Rightmove Regulatory News (RMV)

Embargoed until 07.00 on 27 July 2018

Half year results for the six months ended 30 June 2018

Financial highlights

· Revenue up 10% year on year driven by continued growth in our Agency and New Homes businesses

· Underlying operating profit(1) up 11% and operating profit up 12%

· Underlying basic earnings per share(2) up 13% and basic earnings per share up 14%

· £76.9m (2017: £72.0m) of cash returned to shareholders through dividends and share buybacks in the period

· Interim dividend increased by 3.0p to 25.0(3)p (2017: 22.0p) per ordinary share, up 14%

Operational Highlights

· Stable membership numbers with Agency and New Homes customers up slightly since the start of the year to 20,450 (31 December 2017: 20,427)

· 1.2 million UK residential properties advertised on Rightmove which is a significant stock advantage compared to any other UK portal

· Continued traffic growth with visits up 5% year on year, averaging 139 million(4) visits per month and time on site up 4% year on year and averaging 1.1 billion(4)  minutes per month

· Average revenue per advertiser (ARPA) up £76 on the same period a year ago to £987(6) per month

· Our tenant passport proposition is in trial, in line with our strategy of providing more solutions to deliver efficiency savings for our customers

Guidance and outlook

· Full year ARPA growth expected to be around £80 year on year, with ARPA growth more weighted to the second half of the year than in 2017 due to the timing of 2018 pricing activities.

· Confident in delivering the Board's expectations for the full year.

Peter Brooks-Johnson, Chief Executive Officer, said:

"In the first half of 2018 a record 1.1 billion minutes per month were spent on Rightmove. Home hunters continue to turn to us first to search and research in the only place you can see virtually the whole of the UK property market. Our restless innovation delivers the fastest and easiest way to 'find your happy' from the 1.2 million UK residential properties on Rightmove leading to consumers sending over 22 million enquiries in the period.We're focused on helping our customers succeed by delivering the most significant and effective exposure for their properties and brands and also by being the largest source of high quality leads. In addition, Rightmove helps them drive operational efficiencies through software, tools and support which leverage our unique data and insight across the UK property market.

The continued stable membership numbers and our subscription advertising model, together with the strength of the Rightmove offer for both customers and consumers, give us confidence in delivering expectations for the current year despite muted sentiment towards the UK property market."

Half Year StatementOur strategy and operating priorities

Our aim is to be the place where people turn to first and engage with most when searching, researching and moving home; to make it easy for them; and to provide the most significant and effective exposure for our customers' brands and properties. By combining our commitment to innovative software, data analysis capability and our unique view of the whole market, we also help our customers drive operational efficiencies and inform their business decisions.

Our brand building continues to be focused on national TV, through our partnership with Channel 4, augmented with highly targeted outdoor media, 400 branded taxis and continued partnerships with the Evening Standard and Time Out in London.

In the first half of the year Rightmove attracted a record 830(4) million visits, resulting in home hunters spending 6.5(4) billion minutes on our platforms. Our market share of traffic across both desktop and mobile was 74%(5) with the mobile component even higher.

Rightmove keeps investing to deliver the most engaging experience for home movers and our culture of restlessness continues to drive improvement and innovation. In addition to the hundreds of updates to our platforms released each month, recent improvements and innovations include: 'Keyword sort', which allows home hunters to prioritise those properties which meet their diverse needs from the 1.2m homes for sale or rent listed on Rightmove and the alpha launch of our tenant passport, which aims to make the process of renting a property faster and more efficient by enabling potential tenants to collate in advance all the information needed for the process of applying for a tenancy.

We also continue to create innovative tools and products for our customers to help them be more efficient. The number of leads from our instruction lead products, Local Valuation Alert and Rightmove Discover, in the first half of 2018 increased by nearly 30% compared to the first six months of 2017 following the launch of Rightmove Discover in July 2017. Rightmove Discover uses predictive analytics to identify the most likely potential sellers in a local area within the next six months and markets to them on behalf of an agent.

The roll out of the latest version of the market leading Surveyors Comparable Tool has begun. The tool is used by surveyors to support their valuations in the majority of all successful mortgage applications. The tool searches over 72m records to find comparable properties and is used 200,000 times per month. The tool now supports our surveyor customers' increasingly mobile ways of working both on and offline giving them flexible access to key data and allowing them to have more choice on where and when they work.

Looking forward we have begun early trials of a new tool to help customers become more efficient, 'Opportunity Manager', which analyses behavioural data combined with advanced agent training to help agents prioritise leads to make the most of the enquiries they already receive. Using our proprietary Data Services models, the tool allows agents to market to the high priority leads utilising an indicative valuation range.

