meetings after that date.
(4) Andrew Findlay joined the Board, Audit and Nomination Committees on 1 June
2017 and attended all meetings after that date.
(5)
In addition to the above meetings, the Chairman conducts meetings with the
non-executive directors without the executive directors being present when
required. Peter Williams, the Senior Independent Director, chaired a meeting
in December 2017 of the non-executive directors at which the performance of
the Chairman was also reviewed, without the presence of the Chairman.
Indemnification of directors
The Articles of Association of the Company allow for a qualifying third party
indemnity provision between the Company and its directors and officers, which
remains in force at the date of this report. The Group has also arranged
directors' and officers' insurance cover in respect of legal action against
the directors. Neither our indemnity nor the insurance provides cover in the
event that a director is proven to have acted dishonestly or fraudulently.
The Group has a Dealing Code setting out the process and timing for dealing in
shares, which is compliant with the Market Abuse Regulation. The Dealing Code
applies to all directors, who are persons discharging managerial
responsibility, and other insiders.
Shareholder relations
The Board is accountable to shareholders for the performance and activities of
the Group and welcomes opportunities to engage with shareholders.
Within the terms of the regulatory framework, the directors have conducted
regular and open dialogue with shareholders through ongoing meetings with
institutional investors and research firms to discuss strategy and operational
and financial performance. Contact in the UK is principally with the Chief
Executive Officer and the Finance Director. The Chairman attends selected
investor meetings in the UK and the USA. The Senior Independent Director is
also available to shareholders if they wish to supplement their communication,
or if contact through the normal channels is inappropriate.
The Remuneration Committee proactively engaged with the Company's top
shareholders ahead of setting the Remuneration Policy which was approved at
the 2017 AGM and again in late 2017 when setting executive director base
salary levels for 2018.
The Board is kept informed of the views and opinions of those with an interest
in the Company's shares through reports from the Chief Executive Officer and
the Finance Director, as well as reports from the Company's brokers, UBS and
Numis.
Shareholders are also kept up to date with the Group's activities through the
half year results statement and Annual Report and the investor relations
section of its website, at plc.rightmove.co.uk, which provides details of all
the directors, the financial calendar, latest news including financial
results, investor presentations and Stock Exchange announcements.
Annual General Meeting
The AGM provides an opportunity for shareholders to vote on aspects of the
Company's business, meet the directors and ask them questions. The AGM will be
held on 4 May 2018 at the offices of UBS Limited at 5 Broadgate, London EC2M
2QS.
The Company will arrange for the Annual Report and related papers to be
available on the Company's corporate website at plc.rightmove.co.uk or posted
to shareholders (where requested) at least 20 working days before the AGM.
The Company continues to comply with the Code with the separation of all
resolutions put to shareholders. The Company proactively encourages
shareholders to vote at general meetings by providing electronic voting for
shareholders who wish to vote online and personalised proxy cards to
shareholders electing to receive them, ensuring that all votes are clearly
identifiable. The Company presently takes votes at general meetings on a
show of hands on the grounds of practicality, owing to the limited number of
shareholders in attendance. All proxy votes are counted and the level of proxy
votes, including votes withheld, for each resolution are reported after each
resolution and published on the Company's website.
GOVERNANCE- Corporate governance
Audit Committee report
Dear Shareholder
I am pleased to present the 2017 report of the Audit Committee (the
Committee).
This report provides an overview of the principal activities of the Committee
and details how it has discharged its responsibilities during the year.
The Committee is an essential part of Rightmove's governance framework to
which the Board has delegated oversight of the accounting, financial reporting
and internal control processes, the outsourced internal audit function and the
relationship with the external auditors. The key responsibilities are set out
on pages 39 to 40 of the Corporate Governance Report.
The Committee has overseen a detailed programme of work in 2017 in relation to
its remit, including agreeing the scope of work delivered by the
PricewaterhouseCoopers LLP (PwC) outsourced internal audit function, known as
Rightmove Assurance. The role of Rightmove Assurance has become well
established throughout the organisation and continues to provide insight and
value in both core financial control areas and the broader business
operations.
The Committee has given particular focus this year to the readiness of the
Group to meet the requirements of the forthcoming General Data Protection
Regulation (GDPR) which becomes effective in May 2018. The business has
established a comprehensive GDPR programme, coordinated by a full-time project
manager, and is on track to be substantially compliant by May 2018. There has
also been continued focus on the progress of the Disaster Recovery and
Business Continuity Plans, including a planned closure of the Milton Keynes
office which took place during December 2017. The oversight of financial
controls continues to be a key area of work of the Committee. As a result of
the breadth of the reviews this year, the Committee has had the benefit of
exposure to the broader organisation, which has brought added insight to the
topics under discussion.
Looking forward to the next 12 months, the Committee will continue to focus on
the audit, assurance and risk processes within the Group, including a review
of the control effectiveness of key billing processes, a counter fraud
workshop and an update on the progress towards GDPR compliance.
I have greatly enjoyed my time as Chairman of the Audit Committee over the
last nine years, and thank my fellow Committee members for their wisdom and
support over this period. Andrew Findlay will succeed me as Chairman of the
Audit Committee at the end of the 2018 Annual General Meeting.
I will be available at the AGM to answer any questions about the work of the
Committee.
Written terms of reference that outline the Committee's authority and
responsibilities are published on the investor relations section of the
Group's website at plc.rightmove.co.uk and are available in hard copy form
from the Company Secretary.
Ashley Martin Chairman of the Audit Committee
Committee membership and meetings
All the members of the Audit Committee are Independent Non-Executive Directors
in accordance with provision C3.1 of the UK Corporate Governance Code (the
Code) and the Board has determined that both Andrew Findlay and Ashley Martin
have recent and relevant financial experience as required by the Code. Ashley
Martin is a qualified accountant and was formerly Global Chief Financial
Officer of Engine Holding LLC and Group Finance Director of Rok plc. Andrew
Findlay and Peter Williams are also qualified accountants and Andrew Findlay
is currently Chief Financial Officer of easyJet plc. Andrew Findlay will
succeed Ashley Martin as Chair of the Audit Committee at the end of the 2018
Annual General Meeting. As a whole, the Committee has competence relevant to
the sector in which the Group operates through the digital experience of
Andrew Findlay and Peter Williams, and the media experience of Ashley Martin.
Biographies of the members of the Committee are set out on pages 33 to 36.
Number of meetings
Committee members Eligible to attend Attended
Ashley Martin (Chairman) 5 5
Peter Williams 5 5
Andrew Findlay((1)) 3 3
Rakhi Goss-Custard((2)) 2 4
(1) Andrew Findlay was appointed to the Committee on 1 June 2017.
(2) Rakhi Goss-Custard retired from the Committee on 9 May 2017 and
attended two further meetings as a guest.
The Committee met five times in 2017 and attendance of the members is shown
above. In order to maintain effective communication between all relevant
parties, the Committee invited the Finance Director and Head of Finance,
together with appropriate members of the management team, and the external and
internal auditors, to meetings as necessary. The Committee sets aside time
periodically to seek the views of the external auditor, in the absence of
management. The external auditor has direct access to the Chairman to raise
any concerns outside formal Committee meetings. The Committee also meets
separately with the internal auditor during the year, and in between meetings
the Chairman keeps in touch with the Finance Director and external audit
partner as well as other members of the management team.
After each meeting, the Chairman reports to the Board on the main issues
discussed by the Committee and minutes of the Committee meetings are
circulated to the Board once approved.
Audit Committee effectiveness
The effectiveness of the operation of the Committee was reviewed in December
2017 through a questionnaire completed by all members of the Committee which
focused on areas such as the appropriateness of the focus of the Committee,
how it operates and professional development of the members. This was
supplemented with responses from the effectiveness review of the Board and its
committees where each Board member responded to key questions on Board
performance and commented generally on the performance of Board Committees.
The feedback on the Committee was positive and confirmed that the Committee is
effective and provides appropriate challenge.
