REG - Rightmove Plc - Final Results <Origin Href="QuoteRef">RMV.L</Origin> - Part 7
24/02/2017 07:06
- Part 7: For the preceding part double click ID:nRSX7347Xf
Cash flows from financing activities
Dividends paid 12 (43,206) (36,469)
Purchase of own shares for cancellation 22 (88,083) (76,071)
Purchase of own shares for share incentive plans 23 (751) (507)
Share-related expenses 22 (497) (615)
Proceeds on exercise of share-based incentives 23 373 401
Net cash used in financing activities (132,164) (113,261)
Net increase/(decrease) in cash and cash equivalents 5,331 (2,787)
Cash and cash equivalents at 1 January 8,418 11,205
Cash and cash equivalents at 31 December 18 13,749 8,418
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2016
Note 2016 Restated2015 (refer Note 1)
£000 £000
Cash flows from operating activities
Profit for the year 136,648 123,757
Adjustments for:
Financial income 28 (141,563) (130,263)
Financial expenses 28 527 547
Share-based payments 24 2,404 2,105
Income tax credit (1,074) (1,465)
Operating cash flow before changes in working capital (3,058) (5,319)
Increase in trade and other payables 19 3,058 5,319
Cash generated from operating activities - -
Net decrease in cash and cash equivalents - -
Cash and cash equivalents at 1 January - -
Cash and cash equivalents at 31 December 18 - -
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2016
Note Share capital £000 Own shares held £000 Other reserves £000 Reverse acquisition reserve £000 Retained earnings £000 Total equity £000
At 1 January 2015 1,000 (14,823) 294 138 15,839 2,448
Total comprehensive income
Profit for the year - - - - 109,468 109,468
Transactions with owners recorded directly in equity
Share-based payments 24 - - - - 3,765 3,765
Tax credit in respect of 10 - - - - 4,135 4,135
share-based incentives recognised directly in equity
Dividends to shareholders 12 - - - - (36,469) (36,469)
Exercise of share-based incentives 23 - 1,268 - - (867) 401
Purchase of shares for SIP 23 - (507) - - - (507)
Cancellation of own shares 22 (23) - 23 - (76,071) (76,071)
Share-related expenses 22 - - - - (533) (533)
At 31 December 2015 977 (14,062) 317 138 19,267 6,637
At 1 January 2016 977 (14,062) 317 138 19,267 6,637
Total comprehensive income
Profit for the year - - - - 129,542 129,542
Transactions with owners recorded directly in equity
Share-based payments 24 - - - - 4,142 4,142
Tax credit in respect of 10 - - - - 5 5
share-based incentives recognised directly in equity
Dividends to shareholders 12 - - - - (43,206) (43,206)
Exercise of share-based incentives 23 - 366 - - 7 373
Purchase of shares for SIP 23 - (751) - - - (751)
Cancellation of own shares 22 (22) - 22 - (88,083) (88,083)
Share-related expenses 22 - - - - (617) (617)
At 31 December 2016 955 (14,447) 339 138 21,057 8,042
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2016
Note Share capital £000 Own shares held Other reserves £000 Reverse acquisition reserve £000 Retained earnings £000 Total equity £000
£000
At 1 January 2015 1,000 (11,917) 6,088 103,520 396,657 495,348
Total comprehensive income
Profit for the year - - - - 123,757 123,757
Transactions with owners recorded directly in equity
Share-based payments 24 - - - - 2,105 2,105
Tax credit in respect of 10 - - - - 2,482 2,482
share-based incentives recognised directly in equity
Capital contribution 23 - - 1,660 - - 1,660
Dividends to shareholders 12 - - - - (36,469) (36,469)
Transfer of shares to SIP - (863) - - - (863)
Exercise of share-based incentives - 883 - - (883) -
Cancellation of own shares 22 (23) - 23 - (76,071) (76,071)
Share-related expenses 22 - - - - (533) (533)
At 31 December 2015 977 (11,897) 7,771 103,520 411,045 511,416
At 1 January 2016 977 (11,897) 7,771 103,520 411,045 511,416
Total comprehensive income
Profit for the year - - - - 136,648 136,648
Transactions with owners recorded directly in equity
Share-based payments 24 - - - - 2,404 2,404
Tax credit in respect of 10 - - - - 24 24
share-based incentives recognised directly in equity
Capital contribution 23 - - 1,738 - - 1,738
Dividends to shareholders 12 - - - - (43,206) (43,206)
Transfer of shares to SIP - (517) - - - (517)
Exercise of share-based incentives - 258 - - (258) -
Cancellation of own shares 22 (22) - 22 - (88,083) (88,083)
Share-related expenses 22 - - - - (617) (617)
At 31 December 2016 955 (12,156) 9,531 103,520 417,957 519,807
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
1 General information
Rightmove plc (the Company) is a company registered in England (Company no. 6426485) domiciled in the United Kingdom (UK).
