Michael Page International plc Annual Report 2001 Contents Annual Report and Financial Statements Chairman’s Statement .................................................................................................................................... 2 Chief Executive's Review ................................................................................................................................ 3 Finance Director’s Review ................................................................................................................................ 6 The Board of Directors .................................................................................................................................... 9 Directors' Report .......................................................................................................................................... 11 Statement of Directors' Responsibilities ........................................................................................................ 15 Corporate Governance .................................................................................................................................. 16 Remuneration Report .................................................................................................................................... 19 Auditors' Report ............................................................................................................................................ 24 Proforma Consolidated Profit and Loss Account ............................................................................................ 26 Notes to the Proforma Consolidated Profit and Loss Account ........................................................................ 27 Statutory Consolidated Profit and Loss Account ............................................................................................ 30 Balance Sheets ............................................................................................................................................ 31 Consolidated Cash Flow Statement .............................................................................................................. 32 Statement of Total Recognised Gains and Losses.......................................................................................... 32 Notes to the Accounts .................................................................................................................................. 33 Shareholder Information and Advisers............................................................................................................ 56 Five Year Summary........................................................................................................................................ 57 Notice of Meeting.......................................................................................................................................... 58 Michael Page International plc - 1 Annual Report and Financial Statements Chairman’s Statement This is my first annual report to you following your Company’s return to the London Stock Exchange on 2 April 2001. In reporting the results for the year ended 31 December 2001, may I draw your attention to the fact that the figures I refer to reflect the operating results of Michael Page businesses for a full 12 month period prepared on a proforma basis. As explained in Note 1 to the Financial Statements, a pre-flotation reorganisation took place at the end of February 2001 and this is reflected in the statutory financial statements. Consequently the statutory results are not wholly representative of the full year’s results of the Michael Page businesses that were floated. Financial highlights The difficult trading conditions referred to in my Interim Report deteriorated further, affecting the majority of the Group’s businesses during the second half of the year. Consequently, although turnover for the year ended 31 December 2001 was up 6.6% at £455.0m (2000: £426.9m) due to a shift in the business mix towards a larger number of temporary placements, revenue (gross profit) increased by a modest 1.9% at £244.2m (2000: £239.7m). As a result of the investment in new offices and hiring of additional staff in the latter part of 2000 and in early 2001, the Group’s cost base increased, resulting in lower operating profit before exceptional items of £64.1m (2000: £82.5m*). Profit before tax and exceptional items was £60.0m (2000: £58.0m) and earnings per share adjusted for exceptional items were 10.7p (2000: 9.9p). Whilst it is disappointing to report a fall in operating profits, I believe we have produced a satisfactory performance in a year which saw levels of business confidence weaken at the end of the second quarter and deteriorate rapidly across most markets in the second half. Dividends The Board has proposed a final dividend of 2.3p per ordinary share in line with the dividend policy outlined in the flotation prospectus. Together with the interim dividend of 0.275p per ordinary share paid on 19 October 2001, this makes a total dividend for the year of 2.575p per ordinary share and represents approximately 75% of the total dividend that would have been paid had the shares been listed throughout 2001. The final dividend will be paid on 7 June 2002 to those shareholders on the register at 10 May 2002. Employees In a particularly difficult year, may I acknowledge the commitment, loyalty and efforts of the Group’s staff which sustained your Company’s position as the international leader in the specialist recruitment sector. Current trading and future prospects As anticipated, the current year has started slowly with activity levels substantially below those we enjoyed in the first quarter of 2001. Our current expectation is that revenue in the first quarter will be no better than the £49.9m achieved in the fourth quarter of 2001. However, the volatility of the current market and its exposure to international economic conditions is well understood and the outcome for the remainder of this year will be greatly influenced by these external factors. Your Board remains committed to managing the business for the longer-term benefit of the Group and its shareholders. We are convinced that your Company is well placed to maximise the benefits from increased business activity when growth returns to the specialist recruitment sector. John Wakeham Chairman 25 February 2002 *Pre-Spherion Bonuses. 2 - Michael Page International plc Chief Executive’s Review Annual Report and Financial Statements This is our twenty fifth year of operations and I am therefore particularly pleased to be making my first report since the Group relisted on the London Stock Exchange in April 2001. Over the years, the Group has enjoyed tremendous growth and built up an unrivalled wealth of experience in our staff and management team, firmly establishing Michael Page as the world’s leading specialist recruitment consultancy. Despite the substantial downturn in the majority of our markets in the second half of the year, we nevertheless generated £64.1m of operating profits and £52.4m+ of cash from our global operations. During 2000 and into 2001, we initiated significant investments in both people and new offices in order to secure continued growth. However, global economic conditions have substantially reduced demand for our services and consequently we were unable to achieve our targeted growth and profitability. We started 2001 with 2,666 staff operating from 91 offices in 14 countries. By 30 June 2001, the number of staff had increased to 2,929 and we had opened a number of new offices. Due to the rapid economic slowdown we have reduced our investment and hiring plans which, combined with the normal level of natural attrition in our industry, has seen our headcount fall to 2,657 at 31 December 2001 operating from 109 offices in 14 countries. The current pre bonus monthly cost base is £1.2m (ie 9%) lower than at 30 June 2001. United Kingdom In the UK, turnover increased by 8.5% to £243.6m (2000: £224.5m) and revenue by 4.0% to £122.8m (2000: £118.0m) but, as a consequence of gearing up for greater revenue growth, operating profits were reduced to £34.9m (2000: £39.8m*). However, we continued to invest in new offices, expanding our successful brand into other geographical areas. We consider these to be satisfactory results in a year which saw the total number of advertised vacancies fall by the sharpest rate since January 1983 and the Recruitment and Employment Confederation reported that the numbers of staff placed in permanent positions fell consecutively for every one of the last eight months of 2001. The finance and accounting recruitment businesses, viz. Michael Page Finance, Michael Page City and Accountancy Additions, which represent approximately two thirds of total UK business, achieved a similar level of revenue as the previous year. New Michael Page offices were opened in Oxford, Chelmsford and Swindon, and Accountancy Additions offices were opened in Warrington, Stockport, Leeds and Birmingham. The new Accountancy Additions office in Birmingham is the initial step in developing a network across the Midlands. The Michael Page Marketing and Sales operations enjoyed tremendous growth in 1999 and 2000 but they have borne the brunt of the downturn in the telecoms and technology sectors. Despite this we recorded only a marginal decline in revenue which I believe is testament to the resilience of these businesses which now operate from seven offices throughout the country and are considered the market leaders in their respective sectors. In what was clearly a difficult year for the IT sector, Michael Page Technology maintained its revenues at 2000 levels. Much more encouraging were the results from Michael Page Legal and the more recently established businesses of Michael Page Retail, Michael Page Human Resources and Michael Page Engineering, all of which enjoyed strong revenue growth. + Pre-Spherion bonuses, dividends and purchase of Michael Page own shares. * Pre-Spherion Bonuses. Michael Page International plc - 3 Annual Report and Financial Statements Chief Executive’s Review Continental Europe Our businesses operating in France, the Netherlands, Germany, Italy, Spain, Portugal and Switzerland together increased turnover by 11.9% to £154.3m (2000: £137.9m) and revenue by 4.9% to £91.6m (2000: £87.4m). The increase in turnover is mainly due to the growth, particularly in France, of Page Interim, our temporary recruitment business. As in the UK, investment in additional staff and opening offices in existing and new countries, resulted in lower operating profits of £22.5m (2000: £29.7m*). France continued to be our second largest geographic market after the UK. As mentioned above, Page Interim performed particularly well, benefiting from continued substantial investment and recent changes to labour laws in France. The general economic slowdown has adversely affected the demand for permanent staff, resulting in a decline in revenue from the permanent business. Our business in the Netherlands found the going tough and was unable to maintain the revenue levels achieved in 2000. However, as part of its planned expansion, a new office was opened in Rotterdam in January 2002. Our offices in Spain, Portugal and Switzerland, which are now becoming well established, all achieved increased revenues in the year. Our businesses in Germany and Italy, where we opened new offices in Munich and Rome, both increased revenues and profits and offer the Group excellent longer-term opportunities. We have been assessing the Scandinavian market for some time and in January 2002 we opened an office in Stockholm. Asia Pacific 2001 has been a difficult and frustrating year for our businesses in this region. Turnover and operating profit suffered with our operations being particularly affected by the slowdown in the banking, telecoms and IT sectors. Turnover reduced by 10.3% to £51.7m (2000: £57.6m) and revenue reduced by 12.4% to £25.2m (2000: £28.8m). The reduced revenues for the region and the significant start up costs in Japan contributed to a reduction in operating profit to £7.2m (2000: £11.5m*). In Australia the impact of the economic slowdown in the US resulted in reduced demand from international clients. This had an adverse effect on our New South Wales operations whereas Victoria and Western Australia, with a greater proportion of domestic clients, were less reliant on international business activity. The economic conditions in both Hong Kong and Singapore weakened considerably in the second half of the year and our revenues suffered accordingly. Our planned investment in a Japanese office, which opened in Tokyo in June 2001, provided some good news as, notwithstanding the recessionary environment, it made considerable headway and produced above expected revenue figures. This helped mitigate its projected development losses. *Pre-Spherion bonuses. 4 - Michael Page International plc Annual Report and Financial Statements Chief Executive’s Review The Americas Turnover for the region fell to £5.4m (2000: £7.0m) and revenue was reduced to £4.6m (2000: £5.5m) resulting in the region reporting a small operating loss of £0.6m (2000: profit £1.5m*). In New York, our business in Manhattan, which has been disproportionately concentrated on the Wall Street banking markets, suffered as the major investment banks reduced headcount. However, notwithstanding a difficult year, we remain committed to sensible, planned expansion in the world’s largest market, both geographically and over a wider range of disciplines. The opening of an office in Metro Park, New Jersey in December 2001 follows this longer-term strategy. Our office in Sao Paulo, Brazil is now well established. 