Rightmove Regulatory News (RMV)

RIGHTMOVE PLC - Half-year Report

PR Newswire

London, July 25

Embargoed until 07.00 on 26 July 2019

Half year results for the six months ended 30 June 2019

Financial highlights

Operational Highlights

Guidance and outlook

In the first half of the year we saw ARPA growth ahead of our expectations, as our customers took advantage of the exposure and efficiencies which Rightmove offers. The 4.6% drop in sales transactions year to date compared to 2018 and the lengthening of time to completion and therefore delay in short-term cash flows has disproportionately impacted some low-stock agents who have left the industry. The strong ARPA growth and a meaningful increase in the number of New Homes developments have offset the impact of a decline in branch numbers. We expect the second half to follow a similar pattern for both ARPA and low-stock branches, with development numbers stable.

Rightmove’s subscription advertising model, together with the strength of our proposition for both customers and consumers now and in the future, supports the Board’s continued confidence in delivering its expectations for the full year.

Peter Brooks-Johnson, Chief Executive Officer, said:

“In the first half of 2019 home hunters visited Rightmove a record 845 million times. Home hunters continue to turn to Rightmove first to search and research properties in the only place you can see virtually the whole of the UK market. Our restless innovation delivers the fastest and easiest way to ‘find your happy’ from the 1.1 million UK residential properties on Rightmove.A 4.6% drop in transactions compared to 2018 has put pressure on some low-stock agency branches and created opportunity for others. We’re focused on helping all our customers succeed by delivering the most significant and effective exposure for their properties and brands to compete to win home sale instructions and also by being the largest source of high quality leads. We’ve seen strong adoption of our new digital solutions and existing packages by new homes developers and agents as they recognise the value of the UK’s largest property audience and Rightmove’s unique data insight. 

We’re looking forward to welcoming Van Mildert, a highly respected tenant referencing company, to the Rightmove family which will augment our Rightmove Tenant Passport in our quest to make renting a property faster, easier and more efficient for tenants, landlords, and agents alike.”

Half Year StatementStrategic Highlights

Rightmove is the platform people turn to first and engage with most when searching, researching and moving home. In the first half of the year Rightmove attracted a record 845(5) million visits resulting in home hunters spending 6.5(5) billion minutes across our mobile, app and web platforms.

Being synonymous with home hunting in the UK allows us to provide the most significant and effective exposure for our customers’ brands and properties. Against the backdrop of a housing marketplace with hesitant buyers and sellers, estate agents continue to recognise the value of our additional marketing products and packages with penetration of the Enhanced and Optimiser packages reaching 35% of estate agency customers, up from 27% in December 2018. Access to our unique in-market audience of home hunters also saw New Homes developers spend a record £4.6m in the first six months of 2019 on our digital marketing solutions (up from £3.8m in H1 2018). 

We continue to launch valuable new products - for example, Auto Featured Property was launched in May to further help higher stock agents stand out to potential sellers with over 400 branches signed up as at 30 June 2019; and June saw the early roll out of our next generation digital marketing product, Rightmove Active Extension (RAE), which microtargets home hunters on websites beyond Rightmove based on their search behaviour.

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. To further enhance our market leading RightmovePlus system, we have launched a new suite of tools to help agents identify the most valuable markets they operate in and a new version of the Best Price Guide to help reduce the time spent preparing for property appraisals.

Our strategic focus to innovate to create a simpler and more efficient market for agents and tenants remains unabated with the launch of a new version of the Rightmove Passport, which includes a tenant credit report, and the announcement of our agreement to acquire the entire issued share capital of Van Mildert Landlord And Tenant Protection Limited. Van Mildert will give us tenant referencing and rent guarantee insurance capabilities and their products and operational experience will further augment our tenant passport proposition and Rightmove’s vision of servicing the under-served rental marketplace. The Van Mildert and Rightmove teams will work together to leverage the scale benefits that the Rightmove platform can bring to the referencing proposition.

The purchase price comprises initial cash consideration of £16.0m together with maximum deferred consideration of £4.0m. The transaction is subject to regulatory approval, with completion anticipated to be 31 October 2019. Further details have been announced separately today.