The consolidated financial statements of the Company as at and for the year ended 31 December 2016 comprise the Company and
its interest in its subsidiaries (together referred to as the Group).
The consolidated financial statements of the Group as at and for the year ended 31 December 2016 are available upon request
to the Company Secretary from the Company's registered office at Turnberry House, 30 Caldecotte Lake Drive, Caldecotte,
Milton Keynes, MK7 8LE or are available on the corporate website at plc.rightmove.co.uk.
Statement of compliance
The Group and Company financial statements have been prepared and approved by the Board of directors in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the European Union (Adopted IFRSs).
The consolidated financial statements were authorised for issue by the Board of directors on 24 February 2017.
Basis of preparation
On publishing the Company financial statements here together with the Group financial statements, the Company is taking
advantage of the exemption in s408 of the Companies Act 2006 not to present its individual statement of comprehensive
income and related notes that form a part of these approved financial statements.
The accounting policies set out below have been consistently applied to both years presented, unless otherwise stated.
Following a reassessment of the presentation of the settlement of dividends and share buybacks by Rightmove Group Limited
on behalf of the Company, the 2015 Company Statement of Cash Flows has been restated. The restatement decreased cash
generated from operating activities by £113,155,000 and decreased cash used in financing activities by £113,155,000 for the
year ended 31 December 2015. It has had no impact on net assets as at 1 January 2015 or 31 December 2015, or the
net cash flows and profit for the year ended 31 December 2015. Refer to Note 28 for further details of inter-group
settlement arrangements.
The financial statements have been prepared on an historical cost basis.
Basis of consolidation
Subsidiaries are entities controlled by the Group. Control exists when the Group has existing rights that give it the
ability to direct the relevant activities of an entity and has the ability to affect the returns the Group will receive as
a result of its involvement with the entity. In assessing control, potential voting rights that are currently exercisable
or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial
statements from the date that control commences until the date that control ceases.
During the year the Group acquired The Outside View Analytics Ltd ("Outside View"). The results of Outside View have been
consolidated from the date of acquisition, being 31 May 2016. Details of the acquisition are set out in Note 27.
Changes in accounting policies
The accounting policies applied by the Group in these consolidated financial statements are in accordance with Adopted
IFRSs and are the same as those applied by the Group in its consolidated financial statements as at and for the year ended
31 December 2015.
Amendments to IAS 1 were adopted for the first time for the financial year beginning 1 January 2016. This had no impact on
the Group financial statements.
Going concern
Throughout 2016, the Group was debt free and has continued to generate significant cash and has an overall positive net
asset position. The Group had net cash balances of £13,749,000 at 31 December 2016 (2015: £8,418,000). The Group also had
£4,026,000 of money market deposits (2015: £4,000,000).
The agreement with HSBC for a £10,000,000 committed revolving loan facility expired on 9 February 2017. This has been
replaced with a new 12 month agreement with Barclays Bank Plc for a £10,000,000 committed revolving loan facility that
expires on 12 February 2018. No amount has been drawn under either facility in either year.
During the year £131,289,000 (2015: £112,540,000) of cash was returned to shareholders via dividends and discretionary
share buy backs.