2001 turnover increased by well over 200% from 2000 levels and year end staff numbers rose from 23 to 37. Outlook and strategy The short-term outlook for 2002 suggests a difficult and challenging year. Our business has always been financially well managed with very tight control over costs. We are determined not to take measures that may enhance short- term profitability at the expense of the longer-term prosperity of the Group. We firmly believe there are numerous opportunities to expand our business profitably whilst remaining focused on our core competency of specialist recruitment. The main resource we require to achieve our objectives is our people, which is the reason why we invest heavily in their development and training at all levels. We are committed to maintaining a level of resource that will enable us to provide the high standards of service expected by both clients and candidates. Whilst affecting profitability in the short term, this will ensure that we have the resources to continue the development and growth of the Group. Our overall strategy remains unchanged. We intend to stay focused on our core competency of specialist recruitment and to grow the Group organically by the expansion of our existing businesses in their local markets, introducing new disciplines in existing geographic markets and by entering new geographic markets. Terry Benson Chief Executive 25 February 2002 *Pre-Spherion bonuses. Michael Page International plc - 5 Annual Report and Financial Statements Finance Director’s Review Group reorganisation and presentation of proforma profit and loss account Prior to flotation in April 2001, the Group underwent a reorganisation to legally separate certain Michael Page International businesses from other Spherion owned businesses as described in Note 1. As a consequence the statutory financial statements of the Group show acquisitions, disposals and exceptional items relating to this reorganisation. In order to present the performance of the Michael Page International businesses on a comparable basis, a pro-forma consolidated profit and loss account has been prepared showing the results that would have arisen had the new structure been in place for both the reported periods. All the costs of the reorganisation and flotation were borne by Spherion. As a result of the flotation, a bonus arrangement for management, “Spherion bonus”, has been discontinued and as a result the segmental trading results have been presented before the Spherion bonus expense. Proforma profit and loss account Turnover Turnover for the Group is the total amount billed to clients for the placement of permanent, contract and temporary staff. Turnover includes the employment costs of temporary candidates and the value of client paid recruitment advertising. Turnover for the year increased by 6.6% to £455.0m (2000: £426.9m). However the increase over the prior year was all achieved in the first half of 2001. Sequentially, turnover in the second half of 2001 was 12.5% lower than in the first half reflecting the downturn in economic conditions and business confidence in most of the major markets in which the Group operates. Turnover from temporary placements increased by 19.0% to £259.6m (2000: £218.2m), reflecting the expansion of the Group’s temporary business, particularly in France, and a greater resilience in activity levels than demonstrated by permanent placements in an economic slowdown. Gross profit (revenue) Revenue is the total of placement fees of permanent candidates and the margin earned on the placement of temporary candidates and advertising. Revenue for the year increased by 1.9% to £244.2m (2000: £239.7m). Revenue in the first half of 2001 was £135.6m and £108.6m in the second half. The percentage increase in revenue is lower than the increase in turnover because of a change in the mix with a higher proportion of lower gross margin temporary placements in 2001. This change in the mix also explains the reduction in the Group gross margin to 53.7% (2000: 56.1%). The split of turnover and revenue between permanent and temporary placements was 43:57 respectively (2000: 49:51) and 74:26 respectively (2000: 79:21). The gross margin achieved on temporary placements increased to 24.2% (2000: 23.3%), reflecting growth in the Continental European revenues. Operating profit Administrative expenses in the year before exceptional items were £180.1m (2000: £157.2m*). This increase is the result of investment in new offices and hiring of additional consultants, together with their associated infrastructure costs in the latter half of 2000 and in the first half of 2001. Administrative expenses in the first half of 2001 before exceptional items were £93.5m, reducing to £86.6m in the second half, primarily due to smaller bonus payments to staff as a result of the lower profitability. As a result of the revenue decline in the second half of 2001 and the higher cost base, the Group’s operating profit before exceptional items was £64.1m (2000: £82.5m*). *Pre-Spherion bonuses. 6 - Michael Page International plc Finance Director’s Review Annual Report and Financial Statements Exceptional items The prospectus set out details of a Restricted Share Scheme to be put in place on flotation on which a charge of £7.0m was anticipated in respect of National Insurance and social security charges. This charge is now estimated at £6.0m and has been taken as an exceptional item in the year. The ultimate liability, which does not crystallise until March 2004, is dependent upon the Michael Page share price in March 2004. However, we have hedged against any additional liability above £6.0m through the purchase on flotation of 5.7m Michael Page shares. As a result of the pre flotation reorganisation, in the statutory consolidated profit and loss, an additional exceptional profit is reported, being a gain of £8.4m on the disposal of a subsidiary. Full details of the pre flotation reorganisation are provided in Note 1. Interest payable The interest charge reduced in the year to £4.1m (2000: £15.4m). The interest charge in the first half of 2001 was £3.8m and £0.3m in the second half. The reduction in interest charges is as a result of the cash generated by the Group throughout the year and the capital contribution by Spherion on flotation, enabling the Group to repay all its borrowings from Spherion and substantially reduce its bank borrowings. Taxation Taxation on profits before exceptional items is £20.5m (2000: £20.8m) representing an effective tax rate of 34.1% (2000: 35.8%). The rate is higher than the UK corporate tax rate of 30% as a result of overseas profits arising in higher tax rate jurisdictions and non-allowable expenses. Earnings per share and dividends Basic earnings per share were 9.5p (2000: 9.9p) and adjusted earnings per share before exceptional items were 10.7p (2000: 9.9p). The weighted average number of shares for the year was 370.7m (2000: 375.0m). A final dividend of 2.3p per ordinary share has been proposed by the Directors which, together with the interim dividend of 0.275p per ordinary share, makes a total dividend for the year of 2.575p per ordinary share. The final dividend, which amounts to £8.5m, will be paid on 7 June 2002 to those shareholders on the register at 10 May 2002. Balance sheet The Group’s balance sheet has been substantially strengthened during the year. At 31 December 2001 net assets were £62.4m (2000: net deficit of £138.6m) and the Group had net cash of £14.3m (2000: net debt including amounts owed to Spherion of £204.0m). Of the increase in net assets, £168.0m is due to the pre flotation restructuring and £33.0m is due to retained earnings for the year. Trade debtors have reduced to £65.7m at 31 December 2001 (2000: £87.7m) reflecting improved cash collections and lower business activities at the end of 2001. Within creditors the amount of accruals and deferred income has reduced to £24.7m at 31 December 2001 (2000: £40.9m) primarily because of lower bonus accruals following the reduction in profitability and the cessation of the Spherion bonus scheme for which £9.1m was included in accruals at 31 December 2000. Michael Page International plc - 7 Annual Report and Financial Statements Finance Director’s Review Cash flow At the start of the year the Group had net debt (including amounts owed to Spherion) of £204.0m. The pre flotation reorganisation and capital contribution from Spherion reduced net debt by £175.4m. During the year the Group generated net cash from operating activities of £84.9m (2000: £77.6m) from which the principal payments have been: ◆ Spherion 2000 bonuses to staff of £9.1m; the purchase on flotation of £10.0m Michael Page International shares to hedge against National Insurance and social security liabilities arising on the vesting of Restricted Shares and the exercise of share options; ◆ £11.2m of net capital expenditure on property, infrastructure, information systems and motor vehicles; taxes of £18.1m; interest of £4.0m; and ◆ dividends of £1.0m. At 31 December 2001 the Group had cash balances of £22.1m and borrowings of £7.8m giving a net cash position of £14.3m. Treasury management and currency risk It is the Directors’ intention to finance the activities and development of the Group principally from retained earnings. Cash generated in excess of these requirements will be returned to shareholders through dividends or share buy backs, consent for which is being sought at the forthcoming Annual General Meeting. Cash surpluses are invested in short term deposits with working capital requirements being provided by local overdraft facilities. In addition the Group has a committed £40.0m facility, which expires on 1 March 2003, of which £7.5m is currently utilised in guaranteeing the unsecured loan notes which are repayable on 31 December 2002, and other borrowings. The main functional currencies of the Group are Pounds Sterling, Euros and Australian Dollars. The Group does not have material transactional currency exposures nor is there a material exposure to foreign-denominated monetary assets and liabilities. The Group is exposed to foreign currency translation differences in accounting for its overseas operations, although its policy is not to hedge this exposure. Stephen Puckett Group Finance Director 25 February 2002 8 - Michael Page International plc ◆ ◆ ◆ Annual Report and Financial Statements The Board of Directors Rt. Hon. Lord Wakeham P.C. (69) Non-Executive Chairman. John Wakeham is a Chartered Accountant whose business career includes positions as Chairman of Vosper Thornycroft Holdings Plc and non-executive Director of Wessex Water Ltd, Bristol & West Plc and NM Rothschild & Sons Ltd, amongst others. After joining Michael Page in 1995, he was appointed non-executive Chairman and was appointed President in 1997, following the acquisition by Spherion Corporation. He also has public appointments as Chancellor of Brunel University and in 1999 as Chairman of the Royal Commission on House of Lords Reform. During his political career, he has been Leader of the House of Commons from 1987 to 1989, Secretary of State for Energy from 1989 to 1992 and Leader of the House of Lords from 1992 to 1994. Terry Benson (50) Chief Executive. Terry Benson joined Michael Page in 1979 and was appointed to the Board in 1983. In 1986 he was promoted to Managing Director of the Group’s marketing recruitment businesses and in January 1988 to Managing Director of the Group. In 1990 he was appointed Chief Executive of the Group. Stephen Box (51) Non-Executive Director Stephen Box qualified as a Chartered Accountant at Coopers & Lybrand where he spent more than 25 years, 15 of these as a partner. In August 1997 he was appointed Finance Director of the National Grid since when he has also been on the Board of Energis plc as a Non-Executive Director. He is also a member of the Financial Reporting Review Panel. Stephen Burke (42) Managing Director – UK Stephen Burke joined Michael Page in 1981 and was appointed as a director of Michael Page International in 1988 with responsibility for development of overseas businesses in the Netherlands and Germany. He returned to the UK in 1996 as Managing Director of Accountancy Additions Ltd. and was appointed Managing Director of Michael Page Finance in 1999. He was appointed to his current position in January 2001. Charles-Henri Dumon (43) Managing Director – Continental Europe and South America. Charles-Henri Dumon joined Michael Page in 1985 and was appointed a Director in 1987. Since then he has had full responsibility for the Group’s operations in France and has managed the Group’s entry into Southern Europe and South America. He was appointed as Managing Director for all Michael Page’s Continental European and South American businesses in January 2001. Michael Page International plc - 9 Annual Report and Financial Statements The Board of Directors Stephen Ingham (39) Executive Director – UK Operations Stephen Ingham joined Michael Page in 1987 as a consultant with Michael Page Marketing and Sales. He was responsible for setting up the London marketing and sales business and was promoted to Operating Director in 1990. He was appointed Managing Director of Michael Page Marketing and Sales in 1994. Subsequently he has taken additional responsibility for Michael Page’s Retail, Technology, Human Resources and Engineering businesses. He was promoted to Executive Director of UK operations in January 2001. Adrian Montague (54) Non-Executive Director Adrian Montague qualified as a solicitor with Linklaters & Paines, becoming a partner in 1979. He then joined Kleinwort Benson in 1994 where he became Global Head of Project Finance and a member of its Executive Committee. In 1997 he was appointed Chief Executive of the Treasury Taskforce and subsequently became Deputy Chairman of Partnerships UK. He is currently Deputy Chairman of the company limited by guarantee sponsored by the Government as a bidder for the operations of Railtrack. Stephen Puckett (40) Group Finance Director. Stephen Puckett qualified as a Chartered Accountant with BDO Binder Hamlyn. He joined Wace Group plc in 1988 as Director of Corporate Finance, subsequently being promoted to Group Finance Director in 1991. He was appointed Group Finance Director of Stat Plus Group plc in 2000. He was appointed Group Finance Director of Michael Page in January 2001. Martin Stewart (38) Non-Executive Director. Martin Stewart, who is a qualified Chartered Accountant, was appointed as Chief Financial Officer and a Director of British Sky Broadcasting Plc in May 1998 after serving the company as head of commercial finance from March 1996. Prior to this he was employed at Polygram for five years, latterly at Polygram Filmed Entertainment, where he was Finance Director for two years. 