REG - Rightmove Plc - Final Results <Origin Href="QuoteRef">RMV.L</Origin> - Part 4
24/02/2017 07:06
- Part 4: For the preceding part double click ID:nRSX7347Xc
directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and estimates that are reasonable and prudent;
· state whether they have been prepared in accordance with IFRSs as adopted by the EU; and
· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and
the parent Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent
Company's transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and
enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility
for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud
and other irregularities.
Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report, Directors'
Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those
regulations.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the
company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
GOVERNANCE - Directors' remuneration report
Annual statement by the Chairman of the Remuneration Committee
Dear Shareholder
I am pleased to present our Directors' Remuneration Report for Rightmove (the Company) together with its subsidiary
companies (the Group) for the year ended 31 December 2016.
The report is divided into two sections, the Remuneration Policy Report and the Annual Report on Remuneration. As required
by the remuneration regulations, you will be asked to vote separately on these two reports at our AGM on 9 May 2017. The
Remuneration Policy, which has been subject to review this year by the Remuneration Committee (the Committee) and
consultation with our shareholders, is set out on pages 57 to 67. This year we have introduced a section called
'Remuneration at a glance', to provide our shareholders with a summary of the Company's performance for 2016 and proposed
remuneration arrangements for 2017.
Performance and reward
The Committee considers that the remuneration of the executive directors appropriately and fairly reflects the performance
of the Group. As described in the Strategic Report, our 2016 results show another year of strong growth in organic revenue
and underlying operating profit(1). The increase in underlying operating profit(1) achieved this year is particularly
strong in light of uncertainties influencing the general market place and once again demonstrates the strength of the
Rightmove business model and brand and the effectiveness of our management team.
In accordance with the Remuneration Policy, the Committee has reviewed achievement against the bonus plan objectives for
2016 and recommended an annual bonus payment of 92%. This echoes the strong growth in revenue and underlying operating
profit(1) of 15%, our continued market leadership in audience and encouraging growth in Other revenue, albeit not at the
maximum opportunity. We were also delighted that the employee engagement target was met in full. Overall, performance for
the year significantly outperformed the business plan and the Committee was therefore satisfied that it was appropriate to
pay 92% of the maximum bonus.
Turning to the Group's longer-term performance, which continues to reflect the successful implementation of its growth
strategy over the last three financial years, the 2014 Performance Share Plan awards (measuring performance from 1 January
2014 to 31 December 2016) will vest in full in March 2017 as a result of delivering underlying basic EPS(2) growth of 76%
and TSR growth of 53% over the performance period, which exceeded the respective growth targets set of 70% and FTSE 250
Index +25% over the three-year period. The Committee tested the performance conditions, which were set at the beginning of
the performance period, and determined that the Group had outperformed the maximum targets. It was therefore satisfied that
the awards should vest in full.
Remuneration policy
In 2016, the Committee conducted a full review of the executive Remuneration Policy, which was last approved by
shareholders in 2014.
The review indicated that the overall policy, which provides below market fixed pay (base salary, pension and benefits) and
above market variable pay opportunity (short and long-term incentives) for outstanding performance, remains fit for purpose
in this dynamic, growth-orientated business. However, this policy has resulted in levels of fixed pay falling further below
market levels than the Committee felt was appropriate and, as a consequence, longer term incentives which are broadly in
line with the market as a percentage of salary, have also fallen below market norms. The Committee therefore considers that
an adjustment to levels of fixed pay is appropriate to ensure that the current policy continues to effectively reward and
incentivise our executive directors and senior management team to deliver sustainable performance in a growth-orientated
business.
The Committee consulted the Company's major shareholders, together holding over 50% of Rightmove shares, for their views on
the new policy, including salary proposals for 2017. Our shareholders were overwhelmingly supportive of the proposed
changes, subject to some useful constructive feedback, which has been incorporated into the proposed policy. The key
elements of the Remuneration Policy are summarised in 'Remuneration at a glance' on pages 55 to 56 and detailed in the
Remuneration Policy Report on pages 57 to 67.
