ZPG PLC Regulatory News (ZPG)

25 May 2016

RECORD H1 REVENUES AND PROFITS

Half year results for the six months ended 31 March 2016

Zoopla Property Group Plc (LSE:ZPLA) ("ZPG" or the "Group"), today reports another strong period of growth in the six months ended 31 March 2016 (the "Period") with revenues up 130% to £96.4m and Adjusted EBITDA up 89% to £40.5m, following the inclusion of six months of trading from the Comparison Services division. ZPG owns and operates some of the UK's most trusted and effective home-related digital platforms including Zoopla, uSwitch, PrimeLocation and the Property Software Group.

Summary Results

Business highlights

· Revenue increase of 130% to £96.4m and Adjusted EBITDA increase of 89% to £40.5m

· Robust performance in Property Services division with 12 consecutive months of UK Agency partner growth

· Property listings grew to 854,000 reflecting an increase in the Group's number of property partners

· Outperformance in Comparison Services division with record levels of Energy and Communications switches

· Comparison leads up 37% to 16.2m, helping consumers find best deals and save over £175m off household bills

· Strong traffic with over 300m visits to the Group's websites and mobile apps, of which over 68% via mobile

· Strategic partnerships and investments announced with some of the UK's most-promising PropTech start-ups

· Continued product innovation and integration with launch of new tools for both consumers and professionals

· Acquisition, on 28 April following the end of the Period, of the Property Software Group for £75m

· Interim dividend of 1.5p per share to be paid on 24 June 2016 to shareholders on register as at 3 June 2016

Commenting on today's announcement Alex Chesterman, Founder & CEO of ZPG said:

"I am delighted with the Group's first half performance and our growth as we delivered both record revenues and Adjusted EBITDA. We continue to lead innovation and further differentiate our offering in line with our mission to be the best resource for consumers when finding, moving or managing their home and to be the most effective partner for related businesses.

"Our Property Services division has traded in line with management expectations with ARPA3 growth across every vertical and we have now seen 12 consecutive months of UK Agency partner growth as well as increased inventory and strong traffic. We have launched a number of exciting new features for both consumers and professionals including our 'Running costs' tool which helps our users understand the total costs of occupying any property and our award-winning 'AdReach' retargeting product which helps our partners win more business.

"We have seen a particularly strong performance in our Comparison Services division with record switching volumes in both the Energy and Communications verticals as a result of seasonality, our market-leading collective switch, energy supplier price cuts and a highly-competitive environment for broadband deals. Over the past six months, we have helped save consumers over £175m on their household energy bills alone.

"Following the end of the Period, we announced the acquisition of the Property Software Group and have begun integrating the business into the ZPG family. This deal will transform our relationship with property professionals, providing the UK's first-end-to-end business solution which will enable them to both generate increased revenues and to engage more effectively with their clients."

Outlook

The Board is pleased with current trading and expects full year 2016 Adjusted EBITDA to be at the top end of market expectations4. Management expects continued partner growth within the Property Services division and continued strong performance despite seasonally lower switching volumes in the Comparison Services division. In addition, the recent acquisition of the Property Software Group will underpin future growth with a wider range of products and services on offer.

The Group continues to invest in product innovation and audience growth across both divisions and a detailed update on the Group's strategy will be given at ZPG's first Capital Markets Day on 15 September 2016 in London.

-ENDS-

For further information, please contact:

Lawrence Hall, Head of Communications - lawrence.hall@zpg.co.uk / 07890 078 945

Rachael Malcolm, Head of Investor Relations - rachael.malcolm@zpg.co.uk / 07774 671 082

James Isola at Maitland 020 7379 5151

http://www.zpg.co.uk/

A webcast of the management team presentation to analysts and investors will be made available at http://www.zpg.co.uk/ at 09.00am this morning and registration can be accessed here.

An audio dial in will also be made available:

UK Toll Number: 0203 139 4830

UK Toll-Free Number: 0808 237 0030

United States Toll-Free Number: 1866 928 7517

United States Toll Number: 1 718 873 9077

Participant pin: 57692918#

1. Adjusted EBITDA is defined as operating profit after adding back depreciation and amortisation, share-based payments and exceptional items.

