Final Results
Michael Page International PLC
01 March 2006
1 March 2006
Full Year Results for the year ended 31 December 2005
Michael Page International plc ("Michael Page"), the specialist professional
recruitment company, announces its full year results for the year ended 31
December 2005.
£m 2005 2004 Change
Turnover 523.8 433.7 + 21%
Gross profit 267.6 210.6 + 27%
Operating profit 66.5 38.9 + 71%
Profit before tax 66.1 38.9 + 70%
Basic earnings per share 14.8p 9.8p + 51%
Adjusted earnings per share (note 5) 14.8p 7.2p + 106%
Dividend 5.0p 4.0p + 25%
Key Points
• Results demonstrate strong operational gearing
• United Kingdom operating profits up from £22.9m to £31.9m
• Continental European operating profits up by over 370% to £19.4m
• Record results from Asia Pacific, operating profits of £14.1m
• Very strong cash flow from operations, up from £35.7m to £65.4m
• 16.8m shares repurchased during 2005 at a cost of £34.2m
• Steve Ingham to succeed Terry Benson as Chief Executive in May 2006
Commenting on the results, Terry Benson, Chief Executive of Michael Page, said:
"2005 was another year of considerable progress for the Group and Michael Page
delivered significantly improved results over the previous year. All our
businesses recorded increased profits, but the outstanding performance came from
Continental Europe which grew operating profits by over 370% to £19.4m (2004:
£4.1m).
"The short term outlook is encouraging for Michael Page. Against a background
of relatively favourable trading conditions in all regions across the Group, we
will continue our strategy of organic growth and controlled investment for the
future."
Enquiries:
Michael Page International plc 020 7831 2000 (after 8:00am)
Terry Benson, Chief Executive
Stephen Puckett, Finance Director
Steve Ingham, Chief Executive Designate
Financial Dynamics 020 7269 7291
Richard Mountain / David Yates
CHAIRMAN'S STATEMENT
I am pleased to report another year of considerable progress for the Group and
significantly improved results for 2005. Our outstanding performance
is, we believe, clear endorsement of our longer term strategic decision only to
grow organically, to maintain our infrastructure during economic slowdowns and
to continue to make controlled investments for the future. This is particularly
evident in the improved performance of our businesses in Continental Europe
where, despite the economic conditions remaining difficult, we have increased
gross profits by 40% and operating profits by over 370%.
Financial highlights
Turnover for the year ended 31 December 2005 increased 20.8% to £523.8m (2004:
£433.7m). Gross profits from permanent placements again grew more rapidly than
from temporary placements. This movement in business mix, together with an
increase in margins on temporary placements, contributed to a strong increase in
gross profit of 27.0% to £267.6m (2004: £210.6m). Given the Group's high
operational gearing, operating profit increased by 71.2% to £66.5m (2004:
£38.9m).
Profit before tax was £66.1m (2004: £38.9m) and adjusted earnings per share
increased by 105.6% to 14.8p (2004: 7.2p before exceptional tax items).
Dividends and share repurchases
It is the Board's intention to pay dividends at a level which it believes is
sustainable throughout economic cycles and to continue to use share repurchases
as an additional mechanism for returning surplus cash to shareholders.
As a consequence of our strong growth in profits and excellent cash generation,
the Board is recommending an increase in the total dividend per share for the
year of 25%. A final dividend of 3.5p (2004: 2.75p) per share is proposed which,
together with the interim dividend of 1.5p (2004: 1.25p) per share paid in
October, makes a total dividend for the year of 5.0p (2004: 4.0p) per share. The
final dividend will be paid on 5 June 2006 to those shareholders on the register
at 5 May 2006. The total dividend is covered 3.0 times by basic earnings per
share of 14.8p.
We continued to make share repurchases throughout 2005 acquiring 16.8m shares
for £34.2m, representing an average cost per share of 203.7p. These shares were
initially held in Treasury but were subsequently cancelled along with 7.8m
shares that were held in Treasury from purchases made in 2004.
We will be seeking shareholders' consent for a renewal of the authority to
repurchase up to 10% of the issued shares at the Annual General Meeting on 23
May 2006.
Employees
I wish to express my thanks to the staff worldwide for their commitment, loyalty
and efforts throughout the year. Having operated throughout a sustained period
of difficult trading conditions, they have maintained your Company's position as
the international leader in the specialist recruitment industry.
Board of Directors
On 16 December 2005 Terry Benson announced his decision to retire as Chief
Executive at the forthcoming Annual General Meeting on 23 May 2006. Terry has
worked for the Group for over 26 years, the last 12 as Chief Executive, during
which the company has enjoyed phenomenal success.
On behalf of all stakeholders in the Group, I sincerely thank him for his
tremendous contribution and he has our best wishes for his retirement.
Steve Ingham, who has been with the Group for 19 years, will succeed Terry as
Chief Executive. He has been a member of the senior management for many years
and a key contributor in establishing the current Group strategy. I, and the
rest of the Board, am delighted that we have an exceptional successor who we are
confident will continue the successful development of the Group.