10 - Michael Page International plc Directors’ Report Annual Report and Financial Statements Principal activity and review of the business and future developments The Group is one of the world’s leading specialist recruitment consultancies. The Group’s trading results are set out in the financial statements on pages 26 to 55. Details of the Group’s future prospects, and review of operations are described in the Chairman's Statement, Chief Executive’s Review and Finance Director's Review on pages 2 to 8. Change of name The Company’s name was changed from Michael Page Group PLC to Michael Page International plc on 19 February 2001. Directors The following were Directors during the year and held office throughout the year, unless otherwise indicated. The Right Honourable Lord Wakeham P.C.‡ (Chairman) (appointed 27 February 2001) T W Benson (Chief Executive) S J Box‡* S P Burke C-H Dumon S J Ingham R Krause R Marcy A A Montague‡ C.B.E. S R Puckett M Stewart‡ (appointed 27 February 2001) (appointed 27 February 2001) (appointed 27 February 2001) (appointed 27 February 2001) (resigned 27 February 2001) (resigned 27 February 2001) (appointed 27 February 2001) (appointed 27 February 2001) (appointed 1 March 2001) ‡ Non-Executive Directors * Senior Independent Director All of the current Directors, except for T W Benson, having been appointed during 2001, will retire in accordance with the Company’s Articles of Association. In addition, T W Benson will retire by rotation. All the Directors, being eligible, will offer themselves for re-election at the forthcoming Annual General Meeting. Biographical details for all the current Directors are shown on pages 9 and 10. Michael Page International plc - 11 Annual Report and Financial Statements Directors’ Report The beneficial interests of Directors in office at 31 December 2001 in the shares of the Company at 31 December 2001 and at 25 February 2002 are set out below. No Director had any beneficial interest in the shares of the Company at 31 December 2000. The Right Honourable Lord Wakeham P.C.‡ T W Benson S J Box‡ S P Burke C-H Dumon S J Ingham A A Montague‡ S R Puckett M Stewart‡ ‡ Non-Executive Directors Number of Shares 31 December 2001 - - 15,000 28,571 14,285 28,571 - 114,285 - All of the executive Directors are deemed to have an interest in the ordinary shares of the Restricted Share Scheme held in the Employee Benefit Trust, details of which are set out on page 20. Details of the Directors’ remuneration, options and interests in Restricted Shares are detailed in the Remuneration Report on pages 19 to 23. Results and dividends The profit for the year after exceptional items and taxation, amounted to £43.7m (2000: £37.2m). An interim dividend of 0.275 pence per ordinary share was paid on 19 October 2001. The Directors recommend the payment of a final dividend for the year ended 31 December 2001 of 2.3 pence per ordinary share on 7 June 2002 to shareholders on the register on 10 May 2002 which, if approved at the Annual General Meeting, will result in a total dividend for the year of 2.575 pence per ordinary share (2000: nil). Employee involvement Communication with employees is effected through the Company Intranet, information bulletins, briefing meetings conducted by senior management and formal and informal discussions. Interim and Annual Reports are available to all staff. Informal communication is further facilitated by the Group’s divisional organisation structure. 12 - Michael Page International plc Annual Report and Financial Statements Directors’ Report Equal opportunity The Group endorses and supports the principles of equal employment opportunity. It is the policy of the Group to provide equal employment opportunity to all qualified individuals which ensures that all employment decisions are made, subject to its legal obligations, on a non-discriminatory basis. Due consideration is given to the recruitment, promotion, training and working environment of all staff including those with disabilities. It is Group policy to encourage the training and further development of all its employees where this is of benefit to the individual and to the Group. Supplier payment policy It is the policy of the Group to agree appropriate terms and conditions for transactions with suppliers (by means ranging from standard written terms to individually negotiated contracts) and that payment should be made in accordance with those terms and conditions, provided that the supplier has also complied with them. The Company acts as a holding company for the Group. Creditor days for the Company were nil (2000: nil) as the Company does not undertake any transactions with suppliers. The Group’s creditor days for the year ended 31 December 2001 were 30 (2000: 27). Share capital The authorised and issued share capital of the Company, together with details of shares issued during the year, are shown in note 21 to the financial statements. On 1 March 2001 each ordinary share of £1 was subdivided into 100 ordinary shares of 1p and the authorised share capital was increased from £50,000 to £5,712,500 by the creation of 566,250,000 new ordinary shares. On 2 April 2001 there was a bonus issue of shares in the proportion of 74 ordinary shares for every 1 ordinary share held, following which the Company has 375,000,000 ordinary shares in issue. Substantial shareholdings As at 25 February 2002, the Company has been notified of the following interests held in more than 3% of the issued share capital of the Company: Holder Number of ordinary shares % of issued share capital Capital International Limited 63,859,099 AXA Investment Managers UK Limited 56,556,776 Fidelity Investment Management Limited 22,050,523 Harris Associates 19,466,000 M&G Investment Management Limited 14,988,428 17.03 15.08 5.88 5.19 4.00 Michael Page International plc - 13 Annual Report and Financial Statements Directors’ Report Environmental policy The Group recognises the importance of environmental responsibility. The nature of its activities has a minimal effect on the environment but, where it does, the Group acts responsibly and is aware of its obligations. Donations The Group made charitable donations of £28,735 during the year (2000: £33,843). It is not the Group's policy to make political donations either in the UK or overseas. Auditors Deloitte & Touche are willing to continue in office and accordingly resolutions to re-appoint them as auditors and authorising the Directors to set their remuneration will be proposed at the forthcoming Annual General Meeting. Annual General Meeting The resolutions to be proposed at the Annual General Meeting to be held on 22 May 2002, together with explanatory notes, appear in the Notice of Meeting set out on pages 58 to 60. By order of the Board R A McBride Company Secretary 25 February 2002 14 - Michael Page International plc Statement of Directors’ Responsibilities Annual Report and Financial Statements United Kingdom Company law requires the Directors to prepare financial statements for each financial period which give a true and fair view of the state of affairs of the Group and the Company as at the end of the financial period and of the profit or loss of the Group for that period. In preparing those financial statements, the Directors are required to: ◆ select suitable accounting policies and then apply them consistently; ◆ make judgements and estimates that are reasonable and prudent; ◆ state whether applicable accounting standards have been followed; and ◆ prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and the Company and to enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Michael Page International plc - 15 Annual Report and Financial Statements Corporate Governance The Board of Directors is committed to high standards of corporate governance and has applied the principles of corporate governance recommended in the Combined Code for the period between flotation on 2 April 2001 and 31 December 2001. Board and committee structure The Board of Michael Page International plc is the body responsible for corporate governance, establishing policies and objectives, and the management of the Group’s resources. It is the Group’s policy that the roles of Chairman and Chief Executive are separate. Including the Chairman and Chief Executive, there are currently five Executive and four Non-Executive Directors. The Non-Executive Directors are all regarded by the Board as being independent for Combined Code purposes. All Directors are subject to retirement by rotation and re-election by the shareholders in accordance with the Articles of Association, whereby one third of the Directors retire by rotation each year. All Directors are subject to election by the shareholders at the first Annual General Meeting following their appointment. All Directors have access to the advice and services of the Company Secretary, who is responsible for ensuring that Board procedures and applicable rules and regulations are observed. There is an agreed procedure for Directors to obtain independent professional advice, if necessary, at the Company’s expense. The Board meets regularly throughout the year. It has a formal schedule of matters reserved to it and delegates specific responsibilities to Committees. Each of the Committees has formal written terms of reference. The Audit Committee comprises Lord Wakeham, Martin Stewart and is chaired by Stephen Box. The Committee meets at least three times a year. Its principal tasks are to review the Group’s internal controls, review the scope of the external audit, consider issues raised by the external auditors, and review the half yearly and annual accounts before they are presented to the Board, focusing in particular on accounting policies and compliance, and areas of management judgement and estimates. The Nominations Committee comprises the Chairman, the Chief Executive and the Non-Executive Directors and is chaired by Lord Wakeham. It is responsible for making recommendations to the Board on new appointments. The Remuneration Committee comprises the Non-Executive Directors and is chaired by Lord Wakeham. The Committee reviews the Group’s policy on the Executive Directors’ remuneration and terms of employment, makes recommendations upon this to the Board and other senior executives of the Group, and also approves the provision of policies for the incentivisation of employees including the share option schemes. The Committee meets at least twice a year and is also attended by the Chief Executive except when his own remuneration is under consideration. The Remuneration Report is shown on pages 19 to 23 and includes information on the Directors’ service contracts. Internal control The responsibilities of the Directors in respect of internal control are further defined by the London Stock Exchange’s Listing Rules which incorporate a Code of Practice known as the Combined Code, which requires that Directors review the effectiveness of the Group’s system of internal controls. This requirement stipulates that the review shall cover all controls including operational, compliance and risk management, as well as financial. Internal Control Guidance for Directors on the Combined Code (“the Turnbull Report”) was published in September 1999. 16 - Michael Page International plc Annual Report and Financial Statements Corporate Governance Internal control (continued) The Board has assessed existing risk management and internal control processes during the year ended 31 December 2001 necessary to comply with the Turnbull guidance. The Board believes it has the procedures in place such that the Group has fully complied for the period from flotation on 2 April 2001 through to the end of the financial year on 31 December 2001. The Directors are responsible for the Group’s system of internal financial and operating controls which are designed to meet the Group’s particular needs and aim to safeguard Group assets, ensure proper accounting records are maintained and that the financial information used within the business and for publication is reliable. Any system of internal control can only provide reasonable, but not absolute, assurance against material misstatement and loss. Key elements of the system of internal control are as follows: ◆ Group organisation. The Board of Directors meets at least ten times a year, focusing mainly on strategic issues and financial performance. There is also a defined policy on matters strictly reserved for the Board. The Managing Director of each operating company is accountable for establishing and monitoring internal controls within that division. ◆ Financial reporting. The Group has a comprehensive budgeting system with an annual budget approved by the Board. Detailed monthly reports are produced showing comparisons of results against budget, forecast and the prior year, with performance monitoring and explanations provided for significant variances. The Group reports to shareholders on a half-yearly basis. ◆ Quarterly reforecasting. The Group prepares a full year reforecast on a quarterly basis showing, by individual businesses, the results to date and a reforecast against budget for the remaining period up to the end of the year. ◆ Audit Committee. There is an established Audit Committee whose activities are previously described. ◆ Operational controls. Controls and procedures are documented in policies and procedures manuals. Individual operations complete an annual Self-Certification Statement. Each operational manager, in addition to the Group finance function, confirms the adequacy of their systems of internal control and their compliance with Group policies. The Statement also requires the reporting of any significant control issues that have emerged so that areas of Group concern can be identified and experience can be shared. ◆ Risk Management. Identification of major business risks is carried out at Group level in conjunction with operational management and appropriate steps taken to monitor and mitigate risk. Internal Audit. The Board has considered the need for a separate internal audit function and concluded that at present it is not required. The Board has commissioned a continuing program of reviews to address internal control and risk management processes with particular reference to the Turnbull Report. Its findings will be reported to both the entities reviewed and the Audit Committee acting on behalf of the Board. The Board confirms that there is a continuing process for identifying, evaluating and managing the risks faced by the Group and that the processes have been in place since flotation on 2 April 2001 for the year under review. Relations with shareholders Communications with shareholders are given a high priority. The Annual Report and Interim Report are sent to all shareholders. The Group also has a website (www.michaelpage.co.uk) with an investor section that contains Company announcements and other shareholder information. Michael Page International plc - 17 ◆ Annual Report and Financial Statements Corporate Governance Relations with shareholders (continued) The Group has an on-going programme of dialogue and meetings between the Executive Directors and its major institutional shareholders, where a wide range of relevant issues including strategy, performance, management and corporate governance are discussed. The Annual Report is designed to present a balanced and understandable view of the Group’s activities and prospects. The Chairman’s Statement, Chief Executive’s Review and Finance Director’s Review on pages 2 to 8 provide an assessment of the Group’s affairs and position. Institutional shareholders and sector analysts are invited to briefings by the Company at the time of announcing the Company’s interim and full year results. Going concern The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and therefore continue to adopt the going concern basis in preparing the accounts. In forming this view, the Directors have reviewed the Group’s budget and forecasts for 2002 based on normal business planning and control procedures. Compliance with the combined code The Directors consider that the Company complies with Section 1 of the Combined Code contained in the Listing Rules, now the responsibility of the Financial Services Authority (formerly the responsibility of the London Stock Exchange). The Group complied in full for the period from flotation on 2 April 2001 to 31 December 2001. 