Interim Results

Michael Page International PLC 16 August 2004 16 August 2004 MICHAEL PAGE INTERNATIONAL PLC Half Year Results for the period ended 30 June 2004 Michael Page International plc ("Michael Page"), the specialist professional recruitment company, announces its half year results for the period ended 30 June 2004. Key Points • Turnover up 13.4% to £204.6m (2003: £180.4m) • Revenue (gross profit) up 14.4% to £100.4m (2003: £87.8m) • Operating profit before exceptional items* up 65.9% to £17.6m (2003: £10.6m before exceptional items) • Revenue from permanent placements up 18.7% • Revenue split between permanent and temporary placements was 71:29 (2003: 68:32) • Adjusted earnings per share before exceptional items up 63.2% to 3.1p (2003: 1.9p). Basic earnings per share 5.7p (2003: 2.0p) • Dividend up by 13.6% to 1.25p per share (2003: 1.1p) * Operating profit after exceptional items was £17.6m (2003: £11.1m) Commenting on the results, Terry Benson, Chief Executive of Michael Page, said: "I am very pleased to report encouraging results for the six months ended 30 June 2004 which are considerably improved over the first half of 2003. As economic conditions improved and business confidence began to recover, our businesses in the UK, Asia Pacific and the Americas began to record much stronger revenue growth. Conditions for our Continental European businesses remained challenging, but towards the end of the second quarter we began to experience some early signs of increased activity. "Looking ahead, with brighter economic conditions and increased business confidence, we believe that demand for our services is likely to increase in all countries and across all disciplines. We are very well placed to meet this demand." 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 I am very pleased to report encouraging results for the six months ended 30 June 2004 which are considerably improved over the first half of 2003. As economic conditions improved and business confidence began to recover, our businesses in the UK, Asia Pacific and the Americas began to record much stronger revenue growth. Conditions for our Continental European businesses remained challenging, but towards the end of the second quarter we began to experience some early signs of increased activity. Turnover for the six months ended 30 June 2004 increased by 13.4% to £204.6m (2003: £180.4m) and revenue (gross profit) increased 14.4% to £100.4m (2003: £87.8m). The combination of high operational gearing and usual attention to costs resulted in operating profit of £17.6m (2003: £11.1m including a net exceptional gain of £0.5m), an increase of 65.9% (before exceptional items). Profit before tax was £17.8m (2003: £11.6m). We started the year with 2,260 staff operating from 105 offices in 16 countries. We have continued to invest sensibly in new markets when appropriate and at 30 June 2004 our staff numbers have increased to 2,435 (2003: 2,279) operating from 109 offices in 16 countries. We have experienced significantly larger growth in revenue generated from permanent placements (+18.7%) than that generated from temporary placements (+5.3%). In the first half of 2004 the mix of the Group's turnover and revenue between permanent and temporary placements was 37:63 (2003: 35:65) and 71:29 (2003: 68:32) respectively. UNITED KINGDOM Turnover of the UK operations increased by 21.1% to £111.5m (2003: £92.1m), revenue increased by 21.5% to £53.1m (2003: £43.7m) and operating profit before exceptional items increased by 64.8% to £11.1m (2003: £6.7m). Revenue from Finance and Accounting increased by 18%. Marketing, Sales and Retail increased by 25% and the other disciplines increased by 36%. CONTINENTAL EUROPE Turnover of the Continental European operations was £59.8m (2003: £62.1m), revenue was £29.7m (2003: £30.6m) and operating profit was £1.5m (2003: £0.9m). The two largest businesses in France and Holland faced the most challenging conditions and revenue was less than that recorded in the first half of 2003. All other businesses in Continental Europe increased revenues on a like-for-like basis. Belgium and Sweden which were opened in the first half of 2003 both produced a trading profit in the first half of 2004. ASIA PACIFIC Turnover of the Asia Pacific operations increased by 18.0% to £27.9m (2003: £23.7m) and revenue increased