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Zoopla Property Group PlcAnnual Report 2014

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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

Overview

Introduces Zoopla Property Group and presents the year’s performance highlights and the Chairman’s statement.

02 Zoopla Property Group at a glance

04 Chairman’s statement

Strategic report

Provides an overview of the Company’s business model, strategy, performance and future prospects.

06 Chief Executive Officer’s statement

08 Our strategy and objectives

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

22 Our people and corporate responsibility

Corporate governance

Includes reports from the Directors and each of the Board committees.

24 Chairman’s introduction to governance

26 Board of Directors

28 Corporate governance statement

32 Audit Committee report

36 Nomination Committee report

38 Directors’ remuneration report

62 Directors’ report (other disclosures)

65 Statement of Directors’ responsibilities

Financial statements

Presents the financial statements with their accompanying notes.

66 Independent auditor’s report

69 Consolidated statement of comprehensive income

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

In this report:


01Zoopla Property Group Plc zpg.co.uk

Overview

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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

29.2mTotal leads (2013: 26.1m)

513.5mTotal site visits (2013: 386.4m)

19,663Members at 30 September (2013: 18,676)

Our journey so far: a story of innovation and differentiation.

f Zoopla.co.uk launched

f Launch of Automated Value Model (AVM)

f Winner of UK’s Most Promising Internet Company (First Tuesday)

f Winner of UK’s Best Property Website (Web User)

f Acquired: BytePlay

f Winner of 100 Most Innovative UK Businesses (Smarta)

f Launch of ZooplaPro

f Listed as one of the Top UK Tech Companies (Guardian)

f Acquired: PropertyFinder.com HotProperty.co.uk ThinkProperty.com

f #2 property portal by unique visitors in under two years

f Launch of property listings

f Winner of Best UK Property Portal (Daily Mail Awards)

f Winner of Best Real Estate Website (Website of the Year Awards)

f Traffic up 33% to 513.5 million (2013: 386.4 million)

f Number of members increased 5% to 19,663 (2013: 18,676)

f Number of leads increased by 12% to 29.2 million (2013: 26.1 million)

f Successful IPO in June of this year

f Continued focus on mobile, which now drives 57% of the Group’s traffic

f Up-sell of depth products to members driving ARPA

f SmartNewHomes acquisition fully embedded with 49% increase in developer revenue

f Zoopla Ltd founded

2007

0.3m leads pm

2008 2009 2010

0.4m visits pm 2m visits pm 5m visits pm

02 Zoopla Property Group Plc Annual Report 2014

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 excludes exceptional items.3 The Directors believe that the adjusted figures give a more appropriate measure

of the Group’s underlying financial performance.

27,962

29,433

Financial highlights

Revenue (£000)

£80,230+24%

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80,230

64,498

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Adjusted EBITDA1,3 (£000)

£39,614+35%

39,614

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Operating profit (£000)

£28,467+2%

28,467

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Adjusted profit for the year2,3 (£000)

£26,656+19%

22,330

f Acquired: UpMyStreet.com PrimeLocation.com FindaProperty.com Globrix.com

f Acquisition and integration of DPG created Zoopla Property Group Ltd

f Acquired: HousePrices.co.uk

f Winner of Best Property Portal: Western Europe (Property Portal Awards)

f Winner of Innovative Business of the Year (Fast Growth Business Awards)

f Listed as one of the Top 100 UK Tech Companies (Daily Telegraph)

f Acquired: SmartNewHomes.com HomesOverseas.co.uk

f Winner of Best Brand (Sunday Times Tech Track 2013 Awards)

f Winner of Company of the Year (Growing Business Awards 2013)

f Winner of Europe’s Most Exciting Investor Backed Company of the Year (Investor Allstars Awards 2013)

f Successful IPO on the London Stock Exchange

f Rated an “Outstanding” place to work by Best Companies

f Launch of commercial property channel

2.2m leads pm 2.4m leads pm1.0m leads pm0.6m leads pm

2011 2012 2013 2014

10m visits pm 16m visits pm 35m visits pm 43m visits pm

Membership evolution (number)

2014 (19,663, +5%)

Agency (16,373, +3%) Developer (2,715, +7%) Overseas (575, +106%)

2013 (18,676)

Agency (15,858) Developer (2,539) Overseas (279)

Average revenue per advertiser (ARPA) (£)

2013 (£264)

Agency (£275) Developer (£206) Overseas (£143)

2014 (£312, +18%)

Agency (£323, +17%) Developer (£270, +31%) Overseas (£139, -2.8%)

26,656


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Zoopla Property Group Plc zpg.co.uk

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

“ Our brand strength and reputation has grown strongly, supported by a successful marketing campaign in the past year…”

Chairman’s statementMike Evans, Chairman

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 have continued to make significant long-term investment. The Group remains well funded and debt free.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 products, providing a compelling user experience. We have evolved with the demands of the market to develop highly effective mobile and tablet platforms. Our sites, products and platforms have attracted 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.

DividendThe 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 structureThe 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.


Financial performanceAdjusted EBITDA was up 35% to £39.6 million (2013: £29.4 million) and adjusted earnings per share (EPS), which excludes exceptional items, was up 20% to 6.5 pence per share (2013: 5.4 pence per share). The Group continues to generate high levels of cash and as at 30 September 2014 the cash position was £31.0 million (2013: £28.1 million).

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 the highest standards of corporate governance and instilling a sound 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

from Alex Chesterman and his team ensured the Group was able to successfully complete the IPO whilst continuing to grow the business. I am confident that the Zoopla Property Group team will execute the Group’s strategy effectively, showing diligence throughout.

The Board and I would like to thank all of our users, members and employees for their commitment to the Group over the past 12 months. It has been a challenging year but also a transformative and successful one and I look forward to the future with confidence.

Mike EvansChairman



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Chief Executive Officer’s statementAlex Chesterman, Chief Executive Officer

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 fulfilling that goal. However, there remain some exciting opportunities and interesting challenges ahead.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 properties and research the property market. User visits to our websites and mobile applications increased by 33% over the year, with mobile devices now accounting for over 57% of total user visits, as consumers 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.

“ During the last 12 months we have grown our user audience to record levels as more consumers than ever have used our platform…”

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


Our strategyOur goal is very simply to provide the most useful online resources to UK property consumers and to be the most effective partner to our advertising members. Over the past few years we have made a lot of progress towards achieving that goal having built a market-leading digital property proposition for our users and members.

We help our users to both research the property market and also to find their next home through our huge inventory of available properties and best in class search tools and associated data. We provide unrivalled exposure for our members to a unique audience of online property consumers via the various brands that we own and power.

