Global know-how. Specialist knowledge. Local offices.
Michael Page International plc
Annual Report and Accounts 2005
MICHAEL PAGE INTERNATIONAL
“2005 was another year of considerable progress for the Group
and Michael Page delivered significantly improved results over the
previous year. All our businesses recorded increased profits, but
the outstanding performance came from Continental Europe.
“The short term outlook is encouraging for Michael Page. Against
a background of relatively favourable trading conditions in all
regions across the Group, we will continue our strategy of organic
growth and controlled investment for the future.”
TERRY BENSON | Chief Executive
ANNUAL REPORT AND ACCOUNTS 005
£523.8m
Group Turnover
£267.6m
Gross Profit
£66.1m
Profit before tax
17 Chairman’s Statement 18 Chief Executive’s Review 20 Finance Director’s Review 22 Board of Directors 24 Directors’ Report 30 Corporate
Governance 35 Remuneration Report 46 Independent Auditors’ Report to the members of Michael Page International Plc 48 Consolidated Income
Statement 49 Consolidated Statement of Changes in Equity 50 Statement of Changes in Equity – Parent Company 51 Balance Sheets 52 Cash
Flow Statements 53 Notes to the Accounts 80 Shareholder Information and Advisers 81 Five Year Summary 82 Annual General Meeting
MICHAEL PAGE INTERNATIONAL
London
ANNUAL REPORT AND ACCOUNTS 005
London
“ In the UK, turnover increased by
14.8% to £269.6m (2004: £234.8m)
and gross profit by 17.8% to £129.5m
(2004: £110.0m). Operating profits
were £31.9m (2004: £22.9m), an
increase of 39.3%.”
Manchester
Weybridge
develop teams in existing offices
and disciplines. Plans are also
in place to roll out the newer
disciplines to existing offices and
open new offices.
United Kingdom
A good performance was seen
across the UK with all markets
improving over the prior year.
Our most established business,
Finance and Accounting, had good
growth (10%) in both the permanent
and temporary businesses, strong
growth was evident in Marketing
and Sales (19%) across all industry
sectors and in our Retail business
growth exceeded 10%, an excellent
achievement considering the difficult
year seen on the High Street.
The remaining disciplines grew
revenue by 44% offering significant
scope for expansion as they are
rolled out progressively across the
UK network.
Our business in Scotland is now
managed separately and grew
gross profits in excess of 50%.
There continues to be considerable
scope for all businesses in the
UK to grow with numerous
opportunities to expand and
STEVE INGHAM | UK Managing Director
5
MICHAEL PAGE INTERNATIONAL
“ Turnover in Continental Europe for the year increased
by 28.0% to £159.2m (2004: £124.3m) and gross profit
increased by 40.1% to £86.1m (2004: £61.5m). As a result
of the increased revenue and high operational gearing,
the region produced an increase of over 370% in operating
profit at £19.4m (2004: £4.1m).”
ANNUAL REPORT AND ACCOUNTS 005
Geneva
Amsterdam
Paris
Milan
Continental Europe
Our European businesses achieved
gross profit growth in excess of
40%, with France, our largest
business in Europe showing
strong recovery with gross profit
increasing 18%. The market in
France is still recovering and as our
spare capacity is utilised, we are
well positioned to benefit and gain
market share.
Our remaining businesses in the
region achieved gross profit growth
in excess of 65%. With market
conditions improving, our strategy
of maintaining and investing in our
businesses during the downturn is
clearly justified.
Profitability is also improving as
spare capacity is utilised. However,
in some markets we now need
to invest to exploit the growth
opportunities. During the year
we opened an office in Warsaw,
Poland, our first expansion into
Central Europe.
There remains considerable
scope for expanding teams
and disciplines, rolling out new
disciplines to existing offices,
opening new offices and opening in
new countries.
CHARLES-HENRI DUMON | Continental Europe Managing Director
MICHAEL PAGE INTERNATIONAL
Sydney
ANNUAL REPORT AND ACCOUNTS 005
“ Our businesses in Asia Pacific
produced a record set of results
for the region. Turnover was 22.2%
higher at £76.7m (2004: £62.8m),
gross profit was 23.8% higher at
Chatswood
£39.0m (2004: £31.5m) and operating
profit increased 23.3% to £14.1m
Singapore
(2004: £11.4m).”
Wheelers Hill
Asia Pacific
The markets in Australia remain
encouraging with gross profit
growing a healthy 17.1%. Strong
demand continued from the
Financial Services, Business
Services, and Mining and
Resources. We opened a seventh
office, in Chatswood, North
Sydney and completed a large
office relocation of our business in
Melbourne.
Our other markets in the Asia
Pacific region all achieved excellent
results, with Hong Kong, China,
Japan and Singapore all achieving
another year of significant gross
profit growth.
CHRIS ADAMS | Asia Pacific Managing Director
MICHAEL PAGE INTERNATIONAL
“ An excellent result was reported in the Americas with
turnover for the region 54.6% higher at £18.3m (2004:
£11.8m), gross profit increased by 68.9% to £12.9m
(2004: £7.6m) an d operating profit increased 161% to
£1.0m (2004: £0.4m).”
10
ANNUAL REPORT AND ACCOUNTS 005
Philadelphia
New York
Toronto
The Americas
In North America we opened
offices in Toronto, Canada and in
Philadelphia, USA. We now operate
from seven offices, providing
recruitment in Finance and
Accounting.
All businesses performed well, with
our existing businesses generating
much improved results and the new
offices starting well.
During 2006 we plan to continue
this expansion by investigating
the opportunities for further
office openings as well as the
commencement of new recruitment
disciplines.
In Brazil we achieved another very
successful year with gross profit
growth of 96%. Headcount was
increased in the São Paulo and Rio
de Janeiro offices to nearly 100
staff. We now have a number of
energetic and experienced staff who
will continue to generate increased
business in Brazil and, when the
opportunity arises, elsewhere in
South America.
GARY JAMES | Americas Managing Director
11
MICHAEL PAGE INTERNATIONAL
1
ANNUAL REPORT AND ACCOUNTS 005
1
MICHAEL PAGE INTERNATIONAL
1
ANNUAL REPORT AND ACCOUNTS 005
ANNUAL REPORT AND ACCOUNTS 005
Business Superbrand 005
Michael Page International has again been awarded Business Superbrand
status in the UK. A new Superbrand book is published every 18 months
and features some of the UK’s foremost B2B companies and this is the 4th
consecutive time we’ve been featured.
The Sunday Times 100 Best Companies to work for
Michael Page International are featured in the The Sunday Times 100 Best
Companies to Work For and received particular commendations for organic
growth, people development and individual contribution to the business.
Britain’s Top Employers
Michael Page International has grown and succeeded purely through
organic growth. This has been recognised in the 2006 edition of Britain’s Top
Employers. Put together by The Corporate Research Foundation (CRF) and
published by The Guardian, they applauded our fast-track promotion policy
and meritocratic system. We were naturally proud to be listed as the UK’s
No.1 company in the ‘Promotion and Benefits’ category.
Quality Assurance
In RFI questionnaires and pitches we are often asked for the details of our
Quality Accreditations. Michael Page currently has two accreditations:
ISO 9001/MQA01 (pertaining to Marketing Quality) - Our certificate is
granted by Marketing Quality Assurance, and the registration number is
0058.
ISO 9002 (pertaining to Quality Systems) - also granted by Marketing Quality
Assurance, registration number 0065.
1515
MICHAEL PAGE INTERNATIONAL
“ I am pleased to report another year of considerable
progress for the Group and significantly improved results
for 2005. Our outstanding performance is, we believe,
clear vindication of our longer term strategic decision to
only grow organically, to maintain our infrastructure during
economic slowdowns and to continue to make sensibly
controlled investments for the future. This is particularly
evident in the profit before tax of £66.1m (2004: £38.9m)
and adjusted earnings per share increase by 105.6% to
14.8p (2004: 7.2p before exceptional tax items).”
1
CHAIRMAN’S STATEMENT
ANNUAL REPORT AND ACCOUNTS 005
I am pleased to report another year of
recommending an increase in the
Group, I sincerely thank him for his
considerable progress for the Group
total dividend per share for the year
tremendous contribution and he has
and significantly improved results for
of 25%. A final dividend of 3.5p
our best wishes for his retirement.
2005. Our outstanding performance
(2004: 2.75p) per share is proposed
is, we believe, clear endorsement of
which, together with the interim
our longer term strategic decision
dividend of 1.5p (2004: 1.25p) per
only to grow organically, to maintain
share paid in October, makes a total
our infrastructure during economic
dividend for the year of 5.0p (2004:
slowdowns and to continue to
4.0p) per share. The final dividend
make controlled investments for the
will be paid on 5 June 2006 to those
future. This is particularly evident in
shareholders on the register at 5 May
the improved performance of our
2006. The total dividend is covered
businesses in Continental Europe
3.0 times by basic earnings per share
where, despite the economic
of 14.8p.
Steve Ingham, who has been with
the Group for 19 years, will succeed
Terry as Chief Executive. He has been
a member of the senior management
for many years and a key contributor
in establishing the current Group
strategy. I, and the rest of the Board,
am delighted that we have an
exceptional successor who we are
confident will continue the successful
development of the Group.
On 25 April 2005, Rob Lourey, a
Non-Executive Director resigned
as he was relocating to Sydney,
Australia. Tim Miller was appointed on
15 August 2005 as a Non-Executive
Director and as Chairman of the
Remuneration Committee. Stephen
Burke, the former UK Managing
Director, left the company in May
2005.
Outlook
The short term outlook is encouraging
We continued to make share
repurchases throughout 2005
acquiring 16.8m shares for £34.2m,
representing an average cost per
share of 203.7p. These shares
were initially held in Treasury but
were subsequently cancelled along
with 7.8m shares that were held in
Treasury from purchases made in
2004.
We will be seeking shareholders’
consent for a renewal of the authority
to repurchase up to 10% of the
issued shares at the Annual General
for Michael Page.
Meeting on 23 May 2006.
Employees
I wish to express my thanks to the
staff worldwide for their commitment,
loyalty and efforts throughout the
year. Having operated throughout a
sustained period of difficult trading
conditions, they have maintained
your Company’s position as the
international leader in the specialist
recruitment industry.
Board of Directors
On 16 December 2005 Terry Benson
announced his decision to retire as
Chief Executive at the forthcoming
Annual General Meeting on 23 May
2006. Terry has worked for the Group
for over 26 years, the last 12 as Chief
Executive, during which the company
has enjoyed phenomenal success.
On behalf of all stakeholders in the
Against a background of favourable
trading conditions in all regions
across the Group, we plan to
continue the controlled growth of our
businesses by further increasing our
headcount, continuing the discipline
roll out, opening new offices in
countries where we already have
a presence and establishing new
businesses in other countries.
On 6 April 2006 we will make a
statement in respect of our trading
for the first quarter.
Sir Adrian Montague CBE
Chairman
1 March 2006
1
conditions remaining difficult, we have
increased gross profits by 40% and
operating profits by over 370%.
Financial highlights
Turnover for the year ended 31
December 2005 increased 20.8%
to £523.8m (2004: £433.7m). Gross
profits from permanent placements
again grew more rapidly than
from temporary placements. This
movement in business mix, together
with an increase in margins on
temporary placements, contributed
to a strong increase in gross profit of
27.0% to £267.6m (2004: £210.6m).
Given the Group’s high operational
gearing, operating profit increased by
71.2% to £66.5m (2004: £38.9m).
Profit before tax was £66.1m (2004:
£38.9m) and adjusted earnings per
share increased by 105.6% to 14.8p
(2004: 7.2p before exceptional tax
items).
Dividends and share
repurchases
It is the Board’s intention to pay
dividends at a level which it believes
is sustainable throughout economic
cycles and to continue to use
share repurchases as an additional
mechanism for returning surplus cash
to shareholders.
As a consequence of our strong
growth in profits and excellent
cash generation, the Board is
MICHAEL PAGE INTERNATIONAL
CHIEF EXECUTIVE’S REVIEW
I am delighted with our performance
in Liverpool and achieved the highest
we created a separate management
in 2005, particularly as I believe
growth rate of the three finance
structure to drive growth from our
it demonstrates the benefits of
businesses. Michael Page City, which
existing offices in Glasgow and
our longer term approach to the
accounts for less than 10% of UK
Edinburgh. This has proved to be a
development of the business. We have
gross profits, recorded the lowest level
successful development with gross
achieved good levels of growth in all of
of growth. Accountancy Additions,
profits in Scotland increasing in 2005
our businesses reflecting the quality of
which specialises in lower level finance
by over 50%.
Continental Europe
Turnover in Continental Europe for the
year increased by 28.0% to £159.2m
(2004: £124.3m) and gross profit
increased by 40.0% to £86.1m (2004:
£61.5m). As a result of the increased
revenue and high operational gearing,
the region produced an increase
of over 370% in operating profit at
£19.4m (2004: £4.1m).
In France, our second largest business
after the UK and representing 48% of
the region, gross profit increased by
18%. The growth rate in our French
business improved each quarter
throughout the year, exceeding 20%
in the fourth quarter. The growth
in France has come entirely from
permanent recruitment with temporary
recruitment fees flat on 2004 levels.
While the market in France has
improved during 2005, our rate of
growth clearly indicates that we are
well positioned to benefit and gain
market share.
Elsewhere in the region, collectively
our businesses achieved gross profit
growth in excess of 65%. There
remains considerable scope for these
businesses to grow with numerous
opportunities for expanding teams in
existing offices and disciplines, rolling
out the disciplines to existing offices
and opening new offices.
In addition to the roll out of disciplines,
during the year we started a business
our staff and the high levels of service
and accounting positions, again
they provide to clients and candidates.
expanded its office network from
A product of our strategy to maintain
our infrastructure in a downturn is
30 to 32 locations with new offices
in Liverpool and Edinburgh.
that for a period we may carry spare
The combined gross profits of Michael
capacity and consequently have high
Page Marketing, Michael Page Sales
operational gearing. When economic
and Michael Page Retail, were 19%
conditions improve, we believe this
higher than in 2004 and represented
approach puts us in a better position
22% of the UK total. The Marketing
than the majority of our competitors to
and Sales businesses produced strong
grow our business, and at a far faster
growth from all industry sectors, with
rate. As this spare capacity is utilised
growth from temporary placement fees
through growth, we benefit from this
exceeding permanent as we continue
operational gearing as evidenced by
to develop the temping business in
the 71.2% increase in operating profit
these disciplines. Retail’s growth rate,
from a 27.0% growth in gross profit.
while lower, was still over 10% despite
another tough year on the High Street.
The remaining businesses together
produced gross profit growth in 2005
of 44% and represent a significant
opportunity for further strong growth
as they are rolled out progressively
across the UK network. Michael Page
Legal and Michael Page Technology
both performed well in the year.
Michael Page Human Resources
achieved another year of strong
growth benefiting from its increased
geographic coverage. The separation
of Michael Page Engineering and
Supply Chain Management into
Michael Page Engineering and
Manufacturing, and Michael Page
Procurement and Supply Chain at the
beginning of 2005 was particularly
successful, with both businesses
having significant scope for further
Staff and office numbers
The investments we have made in
new staff, discipline roll outs, office
expansion and start ups has resulted
in an increase in fee generating and
support staff to 2,926 (2004: 2,551),
operating from 118 (2004: 110) offices
in 18 (2004: 16) countries at the end
of the year.
United Kingdom
In the UK, turnover increased by
14.8% to £269.6m (2004: £234.8m)
and gross profit by 17.8% to £129.5m
(2004: £110.0m). Operating profits
were £31.9m (2004: £22.9m) an
increase of 39.3%.
The gross profits of the finance and
accounting businesses of Michael
Page Finance, Michael Page City
and Accountancy Additions, which
generated 57% of UK gross profit,
were 10% higher than in 2004 with
both permanent and temporary
recruitment fees growing well. Michael
Page Finance, the largest of the
three businesses, opened an office
1
expansion. Michael Page Secretarial
in Warsaw, Poland, our first expansion
which only started at the end of 2003
into Central Europe, and have opened
had a successful year with gross profit
a fourth office in the Netherlands in
more than doubling.
In order to capitalise on the opportunity
in Scotland, at the beginning of 2005
Amersfoort, and a Michael Page office
in Toulouse. Page Personnel opened
in Nantes, Strasbourg and Rouen in
ANNUAL REPORT AND ACCOUNTS 005
France, and Geneva in Switzerland.
rapid expansion opening offices in
condition for many more years of
As market conditions in Continental
Europe continue to improve, we are
reaping the benefit of our strategy
to maintain and invest in our
businesses during a downturn. As
predicted last year, with gross profit
growth maintained throughout 2005,
profitability has improved considerably
as spare capacity is utilised. There
Toronto, Canada and in Philadelphia,
successful growth and development.
USA. We now have established a
However I believe the time is right for
network of seven offices in North
me to retire from the business and in
America, providing only recruitment
December 2005 we announced the
in Finance and Accounting. These
plans for succession. Steve Ingham,
investments, together with the
who joined Michael Page in 1987, will
continuing development of our other
formally take over as Chief Executive
offices, incur significant start up costs
at the Annual General Meeting in
ahead of gross profit growth.
May. In my opinion he and the senior
is still some spare capacity within
We are extremely pleased with our
a number of our businesses but in
progress in North America and
others we now need to invest to
during 2006, we will be investigating
exploit the growth opportunities.
the opportunities for further office
management team are second to
none in our sector, and they possess
the energy and enthusiasm to continue
the track record of achievement.
openings as well as starting other
I am sure our shareholders, clients,
Asia Pacific
Our businesses in Asia Pacific
produced a record set of results for the
region. Turnover was 22.2% higher at
£76.7m (2004: £62.8m), gross profit
was 23.8% higher at £39.0m (2004:
£31.5m) and operating profit increased
23.3% to £14.1m (2004: £11.4m).
In Australia gross profit grew a healthy
17.1% despite a disappointing fourth
quarter which was impacted by an
IT implementation. There continued
recruitment disciplines.
In Brazil we achieved another very
successful year growing headcount
in the São Paulo and Rio de Janeiro
offices to nearly 100 staff. We have
now reached the stage where we have
a number of experienced and talented
local staff who will further drive our
expansion in Brazil and elsewhere in
South America.
