Final Results 31 December 2011

Rightmove plc 33 Soho Square London W1D 3QU EMBARGOED UNTIL 7AM 24 FEBRUARY 2012 RIGHTMOVE plc 2011 FULL YEAR RESULTS Rightmove plc, the UK's number one property website, today announces its Full Year results for the year ended 31 December 2011. Highlights: * Revenue increased by 19% to Â£97.0m (2010: Â£81.6m) * Underlying operating profit(1) increased by 23% to Â£69.4m (2010: Â£56.6m) * Underlying operating margin(1) up to 71.5% (2010: 69.4%) * Underlying basic earnings per share(1) up 26% to 50.3p (2010: 39.8p) * Diluted earnings per share(2) up 22% to 42.3p (2010: 34.6p) * Net cash at 31 December 2011 of Â£21.8m (2010: Â£23.1m) * 4.4m shares bought back during 2011 (2010: 4.2m) at an average price of Â£11.10(2010: Â£7.05) * Number of advertisers grew by 1% to 18,276 (2010: 18,042) * Average revenue per advertiser (ARPA) up 17% to Â£443 per month (2010: Â£379 per month) * Proposed final dividend of 11.0p (2010: 9.0p) making a total dividend of 18.0p for the year (2010: 14.0p), up 29% (1) From continuing operations before share-based payments, NI on share-based incentives and no related adjustment for tax. (2) From continuing operations. Ed Williams, Managing Director, said: "Our 2011 results provide ample evidence to support our claim that `Britain Moves at Rightmove.' With further strong growth in 2012, there is every prospect that this will be the year when the property industry's spend on advertising on the internet will exceed that on local newspapers for the first time." 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 2011 Full Year results can be downloaded from www.rightmove.co.uk/investors CHAIRMAN'S STATEMENT It is my pleasure to present Rightmove plc's results for the year ended 31 December 2011. Rightmove stakeholders have much to be pleased about based on 2011 performance across a variety of measures. Most importantly, Rightmove has become synonymous with property advertising and is one of the top ten most popular websites in the UK. With over nine billion page impressions served on our fixed internet, mobile and tablet platforms 2011, was the busiest year in our history. Website traffic grew 22% year on year generating record visibility and enquiries for our advertisers. For several years Rightmove has been evolving from a simple subscription business model to become a provider of a broad set of property advertising products for our customers. We are especially pleased that over two-thirds of our customers now take advantage of this wider product set, allowing them to better promote their properties, brand and proposition. The diversity of our product offerings and industry leading reach contributed to another record operating performance with revenue and underlying operating profit(1) increasing by 19% and 23% respectively. Our sustained growth has seen Rightmove move from a new entrant into the FTSE 350 five years ago, into one of the top 200 listed UK companies by market capitalisation, and in 2011 Rightmove's share price was the second best performing of any FTSE 350 company. Rightmove continues to drive a strong conversion of profits to cash enabling us to return all of the cash from operating activities in 2011 to shareholders through either dividends or the repurchase of shares. In 2011 we bought back 4.4m shares at an average price of Â£11.10 per share whilst increasing dividends by 29% to 18.0p (2010: 14.0p). In total we returned Â£65.1m to shareholders through dividends and share buy backs. Results do not come without investment in employees. While our business model is not labour intensive, with 300 employees at the year end, we are very pleased to have judiciously added to the ranks of senior management ensuring that the skills and experience are available to maintain high standards of service to customers and home seekers alike. I want to express my thanks to 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 In terms of financial results, 2011 set new records for both revenue and profits. Underlying operating profit(1) was up 23% to Â£69.4m (2010: Â£56.6m) driven by strong organic revenue growth coupled with a lower increase in operating costs year on year. Underlying basic earnings per share (EPS)(1) was up 26% to 50.3p (2010: 39.8p). The increase in EPS was strengthened by the repurchase of 4.4m (2010: 4.2m) shares. As at 31 December 2011 the net cash position was Â£21.8m (2010: Â£23.1m). Sale of Holiday Lettings In October 2011 we received the final Â£4.9m of contingent consideration from the June 2010 sale of our 66.7% shareholding in Holiday Lettings (Holdings) Limited. The final cumulative net proceeds from this sale were Â£21.4m, of which Â£1.7m will remain in escrow until 2014. Dividend The Board announced that it would increase the interim dividend to 7.0p per ordinary share which was paid on 11 November 2011. 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 11.0p (2010: 9.0p) per ordinary share for a total dividend for the year of 18.0p (2010: 14.0p). The final dividend, subject to shareholder approval, will be paid on 8 June 2012 to all shareholders on the register on 11 May 2012. 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 joined Rightmove in 2006 and has led our main operating business since 2009. 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. Annual General Meeting and resolutions 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 2012. 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 9 May 2012 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 healthy growth in average spend per advertiser at the start of the year and in the absence of any unexpected and significant deterioration in the UK housing market, the Board remains confident of growing the business further in 2012. Scott Forbes Chairman 1. From continuing operations and before share-based payments and NI on share-based incentives and no related adjustment for tax. BUSINESS AND FINANCIAL REVIEW Rightmove is the method of choice by which the vast majority of people in Britain look for their next home. In 2011, activity on our website increased significantly to new record levels, our lead over our nearest competitor widened to its greatest ever and we maintained our status as one of the top ten UK websites by traffic. Revenues, profits and earnings per share (EPS) were all significantly higher than in any previous year in Rightmove's history and reflect another year of strong growth. The growth was almost entirely as a result of our existing agents and developers spending more with us. The demand for our range of additional advertising products was particularly strong with spending on these products up 43% over 2010. Our advertising base of estate agents, lettings agents and new home developers grew by 1%. This is in spite of 2011 being yet another challenging year for the housing market, with transaction volumes in 2011 being little different from 2008, 2009 and 2010, which is around half the historic levels. We do not anticipate that 2012 housing transactions will be at significantly higher levels. Our 2011 results Profit after tax(2) increased 20% to Â£46.1m (2010: Â£38.5m). Underlying operating profit(1) was up 23% to Â£69.4m (2010: Â£56.6m). Organic revenue growth drove overall revenue to Â£97.0m (2010: Â£81.6m), which was up 19% on the prior year, and with our underlying cost base(1) rising by only 11% we have again demonstrated the scalability and profitability of the Rightmove business model. We returned all the cash flow generated by the business during the year to our shareholders through dividends and share buy backs. The contingent element from the sale of Holiday Lettings (HLL) in June 2010 contributed a further Â£4.9m in cash. What we do and the keys to success Rightmove provides estate agents, lettings agents and new homes developers access to the largest audience of UK home movers by enabling them to advertise all their properties on Rightmove for a monthly subscription fee. Customers can also take advantage of a wider set of advertising products to promote their properties, brand and proposition. Rightmove's success comes from its market leading position with UK home movers and the value we add to our advertisers by giving them the ability to reach the largest audience of UK home movers. We believe the foundations of our success come from: * sustained investment in serving home movers * sustained investment in our brand * sustained support for our advertisers * innovation in advertising products. Sustained investment in serving home movers Home movers use Rightmove because it represents the easiest and most familiar way in which to view the best information about properties currently available on the market. The ease of use and quality of information we provide to home movers 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. During 2011 we have continued to invest in serving home movers. We launched a brand new version of the iPhone App, which now includes key features such as synchronisation with the main website and map based searching. This App has been downloaded around 1.5m times. We launched a new search dedicated to commercial property and a market leading `sold prices' research tool which makes use of our unrivalled property archive. For the new homes market we launched development specific micro-sites which provide home movers with more comprehensive information on the development and its environs. These investments and many others contributed to an increase in home mover usage of Rightmove. Page impressions were up 22% to 9.3bn (2010: 7.6bn) and according to Experian Hitwise, Rightmove served almost double the number of pages of property information than all the other fourteen hundred UK property websites served in total and around ten times that of our nearest competitor. In addition, we saw a big increase in the volume of home hunting activity on our mobile platforms in 2011 with the number of searches up over 150% on 2010. Sustained investment in our brand Rightmove benefits from more than ten years of investment in our brand and we continue to invest to maintain the strength of our brand recognition and our market leading position. The launch of our new positioning `Britain moves at Rightmove' builds on the fact that Rightmove is part of the fabric of everyday life. This is territory that is uniquely ours and is borne out by the sheer volume of traffic on Rightmove. We ran TV campaigns in January and February, in April, September and October, and at Christmas and into 2012. This is the most extensive coverage during any year in our history. The campaigns appear to have helped generate even greater awareness of Rightmove amongst home movers as well as delivering on our commitment to our advertisers to ensure that their properties get the best exposure. Rightmove's investment in its brand is a key defence against new entrants and consolidation within our industry. We continue to receive around four out of five visits to our website from people typing in the `Rightmove' name, using our mobile platforms, responding to our email alerts, or using unpaid links from other sites. The remainder comes from organic search, for which we do not pay. We continue to exploit opportunities within social media, for example, via our `like' and `share' buttons to Facebook. The Rightmove brand was seen over 135m times on Facebook in 2011. We also use social media to engage directly with home movers through initiatives such as our `Seller of the Month' competition and via conversation on both our Facebook and Twitter branded channels. Whilst these provide effective additional channels to reach home movers, there is still no evidence that home hunting activity itself is migrating to social media environments. Sustained support for our advertisers Our programme of free seminars for agents took us to 30 venues across the UK in 2011. Over 5,000 agents have taken up the invitation to attend these events in the last few years. The seminars aim to help our members to be more successful and to get the most from their Rightmove membership, by providing local market insight and Rightmove expertise. They also enable us to share best practice in other areas such as how agents can use social media to their advantage. In the current market, a common issue for agents is how to persuade house vendors to price their properties competitively. To support agents with this message we ran a consumer campaign during the third quarter of 2011 in which we highlighted the fact that only half the properties placed on the market actually sell and we urged vendors `not to leave it to chance'. The campaign ran on local radio and the Rightmove website and included a short video with helpful guidance to vendors on how to ensure that their property was saleable, which was viewed nearly 60,000 times. In 2011, we increased the number of account managers to allow us to spend more time with customers and help them understand the wider range of benefits to be derived from Rightmove membership. These benefits include management information and reporting tools, competitor comparisons and reports and marketing material which customers can use directly with home sellers and landlords. Innovation in advertising products 2011 saw strong growth in the adoption of our additional advertising products, particularly the display advertising products introduced in 2010 and email campaigns for new home developers. Around half our revenue growth has come from spend on additional advertising products. Taking the year as a whole, 25% of revenue came from spending by our customers over and above that spent on listing properties, as compared to 21% in 2010. In absolute terms, spending on these products was up 43% on the previous year. We would expect to see the proportion of total spending accounted for by these and future similar products rise in the coming years. Many of our customers continued to take advantage of a scheme we offer, where for a commitment to spend an additional amount every month all year (typically Â£275 per month in 2011) 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 both in a significant increase in the average spend on Rightmove per advertiser and a continued high predictability of our income streams. It has also been a year of investment in new products which will be launched in 2012. These include three products for use on our mobile platforms and the introduction of the local valuation alert service for agents eager to win more sales instructions. Our focus Our focus remains the UK online property advertising market. We see this sustained focus as a strength of the business and a key contributor to our success. 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. However, that is more a function of improvements in the wider property market and economic outlook. We remain committed to increasing the absolute amount and the proportion of their overall marketing budgets that our customers choose to spend with us. 