30of organic
30of organic
30years
30of organic
years
years
years
years
years
of organic
of organic
of organic
of organic
of organic
of organic
of organic
of organic
growth
growth
Michael Page International plc
Annual Report and Accounts 2006
Australia
Belgium
Brazil
Germany
Holland
Ireland
Poland
Portugal
Russia
Sweden
Switzerland
United Arab Emirates
Canada
China
France
Italy
Japan
Mexico
Singapore
South Africa
Spain
The Group has excellent
growth prospects across
all of its regions. We are
particularly excited about
the opportunities in
North America and
Continental Europe.
United Kingdom
USA
MICHAEL PAGE INTERNATIONAL
In just thirty years and from humble
beginnings, Michael Page International
has grown to become one of the world’s
best-known and respected recruitment
consultancies. Today, we are proud to set
the standard for specialist service within
our profession, whilst maintaining a
personal touch.
16 Chairman’s Statement 18 Chief Executive’s Review 22 Finance Director’s Review 28 Board of Directors 30 Directors’ Report 34 Corporate Governance
39 Remuneration Report 47 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
74 Shareholder Information and Advisers 75 Five Year Summary 76 Annual General Meeting
ANNUAL REPORT AND ACCOUNTS 2006
Highlights
Turnover £m
2006
2005
2004
2003
2002
433.7
372.6
383.5
Gross Profit £m
Profit before tax £m
649.1
523.8
2006
2005
2004
267.6
210.6
348.8
2006
2005
2004
38.9
97.0
66.1
2003
178.5
2002
192.6
2003
22.4
2002
32.6
Basic earnings per share (pence)
Dividend per share (pence)
Headcount at year end
19.6
14.8
9.8
2006
2005
2004
2003
3.8
2002
5.8
2006
2005
2004
2003
2002
4.0
3.4
3.4
6.0
5.0
2006
2005
2004
2003
2002
3,758
2,926
2,647
2,359
2,495
• Turnover up 23.9% to £649.1m (2005: £523.8m)
• Gross profit up 30.4% to £348.8m (2005: £267.6m)
• Operating profit up 46.4% to £97.4m (2005: £66.5m)
• £78.8m of cash generated from operations (2005: £65.4m)
• Gross profit from permanent placements up 33.9%
•
•
Gross profit split between permanent and temporary placements was 75:25 (2005: 73:27)
Basic earnings per share up 32.4% to 19.6p (2005: 14.8p)
• Diluted earnings per share 19.0p (2005: 14.4p)
• 23.3m shares repurchased at a cost of £83.4m
•
Proposed dividend up by 20.0% to 6.0p per share (2005: 5.0p)
Creating a world-leading consultancy
Michael Page International is a world-leading specialist recruitment consultancy.
Growing entirely organically, rather than by mergers or acquisitions, we now have
nearly 4,000 people in 133 offices in 23 countries worldwide.
Our specialist areas are Accounting, Tax and Treasury, Banking and Financial Services,
Consultancy, Strategy and Change, Engineering & Manufacturing, Healthcare, Human
Resources, IT & Technology, Legal, Marketing, Oil & Gas, Procurement & Supply
Chain, Property & Construction, Retail & Hospitality, Sales, and Secretarial.
Our clients range from market leading multi-nationals to small and medium enterprises.
In each case we tailor our services to provide a bespoke offering to meet our clients’
needs whether permanent, contract, temporary or interim.
MICHAEL PAGE INTERNATIONAL
6
ANNUAL REPORT AND ACCOUNTS 2006
MEXICO CITY,
MEXICO
Opened in July 2006, this
is our first office in Central
America and is running
Sales & Marketing,
Finance & Accounting
and Banking & Financial
Services disciplines.
MICHAEL PAGE INTERNATIONAL
DUBAI, UNITED ARAB
EMIRATES
Opened in July 2006,
this is our first office in
the Middle East. The
Dubai office covers the
region and has had a
successful start carrying
out assignments in Dubai,
Abu Dhabi, Saudi Arabia,
Bahrain, Kuwait and
Qatar. It will be looking
to at least double its
headcount during the
course of 2007 and will
be investigating the
potential for new offices
in the region.
ANNUAL REPORT AND ACCOUNTS 2006
Focusing on strategies that endure
Recruitment is a cyclical business. To counter this as much as possible, our strategy is
to expand geographically – nationally and internationally – and broaden the disciplines
to reduce the dependency on individual businesses or markets. We are always making
long-term investment decisions to expand organically, growing existing and new teams,
offices, disciplines and countries with a consistent team culture.
We underpin this drive by drawing upon the skills and experiences of proven
Michael Page management and ensure we have the best, most experienced, home-
grown talent in each key role. Culturally it is imperative that we are entrepreneurial,
operate within a strict meritocracy, and are team-based, whereby consultants enjoy profit
sharing arrangements rather than individual commissions. To achieve this, we place
great emphasis on training our people, and invest heavily in technology to maximise
both performance and delivery.
The results over Michael Page’s first 30 years confirm the success of our strategy.
After 10 years Michael Page had grown to 226 staff, 3 countries, 3 disciplines, £19m
turnover and operating profit of £2.3m. 10 years later, 1996, the Group had expanded
to 734 staff, 7 countries, 6 disciplines, £142m turnover and operating profit of £28.9m.
10 years on, 2006, it has quadrupled with an average number of staff of 3,305, 23 countries,
14 disciplines, £649.1m turnover and an operating profit of £97.4m.
So, whilst maintaining this consistent strategy, where will we be in another 10 years?
MICHAEL PAGE INTERNATIONAL
10
Finding solutions that are needed
Our clients have human resource requirements for qualified talent and the competition
is becoming fiercer and more global. Our candidates have huge desires to further their
professional careers. Between the two, we are there to ensure the best possible match,
regardless of how specific a request may be.
The specialised and consultative approach we provide gives us an excellent reputation
whereby clients and candidates are assured of maximum and mutual satisfaction.
Quality underpins everything we do. To deliver solutions consistently to such a high
standard, we are fully committed to the ongoing training of all of our staff and the
continued roll-out of superior systems and processes.
ANNUAL REPORT AND ACCOUNTS 2006
MOSCOW, RUSSIA
Opened in October 2006,
this is our second office
in Eastern Europe after
opening in Warsaw,
Poland late in 2005.
Currently eight consultants
focus on positions in
Finance & Accounting
with a Banking team to
be established shortly.
Market conditions can
best be described as
dynamic, challenging and
very promising.
11
MICHAEL PAGE INTERNATIONAL
DUBLIN, REPUBLIC
OF IRELAND
We opened our first office
in Ireland in October
2006. Based in Dublin, we
are initially concentrating
on accountancy and
banking appointments.
The first signs are very
encouraging,with a
vibrant economy, and a
significant gap between
demand and supply for
specialised staff.
12
ANNUAL REPORT AND ACCOUNTS 2006
Putting values that work at the heart of our business
There are five values that we believe contribute to our continued success. These attributes
are not only the essence of our brand, but can also be found in each and every valued
employee of Michael Page International.
Pride: We take great pride in what we do. We’re proud of the Company we work for
and, most of all, proud of the people we work with.
Passion: It’s our passion to achieve the very best for our clients and candidates that
drives us to outperform and beat the competition.
Resilience: We know that successful consultants are not fazed by difficulty, but instead,
turn it into an opportunity to demonstrate ability.
Teamwork: By teaming with each other and with clients we improve the quality of
decision-making and increase the likelihood of success.
Fun: Though serious about our work, we’re extremely sociable and enjoy celebrating
our success together.
13
Being recognised for setting the standard
A growing number of initiatives and awards are testament to our commitment to
delivering quality. We have been voted one of Britain’s strongest B2B Superbrands
since 2000, were voted into the Sunday Times 100 Best Companies to work for in 2005
and 2006, and voted one of Britain’s Top Employers in 2005 by the Guardian.
Our growing reputation isn’t confined to the UK’s shores. Overseas, the Boston Business
Journal has voted us one of the “Best Places to Work in Massachusetts” and Crain’s
has named us as one of the Top 10 recruiters in New York City. In 2005, in Australia,
we picked up the title of “Temporary Recruiter of the Year” in the Fairfax Employment
Marketing Awards.
While this external recognition is warmly welcomed, we are also keen to celebrate
some of our own internal initiatives.
Within our business we vigorously promote a culture of diversity. Our clients expect
us to propose candidates for their workforce that have a healthy range of attitudes and
characteristics that reflects fairly the society we live in. To this end, we have our own
internal diversity policy that is communicated to all employees.
We also participate in the Interbank Diversity Forum, striving to ensure that we offer
our clients the most qualified candidates on the basis of their relevant aptitudes, skills
and abilities and that those candidates are drawn from diverse backgrounds, and by
working with organisations like Global Graduates and Race for Opportunity (Rf0)
we advance ideas and explore issues on the diversity agenda.
MICHAEL PAGE INTERNATIONAL
1
ANNUAL REPORT AND ACCOUNTS 2006
JOHANNESBURG,
SOUTH AFRICA
Michael Page started this
operation on 1 August
2006, focusing on finance.
Our team of 10 has
already made excellent
progress and the South
African market is reacting
extremely well to the
Michael Page approach.
1
MICHAEL PAGE INTERNATIONAL
16
Chairman’s Statement
I am delighted to report on another year of tremendous growth for the Group with record levels of turnover
and profits. At the beginning of April, Steve Ingham was appointed Chief Executive and under his stewardship
we have continued our strategy of growing organically, with start-ups in five new countries, opening and
expanding offices in our established countries and broadening the disciplines in existing markets.
The Group has many opportunities to continue its growth and is particularly well positioned with its strong
brand, international network of offices, multi-discipline offering and, above all, its high quality management
and staff.
Financial highlights
Turnover for the year ended 31 December 2006 increased 23.9% to £649.1m (2005: £523.8m). Gross profits
grew by 30.4% to £348.8m (2005: £267.6m). Gross profits from permanent placements grew more rapidly
than from temporary placements. This movement in business mix, together with an increase in margins
on temporary placements, contributed to an increase in gross margin to 53.7% (2005: 51.1%). Given the
Group’s high operational gearing, combined with management’s close attention to costs, operating profits
increased by 46.4% to a record £97.4m (2005: £66.5m).
Profit before tax was £97.0m (2005: £66.1m) and basic earnings per share increased by 32.4% to 19.6p
(2005: 14.8p).
Dividends and share repurchases
With strong growth in earnings, it is the Board’s intention to continue its policy of continually reviewing the
annual dividend with a view to maintaining it at a level which it believes is sustainable throughout economic
cycles. Cash generated in excess of these levels will continue to be returned to shareholders through share
repurchases.
With the strong growth in profits, earnings and cash generation, the Board is recommending an increase in
the total dividend per share for the year of 20%. A final dividend of 4.2p (2005: 3.5p) per share is proposed
which, together with the interim dividend of 1.8p (2005: 1.5p) per share paid in October, makes a total
dividend for the year of 6.0p (2005: 5.0p) per share. The final dividend will be paid on 5 June 2007 to those
shareholders on the register at 4 May 2007. The total dividend is covered 3.3 times by basic earnings per
share of 19.6p.
We continued to make share repurchases throughout 2006 acquiring 23.3m shares for £83.4m, including
related expenses, at an average price per share of 355.8p. At the Annual General Meeting on 23 May 2007,
we will be seeking shareholders’ consent for a renewal of the authority to repurchase up to 10% of the
issued shares.
ANNUAL REPORT AND ACCOUNTS 2006
Employees
I wish to express my thanks to the staff worldwide for their commitment, loyalty and efforts throughout the
year which has delivered this outstanding performance.
Board of Directors
On 6 April 2006, Steve Ingham was formally appointed as Chief Executive, succeeding Terry Benson who
announced his decision to retire as Chief Executive in December 2005.
Steve Ingham, who has been with the Group for 20 years, has been a member of the senior management
for much of that time and a key contributor in establishing the current Group strategy.
Prospects
The Group has excellent growth prospects across all of its regions. We are particularly excited about the
opportunities in North America where, having already successfully established a foot-hold, we will continue
to roll-out our strategy. In Continental Europe, market deregulation will continue to have a positive impact on
our business. With its strong brand, international network of offices, multi-discipline offering and, above all,
its high quality management and staff, Michael Page is well positioned in all of its markets.
We will make a statement in respect of our trading for the first quarter on 5 April 2007.
Sir Adrian Montague CBE
Chairman
28 February 2007
1
MICHAEL PAGE INTERNATIONAL
1
Chief Executive’s Review
2006 was another very strong year for Michael Page and I am delighted to report an excellent set of results,
my first as Chief Executive of the Group. These results reflect not only the efforts put in during the year, but also
the decisions made in earlier periods which laid the foundations to achieve these record numbers. It always
has been, and will continue to be, our intention to take decisions and make investments for the longer-term
benefit of our stakeholders. These decisions and investments may impact the profits reported in an individual
period, but, we believe, they will deliver greater returns over the longer-term.
Staff and office numbers
We have made a number of new investments during 2006, opening in five countries, hiring new staff, opening
and expanding offices and continuing the discipline roll-outs. At the end of the year, the Group had 3,758 (2005:
2,926) fee generating and support staff, operating from 133 (2005: 118) offices in 23 (2005: 18) countries.
United Kingdom
In the UK, turnover increased by 15.9% to £312.4m (2005: £269.6m) and gross profit by 20.3% to £155.8m
(2005: £129.5m). Operating profits were £44.3m (2005: £31.9m), an increase of 38.6%.
The gross profits of the Finance and Accounting businesses of Michael Page Finance, Michael Page Financial
Services and Accountancy Additions, which generated 54% of UK gross profit, were 14% higher than in
2005 with both permanent and temporary recruitment fees growing well. Michael Page Finance, the largest
of the three businesses, opened offices in Sheffield and, in January 2007, Leicester. Michael Page Financial
Services had a very strong year of growth and now accounts for around 10% of UK gross profits. Accountancy
Additions, which specialises in part-qualified and clerical accounting positions, continued to expand its office
network from 32 to 35 locations with new offices in Peterborough, Sheffield and Cardiff. We have a medium-
term goal of building the network towards 50 offices by 2010.
The combined gross profits of Michael Page Marketing, Michael Page Sales and Michael Page Retail, were
13% higher than in 2005 and combined represented 21% of the UK gross profit. The Marketing and Sales
businesses, which operate from 8 locations, produced strong growth from all industry sectors. Despite the
continuing tough conditions on the High Street, Retail, the smallest of the three businesses, still achieved
year-on-year growth.