In addition to the support customers receive from their dedicated Rightmove Account Manager we continue to help our customers with training. The first six months saw our webinar and seminar series augmented with sessions dedicated to helping customers prepare for the recently introduced GDPR regulations, in addition to our range of webinars covering diverse topics such as "How to create the ultimate listing", "Sales Progression" and "Cyber Security for agents". Our webinars and seminars were attended by nearly 11,000 agents in the first half of 2018. We now have over 10,000 agents registered on "The Rightmove Hub", our video on demand platform offering both the ability to catch up with seminars and events and live streaming of selected industry events such as The Property Ombudsman conference.

Evidencing the value property professionals see in our products and services, despite a subdued property market, they continued to increase their spend on Rightmove products and packages to help drive and support their business ambitions resulting in half year ARPA increasing by £76 to £987(6) per month.

AgencyAgency ARPA was up £75 year on year at £940(7) (2017: £865) per office per month as a result of further adoption of additional advertising products and price increases to over half of our customers. Revenue increased across our range of additional advertising products with good adoption of our Enhanced package, launched in the second half of 2017. At 30 June 2018 nearly 1,500 branches were Enhanced members, spending a minimum of £1,250 per month. The number of Agency offices was broadly unchanged, at 17,585(31 December 2017: 17,626) since the start of the year.

New HomesNew Homes ARPA increased by £76 year on year to £1,286(8) (2017: £1,210) per development per month with the growth being driven by the sale of additional advertising products, including email campaigns, and by increases to core membership prices. The number of developments was up 2% since the start of the year at 2,865 (31 December 2017: 2,801).

Financial performance

Revenue

Revenue grew to £131.1m (2017: £119.5m) up 10% on the previous year.

Our Agency business revenue increased by £8.7m year on year, driven by growth in spend on additional advertising products and packages, as well as membership fee price increases.

Revenue from our New Homes business was up £1.9m year on year as a result of continued growth in development numbers together with increases to core membership prices and further adoption of additional advertising products, including email campaigns.

Other revenue, which includes overseas, data services, commercial and third party advertising services, increased by £1.0m in the first half of 2018, driven primarily by growth in our commercial business.

Underlying operating profitUnderlying operating profit(1) increased by 11% to £101.0m (2017: £91.0m) delivering an underlying operating margin(1) of 77.0% (2017: 76.2%). Underlying operating costs(1) in the first half increased to £30.1m (2017: £28.5m) reflecting general wage inflation together with ongoing investment in marketing and technology costs. Full year costs are likely to be slightly more weighted to the second half principally due to the timing of recruitment of additional headcount and the phasing of planned marketing activities.

Underlying operating profit(1) is reported before share-based payments, which are a significant non-cash charge driven by a valuation model, and National Insurance (NI) on share-based incentives, which 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.

Share-based payments and NI on share-based incentivesIn accordance with IFRS 2, a non-cash charge of £2.1m (2017: £2.7m) was charged to income representing the amortisation of the fair value of share-based incentives granted. NI is being accrued, where applicable, on the potential employee gain on share-based incentives granted. Based on an increase in the closing share price from £45.00 at 31 December 2017 to £53.10 at 30 June 2018 in respect of the outstanding share-based incentives granted, together with the actual NI on share-based incentives exercised in the period, there was a charge of £0.7m (2017: £0.7m).

Earnings per share (EPS)Underlying basic EPS(2) rose 13% to 90.6p (2017: 80.3p), with basic EPS increasing 14% to 87.5p (2017: 76.6p), reflecting the growth in profits together with the benefit of our ongoing share buyback programme which reduced the weighted average number of ordinary shares in issue to 90.6m (2017: 92.4m).

Cash flow and share buybacksRightmove continues to see strong cash generation and to return its free cash generated to shareholders

Cash generated from operating activities increased by £6.9m to £96.7m (2017: £89.8m), with cash conversion remaining

high(9).

We bought back and cancelled 1.0m shares (2017: 1.0m shares) in the period at a cost of £44.4m(2017: £42.5m) bringing the total cash returned to shareholders to nearly £950m since our flotation in March 2006. We have now bought back 43m shares since we commenced our share buyback programme in 2007 reducing our share capital by over a third.

The closing Group cash and money market deposit balance was £28.1m (31 December 2017: £25.0m).

Subdivision of shares

We will today issue a circular to all shareholders seeking approval at a General Meeting to be held on22 August 2018 to subdivide the Company's ordinary shares of 1p each into ten new ordinary shares of 0.1p each. This will result in shareholders holding ten new ordinary shares for each existing ordinary share they hold immediately prior to the subdivision. This is anticipated to be effective for trading commencing on31 August 2018.

The Board believes that the subdivision will benefit all shareholders and make the Company's shares more accessible to smaller investors, including Rightmove employees who are members of the Company's share schemes. The subdivision may also improve the liquidity of the Company's shares and reduce in percentage terms the bid/offer spread in the Company's shares.