The Board of directors is confident that with the existing cash resources and banking facilities in place, coupled with the
strength of the underlying business model, the Group and the Company will remain cash positive and will have adequate
resources to continue in operational existence for a period of 12 months from the date of signing these accounts.
1 General information (continued)
Further information regarding the Group's business activities, together with the factors likely to affect its future
development, performance and position are set out in the Strategic Report on pages 1 to 26. The financial position of the
Group, its cash flows, liquidity position and borrowing facilities are described on pages 15 to 17. In addition Note 4 to
the financial statements includes the Group's objectives, policies and processes for managing its capital; its financial
risk management objectives; details of its financial instruments and its exposures to credit risk and liquidity risk.
Capital structure
The Company was incorporated and registered in England and Wales on 14 November 2007 under the Companies Act 1985 as a
private company limited by shares with the name Rightmove Group Limited, registered no. 6426485. The Company was
re-registered as a public limited company under the name Rightmove Group plc on 29 November 2007. On 28 January 2008 the
Company became the holding company of Rightmove Group Limited (formerly Rightmove plc, Company no. 3997679) and its
subsidiaries pursuant to a Scheme of Arrangement under s425 of the Companies Act 1985. The shares in the Company were
admitted to trading on the Official List of the London Stock Exchange on 28 January 2008 and the Company immediately
changed its name to Rightmove plc. Details of the share capital of the Company are disclosed in Note 22.
Judgements and estimates
The preparation of the consolidated and Company financial statements in conformity with Adopted IFRSs requires management
to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts
of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience
and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis
of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised and in any future periods, if applicable.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting
policies that have the most significant effect on the amounts recognised in the consolidated and Company financial
statements is included in the following notes:
Note 2 (j) Revenue recognition, specifically regarding the period to which services relate and the
recognition of revenue from membership offers including discounted or free periods.
Notes 16 and 24 The choice of valuation methodology and the inputs and assumptions used to calculate the initial fair
value for new share-based incentives granted and the rate at which the related deferred tax asset is measured. The key
estimates used in calculating the fair value of the options are the fair value of the Company's shares at the grant date,
expected share price volatility, risk-free interest rate, expected dividends, and weighted average expected life of the
instrument. In respect of share-based incentives granted to employees, the number of share-based incentives that are
expected to vest is based upon estimates of the number of employees that will forfeit their awards through leaving the
Group and the likelihood of any non-market performance conditions being satisfied. Management regularly performs a true-up
of the estimate of the number of shares that are expected to vest; this is dependent on the anticipated number of leavers.
Non-GAAP (Generally Accepted Accounting Principles) performance measures
In the analysis of the Group's financial performance certain information disclosed in the financial statements may be
prepared on a non-GAAP basis or has been derived from amounts calculated in accordance with IFRS but is not itself an
expressly permitted GAAP measure. These measures are reported in line with how financial information is analysed by
management. The key non-GAAP measures presented by the Group are:
· Underlying operating profit - which is defined as operating profit before share-based payments and National
Insurance on share-based incentives; and
· Underlying basic EPS - which is defined as profit for the year before share-based payments and National Insurance,
with no related adjustment for tax, divided by the weighted average number of shares in issue for the year.
The Directors believe that these non-GAAP measures provide a more appropriate measure of the Group's business performance
as share-based payments, which are a significant non-cash charge are driven by a valuation model, and NI on share-based
incentives, is driven by reference to the Rightmove plc share price and so subject to volatility, rather than operational
activity. The directors therefore consider underlying operating profit to be the most appropriate indicator of the
performance of the business and year-on-year trends. For simplicity no adjustment for tax is made within the calculation of
underlying basic EPS. The non-GAAP measures are designed to increase comparability of the Group's financial performance
year-on-year.
2 Significant accounting policies
(a) Investments
Investments in subsidiaries are held at cost less any provision for impairment in the parent Company financial statements.
(b) Intangible assets
(i) Goodwill
Goodwill arising on a business combination represents the difference between the fair value of the consideration paid and
the fair value of the net identifiable assets acquired and is included in intangible assets.