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. We have been able to grow significantly even in the difficult housing market thereafter. The numbers of estate agents, lettings agents and new home developers are inevitably affected by the level of property transactions, which continue to be below historic trading levels. We do not believe, given the wider state of the economy and the specific challenges of the mortgage market, that 2012 will see any substantial increase in transaction volumes as compared to the past three years. However, whilst further large reductions in the number of agents and developers cannot be ruled out, the success of our customers in trading thus far through the housing market downturn, gives us grounds for believing that membership numbers are unlikely to fall significantly. With regard to our competitive environment, 2011 saw little change. A merger was announced in November 2011 between The Digital Property Group, owned by DMGT, and Zoopla. At the time of writing, the proposed merger is under review by the Office of Fair Trading. If the transaction is approved it would bring together the next three largest property portals under a single owner and be the latest merger amongst our property portal competitors. Finally, due to the simplicity of the Rightmove business, we believe that the risks relating to operational failures, to financial and legal exposures, to fraud 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 of our website and in our brand identity, recognition and reputation. The key performance indicators that we monitor include: NUMBER OF ADVERTISERS AVERAGE REVENUE PER ADVERTISER Total membership at end of 2011 was Â£443 per month, up 17% on 2010 18,276 (2010: 18,042), up 1.3% year on year MARKET SHARE CORPORATE ESTATE AGENTS NEW HOME DEVELOPERS 84% of the market share of the top 4 UK property websites by pages viewed, 24/25 of both the largest 2% up on 2010 corporate estate agents and new homes developers advertise on Source: Experian Hitwise and Rightmove.co.uk Rightmove: December 2011 and December 2010 PAGE IMPRESSIONS PROPERTIES DISPLAYED 9.3 billion page impressions up from 1.1 million properties displayed 7.6 billion in 2010 on Rightmove.co.uk at 31 December 2011, same as 2010 Source: Rightmove ENQUIRIES MOBILE 19.6 million enquiries up from 18.6 228 million searches across mobile million enquiries in 2010 platforms up 168% from 85 million in 2010 Financial position Revenue Revenue(2) increased in 2011 by 19% to Â£97.0m (2010: Â£81.6m). The majority of the growth has come from sales of additional products and increases to subscription prices. Our Agency business was the biggest contributor to the revenue growth with a year on year increase of Â£13.6m (2010: Â£16.7m). Agency has always been by far our largest business and its proportion of our total revenue increased to 80% (2010: 78%). Revenue from the New Homes business increased by 12% to Â£16.9m (2010: Â£15.1m) 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 from our Data Services and Overseas businesses was flat at Â£2.7m (2010: Â£2.7m). Margin growth The underlying operating margin(1) for the year increased from 69.4% to 71.5%. This has been driven by the strong organic revenue growth coupled with a lower increase in underlying operating costs(1). Underlying operating costs(1) increased by only Â£2.7m to Â£27.7m (2010: Â£25.0m) with the majority of the increase due to additional staff costs and marketing. Taxation The consolidated tax rate from continuing operations for the year ended 31 December 2011 was 26.6% (2010: 26.2%). Share-based payments and national insurance In accordance with IFRS 2, a non-cash charge of Â£2.3m (2010: Â£1.8m) is included in the income statement representing the amortisation of the fair value of share-based incentives granted, including Sharesave options, since 2006. Employer's National 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 2011 of Â£12.44 together with the actual NI cost on share-based incentives exercised in the year, this resulted in a charge of Â£4.4m (2010: Â£2.7m). Net financial expenses A net financial credit of Â£0.1m (2010: Â£0.2m) was recorded, being interest income on cash balances, off-set by bank charges and fees in relation to our money market facility. Earnings per share Underlying basic EPS(1) increased 26% to 50.3p (2010: 39.8p). Diluted EPS(2) increased 22% to 42.3p (2010: 34.6p). The growth in EPS was helped by our share buy back programme which reduced the weighted average number of ordinary shares in issue to 104.8m (2010: 108.0m). Profit on disposal of HLL A further profit of Â£0.5m has been recognised in relation to the sale of HLL. This is due to the final element of consideration being higher than estimated due to a better than expected performance by the HLL business. Statement of financial position The Group's statement of financial position remains strong with total equity of Â£24.7m at 31 December 2011 (2010: Â£27.9m) and cash balances of Â£21.8m (2010: Â£23.1m). As a result of better trading, trade receivables in current assets increased by 29% to Â£13.1m (2010: Â£10.2m). Trade and other payables increased by Â£4.9m to Â£20.9m (2010: Â£16.0m) mainly due to an increase in the accrual for the potential liability for employer's NI on share-based incentives together with an increase in deferred revenue. Our deferred tax assets have grown to Â£10.7m (2010: Â£6.7m) representing future tax benefits from share-based incentives. Cash flow and net debt Cash generated from operations was Â£67.7m (2010: Â£58.8m). Cash conversion was 108% of operating profit. Tax payments increased to Â£14.3m (2010: Â£12.2m) resulting in net cash from operating activities of Â£53.4m (2010: Â£46.5m). Capital expenditure was Â£0.5m (2010: Â£1.2m). The higher expenditure in 2010 reflected increased investment in database licences and a disk storage solution. The final element of consideration received from the sale of HLL in June 2010 contributed a further Â£4.9m of cash in the year. Proceeds of Â£6.1m (2010: Â£3.9m) were received on the exercise of share-based incentives. A total of Â£48.3m was invested during 2011 in the repurchase of our own shares (2010: Â£29.4m) whilst a further Â£16.8m was paid in dividends (2010: Â£13.0m). 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 2013. As a result of the cash movement noted above, net cash at 31 December 2011 was Â£21.8m (2010: Â£23.1m). 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 continue to be: investment in the business; payment of dividends; and the return of cash to shareholders via share buy backs. The Board believes that the 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 2012 through a combination of dividends and share buy backs. Current trading and outlook The overall outlook for the UK online property advertising market continues to be positive, albeit tempered by a continuation of challenging conditions in the residential housing market. The market for online advertising continues to increase rapidly as its importance is more and more widely accepted. Rightmove is well positioned to benefit from both the continued growth in online spending and its proven ability to increase market share through increased adoption of existing products, further product innovation, pricing and leading brand awareness. With a very strong start to 2012 we are seeing traffic on the Rightmove.co.uk website up over 20% on 2011. This has included a series of days which have been stronger for site traffic than any other day prior to this year. 2012 has the potential to be the first where we serve over 10bn page impressions. In addition, our mobile traffic continues to grow at an even faster rate than on the main website. Overall advertiser numbers are relatively flat. Average spend per advertiser started the year very healthily again and is expected to rise further over the coming months. Subject to there being no further significant decline in the UK housing market, the Board remains confident of making further progress in growing the business organically in 2012 and beyond. Ed Williams, Managing Director Nick McKittrick, Chief Operating Officer and Finance Director 24 February 2012 (1) From continuing operations before share-based payments, NI on share-based incentives and no related adjustment for tax. (2) From continuing operations. DIRECTORS AND OFFICERS Scott Forbes Chairman Scott was appointed Chairman of Rightmove in 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 2000 as Managing Director at its inception. He is also a non-executive director of Trader Media Group owner of 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 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 2007. He is the Commercial 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 Lloyds Banking Group 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 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 joined Rightmove in 2006 as a non-executive director. She 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 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 Commercial Property 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 Commercial Property 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 and has responsibility for driving people-focused activity across the business. He was formerly at Bloomberg LP where he was responsible for HR operations across Europe, the Middle East and Africa. CORPORATE SOCIAL RESPONSIBILITY Our people Our people are our most highly valued asset. We are proud of our people and the mixture of talent and experience that they bring. We depend on their skills and commitment to achieve our objectives. Our cultural style is open and honest. We invest in ensuring that all employees understand 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, ongoing coaching and mentoring, and cross-functional team building events involving all employees. We encourage employee involvement and place emphasis on keeping employees informed of the Group's activities via bi-monthly staff forums, quarterly conferences and half-yearly business performance updates with senior management. 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 2011 we have explored new ways of ensuring that employees are aware of the additional benefits that they can 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 2011 we placed particular emphasis on communicating the importance of saving for retirement and promoting the pension plan we established in 2008 as well as the option to save by salary exchange. We did this by holding employee seminars and offering the opportunity for one to one briefings with external benefits advisers. In November 2011, the Company's third Sharesave contract matured allowing employees to benefit from the success of the Group over the last three years. 49% 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 2011 a considerable number of staff have been active in raising money or supporting the fundraising activities across a wide range of other charities for which we offered to match the donations raised for team events. 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 reduces 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 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 steps to address our environmental responsibilities. For instance, we continue to operate 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. 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 69% of this customer group on paperless billing. In addition we introduced a paperless sign up process for our customers, which has eliminated the need for paper-based membership and product documentation. 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 2011. The Company is domiciled in England (registered number 6426485). Principal activities The Group operates in the UK residential and commercial 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 4 to 10. 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 4 to 10) â€¢ Directors and officers (pages 11 to 12) â€¢ Corporate social responsibility (pages 14 to 15) â€¢ Corporate governance (pages 20 to 27) â€¢ Remuneration report (pages 28 to 41) 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 6. Key performance indicators are given on page 7 and information on the likely developments of the Group under `Current trading and outlook' on page 9. Sale of Holiday Lettings (Holdings) Limited (HLHL) The Group acquired its 67% stake in HLHL in March 2007 for Â£3,108,000 and had operated it as a stand-alone business. HLHL was sold to TripAdvisor Limited, a wholly owned subsidiary of Expedia Inc., on 21 June 2010. Net cash consideration to Rightmove on completion was Â£15,185,000 with a further Â£1,000,000 in Escrow, which together with a Â£5,555,000 contingent consideration agreed in October 2011 took the total proceeds for the Group's 67% stake in the business to Â£21,740,000. 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£69,362,000 (2010: Â£56,563,000). Further information on the results for the Group is set out in the Consolidated Statement of Comprehensive Income on page 44 and the supporting Notes and also the Business and Financial Review on pages 4 to 10. Dividend An interim dividend of 7.0p (2010: 5.0p) per ordinary share was paid on 11 November 2011 to shareholders on the register of members at the close of business on 14 October 2011. The directors are recommending a final dividend for the year of 11.0p (2010: 9.0p) per ordinary share, which together with the interim dividend of 7.0p, paid in respect of the half year period ended 30 June 2011, makes a total for the year of 18.0p (2010: 14.0p), amounting to Â£18,606,000 (2010: Â£14,870,000). Subject to shareholders' approval at the Annual General Meeting on 9 May 2012, the final dividend will be paid on 8 June 2012 to shareholders on the register of members at the close of business on 11 May 2012. Share capital The ordinary shares in issue (including 2,505,430 shares held in treasury) at the year end comprised 110,410,636 (2010: 114,761,434) ordinary shares of Â£0.01 each, being Â£1,104,000 (2010: Â£1,147,000). 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 and reserves in the year are shown in Note 22 and Note 23 to the financial statements. Information on the Group's share-based incentive schemes is set out in Note 24 to the financial statements. Details of the share-based incentive schemes for directors are set out in the Remuneration Report on pages 38 to 40. Share buy back The Company announced a share buy back programme in June 2007, which continued during 2011. Of the 15% authority given by shareholders at the 2011 Annual General Meeting, a total of 4,350,798 (2010: 4,161,977) ordinary shares of Â£0.01 each were purchased in the year to 31 December 2011, being 3.9% 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£11.10 (2010: Â£7.05) with a total consideration paid (inclusive of all costs) of Â£48,626,000 (2010: Â£29,564,000.)Since the introduction of the new parent company in January 2008,a total of 21,494,772 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 9 May 2012. Shares held in trust As at 31 December 2011, 4,527,783 (2010: 6,322,329) 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 These shares had a nominal value at 31 December 2011 of Â£45,000 (2010: Â£63,000) and a market value of Â£56,326,000 (2010: Â£49,251,000). The shares held by the EBT may be used to satisfy share-based incentives for the Group's employee share plans. During the year 1,794,546 (2010: 1,096,545) 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 EBT 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 8.0 Cantillon Capital Management 7,840,004 7.3 Marathon Asset Management LLP 7,835,467 7.3 Caledonia (Private) Investments Pty 6,431,468 6.0 Ltd Kames Capital (formerly AEGON Asset 5,772,199 5.3 Management (UK)) Axa Investment Managers SA 5,510,468 5.1 Blackrock Inc 4,777,310 4.4 The Rightmove Employees' Share 4,527,783 4.2 Trust Legal & General Investment 4,146,797 3.8 Management Ltd Old Mutual Asset Managers 3,805,926 3.5 (1)The above percentages are based upon the voting rights share capital (being the shares in issue less shares held in treasury) of 107,905,206. Directors The directors of the Company at the year end and as at the date of this report are named on pages 11 to 12 together with their profiles. 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 2011 will retire at the forthcoming Annual General Meeting. 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 2011, 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 28 to 41 At 31 December 2011 all of the executive directors were deemed to have a non-beneficial interest in 4,527,783 ordinary shares of Â£0.01 each held by the trustees of the EBT. 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 2011, trade creditors on continuing operations represented 11 days (2010: 32 days) of average daily purchases. The Group had Â£370,000 of trade payables at the year end (2010: Â£1,033,000). 