Final Results
Rightmove Plc
02 March 2007
2 March 2007
RIGHTMOVE plc
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006
Rightmove plc, the UK's number one property website, today announces results for
the year ended 31 December 2006, its first full year results following flotation
on 15 March 2006.
Highlights:
• Revenue grew 85% from £18.2m to £33.6m
• Underlying pre-tax profits(1) increased 101% from £8.8m to £17.7m
• Final dividend proposed of 3p per share making 4.5p for the full year
• Website usage up more than 80% over 2005 and consistently a top 10 website(2)
• Overall advertiser membership increased by 42% from 11,483 to 16,321
• Pipeline of new advertising products and services on track for Q1 2007
delivery
Notes:
(1) Pre-tax profits from continuing operations and before flotation costs and
share based payments expense
(2) Source: Hitwise: ranking of UK websites by page impressions from UK visitors
Ed Williams, Group Managing Director, said:
'2006 was a landmark year in Rightmove's history. Not only did we make a
successful transition from being a privately owned business into a public
company and a member of the FTSE250 index, but we also delivered strong growth
in all areas. Indeed the rate of growth exceeded our expectations at the time of
the flotation in March 2006, resulting in two upgrades to our profit forecasts
since then. All our growth was organic and driven by increases in revenue.
'More than anything though I am pleased that we have preserved the creativity
and entrepreneurialism that defines our company. We have a strong pipeline of
new products and services to serve the housing market that now stretches through
2007. We remain committed to increasing the value that estate agents and new
home developers get from our service. More than ever Rightmove is the place
where home hunters find their next home.
'The outlook for continued growth remains strong. Membership numbers continue to
grow, with very high retention rates. The recent launch of RightmoveChoice, our
premium search service, has proved an immediate success with our customers. We
are also making our very first footsteps into attracting a wider base of
advertisers with the launch of advertising around our new interactive map
service, Aboutmyplace.
'These and other developments, and continued strong growth in our core business,
makes us as confident about the future of our business as we were at the time of
the IPO.'
For more information please contact:
Rightmove
For Ed Williams, Group Managing Director, and
Graham Zacharias, Finance Director please
contact
Maud Rousseau 020 7318 9095
Maitland
Neil Bennett / Brian Hudspith / Charlotte Barker 020 7379 5151
Barker
Introduction
Revenue increased by 85% to £33.6 million (2005: £18.2 million) and pre-tax
profits from continuing operations (before flotation costs and share based
payments expense) doubled to £17.7million (2005: £8.8 million). Net cash
balances at the year end were £14.9 million (2005: £5.6 million). These
impressive financial results were underpinned by strong performance against key
metrics. Customer members increased by nearly 5,000 to 16,321 (2005: 11,483), up
42%. We continued to increase the value we deliver to our members and this was
reflected in turn by a healthy increase in their average spend with us. Customer
retention rate remained around 93% for the third year in succession.
Operating Review
Rightmove's aim is to be the place for all UK home movers to find details of all
properties available to buy or rent. We provide an easy-to-use but sophisticated
on-line property search. With the depth of information that we provide,
including photographs, brochures, location maps, virtual tours, measurements and
floor plans, home hunters can immediately identify a preferred property and
contact the advertiser by phone or email.
Our service is directed at four key membership groups:
• estate agents
• letting (rental) agents
• new homes developers
• overseas homes agents offering properties outside the UK but interested in
advertising to UK-based home hunters.
By providing the tools and marketing support to boost our members' own marketing
effectiveness, we help improve their accuracy in pricing properties and help
them win business from vendors and landlords. Our service therefore goes far
beyond traditional advertising. This is an important part of our membership
service and builds loyalty with both our members and home hunters.
Keys to success
Rightmove's success is the result of our contribution to our advertisers'
success. We help our advertisers by providing quality enquiries at a
significantly lower cost than their traditional advertising alternatives. For
estate agents and letting (rental) agents, Rightmove also plays a key role in
generating new opportunities to win instructions (the right to offer a property
for sale or for rent on behalf of the owner). Many home movers and landlords now
expect that their properties should appear on Rightmove's website in order to
reach the largest market.