In respect of acquisitions prior to 1 January 2004, goodwill is included on the basis of its deemed cost, which represents
the amount previously recorded under UK GAAP. The classification and accounting treatment of business that occurred prior
to 1 January 2004 was not reconsidered in preparing the Group's opening IFRS statement of financial position at 1 January
2004.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is tested annually for impairment. This applies
to all goodwill arising both before and after 1 January 2004.
(ii) Research and development
The Group undertakes research and development expenditure in view of developing new products and improving the existing
property platforms. Expenditure on research activities, undertaken with the prospect of gaining new technical knowledge and
understanding, is recognised in profit or loss as incurred.
Expenditure on development activities, whereby research findings are applied to a plan or design for the production of a
new product or substantially enhanced website, is capitalised if the new product or the enhanced website is technically and
commercially feasible, the Group has sufficient resources to complete development, future economic benefits are probable
and the Group can measure reliably the expenditure attributable to the intangible asset during its development. Capitalised
costs are held as an asset in progress until such point that the asset is brought into use, at which point it is
transferred to the appropriate intangible asset category and amortisation is charged.
The expenditure capitalised includes subcontractors and direct labour. Capitalised development expenditure is stated at
cost less accumulated amortisation and accumulated impairment losses. Subsequent expenditure on capitalised intangible
assets is capitalised only when it increases the economic benefits embodied in the specific asset to which it relates. All
other expenditure is expensed when incurred.
(iii) Computer software and licences
Computer software and externally acquired software licences are capitalised and stated at cost less accumulated
amortisation and impairment losses. Amortisation is charged from the date the asset is available for use. Amortisation is
provided to write off the cost less the estimated residual value of the computer software or licence by equal annual
instalments over its estimated useful economic life as follows:
Computer software 20.0% - 33.3% per annum
Software licences 20.0% - 33.3% per annum
(iv) Market appraisal algorithm
The market appraisal algorithm identified on the acquisition of the Outside View Analytics Ltd is valued using the
reproduction cost method based on market rate salaries. Amortisation is expensed in the profit or loss on a straight-line
basis over the estimated useful economic life as follows:
Market appraisal algorithm 33.3% per annum
(c) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Depreciation is
provided to write off the cost less the estimated residual value of property, plant and equipment by equal annual
instalments over their estimated useful economic lives as follows:
Office equipment, fixtures and fittings 20.0% per annum
Computer equipment 20.0% - 33.3% per annum
Leasehold improvements remaining life of the lease
2 Significant accounting policies (continued)
(d) Impairment
The carrying value of property, plant and equipment is reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is
recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount of
non-financial assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate
largely independent cash flows, the recoverable amount is determined for the cash generating unit to which the asset
belongs.
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation but are tested for
impairment annually and whenever there is an indication that they might be impaired. An impairment loss is recognised for
the amount by which the carrying value of the asset exceeds its recoverable amount.
Investments are assessed for possible impairment when there is an indication that the fair value of the investments may be
below the Company's carrying value. When such a condition is deemed to be other than temporary, the carrying value of the
investment is written down to its fair value and the amount written off is included in profit or loss. In making the
determination as to whether a decline is other than temporary, the Company considers such factors as the duration and
extent of the decline, the investee's financial performance and the Company's ability and intention to retain its
investment for a period that will be sufficient to allow for any anticipated recovery in the investment's market value.
(e) Financial instruments
Trade receivables do not carry any interest and are initially recognised at fair value and subsequently measured at
amortised cost less any impairment loss. A provision for impairment of trade receivables is established when there is
objective evidence that the Group will not be able to collect all amounts due according to the receivables' original
terms.
Trade payables are not interest bearing and are initially recognised at fair value and subsequently measured at amortised
cost. Trade payables are classified as current liabilities unless the Group has an unconditional right to defer settlement
of the liability for at least 12 months after the reporting date.
Money market deposits are initially recorded at fair value and subsequently measured at amortised cost. They represent
deposits with a maturity of over three months.
Inter-group balances and transactions, and any unrealised income and expenses arising from inter-group transactions, are
eliminated in preparing the consolidated financial statements.
