Interim Results
Michael Page International PLC
15 August 2005
Half Year Results for the Period Ended 30 June 2005
Michael Page International plc ("Michael Page"), the specialist professional
recruitment company, announces its half year results for the period ended 30
June 2005.
Key Points
• Turnover up 22.4% to £250.4m (2004: £204.6m)
• Gross profit up 27.6% to £128.2m (2004: £100.4m)
• Operating profit up 78.8% to £30.6m (2004: £17.1m)
• £20.1m of cash generated from operations (2004: £8.0m)
• Gross profit from permanent placements up 31.2%
• Gross profit split between permanent and temporary placements was 73: 27
(2004: 71:29)
• Adjusted earnings per share before exceptional tax items up 113% to 6.6p
(2004: 3.1p). Basic earnings per share 6.6p (2004: 5.6p). Diluted earnings
per share 6.5p (2004: 5.6p).
• Proposed interim dividend up by 20% to 1.5p per share (2004: 1.25p)
Commenting on the results, Terry Benson, Chief Executive of Michael Page, said:
"This is an outstanding set of results, with substantial rises in gross profit,
operating profit and dividends, as well as strong generation of cash. We have
seen excellent growth across all regions of our business and were very
encouraged by the performance of our Continental European businesses,
particularly the strengthening growth in France.
"Market conditions remain favourable and, with the business well positioned for
further growth, we are confident of sustained good progress into the second half
of the year."
Enquiries:
Michael Page International plc
Terry Benson, Chief Executive 020 7214 4487
Stephen Puckett, Finance Director 020 7269 2301
Financial Dynamics 020 7269 7291
David Yates/Rob Gurner
CHAIRMAN'S STATEMENT
It is a pleasure to report another set of strong results for the Group well
ahead of expectations set at the start of the year. While the UK, Asia Pacific
and the Americas continued to grow strongly, the most encouraging aspect of the
first half has been the improved performance of our Continental European
businesses.
These interim results are our first set of results prepared under International
Financial Reporting Standards (IFRS). While the application of IFRS has no
significant impact on the reported results for the Group, the results for 2004
have been restated in accordance with IFRS. Reconciliation of prior periods'
results to those restated under IFRS are shown in Note 10.
The Group's turnover for the six months ended 30 June 2005 increased by 22.4% to
£250.4m (2004: £204.6m) and gross profit increased 27.6% to £128.2m (2004:
£100.4m). The Group's business model with inherent high operational gearing
combined with management's close attention to costs has resulted in operating
profit increasing by 78.8% to £30.6m (2004: £17.1m). Profit before tax was
£30.5m (2004: £17.2m).
We have continued to invest sensibly in our global office network and increasing
our own people resources. At 30 June 2005 our staff numbers have increased to
2,747 (2004: 2,435) operating from 112 offices in 16 countries. During the
period we opened new offices in Chatswood, North Sydney in Australia, Amersfoort
in The Netherlands and Liverpool in the UK. Our ongoing organic expansion
programme will continue in the second half and as part of this we will, during
the third quarter, open an office in Toronto in Canada and Warsaw in Poland.
We generated significantly higher growth in gross profit from permanent
placements (+31.2%) than from temporary placements (+18.9%). In the first half
of 2005, the mix of the Group's turnover and gross profit between permanent and
temporary placements was 39:61 (2004: 37:63) and 73:27 respectively (2004: 71:
29). The gross margin on temporary placements increased to 22.9% (2004: 22.7%).
UNITED KINGDOM
Turnover of the UK operations increased by 14.7% to £127.9m (2004: £111.5m),
gross profit increased by 18.5% to £62.9m (2004: £53.1m) and operating profit
increased by 42.3% to £15.5m (2004: £10.9m). Excluding our Scottish operations
which are now managed separately from the rest of the UK, gross profit from
Finance and Accounting increased by 11%, Marketing, Sales and Retail increased
by 19% and the other disciplines increased by 50%. In Scotland gross profit
increased by 29%.
CONTINENTAL EUROPE
Turnover of the Continental European operations increased by 29.1% to £77.2m
(2004: £59.8m), gross profit increased by 37.2% to £40.7m (2004: £29.7m) and
operating profit increased more than five fold to £7.8m (2004: £1.3m). Our
largest business in this region is in France, which currently contributes just
under 50% of the region's gross profit. The French business returned to growth
towards the end of the fourth quarter of 2004 and this growth rate strengthened
in the first half of 2005 to 14%. Elsewhere in the region our businesses are
all performing well, gaining market share and collectively growing gross profit
by 68%.
ASIA PACIFIC
Turnover of the Asia Pacific operations increased by 33.6% to £37.3m (2004:
£27.9m) and gross profit increased by 31.3% to £18.8m (2004: £14.3m). Operating
profit increased by 38.9% to £6.6m (2004: £4.7m). Our largest business in the
region, Australia continues to perform consistently well increasing gross profit
by 25.8%. The other smaller businesses in the region grew at faster rates,
particularly in Tokyo which benefited from increased investment in personnel and
enlarged office space.