Financial reporting
The Committee is responsible for reviewing the appropriateness of the Group's
half-year reporting and annual financial statements. The Committee does this
by considering, among other things, the accounting policies and practices
adopted by the Group; the correct application of applicable reporting
standards and compliance with broader governance requirements; the approach
taken by management to the key judgmental areas of reporting and the comments
of the external auditor on management's chosen approach.
Significant issues
The key significant issue in the context of the 2017 Consolidated Financial
Statements is revenue recognition. The Committee considers this area to be
significant taking into account the level of materiality and degree of focus
given by management, and discussed the issue in detail to ensure that the
approach taken was appropriate. In relation to the Company Financial
Statements, the key significant issue is the recoverability of the investment
by the Company in Rightmove Group Limited, due to its materiality in the
context of the total assets of the Company.
Issue Committee review
Revenue
As more fully described on page 111 the majority of the Group's revenue is During the year, management performed data analytics procedures on the amounts
derived from subscriptions for core listing fees and advertising products on billed to the two largest customer groups (Agency and New Homes, together 92%
Rightmove's platforms. The Group recognises this revenue over the period of of revenue). This included investigating anomalies and outliers identified and
the contract or the point at which advertising products are used. reporting to the Committee in this regard.
Revenue is a prime area of audit focus and KPMG evolved their approach in this
area this year as a result of management performing the revenue data analytics
procedures that had previously been part of the audit approach. KPMG designed
and performed new data analytics procedures which covered all revenue streams
matching customer billings to cash, and results of this work were reported to
the Committee.
The Committee discussed any anomalies with management and with KPMG in
relation to the data analytics work they performed. The Committee was
satisfied with the explanations provided and conclusions reached.
The approach to data analytics performed by KPMG expands their audit coverage
to 100% of revenue, which together with the data analytics performed by
management has led to increased overall assurance in this area.
The data analytics work above is supplemented by a detailed analytical review
by management of margins, and ARPA together with a comprehensive analysis on
the treatment of discounted and free member offers.
Investment by Rightmove plc in Rightmove Group Limited (RMGL)
The investment by the Company in RMGL is carried at cost, adjusted for
subsequent additions to the investment. Cost was initially assessed as at 28
January 2008 being the date that Rightmove plc became the parent company of The Committee reviewed the assumptions made by management, including the
RMGL. Share-based payment awards to RMGL employees are accounted for as a strong track record of profitable growth and cash generation by Rightmove
deemed capital contribution by Rightmove plc to RMGL of the value of the Group Limited. Furthermore, the Rightmove plc share price has increased
share-based payment charge for those awards, increasing the value of the significantly since 2008, resulting in a current market value of c.£4
investment. Further details are provided in note 15 to the financial billion, significantly in excess of the investment carrying value of £0.5
statements. The investment is not considered at risk of material billion. As Rightmove Group Limited is the main trading entity of Rightmove
misstatement or subject to significant judgement, however it is considered a plc, we therefore see no evidence of impairment. The Committee was satisfied
significant risk due to its size in relation to the Company balance sheet. with the assumptions made.
The Committee also reviewed and considered the following areas due to their
materiality and the application of judgement. However, it considered them to
be stable in nature and therefore did not classify them as significant issues
in the context of the 2017 financial statements.
Issue Committee review
Share-based payment charges and related deferred tax asset The Committee reviewed the judgements, assumptions and estimates made by
management as part of the review of the financial statements to ensure that
they were appropriate. The Committee also obtained the external auditors'
assessment of the calculations. The results of this review were that the
Committee was satisfied with the calculations made.
Going concern and viability statements In assessing the validity of the statements detailed on pages 25 and 107 to
108, the Committee reviewed the work undertaken by management to assess the
Group's resilience to the Principal Risks under various scenarios. The
Committee gained appropriate assurance that sufficient rigour was built into
the process to assess going concern and viability over the designated periods.
Fair balanced and understandable
One of the key governance requirements is for the Annual Report and the
financial statements, taken as a whole, to be fair, balanced and
understandable and provide the information necessary for shareholders to
assess the Group's position and performance, business model and strategy.
The Committee was provided with an early draft of the Annual Report in order
to assess the strategic direction and key messages being communicated.
Feedback was provided by the Committee in advance of the February Board
meeting, highlighting any areas where the Committee believed further clarity
was required. The draft report was then amended to incorporate this feedback
prior to being tabled at the Board meeting for final comment and approval.
When forming its opinion, the Committee reflected on the information it had
received and its discussions throughout the year. In particular, the Committee
considered:
Is the report fair? · Is the whole story presented and has any sensitive material been
omitted that should have been included?
· Are key messages in the narrative aligned with the KPIs and are
they reflected in the financial reporting?
· Are the KPIs being reported consistently from year to year?
· Is the reporting on the business areas in the narrative reporting
consistent with the financial reporting in the financial statements?
Is the report balanced? · Do you get the same messages when reading the front end and back
end of the Annual Report independently?
· Are threats identified and appropriately highlighted?
· Are the alternative performance measures explained clearly with
appropriate prominence?
· Are the key judgements referred to in the narrative reporting and
significant issues reported in this Committee Report consistent with
disclosures of key estimation uncertainties and critical judgements set out in
the financial statements?
· How do these judgements compare with the risks that KPMG are
planning to include in their Auditors' Report?
Is the report understandable? · Is there a clear and cohesive framework for the Annual Report?
· Are the important messages highlighted appropriately throughout
the Annual Report?
· Is the Annual Report written in easy to understand language and
are the key messages clearly drawn out?
· Is the Annual Report free of unnecessary clutter?
Following its review, the Committee is of the opinion that the 2017 Annual
Report, taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group's position,
performance, business model and strategy.
External audit
The Committee has primary responsibility for overseeing the relationship with,
and performance of, the external auditor. The Committee approves the terms of
engagement and fees of the external auditor, ensuring they have appropriate
audit plans in place and that an appropriate relationship is maintained
between the Group and the external auditor.
The Committee is responsible for making recommendations to the Board in
relation to the appointment of the external auditor. KPMG LLP was re-appointed
as the Group's auditor in 2013 following an audit tender, and in accordance
with the EU Audit Directive implemented in 2016, the Group will be required to
put the external audit contract out to tender by 2023. The external auditor is
required to rotate the audit partner responsible for the Group audit every
five years in order to ensure independence. The lead audit partner, Karen
Wightman has been in place for five years, and therefore in accordance with
the FRC's Ethical Standard 3 (Revised), Anna Jones will take over from Karen
Wightman for the financial year ending 31 December 2018.
The Committee approved the fees of KPMG for the year as set out in Note 6 of
the financial statements.
Independence and non-audit services
The Committee has policies and procedures in place in relation to the
provision of non-audit services by the external auditor and the non-audit fee
policy was reviewed by the Committee during the year. The non-audit fee policy
ensures that the Group benefits in a cost-effective manner from the cumulative
knowledge and experience of its auditor, whilst also ensuring that the auditor
maintains the necessary degree of independence and objectivity.
Non-audit service Policy
Assurance-related services directly related to the audit for example, review The half year review is approved by the Committee as part of the annual Audit
of the half-year financial statements. Plan. Management is given the authority to incur additional non-audit services
of up to £15,000 in any financial year without prior approval of the
Committee.
Thereafter all additional fees are to be referred to the Audit Committee in
advance, subject to a cap on permitted non-audit fees of 70% of the average
audit fees over the three preceding financial years.
Permitted non-audit services
Including but not limited to: accounting advice, work related to mergers,
acquisitions, disposals, joint ventures or circulars; and corporate governance
advice.
Prohibited services Prohibited, in accordance with the EU Audit Reform.
In line with the EU Audit Reform, these are services where the auditor's
objectivity and independence may be compromised. Prohibited services are
detailed in the FRC Revised Ethical Standard 2016 and include tax services,
accounting services, internal audit services and valuation services.
The level of non-audit fees as a proportion of the audit fee has typically
been low at Rightmove. During the year, KPMG charged the Group £30,000 for
non-audit services, representing less than 21% of the 2017 audit fee. Of this,
£18,000 relates to the half year review, and £10,000 for a review of the
Group's gender pay gap calculations and methodology. Further details of these
services can be found in Note 6 to the financial statements.