AgencyAgency ARPA was up £83 year on year to £1,023(6) (2018: £940) per branch per month partly as a result of further adoption of our higher value Enhanced and Optimiser product packages together with membership price increases. The number of Agency offices was down 3% at 30 June at 16,768 (31 December 2018: 17,328) reflecting a slowing in housing market activity since the start of the year. Those agents who left the industry were typically low-stock, lower spending sales and rental branches creating a positive mix effect on ARPA.

New HomesNew Homes ARPA increased by £60 year on year to £1,346(7) (2018: £1,286) per development per month with the growth being driven by the sale of additional advertising products, including digital marketing campaigns, and by increases to core membership prices. The number of developments was up 10% since the start of the year at 3,441 (31 December 2018: 3,126).

Financial performance

Revenue

Revenue grew by 10% to £143.9m (2018: £131.1m).

Our Agency revenue increased by £5.5m year on year to £104.8m. Revenue growth was driven by continued spending on additional advertising products and packages coupled with membership core price increases; however some of the ARPA gains were offset by a 3% reduction in net Agency branch numbers. Agency branch losses reflected ongoing Brexit uncertainty causing some buyer and seller hesitancy leading to longer transaction times with consequent cash flow issues for low stock sales branches, together with the implementation of the ban on tenant fees impacting low stock rental branches.

Conversely slightly tighter housing market conditions bring to the fore the strength of our New Homes proposition with housebuilders marketing more of their stock on our platforms and spending more on our suite of digital advertising products to promote their developments. As a result, revenue from our New Homes business grew strongly, up 29% year on year to £27.8m.

Other revenue, which includes Overseas, Data Services, Commercial and Third Party advertising services, increased by £1.1m in the first half of 2019, driven primarily by growth in our Commercial business which grew by over 30% to £3.4m.

Underlying operating profit

Underlying operating profit(1) increased by 10% to £111.0m (2018: £101.0m) delivering an underlying operating margin(1) of 77.1% (2018: 77.0%). Underlying operating costs(1) increased by £2.8m to £32.9m (2018: £30.1m). The year on year increase relates to salaries and associated employee costs reflecting an increase in the average headcount to 517 (2018: 484) together with general wage inflation. Similar to 2018, 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 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 £2.2m (2018: £2.1m) was charged to income representing the amortisation of the fair value of share-based incentives granted.

NI is being accrued, where applicable at a rate of 13.8%, on the potential employee gain on share-based incentives granted. Based on an increase in the closing share price from £4.32 at 31 December 2018 to £5.35 at 30 June 2019 in respect of the outstanding share-based incentives granted, together with the realised NI cost on share-based incentives exercised in the period, there was a charge of £0.6m (2018: £0.7m) in the period.

Earnings per share (EPS)Underlying basic EPS(3) rose 12% to 10.2p (2018: 9.1p(2)), with basic EPS increasing 12% to 9.9p (2018: 8.8p), 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 889.0m (2018: 905.9m(2)).

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 £11.0m to £107.7m (2018: £96.7m), with cash conversion remaining very high(8) at 99.5%.

The Group bought back and cancelled 3.6m shares (2018: 10.0m(2) shares) in the period at a cost of £18.5m (2018: £44.4m) whilst a further £35.5m (2018: £32.6m) was paid in dividends.

The closing Group cash and money market deposit balance was £54.1m (2018: £28.1m). In the second half we expect to fund the acquisition of Van Mildert, with the balance of free cash flow being returned to shareholders over the remainder of the year in line with our cash return policy.

DividendIn June 2019, the Company paid the final dividend for the year ended 31 December 2018 of £35.5m. The Board has announced an interim dividend of 2.8p per ordinary share (2018: 2.5p(2)), an increase of 12%, as part of its commitment to a progressive dividend policy, broadly reflecting the growth in underlying EPS.

The interim dividend will be paid on 1 November 2019 to members on the register on 4 October 2019. 

Principal risks and uncertainties

As set out within the Strategic Report within the 2018 Annual Report, the Group has identified the following principal risks and uncertainties:

The macroeconomic environmentThe Group derives almost all its revenues from the UK and is therefore dependent on the macroeconomic conditions surrounding the UK housing market at the extreme. A poor macroeconomic environment may adversely impact consumer confidence levels leading to fewer discretionary housing moves, resulting in lower property transaction levels.