AMERICAS
In the Americas, turnover increased by 50.1% to £8.0m (2004: £5.3m) and gross
profit increased by 71.8% to £5.7m (2004: £3.3m). Operating profit increased to
£0.7m (2004: £0.2m). In the USA we are continuing to develop our finance and
accounting businesses and build the Michael Page brand. In the second half we
plan further investment with a new office in Toronto, Canada and another office
on the Eastern seaboard of the USA. In Brazil, gross profit more than doubled
as we benefited from increased investment and our strong market position.
TAXATION AND EARNINGS PER SHARE
The charge for taxation is based on the expected effective annual tax rate of
26.0% (2004: 34.8% before exceptional items) on profit before taxation. The
effective rate is substantially lower than in 2004 due to the anticipated
utilisation and recognition of prior years' tax losses.
In 2004 the Restricted Share Scheme, established at the time of flotation,
vested and gave rise to a deduction for tax purposes in the UK and certain other
tax jurisdictions. These deductions gave rise to a tax credit of £9.0m which
was recorded as an exceptional item in 2004.
Basic earnings per share for the six months ended 30 June 2005 was 6.6p (2004:
5.6p) and before exceptional items adjusted earnings per share was 6.6p (2004:
3.1p).
CASH FLOW AND SHARE REPURCHASES
The Group started the year with net cash of £12.2m. In the first half we
generated £20.1m from operations after funding a £14.1m increase in working
capital reflecting the increased activity. Tax paid was £1.2m, benefiting from
the exceptional tax credit and net capital expenditure was £2.9m. During the
first half £24.9m was spent repurchasing 12.8m shares at an average price of
193.3p. After paying £9.4m of dividends in the first half, the Group had net
debt of £6.1m at 30 June 2005.
DIVIDENDS
As previously stated, 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 to return surplus cash to shareholders. The Board has
decided to increase the interim dividend by 20% to 1.5p (2004: 1.25p) per share.
The interim dividend will be paid on 14th October 2005 to shareholders on the
register at 16th September 2005.
CURRENT TRADING AND FUTURE PROSPECTS
We are greatly encouraged by our first half results and although we are now in
the seasonally quieter summer period we are confident of further progress in the
second half. We believe the business is well positioned and intend to continue
to invest and expand the business during the second half of the year. Our third
quarter trading update will be issued on 5 October 2005.
Adrian Montague
Chairman
15 August 2005
Unaudited Consolidated Income Statement for the six months ended 30 June 2005
As restated
Six months ended Year ended
30 June 30 June 31 December
2005 2004 2004
Note £'000 £'000 £'000
Turnover 2 250,415 204,568 433,731
Cost of sales (122,247) (104,123) (223,090)
Gross profit 2 128,168 100,445 210,641
Administrative expenses (97,586) (83,342) (171,783)
Operating profit 2 30,582 17,103 38,858
Net finance (costs) / income (38) 144 1
Profit before tax 30,544 17,247 38,859
Income tax (expense) /credit 3 (7,942) 2,689 (4,523)
Profit for the period 22,602 19,936 34,336
Attributable to:
Equity holders of the parent 22,602 19,936 34,336
Earnings per share
Basic earnings per share (pence) 5 6.6 5.6 9.8
Diluted earnings per share (pence) 5 6.5 5.6 9.7
The above results relate to continuing operations.
Unaudited Consolidated Statement of Changes in Equity at 30 June 2005
Capital Currency
Share Treasury redemption EBT translation Retained Total
capital shares reserve reserve reserve earnings equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2004 (as 3,637 - 113 (9,871) - 67,628 61,507
restated)
Currency translation differences - - - - (1,500) - (1,500)
Net expense recognised directly in - - - - (1,500) - (1,500)
equity
Profit for the six months ended 30 - - - - - 19,936 19,936
June 2004
Total recognised (expense)/income - - - - (1,500) 19,936 18,436
for the period
Purchase of own shares (65) (4,348) 65 - - (10,999) (15,347)
Credit in respect of share schemes - - - - - 502 502
Dividends - - - - - (8,248) (8,248)
(65) (4,348) 65 - - (18,745) (23,093)
Balance at 30 June 2004 (as 3,572 (4,348) 178 (9,871) (1,500) 68,819 56,850
restated)
Balance at 1 July 2004 3,572 (4,348) 178 (9,871) (1,500) 68,819 56,850
Currency translation differences - - - - 1,312 - 1,312
Net income recognised directly in - - - - 1,312 - 1,312
equity
Profit for the six months ended 31 - - - - - 14,400 14,400
December 2004
Total recognised income for the - - - - 1,312 14,400 15,712
period
Purchase of own shares - (8,774) - - - - (8,774)
Credit in respect of share schemes - - - - - 1,057 1,057
Dividends - - - - - (4,345) (4,345)
- (8,774) - - - (3,288) (12,062)
Balance at 31 December 2004 (as 3,572 (13,122) 178 (9,871) (188) 79,931 60,500
restated)
Balance at 1 January 2005 3,572 (13,122) 178 (9,871) (188) 79,931 60,500
Currency translation differences - - - - (203) - (203)
Net expense recognised directly in - - - - (203) - (203)
