Final Results

Rightmove plc 33 Soho Square London W1D 3QU EMBARGOED UNTIL 7AM 26 FEBRUARY 2010 RIGHTMOVE plc 2009 FULL YEAR RESULTS Rightmove plc, the UK's number one property website, today announces its Full Year results for the year ended 31 December 2009. Highlights: * Underlying operating profit(1) increased by 2% from Â£41.0m to Â£41.9m * Revenue fell by 6% from Â£74.0m to Â£69.4m and costs(1) were reduced by 17% to Â£27.5m (2008: Â£33.0m) * Underlying operating margin(2) up from 55% to 60% * Underlying EPS up 28% to 30.5p from 23.8p * Net cash at 31 December 2009 of Â£3.4m (2008: net debt of Â£16.9m) with the outstanding debt of Â£22.5m retired early in February 2010 with no penalties * 1.1m shares bought back during 2009 (2008: 11.9m) at an average price of Â£ 4.84 (2008: Â£3.78) * Number of advertisers grew by 6% to 17,664 (2008: 16,741) * Average revenue per advertiser (ARPA) at Â£308 per month (2008: Â£307 per month) * Proposed final dividend of 7.0p making a total dividend of 10.0p for the year (2008: 10.0p) Ed Williams, Managing Director, said: "The last 18 months have demonstrated the importance of Rightmove in leading a structural shift from traditional media to online property advertising. As early as April 2009 our revenues started to rise in contrast to traditional property advertising media which continues to decline." For more information please contact: Rightmove Ed Williams or Nick McKittrick Rightmove plc Press Office 07894 255295 (1) Before share-based payments, NI on share-based incentives and capital reconstruction credit/costs. (2) Based upon operating profit before share-based payments, NI on share-based incentives and capital reconstruction credit/costs A PDF copy of the 2009 Full Year results can be downloaded from www.rightmove.co.uk/investors.rsp This Annual Report contains forward looking statements. These forward looking statements are not guarantees of future performance. Rather they are based on current views and assumptions and involve known and unknown risks, uncertainties and other factors that may cause actual results to differ from any future results or developments expressed or implied from the forward looking statements. Each forward looking statement speaks only as of the date of the particular statement. CHAIRMAN'S STATEMENT It is my pleasure to present Rightmove plc's financial results for the year ended 31 December 2009. Rightmove's performance during 2009 reflects the widespread recognition across the residential property industry of the primary importance of the internet as a marketing channel and specifically Rightmove's strong leadership position and product innovation. Online advertising's role as the most relevant marketing channel for both home sellers and home hunters was reinforced by Rightmove's experience in 2009. Research recently conducted indicates that half of all successful UK home buyers in 2009 first saw the property they bought on the internet and two thirds of this group first saw the property on Rightmove(1). Our unwavering commitment to both user experience and customer service resulted in record results in 2009 despite a housing market that delivered historically low home sales. Our prospects for 2010 are promising, assisted by the launch of advertising products that enable our customers to promote their brands and market proposition more prominently in addition to advertising the homes they have for sale and to let. Financial results Profits and earnings per share for 2009 were up on 2008, despite the number of estate agents and new home developments being sharply lower than during the first half of 2008. Underlying operating profit(2) was up 2% to Â£41.9m (2008: Â£ 41.0m) and underlying basic earnings per share was up 28% to 30.5p (2008: 23.8p). Profit growth was achieved in no small part by prompt cost reduction initiatives undertaken in 2008. Increased average online spending also contributed to increases in profitability and revenue from the low point in March 2009. Revenues for the second half of 2009 were 7% higher than in the first half and monthly revenues, by the end of 2009, close to their all time peak prior to the collapse in the property market. Growth in earnings per share was attributed in part by the repurchase of 13m shares at an average price of Â£3.87 per share during 2008 and 2009. This reduction of around a tenth of all shares outstanding was financed largely by a Â£40m loan facility entered into in April 2008, which was converted to a Â£25m term loan in April 2009. Strong cash generation allowed us to repay the loan early and in full in February 2010. Dividend The Board announced that it would maintain a 3.0p per ordinary share interim dividend which was paid on 13 November 2009. The Board proposes to pay a final dividend of 7.0p per ordinary share which gives a total dividend for the year of 10.0p (2008: 10.0p) consistent with our policy of paying dividends in line with profits. The final dividend, subject to shareholder approval, will be paid on 11 June 2010 to members on the register on 14 May 2010. The Board of directors As previously announced, Nigel Cooper and Graham Zacharias retired from the Board on 31 March 2009 and 10 April 2009 respectively. As part of the organisational restructure in early January 2009, Nick McKittrick assumed the joint role of Chief Operating Officer and Finance Director. I was delighted to announce the appointment of Ashley Martin as a non-executive director to the Board on 11 June 2009. Ashley's construction and media industry background have made him a welcome addition to the Board and his considerable listed company financial experience is well suited for his role of Audit Committee Chairman. Annual General Meeting and resolutions The majority of the resolutions being proposed at the Annual General Meeting are general in nature. In addition, the Company is required to make amendments to its Articles of Association to incorporate changes required following full implementation of the Companies Act 2006. A summary of the business to be conducted is described in the Directors' Report and in the Notice of Annual General Meeting which will be sent to shareholders in March 2010. I hope that shareholders will approve these resolutions and 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 5 May 2010 at the offices of UBS Limited at 1 Finsbury Avenue, London, EC2M 2PP. Outlook Based on increased investment in Rightmove by our customers, our proven ability to innovate with new advertising products and the prospect at some point in the cycle of a significant increase in customer numbers, the Board is confident of our future success. On behalf of shareholders, I would like to thank Ed Williams and his entire team for the achievements of the past year. My thanks also go to the Board for its guidance during challenging economic times. Scott Forbes Chairman (1) Source: BMRB omnibus survey, November 2009 (2) Before share-based payments, NI on share-based incentives and capital reconstruction credit/costs BUSINESS AND FINANCIAL REVIEW 2009 has been another year of considerable success for Rightmove. Profits for 2009 were the highest in the Group's history. Revenues for the year were significantly higher than at the top of the 2007 market, despite a sharp reduction in the number of estate agents and new homes developments being marketed. The last 18 months have demonstrated the importance of Rightmove in leading a structural shift from traditional media to online property advertising. As early as April 2009 our revenues started to rise in contrast to traditional property advertising media which continues to decline. Writing a year ago, we stated as our objective "to communicate unequivocally to home hunters that we remain the place to look for property and to the property industry that we are the place to advertise". In 2010 we will build on our position of strength with a focus on stressing the importance to sellers not only of having their property on Rightmove, but also the choices that agents can offer them as to how their property is advertised on Rightmove. Our 2009 results 2009 was a record year in terms of Rightmove's profit after tax: Â£30.0m (2008: Â£25.5m). Underlying operating profit(1) was up 2% at Â£41.9m (2008: Â£41.0m) and revenue declined by 6% to Â£69.4m (2008: Â£74.0m). This was achieved in a difficult year for the housing industry, with approximately one fifth of estate agents closing and a decline of around one third in the number of developments being marketed. Both revenue and profits in the second half of the year were up on the first half of the year. The usage of the Rightmove.co.uk website has been at record levels, as has been our share of activity across all UK property websites. Our number of advertisers has grown and the typical spend by our advertisers has increased. What we do and the keys to success Rightmove's continued success in adverse conditions arises directly from what we do and how that differs from others. The most effective property advertising medium By using the Rightmove.co.uk website our advertisers reach the largest audience of prospective home movers in the country by far and home movers see more properties more effectively presented than anywhere else. In 2009 around one third(2) of all houses sold were first found by the buyer on the Rightmove website and Rightmove was used by 85% of buyers who used the internet as part of their home searching activity. Page impressions on the Rightmove.co.uk website were up by 23% to 6.5bn (2008: 5.3bn). According to Experian Hitwise, Rightmove served as many pages of property information as all the other fourteen hundred property websites combined and ten times that of our nearest competitor. The key performance indicators that we monitor include: MARKET SHARE NUMBER OF ADVERTISERS 82% of the market share of the top 4 UK Total membership at end of 2009 was property websites by pages viewed up from 17,664 (2008: 16,741), up 6% year on 79% in 2008 year Source: Experian Hitwise and Rightmove: January 2010 and January 2009 PAGE IMPRESSIONS CORPORATE ESTATE AGENTS 6.5 billion page impressions up from 5.3 100% of all of the top 25 corporate billion in 2008 estate agents list their properties with us Source: Rightmove PROPERTIES DISPLAYED NEW HOME DEVELOPERS 1 million properties displayed on 92% - 23 out of 25 of the top new Rightmove.co.uk at 31 December 2009, 7.6% home developers advertised on down on 2008 reflecting conditions within Rightmove.co.uk in 2009 the UK property market EMAIL ENQUIRIES ADOPTION OF ADDITIONAL PRODUCTS Number of emails doubled from 5.3million At December 2009, 48% of customers to 10.6 million as a result of take additional advertising improvements to the way the site works for products, an increase from 32% as at enquiry generation December 2008 Rightmove's ability to out-perform newspapers in these challenging times reflects: our ongoing property service and relationships with our advertisers; our increasing audience - at a time when newspaper circulation continues to decline; the need for enquiries from home buyers; measurability - with all our customers seeking to reduce costs and yet make sales, measurability has been thrust to the fore; the recognition that home sellers expect their agent to market their property in the places that they themselves look - the internet in general and Rightmove specifically. Long-term sustained investment in brand and the service to home hunters The high level of site activity and enquiries is the result of our historic investment in the development of the Rightmove.co.uk website and the marketing of it. That investment was maintained in 2009 despite an overall reduction in our operating cost base. Rightmove's brand strength means that over four out of every five visitors to the site come as a result of either typing in the "Rightmove" name, responding to email alerts that we send our registered users when relevant properties come onto the market or via websites that link to Rightmove. A further 15% comes to us free as a result of Rightmove being found in generic searches entered into search engines (e.g. "property for sale in Chelmsford"). Only 2% to 3% of visits involve Rightmove paying for online traffic. 2009 saw the launch of our iPhone application, which with over 300,000 downloads was the third most popular free iPhone application. We have embraced other aspects of new technology including RSS data feeds, integration with social networking sites and Twitter. We also launched a new area of the site dedicated to helping sellers and landlords with their market research. Behind the scenes we have invested heavily in ensuring that a particular area (such as "Everton" in Liverpool) is defined in a way that corresponds to how home hunters and estate agents think of it, not just the way the Royal Mail post code defines it. We also now provide "find-as-you-type" functionality to make it even easier to search on Rightmove and have launched map-based searching. Our "See More" media campaign ran from Christmas 2008 to the start of February 2009 and again in September 2009. From Boxing Day 2009 we ran a new TV advertisement building on the "See More" theme and specifically focused on influencing prospective sellers of the benefits of choosing an estate agent that is a Rightmove member. Support to our advertisers Rightmove has a large field and telephone based team of account managers as well as customer service staff to provide a high quality level of service to our customers, in contrast to other entirely online services adopted by many internet advertising businesses. During the year we substantially upgraded the toolkit we provide to our advertisers in terms of management and performance reporting. A new competitive scorecard allows agents to assess their performance against their key competitors on a range of critical performance criteria. We also upgraded our call handling facilities to provide a service to our customers to track their performance responding to phone calls and recording phone calls for quality checking purposes. Of particular note in 2009 were the 35 breakfast seminars held across the UK, with close to 3,000 estate agents taking up the invitation to attend this free service. The seminars focused on helping our members get the best value for money out of their basic Rightmove membership and indeed any other property website that they might use. Innovation in advertising products 2009 saw a high level of innovation in new advertising products. This is central to our strategy. We aim to provide our members with advertising products which allow them to promote their own brands and their unique selling points as effectively as we help them find prospective buyers for the properties they are marketing. The latter part of the year saw record levels of adoption of our existing and enhanced Choice products, with approaching 48% of all our customers and over 59% of new homes developers taking additional products. Improvements were made to the Premium Listing product which enhances the presentation of a property in the search results, as well as rolling Premium Listing out to our lettings and overseas homes customers. The biggest innovation has been the introduction of "search term" driven display advertising in the forms of our Local Homepage advertisements and our Featured Agent/Featured Developer product. Agents and developers can not only target the geographical area where their property stock is, but also target areas they see as offering good future prospects. The format of the advertisements allows agents and developers to communicate their brand, the quality of their product and make offers. Some agents have chosen to use Local Homepage advertisements on Rightmove to communicate to potential vendors that, if they instruct that agent, they will enhance the way in which the seller's property is advertised on the Rightmove website by using one or more of our existing Choice products. The initial take up of these products in January 2010 has been excellent. Critical to overall success of these products will be the retention rates we see through the coming year. Focus Our focus has been and remains on the UK online property advertising market. We believe this focus is a vital ingredient of our success. The last 18 months have offered opportunities to make acquisitions but none had the attraction of organic revenue growth in our core markets. Protecting shareholder value How the Board monitors performance The Board reviews performance at Board meetings and by a detailed monthly management report, which includes the performance of each operating segment against the monthly and annual plan and covers all the key performance indicators featured in this report. Risks are primarily monitored and managed by the monthly Executive Board, which reports to the main Board on such risks bi-annually or as the business requires. With the assistance of the Audit Committee, the Board reviews the effectiveness of internal controls at least annually. Uncertainties, threats and risks The Rightmove business model has proved to be remarkably resilient in the face of the unprecedented down-turn affecting the customers we serve. Nonetheless the business is inevitably exposed to the general state of the housing market and particularly to transaction volumes. Having hit their lowest levels in 50 years during late 2008 and early 2009, there has been a steady recovery. Nonetheless, 2009 will prove to have been the second worst year (after 2008) in terms of overall transaction volumes. We expect 2010 to also be among the most challenging years in terms of transaction volumes, partly due to agents experiencing low existing stock and lack of sellers coming to market. However, we believe that lower cost bases among estate agents and a recent period of healthier profits, together with recapitalisation of house builders, should offer more opportunities than challenges. From its inception, Rightmove has experienced a regular flow of new property portal entrants, whether explicitly seeking to compete with us or not. They have exhibited a range of business models and frequently offer free advertising to agents. Those who attracted the most attention have failed to make any material impact on our market share and whilst we cannot rule out the appearance of a completely new entrant or business model, nothing we have seen to date gives us serious cause for concern. Looking to our organic growth prospects, Rightmove's success as the preferred alternative to local newspapers when property advertising spend recovers will depend on our ability to develop and commercialise the right range of products and services. We believe that risks relating to operational failures, to financial and legal exposures, to fraud or embezzlement or from onerous commercial obligations or liabilities are limited. The business has few tangible assets and the major intellectual assets are tied up in the design of our website and in our brand identity, recognition and reputation. Financial position Revenue Revenue fell in 2009 by Â£4.6m reflecting the tougher trading conditions within the UK housing market. Revenue from estate agency contributed to 68% of total revenue with a year on year fall of Â£2.3m. The slow down in the house building industry saw revenue from new homes developers fall by Â£4.1m. However, the increase in revenues from Holiday Lettings Limited of Â£1.8m partially offset the falls experienced elsewhere. Margin growth The underlying operating margin for the year increased from 55% to 60% as a consequence of a significantly reduced cost base. Year ended Year ended Year ended 31 December 2009 31 December 2008 31 December 2007 Underlying operating margin % (3) 60% 55% 54% Bad debt During the year the net bad debt charge was Â£0.2m (2008: Â£1.4m). The greatly reduced bad debt charge principally reflects the much reduced number of estate agents leaving the industry. Taxation The consolidated tax rate for the year ended 31 December 2009 was 21% (2008: 33%). The difference between this and the standard rate of tax at 28% is mainly attributable to the deferred tax asset created of Â£2.5m on share-based incentives due to the increase in the Company share price over the period, together with tax relief on share options exercised during the year. Share-based payments and national insurance (NI) In accordance with IFRS 2, a non-cash charge of Â£1.9m (2008: Â£2.0m) is included in the profit or loss representing the amortisation of the fair value of share-based incentives granted, including Sharesave options, since 2006. Employer's NI is being accrued, where applicable, at a rate of 12.8% on the potential employee gain on share-based incentives granted. Based on a closing share price at the year end of Â£5.04 this resulted in a charge for the year of Â£1.3m (2008: Â£0.2m credit). Net financial expenses Net financial expenses were Â£0.9m (2008: Â£1.3m). This reduction reflects a combination of a lower level of average borrowings as compared to 2008 and historically low LIBOR rates. Earnings per share Basic earnings per ordinary share of 27.5p (2008: 22.5p) is based on profit after taxation and a weighted average of 109.1m ordinary shares in issue (2008: 113.4m). Underlying basic earnings per ordinary share(1) was 30.5p (2008: 23.8p). Statement of financial position Due to the strong financial performance and cash generation during the year combined with lower levels of share buy backs, the Group has moved into a net asset position with total equity of Â£3.2m at 31 December 2009 (2008: deficit of Â£15.5m). The reduction in trade and other receivables from Â£12.6m to Â£9.4m relates principally to strong cash collections due to an increased focus on credit control processes as well as a reduction of Â£1.2m in relation to marketing prepayments. Trade and other payables increased from Â£12.4m to Â£13.9m principally due to an increase in the potential liability for employer's NI on share-based incentive gains and an increase in deferred revenue of Â£0.9m (of which Â£0.6m relates to Holiday Lettings Limited). Cash flow and net debt Cash generated from operations was Â£46.2m (2008: Â£38.7m) and cash flow conversion was in excess of 100%. Net cash from operating activities was Â£7.5m higher at Â£34.7m (2008: Â£27.2m) due to a net positive movement in working capital and lower interest paid offset by increased taxes of Â£0.8m. Capital expenditure was Â£0.3m (2008: Â£1.0m). A total of Â£5.5m was invested during 2009 in the repurchase of our own shares (2008: Â£44.8m) whilst a further Â£10.9m was paid by way of dividends (2008: Â£ 10.4m) to the Company's shareholders. Proceeds of Â£5.4m (2008: Â£nil) were received on the exercise of share options of which Â£2.4m were applied in the purchase of our own shares by The Rightmove Employees' Share Trust. The Group elected to repay Â£14.8m of its revolving loan facility in April 2009 and termed out Â£25m of the loan at LIBOR plus 150 basis points, repayable in equal quarterly instalments over five years. In addition Â£2.5m of scheduled payments were made during the year bringing total debt repayments in the year to Â£17.3m. In February 2010, a decision was made to retire the debt early and the loan was repaid in full without penalty. Net cash at 31 December 2009 was Â£3.4m (2008: net debt of Â£16.9m). The Board of directors is confident that with the existing cash resources and banking facilities in place, the Group and the Company will remain cash positive and have adequate resources to continue in operational existence for the foreseeable future. The Board's priorities for the usage of cash are: investment in the business; payment of dividends; and the return of excess cash to shareholders via share buy backs. We believe 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 2010 through a combination of dividends and share buy backs. Current trading and outlook 2010 has started with the Rightmove.co.uk website experiencing record levels of site traffic and enquiries, including several of the busiest days in Rightmove's history. The new advertising campaign has been well received not only among home buyers and our advertisers but also with potential home sellers. Average spend per advertiser has started the year strongly and is expected to rise further over the coming months. The strong start to the year is the result of encouraging levels of spending on the new display advertising products as well as the Choice products plus the revenue impact from the first 2010 subscription price rises. By April we expect to see the full impact of these price rises across all business segments. Estate agency membership continues to grow at rates similar to the second half of 2009, while the number of new home developments continues to decline and may be challenging for some time to come. Holiday Lettings has continued to grow with good renewal rates achieved in the key months of January and February. The overall outlook for the UK residential housing market cannot be separated from the general economic environment, consumer confidence and spending power and short- term uncertainties around the forthcoming general election. Subject to there being no further decline in the UK housing market, the Board remains confident of making further progress in 2010. Ed Williams Nick McKittrick Managing Director Chief Operating Officer and Finance Director (1) Before share-based payments, NI on share-based incentives and capital reconstruction credit/costs (2) Source: BMRB omnibus survey, November 2009 (3) Based upon operating profit before share-based payments, NI on share-based incentives and capital reconstruction credit/costs DIRECTORS AND OFFICERS Scott Forbes Chairman Scott was appointed Chairman of Rightmove plc in July 2005. He is also the Chief Executive of Bridge Capital Advisors Ltd which he founded in 2007 and was a director of NetJets Management Ltd, a subsidiary of Berkshire Hathaway through to October 2009. Scott has nearly 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. He was Chairman or Chief Executive of various residential property and travel industry businesses during his tenure at Cendant and held similar roles for other companies in other sectors, including National Car Parks and Green Flag. Prior to his time at Cendant, Scott was a certified public accountant. (Appointed 13 July 2005.) Ed Williams Managing Director Ed joined Rightmove in December 2000 as Managing Director at its inception. He is Chairman of Holiday Lettings (Holdings) Limited in which Rightmove has a two-thirds ownership stake. 