Executive Committee
to be strong demand from the
In September 2005 the Board
financial services, business services,
approved the establishment of an
mining and resources. During the
Executive Committee comprising Chris
year we opened a seventh office,
Adams, Regional MD Asia Pacific,
in Chatswood, North Sydney and
Andrew Wayland, Chief Information
completed a large office relocation of
Officer, and the four executive Main
our business in Melbourne.
Board Directors. The committee, which
In Hong Kong, Shanghai, Tokyo and
Singapore, we achieved another year
of substantial gross profit growth. In
Tokyo we moved into larger offices
at the beginning of the year which
provides sufficient accommodation to
achieve a doubling of our headcount.
The Americas
Turnover for the region was 54.6%
higher at £18.3m (2004: £11.8m),
gross profit increased by 68.9% to
£12.9m (2004: £7.6m) and operating
profit increased 161% to £1.0m
(2004: £0.4m).
In North America we continued our
is headed by the Chief Executive,
is focused on the operational
management of the Group and meets
formally every quarter. It was formed to
facilitate greater communication and
cooperation between the regions, and
to ensure that the deployment of our
resources is considered from a global
perspective.
Strategy
I am delighted with our performance
in 2005 as it clearly demonstrates the
strength of our longer term strategy.
Having worked for Michael Page for 26
years, the last 12 as Chief Executive
I believe the business is in excellent
candidates and staff will welcome the
fact that the overall long term strategy
of the Group will remain absolutely
unchanged following the change in
leadership. The Group intends to stay
focused on its core competency of
specialist recruitment, will continue
to grow 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.
There exist numerous opportunities
to grow the business in all our regions
and expand into new regions. There
is an exceptional pool of ambitious
and talented people in the Group
who are highly motivated to build
on our success. With the short term
economic outlook set to be relatively
favourable, the plan during 2006 is
to slightly increase the pace of our
controlled development.
Terry Benson
Chief Executive
1 March 2006
1
MICHAEL PAGE INTERNATIONAL
FINANCE DIRECTOR’S REVIEW
International Financial
Reporting Standards (IFRS)
The 2005 financial statements are
our first to have been prepared under
IFRS and accordingly the comparative
results for 2004 have been restated.
The most significant impact from the
Operating profit
Taxation
As a result of the Group’s organic
Tax on profits was £16.5m (2004:
growth strategy and the profit based
£4.5m after an exceptional tax credit
bonuses, we have a business which
of £9.0m), representing an effective
is operationally geared as evidenced
tax rate of 25.0% (2004: 34.8%
by the 71.2% increase in operating
before exceptional items). The rate is
profits from a 27.0% increase in gross
lower than the UK corporation tax rate
application of IFRS on reported profits
profit.
is a charge of £2.7m (2004: £1.2m) in
respect of share options. Full details of
the application of IFRS are set out in
note 27 on page 74.
Income statement
Turnover
2005 was another successful year for
the Group with all regions delivering
strong growth. Turnover for the year
increased by 20.8% to £523.8m
(2004: £433.7m). Turnover from
temporary placements increased by
15.7% to £318.3m (2004: £275.2m)
and represented 60.8% (2004:
63.5%) of Group turnover. Turnover
from permanent placements was
£205.5m (2004: £158.5m), an
increase of 29.6%.
Gross profit
This strategy means the Group
incurs start up costs and operating
losses as investments are made
to grow existing businesses, start
new businesses, open new offices
and start up in new countries. The
Chief Executive’s review describes
a number of these investments
including starting businesses in
Canada and Poland.
of 30% primarily as a result of utilising
and recognising tax losses incurred
in earlier years. The majority of these
tax losses arose in Continental Europe
and have largely been recognised
this year as profits in the region have
grown significantly.
Earnings per share and
dividends
In 2005, basic earnings per share
were 14.8p (2004: 9.8p) and adjusted
As a result of the increased numbers
earnings per share in 2005 were
of staff, start up costs and higher
14.8p (2004: 7.2p before exceptional
profit related bonuses, administrative
tax items). The weighted average
expenses in the year increased by
number of shares for the year was
17.0% to £201.1m (2004: £171.8m).
336.3m (2004: 351.6m) reflecting
The Group’s largest category of
expenditure is the remuneration of
the impact of the share repurchases
during the year.
our consultants and support staff.
An increase in the final dividend to
Headcount of the Group was 2,551
3.5p (2004: 2.75p) per ordinary share
at 1 January 2005 and increased
has been proposed which, together
Gross profit for the year increased
to 2,747 at 30 June 2005. The
with the interim dividend of 1.5p
by 27.0% to £267.6m (2004:
Group’s headcount increased further
(2004: 1.25p) per ordinary share,
£210.6m) representing an overall
during the second half of the year
makes a total dividend for the year of
gross margin of 51.1% (2004: 48.6%).
reflecting both the growth of existing
5.0p (2004: 4.0p) per ordinary share,
The percentage increase in gross
businesses and continuing investment
an increase of 25%. The final dividend,
profit is greater than the increase in
for the future. At 31 December 2005
which amounts to £11.5m, will be paid
turnover due primarily to the higher
we employed 2,926 consultants and
on 5 June 2006 to those shareholders
proportion of gross profit derived
support staff.
on the register at 5 May 2006.
from permanent placements in 2005,
together with a higher volume of
temporary placements at slightly
higher gross margin. Gross profit from
temporary placements was £72.6m
(2004: £62.0m) and represented
27.1% (2004: 29.4%) of Group gross
profit. The gross margin achieved on
temporary placements was 22.8%
(2004: 22.5%).
Net interest
While we started the year with net
cash of £12.2m there is a substantial
cash outflow in January every year
as quarter four and annual bonuses
are paid. As a result of the decision to
spend £34.2m repurchasing shares,
the Group had limited surplus cash
to invest. As a consequence a net
interest charge was incurred of £0.4m
(2004: £nil).
0
Balance sheet
•
dividends of £14.4m (2004:
The Group had net assets of £68.9m
£12.6m); and
at 31 December 2005 (2004: £60.5m)
•
share repurchases of £34.2m
of which £13.1m (2004: £12.2m) is
(2004: £24.1m).
represented by net cash. The increase
in net assets relates to the profit of
£49.6m and the credit relating to
share schemes of £6.9m, more than
offsetting share repurchases of £34.2m
and dividends paid of £14.4m. In
At 31 December 2005 the Group had
net cash balances of £13.1m (2004:
£12.2m).
Treasury management and
currency risk
accordance with IFRS there is no
It is the Directors’ intention to finance
provision in the balance sheet for the
the activities and development of
2005 final dividend as this has not yet
the Group principally from retained
been approved by our shareholders.
earnings, and to operate the Group’s
Capital expenditure, net of disposal
proceeds, increased to £6.8m (2004:
£4.4m). Our capital expenditure is
driven primarily by two main factors;
headcount and the maintenance and
enhancement of our IT systems.
The most significant item in the
balance sheet is trade receivables
which were £82.7m at 31 December
2005 (2004: £69.3m) representing
debtor days of 49 (2004: 47 days).
Cash flow
business while maintaining the net
debt/cash position within a relatively
narrow band. Cash generated in
excess of these requirements will be
used to buy back the Company’s
shares for which renewal of the
existing general authority is being
sought at the forthcoming Annual
General Meeting.
Cash surpluses are invested in short-
term deposits with any working capital
requirements being provided from
Group cash resources or by local
At the start of the year the Group had
overdraft facilities.
net cash of £12.2m.
During the year the Group generated
net cash from operating activities
of £65.4m (2004: £35.7m) being
£72.7m (2004: £45.3m) of EBITDA,
an increase in working capital
requirements of £8.5m (2004: £5.8m),
movements in provisions of £0.6m
(2004: £5.1m), and profit on disposal
of our French contractors business of
£0.6m.
The principal payments have been:
•
£6.8m (2004: £4.4m) of
capital expenditure, net of
disposal proceeds, on property,
infrastructure, information systems
and motor vehicles for staff;
•
taxes on profits of £10.1m (2004:
£4.8m);
The main functional currencies of the
Group are Sterling, Euro, US Dollar
and Australian Dollar. The Group
does not have material transactional
currency exposures nor is there
a material exposure to foreign-
denominated monetary assets and
liabilities. The Group is exposed to
foreign currency translation differences
in accounting for its overseas
operations although our policy is not
to hedge this exposure.
Stephen Puckett
Group Finance Director
1 March 2006
ANNUAL REPORT AND ACCOUNTS 005
1
MICHAEL PAGE INTERNATIONAL
BOARD OF DIRECTORS
Sir Adrian Montague CBE (5)
Non-Executive Chairman
Terry Benson (5)
Chief Executive
Sir Adrian Montague is Non-
Terry Benson joined Michael Page in
Charles-Henri Dumon ()
Managing Director – Continental
Europe and The Americas
Executive Chairman of British Energy
1979 and was appointed to the Board
Charles-Henri Dumon joined Michael
plc, Friends Provident plc and
in 1983. In 1986 he was promoted
Infrastructure Investors Limited. From
to Managing Director of the Group’s
1997 to 2001 he held senior posts
marketing recruitment businesses
concerned with the implementation
and in January 1988 to Managing
of the Government’s policies for the
Director of the Group. In 1993 he
involvement of the private sector in
was appointed Chief Executive of the
the delivery of public services, first
Group. He will stand down as Chief
as Chief Executive of the Treasury
Executive at the forthcoming Annual
Taskforce and then as Deputy
General Meeting in May and will leave
Chairman of Partnerships UK plc.
the Company at the end of 2006.
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. His responsibilities were
increased to include North America
in January 2006.
Steve Ingham ()
Managing Director – UK
Chief Executive Designate
Stephen Box (55)
Independent Non-Executive
Director, Senior Independent
Director
Stephen Box qualified as a Chartered
Accountant at Coopers & Lybrand
where he spent more than 25 years,
Steve Ingham joined Michael Page
15 of these as a partner. From August
in 1987 as a consultant with Michael
1997 to November 2002 he was
Page Marketing and Sales. He was
Finance Director of National Grid.
responsible for setting up the London
He is a member of the Financial
marketing and sales businesses and
Reporting Review Panel and a Non-
was promoted to Operating Director
Executive Director of South East
in 1990. He was appointed Managing
Water Limited (SEW) and Wales and
Director of Michael Page Marketing
West Utilities Ltd (WWU). Stephen has
and Sales in 1994. Subsequently he
experience of Audit Committees as
has taken additional responsibility for
a partner at Coopers & Lybrand, as
Michael Page’s Retail, Technology,
an Executive Director of National Grid
Human Resources and Engineering
attending Audit Committees, and as
businesses. He was promoted to
a Non-Executive Director chairing the
the Board as Executive Director of
Audit Committees of SEW and WWU.
UK Operations in January 2001, and
He was appointed a Non-Executive
subsequently to Managing Director of
Director of Michael Page International
UK Operations in May 2005. He was
plc on 27 February 2001.
appointed Chief Executive Designate
in December 2005.
He was Deputy Chairman of Network
Rail from 2001 to 2004 and Non-
Executive Chairman of Cross London
Rail Links Limited from 2004 to 2005.
He spent his early career as a solicitor
with Linklaters & Paines before
joining Kleinwort Benson in 1994.
Sir Adrian is also a Non-Executive
Director of CellMark AB, the pulp and
paper marketing company based in
Gothenburg. He was awarded a CBE
in 2001 and a knighthood in 2006.
He was appointed Non-Executive
Director of Michael Page International
plc on 27 February 2001, and
appointed Chairman on 22 May 2002.
ANNUAL REPORT AND ACCOUNTS 005
Tim Miller ()
Independent Non-Executive
Director
Hubert Reid (5)
Independent Non-Executive
Director
Tim Miller was appointed to the Board
Hubert Reid is Chairman of Enterprise
on 15 August 2005 and became
Inns plc and of the Midas Income
Chairman of the Remuneration
and Growth Trust PLC and Deputy
Committee on 16 September 2005.
Chairman of Majedie Investments
He is also a member of the Audit and
PLC. He was previously Managing
Nomination Committees. Tim has
Director and then Chairman of the
wide experience in human resources
Boddington Group plc, Chairman of
and has held a number of senior HR
Ibstock Plc, Bryant Group plc and
and business roles in the information
the Royal London Group. He was
technology, retail and pharmaceutical
appointed a Non-Executive Director
sectors. He is currently a Director of
of Michael Page International plc on
Standard Chartered Bank, responsible
25 February 2003. Hubert has been a
for HR, Corporate Real Estate,
member of various Audit Committees
Corporate Secretariat, Compliance
since 1993 including Bryant Group
EXECUTIVE COMMITTEE
In addition to the Executive Directors,
the Executive Committee comprises
Chris Adams (Regional Managing
Director - Asia Pacific) and Andrew
Wayland (Chief Information Officer).
Chris Adams ()
Regional Managing Director - Asia
Pacific
Chris Adams joined Michael Page
Marketing in Birmingham in 1987 and
transferred to Australia in 1990. He
was appointed a Director in 1996 and
Managing Director of Michael Page
Australia in 1998. He was appointed
Managing Director of the Asia Pacific
and Regulatory Risk, Internal Audit
plc, Ibstock Plc, Greenalls Group plc,
region in May 2000.
and Legal.
Stephen Puckett ()
Group Finance Director
Stephen Puckett qualified as a
Chartered Accountant with BDO
Binder Hamlyn. He joined Wace
Group plc in 1988 as Director of
Corporate Finance, subsequently
being promoted to Group Finance
Director in 1991. He was Group
Finance Director of Stat Plus Group
plc in 2000, and appointed Group
Finance Director of Michael Page
International plc in January 2001.
He is a Non-Executive Director of
SHL Group plc and chairs its Audit
Committee.
Royal London Group, Midas Income
and Growth Trust PLC, Enterprise
Inns plc and Majedie Investments
PLC.
Andrew Wayland ()
Chief Information Officer
Andrew Wayland was the UK IT
Business Management Director of
PricewaterhouseCoopers where
he worked for over 10 years in
the internal IT functions. He brings
extensive experience in establishing
IT strategy and innovation to support
the wider business strategy, and
integrating technology teams. He was
appointed Chief Information Officer of
Michael Page in December 2005.
MICHAEL PAGE INTERNATIONAL
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 48 to 79. Details
of the Group’s strategy, outlook and
review of operations are described
in the Chairman’s Statement, Chief
Executive’s Review and Finance
Director’s Review on pages 17 to 21.
Directors and interests
The following were Directors during
the year and held office throughout
the year other than as shown below.
Sir Adrian Montague CBE‡ (Chairman)
Terry Benson (Chief Executive)
Stephen Box‡*
Stephen Burke (resigned 25 May
2005)
Charles-Henri Dumon
Steve Ingham
Rob Lourey‡ (resigned 25 April 2005)
Tim Miller‡ (appointed 15 August 2005)
Stephen Puckett
Hubert Reid‡
‡ Non-Executive Directors
* Senior Independent Director
In accordance with the Company’s
Articles of Association, Tim Miller, who
was appointed as a Non-Executive
Director on 15 August 2005, will
retire at the Annual General Meeting
and, being eligible, offers himself for
election.
Biographical details for all the current
Share capital
Directors are shown on pages 22
and 23.
The authorised and issued share
capital of the Company are shown in
The beneficial interests of Directors
note 18 to the financial statements.
in office at 31 December 2005 in
the shares of the Company at 31
December 2005 and at 27 February
2006 are set out in the Remuneration
Report on page 38.
At the Annual General Meeting held
on 27 May 2005 the Company
renewed its authority to make market
purchases of its own ordinary shares
up to a maximum of 10% of the
All of the Executive Directors are
issued share capital.
deemed to have an interest in the
ordinary shares held in the Employee
Benefit Trust and its subsidiaries.
Results and dividends
The profit for the year after taxation
amounted to £49.6m (2004: £34.3m).
A final dividend for 2004 of 2.75
pence per ordinary share was paid
on 3 June 2005. An interim dividend
of 1.5 pence per ordinary share
was paid on 14 October 2005. The
During the year, the Company
purchased 16.8m shares which were
placed in treasury. The nominal value
of these shares was £0.2m and
represented 4.8% of the issued share
capital. The shares were purchased
for a consideration of £34.2m
including expenses. On 28 December
2005 all 24.6m shares held in treasury
were cancelled.
Substantial shareholdings
Directors recommend the payment
As at 27 February 2006, the
of a final dividend for the year ended
Company has been notified of the
31 December 2005 of 3.5 pence per
interests held in more than 3% of the
ordinary share on 5 June 2006 to
issued share capital of the Company
shareholders on the register on 5 May
as shown in Fig.1. below.
2006 which, if approved at the Annual
General Meeting, will result in a total
dividend for the year of 5.0 pence per
ordinary share (2004: 4.0 pence).
Fig.1. Substantial Shareholdings
In addition, Stephen Puckett and
Hubert Reid will retire by rotation at
Holder
Number of
ordinary shares
% of issued
share capital
the Annual General Meeting and,
being eligible, offer themselves for
re-election.
Harris Associates
39,232,100
11.75
Silchester International Investors
25,683,231
Barclays plc
19,905,287
AXA Investment Managers UK Limited
19,560,090
Legal & General
12,780,166
Capital International Limited
12,311,486
7.69
5.96
5.86
3.83
3.69
Corporate social responsibility
(CSR)
The Board recognises its
responsibilities in respect of social,
environmental and ethical (SEE)
matters, with the UK Managing
Director having Board responsibility for
Group Environmental Management.
The Directors continually monitor
all risks to its businesses, including
SEE risks, which may impact the
Group’s short and long term value.
During 2005 no significant SEE risks
were identified. The Company is
also a member of the FTSE4Good
Index Series designed to measure
the performance of, and facilitate
investment in, those companies
meeting globally recognised standards
of corporate responsibility.
The Group’s policies on CSR matters
are described in the following
paragraphs.
(a) Environmental policy
The Group does not operate in
a business sector which causes
significant pollution but the Board
recognises that the business does
have an impact on the environment.
The Board is committed to managing
and improving the way in which our
activities affect the environment by:
Fig.2. UK Waste Generation
ANNUAL REPORT AND ACCOUNTS 005
• optimising the use of energy;
Waste
•
ensuring the efficient use of
•
274 tonnes of waste was
materials;
•
encouraging re-use and recycling;
and
•
incorporating the principle of
generated by UK offices. Our
current national recycling rate is
16% from recycling confidential
paper and toner cartridges.
sustainable development.