Our core brands, Zoopla and PrimeLocation, attract millions of unique users each month allowing us to deliver exceptional value to our members whilst delivering strong revenue and EBITDA growth to our shareholders. We own a number of other leading brands, including SmartNewHomes and HomesOverseas, which allow us to target niche audiences within the property market as well as powering the online property search function for some of the UK’s leading third party brands including The Times, the Daily Telegraph, the Evening Standard, Barclays, Halifax and many more.

During the last 12 months we have invested heavily in our brands in terms of both product and marketing. We continue to innovate and have launched a number of new features to increase engagement on our platforms, including commute time search, a new commercial property channel and enhanced features within ZooplaPro including MarketView, PropertyWatch and new Comparables Reports. We have also broadened our marketing channels to now include TV, radio, cinema, print and outdoor campaigns.

Over the coming months we plan to invest further in growing our user engagement and awareness, ensuring that we deliver even more value to our members as we develop new products and services to monetise. With most consumers shifting from print to online as their preferred method of property search, we are very well positioned to capture a rising share of the growing digital property spend as it further transitions away from traditional print media.

Business modelConsumers engage with our brands when searching or researching the property market. We display over 1 million properties advertised by our members available for sale or rent along with other useful data and information to help our users make smarter property decisions.

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 of services included in each. In addition, our members buy additional

products to enhance their brand prominence, such as Area Sponsorship and Appraisal Booster, or to enhance exposure and drive additional enquiries for their property listings, such as Premium Listings and Featured Properties.

We benefit from strong network effects where the more consumers who use our platform, the more attractive it is for our members to advertise and purchase enhanced marketing products. Almost 90% of estate agents, letting agents and new home developers throughout the UK advertise on our platform to benefit from the high level of exposure and enquiries that we deliver. We also generate additional revenues from third party advertising and partnerships.

Looking forwardThere are significant opportunities that we are very excited about for our business as we go forward. Whilst we remain behind Rightmove currently in terms of audience and revenues, we have closed the gap in terms of brand awareness and the number of advertising members and the gaps in other key performance indicators (KPIs) continue to narrow.

There are also challenges ahead. The next 12 months will see further competition in the form of Agents’ Mutual, an agent-led portal which plans to launch in early 2015 and which proposes to exclude its members from advertising with either us or Rightmove. We will ensure that we demonstrate effectively to our members and consumers the value we provide in the property search process. We believe that ultimately it is in the commercial interests of our members to advertise with us given the unique scale and nature of our audience and the exceptional value that we deliver. Further uncertainties surrounding the upcoming election, interest rates and policy issues such as the proposed mansion tax will also challenge the overall housing market recovery but we are confident that we are well placed to deal with these.

We believe we have built a business in seven short years that combines a market-leading consumer proposition with an unequalled value-for-money member proposition. We look forward to addressing the opportunities and challenges ahead and remain convinced that the long-term winners will be those that offer the best service for consumers and members alike.

Finally, we continue to attract and retain the best talent in the market and continue to build a team that I am extremely proud of and that stands us in great stead as we go forward.

Alex ChestermanChief Executive Officer



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Overview

1Grow brand awareness and user audienceThe Group plans to continue to grow its brand awareness through advertising, public relations, digital marketing and social media campaigns and recognises the importance of increasing its organic and unpaid search traffic.

The Group has achieved significant growth in brand awareness for its core brand, Zoopla, over the last few years. The prompted brand awareness of the Zoopla brand amongst all UK adults has grown from 26% to 77% between November 2010 and October 2014 according to brand surveys conducted by Harris Interactive.

2Extend inventoryThe Group aims to attract the remaining UK property professionals (around 10% of market) that are not currently members by communicating the value of the Group’s products, its niche brand strategy and the benefits of accessing the Group’s significant and unique user audience.

Extending the listings inventory to cover the whole of the market would improve user experience and increase the Group’s value to its users and members.

The Group has extensive field-based and telesales teams that work on building relationships with property professionals who are prospective members.

The Group focuses on the following core strategies in order to deliver on its goal:

3Develop additional products The Group aims to be the most effective partner to property professionals in the UK.

The Group’s strategy is to develop products that assist members as much as possible to attract new clients and generate leads.

The Group’s products, such as ZooplaPro and MarketView, have been developed to provide members with information on their marketing performance and their competitive position in a local area.

4Increase user engagementThe Group intends to further increase its user engagement levels by continuing its consumer-centric approach to product development.

The Group also generates unique property related content that is useful for users as a means to increase engagement. The Group will continue to add more data and content to its platform and develop new features and tools to further improve user experience and deepen engagement with the Group’s websites and mobile applications, thereby improving the volume and quality of leads delivered to members.

5Develop opportunities in related marketsThe Group is pursuing additional opportunities in related markets:

f Further products and services for members. The Group seeks to offer its members additional services, including other marketing and data services.

f Complete ownership of the property journey. The Group plans to develop further services to engage users with the Group’s websites and mobile applications at different points in their property journey.

f 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.

f 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.

Our strategy and objectives


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

More investment/ marketing spend

More visitors/ more leads

More members/ more inventory

Higher ARPA/ more revenue

In turn, users are further drawn to the Group’s 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.

Our business modelHow we deliver it



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What sets us apart

Our key differentiators.

1Multi-brand strategyBroader consumer audience

2Long-term customer relationshipsBusiness model stability

3Exclusive distribution partnershipsMaximising customer reach

4Proven track record of innovationConsumer and industry champion

5Automated valuation modelMarket transparency and efficiency

6Proprietary property datasetUnique insights/opportunities

28m+property pages

9.5m+homes with user data

19m+sold prices

6.5m+archive listings

Core brands

Valuation estimates

Niche brands

HeatMaps SmartMaps

c.2,300 branches representing 12% of the market


Valuation models


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Zoopla Property Group Plc zpg.co.uk

Our brands at a glance

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

Segment Brands

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.

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.


Our exclusive partnerships

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

Our exclusive partners

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, The Daily Telegraph, The Independent, the Evening Standard, Homes & Property, AOL, MSN, Homes24 and more.

We continue to develop our exclusive listings distribution partnerships. Visit our website for the latest: www.zpg.co.uk



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

UK residential property marketResidential property is one of the largest sectors of the UK economy and is currently undergoing a transformation: technology is changing the way users search for homes and the way that professionals market their listings and build their businesses. The 2008 downturn and subsequent partial recovery in the UK property market have served to accentuate this transformation as users are seeking more comprehensive information and professionals are seeking more effective marketing channels.