by 24.3% to £14.3m (2003: £11.5m). Operating profit increased by 51.6% to £4.8m (2003: £3.2m). We opened a new office in Brisbane in the first half of 2004. Our businesses in Hong Kong and Singapore achieved particularly strong year on year revenue growth in excess of 40%. In August we entered into a strategic alliance with Shanghai Tian Cai Network Co. Ltd (Tian Cai). The strategic alliance will allow Michael Page International, through Tian Cai, to provide specialist executive recruitment services to its clients in Shanghai. AMERICAS In the Americas, turnover more than doubled to £5.3m (2003: £2.6m) and revenue increased by 74.8% to £3.3m (2003: £1.9m). Despite start-up costs of new offices the region generated an operating profit of £0.2m (2003: operating loss of £0.2m). In the USA, market conditions continue to improve and we are developing a strong Finance business in both permanent and temporary placements. As planned, we opened offices in Boston and Chicago during the first half and will add further to headcount during the second half. In Brazil the two offices generated an increase in revenue of over 40% and in June we expanded further by starting Sales & Marketing recruitment. TAXATION AND EARNINGS PER SHARE The pre-exceptional charge for taxation is based on the expected effective annual tax rate of 37% (2003: 38.2%) on profit before taxation and exceptional items. The Restricted Share Scheme, which was established at the time of flotation, vested in April 2004 and is expected to give rise to a deduction for tax purposes in the UK and certain other tax jurisdictions. These deductions should give rise to an exceptional tax credit of £9.0m which has been reflected in full in the first half of 2004, giving rise to a net tax credit of £2.4m for the six months ended 30 June 2004. Basic earnings per share for the six months ended 30 June 2004 was 5.7p (2003: 2.0p) and before exceptional items adjusted earnings per share was 3.1p (2003: 1.9p). CASH FLOW The Group started the year with net cash of £22.4m. In the first half we generated £8.0m from operations after funding an £8.6m increase in working capital. During the first half we paid £3.8m to settle the payroll tax liability on vesting of the Restricted Share Scheme. Other significant payments comprised taxation of £4.4m, net capital expenditure of £1.7m and dividends of £8.2m. Also during the first half we reinstated the share buyback programme spending £15.3m purchasing 9m shares at an average cost of 171p per share. At 30 June 2004 net cash was £0.8m. Interest income in the first six months was £0.1m (2003: £0.4m). DIVIDENDS As the Group's profitability has increased considerably and the prospects are encouraging the Board has decided to increase, for the first time since flotation in March 2001, the interim dividend by 13.6% to 1.25p (2003: 1.10p) per share. It is the Board's intention to pay dividends at a level which is sustainable and continue to use share repurchases as an additional mechanism for returning surplus cash to shareholders. The interim dividend will be paid on 15th October 2004 to shareholders on the register at 17th September 2004. CURRENT TRADING AND FUTURE PROSPECTS We are very pleased with our first half results and although we have now entered the seasonally quieter summer period we are confident of further progress in the second half, particularly if the recent encouraging trends on Continental Europe continue. With brighter economic conditions and increased business confidence we believe that demand for our services is likely to increase in all countries and across all disciplines. We are confident that we are very well placed to meet this demand. Adrian Montague Chairman 16 August 2004 Unaudited Consolidated Profit and Loss Account for the six months ended 30 June 2004 Six months ended Year ended 30 June 30 June 31 December 2004 2003 2003 Note £'000 £'000 £'000 Turnover 2 204,568 180,437 372,616 Cost of sales (104,123) (92,665) (194,131) --------------- --------------- --------------- Gross profit 2 100,445 87,772 178,485 Administrative expenses (82,826) (76,652) (156,702) --------------- --------------- --------------- Operating profit 17,619 11,120 21,783 Net interest 144 442 626 --------------- --------------- --------------- Profit on ordinary activities before taxation 2 17,763 11,562 22,409 