Zoopla Property Group Plc Zoopla Property Group Plc Annual Report 2014 Annual Report 2014 Innovative

Zoopla Property Group Plc Zoopla Property Group Plc Annual Report 2014 Annual Report 2014 Innovative. Entrepreneurial. Growing.

Zoopla Property Group is a digital media business that owns and operates some of the UK’s leading online property brands including Zoopla, PrimeLocation, SmartNewHomes and HomesOverseas. Our goal is to provide the most useful resources for UK property consumers and to be the most effective partner for property professionals in the UK.

We help consumers to find their next home and to research the market by combining hundreds of thousands of property listings with market data, local information and community tools. Each of our brands has a distinct market position and attracts a unique audience, delivering increased exposure and enquiries for our members. Our members consist of over 19,600 estate agents, lettings agents and new homes developers who now advertise on our websites. Throughout the 2014 financial year our websites and mobile apps attracted an average of 43 million visits per month and generated over 2.4 million enquiries per month for our estate agent, letting agent and new homes developer members. In addition to operating our own websites we exclusively power the property search facility on a number of the UK’s biggest websites which means that we provide our members with exposure to an unrivalled property audience in the UK.

Read more about our business and strategy from page 8

Visit our corporate website for the latest investor news and announcements at www.zpg.co.uk In this report:

Overview Overview

Introduces Zoopla Property 02 Zoopla Property Group at a glance Group and presents the year’s 04 Chairman’s statement performance highlights and the Chairman’s statement.

Strategic report

Provides an overview of the 06 Chief Executive Officer’s statement Strategic report Company’s business model, 08 Our strategy and objectives strategy, performance and future prospects. 09 Our business model 10 What sets us apart 12 Our brands at a glance 13 Our exclusive partnerships 14 Our market 15 Our KPIs 16 Risk management and key risks

18 Financial review Corporate governance 22 Our people and corporate responsibility

Corporate governance

Includes reports from the 24 Chairman’s introduction to governance Directors and each of the 26 Board of Directors Board committees. 28 Corporate governance statement 32 Audit Committee report Financial statements 36 Nomination Committee report 38 Directors’ remuneration report 62 Directors’ report (other disclosures) 65 Statement of Directors’ responsibilities

Financial statements

Presents the financial 66 Independent auditor’s report statements with their 69 Consolidated statement of comprehensive income accompanying notes. 70 Consolidated statement of financial position 71 Consolidated statement of cash flows 72 Consolidated statement of changes in equity 73 Notes to the financial statements 92 Company statement of financial position 93 Company statement of cash flows 94 Company statement of changes in equity 95 Notes to the Company financial statements 97 Shareholder information 97 Note on forward-looking statements

Zoopla Property Group Plc zpg.co.uk 01 Zoopla Property Group at a glance

In the year of our successful IPO the Group has experienced strong growth and record levels of traffic.

Operational highlights

ffTraffic up 33% to 513.5 million (2013: 386.4 million) 29.2m ffNumber of members increased 5% to 19,663 Total leads (2013: 26.1m) (2013: 18,676) ffNumber of leads increased by 12% to 29.2 million 513.5m (2013: 26.1 million) Total site visits (2013: 386.4m) ffSuccessful IPO in June of this year ffContinued focus on mobile, which now drives 19,663 57% of the Group’s traffic Members at 30 September ffUp-sell of depth products to members driving ARPA (2013: 18,676) ffSmartNewHomes acquisition fully embedded with 49% increase in developer revenue

Our journey so 2008 2009 2010 far: a story of ff Zoopla.co.uk launched ff Acquired: ff Acquired: ff Launch of Automated Value PropertyFinder.com BytePlay innovation and Model (AVM) HotProperty.co.uk ff Winner of 100 Most Innovative ThinkProperty.com differentiation. ff Winner of UK’s Most UK Businesses (Smarta) Promising Internet Company ff #2 property portal by unique ff Launch of ZooplaPro visitors in under two years (First Tuesday) ff Listed as one of the Top UK ff Winner of UK’s Best Property ff Launch of property listings Tech Companies (Guardian) Website (Web User) ff Winner of Best UK Property Portal (Daily Mail Awards) ff Winner of Best Real 2007 Estate Website (Website ff Zoopla Ltd founded of the Year Awards)

0.4m visits pm 2m visits pm 5m visits pm 0.3m leads pm

02 Zoopla Property Group Plc Annual Report 2014 Overview

Financial highlights Membership evolution (number) Strategic report

Revenue (£000) Adjusted EBITDA1,3 (£000) 2014 (19,663, +5%) £80,230 £39,614 Agency (16,373, +3%) +24% +35% Developer (2,715, +7%) Overseas (575, +106%) 80,230 39,614 64,498 29,433 2013 (18,676)

Agency (15,858) Corporate governance Developer (2,539) Overseas (279) 13 14 13 14

Adjusted profit Operating profit (£000) for the year2,3 (£000) Average revenue per advertiser (ARPA) (£) £26,656 £28,467 +19% +2% 2014 (£312, +18%) 26,656 27,962 28,467 Agency (£323, +17%) 22,330 Financial statements Developer (£270, +31%) Overseas (£139, -2.8%)

2013 (£264) 13 14 13 14 Agency (£275) 1 Adjusted EBITDA is defined as operating profit after adding back depreciation Developer (£206) and amortisation, share-based payments and exceptional items. Overseas (£143) 2 Adjusted profit for the year excludes exceptional items. 3 The Directors believe that the adjusted figures give a more appropriate measure of the Group’s underlying financial performance.

2011 2012 2013 2014 ff Acquired: ff Acquired: ff Acquired: ff Successful IPO on the HousePrices.co.uk UpMyStreet.com SmartNewHomes.com London Stock Exchange ff Winner of Best Property PrimeLocation.com HomesOverseas.co.uk ff Rated an “Outstanding” place Portal: Western Europe FindaProperty.com ff Winner of Best Brand (Sunday to work by Best Companies Globrix.com (Property Portal Awards) Times Tech Track 2013 Awards) ff Launch of commercial ff Winner of Innovative Business ff Acquisition and integration ff Winner of Company of property channel of the Year (Fast Growth of DPG created Zoopla the Year (Growing Business Awards) Property Group Ltd Business Awards 2013) ff Listed as one of the Top ff Winner of Europe’s Most 100 UK Tech Companies Exciting Investor Backed (Daily Telegraph) Company of the Year (Investor Allstars Awards 2013)

10m visits pm 16m visits pm 35m visits pm 43m visits pm 0.6m leads pm 1.0m leads pm 2.2m leads pm 2.4m leads pm

Zoopla Property Group Plc zpg.co.uk 03 Chairman’s statement Mike Evans, Chairman

We have evolved with the demands of the market to develop highly effective mobile and tablet platforms.

Zoopla Property Group has experienced another strong year in 2014. Following our successful IPO in June, I am delighted to announce a positive set of results for the Group. Our revenue and profits continue to grow. Total income has increased by 24% to £80.2 million and adjusted EBITDA has increased by 35% to £39.6 million, while we “Our brand strength and have continued to make significant long-term investment. The Group remains well funded reputation has grown and debt free. strongly, supported by This accomplishment is due to a variety of factors. We have continued to attract users to our sites because of the quality of marketing and a successful marketing products, providing a compelling user experience. We have evolved campaign in the past with the demands of the market to develop highly effective mobile and tablet platforms. Our sites, products and platforms have attracted year…” a record 513 million visits over the past 12 months, a substantial increase from 386 million in 2013.

Finally, growth of the Group’s business partially depends on its strong brands and reputation to attract and retain users and, in turn, the members who choose to subscribe to and advertise on the Group’s sites. Our brand strength and reputation have grown strongly, supported by a successful marketing campaign in the past year.

Dividend The Directors have proposed a final dividend of 1.1 pence per share to be paid in respect of the year ended 30 September 2014. This will be paid on 23 February 2015 to all shareholders on the register on 5 December 2014.

Capital structure The Company was admitted to the London Stock Exchange on 23 June 2014. This was facilitated by a number of our larger shareholders reducing their holdings and accepting a lock-in of their remaining shares for a period of six months from Admission. Management agreed to lock-ins of 12 months. Daily Mail and General Trust Plc (DMGT) remains the largest single investor with a 31.8% holding. Alex Chesterman, Founder and Chief Executive Officer, continues to hold 4.1%. In addition, we continue to build up a register of well regarded institutional shareholders.

04 Zoopla Property Group Plc Annual Report 2014 Overview Strategic report Corporate governance

Financial performance from Alex Chesterman and his team ensured the Group was able to Adjusted EBITDA was up 35% to £39.6 million (2013: £29.4 million) successfully complete the IPO whilst continuing to grow the business. and adjusted earnings per share (EPS), which excludes exceptional I am confident that the Zoopla Property Group team will execute the items, was up 20% to 6.5 pence per share (2013: 5.4 pence per Group’s strategy effectively, showing diligence throughout. Financial statements share). The Group continues to generate high levels of cash and The Board and I would like to thank all of our users, members and as at 30 September 2014 the cash position was £31.0 million employees for their commitment to the Group over the past 12 months. (2013: £28.1 million). It has been a challenging year but also a transformative and successful one and I look forward to the future with confidence. The Board In anticipation of the IPO, the Group reviewed and revised the Board composition, appointing three new independent Directors. Our Board now has a diverse mix of backgrounds, skill and experience and its members are committed to setting the strategic direction whilst maintaining Mike Evans the highest standards of corporate governance and instilling a sound Chairman framework for the control and management of the Group, driving it to further success. Biographies of all members of the Board appear on pages 26 and 27.

I joined the Board in May this year and have been extremely impressed by the dedication and determination of the Executive, Management and Employee teams. Everyone at Zoopla Property Group is focused on delivering excellent value to our estate agent, letting agent and new home developer members, while enhancing the user experience for consumers. Going through an IPO process has the potential to be hugely distracting for Management. Careful and thoughtful planning

Zoopla Property Group Plc zpg.co.uk 05 Chief Executive Officer’s statement Alex Chesterman, Chief Executive Officer

It’s been an incredible journey in a relatively short period of time since we launched the business in 2008.

I am delighted to present Zoopla Property Group Plc’s (ZPG) first annual report. It has been an incredible journey in a relatively short period of time since we launched the business in 2008. Back then we set out to transform the way that UK consumers searched for property and researched the market and I think that we have made some great steps towards “During the last 12 months fulfilling that goal. However, there remain some exciting opportunities and interesting we have grown our user challenges ahead. audience to record levels During the last 12 months we have grown our user audience to record levels as more consumers than ever used our platform to search for as more consumers properties and research the property market. User visits to our websites than ever have used and mobile applications increased by 33% over the year, with mobile devices now accounting for over 57% of total user visits, as consumers our platform…” engaged with our services at work, at home and on the move. This growth was driven in part by the continued shift of the property experience online, together with renewed confidence in the UK property market during the year.

Our growing user audience together with the increased levels of activity in the property market resulted in our advertising members (estate agents, letting agents and new home developers) enjoying record levels of exposure and enquiries, with over 29 million leads generated from our platform over the year, an increase of 12%. Over the past 12 months 40,000 individual home sellers used the ZPG valuation tool to contact local agents about selling their home, equating to around £150 million of potential fees for ZPG members. These figures show our ongoing commitment to helping our members win new business and the exceptional value we provide.

We have grown our member base by over 5% over the past 12 months and seen average revenue per member increase by 18% during the period, with a significant portion of the ARPA growth being driven by our members purchasing additional products and services to generate greater standout on our platform. Our revenue growth reflects the overall recovery in the property market and the continued shift from print to digital in property marketing.

06 Zoopla Property Group Plc Annual Report 2014 Overview

Our strategy products to enhance their brand prominence, such as Area Sponsorship Strategic report Our goal is very simply to provide the most useful online resources to and Appraisal Booster, or to enhance exposure and drive additional UK property consumers and to be the most effective partner to our enquiries for their property listings, such as Premium Listings and advertising members. Over the past few years we have made a lot Featured Properties. of progress towards achieving that goal having built a market-leading We benefit from strong network effects where the more consumers digital property proposition for our users and members. who use our platform, the more attractive it is for our members to We help our users to both research the property market and also to advertise and purchase enhanced marketing products. Almost 90% find their next home through our huge inventory of available properties of estate agents, letting agents and new home developers throughout and best in class search tools and associated data. We provide the UK advertise on our platform to benefit from the high level of unrivalled exposure for our members to a unique audience of online exposure and enquiries that we deliver. We also generate additional property consumers via the various brands that we own and power. revenues from third party advertising and partnerships.

Our core brands, Zoopla and PrimeLocation, attract millions of unique Corporate governance Looking forward users each month allowing us to deliver exceptional value to our members There are significant opportunities that we are very excited about for whilst delivering strong revenue and EBITDA growth to our shareholders. our business as we go forward. Whilst we remain behind Rightmove We own a number of other leading brands, including SmartNewHomes currently in terms of audience and revenues, we have closed the gap and HomesOverseas, which allow us to target niche audiences within in terms of brand awareness and the number of advertising members the property market as well as powering the online property search and the gaps in other key performance indicators (KPIs) continue function for some of the UK’s leading third party brands including to narrow. The Times, the Daily Telegraph, the Evening Standard, Barclays, Halifax and many more. There are also challenges ahead. The next 12 months will see further competition in the form of Agents’ Mutual, an agent-led portal which During the last 12 months we have invested heavily in our brands in plans to launch in early 2015 and which proposes to exclude its terms of both product and marketing. We continue to innovate and members from advertising with either us or Rightmove. We will ensure have launched a number of new features to increase engagement Financial statements that we demonstrate effectively to our members and consumers the on our platforms, including commute time search, a new commercial value we provide in the property search process. We believe that property channel and enhanced features within ZooplaPro including ultimately it is in the commercial interests of our members to advertise MarketView, PropertyWatch and new Comparables Reports. We have with us given the unique scale and nature of our audience and the also broadened our marketing channels to now include TV, radio, exceptional value that we deliver. Further uncertainties surrounding cinema, print and outdoor campaigns. the upcoming election, interest rates and policy issues such as the Over the coming months we plan to invest further in growing our user proposed mansion tax will also challenge the overall housing market engagement and awareness, ensuring that we deliver even more value recovery but we are confident that we are well placed to deal to our members as we develop new products and services to monetise. with these. With most consumers shifting from print to online as their preferred We believe we have built a business in seven short years that method of property search, we are very well positioned to capture combines a market-leading consumer proposition with an unequalled a rising share of the growing digital property spend as it further value-for-money member proposition. We look forward to addressing transitions away from traditional print media. the opportunities and challenges ahead and remain convinced that the long-term winners will be those that offer the best service for Business model consumers and members alike. Consumers engage with our brands when searching or researching the property market. We display over 1 million properties advertised Finally, we continue to attract and retain the best talent in the market by our members available for sale or rent along with other useful data and continue to build a team that I am extremely proud of and that and information to help our users make smarter property decisions. stands us in great stead as we go forward.

Our principal source of revenue is the monthly subscription fees paid by our members to advertise their properties on our platform. Our average cost per lead is significantly lower than Rightmove and we offer a variety of subscription packages with varying levels Alex Chesterman of services included in each. In addition, our members buy additional Chief Executive Officer

Zoopla Property Group Plc zpg.co.uk 07 Our strategy and objectives

The Group focuses 1 2 on the following core Grow brand awareness and Extend inventory strategies in order user audience The Group aims to attract the remaining to deliver on its goal: The Group plans to continue to grow its UK property professionals (around 10% brand awareness through advertising, of market) that are not currently members public relations, digital marketing and by communicating the value of the Group’s social media campaigns and recognises products, its niche brand strategy and the the importance of increasing its organic benefits of accessing the Group’s significant and unpaid search traffic. and unique user audience.

The Group has achieved significant growth Extending the listings inventory to cover in brand awareness for its core brand, Zoopla, the whole of the market would improve over the last few years. The prompted brand user experience and increase the Group’s awareness of the Zoopla brand amongst all value to its users and members. UK adults has grown from 26% to 77% The Group has extensive field-based and between November 2010 and October 2014 telesales teams that work on building according to brand surveys conducted by relationships with property professionals Harris Interactive. who are prospective members.

3 4 5 Develop additional products Increase user engagement Develop opportunities The Group aims to be the most effective The Group intends to further increase in related markets partner to property professionals in the UK. its user engagement levels by continuing The Group is pursuing additional opportunities its consumer-centric approach to The Group’s strategy is to develop products in related markets: product development. that assist members as much as possible ff Further products and services for to attract new clients and generate leads. The Group also generates unique property members. The Group seeks to offer its related content that is useful for users as a The Group’s products, such as ZooplaPro members additional services, including means to increase engagement. The Group and MarketView, have been developed to other marketing and data services. will continue to add more data and content provide members with information on their to its platform and develop new features ff Complete ownership of the property marketing performance and their competitive and tools to further improve user experience journey. The Group plans to develop position in a local area. and deepen engagement with the Group’s further services to engage users with the websites and mobile applications, thereby Group’s websites and mobile applications improving the volume and quality of leads at different points in their property journey. delivered to members. ff Overseas and commercial property. The Group acquired and re-launched a leading overseas property portal, HomesOverseas.co.uk, and developed a commercial property channel in 2014.

ff Property dataset. The Group continues to explore new ways to monetise its unique UK property data resource comprised of historic sales transaction data, property listings information and proprietary user-generated content.

08 Zoopla Property Group Plc Annual Report 2014 Our business model How we deliver it

The Group benefits from powerful network Overview effects where the size of its user audience reinforces the value to its members of listing their properties on the Group’s platform.

In turn, users are further drawn to the Group’s Strategic report websites and mobile applications to access the Group’s comprehensive property listings. The unique tools and content available on the Group’s platform (including proprietary content generated by users) reinforce these network effects. Corporate governance

More members/ more inventory Financial statements

More visitors/ Higher ARPA/ more leads more revenue

More investment/ marketing spend

Zoopla Property Group Plc zpg.co.uk 09 What sets us apart

Our key differentiators.

1 Core brands Niche brands Multi-brand strategy Broader consumer audience

2 Long-term customer relationships Business model stability

c.2,300 branches representing 12% of the market 3 Exclusive distribution partnerships Maximising customer reach

4 Valuation estimates HeatMaps SmartMaps Proven track record of innovation Consumer and industry champion

5 Valuation models Automated valuation model Market transparency and efficiency

6 28m+ 9.5m+ 19m+ 6.5m+ Proprietary property dataset property pages homes with sold prices archive listings Unique insights/opportunities user data

10 Zoopla Property Group Plc Annual Report 2014 Overview Strategic report Corporate governance Financial statements 11 zpg.co.uk Zoopla Property Group Plc Group Zoopla Property Our brands at a glance

Each of our brands has a distinct market position and attracts a unique audience.

Segment Brands

UK agencies

The Group’s brands include Zoopla and PrimeLocation, the second and third most-visited property websites in the UK, respectively.

Zoopla.co.uk is the UK’s most comprehensive property website, focused on empowering users with the resources they need to make better-informed property decisions.

PrimeLocation.com focuses on helping house hunters in the middle and upper tiers of the market to find their next home.

Overseas agencies

HomesOverseas.co.uk is the UK’s leading website dedicated entirely to helping users find the perfect holiday property abroad.

New home developers

SmartNewHomes.com is the UK’s only dedicated website for new build properties and lists new developments available for sale from all the leading UK new homes developers.

Agency directory

AlltheAgents.co.uk is an estate agent and letting agent directory, helping users find the most suitable local agent for their property needs.

12 Zoopla Property Group Plc Annual Report 2014 Our exclusive partnerships

We exclusively power the property search Overview facility on a number of the UK’s biggest websites and apps.

Our exclusive partners Strategic report Corporate governance Financial statements

In addition to operating our own websites, we exclusively power the property search facility on a number of the UK’s biggest websites, which means that we offer our members exposure to an unrivalled property audience in the UK.

Our exclusive partnerships include The Times, We continue to develop our exclusive The Daily Telegraph, The Independent, listings distribution partnerships. the Evening Standard, Homes & Property, Visit our website for the latest: AOL, MSN, Homes24 and more. www.zpg.co.uk

Zoopla Property Group Plc zpg.co.uk 13 Our market

Technology is changing the way users search for homes and the way that professionals market their listings.

UK residential property market Similarly, mortgage approval rates, which experienced a rapid decline Residential property is one of the largest sectors of the UK economy and in 2008 to reach a recent historical low in 2009, have since increased is currently undergoing a transformation: technology is changing the way in 2013 and the first part of 2014 to the highest level since the start users search for homes and the way that professionals market their of the financial crisis (source: Bank of England). According to Halifax, listings and build their businesses. The 2008 downturn and subsequent mortgage payments as a percentage of income were 27% in 2013, the partial recovery in the UK property market have served to accentuate lowest level since 1999. There are a number of current UK government this transformation as users are seeking more comprehensive information initiatives aimed at increasing home ownership and transaction volumes and professionals are seeking more effective marketing channels. in the UK, including the NewBuy Guarantee Scheme, launched in March 2012, aimed at increasing mortgage availability for newly built Finding a home is often one of the most important decisions a consumer properties; the Help-to-Buy equity loan scheme, launched in April 2013, will make, especially given that a property is likely to be one of their most a three year initiative aimed at stimulating home sales; and the Funding valuable assets. As a result, users spend a significant amount of time for Lending Scheme, aimed at increasing overall property lending. As a seeking information related to the property search process, such as result of the historically low Bank of England base rate, mortgage interest available properties, historic and current house prices, neighbourhood rates remain extremely competitive, although the potential threat of information and financing options. As users increasingly conduct a base rate increase looms on the horizon. their property search and research online, property professionals are naturally shifting their marketing budgets towards online advertising The FCA implemented the Mortgage Market Review at the end of to reach these users. Equally, for home sellers, getting the best price April 2014, which requires lenders to carry out more detailed checks for one of their most valuable assets is critical and therefore ensuring on applicants before granting mortgages. Its purpose is to ensure that the property professional they engage to conduct this process the mortgage market is sustainable and works better for consumers. is marketing their home widely online is essential. Property portals play a vital role in allowing home sellers to reach the widest audience. Structural shift towards digital advertising In 2007, the pre-crisis property advertising market was worth in the The market downturn saw the average number of residential property region of £700 million with approximately 85% being spent on print. sales transactions in England and Wales fall from an average of In 2014, total advertising spend on property advertising remains below approximately 1,185,000 transactions per year from 2000 to 2007 pre-crisis levels at c.£400 million; however, a clear shift towards digital to 665,000 transactions per year from 2008 to 2013, reaching a low advertising can be seen with c.50% now being spent on digital advertising. in 2009 relative to historical averages. Since then, annual residential This print-to-digital shift reflects consumer search preferences as UK property sales transaction volumes have started to recover, with adults are spending more time online than ever before, aided by the an increase of 17.6% in 2013 as compared with 2012, reflecting proliferation of smartphones. a perceived improvement in UK economic conditions. This recovery continued into 2014, but the second half of the year has seen a Property portals have transformed consumer and agent behaviour with slowdown in activity with potential buyers mindful of continuing over 90% of home movers starting their searches online. For the user, economic uncertainty and the upcoming general election. convenience, price transparency, local area information, real time alerts and advice are driving change. For the agents, efficacy of marketing spend, enhanced reach and exposure, measurable ROI, real time enquiries and market knowledge are enabling increased productivity.

Annual sales transactions volumes (000) Property classified ad spend (£m) England and Wales

697 1,297 1,279 Print 1,226 1,194 1,186 1,184 547

1,087 Digital 1,027 427 441 452 465 383 383 389 399

780 359 663 656 654 621 616

00 01 02 03 04 05 06 07 08 09 10 11 12 13 07 08 09 10 11 12 13 14E 15E 16E 17E Source: Land Registry for England and Wales. Source: Enders analysis (2007–2013). Consensus of selected brokers (2014–2017).

14 Zoopla Property Group Plc Annual Report 2014 Our KPIs

Our key performance indicators (KPIs) help Overview to ensure that we are delivering against our strategic objectives.

Revenue (£m) Adjusted EBITDA (£m) Strategic report £80.2m £39.6m +24% +35%

The Group generates revenue 80.2 Adjusted EBITDA excludes 39.6 from three different sources: share-based payments and 64.5 agency revenue, developer exceptional items. 29.4 revenue and other revenue which includes overseas, advertising and data services.

13 14 13 14 Corporate governance

Adjusted basic EPS (pence per share) ARPA (£) 6.5p £312 +20% +18%

Adjusted basic EPS is calculated 6.5 Average revenue per advertiser 312 as adjusted profit for the year 5.4 (ARPA) is the revenue from 264 divided by the weighted average member subscriptions in a given number of shares in issue for the month divided by the total period. Adjusted profit for the number of members during the year is defined as profit for the month, measured as a monthly Financial statements year excluding exceptional items. average over the period. 13 14 13 14

Visits (m) Leads (m) 513.5m 29.2m +33% +12%

Visits comprise individual 513.5 Leads are enquiries made to the 29.2 sessions on the Group’s websites Group’s members initiated either 26.1 or mobile applications by users 386.4 through the telephone number for the period indicated as or email form displayed on the measured by Google Analytics. Group’s websites and mobile applications.

13 14 13 14

Members (number) Number of listings (m) 19,663 1.1m +5% No change

Members represent the total Number of listings represents the 18,676 19,663 1.1 1.1 number of UK estate and lettings total number of properties being agency branches, new home advertised for sale or to rent at developers and overseas agency the end of the period. branches paying subscription fees to advertise their listings at the end of period. 13 14 13 14

Zoopla Property Group Plc zpg.co.uk 15 Risk management and key risks

The effective management of risk is a major component in delivering on the strategic aims of the Group.

The principal risks Assessment Description Impact Management and mitigation of risk relating to the Group year-on-year and its sector are Macroeconomic conditions If the UK economy contracts or if interest rates increase, ff Regularly reviewing market conditions and indicators to assess average property prices, the number of mortgage approvals, whether any action is required to reduce costs or vary the summarised in the The Group derives most of its revenues from the UK residential property market the volume of transactions in the UK housing market and products and services. and is thus dependent on the market and macroeconomic conditions in the UK. estate agents’ and lettings agents’ marketing budgets ff Maintaining a balance between different streams of revenues table opposite. could decrease, which could reduce the number of and profits in order to provide protection against volatility within agents who subscribe for the Group’s services or the property sales markets. The table also shows how these risks are amount they spend on services. managed by the Group and how the Group ff Developing revenue streams in related/adjacent markets. plans to mitigate these risks. The risk factors described opposite are not New entrant to the market – Agents’ Mutual If Agents’ Mutual successfully launches in 2015 with ff Communicating to members the value proposition of advertising an exhaustive list or an explanation of all its proposed restrictive advertising provision, a portion on Group websites. risks. Additional risks and uncertainties Agents’ Mutual was founded to create a new industry-owned property portal and requires of the Group’s existing members may terminate their ff Offering attractive and competitive subscription packages relating to the Group, including those that its members to list on a maximum of only one other property portal. subscriptions with the Group. to members. are not currently known to the Group or Agents’ Mutual’s launch may also result in fewer that the Group currently deems immaterial, ff Increasing consumer brand awareness through marketing. consumers using the Group’s websites, a loss of may individually or cumulatively also have advertisers and a loss of market share for the Group. ff Increasing revenue from channels that are not susceptible a material adverse effect on the Group’s to Agents’ Mutual (new homes, commercial, overseas, business, results of operations and/or online agents, data services). financial condition. Changing online property landscape New or existing competitors may develop new methods ff Increasing user engagement levels by continuing a consumer-centric Remained the same of working to provide services and products in the approach to product development to extend value to members. The Group participates in a competitive market with new technology developments, property market that are more attractive to the Group’s ff Continually monitoring and undertaking regular reviews of Risk increased which may impact its ability to offer the best service to customers and members. consumers and members, resulting in fewer consumers competitor strategies that are built into the regular business using the Group’s websites or mobile applications, a loss Risk decreased planning cycle. of members and advertisers and a loss of market share. ff Maintaining organisational flexibility, allowing fast responses to new business opportunities or threats.