•
Through recycling, Michael Page
During the year, the Group has
continued to allocate a significant
amount of time and resource to
in the UK has saved 677 trees
and saved a total of 230m3 landfill
space.
further identify where its activities
Energy
•
3,587,058 kWh of electricity
was consumed in the UK, which
converts to 1,542,440 kgCO2.
•
2,272,919 kWh of gas was
consumed in the UK, which
converts to 431,855 kgCO2.
Water
•
In the UK, Michael Page
consumed 22,991 m3 of water.
Transport
In total, UK employees travelling to
and from work converts to 1,841,860
kgCO2.
have an impact on the environment.
An environmental review was again
undertaken jointly by Michael Page
International plc, and Green-Works
Consulting, an external firm of
environmental consultants.
This review is carried out annually
in accordance with the guidance
as laid down by the Department for
Environment, Food and Rural Affairs
(DEFRA), and the Global Reporting
Initiative (GRI), an independent,
international institution established
to create a common framework for
sustainability reporting worldwide.
The current environmental report,
which covers our UK businesses
only, will shortly be available on the
Michael Page website. A summary of
its findings during 2005 is shown in
Fig.2. below.
Confidential waste
Toners
Mixed office paper
Food waste and packaging
Aluminium cans
Glass bottles
Plastic bottles & plastic cups
Cardboard
Miscellaneous
Total
Annual weight
generated (tonnes)
40
% of
total waste
15%
2
96
94
2
5
5
13
17
274
1%
35%
34%
1%
2%
2%
5%
5%
100%
5
MICHAEL PAGE INTERNATIONAL
DIRECTORS’ REPORT
(b) Charitable donations
(d) Equal opportunity and diversity
In 2005, the Group joined Race for
The Group made charitable donations
The Group endorses and supports
of £70,245 during the year (2004:
the principles of equal employment
£44,037). Included in donations
opportunity. It is the policy of the
are amounts made to the Tsunami
Group to provide equal employment
Appeal, and various local charities
opportunity to all qualified
serving the communities in which the
individuals which ensures that all
Group operates. Subject to certain
employment decisions are made,
restrictions, the Group matches
subject to its legal obligations,
charitable donations made by
on a non-discriminatory basis.
employees. It is the Group’s policy not
Due consideration is given to the
to make political donations either in
recruitment, promotion, training
Opportunity (RfO), part of Business in
the Community, a UK movement of
over 700 member companies whose
purpose is to inspire, challenge and
support business in improving its
impact on society. On completion
of the benchmarking, Michael Page
International plc was credited in the
‘Best Newcomer’ Category. As a
result, the Group has taken a number
of proactive steps to enhance its
position on diversity and works closely
with a number of clients to share
ideas/best practice, and to offer
expertise to minority groups.
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
The Group is currently working with
to the individual and to the Group.
RfO on the 2006 benchmarking
Throughout 2005, the Group
monitored the diversity of its UK
employees, 79% of whom to date
have completed the voluntary request
for information. The analysis indicates
a split of 55% female, 44% male, with
1% declining to answer, and regarding
exercise, the results of which
will be reviewed by the Diversity
Steering Group, which is chaired
by an Executive Director, and its
recommendations presented to
the Board for consideration in all
territories.
origin, 89% white, 10% ethnic origin
(e) Health and safety
and 1% declining to answer. The UK
2001 Census showed a total ethnic
population of 7.9%. Similar monitoring
will be carried out during 2006.
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
The Group recognises the importance
other persons who may be affected
of diversity in the workplace for both
by its activities. In order to meet these
our own and our clients’ businesses.
responsibilities the Group will:
We are committed to increasing the
recognition of our brand amongst
a more diverse audience, and to
encourage development of an
increasingly diverse candidate
database together with our workforce.
Our monitoring of our candidate
databases confirms that the brand
attracts candidates from a wide range
of backgrounds.
We strive to ensure that we offer our
clients the most qualified candidates
on the basis of their relevant
aptitudes, skills and abilities and that
such candidates are drawn from
diverse backgrounds.
•
assess the risks to health and
safety;
•
•
implement safe systems at work;
provide information, instruction
and training;
•
establish and maintain emergency
procedures; and
•
regularly review health and safety
policies and procedures.
The Group is being proactive in our
approach to health and safety by
monitoring proposed changes in
legislation and implementing policies
accordingly, and as such we comply
with all statutory and regulatory
requirements.
the UK or overseas.
(c) Employee involvement
Employees are involved in all
aspects of the business. Michael
Page International is featured in The
Sunday Times 100 Best Companies
to Work For and received particular
commendations for organic growth,
people development and individual
contribution to the business.
Communication with employees is
effected through the Company’s
Intranet, information bulletins, briefing
meetings conducted by senior
management and formal and informal
discussions. Interim and Annual
Reports are available to all staff.
Informal communication is further
facilitated by the Group’s divisional
organisation structure.
ANNUAL REPORT AND ACCOUNTS 005
(f) Supplier payment policy
circumstances, a fair presentation
Annual General Meeting
It is the policy of the Group to agree
appropriate terms and conditions for
transactions with suppliers (by means
ranging from standard written terms
will be achieved by compliance with
all applicable International Financial
Reporting Standards. Directors are
also required to:
The resolutions to be proposed at
the Annual General Meeting to be
held on 23 May 2006, together with
explanatory notes, appear in the
to individually negotiated contracts)
•
properly select and apply
Notice of Meeting set out on pages
and that payment should be made
accounting policies;
82 and 83.
in accordance with those terms and
conditions, provided that the supplier
has also complied with them.
•
present information, including
By order of the Board
accounting policies, in a manner
that provides relevant, reliable,
The Company acts as a holding
comparable and understandable
company for the Group. Creditor days
information; and
for the Company were nil (2004: nil)
as the Company does not undertake
any transactions with suppliers. The
Group’s creditor days at the year end
were 30 (2004: 38 days).
Statement of Directors’
responsibilities
The directors are responsible
•
provide additional disclosures
Richard McBride
when compliance with the specific
Company Secretary
requirements in IFRS is insufficient
1 March 2006
to enable users to understand the
impact of particular transactions,
other events and conditions on
the entity’s financial position and
financial performance.
for preparing the Annual Report
The directors are responsible for
and the financial statements. The
keeping proper accounting records
directors are required to prepare
which disclose with reasonable
financial statements for the Group
accuracy at any time the financial
in accordance with International
position of the company, for
Financial Reporting Standards
safeguarding the assets, for taking
(IFRS) and have also elected to
reasonable steps for the prevention
prepare financial statements for the
and detection of fraud and other
company in accordance with IFRS.
irregularities and for the preparation
Company law requires the directors
of a directors’ report and directors’
to prepare such financial statements
remuneration report and operating
in accordance with IFRS, the
and financial review which comply
Companies Act 1985 and Article 4 of
with the requirements of the
the IAS Regulation.
Companies Act 1985.
International Accounting Standard
Legislation in the United Kingdom
1 requires that financial statements
governing the preparation and
present fairly for each year the
dissemination of financial statements
company’s financial position, financial
may differ from legislation in other
performance and cash flows. This
jurisdictions.
requires the faithful representation
of the effects of transactions,
other events and conditions in
accordance with the definitions
and recognition criteria for assets,
liabilities, income and expenses set
out in the International Accounting
Standards Board’s ‘Framework for
the preparation and Presentation of
Financial Statements’. In virtually all
Auditors
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
proposed at the forthcoming Annual
General Meeting.
MICHAEL PAGE INTERNATIONAL
ANNUAL REPORT AND ACCOUNTS 005
MICHAEL PAGE INTERNATIONAL
CORPORATE GOVERNANCE
The Board of Directors has a strong
•
Meetings with shareholders
Tim Miller will retire and offer himself
commitment to high standards
of corporate governance and
(code provision D1.1) – The
for election. Stephen Puckett and
Senior Independent Director has
Hubert Reid will retire by rotation and
has made significant progress in
not met directly with shareholders.
offer themselves for re-election. As
applying the main and supporting
However, other members of the
a result of their annual performance
principles of corporate governance
Board have met face-to-face
evaluation, the Board considers that
as recommended in Section 1 of
with shareholders during the
their individual performances continue
the Combined Code on Corporate
year and the issues discussed
to be effective with each director
Governance, (the “2003 FRC Code”),
are shared collectively with all
demonstrating sufficient commitment
for the year ended 31 December
Board members. Additional
to their role. The Board is therefore
2005.
Compliance with the 00 FRC
Code
The Directors consider that the
Company has complied with the
Code provisions set out in Section 1
of the 2003 FRC Code throughout
the year ended 31 December 2005,
except as stated below:
•
Board balance (code
provision A3.2) - The number
of independent Non-Executive
Directors does not equal that
of the executives. The Board
considers that the collective
know-how and experience of the
Non-Executive Directors provides
a balanced mix of skills which
understanding of shareholders’
pleased to support their re-election
opinions is also gained from
at the forthcoming Annual General
monthly brokers’ reports.
Meeting.
As a result of this information
and extensive feedback from
shareholder meetings, the Senior
Independent Director and the
other Non-Executive Directors
believe they are aware of
shareholders’ views.
The Board and its operation
The Board of Michael Page
International plc is the body
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.
responsible for corporate governance,
The Board meets regularly throughout
establishing policies and objectives,
and the management of the Group’s
resources. It is the Group’s policy
that the roles of Chairman and Chief
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 how and
to whom matters covered at each
meeting should be communicated
and actioned beyond the Board.
Decisions 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.
The Chairman and Non-Executive
Directors also met during the year
without the Executive Directors being
present.
Each of the Committees has formal
written terms of reference which were
reviewed in 2005.
matches the needs of the business
Executive are separate.
The main Board currently comprises
the Chairman, who has no operational
responsibilities, four Executive
Directors and three independent Non-
Executive Directors.
All Directors are subject to retirement
by rotation and re-election by the
shareholders in accordance with the
Articles of Association, whereby one
third of the Directors retire by rotation
each year. All Directors are subject to
election by the shareholders at the first
Annual General Meeting following their
appointment. All Directors are subject
to re-election every three years in
accordance with the 2003 FRC Code.
and is sufficient to ensure proper
governance of the Group which
consists of an organically grown,
single business, producing clear,
transparent results. It is for these
reasons that there is currently no
intention to increase the number
of Non-Executive Directors on the
main Board to more than four,
including the Chairman.
•
Composition of the
remuneration and audit
committees (code provision
B2.1 and C3.1) – Due to the
resignation of Rob Lourey on 25
April 2005, the remuneration and
audit committees did not comprise
three Non-Executive Directors until
the appointment of Tim Miller on
15 August 2005.
0
ANNUAL REPORT AND ACCOUNTS 005
The terms of reference for each
policies and procedures exist
The following criteria also need to be
committee are available on request
within its firm to ensure the firm
met before the external auditors are
and can be found on the Group’s
and its staff are independent of the
contracted to provide such services:
website. Their composition and
Group by reason of family, finance,
manner in which they discharge their
employment, investment and
responsibilities are described below.
business relationships (other than
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 22 and 23.
The Committee met five times in
2005 to fulfil its duties and included
attendance by the external auditors
where required. The Committee also
met with the external auditors during
the year without the presence of
management.
In 2005 the Audit Committee
discharged its responsibilities as
set out in the terms of reference
which can be found on our website.
Its principal tasks are to review the
Group’s internal controls, review the
scope of the external audit, consider
issues raised by the external auditors,
and review the half-yearly and annual
accounts before they are presented
to the Board, focusing in particular on
accounting policies and compliance,
and areas of management judgement
and estimates.
in the normal course of business);
(b) enforcing a policy concerning the
provision of non-audit services
by the auditor which governs the
types of work:
(i) from which the external auditor
is excluded;
(ii) for which the external auditor
can be engaged without referral
to the audit committee; and
•
the firm has the necessary skills
and experience to undertake the
work;
•
there are no potential conflicts that
may arise as a result of carrying
out this activity;
•
the external audit firm is subject to
the company’s normal tendering
processes; and
•
in addition to the normal
authorisation procedures and prior
to inclusion in a tender, approval
has been given by the Group
(iii) for which a case-by-case
Finance Director (and the Audit
decision is required, which
Committee if the fee is to exceed
includes all engagements over
£25,000).
certain fee limits.
(c) enforcing a policy of reviewing all
The following areas are considered
cases where it is proposed that a
to be unacceptable for the external
former employee of the external
auditors to undertake:
•
selection, design or
auditors be employed by the
Group; and
implementation of key financial
(d) monitoring the external auditors’
systems;
•
maintaining or preparing the
accounting books and records
or the preparation of financial
accounts or other key financial
data;
•
provision of outsource financial
systems;
compliance with applicable UK
ethical guidance on the rotation of
audit partners.
Remuneration Committee
The Remuneration Committee
comprises the independent Non-
Executive Directors. During the
year it was chaired by Rob Lourey
until his resignation on 25 April
2005. Hubert Reid chaired the
Remuneration Committee following
Rob Lourey’s departure until Tim
Miller’s appointment as Chairman on
Objectivity and independence
of external auditors
•
provision of outsource operational
management functions;
Deloitte & Touche LLP are employed
•
recruitment of senior finance or
other executives;
to perform work in addition to their
statutory duties where it is felt that
they are best placed to carry out the
engagement as a result of their being
the Group’s auditors. All other work is
•
secondment of senior finance or
16 September 2005.
other executives;
•
provision of internal audit services;
awarded on the basis of competitive
•
valuation services or fairness
tender.
opinions; and
The objectivity and independence of
the external auditor is safeguarded by:
(a) obtaining assurances from the
external auditor that adequate
•
any services specifically prohibited
to be provided by a listed
company’s external auditors under
UK regulations.
1
MICHAEL PAGE INTERNATIONAL
CORPORATE GOVERNANCE
The Committee reviews the
Succession planning
Group’s policy on the Chairman’s,
Executive Directors’ and senior
executives’ remuneration and
terms of employment, makes
recommendations upon this
along with the specific level of
remuneration 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 35 to 42 and includes
information on the Directors’ service
contracts. The terms of reference of
the Remuneration Committee can be
found on our website.
Nomination Committee
The Nomination Committee
comprises the Non-Executive
Directors and is chaired by Sir
Adrian Montague. It is responsible
for making recommendations to the
Board on new appointments, as
well as making recommendations
as to the composition of the Board
generally, and the balance between
Executive and Non-Executive
Directors appointed to the Board.
The terms of reference of the
Nomination Committee can be found
on our website. During the year,
the committee recommended the
appointment of a new Non-Executive
Director to replace Rob Lourey after
his resignation. Detailed role profiles
were agreed by the Committee before
One of the basic premises behind
the strategic development of the
Michael Page business is that
growth is organic rather than through
acquisitions of companies or senior
people. In order to achieve this organic
growth we require good people. It
is therefore one of the fundamental
principles and a major part of the
philosophy of the company that we
train and develop our own people.
This approach creates opportunities
for career progression and helps us
attract and retain high calibre people.
and the benefits of continuity, the
Nomination Committee concluded
that there would be no merit in
progressing with an extensive external
search. As a result of this internal
process, Steve Ingham was selected
and appointed as Chief Executive
Designate on 16 December 2005.
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
Due to this philosophy of nurturing
their individual requirements is then
our own talent, succession planning
compiled. Elements of the programme
is inherently a key part of the process.
typically consists of meeting senior
We do not make promotions or move
management, site visits and attending
people within the business unless
internal conferences. In addition,
there is a clear successor for the
information is provided on the
vacant position. It is therefore one of
company’s services, group structure,
the key responsibilities of all levels of
Board arrangements, financial
management, and not just the Board,
information, major competitors and
to have a clear plan of development
major risks. After an initial induction
for their direct reports.
phase, updates are provided on a
Board appointments
The Board follows formal and
transparent procedures when
periodic basis.
Performance evaluation
The Board, as part of its commitment
appointing directors. The nomination
to ensuring effectiveness and
committee engages external
evaluating its performance
consultants to identify a shortlist of
together with that of its Directors
suitable candidates for Non-Executive
and Committees, conducted an
appointments. All the candidates are
internal review comprising initially a
interviewed by the Chairman and
questionnaire concerning all aspects
the Chief Executive and evaluations
of procedure and effectiveness.
of all candidates are discussed
with all members of the nomination
committee and the recommendation
is subsequently made to the Board.
Following completion of the
questionnaires, the Chief Executive
met with the individual Executive
Directors, and the Chairman met with
external search consultants were
In respect of the appointment of
the individual Non-Executive Directors,
engaged to prepare a shortlist of
the Chief Executive Designate, the
to discuss their views and to give
potentially suitable candidates to go
Nomination Committee considered
feedback on their performance. The
forward to an interview process which
an external search. However, in
results of the evaluation were reported
resulted in the recommendation of the
view of the strong culture of organic
to the Board and where areas of
appointment of Tim Miller.
growth, the emphasis on promotion
improvement have been identified,
of capable executives within the
actions have been agreed upon
businesses, the strength and
and training will be provided where
experience of internal candidates,
required.
ANNUAL REPORT AND ACCOUNTS 005
Stephen Box, as the Senior
including operational, compliance and
Any system of internal control can
Independent Director, led a meeting
risk management, as well as financial.
only provide reasonable, but not
of the non-executive directors to
Internal Control Guidance for Directors
absolute, assurance against material
appraise the performance of the
on the Combined Code (“the Turnbull
misstatement and loss. Key elements
Chairman. The meeting took into
Report”) was published in September
of the system of internal control are
account any comments made by the
1999.
as follows:
Executive Directors. This evaluation
will be carried out annually.
Attendance at meetings
The number of meetings of the
board and committees and individual
attendance by the members of the
Committees only are shown in Fig.3.
The Board has assessed existing risk
•
group organisation. The Board
management and internal control
of Directors meets at least ten
processes during the year ended 31
times a year, focusing mainly on
December 2005 in accordance with
strategic issues, operational and
the Turnbull guidance. The Board
financial performance. There is
believes it has the procedures in
also a defined policy on matters
place such that the Group has fully
strictly reserved for the Board.
complied for the financial year ended
The Managing Director of each
Internal control
31 December 2005.
The responsibilities of the Directors in
The Directors are responsible for the
respect of internal control are defined
Group’s system of internal financial
by the Financial Services Authority’s
and operational controls which
operating division is accountable
for establishing and monitoring
internal controls within that
division;
Listing Rules which incorporate
are designed to meet the Group’s
•
strategic plan. A three year
a Code of Practice known as the
particular needs and aim to safeguard
strategic plan is prepared each
Combined Code, which requires that
Group assets, ensure proper
year and is approved by the
Directors review the effectiveness
accounting records are maintained
Board. The plan sets out the main
of the Group’s system of internal
and that the financial information used
objectives for the Group;
controls. This requirement stipulates
within the business and for publication
that the review shall cover all controls
is reliable.