Taxation on profit on ordinary activities 4 2,428 (4,372) (8,664) --------------- --------------- --------------- Profit on ordinary activities after taxation being profit for the financial period 20,191 7,190 13,745 Equity dividends 5 (4,385) (3,938) (12,171) --------------- --------------- --------------- Retained profit for the financial period 15,806 3,252 1,574 ========= ========= ========= Basic earnings per share (pence) 6 5.7 2.0 3.8 Diluted earnings per share (pence) 6 5.7 2.0 3.8 Adjusted earnings per share (pence) 6 3.1 1.9 4.1 ========= ========= ========= Unaudited Consolidated Statement of Total Recognised Gains and Losses Six months ended Year ended 30 June 30 June 31 December 2004 2003 2003 £'000 £'000 £'000 Profit for the financial period 20,191 7,190 13,745 Foreign currency translation differences (1,500) 2,346 2,786 --------------- --------------- --------------- Total recognised gains and losses for the 18,691 9,536 16,531 period ========= ========= ========= Unaudited Consolidated Balance Sheet at 30 June 2004 Restated (note 1) 30 June 30 June 31 December 2004 2003 2003 Note £'000 £'000 £'000 Fixed assets Intangible assets 1,491 1,587 1,539 Tangible assets 21,069 24,526 23,101 --------------- --------------- --------------- 22,560 26,113 24,640 --------------- --------------- --------------- Current assets Debtors 86,351 75,237 71,530 Cash at bank and in hand 12,140 14,680 23,211 --------------- --------------- --------------- 98,491 89,917 94,741 --------------- --------------- --------------- Creditors: Amounts falling due within one (66,786) (56,075) (59,355) year --------------- --------------- --------------- Net current assets 31,705 33,842 35,386 --------------- --------------- --------------- Total assets less current 54,265 59,955 60,026 liabilities --------------- --------------- --------------- Creditors: Amounts falling due after more (337) - (444) than one year Provisions for liabilities and 7 (1,626) (5,503) (6,239) charges --------------- --------------- --------------- Net assets 2 52,302 54,452 53,343 ========= ========= ========= Capital and reserves Called-up share capital 3,572 3,637 3,637 Capital redemption reserve 178 113 113 EBT reserve (9,871) (10,000) (9,871) Treasury shares (4,348) - - Profit and loss account 62,771 60,702 59,464 --------------- --------------- --------------- Equity shareholders' funds 8 52,302 54,452 53,343 ========= ========= ========= Unaudited Consolidated Cash Flow Statement for the six months ended 30 June 2004 Six months ended Year ended 30 June 30 June 31 December 2004 2003 2003 Note £'000 £'000 £'000 Net cash inflow from operating 9 7,992 7,730 29,179 activities Return on investments and servicing 166 442 625 of finance Taxation paid (4,364) (4,686) (10,657) Capital expenditure and financial (1,747) (3,450) (6,349) investment Equity dividends paid (8,248) (8,233) (12,170) --------------- --------------- --------------- Net cash (outflow)/inflow before (6,201) (8,197) 628 financing Financing Sale of shares held by the Employee - - 129 Benefit Trust Cash inflow from short-term loans 10,600 - - (net) Purchase of own shares for (10,999) - - cancellation Purchase of treasury shares (4,348) - - --------------- --------------- --------------- Net cash (outflow)/inflow from (4,747) - 129 financing --------------- --------------- --------------- (Decrease)/increase in net cash in 10 (10,948) (8,197) 757 the 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 2003. The Group adopted UITF Abstract 38 "Accounting for ESOP Trusts" during the second half of 2003 and as a result a prior year adjustment was reflected in the financial statements for the year ended 31 December 2003. For comparative purposes, the balance sheet for the six months ended 30 June 2003 has also been restated to reflect the adoption of this UITF. As a result, " Investments in own shares" of £10.0m have been removed from net assets and deducted from shareholders' funds. There is no effect on profit for the period. 