ZOOPLA PROPERTY GROUP GROWS AUDIENCE TO RECORD LEVELS ZOOPLA PROPERTY GROUP PLC Full year results for the year ended 30 September 2014

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1 25 November ZOOPLA PROPERTY GROUP GROWS AUDIENCE TO RECORD LEVELS ZOOPLA PROPERTY GROUP PLC Full year results for the year ended 30 September Zoopla Property Group Plc (LSE: ZPLA), the digital media business and operator of leading UK online property portals including Zoopla and PrimeLocation, announces its full year results and KPIs for the year ended 30 September. Financials % Change Revenue ( million) % Adjusted EBITDA ( million) % Operating profit ( million) % Adjusted basic EPS (pence per share) 2, % Basic EPS (pence per share) % KPIs % Change ARPA ( ) % Number of members 5 19,663 18, % Number of visits (million) % Number of leads (million) % Number of listings (million) % Business highlights Record audience levels with traffic up 33% to 513.5m visits (2013: 386.4m) Continued focus on mobile which now accounts for 57% of the Group s traffic Ongoing investment in enhanced products for members with launch of MarketView and Comparables Reports Increased take up of members buying additional premium products SmartNewHomes acquisition fully embedded with 49% increase in developer revenue Expansion into new markets with launch of commercial channel and increased focus on overseas listings 40,000 unique home seller appraisal leads sent to local agents, equating to around 150m of potential fees for Zoopla Property Group members 10 Successful IPO in June of this year Final dividend proposed of 1.1p per share Commenting on today s announcement Alex Chesterman, Founder & CEO of Zoopla Property Group said, I am pleased to present such a strong set of full year results following our successful IPO in June. has been a landmark year for Zoopla Property Group with record audience levels and strong revenue growth across all areas of the business as consumers continue to recognise the importance of the Group's services for searching and researching the property market at work, at home and on the move. We continue to deliver enhanced transparency and efficiency to the market and to develop a world-class consumer proposition designed to aid our users with their property search, increase engagement and drive value for our members. We enjoyed record levels of traffic to our websites and mobile applications with 42.8m average monthly visitors generating over 29 million leads during the year providing an excellent value proposition for our members and resulting in increased take-up of our additional premium products. We remain committed to our mission of building our brands and business to provide the most useful property resources to consumers along with being the most effective partner for property professionals across the UK. 1

2 Outlook We are well placed for future growth with an excellent market position as a result of strong brand awareness and high levels of consumer engagement and market penetration. We remain focused and continue to execute on our strategy of enhancing both our consumer and member propositions with the launch of new features and products to further grow engagement levels and revenues. Whilst there are some political and economic challenges within the overall housing market, the impact of these on our business is not expected to be material and early trading post the year-end is in-line with expectations. The launch of another new portal, Agents Mutual, in January may have some short-term impact on our agency membership numbers but we have seen numerous launches into our market before and taken effective action to compete with them. Longer term we remain very confident in the value proposition we provide to both our members and consumers, which underpins our long term growth prospects. Our next trading update is scheduled for Thursday 12 February ENDS- For further information, please contact: Lawrence Hall, Head of Communications - lawrence.hall@zpg.co.uk / Rachael Malcolm, Investor Relations Manager rachael.malcolm@zpg.co.uk / Dan Yea at Maitland - dyea@maitland.co.uk / A slide webcast of the management team presentation to analysts and investors will be made at today and can be accessed here. An audio dial in will also be made available: UK Toll Number: / UK Toll-Free Number: / Participant pin: # 1. Adjusted EBITDA is defined as operating profit after adding back depreciation and amortisation, share-based payments and exceptional items. 2. Adjusted basic EPS is calculated as profit for the year excluding exceptional items divided by the weighted average number of shares in issue for the period. 3. Adjusted basic EPS excluding 3.0 million of one-off warrant charges incurred during was 7.2 pence per share, an increase of 33% on the prior year. 4. Average Revenue Per Advertiser ( ARPA ) is the revenue from member subscriptions in a given month divided by the average number of members during the month, measured as a monthly average over the period. 5. Members represent the total number of estate agency branches, new home developers and overseas agency branches paying subscription fees to advertise their listings at the end of the period. 6. Visits comprise individual sessions on the Group s websites or mobile applications by users for the period indicated as measured by Google Analytics. 7. Leads are enquiries made to the Group s members initiated either through the telephone number or form displayed on the Group s websites and mobile applications. 8. Number of listings represents the total number of properties being advertised for sale or to rent at the end of the period. 9. The 2013 comparatives have been disclosed on the basis that Zoopla Property Group Plc was in existence from the beginning of the prior year comparatives are based on those of the previously existing Group as presented in the consolidated financial statements of Zoopla Property Group Limited (now ZPG Limited) for the year ended 30 September Based on an average agent fee of 1.5% and the average UK property value of 266,985 for October Cautionary Statement This document contains forward-looking statements. These forward-looking statements include all matters that are not historical facts. Statements containing the words believe, expect, intend, may, estimate or, in each case, their negative and words of similar meaning are forward-looking. By their nature, forward-looking statements involve risks and uncertainties because they relate to events that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that the Group s actual financial condition, results of operations and cash flows, and the development of the industry in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this document. In addition, even if the Group s financial condition, results of operations and cash flows, and the development of the industry in which we operate are consistent with the forward-looking statements in this document, those results or developments may not be indicative of results or developments in subsequent periods. Important facts that could cause the Group s actual results of operations, financial condition or cash flows, or the development of the industry in which we operate, to differ from current expectations include those principal risks and uncertainties disclosed below. As a consequence, the Group s future financial condition, results of operations and cash flows, as well as the development of the industry in which we operate, may differ from those expressed in any forward-looking statements made by us or on the Group s behalf. 2