2. Adjusted basic EPS is calculated as profit for the period excluding exceptional items and amortisation of intangibles arising on acquisitions, adjusted for tax and divided by the weighted average number of shares in issue for the Period.

3. ARPA (Average revenue per advertiser) represents revenue from the Group's property partners in a given month divided by the total number of property partners during the month, measured as a monthly average over the period.

4. As at 24 May 2016, market expectations for Group FY16 EBITDA were in the range of £56m to £71m (Source: Bloomberg).

Cautionary Statement

This document contains forward-looking statements. These forward-looking statements include all matters that are not historical facts. Statements containing the words "believe", "expect", "intend", "may", "estimate" or, in each case, their negative and words of similar meaning are forward-looking. By their nature, forward-looking statements involve risks and uncertainties because they relate to events that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that the Group's actual financial condition, results of operations and cash flows, and the development of the industry in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this document. In addition, even if the Group's financial condition, results of operations and cash flows, and the development of the industry in which we operate are consistent with the forward-looking statements in this document, those results or developments may not be indicative of results or developments in subsequent periods. Important facts that could cause the Group's actual results of operations, financial condition or cash flows, or the development of the industry in which we operate, to differ from current expectations include those principal risks and uncertainties disclosed below. As a consequence, the Group's future financial condition, results of operations and cash flows, as well as the development of the industry in which we operate, may differ from those expressed in any forward-looking statements made by us or on the Group's behalf.

About Zoopla Property Group (www.zpg.co.uk)

Zoopla Property Group Plc (LSE:ZPLA) (ZPG) owns and operates some of the UK's most trusted and effective home-related digital platforms including Zoopla, uSwitch, PrimeLocation and the Property Software Group. Our mission is to be the most useful resource for consumers when finding, moving or managing their home and the most effective partner for related businesses.

We help consumers to understand the market and make smarter decisions and professionals to operate their businesses more effectively. The Group benefits from its multi-brand, multi-channel approach and each of our brands has a distinct market position with an unrivalled proposition. Our websites and mobile apps attract over 50 million visits per month.

Zoopla is the UK's most comprehensive property website, helping consumers to research the market and find their next home by combining hundreds of thousands of property listings with market data and local information. 

uSwitch is the UK's leading comparison website for home services switching, helping consumers to find the best deal and save money on their gas, electricity, broadband, TV, phone and personal finance products.

PrimeLocation is one of the UK's leading property websites, helping house-hunters in the middle and upper tiers of the market explore and find their dream home from the top estate and letting agents.

The Property Software Group is the UK's largest supplier of software and workflow solutions to the property industry and its brand portfolio includes Alto, Jupix, CFP, Vebra, Core, Encore, MyPropertyFile and MoveIT.

Zoopla Property Group Plc was founded in 2007 and has a highly experienced management team, led by Founder & CEO, Alex Chesterman.

Business Review

Zoopla Property Group ("ZPG") has delivered a strong set of first half results with revenue up 130% to £96.4m and Adjusted EBITDA up 89% to £40.5m in the six months to 31 March 2016. Revenue and Adjusted EBITDA increased significantly on the same period last year as a result of the incorporation of six months of trading from the Comparison Services division, which performed ahead of expectations, and the continued robust performance in the Property Services division. Full key performance indicators ("KPIs") for the Group including pro forma comparators for the same period last year can be found at the end of this release.

Executing on our strategy

ZPG continues to lead innovation in the digital property and comparison sectors in its mission to provide the most useful resources for consumers when finding, moving or managing their home and to be the most effective partner for related businesses.

The Group continued to invest heavily in marketing its brands and developing its products as part of its vision to be the consumer champion at the heart of the home. The Group launched a series of new national TV adverts for both its Zoopla and uSwitch brands, with Zoopla's campaign being its biggest to date and resulting in record levels of brand awareness. The uSwitch campaign continued to educate consumers with two new TV adverts illustrating the simplicity of switching. During the Period the Group's websites and mobile apps enjoyed over 300 million visits, of which over 68% were via mobile devices as consumers engaged with the Group's platforms in multiple ways for their home-related needs.

