Final Results 31 December 2010

Rightmove plc 33 Soho Square London W1D 3QU EMBARGOED UNTIL 7AM 25 FEBRUARY 2011 RIGHTMOVE plc 2010 FULL YEAR RESULTS Rightmove plc, the UK's number one property website, today announces its Full Year results for the year ended 31 December 2010. Highlights: * Revenue(1) increased by 26% to Â£81.6m (2009: Â£64.5m) * Underlying operating profit(1)(2) increased by 39% to Â£56.6m (2009: Â£40.6m) * Underlying operating margin(1)(2) up from 62.9% to 69.4% * Underlying basic earnings per share(1) up 34% to 39.8p from 29.6p * Net cash at 31 December 2010 of Â£23.1m (2009: Â£3.4m) * 4.2m shares bought back during 2010 (2009: 1.1m) at an average price of Â£7.05 (2009: Â£4.84) * Number of advertisers grew by 2% to 18,042 (2009: 17,664) * Average revenue per advertiser (ARPA) at Â£379 per month (2009: Â£308 per month) * Proposed final dividend of 9.0p (2009: 7.0p) making a total dividend of 14.0p for the year (2009: 10.0p) * Net consideration for Rightmove's 66.7% stake in the Holiday Lettings business, sold in June 2010, of Â£20.9m including Â£5.1m contingent consideration, representing a seven-fold return on investment since 2007 (1) From continuing operations. Comparative figures have been restated where necessary to reflect the treatment of Holiday Lettings as a discontinued operation. (2) Before share-based payments and NI on share-based incentives. Ed Williams, Managing Director, said: "The results we are reporting today demonstrate the confidence that property advertisers have in using Rightmove to achieve their advertising goals online over traditional media, helping them cost-effectively reach their target audience in this challenging housing market. Rightmove today is considered not simply a listings portal, but an amphitheatre for the entire property industry where we assist our member advertisers in communicating their brand, properties and expertise to the British home-moving public." For more information please contact: Rightmove Ed Williams or Nick McKittrick Rightmove plc Press Office 0207 087 0605 / 07894 255295 A PDF copy of the 2010 Full Year results can be downloaded from www.rightmove.co.uk/investors.rsp CHAIRMAN'S STATEMENT It is my pleasure to present Rightmove plc's results for the year ended 31 December 2010. 2010 marks the tenth anniversary of Rightmove, which has become the place where UK home hunters find their next home. There is much we take for granted today which was merely an aspiration ten years ago. Today most people in the UK use the internet to find their next home and the vast majority of those use Rightmove. Millions of people use Rightmove every month to look for their next home or market their existing home. We serve 18,000 customers, in terms of advertisers representing the considerable majority of estate agents, lettings agents and volume house builders. It is our view that a growing number of home sellers, who are generally buyers as well, are using Rightmove to help them choose which agent to best market their home. Rightmove's history March 2011 marks Rightmove's fifth year as a public company. Each year that followed our initial public offering seems to have included a major change in the housing market. Often these events have diverted focus from the online advertising market in which we operate and our strong underlying performance, which has seen a continual and substantial improvement except for 2009 when our underlying operating profit(2) was essentially flat. In 2006 we withdrew from the prospective market for Home Information Packs when the government withdrew its commitment to implement the full terms of its legislation. 2007 saw the peak of the UK property market, but also with the collapse and nationalisation of Northern Rock, the downturn of the UK economy. 2008 was a disastrous year for the residential property market with more than a fifth of estate agency offices forced to close. 2009 surprised us all, not as a good year for the property market, but in terms of how estate agents and house builders managed to cut their costs, survive and in some instances thrive. Despite a tough housing market, the progression from 2009 to 2010 has represented the least disruptive period and the greatest continuity in moving from one year to another. The comparison of Rightmove's 2010 performance with 2009 reveals clearly the strength of our business. This reflects the increased importance of the internet for finding one's next home and, for our customers, their choice of how to advertise. A record year by every measure 2010 was the busiest year in our history. Website traffic grew year on year with page impressions up 17% to 7.6bn, generating record visibility and enquiries for our advertisers. In terms of financial results, 2010 set new records for organic growth, revenue and profits. We have continued with our commitment to return surplus cash to shareholders and have recorded the strongest share price in our history by a wide margin. The result of a sustained commitment I want to express my thanks to our customers as well as our employees who continue to put their efforts into making Rightmove the best place for home hunters to find their next home and for property advertisers to reach the widest possible audience. Financial results Profits and earnings per share for 2010 were up strongly on 2009. Underlying operating profit(1)(2) was up 39% to Â£56.6m (2009: Â£40.6m) driven by strong organic revenue growth coupled with only a small increase in operating costs year on year. Underlying basic earnings per share (EPS)(1)(2) was up 34% to 39.8p (2009: 29.6p), although using a normalised tax rate of 28% underlying basic EPS was up 44%. The increase in underlying EPS was strengthened by the repurchase of 4.2m shares at an average price of Â£7.05 per share during 2010. Due to the share buy backs being weighted towards the second half of the year, the full benefit to the EPS will only be realised in 2011. As at 31 December 2010 the net cash position was Â£23.1m (2009: Â£3.4m) with cash boosted by the initial net proceeds of Â£13.3m on the disposal of the Holiday Lettings business. Sale of Holiday Lettings We sold our 66.7% shareholding in Holiday Lettings (Holdings) Limited in June 2010 for a net consideration of Â£20.9m of which Â£14.8m has been received in cash, Â£1m is held in Escrow and the balance is contingent consideration. Holiday Lettings has been a very successful business under our three year period of stewardship. We are delighted with our financial returns on our original Â£3.1m investment in 2007 and thank founders Ross Elder and Andy Firth for their excellent contributions. Dividend The Board announced that it would increase the interim dividend to 5.0p per ordinary share which was paid on 12 November 2010 and to rebalance dividends between the interim and final payments. Consistent with our policy of increasing the total dividend for the year in line with underlying operating profits, the Board proposes to pay a final dividend of 9.0p per ordinary share for a total dividend for the year of 14.0p (2009: 10.0p). The final dividend, subject to shareholder approval, will be paid on 10 June 2011 to members on the register on 13 May 2011. The Board of directors I was delighted to announce the appointment of Peter Brooks-Johnson to the Board as an executive director on 10 January 2011. Peter leads our main operating business, which offers the UK's largest number of property advertisers access to the UK's largest home moving audience. His appointment demonstrates the depth of talent within the business. My thanks go to the Board more generally for its contribution and support over the last year. In particular I would like to thank Stephen Shipperley, our longest serving Board member, for the soundness of his advice and the continuity of his involvement from the earliest days at Rightmove. We wish him well as he steps down from the Board and acknowledge his personal contribution to growing both his own Connells business and the Rightmove business over the last decade. For most people either story alone would be a more than fitting testament to a successful business career. Annual General Meeting and resolutions The Board is proposing amendments to the remuneration of the executive directors. These changes are seen by the Board as an important next step in our transition from a new public company to a more substantial business that is now able to benefit from additional senior management talent necessary to achieve our growth objectives. Our proposal is to phase these changes in over three years, so that the transition will be achieved in full by 2013. Otherwise, the resolutions being proposed at the Annual General Meeting are similar in nature to resolutions from prior years. A summary of the business to be conducted is described in the Directors' Report. The Notice of Annual General Meeting will be published in March 2011. I and the rest of the Board look forward to answering any questions and updating shareholders further on the development of the business at our Annual General Meeting which will take place at 10am on 4 May 2011 at the offices of UBS Limited at 1 Finsbury Avenue, London, EC2M 2PP. On behalf of shareholders, I would like to thank Ed Williams and his team for the achievements of the past year. With advertiser numbers holding steady and healthy growth in average spend per advertiser at the start of the year, and in the absence of a significant deterioration in the UK housing market, the Board remains confident of growing the business further in 2011. Scott Forbes Chairman (1) From continuing operations. Comparative figures have been restated where necessary to reflect the treatment of Holiday Lettings as a discontinued operation. (2) Before share-based payments and NI on share-based incentives. Business and financial review Rightmove's revenues and profits for 2010 were significantly higher than in any previous year in Rightmove's history. Our value to property advertisers flows from the fact that Rightmove is where the majority of people in Britain look for their next home. In 2010 activity on our website increased significantly reaching record levels. Our share of the total online property search market grew to an all-time high and our lead over our nearest competitor widened to its greatest ever. Our advertising base of estate agents, lettings agents and new home developers grew by 2% despite 2010 being another challenging year in the UK property market. We believe that in terms of transaction volumes 2010 will be little different from 2008 and 2009 at around half the historic levels. Hence, to have increased revenue(1) by 26% and underlying operating profit(1) (2) by 39% year on year, reflects a further increase in the importance of Rightmove to advertisers. This can be seen by the fact that the very considerable majority of the increase in our revenue came from existing customers choosing to spend more with us. Sales of our new display advertising products launched at the start of 2010 contributed more than a quarter of the increase in revenue. Our 2010 results 2010 was a record year for Rightmove with profits after tax(1) of Â£38.5m (2009: Â£29.1m). Underlying operating profit(1)(2) was up 39% to Â£56.6m (2009: Â£40.6m). Organic revenue growth drove the growth in profits with overall revenue(1) of Â£81.6m (2009: Â£64.5m), up 26%. Underlying costs(1)(2) only rose 5%, further demonstrating the scalability of the Rightmove business. The above numbers exclude the contribution from Holiday Lettings (HLL). We sold our 66.7% share of the business to TripAdvisor Limited (a subsidiary of Expedia Inc) in June 2010 for a net consideration of Â£20.9m, representing a seven-fold increase on our original investment in 2007. The proceeds of this sale have already been returned to shareholders through our share buy back programme. What we do and the keys to success Rightmove's success comes from the value we add to our advertisers, which is itself created primarily by giving them the ability to reach the largest audience of UK home movers in one place. Our demonstrated ability to out-perform print-based property advertising, as well as clear leadership among internet property sites, is based on: * the scale of and continued growth in our home hunting audience; * the strength of the Rightmove brand; * the growing recognition amongst estate agents that they should promote the value of their brands to win vendor instructions to sell their homes; * the particular need for buyer enquiries in a tough market; * the wider services we provide as an integral part of membership; * our consultative sales and service relationship with our customers; and * measurability of our performance. The key performance indicators that we monitor include: MARKET SHARE NUMBER OF ADVERTISERS 82% of the market share of the top 4 UK Total membership at end of 2010 was property websites by pages viewed, same 18,042 (2009: 17,664), up 2% year on as 2009 year Source: Experian Hitwise and Rightmove: January 2011 and January 2010 PAGE IMPRESSIONS CORPORATE ESTATE AGENTS 7.6 billion page impressions up from 6.5 100% of all of the top 25 corporate billion in 2009 estate agents list their properties with us Source: Rightmove PROPERTIES DISPLAYED NEW HOME DEVELOPERS 1.1 million properties displayed on 92% - 23 out of 25 of the top new Rightmove.co.uk at 31 December 2010, up home developers advertised on 10% year on year Rightmove.co.uk in 2010 ENQUIRIES MOBILE 18.6 million enquiries up from 18.4 222 million mobile page impressions million enquiries in 2009 up 900% on 2009 Sustained investment in serving home hunters Home movers use Rightmove above all because it constitutes the easiest and most familiar way in which to view reliable information about most properties currently available on the market. The quality of the experience we provide to home hunters results not just from the scale of our investment in the Rightmove.co.uk website but also the experience we have built up over more than a decade of designing and providing quality information about properties, accessible through the best search in the property sector. During 2010 we have continued with that investment with key innovations including: * a new property details page: this includes larger and more photographs and better floor plans, integrated maps, as well as improved integration with social networking sites; * 'draw a search': the ability to plot out an area on a map or aerial photograph of the specific area in which the home hunter is interested and to search in their chosen area and thereafter to receive updates of properties coming to market in that area; * a generic mobile platform: following the success of our iPhone Application (launched in 2009) Rightmove has introduced a generic mobile platform to allow a wide range of other mobile devices to access a 'mobile friendly' version of the Rightmove site. In addition we launched an iPad Application coinciding with the European launch of the iPad; and * the launch of our property-related social networking site Rightmoveplaces which provides the public with a place to talk about their local neighbourhoods and what it is like to live there. Continuing to innovate and invest in the Rightmove website is important to maintaining and strengthening our position as the method of choice for home hunters to look at properties. Page impressions were up 17% to 7.6bn (2009: 6.5bn). According to Experian Hitwise Rightmove served more pages of property information than all the other 1,400 property websites combined and around ten times that of our nearest competitor. In recent months we have seen a big increase in the amount of home hunting activity carried out on mobile devices. This is in addition to the increase in activity reported above in relation to our website. We believe that the number of property searches being done on Rightmove's mobile platforms are as great as the entire number of searches on our nearest competitors' websites. As we start 2011, the iPhone Application has been downloaded to over 1m phones and the iPad Application downloaded 100,000 times. The emergence of tablet computers, of which the iPad is the highest profile, provide a particularly attractive interface through which to present property details and we see their future success as of benefit to Rightmove. Sustained investment in brand Rightmove benefits from more than ten years of investment in brand recognition. The results of this sustained investment were highlighted by an independent survey which was published in the Sunday Times in January 2011. The survey of 1,600 people across Britain who, either had their homes on the market or had recently sold, showed that 92% used Rightmove and 69% used Rightmove repeatedly. We launched our new TV advert, 'safari', around the turn of the year 2009/10 and have run further campaigns in the spring, early autumn and from Christmas 2010 well into 2011. The campaigns appear to have helped further boost awareness amongst home movers as well as delivering on our commitment to our advertisers to ensure that their properties get the best exposure. Rightmove's historical investment in brand is a key defence against new entrants or disintermediation by large internet companies. We continue to receive around four out of five visits to our website from people either typing in the 'Rightmove' name, using our mobile platforms or responding to our email alerts or unpaid links from other sites. Most of the remainder comes from organic search, for which we do not pay. In those rare instances where we do pay for site traffic, it is small scale, short-term and focused on acquiring a very specific audience(e.g. students in specific cities). Rightmove is an active user of social media sites such as Facebook and Twitter, as one would expect from a major internet brand. Both the redesign of our property details page and the creation of Rightmoveplaces should help us benefit from the social media trend. To date there is no evidence that home hunting activity itself is migrating to social media environments so we see these new media as principally representing opportunities rather than threats. Support to our advertisers Our programme of free breakfast seminars for agents took us to 27 venues across the UK in 2010. Since we started in 2009, we have now had around 5,000 agents taking up the invitation to attend these events. The seminars are designed to help our members be more successful and demonstrate how they can get the most from their Rightmove membership. Rightmove's investment in field and telephone account managers allows us to spend time with every customer to help them understand the wider range of benefits to be derived from their Rightmove membership. These include management information and reporting tools, competitor comparisons and reports and marketing material which they can use directly with home sellers and landlords. In November 2010 we launched a dedicated section of our website specifically to focus on student lettings. Many of Rightmove's lettings agent customers offer properties that would be suitable for students and a few exclusively focus on the student market. By creating a separate part of the site we are making it easier for students to find what they are looking for and for agents to target a student audience. As we roll out the service beyond the initial cities we have focused on, we should also be able to attract some advertisers who would not have previously considered Rightmove as a place to advertise to students. Innovation in advertising products Over a quarter of the increase in our revenues in 2010 came from products we did not have in 2009. Our two key new products provide display advertising services by which our advertisers can communicate messages about themselves and any offers they may have. As the products are `search-term' based, they allow advertisers to target geographically local audiences (in a similar but more granular and flexible way than traditional newspapers). In some cases we have actually attracted advertising spend that the advertiser had considered spending in other media such as radio - something that was unthinkable in a world where Rightmove only offered a property listing service. During 2010 we also made substantial improvements to some existing products. For instance, we replaced the Showcase product with Featured Property. The replacement product gives advertisers a large image of the property, increased prominence of their own logo and automates the process of changing which property is displayed during the month. These changes have made the product significantly more effective in generating interest in the properties featured. Taking the year as a whole, 21% of revenue came from spending by our customers above and beyond that spent on listing properties, as compared to 14% in 2009. In absolute terms spending on these products was up 90% on the previous year. We would expect to see the proportion of total spend accounted for by these and similar future products to rise in the coming years. Many of our customers have taken advantage of a scheme we offer, where for a commitment to spend an additional amount every month all year (typically Â£200 per month in 2010) they can select whatever combination of our additional advertising products they wish in return for a discount against the individual list price of the products. Adoption of this scheme has resulted in both a significant increase in the average spend on Rightmove per advertiser and a continued high predictability of our income streams. Our focus Our focus has been and remains on the UK online property advertising market. We see this focus as a strength of the business and an important contributor to our success. While we believe that Rightmove would be a major beneficiary of any increase in the number of agents in the market or number of developments being marketed by new homes developers, that is more a function of improvements in the wider property market. Where we apply our greatest focus is on increasing the absolute amount and the proportion of overall marketing budgets which our customers choose to spend with us. In 2010 the average spend per branch or development increased by 23%, accounting for the considerable majority of the overall revenue growth. Uncertainties, threats and risks The Rightmove business model has proven to be remarkably resilient in the unprecedented downturn in the property market experienced in 2008 and has delivered significant growth even in a tough market subsequent to that. Nonetheless the business is inevitably exposed to the general state of the housing market and particularly to transaction volumes. We do not believe, given the wider state of the economy and the specific challenges of the mortgage market, that 2011 will see any substantial increase in transaction volumes as compared to 2009 and 2010. While further big reductions in the number of agents and developers cannot be ruled out, the current very low levels of transactions and success of our customers in trading this far through the downturn give us some grounds for thinking that membership numbers are unlikely to fall significantly. Some of the future organic revenue growth we hope to achieve is likely to come from the creation of new advertising products and therefore depends on our ability to develop attractive and effective new products. However, there remains substantial opportunity to increase revenue from increased adoption of the existing products. From our inception, Rightmove has experienced a regular flow of new entrants into the property advertising market whether explicitly seeking to compete with us or not. They have exhibited a range of business models including `free to advertise'. 