Retention and recruitment Competition for qualified employees is intense and the ff Investing in succession planning and improving learning and loss of a number of qualified employees to competitors, development, giving opportunities for employees to upgrade skills. Success depends on the continued service and performance of the Group’s Senior new entrants or otherwise, or an inability to attract, retain ff Providing competitive compensation packages to staff, including Management Team and other key employees. Skilled development, technical, operating, and motivate additional highly skilled employees required a blend of short and long-term incentives for managers. sales and marketing personnel are also essential. for the expansion of the Group’s activities could materially adversely impact the Group’s business, results of ff Maintaining the culture of the Group, which generates significant operations, financial condition or prospects. staff loyalty within senior and mid-management.

ff Planning a structured approach to recruitment using specialist teams to increase the recruitment of high-quality employees quickly.

IT systems Any failure of the internet and/or mobile network ff Operating extensive disaster recovery and business continuity infrastructure generally, or any failure of existing or future contingency plans. The Group’s IT systems are interdependent and a failure in one system or a security breach computer or communication systems or software ff Regular security testing of the IT systems and platforms. may disrupt the efficiency and functioning of the Group’s operations. systems, or any security breach could impair the processing and storage of data and the day-to-day ff Ensuring that all systems that the Group relies on are up to date management of the Group’s business. and the most secure version.

16 Zoopla Property Group Plc Annual Report 2014 Overview

Assessment Strategic report Description Impact Management and mitigation of risk year-on-year

Macroeconomic conditions If the UK economy contracts or if interest rates increase, ff Regularly reviewing market conditions and indicators to assess average property prices, the number of mortgage approvals, whether any action is required to reduce costs or vary the The Group derives most of its revenues from the UK residential property market the volume of transactions in the UK housing market and products and services. and is thus dependent on the market and macroeconomic conditions in the UK. estate agents’ and lettings agents’ marketing budgets ff Maintaining a balance between different streams of revenues could decrease, which could reduce the number of and profits in order to provide protection against volatility within agents who subscribe for the Group’s services or the property sales markets. amount they spend on services. ff Developing revenue streams in related/adjacent markets. Corporate governance New entrant to the market – Agents’ Mutual If Agents’ Mutual successfully launches in 2015 with ff Communicating to members the value proposition of advertising its proposed restrictive advertising provision, a portion on Group websites. Agents’ Mutual was founded to create a new industry-owned property portal and requires of the Group’s existing members may terminate their ff Offering attractive and competitive subscription packages its members to list on a maximum of only one other property portal. subscriptions with the Group. to members. Agents’ Mutual’s launch may also result in fewer ff Increasing consumer brand awareness through marketing. consumers using the Group’s websites, a loss of advertisers and a loss of market share for the Group. ff Increasing revenue from channels that are not susceptible to Agents’ Mutual (new homes, commercial, overseas, online agents, data services).

Changing online property landscape New or existing competitors may develop new methods ff Increasing user engagement levels by continuing a consumer-centric Financial statements of working to provide services and products in the approach to product development to extend value to members. The Group participates in a competitive market with new technology developments, property market that are more attractive to the Group’s ff Continually monitoring and undertaking regular reviews of which may impact its ability to offer the best service to customers and members. consumers and members, resulting in fewer consumers competitor strategies that are built into the regular business using the Group’s websites or mobile applications, a loss planning cycle. of members and advertisers and a loss of market share. ff Maintaining organisational flexibility, allowing fast responses to new business opportunities or threats.

ff Planning a structured approach to recruitment using specialist teams to increase the recruitment of high-quality employees quickly.

Zoopla Property Group Plc zpg.co.uk 17 Financial review

The Group has invested significantly in both marketing and product development in line with long-term plans laid out to shareholders.

Summary

The 2014 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 2014. It has also been a year of investment for the future. The Group has invested significantly in “The Group has performed both marketing and product development in line with the long-term plans laid out to shareholders. strongly in 2014 with The Group has performed strongly in 2014 significant revenue with significant revenue and adjusted EBITDA and adjusted EBITDA growth of 24% and 35% respectively. The growth of 24% and Group also continues to generate high levels of cash, with £31.0 million generated from 35% respectively.” 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 2014 of £4.6 million.

2014 financial performance

Summary income statement The Group’s summary income statement for the year ended 30 September 2014 is shown below:

2014 2013 Change £000 £000 %

Revenue 80,230 64,498 +24% Adjusted EBITDA1 39,614 29,433 +35% Adjusted profit for the year2 26,656 22,330 +19% Profit for the year 21,077 22,330 -6% Adjusted basic EPS3,4 (pence per share) 6.5 5.4 +20% Basic EPS (pence per share) 5.1 5.4 -6%

1 Adjusted EBITDA is defined as operating profit after adding back depreciation and amortisation, share-based payments and exceptional items. 2 Adjusted profit for the year is defined as profit for the year after adding back exceptional items. It includes the impact of £3.0 million of one-off accelerated warrant charges incurred during 2014. 3 Adjusted basic EPS represents adjusted profit for the year divided by the weighted average number of shares in issue for the period. 4 Adjusted basic EPS excluding £3.0 million of one-off accelerated warrant charges incurred during 2014 was 7.2 pence per share, an increase of 33% on the prior year.

18 Zoopla Property Group Plc Annual Report 2014 £80.2m £39.6m £26.7m Overview Total revenue (2013: £64.5m) Adjusted EBITDA (2013: £29.4m) Adjusted profit (2013: £22.3m) 513.5m 19,663 1.1m Number of visits (2013: 386.4m) Number of members (2013: 18,676) Number of listings (2013: 1.1m)

Revenue Strategic report 2014 2013 2014 2013 Change £000 £000 £000 £000 % Staff costs 12,759 9,699 Agency 62,986 51,613 +22% Other operating costs 27,857 25,366 Developer 8,547 5,719 +49% Other 8,697 7,166 +21% Underlying administrative expenses 40,616 35,065

Total revenue 80,230 64,498 +24% Costs excluded from adjusted EBITDA 11,147 1,471

Total administrative expenses 51,763 36,536 The Group’s revenue increased by 24%, from £64.5 million in 2013, to £80.2 million in 2014. This was principally driven by growth in agent Corporate governance and developer revenue, which increased by 22% and 49% respectively. Adjusted EBITDA The 49% growth in developer revenue reflects the success of our niche The Group considers adjusted EBITDA as a more appropriate measure brand strategy, especially the strong performance of our SmartNewHomes of the Group’s underlying business performance. Adjusted EBITDA brand, and our continued focus on improving the value we can offer is defined as operating profit after adding back depreciation and to our developer members. The growth in agency and developer amortisation, share-based payments and exceptional items. 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’s adjusted EBITDA grew by 35% from £29.4 million in 2013 The increase in ARPA has been driven by: to £39.6 million in 2014. This increase was primarily driven by the growth in revenue during the year as set out above. The Group’s high operational ff estate agents upgrading their subscription and buying additional gearing has led to the increase in adjusted EBITDA exceeding the Group’s and new innovative products, such as MarketView; revenue growth and an improvement of c.370 bps in the Group’s overall ff developers upgrading their subscriptions and increasing spend margins. The increase has been offset slightly by the Group’s continued on targeted email campaigns; and Financial statements investment in both its people and brands. ff value generated for the Group’s members through continued growth in both the number of site visits and leads generated. 2014 2013 £000 £000 Finally, the Group continues to develop its other areas of income with Operating profit 28,467 27,962 other revenues increasing by 21%. Other income includes third party advertising, developing and growing our overseas property offering Costs excluded from adjusted EBITDA: and helping customers from the broader property spectrum by Depreciation and amortisation 1,658 1,373 leveraging the largest proprietary property database to offer tailored data services. Going forward the Group will also look to develop Share-based payments 3,910 98 and grow its commercial property offering. Exceptional items 5,579 —

Staff costs and other operating expenses Adjusted EBITDA 39,614 29,433 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 Adjusted EBITDA margin 49.4% 45.6% 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 Depreciation and amortisation also continued its investment in marketing and product development Depreciation and amortisation increased by 21% compared with as it seeks to further build brand awareness, improve the experience 2013 as a result of capital expenditure during the year. The increase for both website and mobile users and provide value for its members. has arisen primarily on depreciation of leasehold improvements Other operating costs were up 10% on the prior year, driven principally recognised on the Group’s relocation to a new head office during by the Group’s continued marketing campaign. Total administrative the year and a full year’s amortisation of intangible assets arising expenses disclosed within the income statement include certain items on the acquisition of Trinity Digital Property Limited in August 2013. that are excluded for the purposes of calculating the Group’s adjusted EBITDA. These items are discussed in more detail opposite.

Zoopla Property Group Plc zpg.co.uk 19 Financial review continued

Adjusted EBITDA continued The Group’s statement of financial position remains strong at Share-based payments 30 September 2014 as the business continues to generate high During 2014 the Group continued to operate its Employee Share levels of cash. Net assets at 30 September 2014 were £98.2 million. Option Scheme and offer warrants for long-term agreements with The overall fall in equity compared to the prior year can be attributed certain members. New options and warrants were granted under the to the £35.5 million of cash returned to shareholders in the form schemes in January 2014. In addition, certain member warrants of dividends paid during the year. The Group ended the year with became exercisable in full as a result of the IPO on 23 June 2014, £31.0 million of cash and cash equivalents and net current assets which led to the recognition of £3.0 million in accelerated share-based of £21.7 million. payments charges during the year. Subsequent to the IPO the Group implemented a number of new Director and employee incentive plans, Summary statement of cash flows full details of which are included within the Directors’ remuneration 2014 2013 report on pages 38 to 61 and Note 21 to the financial statements. £000 £000 Exceptional items Net cash inflows from operating activities 30,981 31,580 Exceptional items of £5.6 million for 2014 represent one-off IPO costs. Acquisition of subsidiaries, net of cash received (1,497) (4,496) Income tax expense Acquisition of PPE and intangibles (1,091) (106) The Group’s effective income tax rate for 2014 was 26.5% (2013: 21.1%), which is higher than the average statutory tax rate of 22% for the period Interest received 202 325 due to non-deductible expenses incurred in relation to the IPO and the one-off warrant acceleration discussed above. Net cash flows used in investing activities (2,386) (4,277)

Dividends paid (35,528) (10,158) Profit for the year Adjusted profit for the year, which includes £3.0 million of one-off Unpaid share capital paid-up 9,563 — accelerated warrant charges, has increased by 19% from £22.3 million Other financing activities 272 22 in 2013 to £26.7 million in 2014. The increase was driven by the growth in both revenue and EBITDA. Statutory profit for the year decreased Net cash flows used in financing activities (25,693) (10,136) by 6% to £21.1 million due to £5.6 million of IPO expenses incurred in 2014. Net increase in cash and cash equivalents 2,902 17,167

Earnings per share (EPS) Cash and cash equivalents at end of period 31,025 28,123 The Group has presented its first EPS figures as a listed company. Comparatives for the 2013 financial year have been stated to reflect Net cash inflows from operating activities the impact of the Group restructuring prior to Admission. Adjusted basic The Group continues to see high cash generation with net cash inflows EPS, which includes the £3.0 million one-off warrant charge but strips from operating activities of £31.6 million in 2013 and £31.0 million in out the impact of exceptional items, has increased by 20% to 6.5 pence 2014. The high level of cash generated was primarily driven by the per share in line with the Group’s increase in revenue and adjusted profit continued growth in both revenue and adjusted EBITDA. 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% Cash used in investing activities on the prior year. The slight decrease in basic earnings per share from The £1.5 million of cash flows used in acquisitions of subsidiaries 5.4 pence per share to 5.1 pence per share was due to exceptional during 2014 represents the settlement of deferred consideration expenses incurred on the IPO. payable from acquisitions made in prior periods. The Group also saw a cash outflow in respect of leasehold improvements during the year Summary statement of financial position which related to the relocation of the Group to a new head office. 2014 2013 £000 £000 Dividends During the year the Group paid pre-IPO dividends of £35.5 million. Goodwill and intangibles 75,194 76,537 The Directors have proposed a final dividend for 2014 of 1.1 pence PPE 1,457 106 per share, resulting in a final proposed dividend of £4.6 million. Unpaid share capital — 9,563 The final dividend represents 43.5% of the Group’s profits excluding share-based payments and exceptional items for the period from Cash and cash equivalents 31,025 28,123 1 June 2014 to 30 September 2014. The 2014 final dividend will Working capital1 (5,531) (5,237) be paid on 23 February 2015 to those shareholders on the share Provisions (634) (551) register as at 5 December 2014. The final dividend is subject to approval at the Group’s AGM on 12 February 2015. Tax assets and liabilities (3,340) (1,254)

Equity 98,171 107,287

1 Current trade and other receivables less trade and other payables.

20 Zoopla Property Group Plc Annual Report 2014 Dividends Number of listings Overview The Group’s inventory of property listings correlates directly with the 2014 2013 £000 £000 number of members who pay to advertise all of their property listings across the Group’s platforms, which is in turn affected by the condition Special dividend paid on 13 June 2014 8,986 — of the UK residential property market and the wider UK economy. Interim dividend for 2014 paid on 10 April 2014 14,294 — Further, the number of listings featured on the Group’s websites and mobile applications is influenced by fluctuations caused by seasonality. Final dividend for 2013 paid on 24 October 2013 12,248 — The number of listings on the Group’s websites and mobile applications Interim dividend for 2013 paid on 12 April 2013 — 10,158 remained relatively stable at 1.1 million throughout 2014.

Total dividends paid in the year 35,528 10,158 ARPA The Group’s ARPA is calculated as the revenue from member subscriptions in a given month divided by the total number of Strategic report Number of visits members during the month, measured as a monthly average over The Group’s number of site visits increased by 33% to 513.5 million the period. Because the Group is committed to maximising the return in 2014. This increase was primarily due to: on marketing investment for members, the Group continues to ff the Group’s continued focus on brand building – the Group’s core innovate with new products and solutions and periodically conducts brand, Zoopla, had 77% prompted brand awareness amongst all rate reviews to ensure that its subscription pricing reflects the value adults nationally in October 2014, up from 26% in November 2010 offered to members. The Group’s average blended ARPA has (source: Harris Interactive); and increased by 18% from £264 per month in 2013 to £312 in 2014. ARPA fluctuates across the different businesses within the Group. ff the success of the Group’s mobile applications – the proportion of visits via a mobile device (smartphones or tablets) increased from 2014 2013 Change an average of 43% in September 2013 to 57% in September 2014. £ £ % Corporate governance Monthly agent ARPA 323 275 +17% Number of leads The number of leads generated by the Group has increased 12% to Monthly developer ARPA 270 206 +31% 29.2 million in 2014 as the Group continues to grow its audience and Monthly overseas agent ARPA 139 143 -3% increase the value provided to its members. The Group’s user-centric approach to product development and track record of continually Blended ARPA 312 264 +18% improving and developing its websites and mobile applications has led to enhanced user engagement and therefore higher lead generation. The increase in agent and developer ARPA is driven by the factors outlined in the revenue section on page 19. Overseas agent ARPA The number of leads includes over 40,000 individual home sellers has seen a small decrease in the year as the Group focused on who used the ZPG valuation tool to contact local agents about selling growing overseas members and listings. their home, equating to around £150 million of potential fees for

ZPG members. Financial statements Factors affecting the Group’s operations Details of the factors affecting the Group’s results of operations, Number of members including the UK property market, competitors and the Group’s As at 30 September 2014, the Group had active subscription strategy have been laid out in the remainder of the Strategic report. 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 2013. Stephen Morana Chief Financial Officer The total of 19,663 members represents a 5% increase from the 18,676 members as at 30 September 2013. 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.

2014 2013 Change Number Number %

Members – Agents 16,373 15,858 +3% Members – Developer 2,715 2,539 +7% Members – Overseas 575 279 +106%

Total members 19,663 18,676 +5%

Zoopla Property Group Plc zpg.co.uk 21 Our people and corporate responsibility

We are committed to investing in our people and providing them with opportunities to succeed in their career development.

Employees Charitable activity We are committed to investing in our people and providing them with The Group strives to make a positive difference to charitable causes, opportunities to succeed in their career development. encouraging charitable giving by our employees and contributing to employees’ development by supporting their charitable efforts. The strong culture of innovation and transparency within the Group has Under the Group’s payroll giving scheme, employees can donate helped us to attract high-calibre personnel, maintain a strong retention tax efficiently to a charity directly through their pre-tax salary. rate of key staff and create a workforce that is dedicated to delivering The Group then matches donations up to a specific amount. high-quality products and services. We are constantly investing in our people to ensure that this continues. We achieve this through providing The Group also donates up to £100 to a registered charity linked to the appropriate support needed from the very beginning in the form of an employee’s personal fundraising activities. Employees may also a comprehensive induction training programme and we supplement take one day’s paid leave every year to donate their time to a charity. this with continual training through the “Zoopla Property Group Training The Group is a patron supporter of the Prince’s Trust, having been Academy”. This aspect of learning and development is in addition to a corporate member since 2012. the long-term career planning and constant opportunities provided The Group donated a total of £94,552 to charity during 2014 to employees to upgrade and transfer their skills in the workplace. (2013: £74,265). We do not have a specific human rights policy, but we respect human rights and the integrity of individuals (and comply with relevant laws) Equal opportunity and diversity in the way we run the business. The Group is committed to ensuring that there is equal opportunity We hold regular Group-wide meetings to drive communication within and diversity in our employment policies and practices. We believe the Group and to offer a forum where employees are recognised for that recruiting, incentivising and retaining the best talent is key to their performance in the workplace. This is an opportunity for employees the Group’s success and that this involves treating everyone equally to nominate departments and fellow employees for their outstanding regardless of their age, sexual orientation, parental responsibilities, work and for the Group to acknowledge employees’ hard work. disability, race, nationality, ethnic origin, membership of a trade union, religion, belief, gender assignment or gender. We also offer market competitive benefit packages and carry out regular internal remuneration benchmarking across the business to ensure that Gender diversity our staff are rewarded appropriately. Our comprehensive employee ZPG Limited as at 30 September 2014 benefits package include more traditional elements such as multiple Male Female Total Male Female bonus schemes, life assurance, private health insurance and a private Number Number Number % % pension scheme. We also listen to our employees and continually adopt innovative suggestions to add to the benefits package, creating Directors 8 1 9 89% 11% a benefits programme designed for our staff needs, with some examples Senior Management1 4 4 8 50% 50% being a “move day benefit” where employees are entitled to one day’s All other employees 119 98 217 55% 45% paid leave when they move house, together with John Lewis vouchers, a “birthday off benefit” where employees are entitled to take their birthday Total 131 103 234 56% 44% off work in addition to their holiday entitlement, and a “help-to-buy scheme” where the Group provides a 12 month interest-free loan 1 Senior Management comprises the Group’s Leadership Team. to help towards the cost of buying a home.

A recent Best Companies employee survey showed that 91% of respondents felt proud to be part of the Group.

22 Zoopla Property Group Plc Annual Report 2014 Overview

Health and safety The Group’s scope 1 and 2 emissions for the year to 30 September 2014 Strategic report We are committed to maintaining a safe workplace for our employees. are set out below. Scope 1 emissions relate to the Group’s fleet of It is therefore our policy that all of the Group’s facilities, products and vehicles which are used by certain employees for business purposes. services comply in all material respects with applicable laws and Scope 2 emissions relate to the Group’s electricity usage. This regulations governing safety and quality. information is set out below:

CO emissions Emissions per employee Environment 2 (Tonnes CO e/number We continue to support energy efficiency throughout our business 2 (Tonnes CO e) of employees) activities and remain conscious of preventing any negative impact 2 we may have on the environment. Scope 1 emissions 368 1.7 As an online property portal, we naturally operate mostly without Scope 2 emissions 154 0.7

the need to print out substantial amounts of paper, a practice which Corporate governance we will continue to maintain. Part of our staff work from two floors Total 522 2.4 of an office building and another group of sales staff drive to meet member clients in designated geographies. We believe that our impact We have measured our greenhouse gas emissions using emissions factors on the environment is kept to a minimum. We encourage our staff to from the ‘UK Government conversion factors for Company Reporting’. take our responsibilities towards protecting the environment seriously The period covered is that of the financial year to 30 September 2014. with a commitment to recycling in the office and automated lights in In order to provide an intensity ratio for our emissions disclosure we all office areas. have calculated our greenhouse gas emissions per employee. The Furthermore, the Group operates a “Bike-to-Work” scheme which Directors believe that the number of employees is the best indicator offers our employees an incentive to travel to and from work in an of the Company’s size for the purposes of this disclosure. The number environmentally friendly way. of employees used is the average number of full-time employees over the measurement period. Financial statements Greenhouse gas emissions This strategic report was approved by the Board of Directors Since 1 October 2013 the Companies Act 2006 (Strategic Report and was signed on its behalf by: and Directors’ Report) Regulations 2013 has required all UK quoted companies to report on their greenhouse gas emissions as part of their annual Directors’ report.

A report on our output of greenhouse gas emissions shows that, when Alex Chesterman compared with other companies of a comparable size in the same sector, Chief Executive Officer the Group’s activities produce a very low impact on the environment. 24 November 2014

Zoopla Property Group Plc zpg.co.uk 23 Chairman’s introduction to governance Mike Evans, Non-Executive Chairman

We are committed to the highest standards of corporate governance.

Dear Shareholder I am pleased to introduce Zoopla Property Group Plc’s first Corporate governance report since our successful IPO in June 2014. The Company listed its Ordinary Shares on the main market of the London Stock Exchange on 23 June 2014 (Admission). The Listing Rules of the Financial Conduct Authority, including the UK Corporate Governance Code (“Governance Code”), have only therefore applied to the Company since that date. On listing, the Board committed itself to the highest standards of corporate governance and undertook to “The key constituents maintain a sound framework for the control and management of the necessary to deliver Group. In this report we provide details of that framework. Since the Company listed only recently, it has not been practicable to fully comply a robust structure are with the provisions of the Governance Code; however, we shall endeavour to progress towards full compliance in a reasonable period of time. The key in place.” constituents necessary to deliver a robust structure are in place and, accordingly, this report includes a description of how the Company has applied the principles and provisions of the Governance Code since 23 June 2014 and how it intends to apply those principles in the future.

Board composition The Board is currently comprised of a Non-Executive Chairman and eight other Directors, of whom three are considered to be wholly independent. The Governance Code recommends that at least half the board of directors of a UK listed company, excluding the chairman, should comprise non-executive directors determined by the board to be independent in character and judgement and free from relationships or circumstances which may affect, or could appear to affect, the directors’ judgement. As such, the Company does not currently comply with the requirements of the Governance Code. On Admission, we stated that the Company intends to move towards compliance with this requirement within a reasonable period of time and this remains our intention.

Board Committees In accordance with the Governance Code, the Company has established Audit, Nomination and Remuneration Committees. At Admission, the Company’s Committees were not compliant in respect of the composition requirement. However, on 9 July 2014 the Board passed a resolution to appoint Robin Klein to the Remuneration Committee and Duncan Tatton-Brown and Sherry Coutu to the Nomination Committee and, by doing so, have made the Committees compliant.

I would like to take this opportunity to thank David Dutton for his work as Chairman prior to the IPO, particularly in respect to the preparation of the Company for Admission.

Mike Evans Non-Executive Chairman

24 Zoopla Property Group Plc Annual Report 2014 Overview

Governance framework Strategic report

The Board The Board comprises nine Directors. We have two Executive Directors, a Non-Executive Chairman, three Independent Non-Executive Directors and three further Non-Executive Directors.

Board Committees Corporate governance

Audit Committee Nomination Committee Remuneration Committee The Audit Committee’s role is The Nomination Committee The Remuneration Committee to assist the Board with the assists the Board in reviewing recommends the Group’s policy discharge of its responsibilities the structure, size and on executive remuneration and in relation to financial reporting. composition of the Board. determines the levels of remuneration for Executive Directors, the Chairman and Management.

Leadership Team Financial statements

Zoopla Property Group Plc zpg.co.uk 25 Board of Directors

ZPG is run by an entrepreneurial, balanced and highly experienced Board.

Our Board has a diverse mix of backgrounds, skills Board Executive/Non-Executive split Board gender diversity and experience and its members are committed to setting the strategic direction whilst maintaining the highest standards of n Executive n Female n Non-Executive n Male corporate governance and instilling a sound framework for the control A Member of the Audit Committee Board change as part of the IPO and management of the The Group’s Board of Directors changed at the N Member of the Nomination Committee IPO to include further independent Directors and Group, driving it to R Member of the Remuneration Committee to appoint a Non-Executive Chairman. Prior to further success. the IPO, the Group’s Board included Simon Kain, Committee Chairman Kevin Beatty and Fred Destin as Directors. These three Directors stood down from the holding company of the Group at the IPO.

N R N

Mike Evans Alex Chesterman Stephen Morana Non-Executive Chairman Founder and Chief Executive Officer Chief Financial Officer Mike became Chairman of Zoopla Property Group Alex founded Zoopla Property Group in 2007 and Stephen joined Zoopla Property Group in 2013 in 2014. He has been Chairman of Hargreaves remains as the CEO. Previously, Alex co-founded and is currently the CFO. He also serves as Lansdown Plc since 2009, which he joined as LOVEFiLM, Europe’s leading online DVD rental a Non-Executive Director of boohoo.com plc. a Non-Executive Director in 2006. Mike is a service, which was successfully sold to Amazon. Previously, Stephen spent over a decade at qualified actuary with over 30 years’ experience Alex is recognised as one of the UK’s leading Betfair Plc, one of the UK’s most successful in the financial services industry. He is also a entrepreneurs, has been a winner of the internet businesses. As part of the Betfair Non‑Executive Director of esure Group Plc and Ernst & Young Entrepreneur of the Year Award management team since 2002, he became Chesnara Plc. He is a member of the advisory and was named by Property Week as one of the CFO in 2006 and then served as interim CEO board of Spectrum Corporate Finance and is a 100 most important people in the UK residential in 2012. Prior to Betfair, he held a number of Trustee of Wessex Heartbeat. Mike was formerly property industry. Alex holds an honours degree in senior finance positions, including at Sapient, Chief Operating Officer at Skandia UK Limited and economics from London University. the Nasdaq-listed technology innovator. he holds a BSc in mathematics from the University Stephen is a qualified chartered accountant of Bristol. and a member of the INSEAD alumni.

26 Zoopla Property Group Plc Annual Report 2014 A N R A N R A N R Overview

Duncan Tatton-Brown Sherry Coutu Robin Klein Senior Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Duncan became a Director of Zoopla Property Sherry became a Director of Zoopla Property Robin became a Director of Zoopla Property Group Strategic report Group in 2014. He is currently CFO of Ocado Group in 2014. She currently serves as a in 2012. He is currently a venture partner of Index Group Plc, which he joined in 2012. Previously, Non-Executive Director of the London Stock Ventures, a founding partner of The Accelerator Duncan was CFO of Fitness First Plc and prior to Exchange Group, Cambridge University Press, Group and serves as a Non-Executive Director that was Group Finance Director of Kingfisher Plc, Raspberry Pi and Artfinder. She also serves on the of MoneySupermarket Plc. Robin is a serial one of the world’s largest home improvement advisory boards of LinkedIn and Care.com and is entrepreneur and an angel investor in a number retailers. He has held senior finance positions at an External Non-Executive Director of Cambridge of the UK’s leading high-growth internet businesses. B&Q Plc, Virgin Entertainment Group and Burton University. Previously, she has served as a Director Companies he has backed at an early stage Group Plc and was also a Non-Executive Director of New Energy Finance, Jarvis Plc and RM Plc include LastMinute.com, Agent Provocateur, of Rentokil Initial Plc. Duncan holds a master’s and formerly she founded Interactive Investor LOVEFiLM, Wonga, Mind Candy (Moshi Monsters), degree in engineering from King’s College, International Plc. Sherry was awarded a CBE Fizzback, Tweetdeck, Graze, FreeAgent, Skimlinks Cambridge and is a member of the Chartered in 2013 for “Services to Entrepreneurship” and and Moo.