During the Period, the Group launched its innovative 'Running Costs' tool on the Zoopla website which is designed to help consumers make better-informed decisions by giving them an idea of what they should expect to spend on monthly bills in a particular property. The tool features indicative costs for each property and includes everything from likely mortgage or rental payments, energy costs, water bills and council tax charges.

Take-up of the Group's award-winning AdReach product, which helps partners engage directly with their target audience via bespoke advertising campaigns, increased as ZPG helped its partners maximise their marketing efficacy and win more business during the period.

In addition, the Group announced four investments and strategic partnerships with some of the UK's most-promising and innovative property technology start-ups: PropertyDetective, FixFlo, Landbay and Trussle to further enhance its consumer experience and create the ultimate home-related lead generation platform.

On 28 April 2016, the Group acquired the Property Software Group, the UK's market-leading provider of software solutions to property professionals. The acquisition of the Property Software Group is a core part of ZPG's mission to be the most effective partner for UK property professionals and will enable the enlarged Group to offer agents the UK property industry's first end-to-end solution including software and CRM, digital marketing and market insight tools and further revenue opportunities.

Property Services

The Property Services division delivered a robust first half set of results, despite tough comparators over the same period last year when the Group experienced significant UK Agency churn part way through the period as the result of the launch of a new portal by Agents' Mutual and its restrictive one other portal rule. The Group remains focused on product differentiation and innovation to drive further consumer engagement and help property professionals win more business.

Average revenue per advertiser (ARPA)

ARPA increased across every vertical as the Group's property partners continued to use ZPG's platform to build brand awareness, win new instructions and market inventory to a highly engaged, property interested audience. UK Agency ARPA grew by 2% to £361 driven by take-up of additional products. ARPA in New Homes grew by 7% to £354, driven by demand for bespoke area targeted email campaigns. Overseas ARPA grew by 5% to £155 as the Group concentrated on growing the number of advertising partners and inventory and ARPA in the Commercial vertical increased by 38% to £129 since it launched just over a year ago.

Partners

The total number of property partners advertising with the Group increased by 5% over the past year to 16,858 at the end of the Period. UK Agency partners increased by 4% to 12,956 as churn rates returned to normal historical levels during the Period. The number of developments reduced slightly to 2,655 reflecting the strong consumer demand for new homes. Overseas and Commercial partners increased significantly by 35% to 894 and 94% to 353 respectively.

Number of visits

Traffic to the Group's property platform remained strong with 44.8 million average monthly visits during the Period (H1 2015: 44.2 million) and averaging a record audience of over 50.0 million per month since the beginning of the calendar year.

Number of Property Services leads

The Group generated 11.0 million leads for its property partners during the Period and continued to focus on lead quality with appraisal leads up 19% compared with the same period last year, helping partners engage with even more consumers and to win more instructions.

Number of listings

The number of listings featured on the Group's property platform increased by 3% from 828,000 at 31 March 2015 to 854,000 as at 31 March 2016, reflecting an increase in the Group's total number of property partners.

Comparison Services

The Comparison Services division performed ahead of expectations experiencing five of its best ever trading months as the uSwitch brand continued its role as the market leading home services comparison site, helping consumers save money off their household bills and find the best deal. Comparison Services revenue increased by 46% to £57.7m when compared to the same period last year (pre-acquisition).

The performance in the Energy vertical was exceptionally strong driven by the typically higher volume of switching during the winter months, the Group's market-leading position, collective switch in October and competitive energy supplier pricing at the start of the calendar year resulting in significant switching volumes.

The Communications vertical also outperformed, driven by highly competitive consumer deals in mobile and broadband encouraging consumers to compare and switch. Management is also pleased with the progress in the Financial Services vertical resulting from a targeted approach towards niche product areas.

The regulatory environment remains supportive towards comparison. In March 2016, the CMA's provisional decision on remedies in its energy market investigation underscored the critical role of price comparison websites in helping increase competition, improve service and empower consumers to save money off their household bills.

Number of Comparison Services leads

The number of Comparison Services leads generated by the Group increased by 37% to 16.2 million, compared to the same period in the prior year (pre-acquisition), as a result of the outperformance across every vertical.