Connecting more people with more property than anyone else
We are able to make the contribution that we do to our members' businesses as a
result of having become the destination for home hunters. In a typical month in
2006, three million people visited the website, each averaging more than one
visit a week and spending around 18 minutes on the site during each visit.
In 2006, the usage of the Rightmove.co.uk website grew more than 80% compared to
2005. Rightmove.co.uk was consistently among the top 10 most used UK websites by
page impressions (according to Hitwise). This generated over 14 million
enquiries tracked through our systems from agents and developers.
The UK property business is cyclical. While our members value our enquiries,
Rightmove often makes its biggest contributions at times in the cycle when
enquiries in general are most scarce. Hence enquiries generated is not an
immediate driver of success for our members and not, we believe, an appropriate
basis for charging for our service.
Strong top-line growth
Rightmove's growth in profits is driven by top-line revenue growth. This has
been achieved through:
• Increases in the number of advertisers
• Increases in the value our advertisers see from their spending with us.
2006 saw substantial success in relation to both sales and value. Overall
advertiser membership increased by 42% from 11,483 to 16,321. The retention rate
of over 93% was towards the top end of our historical range of 91-94%. The
majority of the estate agents and lettings agents who left Rightmove did so
because their own business ceased to trade or there was a significant change in
their business focus.
Based on our estimate of the market of approximately 24,000 potential
advertisers, this represents an increase in our customer base from 48% to 68% of
the total addressable UK market.
The value that our advertisers see in being a Rightmove member also increased
significantly. For the first time we charged lettings (rental) only agents and
now have around half of all lettings agents as members. New members during the
year paid more than our existing members, continuing the Rightmove approach of
seeking to reward the loyalty of long standing members. This is in contrast to
many other companies in our sector who frequently offer their best deals to new
customers in order to win their business.
Rightmove's cost to its members continues to represent a small proportion of the
total industry spend on advertising, a total of around £30m compared to £500m
across traditional media. Overall the average monthly spend on us per advertiser
in 2006 rose from £157 to £192 (an increase of 22%). This increase is in the
context of Rightmove increasing its own audience of home movers by 83% (visits)
and a much higher percentage increase in Rightmove's own marketing spend to
bring home hunters onto the site to view our advertisers' properties. We
continued to invest in technology over the year, increasing our internet
bandwidth ten-fold, doubling our storage capacity, doubling the size of the
support team and upgrading our systems software. We have also invested
substantially in the new RightmovePlus infrastructure by which our members
access the membership services, information services and property data
maintenance facilities we provide. Customer service teams have been expanded
significantly and the level of customer service support offered to customers
extended.
Driving the business forward
With over 16,000 property advertisers, the opportunity still remains to increase
our advertising base by up to 50%, with the largest single opportunity being
amongst new home developers.
A range of new advertising services has been launched in the few weeks of 2007
which allows our members to boost the value they get from Rightmove. Known as
the RightmoveChoice suite of products, they allow advertisers to differentiate
themselves from their competitors and offer an enhanced service to their own
clients. These services should contribute to moving Rightmove forward from
around 6% of the total industry spending on advertising. We are also making our
very first footsteps into attracting a wider base of advertisers with the launch
of advertising around our new interactive map service, Aboutmyplace.
The particular circumstances of the government U-turn on Home Information Packs
was disappointing given the substantial investment of effort we had made. The
actual progress that had been achieved on the pre-selling of our proposition and
the development of the operational and IT infrastructure had been encouraging.
In the circumstances, we were able to act swiftly and decisively, followed by a
rapid winding up of our activity at minimal further cost, albeit with a total
abortive investment of £8.3 million.
Financial review
Revenue in 2006 totalled £33.6 million, an increase of 85% over 2005. 94% of our
revenue came from advertising services relating to our Rightmove.co.uk website,
with the remaining 6% from the provision of business and information services.
Revenue grew significantly in all segments of our advertising business.