equity
Profit for the six months ended 30 - - - - - 22,602 22,602
June 2005
Total recognised (expense)/income - - - - (203) 22,602 22,399
for the period
Purchase of own shares - (24,920) - - - - (24,920)
Credit in respect of share schemes - - - - - 1,360 1,360
Dividends - - - - - (9,444) (9,444)
- (24,920) - - - (8,084) (33,004)
Balance at 30 June 2005 3,572 (38,042) 178 (9,871) (391) 94,449 49,895
Unaudited Consolidated Balance Sheet at 30 June 2005
As restated
30 June 30 June 31 December
2005 2004 2004
Note £'000 £'000 £'000
Non-current assets
Intangible assets - Goodwill 1,539 1,539 1,539
- Computer software 2,448 2,299 2,194
Property, plant and equipment 18,352 18,770 18,739
Deferred tax assets 6,891 2,914 2,423
Trade and other receivables 1,756 1,374 1,692
30,986 26,896 26,587
Current assets
Trade and other receivables 102,399 78,201 86,214
Current tax receivables 623 9,932 1,183
Cash and cash equivalents 7 14,984 12,140 12,532
118,006 100,273 99,929
Total assets 2 148,992 127,169 126,516
Current liabilities
Trade and other payables (62,397) (51,066) (60,694)
Bank overdrafts and loans 7 (21,035) (11,350) (317)
Current tax payable (12,406) (4,458) (1,450)
Provisions for liabilities and charges (480) (712) (576)
(96,318) (67,586) (63,037)
Non-current liabilities
Trade and other payables (2,166) (1,103) (1,678)
Provisions for liabilities and charges (394) (914) (612)
Deferred tax liabilities (219) (716) (689)
(2,779) (2,733) (2,979)
Total liabilities (99,097) (70,319) (66,016)
Net assets 49,895 56,850 60,500
Capital and reserves
Called-up share capital 3,572 3,572 3,572
Capital redemption reserve 178 178 178
EBT reserve (9,871) (9,871) (9,871)
Treasury shares (38,042) (4,348) (13,122)
Currency translation reserve (391) (1,500) (188)
Retained earnings 94,449 68,819 79,931
Total equity 49,895 56,850 60,500
Unaudited Consolidated Cash Flow Statement for the six months ended 30 June 2005
As restated
Six months ended Year ended
30 June 30 June 31 December
2005 2004 2004
Note £'000 £'000 £'000
Cash generated from operations 6 20,063 7,992 35,690
Income tax paid (1,216) (4,364) (4,825)
Net cash from operating activities 18,847 3,628 30,865
Cash flows from investing activities
Purchases of property, plant and equipment (3,187) (2,362) (5,324)
Purchases of computer software (611) (285) (500)
Proceeds from the sale of property, plant and equipment 921 900 1,416
Interest received 193 244 369
Net cash used in investing activities (2,684) (1,503) (4,039)
Cash flows from financing activities
Dividends paid (9,444) (8,248) (12,593)
Interest paid (216) (78) (367)
Purchase of own shares (24,920) (15,347) (24,120)
Proceeds from short-term loan - 10,600 -
Net cash used in financing activities (34,580) (13,073) (37,080)
Net decrease in cash and cash equivalents (18,417) (10,948) (10,254)
Cash and cash equivalents at the beginning of the 12,215 22,434 22,434
period
Net cash inflow from short-tem loans - (10,600) -
Exchange gains/(losses) on cash and cash equivalents 151 (96) 35
Cash and cash equivalents at the end of the period 7 (6,051) 790 12,215
Notes to the unaudited financial information
1. Accounting policies
The consolidated interim financial statements are for the six months ended 30
June 2005. They have been prepared under the historical cost convention and in
accordance with current International Financial Reporting Standards (IFRSs), and
are covered by IFRS 1, "First-time Adoption of International Financial Reporting
Standards", because they are part of the period covered by the Group's first
IFRS financial statements for the year ended 31 December 2005. The interim
financial statements are unaudited but have been reviewed by the auditors.
The policies set out below have been consistently applied to all the periods
presented. The Group has made use of the exemption available under IFRS 1 where
cumulative translation differences for all foreign operations are deemed to be
zero at the date of transition. The Group has also taken the exemption not to
apply IFRS2 "Share-based Payment" to share options granted before 7 November
2002. Additionally, as permitted by IFRS 1, the Group has adopted IAS 32 "
Financial instruments: disclosure and presentation" and IAS 39 "Financial
instruments: recognition and measurement", prospectively from 1 January 2005.
The Group's consolidated financial statements were prepared in accordance with
the United Kingdom Generally Accepted Accounting Principles (UK GAAP) until
31 December 2004. UK GAAP differs in some areas from IFRS. In preparing the
2005 consolidated interim financial statements, management has amended certain
accounting and valuation methods applied in the UK GAAP financial statements to
comply with IFRS. The comparative figures in respect of 2004 were restated to
reflect these adjustments as disclosed in the reconciliations, and descriptions
of the effect of the transition from UK GAAP to IFRS on the Group's equity and
its net income and cash flows are shown in Note10.