Average revenue per lead (ARPL)

The increase in ARPL to £3.56, compared to £3.32 for the same period in the prior year (pre-acquisition) was driven by the significant outperformance in the Energy vertical.

Finance Review

Revenue increased by 130% to £96.4m and Adjusted EBITDA increased by 89% to £40.5m compared to the same period last year. This increase was primarily attributable to the incorporation of six months of trading from the Comparison Services division.

As at 31 March 2016, the Group had net debt of £83.9m with substantial headroom against its covenants. The Group maintains a dividend pay-out ratio of 35-45% of profits excluding share-based payments and exceptional items and the Directors have declared an interim dividend of 1.5 pence per share.

When reviewing performance, the Directors use a number of adjusted measures, including Adjusted EBITDA to measure the Group's underlying performance. This is reconciled below:

Summary Income Statement

The Property Services division generated £38.7m of revenue against tough UK Agency comparators from the same period last year, when the Group experienced significant UK Agency churn related to Agents' Mutual part way through the period. New Homes revenue increased, driven by demand for email campaigns and Other revenue was broadly flat. The Comparison Services division generated £57.7m of revenue and performed ahead of expectations across every vertical, with particular strength in the Energy vertical as outlined in the Business Review.

Operating costs

Operating costs increased by 171% to £55.9m. The increase in operating costs can be attributed to the incorporation of six months of trading from the Comparison Services division. Property Services costs were broadly flat at £20.2m with staff costs of £7.6m and slightly lower other costs of £12.6m due to the Group's planned reduction in marketing. In Comparison Services, the Group invested heavily in PR, marketing and product development as it seeks to further educate consumers, build brand awareness and drive conversion. Comparison Services costs comprise staff costs of £6.7m and other costs of £29.0m. Other costs include marketing, technology, property and administrative costs.

As the business evolves, and the divisions become more integrated, the Directors will continue to assess the relevance of splitting out costs for the Property Services and Comparison Services division.

Adjusted EBITDA

Adjusted EBITDA increased by 89% from £21.4m to £40.5m. Property Services Adjusted EBITDA decreased to £18.5m, giving a margin of 48% (H1 2015: 51%). The Comparison Services division generated £22.0m of Adjusted EBITDA with an increased margin of 38% driven by outperformance in the higher margin Energy vertical. Group margins were lower at 42% due to the mix effect from incorporating the Comparison Services division.

Share-based payments

The share-based payments charge increased by 80% from £1.0m to £1.8m as a result of FY16 grants under the Group's LTIP and deferred bonus schemes and the introduction of the VCP scheme for the CEO on 1 October 2015.

Depreciation & Amortisation

The increased depreciation charge to £0.4m is a result of the incorporation of the Comparison Services division trading results for the Period. The Group splits out amortisation of intangibles arising on acquisitions and amortisation of other intangibles for the purposes of calculating Adjusted basic EPS. The charge for amortisation of intangibles arising on the acquisition of uSwitch was £3.1m. The amortisation of other intangibles charge was broadly flat at £0.8m.

Exceptional items

Exceptional items include costs that Management believe to be exceptional in nature by virtue of their size or incidence. Total exceptional items of £4.9m in H1 2016 represent deferred consideration and deal-related performance payments payable to uSwitch Management as a result of the acquisition.

Net finance costs

The Group incurred net finance costs of £1.4m during the period (H1 2015: finance income of £0.1m) due to the interest charged for the use of the Group's revolving credit facility, secured as part of the uSwitch acquisition in H2 2015.

Income tax expense

The Group's income tax charge was £5.5m representing an effective income tax rate of 19.6%. This is lower than the average statutory tax rate of 20.0% due to the revaluation of deferred tax assets and liabilities as a result of the reduction in the rate of corporation tax to 19% from 1 April 2017 and 18% from 1 April 2020.

Profit for the period

Adjusted profit for the period, calculated as profit for the period after adding back exceptional items and amortisation of intangible assets arising on acquisitions adjusted for tax, increased by 83% to £28.6m. Statutory profit increased by 58% to £22.6m.