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 2003 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 2004 2003 2003 (a) Turnover by geographic £'000 £'000 £'000 region United Kingdom 111,474 92,084 194,262 Continental Europe 59,836 62,099 120,363 Asia Pacific Australia 22,959 20,247 43,708 Other 4,966 3,414 7,673 --------------- --------------- --------------- Total 27,925 23,661 51,381 Americas 5,333 2,593 6,610 --------------- --------------- --------------- 204,568 180,437 372,616 ========= ========= ========= Six months ended Year ended 30 June 30 June 31 December 2004 2003 2003 (b) Turnover by discipline £'000 £'000 £'000 Finance and accounting 138,244 125,119 256,731 Marketing and sales 35,188 29,692 61,832 Other 31,136 25,626 54,053 --------------- --------------- --------------- 204,568 180,437 372,616 ========= ========= ========= Six months ended Year ended 30 June 30 June 31 December 2004 2003 2003 (c) Gross profit by £'000 £'000 £'000 geographic region United Kingdom 53,140 43,737 90,630 Continental Europe 29,670 30,617 58,227 Asia Pacific Australia 9,830 8,418 18,082 Other 4,489 3,103 6,951 --------------- --------------- --------------- Total 14,319 11,521 25,033 Americas 3,316 1,897 4,595 --------------- --------------- --------------- 100,445 87,772 178,485 ========= ========= ========= Six months ended Year ended 30 June 30 June 31 December 2004 2003 2003 (d) Gross profit by £'000 £'000 £'000 discipline Finance and accounting 61,936 55,841 113,599 Marketing and sales 21,975 18,738 37,704 Other 16,534 13,193 27,182 --------------- --------------- --------------- 100,445 87,772 178,485 ========= ========= ========= Six months ended Year ended 30 June 30 June 31 December (e) Profit before interest, 2004 2003 2003 taxation and exceptional items by geographic region £'000 £'000 £'000 United Kingdom 11,087 6,727 15,638 Continental Europe 1,505 943 (280) Asia Pacific Australia 3,311 2,902 6,303 Other 1,514 281 1,285 --------------- --------------- --------------- Total 4,825 3,183 7,588 Americas 202 (230) (62) --------------- --------------- --------------- Profit before interest, taxation and 17,619 10,623 22,884 exceptional items Exceptional items - 497 (1,101) --------------- --------------- --------------- Profit before interest and taxation 17,619 11,120 21,783 Net interest 144 442 626 --------------- --------------- --------------- Profit on ordinary activities before 17,763 11,562 22,409 taxation ========= ========= ========= Restated (note 1) 30 June 30 June 31 December 2004 2003 2003 (f) Net assets/(liabilities) by £'000 £'000 £'000 geographic region United Kingdom 38,214 33,363 41,115 Continental Europe 10,129 17,132 9,791 Asia Pacific Australia 4,576 6,364 4,741 Other 2,221 495 811 --------------- --------------- --------------- Total 6,797 6,859 5,552 Americas (2,838) (2,902) (3,115) --------------- --------------- --------------- 52,302 54,452 53,343 ========= ========= ========= 3. Exceptional items As a result of the vesting of the Restricted Share Scheme in April 2004, the Company is able to obtain a deduction for corporation tax purposes of approximately £27m which, at the relevant local corporation tax rates, has resulted in a non-operating exceptional credit of £9.0m to the corporation tax charge. The exceptional items in the comparative periods included in operating profit comprise a release of the payroll tax provision on the Restricted Share Scheme (June 2003: £3.5m, December 2003: £1.9m), and rentals and other unavoidable costs on onerous lease agreements on vacant properties (June and December 2003: £3.0m). 4. Taxation The pre-exceptional charge for taxation is based on the expected annual tax rate of 37.0% on profit before taxation (2003: 38.2% before exceptional items). Six months ended Year ended 30 June 30 June 31 December 2004 2003 2003 £'000 £'000 £'000 Current tax charge (6,572) (4,223) (8,994) Exceptional tax credit/(charge) (note 3) 9,000 (149) 330 --------------- --------------- --------------- Current tax credit/(charge) for the period 2,428 (4,372) (8,664) ========= ========= ========= 5. Dividends An interim dividend of 1.25 pence (2003: 1.1 pence) per ordinary share will be paid on 15 October 2004 to shareholders on the register at the close of business on 17 September 2004. 