2006 saw two major one-off costs. £6.7 million was incurred in writing off our
abortive investment in producing a Home Information Pack platform. We ceased to
invest in this area as a result of the government U-turn in July 2006. In
addition, £1.6 million (2005: £1.7 million) of expenses relating directly to the
flotation of the Company on the London Stock Exchange in March 2006 were
incurred, comprising for the main part, fees and expenses paid to legal and
financial advisers. These costs are gross of any non-recoverable VAT.
There was also a step increase in our normal operating costs during the latter
part of 2006 due to a number of factors which included:
• The additional costs of operating as a public company
• The trebling of the size of our sales force (much of which was
originally done to allow us to sell our Home Information Pack service but
which we decided to retain in full in order to maintain close relationships
with our much increased membership base and to sell our new advertising
products)
• A doubling of our technology resources to speed up our ability to create and
deliver new products
• A decision to increase our TV advertising expenditure to reinforce and expand
our leadership position.
These costs were substantially reflected in our cost base during the second half
of 2006 which at £9.4 million was significantly higher than the £6.8 million
incurred in the first half.
All of these increases in activity were achieved whilst strengthening overall
operating margins from continuing operations and excluding flotation costs and
share based payments from 48% to 52%.
Rightmove is also in the fortunate position of being able to grow revenue
rapidly without placing a burden on working capital due to the predominantly
subscription based revenue model. Sales growth directly drives cash generation
which is generally collected in advance and accounts for our low levels of bad
debts.
Taxation
The Group's consolidated effective tax rate for the six months ended 31 December
2006 is 40% (31 December 2005: 39%). The difference between this and the
standard rate of corporation tax of 30% is mainly due to the high level of
expenditure on which no tax deduction is available, notably flotation costs and
share based charges.
The income tax expense for the year is notional for the reasons explained below.
As a consequence, the year end cash position benefited from nil corporation tax
payments in the year and a refund of 2005 tax paid of £1.4 million.
A significant corporate tax deduction of approximately £21.1 million arose on
share options exercised in the period. An element of this tax deduction was
carried back to offset the corporation tax liability in respect of the year
ended 31 December 2005 with a resulting tax refund of £1.4 million received in
July. The remaining tax deduction will be set against taxable profits arising
for the year ended 31 December 2006 resulting in an overall tax loss for the
year. A deferred tax asset was created for the tax loss carried forward, which
the directors believe will crystallise in the short term.
The deferred tax asset of £1.2 million was recognised and a notional tax charge
applied for the period ended 31 December 2006 in line with the requirements of
IFRS 2. No corporation tax is due at 31 December 2006.
Capital reconstruction
At an Extraordinary General Meeting of the shareholders held on 30 October 2006,
it was resolved to apply to the Court for permission to cancel the Share Premium
Account and credit the balance to distributable reserves. The Court approved the
cancellation in November 2006 and thereafter the Company paid an interim
dividend of 1.5p on 21 December 2006. The costs of carrying out this exercise
amounting to approximately £50,000 were expensed in 2006.
Share based payment IFRS2
In accordance with IFRS2, a non-cash charge of £2.2 million (2005: nil) is
included in the income statement representing amortisation of the value of the
share options granted since November 2002.
Earnings per share
Earnings per ordinary share is based upon profit after taxation and on a
weighted average of 122,468,206 shares in issue during the period (2005:
118,019,573). Underlying earnings per ordinary share based on continuing
operations and before flotation expenses and share option charges was 10.45p
(2005: 5.24p).
Board Changes
In January 2006, Graham Zacharias was appointed Group Finance Director, bringing
33 years of public company experience to the Board. Jonathan Agnew, Nigel Cooper
and Judy Vezmar were appointed as Independent Non-executive Directors with
Jonathan Agnew appointed as the Senior Independent Director.
Due to interest in a potential public to private acquisition of Countrywide plc,
the largest of our founding shareholders, their director representative, Harry
Hill, resigned from the Rightmove Board on 12 December 2006. Reappointment of
Countrywide's director representative is ultimately contingent upon Countrywide
maintaining a significant interest in Rightmove. We continue to benefit from all
aspects of the commercial agreements entered into between Rightmove and
Countrywide including the agreement to list all Countrywide estate agency
properties on Rightmove until at least March 2009.
