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ANNUAL
RepoRt ANd
AccoUNts 2012
Part of the
page.com
Michael page International plc
contents
1
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12
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16
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25
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26
27
27
28
28
29
30
34
46
54
HIGHLIGHTS
CHAIRMAN’S STATEMENT
REBRAND
BUSINESS REVIEW
Group strategy
Review of 2012
Regional review of 2012
Financial review of 2012
Balance sheet
Cash flow
68
69
70
71
AUDITOR’S REPORT
FINANCIAL STATEMENTS
Consolidated income statement
Consolidated statement of
comprehensive income
72
Consolidated and parent company
balance sheets
74
Consolidated statement of changes
in equity
75
Statement of changes in equity –
Net cash and group borrowing facilities
parent company
Key Performance Indicators (KPIs)
Going concern
Foreign exchange
Treasury management and currency risk
76
77
113
114
Cash flow statements
Notes to the financial statements
FIVE YEAR SUMMARY
SHAREHOLDER INFORMATION
Principal risks and uncertainties
AND ADVISERS
Summary and current trading
115 ARTICLES OF ASSOCIATION
BOARD OF DIRECTORS
DIRECTORS’ REPORT
CORPORATE GOVERNANCE
REMUNERATION REPORT
119 ANNUAL GENERAL MEETING
130
CAUTIONARY STATEMENT AND
STATEMENT OF DIRECTORS’
RESPONSIBILITIES
In just thirty-seven years, pageGroup 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.
2012
2011
2010
2009
989.9
1019.1
832.3
716.7
2012
526.9
2011
553.8
2010
442.2
2009
351.7
Revenue (£m)
gRoss PRofit (£m)
2012
2011
2010
2009
64.8
86.1
72.2
21.1
2012
2011
2010
2009
13.6
18.7
15.1
3.9
PRofit BefoRe tax (£m)*
eaRnings PeR shaRe (P)*
2012
2011
2010
2009
10
10
9
8
2012
2011
2010
2009
5099
5286
4498
3549
DiviDenD PeR shaRe (P)
heaDcount at YeaR enD
*Before exceptional items
highlights
Group gross profit reduced by 4.9% or -1.5% in
constant currency
77% of gross profit generated outside the UK
vs. 61% five years ago
58% of gross profit generated from non-Finance
and Accounting disciplines vs. 46% five years ago
Gross profit from permanent placements reduced by
7% or -3% in constant currency
Gross profit from temporary placements increased
by 2% or +5% in constant currency
Strong balance sheet with net cash at 31 December
2012 of £61.4m
1
ouR gloBal offices
USA
Boston
Chicago
Houston
Iselin
New York
Philadelphia
San Francisco
Stamford
MEXICO
Mexico City
CHILE
Santiago
ARGENTINA
Buenos Aires
2
UNITED KINGDOM
Aberdeen
Birmingham
Brighton
Bristol
Cambridge
Cardiff
Chiswick
Coventry
Edinburgh
Glasgow
Guildford
Kingston
Leeds
Leicester
Liverpool
London
Maidstone
Manchester
Milton Keynes
Newcastle
Nottingham
Oxford
Reading
Sheffield
Slough
Southampton
St Albans
Swindon
Watford
Weybridge
IRELAND
Dublin
BELGIUM
Antwerp
Brussels
FRANCE
Bordeaux
Cergy Pontoise
Lille
Lyon
Marseille
Massy
Monaco
Nantes
Neuilly sur Seine
Noisy Le Grand
Orleans
Paris
Rennes
Rouen
Strasbourg
Toulouse
Versailles
PORTUGAL
Lisbon
Porto
AUSTRIA
Vienna
SPAIN
Barcelona
Bilbao
Madrid
Seville
Valencia
ITALY
Bologna
Milan
Padova
Rome
Turin
CANADA
Montreal
Toronto
COLOMBIA
Bogota
BRAZIL
Alphaville
Barra da Tijuca
Belo Horizonte
Campinas
Curitiba
Porto Alegre
Recife
Rio de Janeiro
São José dos Campos
São Paulo - Central
São Paulo - Vila Olímpia
SWITZERLAND
Basel
Geneva
Lausanne
Zurich
TURKEY
Istanbul
SWEDEN
Gothenburg
Stockholm
RUSSIA
Moscow
MOROCCO
Casablanca
LUXEMBOURG
Luxembourg
THE NETHERLANDS
Amsterdam
Breda
Eindhoven
Rotterdam
Utrecht
GERMANY
Berlin
Dusseldorf
Frankfurt
Hamburg
Munich
Stuttgart
Cologne
POLAND
Warsaw
QATAR
Doha
UAE
Dubai
Abu Dhabi
INDIA
New Delhi
Mumbai
MALAYSIA
Kuala Lumpur
SINGAPORE
Singapore
MICHAEL PAGE AFRICA
Operates out of Paris, France with offices in:
Algiers (Algeria), Cairo (Egypt) and Tunis (Tunisia)
SOUTH AFRICA
Johnannesburg
Cape Town
JAPAN
Tokyo
CHINA & HONG KONG
Beijing
Guangzhou
Hong Kong - Admiralty
Hong Kong - Pacific Place
Kowloon
Pudong
Shanghai
Shenzhen
Suzhou
Taipei
AUSTRALIA
Brisbane
Chatswood
Melbourne
Parramatta
Perth
Sydney
Wheelers Hill
NEW ZEALAND
Auckland
3
chaiRman’s statement
4
Business stRengths
When I became Chairman, I shared with you my assessment
of the strengths of the business:
• A focused strategy of organic growth - rolling out our
brands into country after country, city after city, discipline
after discipline
• An expanding presence in the world’s growth markets
• Powerful brands recognised around the globe
• One of the strongest “make it happen” cultures I have
come across in forty years
• A work hard/play hard/go anywhere management team;
and
• A small and effective Board
Those strengths have been reinforced during 2012. Your
Board has reviewed and embraced the strategy of worldwide
organic growth in multiple disciplines and geographies. We
have continued to open offices in growth markets. We have
established the PageGroup brand for our corporate activities
so as not to dilute the power of our three operating brands,
Michael Page, Page Personnel and Page Executive. We have
redesigned the executive leadership team to create one global
company, organisation and culture. In doing so, we have also
reduced the cost of this team. We have further strengthened
our Board.
We remain free of the constraints that hold back so many
businesses in this difficult environment. We still have: no
debt; no unfunded pension scheme; no acquisition integration
issues; no layers of bureaucracy; and no burdensome
fixed costs.
Performance
There is one constraint we do have. Our industry and our
company are more exposed to global economic troubles
than some. 2012 was a difficult year for the macro-
economy in most countries. Despite this, PageGroup
delivered a creditable performance with gross profit down
4.9% compared to 2011, a decrease of only 1.5% at
constant rates of exchange.
In these tough times the company is looking to get the
maximum effectiveness and efficiency out of its
investments in operations and infrastructure. Some
progress has been made on this already. More will follow
in the months to come. Further details of our performance
and our plans are in the Business Review on page 12.
Dividend
We are committed to increasing the dividend over the
course of the economic cycle in line with our long-term
growth rate. That way, we can maintain a sustainable level
of dividend payment during downturns, as well as during
more prosperous times. Given our results, we intend to
maintain our dividend at the same level as 2011, i.e. pay a
final dividend of 6.75p for the 2012 financial year, bringing
the full year dividend to 10p (2011: 10p).
The Board
In the last Annual Report I explained that the Board was
undergoing considerable change.
Andrew Bracey, our new Chief Financial Officer, started in
April 2012 and has already made valuable contributions.
In May 2012, following Hubert Reid’s retirement from
the Board, Ruby McGregor-Smith, our Audit Committee
Chairman, became our Senior Independent Director.
I mentioned last March that we were looking for another
non-executive. We are delighted that Simon Boddie has
joined the Board. Following the announcement of our
2012 Preliminary results, in April he will succeed Ruby as
Chairman of the Audit Committee.
Our Remuneration Committee Chairman, Reg Sindall,
who had begun making important improvements to our
compensation system, had, for personal reasons, to leave
the Board. We were sorry to lose him. However, we are
very fortunate to have appointed David Lowden to take
over the Chairmanship of the Committee. The outcome of
the Remuneration Committee’s work can be seen in the
Remuneration Report.
Our people navigate the economic ups
and downs. They make the changes
happen. We are very grateful to them.
Governance
Two topics have dominated the UK discussion on
Corporate Governance. Senior executive pay and
boardroom diversity. On executive director pay, we
have made five particularly important changes. We have
capped previously uncapped pay, we have made executive
director incentives both more strategic and longer term,
we have set performance criteria for all incentive payments,
we have introduced claw-back provisions, and we have
increased shareholding guidelines. I should emphasise that
PageGroup will continue to pay the market rate to attract
and keep executives of the highest calibre and we will
reward performance for shareholders.
On diversity, the Board had two goals this year. As a global
group we need extensive international experience and are
keen to see a higher proportion of women on the Board. Our
three new directors have worked in multiple countries in all
regions of the world. A higher proportion of women on our
board would not only bring different skills and perspectives
but also support our gender diversity objectives across the
Group. We continue to look for outstanding individuals who
can bring such diversity to our Board.
There are three elements of our governance that are
particularly important. The Board debates and decides on
strategy, holding the Executive team accountable for its
execution. We ensure that we have and will have the most
talented leadership, both within the Executive team and on
the Board. We always ask, “What is the right thing to do?”
so that everyone involved with PageGroup can continue to
be proud of us. My job is to make sure these three things
happen. Further details of how the company is governed
and how the Board is run are given elsewhere in this report.
Looking Ahead
Our priorities for 2013 are clear. We will continue to execute
our organic growth strategy. We will develop our worldwide
leadership team. We will push for greater returns from our
investments in support systems and processes. We will
build on the improvements we have made in designing a
global company. The Board will concentrate on supporting
and challenging our management to ensure this happens.
The macro-economy is tough. PageGroup will continue to
go through considerable change. Our people navigate the
economic ups and downs. They make the changes happen.
We are very grateful to them.
Robin Buchanan, Chairman
March 2013
5
neW BRanD... same stRategY
What the PagegRouP ReBRanD
means foR ouR investoRs
Our strategy and approach remain unchanged: organic
growth by region and discipline, a focus on growth
markets, development of internal management expertise
and a structure that champions our own talent.
The PageGroup rebrand brings clarity to our operations;
it reflects that we are specialists – by job function, sector,
geography and process. In an increasingly fragmented
recruitment landscape, this specialist approach combined
with our established global network gives us a better ability
to reach more candidates and clients. Our aim is higher
levels of engagement; to continue to establish and build
professional partnerships for the long-term and to move
away from transaction-led relationships. The rebrand
also addresses the need to demonstrate a clear brand
proposition in a marketplace that is growing in complexity.
