Interim Results

Michael Page International PLC 18 August 2003 18 August 2003 MICHAEL PAGE INTERNATIONAL PLC Half Year Results for the period ended 30 June 2003 Michael Page International plc ("Michael Page"), the specialist professional recruitment company, announces its half year results for the period ended 30 June 2003. Key Points â€¢ First half revenue (gross profit) of Â£87.8m â€¢ 5% revenue increase in Q2 2003 over Q1 2003, despite difficult trading conditions â€¢ Operating profit of Â£11.1m, including a net exceptional gain of Â£0.5m â€¢ Earnings per share of 2.0p â€¢ Â£7.7m cash generated from operating activities â€¢ Interim dividend maintained at 1.1p per share Commenting on the results, Terry Benson, Chief Executive of Michael Page, said: "I am pleased to report a slightly better than anticipated end to the second quarter and accordingly the results for the six months ended 30 June 2003 are ahead of expectations. We are continuing to manage the business on the basis that market conditions will remain challenging but stable for the remainder of this year. As a consequence we will maintain our tight control over costs, whilst at the same time ensuring that the longer-term prospects of the business are protected. We are encouraged by our second quarter revenues but, as we have now entered our seasonally quieter third quarter, it is too early to say whether this is the start of a sustainable improvement and we remain cautious about the short-term outlook." Enquiries: Michael Page International plc 020 7269 2205 Terry Benson, Chief Executive Stephen Puckett, Finance Director Financial Dynamics 020 7269 7291 Richard Mountain/David Yates CHAIRMAN'S STATEMENT The first six months of 2003 presented difficult trading conditions with weak economic activity in most of our markets, war in Iraq and the outbreak of SARS . Nevertheless I am pleased to report a slightly better than anticipated end to the second quarter and accordingly the results for the six months ended 30 June 2003 are ahead of expectations. Turnover for the six months ended 30 June 2003 was Â£180.4m (2002: Â£197.8m) and revenue (gross profit) was Â£87.8m (2002: Â£100.9m). Operating profit was Â£11.1m (2002: Â£17.8m), including a net exceptional gain of Â£0.5m (2002: nil). Profit before tax was Â£11.6m (2002: Â£18.0m) and earnings per share were 2.0p (2002: 3.2p). In the first half of 2003 we continued our strategy of maintaining our market presence whilst at the same time exercising our normal tight control on costs. We started the year with 2,390 staff operating from 107 offices in 16 countries. At 30 June 2003, staff numbers have reduced to 2,279 (2002: 2,440) still operating from the same number of offices and countries. These challenging market conditions, whilst impacting virtually all elements of the Group's businesses, continue to have a greater effect on permanent rather than temporary recruitment. In the first half of 2003 the mix of the Group's turnover and revenue between permanent and temporary placements was 35:65 (2002: 39:61) and 68:32 respectively (2002: 70:30). UNITED KINGDOM Turnover of the UK operations was Â£92.1m (2002: Â£105.8m), revenue was Â£43.7m (2002: Â£51.9m) and operating profit before exceptional items was Â£6.7m (2002: Â£10.3m). Revenue from Finance and Accounting was 19% lower than the first half of 2002; Marketing and Sales was 14% lower whilst the other disciplines increased by 2%. The lower finance revenues are a result of reduced activity in more senior finance appointments and continuing weakness in banking and financial services. In our other disciplines, the newer businesses of Human Resources and Engineering continue to develop well, both achieving strong revenue growth. Legal was similar to the first half of 2002 but Technology was lower. CONTINENTAL EUROPE Turnover of the Continental European operations was Â£62.1m (2002: Â£66.3m), revenue was Â£30.6m (2002: Â£35.2m) and operating profit was Â£0.9m (2002: Â£4.4m). All of our larger Continental European operations continue to experience extremely difficult market conditions, particularly in France, Holland and Germany. Our businesses in Italy, Spain, Switzerland and Portugal have fared better, achieving revenue levels broadly similar to the first half of 2002. The new businesses in Belgium and Sweden, both incurred small trading losses in the first half of the year. ASIA PACIFIC Turnover of the Asia Pacific operations increased to Â£23.7m (2002: Â£22.6m), revenue was also higher at