Fig.3. Attendance at Board Meetings (committee attendance shown for committee members only)
Total meetings
Meetings attended
Executive
Terry Benson
Stephen Burke
(resigned 25 May 2005)
Main Board
11
10
3
10
10
11
Charles-Henri Dumon
Steve Ingham
Stephen Puckett
Total meetings
Non-Executive
Sir Adrian Montague CBE
Stephen Box
Rob Lourey
Tim Miller
Hubert Reid
Main Board
Committee
Committee
Committee
Audit
Remuneration
Nomination
(resigned 25 April 2005)
(appointed 15 August 2005)
11
11
11
2
3
11
5
5
2
1
5
7
7
2
2
7
3
3
3
-
2
3
MICHAEL PAGE INTERNATIONAL
CORPORATE GOVERNANCE
•
financial reporting. The Group
confidence, raise concerns about
Board on broking activity during the
has a comprehensive budgeting
possible improprieties relating to
month and any issues that may have
system with an annual budget
financial reporting or other matters;
been raised with them.
approved by the Board. Detailed
and
Shareholders are invited to attend the
monthly reports are produced
showing comparisons of results
against budget, forecast and
the prior year, with performance
monitoring and explanations
provided for significant variances.
The Group reports to shareholders
on a half-yearly basis;
•
quarterly reforecasting. The
Group prepares a full year
reforecast on a quarterly basis
•
internal audit activities. These are
Annual General Meeting where they
performed throughout the year by
are able to discuss any concerns with
members of the head office finance
the Non-Executive Directors.
function, who are independent of
the operations and by operational
finance staff on operations outside
their own regions. Businesses
are visited on a rotational basis
and their controls are assessed
in their effectiveness to mitigate
specific risks. In addition, there
When requested by shareholders,
individual matters can be discussed
with the Chairman or Senior
Independent Director. The Group also
has a website (www.michaelpage.
co.uk) with an investor section that
contains Company announcements
and other shareholder information.
Annual Report
showing, by individual businesses,
is a regular review of these risks
the results to date and a reforecast
and changes are made to the risk
against budget for the remaining
profile where necessary. All internal
The Annual Report is designed
period up to the end of the year;
•
audit committee. There is an
established Audit Committee
whose activities are previously
described;
•
financial and operational
controls. Controls and procedures
are documented in policies and
procedures manuals. Individual
operations complete an annual
Self-Certification Statement. Each
operational manager, in addition
to the finance function for that
operation, confirms the adequacy
of their systems of internal control
and their compliance with Group
policies. The Statement also
requires the reporting of any
significant control issues that have
emerged so that areas of Group
concern can be identified and
experience can be shared;
audit activities are reported to the
Audit Committee. During the year,
to present a balanced and
understandable view of the
the Board reviewed internal audit
Group’s activities and prospects.
arrangements and concluded that
The Chairman’s Statement, Chief
there is currently no need for a
Executive’s Review and Finance
separate and distinct internal audit
Director’s Review on pages 17 to 21
department.
The Board confirms that there is
an ongoing process for identifying,
evaluating and managing the
provide an assessment of the Group’s
affairs and position. The Annual
Report and Interim Report are sent to
all shareholders.
significant risks faced by the Group
The Directors acknowledge their
and that the processes have been in
responsibility for the preparation of
place for the year under review and
the Annual Report. The Statement of
up to the date of approval of the
Directors’ Responsibilities is shown on
annual report and accounts.
Board contact with
shareholders
Communications with shareholders are
page 27. A statement by the auditors
about their reporting responsibilities is
shown on page 44.
Going concern
given a high priority. The main contact
The Directors have a reasonable
between the Board and shareholders
expectation that the Group has
is through the Chief Executive and
adequate resources to continue
the Finance Director. They undertake
in operational existence for the
•
risk management. Identification
two major investor “roadshows” each
foreseeable future being a period of
of major business risks is carried
out at Group level in conjunction
with operational management and
appropriate steps taken to monitor
and mitigate risk;
year in February/March and August/
at least twelve months from the date
September, in which numerous one-to-
of approval of accounts and therefore
one meetings with shareholders take
continue to adopt the going concern
place. The outcome of these meetings
basis in preparing the accounts. In
and the views of shareholders are
forming this view, the Directors have
•
public interest disclosure policy
relayed back to the Board by the
reviewed the Group’s budget and
(whistleblowing). A procedure
is in place where staff may, in
corporate brokers, at the end of each
forecasts for the next twelve months
roadshow. The Group’s corporate
based on normal business planning
brokers also report monthly to the
and control procedures.
REMUNERATION REPORT
Scope and membership of
Remuneration Committee
The Remuneration Committee,
which meets not less than twice a
year, comprises the independent
Non-Executive Directors. The Chief
Executive attends the meetings
except when his own remuneration
is under consideration. The purpose
of the Remuneration Committee is
to review, on behalf of the Board, the
remuneration policy for the Chairman,
Executive Directors and other senior
executives and to determine the level
of remuneration, incentives and other
benefits, compensation payments
and the terms of employment of the
Executive Directors and other senior
executives. It seeks to provide a
remuneration package that aligns the
interests of Executive Directors with
that of the shareholders.
The Committee has continued
to review the remuneration of the
Executive Directors with regard
to the need to maintain a balance
between the constituent elements of
salary, incentive and other benefits.
It receives advice from independent
remuneration consultants, New
Bridge Street Consultants LLP, and
makes comparisons with similar
organisations.
Following the transition to International
Financial Reporting Standards, the
Committee reviewed the elements
of remuneration and confirms that
the measures of performance for the
Directors and other senior executives
remains consistent with previous
years.
No Directors other than the
members of the Remuneration
Committee provided material advice
ANNUAL REPORT AND ACCOUNTS 005
Remuneration policy
of comparable status and market
The objective of the Group’s
remuneration policy is to attract
and retain management with the
appropriate professional, managerial
and operational expertise necessary
to realise the Group’s objectives as
well as to establish a framework for
remunerating all employees.
It is the Company’s policy that all
Executive Directors service contracts
contain a 12 months’ notice period.
The Non-Executive Directors do
not have service contracts with the
Company. They are appointed for
an initial term of three years and
thereafter may be reappointed for a
further term of three years subject
to re-election at Annual General
Meetings. Additional details of service
contracts are shown on page 42.
The remuneration of the Non-
Executive Directors is determined
by the Board. The Non-Executive
Directors do not receive any pension
or other benefits, other than out-of-
pocket expenses, from the Group, nor
do they participate in any of the bonus
or share option schemes.
The remuneration agreed by the
Committee for the Executive Directors
contains the following elements: a base
salary and benefits, an annual bonus
reflecting Group performance, share
options conditional upon achieving
performance criteria, incentive share
plan award and pension benefits.
The following sections provide an
outline of the Company’s remuneration
policy during 2005. Shareholders were
consulted on the policy at the time of
approval of the Incentive Share Plan in
December 2003.
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.
Annual bonus plan
Annual bonuses for the Executive
Directors are based on the division
of a pool of Profits earned during
the financial year. This approach is
similar to the bonus arrangements for
other employees. In 2005, the bonus
pool for Executive Directors was
equal to 6% of Profits earned above
a threshold equal to half of targeted
Profits for the year (i.e. approximately
3% of total Profits). In addition, if
Profits exceed 1.25 times (2004: 1.2
times) the targeted level, then an
additional 2% of Profits earned above
the targeted level is added to the
bonus pool. This arrangement was
in force for 2005 until the resignation
of Stephen Burke, when the
Remuneration Committee revised the
bonus pool arrangements reducing
the relevant percentages from 6% and
2% to 5% and 1.65% respectively.
Profits are defined as group profit
before taxation, exceptional 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.
The bonus pool as described above is
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. No
such variation was made in respect of
to the Committee on Directors’
Base salary and benefits
remuneration.
The Committee establishes salaries
the performance in 2005.
and benefits by reference to those
prevailing in the employment market
generally for Executive Directors
5
MICHAEL PAGE INTERNATIONAL
REMUNERATION REPORT
The targeted level of Profits for 2005
preceding year. Initially these awards
The Committee reviewed the Incentive
was £51.2m (2004: £29.8m) and
are being satisfied by shares in the
Share Plan with regards to the
was set at the beginning of 2005 by
Employee Benefit Trust. Not more
company’s current operations and
reference to market expectations
than 60% of this figure is available for
prospects. It confirms that the growth
and internal forecasts at that time.
awards to the Executive Directors.
levels and criteria remain appropriate.
Based on the 2005 results, awards
totalling £3.5m (2004: £2.0m) will be
made in 2006 of which £940,500
(2004: £895,000) 27% (2004:
44.75%) will be for the Executive
Directors. Details of the awards made
in 2005 are disclosed on page 39.
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. Retesting after the
initial vesting period is not permitted
for any grants awarded in 2004 or
subsequent years.
For participants of the Incentive Share
Plan, the maximum annual awards
are as follows: for the Chief Executive
Officer, 150,000; for all other
Executive Board Directors, 100,000;
and 50,000 for any other senior
executive participating in the Incentive
Share Plan. The Remuneration
Committee has decided not to make
any share option awards to the
Executive Directors in 2006.
Pension benefits
Executive Directors are eligible to
The Committee retains the discretion
The balance is available for awards to
to review this arrangement and set
senior employees. Group Profits are
different rates and thresholds as it
defined as group profit before taxation
deems appropriate for the business.
and before exceptional items and
The target for 2006 has been set and
will be disclosed in next year’s report.
The threshold in 2006 for awarding the
charges or credits resulting from the
Plan or other share option grants, as
described below.
higher level of bonus is set at 1.2 times
Two thirds of these shares (“Deferred
the targeted level of profits.
Share Awards”) are subject to a three
Unlike all other employees who
receive their annual bonuses in
cash, in the event that the executive
director’s annual bonus entitlement is
greater than 100% of salary, only an
amount equal to the executive’s salary
will be paid in cash. To reward service
over a longer period, any excess
above the individual’s salary level will
year deferral period during which they
will be forfeited if the relevant director
or senior employee leaves, other than
in “compassionate circumstances”.
The remaining third (“Performance
Share Awards”) are also to be deferred
for three years but are subject to
earnings per share (“EPS”) growth
targets over the three year period.
be deferred, paid into an employee
Performance share awards of up
benefit trust and invested in the
to 50% of a director’s or senior
Company’s shares with no matching
employee’s salary will only vest if EPS
investment by the Company. Based
grows by an average of 5% over the
on the 2005 results, the amount
growth in UK RPI per annum over
deferred for the four Executive
the three year period. Any excess
Directors is £1.6m (2004: £0.63m).
between 50% and 75% of salary
will only vest to the extent that EPS
grows by 7.5% over the growth in UK
RPI per annum 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
receive only modest share option
grants as described below.
Such shares will be reserved for
the executive and will vest in equal
tranches 1, 2 and 3 years later,
normally so long as the executive is
still in employment at that time.
The profit and loss account for the
year carries a charge for the directors
annual bonus paid in cash while the
deferred amount will be charged in
subsequent years when the shares
vest.
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.The current level of
award is 5% of Group Profits of the
The Committee retains the discretion
participate in a Company pension
to review the proportion of profits
plan which is a defined contribution
dedicated to the Incentive Share Plan
scheme. Where the pension
in the light of the growth in the size of
entitlement exceeds the United
the Company, its profitability and the
Kingdom HM Revenue & Customs
number of Executive Directors.
cap, a cash alternative is payable.
ANNUAL REPORT AND ACCOUNTS 005
Emoluments
Notes to the emoluments:
The aggregate emoluments, excluding pensions, of the Directors of the Company
1. Charles-Henri Dumon is the
who served during the year were as follows:
Salary
and
fees
£’000
Benefits
(note 2)
£’000
Annual
Bonus
(note 3)
£’000
Deferred
Annual
Bonus
(note 3)
£’000
Incentive
Share
Plan
(note 4)
£’000
Compensation
for loss of
office (note 5)
£’000
Total
£’000
354
98
236
227
219
63
34
6
12
29
30
8
197
48
29
–
–
–
–
–
354
98
236
227
219
–
–
–
–
–
314
–
432
441
448
–
–
–
–
–
–
–
209
209
209
–
–
–
–
–
– 1,052
410
614
– 1,310
– 1,152
– 1,124
–
–
–
–
–
63
34
6
12
29
1,278
312
1,134
1,635
627
410 5,396
2005
Executive
Terry Benson
Stephen Burke (note 5)
Charles-Henri Dumon (note 1)
Steve Ingham
Stephen Puckett
Non-Executive
Sir Adrian Montague CBE
Stephen Box
Rob Lourey (note 6)
Tim Miller (note 6)
Hubert Reid
Total
Salary
and fees
£’000
Benefits
(note 2)
£’000
Annual
Bonus
(note 3)
£’000
Deferred
Annual
Bonus
(note 3)
£’000
Incentive
Share
Plan
(note 4)
£’000
344
229
229
207
213
50
30
25
25
29
20
207
42
35
–
–
–
–
344
229
229
207
213
–
–
–
–
177
118
118
107
110
–
–
–
–
119
119
119
119
119
–
–
–
–
Total
£’000
1,013
715
902
682
690
50
30
25
25
1,352
333
1,222
630
595
4,132
2005
£’000
106
47
38
21
36
2004
£’000
103
46
40
20
29
2004
Executive
Terry Benson
Stephen Burke
Charles-Henri Dumon
Steve Ingham
Stephen Puckett
Non-Executive
Sir Adrian Montague CBE
Stephen Box
Rob Lourey
Hubert Reid
Total
Pension contributions
Terry Benson
Stephen Burke
Charles-Henri Dumon
Steve Ingham
Stephen Puckett
highest paid director.
2. Benefits include, inter alia, items
such as company car or cash
alternative, fuel, cash in lieu of
pension contributions, and medical
insurance. Charles-Henri Dumon’s
benefits also include housing and
relocation costs.
3. The annual cash bonus for Board
members is capped at 100%
of salary. Any excess over this
amount is deferred and invested in
the Company’s shares which vest
in equal tranches over three years.
The amount of the annual bonus
earned by the remaining Executive
Directors in 2005 but deferred to
future periods was £1.6m (2004:
£0.6m).
4. Represents the non-performance
proportion of the Incentive Share
Plan to be awarded in March
2006.
5. On 25 May 2005, Stephen Burke
resigned as an Executive Director.
During the period to 25 May 2005,
his remuneration (salary, bonus
and benefits) totalled £204,000.
Details of his compensation for
loss of office can be found on
page 38.
6. Rob Lourey resigned on 25 April
2005. Tim Miller was appointed on
15 August 2005.
MICHAEL PAGE INTERNATIONAL
REMUNERATION REPORT
Compensation for loss of office
The Remuneration Committee has exercised its discretion over Stephen Burke’s compensation for loss of office, taking into
consideration his length of service, his individual performance, the overall performance of the Group and the length of time the
share based awards have been held. On termination of this contract, he received a compensation package totalling £410,000.
From 1 June 2005 until 31 December 2005 he received his normal monthly salary and contractual benefits (£146,000) whilst on
garden leave during which time he was unable to be employed or otherwise engaged in a competing business.
On 31 December 2005 he was paid a lump sum representing salary and contractual benefits for the remaining five months of his
notice period. During this five month period, he remains unable to solicit clients and employees of the Group without prior consent
from the Board. The salary, benefits in kind and pension over the remaining five months of his notice period was £126,000 with his
bonus entitlement under the Annual Bonus Plan being £138,000.
Restricted shares previously granted under the Incentive Share Plan and Annual Bonus Plan were transferred to Stephen Burke
with the restrictions lifted at the discretion of the Remuneration Committee.
The total compensation granted to Stephen Burke is summarised in the table below.
Salary and contractual benefits (1 June 2005 - 31 December 2005)
Salary and contractual benefits (1 January 2006 - 31 May 2006)
Annual Bonus Plan 2005
Compensation for loss of office as disclosed in the table on page 37
£’000
146
126
138
410
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. As at 31 December 2005 all Executive Directors comply with this requirement.
The beneficial interests of the Directors who served throughout the year and their families in the ordinary shares of the Company of
1p each are shown below. Other than for Stephen Burke, there has been no change in these interests from 31 December 2005 to
1 March 2006.
Terry Benson
Stephen Burke (note 1)
Charles-Henri Dumon
Steve Ingham
Stephen Puckett
Stephen Box ‡
‡ Non-Executive Director
Note:
Ordinary
shares of 1p
Direct Holding
Direct Holding
Direct Holding
Direct Holding
Direct Holding
Direct Holding
At 1 January 2005
Acquired in year
Disposal
in year
At 31 December 2005
or date of resignation
3,000,000
1,075,672
1,372,997
1,000,000
203,526
15,000
-
-
-
-
-
-
(1,000,000)
-
(40,000)
-
-
-
2,000,000
1,075,672
1,332,997
1,000,000
203,526
15,000
1. Stephen Burke resigned on 25 May 2005.
No other director has a holding in the Company.
ANNUAL REPORT AND ACCOUNTS 005
Directors’ interests and share ownership requirements (continued)
Incentive Share Plan
Details of awards made under the Incentive Share Plan that remain outstanding at 31 December 2005 are as follows:
Total award at 1 January 2005
Awarded during the year
Vested
in year
Total award at 31 December 2005
Performance
Non-
performance
Total Performance
Non-
performance
Total
Performance
Non-
performance
Total
Terry Benson
Stephen Burke (note 6)
Charles-Henri Dumon (note 4)
Steve Ingham
Stephen Puckett
26,315
26,315
26,315
26,315
26,315
52,631
78,946
52,631
78,946
52,631
78,946
52,631
78,946
52,631
78,946
30,915
30,915
30,915
30,915
30,915
61,831
92,746
–
57,230
114,462
171,692
61,831
92,746
(171,692)
–
–
–
61,831
92,746
61,831
92,746
61,831
92,746
–
–
–
57,230
114,462
171,692
57,230
114,462
171,692
57,230
114,462
171,692
1. The value of the awards made under the Michael Page Incentive Share Plan in 2005 is £180,855 for each individual Director
and is based on the purchase price of the Company’s ordinary shares on 8 March 2005 of 195.0p.