Institute of Management Accountants. she holds an MBA from Harvard, an MSc from Corporate governance the London School of Economics and a BA from the University of British Columbia. Financial statements

Stephen Daintith David Dutton Grenville Turner Non-Executive Director Non-Executive Director Non-Executive Director Stephen became a Director of Zoopla Property David became a Director of Zoopla Property Group Grenville became a Director of Zoopla Group in 2013. He is currently Finance Director in 2012. He serves as Chairman of DMG Information, Property Group in 2010. He is currently Group of Daily Mail & General Trust Plc, which he joined a division of Daily Mail & General Trust Plc, as and Non‑Executive Chairman of Countrywide Plc, in 2011. Previously, Stephen was COO and is a Non-Executive Director of a number of other which he joined in 2006, and is also a CFO of Dow Jones, a subsidiary of News Corp. DMGT subsidiaries. David has been an Executive Non‑Executive Director of the DCLG, Chairman He has also held several CEO and CFO positions Director of Daily Mail & General Trust Plc since of Hamptons International, Chairman of in various overseas markets for British American 1997 and advises the Group on property matters. Bellpenny Ltd and Chairman of Knightsbridge Tobacco. Stephen started his career as an He also serves as Chairman of UCL Business Plc. Student Housing Limited. He was formerly Chief accountant at Price Waterhouse and holds David is a successful entrepreneur and holds a BA Executive, Intelligent Finance and Chief Executive, a degree from Leeds University. in economics from Cambridge University and an Business to Business at HBOS and has previously MBA from Harvard University. served as a Director of St James’s Place Capital Plc, Sainsbury’s Bank Plc and Rightmove Plc. Grenville qualified as a chartered banker and holds an MBA from Cranfield Business School.

Zoopla Property Group Plc zpg.co.uk 27 Corporate governance statement

Compliance with the UK Corporate Governance Code 2012: Introduction The Board is committed to maintaining high standards of corporate governance and maintaining a sound framework for the control and management of the Group.

The UK Corporate Governance Code 2012 applies to financial years beginning on or after 1 October 2012. A copy of the Governance Code can be found at www.frc.co.uk.

This report, which incorporates reports from the Audit and Nomination Committees on pages 32 to 37 together with the Strategic report, the Directors’ remuneration report on pages 38 to 61 and the Directors’ report on pages 62 to 64, describes how the Company has applied the relevant principles of the 2012 Governance Code.

A new version of the Governance Code was published in September 2014 and applies to financial years beginning on or after 1 October 2014. The Company will therefore apply the principles of the new Code going forward.

The role of the Board ff approval of any changes relating to the Group’s capital structure and The Board consists of three independent Non-Executive Directors, material changes to the Group’s management and control structure; four Non-Executive Directors (including the Non-Executive Chairman) ff approval of the financial statements, annual report and accounts, and two Executive Directors. Biographies of all members of the Board material contracts and major projects; appear on pages 26 and 27. ff approval of the dividend policy; The Board is collectively responsible for the long-term success of the Company and for leading and controlling the Group and has ff ensuring a sound system of internal control and risk management; overall authority for the management and conduct of the Group’s ff approval of any major capital project; business, strategy and development. The Board is also responsible for ensuring the maintenance of a sound system of internal control ff approval of communications with shareholders and the market; and risk management (including financial, operational and compliance ff determining changes to structure, size and composition of the Board; controls and for reviewing the overall effectiveness of systems in place) and for the approval of any changes to the capital, corporate and/or ff determining remuneration policy for the Directors and the Leadership management structure of the Group. and Senior Management teams and approval of the remuneration of the Non-Executive Directors; and The CEO and CFO sit on the Board and two levels of management sit below the Board: the Leadership Team and the Senior Management ff approval of all major policies within the Group, including the share Team, each of which are led by the CEO. The CEO and CFO therefore dealing, anti-bribery and health and safety policies. act as a bridge between Management and the Board. The Board All Directors have access to the advice and services of the Company delegates to Management the day-to-day running of the business Secretary, who has responsibility for ensuring compliance with the within defined parameters. Board meetings are scheduled to coincide Board’s procedures. All the Directors have the right to have their with key events in the corporate calendar and in future this will include opposition to, or concerns over, any Board decision noted in the the interim and final results and the Annual General Meeting (AGM). minutes. The Board has adopted guidelines by which Directors may The Board has adopted a formal schedule of matters reserved take independent professional advice at the Company’s expense for its approval and has delegated other specific responsibilities in the performance of their duties. to its Committees. This schedule sets out key aspects of the affairs The Chairman and the Non-Executive Directors met informally once of the Company which the Board does not delegate, including: without the Executives present in the period between the listing on ff responsibility for the overall management of the Group; 23 June 2014 and 30 September 2014 and will continue to hold such meetings periodically. ff approval of the Group’s business strategy and objectives, budgets and forecasts and any material changes to them; Board Committees ff monitoring the delivery of the Group’s business strategy and Subject to those matters reserved for its decision, the Board has objectives and responsibility for any necessary corrective action; delegated to its Audit, Nomination and Remuneration Committees certain authorities. There are written terms of reference for each ff oversight of operations, ensuring adequate systems of internal of these Committees, available on the Group’s corporate website, controls and risk management are in place, ensuring maintenance www.zpg.co.uk, and separate reports for each Committee are of accounting and other records and ensuring compliance with included in this Annual Report from pages 32 to 61. statutory and regulatory obligations; ff approval of any extension of the Group’s activities or any decision to cease to operate any material part of the Group’s business;

28 Zoopla Property Group Plc Annual Report 2014 Overview Strategic report

Role of the Chairman and Chief Executive Officer The Board is chaired by Mike Evans, who was appointed on 1 May 2014. The Chairman is responsible for the effective leadership of the Board, having regard for the interests of all stakeholders and promoting high standards of corporate governance. Alex Chesterman is the Chief Executive Officer and is responsible for implementing the Board’s strategy and leading the Senior Management Team. The role is distinct and separate to that of the Chairman and clear divisions of accountability and responsibility have been agreed by the Board and are set out in writing, including the following: Corporate governance Role of Chairman Role of Chief Executive Officer ff To run the Board effectively by ensuring meetings are ff To manage the Group on a day-to-day basis within held with appropriate frequency. the authority delegated by the Board. ff To ensure the frequency and depth of evaluation of the ff To ensure, with the Executive team, that Board performance of the Board and its Committees is in decisions are implemented effectively. compliance with best practice. ff To advise and make recommendations in respect ff To chair the Nomination Committee to lead the process of Board nominations and succession planning. for Board appointments and identify and recommend ff To make recommendations on remuneration policies,

candidates for the approval of the Board. Financial statements Executive remuneration and terms of employment ff To promote a culture of openness and debate, in for senior employees. particular by facilitating the effective contribution of ff To keep the Chairman informed of all Non-Executive Directors, and ensuring constructive important matters. relations between Executive and Non‑Executive Directors. ff To develop and propose Group strategy, annual ff To hold meetings with the Non-Executive Directors plans and commercial objectives to the Board. without Executive Directors or Senior Management present. ff To ensure that shareholders’ views are communicated to the Board as a whole so that all Directors develop an understanding of their views.

Zoopla Property Group Plc zpg.co.uk 29 Corporate governance statement continued

Role of the Senior Independent Director (SID) length and on normal commercial terms, and that the goodwill, The Governance Code recommends that the Board of Directors reputation and commercial interests of the Company are maintained. of a company with a premium listing on the official list of the London Under the terms of the Relationship Agreement, DMGT can appoint Stock Exchange (“Official List”) should appoint one of the Independent two Directors, providing it holds more than 25% of the votes exercisable Non-Executive Directors to be the Senior Independent Director to provide at general meetings of the Company, and one Director, providing it a sounding board for the Chairman and to serve as an intermediary for holds more than 10% of those votes. the other Directors when necessary. The Senior Independent Director should be available to shareholders if they have concerns which the The Relationship Agreement will remain in force for so long as (a) the normal channels through the Chairman, CEO or other Executive Directors shares of the Company are listed on the premium listing segment of has failed to resolve or for which is inappropriate. Duncan Tatton-Brown the Official List and (b) DMGT or any of its associates together are has been appointed as the Senior Independent Director. entitled to exercise or to control the exercise of 10% or more of the votes which are generally exercisable at general meetings of the Board balance and independence Company. The two Directors appointed by DMGT are David Dutton As mentioned in the Chairman’s statement, the Company is not and Stephen Daintith. currently compliant with this recommendation but intends to become Grenville Turner’s current role at Countrywide plc, a customer and compliant within a reasonable period of time. major shareholder of the Group, means that, at present, we do not The Company has a relationship agreement (“the Relationship Agreement”) deem him to be independent. in place with its principal shareholder, DMGT. The principal purpose of the Relationship Agreement is to ensure that the Company and its Length of appointments subsidiaries are capable of carrying on their business independently Non-Executive appointments to the Board are for a period of up of DMGT, that transactions and relationships with DMGT are at arm’s to three years, extendable by no more than two additional three year periods.

Information, meetings and attendance The Board met on a number of occasions prior to the listing. Since then the Board has met twice before the financial year end to review operational performance. The Board has a full programme of Board meetings planned for 2015 and intends to meet six times. At these meetings, the Board will review the Company’s long-term strategic direction and financial plans and monitor the Company’s performance against an agreed strategy and business plan. In addition, the Board will agree key objectives for the Chief Executive Officer on an annual basis and will then monitor his performance against these objectives. At the Board meeting held on 9 July 2014, seven of the nine Directors attended. At the Board meeting held on 25 September 2014, eight of the nine Directors attended. Due to the short time period between the IPO and the remaining Board dates for 2014, it was not possible to arrange meetings at which all Directors were available to join due to existing commitments.

Date of Audit Remuneration Nomination appointment to the Plc Board Committee Committee Committee

Total meetings 91 42 23 0

Alex Chesterman 23 April 2014 9/9 — 1/1 — Stephen Morana 23 April 2014 9/9 — — — Mike Evans (Chairman) 1 May 2014 6/6 — 1/1 — Duncan Tatton-Brown 1 May 2014 5/6 1/1 1/1 — Sherry Coutu 1 May 2014 4/6 1/1 0/1 — Robin Klein 1 May 2014 9/9 1/1 1/1 — Grenville Turner 21 May 2014 9/9 3/3 — — David Dutton 21 May 2014 9/9 — 2/2 — Stephen Daintith 21 May 2014 8/9 4/4 — —

1 In addition to the nine Board meetings referred to in the table, a further two meetings were held, as part of the IPO process, to deal with the incorporation and reorganisation procedures necessary to set up the Plc entity. Alex Chesterman and Stephen Morana attended both these meetings; Mike Evans attended one of them. The meetings included in the table include the Board meetings held by ZPG Limited, the Group’s previous parent company. 2 This figure includes the Audit Committee meetings held by ZPG Limited, the Group’s previous parent company. 3 This figure includes the Remuneration Committee meetings held by ZPG Limited, the Group’s previous parent company.

The Chairman is responsible for ensuring that the Directors receive accurate, timely and clear information. Prior to each scheduled Board meeting, a pack is circulated in respect of the corresponding financial period, which includes an update on key performance targets, trading performance against budget and includes detailed financial data and analysis. Board packs are distributed five working days prior to each meeting in accordance with the terms of reference to provide sufficient time for Directors to review their papers in advance. If Directors are unable to attend a Board meeting for any reason, they nonetheless receive the relevant papers and are consulted prior to the meeting and their views are made known to the other Directors.

30 Zoopla Property Group Plc Annual Report 2014 Conflicts of interests As noted above, the current Board has been in post for only a Overview The duties to avoid potential conflicts and to disclose such situations short period of time and so a formal evaluation of the performance for authorisation by the Board are the personal responsibility of each of the Board, its principal committees and the individual Directors Director. All Directors are required to ensure that they keep these would be of limited value. However, pending the development and duties under review and to inform the Company Secretary on an implementation of a formal evaluation process during 2015, the ongoing basis of any change in their respective positions. Board is satisfied that each Director remains competent to discharge his/her responsibilities as a member of the Board. The Company’s conflict of interest procedures are reflected in its Articles of Association (“Articles”). In line with the Companies Act 2006, the External appointments Articles allow the Directors to authorise conflicts and potential conflicts The Executive Directors may accept outside appointments provided of interest, where appropriate. The decision to authorise a conflict can that such appointments do not in any way prejudice their ability to only be made by non-conflicted Directors. The Board considers conflicts perform their duties as Executive Directors of the Company.

or potential conflicts at each Board meeting. Strategic report At the time of his appointment as Chairman it was noted that The Articles require the Company to indemnify its officers, including Mike Evans was Chairman of Hargreaves Lansdown Plc but officers of wholly owned subsidiaries, against liabilities arising from the view was taken that this would not adversely impact his the conduct of the Group’s business, to the extent permitted by law. ability to carry out his role. The Group has therefore purchased Directors’ and officers’ liability insurance during the year. Alex Chesterman is currently a Director of Devalink Limited, Hoopla Limited and Barcote Park Management Limited. Stephen Morana is currently Development a Non-Executive Director of Boohoo.com plc. These appointments In preparation for listing, all Directors received an induction briefing are not deemed to adversely impact the Directors’ ability to carry from the Company’s legal advisers on their duties and responsibilities out their roles. as Directors of a publicly quoted company. In addition, the new The Non-Executive Directors’ appointment letters anticipate a time Non-Executive Directors have met key members of Senior Management commitment of 10 days per year, recognising that there is always Corporate governance in order to familiarise themselves with the Group. the possibility of an additional time commitment and ad hoc matters During 2015, the Chairman will review and agree with each arising from time to time, particularly when the Company is undergoing Non‑Executive Director their individual training and development a period of increased activity. The average time commitment inevitably needs. In addition, under the guidance of the Chairman, the increases where a Non-Executive Director assumes additional Company Secretary will establish a formal induction training responsibilities such as being appointed to a Board Committee. process for new Directors. Relations with shareholders Board evaluation As part of the IPO “preparation” in 2014, the Board met a large number Given that the majority of the Directors were only appointed in the of investors. The meetings involved the Chief Executive Officer, months immediately preceding the listing in June 2014, the Board Chief Financial Officer as well as other Senior Management. believes that a meaningful evaluation of the Board can only take place As part of its future investor relations programme, the Executive Financial statements after it has been working together for a reasonable time. An evaluation will aim to maintain an active dialogue with its key stakeholders, policy will be developed and implemented before the end of 2015. including institutional investors, to discuss issues relating to the The Senior Independent Director, Duncan Tatton-Brown, together performance of the Group including strategy and new developments. with the Independent Non-Executive Directors, will evaluate the The Non-Executive Directors are available to discuss any matter performance of the Chairman. stakeholders might wish to raise.

Election of Directors Investor relations activity and a review of the share register are standing The Board can appoint any person to be a Director, either to fill items on the Board’s agenda. Reports from analysts and brokers are a vacancy or as an addition to the existing Board. Any Director so circulated to the Board. The Chairman and Non-Executive Directors appointed by the Board shall hold office only until the next following are available to attend investor relations meetings or to request AGM and shall then be eligible for election by the shareholders. meetings with investors or analysts independent of the Group’s management, if required. The forthcoming AGM on 12 February 2015 will be the Company’s first since registering as a public company. In accordance with the Governance Code, all the Directors will be offering themselves for election at the AGM to be held at the offices of the Company’s solicitors, Freshfields Bruckhaus Deringer LLP, on 12 February 2015, full details of which are set out in the notice of meeting accompanying this Annual Report.

Zoopla Property Group Plc zpg.co.uk 31 Audit Committee report

The Audit Committee’s role is to assist the Board in relation to financial reporting.

Chairman’s introduction The Audit Committee was established by a resolution of the Board dated 4 June 2014, at which meeting terms of reference were considered and adopted. The Board further resolved to appoint Sherry Coutu and Robin Klein to the Committee under my Chairmanship with Stephen Daintith attending as an observer for DMGT. Under its terms of reference, the Committee is required to meet at least three times in each year “The 2014 financial year at appropriate times in the reporting and auditing cycle. has seen a number of The 2014 financial year has seen a number of regulatory changes, which have reinforced the Audit Committee’s role to assist the regulatory changes, which Board to discharge its duty to ensure that the Annual Report, the first as a public company, taken as a whole, is fair, balanced have reinforced the Audit and understandable. In this report, I explain how the Committee has discharged its responsibilities, with specific reference to the Committee’s role.” requirement of the UK Corporate Governance Code to address significant reporting issues for the financial statements and to explain how the Committee assessed external audit effectiveness and safeguards in relation to the provision by the auditor of non‑audit services.

Duncan Tatton-Brown Chairman, Audit Committee

32 Zoopla Property Group Plc Annual Report 2014 Overview

Composition On 20 November 2014, the Audit Committee reviewed and approved Strategic report The Audit Committee is chaired by Duncan Tatton-Brown and its other for consideration by the Board the financial results for the year ended members are Robin Klein and Sherry Coutu. Stephen Daintith attends 30 September 2014. As part of that review process, the members as an observer appointed by DMGT. The Governance Code recommends of the Committee reviewed the Annual Report, the adequacy of the that all members of the Audit Committee are Non‑Executive Directors, disclosure with respect to going concern and whether the Annual Report independent in character and judgement and free from any relationship taken as a whole was fair, balanced and understandable. or circumstance which may, could or would be likely to, or appear to, This additional review by the Audit Committee, supplemented by affect their judgement and that one such member has recent and relevant advice received from external advisers during the drafting process, financial experience. The Board considers that, by virtue of his current assisted the Board in determining that the report is fair, balanced and former Executive and Non-Executive roles, details of which are and understandable at the time that it is approved. The Committee set out on page 27, Duncan Tatton-Brown has recent and relevant considered the appropriateness of preparing the accounts on a going financial experience and the Company complies with the requirements concern basis, including consideration of forecast plans and supporting of the Governance Code in this respect. The Company further considers assumptions and concluded that the Company’s financial position Corporate governance that the attendance of an observer at Committee meetings will not was such that it continued to be appropriate for accounts to be prejudice the independence or proper functioning of the Committee. prepared on a going concern basis.

The Chief Executive Officer and Chief Financial Officer attend meetings Significant issues considered in relation to the financial statements of the Audit Committee by invitation, as do Deloitte LLP and other The Committee, together with Management and the Group’s external members of Management or the Board as appropriate. auditor, considered the following significant matters in relation to the financial statements and how these were addressed. Roles and responsibilities The Audit Committee assists the Board in discharging its responsibilities Revenue recognition with regard to financial reporting, external and internal audits and controls, The Group’s revenue recognition is limited in complexity. The majority including reviewing and monitoring the integrity of the Group’s annual of revenue relates to recurring subscriptions which are predictable and interim financial statements, reviewing and monitoring the extent in nature and invoiced monthly. However, the Group operates a large Financial statements of the non-audit work undertaken by the external auditor, advising volume of agreements, with varying terms, which may include differences on the appointment of the external auditor, overseeing the Group’s in the timing of the billing of subscription fees and the actual subscription relationship with its external auditor, reviewing the effectiveness of the period. There is a risk that revenues may not be recorded in the correct external audit process and reviewing the effectiveness of the Group’s accounting period. Management has discussed the composition and internal controls. The ultimate responsibility for reviewing and approving the recognition principles of each revenue stream and the controls the annual report and accounts and the half-yearly reports remains thereon with the Committee during the year. The Committee is satisfied with the Board. The Audit Committee will give due consideration that no issues have been identified or arisen. Furthermore, revenue to laws and regulations, the provisions of the UK Corporate recognition was an area of focus for the Group’s external auditor during Governance Code and the requirements of the Listing Rules. the audit. The external auditor has reviewed the Group’s revenue streams on a month-by-month basis for anomalies and has performed The Audit Committee reviews the content of the Annual Report and detailed testing over the Group’s revenue. Accounts and advises the Board on whether, taken as a whole, they are fair, balanced and understandable and provide the information Group reorganisation and IPO necessary for shareholders to assess the Company’s performance, During the year the Group was admitted to trading on the London Stock business model and strategy. Exchange through an Initial Public Offering (IPO). As detailed in Note 20 to the financial statements, the Group was subject to a restructuring prior The full terms of reference are available on the Company’s corporate to the IPO which resulted in the insertion of Zoopla Property Group Plc website at www.zpg.co.uk. as the new parent company of the Group. The accounting for the transaction has involved the use of merger accounting and the creation Activities of the Audit Committee of a non-distributable merger reserve in the new parent company. Following Admission, the Audit Committee met on 20 October 2014 The accounting treatment has been reviewed and agreed by the Group’s to discuss the progress of the audit plan and risk management procedures. external auditor. In order to provide meaningful and comparable Prior to listing, an Audit Committee of the Group’s previous parent company, information to shareholders, certain numbers in the financial statements ZPG Limited, met. In November 2013, this Committee discussed the full for the year ended 30 September 2013 have been disclosed as if the year results for 2013 and in February 2014 reviewed the Company’s risk Group restructuring had occurred at the beginning of the prior period. profile. In May 2014, the Committee discussed half year results, risk Both the Committee and the external auditor are comfortable that this and compliance. Prior to the IPO, all of these meetings were chaired disclosure provides the most relevant and understandable information by Stephen Daintith. for shareholders. Finally, £5.6 million of expenses relating directly to the

Zoopla Property Group Plc zpg.co.uk 33 Audit Committee report continued

Significant issues considered in relation to the financial Independence safeguards statements continued In accordance with best ethical standards, external auditors are required Group reorganisation and IPO continued to adhere to a rotation policy whereby the audit engagement partner IPO have been identified by Management as exceptional and disclosed is rotated after five years. The current audit engagement partner was separately. The Committee is satisfied that these costs fall outside the appointed in 2012 but, due to his previous role as the audit engagement recurring operations of the business and therefore their disclosure as partner for certain of the Company’s significant subsidiaries, can serve exceptional is considered reasonable. as the audit engagement partner for only two years after the Group became listed. The external auditor is also required periodically to assess Share-based payments whether, in its professional opinion, it is independent and those views The Group operates a number of share-based payment schemes are shared with the Audit Committee. including both employee share options and warrants issued to certain members. The valuation methods and the related assumptions for The Committee notes that FTSE 250 companies should put the audit these schemes are subject to Management judgement. There is a out to tender at least every 10 years. To avoid significant disruption the risk that these instruments are not valued correctly and therefore an Financial Reporting Council has provided details of transitional arrangements incorrect charge is recognised in the financial statements. The Group’s which would mean that as Deloitte became the auditor after 2000 we external auditor has independently audited the valuation models used would not need to undertake a tender review until 2020. by Management and the assumptions used in calculating the Group’s The Committee has authority to take independent advice as it deems IFRS 2 charge. As a result of Admission, the Group announced a appropriate in order to resolve issues on auditor independence. number of new incentive schemes which will take effect in 2015. No such advice has been required to date. Valuations for grants under these new schemes will be reviewed by the Group’s external auditor. Independence assessment by the Audit Committee Based on the fact that the audit engagement partner rotation policy has Assessment of effectiveness of the external audit process been complied with, the Committee is satisfied that the independence The Audit Committee oversees the relationship with the external of the external auditor is not impaired. Furthermore, the level of fees paid auditor and considers the re-appointment of the Company’s auditor, for non-audit services does not jeopardise its independence. Audit and Deloitte LLP, before making a recommendation to the Board to be put non-audit fees are set out in Note 5 to the financial statements. to shareholders. As part of this responsibility, the Committee approved the audit plan for the year ended 30 September 2014 and reviewed The Audit Committee noted that the auditor had provided services the auditor’s findings and Management representation letters. Prior to on the IPO transaction that were paid by the previous parent company, recommending the appointment of Deloitte at the forthcoming AGM ZPG Limited. The Committee believes sufficient and appropriate safeguards to the Board, the Audit Committee reviewed the extended audit process, were in place for this work and the external auditor remained independent the performance of the auditor and its ongoing independence, taking throughout the period. into consideration input from Management, responses to questions The Committee has assessed the performance and independence of from the Committee and the audit findings reported to the Committee. the external auditor and recommended to the Board the re‑appointment Based on this review, the Committee concluded that the external audit of Deloitte LLP as auditor until the conclusion of the AGM in 2015. process had been run efficiently and that Deloitte has been effective in its role as external auditor. Internal audit The Committee has recommended to the Board that it is not currently Approach to appointing the external auditor and how objectivity necessary to appoint an internal audit function but rather to focus on and independence are safeguarded relative to non-audit services specific areas with ad hoc reviews (e.g. cyber security) and review the As noted earlier in this report, the current Audit Committee was constituted need for an internal audit function on an ongoing basis. The Committee on 4 June 2014 ahead of Admission. In the run up to Admission, the based its decision on several factors including a relatively clear business Board implemented a number of governance measures. The following model with a simple Group structure and a single country focus, an open Audit Committee policies remain to be developed: and accountable culture with clear authority limits and the assurance ff a policy on the independence of the external auditor consistent with gained from reports from Management and reports provided by the the ethical standards published by the Audit Practices Board; and external auditor with regard to internal controls and risk management. ff a policy on the engagement of the external auditor for the provision of non-audit services.

It is the Board’s intention to adopt policies covering both these topics during 2015.

34 Zoopla Property Group Plc Annual Report 2014 Overview

Internal control and risk management There have been no changes in the Company’s internal control during Strategic report The Board is responsible for the overall system of internal controls for the the financial year under review that have materially affected, or are Group and for reviewing its effectiveness. In accordance with the FRC reasonably likely to materially affect, the Company’s control over Internal Control: Guidance to Directors publication, it carries out such financial reporting. a review at least annually, covering all material controls including financial, The Board, with advice from the Audit Committee, is satisfied that an operational and compliance controls and risk management systems. effective system of internal controls and risk management is in place The system of internal controls is designed to manage rather than which enable the Company to identify, evaluate and manage key risks eliminate the risk of failure to achieve business objectives and can and which accord with the guidance provided by the FRC Internal only provide reasonable and not absolute assurance against material Control: Guidance to Directors. These processes have been in place misstatement or loss. since the start of the financial year and up to the date of approval of the accounts. Further details of risk management frameworks and The Group has operating policies and controls in place covering a range

specific material risks and uncertainties facing the business can be Corporate governance of issues including financial reporting, capital expenditure, business found on pages 16 to 17. continuity and information technology and appropriate employee policies. These policies are designed to ensure the accuracy and reliability of Whistleblowing financial reporting and govern the preparation of financial statements. The Group has in place a whistleblowing policy, the “Speak-Up Policy”, The Board is ultimately responsible for the Group’s system of internal which encourages employees to report any malpractice or illegal acts controls and risk management and discharges or intends to discharge or omissions or matters of similar concern by other employees or former its duties in this area by: employees, contractors, suppliers or advisers using a prescribed reporting ff holding regular Board meetings to consider the matters reserved procedure. The policy facilitates the reporting of any ethical wrongdoing for its consideration; or malpractice or suspicion which may constitute ethical wrongdoing or malpractice. Examples include bribery, corruption, fraud, dishonesty ff receiving regular Management reports which provide an and illegal practices which may endanger employees or third parties. assessment of key risks and controls; There have been no instances of whistleblowing during the year Financial statements ff scheduling annual Board reviews of strategy including reviews under review. of the material risks and uncertainties facing the business; Control environment ff ensuring there is a clear organisational structure with defined The Board is committed to business integrity, high ethical and moral responsibilities and levels of authority; values and professionalism in all its activities. The Group has policies ff ensuring there are documented policies and procedures in place for: in place; and ff anti-bribery; ff scheduling regular Board reviews of financial budgets, forecasts ff dealing with third parties; and and covenants with performance reported to the Board monthly. ff gifts and entertainment. In reviewing the effectiveness of the system of internal controls, the Committee will, going forward: Accountability ff review the risk register compiled and maintained by senior managers The Board is required to present a fair, balanced and understandable within the Group and question and challenge where necessary; assessment of the Company’s financial position and prospects. The responsibilities of the Directors and external auditor are set out on ff regularly review the system of financial and accounting controls; and pages 65 and 68. As set out in the Directors’ report, the Directors ff report to the Board on the risk and control culture within the Group. consider the Company’s business to be a going concern.

In respect of the Group’s financial reporting, the Finance Department is responsible for preparing the Group financial statements using a well-established consolidation process and ensuring that accounting policies are in accordance with International Financial Reporting Duncan Tatton-Brown Standards. All financial information published by the Group is subject Chairman, Audit Committee to the approval of the Audit Committee.

