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Annual Report 2007

Plain-text annual report

Annual Report & Accounts 2007 In just thIrty years, MIchael Page InternatIonal has grown to becoMe one of the world’s best-known and Most resPected recruItMent consultancIes. today, we are Proud to set the standard wIthIn our ProfessIon for sPecIalIst servIce, wIth a Personal touch. 16 Chairman’s Statement 18 operational review 24 Financial review 30 Board of Directors 32 Directors’ report 38 Corporate Governance 43 remuneration report 50 Independent auditors’ report to the members of Michael page International plc 53 Consolidated Income Statement 54 Consolidated Statement of Changes in equity 55 Statement of Changes in equity – parent Company 56 Balance Sheets 57 Cash Flow Statements 58 notes to the accounts 84 Shareholder Information and advisers 90 Five Year Summary 91 annual General Meeting annual report 007  Our office locations YE AR ENDED 31 DECEMBER 2007 GROWING ENTIRELY ORGANICALLY, RATHER THAN BY MERGERS OR ACQUISITIONS, WE NOW HAVE OVER 5,000 PEOPLE IN 149 OFFICES IN 25 COUNTRIES WORLDWIDE. Highlights 2007 Revenue (£m) Gross Profit (£m) Profit before tax (£m) 147.4 2007 97.0 66.1 38.9 22.4 2006 2005 2004 2003* Headcount at year end 5,052 2007 3,758 2006 2,926 2005 2,647 2004 2,359 2003 831.6 2007 649.1 2006 523.8 2005 433.7 2004 372.6 2003* 478.1 2007 348.8 2006 267.6 2005 210.6 2004 178.5 2003* Basic earnings per share (pence) Dividend per share (pence) 31.1 19.6 14.8 9.8 3.8 2007 2006 2005 2004 2003* 8.0 6.0 5.0 4.0 3.4 2007 2006 2005 2004 2003 • Record levels of revenue and profits • Gross margin increased to 57.5% (2006: 53.7%) • Conversion rate‡ up to 31.3% (2006: 27.9%) • Over 60% of gross profits generated outside the UK • EMEA gross profits up 55% and now largest region • Americas gross profits up 79% • Cash generated from operations up 88.6% to £148.7m (2006: £78.8m) • 15.1m shares repurchased at a cost of £74.9m (includes 3.5m shares repurchased into trust) • Group headcount increased by 34% to 5,052 employees *00 amounts stated under uK Ga ap. ‡ the amount of operating profit as a proportion of gross profit. annual report 007  Global Profits 2007 “” record oPeratIng ProfIts of £149m, uP 54%. “007 was an outstanding year for Michael page, with record results in each quarter as we continued our significant organic expansion, both by geography and discipline. Since the start of the current year, with the exception of certain sectors related to the banking market, we continue to experience similar year- on-year increases in activity levels in all of our regions. “our consistent organic growth strategy of investment through cycles, coupled with structural changes are driving our growth in the specialist recruitment market. We believe this investment has, in turn, given us greater resilience to the economic cycle by virtue of our increased diversification. Whilst we are mindful of the uncertainties surrounding the current global economic outlook, we shall continue to make strategic and measured investments to position the business for long-term growth. the Board remains confident in the prospects for Michael page.” Steve Ingham, CEO +37% +54% Gross Profit £m Operating Profit £m 478.1 2007 348.8 2006 149.4 97.4 2007 2006  MIChael paGe InternatIonal changing shape of the business: 1990-2007 GEOGRaPHIC DEvElOPmEnt Of GROSS PROfIt eMea united Kingdom asia pacific americas • Geographic spread by number of countries increasing and speeding up: 1990: , 000: 1, 007:  £478.1m • eMea the largest region at 1% ) £ ( t i f o r P s s o r G 500m 400m 300m 200m 100m 0 • uK becoming less dominant: 1990: 6%, 000: 0%, 007: 9% • americas rising fast: 1990: 0%, 000: %, 007: 8% • In 007, gross profit in the americas greater than total Group gross profit in 1990 • In the last seven years, eMea has grown to over 80% of total Group gross profit in 000 £238.3m £31.4m 1990 2000 2007 DISCIPlInE DEvElOPmEnt Of GROSS PROfIt Finance & accounting legal, hr, technology, Secretarial & other Marketing, Sales & retail engineering, property & Construction, procurement & Supply Chain • Diversification by discipline has increased rapidly. non-Finance and accounting gross profit: 1990: 17%, 000: %, £500m £400m ) £ ( t i f o r P s s o r G £300m £200m £100m 0 £31.4m 1990 £238.3m £478.1m 007: 6% • 007 growth in Finance and accounting gross profit 8%, growth in non-Finance and accounting gross profit 0% • More consultants now focused on non-Finance and accounting recruitment than were employed by the Group in 000 • Growth from Finance and accounting recruitment between 000 and 007: 6%, from non- Finance and accounting between 2000 2007 000 and 007: 168% annual report 007  at a glance performance bY region in 2007 the success of our strategy to diversify the business, both geographically and by discipline, through organic growth is increasingly evident, with the eMea region now the largest in the Group. over 60% of the Group’s gross profits were generated outside the uK. We have also added two new countries, luxembourg and argentina, to the Group during 007. EmEa (COntinEntAl EUROpE, MiddlE EAst & AfRiCA) +55% gross profit Gross Profit £196.4m 2007 £126.6m 2006 Operating Profit £63.0m £34.2m 2007 2006 +79% GRoSS PRoFIt Americas 72 Offices 14 Disciplines 2,078 Employees 25th countRY Argentina amERICaS Gross Profit Operating Profit +79% gross profit £38.4m £21.5m 2007 2006 £6.2m £1.9m 2007 2006 15 Offices 10 Disciplines 543 Employees 6 MIChael paGe InternatIonal 4 new oFFIceS United Kingdom +27% GRoSS PRoFIt Asia Pacific +45% Headcount EMEA UnItED kInGDOm Gross Profit Operating Profit +19% gross profit £186.0m 2007 £155.8m 2006 £59.4m £44.3m 2007 2006 50 Offices 12 Disciplines 1,799 Employees 4 new oFFIceS United Kingdom +27% GRoSS PRoFIt Asia Pacific +45% Headcount EMEA aSIa PaCIfIC Gross Profit Operating Profit +27% gross profit £57.2m £45.0m 2007 2006 £20.8m £17.1m 2007 2006 12 Offices 10 Disciplines 632 Employees annual report 007 7 +79% GRoSS PRoFIt Americas 25th countRY Argentina Performance bY region in 2007 EmEa (COntinEntAl EUROpE, MiddlE EAst & AfRiCA) Gross Profit Operating Profit +55% gross profit £196.4m 2007 £126.6m 2006 £63.0m £34.2m 2007 2006 72 Offices 14 Disciplines 2,078 Employees During 007, the eMea region achieved strong growth and is now the largest region in the Group, both in terms of gross profit and headcount. revenue in eMea increased by .0% to £1.1m (006: £.0m) and gross profit increased by .% to £196.m (006: £16.6m). as a result of the increased revenue and high operational gearing, the region produced an increase of 8.% in operating profit to £6.0m (006: £.m), a conversion rate of .1% (006: 7.0%). headcount in the region increased by 60 (%) during the year to ,078, with the majority joining existing offices. In a number of locations we have taken larger office space to accommodate the growth and we continued our longer-term investment opening in luxembourg and starting new offices in hamburg, Valencia and Bordeaux. UnItED kInGDOm Gross Profit Operating Profit +19% gross profit £186.0m 2007 £155.8m 2006 £59.4m £44.3m 2007 2006 50 Offices 12 Disciplines 1,799 Employees In the uK, revenue increased by 1.% to £60.m (006: £1.m) and gross profit by 19.% to £186.0m (006: £1.8m). operating profits were £9.m (006: £.m), an increase of .% and represent a conversion rate of 1.9% (006: 8.%). We invested heavily during the year, increasing headcount by 17% to 1,799 and opening new offices in pall Mall and Canary Wharf in london, leicester and aberdeen. During the year we continued to expand the page personnel office network from  to 7, opening in Swindon and Sheffield. I am delighted to report another outstanding year in Scotland, growing gross profit by 0%. In 007, we opened a new office in aberdeen and moved into larger offices in edinburgh. Scotland now represents % of uK gross profit. 8 MIChael paGe InternatIonal aSIa PaCIfIC Gross Profit Operating Profit +27% gross profit £57.2m £45.0m 2007 2006 £20.8m £17.1m 2007 2006 12 Offices 10 Disciplines 632 Employees In the asia pacific region, revenue was 17.0% higher at £97.8m (006: £8.6m), gross profit was 7.% higher at £7.m (006: £.0m) and operating profit increased .1% to £0.8m (006: £17.1m), with a conversion rate of 6.% (006: 7.9%). We invested in all the existing offices in the region, increasing headcount by % to 6. In australia, (7% of asia pacific) gross profit and operating profit grew in constant currency by .0% and 7.% respectively. We have an excellent opportunity to expand our business significantly in China and plan to open in Beijing and Shenzhen in the first half of 008. amERICaS Gross Profit Operating Profit +79% gross profit £38.4m £21.5m 2007 2006 £6.2m £1.9m 2007 2006 15 Offices 10 Disciplines 543 Employees revenue for the region was 7.1% higher at £.m (006: £0.1m), gross profit increased by 79.0% to £8.m (006: £1.m), operating profit increased to £6.m (006: £1.9m), with a conversion rate of 16.1% (006: 8.7%). headcount in the region increased by 9% to  and we opened new offices in hartford, atlanta, Curitiba in Brazil and our first office in argentina in Buenos aires. In north america, we have continued our rapid expansion of existing and new offices and the discipline roll-out has continued at pace. We now have nine offices and over 80 staff. In latin america, we now have over 60 staff and in Mexico, which opened in 006, we are well ahead of plan, with a good level of profits. annual report 007 9 Strategy consistent through cYcLes lOnG tERm On InvEStmEnt 1996 singapore 2001 switzerland japan 2002 belgium sweden 2006 south africa russia Ireland u.a.e. Mexico 2008 austria turkey new Zealand 1997 spain Italy 2000 Por tugal brazil 2005 Poland 2007 luxembourg canada argentina 1995 hong kong 2003 china 1976 united kingdom 1985 australia 1993 germany 1998 usa 1987 netherlands 1986 france flExIBlE wItH HEaDCOUnt • 86 teams worldwide, typically a Manager and three Consultants • Manager has full p&l responsibility for team • Significant share of profit each quarter allocated to team as bonus • Individual bonuses allocated subjectively, based on contribution and value to team • new consultant hired, costs rise ~0%, consultant lost, costs fall ~0% • teams in bull market maximise potential from existing members before hiring after Director authority • teams in bear market ensure they reward, using bonus, to retain strongest /lose weakest 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 MIChael paGe InternatIonal 6000 5000 4000 3000 2000 1000 0 t n u o c d a e H 10 to organicaLLY grow existing and new teams, offices, discipLines and countries with a consistent te am and meritocratic cuLture s Tea m C o u Offi c e s Culture s e ciplin n tries D i s 1976 united kingdom 1985 australia 1993 germany 1998 usa 1996 singapore 2001 switzerland japan 2002 belgium sweden 2006 south africa russia Ireland u.a.e. Mexico 2008 austria turkey new Zealand 1987 netherlands 1986 france 1997 spain Italy 2000 Por tugal brazil 2005 Poland canada 2007 luxembourg argentina 1995 hong kong 2003 china t n u o c d a e H 6000 5000 4000 3000 2000 1000 0 flExIBlE wItH HEaDCOUnt • 86 teams worldwide, typically a Manager and three Consultants • Manager has full p&l responsibility for team • Significant share of profit each quarter allocated to team as bonus • Individual bonuses allocated subjectively, based on contribution and value to team • new consultant hired, costs rise ~0%, consultant lost, costs fall ~0% • teams in bull market maximise potential from existing members before hiring after Director authority • teams in bear market ensure they reward, using bonus, to retain strongest /lose weakest 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 annual report 007 11 Strategy consistent through cYcLes ClEaR On BRanD Executive Search Qualified Professional Clerical Professional Generalist Staffing 25 Countries 91 Offices 2,964 fee Earners 8 Countries 79 Offices 873 fee Earners COnSIStEnt OvER tImE • no acquisitions, one It platform, one culture, one • organic growth, home grown Directors/MD’s run all remuneration strategy disciplines/countries • Consistent recruitment, training, development to ensure • Strategic and measured investment in downturns has consistent quality of fee earners maximised growth in upturns • Consistent brand strategy 1 MIChael paGe InternatIonal DEEP In ExPERIEnCE senior Operational Management no. tenure in Mp • 100% rMDs/executive Directors joined before 000 executive Directors regional Managing Directors Managing Directors  1 8 1 years 16 years 11 years • 7% rMDs/executive Directors joined before 1990 • Directors experienced in managing upturns and downturns • Strength of working relationships improves communication Directors 1 8 years • hired and trained in one culture 177 ave c.11 years • >0% remuneration linked to Group profit • MDs receive ltIp, Directors share options executive Directors Managing Directors regional Managing Directors Directors A v e r a g e t e r m a t M i c h a e l P a g e 1985 1990 Average Date Joined 1995 2000 2007 N o . o f C u r r e n t D i r e c t o r s annual report 007 1 Growth how we achieVed these resuLts “” growIng entIrely organIcally, rather than by Mergers or acquIsItIons... 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 over ,000 people in 19 offices in  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. Coming from all industry sectors, 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. 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. 1 MIChael paGe InternatIonal finding solutions that are needed Being recognised for setting the standard our clients are competing in an increasingly fierce war a growing number of initiatives and awards are testament to for qualified talent. as a result they rely on Michael page our commitment to delivering quality. We have been voted International to provide creative and innovative solutions to one of Britain’s strongest BB Superbrands since 000 and meet their needs. voted into the Sunday times 100 Best Companies to Work Whether a carefully targeted online campaign, a database For since 00. search, or a desire to source candidates internationally, our growing reputation isn’t confined to the uK’s shores. each solution is bespoke to achieve our clients objectives. overseas, the Boston Business Journal has voted us one this consultative approach has been recognised by the level of the “Best places to Work in Massachusetts”, the hartford of repeat business Michael page receives as well as the ever Business Journal has voted us one of the “Best places to increasing number of clients served. Work in Connecticut” and Crain’s has ranked us as the no.1 Quality underpins everything we do. to deliver solutions executive recruiting Firm in new York City. consistently to such a high standard, we are fully committed While this external recognition is warmly welcomed, we are to the ongoing training of all of our staff and the continued also keen to celebrate some of our own internal initiatives. roll-out of superior systems and processes. 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 also our employees. 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. Within our business we vigorously promote a culture of diversity. our clients rely on us to propose candidates that have a healthy range of attitudes and characteristics that fairly reflects the society we live in. to that end, we have our own internal diversity policy that is communicated to all employees. this ensures we offer our clients the best candidates on the basis of their relevant aptitudes, skills and abilities and that those candidates are drawn from diverse backgrounds. We also provide training and focus-groups on diversity, as well PassIon: It’s our passion to achieve the very best for our as participating in a number of external initiatives such as the clients and candidates that drives us to outperform and beat employers Forum on age, Business in the Community, Global Graduates, race for opportunity and the Brokerage (a charity whose aim is to increase the ambition and employability of young people in the 11 inner-city boroughs of london). 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. annual report 007 1 Chairman’s statement 007 has been an outstanding year for the Group, producing record results quarter after quarter while continuing significant organic expansion, both geographically and by discipline. Market conditions have been strong, with favourable economic activity and positive business confidence driving demand for talent, combined with a shortage of suitably qualified candidates. Highlights revenue for the year ended 1 December 007 increased 8.1% to £81.6m (006: £69.1m) and gross profit grew by 7.1% to £78.1m (006: £8.8m). reflecting strong market conditions, 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 7.% (006: .7%). Given the Group’s high operational gearing, operating profits increased by .% to a record £19.m (006: £97.m). the Group’s conversion rate, which is the proportion of gross profit converted into operating profit, rose to 1.% (006: 7.9%). profit before tax was £17.m (006: £97.0m) and basic earnings per share increased by 8.7% to 1.1p (006: 19.6p). Cash generated from operations increased by 88.6% to £18.7m (006: £78.8m) driven by the increase in operating profits and good working capital management. the success of our strategy to diversify the business, both geographically and by discipline, through organic growth is increasingly evident, with the eMea region now the largest in the group. over 60% of the Group’s gross profits were generated outside the uK. With a heritage in Finance and accounting recruitment, it is likely that these disciplines will continue to represent a significant proportion of the business for some time. however, the other professional disciplines, we are successfully rolling-out, now account for just over % of the Group’s gross profit and the proportion generated from Finance and accounting will continue to reduce. “” ...ProducIng record results quarter after quarter whIle contInuIng sIgnIfIcant organIc exPansIon, both geograPhIcally and by dIscIPlIne. 16 MIChael paGe InternatIonal Dividends and share repurchases Board of Directors With a strong growth in earnings, it is the Board’s intention to on  May 007 ruby McGregor-Smith, Chief executive of continue its policy of reviewing the annual dividend, with a view MItIe Group plc, joined as a non-executive director. We are to increasing it by a level which we believe can be sustained delighted to welcome her to the Board. throughout economic cycles. Surplus cash generated in excess of these dividend levels will continue to be returned to Prospects 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 %. a final dividend of .6p (006: .p) per share is proposed which, together with the interim dividend of .p (006: 1.8p) per share paid in october, makes a total dividend for the year of 8.0p (006: 6.0p) per share. While the economic cycle is the most important short-term factor, there are a number of long-term structural changes that are having a positive impact on the specialist recruitment markets. these key drivers include a deregulation of the labour markets, demographic changes, an increased global shortage of qualified professionals, increasing job mobility and a greater awareness and acceptance for companies to use specialist the final dividend, if approved, will be paid on 9 June 008 recruitment services. to those shareholders on the register at 9 May 008. the total dividend is covered .9 times by basic earnings per share of 1.1p. We repurchased shares throughout 007, acquiring 1.1m shares for £7.9m. We have no intention of changing our strategy on the Group’s capital structure. Given the fall in the share price in the latter part of 007, and our intention to continue to use surplus cash to repurchase the Company’s shares, in order to not be unduly constrained, we will be seeking shareholders’ consent for an increase in the maximum authority to repurchase shares from 10% to 1% at the annual General Meeting on  May 008. Employees I wish to express my thanks to the employees worldwide for their commitment, loyalty and efforts throughout the year which the latter part of 007 has created significant uncertainty over the short-term prospects for the global economy and consequently business confidence, investment and hiring plans. It is a characteristic of the permanent recruitment market that earnings visibility is short. Since the start of the current year, with the exception of certain sectors related to the banking market, we continue to experience similar year- on-year increases in activity levels in all of our regions. our next trading statement covering the first quarter, which in this year, unlike 007, includes the easter period, will be released on 7 april 008. delivered the outstanding performance in 007. Sir adrian montague CBE Chairman  March 008 annual report 007 17 Operational reView In 007, we have grown gross profits by 7% and delivered record operating profits of £19m, up %. this time last year we described 006 as a very strong year for the Group, growing gross profits 0% and producing £97m of operating profit. We also said that we would continue with our strategy of expanding organically, gradually diversifying and reducing our dependency upon any single geographic market or individual discipline and that we would accelerate the pace of implementation. our results for 007 confirm that we have followed this through and how successful we have been. having opened in five countries in 006, our geographic expansion continued in 007 with openings in luxembourg and argentina. More significantly, we increased our fee generating and support staff by nearly 1,00 people, enabling us to expand existing and open new offices, as well as continuing our discipline roll-out. at the end of 007, the Group had ,0 (006: ,78) fee generating and support staff, operating from 19 (006: 1) offices in  (006: ) countries. Branding and market positioning over the last 0 years, the Group has developed a clear brand strategy for the middle to senior-management professional fee earners offices* countries ,96 91  87 79 8 *In some locations offices are shared. 18 MIChael paGe InternatIonal market. Michael page International is now a high-profile Both the Michael page and page personnel businesses are brand, globally recognised, that enables us to attract significant in terms of countries, office networks and fee consultants, candidates and clients in an ever increasing earners as illustrated in the chart below left. number of countries. as a result of the complex variation in legislation relating to how temporary and permanent recruitment is managed in different countries, we developed two brands for the clerical professional market. In the uK, where we were only focused on clerical accounting professionals, the brand was accountancy additions. In europe, where in many countries legislation required us to have a separate business for temporary recruitment, the brand is page personnel. Diversification the objective of our strategy to diversify the business, both geographically and by discipline, while remaining focused on the cyclical recruitment market, is to reduce the dependency upon any one particular market. We believe we have been very successful in implementing this strategy as illustrated in the table below which compares the gross profit from the business today with the position at the end of 000. With changes in legislation over recent years, page personnel can now operate, as did accountancy additions, in both In 000, nearly 0% of Group gross profit was generated in the uK. In 007, it was less than 0%, with eMea now our temporary and permanent recruitment. this and our desire to largest region. roll-out the brand to other disciplines, as we have successfully done in europe, has resulted in us clarifying our strategy at this level with one brand. In november 007, accountancy additions was rebranded to page personnel Finance and accounting and during 007 we launched in the uK two other page personnel disciplines, human resources and Secretarial. In 000, nearly 90% of Group gross profit was generated in four countries. In 007, these same four countries generated two-thirds of Group gross profit. In 000, two-thirds of Group gross profit was generated by Finance and accounting. In 007, it was just over a half. 2007 2000 £78.1m £8.m 1% 9% 1% 8% Gross profit % of gross profit by Region eMea uK asia pacific americas % of gross profit from four largest countries uK France netherlands australia top  9% 1% 7% 7% 66% 6% 9% 1% % 9% % 6% 9% 89% % of gross profit by Discipline Finance and accounting Marketing, Sales and retail legal, technology, hr, Secretarial and other engineering, property & Construction, procurement & Supply Chain 2007 2000 % 19% 1% 66% 1% 10% 1% % annual report 007 19 Continental Europe, middle East and africa (EmEa) During 007, the eMea region achieved strong growth and is now the largest region in the Group, both in terms of gross profit and headcount. revenue in eMea increased by .0% to £1.1m (006: £.0m) and gross profit increased by .