2010 was little different from previous years and we have no basis to believe 2011 will be any different. We believe that risks relating to operational failures, to financial and legal exposures, to fraud or embezzlement or from onerous commercial obligations or liabilities are limited. The business has few tangible assets and the major intellectual assets are tied up in the design and performance of our website and in our brand identity, recognition and reputation. Financial position Revenue Revenue(1) increased in 2010 by Â£17.0m (up 26%). Almost all the growth came from our Agency business with a year on year increase of Â£16.7m (up 35%). Agency has always been by far our largest business but in 2010 showed a growth in terms of the proportion of our total revenue, being 78% (2009: 73%). Revenue from New Homes developers increased by Â£0.5m to Â£15.1m (up 4%) with development numbers stable in the second half of the year suggesting an end to the decline that started in the second half of 2008. Other revenue fell by Â£0.2m with the entire decline being accounted for by the ending of a three year government contract at the start of 2010. Margin growth The underlying operating margin(1)(2) for the year increased from 62.9% to 69.4%. Underlying operating costs(1)(2) only increased by Â£1.1m from Â£23.9m to Â£25.0m, which coupled with the significant organic revenue growth, delivered the year on year step change in margin. Year ended Year ended Year ended 31 December 2010 31 December 2009 31 December 2008 Underlying operating margin % 69.4% 62.9% 57.8% (1)(2) Bad debt During the year the net bad debt charge was Â£0.6m (2009: Â£0.2m). The increase in the charge is due to a one-off write off of Â£0.2m in relation to a media agency that went into liquidation and a modest increase in the bad debt provision. Taxation The consolidated tax rate from continuing operations for the year ended 31 December 2010 was 26% (2009: 21%). The difference between this and the standard rate of tax at 28% is mainly attributable to the increase in the deferred tax asset on share-based incentives due to the increase in the Company share price over the year, together with tax relief on share options exercised during the year. Share-based payments and national insurance In accordance with IFRS 2, a non-cash charge of Â£1.8m (2009: Â£1.9m) is included in the profit or loss representing the amortisation of the fair value of share-based incentives granted, including Sharesave options, since 2006. Employer's NationaI Insurance (NI) is being accrued, where applicable, at a rate of 13.8% on the potential employee gain on share-based incentives granted. Based on a closing share price at 31 December 2010 of Â£7.79 this resulted in a charge for the year of Â£2.7m (2009: Â£1.3m). Net financial expenses A net financial credit of Â£0.2m (2009: Â£0.9m charge) was recorded. This reduction reflects a combination of lower interest charges due to the early repayment of the loan with the Bank of Scotland in February 2010, the release of an accrual made in 2009 in relation to debt issue costs and interest earned on positive cash balances held during the year. Earnings per share Basic earnings per share (EPS)(1) increased 34% to 35.7p (2009: 26.7p) and is based on profit after taxation and a weighted average of 108.0m ordinary shares in issue (2009: 109.1m). Underlying EPS(1)(2) increased 34% to 39.8p (2009: 29.6p). Profit on disposal of HLL A profit of Â£19.5m has been recorded in relation to the trading over the year and disposal of the Group's 66.7% stake in HLL. This comprises HLL's profit after tax for the six months to June 2010 of Â£0.8m plus a profit of Â£18.7m in relation to the sale. Statement of financial position Due to the strong financial performance and cash generation during the year, the Group has further strengthened its balance sheet with total equity of Â£27.9m at 31 December 2010 (2009: Â£3.2m). The increase in current trade and other receivables of 27% from Â£9.4m to Â£11.9m is in line with revenue growth experienced in the year. Trade and other payables increased from Â£13.9m to Â£16.0m principally due to an increase in the potential liability for employer's NI on share-based incentive gains. Cash flow and net debt Cash generated from operations was Â£58.8m (2009: Â£46.2m) and cash flow conversion was in excess of 100%. Lower interest paid of Â£0.1m (2009: Â£0.7m) was offset by increased taxes paid of Â£12.2m (2009: Â£10.8m) resulting in net cash from operating activities of Â£46.5m (2009: Â£34.7m). Capital expenditure was Â£1.2m (2009: Â£0.3m) reflecting increased investment in database licences and a disk storage solution. Initial net proceeds of Â£13.3m were received in relation to the disposal of HLL, which were returned to shareholders via share buy backs. A total of Â£29.4m was invested during 2010 in the repurchase of our own shares (2009: Â£5.5m) whilst a further Â£13.0m was paid by way of dividends (2009: Â£10.9m) to the Company's shareholders. Proceeds of Â£3.9m (2009: Â£5.4m) were received on the exercise of share options. During 2009, the Group converted its Â£25.0m revolving loan facility with the Bank of Scotland into a five year term loan. In February 2010, a decision was made to repay the debt. A total of Â£22.5m loan repayments were made in the year (2009: Â£17.2m). Post repayment of the term loan, the Group entered into an agreement with Barclays Bank Plc for a Â£10.0m uncommitted money market loan. To date no amount has been drawn under the facility and it has been extended for a further year until February 2012. Net cash at 31 December 2010 was Â£23.1m (2009: Â£3.4m). The Board is confident that with the existing cash resources and banking facilities in place, the Group and the Company will remain cash positive and will have adequate resources to continue in operational existence for the foreseeable future. The Board's priorities for the usage of cash are: investment in the business; payment of dividends; and the return of excess cash to shareholders via share buy backs. The Board believes that future working capital and capital expenditure requirements of the business will continue to be low and that the business will be in a position to return surplus capital to shareholders during 2011 through a combination of dividends and share buy backs. Current trading and outlook We started 2011 with record levels of activity on the Rightmove.co.uk website. Almost every day since the first working Monday of the year has seen stronger site traffic than on any other day prior to 2011. January 2011 has seen us send a record number of enquiries to our advertisers. The growth in mobile traffic continues to be strong and increases at an even faster rate than for the main website. Average spend per advertiser started the year very healthily and is expected to rise further over the coming months. Overall advertiser numbers are stable, at similar levels to late 2010. We believe that trends favouring online advertising will continue to buoy Rightmove's own growth prospects despite difficult housing market conditions. Subject to there being no further decline in the UK housing market, the Board remains confident of making significant progress in growing the business organically in 2011. Ed Williams Managing Director Nick McKittrick Chief Operating Officer and Finance Director (1) From continuing operations. Comparative figures have been restated where necessary to reflect the treatment of Holiday Lettings as a discontinued operation. (2) Before share-based payments and NI on share-based incentives. DIRECTORS AND OFFICERS Scott Forbes Chairman Scott was appointed Chairman of Rightmove in July 2005. He is also the Chief Executive of Bridge Capital Advisors Ltd, which he founded in 2007, and was a director of NetJets Management Ltd, a subsidiary of Berkshire Hathaway through to October 2009. Scott has over 30 years' experience in operations, finance and mergers & acquisitions which includes 15 years at Cendant Corporation which was formerly the largest worldwide provider of residential property services. Scott established the Cendant international headquarters in London in 1999 and led this division as Group Managing Director until he joined Rightmove. (Appointed 13 July 2005.) Ed Williams Managing Director Ed joined Rightmove in December 2000 as Managing Director at its inception. He is also a non-executive director of Trader Media Group, the main brands being Auto Trader and AutoTrader.co.uk, the UK's leading motoring website. His prior experience is in business strategy and IT consulting with McKinsey & Co, Accenture and JPMorgan. (Appointed 19 December 2000.) Nick McKittrick Chief Operating Officer and Finance Director Nick joined Rightmove in 2000. He led the development of Rightmove's original website and then went on to build the new homes, lettings and overseas businesses. At the start of 2005 Nick became the Managing Director of the main Rightmove.co.uk operating subsidiary, overseeing a trebling of revenue in three years. In 2009, he was promoted to the role of Chief Operating Officer and Finance Director. Before joining the Company he worked in Accenture for eight years in the technology consulting division. (Appointed to the Board 5 March 2004.) Peter Brooks-Johnson Managing Director, Rightmove.co.uk Peter joined Rightmove in 2006 and developed the Home Information Packs proposition. His focus subsequently shifted to the operation of the Rightmove.co.uk website. He then went on to lead, from the beginning of 2008, the estate agency business. Peter was promoted to the role of Managing Director of Rightmove.co.uk on his appointment to the Board on 10 January 2011 and now leads the main operating business. Prior to joining Rightmove, Peter was a managing consultant with Accenture and the Berkeley Partnership. (Appointed to the Board 10 January 2011.) Jonathan Agnew Non-executive Director Jonathan joined the Board in January 2006 as Senior Independent Director. He is Chairman of Beazley, The Cayenne Trust and Ashmore Global Opportunities. Jonathan was an investment banker for over 25 years, including being a Managing Director of Morgan Stanley and Group Chief Executive of Kleinwort Benson. He has been Chairman of Nationwide Building Society, Limit, Gerrard Group and LMS Capital and has served on the Council of Lloyd's. (Appointed 16 January 2006.) (Chairman of the Remuneration Committee and a member of the Audit and Nomination Committees.) Colin Kemp Non-executive Director Colin was appointed to the Board in July 2007. He is the Network Director for the Halifax Community Bank following the formation of Lloyds Banking Group in January 2009. With over 30 years' experience in high street retail banking, Colin has worked for HBOS companies since 1979. His roles have included running the Retail Contact Centres and heading up the Halifax Employee Share Services business, administering employee share plans to over 400 UK companies. Between January 2005 and December 2007, Colin was Managing Director of Halifax Estate Agencies Limited. Colin is a Cranfield MBA and an Associate of the Chartered Institute of Marketing. (Appointed 3 July 2007.) Ashley Martin Non-executive Director Ashley joined Rightmove in June 2009 as a non-executive director and also as Chairman of the Audit Committee, where he provides oversight of the financial reporting practices, internal control environment and compliance with the various listed company regulations. He is also a member of the Remuneration Committee. He qualified as a chartered accountant in 1981 and has a career in finance spanning 30 years. He was previously Finance Director of Rok plc, the building services group, and Group Finance Director of the media services company, Tempus plc. (Appointed 11 June 2009.) (Chairman of the Audit Committee and member of the Remuneration Committee.) Judy Vezmar Non-executive Director Judy is Chief Executive Officer of LexisNexis International. LexisNexisÂ®, part of the global media group Reed Elsevier PLC, is a leading worldwide provider of content-enabled workflow solutions designed specifically for professionals in the legal, risk management, corporate, government, law enforcement, accounting and academic markets. Judy is responsible for the International Group and their expansion of the range of successful online services to over 100 countries. She is based in London. (Appointed 16 January 2006.) (Member of the Audit, Remuneration and Nomination Committees.) Liz Taylor Company Secretary Liz was appointed Company Secretary of Rightmove in July 2006. She is a Fellow of the Institute of Chartered Secretaries and Administrators and has over 20 years' company secretarial experience across a variety of FTSE 250 public companies in the retail, media and property sectors. Prior to joining Rightmove, she was Company Secretary of The Berkeley Group Holdings plc, the holding company of the group engaged in residential and commercial property development. SENIOR MANAGEMENT TEAM Alex Solomon New Homes Director Alex joined Rightmove in 2005 and, having been responsible for the pricing and products portfolios, now runs the new homes business. Prior to joining Rightmove he spent six years working as an economist/policy advisor for trade bodies, initially representing the interests of agricultural firms at the National Farmers' Union and then mortgage firms at the Council of Mortgage Lenders. Alan Gearing Managing Director, Rightmove Property Services Alan joined Rightmove in 2006 developing new sources of revenue separate from property advertising. He was appointed as Managing Director of Rightmove's Automated Valuation Model division in July 2008. Prior to Rightmove he was a founder of both The Asset Management Group (property disposal and maintenance services) and The Inventory Exchange (online inventory and property inspection) and was Managing Director of a 50 branch estate agency chain. Peter Armstrong Business Development Director Peter joined Rightmove in 2003 and worked in the new homes business which he then went on to run from May 2006 to May 2010. Peter has subsequently taken on the role of business development director. Prior to Rightmove, Peter worked in sales and sales management, latterly in directory advertising with Yell. Miles Shipside Commercial Director Miles joined Rightmove as a founding director in 2001 bringing 20 years of experience at senior levels in independent estate agency and with Halifax Estate Agency. He has responsibility for estate agency and media relations, specialising in advising the industry on how the internet is transforming home moving and the state of the housing market. He qualified as a Chartered Surveyor in 1982. Robyn Perriss Financial Controller Robyn joined Rightmove in 2007 and has day-to-day responsibility for the financial operations, based out of Milton Keynes, as well as statutory reporting and the treasury function. She was formerly Group Financial Controller at the online media business, Trader Media Group. She qualified as a chartered accountant in South Africa with KPMG. Simon Hickie Human Resources Director Simon joined Rightmove in 2007 following seven years at Bloomberg LP where he was responsible for HR operations across Europe, the Middle East and Africa. Prior to moving into HR, he had managed part of Bloomberg's financial research operation covering new debt and equity security issuance and mergers & acquisition activity in Europe. CORPORATE SOCIAL RESPONSIBILITY Our people Our people are our largest resource and our most highly valued asset. We are proud of our people and the mixture of talent and experience that they bring and we depend on their skills and commitment to achieve our objectives. Our cultural style is bolstered by an open and honest communication environment and by investment in ensuring that all employees have a profound understanding of Rightmove's core values and goals. We achieve this through a combination of a rigorous selection process, including technical skills testing, an off-site residential course to ensure all Rightmovers understand our core values and the role that they perform, ongoing coaching and mentoring, and cross-functional team building events involving all employees. In 2010 all executive directors, senior managers and employees attended a series of outdoor team building camping events at Hever Castle. Staff opinions are frequently sought through regular staff forums with senior managers and employee online surveys. We continue to offer our Rightmover-led training academy designed to provide a structured means for employees to expand and diversify their skills and knowledge and explore new ways of working with one another. Given the specialised technical nature of the work we do and the services we provide, we also support ongoing external professional development where appropriate. During 2010 we have explored new ways of ensuring that Rightmovers are aware of the additional benefits that they are entitled to access, which have proved to be a useful retention tool. This is achieved not only via our induction process and intranet but also through benefits fairs. In November 2010, the Company's second Sharesave contract matured allowing employees to benefit from the success of the Company over the last three years. 43% of employees currently participate in the Sharesave scheme. Rightmove has a strong commitment to equality of opportunity in all our employment policies, practices and procedures. We take a proactive approach throughout our recruitment and selection process to ensure that we attract, hire and retain a diverse and talented workforce and this is kept under close and regular scrutiny. No existing or potential employee will receive less favourable treatment due to their race, creed, nationality, colour, ethnic origin, age, religion or similar belief, connections with a national minority, sexual orientation, gender, gender reassignment, marital status, membership or non-membership of a trade union, disability, or any other classification as prescribed by law. Charitable activity We continue to encourage all our employees to devote time and fundraising efforts to charitable causes of particular importance to them as individuals. During 2010 a considerable number of staff have been active in raising money or supporting the fundraising activities of the NSPCC, our nominated charity, and a wide range of other charities. Environment Rightmove actively considers its environmental impact. Since our operation is primarily office-based, the direct environmental impact is relatively low. Indeed Rightmove's business creates opportunities to reduce the overall environmental harm associated with a variety of aspects of the whole home hunting process. Traditional ways of finding a home tend to involve large amounts of paper and printing, whether in the form of newspaper advertising, property particulars mailed to applicants through the post or leaflet drops by agents. Rightmove reduces the need for print media and the environmental damage that goes with them. Rightmove takes care to design the layout of property particulars to reduce the total number of pages that need to be printed out in those cases where a home hunter does want a physical copy. Enhanced information on properties also reduces the amount of time home hunters waste in visiting properties that rapidly turn out to be inappropriate. As a high proportion of viewings involve a car journey, any reduction in wasted viewings has an environmental benefit. Rightmove has worked hard to increase the number and size of photographs of each property and has introduced more comprehensive map searches and aerial photographs which help home hunters to identify the specific location of a property. The higher the quality of the information presented about properties the less carbon footprint is generated by prospective buyers making wasted journeys. The Rightmove.co.uk website includes functionality for our customers to display Energy Performance Certificates which allow prospective buyers to evaluate the energy efficiency of a property they are considering buying and to identify opportunities to improve the energy efficiency once they have purchased the property. We take the environmental impact of our own operations very seriously. As an internet-based Group with most staff employed in two office locations, we believe our own environmental footprint is small and that there are no by-products of our operations which have a clear negative impact on the environment. Our staff are encouraged to take proactive steps to address our environmental responsibilities. For instance, we continue to operate comprehensive recycling schemes which were established in consultation with local authorities and recycling partners. As an operator of an online property portal, the main environmental impact is the power usage of our data centres. Our procurement policy is to purchase hardware with the best computational performance which uses the least electrical power. For example, in the year, we have completed a partial refresh of our data centre hardware replacing old less efficient servers with half the number of new efficient units. This refresh has not only reduced our electrical power usage, but has allowed us to serve 7.6bn page impressions to our customers, an increase of 18% above that of 2009. As an online Group, our culture emphasises a paperless environment. We also recognise that our responsibilities do not stop just with how we operate internally - we also encourage all our customers, business partners and suppliers not to unnecessarily print out emails sent by us in the signature of all our emails. Moreover in 2008 we introduced e-communications for our shareholders, including an interactive copy of the annual report to enable investors and people with an interest in the Company to print specified pages thereby reducing the quantity of printed material we distribute. In 2009, we introduced email invoicing for our new homes developer customers and now have 71% of this customer group on paperless billing. Health and safety The Group considers the effective management of health and safety to be an integral part of managing its business. During 2010, we continued our fire safety, first aid and work place safety training. The Group's ongoing policy on health and safety is to provide adequate control of the health and safety risks arising from work activities, through further consultation with, and training of, employees, the provision and maintenance of plant and equipment, safe handling and use of all substances and the prevention of accidents and causes of ill health. The Group will maintain safe and healthy working conditions for employees, visitors and contractors, and keep the policy on health and safety up-to-date with regular reviews and necessary alterations to the policy as required. DIRECTORS' REPORT The directors submit their report together with the audited financial statements for Rightmove plc (the Company) and its subsidiary companies (the Group) for the year ended 31 December 2010. The Company is domiciled in England (registered number 6426485). Principal activities The Group operates in the UK residential property industry connecting people to properties. Its principal business is the operation of the Rightmove.co.uk website, which is the UK's largest residential property website. Its customers (estate agents, lettings agents, new homes developers and overseas homes agents and vendors) pay fees for the right to display properties on the Rightmove website, which provides home hunters with property details to search. Further information on the Group's activities within each segment during the year under review and of its prospects can be found in the Business and Financial Review on pages 5 to 11. The following sections inclusive are incorporated by reference into the Directors' Report which have been drawn up and presented in accordance with and in reliance upon acceptable English company law and the liabilities of the directors in connection with the report shall be subject to the limitations and restrictions provided by such law: â€¢ Business and financial review (pages 5 to 11) â€¢ Directors and officers (pages 12 to 13) â€¢ Corporate social responsibility (pages 15 to 16) â€¢ Corporate governance (pages 21 to 28) â€¢ Remuneration report (pages 29 to 45) In compliance with the business review provisions of the Companies Act 2006, within the Business and Financial Review, principal risk factors are discussed under the section `Uncertainties, Threats and Risks' on page 8. Key performance indicators are given on page 6 and information on the likely developments of the Group under `Current Trading and Outlook' on page 11. Sale of Holiday Lettings (Holdings) Limited (HLHL) Rightmove sold the HLHL business to TripAdvisor Limited, a wholly owned subsidiary of Expedia Inc, on 21 June 2010. Rightmove acquired its 67% stake in the business in March 2007 for Â£3,108,000 and had operated it as a stand-alone business throughout the period of ownership. Net cash consideration to Rightmove on completion was Â£15,185,000 with a further Â£1,000,000 in Escrow, which together with an estimated Â£5,104,000 contingent consideration is likely to take total proceeds for the Group's 67% stake in the business to Â£20,872,000. Trading results The Group's underlying operating profit from continuing operations (before share-based payments and National Insurance on share-based incentives) for the financial year was Â£56,563,000 (2009: Â£40,606,000). Further information on the results for the Group is set out in the Consolidated Statement of Comprehensive Income on page 48 and the supporting Notes and also the Business and Financial Review on pages 5 to 11. Dividend An interim dividend of 5.0p (2009: 3.0p) per ordinary share was paid on 12 November 2010 to shareholders on the register of members at the close of business on 15 October 2010. The directors are recommending a final dividend for the year of 9.0p (2009: 7.0p) per ordinary share, which together with the interim dividend of 5.0p, paid in respect of the half year period ended 30 June 2010, makes a total for the year of 14.0p (2009: 10.0p), amounting to Â£ 14,905,000 (2009: Â£10,865,000). Subject to shareholders' approval at the Annual General Meeting on 4 May 2011, the final dividend will be paid on 10 June 2011 to shareholders on the register of members at the close of business on 13 May 2011. The final dividend payment has not been included in trade and other payables as it was not approved before the year end. Share capital The ordinary shares in issue (including 2,505,430 shares held in treasury) at the year end comprised 114,761,434 (2009: 118,923,411) ordinary shares of Â£0.01 each, being Â£1,147,000 (2009: Â£1,189,000). The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at general meetings of the Company. Movements in the Company's share capital in the year are shown in Note 23 and Note 24 to the financial statements. Information on the Group's share-based incentive schemes is set out in Note 25 to the financial statements. Details of the share-based incentive schemes for directors are set out in the Remuneration Report on page 42. Share buy back The Company announced a share buy back programme in June 2007, which continued during 2009 and 2010. Of the 15% authority given by shareholders at the 2010 Annual General Meeting, a total of 4,161,977 ordinary shares of Â£0.01 each were purchased in the year to 31 December 2010, being 3.1% of the shares in issue (excluding shares held in treasury) at the time the authority was granted. The average price paid per share was Â£7.05 (2009: Â£4.84) with a total consideration paid (inclusive of all costs) of Â£29,564,000 (2009: Â£5,490,000). Since the introduction of the new parent Company in January 2008, a total of 17,143,974 shares have been purchased of which 2,505,430 have been transferred into treasury with the remainder having been cancelled. A resolution seeking to renew this authority will be put to shareholders at the Annual General Meeting on 4 May 2011. Shares held in trust As at 31 December 2010, 6,322,329 (2009: 7,418,874) ordinary shares of Â£0.01 each in the Company were held by The Rightmove Employees' Share Trust (EBT) for the benefit of Group employees (2009: 7,418,874). These shares had a nominal value at 31 December 2010 of Â£63,000 (2009: Â£74,000) and a market value of Â£49,251,000 (2009: Â£37,428,000). The shares held by the EBT may be used to satisfy share-based incentives for the Group's employee share plans. During the year 1,096,545 shares (2009: 1,641,791) shares were transferred to Group employees following the exercise of both executive and Sharesave share options. The terms of the EBT provide that dividends payable on the shares held by the trust are waived. Substantial shareholdings As at the date of this report, the following beneficial interests in 3% or more of the Company's issued ordinary share capital (excluding shares held in treasury) on behalf of the organisations shown in the table below, had been notified to the Company pursuant to Rule 5 of the Disclosure and Transparency Rules: Shareholder No. of shares %(1) Baillie Gifford & Co 8,615,294 7.7 Marathon Asset Management LLP 7,835,467 7.0 Cantillon Capital Management LLC 6,830,220 6.1 Caledonia (Private) Investments Pty 6,431,468 5.7 Ltd The Rightmove Employees' Share Trust 6,322,329 5.6 AEGON Asset Management (UK) 5,772,199 5.1 Tremblant Partners LP 5,466,506 4.9 Legal & General Investment Management 4,146,797 3.7 Ltd Old Mutual Asset Managers 3,805,926 3.4 BlackRock 3,735,908 3.3 (1) The above percentages are based upon the voting rights share capital (being the shares in issue less shares held in treasury) of 112,256,004. Directors The directors of the Company at the year end and as at the date of this report are named on pages 12 to 13 together with their profiles. Stephen Shipperley served on the Board during the year and resigned on 31 December 2010 and therefore his profile is not included. The Articles of Association of the Company require directors to submit themselves for re-appointment where they have been a director at each of the preceding two Annual General Meetings and were