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Board committees

The Board has established three principal committees, the Audit Committee, the Remuneration Committee and the Nomination Committee, to assist it in the execution of its duties. The Chairman of each Committee reports on the respective Committee’s activities at the subsequent Board meeting.

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 Peter Williams (who is chairman), Ashley Martin, Colin Kemp and Rakhi Parekh.

The primary role of the Committee 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. The remuneration and terms of appointment of the non-executive directors are determined by the Board as a whole.

In accordance with the Code, the Committee also recommends the structure and monitors the level of remuneration for the first layer of management below Board level. The Committee is also aware of, and advises on, the employee benefit structures throughout the Group and ensures that it is kept aware of any potential business risks arising from those remuneration arrangements.

The Committee has formal terms of reference which are reviewed annually and updated as required. These are available on the Company’s website at plc.rightmove.co.uk or on request from the Company Secretary.

The quorum for meetings of the Committee is two members. The Committee will meet at such times as may be necessary but will normally meet at least five times a year.

The Company Secretary acts as Secretary to the Committee.

Only members of the Committee have the right to attend Committee meetings. The Chairman of the Committee has requested that the Chairman of the Board attend the meetings except during discussions relating to his own remuneration. The Chief Executive Officer may also be invited to meetings and the Committee takes into consideration their recommendations regarding the remuneration of executive colleagues and the first layer of management below Board level. No executive director is involved in deciding their own remuneration.

What has the Committee done during the year?

The Committee met five times during the year to consider and where appropriate, approve key remuneration items including the following:

Pay and incentive plan reviews

  • Annual review and approval of executive directors’ base salaries and benefits;
  • Reviewed year end business performance against relevant performance targets to determine annual bonus payouts and vesting of long-term incentives;
  • Reviewed and approved overall remuneration policy for executive directors for 2016, including appropriate benchmarks and performance measures for the annual performance related bonus and 2016 PSP awards to ensure measures are aligned with strategy and that targets are appropriately stretching;
  • Ongoing monitoring of senior management remuneration structures;
  • Approval of  share awards granted under the Deferred Share Bonus Plan (DSP) and the Rightmove Performance Share Plan (PSP); and
  • Reviewed and approved an increase in the Chairman’s fee following an appropriate benchmarking exercise.

Governance

  • Reviewed and approved the 2015 Directors’ Remuneration Report;
  • Reviewed the 2015 AGM voting and feedback from institutional investors;
  • Evaluated the Committee’s performance during the year; and
  • Reviewed the Committee’s terms of reference.

Nomination committee

The Committee’s role is to regularly review the structure, size and composition (including the skills, knowledge and experience) of the Board, with a view to ensuring the continued ability of the Group to compete effectively in the marketplace, and make recommendations to the Board with regard to any changes.

Membership

The purpose of the Nomination Committee is to consider and make recommendations to the Board about the composition of the Board, including proposed appointees, and whether to fill any vacancies that arise or to change the number of Board members.

The Nomination Committee consists of Scott Forbes (who is also Chairman of the Board),Peter Williams, Colin Kemp & Ashley Martin as independent non-executive directors. 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.

Principal activities of the Committee during 2015

During the year the Committee has:

  • Reviewed the Board composition;
  • Reviewed the Board committees’ composition;
  • Approved the plans for the organisation and succession of the executive directors and senior management;
  • Agreed the process for and considered the outcome of the Board’s external evaluation;
  • Considered the diversity of the Board and agreed the policy regarding gender composition on the Board; and
  • Conducted an annual review of its terms of reference. 

Board induction and training

All new non-executive directors joining the Board undertake a tailored induction programme to meet their individual needs. This covers for example: the operation and activities of the Group (including meeting with members of the senior management team, spending a day on the road with a sales director meeting our customers and attendance at an Agency seminar), the role of the Board and the decision making matters reserved to it, the responsibilities of the Board Committees; and the strategic challenges and opportunities facing the Group.

There are procedures in place for individual Board members to receive training and to seek the advice and services of independent professional advisers, at the Group’s expense, where specific expertise or training is required in furtherance of their duties.

Board effectiveness and evaluation

The Board is committed to undertaking annual reviews of its own performance and also the performance of its Committees and individual directors. For the past two years, the Board has undertaken an internal self-assessment. This year, Echelon, an external firm of consultants was appointed to undertake an independent review of the performance of the Board and its Committees together with a Board skills and composition review which was undertaken by Korn Ferry.

The external Board evaluation was conducted by Echelon in the fourth quarter of 2015. The evaluation results including anonymous ratings and comments were summarised in a report and discussed by the Committee and Board in December 2015.