6. Earnings per share Six months ended Year ended 30 June 30 June 31 December 2004 2003 2003 Earnings after exceptional items for basic earnings 20,191 7,190 13,745 per share (£'000) Exceptional items (£'000) (9,000) (348) 771 --------------- --------------- --------------- Earnings before exceptional items for adjusted 11,191 6,842 14,516 earnings per share (£'000) ========= ========= ========= Weighted average number of shares used for basic and 356,689 357,949 357,955 adjusted earnings per share ('000) Dilution effect of share plans ('000) 165 - - --------------- --------------- --------------- Diluted weighted average number of shares used for 356,854 357,949 357,955 diluted earnings per share ('000) ========= ========= ========= Basic earnings per share (pence) 5.7 2.0 3.8 Diluted earnings per share (pence) 5.7 2.0 3.8 Adjusted earnings per share (pence) 3.1 1.9 4.1 ========= ========= ========= 7. Provisions for liabilities and charges Six months ended Year ended 30 June 30 June 31 December 2004 2003 2003 £'000 £'000 £'000 Payroll tax liability on the Restricted Share - 2,517 4,114 Scheme (a) Vacant property provision (b) 1,626 2,986 2,125 --------------- --------------- --------------- 1,626 5,503 6,239 ========= ========= ========= (a) 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 crystallised in April 2004 when the Restricted Shares vested. (b) Vacant property provision The property cost provision represents rentals and other unavoidable costs on onerous lease agreements on vacant properties. 8. Reconciliation of movements in shareholders' funds Six months ended Restated (note 1) Year ended 30 June 30 June 31 December 2004 2003 2003 £'000 £'000 £'000 Profit for the financial period 20,191 7,190 13,745 Dividends (4,385) (3,938) (12,171) --------------- --------------- --------------- Retained profit for the financial period 15,806 3,252 1,574 Foreign currency translation differences (1,500) 2,346 2,786 --------------- --------------- --------------- 14,306 5,598 4,360 Purchase of own shares for cancellation (10,999) - - Purchase of treasury shares (4,348) - - Sale of shares held by the Employee Benefit Trust - - 129 --------------- --------------- --------------- Net (reduction in)/addition to shareholders' (1,041) 5,598 4,489 funds Opening shareholders' funds 53,343 48,854 48,854 --------------- --------------- --------------- Closing shareholders' funds 52,302 54,452 53,343 ========= ========= ========= 9. Reconciliation of operating profit to net cash inflow from operating activities Six months ended Year ended 30 June 30 June 31 December 2004 2003 2003 £'000 £'000 £'000 Operating profit before exceptional items 17,619 10,623 22,884 Exceptional items - 497 (1,101) --------------- --------------- --------------- Operating profit after exceptional items 17,619 11,120 21,783 Depreciation and amortisation charges 3,273 3,578 7,688 (Profit)/loss on sale of fixed assets (39) (77) 241 Increase in debtors (11,388) (4,056) (313) Increase/(decrease) in creditors 2,802 (2,835) (459) (Decrease)/increase in provisions (4,275) - 239 --------------- --------------- --------------- Net cash inflow from operating activities 7,992 7,730 29,179 ========= ========= ========= 10. Reconciliation of net cash flow to movement in net cash Six months ended Year ended 30 June 30 June 31 December 2004 2003 2003 £'000 £'000 £'000 (Decrease)/increase in cash in the period (10,948) (8,197) 757 Cash inflow from increase in short-term loans (10,600) - - Foreign exchange movements (96) 418 305 --------------- --------------- --------------- Movements in net cash in period (21,644) (7,779) 1,062 Opening net cash 22,434 21,372 21,372 --------------- --------------- --------------- Closing net cash 790 13,593 22,434 ========= ========= ========= 11. Analysis of net cash Foreign At Cash exchange At 31 December 2003 flow movements 30 June 2004 £'000 £'000 £'000 £'000 Cash at bank and in hand 23,211 (10,764) (307) 12,140 Bank overdrafts (777) (184) 211 (750) --------------- --------------- --------------- --------------- 22,434 (10,948) (96) 11,390 Debt due within one year - (10,600) - (10,600) --------------- --------------- --------------- --------------- Total net cash 22,434 (21,548) (96) 790 ========= ========= ========= ========= 12. Nature of financial information The interim financial statements were approved by a committee of the Board of Directors on 16 August 2004. 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 2004 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 2004. Deloitte & Touche LLP Chartered Accountants London 16 August 2004 This information is provided by RNS The company news service from the London Stock Exchange

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