Michael Page Legal, Michael Page Technology, Michael Page Human Resources and Michael Page Secretarial
achieved strong growth of 44% and combined represent 15% of UK gross profit. Legal grew strongly both
in London and the regions with new teams being added in Liverpool and Guildford. Human Resources
now operate from 7 locations having opened in Leeds. Secretarial, which operates from a single office in
London, had a very successful year. Technology, the smallest of the four businesses, operating only in London,
has achieved good growth and in January 2007 opened a second location in Weybridge.
ANNUAL REPORT AND ACCOUNTS 2006
The more recently created Michael Page Engineering & Manufacturing, Michael Page Procurement &
Supply Chain and the newly launched Michael Page Property and Construction grew at over 40% and now
represent 5% of UK gross profit. The potential for all of these businesses is significant and we are investing
heavily in them, adding headcount and opening in new locations.
We also had an outstanding year in Scotland growing gross profit by 62%, adding fee earners to the
existing disciplines, as well as launching Legal and Human Resources. Scotland now represents 4% of
UK gross profit.
Continental Europe, Middle East and Africa (EMEA)
Turnover in EMEA for the year increased by 40.1% to £223.0m (2005: £159.2m) and gross profit increased
by 46.9% to £126.6m (2005: £86.1m). As a result of the increased revenue and high operational gearing,
the region produced an increase of 75.7% in operating profit at £34.2m (2005: £19.4m).
In France (38% of EMEA), our second-largest and most established business after the UK, gross
profit increased by 22%. As a result of the “Borloo” law in France we have restructured our businesses.
Page Personnel, which was purely a temporary placement business, can now make permanent placements,
some of which in the past would have been made by Michael Page. The businesses were restructured
during the second half of 2006, with Page Personnel now making temporary and permanent placements
from middle-management positions and below. Michael Page still only does permanent placements, but now
concentrates on middle-management positions and above. We have established Michael Page Interim to
service senior level temporary positions.
Elsewhere in the region, collectively our businesses achieved gross profit of 68%. In Holland (19% of EMEA),
Germany (12% of EMEA) and Spain (11% of EMEA) our businesses grew by over 60%. We have also achieved
strong growth in Belgium, Italy, Poland, Portugal, Sweden and Switzerland. In each of these countries we
added additional staff, expanded existing or opened new offices and continued the roll-out of disciplines.
In addition, we launched businesses in four new countries where we saw significant scope for longer-term
growth. We opened offices in Moscow, Johannesburg, Dubai and, at the end of October 2006, Dublin. These
offices were all opened with experienced senior Michael Page management and we have quickly added
additional staff with all offices generating gross profits in 2006.
The growth in 2006 has been partly achieved by utilising spare capacity and partly by investment. The better
utilisation of capacity is reflected in the operating profits increasing by 75.7% from an increase in gross profit
of 46.9%. There is now little spare capacity remaining in the businesses and we will continue to invest sensibly
to exploit the numerous growth opportunities that remain.
1
MICHAEL PAGE INTERNATIONAL
20
Asia Pacific
In the Asia Pacific region, turnover was 8.9% higher at £83.6m (2005: £76.7m), gross profit was 15.2% higher
at £45.0m (2005: £39.0m) and operating profit increased 21.0% to £17.1m (2005: £14.1m).
In Australia (58% of Asia Pacific) gross profit grew by 5.2% and operating profit increased by 5.6%. The
weak performance in the fourth quarter of 2005 when the business was impacted by an IT implementation
continued during the first half of 2006. Following a review of the business a number of management and
structural changes were implemented. These changes were completed at the end of the third quarter.
While the full benefits of these changes are expected to become evident as we progress through 2007,
we were encouraged by the 16.8% growth in fourth quarter gross profits.
In Hong Kong, Shanghai, Tokyo and Singapore, we achieved another year of substantial gross profit growth
with all locations growing at or above 30%. During the year, we have expanded the office in Shanghai and at
the end of the year opened an office in Sha Tin which will allow us to penetrate more effectively the market in
the New Territories and across the border in Southern China, particularly the Pearl River Delta.
The Americas
Turnover for the region was 64.3% higher at £30.1m (2005: £18.3m), gross profit increased by 66.8% to
£21.5m (2005: £12.9m) and operating profit increased 81.4% to £1.9m (2005: £1.0m).
In North America, following our rapid expansion to seven offices, we consolidated our presence by significantly
increasing the staff in existing locations and launching new disciplines. Having previously focused only on
Finance and Accounting, and Banking we started Sales, Marketing, Human Resources, Engineering, and
Procurement & Supply Chain, initially in one office. These disciplines will be rolled-out to the existing network
of offices in 2007. We have also invested further in our senior management in North America, with a number
of experienced transfers, creating a regional structure to capitalise on the size of the opportunity. This structure
will enable us to expand further with a new office already opened in Hartford, Connecticut in January 2007
and others planned for later in the year. This scale and pace of investment will of course have some impact on
the operating margin we generate from the region in the short-term. However, we believe structurally, in the
medium-term, we can achieve margins similar to those we generate in the UK and EMEA.
We are extremely pleased with our continued development in Latin America. In Brazil, we achieved another
very successful year growing headcount and expanding the São Paulo and Rio de Janeiro offices, as well
as opening a third office in Campinas. In the second half of the year, we opened in Mexico City, starting
with Finance and Accounting, Banking, and plan to start another discipline during the first quarter of 2007.
Latin America provides another tremendous opportunity for the Group to expand and we now have some
highly-talented, home-grown, experienced staff that can drive this growth.
ANNUAL REPORT AND ACCOUNTS 2006
Strategy
Having worked for Michael Page for 20 years and been a significant contributor to the development of
the Group’s strategy, my appointment reinforces the intention to maintain that strategy. I have, and will,
continue to place great emphasis on the key components of the strategy and where appropriate accelerate
the pace of implementation. For instance, communication across the Group and between the regions has
considerably improved with the establishment of an Executive Committee. We will continue to expand
organically, gradually diversifying and reducing the dependency upon any single geographic market or
individual discipline.
Investment in 200
We have made significant investment in 2006, opening in five new countries and increasing headcount by
28% to 3,758. We plan further expansion in 2007, with headcount expected to increase by 21% to around
4,550 by the end of the year. Whilst this investment will be across all regions, the most significant in terms of
senior management, office openings and headcount, will be in North America and Northern Europe where
we see the greatest opportunities. The investments we have made, and plan to make, will increase the 2007
pre-bonus cost base to approximately £260m including all share-based charges.
Outlook
The outlook for Michael Page is highly encouraging. We are currently experiencing favourable trading
conditions in all the regions in which we operate. During 2006, we invested heavily and this will continue in
order to capitalise on the numerous opportunities for future medium and longer-term growth.
We have an exceptional pool of ambitious and talented people in the Group, in particular at the senior
management level, with the expertise and skills required to launch new businesses successfully, and who
are highly motivated to build on our success.
With the current near-term economic outlook looking relatively favourable, I am confident of reporting further
progress during 2007.
Steve Ingham
Chief Executive
28 February 2007
21
Finance Director’s Review
Income statement
Turnover
2006 was another successful year for the Group with all regions delivering strong growth. Turnover for
the year increased by 23.9% to £649.1m (2005: £523.8m). Turnover from temporary placements increased
by 17.1% to £372.7m (2005: £318.3m) and represented 57.4% (2005: 60.8%) of Group turnover. Turnover
from permanent placements was £276.3m (2005: £205.5m), an increase of 34.5%.
Gross profit
Gross profit for the year increased by 30.4% to £348.8m (2005: £267.6m) representing an overall gross
margin of 53.7% (2005: 51.1%). The percentage increase in gross profit is greater than the increase in
turnover due primarily to the higher proportion of gross profit derived from permanent placements in 2006,
together with a higher volume of temporary placements at a slightly higher gross margin. Gross profit from
temporary placements was £87.8m (2005: £72.6m) and represented 25.2% (2005: 27.1%) of Group gross
profit. The gross margin achieved on temporary placements was 23.6% (2005: 22.8%).
Operating profit
As a result of the Group’s organic growth strategy, tight control on costs and profit-based bonuses, we
have a business which is operationally geared as evidenced by the 46.4% increase in operating profits from
a 30.4% increase in gross profit.
This strategy means the Group incurs start-up costs and operating losses as investments are made to
grow existing and new businesses, by opening new offices or launching in new countries. The Chief
Executive’s review describes a number of these investments including new businesses in Russia, Mexico,
South Africa, the United Arab Emirates and the Republic of Ireland.
As a result of the increased numbers of staff and offices, plus start-up costs and higher bonuses due to the
increased profits, administrative expenses in the year increased by 25.1% to £251.5m (2005: £201.1m).
Administrative expenses also includes a £4.6m charge (2005: £2.9m) in respect of executive share option
schemes, the increase over the 2005 charge being largely due to the impact of employers’ social charges
as a consequence of the 68% increase in the share price from 270p at the end of 2005 to 452.25p at the
end of 2006.
MICHAEL PAGE INTERNATIONAL
22
ANNUAL REPORT AND ACCOUNTS 2006
The Group’s largest category of expenditure, approximately 75%, is the remuneration of our consultants and
support staff. Headcount of the Group was 2,926 at 1 January 2006 and increased during the year by 28%
to 3,758 consultants and support staff. One of the anticipated benefits of the roll-out of our new recruitment
system, which started in 2003 and was completed in 2005, was a reduction in the ratio of support staff to
fee earners. The proportion of support staff has reduced from 36% in 2003 to 26% in 2006.
Net interest
While we started the year with net cash of £13.1m, there is a substantial cash outflow in January every
year as fourth-quarter and annual bonuses are paid, and as the profits increased by 46% the bonuses
have increased by a similar proportion. We aim to manage the balance sheet with a broadly neutral cash/
debt position using surplus cash to repurchase shares and, as necessary, drawing on borrowing facilities.
As a consequence, a net interest charge similar to last year was incurred of £0.4m (2005: £0.4m).
Taxation
Tax on profits was £31.5m (2005: £16.5m), representing an effective tax rate of 32.5% (2005: 25.0%).
The rate is higher than the UK Corporation Tax rate of 30% due to disallowable items of expenditure and
profits being generated in countries where the corporate tax rates are higher than 30%. The effective rate
was lower in 2005 as a result of utilising and recognising tax losses incurred in earlier years.
Share repurchases and share options
During the year, 23.3m shares were repurchased at an average price of 355.8p. These shares have all
been cancelled.
At the beginning of 2006, the Group had options outstanding over 38.1m shares, 21.2m of which were
granted at the time of the IPO in 2001, the balance being accumulated by annual grants since 2001 with
a further grant of 2.1m shares during the year under review. In 2006, on achieving performance targets,
27.3m share options vested, including 15.9m of the IPO grant referred to above. At 31 December 2006,
option holders had exercised 23.9m of these share options. At the end of 2006, 14.5m share options
remain outstanding of which 3.5m have vested, but not yet been exercised by option holders.
23
Earnings per share and dividends
In 2006, basic earnings per share were 19.6p (2005: 14.8p) and diluted earnings per share were 19.0p
(2005: 14.4p). The weighted average number of shares for the year was 334.7m (2005: 336.3m) reflecting
the impact of the shares repurchased during the year and the new shares issued to satisfy option
exercises.
An increase in the final dividend to 4.2p (2005: 3.5p) per ordinary share has been proposed which, together
with the interim dividend of 1.8p (2005: 1.5p) per ordinary share, makes a total dividend for the year of
6.0p (2005: 5.0p) per ordinary share, an increase of 20%. The proposed final dividend, which amounts to
£13.9m, will be paid on 5 June 2007 to those shareholders on the register as at 4 May 2007.
Balance sheet
The Group had net assets of £80.4m at 31 December 2006 (2005: £68.9m). The increase in net assets
principally relates to the profit of £65.4m, the credit relating to share schemes of £12.4m and the exercise
of share options of £38.2m, offset by share repurchases of £83.4m and dividends paid of £18.1m.
Our capital expenditure is driven primarily by two main factors: headcount, in terms of office accommodation
and infrastructure; the maintenance and enhancement of our IT systems. Capital expenditure, net of
disposal proceeds, increased to £8.7m (2005: £6.8m) reflecting the 28% increase in headcount and the
opening and expansion of a number of offices.
The most significant item in the balance sheet is trade receivables which were £118.2m at 31 December
2006 (2005: £82.7m) representing debtor days of 55 (2005: 49 days).
Cash flow
At the start of the year, the Group had net cash of £13.1m.
During the year, the Group generated net cash from operating activities of £78.8m (2005: £65.4m) being
£103.8m (2005: £72.7m) of EBITDA, an increase in working capital requirements of £28.7m (2005: £8.5m)
and movements in provisions of £0.4m (2005: £0.6m).
MICHAEL PAGE INTERNATIONAL
2
ANNUAL REPORT AND ACCOUNTS 2006
The principal payments have been:
•
£8.7m (2005: £6.8m) of capital expenditure, net of disposal proceeds, on property, infrastructure,
information systems and motor vehicles for staff;
•
taxes on profits of £21.7m (2005: £10.1m);
• dividends of £18.1m (2005: £14.4m); and
• share repurchases of £83.4m (2005: £34.2m).
£38.2m (2005: £nil) was received in the year from the issue of new shares to satisfy share option exercises.
At 31 December 2006, the Group had net debt of £3.6m.
Treasury management and currency risk
It is the Directors’ intention to continue to finance the activities and development of the Group from retained
earnings, and to operate the Group’s business while maintaining the cash/debt position within a relatively
narrow band. Cash generated in excess of these requirements will be used to buyback 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, Group facilities, or by local overdraft facilities.
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.
Key Performance Indicators (“KPIs”)
Financial and non-financial key performance indicators (KPIs) used by the Board to monitor progress are
listed in the table below. Certain of these indicators are used in the appraisal of senior management on a
global basis. The source of data and calculation methods year-on-year are on a consistent basis. This is
the first year this information has been presented.
2
MICHAEL PAGE INTERNATIONAL
26
KPI
Job count
data
2006
35,336
2005 Definition, method of calculation and analysis
24,496 Represents the number of live jobs on the Michael Page website. It is not necessarily an indication
of the financial performance or prospects of Michael Page International and should not be
considered in isolation; the “global” figure does not include all business lines (Accountancy
Additions and Page Personnel vacancies are not included). Source: Internal data.
Gross margin
53.7%
51.1% Gross profit as a percentage of revenue. Gross margin has slightly improved on last year as a result
of the mix of permanent and temporary placements, and improvements in the gross margins on
temporary placements. Source: Consolidated income statement in the financial statements.
Conversion
27.9%
24.9% Operating profit as a percentage of revenue showing how effective the Group is at controlling the
costs and expenses associated with its normal business operations and the level of investment
for the future. Conversion has improved over last year as a result of better utilisation of existing
capacity, and improved pricing. Source: Consolidated income statement in the financial statements.