Jane Pridgeon will retire from the Board at the close of the Annual General
Meeting and I would like to thank Jane for her commitment and contribution to
Rightmove and wish her well for her retirement. Colin Kemp of Halifax Estate
Agencies will be appointed to the Board as Jane's replacement on 3 July 2007.
Appointment of adviser
The Board is pleased to announce the appointment of Numis as joint broker. UBS
remains joint broker to the company.
Dividend
The Board announced a 1.5p per ordinary share interim dividend which was paid on
21 December 2006 following a capital reconstruction approved by shareholders on
30 October 2006. The Board proposes to pay a final dividend of 3p per ordinary
share, which combined with the interim dividend of 1.5p gives a total dividend
for the year of 4.5p. The final dividend, subject to shareholder approval, will
be paid on 9 May 2007 to members on the register on 13 April 2007.
Current positioning against strategic goals and opportunities
Rightmove is in excellent shape in terms of its being the place on the internet
that UK home hunters go to find all the property available. From the viewpoint
of advertisers Rightmove remains a small proportion of their marketing spend and
delivers results that we believe typically out-perform the next best alternative
marketing investment dramatically.
Accordingly, our primary focus is on completing the task in hand and increasing
our membership while focusing on the value for money we provide to our members.
This includes the focus on the introduction of new services which allow our
members to achieve even greater marketing effectiveness as they convert from
traditional advertising media to on-line.
We believe there are numerous opportunities to add additional services and
offerings. Indeed as a business we are in continuous receipt of approaches from
other businesses who would wish to partner with us to access home movers, estate
agents and developers. We will balance these opportunities and their value to
our existing members and home hunters against projected returns on these
potential investments.
Outlook
The outlook for continued growth remains strong. There remain many agents and
developers who have yet to take the Rightmove service and we are making headway
in all areas. The average amount spent on Rightmove by our advertisers typically
remains a small percentage of their total marketing spend. Our new Rightmove
Choice products allow us to increase the value we bring agents and developers.
Opportunities are opening up for Rightmove to widen its base of advertisers and
extend the service we provide to the home hunter.
Consolidated income statement
for the year ended 31 December 2006
Year ended 31 December 2006 Year ended 31 December 2005
Note Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total
£000 £000 £000 £000 £000 £000
Revenue 33,626 - 33,626 18,199 - 18,199
Administrative
expenses (19,869) (6,668) (26,537) (11,253) (1,572) (12,825)
Operating
profit before
share based
payments and
flotation
costs 17,530 (6,668) 10,862 8,657 (1,572) 7,085
Share based
payments 6 (2,168) - (2,168) - - -
Flotation
costs (1,605) - (1,605) (1,711) - (1,711)
--------------- --------------- ------------ --------------- --------------- ------------
Operating
profit 13,757 (6,668) 7,089 6,946 (1,572) 5,374
--------------- --------------- ------------ --------------- --------------- ------------
Financial
income 322 - 322 189 - 189
Financial
expenses (66) - (66) (27) - (27)
--------------- --------------- ------------ --- --- ------------
Net financial
income 256 - 256 162 - 162
--------------- --------------- ------------ --------------- --------------- ------------
Share of
associate
profit less
loss on
disposal (77) - (77) - - -
--------------- --------------- ------------ --------------- --------------- ------------
Profit before
tax 13,936 (6,668) 7,268 7,108 (1,572) 5,536
Income tax
expense 5 (4,917) 1,993 (2,924) (2,630) 472 (2,158)
--------------- --------------- ------------ --------------- --------------- ------------
Profit for the
year 9,019 (4,675) 4,344 4,478 (1,100) 3,378
--------------- --------------- ------------ --------------- --------------- -----------
Attributable
to:
Equity holders
of the parent 9,019 (4,675) 4,344 4,478 (1,100) 3,378
--------------- --------------- ------------ --------------- --------------- ------------
Earnings/
(loss) per
ordinary share
(pence)
Basic 4 7.37 (3.82) 3.55 3.79 (0.93) 2.86