DividendIn June 2018, the Company paid the final dividend for the year ended 31 December 2017 of £32.6m. The Board has announced an interim dividend of 25.0p per ordinary 1p share (2017: 22.0p), an increase of 14%, as part of its commitment to a progressive dividend policy, broadly reflecting the growth in underlying EPS. Subject to the subdivision of shares being approved by shareholders at the General Meeting to be held on 22 August 2018, the dividend will be recalculated to be 2.5p per 0.1p ordinary share.

The interim dividend will be paid on 2 November 2018 to members on the register on 5 October 2018.

Principal risks and uncertainties

As set out within the Strategic Report within the 2017 Annual Report, the Group has identified the following principal risks and uncertainties:

The macroeconomic environmentThe macroeconomic environment may impact consumer confidence in the UK housing market, which in turn may impact property transaction levels.

Substantially fewer housing transactions than the norm may lead to a reduction in the number of Agency offices or New Home developments, both of which are major determinants of Rightmove's revenue. Housing transactions in the first half of 2018 were down 5%(10) year on year against the first half of 2017.

A contraction in the volume of transactions in the UK housing market could lead to a reduction in advertisers' marketing budgets which could reduce the demand for the Group's property advertising products. ARPA was up £76 year on year to £987(5) in the period reflecting continued adoption of advertising products and price rise activities.

Our strong market position, the strength of our value proposition relative to all other forms of home advertising and relationships with our customers, continue to position us well.

Competitive environmentThe Group operates in a competitive marketplace with attractive margins and low barriers to entry. This may result in increased competition from existing competitors or new entrants targeting the Group's primary revenue markets. Increased competition may impact Rightmove's ability to grow revenue due to the potential loss of audience, advertisers and demand for additional advertising products.

We have always operated in a competitive environment and have demonstrated that we can continue to grow alongside competition from existing players and new entrants to the market. Customer numbers are up slightly since the beginning of the year to 20,450 and we have continued to see good adoption of our additional advertising products, including higher value packages.

We have continued to invest in the best people and training for our account management teams together with market intelligence tools and reporting to ensure that we stay close to our customers and help them run their businesses more efficiently.

New or disruptive technologies and changing consumer behavioursRightmove operates in a fast-moving online marketplace. Failure to innovate or adopt new technologies or failure to adapt to changing customer business models and evolving consumer behaviour may impact the Group's ability to offer the best products and services to its advertisers and the best consumer experience.

We continue to innovate to make Rightmove even more compelling to home movers and advertisers. Our market share amongst the top four property websites on a time basis is 74%(5) and consistent with being a multi-platform digital leader, two thirds of time spent on Rightmove is now on mobile devices. Cyber security and IT systemsThe Group has a high dependence on technology and internal IT systems. In today's digital world there are increased risks associated with external cyber attacks which could result in unavailability of our platforms. Any loss of website availability or theft or misuse of data held within the Group's databases and IT systems could have both reputational and financial implications for the Group.

Rightmove operates from three separate data centres to ensure optimal performance and business continuity capability. Disaster recovery and business continuity plans are subject to regular review and testing and backups, penetration testing and distributed denial of service attack procedures are routinely undertaken.

We continue to invest in security systems and regular staff training and to monitor external threats through updates from external specialists and collaboration with other online organisations.Securing and retaining the right talentOur continued success is dependent on our ability to attract, recruit, retain and motivate our highly skilled workforce. The inability to recruit and retain talented people could impact our ability to deliver growth or result in a loss of competitive advantage.

Our latest employee survey showed continued strong levels of employee engagement with 90% of Rightmovers thinking that "Rightmove is a great place to work". We continue to invest in people, particularly in sales and technology roles, to deliver future growth and ensure that rewards are competitive including a blend of short and long-term incentives for senior management and the ability for all employees to participate in the success of the Group through the share incentive plan.

The EU referendum

The result of the UK's EU referendum in 2016 increased the level of macroeconomic uncertainty and could increase the likelihood of the housing market macroeconomic risks set out on page 5.

During 2018 the Board has continued to assess the impact of the EU referendum result on the Group and its potential implications and has concluded that there has been no material change to the severity of this risk. In particular, the directors considered the following:

· The Rightmove business is largely subscription based and is therefore less susceptible to short-term shocks or variations in the property market or wider economy;

· Around two-thirds of our estate agency customers also provide lettings services which may mitigate the impact of any downturn in the property market on their business; and

· A reduction in housing market activity increases the propensity for advertisers to evaluate their marketing spend both offline and on other portals and we remain confident in the strength of the Rightmove value proposition.

The directors believe that our strong market position and relationships with our customers, and the value embedded in our membership continue to position us well providing that housing transaction volumes do not take a sharp downward turn.