Finding a home is often one of the most important decisions a consumer will make, especially given that a property is likely to be one of their most valuable assets. As a result, users spend a significant amount of time seeking information related to the property search process, such as available properties, historic and current house prices, neighbourhood information and financing options. As users increasingly conduct their property search and research online, property professionals are naturally shifting their marketing budgets towards online advertising to reach these users. Equally, for home sellers, getting the best price for one of their most valuable assets is critical and therefore ensuring that the property professional they engage to conduct this process is marketing their home widely online is essential. Property portals play a vital role in allowing home sellers to reach the widest audience.

The market downturn saw the average number of residential property sales transactions in England and Wales fall from an average of approximately 1,185,000 transactions per year from 2000 to 2007 to 665,000 transactions per year from 2008 to 2013, reaching a low in 2009 relative to historical averages. Since then, annual residential property sales transaction volumes have started to recover, with an increase of 17.6% in 2013 as compared with 2012, reflecting a perceived improvement in UK economic conditions. This recovery continued into 2014, but the second half of the year has seen a slowdown in activity with potential buyers mindful of continuing economic uncertainty and the upcoming general election.

Similarly, mortgage approval rates, which experienced a rapid decline in 2008 to reach a recent historical low in 2009, have since increased in 2013 and the first part of 2014 to the highest level since the start of the financial crisis (source: Bank of England). According to Halifax, mortgage payments as a percentage of income were 27% in 2013, the lowest level since 1999. There are a number of current UK government initiatives aimed at increasing home ownership and transaction volumes in the UK, including the NewBuy Guarantee Scheme, launched in March 2012, aimed at increasing mortgage availability for newly built properties; the Help-to-Buy equity loan scheme, launched in April 2013, a three year initiative aimed at stimulating home sales; and the Funding for Lending Scheme, aimed at increasing overall property lending. As a result of the historically low Bank of England base rate, mortgage interest rates remain extremely competitive, although the potential threat of a base rate increase looms on the horizon.

The FCA implemented the Mortgage Market Review at the end of April 2014, which requires lenders to carry out more detailed checks on applicants before granting mortgages. Its purpose is to ensure the mortgage market is sustainable and works better for consumers.

Structural shift towards digital advertising In 2007, the pre-crisis property advertising market was worth in the region of £700 million with approximately 85% being spent on print. In 2014, total advertising spend on property advertising remains below pre-crisis levels at c.£400 million; however, a clear shift towards digital advertising can be seen with c.50% now being spent on digital advertising. This print-to-digital shift reflects consumer search preferences as UK adults are spending more time online than ever before, aided by the proliferation of smartphones.

Property portals have transformed consumer and agent behaviour with over 90% of home movers starting their searches online. For the user, 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.

Our market

Annual sales transactions volumes (000)England and Wales

00 01 02 03 04 05 06 07 08 09 10 11 12 13Source: Land Registry for England and Wales.

780663

654

656

616

621

1,226

1,2791,027

1,184

1,186

1,297

1,194

1,087

697

547

359 383 383 389 399427 441 452 465

Property classified ad spend (£m)

07 08 09 10 11 12 13 14E 15E 16E 17E Source: Enders analysis (2007–2013). Consensus of selected brokers (2014–2017).

Print Digital


Our KPIs

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

Revenue (£m)

£80.2m +24%

The Group generates revenue from three different sources: agency revenue, developer revenue and other revenue which includes overseas, advertising and data services.

13 14

80.2

64.5

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39.6

29.4

Adjusted EBITDA (£m)

£39.6m +35%

Adjusted EBITDA excludes share-based payments and exceptional items.

13 14

312264

ARPA (£)

£312 +18%

Average revenue per advertiser (ARPA) is the revenue from member subscriptions in a given month divided by the total number of members during the month, measured as a monthly average over the period.

13 14

6.5

5.4

Adjusted basic EPS (pence per share)

6.5p +20%

Adjusted basic EPS is calculated as adjusted profit for the year divided by the weighted average number of shares in issue for the period. Adjusted profit for the year is defined as profit for the year excluding exceptional items.

13 14

29.226.1

Leads (m)

29.2m +12%

Leads are enquiries made to the Group’s members initiated either through the telephone number or email form displayed on the Group’s websites and mobile applications.

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513.5

386.4

Visits (m)

513.5m +33%

Visits comprise individual sessions on the Group’s websites or mobile applications by users for the period indicated as measured by Google Analytics.

13 14

1.11.1

Number of listings (m)

1.1m No change

Number of listings represents the total number of properties being advertised for sale or to rent at the end of the period.

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19,66318,676

Members (number)

19,663 +5%

Members represent the total number of UK estate and lettings agency branches, new home developers and overseas agency branches paying subscription fees to advertise their listings at the end of period.



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Description Impact Management and mitigationAssessment of risk year-on-year

Macroeconomic conditionsThe Group derives most of its revenues from the UK residential property market and is thus dependent on the market and macroeconomic conditions in the UK.

If the UK economy contracts or if interest rates increase, average property prices, the number of mortgage approvals, the volume of transactions in the UK housing market and estate agents’ and lettings agents’ marketing budgets could decrease, which could reduce the number of agents who subscribe for the Group’s services or the amount they spend on services.

f Regularly reviewing market conditions and indicators to assess whether any action is required to reduce costs or vary the products and services.

f Maintaining a balance between different streams of revenues and profits in order to provide protection against volatility within property sales markets.

f Developing revenue streams in related/adjacent markets.

New entrant to the market – Agents’ MutualAgents’ Mutual was founded to create a new industry-owned property portal and requires its members to list on a maximum of only one other property portal.

If Agents’ Mutual successfully launches in 2015 with its proposed restrictive advertising provision, a portion of the Group’s existing members may terminate their subscriptions with the Group.

Agents’ Mutual’s launch may also result in fewer consumers using the Group’s websites, a loss of advertisers and a loss of market share for the Group.

f Communicating to members the value proposition of advertising on Group websites.

f Offering attractive and competitive subscription packages to members.

f Increasing consumer brand awareness through marketing.

f Increasing revenue from channels that are not susceptible to Agents’ Mutual (new homes, commercial, overseas, online agents, data services).

Changing online property landscapeThe Group participates in a competitive market with new technology developments, which may impact its ability to offer the best service to customers and members.

New or existing competitors may develop new methods of working to provide services and products in the property market that are more attractive to the Group’s consumers and members, resulting in fewer consumers using the Group’s websites or mobile applications, a loss of members and advertisers and a loss of market share.

f Increasing user engagement levels by continuing a consumer-centric approach to product development to extend value to members.

f Continually monitoring and undertaking regular reviews of competitor strategies that are built into the regular business planning cycle.

f Maintaining organisational flexibility, allowing fast responses to new business opportunities or threats.