On 25 April 2005, Rob Lourey, a Non-Executive Director resigned as he was
relocating to Sydney, Australia. Tim Miller was appointed on 15 August 2005 as a
Non-Executive Director and as Chairman of the Remuneration Committee. Stephen
Burke, the former UK Managing Director, left the company in May 2005.
Outlook
The short term outlook is encouraging for Michael Page.
Against a background of favourable trading conditions in all regions across the
Group, we plan to continue the controlled growth of our businesses by further
increasing our headcount, continuing the discipline roll out, opening new
offices in countries where we already have a presence and establishing new
businesses in other countries.
On 6 April 2006 we will make a statement in respect of our trading for the
first quarter.
Sir Adrian Montague CBE
Chairman
1 March 2006
CHIEF EXECUTIVE'S REVIEW
I am delighted with our performance in 2005, particularly as I believe it
demonstrates the benefits of our longer term approach to the development of the
Company. We have achieved good levels of growth in all of our businesses
reflecting the quality of our staff and the high levels of service they provide
to clients and candidates.
A product of our strategy to maintain our infrastructure in a downturn is that
for a period we may carry spare capacity and consequently have high operational
gearing. When economic conditions improve, we believe this approach puts us in a
better position than the majority of our competitors to grow our business, and
at a far faster rate. As this spare capacity is utilised through growth, we
benefit from this operational gearing as evidenced by the 71.2% increase in
operating profit from a 27.0% growth in gross profit.
Staff and office numbers
The investments we have made in new staff, discipline roll outs, office
expansion and start ups have resulted in an increase in fee generating and
support staff to 2,926 (2004: 2,551), operating from 118 (2004: 110) offices in
18 (2004: 16) countries at the end of the year.
United Kingdom
In the UK, turnover increased by 14.8% to £269.6m (2004: £234.8m) and gross
profit by 17.8% to £129.5m (2004: £110.0m). Operating profits
were £31.9m (2004: £22.9m), an increase of 39.3%.
The gross profits of the finance and accounting businesses of Michael Page
Finance, Michael Page City and Accountancy Additions, which generated 57% of UK
gross profit, were 10% higher than in 2004 with both permanent and temporary
recruitment fees growing well. Michael Page Finance, the largest of the three
businesses, opened an office in Liverpool and achieved the highest growth rate
of the three finance businesses. Michael Page City, which accounts for less than
10% of UK gross profits, recorded the lowest level of growth. Accountancy
Additions, which specialises in lower level finance and accounting positions,
again expanded its office network from 30 to 32 locations with new offices in
Liverpool and Edinburgh.
The combined gross profits of Michael Page Marketing, Michael Page Sales and
Michael Page Retail, were 19% higher than in 2004 and represented 22% of the UK
total. The Marketing and Sales businesses produced strong growth from all
industry sectors, with growth from temporary placement fees exceeding permanent
as we continue to develop the temping business in these disciplines. Retail's
growth rate, while lower, was still over 10% despite another tough year on the
High Street.
The remaining businesses together produced gross profit growth in 2005 of 44%
and represent a significant opportunity for further strong growth as they are
rolled out progressively across the UK network. Michael Page Legal and Michael
Page Technology both performed well in the year. Michael Page Human Resources
achieved another year of strong growth benefiting from its increased geographic
coverage. The separation of Michael Page Engineering & Supply Chain Management
into Michael Page Engineering & Manufacturing, and Michael Page Procurement &
Supply Chain at the beginning of 2005 was particularly successful, with both
businesses having significant scope for further expansion. Michael Page
Secretarial which only started at the end of 2003 had a successful year with
gross profit more than doubling.
In order to capitalise on the opportunity in Scotland, at the beginning of 2005
we created a separate management structure to drive growth from our existing
offices in Glasgow and Edinburgh. This has proved to be a successful development
with gross profits in Scotland increasing in 2005 by over 50%.
Continental Europe
Turnover in Continental Europe for the year increased by 28.0% to £159.2m (2004:
£124.3m) and gross profit increased by 40.1% to £86.1m (2004:
£61.5m). As a result of the increased revenue and high operational gearing, the
region produced an increase of over 370% in operating profit at £19.4m (2004:
£4.1m).
In France, our second largest business after the UK and representing 48% of the
region, gross profit increased by 18%. The growth rate in our French business
improved each quarter throughout the year, exceeding 20% in the fourth quarter.
The growth in France came entirely from permanent recruitment with temporary
recruitment fees flat on 2004 levels. While the market in France improved during
2005, our rate of growth clearly indicates that we are well positioned to
benefit and gain market share.
Elsewhere in the region, collectively our businesses achieved gross profit
growth in excess of 65%. There remains considerable scope for these businesses
to grow with numerous opportunities for expanding teams in existing offices and
disciplines, rolling out the disciplines to existing offices and opening new
offices.