People want the reassurance of a business with a strong
track record; PageGroup’s brands are presented in a
way that is recognisable and consistent across sectors,
markets, audiences and media channels.
6
ouR BRanD stRuctuRe
Some of our operations
Informatica
Design
PageGroup retains the core brands of Michael Page and Page
Personnel with no operational change. We have rationalised
our executive search operations by introducing Page Executive.
Our new brand structure consolidates our operations to allow
us to capitalise on the range of opportunities within professional
recruitment that lie outside the remit of the original, core brand.
Page Personnel and our executive search businesses have
reached a significant size and market reputation so we want to
reflect their success and potential, alongside our original brand
Michael Page, with a new corporate name that represents our
core operating companies equally.
ReBRanD:
fRom michael Page
inteRnational to
PagegRouP
To recognise our diversification and
remit, the corporate group Michael
Page International became known
as PageGroup in October 2012.
We updated our corporate identity
to reflect the strong growth to date,
and the potential expansion of our
core operating brands in the future.
Retaining ‘Page’ across all of our
brands capitalises on our history
and builds on our success.
New PageGroup website.
7
The executive search business of PageGroup, Page Executive,
offers a range of search, selection and management solutions
for organisations to attract and retain their leadership talent.
The roles we focus on typically sit at the sub-board and board
levels. Page Executive has a global presence, operating
across Africa, Asia Pacific, Europe, North and Latin America.
Our approach
A flexible approach to talent attraction based on client
requirements. Global reach combined with local expertise.
Diverse shortlists based on a thorough search of the market.
Results delivered quickly and accurately. These are the
characteristics you can expect when you partner with
Page Executive to identify your business leaders.
How we reach our audience
Page Executive has a developed network of senior contacts
across our operating territories and markets. This enables
us to approach and attract the top talent in the market for
organisations wishing to make a leadership hire. We also
run managed selection campaigns which can include high
profile or niche advertising.
Opportunities for growth
Page Executive aims to diversify by market sector and
geography, across our international network.
8
Michael Page is the original PageGroup brand and is established
as the first business in each new country that we enter.
Michael Page is comprised of 14 disciplines - each providing
a service to a specialist area of the market. Operating at the
qualified professional and management level, Michael Page
recruits on a permanent, temporary, contract and interim basis.
Michael Page operates in 34 countries worldwide, across Africa,
Asia Pacific, Europe, North and Latin America.
Our approach
At Michael Page, we focus on developing a thorough
understanding of our clients’ businesses, from technical and
soft skill requirements to future growth plans. We are then able
to partner effectively to manage their recruitment requirements
to support expansion, diversification, or change programmes.
How we reach our audience
Michael Page specialises in the selection of employees for
employers, utilising a variety of methods to source candidates
– from our industry-leading databases, to social media,
to networking and managed advertising campaigns.
Opportunities for growth
Michael Page aims to grow by expansion: by establishing
new specialist disciplines and by increasing our operations
geographically, and into new market sectors in the regions
in which we currently operate.
9
Page Personnel offers specialist recruitment services to
organisations requiring employees or people looking for jobs at
the technical and administrative support, professional clerical
and junior management levels. Page Personnel operates in 21
countries across Asia Pacific, Europe, North and Latin America.
Our approach
Employers and candidates in a high activity, high volume market
require a responsive recruitment partner – a service that Page
Personnel is proud to provide. Speed and accuracy define our
proposition; we react quickly to ensure that organisations have
access to the skills they require. Page Personnel operates in
the permanent, contract and temporary recruitment fields.
How we reach our audience
Page Personnel supports employers needing to make hiring
decisions quickly by maintaining and actively growing a pool
of qualified candidates, ready for their next opportunity.
Opportunites for growth
Page Personnel is one of the fastest growing PageGroup
businesses, diversifying by market and geography across
our international network.
10
11
Business RevieW
12
We believe our review is a balanced and
comprehensive analysis of the development
and performance of the company. The business
review discusses the following areas:
13 Group strategy
14 2012 review
16 2012 regional review
24 2012 financial review
25 Balance sheet
25 Cash flow
25 Net cash and group borrowing facilities
26 Key Performance Indicators (KPIs)
27 Going concern
27 Foreign exchange
28 Treasury management and currency risk
28 Principal risks and uncertainties
29 Summary and current trading
gRouP stRategY
The Group’s strategy is to expand and diversify the business by
industry sectors, by professional disciplines, by geography and by
level of focus (Page Personnel, Michael Page or Page Executive),
with the objective of being the leading specialist recruitment
consultancy in each of its chosen markets.
As recruitment activity is dependent upon economic cycles, by
being more diverse, the dependency on individual businesses or
markets is reduced, making the overall Group more resilient. This
strategy is pursued entirely through the organic growth of existing
and new teams, offices, disciplines and countries, with a consistent
team and meritocratic culture.
Our organic growth is achieved by drawing upon the skills and
experiences of proven PageGroup management, ensuring we
have the best and most experienced, home-grown talent in each
key role. When we invest in a new business, we do so only with
a long-term objective and in the knowledge that at some point
there will be periods when economic activity slows. While it is
difficult to predict accurately when these slowdowns will occur
and how severe they will be, it has been our practice in the past,
and remains our intention, to maintain our presence in our chosen
markets, while keeping close control over our cost base.
Our team-based structure and profit share business model is
scalable. The small size of our specialist teams also means we
can increase headcount rapidly to achieve growth. When market
conditions tighten, these teams then reduce in size, largely through
natural attrition. Consequently, our cost base reduces
To increase the diversification
of PageGroup by organically
growing existing and new
teams, offices, disciplines and
countries with a consistent
team and meritocratic culture
and consistent client and
candidate delivery.
countries
teams
Disciplines
Culture
teams
Disciplines
Disciplines
offices
countries
teams
offices
teams
teams Disciplines
countries
countries Disciplines teams
teams Disciplines offices teams
taRgeteD sectoRs
executive
seaRch
QualifieD
PRofessional
cleRical
PRofessional
geneRalist
staffing
PageGroup website launched in 2012
13
in a slowdown. Having invested many years in training and
developing our highly capable management teams, our
objective is to ensure we retain this expertise within the
Group. By following this course of action, we typically gain
market share during downturns and position our businesses
for market leading rates of growth when economic
conditions improve.
Pursuing this approach means that in an economic
downturn our profitability declines as, in addition to the
lower productivity levels that come with a slowdown, we
also carry spare capacity. However, when market conditions
improve, the Group’s profitability recovers more quickly as
spare capacity is utilised. Adopting this strategy in times of
economic slowdown also drives our financing strategy and
the management of our balance sheet position. In periods
of economic slowdown, the business has continued to
produce strong cash flows as working capital requirements
reduce. However, in uncertain markets, a strong balance
sheet is essential to support the business through difficult
periods and, as economic conditions improve, to fund
increased working capital requirements as the
business grows.
RevieW of 2012
With challenging economic conditions remaining throughout
2012, currency exchange rates moving against us and
tough year-on-year comparators, we believe we have
performed well.
As the demand for recruitment services increases, the
number of positions to be filled rises, candidate shortages
begin to emerge, the time-to-hire period reduces and there
is less pressure on pricing. With the increased uncertainty
and resultant reduction in market confidence, many of these
factors trended negatively, albeit to differing degrees in our
geographic regions. This created an environment where
productivity fell with less gross profit per fee earner. The
Group’s strategy of organic growth, as well as maintaining
market presence and a degree of spare capacity, means
that the Group is operationally geared, which resulted in
a proportionally greater reduction in operating profit than
in gross profit. This conversion of gross profit to operating
profit was also reduced by the amount of investment being
made to facilitate and maintain growth in our newer markets,
typically where we see longer term potential.
*Amounts stated in constant rates of exchange
During the course of 2012, we maintained our strategy
of organic investment in developing and diversifying our
business. The rollout of disciplines under the Michael Page,
Page Personnel and Page Executive brands continued
and we launched new businesses in two new countries
in Bogota, in Colombia, and in Casablanca, in Morocco.
We also opened four new offices in Cape Town, Macaé
(Rio de Janeiro), Suzhou and Taipei.
Revenue
Reported revenue for the year was 2.9% lower (0.3%*
higher) at £989.9m (2011: £1,019.1m). As in previous
economic slowdowns, permanent placement activity is
impacted more than temporary. The latter being more
resilient to slowing activity levels. As economic conditions
and market confidence remained poor throughout 2012,
this trend was reflected in revenue, with revenue from
permanent placements in 2012 falling by 6.9% (down
3.4%*) to £422.0m (2011: £453.1m), representing 42.6%
(2011: 44.5%) of Group revenue. Revenue from temporary
placements for the year grew by 0.3% (up 3.3%*) to
£567.9m (2011: £566.0m).
During the course of 2012, we maintained
our strategy of organic investment in
developing and diversifying our business.
Gross profit
Gross profit for the year fell by 4.9% (down 1.5%*) to
£526.9m (2011: £553.8m). Gross profit increased by 2%*
year-on-year in the first half, but as market conditions
deteriorated, the year-on-year growth rate slowed to -5%*
in the second half.
Group gross margin decreased to 53.2% (2011: 54.3%),
largely as a result of the shift in the mix of business due
to the growth in temporary compared to permanent
14
placements. Gross profit from permanent placements
fell by 6.6% (down 3.2%*) to £409.7m (2011: £438.4m),
representing 77.8% (2011: 79.2%) of Group gross profit.
The gross margin from permanent placements remained
broadly flat at 97.1% (2011: 96.8%). Gross profit from
temporary placements increased by 1.6% (up by 5.0%*)
to £117.2m (2011: £115.4m), representing 22.2% (2011:
20.8%) of Group gross profit. The gross margin achieved
on temporary placements was 20.6% (2011: 20.4%) and
was relatively stable throughout 2012.
Operating profit and conversion rates
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 that is highly operationally
geared. The majority of our cost base, around 75%,
relates to our staff, with the other main components
being property and information technology costs. 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, start new
disciplines and launch in new countries. Furthermore, in
periods when headcount is increasing significantly, it takes
time to train and develop staff before they become fully
productive. These characteristics of our growth strategy
and the levels of investment impact on the conversion
rates in any one reporting period.
The majority of our permanent placement activity is
undertaken on a contingent basis, which means on those
assignments we only generate revenue when a candidate
is successfully placed in a role. Our short-term visibility on
these earnings is provided by the number of assignments
we are working on, the number of candidates we have at
interview and the stage they are at in the interview process.
The average time to complete a placement from taking on
an assignment to successfully placing a candidate tends
to shorten in a recovery, increasing productivity, and the
risk of the candidate being rejected or the assignment
being cancelled decreases, thereby improving our
earnings visibility. When economic conditions weaken and
recruitment activity slows, these factors work in reverse
and result in a rapid shortening of earnings visibility.