(f) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less.
(g) Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that
can be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the
obligation.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market
assessment of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised
as a finance cost.
(h) Employee benefits
(i) Pensions
The Group provides access to a stakeholder pension scheme (a defined contribution pension plan) into which employees may
elect to contribute via salary exchange. Obligations for contributions to defined contribution pension plans are recognised
as an employee benefit expense in profit or loss when they are incurred.
(ii) Employee share schemes
The Group provides share-based incentive plans allowing executive directors and other employees to acquire shares in the
Company. An expense is recognised in profit or loss, with a corresponding increase in equity, over the period during which
the employees become unconditionally entitled to acquire equity settled share-based incentives.
Fair value at the grant date is measured using either the Monte Carlo or Black Scholes pricing model as is most appropriate
for each scheme. Measurement inputs include share price on measurement date, exercise price of the instrument, expected
volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available
information), weighted average expected life of the instruments (based on historical experience and general option
behaviour), expected dividends, and risk-free interest rates (based on government bonds). Service and non-market
performance conditions attached to the awards are not taken into account in determining the fair value.
2 Significant accounting policies (continued)
For share-based incentive awards with non-vesting conditions, the grant date fair value of the share-based incentives is
measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes. When
either the employee or the Company chooses not to meet the non-vesting condition, the failure to meet the non-vesting
condition is treated as a cancellation and the cost that would have been recognised over the remainder of the vesting
period is recognised immediately in profit or loss.
(iii) Own shares held by The Rightmove Employees' Share Trust (EBT)
The EBT is treated as an agent of Rightmove Group Limited, and as such EBT transactions are treated as being those of
Rightmove Group Limited and are therefore reflected in the Group's consolidated financial statements. In particular, at a
consolidated level, the EBT's purchases of shares in the Company are charged directly to equity.
(iv) Own shares held by The Rightmove Share Incentive Plan Trust (SIP)
The SIP is treated as an agent of Rightmove plc, and as such SIP transactions are treated as being those of Rightmove plc
and are therefore reflected in the Group's consolidated financial statements. In particular, at a consolidated level, the
SIP's purchases of shares in the Company are charged directly to equity.
(v) National Insurance (NI) on share-based incentives
Employer's NI is accrued, where applicable, at a rate of 13.8%, which management expects to be the prevailing rate when
share-based incentives are exercised. In the case of share options, it is provided on the difference between the share
price at the reporting date and the average exercise price of share options. In the case of nil cost performance shares and
deferred shares, it is provided based on the share price at the reporting date.
(i) Treasury shares and shares purchased for cancellation
When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly
attributable costs, is recognised as a deduction from equity. Repurchased shares are either held in treasury or cancelled.
(j) Revenue
Revenue principally represents the amounts receivable from customers in respect of membership of the Rightmove platforms.
Agency, New Homes, Overseas and Commercial revenue comprises subscriptions for core listing fees and amounts paid for
additional advertising products. Contracts for these services are per branch or branch equivalent for Agency and per
development for New Homes. They vary in length from one month to five years, but are typically for periods of six to 12
months. Revenue is recognised over the period of the contract or as advertising products are used. Membership offers take
place from time to time and may include discounted products and free periods. These are recognised on a monthly basis over
the contract term.
Agency, Overseas and Commercial services are typically billed in advance with revenue deferred until the service
commencement date. New Homes developers are billed monthly in arrears. Where invoices are raised on other than a monthly
basis, the amounts are recognised as deferred or accrued revenue and released to the profit or loss on a monthly basis in
line with the provision of services as stipulated in the contract terms.
Data Services revenue relates to fees generated for data and valuation services under a variety of contractual
arrangements. Revenue is recognised when the service has been provided. Third party advertising revenue represents amounts
paid in respect of non-property advertising on the Rightmove platforms and is recognised in the month in which the service
is provided. Consumer Services revenue principally relates to payment for leads and is recognised when the lead is
generated. Data Services, third party advertising and Consumer Services revenue is typically billed in arrears.