In addition to the roll out of disciplines, during the year we started a
business in Warsaw, Poland, our first expansion into Central Europe, and have
opened a fourth office in the Netherlands in Amersfoort, and a Michael Page
office in Toulouse. Page Personnel opened in Nantes, Strasbourg and Rouen in
France, and Geneva in Switzerland.
As market conditions in Continental Europe continue to improve, we are reaping
the benefit of our strategy to maintain and invest in our businesses during the
downturn. As predicted last year, with gross profit growth maintained throughout
2005, profitability has improved considerably as spare capacity is utilised.
There is still some spare capacity within a number of our businesses but in
others we now need to invest to exploit the growth opportunities.
Asia Pacific
Our businesses in Asia Pacific produced a record set of results for the region.
Turnover was 22.2% higher at £76.7m (2004: £62.8m), gross profit
was 23.8% higher at £39.0m (2004: £31.5m) and operating profit increased 23.3%
to £14.1m (2004: £11.4m).
In Australia gross profit grew a healthy 17.1% despite a disappointing fourth
quarter which was impacted by an IT implementation. There continued to be strong
demand from financial services, business services, mining and resources. During
the year we opened a seventh office, in Chatswood, North Sydney and completed a
large office relocation of our business in Melbourne.
In Hong Kong, Shanghai, Tokyo and Singapore, we achieved another year of
substantial gross profit growth. In Tokyo we moved into larger offices at the
beginning of the year which provides sufficient accommodation to achieve a
doubling of our headcount.
The Americas
Turnover for the region was 54.6% higher at £18.3m (2004: £11.8m), gross profit
increased by 68.9% to £12.9m (2004: £7.6m) and operating profit increased 161%
to £1.0m (2004: £0.4m).
In North America we continued our rapid expansion opening offices in Toronto,
Canada and in Philadelphia, USA. We have now established a network of seven
offices in North America, providing only recruitment in Finance and Accounting.
These investments, together with the continuing development of our other
offices, incur significant start up costs ahead of gross profit growth.
We are extremely pleased with our progress in North America and during 2006, we
will be investigating the opportunities for further office openings as well as
starting other recruitment disciplines.
In Brazil we achieved another very successful year growing headcount in the
Sao Paulo and Rio de Janeiro offices to nearly 100 staff. We have now reached
the stage where we have a number of experienced and talented local staff who
will further drive our expansion in Brazil and elsewhere in South America.
Executive Committee
In September 2005 the Board approved the establishment of an Executive Committee
comprising Chris Adams, Regional MD Asia Pacific, Andrew Wayland, Chief
Information Officer, and the four executive Main Board Directors. The committee,
which is headed by the Chief Executive, is focused on the operational management
of the Group and meets formally every quarter. It was formed to facilitate
greater communication and cooperation between the regions, and to ensure that
the deployment of our resources is considered from a global perspective.
Strategy
I am delighted with our performance in 2005 as it clearly demonstrates the
strength of our longer term strategy. Having worked for Michael Page for 26
years, the last 12 as Chief Executive I believe the business is in excellent
condition for many more years of successful growth and development.
However I believe the time is right for me to retire from the business and in
December 2005 we announced the plans for succession. Steve Ingham,
who joined Michael Page in 1987, will formally take over as Chief Executive at
the Annual General Meeting in May. In my opinion he and the senior management
team are second to none in our sector, and they possess the energy and
enthusiasm to continue the track record of achievement.
I am sure our shareholders, clients, candidates and staff will welcome the fact
that the overall long term strategy of the Group will remain absolutely
unchanged following the change in leadership. The Group intends to stay focused
on its core competency of specialist recruitment, and will continue
to grow organically by the expansion of existing businesses in their local
markets, the introduction of new disciplines into existing locations and
by entering new geographic markets.
There exist numerous opportunities to grow the business in all our regions and
expand into new regions. There is an exceptional pool of ambitious and talented
people in the Group who are highly motivated to build on our success. With the
short term economic outlook set to be relatively favourable, the plan during
2006 is to slightly increase the pace of our controlled development.
Terry Benson
Chief Executive
1 March 2006
FINANCE DIRECTOR'S REVIEW
International Financial Reporting Standards (IFRS)
The 2005 financial statements are our first to have been prepared under IFRS and
accordingly the comparative results for 2004 have been restated.
The most significant impact from the application of IFRS on reported profits is
a charge of £2.7m (2004: £1.2m) in respect of share options. Full details of the
application of IFRS are set out in note 9.
Income statement
Turnover
2005 was another successful year for the Group with all regions delivering
strong growth. Turnover for the year increased by 20.8% to £523.8m (2004:
£433.7m). Turnover from temporary placements increased by 15.7% to £318.3m
(2004: £275.2m) and represented 60.8% (2004: 63.5%) of Group turnover. Turnover
from permanent placements was £205.5m (2004: £158.5m), an increase of 29.6%.