not appointed or re-appointed by the Company at, or since, either such meeting. Following the changes to the Combined Code in June 2010, all directors who have served during the year and remain a director as at 31 December 2010 will retire at the forthcoming Annual General Meeting. Peter Brooks-Johnson (executive director), will also retire and offer himself for election, this being his first general meeting since his appointment in January 2011. The Board is satisfied that the directors retiring are qualified for re-appointment by virtue of their skills, experience and contribution to the Board. Ed Williams, Nick McKittrick and Peter Brooks-Johnson have service agreements with the Company which can be terminated on 12 months notice. The appointments for the non-executive directors, Scott Forbes, Jonathan Agnew, Colin Kemp, Ashley Martin and Judy Vezmar can be terminated on three months' notice. The interests of the directors in the share capital of the Company at 31 December 2010, the directors' total remuneration for the year and details of their service contracts and Letters of Appointment are set out in the Remuneration Report on pages 29 to 45. At 31 December 2010 each of the executive directors was deemed to have a non-beneficial interest in 6,322,329 ordinary shares of Â£0.01 each held by the trustees of the EBT. Directors' interests in contracts Stephen Shipperley served as non-executive director during the year and resigned from the Board on 31 December 2010. Stephen is Group Executive Chairman of Connells Limited, a significant estate agency customer of the Group. The details of amounts owed by and invoiced to Connells Limited during the year are disclosed in the section dealing with Related Party Disclosures in Note 28 to the financial statements on page 84. All transactions are on an arms length basis. Supplier payment policy The Group and Company's policy concerning creditors is to agree payment terms with its suppliers, ensure the relevant terms of payment are included in contracts and to abide by those terms when it is satisfied that goods or services have been provided in accordance with the contracts. For the year to 31 December 2010, trade creditors on continuing operations represented 32 days (2009: 31 days) of average daily purchases. The Group had Â£1,033,000 of trade payables at the year end (2009: Â£777,000). Contractual arrangements Due to the nature of the Group's business activities, the Group maintains a small number of contractual arrangements with external providers of data, software, hardware and web-based services, which are essential to support the operation of all business segments. However, the loss of one of these arrangements due to supplier failure would not result in a critical business failure, as such services could be sourced from a number of other suppliers. Research and development The Group undertakes research and development expenditure in view of developing new products and improving the existing property websites. Further details are disclosed in Note 2 to the financial statements on page 57. Charitable and political donations The Group and the Company made no charitable contributions or political donations during the year (2009: Â£nil). Annual General Meeting The Annual General Meeting of the Company will be held at the offices of UBS Limited at 1 Finsbury Avenue, London, EC2M 2PP on 4 May 2011 at 10am. The Board is proposing amendments to the remuneration of the executive directors. These changes are seen by the Board as an important next step in our transition from a new public company to a more substantial business that is now able to benefit from additional senior management talent necessary to achieve the Board's ambitious growth objectives. The proposals reflect the ending of the incentive arrangements instituted five years ago prior to the Company's flotation on the London Stock Exchange which have been successful in retaining and motivating the original management team who founded the business ten years ago. Our proposal is to phase the proposed changes in over three years, so the transition will be achieved by 2013. Otherwise, the majority of the resolutions being proposed at the 2011 Annual General Meeting are general in nature including the renewal for a further year of the limited authority of the directors to allot the unissued share capital of the Company and to issue shares for cash other than to existing shareholders. A resolution will also be proposed to renew the directors' authority to purchase a proportion of the Company's own shares. One of the items of special business to be addressed at this Annual General Meeting relates to the requirement in the Companies (Shareholders' Rights) Regulations 2009, which came into force on 3 August 2009, that all general meetings must be held on not less than 21 clear days' notice unless shareholders approve a shorter notice period. At the 2010 Annual General Meeting, a resolution was passed allowing the Company to call general meetings (other than Annual General Meetings) on not less than 14 clear days' notice. As this authority will expire at the 2011 Annual General Meeting, we will be proposing a resolution to renew this authority. Auditor KPMG Audit Plc has confirmed its willingness to continue in office as auditor of the Group. In accordance with section 489 of the Companies Act 2006, separate resolutions for the re-appointment of KPMG Audit Plc as auditor of the Group and for the Audit Committee to determine their remuneration will be proposed at the forthcoming Annual General Meeting. Audit information So far as the directors in office at the date of signing of the report are aware, there is no relevant audit information of which the auditors are unaware and each such director has taken all reasonable steps to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information. Responsibility statement of the directors in respect of the annual financial report We confirm that to the best of our knowledge: * the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and * the Directors' Report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. Signed by the Board: Ed Williams Managing Director Nick McKittrick Chief Operating Officer and Finance Director 25 February 2011 CORPORATE GOVERNANCE Statement of compliance The 2008 Combined Code of Corporate Governance (Combined Code) sets out the principles and provisions relating to good governance of UK listed companies. In this section we set out how we have applied the principles and complied with the provisions of the Combined Code during 2010 and explain the reason for one area of non-compliance. The Board At the date of this report, the Board comprises eight directors including the Chairman (Scott Forbes), three executive directors (Ed Williams, Managing Director, Nick McKittrick, Chief Operating Officer and Finance Director and Peter Brooks-Johnson, Managing Director, Rightmove.co.uk) and four non-executive directors (Jonathan Agnew, who is the Senior Independent Director, Ashley Martin, Judy Vezmar, and Colin Kemp). Colin Kemp has worked for HBOS companies for over 30 years and held the position as Managing Director of Halifax Estate Agencies Limited (an agency customer of the Group) from January 2005 to December 2007. Although the Lloyds Banking Group subsequently sold the business in October 2009, in strict application of the Combined Code, Colin Kemp is not considered to be independent. However, the Board considers that Colin Kemp is independent in character and in particular continues to challenge rigorously the executive directors and the Board as a whole. Whilst the composition of the Board for the year under review was not in strict compliance with supporting principle B.1.2 of the Combined Code in that at least half of the directors (excluding the Chairman) are not considered independent non-executive directors, the directors believe that the Board currently operates effectively and that all the non-executive directors are fully independent of management and that Jonathan Agnew, Ashley Martin and Judy Vezmar are free from any business or other relationship that could materially interfere with the exercise of their independent judgment and advice to the Board. Ed Williams, Managing Director, is also a non-executive director of Trader Media Group. His remuneration for that position is retained by him and is set out in the Remuneration Report on page 36. Neither the Chairman nor the other two executive directors hold any other non-executive directorships or commitments disclosable under the Combined Code. Biographical details of the directors at the date of this report appear on pages 12 and 13. Directors' remuneration The principles and details of directors' remuneration and contractual arrangements are contained in the Remuneration Report on pages 29 to 45. Board and committee membership and attendance In accordance with the Combined Code, the Articles of Association require all directors to seek re-election every three years. In addition all directors are subject to election by shareholders at the first opportunity after their appointment. Following the changes introduced by the Combined Code in June 2010, all directors will seek re-election at the 2011 Annual General Meeting. Peter Brooks-Johnson, who having been appointed since the last Annual General Meeting, will retire from the position as executive director and offer himself for election. The membership of the Committees of the Board and attendance at meetings for the year under review are set out in the table below: Remuneration Audit Nomination Board Committee Committee Committee Total meetings 8 6 4 2 Scott Forbes 8 6(1) N/A 2 Jonathan Agnew 8 6 4 2 Colin Kemp 8 N/A N/A N/A Ashley Martin 8 6 4 N/A Nick McKittrick 8 N/A N/A N/A Stephen Shipperley (2) 5 N/A N/A N/A Judy Vezmar 5 5 4 2 Ed Williams 8 N/A N/A N/A (1) The Remuneration Committee Chairman has requested that the Chairman of the Board attend the Remuneration Committee meetings. (2) Stephen Shipperley resigned on 31 December 2010. In addition to the above meetings, the Chairman conducts meetings with the non-executive directors without the executive directors being present when required. Jonathan Agnew, the Senior Independent Director, chaired a meeting of the Board at which the performance of the Chairman was also reviewed (without the presence of the Chairman). Operation of the Board The Board is responsible to shareholders for the overall direction and control of the Group. Its key task is to approve strategy, ensuring the successful implementation of projects and proposals and monitoring the operating performance of the Group in pursuit of its objectives in the interest of maximising long-term shareholder value. The Board has adopted a formal schedule of matters requiring specific approval. These include, amongst other things, the approval of the annual business plan, capital structure, dividend policy, acquisitions and disposals, appointment and removal of officers of the Company, approval of the Half Year and Full Year results, shareholder communication and responsibility for corporate governance and review of the Group's risks and system of internal controls. The Board receives meeting papers one week prior to the meetings to allow sufficient time for detailed review and consideration of the documents beforehand. If any director has a concern about any aspect of the business conducted at any Board meeting, the Company Secretary shall discuss this with the director concerned and record their concern or comments in the Board minutes. The Board also receives monthly management and financial reports on the operational and financial performance of the business setting out actual and forecast financial performance against approved budgets in addition to other key performance indicators. The Board also receives copies of broker reports and press releases relating to the Group. At least once a year the Managing Director and the senior management team present a strategic review and an annual plan to the Board for review and approval. The Board normally schedules eight meetings each year although meetings can be scheduled at short notice at the request of any director or if required. In addition to formal Board meetings, there is regular informal dialogue between all directors. Chairman and Managing Director There are clear written guidelines to support the division of responsibilities at the head of the Company with the roles of the Chairman and Managing Director separately held. The Chairman is responsible for the effective conduct of the Board, for communication with shareholders and for ensuring that each director uses their skills and experience to the benefit of the Board's decision making. With the assistance of the Company Secretary, the Chairman monitors the information provided to the Board to ensure that it is sufficient, pertinent, timely and clear. The Managing Director has day-to-day executive responsibility for the running of the Group, leading the executive and operational teams in developing strategies and delivering results against defined targets to enable the Group to meet its objectives. Board training The breadth of management, financial and listed company experience of the non-executive directors is described in the biographical details on pages 12 and 13, and demonstrates a range of business expertise that provides the right mix of skills and experience given the size of the Company. There are procedures in place for individual Board members to receive induction and training as appropriate and to seek the advice and services of independent professional advisers, at the Company's expense, where specific expertise or training is required in the course of their duties. The directors disclose a qualifying third-party indemnity provision between the Company and its directors and officers as provided by the Articles of Association of the Company, which was in force at the date of this report. The Group has also arranged directors' and officers' insurance cover in respect of legal action against the directors. The Group has set out written policies in compliance with a code of securities dealings in relation to the shares and equivalent to the Model Code published in the Listing Rules. The code applies to all directors, other persons discharging managerial responsibility and other relevant employees. Board evaluation The Board conducted a Board evaluation exercise in quarter four of 2010 which was led by the Chairman, assisted by the Company Secretary. All directors completed questionnaires inviting feedback on the performance and operation of the Board. The results were discussed at the Board meeting in December 2010. The Board concluded that it was operating effectively and agreed a number of actions and training requirements for the forthcoming year. In addition each director provided feedback on the performance of each of their Board colleagues which was collated and communicated at one-to-one meetings conducted by the Chairman. At a meeting chaired by Jonathan Agnew, Senior Independent Director, the Board provided input into and reviewed the performance of the Chairman. The Board has agreed to adopt best practice and to organise an externally facilitated Board evaluation at least once every three years and will take some time to review the external market place over the next year to determine an appropriate facilitator and process alternatives with the aim of introducing an external evaluation by 2012. Relations with shareholders The Board is accountable to shareholders for the performance and activities of the Company and the Chairman ensures that effective communication with shareholders takes place. Within the terms of the regulatory framework, the Company has conducted regular dialogue with shareholders through ongoing meetings with institutional investors and research firms to discuss strategy, operating performance and financial performance. Contact in the UK is principally with the Managing Director and Chief Operating Officer and Finance Director. The Chairman also participates in the USA biannual investor road shows. In 2010, Jonathan Agnew, the Senior Independent Director, consulted major shareholders on the remuneration policy for the executive directors. He is also available to shareholders if they wish to supplement communication or if contact through the normal channels is inappropriate. Shareholders are also kept up to date with the Group's activities through the Annual and Half Year Reports and the investor relations section of its website, which provides details of all the directors, latest news, including financial results, investor presentations and Stock Exchange announcements. The Board is kept informed of the views and opinions of those with an interest in the Company through reports from the Managing Director and Chief Operating Officer and Finance Director as well as reports from the Company's joint brokers, UBS and Numis. Directors receive notification of any changes in the status of substantial shareholders and at each Board meeting an update is given by the executive directors on the movements in major shareholdings and on the views and opinions of those with an interest in the Company. Conflicts of interest In cases of doubt, the Chairman of the Board is responsible for determining whether a conflict of interest exists. Annual General Meeting All shareholders are invited to participate in the Company's Annual General Meeting on 4 May 2011 where all directors will be available to answer questions and will also be available for discussions with shareholders prior to and after the meeting. The Company will arrange for the Annual Report and related papers to be available on the Company's corporate website at www.rightmove.co.uk/ investors.rsp or posted to shareholders (where requested) so as to allow at least 20 working days for consideration before the Annual General Meeting. The Company also complies with the Combined Code with the separation of all resolutions put to the vote of shareholders. The Company proactively encourages shareholders to vote at general meetings by providing electronic voting for shareholders who hold their shares through the Crest system and provides personalised proxy cards to ensure that all votes are clearly identifiable. The Company presently takes votes at general meetings on a show of hands on the grounds of practicality due to the limited number of shareholders in attendance. Votes are taken by a poll at any shareholder meeting where legally required. All proxy votes are counted and the level of proxy votes including abstentions lodged for each resolution are reported after each resolution and published on the Company's website. Board committees The Board has established three principal committees, the Audit Committee, the Remuneration Committee and the Nomination Committee, each of which operates within written terms of reference approved by the Board. No person other than a Committee member is entitled to attend the meetings of these Committees, except by invitation of the Chairman of that Committee. Remuneration committee The Remuneration Committee consists of the three independent non-executive directors, Jonathan Agnew (who is Chairman), Judy Vezmar and Ashley Martin. In addition, the Remuneration Committee Chairman has requested that the Chairman of the Board attend the Remuneration Committee meetings. The quorum for meetings of the Remuneration Committee is two members. The Remuneration Committee will meet at such times as may be necessary but will normally meet at least twice a year. The purpose of the Remuneration Committee is to ensure that the Company's executive directors and senior executives are properly incentivised and fairly rewarded for their individual contributions to the Company's overall performance having due regard to the interests of the shareholders and to the financial and commercial health of the Group. The Remuneration Committee's terms of reference are available on the Company's website, www.rightmove.co.uk/investors.rsp or by request from the Company Secretary. The Company Secretary acts as Secretary to the Committee. The Chairman of the Remuneration Committee reports to the Board on the Remuneration Committee's behalf after each meeting. During 2010 the Committee appointed Aon Hewitt Limited (trading as Hewitt New Bridge Street),remuneration consultants, to assist with a review of the remuneration policy and to set the remuneration for the executive directors and senior management from 2011. A detailed report on the Company's remuneration policy and the work of the Remuneration Committee is available in the Remuneration Report on pages 29 to 45. Nomination committee The Nomination Committee consists of Scott Forbes (who is also Chairman of the Board), Jonathan Agnew and Judy Vezmar as independent non-executive directors. The quorum for meetings of the Nomination Committee is two members. The Chairman of the Company may not chair the Nomination Committee in connection with any discussion about the appointment of his successor to the chairmanship of the Company. In these circumstances, the Senior Independent Director will take the chair. Appointments are for a period of up to three years, extendable by no more than two additional three year periods, so long as members continue to be independent. The Nomination Committee meets at such times as may be necessary and normally meets at least twice a year. The purpose of the Nomination Committee is to consider and make recommendations to the Board about the composition of the Board, including proposed appointees, and whether to fill any vacancies that arise or to change the number of Board members. The Nomination Committee's terms of reference are available on the Company's website, www.rightmove.co.uk/investors.rsp or by request from the Company Secretary. During the year the Nomination Committee reviewed the organisation structure, approved the plans for the succession of the executive directors and the senior management team, agreed the process for the Board's annual evaluation together with the changes to the Combined Code and conducted an annual review of its terms of reference. Audit committee The Audit Committee consists of the three independent non-executive directors, Ashley Martin (who is Chairman), Judy Vezmar and Jonathan Agnew. Ashley Martin was previously the Finance Director of Rok plc and Group Finance Director of the media services group Tempus Group plc and, having relevant financial skills and experience, was appointed to the role of Audit Committee Chairman on his appointment to the Board in June 2009. The quorum for meetings of the Audit Committee is two members. Appointments to the Committee are for a period of up to three years, extendable by no more than two additional three year periods, so long as members continue to be independent. The Audit Committee meets at least four times a year and more often if necessary. Two of its meetings are prior to the announcement of the Half Year and Full Year results of the Group, when the external auditor is in attendance. The Company Secretary acts as Secretary to the Committee. The Chief Operating Officer and Finance Director and Financial Controller are normally invited to attend the meetings. Colin Kemp, non-executive director is also invited to attend the meetings. The Chairman of the Audit Committee reports to the Board on the Audit Committee's behalf after each meeting. The Audit Committee assists the Board in the discharge of its duties concerning the announcement of results, the Annual and Half Year Reports and the maintenance of internal controls. It reviews the scope and planning of the audit and the auditor's findings and considers the Group's accounting policies and the compliance with those policies and applicable legal and accounting standards. The Audit Committee has authority to investigate any areas of concern as to financial impropriety that arise and to obtain outside legal or other independent professional advice in connection therewith. The Audit Committee's principal duties and terms of reference are available on the Company's website, www.rightmove.co.uk/investors.rsp or by request from the Company Secretary. During 2010 the Committee has, amongst other matters, approved the appointment of the external auditor, fixed their remuneration and reviewed the effectiveness of the external audit process. The Committee has also considered the need for an internal audit function. Given the simplicity of the organisational structure, the open and accountable culture with clear authority limits, the straightforward financial model and systems and the fact that the management team and Board conduct regular financial reviews, the Committee recommended to the Board that an internal audit function was not currently appropriate for the business. This decision is kept under regular review. The Committee also discussed its responsibilities to safeguard the audit objectivity and independence as well as the needs of the business and agreed that it was practical in many cases for the auditor to be assigned to other non-audit project work due to their knowledge and expertise of the business. This would usually relate to corporate transaction advice and tax compliance. The Committee agreed a policy that management be given authority to incur non-audit fees up to 50% of the annual agreed audit and tax fee in any financial year without the prior approval of the Audit Committee. In 2010 the non-audit fees were Â£7,000 in relation to other advisory services and are fully disclosed in Note 6 of the financial statements. The Committee reviewed the Annual and Half Year Reports. The external auditor also presented the results of their review of the 2009 Full Year and 2010 Half Year results as well as their audit plan to the Audit Committee. In addition to receiving reports from the external auditor, members met with the external auditor without the presence of the executive directors. The Committee also reviewed the whistleblowing policy (which provides the procedure for staff to report any concerns that they may have independent of management about suspected misconduct without fear of retaliation) and conducted an annual review of its terms of reference. Internal controls The Board has overall responsibility for the Group's system of internal controls and has established a framework of financial and other controls, which is periodically reviewed in accordance with the Turnbull guidance for its effectiveness. The Board has taken, and will continue to take, appropriate measures to ensure that the chances of financial irregularities occurring are reduced as far as reasonably possible by continually seeking to improve the quality of information at all levels in the Group, fostering an open environment and ensuring that the financial analysis is rigorously applied. Any system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The Group's management has established the procedures necessary to ensure that there is an ongoing process for identifying, evaluating and managing the significant risks to the Group. These procedures have been in place for the whole of the financial year ended 31 December 2010 and up to the date of the approval of the financial statements and they are reviewed regularly. The key elements of the system of internal control are: * major commercial, strategic, competitive and financial risks are formally identified, quantified and assessed, discussed with the executive directors, after which they are considered by the Board; * a comprehensive system of planning, budgeting and monitoring Group results. This includes monthly management reporting and monitoring of performance against both budgets and forecasts with explanations for all significant variances; * an organisational structure with clearly defined lines of responsibility and delegation of authority; * clearly defined policies for capital expenditure and investment exist, including appropriate authorisation levels, with larger capital projects, acquisitions and disposals requiring Board approval; * a comprehensive disaster recovery plan based upon co-hosting of the Rightmove.co.uk website across three separate London locations, which is regularly tested and reviewed; * a treasury function which manages cash flow forecasts and cash on deposit and is responsible for monitoring compliance with banking agreements, where appropriate; and * a whistleblowing policy of which all employees are made aware, to enable concerns to be raised either with line management or, if appropriate, confidentially outside the line management structure. Through the procedures outlined above, the Board has considered all significant aspects of internal control for the year and up to the date of this Annual Report. Going concern The Board is required under the Combined Code to consider whether or not it is appropriate to adopt the going concern basis in preparing the Group and the parent Company financial statements. As part of its normal business practice the Group prepares annual and longer term financial plans. In addition, a going concern paper was prepared and presented to the Audit Committee in February 2011 prior to it recommending the approval of the financial statements and notes to the accounts for the year ended 31 December 2010 to the Board. After reviewing this, the Board has a reasonable expectation that the Group has adequate resources and banking facilities to continue in operational existence for the foreseeable future. Accordingly they continue to adopt the going concern basis in preparing the financial statements. Further information is provided in Note 1 to the financial statements. Statement of directors' responsibilities in respect of the Annual Report and financial statements The directors are responsible for preparing the Annual Report and the Group and parent Company financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare Group and parent Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent Company financial statements on the same basis. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period. In preparing each of the Group and parent Company financial statements, the directors are required to: â€¢ select suitable accounting policies and then apply them consistently; â€¢ make judgments and estimates that are reasonable and prudent; â€¢ state whether they have been prepared in accordance with IFRSs as adopted by the EU; and â€¢ prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent Company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. REMUNERATION REPORT In line with the requirements of section 420 of the Companies Act 2006, the directors present the report on directors' remuneration for the year ended 31 December 2010. This report sets out the policies under which executive and non-executive directors were remunerated and provides tables of information showing details of the remuneration and share interests of all the directors. In accordance with the requirements, the report provides the disclosure in two parts: information subject to audit and information that is not subject to audit. Shareholders will be provided with an opportunity to vote on the Remuneration Report as set out in this Annual Report at the forthcoming Annual General Meeting to be held on 4 May 2011. Part I This part of the Remuneration Report is not subject to audit. The Remuneration Committee Terms of reference The Remuneration Committee's (hereinafter referred to as the Committee throughout this report) primary role is to make recommendations to the Board as to the Company's broad policy and framework for the remuneration of the executive directors, the Chairman of the Board and the Company Secretary. In accordance with the Combined Code, the Committee also recommends the structure and monitors the level of remuneration for the first layer of management below Board level. The Committee is also aware of and advises on the employee benefit structures throughout the Company and its subsidiaries and ensures that it is kept aware of any potential business risks arising from remuneration arrangements throughout the Company. The Committee has formal terms of reference which are reviewed annually and updated as required. These are available on the Company's website at www.rightmove.co.uk/investors.rsp or on request from the Company Secretary. Membership The Committee consists of independent non-executive directors, these being at the date of this report, Jonathan Agnew (Chairman), Ashley Martin and Judy Vezmar. Only members of the Committee have the right to attend Committee meetings. The Chairman of the Committee has however requested that Scott Forbes, the Chairman of the Board, attend the meetings except during discussions relating to his own remuneration. The Company Secretary acts as the Secretary of the Committee and normally attends the meetings. Ed Williams, Managing Director, may also be invited to meetings and the Committee takes into consideration his recommendations regarding the remuneration of his executive colleagues and the first layer of management below Board level. No director is involved in deciding their own remuneration. The Committee will meet at such times as may be necessary, but normally meets at least twice a year. During 2010 the Committee met six times and the attendance is shown below: Number of meetings Name of director attended Jonathan Agnew 6 out of 6 Ashley Martin 6 out of 6 Judy Vezmar 5 out of 6 Advice During 2010, Aon Hewitt Limited (trading as Hewitt New Bridge Street (HNBS)) was engaged by the Committee to review the executive director remuneration policy. The Committee and the Board considered that the Company had reached a point at which it was necessary that the remuneration practice should be brought into line with more standard practice among FTSE companies. The Committee commissioned an independent review by HNBS to assist in its determination of an appropriate future remuneration framework for executive directors to apply from 2011. During the year HNBS also provided services in connection with the valuation of share-based incentive awards (as required by IFRS 2) to the Company and confirmed that, in their view, this service did not present a conflict of interest with the services provided to the Committee. Remuneration policy Rightmove's remuneration policy is based on a fundamental belief that growth oriented companies should reward executives with demonstrably lower than market base salaries and benefits and higher than market equity rewards contingent upon achieving challenging performance criteria. The key principles of the Committee's policy are as follows: * Remuneration arrangements should be designed so as to provide executive directors with the opportunity to receive a share in the future growth and development of the Company which is regarded as fair by both other employees and by shareholders. This approach should allow the Company to attract and retain the sort of dynamic, self-motivated individuals who are critical to the future success of the business. * Executive directors should have significantly below market levels of base salary, minimal benefits (and only benefits which are made available on the same basis to all Rightmove employees), and above market levels of variable pay potential. This arrangement is designed to best align the interests of the executive directors with the interests of shareholders. * Remuneration arrangements should be simple to understand and administer. * Changes to remuneration should be made infrequently and those changes made each year should, in most instances, be directly linked to the policies applied to all employees (specifically with regard to rises in base salary and changes to benefits). * Executive directors should be principally rewarded for the overall success of the business for which they have collective responsibility. The Company has key short-term, medium-term, and long-term strategic goals and executive directors should be incentivised against all these goals. * Executives should not be able to gain significantly from short-term successes which subsequently prove not to be consistent with growing the overall value of the business. Hence a majority of any bonus payable in relation to short-term strategic goals is required to be taken in the form of Rightmove plc shares which are deferred for a further two years from when the bonus target has been achieved. 2010 Remuneration framework As disclosed in last year's Remuneration Report, the remuneration framework for executive directors in 2010 was broadly consistent with previous years and comprised: * Base salaries of Â£217,239. * No pension provision. * An annual cash bonus of up to 75% of salary and a deferred share bonus of up to 125% of salary. The bonus was determined by a mixture of underlying profit performance and key performance indicators relating to underlying drivers of long-term revenue growth. * A grant of share options worth 400% of salary to Ed Williams and 350% of salary to Nick McKittrick. Exercise of options will be subject to achieving a mixture of earnings per share (EPS) and Total Shareholder Return (TSR) performance targets. All 2010 bonus targets were met in full. Therefore, a cash bonus of Â£162,929 will be paid to Ed Williams and Nick McKittrick after the announcement of the Full Year results for the year ended 31 December 2010. In addition an award of deferred shares in Rightmove plc worth 125% of salary will be granted to Ed Williams and Nick McKittrick respectively under the Deferred Share Plan which will be deferred until March 2013. The bonus payment reflects the increase in underlying operating profit and strong share price performance in the period, the sale of new products to estate agency customers launched at the end of 2009 and the retention of all of Rightmove's key customers. The Committee believes the resulting bonus payment is appropriate in the context of the business performance against business targets and relative to prevailing market conditions in the property and media industries. Background to and overview of changes to remuneration framework The Committee believes that the remuneration framework outlined above has been successful in implementing its remuneration policy over recent years. However, it is introducing a number of significant changes to the framework to apply from 2011. There have been two triggers for this decision: * The current framework has in the past attracted an adverse response from advisory bodies and some investors, specifically in relation to the high multiple of salary used for share options, despite the low salaries upon which this multiple is based. * As illustrated by the chart below, executive director annual remuneration at Rightmove is currently substantially out of line with that which would be expected in a company of its market capitalisation. The issue particularly relates to the extent to which base salary and benefits are below market levels. This creates a downward compression on salaries among the wider senior management team which affects the Company's ability to recruit externally in the market place candidates of a suitable calibre and to offer salary progression to strong internal performers. It also means that the basic remuneration package may be potentially incapable of retaining our existing executive directors. To date, this retention risk has been offset by the significant one-off share option grant that the executive directors received at flotation in 2006. However, the final tranche of these options vest in March 2011 and will thereafter cease to have a retentive effect. The current situation, while unusual, is far from unique among companies that have grown very rapidly from small private businesses to major public companies. Indeed the Board has sought to maintain the positive aspects of small high-growth private companies for as long as possible in the public environment. The significant option grant made at flotation has allowed the Company to operate with a relatively uncompetitive 'ongoing' pay package for a number of years. However, as that grant ceases to have an impact, the Board and the Committee now need to restructure pay arrangements so that they are brought into line with more standard practice among FTSE companies whilst remaining true to the performance driven culture that has been central to Rightmove's growth over the past decade. The Committee is addressing the above issues through a revised remuneration framework that will apply from 2011. Key features of that framework include: * The value of fixed pay for executive directors will be raised to a level where it is approximately 25% below the benchmark for companies of a similar market capitalisation (rather than being more than 50% below the market benchmark as is currently the case). * This adjustment will be phased in over a three-year period. * Annual bonus potential, expressed as a percentage of salary, will be reduced to ensure that the salary increases do not materially increase the monetary value of bonus that can be earned by the directors. * Subject to shareholder approval at the Annual General Meeting in May 2011, the current executive unapproved and approved share option schemes will be replaced with a Performance Share Plan (PSP) in line with standard practice among UK public companies. Awards under the plan will be capped at 200% of base salary. The Committee is satisfied that, as well as being more market standard, the revised remuneration framework when fully implemented, remains consistent with the basic principles of its remuneration policy, namely for executive directors to receive below market levels of fixed pay and above market levels of variable pay potential (to reflect the performance driven culture of the business). Details of future remuneration framework The Committee has undertaken a thorough consultation process with major shareholders and investor bodies and has received widespread support for its revised remuneration framework. The Committee is sympathetic to the current environment in which increases in pay potential are often viewed unfavourably. The Committee does not believe that any of the issues raised above are so pressing that all the changes need to be implemented in full immediately. Consequently, the increase in base salaries will be phased in over three years (2011-2013). The Committee would clearly want to reserve the right to revisit executive remuneration should the circumstances dictate. However, its intention is to implement these changes over three years with no further alterations to the remuneration framework during that time. Full details of the revised remuneration framework are outlined below. Base salary The Committee has previously agreed that Ed Williams and Nick McKittrick should have equal levels of base salary. It has also agreed that the market benchmark used to assess their pay should be consistent with this decision, hence the use of a benchmark that is based on the average of pay for a chief executive and a finance director. As outlined above, by 2013 the value of Ed Williams and Nick McKittrick's fixed pay (salary plus benefits) will be adjusted so that it is approximately 25% below the market benchmark. Based on the current market benchmark used by the Committee (being the FTSE 250 median for the average of CEO/FD roles) and the current minimal benefits received by the directors, this implies a salary level for these two directors in 2013 of approximately Â£360,000. This figure will be subject to annual review by the Committee before the two further planned salary increases are implemented in 2012 and 2013 to take account of any significant changes in Rightmove's size and also basic inflation (as represented by the average Rightmove employee salary increase for 2012 and 2013). The initial increase towards the salary target was applied from 1 January 2011 with Ed Williams and Nick McKittrick's base salaries increasing to Â£260,000 per annum. Pension and other benefits The Group operates a stakeholder pension plan for Rightmove employees under which the employer contributes 6% of base salary (to a maximum of Â£3,000 each year) subject to the employee contributing a maximum of 3% of base salary. Ed Williams and Nick McKittrick voluntarily do not participate in this arrangement. The Company does not contribute to any personal pension arrangements. The executive directors are entitled to private medical insurance and to life assurance cover equal to four times base salary. Annual performance-related bonus The Committee believes that the annual cash and deferred share bonus schemes already offer a competitive potential reward. It therefore intends to reduce the directors' bonus potential as a percentage of salary to ensure that the monetary value of the potential bonus is maintained broadly at its current value. Consequently, concurrent with the salary increase outlined above, annual bonus potential for Ed Williams and Nick McKittrick in 2011 will be reduced from 200% of salary to 175% of salary (up to 65% of salary in cash and 110% of salary in deferred shares). Assuming full implementation of the proposed salary increases, their bonus potential will be reduced further to 125% of salary by 2013. Deferred shares will vest after two years and be potentially forfeitable over that period. The bonus will, as in previous years, be determined principally (70%) by profit before tax performance with targets set in relation to a carefully considered business plan and requiring significant out-performance of that plan to trigger maximum payments. A significant portion of the bonus (30%) will be determined by reference to pre-set targets for key performance indicators relating to underlying drivers of long-term revenue growth. Share awards Since flotation, the Company has awarded market value share options to executive directors and other selected employees designed to align the interests of employees with the long-term success of the business. However, the Committee believes that, going forward, awards of performance shares would be more consistent with general FTSE practice and provide better line of sight between performance conditions and executive reward. Consequently, subject to shareholder approval at the 2011 Annual General Meeting, the existing executive unapproved and approved share option plans will be replaced by the Rightmove PSP. Full details of the proposed PSP are contained in the Notice of Annual General Meeting. The PSP will permit annual awards of nil cost options or contingent shares worth up to 200% of salary. Ed Williams and Nick McKittrick will receive an annual award in 2011 of 200% of salary. The level of award is intended to reduce for awards in 2012 and 2013 concurrent with salary increases in those years. Assuming full implementation of the proposed salary increases, their annual grant is intended to reduce to an award over shares worth 150% of salary by 2013. Shares will only vest in the event of prior satisfaction of a performance condition. The Committee has made clear in previous Remuneration Reports that it believes EPS growth is the most appropriate type of performance condition for this particular business at this stage in its development. However, it also recognises that a number of shareholders believe it is important for relative TSR to also be a performance measure in order for there to be a clear alignment of executive and shareholder interests. Awards to executive directors under the PSP in 2011 will, therefore, be subject to a mixture of EPS (75% of the awards) and relative TSR (25% of the awards) performance but with the greater weighting on EPS to reflect its particular relevance to the performance of the business. Relative TSR condition The vesting schedule for the relative TSR element of executive directors' 2011 PSP awards is set out below. It is consistent with the TSR condition used for previous grants under the share option scheme. Performance will be measured over three financial years. TSR performance of the Company % of award vesting relative to the FTSE 250 Index (maximum 25%) Less than the Index 0% Equal to the Index 6.25% 25% higher than the Index 25% Intermediate performance Straight-line vesting e.g. if the FTSE 250 Index's TSR was 50% over the three-year performance period, then the Company's TSR would have to be at least 75% for all 25% of the shares to vest. EPS condition Rightmove's EPS growth will be measured over a period of three financial years (2011-2013). The EPS figure used will be equivalent to the reported diluted underlying EPS but with a standard tax rate applied (Normalised EPS). This Normalised EPS figure will be disclosed in the Annual Report. The following vesting schedule will apply for executive directors' awards granted in 2011: Normalised EPS growth % of award vesting from 2011 to 2013* (maximum 75%) Less than 25% 0% 25% 18.75% 50% 75% Between 25% and 50% Straight-line vesting *Assuming no change in the enacted corporation tax rate of 27% before the end of the three-year performance period, the benchmark Normalised EPS for the financial year 2010 from which these growth targets will be measured is 37.2p. The Committee regards these targets as stretching, particularly as the 2010 EPS (the benchmark for the award) is a record high for the Company. However, the Committee is comfortable that these targets are consistent with Company strategy and with what the Board regards as an acceptable level of business risk. All existing executive share-based incentives can be satisfied from shares held in the Rightmove Employees' Share Trust (the EBT) and shares held in treasury. It is intended that the 2011 share-based incentive awards would also be settled from shares currently held in the EBT or from shares held in treasury without any requirement to issue further shares. The non-executive directors do not participate in or benefit from any of the Company's share incentive or bonus plans except that Scott Forbes received Pre-admission options in consideration for the work involved in the IPO and in accordance with his contractual agreement on appointment in 2005. Executive directors are also eligible to participate in the Company's employee Sharesave scheme. Ed Williams and Nick McKittrick both contribute the maximum amounts permitted under the scheme which commenced on 1 November 2009 and which matures in November 2012. Details are included in the table on page 42. New executive director A new executive director, Peter Brooks-Johnson, was appointed to the Board in January 2011. The Committee has approved the following remuneration arrangements for him: * A base salary for 2011 of Â£200,000. * An annual bonus potential of 160% of salary (up to 60% of salary in cash and 100% of salary in deferred shares) determined principally (70%) by profit before tax performance with targets set in relation to a carefully considered business plan and requiring significant out-performance of that plan to trigger maximum payments. A significant portion of the bonus (30%) will be determined by reference to pre-set targets for key performance indicators relating to underlying drivers of long-term revenue growth. * A PSP award of 125% of salary subject to the EPS and TSR targets as outlined on page 35. Although exact figures have not been agreed at this stage and will be dependent upon his performance in the role, the basic structure of Peter Brooks-Johnson's remuneration is anticipated to evolve in a broadly similar manner to that of the other directors (as outlined above). This would involve an increase to a more industry standard salary by 2013 without any resulting material impact on the monetary value of his bonus potential. The latter will require a reduction in his bonus potential as a percentage of salary in 2012 and 2013 (consistent with the other executive directors). Shareholding requirement To be consistent with best practice, a formal share ownership guideline applies for executive directors requiring them to retain at least half of any future share awards vesting as shares (after selling sufficient shares to meet the exercise price and to pay the tax due) until they have a Rightmove shareholding worth at least 200% of salary for the Managing Director and 100% of salary for any other executive director. The value of the current shareholdings held by the executive directors as a percentage of base salary is shown in the table on page 45. External appointments With the approval of the Board in each case, executive directors may accept one external appointment as a non-executive director of another public company and retain any fees received. Ed Williams was appointed as a non-executive director of Trader Media Group in November 2010 and he retains his remuneration for that role. In the year to 31 December 2010 he received fees of Â£5,000. Chairman's and non-executive directors' fees In 2009, the Board decided to increase fees for the Chairman and non-executive directors in future years annually, directly in line with the basic level of pay rise received by employees within the business until such time as it was considered appropriate to conduct a wider review of non-executive director remuneration. Accordingly the Board approved an increase to the fees payable to the Chairman and non-executive directors of 4% per annum. With effect from 1 January 2011, the Chairman is entitled to receive a fee of Â£104,000 per annum (2010: Â£100,000). The other non-executive directors are entitled to receive a fee of Â£41,600 per annum (2010: Â£40,000) for their basic role and an additional Â£5,200 fee per annum (2010: Â£5,000) is paid for the chairing of the Audit and Remuneration Committees. Jonathan Agnew is paid a further Â£5,200 fee per annum (2010: Â£5,000) as Senior Independent Director. The non-executive directors' fee levels are within the limits set by the Articles of Association of the Company. The current fee levels for