Interim Results
Rightmove Plc
01 September 2006
INTERIM RESULTS FOR THE 6 MONTHS TO 30 JUNE 2006
Rightmove plc ('Rightmove'), the UK's number one property website, today
announces interim results for the six months to 30 June 2006.
HIGHLIGHTS
• Operating profit up 138% to £8.3m (2005: £3.5m) before Home Information Pack
project costs, flotation costs and share option charges
• Revenue doubled to £15.1m (2005: £7.6m)
• Net cash of £5.2m (2005: £3.0m)
• Number of advertisers up 53% to 14,680
• Average price paid per advertiser per month up 22% to £181
• Visits to Rightmove.co.uk up 75% to 15.4m per month and page impressions up
93% to 227.3m per month
• Proposed interim dividend of 1.5p per ordinary share
OVERVIEW
We are pleased to report a strong performance from Rightmove for our first
interim results as a public company, following flotation on 15 March 2006.
Operating profit grew by 138% to £8.3m, before Home Information Pack project
costs, flotation costs and share option charges.
The substantial increase in operating profit was achieved through continued
rapid revenue growth. Revenue, at £15.1m was up 99% for the same period last
year. Revenue growth was achieved both through increased sales and price rises.
The advertising base grew by 53% to 14,680 advertising estate agency, lettings
agency and new homes developments. Average price paid per advertiser increased
by 22% to £181 per month.
Operating margins improved despite incremental public company expenses as
overall costs grew at a significantly lower rate than revenue, up 67% at £6.8m.
Following a government change to the proposed legislative framework for Home
Information Packs ('HIPs') announced on 18 July 2006, the Board decided to both
stop development of a HIPs platform and to dispose of a related minority
interest investment in property search service, TMG Holdings Ltd ('TM').
Rightmove had invested approximately £7.0m in developing its HIPs platform and
will incur a further £1.2m of exit costs.
The Board intends to pay an interim dividend of 1.5p per ordinary share once
certain technical conditions (set out below) have been met.
ON-LINE ADVERTISING
The first six months have seen rapid growth in our on-line advertising business
with over 5,000 new advertisers subscribing to Rightmove. Growth has been
particularly strong with estate agency, lettings and new homes advertisers
across all regions of Great Britain.
We entered 2006 with a market penetration among estate agents of 62% nationally,
and have seen this increase to 74% with strong growth in all areas of the
country and in all sectors of the market. Among estate agents specialising in
the premium end of the market, the gains have been significant and include
Savills, Knight Frank, Hamptons, Strutt & Parker, Stags and Douglas & Gordon.
We no longer see an upper limit of 80% on estate agent market penetration. This
is evidenced by three out of ten regions having already breached this level,
with East Anglia at 87%, closely followed by the South East and East Midlands at
86% each.
Growth among lettings agents, new home developers and overseas agents has been
greater than estate agents in percentage terms, though this reflects the lower
starting base. Rental only agents total over 1,523, up from 232 a year ago, new
homes developments total 2,367, up from 1,369, and overseas total 430 compared
to 220 at the end of June 2005.
Significant new advertisers amongst new homes developers include George Wimpey,
Redrow and David Wilson Homes, taking us to the position where eighteen of the
top twenty developers list some or all their developments on Rightmove.co.uk.
During the first half of 2005 the Rightmove service was being sold to new estate
agency advertisers at a monthly cost of £195, with existing advertisers paying
£150. During the same period this year we have sold to new agents at £250, with
existing advertisers paying £195. Overall across all our customer base the
average price per customer is £181 per month as at June 2006, up 22% on a year
ago.
In 2006 Rightmove has regularly been in the top ten UK websites in terms of page
impressions and has gained market share over our competitors. Amongst the top
four property websites Rightmove accounts for four out of every five pages of
property information viewed.
HOME INFORMATION PACKS
On 26 July 2006, the Board announced its intention to discontinue its HIPs
initiative.