% to £196.m (006: £16.6m). as a result of the increased revenue and high operational gearing, the region produced an increase of 8.% in operating profit to £6.0m (006: £.m), a conversion rate of .1% (006: 7.0%). headcount in the region increased by 60 (%) during the year to ,078, with the majority joining existing offices. In a number of locations we have taken larger office space to accommodate the growth and we continued our longer-term investment opening in luxembourg and starting new offices in hamburg, Valencia and Bordeaux. France (% of eMea), which remains our second largest and most established business after the uK, had a very successful year growing gross profits by % in constant currency. the restructuring of the Michael page and page personnel businesses, following the introduction of the “Borloo” law, is now starting to deliver significant growth with the back drop of stable economic conditions. While the growth in France has been impressive, there remains significant scope for further growth, particularly when recognising that the 007 gross profits of our French business are still approximately 10% below the gross profits produced in 000 and 001. elsewhere in the region, collectively, our businesses during 007 maintained the gross profit growth rate of 006 at 68%. all countries contributed to this strong growth as we continue our discipline and geographic expansion. In constant currency, the netherlands (18% of eMea) grew gross profits by 7%, Germany (1% of eMea) grew gross profits by 7%, Spain (11% of eMea) grew gross profits by 9%, Italy (8% of eMea) grew gross profits by 61% and Switzerland (8% of eMea) grew gross profits by 116%. “” durIng 2007, eMea achIeved strong growth and Is now the largest regIon In the grouP, both In terMs of gross ProfIt and headcount. 8% 18% 13% 9% 11% 8% EmEa GROSS PROfIt 2007 +% Growth France 33% +99% Growth Belgium, South africa, uae, Sweden, poland, portugal, russia, Ireland, luxembourg +61% Growth +9% Growth Italy Spain +7% Growth Germany +7% Growth holland +116% Growth Switzerland Growth rates in local currency 0 MIChael paGe InternatIonal the new businesses which opened in 006 in Moscow, the combined gross profits of Michael page Marketing, Johannesburg, Dubai and Dublin, together with luxembourg Michael page Sales and Michael page retail, were % in 007, are ahead of plan. they continue to grow rapidly higher than in 006 and, combined, represented % and collectively had 6 staff at the end of 007. of uK gross profit. the Marketing and Sales businesses With operating profits increasing by 8% from an increase in gross profit of % and the conversion rate now at %, there is little spare capacity within these businesses and performed strongly and now operate from 10 and 9 locations respectively. retail, the smallest of the three businesses, had a tremendous year growing in excess of 0%. future growth in profits will largely be driven by investment in Michael page legal, Michael page technology, Michael page new staff and office space to accommodate them. human resources and Michael page Secretarial achieved United kingdom In the uK, revenue increased by 1.% to £60.m (006: £1.m) and gross profit by 19.% to £186.0m (006: £1.8m). operating profits were £9.m (006: £.m), an increase of .% and represent a conversion rate of 1.9% (006: 8.%). We invested heavily during the year, increasing headcount by 17% to 1,799 and opening new offices in pall Mall and Canary Wharf in london, leicester and aberdeen. the gross profits of the Finance and accounting businesses, which generated 1% of uK gross profit, were 11% higher than in 006. Michael page Finance, the largest of the three businesses, produced a mixed performance, with good growth in the regions, being held back by below expectation growth in london and the South east. a number of changes have been made to the management structure of these growth of 6% and, combined, represented 16% of uK gross profit. From the legal business, we created a new business, Michael page offshore, which focuses on placing legal, tax and accounting candidates in some of the many offshore tax havens around the world. the more recently created Michael page engineering & Manufacturing, Michael page procurement & Supply Chain and Michael page property & Construction businesses, grew at over 0% and now represent 7% of uK gross profit. these businesses all grew significantly in 007 and given the enormous scope for growth in these disciplines, we will continue to invest heavily in them. I am delighted to report another outstanding year in Scotland, growing gross profit by 0%. In 007, we opened a new office in aberdeen and moved into larger offices in edinburgh. Scotland now represents % of uK gross profit. businesses, which should produce an improved performance asia Pacific in 008. Michael page Financial Services had a very strong first half of the year with good growth. the “credit crunch” in the latter half of 007 has impacted certain parts of the banking market and consequently our growth rate slowed, being flat year-on-year in the fourth quarter. During the year we continued to expand the page personnel office network from  to 7, opening in Swindon and Sheffield. In the asia pacific region, revenue was 17.0% higher at £97.8m (006: £8.6m), gross profit was 7.% higher at £7.m (006: £.0m) and operating profit increased .1% to £0.8m (006: £17.1m), with a conversion rate of 6.% (006: 7.9%). We invested in all the existing offices in the region, increasing headcount by % to 6. 7% 16% 5% 22% Uk GROSS PROfIt 2007 +11% Growth Finance & accounting +% Growth Marketing, Sales and retail +0% Growth Scotland 50% +6% Growth +% Growth legal, hr, technology, Secretarial and other engineering, property & Construction, procurement & Supply Chain annual report 007 1 In australia, (7% of asia pacific) gross profit and operating With very limited competition in latin america, the americas profit grew in constant currency by .0% and 7.% represents a tremendous long-term opportunity for the Group respectively, as anticipated, benefiting from the management to expand and we will continue to invest heavily to grow the and structural changes made in the second half of 006. businesses rapidly. this degree of investment results in the We continue to see numerous growth opportunities and conversion rate in the region being below that of the other with a strong australian economy, we have increased our regions. however, we anticipate that operating profits will headcount in australia by 6%, a large proportion of which grow at a faster rate than gross profits and the conversion joined during the second half of the year. margin will improve over time. In hong Kong, Sha tin, Shanghai, tokyo and Singapore, we achieved another year of substantial gross profit growth, with all locations having a record year. While we continue our discipline roll-out, some less mature offices derive a significant proportion of gross profit from one discipline. this is the case with our tokyo office, where in the fourth quarter of 007 our business slowed as the credit crunch impacted on demand in the banking sector. We have an excellent opportunity to expand our business significantly in China and plan to open in Beijing and Shenzhen in the first half of 008. the americas Investment in 2008 and outlook We made significant investment in 007, ahead of what was planned at the start of the year, as market conditions remained favourable. We plan further expansion in 008, with new offices already opened in Montreal, newcastle, Gothenburg and Seville and new country openings planned in austria, turkey and new Zealand. assuming market conditions remain favourable in the majority of countries in which we operate, these investments, together with our continued expansion of our existing businesses, should see our headcount reach 6,000 by the end of 008. revenue for the region was 7.1% higher at £.m an important factor in the success as a business has been (006: £0.1m), gross profit increased by 79.0% to £8.m our use of technology. our current recruitment system has (006: £1.m), operating profit increased to £6.m (006: supported our growth over the past five years, however, £1.9m), with a conversion rate of 16.1% (006: 8.7%). these systems continually develop and the next generation headcount in the region increased by 9% to  and we of systems are now available that will facilitate our continued opened new offices in hartford, atlanta, Curitiba, Brazil and growth. a project is underway throughout the Group to our first office in argentina in Buenos aires. replace the current recruitment system, with a view to the In north america, we have continued our rapid expansion first full implementation taking place early in 009. of existing and new offices and the discipline roll-out has the planned headcount levels, new countries and office continued at pace. We now have nine offices and over 80 openings, will result in an estimated 008 pre-bonus cost staff. In latin america, we now have over 60 staff and in base of approximately £0m, including all share-based Mexico, which opened in 006, we are well ahead of plan, charges. Bonuses will continue to be approximately % of with a good level of profits. pre-bonus operating profit. 43% aSIa PaCIfIC GROSS PROfIt 2007 +% Growth australia +9% Growth asia 57% Growth rates in local currency  MIChael paGe InternatIonal While we have identified numerous opportunities to continue It has always been, and will continue to be, our intention to our growth, we are mindful of the current and now widely- take decisions and make investments for the longer-term predicted weakening of global economic activity. all our benefit of our stakeholders. If there is a slowdown, we believe businesses are formally reviewed and forecasts revised on that the greater geographic and discipline diversification of a quarterly basis. at present there is considerable uncertainty the business that we have created since 000 will make over the extent of any economic slowdown and which the Group earnings more resilient to a slowing in economic region’s economies will be most affected. the severity of any activity when compared to previous slowdowns. I look slowdown is unlikely to impact significantly on our investment forward to reporting our progress each quarter as we plans for new country and office openings as we believe progress through 008. they represent excellent strategic long-term opportunities. however, a slowdown would impact the headcount growth plans of our more established businesses and in the event of a sustained global economic slowdown, our headcount would not reach 6,000 staff by the end of 008. We have an exceptional pool of ambitious and talented people in the Group, in particular at the senior management level, with proven expertise and skills required to launch new or grow existing businesses successfully. this team also has a track record of managing these businesses during recessions and economic slowdowns, while continuing to generate profits and cash. Furthermore, we have a track record in periods of economic slowdown of maintaining our infrastructure and market presence, while continuing to make strategic and measured investments for the longer-term, positioning the business for strong growth when economic conditions improve. Steve Ingham Chief executive  March 008 “” we have an excePtIonal Pool of aMbItIous and talented PeoPle In the grouP. 43% tHE amERICaS GROSS PROfIt 2007 +8% Growth north america +89% Growth latin america 57% Growth rates in local currency annual report 007  financial reView Income statement Revenue 007 was a record year for the Group with all regions delivering strong growth. reported revenue for the year increased by 8.1% to £81.6m (006: £69.1m). using constant currencies, revenue increased by 8.% to £8.m. revenue from temporary placements increased by 17.8% to £9.1m (006: £7.7m) and represented .8% (006: 7.%) of Group revenue. revenue from permanent placements was £9.6m (006: £76.m), an increase of .1%. Gross profit Gross profit for the year increased by 7.1% to £78.1m (006: £8.8m) and in constant currencies by 7.6% to £80.0m. the Group’s gross margin increased to 7.% (006: .7%). the growth in gross profit is greater than growth in revenue, due to the higher proportion of gross profit derived from permanent placements in 007, together with a higher volume of temporary placements at a higher gross margin reflecting strong market conditions. Gross profit from temporary placements was £106.1m (006: £87.8m) and represented .% (006: .%) of Group gross profit. the gross margin achieved on temporary placements was .% (006: .6%). “” 2007 was a record year for the grouP wIth all regIons delIverIng strong growth. GROUP qUaRtERly GROSS PROfIt tREnD: q1 2001 tO q4 2007 120 100 ) m £ ( t i f o r P s s o r G 80 60 40 6 . 9 6 9 . 6 6 7 . 8 5 9 . 9 4 4 . 1 5 5 . 9 4 8 . 7 4 9 . 3 4 0 . 5 4 0 . 5 4 7 . 5 4 8 . 2 4 9 . 9 5 7 . 6 5 5 . 3 5 3 . 2 5 1 . 8 4 2 . 9 7 3 . 8 6 2 . 9 6 2 . 0 7 2 . 8 2 1 4 . 3 2 1 0 . 1 2 1 5 . 5 0 1 1 . 3 9 1 . 9 8 4 . 7 8 20 Q1 Q2 Q3 2001 Q4 Q1 Q2 Q3 2002 Q4 Q1 Q2 Q3 2003 Q4 Q1 Q2 Q3 2004 Q4 Q1 Q2 Q3 2005 Q4 Q1 Q2 Q3 2006 Q4 Q1 Q4 Q2 Q3 2007  MIChael paGe InternatIonal financial Operating profit and conversion rates ,78 at 1 January 007 and increased during the year as a result of the Group’s organic long-term growth strategy, tight control on costs and profit-based bonuses, we have a business model which is operationally geared, as evidenced by the % increase in operating profits to £19.m from a by % to ,0. the ratio of directors and fee earners to support staff in 007 was 76: (006: 7:6). net interest 7% increase in gross profit. In constant currencies operating our intention is to manage the balance sheet with a broadly profits increased by .% to £10.m. With a strategy of organic growth, the Group incurs start-up costs and operating losses as investments are made to grow existing and new businesses, open new offices and launch new countries. Furthermore, significant increases in headcount take time to train and become productive. these characteristics of our growth strategy and the levels of investment impact on the conversion rates in any one reporting period. neutral net cash/debt position throughout the year, using surplus cash to repurchase shares and, as necessary, drawing on borrowing facilities. our net cash/debt position at the end of December each year is usually one of the strongest, due to the need to fund fourth quarter and annual profit-based bonus payments in January. We started 007 with net debt of £.6m and, after funding £7.9m of share repurchases throughout the year, we operated for a large period of 007 with net debt. at 1 December 007, the Group had net cash the Group’s conversion rate in 007 has increased to 1.% of £10.m. as a consequence, the Group has a net interest (006: 7.9%). the conversion rate in three of the Group’s charge for the year of £.0m (006: £0.m). four regions exceeds this rate, with the conversion rate in the americas being lower as a result of the greater level of new taxation investment and start-ups. as a result of the increased numbers of staff and offices, start- tax on profits was £.7m (006: £1.m), representing an effective tax rate of 1% (006: .%). the rate is higher than up costs and higher bonuses due to the increased profits, the uK Corporation tax rate of 0% due to disallowable items administrative expenses in the year increased by 0.7% to of expenditure and profits being generated in countries where £8.7m (006: £1.m). administrative expenses also the corporate tax rates are higher than 0%. the effective included £7.m of share-based charges (006: £8.m) in rate is lower than in 006 primarily as a result of reductions respect of the Group’s deferred annual bonus scheme, long- to tax charges in prior periods. With uK corporation tax rates term incentive plans and executive share option schemes. reducing from 0% to 8% in april 008, the Group’s effective the reduction in these share-based charges, compared tax rate in 008 is estimated to be in the region of 0.%. to 006, is due to lower employers’ social charges as a consequence of the reduction in the share price from .p at the end of 006, to 88.0p at the end of 007. approximately 7% of the Group’s operating expenses are staff-related, including the profit-related bonus, of our consultants and support staff. headcount of the Group was Share repurchases and share options It is the Group’s intention to continue to use share repurchases to return surplus cash to shareholders and to satisfy awards under the Group’s incentive share plan and deferred annual bonus plan. During the year, 1.1m shares were repurchased SCOPE fOR GROwtH: HEaDCOUnt Ratio fee earners : non fee earners Fee earners non Fee earners 4000 3500 3000 2500 2000 1500 1000 500 H1 1999 H2 1999 H1 2000 H2 2000 H1 2001 H2 2001 H1 2002 H2 2002 H1 2003 H2 2003 H1 2004 H2 2004 H1 2005 H2 2005 H1 2006 H2 2006 H1 2007 H2 2007 1999 000 001 00 00 00 00 006 007 9:1 8: 7: 8: 60:0 6:6 71:9 7:6 76: annual report 007  at a cost of £7.9m. 11.m of these shares were cancelled, Balance sheet with the remaining shares purchased by the Company’s employee benefit trust to satisfy future share plan awards. the Group had net assets of £107.9m at 1 December 007 (006: £80.m). the increase in net assets principally relates We have no intention of changing our strategy on the to the profit for the year of £101.7m, the credits relating to Group’s capital structure. Given the Group’s strong cash share schemes of £.m, currency movements of £8.1m generation, the intention to continue repurchasing shares and the exercise of share options of £8.7m, offset by share and the reduction in the Group’s share price in the latter repurchases of £7.9m and dividends paid of £1.8m. part of 007, in order to not be unduly constrained, we will, at the annual General Meeting on  May 008, be seeking shareholder approval for an increase in the authority to make share repurchases up to a maximum of 1%, from 10%, of the issued share capital. at the beginning of 007, the Group had 1.m share options our capital expenditure is driven primarily by two main factors: headcount, in terms of office accommodation and infrastructure and the maintenance and enhancement of our It systems. Capital expenditure, net of disposal proceeds, increased to £1.8m (006: £8.7m) reflecting the % increase in headcount and the opening and expansion of a number of offices. outstanding of which .m had vested. In March 007, .8m the most significant item in the balance sheet is trade share options were granted. During the course of the year receivables, which were £160.9m at 1 December 007 (006: options were exercised over .7m shares, generating £8.7m £118.m) representing debtor days of 8 (006:  days). in cash and 0.m share options lapsed. at the end of 007, 11.1m share options remained outstanding of which .1m Cash flow had vested. at the start of the year, the Group had net debt of £.6m. Earnings per share and dividends During the year, the Group generated net cash from operating activities of £18.7m (006: £78.8m), being £17.m In 007, basic earnings per share were 1.1p (006: 19.6p) (006: £10.8m) of eBItDa, an increase in working capital and diluted earnings per share were 0.6p (006: 19.0p). requirements of £1.1m (006: £8.7m) and movements in the weighted average number of shares for the year was provisions of £0.m (006: £0.m). 7.m (006: .7m) reflecting the shares repurchased during the year and the new shares issued to satisfy option exercises. the principal payments have been: • £1.8m (006: £8.7m) of capital expenditure, net of disposal proceeds, on property, infrastructure, information a % increase in the final dividend to .6p (006: .p) per systems and motor vehicles for staff; ordinary share is proposed which, together with the interim • taxes on profits of £6.m (006: £1.7m); dividend of .p (006: 1.8p) per ordinary share, makes a • dividends of £1.8m (006: £18.1m); and total dividend for the year of 8.0p (006: 6.0p) per ordinary share, an increase of %. the proposed final dividend, which amounts to £18.0m, will be paid on 9 June 008 to those shareholders on the register as at 9 May 008. • share repurchases of £7.9m (006: £8.m). £8.7m (006: £8.m) was received in the year from the issue of new shares to satisfy share option exercises. at 1 December 007, the Group had net cash of £10.m. CaSH REtURnED tO SHaREHOlDERS Interim Dividend Final Dividend net Shares Cancelled * Shares Bought into eBt ** * this represents the cash returned to shareholders by way of share buy backs, less cash received by the exercise of share options. ** this represents the cash used by the employee Benefit trust to purchase shares that were not allocated to share awards during the year. 100 80 60 40 20 0 2006 2007 6 MIChael paGe InternatIonal 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. the source of data and calculation methods year-on-year are on a consistent basis. kPI 2007 2006 definition, method of calculation and analysis Gross margin 7.% .7% 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 1.% 7.9% operating profit as a percentage of gross profit 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. productivity £1.k £16.k represents how productive fee earners are in the business and is calculated by (gross profit per fee earner) dividing the gross profit for the year by the average number of fee earners and directors. 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. Fee earner: 76: 7:6 represents the balance between operational and non-operational staff. support staff ratio the movement this year demonstrates faster growth in fee earners in relation to support staff. Source: Internal data. Debtor days 8  represents the length of time the company receives payments from its debtors. Calculated by comparing how many days billings it takes to cover the debtor balance. Source: Internal data. We achieved a higher level of 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. Debtor days have increased largely as a result of a greater proportion of receivables being in Continental europe where our debtor days are generally higher than in the uK. the ratio of fee earners to support staff has increased as a result of continued efficiencies arising from our effective use of technology and economies of scale. nEw COUntRIES 2007/2008 luxembourg argentina turkey austria new Zealand ExIStInG COUntRIES annual report 007 7 treasury management and currency risk Principal risks and uncertainties It is the Directors’ intention to continue to finance the activities the management of the business and the execution of and development of the Group from retained earnings, the Company’s strategy are subject to a number of risks. and to operate the Group’s business while maintaining the following section comprises a summary of what the net cash/debt position within a relatively narrow band. Michael page International plc believes are the main risks Cash generated in excess of these requirements will be used that could potentially impact the Group’s operating and to buy back the Company’s shares. financial performance. Cash surpluses are invested in short-term deposits, people with any working capital requirements being provided from Group cash resources, Group facilities, or by local overdraft facilities. the Group has set up a multi-currency notional cash pool in 007. Currently the main eurozone subsidiaries and the uK-based Group treasury subsidiary participate in this cash pool, although it is the intention to extend the scope of the participation to other Group companies. the structure facilitates interest and balance compensation of cash and bank overdrafts. 