The evaluation concluded that the Board and Committees operate at a high degree of effectiveness with all individuals contributing with plenty of open debate and challenge from all directors. Recommendations for continued development included remaining proactive in the search for the right talent, both at the Board and executive level; further enhancing Board diversity by recruiting more female non executives or non-executives from different ethnic backgrounds; and ensuring that the Group strategy continues to be both communicated and understood at levels beyond the executive management team.

An internally facilitated review of the performance of the Board and its Committees will again be conducted during 2016.

The Board skills and composition review involved a series of Korn Ferry independent interviews with each executive and non-executive director. Questions were intended to identify the Group’s strategy and the ideal capabilities and experience required on the Board that will best support the Group’s effort to achieve its strategic objectives. The Board skills and composition review also explored corporate governance requirements including compliance with the UK Corporate Governance Code, best practice and diversity policies. Priority capabilities and experience were cross-referenced against the profile of the current Board both at the present time and as of the anticipated dates that directors will retire in order to identify gaps against which the Board’s recruitment policy is based.

The work of Korn Ferry was substantially complete in December 2015, with the results of the review to be distributed in a report to the Committee in early 2016.  The Committee will review the report and discuss its recommendations with the Board as part of an ongoing process to ensure that the Board operates at a high level of effectiveness fortified by the most appropriate resources in support of the Group’s business strategy.

Audit committee

The Committee is comprised entirely of independent non-executive directors. The Board is satisfied that both Ashley Martin and Peter Williams have recent and relevant financial skills and experience. Both have professional qualifications with the Institute of Chartered Accountants of England and Wales.

The Finance Director and the Head of Finance are normally invited to attend the meetings as well as the external auditor, KPMG and the internal auditor, PwC. Other relevant people from the business are also invited to attend certain meetings in order to provide a deeper level of insight into certain key issues and developments. The Committee regularly meets separately with the external and internal auditors without others being present.

The quorum for meetings of the 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 Committee Chairman briefs the Board on the matters discussed at each Committee meeting and the effectiveness of the operation of the Committee was reviewed as part of the effectiveness review of the Board and its committees in December 2015.

Principal activities of the Committee during the year

The principal activities of the Committee through the year, and the manner in which it discharged its responsibilities are described below:

Financial reporting

The primary role of the Committee in relation to financial reporting is to review with both management and the external auditor the appropriateness of the half year results statement and the Annual Report and financial statements including, amongst other matters:

  • The quality and appropriateness of accounting policies and practices;
  • The clarity of the disclosures and compliance with relevant financial reporting standards and governance reporting requirements; and
  • Key accounting issues or matters in which significant judgements have been applied.

At the request of the Board, the Committee was asked to consider whether the 2015 Annual Report and accounts, taken as a whole, is fair, balanced and understandable and provides the necessary information for shareholders to assess the Group’s performance, business model and strategy, and has concluded that this is the case.

The significant areas of judgment considered by the Committee in relation to the 2015 Annual Report and how these were addressed were:

Revenue recognition

The timing of revenue recognition in relation to the billing of subscription fees and additional products and services and the accounting for any membership offers to customers with discounted or free periods. This was a prime area of audit focus with KPMG performing detailed analytical procedures using computer assisted audit techniques throughout the year on amounts billed to the two largest customer groups (Agency and New Homes), together with the billing of Overseas customers, investigating any anomalies and outliers identified and providing detailed reporting to the Committee in this regard. The Committee discussed any reported anomalies highlighted by KPMG ensuring that adequate explanations were received from management in line with their business understanding.

In addition the Committee received regular updates from management discussing current customer offers and their impact on revenue recognition.

As this area is of higher audit risk the Committee also received detailed verbal and written reporting from KPMG on this matter. The Committee was satisfied with the explanations provided and conclusions reached.

Share-based incentives and the related deferred tax balance

The external auditors and Committee discussed the audit plan and assessed the risks associated with share-based incentives and the related deferred tax balances and concluded that it was no longer a significant audit risk area. It remains an area of judgement for management given the technical complexity of the calculations and the assumptions around the rate at which the related deferred tax asset is likely to reverse.

Internal audit

The Group established an outsourced internal audit function provided by PwC during 2015 known as Rightmove Assurance. The aim of Rightmove Assurance is to provide independent and objective assurance on the effectiveness of internal control, risk management and governance processes.