£126.2k
£129.0k Represents how productive fee earners are in the business and is calculated by dividing the gross
profit for the year by the number of fee earners and directors at the year end. The higher the
number, the higher their productivity. Productivity is a function of the rate of investment in new
fee earners, the impact of pricing and the general conditions of the recruitment market. Source:
Consolidated financial statements.
74:26
71:29 Represents the balance between operational and non-operational staff. The movement this year
demonstrates faster growth in fee earners in relation to support staff. Source: Internal data
119.4%
95.2% A measure of the returns that a company is making from its capital. Calculated as profit before
interest, tax and dividends, divided by total assets less current liabilities. The ratio shows how
efficiently capital is being used to generate revenue. Source: Consolidated financial statements.
Productivity
(revenue per
fee earner)
Fee earner:
support staff
ratio
Return
on capital
employed
(ROCE)
Current ratio
1.3
1.4 This ratio is derived by dividing current assets by current liabilities, and is a good indicator of a
company’s ability to meet short-term debt obligations; the higher the ratio, the more liquid the
company is. The current ratio is in line with our expectations and broadly consistent with last year.
Source: Consolidated financial statements.
We achieved a higher level of organic operating profit growth than gross profit growth as a result of our high
operational gearing. The decrease in productivity is as a result of the large increase in headcount particularly
in the second half of the year, as new fee earners can take a number of months to become fully productive.
Our ROCE increased this year with the current ratio remaining broadly in line with expectations. These are
important measures of our creation of value for shareholders.The increase in the ratio of number of fee
earners to the number of support staff has increased as a result of efficiencies made from enhancing our IT
systems. Further discussion of the Group’s financial performance can be found on pages 16 to 25.
ANNUAL REPORT AND ACCOUNTS 2006
Principal risks and uncertainties
The management of the business and the execution of the Company’s strategy are subject to a number of
risks. The following section comprises a summary of what Michael Page International plc believes are the
main risks that could potentially impact the Group’s operating and financial performance.
People
To continue to attract, train and retain high calibre individuals who are key to achieving these objectives. The
resignation of key individuals and the inability to recruit talented people with the right skill-sets could adversely
affect the Group’s results. This is further compounded by the Group’s organic growth strategy and its policy
of not externally hiring senior positions. Mitigation of this risk is achieved by succession planning, training of
staff, competitive pay structures linked to the Group’s results and career progression.
Economic cycle
Recruitment is largely driven by economic cycles and the levels of business confidence. The Board looks to
reduce the cyclical risk by expanding geographically, by increasing the number of disciplines, by building part-
qualified and clerical businesses and by continuing to build the temporary business.
Competition
The Group operates in a highly competitive market around the world. If the Group does not continue to
compete in its market effectively by hiring new staff, opening and expanding offices and continuing the
discipline roll-outs, there is a risk that our competitors may beat us to key strategic opportunities, which may
result in lost business and a reduction in market share. This risk is mitigated by meetings of the Main Board
and Executive Committee where Group strategy is continually reviewed and discussed.
Technology
To utilise new technology or enhance existing technology to support the opening of new offices and the
roll-out of new disciplines around the world. Due to the rapid advancement of technology, there is a risk that
systems could become outdated with the potential to affect efficiency and have an impact on revenue and
client service. This risk is mitigated by the appointment of a new Chief Information Officer in 2005 to oversee
all IT strategy and innovation to support the wider business strategy.
Legal risks
The Group operates in a large number of jurisdictions which have varying legal and compliance regulations.
In order to reduce the legal and compliance risks, fee earners and support staff receive regular training and
updates of changes in legal and compliance requirements.
Stephen Puckett
Group Finance Director
28 February 2007
2
MICHAEL PAGE INTERNATIONAL
Board of Directors
Sir Adrian Montague CBE ()
Stephen Box (6)
Non-Executive Chairman
Independent Non-Executive Director, Senior
Sir Adrian Montague is Non-Executive Chairman of British
Independent Director
Energy plc, Friends Provident plc and Infrastructure Investors
Stephen Box qualified as a Chartered Accountant at Coopers
Limited. From 1997 to 2001 he held senior posts concerned
& Lybrand where he spent more than 25 years, 15 of these
with the implementation of the Government’s policies for
as a partner. From August 1997 to November 2002 he was
the involvement of the private sector in the delivery of public
Finance Director of National Grid. He is a member of the
services, first as Chief Executive of the Treasury Taskforce
Financial Reporting Review Panel, a Non-Executive Director of
and then as Deputy Chairman of Partnerships UK plc.
Thames Water Utilities Ltd (TWUL) and Wales and West Utilities
He was Deputy Chairman of Network Rail from 2001 to
Ltd (WWU). Stephen has experience of Audit Committees as
2004 and Non-Executive Chairman of Cross London Rail
a partner at Coopers & Lybrand, as an Executive Director of
Links Limited from 2004 to 2005. He spent his early career
National Grid attending Audit Committees, and as a Non-
as a solicitor with Linklaters & Paines before joining Kleinwort
Executive Director chairing the Audit Committees of TWUL
Benson in 1994. Sir Adrian is also a Non-Executive Director
and WWU, and formerly of South East Water Limited. He
of CellMark AB, the pulp and paper marketing company
was appointed a Non-Executive Director of Michael Page
based in Gothenburg and of London First, and a Director
International plc on 27 February 2001. He is chairman of the
and trustee of The Waterways Trust. He was awarded a CBE
Audit Committee and is a member of the Remuneration and
in 2001 and a knighthood in 2006.
Nomination Committees.
Steve Ingham ()
Chief Executive
Charles-Henri Dumon ()
Managing Director – Europe and The Americas
Steve Ingham joined Michael Page in 1987 as a consultant
Charles-Henri Dumon joined Michael Page in 1985 and
with Michael Page Marketing and Sales. He was responsible
was appointed a Director in 1987. Since then he has had
for setting up the London marketing and sales businesses
full responsibility for the Group’s operations in France
and was promoted to Operating Director in 1990. He was
and has managed the Group’s entry into Southern
appointed Managing Director of Michael Page Marketing and
Europe and South America. He was appointed Managing
Sales in 1994. Subsequently he took additional responsibility
Director for all Michael Page’s Continental European
for Michael Page’s Retail, Technology, Human Resources
and South American businesses in January 2001. His
and Engineering businesses. He was promoted to the Board
responsibilities were increased to include North America
as Executive Director of UK Operations in January 2001, and
in January 2006.
subsequently to Managing Director of UK Operations in May
2005. He was appointed Chief Executive on 6 April 2006.
2
ANNUAL REPORT AND ACCOUNTS 2006
Tim Miller ()
EXECUTIVE COMMITTEE
Independent Non-Executive Director
In addition to the Executive Directors, the Executive Committee
Tim Miller was appointed to the Board on 15 August 2005
and became Chairman of the Remuneration Committee
on 16 September 2005. He is also a member of the Audit
and Nomination Committees. Tim has wide experience in
comprises Gary James (Regional Managing Director - Asia
Pacific) and Andrew Wayland (Chief Information Officer).
Gary James ()
human resources and has held a number of senior HR
Regional Managing Director - Asia Pacific
and business roles in the information technology, retail
and pharmaceutical sectors. He is currently a Director of
Standard Chartered Bank, responsible for HR, Corporate
Real Estate, Corporate Secretariat, Compliance and
Regulatory Risk, Internal Audit and Legal.
Stephen Puckett ()
Group Finance Director
Gary James joined Michael Page Finance in London in
1984. He was appointed Director of Michael Page Sales
& Marketing in 1994, Managing Director of Michael Page
Marketing in 1997 and transferred to America in 2002 as
Managing Director of North America. He was appointed
Managing Director of the Asia Pacific region in August
2006.
Stephen Puckett qualified as a Chartered Accountant with
Andrew Wayland (0)
BDO Binder Hamlyn. He joined Wace Group plc in 1988
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.
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 was a Non-Executive
Director of SHL Group Plc from 2004 to 2006.
Hubert Reid (66)
Independent Non-Executive Director
Hubert Reid is Chairman of Enterprise Inns plc and of
the Midas Income and Growth Trust PLC and Deputy
Chairman of Majedie Investments PLC. He was previously
Managing Director and then Chairman of the Boddington
Group plc, a Non-Executive Director and then Chairman
of Ibstock Plc, Bryant Group plc and the Royal London
Group. He was appointed a Non-Executive Director of
Michael Page International plc on 25 February 2003. He
is a member of the Audit, Remuneration and Nomination
Committees.
2
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 73. 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 16 to 27.
Enhanced Business Review
The Company is required to set out in this report a fair review
of the business of the Group during the financial year ended
31 December 2006 and of the position of the Group at the
end of that financial year, together with a description of the
principal risks and uncertainties facing the Group (known as
an Enhanced Business Review).
The information that fulfils the requirements of this Review can
be found in the following sections of the Annual Report:
Review of operations
Strategy
Key performance indicators
Future outlook
Risks and uncertainties
Financial review
Corporate responsibility
Directors and interests
page 18 to 21
page 21
page 26
pages 17 and 21
page 27
page 22 to 27
page 31 to 33
The following were Directors during the year and held office
throughout the year other than as shown below.
Sir Adrian Montague CBE‡ (Chairman)
Steve Ingham (Chief Executive)
Terry Benson (resigned 6 April 2006)
Stephen Box‡*
Charles-Henri Dumon
Tim Miller‡
Stephen Puckett
Hubert Reid‡
‡ Non-Executive Directors
* Senior Independent Director
In accordance with the Company’s Articles of Association,
Sir Adrian Montague, Charles-Henri Dumon and Stephen Box
will retire by rotation at the Annual General Meeting and, being
eligible, offer themselves for re-election.
Biographical details for all the current Directors are shown on
pages 28 and 29.
The beneficial interests of Directors in office at 31 December
2006 in the shares of the Company at 31 December 2006 and
at 27 February 2007 are set out in the Remuneration Report
on pages 42 to 43.
All of the Executive Directors are 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 £65.4m
(2005: £49.6m).
A final dividend for 2005 of 3.5 pence per ordinary share was
paid on 2 June 2006. An interim dividend of 1.8 pence per
ordinary share was paid on 12 October 2006. The Directors
recommend the payment of a final dividend for the year ended
31 December 2006 of 4.2 pence per ordinary share on 5 June
2007 to shareholders on the register on 4 May 2007 which, if
approved at the Annual General Meeting, will result in a total
dividend for the year of 6.0 pence per ordinary share (2005:
5.0 pence).
Share capital
The authorised and issued share capital of the Company are
shown in Note 18 to the financial statements.
At the Annual General Meeting held on 27 May 2006 the
Company renewed its authority to make market purchases of
its own ordinary shares up to a maximum of 10% of the issued
share capital.
During the year, the Company purchased 23.3m shares which
were immediately cancelled. The nominal value of these shares
was £0.2m and represented 7.0% of the issued share capital.
The shares were purchased for a consideration of £83.4m
including expenses. 23.9m shares were also issued to satisfy
share options exercised during the year.
Substantial shareholdings
Fig.1. Substantial Shareholdings
Holder
Capital International Limited
JP Morgan
Number of
ordinary
shares
29,920,612
22,799,873
AXA Investment Managers UK Limited
16,305,201
Barclays plc
Legal & General
Aegon UK Plc
16,223,821
12,780,166
10,350,000
% of issued
share capital
8.98
6.84
4.89
4.87
3.83
3.10
As at 26 February 2007, the Company has been notified of the
interests held in more than 3% of the issued share capital of
the Company as shown in Fig.1. above.
30
ANNUAL REPORT AND ACCOUNTS 2006
Corporate social responsibility (CSR)
The Board recognises its responsibilities in respect of social,
environmental and ethical (SEE) matters, with the Chief
Executive having Board responsibility for Group Environmental
Management. The Directors continually monitor all risks to
the Group’s businesses, including SEE risks, which may
impact the Group’s short and long-term value. During 2006
no signifi cant SEE risks were identifi ed. 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 signifi cant 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:
• optimising the use of energy;
•
•
•
ensuring the effi cient use of materials;
encouraging re-use and recycling; and
incorporating the principle of sustainable development.
During the year, the Group has continued to allocate a
signifi cant amount of time and resource to further identify
where its activities have an impact on the environment.
A 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 fi ndings during 2006 is shown
below.
Waste
•
223 tonnes of waste was generated by UK offi ces. Our
current national recycling rate is 24.1% from recycling
confi dential paper and toner cartridges.
•
Through recycling, Michael Page in the UK has saved 939
trees and saved a total of 279m3 landfi ll space.
A summary is shown in Fig.2. below.
Energy
•
•
•
5,192,345 kWh of electricity was consumed in the UK,
which converts to 1,660 tonnes CO2.
3,035,240 kWh of gas was consumed in the UK, which
converts to 607 tonnes CO2.
Through recycling Michael Page in the UK has saved
16,590 kWh of energy.
Water
•
In the UK, Michael Page consumed 28,438 m3 of water.
Transport
•
In total, UK employees travelling to and from work converts
to 2,844 tonnes CO2.
(b) Charitable donations
The Group made charitable donations of £49,416 during the
year (2005: £70,245). Included in donations are amounts
made to various local charities serving the communities in
which the Group operates. Subject to certain restrictions, the
Group matches charitable donations made by employees. It is
the Group’s policy not to make political donations either in the
UK or overseas.
Fig.2. UK Waste Generation
Confi dential waste
Toners
Mixed offi ce paper
Food waste and packaging
Aluminium cans
Glass bottles
Plastic bottles & plastic cups
Cardboard
Miscellaneous
Total
Annual weight
generated (tonnes)
% of total
waste
56
2
71
11
22
11
24
11
15
25%
1%
32%
5%
10%
5%
11%
5%
6%
223
100%
31
MICHAEL PAGE INTERNATIONAL
In 2006, we nominated Breast Cancer Care as our charity of
the year. We have sponsored a number of different initiatives
and have so far raised in excess of £150,000 for the charity.
This has culminated in a team of 37 Michael Page employees
running the New York Marathon on 5th November and the
sponsorship of a total of 69 runners from other backgrounds.
To date, the marathon has generated in excess of £100,000.
As part of our UK graduate induction this year, we utilised an
organisation called Community Service Volunteers to source
and organise a worthwhile community project in which our
graduates can participate. The 46 graduates spent a day
painting a community centre in North London, which was in
need of updating and decoration. The end result delighted the
vast range of local disadvantaged users of the centre and its
caretaker.
Through our partnership with a charity called The Brokerage,
we provided paid summer-time employment to a group
of undergraduates from inner city schools. The students,
many from ethic minority groups, were given valuable work
experience and training in a commercial workplace. In return,
they undertook valuable projects and provided us with an
excellent insight into the values of potential employees of the
future. Once again, the scheme received a great deal of praise
and positive feedback.
During October 2006, we were once again the co-sponsor of
the ICAEW 126 Leadership challenge. The challenge develops
skills in young professionals but includes the opportunity to
work on life-changing projects in rural areas of KwazuluNatal.
The trip this year involved working in a primary school giving
english lessons, IT lessons and painting a reading room
annexe to the library added by last years’ finalists. Michael
Page employees formed part of the team.
(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
culture and leadership.
Communication with employees is effected through Group
newsletters, 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.
(d) Equal opportunity and diversity
The Group endorses and supports the principles of equal
employment opportunity. It is the policy of the Group to
provide equal employment opportunity to all, which ensures
that all employment decisions are made, subject to its legal
obligations, on a non-discriminatory basis. Due consideration
is given to the recruitment, promotion, training and working
environment of all staff including those with disabilities.
It is the Group’s policy to encourage the training and further
development of all its employees where this is of benefit to the
individual and to the Group.
Throughout 2006, the Group monitored the diversity of its
UK employees, 83% of whom to date have completed the
voluntary request for information. The analysis indicates a split
of 40% female, 60% male, and regarding origin, 86% white,
13% ethnic origin and 1% declining to answer. The UK 2001
Census showed a total ethnic population of 7.9%. Similar
monitoring will be carried out during 2007.
The Group recognises the importance of diversity in the
workplace for both our own and our clients’ businesses. 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 participate in the Interbank Diversity Forum and work with
organisations like Global Graduates where 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.
The Group continues to participate in the Race for Opportunity,
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. 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.
In 2006, Michael Page also joined the Employers Forum on
Age (EFA), an independent network of leading employers
which sets the agenda for age and employment issues in
the UK. The membership of EFA lists over 200 organisations,
from central and local government to major multinational
corporations. Upon introduction of the Employer Equality (Age)
Regulations in October 2006, Michael Page was nominated
for an award by the EFA for best implementation of the
legislation in its sector. Following the release of the legislation
on age discrimination, an Age Discrimination Working Party
was formed to review the policies, procedures and systems of
the Company to ensure compliance with the legislation once
introduced. The recommendations made are fully implemented
by the Company.
(e) Health and safety
It is the policy of the Group to take all reasonable and practicable
steps to safeguard the health, safety and welfare of its
32
ANNUAL REPORT AND ACCOUNTS 2006
employees, visitors and other persons who may be affected
by its activities. In order to meet these responsibilities, the
Group will:
•
•
•
•
•
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.
Our medical insurers also provide a 24hr counselling
helpline covering stress, legal issues and consumer rights.
(f) Supplier payment policy
It is the policy of the Group to agree appropriate terms and
conditions for transactions with suppliers (by means ranging
from standard written terms to individually negotiated
contracts) and that payment should be made in accordance
with those terms and conditions, provided that the supplier
has also complied with them.
The Company acts as a holding Company for the Group.
Creditor days for the Company were nil (2005: nil) as the
Company does not undertake any transactions with
suppliers. The Group’s creditor days at the year end were
23 (2005: 30 days).
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual
Report and the financial statements. The Directors are
required to prepare financial statements for the Group in
accordance with International Financial Reporting Standards
(IFRS) and have also elected to prepare financial statements
for the Company in accordance with IFRS. Company law
requires the Directors to prepare such financial statements in
accordance with IFRS, the Companies Act 1985 and Article
4 of the IAS Regulation.
International Accounting Standard 1 requires that financial
statements present fairly for each year the company’s financial
position, financial performance and cash flows. This 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 circumstances, a
fair presentation will be achieved by compliance with all
applicable International Financial Reporting Standards.
Directors are also required to:
•
•
•
properly select and apply accounting policies;
present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information; and
provide additional disclosures when compliance with
the specific requirements in IFRS is insufficient to
enable users to understand the impact of particular
transactions, other events and conditions on the entity’s
financial position and financial performance.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any
time the financial position of the Company, for safeguarding
the assets, for taking reasonable steps for the prevention
and detection of fraud and other irregularities and for the
preparation of a Directors’ report and Directors’ remuneration
report and operating and financial review which comply with
the requirements of the Companies Act 1985.
Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Each of the Directors at the date of approval of this report
confirms that:
1. so far as the Director is aware, there is no relevant audit
information of which the company’s auditors are unaware;
and
2. the Director has taken all the steps that he ought to have
taken as a Director to make himself aware of any relevant
audit information and to establish that the Company’s
auditors are aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of s234ZA of the Companies
Act 1985.
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.
Annual General Meeting
The resolutions to be proposed at the Annual General Meeting
to be held on 23 May 2007, together with explanatory notes,
appear in the Notice of Meeting set out on pages 76 and 77.
By order of the Board
Kelvin Stagg
Company Secretary
28 February 2007
33
MICHAEL PAGE INTERNATIONAL
CORPORATE GOVERNANCE
The Board of Directors has a strong commitment to high
standards of corporate governance and has made significant
progress in applying the main and supporting principles of
corporate governance as recommended in Section 1 of the
Combined Code on Corporate Governance, (the “2003 FRC
Code”), for the year ended 31 December 2006.
Compliance with the 2003 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 2006,
except as stated below:
• Board balance (code provision A3.2)
The number of independent Non-Executive Directors did not
equal that of the executives during the whole year under review.
Prior to the departure of Terry Benson on 6 April 2006, the
number of Executive Directors on the main Board exceeded
that of the independent Non-Executive Directors. However, the
Board considers that the collective know-how and experience
of the independent Non-Executive Directors over this period
provided a balanced mix of skills which matched the needs of
the business and was sufficient to ensure proper governance
of the Group which consists of an organically grown, single
business, producing clear, transparent results. Since Terry
Benson’s resignation and the appointment of Steve Ingham as
Chief Executive, the composition of the Board now complies
with provision A3.2 of the Combined Code.
• Meetings with shareholders (code provision D1.1)
The Senior Independent Director did not meet directly
with shareholders. However, other members of the Board
have met face-to-face with shareholders during the year
and the issues discussed are shared collectively with all
Board members. Additional understanding of shareholders’
opinions is also gained from monthly brokers’ reports. 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
responsible for corporate governance, establishing policies
and objectives, and the management of the Group’s
resources. It is the Group’s policy that the roles of Chairman
and Chief Executive are separate.
The main Board currently comprises the Chairman, who has
no operational responsibilities, three 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.
Sir Adrian Montague, Charles-Henri Dumon and Stephen
Box will retire by rotation and offer themselves for re-election.
As a result of their annual performance evaluation, the
Board considers that their individual performances continue
to be effective with each director demonstrating sufficient
commitment to their role. The Board is therefore pleased to
support their re-election at the forthcoming Annual General
Meeting.
In particular, the Board reviewed the positions of one of its
members in the context of the guidance in the 2003 FRC
Combined Code and determined that, despite the length of
tenure on the Board in the case of Stephen Box, he remains
independent. He continues to contribute effectively and
constructively to Board debate, to challenge and question
management objectively and robustly, and at all times to
have the best interests of the Group in mind. The Board
therefore concluded that there was no evidence to suggest
that length of tenure was having an adverse impact on his
independence and considers that, taking account of these
issues together with the other relevant factors contained in the
Code, all Non-Executive Directors (excluding the Chairman)
are independent for the purposes of the Combined Code.
All Directors have access to the advice and services of the
Company Secretary, who is responsible for ensuring that
Board procedures and applicable rules and regulations are
observed. There is an agreed procedure for Directors to
obtain independent professional advice, if necessary, at the
Company’s expense.
The Board meets regularly throughout the year. It has a formal
schedule of matters reserved to it and delegates specific
responsibilities to Committees. During the meetings, the
Board formally considers 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 2006.
3
ANNUAL REPORT AND ACCOUNTS 2006
The terms of reference for each Committee are available
on request and can be found on the Group’s website. Their
composition and the manner in which they discharge their
responsibilities are described below.
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 the Board of Directors page 28 and 29.
The Committee met four times in 2006 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 2006 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.
for the external auditors to undertake:
• selection, design or implementation of key financial
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;
• provision of outsource operational management
functions;
• recruitment of senior finance or other executives;
• secondment of senior finance or other executives;
• provision of internal audit services;
• valuation services or fairness opinions; and
• any services specifically prohibited to be provided
by a listed company’s external auditors under UK
regulations.
The following criteria also need to be met before
the external auditors are contracted to provide such
services:
• the firm has the necessary skills and experience to
undertake the work;
• there are no potential conflicts that may arise as a
Objectivity and independence of external
result of carrying out this activity;
auditors
Deloitte & Touche LLP are employed 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 awarded
on the basis of competitive tender.
The objectivity and independence of the external auditor
is safeguarded by:
a. obtaining assurances from the external auditor that
adequate policies and procedures exist within its firm
to ensure the firm and its staff are independent of
the Group by reason of family, finance, employment,
investment and business relationships (other than 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
iii. for which a case-by-case decision is required, which
includes all engagements over certain fee limits.
The following areas are considered to be unacceptable
• 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 to be
given by the Group Finance Director and, if the fee
exceeds a certain level, the Audit Committee.
c. enforcing a policy of reviewing all cases where it is
proposed that a former employee of the external
auditors be employed by the Group; and
d. monitoring the external auditors’ compliance with
applicable UK ethical guidance on the rotation of audit
partners.
Remuneration Committee
The Remuneration Committee comprises the independent
Non-Executive Directors and is chaired by Tim Miller.
The Committee reviews the 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
senior 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
3
MICHAEL PAGE INTERNATIONAL
under consideration. The Remuneration Report 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.
Succession planning
the basic premises behind
One of
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 individuals.
Due to this philosophy of nurturing our own talent,
succession planning is inherently a key part of the process.
We do not make promotions or move people within the
business unless there is a clear successor for the vacant
position. It is therefore one of the key responsibilities of all
levels of management, and not just the Board, to have a
clear plan of development for their direct reports.
Board appointments
The Board follows formal and transparent procedures
when appointing directors. The Nomination Committee
identifies a shortlist of suitable candidates for Non-
Executive appointments. All the candidates are interviewed
by the Chairman and the Chief Executive and evaluations
of all candidates are discussed with all members of the
Nomination Committee and the recommendation
is
subsequently made to the Board.
In respect of the appointment of Steve Ingham as Chief
Executive, the Nomination Committee considered an
external search. However, in view of the strong culture of
organic growth, the emphasis on promotion of capable
executives within the businesses, the strength and
experience of internal candidates, 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
on 6 April 2006.
Induction and training programme
On appointment to the Board, each Director discusses
with the Company Secretary the extent of training required
and a tailored induction programme to cover their individual
requirements is then compiled. Elements of the programme
typically consist of meeting senior management, site
visits and attending internal conferences. In addition,
information is provided on the Company’s services, Group
structure, Board arrangements, financial information,
major competitors and major risks. After an initial induction
phase, updates are provided on a periodic basis.
Performance evaluation
The Board, as part of its commitment to ensuring
effectiveness and evaluating its performance together with
that of its Directors and Committees, conducted an internal
review comprising initially a questionnaire concerning all
aspects of procedure and effectiveness.
Following completion of the questionnaires, the Chief
Executive met with the individual Executive Directors,
and the Chairman met with the individual Non-Executive
Directors, to discuss their views and to give feedback
on their performance. The results of the evaluation were
reported to the Board and where areas of improvement
have been identified, actions have been agreed upon and
training will be provided where required.
Stephen Box, as the Senior Independent Director, led a
meeting of the Non-Executive Directors to appraise the
performance of the Chairman. The meeting took into
account any comments made by the Executive Directors.
This evaluation is 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.
Internal control
The responsibilities of the Directors in respect of internal
control are defined by the Financial Services Authority’s
Listing Rules which incorporate a Code of Practice known
as the Combined Code, which requires that Directors
review the effectiveness of the Group’s system of internal
controls. This requirement stipulates that the review shall
cover all controls including operational, compliance and
risk management, as well as financial. Internal Control
36
ANNUAL REPORT AND ACCOUNTS 2006
Guidance for Directors on the Combined Code (“the
Turnbull Report”) was published in September 1999.
The Board has assessed existing risk management and
internal control processes during the year ended 31
December 2006 in accordance with the 1999 Turnbull
guidance. The Board believes it has the procedures
in place such that the Group has fully complied for the
financial year ended 31 December 2006 and at the date
of this report.
The Directors are responsible for the Group’s system
of internal financial and operational controls which are
designed to meet the Group’s particular needs and aim
to safeguard Group assets, ensure proper accounting
records are maintained and that the financial information
used within the business and for publication is reliable.
Any system of internal control can only provide reasonable,
but not absolute, assurance against material misstatement
and loss. Key elements of the system of internal control
are as follows:
• Group organisation.
The Board of Directors meets at least ten times a year,
focusing mainly on strategic issues, operational and
financial performance. There is also a defined policy on
matters strictly reserved for the Board. The Managing
Director of each operating division is accountable for
establishing and monitoring internal controls within that
division;
• strategic plan.
The Group has a three-year strategic plan which is
approved by the Board and sets out the main objectives
for the Group;
• financial reporting.
The Group has a comprehensive budgeting system
with an annual budget approved by the Board. Detailed
monthly reports are produced showing comparisons of
results against budget, forecast and the prior year, with
performance monitoring and explanations provided for
significant variances. The Group reports to shareholders
on a half-yearly basis;
• quarterly reforecasting.
The Group prepares a full-year reforecast on a quarterly
basis showing, by individual businesses/disciplines, the
results to date and a reforecast against budget for the
remaining period up to the end of the year;
• Audit Committee.
There is an established Audit Committee whose
activities are previously described;
• 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
Fig.3. Attendance at Board Meetings (Committee attendance shown for Committee members only)
(resigned 6 April 2006)
Total meetings
Meetings attended
Executive
Steve Ingham
Terry Benson
Charles-Henri Dumon
Stephen Puckett
Total meetings
Non-Executive
Sir Adrian Montague CBE
Stephen Box
Tim Miller
Hubert Reid
Main Board
12
12
3
12
11
Main Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
12
12
12
11
11
4
4
4
4
4
4
4
3
2
2
2
2
2
3
MICHAEL PAGE INTERNATIONAL
Shareholders are invited to attend the Annual General
Meeting where they are able to discuss any concerns with
the Non-Executive Directors.
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
The Annual Report is designed to present a balanced and
understandable view of the Group’s activities and prospects.
The Chairman’s Statement, Chief Executive’s Review and
Finance Director’s Review provide an assessment of the
Group’s affairs and position. The Annual Report and Interim
Report are sent to all shareholders.
The Directors acknowledge their responsibility for the
preparation of the Annual Report. The Statement of Directors’
Responsibilities is shown in the Directors’ Report. A statement
by the auditors about their reporting responsibilities is shown
in the Independent Auditors’ Report on page 47.
Going concern
The Directors have a reasonable expectation that the Group
has adequate resources to continue in operational existence
for the foreseeable future, being a period of at least twelve-
months from the date of approval of accounts, and therefore
continue to adopt the going concern basis in preparing the
accounts. In forming this view, the Directors have reviewed
the Group’s budget and forecasts for the next twelve months
based on normal business planning and control procedures.
systems of internal control and their compliance with
Group policies. The Statement also requires the reporting
of any significant control issues that have emerged so that
areas of Group concern can be identified and experience
can be shared;
• risk management.
Identification of major business risks is carried out at
Group level in conjunction with operational management
and appropriate steps taken to monitor and mitigate
risk;
• public interest disclosure policy (whistleblowing).
A procedure is in place where staff may, in confidence,
raise concerns about possible improprieties relating to
financial reporting or other matters; and
•
internal audit activities.
These are performed throughout the year by a dedicated
Internal Audit Manager, supported by members of the
head office finance 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
is a regular review of these risks and changes are made
to the risk profile where necessary. All internal audit
activities are reported to the Audit Committee. During the
year, the Board reviewed internal audit arrangements and
concluded that there is currently no need for a separate
and distinct internal audit department.
The Board confirms that there is an ongoing process for
identifying, evaluating and managing the significant risks
faced by the Group and that the processes have been in
place for the year under review and up to the date of approval
of the annual report and accounts.
Board contact with shareholders
Communications with shareholders are given a high priority.
The main contact between the Board and shareholders is
through the Chief Executive and the Group Finance Director.
They undertake two major investor “roadshows” each year in
February/March and August/September, in which numerous
one-to-one meetings with shareholders take place. The
outcome of these meetings and the views of shareholders
are relayed back to the Board by the corporate brokers, at
the end of each roadshow. The Group’s corporate brokers
also report monthly to the Board on broking activity during the
month and any issues that may have been raised with them.
3
ANNUAL REPORT AND ACCOUNTS 2006
Remuneration Report
Scope and membership of Remuneration
criteria, incentive share plan award and pension benefits.
Committee
The Remuneration Committee, which meets not less
than twice a year, comprises the independent Non-
Executive Directors. The Chief Executive attends the
meetings as required, 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.
No Directors, other than the members of the Remuneration
Committee, provided material advice to the Committee on
Directors’ remuneration.
Remuneration policy
The objective of the Group’s remuneration policy is to attract
and retain management with the appropriate professional,
managerial and operational expertise necessary to realise
the Group’s objectives as well as to establish a framework
for remunerating all employees.
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 46.
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
The following sections provide an outline of the Company’s
remuneration policy during 2006. Shareholders were
consulted on the policy at the time of approval of the
Incentive Share Plan in December 2003.
Base salary and benefits
The Committee establishes salaries and benefits by
reference to those prevailing in the employment market
generally for Executive Directors of comparable status and
market value, taking into account the range of incentives
described elsewhere in this report, including a performance
bonus. Reviews of such base salary and benefits are
conducted annually by the Committee.
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 2006, the bonus pool for Executive
Directors was equal to 3.85% (2005: 6%) of Profits earned
above a threshold equal to half of targeted Profits for the
year. In addition, if Profits exceed 1.2 times (2005: 1.25
times) the targeted level, then an additional 1.3% (2005:
1.65%) of Profits earned above the targeted level is added
to the bonus pool.
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 up to 10%, to
reflect the Committee’s view on the performance of the
Company relative to its directly comparable peers. The
Committee increased the 2006 bonus pool by 10% in
recognition of both absolute and peer group comparator
performance.
The targeted level of Profits for 2006 was £91.0m
(2005: £51.2m) and was set at the beginning of 2006 by
reference to market expectations and internal forecasts at
that time. The Committee retains the discretion to review
this arrangement and set different rates and thresholds as
it deems appropriate for the business.
The target for 2007 has been set and will be disclosed in
next year’s report. The threshold in 2007 for awarding the
higher level of bonus is set at 1.1 times the targeted level
of profits.
3
MICHAEL PAGE INTERNATIONAL
three-year period. The Committee believes these are the
most appropriate measures of the underlying performance
of the Group. If awards do not vest after three years, then
they will lapse.
Senior executives of the Group who benefit from these
arrangements can only receive modest share option grants
as described below.
The Committee retains the discretion to review the proportion
of profits dedicated to the Incentive Share Plan in the light of
the growth in the size of the Company, its profitability and the
number of Executive Directors.
The Committee reviewed the Incentive Share Plan with regards
to the Company’s current operations and prospects.
Based on the 2006 results, awards totalling £6.1m (2005:
£3.5m) will be made in 2007 of which £1,875,000 (2005:
£940,500) 31% (2005: 27%) will be for the Executive
Directors. Details of the awards made in 2006 are disclosed
on page 42.
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 anyone
receiving an incentive share plan award in 2007.
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 be deferred, paid into an
employee benefit trust and invested in the Company’s shares
with no matching investment by the Company. Based on the
2006 results, the amount deferred for the three Executive
Directors is £1.7m (2005: £1.6m).
Such shares will be reserved for the executive and will vest in
equal annual tranches over two years (previously three years),
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 6% (2005: 5%) of Group Profits
of the preceding year. The size of the award pool was uplifted
to increase the remuneration and therefore aid the retention
of senior employees. Initially these awards are being satisfied
by shares in the Employee Benefit Trust. Not more than
30% of this figure is available for awards to the Executive
Directors. This decrease reflects the reduction in size of
the Executive team. The balance is available for awards to
senior employees. Group Profits are defined as Group profit
before taxation and before exceptional items and charges or
credits resulting from the Plan or other share option grants,
as described below.
Two thirds of these shares (“Deferred Share Awards”) are
subject to a three-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.
Performance share awards of up to 50% of a Director’s or
senior employee’s salary will only vest if EPS grows by an
average of 5% over the growth in UK RPI per annum over
the three year period. Any excess 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
0
ANNUAL REPORT AND ACCOUNTS 2006
Emoluments
The aggregate emoluments, excluding pensions, of the Directors of the Company 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
325
124
260
260
75
38
35
32
33
12
191
26
–
–
–
–
325
–
260
260
–
–
–
–
653
–
538
538
–
–
–
–
417
–
417
417
–
–
–
–
Total
£’000
1,753
136
1,666
1,501
75
38
35
32
1,149
262
845
1,729
1,251
5,236
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
227
354
98
236
219
63
34
6
12
29
48
30
8
197
29
–
–
–
–
–
227
354
98
236
219
–
–
–
–
–
441
314
–
432
448
–
–
–
–
–
209
–
–
209
209
–
–
–
–
–
–
–
410
–
–
–
–
–
–
–
Total
£’000
1,152
1,052
614
1,310
1,124
63
34
6
12
29
1,278
312
1,134
1,635
627
410
5,396
2006
Executive
Steve Ingham (Note 1)
Terry Benson (resigned 6 April 2006) (Note 6)
Charles-Henri Dumon
Stephen Puckett
Non-Executive
Sir Adrian Montague CBE
Stephen Box
Tim Miller
Hubert Reid
Total
2005
Executive
Steve Ingham
Terry Benson
Stephen Burke (resigned 25 May 2005)
Charles-Henri Dumon
Stephen Puckett
Non-Executive
Sir Adrian Montague CBE
Stephen Box
Rob Lourey
Tim Miller
Hubert Reid
Total
Notes to the emoluments:
1. Steve Ingham is the highest paid director.
2.
3.
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.
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 two years (previously three years). The amount of the annual bonus earned by the remaining Executive Directors in 2006, but
deferred to future periods, was £1.7m (2005: £1.6m).
4.
Represents the non-performance proportion of the Incentive Share Plan to be awarded in March 2007.
5. Compensation for loss of office relates to Stephen Burke who resigned on 25 May 2005.
6.
Under the terms of his contract, Terry Benson gave notice of his intention to retire from the Company in December 2005. He resigned as a Director of the
Company on 6 April 2006 but remained employed by the Company as part of his notice period during which he was paid a further £0.3m.
1
MICHAEL PAGE INTERNATIONAL
Pension benefits
Executive Directors are eligible to participate in a Company pension plan which is a defined contribution scheme. Each
Executive Director receives 20% of their base salary or a cash alternative.
Pension contributions
Steve Ingham
Terry Benson (resigned 6 April 2006)
Charles-Henri Dumon
Stephen Puckett
2006
£’000
54
27
39
48
2005
£’000
21
106
38
36
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 2006 all Executive Directors comply with this requirement.
The beneficial interests of the Directors who served during the year and their families in the ordinary shares of the Company of
1p each are shown below. For the Directors in office at the balance sheet date there has been no change in these interests from
31 December 2006 to 28 February 2007.
Ordinary shares
of 1p
Direct Holding
Direct Holding
Direct Holding
Direct Holding
Direct Holding
At 1 January 2006
Acquired in year
Disposal in year
At 31 December 2006
or date of resignation
1,000,000
2,000,000
1,332,997
203,526
15,000
10,884
18,044
11,172
11,170
-
-
–
(11,172)
-
-
1,010,884
2,018,044
1,332,997
214,696
15,000
Steve Ingham
Terry Benson (resigned 6 April 2006)
Charles-Henri Dumon
Stephen Puckett
Stephen Box ‡
‡ Non-Executive Director
No other Director has a holding in the Company.
Incentive Share Plan
Total award at 1 January 2006
Awarded during the year
Vested
in year
Total award at 31 December 2006
or date of resignation
Performance
Non-
performance
Total Performance
Non-
performance
Total
Performance
Non-
performance
Total
Steve Ingham
57,230
114,462 171,692
34,067
68,133 102,200
Terry Benson (resigned 6 April 2006)
57,230
114,462 171,692
Charles-Henri Dumon (Note 4)
57,230
114,462 171,692
Stephen Puckett
57,230
114,462 171,692
–
34,067
34,067
–
–
68,133 102,200
68,133 102,200
–
–
–
–
91,297
182,595 273,892
57,230
114,462 171,692
91,297
182,595 273,892
91,297
182,595 273,892
Details of awards made under the Incentive Share Plan that remain outstanding at 31 December 2006 are as follows:
1. The value of the award made under the Michael Page Incentive Share Plan in 2006 is £313,500 for each individual Director
and is based on the purchase price of the Company’s ordinary shares on 7 March 2006 of 306.68p.
2. The total value of awards at 31 December 2006 for each individual Director in office at the balance sheet date is £1,238,677
and is calculated using the closing market price of the Company’s ordinary shares at 31 December 2006 of 452.25p.
2
ANNUAL REPORT AND ACCOUNTS 2006
3. For awards made in 2006, the base EPS for the performance criteria is 15.5p (2005: 7.5p).
4. Charles-Henri Dumon was granted deferred share options to acquire 68,133 ordinary shares and performance share
options to acquire 34,067 ordinary shares under the Michael Page Incentive Share Plan 2006. These options have a nil
exercise price and do not accrue dividends.
5. The non-performance shares to be awarded in 2007 have been included in the Table of Emoluments on page 41.
Deferred Annual Bonus
As described on pages 39 and 40, 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 two
equal tranches (previously three) on the first two anniversaries (previously three) of the grant.
In 2007, a total of £1.7m 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 41. 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 39 and 40.
Details of awards made under the Deferred Annual Bonus Plan that remain outstanding at 31 December 2006 are as follows:
Steve Ingham
Terry Benson (resigned 6 April 2006)
Charles-Henri Dumon
Stephen Puckett
Total award at
1 January 2006
Awarded
during the year
Vested in year
Total award at 31 December
2006 or date of resignation
55,421
91,883
61,255
56,880
143,761
–
140,710
146,202
(18,473)
(30,627)
(20,418)
(18,960)
180,709
61,256
181,547
184,122
3
MICHAEL PAGE INTERNATIONAL
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 2006 were as follows:
Date of
Grant
At
1 January
2006
Granted
in year
Exercised
in year or
to date of
resignation
Lapsed
in year or
to date of
resignation
At 31
December
2006 or
date of
resignation
Market
price at
date of
exercise
(pence)
Gains
made on
exercise
Exercise
price
(pence)
Period of
exercise
Steve Ingham
Terry Benson
(resigned 6 April 2006)
Charles-Henri Dumon
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
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
1,125,000
300,000
200,000
50,000
50,000
750,000
150,000
150,000
200,000
50,000
50,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(515,559)
(150,000)
(150,000)
(200,000)
–
–
–
–
–
–
–
–
(833,984)
(300,000)
–
–
–
(515,559)
(150,000)
(150,000)
(200,000)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
234,441
368.10
995,544
175 2004-2011
–
–
–
50,000
50,000
3,750,000
150,000
150,000
200,000
50,000
50,000
368.10
273,150
186 2005-2012
368.10
273,150
186 2006-2012
368.10
573,200
81.5 2006-2013
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
171 2007-2014
190.75 2008-2015
175 2004-2011
186 2005-2012
186 2006-2012
81.5 2006-2013
171 2007-2014
190.75 2008-2015
291,016
332.29*
1,311,757
175 2004-2011
–
328.83
428,490
186 2006-2012
200,000
50,000
50,000
–
–
–
–
–
–
83.4 2007-2013
171 2007-2014
190.75 2008-2015
234,441
368.10
995,544
175 2004-2011
–
–
–
50,000
50,000
368.10
273,150
186 2005-2012
368.10
273,150
186 2006-2012
368.10
573,200
81.5 2006-2013
–
–
–
–
171 2007-2014
190.75 2008-2015
* This represents the weighted average rate for the total exercise.
1. The market price of the shares at 31 December 2006 was 452.25p with a range during the year of 265.5p to 452.25p.
2. No options were given under the Executive Share Option Scheme to the Executive Directors in 2006.
ANNUAL REPORT AND ACCOUNTS 2006
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 flotation.
Versus FTSE250 and FTSE Support Services
31 December 2001
31 December 2002
31 December 2003
31 December 2004
31 December 2005
31 December 2006
290
270
250
230
210
190
170
150
130
110
90
70
50
289.7
217.9
108.1
170.5
167.5
87.2
128.5
115.7
71.7
112.8
104.6
69.9
100.4
96.9
89.4
75.3
64.2
59.4
FTSE250
FTSE Support Services
Michael Page International
MICHAEL PAGE INTERNATIONAL
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 was a Non-Executive Director of
SHL Group plc and resigned during the year. He received fees of £32,576 (prorated to his date of resignation) (2005: £25,000)
as compensation for this role. These fees are not included in the emoluments table on page 41.
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 2006
Notice period
Provision for compensation
on early termination
Other termination
provisions
Executive
Steve Ingham
05/03/01
no specific term
12 months
Charles-Henri Dumon
13/06/03
no specific term
12 months
Stephen Puckett
05/03/01
no specific term
12 months
12 months salary plus
other contractual benefits
12 months salary plus
other contractual benefits
12 months salary plus
other contractual benefits
Non-Executive
Sir Adrian Montague CBE*
27/02/07
Stephen Box*
Hubert Reid
Tim Miller
27/02/07
25/02/06
15/08/05
2 months
2 months
26 months
19 months
None
None
None
None
*Sir Adrian Montague’s and Stephen Box’s appointments were renewed on 27 February 2007.
None
None
None
None
None
None
None
None
None
None
None
Annual resolution
Shareholders will be given the opportunity to approve the Remuneration Report at the Annual General Meeting (resolution 6)
on 23 May 2007.
Audit requirement
Within the Remuneration Report, the sections on Emoluments, and Directors’ interests and share ownership requirements,
on pages 41 to 44 inclusive, are audited. All other sections of the Remuneration Report are unaudited.
Tim Miller
Chairman - Remuneration Committee
28 February 2007
6
ANNUAL REPORT AND ACCOUNTS 2006
Independent Auditors’ Report to the
Members of Michael Page International plc
We have audited the group and parent company financial statements
(the ‘‘financial statements’’) of Michael Page International plc for
the year ended 31 December 2006 which comprise 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 Changes in Equity and the related notes 1 to
26. 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.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the Annual Report,
the Directors’ Remuneration Report and the financial statements
in accordance with applicable law and International Financial
Reporting Standards (IFRSs) as adopted by 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 to be audited in accordance
with relevant 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 and whether the financial statements and
the part of the Directors’ Remuneration Report to be audited have
been properly prepared in accordance with the Companies Act
1985 and, as regards the group financial statements, Article 4 of
the IAS Regulation. We also report to you whether in our opinion
the information given in the Directors’ Report is consistent with
the financial statements.
In addition we report to you if, in our opinion, the company has
not kept proper accounting records, if we have not received all
the information and explanations we require for our audit, or if
information specified by law regarding directors’ remuneration
and other transactions is not disclosed.
We review whether the Corporate Governance Statement reflects
the company’s compliance with the nine provisions of the 2003
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 other information contained in the Annual Report
as described in the contents section and consider whether it is
consistent with the audited financial statements. We consider the
implications for our report if we become aware of any apparent
misstatements or material inconsistencies with the financial
statements. Our responsibilities do not extend to any further
information outside the Annual Report.
Basis of audit opinion
We conducted our audit in 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 to be audited.
It also includes an assessment of the significant estimates and
judgments made by the directors in the preparation of the financial
statements, and of whether the accounting policies are appropriate
to the group’s and company’s circumstances, consistently applied
and adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary
in order to provide us with sufficient evidence to give reasonable
assurance that the financial statements and the part of the
Directors’ Remuneration Report to be 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 to be audited.
Opinion
In our opinion:
•
•
•
the group financial statements give a true and fair view, in
accordance with IFRSs as adopted by the European Union,
of the state of the group’s affairs as at 31 December 2006 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 by the European
Union as applied in accordance with the provisions of the
Companies Act 1985, of the state of the parent company’s
affairs as at 31 December 2006;
the financial statements and the part of the Directors’
Remuneration Report to be audited have been properly
prepared in accordance with the Companies Act 1985 and,
as regards the group financial statements, Article 4 of the IAS
Regulation; and
•
the information given in the Directors’ Report is consistent with
the financial statements.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditors – London
28 February 2007
MICHAEL PAGE INTERNATIONAL
CONSOLIDATED INCOME STATEMENT
Year ended 31 December 2006
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
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
2006
£’000
649,060
(300,243)
348,817
(251,450)
97,367
821
(1,229)
96,959
(31,512)
65,447
2005
£’000
523,810
(256,229)
267,581
(201,062)
66,519
393
(776)
66,136
(16,506)
49,630
65,447
49,630
19.6
19.0
14.8
14.4
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
at 31 December 2006
ANNUAL REPORT AND ACCOUNTS 2006
Share
premium
£’000
Capital
redemption
reserve
£’000
Reserve
for own
shares
£’000
Treasury
shares
£’000
Currency
translation
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
Group
Note
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
Balance at 1 January 2006
Currency translation differences
Net expense recognised directly in equity
Profit for the year
Total recognised (expense)/income for the year
Purchase of own shares for cancellation
Issue of share capital
Transfer to reserve for own shares
Credit in respect of share schemes
Dividends
8
8
Share
capital
£’000
3,572
–
–
–
–
–
(246)
–
–
(246)
3,326
3,326
–
–
–
–
(232)
238
–
–
–
6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
37,952
–
–
–
37,952
Balance at 31 December 2006
3,332
37,952
178
(9,871)
(13,122)
(188)
79,931
60,500
–
–
–
–
–
246
–
–
246
424
–
–
–
–
–
–
–
–
–
–
–
–
–
(34,216)
47,338
–
–
13,122
492
492
–
–
492
492
–
49,630
49,630
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
424
(9,871)
–
–
–
–
232
–
–
–
–
232
656
–
–
–
–
–
–
970
–
–
970
(8,901)
–
–
–
–
–
–
–
–
–
–
–
–
304
74,713
68,896
(3,116)
(3,116)
–
–
(3,116)
(3,116)
–
65,447
65,447
(3,116)
65,447
62,331
–
(83,363)
(83,363)
–
–
–
–
–
–
38,190
(970)
–
12,425
12,425
(18,088)
(18,088)
(89,996)
(50,836)
(2,812)
50,164
80,391
MICHAEL PAGE INTERNATIONAL
STATEMENT OF CHANGES IN EQUITY – PARENT COMPANY
at 31 December 2006
Share
capital
£’000
3,572
–
3,572
–
–
–
(246)
–
(246)
3,326
3,326
–
–
(232)
Share
premium
£’000
Capital
redemption
reserve
£’000
Reserve
for own
shares
£’000
Treasury
shares
£’000
Retained
earnings
£’000
Total
equity
£’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
178
(9,871)
(13,122)
299,688
280,445
–
9,871
–
(3,723)
6,148
178
–
–
–
246
–
246
424
424
–
–
232
–
–
232
656
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(13,122)
295,965
286,593
–
–
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)
–
246,988
250,738
–
–
–
–
–
–
–
–
246,988
250,738
9,376
9,376
9,376
9,376
(83,363)
(83,363)
–
38,190
(18,088)
(18,088)
(101,451)
(63,261)
154,913
196,853
238
37,952
–
6
–
37,952
3,332
37,952
Company
Balance at 1 January 2005
Note
Effects of change in accounting for Employee Benefit Trust
1
Balance at 1 January 2005 restated
Profit for the year
Total recognised income for the year
Purchase of own shares
Cancellation of treasury shares
Dividends
Balance at 31 December 2005
Balance at 1 January 2006
Profit for the year
Total recognised income for the year
Purchase of own shares
Issue of share capital
Dividends
Balance at 31 December 2006
8
8
0
BALANCE SHEETS
at 31 December 2006
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
Deferred tax liabilities
Current liabilities
Trade and other payables
Bank overdrafts
Bank loans
Current tax payable
Provisions for liabilities
Total liabilities
Net assets
Capital and reserves
Called-up share capital
Share premium
Capital redemption reserve
Reserve for own shares
Currency translation reserve
Retained earnings
Total equity
ANNUAL REPORT AND ACCOUNTS 2006
Group
Company
2006
£’000
21,550
3,598
–
9,447
1,927
2005
£’000
19,666
3,751
–
9,255
1,106
as restated
(Note 1)
2005
£’000
–
–
2006
£’000
–
–
426,777
427,345
–
–
–
–
36,522
33,778
426,777
427,345
143,813
104,935
213
35,587
179,613
336
20,060
125,331
332
489
–
821
15
225
–
240
216,135
159,109
427,598
427,585
(1,130)
–
–
(662)
(192)
(147)
(1,130)
(1,001)
–
–
–
–
–
–
–
–
(83,525)
(71,624)
(191,595)
(170,147)
(43)
(39,150)
(11,704)
(192)
(281)
(6,700)
(10,223)
(384)
–
–
(39,150)
(6,700)
–
–
–
–
(134,614)
(89,212)
(230,745)
(176,847)
(135,744)
(90,213)
(230,745)
(176,847)
80,391
68,896
196,853
250,738
3,332
37,952
656
(8,901)
(2,812)
50,164
80,391
3,326
–
424
(9,871)
304
74,713
68,896
3,332
37,952
656
–
–
154,913
196,853
3,326
–
424
–
–
246,988
250,738
Note
10
11
12
17
13
13
7
21
2
14
16
17
14
15
15
7
16
2
18
19
19
19
19
These financial statements were approved by the Board of Directors on 28 February 2007.
On behalf of the Board of Directors.
S Ingham
Chief Executive
S R Puckett
Group Finance Director
1
Group
Company
Note
20
22
2006
£’000
78,827
2005
£’000
65,432
(21,705)
(10,127)
57,122
55,305
(9,167)
(7,167)
(737)
1,210
–
821
(965)
1,354
1,353
393
(7,873)
(5,032)
as restated
(Note 1)
2005
£’000
40,754
1,702
42,456
2006
£’000
29,234
2,446
31,680
–
–
–
–
–
–
–
–
–
–
–
–
(18,088)
(14,432)
(18,088)
(14,432)
(1,209)
39,150
(6,700)
38,190
(83,363)
(32,020)
17,229
19,779
(1,464)
35,544
(773)
6,700
–
–
(34,216)
(42,721)
7,552
12,215
12
19,779
(869)
39,150
(6,700)
38,190
(83,363)
(31,680)
–
–
–
–
(508)
6,700
–
–
(34,216)
(42,456)
–
–
–
–
MICHAEL PAGE INTERNATIONAL
CASH FLOW STATEMENTS
for the year ended 31 December 2006
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
Repayment of bank loan
Issue of own shares for the exercise of options
Purchase of own shares
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Exchange (losses)/gains on cash and cash equivalents
Cash and cash equivalents at the end of the year
21
2
ANNUAL REPORT AND ACCOUNTS 2006
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). 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 £6.7m (2005: £11.1m).
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.
Change in accounting policy and prior year restatement
The assets and liabilities of the Employee Benefit Trust were previously reported within the company only balance sheet; in
accordance with SIC 12 ‘Consolidation – Special Purpose Entities’ the accounting policy has been amended such that these
assets and liabilities are recorded only within the consolidated balance sheet of the Group. The prior year comparatives for the
company only balance sheet have been restated accordingly. This has had an effect of increasing net assets in the company only
balance sheet at 31 December 2005 by £6.1m with no impact on profit. The net assets, profit and cashflows of the Group are
unaffected by this adjustment.
With the exception of the change in policy referred to above, the remaining policies, set out below, have been consistently applied
to all the periods presented.
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.
3
MICHAEL PAGE INTERNATIONAL
NOTES TO THE ACCOUNTS
1. Significant accounting policies (continued)
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.
(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 (2005: £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
25% per annum
g) Investments
Fixed asset investments are stated at cost less provision for impairment.
ANNUAL REPORT AND ACCOUNTS 2006
1. Significant accounting policies (continued)
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.
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.
MICHAEL PAGE INTERNATIONAL
NOTES TO THE ACCOUNTS
1. Significant accounting policies (continued)
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, EMEA, 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.
(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 accrued in the income statement on a time basis.
u) Financial instruments: recognition and measurement
The Group has no derivative contracts at the balance sheet date and therefore the requirements of the recognition criteria under
IAS 39 are not relevant to the Group.
6
ANNUAL REPORT AND ACCOUNTS 2006
1. Significant accounting policies (continued)
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.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that
have the most significant effect on the amount recognised in the financial statements are described in the following notes:
• Note 1 – revenue recognition
• Note 17 – utilisation of tax losses
• Note 18 – measurement of share-based payments
w) New standards and interpretations not yet adopted
At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied
in these financial statements were in issue but not yet effective:
IFRS 7 Financial Instruments: Disclosures; and the related amendment to IAS 1 on capital disclosures
IFRIC 4 Determining whether an Arrangement contains a Lease
IFRIC 7 Applying the Restatement Approach under IAS 29
IFRIC 8 Scope of IFRS 2 Share-based Payment
IFRIC 9 Reassessment of Embedded Derivatives
IFRIC 10 Interim Financial Reporting and Impairment.
The Directors anticipate that the adoption of the Standards and Interpretations in future periods will have no impact on the financial
statements of the Group except for additional disclosures when the relevant Standards come into effect for periods commencing
on or after 1 January 2007.
2. Segment reporting
The consolidated entity operates in one business segment, being that of recruitment services, and this is the Group’s primary
segment. 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, gross profit and operating profit by geographic region
United Kingdom
EMEA
Asia Pacific Australia
Other
Total
Americas
Turnover
Gross Profit
Operating Profit
2006
£’000
2005
£’000
2006
£’000
2005
£’000
2006
£’000
2005
£’000
312,408
269,623
155,811
129,535
44,270
31,939
222,993
159,157
126,577
63,208
20,370
83,578
30,081
61,152
15,565
76,717
18,313
26,017
18,944
44,961
21,468
86,138
24,722
14,315
39,037
12,871
34,171
19,449
8,982
8,077
8,509
5,593
17,059
14,102
1,867
1,029
649,060
523,810
348,817
267,581
97,367
66,519
The above analysis by destination is not materially different to analysis by origin.
MICHAEL PAGE INTERNATIONAL
NOTES TO THE ACCOUNTS
2. Segment reporting (continued)
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
United Kingdom
EMEA
Asia Pacific Australia
Other
Total
Americas
2006
£’000
2005
£’000
2006
£’000
2005
£’000
88,364
66,379
73,228
39,159
91,281
14,592
10,165
24,757
11,520
64,932
12,256
6,877
19,133
8,329
39,734
31,648
5,457
2,251
7,708
3,370
5,547
1,694
7,241
1,942
Segment assets/liabilities/capital expenditure
215,922
158,773
124,040
79,990
Income tax
213
336
11,704
216,135
159,109
135,744
10,223
90,213
(c) Turnover and gross profit by discipline
2006
£’000
3,113
3,899
958
386
1,344
1,548
9,904
2005
£’000
3,117
2,403
773
584
1,357
1,255
8,132
Finance and Accounting
Marketing, Sales and Retail
Legal, Technology, HR, Secretarial and Other
Engineering, Property & Construction, Procurement & Supply Chain
Turnover
Gross Profit
2006
£’000
408,250
100,153
96,595
44,062
2005
£’000
2006
£’000
2005
£’000
336,207
202,542
159,463
84,591
69,740
33,272
67,863
46,655
31,757
55,111
31,833
21,174
649,060
523,810
348,817
267,581
(d) Turnover and gross profit generated from permanent and temporary placements
Permanent
Temporary
Turnover
Gross Profit
2006
£’000
276,346
372,714
649,060
2005
£’000
205,482
318,328
523,810
2006
£’000
2005
£’000
261,000
194,967
87,817
72,614
348,817
267,581
The above analyses in notes (a) by operating profit by geographic region, (b) segment liabilities by geographic region, (c) turnover
and gross profit by discipline (being the professions of candidates placed) and (d) turnover and gross profit generated from
permanent and temporary placements have been included as additional disclosure over and above the requirements of IAS14
“Segment Reporting”.
Note (d) turnover and gross profit generated from permanent and temporary placements has been included this year for the
purpose of additional information.
ANNUAL REPORT AND ACCOUNTS 2006
3. Other operating expenses
Profit for the year is stated after charging/(crediting):
Employment costs (Note 4)
Exchange loss
Depreciation of property, plant and equipment - owned
Amortisation of computer software
Fees payable to the company’s auditors for the audit of the company’s annual accounts
Fees payable to the company’s auditors and their associates for other services to the group:
- The audit of the company’s subsidiaries pursuant to legislation
Total audit fees
- Other services pursuant to legislation
- Tax services
- Other services
Total non-audit fees
Profit on disposal of property, plant and equipment, and computer software
Profit on disposal of business
Operating lease rentals - land and buildings
- plant and machinery
. Employee information
2006
£’000
2005
£’000
168,792
139,697
124
5,630
815
63
362
425
27
245
46
318
(48)
–
141
5,201
961
59
355
414
26
191
–
217
(183)
(622)
13,543
2,505
12,026
1,574
The average number of employees (including Executive Directors) during the year and total number of employees (including
Executive Directors) at 31 December 2006 were as follows:
Management
Client services
Administration
Consultants for contract hire (Note a)
2006
Average No.
2005
Average No.
2006
Total No.
2005
Total No.
123
2,261
921
3,305
–
3,305
96
1,806
846
2,748
53
2,801
141
2,623
994
3,758
–
3,758
104
1,971
851
2,926
–
2,926
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
2006
£’000
2005
£’000
140,806
115,602
18,366
16,781
5,141
4,479
4,620
2,694
168,792
139,697
Details of Directors’ remuneration for the year are provided in the Directors’ Remuneration Report on pages 39 to 46.
No staff are employed by the parent company (2005: nil) hence no remuneration has been disclosed.
MICHAEL PAGE INTERNATIONAL
NOTES TO THE ACCOUNTS
. Financial income/(expenses)
Financial income
Bank interest receivable
Financial expenses
Bank interest payable
2006
£’000
2005
£’000
821
393
(1,229)
(776)
6. Taxation on profits on ordinary activities
The charge for taxation is based on the annual tax rate of 32.5% on profit before tax (2005: 25.0% before exceptional items).
Analysis of charge in year
UK income tax at 30% for year
Adjustments in respect of prior periods
Overseas income tax
Deferred tax expense
Origination and reversal of temporary differences
Reduction in tax rate
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
Higher tax rates on overseas earnings
Adjustment to tax charge in respect of prior periods
Tax expense and effective rate for the year
Tax recognised directly in equity
Relating to equity settled transactions
2006
£’000
96,959
29,088
594
361
(191)
(948)
1,637
971
31,512
%
30.0
0.6
0.4
(0.2)
(1.0)
1.7
1.0
32.5
2006
£’000
17,694
1,228
14,515
33,437
(1,168)
31
(788)
(1,925)
31,512
2005
£’000
66,136
19,841
557
332
(1,966)
(2,621)
483
(120)
16,506
2005
£’000
12,522
(120)
7,334
19,736
(609)
–
(2,621)
(3,230)
16,506
%
30.0
0.9
0.5
(3.0)
(4.0)
0.7
(0.1)
25.0
2006
£’000
2005
£’000
(8,302)
(4,228)
60
ANNUAL REPORT AND ACCOUNTS 2006
. Current tax assets and liabilities
The current tax asset of £0.2m (2005: £0.3m), and current tax liability of £11.7m (2005: £10.2m) 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 2005 of 3.5p per ordinary share (2004: 2.75p)
Interim dividend for the year ended 31 December 2006 of 1.8p per ordinary share (2005: 1.5p)
2006
£’000
12,100
5,988
18,088
2005
£’000
9,444
4,988
14,432
Amounts proposed as distributions to equity holders in the year:
Proposed final dividend for the year ended 31 December 2006 of 4.2p per ordinary share (2005: 3.5p)
13,859
11,497
The proposed final dividend had not been approved by shareholders at 31 December 2006 and therefore has not been included as
a liability. The comparative final dividend at 31 December 2005 was also not recognised as a liability in the prior year.
The proposed final dividend of 4.2p (2005: 3.5p) per ordinary share will be paid on 5 June 2007 to shareholders on the register at
the close of business on 4 May 2007, subject to approval by shareholders.
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 and diluted earnings per share is based on the following data:
Earnings
Earnings for basic and diluted earnings per share (£‘000)
Number of shares
Weighted average number of shares used for basic 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)
The above results relate to continuing operations.
Basic
2006
65,447
2005
49,630
334,744
336,283
8,888
9,014
343,632
345,297
19.6
19.0
14.8
14.4
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.
61
MICHAEL PAGE INTERNATIONAL
NOTES TO THE ACCOUNTS
. Earnings per ordinary share (continued)
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.
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
(322)
(697)
2006
Leasehold
improvements
£’000
Furniture,
fixtures and
equipment
£’000
Motor
vehicles
£’000
Leasehold
improvements
£’000
Total
£’000
2005
Furniture,
fixtures and
equipment
£’000
Motor
vehicles
£’000
Total
£’000
15,953
27,639
2,125
45,717
14,426
25,586
3,454
43,466
3,217
4,953
(1,763)
(1,453)
997
(855)
(26)
9,167
(4,071)
(1,045)
2,091
(546)
(18)
4,083
993
7,167
(2,155)
(2,341)
(5,042)
125
19
126
17,085
30,442
2,241
49,768
15,953
27,639
2,125
45,717
7,824
2,016
17,505
3,062
722
552
26,051
5,630
(1,069)
(1,353)
(483)
(2,905)
16,553
2,875
1,625
24,727
552
5,201
(1,955)
(1,442)
(3,897)
(157)
8,614
(397)
18,817
(4)
787
(558)
32
28,218
7,824
17,505
(13)
722
20
26,051
6,549
1,774
(500)
1
8,471
11,625
1,454
21,550
8,129
10,134
1,403
19,666
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
62
ANNUAL REPORT AND ACCOUNTS 2006
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
2006
2005
Computer
software
£’000
Goodwill
£’000
Total
£’000
Computer
software
£’000
Goodwill
£’000
Total
£’000
5,347
737
(3)
(150)
5,931
3,135
815
–
(2)
(76)
3,872
1,539
–
–
–
1,539
–
–
–
–
–
–
6,886
737
(3)
(150)
7,470
3,135
815
–
(2)
(76)
3,872
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
2,402
961
–
(218)
(10)
3,135
2,059
1,539
3,598
2,212
1,539
3,751
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
2006
£’000
1,274
214
51
1,539
2005
£’000
1,274
214
51
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 5%, 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 (8%). 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 2006 there was no impairment of intangible assets.
12. Investments
Company
Cost
At 1 January 2006 (as restated)
Derecognised on vesting of LTIP’s and deferred bonus shares
At 31 December 2006
Subsidiary
undertakings
£’000
Total
£’000
427,345
427,345
(568)
(568)
426,777
426,777
The derecognition of assets represents the decrease of the parent company’s holding of own shares which have vested and
transferred to beneficial holders.
63
MICHAEL PAGE INTERNATIONAL
NOTES TO THE ACCOUNTS
12. Investments (continued)
The Company’s principal subsidiary undertakings at 31 December 2006, 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 (Belgium) NV/SA
Page Interim (Belgium) NV/SA
Michael Page International (France) SAS
Page Personnel SAS
Michael Page International (Deutschland) GmbH
Michael Page International (Ireland) Limited
Michael Page International Italia Srl
Page Personnel Italia SpA
Michael Page International (Nederland) BV
Page Interim BV
Michael Page International (Poland) Sp.Z.O.O
Michael Page International Empressa de Trabalho Temporário e Serviços de Consultadoria Lda
LLC Michael Page International RU
Michael Page International (SA) (Pty) Limited
Michael Page International (Espana) SA
Page Personnel (Espana) SA
Michael Page International (Sweden) AB
Michael Page International (Switzerland) SA
Michael Page International (UAE) Limited
Michael Page International (Australia) Pty Limited
Michael Page International (Hong Kong) Limited
Michael Page International (Japan) K.K.
Michael Page International Pte Limited*
Michael Page International (Brasil) SC Ltda
Michael Page International Canada Limited
Michael Page International Mexico Reclutamiento Especializado, S.A. de C.V.
Country of incorporation
Principal activity
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Belgium
Belgium
France
France
Germany
Ireland
Italy
Italy
Netherlands
Netherlands
Poland
Portugal
Russia
Holding company
Support services
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
South Africa
Recruitment consultancy
Spain
Spain
Sweden
Switzerland
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
United Arab Emirates
Recruitment consultancy
Australia
Hong Kong
Japan
Singapore
Brazil
Canada
Mexico
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Michael Page International Inc*
United States
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.
6
ANNUAL REPORT AND ACCOUNTS 2006
13. 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
2006
£’000
121,515
(3,270)
118,245
4,497
21,071
2005
£’000
85,059
(2,328)
82,731
3,854
18,350
143,813
104,935
1,927
1,106
2006
£’000
2005
£’000
–
–
–
307
25
332
–
–
–
–
–
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
2006
£’000
2005
£’000
2006
£’000
as restated
2005
£’000
5,630
–
28,690
10,070
38,556
579
4,608
–
–
–
191,574
170,144
26,098
8,837
31,579
502
–
–
21
–
1
–
2
–
83,525
71,624
191,595
170,147
495
635
1,130
350
312
662
–
–
–
–
–
–
The fair values of trade and other payables are not materially different to those disclosed above.
The total liability relating to other tax and social security includes a balance of £2.5m (2005:£2.9m) relating to social charges on
share based payments.
6
MICHAEL PAGE INTERNATIONAL
NOTES TO THE ACCOUNTS
1. Bank overdrafts and loans
Bank overdrafts
Bank loans
Group
Company
2006
£’000
43
39,150
39,193
2005
£’000
281
6,700
6,981
2006
£’000
–
39,150
39,150
2005
£’000
–
6,700
6,700
Total
£’000
43
39,150
39,193
281
6,700
6,981
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 2006
Bank overdrafts
Bank loans
31 December 2005
Bank overdrafts
Bank loans
Sterling
£’000
–
39,150
39,150
–
6,700
6,700
Euro
£’000
US Dollar
£’000
–
–
–
281
–
281
43
–
43
–
–
–
Bank overdrafts are repayable on demand.
At 31 December 2006, the Group had available £10.2m (2005: £44.8m) 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
2006
31 December
2005
4.26%
5.40%
5.63%
5.46%
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 25.
66
ANNUAL REPORT AND ACCOUNTS 2006
16. Provisions for liabilities
At 1 January
Utilised in year
At 31 December
Analysis of total provisions:
Non-current liabilities
Current liabilities
Group
Company
2006
£’000
576
(384)
192
2006
£’000
–
192
192
2005
£’000
1,188
(612)
576
2005
£’000
192
384
576
2006
£’000
2005
£’000
–
–
–
–
–
–
2006
£’000
2005
£’000
–
–
–
–
–
–
The provision at 31 December 2006 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 year.
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.
At 1 January 2005
Credit to equity for the year
Credit to profit or loss for the year
Exchange differences
At 1 January 2006
Recognised in equity for the year
Recognised in profit or loss for the year
Changes in rate
Exchange differences
At 31 December 2006
Accelerated tax
depreciation
£’000
Share-based
payments
£’000
Tax losses
£’000
283
–
(7)
(1)
(1,480)
(4,228)
(552)
–
–
–
(2,621)
–
275
(6,260)
(2,621)
–
13
–
–
1,318
(742)
–
(2)
–
(788)
31
264
Other
£’000
(537)
–
(50)
85
(502)
–
(439)
–
6
Total
£’000
(1,734)
(4,228)
(3,230)
84
(9,108)
1,318
(1,956)
31
268
288
(5,686)
(3,114)
(935)
(9,447)
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:
Deferred tax assets
Deferred tax liabilities
2006
£’000
2005
£’000
(9,447)
(9,255)
–
147
(9,447)
(9,108)
6
MICHAEL PAGE INTERNATIONAL
NOTES TO THE ACCOUNTS
1. Deferred tax (continued)
At 31 December 2006, unremitted earnings of overseas Group companies amounted to £40.2m (2005: £17.6m). 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 £0.8m (2005: £0.5m) in respect of tax losses of overseas
companies. These tax losses are available to offset future taxable profits in the respective jurisdictions.
All of the deferred tax asset for losses of £3,114,000 is dependent on arising future taxable profits. Of the recognised deferred tax
asset, £3,068,000 is recognised within territories that were loss making in the current year. These losses have been recognised
given managements’ expectations for the businesses to which they relate for 2007 and the occurrence of one-off costs within 2006
that are not expected to re-occur.
1. Called-up share capital
Authorised
Ordinary shares of 1p each
Allotted, called-up and fully paid
At 1 January
Shares issued
Cancellation of own shares
At 31 December
2006
2005
£’000
Number of
shares
£’000
Number of
shares
5,713
571,250,000
5,713
571,250,000
3,326
332,637,799
3,572
357,202,799
238
23,874,277
–
–
(232)
(23,270,000)
(246)
(24,565,000)
3,332
333,242,076
3,326
332,637,799
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 “First-time Adoption of International Financial Reporting Standards” and
IFRS 2 “Share-based Payment”.
At 31 December 2006 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.
6
ANNUAL REPORT AND ACCOUNTS 2006
1. Called-up share capital (continued)
Executive Share Option Scheme (ESOS)
Year of grant
2001 (Note 1)
2002 (Note 2)*
2002 (Note 2)*
2003 (Note 2)*
2004 (Note 2)
2005 (Note 2)
2006 (Note 2)
Balance at
1 January
2006
Granted
in year
Exercised
in year
No. of shares
oustanding at 31
December 2006
Lapsed
in year
Base
EPS
Exercise price
per share
Exercise period
21,166,055
– (14,045,021)
(1,568,134)
5,552,900
9.9
175p March 2004 - March 2011
2,323,750
3,343,750
6,120,000
2,463,000
2,650,000
–
–
–
–
–
(2,126,250)
(2,933,750)
–
–
410,000
(4,242,700)
(60,000)
1,817,300
(50,000)
(239,225)
2,173,775
197,500
10.6
186p March 2005 - March 2012
5.8
5.8
4.1
186p March 2006 - March 2012
81.5p-86.1p
April 2006 - April 2013
171p-190.3p March 2007 - March 2014
(50,000)
(294,200)
2,305,800
7.5
190.75p-191.5p March 2008 - March 2015
–
2,123,500
–
(100,316)
2,023,184
15.5
309.9p March 2009 - March 2016
Total 2006
38,066,555
2,123,500 (23,447,721)
(2,261,875)
14,480,459
Weighted average exercise
price 2006 (£)
1.63
3.10
1.60
1.80
1.84
Total 2005
39,782,159
2,770,000
(426,556)
(4,059,048)
38,066,555
Weighted average exercise
price 2005 (£)
*These options have fully vested
1.61
1.91
1.32
1.69
1.63
3,496,366 options were exercisable at the end of 2006 at a weighted average exercise price of £1.51 (2005: £1.75).
In 2006, options were granted on 7 March with the estimated fair values of the options granted on that day of £3.10. In 2005,
options were granted on 28 February. The estimated fair values of the options granted on that date was £1.91.
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 2006 have an exercise price in the range of 81.5 pence to 309.9 pence and a weighted
average contractual life of 6.3 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 (£)
Weighted average fair value (£)
Expected volatility
Expected life
Risk free rate
Expected dividend yield
Share Option Scheme
Incentive Share Scheme
Deferred Bonus Shares
2006
3.10
3.10
3.10
35%
5 years
4.75%
1.5%
2005
1.91
1.91
1.91
35%
5 years
4.75%
2%
2006
3.10
Nil
3.10
35%
3 years
4.75%
Nil
2005
1.93
Nil
1.93
35%
3 years
4.75%
Nil
2006
3.10
Nil
3.10
35%
3 years
4.75%
Nil
2005
1.93
Nil
1.93
35%
3 years
4.75%
Nil
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 £4.5m (2005: £2.7m) related to equity-settled share-based payment transactions during
the year.
6
MICHAEL PAGE INTERNATIONAL
NOTES TO THE ACCOUNTS
1. Called-up share capital (continued)
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 met the EPS performance conditions for 85% of the outstanding options. The result for the year
ended 31 December 2006 met the EPS performance conditions for the remaining 15% of the outstanding options, these will
vest on 1 March 2007.
(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 2006, the performance conditions were met for 62.4% (2005: 33.7%) of the outstanding
share price dependent options.
Note 2 Grants post flotation
The respective base earnings per share for each grant are shown in the table on page 69. For the 2004, 2005 and 2006 grants, the
performance condition is tested on the third anniversary and no retesting will occur thereafter. 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 UK Retail Price Index.
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 39 and 40, and are settled by the physical delivery
of shares, currently satisfied by shares held in the Employee Benefit Trust, to the extent that service and performance conditions
are met.
0
ANNUAL REPORT AND ACCOUNTS 2006
1. Reserves
Share premium
The share premium account has been established to represent the excess of the exercise share price over the nominal value of the
shares on the exercise of share options.
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 23,270,000 shares cancelled during the year as shown in Note 18.
Reserve for own shares
At 31 December 2006, the EBT reserve consisted of 5,552,237 (2005: 5,640,715) ordinary shares held by the Employee Benefit
Trust representing 1.67% of the called-up share capital with a market value of £14.7m (2005: £15.2m).
A total of 1,805,754 shares have been allocated to satisfy awards made under the Incentive Share Plan, and 575,820 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 3,259,141 ordinary shares has been waived, and they are excluded from the EPS
calculation.
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.
20. Cash flows from operating activities
Profit before tax
Depreciation and amortisation charges
Profit on sale of property, plant and equipment, and computer software
Profit on the sale of business (Note 22)
Share scheme charges
Net finance cost
Operating cashflow before changes in working capital and provisions
Increase in receivables
Increase in payables
Decrease in provisions
Cash generated from operations
Group
Company
2006
£’000
96,959
6,445
(48)
–
4,168
408
107,932
(42,376)
13,655
(384)
78,827
2005
£’000
66,136
6,162
(183)
(622)
2,694
383
74,570
(17,907)
9,381
(612)
2006
£’000
6,665
568
–
–
–
891
8,124
(318)
2005
£’000
11,142
–
–
–
–
511
11,653
–
21,428
29,101
–
–
65,432
29,234
40,754
1
MICHAEL PAGE INTERNATIONAL
NOTES TO THE ACCOUNTS
21. 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
Bank loans
Net (debt)/funds
22. Disposal of business
Group
Company
2006
£’000
23,355
12,232
35,587
(43)
35,544
(39,150)
(3,606)
2005
£’000
11,095
8,965
20,060
(281)
19,779
(6,700)
13,079
2006
£’000
as restated
2005
£’000
–
–
–
–
–
–
–
–
–
–
(39,150)
(39,150)
(6,700)
(6,700)
In the prior year, the Group sold a French business dealing in the placement of subcontractors 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.
23. Commitments
Operating lease commitments
At 31 December 2006 the Group was committed to make the following payments in respect of non-cancellable operating leases:
Leases which expire:
Within one year
Within two to five years
After five years
Land and buildings
Other
2006
£’000
2005
£’000
1,034
25,280
53,088
79,402
2,205
17,718
50,517
70,440
2006
£’000
284
4,645
–
4,929
2005
£’000
245
2,820
–
3,065
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 £0.6m as at 31 December 2006 (2005: £0.4m) relating to property, plant and
equipment. The Group had contractual capital commitments of £0.2m as at 31 December 2006 (2005: £nil) 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 2006 amounted to £6.3m (2005: £6.4m).
2
ANNUAL REPORT AND ACCOUNTS 2006
2. Contingent liabilities
The Company has provided guarantees to other Group undertakings amounting to £8.9m (2005: £5.0m) in the ordinary course of
business. It is not anticipated that any material liabilities will arise from the contingent liabilities.
2. Events after the balance sheet date
Between 31 December 2006 and 16 February 2007 161,434 options were exercised, which has led to an increase of share capital
of £1,614 and an increase in share premium of £299,883.
26. Related party transactions
Identity of related parties
The Group has a related party relationship with its Directors and members of the Executive Committee, and subsidiaries
(Note 12).
Transactions with key management personnel
Key management personnel are deemed to be the Directors and members of the Executive Committee. 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. For transactions with Directors see the Remuneration Report on pages 39 to
44. Transactions with the remaining members of the Executive Committee are disclosed below.
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:
Short-term employee benefits
Pension costs - defined contribution plans
Termination benefits
2006
£’000
468
33
63
2005
£’000
85
2
–
Relocation costs of £98,000 were incurred in the year for key management personnel. Their compensation is included in employment
costs (Note 4).
In addition, 50,000 options were granted under the Executive Share Option Scheme to the members of the Executive Committee
during the year at an exercise price of 309.9p.
The increase in emoluments in the current year represents members being on the Committee for a full year.
Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on
consolidation and are not disclosed in this note. Details of transactions between the parent company and subsidiary undertakings
are shown below.
Dividends received
Amounts owed by
related parties
Amounts owed to
related parties
2006
£’000
8,140
2005
£’000
2006
£’000
2005
£’000
2006
£’000
2005
£’000
11,668
38,067
47,576
229,641
218,224
3
MICHAEL PAGE INTERNATIONAL
SHAREHOLDER INFORMATION AND ADVISERS
Annual General Meeting
To be held on 23 May 2007 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 31 December 2006
To be paid (if approved) on 5 June 2007 to shareholders on the register on 4 May 2007.
Company secretary
Kelvin Stagg
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:
Page House, 1 Dashwood Lang Road
Addlestone, Weybridge KT15 2QW
Tel: 01932 264144
Fax: 01932 264297
Auditors
Deloitte & Touche LLP
Chartered Accountants
Stonecutter Court
1 Stonecutter Street
London, EC4A 4TR
Solicitors
Herbert Smith
Exchange House
Primrose Street
London EC2A 3TR
Joint Corporate Brokers
Deutsche Bank
Winchester House
1 Great Winchester Street
London
EC2N 2DB
Citigroup
33 Canada Square
Canary Wharf
London E14 5LB
Key dates
Ex-Dividend date
Record date
Annual General Meeting
Payment of proposed final ordinary dividend
Interim results announcement
Registrars
Capita Registrars
Northern House
Woodstone Park
Fenay Bridge
Huddersfield
West Yorkshire
HD8 0LA
Bankers
HSBC Bank plc
West End Business Banking Centre
70 Pall Mall
London SW1Y 5GZ
2 May 2007
4 May 2007
23 May 2007
5 June 2007
20 August 2007
ANNUAL REPORT AND ACCOUNTS 2006
FIVE YEAR SUMMARY
INCOME STATEMENT
Turnover
Gross profit
Operating profit
Profit before tax
Profit attributable to equity holders
UK GAAP
IFRS
2002
£’000
383,470
192,648
32,136
32,597
21,154
2003
£’000
372,616
178,485
21,783
22,409
13,745
2004
£’000
433,731
210,641
38,858
38,859
34,336
2005
£’000
523,810
267,581
66,519
66,136
49,630
2006
£’000
649,060
348,817
97,367
96,959
65,447
Basic earnings per share (pence)
5.8
3.8
9.8
14.8
19.6
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.
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 2007 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 2006.
2. To declare a final dividend on the ordinary share capital of the Company for the year ended 31 December 2006 of 4.2p per
share.
3. To re-elect Charles-Henri Dumon as a director of the Company (Note 2)
4. To re-elect Sir Adrian Montague as a director of the Company (Note 2)
5. To re-elect Stephen Box 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 2006 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 £1,099,699 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 £166,621,
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 33,324,208;
(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;
6
ANNUAL REPORT AND ACCOUNTS 2006
(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
Kelvin Stagg
Company Secretary
Page House, 1 Dashwood Lang Road
Addlestone, Weybridge KT15 2QW
Registered in England No. 3310225
28 February 2007
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. Sir Adrian Montague, Stephen Box and Charles-Henri Dumon will retire by rotation and are seeking reappointment at the
Annual General Meeting. Biographical information on each of the Directors is contained on pages 28 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. There are currently no shares held as Treasury Shares.
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 will be cancelled.
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.
MICHAEL PAGE INTERNATIONAL
GERMANY
Dusseldorf
Frankfurt
Munich
Berlin
THE NETHERLANDS
Amsterdam
Eindhoven
Rotterdam
Amersfoort
Utrecht
UNITED KINGDOM
Basingstoke
Birmingham
Brighton
Bristol
Bromley
Cambridge
Cardiff
Chelmsford
Coventry
Crawley
Croydon
Ealing
Edinburgh
Glasgow
Guildford
Harrow
Kingston
Leeds
Liverpool
London
Maidstone
Manchester
Middlesex
Milton Keynes
Nottingham
Oxford
Peterborough
Reading
Sheffield
Slough
Southampton
St Albans
Stockport
Swindon
Warrington
Watford
Weybridge
IRELAND
Dublin
BELGIUM
Brussells
Antwerp
SWITZERLAND
Geneva
Zurich
FRANCE
Paris
Aix en Provence
Lille
Lyon
Nantes
Neuilly sur Seine
Strasbourg
Cesson Sevigne
Toulouse
Courbevoie
Clichy
Issy les Moulineaux
Orleans
Rennes
Rouen
Versailles
Marseille
Noisiel
SPAIN
Madrid
Barcelona
PORTUGAL
Lisbon
ITALY
Milan
Rome
Turin
Bologna
SWEDEN
Stockholm
POLAND
Warsaw
RUSSIA
Moscow
JAPAN
Tokyo
CHINA
Shanghai
Hong Kong
Sha Tin
MEXICO
Mexico City
CANADA
Toronto
USA
New York (NY)
Iselin (NJ)
Stamford (CT)
Boston (MA)
Chicago (IL)
Philadelphia (PA)
UAE
Dubai
BRAZIL
Sao Paulo
Rio de Janeiro
Campinas
SOUTH AFRICA
Johannesburg
SINGAPORE
Singapore
AUSTRALIA
Sydney (NSW)
Parramatta (NSW)
Chatswood (NSW)
Melbourne (Vic)
Wheeler’s Hill (Vic)
Perth (WA)
Brisbane (QLD)
GERMANY
Dusseldorf
Frankfurt
Munich
Berlin
THE NETHERLANDS
Amsterdam
Eindhoven
Rotterdam
Amersfoort
Utrecht
UNITED KINGDOM
Basingstoke
Birmingham
Brighton
Bristol
Bromley
Cambridge
Cardiff
Chelmsford
Coventry
Crawley
Croydon
Ealing
Edinburgh
Glasgow
Guildford
Harrow
Kingston
Leeds
Liverpool
London
Maidstone
Manchester
Middlesex
Milton Keynes
Nottingham
Oxford
Peterborough
Reading
Sheffield
Slough
Southampton
St Albans
Stockport
Swindon
Warrington
Watford
Weybridge
BELGIUM
Brussells
Antwerp
FRANCE
Paris
Aix en Provence
Lille
Lyon
Nantes
Neuilly sur Seine
Strasbourg
Cesson Sevigne
Toulouse
Courbevoie
Clichy
Issy les Moulineaux
Orleans
Rennes
Rouen
Versailles
Marseille
Noisiel
IRELAND
Dublin
SWITZERLAND
Geneva
Zurich
ANNUAL REPORT AND ACCOUNTS 2006
Growing entirely organically, rather
than by mergers or acquisitions, we now
have nearly 4,000 people in 133 offices
in 23 countries worldwide.
SWEDEN
Stockholm
POLAND
Warsaw
RUSSIA
Moscow
SPAIN
Madrid
Barcelona
PORTUGAL
Lisbon
ITALY
Milan
Rome
Turin
Bologna
JAPAN
Tokyo
CHINA
Shanghai
Hong Kong
Sha Tin
MEXICO
Mexico City
UAE
Dubai
BRAZIL
Sao Paulo
Rio de Janeiro
Campinas
SOUTH AFRICA
Johannesburg
SINGAPORE
Singapore
AUSTRALIA
Sydney (NSW)
Parramatta (NSW)
Chatswood (NSW)
Melbourne (Vic)
Wheeler’s Hill (Vic)
Perth (WA)
Brisbane (QLD)
CANADA
Toronto
USA
New York (NY)
Iselin (NJ)
Stamford (CT)
Boston (MA)
Chicago (IL)
Philadelphia (PA)
www.michaelpage.co.uk