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 on 5 March 2004.) Jonathan Agnew Non-executive Director Jonathan joined the Board in January 2006 as Senior Independent Director. He is Chairman of Beazley, LMS Capital, 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 and Gerrard Group and has served on the Council of Lloyd's. (Appointed 16 January 2006.) (Chairman of the Remuneration Committee and a member of the Audit and Nomination Committees.) Colin Kemp Non-executive Director Colin was appointed to the Board in July 2007. He is Finance and Business Performance Director for the Halifax Community Bank following the formation of Lloyds Banking Group in January 2009. With over 30 years' experience in high street retail banking, Colin has worked for HBOS companies since 1979. His roles have included running the Retail Contact Centres and heading up the Halifax Employee Share Services business, administering employee share plans to over 400 UK companies. Between January 2005 and December 2007, Colin was Managing Director of Halifax Estate Agents. 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 plc in June 2009 as a non-executive director and also as Chairman of the Audit Committee, where he provides oversight of the financial reporting practices, internal control environment and compliance with the various listed company regulations. He is also a member of the Remuneration Committee. He is Finance Director of Rok plc and prior to that served as 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.) Stephen Shipperley Non-executive Director Stephen joined the Board on its formation in 2000. Stephen has over 30 years of experience in the property industry. He is Group Executive Chairman of Connells Limited, which has grown to become the second largest estate agency business in the UK with interests in residential estate agency, surveying, financial services, relocations and conveyancing. (Appointed 30 June 2000.) Judy Vezmar Non-executive Director Judy is Chief Executive Officer of LexisNexis International. LexisNexisÂ®, part of the global media group Reed Elsevier PLC, is a leading worldwide provider of content-enabled workflow solutions designed specifically for professionals in the legal, risk management, corporate, government, law enforcement, accounting and academic markets. Judy is responsible for the International group and their expansion of the range of successful online services to over 100 countries. She is based in London. (Appointed 16 January 2006.) (Member of the Audit, Remuneration and Nomination Committees.) Liz Taylor Company Secretary Liz Taylor was appointed Company Secretary of Rightmove plc on 4 July 2006. She is a Fellow of the Institute of Chartered Secretaries and Administrators and has 20 years' company secretarial experience across a variety of public companies. Prior to joining Rightmove, she was Company Secretary of The Berkeley Group Holdings plc. SENIOR MANAGEMENT TEAM Peter Brooks-Johnson, Agency Director Peter joined Rightmove in 2006 and is responsible for the Estate Agency business, marketing, the website and the proposition to agency customers including the development of advertising products. Peter was formerly a management consultant with Accenture and The Berkeley Partnership, working with clients such as BP, Marks & Spencer and the Woolwich. Peter Armstrong, New Homes Director Peter joined Rightmove in 2003 as one of the first handful of people developing the New Homes business, a business which he has run since May 2006. 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. 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. Scott Marshall, Finance Director of Rightmove.co.uk Scott joined Rightmove in 2001 as Finance Director and was Company Secretary until the IPO in 2006. Scott led the preparations for the float on the London Stock Exchange in 2006 and led the 2008 Scheme of Arrangement project to introduce and list a new holding company for the Group. Scott is a director of Holiday Lettings (Holdings) Limited. Scott qualified as a Chartered Accountant in Australia with Ernst & Young. Simon Hickie, Human Resources Director Simon joined Rightmove in 2007 following seven years at Bloomberg LP where he was responsible for HR operations across Europe, the Middle East and Africa. Prior to moving into HR, he had managed part of Bloomberg's financial research operation covering new debt and equity security issuance and M&A activity in Europe. 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, Auto Trader. She qualified as a chartered accountant in South Africa with KPMG. CORPORATE SOCIAL RESPONSIBILITY Our people Our people are our largest resource and our most highly valued asset. We are proud of our people and the mixture of talent and experience that they bring and we depend on their skills and commitment to achieve our objectives. Our cultural style is bolstered by an open and honest communication environment and by investment in ensuring that all employees have a profound understanding of Rightmove's core values and goals. We achieve this through a combination of a rigorous selection process, an off-site residential course to ensure all Rightmovers understand our core values and the role that they perform, ongoing coaching and mentoring, and cross-functional team building events involving all employees. Staff opinions are frequently sought through regular staff forums with senior managers and employee online surveys. We have also expanded 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 2009 we have explored new ways of ensuring that Rightmovers are aware of the additional benefits that they are entitled to access, and which have proved to be a useful retention tool. This is achieved not only via our induction process and intranet but also through benefits fairs. In November 2009, the Company's first Sharesave contract matured allowing a large cross section of employees to invest and benefit from the success of the Company over the last three years. 42% 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 During 2009, our employees continued to support the NSPCC, our Company nominated charity and we continue to encourage all our employees to devote time and fundraising efforts to charitable causes of particular importance to them as individuals. During 2009 a considerable number of staff have been active in raising money or supporting the fundraising activities of others. Environment Rightmove actively considers its environmental impact. Since our operation is primarily office-based, the direct environmental impact is relatively low. Indeed Rightmove's business creates opportunities to reduce the overall environmental harm associated with a variety of aspects of the whole home hunting process. Traditional ways of finding a home tend to involve large amounts of paper and printing, whether in the form of newspaper advertising, property particulars mailed to applicants through the post or leaflet drops by agents. Rightmove reduces the need for print media and the environmental damage that goes with them. Rightmove takes care to design the layout of property particulars to reduce the total number of pages that need to be printed out in those cases where a home hunter does want a physical copy. Enhanced information on properties also reduces the amount of time home hunters waste in visiting properties that rapidly turn out to be inappropriate. As a high proportion of viewings involve a car journey, any reduction in wasted viewings has an environmental benefit. Rightmove has worked hard to increase the number of photographs of each property and has introduced more comprehensive maps and aerial photographs which help home hunters to identify the specific location of a property. The higher quality the information presented about properties the less carbon footprint is generated by prospective buyers making wasted journeys. The Rightmove.co.uk website includes functionality for our customers to display Energy Performance Certificates which allow prospective buyers to evaluate the energy efficiency of a property they are considering buying and to identify opportunities to improve the energy efficiency once they have purchased the property. We take the environmental impact of our own operations very seriously. As an internet-based Group with most staff employed in three office locations, we believe our own environmental footprint is small and that there are no by-products of our operations which have a clear negative impact on the environment. Our staff are encouraged to take proactive steps to address our environmental responsibilities. For instance, we continue to operate comprehensive recycling schemes which were established in consultation with local authorities and recycling partners. As an operator of an online property portal, the main environmental impact is the power usage of our data centres. Our procurement policy is to purchase hardware with the best computational performance which uses the least electrical power. For example, in the period, we have completed a partial refresh of our data centre hardware replacing old less efficient servers with half the number of new efficient units. This refresh has not only reduced our electrical power usage, but has allowed us to serve over six billion page impressions to our customers, an increase of 23% above that of 2008. 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 e-mail invoicing for our new homes developer customers and have plans to roll out e-mail invoicing to the wider customer base in 2010, where practicable to do so. Health and safety The Group considers the effective management of health and safety to be an integral part of managing its business. During 2009, 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 2009. The Company is domiciled in England (registered number 6426485). Principal activities The Group operates in the UK residential property industry connecting people to properties. Its principal business is the operation of the Rightmove.co.uk website, which is the UK's largest residential property website. Its customers (estate agents, letting 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 during the year under review and of its prospects are contained in the Business and Financial Review on pages 4 to 9. 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 9) â€¢ Directors and officers (pages 10 to 12) â€¢ Corporate social responsibility (pages 13 to 14) â€¢ Corporate governance (pages 19 to 25) â€¢ Remuneration report (pages 26 to 38) 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 7. Key performance indicators are given on page 5 and information on the likely developments of the Group under "Current Trading and Outlook" on page 9. Trading results The Group's underlying operating profit from continuing operations (before share-based payments, National Insurance (NI) on share-based incentives and capital reconstruction credit/costs) for the financial year was Â£41,916,000 (2008: Â£41,004,000). Further information on the results for the Group is set out in the Consolidated Statement of Comprehensive Income on page 41 and the supporting Notes and also the Business and Financial Review on pages 4 to 9. Dividend An interim dividend of 3.0p (2008: 3.0p) per ordinary share was paid on 13 November 2009 to shareholders on the register of members at the close of business on 16 October 2009. The directors are recommending a final dividend for the year of 7.0p (2008: 7.0p) per ordinary share, which together with the interim dividend of 3.0p, paid in respect of the half year period ended 30 June 2009, makes a total for the year of 10.0p (2008: 10.0p), amounting to Â£ 10,909,000 (2008: Â£10,891,000). Subject to shareholders' approval at the Annual General Meeting on 5 May 2010, the final dividend will be paid on 11 June 2010 to shareholders on the register of members at the close of business on 14 May 2010. The final dividend payment has not been included in trade and other payables as it was not approved before the year end. Share capital The ordinary shares in issue (including 2,505,430 shares held in treasury) at the year end comprised 118,923,411 (2008: 120,050,873) ordinary shares of Â£0.01 each, being Â£1,189,000 (2008: Â£1,201,000). 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 meetings of the Company. Movements in the Company's share capital in the year are shown in Note 22 to the financial statements. Information on the Group's share-based incentives 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 page 36. Share buy back The Company announced a share buy back programme in June 2007, which continued during 2008 and the latter part of 2009. Of the 15% authority given by shareholders at the 2009 Annual General Meeting, a total of 1,127,462 ordinary shares of Â£0.01 each were purchased in the year to 31 December 2009, being 1% of the shares in issue (excluding shares held in treasury) at the time the authority was granted. The average price paid per share was Â£4.84 with a total consideration paid (inclusive of all costs) of Â£5,490,000 (2008: Â£45,044,000).Since the introduction of the new parent Company in January 2008, a total of 12,981,997 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 5 May 2010. Shares held in trust As at 31 December 2009, 7,418,874 ordinary shares of Â£0.01 each in the Company were held by The Rightmove Employees' Share Trust (EBT) for the benefit of Group employees (2008: 8,353,700). These shares had a nominal value at 31 December 2009 of Â£74,000 (2008: Â£84,000) and a market value of Â£37,428,000 (2008: Â£14,703,000). The shares held by the EBT may be used to satisfy share-based incentives for the Group's employee share plans. During the year the EBT purchased 706,965 shares in the Company and 1,641,791 shares were transferred to Group employees following the exercise of both executive and Sharesave share options. The terms of the EBT provide that dividends payable on the shares held by the trust are waived. Substantial shareholdings As at the date of this report, the following beneficial interests in 3% or more of the Company's issued ordinary share capital (excluding shares held in treasury) on behalf of the organisations shown in the table below, had been notified to the Company pursuant to Rule 5 of the Disclosure and Transparency Rules: No of shares %(1) Tremblant Partners LP 10,160,848 8.7 BlackRock Inc 9,251,289 7.9 Baille Gifford & Co 8,708,438 7.5 The Rightmove Employee Trust 7,418,874 6.4 Caledonia Investments Pty Ltd 7,016,588 6.0 Credit Suisse Group AG 6,864,011 5.9 Old Mutual Asset Management 6,792,531 5.8 Lone Pine Capital LLC 6,625,149 5.7 Maverick Capital Ltd (as a discretionary manager) 6,153,416 5.3 Marathon Asset Management LLP 5,930,755 5.1 Aegon UK Group 4,544,788 3.9 Legal and General Investment Mngt 4,171,564 3.6 (1) The above percentages are based upon the voting rights capital (being the shares in issue less shares held in treasury) of 116,417,981. Directors The directors of the Company at the year end and as at the date of this report are named on pages 10 to 11 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. In accordance with these provisions, Ed Williams (Managing Director), Nick McKittrick (Chief Operating Officer and Finance Director) and Stephen Shipperley (non-executive director) will retire at the forthcoming Annual General Meeting and each will offer themselves for re-election. Ashley Martin (non-executive director), will also retire and offer himself for election, this being his first general meeting since his appointment in June 2009. 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 and Nick McKittrick have service agreements with the Company which can be terminated on 12 months notice. Ashley Martin and Stephen Shipperley have a Letter of Appointment with the Company that can be terminated on three months' notice. The interests of the directors in the share capital of the Company at 31 December 2009, 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 26 to 38. At 31 December 2009 each of the executive directors was deemed to have a non-beneficial interest in 7,418,874 ordinary shares of Â£0.01 each held by the trustees of the EBT. Directors' interests in contracts Stephen Shipperley, non-executive director, is Group Chairman of Connells Limited. Colin Kemp, non-executive director, held the position of Managing Director of Halifax Estate Agencies Limited from January 2005 to December 2007. Prior to the IPO in 2006 the Group had entered into agreements with Connells Limited and Halifax Estate Agencies Limited to list all their respective estate agency properties on Rightmove.co.uk until at least March 2009. In December 2008 and April 2009 respectively, the Group announced that the agreements with Connells Limited and Halifax Estate Agencies Limited had been extended into 2012. Further details of amounts owed by and invoiced to Connells Limited during the year are disclosed in the section dealing with Related Party Disclosures in Note 28 to the financial statements on page 74. 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 2009, trade creditors represented 26 days (2008: 25 days) of average daily purchases. The Group had Â£777,000 of trade payables at the year end (2008: Â£1,225,000). 