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 that is highly
operationally geared.
As a result of the continuing macroeconomic uncertainty
and the slowing in our growth rates, following selective
increases in our headcount in the first half, headcount
reduced by 66 in the third quarter and by 156 in the fourth
quarter. Our headcount at the end of 2012 was 5,099,
which is 187 (3.5%) lower than at the end of 2011.
The costs associated with increasing and decreasing the
headcount capacity in the business are considered to
be part of normal trading expenses and are therefore not
separately disclosed.
The Group’s strategy of growing organically using home-
grown talent, maintaining market presence and maintaining
spare capacity, means that the Group is highly operationally
geared to an increase in gross profit as economies
recover, tempered only by the rate of investment for future
growth. However, when economic conditions weaken and
recruitment activity slows, these factors work in reverse
and are compounded by a shortening of earnings visibility.
This is reflected in the 24.3% decrease in operating profit
from £86.0m in 2011, to £65.1m before exceptional items in
2012. Accordingly, the Group’s conversion rate of operating
profit before exceptional items from gross profit fell to
12.4% (2011: 15.5%).
Administrative expenses in the year decreased by 1.3%
to £461.7m (2011: £467.7m), largely as a result of the
decrease in headcount. Administrative expenses included
£13.2m of share-based payment charges (2011: £13.0m)
in respect of the Group’s deferred annual bonus scheme,
long-term incentive plan and share option schemes.
During the first half of 2012, we restructured the Group’s
management, which resulted in the removal of the
Continental Europe and Americas regional management
team, including one Executive Director. Severance
packages for this team, (employed by the Group for many
years and largely based in France, with accompanying
high employment protection and social charges), totalled
£7.8m, within which were £1.5m of accelerated share
plan related charges. These have been presented as an
exceptional charge in the income statement. The payback
period for this investment is around two years.
The majority of our cost base,
around 75%, relates to our staff,
with the other main components
being property and information
technology costs.
15
2012 Regional RevieW
Continental Europe, Middle East & Africa (EMEA)
16
In EMEA, the Group’s largest region, contributing 41% of Group
gross profit for the year (2011: 43%), revenue fell by 4.3%
(increased by 2.2%*) to £403.2m (2011: £421.2m) and gross
profit fell by 8.8% (fell by 2.8%*) to £218.4m (2011: £239.6m).
Market conditions in Continental Europe worsened during
the year, with the economic uncertainty impacting market
confidence. The weakening of the Euro relative to Sterling also
impacted the results, with year-on-year reported growth rates
some 5% lower than in constant currency.
Generally in Europe the employer has less flexibility with
permanent staff than in most other regions. With challenging
market conditions, Europe as a whole has been impacted more
severely, as clients are even more reluctant to hire permanent
staff if there is an alternative viable temporary or contractor
option. In France and Germany, gross profit was down as a
result of the greater part of the business being permanent
recruitment. However, our temporary businesses have grown.
Elsewhere, our larger businesses such as Spain, Italy,
Switzerland and Holland were similarly affected. The newer
investments such as Africa, Austria, Luxembourg, Qatar, Russia,
Turkey and the UAE all performed well. In most of the European
countries in which we operate, we are the market leader
and by continuing to manage our cost base with gross profit
performance, we remain profitable in all major countries.
Headcount in the region was 2,210 at the start of the year
and decreased by 7.7% to 2,040 by the end of December,
reflecting the difficult market conditions. With the lower level of
gross profit, the region recorded a fall in operating profit before
exceptional items to £22.1m (2011: £31.7m), a conversion rate
of 10.1% (2011: 13.2%).
During the year, we launched a new business in Casablanca,
Morocco, and opened a new office in Cape Town,
South Africa.
gRoss PRofit (£m) & heaDcount
gRoss PRofit
Ratio
Permanent
£218m
Gross profit
Gross Profit
Headcount
2012
2011
51.5
49.0
57.6
60.3
61.0
58.3
64.1
56.2
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
highlights
Profitable in all major countries.
Newer businesses such as
Africa, Middle East, Austria,
Luxembourg, Russia and
Turkey all performed well.
Opened new offices in
Casablanca and Cape Town.
2040
2107
2185
2193
2210
2190
2126
1982
75%
25%
Temporary
gRoss PRofit BY DisciPline
Legal, Technology,
HR, Secretarial &
Healthcare
21%
Engineering,
Property &
Construction,
Procurement
& Supply Chain
22%
17%
Marketing,
Sales & Retail
40%
Finance
& Accounting
Operating profit*
Gross profit of PageGroup
£22m
41%
2040
14
78
Headcount (-8%)
Disciplines
Offices
*Before exceptional items
17
The UK contributed 23% of Group gross profit in 2012 (2011:
24%). Revenue fell by 8.9% to £295.9m (2011: £324.9m) and
gross profit fell by 6.6% to £121.4m (2011: £130.0m). The
gross margin in the UK remained broadly flat at 41%, with both
the mix of permanent and temporary gross profit and their
respective gross profit margins remaining largely the same
as in 2011.
Market conditions remained difficult but stable throughout
2012, with clients and candidates remaining cautious. Our
UK business is well-diversified in terms of geography and
disciplines, as well as the mix of permanent and temporary
revenues and is substantially less dependent on Financial
Services than in the past (now only 4% of UK gross profit).
Our strongest performances in the UK came from more
technical disciplines such as procurement, supply chain,
logistics, property and construction, technology, digital
and energy. These have helped to offset the more
established disciplines.
UK headcount was 1,292 at the start of the year and decreased
to 1,237 by the end of December, a reduction of 4.3%.
The headcount trend followed the performance of the business,
falling throughout the year, with the exception of the third
quarter when we hired a small number of graduates continuing
our investment in training and exporting talent. In a difficult
economic environment, operating profit before exceptional
items for the full year was 13.9% lower at £15.8m (2011:
£18.3m), representing a conversion rate of 13.0%
(2011: 14.1%).
2012 Regional RevieW
United Kingdom
18
gRoss PRofit (£m) & heaDcount
gRoss PRofit
Ratio
Permanent
£121m
Gross profit
Gross Profit
Headcount
2012
2011
30.2
29.5
31.1
30.6
30.9
33.1
34.3
31.7
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
highlights
Market conditions tough
but stable.
UK remains diversified in
geography, disciplines and
permanent/temporary
revenue mix.
Technical disciplines such as
procurement, supply chain
and logistics performed well.
1237
1265
1243
1259
1292
1414
1343
1358
70%
30%
Temporary
gRoss PRofit BY DisciPline
Legal, Technology,
HR, Secretarial &
Healthcare
17%
Engineering,
Property &
Construction,
Procurement
& Supply Chain
17%
22%
Marketing,
Sales & Retail
44%
Finance
& Accounting
Operating profit*
Gross profit of PageGroup
£16m
23%
1237
12
32
Headcount (-4%)
Disciplines
Offices
*Before exceptional items
19
The Asia Pacific region contributed 22% of Group gross profit in
2012 (2011: 19%). Revenue increased by 15.7% (increased
by 14.6%*) at £192.2m (2011: £166.1m) and gross profit
increased by 11.1% (increased by 9.8%*) at £114.9m (2011:
£103.4m), with all countries in the region showing growth.
Operating profit increased to £29.0m (2011: £26.2m),
representing a conversion rate of 25.2% (2011: 25.3%), flat on
2011 as a result of headcount growth in the first half and new
business investment in the region, including two new offices.
Headcount across the Asia Pacific region increased from 971 at
the start of the year, to 1,036 at the end of the year, an increase
of 7%, reflecting both increased activity levels and our intention
to continue building a substantial business in Asia over the
medium to long-term.
In Australia and New Zealand, gross profit grew 3%*, notably
due to growth in Western Australia, driven by the mining and
commodities sector. However, these sectors experienced
a slowing in the second half of 2012. In Asia, gross profit
grew 17%*. Our businesses across Japan and Greater China
remained resilient and we opened new offices in Taipei and
Suzhou. Our newest businesses in Malaysia and India both
finished 2012 with strong performances.
2012 Regional RevieW
Asia Pacific
20
gRoss PRofit (£m) & heaDcount
gRoss PRofit
Ratio
Permanent
£115m
Gross profit
Gross Profit
Headcount
2012
2011
27.8
30.2
30.6
26.3
25.6
29.2
27.2
21.4
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
highlights
Asia +17% gross profit growth
in constant currency.
Australia and New Zealand
+3% gross profit growth in
constant currency.
New offices opened in Taipei
and Suzhou.
Strong performances from our
newest businesses Malaysia
and India.
1036
1054
1050
1007
971
956
874
789
85%
15%
Temporary
gRoss PRofit BY DisciPline
Legal, Technology,
HR, Secretarial &
Healthcare
22%
Engineering,
Property &
Construction,
Procurement
& Supply Chain
17%
19%
Marketing,
Sales & Retail
Finance
& Accounting
42%
Operating profit
Gross profit of PageGroup
£29m
22%
1036
13
24
Headcount (+7%)
Disciplines
Offices
21
2012 Regional RevieW
The Americas
22
The Americas region contributed 14% of Group gross profit
in 2012 (2011: 14%). Revenue for the region fell by 7.8% (fell
by 1.3%*) to £98.6m (2011: £106.9m) and gross profit fell by
10.7% (down 3.7%*) to £72.2m (2011: £80.9m). With falls in
revenue and gross profit, the region produced an operating
loss of £1.7m (2011: profit £9.9m). This was in part due to
management changes in North America and it represented
a conversion rate of -2.3% (2011: 12.2%). Headcount in the
region decreased by 3.3% from 813 to 786 at the end of
the year, with limited increases in the first quarter offset by
reductions during the latter part of the year.
Approximately two-thirds of the Americas region is in Latin
America, of which our largest business is in Brazil, our fourth
largest country in gross profit terms. Brazil’s economy slowed
towards the end of 2011 and through the first half of 2012. This
quickly impacted hiring decisions and therefore our business.
With 15 offices, in what is an underdeveloped recruitment
market, as hiring volumes shrink a proportion of recruitment is
brought back in house. However, we have a strong and well-
established Brazilian management team and we continue to
invest to ensure we are able to capitalise on our market-leading
position when economic conditions improve.
Elsewhere in Latin America our businesses performed well.
Chile and Mexico delivered record performances in 2012 and
our new office in Bogota, Colombia, had a strong start. We also
opened an additional office in Macaé, Rio de Janeiro, to invest
further in our growing global Oil and Gas business.
In North America, we were impacted by the difficulties in the
financial services sector and year-on-year gross profit was
down by 3% in constant currency in the first half. We have
strengthened significantly the management team in the region
and the early signs of these changes are promising.
gRoss PRofit (£m) & heaDcount
gRoss PRofit
Ratio
Permanent
£72m
Gross profit
Gross Profit
Headcount
2012
2011
17.0
17.8
18.7
18.7
18.6
22.0
22.3
18.0
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
highlights
Clear market leader in Latin
America with 5 countries,
20 offices and 538 headcount.