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 53. Charitable and political donations The Group made charitable contributions of Â£3,000 (2010: Â£nil). Neither the Group or the Company made any political donations during the year (2010: 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 9 May 2012 at 10am. The resolutions being proposed at the 2012 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 2011 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 2012 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 auditor is unaware and each such director has taken all reasonable steps to make themselves aware of any relevant audit information and to establish that the auditor is 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 24 February 2012 CORPORATE GOVERNANCE Statement of compliance The 2010 UK Corporate Governance Code (UKCGC) 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 UKCGC during 2011. As a UK listed company, the Company is required to state whether it has complied with the provisions of the UKCGC and where the provisions have not been complied with, to provide an explanation. The directors believe that the Company is compliant in all areas with one exception, which is explained below. The Board, the Board balance and independence 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, Colin Kemp, Ashley Martin and Judy Vezmar). Rightmove currently has one female Board member on an eight person Board, thereby constituting 12.5% of the Board members. It is the Board's goal to appoint a further female Board member by 2015 as part of the cycle of refreshing the membership of the Board. Assuming an unchanged number of Board directors, Rightmove would then have 25% of Board members being female. The directors believe that the Board currently operates effectively and that there is an appropriate balance between the executive and non-executive directors and that all the non-executive directors are fully independent of management and independent in character and judgment. Colin Kemp (non-executive director) is an employee of Lloyds Banking Group. Lloyds Banking Group is a customer of Rightmove Group Limited. Until October 2009, Lloyds Banking Group owned Halifax Estate Agencies Ltd. Halifax Estate Agencies Ltd was a shareholder in Rightmove plc until May 2008. Therefore in strict application of the UKCGC, Colin Kemp is not considered to be independent, though he will be considered to be so from October 2012. Nonetheless, 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. As a result, the composition of the Board for the year under review was not in strict compliance with supporting principle B.1.2 of the UKCGC in that at least half of the directors (excluding the Chairman) are not considered independent non-executive directors. Ed Williams, Managing Director, is also a non-executive director of Trader Media Group. His remuneration in relation to this role is set out in the Remuneration Report on page 34, though from July 2010 his remuneration has been given directly to charity. Neither the Chairman nor the other two executive directors hold any other non-executive directorships or commitments disclosable under the UKCGC. Biographical details of the directors at the date of this report and details of their committee membership appear on pages 11 and 12. Directors' remuneration The principles and details of directors' remuneration and contractual arrangements are contained in the Remuneration Report on pages 28 to 41. Re-election to the Board In accordance with the UKCGC, 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 Annual General Meeting following their appointment. Following the changes introduced by the UKCGC in June 2010, all directors will seek re-election at the 2012 Annual General Meeting. Board and Committee membership and attendance The membership of the Committees of the Board and attendance at Board and Committee meetings for the year under review are set out in the table below: Remuneration Audit Nomination Board Committee Committee Committee Total meetings 8 5 4 2 Scott Forbes 8 5(1) N/A 2 Jonathan Agnew 8 5 4 2 Peter Brooks-Johnson 8 N/A N/A N/A Colin Kemp 7 N/A N/A N/A Ashley Martin 8 5 4 N/A Nick McKittrick 8 N/A N/A N/A Judy Vezmar 8 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. 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 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 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 The posts of Chairman and Managing Director are separate and there are clear written guidelines to support their division of responsibilities. The Chairman, Scott Forbes, is responsible for the effective conduct and leadership of the Board and for communication with shareholders. 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 11 and 12, 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 tailored to their individual needs and to seek the advice and services of independent professional advisers, at the Company's expense, where specific expertise or training is required in furtherance 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. Performance evaluation The Board conducted a Board evaluation exercise in quarter four of 2011 which was led by the Chairman, assisted by the Company Secretary. All directors provided feedback on the performance and operation of the Board and its Committees. The results were discussed at the Board meeting in December 2011. The performance of the individual directors was evaluated by the Chairman with input from all directors. At a meeting chaired by Jonathan Agnew, Senior Independent Director, (without the presence of the Chairman), the Board provided input into and reviewed the performance of the Chairman. Following these evaluations the directors have concluded that the Board and its Committees are operating effectively and that each director is contributing effectively and demonstrates commitment to their role. The Board has agreed to organise an externally facilitated Board evaluation at least once every three years and will take some time to review the external marketplace over the next year to determine an appropriate facilitator and process alternatives with the aim of introducing an external evaluation in 2012. Relations with shareholders The Board is accountable to shareholders for the performance and activities of the Company and welcomes the opportunities to engage with shareholders. Within the terms of the regulatory framework, the Company has conducted regular dialogue with institutional 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 the Chief Operating Officer and Finance Director. The Chairman also participates in the USA bi-annual investor road shows. Jonathan Agnew, Senior Independent Director, is also available to shareholders if they wish to supplement communication or if contact through the normal channels is inappropriate. 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. 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, at www.rightmove.co.uk/investors, which provides details of all the directors, latest news, including financial results, investor presentations and Stock Exchange announcements. 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 The Annual General Meeting is an opportunity for shareholders to vote on certain aspects of the Company's business, and to ask questions of the directors, who will also be available for discussions with shareholders prior to and after the meeting. The Annual General Meeting will be held on 9 May 2012 at the offices of UBS Limited at 1 Finsbury Avenue, London, EC2M 2PP. 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 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 UKCGC 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's principal responsibility is for setting, reviewing and recommending to the Board the remuneration policy and strategy 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. Full details of the Remuneration Committee's responsibilities, and a report of its activities during the year, are set out in the Remuneration Report on pages 28 to 41. Nomination committee 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 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 Nomination Committee's terms of reference are available on the Company's website, www.rightmove.co.uk/investors or by request from the Company Secretary. During the year the Nomination Committee has: * approved 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; * considered the diversity of the Board and agreed the policy regarding gender composition on the Board; and * conducted an annual review of its terms of reference. Audit committee 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 an effective system 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, or by request from the Company Secretary. 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 Audit 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. During 2011 the Audit Committee has, amongst other matters: * approved the appointment of the external auditor; * fixed their remuneration and reviewed the effectiveness of the external audit process; * considered the need for an internal audit function; * considered its responsibilities to safeguard the audit objectivity and independence as well as the needs of the business and reviewed a policy for non-audit project work; * received the report from the external auditor on their review of the 2010 Full Year and reviewed the 2010 Annual Report; * agreed the remit of the 2011 audit plan by the external auditor; * received the report from the external auditor on their review of the 2011 Half Year results and reviewed the 2011 Half Year Report; * reviewed the Group's treasury policy; * received the report from the external auditor on their review of the internal systems and controls; * 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); * reviewed the bribery policy and procedures for compliance with the Bribery Act; and * conducted an annual review of its terms of reference. 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 Audit 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 Audit 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 Audit 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 2011 the non-audit fees were Â£4,000 in relation to other advisory services and were Â£11,000 in relation to tax advice and are fully disclosed in Note 6 of the financial statements. 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 2011 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 signicant 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; * 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; and * a bribery policy of which all employees are made aware, to ensure compliance with the Bribery Act. 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 UKCGC 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 2012 prior to it recommending the approval of the financial statements and notes to the accounts for the year ended 31 December 2011 to the Board. After making enquiries, the Board has a reasonable expectation that the Group and the Company has adequate resources and banking facilities to continue in operational existence for the foreseeable future. Accordingly, the Board continues to adopt the going concern basis in preparing the annual report and 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: * select suitable accounting policies and then apply them consistently; * make judgments and estimates that are reasonable and prudent; * state whether they have been prepared in accordance with IFRSs as adopted by the EU; and * 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 Rightmove plc (the Company) and its subsidiary companies (the Group) for the year ended 31 December 2011. 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 9 May 2012 Part I: Unaudited information This part of the Remuneration Report is not subject to audit. The Remuneration Committee Terms of reference The primary role of the Remuneration Committee (hereinafter referred to as the Committee throughout this report) 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 UK Corporate Governance 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 those remuneration arrangements. 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 or on request from the Company Secretary. Membership The following independent non-executive directors were members of the Committee during 2011 and continue to be members. During 2011 the Committee met five times and the attendance is shown below: Number of meetings attended Name of director Jonathan Agnew (Chairman of the Committee) 5 out of 5 Ashley Martin 5 out of 5 Judy Vezmar 5 out of 5 Only members of the Committee have the right to attend Committee meetings. The Chairman of the Committee has 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 quorum for meetings of the Committee is two members. The Committee will meet on such times as may be necessary but will normally meet at least twice a year. Advice During the latter part of 2010 and early 2011, Aon Hewitt Limited (trading as New Bridge Street) 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 closer into line with more standard practice among FTSE companies. The Committee commissioned an independent review by New Bridge Street to assist in its determination of an appropriate future remuneration framework for executive directors to apply from 2011. During 2011 New Bridge Street also provided services to the Company in connection with the valuation of share-based incentives (as required by IFRS 2) and confirmed that, in its view, this service did not present a conflict of interest with the services provided to the Committee 2011 In line with its remit, the following matters were considered by the Committee during the year: * consultation with shareholders on the new remuneration framework; * approval of the 2010 Remuneration Report and review of the voting for the report at the Annual General Meeting; * approval of the Rightmove Performance Share Plan (PSP); * approval of deferred share awards for the 2010 financial year under the Deferred Share Bonus Plan (DSP); * setting of all performance measures for the 2011 bonus plan and long term incentives; * approval of awards under the PSP; * annual review of executive directors' and senior managers' base salaries; * agreeing the targets for the 2012 bonus plan; * agreeing the targets for the proposed PSP awards to be made in March 2012; * review of the Committee's performance during the period; and * review of the Committee's terms of reference. Remuneration policy Rightmove's remuneration policy is based on the belief that growth-orientated companies should reward executives with demonstrably lower than market base salaries and benefits and higher than market equity rewards contingent upon the achievement of 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 shareholders. This approach should allow the Company to attract and retain the sort of dynamic, self-motivated individuals who are critical to the success of the business. * Executive directors should have 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 and to reflect the performance driven culture of the Company. * 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 in 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 goals and executive directors should be incentivised against 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 shares in the Company which are deferred for a further two years after the bonus target has been achieved. The Committee is sympathetic to the current concerns regarding executive remuneration and supportive of proposals to bring more rigour and transparency to this area. At the time of writing only the outline of what the government and the investor community intend has been made public. The Committee believes that its approach to remuneration and the current contractual commitments in place with executives are likely to be compatible with the proposals which are to be implemented. The Committee's approach already demonstrates a commitment to modest guaranteed rewards compared to market norms. Base salaries are modest compared to benchmarks and as compared to the average remuneration of employees in the business. Executive directors only receive the same additional benefits that are available to all employees. Neither employment contracts nor previous precedents suggest that the Company offers rewards for failure. No employment contract has a term greater than one year and claw back provisions are in place with regard to bonus and the PSP plans. To the extent that executive remuneration has been high or may continue to be so, this has been the result of the strong operating performance of the business and the high level of shareholder returns generated. As stated above, overall remuneration philosophy is for significantly lower than benchmark fixed remuneration and higher proportionate rewards for success. This appears to be in line with the government's policies. 