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 50. Charitable and political donations The Company made no charitable contributions or political donations during the year (2008: Â£nil). Subsequent events In the period between 31 December 2009 and the date that the Directors' Report was signed, the Board of directors agreed to retire the debt with the Bank of Scotland and the outstanding sum of the term loan of Â£21,250,000 (being the balance of the term loan at 31 December 2009 of Â£22,500,000 less a quarterly instalment of Â£1,250,000) was repaid in full on 10 February 2010. Further details are disclosed in Note 31 to the financial statements on page 77. Annual General Meeting The Annual General Meeting of Rightmove plc will be held at the offices of UBS Limited at 1 Finsbury Avenue, London, EC2M 2PP on 5 May 2010 at 10am. The majority of the resolutions being proposed at the 2010 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 2009 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 this Annual General Meeting, we will be proposing a resolution at the 2010 Annual General Meeting to renew this authority. We will also be asking shareholders to approve a number of amendments to our Articles of Association, primarily to reflect the remaining provisions of the Companies Act 2006 which came into force in October 2009. An explanation of the main changes between the proposed and the existing Articles of Association and other resolutions being proposed at the 2010 Annual General Meeting will be provided in the Notice of Annual General Meeting, which will be sent to shareholders (where requested) and made available on the corporate website (www.rightmove.co.uk/investors.rsp) in March 2010. Auditors KPMG Audit Plc has confirmed its willingness to continue in office as auditors of the Group. In accordance with Section 489 of the Companies Act 2006, a resolution for the re-appointment of KPMG Audit Plc as auditors of the Group and for the Audit Committee to determine their remuneration will be proposed at the forthcoming Annual General Meeting. Audit information So far as the directors in office at the date of signing of the report are aware, there is no relevant audit information of which the auditors are unaware and each such director has taken all reasonable steps to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information. Responsibility statement of the directors in respect of the annual financial report We confirm that to the best of our knowledge: * the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and * the Directors' Report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. Signed by the Board: Ed Williams Nick McKittrick Managing Director Chief Operating Officer and Finance Director 26 February 2010 CORPORATE GOVERNANCE Statement of compliance The 2008 Combined Code of Corporate Governance (Combined Code) sets out the principles and provisions relating to good governance of UK listed companies. In this section we set out how we have applied the principles and complied with the provisions of the Combined Code during 2009 and explain the reason for one area of non-compliance. The Board At the date of this report, the Board comprises eight directors including the Chairman (Scott Forbes), two executive directors (Ed Williams, Managing Director and Nick McKittrick, Chief Operating Officer and Finance Director) and five non-executive directors (Jonathan Agnew, who is the Senior Independent Director, Ashley Martin, Judy Vezmar, Colin Kemp and Stephen Shipperley). Stephen Shipperley is Group Executive Chairman of Connells Limited and in strict application of the criteria of the Combined Code is not considered to be independent. Colin Kemp has worked for HBOS companies for over 30 years and held the position as Managing Director of Halifax Estate Agencies Limited from January 2005 to December 2007. The Board considers thatboth Stephen Shipperley and Colin Kemp are independent in character and in particular both continue to challenge rigorously the executive directors and the Board as a whole. Whilst the composition of the Board for the period under review was not in strict compliance with supporting principle A3.2 of the Combined Code in that at least half of the directors (excluding the Chairman) are not considered independent non-executive directors, the directors believe that the Board currently operates effectively and that all the non-executive directors are fully independent of management and that Jonathan Agnew, Ashley Martin and Judy Vezmar are free from any business or other relationship that could materially interfere with the exercise of their independent judgment and advice to the Board. Neither the Chairman nor any of the executive directors hold any other non-executive directorships or commitments disclosable under the Combined Code. Biographical details of the directors appear on pages 10 and 11. Directors' remuneration The principles and details of directors' remuneration and contractual arrangements are contained in the Remuneration Report on pages 26 to 38. Board and committee membership and attendance In accordance with the Combined Code, the Articles of Association require all directors to seek re-election every three years. In addition all directors are subject to election by shareholders at the first opportunity after their appointment. As previously explained in the Directors' Report, Ed Williams, Nick McKittrick and Stephen Shipperley are required to seek re-election at the 2010 Annual General Meeting. Ashley Martin, who having been appointed since the last Annual General Meeting, will retire from the position as non-executive director and offer himself for election. The membership of the Committees of the Board and attendance at meetings for the year under review are set out in the table below: Remuneration Audit Nomination Board Committee Committee Committee Total meetings 7 4 4 2 Scott Forbes 7 4(1) N/A 2 Jonathan Agnew 7 4 4 2 Colin Kemp 6 N/A N/A N/A Ashley Martin 4(2) 2(2) 3(2) N/A Nick McKittrick 7 N/A N/A N/A Stephen 6 N/A N/A N/A Shipperley Judy Vezmar 7 3 4 2 Ed Williams 7 N/A N/A N/A The Remuneration Committee Chairman has requested that the Chairman of the Board attend the Remuneration Committee meetings. Ashley Martin has attended all Board, Audit and Remuneration Committee meetings since his appointment to the Board on 11 June 2009. In addition to the above meetings, the Chairman conducts meetings with the non-executive directors without the executive directors being present when required. Jonathan Agnew, the Senior Independent Director, chaired a meeting of the Board at which the performance of the Chairman was also reviewed (without the presence of the Chairman). Operation of the Board The Board is responsible to shareholders for the overall direction and control of the Group. Its key task is to approve strategy, ensuring the successful implementation of projects and proposals and monitoring the operating performance of the Group in pursuit of its objectives in the interest of maximising long-term shareholder value. The Board has adopted a formal schedule of matters requiring specific approval. These include, amongst other things, the approval of the annual business plan, capital structure, dividend policy, acquisitions and disposals, appointment and removal of officers of the Company, approval of the Half Year and Full Year results, shareholder communication and responsibility for corporate governance and review of the Group's risks and system of internal controls. The Board receives meeting papers one week prior to the meeting to allow sufficient time for detailed review and consideration of the documents beforehand. If any director has a concern about any aspect of the business conducted at any Board meeting, the Company Secretary shall discuss this with the director concerned and record their concern or comments in the Board minutes. The Board also receives monthly management and financial reports on the operational and financial performance of the business setting out actual and forecast financial performance against approved budgets in addition to other key performance indicators. The Board also receives copies of broker reports and press releases relating to the Group. At least once a year the Managing Director and the senior management team present a strategic review and an annual plan to the Board for review and approval. The Board normally schedules eight meetings each year although meetings can be scheduled at short notice at the request of any director or if required. In 2009 seven meetings were required. In addition to formal Board meetings, there is regular informal dialogue between all directors. Chairman and Managing Director There are clear written guidelines to support the division of responsibilities at the head of the Company with the roles of the Chairman and Managing Director separately held. The Chairman is responsible for the effective conduct of the Board, for communication with shareholders and for ensuring that each director uses their skills and experience to the benefit of the Board's decision making. With the assistance of the Company Secretary, the Chairman monitors the information provided to the Board to ensure that it is sufficient, pertinent, timely and clear. The Managing Director has day-to-day executive responsibility for the running of the Group, leading the executive and operational teams in developing strategies and delivering results against defined targets to enable the Group to meet its objectives. Board training The breadth of management, financial and listed company experience of the non-executive directors is described in the biographical details on pages 10 and 11, and demonstrates a range of business expertise that provides the right mix of skills and experience given the size of the Company. There are procedures in place for individual Board members to receive induction and training as appropriate and to seek the advice and services of independent professional advisers, at the Company's expense, where specific expertise or training is required in the course of their duties. The directors disclose a qualifying third-party indemnity provision between the Company and its directors and officers as provided by the Articles of Association of the Company, which was in force at the date of this report. The Group has also arranged directors' and officers' insurance cover in respect of legal action against the directors. The Group has set out written policies in compliance with a code of securities dealings in relation to the shares and equivalent to the Model Code published in the Listing Rules. The code applies to all directors, other persons discharging managerial responsibility and other relevant employees. Board evaluation The Board conducted a Board evaluation exercise in quarter four of 2009 which was led by the Chairman, assisted by the Company Secretary. All directors completed a comprehensive questionnaire inviting feedback on the performance and operation of the Board. The results were discussed at a Board meeting in December 2009, with all scores exceeding performance recorded in 2007 and 2008. Accordingly the Board agreed that it was operating effectively and no actions were required for the forthcoming year. In addition each director completed an individual questionnaire on the performance of each of their Board colleagues and feedback was provided at one-to-one meetings conducted by the Chairman. At a meeting chaired by Jonathan Agnew, Senior Independent Director, the Board provided input into and reviewed the performance of the Chairman. Relations with shareholders The Board is accountable to shareholders for the performance and activities of the Company and the Chairman ensures that effective communication with shareholders takes place. Within the terms of the regulatory framework, the Company has conducted regular dialogue with shareholders through ongoing meetings with institutional investors and research firms to discuss strategy, operating performance and financial performance. Contact in the UK is principally with the Managing Director and Chief Operating Officer and Finance Director. The Chairman also participates in the USA bi-annual investor road shows. In 2009, Jonathan Agnew, the Senior Independent Director consulted major shareholders on the remuneration policy for the executive directors and is also available to shareholders if they wish to supplement communication or if contact through the normal channels is inappropriate. Shareholders are also kept up to date with the Group's activities through the Full Year and Half Year Reports and the investor relations section of its website, which provides details of all the directors, latest news, including financial results, investor presentations and Stock Exchange announcements. The Board is kept informed of the views and opinions of those with an interest in the Company through reports from the Managing Director and Chief Operating Officer and Finance Director as well as reports from the Company's joint brokers, UBS and Numis. All directors receive notification of any changes in the status of substantial shareholders and at each Board meeting an update is given by the executive directors on the movements in major shareholdings and on the views and opinions of those with an interest in the Company. Conflicts of interest In cases of doubt, the Chairman of the Board is responsible for determining whether a conflict of interest exists. Annual General Meeting All shareholders are invited to participate in the Company's Annual General Meeting on 5 May 2010 where all directors will be available to answer questions and will also be available for discussions with shareholders prior to and after the meeting. The Company will arrange for the Annual Report and Accounts and related papers to be available on the Company's corporate website at www.rightmove.co.uk/ investors.rsp or posted to shareholders (where requested) so as to allow at least 20 working days for consideration before the Annual General Meeting. The Company also complies with the Combined Code with the separation of all resolutions put to the vote of shareholders. The Company proactively encourages shareholders to vote at general meetings by providing electronic voting for shareholders who hold their shares through the Crest system and provides personalised proxy cards to ensure that all votes are clearly identified. The Company presently takes votes at general meetings on a show of hands on the grounds of practicality due to the limited number of shareholders in attendance. Votes are taken by a poll at any shareholder meeting where legally required. All proxy votes are counted and the level of proxy votes including abstentions lodged for each resolution are reported after each resolution and published on the Company's website. Board committees The Board has established three principal committees, the Audit Committee, the Remuneration Committee and the Nomination Committee, each of which operates within written terms of reference approved by the Board. No person other than a Committee member is entitled to attend the meetings of these Committees, except by invitation of the Chairman of that Committee. Remuneration committee The Remuneration Committee consists of the three independent non-executive directors, Jonathan Agnew (who is Chairman), Judy Vezmar and Ashley Martin. In addition, the Remuneration Committee Chairman has requested that the Chairman of the Board attend the Remuneration Committee meetings. The quorum for meetings of the Remuneration Committee is two members. The Remuneration Committee will meet at such times as may be necessary but will normally meet at least twice a year. The purpose of the Remuneration Committee is to ensure that the Company's executive directors and senior executives are properly incentivised and fairly rewarded for their individual contributions to the Company's overall performance having due regard to the interests of the shareholders and to the financial and commercial health of the Group. The Remuneration Committee's terms of reference are available on the Company's website, www.rightmove.co.uk/investors.rsp or by request from the Company Secretary. The Company Secretary acts as Secretary to the Committee. The Chairman of the Remuneration Committee reports to the Board on the Remuneration Committee's behalf after each meeting. During 2008 the Committee appointed Hewitt New Bridge Street (HNBS), remuneration consultants, to assist with a review of the remuneration policy and to set the remuneration for the executive directors and senior management for 2009. During 2009, the Committee implemented the new remuneration policy and sought HNBS's input in terms of the general remuneration environment and changes in market sentiment and practice. A detailed report on the Company's remuneration policy and the work of the Remuneration Committee is available in the Remuneration Report on pages 26 to 38. Nomination committee The Nomination Committee consists of Scott Forbes (who is also Chairman of the Board), Jonathan Agnew and Judy Vezmar as independent non-executive directors. The quorum for meetings of the Nomination Committee is two members. The Chairman of the Company may not chair the Nomination Committee in connection with any discussion about the appointment of his successor to the chairmanship of the Company. In these circumstances, the Senior Independent Director will take the chair. Appointments are for a period of up to three years, extendable by no more than two additional three year periods, so long as members continue to be independent. The Nomination Committee meets at such times as may be necessary and normally meets at least twice a year. The purpose of the Nomination Committee is to consider and make recommendations to the Board about the composition of the Board, including proposed appointees, and whether to fill any vacancies that arise or to change the number of Board members. The Nomination Committee's terms of reference are available on the Company's website, www.rightmove.co.uk/investors.rsp or by request from the Company Secretary. During the year the Nomination Committee appointed Korn Ferry to assist with the search for a new non-executive director and recommended the appointment of Ashley Martin to the Board as non-executive director and Audit Committee Chairman. In addition, the Nomination Committee reviewed the organisation structure, approved the plans for the succession of the executive directors and the senior management team, agreed the process for the Board's annual evaluation and conducted an annual review of its terms of reference. Audit committee The Audit Committee consists of the three independent non-executive directors, Ashley Martin (who is Chairman), Judy Vezmar and Jonathan Agnew. Ashley Martin is the Finance Director of Rok plc and was previously Group Finance Director of the media services group, Tempus Group plc and having relevant financial skills and experience, was appointed to the role of Audit Committee Chairman on his appointment to the Board in June 2009. The quorum for meetings of the Audit Committee is two members. Appointments to the Committee are for a period of up to three years, extendable by no more than two additional three year periods, so long as members continue to be independent. The Audit Committee meets at least four times a year and more often if necessary. Two of its meetings are prior to the announcement of the Half Year and Full Year results of the Group, when the external auditor is in attendance. The Company Secretary acts as Secretary to the Committee. The Chief Operating Officer and Finance Director and Financial Controller are normally invited to attend the meetings. The Chairman of the Audit Committee reports to the Board on the Audit Committee's behalf after each meeting. The Audit Committee assists the Board in the discharge of its duties concerning the announcement of results, the Annual and Half Year Reports and the maintenance of internal controls. It reviews the scope and planning of the audit and the auditor's findings and considers the Group's accounting policies and the compliance with those policies and applicable legal and accounting standards. The Audit Committee has authority to investigate any areas of concern as to financial impropriety that arise and to obtain outside legal or other independent professional advice in connection therewith. The Audit Committee's principal duties and terms of reference are available on the Company's website, www.rightmove.co.uk/investors.rsp or by request from the Company Secretary. During 2009 the Committee has, amongst other matters, approved the appointment of the external auditors, fixed their remuneration and reviewed the effectiveness of the external audit process. The Committee has also considered the need for an internal audit function. Given the simplicity of the organisational structure, the open and accountable culture with clear authority limits, the straightforward financial model and systems and the fact that the management team and Board conduct regular financial reviews, the Committee recommended to the Board that an internal audit function was not currently appropriate for the business. This decision is kept under regular review. The Committee also discussed its responsibilities to safeguard the audit objectivity and independence as well as the needs of the business and agreed that it was practical in many cases for the auditors to be assigned to other non-audit project work due to their knowledge and expertise of the business. This would usually relate to corporate transaction advice and tax compliance. The Committee agreed a policy that management be given authority to incur non-audit fees up to 50% of the annual agreed audit and tax fee in any financial year without the prior approval of the Audit Committee. In 2009 the non-audit fees were Â£2,000 in relation to other advisory services and are fully disclosed in Note 6 of the financial statements. Combined with the induction programme for Ashley Martin, the Committee also requested presentations regarding the availability of the Rightmove.co.uk website and its disaster recovery processes and also the billing and revenue recognition controls and processes. The Committee reviewed the Annual and Half Year Reports. The external auditors also presented the results of their review of the 2008 Full Year and 2009 Half Year results as well as their audit plan to the Audit Committee. In addition to receiving reports from the external auditors, members met with the external auditors without the presence of the executive directors. The Committee also reviewed the whistleblowing policy (which provides the procedure for staff to report any concerns that they may have independent of management about suspected misconduct without fear of retaliation) and conducted an annual review of its terms of reference. Internal controls The Board of directors 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 2009 and up to the date of the approval of these 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 of directors; A comprehensive system of planning, budgeting and monitoring Group results. This includes monthly management reporting and monitoring of performance against both budgets and forecasts with explanations for all significant variances; An organisational structure with clearly defined lines of responsibility and delegation of authority; Clearly defined policies for capital expenditure and investment exist, including appropriate authorisation levels, with larger capital projects, acquisitions and disposals requiring Board approval; A comprehensive disaster recovery plan based upon co-hosting of the Rightmove.co.uk website across three separate London locations, which is regularly tested and reviewed; A treasury function which manages net debt against cash flow forecasts and is responsible for monitoring compliance with bank covenants; and A whistleblowing policy of which all employees are made aware, to enable concerns to be raised either with line management or, if appropriate, confidentially outside the line management structure. Through the procedures outlined above, the Board of directors has considered all significant aspects of internal control for the year and up to the date of this Annual Report and Accounts. Going concern The Board of directors is required under the Combined Code to consider whether or not it is appropriate to adopt the going concern basis in preparing the Group and the parent Company financial statements. As part of its normal business practice the Group prepares annual and longer term financial plans. In addition, a going concern paper was prepared and presented to the Audit Committee in February 2010 prior to it recommending the approval of the financial statements and notes to the accounts for the year ended 31 December 2009 to the Board of directors. After reviewing this, the Board of directors has a reasonable expectation that the Group has adequate resources and banking facilities to continue in operational existence for the foreseeable future. Accordingly they continue to adopt the going concern basis in preparing the financial statements. Further information is provided in Note 1 to the financial statements. Statement of directors' responsibilities in respect of the Annual Report and financial statements The directors are responsible for preparing the Annual Report and the Group and parent Company financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare Group and parent Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent Company financial statements on the same basis. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period. In preparing each of the Group and parent Company financial statements, the directors are required to: â€¢ select suitable accounting policies and then apply them consistently; â€¢ make judgments and estimates that are reasonable and prudent; â€¢ state whether they have been prepared in accordance with IFRSs as adopted by the EU; and â€¢ prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent Company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. REMUNERATION REPORT As required by Section 420 of the Companies Act 2006, the directors present the report on directors' remuneration for the year ended 31 December 2009. 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. The Company has complied with Section B of the Combined Code on Corporate Governance (Combined Code). 