Next trading update

Our next scheduled reporting date is 1 March 2019 when we will announce our results for the year ending31 December 2018.

Scott Forbes Peter Brooks-Johnson

Chairman Chief Executive Officer

27 July 2018

Notes to the half year results for the six months ended 30 June 2018

(1) Before share-based payments and NI on share-based incentives as share-based payments are a non-cash charge and NI on share-based incentives is subject to volatility based on the Rightmove plc share price.

(2) Before share-based payments, NI on share-based incentives and no related adjustment for tax as share-based payments are a non-cash charge and NI on share-based incentives is subject to volatility based on the Rightmove plc share price. Underlying basic earnings per share is therefore considered to be more representative of the operating performance of the business and the year on year trends. A reconciliation between basic earnings per share and underlying basic earnings per share is set out in Note 7.

(3) Subject to approval of the subdivision of shares by shareholders at the General Meeting to be held on 22 August 2018, the dividend will be recalculated to be 2.5p per 0.1p ordinary share.

(4) Source: Google Analytics.

(5) Source: comScore.

(6) ARPA is calculated as Agency and New Homes revenue for the six-month period divided by the average number of Agency and New Homes branches/developments for the period of 20,410 (2017: 20,169). Increases in ARPA have been a significant component of revenue growth in recent years and hence ARPA is disclosed as a key performance indicator of the business.

(7) Agency ARPA is calculated as Agency revenue for the six-month period divided by the average number of Agency branches for the period of 17,615 (2017: 17,460).

(8) New Homes ARPA is calculated as New Homes revenue for the six-month period divided by the average number of developments for the period 2,795 (2017: 2,709).

(9) Cash generated from operating activities of £96.7m compared to operating profit as reported in the profit or loss of £98.2m.

(10) Source: HMRC transactions for England, Wales and Scotland as published on 24 July 2018.

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF YEAR REPORT 2018

We confirm that to the best of our knowledge:

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

· The interim management report includes a fair review of the information required by:(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed consolidated interim financial statements; and a description of the principal risks and uncertainties for the remaining six months of the financial year; and(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Group during that period; and any changes in the related party transactions described in the last annual report that could do so.

By order of the Board of directors

Scott Forbes Peter Brooks-Johnson

Chairman Chief Executive Officer

27 July 2018

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOMEfor the six months ended 30 June 2018 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITIONas at 30 June 2018 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWSfor the six months ended 30 June 2018

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITYfor the six months ended 30 June 2018 

NOTES

1 General information

Rightmove plc (the Company) is a Company registered in England (Company no. 6426485) domiciled in the United Kingdom (UK). The condensed consolidated interim financial statements of the Company as at and for the six months ended 30 June 2018 comprise the Company and its interest in its subsidiaries (together referred to as the Group). Its principal business is the operation of the Rightmove platforms, which have the largest audience of any UK property portal (as measured by time on site). 

The consolidated financial statements of the Group as at and for the year ended 31 December 2017 are available upon request to the Company Secretary from the Company's registered office at 2 Caldecotte Lake Business Park, Caldecotte Lake Drive, Caldecotte, Milton Keynes, MK7 8LE or are available on the corporate website at plc.rightmove.co.uk.

Basis of preparation

These interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting, and should be read in conjunction with the Group's last annual consolidated financial statements as at and for the year ended 31 December 2017 ('last annual financial statements'). They do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual financial statements.

This is the first set of the Group's financial statements where IFRS 9, IFRS 15 and IFRS 16 have been applied. Changes to significant accounting policies are described in Note 2.

The condensed consolidated interim financial statements were approved by the Board of directors on 27 July 2018. The half year results for the current and comparative period are unaudited. The auditor, KPMG LLP, has carried out a review of the condensed consolidated interim financial statements and their report is set out at the end of this document.The comparative figures as at and for the year ended 31 December 2017 are extracted from the Group's statutory accounts for that financial year. Those accounts have been reported on by the auditor and delivered to the Registrar of Companies. The report of the auditor was:(i) unqualified;(ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report; and(iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.The Group's financial risk management objectives and policies are consistent with that disclosed in the consolidated financial statements as at and for the year ended 31 December 2017.

Going concern

Throughout the period, the Group was debt free, has continued to generate significant cash and has cash balances of £23,988,000 at 30 June 2018 (31 December 2017: £20,930,000). The Group also had £4,067,000

(31 December 2017: £4,045,000) of money market deposits.

The Group agreed to extend a 12 month agreement with Barclays Bank plc for a £10,000,000 committed revolving loan facility during the period. This agreement will expire on 12 February 2019.After making enquiries the Board of directors has a reasonable expectation that the Group and the Company have adequate resources and banking facilities to continue in operational existence for the foreseeable future. Accordingly, the Board of directors continues to adopt the going concern basis in preparing these condensed consolidated interim financial statements.