Â£11.5m (2002: Â£11.3m) and operating profit was Â£3.2m (2002: Â£3.5m). Our businesses in Australia continue to develop well and gain market share despite tough market conditions. The outbreak of SARS adversely affected our businesses in Hong Kong and Singapore, although not as severely as was first feared. The Tokyo office, which opened two years ago, has progressed well and we intend to further increase our headcount in the second half of this year. AMERICAS Turnover was Â£2.6m (2002: Â£3.1m), revenue was Â£1.9m (2002: Â£2.5m) and we recorded an operating loss of Â£0.2m (2002: Â£0.3m). Market conditions in the USA continue to be difficult. However our business is operating to plan and it is our current intention to open a third office in the second half of this year. In Brazil the business has grown significantly. We now employ 40 people and have opened a second office in Rio de Janeiro. EXCEPTIONAL ITEMS In the first six months of 2003 the Group has two exceptional items which give rise to a net exceptional gain of Â£0.5m. At the end of 2001, the Group committed to a 20 year lease on 33,000 sq.ft. of offices in London to provide space for future expansion and to accommodate existing businesses whose leases were expiring in 2002 to 2004. Possession of the new offices took place in the first half of 2003 and, given the reductions in headcount, a substantial amount of space is now vacant. In accordance with FRS 12 the Group is making an exceptional charge for vacant property of Â£3.0m. On flotation in March 2001, the Group recorded an exceptional charge of Â£6.0m in respect of employer's social charges on the Restricted Share Scheme. These liabilities, which are dependent upon the price of Michael Page shares, crystallise in March 2004. In these interim results, this liability has been estimated at Â£2.5m using the share price at 30 June 2003 (110.5p). As a consequence there is an exceptional credit in the first six months of Â£3.5m. This provision will be recalculated at the year end using the share price at 31 December 2003 and at the end of March 2004 when the shares are distributed. TAXATION The charge for taxation is based on the expected effective annual tax rate of 38.0% on profit before taxation, exceptional items and amortisation of goodwill (2002: 34.1%). The effective rate has increased principally due to unrelieved tax losses in a number of separate jurisdictions. As a result of recent changes in UK tax legislation, the Company expects to obtain a deduction for corporation tax purposes when the Restricted Share Scheme vests. Based on the price of Michael Page shares at 30 June 2003, the deduction to UK taxable profits would be approximately Â£16m which, at the UK corporation tax rate of 30%, would reduce the tax charge in 2004 by Â£4.8m. CASH FLOW The Group started the year with net cash of Â£21.4m. In the first half we generated Â£7.7m from operations. After tax payments of Â£4.7m, net capital expenditure of Â£3.5m and dividends of Â£8.2m, we ended the period with Â£13.6m of net cash. Interest income in the first six months was Â£0.4m (2002: Â£0.1m) and includes Â£0.2m of interest on a tax refund. DIVIDENDS Whilst the Group's profits have declined, our cash position remains strong and the Board has decided to maintain the interim dividend at 1.1p (2002: 1.1p) per share. The interim dividend will be paid on 17 October 2003 to shareholders on the register at 19 September 2003. CURRENT TRADING AND FUTURE PROSPECTS We are continuing to manage the business on the basis that market conditions will remain challenging but stable for the remainder of this year. As a consequence we will maintain our tight control over costs, whilst at the same time, ensuring that the longer-term prospects of the business are protected. We are encouraged by our second quarter revenues but, as we have now entered our seasonally quieter third quarter, it is too early to say whether this is the start of a sustainable improvement and we remain cautious about the short-term outlook. Adrian Montague 18 August 2003 Unaudited Consolidated Profit and Loss Account for the six months ended 30 June 2003 Six months ended 30 June Before Exceptional After Six months Year exceptional items exceptional ended ended items (note 3) items 30 June 31 December Note 2003 2003 2003 2002 2002 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Turnover 2 180,437 - 180,437 197,822 383,470 Cost of sales (92,665) - (92,665) (96,971) (190,822) __________ ___________ ___________ ___________ ___________ Gross profit 2 87,772 - 87,772 100,851 192,648 Administrative expenses (77,149) 497 (76,652) (83,037) (160,512) ___________ ___________ ___________ ___________ ___________ Operating profit 10,623 497 11,120 17,814 32,136 Net interest 442 - 442 137 461 ___________ ___________ --___________ ___________ ___________ Profit on ordinary 2 11,065 497 11,562 17,951 32,597 activities before taxation Taxation on profit on ordinary activities 4 (4,223) (149) (4,372) (6,137) (11,443) ___________ ___________ ___________ --___________ ___________ Profit on ordinary activities after taxation being profit for the 6,842 348 7,190 11,814 21,154 financial period Equity dividends 5 (3,938) - (3,938) (4,062) (12,263) ___________ ___________ ___________ ___________ ___________ Retained profit for the 2,904 348 3,252 7,752 8,891 financial period ___________ ___________ ___________ ___________ ___________ Basic earnings per share 6 2.0 3.2 5.8 (pence) Diluted earnings per share 6 2.0 3.2 5.8 (pence) Adjusted earnings per share 6 1.9 3.2 5.8 (pence) ___________ ___________ ___________ Unaudited Consolidated Statement of Total Recognised Gains and Losses Year Six months ended ended 30 June 30 June 31 December 2003 2002 2002 Â£'000 Â£'000 Â£'000 Profit for the financial period 7,190 11,814 21,154 Foreign currency translation 2,346 1,939 1,256 differences ___________ ___________ ___________ Total recognised gains and losses for 9,536 13,753 22,410 the period ___________ ___________ ___________ Unaudited Consolidated Balance Sheet at 30 June 2003 30 June 30 June 31 December 2003 2002 2002 Note Â£'000 Â£'000 Â£'000 Fixed assets Intangible assets 1,587 1,683 1,635 Tangible assets 24,526 26,762 23,505 Investments in own shares 10,000 10,000 10,000 ___________ ___________ ___________ 36,113 38,445 35,140 ___________ ___________ ___________ Current assets Debtors 75,237 84,762 70,743 Cash at bank and in hand 14,680 21,615 22,040 ___________ ___________ ___________ 89,917 106,377 92,783 ___________ ___________ ___________ Creditors Amounts falling due within one year (56,075) (66,698) (63,069) _________ ___________ ___________ Net current assets 33,842 39,679 29,714 ___________ ___________ ___________ Total assets less current liabilities 69,955 78,124 64,854 ___________ ___________ ___________ Provisions for liabilities and charges 7 (5,503) (6,000) (6,000) ___________ ___________ ___________ Net assets 2 64,452 72,124 58,854 ___________ ___________ ___________ Capital and reserves Called up share capital 3,637 3,750 3,637 Capital contribution reserve - 306,487 - Capital redemption reserve 113 - 113 Profit and loss account 60,702 (238,113) 55,104 ___________ ___________ ___________ Equity shareholders' funds 8 64,452 72,124 58,854 ___________ ___________ ___________ Unaudited Consolidated Cash Flow Statement for the six months ended 30 June 2003 Six months ended Year ended 30 June 30 June 31 December 2003 2002 2002 Note Â£'000 Â£'000 Â£'000 Net cash inflow from operating activities 9 7,730 17,514 46,657 Returns on investments and servicing of 442 137 467 finance Taxation paid (4,686) (8,440) (11,537) Capital expenditure and financial (3,450) (1,251) (2,536) investment Equity dividends paid (8,233) (8,494) (12,524) ___________ ___________ ___________ Net cash (outflow)/inflow before (8,197) (534) 20,527 financing ___________ ___________ ___________ Financing Repayment of loan notes - - (5,452) Purchase of own shares for cancellation - - (13,726) ___________ ___________ ___________ Net cash outflow from financing - - (19,178) ___________ ___________ ___________ (Decrease)/increase in net cash in the 10 (8,197) (534) 1,349 period ___________ ___________ ___________ Notes to the unaudited financial information 1. Basis of accounting The consolidated interim financial statements have been prepared under the historical cost convention and in accordance with applicable United Kingdom accounting and financial reporting standards. The accounting policies are the same as those set out in the financial statements of the Group for the year ended 31 December 2002. The interim financial statements are unaudited but have been reviewed by the auditors and their report is set out at the end of this statement. The comparative figures for the year ended 31 December 2002 have been extracted from the Group's financial statements, a copy of which has been delivered to the Registrar of Companies. The auditors' report on those statements was unqualified and did not include a statement under Section 237 (2) or (3) of the Companies Act 1985. The interim financial information does not constitute statutory accounts as defined under Section 240 of the Companies Act 1985. 