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 5 May 2010. Part I This part of the Remuneration Report is not subject to audit. The Remuneration Committee Terms of reference The Remuneration Committee's primary role is to make recommendations to the Board as to the Company's broad policy and framework for the remuneration of the executive directors, the Chairman of the Board and the Company Secretary. In accordance with the Combined Code, the Remuneration Committee also recommends the structure and monitors the level of remuneration for the first layer of management below Board level. The Remuneration Committee is also aware of and advises on the employee benefit structures throughout the Company and its subsidiaries and ensures that it is kept aware of any potential business risks arising from remuneration arrangements throughout the Company. The Remuneration Committee has formal terms of reference which are reviewed annually and updated as required. These are available on the Company's website at www.rightmove.co.uk/investors.rsp or on request from the Company Secretary. Membership The Remuneration Committee consists of independent non-executive directors, these being at the date of this report, Jonathan Agnew (Chairman), Ashley Martin and Judy Vezmar. Only members of the Remuneration Committee have the right to attend Remuneration Committee meetings. The Chairman of the Remuneration Committee has however requested that Scott Forbes, the Chairman of the Board, attend the meetings except during discussions relating to his own remuneration. The Company Secretary acts as the Secretary of the Remuneration Committee and normally attends the meetings. Ed Williams, Managing Director, may also be invited to meetings and the Remuneration 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 Remuneration Committee will meet at such times as may be necessary but normally meets at least twice a year. During 2009 the Remuneration Committee met four times and the attendance is shown below: Number of meetings attended Name of director Jonathan Agnew 4 out of 4 Judy Vezmar 3 out of 4 Ashley Martin (appointed 11 June 2009) 2 out of 2 Nigel Cooper (retired 31 March 2009) 1 out of 1 Advice During 2008, Hewitt Associates (trading as Hewitt New Bridge Street (HNBS)) was engaged by the Remuneration Committee to review the executive director remuneration policy. The policy had been established prior to the IPO in 2006 and was designed to apply for the first three years following the IPO. As the three year period had elapsed, the Remuneration Committee commissioned an independent review by HNBS to assist in its determination of an appropriate future remuneration framework for executive directors from 2009. During 2009, HNBS's input was sought in terms of the general remuneration environment and changes in practice, although they were not formally engaged to conduct any further review. Some of the changes to remuneration policy reported below for 2010 were a result of or in line with recommendations made in the 2008 review, but were not implemented for 2009 owing to the prevailing economic environment and the market challenges facing the Group at that time. During the year HNBS also provided services in connection with the valuation of share-based incentive awards (as required by IFRS 2) to the Company and confirmed that, in their view, this service did not present a conflict of interest with the services provided to the Remuneration Committee. Remuneration policy The key principles of the Remuneration Committee's policy are as follows: Remuneration arrangements should be designed so as to provide executive directors with the opportunity to receive a share in the future growth and development of the Company which is regarded as fair by both other employees and by shareholders. This approach should allow the Company to attract and retain the sort of dynamic, self-motivated individuals who are critical to the success of the business. Executive directors should have significantly below market levels of base salary, minimal benefits (and only benefits which are made available on the same basis to all Rightmove employees) and above market levels of variable pay potential. This arrangement is designed to best align the interests of the executive directors with the interests of shareholders. As far as possible, remuneration arrangements should be simple to understand and administer. As far as possible, changes to remuneration should be made infrequently and those changes made each year should, in most instances, be directly linked to the policies applied to all employees (specifically with regard to rises in base salary and changes to benefits). Executive directors should be principally rewarded for the overall success of the business for which they have collective responsibility. The Company has key short-term, medium-term, and long-term strategic goals and executive directors should be incentivised against all these goals. Executives should not be able to gain significantly from short-term successes which subsequently prove not to be consistent with growing the overall value of the business. Hence a majority of any bonus payable in relation to short-term strategic goals is to be in the form of Rightmove plc shares which are deferred for a further two years from when the bonus target has been achieved. 2009 Remuneration Last year's resolution to approve the Remuneration Report received a vote of 76% in favour at the 2009 Annual General Meeting. Some adverse comments from UK investor bodies resulted in votes against the Remuneration Report, which we wish to address. The Remuneration Committee and the Board believe that Rightmove's remuneration policy has served the business and shareholders well including during recent periods when the challenging economic environment created concern about the remuneration of boards of directors and senior executives generally. The Remuneration Committee wishes to take this opportunity to clarify not only the policy, but the underlying rationale behind the policy, how it believes this policy has served well in 2009 and why it intends to continue with the policy. Rightmove's remuneration policy is based on a fundamental belief that growth oriented companies should reward executives with demonstrably lower than market base salaries and benefits and higher than market equity rewards which are contingent upon challenging performance criteria. As a direct result of these principles, some aspects of the policy are not in line with the guidelines produced by UK investor advisory bodies, although we believe that Rightmove's remuneration meets the established objectives of those same advisory bodies. In several cases the fact that Rightmove's policy appears not to be in line with the guidelines of these advisory bodies is a direct consequence of the way in which some guidelines are structured. In particular bonus and long-term incentives are expressed as a percentage of base salary which results in seemingly high percentage levels of bonus and long-term incentives. As illustrated below, the Remuneration Committee and the Board believe that in absolute terms the levels of these elements of remuneration are, at most, in line with companies of a similar market capitalisation. The high percentages result purely from the policy of paying substantially lower quartile base salaries, itself an explicit component of Rightmove's remuneration policy. We believe that in 2009 the remuneration policy has worked well given the following: The low level of base salary and benefits by market standards positioned the business to continue to operate with a low level of fixed cost at a time when revenue was falling, following the collapse in the UK housing market in 2008. The actual performance, which has resulted in an increase in underlying operating profit and contributed to the strong share price performance in the year, has in part been achieved by extending Rightmove's leadership position in terms of site traffic and retaining all Rightmove's key customers as well as significantly reducing costs. These, together with a target for underlying operating profit, have resulted in payment of a full bonus which the Remuneration Committee believes is appropriate in the context of the business performance relative to prevailing market conditions in the property and media industries. The 2009 bonus for executive directors will, therefore, comprise 75% of salary paid in cash and 125% of salary paid to Ed Williams and 100% to Nick McKittrick respectively in the form of deferred shares to be awarded in March 2010 and vest in March 2012. The share option scheme and deferred bonus in the form of Rightmove shares mean that the substantial majority of the executive director's remuneration for 2009 will only be realisable in 2012 and the value of it will be directly related to share price performance two years hence. The Board believes that the nature of Rightmove's business affords little potential for management to drive short-term performance to the detriment of longer term performance. Nonetheless the remuneration structure affords shareholders a high degree of protection in this respect. The business has retained all the key senior executives whom it wished to retain during a period when at times the short-term prospects were challenging and the exercise price of all outstanding share options was considerably below the then share price. Remuneration for 2010 On the recommendation of the Remuneration Committee, the Board of directors has agreed remuneration for 2010 based on the framework established last year and is implementing the policy stated above. The only changes to the remuneration of the executive directors in comparison with the previous year are: An increase in base salary levels of 4%, the amount to be awarded to all employees in good standing from 1 January 2010 and following a salary freeze applied to all employees and all directors for the duration of 2009. Significantly more challenging profit targets (reflecting the more stable economic outlook) to trigger bonus entitlement in 2010. An increase in the maximum potential bonus from 175% of salary to 200% of salary and share options from 300% of salary to 350% of salary for Nick McKittrick, in recognition of his successfully undertaking the role of Finance Director in addition to that of Chief Operating Officer. The use of an equal mixture of earnings per share (EPS) and relative Total Shareholder Return (TSR) performance measures to determine the ability to exercise options granted in 2010. Base salary The current salaries for the executive directors with effect from 1 January 2010 are set out in the table below: Salary year ended Salary 31 December 2008 and 31 December 2009 Increase in salary 1 January 2010 Executive directors(1) Ed Williams Â£217,239 Â£208,884 4% Nick McKittrick Â£217,239 Â£208,884 4% (1) The executive directors' basic salaries made up 3.3% of the Group's basic salary cost in 2009. Annual performance-related bonus In 2010 the executive directors will be eligible to receive a bonus of 75% of base salary in cash with an opportunity of earning up to a further 125% of salary in deferred shares. Shares will be deferred for two years and be potentially forfeitable over that period. The bonus will, as in previous years, be determined principally (70%) by underlying operating profit 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-based incentives The Company has established executive share option plans designed to align the interests of employees with the long-term success of the business. The Remuneration Committee intends to make a grant in March 2010 of market value share options over shares worth 400% of salary to Ed Williams and 350% of salary to Nick McKittrick in order to ensure the retention and motivation of these key individuals. These awards are within the exceptional annual award limits of the unapproved share option plan. As outlined above, the Remuneration Committee believes that awards of this multiple of salary are entirely appropriate given the deliberate policy of setting lower quartile base salaries for the directors. Options will only be exercisable in the event of prior satisfaction of a performance condition. As indicated in last year's report, the Remuneration Committee believes that an EPS growth target is the most appropriate type of performance condition for the business in normal operating conditions. However, given the market uncertainty for 2009, the Remuneration Committee applied a relative TSR performance condition to the share option awards made in March 2009. The Remuneration Committee has reviewed the performance conditions to apply to awards of options in 2010 and, reflecting the more stable economic outlook, has decided to make these awards subject to an equal measure of TSR performance and growth in the Group's EPS. The vesting of 50% of the award will be dependent on a relative TSR performance condition measured over a three-year performance period. TSR performance of the Company relative to the FTSE 250 Index % of half of the 2010 options exercisable Less than the Index 0% Equal to the Index 25% 25% higher than the Index(1) 100% Intermediate performance Pro-rata on a sliding scale e.g. if the FTSE 250 Index's TSR was 50% over the three-year period, then the Company's TSR would have to be at least 75% for all 50% of the 2010 options subject to the TSR performance condition to be exercisable. The vesting of the other 50% of the 2010 award will be dependent on the satisfaction of EPS growth targets over a three-year vesting period. The Remuneration Committee has decided to calculate the EPS denominator based on the diluted number of shares in issue at the period end and will apply the standard corporation tax rate prevailing at the end of the performance period to underlying operating profit. This will avoid any positive or adverse swings in the Group's tax rate which have in the past been significant and which for the year ended 31 December 2009 (the base year by which the performance of the 2010 awards will be measured) significantly increased EPS. Therefore, the EPS figure used for this purpose will be the equivalent to the Group's reported diluted underlying EPS but with a standard tax rate applied (Normalised EPS) and will be disclosed in the Report & Accounts. The Remuneration Committee has applied more stretching targets to awards made over 200% of salary. The following vesting schedule will apply to 50% of the 2010 share option awards dependent on the Group's Normalised EPS measured over a three-year performance period: Aggregate Normalised EPS growth % of quarter of the % of quarter of the over the three-year performance 2010 options 2010 options period(1) exercisable exercisable 25% 0% 45% 100% 0% 65% 100% Straight line vesting between these points (1) Assuming no change in the standard corporation tax rate before the end of the performance period, the benchmark Normalised EPS for 2009 from which these growth targets will be measured is 26.7p. All existing executive share-based incentives can be satisfied from shares held in The Rightmove Employees' Share Trust (EBT). It is intended that the 2010 share-based incentive awards would also be settled from shares currently held in the EBT or from shares held in treasury so that the Company will not need to issue new shares. The non-executive directors do not participate in or benefit from any of the Company's share incentive or bonus plans except that Scott Forbes (non-executive Chairman) received Pre- admission options in consideration for the work involved in the IPO and in accordance with his contractual agreement on appointment in 2005. Executive directors are also eligible to participate in the Company's employee Sharesave scheme. Ed Williams and Nick McKittrick had both contributed to the 2006 Sharesave contract to the maximum amounts permitted under the scheme. The contract matured on 1 November 2009 when both directors opted to exercise and sell all the shares received on exercise. Further details are included in the table "Directors' interests in options to purchase ordinary shares" on page 36.Ed Williams and Nick McKittrick have both contributed to the 2009 Sharesave contract to the maximum amounts permitted under the scheme. Shareholding requirement To be consistent with best practice, a formal share ownership guideline has been introduced for executive directors requiring them to retain at least half of any future share awards vesting as shares (after selling sufficient shares to meet the exercise price and to pay tax due on the vesting of the shares) 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 38. Other benefits The executive directors are entitled to private medical insurance and to life assurance cover equal to four times basic annual salary. Pensions In 2007, the Company launched a new stakeholder pension plan for Rightmove Group employees which commenced on 1 January 2008. The employer contributes 6% of basic salary (to a maximum of Â£3,000 each year) subject to the employee contributing a minimum of 3% of basic salary. Participation in the plan was extended to the executive directors with effect from 1 January 2009. Ed Williams and Nick McKittrick have chosen not to participate in the Company pension arrangements. The Company does not contribute to any personal pension arrangements. External appointments With the approval of the Board of directors in each case, executive directors may accept one external appointment as a non-executive director of another company and retain any fees received. Ed Williams and Nick McKittrick do not hold any external appointments as non-executive directors. Chairman's and non-executive directors' fees The fee levels of the Chairman and the non-executive directors were set at the start of 2006 and have not been increased to reflect inflation or rises in comparable fees elsewhere. The external review of directors' remuneration conducted towards the end of 2008 recommended increases to the aggregate fees paid to the Chairman and non-executive directors to better align fees with the current market fee levels in comparable size businesses. However, the Board took the view that any increase for 2009 was inappropriate in the context of a freeze on employee salaries and the likely short-term prospects for the business. Given the changed circumstances, the Board of directors has decided that an increase in the base fees for the Chairman and non-executive directors in line with basic salary increases within the Rightmove business since 2006 (2007: 3%; 2008: 4%; 2009: 0%; 2010: 4%) would result in annual fees approximating market fees for comparable size businesses. It is the intention of the Board to increase fees 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 is considered appropriate to conduct a wider review of non-executive director remuneration. The Chairman is entitled to receive a fee of Â£100,000 per annum (2009: Â£ 90,000). The other non-executive directors are entitled to receive a fee of Â£40,000 per annum (2009: Â£35,000) for their basic role and an additional Â£5,000 fee per annum (2009: Â£5,000) is paid for the chairing of the Audit and Remuneration Committees. Jonathan Agnew is paid a further Â£5,000 fee per annum (2009: Â£ 5,000) as Senior Independent Director. The non-executive directors' fee levels are within the limits set by the Articles of Association of the Company. The current fee levels for the non-executive directors with effect from 1 January 2010 are set out in the table below: Fee Fee year ended Increase Average annual increase 1 January 2010 31 December 2009 in fee in fee since 2006 Scott Forbes Â£100,000 Â£90,000 11% 3% Jonathan Agnew Â£50,000 Â£45,000 11% 3% Colin Kemp (1) (2) Â£40,000 N/A N/A N/A Ashley Martin(2) (3) Â£45,000 Â£40,000 12% N/A Stephen Shipperley (2) Â£40,000 Â£35,000 14% 3% Judy Vezmar Â£40,000 Â£35,000 14% 3% Colin Kemp, non-executive director, waives his fee whilst employed by the Lloyds Banking Group, the fee having been waived in full in 2009 and continues to be waived as at the date of this report. Either not actually on the Board or not entitled to a fee in 2006, but fees earned since being eligible for a fee have been set at 2006 rates. Appointed to the Board on 11 June 2009. The fee payable was Â£35,000 per annum base fee with Â£5,000 per annum payable for chairing the Audit Committee. The actual fee paid was pro-rata for the period from 11 June 2009 to 31 December 2009, being Â£22,154. Directors' service contracts and non-executive directors' terms of appointment The Remuneration Committee's policy on service agreements for executive directors is that they should provide for 12 months' notice of termination by the Company and by the executive. Any proposals for the early termination of the service agreements of directors or senior executives are considered by the Remuneration Committee. The service agreements for the executive directors (Ed Williams and Nick McKittrick) 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 36. The Letters of Appointment for Jonathan Agnew, Ashley Martin and Judy Vezmar (the independent non-executive directors) provide for a term of up to two three-year periods (subject to re-election by shareholders) with a notice period of three months on either side and also set out the time commitments required to meet the expectations of their roles. The Letters of Appointment for Stephen Shipperley and Colin Kemp provide that their appointments may be terminated by either party upon three months' written notice. Copies are available for inspection by request to the Company Secretary. Further details of all directors' contracts and Letters of Appointment are summarised on page 34. Directors' contracts and Letters of Appointment Date of Date of contract/(2) Notice Length of service appointment Letter of Appointment (months) at 26 February 2010 Executive directors Ed Williams (Managing 19 December 2000 7 February 2006 12 9 years 2 months Director) Nick 5 March 2004 7 February 2006 12 5 years 11 months McKittrick (1) Non-executive directors Scott Forbes 13 July 2005 21 February 2006 3 4 years 7 months (Chairman) Jonathan Agnew 16 January 2006 12 December 2005 3 4 years 1 month (Senior Independent Director) Colin Kemp 3 July 2007 4 December 2007 3 2 years 7 months Ashley Martin 11 June 2009 11 June 2009 3 8 months Stephen 30 June 2000 1 January 2009 3 9 years 8 months Shipperley Judy Vezmar 16 January 2006 12 December 2005 3 4 years 1 month Former Date of directors resignation Nigel Cooper 16 January 2006 12 December 2005 3 31 March 2009 (3) Graham 17 January 2006 7 February 2006 12 10 April 2009 Zacharias(4) (1) Nick McKittrick joined the Company in December 2000 and was appointed to the Board on 5 March 2004. His service with the Company at the date of this report is 9 years and 2 months. (2) The contracts of employment and the Letters of Appointment 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. (3) Nigel Cooper, non-executive director, retired from the Board on 31 March 2009. (4) Graham Zacharias, executive director, left the Company on 10 April 2009. Part II (Audited) Directors' remuneration The remuneration of the directors of the Company during the year for time served as a director is as follows: 2009 Basic Cash bonus Benefits in salary / payable(1) kind(2) fees 2009 total 2008 total Â£ Â£ Â£ Â£ Â£ Executive directors Ed Williams 208,884 156,663 989 366,536 276,717 (Managing Director) Nick McKittrick 208,884 156,663 943 366,490 276,436 Non-executive directors Scott Forbes 90,000 - - 90,000 90,000 (Chairman) Jonathan Agnew 45,000 - - 45,000 45,000 (Senior Independent Director) Colin Kemp(3) - - - - - Ashley Martin (4) 22,154 - - 22,154 - Stephen Shipperley 35,000 - - 35,000 - Judy Vezmar 35,000 - - 35,000 35,000 Former directors Nigel Cooper(5) 10,000 - - 10,000 