Zoopla Property Group Plc zpg.co.uk 35 Nomination Committee report

The Nomination Committee’s role is to ensure we have the right people.

Chairman’s introduction My role as Chairman of the Nomination Committee complements that of Chairman of the Board as one of my key responsibilities is to ensure we have the right people with the right skills on the Board and in Senior Management positions. During the forthcoming year, I am therefore committed to ensuring that “During the forthcoming succession planning is a key focus for the year, I am committed to Nomination Committee. The Nomination Committee is responsible for identifying and nominating ensuring that succession candidates for the approval of the Board to fill Board vacancies and to keep under review the balance of skills, knowledge and experience planning is a key focus on the Board to ensure the orderly evolution of the membership of the for the Nomination Board and to make recommendations to the Board on composition and balance. The Committee will be proactive in discharging these Committee.” responsibilities, cognisant of the importance of succession planning and the need to align Board and Executive leadership skills to the Company’s long-term strategy.

Mike Evans Chairman, Nomination Committee

36 Zoopla Property Group Plc Annual Report 2014 Overview

Composition Diversity Strategic report The Nomination Committee is chaired by Mike Evans and its other Whilst the Company pursues diversity, including gender diversity, members are Alex Chesterman, Sherry Coutu, Robin Klein and throughout the business, and the Board endorses the aspirations of Duncan Tatton-Brown. David Dutton attends as an observer appointed the Davies Review on Women on Boards, the Board is not committing by DMGT. The Governance Code recommends that a majority of the to any specific targets. Our Board currently has one female Director Nomination Committee be non‑executive directors, independent in (11% of the Board). We will give due consideration to Board balance character and judgement and free from any relationship or circumstance and diversity when making new appointments to the Board. The Board which may, could or would be likely to, or appear to, affect their judgement. will engage executive search firms who have signed up to the voluntary As such, the Board considers that the Company complies with the code of conduct setting out the seven key principles of best practice Governance Code. The Company considers that the attendance of an to abide by throughout the recruitment process and will continue to observer at Committee meetings will not prejudice the independence follow a policy of appointing talented people at every level to deliver or proper functioning of the Committee. high performance. The Board will also ensure that its own development in this area is consistent with its strategic objectives and enhances Corporate governance The Nomination Committee will meet as often as it deems necessary Board effectiveness. but in any event at least twice a year.

Roles and responsibilities The Nomination Committee assists the Board in discharging its responsibilities relating to the composition and make-up of the Board Mike Evans and any committees of the Board. It is also responsible for periodically Chairman, Nomination Committee reviewing the Board’s structure and identifying potential candidates to be appointed as Directors or Committee members as the need may arise. The Nomination Committee is responsible for evaluating the balance of skills, knowledge and experience and the size, structure and composition of the Board and Committees of the Board, retirements Financial statements and appointments of additional and replacement Directors and Committee members and makes appropriate recommendations to the Board on such matters.

The full terms of reference are available on the Company’s corporate website at www.zpg.co.uk.

Activities of the Nomination Committee The Nomination Committee did not meet formally between 23 June 2014 and 30 September 2014. The first meeting of the Nomination Committee took place on 20 November 2014. Prior to the creation of the Nomination Committee, as part of the preparation for the IPO, the Board received a detailed report on the skills and experience of the members of the Management Team as part of its consideration of succession planning.

Zoopla Property Group Plc zpg.co.uk 37 Directors’ remuneration report

Introduction from the Chairman of the Remuneration Committee

Dear Shareholder As the Chairman of the Remuneration Committee, I am pleased to present the report of the Board covering the Remuneration Policy and practice for the first time as a listed company. In the prospectus we set out some of our core principles for our Remuneration Policy. These have been further developed and are set out in detail in the “The Committee’s goal is Policy report which will be put to shareholders for a binding vote. We have continued with the pre-IPO bonus plan for the remainder to ensure the retention of this financial year as the targets had been set before IPO and and incentivisation of it was not appropriate to change the plan part way through the year. All the other arrangements operated by the Company during the year the Management Team were in line with the policy summarised in the prospectus and which required to deliver the are now set out in full in this report. During the year the Group delivered strong performance, as summarised Group’s mission.” on page 15. Revenue increased by 24.4% compared to the prior year as the Group continues to grow, supported by our continued marketing campaign during the year. The Group also saw strong growth in adjusted EBITDA, increasing by 34.6% from the prior year. This performance has been reflected in the level of payments under our incentive plans.

The new incentive schemes, established during the year, have been designed to support the principles of our Remuneration Policy which are described on pages 42 to 54. These policies have been developed to align with the Group’s strategy and reward achievement of the Group’s long-term goals.

I am pleased to take up the role as Remuneration Committee Chairman and would like to welcome Duncan Tatton-Brown, Robin Klein and our Group Chairman, Mike Evans, to the Committee. David Dutton also attends as an observer appointed by DMGT. The Company considers that the attendance of an observer at Committee meetings will not prejudice the independence or proper functioning of the Committee. Each member brings his/her own extensive business knowledge and experience to ensure that the Committee has the level of competency required to operate effectively and support the business as it continues to grow. During the period the Committee has also been advised by PricewaterhouseCoopers LLP (PwC), following an extensive tender process, to ensure that our Remuneration Policy is appropriately benchmarked against our peers, is consistent with market practice and accurately aligns with the Group’s strategy.

38 Zoopla Property Group Plc Annual Report 2014 Overview

Remuneration highlights for the 2014 financial year Key activities of the Committee Strategic report ff annual bonuses of 50% of salary for the CEO and 50% for the CFO1 The Committee’s key activities during the 2014 financial year were: recognising the strong financial performance of the Group and the ff agreement of the Committee’s terms of reference; personal performance of the Executive Directors over the year; ff formulation of the Company’s first Remuneration Policy ff the launch of the new ZPG Long Term Incentive Plan with annual as a listed company; grants of nil-cost options worth up to 150% of salary to the CEO and 125% of salary for the CFO. Awards will vest at the end of ff implementing and making awards under the Company’s new three years subject to the achievement of the following Long Term Incentive Plan; performance conditions: ff determining the level of bonus payments in respect of this financial � 50% of pay-out is based on adjusted basic earnings per share2 year; and (EPS) growth of 15% p.a. for 25% of this element of the award to

ff drafting the Company’s first Directors’ remuneration report Corporate governance vest with full vesting occurring for EPS growth of 27.5% p.a.; and as a listed company. � 50% of pay-out is based on comparative total shareholder I hope that you find the information in this report helpful and I look return (TSR) performance of the Company compared to the forward to your support at the Company’s AGM. FTSE 250 (excluding real estate and equity investment trusts) – 25% of this element of the award vesting for median TSR comparative performance with full vesting at upper quartile and straight-line vesting between these two points; and Sherry Coutu ff launch of the new ZPG Share Incentive Plan – this plan provides Chairman, Remuneration Committee the following benefits to all employees:

� an award of £2,500 Free Shares which vest after three years

subject to continued employment; Notes Financial statements This report has been prepared in accordance with Schedule 8 to The Large and � the opportunity to buy £1,800 worth of shares out of pre-tax Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 as salary whereby individuals will receive one matching share for amended in 2013, the provisions of the September 2014 UK Corporate Governance Code (the “Code”) and the Listing Rules. The report consists of three sections: each share purchased. The level of participation amongst eligible employees was 65% at the launch of the plan with the average ff the annual statement by the Remuneration Committee Chairman; sum committed to the purchase of shares being £1,449; and ff the Remuneration policy report which sets out the Company’s Remuneration Policy for Directors and the key factors that were taken into account in setting the policy. � these shares are all provided under an HMRC approved This policy will apply for three years from its date of approval at the 2015 AGM; and plan which provides potential tax benefits to participants ff the Annual report on remuneration which sets out payments made to the Directors and the Company. and details the link between Company performance and remuneration for the 2014 financial year.

The Chairman’s annual statement and the annual report on remuneration will be subject to an advisory vote at the AGM. The Policy will be subject to a binding vote. 1 50% of salary for the nine month period from 1 January 2014 to 30 September 2014. Prior to 1 January 2014 bonuses were awarded based on performance over the calendar year. See page 56 for more information on bonus awards. 2 Adjusted basic earnings per share is defined on page 15.

Zoopla Property Group Plc zpg.co.uk 39 Directors’ remuneration report continued

At a glance

Introduction Our strategy The Group’s strategy is laid out on page 8. The Group’s goal is to In this section, we summarise the purpose provide the most useful online resources to UK property consumers of our Remuneration Policy and its linkage and be the most effective partner to its members. The Group focuses on the following core strategies in order to deliver on its goal: to our corporate strategic objectives and we 1. Grow brand awareness and user audience highlight the performance and remuneration 2. Extend listings inventory and property data outcomes for 2014. More detail can be found 3. Develop additional products to extend value to members in the Annual report on remuneration. 4. Further innovate and increase user engagement Our principles of remuneration 5. Develop revenue streams in related/adjacent markets ff There should be a strong link between an individual’s reward The Directors believe that the Group’s large and engaged user audience, and the performance of the Group to align the interests strong relationships with the vast majority of UK property professionals, of Senior Management with those of shareholders. leading brands and powerful technology platform make it well ff Variable remuneration makes up a significant proportion positioned to capitalise on opportunities in related/adjacent markets. of the remuneration package up to 275% of base salary. ff Stretching performance conditions directly aligned with Group strategy.

Remuneration policy As part of the successful IPO, our Remuneration Policy has been designed to support the strategic objectives of the Company and to allow the business to recruit, retain and incentivise the quality of Senior Management needed to shape and execute our strategy to deliver sustained shareholder value over the long term. The key elements of our Executive Director remuneration are outlined below.

Element Operation of element

Salary The Company provides competitive levels in line with comparator companies in the FTSE 250. Benefits Pension

Annual bonus 50% of the bonus earned with respect to performance in the financial year will be paid in cash and 50% of bonus earned will be deferred into Company shares which vest after three years based on continued employment (newly introduced from the 2015 financial year).

Long Term Incentive Plan Awards will vest at the end of three years subject to the achievement of: ff stretching EPS conditions which provide alignment to our core strategic priorities of increasing brand awareness, property data, product portfolio and the development of revenue streams; and

ff TSR performance of the Company compared to the FTSE 250 (excluding real estate and equity investment trusts) which provides alignment to the success of our business in delivering value to our shareholders compared against companies of a similar size and scale to Zoopla Property Group.

40 Zoopla Property Group Plc Annual Report 2014 Overview

How we have performed Strategic report 24% 35% 20% 18% Revenue Adjusted EBITDA Adjusted EPS ARPA

No change 33% 12% 5% Listings Visits Leads Members

KPI definitions can be found on page 15. Corporate governance

Single total figure of remuneration for Executive Directors for the 2014 financial year

Salary Benefits Bonus LTIPs Pension SIP Total Name Period £000 £000 £000 £000 £000 £000 £000

Alex Chesterman 2014 302 3 158 — 33 3 499 2013 203 3 119 — 31 — 356

Stephen Morana 2014 223 3 113 — 14 3 356 2013 83 1 44 — — — 128 1 Financial statements

1 Stephen Morana joined the Group on 15 April 2013 and therefore his remuneration reflects only part of the financial year.

Composition and terms of reference of the Advisers to the Remuneration Committee Remuneration Committee Following a formal tendering process carried out by the Board The Board has delegated to the Committee, under agreed terms of prior to the IPO of the Company, the Committee has engaged the reference, responsibility for the Remuneration Policy and for determining services of PwC as independent remuneration adviser. specific packages for the Executive Directors, the Chairman and other During the financial year, PwC advised the Committee on all aspects members of the Executive Team. The Company consults with key of the Remuneration Policy for Executive Directors and members of shareholders in respect of the Remuneration Policy and the introduction the Executive Team. The Committee is satisfied that advice received of new incentive arrangements. The terms of reference for the Committee from PwC during the year was objective and independent. are available on the Company’s corporate website, www.zpg.co.uk. PwC is a member of the Remuneration Consultants Group and the All members of the Committee are either Independent Non-Executive voluntary code of conduct of that body is designed to ensure objective Directors or the Group Chairman and were appointed to the Committee and independent advice is given to remuneration committees. Fees of on 4 June 2014, with the exception of Robin Klein, who was appointed £41,500 (2013: £nil) were provided to PwC during the year in respect on 9 July 2014. The Committee receives assistance from the HR Director of remuneration advice received. PwC have no other connection with and Company Secretary, who attend meetings by invitation, except the Group. when issues relating to their own remuneration are being discussed. The CEO and CFO attend by invitation on occasions. The Committee met once between the IPO and the end of the 2014 financial year. Meeting attendance is shown on page 30 of this report.

Zoopla Property Group Plc zpg.co.uk 41 Directors’ remuneration report continued

Remuneration policy

Introduction ff maintain a competitive package against businesses of a comparable size in the FTSE 250 and comparable peer In accordance with the new regulations, the group businesses in the sector with reference to the breadth Directors’ Remuneration Policy (the “Policy”) of the role and experience the role holder brings to the Company; as set out below will become formally effective ff operate a consistent reward and performance philosophy throughout the business; at the AGM on 12 February 2015 and will apply ff encourage a material, personal stake in the business and a for the period of three years from the date long-term focus on sustained growth through long-term shareholding; of approval. ff provide a balanced package with a focus on variable pay; and

Policy summary ff take into account the associated risks of each aspect of remuneration. The Committee determines the Policy for the Executive Directors, The Committee is satisfied that its approach to the Executive Chairman and other Senior Management for current and future years Directors’ remuneration is designed to promote the long-term and this is reviewed on an annual basis. The Policy is designed to success of the Company. support the strategic objectives of the Company and to allow the business to recruit, retain and incentivise the quality of Senior Management The ways in which these principles are reflected in the Policy and needed to shape and execute our strategy to deliver sustained its application are described on pages 55 to 61 of this report. shareholder value over the long term. The Remuneration Committee will review annually the remuneration The Policy aims to align the interests of the Executive Directors, arrangements for the Executive Directors and key Senior Management Senior Management and employees to the long-term interests of drawing on trends and adjustments made to all employees across the shareholders and aims to support a high performance culture with Group and taking into consideration: appropriate reward for superior performance, without creating incentives ff business strategy over the period; that will encourage excessive risk taking or unsustainable Company performance. The Committee considers that a successful policy needs ff overall corporate performance; to be sufficiently flexible to take account of future changes in the Company’s ff market conditions affecting the Company; business environment and in remuneration practice. ff the property market; The Policy is designed around the following key principles: ff changing practice in the markets where the Company competes ff ensure a strong link between an individual’s reward and the performance for talent; and of the Group to align the interests of Senior Management with those of shareholders. In achieving this principle the Committee has ff changing views of institutional shareholders and their ensured that the performance elements of the remuneration are representative bodies. transparent and stretching;

42 Zoopla Property Group Plc Annual Report 2014 Overview

UK Corporate Governance Code Strategic report The Committee is comfortable that the proposed Policy is in line with the revised 2014 Code. The following table sets out the key elements of the revised Code and how the Policy is in line with the Governance Code:

Code provision Company remuneration policy

Executive Directors’ remuneration should be designed to promote The Company has an LTIP with a three year performance period the long-term success of the Company. and has provision for the Committee to add holding periods post‑vesting. The Policy incorporates bonus arrangements where part of the bonus is deferred in shares for three years with the facility for the Committee to add holding periods post-vesting. It is the Committee’s view that these arrangements provide a holistic

approach to ensuring Executive Directors are focused on the Corporate governance long-term success of the Company.

Schemes should include provisions that would enable the Company Both the bonus plan and the Long Term Incentive Plan include to recover sums paid or withhold the payment of any sum, and best practice malus and clawback provisions. specify the circumstances in which it would be appropriate to do so.

For share-based remuneration, the Remuneration Committee The Policy contains the following relevant features: should consider requiring Directors to hold a minimum number ff minimum shareholding requirements for Executive Directors of shares and to hold shares for a further period after vesting or of 100% of salary; and exercise, including for a period after leaving the Company, subject to the need to finance any costs of acquisition and associated ff the provision for the Committee to add holding periods tax liabilities. post-vesting for the bonus plan and the Long Term Incentive Plan. Financial statements The Committee does not currently believe that with the shareholding requirement and the deferral period for part of the annual bonus in shares that additional holding periods are required. However, the Committee will consider this position on an annual basis.

Discretion The Committee has discretion in several areas of policy as set out It is the Committee’s intention that commitments made in line with in this report. The Committee may also exercise operational and its policies prior to the date of the 2015 AGM will be honoured, even administrative discretions under relevant plan rules approved by if satisfaction of such commitments is made following the AGM and shareholders as set out in those rules. In addition, the Committee may be inconsistent with the remuneration policies. To the best of the has the discretion to amend the Policy with regard to minor or Company’s knowledge, there are no such commitments. administrative matters where it would be, in the opinion of the Committee, disproportionate to seek or await shareholder approval.

Zoopla Property Group Plc zpg.co.uk 43 Directors’ remuneration report continued

Remuneration policy continued

Differences in policy from the wider employee population The Group aims to provide a remuneration package for all employees that is market competitive and operates the same core structure as for the Executive Directors. The Group operates employee share and variable pay plans, with pension provisions provided for all Executives and employees. In addition, any salary increases for Executive Directors are expected to be generally in line with those for UK-based employees.

Policy table All references to a policy level (e.g. median) are in relation to the Company’s comparator group for remuneration.

Element of How it supports the Company’s short remuneration and long-term strategic objectives Operation Opportunity

Salary

Policy: Median Provides a base level of remuneration An Executive Director’s basic salary is set on appointment ff pay and conditions throughout the Company. The Committee Whilst there is no maximum salary level or salary increase level, to support recruitment and retention of and reviewed annually or when there is a change in position has access to pay and conditions of other employees within the to reflect the Committee’s wish to ensure that fixed costs are Executive Directors with the necessary or responsibility. Group when determining remuneration for the Executive Directors minimised it is intended that salaries will not exceed the median experience and expertise to deliver the and also considers the relationship between general changes to level relative to the current comparator group of companies. When determining an appropriate level of salary, the Group’s strategy. pay and conditions within the Group as a whole; and Committee considers: The companies in the comparator group are the constituents of the FTSE 250 Index. The Committee intends to review the ff remuneration practices within the Group; ff the economic environment. list of companies each year and may add or remove companies Individuals who are recruited or promoted to the Board may, ff the performance of the individual Executive Director; from the Group as it considers appropriate. Any changes to on occasion, have their salaries set below the targeted policy the comparator group will be disclosed in the part of the report ff the individual Executive Director’s experience level until they become established in their role. In such cases setting out the operation of the policy for the future year. and responsibilities; subsequent increases in salary may be higher than the average In general salary rises to Executive Directors will be in line ff the general performance of the Group; until the target positioning is achieved. with the rise to employees. ff salaries within the ranges paid by the companies in the The Company will set out, in the section headed “Implementation comparator group used for remuneration benchmarking; of the Policy in the following financial year” the salaries for that year for each of the Executive Directors (see page 59).

Benefits

Policy: Market Provides a benefits package in line with The Executive Directors receive family private health cover and The maximum will be set at the cost of providing the The cost of the benefits provided. standard market practice relative to its death in service life assurance. The Committee recognises the benefits described. comparator group to enable the Company need to maintain suitable flexibility in the determination of benefits to recruit and retain Executive Directors with that ensure it is able to support the objective of attracting and the experience and expertise to deliver the retaining personnel. Group’s strategy. Executive Directors shall be reimbursed for all reasonable expenses and the Group may settle any tax incurred in relation to these.

Pensions

Policy: Median Provides a pension provision in line with the Employer retirement funding is determined as a percentage of be provided in the form of a salary supplement, which would 15% of salary p.a. comparator group to enable the Company gross basic salary, up to a maximum limit of 15%. Where this not itself be pensionable or form part of salary for the purposes to recruit and retain Executive Directors with exceeds the maximum annual pension contribution that can of determining the extent of participation in the Company’s the experience and expertise to deliver the benefit from tax relief or the Lifetime Allowance, any excess may incentive arrangements. Group’s strategy.

44 Zoopla Property Group Plc Annual Report 2014 Overview

Differences in policy from the wider employee population Strategic report The Group aims to provide a remuneration package for all employees that is market competitive and operates the same core structure as for the Executive Directors. The Group operates employee share and variable pay plans, with pension provisions provided for all Executives and employees. In addition, any salary increases for Executive Directors are expected to be generally in line with those for UK-based employees.

Policy table All references to a policy level (e.g. median) are in relation to the Company’s comparator group for remuneration.

Element of How it supports the Company’s short remuneration and long-term strategic objectives Operation Opportunity

Salary Corporate governance Policy: Median Provides a base level of remuneration An Executive Director’s basic salary is set on appointment ff pay and conditions throughout the Company. The Committee Whilst there is no maximum salary level or salary increase level, to support recruitment and retention of and reviewed annually or when there is a change in position has access to pay and conditions of other employees within the to reflect the Committee’s wish to ensure that fixed costs are Executive Directors with the necessary or responsibility. Group when determining remuneration for the Executive Directors minimised it is intended that salaries will not exceed the median experience and expertise to deliver the and also considers the relationship between general changes to level relative to the current comparator group of companies. When determining an appropriate level of salary, the Group’s strategy. pay and conditions within the Group as a whole; and Committee considers: The companies in the comparator group are the constituents of the FTSE 250 Index. The Committee intends to review the ff remuneration practices within the Group; ff the economic environment. list of companies each year and may add or remove companies Individuals who are recruited or promoted to the Board may, ff the performance of the individual Executive Director; from the Group as it considers appropriate. Any changes to on occasion, have their salaries set below the targeted policy the comparator group will be disclosed in the part of the report ff the individual Executive Director’s experience level until they become established in their role. In such cases setting out the operation of the policy for the future year. and responsibilities; subsequent increases in salary may be higher than the average

In general salary rises to Executive Directors will be in line Financial statements ff the general performance of the Group; until the target positioning is achieved. with the rise to employees. ff salaries within the ranges paid by the companies in the The Company will set out, in the section headed “Implementation comparator group used for remuneration benchmarking; of the Policy in the following financial year” the salaries for that year for each of the Executive Directors (see page 59).

Benefits

Pensions

Zoopla Property Group Plc zpg.co.uk 45 Directors’ remuneration report continued

Remuneration policy continued

Policy table continued

Element of How it supports the Company’s short remuneration and long-term strategic objectives Operation Opportunity Performance metrics

Annual Bonus and Deferred Bonus Plan (DBP)

Policy: Median The DBP provides a significant incentive to The Company operates in a rapidly changing sector and therefore The Committee will determine the maximum annual participation The Plan is based on a mix of financial and strategic/operational the Executive Directors linked to achievement the Committee may change the balance of the measures or use in the Plan for each year, which will not exceed 125% of salary. conditions and is measured over a period of one financial year. in delivering goals that are closely aligned different measures for subsequent financial years, as appropriate, The financial measures will account for no less than 50% of the Below threshold level of performance 0% of the bonus will be with the Company’s strategy and the to reflect this. This is subject to the condition that at least 50% of bonus opportunity. earned. At threshold level of performance 25% of the bonus creation of value for shareholders. the award is based on financial performance. will be earned. At target level of performance 75% of the bonus The Committee retains discretion in exceptional circumstances In particular, the DBP supports the Company’s The Company will set out in the section headed “Implementation will be earned. At 105% of target performance 100% of the to change performance measures and targets and the weightings objectives allowing the setting of annual of the Policy in the following financial year” the nature of the target bonus will be earned (the maximum). attached to performance measures part-way through a performance targets based on the businesses’ strategic year if there is a significant and material event which causes the measures and their weighting for each year (see page 59). The annual bonus will be paid in cash and deferred shares. objectives at that time, meaning that a wider Committee to believe the original measures, weightings and targets Details of the performance measurements and their level of For Executive Directors 50% of annual bonus to be paid range of performance metrics can be used are no longer appropriate. Discretion may also be exercised in satisfaction for the year being reported on will be set out in the immediately in cash and 50% deferred into shares. that are relevant and achievable. cases where the Committee believes that the bonus outcome Annual report on remuneration. is not a fair and accurate reflection of business performance. The Committee has discretion to defer part The Committee can determine that part of the bonus earned of the annual bonus earned in shares under The Remuneration Committee is of the opinion that, given the under the Annual Bonus Plan is provided in the form of an award the Annual Bonus and Deferred Bonus Plan. commercial sensitivity arising in relation to the detailed financial of shares under the DBP. The maximum value of deferred shares The advantage of deferral is: targets used for the annual bonus, disclosing precise targets for is 50% of the bonus earned. the bonus plan in advance would not be in shareholder interests. ff ongoing risk adjustment due to the The main terms of these awards are: This avoids the risk of the Company inadvertently providing link to the share price over the deferral a profit forecast because profit targets are linked to budgets. period thereby driving long-term strategic ff minimum deferral period of three years; and Actual targets, performance achieved and awards made will be behaviours; and ff the participants’ continued employment at the end published at the end of the performance periods so shareholders ff amounts deferred in shares are also of the deferral period. can fully assess the basis for any pay-outs under the annual bonus. forfeitable on an Executive Director’s The Committee retains the discretion to include holding periods. The DBP contains clawback and malus provisions. voluntary cessation of employment which provides an effective lock-in. The Committee may award dividend equivalents on those shares to plan participants to the extent that they vest.

Long Term Incentive Plan (LTIP)

Policy: Median Awards are designed to incentivise the Awards are granted annually to Executive Directors. These will Plan maximum 200% of salary. The performance conditions for awards are currently EPS growth Executive Directors to maximise total vest at the end of a three year period subject to: and TSR. EPS growth for this purpose is defined as the increase Below threshold level of performance 0% of the award will vest. shareholder returns by successfully in adjusted basic EPS1. ff the Executive Director’s continued employment at the date 25% of the award will vest for threshold performance. 100% delivering the Company’s objectives of vesting; and of the award will vest for maximum performance. Straight-line The Company operates in a rapidly changing sector and therefore and to share in the resulting increase vesting occurs between these points. the Committee may change the balance of the measures, or use in total shareholder value. ff satisfaction of the performance conditions. different measures for subsequent awards, as appropriate. It is the The use of EPS ensures Executive Directors The Committee may award dividend equivalents on awards Committee’s intention that no material change will be made to the are focused on ensuring the annual profit to the extent that these vest. type of performance conditions without prior shareholder consultation. performance targeted by the Annual Bonus The Committee retains the discretion to include holding periods. Details of the performance conditions for grants made in the year Plan flows through to long-term sustainable will be set out in the Annual report on remuneration and for future EPS growth. grants in the statement of implementation of remuneration policy The use of comparative TSR measures in the future financial year. the success of the implementation of the The LTIP contains clawback and malus provisions. Company’s strategy in delivering an above market level of return. 1 Adjusted basic EPS is calculated as basic EPS excluding exceptional items and any other material items considered by the Committee to be outside the control of Management.