Non-GAAP (Generally Accepted Accounting Principles) performance measures

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

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

• Underlying basic earnings per share (EPS) - which is defined as profit for the year before share-based payments and National Insurance on share-based incentives, 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 are a significant non-cash charge and 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 reflecting 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 Changes in significant accounting policies

Except as described below, the accounting policies applied in these interim financial statements are the same as those applied in the Group's consolidated financial statements as at and for the year ended 31 December 2017.

The Group has initially adopted IFRS 9 Financial Instruments, IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases from 1 January 2018. IFRS 9, IFRS 15 and IFRS 16 are effective from 1 January 2018, with IFRS 15 and IFRS 16 having a material effect on the Group's financial statements. The changes in accounting policies will be reflected in the Group's consolidated financial statements as at and for the year ending 31 December 2018.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaced IAS 18 Revenue and related interpretations.

The Group has adopted IFRS 15 using the cumulative effect method, with the effect of initially applying this standard recognised at the date of initial application (i.e. 1 January 2018). Accordingly, the information presented for 2017 has not been restated - i.e. it is presented, as previously reported, under IAS 18 and related interpretations.

Under IAS 18 revenue was recognised either over time where there was continuing service provided by Rightmove to the customer or at the point in time when the risks and rewards of ownership transferred to the customer. Under IFRS 15 revenue is recognised when performance obligations are satisfied. For the Group the transfer of control under IFRS 15 and satisfaction of performance obligations remains consistent with the transfer of risks and rewards to the customer under IAS18. Consequently, there were no profit or loss impacting adjustments required on application of IFRS 15.

On adoption of IFRS 15 the Group no longer recognises a trade receivable and a corresponding deferred income balance for amounts billed in advance for services which have not yet been provided. IFRS 15 classifies this as a contract liability, as the Group has not yet delivered the promised services to its customer, and a contract asset. IFRS 15 requires the offset of contract assets and contract liabilities within the same contract. Overall this has resulted in no adjustment at the net asset level.

Accounting policy for revenue

Revenue is measured based on the consideration specified in a contract with a customer and is recognised when a customer obtains control of the services.

Revenue principally represents the amounts receivable from customers in respect of membership of the Rightmove platforms. Rightmove also provides non property advertising services, including Data Services and third party advertising. Revenue is recognised as services are provided to customers.

The below table covers the different types of products and services offered to customers along with the nature and timing of satisfaction of performance obligations:

IFRS 16 Leases

IFRS 16 Leases was issued in January 2016, and was endorsed by the EU in 2017. 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. The Group has decided to early adopt this standard using the modified retrospective approach with a date of initial application to the Group of 1 January 2018. Comparative information has not been restated and continues to be reported under IAS 17.

Accounting policy for leases

At inception of a contract, the Group assess whether or not a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. For contracts entered into before 1 January 2018, the Group determined whether the arrangement was or contained a lease based on the assessment of whether fulfilment of the arrangement was dependent on the use of specific asset and the arrangement had conveyed a right to use the asset.

When a lease is recognised in a contract the Group recognises a right-of-use asset and a lease liability at the lease commencement date.

The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease prepayments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain re-measurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. The lease liability is measured at amortised cost using the effective interest method. It is re-measured when there is a change in future lease payments arising from a change in an index or rate, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option.

The Group presents right-of-use assets in property, plant and equipment and leased liabilities in lease liabilities in the Statement of Financial Position.

The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less and leases of low-value assets, including IT equipment. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

2 Changes in significant accounting policies (continued)

IFRS 9 Financial Instruments

IFRS 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standard replaces IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 is effective for annual periods beginning on or after 1 January 2018 and simplifies the classification of financial assets for measurement purposes. Comparative information has not been restated and continues to be reported under IAS 39.

There is no impact on the profit or loss or statement of financial position from the adoption of IFRS 9.

Accounting policy for Financial Instruments

IFRS 9 eliminates the previous IAS 39 category for financial assets of loans and receivables. Under IFRS 9, on initial recognition, a financial asset is classified as measured at: amortised cost, fair value through profit or loss or fair value though other comprehensive income. 

A financial asset is measured at amortised cost if it meets both of the following conditions: it is held within a business model whose objective is to hold assets to collect contractual cash flows; and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Under IFRS 9 trade receivables, without a significant financing component, are classified and held at amortised cost, being initially measured at the transaction price and subsequently measured at amortised cost less any impairment loss.

The Group has elected to measure loss allowances for trade receivables and contract assets at an amount equal to lifetime expected credit losses. Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group's historical experience and informed credit assessment and including forward-looking information. The Group performs the calculation of expected credit losses separately for each customer group.