3 Business review Consumers are demanding more property related information and continue to recognise the importance of the Group's services for searching and researching the property market at work, at home and on the move. The Group continues to experience strong levels of traffic to its websites and mobile applications with 42.8m average monthly visits and our continued focus on mobile means this avenue is now producing 57% of the Group s traffic. The number of leads generated during the period has increased 12% to 29.2 million in as the Group continues to increase the value provided to its members through continual improvement and development of the Group s sites and mobile apps leading to enhanced user engagement. Over the past 12 months, the Group has referred over 40,000 individual home seller leads to its members for valuations, equating to over 150 million of potential fees for its members. Brand awareness has grown significantly in recent years, with prompted brand awareness amongst all adults nationally at 77% for the Group s Zoopla brand. The Group continues to innovate and accelerate its portfolio of products for both users and members, such as searching by commute times and customers with tools like MarketView. Key performance indicators The Directors consider the following metrics to be the Group s key performance indicators ( KPIs ) 2013 Change % Revenue ( million) % Adjusted EBITDA ( million) % Adjusted basic EPS (pence per share) % ARPA ( ) % Number of members 19,663 18, % Number of visits (million) % Number of leads (million) % Number of listings (million) % ARPA Because the Group is committed to maximising the return on marketing investment for members, the Group continues to innovate with new products and solutions and periodically conducts rate reviews to ensure that its subscription pricing reflects the value offered to members. The Group s average blended ARPA has increased by 18% from 264 per month in 2013 to 312 in. ARPA fluctuates across the different businesses within the Group Change Monthly agent ARPA % Monthly developer ARPA % Monthly overseas agent ARPA % Blended APRA % The increase in agency and developer ARPA has been driven by: estate agents upgrading their subscription and buying additional and new innovative products, such as MarketView; developers upgrading their subscriptions and increasing spend on targeted campaigns; and value generated for the Group s members through continued growth in both the number of site visits and leads generated. Overseas agent ARPA has seen a small decrease in the year as the Group focused on growing overseas members and listings. 3

4 Number of members As at 30 September, the Group had active subscription contracts with 19,663 members, including 16,373 UK estate and lettings agency branches and 2,715 new home developers, which the Directors believe represents close to 90% of the total number of property professionals in the UK. The Group also had 575 overseas agents, an increase of 106% from September The total of 19,663 members represents a 5% increase from the 18,676 members as at 30 September This increase was primarily due to increased activity in the housing market, the Group s focus on attracting the remaining UK property professionals that are not currently members and growth in the number of the Group s overseas agents Change Members Agents 16,373 15, % Members Developer 2,715 2, % Members Overseas % Total members 19,663 18, % Number of visits The Group s number of site visits increased by 33% to million in. This increase was primarily due to: the Group s continued focus on brand building - the Group s core brand, Zoopla, had 77% prompted brand awareness amongst all adults nationally in October, up from 26% in November 2010 (source: Harris Interactive); the success of the Group s mobile applications - the proportion of visits via a mobile device (smart phones or tablets) increased from of 43% in September 2013 to 57% in September Number of leads The number of leads generated by the Group has increased 12% to 29.2 million in as the Group continues to grow its audience and increase the value provided to its members. The Group s user-centric approach to product development and track record of continually improving and developing its websites and mobile applications has led to enhanced user engagement and therefore higher lead generation. There has also been a focus on improving the quality of leads generated, which is demonstrated by the 10% increase in vendor leads during the year. Number of listings The number of listings featured on the Group s websites and mobile applications is influenced by fluctuations caused by seasonality. The number of listings on the Group s websites and mobile applications remained relatively stable at 1.1 million throughout. 4