Effectiveness and reappointment
The Committee considered the quality and effectiveness of the external audit
process, in light of the FRC's Practice Aid for Audit Committees (May 2015).
The effectiveness of the external audit process is dependent on a number of
factors. These include the quality, continuity, experience and training of
audit personnel, business understanding, technical knowledge and the degree of
rigour applied in the review processes of the work undertaken, communication
of key accounting and audit judgements, together with appropriate audit risk
identification at the start of the audit cycle.
The Committee reviewed the report of the FRC's Audit Quality Review team
relating to KPMG as a firm and discussed the actions taken by KPMG in light of
the recommendations, including in relation to the firm's approach to the audit
of revenue.
The Committee evaluated the effectiveness of the audit process together with
input from management. Areas the Committee considered in this review included
the quality of audit planning and execution, engagement with the Committee and
management, quality of reporting and capability and experience of the audit
team. For the 2017 financial year, the Committee was satisfied that there had
been appropriate focus and challenge on the primary areas of audit risk and
concluded that the performance of KPMG remained efficient and effective.
Internal audit
The Group has an Internal Audit function, known as Rightmove Assurance which
is fully outsourced to PwC. The aim of Rightmove Assurance is to provide
independent and objective assurance on the adequacy and effectiveness of
internal control, risk management and governance processes. This includes
assurance that underlying financial controls and processes are working
effectively, as well as specialist operational and compliance reviews that
focus on emerging risks in new and evolving areas of the business. The
Rightmove Assurance plan for 2017 was approved by the Audit Committee and
covered a broad range of core financial and operational processes and
controls, focusing on specific risk areas. Specialist reviews were undertaken
in the following areas:
· Data privacy, including a readiness assessment in relation to GDPR;
· Cyber maturity assessment, covering technical, process and people
controls. The review also included particular focus on data loss management,
Bring Your Own Device (BYOD) and end point management, corporate network
management and identity and access management;
· Employment taxes;
· Procure to pay cycle and cash management;
· Pre-implementation review of a new HR system; and a
· Payroll controls review.
Reports setting out the principal findings of the Rightmove Assurance reviews
and agreed management actions were discussed by the Committee. The Committee
also reviewed open actions from previous reviews, together with monitoring the
progress by management in completing these actions.
Effectiveness of the internal audit process
The work of Rightmove Assurance provides a key additional source of assurance
and support to management and the Audit Committee on the effectiveness of
internal controls as well as providing guidance and recommendations to further
enhance the internal control environment, and provide specialist insight into
areas of change in the business.
During the year, the Audit Committee undertook a review of the effectiveness
of the Rightmove Assurance function. The evaluation was led by the Committee
Chairman and involved issuing tailored evaluation questionnaires which were
completed by Rightmove management, the external auditors, KPMG, the Committee
and PwC themselves. The evaluation concluded that the Rightmove Assurance
function had an appreciation of the key issues facing the business, was
realistic and robust with audit suggestions and added value to the business.
It included a number of recommendations which were incorporated into the 2017
Rightmove Assurance plan.
Whistleblowing
The Group has a whistleblowing process (including an external confidential
reporting hotline) which enables employees of the Group to raise concerns on
an entirely confidential basis. The Committee receives reports on the
communication within the business of the whistleblowing policy and external
confidential reporting arrangements, and the use of the service including any
whistleblowing incidents and their outcomes.
Internal controls The Board has overall responsibility for the Group's system
of internal controls and has established a framework of financial and other
controls which is periodically reviewed in accordance with the FRC Internal
Control: Guidance to Directors publication for its effectiveness.
The Board has taken, and will continue to take, appropriate measures to ensure
that the chances of financial irregularities occurring are reduced as far as
reasonably possible by improving the quality of information at all levels in
the Group, fostering an open environment and ensuring that the financial
analysis is rigorously applied. Any system of internal control is designed to
manage rather than eliminate the risk of failure to achieve business
objectives and can only provide reasonable and not absolute assurance against
material misstatement or loss.
The Group's management have established the procedures necessary to ensure
that there is an ongoing process for identifying, assessing and managing the
significant risks to the Group. These procedures have been in place for the
whole of the financial year ended 31 December 2017 and up to the date of the
approval of these financial statements and they are reviewed regularly.
Rightmove has an internal audit function, known as Rightmove Assurance, which
is fully outsourced to PwC. Rightmove Assurance provides the Group with
additional independent assurance on the effectiveness of internal controls.
The key elements of the system of internal control are:
· Major commercial, strategic, competitive and financial risks are
formally identified, quantified and assessed, discussed with the Executive
Committee, after which they are considered by the Board;
· A comprehensive system of planning, budgeting and monitoring
Group results. This includes monthly management reporting and monitoring of
performance against both budgets and forecasts with explanations for all
significant variances;
· Clearly defined policies for capital expenditure and investment
exist, including appropriate authorisation levels, with larger capital
projects, acquisitions and disposals requiring Board approval;
· A treasury function which manages cash flow forecasts and cash on
deposit (including counterparty risk);
· An organisational structure with clearly defined lines of
responsibility and delegation of authority, and an embedded culture of
openness where business decisions and their associated risks and benefits are
discussed and challenged;
· A comprehensive disaster recovery plan and business continuity
plan based upon:
· co-hosting of the Rightmove platforms across three separate
locations, which is regularly tested and reviewed;
· the ability of the business to maintain business critical
activities in the event of an incident;
· the capability for employees to work remotely from home or a
third party location in the event of a loss of one of our premises. This was
tested for the Milton Keynes office during the year through a planned full
office closure.
· Regular testing of the security of the IT systems and platforms,
regular backups of key data and ongoing threat monitoring to protect against
the risk of cyber-attack; and
· Whistleblowing and bribery policies of which all employees are
made aware, to enable concerns to be raised either with line management or, if
appropriate, confidentially outside the line management.
Through the procedures outlined above, the Board, with advice from the Audit
Committee, has considered all significant aspects of internal control for the
year and up to the date of this Annual Report. No significant failings or
weaknesses were identified during this review. However, had there been any
such failings or weaknesses, the Board confirms that necessary actions would
have been taken to remedy them.
GOVERNANCE - Corporate governance report
Nomination Committee report
Dear Shareholder
I am pleased to present the report of the Nomination Committee (the Committee)
for 2017.
The Committee's role is to keep the structure, size and composition of the
Board under review with the objective of matching the skills, knowledge and
experience of directors to business requirements. Our priority is to optimise
the Board's performance to enable the Group to prosper, compete effectively
and manage risk in an evolving market.
A copy of the terms of reference of the Committee can be found on the
Company's website at: plc.rightmove.co.uk. These were reviewed and updated
with minor changes during the year.
The Committee fulfilled its terms of reference during 2017 by:
· reviewing the Group organisation and succession plans;
· recommending the appointment of new non-executive directors; and
· conducting internal Board and Committee evaluations. Further
details of the Board evaluation can be found on page 55.
The Committee continued to review Board succession and Andrew Findlay was
appointed as a non-executive director on 1 June 2017, following an external
search by Korn Ferry International (Korn Ferry). Andrew will succeed Ashley
Martin as our Audit Committee Chairman following the 2018 AGM. Lorna Tilbian
joined the Board on 1 February 2018, following her retirement from Numis
Corporation PLC.
The Board currently consists of nine directors including seven non-executive
directors, six of which are considered to be independent. Following the
retirement of Ashley Martin (non-executive director) at the 2018 AGM, the
Board will comprise eight directors (two executive and six non-executive
directors) and equal representation of men and women directors at both
executive and non-executive levels.
I will be available at the AGM to answer any questions about the work of the
Committee.
Scott Forbes Chairman of the Nomination Committee
Composition and attendance at meetings
The Chairman and all the non-executive directors are members of the
Committee. Peter Brooks-Johnson and Robyn Perriss attended meetings by
invitation.
The Committee met three times during the year and attendance at the meetings
is shown on page 43.