2. Segmental analysis Six months ended Year ended 30 June 30 June 31 December 2003 2002 2002 (a) Turnover by geographic region Â£'000 Â£'000 Â£'000 United Kingdom 92,084 105,790 203,868 Continental Europe 62,099 66,348 127,551 Asia Pacific Australia 20,247 18,803 39,187 Other 3,414 3,828 7,503 ___________ ___________ ___________ Total 23,661 22,631 46,690 Americas 2,593 3,053 5,361 ___________ ___________ ___________ 180,437 197,822 383,470 ___________ ___________ ___________ Six months ended Year ended 30 June 30 June 31 December 2003 2002 2002 (b) Turnover by discipline Â£'000 Â£'000 Â£'000 Finance and accounting 125,119 144,288 277,818 Marketing and sales 29,692 28,251 54,590 Other 25,626 25,283 51,062 ___________ ___________ ___________ 180,437 197,822 383,470 ___________ ___________ ___________ Six months ended Year ended 30 June 30 June 31 December 2003 2002 2002 (c) Gross profit by geographic region Â£'000 Â£'000 Â£'000 United Kingdom 43,737 51,946 99,274 Continental Europe 30,617 35,151 66,334 Asia Pacific Australia 8,418 8,010 16,380 Other 3,103 3,286 6,536 ___________ ___________ ___________ Total 11,521 11,296 22,916 Americas 1,897 2,458 4,124 ___________ ___________ ___________ 87,772 100,851 192,648 ___________ ___________ ___________ Six months ended Year ended 30 June 30 June 31 December 2003 2002 2002 (d) Gross profit by discipline Â£'000 Â£'000 Â£'000 Finance and accounting 55,841 66,108 126,477 Marketing and sales 18,738 20,847 38,740 Other 13,193 13,896 27,431 ___________ ___________ ___________ 87,772 100,851 192,648 ___________ ___________ ___________ Six months ended Year ended 30 June 30 June 31 December (e) Profit before interest, taxation and 2003 2002 2002 exceptional items by geographic region Â£'000 Â£'000 Â£'000 United Kingdom 6,727 10,316 20,487 Continental Europe 943 4,370 5,567 Asia Pacific Australia 2,902 2,873 5,796 Other 281 598 1,033 ___________ ___________ ___________ Total 3,183 3,471 6,829 Americas (230) (343) (747) ___________ ___________ ___________ Profit before taxation, interest and 10,623 17,814 32,136 exceptional items Exceptional items 497 - - ___________ ___________ ___________ Profit before interest and taxation 11,120 17,814 32,136 Net interest 442 137 461 ___________ ___________ ___________ Profit on ordinary activities before taxation 11,562 17,951 32,597 ___________ ___________ ___________ Six months ended Year ended 30 June 30 June 31 December 2003 2002 2002 (f) Net assets/(liabilities) by geographic Â£'000 Â£'000 Â£'000 region United Kingdom 43,363 40,351 40,264 Continental Europe 17,132 28,716 17,166 Asia Pacific Australia 6,364 3,894 3,825 Other 495 874 340 ___________ ___________ ___________ Total 6,859 4,768 4,165 Americas (2,902) (1,711) (2,741) ___________ ___________ ___________ 64,452 72,124 58,854 ___________ ___________ ___________ 3. Exceptional items Six months ended Year ended 30 June 30 June 31 December 2003 2002 2002 Â£'000 Â£'000 Â£'000 Release of payroll tax provision on Restricted Share 3,483 - - Scheme (a) Property costs (b) (2,986) - - ___________ ___________ ___________ 497 - - Taxation on exceptional items (149) - - ___________ ___________ ___________ 348 - - ___________ ___________ ___________ (a) Release of payroll tax provision on Restricted Share Scheme The grant of Restricted Shares on flotation in 2001 gave rise to potential National Insurance and social security liabilities. These liabilities were estimated at Â£6.0m and were charged as an exceptional item in 2001. As these liabilities crystallise in March 2004 when the Restricted Shares vest, these liabilities are now being estimated using the share price at each period end. Using the share price at 30 June 2003 of 110.5p, the required provision is Â£2.5m and as a consequence, Â£3.5m has been released from the provision. (b) Property costs The property cost provision represents rentals and other unavoidable costs on onerous lease agreements on vacant properties. 4. Taxation The charge for taxation is based on the expected annual tax rate of 38.0% on profit before taxation, exceptional items, and amortisation of goodwill (2002: 34.1% before amortisation of goodwill). 5. Dividends An interim dividend of 1.1 pence (2002: 1.1 pence) per ordinary share will be paid on 17 October 2003 to shareholders on the register at the close of business on 19 September 2003. 