5 Financial review Summary The financial year has been one of continued growth and progression, most notably with the Group s admission to trading on the London Stock Exchange on 23 June. It has also been a year of investment for the future. The Group has invested significantly in both marketing and product development in line with the long-term plans laid out to shareholders. The Group has performed strongly in with significant revenue and Adjusted EBITDA growth of 24% and 35% respectively. The Group also continues to generate high levels of cash, with 31.0 million generated from operating activities net of tax during the year. This has led to the Group being able to return 35.5 million of cash in the form of dividends to shareholders during the year. In addition, the Directors have proposed the payment of a final dividend for of 4.6m. Summary Income statement The Group s summary Income statement for the year ended 30 September is shown below: 2013 Change Revenue 80,230 64, % Adjusted EBITDA 39,614 29, % Adjusted profit for the year 1 26,656 22, % Profit for the year 21,077 22,330-6% Adjusted basic EPS (pence per share) % Basic EPS (pence per share) % 1 Adjusted profit for the year excludes exceptional items but includes 3.0 million in respect of one-off warrant charges. Revenue 2013 Change Agency 62,986 51, % Developer 8,547 5, % Other 8,697 7, % Total revenue 80,230 64, % The Group s revenue increased by 24% from 64.5 million in 2013 to 80.2 million in. This was principally driven by growth in agent and developer revenue, which increased by 22% and 49% respectively. The 49% growth in developer revenue reflects the success of our niche brand strategy, especially the strong performance of our SmartNewHomes brand, and our continued focus on improving the value we can offer to our developer members. The growth in agency and developer revenue is attributable to both an increase in the number of the Group s subscribing members as well as an overall increase in ARPA. The Group also continues to develop its other areas of income with other revenues increasing by 21%. Other income includes third party advertising, developing and growing our overseas property offering and helping customers from the broader property spectrum by leveraging the largest proprietary property database to offer tailored data services. Going forward the Group will also look to develop and grow its commercial property offering. Staff costs and other operating expenses The Group has continued to invest in both its people and brands. Employee costs increased by 3.1 million to 12.8 million compared to 9.7 million in the prior year as a result of increased headcount to support the continued growth of the business and the transition to a plc. The Group also continued its investment in marketing and product development as it seeks to further build brand awareness, improve the experience for both website and mobile users and provide value for its members. Other operating costs were up 10% on the prior year driven principally by the Group s continued marketing campaign. Total administrative expenses disclosed within the Income Statement include certain items that are excluded for the purposes of calculating the Group s adjusted EBITDA. These items are discussed in more detail below. 5

6 2013 Change Staff costs 12,759 9, % Other operating costs 27,857 25, % Underlying administrative expenses 40,616 35, % Costs excluded from adjusted EBITDA 11,147 1,471 >100% Total administrative expenses 51,763 36, % Adjusted EBITDA The Group s Adjusted EBITDA grew by 35% from 29.4 million in 2013 to 39.6 million in. This increase was primarily driven by the growth in revenue during the year as set out above. The Group s high operational gearing has led to the increase in Adjusted EBITDA exceeding the Group s revenue growth and an improvement of c. 370bps in the Group s overall margins. The increase has been offset slightly by the Group s continued investment in both its people and brands as discussed above Change Operating profit 28,467 27,962 +2% Costs excluded from adjusted EBITDA: Depreciation and amortisation 1,658 1, % Share-based payments 3, >100% Exceptional items 5,579 - n/a Adjusted EBITDA 39,614 29, % Adjusted EBITDA margin 49.4% 45.6% +8% Depreciation and amortisation Depreciation and amortisation increased by 21% compared with The increase has arisen primarily on depreciation of leasehold improvements recognised on the Group s relocation to a new head office during the year and a full year s amortisation of intangible assets arising on the acquisition of Trinity Digital Property Limited in August Share-based payments During the Group continued to operate its Employee Share Option Scheme for employees and offer warrants for long term agreements with certain members. New options and warrants were granted under the schemes in January. In addition, certain member warrants became exercisable in full as a result of the IPO on 23 June which led to the recognition of 3.0 million in accelerated share-based payments charges during the year. Exceptional items Exceptional items of 5.6 million for represent one-off costs incurred as part of the IPO. Income tax expense The Group s effective Income tax rate for was 26.5% (2013: 21.1%) which is higher than the average statutory tax rate of 22% for the period due to non-deductible expenses incurred in relation to the IPO and the one-off warrant acceleration discussed above. Profit for the year Adjusted profit for the year, which includes 3.0 million of one-off, accelerated warrant charges, has increased by 19% from 22.3 million in 2013 to 26.7 million in. The increase was driven by the growth in both revenue and EBITDA. Statutory profit for the year decreased by 6%, to 21.1 million, due to 5.6 million of IPO expenses incurred in. 6