The interim financial information has been prepared on the basis of the
recognition and measurement requirements of IFRS in issue that either are
endorsed by the EU and effective (or available for early adoption) at 31
December 2005 or are expected to be endorsed and effective (or available for
early adoption) at 31 December 2005, the Group's first annual reporting date at
which it is required to use adopted IFRSs. In addition, the adopted IFRS that
will be effective (or available for early adoption) in the annual financial
statements for the year ending 31 December 2005 are still subject to change and
to additional interpretations and therefore cannot be determined with certainty.
Accordingly, the accounting policies for that annual period will be determined
finally only when the annual financial statements are prepared for the year
ending 31 December 2005.
The comparative figures for the year ended 31 December 2004, prior to the
adjustments required on transition to IFRS as described below and in Note 10,
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.
The adoption of the above IFRS did not result in substantial changes to the
Group's accounting policies under UK GAAP and as set out in the Group's
financial statements for the year ended 31 December 2004. In summary:
• IAS 1 "Presentation of Financial Statements" and IAS 7 "Cash Flow
Statements" have affected the overall presentation and certain
disclosures.
• IAS 10 "Events After the Balance Sheet Date" has the effect of
prohibiting the recognition of the final dividend as a liability until
shareholder approval has been received. Under FRS 12 "Provisions,
contingent liabilities and contingent assets", a liability was
recognised.
• IAS 14 "Segment Reporting" has no material effect on the Group's
policy. The Group continues to operate in only one business segment
being that of recruitment services, and this has been identified as
the Group's primary segment. Geography is the Group's secondary
segment.
• IAS 21 "The Effects of Changes in Foreign Exchange Rates" has no
material effect on the Group's policy. All material Group entities
have the same functional currency as their measurement currency.
• IAS 24 "Related Party Disclosures" has affected the identification of
related parties and some other related-party disclosures.
• the adoption of IFRS 2 "Share-based Payment" has resulted in a change
in the accounting policy for share-based payments. Under UK GAAP, the
provision of share-based payments to employees did not result in a
charge in the income statement. Under IFRS, the Group charges the
cost of share-based payments to the income statement over the vesting
period.
• the adoption of IFRS 3 "Business Combinations", IAS 36 "Impairment of
Assets and IAS 38 "Intangible Assets" have resulted in a change in the
accounting policy for goodwill. Under UK GAAP, goodwill was amortised
on a straight line basis over a period of 20 years and assessed for an
indication of impairment at each balance sheet date. In accordance
with the provisions of IFRS 3, the Group ceased amortisation of
goodwill from 1 January 2005. Accumulated amortisation as at 31
December has been eliminated with a corresponding decrease in the cost
of goodwill. From the year ended 31 December 2005 onwards, goodwill
is tested annually for impairment, as well as when there are
indications of impairment.
The group has reassessed the useful lives of its intangible assets in accordance
with the provisions of IAS 38. No adjustment resulted from this reassessment.
The remaining standards are either not applicable to the business or have no
material effect on the Group's policies.
All changes in the accounting policies have been made in accordance with the
transition provisions in the respective standards. The revised accounting
policies now followed by the Group are shown below.
Turnover and income recognition
Turnover, which excludes value added tax ("VAT"), constitutes the value of
services undertaken by the Group as its principal activities, which are
recruitment consultancy and other ancillary services. These consist of:
• turnover from temporary placements, which represents amounts billed
for the services of temporary staff including the salary cost of these
staff. This is recognised when the service has been provided;
• turnover from permanent placements, which is based on a percentage of
the candidate's remuneration package, and is derived from both
retained assignments (income recognised on completion of defined
stages of work) and non-retained assignments (income recognised at the
date an offer is accepted by a candidate, and where a start date has
been determined). The latter includes turnover anticipated, but not
invoiced, at the balance sheet date, which is correspondingly accrued
on the balance sheet within "Trade and other receivables". A
provision is made against accrued income for possible cancellations of
placements prior to, or shortly after, the commencement of employment;
and
• turnover from amounts billed to clients for expenses incurred on their
behalf (principally advertisements) and is recognised when the expense
in incurred.
Cost of sales
Cost of sales consists of the salary cost of temporary staff and costs incurred
on behalf of clients, principally advertising costs.
Gross profit
Gross profit is represented by turnover less cost of sales and consists of the
total placement fees of permanent candidates, the margin earned on the placement
of temporary candidates and advertising income.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value
of the Group's share of the net identifiable assets of the acquired subsidiary/
associate at the date of acquisition. Goodwill on acquisitions of subsidiaries
is included in intangible assets. Goodwill is tested annually for impairment
and carried at cost less accumulated impairment losses. Gains and losses on the
disposal of an entity include the carrying amount of goodwill relating to the
entity sold. Goodwill is allocated to cash-generating units for the purpose of
impairment testing.
Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates ("the functional currency"). The consolidated financial
statements are presented in sterling, which is the Company's functional and
presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the respective functional
currency using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of monetary
assets and liabilities denominated in foreign currencies are recognised in the
income statement.
(c) Group companies
The results and financial position of all the group entities (none of which has
the currency of a hyperinflationary economy) that have a functional currency
different from the presentation currency are translated into the presentation
currency as follows:
(i) assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance sheet;
(ii) income and expenses for each income statement are translated at
average exchange rates; and
(iii) all resulting exchange differences are recognised as a separate
component of equity.
Intangible assets
Intangible fixed assets are stated at original cost less annual impairment (in
the case of Goodwill) or accumulated amortisation (in the case of Computer
software).
Amortisation is calculated to write off the cost less estimated residual value
of the asset evenly over its expected useful life.
Goodwill Annually impaired where required
Computer software 20% per annum
Property, plant and equipment
Property, plant and equipment is stated at original cost less accumulated
depreciation. Depreciation is calculated to write off the cost less estimated
residual value of each asset evenly over its expected useful life at the
following rates:
Leasehold improvements 10% per annum or period of lease if
shorter
Furniture, fixtures and equipment 10% - 20% per annum
Motor vehicles 25% per annum
Investments
Fixed asset investments are stated at cost less provision for impairment.
Impairment of assets
Assets that have an indefinite useful life are not subject to amortisation and
are tested annually for impairment. An impairment loss is recognised for the
amount by which the asset's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset's fair value less costs to sell and
value in use. For the purpose of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash flows
(cash-generating units).
Taxation
The charge for taxation is provided at rates of corporation tax ruling during
the accounting period.
Deferred tax provided in full, using the liability method, on temporary
differences which result in an obligation at the balance sheet date to pay more
tax, or a right to pay less tax, at a future date, at rates expected to apply
when they crystallise based on current tax rates and law. Temporary differences
arise between the tax bases of assets and liabilities and their carrying amounts
in the financial statements. Deferred tax assets are recognised to the extent
that it is regarded as more likely than not that they will be recovered.
Pension costs
The Group operates defined contribution pension schemes. The assets of the
schemes are held separately from those of the Group in independently
administered funds. The pension costs charged to the income statement
represents the contributions payable by the Group to the funds during each
period.
Leased assets
Leases are classified as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee. All other
leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Group at their
fair value at the inception of the lease or, if lower, at the present value of
the minimum lease payments. The corresponding liability to the lessor is
included in the balance sheet as a finance lease obligation. Lease payments are
apportioned between finance charges and reduction in the lease obligation so as
to achieve a constant rate of interest on the remaining balance of the
liability. Finance charges are charged to profit or loss. Rentals payable
under operating leases are charged to profit or loss on a straight-line basis
over the term of the relevant lease. Benefits received and receivable as an
incentive to enter into an operating lease are also spread on a straight-line
basis over the lease term.
Leases in which a significant portion of the risks and rewards of ownership are
retained by the lessor are classed as operating leases. Rentals under operating
leases are charges to the income statement on a straight line basis over the
term of the lease.
Segment reporting
The consolidated entity operates in one business segment being that of
recruitment services (primary segment). As a result no additional business
segment information is required to be provided. The consolidated entity
operates in four geographic segments (secondary segments), the United Kingdom,
Continental Europe, Asia Pacific and the Americas.
Dividend distribution
Dividend distribution to the Company's shareholders is recognised as a liability
in the Group's financial statements in the period in which the dividends are
approved by the Company's shareholders.
Share-based compensation
The Group operates a number of equity-settled, share-based compensation plans.
Their subsequent accounting treatments are described below:
Share option schemes
The fair value of the employment services received in exchange for the grant of
the options is recognised as an expense. The total amount to be expensed over
the vesting period is determined by reference to the fair value of the options
granted, excluding the impact of any non-market vesting conditions (for example,
earnings per share). Non-market vesting conditions are included in assumptions
about the number of options that are expected to become exercisable. At each
balance sheet date, the estimate of the number of options that are expected to
become exercisable is revised. The Group recognises the impact of the revision
of original estimates, if any, in the income statement, and the corresponding
adjustment to equity over the remaining vesting period.
Deferred Annual Bonus and Long Term Incentive Plan
Where deferred awards are made to directors and senior executives under either
the Incentive Share Plan or the Annual Bonus Scheme, to reflect the awards are
for services over a longer period, the value of the expected award is charged to
the income statement on a straight line basis over the vesting period to which
the award relates.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with
banks, other short-term highly liquid investments with original maturities of
three months or less, and bank overdrafts. Bank overdrafts are shown within
current liabilities on the balance sheet.