Retention and recruitmentSuccess depends on the continued service and performance of the Group’s Senior Management Team and other key employees. Skilled development, technical, operating, sales and marketing personnel are also essential.

Competition for qualified employees is intense and the loss of a number of qualified employees to competitors, new entrants or otherwise, or an inability to attract, retain and motivate additional highly skilled employees required for the expansion of the Group’s activities could materially adversely impact the Group’s business, results of operations, financial condition or prospects.

f Investing in succession planning and improving learning and development, giving opportunities for employees to upgrade skills.

f Providing competitive compensation packages to staff, including a blend of short and long-term incentives for managers.

f Maintaining the culture of the Group, which generates significant staff loyalty within senior and mid-management.

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

IT systemsThe Group’s IT systems are interdependent and a failure in one system or a security breach may disrupt the efficiency and functioning of the Group’s operations.

Any failure of the internet and/or mobile network infrastructure generally, or any failure of existing or future computer or communication systems or software systems, or any security breach could impair the processing and storage of data and the day-to-day management of the Group’s business.

f Operating extensive disaster recovery and business continuity contingency plans.

f Regular security testing of the IT systems and platforms.

f Ensuring that all systems that the Group relies on are up to date and the most secure version.

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 relating to the Group and its sector are summarised in the table opposite. The table also shows how these risks are managed by the Group and how the Group plans to mitigate these risks.

The risk factors described opposite are not an exhaustive list or an explanation of all risks. Additional risks and uncertainties relating to the Group, including those that are not currently known to the Group or that the Group currently deems immaterial, may individually or cumulatively also have a material adverse effect on the Group’s business, results of operations and/or financial condition.

Remained the same

Risk increased

Risk decreased


Description Impact Management and mitigationAssessment of risk year-on-year

Macroeconomic conditionsThe Group derives most of its revenues from the UK residential property market and is thus dependent on the market and macroeconomic conditions in the UK.

If the UK economy contracts or if interest rates increase, average property prices, the number of mortgage approvals, the volume of transactions in the UK housing market and estate agents’ and lettings agents’ marketing budgets could decrease, which could reduce the number of agents who subscribe for the Group’s services or the amount they spend on services.

f Regularly reviewing market conditions and indicators to assess whether any action is required to reduce costs or vary the products and services.

f Maintaining a balance between different streams of revenues and profits in order to provide protection against volatility within property sales markets.

f Developing revenue streams in related/adjacent markets.

New entrant to the market – Agents’ MutualAgents’ Mutual was founded to create a new industry-owned property portal and requires its members to list on a maximum of only one other property portal.

If Agents’ Mutual successfully launches in 2015 with its proposed restrictive advertising provision, a portion of the Group’s existing members may terminate their subscriptions with the Group.

Agents’ Mutual’s launch may also result in fewer consumers using the Group’s websites, a loss of advertisers and a loss of market share for the Group.

f Communicating to members the value proposition of advertising on Group websites.

f Offering attractive and competitive subscription packages to members.

f Increasing consumer brand awareness through marketing.

f Increasing revenue from channels that are not susceptible to Agents’ Mutual (new homes, commercial, overseas, online agents, data services).

Changing online property landscapeThe Group participates in a competitive market with new technology developments, which may impact its ability to offer the best service to customers and members.

New or existing competitors may develop new methods of working to provide services and products in the property market that are more attractive to the Group’s consumers and members, resulting in fewer consumers using the Group’s websites or mobile applications, a loss of members and advertisers and a loss of market share.

f Increasing user engagement levels by continuing a consumer-centric approach to product development to extend value to members.

f Continually monitoring and undertaking regular reviews of competitor strategies that are built into the regular business planning cycle.

f Maintaining organisational flexibility, allowing fast responses to new business opportunities or threats.

Retention and recruitmentSuccess depends on the continued service and performance of the Group’s Senior Management Team and other key employees. Skilled development, technical, operating, sales and marketing personnel are also essential.

Competition for qualified employees is intense and the loss of a number of qualified employees to competitors, new entrants or otherwise, or an inability to attract, retain and motivate additional highly skilled employees required for the expansion of the Group’s activities could materially adversely impact the Group’s business, results of operations, financial condition or prospects.

f Investing in succession planning and improving learning and development, giving opportunities for employees to upgrade skills.

f Providing competitive compensation packages to staff, including a blend of short and long-term incentives for managers.

f Maintaining the culture of the Group, which generates significant staff loyalty within senior and mid-management.

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

IT systemsThe Group’s IT systems are interdependent and a failure in one system or a security breach may disrupt the efficiency and functioning of the Group’s operations.

Any failure of the internet and/or mobile network infrastructure generally, or any failure of existing or future computer or communication systems or software systems, or any security breach could impair the processing and storage of data and the day-to-day management of the Group’s business.

f Operating extensive disaster recovery and business continuity contingency plans.

f Regular security testing of the IT systems and platforms.

f Ensuring that all systems that the Group relies on are up to date and the most secure version.



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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 both marketing and product development in line with the long-term plans laid out to shareholders.

The Group has performed strongly in 2014 with significant revenue and adjusted EBITDA growth of 24% and 35% respectively. The Group also continues to generate high levels of cash, with £31.0 million generated from operating activities net of tax during the year. This has led to the Group being able to return £35.5 million of cash in the form of dividends to shareholders during the year. In addition the Directors have proposed the payment of a final dividend for 2014 of £4.6 million.

2014 financial performance

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

2014 £000

2013 £000

Change%

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.

Financial review

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

“ The Group has performed strongly in 2014 with significant revenue and adjusted EBITDA growth of 24% and 35% respectively.”


Revenue2014 £000

2013 £000

Change%

Agency 62,986 51,613 +22%

Developer 8,547 5,719 +49%

Other 8,697 7,166 +21%

Total revenue 80,230 64,498 +24%

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 and developer revenue, which increased by 22% and 49% respectively. The 49% growth in developer revenue reflects the success of our niche brand strategy, especially the strong performance of our SmartNewHomes brand, and our continued focus on improving the value we can offer to our developer members. The growth in agency and developer revenue is attributable to both an increase in the number of the Group’s subscribing members as well as an overall increase in ARPA. The increase in ARPA has been driven by:

f estate agents upgrading their subscription and buying additional and new innovative products, such as MarketView;

f developers upgrading their subscriptions and increasing spend on targeted email campaigns; and

f value generated for the Group’s members through continued growth in both the number of site visits and leads generated.