7 Earnings per share (EPS) The Group has presented its first EPS figures as a listed company. Comparatives for the 2013 financial year have been stated to reflect the impact of the group restructuring prior to Admission. Adjusted basic EPS, which includes the 3.0 million one-off warrant charge but strips out the impact of exceptional items, has increased by 20% to 6.5 pence per share in line with the Group s increase in revenue and adjusted profit for the year. Excluding the impact of the 3.0 million one-off warrant charge, adjusted EPS was 7.2 pence per share, an increase of 33% on the prior year. The slight decrease in basic earnings per share from 5.4 pence per share to 5.1 pence per share was due to exceptional expenses incurred on the IPO Profit for the year 21,077 22,330 Adjusted profit for the year 26,656 22,330 Total number of Ordinary Shares at 30 September 418,092, ,642,460 Weighted average number of shares held in trust (6,811,363) (6,948,000) Weighted impact of shares issued post-ipo (328,122) - Weighted average number of shares 410,953, ,694,460 Dilutive effect of share options and warrants 5,011,672 2,420,350 Dilutive earnings per share denominator 415,964, ,114,810 Basic EPS (pence per share) Diluted EPS (pence per share) Adjusted Basic EPS (pence per share) Summary Statement of financial position 2013 Goodwill and intangibles 75,194 76,537 PPE 1, Unpaid share capital - 9,563 Cash and cash equivalents 31,025 28,123 Working capital 1 (5,531) (5,237) Provisions (634) (551) Tax assets and liabilities (3,340) (1,254) Equity 98, ,287 1 Current trade and other receivables less trade and other payables The Group s Statement of financial position remains strong at 30 September as the business continues to generate high levels of cash. Net assets at 30 September were 98.2 million. The overall fall in equity compared to the prior year can be attributed to the 35.5 million of cash returned to shareholders in the form of dividends paid during the year. The Group ended the year with 31.0 million of cash and cash equivalents and net current assets of 21.7 million. 7

8 Summary Statement of cash flows 2013 Net cash inflows from operating activities 30,981 31,580 Acquisition of subsidiaries, net of cash received (1,497) (4,496) Acquisition of PPE and intangibles (1,091) (106) Interest received Net cash flows used in investing activities (2,386) (4,277) Dividends paid (35,528) (10,158) Unpaid share capital paid-up 9,563 - Other financing activities Net cash flows used in financing activities (25,693) (10,136) Net increase in cash and cash equivalents 2,902 17,167 Cash and cash equivalents at end of period 31,025 28,123 Net cash inflows from operating activities The Group continues to see high cash generation with net cash inflows from operating activities of 31.6 million in 2013 and 31.0 million in. The high level of cash generated was primarily driven by the continued growth in both revenue and Adjusted EBITDA. Cash used in investing activities The 1.5 million of cash flows used in acquisitions of subsidiaries during represents the settlement of deferred consideration payable from acquisitions made in prior periods. The Group also saw a cash outflow in respect of leasehold improvements during the year which related to the relocation of the Group to a new head office. Dividends During the year the Group paid pre-ipo dividends of 35.5 million. The Directors have proposed a final dividend for of 1.1 pence per share, resulting in a final proposed dividend of 4.6 million. The final dividend represents 43.5% of the Group s profits excluding share-based payments and exceptional items for the period from 1 June to 30 September. The final dividend will be paid on 23 February 2015 to those shareholders on the share register as at 5 December. The final dividend is subject to approval at the Group s AGM on 12 February Interim dividend for 2013 paid on 12 April ,158 Final dividend for 2013 paid on 24 October ,248 - Interim dividend for paid on 10 April 14,294 - Special dividend paid on 13 June 8,986 - Total dividends paid in the year 35,528 10,158 FY14 final dividend proposed 4,599 8