Details of the changes to the salaries of the executive directors are set out on page 69. In summary, increases of 3% in
excess of the average of Rightmove's employees were awarded to the CEO and COO and an increase of 11.8% above that of the
workforce was awarded to the Finance Director. These increases were introduced in January 2017 and reflect the increase in
size and complexity of each role and, in the case of the Finance Director, that on appointment her salary was set
significantly below the Committee's assessment of an appropriate rate for the role and the performance and capability that
she has demonstrated as she has gained experience in the role.
The proposed Remuneration Policy will also incorporate some minor modifications to bring it in line with current market and
best practice and is expected to operate for three-years from shareholder approval in May 2017.
The Committee's objective is to retain a remuneration framework that rewards and incentivises our management team to
deliver Rightmove's longer term strategy with a clear emphasis on performance-related pay to reflect the culture of the
Group. Following the proposed changes, the Remuneration Policy will continue to provide below market levels of fixed pay
with above market levels of variable pay opportunity, subject to the achievement of challenging performance measures linked
to the Group KPIs. Variable pay is geared toward long-term sustainable performance, with a high level of annual bonus
deferral into shares, long-term incentive awards and higher share ownership guidelines.
We are committed to maintaining an open and transparent dialogue with shareholders. We have valued the engagement with, and
support of, shareholders and we remain focused on disclosing clearly how much our executive directors earn and how this is
linked closely to performance.
CEO retirement
On 23 February 2017, Nick McKittrick notified the Board of his intention to retire as a director and Chief Executive
Officer following the AGM on 9 May 2017. A summary of the remuneration arrangements in relation to his retirement are set
out on pages 83 to 84.
Peter Williams
Chairman of the Remuneration Committee
(1) Before share-based payments and NI on share-based incentives
(2) Before share-based payments and NI on share-based incentives with no related adjustment for tax
Remuneration at a glance
2016 Financial Performance Revenue Underlying operating profit before tax(1)+15% Returns to shareholders£131.3m
+15%
Long-term incentive plan - outcome against maximum targets: 100%
Earnings Per Share(2) Total Shareholder Return
Please refer to the pdfhttp://www.rns-pdf.londonstockexchange.com/rns/7347X_-2017-2-23.pdf 75% of 2014 Performance Share Plan (PSP) awards vest on achievement of outstanding three-year EPS growth of 76%. Please refer to the pdfhttp://www.rns-pdf.londonstockexchange.com/rns/7347X_-2017-2-23.pdf 25% of 2014 Performance Share Plan awards vest in line with upper quartile relative TSR performance.
Annual bonus plan - outcome against maximum targets: 92%
Underlying operating profit before tax(1) Growth in absolute website visits relative to our nearest competitor Growth in Other revenue(3) Employee survey respondents who think 'Rightmove is a great place to work'
Target: £163.8mActual: £166.2m Target: 50% higher growth in absolute visits than our nearest competitorActual: Growth in absolute visits was 17.75 times higher than our nearest competitor Target: 30% growthActual: 23% Target: 95%Actual: 95%
Pay and performance for 2016
Nick McKittrick Peter Brooks-Johnson Robyn Perriss
Salary £424,320 £355,368 £281,112
Benefits & Pension £1,973 £17,822 £14,473
Cash Bonus £195,187 £163,469 £129,312
Deferred Shares £292,781 £245,204 £193,967
Performance Shares £1,212,662 £1,015,601 £803,392
Total remuneration £2,126,923 £1,797,465 £1,422,256
Shareholder alignment
Shareholding Guidelines: 200% of salary for all executive directors from 2017 Proportion of variable awards received in shares:85% of performance-related pay is awarded in Rightmove shares Shares required to be retained on vesting until guidelines met:50% of vested Deferred and Performance shares
Remuneration Policy 2017 - 2020
Policy element Proposed change from 2014 policy
Fixed pay below comparative market median and variable incentive opportunity above median No change
Base salaries executive directors receive inflationary adjustments to salaries in line with all employees Increases in base salary capped at 3% above wider workforce increases(4)
Pension contributions up to 6% of base salary No change
Annual bonus maximum 125% of salary, with 40% cash and 60% deferred into Company shares for two years No change
Performance Share Plan awards granted at 200% of salary. No post-vesting holding period No change. The Committee will have discretion to introduce post-vesting holding periods for new executive directors
Clawback applies to deferred annual bonus awards and Performance Share Plan awards No change
(1) Before share-based payments and NI on share-based incentives.