Diluted 4 7.27 (3.77) 3.50 3.63 (0.89) 2.74
Consolidated and company statement of recognised income and expense
for the year ended 31 December 2006
Note Group and Group and
Company Company
Year ended Year ended
31 December 31 December
2006 2005
£000 £000
Tax in respect of share options recognised
directly in equity 5 4,681 1,666
-------------- --------------
Net income recognised directly in equity 4,681 1,666
Profit for the year 4,344 3,378
-------------- --------------
Total recognised income and expense for
the year 9,025 5,044
-------------- --------------
Consolidated and company balance sheets
as at 31 December 2006
Group and Group and
Company Company
31 December 31 December
2006 2005
£000 £000
Non-current assets
Property, plant and equipment 1,375 1,137
Intangible assets 1,471 2,222
Deferred tax asset 1,241 1,666
-------------- --------------
Total non-current assets 4,087 5,025
-------------- --------------
Current assets
Trade and other receivables 2,921 2,450
Income tax receivable 163 -
Cash and cash equivalents 14,881 5,580
-------------- --------------
Total current assets 17,965 8,030
-------------- --------------
Total assets 22,052 13,055
-------------- --------------
Current liabilities
Trade and other payables (5,835) (6,674)
Income tax payable - (692)
Provisions (96) -
-------------- --------------
Total current liabilities (5,931) (7,366)
-------------- --------------
Non current liabilities
Deferred tax liabilities - (67)
Provisions (112) -
-------------- --------------
Net assets 16,009 5,622
-------------- --------------
Equity
Share capital 1,327 1
Retained earnings 14,682 5,621
-------------- --------------
Total equity attributable to the equity holders
of the parent 16,009 5,622
-------------- --------------
Consolidated statement of cash flows
for the year ended 31 December 2006
Note Year ended Year ended
31 December 31 December
2006 2005
£000 £000
Cash flows from operating activities
Profit for the year 4,344 3,378
Adjustments for:
Depreciation charges 385 261
Amortisation charges 304 150
Impairment of tangible and intangible 1,011 -
assets
Loss on sale of property, plant and - 5
equipment
Loss on sale of investment in associate 7 206 -
Investment income 7 (129) -
Interest income (322) (189)
Interest expense 1 27
Share options charge 6 2,168 -
Income tax expense 5 2,924 2,158
-------------- --------------
Operating profit before changes in
working capital 10,892 5,790
Increase in trade and other receivables (471) (153)
(Decrease)/increase in trade and other (839) 4,890
payables
Increase in provisions 208 -
-------------- --------------
Cash generated from operations 9,790 10,527
Income taxes received/(paid) 1,259 (2,196)
-------------- --------------
Net cash from operating activities 11,049 8,331
-------------- --------------
Cash flows from investing activities
Interest received 322 189
Acquisition of property, plant and (938) (864)
equipment
Acquisition of intangible assets (249) (656)
Acquisition of investment in associate 7 (3,319) -
Proceeds from sale of investment in 7 3,243 -
associate
Proceeds from sale of property, plant &
equipment - 36
-------------- --------------
Net cash from investing activities (941) (1,295)
-------------- --------------
Cash flows from financing activities
Interest paid (1) (27)
Dividends paid (1,861) (5,000)
Share issue 1,055 -
-------------- --------------
Net cash from financing activities (807) (5,027)
-------------- --------------
Net increase in cash and cash equivalents 9,301 2,009
Cash and cash equivalents at 1 January 5,580 3,571
-------------- --------------
Cash and cash equivalents at 31 December 14,881 5,580
-------------- --------------
NOTES
1. General information
The Group accounts have been prepared in accordance with international
accounting standards and international financial reporting standards that were
effective at 31st December 2006 and adopted by the EU.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2006 or 2005. Statutory
accounts for 2005 have been delivered to the registrar of companies, and those
for 2006 will be delivered following the Company's Annual General Meeting. The
auditors have reported on those accounts; their reports were (i) unqualified,
(ii) did not included references to any matters to which the auditors drew
attention by way of emphasis without qualifying their reports and (iii) did not
contain statements under section 237(2) or (3) of the Companies Act 1985.