Substantially fewer housing transactions than the norm may lead to a reduction in the number of Agency branches or New Home developments, both of which are major determinants of Rightmove’s revenue. Housing transactions in the first half of 2019 were down 4.6%(9) year on year against the first half of 2018. Agency branch numbers declined by 3% in the first half of the year; however New Homes developments grew strongly up 10% year on year.

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. With transaction levels marginally lower there has been no evidence of a slowdown in demand for the Group’s advertising products. ARPA was up a record £90 year on year to £1,077(4) in the period and the increased penetration of the higher value Enhanced and Optimiser packages demonstrates the value customers place on the enhanced profile Rightmove products bring to their brands and properties.

Our strong market position, the strength of our value proposition relative to all other forms of property 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.

Consistent with being a digital leader, we have maintained our market share amongst the top four UK property portals on a time basis; demonstrating the strength of network effects and our ability to continue to grow alongside competition from existing property portals and new entrants to the market.

New or disruptive technologies and changing consumer behavioursRightmove operates in an online marketplace and new entrants may invest in competitive technologies or business models. 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.

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. A security breach such as corruption or loss of key data may disrupt the efficiency and functioning of the Group’s day to day operations.

Our brand is one of our biggest assets. Failure to maintain and protect our brand, or negative publicity that affects our reputation (for example, a data breach), could diminish the confidence that consumers and advertisers have in our products and services, and result in a reduction in audience and financial loss.

The enactment of GDPR in May 2018 has significantly increased the maximum potential financial impact of a personal data breach. We continue to review all processes that involve data collection, storage or processing to ensure that they meet the enhanced GDPR requirements.

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 talent

Our 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 maintain our financial performance and deliver growth. When key staff leave or retire, there is a risk that knowledge or competitive advantage is lost.

Our latest employee survey showed continued strong levels of employee engagement with 91% 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 2019 the Board has continued to assess the potential impact of the EU referendum result in relation to the broader UK housing market, sales transaction levels and our customer base. The Board acknowledges that the prolonged effect of Brexit uncertainty and the greater likelihood of a ‘no-deal’ scenario provides a more challenging market backdrop for a sub-set of our customers than this time a year ago with a slight increase in the risk of further Agency branch losses. In particular, the directors considered the following:

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.

In relation to both our cost base and day to day operational issues we perceive the potential impact on Rightmove of a ‘no-deal Brexit’ to be low as:

Our balance sheet remains debt-free which we believe is a strength as we have no refinancing or interest related Brexit risks.

Next trading update

Our next scheduled reporting date is 28 February 2020 when we will announce our results for the year ending 31 December 2019.

Scott Forbes Peter Brooks-Johnson

Chairman Chief Executive Officer

26 July 2019

Notes to the half year results for the six months ended 30 June 2019

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF YEAR REPORT 2019

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

26 July 2019

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOMEfor the six months ended 30 June 2019 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITIONas at 30 June 2019 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWSfor the six months ended 30 June 2019

*The June 2018 prior year comparatives have been restated. Refer to Note 2 for further explanation.

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYfor the six months ended 30 June 2019 

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 2019 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 2018 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, prepared in accordance with IFRS as adopted by the EU, as at and for the year ended 31 December 2018 (‘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.

The condensed consolidated interim financial statements were approved by the Board of directors on 26 July 2019. 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 its report is set out at the end of this document.The comparative figures as at and for the year ended 31 December 2018 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 2018.

Going concern

Throughout the period, the Group was debt free, has continued to generate significant cash and has cash balances of £50,020,000 at 30 June 2019 (31 December 2018: £15,847,000). The Group also had £4,116,000 (31 December 2018: £4,090,000) 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 2020. No amount has been drawn under this facility.After making enquiries the Board of directors has a reasonable expectation that the Group and the Company have adequate resources and banking facilities to continue in operational existence for the foreseeable future. Accordingly, the Board of directors continues to adopt the going concern basis in preparing these condensed consolidated interim financial statements.

Alternative 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:

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 alternative performance measures are designed to increase comparability of the Group’s financial performance year-on-year.