Finally, the Group continues to develop its other areas of income with other revenues increasing by 21%. Other income includes third party advertising, developing and growing our overseas property offering and helping customers from the broader property spectrum by leveraging the largest proprietary property database to offer tailored data services. Going forward the Group will also look to develop and grow its commercial property offering.

Staff costs and other operating expensesThe Group has continued to invest in both its people and brands. Employee costs increased by £3.1 million to £12.8 million, compared to £9.7 million in the prior year, as a result of increased headcount to support the continued growth of the business and the transition to a plc. The Group also continued its investment in marketing and product development as it seeks to further build brand awareness, improve the experience for both website and mobile users and provide value for its members. Other operating costs were up 10% on the prior year, driven principally by the Group’s continued marketing campaign. Total administrative expenses disclosed within the income statement include certain items that are excluded for the purposes of calculating the Group’s adjusted EBITDA. These items are discussed in more detail opposite.

2014 £000

2013 £000

Staff costs 12,759 9,699

Other operating costs 27,857 25,366

Underlying administrative expenses 40,616 35,065

Costs excluded from adjusted EBITDA 11,147 1,471

Total administrative expenses 51,763 36,536

Adjusted EBITDAThe Group considers adjusted EBITDA as a more appropriate measure of the Group’s underlying business performance. Adjusted EBITDA is defined as operating profit after adding back depreciation and amortisation, share-based payments and exceptional items.

The Group’s adjusted EBITDA grew by 35% from £29.4 million in 2013 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 gearing has led to the increase in adjusted EBITDA exceeding the Group’s revenue growth and an improvement of c.370 bps in the Group’s overall margins. The increase has been offset slightly by the Group’s continued investment in both its people and brands.

2014 £000

2013 £000

Operating profit 28,467 27,962

Costs excluded from adjusted EBITDA:

Depreciation and amortisation 1,658 1,373

Share-based payments 3,910 98

Exceptional items 5,579 —

Adjusted EBITDA 39,614 29,433

Adjusted EBITDA margin 49.4% 45.6%

Depreciation and amortisationDepreciation and amortisation increased by 21% compared with 2013 as a result of capital expenditure during the year. The increase has arisen primarily on depreciation of leasehold improvements recognised on the Group’s relocation to a new head office during the year and a full year’s amortisation of intangible assets arising on the acquisition of Trinity Digital Property Limited in August 2013.

£80.2mTotal revenue (2013: £64.5m)

£39.6mAdjusted EBITDA (2013: £29.4m)

£26.7mAdjusted profit (2013: £22.3m)

513.5mNumber of visits (2013: 386.4m)

19,663Number of members (2013: 18,676)

1.1mNumber of listings (2013: 1.1m)



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Adjusted EBITDA continuedShare-based paymentsDuring 2014 the Group continued to operate its Employee Share Option Scheme and offer warrants for long-term agreements with certain members. New options and warrants were granted under the schemes in January 2014. In addition, certain member warrants became exercisable in full as a result of the IPO on 23 June 2014, which led to the recognition of £3.0 million in accelerated share-based payments charges during the year. Subsequent to the IPO the Group implemented a number of new Director and employee incentive plans, full details of which are included within the Directors’ remuneration report on pages 38 to 61 and Note 21 to the financial statements.

Exceptional itemsExceptional items of £5.6 million for 2014 represent one-off IPO costs.

Income tax expenseThe 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 due to non-deductible expenses incurred in relation to the IPO and the one-off warrant acceleration discussed above.

Profit for the yearAdjusted profit for the year, which includes £3.0 million of one-off accelerated warrant charges, has increased by 19% from £22.3 million in 2013 to £26.7 million in 2014. The increase was driven by the growth in both revenue and EBITDA. Statutory profit for the year decreased by 6% to £21.1 million due to £5.6 million of IPO expenses incurred in 2014.

Earnings per share (EPS)The Group has presented its first EPS figures as a listed company. Comparatives for the 2013 financial year have been stated to reflect the impact of the Group restructuring prior to Admission. Adjusted basic EPS, which includes the £3.0 million one-off warrant charge but strips out the impact of exceptional items, has increased by 20% to 6.5 pence per share in line with the Group’s increase in revenue and adjusted profit for the year. Excluding the impact of the £3.0 million one-off warrant charge, adjusted EPS was 7.2 pence per share, an increase of 33% on the prior year. The slight decrease in basic earnings per share from 5.4 pence per share to 5.1 pence per share was due to exceptional expenses incurred on the IPO.

Summary statement of financial position

2014 £000

2013 £000

Goodwill and intangibles 75,194 76,537

PPE 1,457 106

Unpaid share capital — 9,563

Cash and cash equivalents 31,025 28,123

Working capital1 (5,531) (5,237)

Provisions (634) (551)

Tax assets and liabilities (3,340) (1,254)

Equity 98,171 107,287

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

The Group’s statement of financial position remains strong at 30 September 2014 as the business continues to generate high levels of cash. Net assets at 30 September 2014 were £98.2 million. The overall fall in equity compared to the prior year can be attributed to the £35.5 million of cash returned to shareholders in the form of dividends paid during the year. The Group ended the year with £31.0 million of cash and cash equivalents and net current assets of £21.7 million.

Summary statement of cash flows

2014 £000

2013 £000

Net cash inflows from operating activities 30,981 31,580

Acquisition of subsidiaries, net of cash received (1,497) (4,496)

Acquisition of PPE and intangibles (1,091) (106)

Interest received 202 325

Net cash flows used in investing activities (2,386) (4,277)

Dividends paid (35,528) (10,158)

Unpaid share capital paid-up 9,563 —

Other financing activities 272 22

Net cash flows used in financing activities (25,693) (10,136)

Net increase in cash and cash equivalents 2,902 17,167

Cash and cash equivalents at end of period 31,025 28,123

Net cash inflows from operating activitiesThe Group continues to see high cash generation with net cash inflows from operating activities of £31.6 million in 2013 and £31.0 million in 2014. The high level of cash generated was primarily driven by the continued growth in both revenue and adjusted EBITDA.

Cash used in investing activitiesThe £1.5 million of cash flows used in acquisitions of subsidiaries during 2014 represents the settlement of deferred consideration payable from acquisitions made in prior periods. The Group also saw a cash outflow in respect of leasehold improvements during the year which related to the relocation of the Group to a new head office.