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due. The Group assesses whether a financial asset is in default on a case by case basis when it becomes probable that the customer is unlikely to pay its credit obligations.

The following table provides information about the exposure to credit risk and expected credit losses for trade receivables as at 1 January 2018.

The loss allowance as a percentage of gross carrying amount within the category 61-90 days is higher than other categories due to a specific provision for one customer.

2 Changes in significant accounting policies (continued)

The following table summarises the impacts of adopting IFRS 15, IFRS 16 and IFRS 9 on the Group's Interim Consolidated Statement of Financial Position as at 30 June 2018 and its Interim Consolidated Statement of Cash Flows for the six-month period ended 30 June 2018. Adoption of IFRS 15 and IFRS 9 had no impact on the Condensed Consolidated Interim Statement of Comprehensive Income and IFRS 9 had no impact on the Interim Consolidated Statement of Financial Position and the Interim Consolidated Statement of Cash Flows.

Impact on the Condensed Consolidated Interim Statement of Comprehensive Income

2 Changes in significant accounting policies (continued)

 Impact on the Condensed Consolidated Interim Statement of Financial Position

2 Changes in significant accounting policies (continued)

 Impact on the Condensed Consolidated Interim Statement of Cash Flows

3 Judgements and estimates

The preparation of the condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in future periods if applicable.In particular information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the condensed consolidated financial statements is included in the following notes: 

Notes 7 and 9 The choice of valuation methodology and the inputs and assumptions used to calculate the initial fair value for new share-based incentives granted and the rate at which the related deferred tax asset is measured. The key estimates used in calculating the fair value of the share-based incentives are the fair value of Company's shares at the grant date, expected share price volatility, risk-free interest rate, expected dividends, and weighted average expected life of the instrument. In respect of share-based incentives granted to employees, the number of share-based incentives that are expected to vest is based upon estimates of the number of employees that will forfeit their awards through leaving the Group and the likelihood of any non-market performance conditions being satisfied. Management regularly performs a true-up of the estimate of the number of shares that are expected to vest; this is dependent on the anticipated number of leavers.

 4 Operating segmentsThe Group determines and presents operating segments based on internal information that is provided to the Chief Executive Officer, who is the Group's Chief Operating Decision Maker.The Group's reportable segments are as follows:

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

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

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

Management monitors the business segments at a revenue and trade receivables level separately for the purpose of making decisions about resources to be allocated and of assessing performance. All revenues in all periods are derived from third parties and there are no inter-segment revenues.Operating costs, financial income, financial expenses and income taxes in relation to the Agency, New Homes and the Other segment are managed on a centralised basis at a Rightmove Group Limited level and as there are no internal measures of individual segment profitability, relevant disclosures have been shown under the heading of Central in the table overleaf. 

4 Operating segments (continued)

(1) Operating profit is stated after the charge for depreciation and amortisation.

(2) Operating profit for the six months ended 30 June 2018 includes charges for share-based payments charge of £2,045,000 (30 June 2017: £2,714,000) and for NI on share-based incentives of £743,000

(30 June 2017: £736,000).

(3) The only segment assets that are separately monitored by the Chief Operating Decision Maker relate to trade receivables net of any associated provision for impairment. All other segment assets are reported on a centralised basis.

(4) These adjustments reflect the reclassification of credit balances in accounts receivable and debit balances in accounts payable made on consolidation for statutory accounts purposes.

(5) Capital expenditure consists of additions of property, plant and equipment and intangible assets.

(6) Operating profit for the year ended 31 December 2017 includes share-based payments charge of £4,836,000 and NI charge on share-based incentives of £1,228,000

5 Revenue

The Group's operations and main revenue streams are those described in the last annual financial statements. The Group's revenue is derived from contracts with customers.

The nature and effect of initially applying IFRS 15 on the Group's interim financial statements are disclosed in Note 2.

Disaggregation of revenue

In the following table, revenue is disaggregated by property and non-property advertising revenue. The table also includes a reconciliation of the disaggregated revenue with the Group's reportable segments (see Note 4).

Contract balances

The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.

* The Group recognised the cumulative effect of initially applying IFRS 15 as an adjustment to the opening balance at

1 January 2018. The movement recognised in the cash flow for the 9 months ended 30 June 2018 is the difference

between the reported contract asset and contract liability balances at 30 June 2018 and the related balances on adoption of

IFRS 15.

The contract assets primarily relate to the Group's rights to consideration for services provided but not invoiced at the reporting date. The contract assets are transferred to receivables when invoiced and the rights have become unconditional.

The contract liabilities primarily relate to the advance consideration received from Estate Agency, Overseas and Commercial customers, for which revenue is recognised as or when the services are provided.

The full amount of £2,724,000 recognised in contract liabilities at 1 January 2018 has been recognised as revenue for the six months ended 30 June 2018.