(2) Before share-based payments and NI on share-based incentives with no related adjustment for tax.
(3) Other revenue is all revenue excluding Agency and New Homes.
(4) A one off increase in the Finance Director's salary of 13.8% is proposed in 2017 to address her historically low
starting salary level and recognise the capability she has demonstrated as she has gained experience in that role.
Remuneration Policy Report (unaudited)
Introduction
This report sets out the Company's policy on directors' remuneration for the forthcoming year and, for subsequent years, as
well as information on remuneration paid to directors for the financial year ended 31 December 2016. The report has been
prepared in accordance with the Companies Act 2006, the Large and Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013 (together the Act) and the 2014 UK Corporate Governance Code (the Code).
In accordance with the Act this report comprises a Policy Report and an Annual Report on Remuneration. The Remuneration
Policy was approved by shareholders in 2014 and, in compliance with the Act, a revised Policy Report will be put to a
binding shareholder vote at the 2017 AGM. In practice, however, the Remuneration Committee (the Committee) has applied some
elements of the policy detailed below from the beginning of 2017 and expects to apply the new policy throughout the
three-year period from and subject to shareholder approval on 9 May 2017. The Annual Report on Remuneration will be subject
to an advisory vote at the 2017 AGM. The parts of the report which have been audited have been highlighted.
Remuneration Policy Report (the Policy Report)
This part of the Directors' Remuneration Report sets out the Remuneration Policy for the Company and has been prepared in
accordance with the Act.
The policy has been developed after taking into account Rightmove's pay philosophy that our executives should be rewarded
with demonstrably lower than market base salaries and benefits and higher than market equity rewards contingent upon the
achievement of challenging performance targets in accordance with the 'best practice' principles set out in the Code and
the views of our major shareholders.
The key principles of the Committee's policy are unchanged and are as follows:
· Remuneration arrangements should be simple to explain, understand and administer.
· Remuneration arrangements should be designed to provide executive directors with the opportunity to receive a share in
the future growth and development of the Group which is regarded as fair by both other employees and shareholders. This
approach should allow the Company to attract and retain the dynamic, self-motivated individuals who are critical to the
success of the business.
· Executive directors should have below market levels of base salary, minimal benefits (which are made available on the
same basis to all Rightmove employees), but with above market levels of variable pay potential. This arrangement is
designed to align the interests of the executive directors with the interests of shareholders and to reflect the dynamic,
performance driven culture of the Group. The Company will generally review market levels of remuneration for executive
directors with the assistance of external, independent remuneration consultants and consult shareholders on remuneration
policy at least every three years.
· Executive director remuneration should normally be reviewed against the market every three years, further changes to
remuneration for the current executives should be made infrequently. Annual pay reviews for executive directors in
intervening years should, in most instances, be directly linked to the policies applied to all employees, specifically with
regard to cost of living rises in base salary and changes in benefits.
· Executive directors should be principally rewarded for the overall success of the business for which they have
collective responsibility. The Group has key short-term and medium to long-term goals and executive directors should be
incentivised against these goals.
· Executive directors should not be able to gain significantly from short-term successes, which subsequently prove not
to be consistent with growing the overall value of the business. Hence a majority of any bonus payable in relation to
short-term strategic goals is required to be taken in the form of shares in the Company which are deferred for a further
two years after the bonus target has been achieved.