DividendsDuring the year the Group paid pre-IPO dividends of £35.5 million. The Directors have proposed a final dividend for 2014 of 1.1 pence per share, resulting in a final proposed dividend of £4.6 million. The final dividend represents 43.5% of the Group’s profits excluding share-based payments and exceptional items for the period from 1 June 2014 to 30 September 2014. The 2014 final dividend will be paid on 23 February 2015 to those shareholders on the share register as at 5 December 2014. The final dividend is subject to approval at the Group’s AGM on 12 February 2015.

Financial review continued


Dividends

2014 £000

2013 £000

Special dividend paid on 13 June 2014 8,986 —

Interim dividend for 2014 paid on 10 April 2014 14,294 —

Final dividend for 2013 paid on 24 October 2013 12,248 —

Interim dividend for 2013 paid on 12 April 2013 — 10,158

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

Number of visitsThe Group’s number of site visits increased by 33% to 513.5 million in 2014. This increase was primarily due to:

f the Group’s continued focus on brand building – the Group’s core brand, Zoopla, had 77% prompted brand awareness amongst all adults nationally in October 2014, up from 26% in November 2010 (source: Harris Interactive); and

f the success of the Group’s mobile applications – the proportion of visits via a mobile device (smartphones or tablets) increased from an average of 43% in September 2013 to 57% in September 2014.

Number of leadsThe number of leads generated by the Group has increased 12% to 29.2 million in 2014 as the Group continues to grow its audience and increase the value provided to its members. The Group’s user-centric approach to product development and track record of continually improving and developing its websites and mobile applications has led to enhanced user engagement and therefore higher lead generation.

The number of leads includes over 40,000 individual home sellers who used the ZPG valuation tool to contact local agents about selling their home, equating to around £150 million of potential fees for ZPG members.

Number of membersAs at 30 September 2014, the Group had active subscription contracts with 19,663 members, including 16,373 UK estate and lettings agency branches and 2,715 new home developers, which the Directors believe represents close to 90% of the total number of property professionals in the UK. The Group also had 575 overseas agents, an increase of 106% from September 2013.

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.

2014Number

2013Number

Change%

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%

Number of listingsThe Group’s inventory of property listings correlates directly with the 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 of the UK residential property market and the wider UK economy. Further, the number of listings featured on the Group’s websites and mobile applications is influenced by fluctuations caused by seasonality. The number of listings on the Group’s websites and mobile applications remained relatively stable at 1.1 million throughout 2014.

ARPAThe Group’s ARPA is calculated as the revenue from member subscriptions in a given month divided by the total number of members during the month, measured as a monthly average over the period. Because the Group is committed to maximising the return on marketing investment for members, the Group continues to innovate with new products and solutions and periodically conducts rate reviews to ensure that its subscription pricing reflects the value offered to members. The Group’s average blended ARPA has increased by 18% from £264 per month in 2013 to £312 in 2014. ARPA fluctuates across the different businesses within the Group.

2014£

2013£

Change%

Monthly agent ARPA 323 275 +17%

Monthly developer ARPA 270 206 +31%

Monthly overseas agent ARPA 139 143 -3%

Blended ARPA 312 264 +18%

The increase in agent and developer ARPA is driven by the factors outlined in the revenue section on page 19. Overseas agent ARPA has seen a small decrease in the year as the Group focused on growing overseas members and listings.

Factors affecting the Group’s operationsDetails of the factors affecting the Group’s results of operations, including the UK property market, competitors and the Group’s strategy have been laid out in the remainder of the Strategic report.

Stephen MoranaChief Financial Officer



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

The strong culture of innovation and transparency within the Group has helped us to attract high-calibre personnel, maintain a strong retention rate of key staff and create a workforce that is dedicated to delivering high-quality products and services. We are constantly investing in our people to ensure that this continues. We achieve this through providing the appropriate support needed from the very beginning in the form of a comprehensive induction training programme and we supplement this with continual training through the “Zoopla Property Group Training Academy”. This aspect of learning and development is in addition to the long-term career planning and constant opportunities provided to employees to upgrade and transfer their skills in the workplace. We do not have a specific human rights policy, but we respect human rights and the integrity of individuals (and comply with relevant laws) in the way we run the business.

We hold regular Group-wide meetings to drive communication within the Group and to offer a forum where employees are recognised for their performance in the workplace. This is an opportunity for employees to nominate departments and fellow employees for their outstanding work and for the Group to acknowledge employees’ hard work.

We also offer market competitive benefit packages and carry out regular internal remuneration benchmarking across the business to ensure that our staff are rewarded appropriately. Our comprehensive employee benefits package include more traditional elements such as multiple bonus schemes, life assurance, private health insurance and a private pension scheme. We also listen to our employees and continually adopt innovative suggestions to add to the benefits package, creating a benefits programme designed for our staff needs, with some examples being a “move day benefit” where employees are entitled to one day’s paid leave when they move house, together with John Lewis vouchers, a “birthday off benefit” where employees are entitled to take their birthday off work in addition to their holiday entitlement, and a “help-to-buy scheme” where the Group provides a 12 month interest-free loan 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.

Charitable activityThe Group strives to make a positive difference to charitable causes, encouraging charitable giving by our employees and contributing to employees’ development by supporting their charitable efforts. Under the Group’s payroll giving scheme, employees can donate tax efficiently to a charity directly through their pre-tax salary. The Group then matches donations up to a specific amount.

The Group also donates up to £100 to a registered charity linked to an employee’s personal fundraising activities. Employees may also take one day’s paid leave every year to donate their time to a charity. The Group is a patron supporter of the Prince’s Trust, having been a corporate member since 2012.

The Group donated a total of £94,552 to charity during 2014 (2013: £74,265).

Equal opportunity and diversityThe Group is committed to ensuring that there is equal opportunity and diversity in our employment policies and practices. We believe that recruiting, incentivising and retaining the best talent is key to the Group’s success and that this involves treating everyone equally regardless of their age, sexual orientation, parental responsibilities, disability, race, nationality, ethnic origin, membership of a trade union, religion, belief, gender assignment or gender.

Gender diversityZPG Limited as at 30 September 2014

MaleNumber

FemaleNumber

TotalNumber

Male %

Female %

Directors 8 1 9 89% 11%

Senior Management1 4 4 8 50% 50%

All other employees 119 98 217 55% 45%

Total 131 103 234 56% 44%

1 Senior Management comprises the Group’s Leadership Team.

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

Our people and corporate responsibility


Health and safetyWe are committed to maintaining a safe workplace for our employees. It is therefore our policy that all of the Group’s facilities, products and services comply in all material respects with applicable laws and regulations governing safety and quality.

EnvironmentWe continue to support energy efficiency throughout our business activities and remain conscious of preventing any negative impact we may have on the environment.