Membership
The Committee is comprised entirely of non-executive directors, whose
biographical details can be found on pages 33 to 36. As at 31 December 2017,
all the non-executive directors (five out of six members of the Committee)
were considered by the Board to be independent. The quorum for meetings of the
Committee is two members. At the request of the Committee Chairman, the Chief
Executive Officer is normally invited to attend the meeting to discuss the
annual organisation and succession plan.
The Chairman of the Company may not chair the Committee in connection with any
discussion about the appointment of his successor. In these circumstances, the
Senior Independent Director will take the chair.
Appointments are for a period of up to three years, extendable by no more than
two additional three-year periods, so long as Committee members continue to be
independent.
Principal activities of the Committee during 2017 During the year the
Committee has:
· reviewed the composition and diversity of the Board;
· reviewed the Board committees' composition;
· approved the plans for the organisation and succession of the
executive directors and senior management;
· recommended the implementation of the Board succession plan and the
appointment of Peter Brooks-Johnson as Chief Executive Officer following the
retirement of Nick McKittrick;
· recommended the appointment of two non-executive directors including
consideration of independence in relation to the Code;
· agreed the process for and considered actions based upon the findings
of the Board evaluation;
· considered potential conflicts of interest for non-executive
directors appointed to other boards;
· reviewed and considered actions to address the Group's gender pay
gap; and
· conducted an annual review of its terms of reference.
Board induction and training
All new non-executive directors joining the Board undertake a tailored
induction including meetings with key members of the management team.
Directors are also encouraged to spend a day on the road with a sales director
meeting our customers. New directors receive a comprehensive induction pack
of corporate information and a briefing from the Company Secretary covering
corporate governance, Group policies and relevant regulations.
Individual Board members have access to training and can seek advice from
independent professional advisers, at the Group's expense, where specific
expertise or training is required in furtherance of their duties.
Board succession and independence
At the end of 2016, the Committee confirmed the candidate profile identified
through the Board Strategy review process and initiated the search for a
non-executive director with suitable skills and experience to replace Ashley
Martin, when he retires from the Board and as Audit Committee Chairman in May
2018. Following an external search, facilitated by Korn Ferry, the Committee
recommended the appointment of Andrew Findlay as an experienced Finance
Director with suitable financial skills and experience to Chair the Audit
Committee.
With due consideration to the conclusions of the Board Strategy Review
(externally facilitated by Korn Ferry in 2015), the current Board composition
and the Group's strategic plan, the Committee agreed that a director with a
broader media industry background would benefit the business. Following a
process including Korn Ferry, the Board recruited and then agreed to appoint
Lorna Tilbian as an independent non-executive director, following her
retirement from Numis Corporation PLC (Numis) in December 2017.
As Numis is Rightmove's joint corporate broker together with UBS, the Board is
aware that there may be a perception that a material relationship could exist
or continue to exist that might impair Lorna's independence. Therefore,
Rightmove not only conducted a rigorous review to evaluate Lorna's
independence, as it does for every director, but the Board also sought
independent legal advice to ensure compliance with Code requirements. The
Committee concluded that no material relationship existed with Numis over the
past three years, no material ongoing relationship exists and that Lorna is
independent in character and judgment. In addition to Lorna's media sector
experience, her capital markets experience will be a great asset to Rightmove
and the Board.
The Board considered the primary tests under the Code: whether there is a
material financial relationship between Numis and Rightmove and whether that
relationship would influence Lorna's judgement. Numis Securities receives a
standard commission from Rightmove for the share buyback programme and there
is no retainer or special fees agreement in relation to brokerage or research;
the commission payments of c£100,000 per annum are immaterial to Rightmove.
Lorna retired from the Numis Board in September 2017. The Board carefully
considered Lorna's prior dealings with the Rightmove management team, which
were meetings in the ordinary course of business with our former Chief
Executive Officer. The Board therefore determined that Lorna is independent in
character and judgement and there are no other factors that are likely to
impair her judgement or prevent her from fulfilling her duties and
responsibilities as a non-executive director effectively.
Board effectiveness and evaluation
The Board is committed to undertaking annual reviews of its own performance
and also the performance of its Committees and individual directors.
The Board again completed an internal self-assessment during 2017. Directors
were invited to provide feedback via the Company Secretary on Board and
Committee performance and answer key questions relating to the Board's
strengths, improvements during the year and which business risks and
development opportunities should receive more focus. The whole Board discussed
the feedback at the Committee meeting in December 2017 and concluded that the
Board and its Committees continue to operate effectively with an open and
effective Board dynamic resulting in effective challenge and collaboration
between non-executive and executive directors. The Board also agreed
initiatives to further improve board effectiveness including a greater variety
of business presentations from senior management covering a wide range of
company business operations.
An externally facilitated review of the performance of the Board and its
Committees will be conducted in 2018.
GOVERNANCE - Directors' report
The directors submit their report together with the audited financial
statements for the Company and its subsidiary companies (the Group) for the
year ended 31 December 2017.
Pages 56 to 59, comprise the Directors' Report, which has been drawn up and
presented in accordance with English company law and the liabilities of the
directors in connection with the report shall be subject to the limitations
and restrictions provided by such law.
Rightmove plc (the Company) is incorporated as a public limited company
registered in England number 6426485 with a registered office at Turnberry
House, 30 Caldecotte Lake Drive, Caldecotte, Milton Keynes MK7 8LE.
Strategic Report
The Strategic Report can be found on pages 1 to 32. This report sets out the
development and performance of the Group's business during the financial year,
the position of the Group at the end of the year and a description of the
principal risks and uncertainties facing the Group.
Dividend An interim dividend of 22.0p (2016: 19.0p) per ordinary share was
paid in respect of the half year period on 3 November 2017, to shareholders
on the register of members at the close of business on 6 October 2017. The
directors are recommending a final dividend for the year of 36.0p
(2016: 32.0p) per ordinary share, which together with the interim dividend,
makes a total for the year of 58.0p (2016: 51.0p), amounting to £32,758,000
(2016: £29,696,000). Subject to shareholders' approval at the Annual General
Meeting (AGM) on 4 May 2018, the final dividend will be paid on
1 June 2018 to shareholders on the register of members at the close of
business on 4 May 2018.
Share capital
The shares in issue, including 1,892,456 shares held in treasury (2016:
2,271,725) at the year-end amounted to 93,266,207 (2016: 95,490,266) ordinary
shares of £0.01, with a nominal value of £932,662 (2016: £954,902). The
holders of ordinary shares are entitled to receive dividends as declared from
time to time, and are entitled to one vote per share at general meetings of
the Company. Movements in the Company's share capital and reserves in the year
are shown in Note 22 and Note 23 to the financial statements. Information on
the Group's share-based incentive schemes is set out in Note 24 to the
financial statements. Details of the share-based incentive schemes for
directors are set out in the Directors' Remuneration Report on pages 61 to 94.
Share buyback
The Company's share buyback programme continued during 2017. Of the 10%
authority given by shareholders at the 2017 AGM, a total of 2,224,059
(2016: 2,251,711) ordinary shares of £0.01 each were purchased in the year
to 31 December 2017, being 2.4% (2016: 2.4%) of the shares in issue
(excluding shares held in treasury) at the time the authority was granted. The
average price paid per share was £40.83 (2016: £39.12) with a total
consideration paid (excluding all costs) of £90,809,000
(2016: £88,083,000). Since the introduction of the new parent company in
January 2008, a total of 38,639,201 shares had been purchased as at 31
December 2017 of which 1,892,456 are held in treasury with the remainder
having been cancelled. A resolution seeking to renew this authority will be
put to shareholders at the AGM on 4 May 2018.
Shares held in trust
As at 31 December 2017, 263,767 (2016: 343,275) ordinary shares of £0.01
each in the Company were held by The Rightmove Employees' Share Trust (EBT)
for the benefit of Group employees. These shares had a nominal value at
31 December 2017 of £2,638 (2016: £3,433) and a market value of
£11,870,000 (2016: £13,398,000). The shares held by the EBT may be used to
satisfy share-based incentives for the Group's employee share plans. During
the year, 77,008 (2016: 50,082) shares were transferred to Group employees
following the exercise of share-based incentives. Additionally, 17,500 shares
were purchased by the EBT for transfer to the Rightmove Share Incentive Plan
Trust (SIP). The terms of the EBT provide that dividends payable on the shares
held by the EBT are waived.