the non-executive directors with effect from 1 January 2011 are set out in the table below: Fee Fee Increase in fee year ended 1 January 2011 31 December 2010 Scott Forbes Â£104,000 Â£100,000 4% Jonathan Agnew Â£52,000 Â£50,000 4% Colin Kemp(1) Â£41,600 Â£40,000 4% Ashley Martin Â£46,800 Â£45,000 4% Judy Vezmar Â£41,600 Â£40,000 4% (1) Colin Kemp, non-executive director, waives his fee whilst employed by the Lloyds Banking Group, the fee having been waived in full in 2010 and continues to be waived as at the date of this report. Directors' service contracts and non-executive directors' terms of appointment The Committee's policy on service agreements for executive directors is that they should provide for 12 months' notice of termination by the Company and by the executive. Any proposals for the early termination of the service agreements of directors or senior executives are considered by the Committee. The service agreements for the executive directors (Ed Williams, Nick McKittrick and Peter Brooks-Johnson (appointed on 10 January 2011)) allow for lawful termination of employment by making a payment in lieu of notice or by making phased payments over any remaining unexpired period of notice. The phased payments may be reduced if and to the extent that the executive finds an alternative remunerated position. Scott Forbes' appointment may be terminated by either party giving to the other not less than three months' notice in writing. The Company may also terminate by making a payment in lieu of notice. Scott Forbes is not contractually entitled to any other benefits on termination of his contract other than in relation to his share options as described in the table on page 42. The Letters of Appointment for Jonathan Agnew, Colin Kemp, Ashley Martin and Judy Vezmar provide for a term of up to two three-year periods (subject to re-election by shareholders) with a notice period of three months on either side and also set out the time commitments required to meet the expectations of their roles. Further details of all directors' contracts and Letters of Appointment are summarised on page 40. Copies are available for inspection on request to the Company Secretary. Performance graph The first graph below compares the TSR of Rightmove's shares against the FTSE 250 Index for the period from 1 January 2009 to 31 December 2010. Specifically, it illustrates the value of Â£100 invested in Rightmove's shares and in the FTSE 250 Index over that period. This index was chosen as the comparator as Rightmove is a current constituent of this index. It was used as a comparator in the performance condition applying to share options granted in 2009 and 2010 and will also be used as the criteria applied to 25% of the PSP awards to be granted in 2011, subject to approval of the rules of the PSP by shareholders at the 2011 Annual General Meeting. Directors' contracts and Letters of Appointment Date of contract Date of /Letter of Notice Length of service appointment Appointment(1) (months) at 25 February 2011 Executive directors Ed Williams (Managing 19 December 7 February 2006 12 10 years 2 months Director) 2000 Nick McKittrick(2) 5 March 2004 7 February 2006 12 6 years 11 months Peter 10 January 2011 22 February 2011 12 1 month Brooks-Johnson(3) Non-executive directors Scott Forbes 13 July 2005 21 February 2006 3 5 years 7 months (Chairman) Jonathan Agnew (Senior 16 January 2006 12 December 2005 3 5 years 1 month Independent Director) Colin Kemp 3 July 2007 4 December 2007 3 3 years 7 months Ashley Martin 11 June 2009 11 June 2009 3 1 year 8 months Judy Vezmar 16 January 2006 12 December 2005 3 5 years 1 month Former directors Date of resignation Stephen Shipperley(4) 30 June 2000 1 January 2009 3 31 December 2010 (1) The contracts of employment and the Letters of Appointment for all directors with the exception of Peter Brooks-Johnson (who was appointed to the Board on 10 January 2011) were transferred from Rightmove Group Limited to Rightmove plc with effect from 28 January 2008 on completion of a Scheme of Arrangement under the Companies Act 1985. (2) Nick McKittrick joined the Group in December 2000 and was appointed to the Board on 5 March 2004. His service with the Group at the date of this report is 10 years and 2 months. (3) Peter Brooks-Johnson was appointed to the Board on 10 January 2011. His service with the Group at the date of this report is 5 years and 1 month. (4) Stephen Shipperley, non-executive director, retired from the Board on 31 December 2010. Part II (Audited) Directors' remuneration The remuneration of the directors of the Company during the year for time served as a director is as follows: 2010 Basic 2010 salary / cash bonus Benefits in fees payable(1) kind(2) 2010 total 2009 total Â£ Â£ Â£ Â£ Â£ Executive directors Ed Williams (Managing Director) 217,239 162,929 1,083 381,251 366,536(3) Nick McKittrick 217,239 162,929 1,083 381,251 366,490(3) Non-executive directors Scott Forbes 100,000 - - 100,000 90,000 (Chairman) Jonathan Agnew (Senior Independent 50,000 - - 50,000 45,000 Director) Colin Kemp(4) - - - - - Ashley Martin 45,000 - - 45,000 22,154(5) Judy Vezmar 40,000 - - 40,000 35,000 Former directors Stephen Shipperley(6) 40,000 - - 40,000 35,000 (1) Bonus relates to the accrued cash payment in respect of the Full Year results for the year ended 31 December 2010. In addition to the 2010 cash bonus noted above an award of deferred shares worth 125% of salary will be granted to Ed Williams and Nick McKittrick respectively under the Deferred Share Plan in March 2011 and vesting in 2013. The bonus payment reflects the increase in underlying operating profit and strong share price performance in the year, the sale of new products to estate agency customers launched at the end of 2009 and the retention of all of Rightmove's key customers. The Committee believes the resulting bonus payment is appropriate in the context of the business performance against business targets and relative to prevailing market conditions in the property and media industries. (2) Benefits in kind for the executive directors relate to private medical insurance. (3) On 5 March 2010, Ed Williams and Nick McKittrick were awarded 39,205 and 31,364 deferred shares respectively under the Deferred Share Plan which vest in 2012. The monetary value of these awards was Â£261,105 for Ed Williams and Â£208,884 for Nick McKittrick. The awards related to the bonus in respect of the Full Year Results for the year ended 31 December 2009 and were calculated based upon a share price of Â£6.66. The awards are included in the table on page 42. (4) Colin Kemp waives his fee whilst employed by the Lloyds Banking Group, the fee having been waived in full in 2010 and continues to be waived as at the date of this report. (5) Ashley Martin was appointed to the Board on 11 June 2009. The fee received in 2009 was from his appointment date to 31 December 2009. (6) Stephen Shipperley, non-executive director, resigned from the Board on 31 December 2010. Share-based incentives held by the directors and not exercised as at 31 December 2010 Date granted Share-based Granted Exercise Exercised Price at Share-based Vesting Expiry incentives in year price in year date of incentives date(1) date held exercise held at 1 January 31 December 2010 2010 Executive directors Ed Williams 14/3/2006 7,317 - Â£4.10 - - 7,317(1) Between 13/3/ (Managing (Approved) 14/3/ 2016 Director) 2009 and 14/3/ 2011 15/3/2006 1,681,412 - Â£3.35 - - 1,681,412 Between 14/3/ (Unapproved) (1) 15/3/ 2016 2009 and 15/3/ 2011 5/3/2009 373,007(2) - Â£2.24 - - 373,007 5/3/2012 4/3/2019 (Unapproved) 1/10/2009 2,135 - Â£4.25 - - 2,135 1/11/ 30/4/ (Sharesave) 2012 2013 5/3/2010 - 130,474(5) Â£6.66 - - 130,474 5/3/2013 4/3/2020 (Unapproved) 5/3/2010 - 39,205(6) Â£0.00 - - 39,205 5/3/2012 4/3/2013 (Deferred Share Plan) Total 2,063,871 169,679 - - - 2,233,550 Nick 14/3/2006 7,317 - Â£4.10 - - 7,317(1) Between 13/3/ McKittrick (Approved) 14/3/ 2016 2009 and 14/3/ 2011 15/3/2006 987,047 - Â£3.35 - - 987,047(1) Between 14/3/ (Unapproved) 15/3/ 2016 2009 and 15/3/ 2011 10/10/2007 75,000(3) - Â£5.22 - - 75,000 15/3/ 9/10/ (Unapproved) 2011 2017 5/3/2009 279,755(2) - Â£2.24 - - 279,755 5/3/2012 4/3/2019 (Unapproved) 1/10/2009 2,135 - Â£4.25 - - 2,135 1/11/ 30/4/ (Sharesave) 2012 2013 5/3/2010 - 114,165(5) Â£6.66 - - 114,165 5/3/2013 4/3/2020 (Unapproved) 5/3/2010 - 31,364(6) Â£0.00 - - 31,364 5/3/2012 4/3/2013 (Deferred Share Plan) Total 1,351,254 145,529 - - - 1,496,783 Non-executive director Scott Between Forbes 15/3/2006 15/3/ (Chairman) (Unapproved) 1,138,729 - Â£3.35 - - 1,138,729(4) 2007 and 14/3/ 15/3/ 2016 2009 (1) 1,981,412 and 987,047 pre-admission options were granted to Ed Williams and Nick McKittrick in March 2006 under the Rightmove Unapproved Executive Share Option Plan and the Rightmove Approved Executive Share Option Plan and vest as to one third of the number of option shares on each of the third, fourth and fifth anniversaries of the date of the option grant. Of the 987,047 unapproved options outstanding for Nick McKittrick as at 31 December 2010, 658,031 options have vested and are eligible for exercise. Following the vesting of one third of the options in March 2009, Ed Williams exercised 300,000 of the vested options in November 2009. Of the 1,681,412 unapproved options outstanding as at 31 December 2010, 1,020,942 have vested and are eligible for exercise. Of the 7,317 approved options outstanding as at 31 December 2010, 4,878 options have vested and are eligible for exercise. (2) The options granted on 5 March 2009 are exercisable on 5 March 2012 at an exercise price of Â£2.24, subject to 100% TSR performance criteria based upon the performance of Rightmove's shares against the FTSE 250 Index for the period from 1 January 2009 to 31 December 2011. TSR performance of the Company relative 2009 options exercisable to the FTSE 250 Index Less than the Index 0% Equal to the Index 25% 25% higher than the Index 100% Intermediate performance Straight-line vesting If the FTSE 250 Index's TSR was 50% over the three-year performance period, then the Company's TSR would have to be at least 75% for all of the 2009 options to be exercisable. (3) The options granted on 10 October 2007 are exercisable on 15 March 2011 at an exercise price of Â£5.22 subject to the basic EPS per the audited consolidated financial statements for the Group for the year ended 31 December 2010 being not less than 30p. (4) Pre-admission options granted to Scott Forbes under the Rightmove Unapproved Executive Share Option Plan, vest as to one third of the number of option shares on each of the first, second and third anniversaries of the date of the option grant. All options outstanding as at 31 December 2010 have vested and are eligible for exercise. (5) The options granted on 5 March 2010 are exercisable on 5 March 2013 at an exercise price of Â£6.66 subject to the following performance conditions: The vesting of 50% of the 2010 award will be dependent on a relative subject TSR performance criteria based upon the performance of Rightmove's shares against the FTSE 250 Index for the period from 1 January 2010 to 31 December 2012. TSR performance of the Company relative 2010 options exercisable to the FTSE 250 Index (maximum 50%) Less than the Index 0% Equal to the Index 12.5% 25% higher than the Index 50% Intermediate performance Straight-line vesting If the FTSE 250 Index's TSR was 50% over the three-year performance period, then the Company's TSR would have to be at least 75% for all 50% of the options to be exercisable. The vesting of 50% of the 2010 award will be dependent on the satisfaction of the Group's Normalised EPS growth for the period 1 January 2010 to 31 December 2012. Normalised EPS growth from 2010 options exercisable 2010 options exercisable 2010 to 2012 up to 200% of salary over 200% of salary 25% 0% 0% 45% In full 0% 65% 0% In full Intermediate performance Straight-line vesting Straight- line vesting Assuming no change in the standard corporation tax rate before the end of the three-year performance period, the benchmark EPS for the financial year 2009 from which these growth targets will be measured is 26.7p. (6) On 5 March 2010, Ed Williams and Nick McKittrick were awarded 39,205 and 31,364 deferred shares respectively under the Deferred Share Plan which vest in 2012. The monetary value of these awards was Â£261,105 and Â£208,884 respectively and calculated by reference to a share price of Â£6.66. Directors' interests in shares The interests (both beneficial and family interests) of the directors in office at 31 December 2010 in the share capital of the Company were as follows: Interests in Interests in ordinary shares of Â£0.01 share-based incentives At At At At 31 December 2010 1 January 2010 31 December 2010 1 January 2010 Executive directors Ed Williams (Managing 1,374,178 2,407,995 2,233,550 2,063,871 Director) Nick 129,000 129,000 1,496,783 1,351,254 McKittrick Non-executive directors Scott Forbes (Chairman) 619,300 619,300 1,138,729 1,138,729 Jonathan Agnew (Senior Independent 30,000 30,000 - - Director) Colin Kemp - - - - Ashley Martin 2,060 2,060 - - Judy Vezmar 31,343 31,343 - - The Company's shares in issue (including 2,505,430 shares held in treasury) as at 31 December 2010 comprised 114,761,434 (2009: 118,923,411) ordinary shares of Â£0.01 each. The mid-market share price of the Company was Â£5.04 as at 1 January 2010 and was Â£7.79 as at 31 December 2010. The mid-market high and low share prices of the Company were Â£8.30 (28 October 2010) and Â£4.95 (27 January 2010) respectively in the year. The executive directors are regarded as being interested, for the purposes of the Companies Act 2006, in 6,322,329 (2009: 7,418,874) ordinary shares of Â£0.01 each in the Company currently held by the EBT as they are, together with other employees, potential beneficiaries of the EBT. The directors' beneficial holdings represent 2.0% of the Company's shares in issue as at 31 December 2010 (2009: 2.8%) (excluding shares held in treasury). There have been no changes to the above interests between the year end and the date of this report. Peter Brooks-Johnson (appointed 10 January 2011) holds 4,543 ordinary shares of Â£0.01 each in the Company. The interests of the executive directors in office at 31 December 2010 in the share capital of the Company as a percentage of basic salary were as follows: Number of shares Value of Value of shares Basic salary held at shares at as a % of basic 31 December 2010 31 December 2010 31 December 2010 salary Executive directors Ed Williams (Managing Â£217,239 1,374,178 Â£10,705,000 4,928% Director) Nick Â£217,239 129,000 Â£1,005,000 463% McKittrick Jonathan Agnew Chairman, Remuneration Committee 25 February 2011 Auditor's Report Independent auditor's report to the members of Rightmove plc We have audited the financial statements of Rightmove plc for the year ended 31 December 2010 set out on pages 48 to 87. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU and, as regards the parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's 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 and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditor As explained more fully in the Directors' Responsibilities Statement set out on page 28, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the APB's website at www.frc.org.uk/apb/scope/private.cfm. Opinion on financial statements In our opinion: * the financial statements give a true and fair view of the state of the Group's and of the parent Company's affairs as at 31 December 2010 and of the Group's profit for the year then ended; * the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU; * the parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006; and * the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation. Opinion on other matters prescribed by the Companies Act 2006 In our opinion: * the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; * the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and * information given in the Corporate Governance Statement set out on pages 21 to 28 with respect to internal control and risk management systems in relation to financial reporting processes and about share capital structures is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following: Under the Companies Act 2006 we are required to report to you if, in our opinion: * adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us; or * the parent Company financial statements and the part of the Directors' Remuneration Report to be audited are not in agreement with the accounting records and returns; or * certain disclosures of directors' remuneration specified by law are not made; or * we have not received all the information and explanations we require for our audit; or * a Corporate Governance Statement has not been prepared by the Company. Under the Listing Rules we are required to review: * the directors' statement, set out on page 28, in relation to going concern; * the part of the Corporate Governance Statement on pages 21 to 28 relating to the Company's compliance with the nine provisions of the June 2008 Combined Code specified for our review; and * certain elements of the report to shareholders by the Board on directors' remuneration. SJ Wardell (Senior Statutory Auditor) for and on behalf of KPMG Audit Plc, Statutory Auditor Chartered Accountants Altius House One North Fourth Street Milton Keynes, MK9 1NE 25 February 2011 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2010 Restated (1) Year ended Year ended 31 December 2010 31 December 2009 Note Â£000 Â£000 Continuing operations Revenue 2 81,556 64,521 Administrative expenses (29,490) (27,121) Operating profit before share-based payments and NI on share-based 56,563 40,606 incentives Share-based payments 25 (1,846) (1,896) NI on share-based 25 (2,651) (1,310) incentives Operating profit 6 52,066 37,400 Financial income 8 171 194 Financial credit/ 9 8 (1,086) (expenses) Net financial income/ 179 (892) (expenses) Profit before tax 52,245 36,508 Income tax expense 10 (13,710) (7,420) Profit from continuing 38,535 29,088 operations Discontinued operation Profit from discontinued operation 11 19,467 939 (net of income tax) Profit for the year being total comprehensive income 58,002 30,027 Attributable to: Equity holders of the 58,002 30,027 Parent Earnings per share (pence) Basic 12 53.69 27.52 Diluted 12 52.08 27.18 Earnings per share - continuing operations (pence) Basic 12 35.67 26.66 Diluted 12 34.60 26.33 Dividends per share 13 12.00 10.00 (pence) Total dividends 13 12,957 10,894 (1) Comparative figures have been restated to reflect the treatment of the Holiday Lettings segment as a discontinued operation. For details refer to Note 11. CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2010 Note 31 December 2010 31 December 2009 Â£000 Â£000 Non-current assets Property, plant and 14 1,488 1,393 equipment Intangible assets 15 1,463 14,314 Trade and other 17 1,000 - receivables Contingent consideration 11 667 - Deferred tax assets 22 6,675 2,722 Total non-current assets 11,293 18,429 Current assets Trade and other 17 11,865 9,421 receivables Contingent consideration 11 4,437 - Cash and cash equivalents 18 23,148 25,893 Total current assets 39,450 35,314 Total assets 50,743 53,743 Current liabilities Loans and borrowings 20 - (5,000) Trade and other payables 19 (15,989) (13,861) Income tax payable 10 (6,890) (5,203) Deferred consideration 11 - (8,909) Provisions 21 - (6) Total current liabilities (22,879) (32,979) Non-current liabilities Loans and borrowings 20 - (17,500) Deferred tax liabilities 22 - (71) Total non-current liabilities - (17,571) Net assets 27,864 3,193 Equity Share capital 23,24 1,147 1,189 Other reserves 24 285 243 Retained earnings 24 26,432 1,761 Total equity attributable 24 to the equity holders of 27,864 3,193 the Parent The financial statements were approved by the Board of directors on 25 February 2011 and were signed on its behalf by: Ed Williams Director Nick McKittrick Director COMPANY STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2010 Note 31 December 2010 31 December 2009 Â£000 Â£000 Non-current assets Investments 16 539,304 538,501 Deferred tax assets 22 5,142 1,896 Total non-current assets 544,446 540,397 Current assets Cash and cash equivalents 18 - 5,424 Total current assets - 5,424 Total assets 544,446 545,821 Current liabilities Loans and borrowings 20 - (5,000) Trade and other payables 19 (25,652) (62,933) Total current liabilities (25,652) (67,933) Non-current liabilities Loans and borrowings 20 - (17,500) Total non-current - (17,500) liabilities Net assets 518,794 460,388 Equity Share capital 23,24 1,147 1,189 Other reserves 24 105,960 105,116 Retained earnings 24 411,687 354,083 Total equity attributable 24 to the equity holders of 518,794 460,388 the Parent The financial statements were approved by the Board of directors on 25 February 2011 and were signed on its behalf by: Ed Williams Director Nick McKittrick Director CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2010 Note Year ended Year ended 31 December 2010 31 December 2009 Â£000 Â£000 Cash flows from operating activities Profit for the year 58,002 30,027 Adjustments for: Depreciation charges 14 575 646 Amortisation charges 15 336 482 Loss on disposal of property, plant 76 94 and equipment Loss on disposal of intangible 1 - assets Financial income 8 (171) (199) Financial (credit)/ expenses 9 (8) 1,088 Share-based payments charge 25 1,846 1,896 Gain on sale of discontinued 11 (18,691) - operation (net of income tax) Income tax expense 10 14,014 7,794 Operating cash flow before changes 55,980 41,828 in working capital (Increase)/decrease in trade and (2,734) 3,199 other receivables Increase in trade and other 5,585 1,225 payables Increase/(decrease) in provisions 4 (7) Cash generated from operations 58,835 46,245 Interest paid (136) (744) Income taxes paid (12,198) (10,783) Net cash from operating activities 46,501 34,718 Cash flows from investing activities Interest received 109 206 Acquisition of property, plant and 14 (906) (250) equipment Acquisition of intangible assets 15 (245) (28) Proceeds on disposal of property, 15 - plant and equipment Disposal of discontinued operation 11 - (net of cash disposed of) 13,284 Net cash from/ (used in) investing 12,257 (72) activities Cash flows from financing activities Dividends paid 13 (12,957) (10,894) Subsidiary dividends paid to 13 (300) (870) minority shareholders Purchase of shares for cancellation 24 (29,358) (5,452) Purchase of shares by The Rightmove 24 - (2,401) Employees' Share Trust (EBT) Share related expenses 24 (206) (56) Proceeds on exercise of share 24 3,893 5,408 options Repayment of borrowings 20 (22,500) (17,250) Debt issue costs (75) (125) Net cash used in financing (61,503) (31,640) activities Net (decrease)/increase in cash and cash equivalents (2,745) 3,006 Cash and cash equivalents at 25,893 22,887 1 January Cash and cash equivalents at 18 23,148 25,893 31 December COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2010 Year ended Year ended Note 31 December 2010 31 December 2009 Â£000 Â£000 Cash flows from operating activities Profit/(loss) for the year 24 96,093 (4,315) Adjustments for: Financial income (99,904) (91) Financial expenses 759 1,624 Share-based payments charge 25 1,043 1,063 Income tax credit (1,444) (673) Operating cash flow before changes (3,453) (2,392) in working capital Increase in trade and other 63,112 25,275 payables Cash generated from operations 59,659 22,883 Interest paid (69) (669) Net cash from operating activities 59,590 22,214 Cash flows from investing activities Interest received 7 91 Net cash from investing activities 7 91 Cash flows from financing activities Dividends paid 13 (12,957) (10,894) Purchase of shares for cancellation 24 (29,358) (5,452) Share related expenses 24 (206) (38) Repayment of borrowings 20 (22,500) (17,250) Debt issue costs - (125) Net cash used in financing (65,021) (33,759) activities Net decrease in cash and cash (5,424) (11,454) equivalents Cash and cash equivalents at 5,424 16,878 1 January Cash and cash equivalents at 18 - 5,424 31 December EBT Reverse Share shares Treasury Other acquisition Retained Total capital reserve shares Â£ reserves reserve earnings equity Note Â£000 Â£000 000 Â£000 Â£000 Â£000 Â£000 At 1 January 2009 1,201 (17,149) (11,917) 93 138 12,125 (15,509) Total comprehensive income Profit for the - - - - - 30,027 30,027 year Transactions with owners recorded directly in equity Equity settled 25 share-based - - - - - 1,896 1,896 incentives charge Tax in respect of 22 - share-based - - - - incentives 174 174 recognised directly in equity Dividends to 13 - - - - - (10,894) (10,894) shareholders Exercise of share 24 - 3,365 - - - 2,043 5,408 options Purchase of own 24 - (2,401) - - - - (2,401) shares Cancellation of 24 (12) - - 12 - (5,452) (5,452) own shares Share related 24 - - - - - (56) (56) expenses 1,189 (16,185) (11,917) 105 138 At 29,863 3,193 31 December 2009 At 1 January 2010 1,189 (16,185) (11,917) 105 138 29,863 3,193 Total comprehensive income Profit for the - - - - - 58,002 58,002 year Transactions with owners recorded directly in equity Equity settled 25 share-based - - - - - 1,846 1,846 incentives charge Tax in respect of 22 share-based incentives - - - - - 3,451 3,451 recognised directly in equity Dividends to 13 - - - - - (12,957) (12,957) shareholders Exercise of share 24 - 2,248 - - - 1,645 3,893 options Cancellation of 24 (42) - - 42 - (29,358) (29,358) own shares Share related 24 - - - - - (206) (206) expenses At 31 December 2010 1,147 (13,937) (11,917) 147 138 52,286 27,864 COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEAR ENDED 31 DECEMBER 2010 Reverse Share Treasury Other acquisition Retained Total capital shares reserves reserve earnings equity Note Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 At 1 January 2009 1,201 (11,917) 751 103,520 384,413 477,968 Total comprehensive income Loss for the year - - - - (4,315) (4,315) Transactions with owners recorded directly in equity Equity settled share-based 25 - - - - 1,063 1,063 incentives charge Tax in respect of 22 - - - - 1,223 1,223 share-based incentives recognised directly in equity Capital - - 833 - - 833 contribution Dividends to 13 - - - - (10,894) (10,894) shareholders Cancellation of own 24 (12) - 12 - (5,452) (5,452) shares Share related 24 - - - - (38) (38) expenses (11,917) At 31 December 2009 1,189 1,596 103,520 366,000 460,388 At 1 January 2010 1,189 (11,917) 1,596 103,520 366,000 460,388 Total comprehensive income Profit for the year - - - - 96,093 96,093 Transactions with owners recorded directly in equity Equity settled share-based 25 - - - - 1,043 1,043 incentives charge Tax in respect of 22 share-based incentives - - - - 2,988 2,988 recognised directly in equity Capital 24 - - 803 - - 803 contribution Dividends to 13 - - - - (12,957) (12,957) shareholders Cancellation of own 24 (42) - 42 - (29,358) (29,358) shares Share related 