1 General Information (continued)

Capital structure - Subdivision of shares

On 31 August 2018 the ordinary shares of 1 pence each in the capital of the Company were subdivided into ten ordinary shares of 0.1 pence each in the capital of the Company (the New Ordinary Shares); the purpose being to make the Company’s shares more accessible to smaller investors, including Rightmove employees. Each New Ordinary Share has the rights and entitlements as before and continues to be subject to the restrictions set out in the articles of association of the Company. Group disclosures in relation to earnings per share, dividends, capital and reserves and share-based payments for comparative periods have been updated accordingly.

2 Significant accounting policies

The Group adopted IFRS 9 Financial Instruments, IFRS 15 Revenue from contracts with customers and IFRS 16 Leases with effect from 1 January 2018 with IFRS 15 and IFRS 16 having a material effect on the Group’s financial statements. Detailed disclosures in relation to the impact on adoption are included in the financial statements for the year ended 31 December 2018. These continue to be applied in these interim financial statements.

Restatement of Consolidated Statement of Cash flows

In preparing the 2018 annual report, we reviewed the adjustments posted on adoption of IFRS 15 for the period 1 January 2018 to 30 June 2018 and we identified that the cash movements in trade and other receivables and trade and other payables, as originally presented in the condensed consolidated interim statement of cash flows for the six months ended 30 June 2018, were overstated by equal and opposite amounts. Therefore, these line items for the six months ended 30 June 2018 have now been restated as below. No restatement is required for the 31 December 2018 comparatives.

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.

Management has determined that there are no significant areas of estimation uncertainty or critical judgements in applying accounting policies that have a significant effect on the amounts recognised in the condensed consolidated interim financial statements of the Group.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 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 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 revenue 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 below. 

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.

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 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 trade 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.

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), Performance Share Plan (PSP) and the Rightmove Share Incentive Plan (SIP). In March 2019 a Restricted Share Plan (RSP) was established that awards shares to selected senior management.

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. 

6 Share-based payments (continued)

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 2019 relating to all share-based incentive plans was £2,198,000 (2018: £2,045,000).

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 2019 relating to all awards was £573,000 (2018: £743,000). The share price at 30 June 2019 was £5.35 (30 June 2018: £5.31).

Approved and Unapproved Plans

There has been no award of share options under these plans 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.

351,802 PSP awards were made on 6 March 2019 (the Grant Date) subject to Earnings Per Share (EPS) and Total Shareholders Return (TSR) performance. Performance for all 2019 awards will be measured over three financial years

(1 January 2019 - 31 December 2021). The vesting in March 2022 (Vesting Date) of 25% of the 2019 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 2019 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 78% of the 2018 internal performance targets, 572,387 nil cost deferred shares were awarded to executives and senior management on 6 March 2019 with the right to the release of the shares deferred until March 2021.

Share Incentive Plan (SIP)

In 2014, the Group established the Rightmove SIP. Employees were offered 500 free shares on 1 January 2018 and a further 475 shares on 21 December 2018 as a gift, split across two different tax years, subject to a three-year service period (the Vesting Period). 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. No performance criteria are applied to the exercise of SIP options.

Restricted share plan (RSP)

In March 2019 a RSP was established that awards shares to selected senior management, subject only to service conditions. 254,502 nil cost deferred shares were awarded to senior management on 6 March 2019. All these awards will vest three years from the date of grant, subject to a three-year service period.

Participants are not entitled to receive dividends on these awards. RSP awards have been valued using the Black Scholes model and the resulting share-based payments charge is being spread evenly over the Vesting Period of the shares, being three years.

7 Earnings per share (EPS)

*Following the ten for one subdivision of the Company’s ordinary share capital on 31 August 2018 (refer to Note 1), the June 2018 comparatives have been restated in line with IAS 33.

Weighted average number of ordinary shares (basic) Restated

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.

Restated

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 DividendsFollowing the ten for one subdivision of the Company’s ordinary share capital on 31 August 2018 (refer to Note 1), the June 2018 comparatives have been restated in order to aid comparability of information.