6 Share-based payments 

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

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

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

The total share-based payments charge for the six months ended 30 June 2018 relating to all share-based incentive plans was £2,045,000 (2017: £2,714,000).

NI is being accrued, where applicable, at a rate of 13.8%, which management expects to be the prevailing rate when the awards are exercised, based on the share price at the reporting date. The total NI charge for the six months ended 30 June 2018 relating to all awards was £743,000 (2017: £736,000). The share price at 30 June 2018 was £53.10 (30 June 2017: £42.50).

Approved and Unapproved Plans

There has been no award of share options since 5 March 2010.Performance Share Plan (PSP)

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

36,480 PSP awards were made on 28 February 2018 (the Grant Date) subject to Earnings Per Share (EPS) and Total Shareholders Return (TSR) performance. Performance for all 2018 awards will be measured over three financial years (1 January 2018 - 31 December 2020). The vesting in March 2021 (Vesting Date) of 25% of the 2018 PSP award will be dependent on a relative TSR performance condition measured over a three year performance period and the vesting of the 75% of the 2018 PSP award will be dependent on the satisfaction of an EPS growth target measured over a three year performance period. The PSP awards have been valued using the Monte Carlo model for the TSR element and the Black Scholes model for the EPS element and the resulting charge is being spread over the three year period between Grant Date and Vesting Date.

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

Deferred share bonus plan (DSP)

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

Following the achievement of 60% of the 2017 internal performance targets, 43,212 nil cost deferred shares were awarded to executives and senior management on 28 February 2018 with the right to the release of the shares deferred until March 2020.

Share Incentive Plan (SIP)

In November 2014, the Group established the Rightmove Share Incentive Plan (SIP). Employees were offered 50 free shares (2017: 50) subject to a three year service period (the Vesting Period), with effect from 1 January 2018. The SIP awards have been valued using the Black Scholes model and the resulting share-based payments charge spread evenly over the Vesting Period of three years. The SIP shareholders are entitled to a dividend paid in cash over the Vesting Period.

The Rightmove Employees' Share Trust (EBT) used surplus cash held by the EBT to purchase 20,000 shares in December 2017 to fund the share requirements of the SIP. These shares were subsequently transferred into the SIP Trust in 2018.

7 Earnings per share (EPS)

Weighted average number of ordinary shares (basic) 

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

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

8 DividendsCompany dividendsDividends declared and paid by the Company were as follows: 

8 Dividends (continued)

After the period end an interim dividend of 25.0p (2017: 22.0p) per qualifying ordinary 1p share being £22,589,000 (2017: £20,104,000) was proposed by the Board of directors.

Subject to the proposed subdivision of the ordinary shares of the Company set out on page 4 being approved by the shareholders of the Company at a General Meeting to be held on 22 August 2018, the dividend will be recalculated to be 2.5p per 0.1p ordinary share.The 2017 final dividend paid on 1 June 2018 was £32,559,000 (2016 final dividend: £29,507,000) being a difference of £199,000 compared to that reported in the 2017 Annual Report which was due to a decrease in the ordinary shares entitled to a dividend between 31 December 2017 and the final dividend record date of 4 May 2018.The terms of the EBT provide that dividends payable on the ordinary shares held by the EBT are waived.No provision was made for the interim dividend in either period and there are no income tax consequences. 

9 TaxationThe income tax expense of £18,800,000 (2017: £16,792,000) is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year applied to the profit before tax for the six month period. The Group's consolidated effective tax rate for the six months ended 30 June 2018 was 19.2% (2017: 19.2%). The difference between the standard rate of 19.0% and the effective rate of 19.2% at 30 June 2018 is attributable to disallowable expenditure of 0.1% and a reduction in the rate at which the deferred tax asset is recognised of 0.1% (2017: 0.1%).The deferred tax asset of £5,470,000 (2017: £7,424,000) is presented net on the balance sheet in so far as a right of offset exists. The deferred tax asset of £5,484,000 at 30 June 2018 (2017: £7,455,000) is in respect of equity settled share-based incentives and depreciation in excess of capital allowances. The deferred tax asset arising on equity settled share-based incentives was recognised in profit or loss to the extent that the related equity settled share-based payments charge was recognised in the statement of comprehensive income. The deferred tax liability of £14,000 at 30 June 2018 (2017: £31,000) is in respect of the intangible asset recognised on acquisition of The Outside View Analytics Ltd.

A reduction in the UK corporation tax rate from 20% to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) was substantively enacted on 26 October 2015, and an additional reduction to 17% (effective 1 April 2020) was substantively enacted on 6 September 2016. This will reduce the Group's future tax charge accordingly. The deferred tax asset at 30 June 2018 has been calculated at the rate of 18% which represents the average expected rate at which the net deferred tax asset will reverse in the future.