2. Discontinued operations
On 18 July 2006, the Government announced fundamental changes to the contents of
Home Information Packs (HIPs), specifically that the Home Condition Report
within the HIP would be voluntary for the foreseeable future. As a consequence,
the Board decided to discontinue the HIPs business. The total spend during the
year was £6,668,000 including exit costs of £1,900,000 and research costs of
£2,060,000.
During the year ended 31 December 2006, the HIPs division had cash outflows from
operating activities of £5,226,000 (2005: £1,540,000).
The net book value of computer and office equipment (£315,000) and the net book
value of computer software relating to HIPs (£696,000) have been written off.
3. Segmental reporting
Segmental information is presented in respect of Group's business segments. The
Group does not have geographical segments.
Segmental results, total assets and total liabilities include items directly
attributable to the segment as well as those that can be allocated on a
reasonable basis.
Segmental capital expenditure is the total cost incurred during the year to
acquire segment assets that are expected to be used for more than one period.
Segmental reporting details are provided below:
For the year ended 31 December 2006
Property HIPs Total
advertising
£000 £000 £000
Income statement
information
Segmental revenue 33,626 - 33,626
Depreciation and 550 139 689
amortisation
------------ ------------ ------------
Segmental operating profit/ 13,757 (6,668) 7,089
(loss)
Financial income 322 - 322
Financial expenses (66) - (66)
Income tax expense (4,917) 1,993 (2,924)
Share of associate profit
less loss (77) - (77)
on disposal
------------ ------------ ------------
Profit for the year 9,019 (4,675) 4,344
Balance sheet information
Capital expenditure 901 286 1,187
Property, plant and 1,375 - 1,375
equipment
Intangible assets 1,471 - 1,471
Total assets 22,052 - 22,052
Total liabilities (5,612) (431) (6,043)
For the year ended 31 December 2005
Property HIPs Total
advertising
£000 £000 £000
Income statement
information
Segmental revenue 18,199 - 18,199
Depreciation and 379 32 411
amortisation
------------ ------------ ------------
Segmental operating profit/ 6,946 (1,572) 5,374
(loss)
Financial income 189 - 189
Financial expenses (27) - (27)
Income tax expense (2,630) 472 (2,158)
------------ ------------ ------------
Profit for the year 4,478 (1,100) 3,378
Balance sheet information
Capital expenditure 1,235 902 2,137
Property, plant and 1,068 69 1,137
equipment
Intangible assets 1,421 801 2,222
Total assets 12,185 870 13,055
Total liabilities (7,433) - (7,433)
All revenue is derived from external operations arising in the UK, and there is
no inter-segmental revenue.
There are no other separately identifiable business segment income statement or
balance sheet items.
4. Earnings per share
Weighted
average Per share
number of Earnings amount
shares
£000 pence
Year ended 31 December 2005
Basic EPS 118,009,573 3,378 2.86
Diluted EPS 123,438,584 3,378 2.74
Underlying EPS 118,009,573 6,189 5.24
Year ended 31 December 2006
Basic EPS 122,468,206 4,344 3.55
Diluted EPS 123,959,764 4,344 3.50
Underlying EPS 122,468,206 12,792 10.45
Underlying earnings per ordinary share is calculated before the charge for HIPs
costs, flotation costs and share option charges. A reconciliation of the basic
earnings for the year to the underlying earnings is presented below:
2006 2005
£000 £000
Basic earnings for the year 4,344 3,378
HIPs costs (net of tax) 4,675 1,100
Flotation costs 1,605 1,711
Share options charge 2,168 -
---------------- -----------------
Underlying earnings for the year 12,792 6,189
================ =================
5. Taxation
Analysis of charge in year:
Year ended Year ended
31 December 31 December
2006 2005
£000 £000
UK corporation tax
Income tax for the year 3,544 2,114
Adjustment for prior period - 2
---------------- ----------------
Total current tax 3,544 2,116
Deferred tax
Origination/reversal of timing (620) 42
differences
---------------- ----------------
Total tax in income statement 2,924 2,158
================ ================
Factors affecting the tax charge for the current period
The current tax charge for the year is higher (2005: higher) than the standard
rate of corporation tax in the UK 30% (2005: 30%). The differences are explained
below:
Year ended Year ended
31 December 31 December
2006 2005
£000 £000
Current tax reconciliation
Profit before tax 7,268 5,536
---------------- ---------------
Current tax at 30% (2005: 30%) 2,180 1,661
Effects of:
Expenses not deductible for tax purposes 744 499
Adjustment in respect of prior years - (2)
---------------- ---------------
Total tax charge (see above) 2,924 2,158
================ ===============
A notional tax charge of £3,544,000 was applied for the year ended 31 December
2006 and recognised directly in equity in line with the requirements of IFRS 2.