2011 Remuneration As disclosed in detail in last year's Remuneration Report, the Committee has approved a number of significant changes to the remuneration framework in order to ensure that the framework remains consistent with the Committee's remuneration policy. In particular, base salaries are being adjusted to a more market competitive level (albeit a level that is still significantly below the market median) in order to ensure that the Company is able to recruit and retain high quality executives. These changes, approved by shareholders at the 2011 Annual General Meeting, are being phased in over a three year period to 2013. The first phase of these changes applied in 2011 and, in summary, pay arrangements comprised the following: * Base salaries of Â£260,000 for Ed Williams and Nick McKittrick. Peter Brooks-Johnson received a salary of Â£200,000 in the first year of his appointment as an executive director. * No pension provision for Nick McKittrick and Ed Williams. Peter Brooks-Johnson was appointed to the Board in January 2011 and was already a member of the stakeholder pension plan with the Company paying employer contributions of Â£3,000 per annum. * An annual cash bonus of up to 65% of salary (reduced from 75% in 2010) and a deferred share bonus of up to 110% of salary (reduced from 125% in 2010) for Ed Williams and Nick McKittrick. The corresponding figures for Peter Brooks-Johnson were a cash bonus of up to 60% of salary and a deferred share bonus of up to 100%. 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 under the PSP of nil cost options or contingent shares worth up to 200% of salary to Ed Williams and to Nick McKittrick and 125% of salary to Peter Brooks-Johnson. Vesting of awards is subject to a mixture of earnings per share growth (EPS) (75% of the awards) and relative Total Shareholder Return (TSR) (25% of the awards) performance targets. All 2011 bonus targets were met in full. Therefore, a cash bonus of Â£169,000 will be paid to Ed Williams and Nick McKittrick and Â£120,000 to Peter Brooks-Johnson after the announcement of the Full Year results for the year ended 31 December 2011. In addition an award of deferred shares in the Company worth 110% of salary will be granted to Ed Williams and Nick McKittrick and 100% of salary to Peter Brooks-Johnson respectively under the DSP which will be deferred until March 2014. The bonus payment reflects the increase in underlying operating profit and strong share price performance in the period, the website traffic performance 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. 2012 remuneration and details of the future remuneration framework During 2010, the Committee undertook a consultation process with major shareholders and investor bodies and, at the 2011 Annual General Meeting, received widespread support for the introduction of its revised remuneration framework with 99.0% of the votes cast in favour of the Remuneration Report. Consequently, the revised remuneration framework is being implemented and phased in over three years (2011-2013). The Committee reserves the right to revisit executive remuneration should the circumstances dictate but its intention is to implement these changes over three years with no further alterations to the remuneration framework during that time. Despite the particularly strong share price performance of the Company over the past year, the Committee is proposing no further changes to its original proposals. 2012 is the second year of the phased changes. Full details of pay arrangements for 2012 are outlined on pages 31 to 33. Base salary The Committee had previously agreed that Ed Williams and Nick McKittrick should have equal levels of base salary. It had also agreed that the market benchmark used to assess their pay should be consistent with this decision; hence the use of a benchmark which is based on the FTSE 250 median for the average pay for a chief executive and a finance director. As disclosed in the 2010 Remuneration Report, the Committee has determined that the value of Ed Williams' and Nick McKittrick's fixed pay (salary plus benefits) should be adjusted so that by 2013 it is approximately 25% below the market benchmark. Based on the current market benchmark used by the Committee (used in the 2010 review and adjusted to reflect the 4% salary increase received by employees in 2012) and the current minimal benefits received by the directors, this implies a salary level for these two directors in 2013 of approximately Â£374,000. This figure is subject to annual review by the Committee in 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 2013). The second phased increase towards this target level applies in 2012. The previously agreed base salaries (of Â£306,000 each for 2012) were subject to review by the Committee to take account of any significant changes in Rightmove's size (no adjustment was made despite a significant increase in share price during the year) and also basic inflation (where a market adjustment was applied at the same percentage rate of 4% as for other employees). Therefore base salaries for Ed Williams and Nick McKittrick with effect from 1 January 2012 were set at Â£318,240. The Committee has agreed that by the end of the implementation of the new remuneration framework in 2013, Peter Brooks-Johnson's salary should be 75% of Ed Williams and Nick McKittrick's salaries and accordingly his salary was increased to Â£245,000 with effect from 1 January 2012, as a transitional point to the 2013 level. The current salaries for the executive directors with effect from 1 January 2012 are set out in the table below: Salary Salary 1 January 2012 31 December 2011 Executive directors(1) Ed Williams Â£318,240 Â£260,000 Nick McKittrick Â£318,240 Â£260,000 Peter Brooks-Johnson Â£245,000 Â£200,000 (1) The executive directors' wages and salaries made up 9% of the Group's wages and salaries cost in 2011. Pension and other benefits The Group operates a stakeholder pension plan for 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 minimum of 3% of base salary. Ed Williams and Nick McKittrick voluntarily do not participate in this arrangement. Peter Brooks-Johnson is a member of the stakeholder pension plan and the Company contributes Â£3,000 per annum. 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. A medical cash plan was introduced in 2011 to all employees and Nick McKittrick is a member of the plan. Annual performance-related bonus The Committee believes that the annual cash and deferred share bonus schemes offer a competitive potential reward. As disclosed last year, it is, therefore, reducing the directors' bonus potential as a percentage of salary over the three years 2011-2013 to ensure that the monetary value of the potential bonus is maintained broadly at the value as before the implementation of the new pay framework. Consequently, concurrent with the salary increase outlined above, annual bonus potential for Ed Williams and Nick McKittrick in 2012 will be reduced to 150% of salary (175% of salary in 2011). Peter Brooks-Johnson's annual bonus potential in 2012 is also 150% of salary (160% of salary in 2011). In all cases, the maximum bonus in 2012 will be made up of 55% of salary in cash and 95% of salary in deferred shares. Assuming implementation of the final proposed salary increase, executive directors' bonus potentials will be reduced further to 125% of salary in 2013 (50% of salary paid in cash and 75% of salary in deferred shares). 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 At flotation and in 2009 and 2010, the Company 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. As outlined in last year's Remuneration Report however, the Committee believes that awards of performance shares are now more consistent with general FTSE practice and provide better alignment of executive reward to performance. Consequently, following shareholder approval at the 2011 Annual General Meeting, the PSP was established. The PSP permits 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 2012 of 175% of salary (2011: 200%). Their annual award is intended to reduce again in 2013 to an award of shares worth 150% of salary concurrent with their planned salary increase for that year. Peter Brooks-Johnson will receive an award of 150% of salary in 2012 (2011: 125% of salary). 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. It also recognises that a number of shareholders believe it important that relative TSR should also be a performance measure in order for there to be a clear alignment of executive and shareholder interests. Consistent with 2011, PSP awards to executive directors under the PSP in 2012 will be subject to a mixture of EPS (75% of the awards) and relative TSR (25% of the awards) performance but with a higher EPS threshold of 30% growth at which awards are eligible to vest (2011: 25% growth). The 2012 targets are as follows: Relative TSR condition The vesting schedule for the relative TSR element of executive directors' 2012 PSP awards is set out below. It is consistent with the TSR condition used for previous grants under the share-based incentive schemes. Performance will be measured over three financial years. TSR performance of the Company % of award vesting relative to the FTSE 250 Index (maximum 25%) (1) Less than the Index 0% Equal to the Index 6.25% 25% higher than the Index 25% Intermediate performance Straight-line vesting (1) 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 The Group's EPS growth will be measured over a period of three financial years (2012-2014). The EPS figure used will be equivalent to the Group's reported diluted underlying EPS but with a standard UK tax rate applied (Normalised EPS). The following vesting schedule will apply for executive directors' PSP awards to be granted in 2012: Normalised EPS growth % of award vesting from 2012 to 2014(1) (maximum 75%) Less than 30% 0% 30% 18.75% 50% 75% Between 30% and 50% Straight-line vesting (1) Assuming no change in the enacted UK corporation tax rate of 26% before the end of the three-year performance period, the benchmark Normalised EPS for the financial year 2011 from which these growth targets will be measured is 47.5p. The Committee regards these targets as stretching, particularly as the 2011 EPS (the benchmark for the 2012 award) is a record high for the Company. 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. 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 unapproved options in consideration for his 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, Nick McKittrick and Peter Brooks-Johnson all 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 pages 38 to 40. Dilution All existing executive share-based incentives can be satisfied from shares held in the Rightmove Employees' Share Trust (EBT) and shares held in treasury. It is intended that the 2012 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. Clawback The new UK Corporate Governance Code provision (applying for the first time this year) states that companies should consider the introduction of 'clawback' provisions in `exceptional circumstances of misstatement or misconduct'. The Committee supports this provision and has introduced relevant clawback clauses in the Group's DSP and PSP rules. Shareholding policy To be consistent with best practice, a formal share ownership guideline applies for executive directors requiring them to retain at least half of any share awards vesting or exercised (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 41. 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. In the year to 31 December 2011 he received fees of Â£30,000 which, from July 2011, were donated directly to charity. 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 2012, the Chairman is entitled to receive a fee of Â£108,160 per annum (2011: Â£104,000). The other non-executive directors are entitled to receive a basic fee of Â£43,264 per annum (2011: Â£41,600) and an additional Â£5,408 fee per annum (2011: Â£5,200) for the chairing of the Audit and Remuneration Committees. Jonathan Agnew is paid a further Â£5,408 fee per annum (2011: Â£5,200) 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 2012 are set out in the table below: Fee Fee Increase in fee 1 January 2012 year ended 31 December 2011 Scott Forbes Â£108,160 Â£104,000 4% Jonathan Agnew Â£54,080 Â£52,000 4% Colin Kemp(1) Â£43,264 Â£41,600(1) 4% Ashley Martin Â£48,672 Â£46,800 4% Judy Vezmar Â£43,264 Â£41,600 4% (1) Colin Kemp, non-executive director, waived his fee in full for 2011. The fee will be payable with effect from 1 January 2012. 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 by the Company 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) 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 39. The Letters of Appointment of Jonathan Agnew, Colin Kemp, Ashley Martin and Judy Vezmar provide for a term of up to two three-year periods and a possible further three-year term (subject to re-election by shareholders and subject to the director remaining independent). The appointments may be terminated with a notice period of three months on either side and the Letters of Appointment set out the time commitments required to meet the expectations of their roles. Copies are available for inspection on request to the Company Secretary. Further details of all directors' contracts and Letters of Appointment are summarised below. Date of contract Length of Date of /Letter of Notice service at 24 appointment Appointment(1) (months) February 2012 Executive directors Ed Williams (Managing Director) 19 December 2000 7 February 2006 12 11 years 2 months Nick McKittrick(2) 5 March 2004 7 February 2006 12 7 years 11 months Peter 10 January 2011 22 February 2011 12 1 year 1 month Brooks-Johnson(3) Non-executive directors Scott Forbes 13 July 2005 21 February 2006 3 6 years 7 months (Chairman) Jonathan Agnew (Senior Independent 16 January 2006 12 December 2005 3 6 years 1 month Director) Colin Kemp 3 July 2007 4 December 2007 3 4 years 7 months Ashley Martin 11 June 2009 11 June 2009 3 2 years 8 months Judy Vezmar 16 January 2006 12 December 2005 3 6 years 1 month (1) The service contracts 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 11 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 6 years and 1 month. Performance graph In 2011, the Company's share price ended the year up 60% year on year (the FTSE 250 was down 13%), making it the second best performing share in the FTSE 350 for 2011 and third best performing FTSE 350 share over the last three years. The graph on the left below compares the TSR of Rightmove's shares against the FTSE 250 Index for the period from 1 January 2009 to 31 December 2011. 