Company dividendsDividends declared and paid by the Company were as follows: Restated

After the period end an interim dividend of 2.8p (2018: 2.5p) per qualifying ordinary 1p share being £24,845,000 (2018: £22,589,000) was proposed by the Board of directors.The 2018 final dividend paid on 31 May 2019 was £35,510,000 (2017 final dividend: £32,559,000) being a difference of £103,000 compared to that reported in the 2018 Annual Report which was due to a decrease in the ordinary shares entitled to a dividend between 31 December 2018 and the final dividend record date of 2 May 2019.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 £20,632,000 (2018: £18,800,000) 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 2019 was 19.1% (2018: 19.2%). The difference between the standard rate of 19.0% and the effective rate of 19.1% at 30 June 2019 is attributable to disallowable expenditure of 0.1%.The deferred tax asset of £3,109,000 (2018: £5,470,000) is presented net on the balance sheet in so far as a right of offset exists. The deferred tax asset of £3,109,000 at 30 June 2019 (2018: £5,484,000) 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 nil at 30 June 2019 (2018: £14,000) 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 2019 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.

12 Reconciliation of movement in capital and reservesShare buybackIn 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 2019 was 3,630,257 (2018: 9,954,040) representing 0.4% (2018: 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 £18,499,000 (2018: £44,365,000). The maximum and minimum prices paid were £5.60 (2018: £5.30) and £4.28 (2018: £4.15) per share respectively.

12 Reconciliation of movement in capital and reserves (continued)

Own shares held – number of shares

(a) EBT shares reserve

This reserve represents the cost of own shares acquired by the EBT less any exercises of share-based incentives. On 8 March 2019 the EBT acquired 254,502 shares at a cost of £1,285,000 to satisfy the awards granted under the RSP scheme.

At 30 June 2019, the EBT held 2,448,422 (2018: 2,426,880) ordinary shares in the Company, representing 0.3% (2018: 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 2019 was £13,099,000 (2018: £12,887,000).

(b) SIP shares reserve

In November 2014, the Group established the Rightmove Share Incentive Plan Trust (SIP). This reserve represents the cost of acquiring shares less any exercises or releases of SIP awards. Employees of the Group were offered 500 0.1 pence free shares with effect from 5 January 2018 and 475 0.1 pence free shares with effect from 21 December 2018, split across two different tax years, subject to a three-year service period.

At 30 June 2019 the SIP Trust held 688,645 (2018: 665,000) ordinary shares in the Company of 0.1 pence each, representing 0.08% (2018: 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 £3,684,000 (30 June 2018: £3,531,000).

(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 per 1 pence share 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 £4,000 (2018: £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.

13 Related partiesInter-group transactions with subsidiariesDuring the period Rightmove plc was charged interest of £308,000 (2018: £109,000) by Rightmove Group Limited in respect of balances owing under the inter-group loan agreement dated 30 January 2008. As at 30 June 2019 the balance owing under this agreement was £1,805,000 (2018: £22,958,000) including capitalised interest.On 24 June 2019 Rightmove Group Limited declared an interim dividend of 73p per ordinary share to the Company. The dividend of £94,462,000 was settled via a reduction in the inter-group loan balance owed by Rightmove plc to Rightmove Group Limited.

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. At 30 December 2018 the balance owing under an inter-group loan agreement dated 13 June 2016 was £31,000. This balance is now £nil. The Outside View Analytics Ltd is currently in the process of liquidation.

In 2018, Rightmove Rent Services Limited became a related party to the company following its incorporation on 19 February 2018. The balance owing under the inter-group loan agreement dated 28 March 2018 was £1,090,000 as at 30 June 2019 (2018: Nil)

 Transactions with key management staff

There were no transactions with key management in any period.

14 Subsequent Events

On 25 July 2019, Rightmove Group Limited entered into an agreement to acquire 100% of the issued share capital of Van Mildert Landlord and Tenant Protection Limited (Van Mildert), a company whose principal activities are the provision of tenant referencing services and rent guarantee insurance products.

The purchase price comprises an initial cash consideration of £16.0m together with a maximum deferred consideration of £4.0m. The transaction is subject to FCA approval in relation to the change in control, with completion anticipated to be 31 October 2019.

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 0391 (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 2019 which comprises the condensed consolidated interim statement of comprehensive income, condensed consolidated interim statement of financial position, condensed consolidated interim statement of cash flows, 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 2019 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

1 North Fourth Street

Milton Keynes

MK9 1NE

26 July 2019