18 - Michael Page International plc Annual Report and Financial Statements Remuneration Report Remuneration policy The objective of the Group’s remuneration policy is to attract and retain management with the appropriate professional, managerial and operational expertise necessary to realise the Group’s objectives as well as to establish a framework for remunerating all employees. Scope and membership of remuneration committee The Remuneration Committee meets not less than twice a year and comprises the Non-Executive Directors. Lord Wakeham is Chairman of the Committee. The purpose of the Remuneration Committee is to review, on behalf of the Board, the remuneration policy for the Executive Directors and to determine the level of remuneration, incentives and other benefits, compensation payments and the terms of employment of each Executive Director. It also seeks to provide a remuneration package that aligns the interests of Executive Directors with the shareholders. The Committee has continued to review the remuneration of the Executive Directors with regard to the need to maintain a balance between the constituent elements of salary, incentive and other benefits. It receives advice from independent remuneration consultants, including comparisons with similar organisations. Remuneration package The remuneration agreed by the Committee for the Executive Directors contains the following elements; a base salary and benefits, a bonus payable annually reflecting individual and Group performance, share options conditional upon achieving performance criteria, and pension benefits. The following sections provide an outline of current practice with regard to each component. Base salary and benefits The Committee establishes salaries and benefits by reference to those prevailing in the employment market generally for Executive Directors of comparable status and ongoing market value, taking into account the range of incentives described elsewhere in this report, including a performance bonus. Reviews of such base salary and benefits are conducted annually by the Committee having regard to the individual’s performance and the performance of the Group relative to its competitors. Performance bonus Executive Directors are eligible to receive a bonus related to the performance of both the individual and the Group. The terms upon which the bonus is payable are determined annually. The bonus is not pensionable. Michael Page International plc - 19 Annual Report and Financial Statements Remuneration Report Share schemes Restricted share scheme On flotation, 6% of the issued shares of the Group owned by Spherion Corporation, the Group’s previous ultimate parent company, were allocated to the Executive Directors and certain senior executives in a Restricted Share Scheme. Benefits received under the Restricted Share Scheme are not pensionable and the shares will be delivered in March 2004. Executive share option scheme The Executive Directors and certain key employees are eligible to participate in the Executive Share Option Scheme. No payment is required on the grant of an option and no share options are granted at a discount. Benefits received under the Executive Share Option Scheme will not be pensionable. On flotation options over 33,750,000 (9%) ordinary shares were granted to the Executive Directors and 427 key employees. These options are subject to the following performance conditions: (a) 55.6% of an individual’s option entitlement will normally only be exercisable to the extent that Earnings Per Share (EPS) targets have been satisfied over a period of 3 to 10 years. None of these options will vest unless EPS has grown in line with the UK Retail Prices Index (RPI) plus an average of 5% per annum. At that point 33.3% of this portion of the options vest. If EPS growth is higher than this level, vesting increases on a sliding scale basis until 100% of this portion of the options vest where EPS growth matches RPI plus an average of 10% per annum; (b) 44.4% of an individual’s option entitlement will normally only be exercisable to the extent that share price growth targets have been satisfied over a period of at least 3 years. None of these options will vest unless the Company’s share price has achieved 50% growth after 3 years and not later than five years. At that point 33.3% of this portion of the options vest. Vesting then increases progressively for further share price growth until full vesting occurs where there is 200% growth after 3 years and not later than 5 years. These hurdles rise from the fifth anniversary of the date of grant at compound rates of growth of 8.45% and 24.57% respectively. All future grants of options under this scheme will be subject to performance conditions designed to provide a direct link between the rewards for executives and the returns to shareholders, whilst at the same time ensuring that senior executives can measure the results of their efforts through the Company’s share price. 20 - Michael Page International plc Annual Report and Financial Statements Remuneration Report Directors’ remuneration and shareholdings Emoluments: The aggregate emoluments, excluding pensions, of the Directors of the Company who served during the year were as follows: 2001 Executive T W Benson (note 1) S P Burke (appointed 27 Feb 2001) C-H Dumon (appointed 27 Feb 2001) S J Ingham (appointed 27 Feb 2001) S R Puckett (appointed 27 Feb 2001) R Marcy (resigned 27 Feb 2001) R Krause (resigned 27 Feb 2001) Non-Executive Lord Wakeham (appointed 27 Feb 2001) S J Box (appointed 27 Feb 2001) A A Montague (appointed 27 Feb 2001) M Stewart (appointed 1 Mar 2001) Salary and fees £'000 Benefits (note 2) £'000 Spherion bonus (note 3) £'000 315 177 227 160 164 - - 41 23 19 18 17 7 33 29 - - - - - 413 55 58 46 28 - - - - - Total (excluding pensions) £’000 998 391 384 367 353 - - 41 23 19 Bonus £’000 252 142 92 128 132 - - - - - 19 ––––––––– 1,145 ======== - ––––––––– 104 ======== - ––––––––– 600 ======== - ––––––––– 746 ======== 19 ––––––––– 2,595 ======== Those Directors who were appointed during the year only have their remuneration included from the date of appointment. 2000 T W Benson (note 1) R Marcy (resigned 27 Feb 2001) R Krause (resigned 27 Feb 2001) Salary and fees 2001 £'000 300 - - ––––––––– 300 ======== Benefits (note 2) £'000 17 - - ––––––––– 17 ======== Spherion bonus (note 3) £'000 1,361 - - ––––––––– 1,361 ======== Total (excluding pensions) £’000 2,302 - - ––––––––– 2,302 ======== Bonus £’000 624 - - ––––––––– 624 ======== Michael Page International plc - 21 Annual Report and Financial Statements Remuneration Report Directors’ remuneration and shareholdings continued 1. Mr Benson is the highest paid director. 2. Benefits include items such as company car or cash alternative, fuel and medical insurance. 3. On flotation the Spherion bonus arrangements were discontinued and replaced by the grant of Restricted Shares and Executive Share Options. The 2001 Spherion bonus was borne by Spherion Corporation and is in respect of the first quarter 2001 trading performance. Pension contributions T W Benson S P Burke C-H Dumon S J Ingham S R Puckett R Marcy R Krause Pension benefits 2001 £’000 95 35 2 16 20 - 2000 £’000 90 - - - - - - ––––––––– 168 ======== - ––––––––– 90 ======== Executive Directors are eligible to participate in a Company pension plan which is a defined contribution scheme. Directors' interests The beneficial interests of the Executive Directors and their families in Restricted Shares of the Company were as follows: 31 December 2001 shares 5,450,512 3,007,179 3,007,179 1,597,564 140,962 Director T W Benson S P Burke C-H Dumon S J Ingham S R Puckett 22 - Michael Page International plc Remuneration Report Annual Report and Financial Statements The beneficial interests of the Executive Directors and their families in share options of the Company at 31 December 2001 were as follows: Options granted during the year1 and at price 31 December 2001 (pence) Exercise Date of grant Earliest exercise date Expiry date T W Benson S P Burke C-H Dumon S J Ingham S R Puckett 30/03/2001 175 3,750,000 31/03/2004 31/03/2011 30/03/2001 175 1,125,000 31/03/2004 31/03/2011 30/03/2001 175 1,125,000 31/03/2004 31/03/2011 30/03/2001 30/03/2001 175 175 750,000 31/03/2004 31/03/2011 750,000 31/03/2004 31/03/2011 –-----–––––––– 7,500,000 ========== 1 The market price of the shares at 31 December 2001 was 156p with a range during the year of 96.5p to 233.5p. 2. No options held by Directors lapsed unexercised or were exercised during the period. The options are normally exercisable subject to achieving performance criteria at any time on or after the third, but not later than the tenth anniversary of the date on which the option was granted. The performance criteria are set out on page 20. Service contracts All Executive Directors service contracts contain a 12 month notice period. The service contracts also contain restrictive covenants preventing the Directors from competing with the Group for six months following the termination of employment and preventing the Directors from soliciting key employees, clients and candidates of the employing company and Group Companies for 12 months respectively following termination of employment. Appointment and remuneration of non-executive directors The Non-Executive Directors are appointed for an initial term of 3 years and thereafter are subject to reappointment each year. The remuneration of the Non-Executive Directors is determined by the Board. The Non-Executive Directors do not receive any pension or other benefits from the Group, nor do they participate in any of the bonus, or share option schemes. Lord Wakeham Chairman Remuneration Committee 25 February 2002 Michael Page International plc - 23 Annual Report and Financial Statements Independent Auditors’ Report to the Members of Michael Page International plc (formerly Michael Page Group PLC) We have audited the financial statements of Michael Page International Plc for the year ended 31 December 2001 which comprise the consolidated profit and loss account, the balance sheets, the consolidated cash flow statement, the consolidated statement of total recognised gains and losses, the related notes 1 to 30, and also the proforma consolidated profit and loss account and the notes to the proforma consolidated profit and loss account. These financial statements have been prepared under the accounting policies set out therein. Respective responsibilities of directors and auditors As described in the statement of directors' responsibilities, the company's directors' are responsible for the preparation of the financial statements in accordance with applicable United Kingdom law and accounting standards. Our responsibility is to audit the financial statements in accordance with relevant United Kingdom legal and regulatory requirements, auditing standards, and the Listing Rules of the Financial Services Authority. We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985. We also report if, in our opinion, the directors’ report is not consistent with the financial statements, if the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law or the Listing Rules regarding directors’ remuneration and transactions with the company and other members of the group is not disclosed. We review whether the corporate governance statement reflects the company's compliance with the seven provisions of the Combined Code specified for our review by the Listing Rules and we report if it does not. We are not required to consider whether the board's statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the group's corporate governance procedures or its risk and control procedures. We read the directors’ report and the other information contained in the annual report for the above year as described in the contents section and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Basis of audit opinion We conducted our audit in accordance with United Kingdom auditing standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements and of whether the accounting policies are appropriate to the circumstances of the company and the group, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the financial statements. 