As an online property portal, we naturally operate mostly without the need to print out substantial amounts of paper, a practice which we will continue to maintain. Part of our staff work from two floors of an office building and another group of sales staff drive to meet member clients in designated geographies. We believe that our impact on the environment is kept to a minimum. We encourage our staff to take our responsibilities towards protecting the environment seriously with a commitment to recycling in the office and automated lights in all office areas.

Furthermore, the Group operates a “Bike-to-Work” scheme which offers our employees an incentive to travel to and from work in an environmentally friendly way.

Greenhouse gas emissionsSince 1 October 2013 the Companies Act 2006 (Strategic Report 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 compared with other companies of a comparable size in the same sector, the Group’s activities produce a very low impact on the environment.

The Group’s scope 1 and 2 emissions for the year to 30 September 2014 are set out below. Scope 1 emissions relate to the Group’s fleet of vehicles which are used by certain employees for business purposes. Scope 2 emissions relate to the Group’s electricity usage. This information is set out below:

CO2 emissions Emissions per employee

(Tonnes CO2e)

(Tonnes CO2e/number

of employees)

Scope 1 emissions 368 1.7

Scope 2 emissions 154 0.7

Total 522 2.4

We have measured our greenhouse gas emissions using emissions factors from the ‘UK Government conversion factors for Company Reporting’. The period covered is that of the financial year to 30 September 2014. In order to provide an intensity ratio for our emissions disclosure we have calculated our greenhouse gas emissions per employee. The Directors believe that the number of employees is the best indicator of the Company’s size for the purposes of this disclosure. The number of employees used is the average number of full-time employees over the measurement period.

This strategic report was approved by the Board of Directors and was signed on its behalf by:

Alex ChestermanChief Executive Officer24 November 2014



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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 maintain a sound framework for the control and management of the Group. In this report we provide details of that framework. Since the Company listed only recently, it has not been practicable to fully comply with the provisions of the Governance Code; however, we shall endeavour to progress towards full compliance in a reasonable period of time. The key 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 compositionThe 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 CommitteesIn 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 EvansNon-Executive Chairman

Chairman’s introduction to governanceMike Evans, Non-Executive Chairman

“ The key constituents necessary to deliver a robust structure are in place.”

We are committed to the highest standards of corporate governance.


Governance framework

Board Committees

Audit CommitteeThe Audit Committee’s role is to assist the Board with the

discharge of its responsibilities in relation to financial reporting.

Nomination CommitteeThe Nomination Committee

assists the Board in reviewing the structure, size and

composition of the Board.

Remuneration CommitteeThe Remuneration Committee

recommends the Group’s policy on executive remuneration and

determines the levels of remuneration for Executive

Directors, the Chairman and Management.

The BoardThe Board comprises nine Directors. We have two Executive Directors, a Non-Executive Chairman,

three Independent Non-Executive Directors and three further Non-Executive Directors.

Leadership Team



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Mike EvansNon-Executive ChairmanMike became Chairman of Zoopla Property Group in 2014. He has been Chairman of Hargreaves Lansdown Plc since 2009, which he joined as a Non-Executive Director in 2006. Mike is a qualified actuary with over 30 years’ experience in the financial services industry. He is also a Non-Executive Director of esure Group Plc and Chesnara Plc. He is a member of the advisory board of Spectrum Corporate Finance and is a Trustee of Wessex Heartbeat. Mike was formerly Chief Operating Officer at Skandia UK Limited and he holds a BSc in mathematics from the University of Bristol.

Alex ChestermanFounder and Chief Executive OfficerAlex founded Zoopla Property Group in 2007 and remains as the CEO. Previously, Alex co-founded LOVEFiLM, Europe’s leading online DVD rental service, which was successfully sold to Amazon. Alex is recognised as one of the UK’s leading entrepreneurs, has been a winner of the Ernst & Young Entrepreneur of the Year Award and was named by Property Week as one of the 100 most important people in the UK residential property industry. Alex holds an honours degree in economics from London University.

Stephen MoranaChief Financial OfficerStephen joined Zoopla Property Group in 2013 and is currently the CFO. He also serves as a Non-Executive Director of boohoo.com plc. Previously, Stephen spent over a decade at Betfair Plc, one of the UK’s most successful internet businesses. As part of the Betfair management team since 2002, he became CFO in 2006 and then served as interim CEO in 2012. Prior to Betfair, he held a number of senior finance positions, including at Sapient, the Nasdaq-listed technology innovator. Stephen is a qualified chartered accountant and a member of the INSEAD alumni.

Board of Directors

Our Board has a diverse mix of backgrounds, skills and experience and its members are committed to setting the strategic direction whilst maintaining the highest standards of corporate governance and instilling a sound framework for the control and management of the Group, driving it to further success.

A Member of the Audit Committee

N Member of the Nomination Committee

R Member of the Remuneration Committee

Committee Chairman

Board change as part of the IPOThe Group’s Board of Directors changed at the IPO to include further independent Directors and to appoint a Non-Executive Chairman. Prior to the IPO, the Group’s Board included Simon Kain, Kevin Beatty and Fred Destin as Directors. These three Directors stood down from the holding company of the Group at the IPO.

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

N R N

Board gender diversity

n Femalen Male

Board Executive/Non-Executive split

n Executiven Non-Executive


Stephen DaintithNon-Executive DirectorStephen became a Director of Zoopla Property Group in 2013. He is currently Finance Director of Daily Mail & General Trust Plc, which he joined in 2011. Previously, Stephen was COO and CFO of Dow Jones, a subsidiary of News Corp. He has also held several CEO and CFO positions in various overseas markets for British American Tobacco. Stephen started his career as an accountant at Price Waterhouse and holds a degree from Leeds University.

David DuttonNon-Executive DirectorDavid became a Director of Zoopla Property Group in 2012. He serves as Chairman of DMG Information, a division of Daily Mail & General Trust Plc, as and is a Non-Executive Director of a number of other DMGT subsidiaries. David has been an Executive Director of Daily Mail & General Trust Plc since 1997 and advises the Group on property matters. He also serves as Chairman of UCL Business Plc. David is a successful entrepreneur and holds a BA in economics from Cambridge University and an MBA from Harvard University.

Grenville TurnerNon-Executive DirectorGrenville became a Director of Zoopla Property Group in 2010. He is currently Group Non-Executive Chairman of Countrywide Plc, which he joined in 2006, and is also a Non-Executive Director of the DCLG, Chairman of Hamptons International, Chairman of Bellpenny Ltd and Chairman of Knightsbridge Student Housing Limited. He was formerly Chief Executive, Intelligent Finance and Chief Executive, Business to Business at HBOS and has previously 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.