46 Zoopla Property Group Plc Annual Report 2014 Overview

Policy table continued Strategic report

Element of How it supports the Company’s short remuneration and long-term strategic objectives Operation Opportunity Performance metrics

Annual Bonus and Deferred Bonus Plan (DBP)

In particular, the DBP supports the Company’s The Company will set out in the section headed “Implementation will be earned. At 105% of target performance 100% of the to change performance measures and targets and the weightings Corporate governance objectives allowing the setting of annual of the Policy in the following financial year” the nature of the target bonus will be earned (the maximum). attached to performance measures part-way through a performance targets based on the businesses’ strategic year if there is a significant and material event which causes the measures and their weighting for each year (see page 59). The annual bonus will be paid in cash and deferred shares. objectives at that time, meaning that a wider Committee to believe the original measures, weightings and targets Details of the performance measurements and their level of For Executive Directors 50% of annual bonus to be paid range of performance metrics can be used are no longer appropriate. Discretion may also be exercised in satisfaction for the year being reported on will be set out in the immediately in cash and 50% deferred into shares. that are relevant and achievable. cases where the Committee believes that the bonus outcome Annual report on remuneration. is not a fair and accurate reflection of business performance. The Committee has discretion to defer part The Committee can determine that part of the bonus earned of the annual bonus earned in shares under The Remuneration Committee is of the opinion that, given the under the Annual Bonus Plan is provided in the form of an award the Annual Bonus and Deferred Bonus Plan. commercial sensitivity arising in relation to the detailed financial of shares under the DBP. The maximum value of deferred shares The advantage of deferral is: targets used for the annual bonus, disclosing precise targets for is 50% of the bonus earned. the bonus plan in advance would not be in shareholder interests. ff ongoing risk adjustment due to the The main terms of these awards are: This avoids the risk of the Company inadvertently providing link to the share price over the deferral Financial statements a profit forecast because profit targets are linked to budgets. period thereby driving long-term strategic ff minimum deferral period of three years; and Actual targets, performance achieved and awards made will be behaviours; and ff the participants’ continued employment at the end published at the end of the performance periods so shareholders ff amounts deferred in shares are also of the deferral period. can fully assess the basis for any pay-outs under the annual bonus. forfeitable on an Executive Director’s The Committee retains the discretion to include holding periods. The DBP contains clawback and malus provisions. voluntary cessation of employment which provides an effective lock-in. The Committee may award dividend equivalents on those shares to plan participants to the extent that they vest.

Long Term Incentive Plan (LTIP)

Zoopla Property Group Plc zpg.co.uk 47 Directors’ remuneration report continued

Remuneration policy continued

Policy table continued

Element of How it supports the Company’s short remuneration and long-term strategic objectives Operation Opportunity Performance metrics

HMRC Share Incentive Plan

Policy: Market To encourage Company-wide employee The Company operates a share incentive plan in which the UK plan in line with HMRC limits as amended from time to time. There are no performance conditions as this is an share ownership and thereby align Executive Directors are eligible to participate (which is HMRC all‑employee plan. employees’ interests with shareholders. approved and is open to all eligible staff). The Company retains the discretion to introduce additional plans, and to make Directors eligible for these as appropriate.

Minimum shareholding requirement

The Remuneration Committee has adopted formal shareholding guidelines that will encourage the Executive Directors to build up, over a five year period, and then subsequently hold a shareholding equivalent to a percentage of base salary. Adherence to these guidelines is a condition of continued participation in the equity incentive arrangements. This Policy ensures that the interests of Executive Directors and those of shareholders are closely aligned.

Chairman and Non-Executive Director fees

Policy: Median Provides a level of fees to support The Board, as a whole, is responsible for setting the remuneration The fees for the Chairman and Non-Executive Directors are None. recruitment and retention of the Chairman of the Non-Executive Directors, other than the Chairman whose set at broadly the median of the comparator group. and Non-Executive Directors with the remuneration is considered by the Remuneration Committee and In general the level of fee increase for the Chairman and necessary experience to advise and assist recommended to the Board. Non-Executive Directors will be set taking account of any with establishing and monitoring the Group’s Non-Executive Directors are paid a base fee and additional fees change in responsibility and will take into account the strategic objectives. for Chairmanship of Committees. The Chairman does not receive general rise in salaries across the UK workforce. any additional fees for membership of Committees. The Company will pay reasonable expenses incurred Fees are reviewed annually based on equivalent roles in the by the Chairman and Non-Executive Directors and may comparator group used to review salaries paid to the Executive settle any tax incurred in relation to these. Directors. Fees are set at broadly the median of the comparator group. The Chairman and Non-Executives’ fees are set out on page 55. The Chairman and Non-Executive Directors do not participate in any variable remuneration or benefit arrangements.

48 Zoopla Property Group Plc Annual Report 2014 Overview

Policy table continued Strategic report

Element of How it supports the Company’s short remuneration and long-term strategic objectives Operation Opportunity Performance metrics

HMRC Share Incentive Plan

Chairman and Non-Executive Director fees

In general the level of fee increase for the Chairman and Financial statements necessary experience to advise and assist recommended to the Board. Non-Executive Directors will be set taking account of any with establishing and monitoring the Group’s Non-Executive Directors are paid a base fee and additional fees change in responsibility and will take into account the strategic objectives. for Chairmanship of Committees. The Chairman does not receive general rise in salaries across the UK workforce. any additional fees for membership of Committees. The Company will pay reasonable expenses incurred Fees are reviewed annually based on equivalent roles in the by the Chairman and Non-Executive Directors and may comparator group used to review salaries paid to the Executive settle any tax incurred in relation to these. Directors. Fees are set at broadly the median of the comparator group. The Chairman and Non-Executives’ fees are set out on page 55. The Chairman and Non-Executive Directors do not participate in any variable remuneration or benefit arrangements.

Zoopla Property Group Plc zpg.co.uk 49 Directors’ remuneration report continued

Remuneration policy continued

Recruitment policy The Company’s principle is that the remuneration of any new Director will be assessed in line with the same principles as for the Executive Directors, as set out in the remuneration policy table. The Remuneration Committee’s approach to recruitment remuneration is to pay no more than is necessary to attract candidates of the appropriate calibre and experience needed for the role from the market in which the Company competes. The Remuneration Committee is mindful that it wishes to avoid paying more than it considers necessary to secure the preferred candidate and will have regard to guidelines and shareholder sentiment regarding one-off or enhanced short-term or long-term incentive payments made on recruitment and the appropriateness of any performance measures associated with an award. The Company’s detailed policy when setting remuneration for the appointment of new Directors is summarised in the table below:

Remuneration element Recruitment policy

Salary Salary will be set in line with the policy for existing Executive Directors.

Benefits The standard benefit package for existing Executive Directors will apply.

Pension The maximum employer contribution will be set in line with the Company’s policy for existing Executive Directors.

Annual bonus Maximum annual participation will be set in line with the Company’s policy for existing Executive Directors and will not exceed 125% of salary.

LTIP Maximum annual participation will be set in line with the Company’s policy for existing Executive Directors and will not exceed 200% of salary.

Maximum variable In the year of recruitment, the maximum variable pay will be 325% of salary (450% if maximum sign-on pay (incentive compensation is provided). opportunity)

Sign-on The Committee’s policy is not to provide sign-on compensation. compensation However, in exceptional circumstances, where the Committee decides to provide this type of compensation, it will endeavour to provide the compensation in equity, subject to a holding period during which cessation of employment will generally result in forfeiture and subject to the satisfaction of performance targets. The maximum value of this one-off compensation will be proportionate to the overall remuneration offered by the Company and in all circumstances is limited to 125% of salary.

Buyout of The Committee’s policy is not to provide buyouts as a matter of course. incentives However, should the Committee determine that the individual circumstances of recruitment justified the provision forfeited on of a buyout, the equivalent value of any incentives that will be forfeited on cessation of a Director’s previous cessation of employment will be calculated taking into account the following: employment ff the proportion of the performance period completed on the date of the Director’s cessation of employment;

ff the performance conditions attached to the vesting of these incentives and the likelihood of their being satisfied; and

ff any other terms and conditions having a material effect on their value (lapsed value).

The Committee may then grant up to the same value as the lapsed value, where possible, under the Company’s incentive plans. To the extent that it was not possible or practical to provide the buyout within the terms of the Company’s existing incentive plans, a bespoke arrangement would be used.

50 Zoopla Property Group Plc Annual Report 2014 Overview

Where an existing employee is promoted to the Board, the policy set out on the previous page would apply from the date of promotion but there Strategic report would be no retrospective application of the policy in relation to subsisting incentive awards or remuneration arrangements. Accordingly, prevailing elements of the remuneration package for an existing employee would be honoured and form part of the ongoing remuneration of the person concerned. These would be disclosed to shareholders in the Directors’ remuneration report for the relevant financial year. The Company’s policy when setting fees for the appointment of a new Chairman or Non-Executive Director is to apply the policy that applies to the current Chairman and Non-Executive Directors.

Service agreements and letters of appointment Notice periods Compensation Date of service contract/ provisions for Name letter of appointment Nature of contract From Company From Director early termination Corporate governance Executive Directors Alex Chesterman 22 April 2014 Rolling 12 months 12 months None Stephen Morana 22 April 2014 Rolling 12 months 12 months None

Non-Executive Directors Mike Evans 1 May 2014 3 year contract 3 months 3 months None David Dutton 4 June 2014 3 year contract None None None Duncan Tatton-Brown 1 May 2014 3 year contract 1 month 1 month None Grenville Turner 21 May 2014 3 year contract 1 month 1 month None

Robin Klein 1 May 2014 3 year contract 1 month 1 month None Financial statements Sherry Coutu 1 May 2014 3 year contract 1 month 1 month None Stephen Daintith 4 June 2014 3 year contract None None None

The Committee’s policy for setting notice periods is that a 12 month period will apply for Executive Directors. The Committee may, in exceptional circumstances arising on recruitment, allow a longer period which would, in any event, reduce to 12 months following the first year of employment. The Non-Executive Directors of the Company (including the Chairman) do not have service contracts. The Non-Executive Directors are appointed by letters of appointment. Each Independent Non-Executive Director’s term of office runs for a three year period. The Company follows the UK Corporate Governance Code’s recommendation that all Directors be subject to annual re-appointment by shareholders.

Illustrations of the application of the remuneration policy The chart below illustrates the remuneration that would be paid to each of the Executive Directors, based on salaries at the start of financial year 2015, under three different performance scenarios: (i) minimum; (ii) on-target; and (iii) maximum. The elements of remuneration have been categorised into three components: (i) fixed; (ii) annual bonus (deferred bonus); and (iii) LTIP.

Element Description Minimum On-target Maximum

Fixed Salary, benefits and pension Included Included Included Annual bonus Annual bonus 0% 75% of the maximum bonus 100% of the maximum bonus (including deferred shares) Long Term Incentive Plan Award under the 0% 62.5% of the maximum award 100% of the maximum award Long Term Incentive Plan

Zoopla Property Group Plc zpg.co.uk 51 Directors’ remuneration report continued

Remuneration policy continued

Illustrations of the application of the remuneration policy continued In accordance with the regulations, share price growth has not been included. For the purposes of this disclosure, dividend equivalents have not been added to deferred share bonus and LTIP share awards.

£2,000,000 LTIP £1,757,300 Bonus Fixed elements £1,500,000 £1,363,550 38% 31% £1,022,000 £1,000,000 £806,375 37% 31% 32% £519,800 29% £500,000 £347,000 28% 29%

100% 38% 30% 100% 43% 34% £0 Minimum On-target Maximum MinimumMOn-target aximum

Chief Executive Ofﬁcer Chief Financial Ofﬁcer

Payment for loss of office The Committee will honour Executive Directors’ contractual entitlements. Service contracts do not contain liquidated damages clauses. If a contract is to be terminated, the Committee will determine such mitigation as it considers fair and reasonable in each case. There are no contractual arrangements that would guarantee a pension with limited or no abatement on severance or early retirement. There is no agreement between the Company and its Executive Directors or employees providing for compensation for loss of office or employment that occurs because of a takeover bid. The Committee reserves the right to make additional payments where such payments are made in good faith in discharge of an existing legal obligation (or by way of damages for breach of such an obligation) or by way of settlement or compromise of any claim arising in connection with the termination of an Executive Director’s office or employment. When determining any loss of office payment for a departing individual, the Remuneration Committee will always seek to minimise cost to the Company whilst seeking to address the circumstances at the time.

Remuneration element Treatment on exit

Salary Salary will be paid over the notice period. The Company has discretion to make a lump sum payment on termination of the salary payable during the notice period. In all cases the Company will seek to mitigate any payments due.

Benefits Benefits will normally be provided over the notice period. The Company has discretion to make a lump sum payment on termination equal to the value of the benefits payable during the notice period. In all cases the Company will seek to mitigate any payments due.

Pension Company pension contributions will normally be provided over the notice period. The Company has discretion to make a lump sum payment on termination equal to the value of the Company pension contributions during the notice period. In all cases the Company will seek to mitigate any payments due.

Annual Bonus Good leaver reason Plan ff Prorated to time and performance for year of cessation.

Other leaver reason ff No bonus payable for year of cessation.

52 Zoopla Property Group Plc Annual Report 2014 Overview Strategic report Remuneration element Treatment on exit

Deferred Good leaver reason Bonus Plan ff Retention of each subsisting deferred share award.

Other leaver reason ff Lapse of any unvested deferred share awards.

Discretion The Committee has the following elements of discretion: ff to determine that an Executive is a good leaver. It is the Committee’s intention to only use this discretion in

circumstances where there is an appropriate business case which will be explained in full to shareholders; Corporate governance

ff to allow immediate or deferred vesting;

ff to prorate the maximum number of shares to the time from the date of grant to the date of cessation. The Committee’s policy is generally to not prorate to time; and

ff to determine whether to prorate based on the circumstances of the Executive’s departure.

LTIP Good leaver reason ff Prorated to time and performance in respect of each subsisting LTIP award.

Other leaver reason ff Lapse of any unvested LTIP awards. Financial statements Discretion The Committee has the following elements of discretion: ff to determine that an Executive is a good leaver. It is the Committee’s intention to only use this discretion in circumstances where there is an appropriate business case which will be explained in full to shareholders;

ff to measure performance over the original performance period or at the date of cessation. The Committee will make this determination depending on the type of good leaver reason resulting in the cessation; and

ff to prorate the maximum number of shares to the time from the date of grant to the date of cessation. The Committee’s policy is generally to prorate to time. It is the Committee’s intention to only use this discretion in circumstances where there is an appropriate business case which will be explained in full to shareholders.

Other contractual There are no other contractual provisions, other than those set out above, agreed prior to 27 June 2012. obligations

A good leaver reason is defined as cessation in the following circumstances: ff death; ff ill health; ff injury or disability; ff redundancy; ff retirement with agreement of employer; ff employing company ceasing to be a Group company; ff transfer of employment to a company that is not a Group company; and ff at the discretion of the Remuneration Committee (as described above).

Cessation of employment in circumstances other than those set out above is cessation for other leaver reasons.

Zoopla Property Group Plc zpg.co.uk 53 Directors’ remuneration report continued

Remuneration policy continued

Change of control The Committee’s policy on the vesting of incentives on a change of control is summarised on page 52 and below:

Name of incentive plan Change of control Discretion

Annual Bonus Prorated to time and performance to the date of the The Committee has discretion to continue the Plan change of control. operation of the Plan to the end of the bonus year.

Deferred The number of shares subject to subsisting deferred The Committee will take into account the circumstances Bonus Plan share awards on a change of control may be prorated of the change of control in determining whether to to time. apply prorating.

LTIP The number of shares subject to subsisting deferred There is a presumption that the Committee will prorate LTIP awards on a change of control will be prorated to time. The Committee will only waive prorating in to time and performance. exceptional circumstances where it views the change of control as an event which has provided a material enhanced value to shareholders which will be fully explained to shareholders.

Statement of conditions elsewhere in the Company The remuneration policy for all employees is determined in terms of best practice and ensuring that the Company is able to attract and retain the best people. This principle is followed in the development of our Policy. However, employee views are not specifically sought in determining this policy. The Company does not currently use any remuneration comparison metrics. Salary and benefit packages are linked to both individual and business performance. All employees participate in bonus schemes which, together with salary reviews linked to business performance, enable all employees to share in the success of the Group. All employees are eligible to participate in the SIP.

Consideration of shareholder views The Committee takes the views of the shareholders seriously and these views are taken into account in shaping remuneration policy and practice. Shareholder views are considered when evaluating and setting remuneration strategy and the Committee commits to consulting with key shareholders prior to any significant changes to its Policy.

54 Zoopla Property Group Plc Annual Report 2014 Annual report on remuneration Overview

Introduction Strategic report The following report outlines how the Policy was implemented in 2014 and how the Committee intends to apply the Policy in 2015.

Single total figure of remuneration (audited) Executive Directors (audited) The table below sets out the single total figure of remuneration and breakdown for each Executive Director in respect of the 2014 financial year. Comparative figures for the 2013 financial year have also been provided. Figures provided have been calculated in accordance with the new UK disclosure requirements: the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 (Schedule 8 to the Regulations). Corporate governance Single total figure of remuneration for Executive Directors for the 2014 financial year (audited)

Salary Benefits1 Bonus LTIPs Pension2 SIP Total Name Period £000 £000 £000 £000 £000 £000 £000

Alex Chesterman 2014 302 3 158 — 33 3 499 2013 203 3 119 — 31 — 356

Stephen Morana 2014 223 3 3 113 — 16 3 358 2013 83 1 44 — — — 1284

1 The types of benefits provided are set out in the Remuneration Policy section of this report. Financial statements 2 Pension contribution was 5% of the respective salaries prior to the IPO and 15% thereafter. 3 Stephen Morana became a Non-Executive Director of boohoo.com plc in April 2014. Stephen receives and retains £40,000 per annum in respect of this role. This amount has not been included in the single remuneration figure presented in the table. 4 Stephen Morana joined the Group on 15 April 2013 and therefore his remuneration reflects only part of the financial year.

Non-Executive Directors (audited) The table below sets out the single total figure of remuneration and breakdown for each Non-Executive Director for the year from the date of their appointment.

2014 2013

Taxable Taxable Fees benefits Total Fees benefits Total £000 £000 £000 £000 £000 £000 Roles

Mike Evans (Chairman) 63 — 63 — — — Chairman, Nomination Committee Chairman

David Dutton — — — — — — Non-Executive Director

Duncan Tatton-Brown 21 — 21 — — — Senior Independent Director, Audit Committee Chairman

Grenville Turner 11 — 11 — — — Non-Executive Director

Robin Klein 17 — 17 — — — Non-Executive Director

Sherry Coutu 21 — 21 — — — Remuneration Committee Chairman

Stephen Daintith — — — — — — Non-Executive Director

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Annual report on remuneration continued

Annual fees 2014 2013 annual fee annual fee £000 £000

Chairman 150 —

Board fee 40 —

Chairman of Remuneration Committee 10 —

Chairman of Audit Committee 10 —

Additional information regarding single figure table (audited) The Committee considers that performance conditions for all incentives are suitably demanding, having regard to the business strategy, shareholder expectations, cyclicality of the markets in which the Group operates and external advice. To the extent that any performance condition is not met, the relevant part of the award will lapse. There is no retesting of performance.

Bonus awards (audited) In respect of the 2014 financial year, the bonus awards payable to Executive Directors were agreed by the Committee having reviewed the Company’s revenue and adjusted EBITDA performance and each Executive Director’s performance against their personal objectives. This bonus was applied to the weighted average salary of each Director over the nine month period to 30 September 2014. Prior to this, bonuses had been paid based on a performance period aligned with the calendar year. The total bonus figure for the 2014 financial year therefore contains a three month allocation of the bonus paid in respect of the 2013 calendar year. Going forward bonuses will be assessed over a performance period aligned with the financial year using the criteria outlined in the Policy on pages 46 and 47. The 2014 bonus will be paid in cash. For the 2015 financial year, a portion of the bonus will be deferred in shares as set out in the “Remuneration Policy” and “Implementation of the Policy in financial year 2015”.

Actual Annual bonus Annual bonus performance value achieved value achieved Name Performance criteria Weighting against target (% salary) £000

Alex Chesterman Revenue 33% >100% Adjusted EBITDA 33% >100% 50% 158 Personal objectives 33% 100%

Stephen Morana Revenue 33% >100% Adjusted EBITDA 33% >100% 50% 113 Personal objectives 33% 100%

The Committee has not exercised any discretion in relation to the bonus outcomes. It is the Committee’s view that the personal performance conditions are commercially sensitive and therefore details cannot be disclosed. It should be noted that the bonus plan for 2015 has been designed to allow the Committee to provide full retrospective disclosure of the level of financial performance achieved against targets set at the beginning of the financial year.

56 Zoopla Property Group Plc Annual Report 2014 Overview

Long-term incentives awarded in 2014 (audited) Strategic report The table below sets out the details of the long-term incentive awards granted in the 2014 financial year where vesting will be determined according to the achievement of performance conditions that will be tested in future reporting periods.

Percentage of Maximum award vesting percentage Face value at threshold of face value Basis on which of award performance that could vest Name Award type award made £000 % % Performance conditions

Alex Chesterman LTIP Annual 675 25% 100% Relative TSR and EPS equally weighted

Stephen Morana LTIP Annual 375 25% 100% Relative TSR and EPS equally weighted

The awards were granted on 1 August 2014 in the form of nil-cost options. The face value is calculated using the IPO price of 220 pence. Corporate governance The performance conditions are set out in the Remuneration Committee Chairman’s annual statement. The awards will vest, subject to achieving the threshold performance level, over the period to 30 September 2017.

HMRC Share Incentive Plan (audited) This section sets out the details of the Share Incentive Plan awards granted in the 2014 year. This plan was available to all employees, including the Executive Directors. There are no performance conditions attached to the grants. However, the award of Free Shares is subject to the Director’s continued employment for a period of three years from the grant date. Each Executive Director received 1,137 Free Shares on 23 June 2014 with a face value of £2,500. The face value of the Free Shares was calculated using the IPO price of 220 pence. During the year each Executive Director also contributed £600 from pre-tax income to the Partnership Share element of the Plan. Shares purchased by employees under the plan are subject to one-for-one matching by the Company. Financial statements Payments to past Directors/payments for loss of office There were no payments in the financial year.

Statement of Directors’ shareholdings (audited) Shareholding requirements in operation at the Company are currently 100% of base salary for both the CEO and CFO. Executive Directors are required to build up their shareholdings over a reasonable amount of time which would normally be five years. The number of shares of the Company in which current Directors had a beneficial interest and details of long-term incentive interests as at 30 September 2014 are set out in the table below.

Shares held directly Other shares held

Shares not LTIP interests subject to Total number Current subject to Beneficially performance of ordinary and shareholding performance Director owned1 conditions2 deferred shares (% salary)3 conditions

Alex Chesterman 17,300,445 1,137 17,301,582 >100% 306,818 Stephen Morana 1,005,000 1,137 1,006,137 >100% 170,454

1 No shares were held by any connected parties. There has been no change in the number of shares held between 30 September 2014 and 9 December 2014. 2 The number of matching shares to be awarded under the SIP is not yet certain as the accumulation period for the purchase of Partnership Shares extends beyond the financial year end. The number of shares will be determined at the end of the accumulation period in March 2015. 3 The closing share price of 236.60 pence as at 30 September 2014 has been taken for the purpose of calculating the current shareholding as a percentage of salary. Unvested LTIP shares and options do not count towards satisfaction of the shareholding guidelines. Shares awarded under the DBP and matching shares under the Share Incentive Plan will not count towards the shareholding requirement.

Zoopla Property Group Plc zpg.co.uk 57 Directors’ remuneration report continued

Annual report on remuneration continued

Statement of Directors’ shareholdings (audited) continued The Chairman and the Non-Executive Directors are not subject to a shareholding requirement. Details of their interests in shares are set out below:

Shares held Director 30 September 2014 1

Mike Evans (Chairman) 34,494 David Dutton — Duncan Tatton-Brown 22,727 Grenville Turner — Robin Klein 653,246 Sherry Coutu 588,790 Stephen Daintith —

1 Shares held include any shares held by connected parties. There has been no movement in the number of shares held between 30 September 2014 and 9 December 2014.

Comparison of overall performance and pay (TSR graph) The graph below shows the value of £100 invested in the Company’s shares since listing compared to the FTSE 250 index. The graph shows the total shareholder return generated by both the movement in share value and the reinvestment over the same period of dividend income. The Committee considers that the FTSE 250 is the appropriate index because the Company has been a member of this since listing. This graph has been calculated in accordance with Regulations. It should be noted that the Company listed on 23 June 2014 and therefore only has a listed share price for the period of 23 June 2014 to date of publication. 115

110

105

100

95 lue of £100 invested Va 90 Source: Thomson Reuters DataStream Zoopla Property Group Plc FTSE 250 index

85 23 June 30 June 31 July 29 August 30 September 2014 2014 2014 2014 2014

This graph shows the value by 30 September 2014 of £100 invested in Zoopla Property Group Plc on 23 June 2014 compared with the value of £100 invested in the FTSE 250 index.

Chief Executive Officer historic remuneration The table below sets out the total remuneration delivered to the Chief Executive Officer over the last two years valued using the methodology applied to the single total figure of remuneration. The Company has expanded quickly from a start-up company and the Committee does not believe that the remuneration payable in its earlier years bares any comparative value to that paid in its later years and therefore the Committee has chosen to disclose remuneration only for the two most recent financial years:

Chief Executive Officer 2014 2013

Total single figure (£000) 499 356 Annual bonus payment level achieved (% of maximum opportunity) 100% 100%

It should be noted that the Company did not introduce a long term incentive plan until it listed. Therefore, there were no awards capable of vesting in 2013 and 2014.

58 Zoopla Property Group Plc Annual Report 2014 Overview

Relative importance of the spend on pay Strategic report The table below sets out the relative importance of the spend on pay in the 2014 financial year and 2013 financial year compared with other disbursements. All figures provided are taken from the relevant Company accounts.

Disbursements from Disbursements from profit in 2014 profit in 2013 financial year financial year £000 £000 % change

Profit distributed by way of dividend1 27,879 22,406 24.4% Overall spend on pay including Executive Directors 13,565 9,774 38.8% Total tax contributions2 16,812 11,821 42.2%

1 Includes dividends paid and proposed in respect of the financial year. Corporate governance 2 Total tax contributions include tax for period in respect of corporation tax, PAYE, national insurance contributions and VAT.

Change in Chief Executive Officer’s remuneration compared with employees The following table sets out the change in the remuneration paid to the Chief Executive Officer from 2013 to 2014 compared with the average percentage change for employees.

% increase in remuneration in 2014 compared with remuneration in 2013

CEO Employees

Salary 48.8% 6.5%

Annual bonus 32.8% 14.0% Financial statements Taxable benefits 0.0% 0.0%

The increase in salary for the CEO in 2014 reflects the fact that salaries for Executive Directors were benchmarked against a FTSE 250 comparative Group at the IPO and were implemented with effect from 23 June 2014. The percentage increases for employees are based on the number of employees across the Group who were in full-time employment at both 30 September 2013 and 30 September 2014.

Implementation of the Policy in 2015 The Remuneration Committee proposes to implement the Policy for 2015, subject to shareholder approval, as set out below: Salary There are no changes to salaries for 2015.

Salary 2015 1 Name £000

Alex Chesterman 450 Stephen Morana 300

1 Salaries for Executive Directors were benchmarked against a FTSE 250 comparative Group at the IPO and were implemented with effect from 23 June 2014. These salaries are unadjusted for the 2015 financial year. Benefits and pension There are no proposed changes for the financial year ending 30 September 2015.

Zoopla Property Group Plc zpg.co.uk 59 Directors’ remuneration report continued

Annual report on remuneration continued

Implementation of the Policy in 2015 continued Annual bonus Operation of element Potential value Performance metrics used, weightings and time period applicable

Introduction of Deferred Bonus Plan Maximum bonus opportunity Performance conditions for the 2015 financial year and which means that for the 2015 as disclosed in the prospectus: their weighting: financial year: ff CEO 125% of salary; and ff EBITDA (50%); ff 50% of any bonus earned will ff CFO 100% of salary. ff revenue (30%); and be paid in cash; and ff personal strategic objectives (20%). ff 50% of any bonus earned will be paid in shares which vest The details of the targets applicable to the bonus for the after a further three years subject coming year are considered by the Committee to be to the Executive Director’s commercially sensitive as they are the key metrics that continued employment. are critical to the operation of the Company, so they have not been disclosed as the Committee feels it would be detrimental to the interests of the Company to do so. The Committee will provide full retrospective disclosure of the performance targets for the financial measures to allow shareholders to judge the bonus earned in the context of the performance delivered. The Committee believes that some of the personal objectives may continue to remain commercially sensitive.

Long Term Incentive Plan The August 2014 LTIP grant was made in respect of the 2015 financial year. Therefore, there are no proposed changes for the 2015 financial year.