In June, the government laid down the regulations to govern the content of HIPs,
the regulation of Home Inspectors and the compliance regime as required of it
under the 2004 Housing Act, which set out the requirement for mandatory HIPs.
The content of these regulations were broadly favourable to Rightmove. The
subsequent government announcement on 18 July 2006 stated that Home Condition
Reports would be a voluntary rather than mandatory element of HIPs when
introduced in June 2007. It is also very likely that people will be able to
start marketing properties without actually having a HIP, thereby removing the
urgency for an efficiently and reliably produced and delivered solution.
The Board considered these changes and concluded that there was no realistic
prospect of developing a profitable Rightmove HIPs business.
£22m had been allocated to the development of the HIPs proposition, of which
approximately £7.0m had been spent to the date of our announcement. Exit costs
are not expected to exceed £1.2m and will be accounted for in the full year
accounts. £0.3m of HIPs development costs previously capitalised have been
written off in these accounts, together with £0.7m of fixed assets.
In January Rightmove invested £3.25m to acquire a 25% stake in TM, a provider of
searches from local authorities and other bodies. The TM shareholder agreement
explicitly made provision for circumstances in which Rightmove might be unable
to order substantial volumes of searches. The four shareholders in TM have
agreed to exercise the exit provisions set out in the agreement. As a result, in
the second half of 2006, Rightmove intends to dispose of its 25% stake to the
other shareholders for £3.25m, before costs.
DIVIDEND
At the time of the flotation we communicated that our intention was to adopt a
progressive dividend policy. Our expectation was that we would make significant
investment through to June 2007 in our HIPs business. We now find ourselves with
a robust cash position, corporation tax credits, the prospects of receipts for
the sale of our shareholding in TM and no major cash outflows relating to the
HIPs business. Therefore, the Board intends to stand by its commitment to pay
dividends when Rightmove's cash position was firmly established.
As a consequence, Rightmove intends to pay an interim dividend of 1.5p per
ordinary share.
However due to technical issues concerning the level of the Company's
distributable reserves (which would impact on our ability to pay dividends), the
Board proposes, subject to shareholder approval, to apply to the High Court for
a capital reduction. If granted, this will have the effect of converting a
significant proportion of the share premium account into retained earnings,
thereby permitting the payment of an interim dividend. This process is expected
to take place before the end of the year with the dividend being paid as soon as
is practicable thereafter.
OUTLOOK
The Board of Rightmove believe the outlook remains positive as the shift
continues away from traditional advertising to the internet. The property
industry spends more than £500m annually on advertising in newspapers alone.
Though the clear market leader among property web sites, Rightmove only accounts
for around 5% of the property industry spend on newspaper advertising.
We will focus all our sales efforts on increasing advertiser numbers and to
focus our technology resources on delivering new advertising products more
rapidly than we had originally planned. Many customers have indicated their
desire to differentiate their Rightmove advertising from their competitors, as
they do in traditional advertising media such as local newspapers.
We believe that the second half of 2006 provides Rightmove with every
opportunity to build on the strong first half of the year and to lay the
foundations for further rapid growth in revenue in 2007 and beyond.