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 operational 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. the main functional currencies of the Group are Sterling, Macro economic environment euro 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. our policy is not to hedge this exposure. In certain cases, where the Group gives or receives short- term loans to and from other Group companies with different reporting currencies, it may use foreign exchange swap derivative financial instruments to manage the currency and interest rate exposure that arises on these loans. It is the Group’s policy not to seek to designate these derivatives as hedges. recruitment activity is largely driven by economic cycles and the levels of business confidence. the Board look to reduce the Group’s 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. a substantial portion of the Group’s gross profit arises from fees which are contingent upon the successful placement of a candidate in a position. If a client cancels the assignment at any stage in the process the Group receives no remuneration. as a consequence the Group’s visibility of gross profits is generally quite short and tends to reduce further during periods of economic downturn. OffICES In EaCH COUntRy added during 2007 added during 2006 offices at 2005 e c n a r F K U 50 s e c i f f o f o r e b m u N 40 30 20 10 0 s d n a l r e h t e N i n a p S a i l a r t s u A A S U y n a m r e G l y a t I d n a l r e z t i w S l i z a r B i a n h C n e d e w S l a g u t r o P d n a o P l a d a n a C n a p a J e r o p a g n S i i a s s u R i o c x e M d n a e r I l a c i r f A h t u o S g r u o b m e x u L a n i t n e g r A E A U i m u g e B l 8 MIChael paGe InternatIonal Competition the degree of competition varies in each of the Group’s regular reviews of the Group’s technology strategy to ensure that it supports the overall Group strategy. main regions. In the uK, australia and north america, the legal recruitment market is well developed, highly competitive and fragmented. the characteristics of a developed market are greater competition for clients and candidates, as well as pricing pressure. In eMea, latin america and asia, the recruitment market is generally less developed with a large proportion of all recruitment being carried out by companies’ internal resources rather than through recruitment specialists. this is changing rapidly due to changes in legislation, increasing job mobility and the difficulty internal resources face in sourcing suitably qualified candidates. If the Group does not continue to compete in its markets effectively, by hiring new staff, opening and expanding offices and continuing the discipline roll-outs, there is a risk that 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, executive Board and regional and Country Management Boards where Group strategy is continually reviewed and decisions made over the allocation of the Group’s resources, principally people. technology the Group is reliant on a number of technology systems to provide services to clients and candidates. these systems are dependent on a number of important suppliers that provide the technology infrastructure and disaster recovery solutions. the performance of these suppliers are continually monitored to ensure business critical services are available and maintained as far as practically possible. 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 Group operates in a large number of jurisdictions which have varying legal and compliance regulations. the Group takes its responsibilities seriously and ensures that its policies, systems and procedures are continually updated to reflect best practice and to comply with the legal requirements in all the markets in which it operates. 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  March 008 “” durIng the year, the grouP generated net cash froM oPeratIng actIvItIes of £148.7M, uP 89%. DISCIPlInES In EaCH COUntRy added during 2007 added during 2006 disciplines at 2005 15 e c n a r F K U 12 i n a p S s d n a l r e h t e N s e n i l i i p c s d f o r e b m u N 9 6 3 0 a i l a r t s u A y n a m r e G l y a t I d n a l r e z t i w S i a n h C l i z a r B A S U i m u g e B l e r o p a g n S i n a p a J l a g u t r o P n e d e w S d n a o P l a d a n a C i o c x e M i a s s u R d n a e r I l a c i r f A h t u o S g r u o b m e x u L a n i t n e g r A E A U annual report 007 9 Board of directors Sir adrian montague CBE (60) non-Executive Chairman Sir adrian Montague is non-executive Chairman of British energy plc, Friends provident plc and Infrastructure Investors limited. From 1997 to 001 he held senior posts concerned with the implementation of the Government’s policies for the involvement of the private sector in the delivery of public services, first as Chief executive of the treasury taskforce and then as Deputy Chairman of partnerships uK plc. he was Deputy Chairman of network rail from 001 to 00 and non-executive Chairman of Cross london rail links limited from 00 to 00. he spent his early career as a solicitor with linklaters & paines before joining Kleinwort Benson in 199. Sir adrian is also a non-executive Director of london First, CellMark aB, the pulp and paper marketing company based in Gothenburg, a Director of Skanska aB, the Swedish international construction group, and a trustee of the historic royal palaces. he was awarded a CBe in 001 and a knighthood in 006. he is also Chairman of the nomination Committee. Steve Ingham (45) Chief Executive Steve Ingham joined Michael page in 1987 as a consultant with Michael page Marketing and Sales. he was responsible for setting up the london marketing and sales businesses and was promoted to operating Director in 1990. he was appointed Managing Director of Michael page Marketing and Sales in 199. Subsequently he took additional responsibility for Michael page’s retail, technology, human resources and engineering businesses. he was promoted to the Board as executive Director of uK operations in January 001, and subsequently to Managing Director of uK operations in May 00. he was appointed Chief executive on 6 april 006. Stephen Box (57) independent non-Executive director, senior independent director Stephen Box is a Chartered accountant who spent more than  years at Coopers & lybrand, 1 of these as a partner. From august 1997 to november 00 he was Finance Director of national Grid. he is a member of the Financial reporting review panel and a non-executive Director of partyGaming plc (pG), thames Water utilities ltd (tWul) and Wales & West utilities ltd (WWu). Stephen has experience of audit Committees as a partner at Coopers & lybrand, as an executive Director of national Grid attending audit Committees, and as a non-executive Director chairing the audit Committees of pG, tWul and WWu, and formerly of South east Water limited. he was appointed a non-executive Director of Michael page International plc on 7 February 001. he is chairman of the audit Committee and is a member of the remuneration and nomination Committees. Charles-Henri Dumon (49) Managing director – Continental Europe and the Americas Charles-henri Dumon joined Michael page in 198 and was appointed a Director in 1987. Since then he has had full responsibility for the Group’s operations in France and has managed the Group’s entry into Southern europe and South america. he was appointed Managing Director for all Michael page’s european and South american businesses in January 001. his responsibilities were increased to include north america in January 006. 0 MIChael paGe InternatIonal Ruby mcGregor-Smith (45) independent non-Executive director ruby McGregor-Smith qualified as a Chartered accountant with BDo Stoy hayward and was appointed to the Board of Michael page International plc on  May 007. She is Chief executive of MItIe Group plC, a position she has held since March 007. previously to being appointed Chief executive, she held the positions of Group Finance Director and then Chief operating officer. prior to joining MItIe Group plC, she held a range of senior roles within the support services sector, primarily at Serco Group plc. She is a member of the audit, remuneration and nomination Committees. Dr tim miller (50) independent non-Executive director Dr tim Miller was appointed to the Board on 1 august 00 and became Chairman of the remuneration Committee on 16 September 00. he is also a member of the audit and nomination Committees. tim has wide experience in human resources and has held a number of senior hr 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, legal, Compliance & regulatory risk, Internal audit, Global research and operational excellence functions. Stephen Puckett (46) Group finance director Stephen puckett qualified as a Chartered accountant with BDo Binder hamlyn. he joined Wace Group plc in 1988 as Director of Corporate Finance, subsequently being promoted to Group Finance Director in 1991. he was Group Finance Director of Stat plus Group plc in 000, and appointed Group Finance Director of Michael page International plc in January 001. he was a non-executive Director of Shl Group plc from 00 to 006. Hubert Reid (67) 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, and 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  February 00. he is a member of the audit, remuneration and nomination Committees. ExECUtIvE BOaRD In addition to the executive Directors, the executive Board comprises alexis de Bretteville (regional Managing Director - the americas), Christophe Duchatellier (regional Managing Director - europe (excluding France)), Gary James (regional Managing Director - asia pacific) and andrew Wayland (Chief Information officer). alexis de Bretteville (45) Regional Managing director – the Americas alexis de Bretteville joined Michael page in 199 as a Consultant in paris, France. In 1997 he was appointed Managing Director of Michael page Spain, launching Spain, portugal and later, Brazil. In 00 he moved to Germany, taking on responsibility for Germany, Belgium and Sweden. In 00 he moved to Belgium when his responsibilities also included holland and the launch of poland in 00. In 006 he became regional Managing Director for the the americas, based in new York, having responsibility for Michael page in uSa, Canada, Brazil, Mexico and most recently argentina. Christophe Duchatellier (45) Regional Managing director – Continental Europe (excluding france) Christophe Duchatellier joined Michael page in 199 as a Consultant in paris. he progressed to Director having launched the Mp Secretarial business in France. In 1997 he moved to Milan, Italy and launched Michael page Italy and in 001 Michael page Switzerland. In 00 he assumed responsibility as regional Managing Director for Spain and portugal. In 006 he moved to Geneva and assumed additional responsibility for northern, Central and eastern europe, also assisting with the launch of Mp russia, 006 and Mp luxembourg, 007. Gary James (46) Regional Managing director – Asia pacific Gary James joined Michael page Finance in london in 198. he was appointed Director of Michael page Sales & Marketing in 199, Managing Director of Michael page Marketing in 1997 and transferred to america in 00 as Managing Director of north america. he moved to australia and was appointed Managing Director of the asia pacific region in august 006. andrew wayland (41) 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 00. annual report 007 1 Directors’ report Principal activity and review of the business and • Sir adrian Montague CBe‡ (Chairman) 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  to 8. Details of the Group’s strategy, outlook and review of operations are described in the Chairman’s Statement, operational review and Financial review on pages 16 to 9. Enhanced Business Review • Steve Ingham (Chief executive) • Stephen Box‡* • Charles-henri Dumon • ruby McGregor-Smith‡ (appointed  May 007) • Dr tim Miller‡ • Stephen puckett • hubert reid‡ the Company is required to set out in this report a fair review ‡ non-executive Directors of the business of the Group during the financial year ended * Senior Independent Director 1 December 007 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 page 18 to  page 10 to 1 page 7 Future outlook pages 17,  and  risks and uncertainties pages 8 and 9 Financial review Corporate responsibility Significant agreements page  to 9 page  to 6 there are no significant agreements that take effect, alter or terminate upon a change of control of the Company following a takeover bid. Directors and interests In accordance with the Company’s articles of association, Steve Ingham, Dr tim Miller and ruby McGregor-Smith 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 0 and 1. the beneficial interests of Directors in office at 1 December 007 in the shares of the Company at 1 December 007 and at  March 008 are set out in the remuneration report on pages  to 9. all of the executive Directors are deemed to have an interest in the ordinary shares held in the employee Benefit trust and its subsidiaries. the Company has purchased and maintained throughout the year directors’ and officers’ liability insurance in respect of itself and its directors. the directors also have the benefit of the indemnity provision contained in the Company’s articles of association. these provisions, which are qualifying third party indemnity provisions as defined by Section  of the Companies act 006 (previously Section 09B of the Companies act 198), were in force throughout the year the following were Directors during the year and held office and are currently in force. throughout the year other than as shown below.  MIChael paGe InternatIonal “” the grouP Is one of the world’s leadIng sPecIalIst recruItMent consultancIes. Results and dividends the profit for the year after taxation amounted to £101.7m (006: £6.m). a final dividend for 006 of . pence per ordinary share was paid on  June 007. an interim dividend of . pence per ordinary share was paid on 1 october 007. the Directors recommend the payment of a final dividend for the year ended 1 December 007 of .6 pence per ordinary share on 9 June 008 to shareholders on the register on 9 May 008 which, if approved at the annual General Meeting, will result in a total dividend for the year of 8.0 pence per ordinary share (006: 6.0 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  May 007, 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 11.m shares which were immediately cancelled. a further .m shares were also purchased by the employee benefit trust and held to fund share scheme awards. the total nominal value of all shares repurchased was £0.m and represented .% of the issued share capital. the shares were purchased for a consideration of £7.9m including expenses. .7m shares were also issued to satisfy share options exercised during the year. annual report 007  Substantial shareholdings (a) Environmental policy as at  February 008, the Company has been notified of the Group does not operate in a business sector which the interests held in more than % of the issued share capital causes significant pollution, but the Board recognises that of the Company as shown in Fig.1. below. the business does have an impact on the environment. the Board is committed to managing and improving the way in which our activities affect the environment by: Fig.1. Substantial Shareholdings • optimising the use of energy; Holder Number of ordinary shares % of issued share capital • ensuring the efficient use of materials; • encouraging re-use and recycling; and Capital International Limited 33,990,190 10.38 • incorporating the principle of sustainable development. Standard Life Investments 30,084,802 AXA Investment Managers UK Limited 16,305,201 Barclays plc JP Morgan Legal & General 16,223,821 15,993,951 13,368,196 9.19 4.98 4.96 4.88 4.08 During the year, the Group has continued to allocate a significant 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 Corporate responsibility (CR) reporting worldwide. 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 007 no significant See risks were identified. the Company is also a member of the FtSeGood Index Series designed to measure the performance of, and facilitate investment in, the current environmental report, which covers our uK businesses only, will shortly be available on the Michael page website. a summary of its findings during 007 is shown below. Waste • 1 tonnes of waste was generated by uK offices. our current national recycling rate is .0% from recycling confidential paper and toner cartridges. those companies meeting globally recognised standards of • through recycling, Michael page in the uK has saved corporate responsibility. ,77 trees and saved a total of 78m landfill space. the Group’s policies on Cr matters are described in the a summary is shown in Fig.. below. following paragraphs. Fig.2. UK Waste Generation Confidential waste Toners Mixed office paper Food waste and packaging Aluminium cans Glass bottles Plastic bottles & plastic cups Cardboard Miscellaneous Total Annual weight generated (tonnes) % of total waste 61 3 80 13 20 8 20 8 8 28% 1% 35% 6% 9% 4% 9% 4% 4% 221 100%  MIChael paGe InternatIonal Energy • 6,166, kWh of electricity was consumed in the uK, which converts to 1,97 tonnes Co. • ,17,10 kWh of gas was consumed in the uK, which converts to  tonnes Co. • through recycling Michael page in the uK has saved 9,19 kWh of energy. Water • In the uK, Michael page consumed 9,61 m of water. transport • In total, uK employees travelling to and from work converts to 1,100 tonnes Co. “More Green” as a company committed to green issues, we are actively involved in finding work practices that can help reduce our with disabilities through “hanploi.com”, as well as various other charities involved in issues such as anti-discrimination and cancer. In holland, a team redecorated rooms for parents to stay when they visit their sick children. they also participated in various cancer related charity events. In the uK, subject to certain restrictions, the Group matches charitable donations made by employees. In 007, we nominated Cancer research uK as our charity of the year. We have sponsored a number of different initiatives and have so far raised approximately £100,000 for the charity. In the americas, Michael page Brazil engaged in a number of charity events, sponsoring a charity auction in aid of ‘Boys and Girls hope worldwide’, sponsorship of a new location in Sao paulo for the ‘projeto Guri’ bringing music and culture to poor areas of the city, and ongoing help and support for ‘Gotas de Flor com amor’, an institution focusing on childrens’ education. carbon footprint. ‘More Green’ was launched in the uK in In asia pacific, Michael page australia provided sponsorship 007 to focus employees more actively on green issues and to children via the World Vision charity and held numerous to advertise internally the environmental matters in which charitable events, supporting a range of charities including Michael page is engaged. Michael page are proud consumers of Green Choice energy which is the most environmentally sound electricity option available in the uK. Green Choice energy supplies electricity from environmental sources coming from a mixture of the Breast Cancer Foundation, Juvenile Diabetes Foundation and ronald McDonald house Children’s Charity. In hong Kong, Michael page hong Kong supported children’s cancer charities with a range of events including rickshaw and sedan chair style races. renewable sources. these sources do not involve the burning (c) Employee involvement of fossil fuels, which produce Co emissions. employees are involved in all aspects of the business. together, Michael page and page personnel in the uK Michael page International is featured in the Sunday earned a SIta Certificate of recycling. In 008 we will be times 100 Best Companies to Work For. the Group has working hard to make an even greater effort to reduce our been placed in the top 100 consistently every year and environmental impact. (b) Charitable donations has recently moved from a 1 star to a  star accreditation receiving particular commendations for culture, team sprit, people development and leadership. In addition, the Group the Group made charitable donations of £89,800 during the has engaged an external organisation to implement on-line year (006: £9,16). Included in donations are amounts exit interviews with a view to enhancing its knowledge of made to various local charities serving the communities in employee engagement and satisfaction issues. which the Group operates. It is the Group’s policy not to make political donations. Communication with employees is effected through Group newsletters, the Company’s Intranet, information bulletins, In eMea, Michael page Switzerland participated in the briefing meetings conducted by senior management and Course de l’escalade in support of the red Cross, while formal and informal discussions. Interim and annual reports in Michael page Germany, a candidate charitable donation are available to all staff. Informal communication is further programme was introduced in aid of aktion Mensch, facilitated by the Group’s divisional organisation structure. a disability charity. Michael page France has been working with several charities for a number of years. they have helped young people develop social skills and confidence through “Sport Dans la Ville”, the provision of employment opportunities for older people through “la Fondation de la éme Chance” and “Cadraxion 78”, the encouragement of employment of people In the americas, Michael page uSa was ranked number 1 executive recruitment firm in new York by Crains in both 006 and 007, voted ‘one of the best places to work in Connecticut’ by the hartford Business Journal and voted ‘one of the best places to work in Massachusetts’ by the Boston Business Journal. annual report 007  (d) Equal opportunity and diversity Working party was formed to review the policies, procedures the Group endorses and supports the principles of equal employment opportunity. It is the policy of the Group to and systems of the Company to ensure compliance with the legislation once introduced. provide equal employment opportunity to all, which ensures the recommendations made are fully implemented by that all employment decisions are made, subject to its legal the Company. additionally, we participate in a number of obligations, on a non-discriminatory basis. Due consideration external initiatives such as the Global Graduates and the is given to the recruitment, promotion, training and working Brokerage, a charity whose aim is to increase the ambition environment of all staff including those with disabilities. and employability of young people in the 11 inner-city It is the Group’s policy to encourage the training and further london boroughs. development of all its employees where this is of benefit to the individual and to the Group. (e) Health and safety throughout 007, the Group monitored the diversity of its uK employees, 87% of whom to date have completed the voluntary request for information. the analysis indicates a split of % female, 6% male, and regarding origin, 88% white, 11% ethnic origin and 1% declining to answer. It is the policy of the Group to take all reasonable and practicable steps to safeguard the health, safety and welfare of its employees, visitors and other persons who may be affected by its activities. In order to meet these responsibilities, the Group will: the uK 001 Census showed a total ethnic population of • assess the risks to health and safety; 7.9%. Similar monitoring will be carried out during 008. 