2. Segment analysis
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
Six months ended Year ended Six months ended Year ended
30 June 30 June 31 December 30 June 30 June 31 December
2005 2004 2004 2005 2004 2004
£'000 £'000 £'000 £'000 £'000 £'000
United Kingdom 127,876 111,474 234,822 62,946 53,140 109,984
Continental Europe 77,228 59,836 124,293 40,719 29,670 61,503
Asia Pacific Australia 30,230 22,959 51,286 12,365 9,830 21,105
Other 7,077 4,966 11,484 6,440 4,489 10,429
Total 37,307 27,925 62,770 18,805 14,319 31,534
Americas 8,004 5,333 11,846 5,698 3,316 7,620
250,415 204,568 433,731 128,168 100,445 210,641
(b) Segment assets and capital expenditure by geographic region
Total assets Capital expenditure
Six months ended Year ended Six months ended Year ended
30 June 30 June 31 December 30 June 30 June 31 December
2005 2004 2004 2005 2004 2004
£'000 £'000 £'000 £'000 £'000 £'000
United Kingdom 60,981 57,388 55,897 1,821 1,368 3,106
Continental Europe 59,533 45,176 50,222 852 655 1,404
Asia Pacific Australia 14,069 7,333 10,134 176 245 610
Other 7,230 3,670 5,157 408 53 98
Total 21,299 11,003 15,291 584 298 708
Americas 6,556 3,670 3,923 541 326 606
Segment assets/capital expenditure 148,369 117,237 125,333 3,798 2,647 5,824
Income tax assets 623 9,932 1,183
Total assets 148,992 127,169 126,516
Segment assets consist primarily of property, plant and equipment, computer
software, receivables and operating cash. The individual geographic segments
exclude income tax assets. Capital expenditure comprises additions to property,
plant and equipment, motor vehicles and computer hardware/software.
(c) Turnover and gross profit by discipline
Turnover Gross profit
Six months ended Year ended Six months ended Year ended
30 June 30 June 31 December 30 June 30 June 31 December
2005 2004 2004 2005 2004 2004
£'000 £'000 £'000 £'000 £'000 £'000
Finance and accounting 160,551 138,244 290,151 76,248 61,936 129,687
Marketing and sales 40,926 35,188 73,985 26,792 21,975 44,894
Other 48,938 31,136 69,595 25,128 16,534 36,060
250,415 204,568 433,731 128,168 100,445 210,641
(d) Operating profit by geographic region
As restated
Six months ended Year ended
30 June 30 June 31 December
2005 2004 2004
£'000 £'000 £'000
United Kingdom 15,464 10,869 22,928
Continental Europe 7,797 1,330 4,101
Asia Pacific Australia 4,268 3,247 7,551
Other 2,318 1,494 3,883
Total 6,586 4,741 11,434
Americas 735 163 395
Operating profit 30,582 17,103 38,858
The above analysis in notes (c) 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
The charge for taxation is based on the expected annual tax rate of 26.0% on
profit before taxation (30 June 2004: 36.6% before exceptional items, 31
December 2004: 34.8% before exceptional items). The exceptional item referred to
in the comparative periods related to a tax deduction received as a result of
the vesting of the Restricted Share Scheme in April 2004. This deduction for
corporation tax purposes arose in various tax jurisdictions and resulted in a
non-operational exceptional credit of £9.0m to the income tax charge.
4. Dividends
Six months ended Year ended
30 June 30 June 31 December
2005 2004 2004
£'000 £'000 £'000
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2004 of 2.75p per ordinary share 9,444 8,248 8,248
(2003: 2.3p)
Interim dividend for the period ending 30 June 2004 of 1.25p per ordinary - - 4,345
share
9,444 8,248 12,593
Amounts proposed as distributions to equity holders in the period:
Proposed interim dividend for the six months ending 30 June 2005 of 1.5p per 4,987 4,345 -
ordinary share (2004: 1.25p)
The proposed interim dividend had not been approved by the Board at 30 June 2005
and therefore is not included as a liability. The comparative interim dividend
at 30 June 2004 was also not recognised as a liability in the June comparatives.
An interim dividend of 1.5 pence (2004: 1.25 pence) per ordinary share will be
paid on 14 October 2005 to shareholders on the register at the close of business
on 16 September 2005.
5. Earnings per share ("EPS")
The calculation of the basic, diluted and adjusted earnings per share is based
on the following data:
As restated
Six months ended Year ended
30 June 30 June 31 December
2005 2004 2004
Earnings
Earnings after exceptional items for basic EPS (£'000) 22,602 19,936 34,336
Post tax exceptional items (£'000) - (9,000) (9,000)
Earnings before exceptional items for adjusted EPS (£'000) 22,602 10,936 25,336
Number of shares
Weighted average number of shares used for basic and adjusted EPS ('000) 341,591 356,689 351,555
Dilution effect of share plans 5,617 165 3,744
Diluted weighted average number of shares used for diluted EPS ('000) 347,208 356,854 355,299
Basic earnings per share (pence) 6.6 5.6 9.8
Diluted earnings per share (pence) 6.5 5.6 9.7
Adjusted earnings per share (pence) 6.6 3.1 7.2
All earnings are derived from continuing operations.