Scott Forbes Ed Williams
Chairman Group Managing Director
1 September 2006
For further information please contact:
Rightmove
For Ed Williams, Group Managing Director, and Graham Zacharias, Finance
Director please contact
Maud Rousseau 020 7318 9095
Maitland
Neil Bennett / Brian Hudspith 020 7379 5151
Consolidated income statement
for the six months ended 30 June 2006
Note 6 months 6 months Year ended
ended ended 31 December
30 June 2006 30 June 2005 2005
£000 £000 £000
Revenue 15,099 7,574 18,199
Administrative expenses (13,670) (4,226) (12,825)
Operating profit before HIPs, share
based payments and flotation costs 8,256 3,469 8,657
Share based payments (IFRS 2) 4 (794) - -
HIPs development costs (4,650) (121) (1,572)
Flotation costs (1,383) - (1,711)
---------- ----------- -----------
Operating profit 1,429 3,348 5,374
---------- ----------- -----------
Financial income 78 78 189
Financial expenses - - (27)
---------- ----------- -----------
Net financial income 78 78 162
---------- ----------- -----------
Share of associate profit 7 129 - -
Profit before tax 1,636 3,426 5,536
Income tax expense 9 (1,137) (1,043) (2,158)
---------- ----------- -----------
Profit for the period 499 2,383 3,378
Attributable to:
Equity holders 499 2,383 3,378
Earnings per ordinary share (pence)
Basic 5 0.41 2.03 2.86
Diluted 0.40 1.93 2.74
Consolidated statement of recognised income and expense
for the six months ended 30 June 2006
6 months 6 months 12 months
ended ended ended
30 June 2006 30 June 2005 31 December
2005
£000 £000 £000
Tax in respect of share options
recognised directly in equity 3,305 742 1,666
----------- ----------- -----------
Net income recognised directly in equity 3,305 742 1,666
Profit for the period 499 2,383 3,378
----------- ----------- -----------
Total recognised income and expense for
the period 3,804 3,125 5,044
=========== =========== ===========
Reconciliation of movements in shareholders' funds
for the six months ended 30 June 2006
6 months 6 months 12 months
ended ended ended
30 June 2006 30 June 2005 31 December
2005
£000 £000 £000
At 1 January 5,622 5,578 5,578
Profit for the period 499 2,383 3,378
Dividends to shareholders - (5,000) (5,000)
Issue of new shares 20,037 - -
Own shares held (17,707) - -
Capitalisation of distributable
reserves to fully pay up bonus issue shares (1,275) - -
Notional corporation tax charge recognised
in reserves 1,359 - -
Share based payments charge (IFRS 2) 794 - -
Tax in respect of share options 3,305 742 1,666
----------- ----------- -----------
Closing shareholders' funds 12,634 3,703 5,622
=========== =========== ===========
Consolidated balance sheet
as at 30 June 2006
Note 30 June 2006 30 June 2005 31 December
2005
£000 £000 £000
Non-current assets
Property, plant and equipment 998 621 1,137
Intangible assets 7 4,737 1,253 2,222
Investments 7 185 - -
Deferred tax asset 9 3,012 801 1,666
----------- ----------- -----------
Total non-current assets 8,932 2,675 5,025
----------- ----------- -----------
Current assets
Trade and other
receivables 2,282 992 2,450
Income tax receivable 1,585 - -
Cash and cash equivalents 5,206 2,971 5,580
----------- ----------- -----------
Total current assets 9,073 3,963 8,030
----------- ----------- -----------
Total assets 18,005 6,638 13,055
----------- ----------- -----------
Current liabilities
Trade and other payables 6 (5,371) (1,035) (6,674)
Income tax payable - (1,900) (692)
----------- ----------- -----------
Total current liabilities (5,371) (2,935) (7,366)
----------- ----------- -----------
Non current liabilities
Deferred tax liabilities - - (67)
----------- ----------- -----------
Net assets 12,634 3,703 5,622
=========== =========== ===========
Equity
Share capital 1,327 1 1
Share premium 18,711 - -
Own shares held (17,707) - -
Retained earnings 10,303 3,702 5,621
----------- ----------- -----------
Total equity 12,634 3,703 5,622
=========== =========== ===========
Consolidated statement of cash flows
for the six months ended 30 June 2006
Note 6 months 6 months 12 months
ended ended ended
30 June 2006 30 June 2005 31 December
2005
£000 £000 £000
Cash flows from operating activities
Profit for the period 499 2,383 3,378
Adjustments for:
Depreciation charges 368 169 261
Amortisation charges - - 150
Impairment of fixed assets 971 - -
Loss on sale of fixed assets - - 5
Investment income (129) - -
Interest income (78) (78) (189)
Interest expense - - 27
Share options charge 794 - -
Income tax expense 1,137 1,043 2,158