40,000 Graham Zacharias 65,879 - 452 66,331 485,825 (6) (1) Bonus relates to the accrued cash payment in respect of the Full Year results for the year ended 31 December 2009. An award of deferred shares worth 125% and 100% of salary will additionally be granted to Ed Williams and Nick McKittrick respectively in March 2010 and vesting in 2012. The bonus payment reflects the increase in underlying operating profit and strong share price performance in the period, the extension of Rightmove's leadership position in terms of site traffic and the retention of all of Rightmove's key customers. The Remuneration Committee believes the resulting bonus payment is appropriate in the context of the business performance relative to prevailing market conditions in the property and media industries. (2) Benefits in kind for the executive directors relate to private medical insurance. (3) Colin Kemp waives his fee whilst employed by the Lloyds Banking Group, the fee having been waived in full in 2009 and continues to be waived as at the date of this report. (4) Ashley Martin was appointed to the Board on 11 June 2009. The fee received is from 11 June to 31 December 2009. (5) Nigel Cooper, non-executive director, resigned from the Board on 31 March 2009. (6) Graham Zacharias, executive director, left the Company on 10 April 2009. Included in the 2008 total was the contractual accrued payment payable for pay in lieu of notice and compensation for loss of office on the termination of his employment. Directors' interests in options to purchase ordinary shares Options Options held Price at held at Granted Exercise Exercised date of 31 December Vesting Expiry Date granted 1 January 2009 in year price in year exercise 2009 date date Executive directors Ed Williams Between (Managing 14/3/ Director) 2009 14/3/2006 and 14/ 13/3/ (Approved) 7,317 - Â£4.10 - N/A 7,317 3/2011 2016 Between 15/3/ 15/3/2006 2009 and 15/ 14/3/ (Unapproved) 1,981,412(1) - Â£3.35 300,000(1) Â£5.30 1,681,412 3/2011 2016 5/3/2009 373,007 5/3/ 4/3/ (Unapproved) - (3) Â£2.24 - N/A 373,007 2012 2019 2/10/2006 1/11/ 30/4/ (Sharesave) 3,648 - Â£2.59 3,648 (2) Â£5.30 - 2009 2010 1/10/2009 1/11/ 30/4/ (Sharesave) - 2,135 Â£4.25 - N/A 2,135 2012 2013 TOTAL 1,992,377 375,142 N/A 303,648 N/A 2,063,871 Nick Between 14/3/ McKittrick 2009 14/3/2006 and 14/ 13/3/ (Approved) 7,317 - Â£4.10 - N/A 7,317 3/2011 2016 Between 15/3/ 15/3/2006 2009 and 15/ 14/3/ (Unapproved) 987,047 - Â£3.35 - N/A 987,047 3/2011 2016 10/10/2007 15/03/ 9/10/ (Unapproved) 75,000(4) - Â£5.22 - N/A 75,000 2011 2017 5/3/2009 5/3/ 4/3/ (Unapproved) - 279,755(3) Â£2.24 - N/A 279,755 2012 2019 2/10/2006 1/11/ 30/4/ (Sharesave) 3,648 - Â£2.59 3,648(2) Â£5.30 - 2009 2010 1/10/2009 1/11/ 30/4/ (Sharesave) - 2,135 Â£4.25 - - 2,135 2012 2013 TOTAL 1,073,012 281,890 N/A 3,648 N/A 1,351,254 Non-executive director Scott Between Forbes 15/3/2006 15/3/ (Chairman) 1,738,729 (5) - Â£3.35 600,000 Â£5.41 1,138,729 2007 14/3/ (Unapproved) (5) and 15/ 2016 3/2009 Former director Options Price at held at Options held Granted Exercise Lapsed in date of date of Vesting Expiry Date granted 1 January 2009 in year price year exercise leaving date date Graham Between Zacharias 14/3/ (6) 2009 14/3/2006 and 14/ 13/3/ (Approved) 7,317 - Â£4.10 2,439 N/A 4,878 3/2010 2011 Between 15/3/ 15/3/2006 2009 and 15/ 14/3/ (Unapproved) 987,047 - Â£3.35 329,016 N/A 658,031 3/2010 2011 2/10/2006 (Sharesave) 3,648 - Â£2.59 3,648 N/A - N/A N/A TOTAL 998,012 - N/A 335,103 N/A 662,909 (1) Pre-admission options granted to Ed Williams under the Rightmove Unapproved Executive Share Option Plan, vest as to one third of the number of option shares on each of the third, fourth and fifth anniversaries of the date of the option grant. Accordingly, on 15 March 2009, one third (660,471) of the unapproved options granted to Ed Williams on 15 March 2006 became exercisable. On 5 November 2009, Ed Williams exercised 300,000 of the vested options at an exercise price of Â£3.35 and sold the shares received on exercise at a market value of Â£5.30 per share. The gross gain on exercise was Â£585,000. (2)On 1 November 2009, the 2006 Sharesave contract matured. Ed Williams and Nick McKittrick exercised their right to use the money in their Sharesave accounts to buy 3,648 shares at the option exercise price of Â£2.59, and subsequently sold all the shares on exercise at a market price of Â£5.30 per share. The gross gain on exercise was Â£9,886. (3) The options granted on 5 March 2009 are exercisable in 2012, subject to 100% TSR performance criteria based upon the performance of Rightmove's shares against the FTSE 250 Index for the period from 1 January 2009 to 31 December 2011. TSR performance of the Company relative to % of the 2009 options exercisable the FTSE 250 Index Less than the Index 0% Equal to the Index 25% 25% higher than the Index (1) 100% Intermediate performance Pro-rata on a sliding scale (1) e.g. if the FTSE 250 Index's TSR was 50% over the three-year period, then the Company's TSR would have to be at least 75% for all of the 2009 options to be exercisable. (4)The options granted on 10 October 2007 are exercisable on 15March 2011, subject to the basic earnings per share per the audited consolidated financial statements for the Group for the year ended 31 December 2010 being not less than 30p. (5) Pre-admission options granted to Scott Forbes under the Rightmove Unapproved Executive Share Option Plan, vest as to one third of the number of option shares on each of the first, second and third anniversaries of the date of the option grant. On 30 November 2009, Scott Forbes exercised 600,000 of the vested options at an option price of Â£3.35 and sold the shares received on exercise at a market value of Â£5.41 per share. The gross gain on exercise was Â£1,238,000. (6) At the date of leaving the Company on 10 April 2009, one third of the unapproved and approved options held by Graham Zacharias (a former executive director) lapsed. Graham Zacharias retained the right to exercise 658,031 unapproved share options and 4,878 approved options. One half of the options vested on 15 March 2009 and are exercisable for a period of 12 months from the date of leaving and one half are exercisable for a period of 12 months from the vesting date of 15 March 2010. Directors' interests in shares The interests (both beneficial and family interests) of the directors in office at 31 December 2009 in the share capital of the Company were as follows: Interests in Interests in ordinary shares of Â£0.01 share options At At At At 31 December 2009 1 January 2009 31 December 2009 1 January 2009 Executive directors Ed Williams (Managing Director) 2,407,995 2,407,995 2,063,871 1,992,377 Nick McKittrick 129,000 129,000 1,351,254 1,073,012 Non-executive directors Scott Forbes 619,300 619,300 1,138,729 1,738,729 (Chairman) Jonathan Agnew (Senior Independent 30,000 30,000 - - Director) Colin Kemp - - - - Ashley Martin 2,060 - - - Stephen - - - - Shipperley Judy Vezmar 31,343 31,343 - - (1) The Company's shares in issue (including 2,505,430 shares held in treasury) as at 31 December 2009 comprised 118,923,411 (2008: 120,050,873) ordinary shares of Â£0.01 each. (2) The mid-market share price of the Company was Â£1.76 as at 1 January 2009 and was Â£5.04 as at 31 December 2009. The mid-market high and low share prices of the Company were Â£5.94 and Â£1.59 respectively in the year. (3) The executive directors are regarded as being interested, for the purposes of the Companies Act 2006, in 7,418,874 (2008: 8,353,700) 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. (4) The directors' beneficial holdings represent 2.8% of the Company's shares in issue as at 31 December 2009 (2008: 2.7%) (excluding shares held in treasury). (5) 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 2009 in the share capital of the Company as a percentage of basic salary were as follows: Value of shares as a Number of shares Value of % of basic Basic salary held at shares at salary 31 December 2009 31 December 2009 31 December 2009 Executive directors Ed Williams (Managing Director) Â£208,884 2,407,995 Â£12,148,000 5,816% Nick McKittrick Â£208,884 129,000 Â£651,000 312% Jonathan Agnew Chairman, Remuneration Committee 26 February 2010 AUDITORS' REPORT THE INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF RIGHTMOVE PLC We have audited the Group and parent Company financial statements (the "financial statements") of Rightmove plc for the year ended 31 December 2009 set out on pages 41 to 77. 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. The 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 auditors' 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, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the Directors' Responsibilities Statement set out on page 25, 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 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/UKP. 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 2009 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 19 to 25 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 25, in relation to going concern; and the part of the Corporate Governance Statement on pages 19 to 25 relating to the Company's compliance with the nine provisions of the June 2008 Combined Code specified for our review. 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 26 February 2010 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2009 Year ended Year ended 31 December 2009 31 December 2008 Note Â£000 Â£000 Revenue 2 69,386 74,046 Administrative expenses (30,676) (34,555) Operating profit before share-based payments, NI on share-based incentives, and capital reconstruction credit 41,916 41,004 Share-based payments 24 (1,896) (1,998) NI on share-based incentives 24 (1,310) 240 Capital reconstruction credit 6 - 245 Operating profit 6 38,710 39,491 Financial income 8 199 630 Financial expenses 9 (1,088) (1,955) Net financial expenses (889) (1,325) Profit before tax 37,821 38,166 Income tax expense 10 (7,794) (12,663) Profit for the year being total comprehensive income 30,027 25,503 Attributable to: Equity holders of the Parent 30,027 25,503 Earnings per share (pence) Basic 11 27.52 22.49 Diluted 11 27.18 22.48 Dividends per share (pence) 12 10.00 9.00 Total dividends 12 10,894 10,358 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2009 31 December 31 December 2009 2008 Note Â£000 Â£000 Non-current assets Property, plant and equipment 13 1,393 1,883 Intangible assets 14 14,314 11,123 Deferred tax assets 21 2,722 164 Total non-current assets 18,429 13,170 Current assets Trade and other receivables 16 9,421 12,627 Cash and cash equivalents 17 25,893 23,059 Total current assets 35,314 35,686 Total assets 53,743 48,856 Current liabilities Loans and borrowings 19 (5,000) (39,750) Bank overdraft 19 - (172) Trade and other payables 18 (13,861) (12,418) Income tax payable (5,203) (5,787) Deferred consideration 27 (8,909) (6,133) Provisions 20 (6) (13) Total current liabilities (32,979) (64,273) Non-current liabilities Loans and borrowings 19 (17,500) - Deferred tax liabilities 21 (71) (92) Total non-current liabilities (17,571) (92) Net assets/(liabilities) 3,193 (15,509) Equity Share capital 23 1,189 1,201 Other reserves 23 243 231 Retained earnings/(deficit) 23 1,761 (16,941) Total equity attributable to the equity holders of the Parent 3,193 (15,509) 23 The financial statements were approved by the Board of directors on 26 February 2010 and were signed on its behalf by: Ed Williams Director Nick McKittrick Director COMPANY STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2009 31 December 31 December Note 2009 2008 Â£000 Â£000 Non-current assets Investments 15 538,501 537,668 Deferred tax assets 21 1,896 - Total non-current assets 540,397 537,668 Current assets Cash and cash equivalents 17 5,424 17,050 Total current assets 5,424 17,050 Total assets 545,821 554,718 Current liabilities Bank overdraft 19 - (172) Loans and borrowings 19 (5,000) (39,750) Trade and other payables 18 (62,933) (36,828) Total current liabilities (67,933) (76,750) Non-current liabilities Loans and borrowings 19 (17,500) - Total non-current liabilities (17,500) - Net assets 460,388 477,968 Equity Share capital 23 1,189 1,201 Other reserves 23 105,116 104,271 Retained earnings 23 354,083 372,496 Total equity attributable to the equity holders of the Parent 460,388 477,968 23 The financial statements were approved by the Board of directors on 26 February 2010 and were signed on its behalf by: Ed Williams Director Nick McKittrick Director CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2009 Year ended Year ended 31 December 2009 31 December 2008 Â£000 Â£000 Note Cash flows from operating activities Profit for the year 30,027 25,503 Adjustments for: Depreciation charges 13 646 648 Amortisation charges 14 482 452 Loss on disposal of property, plant and 13 94 - equipment Financial income 8 (199) (630) Financial expenses 9 1,088 1,955 Share-based payments charge 24 1,896 1,998 Income tax expense 10 7,794 12,663 Operating cash flow before changes in 41,828 42,589 working capital Decrease/(increase) in trade and other 3,199 (1,462) receivables Increase/(decrease) in trade and other 1,225 (2,296) payables Decrease in provisions (7) (160) Cash generated from operations 46,245 38,671 Interest paid (744) (1,480) Income taxes paid (10,783) (9,972) Net cash from operating activities 34,718 27,219 Cash flows from investing activities Interest received 206 667 Acquisition of property, plant and 13 (250) (491) equipment Acquisition of intangible assets 14 (28) (464) Proceeds from disposal of property, plant - 1 and equipment Net cash used in investing activities (72) (287) Cash flows from financing activities Dividends paid 12 (10,894) (10,358) Subsidiary dividends paid to minority 12 (870) - shareholders Purchase of shares for treasury 23 - (11,917) Purchase of shares for cancellation 23 (5,452) (32,840) Purchase of shares by The Rightmove Employees' Share Trust (EBT) (2,401) 23 - Share related expenses 23 (56) (287) Proceeds on exercise of share options 23 5,408 - Proceeds from borrowings 19 - 39,750 Repayment of borrowings 19 (17,250) - Debt issue costs (125) (200) Net cash used in financing activities (31,640) (15,852) 3,006 11,080 Net increase in cash and cash equivalents Cash and cash equivalents at 1 January 22,887 11,807 Cash and cash equivalents at 31 December 17 25,893 22,887 COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2009 Year ended Period ended 31 December 31 December 2008 Â£ 2009 000 Â£000 Note Cash flows from operating activities Loss for the period 23 (4,315) (5,637) Adjustments for: Financial income (91) (253) Financial expenses 1,624 2,758 Share-based payments charge 24 1,063 1,339 Income tax credit (673) - Operating cash flow before changes in working (2,392) (1,793) capital Decrease in trade and other receivables - 50 Increase in trade and other payables 25,275 35,602 Cash generated from operations 22,883 33,859 Interest paid (669) (1,332) Net cash from operating activities 22,214 32,527 Cash flows from investing activities Interest received 91 253 Net cash from investing activities 91 253 Cash flows from financing activities Dividends paid 12 (10,894) (10,358) Purchase of shares for treasury 23 - (11,917) Purchase of shares for cancellation 23 (5,452) (32,840) Share related expenses 23 (38) (287) Proceeds from borrowings 19 - 39,750 Repayment of borrowings 19 (17,250) - Debt issue costs (125) (200) Redemption of redeemable preference shares - (50) Net cash used in financing activities (33,759) (15,902) Net (decrease)/increase in cash and cash (11,454) 16,878 equivalents Cash and cash equivalents at beginning of the 16,878 - period Cash and cash equivalents at 31 December 17 5,424 16,878 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEAR ENDED 31 DECEMBER 2009 EBT Reverse Share Share shares Treasury Other acquisition Retained Total capital premium reserve shares reserves reserve earnings equity Group Note Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 At 1 January 1,327 105 (17,149) (19,362) - - 47,471 12,392 2008 Total comprehensive income Profit for the - - - - - - 25,503 25,503 year Transactions with owners recorded directly in equity Capital (33) (105) - 19,362 - 138 (19,362) - reconstruction Equity settled share-based 24 - - - - - - 1,998 1,998 incentives charge Dividends to 12 - - - - - - (10,358) (10,358) shareholders Purchase of shares for 23 - treasury - - (11,917) - - - (11,917) Purchase of own 23 - - - (32,840) - - - (32,840) shares Cancellation of 23 (93) - - 32,840 93 - (32,840) - own shares Share related 23 - - - - - - (287) (287) expenses At 1,201 - (17,149) (11,917) 93 138 12,125 (15,509) 31 December 2008 At 1 January 1,201 - (17,149) (11,917) 93 138 12,125 (15,509) 2009 Total comprehensive income Profit for the - - - - - - 30,027 30,027 year Transactions with owners recorded directly in equity Equity settled share-based 24 - - - - - - 1,896 1,896 incentives charge Tax in respect of share-based incentives recognised directly in 21 - - - - - - 174 174 equity Dividends to 12 - - - - - - (10,894) (10,894) shareholders Exercise of 23 - - 3,365 - - - 2,043 5,408 share options Purchase of own 23 - - (2,401) - - - - (2,401) shares Cancellation of own shares 23 (12) - - - 12 - (5,452) (5,452) Share related 23 - - - - - - (56) (56) expenses At 31 December 2009 1,189 - (16,185) (11,917) 105 138 29,863 3,193 COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEAR ENDED 31 DECEMBER 2009 Reverse Share Treasury Other acquisition Retained Total capital shares Â£ reserves reserve earnings equity Company Note Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 At 1 January 2008 - - - - - - Total comprehensive income Loss for the - - - - (5,637) (5,637) period Transactions with owners recorded directly in equity Share for share 433,490 - - - - 433,490 exchange Capital (432,196) - - 103,520 432,196 103,520 reconstruction Equity settled share-based incentives charge 24 - - - - 1,339 1,339 Capital 15 - - 658 - - 658 contribution Dividends to 12 - - - - (10,358) (10,358) shareholders Purchase of shares 23 - (11,917) - - - (11,917) for treasury Purchase of own 23 - (32,840) - - - (32,840) shares Cancellation of 23 (93) 32,840 93 - (32,840) - own shares Share related 23 - - - - (287) (287) expenses At 1,201 (11,917) 751 103,520 384,413 477,968 31 December 2008 At 1 January 2009 1,201 (11,917) 751 103,520 384,413 477,968 Total comprehensive income Loss for the year - - - - (4,315) (4,315) Transactions with owners recorded directly in equity Equity settled share-based incentives charge 24 - - - - 1,063 1,063 Tax in respect of share-based incentives recognised directly in equity 21 - - - - 1,223 1,223 Capital 15 - - 833 - - 833 contribution Dividends to 12 - - - - (10,894) (10,894) shareholders Cancellation of 23 (12) - 12 - (5,452) (5,452) own shares Share related 23 - - - - (38) (38) expenses At 31 December 2009 1,189 (11,917) 1,596 103,520 366,000 460,388 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 2009 comprise the Company and its interest in its subsidiaries (together referred to as the Group). Its principal business is the operation of the Rightmove.co.uk website, which is the UK's largest property website. The consolidated financial statements of the Group as at and for the year ended 31 December 2009 are available upon request to the Company Secretary from the Company's registered office or from the investor relations website at www.rightmove.co.uk/investors.rsp. The Company's registered office is 4th Floor, 33 Soho Square, London, W1D 3QU. Statement of compliance The consolidated and Company financial statements have been prepared and approved by the Board of directors in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (Adopted IFRSs) and issued by the International Accounting Standards Board (IASB). The consolidated financial statements were authorised for issue by the Board of directors on 26 February 2010. 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. The accounting policies set out below have been consistently applied to all the periods presented, unless otherwise stated. The financial statements have been prepared on an historical cost basis. Changes in accounting policies The accounting policies applied by the Group in these consolidated financial statements are in accordance with Adopted IFRSs and except as described below are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2008. The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 January 2009: Revised IAS 1 Presentation of Financial Statements (2007) introduces the term 'total comprehensive income' which represents changes in equity during the period other than those changes from transactions with owners in their capacity as owners. The Group has elected to present one performance statement being the statement of comprehensive income which replaces the income statement. Comparative information has been re-presented so that it is also in conformity with the revised standard. Since the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share. IFRS 2 Share-Based Payments - Vesting Conditions and Cancellations clarifies the definition of vesting conditions, introduces the concept of non-vesting conditions to be reflected in the grant date fair value and provides the accounting treatment for non-vesting conditions and cancellations. Revisions to IFRS 2 have been adopted in the calculation of share-based payments in the current year. The revisions had no significant impact to the financial statements in the prior year and accordingly the 2008 comparatives have not been restated. The change in accounting policy had no material impact on earnings per share. IFRS 8 Operating Segments introduces the 'management approach' to segment reporting under which segment information is presented on the same basis as that used for internal reporting purposes. This has resulted in an increase in the number of reportable segments presented, as the previously reported property advertising segment has been split into Agency, New Homes, Holiday Lettings and Other segments. Comparative segment information has been re-presented so that it is also in conformity with the revised standard. Since the change in accounting policy only impacts presentation and disclosure aspects, there is no impact on earnings per share. Going concern The Group has significant cash balances of Â£25,893,000 at 31 December 2009 (refer Note 17). As described in Note 19, the Company entered into a revolving loan facility of Â£39,750,000 during 2008. During 2009 Â£14,750,000 of the revolving loan facility was repaid and on 16 April 2009 the Company converted Â£25,000,000 into a five year term loan. In February 2010 a decision was made to repay the term loan early thereby extinguishing the debt (refer Note 31). Post repayment of the debt, the Group and the Company continued to be cash positive. The Group met all banking covenant requirements during the year. After making enquiries, the Board of directors has a reasonable expectation that the Group and the Company have adequate resources and banking facilities to continue in operational existence for the foreseeable future. Accordingly, the Board of directors continues to adopt the going concern basis in preparing the annual report and financial statements. Further information regarding the Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Business and Financial Review on pages 4 to 9. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Position on pages 7 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 (the Scheme) 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. The minority shareholders of Holiday Lettings (Holdings) Limited (HLHL) have a put option which if exercised requires Rightmove Group Limited to purchase their remaining 33.3% shareholding in HLHL (refer Note 27). In accordance with IAS 32, the option for the purchase of the remaining 33.3% shareholding along with the existing investment in HLHL of 66.7% has been accounted for at a consolidated level as if the Group holds 100% of the ordinary share capital in HLHL and consequently no minority interest is recognised. HLHL management can exercise the put option from 1 July 2009 based on either a multiple of EBIT per the latest audited accounts or HLHL's market value if higher. The impact on the consolidated statement of financial position is to recognise a liability of Â£ 8,909,000 which is based upon Rightmove Group Limited's best estimate of likely market value for the business. This has resulted in an increase of Â£2,776,000 in deferred consideration and a corresponding increase in goodwill. 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 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 14 Measurement of the recoverable amounts of cash generating units containing goodwill Note 21 Deferred tax assets and liabilities Note 24 Measurement of share-based payments Note 27 Estimate of deferred purchase consideration for HLHL 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 recorded under previous UK Generally Accepted Accounting Principles (GAAP). The classification and accounting treatment of business combinations that occurred prior to 1 January 2004 were not reconsidered in preparing the Group's opening IFRS statement of financial position at 1 January 2004. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is no longer amortised but is tested annually for impairment. This applies to all goodwill arising both before and after 1 January 2004. IFRS 1 permits goodwill on acquisitions made before this date to be brought onto the statement of financial position at 1 January 2004 at its carrying value under UK GAAP. (ii) Research and development The Group undertakes research and development expenditure in view of developing new products and improving the existing property websites. Expenditure on research activities, undertaken with the prospect of gaining new technical knowledge and understanding, is recognised in the profit or loss as incurred. Expenditure on development activities, whereby research findings are applied to a plan or design for the production of a new product or substantially enhanced website, is capitalised if the new product or the enhanced website is technically and commercially feasible and the Group has sufficient resources to complete development. The expenditure capitalised includes subcontractors and direct labour. Capitalised development expenditure is stated at cost less accumulated amortisation and accumulated impairment losses. Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed when incurred. (iii) Computer software Computer software is capitalised and is 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 by equal annual instalments over its estimated useful economic life as follows: Computer software 16.7% - 33.3% per annum (iv) Customer relationships Customer relationships are identified on the acquisition of a business and valued using discounted cash flows based on historical customer attrition rates. Amortisation is expensed in the profit or loss on a straight line basis over the estimated useful economic life as follows: Customer relationships 16.7% per annum (c) Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Depreciation is provided to write off the cost less the estimated residual value of property, plant and equipment by equal annual instalments over their estimated useful economic lives as follows: Office equipment, fixtures & fittings 20.0% per annum Computer equipment 20.0% per annum (d) Impairment The carrying value of the property, plant and equipment is reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount of non-financial assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the cash generating unit to which the asset belongs. Intangible assets that have an indefinite useful life and which are not available for use are not subject to amortisation but are tested for impairment annually and whenever there is an indication that they might be impaired. An impairment loss is recognised for the amount by which the carrying value of the asset exceeds its recoverable amount. Goodwill was tested for impairment at the IFRS transition date; no impairment was deemed necessary. An impairment test is performed annually at 31 December on goodwill regardless of the existence of impairment indicators. Investments are assessed for possible impairment when there is an indication that the fair value of the investments may be below the Company's carrying value. When such a condition is deemed to be other than temporary, the carrying value of the investment is written down to its fair value and the amount written off is included in net income. In making the determination as to whether a decline is other than temporary, the Company considers such factors as the duration and extent of the decline, the investee's financial performance and the Company's ability and intention to retain its investment for a period that will be sufficient to allow for any anticipated recovery in the investment's market value. (e) Financial instruments Trade receivables are recognised at fair value less any impairment loss. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Inter-group balances and transactions, and any unrealised income and expenses arising from inter-group transactions, are eliminated in preparing the consolidated financial statements. Trade payables are recognised at fair value. Trade payables are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs associated with borrowings. After initial recognition, loans and borrowings are subsequently measured at amortised cost and any difference between the proceeds and the redemption value is recognised in the profit or loss over the period of the borrowings using the effective interest method. The Group uses derivative financial instruments such as foreign currency contracts to hedge the risk associated with changes in foreign exchange rates. Such derivative financial instruments are initially measured at fair value on the contract date and are remeasured to fair value at subsequent reporting dates. The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The Company does not specifically designate forward exchange contracts as cash flow hedges and gains and losses are recorded directly in the profit or loss. (f) Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. (g) Provisions A provision is recognised when the Group has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risk specific to the liability. The unwinding of the discount is recognised as a finance cost. A provision is maintained in respect of vacant leasehold properties where the lease is considered to be onerous to take account of the net present value of residual lease commitments over the remaining term of the lease. (h) Employee benefits (i) Pensions The Group provides access to a stakeholder pension scheme into which employees may elect to contribute via salary deduction. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in the profit or loss when they are due. (ii) Employee share schemes The share option and deferred share plans allow certain senior management to acquire shares in the Company. An expense is recognised in the profit or loss, with a corresponding increase in equity, over the period to which the employees become unconditionally entitled, on equity settled share-based payment schemes granted after 7 November 2002 and which had not vested by 1 January 2005. Awards made before this date are not accounted for under IFRS 2, as permitted under the transitional rules of IFRS 1. For awards made after 7 November 2002 and not vested by 1 January 2005, the charge is based on the fair value of the share-based incentive granted as at the grant date, calculated using an option pricing model. Fair value is measured using either the Monte Carlo pricing model or Black Scholes model as is most appropriate for each scheme. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option behaviour), expected dividends, and risk-free interest rates (based on government bonds). Service and non-market performance conditions attached to the awards are not taken into account in determining the fair value. (iii) Own shares held by The Rightmove Employees' Share Trust (EBT) The EBT is treated as an agent of Rightmove Group Limited and as such EBT transactions are treated as being those of Rightmove Group Limited and are therefore reflected in the Group's consolidated financial statements. In particular, at a consolidated level, the EBT's purchases of shares in the Company are debited directly to equity. (i) Treasury shares and shares purchased for cancellation When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognised as a deduction from equity. Repurchased shares are either held in treasury or cancelled. (j) Revenue Revenue principally represents the amounts, excluding value added tax (VAT), receivable from customers in respect of properties advertised on Group websites. Revenue relating to properties advertised on the website is recognised in the month to which it relates. Estate agency and overseas branches are billed in advance with net revenue deferred until the service commencement date. The VAT liability is recognised at the point of invoice. New homes developers are typically billed monthly in arrears. Where invoices are raised on other than a monthly basis, the amounts are recognised as deferred or accrued revenue and released to the profit or loss on a monthly basis in line with the provision of services as stipulated in the contract terms. Holiday Lettings Limited (HLL) revenue is billed in advance. The majority of HLL revenue relates to a 12 month period although some is billed quarterly and half yearly. This revenue is spread equally over the period with any deferred revenue held on the statement of financial position. (k) Segmental reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components. An operating segment's operating results are reviewed regularly by the Group's Managing Director to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. (l) Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. Foreign currency differences arising on retranslation are recognised in the profit or loss. (m) Leases Operating lease rentals are charged to the profit or loss on a straight line basis over the period of the lease. Where cash is received in exchange for entering into a lease with rates above market value, this upfront payment is deferred and released on a straight line basis over the lease term. (n) Financial income and expenses Financial income comprises interest receivable on cash balances, deposits and dividend income. Interest income is recognised as it accrues, using the effective interest method. Dividend income is recognised on the date that the Group's right to receive payment is established. Financial expenses comprise debt issue costs, preference dividend interest and interest payable on bank loans. Interest payable is recognised on an accruals basis. (o) Taxation Income tax on the results for the year comprises current and deferred tax. Income tax is recognised in the profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous periods. Deferred tax is provided in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination and the differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted by the reporting date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. In accordance with IAS 12, the Group policy in relation to the recognition of deferred tax on share-based payments is to include the income tax effect of the excess tax deduction in the profit or loss to the value of the income tax charge on the cumulative IFRS 2 charge. The remainder of the income tax effect of the excess tax deduction is recognised in equity. (p) 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. (q) Earnings per share The Group presents basic, diluted and underlying earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, 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 11. 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 2009 and have not been applied in preparing these consolidated financial statements. The standards and interpretations to be adopted include: Effective date Revised IFRS 3 Business Combinations (2008) 1/1/2010 Amended IAS 27 Consolidated and Separate Financial Statements 1/1/2010 (2008) Revised IFRS 3 Business Combinations (2008) incorporates the following changes that are likely to be relevant to the Group's operations: The definition of a business has been broadened, which is likely to result in more acquisitions being treated as business combinations; Contingent consideration will be measured at fair value, with subsequent changes therein recognised in profit or loss; Transaction costs, other than share and debt issue costs, will be expensed as incurred; Any pre-existing interest in the acquiree will be measured at fair value with the gain or loss recognised in profit or loss; and Any non-controlling (minority) interest will be measured at either fair value, or at its proportionate interest in the identifiable assets and liabilities of the acquiree, on a transaction by transaction basis. Revised IFRS 3, which becomes mandatory for the Group's 2010 consolidated financial statements, will be applied prospectively and therefore there will be no impact on prior years. Amended IAS 27 Consolidated and Separate Financial Statements (2008) requires accounting for changes in ownership interests by the Group in a subsidiary, while maintaining control, to be recognised as an equity transaction. When the Group loses control of a subsidiary, any interest retained in the former subsidiary will be measured at fair value with the gain or loss recognised in profit or loss. The amendments to IAS 27, which become mandatory for the Group's 2010 consolidated financial statements, are not expected to have a significant impact on the consolidated financial statements. 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 90.5% 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 ensures 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, before financing activities, for a period of 277 days (2008: 113 days). As at 31 December 2009 the Group had bank borrowings of Â£22,500,000 (2008: Â£ 39,750,000). On 10 February 2010 the loan was repaid in full without penalty (refer Note 31). Market risk Market risk is the risk that changes in market prices such as foreign exchange and interest rates will affect the Group's income. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk. Currency risk More than 99.9% of the Group's sales are Sterling denominated, with the balance being Euro denominated. As the value of Euro denominated trade receivables is low in relation to total receivables, no amounts are hedged. HLL purchases forward exchange contracts to hedge the currency risk associated with changes in US Dollar exchange rates in respect of search marketing services supplied by Google (refer to Note 29). Interest rate risk The Group and Company have interest bearing financial liabilities. The Group and Company are exposed to interest rate risk on the bank loan facility and cash balances. Operational risk Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Group's processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Group's operations. The Group's objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Group's reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity. The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management within each business unit. This responsibility is supported by the development of overall Group standards for the management of operational risk in the following areas: requirements for appropriate segregation of duties, including the independent authorisation of transactions; requirements for the reconciliation and monitoring of transactions; compliance with regulatory and other legal requirements; documentation of controls and procedures; requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the risks identified; requirements for reporting of operational losses and proposed remedial action; development of contingency plans; training and professional development; and risk mitigation, including insurance where this is effective. Capital management The Board of directors policy is to maintain an efficient statement of financial position with an appropriate level of leverage for the size of the business so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of directors considers that the future working capital and capital expenditure requirements of the Group will continue to be low and accordingly return on capital measures are not key performance targets. The Board of directors monitors the spread of the Company's shareholders as well as underlying earnings per share. The Board of directors has a progressive dividend policy and also monitors the level of dividends to ordinary shareholders in relation to profit growth. As at 31 December 2009 the directors hold 2.8% of the ordinary share capital of the Company (excluding shares held in treasury). In addition the executive directors are regarded as being interested, for the purposes of the Companies Act 2006, in 6.4% (2008: 7.1%) ordinary shares in the Company currently held by the EBT as they are, together with other employees, potential beneficiaries of the EBT. The Company purchases its own shares in the market; the timing of these purchases depends on market conditions. In April 2008 the Company entered into a revolving loan facility in order to support its continuing share buy back programme. Of the 11,854,535 shares bought back during 2008, 9,349,105 were cancelled, with the balance transferred into treasury, providing flexibility for future share-based incentives. In 2009, 1,127,462 shares were bought back and were cancelled. There were no changes in the Group's approach to capital management during the year. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements. 5 Operating segments As from 1 January 2009, the Group determines and presents operating segments based on the information that internally is provided to the Managing Director, who is the Group's Chief Operating Decision Maker. The Group's reportable segments are as follows: The Agency segment which provides resale and lettings property advertising services on www.rightmove.co.uk; The New Homes segment which provides property advertising services to new homes developers and Housing Associations on www.rightmove.co.uk;and The Holiday Lettings segment which provides advertising services in connection with holiday rental properties on www.holidaylettings.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, banner advertising on www.aboutmyplace.co.uk and Automated Valuation Model services. Management monitors the operating results of business segments separately for the purpose of making decisions about resources to be allocated and of assessing performance. Segment performance is evaluated based on revenue which in certain respects, as explained in the table below, is measured differently from revenue as reported in the consolidated financial statements. All revenues in all periods are derived from third parties and there are no inter-segment revenues. Operating costs, financial income, financial expenses and income taxes in relation to the Agency, New Homes and the Other segment are managed on a centralised basis at a Rightmove Group Limited level and as there are no internal measures of individual segment profitability relevant disclosures have been shown under the heading of Central in the table below. The Company has no reportable segments. New Holiday Agency Homes Lettings Sub total Other Central Adjustments Total Operating Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 segments Year ended 31 December 2009 Revenue 47,096 14,554 5,523 67,173 2,871 - (658) (1) 69,386 Operating - - 2,052 2,052 - 40,606 (3,948) (3) 38,710 profit(2) Depreciation and amortisation - - (32) (32) - (1,012) (84) (4) (1,128) Financial - - 20 20 - 179 - 199 income Financial - - (2) (2) - (1,086) - (1,088) expenses Trade 5,806 2,131 77 8,014 209 - 97(6) 8,320 receivables (5) Other - - 891 891 - 31,731 12,801 (7) 45,423 segment assets Segment - - (649) (649) - (47,666) (2,235) (8) (50,550) liabilities Capital - - 49 49 - 229 - 278 expenditure (9) Year ended 31 December 2008 Revenue 49,428 18,676 3,791 71,895 3,209 - (1,058)(1) 74,046 Operating - - 907 907 - 41,239 (2,655)(10) 39,491 profit(2) Depreciation and amortisation - - (19) (19) - (997) (84) (4) (1,100) Financial - - 30 30 - 600 - 630 income Financial - - (2) (2) - (1,679) (274)(11) (1,955) expenses Trade 5,209 3,704 50 8,963 852 - 150(6) 9,965 receivables (5) Other - - 1,538 1,538 - 28,113 9,240(7) 38,891 segment assets Segment - - (322) (322) - (62,413) (1,630)(8) (64,365) liabilities Capital - - 102 102 - 853 - 955 expenditure (9) (1) Segment revenue in respect of Holiday Lettings is recognised for management purposes when the invoice is raised. In the consolidated financial statements the revenue is spread evenly over the period of the contracted service with any deferred revenue held on the statement of financial position and accordingly an adjustment has been made to reconcile to consolidated Group revenue. (2) Operating profit is stated after the charge for depreciation and amortisation. (3) Operating profit for the year ended 31 December 2009 does not include share-based payments charge (Â£1,896,000), Employer's National Insurance (NI) on share-based incentives (Â£1,310,000), the amortisation of customer relationships (Â£84,000) and the additional segment revenue recognised by Holiday Lettings (Â£ 658,000). (4) Depreciation and amortisation excludes the consolidation adjustment in respect of the amortisation of customer relationships. (5) 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. (6) The adjustments column reflects the reclassification of credit balances in accounts receivable made on consolidation for statutory accounts purposes. (7) Other segment assets exclude goodwill arising on consolidation in connection with the accounting entries for the acquisition of HLHL as well as the net book value of customer relationships. (8) The adjustment column reflects the reclassification of credit balances in accounts receivable as well as an adjustment to reflect the deferred revenue balance in respect of the Holiday Lettings segment. (9) Capital expenditure consists of additions of property, plant and equipment and intangible assets (excluding goodwill). (10) Operating profit for the year ended 31 December 2008 does not include share-based payments charge (Â£1,998,000), NI on share-based incentives (Â£ 240,000 credit), capital reconstruction credit (Â£245,000), the amortisation of customer relationships (Â£84,000) and the additional segment revenue recognised by Holiday Lettings (Â£1,058,000). (11) Financial expenses exclude the consolidation adjustment relating to the unwinding of the effective interest rate on the HLHL deferred purchase consideration. 