6. Cash flows from operating activities
As restated
Six months ended Year ended
30 June 30 June 31 December
2005 2004 2004
£'000 £'000 £'000
Profit before taxation 30,544 17,247 38,859
Depreciation and amortisation charges 3,080 3,225 6,404
(Profit)/loss on sale of fixed assets (150) (39) 53
Share scheme charges 955 556 1,178
Net finance cost/(income) 38 (144) (1)
Operating cashflow before changes in working capital and provisions 34,467 20,845 46,493
Increase in receivables (17,096) (11,388) (17,739)
Increase in payables 3,008 2,810 11,987
Decrease in provisions (316) (4,275) (5,051)
Cash generated from operations 20,063 7,992 35,690
7. Cash and cash equivalents
Six months ended Year ended
30 June 30 June 31 December
2005 2004 2004
£'000 £'000 £'000
Cash at bank and in hand 11,103 9,524 10,091
Short term deposits 3,881 2,616 2,441
14,984 12,140 12,532
Cash and cash equivalents include the following for the purposes of the cash
flow statement:
Cash at bank and short term deposits 14,984 12,140 12,532
Bank overdrafts (21,035) (11,350) (317)
(6,051) 790 12,215
8. Capital commitments
The Group had capital commitments of £518,000 at 30 June 2005 (31 December 2004:
£853,000)
9. Nature of financial information
The interim financial statements were approved by a committee of the Board of
Directors on 15 August 2005.
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.
10. Adoption of IFRS in 2005
The accounting policies were changed on 1 January 2005 to comply with IFRS. The
transition 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 presented 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 £48,000 and £96,000 at 30 June
2004 and 31 December 2004 respectively. 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 £8,234,000
and £9,470,000 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 profit and loss account. 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. This
liability is fair valued at each half year.
Deferred tax relating to the new share option charges 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 as a currency translation reserve as a separate component
of equity.
RECONCILIATION OF PROFIT
As at 30 June 2004 As at 31 December 2004
(comparable interim period under UK (end of last period presented under UK
GAAP) GAAP)
Effect of Effect of
transition transition
Under to IFRS Under Under to IFRS Under IFRS
UK GAAP IFRS UK GAAP
Note £'000 £'000 £'000 £'000 £'000 £'000
Turnover 204,568 - 204,568 433,731 - 433,731
Cost of sales (104,123) - (104,123) (223,090) - (223,090)
Gross profit 100,445 - 100,445 210,641 - 210,641
Administrative expenses a,c (82,826) (516) (83,342) (170,604) (1,179) (171,783)
Operating profit 17,619 (516) 17,103 40,037 (1,179) 38,858
Net finance income 144 - 144 1 - 1
Profit before taxation 17,763 (516) 17,247 40,038 (1,179) 38,859
Income tax credit/(expense) d 2,428 261 2,689 (4,933) 410 (4,523)
Profit for the period 20,191 (255) 19,936 35,105 (769) 34,336
Attributable to:
Equity holders of the 20,191 (255) 19,936 35,105 (769) 34,336
parent
Basic earnings per share 5.7 (0.1) 5.6 10.0 (0.2) 9.8
(pence)
Diluted earnings per share 5.7 (0.1) 5.6 9.9 (0.2) 9.7
(pence)
Profit UK GAAP 20,191 35,105
Goodwill not amortised
after date of transition a 48 96
Share option charges c (564) (1,275)
Deferred tax on share d 261 410
scheme charges
(255) (769)
Profit IFRS 19,936 34,336
RECONCILIATION OF EQUITY
At 1 January 2004
(date of transition)
Effect of Opening
Under UK transition IFRS Balance
GAAP to IFRS Sheet
Note £'000 £'000 £'000
Non-current assets
Goodwill a 1,539 - 1,539
Computer software e - 2,444 2,444
Property, plant and equipment e 23,101 (2,444) 20,657
Deferred income tax assets d 1,345 1,416 2,761
Trade and other receivables 1,570 - 1,570
27,555 1,416 28,971
Current assets
Trade and other receivables 68,615 - 68,615
Current tax receivables 1,664 - 1,664
Cash and cash equivalents 23,211 - 23,211
93,490 - 93,490
Total assets 121,045 1,416 122,461
Current liabilities
Trade and other payables b (57,356) 8,234 (49,122)
Borrowings (777) - (777)
Current tax payable (2,886) - (2,886)
Provisions for liabilities and charges (4,863) - (4,863)
(65,882) 8,234 (57,648)
Non-current liabilities
Trade and other payables c (444) (759) (1,203)
Provisions for liabilities and charges (1,376) - (1,376)
Deferred tax liabilities d - (727) (727)
(1,820) (1,486) (3,306)
Total liabilities (67,702) 6,748 (60,954)
Net assets 53,343 8,164 61,507
Capital and reserves
Called-up share capital 3,637 - 3,637
Capital redemption reserve 113 - 113
EBT reserve (9,871) - (9,871)
Treasury shares - - -
Currency translation reserve f - - -
Profit and loss account 59,464 8,164 67,628
Total equity 53,343 8,164 61,507
Total equity UK GAAP 53,343
Goodwill not amortised after date of transition a -
Dividend not recognised as a liability until paid b 8,234
Social charges on share option schemes c (759)
Deferred tax on share schemes d 689
Computer software now classified as intangible e -
Current translation reserve f -
Total adjustments to equity 8,164
Total equity IFRS 61,507
There are no material adjustments to the cash flow statement in either period.