No corporation tax liability is due at 31 December 2006.
The effective tax rate for the year ended 31 December 2006 is 40% (2005:39%).
The difference between this and the corporation tax of 30% is mainly due to the
high level of expenditure on which no tax deduction is available, notably
flotation costs and the share option charge.
During the year a significant tax deduction of £21,101,000 arose on share
options exercised on flotation. An element of this tax deduction was carried
back to eliminate the corporation tax charge of £2,114,000 in respect of the
year ended 31 December 2005. The tax credit was recognised directly in reserves
as it arose on share options exercised for which the related IFRS 2 charge was
nil.
Movement in current and deferred tax
31
January 1 Recognised Recognised (Paid)/ December
2006 in income in equity received 2006
£000 £000 £000 £000 £000
Deferred tax
Property, plant and equipment 68 (300) - - (232)
Equity settled share options (1,666) (320) 1,666 - (320)
Tax losses - - (689) - (689)
------- ------- ------- ------- -------
Deferred tax asset (1,598) (620) 977 - (1,241)
Current tax
Income tax for the year - 3,544 (3,544) (163) (163)
Adjustments for prior period 692 - (2,114) 1,422 -
------- ------- ------- ------- -------
Tax creditor/(debtor) 692 3,544 (5,658) 1,259 (163)
------- ------- ------- ------- -------
(906) 2,924 (4,681) 1,259 (1,404)
------- ------- ------- ------- -------
6. Share based payments
The Company operates a performance related share incentive scheme for key
management personnel and senior employees, comprising of the Rightmove
Unapproved Executive Share Option Plan ('Unapproved Plan') and the Rightmove
Approved Executive Share Option Plan ('Approved Plan'). The Company also
operates a Savings Related Share Option Scheme ('SAYE').
In July 2004, the Company granted options under the Rightmove.co.uk Limited
Enterprise Management Incentive Scheme ('EMI Plan') to key management personnel
and senior employees.
Additionally, one EMI share option plan was granted prior to 7 November 2002.
The recognition and measurement principles in IFRS 2 have not been applied to
this share option plan in accordance with the transitional provisions in IFRS 1.
The fair value of services received in return for share options granted is
measured by reference to the fair value of share options granted. The estimate
of the fair value of the services received is measured based on the Black
Scholes model. The contractual life of the options is used as an input into this
model.
All share incentive schemes are granted under a service condition. Such
conditions are not taken into account in the fair value of the services
received. There are no market conditions associated with the above grants.
The employee turnover before vesting has not been included in calculating the
fair value of options.
The total charge for the year relating to employee share based payment plans was
£2,168,000 (2005: £nil), all of which related to share options granted in 2006.
7. Acquisition and disposal of associate
During the year, the Company acquired 25% of the ordinary share capital of TMG
Holdings Limited ('TM') for a consideration of £3,243,000 and acquisition costs
of £77,000. This gave rise to positive goodwill of £2,140,000 and an intangible
asset relating to customer lists of £1,124,000. The Group's share in the fair
value of net assets of the associate at the date of acquisition was £56,000.
As a result of the discontinuance of the HIPs business, it was no longer
considered appropriate to retain this shareholding. Accordingly, the holding was
disposed of for £3,243,000, before costs. The sale gave rise to a loss on
disposal of £206,000. Whilst TM was an associate and before the decision to sell
was made, the results of the associate were equity accounted for. The Group
recognised a profit of £129,000 representing its share of TM's profit for that
period. The directors decided to present the loss on disposal of £206,000 and
the share of associate's profit of £129,000 on the face of the income statement.
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