(k) Segmental reporting
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and
incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components. An
operating segment's operating results are reviewed regularly by the Group's Chief Executive Officer to make decisions about
resources to be allocated to the segment and assess its performance and for which discrete financial information is
available.
(l) Leases
Operating lease rentals are charged to profit or loss on a straight-line basis over the period of the lease. Where cash is
received in exchange for entering into a lease with rates above market value, this upfront payment is deferred and released
on a straight-line basis over the lease term.
(m) Financial income and expenses
Financial income comprises interest receivable on cash balances, money market deposits and dividend income. Interest income
is recognised as it accrues, using the effective interest method. Dividend income is recognised on the date that the
Company's right to receive payment is established.
Financial expenses comprise banking facility fees and bank charges and the unwinding of the discount on provisions.
2 Significant accounting policies (continued)
(n) Taxation
Income tax on the results for the year comprises current and deferred tax. Income tax is recognised in profit or loss
except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the period net of any charge or credit posted directly to
equity, using tax rates enacted or substantially enacted at the reporting date and any adjustment to tax payable in respect
of previous periods.
Deferred tax is provided in respect of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not
provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither
accounting nor taxable profit other than in a business combination, and the differences relating to investments in
subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax
provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities,
using tax rates enacted or substantially enacted by the reporting date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available
against which the asset can be utilised.
In accordance with IAS 12, the Group policy in relation to the recognition of deferred tax on share-based incentives is to
include the income tax effect of the tax deduction in profit or loss to the value of the income tax charge on the
cumulative IFRS 2 charge. The remainder of the income tax effect of the tax deduction is recognised in equity.
(o) Dividends
Dividends unpaid at the reporting date are only recognised as a liability (and deduction to equity) at that date to the
extent that they are appropriately authorised and are no longer at the discretion of the Company. Unpaid dividends that do
not meet these criteria are disclosed in the notes to the financial statements.
(p) Earnings per share
The Group presents basic, diluted and underlying basic and diluted earnings per share (EPS) data for its ordinary shares.
Basic EPS is calculated by dividing the profit or loss attributable to equity holders of the Company by the weighted
average number of ordinary shares outstanding during the year, adjusted for own shares held. Diluted EPS is determined by
adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares
outstanding, adjusted for own shares held, for the effects of all potential dilutive instruments, which comprise
share-based incentives granted to employees. The calculation of underlying basic and diluted EPS is disclosed in Note 11.
3 IFRSs not yet applied
A number of new standards, amendments to standards and interpretations have been issued but are not yet effective for the
year ended 31 December 2016 and have not been applied in preparing these consolidated financial statements.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 Revenue from Contracts with Customers was issued in 2014 and was endorsed by the EU in 2016. IFRS 15 establishes a
comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue
recognition guidance, including IAS 18 Revenue. IFRS 15 is effective for annual periods beginning on or after 1 January
2018, with early adoption permitted. The Group plans to adopt IFRS 15 in its financial statements for the year ending 31
December 2018 and to use the practical expedients for completed contracts.
At present revenue is recognised either over time where there is continuing service provided by Rightmove to the customer
or at the point in time when the risks and rewards of ownership transfer to the customer. Under IFRS 15 revenue will be
recognised when performance obligations are satisfied. For the Group the transfer of control under IFRS 15 and satisfaction
of performance obligations is over time. We have undertaken a detailed analysis of the impact of IFRS 15 on the Group
which has shown that the recognition of revenue will be consistent with the transfer of risks and rewards to the customer
under IAS 18. We have concluded following this assessment that the implementation of IFRS 15 will not have a significant
impact on the Group's consolidated financial statements.
IFRS 16 Leases
IFRS 16 Leases was issued in January 2016, although it has not yet been endorsed by the EU. IFRS 16 introduces a single
on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-use asset representing its right to use
the underlying asset and a corresponding lease liability representing its obligation to make lease payments. There are
optional exemptions for short-term leases and leases of low value items.