The following table provides an overview of the Committee's Remuneration Policy, which has been designed to reflect the
principles described above:
Remuneration Policy
Element of remuneration Purpose and link to strategy Operation Maximum opportunity Performance criteria
Salary To provide a base salary which will attract and retain high calibre executives to execute the Group's business strategy. Base salaries are normally reviewed annually. The timing of any change is at the Committee's discretion and will usually be effective from 1 January. Directors' current salaries are set out on page 69. These salary levels will be eligible for increases during the period that the Remuneration Policy operates from the effective date. During this time, salaries may be increased each year (in percentage of salary terms) in line with those of the wider workforce and will be capped at the average workforce increase plus 3%, subject to the Committee's consideration of the overall salary budget, individual and Group performance and factors in the wider economy including inflation. Increases beyond those linked to the workforce (in percentage of salary terms) will only be awarded where there is a change of incumbent, in responsibility, experience or a significant increase in the scale of the role and/or size, value and/or complexity of the Group. The Committee considers both individual and Group performance in a broad context when
When considering the executive's eligibility for a salary increase, the Committee considers the following points:· size and responsibilities of the role;· individual and Group performance;· increases awarded to the wider workforce; and· broader economic and inflationary conditions. Executive directors' remuneration is benchmarked against external market data periodically (generally every three years). Relevant market comparators are selected for comparison, which include other companies of a similar size and complexity. The Committee considers benchmark data, alongside a broad review of the individual's skills and experience, performance and internal relativities. determining base salary increases.
Benefits To provide simple, cost-effective, employee benefits which are the same as those offered to the wider workforce. The executive directors are enrolled in the Group's private medical insurance scheme and receive life assurance cover equal to four times base salary. Additionally, all executive directors are members of the Group's medical cash plan. Executive directors will be entitled to receive new benefits on the same terms as those introduced for the whole workforce. The value of benefits may vary from year to year depending on the cost to the Company from third party providers. Not applicable
Pension To provide abasic, cost-effective, long-term retirement benefit. The Group operates a stakeholder pension plan for employees under which the employer contributes 6% of base salary subject to the employee contributing a minimum of 3% of base salary. The Company does not contribute to any personal pension arrangements. The Company may introduce a cash alternative to a pension contribution where this would be more tax efficient for the individual. Whilst executives are not obliged to join, the Company operates a pension salary exchange arrangement whereby executives can exchange part of their salary for Company paid pension contributions. Where executives exchange salary and this reduces the Company's National Insurance Contributions the Company credits the full saving to the executive's pension. 6% of base salary Not applicable
Annual bonus including Deferred Share Bonus Plan (DSP) To incentivise and recognise execution of the business strategy on an annual basis. Rewards the achievement of annual financial and operational objectives. The annual bonus comprises a cash award (40% of any bonus earned) and a DSP award (60% of any bonus earned). A greater proportion of the annual bonus may be deferred in future years at the Committee's discretion.Deferred shares will vest after two years and be potentially forfeitable during that period. Payments under the annual bonus plan may be subject to clawback in the event of a material misstatement of the Group's financial results or misconduct. Maximum (% salary):125% of base salary The bonus is determined by and based on performance against a range of key
performance indicators which will be selected and weighted to support delivery of the
business strategy.The primary bonus metric will be profit-based (e.g. underlying
operating profit before tax) with targets set in relation to a carefully considered
business plan and requiring significant out-performance of that plan to trigger
maximum payments. A minority of bonus will also be earned based on pre-set targets
drawn from the Group's other key performance indicators relating to underlying
drivers of long-term revenue growth.Details of the performance measures used for the
current year and the targets set for the year under review and performance against
them is provided on pages 70 and 75 to 77.25% of the awards vest for achieving the
threshold performance target. Bonus is earned on a linear basis from threshold to
maximum performance levels.
Performance Share Plan (PSP) To incentivise and reward executives for the achievement of superior returns to shareholders over a three-year period, and to retain key individuals and align interests with shareholders. The PSP was established in 2011 and permits annual awards of nil cost options, contingent shares and forfeitable shares which vest after three years subject to continued service and the achievement of challenging performance conditions. The Committee has discretion to introduce a two-year post-vesting holding period for future executive appointments to the Board. A dividend equivalent provision operates enabling dividends to be paid (in cash or shares) on shares at the time of vesting.PSP awards may be subject to clawback in the event of a material misstatement of the Group's financial results or misconduct. Maximum (% salary): 200% of base salary Awards vest based on three-year performance against challenging financial targets for
EPS and relative TSR performance.
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