Earnings per share (EPS)

Adjusted basic EPS, which strips out the impact of exceptional items and amortisation of intangible assets arising on acquisitions, increased by 82% to 6.9p. Statutory basic EPS also grew by 57% to 5.5p.

Summary statement of financial position

The Group's statement of financial position remained strong as the business generated a high level of cash during the Period. Net assets as at 31 March 2016 were £131.0m. Intangible assets increased to £250.5m reflecting acquired intangibles as a result of the uSwitch acquisition. Trade and other receivables increased due to accrued income in the Comparison Services division, which operates on a longer working capital cycle as a result of its transactional nature. The Group recognised a liability of £31.4m for deferred and contingent consideration payable as a result of the uSwitch acquisition.

Net debt position

As at 31 March 2016 the Group had net debt of £83.9m including borrowings of £96.0m before the deduction of capitalised costs. The overall increase in net debt can be attributed to the acquisition of uSwitch in June 2015.

Summary statement of cash flows

The Group saw strong operating cash generation with net cash inflows from operating activities of £32.9m. The increase of 170% compared to the same period in the prior year is due to the incorporation of six months of trading in the Comparison Services division. During the Period the Group settled £10.0m of deferred consideration relating to the acquisition of uSwitch. The Group also repaid debt by a net amount of £18.0m, reducing the Group's outstanding gross debt from £114.0m to £96.0m.

Dividends

The Group maintains a target dividend pay-out ratio of 35-45% of profits excluding share-based payments and exceptional items based on the strong cash generation and long-term earnings potential of the Group. The Directors have declared an interim dividend of 1.5p which will be paid on 24 June 2016 to those shareholders on the share register as at 3 June 2016.

Appendix 1: Group Key Performance Indicators ("KPIs") (unaudited)

The figures below are for the six-month periods to 31 March 2015 and 31 March 2016. Each period includes trading in the Comparison Services division in order to give a meaningful comparative, however the division was not part of the Group during the prior period and therefore the results for H1 2015 are not statutory results of the Group.

1Other includes revenue from advertising, marketing services, data sales, overseas and commercial property

2Energy includes revenue from gas & electricity switching

3Communications includes revenue from mobile, broadband, pay TV & home phone switching

4Other includes revenue from financial services switching, boiler cover, business energy and data insight

5Other Costs includes marketing, technology, property and administrative costs

6Visits comprise individual sessions on the Group's websites or mobile applications by users for the Period indicated as measured by Google Analytics

7Number of Comparison Services leads - The Group measures Comparison Services leads at the point when a consumer completes an application form hosted on the Group's website or at the point in time when the customer leaves the Group's website having clicked through to a third party website

8ARPL (average revenue per lead) - ARPL is the revenue from energy switching, communications switching, financial services switching, boiler cover, business energy and data insight divided by the total number of Comparison Services leads during the month, measured as a monthly average over the period

Principal risks and uncertainties

As set out within the Strategic Report within the Annual Report 2015, the Group has identified the following principal risks and uncertainties:

· Macroeconomic conditions - The Group derives most of its revenues from the UK residential property, energy, broadband and mobile markets. The Group is therefore dependent on the macroeconomic conditions in the UK and macro factors within each of the Group's key markets.

· Competitive environment - The Group operates in marketplaces which are highly competitive. The actions of the Group's competitors can have a direct impact on the Group.

· Changing online landscape and consumer trends - The Group participates in fast-moving marketplaces which are subject to rapid technological development and changes in consumer trends which may impact the Group's ability to offer the best products and services to its partners and consumers.

· Retention and recruitment - Success depends on the continued service and performance of the Group's Senior Leadership Team and other key employees. Skilled development, technical, operating, sales and marketing personnel are also essential for the business to meet its strategic goals.

· IT systems and cyber security - A number of the Group's IT systems are interdependent and a failure in one system or a security breach may disrupt the efficiency and functioning of the Group's operations. The Group may also be subjected to cyber-attacks.

· Reputational and brand damage - The Group operates a number of identifiable and respected brands which could be damaged by factors such as unethical or unlawful activity, poor customer service or negative press.