24 - - - - (206) (206) expenses At 31 December 2010 1,147 (11,917) 2,441 103,520 423,603 518,794 NOTES FORMING PART OF THE FINANCIAL STATEMENTS 1 General information Rightmove plc (the Company) is a company registered in England (Company no. 6426485) domiciled in the United Kingdom (UK). The consolidated financial statements of the Company as at and for the year ended 31 December 2010 comprise the Company and its interest in its subsidiaries (together referred to as the Group). Its principal business is the operation of the Rightmove.co.uk website, which is the UK's largest property website. The consolidated financial statements of the Group as at and for the year ended 31 December 2010 are available upon request to the Company Secretary from the Company's registered office at 4th Floor, 33 Soho Square, London, W1D 3QU or from the investor relations website at www.rightmove.co.uk/investors.rsp. Statement of compliance The consolidated and Company financial statements have been prepared and approved by the Board of directors in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (Adopted IFRSs) and issued by the International Accounting Standards Board (IASB). The consolidated financial statements were authorised for issue by the Board of directors on 25 February 2011. Basis of preparation On publishing the Company financial statements here together with the Group financial statements, the Company is taking advantage of the exemption in s408 of the Companies Act 2006 not to present its individual statement of comprehensive income and related notes that form a part of these approved financial statements. On 21 June 2010 the Group disposed of its 66.7% shareholding in Holiday Lettings (Holdings) Limited (HLHL), which owned 100% of the shares in the trading entity Holiday Lettings Limited (HLL), (together referred to as the Holiday Lettings segment) to TripAdvisor Limited. The Group has restated the comparatives within the consolidated statement of comprehensive income to reflect the Holiday Lettings segment as a discontinued operation following its disposal (refer Note 11). The accounting policies set out below have been consistently applied to all the periods presented, unless otherwise stated. The financial statements have been prepared on an historical cost basis. Changes in accounting policies The accounting policies applied by the Group in these consolidated financial statements are in accordance with Adopted IFRSs and except as described below are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2009. The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 January 2010: (i) Revised IFRS 3 Business Combinations (2008) incorporates the following changes that may be relevant to the Group's operations: * The definition of a business has been broadened, which is likely to result in more acquisitions being treated as business combinations; * Contingent consideration will be measured at fair value, with subsequent changes therein recognised in profit or loss; * Transaction costs, other than share and debt issue costs, will be expensed as incurred; * Any pre-existing interest in the acquiree will be measured at fair value with the gain or loss recognised in profit or loss; and * Any non-controlling (minority) interest will be measured at either fair value, or at its proportionate interest in the identifiable assets and liabilities of the acquiree, on a transaction by transaction basis. Revised IFRS 3 is applied prospectively and as there have been no acquisitions in the year ended 31 December 2010 there has been no impact on the financial statements or reported earnings per share. (ii) Amended IAS 27 Consolidated and Separate Financial Statements (2008) requires accounting for changes in ownership interests by the Group in a subsidiary, while maintaining control, to be recognised as an equity transaction. When the Group loses control of a subsidiary, any interest retained in the former subsidiary will be measured at fair value with the gain or loss recognised in profit or loss. The amendments to IAS 27, which became mandatory for the Group's 2010 consolidated financial statements, have not had any impact on the consolidated financial statements. Going concern During 2009, the Group converted Â£25,000,000 of a revolving loan facility into a five-year term loan. In February 2010 a decision was made to repay the term loan early thereby extinguishing the debt. Post repayment of the term loan, the Group was debt free and continued to generate significant cash and has net cash balances of Â£23,148,000 at 31 December 2010 (2009: Â£3,393,000). The Group entered into an agreement with Barclays Bank Plc for a Â£10,000,000 uncommitted money market loan on 15 February 2010. No amount was drawn under this facility during the year and the loan was extended on 11 February 2011 for a further 12 month period. The Group met all banking covenant requirements in relation to the term loan during the year. 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 the annual report and financial statements. Further information regarding the Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Business and Financial Review on pages 5 to 11. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Position on pages 9 to 11. In addition Note 4 to the financial statements includes the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and its exposures to credit risk and liquidity risk. Capital structure The Company was incorporated and registered in England and Wales on 14 November 2007 under the Companies Act 1985 as a private company limited by shares with the name Rightmove Group Limited, registered no. 6426485. The Company was re-registered as a public limited company under the name Rightmove Group plc on 29 November 2007. On 28 January 2008 the Company became the holding company of Rightmove Group Limited (formerly Rightmove plc, Company no. 3997679) and its subsidiaries pursuant to a Scheme of Arrangement under s425 of the Companies Act 1985. The shares in the Company were admitted to trading on the Official List of the London Stock Exchange on 28 January 2008 and the Company immediately changed its name to Rightmove plc. Details of the share capital of the Company are disclosed in Note 23. Basis of consolidation Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Judgments and estimates The preparation of the consolidated financial statements in conformity with Adopted IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods, if applicable. In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements is included in the following notes: Note 11 Measurement of the contingent consideration receivable in relation to the disposal of the Holiday Lettings segment regarding the estimate of future profitability Note 22 Deferred tax assets relating to the rate at which the asset will reverse and the recoverability of the asset Note 25 Measurement of share-based payments relating to the inputs to the fair value models and the estimate of the number of shares that will eventually be issued 2 Significant accounting policies (a) Investments Investments in subsidiaries are held at cost less any provision for impairment in the Parent company financial statements. (b) Intangible assets (i) Goodwill All business combinations are accounted for by applying the purchase method. Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. In respect of business acquisitions that have occurred since 1 January 2004, goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. In respect of acquisitions prior to this date goodwill is included on the basis of its deemed cost, which represents the amount previously recorded under UK Generally Accepted Accounting Principles (GAAP). The classification and accounting treatment of business combinations that occurred prior to 1 January 2004 were not reconsidered in preparing the Group's opening IFRS statement of financial position at 1 January 2004. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is no longer amortised but is tested annually for impairment. This applies to all goodwill arising both before and after 1 January 2004. IFRS 1 permits goodwill on acquisitions made before this date to be brought onto the statement of financial position at 1 January 2004 at its carrying value under UK GAAP. (ii) Research and development The Group undertakes research and development expenditure in view of developing new products and improving the existing property websites. Expenditure on research activities, undertaken with the prospect of gaining new technical knowledge and understanding, is recognised in the profit or loss as incurred. Expenditure on development activities, whereby research findings are applied to a plan or design for the production of a new product or substantially enhanced website, is capitalised if the new product or the enhanced website is technically and commercially feasible and the Group has sufficient resources to complete development. The expenditure capitalised includes subcontractors and direct labour. Capitalised development expenditure is stated at cost less accumulated amortisation and accumulated impairment losses. Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed when incurred. (iii) Computer software and licenses Computer software and externally acquired software licenses are capitalised and stated at cost less accumulated amortisation and impairment losses. Amortisation is charged from the date the asset is available for use. Amortisation is provided to write off the cost less the estimated residual value of the computer software or license by equal annual instalments over its estimated useful economic life as follows: Computer software 16.7% - 33.3% per annum Software licences 20.0% - 33.3% per annum (iv) Customer relationships Customer relationships are identified on the acquisition of a business and valued using discounted cash flows based on historical customer attrition rates. Amortisation is expensed in the profit or loss on a straight line basis over the estimated useful economic life as follows: Customer relationships 16.7% per annum (c) Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Depreciation is provided to write off the cost less the estimated residual value of property, plant and equipment by equal annual instalments over their estimated useful economic lives as follows: Office equipment, fixtures & fittings 20.0% per annum Computer equipment 20.0% - 33.3% per annum Leasehold improvements life of the lease (d) Impairment The carrying value of the property, plant and equipment is reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount of non-financial assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the cash generating unit to which the asset belongs. Intangible assets that have an indefinite useful life and which are not available for use are not subject to amortisation but are tested for impairment annually and whenever there is an indication that they might be impaired. An impairment loss is recognised for the amount by which the carrying value of the asset exceeds its recoverable amount. Goodwill was tested for impairment at the IFRS transition date; no impairment was deemed necessary. An impairment test is performed annually at 31 December on goodwill regardless of the existence of impairment indicators. Investments are assessed for possible impairment when there is an indication that the fair value of the investments may be below the Company's carrying value. When such a condition is deemed to be other than temporary, the carrying value of the investment is written down to its fair value and the amount written off is included in profit or loss. In making the determination as to whether a decline is other than temporary, the Company considers such factors as the duration and extent of the decline, the investee's financial performance and the Company's ability and intention to retain its investment for a period that will be sufficient to allow for any anticipated recovery in the investment's market value. (e) Financial instruments Trade receivables are recognised at fair value less any impairment loss. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Inter-group balances and transactions, and any unrealised income and expenses arising from inter-group transactions, are eliminated in preparing the consolidated financial statements. Trade payables are recognised at fair value. Trade payables are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs associated with borrowings. After initial recognition, loans and borrowings are subsequently measured at amortised cost and any difference between the proceeds and the redemption value is recognised in the profit or loss over the period of the borrowings using the effective interest method. The Group uses derivative financial instruments such as foreign currency contracts to hedge the risk associated with changes in foreign exchange rates. Such derivative financial instruments are initially measured at fair value on the contract date and are remeasured to fair value at subsequent reporting dates. The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The Group does not specifically designate forward exchange contracts as cash flow hedges and gains and losses are recorded directly in profit or loss. (f) Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. (g) Provisions A provision is recognised when the Group has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risk specific to the liability. The unwinding of the discount is recognised as a finance cost. A provision is maintained in respect of vacant leasehold properties where the lease is considered to be onerous to take account of the net present value of residual lease commitments over the remaining term of the lease. (h) Employee benefits (i) Pensions The Group provides access to a stakeholder pension scheme into which employees may elect to contribute via salary deduction. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in the profit or loss when they are due. (ii) Employee share schemes The share option and deferred share plans allow certain senior management to acquire shares in the Company. An expense is recognised in the profit or loss, with a corresponding increase in equity, over the period to which the employees become unconditionally entitled, on equity settled share-based payment schemes granted after 7 November 2002 and which had not vested by 1 January 2005. Awards made before this date are not accounted for under IFRS 2, as permitted under the transitional rules of IFRS 1. For awards made after 7 November 2002 and not vested by 1 January 2005, the charge is based on the fair value of the share-based incentive granted as at the grant date, calculated using an option pricing model. Fair value is measured using either the Monte Carlo or Black Scholes pricing model as is most appropriate for each scheme. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option behaviour), expected dividends, and risk-free interest rates (based on government bonds). Service and non-market performance conditions attached to the awards are not taken into account in determining the fair value. (iii) Own shares held by The Rightmove Employees' Share Trust (EBT) The EBT is treated as an agent of Rightmove Group Limited and as such EBT transactions are treated as being those of Rightmove Group Limited and are therefore reflected in the Group's consolidated financial statements. In particular, at a consolidated level, the EBT's purchases of shares in the Company are debited directly to equity. (i) Treasury shares and shares purchased for cancellation When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognised as a deduction from equity. Repurchased shares are either held in treasury or cancelled. (j) Revenue Revenue principally represents the amounts, excluding value added tax (VAT), receivable from customers in respect of properties advertised on Group websites. Revenue relating to properties advertised on the website is recognised in the month to which it relates. Estate agency and overseas branches are billed in advance with net revenue deferred until the service commencement date. The VAT liability is recognised at the point of invoice. New homes developers are typically billed monthly in arrears. Where invoices are raised on other than a monthly basis, the amounts are recognised as deferred or accrued revenue and released to the profit or loss on a monthly basis in line with the provision of services as stipulated in the contract terms. HLL revenue was billed in advance. The majority of HLL revenue related to annual contracts although some was billed quarterly and half yearly. This revenue was spread equally over the period until disposal with any deferred revenue held on the statement of financial position as at the disposal date. (k) Segmental reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components. An operating segment's operating results are reviewed regularly by the Group's Managing Director to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. (l) Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. Foreign currency differences arising on retranslation are recognised in the profit or loss. (m) Leases Operating lease rentals are charged to the profit or loss on a straight-line basis over the period of the lease. Where cash is received in exchange for entering into a lease with rates above market value, this upfront payment is deferred and released on a straight-line basis over the lease term. (n) Financial income and expenses Financial income comprises interest receivable on cash balances, deposits and dividend income. Interest income is recognised as it accrues, using the effective interest method. Dividend income is recognised on the date that the Group's right to receive payment is established. Financial expenses comprise debt issue costs, interest payable on bank loans and bank charges. Interest payable is recognised on an accruals basis. (o) National Insurance (NI) on share-based incentives Employer's NI is accrued, where applicable, at a rate of 13.8%, which management expects to be the prevailing rate when share-based incentives are exercised. In the case of share options it is provided on the difference between the share price at the reporting date and the average exercise price of share options. In the case of deferred shares at nil cost it is provided based on the share price at the reporting date. (p) Taxation Income tax on the results for the year comprises current and deferred tax. Income tax is recognised in the profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous periods. Deferred tax is provided in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination and the differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted by the reporting date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. In accordance with IAS 12, the Group policy in relation to the recognition of deferred tax on share-based payments is to include the income tax effect of the tax deduction in the profit or loss to the value of the income tax charge on the cumulative IFRS 2 charge. The remainder of the income tax effect of the tax deduction is recognised in equity. (q) Dividends Dividends unpaid at the reporting date are only recognised as a liability (and deduction to equity) at that date to the extent that they are appropriately authorised and are no longer at the discretion of the Company. Unpaid dividends that do not meet these criteria are disclosed in the notes to the financial statements. (r) Earnings per share The Group presents basic, diluted and underlying earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all potential dilutive instruments, which comprise share-based incentives granted to employees. The calculation of underlying EPS is disclosed in Note 12. (s) Discontinued operations A discontinued operation is a component of the Group's business that represents a separate major line of business or geographical area of operations that has been disposed of or is held for sale or distribution, or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative statement of comprehensive income is restated as if the operation had been discontinued from the start of the comparative year. 3 IFRSs not yet applied A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 December 2010 and have not been applied in preparing these consolidated financial statements. None of these is expected to have a significant effect on the consolidated financial statements of the Group. 4 Financial risk management Overview The Group has exposure to the following risks from its use of financial instruments: * credit risk * liquidity risk * market risk * operational risk This note presents information about the Group and Company's exposure to each of the above risks, the Group's objectives, policies and processes for measuring and managing risk and the Group's management of capital. Further quantitative disclosures are included throughout these consolidated financial statements. The Board of directors has overall responsibility for the establishment and oversight of the Group's risk management framework. The primary method by which risks are monitored and managed by the Group is through the monthly Executive Management Board, where any significant new risks or change in status to existing risks will be discussed and actions taken as appropriate. The Group's risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The Audit Committee oversees how management monitors compliance with the Group's internal controls and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. Credit risk Credit risk is the risk of financial loss to the Group if a customer fails to meet its contractual obligations. The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Group provides credit to customers in the normal course of business. The Group provides its services to a wide range of customers in the UK and overseas and therefore believes it has no material concentration of credit risk. More than 94.0% of the Group's customers pay via monthly direct debit, minimising the risk of non-payment. The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables based on individually identified loss exposures. Liquidity risk Liquidity risk is the risk that the Group will encounter difficulties in meeting the obligations associated with its financial liabilities that are settled by delivering cash. The Group and Company's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation. The Group's revenue model is largely subscription-based which results in a regular level of cash conversion allowing it to service working capital requirements. The Group and Company ensure that they have sufficient cash on demand to meet expected operational expenses excluding the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. Throughout the year, the Group typically had sufficient cash on demand to meet operational expenses on continuing operations, before financing activities, for a period of 296 days (2009: 308 days). As at 31 December 2010 the Group had bank borrowings of Â£nil (2009: Â£22,500,000). On 10 February 2010 the loan outstanding as at 31 December 2009 was repaid in full without penalty (refer Note 20). Post repayment of the loan the Group entered into an agreement with Barclays Bank Plc for a Â£10,000,000 uncommitted money market loan. To date no amount has been drawn under this facility. The loan was extended on 11 February 2011 for a further 12 month period. Market risk Market risk is the risk that changes in market prices such as foreign exchange and interest rates will affect the Group's income. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk. Currency risk All of the Group's sales and more than 99.0% of the Group's purchases are Sterling denominated, accordingly it has no currency risk. Interest rate risk The Group and Company have no interest bearing financial liabilities. The Group is exposed to interest rate risk on cash balances and amounts held in Escrow.Operational risk Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Group's processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Group's operations. The Group's objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Group's reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity. The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management within each business unit. This responsibility is supported by the development of overall Group standards for the management of operational risk in the following areas: * requirements for appropriate segregation of duties, including the independent authorisation of transactions; * requirements for the reconciliation and monitoring of transactions; * compliance with regulatory and other legal requirements; * documentation of controls and procedures; * requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the risks identified; * requirements for reporting of operational losses and proposed remedial action; * development of contingency plans; * training and professional development; and * risk mitigation, including insurance where this is effective. Capital management The Board of directors' policy is to maintain an efficient statement of financial position with an appropriate level of leverage for the size of the business so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of directors considers that the future working capital and capital expenditure requirements of the Group will continue to be low and accordingly return on capital measures are not key performance targets. The Board of directors monitors the spread of the Company's shareholders as well as underlying earnings per share. The Board of directors has a progressive dividend policy and also monitors the level of dividends to ordinary shareholders in relation to profit growth. As at 31 December 2010 the directors hold 2.0% (2009: 2.8%) of the ordinary share capital of the Company (excluding shares held in treasury). In addition the executive directors are regarded as being interested, for the purposes of the Companies Act 2006, in 5.6% (2009: 6.4%) ordinary shares in the Company currently held by the EBT as they are, together with other employees, potential beneficiaries of the EBT. The Company purchases its own shares in the market; the timing of these purchases depends on market conditions. In 2010, 4,161,977 (2009:1,127,462) shares were bought back and were cancelled. There were no changes in the Group's approach to capital management during the year. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements. 