3 IFRSs not yet applied (continued)
IFRS 16 replaces existing leases guidance including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a
Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a
Lease. The standard is effective for annual periods beginning on or after 1 January 2019. Early adoption is permitted for
entities that apply IFRS 15 Revenue from Contracts with Customers at or before the date of initial application of IFRS 16.
The Group has started a detailed assessment to quantify the impact on its reported assets and liabilities of adoption of
IFRS 16. So far, the most significant impact identified is that the Group will recognise new assets and liabilities for its
operating leases in respect of office premises and company cars. In addition, the nature of expenses related to those
leases will change as the straight-line operating lease expense will be replaced with a depreciation charge for
right-of-use assets and interest expense on lease liabilities. The quantitative effect will depend on the transition method
chosen, the extent to which the Group uses the practical expedients and recognition exemptions, and any additional leases
that the Group enters into. Once the detailed assessment has been completed in 2017 the Group will confirm its transition
date, approach and related quantitative information.
Other amendments
There are no other new or amended standards expected to have a significant impact on the Group's consolidated financial
statements.
4 Risk and capital management
Overview
The Group has exposure to the following risks from its use of financial instruments:
· credit risk
· liquidity risk
· market risk
This note presents information about the Group and Company's exposure to each of the above risks, the Group's objectives,
policies and processes for measuring and managing risk and the Group's management of capital. Further quantitative
disclosures are included throughout these consolidated financial statements.
The Board of directors has overall responsibility for the establishment and oversight of the Group's risk management
framework. The primary method by which risks are monitored and managed by the Group is through the monthly Executive
Management Board, where any significant new risks or change in status to existing risks will be discussed and actions taken
as appropriate.
The Group's risk management policies are established to identify and analyse the risks faced by the Group, to set
appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are
reviewed regularly to reflect changes in market conditions and the Group's activities. The Group, through its training and
management standards and procedures, aims to develop a disciplined and constructive control environment in which all
employees understand their roles and obligations.
The Audit Committee oversees how management monitors compliance with the Group's internal controls and reviews the adequacy
of the risk management framework in relation to the risks faced by the Group.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or banking institution fails to meet its contractual
obligations.
The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Group
provides credit to customers in the normal course of business. The Group provides its services to a wide range of customers
in the UK and overseas and therefore believes it has no material concentration of credit risk.
More than 90.0% (2015: 90.0%) of the Group's Agency and New Homes customers pay via monthly direct debit, minimising the
risk of non-payment. The Group establishes an allowance for impairment that represents its estimate of incurred losses in
respect of trade and other receivables based on individually identified loss exposures.
The Group's treasury policy is to monitor cash and deposit balances on a daily basis to ensure that no more than
£30,000,000 is held with any single institution.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulties in meeting the obligations associated with its
financial liabilities that are settled by delivering cash. The Group and Company's approach to managing liquidity is to
ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both
normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.
4 Risk and capital management (continued)
The Group's revenue model is largely subscription-based, which results in a regular level of cash conversion allowing it to
service working capital requirements.
The Group and Company ensure that they have sufficient cash on demand to meet expected operational expenses excluding the
potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. Throughout the
year, the Group typically had sufficient cash on demand to meet operational expenses, before financing activities, for a
period of 95 days (2015: 137 days).
The agreement with HSBC for a £10,000,000 committed revolving loan facility expired on 9 February 2017. This has been
replaced with a new 12 month agreement with Barclays Bank Plc for a £10,000,000 committed revolving loan facility that
expires on 12 February 2018. No amount has been drawn under either facility in either year.
Market risk
Market risk is the risk that changes in market prices such as foreign exchange and interest rates will affect the Group's
income. The objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimising the return on risk.
(i) Currency risk
All of the Group's sales and more than 97.0% (2015: 95.0%) of the Group's purchases are Sterling denominated, accordingly
it has no significant currency risk.
(ii) Interest rate risk
The Group and Company have no interest bearing financial liabilities. The Group is exposed to interest rate risk on cash
and money market deposit balances.