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 2009 Year ended 31 December 2008 Revenue Trade Receivables Revenue Trade Receivables Â£000 Â£000 Â£000 Â£000 Group UK 66,609 8,305 71,523 9,879 Rest of the world 2,777 15 2,523 86 69,386 8,320 74,046 9,965 6 Operating profit Year ended Year ended 31 December 2009 31 December 2008 Â£000 Â£000 Operating profit is stated after charging/ (crediting): Depreciation of property, plant and equipment 646 648 Amortisation of computer software 398 368 Amortisation of customer relationships 84 84 Bad debt impairment charge 191 1,353 Operating lease rentals Land and buildings 899 1,038 Other 350 668 Capital reconstruction (credit)* - (245) *Following clarification of the VAT treatment on professional fees incurred in connection with the capital reconstruction Â£245,000 was released to the profit and loss in 2008. Auditors' remuneration Year ended Year ended 31 31 December 2009 December 2008 Â£000 Â£000 Fees payable to the Company's auditors and their associates in respect of the audit Audit of the Company's financial statements 20 15 Audit of the Company's subsidiaries pursuant to 112 115 legislation Total audit remuneration 132 130 Fees payable to the Company's auditors in respect of non-audit related services Tax advisory 13 20 Transaction services - 14 All other services 2 13 Total non-audit remuneration 15 47 Included in the current year's auditors' remuneration for the Company is an amount of Â£5,000 (2008: Â£nil) relating to the prior year audit and Â£nil (2008: Â£9,000) relating to finalisation of the prior year tax computation. 7 Employee numbers and costs The average number of persons employed (including directors) during the year, analysed by category, was as follows: Year ended Year ended 31 December 2009 31 December 2008 Number of employees Number of employees Administration 292 346 Management 14 14 306 360 The aggregate payroll costs of these persons were as follows: Year ended Year ended 31 December 2009 31 December 2008 Â£000 Â£000 Wages and salaries 12,665 15,200 Social security costs 1,192 1,674 Pension costs 235 295 14,092 17,169 8 Financial income Year ended Year ended 31 December 2009 31 December 2008 Â£000 Â£000 Interest income on cash balances 199 551 Interest income on over payment of taxes - 79 199 630 9 Financial expenses Year ended Year ended 31 December 2009 31 December 2008 Â£000 Â£000 Debt issue costs 325 200 Interest expense 668 1,367 Unwinding of effective interest rate on deferred purchase consideration - 274 Other financial expenses 95 113 Preference dividend interest - 1 1,088 1,955 10 Income tax expense Year ended Year ended 31 December 2009 31 December 2008 Â£000 Â£000 Current tax expense Current year 10,273 11,718 Adjustment to current tax charge in respect of (74) (209) prior years 10,199 11,509 Deferred tax expense Origination and reversal of temporary (2,405) 1,155 differences Reduction in tax rate - (1) (2,405) 1,154 Total income tax expense 7,794 12,663 Reconciliation of effective tax rate The Group's income tax expense for the year is lower (2008: higher) than the standard rate of corporation tax in the UK of 28.0% (2008: 28.5%). The differences are explained below: Year ended Year ended 31 December 2009 31 December 2008 Â£000 Â£000 Profit before tax 37,821 38,166 Current tax at 28.0% (2008: 28.5%) 10,877 10,590 Adjustment to current tax charge in respect (74) (209) of prior years Non-deductible expenses 54 859 Change in tax rate - (1) Small companies relief - (2) Share-based incentives (2,790) 1,252 Adjustment to deferred tax charge in respect 14 (113) of prior years 7,794 12,663 The Group's consolidated effective tax rate for the year ended 31 December 2009 is 20.6% (2008: 33.0%). The difference between the standard rate and effective rate at 31 December 2009 is mainly attributable to credits as a result of the increase in the deferred tax asset arising on share-based incentives (6.2%) and corporation tax deductions arising on exercise of share options (2.3%), offset by disallowable expenditure (1.6%). Income tax recognised directly in equity Year ended Year ended 31 31 December 2008 December 2009 Â£000 Â£000 Deferred tax Equity settled share-based incentives 174 - Total income tax credit recognised directly in 174 - equity 11 Earnings per share (EPS) Weighted average number of Earnings shares Â£000 Pence per share Year ended 31 December 2009 Basic EPS 109,100,758 30,027 27.52 Diluted EPS 110,482,567 30,027 27.18 Underlying basic EPS 109,100,758 33,233 30.46 Underlying diluted EPS 110,482,567 33,233 30.08 Year ended 31 December 2008 Basic EPS 113,405,224 25,503 22.49 Diluted EPS 113,449,416 25,503 22.48 Underlying basic EPS 113,405,224 27,016 23.82 Underlying diluted EPS 113,449,416 27,016 23.81 Weighted average number of ordinary shares (basic) Year ended Year ended 31 December 2009 31 December 2008 Number of shares Number of shares Issued ordinary shares at 1 January less 111,697,173 121,046,278 ordinary shares held by the EBT Effect of own shares held in treasury (2,505,430) (2,146,388) Effect of own shares purchased for (65,260) (5,494,666) cancellation Effect of own shares purchased by the EBT (331,649) - Effect of share options exercised 305,924 - 109,100,758 113,405,224 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 dilutive potential shares. The Group has one potential dilutive instrument being those ordinary shares held by the EBT to satisfy share-based incentives granted to employees. Year ended Year ended 31 December 2009 31 December 2008 Number of shares Number of shares Weighted average number of ordinary shares 109,100,758 113,405,224 (basic) Dilutive impact of own shares held by the EBT 1,381,809 44,192 110,482,567 113,449,416 Underlying EPS is calculated before the charge for share-based payments, capital reconstruction credit and National Insurance (NI) on share-based incentives. A reconciliation of the basic earnings for the year to the underlying earnings is presented below: Year ended Year ended 31 December 2009 31 December 2008 Â£000 Â£000 Basic earnings for the year 30,027 25,503 Share-based payments 1,896 1,998 NI on share-based incentives 1,310 (240) Capital reconstruction credit - (245) Underlying earnings for the year 33,233 27,016 12 Dividends Dividends declared and paid by the Company were as follows: 2009 2008 Pence per share Â£000 Pence per share Â£000 2007 final dividend paid - - 6.0 7,082 2008 interim dividend paid - - 3.0 3,276 2008 final dividend paid 7.0 7,615 - - 2009 interim dividend paid 3.0 3,279 - - 10.0 10,894 9.0 10,358 After the reporting date a final dividend of 7.0p (2008: 7.0p) per qualifying ordinary share being Â£7,630,000 (2008: Â£7,643,000) was proposed by the Board of directors. The 2008 final dividend paid on 12 June 2009 was Â£7,615,000 being a difference of Â£28,000 compared to that reported in the 2008 Annual Report which was due to a reduction in the ordinary shares entitled to a dividend between 31 December 2008 and the final dividend record date of 15 May 2009 following the purchase of own shares by the EBT. The 2009 interim dividend paid on 13 November 2009 was Â£3,279,000 being a difference of Â£15,000 compared to that reported in the 2009 Half Year Report which was due to an increase in the ordinary shares entitled to a dividend between 30 June 2009 and the interim dividend record date of 16 October 2009, following the exercise of share-based incentives. 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£870,000 (2008: Â£nil) were paid in the year by HLHL to minority shareholders. As no minority interest is recognised in the consolidated statement of financial position and the Group consolidates 100% of HLHL's results, the dividends paid in the year have been treated as an addition to goodwill. 13 Property, plant and equipment Office equipment, fixtures & Computer Leasehold Work in Group fittings equipment improvements progress Total Â£000 Â£000 Â£000 Â£000 Â£000 Cost At 844 3,632 32 - 4,508 1 January 2009 Additions 2 233 15 - 250 Disposals (62) (1,155) - - (1,217) At 784 2,710 47 - 3,541 31 December 2009 Depreciation At (379) (2,242) (4) - (2,625) 1 January 2009 Charge for year (118) (521) (7) - (646) Disposals 56 1,067 - - 1,123 At (441) (1,696) (11) - (2,148) 31 December 2009 Net book value At 343 1,014 36 - 1,393 31 December 2009 At 465 1,390 28 - 1,883 1 January 2009 Office equipment, fixtures & Computer Leasehold Work in Group fittings equipment improvements progress Total Â£000 Â£000 Â£000 Â£000 Â£000 Cost At 771 3,224 8 16 4,019 1 January 2008 Transfers - 16 - (16) - Additions 73 394 24 - 491 Disposals - (2) - - (2) At 844 3,632 32 - 4,508 31 December 2008 Depreciation At (269) (1,708) - - (1,977) 1 January 2008 Charge for year (110) (534) (4) - (648) At (379) (2,242) (4) - (2,625) 31 December 2008 Net book value At 465 1,390 28 - 1,883 31 December 2008 At 502 1,516 8 16 2,042 1 January 2008 During 2008 the development of the new finance billing system was brought into use and so the associated costs were transferred from work in progress to computer equipment. The Company has no property, plant or equipment in either period. 14 Intangible assets Computer Customer Work in Goodwill software relationships progress Total Group Â£000 Â£000 Â£000 Â£000 Â£000 Cost At 1 January 9,605 3,200 514 - 13,319 2009 Additions 3,645 28 - - 3,673 Disposals - (216) - - (216) At 13,250 3,012 514 - 16,776 31 December 2009 Amortisation At - (2,049) (147) - (2,196) 1 January 2009 Charge for year - (398) (84) - (482) Disposals - 216 - - 216 At - (2,231) (231) - (2,462) 31 December 2009 Net book value At 13,250 781 283 - 14,314 31 December 2009 At 9,605 1,151 367 - 11,123 1 January 2009 Computer Customer Work in Goodwill software relationships progress Total Group Â£000 Â£000 Â£000 Â£000 Â£000 Cost At 6,074 2,359 514 377 9,324 1 January 2008 Transfers - 377 - (377) - Additions 3,531 464 - - 3,995 At 9,605 3,200 514 - 13,319 31 December 2008 Amortisation At - (1,681) (63) - (1,744) 1 January 2008 Charge for year - (368) (84) - (452) At - (2,049) (147) - (2,196) 31 December 2008 Net book value At 9,605 1,151 367 - 11,123 31 December 2008 At 6,074 678 451 377 7,580 1 January 2008 During 2008 the development of the new finance billing system was brought into use and so the associated costs were transferred from work in progress to computer software. The Company has no intangible assets in either period. Impairment testing for cash generating units containing goodwill For the purpose of impairment testing, goodwill is allocated to the Group's operations which represent the lowest level within the Group at which the goodwill is monitored for internal management purposes, which is not higher than the Group's operating segments as reported in Note 5. The aggregate carrying amounts of goodwill allocated to each unit are as follows: 31 December 2009 31 December 2008 Â£000 Â£000 Holiday Lettings Limited 12,518 8,873 Rightmove Group Limited 732 732 13,250 9,605 The recoverable amount of the HLL cash generating unit was based on its value in use. Value in use was determined by discounting the estimated future cash flows generated from the business and was based on the following key assumptions: Cash flows were projected based on past experience, actual operating results and the three year business plan; Cash flows thereafter were extrapolated into perpetuity applying a growth rate of 2.0% (2008: 2.0%); The key assumption is sales growth rate. In 2009 revenues on a management accounts basis, before adjusting for deferred revenue, grew by 45.7% year on year (refer Note 5) and in the business plan revenues have been projected based on historical growth and future plans for the business; and A pre-tax discount rate of 19.6% was applied in determining the recoverable amount; based on an industry specific weighted average cost of capital. The carrying value of the Â£732,000 purchased goodwill in Rightmove Group Limited, arising pre-transition to IFRS, is also reviewed annually for impairment. Due to its level of significance the disclosures as required by IAS 36 Impairment of Assets have not been made. 15 Investments The subsidiaries of the Group as at 31 December 2009 are as follows: Country of Company Nature of incorporation Holding Class of business shares Rightmove Group Limited Online England and 100% Ordinary advertising Wales Holiday Lettings (Holdings) Holding England and 66.7% Ordinary Limited company Wales Holiday Lettings Limited Online England and 66.7% Ordinary advertising Wales Rightmove.co.uk Limited Dormant England and 100% Ordinary Wales Rightmove Home Information Packs Limited Dormant England and 100% Ordinary Wales All the above subsidiaries are included in the Group consolidated results. HLHL and HLL were indirectly owned by the Company at the reporting date. Company 31 December 2009 31 December 2008 Investment in subsidiary undertakings Â£000 Â£000 At 1 January 537,668 - Additions in the year - capital - 537,010 reconstruction Additions - subsidiary equity settled share options charge (refer Note 23) 833 658 At 31 December 538,501 537,668 As described within Note 1, capital structure, Rightmove plc became the new holding company for the Group on 28 January 2008. The increase in the cost of investment of Â£537,010,000 in the prior year represents the purchase of 100% of the ordinary shares in Rightmove Group Limited (formerly Rightmove plc). Following the capital reconstruction in 2008 all employees' share-based incentives were transferred to the new holding company, Rightmove plc. In addition certain directors' contracts of employment were transferred from Rightmove Group Limited to Rightmove plc, whilst all other employees remained employed by Rightmove Group Limited. Accordingly the IFRS 2 charge has been split between the Company and Rightmove Group Limited with Â£833,000 (2008: Â£ 658,000) being recognised in the Company accounts as a capital contribution to its subsidiary. 16 Trade and other receivables 31 December 2009 31 December 2008 Â£000 Â£000 Group Trade receivables 8,405 10,266 Less provision for impairment of trade (216) (383) receivables Net trade receivables 8,189 9,883 Amounts owed by related parties (refer 131 82 Note 28) Other debtors 132 260 Prepayments and accrued income 967 2,395 Forward exchange contracts 2 - Accrued interest receivable - 7 9,421 12,627 Exposure to credit and currency risks and impairment losses related to trade and other receivables are disclosed in Note 29. The Company has no trade and other receivables in either period. 17 Cash and cash equivalents Group Company 31 December 2009 31 December 2008 31 December 2009 31 December 2008 Â£000 Â£000 Â£000 Â£000 Bank accounts 932 5,091 - - Deposit 24,961 17,968 5,424 17,050 accounts Cash and cash 25,893 23,059 5,424 17,050 equivalents Bank overdraft - (172) - (172) used for cash management purposes Cash and cash equivalents 25,893 5,424 in the 22,887 16,878 statement of cash flows Cash balances were placed on deposit for various lengths between one day and two months during the year and attracted interest at a weighted average rate of 0.9% (2008: 4.2%). 18 Trade and other payables Group Company 31 December 2009 31 December 2008 31 December 2009 31 December 2008 Â£000 Â£000 Â£000 Â£000 Trade 777 1,225 - 2 payables Trade 2,670 2,112 1,314 - accruals Other 250 67 - - creditors Other taxation 2,798 2,601 - - and social security Deferred 7,347 6,413 - - revenue Inter-group - - 59,763 35,600 payables Accrued interest on - - 1,837 1,226 inter-group payables balance Interest 19 - 19 - payable 13,861 12,418 62,933 36,828 Exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 29. 19 Loans and borrowings In April 2008, the Company entered into a Sterling-denominated revolving loan facility of Â£39,750,000 with the Bank of Scotland to support its share buy back programme. During 2009, Â£14,750,000 of the revolving loan facility was repaid out of surplus cash. On 16 April 2009 the Company converted Â£25,000,000, being the balance of its revolving loan facility, into a five year term loan. The loan bears interest at LIBOR plus 1.5% together with a mandatory cost applied by the lender and is repayable over five years in 20 equal instalments. In February 2010, the Company repaid the loan early, without penalty, thereby extinguishing the debt. Post repayment of the debt, both the Company and the Group continued to be cash positive (refer Note 31). Fair value Carrying value Fair value Carrying value 31 December 2009 31 December 2009 31 December 2008 31 December 2008 Group Â£000 Â£000 Â£000 Â£000 Non-current liabilities Unsecured 17,500 17,500 - - bank borrowings Current liabilities Bank - - 172 172 overdraft Unsecured 5,000 5,000 39,750 39,750 bank borrowings 22,500 22,500 39,922 39,922 Cash and cash (25,893) (25,893) (23,059) (23,059) equivalents (refer Note 17) Total net (3,393) (3,393) 16,863 16,863 (cash)/debt Analysis of net debt cash flows 1 January 2009 Cash flows 31 December 2009 Group Â£000 Â£000 Â£000 Cash and cash equivalents (23,059) (2,834) (25,893) Bank overdraft 172 (172) - Interest-bearing loans and borrowings 39,750 (17,250) 22,500 Total net debt/(cash) 16,863 (20,256) (3,393) Fair value Carrying value Fair value Carrying value 31 December 2009 31 December 2009 31 December 2008 31 December 2008 Company Â£000 Â£000 Â£000 Â£000 Non-current liabilities Unsecured 17,500 17,500 - - bank borrowings Current liabilities Bank - - 172 172 overdraft Unsecured 5,000 5,000 39,750 39,750 bank borrowings 22,500 22,500 39,922 39,922 Cash and cash (5,424) (5,424) (17,050) (17,050) equivalents (refer Note 17) Total net 17,076 17,076 22,872 22,872 debt Analysis of net debt cash flows 1 January 2009 Cash flows 31 December 2009 Company Â£000 Â£000 Â£000 Cash and cash equivalents (17,050) 11,626 (5,424) Bank overdraft 172 (172) - Interest-bearing loans and borrowings 39,750 (17,250) 22,500 Total net debt/(cash) 22,872 (5,796) 17,076 20 Provisions Property provisions Â£000 Group At 1 January 2009 13 Provisions utilised in the year (13) Provisions made during the year 6 At 31 December 2009 6 The 2008 provision for vacant leasehold property related to the former premises occupied by HLL. The provision represented the total future lease and rate payments over the remaining term of the lease. In determining the provision for the vacant leasehold property the cash flows were not discounted as the time value of money was not significant. This provision has now been fully utilised. The 2009 provision for lease dilapidations relates to the current premises occupied by HLL. The Company has no provisions in either period. 21 Deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: Assets Liabilities Net Group 31 December 31 December 31 December 31 December 31 December 31 December 2009 2008 2009 2008 2009 2008 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Property, plant and equipment (150) (91) 4 4 (146) (87) Tax losses - (66) - - - (66) Provisions (48) (7) - - (48) (7) Intangible assets - - 67 88 67 88 Equity settled share-based (2,524) - - (2,524) - incentives - Net tax (assets) (2,722) (164) 71 92 (2,651) (72) The net deferred tax asset of Â£2,651,000 at 31 December 2009 (2008: Â£72,000) is in respect of share-based incentives, intangibles, accelerated capital allowances and provisions. The deferred tax asset relating to share-based incentives at 31 December 2009 is Â£2,524,000 (2008: Â£nil). This increase is due to the Company's share price increasing from Â£1.76 at 31 December 2008 to Â£5.04 at 31 December 2009. Assets Liabilities Net 31 December 31 31 31 31 31 2009 December December December December December Company 2008 2009 2008 Â£000 2009 2008 Â£000 Â£000 Â£000 Â£000 Â£000 Equity settled share-based (1,896) - - (1,896) - incentives - Net tax (assets) (1,896) - - - (1,896) - The net deferred tax asset of Â£1,896,000 at 31 December 2009 (2008: Â£nil) is in respect of share-based incentives. This increase is due to the Company's share price increasing from Â£1.76 at 31 December 2008 to Â£5.04 at 31 December 2009. Movement in deferred tax during the year: Recognised in Recognised in 1 January 2009 income equity Â£000 Â£000 Â£000 31 December Group 2009 Â£000 Provisions (7) (41) - (48) Property, plant and (87) (59) - (146) equipment Intangible assets 88 (21) - 67 Tax losses (66) 66 - - Equity settled share-based incentives - (2,350) (174) (2,524) (72) (2,405) (174) (2,651) Recognised in Recognised in income equity 1 January 2009 Â£000 Â£000 31 December Company Â£000 2009 Â£000 Equity settled share-based incentives - (673) (1,223) (1,896) Movement in deferred tax during the prior year: Recognised in Recognised in 1 January 2008 income equity 31 December Â£000 Â£000 Â£000 2008 Group Â£000 Provisions - (7) - (7) Property, plant and (82) (5) - (87) equipment Intangible assets 108 (20) - 88 Tax losses - (66) - (66) Equity settled share-based incentives (1,252) 1,252 - - (1,226) 1,154 - (72) The deferred tax asset arising on equity settled share-based incentives in both years was recognised in the profit and loss to the extent that the related equity settled share options charge was recognised in the profit and loss. 22 Share capital Ordinary shares Non-voting preference shares of Â£0.01 each of Â£0.01 each 31 December 31 December 31 December 31 December 2009 2008 2009 2008 Number of Number of Number of Number of shares shares shares shares In issue At 1 January 120,050,873 200 - 5,000,000 Issue of shares pursuant to the Scheme - 129,399,778 - - Redemption of shares - - - (5,000,000) Purchase and cancellation of own shares (1,127,462) (9,349,105) - - At 31 December 118,923,411 120,050,873 - - On 28 January 2008, a total of 129,399,978 ordinary shares were allotted to the former holders of ordinary shares in the capital of Rightmove Group Limited pursuant to the Scheme, credited as fully paid (refer Note 1). During 2008, 9,349,105 ordinary shares were bought back by the Company and were subsequently cancelled. In 2009, 1,127,462 shares were bought back and were cancelled. Further details are disclosed in Note 23. At 31 December 2009 the authorised share capital comprised 300,000,000 (2008: 300,000,000) ordinary shares of Â£0.01 each. 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 are 7,418,874 ordinary shares (2008: 8,353,700) held by the EBT and 2,505,430 (2008: 2,505,430) are held in treasury. 23 Reconciliation of movement in capital and reserves EBT Reverse Share Share shares acquisition Total capital premium reserve Treasury Other reserve Â£ Retained equity Group Â£000 Â£000 Â£000 shares reserves 000 earnings Â£000 Â£000 Â£000 Â£000 At 1,327 105 (17,149) (19,362) - - 47,471 12,392 1 January 2008 Capital (33) (105) - 19,362 - 138 (19,362) - reconstruction Profit for the - - - - - - 25,503 25,503 year Equity settled share-based incentives - - - - - - 1,998 1,998 charge Dividends to - - - - - - (10,358) (10,358) shareholders Purchase of - - - (11,917) - - - (11,917) shares for treasury Purchase of - - - - - - (32,840) own shares (32,840) Cancellation (93) - - 32,840 93 - (32,840) - of own shares Share related - - - - - - (287) (287) expenses At 31 December 1,201 - (17,149) (11,917) 93 138 12,125 (15,509) 2008 At 1 January 2009 1,201 - (17,149) (11,917) 93 138 12,125 (15,509) Profit for the year - - - - - - 30,027 30,027 Equity settled share-based incentives charge - - - - - - 1,896 1,896 Tax in respect of share- based incentives recognised directly in equity - - - - - - 174 174 Dividends to shareholders - - - - - - (10,894) (10,894) Exercise of share options - - 3,365 - - - 2,043 5,408 Purchase of own shares - - (2,401) - - - - (2,401) Cancellation of own shares (12) - - - 12 - (5,452) (5,452) Share related expenses - - - - - - (56) (56) At 31 December 2009 1,189 - (16,185) (11,917) 105 138 29,863 3,193 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 2009 was 1,127,462 (2008: 11,854,535) representing 1.0% (2008: 10.1%) of the issued share capital (excluding shares held in treasury). Of the 1,127,462 shares bought back in year, 1,127,462 (2008: 9,349,105) shares were cancelled and nil (2008: 2,505,430) shares were transferred to treasury. The shares were acquired on the open market at a total consideration (excluding costs) of Â£5,452,000 (2008: Â£44,757,000). The maximum and minimum prices paid were 500p (2008: 501p) and 471p (2008: 215p) per share respectively. EBT shares reserve This reserve represents the carrying value of own shares held by the EBT. During the year the EBT purchased 706,965 shares on the open market at a cost of Â£2,401,000 to satisfy share-based incentive awards. 