Operation of element Potential value Performance metrics used, weightings and time period applicable ff No change. Maximum award value as disclosed Awards will vest at the end of three years subject to the in the prospectus: achievement of the following performance conditions:

ff CEO 150% of salary; and ff 50% EPS – EPS growth of 15% p.a. for 25% of this element of the award to vest with full vesting occurring ff CFO 125% of salary. for EPS growth of 27.5% p.a.; and

ff 50% comparative TSR performance of the Company compared to the FTSE 250 (excluding real estate and equity investment trusts) – 25% vesting of this element of the award for median TSR comparative performance with full vesting at the upper quartile.

HMRC Share Incentive Plan From 6 April 2015 the scheme will be amended so that Matching Partnership Shares are granted on a monthly basis for each Partnership Share purchased by an eligible employee.

60 Zoopla Property Group Plc Annual Report 2014 Overview

Non-Executive fees Strategic report There are no changes to the Chairman’s and Non-Executive Directors’ fees for 2015.

Fees 2015 1 Name £000

Mike Evans 150 Duncan Tatton-Brown 50 Grenville Turner 40 Robin Klein 40 Sherry Coutu 50 Corporate governance

1 Fees for the Chairman and Non-Executive Directors were benchmarked against a FTSE 250 comparative group at the IPO and were implemented with effect from 1 July 2014. These fees are unadjusted for the 2015 financial year.

Shareholder voting at general meeting The Policy will be put to a binding vote at the AGM on 12 February 2015. The Chairman’s annual statement and the Annual report on remuneration will be subject to an advisory vote. This is the Company’s first year as a public company and therefore the 2015 AGM will be the first. This means that there is no historic voting to disclose on the Company’s Executive remuneration.

Sherry Coutu Financial statements Chairman, Remuneration Committee

Zoopla Property Group Plc zpg.co.uk 61 Directors’ report (other disclosures)

Introduction Directors The Directors of the Company who held office up to the date of signing The Directors present their Annual Report and the financial statements can be found on page 51. audited financial statements for the year ended The Directors’ biographical details setting out their key strengths and 30 September 2014, in accordance with experiences are laid out on pages 26 to 27. Following recommendations from the Nomination Committee, the Board considers that all Directors section 415 of the Companies Act 2006. continue to be effective, committed to their roles and able to devote Certain disclosure requirements for inclusion in this report have been sufficient time to discharge their responsibilities. All of the Directors will incorporated by way of cross reference to the Strategic report and seek election at the Company’s AGM on 12 February 2015 in accordance the Directors’ remuneration report, and should be read in conjunction with the Company’s Articles of Association, which require newly with this report. The following also form part of this report: appointed Directors to stand for election at the next AGM. ff greenhouse gas emissions, which can be found on page 23; Directors’ interests ff employees, which can be found on page 22; Information about the Directors’ interests in the Ordinary Shares of the Company at 30 September 2014 or date of appointment if later, ff the Corporate governance statement, set out on pages 28 to 31; and and the 9 December 2014 is set out in the Directors’ remuneration ff our strategy and objectives, set out on page 8. report on pages 57 and 58.

Information regarding the Company’s charitable donations can be found Directors’ indemnities and insurance in the Our people and corporate responsibility report on pages 22 to 23. In accordance with the Companies Act 2006 and the Company’s No political donations were made in 2014 (2013: £nil). Articles, the Company has purchased and maintains Directors’ and officers’ liability insurance cover which remains in place as at the date The Company of this report. A review will be carried out on an annual basis to ensure Zoopla Property Group Plc (the “Company”) is a company incorporated that the Board remains satisfied that an appropriate level of cover is and domiciled in the UK, with registration number 09005884. The in place. Company was incorporated on 22 April 2014, prior to the initial public The Company also purchased prospectus liability insurance to provide offering of the Company, as a wholly owned subsidiary of DMG Media cover for liabilities incurred by the Directors in the performance of their Investments Limited. duties or powers in connection with the issue of the Prospectus in relation On 16 May 2014, the Company re-registered as a public limited to the listing of the Company’s shares on the London Stock Exchange. company and changed its name from “Project ZigZag Limited” to “Zoopla Property Group Plc”. On 18 June 2014 conditional dealings Employees of the Company’s shares began on the London Stock Exchange and As at year end the Company employed 234 employees (as set out on 23 June 2014 the Company was admitted to trading on the main in the gender diversity table on page 22). market of the London Stock Exchange. The Company has no overseas subsidiaries. Articles of Association The Articles of Association of the Company can only be amended Results and dividends by special resolution at a general meeting of the shareholders. The Group’s results for the year are set out in the consolidated financial No amendments are proposed at the 2015 AGM. statements on pages 69 to 91. The Company only results of Zoopla Property Group Plc are set out on pages 92 to 96. The Directors have proposed a final dividend of 1.1 pence per share to be paid in respect of the year ended 30 September 2014. This will be paid on 23 February 2015 to all shareholders on the register on 5 December 2014.

62 Zoopla Property Group Plc Annual Report 2014 Overview

Annual General Meeting (AGM) Strategic report Number The Company’s first AGM since listing will take place on 12 February 2015 Shareholder Lock-up period of shares at the offices of the Company’s solicitors, Freshfields Bruckhaus Deringer LLP at 65 Fleet Street, London EC4Y 1HT at 10.00am, and the Chairmen 1. Alex Chesterman1 365 days from Admission 17,300,445 of each of the Board’s Committees will be present to answer questions 2. Simon Kain 365 days from Admission 4,148,039 put to them by shareholders. The Annual Report and Accounts and Notice 3. DMGT Media 180 days from Admission 132,788,961 of the AGM, including the resolutions to be proposed, will be sent to Investments Limited shareholders at least 20 working days prior to the date of the meeting. 4. Atlas Venture Fund VII LP 180 days from Admission 19,901,869 To encourage shareholders to participate in the AGM process, the Company proposes to offer electronic proxy voting through the CREST 5. Octopus Investments 180 days from Admission 822,022 service and all resolutions will be proposed and voted on at the meeting Nominees Limited on an individual basis by shareholders or their proxies. Voting results 6. Octopus Zenith LP 180 days from Admission 7,031,765 Corporate governance will be announced through the Regulatory News Service and made available on the Company’s website. 7. Countrywide2 180 days from Admission 16,923,813 8. Connells Limited 180 days from Admission 16,372,745 Share capital 9. LSL Property Services Plc 180 days from Admission 10,863,818 Details of the Company’s share capital are set out in Note 20 to the consolidated financial statements. Following the Company’s IPO it has 10. Chesham Holdings Limited3 365 days from Admission 588,790 one class of Ordinary Shares. As at 24 November 2014 the Company 11. Local Globe III Limited4 365 days from Admission 1,303,884 had an issued share capital of 418,092,702 Ordinary Shares of £0.001. 12. Stephen Morana 365 days from Admission 1,005,000 The rights and obligations attached to these shares are governed by UK law and the Company’s Articles of Association. 13. Duncan Tatton-Brown 365 days from Admission 22,727 Holders of Ordinary Shares of the Company are entitled to receive 14. Jon Notley 365 days from Admission 79,429 notice and to attend and speak at general meetings. On a show Financial statements of hands, every shareholder present in person or by proxy (or duly 1 Alex Chesterman’s shareholding at Admission was disclosed in the IPO prospectus authorised corporate representatives) shall have one vote and, on as 4.5%. The over allotment sale took place in the month following the IPO and reduced his shareholding to 4.1%. a poll, every member who is present in person or by proxy shall 2 Countrywide’s shares are held by two entities: Countrywide Plc and Countrywide have one vote for every share held. Estate Agents. Other than the general provisions of the Articles of Association and 3 Shares held by Chesham Holdings Limited are held on behalf of Sherry Coutu. prevailing legislation, there are no specific restrictions on the size 4 50.1% of the shares held by Local Globe III Limited are held on behalf of Robin Klein. of a holding or on the transfer of the Ordinary Shares. Authority to purchase own shares The Directors are not aware of any agreements between holders of At a general meeting of the Company on 4 June 2014, the Company the Company’s shares that may result in the restriction of the transfer was authorised to purchase a maximum of 10% of the Company’s of securities or on voting rights except for the lock-ins agreed at the issued share capital immediately following Admission to the London time of Admission by certain significant corporate and individual Stock Exchange. This authority will expire at the close of the 2015 shareholders, as detailed opposite. No shareholder holds securities AGM or 18 months from the date of the resolution if earlier. carrying any special rights or control over the Company’s share capital. Authority to allot shares As part of the IPO, the Company was granted a general authority by its shareholders to allot shares up to an aggregate nominal amount of £139,214.15 and in connection with a rights issue or other pre-emptive offer to allot shares up to an aggregate nominal amount of £278,428.31. As at the date of this Annual Report shares have been issued under these authorities. These authorities will expire at the conclusion of the 2015 AGM unless revoked, varied or renewed prior to that meeting. Resolutions will be proposed at the 2015 AGM to renew these authorities.

Zoopla Property Group Plc zpg.co.uk 63 Directors’ report (other disclosures) continued

Major interests in shares As at 30 September 2014 and 9 December 2014, the Company had been advised of the following notifiable interests in the Company’s voting rights:

Number of % voting Number of % voting voting rights at rights at voting rights at rights at 9 December 9 December 30 September 30 September 2014 2014 2014 2014

DMG Media Investments 132,788,961 31.76 132,788,961 31.76

Lansdowne Partners 29,547,280 7.07 21,808,000 5.22

Standard Life Investments 25,891,479 6.19 26,100,171 6.24

Capital Research & Management 21,611,820 5.17 11,000,000 2.63

Atlas Venture 19,901,869 4.76 19,901,869 4.76

Alex Chesterman 17,300,445 4.14 17,300,445 4.14

Countrywide plc 16,923,813 4.05 16,923,813 4.05

Caledonia Investments, Australia 16,384,139 3.92 18,742,766 4.48

Connells Limited 16,372,745 3.92 16,372,745 3.92

Fidelity Management & Research 9,200,973 2.20 13,309,416 3.18

Financial risk management The confirmation is given and should be interpreted in accordance The Company’s objectives and policies on financial risk management, with the provisions of section 418 of the Companies Act 2006. including information on credit, liquidity and market risks can be found Deloitte LLP has expressed its willingness to continue in office as in Note 23 to the financial statements. auditor and a resolution to re-appoint it as the Company’s auditor will be proposed at the forthcoming AGM. Going concern The financial position of the Group shows a positive net and current Subsequent events asset position with significant cash resources. As a consequence, the Between 30 September 2014 and the date of signing of this report Directors believe that the Group is well placed to manage its business there have been no reportable subsequent events. and financial risks successfully. This report has been approved by the Board of Directors and has been The Directors have a reasonable expectation that the Group has signed on its behalf by: adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the historical financial information.

Auditor and disclosure of information to auditor Ned Staple Each of the Directors at the date of this report confirms that: Company Secretary 24 November 2014 ff so far as he or she is aware, there is no relevant audit information of which the Company’s auditor is unaware; and Zoopla Property Group Plc Harlequin Building ff he/she has taken all the reasonable steps that he/she ought to 65 Southwark Street have taken as a Director to make himself/herself aware of any London SE1 0HR relevant audit information and to establish that the Company’s Company number: 09005884 auditor is aware of the information.

64 Zoopla Property Group Plc Annual Report 2014 Statement of Directors’ responsibilities Overview

The Directors are responsible for preparing the Annual Report and Under applicable law and regulations, the Directors are also responsible Strategic report the Group and parent company financial statements in accordance for preparing a Strategic report, Directors’ report, Directors’ remuneration with applicable law and regulations. report and Corporate governance statement that comply with that law and those regulations. Company law requires the Directors to prepare Group and parent company financial statements for each financial year. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Under that law they are required to prepare the Group financial Legislation in the UK governing the preparation and dissemination of statements in accordance with IFRSs as adopted by the European financial statements may differ from legislation in other jurisdictions. Union and applicable law and have elected to prepare the parent company financial statements on the same basis. Having taken advice from the Audit Committee, the Directors consider that the Annual Report, taken as a whole, is fair, balanced Under company law the Directors must not approve the financial and understandable and provides the information necessary for statements unless they are satisfied that they give a true and fair view shareholders to assess the Company’s performance, business Corporate governance of the state of affairs of the Group and parent company and of their model and strategy. profit or loss for that period.

In preparing each of the Group and parent company financial Directors’ statement pursuant to the Disclosure statements, the Directors are required to: and Transparency Rules ff select suitable accounting policies and then apply them consistently; Each of the Directors, whose names and functions are listed within the Corporate governance statement, confirm that, to the best of ff make judgements and estimates that are reasonable and prudent; their knowledge: ff state whether they have been prepared in accordance with IFRSs ff the Group financial statements, which have been prepared in as adopted by the European Union; and accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit ff prepare the financial statements on the going concern basis

of the Group; and Financial statements unless it is inappropriate to presume that the Group and the parent company will continue in business. ff the Strategic report contained in the Annual Report includes a fair review of the development and performance of the business and The Directors are responsible for keeping adequate accounting the position of the Group, together with a description of the records that are sufficient to show and explain the parent company’s principal risks and uncertainties that it faces. transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Zoopla Property Group Plc zpg.co.uk 65 Independent auditor’s report To the members of Zoopla Property Group Plc

Opinion on financial statements of Zoopla Property Group plc of cash flows, the consolidated and parent company statement of In our opinion: changes in equity and the related Notes 1 to 26 to the consolidated ff the financial statements give a true and fair view of the state of the financial statements and Notes 1 to 9 to the parent company financial group’s and of the parent company’s affairs as at 30 September 2014 statements. The financial reporting framework that has been applied and of the group’s profit for the year then ended; in their preparation is applicable law and IFRSs as adopted by the European Union and, as regards the parent company financial ff the group financial statements have been properly prepared in statements, as applied in accordance with the provisions of accordance with International Financial Reporting Standards the Companies Act 2006. (IFRSs) as adopted by the European Union; ff the parent company financial statements have been properly Going concern prepared in accordance with IFRSs as adopted by the European As required by the Listing Rules we have reviewed the directors’ Union and as applied in accordance with the provisions of the statement contained on page 64 that the group is a going concern. Companies Act 2006; and We confirm that: ff the financial statements have been prepared in accordance with the ff we have concluded that the directors’ use of the going concern requirements of the Companies Act 2006 and, as regards the group basis of accounting in the preparation of the financial statements financial statements, Article 4 of the IAS Regulation. is appropriate; and

The financial statements comprise of the consolidated statement of ff we have not identified any material uncertainties that may cast significant comprehensive income, the consolidated and parent company statement doubt on the group’s ability to continue as a going concern. of financial position, the consolidated and parent company statement 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 How the scope of our audit responded to the risk

Revenue Recognition – completeness In order to address the risk of revenue completeness we have: Revenue primarily consists of recurring subscription payments in return i) understood Management’s processes and controls in respect for property listings on the Group’s websites. Individual contracts exist of the appropriate recognition of revenue, including testing the with each customer with a range of different terms and conditions, and design and implementation of those controls. Our work focused, as a result there are a significant number of agreements. Consequently in particular on the arrangements put in place by Management there is a risk that customer subscription agreements may not be to ensure billing of customers in line with contractual terms; appropriately captured and accounted for in line with underlying contractual terms and hence the revenue population may not be complete. ii) identified and investigated anomalies in billing patterns for specific customers to check that billing runs (and hence revenue) are complete; and

iii) checked that for a sample of customer contracts, that revenue has been appropriately recognised in line with the contractual terms and IAS 18.

66 Zoopla Property Group Plc Annual Report 2014 Risk How the scope of our audit responded to the risk Overview

Accounting for share-based payment arrangements We have assessed the accounting treatment for both warrants and including warrants employee share option schemes to ensure that they are in line with The Group has a number of share-based payment arrangements, IFRS 2, involving consideration of the appropriate vesting period for which include warrants issued to certain estate agents and share each scheme (pre and post IPO). incentive plans for management and employees. The warrant We have critically assessed and evaluated Management’s assumptions instruments are complex and involve a commitment to list properties and valuation methodology, using specialists where necessary for in return for commercially agreed subscription fees. The fair value the more complex schemes. We have agreed key inputs used within of the warrant is based on the fair value at the time of grant and valuation models to internal and external sources, benchmarked this involves Management judgement. For the share incentive plans, these underlying assumptions against external data and internal Management judgement is also required for the inputs to the historical trends to check that they are reasonable and supportable. Strategic report valuation model and the underlying assumptions. We obtained the share-based payment calculations and performed There is a risk that these complex instruments may not be valued audit procedures to determine the accuracy of the IFRS 2 charge, correctly, and subsequently not accounted for appropriately in as well as considering whether the disclosure in Note 21 meets accordance with IFRS 2. the requirements of IFRS 2.

Group reorganisation and IPO For the Group reorganisation we reviewed the accounting entries Accounting for group reorganisation prior to the IPO and costs directly prepared by management, involved technical experts, and tested incurred in relation to the IPO were significant matters that required the accounting entries to supporting documentation. management judgement. For the IPO costs, we confirmed by reference to invoices and other The accounting for the Group reorganisation, in the absence of any supporting documentation, that the costs classified as exceptional prescribed accounting treatment for common control transactions directly related to the IPO. Corporate governance 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.

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 Financial statements the performance shown in the Income statement.

The Audit Committee’s consideration of these risks is set out on We agreed with the Audit Committee that we would report to the pages 33 and 34. Committee all audit differences in excess of £30,000, as well as differences below that threshold that, in our view, warranted reporting Our audit procedures relating to these matters were designed in the on qualitative grounds. We also report to the Audit Committee on context of our audit of the financial statements as a whole, and not to disclosure matters that we identified when assessing the overall express an opinion on individual accounts or disclosures. Our opinion presentation of the financial statements. 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 An overview of the scope of our audit individual matters. Our group audit was scoped by obtaining an understanding of the group and its environment, including group-wide controls, and assessing Our application of materiality the risks of material misstatement at the group level. Our audit scope We define materiality as the magnitude of misstatement in the financial covers 100% of the group’s net assets, revenue and profit before tax. statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. At the parent entity level we also tested the consolidation process and We use materiality both in planning the scope of our audit work and carried out analytical procedures to confirm our conclusion that there in evaluating the results of our work. were no significant risks of material misstatement of the aggregated financial information of the remaining components not subject to audit We determined materiality for the group to be £1.5 million, which is 5% or audit of specified account balances. of pre-tax profit, and below 2% of equity.

Zoopla Property Group Plc zpg.co.uk 67 Independent auditor’s report continued To the members of Zoopla Property Group Plc

Opinion on other matters prescribed by the Companies Act 2006 Respective responsibilities of Directors and auditor In our opinion: As explained more fully in the Statement of Directors’ responsibilities, the directors are responsible for the preparation of the financial ff the part of the Directors’ remuneration report to be audited statements and for being satisfied that they give a true and fair view. has been properly prepared in accordance with the Companies Our responsibility is to audit and express an opinion on the financial Act 2006; and statements in accordance with applicable law and International Standards ff the information given in the Strategic Report and the Directors’ on Auditing (UK and Ireland). Those standards require us to comply Report for the financial year for which the financial statements with the Auditing Practices Board’s Ethical Standards for Auditors. are prepared is consistent with the financial statements. We also comply with International Standard on Quality Control (UK and Ireland). Our audit methodology and tools aim to ensure that Matters on which we are required to report by exception our quality control procedures are effective, understood and applied. Adequacy of explanations received and accounting records Our quality controls and systems include our dedicated professional Under the Companies Act 2006 we are required to report to you if, standards review team and independent partner reviews. in our opinion: This report is made solely to the company’s members, as a body, ff we have not received all the information and explanations we in accordance with Chapter 3 of Part 16 of the Companies Act 2006. require for our audit; or 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 ff adequate accounting records have not been kept by the parent in an auditor’s report and for no other purpose. To the fullest extent company, or returns adequate for our audit have not been received permitted by law, we do not accept or assume responsibility to anyone from branches not visited by us; or other than the company and the company’s members as a body, for ff the parent company financial statements are not in agreement our audit work, for this report, or for the opinions we have formed. with the accounting records and returns. Scope of the audit of the financial statements We have nothing to report in respect of these matters. An audit involves obtaining evidence about the amounts and disclosures Directors’ remuneration in the financial statements sufficient to give reasonable assurance that the Under the Companies Act 2006 we are also required to report if in our financial statements are free from material misstatement, whether caused opinion certain disclosures of directors’ remuneration have not been by fraud or error. This includes an assessment of: whether the accounting made or the part of the Directors’ remuneration report to be audited policies are appropriate to the group’s and the parent company’s is not in agreement with the accounting records and returns. We have circumstances and have been consistently applied and adequately nothing to report arising from these matters. disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial Corporate Governance Statement statements. In addition, we read all the financial and non-financial Under the Listing Rules we are also required to review the part of the information in the annual report to identify material inconsistencies with Corporate Governance Statement relating to the company’s compliance the audited financial statements and to identify any information that is with nine provisions of the UK Corporate Governance Code. We have apparently materially incorrect based on, or materially inconsistent with, nothing to report arising from our review. the knowledge acquired by us in the course of performing the audit. Our duty to read other information in the Annual Report If we become aware of any apparent material misstatements or Under International Standards on Auditing (UK and Ireland), we are inconsistencies we consider the implications for our report. required to report to you if, in our opinion, information in the annual report is: ff materially inconsistent with the information in the audited financial statements; or Mark Lee-Amies (Senior statutory auditor) for and on behalf of Deloitte LLP ff apparently materially incorrect based on, or materially inconsistent Chartered Accountants and Statutory Auditor with, our knowledge of the group acquired in the course of performing London our audit; or 24 November 2014 ff 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.

68 Zoopla Property Group Plc Annual Report 2014 Consolidated statement of comprehensive income For the year ended 30 September 2014

2014 2013 Overview Notes £000 £000

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 Strategic report Finance income 202 325

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 Corporate governance Earnings per share Basic (pence per share) 11 5.1 5.4 Diluted (pence per share) 11 5.1 5.4 Financial statements

Zoopla Property Group Plc zpg.co.uk 69 Consolidated statement of financial position As at 30 September 2014

2014 2013 Notes £000 £000

Assets Non-current assets Property, plant and equipment 12 1,457 106 Intangible assets 15 75,194 76,537 Trade and other receivables 16 — 9,563 Deferred tax assets 19 437 —

77,088 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 114,000 119,232

Liabilities Current liabilities Trade and other payables 17 11,418 10,140 Current tax liabilities 3,777 720 Provisions 18 — 492 Non-current liabilities Deferred tax liability 19 — 534 Provisions 18 634 59

Total liabilities 15,829 11,945

Net assets 98,171 107,287

Equity attributable to owners of the parent Share capital 20 418 4 Share premium reserve 50 18,577 Other reserves 20 87,537 70,187 Retained earnings 10,166 18,519

Total equity 98,171 107,287

The consolidated financial statements of Zoopla Property Group Plc were approved by the Board of Directors and were signed on its behalf by:

A Chesterman S Morana Director Director 24 November 2014 24 November 2014

70 Zoopla Property Group Plc Annual Report 2014 Consolidated statement of cash flows For the year ended 30 September 2014

2014 2013 Overview £000 £000

Cash flows from operating activities Profit before tax 28,669 28,287 Adjustments for: Depreciation of property, plant and equipment 153 132 Amortisation of intangible assets 1,505 1,241 Loss on disposal of property, plant and equipment — 23 Financial income (202) (325) Strategic report Share-based payments 3,910 98

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 Corporate governance

Cash flows (used in)/from investing activities Acquisition of subsidiaries, net of cash acquired (1,497) (4,496) Interest received 202 325 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 Financial statements Proceeds on issue of shares 72 22 Unpaid share capital paid-up 9,563 — Shares released from trust 150 — 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

Zoopla Property Group Plc zpg.co.uk 71 Consolidated statement of changes in equity For the year ended 30 September 2014

Other reserves Share Share premium EBT share Merger Retained Total capital reserve reserve reserve earnings equity £000 £000 £000 £000 £000 £000

At 1 October 2013 4 18,577 — 70,187 18,519 107,287 Profit and total comprehensive income for the period — — — — 21,077 21,077 Transactions with owners recorded directly in equity: Share-based payments — — — — 3,882 3,882 Current tax on share-based payments — — — — 459 459 Deferred tax on share-based payments — — — — 722 722 Issue of share capital — 1,788 — — — 1,788 Group restructuring1 414 (20,315) — 19,901 — — Equity contributions — — — — 50 50 Shares purchased by EBT — — (1,716) — — (1,716) Shares released from EBT — — 150 — — 150 Transfer between reserves2 — — — (985) 985 — Dividends paid — — — — (35,528) (35,528)

At 30 September 2014 418 50 (1,566) 89,103 10,166 98,171

Other reserves Share Share premium EBT share Merger Retained Total capital reserve reserve reserve earnings equity £000 £000 £000 £000 £000 £000

At 1 October 2012 4 13,492 — 71,172 5,264 89,932 Profit and total comprehensive income for the year — — — — 22,330 22,330 Transactions with owners recorded directly in equity: Share-based payments — — — — 98 98 Issue of share capital — 5,085 — — — 5,085 Transfer between reserves2 — — — (985) 985 — Dividends paid — — — — (10,158) (10,158)

At 30 September 2013 4 18,577 — 70,187 18,519 107,287

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. 2013 balances are stated as though the transactions occurred within Zoopla Property Group Plc. In addition, the 2014 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 2014 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 2012.

72 Zoopla Property Group Plc Annual Report 2014 Notes to the financial statements

1. Accounting policies Overview 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 2014 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 2014 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 2014 and 30 September 2013. 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 Strategic report (“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 2014: ff IFRS 9 – Financial Instruments – classification of financial assets and financial liabilities ff Amendments to IFRS 11 – accounting for acquisition of Interests in Joint Operations ff Amendments to IAS 16 and IAS 38 – clarification of acceptable methods of depreciation and amortisation Corporate governance ff IFRS 15 – revenue from contracts with customers ff Amendments to IAS 27 – equity method in separate financial statements ff Amendments to IFRS 10/IAS 28 – sale or contribution of assets between an investor and its associate or joint venture ff Improvements 2014 – annual improvements to IFRSs: 2012–2014

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 Financial statements reported in the financial statements is provided below.

IFRS 10 – Consolidated Financial Statements IFRS 10 replaces the parts of IAS 27 – Consolidated and Separate Financial Statements that deal with consolidated financial statements and SIC-12 Consolidation – Special Purpose Entities. IFRS 10 changes the definition of control such that an investor has control over an investee when (i) it has power over the investee; (ii) it is exposed, or has rights, to variable returns from its involvement with the investee; and (iii) has the ability to use its power to affect its returns. All three of these criteria must be met for an investor to have control over an investee. Previously, control was defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The adoption of IFRS 10 has had no material impact on the financial statements.

IFRS 12 – Disclosure of Interests in Other Entities IFRS 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities.

In general, the application of IFRS 12 has resulted in slightly more disclosures in the financial statements.

IFRS 13 – Fair Value Measurement IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The scope of IFRS 13 is broad; the fair value measurement requirements of IFRS 13 apply to both financial instrument items and non-financial instrument items for which other IFRSs require or permit fair value measurements and disclosures about fair value measurements, except for share-based payment transactions that are within the scope of IFRS 2 – Share-based Payment, leasing transactions that are within the scope of IAS 17 – Leases, and measurements that have some similarities to fair value but are not fair value (e.g. net realisable value for the purposes of measuring inventories or value in use for impairment assessment purposes).

IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions. Fair value under IFRS 13 is an exit price regardless of whether that price is directly observable or estimated using another valuation technique.

The adoption of IFRS 13 has had no material impact on the financial statements.

Zoopla Property Group Plc zpg.co.uk 73 Notes to the financial statements continued

1. Accounting policies continued 1.3 Basis of consolidation The Consolidated financial statements incorporate the accounts of Zoopla Property Group Plc (“the Company”) and entities controlled by the Company (its “subsidiaries”) (together, “the Group”). Control is achieved where the Company: ff has the power over the investee; ff is exposed, or has rights, to variable return from its involvement with the investee; and ff has the ability to use its power to affect its returns.

The results of subsidiaries acquired are included from the effective date of acquisition. The results of subsidiaries sold are included up to the effective date of disposal.