----------- ----------- -----------
Operating profit before changes in
working capital 3,562 3,517 5,790
Decrease/(increase) in trade and
other receivables 172 1,304 (153)
(Decrease)/increase in trade and
other payables (1,305) (131) 4,890
Cash generated from operations 2,429 4,690 10,527
Income taxes paid (164) - (2,196)
----------- ----------- -----------
Net cash from operating
activities 2,265 4,690 8,331
----------- ----------- -----------
Cash flows from investing activities
Interest received 78 78 189
Acquisition of property, plant
and equipment (307) (173) (864)
Acquisition of intangible assets (222) (195) (656)
Acquisition of investment in
associate 7 (3,243) - -
Proceeds from sale of property,
plant and equipment - - 36
----------- ----------- -----------
Net cash from investing
activities (3,694) (290) (1,295)
----------- ----------- -----------
Cash flows from financing activities
Interest paid - - (27)
Dividends paid - (5,000) (5,000)
Share issue 1,055 - -
----------- ----------- -----------
Net cash from financing activities 1,055 (5,000) (5,027)
----------- ----------- -----------
Net (decrease) / increase in
cash and cash equivalents (374) (600) 2,009
Cash and cash equivalents at
1 January 5,580 3,571 3,571
----------- ----------- -----------
Cash and cash equivalents
at period end 5,206 2,971 5,580
=========== =========== ===========
Notes
1. Basis of preparation
This interim financial information has been prepared applying the accounting
policies and presentation that were applied in the preparation of the company's
financial statements for the year ended 31 December 2005.
The financial statements are prepared on the historical cost basis.
2. The financial statements for the half year ended 30 June 2006 have not been
audited, although the auditor, KPMG LLP, has carried out an independent review.
The comparative figures for the financial year ended 31 December 2005 are
extracted from the company's statutory accounts for that financial year. Those
accounts have been reported on by the company's auditors and delivered to the
registrar of companies. The report of the auditors was:
(i) unqualified,
(ii) did not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report, and
(iii) did not contain a statement under section 237(2) or (3) of the Companies
Act 1985.
3. Segmental reporting
Segmental reporting details are provided below:
For the six months ended 30 June 2006
Property HIPs Other Total
advertising
£000 £000 £000 £000
Income statement information
Segmental revenue 15,099 - - 15,099
Depreciation and amortisation 261 106 1 368
-------- -------- -------- --------
Segmental operating
(loss) / profit 6,427 (4,650) (219) 1,558
Financial income 78
Financial expenses -
Income tax expense (1,137)
--------
Profit for the period 499
========
Balance sheet information
Capital expenditure 3,548 207 17 3,772
Property, plant and equipment 981 - 17 998
Intangible assets 4,401 - 336 4,737
Total assets 17,235 414 356 18,055
Total liabilities (5,136) (227) (8) (5,371)
For the six months ended 30 June 2005
Property HIPs Other Total
advertising
£000 £000 £000 £000
Income statement information
Segmental revenue 7,574 - - 7,574
Depreciation and amortisation 169 - - 169
-------- -------- -------- --------
Segmental operating
(loss) / profit 3,516 (121) (47) 3,348
Financial income 78
Financial expenses -
Income tax expense (1,043)
--------
Profit for the period 2,383
========
Balance sheet information
Capital expenditure 185 - 183 368
Property, plant and equipment 621 - - 621
Intangible assets 1,070 - 183 1,253
Total assets 6,455 - 183 6,638
Total liabilities (2,935) - - (2,935)
For the year ended 31 December 2005
Property HIPs Other Total
advertising
£000 £000 £000 £000
Income statement information
Segmental revenue 18,199 - - 18,199
Depreciation and amortisation 379 32 - 411
-------- -------- -------- --------
Segmental operating (loss) / profit 7,000 (1,572) (54) 5,374
Financial income 189
Financial expenses (27)
Income tax expense (2,158)
--------
Profit for the year 3,378
Balance sheet information
========
Capital expenditure 898 902 337 2,137
Property, plant and equipment 1,068 69 - 1,137
Intangible assets 1,085 801 336 2,222
Total assets 11,849 870 336 13,055
Total liabilities (7,433) - - (7,433)
4. Share based payments
In accordance with IFRS 2 a charge of £794,000 (30 June 2005: £Nil) is included
in the income statement, being the amortisation of the value of the share
options granted since November 2002.