9 Principal risks and uncertainties Description Impact Management and mitigation Assessment of risk yearon-year Macroeconomic Conditions The Group derives most of its revenues from the UK residential property market and is thus dependent on this market and macroeconomic conditions in the UK. If the UK economy contracts or if interest rates increase, average property prices, the number of mortgage approvals, the volume of transactions in the UK housing market and estate agents and lettings agents marketing budgets could decrease, which could reduce the number of agents who subscribe to the Group s services or the amount they spend on our services. Regularly reviewing market conditions and indicators to assess whether any action is required to reduce costs or vary the products and services. Maintaining a balance between different streams of revenues and profits in order to provide protection against volatility within property sales markets. Developing revenue streams in related/adjacent markets. New Entrant to the Market Agents Mutual Agents Mutual was founded to create a new industry-owned property portal and requires its members to list on a maximum of only one other property portal. If Agents Mutual successfully launches in 2015 with its proposed restrictive advertising provision, a portion of the Group s existing members may terminate their subscriptions with the Group. The launch of Agents Mutual may also result in fewer consumers using the Cpmpany s websites, a loss of advertisers and a loss of market share for the Group. Communicating to members the value proposition of advertising on the Group s websites. Offering attractive and competitive subscription packages to members. Increasing consumer brand awareness through marketing. Increasing revenue from channels that are not susceptible to Agents Mutual (new homes, commercial, overseas, online agents, data). Changing Online Property Landscape The Group participates in a competitive market with new New or existing competitors may develop new methods of working to provide services and products in the property market that are more attractive to the Increasing user engagement levels by continuing a consumercentric approach to 9

10 technology developments. Group s consumers and members resulting in fewer consumers using the Group s websites or mobile applications, the loss of members and advertisers and loss of market share. product development to extend value to members. Continually monitoring and undertaking regular reviews of competitor strategies that are built into the regular business planning cycle. Maintaining organisational flexibility allowing fast responses to new business opportunities or threats. Retention and Recruitment Success depends on the continued service and performance of the Group s senior management team and other key employees. Skilled development, technical, operating, sales and marketing personnel are also required. Competition for qualified employees is intense and the loss of a number of qualified employees to competitors, new entrants or otherwise, or an inability to attract, retain and motivate additional highly skilled employees required for the expansion of the Group s activities could materially adversely impact the Group s business, results of operations, financial condition or prospects. Investing in succession planning and improving learning and development, giving opportunities for employees to upgrade skills. Providing competitive compensation packages to staff, including a blend of short and long term incentives for managers. Maintaining the culture of the Group which generates significant staff loyalty within senior and mid-management. Planning a structured approach to recruitment using specialist teams to increase the recruitment of high-quality employees quickly. IT Systems The Group s IT systems are interdependent and a failure in one system or a security breach may disrupt the efficiency and functioning of the Group s Any failure of the internet and/or mobile network infrastructure generally, or any failure of existing or future computer or communication systems or software systems, or any security breach could impair the processing and storage of data and the day-to-day management of the Operating extensive disaster recovery and business continuity contingency plans. Regular security testing of the IT systems and platforms. 10

11 operations. Group s business. Ensuring that all systems which the Group relies on are up-to-date and the most secure version. Full year results The Group presents its financial statements for the year ended 30 September. The Group s full Annual Report will be made available to shareholders, and displayed on the Group s website in January Statement of Directors responsibilities The responsibility statement below has been prepared in connection with the Company s full Annual Report for the year ended 30 September. Certain parts thereof are not included within this Announcement. The Directors confirm to the best of their knowledge that: a) the Group consolidated financial statements from which the financial information within these preliminary consolidated financial results have been extracted, are prepared in accordance with IFRSs as adopted by the European Union and give a true and fair view of the assets, liabilities, financial position and profit of the Group and the undertakings included in the consolidation taken as a whole; and b) the Annual Report and the Operating and Financial Review include a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties faced by the Group. The Directors of Zoopla Property Group Plc and their respective responsibilities are listed in the Annual Report for. This responsibility statement was approved by the Board of Directors and is signed on its behalf by: Alex Chesterman Chief Executive Officer 24 November 11