· Regulatory environment - The Group operates in a number of regulated environments. Certain revenue streams within the Comparison Services business are regulated by the FCA. The Comparison Services division also complies with the OFGEM Confidence Code and is continuing to work with OFGEM in relation to its inquiries. The Group is also involved in regular communication with OFCOM, the CMA and other regulatory bodies which impact the Group and its partners.

· Debt covenants and funding - The Group holds external debt and therefore must ensure compliance with its debt covenant ratios. The Group also needs to ensure that it has the funding required to deliver on its strategy and future growth plans and that it manages its debt and cash balances effectively.

· uSwitch integration - The acquisition of uSwitch was a significant transaction and the Group needs to ensure that the business integrates successfully in terms of strategy, operations and culture.

The Directors' assessment of the risks identified above has not changed materially during the six month period to 31 March 2016. The risks identified above will continue to affect the Group in the second half of the year. Actions taken to mitigate the risks identified have been disclosed in the Strategic Report within the Annual Report 2015.

On 28 April 2016, the Company acquired the Property Software Group. The integration of the business presents an additional risk to the Group. An integration plan has been developed and will be executed throughout the remainder of the financial year and beyond in order to mitigate this.

Related party transactions

There have been no material related party transactions in the period. Details of related party transactions are set out in Note 15 to the condensed set of financial statements.

Going concern

As stated in Note 2 to the condensed set of financial statements, the Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements.

Responsibility statement

We confirm that to the best of our knowledge:

(a) the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';

(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

Independent review report to Zoopla Property Group Plc

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 31 March 2016 which comprises the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated statement of financial position, the condensed consolidated statement of cash flows and related notes 1 to 16. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company 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. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review 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 formed.

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 Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting", as adopted by the European Union.

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.

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 United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) 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.

Conclusion

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 31 March 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority

Deloitte LLP

Chartered Accountants and Statutory Auditor

London, United Kingdom

24 May 2016

Condensed set of financial statements

Consolidated statement of comprehensive income

For the six months ended 31 March 2016

Consolidated statement of financial position

As at 31 March 2016

Consolidated statement of cash flows

For the six months ended 31 March 2016

Consolidated statement of changes in equity

For the six months ended 31 March 2016

1The transfer from merger reserve to retained earnings in each period represents an equalisation adjustment in respect of the amortisation charge on intangibles which arose on acquisition of The Digital Property Group Limited on 31 May 2012.

Notes

1. General information

Zoopla Property Group Plc (the "Company") is a digital media and lead generation platform registered in England and Wales under Company Number 06074771. The principal activity of the Company is the operation of some of the UK's most trusted and effective home-related digital platforms including Zoopla, uSwitch, PrimeLocation and the Property Software Group. A copy of the Company's statutory accounts for the year ended 30 September 2015 has been delivered to the Registrar of Companies. The accounts are available on the Company's website at www.zpg.co.uk/investors. The Company's auditor reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

2. Accounting Policies

Basis of preparation

The annual financial statements of the Group and the Company are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard ("IAS") 34 'Interim Financial Reporting', as adopted by the European Union.

The half year results for the six months ended 31 March 2016 are unaudited. The auditor, Deloitte LLP, has carried out a review of the condensed set of financial statements and their report is included within this announcement. The comparative figures for the year ended 30 September 2015 have been extracted from the Group's 2015 Annual Report. These comparatives have been audited by the auditor and their report was unqualified. The comparative figures for the six months ended 31 March 2015 have been extracted from the Group's half year results for the six months ended 31 March 2015 which were reviewed by the auditor.

The consolidated financial statements incorporate the accounts of the Company and entities controlled by the Company (its "subsidiaries") (together, "the Group"). Control is achieved where the Company:

· has the power over the investee;

· is exposed, or has rights, to variable return from its involvement with the investee; and

· has the ability to use its power to affect its returns.

The results of subsidiaries acquired are included from the effective date of acquisition. The results of subsidiaries sold are included up to the effective date of disposal.