5 Operating segments As from 1 January 2009, the Group determines and presents operating segments based on the information that internally is provided to the Managing Director, who is the Group's Chief Operating Decision Maker. The Group's reportable segments are as follows: * The Agency segment which provides resale and lettings property advertising services on www.rightmove.co.uk; and * The New Homes segment which provides property advertising services to new home developers and Housing Associations on www.rightmove.co.uk. The Other segment which represents activities under the reportable segments threshold, comprises overseas property advertising services on www.rightmove.co.uk and non-property advertising services which include business and information services and Automated Valuation Model services. Management monitors the business segments at a revenue and trade receivables level separately for the purpose of making decisions about resources to be allocated and of assessing performance. All revenues in both years are derived from third parties and there are no inter-segment revenues. Operating costs, financial income, financial expenses and income taxes in relation to the Agency, New Homes and the Other segment are managed on a centralised basis at a Rightmove Group Limited level and as there are no internal measures of individual segment profitability relevant disclosures have been shown under the heading of Central in the table below. Profit or loss segmental disclosures have been made on a continuing operations basis. Disclosures in respect of the discontinued Holiday Lettings segment are shown in Note 11. The Company has no reportable segments. Operating segments New Sub Agency Homes total Other Central Adjustments Total Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Year ended 31 December 2010 Revenue 63,795 15,078 78,873 2,683 - - 81,556 Operating - - - - 56,563 (4,497)(2) 52,066 profit(1) Depreciation and - - - - (845) - (845) amortisation Financial - - - - 171 - 171 income Financial - - - - 8 - 8 credit Trade 7,878 2,156 10,034 115 - 40(5) 10,189 receivables(4) Other segment - - - - 40,539 15(6) 40,554 assets Segment - - - - (22,824) (55)(5)(6) 22,879 liabilities Capital - - - - 1,077 74(11) 1,151 expenditure(7) Year ended 31 December 2009 Revenue 47,096 14,554 61,650 2,871 - - 64,521 Operating - - - - 40,606 (3,206) (3) 37,400 profit(1) Depreciation - - - - (1,012) - (1,012) and amortisation Financial - - - - 194 - 194 income Financial - - - - (1,086) - (1,086) expenses Trade 5,806 2,131 7,937 209 - 174 (8) 8,320 receivables(4) Other segment - - - - 31,731 13,692(9) 45,423 assets Segment - - - - (47,666) (2,884) (50,550) liabilities (10) Capital - - - - 229 49(11) 278 expenditure(7) (1) Operating profit is stated after the charge for depreciation and amortisation. (2) Operating profit for the year ended 31 December 2010 does not include share-based payments charge (Â£1,846,000) and NI on share-based incentives (Â£2,651,000). (3) Operating profit for the year ended 31 December 2009 does not include share-based payments charge (Â£1,896,000) and NI on share-based incentives (Â£1,310,000). (4) The only segment assets that are separately monitored by the Chief Operating Decision Maker relate to trade receivables net of any associated provision for impairment. All other segment assets are reported on a centralised basis. (5) The adjustments column reflects the reclassification of credit balances in accounts receivable made on consolidation for statutory accounts purposes. (6) The adjustments column reflects the reclassification of debit balances in accounts payable made on consolidation for statutory accounts purposes. (7) Capital expenditure consists of additions of property, plant and equipment and intangible assets (excluding goodwill). (8) The adjustments column reflects the reclassification of credit balances in accounts receivable made on consolidation for statutory accounts purposes of Â£97,000 and Â£77,000 in relation to the discontinued Holiday Lettings segment trade receivables. (9) The adjustments column reflects Â£13,692,000 in respect of other segment assets, principally goodwill, in relation to the discontinued Holiday Lettings segment. (10) The adjustments column reflects the reclassification of credit balances in accounts receivable made on consolidation for statutory accounts purposes of Â£97,000 and Â£2,787,000 in relation to the discontinued Holiday Lettings segment liabilities. (11) The adjustments column reflects capital expenditure of Â£74,000 (2009: Â£49,000) in relation to the discontinued Holiday Lettings segment. Geographic information In presenting information on the basis of geography, revenue and assets are based on the geographical location of customers. Year ended 31 December 2010 Year ended 31 December 2009 Group Revenue Trade Revenue Trade Â£000 Receivables Â£000 Receivables Â£000 Â£000 UK 80,758 10,152 63,797 8,305 Rest of the world 798 37 724 15 81,556 10,189 64,521 8,320 6 Operating profit Year ended Year ended 31 December 2010 31 December 2009 Â£000 Â£000 Operating profit is stated after charging: Depreciation of property, plant and 575 646 equipment Amortisation of computer software 294 398 Amortisation of customer relationships 42 84 Bad debt impairment charge 567 191 Operating lease rentals Land and buildings 807 899 Other 337 350 Included within depreciation of property, plant and equipment is an amount of Â£24,000 (2009: Â£32,000) relating to the discontinued Holiday Lettings segment. Amortisation of customer relationships relates to the discontinued Holiday Lettings segment in both years. Included within operating lease rentals for the year are amounts relating to the discontinued Holiday Lettings segment of Â£61,000 (2009: Â£160,000) for land and buildings and Â£nil (2009: Â£nil) for other operating lease rentals. Auditor's remuneration Year ended Year ended 31 December 2010 31 December 2009 Â£000 Â£000 Fees payable to the Company's auditor and their associates in respect of the audit Audit of the Company's financial statements 14 20 Audit of the Company's subsidiaries pursuant 102 112 to legislation Total audit remuneration 116 132 Fees payable to the Company's auditor in respect of non-audit related services Tax advisory 4 13 All other services 7 2 Total non-audit remuneration 11 15 Included in the current year's auditor's remuneration for the Company is an amount of Â£nil (2009: Â£5,000) relating to the prior year audit. Included in the non-audit related services is a credit of Â£5,000 (2009: Â£nil) relating to the release of an accrual. 7 Employee numbers and costs The average number of persons employed (including executive directors) during the year, analysed by category, was as follows: Year ended Year ended 31 December 2010 31 December 2009 Number of Number of employees employees Administration 299 292 Management 13 14 312 306 The aggregate payroll costs of these persons were as follows: Year ended Year ended 31 December 2010 31 December 2009 Â£000 Â£000 Wages and salaries 13,246 12,665 Social security costs 1,532 1,192 Pension costs 251 235 15,029 14,092 Included within employee numbers are 40 (2009: 62) full-time equivalent heads employed by the discontinued Holiday Lettings segment. The payroll costs include amounts of Â£1,047,000 (2009: Â£1,722,000) for these employees. 8 Financial income Year ended Year ended 31 December 2010 31 December 2009 Â£000 Â£000 Interest income on cash balances from 171 194 continuing operations Interest income on cash balances from - 5 discontinued operation (refer Note 11) 171 199 9 Financial (credit)/expenses Year ended Year ended 31 December 2010 31 December 2009 Â£000 Â£000 Debt issue (credit)/costs (125) 325 Interest expense 52 666 Other financial expenses 65 95 Financial (credit)/expenses from continuing (8) 1,086 operations Other financial expenses from discontinued - 2 operation (refer Note 11) (8) 1,088 10 Income tax expense Year ended Year ended 31 December 2010 31 December 2009 Â£000 Â£000 Current tax expense Current year 14,534 10,273 Adjustment to current tax charge in respect (11) (74) of prior years 14,523 10,199 Deferred tax credit Origination and reversal of temporary (528) (2,405) differences Adjustment to deferred tax charge in respect 10 - of prior years Reduction in tax rate 9 - (509) (2,405) Total income tax expense 14,014 7,794 Income tax expense from continuing 13,710 7,420 operations Income tax expense from discontinued 304 374 operation (refer Note 11) 14,014 7,794 Income tax recognised directly in equity Year ended Year ended 31 December 2010 31 December 2009 Â£000 Â£000 Deferred tax Equity settled share-based incentives 3,451 174 Total income tax credit recognised directly 3,451 174 in equity Reconciliation of effective tax rate The Group's income tax expense for the year is lower (2009: lower) than the standard rate of corporation tax in the UK of 28.0% (2009: 28.0%). The differences are explained below: Year ended Year ended 31 December 2010 31 December 2009 Â£000 Â£000 Profit for the year 58,002 30,027 Total income tax expense 14,014 7,794 Profit excluding income tax 72,016 37,821 10,590 Current tax at 28.0% (2009: 28.0%) 20,164 Exempt income on sale of discontinued (5,232) - operation Share-based incentives (978) (2,790) Adjustment to current tax charge in respect (11) (74) of prior years Non-deductible expenses 52 54 Reduction in tax rate 9 - Adjustment to deferred tax charge in respect 10 14 of prior years 14,014 7,794 The Group's consolidated effective tax rate on the profit of Â£52,245,000 from continuing operations for the year ended 31 December 2010 is 26.2% (2009: 20.6%). The difference between the standard rate and effective rate on continuing operations at 31 December 2010 is attributable to credits as a result of the increase in the deferred tax asset arising on share-based incentives (0.9%) and corporation tax deductions arising on exercise of share options (1.0%) offset by disallowable expenditure (0.1%). 11 Discontinued Operation On 21 June 2010 the Group sold its 66.7% shareholding in HLHL, which owned 100% of the shares in the trading entity HLL, to TripAdvisor Limited. The Holiday Lettings segment was not previously a discontinued operation or classified as a non-current asset held for sale. Accordingly the comparative statement of comprehensive income has been presented to show the discontinued operation separately from continuing operations. Year ended Year ended 31 December 31 December 2010 2009 Â£000 Â£000 Results of discontinued operation Revenue 3,059 4,865 Administrative expenses (1,979) (3,555) Operating profit 1,080 1,310 Financial income (refer Note 8) - 5 Financial expenses (refer Note 9) - (2) Results from operating 1,080 1,313 activities Income tax (refer Note 10) (304) (374) Results from operating activities 776 939 (net of income tax) Gain on sale of discontinued 18,691 - operation Income tax on gain on sale of - discontinued operation - Effect on profit for the year 19,467 939 Earnings per share (pence) Basic 18.02 0.86 Diluted 17.48 0.85 Included in administrative expenses were depreciation and amortisation charges of Â£66,000 (2009: Â£116,000). Year ended Year ended 31 December 31 December 2010 2009 Â£000 Â£000 Cash flows from discontinued operation Net cash from operating 1,856 2,070 activities Net cash from/(used in) 13,661 (45) investing activities Net cash used in financing (300) (870) activities Net cash from discontinued 15,217 1,155 operation Year ended 31 December 2010 Â£000 Effect of the disposal on the financial position of the Group Property, plant and equipment (refer Note 14) (145) Intangible assets (refer Note 15) (13,059) Trade and other receivables (352) Cash and cash equivalents (1,484) Trade and other payables 3,238 Income tax payable 638 Deferred consideration 8,909 Provisions 10 Deferred tax liabilities (refer Note 22) 64 Net assets disposed of (2,181) Consideration received, satisfied in cash 15,185 Contingent consideration 5,104 Amounts held in Escrow 1,000 Less costs to sell (417) Net consideration 20,872 Consideration received, satisfied in cash 15,185 Cash and cash equivalents disposed of (1,484) Less costs to sell (417) Net cash inflow 13,284 The value of the contingent consideration is dependent on the performance of the Holiday Lettings segment for the 12 month period from 1 April 2010 to 31 March 2011. The value of the contingent consideration has been revised upwards from Â£2,917,000 reported as at 30 June 2010 to Â£5,104,000 based on the actual results to 31 December 2010 plus the latest business forecast for the three month period to 31 March 2011. The first Â£667,000 of contingent consideration will be transferred into an Escrow account, in addition to the Â£1,000,000 of completion proceeds already held in Escrow. The total estimated future cash consideration is Â£6,104,000 of which Â£1,667,000 has been classified as non-current. Under the terms of the sale agreement the amounts held in Escrow earn interest at Barclays Bank Plc's current interest rate and become available on the fourth anniversary of the completion date of the transaction. No discount has been applied as the account is interest bearing. 12 Earnings per share (EPS) Weighted average number of Continuing Discontinued Total ordinary operations operation earnings Pence per shares Â£000 Â£000 Â£000 share Year ended 31 December 2010 Basic EPS 108,021,339 38,535 19,467 58,002 53.69 Diluted EPS 111,361,386 38,535 19,467 58,002 52.08 Underlying basic 108,021,339 43,032 19,467 62,499 57.86 EPS Underlying 111,361,386 43,032 19,467 62,499 56.12 diluted EPS Year ended 31 December 2009 Basic EPS 109,100,758 29,088 939 30,027 27.52 Diluted EPS 110,482,567 29,088 939 30,027 27.18 Underlying basic 109,100,758 32,294 939 33,233 30.46 EPS Underlying 110,482,567 32,294 939 33,233 30.08 diluted EPS Weighted average number of ordinary shares (basic) Year ended Year ended 31 December 2010 31 December 2009 Number of shares Number of shares Issued ordinary shares at 1 January less 111,504,537 111,697,173 ordinary shares held by the EBT Effect of own shares held in treasury (2,505,430) (2,505,430) Effect of own shares purchased for (1,560,101) (65,260) cancellation Effect of own shares purchased by the EBT - (331,649) Effect of share options exercised 582,333 305,924 Weighted average number of ordinary shares (diluted)108,021,339 109,100,758 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 and shares held in treasury. Year ended Year ended 31 December 2010 31 December 2009 Number of shares Number of shares Weighted average number of ordinary shares 108,021,339 109,100,758 (basic) Dilutive impact of own shares held by the EBT and shares held in treasury 3,340,047 1,381,809 111,361,386 110,482,567 Underlying EPS Underlying EPS is calculated before the charge for share-based payments and NI on share-based incentives. A reconciliation of the basic earnings for the year to the underlying earnings is presented below: Year ended Year ended 31 December 2010 31 December 2009 Â£000 Â£000 Basic earnings for the year 58,002 30,027 Share-based payments 1,846 1,896 NI on share-based incentives 2,651 1,310 Underlying earnings for the year 62,499 33,233 13 Dividends Dividends declared and paid by the Company were as follows: 2010 2009 Pence per Â£000 Pence per Â£000 share share 2008 final dividend - - 7.0 7,615 paid 2009 interim - - 3.0 3,279 dividend paid 2009 final dividend 7.0 7,586 - - paid 2010 interim 5.0 5,371 - - dividend paid 12.0 12,957 10.0 10,894 After the reporting date a final dividend of 9.0p (2009: 7.0p) per qualifying ordinary share being Â£9,534,000 (2009: Â£7,630,000) was proposed by the Board of directors. The 2009 final dividend paid on 11 June 2010 was Â£7,586,000 being a difference of Â£44,000 compared to that reported in the 2009 Annual Report which was due to a reduction in the ordinary shares entitled to a dividend between 31 December 2009 and the final dividend record date of 14 May 2010. The 2010 interim dividend paid on 12 November 2010 was Â£5,371,000 being a difference of Â£32,000 compared to that reported in the 2010 Half Year Report which was due to a reduction in the ordinary shares entitled to a dividend between 30 June 2010 and the interim dividend record date of 15 October 2010. 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 final dividend in either year and there are no income tax consequences. Subsidiary dividends Dividends of Â£300,000 (2009: Â£870,000) were paid in the year by HLHL to minority shareholders. As no minority interest was recognised in the consolidated statement of financial position and the Group consolidated 100% of HLHL's results prior to its disposal, the dividends paid in the year were treated as an addition to goodwill (refer Note 15). 14 Property, plant and equipment Office equipment, Group fixtures & Computer Leasehold fittings equipment improvements Total Â£000 Â£000 Â£000 Â£000 Cost At 1 January 2010 784 2,710 47 3,541 Additions 56 748 102 906 Disposals (69) (649) - (718) Disposal of discontinued (37) (141) (47) (225) operation (refer Note 11) At 31 December 2010 734 2,668 102 3,504 Depreciation At 1 January 2010 (441) (1,696) (11) (2,148) Charge for year (103) (451) (21) (575) Disposals 66 561 - 627 Disposal of discontinued 16 48 16 80 operation (refer Note 11) At 31 December 2010 (462) (1,538) (16) (2,016) Net book value At 31 December 2010 272 1,130 86 1,488 At 1 January 2010 343 1,014 36 1,393 Office equipment, Group fixtures & Computer Leasehold fittings equipment improvements Total Â£000 Â£000 Â£000 Â£000 Cost At 1 January 2009 844 3,632 32 4,508 Additions 2 233 15 250 Disposals (62) (1,155) - (1,217) At 31 December 2009 784 2,710 47 3,541 Depreciation At 1 January 2009 (379) (2,242) (4) (2,625) Charge for year (118) (521) (7) (646) Disposals 56 1,067 - 1,123 At 31 December 2009 (441) (1,696) (11) (2,148) Net book value At 31 December 2009 343 1,014 36 1,393 At 1 January 2009 465 1,390 28 1,883 The Company has no property, plant or equipment in either year. 15 Intangible assets Computer Customer Goodwill software relationships Total Group Â£000 Â£000 Â£000 Â£000 Cost At 1 January 2010 13,250 3,012 514 16,776 Additions 300 245 - 545 Disposals - (5) - (5) Disposal of discontinued (12,818) - (514) (13,332) operation (refer Note 11) At 31 December 2010 732 3,252 - 3,984 Amortisation At 1 January 2010 - (2,231) (231) (2,462) Charge for year - (294) (42) (336) Disposals - 4 - 4 Disposal of discontinued - - 273 273 operation (refer Note 11) At 31 December 2010 - (2,521) - (2,521) Net book value At 31 December 2010 732 731 - 1,463 At 1 January 2010 13,250 781 283 14,314 Computer Customer Goodwill software relationships Total Group Â£000 Â£000 Â£000 Â£000 Cost At 1 January 2009 9,605 3,200 514 13,319 Additions 3,645 28 - 3,673 Disposals - (216) - (216) At 31 December 2009 13,250 3,012 514 16,776 Amortisation At 1 January 2009 - (2,049) (147) (2,196) Charge for year - (398) (84) (482) Disposals - 216 - 216 At 31 December 2009 - (2,231) (231) (2,462) Net book value At 31 December 2009 13,250 781 283 14,314 At 1 January 2009 9,605 1,151 367 11,123 The Company has no intangible assets in either year. Impairment testing for cash generating units containing goodwill For the purpose of impairment testing, goodwill is allocated to the Group's operations which represent the lowest level within the Group at which the goodwill is monitored for internal management purposes, which is not higher than the Group's operating segments as reported in Note 5. The aggregate carrying amounts of goodwill allocated to each unit are as follows: 31 December 2010 31 December 2009 Â£000 Â£000 Holiday Lettings (discontinued) - 12,518 Agency 732 732 732 13,250 The recoverable amount of the HLL cash generating unit in 2009 was based on its value in use. Value in use was determined by discounting the estimated future cash flows generated from the business and was based on the following key assumptions: * Cash flows were projected based on past experience, actual operating results and the three year business plan; * Cash flows thereafter were extrapolated into perpetuity applying a growth rate of 2.0%; * The key assumption was sales growth rate. In 2009 revenues on a management accounts basis, before adjusting for deferred revenue, grew by 45.7% year on year and in the business plan revenues were projected based on historical growth and future plans for the business; and * A pre-tax discount rate of 19.6% was applied in determining the recoverable amount; based on an industry specific weighted average cost of capital. The carrying value of the Â£732,000 purchased goodwill in Agency, arising pre-transition to IFRS, is also reviewed annually for impairment. Due to its level of significance the disclosures as required by IAS 36 Impairment of Assets have not been made. 16 Investments The subsidiaries of the Group as at 31 December 2010 are as follows: Company Nature of Country of Class of business incorporation Holding shares Rightmove Group Limited Online England and 100% Ordinary advertising Wales Rightmove.co.uk Limited Dormant England and 100% Ordinary Wales Rightmove Home Information Packs Limited Dormant England and 100% Ordinary Wales All the above subsidiaries are included in the Group consolidated results. The Group disposed of its' holdings in HLHL and HLL during the year (refer Note 11). Company 31 December 2010 31 December 2009 Investment in subsidiary undertakings Â£000 Â£000 At 1 January 538,501 537,668 Additions - subsidiary equity settled share-based incentives charge (refer 803 833 Note 24) At 31 December 539,304 538,501 Following the capital reconstruction in 2008 all employees' share-based incentives were transferred to the new holding company, Rightmove plc. In addition certain directors' contracts of employment were transferred from Rightmove Group Limited to Rightmove plc, whilst all other employees remained employed by Rightmove Group Limited. Accordingly the IFRS 2 charge has been split between the Company and Rightmove Group Limited with Â£803,000 (2009: Â£833,000) being recognised in the Company accounts as a capital contribution to its subsidiary. 17 Trade and other receivables Group 31 December 2010 31 December 2009 Â£000 Â£000 Trade receivables 10,444 8,405 Less provision for impairment of trade (371) (216) receivables Net trade receivables 10,073 8,189 Amounts owed by related parties (refer 116 131 Note 28) Amounts held in Escrow (refer Note 11) 1,000 - Prepayments and accrued income 1,577 967 Interest receivable 62 - Other debtors 37 132 Forward exchange contracts - 2 12,865 9,421 Non-current 1,000 - Current 11,865 9,421 12,865 9,421 Exposure to credit and currency risks and impairment losses relating to trade and other receivables are disclosed in Note 29. Included within net trade receivables at 31 December 2010 is an amount of Â£nil (2009: Â£77,000) relating to the discontinued Holiday Lettings segment. The Company has no trade and other receivables in either year. 18 Cash and cash equivalents Group Company 31 December 2010 31 December 2009 31 December 2010 31 December 2009 Â£000 Â£000 Â£000 Â£000 Bank accounts 23,148 932 - - Deposit accounts - 24,961 - 5,424 Cash and cash equivalents in 23,148 25,893 - 5,424 the statement of cash flows Cash balances were placed on deposit for various lengths between one day and two months during the year and attracted interest at a weighted average rate of 0.7% (2009: 0.9%). Included within cash and cash equivalents at 31 December 2010 is an amount of Â£nil (2009: Â£562,000) relating to the discontinued Holiday Lettings segment. 19 Trade and other payables Group Company 31 December 2010 31 December 2009 31 December 2010 31 December 2009 Â£000 Â£000 Â£000 Â£000 Trade payables 1,033 777 - - Trade accruals 4,734 2,670 3,047 1,314 Other creditors 240 250 - - Other taxation and social 3,223 2,798 - - security Deferred revenue 6,759 7,347 - - Inter-group - - 22,605 59,763 payables Accrued interest on inter-group - - - 1,837 payables balance Interest payable - 19 - 19 15,989 13,861 25,652 62,933 Exposure to currency and liquidity risk relating to trade and other payables is disclosed in Note 29. Included within trade payables at 31 December 2010 is an amount of Â£nil (2009: Â£57,000) relating to the discontinued Holiday Lettings segment. 