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 because 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 (100% TSR), 2010 (50% TSR) and 25% of the PSP awards in 2011. It will also be used as the criteria applied to 25% of the PSP awards to be granted in 2012. The graph on the right below illustrates, for statutory purposes, the TSR of Rightmove's shares against the FTSE 250 Index for the five years to 31 December 2011. Part II Audited information Directors' remuneration The remuneration of the directors of the Company during the year for time served as a director is as follows: 2011 Basic cash bonus Benefits in salary payable(1) kind(2) 2011 total 2010 total /fees (3) Â£ Â£ Â£ Â£ Â£ Executive directors Ed Williams (Managing Director) 260,000 169,000 1,233 430,233 381,251 Nick McKittrick 260,000 169,000 1,090 430,090 381,251 Peter Brooks-Johnson 200,000 120,000 3,921 323,921 -(4) Non-executive directors Scott Forbes 104,000 - - 104,000 100,000 (Chairman) Jonathan Agnew (Senior Independent 52,000 - - 52,000 50,000 Director) Colin Kemp(5) - - - - - Ashley Martin 46,800 - - 46,800 45,000 Judy Vezmar 41,600 - - 41,600 40,000 Former directors Stephen Shipperley - - - - 40,000 (6) (1) Bonus relates to the accrued cash payment in respect of the Full Year results for the year ended 31 December 2011. In addition to the 2011 cash bonus noted above an award of deferred shares worth 110% of salary (year ended 31 December 2010: 125% of salary) will be granted to Ed Williams and Nick McKittrick respectively and 100% of salary for Peter Brooks-Johnson under the DSP in March 2012 and vesting in 2014. The bonus payment reflects the increase in underlying operating profit and strong share price performance in the year, the measurement of website traffic 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 (all directors), pension contributions (Peter Brooks-Johnson) and the medical cash plan (Nick McKittrick). (3) Additionally, on 4 March 2011, Ed Williams and Nick McKittrick were both awarded 29,199 deferred shares under the DSP which vest in 2013. The monetary value of these awards was Â£271,549. The awards related to the bonus in respect of the Full Year results for the year ended 31 December 2010 and were calculated based upon a share price of Â£9.30. The awards are included in the table on page 38. (4) Peter Brooks-Johnson was appointed to the Board on 10 January 2011. (5) Colin Kemp waived his fee in 2011. (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 2011 Date granted Share-based Granted Exercise Exercised Share Share-based Vesting Expiry incentives in year price in year Price at incentives date(1) date held date of held at 1 January 2011 exercise 31 December 2011 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 & 14/3/ 2011 15/3/2006 1,681,412 - Â£3.35 (300,000) Â£13.47827 1,381,412 Between 14/3/ (Unapproved) (1) (1) 15/3/ 2016 2009 & 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 (DSP) 4/3/2011 - 29,199 Â£0.00 - - 29,199 4/3/2013 3/3/2014 (DSP) (7) 4/5/2011 - 49,289 Â£0.00 - - 49,289 4/3/2014 3/3/2016 (PSP) (8) Total 2,233,550 78,488 - (300,000) - 2,012,038 Nick 14/3/2006 7,317 - Â£4.10 (1,317) Â£12.42247 6,000(1) Between 13/3/ McKittrick (Approved) (1) 14/3/ 2016 2009 & 14/3/ 2011 15/3/2006 987,047 - Â£3.35 (387,047) Â£12.42247 600,000(1) Between 14/3/ (Unapproved) (1) 15/3/ 2016 2009 & 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 (DSP) 4/3/2011 - 29,199 Â£0.00 - - 29,199 4/3/2013 3/3/2014 (DSP) (7) 4/5/2011 - 49,289 Â£0.00 - - 49,289 4/3/2014 3/3/2016 (PSP) (8) Total 1,496,783 78,488 - (388,364) - 1,186,907 Peter 14/3/2006 Brooks-Johnson (Approved) 2,439 - Â£4.10 - - 2,439(1) Between 13/3/2016 14/3/ 2009 & 14/3/ 2011 15/3/2006 85,949 - Â£3.35 (85,949) Â£9.69559 -(1) Between 14/3/2016 (Unapproved) (1) 15/3/ 2009 & 15/3/ 2011 10/10/2007 75,000(3) - Â£5.22 - - 75,000 15/3/2011 9/10/2017 (Unapproved) 5/3/2009 139,286(2) - Â£2.24 - - 139,286 5/3/2012 4/3/2019 (Unapproved) 1/10/2009 2,135 - Â£4.25 - - 2,135 1/11/2012 30/4/2013 (Sharesave) 5/3/2010 52,553(5) - Â£6.66 - - 52,553 5/3/2013 4/3/2020 (Unapproved) 5/3/2010 34,821(6) - Â£0.00 - - 34,821 5/3/2012 4/3/2013 (DSP) 4/3/2011 - 18,393 Â£0.00 - - 18,393 4/3/2013 3/3/2014 (DSP) (7) 4/5/2011 - 23,697 Â£0.00 - - 23,697 4/3/2014 3/3/2016 (PSP) (8) Total 392,183 42,090 - (85,949) - 348,324 Non-executive director Scott Forbes 15/3/2006 1,138,729 - Â£3.35 (500,000) Â£9.62266 638,729 Between 14/3/2016 (Chairman) (Unapproved) (4) (4) 15/3/ 2007 & 15/3/ 2009 (1) In March 2006, 1,981,412, 987,047 and 257,847 pre-admission options were granted to Ed Williams, Nick McKittrick and Peter Brooks-Johnson under the Rightmove Unapproved Executive Share Option Plan and 7,317 pre-admission options were granted to each of the executive directors under the Rightmove Approved Executive Share Option Plan. The options vested 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. Ed Williams exercised 300,000 of the vested pre-admission unapproved options in November 2011 and sold all the shares immediately on exercise at a market value of Â£13.47827 per share. Of the 1,318,412 pre-admission unapproved options and 7,317 pre-admission approved options outstanding for Ed Williams as at 31 December 2011, all options have vested and are eligible for exercise. Nick McKittrick exercised 387,047 vested pre-admission unapproved options and 1,317 vested pre-admission approved options in September 2011 and sold all the shares immediately on exercise at a market value of Â£12.42247 per share. Of the 600,000 pre-admission unapproved options and 6,000 pre-admission approved options outstanding for Nick McKittrick as at 31 December 2011, all options have vested and are eligible for exercise. Peter Brooks-Johnson exercised 85,949 pre-admission unapproved options in March 2011 and sold all the shares immediately on exercise at a market value of Â£9.69559. The 2,439 pre-admission approved options outstanding for Peter Brooks-Johnson as at 31 December 2011 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. Relative TSR condition 2009 options exercisable Less than the Index 0% Equal to the Index 25% 25% higher than the Index 100% Intermediate performance Straight-line vesting At the end of the performance period, Rightmove's TSR was 660.8% compared to 70.5% for the FTSE 250 Index. As this level of out performance is more than 25%, these options will be fully exercisable from 5 March 2012. (3) The options granted on 10 October 2007 are exercisable from 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 30.0p. All options have vested. (4) Pre-admission unapproved options granted to Scott Forbes in March 2006 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. Scott Forbes exercised 500,000 of the vested pre-admission unapproved options in March 2011 and sold all the shares immediately on exercise at a market value of Â£9.62266 per share. All pre-admission options outstanding as at 31 December 2011 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 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. Relative TSR condition 2010 options exercisable (maximum 50%) Less than the Index 0% Equal to the Index 12.5% 25% higher than the Index 50% Intermediate performance Straight-line vesting 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. EPS condition 2010 options exercisable 2010 options exercisable up to 200% of salary over 200% of salary 25% 0% 0% 45% In full 0% 65% - 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, Nick McKittrick and Peter Brooks-Johnson were awarded deferred shares under the DSP, which vest in 2012. The closing share price on the date of grant was Â£6.77. (7) On 4 March 2011, Ed Williams, Nick McKittrick and Peter Brooks-Johnson were awarded deferred shares under the DSP, which vest in 2013. The closing share price on the date of grant was Â£9.59. (8) On 4 May 2011, Ed Williams, Nick McKittrick and Peter Brooks-Johnson were awarded 49,289, 49,289 and 23,697 shares respectively under the PSP, which vest in 2014 and are subject to a mixture of EPS (75% of the awards) and relative TSR (25% of the awards) performance with the greater weighting on EPS to reflect its particular relevance to the performance of the business. The closing share price on the date of grant was Â£10.39. 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. Relative TSR condition % of award vesting (maximum 25%) Less than the Index 0% Equal to the Index 6.25% 25% higher than the Index 25% Intermediate performance Straight-line vesting 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 Normalised EPS (the reported diluted underlying EPS but with a standard tax rate applied). 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. Directors' interests in shares The interests (both beneficial and family interests) of the directors in office at 31 December 2011 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 2011 1 January 2011 31 December 2011 1 January 2011 Executive directors Ed Williams 1,072,578 1,374,178 2,012,038 2,233,550 (Managing Director) Nick 129,000 129,000 1,186,907 1,496,783 McKittrick Peter 4,543 4,543 348,324 392,183 Brooks-Johnson Non-executive directors Scott Forbes (Chairman) 619,300 619,300 638,729 1,138,729 Jonathan Agnew (Senior Independent 5,000 30,000 - - Director) Colin Kemp - - - - Ashley Martin 2,060 2,060 - - Judy Vezmar 16,343 31,343 - - * The Company's shares in issue (including 2,505,430 shares held in treasury) as at 31 December 2011 comprised 110,410,636 (2010: 114,761,434) ordinary shares of Â£0.01 each. * The mid-market share price of the Company was Â£8.12 as at 4 January 2011 (the first day of trading in 2011) and was Â£12.44 as at 30 December 2011 (the last day of trading in 2011). The mid-market high and low share prices of the Company were Â£14.24 (8 November 2011) and Â£7.66 (17 January 2011) respectively in the year. * The executive directors are regarded as being interested, for the purposes of the Companies Act 2006, in 4,527,783 (2010: 6,322,329) 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 1.7% of the Company's shares in issue as at 31 December 2011 (2010: 2.0%) (excluding shares held in treasury). * There have been no changes to the above interests between the year end and the date of this report. The interests of the executive directors in office at 31 December 2011 in the share capital of the Company as a percentage of basic salary were as follows: Number of shares Value of Value of Basic salary held at shares at shares as a % 1 January 2012 31 December 2011 31 December 2011 of basic salary Executive directors Ed Williams Â£318,240 1,072,578 Â£13,342,870 4,193 (Managing Director) Nick Â£318,240 129,000 Â£1,604,760 504 McKittrick Peter Â£245,000 4,543 Â£56,515 23 Brooks-Johnson Jonathan Agnew Chairman, Remuneration Committee 24 February 2012 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 2011 set out on pages 44 to 81. 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 27, 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 2011 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 20 to 27 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 27, in relation to going concern; * the part of the Corporate Governance Statement on pages 20 to 27 relating to the Company's compliance with the nine provisions of the UK Corporate Governance 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 24 February 2012 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2011 Year ended Year ended 31 December 2011 31 December 2010 Note Â£000 Â£000 Continuing operations Revenue 2,5 97,017 81,556 Administrative (34,350) (29,490) expenses Operating 69,362 56,563 profit before share-based payments and NI on share-based incentives Share-based 24 (2,269) (1,846) payments NI on 24 (4,426) (2,651) share-based incentives Operating 6 62,667 52,066 profit Financial 8 182 171 income Financial 9 (121) 8 (expenses)/ credit Net financial 61 179 income Profit before 62,728 52,245 tax Income tax 10 (16,674) (13,710) expense Profit from 46,054 38,535 continuing operations Discontinued operation Profit from discontinued 11 451 19,467 operation (net of income tax) Profit for the year being 46,505 58,002 total comprehensive income Attributable to: 46,505 58,002 Equity holders of the Parent Earnings per share (pence) Basic 12 44.37 53.69 Diluted 12 42.71 52.08 Earnings per share - continuing operations (pence) Basic 12 43.94 35.67 Diluted 12 42.29 34.60 Dividends per 13 16.00 12.00 share (pence) Total 13 16,777 12,957 dividends CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2011 Note 31 December 2011 31 December 2010 Â£000 Â£000 Non-current assets Property, plant and 14 1,120 1,488 equipment Intangible assets 15 1,320 1,463 Trade and other 11,17 1,667 1,000 receivables Contingent consideration 11 - 667 Deferred tax assets 21 10,684 6,675 Total non-current assets 14,791 11,293 Current assets Trade and other 17 14,990 11,865 receivables Contingent consideration 11 - 4,437 Cash and cash equivalents 18 21,768 23,148 Total current assets 36,758 39,450 Total assets 51,549 50,743 Current liabilities Trade and other payables 19 (20,874) (15,989) Income tax payable (6,021) (6,890) Total current liabilities (26,895) (22,879) Net assets 24,654 27,864 Equity Share capital 22,23 1,104 1,147 Other reserves 23 328 285 Retained earnings 23 23,222 26,432 Total equity attributable to the equity holders of 23 24,654 27,864 the Parent The financial statements were approved by the Board of directors on 24 February 2012 and were signed on its behalf by: Ed Williams, Director Nick McKittrick,Director COMPANY STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2011 31 December 2011 31 December 2010 Note Â£000 Â£000 Non-current assets Investments 16 540,094 539,304 Deferred tax assets 21 8,373 5,142 Total non-current assets 548,467 544,446 Total assets 548,467 544,446 Current liabilities Trade and other payables 19 (93,315) (25,652) Total current liabilities (93,315) (25,652) Net assets 455,152 518,794 Equity Share capital 22,23 1,104 1,147 Other reserves 23 106,794 105,961 Retained earnings 23 347,254 411,686 Total equity attributable 23 to the equity holders of 455,152 518,794 the Parent The financial statements were approved by the Board of directors on 24 February 2012 and were signed on its behalf by: Ed Williams,Director Nick McKittrick,Director CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2011 Year ended Year ended 31 December 2011 31 December 2010 Note Â£000 Â£000 Cash flows from operating activities Profit for the year 46,505 58,002 Adjustments for: Depreciation charges 14 661 575 Amortisation charges 15 279 336 Loss on disposal of property, plant 68 76 and equipment Loss on disposal of intangible 26 1 assets Financial income 8 (182) (171) Financial expenses/(credit) 9 121 (8) Share-based payments charge 24 2,269 1,846 Gain on sale of discontinued 11 (451) (18,691) operation (net of income tax) Income tax expense 10 16,674 14,014 Operating cash flow before changes 65,970 55,980 in working capital Increase in trade and other (3,129) (2,734) receivables Increase in trade and other 4,870 5,585 payables Increase in provisions - 4 Cash generated from operating 67,711 58,835 activities Interest paid (121) (136) Income taxes paid (14,281) (12,198) Net cash from operating activities 53,309 46,501 Cash flows from investing activities Interest received 186 109 Acquisition of property, plant and 14 (361) (906) equipment Acquisition of intangible assets 15 (162) (245) Proceeds on disposal of property, - 15 plant and equipment Disposal of discontinued operation (net of cash disposed of) 11 4,888 13,284 Net cash from investing activities 4,551 12,257 Cash flows from financing activities Dividends paid 13 (16,777) (12,957) Subsidiary dividends paid to 13 - (300) minority shareholders Purchase of own shares for 23 (48,288) (29,358) cancellation Share related expenses 23 (323) (206) Proceeds on exercise of share 23 6,148 3,893 options Repayment of borrowings - (22,500) Debt issue costs - (75) Net cash used in financing (59,240) (61,503) activities Net decrease in cash and cash equivalents (1,380) (2,745) Cash and cash equivalents at 23,148 25,893 1 January Cash and cash equivalents at 18 21,768 23,148 31 December COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2011 Year ended Year ended 31 December 2011 31 December 2010 Note Â£000 Â£000 Cash flows from operating activities (Loss)/profit for the year 23 (5,991) 96,093 Adjustments for: Financial income - (99,904) Financial