2. The value at 31 December 2005 for each individual Director is £463,568 and is calculated using the closing market price of the
Company’s ordinary shares at 31 December 2005 of 270.0p.
3. For awards made in 2005, the base EPS for the performance criteria is 7.5p (2004: 4.1p).
4. Charles-Henri Dumon was granted deferred share options to acquire 61,831 ordinary shares and performance share options to
acquire 30,915 ordinary shares under the Michael Page Incentive Share Plan 2005. These options have a nil exercise price and
do not accrue dividends.
5. The non performance shares to be awarded in 2006 have been included in the table of emoluments on page 37.
6. As part of Stephen Burke’s compensation for loss of office as disclosed on page 38, awards made to him under the Long Term
Incentive Plan vested in the year with the restrictions lifted at the discretion of the Remuneration Committee.
The value of the awards charged to the income statement during the period was £377,900 (2004: £187,500) in respect of
awards made to the Executive Directors in the year under the Incentive Share Plan. For full descriptions of the performance and
vesting conditions, see “Incentive Share Plan for Executive Directors and Senior Employees” on page 36.
Deferred Annual Bonus
As described on pages 35 and 36, in the event that the Executive Directors’ bonus entitlement is greater than 100% of salary, the
excess above the individual’s salary is deferred, invested in the Company’s shares and delivered to the individual in three equal
tranches on the first three anniversaries of the grant.
In 2006 a total of £1.6m will be awarded to the Executive Directors representing this excess and has been included in the
emoluments table for the year as shown on page 37.There has been no charge made to the income statement in the year for
the deferred element of the Annual Bonus Plan. The charge for the year will be spread over future periods as described in the
accounting policies in Note 1 on pages 53 to 57. For full descriptions of the performance and vesting conditions, see “Annual
Bonus Plan” on pages 35 and 36.
MICHAEL PAGE INTERNATIONAL
REMUNERATION REPORT
Directors’ interests and share ownership requirements (continued)
Beneficial interests
The beneficial interests of the Executive Directors who served during the year and their families in share options of the Michael Page
International plc Executive Share Option Scheme at 31 December 2005 were as follows:
Date of
Grant
At 1 January
2005
Granted in
year
Exercised in
year
Lapsed in
year
At 31 December
2005
Exercise price
(pence)
Terry Benson
Stephen Burke
Charles-Henri Dumon
Steve Ingham
Stephen Puckett
2001
2002
2002
2003
2004
2005
2001
2002
2002
2003
2004
2005
2001
2002
2003
2004
2005
2001
2002
2002
2003
2004
2005
2001
2002
2002
2003
2004
2005
3,750,000
150,000
150,000
200,000
50,000
-
-
-
-
-
-
50,000
1,125,000
150,000
150,000
200,000
50,000
-
-
-
-
-
-
50,000
1,125,000
300,000
200,000
50,000
-
-
-
-
-
50,000
750,000
150,000
150,000
200,000
50,000
-
-
-
-
-
-
50,000
750,000
150,000
150,000
200,000
50,000
-
-
-
-
-
-
50,000
-
-
-
-
-
-
-
-
-
-
-
-
3,750,000
150,000
150,000
200,000
50,000
50,000
(168,223)
-
-
(200,000)
(37,500)
(20,833)
(956,777)
(150,000)
(150,000)
-
(12,500)
(29,167)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,125,000
300,000
200,000
50,000
50,000
750,000
150,000
150,000
200,000
50,000
50,000
750,000
150,000
150,000
200,000
50,000
50,000
175
186
186
81.5
171
190.75
175
186
186
81.5
171
190.75
175
186
83.4
171
190.75
175
186
186
81.5
171
190.75
175
186
186
81.5
171
190.75
Period of
exercise
2004-2011
2005-2012
2006-2012
2006-2013
2007-2014
2008-2015
2004-2011
2005-2012
2006-2012
2006-2013
2007-2014
2008-2015
2004-2011
2006-2012
2007-2013
2007-2014
2008-2015
2004-2011
2005-2012
2006-2012
2006-2013
2007-2014
2008-2015
2004-2011
2005-2012
2006-2012
2006-2013
2007-2014
2008-2015
1. The market price of the shares at 31 December 2005 was 270.0p with a range during the year of 175.5p to 278.0p.
2. Other than those held by Stephen Burke (details of which are given on page 41), no options held by Directors lapsed
unexercised or were exercised during the period. Options granted before 2004 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. Grants made in 2004 and subsequent years are subject to one performance test only on the third anniversary of
the grant. The performance criteria are set out in note 18.
0
ANNUAL REPORT AND ACCOUNTS 005
3. The total gain on share options exercised by Stephen Burke was £575,518. His 2001 options were exercised subject
to performance criteria which had been achieved. Options under the 2003, 2004 and 2005 Share Option Scheme were
prorated to reflect the period of his employment. The vesting periods of these options were reduced at the discretion of the
Remuneration Committee and the performance conditions waived. The market price at the date of exercise was 270.0p.
Total Shareholder Return (TSR)
The graphs below 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.
190
170
150
130
110
90
70
50
190
170
150
130
110
90
70
50
31 December 2001
31 December 2002
31 December 2003
31 December 2004
31 December 2005
Versus FTSE Support Services
96.9
89.4
112.8
115.7
64.2
59.4
69.9
71.7
FTSE Support Services
Michael Page International
170.5
87.2
31 December 2001
31 December 2002
31 December 2003
31 December 2004
31 December 2005
Versus FTSE250
128.5
115.7
112.8
104.6
100.4
89.4
75.3
64.2
FTSE250
Michael Page International
170.5
167.5
1
MICHAEL PAGE INTERNATIONAL
REMUNERATION REPORT
Outside appointments
The Remuneration Committee recognises that Non-Executive Directorships are a significant benefit in broadening executive’s
experience. Subject to review in each case, the Remuneration Committee’s general policy is that Executive Directors may accept
Non-Executive Directorships with other companies, so long as there is no conflict of interest and their effectiveness is not impaired.
The executive is permitted to retain any fees for the service. Stephen Puckett received fees of £25,000 (2004: £20,833 prorated
from his date of appointment) as a Non-Executive Director of SHL Group plc. These fees are not included in the emoluments table
on page 37.
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.
On termination, any compensation payments due to a Director are calculated in accordance with normal legal principles.
Mitigation of these payments would be applied, depending on the individual circumstances of each case.
Contract
date
Unexpired term at
31 December 2005
Notice
period
Provision for compensation
on early termination
Other
termination
provisions
Executive
Terry Benson
05/03/01
12 months
12 months
Charles-Henri Dumon
13/06/03
no specific term 12 months
Steve Ingham
05/03/01
no specific term 12 months
Stephen Puckett
05/03/01
no specific term 12 months
Non-Executive
Sir Adrian Montague CBE
26/01/04
13 months
Stephen Box
Hubert Reid*
Tim Miller
26/01/04
25/02/03
15/08/05
13 months
2 months
31 months
None
None
None
None
*Hubert Reid’s appointment was renewed on 27 February 2006.
Annual resolution
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
Shareholders will be given the opportunity to approve the Remuneration Report at the Annual General Meeting (resolution 6) on
23 May 2006.
Audit requirement
Within the Remuneration Report, the sections on Emoluments, Compensation for loss of office, and Directors’ interests and share
ownership requirements, on pages 37 to 41 inclusive, are audited. All other sections of the Remuneration Report are unaudited.
Tim Miller
Chairman - Remuneration Committee
1 March 2006
ANNUAL REPORT AND ACCOUNTS 005
This page is left intentionally blank
MICHAEL PAGE INTERNATIONAL
ANNUAL REPORT AND ACCOUNTS 005
This page is left intentionally blank
5
MICHAEL PAGE INTERNATIONAL
INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF MICHAEL PAGE INTERNATIONAL PLC
Respective responsibilities of
directors and auditors
The directors’ responsibilities for
preparing the annual report, the
We also report to you if, in our
opinion, the company has not
complied with any of the four
directors’ remuneration disclosure
directors’ remuneration report and the
requirements specified for our review
financial statements in accordance
with applicable United Kingdom law
and International Financial Reporting
Standards (IFRSs) as adopted for
use in the European Union are set
out in the statement of directors’
responsibilities.
Our responsibility is to audit the
financial statements and the part of
the directors’ remuneration report
described as having been audited
in accordance with relevant United
Kingdom legal and regulatory
requirements and International
Standards on Auditing (UK and
Ireland).
We report to you our opinion as to
whether the financial statements give
a true and fair view in accordance
with the relevant framework 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 and Article 4 of the IAS
Regulation. We report to you if, in
our opinion, the directors’ report
is not consistent with the financial
statements. We also report to you
if the company has not kept proper
accounting records, if we have not
received all the information and
by the Listing Rules of the Financial
Services Authority. These comprise
the amount of each element in
the remuneration package and
information on share options, details
of long term incentive schemes, and
money purchase and defined benefit
schemes. We give a statement, to the
extent possible, of details of any non-
compliance.
We review whether the corporate
governance statement reflects the
company’s compliance with the nine
provisions of the 2003 FRC 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.
We read the directors’ report and
the other information contained
in the annual report including the
unaudited part of the directors’
remuneration report and we
consider the implications for our
report if we become aware of any
apparent misstatements or material
inconsistencies with the financial
explanations we require for our audit,
statements.
or if information specified by law
regarding directors’ remuneration and
transactions with the company and
other members of the group is not
disclosed.
We have audited the group and
individual company financial
statements (the “financial statements”)
of Michael Page International plc for
the year ended 31 December 2005
which comprise the consolidated
income statement, the consolidated
and individual company balance
sheets, the consolidated and
individual company cash flow
statements, the consolidated and
individual company statements of
change in shareholders’ equity, and
the related notes 1 to 27. These
financial statements have been
prepared under the accounting
policies set out therein. We have
also audited the information in 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.
Basis of audit opinion
Opinion
We conducted our audit in
In our opinion:
accordance with International
Standards on Auditing (UK and
Ireland) 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 described as
having been audited. It also includes
an assessment of the significant
estimates and judgements made
by the directors in the preparation
of the financial statements, and of
whether the accounting policies
are appropriate to the company’s
circumstances, consistently applied
•
the group financial statements give
a true and fair view, in accordance
with IFRSs as adopted for use in
the European Union, of the state
of the group’s affairs as at 31
December 2005 and of its profit
for the year then ended;
•
the individual company financial
statements give a true and fair
view, in accordance with IFRSs as
adopted for use in the European
Union as applied in accordance
with the requirements of the
Companies Act 1985, of the
individual company’s affairs as at
31 December 2005; and
and adequately disclosed.
•
the financial statements and the
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.
part of the directors’ remuneration
report described as having been
audited have been properly
prepared in accordance with the
Companies Act 1985 and Article 4
of the IAS Regulation.
Deloitte & Touche LLP
Chartered Accountants and
Registered Auditors
London
1 March 2006
ANNUAL REPORT AND ACCOUNTS 005
MICHAEL PAGE INTERNATIONAL
CONSOLIDATED INCOME STATEMENT
Year ended 1 December 005
Turnover
Cost of sales
Gross profit
Administrative expenses
Operating profit
Financial income
Financial expenses
Profit before tax
Income tax expense
Profit for the year
Attributable to:
Equity holders of the parent
Earnings per share
Basic earnings per share (pence)
Diluted earnings per share (pence)
The above results relate to continuing operations.
Note
2
2
2
5
5
6
9
9
2005
£’000
523,810
(256,229)
267,581
(201,062)
66,519
393
(776)
66,136
(16,506)
49,630
2004
£’000
433,731
(223,090)
210,641
(171,783)
38,858
369
(368)
38,859
(4,523)
34,336
49,630
34,336
14.8
14.4
9.8
9.7
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
at 1 December 005
ANNUAL REPORT AND ACCOUNTS 005
Group
Note
Balance at 1 January 2004
Currency translation differences
Net expense recognised directly in equity
Profit for the year
Total recognised (expense)/income for the year
Purchase of own shares
Credit in respect of share schemes
Dividends
Balance at 31 December 2004
Balance at 1 January 2005
Currency translation differences
Net income recognised directly in equity
Profit for the year
Total recognised income for the year
Purchase of own shares
Cancellation of treasury shares
Credit in respect of share schemes
Dividends
Balance at 31 December 2005
8
8
Capital
redemption
reserve
£’000
EBT
reserve
£’000
Treasury
shares
£’000
113
(9,871)
Currency
translation
reserve
£’000
Retained
earnings
£’000
–
67,628
–
–
–
–
–
(13,122)
–
–
(13,122)
–
–
–
–
–
–
–
–
(188)
(188)
–
(188)
–
–
–
–
Total
equity
£’000
61,507
(188)
(188)
34,336
34,148
–
–
34,336
34,336
(10,999)
(24,121)
1,559
1,559
(12,593)
(12,593)
(22,033)
(35,155)
Share
capital
£’000
3,637
–
–
–
–
(65)
–
–
(65)
3,572
–
–
–
–
65
–
–
65
178
(9,871)
(13,122)
(188)
79,931
60,500
3,572
178
(9,871)
(13,122)
(188)
79,931
60,500
–
–
–
–
–
(246)
–
–
(246)
3,326
–
–
–
–
–
246
–
–
246
424
–
–
–
–
–
–
–
–
–
–
–
–
–
(34,216)
47,338
–
–
13,122
492
492
–
492
–
–
–
–
–
–
–
49,630
49,630
492
492
49,630
50,122
–
(34,216)
(47,338)
–
6,922
6,922
(14,432)
(14,432)
(54,848)
(41,726)
(9,871)
–
304
74,713
68,896
MICHAEL PAGE INTERNATIONAL
STATEMENT OF CHANGES IN EQUITY – PARENT COMPANY
at 1 December 005
Company
Balance at 1 January 2004
Profit for the year
Total recognised income for the year
Purchase of own shares
Dividends
Balance at 31 December 2004
Balance at 1 January 2005
Profit for the year
Total recognised income for the year
Purchase of own shares
Cancellation of treasury shares
Dividends
Balance at 31 December 2005
Note
8
8
Share
capital
£’000
3,637
–
–
(65)
–
(65)
Capital
redemption
reserve
£’000
EBT
reserve
£’000
Treasury
shares
£’000
Retained
earnings
£’000
Total
equity
£’000
113
(9,871)
–
–
65
–
65
–
–
–
–
–
–
–
–
310,674
304,553
12,606
12,606
12,606
12,606
(13,122)
(10,999)
(24,121)
–
(12,593)
(12,593)
(13,122)
(23,592)
(36,714)
3,572
178
(9,871)
(13,122)
299,688
280,445
3,572
178
(9,871)
(13,122)
299,688
280,445
–
–
–
(246)
–
(246)
3,326
–
–
–
246
–
246
424
–
–
–
–
–
–
–
–
12,793
12,793
12,793
12,793
(34,216)
–
(34,216)
47,338
(47,338)
–
–
(14,432)
(14,432)
13,122
(61,770)
(48,648)
(9,871)
–
250,711
244,590
50
BALANCE SHEETS
at 1 December 005
Non-current assets
Property, plant and equipment
Intangible assets
Investments
Deferred tax assets
Other receivables
Current assets
Trade and other receivables
Current tax receivable
Cash and cash equivalents
Total assets
Non-current liabilities
Other payables
Provisions for liabilities and charges
Deferred tax liabilities
Current liabilities
Trade and other payables
Bank overdrafts
Bank loans
Current tax payable
Provisions for liabilities and charges
Total liabilities
Net assets
Capital and reserves
Called-up share capital
Capital redemption reserve
EBT reserve
Treasury shares
Currency translation reserve
Retained earnings
Total equity
ANNUAL REPORT AND ACCOUNTS 005
Group
Company
Note
2005
£’000
2004
£’000
2005
£’000
2004
£’000
10
11
12
17
13
13
7
21
2
14
16
17
14
21
15
7
16
2
18
19,666
3,751
–
9,255
1,106
18,739
3,733
–
–
–
–
–
421,545
421,545
2,423
1,692
–
–
–
–
33,778
26,587
421,545
421,545
104,935
86,214
336
20,060
125,331
1,183
12,532
99,929
15
225
156
396
15
277
156
448
159,109
126,516
421,941
421,993
(662)
(192)
(147)
(1,678)
(612)
(689)
(1,001)
(2,979)
–
–
–
–
–
–
–
–
(71,624)
(60,694)
(170,651)
(141,548)
(281)
(6,700)
(317)
–
(10,223)
(1,450)
(384)
(576)
–
(6,700)
–
–
–
–
–
–
(89,212)
(63,037)
(177,351)
(141,548)
(90,213)
(66,016)
(177,351)
(141,548)
68,896
60,500
244,590
280,445
3,326
424
(9,871)
–
304
74,713
68,896
3,572
178
(9,871)
(13,122)
(188)
79,931
60,500
3,326
424
(9,871)
–
–
250,711
244,590
3,572
178
(9,871)
(13,122)
–
299,688
280,445
These financial statements were approved by the Board of Directors on 1 March 2006.
On behalf of the Board of Directors.
T W Benson
Chief Executive
S R Puckett
Group Finance Director
51
MICHAEL PAGE INTERNATIONAL
CASH FLOW STATEMENTS
for the year ended 1 December 005
Cash generated from operations
Income tax (paid)/received
Net cash from operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Purchases of computer software
Proceeds from the sale of property, plant and equipment, and computer software
Proceeds from sale of business
Interest received
Net cash used in investing activities
Cash flows from financing activities
Dividends paid
Interest paid
Proceeds from bank loan
Purchase of own shares
Net cash used in financing activities
Note
20
22
Group
Company
2005
£’000
65,432
2004
£’000
35,690
(10,127)
(4,825)
55,305
30,865
2005
£’000
40,754
1,702
42,456
2004
£’000
36,932
–
36,932
(7,167)
(5,324)
(965)
1,354
1,353
393
(500)
1,416
–
369
(5,032)
(4,039)
–
–
–
–
–
–
–
–
–
–
–
–
(14,432)
(12,593)
(14,432)
(12,593)
(773)
6,700
(367)
–
(508)
6,700
(199)
–
(34,216)
(24,120)
(34,216)
(24,120)
(42,721)
(37,080)
(42,456)
(36,912)
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Exchange gains on cash and cash equivalents
7,552
(10,254)
12,215
22,434
12
35
Cash and cash equivalents at the end of the year
21
19,779
12,215
–
156
–
156
20
136
–
156
5
ANNUAL REPORT AND ACCOUNTS 005
NOTES TO THE ACCOUNTS
1. Significant accounting policies
Statement of compliance
The financial statements have been prepared under the historical cost convention and in accordance with current International Financial
Reporting Standards (IFRS), and are covered by IFRS 1, “First-time Adoption of International Financial Reporting Standards”, because they
are the Group’s first consolidated IFRS financial statements. The disclosures required by IFRS 1 concerning the transition from UK GAAP
to IFRS are given in note 27. The financial statements have been prepared in accordance with IFRS adopted for use in the European Union
and therefore comply with Article 4 of the EU IAS Regulation.