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 wholly owned direct subsidiary of Zoopla Property Group Plc through a share-for-share exchange. Such Group reorganisations are outside the scope of IFRS 3. Therefore, in accordance with IAS 8, Management has used its judgement to develop a relevant and reliable accounting treatment, applying the principles of merger accounting under the Companies Act 2006. Under this method the share capital and share premium reflect that of Zoopla Property Group Plc. The 2013 comparatives have been disclosed on the basis that Zoopla Property Group Plc was in existence from the beginning of the prior year. 2013 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 2013. The difference between the net assets of ZPG Limited recognised as an investment by Zoopla Property Group Plc at the date of restructuring and the value of the shares issued within share capital has been recognised within equity as a merger reserve. The brought forward merger reserve and retained earnings represent those of the previously existing Group.

1.4 Going concern The financial position of the Group shows a positive net and current asset position with significant cash resources and high cash generation. Furthermore, the Group continues to generate both positive adjusted EBITDA and profit after tax. As a consequence, the Directors believe that the Group is well placed to manage its business and financial risks successfully.

The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the historical financial information.

1.5 Revenue Revenue represents amounts due for services provided during the period, net of value added tax (VAT), with the VAT liability being recognised at the date of invoice.

The main sources of revenue are subscriptions from estate agents (“agency revenue”) and developers (“developer revenue”), in respect of properties advertised on Group websites. They are recognised over the period of the subscription.

Revenue from other services (“other revenue”) is recognised in the month in which the service is provided.

1.6 Operating leases Leases are classified as operating leases as substantially all of the risks and rewards incidental to ownership are not transferred to the Group. The total rentals payable under the lease are charged to the consolidated statement of comprehensive income on a straight-line basis over the lease term.

1.7 Finance income and costs Finance income represents interest receivable on cash and deposit balances. Interest income is recognised on an accruals basis using the effective interest method.

Finance costs represent interest charged on bank loans and overdraft balances. Finance costs are recognised on an accruals basis using the effective interest method.

1.8 Property, plant and equipment Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs and the estimated present value of any future unavoidable costs of dismantling and removing items. The corresponding liability is recognised within provisions in accordance with IAS 37.

Subsequent costs to repair or service a previously recognised item of property, plant and equipment are expensed when incurred as they do not provide future economic benefit to the organisation.

Depreciation is recognised so as to write off the cost of assets less their residual values over their useful economic lives, using the straight-line method, on the following bases:

Fixtures and fittings – over 3–5 years Computer equipment – over 2–5 years Leasehold improvements – over the lease term

The Directors review the residual values and useful economic lives of assets on an annual basis. In 2014 the Group purchased fixtures and fittings and computer equipment as part of the business’ relocation to a new head office. The Directors believe that the economic life of these assets is five years. This has been reflected in the policy above.

74 Zoopla Property Group Plc Annual Report 2014 1. Accounting policies continued Overview 1.9 Business combinations The acquisition of subsidiaries and businesses is accounted for using the acquisition method in accordance with IFRS 3. The consideration for each acquisition is measured at the aggregate of fair values of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition related costs are recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and liabilities assumed are recognised at their fair value on the acquisition date except deferred tax assets and liabilities which are measured in accordance with IAS 12 – Income Taxes.

1.10 Goodwill Goodwill represents the difference between consideration paid and fair value of assets and liabilities acquired in a business combination. Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated statement of comprehensive income.

Goodwill is not subject to amortisation but is tested for impairment annually and whenever the Directors have an indication that it might be Strategic report impaired. For the purposes of impairment testing, goodwill is allocated to the cash-generating units expected to benefit from the combination.

Goodwill is tested for impairment by comparing the carrying amount of the cash-generating unit with its recoverable amount, which represents the higher of estimated fair value and value in use. An impairment loss is recognised when the carrying value of the asset exceeds its recoverable amount.

The recoverable amounts of intangible assets and goodwill are based on the value in use, which is determined using cash flow projections derived from financial plans approved by Management covering a five year period. They reflect Management’s expectations of revenue, EBITDA growth, capital expenditure, working capital and operating cash flows, based on past experience and future expectations of business performance. Cash flows beyond the five year period have been extrapolated using perpetuity growth rates.

A growth rate of 3% has been applied to extrapolate the cash flows into perpetuity. The growth rate has been determined using long-term historical growth rates of the goodwill and intangible assets and Management‘s expectation of future growth.

The pre-tax discount rate used is 12%. Corporate governance

1.11 Intangible assets Intangible assets with finite lives are stated at cost less accumulated amortisation and accumulated impairment losses. Amortisation is charged to the consolidated statement of comprehensive income on a straight-line basis over the estimated useful lives of the intangible assets as follows:

Domain names – 5 years Databases – 5–10 years Customer relationships – 5 years Computer software – 3 years

1.12 Research and development The Group incurs expenditure on research and development in order to develop and improve new and existing property websites and products.

Expenditure includes the staff costs of the technical team. Financial statements

Research expenditure on planning new websites or products and obtaining new technical knowledge is expensed in the period in which it is incurred. Development costs are expensed when incurred unless they meet certain criteria for capitalisation. Development costs whereby research findings are applied to creating a substantially enhanced website or new product are only capitalised once the technical feasibility and the commercial viability of the project has been demonstrated and they can be reliably measured. Capitalised development costs are amortised on a straight-line basis over their expected useful economic life.

Once the new website or product is available for use, subsequent expenditure to maintain the website or product, or on small enhancements to the website or product, is recognised as an expense when it is incurred.

1.13 Impairment of tangible and intangible assets excluding goodwill At each statement of financial position date, the Directors review the carrying amounts of tangible and intangible assets to determine whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of any impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the recoverable amount of the cash-generating unit to which the asset belongs is estimated.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that this increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

Zoopla Property Group Plc zpg.co.uk 75 Notes to the financial statements continued

1. Accounting policies continued 1.14 Financial instruments Financial assets and financial liabilities are recognised on the statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

Trade and other receivables are not interest bearing and are designated as loans and receivables. They are recognised at amortised cost, which is net of any allowance for impairment in relation to irrecoverable amounts. This is deemed to be a reasonable approximation of their fair value.

An impairment allowance is made for trade receivables. This provision is reviewed regularly in conjunction with a detailed analysis of historic payment profiles and past default experience. When a trade receivable is deemed uncollectible, it is written off against the allowance account.

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

Trade and other payables are not interest bearing and are designated as other financial liabilities. They are recognised at their carrying amount which is deemed to be a reasonable approximation of their fair value.

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. The Group’s Ordinary Shares are classified as equity instruments and are recognised at the proceeds received, net of any direct issue costs. Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

Financial instruments are not used for speculative purposes.

1.15 Current tax Current income tax, including UK income tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the statement of financial position date.

1.16 Deferred tax Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated statement of financial position differs from its tax base, except for differences arising on: ff the initial recognition of goodwill; ff the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and ff investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax assets are recovered.

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either: ff the same taxable Group company; or ff different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

1.17 Provisions Provisions are recognised when the Group has a present obligation, legal or constructive, as a result of a past event, it is probable that the Group will be required to settle that obligation, and a reliable estimate of the amount of the obligation can be made. Provisions are measured at the Directors’ best estimate of the expenditure required to settle the obligation at the period end date, and are discounted to present value where the impact is material. The unwinding of any discount is recognised in finance costs.

Dilapidation provisions are recognised based on Management’s best estimation of costs to make good the Group’s leasehold properties at the end of the lease term.

The Group recognises a restructuring provision when there is a detailed formal plan in place and when it has raised a valid expectation in those affected that it will carry out the restructuring, either by starting to implement the plan or by announcing its main features to those affected. The provision includes only the direct expenditures arising from the restructuring and not those associated with the ongoing activities of the Group.

1.18 Employee benefits: defined contribution benefit scheme The Group operates a defined contribution pension scheme which is a post-employment benefit plan under which the Group pays fixed contributions into a fund. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The pension charge represents the amounts payable by the Group to the fund in respect of the period.

76 Zoopla Property Group Plc Annual Report 2014 1. Accounting policies continued Overview 1.19 Share-based payments The Group provides equity-settled share-based incentive plans whereby Zoopla Property Group Plc allows certain employees of its subsidiary ZPG Limited to acquire its shares via an employee benefit trust. The Group also issues warrants over shares in Zoopla Property Group Plc to a number of the Company’s estate agent members, allowing them to acquire shares in exchange for the estate agent members making their property listings available for inclusion on the Company’s websites.

Equity-settled share-based payments to employees and members are measured at the fair value of the equity instruments at the grant date. The fair value excludes the effect of non-market-based vesting conditions and includes the impact of non-vesting conditions. Details regarding the determination of the fair value of equity-settled share-based payment transactions are set out in Note 21.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company’s estimate of the number of equity instruments that will eventually vest. Strategic report At each statement of financial position date, the Company revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate.

The fair value is measured using a suitable valuation model, including the Black-Scholes valuation model where appropriate. The measurement inputs for each scheme include the share price on the measurement date, exercise price of the instrument, expected volatility (based on a statistical analysis of daily share prices), weighted average expected life of the instruments (based on historical experience and general option behaviour), expected dividend yield, and risk-free interest rates based on government-backed securities. Details of the inputs used under each scheme are set out in Note 21.

Prior to the Group’s Admission to the London Stock Exchange the Group granted rights over shares of ZPG Limited. Following Admission on 23 June 2014 Zoopla Property Group Plc grants rights over its equity instruments to employees and estate agent members of ZPG Limited.

These are accounted for as equity-settled transactions by the Group, recognising the expense within profit and loss for the year and a corresponding Corporate governance credit to equity. Within the Company accounts of Zoopla Property Group Plc equity-settled share options granted directly to a subsidiary are treated as a capital contribution to the subsidiary. The capital contribution is measured by reference to the fair value of the share-based payments charge for the period and is recognised as an increase in the cost of investment with a corresponding credit to equity.

A number of shares are held in Trust in order to settle future exercises of the Group’s share incentive schemes. Details of the trusts are included in Note 21. Shares held in trust are treated as a deduction from equity.

Employer’s national insurance contributions are accrued, where applicable, at a rate of 13.8%. The amount accrued is based on the market value of the shares at 30 September 2014 after deducting the exercise price of the share option.

1.20 Critical accounting judgements and key sources of estimation uncertainty The Group’s Management makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the current Financial statements circumstances. Actual results may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within future periods are discussed below.

Impairment of goodwill and intangibles The Group holds goodwill and intangibles on the statement of financial position in respect of business acquisitions made. Acquired intangibles include acquired domain names and customer relationships. The Group is required to review these assets for impairment. Determining whether goodwill and intangible assets are impaired or whether a reversal of impairment of intangible assets should be recorded requires an estimation of the recoverable value, which represents the higher of fair value and value in use, of the relevant cash-generating unit. The value in use calculation requires Management to estimate the future cash flows expected to arise from the cash-generating unit, discounted using a suitable discount rate to determine if any impairment has occurred. A key area of judgement is deciding the long-term growth rate of the applicable businesses and the discount rate applied to those cash flows.

Share-based payments The Group operates a number of different share-based payment schemes. These are measured at their estimated fair value at the date of grant, calculated using an appropriate option pricing model. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of the number of shares that will eventually vest. The key estimates used in calculating the fair value of the options are the fair value of Company’s shares at the grant date, the discount rate, expected share price volatility, risk-free interest rate, expected dividends, and expected option lives.

In respect of share options granted to employees, the number of options that are expected to vest is based upon estimates of the number of employees that will forfeit their awards through leaving the Group and the likelihood of any non-market-based performance conditions being satisfied. Management regularly performs a true-up of the estimate of the number of shares that are expected to vest; this is dependent on the anticipated number of leavers. Management is also required to make a judgement on the number of warrants expected to vest based on whether or not the estate agent member is expected to meet their contracted requirements over the vesting period.

Zoopla Property Group Plc zpg.co.uk 77 Notes to the financial statements continued

1. Accounting policies continued 1.21 Non-GAAP performance measures In the analysis of the Group’s financial performance certain information disclosed in the financial statements may be prepared on a non-GAAP basis or has been derived from amounts calculated in accordance with IFRS but is not itself an expressly permitted GAAP measure. These measures are reported in line with how financial information is analysed by Management. The Directors’ believe that these non-GAAP measures provide a more appropriate measure of the Group’s underlying business performance. The non-GAAP measures are designed to increase comparability of the Group’s financial performance year-on-year. However, these measures may not be comparable with non-GAAP measures adopted by other companies. The key non-GAAP measures presented by the Group are: ff Adjusted EBITDA – which is defined as operating profit after adding back depreciation and amortisation, share-based payments and exceptional items (Note 3). ff Adjusted basic EPS – which is defined as profit for the year excluding exceptional items divided by the weighted average number of shares in issue for the period (Note 11).

2. Business and geographical segments The Board of Directors has been identified as the Group’s chief operating decision maker. The monthly reporting pack provided to the Board to enable assessment of the performance of the business has been used as the basis for determining the Group’s operating segments.

Whilst the chief operating decision maker monitors the performance of the business at a revenue stream level; administrative expenses, finance income and costs, and income tax are all monitored on a centralised basis. Accordingly, there is no profitability information below the Group level and thus there is a single operating segment.

The Group focuses its internal management reporting on the following activities: ff agency revenue, which represents property advertising services to estate agents and lettings agents on the Group’s websites; ff developer revenue, which represents property advertising services to new home developers on the Group’s websites; and ff other revenue, which predominantly represents overseas property advertising services, display advertising on the Group’s websites and data services.

Assets and liabilities are also managed on a centralised basis and are not reported to the chief operating decision maker in a disaggregated format.

All material revenues are generated from within the UK.

The following table analyses the Group’s revenues as described above:

2014 2013 £000 £000

Agency 62,986 51,613 Developer 8,547 5,719 Other 8,697 7,166

Total revenue 80,230 64,498

3. Adjusted EBITDA Adjusted EBITDA is used by Management as a key measure to monitor the Group’s business and the Directors believe it should be disclosed on the face of the income statement to assist in the understanding of the Group’s underlying financial performance.

The Group defines EBITDA as profit or loss for the period before income tax expense or income, finance income, finance costs, and depreciation and amortisation. Adjusted EBITDA is arrived at by making adjustments for costs and profits which Management believe to be exceptional in nature by virtue of their size or incidence. Such items would include costs associated with business combinations, one-off gains and losses on disposal, and similar items of a non-recurring nature together with reorganisation costs and similar charges. This is further adjusted for share-based payment expenses which are comprised of charges relating to (i) warrants issued to certain of the Group’s members in order to establish a critical mass of property listings on the Group’s platform; and (ii) employee incentive plans which are aimed at retaining staff and aligning employee objectives with those of the Group. The Directors consider that excluding these non-cash charges in arriving at adjusted EBITDA gives a more appropriate measure of the Group’s underlying financial performance.

78 Zoopla Property Group Plc Annual Report 2014 3. Adjusted EBITDA continued Overview The table below presents a reconciliation of profit for the period to adjusted EBITDA for the periods shown: 2014 2013 £000 £000

Profit for the year 21,077 22,330 Income tax expense 7,592 5,957 Finance income (202) (325) Depreciation and amortisation 1,658 1,373 Share-based payments (Note 21) 3,910 98 Exceptional items (IPO costs) 5,579 — Strategic report

Adjusted EBITDA 39,614 29,433

4. Operating profit 2014 2013 £000 £000

Operating profit is stated after charging: Depreciation of property, plant and equipment 153 132 Amortisation of intangible assets 1,505 1,241

Loss on disposal of property, plant and equipment — 23 Corporate governance Operating lease rentals: – Land and buildings 428 324 – Other 304 89 Share-based payments (Note 21) 3,910 98

Amortisation charges on the Group’s intangible assets are recognised within the administrative expenses line item in the consolidated statement of comprehensive income.

5. Auditor’s remuneration

2014 2013 Financial statements £000 £000

Fees payable to the Group’s auditor and its associates: – for the audit of Zoopla Property Group Plc and the consolidated financial statements 30 — – for the audit of subsidiaries of Zoopla Property Group Plc1 85 59

Total audit fees 115 59

Fees payable to the Group’s auditor and its associates for other services to the Group: – Services related to corporate finance transactions (including IPO services in 2014) 678 —

Total non-audit fees 678 —

1 The prior year audit fee of £59,000 includes fees associated with the audit of the consolidated financial statements of the previously existing Group.

6. Employee costs 2014 2013 £000 £000

Staff costs (including Directors) comprise: Wages and salaries 11,210 8,640 Social security costs 1,371 975 Defined contribution pension cost 178 84 Share-based payments (Note 21) 806 75

13,565 9,774

Zoopla Property Group Plc zpg.co.uk 79 Notes to the financial statements continued

7. Executive Directors’ remuneration 2014 2013 £000 £000

Salary, benefits and bonus 802 453 Defined contribution pension cost 49 31

851 484

In respect of the highest paid Director: Salary, benefits and bonus 463 325 Defined contribution pension cost 33 31

496 356

Both Executive Directors are members of the Group’s defined contribution pension plan (2013: both).

Further information about the remuneration of individual Directors is provided in the audited part of the Directors’ remuneration report on pages 38 to 61.

8. Director and employee numbers The average monthly number of Directors, and employees in administration and Management, during the period was:

2014 2013 Number Number

Administration 205 163 Management 12 9

217 172

9. Income tax expense 2014 2013 £000 £000

Current tax Current period 8,076 2,132 Adjustment in respect of prior periods (235) (215)

Total current tax 7,841 1,917

Deferred tax Origination and reversal of temporary differences (280) 4,023 Adjustment in respect of prior periods 4 (60) Effect of change in UK corporation tax rate 27 77

Total deferred tax (249) 4,040

Total income tax expense 7,592 5,957

Corporation tax is calculated at 22.0% (2013: 23.5%) of the taxable profit for the year.

A reduction in the standard rate of corporation tax from 24% to 23% was effective from 1 April 2013. The Finance Act 2013 provides for a further reduction in the standard rate of tax from 23% to 21% effective from 1 April 2014 and to 20% effective from 1 April 2015. This change was substantively enacted on 2 July 2013, which was before the statement of financial position date. These reduced rates have been reflected in the calculation of deferred tax as they were substantively enacted at the statement of financial position date.

80 Zoopla Property Group Plc Annual Report 2014 9. Income tax expense continued Overview The charge for the period can be reconciled to the profit in the statement of comprehensive income as follows:

2014 2013 £000 £000

Profit before tax 28,669 28,287

Current corporation tax rate of 22.0% (2013: 23.5%) 6,307 6,647 Non-deductible expenses 1,584 43 Adjustments in respect of prior periods (231) (275) Utilisation of tax losses not previously recognised (63) (405) Tax credit on exercise of share options (32) — Strategic report Effect of change in UK corporation tax rate 27 77 Recognition of deferred tax assets not previously recognised — (130)

Total income tax expense 7,592 5,957

In addition to the amount charged to profit and loss, the following amounts relating to tax have been recognised directly in equity:

2014 2013 £000 £000

Current tax Corporate governance Tax credit on exercise of share options 459 — Deferred tax Deferred tax asset arising on share options 722 —

Total income tax recognised directly in equity 1,181 —

10. Dividends 2014 1 2013 1 £000 £000

Special dividend of 2.2 pence per Ordinary Share paid on 13 June 2014 8,986 — Financial statements Interim dividend for 2014 of 3.5 pence per Ordinary Share paid on 10 April 2014 14,294 — Final dividend for 2013 of 3.0 pence per Ordinary Share paid on 24 October 2013 12,248 — Interim dividend for 2013 of 2.5 pence per Ordinary Share paid on 12 April 2013 — 10,158

Total dividends paid in the year 35,528 10,158

1 Dividends paid were declared on shares over the Group’s previous parent ZPG Limited. The dividend per share amounts disclosed above have been stated as if the 10 for one share exchange set out in Note 20 occurred at the beginning of the comparative period.

During the year the Group paid £35.5 million in dividends to shareholders. Additionally, the Directors propose a final dividend for 2014 of 1.1 pence per share (2013: 2.5 pence per share) resulting in a final proposed dividend of £4,599,000 (2013: £10,158,000). The dividend is subject to approval at the Group’s AGM on 12 February 2015. The final dividend proposed has not been included as a liability at the statement of financial position date.

There are no tax consequences of future dividend payments.

Zoopla Property Group Plc zpg.co.uk 81 Notes to the financial statements continued

11. Earnings per share 2014 2013 £000 £000

Earnings for the purposes of basic and diluted earnings per share, being profit for the year 21,077 22,330 Exceptional items (Note 3) 5,579 —

Adjusted earnings for the year 26,656 22,330

Number of shares Weighted average number of Ordinary Shares 410,953,217 410,694,460 Dilutive effect of share options and warrants 5,011,672 2,420,350

Dilutive earnings per share denominator 415,964,889 413,114,810

Basic and diluted earnings per share Basic earnings per share (pence per share) 5.1 5.4 Diluted (earnings per share (pence per share) 5.1 5.4

Adjusted earnings per share Adjusted basic earnings per share (pence per share) 6.5 5.4 Adjusted diluted earnings per share (pence per share) 6.4 5.4

The nil-cost options granted under the Group’s Long Term Incentive Plan, as disclosed in Note 21, are not considered dilutive for 2014. The 2013 weighted average number of shares has been stated as if the Group reorganisation set out in Note 20 had occurred at the beginning of the comparative period.

12. Property, plant and equipment Fixtures Computer Leasehold and fittings equipment improvements Total £000 £000 £000 £000

Cost At 1 October 2013 109 184 33 326 Additions 185 212 1,107 1,504 Disposals (85) (37) (33) (155)

At 30 September 2014 209 359 1,107 1,675

At 1 October 2012 102 206 33 341 Additions 7 78 — 85 Disposals — (100) — (100)

At 30 September 2013 109 184 33 326

Accumulated depreciation At 1 October 2013 91 96 33 220 Charge for the year 29 67 57 153 Disposals (85) (37) (33) (155)

At 30 September 2014 35 126 57 218

At 1 October 2012 80 54 31 165 Charge for the year 11 119 2 132 Disposals — (77) — (77)

At 30 September 2013 91 96 33 220

Net book value

At 30 September 2014 174 233 1,050 1,457

At 30 September 2013 18 88 — 106

82 Zoopla Property Group Plc Annual Report 2014 13. Investment in subsidiaries Overview Details of the Group’s subsidiaries at 30 September 2014 are shown below. Other than ZPG Limited all subsidiaries were dormant as at 30 September 2014. ZPG Limited is the only direct subsidiary of Zoopla Property Group Plc. All other entities are wholly owned subsidiaries of ZPG Limited.

Ownership and voting interest Name Country of incorporation at 30 September 2014

ZPG Limited (formerly Zoopla Property Group Limited) United Kingdom 100% Propertyfinder Group Limited United Kingdom 100% Propertyfinder Publications Limited United Kingdom 100% Sherlock Publications Limited United Kingdom 100% Strategic report Propertyfinder.co.uk Limited United Kingdom 100% Propertyfinder Holdings Limited United Kingdom 100% Internet Property Finder Limited United Kingdom 100% Vizzihome Limited United Kingdom 100% Active (during accounting year) Trinity Mirror Digital Property Limited1 United Kingdom 100%

1 On 31 December 2013, the assets of Trinity Mirror Digital Property Limited were transferred to ZPG Limited and the business ceased to trade.

14. Acquisitions Corporate governance The following table provides a reconciliation of the amounts included in the consolidated statement of cash flows:

2014 2013 £000 £000

Cash consideration — (4,025) Deferred consideration paid (1,497) (672) Cash and cash equivalents acquired with subsidiaries — 201

Cash outflow on acquisition of subsidiaries (1,497) 4,496

As at 30 September 2014 all deferred consideration relating to prior period acquisitions had been paid in full. Financial statements

15. Intangible assets Customer Domain Computer Goodwill relationships names software Database Total £000 £000 £000 £000 £000 £000

Cost At 1 October 2013 70,793 6,091 1,451 — 229 78,564 Additions — — — 162 — 162

At 30 September 2014 70,793 6,091 1,451 162 229 78,726

Amortisation At 1 October 2013 — 1,260 573 — 194 2,027 Charge for the year — 1,218 274 — 13 1,505

At 30 September 2014 — 2,478 847 — 207 3,532

Net book value

At 30 September 2014 70,793 3,613 604 162 22 75,194

At 30 September 2013 70,793 3,829 780 — 35 73,040

Zoopla Property Group Plc zpg.co.uk 83 Notes to the financial statements continued

16. Trade and other receivables 2014 2013 £000 £000

Trade receivables 2,839 2,127 Prepayments 2,077 1,912 Accrued income 525 742 Unpaid premium on share capital1 — 9,563 Other receivables 446 122

5,887 14,466

Current 5,887 4,903 Non-current — 9,563

5,887 14,466

1 The decrease in unpaid premium on share capital represents the paying up of all amounts outstanding on the Group’s A Ordinary Shares prior to the IPO. The Directors consider that the carrying value of trade and other receivables is approximate to their fair value. The carrying value also represents the maximum credit exposure. Details of the Group’s exposure to credit risk are given in Note 23.

17. Trade and other payables 2014 2013 £000 £000

Trade payables 4,676 3,043 Other payables 281 2,599 Accruals 3,406 2,666 Deferred income 155 17 Other taxation and social security payments 2,900 1,815

11,418 10,140

The Directors consider that the carrying value of trade and other payables is approximate to their fair value. Details of the Group’s exposure to liquidity risk are given in Note 23.

18. Provisions The movement in provisions can be analysed as follows: Dilapidation Redundancy provisions provisions Total £000 £000 £000

At 1 October 2013 201 350 551 Charged in the period 575 — 575 Utilised in the period (142) (350) (492)

At 30 September 2014 634 — 634

Current — — — Non-current 634 — 634

At 1 October 2012 59 — 59 Charged in the period 142 350 551

At 30 September 2013 201 350 551

Current 142 350 492 Non-current 59 — 59

The dilapidation provisions relate to Management’s best estimation of costs to make good the Group’s leasehold properties at the end of the lease term. The charge in the period represents expected exit costs in 2024 on completion of the Company’s new property lease. The redundancy provisions related to post-acquisition restructuring costs in respect of the acquisition of Trinity Mirror Digital Property Limited.

84 Zoopla Property Group Plc Annual Report 2014 19. Deferred tax Overview Property, plant and equipment Other and computer Share-based intangible software payments assets Total £000 £000 £000 £000

Deferred tax asset/(liability) at 1 October 2013 514 — (1,048) (534) (Charge)/credit to profit or loss (188) 173 264 249 Credit to equity — 722 — 722

Deferred tax asset/(liability) at 30 September 2014 326 895 (784) 437 Strategic report Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so.

The following is an analysis of the deferred tax balances (after offset) for financial reporting purposes:

2014 2013 £000 £000

Deferred tax liabilities (784) (1,048) Deferred tax assets 1,221 514

437 (534)

20. Equity Corporate governance Share capital 2014 2013 £000 £000

Shares classified as capital Authorised 418,092,702 (2013: 41,886,900) shares of £0.001 (2013: £0.0001) each 418 4

Called up share capital – allotted and fully paid 418,092,702 (2013: 38,267,250) Ordinary Shares of £0.001 (2013: £0.0001) each 418 4 Financial statements The share capital of the Group is represented by the share capital of the parent company, Zoopla Property Group Plc. This company was incorporated on 22 April 2014 to act as the holding company of the Group. Prior to this the share capital of the Group was represented by the share capital of the previous parent, ZPG Limited. ZPG Limited had 38,267,250 Ordinary Shares, 2,550,000 A Ordinary Shares and 65,876 B deferred shares in issue at 30 September 2013. The A Ordinary Shares and B deferred shares were re-designated/cancelled in advance of the Group restructuring as set out below.

Rights and restrictions attaching to shares Ordinary Shares The Ordinary Shares carry one vote per share and rights to dividends.

Share transactions In October 2013 the Group’s previous parent, ZPG Limited, cancelled its B deferred shares with £nil value.

On 22 April 2014 Zoopla Property Group Plc was incorporated under its previous name, Project ZigZag Limited, through the issue of 50,000 redeemable preference shares to its ultimate controlling party, DMG Media Investments Limited. On 16 May 2014 the Company registered as a public limited company and changed its name to Zoopla Property Group Plc.