Continuing to invest in
platform for future growth.
Launched in Bogota, Colombia
and opened new office in
Macaé, Rio de Janeiro.
786
829
843
850
813
790
778
723
89%
11%
Temporary
gRoss PRofit BY DisciPline
Legal, Technology,
HR, Secretarial &
Healthcare
19%
Engineering,
Property &
Construction,
Procurement
& Supply Chain
20%
16%
Marketing,
Sales & Retail
45%
Finance
& Accounting
Gross profit of PageGroup
Operating loss
£2m
14%
786
30
Headcount (-3%)
Offices
13
Disciplines
23
Discipline development
Our strategy of diversifying the Group by professional
disciplines has continued with the investment in the roll-out
of existing and new disciplines throughout our country and
office network. Structurally, the Group is now more broadly
diversified, having a wider range of disciplines.
Placements of candidates in Engineering, Property &
Construction and Procurement & Supply Chain roles
accounted for around 20% of Group gross profit.
Revenue from these disciplines increased by 8.0%
(12.2%*) to £177.9m (2011: £164.7m) and gross profit
increased by 1.5% (5.9%*) to £102.8m (2011: £101.3m).
Over the last 25 years there has been a consistent strategy
of diversifying PageGroup, so it is less dependent on any
one profession or industry. The heritage of the business
is in placing candidates in Finance and Accounting roles,
the large majority of which are professionally qualified
accountants into industry and commerce. It is also the
discipline where the PageGroup brands are strongest and
therefore tends to be the discipline we start with when
we enter a new geographic market, following which we
roll out other disciplines. While Finance and Accounting
remains our largest area of business, it now represents
approximately 42% of the Group’s 2012 gross profit.
Revenue from Finance and Accounting placements fell
by 10.7% (fell by 7.8%*) to £465.4m (2011: £521.4m)
and gross profit fell by 11.1% (fell by 8.1%*) to £220.6m
(2011: £248.0m).
Placements of candidates in
Engineering, Property & Construction
and Procurement & Supply Chain
roles accounted for around 20% of
Group gross profit.
24
Legal, Technology, Human Resources, Secretarial and
Other disciplines generated around 20% of Group gross
profit. Revenue from these disciplines increased by 7.2%
(10.5%*) to £220.0m (2011: £205.2m) and gross profit
increased by 0.8% (4.4%*) to £106.4m (2011: £105.6m).
Placements of Marketing, Sales and Retail professionals
generated around 18% of Group gross profit. Revenue
from these disciplines fell by 1.0% (increased by 1.9%*)
to £126.6m (2011: £127.9m) and gross profit fell by 1.8%
(increased by 1.3%*) to £97.1m (2011: £98.9m).
financial RevieW of 2012
2012 Exceptional items
The Group has taken a restructuring cost in the first half
of 2012 of £7.8m, relating to changes in management
structure where an entire layer of management was
removed. These costs represent direct expenditure
incurred as a result of the restructuring and are not
associated with the ongoing costs of the Group.
Intangible assets
We expect to commence operating our new software in
2013, which will generate operational efficiencies, and
therefore savings, as it is rolled-out across the business.
We intend to begin the amortisation of this intangible asset
in 2013. It is our current intention to amortise the software
and associated development costs over 5 years or their
useful life, whichever is the shorter.
Taxation
Tax on profit was £20.8m (2011: £29.3m). This represented
an effective tax rate of 36.5% (2011: 34.0%). The rate is
higher than the effective UK Corporation Tax rate for the
year of 24.5% due to disallowable items of expenditure
and profits being generated in countries where corporation
tax rates are higher than in the UK. The effective tax rate
is higher than in 2011 due to the increased relative sizes of
both the French Professional tax and non-deductible share
option charges to the underlying profits. Excluding these
two items, the overall tax charge would have been £16.1m,
or 28.3%.
The Group has taken a restructuring cost
in the first half of 2012, relating to changes
in management structure where an entire
layer of management was removed.
Share repurchases and share options
During the year, the Group’s employee benefit trust
purchased 5.0m shares for £18.0m at an average price of
£3.57 to satisfy employee share plan awards. No shares
were repurchased and cancelled during the year.
At the beginning of 2012, the Group had 22.9m share
options outstanding, of which 1.3m had vested, but had
not been exercised. In March 2012, 5.0m share options
were granted under the Group’s Share Option Scheme.
During the course of the year, options were exercised over
3.6m shares, generating £7.8m in cash and 1.5m share
options lapsed. At the end of 2012, 22.8m share options
remained outstanding, of which 3.5m had vested, but had
not been exercised.
Earnings per share and dividends
In 2012, basic earnings per share before exceptional
items was 13.6p (down 27.3%) (2011: 18.7p) and diluted
earnings per share before exceptional items was 13.5p
(2011: 18.2p). After exceptional items, basic earnings per
share was 11.9p (2011: 18.7p) and diluted earnings per
share was 11.7p (2011: 18.2p). The weighted average
number of shares for the year was 305.3m (2011: 304.5m).
the development and maintenance of our IT systems.
Capital expenditure, net of disposal proceeds, decreased
to £16.5m (2011: £29.4m), reflecting the reduction in
headcount and a lower level of capital expenditure in the
development of our new IT systems.
In line with the Group’s strategy for returns to shareholders,
the dividend is being maintained at a level that the Board
believes is sustainable. A final dividend of 6.75p, (2011:
6.75p) per ordinary share is proposed, which, together with
the interim dividend of 3.25p (2011: 3.25p) per ordinary
share, holds the total dividend for the year at 10.0p per
ordinary share (2011: 10.0p). The proposed final dividend,
which amounts to £20.5m, will be paid on 21 June 2013 to
those shareholders on the register as at 24 May 2013.
The most significant item in the Group balance sheet is
trade receivables of £141.7m at 31 December 2012 (2011:
£157.0m). The decrease in trade receivables reflects both
the decreased activity and a decrease in debtor days
to 47 (2011: 50 days). The movement in debtor days is
due largely to the increased proportion of revenue being
derived from temporary placements where our debtor days
are lower than from permanent placements.
In June 2012, the Group extended its £50m three-year
multi-currency committed revolving credit facility with
Deutsche Bank for a further three months to facilitate a
smooth transition of funding arrangements. In July 2012,
it was replaced by a £50m three-year Invoice Financing
arrangement with HSBC Bank. This arrangement
provides a term drawdown borrowing facility in Sterling,
with availability directly linked to UK trade receivables.
The arrangement is subject to conventional banking
covenants. In November 2012, the Group also put in
place a £10m committed overdraft facility with Deutsche
Bank to facilitate smooth operation of its European cash
management structure.
Our capital expenditure is driven primarily
by two main factors, being headcount,
in terms of expenditure on office
accommodation and infrastructure, as well
as the development and maintenance of
our IT systems.
Balance sheet
The Group had net assets of £181.4m at 31 December
2012 (2011: £180.6m). The increase in net assets
comprises profit after tax for the year of £36.2m, credits
relating to share schemes of £10.5m, cash received from
the exercise of share options of £7.8m, offset by adverse
currency movements of £5.2m, share repurchases by the
employee benefit trust of £18.0m and dividends paid of
£30.6m. Our capital expenditure is driven primarily by two
main factors, being headcount, in terms of expenditure
on office accommodation and infrastructure, as well as
cash floW
The Group started the year with net cash of £58.2m.
In 2012, we generated £62.3m from operations, after a
decrease in working capital of £2.4m (2011: increase of
£7.1m), reflecting decreased activity. Tax paid was £24.4m
and net capital expenditure was £16.5m (2011: £29.3m),
with net interest paid of £0.3m. During the year, £18.0m
was spent on the repurchase of shares into the employee
benefit trust to satisfy future share plan awards, £7.8m was
received from the exercise of share options and dividends
of £30.6m were paid. The Group had net cash of £61.4m at
31 December 2012.
net cash anD gRouP
BoRRoWing facilities
At 31 December 2012, the Group had net cash of £61.4m
(2011: £58.2m). The net cash position comprised gross
cash deposits of £70.8m with 18 separate banks.
25
KeY PeRfoRmance
inDicatoRs (“KPis”)
KPI
2012
2011
Definition, method of calculation and analysis
Financial and non-financial key performance indicators
(KPIs) used by the Board to monitor progress are listed in
the table right.
Gross margin
53.2% 54.3%
Conversion
before
exceptional
items
12.4% 15.5%
Productivity
(gross profit
per fee earner)
£140.4k
£149.5k
Gross profit as a percentage of revenue. Gross margin has decreased slightly,
due largely as a result of the mix of permanent and temporary placements.
In tougher trading conditions, there tends to be a swing to lower margin
temporary placements. Source: Consolidated income statement in the
financial statements
Operating profit as a percentage of gross profit showing the Group’s
effectiveness at controlling the costs and expenses associated with its normal
business operations and the level of investment for future growth. Conversion
has declined compared to last year, reflecting the impact of the economic
uncertainty on demand for the Group’s services, lower productivity and the
investment in maintaining market presence and carrying spare capacity.
Source: Consolidated income statement in the financial statements.
Represents productivity of fee earners and is calculated by 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
numbers and experience of fee earners, the impact of pricing and the general
conditions of the recruitment market. The decrease in productivity this year is
as a result of a general worsening of market conditions. Source: Internal data.
Fee earner:
support staff
ratio
71:29
72:28
Represents the balance between operational and non-operational staff.
The balance in the year reflects the relative increase in support staff in new
infrastructure over the movement in the number of fee earners. Source:
Internal data.
Debtor days
47
50
Represents the length of time before the Group receives payments from its
debtors. Calculated by comparing how many days’ billings it takes to cover the
debtor balance. The decrease in the year reflects an increased focus on cash
collections and a greater proportion of temporary business, with the average
debtor days being lower for the temporary business compared to
the permanent business. Source: Internal data.
The movements in KPIs are consistent with the business performance as discussed in the Business Review.
The source of data and calculation methods year-on-year are on a consistent basis.
26
going conceRn
The Board has undertaken a recent and thorough review
of the Group’s budget, forecasts and associated risks and
sensitivities and has concluded, given the level of cash
in the business, the level of borrowing facilities available,
the geographical and discipline diversification, limited
concentration risk, as well as the ability to manage the
cost base, 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 these accounts. As a result, the going
concern basis continues to be appropriate in preparing
the financial statements.