24 - Michael Page International plc Annual Report and Financial Statements Independent Auditors’ Report to the Members of Michael Page International plc (formerly Michael Page Group PLC) Opinion In our opinion the financial statements give a true and fair view of the state of affairs of the company and the group as at 31 December 2001 and of the profit of the group for the year then ended and have been properly prepared in accordance with the Companies Act 1985. Deloitte & Touche Chartered Accountants and Registered Auditors 25 February 2002 Notes: An audit does not provide assurance on the maintenance and integrity of the website, including controls used to achieve this, and in particular on whether any changes may have occurred to the financial statements since first published. These matters are the responsibility of the directors but no control procedures can provide absolute assurance in this area. Legislation in the United Kingdom governing the preparation and dissemination of financial statements differs from legislation in other jurisdictions. Michael Page International plc - 25 Annual Report and Financial Statements Proforma Consolidated Profit and Loss Account Year ended 31 December 2001 Before exceptional items 2001 £'000 Note Exceptional After items exceptional items 2001 £'000 (Note 3) 2001 £'000 2000 £'000 Turnover Cost of sales 2 455,020 - 455,020 426,886 (210,806) ––––––––– - ––––––––– (210,806) ––––––––– (187,222) ––––––––– Gross profit 2 244,214 - 244,214 239,664 Administrative expenses: Spherion bonuses Other administrative expenses Total administrative expenses - (180,138) ––––––––– (180,138) - (6,000) ––––––––– (6,000) - (186,138) ––––––––– (186,138) (9,075) (157,210) ––––––––– (166,285) Operating profit Net interest payable and similar charges 64,076 (6,000) 58,076 73,379 (4,068) ––––––––– - ––––––––– (4,068) ––––––––– (15,377) ––––––––– Profit on ordinary activites before taxation 2 60,008 (6,000) 54,008 58,002 Taxation (20,459) ––––––––– 1,800 ––––––––– (18,659) ––––––––– (20,766) ––––––––– Profit on ordinary activites after taxation 39,549 (4,200) 35,349 37,236 Equity minority interests - ––––––––– - ––––––––– - ––––––––– (197) ––––––––– Profit for the financial period 39,549 (4,200) 35,349 37,039 Equity dividends Retained profit for the financial period (9,510) ––––––––– - ––––––––– (9,510) ––––––––– - ––––––––– 30,039 ======== (4,200) ======== 25,839 ======== 37,039 ======== Basic earnings per share (pence) Diluted earnings per share (pence) Adjusted earnings per share (pence) 4 4 4 9.5 9.5 10.7 9.9 9.9 9.9 Proforma Statement of Total Recognised Gains and Losses Year ended 31 December 2001 Profit for the financial year Foreign currency translation differences Total recognised gains and losses for the year 26 - Michael Page International plc 2001 £'000 2000 £'000 35,349 (982) ––––––––– 34,367 ======== 37,039 371 ––––––––– 37,410 ======== Annual Report and Financial Statements Notes to the Proforma Consolidated Profit and Loss Account Year ended 31 December 2001 1. Proforma financial information The proforma financial information has been prepared using consistent accounting policies used in the preparation of the statutory accounts except that they have been prepared to reflect the combined financial information of Michael Page International Inc and Michael Page International Pte Limited (MPI USA and MPI Singapore) which were transferred to the Group by Spherion Corporation (the Group's previous ultimate parent company) on 27 February 2001 and which have been included as they were commonly controlled and managed by the Group prior to that date (see note 19 of the statutory accounts), and excluding the results of Plusbox Limited and its subsidiaries which were transferred to Spherion Corporation on 28 February 2001 as they were not commonly controlled or managed by the Group prior to that date (see note 20 of the statutory accounts). The proforma financial information reflects the structure of the Group going forward. The statutory profit after taxation and exceptional items is reconciled to the proforma basis as follows: Profit after taxation and exceptional items Per statutory financial information Results of MPI USA and MPI Singapore Results of Plusbox Limited Profit on disposal of Plusbox Limited Per proforma financial information 2. Segmental analysis (i) Turnover Turnover by geographic region United Kingdom Continental Europe Asia Pacific Americas Total turnover Turnover by discipline Finance and accounting Marketing and sales Other Total turnover 2001 £'000 2000 £'000 43,653 37,205 105 8 (8,417) ––––––––– 35,349 ======== 832 (801) - ––––––––– 37,236 ======== 2001 £'000 2000 £'000 243,614 154,335 51,663 5,408 ––––––––– 455,020 ======== 334,550 67,581 52,889 ––––––––– 455,020 ======== 224,469 137,862 57,569 6,986 ––––––––– 426,886 ======== 311,963 65,995 48,928 ––––––––– 426,886 ======== Michael Page International plc - 27 Annual Report and Financial Statements Notes to the Proforma Consolidated Profit and Loss Account Year ended 31 December 2001 2. Segmental analysis (continued) (ii) Gross profit Gross profit by geographic region United Kingdom Continental Europe Asia Pacific Americas Total gross profit Gross profit by discipline Finance and accounting Marketing and sales Other Total gross profit (iii) Profit on ordinary activities before taxation Profit before interest, taxation, exceptional items and Spherion bonus by geographic region United Kingdom Continental Europe Asia Pacific Americas Profit before interest, taxation, exceptional items and Spherion bonus Exceptional items (note 3) Spherion bonus Profit before interest and taxation Net interest Profit on ordinary activities before taxation 28 - Michael Page International plc 2001 £'000 122,769 91,644 25,196 4,605 ––––––––– 244,214 ======== 160,102 51,429 32,683 ––––––––– 244,214 ======== 2001 £'000 34,926 22,453 7,248 (551) ––––––––– 2000 £'000 118,022 87,355 28,765 5,522 ––––––––– 239,664 ======== 158,520 49,799 31,345 ––––––––– 239,664 ======== 2000 £'000 39,765 29,676 11,504 1,509 ––––––––– 64,076 82,454 (6,000) - ––––––––– - (9,075) ––––––––– 58,076 73,379 (4,068) ––––––––– (15,377) ––––––––– 54,008 ======== 58,002 ======== Notes to the Proforma Consolidated Profit and Loss Account Year ended 31 December 2001 Annual Report and Financial Statements 3. Exceptional items National Insurance and social security liabilities on Restricted Share Scheme Taxation on exceptional items 4. Earnings per share Earnings per share have been calculated on the following basis: Year ended 31 December 2001 Profit after taxation Average shares (number '000) Year ended 31 December 2000 Profit after taxation and equity minority interests Average shares (number '000) There is no dilutive effect of unexercised share options. 2001 £'000 2000 £'000 6,000 (1,800) ––––––––– 4,200 ======== - - ––––––––– - ======== Basic EPS £'000 Exceptional items £'000 Adjusted EPS £'000 35,349 ––––––––– 370,714 ––––––––– 37,039 ––––––––– 375,000 ––––––––– 4,200 ––––––––– - ––––––––– - ––––––––– - ––––––––– 39,549 ––––––––– 370,714 ––––––––– 37,039 ––––––––– 375,000 ––––––––– Michael Page International plc - 29 Annual Report and Financial Statements Consolidated Profit and Loss Account Year ended 31 December 2001 Before exceptional items 2001 £'000 Note Exceptional After items (Note 5) exceptional items 2001 £'000 2001 £'000 2000 £'000 Turnover Continuing Acquisitions Discontinued Turnover Cost of sales Gross profit Administrative expenses: Spherion bonuses Other administrative expenses 448,891 4,903 5,753 ––––––––– 459,547 (214,467) ––––––––– 245,080 - - - ––––––––– 448,891 4,903 5,753 ––––––––– 418,422 - 39,643 ––––––––– - 459,547 458,065 - ––––––––– (214,467) ––––––––– (211,736) ––––––––– - 245,080 246,329 2 3 - (181,061) ––––––––– - (6,000) ––––––––– - (187,061) ––––––––– (9,075) (163,152) ––––––––– Total administrative expenses 3 (181,061) (6,000) (187,061) (172,227) Operating profit Continuing Acquisitions Discontinued Operating profit 64,071 (156) 104 ––––––––– (6,000) - - ––––––––– 58,071 (156) 104 ––––––––– 72,108 - 1,994 ––––––––– 64,019 (6,000) 58,019 74,102 Profit on disposal of subsidiary 20 - ––––––––– 8,417 ––––––––– 8,417 ––––––––– - ––––––––– Profit on ordinary activities before interest 64,019 2,417 66,436 74,102 Net interest payable and similar charges Profit on ordinary activities before taxation Taxation Profit on ordinary activities after taxation Equity minority interests Profit for the financial period Equity dividends Retained profit for the financial period Basic earnings per share (pence) Diluted earnings per share (pence) Adjusted earnings per share (pence) 7 2 8 9 10 10 10 (4,110) ––––––––– - ––––––––– (4,110) ––––––––– (15,566) ––––––––– 59,909 2,417 62,326 58,536 (20,473) ––––––––– 1,800 ––––––––– (18,673) ––––––––– (21,331) ––––––––– 39,436 4,217 43,653 37,205 - ––––––––– - ––––––––– - ––––––––– (197) ––––––––– 39,436 4,217 43,653 37,008 (9,510) ––––––––– 29,926 ======== - ––––––––– 4,217 ======== (9,510) ––––––––– 34,143 ======== - ––––––––– 37,008 ======= 11.8 11.8 10.6 9.9 9.9 9.9 30 - Michael Page International plc Balance Sheets 31 December 2001 Fixed assets Intangible assets Tangible assets Investments Current assets Debtors Cash at bank and in hand Annual Report and Financial Statements Group Company Note 2001 £'000 2000 £'000 2001 £'000 2000 £'000 11 12 13 14 1,731 28,663 10,000 ––––––––– 40,394 ––––––––– 22,096 25,659 - ––––––––– 47,755 ––––––––– - - 431,545 ––––––––– 431,545 ––––––––– - 3,955 351,286 ––––––––– 355,241 ––––––––– 80,747 22,104 ––––––––– 103,651 17,035 ––––––––– 5,487 - ––––––––– 44,780 13 ––––––––– 102,851 120,686 5,487 44,793 Creditors: Amounts falling due within one year 15 Net current assets/(liabilities) (74,812) ––––––––– 28,039 ––––––––– (163,313) ––––––––– (42,627) ––––––––– (118,590) ––––––––– (113,103) ––––––––– (107,857) ––––––––– (63,064) ––––––––– Total assets less current liabilities 68,433 5,128 318,442 292,177 Creditors: Amounts falling due after more than one year 16 - (142,000) - (142,000) Provisions for liabilities and charges Net assets/(liabilities) Capital and reserves Called up share capital Capital contribution reserve Profit and loss account Equity shareholders’ funds/(deficit) 17 2 21 23 23 24 (6,000) ––––––––– 62,433 ======== (1,757) ––––––––– (138,629) ======== (6,000) ––––––––– 312,442 ======== (522) ––––––––– 149,655 ======== 3,750 306,487 (247,804) ––––––––– 62,433 ======== 50 142,187 (280,866) ––––––––– (138,629) ======== 3,750 306,487 2,205 ––––––––– 312,442 ======== 50 142,187 7,418 ––––––––– 149,655 ======== These financial statements were approved by the Board of Directors on 25 February 2002. Signed on behalf of the Board of Directors. T W Benson Chief Executive S R Puckett Group Finance Director Michael Page International plc - 31 Annual Report and Financial Statements Consolidated Cash Flow Statement Year ended 31 December 2001 Net cash inflow from operating activities excluding Spherion Bonus Net cash outflow from Spherion Bonus Net cash inflow from operating activities Returns on investments and servicing of finance Taxation paid Capital expenditure and financial investment Purchases less disposals of fixed assets Purchase of own shares Net capital expenditure Acquisitions and disposals Equity dividends paid Net cash inflow before financing Financing Repayment of loan notes Capital contribution Note 25 2001 £'000 2000 £'000 84,944 77,578 (9,075) ––––––––– (7,731) ––––––––– 75,869 69,847 (4,024) (11,506) (18,073) (15,992) (11,226) (10,000) ––––––––– (21,226) ––––––––– (11,124) - ––––––––– (11,124) ––––––––– 19, 20 814 (2,179) (1,016) ––––––––– 32,344 ––––––––– - ––––––––– 29,046 ––––––––– (915) (539) 168,000 - (51,531) (1,378) (142,000) ––––––––– (19,500) ––––––––– (26,446) ––––––––– 5,898 ======== (21,417) ––––––––– 7,629 ======== Repayment of amounts owed to previous parent company Decrease in bank loans Net cash outflow from financing Increase in cash in the year 27 Included within the repayment of amounts owed to the previous parent company is the net consideration from the Spherion Group of £7.4m for the disposal of Plusbox Limited and its subsidiaries. Statement of Total Recognised Gains and Losses Year ended 31 December 2001 Profit for the financial year Foreign currency translation differences Total recognised gains and losses for the year 32 - Michael Page International plc 2001 £'000 2000 £'000 43,653 37,008 (1,081) ––––––––– 42,572 ======== 429 ––––––––– 37,437 ======== Annual Report and Financial Statements Notes to the Accounts Year ended 31 December 2001 1. Accounting policies The financial statements are prepared in accordance with applicable United Kingdom accounting standards. The particular accounting policies adopted by the Directors are described below. Accounting convention The accounts have been prepared under the historical cost convention. Basis of consolidation The financial statements of Michael Page International plc consolidate the results of the Company and all its subsidiary undertakings. As permitted by Section 230 of the Companies Act 1985, the profit and loss account of the Company has not been included as part of these accounts. The Company's profit for the financial year amounted to £4.3m (2000: £19.6m). Prior to flotation the Group underwent a reorganisation. On 27 February 2001 Michael Page International Inc and Michael Page International Pte Limited were transferred to the Group by Spherion Corporation, the Group's previous ultimate parent company. On 28 February 2001, Plusbox Limited and its subsidiaries were transferred from the Group to Spherion Corporation. Proforma financial information has been prepared on pages 26 to 29 to show the results of the Group that would have arisen had the new structure been in place for the reported periods and are indicative of the business going forward after flotation. In accordance with UITF 13, the results of the Employee Benefit Trust that are under de facto control of the Company have been incorporated in these financial statements. 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 “Prepayments and accrued income”. A general 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 is incurred. Cost of sales Cost of sales consist of the salary cost of temporary staff and costs incurred on behalf of clients, principally advertising costs. Michael Page International plc - 33 Annual Report and Financial Statements Notes to the Accounts Year ended 31 December 2001 1. Accounting policies (continued) Gross profit Gross profit (turnover less cost of sales) is referred to by management as revenue. Goodwill Since 31 December 1997, goodwill arising on acquisitions (representing the excess of the fair value of the consideration given over the fair value of the separable net assets acquired) has been capitalised and classified as an asset on the balance sheet and amortised over its estimated useful economic life of 20 years. Goodwill arising on acquisitions prior to 31 December 1997 has been written off against reserves and will be charged or credited in the profit and loss account on subsequent disposal of the business to which it related. Foreign exchange Transactions in foreign currencies are translated into sterling at the rates of exchange prevailing at the dates the transactions were made. Translation differences are dealt with in the profit and loss account. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at rates ruling at that date. Translation differences are dealt with in the statement of total recognised gains and losses. Accounts of overseas operations are translated using the closing rate method. Profits, losses and cash flows of overseas operations are translated at the average exchange rate applicable to the period, whereas assets and liabilities of overseas subsidiaries are translated at the rates ruling at the period end. Unrealised gains and losses arising on these transactions are dealt with in the statement of total recognised gains and losses. Tangible fixed assets Tangible fixed assets are 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 Furniture, fixtures and equipment Motor vehicles Investments 10% per annum or period of lease if shorter 10% - 20% per annum 25% per annum Fixed asset investments are stated at cost less provision for impairment. Taxation The charge for taxation is provided at rates of corporation tax ruling during the accounting period. The Group has adopted FRS 19 Deferred Tax early. Deferred tax is provided in full on timing 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. Timing differences arise from the inclusion of income and expenditure in taxation computations in periods different from those in which they are included in financial statements. Deferred tax is not provided on timing differences arising from the revaluation of fixed assets where there is no commitment to sell the asset, or on unremitted earnings of subsidiaries and associates where there is no commitment to remit these earnings. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted. 34 - Michael Page International plc Annual Report and Financial Statements Notes to the Accounts Year ended 31 December 2001 1. Accounting policies (continued) 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 profit and loss account represent the contributions payable by the Group to the funds during each period. Leased assets Rentals under operating leases are charged to the profit and loss account on a straight line basis over the term of the lease. 2. Segmental analysis (a) Turnover by geographic region United Kingdom: continuing operations discontinued operations Total 2001 £'000 243,614 5,753 ––––––––– 249,367 2000 £'000 224,469 39,643 ––––––––– 264,112 Continental Europe: continuing operations 154,335 137,897 Asia Pacific: Americas: continuing operations acquisitions Total continuing operations acquisitions Total 49,547 1,759 ––––––––– 51,306 1,395 3,144 ––––––––– 4,539 ––––––––– 459,547 ======== 55,664 - ––––––––– 55,664 392 - ––––––––– 392 ––––––––– 458,065 ======== Turnover analysed by destination is not materially different to turnover analysed by origin. The amounts stated above derive from the Group’s single activity of recruitment consultancy. Michael Page International plc - 35 Annual Report and Financial Statements Notes to the Accounts Year ended 31 December 2001 2. Segmental analysis (continued) (b) Profit before interest, taxation, exceptional items and Spherion bonus by geographic region United Kingdom: continuing operations discontinued operations Total 2001 £'000 34,926 104 ––––––––– 35,030 2000 £'000 39,767 1,994 ––––––––– 41,761 Continental Europe: continuing operations 22,453 29,676 Asia Pacific: Americas: continuing operations acquisitions Total continuing operations acquisitions Total Profit before interest, taxation, exceptional items and Spherion bonus Exceptional items (note 5) Spherion bonus Profit before interest and taxation Net interest Profit on ordinary activities before taxation 6,787 456 ––––––––– 7,243 (95) (612) ––––––––– (707) ––––––––– 11,518 - ––––––––– 11,518 222 - ––––––––– 222 ––––––––– 64,019 83,177 2,417 - ––––––––– - (9,075) ––––––––– 66,436 74,102 (4,110) ––––––––– 62,326 ======== (15,566) ––––––––– 58,536 ======== Net interest payable has not been allocated, recognising the centre's role and responsibility in allocating financial resources. 36 - Michael Page International plc Notes to the Accounts Year ended 31 December 2001 2. Segmental analysis (continued) (c) Net assets/(liabilities) by geographic region United Kingdom: continuing operations discontinued operations Total Annual Report and Financial Statements 2001 £'000 30,413 - ––––––––– 30,413 2000 £'000 (174,926) (1,009) ––––––––– (175,935) Continental Europe: continuing operations 26,384 26,702 Asia Pacific: Americas: continuing operations acquisitions Total continuing operations acquisitions Total 6,706 187 ––––––––– 6,893 (53) (1,204) ––––––––– (1,257) ––––––––– 62,433 ======== 10,429 - ––––––––– 10,429 175 - ––––––––– 175 ––––––––– (138,629) ======== 3. Cost of sales and net operating expenses Continuing operations Acquisitions 2001 £'000 2001 £'000 Discontinued operations 2001 £'000 Continuing operations Acquisitions 2000 £'000 2000 £'000 Discontinued operations 2000 £'000 Total 2001 £'000 Total 2000 £'000 Cost of sales Net operating expenses Spherion bonus Administrative expenses 209,854 211,736 ======== ======== ======== ======== ======== ======== ======== ======== 214,467 185,016 26,720 3,834 779 - - - - - 9,075 - - 9,075 163,152 180,655 ––––––––– ––––––––– 180,655 172,227 ======== ======== ======== ======== ======== ======== ======== ======== - ––––––––– - 10,929 ––––––––– 10,929 152,223 ––––––––– 161,298 187,061 ––––––––– 187,061 1,815 ––––––––– 1,815 4,591 ––––––––– 4,591 Included within administrative expenses are £6.0m of exceptional items (2000: £Nil), all relating to continuing operations. Michael Page International plc - 37 Annual Report and Financial Statements Notes to the Accounts Year ended 31 December 2001 4. Operating profit Operating profit is stated after charging/(crediting): Staff costs (note 6) Depreciation of tangible fixed assets - owned Amortisation of goodwill Auditors’ remuneration: audit fees other services Loss/(Profit) on disposal of tangible fixed assets Operating lease rentals: land and buildings plant and machinery 5. Exceptional items National Insurance and Social Security liabilities on Restricted Share Scheme (see below) Profit on disposal of Plusbox Limited (note 20) Taxation on exceptional items 2001 £'000 2000 £'000 108,822 7,364 306 271 41 159 9,732 118 ======== 110,518 5,605 1,309 229 43 (27) 6,992 86 ======== 2001 £'000 2000 £'000 (6,000) - 8,417 ––––––––– 2,417 1,800 ––––––––– 4,217 ======== - ––––––––– - - ––––––––– - ======== Restricted share scheme Bonuses paid by the Group's previous parent company, Spherion Corporation, historically formed part of the remuneration of the Group's senior executives. On flotation this arrangement ceased with Spherion granting Restricted Shares to certain senior executives. The Restricted Shares represent 6% of the issued ordinary shares of the Group owned by Spherion prior to flotation. The grant of Restricted Shares gives rise to National Insurance and social security liabilities amounting to £6.0m based on the flotation price of 175p. These liabilities are expected to be payable in March 2004 when the shares vest to those senior executives. 38 - Michael Page International plc Notes to the Accounts Year ended 31 December 2001 6. Employee information The average number of employees (including executive directors) during the year was as follows: Management Client services Administration Annual Report and Financial Statements 2001 No. 2000 No. 140 1,601 1,024 ––––––––– 2,765 ======== 90 1,465 879 ––––––––– 2,434 ======== Employment costs (including directors’ emoluments) comprised: £'000 £'000 Wages and salaries Social security costs Other pension costs 7. Net interest payable Bank interest Interest payable to former parent company Loan notes Bank interest receivable 91,388 12,730 4,704 ––––––––– 108,822 ======== 94,959 12,496 3,063 ––––––––– 110,518 ======== 2001 £'000 3,303 991 214 ––––––––– 4,508 (398) ––––––––– 4,110 ======== 2000 £'000 11,633 3,986 365 ––––––––– 15,984 (418) ––––––––– 15,566 ======== Michael Page International plc - 39 Annual Report and Financial Statements Notes to the Accounts Year ended 31 December 2001 8. Tax on profits on ordinary activities The taxation charge for the year is made up as follows: Taxation relating to current year: UK corporation tax at 30% (2000: 30%) Overseas corporation tax Deferred taxation Taxation relating to prior periods: UK corporation tax Overseas corporation tax Deferred taxation 9. Dividends Interim Dividend of 0.275p per ordinary share (2000 – Nil) Proposed Final Dividend of 2.3p per ordinary share (2000 – Nil) Total Dividend of 2.575p per ordinary share (2000 – Nil) 10. Earnings per ordinary share Earnings per share have been calculated on the following bases: Year ended 31 December 2001 Profit after taxation Average shares (number '000) Year ended 31 December 2000 Profit after taxation and equity minority interests Average shares (number '000) There is no dilutive effect of unexercised share options. 40 - Michael Page International plc 2001 £'000 11,906 8,734 (1,901) 2000 £'000 8,363 11,666 1,641 838 (492) (412) ––––––––– 18,673 ======== (505) (489) 655 ––––––––– 21,331 ======== 2001 £'000 1,016 8,494 ––––––––– 9,510 ======== 2000 £'000 - - ––––––––– - ======== Basic EPS £'000 Exceptional items £'000 Adjusted EPS £'000 43,653 ––––––––– 370,714 ––––––––– 37,008 ––––––––– 375,000 ––––––––– (4,217) ––––––––– - ––––––––– - ––––––––– - ––––––––– 39,436 ––––––––– 370,714 ––––––––– 37,008 ––––––––– 375,000 ––––––––– Notes to the Accounts Year ended 31 December 2001 Annual Report and Financial Statements 11. Intangible assets Cost: At 1 January 2001 Additions Disposals At 31 December 2001 Amortisation: At 1 January 2001 Charge for the year Disposals At 31 December 2001 Net book value At 31 December 2001 At 31 December 2000 Goodwill £’000 25,428 318 (23,870) ––––––––– 1,876 ––––––––– 3,332 306 (3,493) ––––––––– 145 ––––––––– 1,731 ======== 22,096 ======== The addition to goodwill principally results from the purchase of Michael Page International Inc. and Michael Page International Pte Limited from fellow subsidiaries of Spherion Corporation. This additional goodwill is being amortised over 20 years. The disposals have arisen as a result of the disposal of Plusbox Limited and its subsidiaries as shown in note 20. Michael Page International plc - 41 Leasehold improvements £’000 Furniture, fixtures and equipment £’000 8,248 451 4,058 (749) (222) ––––––––– 11,786 ––––––––– 2,551 100 1,218 (213) (172) ––––––––– 3,484 ––––––––– 8,302 ======== 5,697 ======== 23,586 594 5,296 (3,320) (390) ––––––––– 25,766 ––––––––– 10,233 173 3,988 (2,354) (123) ––––––––– 11,917 ––––––––– 13,849 ======== 13,353 ======== Motor vehicles £’000 8,626 - 3,687 (2,553) (771) ––––––––– 8,989 ––––––––– 2,017 - 2,158 (1,206) (492) ––––––––– 2,477 ––––––––– 6,512 ======== 6,609 ======== Total £’000 40,460 1,045 13,041 (6,622) (1,383) ––––––––– 46,541 ––––––––– 14,801 273 7,364 (3,773) (787) ––––––––– 17,878 ––––––––– 28,663 ======== 25,659 ======== Annual Report and Financial Statements Notes to the Accounts Year ended 31 December 2001 12. Tangible fixed assets Group Cost At 1 January 2001 On acquisition Additions Disposals Foreign currency translation At 31 December 2001 Depreciation At 1 January 2001 On acquisition Charge for the year Disposals Foreign currency translation At 31 December 2001 Net book value At 31 December 2001 At 31 December 2000 42 - Michael Page International plc Notes to the Accounts Year ended 31 December 2001 12. Tangible fixed assets (continued) Company Cost At 1 January 2001 Additions Disposals Net group transfers At 31 December 2001 Depreciation At 1 January 2001 Charge for the year Disposals Net group transfers At 31 December 2001 Net book value At 31 December 2001 At 31 December 2000 13a. Investments Investments in subsidiaries: Company Cost: At 1 January 2001 Additions Disposals 31 December 2001 Annual Report and Financial Statements Leasehold improvements £’000 Furniture, fixtures and equipment £’000 1,042 171 - (1,213) ––––––––– - ––––––––– 364 21 - (385) ––––––––– - ––––––––– 2,593 85 - (2,678) ––––––––– - ––––––––– 1,485 90 - (1,575) ––––––––– - ––––––––– Motor vehicles £’000 3,011 180 (317) (2,874) ––––––––– - ––––––––– 842 161 (181) (822) ––––––––– - ––––––––– Total £’000 6,646 436 (317) (6,765) ––––––––– - ––––––––– 2,691 272 (181) (2,782) ––––––––– - ––––––––– - ======== 678 ======== - ======== 1,108 ======== - ======== 2,169 ======== - ======== 3,955 ======== Subsidiary undertakings £’000 Own Shares £’000 351,286 421,545 (351,286) ––––––––– 421,545 ======== - 10,000 - ––––––––– 10,000 ======== Total £’000 351,286 431,545 (351,286) ––––––––– 431,545 ======== Michael Page International plc - 43 Annual Report and Financial Statements Notes to the Accounts Year ended 31 December 2001 13a. Investments (continued) On 28 February 2001 the company disposed of its interest in the entire issued share capital of Michael Page Recruitment Group Limited and its business of personal recruitment to Michael Page International Recruitment Limited for a consideration of 1 ordinary share of £1 and 421,544,426 preference shares of £1. The Company's principal subsidiary undertakings at 31 December 2001, their principal activities and countries of incorporation are set out below: Name of undertaking Country of incorporation Principal activity Michael Page Recruitment Group Limited Michael Page Holdings Limited United Kingdom United Kingdom Holding company Support services Michael Page International Recruitment Limited* United Kingdom Recruitment consultancy Michael Page UK Limited Michael Page Limited Accountancy Additions Limited Michael Page International (France) SA Page Interim SA Michael Page International (Espana) SA Page Interim (Espana) SA Michael Page International (Italia) Srl Page Interim (Italia) Srl United Kingdom United Kingdom United Kingdom France France Spain Spain Italy Italy Michael Page International (Deutschland) GmbH Germany Michael Page International (Nederland) BV Netherlands Michael Page International (Australia) Pty Limited Australia Michael Page International (Hong Kong) Limited Hong Kong Michael Page International (Brasil) SC Ltda Michael Page International Portugal Lda Michael Page International (Japan) KK Michael Page International (Switzerland) SA Michael Page International Inc* Michael Page International Pte Limited* Brazil Portugal Japan Switzerland United States Singapore Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy *The equity of these subsidiary undertakings is held directly by Michael Page International plc. All companies have been included in the consolidation and operated principally in their country of incorporation. The percentage of the issued share capital held is equivalent to the percentage of voting rights held. The share capital of all the subsidiary undertakings comprise ordinary shares. 