Capital management
The Board of directors' policy is to maintain an efficient statement of financial position so as to maintain investor,
creditor and market confidence and to sustain future development of the business. The Board of directors considers that the
future working capital and capital expenditure requirements of the Group will continue to be low and accordingly return on
capital measures are not key performance targets. The Board of directors monitors the spread of the Company's shareholders
as well as underlying basic EPS.
The Board's policy is to return surplus capital to shareholders through a combination of dividends and share buybacks.
(i) Dividend policy
The Board of directors has a progressive dividend policy and monitors the level of dividends to ordinary shareholders in
relation to the growth in underlying basic EPS. The Board has adopted this policy in order to align shareholder returns
with the underlying growth achieved in the profitability in the Group.
The capacity of the Group to make dividend payments is primarily determined by the level of available retained earnings in
the Company, after deduction of own shares held, and the cash resources of the Group. The retained earnings of the Company,
after deduction of own shares held, are £405,801,000 (2015: £400,808,000) as set out in the Company statement of changes in
shareholders' equity on page 95. The Group has cash and money market deposits at 31 December 2016 of £17,775,000 (2015:
£12,418,000), the majority of which are held by the principal operating subsidiary Rightmove Group Limited. The Group is
well positioned to fund its future dividends given the strong cash generative nature of the business and in 2016 cash
generated from operating activities was £169,250,000 (2015: £143,181,000) representing an operating cash conversion in
excess of 100%.
(ii) Share buybacks
The Company purchases its own shares in the market; the timing of these purchases depends on available free cash flow and
market conditions. In 2016, 2,251,711 (2015: 2,251,340) shares were bought back and were cancelled at an average price of
£39.12 (2015: £33.79).
There were no changes in the Group's approach to capital management during the year. Neither the Company nor any of its
subsidiaries are subject to externally imposed capital requirements.
Operational risk
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Group's
processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity
risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour.
Operational risks arise from all of the Group's operations.
The Group's objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the
Group's reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and
creativity.
4 Risk and capital management (continued)
The primary responsibility for the development and implementation of controls to address operational risk is assigned to
senior
management within each business unit. This responsibility is supported by the development of overall Group standards for
the management of operational risk in the following areas:
· requirements for appropriate segregation of duties, including the independent authorisation of transactions;
· requirements for the reconciliation and monitoring of transactions;
· compliance with regulatory and other legal requirements;
· documentation of controls and procedures;
· requirements for the periodic assessment of operational risks faced and the adequacy of controls and procedures to
address the risks identified;
· requirements for reporting of operational losses and proposed remedial action;
· development and regular testing of business continuity and disaster recovery plans;
· 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;
· training and professional development; and
· risk mitigation, including insurance where this is effective.
5 Operating segments
The Group determines and presents operating segments based on internal information that is provided to the Chief Executive
Officer, who is the Group's Chief Operating Decision Maker.
The Group's reportable segments are as follows:
· The Agency segment which provides resale and lettings property advertising services on Rightmove's platforms; and
· The New Homes segment which provides property advertising services to new home developers and housing associations
on Rightmove's platforms.
The Other segment which represents activities under the reportable segments threshold, comprises Overseas and Commercial
property advertising services and non-property advertising services which include our third party advertising and Consumer
Services as well as Data Services. Management monitors the business segments at a revenue and trade receivables level
separately for the purpose of making decisions about resources to be allocated and of assessing performance. All revenues
in both years are derived from third parties and there are no inter-segment revenues.
Operating costs, financial income, financial expenses and income taxes in relation to the Agency, New Homes and the Other
segment are managed on a centralised basis at a Rightmove Group Limited level and as there are no internal measures of
individual segment profitability, relevant disclosures have been shown under the heading of Central in the table below.
The Company has no reportable segments.
Agency New Homes £000 Subtotal Other Central Adjustments Total £000
£000 £000 £000 £000 £000
Year ended
31 December 2016
Revenue 168,311 33,893 202,204 17,789 - - 219,993
Operating profit(1) - - - - 166,240 (4,593)(2) 161,647
Depreciation and amortisation - - - - (1,619) - (1,619)
Financial income - - - - 109 - 109
Financial expenses - -
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