12 Independent auditor s report to the members of Zoopla Property Group Plc Opinion on financial statements of Zoopla Property Group plc 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 30 September and of the group s profit for the year then ended; the group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union 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. The financial statements comprise of the consolidated statement of comprehensive income, the consolidated and parent company statement of financial position, the consolidated and parent company statement of cash flows, the consolidated and parent company statement of changes in equity and the related notes 1 to 26. The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act Going concern As required by the Listing Rules we have reviewed the Directors statement that the group is a going concern. We confirm that: we have concluded that the directors use of the going concern basis of accounting in the preparation of the financial statements is appropriate; and we have not identified any material uncertainties that may cast significant doubt on the group s ability to continue as a going concern. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the group s ability to continue as a going concern. Our assessment of risks of material misstatement The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team: Risk Revenue Recognition - completeness Revenue primarily consists of recurring subscription payments in return for property listings on the Group s websites. Individual contracts exist with each customer with a range of different terms and conditions, and as a result there are a significant number of agreements. Consequently there is a risk that customer subscription agreements may not be appropriately captured and accounted for in line with underlying contractual terms and hence the revenue population may not be complete. How the scope of our audit responded to the risk In order to address the risk of revenue completeness we have: i) understood Management s processes and controls in respect of the appropriate recognition of revenue, including testing the design and implementation of those controls. Our work focused, in particular on the arrangements put in place by Management to ensure billing of customers in line with contractual terms; ii) identified and investigated anomalies in billing patterns for specific customers to check that billing runs (and hence revenue) are complete; and 12

13 iii) checked that for a sample of customer contracts, that revenue has been appropriately recognised in line with the contractual terms and IAS 18. Accounting for share based payment arrangements including warrants The Group has a number of share-based payment arrangements, which include warrants issued to certain estate agents and share incentive plans for management and employees. The warrant instruments are complex and involve a commitment to list properties in return for commercially agreed subscription fees. The fair value of the warrant is based on the fair value at the time of grant and this involves Management judgement. For the share incentive plans, management judgement is also required for the inputs to the valuation model and the underlying assumptions. There is a risk that these complex instruments may not be valued correctly, and subsequently not accounted for appropriately in accordance with IFRS 2. Group reorganization and IPO Accounting for group reorganisation prior to the IPO and costs directly incurred in relation to the IPO were significant matters that required management judgement. The accounting for the Group reorganisation, in the absence of any prescribed accounting treatment for common control transactions under IFRS, required management to adopt the principles of FRS 6 and involved the use of merger relief and the creation of a non-distributable merger reserve in the new parent company. This item leads to material accounting entries, particularly in the parent company financial statements and, therefore, there is a risk that incorrect application of the accounting principles leads to a misleading presentation of the reserves available for distribution. We have assessed the accounting treatment for both warrants and employee share option schemes to ensure that they are in line with IFRS 2, involving consideration of the appropriate vesting period for each scheme (pre and post IPO). We have critically assessed and evaluated Management s assumptions and valuation methodology, using specialists where necessary for the more complex schemes. We have agreed key inputs used within valuation models to internal and external sources, benchmarked these underlying assumptions against external data and internal historical trends to check that they are reasonable and supportable. We obtained the share-based payment calculations and performed audit procedures to determine the accuracy of the IFRS 2 charge, as well as considering whether the disclosure in note 21 meets the requirements of IFRS2. For the Group reorganisation we reviewed the accounting entries prepared by management, involved technical experts, and tested the accounting entries to supporting documentation. For the IPO costs, we confirmed by reference to invoices and other supporting documentation, that the costs classified as exceptional directly related to the IPO. Directly attributable IPO costs totalling 5.6 million have been separately disclosed as exceptional items, which is a non-gaap measure. This item is a material disclosure in the financial statements and, therefore, there is a risk of inappropriate classification distorting the performance shown in the Income statement. The Audit Committee s consideration of these risks is set out in the Annual Report. 13