6. Earnings per share Basic and diluted Exceptional Adjusted EPS items EPS 30 June 2003 Profit after taxation (Â£'000) 7,190 (348) 6,842 ___________ ___________ ___________ Average shares ( '000) 357,949 - 357,949 ___________ ___________ ___________ Earnings per share (pence) 2.0 - 1.9 ___________ ___________ ___________ 30 June 2002 Profit after taxation (Â£'000) 11,814 - 11,814 ___________ ___________ ___________ Average shares ( '000) 369,286 - 369,286 ___________ ___________ ___________ Earnings per share (pence) 3.2 - 3.2 ___________ ___________ ___________ 31 December 2002 Profit after taxation (Â£'000) 21,154 - 21,154 ___________ ___________ ___________ Average share ( '000) 366,355 - 366,355 ___________ ___________ ___________ Earnings per share (pence) 5.8 - 5.8 ___________ ___________ ___________ 7. Provisions for liabilities and charges Six months ended Year ended 30 June 30 June 31 December 2003 2002 2002 Â£'000 Â£'000 Â£'000 Payroll tax liability on the Restricted Share Scheme 2,517 6,000 6,000 (note 3) Vacant property provision (note 3) 2,986 - - ___________ ___________ ___________ 5,503 6,000 6,000 ___________ ___________ ___________ 8. Reconciliation of movements in shareholders' funds Six months ended Year ended 30 June 30 June 31 December 2003 2002 2002 Â£'000 Â£'000 Â£'000 Profit for the financial period 7,190 11,814 21,154 Dividends (3,938) (4,062) (12,263) ___________ ___________ ___________ Retained profit for the financial period 3,252 7,752 8,891 Foreign currency translation differences 2,346 1,939 1,256 ___________ ___________ ___________ 5,598 9,691 10,147 Share buybacks - - (13,726) Opening shareholders' funds 58,854 62,433 62,433 ___________ ___________ ___________ Closing shareholders' funds 64,452 72,124 58,854 ___________ ___________ ___________ 9. Reconciliation of operating profit to net cash inflow from operating activities Six months ended Year ended 30 June 30 June 31 December 2003 2002 2002 Â£'000 Â£'000 Â£'000 Operating profit 11,120 17,814 32,136 Depreciation and amortisation charges 3,578 3,867 8,067 (Profit)/loss on sale of fixed assets (77) 14 262 (Increase)/decrease in debtors (4,056) (3,480) 10,349 Decrease in creditors (2,835) (701) (4,157) Net cash inflow from operating activities 7,730 17,514 46,657 10. Reconciliation of net cash flow to movement in net funds Six months ended Year ended 30 June 30 June 31 December 2003 2002 2002 Â£'000 Â£'000 Â£'000 (Decrease)/increase in cash in the period (8,197) (534) 1,349 Change in net funds resulting from cash flows (8,197) (534) 1,349 Decrease in debt financing - - 5,452 Foreign exchange movements 418 424 224 Movements in net funds in period (7,779) (110) 7,025 Opening net funds 21,372 14,347 14,347 Closing net funds 13,593 14,237 21,372 11. Analysis of net funds Foreign At Cash exchange At 31 December 2002 flow movements 30 June 2003 Â£'000 Â£'000 Â£'000 Â£'000 Cash at bank and in hand 22,040 (7,748) 388 14,680 Bank overdrafts (668) (449) 30 (1,087) Total net funds 21,372 (8,197) 418 13,593 12. Nature of financial information The interim financial statements were approved by a committee of the Board of Directors on 18 August 2003. Copies of this statement of interim results are available from the Company's Registrar - Capita IRG plc, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU, at the Company's registered office - Page House, 39-41 Parker Street, London WC2B 5LN, and on the Company's website - www.michaelpage.co.uk. Independent review report to Michael Page International plc Introduction We have been instructed by the company to review the financial information for the six months ended 30 June 2003 which comprises the consolidated profit and loss account, the consolidated statement of total recognised gains and losses, the consolidated balance sheet, the consolidated cash flow statement and related notes 1 to 12. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report is made solely to the company in accordance with Bulletin 1999/4 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting polices and presentation applied to the interim figures are consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom auditing standards and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2003. Deloitte & Touche LLP Chartered Accountants 18 August 2003 This information is provided by RNS The company news service from the London Stock Exchange

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