Gross profit
Gross profit for the year increased by 27.0% to £267.6m (2004: £210.6m)
representing an overall gross margin of 51.1% (2004: 48.6%). The percentage
increase in gross profit is greater than the increase in turnover due primarily
to the higher proportion of gross profit derived from permanent placements in
2005, together with a higher volume of temporary placements at slightly higher
gross margin. Gross profit from temporary placements was £72.6m (2004: £62.0m)
and represented 27.1% (2004: 29.4%) of Group gross profit. The gross margin
achieved on temporary placements was 22.8% (2004: 22.5%).
Operating profit
As a result of the Group's organic growth strategy and the profit based bonuses,
we have a business which is operationally geared as evidenced by the 71.2%
increase in operating profits from a 27.0% increase in gross profit.
This strategy means the Group incurs start up costs and operating losses as
investments are made to grow existing businesses, start new businesses, open new
offices and start up in new countries. The Chief Executive's review describes a
number of these investments including starting businesses in Canada and Poland.
As a result of the increased numbers of staff, start up costs and higher profit
related bonuses, administrative expenses in the year increased by 17.0% to
£201.1m (2004: £171.8m).
The Group's largest category of expenditure is the remuneration of our
consultants and support staff. Headcount of the Group was 2,551 at 1 January
2005 and increased to 2,747 at 30 June 2005. The Group's headcount increased
further during the second half of the year reflecting both the growth of
existing businesses and continuing investment for the future. At 31 December
2005 we employed 2,926 consultants and support staff.
Net interest
While we started the year with net cash of £12.2m there is a substantial cash
outflow in January every year as quarter four and annual bonuses are paid. As a
result of the decision to spend £34.2m repurchasing shares, the Group had
limited surplus cash to invest. As a consequence a net interest charge was
incurred of £0.4m (2004: £nil).
Taxation
Tax on profits was £16.5m (2004: £4.5m after an exceptional tax credit of
£9.0m), representing an effective tax rate of 25.0% (2004: 34.8% before
exceptional items). The rate is lower than the UK corporation tax rate of 30%
primarily as a result of utilising and recognising tax losses incurred in
earlier years. The majority of these tax losses arose in Continental Europe and
have largely been recognised this year as profits in the region have
grown significantly.
Earnings per share and dividends
In 2005, basic earnings per share were 14.8p (2004: 9.8p) and adjusted earnings
per share in 2005 were 14.8p (2004: 7.2p before exceptional tax items). The
weighted average number of shares for the year was 336.3m (2004: 351.6m)
reflecting the impact of the share repurchases during the year.
An increase in the final dividend to 3.5p (2004: 2.75p) per ordinary share has
been proposed which, together with the interim dividend of 1.5p (2004: 1.25p)
per ordinary share, makes a total dividend for the year of 5.0p (2004: 4.0p) per
ordinary share, an increase of 25%. The final dividend, which amounts to £11.5m,
will be paid on 5 June 2006 to those shareholders on the register at 5 May 2006.
Balance sheet
The Group had net assets of £68.9m at 31 December 2005 (2004: £60.5m) of which
£13.1m (2004: £12.2m) is represented by net cash. The increase
in net assets relates to the profit of £49.6m and the credit relating to share
schemes of £6.9m, more than offsetting share repurchases of £34.2m and dividends
paid of £14.4m. In accordance with IFRS there is no provision in the balance
sheet for the 2005 final dividend as this has not yet been approved by our
shareholders.
Capital expenditure, net of disposal proceeds, increased to £6.8m (2004: £4.4m).
Our capital expenditure is driven primarily by two main factors; headcount and
the maintenance and enhancement of our IT systems.
The most significant item in the balance sheet is trade receivables which were
£82.7m at 31 December 2005 (2004: £69.3m) representing debtor days of 49 (2004:
47 days).
Cash flow
At the start of the year the Group had net cash of £12.2m.
During the year the Group generated net cash from operating activities of £65.4m
(2004: £35.7m) being £72.7m (2004: £45.3m) of EBITDA, an increase in working
capital requirements of £8.5m (2004: £5.8m), movements in provisions of £0.6m
(2004: £5.1m), and profit on disposal of our French contractors business of
£0.6m.
The principal payments have been:
• £6.8m (2004: £4.4m) of capital expenditure, net of disposal proceeds, on
property, infrastructure, information systems and motor vehicles for staff;
• taxes on profits of £10.1m (2004: £4.8m);
• dividends of £14.4m (2004: £12.6m); and
• share repurchases of £34.2m (2004: £24.1m).
At 31 December 2005 the Group had net cash balances of £13.1m (2004: £12.2m).
Treasury management and currency risk
It is the Directors' intention to finance the activities and development of the
Group principally from retained earnings, and to operate the Group's
business while maintaining the net debt/cash position within a relatively narrow
band. Cash generated in excess of these requirements will be used to buy back
the Company's shares for which renewal of the existing general authority is
being sought at the forthcoming Annual General Meeting.
Cash surpluses are invested in short-term deposits with any working capital
requirements being provided from Group cash resources or by local
overdraft facilities.
The main functional currencies of the Group are Sterling, Euro, US Dollar and
Australian Dollar. The Group does not have material transactional currency
exposures nor is there a material exposure to foreign-denominated monetary
assets and liabilities. The Group is exposed to foreign currency translation
differences in accounting for its overseas operations although our policy is not
to hedge this exposure.