As at 31 December 2017, 67,700 (2016: 50,150) ordinary shares of £0.01
each in the Company were held by the SIP for the benefit of Group employees.
These shares had a nominal value at 31 December 2017 of £677 (2016: £502)
and a market value of £3,047,000 (2016: £1,957,000). The shares held by the
SIP are awarded as free shares to eligible employees in January of each year
and are held in trust for a period of three years before an employee is
entitled to take ownership of the shares. During the year, 2,450 (2016: 600)
shares were released early from the SIP in relation to good leavers and
retirees under the SIP rules.
Substantial shareholdings As at the date of this report, the following
beneficial interests in 3% or more of the Company's issued ordinary share
capital (excluding shares held in treasury) on behalf of the organisations
shown in the table below, had been notified to the Company pursuant to
Rule 5.1 of the Disclosure Guidance and Transparency Rules. The information
provided below was correct as at the date of notification, where indicated
this was not in the 2017 financial year. It should be noted that these
holdings are likely to have changed since notified to the Company. However,
notification of any change is not required until the next applicable threshold
is crossed.
Shareholder Nature of holding Total voting rights % of total voting rights((1))
BlackRock Inc ((3)) Indirect 5,068,243 5.57%
Contracts for difference (CFD) 1,668,080 1.83%
Stock Lending 1,025,280 1.13%
Marathon Asset Management LLP((2)) Indirect 5,930,755
6.52%
Baillie Gifford & Co((2)) Indirect 5,873,614 6.45%
Caledonia (Private) Investments Pty Limited((3)) Direct 4,561,397 5.01%
Generation Investment Management LLP Indirect 4,583,127 5.04%
Axa Investment Managers SA Indirect 4,441,378 4.88%
Contracts for difference (CFD) 37,662 0.04%
Standard Life Investments Indirect 4,356,376 4.79%
Stock Lending 362,089 0.40%
UBS Investment Bank Indirect 2,572,737 2.83%
UBS Group AG((3)) Equity Swaps 2,916,519 3.21%
Stock Lending 1,021 0.00%
(1) The above percentages are based upon the voting rights share capital
(being the shares in issue less shares held in treasury) of 90,995,551 as at
22 February 2018.
(2) Date of notification preceded the 2017 financial year.
(3) Date of notification followed the 2017 financial year end.
Directors The directors of the Company as at the date of this report are named
on pages 33 to 36 together with their profiles.
The Articles of Association of the Company require directors to submit
themselves for re-appointment where they have been a director at each of the
preceding two AGMs and were not appointed or re-appointed by the Company at,
or since, either such meeting. Following the provisions of the UK Corporate
Governance Code, all directors who have served during the year and remain a
director as at 31 December 2017 will retire and offer themselves for
re-election at the forthcoming AGM with the exception of Ashley Martin, who
has notified the Company of his retirement from the Board as at this date.
Andrew Findlay and Lorna Tilbian will offer themselves for election, this
being the directors' first AGM following their appointments to the Board as
non-executive directors on 1 June 2017 and 1 February 2018 respectively.
The Board is satisfied that the directors retiring and standing for
re-election are qualified for re-appointment by virtue of their skills,
experience and contribution to the Board. The executive directors have service
contracts with the Company which can be terminated on 12 months' notice. The
appointments for the non-executive directors can be terminated on three
months' notice.
The interests of the directors in the share capital of the Company as at the
date of this report, the directors' total remuneration for the year and
details of their service contracts and Letters of Appointment are set out in
the Directors' Remuneration Report on pages 61 to 94. At the date of this
report, the executive directors were deemed to have a non-beneficial interest
in 245,441 ordinary shares of £0.01 each held by the EBT.
Research and development
The Group undertakes research and development activity in order to develop new
products and to continually improve the existing property platforms. Further
details are disclosed in Note 2 to the financial statements on page 109.
Political donations
During the year the Group did not make any donations to any political party or
other political organisation and did not incur any political expenditure
within the meanings of sections 362 to 379 of the Companies Act 2006.
Annual General Meeting
The AGM of the Company will be held at the offices of UBS Limited at 5
Broadgate, London, EC2M 2QS on 4 May 2018 at 10am. The Notice of Annual
General Meeting will be published in March 2017.
The resolutions being proposed at the 2018 AGM are general in nature,
including the renewal for a further year of the limited authority of the
directors to allot the unissued share capital of the Company and to issue
shares for cash other than to existing shareholders (in line with the
Pre-Emption Group's Statement of Principles). A resolution will also be
proposed to renew the directors' authority to purchase a proportion of the
Company's own shares. The Company will again seek shareholder approval to
hold general meetings (other than AGMs) at 14 days' notice. Resolutions will
be proposed to renew these authorities, which would otherwise expire at the
2018 AGM.
Auditor KPMG LLP has confirmed its willingness to continue in office as
auditor of the Group. In accordance with section 489 of the
- More to follow, for following part double click ID:nRSW7131Fd tion
Committee, to assist it in the execution of its duties. The Chairman of each Committee reports on the respective
Committee's activities at the subsequent Board meeting.
The Committees' terms of reference are available on the Company's corporate website, plc.rightmove.co.uk or by request from
the Company Secretary.
Each of the Committees is authorised, at the Company's expense, to obtain legal or other professional advice to assist in
carrying out its duties. No person other than a Committee member is entitled to attend the meetings of these Committees,
except by invitation of the Chairman of that Committee.
Current membership of the Committees is shown on page 43. The composition of these Committees is reviewed regularly, taking
into consideration the recommendations of the Nomination Committee.
Committee Role and terms of reference Membership required under the terms of reference Minimum number of meetings per year Committee report on pages
Audit Reviews and reports to the Board on: · Group financial reporting;· the system of internal At least three members who should be independent non-executive directors Three 45 to 52
control and risk management; · independence and effectiveness of the external audit process; and
· the internal audit plan, results and effectiveness of Rightmove Assurance, the outsourced
internal audit function. Recommends the appointment of the external auditors to the Board for approval
by shareholders.
Remuneration Makes recommendations to the Board on:· the Remuneration Policy and strategy for executive At least three members who should be independent non-executive directors Two 61 to 94
directors and senior managers;· long-term incentive arrangements;· the design and
determination of targets under any performance-related pay scheme; and · any major changes in
employee benefit structures with the objective of ensuring that directors and employees are
incentivised and fairly rewarded for their individual contributions to the Group's overall
performance. Careful consideration is given to the interests of the shareholders and to the financial
and commercial health of the Group.
Nomination Undertakes an annual review of organisation and succession planning and ensures that the membership At least three members, the majority of whom should be independent non-executive directors Two 53 to 55
and composition of the Board, including the balance of skills, remains appropriate. Makes
recommendations for the membership of the Board, Audit and Remuneration Committees.
Board composition
The Board at the date of this report comprises two executive directors and seven non-executive directors, including the
Chairman. The two executive directors are Peter Brooks-Johnson (Chief Executive Officer) and Robyn Perriss (Finance
Director) and the non-executive directors are Scott Forbes (Chairman), Peter Williams (Senior Independent Director), Ashley
Martin, Rakhi Goss-Custard, Jacqueline de Rojas, Andrew Findlay and Lorna Tilbian.
Biographical details of all directors at the date of this report appear on pages 33 to 36 and details of Committee
membership appear on page 43.
The Board's size and composition is kept under regular review by the Nomination Committee.
Board changes
Nick McKittrick, Chief Executive Officer, retired from the Board on 9 May 2017 and Peter Brooks-Johnson, formerly Chief
Operating Officer, was appointed as Chief Executive Officer from that date. Colin Kemp retired from the Board on 9 May
2017, having served nine years as a non-executive director.
Andrew Findlay was appointed as a non-executive director on 1 June 2017 and Lorna Tilbian was appointed with effect from 1
February 2018. All other directors served throughout the year.