expenses 499 759 Share-based payments charge 24 1,479 1,043 Income tax credit (1,880) (1,444) Operating cash flow before changes (5,893) (3,453) in working capital Increase in trade and other payables 71,281 63,112 Cash generated from operating 65,388 59,659 activities Interest paid - (69) Net cash from operating activities 65,388 59,590 Cash flows from investing activities Interest received - 7 Net cash from investing activities - 7 Cash flows from financing activities Dividends paid 13 (16,777) (12,957) Purchase of own shares for 23 (48,288) (29,358) cancellation Share related expenses 23 (323) (206) Repayment of borrowings - (22,500) Net cash used in financing (65,388) (65,021) activities Net decrease in cash and cash - (5,424) equivalents Cash and cash equivalents at - 5,424 1 January Cash and cash equivalents at 18 - - 31 December CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011 EBT Reverse Share shares Treasury Other acquisition Retained Total capital reserve shares reserves reserve earnings equity Note Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 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 Share-based 24 - - - - - 1,846 1,846 payments Tax credit in 21 - - - - - 3,451 3,451 respect of share-based incentives recognised directly in equity Dividends to 13 - - - - - (12,957) (12,957) shareholders Exercise of share 23 - 2,248 - - - 1,645 3,893 options Cancellation of 23 (42) - - 42 - (29,358) (29,358) own shares Share related 23 - - - - - (206) (206) expenses At 1,147 (13,937) (11,917) 147 138 52,286 27,864 31 December 2010 At 1 January 2011 1,147 (13,937) (11,917) 147 138 52,286 27,864 Total comprehensive income Profit for the - - - - - 46,505 46,505 year Transactions with owners recorded directly in equity Share-based 24 - - - - - 2,269 2,269 payments Tax credit in 21 - - - - - 7,271 7,271 respect of share-based incentives recognised directly in equity Dividends to 13 - - - - - (16,777) (16,777) shareholders Exercise of share 23 - 3,679 - - - 2,469 6,148 options Cancellation of 23 (43) - - 43 - (48,288) (48,288) own shares Share related 23 - - - - - (338) (338) expenses At 31 December 1,104 (10,258) (11,917) 190 138 45,397 24,654 2011 COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011 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 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 Share-based 24 - - - - 1,043 1,043 payments Tax credit in 21 - - - - 2,988 2,988 respect of share-based incentives recognised directly in equity Capital 23 - - 803 - - 803 contribution Dividends to 13 - - - - (12,957) (12,957) shareholders Cancellation of own 23 (42) - 42 - (29,358) (29,358) shares Share related 23 - - - - (206) (206) expenses At 31 December 2010 1,147 (11,917) 2,441 103,520 423,603 518,794 At 1 January 2011 1,147 (11,917) 2,441 103,520 423,603 518,794 Total comprehensive income Loss for the year - - - - (5,991) (5,991) Transactions with owners recorded directly in equity Share-based 24 - - - - 1,479 1,479 payments Tax credit in 21 - - - - 5,483 5,483 respect of share-based incentives recognised directly in equity Capital 23 - - 790 - - 790 contribution Dividends to 13 - - - - (16,777) (16,777) shareholders Cancellation of own 23 (43) - 43 - (48,288) (48,288) shares Share related 23 - - - - (338) (338) expenses At 31 December 2011 1,104 (11,917) 3,274 103,520 359,171 455,152 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 2011 comprise the Company and its interest in its subsidiaries (together referred to as the Group). Its principal business is the operation ofthe 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 2011 are available upon request to the Company Secretary from the Company's registered office at 4th Floor, 33 Soho Square, London, W1D 3QU or are available on the investor relations website at www.rightmove.co.uk/investors. Statement of compliance The Group 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 24 February 2012. 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 Holiday Lettings segment has been treated as a discontinued operation in both years. The accounting policies set out below have been consistently applied to both 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 are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2010. There are no new standards or amendments to standards that are mandatory for the first time for the financial year beginning 1 January 2011 that have an impact on the Group or Company financial statements. Going concern Throughout 2011, the Group was debt free, has continued to generate significant cash and has net cash balances of Â£21,768,000 at 31 December 2011 (2010: Â£23,148,000). The Group entered into an agreement with Barclays Bank Plc for a Â£10,000,000 uncommitted money market loan on 15 February 2010. The loan was extended on 11 February 2011 for a 12 month period and again on 8 February 2012 for a further 12 month period. To date no amount has been drawn under this facility in any 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 4 to 10. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Position on pages 8 to 9. 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 22. 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 21 Deferred tax assets relating to the rate at which the asset will reverse and the recoverability of the asset Note 24 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 tested annually for impairment. This applies to all goodwill arising both before and after 1 January 2004. (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 income statement 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 income statement 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 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. Goodwill and intangible assets that have an indefinite useful life 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. 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 profit or loss over the term of the borrowings using the effective interest method. (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) Employee benefits (i) Pensions The Group provides access to a stakeholder pension scheme (a defined contribution pension plan) 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 profit or loss when they are due. (ii) Employee share schemes The Group provides share-based incentive plans allowing certain senior management to acquire shares in the Company. An expense is recognised in profit or loss, with a corresponding increase in equity, over the period to which the employees become unconditionally entitled, on equity settled share-based incentive schemes granted after 7 November 2002 and which had not vested by 1 January 2005. 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. For share-based incentive awards with non-vesting conditions, the grant date fair value of the share-based incentives is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes. When either the employee or the Company chooses not to meet the non-vesting condition the failure to meet the non-vesting condition is treated as a cancellation and the cost that would have been recognised over the remainder of the vesting period is recognised immediately in profit or loss. (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. (h) 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. (i) Revenue Revenue principally represents the amounts, excluding value added tax (VAT), receivable from customers in respect of properties advertised on Group websites. All revenue 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 income statement on a monthly basis in line with the provision of services as stipulated in the contract terms. (j) 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. (k) Leases Operating lease rentals are charged to the income statement 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. (l) 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. (m) 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 performance shares and deferred shares at nil cost, it is provided based on the share price at the reporting date. (n) Taxation Income tax on the results for the year comprises current and deferred tax. Income tax is recognised in 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 net of any charge or credit posted directly to equity, 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 incentives is to include the income tax effect of the tax deduction in 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. (o) 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. (p) 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 equity holders 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. (q) 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 2011 and have not been applied in preparing these consolidated financial statements. None of these are 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 342 days (2010: 296 days). As at 31 December 2011 the Group had bank borrowings of Â£nil (2010: Â£nil). The Group entered into an agreement with Barclays Bank Plc for a Â£10,000,000 uncommitted money market loan on 15 February 2010. The loan was extended on 11 February 2011 for a 12 month period and again on 8 February 2012 for a further 12 month period. To date no amount has been drawn under this facility in any year. 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. (i) Currency risk All of the Group's sales and more than 95.0% of the Group's purchases are Sterling denominated, accordingly it has no significant currency risk. (ii) 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 and regular testing 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. The Board's policy is to return surplus capital to shareholders through a combination of dividends and share buy backs. The Company purchases its own shares in the market; the timing of these purchases depends on market conditions. In 2011, 4,350,798 (2010: 4,161,977) 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 The Group determines and presents operating segments based on internal information that 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 overleaf. 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. Agency New Sub Other Central Adjustments Total Operating Â£000 Homes total Â£000 Â£000 Â£000 Â£000 segments Â£000 Â£000 Year ended 31 December 2011 Revenue 77,388 16,869 94,257 2,760 - - 97,017 Operating profit - - - - 69,362 (6,695)(2) 62,667 (1) Depreciation and amortisation - - - - (940) - (940) Financial income - - - - 182 - 182 Financial - - - - (121) - (121) expenses Trade 9,907 2,677 12,584 498 - 50(4) 13,132 receivables(3) Other segment - - - - 38,405 12(5) 38,417 assets Segment - - - - (26,833) (62)(4)(5) (26,895) liabilities Capital - - - - 523 - 523 expenditure(6) Year ended 31 December 2010 Revenue 63,795 15,078 78,873 2,683 - - 81,556 Operating profit - - - - 56,563 (4,497)(7) 52,066 (1) Depreciation and amortisation - - - - (845) - (845) Financial income - - - - 171 - 171 Financial credit - - - - 8 - 8 Trade 7,878 2,156 10,034 115 - 40(4) 10,189 receivables(3) Other segment - - - - 40,539 15(5) 40,554 assets Segment - - - - (22,824) (55)(4)(5) (22,879) liabilities Capital - - - - 1,119 32(8) 1,151 expenditure(6) (1) Operating profit is stated after the charge for depreciation and amortisation. (2) Operating profit for the year ended 31 December 2011 does not include share-based payments charge (Â£2,269,000) and NI on share-based incentives (Â£4,426,000). (3) The only segment assets that are separately monitored by the Chief Operating Decision Maker relate to trade receivables net of any associated provision for impairment. All other segment assets are reported on a centralised basis. (4) The adjustments column reflects the reclassification of credit balances in accounts receivable made on consolidation for statutory accounts purposes. (5) The adjustments column reflects the reclassification of debit balances in accounts payable made on consolidation for statutory accounts purposes. (6) Capital expenditure consists of additions of property, plant and equipment and intangible assets (excluding goodwill). (7) 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). (8) The adjustments column reflects capital expenditure of Â£32,000 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 2011 Year ended 31 December 2010 Group Revenue Trade Revenue Trade Â£000 receivables Â£000 receivables Â£000 Â£000 UK 96,135 13,086 80,758 10,152 Rest of the world 882 46 798 37 97,017 13,132 81,556 10,189 6 Operating profit Year ended Year ended 31 December 2011 31 December 2010 Â£000 Â£000 Operating profit is stated after charging: Depreciation of property, plant and 661 575 equipment Amortisation of computer software 279 294 Amortisation of customer relationships - 42 Bad debt impairment charge 315 567 Operating lease rentals Land and buildings 746 807 Other 332 337 Included within depreciation of property, plant and equipment is an amount of Â£nil (2010: Â£24,000) relating to the discontinued Holiday Lettings segment. Amortisation of customer relationships relates to the discontinued Holiday Lettings segment. Included within operating lease rentals for the year are amounts relating to the discontinued Holiday Lettings segment of Â£nil (2010: Â£61,000) for land and buildings and Â£nil (2010: Â£nil) for other operating lease rentals. Auditor's remuneration Year ended Year ended 31 December 2011 31 December 2010 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 14 Audit of the Company's subsidiaries pursuant 99 102 to legislation Total audit remuneration 113 116 Fees payable to the Company's auditor in respect of non-audit related services Tax advisory 11 4 All other services 4 7 Total non-audit remuneration 15 11 Included in the non-audit related services is a credit of Â£nil (2010: Â£5,000) 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 2011 31 December 2010 Number of Number of employees employees Administration 277 299 Management 16 13 293 312 The aggregate payroll costs of these persons were as follows: Year ended Year ended 31 December 2011 31 December 2010 Â£000 Â£000 Wages and salaries 13,647 13,246 Social security costs 1,640 1,532 Pension costs 275 251 15,562 15,029 Included within employee numbers are no (2010: 40) full-time equivalent heads employed by the discontinued Holiday Lettings segment. The payroll costs include amounts of Â£nil (2010: Â£1,047,000) for these employees. 