Basis of preparation
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 £11.1m (2004: £12.6m).
The policies set out below have been consistently applied to all the periods presented. The Group has made use of the exemption available
under IFRS 1 where cumulative translation differences for all foreign operations are deemed to be zero at the date of transition. The Group
has also taken the exemption not to apply IFRS 2 “Share-based Payment” to share options granted before 7 November 2002. Additionally,
as permitted by IFRS 1, the Group has adopted IAS 32 “Financial instruments: disclosure and presentation” and IAS 39 “Financial
instruments: recognition and measurement”, prospectively from 1 January 2005.
The Group’s consolidated financial statements were prepared in accordance with United Kingdom Generally Accepted Accounting
Principles (UK GAAP) until 31 December 2004. UK GAAP differs in some areas from IFRS. In preparing the 2005 consolidated financial
statements, management has amended certain accounting and valuation methods applied in the UK GAAP financial statements to comply
with IFRS. The comparative figures in respect of 2004 were restated to reflect these adjustments as disclosed in the reconciliations, and
descriptions of the effect of the transition from UK GAAP to IFRS on the Group’s equity and its net income and cash flows are shown in
note 27.
The comparative figures for the year ended 31 December 2004, prior to the adjustments required on transition to IFRS as described
below and in note 27, have been extracted from the Group’s financial statements, a copy of which has been delivered to the Registrar of
Companies. The auditors’ report on those statements was unqualified and did not include a statement under Section 237(2) or (3) of the
Companies Act 1985.
The adoption of the above IFRS did not result in substantial changes to the Group’s accounting policies under UK GAAP and as set out in
the Group’s financial statements for the year ended 31 December 2004. In summary:
•
IAS 1 “Presentation of Financial Statements” and IAS 7 “Cash Flow Statements” have affected the overall presentation and certain
disclosures.
•
IAS 10 “Events After the Balance Sheet Date” has the effect of prohibiting the recognition of the final dividend as a liability until
shareholder approval has been received. Under FRS 12 “Provisions, contingent liabilities and contingent assets”, a liability was
recognised.
•
IAS 14 “Segment Reporting” has no material effect on the Group’s policy. The Group continues to operate in only one business
segment being that of recruitment services, and this has been identified as the Group’s primary segment. Geography is the Group’s
secondary segment.
•
IAS 21 “The Effects of Changes in Foreign Exchange Rates” has no material effect on the Group’s policy. All material Group entities
have the same functional currency as their measurement currency.
•
•
IAS 24 “Related Party Disclosures” has affected the identification of related parties and some other related-party disclosures.
The adoption of IFRS 2 “Share-based Payment” has resulted in a change in the accounting policy for share-based payments. Under
UK GAAP, the provision of share-based payments to employees did not result in a charge in the income statement. Under IFRS, the
Group charges the cost of share-based payments to the income statement over the vesting period.
•
The adoption of IFRS 3 “Business Combinations”, IAS 36 “Impairment of Assets” and IAS 38 “Intangible Assets” have resulted in a
change in the accounting policy for goodwill. Under UK GAAP, goodwill was amortised on a straight line basis over a period of 20
years and assessed for an indication of impairment at each balance sheet date. In accordance with the provisions of IFRS 3, the Group
ceased amortisation of goodwill from 1 January 2005. Accumulated amortisation as at 31 December 2004 has been eliminated with
a corresponding decrease in the cost of goodwill. From the year ended 31 December 2005 onwards, goodwill is tested annually for
impairment, as well as when there are indications of impairment.
•
The Group has reassessed the useful lives of its intangible assets in accordance with the provisions of IAS 38. No adjustment resulted
from this reassessment.
5
MICHAEL PAGE INTERNATIONAL
NOTES TO THE ACCOUNTS
1. Significant accounting policies (continued)
The remaining standards are either not applicable to the business or have no material effect on the Group’s policies.
Basis of consolidation
(i)
Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern
the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights
that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences until the date that control ceases.
(ii) Transactions eliminated on consolidation
Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated
in preparing the consolidated financial statements. Unrealised gains arising from transactions with associates and jointly controlled
entities are eliminated to the extent of the Group’s interest in the entity. Unrealised losses are eliminated in the same way as unrealised
gains, but only to the extent that there is no evidence of impairment.
All changes in the accounting policies have been made in accordance with the transition provisions in the respective standards. The revised
accounting policies now followed by the Group are shown below:
a) 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) is recognised when the
expense is incurred.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
b) Cost of sales
Cost of sales consists of the salary cost of temporary staff and costs incurred on behalf of clients, principally advertising costs.
c) Gross profit
Gross profit is represented by turnover less cost of sales and consists of the total placement fees of permanent candidates, the margin
earned on the placement of temporary candidates and the margin on advertising income.
d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in sterling, which
is the Company’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the respective functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
5
ANNUAL REPORT AND ACCOUNTS 005
1. Significant accounting policies (continued)
d) Foreign currency translation (continued)
(iii) Group companies
The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a
functional currency different from the presentation currency are translated into the presentation currency as follows:
• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
• income and expenses for each income statement are translated at average exchange rates; and
• all resulting exchange differences are recognised as a separate component of equity.
e) Intangible assets
(i) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the
acquired subsidiary at the date of acquisition. Goodwill on the acquisition of subsidiaries is included in intangible assets.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but
is tested annually for impairment (see accounting policy h). Gains and losses on the disposal of an entity include the carrying amount of
goodwill relating to the entity sold.
(ii) Computer software
Computer software acquired by the Group is stated at cost less accumulated amortisation (see below).
(iii) Amortisation
Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such
lives are indefinite. Goodwill has an indefinite useful life. Computer software is amortised at 20% per annum.
The cumulative amount of goodwill written off directly to retained earnings in respect of acquisitions prior to 31 December 1997 is £311.7m
(2004: £311.7m).
f) Property, plant and equipment
Property, plant and equipment 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
g) Investments
25% per annum
Fixed asset investments are stated at cost less provision for impairment.
h) Impairment of assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. An impairment loss is
recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of
an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels
for which there are separately identifiable cash flows (cash-generating units).
i) Trade and other receivables
Trade and other receivables are stated at cost less impairment losses.
j) Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement
because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never
taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by
the balance sheet date.
55
MICHAEL PAGE INTERNATIONAL
NOTES TO THE ACCOUNTS
1. Significant accounting policies (continued)
j) Taxation (continued)
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are
not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other
assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to
control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred
tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred
tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and
liabilities on a net basis.
k) Pension costs
The Group operates defined contribution pension schemes. The assets of the schemes are held separately from those of the Group in
independently administered funds. The pension costs charged to the income statement represent the contributions payable by the Group
to the funds during each period.
l) Leased assets
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the
lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the
present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease
obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance charges are charged to profit or loss.
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classed as operating leases.
Rentals under operating leases are charged to the income statement on a straight-line basis over the term of the lease. Benefits received
and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.
m) Segment reporting
The consolidated entity operates in one business segment being that of recruitment services (primary segment). As a result no additional
business segment information is required to be provided. The consolidated entity operates in four geographic segments (secondary
segment), the United Kingdom, Continental Europe, Asia Pacific and the Americas.
n) Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the
dividends are approved by the Company’s shareholders.
o) Share-based compensation
The Group operates a number of equity-settled, share-based compensation plans. Their subsequent accounting treatments are described
below:
(i) Share option schemes
The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to
be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-
market vesting conditions (for example, earnings per share). Non-market vesting conditions are included in assumptions about the number
of options that are expected to become exercisable. At each balance sheet date, the estimate of the number of options that are expected
to become exercisable is revised. The Group recognises the impact of the revision of original estimates, if any, in the income statement, and
the corresponding adjustment to equity over the remaining vesting period.
5
ANNUAL REPORT AND ACCOUNTS 005
1. Significant accounting policies (continued)
o) Share-based compensation (continued)
(ii) Deferred Annual Bonus and Long Term Incentive Plans
Where deferred awards are made to directors and senior executives under either the Incentive Share Plan or the Annual Bonus Scheme,
to reflect that the awards are for services over a longer period, the value of the expected award is charged to the income statement on a
straight-line basis over the vesting period to which the award relates.
p) Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks, and other short-term highly liquid investments with
original maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash
management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
q) Repurchase of share capital
When share capital recognised as equity is repurchased, the amount of the consideration paid, including any directly attributable costs, is
recognised as a change in equity.
r) Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and
it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are measured at the directors’ best
estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect
is material.
s) Trade and other payables
Trade and other payables are stated at cost.
t) Borrowing costs
All borrowing costs are recognised in the income statement in the period in which they are incurred.
u) Financial instruments
The Group has no derivative contracts and therefore the requirements of the recognition criteria under IAS 39 are not relevant to the Group.
v) Critical accounting estimates and judgements
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates and judgements. It
also requires management to exercise judgement in the process of applying the Company’s accounting policies. Estimates and judgements
are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed
to be reasonable under the circumstances. Management anticipate that any estimates and judgements made do not have a material effect
on the results.
5
MICHAEL PAGE INTERNATIONAL
NOTES TO THE ACCOUNTS
. Segment reporting
Business is the Group’s primary segment. The consolidated entity operates in one business segment being that of recruitment services.
As a result, no additional business segment information is required to be provided. The Group’s secondary segment is geography. The
segment results by geography are shown below:
(a) Turnover and gross profit by geographic region
United Kingdom
Continental Europe
Asia Pacific Australia
Other
Total
Americas
Turnover
Gross Profit
2005
£’000
2004
£’000
2005
£’000
2004
£’000
269,623
234,822
129,535
109,984
159,157
124,293
86,138
61,503
61,152
15,565
76,717
51,286
11,484
62,770
24,722
14,315
39,037
21,105
10,429
31,534
18,313
11,846
12,871
7,620
523,810
433,731
267,581
210,641
The above analysis by destination is not materially different to analysis by origin.
The analysis below is of the carrying amount of segment assets, segment liabilities and capital expenditure. Segment assets and liabilities
include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. The individual geographic
segments exclude income tax assets and liabilities. Capital expenditure comprises additions to property, plant and equipment, motor
vehicles and computer hardware/software.
(b) Segment assets, segment liabilities and capital expenditure by geographic region
Total Assets
Total Liabilities
Capital Expenditure
2005
£’000
66,379
2004
£’000
55,897
2005
£’000
39,159
2004
£’000
30,924
2005
£’000
3,117
2004
£’000
3,106
64,932
50,222
31,648
27,246
2,403
1,404
773
584
1,357
1,255
8,132
610
98
708
606
5,824
United Kingdom
Continental Europe
Asia Pacific
Australia
Other
Total
12,256
6,877
19,133
10,134
5,157
15,291
5,547
1,694
7,241
4,178
1,295
5,473
Americas
8,329
3,923
1,942
923
Segment assets/liabilities/capital expenditure
158,773
125,333
79,990
64,566
Income tax
336
1,183
10,223
1,450
159,109
126,516
90,213
66,016
5
.
Segment reporting (continued)
(c) Turnover and gross profit by discipline
Finance and accounting
Marketing, sales and retail
Other
(d) Operating profit by geographic region
United Kingdom
Continental Europe
Asia Pacific Australia
Other
Total
Americas
ANNUAL REPORT AND ACCOUNTS 005
Turnover
Gross Profit
2005
£’000
2004
£’000
2005
£’000
2004
£’000
336,207
290,151
159,463
129,687
84,591
73,985
55,111
44,894
103,012
69,595
53,007
36,060
523,810
433,731
267,581
210,641
2005
£’000
2004
£’000
31,939
22,928
19,449
4,101
8,509
5,593
7,551
3,883
14,102
11,434
1,029
66,519
395
38,858
The above analyses in notes (b) segment liabilities by geographic region, (c) turnover and gross profit by discipline (being the professions
of candidates placed), and (d) by operating profit, have been included as additional disclosure over and above the requirements of IAS14
“Segment Reporting”.
. Other operating expenses
Profit for the year is stated after charging/(crediting):
Employee benefit costs (note 4)
Depreciation of property, plant and equipment - owned
Amortisation of computer software
Audit services - statutory audit
Other services provided by the auditors - tax compliance services
- tax advisory services
(Profit)/loss on disposal of property, plant and equipment, and computer software
Profit on disposal of business
Operating lease rentals - land and buildings
- plant and machinery
2005
£’000
2004
£’000
139,697
115,217
5,201
5,704
961
440
76
115
(183)
(622)
12,026
1,574
700
334
81
195
53
–
11,578
1,081
5
MICHAEL PAGE INTERNATIONAL
NOTES TO THE ACCOUNTS
. Employee information
The average number of employees (including Executive Directors) during the year and total number of employees (including Executive
Directors) at 31 December 2005 were as follows:
Management
Client services
Administration
Consultants for contract hire (note a)
2005
Average No.
2004
Average No.
2005
Total No.
2004
Total No.
96
1,806
846
2,748
53
2,801
92
1,512
838
2,442
95
2,537
104
1,971
851
2,926
–
2,926
92
1,616
843
2,551
96
2,647
Note a: The business in which the Group employed consultants for contract hire was disposed of during 2005. (See note 22 Disposal of
business.)
Employment costs (including Directors’ emoluments) comprised:
Wages and salaries
Social security costs
Pension costs - defined contribution plans
Equity settled transactions
2005
£’000
115,602
16,781
4,620
2,694
2004
£’000
96,607
13,432
4,000
1,178
139,697
115,217
Details of Directors’ remuneration for the year are provided in the audited part of the Directors’ Remuneration Report on pages 35 to 42.
No staff are employed by the parent company (2004: nil) hence no remuneration has been disclosed.
5. Finance income/(costs)
Finance income
Bank interest receivable
Finance costs
Bank interest payable
2005
£’000
2004
£’000
393
369
(776)
(368)
0
ANNUAL REPORT AND ACCOUNTS 005
. Taxation on profits on ordinary activities
The charge for taxation is based on the annual tax rate of 25.0% on profit before tax (2004: 34.8% before exceptional items).
The exceptional item referred to in the prior year comparatives relates to a tax deduction received as a result of the vesting of the
Restricted Share Scheme in April 2004. This deduction for income tax purposes arose in various tax jurisdictions and resulted in a
non-operational exceptional credit of £9.0m to the income tax charge.
Analysis of charge in year
UK income tax at 30% for year before exceptional tax credits
UK exceptional tax credit
UK income tax at 30% for year after exceptional tax credits
Adjustments in respect of prior periods
Overseas income tax before exceptional tax credits
Exceptional tax credit
Overseas income tax after exceptional tax credits
Deferred tax expense
Origination and reversal of temporary differences
Benefit of tax losses recognised
Deferred tax expense
Total income tax expense in the income statement
Reconciliation of effective tax rate
Profit before taxation
Profit on ordinary activities before tax multiplied by the standard rate of corporation tax in the UK
Effects of:
Disallowable items and other permanent timing differences
Unrelieved overseas losses
Utilisation of losses not previously recognised
Recognition of further losses not previously recognised
Tax deduction for Restricted Share Scheme
Higher tax rates on overseas earnings
Adjustment to tax charge in respect of prior periods
Tax expense and effective rate for the year
Deferred tax recognised directly in equity
Relating to equity settled transactions
2005
£’000
66,136
19,841
557
332
(1,966)
(2,621)
–
483
(120)
16,506
%
30.0
0.9
0.5
(3.0)
(4.0)
–
0.7
(0.1)
25.0
2005
£’000
12,522
–
12,522
2004
£’000
9,081
(7,935)
1,146
(120)
152
7,334
–
7,334
19,736
(609)
(2,621)
(3,230)
16,506
2004
£’000
38,859
11,658
1,151
453
–
–
3,644
(1,065)
2,579
3,877
646
–
646
4,523
%
30.0
3.0
1.1
–
–
(9,000)
(23.2)
109
152
4,523
2005
£’000
(4,228)
0.3
0.4
11.6
2004
£’000
(381)
1
MICHAEL PAGE INTERNATIONAL
NOTES TO THE ACCOUNTS
. Current tax assets and liabilities
The current tax asset of £0.4m (2004: £1.2m), and current tax liability of £10.2m (2004: £1.5m) represent the amount of income taxes
recoverable and payable in respect of current and prior periods.
. Dividends
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 December 2004 of 2.75p per ordinary share (2003: 2.3p)
Interim dividend for the year ended 31 December 2005 of 1.5p per ordinary share (2004: 1.25p)
2005
£’000
9,444
4,988
2004
£’000
8,248
4,345
14,432
12,593
Amounts proposed as distributions to equity holders in the year:
Proposed final dividend for the year ended 31 December 2005 of 3.5p per ordinary share (2004: 2.75p)
11,497
9,444
The proposed final dividend had not been approved by shareholders at 31 December 2005 and therefore has not been included as a
liability. The comparative final dividend at 31 December 2004 was also not recognised as a liability in the prior year comparatives.
A final dividend of 3.5p (2004: 2.75p) per ordinary share will be paid on 5 June 2006 to shareholders on the register at the close of business
on 5 May 2006.
When the Company pays a dividend to shareholders, there may be income tax consequences. The impact will depend upon the individual
circumstances of the shareholder.
. Earnings per ordinary share
The calculation of the basic, diluted and adjusted earnings per share is based on the following data:
Earnings
Earnings after exceptional tax items for basic earnings per share (£‘000)
Exceptional tax items ( £’000)
Earnings before exceptional tax items for adjusted earnings per share (£‘000)
Number of shares
Weighted average number of shares used for basic and adjusted earnings per share (‘000)
Dilution effect of share plans (‘000)
Diluted weighted average number of shares used for diluted earnings per share (‘000)
Basic earnings per share (pence)
Diluted earnings per share (pence)
Adjusted earnings per share (pence)
The above results relate to continuing operations.