At the end of 2012, the Group was
operating in 34 countries around the world
and carried out transactions recorded in
twenty-five local currencies.
transactions between Group companies. However, royalties
are charged for the use of the Group’s trademarks and
management fees are charged for Group and regional
functions that provide services to other Group subsidiary
companies. Foreign exchange gains and losses are
recognised in accordance with IFRS on the settlement of
these transactions where the cash received, when converted
into Sterling, differs from the amounts previously recorded
in the Income Statement. These exchange gains and losses
are included within operating profit.
The table below shows the relative movements of the
Group’s main trading currencies against Pounds Sterling
during 2012, when compared to those prevalent during
2011. Negative percentages indicate that Sterling has
weakened against the foreign currency during the period.
foReign exchange
At the end of 2012, the Group was operating in 34 countries
around the world and carried out transactions recorded in
twenty-five local currencies. The Group reports its Income
Statement and Cash Flow Statement results in Pounds
Sterling, using the average exchange rate for each month
to translate the local currency amounts into Sterling. The
Balance Sheet is translated using the exchange rates at the
Balance Sheet date.
As a service company, most of the Group’s transactions are
within the respective territory in which the local business
operates and consequently there are few cross-border
Currency
Euro
Swiss Franc
Brazilian Real
US Dollar
Australian Dollar
Hong Kong Dollar
Singapore Dollar
Japanese Yen
Movement in the average exchange
rate used for Income Statement
translation between 2011 and 2012
Movement in the year end exchange
rate used for Balance Sheet
translation between 2011 and 2012
7%
5%
16%
-1%
0%
-1%
-2%
0%
3%
2%
15%
5%
3%
4%
-1%
18%
27
tReasuRY management
anD cuRRencY RisK
economic uncertainty, a more cautious funding position
is adopted, with the Group being managed in a net
cash position.
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 a strong balance sheet position. In a generally
benign economic environment, this equates to maintaining
the Group’s net cash/debt position within a relatively narrow
band, with cash generated in excess of these requirements
being used to buy back the Group’s shares. In a period of
Cash surpluses are invested in short-term deposits, with
any working capital requirements being provided from
Group cash resources, Group facilities, or by local overdraft
facilities. The Group has a multi-currency notional cash
pool between the Eurozone subsidiaries and the UK-based
Group Treasury subsidiary. The structure facilitates interest
and balance compensation of cash and bank overdrafts.
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. 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.
PRinciPle RisKs
anD unceRtainties
The management of the business and the execution of
the Group’s strategy are subject to a number of risks. The
following section comprises a summary of the main risks
PageGroup believes could potentially impact the Group’s
operating and financial performance.
People
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 and share plans linked to the
Group’s results and career progression.
Macroeconomic environment
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 diversifying the
business by expanding geographically, increasing the
number of disciplines, building part qualified and clerical
businesses and continuing to build the temporary business.
A substantial portion of the Group’s gross profit arises from
fees that 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 reduces further
during periods of economic downturn.
Competition
The degree of competition varies in each of the Group’s
main regions. In the UK, Australia and North America, the
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 the majority of 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 due to changes in
legislation, increasing job mobility and the difficulty internal
resources face in sourcing suitably qualified candidates and
28
managing increasing levels of compliance. 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 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 is 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 regular reviews of the Group’s
technology strategy to ensure that it supports the overall
Group strategy.
Legal
The Group operates in a large number of jurisdictions
that 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.
summaRY anD cuRRent tRaDing
in the business, we are well positioned to respond to
improvements in market conditions in 2013.
We will next update the market on our first quarter trading
in an announcement on 16 April 2013.
Steve Ingham, Chief Executive Officer
5 March 2013
Andrew Bracey, Chief Financial Officer
5 March 2013
Despite market conditions deteriorating considerably
since Q2, the Group delivered a good performance in a
tough economic environment with gross profit down 4.9%
compared to 2011, a decrease of only 1.5% at constant
rates of exchange.
As in previous economic slowdowns, we have reacted
according to the prevailing economic climate in each
market in which we operate and managed each business
appropriately, adjusting headcount to reflect market
conditions, while continuing to invest where we have
opportunities for long-term growth. Group headcount
remained broadly flat in the first half, increasing in areas
where we had growth, principally Asia and our newer
businesses and reducing in other areas, largely from natural
attrition. Reflecting the increasingly challenging conditions
since the first quarter, in the second half our headcount
reduced, through natural attrition, by 222 people.
We continue to invest in geographic diversification where we
see long-term growth potential. In 2012 we opened offices
in Cape Town and a further office in Macaé (Rio de Janeiro),
adding to the new offices in Taipei, Suzhou, Bogota, and
Casablanca opened earlier in the year. It is a clear priority
that we continue to manage the cost base to reflect market
conditions, whilst investing to create a platform for greater
growth when markets improve. We believe strongly that we
have the balance right.
We are encouraged by the improvement in the growth rate
in Group gross profit we recorded in the fourth quarter of
2012, with three of our four regions recording a sequential
improvement. While the strength of any recovery is
uncertain, we believe that with a strong balance sheet,
an outstanding geographic footprint and spare capacity
29
BoaRD of DiRectoRs
RoBin Buchanan
Chairman
Robin was appointed to the Board of Michael Page in August 2011 and became Chairman of the Board that
December. He is also a non-executive director of Schroders plc and LyondellBasell NV. He is a member of the Trilateral
Commission, a Senior Adviser to Bain & Company, and an adviser to private equity firms, family offices and voluntary
organisations. Prior to joining the Board of Michael Page, Robin served as Dean and President of London Business
School and as the Senior Partner of Bain & Company in the United Kingdom. Past board appointments include Bain &
Company Inc., Shire plc and Liberty International plc. He qualified as a Chartered Accountant with a predecessor firm
of Deloitte Touche Tohmatsu. Robin is also Chairman of the Nomination Committee.
steve ingham
Chief Executive Officer
anDReW BRaceY
Chief Financial Officer
Steve 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 1994.
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 2001,
and subsequently to Managing Director of UK
Operations in May 2005. He was appointed
Chief Executive Officer on 6 April 2006. Steve
is a member of the Great Ormond Street
Hospital’s Corporate Partnership Board, and on
8 January 2013 he was appointed to the Board
of Debenhams plc as a Non-Executive Director.
Andrew joined Michael Page from Ocado
Group plc where he was Chief Financial
Officer and Executive Director. Prior to Ocado,
Andrew had an 18 year career in private equity
and investment banking. He ran Jefferies
International’s European consumer group until
2009. From 2003 to 2008, he was at Barclays
Capital as Head of the Principal Investments
Area and also sat on the Board and Audit
Committee of Somerfield. From 2000 to 2003,
he was a Managing Director at Credit Suisse.
He started his career at UBS in 1991
in Corporate Finance.
30
simon BoDDie
Independent Non-Executive Director
DaviD loWDen
Independent Non-Executive Director
DR tim milleR
Independent Non-Executive Director
Simon is a Chartered Accountant and
has been Group Finance Director of
Electrocomponents plc since September
2005. Simon joined Electrocomponents
plc from Diageo where he held a variety
of senior finance positions over a 13 year
career, latterly as Finance Director of Key
Markets. Simon was appointed to the
Board of Michael Page International plc on
24 September 2012 and is a member of
the Remuneration, Audit and Nomination
Committees.
David is Senior Independent Director and
Chairman of the Remuneration Committee of
Berendsen plc, Non-Executive Director and
Chairman of the Audit Committee at William
Hill plc, and Chairman of Rice 2 Limited.
David was a member of the Board of TNS plc,
the marketing services business, from 1999
to 2009, becoming Chief Executive Officer in
2006. Before joining TNS plc he held senior
financial positions with Asprey plc, A.C. Nielsen
Corporation and Federal Express Corporation.
David is Chairman of the Remuneration
Committee and a member of the Audit and
Nomination Committees.
Tim was appointed a Director of Standard
Chartered Bank in December 2004.
Tim is responsible for the Corporate Real
Estate, Corporate Secretariat, Legal,
Compliance & Assurance, Internal Audit
and Global Research functions. Tim is also
Chairman of Standard Chartered Korea
and Chairman of the Bank’s Environment
Committee. Outside the Bank, Tim is Chairman
of the Governing Body, School of Oriental &
African Studies (“SOAS”) and a Member of
the School Advisory Board, and a Special
Professor of Strategy at Nottingham
University Business School. Tim was
appointed to the Board on 15 August 2005.
Tim is a member of the Audit, Nomination and
Remuneration Committees.
RuBY mcgRegoR-smith
Independent Non-Executive Director
Ruby McGregor-Smith is the Chief Executive of MITIE Group PLC. She was appointed to the Board of Michael Page
International plc on 23 May 2007 and is the Senior Independent Director, Chairman of the Audit Committee and
a member of the Remuneration and Nomination Committees. She qualified as a Chartered Accountant with BDO
Stoy Hayward. In December 2002 she joined MITIE Group PLC as Group Finance Director and was appointed Chief
Operating Officer in September 2005 before being appointed CEO in March 2007. Ruby is a member of the BitC’s
(Business in the Community’s) Board of Trustee Directors, a member of the CBI’s Presidents Committee and the
Public Services Strategy Board. In March 2012 she was also appointed as the Chairperson of the Women’s Business
Council, a working group set up by the Home Secretary, to make a list of recommendations to ministers on the best
ways to maximise women’s contributions and opportunities in the workplace.
31
executive BoaRD
PatRicK hollaRD
Executive Board Director LATAM, Southern & Western USA
Patrick joined Michael Page in France in 1996, having worked previously for KPMG Peat Marwick. Prior to that,
he was Vice-President of AIESEC International from 1991 to 1992. Appointed Director in 1999, he moved to
Sao Paulo to launch Michael Page Brazil, then Mexico in 2006, Argentina in 2008, Chile in 2010 and Colombia
in 2011. Appointed Regional Managing Director in 2007, he is now responsible for the LATAM, Southern and
Western USA regions.
oliveR Watson
Executive Board Director UK, UAE,
South Africa, Eastern USA & Canada
Oliver joined Michael Page in 1995 as a
consultant in London. He was appointed
Director of Michael Page UK Sales in
1997 and then Managing Director in 2002.
In 2006, he was appointed Regional Managing
Director for Michael Page UK Sales, Marketing
and Retail. In 2007, he launched Michael Page
Middle East and has since developed our office
network across the region. In 2009, he became
Regional Managing Director for Michael Page
UK Finance, Marketing and Sales, Middle East,
Scotland and Ireland. He is now responsible for
the UK, UAE, South Africa, Eastern USA and
Canada regions.
olivieR lemaitRe
Executive Board Director Europe
Olivier joined Michael Page Finance in Paris in
1997, having worked previously as a Controller
for Renault in Poland. In 1999, he moved to
Sao Paulo to launch Michael Page Brazil,
before returning to Europe in November 2002
to lead our Michael Page Frankfurt office.