RECONCILIATION OF EQUITY
At 30 June 2004
(comparable interim period under UK GAAP)
Effect of Opening
Under UK transition IFRS Balance
GAAP to IFRS Sheet
Note £'000 £'000 £'000
Non-current assets
Goodwill a 1,491 48 1,539
Computer software e - 2,299 2,299
Property, plant and equipment e 21,069 (2,299) 18,770
Deferred income tax assets d 1,302 1,612 2,914
Trade and other receivables 1,374 - 1,374
25,236 1,660 26,896
Current assets
Trade and other receivables 78,201 - 78,201
Current tax receivables 9,932 - 9,932
Cash and cash equivalents 12,140 - 12,140
100,273 - 100,273
Total assets 125,509 1,660 127,169
Current liabilities
Trade and other payables b (55,436) 4,370 (51,066)
Borrowings (11,350) - (11,350)
Current tax payable (4,458) - (4,458)
Provisions for liabilities and charges (712) - (712)
(71,956) 4,370 (67,586)
Non-current liabilities
Trade and other payables c (337) (766) (1,103)
Provisions for liabilities and charges (914) - (914)
Deferred tax liabilities d - (716) (716)
(1,251) (1,482) (2,733)
Total liabilities (73,207) 2,888 (70,319)
Net assets 52,302 4,548 56,850
Capital and reserves
Called-up share capital 3,572 - 3,572
Capital redemption reserve 178 - 178
EBT reserve (9,871) - (9,871)
Treasury shares (4,348) - (4,348)
Currency translation reserve f - (1,500) (1,500)
Profit and loss account 62,771 6,048 68,819
Total equity 52,302 4,548 56,850
Total equity UK GAAP 52,302
Goodwill not amortised after date of transition a 48
Dividend not recognised as a liability until paid b 4,370
Social charges on share option schemes c (766)
Deferred tax on share schemes d 896
Computer software now classified as intangible e -
Current translation reserve f -
Total adjustments to equity 4,548
Total equity IFRS 56,850
There are no material adjustments to the cash flow statement in either period.
RECONCILIATION OF EQUITY
At 31 December 2004
(end of last period presented under UK GAAP)
Effect of Opening
Under UK transition IFRS Balance
GAAP to IFRS Sheet
Note £'000 £'000 £'000
Non-current assets
Goodwill a 1,443 96 1,539
Computer software e - 2,194 2,194
Property, plant and equipment e 20,933 (2,194) 18,739
Deferred income tax assets d 254 2,169 2,423
Trade and other receivables 1,692 - 1,692
24,322 2,265 26,587
Current assets
Trade and other receivables 86,214 - 86,214
Current tax receivables 1,183 - 1,183
Cash and cash equivalents 12,532 - 12,532
99,929 - 99,929
Total assets 124,251 2,265 126,516
Current liabilities
Trade and other payables b (70,164) 9,470 (60,694)
Borrowings (317) - (317)
Current tax payable (1,450) - (1,450)
Provisions for liabilities and charges (576) - (576)
(72,507) 9,470 (63,037)
Non-current liabilities
Trade and other payables c (461) (1,217) (1,678)
Provisions for liabilities and charges (612) - (612)
Deferred tax liabilities d - (689) (689)
(1,073) (1,906) (2,979)
Total liabilities (73,580) 7,564 (66,016)
Net assets 50,671 9,829 60,500
Capital and reserves
Called-up share capital 3,572 - 3,572
Capital redemption reserve 178 - 178
EBT reserve (9,871) - (9,871)
Treasury shares (13,122) - (13,122)
Currency translation reserve f - (188) (188)
Profit and loss account 69,914 10,017 79,931
Total equity 50,671 9,829 60,500
Total equity UK GAAP 50,671
Goodwill not amortised after date of transition a 96
Dividend not recognised as a liability until paid b 9,470
Social charges on share option schemes c (1,217)
Deferred tax on share schemes d 1,480
Computer software now classified as intangible e -
Current translation reserve f -
Total adjustments to equity 9,829
Total equity IFRS 60,500
There are no material adjustments to the cash flow statement in either period.
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 2005 which comprises the consolidated income
statement, the consolidated statement of changes in equity, the consolidated
balance sheet, the consolidated cash flow statement and the related notes 1 to
10. 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
policies 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.
International Financial Reporting Standards (IFRS)
As disclosed in note 1, the next annual financial statements of the Group will
be prepared in accordance with IFRS as adopted for use in the EU. Accordingly,
the interim report has been prepared in accordance with the recognition and
measurement criteria of IFRS and the disclosure requirements of the Listing
Rules. The accounting policies are consistent with those that the directors
intend to use in the annual financial statements.
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 2005.
Deloitte & Touche LLP
Chartered Accountants
London
15 August 2005
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