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 • implement safe systems at work; • provide information, instruction and training; • establish and maintain emergency procedures; and brand amongst a more diverse audience, and to encourage • regularly review health and safety policies and development of an increasingly diverse candidate database procedures. 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 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 hr counselling helpline covering stress, legal issues and consumer rights. drawn from diverse backgrounds. (f) supplier payment policy the Group continues to participate in the race for It is the policy of the Group to agree appropriate terms opportunity, part of Business in the Community, a uK and conditions for transactions with suppliers (by means movement of over 700 member companies whose purpose ranging from standard written terms to individually negotiated is to inspire, challenge and support business in improving its contracts) and that payment should be made in accordance impact on society. as a result, the Group has taken a number with those terms and conditions, provided that the supplier of proactive steps to enhance its position on diversity and has also complied with them. works closely with a number of clients to share ideas/best practice, and to offer expertise to minority groups. the Company acts as a holding Company for the Group. Creditor days for the Company were nil (006: nil) as the Michael page is also a member of the employers Forum on Company does not undertake any transactions with suppliers. age (eFa), an independent network of leading employers the Group’s creditor days at the year end were 7 (006: which sets the agenda for age and employment issues in  days). the uK. the membership of eFa lists over 00 organisations, from central and local government to major multinational corporations. upon introduction of the employer equality (age) regulations in october 006, 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 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 6 MIChael paGe InternatIonal in accordance with IFrS. Company law requires the Directors • Corporate Governance (the Board and its operation) to prepare such financial statements in accordance with IFrS, the Companies act 198 and article  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 • Corporate Governance (nomination Committee) • Corporate Governance (Board appointments) • remuneration report (annual bonus plan) • remuneration report (Directors’ interests and share ownership requirements) • notes to the accounts (note 18: Called up Share Capital) set out in the International accounting Standards Board’s • Shareholder Information and advisers (Memorandum and ‘Framework for the preparation and presentation of Financial articles of association) 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: each of the above sections is incorporated by reference into, and forms part of, this Directors’ report. Information to auditors • properly select and apply accounting policies; each of the Directors at the date of approval of this report • present information, including accounting policies, in a confirms that: manner that provides relevant, reliable, comparable and 1. so far as the Director is aware, there is no relevant audit understandable information; and information of which the company’s auditors are unaware; • provide additional disclosures when compliance with the and specific requirements in IFrS is insufficient to enable users . the Director has taken all the steps that he ought to have to understand the impact of particular transactions, other taken as a Director to make himself aware of any relevant events and conditions on the entity’s financial position and audit information and to establish that the Company’s financial performance. the Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any auditors are aware of that information. this confirmation is given and should be interpreted in accordance with the provisions of sZa of the Companies act 198. time the financial position of the Company, for safeguarding the assets, for taking reasonable steps for the prevention auditors 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 198. 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. the directors are responsible for the maintenance and annual General meeting integrity of the company’s website. legislation in the united Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Share capital, restrictions on transfer of shares and other additional information the resolutions to be proposed at the annual General Meeting to be held on  May 008, together with explanatory notes, appear in the notice of Meeting set out on pages 91 to 9. By order of the Board to the extent not discussed in this Directors’ report, information relating to the Company’s share capital structure, kelvin Stagg restrictions on the holding or transfer of its shares or on the exercise of voting rights attached to such securities required by Section 99 of the Companies act 006 is set out in the following sections of the annual report: Company Secretary  March 008 annual report 007 7 Corporate goVernance the Board of Directors has a strong commitment to high all Directors have access to the advice and services of the standards of corporate governance and has made significant Company Secretary, who is responsible for ensuring that progress in applying the main and supporting principles of Board procedures and applicable rules and regulations are corporate governance as recommended in Section 1 of the observed. there is an agreed procedure for Directors to Combined Code on Corporate Governance, (the “006 FrC obtain independent professional advice, if necessary, at the Code”), for the year ended 1 December 007. Company’s expense. Compliance with the 2006 fRC Code the Directors consider that the Company has complied with all the Code provisions set out in Section 1 of the 006 FrC Code throughout the year ended 1 December 007. the Board and its operation 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 the Board of Michael page International plc is the body Board level. the structure of the Group facilitates the day to responsible for corporate governance, establishing policies day running of the business and enables efficient and effective and objectives, and the management of the Group’s communication of issues to the Board when required. 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 four 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 006 FrC Code. ruby McGregor-Smith will retire and offer herself for election. Steve Ingham and Dr tim Miller 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 commitment to their role. the Board is therefore pleased to support their re-election at the forthcoming annual General Meeting. 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 007. the terms of reference for the audit, remuneration and nomination Committees 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. the executive Board, a Committee of the Main Board, meets formally at least four times a year, and is responsible for assisting the Chief executive in the performance of his duties, including development and implementation of strategy, operational plans, policies, procedures and budgets. During the year, four regional Boards were established as Committees of the Main Board, for the uK, eMea, asia pacific and the americas. each regional Board meets at least four times a year. 8 MIChael paGe InternatIonal audit Committee i. from which the external auditor is excluded; the audit Committee comprises the independent non- executive Directors and is chaired by Stephen Box. ii. for which the external auditor can be engaged without referral to the audit Committee; and their relevant qualifications and experience are shown in their iii. for which a case-by-case decision is required, which biographies on the Board of Directors page 0 and 1. includes all engagements over certain fee limits. the Committee met four times in 007 to fulfil its duties and the following areas are considered to be unacceptable included attendance by the external auditors where required. for the external auditors to undertake: the Committee also met with the external auditors during the year without the presence of management. In 007 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 and internal audit reports, 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 • 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; management judgement and estimates. • secondment of senior finance or other executives; Objectivity and independence of external 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: • 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 result of carrying out this activity; • the external audit firm is subject to the company’s normal tendering processes; and • in addition to the normal authorisation procedures and prior to inclusion in a tender, approval has to be given by the Group Finance Director and, if the fee exceeds a certain level, the audit Committee. annual report 007 9 c. enforcing a policy of reviewing all cases where it is Due to this philosophy of nurturing our own talent, succession proposed that a former employee of the external auditors planning is inherently a key part of the process. We do not be employed by the Group; and make promotions or move people within the business unless 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 Dr 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 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 in the case of the most recent appointment, all candidates in the final shortlist were interviewed by the nomination Committee. evaluations of all candidates are discussed with all members of the nomination Committee and the recommendation is subsequently made by the Chief executive, except when his own remuneration to the Board. is under consideration. the remuneration report includes information on the Directors’ service contracts. the terms Induction and training programme 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 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 between executive and non-executive Directors appointed provided on a periodic basis. to the Board. the terms of reference of the nomination Committee can be found on our website. Performance evaluation During the year, the Committee recommended the the Board, as part of its commitment to ensuring appointment of a non-executive Director. Detailed role effectiveness and evaluating its performance together with profiles were agreed by the Committee before a shortlist of that of its Directors and Committees, conducted an internal potentially suitable candidates was prepared to go forward review comprising a questionnaire concerning all aspects of to an interview process. this resulted in the recommendation procedure and effectiveness. of the appointment of ruby McGregor-Smith. Succession planning one of the basic premises behind the strategic development of the Michael page business is that growth is organic rather than through acquisitions of companies or hiring senior people in non-support roles. In order to achieve this organic growth 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 we require good people. It is therefore one of the fundamental be provided where required. 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. 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 0 MIChael paGe InternatIonal account any comments made by the executive Directors. the Group’s particular needs and aim to safeguard Group this evaluation is carried out annually. assets, ensure proper accounting records are maintained and that the financial information used within the business attendance at meetings and for publication is reliable. the number of meetings of the Board and Committees and individual attendance by the members of the Committees only are shown in Fig.. Internal control the responsibilities of the Directors in respect of internal 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. control are defined by the Financial Services authority’s listing the Board of Directors meets at least ten times a year, rules which incorporate a Code of practice known as the focusing mainly on strategic issues, operational and Combined Code, which requires that Directors review the financial performance. there is also a defined policy on effectiveness of the Group’s system of internal controls. this matters strictly reserved for the Board. the Managing requirement stipulates that the review shall cover all controls Director of each operating division is accountable for including operational, compliance and risk management, establishing and monitoring internal controls within as well as financial. Internal Control Guidance for Directors on that division; the Combined Code (“the turnbull report”) was published in September 1999, updated october 00. • annual business plan. the Board has assessed existing risk management and internal control processes during the year ended 1 December 007 in accordance with the turnbull guidance. the Board believes it has the procedures in place such that the Group has fully complied for the financial year ended 1 December 007 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 has a comprehensive budgeting system with an annual budget approved by the Board; • financial reporting. 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 quarterly basis; Fig.3. Attendance at Board Meetings (Committee attendance shown for Committee members only) Total meetings Meetings attended Executive Steve Ingham Charles-Henri Dumon Stephen Puckett Total meetings Non-Executive Sir Adrian Montague CBE Stephen Box Ruby McGregor-Smith (appointed 23 May 2007) Dr Tim Miller Hubert Reid annual report 007 Main Board 11 11 11 11 Main Board Audit Committee Remuneration Committee Nomination Committee 11 11 11 5 11 11 4 4 2 4 4 2 2 – 2 2 2 2 2 – 2 2 1 • quarterly reforecasting. place for the year under review and up to the date of approval 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 systems of internal control and their compliance with Group policies. the Statement also requires the reporting of any 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. Shareholders are invited to attend the annual General Meeting where they are able to discuss any concerns with significant control issues that have emerged so that areas the non-executive Directors. 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. 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, operational review and Financial review provide an assessment of the Group’s affairs and position. the annual report and Interim report are sent to all shareholders on the register. the Directors acknowledge their responsibility for the these are performed throughout the year by a dedicated preparation of the annual report. the Statement of Directors’ Internal audit Manager supported by members of the responsibilities is shown in the Directors’ report. a statement head office finance function, who are independent of the by the auditors about their reporting responsibilities is shown operations and by operational finance staff on operations in the Independent auditors’ report on pages 0 and 1. outside their own regions. Businesses are visited on a rotational basis and their controls are assessed in their Going concern 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 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 the Board confirms that there is an ongoing process for months based on normal business planning and control identifying, evaluating and managing the significant risks procedures. faced by the Group and that the processes have been in  MIChael paGe InternatIonal Remuneration report Scope and membership of Remuneration Committee General Meetings. additional details of service contracts are the remuneration Committee, which meets not less than shown on pages 8 and 9. twice a year, comprises the independent non-executive the remuneration of the non-executive Directors is Directors. the Chief executive attends the meetings as determined by the Board. the non-executive Directors do required, except when his own remuneration is under not receive any pension or other benefits, other than out-of- consideration. the purpose of the remuneration Committee pocket expenses, from the Group, nor do they participate is to review, on behalf of the Board, the remuneration policy in any of the bonus or share option schemes. 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 remuneration agreed by the Committee for the executive Directors contains the following elements: a base salary and benefits, an annual bonus reflecting Group performance, incentive share plan award and pension benefits. the following sections provide an outline of the Company’s remuneration policy during 007. Shareholders were consulted on the policy at the time of approval of the Incentive Share plan in December 00. 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. the objective of the Group’s remuneration policy is to attract annual bonus plan 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 1-month 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 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 007, the bonus pool for executive Directors was equal to .8% (006: .8%) of profits earned above a threshold equal to half of targeted profits for the year. In addition, if profits exceed 1.1 times (006: 1. times) the targeted level, then an additional 1.% (006: 1.%) of profits earned above the targeted level is added two terms of three years, subject to re-election at annual to the bonus pool. annual report 007  profits are defined as Group profit before taxation, exceptional these awards are satisfied in shares of the company which items and before the executive Directors’ annual bonus are purchased and held by the employee Benefit trust. charges and charges or credits resulting from the Incentive Share plan described below or other share option grants. two thirds of these shares (“Deferred Share awards”) are subject to a three-year deferral period during which they will the bonus pool as described above is capable of variation by be forfeited if the relevant director or senior employee leaves, the Committee both up and down, by up to 10%, to reflect other than in “compassionate circumstances”. the remaining the Committee’s view on the performance of the Company third (“performance Share awards”) are also to be deferred relative to its directly comparable peers. the Committee for three years but are subject to earnings per share (“epS”) increased the 007 bonus pool by 10% in recognition of growth targets over the three year period. both absolute and peer group comparator performance. performance share awards of up to 0% of a Director’s or the targeted level of profits for 007 was £17.7m (006: senior employee’s salary only vest if epS grows by an average £91.0m) and was set at the beginning of 007 by reference of % over the growth in uK rpI per annum over the three to market expectations and internal forecasts at that time. year period. any excess between 0% and 7% of salary only the Committee retains the discretion to review this vest to the extent that epS grows by 7.% over the growth arrangement and set different rates and thresholds as it in uK rpI per annum over the three year period. Finally, to deems appropriate for the business. the extent that the performance share award is greater than the target for 008 has been set and will be disclosed in next year’s report. the threshold in 008 for awarding the higher level of bonus is set at 1.1 times the targeted level of profits. 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 is paid in cash. to reward service over a longer period, any excess above 7% of an executive’s salary, the hurdle is 10% over the growth in uK rpI per annum over the 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 lapse. 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 individual’s salary level is deferred, paid into an employee the Committee reviewed the Incentive Share plan with regards benefit trust and invested in the Company’s shares with no to the Company’s current operations and prospects. matching investment by the Company. Based on the 007 results, the amount deferred for the three executive Directors is £.0m (006: £1.7m). Based on the 007 results, the total award available was £9,196,00. of this, £,78,90 (0%) is for the executive Directors. awards totalling £6,1,000 will be made to Such shares are reserved for the executive and vest in equal senior employees. Details of the awards made in 007 to annual tranches over two years, normally so long as the the executive Directors are disclosed on pages 6 and 7. 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 is charged in subsequent years when the shares vest. 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 Incentive Share Plan for Executive Directors and options are granted at a discount. Benefits received under Senior Employees In December 00, shareholders approved a new Incentive Share plan for executive Directors and senior employees. the current level of award is 6% (006: 6%) of Group profits of the preceding year. not more than 0% of this figure is available for awards to the executive Directors, with the balance 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. the executive Share option Scheme are not 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 00 and subsequent years.  MIChael paGe InternatIonal Emoluments the aggregate emoluments, excluding pensions, of the Directors of the Company who served during the year were as follows: 2007 Executive Steve Ingham (Note 1) Charles-Henri Dumon Stephen Puckett Non-Executive Sir Adrian Montague CBE Stephen Box Ruby McGregor-Smith (appointed 23 May 2007) Dr Tim Miller Hubert Reid Total 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 Dr Tim Miller Hubert Reid Total Salary and fees £’000 Benefits (Note 2) £’000 Annual Bonus (Note 3) £’000 Deferred Annual Bonus (Note 3) £’000 Incentive Share Plan (Note 5) £’000 360 275 275 101 45 26 41 40 22 139 22 – – – – – 360 275 275 – – – – – 1,173 924 924 – – – – – 718 718 718 – – – – – Total £’000 2,633 2,331 2,214 101 45 26 41 40 1,163 183 910 3,021 2,154 7,431 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 notes to the emoluments: 1. Steve Ingham is the highest paid director. . 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, now ceased. . 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. the amount of the annual bonus earned by the remaining executive Directors in 007, but deferred to future periods, was £.0m (006: £1.7m). . represents the non-performance proportion of the Incentive Share plan awarded in March 007. . represents the non-performance proportion of the Incentive Share plan to be awarded in March 008 and the performance vesting proportion of the March 00 award. 