Stephen Puckett
Group Finance Director
1 March 2006
Consolidated Income Statement for the year ended 31 December 2005
2005 2004
Note £'000 £'000
Turnover 2 523,810 433,731
Cost of sales (256,229) (223,090)
Gross profit 2 267,581 210,641
Administrative expenses (201,062) (171,783)
Operating profit 2 66,519 38,858
Financial income 393 369
Financial expenses (776) (368)
Profit before tax 66,136 38,859
Income tax expense 3 (16,506) (4,523)
Profit for the year 49,630 34,336
Attributable to:
Equity holders of the parent 49,630 34,336
Earnings per share
Basic earnings per share (pence) 5 14.8 9.8
Diluted earnings per share (pence) 5 14.4 9.7
The above results relate to continuing operations.
Consolidated Statement of Changes in Equity at 31 December 2005
Capital Currency
Share redemption EBT Treasury translation Retained Total
capital reserve reserve shares reserve earnings equity
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2004 3,637 113 (9,871) - - 67,628 61,507
Currency translation differences - - - - (188) - (188)
Net expense recognised directly in - - - - (188) - (188)
equity
Profit for the year - - - - - 34,336 34,336
Total recognised (expense)/income - - - - (188) 34,336 34,148
for the year
Purchase of own shares (65) 65 - (13,122) - (10,999) (24,121)
Credit in respect of share schemes - - - - - 1,559 1,559
Dividends 4 - - - - - (12,593) (12,593)
(65) 65 - (13,122) - (22,033) (35,155)
Balance at 31 December 2004 3,572 178 (9,871) (13,122) (188) 79,931 60,500
Balance at 1 January 2005 3,572 178 (9,871) (13,122) (188) 79,931 60,500
Currency translation differences - - - - 492 - 492
Net income recognised directly in - - - - 492 - 492
equity
Profit for the year - - - - - 49,630 49,630
Total recognised income for the - - - - 492 49,630 50,122
year
Purchase of own shares - - - (34,216) - - (34,216)
Cancellation of treasury shares (246) 246 - 47,338 - (47,338) -
Credit in respect of share schemes - - - - - 6,922 6,922
Dividends 4 - - - - - (14,432) (14,432)
(246) 246 - 13,122 - (54,848) (41,726)
Balance at 31 December 2005 3,326 424 (9,871) - 304 74,713 68,896
Balance Sheet at 31 December 2005
2005 2004
Note £'000 £'000
Non-current assets
Property, plant and equipment 19,666 18,739
Intangible assets - Goodwill 1,539 1,539
- Computer software 2,212 2,194
Deferred tax assets 9,255 2,423
Other receivables 1,106 1,692
33,778 26,587
Current assets
Trade and other receivables 104,935 86,214
Current tax receivable 336 1,183
Cash and cash equivalents 7 20,060 12,532
125,331 99,929
Total assets 2 159,109 126,516
Non-current liabilities
Other payables (662) (1,678)
Provisions for liabilities and charges (192) (612)
Deferred tax liabilities (147) (689)
(1,001) (2,979)
Current liabilities
Trade and other payables (71,624) (60,694)
Bank overdrafts 7 (281) (317)
Bank loans (6,700) -
Current tax payable (10,223) (1,450)
Provisions for liabilities and charges (384) (576)
(89,212) (63,037)
Total liabilities 2 (90,213) (66,016)
Net assets 68,896 60,500
Capital and reserves
Called up share capital 3,326 3,572
Capital redemption reserve 424 178
EBT reserve (9,871) (9,871)
Treasury shares - (13,122)
Currency translation reserve 304 (188)
Retained earnings 74,713 79,931
Total equity 68,896 60,500
Consolidated Cash Flow Statement for the year ended 31 December 2005
2005 2004
Note £'000 £'000
Cash generated from operations 6 65,432 35,690
Income tax paid (10,127) (4,825)
Net cash from operating activities 55,305 30,865
Cash flows from investing activities
Purchases of property, plant and equipment (7,167) (5,324)
Purchases of computer software (965) (500)
Proceeds from the sale of property, plant and equipment, 1,354 1,416
and computer software
Proceeds from the sale of business 1,353 -
Interest received 393 369
Net cash used in investing activities (5,032) (4,039)
Cash flows from financing activities
Dividends paid (14,432) (12,593)
Interest paid (773) (367)
Proceeds from bank loan 6,700 -
Purchase of own shares (34,216) (24,120)
Net cash used in financing activities (42,721) (37,080)
Net increase/(decrease) in cash and cash equivalents 7,552 (10,254)
Cash and cash equivalents at the beginning of the year 12,215 22,434
Exchange gains on cash and cash equivalents 12 35
Cash and cash equivalents at the end of the year 7 19,779 12,215
Notes to the financial information
1. Significant accounting policies
Basis of preparation
The preliminary results have been prepared under the historical cost convention
and in accordance with current International Financial Reporting Standards
(IFRS), and are covered by IFRS 1, "First-time Adoption of International
Financial Reporting Standards", because they are the Group's first consolidated
IFRS financial statements. The disclosures required by IFRS 1 concerning the
transition from UK GAAP to IFRS are given in note 9. The financial statements
have been prepared in accordance with IFRS adopted for use in the European Union
and therefore comply with Article 4 of the EU IAS Regulation.