44 - Michael Page International plc Annual Report and Financial Statements Notes to the Accounts Year ended 31 December 2001 13b. Investments in own shares 5,714,286 ordinary shares were acquired by the Employee Benefit Trust on flotation at a cost of £10.0m as a hedge against National Insurance and social security liabilities payable in respect of the Restricted Share Scheme and the Executive Share Option Scheme. This holding represents 1.52% of the called up share capital and at 31 December 2001 had a market value of £8.9m (2000: nil). Dividend income on these shares has been waived by the Employee Benefit Trust. 14. Debtors Amounts falling due within one year: Trade debtors ACT recoverable Other debtors Prepayments and accrued income Group Company 2001 £'000 2000 £'000 2001 £'000 2000 £'000 65,722 87,652 - 2,757 10,238 ––––––––– 78,717 777 1,921 11,606 ––––––––– 101,956 - - 3,687 - ––––––––– 3,687 29,668 777 6,528 7,807 ––––––––– 44,780 Amounts falling due after more than one year: Deferred taxation (see note 18) 461 - 1,800 - Prepayments and accrued income 1,569 ––––––––– 80,747 ======== 1,695 ––––––––– 103,651 ======== - ––––––––– 5,487 ======== - ––––––––– 44,780 ======== Michael Page International plc - 45 Annual Report and Financial Statements Notes to the Accounts Year ended 31 December 2001 15. Creditors: amounts falling due within one year Loan notes Bank overdrafts Trade creditors Amounts owed to Group companies Amounts owed to former parent company Corporation tax Other tax and social security Other creditors Accruals and deferred income Dividends payable Group Company 2001 £'000 5,452 2,305 5,297 - - 3,309 20,193 5,021 24,741 8,494 ––––––––– 74,812 ======== 2000 £'000 6,367 2,666 5,430 - 69,979 2,143 24,663 11,133 40,932 - ––––––––– 163,313 ======== 2001 £'000 5,452 - - 104,461 - - - - 183 8,494 ––––––––– 118,590 ======== 2000 £'000 6,367 96 114 79,301 - 1,542 6,396 2,402 11,639 - ––––––––– 107,857 ======== Interest is payable on the loan notes at a rate of 1% below LIBOR for six month sterling deposits on 30 June and 31 December, the “Interest Payment Dates”. Loan note holders may redeem at par all or part of their holdings on any Interest Payment Date. The latest redemption date is 31 December 2002. 16. Creditors: amounts falling due after more than one year Bank loan 17. Provisions for liabilities and charges National insurance and social security liabilities on Restricted Share Scheme (note 5) Deferred taxation (note 18) Group Company 2001 £'000 2000 £'000 2001 £'000 2000 £'000 - ======== 142,000 ======== - ======== 142,000 ======== Group Company 2001 £'000 2000 £'000 2001 £'000 2000 £'000 6,000 - ––––––––– 6,000 ======== - 1,757 ––––––––– 1,757 ======== 6,000 - ––––––––– 6,000 ======== - 522 ––––––––– 522 ======== 46 - Michael Page International plc Notes to the Accounts Year ended 31 December 2001 18. Deferred taxation Deferred taxation (asset)/provision is as follows: Capital allowances in excess of depreciation Other timing differences At 1 January Current period charge Prior period charge Transfer Foreign currency translation At 31 December Annual Report and Financial Statements Group Company 2001 £'000 2000 £'000 2001 £'000 2000 £'000 378 (839) ––––––––– (461) ======== 1,757 (1,901) (412) - 95 ––––––––– (461) ======== 427 1,330 ––––––––– 1,757 ======== (339) 1,641 655 - (200) ––––––––– 1,757 ======== - (1,800) ––––––––– (1,800) ======== 522 (1,800) - (522) - ––––––––– (1,800) ======== 40 482 ––––––––– 522 ======== (887) 760 309 340 - ––––––––– 522 ======== 19. Purchase of subsidiary undertakings As a result of the reorganisation prior to flotation, on 27 February 2001 the Group acquired the entire issued share capital of Michael Page International Inc and Michael Page International Pte Limited for nil consideration from fellow subsidiaries of Spherion Corporation. The acquisitions were accounted for under the acquisition method of accounting. The goodwill arising of £307,000 equivalent to the net liabilities in the companies is being amortised over 20 years. No fair value adjustments were required. Michael Page International plc - 47 Annual Report and Financial Statements Notes to the Accounts Year ended 31 December 2001 20. Disposal of subsidiary undertakings As a result of the restructuring prior to flotation, on 28 February 2001 the Group disposed of its 100% investment in Plusbox Limited and its subsidiaries, including Spherion UK plc (formerly Crone Corkill Group plc) generating a net profit before taxation on disposal of £8.4m as follows: Net liabilities disposed of: Intangible fixed assets Tangible fixed assets Debtors Cash at bank and in hand Creditors Profit on sale before taxation Satisfied by: Reduction in the capital contribution received in cash from Spherion Corporation £'000 20,377 877 7,510 (737) (29,044) ––––––––– (1,017) ––––––––– 8,417 ======== 7,400 ======== Plusbox Limited contributed £5.5m to the Group's net operating cash flows, paid £nil in respect of net returns on investments and servicing of finance, paid £0.3m in respect of taxation and utilised £2.2m for capital expenditure. 21. Called up share capital Authorised 571,250,000 ordinary shares of 1p each (2000: 50,000 ordinary shares of £1 each) Allotted, called up and fully paid 375,000,000 ordinary shares of 1p each (2000: 50,000 ordinary shares of £1 each) At 1 January 2001 Transfer from capital contribution reserve At 31 December 2001 2001 £'000 2000 £'000 5,713 ======== 50 ======== 3,750 ======== 50 3,700 ––––––––– 3,750 ======== 50 ======== 50 - ––––––––– 50 ======== On 1 March 2001 each ordinary share was subdivided into 100 ordinary shares of 1p and the authorised share capital was increased from £50,000 to £5,712,500 by the creation of 566,250,000 new ordinary shares. On 2 April 2001 there was a £3.7m bonus issue of shares in the proportion of 74 ordinary shares for every 1 share held. 48 - Michael Page International plc Annual Report and Financial Statements Notes to the Accounts Year ended 31 December 2001 22. Share options At 31 December 2001 the following options had been granted and remained outstanding in respect of the Company’s ordinary shares of 1p under the Executive Share Option Scheme. Number of shares 31,593,728 Exercise price per share Exercise period £1.75p April 2004 – March 2011 No options were exercised in the year and 2,156,250 shares lapsed in the year. 23. Reserves At 1 January 2001 Retained profit/(loss) for the year Foreign currency translation differences Amount capitalised on admission Capital contribution At 31 December 2001 Group Company Capital Contribution Reserve £’000 Profit Capital and loss Contribution Reserve account £’000 £’000 142,187 - - (3,700) 168,000 ––––––––– 306,487 ======== (280,866) 34,143 (1,081) - - ––––––––– (247,804) ======== 142,187 - - (3,700) 168,000 ––––––––– 306,487 ======== Profit and loss account £’000 7,418 (5,213) - - - ––––––––– 2,205 ======== The deficit on the profit and loss account arose following the acquisition of the Michael Page Group PLC in 1997. Goodwill of £311.7m arising on this acquisition was written off directly to reserves in accordance with the accounting policy set out in note 1. The entire capital contribution reserve constitutes cash injections of £142.2m by the Group’s previous ultimate parent company, Spherion Corporation in April 1997 and a further cash injection of £168.0m by Spherion Corporation on flotation. Reserves herein are distributable. On admission £3.7m was capitalised for the purpose of paying in full at par 370,000,000 ordinary shares to be allotted and distributed credited as fully paid up, to and amongst the members in the proportion of 74 ordinary shares for every 1 ordinary share held by them. Michael Page International plc - 49 Annual Report and Financial Statements Notes to the Accounts Year ended 31 December 2001 24. Reconciliation of movements in shareholders funds Group Company Profit for the financial year Dividends Retained profit/(loss) for the financial year Foreign exchange movements Capital contribution Opening shareholder’s (deficit)/funds Closing shareholders’ funds/(deficit) 2001 £'000 43,653 (9,510) ––––––––– 34,143 (1,081) ––––––––– 33,062 168,000 (138,629) ––––––––– 62,433 ======== 2000 £'000 37,008 - ––––––––– 37,008 429 ––––––––– 37,437 - (176,066) ––––––––– (138,629) ======== 25. Reconciliation of operating profit to net cash inflow from operating activities Operating profit Depreciation and amortisation charges Loss/(profit) on sale of fixed assets Decrease/(increase) in debtors Increase in creditors Net cash inflow from operating activities 26. Reconciliation of net cash flow to movement in net cash/(debt) Increase in cash in the year Decrease in debt financing Foreign exchange movements Movements in net cash in year Opening net debt Closing net cash/(debt) 50 - Michael Page International plc 2001 £'000 4,297 (9,510) ––––––––– (5,213) - ––––––––– (5,213) 168,000 149,655 ––––––––– 312,442 ======== 2001 £'000 58,019 7,670 159 17,289 1,807 ––––––––– 84,944 ======== 2001 £'000 5,898 212,894 (468) ––––––––– 218,324 (203,977) ––––––––– 14,347 ======== 2000 £'000 19,610 - ––––––––– 19,610 - ––––––––– 19,610 - 130,045 ––––––––– 149,655 ======== 2000 £'000 74,102 6,914 (27) (35,536) 32,125 ––––––––– 77,578 ======== 2000 £'000 7,629 17,431 257 ––––––––– 25,317 (229,294) ––––––––– (203,977) ======== Annual Report and Financial Statements At 31 December 2000 £'000 Foreign Cash flow movements £'000 At exchange 31 December 2001 £'000 £'000 17,035 (2,666) ––––––––– 14,369 (6,367) (69,979) (142,000) ––––––––– (203,977) ======== 5,537 361 ––––––––– 5,898 915 69,979 142,000 ––––––––– 218,792 ======== (468) - ––––––––– (468) - - - ––––––––– (468) ======== 22,104 (2,305) ––––––––– 19,799 (5,452) - - ––––––––– 14,347 ======== Notes to the Accounts Year ended 31 December 2001 27. Analysis of net cash/(debt) Cash at bank and in hand Bank overdrafts Loan notes due within one year Amounts owed to previous parent company Bank loans due after more than one year Total net (debt)/cash 28. Financial instruments The Group's financial instruments comprise borrowings, cash and liquid resources plus various items such as trade debtors and trade creditors which arise directly from its operations. The main purpose of these financial instruments is to provide finance for the Group's operations. The Group has opted to exclude all financial risk disclosures relating to short term debtors and creditors with the exception of currency risk. The main exposures arising from the Group's financial instruments are currency risk, liquidity risk and interest rate risk. Currency risk The Group's cash and bank balances, analysed by the constituent currencies at the end of each financial year are disclosed in Table (a) below. The main functional currencies of the Group are pounds sterling, Australian dollars and the Euro. The Group does not have material transactional exposures at local entity level as the associated revenues and costs are denominated in their functional currencies. Likewise, there are no material exposures to foreign-denominated monetary assets and monetary liabilities held by the local entities. The Group, however, has exposure to foreign currency translation differences in accounting for its overseas operations although its policy is not to hedge against this exposure. Liquidity risk The Group's overall objective is to ensure that it is able to meet, at all times, all its financial commitments as and when they fall due. Surplus funds are invested in short term deposit accounts. Short-term working capital requirements are met by overdraft facilities. Interest rate risk The Group finances its operations through a mixture of retained earnings and debt. Michael Page International plc - 51 Annual Report and Financial Statements Notes to the Accounts Year ended 31 December 2001 28. Financial instruments (continued) (a) Currency exposures of financial assets and liabilities The extent to which Group companies have monetary assets and liabilities in currencies other than their local currency is shown in the tables below. As at 31 December 2001 Net foreign currency monetary assets/(liabilities) Functional currency of Group operation Sterling US dollar EU currencies Other currencies Total Sterling £'000 - - - - ––––––––– - ======== US$ £'000 186 - - - ––––––––– 186 ======== EU currencies £'000 Other currencies £'000 4,017 - - - ––––––––– 4,017 ======== - - - (231) ––––––––– (231) ======== Total 2001 £'000 4,203 - - (231) ––––––––– 3,972 ======== As at 31 December 2000 Net foreign currency monetary assets/(liabilities) Functional currency of Group operation Sterling US dollar EU currencies Other currencies Total Sterling £'000 - - - - ––––––––– - ======== US$ £'000 153 - - - ––––––––– 153 ======== EU currencies £'000 Other currencies £'000 (76) - - - ––––––––– (76) ======== - - - (218) ––––––––– (218) ======== Total 2000 £'000 77 - - (218) ––––––––– (141) ======== 52 - Michael Page International plc Annual Report and Financial Statements Notes to the Accounts Year ended 31 December 2001 28. Financial instruments (continued) (b) Maturity of financial liabilities The maturity profile of the carrying value of the Group's and Company’s financial liabilities, other than short term creditors and accruals, as at 31 December was as follows: Less than one year Between two and five years Total (c) Borrowing facilities Group........... Company 2001 £'000 6,244 - ––––––––– 6,244 ======== 2000 £'000 62,033 142,000 ––––––––– 204,033 ======== 2001 £'000 5,452 - ––––––––– 5,452 ======== 2000 £'000 59,481 142,000 ––––––––– 201,481 ======== The Group and Company has the following undrawn committed borrowing facilities available at 31 December 2001. Less than one year Between one and two years Between two and five years Total Group........... Company 2001 £'000 1,676 33,500 - ––––––––– 35,176 ======== 2000 £'000 12,284 - 310,110 ––––––––– 322,394 ======== 2001 £'000 - 33,500 - ––––––––– 33,500 ======== 2000 £'000 - - 310,110 ––––––––– 310,110 ======== The facilities have been arranged to help finance the expansion of the Group's activities around the world. (d) Financial assets and liabilities (i) Assets The following analysis excludes short term debtors: Cash Group Total 2001 £'000 Group Total 2000 £'000 22,104 ======== 17,035 ======== Michael Page International plc - 53 Annual Report and Financial Statements Notes to the Accounts Year ended 31 December 2001 28. Financial instruments (continued) (ii) Liabilities including interest rate risk profile The interest rate profile of the Group's financial liabilities, excluding short term creditors at 31 December was as follows: Floating rate liabilities 2001 £'000 5,452 - 2,305 ––––––––– 7,757 ======== Fixed rate liabilities 2001 £'000 - - - ––––––––– - ======== Total 2001 £'000 5,452 - 2,305 ––––––––– 7,757 ======== Floating rate liabilities 2000 £'000 149,833 - - ––––––––– 149,833 ======== Fixed rate liabilities 2000 £'000 54,200 - - ––––––––– 54,200 ======== Total 2000 £'000 204,033 - - ––––––––– 204,033 ======== Sterling EU currencies Others Total All the Group's creditors falling due within one year (other than bank and other borrowings) have been excluded from the above table by either applying the exemption granted by Financial Reporting Standard 13 relating to other short term items, or because they do not meet the definition of a financial liability, such as balances relating to taxation. The floating rate liabilities bear interest at rates based on relevant national LIBOR equivalents. (e) Fair value of financial assets and liabilities The fair value of financial assets and liabilities is not materially different to the book value. 54 - Michael Page International plc Annual Report and Financial Statements Notes to the Accounts Year ended 31 December 2001 29. Commitments and contingent liabilities Operating lease commitments At 31 December 2001 the Group was committed to make the following payments in the next financial year in respect of non-cancellable operating leases: Leases which expire: Within one year Within two to five years After five years Capital commitments Group Land and buildings £’000 Group Other £'000 1,312 4,924 3,704 ––––––––– 9,940 ======== 23 85 - ––––––––– 108 ======== The Group had capital commitments of £335,000 as at 31 December 2001 (2000 - £1,488,000) VAT group registration As a result of group registration for VAT purposes, the Company is contingently liable for VAT liabilities arising in other companies within the VAT group which at 31 December 2001 amounted to £4,772,515 (2000 - £5,327,765). Bank cross-guarantees The Company has given cross-guarantees to its bankers in respect of overdraft facilities granted to certain other group companies. There was a contingent liability in respect of these guarantees as at 31 December 2001 of £NIL (2000 - £1,399,000). 30. Related party transactions Details of Directors' shareholdings and share options are shown on pages 12 to 23. The Group is taking advantage of the exemption granted by paragraph 3(c) of Financial Reporting Standard No. 8 "Related Party Disclosures" not to disclose transactions with group companies which are related parties. Michael Page International plc - 55 Annual Report and Financial Statements Shareholder Information and Advisers Annual General Meeting To be held on 22 May 2002 at 12 noon at 39-41 Parker Street, London, WC2B 5LN. Every shareholder is entitled to attend and vote at the meeting. Final dividend for the year ended 31 December 2001 To be paid (if approved) on 7 June 2002 to shareholders on the register on 10 May 2002. Company secretary R A McBride Company number 3310225 Registered office 39-41 Parker Street London WC2B 5LN Tel: 020 7831 2000 Fax: 020 7269 2280 Auditors Solicitors Registrars Brokers Capita IRG Balfour House Vintners Place Boston (Europe) Limited 390/398 High Road Ilford, Essex IG1 1NQ One Cabot Square London E14 4QJ Credit Suisse First 25 Feb 2002 March 2002 8 May 2002 10 May 2002 22 May 2002 7 June 2002 August 2002 Deloitte & Touche Hill House 1 Little New Street London EC4A 3TR Herbert Smith Exchange House Primrose Street London EC2A 3TR Key dates Preliminary announcement of 2001 results Publication of 2001 annual Report and Accounts Ex-Dividend date Record date Annual General Meeting Payment of final ordinary dividend Interim results announcement 56 - Michael Page International plc Five Year Summary Profit and Loss Account Turnover Gross profit Operating profit Profit on ordinary activities before taxation Profit for the financial period Equity dividends Basic earnings per share (pence) Diluted earnings per share (pence) Adjusted earnings per share (pence) 1997 £'000 189,520 ––––––––– 105,723 ––––––––– 40,365 ––––––––– 24,532 ––––––––– 8,427 ––––––––– 20,000 ======== 2.2 2.2 2.2 Proforma Profit and Loss Account Turnover Gross profit Operating profit Profit on ordinary activities before taxation Profit for the financial period Equity dividends Basic earnings per share (pence) Diluted earnings per share (pence) Adjusted earnings per share (pence) 1997 £'000 190,791 ––––––––– 106,272 ––––––––– 40,225 ––––––––– 24,392 ––––––––– 8,362 ––––––––– 20,000 ======== 2.2 2.2 2.2 1998 £'000 277,357 ––––––––– 146,939 ––––––––– 45,949 ––––––––– 31,276 ––––––––– 19,382 ––––––––– 42,000 ======== 5.2 5.2 5.2 1998 £'000 255,103 ––––––––– 138,225 ––––––––– 44,925 ––––––––– 31,812 ––––––––– 20,819 ––––––––– 42,000 ======== 5.6 5.6 5.6 Annual Report and Financial Statements 1999 £'000 356,252 ––––––––– 181,670 ––––––––– 56,217 ––––––––– 42,211 ––––––––– 27,258 ––––––––– - ======== 7.3 7.3 7.3 1999 £'000 327,412 ––––––––– 173,645 ––––––––– 54,881 ––––––––– 40,834 ––––––––– 26,765 ––––––––– - ======== 7.1 7.1 7.1 2000 £'000 458,065 ––––––––– 246,329 ––––––––– 74,102 ––––––––– 58,536 ––––––––– 37,008 ––––––––– - ======== 9.9 9.9 9.9 2000 £'000 426,886 ––––––––– 239,664 ––––––––– 73,379 ––––––––– 58,002 ––––––––– 37,039 ––––––––– - ======== 9.9 9.9 9.9 2001 £'000 459,547 ––––––––– 245,080 ––––––––– 58,019 ––––––––– 62,326 ––––––––– 43,653 ––––––––– 9,510 ======== 11.8 11.8 10.6 2001 £'000 455,020 ––––––––– 244,214 ––––––––– 58,076 ––––––––– 54,008 ––––––––– 35,349 ––––––––– 9,510 ======== 9.5 9.5 10.7 Michael Page International plc - 57 Annual Report and Financial Statements Annual General Meeting Notice of Meeting Notice is hereby given that the Annual General Meeting of the Company will be held at 39-41 Parker Street, London WC2B 5LN on Wednesday 22 May 2002 at 12 noon for the following purposes: 1. To receive the reports of the directors and auditors and accounts for the year ended 31 December 2001. 2. To declare a final dividend on the ordinary share capital of the Company for the year ended 31 December 2001 of 2.3p per share. 3. To reappoint by separate resolutions, each of the following Persons as a director of the Company (note 2): i. ii. iii. iv. v. vi. The Right Honourable Lord Wakeham P.C. T. W. Benson S. J. Box S. P . Burke C-H. Dumon S. J. Ingham vii. A. A. Montague viii. S. R. Puckett ix. M. Stewart 4. To re-appoint Deloitte & Touche as auditors of the Company to hold office until the conclusion of the next Annual Meeting at a remuneration to be fixed by the directors. 5. To propose the following ordinary resolution: That the directors be and are hereby generally and unconditionally authorised for the purposes of Section 80 of the Companies Act 1985 (the “Act”) to exercise all powers of the Company to allot relevant securities (as defined in Section 80 (2) of the Act) up to an aggregate nominal amount of £1,250,000 to such persons upon such conditions as the directors may determine, such authority to expire at the conclusion of the next Annual General Meeting of the Company save that the Company may before such expiry make an offer or agreement which would or might require relevant securities to be allotted in pursuance of such an offer or agreement as if the authority conferred hereby had not expired (note 4). 6. To propose the following special resolution: That the directors be and are hereby empowered pursuant to Section 95 of the Companies Act 1985 (the "Act") to allot equity securities (as defined in Section 94 of the Act) for cash pursuant to the authority conferred by resolution 5 above as if Section 89 (1) of the Act did not apply to such allotment provided that this power shall be limited to: (a) the allotment of equity securities in connection with a rights issue and so that for this purpose “rights issue” means an offer of equity securities open for acceptance for a period fixed by the directors to holders of equity securities on the register on a fixed record date in proportion to their respective holdings of such securities or in accordance with the rights attached thereto but subject to such exclusions or other arrangements as the directors may deem necessary or expedient to deal with fractional entitlements or legal or practical problems under the laws of any overseas territory or requirements of any recognised regulatory authority or stock exchange in any country or any matter whatever, and 58 - Michael Page International plc Annual Report and Financial Statements Annual General Meeting Notice of Meeting (b) the allotment (other than within the authority conferred in sub paragraph (a) above) of equity securities for cash up to an aggregate nominal amount of £187,500: and shall expire at the conclusion of the next Annual General Meeting of the Company, save that the Company may before such expiry make an offer or agreement which would or might require equity securities to be allotted in pursuance of such an offer or agreement as if the authority conferred hereby had not expired (note 5). 7. To propose as special business the following special resolution: That pursuant to the Company’s Articles of Association and Section 166 of the Companies Act 1985 (the ”Act”), the Company be and is hereby authorised to make market purchases of ordinary shares of 1p each in the capital of the Company provided that: (a) the maximum number of ordinary shares hereby authorised to be purchased is 37,500,000. (b) the minimum price which may be paid for each ordinary share is 1 pence. (c) the maximum price which may be paid for each ordinary share is in respect of an ordinary share contracted to be purchased on any day, an amount equal to 105% of the average of the mid-market quotations for an ordinary share of the company as derived from The London Stock Exchange Daily Official List for the five business days immediately preceeding the day on which the ordinary share is purchased. (d) the authority hereby conferred shall expire at the conclusion of the next Annual General Meeting of the Company after the date of passing this resolution, unless such authority is renewed prior to such time. (e) the Company may conclude a contract to purchase ordinary shares under the authority hereby conferred prior to the expiry of such authority which will or may be exercised wholly or partly after the expiry of such authority and may make a purchase of ordinary shares in pursuance of any such contract as if the authority hereby conferred had not expired (note 6). By order of the Board R. A. McBride Secretary 39-41 Parker Street London WC2B 5LN Registered in England No. 3310225 25th February 2002 Michael Page International plc - 59 Annual Report and Financial Statements Annual General Meeting Notice of Meeting Notes 1. Any member entitled to attend and vote at the meeting may appoint another person, whether a member or not, as his proxy to attend and on a poll, to vote instead of him. A form of proxy is enclosed for this purpose and to be valid must be lodged with the Company’s registrars together with any power of attorney or other authority under which it is signed, not less than 48 hours before the time appointed for the meeting. Completion and return of the form of proxy will not preclude a member from attending and voting at the meeting. 2. Each director other than T. W. Benson was appointed after the last Annual General Meeting and must therefore retire and seek a re-appointment at the next Annual General Meeting. T.W. Benson is required to retire by rotation and is seeking re-appointment at the Annual General Meeting. By virtue of his age, Lord Wakeham will be required to seek re-election in 2003 and therefore his re-appointment at this Annual General Meeting will be for one year. 3. The following documents are available for inspection by members at the registered office of the Company on any weekday during normal business hours from the date of this announcement until the day of the Annual General Meeting and at the meeting not less than 15 minutes before the meeting commences and after the meeting concludes: (a) the register of directors’ interests required to be kept section 325 of the Act; and (b) copies of the directors’ contracts of service. 4. This authority is in respect of 33% of the issued share capital of the Company and is in accordance with the recommendations of the Association of British Insurers (“ABI”). It is the directors’ intention to seek renewal of this authority annually. The directors have no present intention of exercising this authority. 5. This authority is in respect of 5% of the issued share capital of the Company and is in accordance with the recommendations of the ABI. It is the directors’ intention to seek renewal of this authority annually. The directors’ have no present intention of exercising this authority. 6. This authority is in respect of 10% of the issued share capital of the Company and the power given by this resolution will only be exercised if the directors are satisfied that any purchase will increase the Earnings per Share of the Ordinary Share Capital in issue after the purchase and accordingly, that the purchase is in the interests of shareholders. If the Company buys any ordinary shares under this authority they will be cancelled. 7. Biographical information on each of the directors is contained on pages 9 and 10. 8. To have the right to attend and vote at the meeting (and also for the purpose of calculating how many votes a person may cast), a person must have his/her name entered on the register of members by no later than 48 hours before the time of the meeting. Changes to entries on the register after this time shall be disregarded in determining the rights of any person to attend or vote at the meeting. 60 - Michael Page International plc Michael Page International plc Page House, 39-41 Parker Street, London WC2B 5LN Tel: 020 7831 2000, Fax: 020 7269 2280 Visit our Investor Relations Centre on our website at www.michaelpage.co.uk/ir