14 Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole, and not to express an opinion on individual accounts or disclosures. Our opinion on the financial statements is not modified with respect to any of the risks described above, and we do not express an opinion on these individual matters. Our application of materiality We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work. We determined materiality for the group to be 1.5 million, which is 5% of pre-tax profit, and below 2% of equity. We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of 30,000, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements. An overview of the scope of our audit Our group audit was scoped by obtaining an understanding of the group and its environment, including group-wide controls, and assessing the risks of material misstatement at the group level. Our audit scope covers 100% of the group s net assets, revenue and profit before tax. At the parent entity level we also tested the consolidation process. 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; and the information given in the Strategic Report and the Directors Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception Adequacy of explanations received and accounting records Under the Companies Act 2006 we are required to report to you if, in our opinion: we have not received all the information and explanations we require for our audit; or 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 are not in agreement with the accounting records and returns. We have nothing to report in respect of these matters. Directors remuneration Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors remuneration have not been made or the part of the Directors Remuneration Report to be audited is not in agreement with the accounting records and returns. We have nothing to report arising from these matters. Corporate Governance Statement Under the Listing Rules we are also required to review the part of the Corporate Governance Statement relating to the company s compliance with nine provisions of the UK Corporate Governance Code. We have nothing to report arising from our review. 14

15 Our duty to read other information in the Annual Report Under International Standards on Auditing (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is: materially inconsistent with the information in the audited financial statements; or apparently materially incorrect based on, or materially inconsistent with, our knowledge of the group acquired in the course of performing our audit; or otherwise misleading. In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the directors statement that they consider the annual report is fair, balanced and understandable and whether the annual report appropriately discloses those matters that we communicated to the audit committee which we consider should have been disclosed. We confirm that we have not identified any such inconsistencies or misleading statements. Respective responsibilities of directors and auditor As explained more fully in the Directors Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. We also comply with International Standard on Quality Control (UK and Ireland). Our audit methodology and tools aim to ensure that our quality control procedures are effective, understood and applied. Our quality controls and systems include our dedicated professional standards review team and independent partner reviews. This report is made solely to the company s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act Our audit work has been undertaken so that we might state to the company s members those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company s members as a body, for our audit work, for this report, or for the opinions we have formed. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group s and the parent company s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Mark Lee-Amies (Senior statutory auditor) for and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditor London 24 November 15

16 Consolidated statement of comprehensive income For the year ended 30 September Notes 2013 Revenue 80,230 64,498 Administrative expenses (51,763) (36,536) Adjusted EBITDA 3 39,614 29,433 Share-based payments 21 (3,910) (98) Depreciation and amortisation (1,658) (1,373) Exceptional items 3 (5,579) - Operating profit 4 28,467 27,962 Finance income Profit before tax 28,669 28,287 Income tax expense 9 (7,592) (5,957) Profit for the year being total comprehensive income 21,077 22,330 Attributable to: Owners of the parent 21,077 22,330 Earnings per share Basic (pence per share) Diluted (pence per share)

17 Consolidated statement of financial position As at 30 September 2013 Notes Assets Non-current assets Property, plant and equipment 12 1, Intangible assets 15 75,194 76,537 Trade and other receivables 16-9,563 Deferred tax assets ,088 86,206 Current assets Trade and other receivables 16 5,887 4,903 Cash and cash equivalents 31,025 28,123 36,912 33,026 Total assets 114, ,232 Liabilities Current liabilities Trade and other payables 17 11,418 10,140 Current tax liabilities 3, Provisions Non-current liabilities Deferred tax liability Provisions Total liabilities 15,829 11,945 Net assets 98, ,287 Equity attributable to owners of the parent Share capital Share premium reserve 50 18,577 Other reserves 20 87,537 70,187 Retained earnings 10,166 18,519 Total equity 98, ,287 The consolidated financial statements of Zoopla Property Group Plc were approved by the Board of Directors and were signed on it behalf by: A Chesterman S Morana Director Director 24 November 24 November 17

18 Consolidated statement of cash flows For the year ended 30 September Cash flows from operating activities 2013 Profit before tax 28,669 28,287 Adjustments for: Depreciation of property, plant and equipment Amortisation of intangible assets 1,505 1,241 Loss on disposal of property, plant and equipment - 23 Financial income (202) (325) Share-based payments 3, Operating cash flow before changes in working capital 34,035 29,456 (Increase)/decrease in trade and other receivables (984) 2,577 Increase in trade and other payables 2,747 1,271 (Decrease)/increase in provisions (492) 492 Cash generated from operating activities 35,306 33,796 Income tax paid (4,325) (2,216) Net cash inflows from operating activities 30,981 31,580 Cash flows (used in)/from investing activities Acquisition of subsidiaries, net of cash acquired (1,497) (4,496) Interest received Acquisition of property, plant and equipment (929) (85) Acquisition of intangible assets (162) (21) Net cash flows used in investing activities (2,386) (4,277) Cash flows from/(used in) financing activities Proceeds on issue of shares Unpaid share capital paid-up 9,563 - Shares released from trust Equity contributions received 50 - Dividends paid (35,528) (10,158) Net cash flows used in financing activities (25,693) (10,136) Net increase in cash and cash equivalents 2,902 17,167 Cash and cash equivalents at beginning of period 28,123 10,956 Cash and cash equivalents at end of period 31,025 28,123 18