The financial information in the preliminary announcement does not constitute
the Group's statutory financial statements for 2005 but has been extracted from
the Group's 2005 financial statements and, as such, does not contain all
information required to be disclosed in the financial statements prepared in
accordance with International Financial Reporting Standards. Statutory
financial statements for 2005 will be filed following the Annual General
Meeting. The auditors have reported on these financial statements; their report
was unqualified and did not contain a statement under section 237 (2) or (3) of
the Companies Act 1985.
The financial information for the 2004 comparatives does not constitute
statutory financial statements as defined in section 240 of the Companies Act
1985 but has been extracted from the reconciliations of UK GAAP to IFRS
presented with the Interim Financial Information published on 15 August 2005.
The UK GAAP financial information as at 31 December 2004 within the document had
been extracted from the 2004 statutory financial statements which have been
filed with the Registrar of Companies. The auditors have reported on those
financial statements; their report was unqualified and did not contain a
statement under section 237 (2) or (3) of the Companies Act 1985.
The financial information has been prepared in accordance with International
Financial Reporting Standards, using the same accounting policies as set out in
the Interim Financial Information. Whilst the financial information included in
this preliminary announcement has been computed in accordance with International
Financial Reporting Standards (IFRS), this announcement does not itself contain
sufficient information to comply with IFRS. The Company expects to publish full
financial statements that comply with IFRS in April 2006.
The preliminary announcement was approved by the board of directors on 1 March
2006.
The Annual General Meeting of Michael Page International plc will be held at
Victoria House, Southampton Row, London, WC1B 4JB on 23 May 2006 at 12.00 noon.
2. Segment reporting
Business is the Group's primary segment. The consolidated entity operates in one
business segment being that of recruitment services. As a result, no additional
business segment information is required to be provided. The Group's secondary
segment is geography. The segment results by geography are shown below:
(a) Turnover and gross profit by geographic
region
Turnover Gross Profit
2005 2004 2005 2004
£'000 £'000 £'000 £'000
United Kingdom 269,623 234,822 129,535 109,984
Continental Europe 159,157 124,293 86,138 61,503
Asia Pacific Australia 61,152 51,286 24,722 21,105
Other 15,565 11,484 14,315 10,429
Total 76,717 62,770 39,037 31,534
Americas 18,313 11,846 12,871 7,620
523,810 433,731 267,581 210,641
The analysis below is of the carrying amount of segment assets, segment
liabilities and capital expenditure. Segment assets and liabilities include
items directly attributable to a segment as well as those that can be allocated
on a reasonable basis. The individual geographic segments exclude income tax
assets and liabilities. Capital expenditure comprises additions to property,
plant and equipment, motor vehicles and computer hardware/software.
(b) Segment assets, segment liabilities and capital expenditure by
geographic region
Total Assets Total Liabilities Capital Expenditure
2005 2004 2005 2004 2005 2004
£'000 £'000 £'000 £'000 £'000 £'000
United Kingdom 66,379 55,897 39,159 30,924 3,117 3,106
Continental Europe 64,932 50,222 31,648 27,246 2,403 1,404
Asia Pacific Australia 12,256 10,134 5,547 4,178 773 610
Other 6,877 5,157 1,694 1,295 584 98
Total 19,133 15,291 7,241 5,473 1,357 708
Americas 8,329 3,923 1,942 923 1,255 606
Segment assets/liabilities/capital 158,773 125,333 79,990 64,566 8,132 5,824
expenditure
Income tax 336 1,183 10,223 1,450
159,109 126,516 90,213 66,016
(c) Turnover and gross profit by discipline
Turnover Gross Profit
2005 2004 2005 2004
£'000 £'000 £'000 £'000
Finance and accounting 336,207 290,151 159,463 129,687
Marketing, sales and retail 84,591 73,985 55,111 44,894
Other 103,012 69,595 53,007 36,060
523,810 433,731 267,581 210,641
(d) Operating profit by geographic region
2005 2004
£'000 £'000
United Kingdom 31,939 22,928
Continental Europe 19,449 4,101
Asia Pacific Australia 8,509 7,551
Other 5,593 3,883
Total 14,102 11,434
Americas 1,029 395
66,519 38,858
The above analysis in notes (b) segment liabilities by geographic region, (c)
turnover and gross profit by discipline (being the professions of candidates
placed), and (d) by operating profit, have been included as additional
disclosure over and above the requirement of IAS 14 "Segment Reporting".