He was appointed Managing Director of
Michael Page Germany in 2004. In 2007,
he was appointed Regional Managing Director
in charge of Austria, Belgium, Germany,
Holland, Luxembourg and Switzerland.
He is now in charge of Continental Europe.
32
gaRY James
Executive Board Director
Asia Pacific
Gary joined Michael Page Finance in London
in 1984. He was appointed Director of
Michael Page Sales & Marketing in 1994,
Managing Director of Michael Page
Marketing in 1997 and transferred to
America in 2002 as Managing Director
of North America. He was appointed
Managing Director of the Asia Pacific
region in August 2006, moving to Australia,
then on to Singapore.
faBRice lacomBe
Executive Board Director France,
Central & Eastern Europe
Fabrice joined Michael Page Finance in 1994
as a consultant in Paris. In 1996, he launched
Michael Page Engineering and became a
Director in 1998. In 1999, he was appointed
Executive Director and then in 2001 Managing
Director of Michael Page France. He launched
Michael Page Africa in 2005 and also took
charge of Page Personnel France in 2007.
He became Regional Managing Director
for France and Africa in 2010. He is now
responsible for France, Central and
Eastern Europe.
maRK locKton-goDDaRD
Chief Information Officer
Mark joined from PricewaterhouseCoopers
(PwC) where he was a Director in the Business
and Technology Transformation Consulting
business for 3 years. Prior to that he worked
for other ‘Big 4’ accounting and consulting
firms for over 15 years. In that time he assisted
a range of FTSE 250 businesses across
multiple sectors, including recruitment and
professional services, to reduce complexity
and drive operational performance through
the better use of technology.
33
DiRectoRs’ RePoRt
34
The Directors present their annual report on the affairs
of the Group, together with the Financial Statements and
Auditor’s Report for the year ended 31 December 2012.
Principal activity
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 69 to 112.
Business review
The Company is required by the Companies Act to include
a business review in their report. The information that
fulfils the requirements of the business review can be
found on pages 12 to 29 which are incorporated in this
report by reference.
Corporate governance
The Company and the Group are committed to high
standards of corporate governance, details of which are
provided in the Corporate Governance Report on pages
46 to 53 and the Remuneration Report on pages 54 to 67.
significant agReements
There are certain agreements to which the Company is
party that take effect, alter or terminate upon a change of
control of the Company following a takeover bid. Details of
the significant agreements of this kind are as follows:
• an invoice discounting facility that terminates on a
change of control, with prepaid amounts becoming
payable; and
• provisions of the Company’s share schemes and plans
may cause options and awards granted to employees
under such schemes and plans to vest on a takeover.
DiRectoRs anD inteRests
The following were Directors during the year and held
office throughout the year other than as shown below.
Non-Executive Directors
Senior Independent Director
- Robin Buchanan
(Chairman)
- Steve Ingham (Chief Executive)
- Simon Boddie
(appointed 24 September 2012)
- Andrew Bracey (Chief Financial Officer)
(appointed 23 April 2012)
- Charles-Henri Dumon
(left the board on 28 February 2012)
- David Lowden
(appointed 22 August 2012)
- Ruby McGregor-Smith CBE
- Dr Tim Miller
- Stephen Puckett (retired on 18 May 2012)
- Hubert Reid
(retired on 18 May 2012)
- Reg Sindall
(retired on 22 August 2012)
On 31 December 2011 Sir Adrian Montague retired from
the position of Chairman and from the Board. On the same
day Robin Buchanan was appointed as Chairman.
In January 2012, Andrew Bracey agreed to join the Board as
Chief Financial Officer and was appointed on 23 April 2012.
Andrew joined PageGroup from Ocado Group plc where he
was Chief Financial officer and Executive Director.
Hubert Reid retired from the Board at the 2012 Annual
General Meeting, with Ruby McGregor- Smith taking over
the role of Senior Independent Director.
Reg Sindall left the Board on 22 August 2012, with David
Lowden replacing him as Chairman of the Remuneration
Committee. David was also appointed as a Non-Executive
Director and member of the Audit and Nomination
Committees.
Simon Boddie was appointed as a Non-Executive Director
and member of the Audit, Remuneration and Nomination
Committees on 24 September 2012 and on 28 February
2012, Charles-Henri Dumon, Managing Director –
Continental Europe and The Americas, left the Board.
In accordance with the new UK Corporate Governance
Code, David Lowden and Simon Boddie will offer
themselves for election and all the other Directors will offer
themselves for re-election at the Annual General Meeting.
Biographical details for all the Directors are shown on
pages 30 and 31.
David Lowden and Simon Boddie will
offer themselves for election and all the
other Directors will offer themselves for
re-election at the Annual General Meeting.
35
The beneficial interests of Directors in office at 31 December
2012 in the shares of the Company at 31 December 2012
and at 5 March 2013 are set out in the Remuneration Report
on pages 54 to 67. Both of the Executive Directors are
deemed to have an interest in the ordinary shares held in
the Employee Benefit Trust. The Company has 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 234 of the Companies Act
2006, were in force throughout the year and are currently
in force.
Results anD DiviDenDs
The profit for the year after taxation amounted to £36.2m
(2011: £56.9m).
A final dividend for 2011 of 6.75 pence per ordinary share
was paid on 6 June 2012. An interim dividend for 2012 of
3.25 pence per ordinary share was paid on 5 October 2012.
The Directors recommend the payment of a final dividend
for the year ended 31 December 2012 of 6.75 pence per
ordinary share on 21 June 2013 to shareholders on the
register on 24 May 2013 which, if approved at the Annual
General Meeting, will result in a total dividend for the year
of 10.0 pence per ordinary share (2011: 10.0 pence).
cReDitoR DaYs
suBstantial shaReholDings
The Company acts as a holding company for the Group.
Creditor days for the Company were nil (2011: nil) as
the Company does not undertake any transactions with
suppliers. The Group’s creditor days at the year end were
31 (2011: 30 days).
As at 31 December 2012, the Company had been notified
in accordance with Chapter 5 of the Disclosure and
Transparency Rules (DTR5) of the following voting rights
by shareholders of the Company as shown below.
Holder
Fidelity (FMR)
Sleep, Zakaria and Co (Nomad)
Causeway Capital Management LLC
Capital Group of Companies
Franklin Resources Inc
Artisan
Lone Pine Capital
Baillie Gifford & Co
Standard Life Investments (Vidacos)
Kames Capital
Natixis
Number of ordinary shares
% of issued share capital
34,514,751
21,552,513
17,948,293
16,719,500
16,274,200
15,483,502
15,425,920
14,227,203
12,985,079
12,092,178
9,827,350
10.85%
6.78%
5.64%
5.26%
5.12%
4.87%
4.85%
4.47%
4.08%
3.80%
3.09%
The following DTR5 notifications were received after 31 December 2012.
Holder
Artisan
Franklin Resources Inc
Causeway Capital Management LLC
Capital Group of Companies
Lone Pine Capital
Number of ordinary shares
% of issued share capital
21,133,914
15,308,070
15,218,870
15,177,493
15,173,738
6.64%
4.81%
4.79%
4.77%
4.77%
36
consultants going into schools and giving CV and interview
advice, as well as volunteers helping out on community or
environmental projects in places such as hospitals, care
homes, social centres and wildlife sanctuaries.
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 18 May 2012, 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 Group’s Employee
Benefit Trust repurchased 5.0m shares to satisfy employee
share plan awards. The total nominal value of the shares
repurchased was £0.1m and represented 1.6% of the
issued share capital. The shares were purchased for a
consideration of 18.0m including expenses. No shares were
repurchased and cancelled during the year.
1.1m shares were also issued to satisfy share options
exercised during the year.
coRPoRate ResPonsiBilitY (cR)
Ethical, responsible practices and total commitment to
minimise our impact on the environment, are the key
motivators behind our CR strategy.
Our staff
We never forget that the people who work at PageGroup
will always be our most valued assets. It is these individuals
who drive the company forward and take it in the right
direction. We therefore value their ideas and contribution,
encourage them to maximise their potential, and invest
heavily in learning and development. This means every
member of staff has a fair opportunity to excel and develop
a full and rewarding career to become our future directors
and managing directors.
Our clients
We have always treated our clients as our partners and
therefore have a responsibility to represent them in the best
possible way. We ensure diversity in our candidate shortlists
by conducting searches which reach minority groups, so
that we can present the widest possible pool of talent.
Our candidates
We are ever conscious of our diversity responsibility when
registering candidates and sourcing them for our clients.
Candidates can be assured that they will be always be
assessed purely on their skill-set and presented to clients
without bias, to ensure competition for jobs is on a level
playing field.
Ethical, responsible practices and total
commitment to minimise our impact on
the environment, are the key motivators
behind our CR strategy.
Our investors
We are aware that investors insist on good CR credentials,
so we communicate regularly, keeping them well informed
of our activities. Feedback from investors has helped shape
our clear business strategy and encouraged further CR
activities. Listening carefully to investors helps determine
our CR approach for the benefit of the business.
Our community
Throughout the world, we seek to work closely with
local communities, looking to give something back to
the societies in which we operate. To achieve this, we
encourage our staff to be pro-active in seeking projects
within their own community and to make a telling
contribution. Around the world, projects include
37
oPen Page - inclusion foR all
Our inclusion promise
Inclusion in recruitment and employment is about
recognising and appreciating that every individual is
different. It’s about ensuring that everyone, whether they
are a candidate seeking work through PageGroup or one
of our own employees, is valued and respected.
Regardless of individual characteristics, a person’s
suitability for recruitment, training or promotion is
always based on professional merit. At PageGroup, we
are committed to promoting inclusion and continually
developing our understanding and approaches to
upholding an inclusive working environment.
The nature of our international business means inclusion in
the global marketplace is essential for us to understand the
people we employ and services we offer. We are determined
to lead the way on inclusion within the recruitment industry
and we work closely with our clients to support their
diversity strategies, from consultation through to delivery on
how to source and recruit from a truly diverse talent pool.
Employers Network for Equality & Inclusion
Works to achieve and promote best practice in equality
and inclusion in the workplace.
Clearkit
The UK’s leading auditor of disability and inclusion best
practice in recruitment.
We are determined to lead the way on
inclusion within the recruitment industry.
REC Diversity Pledge
Is an initiative run by the REC and Jobcentre Plus which
is a commitment made by recruiters to harness the talent
and potential of everyone to achieve business success.
coRPoRate memBeRshiPs
ouR PeoPle
In order to give us even greater insight into inclusion issues,
we have joined forces with the below organisations as a
corporate member. Our senior staff are actively involved
with these bodies through work-streams and joint initiatives,
ensuring we are constantly learning from their experience
and indeed using our own resources to share best practice
and ideas.
Race for Opportunity
An organisation committed to improving employment
opportunities for ethnic minorities across the UK.