Division of responsibilities
The posts of Chairman and Chief Executive Officer are separate and there are clear written guidelines to support their
division of responsibilities. The key responsibilities of the Board members are summarised below:
Chairman Responsible for the leadership and governance of the Board, including:· ensuring its effectiveness by creating and managing constructive relationships between the executive and non-executive directors;· ensuring there is ongoing and effective
communication between the Board and its key stakeholders; and· with the assistance of the Company Secretary, setting the Board's agenda and ensuring that adequate time is available for discussion and effective decision making, and that directors
receive sufficient, relevant, timely and clear information.
Chief Executive Officer Responsible for the day to day management of the Group, including:· the operational and financial performance of the Group;· developing the Group's objectives and strategy and following Board approval, the successful execution of strategy;·
effective and ongoing communication with stakeholders; and· chairing the Executive Committee.
Non-executive directors The role of the non-executive directors is to:· constructively challenge the executive directors; and· monitor the delivery of the strategy within the risk and control framework set by the Board. The non-executive directors bring wide and varied
commercial experience and independent judgement to the Board and the Committees' deliberations. The breadth of management, financial and listed company experience of the non-executive directors is described in the biographical details on pages 33 to 36
and demonstrates a range of business expertise that provides the right mix of skills and experience given the size of the Group.
Senior Independent Director The role of the Senior Independent Director is to:· act in an advisory capacity to the Chairman;· deputise for the Chairman if required;· serve as an intermediary for other directors when necessary;· be available to shareholders if they
have concerns which they have not been able to resolve through the normal channels of the Chairman and Chief Executive Officer or other executive directors for which such contact is inappropriate; and· conduct an annual review of the performance of
the Chairman and, in the event it should be necessary, convening a meeting of the non-executive directors.
Company Secretary The Company Secretary:· monitors compliance with appropriate Board procedures; · advises the Board on corporate governance matters;· assists the Chairman in ensuring that all the directors have full and timely access to relevant information;
and· assists the Chairman by organising directors' induction and training programmes. The Company Secretary also acts as Secretary to the Audit, Remuneration and Nomination Committees. The appointment and removal of the Company Secretary is a matter
for Board approval.
Board diversity and experience
We are committed to a Board comprised of directors from different backgrounds with diverse and relevant experience,
perspectives, skills and knowledge. We believe that diversity, including gender diversity, amongst directors contributes
towards a high performing and effective Board and business, so we strive to maintain the optimal balance. We endorse both a
meritocratic Board appointment process and balanced gender representation on the Board.
At 31 December 2017, 38% of Board members were female and following the appointment of Lorna Tilbian, that proportion has
risen to 44% of Board members. Following the retirement of Ashley Martin in May the proportion of female Board members
will rise to 50%. We remain committed to recruiting the best people and appropriate talent for the business whilst seeking
to maintain as near 50:50 gender balance on the Board as possible.
The range of skills and experience the Board considers necessary to deliver Rightmove's business strategy, and which were
identified in the Board Strategy Review, includes:
· Finance and governance
· Voice of the customer and property market
· Technology and innovation
· Voice of the consumer and retail
· Digital marketing and online media, and
· Corporate transactions.
Board independence
The Code provides that the Board should identify in the Annual Report each non-executive director that it considers to be
independent. That is, to determine whether the director is independent in character and judgement and whether there are
relationships or circumstances which are likely to affect, or could appear to affect, the director's judgement.
The Board reviews non-executive director independence on an annual basis taking into account such factors as their
contribution to unbiased and independent debate during meetings. The Board considers that there is an appropriate balance
between the executive and non-executive directors and that all non-executive directors are fully independent of management
and independent in character and judgement. Ashley Martin will have completed nine years' service as a non-executive
director in June 2018 and will retire from the Board following the 2018 AGM. The Nomination Committee carefully considered
the independence of Lorna Tilbian before her appointment to the Board and details of that process is set out in the
Nomination Committee report on pages 54 to 55.
To safeguard their independence, a director is not entitled to vote on any matter in which they may be conflicted or have a
personal interest. Where necessary, directors are required to absent themselves from a meeting of the Board while such
matters are being discussed. In cases of doubt, the Chairman of the Board is responsible for determining whether a conflict
of interest exists.
The Chairman is also the Chairman of two other publically listed companies. The executive directors do not hold any other
non-executive directorships or commitments requiring disclosure under the Code.
Board tenure as at 31 December 2017 Balance of directors as at 31 December 2017
http://www.rns-pdf.londonstockexchange.com/rns/7131F_1-2018-2-22.pdf
Re-election to the Board
Directors are appointed and may be removed in accordance with the Articles of Association of the Company and the provisions
of the Companies Act. All directors are subject to election at the first AGM following their appointment and in accordance
with the Code, all directors will seek re-election at the 2018 AGM with the exception of Ashley Martin, who will retire
from the Board on that date.
Board and Committee membership and attendance
The membership of the Committees of the Board and attendance at Board and Committee meetings for the year under review are
set out in the table below:
Board Remuneration Audit Nomination
Committee Committee Committee
Total meetings 7 6 5 3
Scott Forbes 7 - - 3
Peter Brooks-Johnson 7 - - -
Robyn Perriss 7 - -
Ashley Martin 7 - 5 3
Peter Williams 7 6 5 3
Rakhi Goss-Custard 7 6 4(1) 3(2)
Jacqueline de Rojas 7 3(3) - 2(2)
Andrew Findlay 5(4) - 3(4) 2(4)
-
(1) Rakhi Goss-Custard was a member of the Audit Committee until 9 May 2017 and attended two further meetings as a guest.
(2) Rakhi Goss-Custard and Jacqueline de Rojas joined the Nomination Committee on 9 May 2017 and attended all meetings
after that date. Rakhi attended one meeting before that date as a guest.
(3) Jacqueline de Rojas joined the Remuneration Committee on 9 May 2017 and attended all meetings after that date.
(4) Andrew Findlay joined the Board, Audit and Nomination Committees on 1 June 2017 and attended all meetings after that
date.
(5)
In addition to the above meetings, the Chairman conducts meetings with the non-executive directors without the executive
directors being present when required. Peter Williams, the Senior Independent Director, chaired a meeting in December 2017
of the non-executive directors at which the performance of the Chairman was also reviewed, without the presence of the
Chairman.
Indemnification of directors
The Articles of Association of the Company allow for a qualifying third party indemnity provision between the Company and
its directors and officers, which remains in force at the date of this report. The Group has also arranged directors' and
officers' insurance cover in respect of legal action against the directors. Neither our indemnity nor the insurance
provides cover in the event that a director is proven to have acted dishonestly or fraudulently.
The Group has a Dealing Code setting out the process and timing for dealing in shares, which is compliant with the Market
Abuse Regulation. The Dealing Code applies to all directors, who are persons discharging managerial responsibility, and
other insiders.
Shareholder relations
The Board is accountable to shareholders for the performance and activities of the Group and welcomes opportunities to
engage with shareholders.
Within the terms of the regulatory framework, the directors have conducted regular and open dialogue with shareholders
through ongoing meetings with institutional investors and research firms to discuss strategy and operational and financial
performance. Contact in the UK is principally with the Chief Executive Officer and the Finance Director. The Chairman
attends selected investor meetings in the UK and the USA. The Senior Independent Director is also available to shareholders
if they wish to supplement their communication, or if contact through the normal channels is inappropriate.
The Remuneration Committee proactively engaged with the Company's top shareholders ahead of setting the Remuneration Policy
which was approved at the 2017 AGM and again in late 2017 when setting executive director base salary levels for 2018.
The Board is kept informed of the views and opinions of those with an interest in the Company's shares through reports from
the Chief Executive Officer and the Finance Director, as well as reports from the Company's brokers, UBS and Numis.
Shareholders are also kept up to date with the Group's activities through the half year results statement and Annual Report
and the investor relations section of its website, at plc.rightmove.co.uk, which provides details of all the directors, the
financial calendar, latest news including financial results, investor presentations and Stock Exchange announcements.
Annual General Meeting
The AGM provides an opportunity for shareholders to vote on aspects of the Company's business, meet the directors and ask
them questions. The AGM will be held on 4 May 2018 at the offices of UBS Limited at 5 Broadgate, London EC2M 2QS.