3. Taxation on profits on ordinary activities
The charge for taxation is based on the annual tax rate of 25.0% on profit
before tax (2004: 34.8% before exceptional items). The exceptional item referred
to in the prior year comparatives relates to a tax deduction received as a
result of the vesting of the Restricted Share Scheme in April 2004. This
deduction for income tax purposes arose in various tax jurisdictions and
resulted in a non-operational exceptional credit of £9.0m to the income tax
charge.
2005 2004
Analysis of charge in year £'000 £'000
UK income tax at 30% for year before exceptional tax credits 12,522 9,081
UK exceptional tax credit - (7,935)
UK income tax at 30% for year after exceptional tax credits 12,522 1,146
Adjustments in respect of prior periods (120) 152
Overseas income tax before exceptional tax credits 7,334 3,644
Exceptional tax credit - (1,065)
Overseas income tax after exceptional tax credits 7,334 2,579
19,736 3,877
Deferred tax expense
Origination and reversal of temporary differences (609) 646
Benefit of tax losses recognised (2,621) -
Deferred tax expense (3,230) 646
Total income tax expense in the income statement 16,506 4,523
4. Dividends
2005 2004
£'000 £'000
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 December 2004 of 2.75p per ordinary share 9,444 8,248
(2003: 2.3p)
Interim dividend for the year ended 31 December 2005 of 1.5p per ordinary 4,988 4,345
share (2004: 1.25p)
14,432 12,593
Amounts proposed as distributions to equity holders in the year:
Proposed final dividend for the year ended 31 December 2005 of 3.5p per 11,497 9,444
ordinary share (2004: 2.75p)
The proposed final dividend had not been approved by shareholders at 31 December
2005 and therefore has not been included as a liability. The comparative final
dividend at 31 December 2004 was also not recognised as a liability in the prior
year comparatives.
A final dividend of 3.5p (2004: 2.75p) per ordinary share will be paid on 5 June
2006 to shareholders on the register at the close of business on 5 May 2006.
5. Earnings per ordinary share
The calculation of the basic, diluted and adjusted earnings per share is based
on the following data:
2005 2004
Earnings
Earnings after exceptional tax items for basic earnings per share (£'000) 49,630 34,336
Exceptional tax items (£'000) - (9,000)
Earnings before exceptional tax items for adjusted earnings per share (£'000) 49,630 25,336
Number of shares
Weighted average number of shares used for basic and adjusted earnings per 336,283 351,555
share ('000)
Dilution effect of share plans ('000) 9,014 3,744
Diluted weighted average number of shares used for diluted earnings per share 345,297 355,299
('000)
Basic earnings per share (pence) 14.8 9.8
Diluted earnings per share (pence) 14.4 9.7
Adjusted earnings per share (pence) 14.8 7.2
The above results relate to continuing operations.
6. Cash flows from operating activities
2005 2004
£'000 £'000
Profit before tax 66,136 38,859
Depreciation and amortisation charges 6,162 6,404
(Profit)/loss on sale of property, plant and equipment, and computer (183) 53
software
Profit on the sale of business (622) -
Share scheme charges 2,694 1,178
Net finance cost/(income) 383 (1)
Operating cash flow before changes in working capital and provisions 74,570 46,493
Increase in receivables (17,907) (17,739)
Increase in payables 9,381 11,987
Decrease in provisions (612) (5,051)
Cash generated from operations 65,432 35,690
7. Cash and cash equivalents
2005 2004
£'000 £'000
Cash at bank and in hand 11,095 10,091
Short term deposits 8,965 2,441
Cash and cash equivalents 20,060 12,532
Bank overdrafts (281) (317)
Cash and cash equivalents in the statement of cash flows 19,779 12,215
8. Capital commitments
The Group had contractual capital commitments of £0.4m as at 31 December 2005
(2004: £0.8m) relating to property, plant and equipment. The Group had
contractual capital commitments of £nil as at 31 December 2005 (2004: £0.1m)
relating to computer software.
9. Adoption of IFRS in 2005
The accounting policies were changed on 1 January 2005 to comply with IFRS. The
transition from UK GAAP to IFRS is accounted for in accordance with IFRS 1, "
First-Time Adoption of International Financial Reporting Standards" with 1
January 2004 as the date of transition. The changes in accounting policies as a
consequence of the transition to IFRS are described below, and the
reconciliations of the effects of the transition to IFRS are summarised below
and presented in full in the notes to the first IFRS financial statements.
The transition to IFRS resulted in the following changes in accounting policies:
Goodwill is not amortised but measured at cost less impairment losses. Under UK
GAAP, goodwill was amortised on a straight-line basis through profit and loss
over its estimated useful economic life of 20 years. The effect of the change
is an increase in equity and profit before tax of £96k at 31 December 2004. The
change does not affect equity or profit before tax at 1 January 2004. The
change has no tax effect as deferred taxes are not recognised for temporary
differences arising from goodwill for which amortisation is not deductible for
tax purposes.
Dividends to shareholders declared after the balance sheet date but before the
financial statements are authorised for issue are not recognised as a liability
at the balance sheet date but are disclosed separately in the notes. Under UK
GAAP dividends for the accounting year were recognised as a liability. The
effect of the change is an increase in equity at 1 January 2004 of £8.2m and
£9.5m at 31 December 2004.