5. Earnings per share
Earnings per ordinary share is based upon profit after taxation and on a
weighted average of 120,860,606 shares in issue during the period (30 June 2005:
117,893,351). Underlying earnings per ordinary share which is calculated before
the charge for HIPs development costs, flotation costs and share option charges
were 4.85p for the six months to 30 June 2006 (6 months to 30 June 2005: 2.09p).
6. Trade and other payables
30 June 2006 30 June 2005 31 December
2005
£000 £000 £000
Trade payables 862 194 1,183
Other taxation and social security 1,032 556 957
Deferred income from government
contract 2,528 - 2,428
Other accruals and deferred income 949 285 2,106
---------- --------- ----------
5,371 1,035 6,674
---------- --------- ----------
7. Acquisitions
During the period the company acquired 25% of the ordinary share capital of TM
Holdings Limited for a consideration of £3.25m. This gave rise to positive
goodwill of £2.1m and a customer list intangible asset of £1.1m. After the
balance sheet date, and as a result of the discontinuance of the HIPs business,
it is no longer considered appropriate to retain this shareholding. Accordingly,
this is expected to be disposed of for £3.25m, before costs.
8. Post balance sheet event
On 18 July 2006, the Government announced fundamental changes to the contents of
Home Information Packs (HIPs), specifically that the Home Condition Report
within the HIP would be voluntary for the foreseeable future. As a consequence,
the Board decided to discontinue the HIPs business. Total spend to end July 2006
was £7m and exit costs are not expected to exceed £1.2m.
In the interim accounts, 2005 capitalised development costs (£0.3m) and the net
book value of fixed assets relating to HIPs (£0.7m) have been written off. The
remaining costs relating to July and August operating expenses (£1.1m) and exit
costs (£1.2m) will be dealt with in the full year accounts.
9. Taxation
The group's consolidated effective tax rate for the 6 months ended 30 June 2006
is 69% (30 June 2005: 30 %). The difference between this and the standard rate
of corporation tax of 30% is mainly due to the high level of expenditure on
which no tax deduction is available, notably flotation costs and share option
charges.
A significant corporate tax deduction of approximately £21.1m arose on share
options exercised in the period. An element of this tax deduction was carried
back to offset the corporation tax liability in respect of the year ended 31
December 2005 with a resulting tax refund of £1.6m being expected in the second
half of the year. The remaining tax deduction will be set against the forecasted
taxable profits arising for the year ended 31 December 2006 resulting in an
overall tax loss for the year. A deferred tax asset was created for the tax loss
carried forward which the directors believe will crystallise in the short term.
The deferred tax asset of £3 million was recorded directly in equity and a
notional tax charge applied for the period ended 30 June 2006 in line with the
requirements of IFRS 2. No corporation tax liability is due at 30 June 2006.
Independent review report to Rightmove plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2006 which comprises the primary financial
statements and the related notes 1 to 9. We have read the other information
contained in the interim report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
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 Listing
Rules of the Financial Services Authority. 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.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the UK. A review consists
principally of making enquiries of management and applying analytical procedures
to the financial information and underlying financial data and, based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit performed in
accordance with International Statements on Auditing (UK and Ireland) and
therefore provides a lower level of assurance than an audit. Accordingly, we do
not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2006.
KPMG LLP
Chartered Accountants
Milton Keynes
1 September 2006
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