During the year and in accordance with the approved internal audit plan, Rightmove Assurance has carried out reviews in respect of: certain core financial processes, the robustness of the risk management framework in the context of the new Corporate Governance Code, options in relation to the provision of mortgage content on the rightmove.co.uk website, the identification and prevention of certain fraudulent online activities by third parties against Rightmove and the systems and controls in place to prevent the loss or malicious publication of Rightmove data. Reports setting out their principal findings and agreed management actions were discussed by the Committee.

External audit

KPMG has been the Group’s auditors since 2000. Following the 2012 revision of the UK Corporate Governance Code by the Financial Reporting Council, a decision was made by the Committee to formally tender the provision of audit and taxation services to the Group. A comprehensive tender and review process was concluded in March 2013. The Committee was satisfied that the skills and depth of industry knowledge in the team remained very strong and combined with the fresh perspective of the new audit partner decided that KPMG should be re-appointed as the Group’s auditor, with Karen Wightman taking over responsibility as lead audit partner.

The EU Audit Regulations have not yet been formally enacted in the UK, however in October 2015 the Department for Business Innovation & Skills consultation on the legislative implementation of the EU Audit Directive and Regulation, commented that a tender of an audit engagement resulting in the reappointment of the incumbent auditor for an accounting period beginning up to ten years before the application of the new EU Audit Directive and Regulation, effective 17 June 2016 (The EU Regulation), should be treated as a tender for the purposes of the transitional provisions. As KPMG were reappointed in 2013 following a competitive tender process, we therefore anticipate Rightmove’s next requirement to tender its audit will be for the 2023 calendar accounting year. These timeframes will also ensure compliance with the provisions of the CMA Statutory Audit Services Order 2014.

The external auditor is required to rotate the audit partner responsible for the Group audit every five years. The current lead partner, Karen Wightman, has been in place for three years.
The Committee also approved the fees of KPMG during the year.

Effectiveness of the external audit process

The effectiveness of the external audit process is dependent on a number of matters. These include the quality, continuity, experience and training of audit personnel, business understanding, technical knowledge and the degree of rigour applied in the review processes of the work undertaken, together with appropriate audit risk identification at the start of the audit cycle.

The Committee evaluated the effectiveness of the audit process in addressing these matters together with input from management. Areas the Committee considered in this review included the quality of audit planning and execution, engagement with the Committee and management, quality of reporting and capability and experience of the audit team. For the 2015 financial year, the Committee were satisfied that there had been appropriate focus and challenge on the primary areas of audit risk and concluded that the performance of KPMG remained efficient and effective.

Non-audit services

The Committee also discussed its responsibilities to safeguard audit objectivity and independence as well as the needs of the business and agreed that it was practical in certain limited cases for the auditor to be assigned to other non-audit project work due to their knowledge and expertise of the business.

In November 2015 the Committee agreed a policy that management be given authority to incur permitted non-audit fees up to 50% of the annual agreed audit fee in any financial year without the prior approval of the Committee. Thereafter all additional fees will be referred to the Committee in advance, subject to a cap on permitted non-audit fees at 70% of the average audit fees over the three preceding financial years, in line with the forthcoming new EU Regulations. Permitted non-audit fees exclude those services prohibited by the EU requirements, in particular all tax services. Non-audit services required by legislation are not subject to the cap.

In 2015 the non-audit fees were £5,000 in relation to other advisory services and were £10,000 in relation to tax compliance and advice and are fully disclosed in Note 6 of the financial statements. As a result of the forthcoming EU regulations on permitted non-audit services, KPMG will no longer be able to provide tax compliance and advisory services and we have therefore appointed PwC to provide these services in 2016.

Internal controls

The Board has overall responsibility for the Group’s system of internal controls and has established a framework of financial and other controls which is periodically reviewed in accordance with the FRC Internal Control: Guidance to Directors publication 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 improving 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 have 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 2015 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;
  • 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 and business continuity plan based upon:
    • co-hosting of the rightmove.co.uk website across three separate locations which is regularly tested and reviewed; and
    • the capability for employees to remote work from home or a third party location in the event of a loss of one of our premises which has been tested for both our London and Milton Keynes offices during the year.
  • Regular testing of the security of the IT systems and platforms, regular back ups of key data and ongoing threat monitoring to protect against the risk of cyber attack;
  • A treasury function which manages cash flow forecasts and cash on deposit and counterparty risk and is responsible for monitoring compliance with banking agreements, where appropriate; and
  • Whistleblowing and bribery policies 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.

Through the procedures outlined above, the Board, with advice from the Committee, has considered all significant aspects of internal control for the year and up to the date of this Annual Report. No significant failings or weaknesses were identified during this review. However, had there been any such failings or weaknesses, the Board confirms that necessary actions would have been taken to remedy them.