10 Leases

The Group leases assets including land and buildings and motor vehicles that are held within property, plant and equipment. Information about leases for which the Group is a lessee is presented below.

10 Leases (continued)

11 Trade and other receivables 

12 Trade and other payables 

13 Reconciliation of movement in capital and reservesShare buy backIn June 2007, the Company commenced a share buyback programme to purchase its own ordinary shares. The total number of shares bought back in the six months to 30 June 2018 was 995,404 (2017: 1,039,297 shares) representing 1.1% (2017: 1.1%) of the ordinary shares in issue (excluding shares held in treasury). All the shares bought back in the period were cancelled. The shares were acquired on the open market at a total consideration (excluding costs) of £44,365,000 (2017: £42,490,000). The maximum and minimum prices paid were £53.00 (2017: £43.00) and £41.48 (2017: £38.48) per share respectively.

13 Reconciliation of movement in capital and reserves (continued)

Own shares held - £000

Own shares held - number of shares

13 Reconciliation of movement in capital and reserves (continued)

(a) EBT shares reserve

This reserve represents the cost of own shares acquired by the EBT less any exercises of share-based incentives.

At 30 June 2018, the EBT held 242,688 (2017: 292,962) ordinary shares in the Company of £0.01 each, representing 0.3% (2017: 0.3%) of the ordinary shares in issue (excluding shares held in treasury). The market value of the shares held by the EBT at 30 June 2018 was £12,887,000 (2017: £12,451,000).

(b) SIP shares reserve

In November 2014, the Group established the Rightmove SIP Trust SIP. This reserve represents the cost of acquiring shares less any exercises or releases of SIP awards. On 5 January 2018 employees of the Group were offered 50 free shares (3 January 2017: 50) subject to a three year service period.

At 30 June 2018 the SIP Trust held 66,500 (2017: 68,750) ordinary shares in the Company of £0.01 each, representing 0.07% (2017: 0.07%) of the ordinary shares in issue (excluding shares held in treasury). The market value of the shares held in the SIP Trust at the period end was £3,531,000 (30 June 2017: £2,922,000).

(c) Treasury Shares

This represents the cost of acquiring shares held in treasury less any exercises of share-based incentives. These shares were bought back in 2008 at an average price of £4.76 and may be used to satisfy certain share-based incentive awards.

Other reserves

This represents the Capital Redemption Reserve in respect of own shares bought back and cancelled. The movement in other reserves of £10,000 (2017: £10,000) comprises the nominal value of ordinary shares cancelled during the period. 

Retained earnings

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

14 Related partiesInter-group transactions with subsidiariesDuring the period Rightmove plc was charged interest of £109,000 (2017: £107,000) by Rightmove Group Limited in respect of balances owing under the inter-group loan agreement dated 30 January 2008. As at 30 June 2018 the balance owing under this agreement was £22,958,000 (2017: £29,153,000) including capitalised interest.On 26 June 2018 Rightmove Group Limited declared an interim dividend of 60p per ordinary share to the Company. The dividend of £77,640,000 was settled via a reduction in the inter-group loan balance owed by Rightmove plc to Rightmove Group Limited. Rightmove Group Limited also declared a dividend in specie of £761,000 (2017: £741,000), representing the cost of the SIP shares transferred from the EBT to the SIP.

Inter-group transactions between subsidiaries

Following its acquisition on 31 May 2016, The Outside View Analytics Ltd became a related party to Rightmove Group Limited. Since acquisition Rightmove Group Limited has settled liabilities on behalf of The Outside View Analytics Ltd and the balance owing under an inter-group loan agreement dated 13 June 2016 was £25,000 as at 30 June 2018 (2017: £23,000).

Transactions with key management staff

There were no transactions with key management in any period.

ADVISERS AND SHAREHOLDER INFORMATION 

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

Link Asset ServicesThe Registry34 Beckenham RoadBeckenhamKentBR3 4TULink Asset Services is a trading name of Link Market Services Limited.

Shareholder helpline: 0371 664 0300 (calls cost 10p per minute plus network extras) (Overseas: +44 20 8639 3399)Email: enquiries@linkgroup.co.uk

Share portal: www.signalshares.com

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

INDEPENDENT REVIEW REPORT TO RIGHTMOVE PLC

Conclusion 

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2018 which comprises the condensed consolidated interim statement of comprehensive income, condensed consolidated interim statement of financial position, condensed consolidated interim statement of cash flow, condensed consolidated interim statement of changes in shareholders equity and the related explanatory notes. 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2018 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").

Scope of review 

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

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

Directors' responsibilities 

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA. 

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

Our responsibility 

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

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

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached. 

Anna Jones

for and on behalf of KPMG LLP 

Chartered Accountants 

Altius House