The Company will arrange for the Annual Report and related papers to be available on the Company's corporate website at
plc.rightmove.co.uk or posted to shareholders (where requested) at least 20 working days before the AGM.
The Company continues to comply with the Code with the separation of all resolutions put to shareholders. The Company
proactively encourages shareholders to vote at general meetings by providing electronic voting for shareholders who wish to
vote online and personalised proxy cards to shareholders electing to receive them, ensuring that all votes are clearly
identifiable. The Company presently takes votes at general meetings on a show of hands on the grounds of practicality,
owing to the limited number of shareholders in attendance. All proxy votes are counted and the level of proxy votes,
including votes withheld, for each resolution are reported after each resolution and published on the Company's website.
GOVERNANCE- Corporate governance
Audit Committee report
Dear Shareholder
I am pleased to present the 2017 report of the Audit Committee (the Committee).
This report provides an overview of the principal activities of the Committee and details how it has discharged its
responsibilities during the year.
The Committee is an essential part of Rightmove's governance framework to which the Board has delegated oversight of the
accounting, financial reporting and internal control processes, the outsourced internal audit function and the relationship
with the external auditors. The key responsibilities are set out on pages 39 to 40 of the Corporate Governance Report.
The Committee has overseen a detailed programme of work in 2017 in relation to its remit, including agreeing the scope of
work delivered by the PricewaterhouseCoopers LLP (PwC) outsourced internal audit function, known as Rightmove Assurance.
The role of Rightmove Assurance has become well established throughout the organisation and continues to provide insight
and value in both core financial control areas and the broader business operations.
The Committee has given particular focus this year to the readiness of the Group to meet the requirements of the
forthcoming General Data Protection Regulation (GDPR) which becomes effective in May 2018. The business has established a
comprehensive GDPR programme, coordinated by a full-time project manager, and is on track to be substantially compliant by
May 2018. There has also been continued focus on the progress of the Disaster Recovery and Business Continuity Plans,
including a planned closure of the Milton Keynes office which took place during December 2017. The oversight of financial
controls continues to be a key area of work of the Committee. As a result of the breadth of the reviews this year, the
Committee has had the benefit of exposure to the broader organisation, which has brought added insight to the topics under
discussion.
Looking forward to the next 12 months, the Committee will continue to focus on the audit, assurance and risk processes
within the Group, including a review of the control effectiveness of key billing processes, a counter fraud workshop and an
update on the progress towards GDPR compliance.
I have greatly enjoyed my time as Chairman of the Audit Committee over the last nine years, and thank my fellow Committee
members for their wisdom and support over this period. Andrew Findlay will succeed me as Chairman of the Audit Committee at
the end of the 2018 Annual General Meeting.
I will be available at the AGM to answer any questions about the work of the Committee.
Written terms of reference that outline the Committee's authority and responsibilities are published on the investor
relations section of the Group's website at plc.rightmove.co.uk and are available in hard copy form from the Company
Secretary.
Ashley Martin
Chairman of the Audit Committee
Committee membership and meetings
All the members of the Audit Committee are Independent Non-Executive Directors in accordance with provision C3.1 of the UK
Corporate Governance Code (the Code) and the Board has determined that both Andrew Findlay and Ashley Martin have recent
and relevant financial experience as required by the Code. Ashley Martin is a qualified accountant and was formerly Global
Chief Financial Officer of Engine Holding LLC and Group Finance Director of Rok plc. Andrew Findlay and Peter Williams are
also qualified accountants and Andrew Findlay is currently Chief Financial Officer of easyJet plc. Andrew Findlay will
succeed Ashley Martin as Chair of the Audit Committee at the end of the 2018 Annual General Meeting. As a whole, the
Committee has competence relevant to the sector in which the Group operates through the digital experience of Andrew
Findlay and Peter Williams, and the media experience of Ashley Martin.
Biographies of the members of the Committee are set out on pages 33 to 36.
Number of meetings
Committee members Eligible to attend Attended
Ashley Martin (Chairman) 5 5
Peter Williams 5 5
Andrew Findlay(1) 3 3
Rakhi Goss-Custard(2) 2 4
(1) Andrew Findlay was appointed to the Committee on 1 June 2017.
(2) Rakhi Goss-Custard retired from the Committee on 9 May 2017 and attended two further meetings as a guest.
The Committee met five times in 2017 and attendance of the members is shown above. In order to maintain effective
communication between all relevant parties, the Committee invited the Finance Director and Head of Finance, together with
appropriate members of the management team, and the external and internal auditors, to meetings as necessary. The Committee
sets aside time periodically to seek the views of the external auditor, in the absence of management. The external auditor
has direct access to the Chairman to raise any concerns outside formal Committee meetings. The Committee also meets
separately with the internal auditor during the year, and in between meetings the Chairman keeps in touch with the Finance
Director and external audit partner as well as other members of the management team.
After each meeting, the Chairman reports to the Board on the main issues discussed by the Committee and minutes of the
Committee meetings are circulated to the Board once approved.
Audit Committee effectiveness
The effectiveness of the operation of the Committee was reviewed in December 2017 through a questionnaire completed by all
members of the Committee which focused on areas such as the appropriateness of the focus of the Committee, how it operates
and professional development of the members. This was supplemented with responses from the effectiveness review of the
Board and its committees where each Board member responded to key questions on Board performance and commented generally on
the performance of Board Committees. The feedback on the Committee was positive and confirmed that the Committee is
effective and provides appropriate challenge.
Financial reporting
The Committee is responsible for reviewing the appropriateness of the Group's half-year reporting and annual financial
statements. The Committee does this by considering, among other things, the accounting policies and practices adopted by
the Group; the correct application of applicable reporting standards and compliance with broader governance requirements;
the approach taken by management to the key judgmental areas of reporting and the comments of the external auditor on
management's chosen approach.
Significant issues
The key significant issue in the context of the 2017 Consolidated Financial Statements is revenue recognition. The
Committee considers this area to be significant taking into account the level of materiality and degree of focus given by
management, and discussed the issue in detail to ensure that the approach taken was appropriate. In relation to the Company
Financial Statements, the key significant issue is the recoverability of the investment by the Company in Rightmove Group
Limited, due to its materiality in the context of the total assets of the Company.
Issue Committee review
RevenueAs more fully described on page 111 the majority of the Group's revenue is derived from subscriptions for core listing fees and advertising products on Rightmove's platforms. The Group recognises this revenue over the period of the contract or the point at which advertising products are used. During the year, management performed data analytics procedures on the amounts billed to the two largest customer groups (Agency and New Homes, together 92% of revenue). This included investigating anomalies and outliers identified and reporting to the
Committee in this regard. Revenue is a prime area of audit focus and KPMG evolved their approach in this area this year as a result of management performing the revenue data analytics procedures that had previously been part of the audit approach. KPMG
designed and performed new data analytics procedures which covered all revenue streams matching customer billings to cash, and results of this work were reported to the Committee. The Committee discussed any anomalies with management and with KPMG in
relation to the data analytics work they performed. The Committee was satisfied with the explanations provided and conclusions reached. The approach to data analytics performed by KPMG expands their audit coverage to 100% of revenue, which together with
the data analytics performed by management has led to increased overall assurance in this area. The data analytics work above is supplemented by a detailed analytical review by management of margins, and ARPA together with a comprehensive analysis on the
treatment of discounted and free member offers.
Investment by Rightmove plc in Rightmove Group Limited (RMGL)The investment by the Company in RMGL is carried at cost, adjusted for subsequent additions to the investment. Cost was initially assessed as at 28 January 2008 being the date that Rightmove plc became the parent company of RMGL. Share-based payment awards to RMGL employees are accounted for as a deemed capital contribution by Rightmove plc to RMGL of the value of the share-based payment charge for those awards, increasing the value of the investment. Further details are provided in note 15 to the financial statements. The investment is not considered at risk of material misstatement or subject to significant judgement, however it is considered a significant risk due to its size in relation to the Company balance sheet. The Committee reviewed the assumptions made by management, including the strong track record of profitable growth and cash generation by Rightmove Group Limited. Furthermore, the Rightmove plc share price has increased significantly since 2008, resulting
in a current market value of c.£4 billion, significantly in excess of the investment carrying value of £0.5 billion. As Rightmove Group Limited is the main trading entity of Rightmove plc, we therefore see no evidence of impairment. The Committee was
satisfied with the assumptions made.