19 Consolidated statement of changes in equity For the year ended 30 September Share capital Share premium reserve Other reserves EBT share reserve Merger reserve Retained earnings Total equity At 1 October ,577 70,187 18, ,287 Profit and total comprehensive income for the period ,077 21,077 Transactions with owners recorded directly in equity: Share-based payments ,882 3,882 Current tax on share-based payments Deferred tax on share-based payments Issue of share capital - 1, ,788 Group restructuring (20,315) - 19, Equity contributions Shares purchased by EBT - - (1,716) - - (1,716) Shares released from EBT Transfer between reserves (985) Dividends paid (35,528) (35,528) At 30 September (1,566) 89,103 10,166 98,171 Share capital Share premium Reserve Other reserves EBT share reserve Merger reserve Retained earnings Total equity At 1 October ,492 71,172 5,264 89,932 Profit and total comprehensive income for the year ,330 22,330 Transactions with owners recorded directly in equity: Share-based payments Issue of share capital - 5, ,085 Transfer between reserves (985) Dividends paid (10,158) (10,158) At 30 September ,577-70,187 18, ,287 19

20 1 During the year the Group was subject to restructuring prior to Admission on the London Stock Exchange. Zoopla Property Group Plc was inserted at the top of the Group as the new parent company, with the former parent, ZPG Limited (formerly Zoopla Property Group Limited), becoming a direct subsidiary of Zoopla Property Group Plc through a share-for-share exchange. Note 1.3 provides further details on the basis of consolidation balances are stated as though the transactions occurred within Zoopla Property Group Plc. In addition, the issue of share capital balance of 1,788,000 represents 1,738,000 of shares issued by the previous parent company, ZPG Limited. It is presented as though the shares were issued by Zoopla Property Group Plc. 2 The transfer from merger reserve to retained earnings in and 2013 represents an equalisation adjustment in respect of the amortisation charge on intangibles which arose on acquisition of The Digital Property Group Limited on 31 May Notes to the financial statements 1. Accounting policies Zoopla Property Group Plc is a company domiciled and incorporated in the United Kingdom. The address of the registered office is the Harlequin Building, 65 Southwark Street, London SE1 0HR. The Company was incorporated on 22 April as Project ZigZag Limited, to act as the holding company for ZPG Limited (formerly known as Zoopla Property Group Limited) and its subsidiaries. On 16 May the Company registered as a public limited company and changed its name to Zoopla Property Group Plc. 1.1 Basis of preparation The principal accounting policies adopted in the preparation of the financial statements are set out below for the years ended 30 September and 30 September The policies have been consistently applied to all the periods presented, unless otherwise stated. These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and IFRIC Interpretations (collectively IFRSs ) issued by the International Accounting Standards Board ( IASB ) as adopted by the European Union ( adopted IFRSs ). They are prepared on the historical cost basis. The preparation of financial statements in compliance with adopted IFRS requires the use of certain critical accounting estimates. It also requires Management to exercise judgement in applying the Group's accounting policies. Note 1.20 gives further details relating to the Group s critical accounting estimates. At the date of approval, the following standards and interpretations which have not been applied in these financial statements were in issue but not yet effective for financial years beginning on or after 1 January : IFRS 9 Financial Instruments classification of financial assets and financial liabilities. Amendments to IFRS 11 accounting for acquisition of Interests in Joint Operations Amendments to IAS 16 and IAS 38 clarification of acceptable methods of depreciation and amortisation IFRS 15 revenue from contracts with customers Amendments to IAS 27 equity method in separate financial statements Amendments to IFRS 10/IAS 28 sale or contribution of assets between an investor and its associate or joint venture Improvements annual improvements to IFRSs: These standards are not expected to have a material impact on the financial statements. 1.2 Adoption of new and revised standards These financial statements have been prepared in accordance with the policies set out in the statutory financial statements of Zoopla Property Group Limited for the year ended 30 September 2013, with the exception of the application of certain new and revised accounting standards in the period. The new and revised standards and interpretations that have been adopted and a description of their impact on the amounts reported in the financial statements is provided below. 20