On 23 June 2014 in accordance with the pre-IPO reorganisation deed the following steps took place:

ZPG Limited issued 694,800 Ordinary Shares of £0.0001 each for cash consideration of £1.7 million to the Appleby Employee Benefit Trust in order to meet any future exercises of the Employee Share Options Scheme (Note 21).

The Company issued 2,273 Ordinary Shares of £0.0001 to DMG Media Investments Limited at nominal value. The consideration was left outstanding pursuant to the terms of an undertaking to pay.

All of the A Ordinary Shares in issue were re-designated on a like for like basis as Ordinary Shares.

Zoopla Property Group Plc zpg.co.uk 85 Notes to the financial statements continued

20. Equity continued Share transactions continued Each of the shareholders of the Group’s previous parent, ZPG Limited, took part in a share-for-share exchange whereby they were issued 10 new shares in Zoopla Property Group Plc in exchange for one ZPG Limited share. At the date of restructuring there were 41,764,246 ZPG Limited shares in issue. This resulted in the issue of 417,642,460 shares in Zoopla Property Group Plc and the insertion of Zoopla Property Group Plc at the top of the Group as the new parent company. The redeemable preference shares were redeemed by Zoopla Property Group Plc in advance of the share-for-share exchange.

During the period after the IPO Zoopla Property Group Plc issued 427,515 Ordinary Shares of £0.001 each in relation to the grant of employee share options under the Savings Incentive Plan (SIP). These shares are held in the Yorkshire Building Society Share Incentive Plan Trust. Furthermore, 22,727 Ordinary Shares of £0.001 each were issued for consideration of £50,000 to one of the Directors.

Other reserves – Merger reserve The opening merger reserve was created in May 2012 from the premium on shares issued for the acquisition of The Digital Property Group Limited. The increase during the period reflects the impact of the Group’s reorganisation prior to the IPO.

Other reserves – EBT share reserve This represents shares in issue that are held by within the Employee Benefit Trust for the purpose of settling the Group’s obligations under the Employee Share Option Scheme.

21. Share-based payments The Group operates a number of share-based incentive schemes for both its employees and certain estate agent members. The Group recognised a total share-based payments charge of £3.9 million for 2014 (2013: £0.1 million) as set out below. The charge included a one-off, accelerated charge of £3.0 million in respect of warrants exercised on the Group’s Admission to the London Stock Exchange.

2014 2013 £000 £000

Employee Share Option Scheme (i) 587 74 Long Term Incentive Plan (ii) 86 — Share Incentive Plan (iii) 105 — One-off warrant charge on IPO (iv) 2,985 — Other warrant charges (iv) 119 24 National insurance contributions payable in respect of eligible share-based payment schemes (v) 28 —

Total share-based payments charge 3,910 98

As set out in Note 20 share-based payment schemes were settled in shares of the Group’s previous parent, ZPG Limited, prior to the IPO. Subsequent to the IPO all share-based payment schemes are settled in shares of the Group’s ultimate parent at 30 September 2014, Zoopla Property Group Plc. The information disclosed in this note has been presented as though the options were exercisable over shares in Zoopla Property Group Plc throughout all periods presented. i) Employee Share Option Scheme The Group operates a share-based incentive scheme for all employees under an approved plan until 31 May 2012 and an unapproved plan thereafter.

Options are exercisable at a price determined by the Board on the date of each grant. The options vest in instalments over four years. Options remain valid for 10 years from the date of grant, after which the options lapse. Options are forfeited if the employee leaves the Group before the options vest.

The Group recognised a charge of £587,000 (2013: £74,000) in respect of options under this scheme. Of these, £nil (2013: £nil) were cash settled.

Details of options under the scheme outstanding at 30 September 2014 are set out below:

2014 2013

Weighted average Weighted average Number exercise price Number exercise price ’000 £ ’000 £

Outstanding options at the beginning of the year 5,198 0.19 3,212 0.06 Granted during the year 2,550 0.35 2,393 0.35 Exercised during the year (1,338) 0.13 (352) 0.06 Forfeited during the year (717) 0.32 (55) 0.06

Outstanding options at the end of the year 5,693 0.26 5,198 0.19

86 Zoopla Property Group Plc Annual Report 2014 21. Share-based payments continued Overview i) Employee Share Option Scheme continued The options outstanding at 30 September 2014 had a weighted average exercise price of £0.26 (2013: £0.19) and a weighted average remaining contractual life of 8.1 years (2013: 6.9 years). The range of exercise prices for outstanding options was £0.06 to £0.35 (2013: £0.06 to £0.35).

The number of options exercisable as at 30 September 2014 was 1,458,000 (2013:117,000).

The following information is relevant in the determination of the fair value of options granted and shares issued during the year under the equity-settled share-based payment arrangements operated by the Group:

Options granted Options granted October 2012 January 2014 and April 2013

Weighted average share price at grant date £1.75 £0.35 Strategic report Exercise price £0.35 £0.35 Expected volatility 31.3% 30.3% Expected life 4 years 4 years Expected dividend yield 3.1% nil% Risk-free interest rate 1.9% 0.5%

The Employee Share Option Scheme will continue to operate until all shares vest or lapse, or the scheme is otherwise cancelled. There will be no future grants under this scheme. 5,908,116 shares are held in trust in order to meet any future obligation.

ii) Long Term Incentive Plan Corporate governance On Admission to the London Stock Exchange the Group introduced a Long Term Incentive Plan. On 1 August 2014 1,236,402 nil-cost options were granted under the scheme. The vesting of the options is subject to both adjusted earnings per share (EPS) and total shareholder return (TSR) performance criteria. The TSR performance criteria is measured from the date of IPO; however, the EPS performance period commences on 1 October 2014 and the options will vest, subject to meeting the performance criteria, on 1 October 2017. A full valuation of the scheme will be completed by the Group in the first half of the 2015 financial year. Valuation assumptions will be disclosed in the March 2015 interim accounts. A charge of £86,000 has been recognised in 2014 (2013: £nil). Of these, £nil (2013: £nil) were cash settled. iii) Share Incentive Plan (SIP) The SIP is an all-employee share ownership plan which has been designed to meet the requirements of Schedule 2 of the Income Tax (Earnings and Pensions) Act 2003 so that shares can be provided to UK employees under the SIP in a tax-efficient manner. Under the scheme employees may be awarded Free Shares and/or offered the opportunity to purchase Partnership Shares with one Free Matching Share for each Partnership Share purchased. Financial statements

Free Shares On Admission employees were each issued Free Shares to the value of £2,500 determined by reference to the offer price of £2.20. There are no performance conditions attached to the issue; however, the shares are subject to forfeiture should the employee terminate their employment within three years of the issue. The charge is therefore recognised on a straight-line basis over the three year period.

246,729 shares were issued to the Share Incentive Plan Trust in order to meet the future obligation. At 30 September 2014 17,055 shares had lapsed due to leavers. The number of options outstanding at 30 September 2014 was therefore 229,674.

The charge under this scheme for the year ended 30 September 2014 was £36,000 (2013: £nil). Of these, £nil (2013: £nil) were cash settled.

Partnership Shares and Partnership Matching Shares At Admission, employees were given the option to purchase up to £1,800 of shares in the period ending 5 April 2015 paid for through pre-tax payroll deductions from the date of Admission. On the purchase of each Partnership Share at the end of the tax period eligible employees are entitled to a Free Matching Share on a one-for-one ratio. The Free Matching Shares have no performance or service conditions. A charge equal to the fair value of the Matching Shares will be recognised in the income statement over the nine month vesting period.

180,786 shares were issued to the Share Incentive Plan Trust in order to meet the future obligation.

The charge under this scheme for the year ended 30 September 2014 was £69,000 (2013: £nil). Of these, £nil (2013: £nil) were cash settled.

Zoopla Property Group Plc zpg.co.uk 87 Notes to the financial statements continued

21. Share-based payments continued iv) Warrants In January 2014 the Group’s previous parent, ZPG Limited, entered into agreements with a number of estate agent members. Pursuant to these agreements, which had an initial term of five years, the estate agents agreed to pay annual fees for advertising on the Group’s websites and committed to making their property listings available on the Group’s websites. In exchange ZPG Limited agreed to issue a fixed number of warrants over Ordinary Shares. The warrants are issued annually over the five year term of the agreements upon payment of the final instalment of each year’s annual fees. The warrants are exercisable at a price equal to the nominal value of each share (£0.001) and vest in instalments over five years. Warrants expire five years after the date of issue. Some or all of the warrants are forfeited if service agreements are terminated before the end of the term and the vesting for certain agreements is accelerated in the event of an exit event. Similar agreements were entered into in March 2011. The March 2011 warrants vest after five years and expire 90 days after the exercise date. Warrants over shares in ZPG Limited converted to warrants over shares in Zoopla Property Group Plc as part of the Group restructuring set out in Note 20.

The total charge recognised for the year ended 30 September 2014 in respect of warrants was £3,104,000 (2013: £24,000). Of these, £nil (2013: £nil) were cash settled. The warrant charge for 2014 related to warrants granted in January 2014 and March 2011 (2013: March 2011) and included an accelerated charge of £3.0 million in respect of certain warrants exercised as a result of the Group’s Admission to the London Stock Exchange.

2014 2013

Weighted Weighted average average Number exercise price Number exercise price ’000 £ ’000 £

Outstanding warrants at the beginning of the year 343 0.001 343 0.001 Granted during the year 1,859 0.001 — 0.001 Exercised during the year (2,202) 0.001 — 0.001

Outstanding warrants at the end of the year — — 343 0.001

The number of warrants outstanding at 30 September 2014 was nil (2013: 343,000). All outstanding warrants were excised prior to the IPO and no warrants have been issued since that date. The warrants outstanding at 30 September 2013 had a weighted average exercise price of £0.001, and a weighted average remaining contractual life of 2.4 years.

The number of warrants issuable over shares in Zoopla Property Group Plc under existing member contracts is 1,427,000. The warrants will be issued at an exercise price of £0.001 over the lives of the contracts.

The following information is relevant in the determination of the fair value of the warrants granted:

Warrants granted Warrants granted January 2014 March 2011

Share price at grant date £1.75 £0.35 Exercise price £0.001 £0.001 Expected volatility 34.8% 46.9% Expected life 5 years 5 years Expected dividend yield 3.1% nil% Risk-free interest rate 1.9% 1.4%

The volatility assumption, measured at the standard deviation of expected share price returns, is based on a statistical analysis of daily share prices over the last five years for a Group of comparable companies. v) National insurance contributions (NIC) National insurance contributions are payable in respect of certain share-based payment schemes. These contributions are treated as cash-settled transactions and are accrued at a rate of 13.8%. The total NIC charge relating to share-based payment schemes was £28,000 (2013: £nil).

88 Zoopla Property Group Plc Annual Report 2014 21. Share-based payments continued Overview vi) The Employee Benefit Trust (EBT) and Share Incentive Plan Trust (SIP Trust) Employee Benefit Trust (EBT) The Group has established an Employee Benefit Trust which is constituted by a trust deed entered into between the Company and Appleby Trust (Jersey) Limited. The Trust held 5,908,116 Ordinary Shares in Zoopla Property Group Plc at 30 September 2014 (2013: nil). These shares are held to satisfy future exercises under the Employee Share Option Scheme. Shares are allocated by the Trust when the awards are exercised. The Trust waives its right to any dividends. The market value of the shares held in the Trust at 30 September 2014 was £13,978,602 (2013: £nil). The cost of the shares has been deducted from equity.

Share Incentive Plan Trust (SIP Trust) The Group has established a Share Incentive Plan Trust which is constituted by a trust deed which was entered into between Zoopla Property Group Plc and Yorkshire Building Society. The Trust owns 427,515 Ordinary Shares in Zoopla Property Group Plc at 30 September 2014 (2013: nil).

These shares are held to satisfy future Free Share and Partnership Share exercises. Shares are allocated by the Trust when the awards are exercised. Strategic report Dividends paid on shares held in the Trust are passed to the employees when the shares are allocated. The market value of the shares held in the Trust at 30 September 2014 was £1,011,500 (2013: £nil). The cost of the shares has been deducted from equity.

22. Related party transactions a) Key management personnel The Chairman and the Directors are considered to be the key management personnel of the Group. Details of Executive Directors’ remuneration are given in Note 7. Details of the Chairman’s and Non-Executive Directors’ remuneration can be found in the Directors’ remuneration report on pages 38 to 61. b) Other Group companies Details of transactions with subsidiaries are outlined in the Company’s financial statements on page 96. Transactions with other Group companies have been eliminated on consolidation. Corporate governance c) Other related parties Other related party transactions are as follows:

Daily Mail and General Trust plc (DMGT) owned 52% of the share capital of ZPG Limited at the beginning of the period. The shares in ZPG Limited converted to shares in Zoopla Property Group Plc on a 10 for one basis as part of the Group restructuring. At 30 September 2014 DMGT owned 31.8% of the share capital of Zoopla Property Group Plc.

A&N Media Finance Services Limited (ANMFS), a subsidiary of DMGT, supplied various shared services to ZPG Limited for which the fee was £89,000 for the year (2013: £115,000). The balance outstanding at 30 September 2014 was £nil (2013: £25,000).

Northcliffe Media Limited, a subsidiary of DMGT, previously provided advertising services and estate agency listing fees to ZPG Limited. The fee earned for these services was £nil for the year (2013: £142,000). The balance outstanding at 30 September 2014 was £nil (2013: £nil). Financial statements Local World Limited, an associate of DMGT, provided advertising and estate agency listing services to ZPG Limited. Fees paid for these services amounted to £61,000 for the year to 30 September 2014 (2013: £530,000). The balance outstanding at 30 September 2014 was £nil (2013: £nil).

23. Financial instruments The Group is exposed to the following risks from financial instruments: ff credit risk; ff liquidity risk; and ff market risk.

Credit risk Credit risk is the risk of financial loss to the Group if a customer or bank (“counterparty”) fails to meet its contractual obligations, resulting in financial loss to the Group. The exposure to credit risk is influenced by the individual characteristics of each counterparty.

The Group’s most significant customer accounts for £598,000 (2013: £279,000) of the trade receivables carrying amount. The Group’s customer base is large, so there is no significant concentration of credit risk. There were only three customers at 30 September 2014 with individual debtors balances in excess of 5% of the total gross trade receivables balance (2013: one). The Directors therefore consider the credit risk from trade receivables to be low.

Standard credit terms range from 15 to 30 days from the date of invoice. The Group reserves the right to charge interest on overdue receivables, although it does not hold collateral over any trade receivable balances. The Group’s trade receivables are stated net of an impairment allowance. This provision is reviewed regularly in conjunction with a detailed analysis of historic payment profiles and past default experience.

Zoopla Property Group Plc zpg.co.uk 89 Notes to the financial statements continued

23. Financial instruments continued Credit risk continued The ageing of trade receivables at the period end was as follows:

2014 2013

Gross Impairment Gross Impairment £000 £000 £000 £000

0–30 days 2,033 — 1,274 — 31–60 days 927 (191) 749 (114) 61–90 days 125 (104) 208 (102) 91+ days 299 (250) 403 (291)

Total 3,384 (545) 2,634 (507)

Movement in the allowance for impairment of trade receivables:

2014 2013 £000 £000

At the beginning of the period (507) (475) Movement in the allowance in the period (38) (32)

Balance at end of the period (545) (507)

Impairment losses recognised (358) (444)

In determining the recoverability of a trade receivable, Management considers any change in the credit quality of the trade receivable from the date credit was granted up to the period end date.

The credit risk associated with bank and deposit balances is mitigated by the use of banks with good credit ratings.

The Group’s maximum exposure to credit risk at the period end was equal to the carrying amount of financial assets recorded in the financial statements.

Liquidity risk Liquidity risk refers to the ability of the Group to meet the obligations associated with its financial liabilities that are settled in cash as they fall due. Management regularly reviews performance against budgets and forecasts to ensure sufficient cash funds are available to meet its contractual obligations.

The Group’s revenue streams are largely subscription based, which results in a regular level of cash conversion, allowing it to effectively service working capital requirements. Furthermore, the Group is debt free and cash generative and therefore it has adequate funds in place for any unforeseen events.

The following tables detail the Group’s remaining contractual maturities for undiscounted financial liabilities, including interest:

Carrying Contractual Less than amount cash flows 3 months At 30 September 2014 £000 £000 £000

Trade payables (4,676) (4,676) (4,599)

(4,676) (4,676) (4,599)

Carrying Contractual Less than amount cash flows 3 months At 30 September 2013 £000 £000 £000

Trade payables (3,043) (3,043) (3,043)

(3,043) (3,043) (3,043)

90 Zoopla Property Group Plc Annual Report 2014 23. Financial instruments continued Overview Market risk Market risk is the risk that changes in foreign exchange and interest rates will affect the income and financial management of the Group. The objective of Management is to ascertain and optimise the return on risk. The Group is not exposed to any significant currency risk. There are no interest bearing financial liabilities and there is a minimal interest rate risk on cash and bank balances.

At 30 September 2014 the Group held total cash and bank balances of £31.0 million (30 September 2013: £28.1 million).

Sensitivity analysis Due to the Group’s limited exposure to interest rate and exchange rate risks, the Directors are comfortable that any sensitivity to fluctuations in interest or exchange rates would not have a material impact on the results of the Group.

24. Operating lease commitments At the statement of financial position date, the Group had outstanding commitments for future minimum lease payments under non-cancellable Strategic report operating leases, which fall due as follows:

2014 2013 £000 £000

Within one year 258 339 In the second to fifth year inclusive 2,757 129 After five years 3,059 —

6,074 468 Corporate governance 25. Subsequent events There have been no reportable subsequent events between 30 September 2014 and the date of signing of this report.

26. Ultimate controlling party The Directors are of the opinion that there was no ultimate controlling party in either period presented. Financial statements

Zoopla Property Group Plc zpg.co.uk 91 Company statement of financial position As at 30 September 2014

2014 Notes £000

Assets Non-current assets Investment in subsidiary 4 91,332

Current assets Prepayments 12 Other receivables 55 Cash and cash equivalents 100

167

Total assets 91,499

Liabilities Current liabilities Accruals 37 Amounts payable to other Group companies 348

Total liabilities 385

Net assets 91,114

Equity Share capital 5 418 Share premium reserve 50 Merger reserve 5 90,495 Retained earnings 151

Total equity 91,114

The financial statements of Zoopla Property Group Plc (company number 09005884) were approved and authorised for issue by the Board of Directors and were signed on its behalf by:

A Chesterman S Morana Director Director 24 November 2014 24 November 2014

92 Zoopla Property Group Plc Annual Report 2014 Company statement of cash flows For the period from incorporation on 22 April 2014 to 30 September 2014

2014 Overview £000

Cash flows from operating activities Operating loss (318)

Operating cash flow before changes in working capital (318) Increase in trade and other receivables (67) Increase in trade and other payables 385

Net cash inflows from operating activities — Strategic report Net cash from investing activities —

Cash flows from financing activities Proceeds on issue of shares 50 Equity contributions received 50

Net cash flows from financing activities 100

Net increase in cash and cash equivalents 100 Cash and cash equivalents at beginning of period — Corporate governance Cash and cash equivalents at end of period 100 Financial statements

Zoopla Property Group Plc zpg.co.uk 93 Company statement of changes in equity For the period from incorporation on 22 April 2014 to 30 September 2014

Share Share premium Merger Retained Total capital reserve reserve earnings equity £000 £000 £000 £000 £000

Profit and total comprehensive income for the period — — — (318) (318) Transactions with owners recorded directly in equity: Issue of Ordinary Shares 418 50 90,495 — 90,963 Issue of preference shares 50 — — — 50 Equity contributions received — — — 50 50 Redemption of preference shares (50) — — — (50) Share-based payments — — — 419 419

30 September 2014 418 50 90,495 151 91,114

94 Zoopla Property Group Plc Annual Report 2014 Notes to the Company financial statements

1. Accounting policies and basis of accounting Overview The Directors have applied International Financial Reporting Standards (IFRS) as adopted by the European Union.

The accounting policies and the financial risk management policies, where relevant to the Company, are consistent with those of the consolidated Group as set out in Notes 1 and 23 to the consolidated financial statements respectively.

Income statement The Company has taken advantage of the exemption available under section 408 of the Companies Act 2006 and has not presented an income statement. The loss for the period ended 30 September 2014 was £318,000.

2. Auditor’s remuneration The Company incurred a cost of £30,000 for statutory audit services for the period ended 30 September 2014. This cost was paid on behalf of the Zoopla Property Group Plc by the Company’s subsidiary, ZPG Limited. Strategic report

3. Employee costs and Directors’ remuneration The Company has no employees other than the Directors of the Company. Remuneration paid to the Directors was accounted for and paid by the Group’s trading entity, ZPG Limited. Details of Directors’ remuneration are set out in the Directors’ remuneration report on pages 38 to 61 of the Annual Report.

4. Investments in subsidiaries The investment in subsidiaries balance of £91,332,000 represents the Company’s 100% shareholding in ZPG Limited, acquired as part of the restructuring prior to Admission on 23 June 2014. On restructuring the Company recognised an investment of £90,913,000 in ZPG Limited, being the value of ZPG Limited’s net assets at the restructuring date. The Company has applied merger accounting in line with the Companies Act 2006 to record the restructuring. A merger reserve of £90,495,000 was created on acquisition. The balance of £418,000 represents the nominal value of the shares issued on Admission. Corporate governance Subsequent to the restructuring the Company recognised an increase in the investment in respect of the Group’s share schemes. Consistent with the Group accounting policies outlined in Note 1.19 to the consolidated financial statements, equity-settled share options granted directly to a subsidiary are treated as a capital contribution to the subsidiary. The capital contribution is measured by reference to the consolidated share-based payments charge and is recognised as an increase in the cost of investment with a corresponding credit to retained earnings. The credit to retained earnings does not make up part of distributable reserves.

2014 £000

Initial investment in ZPG Limited at restructuring 90,913 Share-based payments – capital contribution 419 Financial statements Balance as at 30 September 2014 91,332

5. Equity Share capital Details of the Company’s share capital are included in Note 20 to the consolidated financial statements.

Merger reserve The merger reserve represents the difference between the investment recognised on restructuring in ZPG Limited of £90.9 million and the value of the shares issued of £0.4 million.

6. Financial instruments The IFRS 7 Financial Instruments disclosures, where relevant to the Company, are consistent with those of the Group as set out in Note 23 to the consolidated financial statements. The Company has an intercompany payable to its subsidiary, ZPG Limited, of £348,000 on the statement of financial position at 30 September 2014. The carrying value of the balance is considered approximate to its fair value.

Zoopla Property Group Plc zpg.co.uk 95 Notes to the Company financial statements continued

7. Related parties a) Key management personnel There are no employees of the Company. The Directors are employed and/or remunerated by ZPG Limited. There were no transactions during the year between the Directors and the Company other than the issue of shares and share options as outlined in the Directors’ remuneration report on pages 38 to 61. b) Subsidiaries In June 2014 the Group was restructured on Admission to the London Stock exchange. Each of the shareholders of ZPG Limited took part in a share-for-share exchange whereby they were issued with 10 new shares in Zoopla Property Group Plc with a nominal value of £0.001 in exchange for one ZPG Limited share. This resulted in the insertion of Zoopla Property Group Plc at the top of the Group as the new parent company. For the year ended 30 September 2014 the Company entered into transactions with its subsidiary as set out below.

Transactions with subsidiaries During the year ZPG Limited settled bills to the value of £348,000 (2013: £nil) on behalf of Zoopla Property Group Plc in order to settle costs incurred on restructuring and the Company’s audit fee. Other than the transaction outlined above, the Company issues shares to employees and estate agent members of its subsidiary as part of the Group’s share-based payment schemes as set out in Note 21 to the consolidated financial statements. There have been no other transactions with the Company’s subsidiary during the year.

Year end balances with subsidiaries The balance of £348,000 transferred from ZPG Limited during the year is still outstanding at 30 September 2014. This amount will be settled on receipt of any dividend from ZPG Limited. No interest is payable on the balance.

There were no other related party transactions in the period. c) Other related parties There were no transactions between the Company and any other related parties.

8. Subsequent events There have been no reportable subsequent events between 30 September 2014 and the date of signing of this report.

9. Ultimate controlling party The Directors are of the opinion that there was no ultimate controlling party in either period presented.

96 Zoopla Property Group Plc Annual Report 2014 Shareholder information

Contacts Financial Calendar 2014 Overview Chief Executive Officer 2014 full year results 25 November 2014 Alex Chesterman Record date for final dividend 5 December 2014 Chief Financial Officer Interim Management statement 12 February 2015 Stephen Morana Annual General Meeting 12 February 2015 Company Secretary Ned Staple Payment date for final dividend 23 February 2015 Half year results May 2015 Head of Communications Lawrence Hall Payment date for interim dividend July 2015

Website:

Shareholder enquiries Strategic report www.zpg.co.uk The Company’s registrar is Equiniti. They will be pleased to deal with any questions regarding Registered Office your shareholding or dividends. Please notify them of your change of address or other personal Zoopla Property Group Plc information. Their address details are: Harlequin Building Equiniti 65 Southwark Street Aspect House London SE1 0HR Spencer Road Lancing Corporate advisers West Sussex BN99 6DA Auditor Deloitte LLP Equiniti is a trading name of Equiniti Limited.

Remuneration advisers Equiniti helpline: 0871 384 2030 (calls cost 8 pence per minute plus network extras) Corporate governance PricewaterhouseCoopers LLP (Overseas: +44 121 415 7047) Brokers Lines open 8.30am to 5.30pm, Monday to Friday (excluding public holidays). Credit Suisse Securities (Europe) Limited Shareholders are able to manage their shareholding online and facilities included electronic Jefferies Hoare Govett communications, account enquiries, amendment of address and dividend mandate instructions. Solicitors Freshfields Bruckhaus Deringer LLP

Registrar Equiniti Limited Financial statements

Note on forward-looking statements This report includes statements related to our future business, financial ff a change in the competition within the industry in which we operate; performance and future events or developments that may constitute ff a change, due to various factors which may include the forward-looking statements. These forward-looking statements can be macroeconomic conditions in which we operate, in the level identified by the use of forward-looking terminology, including the terms of transactions in the UK residential property market; ‘believes’, ‘estimates’, ‘anticipates’, ‘plans’, ‘projects’, ‘expects’, ‘intends’, ‘may’, ‘will’ or ‘should’ or, in each case, their negative, or other variations ff a change in technological developments; or comparable terminology. These forward-looking statements include ff the loss of any of our important commercial relationships; and matters that are not historical facts. They appear throughout this report and include statements relating to our beliefs, intentions or current ff any increase in litigation or disputes expectations concerning a number of matters including our results of We caution that the foregoing list of factors may not contain all of the liquidity, the effect of our financial performance on our share price, financial material factors that are important to you and you should not place condition, prospects, growth and expansion, strategies and the industry undue reliance on these forward-looking statements, which speak only in which we operate. All forward-looking statements are based upon as of the date of this Annual Report. We undertake no obligation, and information available to us on the date of this Annual Report. While we are not under any obligation, to update or keep current the information believe that the forward-looking statements are reasonable, we caution contained in this Annual Report, whether as a result of new information, that it is very difficult to predict the impact of known or unknown future events or otherwise. factors or to anticipate all factors that could affect our actual results.

As such, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or developments to differ materially from those expressed or implied by such forward-looking statements. These factors include, but are not limited to:

Zoopla Property Group Plc zpg.co.uk 97 Zoopla Property Group Plc Annual Report 2014 Zoopla Property Group Plc’s commitment to environmental issues is reflected commitment to environmental Plc’s Group Zoopla Property silk which is an FSC®in this Annual Report which has been printed on Core was printed by Park Communications using This document certified paper. the impact of printing which minimises print technology, their environmental based inks have been used and 99% of all Vegetable on the environment. landfill. is diverted from dry waste associated with this production Park Communications is a CarbonNeutral® printer. Zoopla Property Group Plc Group Zoopla Property Harlequin Building 65 Southwark Street London SE1 0HR www.zpg.co.uk