Changes in accounting policies

The accounting policies applied by the Group are the same as those applied for the year ended 30 September 2015 as set out in the 2015 Annual Report. In addition to those policies, during the period the Group has recognised a number of financial assets which have been designated as "available for sale". The Group initially recognises available for sale financial assets at fair value with any subsequent movements in fair value recorded within other comprehensive income. There has been no material movement in the fair value of these investments since initial recognition.

There are no new standards or amendments to standards effective for the periods presented that have a material impact on the Group.

Going Concern

The financial position of the Group shows a positive net asset position with significant cash resources and high cash generation. Furthermore, the Group continues to generate both positive Adjusted EBITDA and profit after tax. As a consequence, the Directors believe that the Group is well placed to manage its business and financial risks successfully.

The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the historical financial information.

Critical accounting judgements and key sources of estimation uncertainty

The Group's Management makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the current circumstances. Actual results may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within future periods are consistent with those disclosed in the 2015 Annual Report, with the exception of the acquisition of uSwitch which relates specifically to the previous financial year:

· Impairment of goodwill and intangibles - The value of Goodwill and intangibles has increased significantly over the last year due to the acquisition of uSwitch. Determining whether goodwill and intangible assets are impaired or whether a reversal of impairment of intangible assets should be recorded requires an estimation of the recoverable value, which represents the higher of fair value and value in use, of the relevant cash-generating unit. Management has not identified any indicators of impairment.

· Revenue and accrued income - Revenue generated by the Group's Comparison Services division is recognised predominantly from online switching services. Revenue accruals are made based on an estimation of the likely number of successful switches. Revenue recognition is considered to be a significant judgement area due to the estimates required to determine accrued income at the period end.

Non-GAAP 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 Directors' believe that these non-GAAP measures provide a more appropriate measure of the Group's underlying business performance. The non-GAAP measures are designed to increase comparability of the Group's financial performance year-on-year. However, these measures may not be comparable with non-GAAP measures adopted by other companies. The key non-GAAP measures presented by the Group are:

3. Business and geographical segments

The Board of Directors has been identified as the Group's chief operating decision maker. The monthly reporting pack provided to the Board to enable assessment of the performance of the business has been used as the basis for determining the Group's operating segments.

Whilst the chief operating decision maker monitors the performance of the business at a revenue and Adjusted EBITDA level (Note 4), depreciation and amortisation, share-based payments, exceptional items, finance income and costs and income tax are all monitored on a centralised basis. As the business evolves, and the divisions become more integrated, the Directors will continue to assess the relevance of splitting out costs for the Property Services and Comparison Services division.

Assets and liabilities are also managed on a centralised basis and are not reported to the chief operating decision maker in a disaggregated format.

The chief operating decision maker monitors six individual revenue streams as set out below. The six revenue streams are grouped under two headings: Property Services and Comparison Services. Adjusted EBITDA is monitored on an aggregated basis under these two headings. Certain central costs such as Board fees and the salaries of certain Executive Directors are allocated across the two divisions.

Property Services:

Comparison Services:

All material revenues are generated from within the UK.

The following table analyses the Group's revenue streams as described above:

4. Adjusted EBITDA

Adjusted EBITDA is used by Management as a key measure to monitor the Group's business and the Directors believe it should be disclosed on the face of the statement of comprehensive income to assist in the understanding of the Group's underlying financial performance.

The Group defines EBITDA as operating profit after adding back depreciation and amortisation, share-based payments and exceptional items. Adjusted EBITDA is arrived at by making adjustments for costs and profits which Management believe to be exceptional in nature by virtue of their size or incidence. Such items would include costs associated with business combinations, one-off gains and losses on disposal, and similar items of a non-recurring nature together with reorganisation costs and similar charges. This is further adjusted for share-based payment expenses which are comprised of charges relating to (i) warrants issued to certain of the Group's members in order to establish a critical mass of property listings on the Group's platform; and (ii) employee incentive plans which are aimed at retaining staff and aligning employee objectives with those of the Group. The Directors consider that excluding these non-cash charges in arriving at adjusted EBITDA gives a more appropriate measure of the Group's underlying financial performance.

The table below presents a reconciliation of operating profit to adjusted EBITDA for the periods shown:

Exceptional items comprise: