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Annual Report 2003

Plain-text annual report

MICHAEL PAGE INTERNATIONAL PLC ANNUAL REPORT 2003 Company profile Michael Page is one of the world’s leading professional recruitment consultancies, specialising in the placement of candidates in permanent, contract, temporary and interim positions with clients around the world. The Group has operations in the UK, Continental Europe, Asia-Pacific and the Americas and focuses on the areas of Accounting and Finance, Banking and Financial Markets, Marketing, Retail, Sales, Legal, Technology, Human Resources, Engineering & Supply Chain, Taxation, Corporate Treasury, Consultancy/Strategy/Change and Secretarial. 04 Chairman’s Statement 06 Chief Executive’s Review 09 Finance Director’s Review 12 The Board of Directors 14 Directors’ Report 18 Corporate Governance 23 Remuneration Report 30 Independent Auditors’ Report 32 Consolidated Profit and Loss Account 33 Balance Sheets 34 Consolidated Statement of Total Recognised Gains and Losses 34 Consolidated Reconciliation of Movements in Shareholders’ Funds 35 Consolidated Cash Flow Statement 36 Notes to the Accounts 55 Shareholder Information and Advisers 56 Five Year Summary 57 Notice of Meeting 2 Michael Page International plc | Annual Report 2003 £372.6m Group Turnover £178.5m Gross Profit £23.5m Profit before taxation and exceptional items Group financial highlights For the year ended 31 December 2003 Turnover Gross profit Profit before taxation Profit before taxation and exceptional items Basic and diluted earnings per share Adjusted earnings per share 2003 £’000 372,616 178,485 22,409 23,510 3.8p 4.1p 2002 £’000 383,470 192,648 32,597 32,597 5.8p 5.8p Annual Report 2003 | Michael Page International plc 3 Chairman’s Statement Adrian Montague Chairman The Group performed creditably during the year and exited 2003 in a strong financial position. This was achieved despite it being another challenging year for recruitment specialists. The slowing down of economic activity and weakening of business confidence experienced throughout 2002 continued into the first half of 2003, compounded by the war in Iraq and the outbreak of SARS. These conditions impacted directly upon the professional employment markets and consequently on the results of the Group. However, towards the end of the first half we experienced a slight improvement in activity which continued throughout the second half of the year. Dividends and share repurchases Despite the reduction in profits, the Board Financial highlights is recommending that the dividend be As a consequence of these difficult trading conditions, turnover for the year ended 31 December 2003 was 2.8% lower at £372.6m (2002: £383.5m). Temporary placement activity has been more resilient than permanent and this shift in business mix contributed to a revenue (gross profit) reduction of 7.4% to £178.5m (2002: £192.6m). Given the Group’s high operational gearing, operating profit before exceptional items reduced by 28.8% to maintained at last year’s level. A final dividend of 2.3p per ordinary share is proposed which, together with the interim dividend of 1.1p per ordinary share paid in October, makes a total dividend for the year of 3.4p (2002: 3.4p) per ordinary share. The final dividend will be paid on 4 June 2004 to those shareholders on the register at 7 May 2004. The total dividend is covered 1.2 times by earnings per share before exceptional items of 4.1p. £22.9m (2002: £32.1m). In view of the uncertain and weak market Profit before tax and exceptional items was £23.5m (2002: £32.6m) and earnings per share before exceptional items were 4.1p (2002: 5.8p). conditions during 2003, we did not make any share repurchases. However, we anticipate share repurchases being an ongoing use of surplus cash and accordingly will be seeking shareholders’ consent for a renewal of the Cash flow was again very strong during the repurchase authority at the Annual General year with the Group generating £29.2m Meeting on 27 May 2004. (2002: £46.7m) from operating activities. At 31 December 2003 the Group had net cash of £22.4m (2002: £21.4m). 4 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 5 Adrian Montague Chairman Employees I wish to express my thanks to the staff worldwide for their commitment, loyalty and efforts throughout this sustained period of difficult trading conditions when they have maintained your Company’s position as the international leader in the specialist recruitment industry. Outlook For the Group as a whole, our current expectation is that our first quarter revenues will be of a similar order to the £45.7m in the fourth quarter of 2003, with pre-bonus costs, including new investments, running at an In the UK, our largest geographic market, average monthly rate of approximately there is now clear evidence of increasing £13m over the year as a whole. activity levels across all disciplines and we have now begun investing in anticipation of further growth. The outlook in Asia Pacific and the Americas is also improving and we are planning to open a number of new offices in those markets. However, in Continental Adrian Montague Europe, trading conditions remain weak Chairman and our expectation is that 2004 will prove 25 February 2004 another difficult year for our businesses there. In the UK, our largest geographic market, there is now clear evidence of increasing activity levels across all disciplines and we have now begun investing in anticipation of further growth. 4 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 5 Chief Executive’s Review Terry Benson Chief Executive Whilst having to review another challenging year, I do so in the belief that there are encouraging signs that the worst is behind us in many of our markets. During the year we have continued to invest cautiously and sensibly in the organic development of our businesses, while maintaining our normal tight cost control, and produced over £23.5m of profits before exceptional items. We started the year with 2,390 fee generating and support staff operating from 107 offices in 16 countries. During the course of the year we took the opportunity, United Kingdom In the UK, turnover fell by 4.7% to £194.3m (2002: £203.9m) and revenue (gross profit) by 8.7% to £90.6m (2002: £99.3m). Operating profits before exceptional items were £15.6m (2002: £20.5m). Revenue in the second half of the year was 7.2% higher than in the first half reflecting improved trading conditions. The operational gearing effect on these increased revenues, combined with good cost control, resulted in a 32% increase in second half operating profits, compared with the first half. The combined revenues of Michael Page Marketing, Michael Page Sales and Michael Page Retail, were 7% lower than in 2002 and represented 23% of the UK total. The Marketing and Sales businesses, which had borne the full brunt of the economic downturn in 2001 and 2002, particularly in the Technology and Telecoms sectors, were both beneficiaries of increased levels of enquiry as the year progressed. Michael Page Retail produced another sound performance, with second half revenue 9% higher than the first. The national coverage of these businesses increased to eight offices in January 2004 with the opening of an office upon the expiration of lease commitments, The revenues of the finance and accounting in Bristol. to consolidate a small number of offices in the UK and France, and at 31 December 2003 we employed 2,260 fee generating and support staff operating from 105 offices in businesses of Michael Page Finance, Michael Page City and Accountancy Additions, which generate approximately two thirds of our UK revenue, were 12% lower than in 2002. 16 countries. Michael Page Finance, the largest of the three businesses, recorded its highest quarterly revenue of the year in the fourth quarter, which was very encouraging given that this quarter includes the seasonally quieter Christmas period. Although the revenue of Michael Page City for the year as a whole was 20% lower than in 2002, the second half improved significantly on the first, reflecting the improved confidence In 2003, Michael Page Legal achieved almost identical levels of revenue to 2002, the second half being 6% stronger than the first. The revenue of our Technology business improved substantially in the second half enabling us to achieve a break- even position for the year as a whole. Our newer businesses, Michael Page Human Resources and Michael Page Engineering and Supply Chain Management both achieved in excess of 30% revenue growth year on year. We have extended the geographical coverage of both businesses and they are now represented in four and five levels experienced by many large financial locations respectively. institutions. The revenue of Accountancy Additions, which specialises in lower level finance and accounting positions, proved, as in 2002, to be the most resilient and least affected by adverse economic conditions. In December we started a new business, Michael Page Secretarial, in the City and West End of London. 6 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 7 Continental Europe Our Continental European businesses continued to experience extremely Clearly the depressed economic environment challenging trading conditions throughout the in many Continental European markets year. Turnover was 5.6% lower at £120.4m severely impacted the Group’s businesses (2002: £127.6m) and revenue 12.2% lower over the past three years. Nevertheless we at £58.2m (2002: £66.3m). The decline in are committed to these markets in the longer activity continued throughout the year with term and accordingly we have continued to second half revenue 10% lower than in the invest modestly and sensibly in 2003 with the first. As a result the region recorded a loss opening of small offices in Zürich and Berlin, in the second half, resulting in a full year and expanded our offices in Rotterdam, operating loss before exceptional items of which opened in 2002, and Düsseldorf, £0.3m (2002: £5.6m profit ). by starting Michael Page Engineering and France is our second largest geographic market after the UK, representing approximately 20% of the Group’s 2003 Production. Asia Pacific revenues, and once again trading conditions Turnover for the region was 10.0% higher proved to be very difficult. Revenue from at £51.4m (2002: £46.7m), revenue was permanent placements was 22% lower than 9.2% higher at £25.0m (2002: £22.9m) and in 2002. The temporary and contracting operating profit before exceptional items businesses fared better but still experienced increased to £7.6m (2002: £6.8m). and Technology sectors was subdued in Sydney in the first half, but showed signs of improvement towards the end of the year. The newer businesses, Michael Page Human Resources and Michael Page Engineering, both progressed well during the course of 2003. The lease of our Sydney office expired in December and we successfully relocated to new premises with minimum disruption in what was the beginning of the seasonally quieter summer period in Australia. Having carefully evaluated the opportunities in Queensland, a new office was opened in Brisbane in January 2004. Our businesses in Hong Kong and Singapore, both of which have traditionally been heavily dependent on the International Financial Services, Telecoms and IT sectors, experienced a particularly anxious start to 2003 due to the outbreak of SARS. The impact proved to be less than we originally feared and both businesses exceeded The economy in Australia proved to be the internal expectations. We are equally pleased most resilient of all our major markets in 2003 with the progress of our Tokyo office, which and I am pleased to report another year of increased revenue year on year by over 50% achievement. Our businesses in Melbourne and produced an operating profit in 2003. and Perth all benefited from strong demand by domestic clients. As elsewhere in the Our businesses in The Netherlands, world, demand from our clients in the Germany and Switzerland also experienced International Financial Services, Telecoms We remain confident that the Asia Pacific region, in particular Greater China, offers considerable longer term potential for the Group. a 16% decline in revenue year on year. Whilst continuing to maintain our market leading position, staff numbers were reduced by over 25% from the beginning of 2003 and we successfully consolidated a number of offices during the year. difficult trading conditions throughout the year. Our businesses in Italy, Spain and Portugal fared better and as a result achieved similar levels of revenue to 2002. There are encouraging signs that the worst is behind us in many of our markets. 6 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 7 The United States offers significant long-term opportunities for the Group and it remains our objective to grow our business in the USA organically. Chief Executive’s Review (continued) The Americas Turnover for the region was £6.6m (2002: £5.4m) and revenue increased to £4.6m (2002: £4.1m). Revenue in the second half of 2003 was over 40% higher than in the first half and consequently the first half losses were largely recovered and the region only recorded a small operating loss before exceptional items for the year of £0.1m (2002: £0.7m loss). The increased revenue achieved in the second half reflects both improving overall trading conditions, particularly in the USA, and the continuing investment in our own staff and new offices. opening of a third office in the USA in 2003, despite the extremely challenging environment we faced at that time. I am pleased to report that our office in Stamford, Connecticut was duly opened in September and we are very satisfied with its progress to date. In São Paulo, Brazil, we enjoyed another successful year and were particularly pleased with the development of Michael Page Engineering and Production. We opened an office in Rio de Janeiro and it is our intention to expand into Sales and Marketing recruitment during the course of 2004. In my review last year I anticipated the Strategy New IT system We have now successfully commenced the global roll out of our new front office recruitment system, which is now live in the UK, France and USA. The worldwide roll out is currently anticipated to be substantially complete by the end of 2004. Since 2001 we have experienced the most challenging trading conditions for at least a decade or more. During this period we have retained a level of resource that has enabled us to maintain and indeed grow our presence in some markets and start new businesses in developing markets. Our staff around the world should be congratulated for these achievements and we will continue to invest in their training and development. I believe the demand for our services will The United States offers significant long- term opportunities for the Group and it remains our objective to grow our business in the USA organically, as rapidly as internal resources will allow. To this end we already have in place a plan of action which should allow us to open new offices in Boston and Chicago within the first half of 2004. Terry Benson Chief Executive increase in the coming years. Our overall 25 February 2004 strategy remains absolutely unchanged. We intend to stay focused on our core competency of specialist recruitment and to grow the business organically by the expansion of existing businesses in their local markets, the introduction of new disciplines into existing locations and by entering new geographic markets. 8 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 9 Finance Director’s Review Stephen Puckett Finance Director Profit and loss account Turnover Turnover for the year was 2.8% lower at £372.6m (2002: £383.5m). In the second half of 2003, turnover was 6.5% higher than in the first half and was 3.5% higher than the second half of 2002. Turnover from temporary placements increased marginally by 0.6% to £243.8m (2002: £242.2m) and represented 65.4% (2002: 63.2%) of Group turnover. Turnover from permanent placements was £128.8m (2002: £141.2m). Gross profit (revenue) Revenue for the year decreased by 7.4% to £178.5m (2002: £192.6m) representing an overall gross margin of 47.9% (2002: 50.2%). The percentage reduction in revenue is greater than the reduction in turnover due to a combination of a higher proportion of temporary placements in 2003 and a lower Revenue in the second half of 2003 was 3.4% higher than in the first half. As the chart below shows, the Group’s quarterly revenue in the first quarter of 2001 was £69.6m and it declined sequentially to £49.5m in the first quarter of 2002. After three relatively stable quarters of around £50m from the fourth quarter of 2001 to the second quarter of 2002, it declined sequentially through to the first quarter of 2003. We have now had another three stable quarters of around £45m and in the fourth quarter of 2003 recorded the first year on year quarterly increase since the first quarter of 2001. Operating profit Administrative expenses in the year reduced to £155.6m (2002: £160.5m) before exceptional items, principally due to the lower profit related bonuses payable to staff. The Group’s largest category of expenditure is the remuneration of our consultants and support staff. Headcount of the Group was 2,390 at 1 January 2003 and reduced to 2,279 at 30 June. The Group’s headcount has remained relatively stable during the second half of the year and at 31 December 2003 we employed 2,260 consultants and support staff. As a result of the revenue decline and the Group’s high operational gearing, operating profit before exceptional items was £22.9m (2002: £32.1m). gross margin on temps. Revenue from Revenue temporary placements was £56.7m (2002: £59.7m) and represented 31.7% (2002: 31.0%) of Group revenue. The gross margin achieved on temporary placements was 23.2% (2002: 24.7%). m £ 69.6 66.9 58.7 49.9 49.5 51.4 47.8 43.9 42.8 45.0 45.0 45.7 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2001 2002 2003 8 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 9 Finance Director’s Review (continued) Exceptional items At the end of 2001, the Group committed to a 20 year lease on 33,000 sq.ft. of offices in London to provide space for future Net interest Earnings per share and dividends Basic earnings per share were 3.8p (2002: 5.8p) and adjusted earnings per share before exceptional items were 4.1p (2002: expansion and to accommodate existing The net interest receivable in the year was 5.8p). The weighted average number of businesses whose leases were expiring £0.6m (2002: £0.5m). During the year £0.4m shares for the year was 357,955,000 (2002: in 2002 to 2004. Possession of the new of interest was earned on surplus cash 366,355,000). The 2003 average number of offices took place in the first half of 2003 balances which were invested in the short- shares was lower than 2002 due to the full and, given the reductions in headcount, a term money market. In addition interest of year effect of the shares repurchased and substantial amount of space is now vacant. £0.2m was received on a tax related refund. cancelled during the second half of 2002. In accordance with FRS 12 the Group has recorded an exceptional charge for vacant Taxation properties of £3.0m. Taxation on profits before exceptional items by the Directors which, together with the A maintained final dividend of 2.3p (2002: 2.3p) per ordinary share has been proposed On flotation in March 2001, the Group and goodwill amortisation was £9.0m (2002: interim dividend of 1.1p (2002: 1.1p) per incurred an exceptional charge and made a £11.4m), representing an effective tax rate ordinary share, makes a total dividend for provision of £6.0m in respect of employer’s of 38.1% (2002: 35.0%). The rate is higher the year of 3.4p (2002: 3.4p) per ordinary social charges on the Restricted Share than the UK corporation tax rate of 30% as a share. The final dividend, which amounts to Scheme which vests in 2004. This liability, result of non-deductible business expenses, £8.2m, will be paid on 4 June 2004 to those which is dependent upon the price of profits arising in higher tax rate jurisdictions, shareholders on the register at 7 May 2004. Michael Page shares, has been estimated and losses which are unable to be offset in these accounts at £4.1m using the share against profits in the current year and against price at 31 December 2003 (186p). As a which no deferred tax asset has been consequence there is an exceptional credit recognised. The rate has increased over Balance sheet in the year of £1.9m. When this liability 2002 as a direct result of the lower profits in We have adopted early the new guidance on crystallises, any material difference from Continental Europe. the current provision will be taken as an exceptional item in the 2004 accounts. As a result of recent changes in tax legislation, the Company expects to obtain a deduction for corporation tax purposes when the Restricted Share Scheme vests in 2004. Based on the price of Michael Page shares at 31 December 2003, the deduction to UK taxable profits would be approximately £27m which, at the UK corporation tax rate of 30%, would reduce the tax charge in 2004 by £8.1m. accounting for own shares and have classed these as “EBT reserve” deducted from Shareholders’ Funds rather than being held as investments on the balance sheet. The impact of this is to reduce the Group’s net assets, in both the current and prior year, by approximately £10m. 10 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 11 The Group had net assets of £53.3m at 31 December 2003 (2002: £48.9m) of which £22.4m (2002: £21.4m) is represented by net cash. While capital expenditure is fundamentally driven by the Group’s headcount, as indicated last year, 2003 capital expenditure, net of disposal proceeds, increased to £6.3m (2002: £2.5m) due to the fit out costs of the new building in London and the implementation of the new IT system. Trade debtors were £53.2m at 31 December 2003 (2002: £53.2m) representing debtor days of 46.0 (2002: 47.5 days). Cash flow We have had three stable quarters of around £45m of revenue and in the fourth quarter, recorded the first year on year quarterly increase since the first quarter of 2001. The principal payments have been: • £6.3m (2002: £2.5m) of capital expenditure, net of disposal proceeds, on property, infrastructure, information systems and motor vehicles for staff; Cash surpluses are invested in short- term deposits with any working capital requirements being provided by local overdraft facilities. At the start of the year the Group had net • taxes on profits of £10.7m (2002: £11.5m); The main functional currencies of the Group are Sterling, Euro and Australian Dollar. The cash of £21.4m. • dividends of £12.2m (2002: £12.5m). Group does not have material transactional During the year the Group generated net At 31 December 2003 the Group had net cash from operating activities of £29.2m cash balances of £22.4m. (2002: £46.7m) being £29.7m (2002: £40.5m) of EBITDA, an increase in working Treasury management and capital requirements of £0.8m (2002: £6.2m currency risk currency exposures nor is there a material exposure to foreign-denominated monetary assets and liabilities. The Group is exposed to foreign currency translation differences in accounting for its overseas operations although our policy is not to hedge this reduction) and movements in provisions of £0.2m (2002: £nil). The increased working capital is largely due to the greater activity in December 2003 when compared to December 2002. It is the Directors’ intention to finance the exposure. activities and development of the Group principally from retained earnings and to operate the Group’s business while maintaining the net debt/cash position within a relatively narrow band. Cash generated in excess of these requirements will be used to Stephen Puckett buy back the Company’s shares for which Group Finance Director renewal of the existing authority is being 25 February 2004 sought at the forthcoming Annual General Meeting. 10 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 11 Board of Directors Adrian Montague CBE (56) Non-Executive Chairman Adrian Montague is Chairman of British Energy plc and Deputy Chairman of Network Rail Limited. From 1997 to 2001 he held senior posts concerned with the implementation of Government’s policies for the involvement of the private sector in the delivery of public services, first as Chief Executive of the Treasury Taskforce and then as Deputy Chairman of Partnerships UK plc. He spent his early career as a solicitor with Linklaters & Paines before joining Kleinwort Benson in 1994. Adrian is also a Non- Executive Director of CellMark AB, the pulp and paper marketing company based in Gothenburg. He was appointed Chairman of Michael Page International plc on 22 May 2002. Stephen Burke (44) 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 (45) 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. Terry Benson (52) 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 1993 he was appointed Chief Executive of the Group. Stephen Box (53) 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. From August 1997 to November 2002 he was Finance Director of National Grid. He is a member of the Financial Reporting Review Panel and a Non-Executive Director of South East Water plc. Stephen has experience of Audit Committees as a partner at Coopers & Lybrand, as an Executive Director of National Grid attending Audit Committees, and as a Non-Executive Director chairing the Audit Committee of South East Water plc. 12 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 13 Stephen Ingham (41) 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 businesses and was promoted to Operating Director in 1990. He was appointed Managing Director of Michael Page Stephen Puckett (42) Group Finance Director Marketing and Sales in 1994. Subsequently Stephen Puckett qualified as a Chartered he has taken additional responsibility for Accountant with BDO Binder Hamlyn. He Michael Page’s Retail, Technology, Human joined Wace Group plc in 1988 as Director Resources and Engineering businesses. He of Corporate Finance, subsequently being was promoted to Executive Director of UK promoted to Group Finance Director in 1991. Operations in January 2001. He was appointed Group Finance Director Hubert Reid (63) Non-Executive Director Hubert Reid is Chairman of Enterprise Inns plc and the Royal London Group, Deputy Chairman of Majedie Investments PLC and a Non-Executive Director of the Taverners Trust PLC. He was previously Managing Director and then Chairman of the Boddington Group plc and Chairman of Ibstock Plc and Bryant Group plc. He was appointed a Non-Executive Director of Michael Page International plc on 25 February 2003. Hubert has been a member of various Audit Committees since 1993 including Bryant of Stat Plus Group plc in 2000. He was Group Plc, Ibstock Plc, Greenalls Group plc, appointed Group Finance Director of Michael Royal London Group, Taverners Trust PLC, Page in January 2001. Enterprise Inns plc and Majedie Investments PLC. None of the Executive Directors has a Non- Executive Directorship in another company. Robert Lourey (46) Non-Executive Director Robert Lourey is Group Human Resources Director of BOC Group plc. He joined BOC in Australia in 1996 and was appointed to the Executive Management Board in June 2000. He has a Bachelor of Business degree in personnel management. He was appointed a Non-Executive Director of Michael Page International plc on 7 October 2003. Rob has experience as a member of the Executive Management Board of a FTSE100 Company, including participation in that company’s management, investments, capital allocation, and governance. Rob also has experience as a Non-Executive Director of two publicly listed companies in the Republic of South Africa. 12 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 13 Directors’ Report 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 32 to 54. retire by rotation. All retiring Directors being 2003 of 2.3 pence per ordinary share on 4 eligible will offer themselves for re-election at June 2004 to shareholders on the register on the forthcoming Annual General Meeting. 7 May 2004 which, if approved at the Annual Biographical details for all the current Directors are shown on pages 12 and 13. General Meeting, will result in a total dividend for the year of 3.4 pence per ordinary share (2002: 3.4 pence). Details of the Group’s future prospects and The beneficial interests of Directors in office at 31 December 2003 in the shares Share capital review of operations are described in the Chairman’s Statement, Chief Executive’s Review and Finance Director’s Review on pages 4 to 11. Directors and interests of the Company at 31 December 2003 and at 25 February 2004 are set out in the Remuneration Report on pages 26 and 27. All of the Executive Directors are deemed to have an interest in the ordinary shares The following were Directors during the year held in the Employee Benefit Trust and its and held office throughout the year, unless subsidiaries. otherwise indicated. A A Montague‡ CBE (Chairman) Results and dividends T W Benson (Chief Executive) The profit for the year after taxation The authorised and issued share capital of the Company are shown in note 18 to the financial statements. At the Annual General Meeting held on 22 May 2003 the Company renewed its authority to make market purchases of its own ordinary shares up to a maximum of 10% of the issued shared capital. No purchases were made during the year. S J Box‡* S P Burke C-H Dumon S J Ingham amounted to £13.7m (2002: £21.2m). Substantial shareholdings An interim dividend of 1.1 pence per ordinary As at 25 February 2004, the Company has share was paid on 17 October 2003. The been notified of the following interests held in Directors recommend the payment of a final more than 3% of the issued share capital of R Lourey‡ (appointed 7 October 2003) dividend for the year ended 31 December the Company: S R Puckett Holder Number of ordinary shares % of issued share capital H V Reid‡ (appointed 25 February 2003) Harris Associates 47,085,000 M Stewart‡ (resigned 7 October 2003) AXA Investment Managers UK Limited 43,581,270 ‡ Non-Executive Directors * Senior Independent Director R Lourey was appointed on 7 October 2003. In accordance with the Company’s Articles of Silchester International Investors 34,905,755 Barclays plc 22,556,117 Fidelity Investment Management Limited 20,709,642 College Retirement Equities Fund 14,536,294 Association he will retire and in addition Legal & General 12,780,166 S J Box, S P Burke and C-H Dumon will Capital International Limited 10,896,097 12.95 11.98 9.60 6.20 5.69 4.00 3.51 3.00 14 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 15 Corporate social responsibility The Board recognises its responsibilities in respect of social, environmental and ethical (SEE) matters. The Directors continually monitor all risks to its businesses, including The review was carried out in accordance with the guidance as laid down by the Department for Environment, Food and Rural Affairs (DEFRA), and the Global Reporting Initiatives (GRI), a new independent, international institution established to create a common framework for sustainability SEE risks, which may impact the Group’s reporting worldwide. short and long term value. During 2003 no significant SEE risks were identified. (a) Environmental policy The Group does not operate in a business sector which causes significant pollution The first environmental report, which covers our UK businesses only, is expected to be available during 2004 and will be published on the Michael Page website. A summary of its findings during 2003 are shown below. As this is the first report, comparatives are but the Board recognises that the business not available. does have an impact on the environment. The Board is committed to managing and Waste improving the way in which our activities affect the environment by: • optimising the use of energy; • ensuring the efficient use of materials; • 250 tonnes of waste was generated by UK offices. Our current national recycling rate is 26% from recycling confidential paper and toner cartridges. Cardboard Annual weight generated (tonnes) % of total waste 64 1 26% 1% 115 45% 38 15% 9 6 10 7 4% 2% 4% 3% Confidential waste Toners Mixed office paper Food waste and packaging Aluminium cans Glass bottles Plastic bottles and plastic cups • encouraging re-use and recycling; and • Through recycling, Michael Page in the UK • incorporating the principle of sustainable has saved 1,087 trees and saved a total of development. 322m3 landfill space. TOTAL 250 100% During the year the Group has allocated a significant amount of time and resource to identify where its activities have an impact on the environment. An environmental review was undertaken jointly by Michael Page International plc, and 3Re, an external firm of environmental consultants. Confidential waste Toners Mixed office paper Food waste and packaging Aluminium Cans Glass bottles Plastic bottles and plastic cups Cardboard 14 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 15 Directors’ Report (continued) Energy • 2,873,018 kWh of electricity was consumed in the UK, which converts to 1,235,398 kgCO2 • 614,896 kWh of gas was consumed in the UK, which converts to 116,830 kgCO2 Water (c) Employee involvement (e) Health and safety It is the policy of the Group to take all reasonable and practicable steps to safeguard the health, safety and welfare of its employees, visitors and other persons who may be affected by its activities. In order to • In the UK, Michael Page consumed 43,033 Communication with employees is effected meet these responsibilities the Group will: m3 of water. Transport through the Company’s Intranet, information bulletins, briefing meetings conducted by • assess the risks to health and safety; senior management and formal and informal • implement safe systems at work; In total, UK employees travelling to and from work converts to 373,164 kgCO2. (b) Charitable donations discussions. Interim and Annual Reports are available to all staff. Informal communication is further facilitated by the Group’s divisional organisation structure. (d) Equal opportunity • provide information, instruction and training; • establish and maintain emergency procedures; and The Group made charitable donations of £25,567 during the year (2002: £42,377) principally to local charities serving the communities in which the Group operates. Subject to certain restrictions, the Group matches charitable donations made by employees. It is the Group’s policy not to make political donations either in the UK or overseas. The Group endorses and supports the principles of equal employment opportunity. • regularly review health and safety policies and procedures. It is the policy of the Group to provide We are being proactive in our approach to equal employment opportunity to all health and safety by monitoring proposed qualified individuals which ensures that all changes in legislation and implementing employment decisions are made, subject to policies accordingly, and as such we comply its legal obligations, on a non-discriminatory with all statutory and regulatory requirements. basis. Due consideration is given to the recruitment, promotion, training and working environment of all staff including those with disabilities. It is the Group’s policy to encourage the training and further development of all its employees where this is of benefit to the individual and to the Group. 16 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 17 (f) 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 (2002: nil) as the Company does not undertake any transactions with suppliers. The Group’s creditor days for the year ended 31 December 2003 were 28 (2002: 29 days). Statement of Directors’ responsibilities Auditors On 1 August 2003, Deloitte & Touche, the Company’s auditors transferred their business to Deloitte & Touche LLP, a limited liability partnership incorporated under the Limited Liability Partnerships Act 2000. The Company’s consent has been given to treating the appointment of Deloitte & Touche as extending to Deloitte & Touche LLP under the provisions of Section 26(5) of the Companies Act 1989. Deloitte & Touche LLP 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 • 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 United Kingdom Company law requires the inappropriate to presume that the Group proposed at the forthcoming Annual General 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: will continue in business. Meeting. The Directors are responsible for keeping Annual General Meeting 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. The resolutions to be proposed at the Annual General Meeting to be held on 27 May 2004, together with explanatory notes, appear in the Notice of Meeting set out on pages 57 to 59. By order of the Board R A McBride Company Secretary 25 February 2004 16 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 17 Corporate Governance The Board of Directors is committed to high standards of corporate governance and has applied the The main Board comprises the Chairman, principles of corporate governance who has no executive responsibilities, five recommended in Section 1 of the Executive Directors and three independent Combined Code for the year ended Non-Executive Directors. The relatively large 31 December 2003. This statement also reflects best practice governance matters as defined by the recent Higgs review of the role and effectiveness of non-executive directors. The Board has continued to adopt the ‘comply or explain’ approach reinforced by Higgs confirming that either the company complies with the recommendations or provides an explanation for non-compliance. However the formal compliance statement made below refers to the current Combined Code dated June 1998 applicable to this year end. Compliance with the Combined Code The Directors consider that the Company has complied with the Code provisions set out in Section 1 of the Combined Code throughout the year ended 31 December 2003. The Board and its operation number of Executive Directors reflects the Group’s team approach to management. The number of independent Non-Executive Directors does not equal that of the executives as the Board considers that the collective know-how and experience of the Non-Executive Directors provides a balanced mix of skills which is sufficient to ensure proper governance of the Group which consists of an organically grown, 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. During the meetings, the Board formally considers single business, producing clear, transparent how and to whom matters covered at each results. With this high level of visibility there is considered to be no value in appointing additional Non-Executive Directors and therefore there is currently no intention to increase the number of independent Non- Executive Directors on the main Board. 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 meeting should be communicated and actioned beyond the Board. Decision making concerning matters of a more routine nature are dealt with by management below Board level. The structure of the Group facilitates the day to day running of the business and enables efficient and effective communication of issues to the Board when required. Each of the Committees has formal written terms of reference which were reviewed and amended in 2003 in accordance with the Higgs recommendations. Their composition The Board of Michael Page International shareholders at the first Annual General and manner in which they discharge their plc is the body responsible for corporate Meeting following their appointment. All responsibilities are described below. governance, establishing policies and Directors are subject to re-election every objectives, and the management of the three years in accordance with the Higgs Group’s resources. It is the Group’s policy recommendations. that the roles of Chairman and Chief Executive are separate. 18 Michael Page International plc | Annual Report 2003 Audit Committee The Audit Committee comprises the independent Non-Executive Directors and is chaired by Stephen Box. Their relevant qualifications and experience are shown in their biographies on pages 12 and 13. The Committee met four times this year to fulfil its duties and included attendance by the external auditors where required. 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 (b) enforcing a policy concerning the provision of non-audit services by the auditor which governs the types of work: Remuneration Committee The Remuneration Committee comprises the Non-Executive Directors and is chaired by Adrian Montague. It is recognised that the membership of the Committee does not (i) from which the external auditor is comply with the current recommendations excluded; of the Higgs review, in as much as the (ii) for which the external auditor can be engaged without referral to the audit committee; (iii) for which a case-by-case decision is required, which includes all engagements over certain fee limits. Chairman is a member of the Committee. However, it is the current belief of the Board that the Chairman is best placed to manage discussions concerning remuneration and to address any concerns raised by shareholders. on accounting policies and compliance, (c) enforcing a policy of reviewing all cases The Committee reviews the Group’s policy and areas of management judgement and estimates. Objectivity and independence of external auditors where it is proposed that a former employee of the external auditors be employed by the Group; and (d) monitoring the external auditors’ compliance with applicable UK ethical The objectivity and independence of the guidance on the rotation of audit external auditor is safeguarded by: partners. (a) obtaining assurances from the external auditor that adequate policies and Nomination Committee procedures exist within its firm to ensure The Nomination Committee comprises the on the Executive Directors’ and senior executives’ remuneration and terms of employment, makes recommendations upon this to the Board, and also approves the provision of policies for the incentivisation of employees including share 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 23 to 29 and the firm and its staff are independent of Non-Executive Directors and is chaired includes information on the Directors’ service the Group by reason of family, finance, by Adrian Montague. It is responsible for contracts. employment, investment and business making recommendations to the Board relationships (other than in the normal on new appointments, as well as making course of business); recommendations as to the composition of the Board generally and the balance between Executive and Non-Executive Directors appointed to the Board. Annual Report 2003 | Michael Page International plc 19 Corporate Governance continued Transparency of Board appointments Performance evaluation The Board follows formal and transparent procedures when appointing directors. Following the issue of the Revised Combined Code on Corporate Governance in July 2003, the nomination committee engages external consultants to identify a shortlist of suitable candidates for Non-Executive appointments. All the candidates are interviewed by the Chairman and the Chief Executive and evaluations of all candidates are discussed with all members of the nomination committee and the recommendation is subsequently made to the Board. Induction and training programme On appointment to the Board, each director discusses with the Company Secretary the extent of training required and a tailored induction programme to cover their individual requirements is then compiled. Elements of the programme typically consists of meeting senior management, site visits and attending internal conferences. In addition, information In the year under review, evaluation of the performance of the Board was undertaken in respect of the achievement of financial targets which directly impacted the level of bonus awarded. Financial and non-financial goals have been agreed for 2004 as part of the budget process and these will be evaluated at the end of the year. is provided on the company’s services, group Attendance at meetings structure, Board arrangements, financial information, major competitors and major risks. After an initial induction phase, updates are provided on a periodic basis. The number of meetings of the board and commitees and individual attendance by the directors are shown below: Total meetings Meetings attended Executive T W Benson S P Burke C-H Dumon S J Ingham S R Puckett Total meetings Non-Executive A A Montague* S J Box R Lourey (appointed 7 October 2003) H V Reid (appointed 25 February 2003) M Stewart (resigned 7 October 2003) Main Board 12 11 11 9 10 12 Main Board Audit Committee Remuneration Committee Nomination Committee 12 12 12 2 11 5 4 2 4 1 3 2 6 6 6 1 3 4 2 2 2 - 1 1 * Resigned as a member of the Audit Committee on 22 May 2003 in line with the recommendation made in the Smith Report “Audit Committees – Combined Code Guidance”. 20 Michael Page International plc | Annual Report 2003 Internal control The responsibilities of the Directors in respect of internal control are defined by the Financial Services Authority’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 • financial and operational controls. Controls and procedures are documented in policies and procedures manuals. Individual operations complete an • group organisation. The Board of annual Self-Certification Statement. Directors meets at least ten times a year, Each operational manager, in addition to focusing mainly on strategic issues, the finance function for that operation, operational and financial performance. There confirms the adequacy of their systems is also a defined policy on matters strictly of internal control and their compliance reserved for the Board. The Managing with Group policies. The Statement also Director of each operating company is requires the reporting of any significant accountable for establishing and monitoring control issues that have emerged so that internal controls within that division; areas of Group concern can be identified (“the Turnbull Report”) was published in • financial reporting. The Group has a and experience can be shared; September 1999. comprehensive budgeting system with an • risk management. Identification of major The Board has assessed existing risk management and internal control processes during the year ended 31 December 2003 in accordance with the Turnbull guidance. The Board believes it has the procedures in place such that the Group has fully complied for the financial year ended 31 December 2003. The Directors are responsible for the Group’s system of internal financial and operational 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: annual budget approved by the Board. business risks is carried out at Group Detailed monthly reports are produced level in conjunction with operational showing comparisons of results against management and appropriate steps taken budget, forecast and the prior year, with to monitor and mitigate risk; performance monitoring and explanations provided for significant variances. The Group reports to shareholders on a half- yearly basis; • public interest disclosure policy. A procedure is in place where staff may, in confidence, raise concerns about possible improprieties relating to financial reporting • quarterly reforecasting. The Group or other matters; and 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; Annual Report 2003 | Michael Page International plc 21 Corporate Governance continued • internal audit activities. These are performed by members of the head office finance function, who are independent of the operations, throughout the year. Businesses are visited on a rotational basis and their controls are assessed in their effectiveness to mitigate specific risks. In addition, there is a regular review of these risks and changes are made to the risk profile where necessary. All internal audit activities are reported to the Audit Committee. During the year, the Board reviewed internal audit arrangements and concluded that there is currently no need for a separate and distinct internal audit department. The Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Group and that the processes have been in place for the year under review and up to the date of approval of the annual report and accounts. Annual Report The Annual Report is designed to present Board contact with shareholders a balanced and understandable view of Communications with shareholders are given a high priority. The main contact between the Board and shareholders is through the Chief Executive and the Finance Director. They undertake two major investor “roadshows” each year in February/March and August/ September, in which numerous one-to-one the Group’s activities and prospects. The Chairman’s Statement, Chief Executive’s Review and Finance Director’s Review on pages 4 to 11 provide an assessment of the Group’s affairs and position. The Annual Report and Interim Report are sent to all shareholders. meetings with shareholders take place. The The Directors acknowledge their outcome of these meetings and the views of responsibility for the preparation of the shareholders are relayed back to the Board Annual Report. The Statement of Directors’ by the corporate brokers, at the end of each Responsibilities is shown on page 17. roadshow. The Group’s corporate brokers A statement by the auditors about their also report monthly to the Board on broking reporting responsibilities is shown on pages activity during the month and any issues that 30 to 31. may have been raised with them. Where appropriate, individual matters (e.g. Going concern the introduction of a share incentive plan) The Directors have a reasonable expectation are discussed by the Chairman or Senior that the Group has adequate resources to Independent Director directly with major continue in operational existence for the shareholders. The Group also has a website (www.michaelpage.co.uk) with an investor section that contains Company announcements and other shareholder information. foreseeable future being a period of at least twelve months from the date of approval of accounts 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 2004 based on normal business planning and control procedures. 22 Michael Page International plc | Annual Report 2003 Remuneration Report Scope and membership of Remuneration Committee The Remuneration Committee meets not less than twice a year and comprises the Chairman and Non-Executive Directors. It is chaired by Adrian Montague. The Chief Executive attends the meetings except when his own remuneration is under consideration. The purpose of the Remuneration Committee 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 following sections provide an outline of the Company’s policy during 2003 and for the forthcoming and subsequent years with regard to each component. Base salary and benefits the Group’s objectives as well as to establish a The Committee establishes salaries and framework for remunerating all employees. is to review, on behalf of the Board, the It is the Company’s policy that none of the remuneration policy for the Executive Executive Directors has a service contract Directors and other senior executives and which can be determined by more than to determine the level of remuneration, 12 months’ notice. The Non-Executive incentives and other benefits, compensation Directors do not have service contracts payments and the terms of employment with the Company. They are appointed for of the Executive Directors and other senior an initial term of three years and thereafter executives. It seeks to provide a remuneration may be reappointed for one further term of benefits by reference to those prevailing in the employment market generally for Executive Directors of comparable status and 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 wage inflation in the economy. package that aligns the interests of Executive three years subject to re-election at Annual Annual bonus plan Directors with the shareholders. The General Meetings. Additional details of Committee has continued to review the service contracts are shown on page 29. Annual bonuses for the Executive Directors are based on the division of a pool of Profits 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 has appointed and receives advice from independent remuneration consultants, New Bridge Street Consultants, and makes comparisons with similar organisations. New Bridge Street The remuneration of the Non-Executive earned during the financial year. 6% of Profits Directors is determined by the Board. The earned above a threshold equal to half of Non-Executive Directors do not receive any targeted Profits for the year will be reserved pension or other benefits, other than out-of- for bonuses (i.e. approximately 3% of total pocket expenses, from the Group, nor do Profits). In addition, if Profits exceed 1.2 they participate in any of the bonus or share times the targeted level, then an additional option schemes. Consultants provides no other material The remuneration agreed by the Committee for services to the Company, nor do they have the Executive Directors contains the following any other connection with the Company. elements: a base salary and benefits, an No Directors other than the members of the Remuneration Committee provided material advice to the Committee on Directors’ remuneration. annual bonus reflecting Group performance, share options conditional upon achieving performance criteria, incentive share plan award and pension benefits. 2% of Profits earned above the targeted level will be added to the bonus pool. Profits are defined as group profit before taxation, exceptional and extraordinary items and before the Executive Directors’ annual bonus charges and charges or credits resulting from the Incentive Share Plan described below or other share option grants. Annual Report 2003 | Michael Page International plc 23 Remuneration Report continued The targeted level of Profits for 2003 was £16m and was set at the beginning of 2003 by reference to market expectations and internal forecasts at that time. The Committee retains the discretion to review this arrangement and set different rates and thresholds as it deems appropriate for the business. Incentive Share Plan for Executive Directors and Senior Employees In December 2003, shareholders approved a new Incentive Share Plan for Executive Directors and senior employees. Initially, 5% of Group Profits of the preceeding year will be paid into an employee benefit trust and invested in the Company’s shares. Not more than 60% of this figure will be available for awards to the Executive Directors. The balance will be for awards to senior over the three year period. Finally, to the extent that the performance share award is greater than 75% of an executive’s salary, the hurdle will be 10% over the growth in UK RPI per annum over the three year period. If awards do not vest after three years, then they will lapse. Senior executives of the Group who benefit from these arrangements will, in the future, receive only modest share option grants as The target for 2004 has been set and will be employees. Group Profits are defined as described below. disclosed in next year’s report. The threshold group profit before taxation and before in 2004 for awarding the additional 2% of exceptional and extraordinary items and profits has been increased to 1.25 from charges or credits resulting from the Plan 1.2 times the targeted level. or other share option grants, as described In the event that this mechanism creates an below. The Committee retains the discretion to review the proportion of profits dedicated to the Incentive Share Plan in the light of the growth in the size of the Company, its profitability and the number of Executive annual bonus greater than 100% of salary for Two thirds of these shares (“Deferred Share Directors. any executive, only an amount equal to the Awards”) are subject to a three year deferral executive’s salary will be paid in cash. The period during which they will be forfeited excess above the individual’s salary level will if the relevant director or senior employee be paid into an employee benefit trust and leaves, other than in “compassionate Based on the 2003 results, awards totalling £1.175m will be made in 2004 of which £0.675m (57.4%) is for the Executive invested in the Company’s shares with no circumstances”. The remaining third Directors. matching investment by the Company. These (“Performance Share Awards”) are also to shares will be reserved for the executive and be deferred for three years but are subject Restricted Share Scheme will vest in equal tranches 1, 2 and 3 years to earnings per share (“EPS”) growth targets later, normally so long as the executive is still over the three year period. Awards up to in employment at that time. 50% of a director’s or senior employee’s On flotation in 2001, 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 The bonus pool will be capable of variation by the Committee both up and down by, initially, 10%, to reflect the Committee’s view on the performance of the Company relative to its directly comparable peers. There has been no variation made to the 2003 bonus pool. 24 salary will only vest if EPS grows by an average of 5% over the growth in UK RPI per annum over the three year period. Any executives in a Restricted Share Scheme. excess between 50% and 75% of salary will Benefits received under the Restricted Share only vest to the extent that EPS grows by Scheme are not pensionable and the shares 7.5% over the growth in UK RPI per annum will be delivered in 2004. Michael Page International plc | Annual Report 2003 Executive Share Option Scheme The Executive Directors and senior 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. Share options can only be exercised on the achievement of performance criteria which are disclosed in note 18 of the Financial Statements. For future share option awards retesting after the initial vesting period will not be permitted. Following shareholder approval of the Incentive Share Plan, the maximum annual pension entitlement exceeds the Inland awards are as follows: for the Chief Executive Revenue’s cap, a cash alternative is Officer, 150,000; for all other Executive Board payable. No changes were made to pension Directors, 100,000; and for any other senior arrangements during 2003 and no changes executive participating in the Incentive Share are anticipated in 2004. Plan, the maximum award is 50,000. Pension benefits Directors’ remuneration Executive Directors are eligible to participate Emoluments in a Company pension plan which is a The aggregate emoluments, excluding defined contribution scheme. Where the pensions, of the Directors of the Company who served during the year were as follows: Executive T W Benson (note 1) S P Burke C-H Dumon S J Ingham S R Puckett Non-Executive A A Montague S J Box R Lourey (appointed 7 October 2003) H V Reid (appointed 25 February 2003) M Stewart (resigned 7 October 2003) 2003 Salary and fees £’000 2003 Benefits (note 2) £’000 334 223 223 202 207 50 30 6 21 19 28 20 125 42 43 - - - - - 2003 Bonus £’000 333 222 222 201 206 - - - - - 2003 Total £’000 695 465 570 445 456 50 30 6 21 19 2002 Total £’000 607 408 406 393 402 40 30 - - 25 The base salaries of the Executive Directors were reviewed in January 2004 and were increased by 2.8% effective from 1 January 2004. Notes: 1. Mr Benson is the highest paid director. 2. Benefits include, inter alia, items such as company car or cash alternative, fuel, relocation costs, cash in lieu of pension contributions, and medical insurance. Annual Report 2003 | Michael Page International plc 25 Remuneration Report continued Directors’ remuneration (continued) Pension contributions T W Benson S P Burke C-H Dumon S J Ingham S R Puckett 2003 £’000 100 45 5 20 20 2002 £’000 97 43 2 19 19 Directors’ interests and share ownership requirements Executive Directors are required to build and hold, as a minimum, a direct beneficial interest in the Company’s ordinary shares equal to their respective base salary. The beneficial interests of the Directors and their families in shares of the Company are shown below. There has been no change in these interests from 31 December 2003 to 25 February 2004. Direct Holding Ordinary shares of 1p 31 December 2003 31 December 2002 Restricted Shares Ordinary shares of 1p 31 December 2003 31 December 2002 T W Benson S P Burke C-H Dumon S J Ingham S R Puckett A A Montague‡ S J Box‡ R Lourey‡ (appointed 7 October 2003) H V Reid‡ (appointed 25 February 2003) ‡ Non-Executive Directors - 28,571 14,285 28,571 - 28,571 14,285 28,571 114,285 114,285 - - 15,000 15,000 - - - - 5,673,583 3,130,254 3,130,254 1,662,947 146,731 - - - - 5,552,673 3,063,544 3,063,544 1,627,507 143,604 - - - - 26 Michael Page International plc | Annual Report 2003 Directors’ interests and share ownership requirements (continued) The beneficial interests of the Executive Directors and their families in share options of the Michael Page International plc Executive Share Option Scheme at 31 December 2003 were as follows: T W Benson S P Burke C-H Dumon S J Ingham S R Puckett At 1 January Date of Grant 2003 Granted in year At 31 December 2003 Exercise price (pence) 2001 2002 2002 2003 2001 2002 2002 2003 2001 2002 2003 2001 2002 2002 2003 2001 2002 2002 2003 3,750,000 150,000 150,000 - - - - 200,000 1,125,000 150,000 150,000 - - - - 200,000 1,125,000 300,000 - - - 200,000 750,000 150,000 150,000 - - - - 200,000 750,000 150,000 150,000 - - - - 200,000 3,750,000 150,000 150,000 200,000 1,125,000 150,000 150,000 200,000 1,125,000 300,000 200,000 750,000 150,000 150,000 200,000 750,000 150,000 150,000 200,000 175 186 186 81.5 175 186 186 81.5 175 186 83.4 175 186 186 81.5 175 186 186 81.5 Period of exercise 2004-2011 2005-2012 2006-2012 2006-2013 2004-2011 2005-2012 2006-2012 2006-2013 2004-2011 2006-2012 2007-2013 2004-2011 2005-2012 2006-2012 2006-2013 2004-2011 2005-2012 2006-2012 2006-2013 1. The market price of the shares at 31 December 2003 was 186.0p with a range during the year of 78.5p to 202.0p. 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 in note 18 to the financial statements. Annual Report 2003 | Michael Page International plc 27 Remuneration Report continued Total Shareholder Return (TSR) Versus FTSE Support Services The graphs opposite show Total Shareholder Return (TSR) for the Group and the FTSE Support Services index which, as it is the sector in which the Company operates, is considered the most appropriate comparator index in the absence of a more directly representative recognised index. A comparison with the FTSE 250 index is also given. The graphs illustrate TSR for the financial periods since the date of flotation in 2001. 120 110 100 90 80 70 60 50 31 December 2001 31 December 2002 31 December 2003 96.9 89.4 64.2 59.4 112.8 69.9 Mar 01 Sept 01 Feb 02 Aug 02 Jan 03 Jul 03 Dec 03 Michael Page FTSE Support Services 31 December 2001 31 December 2002 31 December 2003 Versus FTSE 250 112.8 104.6 100.4 89.4 75.3 64.2 120 110 100 90 80 70 60 50 Mar 01 Sept 01 Feb 02 Aug 02 Jan 03 Jul 03 Dec 03 Michael Page FTSE 250 28 Michael Page International plc | Annual Report 2003 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 following termination of employment. Contract date Unexpired term Notice period Provision for compensation on early termination Other termination provisions 05/03/01 05/03/01 13/06/03 05/03/01 05/03/01 no specific term no specific term no specific term no specific term no specific term 26/01/04 35 months 26/01/04 35 months 07/10/03 32 months 25/02/03 24 months 12 months 12 months 12 months 12 months 12 months None None None None 12 months salary plus other contractual benefits 12 months salary plus other contractual benefits 12 months salary plus other contractual benefits 12 months salary plus other contractual benefits 12 months salary plus other contractual benefits None None None None None None None None None None None None None Executive T W Benson S P Burke C-H Dumon S J Ingham S R Puckett Non-Executive A A Montague S J Box R Lourey H V Reid Annual resolution Shareholders will be given the opportunity to approve the Remuneration Report at the Annual General Meeting (resolution 7) on 27 May 2004. Audit requirement Within the Remuneration Report, the sections on Directors’ remuneration, shareholdings, and pension benefits, on pages 25 to 27 inclusive, are audited. All other sections of the Remuneration Report are unaudited. On behalf of the Board of Directors Adrian Montague Chairman Remuneration Committee 25 February 2004 Annual Report 2003 | Michael Page International plc 29 Independent Auditors’ Report to the Members of Michael Page International plc We have audited the financial Respective responsibilities of We review whether the corporate statements of Michael Page directors and auditors International plc for the year ended 31 December 2003 which comprise the consolidated profit and loss account, the balance sheets, the consolidated statement of total recognised gains and losses, the consolidated reconciliation of movements in shareholders’ funds, the consolidated cash flow statement, and the related notes 1 to 25. These financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the part of the directors’ remuneration report that is described as having been audited. This report is made solely to the company’s members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. 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. They are also responsible for the preparation of the other information contained in the annual report including the directors’ remuneration report. Our responsibility is to audit the financial governance statement reflects the company’s compliance with the seven provisions of the Combined Code specified for our review by the Listing Rules of the Financial Services Authority, 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. statements and the part of the directors’ We read the directors’ report and the other remuneration report described as having information contained in the annual report for been audited in accordance with relevant the above year as described in the contents section including the unaudited part of the directors’ remuneration report and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. United Kingdom legal and regulatory requirements and auditing standards. We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the directors’ remuneration report described as having been audited have been properly prepared in accordance with the Companies Act 1985. We also report to you 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 regarding directors’ remuneration and transactions with the company and other members of the group is not disclosed. 30 Michael Page International plc | Annual Report 2003 Basis of audit opinion Opinion We conducted our audit in accordance In our opinion: 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 and the part of the directors’ remuneration report • the financial statements give a true and fair view of the state of affairs of the company and the group as at 31 December 2003 and of the profit of the group for the year then ended; and described as having been audited. It also • the financial statements and part of the includes an assessment of the significant directors’ remuneration report described estimates and judgements made by the as having been audited have been directors in the preparation of the financial properly prepared in accordance with statements and of whether the accounting the Companies Act 1985. 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 and the part of the directors’ remuneration report described as having been audited 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 and the part of the directors’ remuneration report described as having been audited. Deloitte & Touche LLP Chartered Accountants and Registered Auditors London 25 February 2004 Annual Report 2003 | Michael Page International plc 31 Consolidated Profit and Loss Account Year ended 31 December 2003 Before exceptional items 2003 £’000 Exceptional items (note 3) 2003 £’000 After exceptional items 2003 £’000 Note 2002 £’000 Turnover Cost of sales Gross profit Administrative expenses Operating profit Net interest Profit on ordinary activities before taxation Taxation on profit on ordinary activities Profit on ordinary activities after taxation being profit for the financial year Equity dividends Retained profit for the financial year Basic earnings per share (pence) Diluted earnings per share (pence) Adjusted earnings per share (pence) The above results relate to continuing operations. 2 2 4 6 2 7 8 19 9 9 9 372,616 (194,131) 178,485 (155,601) 22,884 626 23,510 (8,994) 14,516 (12,171) 2,345 - - - (1,101) (1,101) - (1,101) 330 (771) - (771) 372,616 383,470 (194,131) (190,822) 178,485 192,648 (156,702) (160,512) 21,783 626 22,409 (8,664) 13,745 (12,171) 1,574 3.8 3.8 4.1 32,136 461 32,597 (11,443) 21,154 (12,263) 8,891 5.8 5.8 5.8 32 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 33 Balance Sheets 31 December 2003 Group Company As restated (note 10) 2002 £’000 1,635 23,505 - 2003 £’000 1,539 23,101 - 24,640 25,140 71,530 23,211 94,741 70,743 22,040 92,783 As restated (note 10) 2002 £’000 - - 421,545 421,545 3,314 - 3,314 2003 £’000 - - 421,545 421,545 1,414 131 1,545 (59,355) (63,069) (122,657) (124,525) 35,386 60,026 (444) (6,239) 53,343 3,637 113 (9,871) 59,464 53,343 29,714 54,854 - (6,000) 48,854 3,637 113 (10,000) 55,104 48,854 (121,112) (121,211) 300,433 300,334 - (4,114) 296,319 3,637 113 (9,871) 302,440 296,319 - (6,000) 294,334 3,637 113 (10,000) 300,584 294,334 Note 11 12 13 14 22 15 15 16 2 18 19 19 19 Fixed Assets Intangible assets Tangible assets Investments Current assets Debtors Cash at bank and in hand Creditors: Amounts falling due within one year Net current assets/(liabilities) Total assets less current liabilities Creditors: Amounts falling due after more than one year Provisions for liabilities and charges Net assets Capital and reserves Called up share capital Capital redemption reserve EBT reserve Profit and loss account Equity shareholders’ funds These financial statements were approved by the Board of Directors on 25 February 2004. On behalf of the Board of Directors. T W Benson Chief Executive S R Puckett Group Finance Director 32 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 33 Consolidated Statement of Total Recognised Gains and Losses Year ended 31 December 2003 Profit for the financial year Foreign currency translation differences Total recognised gains and losses for the year 2003 £’000 13,745 2,786 16,531 2002 £’000 21,154 1,256 22,410 Consolidated Reconciliation of Movements in Shareholders’ Funds Year ended 31 December 2003 Profit for the financial year Dividends Retained profit for the financial year Foreign currency translation differences Purchase own shares for cancellation Sale of shares held by the Employee Benefit Trust Net addition to/(reduction in) shareholders’ funds Opening shareholders’ funds as previously stated Prior year adjustment (note 10) Opening shareholders’ funds as restated Closing shareholders’ funds 2003 £’000 13,745 2002 £’000 21,154 (12,171) (12,263) 1,574 2,786 4,360 - 129 4,489 48,854 8,891 1,256 10,147 (13,726) - (3,579) 62,433 - (10,000) 48,854 53,343 52,433 48,854 34 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 35 Consolidated Cash Flow Statement Year ended 31 December 2003 Net cash inflow from operating activities Returns on investments and servicing of finance Note 20 Interest received Interest paid Net cash inflow from returns on investments and servicing of finance Taxation Capital expenditure and financial investment Purchase of tangible fixed assets Receipts from sales of tangible fixed assets Net cash outflow from capital expenditure and financial investment Equity dividends paid Net cash inflow before financing Financing Sale of shares held by the Employee Benefit Trust Repayment of loan notes Purchase of own shares for cancellation Net cash inflow/(outflow) from financing Increase in net cash in the year 22 2003 £’000 29,179 702 (77) 625 2002 £’000 46,657 825 (358) 467 (10,657) (11,537) (8,311) 1,962 (6,349) (12,170) 628 129 - - 129 757 (4,958) 2,422 (2,536) (12,524) 20,527 - (5,452) (13,726) (19,178) 1,349 34 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 35 Notes to the Accounts Year ended 31 December 2003 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 and have been applied consistently throughout the current and prior year with the exception of the change in accounting policy resulting from the adoption of UITF 38 as described in note 10. 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 £14.0m (2002: £17.8m). In preparing the financial statements for the current year, the Group has adopted UITF Abstract 38 “Accounting for ESOP Trusts” early. The early adoption of this UITF has resulted in a prior year adjustment as disclosed in note 10. 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 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 consists of the salary cost of temporary staff and costs incurred on behalf of clients, principally advertising costs. Gross profit Gross profit is represented by turnover less cost of sales and consists of the total of placement fees of permanent candidates, the margin earned on the placement of temporary candidates and advertising income. It 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 at cost 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. 36 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 37 1. Accounting policies (continued) Foreign exchange Transactions in foreign currencies are translated into sterling at the rates of exchange prevailing at the dates the transactions were made. Exchange differences on these items 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 10% per annum or period of lease if shorter Furniture, fixtures and equipment 10% - 20% per annum Motor vehicles Investments 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. 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 unremitted 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. 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. 36 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 37 Notes to the Accounts continued 2. Segmental analysis (a) Turnover and gross profit by geographic region United Kingdom Continental Europe Asia Pacific Australia Other Total Americas Turnover Gross Profit 2003 £’000 2002 £’000 194,262 203,868 120,363 127,551 43,708 7,673 51,381 39,187 7,503 46,690 2003 £’000 90,630 58,227 18,082 6,951 25,033 2002 £’000 99,274 66,334 16,380 6,536 22,916 6,610 5,361 4,595 4,124 372,616 383,470 178,485 192,648 The above analysis by destination is not materially different to analysis by origin. The amounts stated above derive from the Group’s single activity of recruitment consultancy. (b) Turnover and gross profit by discipline Finance and accounting Marketing and sales Other Turnover Gross Profit 2003 £’000 2002 £’000 2003 £’000 2002 £’000 256,731 277,818 113,599 126,477 61,832 54,053 54,590 51,062 37,704 27,182 38,740 27,431 372,616 383,470 178,485 192,648 38 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 39 2. Segmental analysis (continued) (c) Profit before interest, taxation and exceptional items by geographic region United Kingdom Continental Europe Asia Pacific Australia Other Total Americas Profit before interest, taxation and exceptional items Exceptional items Profit before interest and taxation Net interest Profit on ordinary activities before taxation Net interest has not been allocated, recognising the head office’s role and responsibility in allocating financial resources. (d) Net assets/(liabilities) by geographic region United Kingdom Continental Europe Asia Pacific Australia Other Total Americas 2003 £’000 2002 £’000 15,638 20,487 (280) 5,567 6,303 1,285 7,588 5,796 1,033 6,829 (62) (747) 22,884 32,136 (1,101) - 21,783 32,136 626 461 22,409 32,597 As restated (note 10) 2002 £’000 2003 £’000 41,115 30,264 9,791 17,166 4,741 811 5,552 3,825 340 4,165 (3,115) (2,741) 53,343 48,854 38 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 39 Notes to the Accounts continued 3. Exceptional items Release of payroll tax provision on Restricted Share Scheme (a) Property costs (b) Taxation on exceptional items 2003 £’000 1,886 (2,987) (1,101) 330 (771) 2002 £’000 - - - - - (a) Release of payroll tax provision on Restricted Share Scheme The grant of Restricted Shares on flotation in 2001 gave rise to potential National Insurance and social security liabilities for which a provision of £6.0m was established in 2001. As these liabilities crystallise in 2004 when the Restricted Shares vest, these liabilities have now been estimated using the share price at 31 December 2003 of 186.0p. The required provision is £4.1m and as a consequence, £1.9m has been released from the provision. (b) Property costs The property cost provision represents rentals and other unavoidable costs on onerous lease agreements on vacant properties. 4. Operating profit Operating profit is stated after charging: Staff costs (note 5) Depreciation of tangible fixed assets - owned Amortisation of goodwill Audit services - statutory audit Other services provided by the auditors - tax compliance services - tax advisory services Loss on disposal of tangible fixed assets Operating lease rentals: - land and buildings - plant and machinery 2003 £’000 2002 £’000 100,070 98,527 7,592 7,971 96 312 71 135 241 96 287 67 169 262 12,558 10,684 634 332 40 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 41 5. Employee information The average number of employees (including Executive Directors) during the year and total number of employees (including Executive Directors) at 31 December 2003 were as follows: Management Client services Administration Consultants for contract hire Employment costs (including Directors’ emoluments) comprised: Wages and salaries Social security costs Other pension costs 2003 Average No. 2002 Average No. 2003 Total No. 2002 Total No. 92 1,345 852 2,289 107 2,396 127 1,407 937 2,471 53 93 1,351 816 2,260 99 2,524 2,359 114 1,361 915 2,390 105 2,495 2003 £’000 2002 £’000 83,530 82,477 12,673 12,480 3,867 3,570 100,070 98,527 Details of Directors’ remuneration for the year are provided in the audited part of the Directors’ Remuneration Report on pages 25 to 27. 6. Net interest Bank interest receivable Bank interest payable Loan note interest payable Net interest receivable 2003 £’000 704 (78) - (78) 626 2002 £’000 825 (283) (81) (364) 461 40 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 41 Notes to the Accounts continued 7. Taxation on profits on ordinary activities (a) Analysis of charge in period UK Corporation tax at 30% for year Adjustments in respect of prior periods Overseas corporation tax Total current tax charge (note 7(b)) Deferred taxation Origination and reversal of timing differences Taxation on profit on ordinary activities 2003 £’000 6,236 (543) 2,013 7,706 2002 £’000 9,964 (296) 3,516 13,184 958 (1,741) 8,664 11,443 The tax assessed for the period differs from the standard rate of corporation tax in the UK (30%). The differences are explained below. (b) Factors affecting the taxation charge for the period Profit on ordinary activities before taxation 2003 £’000 2002 £’000 22,409 32,597 Profit on ordinary activities before tax multiplied by the standard rate of corporation tax in the UK of 30% 6,723 9,779 Effects of: Disallowable items and other permanent timing differences Capital allowances in excess of depreciation Unrelieved overseas losses Other timing differences Release of payroll tax liabilities on Restricted Share Scheme Higher tax rates on overseas earnings Adjustment to tax charge in respect of prior periods Current tax charge for the period (note 7(a)) 459 446 1,466 (354) (566) 75 (543) 7,706 676 13 1,178 1,481 - 353 (296) 13,184 42 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 43 7. Taxation on profits on ordinary activities (continued) (c) Factors affecting future taxation charges Provision has not been made for taxation on unremitted earnings of Group companies overseas as the earnings are continually reinvested and, accordingly, no taxation is expected to be payable on them in the foreseeable future. Unremitted earnings may be liable to overseas taxes and UK taxation (after allowing for double taxation relief) if they were to be distributed as dividends. In the overseas jurisdictions where the Group currently operates, tax rates are generally higher than those in the UK. Certain of the Group’s overseas operations have current and prior year tax losses, the future utilisation of which is uncertain. Accordingly the Group has not recognised a deferred tax asset of £3.9m (2002: £2.8m) in respect of tax losses of overseas companies. These tax losses are available to offset future taxable profits in the respective jurisdictions. As a result of recent changes in tax legislation, the Company expects to obtain a deduction for corporation tax purposes when the Restricted Share Scheme vests in 2004. Based on the price of Michael Page shares at 31 December 2003, the deduction to UK taxable profits would be approximately £27m which, at the UK corporation tax rate of 30%, would reduce the tax charge in 2004 by £8.1m. 8. Dividends Interim dividend of 1.1p per ordinary share (2002: 1.1p) Proposed final dividend of 2.3p per ordinary share (2002: 2.3p) Total dividend of 3.4p per ordinary share (2002: 3.4p) 9. Earnings per ordinary share Earnings per share have been calculated on the following bases: Year ended 31 December 2003 Profit after taxation (£’000) Weighted average number of shares (‘000) Earnings per share (pence) Year ended 31 December 2002 Profit after taxation (£’000) Weighted average number of shares (‘000) Earnings per share (pence) 10. Prior year adjustment 2003 £’000 3,937 8,234 2002 £’000 4,030 8,233 12,171 12,263 Basic and diluted EPS Exceptional items Adjusted EPS 13,745 771 14,516 357,955 3.8 21,154 366,355 5.8 - - - - - 357,955 4.1 21,154 366,355 5.8 The Group has adopted UITF Abstract 38 “Accounting for ESOP Trusts” early. The early adoption of this UITF has resulted in “Investments in own shares” being classed as “EBT reserve” on the balance sheet and deducted from shareholders’ funds rather than being held as an asset. Prior year net assets have reduced by £10.0m as a result of this restatement. There is no effect on profit in either the current or preceding financial year. 42 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 43 Notes to the Accounts continued 11. Intangible assets Group Cost At 1 January 2003 and 31 December 2003 Amortisation At 1 January 2003 Charge for the year At 31 December 2003 Net book value At 31 December 2003 At 31 December 2002 12. Tangible fixed assets Group Cost At 1 January 2003 Additions Disposals Foreign currency translation At 31 December 2003 Depreciation At 1 January 2003 Charge for the year Disposals Foreign currency translation At 31 December 2003 Net book value At 31 December 2003 At 31 December 2002 Goodwill £’000 1,876 241 96 337 1,539 1,635 Total £’000 46,812 8,311 (6,636) 2,095 50,582 23,307 7,592 (4,433) 1,015 27,481 23,101 23,505 Leasehold improvements £’000 Furniture, fixtures and equipment £’000 Motor vehicles £’000 11,948 2,968 (676) 542 27,296 3,958 (2,111) 1,230 14,782 30,373 4,914 1,538 (595) 171 15,551 4,553 (1,758) 734 6,028 19,080 8,754 7,034 11,293 11,745 7,568 1,385 (3,849) 323 5,427 2,842 1,501 (2,080) 110 2,373 3,054 4,726 44 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 45 13. Investments Company Cost Subsidiary undertakings £’000 Total (as restated) £’000 At 1 January 2003 and 31 December 2003 421,545 421,545 The Company’s principal subsidiary undertakings at 31 December 2003, 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 Michael Page International Recruitment Limited* Michael Page UK Limited Michael Page Limited Accountancy Additions Limited Michael Page International (France) SAS Page Interim SAS Michael Page International (Espana) SA Page Interim (Espana) SA Michael Page International Italia Srl Page Personnel Italia SpA Michael Page International (Deutschland) GmbH Michael Page International (Nederland) BV Michael Page International (Belgium) NV/SA Michael Page International (Sweden) AB Michael Page International (Australia) Pty Limited Michael Page International (Hong Kong) Limited Michael Page International (Brasil) SC Ltda United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom France France Spain Spain Italy Italy Germany Netherlands Belgium Sweden Australia Hong Kong Brazil Michael Page International Serviçod de Consultadoria Lda Portugal Michael Page International (Japan) K.K. Michael Page International (Switzerland) SA Michael Page International Inc* Michael Page International Pte Limited* Japan Switzerland United States Singapore Holding company Support services 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 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 Group holds 100% of all classes of issued share capital. The share capital of all the subsidiary undertakings comprise ordinary shares, with the exception of Michael Page International Recruitment Limited which comprises 1 ordinary share and 421,544,426 preference shares. 44 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 45 Notes to the Accounts continued 14. Debtors Amounts falling due within one year Trade debtors Other debtors Prepayments and accrued income Amounts falling due after more than one year Deferred taxation (see note 17) Prepayments and accrued income 15. Creditors Amounts falling due within one year Bank overdrafts Trade creditors Amounts owed to Group companies Corporation tax Other tax and social security Other creditors Accruals and deferred income Dividends payable Group Company 2003 £’000 2002 £’000 2003 £’000 2002 £’000 - 1,494 20 1,514 - 169 10 179 1,235 1,800 - - 53,154 53,244 3,467 11,994 68,615 1,345 1,570 2,684 11,289 67,217 2,198 1,328 71,530 70,743 1,414 3,314 Group Company 2003 £’000 777 3,815 - 2002 £’000 668 4,296 2003 £’000 - - 2002 £’000 1,775 - - 114,420 114,268 1,222 3,215 18,048 18,298 7,003 6,949 20,256 21,410 - - 3 - - - 187 62 8,234 8,233 8,234 8,233 59,355 63,069 122,657 124,525 Amounts falling due after more than one year Accruals and deferred income 444 - - - 46 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 47 16. Provisions for liabilities and charges At 1 January 2003 Provided in year (note 3) Utilised in year Released in year (note 3) At 31 December 2003 17. Deferred taxation Deferred taxation (asset)/provision is as follows: Capital allowances in excess of depreciation Other timing differences At 1 January Deferred tax charge/(credit) in profit and loss account for period Foreign currency translation At 31 December Payroll tax liability on Restricted Share Scheme £’000 6,000 - - Group Vacant property provision £’000 - 2,987 (862) Total £’000 6,000 2,987 (862) (1,886) - (1,886) 4,114 2,125 6,239 Company Payroll tax liability on Restricted Share Scheme £’000 6,000 - - (1,886) 4,114 Group Company 2003 £’000 2002 £’000 2003 £’000 2002 £’000 (7) (1,338) (1,345) (2,198) 958 (105) 439 (2,637) (2,198) (461) (1,741) 4 - (1,235) (1,235) (1,800) 565 - - (1,800) (1,800) (1,800) - - (1,345) (2,198) (1,235) (1,800) 46 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 47 Notes to the Accounts continued 18. Called-up share capital Authorised 571,250,000 ordinary shares of 1p each Allotted, called-up and fully paid 363,662,799 ordinary shares of 1p each (2002: 363,662,799 ordinary shares of 1p each) At 1 January Cancellation of own shares At 31 December Share options 2003 £’000 2002 £’000 5,713 5,713 3,637 3,637 - 3,637 3,637 3,750 (113) 3,637 At 31 December 2003 the following options had been granted and remained outstanding in respect of the Company’s ordinary shares of 1p under the Michael Page International plc Executive Share Option Scheme: Year of grant Balance at 1 January 2003 Granted in year Exercised in year Lapsed in year No. of shares oustanding Exercise price per share Exercise period 2001 (Note 1) 29,276,764 2002 (Note 2) 2,926,250 2002 (Note 2) 4,281,250 - - - 2003 (Note 3) - 7,140,000 Note 1 Pre flotation options 53,571 1,797,320 27,425,873 175p March 2004 - March 2011 20,000 50,819 2,855,431 186p March 2005 - March 2012 - - 150,819 4,130,431 186p March 2006 - March 2012 50,000 7,090,000 81.5p-86.1p April 2007 - April 2013 On flotation, options over 33,750,000 (9%) ordinary shares were granted to the Executive Directors and employees. These options are subject to the following: (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; The base earnings per share is 9.9p. (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 5 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. 48 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 49 18. Called-up share capital (continued) Note 2 2002 Grant On 14 March 2002, options over 7,500,000 ordinary shares were granted in two tranches to the Executive Directors and 203 employees at an exercise price of 186p. The first tranche of options is exercisable, under normal circumstrances, between 3 and 10 years from the date of grant. The second tranche is exercisable, under normal circumstances, between 4 and 10 years fom the date of grant. These options were granted subject to a performance condition requiring that an option may only be exercised, in normal circumstances, if there has been an increase in base earnings per share (as defined) of at least 3% per annum above the growth in the retail price index. The 2001 earnings per share of 10.6p is the base for the first tranche of options. The 2002 earnings per share of 5.8p is the base for the second tranche of options. Note 3 2003 Grant On 8 April 2003, options over 7,140,000 were granted to the Executive Directors and 110 employees at exercise prices of between 81.5p and 86.1p. These are exercisable, under normal circumstances, between 3 and 10 years from the date of grant. These grants are subject to a performance condition requiring that an option may only be exercised, under normal circumstances, if there has been an increase in base earnings per share (as defined) of at least 3% per annum above the growth in the retail price index. The base earnings per share is 5.8p. All future grants of options under this scheme will be subject to similar EPS performance conditions which is considered the best measure of the Group’s performance and is 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. 19. Reserves Group (as restated) Company (as restated) Capital redemption reserve £’000 EBT reserve £’000 Profit and loss account £’000 Capital redemption reserve £’000 EBT reserve £’000 Profit and loss account £’000 At 1 January 2003 113 (10,000) 55,104 113 (10,000) 300,584 Retained profit for the year Foreign currency translation differences Sale of shares Reserve transfer - - - - - - 129 - 1,574 2,786 - - - - - - - - 129 - 1,856 - - - At 31 December 2003 113 (9,871) 59,464 113 (9,871) 302,440 The EBT reserve consists of 5,640,715 ordinary shares held by the Employee Benefit Trust representing 1.55% of the called up share capital and at 31 December 2003 had a market value of £10.5m (2002: £6.3m). Dividend income on shares held by the Employee Benefit Trust has been waived. The EBT reserve is now shown as a deduction from shareholders’ funds following the early adoption of UITF 38 as described in note 10. 48 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 49 Notes to the Accounts continued 20. Reconciliation of operating profit to net cash inflow from operating activities Operating profit before exceptional items Exceptional items (note 3) Operating profit after exceptional items Depreciation and amortisation charges Loss on sale of fixed assets (Increase)/decrease in debtors Decrease in creditors Increase in provisions (note 16) 2003 £’000 22,884 (1,101) 21,783 7,688 241 (313) (459) 239 2002 £’000 32,136 - 32,136 8,067 262 10,349 (4,157) - Net cash inflow from operating activities 29,179 46,657 21. Reconciliation of net cash flow to movement in net cash Increase in net cash in the year Decrease in debt financing Foreign exchange movements Movements in net cash in year Opening net cash Closing net cash 22. Analysis of net cash Cash at bank and in hand Bank overdrafts Total net cash 2003 £’000 757 - 305 1,062 21,372 22,434 2002 £’000 1,349 5,452 224 7,025 14,347 21,372 At 1 January 2003 £’000 22,040 (668) 21,372 Foreign exchange movements £’000 At 31 December 2003 £’000 Cash flow £’000 852 (95) 757 319 (14) 305 23,211 (777) 22,434 50 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 51 23. 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 exposure arising from the Group’s financial instruments is currency risk. An explanation of the Group’s treasury policy is included in the Finance Director’s review on page 11. (a) Currency exposures of financial assets and liabilities The extent to which Group companies have monetary assets and liabilities, excluding intercompany balances, in currencies other than their local currency is shown in the tables below. As at 31 December 2003 Net foreign currency monetary assets/(liabilities) Functional currency of Group operation Sterling US dollar EU currencies Other currencies Total Sterling £’000 US$ £’000 EU currencies £’000 Other currencies £’000 - - - - - - - - - - - - - - - - - - 163 163 Total 2003 £’000 - - - 163 163 As at 31 December 2002 Net foreign currency monetary assets/(liabilities) Functional currency of Group operation Sterling US dollar EU currencies Other currencies Total Sterling £’000 US$ £’000 EU currencies £’000 Other currencies £’000 - - - - - - - - - - 459 - - (46) 413 - - - 47 47 Total 2002 £’000 459 - - 1 460 50 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 51 Notes to the Accounts continued 23. 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 (c) Borrowing facilities Group Company 2003 £’000 777 2002 £’000 668 2003 £’000 - 2002 £’000 1,775 The Group and Company has the following undrawn committed borrowing facilities available at 31 December 2003: Less than one year Between one and two years Total (d) Financial assets and liabilities (i) Assets excluding short-term debtors: Cash Group Company 2003 £’000 23,786 2002 £’000 2,956 2003 £’000 20,632 2002 £’000 - - 40,659 - 40,659 23,786 43,615 20,632 40,659 Group 2003 £’000 23,211 Group 2002 £’000 22,040 52 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 53 23. Financial instruments (continued) (d) Financial assets and liabilities (ii) Liabilities including interest rate risk profile The Group does not consider the interest rate risk as significant. The interest rate profile of the Group’s financial liabilities, excluding short term creditors at 31 December was as follows: Sterling Others Total Floating rate liabilities 2003 £’000 Floating rate liabilities 2002 £’000 - 777 777 - 668 668 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 benchmark rates for determining floating rate liabilities are 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. 24. Commitments and contingent liabilities Operating lease commitments At 31 December 2003 the Group was committed to make the following payments in the next financial year in respect of operating leases: Leases which expire: Within one year Within two to five years After five years Land and buildings Other 2003 £’000 705 6,232 4,094 2002 £’000 2,343 3,724 4,532 11,031 10,599 2003 £’000 2002 £’000 90 238 - 328 273 97 - 370 At 31 December 2003, the Company had no annual commitments under operating leases (2002: £nil). 52 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 53 Notes to the Accounts continued 24. Commitments and contingent liabilities (continued) Capital commitments The Group had capital commitments of £613,000 as at 31 December 2003 (2002 - £2,531,000) 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 2003 amounted to £3,770,814 (2002 - £3,439,929). Other commitments The Company has provided guarantees to other Group undertakings amounting to £368,000. 25. Related party transactions Details of Directors’ shareholdings and share options are shown on pages 26 and 27. 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. 54 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 55 Shareholder Information and Advisers Annual General Meeting To be held on 27 May 2004 at 12.00 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 2003 To be paid (if approved) on 4 June 2004 to shareholders on the register on 7 May 2004. 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 Bankers Deloitte & Touche LLP Herbert Smith Capita IRG Citigroup HSBC Bank plc London Exchange House The Registry 33 Canada Square West End Business Banking Centre Primrose Street 34 Beckenham Road Canary Wharf 70 Pall Mall London EC2A 3TR Beckenham, Kent BR3 4TU London E14 5LB London SW1Y 5GZ Key dates Ex-Dividend date Record date Annual General Meeting Payment of final ordinary dividend Interim results announcement 5 May 2004 7 May 2004 27 May 2004 4 June 2004 16 August 2004 54 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 55 Five Year Summary Profit and Loss Account Turnover Gross profit Operating profit 1999 £’000 2000 £’000 2001 £’000 2002 £’000 356,252 458,065 459,547 383,470 181,670 246,329 245,080 192,648 56,217 74,102 58,019 32,136 Profit on ordinary activities before taxation 42,211 58,536 62,326 32,597 Profit for the financial period 27,258 37,008 43,653 21,154 2003 £’000 372,616 178,485 21,783 22,409 13,745 Basic and diluted earnings per share (pence) Adjusted earnings per share (pence) 7.3 7.3 9.9 9.9 11.8 10.6 5.8 5.8 3.8 4.1 56 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 57 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 Thursday 27 May 2004 at 12 noon for the following purposes: 1. To receive and approve the reports of the directors and auditors and accounts for the year ended 31 December 2003. 2. To declare a final dividend on the ordinary share capital of the Company for the year ended 31 December 2003 of 2.3p per share. 3. To re-elect R. Lourey as a director of the Company (note 2) 4. To re-elect S.J. Box as a director of the Company (note 2) 5. To re-elect S.P. Burke as a director of the Company (note 2) 6. To re-elect C-H Dumon as a director of the Company (note 2) 7. To propose the following ordinary resolution: That the directors’ remuneration report for the year ended 31 December 2003 be received and approved. 8. To re-appoint Deloitte & Touche LLP as auditors of the Company to hold office until the conclusion of the next Annual General Meeting at a remuneration to be fixed by the directors. 9. 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 £1,212,209 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). 10. 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 9 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 56 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 57 Annual General Meeting continued (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 £181,831: and shall expire at the conclusion of the next Annual General Meeting of the Company when the general authority under Resolution 9 shall expire, 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). 11. 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 generally and unconditionally 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 36,366,280; (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 preceding the day on which the ordinary share is contracted to be 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; and (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 2004 58 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 59 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 must be deposited 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. Messrs Box, Burke and Dumon retire by rotation and are seeking reappointment at the Annual General Meeting. R. Lourey was appointed after the last Annual General Meeting and must therefore retire and seek re-appointment at this Annual General Meeting. Biographical information on each of the directors is contained on pages 12 and 13 of the annual report and accounts. 3. The register of directors’ interests required to be kept under section 325 of the Act together with copies of the directors’ service contracts will be 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 place of the meeting not less than 15 minutes before the meeting commences and after the meeting concludes. 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 applies to both the issue of new shares and sales of shares out of treasury. 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. Shares purchased under this authority may be cancelled or held in treasury. Any shares held in treasury will have no voting rights, no rights to receive dividends, and will be treated as cancelled whilst in treasury. 7. 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 (and the number of votes they may cast) at the meeting or adjourned meeting. 58 Michael Page International plc | Annual Report 2003 Annual Report 2003 | Michael Page International plc 59 Michael Page International plc 39-41 Parker Street, London WC2B 5LN Tel: 020 7831 2000 Fax: 020 7269 2280 www.michaelpage.co.uk 

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