The Committee also reviewed and considered the following areas due to their materiality and the application of judgement.
However, it considered them to be stable in nature and therefore did not classify them as significant issues in the context
of the 2017 financial statements.
Issue Committee review
Share-based payment charges and related deferred tax asset The Committee reviewed the judgements, assumptions and estimates made by management as part of the review of the financial statements to ensure that they were appropriate. The Committee also obtained the external auditors' assessment of the calculations. The results of this review were that the Committee was satisfied with the calculations made.
Going concern and viability statements In assessing the validity of the statements detailed on pages 25 and 107 to 108, the Committee reviewed the work undertaken by management to assess the Group's resilience to the Principal Risks under various scenarios. The Committee gained appropriate assurance that sufficient rigour was built into the process to assess going concern and viability over the designated periods.
Fair balanced and understandable
One of the key governance requirements is for the Annual Report and the financial statements, taken as a whole, to be fair,
balanced and understandable and provide the information necessary for shareholders to assess the Group's position and
performance, business model and strategy.
The Committee was provided with an early draft of the Annual Report in order to assess the strategic direction and key
messages being communicated. Feedback was provided by the Committee in advance of the February Board meeting, highlighting
any areas where the Committee believed further clarity was required. The draft report was then amended to incorporate this
feedback prior to being tabled at the Board meeting for final comment and approval.
When forming its opinion, the Committee reflected on the information it had received and its discussions throughout the
year. In particular, the Committee considered:
Is the report fair? · Is the whole story presented and has any sensitive material been omitted that should have been included?· Are key messages in the narrative aligned with the KPIs and are they reflected in the financial reporting?· Are the KPIs being
reported consistently from year to year?· Is the reporting on the business areas in the narrative reporting consistent with the financial reporting in the financial statements?
Is the report balanced? · Do you get the same messages when reading the front end and back end of the Annual Report independently?· Are threats identified and appropriately highlighted?· Are the alternative performance measures explained clearly with appropriate
prominence?· Are the key judgements referred to in the narrative reporting and significant issues reported in this Committee Report consistent with disclosures of key estimation uncertainties and critical judgements set out in the financial
statements?· How do these judgements compare with the risks that KPMG are planning to include in their Auditors' Report?
Is the report understandable? · Is there a clear and cohesive framework for the Annual Report?· Are the important messages highlighted appropriately throughout the Annual Report?· Is the Annual Report written in easy to understand language and are the key messages
clearly drawn out?· Is the Annual Report free of unnecessary clutter?
Following its review, the Committee is of the opinion that the 2017 Annual Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Group's position, performance,
business model and strategy.
External audit
The Committee has primary responsibility for overseeing the relationship with, and performance of, the external auditor.
The Committee approves the terms of engagement and fees of the external auditor, ensuring they have appropriate audit plans
in place and that an appropriate relationship is maintained between the Group and the external auditor.
The Committee is responsible for making recommendations to the Board in relation to the appointment of the external
auditor. KPMG LLP was re-appointed as the Group's auditor in 2013 following an audit tender, and in accordance with the EU
Audit Directive implemented in 2016, the Group will be required to put the external audit contract out to tender by 2023.
The external auditor is required to rotate the audit partner responsible for the Group audit every five years in order to
ensure independence. The lead audit partner, Karen Wightman has been in place for five years, and therefore in accordance
with the FRC's Ethical Standard 3 (Revised), Anna Jones will take over from Karen Wightman for the financial year ending 31
December 2018.
The Committee approved the fees of KPMG for the year as set out in Note 6 of the financial statements.
Independence and non-audit services
The Committee has policies and procedures in place in relation to the provision of non-audit services by the external
auditor and the non-audit fee policy was reviewed by the Committee during the year. The non-audit fee policy ensures that
the Group benefits in a cost-effective manner from the cumulative knowledge and experience of its auditor, whilst also
ensuring that the auditor maintains the necessary degree of independence and objectivity.
Non-audit service Policy
Assurance-related services directly related to the audit for example, review of the half-year financial statements. The half year review is approved by the Committee as part of the annual Audit Plan. Management is given the authority to incur additional non-audit services of up to £15,000 in any financial year without prior approval of the Committee.Thereafter all
additional fees are to be referred to the Audit Committee in advance, subject to a cap on permitted non-audit fees of 70% of the average audit fees over the three preceding financial years.
Permitted non-audit servicesIncluding but not limited to: accounting advice, work related to mergers, acquisitions, disposals, joint ventures or circulars; and corporate governance advice.
Prohibited servicesIn line with the EU Audit Reform, these are services where the auditor's objectivity and independence may be compromised. Prohibited services are detailed in the FRC Revised Ethical Standard 2016 and include tax services, accounting services, internal audit services and valuation services. Prohibited, in accordance with the EU Audit Reform.
The level of non-audit fees as a proportion of the audit fee has typically been low at Rightmove. During the year, KPMG
charged the Group £30,000 for non-audit services, representing less than 21% of the 2017 audit fee. Of this, £18,000
relates to the half year review, and £10,000 for a review of the Group's gender pay gap calculations and methodology.
Further details of these services can be found in Note 6 to the financial statements.
Effectiveness and reappointment
The Committee considered the quality and effectiveness of the external audit process, in light of the FRC's Practice Aid
for Audit Committees (May 2015). The effectiveness of the external audit process is dependent on a number of factors. These
include the quality, continuity, experience and training of audit personnel, business understanding, technical knowledge
and the degree of rigour applied in the review processes of the work undertaken, communication of key accounting and audit
judgements, together with appropriate audit risk identification at the start of the audit cycle.
The Committee reviewed the report of the FRC's Audit Quality Review team relating to KPMG as a firm and discussed the
actions taken by KPMG in light of the recommendations, including in relation to the firm's approach to the audit of
revenue.
The Committee evaluated the effectiveness of the audit process together with input from management. Areas the Committee
considered in this review included the quality of audit planning and execution, engagement with the Committee and
management, quality of reporting and capability and experience of the audit team. For the 2017 financial year, the
Committee was satisfied that there had been appropriate focus and challenge on the primary areas of audit risk and
concluded that the performance of KPMG remained efficient and effective.
Internal audit
The Group has an Internal Audit function, known as Rightmove Assurance which is fully outsourced to PwC. The aim of
Rightmove Assurance is to provide independent and objective assurance on the adequacy and effectiveness of internal
control, risk management and governance processes. This includes assurance that underlying financial controls and processes
are working effectively, as well as specialist operational and compliance reviews that focus on emerging risks in new and
evolving areas of the business. The Rightmove Assurance plan for 2017 was approved by the Audit Committee and covered a
broad range of core financial and operational processes and controls, focusing on specific risk areas. Specialist reviews
were undertaken in the following areas:
· Data privacy, including a readiness assessment in relation to GDPR;
· Cyber maturity assessment, covering technical, process and people controls. The review also included particular focus
on data loss management, Bring Your Own Device (BYOD) and end point management, corporate network management and identity
and access management;
· Employment taxes;
· Procure to pay cycle and cash management;
· Pre-implementation review of a new HR system; and a
· Payroll controls review.
Reports setting out the principal findings of the Rightmove Assurance reviews and agreed management actions were discussed
by the Committee. The Committee also reviewed open actions from previous reviews, together with monitoring the progress by
management in completing these actions.
Effectiveness of the internal audit process
The work of Rightmove Assurance provides a key additional source of assurance and support to management and the Audit
Committee on the effectiveness of internal controls as well as providing guidance and recommendations to further enhance
the internal control environment, and provide specialist insight into areas of change in the business.
During the year, the Audit Committee undertook a review of the effectiveness of the Rightmove Assurance function. The
evaluation was led by the Committee Chairman and involved issuing tailored evaluation
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