8 Financial income Year ended Year ended 31 December 2011 31 December 2010 Â£000 Â£000 Interest income on cash balances 182 171 9 Financial expenses/(credit) Year ended Year ended 31 December 2011 31 December 2010 Â£000 Â£000 Debt issue costs/(credit) - (125) Interest expense - 52 Other financial expenses 121 65 Financial expenses/(credit) 121 (8) 10 Income tax expense Year ended Year ended 31 December 2011 31 December 2010 Â£000 Â£000 Current tax expense Current year 16,748 14,534 Adjustment to current tax charge in respect (34) (11) of prior years 16,714 14,523 Deferred tax credit Origination and reversal of temporary (70) (528) differences Adjustment to deferred tax charge in respect 7 10 of prior years Reduction in tax rate 23 9 (40) (509) Total income tax expense 16,674 14,014 Income tax expense from continuing 16,674 13,710 operations Income tax expense from discontinued - 304 operation (refer Note 11) 16,674 14,014 Income tax credit recognised directly in equity Year ended Year ended 31 December 2011 31 December 2010 Â£000 Â£000 Current tax Share-based incentives (3,302) - Deferred tax Share-based incentives (3,969) (3,451) Total income tax credit recognised directly (7,271) (3,451) in equity Reconciliation of effective tax rate The Group's income tax expense for the year is lower (2010: lower) than the standard rate of corporation tax in the UK of 26.5% (2010: 28.0%). The differences are explained below: Year ended Year ended 31 December 2011 31 December 2010 Â£000 Â£000 Profit for the year 46,505 58,002 Total income tax expense 16,674 14,014 Profit excluding income tax 63,179 72,016 Current tax at 26.5% (2010: 28.0%) 16,742 20,164 Exempt income on sale of discontinued (120) (5,232) operation Share-based incentives 10 (978) Adjustment to current tax charge in respect (34) (11) of prior years Non-deductible expenses 46 52 Reduction in tax rate 23 9 Adjustment to deferred tax charge in respect 7 10 of prior years 16,674 14,014 The Group's consolidated effective tax rate on the profit of Â£62,728,000 from continuing operations for the year ended 31 December 2011 is 26.6% (2010: 26.2%). The difference between the standard rate and effective rate on continuing operations at 31 December 2011 is attributable to 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, a wholly owned subsidiary of Expedia Inc. Year ended Year ended 31 December 2011 31 December 2010 Â£000 Â£000 Results of discontinued operation Revenue - 3,059 Administrative expenses - (1,979) Results from operating - 1,080 activities Income tax (refer Note 10) - (304) Results from operating activities - 776 (net of income tax) Gain on sale of discontinued 451 18,691 operation Effect on profit for the year 451 19,467 Earnings per share (pence) Basic 0.43 18.02 Diluted 0.42 17.48 Included in 2010 administrative expenses were depreciation and amortisation charges of Â£66,000. Year ended Year ended 31 December 2011 31 December 2010 Â£000 Â£000 Cash flows from discontinued operation Net cash from operating - 1,856 activities Net cash from investing 4,888 13,661 activities Net cash used in financing - (300) activities Net cash from discontinued 4,888 15,217 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 21) 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 contingent consideration was dependent on the performance of the discontinued Holiday Lettings segment for the 12 month period from 1 April 2010 to 31 March 2011. The value of the contingent consideration was revised upwards by Â£451,000 from Â£5,104,000 as reported as at 31 December 2010 to a final agreed amount of Â£5,555,000. Â£4,888,000 contingent consideration was received in October 2011 with Â£667,000 being transferred into an Escrow account in addition to the Â£1,000,000 of completion proceeds already held in Escrow and classified as non-current (refer Note 17). 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 Continuing Discontinued number of operations operation Total ordinary Â£000 Â£000 earnings Pence per shares Â£000 share Year ended 31 December 2011 Basic EPS 104,809,475 46,054 451 46,505 44.37 Diluted EPS 108,891,146 46,054 451 46,505 42.71 Underlying basic EPS 104,809,475 52,749 451 53,200 50.76 Underlying diluted EPS 108,891,146 52,749 451 53,200 48.86 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 EPS 108,021,339 43,032 19,467 62,499 57.86 Underlying diluted EPS 111,361,386 43,032 19,467 62,499 56.12 Weighted average number of ordinary shares (basic) Year ended Year ended 31 December 2011 31 December 2010 Number of shares Number of shares Issued ordinary shares at 1 January less 108,439,105 111,504,537 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 (1,904,709) (1,560,101) cancellation Effect of share options exercised 780,509 582,333 104,809,475 108,021,339 Weighted average number of ordinary shares (diluted) For diluted EPS, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive shares. The Group's potential dilutive instruments are in respect of share-based incentives granted to employees, which will be settled by ordinary shares held by the EBT and shares held in treasury. Year ended Year ended 31 December 2011 31 December 2010 Number of shares Number of shares Weighted average number of ordinary shares 104,809,475 108,021,339 (basic) Dilutive impact of own shares held by the EBT and shares held in treasury 4,081,671 3,340,047 108,891,146 111,361,386 Underlying EPS Underlying EPS is calculated before the charge for share-based payments and NI on share-based incentives but without any adjustment to the tax charge in respect of these items. A reconciliation of the basic earnings for the year to the underlying earnings is presented below: Year ended Year ended 31 December 2011 31 December 2010 Â£000 Â£000 Basic earnings for the year 46,505 58,002 Share-based payments 2,269 1,846 NI on share-based incentives 4,426 2,651 Underlying earnings for the year 53,200 62,499 13 Dividends Dividends declared and paid by the Company were as follows: 2011 2010 Pence per Â£000 Pence per Â£000 share share 2009 final dividend - - 7.0 7,586 paid 2010 interim - - 5.0 5,371 dividend paid 2010 final dividend 9.0 9,499 - - paid 2011 interim 7.0 7,278 - - dividend paid 16.0 16,777 12.0 12,957 After the reporting date a final dividend of 11.0p (2010: 9.0p) per qualifying ordinary share being Â£11,328,000 (2010: Â£9,534,000) was proposed by the Board of directors. The 2010 final dividend paid on 10 June 2011 was Â£9,499,000 being a difference of Â£35,000 compared to that reported in the 2010 Annual Report, which was due to a reduction in the ordinary shares entitled to a dividend between 31 December 2010 and the final dividend record date of 13 May 2011. The 2011 interim dividend paid on 11 November 2011 was Â£7,278,000 being a difference of Â£28,000 compared to that reported in the 2011 Half Year Report, which was due to a reduction in the ordinary shares entitled to a dividend between 30 June 2011 and the interim dividend record date of 14 October 2011. 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 were paid in 2010 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 2010 were treated as an addition to goodwill (refer Note 15). 14 Property, plant and equipment Office equipment, fixtures & Computer Leasehold fittings equipment improvements Total Group Â£000 Â£000 Â£000 Â£000 Cost At 1 January 2011 734 2,668 102 3,504 Additions 9 352 - 361 Disposals (45) (534) - (579) At 31 December 2011 698 2,486 102 3,286 Depreciation At 1 January 2011 (462) (1,538) (16) (2,016) Charge for year (82) (518) (61) (661) Disposals 40 471 - 511 At 31 December 2011 (504) (1,585) (77) (2,166) Net book value At 31 December 2011 194 901 25 1,120 At 1 January 2011 272 1,130 86 1,488 Office equipment, fixtures & Computer Leasehold fittings equipment improvements Total Group 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 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 2011 732 3,252 - 3,984 Additions - 162 - 162 Disposals - (321) - (321) At 31 December 2011 732 3,093 - 3,825 Amortisation At 1 January 2011 - (2,521) - (2,521) Charge for year - (279) - (279) Disposals - 295 - 295 At 31 December 2011 - (2,505) - (2,505) Net book value At 31 December 2011 732 588 - 1,320 At 1 January 2011 732 731 - 1,463 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 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 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 2011 31 December 2010 Â£000 Â£000 Agency 732 732 The carrying value of the Â£732,000 purchased goodwill in Agency, arising pre-transition to IFRS, is 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 2011 are as follows: Country of Company Nature of incorporation Holding Class of business 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 financial statements. The Group disposed of its holdings in HLHL and HLL during the prior year (refer Note 11). Company 31 December 2011 31 December 2010 Investment in subsidiary undertakings Â£000 Â£000 At 1 January 539,304 538,501 Additions - subsidiary share-based payments charge (refer Note 24) 790 803 At 31 December 540,094 539,304 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 share-based payments charge has been split between the Company and Rightmove Group Limited with Â£790,000 (2010: Â£803,000) being recognised in the Company accounts as a capital contribution to its subsidiary. 17 Trade and other receivables 31 December 2011 31 December 2010 Group Â£000 Â£000 Trade receivables 13,561 10,444 Less provision for impairment of trade (429) (371) receivables Net trade receivables 13,132 10,073 Amounts owed by related parties (refer - 116 Note 27) Amounts held in Escrow (refer Note 11) 1,667 1,000 Prepayments and accrued income 1,683 1,577 Interest receivable 58 62 Other debtors 117 37 16,657 12,865 Non-current 1,667 1,000 Current 14,990 11,865 16,657 12,865 Exposure to credit and currency risks and impairment losses relating to trade and other receivables are disclosed in Note 28. The Company has no trade and other receivables in either year. 18 Cash and cash equivalents Group Company 31 December 2011 31 December 2010 31 December 2011 31 December 2010 Â£000 Â£000 Â£000 Â£000 Bank accounts 21,768 23,148 - - Cash balances were placed on deposit for various lengths between one day and one month during the year and attracted interest at a weighted average rate of 0.6% (2010: 0.7%). 19 Trade and other payables Group Company 31 December 2011 31 December 2010 31 December 2011 31 December 2010 Â£000 Â£000 Â£000 Â£000 Trade payables 370 1,033 - - Trade accruals 7,357 4,734 5,940 3,047 Other creditors 34 240 - - Other taxation and social 4,033 3,223 - - security Deferred revenue 9,080 6,759 - - Accrued interest on inter-group - - 499 - payable balance Inter-group - - 86,876 22,605 payables 20,874 15,989 93,315 25,652 Exposure to currency and liquidity risk relating to trade and other payables is disclosed in Note 28. 20 Loans and borrowings The Group entered into an agreement with Barclays Bank Plc for a Â£10,000,000 uncommitted money market loan on 15 February 2010. The loan was extended on 11 February 2011 for a further 12 month period and again on 8 February 2012. To date no amount has been drawn under this facility in any year. The Company had no borrowings or cash balances in either year. 21 Deferred tax assets Deferred tax assets are attributable to the following: Assets 31 December 2011 31 December 2010 Group Â£000 Â£000 Share-based incentives 10,402 6,427 Property, plant and equipment 199 161 Provisions 83 87 Tax assets 10,684 6,675 The deferred tax asset of Â£10,684,000 at 31 December 2011 (2010: Â£6,675,000) 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 2011 is Â£10,402,000 (2010: Â£6,427,000). This increase is due to the Company's share price increasing from Â£7.79 at 31 December 2010 to Â£12.44 at 31 December 2011. Assets 31 December 2011 31 December 2010 Company Â£000 Â£000 Share-based incentives 8,373 5,142 Tax assets 8,373 5,142 The deferred tax asset of Â£8,373,000 at 31 December 2011 (2010: Â£5,142,000) is in respect of share-based incentives. This increase is due to the Company's share price increasing from Â£7.79 at 31 December 2010 to Â£12.44 at 31 December 2011. Movement in deferred tax during the year: Recognised Recognised 1 January 2011 in income in equity 31 December 2011 Group Â£000 Â£000 Â£000 Â£000 Share-based 6,427 6 3,969 10,402 incentives Property, plant and equipment 161 38 - 199 Provisions 87 (4) - 83 6,675 40 3,969 10,684 Recognised in Recognised in 1 January 2011 income equity 31 December 2011 Company Â£000 Â£000 Â£000 Â£000 Share-based 5,142 329 2,902 8,373 incentives On 23 March 2011 the Chancellor of the Exchequer announced a reduction in the main rate of corporation tax from 28.0% to 26.0% with effect from 1 April 2011, with a further reduction to 25.0% scheduled for 1 April 2012 and proposed changes to further reduce this rate by 1.0% per annum to 23.0% by 1 April 2014. The first 1.0% reduction with effect from 1 April 2012 was substantively enacted for the purposes of IFRS on 5 July 2011. It has not been possible to quantify the full anticipated effect of the announced further 2.0% rate reduction but it is expected to result in a reduction in the Group's future current tax charge and to reduce the Group's deferred tax assets accordingly, resulting in a charge to income and a debit directly to equity in accordance with the accounting for share-based incentives. 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: Disposal of Recognised Recognised discontinued Group 1 January 2010 in income in equity operation 31 December 2010 Â£000 Â£000 Â£000 Â£000 Â£000 Share-based 2,524 452 3,451 - 6,427 incentives Property, plant 146 8 - 7 161 and equipment Provisions 48 39 - - 87 Intangible assets (67) 10 - 57 - 2,651 509 3,451 64 6,675 The deferred tax asset arising on equity settled share-based incentives in both years was recognised in the income statement to the extent that the related equity settled share-based incentives charge was recognised in the income statement. Recognised in Recognised in 1 January 2010 income equity 31 December 2010 Company Â£000 Â£000 Â£000 Â£000 Share-based 1,896 258 2,988 5,142 incentives 22 Share capital Ordinary shares of Â£0.01 each 31 December 2011 31 December 2010 Number of shares Number of shares In issue At 1 January 114,761,434 118,923,411 Purchase and cancellation of own shares (4,350,798) (4,161,977) At 31 December 110,410,636 114,761,434 Authorised - par value Â£0.01 each 300,000,000 300,000,000 During 2011, 4,350,798 (2010: 4,161,977) ordinary shares were bought back by the Company and were subsequently cancelled. Further details are disclosed in Note 23. 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 2011 are 4,527,783 ordinary shares (2010: 6,322,329) held by the EBT and 2,505,430 (2010: 2,505,430) held in treasury. 23 Reconciliation of movement in capital and reserves EBT Treasury Other Reverse Retained Share shares shares reserves acquisition earnings Total capital reserve reserve equity Group Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 At 1 January 2010 1,189 (16,185) (11,917) 105 138 29,863 3,193 Profit for the year - - - - - 58,002 58,002 Share-based payments - - - - - 1,846 1,846 Tax credit in respect - - - - - 3,451 3,451 of 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 own (42) - - 42 - (29,358) (29,358) shares Share related - - - - - (206) (206) expenses At 31 December 2010 1,147 (13,937) (11,917) 147 138 52,286 27,864 At 1 January 2011 1,147 (13,937) (11,917) 147 138 52,286 27,864 Profit for the year - - - - - 46,505 46,505 Share-based - - - - - 2,269 2,269 payments Tax credit in - - - - - 7,271 7,271 respect of share-based incentives recognised directly in equity Dividends to - - - - - (16,777) (16,777) shareholders Exercise of share - 3,679 - - - 2,469 6,148 options Cancellation of own (43) - - 43 - (48,288) (48,288) shares Share related - - - - - (338) (338) expenses At 31 December 2011 1,104 (10,258) (11,917) 190 138 45,397 24,654 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 2011 was 4,350,798 (2010: 4,161,977) representing 4.0% (2010: 3.7%) of the ordinary shares in issue (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£48,288,000 (2010: Â£29,358,000). The maximum and minimum prices paid were Â£13.58 (2010: Â£7.73) and Â£9.04 (2010: Â£6.09) per share respectively. EBT shares reserve This reserve represents the carrying value of own shares held by the EBT. During the current and prior year the EBT purchased no shares. 