6. under the terms of his contract, terry Benson gave notice of his intention to retire from the Company in December 00. he resigned as a Director of the Company on 6 april 006 but remained employed by the Company as part of his notice period during which he was paid a further £0.m. annual report 007  Pension benefits executive Directors are eligible to participate in the Group pension plan which is a defined contribution scheme. each executive Director receives 0% of their base salary or a cash alternative. Pension contributions Steve Ingham Terry Benson (resigned 6 April 2006) Charles-Henri Dumon Stephen Puckett 2007 £’000 2006 £’000 72 – 38 55 54 27 39 48 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 1 December 007 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 1 December 007 to  March 008. Ordinary shares of 1p Direct Holding Direct Holding Direct Holding Direct Holding At 1 January 2007 Acquired in year Vesting of plans Disposal in year 1,010,884 1,332,997 214,696 15,000 170,000 170,000 170,000 – 85,630 115,845 86,396 – (96,514) (415,845) (97,566) – At 31 December 2007 1,170,000 1,202,997 373,526 15,000 Steve Ingham Charles-Henri Dumon Stephen Puckett Stephen Box ‡ ‡ Non-Executive Director 1. Steve Ingham transferred 78,96 shares from the Incentive Share plan and 9,117 from the Deferred annual Bonus to his Direct holding in the year. . Stephen puckett transferred 78,96 shares from the Incentive Share plan and 9,88 from the Deferred annual Bonus to his Direct holding in the year. no other Director has a holding in the Company. incentive share plan Details of awards made under the Incentive Share plan that remain outstanding at 1 December 007 are as follows: Total award at 1 January 2007 Awarded during the year Performance shares Non- performance shares Total shares Performance shares Non- performance shares Total shares Vested in year Total award at 31 December 2007 Performance shares Non- performance shares Total shares Steve Ingham 91,297 182,595 273,892 Charles-Henri Dumon (Note 4) 91,297 182,595 273,892 Stephen Puckett 91,297 182,595 273,892 44,851 44,851 44,851 89,702 134,553 (78,946) 109,833 219,666 329,499 89,702 134,553 (78,946) 109,833 219,666 329,499 89,702 134,553 (78,946) 109,833 219,666 329,499 1. the value of the award made under the Michael page Incentive Share plan in 007 is £6,000 for each individual Director and is based on the purchase price of the Company’s ordinary shares on  March 007 of 6.p. the market value of the shares vested in the year at the date of award was 1.0p. . the total value of awards at 1 December 007 for each individual Director in office at the balance sheet date is £98,97 and is calculated using the closing market price of the Company’s ordinary shares at 1 December 007 of 88.0p. 6 MIChael paGe InternatIonal . For awards made in 007, the base epS for the performance criteria is 1.p (006: 1.p). . Charles-henri Dumon was granted deferred share options to acquire 89,70 ordinary shares and performance share options to acquire ,81 ordinary shares under the Michael page Incentive Share plan 007. these options have a nil exercise price and do not accrue dividends. . the non-performance shares to be awarded in 008 have been included in the table of emoluments on page . deferred Annual Bonus as described on page , 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 on the first two anniversaries of the grant. In 008, a total of £.0m 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 . 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 8 to 6. For full descriptions of the performance and vesting conditions, see “annual Bonus plan” on pages  and . Details of awards made under the Deferred annual Bonus plan that remain outstanding at 1 December 007 are as follows: Steve Ingham Charles-Henri Dumon Stephen Puckett Total award at 1 January 2007 (shares) 180,709 181,547 184,122 Awarded during the year (shares) 140,501 115,758 115,758 Vested in year (shares) (66,394) (67,321) (67,694) Total award at 31 December 2007 (shares) 254,816 229,984 232,186 the average market value of the shares vested in the year at the date of award was 0.8p. 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 1 December 007 were as follows: Steve Ingham Charles-Henri Dumon Stephen Puckett At 1 January 2007 (shares) Exercised in year (shares) At 31 December 2007 (shares) Market price at date of exercise (pence) Date of Grant 2001 2004 2005 2001 2003 2004 2005 2001 2004 2005 234,441 (140,970) 93,471 50,000 50,000 291,016 200,000 50,000 50,000 (50,000) – – 50,000 (150,807) (200,000) (50,000) 140,209 – – – 50,000 234,441 (140,970) 93,471 50,000 50,000 (50,000) – – 50,000 560 560 – 560 560 560 – 560 560 – Gains made on exercise (pounds) 542,735 194,500 Exercise price (pence) Period of exercise 175 171 2004-2011 2007-2014 – 190.75 2008-2015 580,607 953,200 194,500 175 83.4 171 2004-2011 2007-2013 2007-2014 – 190.75 2008-2015 542,735 194,500 175 171 2004-2011 2007-2014 – 190.75 2008-2015 1. the market price of the shares at 1 December 007 was 88.0p with a range during the year of 9.7p to 9.0p. . no options were granted under the executive Share option Scheme to the executive Directors in 008. annual report 007 7 total Shareholder Return (tSR) the graph below shows 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 0 index is also given. the graph illustrates tSr for the financial periods since flotation. Versus FTSE250 and FTSE Support Services 31 December 2002 31 December 2003 31 December 2004 31 December 2005 31 December 2006 31 December 2007 330 310 290 270 250 230 210 190 170 150 130 110 90 70 50 324.1 216.9 211.6 209.0 111.6 100.6 190.8 166.6 90.0 126.2 104.1 72.2 129.5 127.9 74.1 75.0 71.8 61.4 FTSE250 FTSE Support Services Michael Page International Outside appointments the remuneration Committee recognises that non-executive Directorships are a significant benefit in broadening executives’ 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 their service. Service contracts all executive Directors’ service contracts contain a twelve 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 twelve 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. 8 MIChael paGe InternatIonal Contract date Unexpired term at 31 December 2007 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 Non-Executive Sir Adrian Montague CBE Stephen Box Ruby McGregor-Smith Dr Tim Miller Hubert Reid annual resolution 05/03/01 no specific term 12 months 27/02/07 27/02/07 23/05/07 15/08/05 25/02/06 26 months 26 months 29 months 7 months 14 months None None None None None 12 months salary plus other contractual benefits 12 months salary plus other contractual benefits 12 months salary plus other contractual benefits None None None None None None None None None None None None None Shareholders will be given the opportunity to approve the remuneration report at the annual General Meeting (resolution 6) on  May 008. audit requirement Within the remuneration report, the sections on emoluments, and Directors’ interests and share ownership requirements, on pages  to 7 inclusive, are audited. all other sections of the remuneration report are unaudited. Dr tim miller Chairman – remuneration Committee  March 008 annual report 007 9 audit report Independent auditors’ Report to the members of our responsibility is to audit the financial statements and the michael Page International plc part of the Directors’ remuneration report to be audited in We have audited the group and parent company financial statements (the ‘‘financial statements’’) of Michael page accordance with relevant legal and regulatory requirements and International Standards on auditing (uK and Ireland). International plc for the year ended 1 December 007 which We report to you our opinion as to whether the financial comprise Consolidated Income Statement, the Consolidated statements give a true and fair view and whether the financial and parent Company Statements of Changes in equity, the statements and the part of the Directors’ remuneration Consolidated and parent Company Balance Sheets, the report to be audited have been properly prepared in Consolidated and parent Company Cash Flow Statements accordance with the Companies act 198 and, as regards and the related notes 1 to 6. these financial statements the Group financial statements, article  of the IaS regulation. have been prepared under the accounting policies set out We also report to you whether in our opinion the information therein. We have also audited the information in the Directors’ given in the Directors’ report is consistent with the financial remuneration report that is described as having been statements. audited. In addition we report to you if, in our opinion, the company this report is made solely to the company’s members, has not kept proper accounting records, if we have not as a body, in accordance with section  of the Companies received all the information and explanations we require for act 198. our audit work has been undertaken so that we our audit, or if information specified by law regarding directors’ might state to the company’s members those matters we remuneration and other transactions is not disclosed. 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 We review whether the Corporate Governance Statement reflects the company’s compliance with the nine provisions of the 006 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 the directors’ responsibilities for preparing the annual and control procedures. 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. 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. 0 MIChael paGe InternatIonal Basis of audit opinion Opinion We conducted our audit in accordance with International In our opinion: 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. • 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 1 December 007 and of its profit for the year then ended; • the parent 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 198, of the state of the parent company’s affairs as at 1 December 007; 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 • the financial statements and the part of the Directors’ remuneration report to be audited have been properly prepared in accordance with the Companies act 198 and, as regards the Group financial statements, article  and the part of the Directors’ remuneration report to be of the IaS regulation; and 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. • the information given in the Directors’ report is consistent with the financial statements. Deloitte & touche llP Chartered accountants and registered auditors – london  March 008 annual report 007 1 financial statements Consolidated income statement ................................... 53 Consolidated statement of Changes in Equity ............. 54 statement of Changes in Equity – parent Company .... 55 Balance sheets .............................................................. 56 Cash flow statements ................................................... 57 notes to the Accounts ................................................... 58 1. . . . . 6. 7. 8. 9. Significant accounting policies..........................8 Segment reporting ...........................................6 profit for the year ..............................................6 employee information .......................................6 Financial income/(expenses) .............................66 taxation on profits on ordinary activities ...........66 Current tax assets and liabilities .......................67 Dividends .........................................................67 earnings per ordinary share ..............................67 10. property, plant and equipment .........................68 11. Intangible assets ..............................................69 1. Investments......................................................69 1. trade and other receivables .............................71 1. trade and other payables .................................71 1. Bank overdrafts and loans ................................7 16. provisions for liabilities ......................................7 17. Deferred tax .....................................................7 18. Called-up share capital .....................................7 19. reserves ..........................................................76 0. Cash flows from operating activities .................77 1. Cash and cash equivalents ..............................77 . Financial risk management ...............................77 . Commitments ..................................................8 . Contingent liabilities ..........................................8 . events after the balance sheet date .................8 6. related party transactions ................................8  MIChael paGe InternatIonal Consolidated Income Statement Year ended 31 december 2007 Revenue Cost of sales Gross profit Administrative expenses Operating profit Financial income Financial expenses Profit before tax Income tax expense Profit for the year Attributable to: Equity holders of the parent Earnings per share Basic earnings per share (pence) Diluted earnings per share (pence) The above results relate to continuing operations. Note 2 2 2 5 5 6 3 9 9 2007 £’000 831,640 (353,546) 478,094 (328,662) 149,432 1,189 (3,180) 147,441 (45,707) 101,734 2006 £’000 649,060 (300,243) 348,817 (251,450) 97,367 821 (1,229) 96,959 (31,512) 65,447 101,734 65,447 31.1 30.6 19.6 19.0 annual report 007  Consolidated Statement of Changes in Equity at 31 december 2007 Called-up share capital £’000 3,326 Note Share premium £’000 Capital redemption reserve £’000 Reserve for shares held in the employee benefit trust £’000 Currency translation reserve £’000 Retained earnings £’000 Total equity £’000 – – – – – – 37,952 – – – 37,952 37,952 424 (9,871) 304 74,713 68,896 – – – – 232 – – – – 232 656 – – – – – – 970 – – 970 (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) (8,901) (2,812) 50,164 80,391 – – – – (232) 238 – – – 6 3,332 3,332 37,952 656 (8,901) (2,812) 50,164 80,391 – – – – (115) – 57 – – – – – – – – – 8,683 – – – (58) 8,683 3,274 46,635 – – – – 115 – – – – – 115 771 – – – – – (15,000) – 1,161 – – (13,839) 8,127 8,127 – – 8,127 8,127 – 101,734 101,734 8,127 101,734 109,861 – – – – – – – (59,885) (59,885) – – (15,000) 8,740 (1,161) – 5,528 5,528 (21,785) (21,785) (77,303) (82,402) (22,740) 5,315 74,595 107,850 Group 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 shares held in the employee benefit trust Credit in respect of share schemes Dividends Balance at 31 December 2006 Balance at 1 January 2007 Currency translation differences Net income recognised directly in equity Profit for the year Total recognised income for the year Purchase of own shares for cancellation Purchase of shares held in the employee benefit trust Issue of share capital Transfer to reserve for shares held in the employee benefit trust Credit in respect of share schemes Dividends Balance at 31 December 2007 8 8  MIChael paGe InternatIonal Statement of Changes in Equity – Parent Company at 31 december 2007 Company Balance at 1 January 2006 Profit for the year Total recognised income for the year Purchase of own shares for cancellation Issue of share capital Dividends Balance at 31 December 2006 Balance at 1 January 2007 Profit for the year Total recognised income for the year Purchase of own shares for cancellation Issue of share capital Dividends Balance at 31 December 2007 Note 8 8 Share capital £’000 3,326 – – (232) 238 – 6 3,332 Share premium £’000 Capital redemption reserve £’000 Retained earnings £’000 Total equity £’000 – – – – 37,952 – 37,952 37,952 424 246,988 250,738 – – 9,376 9,376 9,376 9,376 232 (83,363) (83,363) – – 232 656 – (18,088) (101,451) 38,190 (18,088) (63,261) 154,913 196,853 3,332 37,952 656 154,913 196,853 – – (115) 57 – (58) 3,274 – – – 8,683 – 8,683 46,635 – – 1,565 1,565 1, 565 1, 565 115 (59,885) (59,885) – – 115 771 – (21,785) (81,670) 8,740 (21,785) (72,930) 74,808 125,488 annual report 007  Balance Sheets at 31 december 2007 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 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 shares held in the employee benefit trust Currency translation reserve Retained earnings Total equity Group Company Note 2007 £’000 2006 £’000 2007 £’000 2006 £’000 10 11 12 17 13 13 7 21 2 14 17 14 15 15 7 16 2 18 19 19 19 19 27,149 4,296 – 4,998 2,301 21,550 3,598 – 9,447 1,927 – – – – 426,028 426,777 – – – – 38,744 36,522 426,028 426,777 192,810 143,813 – 82,990 275,800 213 35,587 179,613 73,562 1,333 – 74,895 332 489 – 821 314,544 216,135 500,923 427,598 (680) (17) (697) (1,130) – (1,130) – – – – – – (115,405) (83,525) (302,702) (191,595) (47,433) (25,300) (17,859) – (43) (39,150) (11,704) (192) (47,433) (25,300) – – – (39,150) – – (205,997) (134,614) (375,435) (230,745) (206,694) (135,744) (375,435) (230,745) 107,850 80,391 125,488 196,853 3,274 46,635 771 (22,740) 5,315 74,595 107,850 3,332 37,952 656 (8,901) (2,812) 50,164 80,391 3,274 46,635 771 – – 74,808 125,488 3,332 37,952 656 – – 154,913 196,853 these financial statements were approved by the Board of Directors and authorised for issue on  March 008. on behalf of the Board of Directors. s Ingham Chief executive 6 s r Puckett Group Finance Director MIChael paGe InternatIonal Cash Flow Statements for the Year ended 31 december 2007 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 Interest received Net cash used in investing activities Note 20 Group Company 2007 £’000 148,663 (36,519) 112,144 (11,927) (1,579) 743 1,189 2006 £’000 78,827 (21,705) 57,122 (9,167) (737) 1,210 821 (11,574) (7,873) 2007 £’000 41,744 – 41,744 2006 £’000 29,234 2,446 31,680 – – – – – – – – – – 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 for cancellation Purchase of shares held in the employee benefit trust (21,785) (18,088) (21,785) (18,088) (2,741) 25,300 (39,150) 8,740 (59,885) (15,000) (1,209) 39,150 (6,700) 38,190 (2,397) 25,300 (39,150) 8,740 (869) 39,150 (6,700) 38,190 (83,363) (59,885) (83,363) – – – Net cash used in financing activities (104,521) (32,020) (89,177) (31,680) Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Exchange gains/(losses) on cash and cash equivalents Cash and cash equivalents at the end of the year 21 (3,951) 35,544 3,964 35,557 17,229 19,779 (1,464) 35,544 (47,433) – – (47,433) – – – – annual report 007 7 Notes to the Accounts for the Year ended 31 december 2007 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  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 0 of the Companies act 198, 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 £0.7m (006: £6.7m). 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. (iii) employee Benefit trust In accordance with uItF 8, accounting for employee Share ownership plan (eSop) trusts, shares in Michael page International plc held by the trust are shown as a reduction in shareholder’s funds. other assets and liabilities held by the trust are consolidated with the assets of the Group. the policies, set out below, have been consistently applied to all the periods presented. new standards and interpretations In the current year, the Group has adopted IFrS 7 Financial Instruments: Disclosures which is effective for annual reporting periods beginning on or after 1 January 007, and the related amendment to IaS 1 presentation of Financial Statements. the impact of the adoption of IFrS 7 and the changes to IaS 1 has been to expand the disclosures provided in these financial statements regarding the Group’s financial instruments and management of capital (see note ). Four Interpretations issued by the International Financial reporting Interpretations Committee are effective for the current period. these are: IFrIC 7 applying the restatement approach under IaS 9, Financial reporting in hyperinflationary economies; IFrIC 8 Scope of IFrS ; IFrIC 9 reassessment of embedded Derivates; and IFrIC 10 Interim Financial reporting and Impairment. the adoption of these interpretations has not led to any changes in the Group’s accounting policies. at the date of authorisation of these financial statements, the following Standards and Interpretations impacting the Group which have not been applied in these financial statements were in issue but not yet effective: IFrS 8 IaS  revised IFrIC 11 IFrS IFrIC 1 IFrIC 1 operating Segments Borrowing Costs Group and treasury Share transactions Service Concession arrangements Customer loyalty programmes IFrIC 1 IaS 19 the limit of a Defined Benefit asset, Minimum Funding requirements and their Interaction 8 MIChael paGe InternatIonal 1. Significant accounting policies (continued) new standards and interpretations (continued) the Directors anticipate that the adoption of the above Standards and Interpretations in future periods will have little or no impact on the financial statements of the Group when the relevant Standards come into effect for periods commencing on or after 1 January 008. a) Revenue and income recognition revenue, 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: • • revenue 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; revenue 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 revenue 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 • revenue from amounts billed to clients for expenses incurred on their behalf (principally advertisements) is recognised when the expense is incurred. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable. b) Cost of sales Cost of sales consists of the salary cost of temporary staff and costs incurred on behalf of clients, principally advertising costs. c) Gross profit Gross profit represents revenue 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. annual report 007 9 1. Significant accounting policies (continued) 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 0% per annum. the cumulative amount of goodwill written off directly to retained earnings in respect of acquisitions prior to 1 December 1997 is £11.7m (006: £11.7m). 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 10-0% per annum • Motor vehicles % per annum g) Investments Fixed asset investments are stated at cost less provision for impairment. h) Impairment of assets assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. an impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. the recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). a financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. a financial asset is considered to be impaired if objective evidence indicates that one or more events has had a negative effect on the estimated future cash flows of that asset. For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio, as well as observable changes in national or local economic conditions that correlate with default on receivables. the carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. 60 MIChael paGe InternatIonal 1. Significant accounting policies (continued) i) 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. j) 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. k) 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. l) 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), eMea, the united Kingdom, asia pacific and the americas. annual report 007 61 1. Significant accounting policies (continued) m) 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. n) Share-based compensation the Group operates a number of equity-settled, share-based compensation plans. their 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. o) 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. p) 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. q) Borrowing costs all borrowing costs are accrued in the income statement on a time basis. r) financial assets and liabilities Financial assets and liabilities are recognised in the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument. non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. 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. trade and other payables are stated at cost. other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. the Group has no financial assets ‘at fair value through profit or loss’, ‘held-to-maturity’ investments or ‘available for sale’ financial assets under IFrS 7. additionally, as the Group has no derivative contracts at the balance sheet date, the requirements of the recognition criteria under IaS 9 are also not relevant to the Group. 