Opportunity Now
A membership organisation for employers who are
committed to creating an inclusive workplace for women.
Business Disability Forum
A not-for-profit member organisation that makes it easier
and more rewarding to do business with, and employ,
disabled people.
Employee engagement
With our business strategy of increased diversification
through organic international growth, our vision of Maximising
Potential exists for employees to articulate opportunity,
development and the ambition of each individual.
At the heart of our company is the camaraderie of team
work, so much so that it is also one of our company values.
We are a very sociable company, with regular team activities
in and out of the office including quarterly events and high
profile exclusive trips for our ‘High Flyers’, the latter a reward
for those who have performed exceptionally well.
We run several initiatives worldwide to monitor employee
engagement. For example, in the UK we participate in the
Sunday Times Best 100 Companies to work for, in which
we’ve been recognised for eight years. With over 1,000
companies entering, we were delighted to see us rank the
58th best company to work for in the UK. However it is not
just in the UK where we are recognised as a great place
38
to work as we also place top in Actualidad Económica
Magazine’s 100 best companies to work for in Spain, and
Apertura Magazine’s best small/mid company to work for in
Argentina.
Hiring the best
Sourcing and retaining the highest calibre employees
from a wide range of backgrounds is key to our success.
The service we provide to all our customers is only as good
as the people who represent our brand.
Our strategy, to grow organically by promoting from within,
presents enormous opportunities to employees who range
from graduates to people changing careers – often from
the disciplines we recruit for. It’s also extremely important
to us to recognise that when we recruit, we are hiring our
managers, directors and indeed managing directors of
the future. We aspire to help people to be the best they
can, whether they are looking for a career in recruitment,
or need a hand finding the right role to suit their needs.
leaRning anD DeveloPment
– ouR futuRe
It’s visible both inside and out, that at PageGroup we are
passionate about our people’s development. Through
a diverse range of education, experience and exposure
opportunities, we support our employees to develop in
their roles and build a solid foundation for their future
career with us.
From the day they start, through to becoming leaders,
our people continuously undertake development and
succession planning programmes through quarterly
appraisals, coaching, and people management training
using 360 degree feedback. At PageGroup we are about
specialisation. So, in order for our people to be the best at
what they do, we have established dedicated Learning &
Development (L&D) teams across the Group that customise
our programmes to offer the right training to suit different
cultures and working environments.
Our L&D activities include:
• Induction training; diversity, customer service,
behaviour, culture, legal & policy
• Business technology skills; preliminary and advanced
• Maximising Sales; core skills in three day module
sessions
• Workshops; self management, advanced interviewing,
presentation skills
• Virtual office; advanced skills training
• Management development for both fee earning and
support staff; Operational management, financial/
business management, succession planning, coaching
and development, motivation
• One-to-one coaching and mentoring
• Leadership programme for directors incorporating
external 360 degree feedback
• Global director academy; sharing global knowledge
• Talent management workshops for global managing
director population.
Retaining the most talented people
With a solid strategy of organic growth, and using this
expertise as a platform for growing into new markets,
we have a strong commitment to internal promotion and
employee empowerment which has continually helped us
retain our very best people.
At the highest level, we want people who are immersed
thoroughly in our company culture and understand the
intricacies of our business. Retaining our best people is
fundamental to our long-term success and continuity.
Keeping in touch:
• Regular ‘state of the nation’ broadcasts to our staff
from our CEO.
• Bi-annual global newsletters.
• Quarterly team building events.
• High Flyers events – premium international trips for
high performing consultants and managers.
WhistleBloWing
The Company is committed to maintaining the highest
ethical standards and the personal and professional integrity
of its employees, suppliers, contractors and consultants.
PageGroup at all times conducts its business with the
highest standards of integrity and honesty. It expects all
employees to maintain the same standards in everything
they do. Employees are therefore encouraged to report any
wrongdoing by PageGroup or its employees that falls short
of these business principles. The aim of this policy is to
ensure that as far as possible, our employees are able to tell
us about any wrongdoing at work which they believe has
occurred, or is likely to occur.
PageGroup at all times conducts its
business with the highest standards
of integrity and honest.
39
BRiBeRY anD anti-coRRuPtion
Bribery and corruption is, unfortunately, a feature of
corporate and public life in many countries across the
world. Governments, businesses and non-governmental
organisations such as Transparency International are
working together to tackle the issue, but despite our
collective efforts, eradicating all forms of bribery and
corruption will take time.
PageGroup therefore has a clear policy and we support
our employees to make decisions in line with our
stated position.
Following the release of the UK Bribery Act on 1 July 2011,
a significant amount of time has been spent training staff
across PageGroup in every country in which we operate.
This training program went on for a number of weeks, to
ensure all relevant personnel were fully aware of its impact.
Changes were made to our policies and procedures where
deemed necessary and we have updated our Group
Code of Conduct which can be found on our website.
Our corporate conduct is based on our commitment to
acting professionally, fairly and with integrity. PageGroup
has adequate anti-corruption procedures in place and
PageGroup has adequate anti-
corruption procedures in place and
maintains a zero-tolerance approach
against corruption.
maintains a zero-tolerance approach against corruption.
Facilitation payments are also not permitted within
PageGroup’s operations.
Make it fun
Of course we are serious about business, but we recognise
that having fun is an important factor within any office
environment. We encourage it and have learnt that the
happier our people are, the more successful we’ll be.
ouR coRe values
Our five values are key to our success. They are the roots of
PageGroup and the foundation of our methods, approach to
business and motivating our staff. More than mere words,
we believe our values are the essence of our brand and
influence to the way we work and operate, day in, day out.
Take pride
This means taking pride in everything we do, who we are
and what we stand for. We want every person who works
for us to be proud, not just of their personal achievements,
but of those of the company too.
Be passionate
It’s our passion to provide the best service for our clients
and candidates that triumphs over our competition.
Never give up
A value few possess, but is essential in business,
particularly ours. It means never allowing yourself to be
knocked back by disappointment, refusing to give up and
showing real resilience. ‘When the going gets tough,
the tough get going’, is an apt phrase for PageGroup.
Work as a team
Teamwork is essential in any company and ours is no
exception. We embrace it wholeheartedly and every
employee is committed to working as part of a team.
Teamwork makes us stronger, more efficient and the
success that follows is so much more rewarding.
talent DeveloPment
Women@Page
The best companies are those that are truly diverse. In
2012 we introduced the Women@Page initiative to help us
achieve better gender diversity across all levels of our global
business. The initiative is being driven by Fabrice Lacombe,
a member of our Executive Board. We aim to create an
inclusive working environment by developing the pipeline of
female talent and retaining that talent. We have established
a Women@Page steering group who have monthly global
conference calls to introduce and drive a number of key
programmes that will be rolled out to the business. The first
programme is the Global Mentoring Programme.
The Global Mentoring Programme has been launched in
the UK and France, currently focusing on female managers.
We worked with an external training consultancy to provide
the best training for our mentors to ensure they are well
prepared and effective mentors to their mentees. All
mentees were formally welcomed by the country managing
director and given a brochure explaining the aspirations and
logistics of the programme. Mentors were carefully paired
with individuals with whom they had no prior contact and
over the last few months they have been travelling to a
variety of locations to conduct their first meetings.
In South Africa, Michael Page has launched a learning
scheme for women, the Michael Page South Africa
Learnership Programme, to show its commitment to skills
40
Meeting my mentor for Women@Page
and getting the opportunity to work with
a managing director outside of Page
Personnel was inspirational. It has not
only given me more confidence in my
abilities as a manager, but has put a lot
of my potential worries about the future
in perspective. It’s been really useful to
get an objective perspective from a senior
colleague outside of my own discipline.
mentee, uK
development and female empowerment in South Africa.
The 12 month programme offers seven full time positions
to women from disadvantaged backgrounds and gives
opportunity to gain professional hands-on experience
across Michael Page disciplines, as well providing
theoretical foundations through a fully funded course in
Business Administration.
chaRitY anD communitY
Charitable donations
PageGroup made charitable donations of £194k during
the year (2011: £171k).
Helping young people prepare for employment
The City of London shares its borders with some of the
UK’s most deprived boroughs where unemployment is high,
despite the considerable employment opportunities in the
City. In 2005, PageGroup joined forces with The Brokerage
Citylink to support the City of London Business Traineeship
Programme to help combat this issue. The initiative works
with London borough schools to raise awareness of the
career opportunities in the City and brings together school
and college leavers with City firms for placements between
six and thirteen weeks.
will assist with addressing these issues. In particular, our
2012 contribution aided the construction of a kitchen to feed
the pupils, something the school had been working towards
for a number of years.
In London, staff volunteered their time to help an elderly
couple maintain their garden. The couple had both been
suffering serious health problems and were unable to
maintain their passion for gardening and their previously
immaculate garden suffered. Our team visited their home to
work on their garden to cut down the overgrowth and made
it look presentable once again. The couple were thrilled and
very appreciative that we were able to give them our time.
Page Personnel gave me the opportunity
to really enhance my personal life by
taking on Hopsi. The whole office needed
to agree to accept my project and actively
participate in his development. Now Hopsi
is firmly part of daily life in the office, his
playful character has a real positive effect
on the team.
nicolas Bonnet, Page Personnel lyon
In 2012, we brought another five high-achieving, aspiring
students on-board who were keen to gain an insight into
the recruitment industry. This year, one of our trainees,
Shermeen Begum, was recognised for her stand-out
work achieving ‘Trainee of the Year’ from a group of over
100. Individuals that do their traineeship at PageGroup
can nominate to work in the operational business as a
consultant or in one of the support functions including
marketing, human resources or information technology.
Bespoke training and development programmes ensure
that all trainees get a real introduction into the world of
recruitment. Each person is mentored and nurtured during
their time with us, so that they go away with a better
understanding of working life.
Working with local communities
In France, we are actively involved in supporting a non-
government organisation supporting blind people. One
member of staff has taken on a puppy that will be raised and
trained as a guide dog for the blind. Hopsi travels into the
Lyon office everyday to learn how to be around people and
how to behave in the office so that he can go on to guide a
blind person who works in a similar office environment.
In South Africa, Michael Page has formed a partnership with
Chakaza School, an educational institution housing more
than 700 children from the ages of 6 to 12 in the rural area of
Mpumalanga. It has recently been declared a non fee paying
school because of the poverty in the region. The school’s
vision is to develop pupils holistically from an academic,
sporting and cultural perspective despite financial and
broader social challenges. Our partnership with the school
41
Sharing our skills
In Scotland, we have a close and long-standing relationship
with Craigroyston High School in Edinburgh, regularly
holding interview skills workshops for the pupils to help
improve their employability skills. In 2012, we launched the
PageGroup Scholarship Award which will see the winning
pupil receive a trophy and certificate as well as a paid
internship in our Edinburgh office. A representative from
our Scotland business was invited to attend the Duke of
Rothesay ‘Seeing is Believing’ event held at the school
where we shared discussions with Prince Charles and a
number of business leaders from the area. The ‘Seeing
is Believing’ programme was established by His Royal
Highness to give business leaders an insight into how they
can play a role in addressing some of the key challenges
facing urban and rural communities.