Share option costs under UK GAAP were based on the intrinsic value of the option
at the date of grant and as such, grants made under the Group's share option
plans did not result in a charge to the income statement. Under IFRS 2 "
Share-based Payment", the Group measures the cost of all share options granted
since 7 November 2002 that have not fully vested at the balance sheet date,
using an option pricing model. A liability in respect of social charges has
also been recognised in respect of the Group's share option schemes.
Deferred tax relating to the new share option charges described above have been
recognised as a deferred tax asset.
Computer software has been reclassified from tangible fixed assets to intangible
fixed assets.
Cumulative translation differences for all foreign operations have been deemed
to be zero at the date of transition. After the date of transition, foreign
exchange differences arising from the translation of accounts of overseas
operations are shown in a currency translation reserve as a separate component
of equity.
RECONCILIATION OF PROFIT
Year ended 31 December 2004
(end of last period presented under
UK GAAP)
Effect of
Under transition Under
UK GAAP to IFRS IFRS
Ref £'000 £'000 £'000
Turnover 433,731 - 433,731
Cost of sales (223,090) - (223,090)
Gross profit 210,641 - 210,641
Administrative expenses a,c (170,604) (1,179) (171,783)
Operating profit 40,037 (1,179) 38,858
Net finance income 1 - 1
Profit before tax 40,038 (1,179) 38,859
Income tax expense d (4,933) 410 (4,523)
Profit for the year 35,105 (769) 34,336
Attributable to:
Equity holders of the parent 35,105 (769) 34,336
Earnings per share
Basic earnings per share (pence) 10.0 (0.2) 9.8
Diluted earnings per share (pence) 9.9 (0.2) 9.7
Profit UK GAAP 35,105
Goodwill not amortised after a 96
date of transition
Share option charges c (1,275)
Deferred tax on share scheme d 410
charges
(769)
Profit IFRS 34,336
RECONCILIATION OF EQUITY
At 1 January 2004 At 31 December 2004
(date of transition) (end of last period presented under
UK GAAP)
Opening Opening
Effect of IFRS Effect of IFRS
Under transition balance Under transition balance
Ref UK GAAP to IFRS sheet UK GAAP to IFRS sheet
£'000 £'000 £'000 £'000 £'000 £'000
Non-current assets
Property, plant and equipment e 23,101 (2,444) 20,657 20,933 (2,194) 18,739
Goodwill a 1,539 - 1,539 1,443 96 1,539
Computer software e - 2,444 2,444 - 2,194 2,194
Deferred income tax assets d 1,345 1,416 2,761 254 2,169 2,423
Other receivables 1,570 - 1,570 1,692 - 1,692
27,555 1,416 28,971 24,322 2,265 26,587
Current assets
Trade and other receivables 68,615 - 68,615 86,214 - 86,214
Current tax receivable 1,664 - 1,664 1,183 - 1,183
Cash and cash equivalents 23,211 - 23,211 12,532 - 12,532
93,490 - 93,490 99,929 - 99,929
Total assets 121,045 1,416 122,461 124,251 2,265 126,516
Non-current liabilities
Other payables c (444) (759) (1,203) (461) (1,217) (1,678)
Provisions for liabilities and (1,376) - (1,376) (612) - (612)
charges
Deferred tax liabilities d - (727) (727) - (689) (689)
(1,820) (1,486) (3,306) (1,073) (1,906) (2,979)
Current liabilities
Trade and other payables b (57,356) 8,234 (49,122) (70,164) 9,470 (60,694)
Borrowings (777) - (777) (317) - (317)
Current tax payable (2,886) - (2,886) (1,450) - (1,450)
Provisions for liabilities and (4,863) - (4,863) (576) - (576)
charges
(65,882) 8,234 (57,648) (72,507) 9,470 (63,037)
Total liabilities (67,702) 6,748 (60,954) (73,580) 7,564 (66,016)
Net assets 53,343 8,164 61,507 50,671 9,829 60,500
Capital and reserves
Called up share capital 3,637 - 3,637 3,572 - 3,572
Capital redemption reserve 113 - 113 178 - 178
EBT reserve (9,871) - (9,871) (9,871) - (9,871)
Treasury shares - - - (13,122) - (13,122)
Currency translation reserve f - - - - (188) (188)
Profit and loss account 59,464 8,164 67,628 69,914 10,017 79,931
Total equity 53,343 8,164 61,507 50,671 9,829 60,500
Total equity UK GAAP 53,343 50,671
Goodwill not amortised after a - 96
date of transition
Dividend not recognised as a b 8,234 9,470
liability until approved by
shareholders
Social charges on share option c (759) (1,217)
schemes
Deferred tax on share schemes d 689 1,480
Computer software now classified e - -
as intangible
Currency translation reserve f - -
Total adjustments to equity 8,164 9,829
Total equity IFRS 61,507 60,500
There are no material adjustments to the cash flow statement in either period.
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