6 MIChael paGe InternatIonal 1. Significant accounting policies (continued) s) 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 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) Revenue, gross profit and operating profit by geographic region EMEA United Kingdom Asia Pacific Australia Other Total Americas Revenue Gross Profit Operating Profit 2007 £’000 2006 £’000 2007 £’000 2006 £’000 2007 £’000 2006 £’000 321,102 222,993 196,421 126,577 63,013 34,171 360,395 312,408 186,024 155,811 72,020 25,741 97,761 52,382 63,208 20,370 83,578 30,081 32,855 24,366 57,221 38,428 26,017 18,944 44,961 21,468 59,412 9,899 10,922 20,821 6,186 44,270 8,982 8,077 17,059 1,867 831,640 649,060 478,094 348,817 149,432 97,367 the above analysis by destination is not materially different to analysis by origin. the analysis below is of the carrying amount of segment assets, 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. annual report 007 6 2. Segment reporting (continued) (b) Segment assets, liabilities and capital expenditure by geographic region Total Assets Total Liabilities Capital Expenditure EMEA United Kingdom Asia Pacific Australia Other Total Americas 2007 £’000 2006 £’000 2007 £’000 2006 £’000 165,719 91,281 58,325 39,734 89,679 22,899 15,672 38,571 20,575 88,364 114,622 73,228 14,592 10,165 24,757 11,520 7,103 2,738 9,841 6,047 5,457 2,251 7,708 3,370 2007 £’000 5,934 5,043 436 303 739 1,790 Segment assets/liabilities/capital expenditure 314,544 215,922 188,835 124,040 13,506 Income tax – 213 17,859 11,704 314,544 216,135 206,694 135,744 2006 £’000 3,899 3,113 958 386 1,344 1,548 9,904 the above table is shown gross of the effect of the multi-currency notional cash pool. Were the cash pool to be shown on a net basis, this would reduce both the total liabilities in the uK and the total assets in eMea by £9.m each. Further information on the notional cash pool is provided in note 1 on page 77. (c) Revenue and gross profit by discipline Finance and Accounting Marketing, Sales and Retail Legal, Technology, HR, Secretarial and Other Engineering, Property & Construction, Procurement & Supply Chain Revenue Gross Profit 2007 £’000 496,506 119,103 134,908 81,123 2006 £’000 408,250 100,153 96,595 44,062 2007 £’000 2006 £’000 258,667 202,542 89,910 73,835 55,682 67,863 46,655 31,757 831,640 649,060 478,094 348,817 (d) Revenue and gross profit generated from permanent and temporary placements Permanent Temporary Revenue Gross Profit 2007 £’000 392,583 439,057 831,640 2006 £’000 276,346 372,714 649,060 2007 £’000 371,998 106,096 478,094 2006 £’000 261,000 87,817 348,817 the above analyses in notes (a) operating profit by geographic region, (b) segment liabilities by geographic region, (c) revenue and gross profit by discipline (being the professions of candidates placed) and (d) revenue and gross profit generated from permanent and temporary placements have been included as additional disclosure over and above the requirements of IaS1 “Segment reporting”. 6 MIChael paGe InternatIonal 3. Profit for the year Profit for the year is stated after charging/(crediting): Employment costs (Note 4) Exchange (gain)/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 Loss/(profit) on disposal of property, plant and equipment, and computer software Operating lease rentals - land and buildings - plant and machinery 2007 £’000 2006 £’000 224,743 168,792 (240) 6,726 934 69 477 546 26 162 10 198 91 124 5,630 815 63 362 425 27 245 46 318 (48) 16,416 3,774 13,543 2,505 *In 007, this includes £0k of gains on foreign exchange swaps that economically hedge the fair value of loans with subsidiaries, but for which hedge accounting was not applied. this comprises a gain of £78k which is directly offset by foreign exchange losses on the underlying euro intercompany loans, with an offsetting £6k charge relating to the euro to Sterling interest differential. 4. Employee information the average number of employees (including executive Directors) during the year and total number of employees (including executive Directors) at 1 December 007 were as follows: Management Client services Administration employment costs (including Directors’ emoluments) comprised: 2007 Average No. 2006 Average No. 2007 Total No. 2006 Total No. 163 3,153 1,089 4,405 123 2,261 921 3,305 179 3,658 1,215 5,052 141 2,623 994 3,758 Wages and salaries Social security costs Pension costs - defined contribution plans Equity settled transactions 2007 £’000 2006 £’000 186,873 140,806 24,096 18,366 7,017 6,757 5,141 4,479 224,743 168,792 Details of Directors’ remuneration for the year are provided in the Directors’ remuneration report on pages  to 9. no staff are employed by the parent company (006: nil) hence no remuneration has been disclosed. annual report 007 6 5. Financial income/(expenses) Financial income Bank interest receivable Financial expenses Bank interest payable 6. Taxation on profits on ordinary activities the charge for taxation is based on the annual tax rate of 1.0% on profit before tax (006: .%). 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 Charge/(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 2007 £’000 147,441 44,232 715 416 – – 1,485 (1,141) 45,707 % 30.0 0.5 0.3 – – 1.0 (0.8) 31.0 2007 £’000 2006 £’000 1,189 821 (3,180) (1,229) 2007 £’000 22,518 (1,141) 23,866 45,243 2006 £’000 17,694 1,228 14,515 33,437 (1,228) (1,168) (16) 1,708 464 45,707 2006 £’000 96,959 29,088 594 361 (191) (948) 1,637 971 31,512 2007 £’000 833 31 (788) (1,925) 31,512 % 30.0 0.6 0.4 (0.2) (1.0) 1.7 1.0 32.5 2006 £’000 (8,302) 66 MIChael paGe InternatIonal 7. Current tax assets and liabilities the current tax asset of £nil (006: £0.m), and current tax liability of £17.9m (006: £11.7m) for the Group, and current tax asset of £1.m (006: £0.m) for the parent, represent the amount of income taxes recoverable and payable in respect of current and prior periods. 8. Dividends Amounts recognised as distributions to equity holders in the year: Final dividend for the year ended 31 December 2006 of 4.2p per ordinary share (2005: 3.5p) Interim dividend for the year ended 31 December 2007 of 2.4p per ordinary share (2006: 1.8p) 2007 £’000 13,979 7,806 21,785 2006 £’000 12,100 5,988 18,088 Amounts proposed as distributions to equity holders in the year: Proposed final dividend for the year ended 31 December 2007 of 5.6p per ordinary share (2006: 4.2p) 17,984 13,859 the proposed final dividend had not been approved by shareholders at 1 December 007 and therefore has not been included as a liability. the comparative final dividend at 1 December 006 was also not recognised as a liability in the prior year. the proposed final dividend of .6p (006: .p) per ordinary share will be paid on 9 June 008 to shareholders on the register at the close of business on 9 May 008, 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. 9. 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 2007 101,734 2006 65,447 327,528 334,744 5,353 8,888 332,881 343,632 31.1 30.6 19.6 19.0 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 employee Benefit trust and held in the reserve. annual report 007 67 9. Earnings per ordinary share (continued) Diluted Diluted earnings per share is calculated by 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 2007 Leasehold improvements £’000 Furniture, fixtures and equipment £’000 Motor vehicles £’000 Leasehold improvements £’000 Total £’000 2006 Furniture, fixtures and equipment £’000 Motor vehicles £’000 Total £’000 Group Cost At 1 January Additions Disposals 17,085 30,442 4,519 6,206 (1,520) (3,445) 2,241 1,202 (919) 49,768 11,927 (5,884) 3,217 4,953 (1,763) (1,453) 15,953 27,639 2,125 45,717 997 (855) (26) 9,167 (4,071) (1,045) Effect of movements in foreign exchange 793 1,628 57 2,478 (322) (697) 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 20,877 34,831 2,581 58,289 17,085 30,442 2,241 49,768 8,614 2,299 18,817 3,792 787 635 28,218 6,726 7,824 2,016 17,505 3,062 722 552 26,051 5,630 (1,329) (3,244) (525) (5,098) (1,069) (1,353) (483) (2,905) 360 9,944 907 20,272 27 924 1,294 31,140 (157) 8,614 (397) 18,817 (4) 787 (558) 28,218 10,933 14,559 1,657 27,149 8,471 11,625 1,454 21,550 68 MIChael paGe InternatIonal 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 Disposals Effect of movements in foreign exchange At 31 December Net book value At 31 December Impairment tests for goodwill 2007 2006 Computer software £’000 Goodwill £’000 Total £’000 Computer software £’000 Goodwill £’000 Total £’000 5,931 1,579 (517) 347 7,340 3,872 934 (470) 247 4,583 1,539 – – – 1,539 – – – – – 7,470 1,579 (517) 347 8,879 3,872 934 (470) 247 4,583 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 2,757 1,539 4,296 2,059 1,539 3,598 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 2007 £’000 1,274 214 51 1,539 2006 £’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 %, 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 1 December 007 there was no impairment of intangible assets. 12. Investments Company Cost At 1 January 2007 Derecognised on vesting of LTIP’s and deferred bonus shares At 31 December 2007 Subsidiary undertakings £’000 Total £’000 426,777 426,777 (749) (749) 426,028 426,028 the derecognition of assets represents the decrease of the parent company’s holding of own shares which have vested and transferred to beneficial holders. annual report 007 69 12. Investments (continued) the Company’s principal subsidiary undertakings at 1 December 007, 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 Page Personnel (UK) 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 (Luxembourg) 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 Argentina SA Michael Page International (Brasil) SC Ltda Michael Page International Canada Limited Michael Page International Mexico Reclutamiento Especializado, S.A. de C.V. Michael Page International Inc* 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 Luxembourg Netherlands Netherlands Poland Portugal Russia South Africa Spain Spain Sweden Switzerland Holding company Support services Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy United Arab Emirates Recruitment consultancy Australia Hong Kong Japan Singapore Argentina Brazil Canada Mexico United States Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy Recruitment consultancy *the equity of these subsidiary undertakings is held directly by Michael page International plc. all companies have been included in the consolidation and 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 1,,6 preference shares. 70 MIChael paGe InternatIonal 13. Trade and other receivables Current Trade receivables Less provision for impairment of receivables Net trade receivables Amounts due from Group companies Other receivables Prepayments and accrued income Non-current Prepayments and accrued income Group Company 2007 £’000 2006 £’000 2007 £’000 2006 £’000 164,605 121,515 (3,733) (3,270) 160,872 118,245 – – – – 4,632 27,306 – 73,516 4,497 21,071 – 46 192,810 143,813 73,562 2,301 1,927 – – – – – 307 25 332 – all non-current receivables are due within five years from the balance sheet date. the Group’s exposure to credit and currency risks and impairment losses related to trade and other receivables is disclosed in note . 14. 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 2007 £’000 2006 £’000 2007 £’000 2006 £’000 7,217 – 37,122 13,200 57,209 657 5,630 – – – 302,242 191,574 28,690 10,070 38,556 579 – – 460 – – – 21 – 115,405 83,525 302,702 191,595 475 205 680 495 635 1,130 – – – – – – 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 £1.1m (006: £.m) relating to social charges on share based payments. the Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note . annual report 007 71 2006 £’000 – 39,150 39,150 Total £’000 47,433 25,300 72,733 43 39,150 39,193 15. Bank overdrafts and loans Bank overdrafts Bank loans Group Company 2007 £’000 47,433 25,300 72,733 2006 £’000 43 39,150 39,193 2007 £’000 47,433 25,300 72,733 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 2007 Bank overdrafts Bank loans 31 December 2006 Bank overdrafts Bank loans Sterling £’000 47,433 25,300 72,733 – 39,150 39,150 US Dollar £’000 – – – 43 – 43 Bank overdrafts are repayable on demand. at 1 December 007, the Group had available £1.7m (006: £10.m) of undrawn committed borrowing facilities in respect of which all conditions precedent had been met. the Group’s exposure to interest rate, foreign currency and liquidity risk for financial assets and liabilities is disclosed in note . 16. Provisions for liabilities At 1 January Utilised in year At 31 December Group Company 2007 £’000 192 (192) – 2006 £’000 576 (384) 192 2007 £’000 2006 £’000 – – – – – – 7 MIChael paGe InternatIonal 17. 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 2006 Recognised in equity for the year Recognised in profit or loss for the year Changes in rate Exchange differences At 1 January 2007 Recognised in equity for the year Recognised in profit or loss for the year Exchange differences At 31 December 2007 Accelerated tax depreciation £’000 Share-based payments £’000 Tax losses £’000 275 (6,260) (2,621) 1,318 (742) – (2) (5,686) 3,652 87 – – (788) 31 264 (3,114) – 1,708 384 – 13 – – 288 – (104) – 184 Other £’000 (502) – (439) – 6 (935) – (1,227) – Total £’000 (9,108) 1,318 (1,956) 31 268 (9,447) 3,652 464 384 (1,947) (1,022) (2,162) (4,947) 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 2007 £’000 (4,998) 17 2006 £’000 (9,447) – (4,981) (9,447) at 1 December 007, unremitted earnings of overseas Group companies amounted to £78.6m (006: £0.m). 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 due to the split of unremitted earnings between lower taxed jurisdictions and higher taxed jurisdictions. 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 £1.m (006: £0.8m) 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 £1.0m is dependent on generating future taxable profits. of the recognised deferred tax asset, £nil is recognised within territories that were loss making in the current year. annual report 007 7 18. 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 2007 2006 £’000 Number of shares £’000 Number of shares 5,713 571,250,000 5,713 571,250,000 3,332 333,242,076 3,326 332,637,799 57 5,676,073 238 23,874,277 (115) (11,524,415) (232) (23,270,000) 3,274 327,393,734 3,332 333,242,076 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 00. the recognition and measurement principles in IFrS  have been applied to all grants after 7 november 00. they have not been applied to the two grants made prior to 7 november 00 in accordance with the transitional provisions in IFrS 1 “First-time adoption of International Financial reporting Standards” and IFrS  “Share-based payment”. at 1 December 007 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. 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) 2007 (Note 2) Total 2007 Balance at 1 January 2007 5,552,900 197,500 410,000 1,817,300 2,173,775 2,305,800 2,023,184 – – – – – – – Granted in year Exercised in year No. of shares outstanding at 31 December 2007 Lapsed in year Base EPS Exercise price per share Exercise period (2,578,787) (191,415) 2,782,698 9.9 175p March 2004 - March 2011 (105,000) (185,000) (1,355,000) – – – 92,500 10.6 186p March 2005 - March 2012 225,000 462,300 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 (1,349,803) (25,619) 798,353 (60,800) (138,111) 2,106,889 7.5 190.75p-191.5p March 2008 - March 2015 (41,684) (116,688) 1,864,812 15.5 309.9p March 2009 - March 2016 – 2,818,000 – (59,611) 2,758,389 21.3 464.5p-494.1p March 2010 - March 2017 14,480,459 2,818,000 (5,676,074) (531,444) 11,090,941 Weighted average exercise price 2007 (£) 1.84 4.66 1.53 2.41 2.69 Total 2006 38,066,555 2,123,500 (23,447,721) (2,261,875) 14,480,459 Weighted average exercise price 2006 (£) *these options have fully vested 1.63 3.10 1.60 1.80 1.84 ,090,61 options were exercisable at the end of 007 at a weighted average exercise price of £1.61 (006: £1.1). In 007, options were granted on  March with the estimated fair values of the options granted on that day of £.6. In 006, options were granted on 7 March. the estimated fair values of the options granted on that date was £.10. 7 MIChael paGe InternatIonal 18. Called-up share capital (continued) 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 001. the options outstanding at 1 December 007 have an exercise price in the range of 81. pence to 9.1 pence and a weighted average contractual life of 6.6 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 2007 4.65 4.65 4.65 30% 5 years 5.00% 1.25% 2006 3.10 3.10 3.10 35% 5 years 4.75% 1.5% 2007 4.65 Nil 4.65 30% 3 years 5.00% Nil 2006 3.10 Nil 3.10 35% 3 years 4.75% Nil 2007 4.65 Nil 4.65 30% 2 years 5.00% Nil 2006 3.10 Nil 3.10 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 £6.8m (006: £.m) related to equity-settled share-based payment transactions during the year. Option plan details note 1 pre flotation options on flotation, options over ,70,000 (9%) ordinary shares were granted to the executive Directors and 7 employees. these options are subject to the following: (a) .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  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 % 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 1 December 00 met the epS performance conditions for 8% of the outstanding options. the result for the year ended 1 December 006 met the epS performance conditions for the remaining 1% of the outstanding options, these vested on 1 March 007. (b) .% 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  years. none of these options will vest unless the Company’s share price has achieved 0% growth after  years and not later than  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 00% growth after  years and not later than  years. these hurdles rise from the fifth anniversary of the date of grant at compound rates of growth of 8.% and .7% respectively. at 1 December 007, the performance conditions were met for 81.8% (006: 6.%) of the outstanding share price dependent options. annual report 007 7 18. Called-up share capital (continued) note 2 Grants post flotation the respective base earnings per share for each grant are shown in the table on page 7. For grants since 00, 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 % 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  and , 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. 19. 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 11,,1 shares cancelled during the year as shown in note 18. Reserve for shares held in the employee benefit trust at 1 December 007, the reserve for shares held in the employee benefit trust consisted of 7,90,0 ordinary shares (006: , ,7 ordinary shares) held for the purpose of satisfying awards made under the Incentive Share plan and deferred shares under the annual Bonus plan, representing .% of the called-up share capital with a market value of £.9m (006: £1.7m). a total of 1,8,091 shares have been allocated to satisfy share awards made under the Incentive Share plan, and 87,001 deferred shares have been allocated under the annual Bonus plan. Dividends are paid on these shares and they are included in the epS calculation. a total of 1,1,0 shares have been allocated to satisfy share option awards made under the Incentive Share plan, and 9,98 deferred share option have been allocated under the annual Bonus plan. Dividends on these shares are waived and are treated as non dilutive. Following the allocation of awards made under the above mentioned plans, to date ,066,91 ordinary shares remain unallocated in the reserve. Dividends on these shares are also waived and are treated as non dilutive. 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. 76 MIChael paGe InternatIonal 20. Cash flows from operating activities Profit before tax Depreciation and amortisation charges Loss/(profit) on sale of property, plant and equipment, and computer software 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 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 funds/(debt) Group Company 2007 £’000 2006 £’000 147,441 96,959 7,660 91 6,757 1,991 163,940 (40,863) 25,778 (192) 148,663 6,445 (48) 4,168 408 107,932 (42,376) 13,655 (384) 78,827 2007 £’000 721 749 – – 2,837 4,307 (73,230) 110,667 – 2006 £’000 6,665 568 – – 891 8,124 (318) 21,428 – 41,744 29,234 Group Company 2007 £’000 75,647 7,343 82,990 (47,433) 35,557 2006 £’000 23,355 12,232 35,587 (43) 35,544 (25,300) (39,150) 10,257 (3,606) 2007 £’000 2006 £’000 – – – (47,433) (47,433) (25,300) (72,733) – – – – – (39,150) (39,150) the Group has set up a multi-currency notional cash pool in 007. Currently the main eurozone subsidiaries and the uK-based Group treasury subsidiary participate in this cash pool, although it is the Group’s intention to extend the scope of the participation to other Group companies going forward. the structure facilitates interest and balance compensation of cash and bank overdrafts. this notional pooling does not meet the strict set-off rules under IFrS and as a result the cash and bank overdraft balances must be reported ‘gross’ on the balance sheet. on a ‘netted’ pro forma basis, cash and cash equivalents and overdraft balances would have been £9.m lower, resulting in £.m cash and cash equivalents and £18.0m bank overdraft balances. 22. Financial risk management the Group has exposure to the following risks from its use of financial instruments: (i) credit risk (ii) liquidity risk (iii) market risk this note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements. annual report 007 77 22. Financial risk management (continued) the Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. the Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. the Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. the Group audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. the Group audit Committee is assisted in its oversight role by Internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the audit Committee. (i) Credit risk Credit risk is the risk of financial loss to the Group if a client or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from clients and investment securities. 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. trade and other receivables total trade receivables (net of allowances) held by the Group at 1 December 007 amounted to £160.9m (006: £118.m). an initial credit period is made available on invoices. no interest is charged on trade receivables from the date of the invoice during this credit period. thereafter, interest is charged on the outstanding balance. the Group has provided fully for all receivables over 10 days because historical experience is such that receivables past due beyond 10 days are generally not recoverable. trade receivables below 10 days are provided for based on estimated irrecoverable amounts from the provision of our services, determined by reference to past default experience. Included in the Group’s trade receivable balance are debtors with a carrying amount of £77.7m (006: £.9m) that are past due at the reporting date for which the Group has not provided as the amounts are still considered recoverable. the Group does not hold any collateral over these balances. the average age of these receivables is  days in excess of the initial credit period (006: 1 days). the aging of trade receivables at the reporting date was: Not past due Past due 0-30 days Past due 31-150 days More than 150 days Gross receivables 2007 £’000 Provision 2007 £’000 Gross receivables 2006 £’000 83,486 46,554 32,261 2,304 164,605 178 467 784 2,304 3,733 62,360 37,681 19,514 1,960 121,515 Provision 2006 £’000 41 460 809 1,960 3,270 the Group’s exposure to credit risk is influenced mainly by the individual characteristics of each client. the demographics of the Group’s client base, including the country in which clients operate, also has an influence on credit risk. less than % of the Group’s revenue is attributable to sales transactions with a single client. the geographic diversification of the Group’s revenue also reduces the concentration of credit risk. the majority of the Group’s clients have been transacting with the Group for several years, with losses rarely occurring. In monitoring client credit risk, clients are grouped according to their credit characteristics, including geographic location, industry, aging profile, maturity and existence of previous financial difficulties. 78 MIChael paGe InternatIonal 22. Financial risk management (continued) movement in the allowance for doubtful debts Balance at beginning of the year Impairment losses recognised on receivables Amounts written off as uncollectable Amounts recovered during the year Impairment losses reversed Balance at end of the year 2007 £’000 3,270 5,682 (1,244) (1,638) (2,337) 3,733 2006 £’000 2,328 3,923 (431) (1,177) (1,373) 3,270 the majority of the allowance for doubtful debts are individually impaired trade receivables with a balance of £1.1m (006: £0.8m) which have been placed in litigation, as well as a further provision for debts of 10 days and over. the impairment recognised represents the difference between the carrying amount of these trade receivables and the present value of the expected liquidation proceeds. the Group does not hold any collateral over these balances. Exposure to credit risk the maximum exposure to credit risk for trade receivables at the reporting date by geographic region was: EMEA United Kingdom Asia Pacific Americas Carrying amount 2007 £’000 84,324 55,097 12,978 8,473 2006 £’000 53,964 50,270 9,234 4,777 160,872 118,245 annual report 007 79 22. Financial risk management (continued) the maximum exposure to credit risk for accrued income at the reporting date by geographic region was: EMEA United Kingdom Asia Pacific Americas Carrying amount 2007 £’000 456 2006 £’000 150 14,195 12,108 4,729 1,963 3,387 852 21,343 16,497 the entire accrued income balance is not past due. the fair values of trade and other receivables are not materially different to those disclosed above. (ii) liquidity risk management ultimate responsibility for liquidity risk management rests with the Board, which has built an appropriate liquidity risk management framework that aims to ensure that the Group has sufficient cash or credit facilities at all times to meet all current and forecast liabilities as they fall due. 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 net cash/debt position within a relatively narrow band. 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. Cash generated in excess of these requirements will be used to buy back the Company’s shares. the Group also operates a multi-currency notional cash pool to facilitate interest and balance compensation of cash and bank overdrafts. the following are the contractual maturities of financial liabilities. 2007 Trade payables Accruals and other payables Bank overdraft 2006 Trade payables Accruals and other payables Bank overdraft Less than 1 month £’000 5,030 51,725 47,433 Less than 1 month £’000 4,800 40,065 43 Carrying amount 1-3 months £’000 3-12 months £’000 970 24,257 – 1,067 19,061 – Carrying amount 1-3 months £’000 3-12 months £’000 318 7,118 – 157 21,177 – More than 12 months £’000 150 4,023 – More than 12 months £’000 355 2,815 – (iii) market risk and sensitivity analysis the Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates, but these risks are not deemed to be material. however, a sensitivity analysis showing hypothetical fluctuations in pounds Sterling against the Group’s main exposure currencies is shown on pages 81 and 8. there has been no material change in the Group’s exposure to market risks or the manner in which it manages and measures the risk. For additional information on market risk, refer to ‘treasury management and currency risk’ in the Financial review. 80 MIChael paGe InternatIonal 22. Financial risk management (continued) Interest rate risk management 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. the average interest rates paid were as follows: Bank overdrafts Bank loans Currency rate risk 2007 6.40% 6.22% 2006 4.26% 5.40% We publish our results in pounds Sterling and conduct our business in many foreign currencies. as a result, we are subject to foreign currency exchange risk due to exchange rate movements. We are exposed to foreign currency exchange risk as a result of transactions in currencies other than the functional currencies of some of our subsidiaries and the translation of the results and underlying net assets of our foreign subsidiaries. the main functional currencies of the Group are Sterling, euro 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. In certain cases, where the Group gives or receives short-term loans to and from other Group companies with different reporting currencies, it may use foreign exchange swap derivative financial instruments to manage the currency and interest rate exposure that arises on these loans. It is the Group’s policy not to seek to designate these derivatives as hedges. Sensitivity analysis - currency risk a 10 percent strengthening of sterling against the following currencies at 1 December would have increased/(decreased) equity and profit or loss by the amounts shown on page 8. this analysis is applied currency by currency in isolation, i.e. ignoring the impact of currency correlation, and assumes that all other variables, in particular interest rates, remain constant. the analysis is performed on the same basis for 006. the amounts generated from the sensitivity analysis are forward-looking estimates of market risk assuming certain adverse market conditions occur. actual results in the future may differ materially from those projected, due to developments in the global financial markets which may cause fluctuations in interest and exchange rates to vary from the hypothetical amounts disclosed in the table below, which therefore should not be considered a projection of likely future events and losses. annual report 007 81 22. Financial risk management (continued) Sensitivity analysis - currency risk (continued) Euro Australian Dollar Swiss Franc Hong Kong Dollar Brazilian Real United States Dollar Other Euro Australian Dollar Swiss Franc Hong Kong Dollar Brazilian Real United States Dollar Other 2007 Equity £’000 (7,060) (1,530) (572) (523) (509) (330) (945) 2006 Equity £’000 (3,049) (756) (174) (267) (175) 116 (439) PBT £’000 (4,617) (796) (257) (324) (442) 3 (245) PBT £’000 (2,168) (424) (107) (160) (247) 64 (181) a 10 percent weakening of sterling against the above currencies at 1 December would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant. 23. Commitments Operating lease commitments at 1 December 007 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 2007 £’000 2006 £’000 2,562 29,411 57,980 89,953 1,034 25,280 53,088 79,402 2007 £’000 449 7,526 – 7,975 2006 £’000 284 4,645 – 4,929 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. 8 MIChael paGe InternatIonal 23. Commitments (continued) Capital commitments the Group had contractual capital commitments of £1.m as at 1 December 007 (006: £0.6m) relating to property, plant and equipment. the Group had contractual capital commitments of £.m as at 1 December 007 (006: £0.m) 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 1 December 007 amounted to £7.6m (006: £6.m). 24. Contingent liabilities the Company has provided guarantees to other Group undertakings amounting to £9.7m (006: £8.9m) in the ordinary course of business. It is not anticipated that any material liabilities will arise from the contingent liabilities. 25. Events after the balance sheet date Between 1 December 007 and  March 008 79,78 options were exercised, which has led to an increase of share capital of £797 and an increase in share premium of £188,86. 26. Related party transactions Identity of related parties the Group has a related party relationship with its Directors and members of the executive Board, and subsidiaries (note 1). transactions with key management personnel Key management personnel are deemed to be the Directors and members of the executive Board. the remuneration of Directors and members of the executive Board 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  to 9. over and above these transactions, equity settled transactions for the year were £.m (006: £1.m). transactions with the remaining members of the executive Board are disclosed below: Short-term employee benefits Pension costs - defined contribution plans Equity settled transactions Termination benefits 2007 £’000 746 40 340 – 2006 £’000 468 33 – 63 the increase in emoluments in the current year represents members being on the executive Board for a full year and an increase in the bonus award, as well as awards made under the Michael page executive Share option Scheme. In addition to their salaries, the Group also provides non-cash benefits to members of the executive Board, and contributes to a post-employment defined contribution pension plan on their behalf, details of which are given in note 1. transactions between the Group and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation. 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 2007 £’000 4,283 2006 £’000 8,140 2007 £’000 2006 £’000 2007 £’000 2006 £’000 73,516 38,067 302,241 229,641 annual report 007 8 Shareholder information and adVisers Annual General Meeting to be held on  May 008 at 1.00 noon at page house, the Bourne Business park, 1 Dashwood lang road, addlestone, Weybridge, Surrey, Kt1 QW. every shareholder is entitled to attend and vote at the meeting. Final dividend for the year ended 31 December 2007 to be paid (if approved) on 9 June 008 to shareholders on the register on 9 May 008. Company secretary Kelvin Stagg Company number 10 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, the Bourne Business park, 1 Dashwood lang road addlestone, Weybridge, Surrey Kt1 QW tel: 019 61 Fax: 019 697 Auditors Solicitors Registrars Deloitte & touche llp Chartered accountants Stonecutter Court 1 Stonecutter Street london eCa tr herbert Smith exchange house primrose Street london eCa tr Capita registrars ltd northern house Woodstone park Fenay Bridge huddersfield West Yorkshire hD8 0la Joint Corporate Brokers Bankers Citigroup  Canada Square Canary Wharf london e1 lB Deutsche Bank Winchester house 1 Great Winchester Street london eCn DB hSBC Bank plc West end Business Banking Centre 70 pall Mall london SW1Y GZ aBn aMro Bank n.V. Corporate Clients De entree 99 1101 he amsterdam the netherlands Key dates ex-Dividend date record date annual General Meeting payment of proposed final ordinary dividend Interim results announcement 7 May 008 9 May 008  May 008 9 June 008 18 august 008 8 MIChael paGe InternatIonal Memorandum and Articles of Association the following summarises certain provisions of the Company’s Memorandum and articles of association and applicable english law. the summary is qualified in its entirety by reference to the Companies act 198 of Great Britain (“the act”), as amended, and the Company’s articles of association. Objects and purposes the Company is incorporated under the name Michael page International plc and is registered in england and Wales with registered number 10. the Memorandum of association of the Company provides that the Company’s principal object is to carry on business as a general commercial company and to carry out the other objects more particularly set out in the Memorandum of association of the Company. Share capital the authorised share capital of the Company currently consists of 71,0,000 ordinary shares of 1p each. as at 1 December 007, 7,9,7 ordinary shares have been allotted, called-up and fully paid (see note 18, notes to the accounts). alteration of capital the Company may from time to time by ordinary resolution: (a) increase its share capital by new shares of such amount as the resolution prescribes; (b) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; (c) subject to the provisions of the act, sub-divide its shares, or any of them, into shares of a smaller amount than is fixed by the memorandum; (d) determine that, as between the shares resulting from such a sub-division, any of them may have any preference or advantage as compared with the others; and (e) cancel shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled. Subject to the provisions of the act, the Company may by special resolution reduce its share capital, any capital redemption reserve and any share premium account, in any way. Purchase of own shares Subject to the provisions of the act, the Company may purchase its own shares, including redeemable shares. the Company proposes to renew its authority to purchase its own shares for another year in item 11 of the annual General Meeting notice. General meetings and voting rights the Directors may call general meetings whenever and at whatever time and location they so determine. Subject to the provisions of the act, an annual general meeting and an extraordinary general meeting called to pass a special resolution shall be called by at least 1 clear days’ notice, and all other extraordinary general meetings shall be called by at least 1 days’ notice. two persons entitled to vote upon the business to be transacted shall be a quorum. the articles of association provide that subject to any rights or restrictions attached to any shares, on a show of hands every member shall have one vote, and on a poll every member shall have one vote for every share of which he is a holder. on a poll, annual report 007 8 votes may be given either personally or by proxy or (in the case of a corporate member) by a duly authorised representative. no member shall be entitled to vote in respect of any share held by him if any call or other sum payable by him to the Company remains unpaid. If a member or any person appearing to be interested in shares held by a member has been duly served with a notice under Section 79 of the Companies act 006 (previously Section 1 of the act) and is in default for the prescribed period in supplying to the Company information thereby required, unless the Directors otherwise determine, the member shall not be entitled in respect of the default shares to be present or to vote (either in person or by representative or proxy) at any general or class meeting of the Company or on any poll or to exercise any other right confirmed by membership in relation to such meeting or poll. In certain circumstances, any dividend due in respect of the default shares shall be withheld and certain certificated transfers may be refused. a member entitled to more than one vote need not, if he votes, use all his votes or cast all the votes he uses in the same way. a proxy need not be a member. a member may appoint more than one proxy to attend on the same occasion. this does not preclude the member from attending and voting at the meeting or at any adjournment of it. limitations and non-resident or foreign shareholders english law treats those persons who hold the shares and are neither uK residents nor nationals in the same way as uK residents or nationals. they are free to own, vote on and transfer any shares they hold. variation of rights Subject to the act, if at any time the capital of the Company is divided into different classes of shares, the rights attached to any class of may be varied either: (a) in such manner (if any) as may be provided by those rights; or (b) in the absence of any such provision, with the consent in writing of the holders of three-quarters in nominal value of the issued shares of the class or with the sanction of an extraordinary resolution passed at a separate general meeting of the holders of the shares of the class but not otherwise, and may be so varied either whilst the Company is a going concern or during, or in contemplation of, a winding- up. at every such separate general meeting the necessary quorum shall be at least two persons together holding or representing by proxy at least one-third in nominal value of the issued shares of the class (but at any adjourned meeting any holder of shares of the class present in or by proxy shall be a quorum). unless otherwise expressly provided by the rights attached to any class of shares, those rights shall be deemed not to be varied by the purchase by the Company of any of its own shares. Dividend rights holders of the Company’s ordinary shares may by ordinary resolution declare dividends but no such dividend shall exceed the amount recommended by the Directors. If, in the opinion of the Directors, the profits of the Company available for distribution justify such payments, the Directors may, from time to time, pay interim dividends on the shares of such amounts and on such dates and in respect of such periods as they think fit. the profits of the Company available for distribution and resolved to be distributed shall be apportioned and paid proportionately to the amounts paid up on the shares during any portion of the period in respect of which the dividend is paid. the members may, at a general meeting declaring a dividend upon the recommendation of the Directors, direct that it shall be satisfied wholly or fully by the distribution of assets. no dividend shall be paid otherwise than out of profits available for distribution as specified under the provisions of the act. any dividend unclaimed after a period of twelve years from the date of declaration of such dividend shall, if the Directors so resolve, be forfeited and shall revert to the Company. Calls on shares Subject to the terms of allotment, the Directors may make calls upon members in respect of any amounts unpaid on their shares (whether in respect of nominal value or premium) and each member shall pay to the Company as required by the notice the amount called on his shares. transfer of shares any member may transfer all or any of his shares in certificated form by instrument of transfer in the usual common form or in any other form which the Directors may approve. the transfer instrument shall be signed by or on behalf of the transferor and, except in the case of fully-paid shares, by or on behalf of the transferee. Where any class of share is for the time being a participating security, title to shares of that class which are recorded as being held in uncertificated form, may be transferred by the relevant system concerned. 86 MIChael paGe InternatIonal the Directors may in their absolute discretion and without giving any reason refuse to register any transfer of shares (being shares which are not fully paid or on which the Company has a lien), provided that if the share is listed on the official list of the uK listing authority such refusal does not prevent dealings in the shares from taking place on an open and proper basis. the Directors may also refuse to register a transfer of shares unless the transfer instrument: (a) is lodged at the registered office, or such other place as the Directors may appoint, accompanied by the relevant share certificate(s); (b) is in respect of only one class of share; and (c) is in favour of not more than four persons jointly. the Directors of the Company may refuse to register the transfer of a share in uncertificated form to a person who is to hold it thereafter in certificated form in any case where the Company is entitled to refuse (or is excepted from the requirements) under the uncertificated Securities regulations 001 to register the transfer; and they may refuse to register any such transfer in favour of more than four transferees. Subject to the uncertificated Securities regulations, the registration of transfers of shares or of any class of shares may be suspended at such times and for such periods (not exceeding thirty days in any year) as the Directors may determine. Directors the Company’s articles of association provide for a Board of Directors, consisting of (unless otherwise determined by the Company by ordinary resolution) not fewer than two Directors, who shall manage the business of the Company. the Directors may exercise all the powers of the Company, subject to the provisions of the act, the Memorandum of association, the articles of association and any directions given by special resolution. the quorum for meetings of the Directors is currently two Directors. the Directors may delegate any of their powers to: (a) any managing director, any director holding any other executive office, or any other director; (b) any committee consisting of one or more directors and (if thought fit) one or more other persons, but a majority of members of the committee shall be directors and no resolution of the committee shall be effective unless a majority of those present when it is passed are directors; and (c) to any local board or agency for managing any of the affairs of the Company either in the united Kingdom or elsewhere, and such delegation may include authority to sub-delegate all or any of the powers delegated, may be subject to conditions and may be revoked or varied. the Directors may also, by power of attorney or otherwise, appoint any person, whether nominated directly or indirectly by the Directors, to be the agent of the Company for such purposes and subject to such conditions as they think fit, and may delegate any of their powers to such an agent. the articles of association place a general prohibition on a Director voting on any resolution concerning a matter in which he has, directly or indirectly, a material interest (other than an interest in shares, debentures or other securities of, or otherwise in or through the Company), unless his interest arises only because the case falls within one or more of the following: (a) the giving to him of a guarantee, security, or indemnity in respect of money lent to, or an obligation incurred by him for the benefit of, the Company or any of its subsidiary undertakings; (b) the giving to a third party of a guarantee, security, or indemnity in respect of an obligation of the Company or any of its subsidiary undertakings for which the Director has assumed responsibility in whole or in part and whether alone or jointly with others under a guarantee or indemnity or by the giving of security; (c) his interest arises by virtue of his being, or intending to become a participant in the underwriting or sub-underwriting of an offer of any shares in or debentures or other securities of the Company for subscription, purchase or exchange; (d) the resolution relates to a retirement benefits scheme which has been approved, or is conditional upon approval, by the Board of Inland revenue for taxation purposes; (e) (f) any arrangement for the benefit of the employees of the Company or any of its subsidiaries, including but without being limited to an employees’ share scheme, which does not accord to him any privilege or advantage not generally accorded to employees to whom the arrangement relates; any transaction or arrangement with any other company in which he is interested, directly or indirectly, provided that he is not the holder of or beneficially interested in at least one per cent of any class of shares of that company (or of any other company through which his interest is derived), and is not entitled to exercise at least one per cent of the voting rights available to members of the relevant company; and annual report 007 87 (g) the purchase or maintenance for any Director or Directors of insurance against liability. If a question arises at a Directors’ meeting as to the right of a Director to vote, the question may be referred to the Chairman of the meeting (or if the Director concerned is the Chairman, to the other Directors at the meeting), and his ruling in relation to any Director (or, as the case may be, the ruling of the majority of the other Directors in relation to the Chairman) shall be final and conclusive. the act requires a Director of a company who is in any way interested in a contract or a proposed contract with the company to declare the nature of his interest at a meeting of the Directors of the company. the definition of “interest” now includes the interests of spouses, children, companies and trusts. Further requirements regarding the Directors’ duty to declare any interests relevant to the Company and its activities are the subject of item 1 at the annual General Meeting, a description of which is provided in the section of the annual report entitled “aGM notice of Meeting”. Borrowing powers of the Directors the Directors shall restrict the borrowings of the Company and exercise all powers of control exercisable by the Company in relation to its subsidiary undertakings so as to secure (as regards subsidiary undertakings so far as by such exercise they can secure) that the aggregate principal amount (including any premium payable on final repayment) outstanding of all money borrowed by the Group (excluding amounts borrowed by any member of the Group from any other member of the Group), shall not at any time, save with the previous sanction of an ordinary resolution of the Company, exceed an amount equal to three times the aggregate of: (a) the amount paid up on the share capital of the Company; and (b) the total of the capital and revenue reserves of the Group, including any share premium account, capital redemption reserve, capital contribution reserve and credit balance on the profit and loss account, but excluding sums set aside for taxation and amounts attributable to outside shareholders in subsidiary undertakings of the Company and deducting any debit balance on the profit and loss account, all as shown in the latest audited consolidated balance sheet and profit and loss account of the Group, but adjusted as may be necessary in respect of any variation in the paid up share capital or share premium account of the Company since the date of that balance sheet and further adjusted as may be necessary to reflect any change since that date in the companies comprising the Group. Director’s appointment and removal at each aGM, there shall retire from office by rotation: (a) all Directors of the Company who held office at the time of the two preceding aGMs and who did not retire by rotation at either of them; and (b) such additional number of Directors as shall, when aggregated with the number of Directors retiring under paragraph (a) above, equal either one third of the number of Directors, in circumstances where the number of Directors is three or a multiple of three, or in all other circumstances, the whole number which is nearest to but does not exceed one-third of the number of Directors (the “relevant proportion”) provided that: (i) the provisions of this paragraph (b) shall only apply if the number of Directors retiring under paragraph (a) above is less than the relevant proportion; and (ii) subject to the provisions of the act and to the relevant provisions of these articles of association, the Directors to retire under this paragraph (b) shall be those who have been longest in office since their last appointment or reappointment, but as between persons who became or were last reappointed Directors on the same day those to retire shall (unless they otherwise agree among themselves) be determined by lot. If the Company, at the meeting at which a director retires by rotation, does not fill the vacancy the retiring Director shall, if willing to act, be deemed to have been reappointed unless a resolution not to fill the vacancy or not to reappoint that Director is passed. Subject to the act, the Company may, by extraordinary resolution, remove a director before the expiration of his period of office (without prejudice to any claim for damages for breach of any contract of service between the director and the Company) and, subject to the articles of association, may by ordinary resolution, appoint another person instead of him. the newly appointed person shall be subject to retirement at the same time as if he had become a director on the day on which the director in whose place he is appointed was last appointed or reappointed as a Director. a Director shall be disqualified from holding office if: (a) he ceases to be a director under the provisions of the act or he becomes prohibited by law from being a Director; (b) he becomes bankrupt or makes an arrangement or composition with his creditors generally; (c) he is, or may be suffering from mental disorder in certain circumstance; (d) he resigns his office by notice in writing to the Company; 88 MIChael paGe InternatIonal (e) (f) in the case of an executive Director, his appointment as such is terminated or expires and the Directors resolve that his office be vacated; he is absent from Directors’ meetings for more than six consecutive months and the Directors resolve that his office be vacated; or (g) he is requested in writing by all the other Directors to resign. no person shall be disqualified from being appointed or re-appointed as a Director and no Director shall be requested to vacate that office by reason of his attaining the age of seventy or any other age. there is no requirement of share ownership for a Director’s qualification. amendments to the articles of association Subject to the act and the Memorandum of association, the articles of association of the Company can be altered by special resolution of the members. winding-up If the Company is wound up, the liquidator may, with the sanction of an extraordinary resolution of the Company and any other sanction required by law: (a) divide among the members in kind the whole or any part of the assets of the Company and, for that purpose, set such values as he deems fair upon any property to be divided and determine how the division shall be carried out between the members; and (b) vest the whole or any part of the assets in trustees upon such trusts for the benefit of members as the liquidator shall think fit, but no member shall be compelled to accept any assets upon which there is a liability. annual report 007 89 Summary 5 Year summarY income statement Revenue Gross profit Operating profit Profit before tax Profit attributable to equity holders Conversion UK GAAP 2003 £’000 372,616 178,485 21,783 22,409 13,745 12.2% 2004 £’000 433,731 210,641 38,858 38,859 34,336 18.4% IFRS 2005 £’000 523,810 267,581 66,519 66,136 49,630 24.9% 2006 £’000 649,060 348,817 97,367 96,959 65,447 27.9% 2007 £’000 831,640 478,094 149,432 147,441 101,734 31.3% Basic earnings per share (pence) 3.8 9.8 14.8 19.6 31.1 the amounts disclosed for 00 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. 90 MIChael paGe InternatIonal aGm notice of mee ting this notice of annual General Meeting is important and requires your immediate attention. If you have any doubts as to the action you should take, you are recommended to seek your own financial advice from your stockbroker, bank manager, solicitor, accountant or other financial adviser authorised under the Financial Services and Markets act 000. If you have sold or otherwise transferred all your ordinary shares in Michael page International plc, please send this document, together with the accompanying documents to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. notice is hereby given that the annual General Meeting of the Company will be held at page house, the Bourne Business park, 1 Dashwood lang road, addlestone, Weybridge, Surrey Kt1 QW on  May 008 at 1.00 noon for the following purposes: 1. to receive and adopt the reports of the Directors and auditors and accounts for the year ended 1 December 007. . to declare a final dividend on the ordinary share capital of the Company for the year ended 1 December 007 of .6p per share. . to re-elect Steve Ingham as a director of the Company (note 6) . to re-elect Dr tim Miller as a director of the Company (note 6) . to elect ruby McGregor-Smith as a director of the Company (note 6) 6. to propose the following ordinary resolution: that the Directors’ remuneration report for the year ended 1 December 007 be received and approved. 7. 8. a. b. 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. to propose the following ordinary resolution: that in accordance with section 66 and 67 of the Companies act 006 (the ‘006 act’) the Company, and all companies that are subsidiaries of the Company at the date on which this resolution 8 is passed or during the period when this resolution 8 has effect, are authorised to: make political donations to political parties (or independent election candidates), as defined in the 006 act, not exceeding £,000 in total; make political donations to political organisations other than political parties, as defined in the 006 act, not exceeding £,000 in total; and c. incur political expenditure, as defined in the 006 act, not exceeding £,000 in total; during the period commencing on the date of this resolution and ending on the date of the aGM of the Company in 009 provided that the authorised sum referred to in paragraphs (a), (b) and (c) above, may be comprised of one or more amounts in different currencies which, for the purposes of calculating the said sum, shall be converted into pounds sterling at the exchange rate published in the london edition of the Financial times on the date on which the relevant donation is made or expenditure incurred (or the first business day thereafter) or, if earlier, on the day in which the Company enters into any contract or undertaking in relation to the same. 9. to propose the following ordinary resolution: that the Directors be and are hereby generally and unconditionally authorised for the purposes of Section 80 of the Companies act 198 (the “act”) to exercise all powers of the Company to allot relevant securities (as defined in Section 80 () of the act) up to an aggregate nominal amount of £1,080,99 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 annual report 007 91 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 8). 10. to propose the following special resolution: that the Directors be and are hereby empowered pursuant to Section 9 of the Companies act 198 (the “act”) to allot equity securities (as defined in Section 9 of the act) for cash pursuant to the authority conferred by resolution 9 above as if Section 89 (1) of the act did not apply to such allotment provided that this power shall be limited to: (a) the allotment of equity securities in connection with a rights issue and so that for this purpose “rights issue” means an offer of equity securities open for acceptance for a period fixed by the Directors to holders of equity securities on the register on a fixed record date in proportion to their respective holdings of such securities or in accordance with the rights attached thereto but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient to deal with fractional entitlements or legal or practical problems under the laws of any overseas territory or requirements of any recognised regulatory authority or stock exchange in any country or any matter whatever, and (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 £16,697, and shall expire at the conclusion of the next annual General Meeting of the Company when the general authority under resolution 9 shall expire, save that the Company may before such expiry make an offer or agreement which would or might require equity securities to be allotted in pursuance of such an offer or agreement as if the authority conferred hereby had not expired (note 9). 11. to propose the following special resolution: that pursuant to the Company’s articles of association and Section 166 of the Companies act 198 (the ”act”), the Company be and is hereby generally and unconditionally authorised to make market purchases (within the meaning of section 16() of the act) 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 9,076,1; (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 10% of the average of the mid-market quotations for an ordinary share of the company as derived from the london Stock exchange Daily official list for the five business days immediately preceding the day on which the ordinary share is contracted to be purchased; (d) the authority hereby conferred shall expire at the conclusion of the next annual General Meeting of the Company after the date of passing this resolution, unless such authority is renewed prior to such time; and (e) the Company may conclude a contract to purchase ordinary shares under the authority hereby conferred prior to the expiry of such authority which will or may be exercised wholly or partly after the expiry of such authority and may make a purchase of ordinary shares in pursuance of any such contract as if the authority hereby conferred had not expired (note 10). 1. to propose the following special resolution: that the articles of association, contained in the document produced at the meeting and signed by the Chairman for the purposes of identification, be approved and adopted as the new articles of association of the Company in substitution for, and to the exclusion of, the existing articles of association, with effect from the conclusion of the 008 annual General Meeting (note 1). the directors of the Company consider that all the proposals to be considered at the annual General Meeting are in the best interests of it’s shareholders as a whole and they recommend that you vote in favour of them. By order of the Board kelvin Stagg Company Secretary page house, 1 Dashwood lang road addlestone, Weybridge, Surrey, Kt1 QW registered in england no. 10  March 008 9 MIChael paGe InternatIonal Notes 1. . . . . a member entitled to attend and vote at the meeting may appoint another person(s) (who need not be a member of the Company) to exercise all or any of his rights to attend, speak and vote at the meeting. a member can appoint more than one proxy in relation to the meeting, provided that each proxy is appointed to exercise the rights attaching to different shares held by him. a proxy does not need to be a member of the Company but must attend the Meeting to represent you. Your proxy will vote as you instruct and must attend the meeting for your vote to be counted. Details of how to appoint the Chairman or another person as your proxy using the proxy form are set out in the notes to the proxy form. appointing a proxy does not preclude you from attending the Meeting and voting in person. If you attend the Meeting in person, your proxy appointment will automatically be terminated. a copy of this notice has been sent for information only to persons who have been nominated by a member to enjoy information rights under section 16 of the Companies act 006 (a “nominated person”). the rights to appoint a proxy can not be exercised by a nominated person: they can only be exercised by the member. however, a nominated person may have a right under an agreement between him and the member by whom he was nominated to be appointed as a proxy for the meeting or to have someone else so appointed. If a nominated person does not have such a right or does not wish to exercise it, he may have a right under such an agreement to give instructions to the member as to the exercise of voting rights. In order to be valid an appointment of proxy must be returned (together with any authority under which it is executed) to the Company’s registrars not less than 8 hours before the time of the meeting. CreSt members who wish to appoint a proxy or proxies by utilising the CreSt electronic proxy appointment service may do so by utilising the procedures described in the CreSt Manual. CreSt personal Members or other CreSt sponsored members, and those CreSt members who have appointed a voting service provider(s), should refer to their CreSt sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order for a proxy appointment made by means of CreSt to be valid, the appropriate CreSt message (a “CreSt proxy Instruction”) must be properly authenticated in accordance with euroclear uK & Ireland limited’s (euI) specifications and must contain the information required for such instructions, as described in the CreSt Manual. the message regardless of whether it constitutes the appointment of a proxy or an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer’s agent (ID number – r1710) by the latest time(s) for receipt of proxy appointments specified in the notice of meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CreSt applications host) from which the issuer’s agent is able to retrieve the message by enquiry to CreSt in the manner prescribed by CreSt. the Company may treat as invalid a CreSt proxy Instruction in the circumstances set out in regulation ()(a) of the uncertificated Securities regulations 001. 6. Steve Ingham and Dr tim Miller will retire by rotation and are seeking reappointment at the annual General Meeting. as ruby McGregor-Smith was first appointed to the Board by the Directors, in accordance with regulation 9a of the Company’s articles of association, she is retiring and seeking re-appointment at the annual General Meeting. Biographical information on each of the Directors is contained on pages 0 and 1 of the annual report and accounts. 7. For the purpose of this resolution, ‘political donations’, ‘political organisations’ and ‘political expenditure’ have the meanings given to them in Section 6-6 of the 006 act. In accordance with its Business principles, it is the Company’s policy not to make contributions to political parties. there is no intention to change it. however, what constitutes a ‘political party’, a ‘political organisation’, ‘political donations’ or ‘political expenditure’ under the Companies act 006 is not easy to decide as the legislation is capable of wide interpretation. Sponsorship, subscriptions, payment of expenses, paid leave for employees fulfilling public duties, and support for bodies representing the business community in policy review or reform, among other things, may fall within this. therefore, notwithstanding that the Company has no intention of making any political donation or incurring any political expenditure in respect of any political party, political organisation or independent election candidate, the Board has decided to put forward resolution 8 to grant the authority. this will allow the Company to continue to support the community and put forward its views to wider business and Government interests without running the risk of being in breach of the law. as permitted under the 006 act, resolution 8 has also been extended to cover any of these activities by the Company’s subsidiaries. 8. this authority is in respect of % 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. annual report 007 9 9. this authority is in respect of % 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. 10. this authority is in respect of 1.99% 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. It is the intention that shares purchased under this authority be cancelled, but in order to respond properly to the Company’s capital requirements and prevailing market conditions, the directors will need to reassess at the time of any and each actual purchase whether to hold the shares in treasury or cancel them, provided it is permitted to do so. 11. to have the right to attend and vote at the meeting or adjourned 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 6.00pm on 1 May 008 (or if the meeting is adjourned, at 6.00pm on the date which is two days prior to the adjourned 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. 1. the Company proposes to adopt new articles of association. these incorporate amendments to the current articles of association to reflect the provisions of the Companies act 006 (“the 006 act”) which relate to directors’ conflicts of interest which will come into effect in october 008. as the 006 act will not be fully in force until october 009, and so it is not yet possible to fully reflect the 006 act changes, it is anticipated that shareholders will be asked to approve further changes to our articles of association at the 009 aGM. the 006 act sets out directors’ general duties which largely codify the existing law but with some changes. under the 006 act, from 1 october 008 a director has a statutory duty to avoid a situation where he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the company’s interests. the requirement is very broad and could apply, for example, if a director becomes a director of another company or a trustee of another organisation. the 006 act allows directors of public companies to authorise conflicts and potential conflicts where appropriate, if the articles of association contain a provision to this effect. the 006 act also allows the articles to contain other provisions for dealing with directors’ conflicts of interest to avoid a breach of duty. article 100, which is the provision for dealing with conflicts in our current articles, allowing directors to be interested in transactions and to be an officer of or employed by or interested in a body corporate in which the company is interested, has been amended so that it confirms that such interests, offices or employment will not infringe the conflicts duty as codified in the 006 act. new article 101 gives the directors authority to approve conflict situations including other directorships held by the company’s directors and include other provisions to allow conflicts of interest to be dealt with in a similar way to the current position. there are safeguards that will apply when directors decide whether to authorise a conflict or potential conflict. First, only directors who have no interest in the matter being considered will be able to take the relevant decision, and secondly, in taking the decision the directors must act in a way they consider, in good faith, will be most likely to promote the company’s success. the directors will be able to impose limits or conditions when giving authorisation if they think this is appropriate. the proposed new article 101 also contains provisions relating to confidential information, attendance at board meetings and availability of board papers to protect a director from being in breach of duty if a conflict of interest or potential conflict of interest arises. these provisions will only apply where the position giving rise to the potential conflict has previously been authorised by the directors. It is the board’s intention to report annually on the Company’s procedures for ensuring that the board’s powers of authorisation of conflicts are operated effectively and that the procedures have been followed. 9 MIChael paGe InternatIonal 1. In order to facilitate voting by corporate representatives at the meeting, arrangements will be put in place at the meeting so that (i) if a corporate shareholder has appointed the Chairman of the meeting as its corporate representative with instructions to vote on a poll in accordance with the directions of all of the other corporate representatives for that shareholder at the meeting, then on a poll those corporate representatives will give voting directions to the Chairman and the Chairman will vote (or withhold a vote) as corporate representative in accordance with those directions; and (ii) if more than one corporate representative for the same corporate shareholder attends the meeting but the corporate shareholder has not appointed the Chairman of the meeting as its corporate representative, a designated corporate representative will be nominated, from those corporate representatives who attend, who will vote on a poll and the other corporate representatives will give voting directions to that designated corporate representative. Corporate shareholders are referred to the guidance issued by the Institute of Chartered Secretaries and administrators on proxies and corporate representatives (www.icsa.org.uk) for further details of this procedure. the guidance includes a sample form of representation letter if the Chairman is being appointed as described in (i) above. 1. as at  March 008 (being the latest business day prior to the publication of this notice), the Company’s issued share capital consists of 7,7,8 ordinary shares. the employee Benefit trust holds ,618,8 ordinary shares of the Company carrying no voting rights. no shares are held in treasury. therefore the total voting rights in the Company are 1,8,. 1. Members satisfying the thresholds in section 7 of the Companies act 006 can require the Company to publish a statement on its website setting out any matter relating to (a) the audit of the Company’s accounts (including the auditor’s report and the conduct of the audit) that are to be laid before the meeting; or (b) any circumstances connected with an auditor of the Company ceasing to hold office since the last annual General Meeting, that the members propose to raise at the meeting. the Company cannot require the members requesting the publication to pay its expenses. any statement placed on the website must also be sent to the Company’s auditors no later than the time it makes its statement available on the website. the business which may be dealt with at the meeting includes any statement that the Company has been required to publish on its website. 16. Copies of the directors’ service contracts with the Company, and the terms and conditions of the non-executive directors are available for inspection at the registered office of the Company during usual business hours (Saturdays, Sundays and public holidays excepted) and will be available at the place of the meeting from 9.00am until its conclusion. annual report 007 9 Michael Page International is a world leading recruitment consultancy 149 offices in 25 countries worldwide | www.michaelpage.co.uk 

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