Sherry CoutuIndependent Non-Executive DirectorSherry became a Director of Zoopla Property Group in 2014. She currently serves as a Non-Executive Director of the London Stock Exchange Group, Cambridge University Press, Raspberry Pi and Artfinder. She also serves on the advisory boards of LinkedIn and Care.com and is an External Non-Executive Director of Cambridge University. Previously, she has served as a Director of New Energy Finance, Jarvis Plc and RM Plc and formerly she founded Interactive Investor International Plc. Sherry was awarded a CBE in 2013 for “Services to Entrepreneurship” and she holds an MBA from Harvard, an MSc from the London School of Economics and a BA from the University of British Columbia.

Duncan Tatton-BrownSenior Independent Non-Executive DirectorDuncan became a Director of Zoopla Property Group in 2014. He is currently CFO of Ocado Group Plc, which he joined in 2012. Previously, Duncan was CFO of Fitness First Plc and prior to that was Group Finance Director of Kingfisher Plc, one of the world’s largest home improvement retailers. He has held senior finance positions at B&Q Plc, Virgin Entertainment Group and Burton Group Plc and was also a Non-Executive Director of Rentokil Initial Plc. Duncan holds a master’s degree in engineering from King’s College, Cambridge and is a member of the Chartered Institute of Management Accountants.

Robin KleinIndependent Non-Executive DirectorRobin became a Director of Zoopla Property Group in 2012. He is currently a venture partner of Index Ventures, a founding partner of The Accelerator Group and serves as a Non-Executive Director of MoneySupermarket Plc. Robin is a serial entrepreneur and an angel investor in a number of the UK’s leading high-growth internet businesses. Companies he has backed at an early stage include LastMinute.com, Agent Provocateur, LOVEFiLM, Wonga, Mind Candy (Moshi Monsters), Fizzback, Tweetdeck, Graze, FreeAgent, Skimlinks and Moo.



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N N NA A AR R R

The role of the BoardThe Board consists of three independent Non-Executive Directors, four Non-Executive Directors (including the Non-Executive Chairman) and two Executive Directors. Biographies of all members of the Board appear on pages 26 and 27.

The Board is collectively responsible for the long-term success of the Company and for leading and controlling the Group and has overall authority for the management and conduct of the Group’s business, strategy and development. The Board is also responsible for ensuring the maintenance of a sound system of internal control and risk management (including financial, operational and compliance controls and for reviewing the overall effectiveness of systems in place) and for the approval of any changes to the capital, corporate and/or management structure of the Group.

The CEO and CFO sit on the Board and two levels of management sit below the Board: the Leadership Team and the Senior Management Team, each of which are led by the CEO. The CEO and CFO therefore act as a bridge between Management and the Board. The Board delegates to Management the day-to-day running of the business within defined parameters. Board meetings are scheduled to coincide with key events in the corporate calendar and in future this will include the interim and final results and the Annual General Meeting (AGM).

The Board has adopted a formal schedule of matters reserved for its approval and has delegated other specific responsibilities to its Committees. This schedule sets out key aspects of the affairs of the Company which the Board does not delegate, including:

f responsibility for the overall management of the Group;

f approval of the Group’s business strategy and objectives, budgets and forecasts and any material changes to them;

f monitoring the delivery of the Group’s business strategy and objectives and responsibility for any necessary corrective action;

f oversight of operations, ensuring adequate systems of internal controls and risk management are in place, ensuring maintenance of accounting and other records and ensuring compliance with statutory and regulatory obligations;

f approval of any extension of the Group’s activities or any decision to cease to operate any material part of the Group’s business;

f approval of any changes relating to the Group’s capital structure and material changes to the Group’s management and control structure;

f approval of the financial statements, annual report and accounts, material contracts and major projects;

f approval of the dividend policy;

f ensuring a sound system of internal control and risk management;

f approval of any major capital project;

f approval of communications with shareholders and the market;

f determining changes to structure, size and composition of the Board;

f determining remuneration policy for the Directors and the Leadership and Senior Management teams and approval of the remuneration of the Non-Executive Directors; and

f approval of all major policies within the Group, including the share dealing, anti-bribery and health and safety policies.

All Directors have access to the advice and services of the Company Secretary, who has responsibility for ensuring compliance with the Board’s procedures. All the Directors have the right to have their opposition to, or concerns over, any Board decision noted in the minutes. The Board has adopted guidelines by which Directors may take independent professional advice at the Company’s expense in the performance of their duties.

The Chairman and the Non-Executive Directors met informally once without the Executives present in the period between the listing on 23 June 2014 and 30 September 2014 and will continue to hold such meetings periodically.

Board CommitteesSubject to those matters reserved for its decision, the Board has delegated to its Audit, Nomination and Remuneration Committees certain authorities. There are written terms of reference for each of these Committees, available on the Group’s corporate website, www.zpg.co.uk, and separate reports for each Committee are included in this Annual Report from pages 32 to 61.

Compliance with the UK Corporate Governance Code 2012: IntroductionThe 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.

Corporate governance statement


Role of the Chairman and Chief Executive OfficerThe 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:

Role of Chairman

f To run the Board effectively by ensuring meetings are held with appropriate frequency.

f To ensure the frequency and depth of evaluation of the performance of the Board and its Committees is in compliance with best practice.

f To chair the Nomination Committee to lead the process for Board appointments and identify and recommend candidates for the approval of the Board.

f To promote a culture of openness and debate, in particular by facilitating the effective contribution of Non-Executive Directors, and ensuring constructive relations between Executive and Non-Executive Directors.

f To hold meetings with the Non-Executive Directors without Executive Directors or Senior Management present.

f To ensure that shareholders’ views are communicated to the Board as a whole so that all Directors develop an understanding of their views.

Role of Chief Executive Officer

f To manage the Group on a day-to-day basis within the authority delegated by the Board.

f To ensure, with the Executive team, that Board decisions are implemented effectively.

f To advise and make recommendations in respect of Board nominations and succession planning.

f To make recommendations on remuneration policies, Executive remuneration and terms of employment for senior employees.

f To keep the Chairman informed of all important matters.

f To develop and propose Group strategy, annual plans and commercial objectives to the Board.



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Corporate governance statement continued

Role of the Senior Independent Director (SID)The Governance Code recommends that the Board of Directors of a company with a premium listing on the official list of the London Stock Exchange (“Official List”) should appoint one of the Independent Non-Executive Directors to be the Senior Independent Director to provide a sounding board for the Chairman and to serve as an intermediary for the other Directors when necessary. The Senior Independent Director should be ava

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