2005
49,630
–
49,630
2004
34,336
(9,000)
25,336
336,283
351,555
9,014
3,744
345,297
355,299
14.8
14.4
14.8
9.8
9.7
7.2
ANNUAL REPORT AND ACCOUNTS 005
. Earnings per ordinary share (continued)
Basic
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number
of ordinary shares in issue during the year, excluding ordinary shares purchased by the company and held in the EBT reserve or as treasury
shares.
Diluted
Diluted earnings per share is calculated adjusting the weighted average number of ordinary shares outstanding to assume conversion of all
dilutive potential ordinary shares. This calculation determines the number of shares that could have been acquired at fair value (determined
as the average market price of the Company’s shares) based on the monetary value of the subscription rights attached to the outstanding
share options. The number of shares calculated in the basic earnings per share is then adjusted to reflect the number of shares deemed to
be issued for nil consideration as a result of the potential exercise of existing share options.
The remaining share options that are currently not dilutive and hence excluded from the dilutive earnings per share calculation remain
potentially dilutive until they are either exercised or they lapse.
Adjusted
Adjusted earnings per share is calculated as for basic earnings per share with the profit attributable to equity holders of the Company
adjusted to be stated before exceptional items.
Potential future ordinary share transactions
It remains the Company’s intention to use surplus cash to repurchase and cancel its shares.
10. Property, plant and equipment
Group
Cost
At 1 January
Additions
Disposals
Effect of movements in foreign exchange
At 31 December
Depreciation
At 1 January
Charge for the year
Disposals
Effect of movements in foreign exchange
At 31 December
Net book value
At 31 December
2005
Leasehold
improvements
£’000
Furniture,
fixtures and
equipment
£’000
14,426
25,586
4,083
Motor
vehicles
£’000
Leasehold
improvements
£’000
Total
£’000
2004
Furniture,
fixtures and
equipment
£’000
Motor
vehicles
£’000
Total
£’000
3,454
993
43,466
14,782
25,135
7,167
817
3,592
5,427
915
45,344
5,324
(2,155)
(2,341)
(5,042)
(1,130)
(3,035)
(2,843)
(7,008)
125
19
126
(43)
(106)
15,953
27,639
2,125
45,717
14,426
25,586
16,553
2,875
1,625
552
24,727
5,201
(1,955)
(1,442)
(3,897)
32
20
(13)
722
6,028
1,521
(973)
(27)
16,286
3,257
(59)
7,824
17,505
26,051
6,549
16,553
(45)
3,454
2,373
926
(194)
43,466
24,687
5,704
(16)
1,625
(102)
24,727
(2,931)
(1,658)
(5,562)
2,091
(546)
(18)
6,549
1,774
(500)
1
8,129
10,134
1,403
19,666
7,877
9,033
1,829
18,739
MICHAEL PAGE INTERNATIONAL
NOTES TO THE ACCOUNTS
11. Intangible assets
Group
Cost
At 1 January
Additions
Disposals
Effect of movements in foreign exchange
At 31 December
Amortisation
At 1 January
Charge for the year
Impairment
Disposals
Effect of movements in foreign exchange
At 31 December
Net book value
At 31 December
Impairment tests for goodwill
2005
2004
Computer
software
£’000
Goodwill
£’000
Total
£’000
Computer
software
£’000
Goodwill
£’000
Total
£’000
4,596
965
(244)
30
5,347
2,402
961
–
(218)
(10)
3,135
1,539
–
–
–
1,539
–
–
–
–
–
–
6,135
965
(244)
30
6,886
5,238
500
(1,108)
(36)
4,594
2,402
2,794
961
–
(218)
(10)
3,135
700
–
(1,085)
(9)
2,400
1,539
–
–
–
1,539
–
–
–
–
–
–
6,777
500
(1,108)
(36)
6,133
2,794
700
–
(1,085)
(9)
2,400
2,212
1,539
3,751
2,194
1,539
3,733
Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to the country of operation.
A summary of the goodwill allocation is presented below.
UK
USA
Singapore
2005
£’000
1,274
214
51
2004
£’000
1,274
214
51
1,539
1,539
In assessing value in use, the estimated future cash flows are calculated by preparing cash flow forecasts derived from the most recent
financial budget and an assumed growth rate of 3%, which does not exceed the long-term average growth rate of the relevant markets.
The terminal value of the cash flow is then calculated by discounting using the Group’s weighted average cost of capital. If the recoverable
amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount.
An impairment loss is recognised as an expense.
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. It is the opinion
of the Directors that at 31 December 2005 there was no impairment of intangible assets.
ANNUAL REPORT AND ACCOUNTS 005
1. Investments
Company
Cost
At 1 January 2005 and 31 December 2005
Subsidiary
undertakings
£’000
Total
£’000
421,545
421,545
The Company’s principal subsidiary undertakings at 31 December 2005, their principal activities and countries of incorporation are set out
below:
Name of undertaking
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 Personnel SAS
Michael Page International (Espana) SA
Page Personnel (Espana) SA
Michael Page International Italia Srl
Page Personnel Italia SpA
Country of
incorporation
Principal activity
United Kingdom Holding company
United Kingdom Support services
United Kingdom Recruitment consultancy
United Kingdom Recruitment consultancy
United Kingdom Recruitment consultancy
United Kingdom Recruitment consultancy
France
France
Spain
Spain
Italy
Italy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Michael Page International Empressa de Trabalho Temporário e Serviços de Consultadoria Lda Portugal
Recruitment consultancy
Michael Page International (Switzerland) SA
Michael Page International (Deutschland) GmbH
Michael Page International (Nederland) BV
Page Interim BV
Michael Page International (Belgium) NV/SA
Page Interim (Belgium) NV/SA
Michael Page International (Sweden) AB
Michael Page International (Poland) Sp.Z.O.O
Michael Page International (Australia) Pty Limited
Michael Page International (Hong Kong) Limited
Michael Page International (Brasil) SC Ltda
Michael Page International (Japan) K.K.
Michael Page International Pte Limited*
Michael Page International Inc*
Michael Page International Canada Limited
Switzerland
Recruitment consultancy
Germany
Recruitment consultancy
Netherlands
Recruitment consultancy
Netherlands
Recruitment consultancy
Belgium
Belgium
Sweden
Poland
Australia
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Hong Kong
Recruitment consultancy
Brazil
Japan
Recruitment consultancy
Recruitment consultancy
Singapore
Recruitment consultancy
United States
Recruitment consultancy
Canada
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 operate 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.
5
MICHAEL PAGE INTERNATIONAL
NOTES TO THE ACCOUNTS
1. Trade and other receivables
Trade receivables
Less provision for impairment of receivables
Net trade receivables
Other receivables
Prepayments and accrued income
Non-current
Prepayments and accrued income
Group
Company
2005
£’000
85,059
(2,328)
82,731
3,854
18,350
104,935
2004
£’000
72,384
(3,098)
69,286
3,635
13,293
86,214
1,106
1,692
2005
£’000
2004
£’000
–
–
–
–
15
15
–
–
–
–
–
15
15
–
All non-current receivables are due within five years from the balance sheet date.
The fair values of trade and other receivables are not materially different to those disclosed above.
Credit risk
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis.
At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the
carrying amount of each financial asset in the balance sheet.
1. Trade and other payables
Current
Trade payables
Amounts owed to Group companies
Other tax and social security
Other payables
Accruals
Deferred income
Non-current
Deferred income
Other tax and social security
Group
Company
2005
£’000
2004
£’000
2005
£’000
2004
£’000
4,608
–
26,098
8,837
31,579
502
5,280
–
–
–
170,648
141,544
22,530
7,157
25,616
111
1
–
2
–
1
3
–
–
71,624
60,694
170,651
141,548
350
312
662
461
1,217
1,678
–
–
–
–
–
–
The fair values of trade and other payables are not materially different to those disclosed above.
ANNUAL REPORT AND ACCOUNTS 005
Group
Company
2005
£’000
281
6,700
6,981
2004
£’000
317
–
317
Sterling
£’000
–
6,700
6,700
2005
£’000
–
6,700
6,700
Euro
£’000
281
–
281
2004
£’000
–
–
–
Total
£’000
281
6,700
6,981
–
317
317
15. Bank overdrafts and loans
Bank overdrafts
Bank loans
The borrowings stated above are repayable on demand or otherwise within one year.
The carrying amounts of the Group’s borrowings are denominated in the following currencies:
31 December 2005
Bank overdrafts
Bank loans
31 December 2004
Bank overdrafts
Bank overdrafts are repayable on demand. Overdrafts of £281,000 (2004: £305,000) have been secured against assets of the company.
At 31 December 2005, the Group had available £44.8m (2004: £40.8m) of undrawn committed borrowing facilities in respect of which all
conditions precedent had been met.
The average interest rates paid were as follows:
Bank overdrafts
Bank loans
Interest rate risk
31 December
2005
31 December
2004
5.63%
5.46%
5.56%
5.38%
The exposure to interest rate and currency risk arises in the normal course of the Group’s business.
Borrowings are arranged at floating rates, thus exposing the Group to cash flow interest rate risk. The Group does not consider this risk as
significant.
The benchmark rates for determining floating rate liabilities are based on relevant national LIBOR equivalents.
Currency rate risk
An explanation of the Group’s treasury policy is included in the Finance Directors review on page 21.
MICHAEL PAGE INTERNATIONAL
NOTES TO THE ACCOUNTS
1. Provisions for liabilities and charges
At 1 January
Utilised in year
At 31 December
Analysis of total provisions:
Non-current liabilities
Current liabilities
Group
Company
2005
£’000
1,188
(612)
576
2005
£’000
192
384
576
2004
£’000
6,239
(5,051)
1,188
2004
£’000
612
576
1,188
2005
£’000
–
–
–
2004
£’000
4,114
(4,114)
–
2005
£’000
2004
£’000
–
–
–
–
–
–
The provision at 31 December 2005 relates to rentals and other unavoidable costs on onerous lease agreements on properties in the UK.
The Group expects to utilise the provision over the next 2 years. The provision in the prior year also included National Insurance and social
security liabilities on the Restricted Share Scheme. These liabilities crystalised in April 2004 when the Restricted Shares vested.
1. Deferred tax
The following are the major deferred tax liabilities and assets recognised by the Group, and the movements thereon, during the current and
prior reporting periods.
Accelerated tax
depreciation
£’000
Share-based
payments
£’000
NIC Provision
£’000
Tax losses
£’000
At 1 January 2004
Credit to equity for the year
Charge/(credit) to profit or loss for the year
Exchange differences
At 1 January 2005
Credit to equity for the year
Credit to profit or loss for the year
Exchange differences
At 31 December 2005
245
–
37
1
283
–
(7)
(1)
(689)
(381)
(410)
–
(1,480)
(4,228)
(552)
–
275
(6,260)
(1,234)
–
1,234
–
–
–
–
–
–
–
–
–
–
–
–
(2,621)
–
Other
£’000
(356)
–
(153)
(28)
(537)
–
(50)
85
Total
£’000
(2,034)
(381)
708
(27)
(1,734)
(4,228)
(3,230)
84
(2,621)
(502)
(9,108)
Certain deferred tax assets and liabilities have been offset in accordance with the Group’s accounting policy. The following is the analysis of
the deferred tax balances (after offset) for balance sheet purposes:
2005
£’000
2004
£’000
(9,255)
(2,423)
147
689
(9,108)
(1,734)
Deferred tax assets
Deferred tax liabilities
ANNUAL REPORT AND ACCOUNTS 005
1. Deferred tax (continued)
At 31 December 2005, unremitted earnings of overseas Group companies amounted to £17.6m (2004: £14.0m). Unremitted earnings may
be liable to some overseas and UK tax (after allowing for double taxation relief) if they were to be distributed as dividends. However no tax
is expected to be payable on them.
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 £0.5m (2004: £5.3m) in respect of tax losses of overseas companies. These tax
losses are available to offset future taxable profits in the respective jurisdictions.
1. Called-up share capital
Authorised
Ordinary shares of 1p each
Allotted, called-up and fully paid
At 1 January
Cancellation of own shares
At 31 December
2005
£’000
Number of
shares
2004
£’000
Number of
shares
5,713
571,250,000
5,713
571,250,000
3,572
(246)
3,326
357,202,799
(24,565,000)
332,637,799
3,637
363,662,799
(65)
(6,460,000)
3,572
357,202,799
Executive Share Option Scheme (ESOS)
The Group has an Executive Share Option Scheme (ESOS) that entitles key management personnel and senior employees to receive shares
in the entity. In accordance with these programmes, options are exercisable at the market price of the shares at the date of the grant.
Two grants under the ESOS were made before 7 November 2002. The recognition and measurement principles in IFRS 2 have been
applied to all grants after 7 November 2002. They have not been applied to the two grants made prior to 7 November 2002 in accordance
with the transitional provisions in IFRS 1 and IFRS 2.
At 31 December 2005 the following options had been granted and remained outstanding in respect of the Company’s ordinary shares of
1p under the Michael Page Executive Share Option Scheme. All options granted are settled by the physical delivery of shares. The Group
has no legal or constructive obligation to repurchase or settle the options in cash.
Year of grant
2001 (Note 1)
2002 (Note 2)
2002 (Note 2)
2003 (Note 3)
2004 (Note 4)
2005 (Note 5)
Total 2005
Balance at
1 January 2005
Granted
in year
Exercised
in year
Lapsed
in year
No. of shares
oustanding at
31 December
2005
Exercise price per
share
Exercise period
24,077,659
2,638,750
3,738,750
6,680,000
2,647,000
–
–
–
–
–
(168,223)
(2,743,381)
21,166,055
175p March 2004 - March 2011
–
–
(315,000)
2,323,750
186p March 2005 - March 2012
(395,000)
3,343,750
186p March 2006 - March 2012
(200,000)
(360,000)
6,120,000
81.5p-86.1p
April 2006 - April 2013
(37,500)
(146,500)
2,463,000
171p-190.3p March 2007 - March 2014
–
2,770,000
(20,833)
(99,167)
2,650,000
190.75p-191.5p March 2008 - March 2015
39,782,159
2,770,000
(426,556)
(4,059,048)
38,066,555
Weighted average exercise price 2005
1.61
1.91
1.32
1.69
1.63
Total 2004
41,501,735
2,711,000
(267,858)
(4,162,718)
39,782,159
Weighted average exercise price 2004
1.62
1.72
1.75
1.66
1.61
3,164,968 options were exercisable at the end of 2005 at a weighted average exercise price of £1.75 (2004: nil).
MICHAEL PAGE INTERNATIONAL
NOTES TO THE ACCOUNTS
1. Called-up share capital (continued)
In 2005, options were granted on 28 February with the estimated fair values of the options granted on that day of £1.7m. In 2004, options
were granted on 1 March. The estimated fair values of the options granted on that date was £1.5m.
Share options are granted under service and non-market performance conditions. These conditions are not taken into account in the fair
value measurement at grant date. There are no market conditions associated with the share option grants other than those on the initial
grant in 2001.
The options outstanding at 31 December 2005 have an exercise price in the range of 81.5 pence to 190.75 pence and a weighted average
contractual life of 6.2 years. The fair values of options granted during the year were calculated using the Black-Scholes option pricing
model. The inputs into the model were as follows:
Share price (£)
Average exercise price (£)
Expected volatility
Expected life
Risk free rate
Expected dividend yield
Share Option Scheme
Incentive Share Scheme
Deferred Bonus Shares
2005
1.91
1.91
35%
5 years
4.75%
2%
2004
1.71
1.72
35%
5 years
4.75%
2%
2005
1.93
Nil
35%
3 years
4.75%
Nil
2004
1.71
Nil
35%
3 years
4.75%
Nil
2005
1.93
Nil
35%
3 years
4.75%
Nil
2004
–
–
–
–
–
–
Expected volatility was determined by reference to historical volatility of the Company’s share price since flotation. The expected life used
in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and
behavioural considerations. Expectations of early exercise are incorporated into the Black-Scholes option pricing model.
The Group recognised total expenses of £2.7m (2004: £1.2m) related to equity-settled share-based payment transactions during the year.
Option plan details
Note 1 Pre flotation options
On flotation, options over 33,750,000 (9%) ordinary shares were granted to the Executive Directors and 427 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 one third 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. The results for the year ended 31 December 2005 have met the
EPS performance conditions for 85% of the outstanding options which will vest on 1 March 2006.
(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 one third 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. At 31
December 2005, the performance conditions were met for 33.7% of the outstanding share price dependent options and these vested
on 31 December 2005.
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 circumstances, between 3 and 10 years from the date
of grant. The second tranche is exercisable, under normal circumstances, between 4 and 10 years from 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 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. The
results for the year ended 31 December 2005 have met the performance conditions for both tranches, 100% of which will vest on 1 March
2006 and 14 March 2006 respectively.
0
ANNUAL REPORT AND ACCOUNTS 005
1. Called-up share capital (continued)
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 of at least 3% per annum above the growth in the retail price index. The base earnings per share is 5.8p. The
results for the year ended 31 December 2005 have met these performance conditions and therefore 100% of these options will vest on 8
April 2006.
Note 4 2004 Grant
On 1 March 2004, options over 2,711,000 were granted to the Executive Directors and 99 employees at an exercise price of between
171p-190.3p. 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 of at least 3% per annum above the growth in the retail price index. The performance condition is
tested on the third anniversary only and no retesting will occur thereafter. The base earnings per share is 4.1p.
Note 5 2005 Grant
On 28 February 2005, options over 2,770,000 were granted to the Executive Directors and 133 employees at an exercise price of between
190.75p and 191.5p. 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 of at least 3% per annum above the growth in the retail price index. The performance condition is
tested on the third anniversary only and no retesting will occur thereafter. Base earnings per share is 7.5p after adjusting for share scheme
charges.
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.
Other share-based payment plans
The Company also operates an Incentive Share Plan for the Executive Directors and Senior Employees and an Annual Bonus Plan for the
Executive Directors. Details of these schemes are disclosed on pages 35 and 36, and are settled by the physical delivery of shares to the
extent that service and performance conditions are met.
1. Reserves
Capital redemption reserve
The capital redemption reserve relates to the cancellation of the Company’s own shares. The increase in the year represents the nominal
value of the 24,565,000 shares cancelled during the year as shown in Note 18.
EBT reserve
At 31 December 2005, the EBT reserve consisted of 5,640,715 (2004: 5,640,715) ordinary shares held by the Employee Benefit Trust
representing 1.70% of the called-up share capital with a market value of £15.2m (2004: £10.5m).