1,642,000 options were exercised by Group employees in the year at an average price of Â£3.29 per ordinary share, which were satisfied by shares held in the EBT. At 31 December 2009 the EBT held 7,418,874 (31 December 2008: 8,353,700) ordinary shares in the Company of Â£0.01 each representing 6.4% (2008: 7.1%) of the ordinary shares in issue (excluding shares held in treasury). The market value of the shares held in the EBT at 31 December 2009 was Â£37,428,000 (2008: Â£14,703,000). Other reserves The movement on other reserves of Â£12,000 (2008: Â£93,000) comprises the nominal value of ordinary shares cancelled during the year. Retained earnings The gain on the exercise of share options is the difference between the value that the shares held by the EBT were originally acquired at and the option grant price at which exercises took place during the year. Reverse acquisition Share Treasury Other reserve Retained Total capital shares reserves earnings equity Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Company At 1 January 2008 - - - - - - Share for share 433,490 - - - - 433,490 exchange Capital (432,196) - - 103,520 432,196 103,520 reconstruction Loss for the period - - - - (5,637) (5,637) Dividends to - - - - (10,358) (10,358) shareholders Equity settled share-based incentives charge - - - - 1,339 1,339 Capital - - 658 - - 658 contribution Purchase of shares - (11,917) - - - (11,917) for treasury Purchase of own - (32,840) - - - (32,840) shares Cancellation of own (93) 32,840 93 - (32,840) - shares Share related - - - - (287) (287) expenses At 31 December 2008 1,201 (11,917) 751 103,520 384,413 477,968 At 1 January 2009 1,201 (11,917) 751 103,520 384,413 477,968 Loss for the year - - - - (4,315) (4,315) Dividends to shareholders - - - - (10,894) (10,894) Equity settled share-based incentives charge - - - - 1,063 1,063 Tax in respect of share-based incentives recognised directly in equity - - - - 1,223 1,223 Capital contribution - - 833 - - 833 Cancellation of own shares (12) - 12 - (5,452) (5,452) Share related expenses - - - - (38) (38) At 31 December 2009 1,189 (11,917) 1,596 103,520 366,000 460,388 Reverse acquisition reserve This reserve resulted from the acquisition of Rightmove Group Limited by the Company and represents the difference between the value of the shares acquired at 28 January 2008 and the nominal value of the shares issued. Other reserves The principal movement in other reserves for the year comprises Â£833,000 (2008: Â£658,000) in respect of the equity settled share-based incentives charge for employees of Rightmove Group Limited. As the awards relate to shares in the Company the IFRS 2 charge has been treated as a deemed capital contribution. In addition a movement of Â£12,000 (2008: Â£93,000) 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 certain senior management comprising the Rightmove Unapproved Executive Share Option Plan (Unapproved Plan), the Rightmove Approved Executive Share Option Plan (Approved Plan) and the Rightmove Deferred Share Bonus Plan. The Group also operates a Savings Related Share Option Scheme (Sharesave). 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 pricing model or Black Scholes model as is most appropriate for each scheme. All share-based incentive schemes are granted under a service condition. Such conditions are not taken into account in the fair value of the service received. The unapproved executive share option awards made on 5 March 2009 are subject to TSR performance over a three year period, relative to the constituents of the FTSE 250. There are no market conditions associated with any other share-based incentives granted. The total Group charge for the year relating to employee share-based incentive plans was Â£1,896,000 (2008: Â£1,998,000). The total Company charge for the year was Â£1,063,000 (2008: Â£1,339,000). Approved and unapproved plans The assumptions used in the measurement of the fair values at grant date of the share option plans are as follows: Grant date Share price Exercise Expected Option Risk Dividend before per at grant price volatility life free yield vesting date (pence) (%) (years) rate option (pence) (%) (%) (pence) (%) (years) 14 March 413.50 410.00 27.0 7.0 4.5 4.0 16.0 92.00 2006 (Approved) 15 March 413.75 335.00 27.0 7.0 4.5 4.0 0.0 116.00 2006 (Unapproved) 15 March 413.75 335.00 27.0 6.0 4.5 3.0 16.0 130.00 2006 (Unapproved) 12 October 348.00 347.00 27.0 7.0 4.5 4.0 16.0 76.00 2006 (Unapproved) 6 September 613.00 597.00 32.0 7.0 5.8 2.0 17.0 228.00 2007 (Approved) 6 September 613.00 597.00 32.0 7.0 5.8 2.0 17.0 181.00 2007 Unapproved) 10 October 525.00 522.00 32.0 6.75 5.8 2.0 17.0 189.00 2007 (Unapproved) 5 March 2009 226.75 224.00 50.3 6.5 2.6 4.4 12.0 69.00 (Unapproved) Expected volatility is estimated by considering historic average share price volatility at the grant date. 2009 2008 Weighted Weighted average average exercise exercise price price Group Number (pence) Number (pence) Outstanding at 1 7,305,292 348.66 8,044,439 348.59 January Granted 1,103,948 224.00 - - Forfeited (33,146) 596.99 (739,147) 347.99 Exercised (1,497,784) 336.24 - - Outstanding at 31 6,878,310 330.16 7,305,292 348.66 December Exercisable at 31 2,199,400 336.01 1,075,819 335.00 December 2009 2008 Weighted average Weighted exercise average price exercise Number (pence) Number price Company (pence) Outstanding at beginning of 7,305,292 348.66 - - the period Granted 1,103,948 224.00 - - Transferred - - 8,044,439 348.59 Forfeited (33,146) 596.99 (739,147) 347.99 Exercised (1,497,784) 336.24 - - Outstanding at 31 December 6,878,310 330.16 7,305,292 348.66 Exercisable at 31 December 2,199,400 336.01 1,075,819 335.00 Following the capital reconstruction in January 2008 all employees' share option entitlements 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 staff remained employed by Rightmove Group Limited. Accordingly the IFRS 2 charge has been split between the Company and Rightmove Group Limited. The weighted average market value per ordinary share for executive options exercised in 2009 was Â£5.44 (2008: no options exercised). NI is accrued, where applicable, at a rate of 12.8% 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 2009 is Â£1,268,000. Based on the share price as at 31 December 2008 the accrual built up in prior periods was reversed resulting in a credit to the profit and loss of Â£240,000 in that year. Sharesave options The Group operates an Her Majesty's Revenue and Customs approved Sharesave option scheme under which employees are granted an option to purchase ordinary shares in the Company at up to 20% less than the market price at invitation, in three years' time, dependent on their entering into a contract to make monthly contributions into a savings account over the relevant period. These funds are used to fund the option exercise. No performance criteria are applied to the exercise of Sharesave options. The assumptions used in the measurement of the fair value at grant date of the Sharesave option scheme are as follows: Employee turnover before vesting/non Share vesting conditions price (%) at Exercise Expected Option Risk Dividend Fair grant price volatility life free yield value Grant date (pence) (%) (years) rate (%) per date (pence) (%) option (pence) 2 345.75 259.00 27.0 3.25 4.5 3.0 16 108.00 October 2006 3 525.00 490.00 32.0 3.25 5.8 1.5 84 156.00 October 2007 2 253.75 255.00 32.0 3.25 3.0 1.5 25 59.00 October 2008 1 545.00 425.00 50.3 3.25 3.5 4.4 25 199.00 October 2009 Expected volatility is estimated by considering historic average share price volatility at the grant date. The requirement that an employee has to save in order to purchase shares under the Sharesave option scheme is a non-vesting condition. This feature has been incorporated into the fair value at grant date by applying a discount to the valuation obtained from the Black Scholes pricing model. The discount has been determined by estimating the probability that the employee will stop saving based on expected future trends in the share price and employee behaviour. 2009 2008 Weighted average Weighted exercise average price exercise Number (pence) Number price Group (pence) Outstanding at 1 274,993 267.41 311,470 312.93 January Granted 106,527 545.00 122,757 255.00 Forfeited (59,078) 282.77 (159,234) 346.87 Exercised (144,007) 259.00 - - Outstanding at 31 178,435 434.84 274,993 267.41 December Exercisable at 31 7,661 259.00 - - December 2009 2008 Weighted average Weighted exercise average price exercise Number (pence) Number price Company (pence) Outstanding at beginning of the period 274,993 267.41 - - Transferred - - 311,470 312.93 Granted 106,527 545.00 122,757 255.00 Forfeited (59,078) 282.77 (159,234) 346.87 Exercised (144,007) 259.00 - - Outstanding at 31 178,435 434.84 274,993 267.41 December Exercisable at 31 7,661 259.00 - - December Following the capital reconstruction in January 2008 all employees' Sharesave option entitlements 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 staff remained employed by Rightmove Group Limited. Accordingly the IFRS 2 charge has been split between the Company and Rightmove Group Limited. The weighted average market value per ordinary share for Sharesave options exercised in 2009 was Â£5.21 (2008: no options exercised). Deferred share plan In March 2009 a deferred share plan was established which will allow certain senior management the opportunity to earn a bonus linked as a percentage of base salary settled in deferred shares. The award of shares in March 2010 is contingent on the satisfaction of pre-set internal targets including profit before tax relative to the Group business plan and key performance indicators such as website traffic share and customer retention. The right to the shares will be deferred for two years from March 2010 until March 2012 and potentially forfeitable during that period should the employee leave employment. The deferred share awards have been valued using the Black Scholes model and the resulting IFRS 2 charge has been spread evenly over the combined performance period and the vesting period of the shares, being three years. The IFRS 2 charge for the period ended 31 December 2009 is Â£187,000. NI is being accrued, where applicable, at a rate of 12.8% based on the share price at the period end date. The charge for the period ended 31 December 2009 is Â£42,000. The charges have been split between the Company and Rightmove Group Limited. The assumptions used in the measurement of the fair value at grant date of the deferred share plan are as follows: Employee Dividend Share price Expected Expected Risk yield turnover Fair at grant Exercise volatility term free value per Grant date price (%) (years) rate (%) before share date (pence) (%) vesting (pence) (pence) (%) 5 226.75 nil n/a 3.0 2.6 4.4 12.0 199.00 March 2009 25 Operating lease commitments Non-cancellable operating lease rentals are payable as follows: 31 December 2009 31 December 2008 Plant & machinery Â£ Plant & machinery Â£ 000 Other 000 Other Total Total Â£000 Â£000 Â£000 Group Â£000 Less than one year 260 967 1,227 430 978 1,408 Between one and five years 69 3,804 3,873 294 3,394 3,688 More than five years - 1,713 1,713 - 2,527 2,527 329 6,484 6,813 724 6,899 7,623 An area of the HLL premises has been sublet during 2009. The lease and the subleases expire in 2015. Sub lease income of Â£46,000 is expected to be received during the next financial year. The Company has no operating lease commitments in either period. 26 Capital commitments As at 31 December 2009 the Group had committed to incur capital expenditure of Â£nil (2008: Â£nil). The Company has no capital commitments in either period. 27 Acquisitions and disposals On 21 March 2007, Rightmove Group Limited acquired 66.7% of the ordinary share capital of HLL, a provider of online advertising services to owners of holiday rental properties, for consideration of Â£3,216,000, including acquisition costs of Â£73,000. On 2 January 2009 all the shares in HLL were sold to a newly incorporated holding company, HLHL. In return Rightmove Group Limited received shares in HLHL in the same proportions as previously held in HLL. There was no change to the ultimate parent company, being Rightmove plc. In terms of the HLHL shareholders' agreement, a put and call option exists to acquire the remaining 33.3% interest owned by management. The put option can be exercised any time from 1 July 2009 based either on a multiple of EBIT per the latest audited accounts or HLHL's market value if higher. The call option can be exercised by Rightmove Group Limited from 1 July 2013. At 31 December 2009 the deferred consideration was increased to Â£ 8,909,000 based on Rightmove Group Limited's best estimate of the likely market value for the business. 28 Related party disclosures Transactions with principal shareholders Halifax Estate Agencies Limited and Connells Limited sold their shareholdings in the Company in May and December 2008 respectively. Consequently as at 31 December 2008 and 31 December 2009 the Company had no principal shareholders. Inter-group transactions with subsidiaries During the year Rightmove plc was charged interest of Â£611,000 (2008: Â£ 1,226,000) by Rightmove Group Limited in respect of balances owing under the inter-group loan agreement dated 30 January 2008. As at 31 December 2009 the balance owing under this agreement was Â£61,600,000 (2008: Â£36,826,000) 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 directors, 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 26 to 38. Stephen Shipperley, a non executive director, is also Group Executive Chairman of Connells Limited, a significant estate agency customer of the Group. During the year Connells Limited renewed their membership for a further three years on an arms length basis. The Group's transactions and balances with this customer for both years were as follows: Year ended Year ended 31 December 2009 31 December 2008 Group Â£000 Â£000 Amounts owed by: Sequence (UK) Limited (Connells) 80 55 Connells Residential 51 27 131 82 Amounts invoiced to: Sequence (UK) Limited (Connells) 598 581 Connells Overseas Property Department - 2 Connells Residential 327 333 925 916 Included within trade and other receivables is Â£131,000 due from related parties (2008: Â£82,000). Trade and other payables include Â£nil due to former shareholders (2008: Â£nil). Year ended Year ended 31 December 2009 31 December 2008 Group Â£000 Â£000 Dividends paid: Connells Limited - 1,912 Transactions with key management staff There were no transactions in either year with key management staff. 29 Financial instruments Credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was: Group Company 31 December 2009 31 December 2008 31 December 2009 31 December 2008 Note Â£000 Â£000 Â£000 Â£000 Net trade 16 8,189 9,883 - - receivables Amounts owed by 16 131 82 - related - parties Other 16 132 260 - - debtors Accrued interest 16 - 7 - receivable - Cash and cash 17 25,893 23,059 17,050 equivalents (5,424) 34,345 33,291 (5,424) 17,050 The maximum exposure to credit risk for trade receivables (including related parties) at the reporting date by geographic region was: 31 December 2009 31 December 2008 Group Note Â£000 Â£000 UK 8,305 9,879 Rest of the world 15 86 16 8,320 9,965 The maximum exposure to credit risk for trade receivables (including related parties) at the reporting date by type of customer was: 31 December 2009 31 December 2008 Group Note Â£000 Â£000 Property advertisers 8,123 9,229 Other 197 736 16 8,320 9,965 The Group's most significant customer, a UK house builder, accounts for Â£ 220,000 (2008: Â£444,000) of the trade receivables carrying amount. Impairment losses The ageing of trade receivables (including related parties) at the reporting date was: 31 December 2009 31 December 2008 Gross Impairment Gross Impairment Group Â£000 Â£000 Â£000 Â£000 Not past 5,610 (4) 4,803 (24) due Past due 0 1,737 (25) 2,637 (49) - 30 days Past due 951 (11) 1,418 (53) 30 - 60 days Past due 142 (104) 596 (67) 60 - 90 days Past due 96 (72) 894 (190) older 8,536 (216) 10,348 (383) The movement in the allowance for impairment in respect of trade receivables during the year was as follows: 31 December 2009 Â£000 31 December 2008 Group Â£000 At 1 January 383 91 Charged during the year 191 1,353 Utilised during the year (358) (1,061) At 31 December 216 383 The Group has identified specific balances for which it has provided an impairment allowance on a line by line basis across all ledgers, in both years. No general impairment allowance has been provided in either year. The allowance accounts in respect of trade receivables are used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible; at that point the amounts considered irrecoverable are written off against the financial asset directly. Liquidity risk The following are the contractual maturities of financial liabilities, including estimated interest payments: 31 December 2009 Carrying Contractual 6 amount cash flows months 6-12 1-2 2-5 months years years Â£000 Â£000 or less Â£000 Â£000 Â£000 Group Â£000 Non-derivative financial liabilities Unsecured bank 22,500 (22,500) (2,500) (2,500) (5,000) (12,500) borrowings Trade payables 777 (777) (777) - - - 23,277 (23,277) (3,277) (2,500) (5,000) (12,500) Derivative financial liabilities Forward exchange (2) (216) (216) - - - contracts 23,275 (23,493) (3,493) (2,500) (5,000) (12,500) 31 December 2008 Carrying Contractual 6 months 6-12 amount cash flows months or less 1-2 2-5 Â£000 Â£000 Â£000 years years Â£000 Group Â£000 Â£000 Non-derivative financial liabilities Unsecured bank 39,750 (39,750) (39,750) - - - borrowings Trade payables 1,225 (1,225) (1,225) - - - 40,975 (40,975) (40,975) - - - 31 December 2009 Carrying Contractual 6 amount cash flows months 6-12 1-2 2-5 months years years Â£000 Â£000 or less Â£000 Â£000 Â£000 Company Â£000 Non-derivative financial liabilities Unsecured bank 22,500 (22,500) (2,500) (2,500) (5,000) (12,500) borrowings 31 December 2008 Carrying Contractual 6 months 6-12 amount cash flows months or less 1-2 2-5 Â£000 Â£000 Â£000 years years Â£000 Company Â£000 Â£000 Non-derivative financial liabilities Unsecured bank 39,750 (39,750) (39,750) - - - borrowings Trade payables 2 (2) (2) - - - 39,752 (39,752) (39,752) - - - The contractual cash flows in respect of unsecured bank borrowings relate only to the principal amount and do not include interest as the loan was repaid in full on 10 February 2010 (refer Note 31). It is not expected that the cash flows included in the maturity analysis could occur at significantly different amounts. Currency risk During 2009 all the Group's sales were Sterling denominated. As such the Group does not present sensitivity analysis for a movement in the Sterling to Euro exchange rate, nor does the Group undertake any hedging of foreign currency receivables exposure. As at 31 December 2009 the Group's subsidiary, HLL, has entered into seven forward exchange contracts of USD 50,000 each which mature in 2010. HLL purchases forward exchange contracts to hedge the currency risk associated with changes in US Dollar exchange rates in respect of search marketing services supplied by Google. A strengthening of the US Dollar of 5% against the GBP at 31 December 2009 would have decreased equity and profit or loss by Â£11,000. This analysis is based on the foreign currency exchange rate variances that the Group considers to be reasonably possible at 31 December 2009. The analysis assumes that all other variables, in particular interest rates, remain constant. Interest rate risk The Group and the Company have exposure to interest rate risk on their cash balances and bank overdraft. As at 31 December 2009 the Group had total cash of Â£25,893,000 (2008: Â£23,059,000) and a bank overdraft of Â£nil (2008: Â£172,000). The Group and the Company have exposure to interest rate risk on the loan facility of Â£22,500,000 (2008: Â£39,750,000) which bears interest at LIBOR plus 1.5%. A change of 100 basis points in interest rates would have increased or decreased equity by Â£265,000 (2008: Â£196,000). Fair values The fair values of all financial instruments in both years are set out in the tables below: 31 December 2009 31 December 2008 Carrying Fair value Carrying Fair value amount Â£000 amount Â£000 Group Â£000 Â£000 Trade and other 9,421 9,421 12,627 12,627 receivables Cash and cash equivalents 25,893 25,893 23,059 23,059 Bank overdraft - - (172) (172) Trade and other payables (13,861) (13,861) (12,418) (12,418) Loans and borrowings (22,500) (22,500) (39,750) (39,750) (1,047) (1,047) (16,654) (16,654) 31 December 2009 31 December 2008 Carrying amount Fair value Carrying amount Fair value Â£000 Â£000 Â£000 Â£000 Company Cash and cash 5,424 5,424 17,050 17,050 equivalents Bank overdraft - - (172) (172) Trade and other payables (62,933) (62,933) (36,828) (36,828) Loans and borrowings (22,500) (22,500) (39,750) (39,750) (80,009) (80,009) (59,700) (59,700) 30 Contingent liabilities The Group and the Company had no contingent liabilities in either period. 31 Subsequent events Subsequent to 31 December 2009, the Board of directors agreed to retire the debt with the Bank of Scotland and on 10 February 2010 the outstanding debt of Â£21,250,000, being the balance at 31 December 2009 less a quarterly instalment of Â£1,250,000 paid in January 2010, was repaid in full. No penalties or break costs were incurred in exiting the facility early. Post repayment of the debt both the Group and the Company continued to be cash positive. ADVISERS AND SHAREHOLDER INFORMATION Contacts Registered Corporate office advisers Managing Director: Ed Williams Rightmove Financial plc adviser Chief Operating Officer and 4th Floor UBS Investment Finance Director: Nick McKittrick 33 Soho Bank Square Joint brokers Company Secretary: Liz Taylor London UBS Limited Website: www.rightmove.co.uk W1D 3QU Numis Securities Limited Email: investor.relations@rightmove.co.uk Registered Auditor in England no. KPMG Audit Plc 6426485 Bankers Financial calendar 2010 Barclays Bank plc 2009 full year results 26 February 2010 Bank of Scotland plc Annual General Meeting 05 May 2010 Solicitors Slaughter and Final dividend record date 14 May 2010 May Final dividend payment 11 June 2010 Pinsent Masons Interim Management May, November 2010 Registrar Statement Half year results 27 August 2010 Capita Registrars* Interim dividend November 2010 *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 PO Box 1269 Huddersfield HD1 9UT 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 enquires, amendment of address and dividend mandate instructions.

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