20 Loans and borrowings In April 2008, the Group entered into a Sterling-denominated revolving loan facility of Â£39,750,000 with the Bank of Scotland to support its share buy back programme. During 2009, Â£14,750,000 of the revolving loan facility was repaid out of surplus cash. On 16 April 2009 the Group converted Â£25,000,000 being the balance of its revolving loan facility, into a five year term loan. The loan bore interest at LIBOR plus 1.5% together with a mandatory cost applied by the lender and was repayable over five years in 20 equal instalments. The Board of directors agreed to retire the debt with the Bank of Scotland early and on 10 February 2010 the outstanding debt of Â£21,250,000, being the balance as at 31 December 2009 less a quarterly instalment of Â£1,250,000 paid in January 2010, was repaid in full. No penalties or break costs were incurred in exiting the facility early. Post repayment of the debt the Group entered into an agreement with Barclays Bank Plc for a Â£10,000,000 uncommitted money market loan. To date no amount has been drawn under this facility. The loan was extended on 11 February 2011 for a further 12 month period. Fair value Carrying value Fair value Carrying value 31 December 2010 31 December 2010 31 December 2009 31 December 2009 Group Â£000 Â£000 Â£000 Â£000 Non-current liabilities Unsecured bank - - 17,500 17,500 borrowings Current liabilities Unsecured bank - - 5,000 5,000 borrowings - - 22,500 22,500 Cash and cash equivalents (23,148) (23,148) (25,893) (25,893) (refer Note 18) Total net (cash) (23,148) (23,148) (3,393) (3,393) Analysis of net debt cash flows 1 January 2010 Cash flows 31 December 2010 Group Â£000 Â£000 Â£000 Cash and cash (25,893) 2,745 (23,148) equivalents Interest-bearing loans and borrowings 22,500 (22,500) - Total net (cash) (3,393) (19,755) (23,148) Fair value Carrying value Fair value Carrying value 31 December 2010 31 December 2010 31 December 2009 31 December 2009 Company Â£000 Â£000 Â£000 Â£000 Non-current liabilities Unsecured bank - - 17,500 17,500 borrowings Current liabilities Unsecured bank - - 5,000 5,000 borrowings - - 22,500 22,500 Cash and cash equivalents - - (5,424) (5,424) (refer Note 18) Total net (cash)/ - - 17,076 17,076 debt Analysis of net debt cash flows 1 January 2010 Cash flows 31 December 2010 Company Â£000 Â£000 Â£000 Cash and cash (5,424) 5,424 - equivalents Interest-bearing loans and borrowings 22,500 (22,500) - Total net debt/(cash) 17,076 (17,076) - 21 Provisions Group Property provisions Â£000 At 1 January 2010 6 Provisions made during the year 4 Provisions disposed of (refer Note 11) (10) At 31 December 2010 - The 2009 property provision for lease dilapidations related to the premises occupied by HLL. The Company has no provisions in either year. 22 Deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: Net Assets Liabilities 31 31 31 31 31 31 December December December December December December Group 2010 2009 2010 2009 2010 2009 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Equity settled (6,427) (2,524) - - (6,427) (2,524) share-based incentives Property, plant and (161) (150) - 4 (161) (146) equipment Provisions (87) (48) - - (87) (48) Intangible - - - 67 - 67 assets Net tax (6,675) (2,722) - 71 (6,675) (2,651) (assets) The net deferred tax asset of Â£6,675,000 at 31 December 2010 (2009: Â£2,651,000) is in respect of share-based incentives, depreciation in excess of capital allowances and provisions. The deferred tax asset relating to share-based incentives at 31 December 2010 is Â£6,427,000 (2009: Â£2,524,000). This increase is due to the Company's share price increasing from Â£5.04 at 31 December 2009 to Â£7.79 at 31 December 2010. Assets Liabilities Net 31 31 31 31 31 31 December December December December December December Company 2010 2009 2010 2009 2010 2009 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Equity settled (5,142) (1,896) - - (5,142) (1,896) share-based incentives Net tax (5,142) (1,896) - - (5,142) (1,896) (assets) The net deferred tax asset of Â£5,142,000 at 31 December 2010 (2009: Â£1,896,000) is in respect of share-based incentives. This increase is due to the Company's share price increasing from Â£5.04 at 31 December 2009 to Â£7.79 at 31 December 2010. Movement in deferred tax during the year: Disposal of Group Recognised Recognised discontinued 1 January 2010 in income in equity operation 31 December 2010 Â£000 Â£000 Â£000 Â£000 Â£000 Equity settled share-based (2,524) (452) (3,451) - (6,427) incentives Property, plant and equipment (146) (8) - (7) (161) Provisions (48) (39) - - (87) Intangible 67 (10) - (57) - assets (2,651) (509) (3,451) (64) (6,675) Recognised in Recognised in Company 1 January 2010 income equity 31 December 2010 Â£000 Â£000 Â£000 Â£000 Equity settled (1,896) (258) (2,988) (5,142) share-based incentives The Emergency Budget of 22 June 2010 announced a phased reduction in the main UK corporation tax rate from 28.0% to 24.0% with the first 1.0% reduction taking effect from 1 April 2011. The first 1.0% reduction was substantively enacted for the purposes of IFRS on 20 July 2010. It has not been possible to quantify the full anticipated effect of the announced further 3.0% rate reduction but it is expected to result in a reduction in the Group's future current tax charge and reduce the Group's deferred tax assets accordingly resulting in a further charge to income and a debit directly to equity. The anticipated changes to the capital allowance rules from April 2012 are considered unlikely to have a material impact on the effective rate of tax. Movement in deferred tax during the prior year: Recognised in Recognised in 31 December Group 1 January 2009 income equity 2009 Â£000 Â£000 Â£000 Â£000 Equity settled share-based - (2,350) (174) (2,524) incentives Property, plant and (87) (59) - (146) equipment Provisions (7) (41) - (48) Intangible assets 88 (21) - 67 Tax losses (66) 66 - - (72) (2,405) (174) (2,651) The deferred tax asset arising on equity settled share-based incentives in both years was recognised in the profit or loss to the extent that the related equity settled share-based incentives charge was recognised in the profit or loss. 23 Share capital Ordinary shares of Â£0.01 each 31 December 2010 31 December 2009 Number of shares Number of shares In issue At 1 January 118,923,411 120,050,873 Purchase and cancellation of own shares (4,161,977) (1,127,462) At 31 December 114,761,434 118,923,411 Authorised - par value Â£0.01 each 300,000,000 300,000,000 During 2010, 4,161,977 (2009: 1,127,462) ordinary shares were bought back by the Company and were subsequently cancelled. Further details are disclosed in Note 24. All issued shares are fully paid. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at general meetings of the Company. Included within shares in issue at 31 December 2010 are 6,322,329 ordinary shares (2009: 7,418,874) held by the EBT and 2,505,430 (2009: 2,505,430) held in treasury. 24 Reconciliation of movement in capital and reserves EBT Reverse Share shares Treasury Other acquisition Retained Total capital reserve shares reserves reserve earnings equity Group Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 At 1 January 2009 1,201 (17,149) (11,917) 93 138 12,125 (15,509) Profit for the - - - - - 30,027 30,027 year Equity settled - - - - - 1,896 1,896 share-based incentives charge Tax in respect of - - - - - 174 174 share-based incentives recognised directly in equity Dividends to - - - - - (10,894) (10,894) shareholders Exercise of share - 3,365 - - - 2,043 5,408 options Purchase of own - (2,401) - - - - (2,401) shares Cancellation of (12) - - 12 - (5,452) (5,452) own shares Share related - - - - - (56) (56) expenses At 31 December 2009 1,189 (16,185) (11,917) 105 138 29,863 3,193 At 1 January 2010 1,189 (16,185) (11,917) 105 138 29,863 3,193 Profit for the - - - - - 58,002 58,002 year Equity settled - - - - - 1,846 1,846 share-based incentives charge Tax in respect of - - - - - 3,451 3,451 share-based incentives recognised directly in equity Dividends to - - - - - (12,957) (12,957) shareholders Exercise of share - 2,248 - - - 1,645 3,893 options Cancellation of (42) - - 42 - (29,358) (29,358) own shares Share related - - - - - (206) (206) expenses At 31 December 2010 1,147 (13,937) (11,917) 147 138 52,286 27,864 Share buy back In June 2007, the Company commenced a share buy back programme to purchase its own ordinary shares. The total number of shares bought back in 2010 was 4,161,977 (2009: 1,127,462) representing 3.7% (2009: 1.0%) of the issued share capital (excluding shares held in treasury). All of the shares bought back in both years were cancelled. The shares were acquired on the open market at a total consideration (excluding costs) of Â£29,358,000 (2009: Â£5,452,000). The maximum and minimum prices paid were Â£7.73 (2009: Â£5.00) and Â£6.09 (2009: Â£4.71) per share respectively. EBT shares reserve This reserve represents the carrying value of own shares held by the EBT. During the year the EBT purchased no shares. 1,096,545 (2009: 1,641,791) options were exercised by Group employees in the year at an average price of Â£3.55 (2009: Â£3.29) per ordinary share, which were satisfied by shares held in the EBT. At 31 December 2010 the EBT held 6,322,329 (2009: 7,418,874) ordinary shares in the Company of Â£0.01 each, representing 5.6% (2009: 6.4%) of the ordinary shares in issue (excluding shares held in treasury). The market value of the shares held in the EBT at 31 December 2010 was Â£49,251,000 (2009: Â£37,428,000). Other reserves The movement on other reserves of Â£42,000 (2009: Â£12,000) comprises the nominal value of ordinary shares cancelled during the year. Retained earnings The gain on the exercise of share options is the difference between the value that the shares held by the EBT were originally acquired at and the price at which share options were exercised during the year. Company Reverse Share Treasury Other acquisition Retained Total capital shares Reserves reserve earnings equity Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 At 1 January 2009 1,201 (11,917) 751 103,520 384,413 477,968 Loss for the year - - - - (4,315) (4,315) Dividends to - - - - (10,894) (10,894) shareholders Equity settled share-based incentives - - - - 1,063 1,063 charge Tax in respect of - - - - 1,223 1,223 share-based incentives recognised directly in equity Capital contribution - - 833 - - 833 Cancellation of own (12) - 12 - (5,452) (5,452) shares Share related expenses - - - - (38) (38) At 31 December 2009 1,189 (11,917) 1,596 103,520 366,000 460,388 At 1 January 2010 1,189 (11,917) 1,596 103,520 366,000 460,388 Profit for the year - - - - 96,093 96,093 Dividends to - - - - (12,957) (12,957) shareholders Equity settled share-based incentives - - - - 1,043 1,043 charge Tax in respect of - - - - 2,988 2,988 share-based incentives recognised directly in equity Capital contribution - - 803 - - 803 Cancellation of own (42) - 42 - (29,358) (29,358) shares Share related expenses - - - - (206) (206) At 31 December 2010 1,147 (11,917) 2,441 103,520 423,603 518,794 Reverse acquisition reserve This reserve resulted from the acquisition of Rightmove Group Limited by the Company and represents the difference between the value of the shares acquired at 28 January 2008 and the nominal value of the shares issued. Other reserves The principal movement in other reserves for the year comprises Â£803,000 (2009: Â£833,000) in respect of the equity settled share-based incentives charge for employees of Rightmove Group Limited. As the awards relate to shares in the Company the IFRS 2 charge has been treated as a deemed capital contribution. In addition a movement of Â£42,000 (2009: Â£12,000) has been recorded in relation to the nominal value of ordinary shares cancelled during the year. 25 Share-based payments The Group and Company operate share-based incentive schemes for certain senior management comprising the Rightmove Unapproved Executive Share Option Plan (Unapproved Plan), the Rightmove Approved Executive Share Option Plan (Approved Plan) and the Rightmove Deferred Share Bonus Plan (DSB Plan). The Group also operates a Savings Related Share Option Scheme (Sharesave Plan). 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 services received is measured using either the Monte Carlo or Black Scholes pricing model as is most appropriate for each scheme. All share-based incentive schemes are granted under a service condition. Such conditions are not taken into account in the fair value of the service received. The unapproved executive share option awards granted on 5 March 2010 at an exercise price of Â£6.66 are subject to an equal measure of TSR performance and growth in EPS. The vesting of 50% of the 2010 award will be dependent on a relative TSR performance condition measured over a three-year performance period and the vesting of the other 50% of the 2010 award will be dependent on the satisfaction of an EPS growth target over a three-year performance period. The unapproved executive share option awards made on 5 March 2009 are subject to a relative TSR performance over a three-year performance period, relative to the constituents of the FTSE 250. There are no market conditions associated with any other share-based incentives granted. The IFRS 2 charge for the year relating to employee share-based incentive plans was Â£1,846,000 (2009: Â£1,896,000). The Company charge for the year was Â£1,043,000 (2009: Â£1,063,000). Approved and Unapproved Plans The assumptions used in the measurement of the fair values at grant date of the Approved and Unapproved Plans are as follows: Share price Employee Fair at Risk turnover value grant Exercise Expected Option free Dividend before per Grant date date price volatility life rate yield vesting option (pence) (pence) (%) (years) (%) (%) (%) (pence) 14 March 2006 413.50 410.00 27.0 7.0 4.5 4.0 16.0 92.00 (Approved) 15 March 2006 413.75 335.00 27.0 7.0 4.5 4.0 0.0 116.00 (Unapproved) 15 March 2006 413.75 335.00 27.0 6.0 4.5 3.0 16.0 130.00 (Unapproved) 12 October 2006 348.00 347.00 27.0 7.0 4.5 4.0 16.0 76.00 (Unapproved) 6 September 613.00 597.00 32.0 7.0 5.8 2.0 17.0 228.00 2007 (Approved) 6 September 613.00 597.00 32.0 7.0 5.8 2.0 17.0 181.00 2007 (Unapproved) 10 October 2007 525.00 522.00 32.0 6.8 5.8 2.0 17.0 189.00 (Unapproved EPS dependent)(1) 5 March 2009 226.75 224.00 50.3 6.5 2.6 4.4 12.0 69.00 (Unapproved TSR dependent)(1) 5 March 2010 677.00 666.00 49.0 6.5 3.2 1.5 12.0 267.00 (Unapproved TSR dependent)(1) 5 March 2010 677.00 666.00 49.0 6.5 3.2 1.5 12.0 312.00 (Unapproved EPS dependent)(1) (1) For details of TSR and EPS performance conditions refer to Part II of the Remuneration Report on pages 41 to 45. Expected volatility is estimated by considering historic average share price volatility at the grant date. 2010 2009 Group and Company Weighted Weighted average average Number exercise Number exercise price price (pence) (pence) Outstanding at 1 January 6,878,310 330.16 7,305,292 348.66 Granted 440,019 666.00 1,103,948 224.00 Forfeited (145,030) 403.39 (33,146) 596.99 Exercised (1,077,870) 354.63 (1,497,784) 336.24 Outstanding at 31 6,095,430 348.33 6,878,310 330.16 December Exercisable at 31 2,925,602 335.56 2,199,400 336.01 December The weighted average market value per ordinary share for executive options exercised in 2010 was Â£6.98 (2009: Â£5.44). The options outstanding at 31 December 2010 have an exercise price in the range of Â£2.24 to Â£6.66 (2009: Â£2.24 to Â£5.97) and a weighted average contractual life of 6.1 years (2009: 6.8 years). The IFRS 2 charge for approved and unapproved options for the year ended 31 December 2010 is Â£1,318,000 (2009: Â£1,570,000). The Company charge for the year was Â£781,000 (2009: Â£958,000). NI is accrued, where applicable, at a rate of 13.8%, which management expects to be the prevailing rate when the share options are exercised, on the difference between the share price at the reporting date and the average exercise price of share options. The charge for the year ended 31 December 2010 is Â£2,526,000 (2009: Â£1,268,000). Sharesave Plan The Group operates an Her Majesty's Revenue and Customs approved Sharesave Plan under which employees are granted an option to purchase ordinary shares in the Company at up to 20% less than the market price at invitation, in three years' time, dependent on their entering into a contract to make monthly contributions into a savings account over the relevant period. These funds are used to fund the option exercise. No performance criteria are applied to the exercise of Sharesave options. The assumptions used in the measurement of the fair value at grant date of the Sharesave option scheme are as follows: Employee Share turnover price before Fair at Risk vesting/ value grant Exercise Expected Option free Dividend non-vesting per date price volatility life rate yield conditions option Grant (pence) (pence) (%) (years) (%) (%) (%) (pence) date 2 October 2006 345.75 259.00 27.0 3.25 4.5 3.0 16.0 108.00 3 October 2007 525.00 490.00 32.0 3.25 5.8 1.5 84.0 156.00 2 October 2008 253.75 255.00 32.0 3.25 3.0 1.5 25.0 59.00 1 October 2009 545.00 425.00 50.3 3.25 3.5 4.4 25.0 199.00 5 October 2010 745.50 553.00 49.0 3.25 2.3 1.6 25.0 318.00 Expected volatility is estimated by considering historic average share price volatility at the grant date. The requirement that an employee has to save in order to purchase shares under the Sharesave option scheme is a non-vesting condition. This feature has been incorporated into the fair value at grant date by applying a discount to the valuation obtained from the Black Scholes pricing model. The discount has been determined by estimating the probability that the employee will stop saving based on expected future trends in the share price and employee behaviour. 2010 2009 Group and Company Weighted Weighted average average exercise exercise Number price Number price (pence) (pence) Outstanding at 178,435 364.63 274,993 267.41 1 January Granted 44,534 553.00 106,527 425.00 Forfeited (27,771) 370.39 (59,078) 278.44 Exercised (18,675) 377.19 (144,007) 259.00 Outstanding at 176,523 409.92 178,435 364.63 31 December Exercisable at - - 7,661 259.00 31 December The weighted average market value per ordinary share for Sharesave options exercised in 2010 was Â£7.01 (2009: Â£5.21). The Sharesave options outstanding at 31 December 2010 have an exercise price in the range of Â£2.55 to Â£5.53 (2009: Â£2.55 to Â£4.25) and a weighted average contractual life of 2.0 years (2009: 2.5 years). The IFRS 2 charge for Sharesave options for the year ended 31 December 2010 is Â£88,000 (2009: Â£139,000). The Company charge for the year was Â£2,000 (2009: Â£3,000). DSB Plan In March 2009 a DSB Plan was established which allows certain senior management the opportunity to earn a bonus linked as a percentage of base salary settled in 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 IFRS 2 charge has been spread evenly over the combined Performance period and Vesting period of the shares, being three years. The IFRS 2 charge for the year ended 31 December 2010 is Â£440,000 (2009: Â£187,000). The Company charge for the year was Â£260,000 (2009: Â£102,000). NI is being accrued, where applicable, at a rate of 13.8%, which management expects to be the prevailing rate when the deferred shares are released to the employees, based on the share price at the reporting date. The charge for the year ended 31 December 2010 is Â£125,000 (2009: Â£42,000). The assumptions used in the measurement of the fair value of the deferred share awards are calculated at the date on which the potential bonus is communicated to senior management (the Grant date) as follows: Share price Employee Fair at Risk turnover value Grant Exercise Expected Expected free Dividend before per Grant Award date price volatility term rate yield vesting share date date (pence) (pence) (%) (years) (%) (%) (%) (pence) 5 March 2009 5 March 2010 226.75 nil n/a 3.0 2.6 4.4 12.0 199.00 5 March 2010 - 677.00 nil n/a 3.0 3.2 1.5 12.0 648.00 Following the achievement of the 2009 internal performance targets, 215,958 deferred shares were awarded to senior management on 5 March 2010 (the Award date) with the right to the release of the shares deferred until March 2012. 26 Operating lease commitments Non-cancellable operating lease rentals are payable as follows: 31 December 2010 31 December 2009 Group Plant & Plant & machinery Other Total machinery Other Total Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Less than one 168 781 949 260 967 1,227 year Between one and five 185 2,964 3,149 69 3,804 3,873 years More than five years - 855 855 - 1,713 1,713 353 4,600 4,953 329 6,484 6,813 Included in operating lease commitments is Â£nil (2009: Â£1,100,000) relating to the discontinued Holiday Lettings segment. The Company has no operating lease commitments in either year. 27 Capital commitments As at 31 December 2010 the Group had committed to incur capital expenditure of Â£nil (2009: Â£nil). The Company has no capital commitments in either year. 28 Related party disclosures Inter-group transactions with subsidiaries During the year the Company was charged interest of Â£909,000 (2009: Â£611,000) by Rightmove Group Limited in respect of balances owing under the inter-group loan agreement dated 30 January 2008. On 21 December 2010 Rightmove Group Limited declared an interim dividend of 77.2p per ordinary share to the Company. The dividend of Â£99,897,000 was settled via a reduction in the inter-group loan balance. As at 31 December 2010 the balance owing under this agreement was Â£22,605,000 (2009: Â£61,600,000) including capitalised interest. Directors' transactions There were no transactions with directors in either year other than those disclosed in the Remuneration Report. Information on the emoluments of the directors, who served during the year, together with information regarding the beneficial interest of the directors in the ordinary shares of the Company is included in the Remuneration Report on page 44. Stephen Shipperley, a non-executive director during the year, is also Group Executive Chairman of Connells Limited, a significant estate agency customer of the Group. During 2009 Connells Limited renewed their membership for a further three years on an arms length basis. The Group's transactions and balances with this customer for both years were as follows: Year ended Year ended Group 31 December 2010 31 December 2009 Â£000 Â£000 Amounts owed by: Sequence (UK) Limited (Connells) 70 80 Connells Residential 46 51 116 131 Amounts invoiced to: Sequence (UK) Limited (Connells) 678 598 Connells Residential 413 327 1,091 925 Included within trade and other receivables is Â£116,000 due from related parties (2009: Â£131,000). Trade and other payables include Â£nil due to related parties (2009: Â£nil). Transactions with key management staff There were no transactions in either year with key management staff. 29 Financial instruments Credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was: Group Company 31 December 2010 31 December 2009 31 December 2010 31 December 2009 Note Â£000 Â£000 Â£000 Â£000 Net trade 17 10,073 8,189 - - receivables Amounts owed - by related 17 116 131 - parties Amounts held in Escrow 11,17 1,000 - - - Accrued 17 interest 62 - - - receivable Other debtors 17 37 132 - - Cash and cash 5,424 equivalents 18 23,148 25,893 - 34,436 34,345 - 5,424 The maximum exposure to credit risk for trade receivables (including related parties) at the reporting date by geographic region was: 31 December 2010 31 December 2009 Group Note Â£000 Â£000 UK 10,152 8,305 Rest of the 37 15 world 17 10,189 8,320 The maximum exposure to credit risk for trade receivables (including related parties) at the reporting date by type of customer was: 31 December 2010 31 December 2009 Group Note Â£000 Â£000 Property 10,114 8,123 advertisers Other 75 197 17 10,189 8,320 The Group's most significant customer, an Estate Agent, accounts for Â£600,000 (2009: Â£306,000) of the trade receivables carrying amount. Impairment losses The ageing of trade receivables (including related parties) at the reporting date was: 31 December 2010 31 December 2009 Gross Impairment Gross Impairment Group Â£000 Â£000 Â£000 Â£000 Not past due 7,088 (6) 5,610 (4) Past due 0 - 30 days 1,892 (162) 1,737 (25) Past due 30 - 60 1,355 (160) 951 (11) days Past due 60 - 90 180 (22) 142 (104) days Past due older 45 (21) 96 (72) 10,560 (371) 8,536 (216) The movement in the allowance for impairment in respect of trade receivables during the year was as follows: 31 December 2010 31 December 2009 Group Â£000 Â£000 At 1 January 216 383 Charged during the 567 191 year Utilised during the (412) (358) year At 31 December 371 216 The Group has identified specific balances for which it has provided an impairment allowance on a line by line basis across all ledgers, in both years. No general impairment allowance has been provided in either year. The allowance accounts in respect of trade receivables are used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible; at that point the amounts considered irrecoverable are written off against the financial asset directly. Liquidity risk The following are the contractual maturities of financial liabilities, including estimated interest payments: 31 December 2010 Group Carrying Contractual 6 months 6-12 amount cash flows or less months 1-2 years 2-5 years Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Non-derivative financial liabilities Trade payables 1,033 (1,033) (1,033) - - - 31 December 2009 Group Carrying Contractual 6 months 6-12 amount cash flows or less months 1-2 years 2-5 years Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Non-derivative financial liabilities Unsecured bank 22,500 (22,500) (2,500) (2,500) (5,000) (12,500) borrowings Trade payables 777 (777) (777) - - - 23,277 (23,277) (3,277) (2,500) (5,000) (12,500) Derivative financial liabilities Forward exchange (2) (216) (216) - - - contracts 23,275 (23,493) (3,493) (2,500) (5,000) (12,500) Forward exchange contracts in 2009 related to the discontinued Holiday Lettings segment. 31 December 2010 Company Carrying Contractual 6 months amount cash flows or less 6-12 1-2 years 2-5 years Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Non-derivative financial liabilities Unsecured bank - - - - - - borrowings 31 December 2009 Company Carrying Contractual 6 months 6-12 amount cash flows or less months 1-2 years 1-2 years Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Non-derivative financial liabilities Unsecured bank 22,500 (22,500) (2,500) (2,500) (5,000) (12,500) borrowings The contractual cash flows in respect of unsecured bank borrowings relate only to the principal amount and do not include interest as the loan was repaid in full on 10 February 2010 (refer Note 20). It is not expected that the cash flows included in the maturity analysis could occur earlier or at significantly different amounts. Currency risk During 2010 all the Group's sales and more than 99.0% of the Group's purchases were Sterling denominated and accordingly it has no currency risk. Interest rate risk The Group and the Company have exposure to interest rate risk on their cash balances and amounts held in Escrow. As at 31 December 2010 the Group had total cash of Â£23,148,000 (2009: Â£25,893,000)and Â£1,000,000 (2009: Â£nil) held in Escrow. In 2009 the Group and the Company had exposure to interest rate risk on the loan facility of Â£22,500,000 which bore interest at LIBOR plus 1.5%. A change of 1.0% in interest rates would have increased or decreased equity by Â£265,000. Fair values The fair values of all financial instruments in both years are set out in the tables below: 31 December 2009 31 December 2010 Group Carrying Carrying amount Fair value amount Fair value Â£000 Â£000 Â£000 Â£000 Trade and other 12,865 12,865 9,421 9,421 receivables Cash and cash 23,148 23,148 25,893 25,893 equivalents Trade and other (15,989) (15,989) (13,861) (13,861) payables Loans and - - (22,500) (22,500) borrowings 20,024 20,024 (1,047) (1,047) 31 December 2010 31 December 2009 Company Carrying Carrying amount Fair value amount Fair value Â£000 Â£000 Â£000 Â£000 Cash and cash - - 5,424 5,424 equivalents Trade and other (25,652) (25,652) (62,933) (62,933) payables Loans and borrowings - - (22,500) (22,500) (25,652) (25,652) (80,009) (80,009) 30 Contingent liabilities The Group and the Company had no contingent liabilities in either year. 31 Subsequent events There have been no subsequent events having a material impact on the financial statements between 31 December 2010 and the reporting date. ADVISERS AND SHAREHOLDER INFORMATION Contacts Managing Director: Ed Williams Chief Operating Officer and Finance Director: Nick McKittrick Company Secretary: Liz Taylor Website: www.rightmove.co.uk Registered office: Rightmove plc 4th Floor 33 Soho Square London W1D 3QU Registered in England no. 6426485 Financial calendar 2011 2010 full year results 25 February 2011 Annual General Meeting 4 May 2011 Final dividend record 13 May 2011 date Final dividend payment 10 June 2011 Interim Management May, November 2011 Statement Half year results 3 August 2011 Interim dividend November 2011 Corporate advisers Financial adviser UBS Investment Bank Joint brokers UBS Ltd Numis Securities Ltd Auditor KPMG Audit Plc Bankers Barclays Bank PLC HSBC Bank Plc Solicitors Slaughter and May Pinsent Masons Registrar Capita registrars Shareholder enquiries The Company's registrar is Capita Registrars. 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: Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Capita Registrars is a trading name of Capita Registrars Limited. Capita shareholder helpline: 0871 664 0300 (calls cost 10p per minute plus network extras) (Overseas: +44 20 8639 3399) Email: ssd@capitaregistrars.com Share portal: www.capitashareportal.com Through the website of our registrar, Capita Registrars, shareholders are able to manage their shareholding online and facilities include electronic communications, account enquiries, amendment of address and dividend mandate instructions.

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