A total of 1,219,934 shares have been allocated to satisfy awards made under the Incentive Share Plan, and 265,439 deferred shares have
been allocated under the Annual Bonus Plan. Dividends are paid on these shares and they are included in the EPS calculation. Dividend
income on the remaining 4,155,342 ordinary shares has been waived, and they are excluded from the EPS calculation.
Treasury shares
The reserve for the Company’s own shares in the previous year comprised the cost of the Company’s shares held by the Group. During the
year to 31 December 2005, all shares held in treasury were cancelled. At 31 December 2004, the Group held 7,765,000 of the Company’s
shares in Treasury.
Currency translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign
operations that are integral to the operations of the Company.
1
MICHAEL PAGE INTERNATIONAL
NOTES TO THE ACCOUNTS
0. Cash flows from operating activities
Profit before tax
Depreciation and amortisation charges
(Profit)/loss on sale of property, plant and equipment, and computer software
Profit on the sale of business (note 22)
Share scheme charges
Net finance cost/(income)
Group
Company
2005
£’000
66,136
6,162
(183)
(622)
2,694
383
2004
£’000
38,859
6,404
53
–
1,178
(1)
2005
£’000
2004
£’000
11,142
13,732
–
–
–
–
–
–
–
–
511
200
Operating cashflow before changes in working capital and provisions
74,570
46,493
11,653
13,932
Increase in receivables
Increase in payables
Decrease in provisions
Cash generated from operations
1. Cash and cash equivalents
Cash at bank and in hand
Short term deposits
Cash and cash equivalents
Bank overdrafts
Cash and cash equivalents in the statement of cash flows
. Disposal of business
(17,907)
(17,739)
9,381
(612)
65,432
11,987
(5,051)
35,690
–
29,101
–
40,754
(6)
27,120
(4,114)
36,932
Group
Company
2005
£’000
11,095
8,965
20,060
(281)
19,779
2004
£’000
10,091
2,441
12,532
(317)
12,215
2005
£’000
2004
£’000
156
–
156
–
156
156
–
156
–
156
In July 2005 the Group sold its French contractors business for £1.4m resulting in a profit on disposal of £0.6m. No assets, liabilities or
cash were disposed of, with the disposal comprising business contracts only and associated costs. The trading and cash effects of this
business during the year were not material.
. Commitments
Operating lease commitments
At 31 December 2005 the Group was committed to make the following payments in respect of non-cancellable operating leases:
Land and buildings
Other
2005
£’000
2004
£’000
2005
£’000
2004
£’000
2,205
17,718
50,517
70,440
536
18,083
55,614
74,233
245
2,820
–
3,065
86
1,749
–
1,835
Leases which expire:
Within one year
Within two to five years
After five years
ANNUAL REPORT AND ACCOUNTS 005
. Commitments (continued)
The Group leases various offices under non-cancellable operating lease agreements. The leases have varying terms, escalation clauses and
renewal rights.
The Group also leases various plant and machinery under operating lease agreements. The Group is required to give a varying notice for
the termination of these agreements.
Capital commitments
The Group had contractual capital commitments of £0.4m as at 31 December 2005 (2004: £0.8m) relating to property, plant and
equipment. The Group had contractual capital commitments of £nil as at 31 December 2005 (2004: £0.1m) relating to computer software.
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 2005 amounted to £6.4m (2004: £5.7m).
. Contingent liabilities
The Company has provided guarantees to other Group undertakings amounting to £5.0m (2004: £5.2m) in the ordinary course of business.
It is not anticipated that any material liabilities will arise from the contingent liabilities.
5. Events after the balance sheet date
Between 31 December 2005 and 17 February 2006 785,125 options were exercised, which has led to an increase of share capital of
£7,851.
. Related party transactions
Identity of related parties
The Group has a related party relationship with its subsidiaries (note 12), and with its directors and members of the Executive Committee.
Details of transactions between the Group and other related parties are disclosed below:
Transactions with key management personnel
For transactions with directors see the Remuneration report on pages 35 to 42. The remuneration of directors and members of the
Executive Committee is determined by the remuneration committee having regard to the performance of individuals and market trends.
In addition to their salaries, the Group also provides non-cash benefits to members of the Executive Committee, and contributes to a post-
employment defined contribution pension plan on their behalf, details of which are given in note 1.
The compensations of the members of the Executive Committee who are not directors are detailed below (pro rated from committee
commencement date):
Short-term employee benefits
Their compensation is included in employment costs (note 4).
Details of transactions between the Company and its subsidiaries are shown below:
2005
£’000
87
Dividends received
Amounts owed by
related parties
Amounts owed to
related parties
2005
£’000
11,668
2004
£’000
6,109
2005
£’000
2004
£’000
2005
£’000
2004
£’000
47,576
42,487
218,224
184,031
MICHAEL PAGE INTERNATIONAL
NOTES TO THE ACCOUNTS
. Adoption of IFRS in 005
The accounting policies were changed on 1 January 2005 to comply with IFRS. The transition from UK GAAP to IFRS is accounted for in
accordance with IFRS 1 “First-Time Adoption of International Financial Reporting Standards” with 1 January 2004 as the date of transition.
The changes in accounting policies as a consequence of the transition to IFRS are described below, and the reconciliations of the effects of
the transition to IFRS are presented in the notes to the first IFRS financial statements. The revised accounting policies are described in note 1.
The transition to IFRS resulted in the following changes in accounting policies:
Goodwill is not amortised but measured at cost less impairment losses. Under UK GAAP, goodwill was amortised on a straight-line basis
through profit and loss over its estimated useful economic life of 20 years. The effect of the change is an increase in equity and profit before
tax of £96,000 at 31 December 2004. The change does not affect equity or profit before tax at 1 January 2004. The change has no tax
effect as deferred taxes are not recognised for temporary differences arising from goodwill for which amortisation is not deductible for tax
purposes.
Dividends to shareholders declared after the balance sheet date but before the financial statements are authorised for issue are not
recognised as a liability at the balance sheet date but are disclosed separately in the notes. Under UK GAAP dividends for the accounting
year were recognised as a liability. The effect of the change is an increase in equity at 1 January 2004 of £8.2m and £9.5m at 31 December
2004.
Share option costs under UK GAAP were based on the intrinsic value of the option at the date of grant and as such, grants made under
the Group’s share option plans did not result in a charge to the income statement. Under IFRS 2 “Share-based Payment”, the Group
measures the cost of all share options granted since 7 November 2002 that have not fully vested at the balance sheet date, using an option
pricing model. A liability in respect of social charges has also been recognised in respect of the Group’s share option schemes.
Deferred tax relating to the new share option charges described above have been recognised as a deferred tax asset.
Computer software has been reclassified from tangible fixed assets to intangible fixed assets.
Cumulative translation differences for all foreign operations have been deemed to be zero at the date of transition. After the date of
transition, foreign exchange differences arising from the translation of accounts of overseas operations are shown in a currency translation
reserve as a separate component of equity.
. Adoption of IFRS in 005 (continued)
Reconciliation of Group Profit
The adoption of IFRS had the following impact on Group profit.
Turnover
Cost of sales
Gross profit
Administrative expenses
Operating profit
Net finance income
Profit before tax
Income tax expense
Profit for the year
Attributable to:
Equity holders of the parent
Earnings per share
Basic earnings per share (pence)
Diluted earnings per share (pence)
Profit UK GAAP
Goodwill not amortised after date of transition
Share option charges
Deferred tax on share scheme charges
Profit IFRS
ANNUAL REPORT AND ACCOUNTS 005
Ref
Year ended 31 December 2004
(end of last period presented under UK GAAP)
Under
UK GAAP
£’000
433,731
(223,090)
210,641
Effect of
transition
to IFRS
£’000
–
–
–
Under
IFRS
£’000
433,731
(223,090)
210,641
a, c
(170,604)
(1,179)
(171,783)
d
a
c
d
40,037
(1,179)
38,858
1
–
1
40,038
(1,179)
(4,933)
35,105
410
(769)
38,859
(4,523)
34,336
35,105
(769)
34,336
10.0
9.9
(0.2)
(0.2)
9.8
9.7
£’000
35,105
96
(1,275)
410
(769)
34,336
5
MICHAEL PAGE INTERNATIONAL
NOTES TO THE ACCOUNTS
. Adoption of IFRS in 005 (continued)
Reconciliation of Group Equity
At 1 January 2004
(date of transition)
At 31 December 2004
(end of last period presented under UK GAAP)
Under
UK GAAP
£’000
Ref
Effect of
transition
to IFRS
£’000
Opening
IFRS balance
sheet
£’000
Under
UK GAAP
£’000
Effect of
transition
to IFRS
£’000
Opening
IFRS balance
sheet
£’000
e
a
e
d
c
d
b
f
Non-current assets
Property, plant and equipment
Goodwill
Computer software
Deferred income tax assets
Other receivables
Current assets
Trade and other receivables
Current tax receivable
Cash and cash equivalents
Total assets
Non-current liabilities
Other payables
Provisions for liabilities and charges
Deferred tax liabilities
Current liabilities
Trade and other payables
Borrowings
Current tax payable
Provisions for liabilities and charges
Total liabilities
Net assets
Capital and reserves
Called-up share capital
Capital redemption reserve
EBT reserve
Treasury shares
Currency translation reserve
Profit and loss account
Total equity
23,101
(2,444)
20,657
20,933
(2,194)
18,739
1,539
–
1,345
1,570
–
2,444
1,416
–
1,539
2,444
2,761
1,570
1,443
–
254
1,692
96
2,194
2,169
–
1,539
2,194
2,423
1,692
27,555
1,416
28,971
24,322
2,265
26,587
68,615
1,664
23,211
93,490
–
–
–
–
68,615
86,214
1,664
1,183
23,211
12,532
93,490
99,929
–
–
–
–
86,214
1,183
12,532
99,929
121,045
1,416
122,461
124,251
2,265
126,516
(444)
(1,376)
–
(1,820)
(759)
–
(727)
(1,486)
(1,203)
(1,376)
(727)
(3,306)
(461)
(612)
–
(1,073)
(1,217)
(1,678)
–
(689)
(1,906)
(612)
(689)
(2,979)
(57,356)
8,234
(49,122)
(70,164)
9,470
(60,694)
(777)
(2,886)
(4,863)
–
–
–
(777)
(2,886)
(4,863)
(317)
(1,450)
(576)
–
–
–
(317)
(1,450)
(576)
(65,882)
8,234
(57,648)
(72,507)
9,470
(63,037)
(67,702)
6,748
(60,954)
(73,580)
7,564
(66,016)
53,343
8,164
61,507
50,671
9,829
60,500
3,637
113
(9,871)
–
–
59,464
53,343
–
–
–
–
–
8,164
8,164
3,637
3,572
113
178
(9,871)
(9,871)
(13,122)
–
–
–
–
–
–
3,572
178
(9,871)
(13,122)
–
(188)
(188)
67,628
69,914
10,017
79,931
61,507
50,671
9,829
60,500
ANNUAL REPORT AND ACCOUNTS 005
Ref
a
b
c
d
e
f
At 1 January 2004
(date of transition)
Effect of transition
to IFRS
£’000
At 31 December 2004
(end of last period
presented under UK GAAP)
Effect of transition
to IFRS
£’000
53,343
50,671
–
8,234
(759)
689
–
–
8,164
61,507
96
9,470
(1,217)
1,480
–
–
9,829
60,500
. Adoption of IFRS in 005 (continued)
Reconciliation of Group Equity (continued)
Total equity UK GAAP
Goodwill not amortised after date of transition
Dividend not recognised as a liability until approved by shareholders
Social charges on share option schemes
Deferred tax on share schemes
Computer software now classified as intangible
Currency translation reserve
Total adjustments to equity
Total equity IFRS
There are no material adjustments to the cash flow statement in either period.
MICHAEL PAGE INTERNATIONAL
NOTES TO THE ACCOUNTS
. Adoption of IFRS in 005 (continued)
Reconciliation of Company Profit
The adoption of IFRS had no impact on the Company’s profit.
Reconciliation of Company Equity
At 1 January 2004
(date of transition)
At 31 December 2004
(end of last period presented under UK GAAP)
Under
UK GAAP
£’000
Ref
Effect of
transition
to IFRS
£’000
Opening
IFRS balance
sheet
£’000
Under
UK GAAP
£’000
Effect of
transition
to IFRS
£’000
Opening
IFRS balance
sheet
£’000
421,545
1,235
422,780
179
131
310
423,090
–
–
–
–
–
–
–
–
–
b
(8,237)
8,234
421,545
421,545
1,235
–
422,780
421,545
179
131
310
292
156
448
423,090
421,993
–
–
(3)
–
–
–
–
–
–
–
–
421,545
–
421,545
292
156
448
421,993
–
(3)
(9,473)
9,470
(114,420)
–
(4,114)
–
–
–
(114,420)
(141,544)
–
(4,114)
(1)
–
–
–
–
(141,544)
(1)
–
(126,771)
8,234
(118,537)
(151,018)
9,470
(141,548)
(126,771)
8,234
(118,537)
(151,018)
9,470
(141,548)
296,319
8,234
304,553
270,975
9,470
280,445
3,637
113
(9,871)
–
302,440
296,319
–
–
–
–
3,637
3,572
113
178
(9,871)
(9,871)
–
(13,122)
–
–
–
–
8,234
8,234
310,674
290,218
304,553
270,975
9,470
9,470
3,572
178
(9,871)
(13,122)
299,688
280,445
Non-current assets
Investments
Deferred tax assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Non-current liabilities
Current liabilities
Trade and other payables
Amounts owed to Group companies
Current tax payable
Provisions for liabilities and charges
Total liabilities
Net assets
Capital and reserves
Called-up share capital
Capital redemption reserve
EBT reserve
Treasury shares
Profit and loss account
Total equity
ANNUAL REPORT AND ACCOUNTS 005
Ref
b
At 1 January 2004
(date of transition)
Effect of transition
to IFRS
£’000
At 31 December 2004
(end of last period
presented under UK GAAP)
Effect of transition
to IFRS
£’000
296,319
270,975
8,234
9,470
8,234
304,553
9,470
280,445
. Adoption of IFRS in 005 (continued)
Reconciliation of Company Equity (continued)
Total equity UK GAAP
Dividend not recognised as a liability until approved by shareholders
Total adjustments to equity
Total equity IFRS
There are no material adjustments to the cash flow statement in either period.
MICHAEL PAGE INTERNATIONAL
SHAREHOLDER INFORMATION AND ADVISERS
Annual General Meeting
To be held on 23 May 2006 at 12.00 noon at Victoria House, Southampton Row, London, WC1B 4JB. Every shareholder is entitled to
attend and vote at the meeting.
Final dividend for the year ended 1 December 005
To be paid (if approved) on 5 June 2006 to shareholders on the register on 5 May 2006.
Company secretary
Richard McBride
Company number
3310225
Registered office, domicile and legal form
The Company is a limited liability company incorporated and domiciled within the United Kingdom. The address of its registered office is:
39-41 Parker Street
London
WC2B 5LN
Tel: 020 7831 2000
Fax: 01932 264297
Auditors
Solicitors
Registrars
Deloitte & Touche LLP
Herbert Smith
Capita IRG
Brokers
Citigroup
Bankers
HSBC Bank plc
Chartered Accountants Exchange House
The Registry
33 Canada Square
West End Business Banking Centre
London
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
3 May 2006
5 May 2006
23 May 2006
5 June 2006
14 August 2006
0
FIVE YEAR SUMMARY
INCOME STATEMENT
Turnover
Gross profit
Operating profit
Profit before tax
Profit attributable to equity holders
Basic earnings per share (pence)
Adjusted earnings per share (pence)
ANNUAL REPORT AND ACCOUNTS 005
UK GAAP
IFRS
2001
£’000
2002
£’000
2003
£’000
2004
£’000
2005
£’000
459,547
383,470
372,616
433,731
523,810
245,080
192,648
178,485
210,641
267,581
58,019
62,326
43,653
11.8
10.6
32,136
32,597
21,154
5.8
5.8
21,783
22,409
13,745
3.8
4.1
38,858
38,859
34,336
9.8
7.2
66,519
66,136
49,630
14.8
14.8
The amounts disclosed for 2003 and earlier periods are stated on the basis of UK GAAP because it is not practicable to restate amounts
for periods prior to the date of transition to IFRS. The principal differences between UK GAAP and IFRS are explained in note 27 to the
financial statements which provides an explanation of the transition to IFRS.
1
MICHAEL PAGE INTERNATIONAL
ANNUAL GENERAL MEETING
Notice of Meeting
Notice is hereby given that the Annual General Meeting of the Company will be held at Victoria House, Southampton Row, London,
WC1B 4JB on 23 May 2006 at 12.00 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 2005.
2. To declare a final dividend on the ordinary share capital of the Company for the year ended 31 December 2005 of 3.5p per share.
3. To re-elect Stephen Puckett as a director of the Company (note 2)
4. To re-elect Hubert Reid as a director of the Company (note 2)
5. To elect Tim Miller as a director of the Company (note 2)
6. To propose the following ordinary resolution:
That the directors’ remuneration report for the year ended 31 December 2005 be received and approved.
7.
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.
8. 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 £1,112,516 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).
9. 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 8 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
(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 £166,877,
and shall expire at the conclusion of the next Annual General Meeting of the Company when the general authority under Resolution 8
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).
10. To propose 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 33,263,780;
(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;
ANNUAL REPORT AND ACCOUNTS 005
(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
Richard McBride
Secretary
39-41 Parker Street
London WC2B 5LN
Registered in England No. 3310225
1 March 2006
MICHAEL PAGE INTERNATIONAL
ANNUAL GENERAL MEETING
Notice of Meeting
Notes
1.
Any member entitled to attend and vote at the meeting may appoint another person, whether a member or not, as his proxy to attend
and on a poll, to vote instead of him. A form of proxy is enclosed for this purpose and 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.
Stephen Puckett and Hubert Reid retire by rotation and are seeking reappointment at the Annual General Meeting. Tim Miller 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 22 and 23 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.
ANNUAL REPORT AND ACCOUNTS 005
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5
MICHAEL PAGE INTERNATIONAL
ANNUAL REPORT AND ACCOUNTS 005
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Michael Page International plc
39-41 Parker Street, London WC2B 5LN
Tel: 020 7831 2000 Fax: 020 7269 2280
www.michaelpage.co.uk