1,794,546 (2010: 1,096,545) options were exercised by Group employees during the year at an average price of Â£3.43 (2010: Â£3.55) per ordinary share, which were satisfied by shares held in the EBT. At 31 December 2011 the EBT held 4,527,783 (2010: 6,322,329) ordinary shares in the Company of Â£0.01 each, representing 4.2% (2010: 5.6%) of the ordinary shares in issue (excluding shares held in treasury). The market value of the shares held in the EBT at 31 December 2011 was Â£56,326,000 (2010: Â£49,251,000). Other reserves This reserve represents the cumulative value of own shares bought back and cancelled. The movement of Â£43,000 (2010: Â£42,000) comprises the nominal value of ordinary shares cancelled during the year. Retained earnings The gain on the exercise of share-based incentives is the difference between the value that the shares held by the EBT were originally acquired at and the price at which share-based incentives were exercised during the year. Company Share Treasury Other Reverse Retained Total capital shares reserves acquisition earnings equity reserve Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 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 Share-based payments - - - - 1,043 1,043 Tax credit in respect - - - - 2,988 2,988 of 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 1,147 (11,917) 2,441 103,520 423,603 518,794 At 1 January 2011 Loss for the year - - - - (5,991) (5,991) Dividends to - - - - (16,777) (16,777) shareholders Share-based payments - - - - 1,479 1,479 Tax credit in respect - - - - 5,483 5,483 of share-based incentives recognised directly in equity Capital contribution - - 790 - - 790 Cancellation of own (43) - 43 - (48,288) (48,288) shares Share related expenses - - - - (338) (338) At 31 December 2011 1,104 (11,917) 3,274 103,520 359,171 455,152 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 Awards relating to share-based incentives in Rightmove Group Limited have been treated as a deemed capital contribution. The principal movement in other reserves for the year comprises Â£790,000 (2010: Â£803,000) in respect of the share-based incentives charge for employees of Rightmove Group Limited. In addition a movement of Â£43,000 (2010: Â£42,000) has been recorded in relation to the nominal value of ordinary shares cancelled during the year. 24 Share-based payments The Group and Company operate share-based incentive schemes for executive directors and other selected senior management employees. Since flotation, the Company has awarded share options under the Rightmove Unapproved Executive Share Option Plan (Unapproved Plan) and the Rightmove Approved Executive Share Option Plan (Approved Plan). The Group also operates a Savings Related Share Option Scheme (Sharesave Plan). Following approval by shareholders at the Annual General Meeting in May 2011, the Rightmove Performance Share Plan (PSP) was introduced. The PSP permits awards of nil cost options or contingent shares which will only vest in the event of prior satisfaction of a performance condition. All share-based incentives are subject to a service condition. Such conditions are not taken into account in the fair value of the service received. The fair value of services received in return for share-based incentives is measured by reference to the fair value of share-based incentives granted. The estimate of the fair value of the services received is measured using either the Monte Carlo or Black Scholes pricing model as is most appropriate for each scheme. The total share-based payments charge for the year relating to employee share-based incentive plans was Â£2,269,000 (2010: Â£1,846,000). The Company charge for the year was Â£1,479,000 (2010: Â£1,043,000). Approved and Unapproved Plans There was no award of executive share options in the year ended 31 December 2011. 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 Total Shareholder Return (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. 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. The assumptions used in the measurement of the fair values at grant date of the Approved and Unapproved Plans are as follows: Share Expected Option Risk Dividend Employee Fair price Exercise volatility life free yield turnover value at price (%) (years) rate before per grant (pence) (%) (%) vesting/ option date non-vesting (pence) Grant date (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 2007 613.00 597.00 32.0 7.0 5.8 2.0 17.0 228.00 (Approved) 6 September 2007 613.00 597.00 32.0 7.0 5.8 2.0 17.0 181.00 (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 37 to 41. Expected volatility is estimated by considering historic average share price volatility at the grant date. 2011 2010 Group and Company Weighted Weighted average average exercise Number exercise Number price price (pence) (pence) Outstanding at 1 January 6,095,430 348.33 6,878,310 330.16 Granted - - 440,020 666.00 Forfeited - - (145,030) 403.39 Exercised (1,751,885) 344.73 (1,077,870) 354.63 Outstanding at 4,343,545 349.78 6,095,430 348.33 31 December Exercisable at 2,793,167 345.77 2,925,602 335.56 31 December The weighted average market value per ordinary share for executive options exercised in 2011 was Â£11.58 (2010: Â£6.98). The options outstanding at 31 December 2011 have an exercise price in the range of Â£2.24 to Â£6.66 (2010: Â£2.24 to Â£6.66) and a weighted average contractual life of 5.4 years (2010: 6.1 years). The share-based payments charge for approved and unapproved options for the year ended 31 December 2011 is Â£1,088,000 (2010: Â£1,318,000). The Company charge for the year was Â£688,000 (2010: Â£781,000). 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, based 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 2011 is Â£4,032,000 (2010: Â£2,526,000). 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 Plan are as follows: Employee turnover before Share vesting/ price non-vesting at Exercise Expected Option Risk Dividend condition Fair grant price volatility life free yield (%) value Grant date date (pence) (%) (years) rate (%) per (pence) (%) option (pence) 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 3 October 2011 1200.00 988.00 42.9 3.25 2.8 1.3 25.0 446.00 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 Plan 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. 2011 2010 Group and Company Weighted Weighted average average exercise exercise Number price Number price (pence) (pence) Outstanding at 176,523 409.92 178,435 364.63 1 January Granted 30,142 988.00 44,534 553.00 Forfeited (18,022) 429.83 (27,771) 370.39 Exercised (42,661) 255.00 (18,675) 377.19 Outstanding at 31 145,982 572.10 176,523 409.92 December Exercisable at 31 1,431 255.00 - - December The weighted average market value per ordinary share for Sharesave options exercised in 2011 was Â£12.77 (2010: Â£7.01). The Sharesave options outstanding at 31 December 2011 have an exercise price in the range of Â£2.55 to Â£9.88 (2010: Â£2.55 to Â£5.53) and a weighted average contractual life of 1.7 years (2010: 2.0 years). The share-based payments charge for Sharesave options for the year ended 31 December 2011 is Â£106,000 (2010: Â£88,000). The Company charge for the year was Â£5,000 (2010: Â£2,000). Performance Share Plan (PSP) In May 2011 following shareholder approval, a PSP was established. 164,258 PSP awards were made to executive directors and senior managers on 4 May 2011 (the Grant date) subject to EPS and relative TSR performance. Performance will be measured over three financial years (1 January 2011 - 31 December 2013). The vesting in March 2014 (Vesting date) of 25% of the 2011 PSP award will be dependent on a relative TSR performance condition measured over a three-year performance period and the vesting of 75% of the 2011 PSP award will be dependent on the satisfaction of an EPS growth target measured over a three-year performance period. PSP award holders are entitled to receive dividends accruing between the Grant date and Vesting date, and this value will be delivered in shares. The PSP awards have been valued using the Monte Carlo model and the resulting share-based payments charge is being spread evenly over the period between the Grant date and the Vesting date, being 34 months. Employee turnover before Share vesting/ price Risk non-vesting Fair at Exercise Expected Option free Dividend condition value Grant price volatility life rate yield (%) per Grant date date (pence) (%) (years) (%) (%) option (pence) (pence) 4 May 2011 1039.00 nil 42.9 2.8 1.4 0.0 3.1 739.00 (TSR dependent)(1) 4 May 2011 1039.00 nil 42.9 2.8 1.4 0.0 3.1 1039.00 (EPS dependent)(1) (1) For details of TSR and EPS performance conditions refer to Part II of the Remuneration Report on pages 37 to 41. Expected volatility is estimated by considering historic average share price volatility at the Grant date. The share-based payments charge for the year ended 31 December 2011 is Â£361,000 (2010: Â£nil). The Company charge for the year was Â£277,000 (2010: Â£nil). NI is being accrued, where applicable, at a rate of 13.8%, which management expects to be the prevailing rate when the PSP awards are exercised, based on the share price at the reporting date. The charge for the year ended 31 December 2011 is Â£64,000 (2010: Â£nil). Deferred Share Bonus Plan (DSP) In March 2009 a DSP was established which allows executive directors and other selected senior management the opportunity to earn a bonus determined as a percentage of base salary settled in deferred shares. The award of shares under the DSP is contingent on the satisfaction of pre-set internal targets relating to underlying drivers of long-term revenue growth (the Performance period). The right to the shares is deferred for two years from the date of the award (the Vesting period) and potentially forfeitable during that period should the employee leave employment. The deferred share awards have been valued using the Black Scholes model and the resulting share-based payments charge is being spread evenly over the combined Performance period and Vesting period of the shares, being three years. 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 Exercise Dividend Employee at price Expected Expected Risk yield turnover Fair Grant (pence) volatility term free before value Grant date Award date date (%) (years) rate (%) vesting/ per (pence) (%) non- share vesting (pence) condition (%) 5 March 2009 5 March 2010 226.75 nil n/a 3.0 2.6 4.4 12.0 199.00 5 March 2010 4 March 2011 677.00 nil n/a 3.0 3.2 1.5 12.0 648.00 (1) 4 March 2011 - 1039.00 nil n/a 2.8 1.4 1.4 3.4 1000.00 (1) Following the achievement of the 2010 internal performance targets, 118,467 nil cost option deferred shares were awarded to executives and senior management on 4 March 2011 (the Award date) with the right to the release of the shares deferred until March 2013. 2011 2010 Group and Company Weighted Weighted average average exercise exercise Number price Number price (pence) (pence) Outstanding at 215,958 - - - 1 January Granted 118,467 - 215,958 - Forfeited (2,436) - - - Outstanding at 31 331,989 - 215,958 - December Exercisable at 31 - - - - December The share-based payments charge for the year ended 31 December 2011 is Â£714,000 (2010: Â£440,000). The DSP awards have a weighted average contractual life of 1.0 years (2010: 1.6 years). The Company charge for the year was Â£509,000 (2010: Â£260,000). 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 2011 is Â£330,000 (2010: Â£125,000). 25 Operating lease commitments Non-cancellable operating lease rentals are payable as follows: 31 December 2011 31 December 2010 Group Plant & Plant & machinery Other Total machinery Other Total Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Less than one 374 687 1,061 168 781 949 year Between one and five 455 2,624 3,079 185 2,964 3,149 years More than five years - 199 199 - 855 855 829 3,510 4,339 353 4,600 4,953 The Company has no operating lease commitments in either year. During the year, the landlord of the office premises in Milton Keynes served notice of early termination of the lease. As a result the current lease will expire in March 2012. Accordingly, only three months commitments are included in the table above. A lease on new premises was signed in January 2012 and no amounts in respect of this new lease are included above. 26 Capital commitments As at 31 December 2011 the Group had committed to incur capital expenditure of Â£nil (2010: Â£nil). The Company has no capital commitments in either year. 27 Related party disclosures Inter-group transactions with subsidiaries During the year the Company was charged interest of Â£499,000 (2010: Â£909,000) by Rightmove Group Limited in respect of balances owing under the inter-group loan agreement dated 30 January 2008. As at 31 December 2011 the balance owing under this agreement was Â£87,375,000 (2010: Â£22,605,000) 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 pages 28 to 41. Stephen Shipperley, who resigned as a non-executive director on 31 December 2010, was 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 2010 were as follows: Year ended Group 31 December 2010 Â£000 Amounts owed by: Sequence (UK) Limited (Connells) 70 Connells Residential 46 116 Amounts invoiced to: Sequence (UK) Limited (Connells) 678 Connells Residential 413 1,091 Included within trade and other receivables is Â£nil due from related parties (2010: Â£116,000). 28 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 31 December 2011 31 December 2010 Note Â£000 Â£000 Net trade receivables 17 13,132 10,073 Amounts owed by 17 - 116 related parties Amounts held in Escrow 11,17 1,667 1,000 Accrued interest 17 58 62 receivable Other debtors 17 117 37 Cash and cash 18 21,768 23,148 equivalents 36,742 34,436 The Company had no exposure to credit risk in either year. The maximum exposure to credit risk for trade receivables (including related parties) at the reporting date by geographic region was: 31 December 2011 31 December 2010 Group Note Â£000 Â£000 UK 13,086 10,152 Rest of the 46 37 world 17 13,132 10,189 The maximum exposure to credit risk for trade receivables (including related parties) at the reporting date by type of customer was: 31 December 2011 31 December 2010 Group Note Â£000 Â£000 Property 12,676 10,114 advertisers Other 456 75 17 13,132 10,189 The Group's most significant customer, an Estate Agent, accounts for Â£1,011,000 (2010: Â£600,000) of the trade receivables carrying amount. Impairment losses The ageing of trade receivables (including related parties) at the reporting date was: 31 December 2011 31 December 2010 Gross Impairment Gross Impairment Group Â£000 Â£000 Â£000 Â£000 Not past due 9,662 (35) 7,088 (6) Past due 0 - 30 days 2,405 (247) 1,892 (162) Past due 30 - 60 1,311 (109) 1,355 (160) days Past due 60 - 90 129 (31) 180 (22) days Past due older 54 (7) 45 (21) 13,561 (429) 10,560 (371) The movement in the allowance for impairment in respect of trade receivables during the year was as follows: 31 December 2011 31 December 2010 Group Â£000 Â£000 At 1 January 371 216 Charged during the 315 567 year Utilised during the (257) (412) year At 31 December 429 371 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: Group Carrying Contractual 6 months amount cash flows or less 6-12 1-2 years 2-5 years months Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 At 31 December 2011 Non-derivative financial liabilities Trade payables 370 (370) (370) - - - Carrying Contractual 6 months Group amount cash flows 6-12 1-2 years 2-5 years or less months Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 At 31 December 2010 Non-derivative financial liabilities Trade payables 1,033 (1,033) (1,033) - - - The Company had no non-derivative financial liabilities in either year. It is not expected that the cash flows included in the maturity analysis could occur earlier or at significantly different amounts. Currency risk During 2011 all the Group's sales and more than 95.0% of the Group's purchases were Sterling denominated and accordingly it has no significant 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 2011 the Group had total cash of Â£21,768,000 (2010: Â£23,148,000) and Â£1,667,000 (2010: Â£1,000,000) held in Escrow. Fair values The fair values of all financial instruments in both years are equal to the carrying values. 29 Contingent liabilities The Group and the Company had no contingent liabilities in either year. 30 Subsequent events There have been no subsequent events having a material impact on the financial statements between 31 December 2011 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 Financial calendar 2012 2011 full year results: 24 February 2012 Annual General Meeting: 9 May 2012 Final dividend record date: 11 May 2012 Final dividend payment: 8 June 2012 Interim Management Statement: May, November 2012 Half year results: 1 August 2012 Interim dividend: November 2012 Registered office: Rightmove plc 4th Floor 33 Soho Square London W1D 3QU Registered in England no. 6426485 Corporate advisers Financial adviser UBS Investment Bank Joint brokers UBS Limited Numis Securities Limited 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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