Teams in France support Nos Quartiers ont du Talent, a
non-government organisation, through a unique project.
PageGroup executives join together to help graduates from
underprivileged areas regarding their job search, focusing on
CV writing, covering letters, preparation for job interviews as
well as building their self-esteem and career development.
By the end of 2012, we saw 17 mentors actively supporting
44 graduates throughout the year.
results of our business in South Africa, the more we are able
to contribute in terms of financial support to the Children
of the Dawn, which is a huge motivational factor for our
employees. Our success in 2011 resulted in a donation that
enabled us to support 25 orphaned and vulnerable children
in 2012. The contribution provided in-depth care such as
nutrition and schooling support, counselling, monitoring of
health and access to leisure activities.
In the UK, our business set up a ‘first of its kind’ pilot
scheme with the University College Hospital Macmillan
Cancer Centre in London, which helps rehabilitate cancer
patients in a numbers of areas. PageGroup staff were invited
to put our specialist skills to use and be involved in a unique
pilot to support those affected by cancer. The purpose was
to help patients become better prepared for re-entering the
workplace through running workshops on CV writing and
interview skills and putting them in a stronger position when
applying for new opportunities.
The UK charity partner is currently Macmillan Cancer
Support. To date we have raised over £192k to fund four
Macmillan Cancer Nurse Specialists within four major UK
cities. In 2012, our charity champion network has held a
number of quiz nights, in London, Edinburgh, Glasgow, and
Manchester. We’ve celebrated the Queens Jubilee and the
London Olympics with cake sales and sweepstakes. Some
have pushed themselves to their physical limits through
marathons, throwing themselves out of planes and climbing
mountains.
In the UK, our business set up a ‘first of
its kind’ pilot scheme with the University
College Hospital Macmillan Cancer Centre
in London.
Partnering with charities
By working together with charities and associations, we can
contribute towards initiatives which provide the vital support
they need to continue raising awareness and funding
research for important causes. This year, PageGroup has
supported a number of charities and local projects around
the world.
In July, 90 people from PageGroup in the UK participated
in the fourth annual Yorkshire Three Peaks challenge; a 25
mile trek across Yorkshire’s largest peaks in aid of Macmillan
Cancer Support. The weather was not on their side, but
despite wind, heavy rain, hail and at times snow, their sheer
determination got them round. The fastest group completed
the challenge in an impressive six hours 25 minutes.
Everyone made a huge effort to fundraise for Macmillan and
as a team raised £40k. Over the four years we’ve organised
this event, we’ve raised over £200k.
enviRonment
In South Africa, our business has a partnership with the
Children of the Dawn charity where levels of contribution
are directly linked to company performance. The better the
Taking responsibility for our environment
PageGroup is a typical office-based business. As such, our
main environmental impacts come from the running of our
42
businesses around the world, generating carbon emissions
though the consumption of gas and electricity, vehicle use
and business travel, as well as office-based waste such as
paper and toners.
Reducing our carbon footprint
PageGroup fully recognise its responsibilities in relation to its
carbon footprint. The Board is committed to improving the
way in which our activities affect the environment by:
This is only a summary of the many CR activities in
which we are involved and the impact the Group has on
its environment.
At PageGroup, we are acutely aware of our responsibility
and work hard to minimise our impact on the environment
on a global scale. In a number of areas, we strive to make
a difference and act responsibly in terms of recycling,
whereby PageGroup increased its recycling wastage by
8% from 2011. PageGroup also seeks to act responsibly in
conservation and usage.
At PageGroup, we are acutely aware of our
responsibility and work hard to minimise our
impact on the environment on a global scale.
In a number of areas, we strive to make a
difference and act responsibly in terms of
recycling, whereby PageGroup increased its
recycling wastage by 8% from 2011.
PageGroup has initiated KPI’s based on GHG direct
and indirect emissions, water consumption and waste
generation. These enable PageGroup to monitor its
efficiencies, and focus on minimising fuel combustions,
energy and waste. In 2012, Trucost was commissioned
to assess PageGroup’s 2012 environmental data. Data
was collated over a range of sites and offices to reflect
our total environmental impact. This data is available in
the 2012 Corporate Responsibility report found on the
PageGroup website. Along with policies on how to use our
resources responsibly around the offices, we also have our
own internal “MoreGreen” scheme, which offers staff the
opportunity to purchase ‘green’ products at reduced prices.
• Minimising the extent of the environmental impacts of
operations within the Company’s sphere of influence
• Striving to minimise any emissions of effluents in our
properties that may cause environmental damage
• Conserving energy through minimising consumption,
waste and maximising efficiency
• Promoting efficient purchasing, which will both minimise
waste and allow materials to be recycled where
appropriate
• Employing sound waste management practices
• Putting in place procedures and supporting information
that enables compliance with the law, regulation and
code of practice relating to environmental issues
• Monitoring environmental performance and making
improvements where possible on a global scale
• Adopting a systematic energy use data collection
procedure and audit across all sites with yearly or half-
yearly monitoring
• Deploying an environmental monitoring system across
PageGroup operations which will ensure systematic,
robust, effective environmental data collection.
health & safetY
We recognise that Health and Safety is an integral part
of our workforce. The day-to-day services we provide do
not pose great risk to either our employees or our clients.
However, we endeavour to maintain a safe and active
environment. Each office is responsible for its own fire
risk assessment and emergency procedures and has an
allocated Facilities and Health and Safety Representative.
Further details of our CR activities and impacts are shown
in our main CR report, a copy of which can be downloaded
from our website at:
www.pagegroup.co.uk/investors/responsibilities/
society-and-environment.aspx
suPPlieR PaYment PolicY
It is the policy of the Group to agree appropriate terms and
conditions for transactions with suppliers (by means ranging
from standard written terms to individually negotiated
contracts) and that payment should be made in accordance
with those terms and conditions, provided that the supplier
has also complied with them.
Further details of our CR activities
and impacts are shown in our main
CR report.
43
shaRe caPital, RestRictions on
tRansfeR of shaRes anD otheR
aDDitional infoRmation
To the extent not discussed in this Directors’ Report,
information relating to the Company’s share capital
structure, restrictions on the holding or transfer of its
shares or on the exercise of voting rights attached to such
securities required by Section 992 of the Companies
Act 2006 is set out in the following sections of the
Annual Report:
• Corporate Governance Report;
• Remuneration Report;
• Notes to the Accounts (Note 18: Called-up share capital);
and
• Shareholder Information and Advisers (Articles of
Association).
Each of the above sections is incorporated by reference
into, and forms part of, this Directors’ Report.
The Annual General Meeting will be
held on 6 June 2013.
44
infoRmation to auDitoRs
DiRectoRs’ confiRmation
Each of the Directors at the date of approval of this report
confirms that:
1. so far as the Director is aware, there is no relevant audit
information of which the company’s auditor is unaware;
and
2. the Director has taken all the steps that he/she ought to
have taken as a Director to make himself/herself aware
of any relevant audit information and to establish that the
Company’s auditor is aware of that information.
The directors confirm that they consider the Annual Report
and Accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary
for shareholders to assess and provide the company’s
performance, business model and strategy.
By order of the Board
This confirmation is given and should be interpreted in
accordance with the provisions of s418 of the Companies
Act 2006.
Kelvin Stagg
Company Secretary
5 March 2013
auDitoRs
Ernst & Young LLP are willing to continue in office and
accordingly resolutions to re-appoint them as auditor and
authorising the Directors to set their remuneration will be
proposed at the forthcoming Annual General Meeting.
annual geneRal meeting
The resolutions to be proposed at the Annual General
Meeting to be held on 6 June 2013, together with
explanatory notes, appear in the Notice of Meeting set
out on pages 119 to 129 and is available on our website at
www.pagegroup.co.uk/investors/shareholder-information/
agm
45
At the date of this report, the principal governance rules
applying to UK companies listed on the London Stock
Exchange are contained in the UK Corporate Governance
Code (the “Code”), as adopted by the Financial Reporting
Council (the “FRC”). The FRC published the Code in May
2010, which applies to financial years beginning on or after
29 June 2010.
A new edition of the Code was published in September
2012 and applies to reporting periods beginning on or
1 October 2012. The FRC has advised that companies
reporting on reporting periods beginning before 1 October
2012 should continue to report against the June 2010
edition of the Code, although they are encouraged to
consider whether it would be beneficial to adopt some or
all of the new provisions in the revised code earlier than
formally expected.
The Board of Directors has a strong commitment to high
standards of corporate governance and has applied all
of the main and supporting principles set out in sections
A to E as recommended in the Code for the year ended
31 December 2012. Where practicable, the Company has
also adopted the new provisions in the revised code.
The Directors also seek to comply with guidelines issued
by institutional investors and their representative bodies
where it is practical to do so.
coRPoRate goveRnance
46
Compliance with the Code
The Directors consider that the Company has complied
with all of the principles set out in sections A to E of
the Code for the year ended 31 December 2012.
The Company’s auditors, Ernst & Young LLP, are required
to review whether the above statement reflects the
Company’s compliance with the relevant provisions of the
Code specified for the review by the Listing Rules of the
UK Listing Authority and to report if it does not reflect
such compliance. No report has been made.
leaDeRshiP
The Board and its operation
The Board of Michael Page International plc is the body
responsible for corporate governance, establishing policies
and objectives, and the management of the Group’s
resources. The Board comprises the Chairman, who
is deemed to be independent and has no operational
responsibilities, two Executive Directors and four
independent Non-Executive Directors. Collectively, they
have a broad balance of skills and experience.
The Board meets regularly throughout the year. It has a
formal schedule of matters reserved to it and delegates
specific responsibilities to Committees. During the
Meetings, the Board formally considers how and to whom
matters covered at each meeting should be communicated
and actioned beyond the Board. Decisions concerning
matters of a more routine nature are dealt with by
management below Board level.
The structure of the Group facilitates the day-to-day
running of the business and enables efficient and effective
communication of issues to the Board when required. The
Chairman and Non-Executive Directors also met during
the year without the Executive Directors being present.
Each of the Committees has formal written terms of
reference, which were reviewed in 2012. 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 in this report.
The Executive Board, a Committee of the Board, meets
formally at least four times a year, and is responsible
for assisting the Chief Executive Officer in the performance
of his duties, including development and implementation
of strategy, operational plans, policies, procedures
and budgets. These activities are performed at a regional
level by four Regional Boards for the UK, EMEA, Asia
Pacific and the Americas. Each Regional Board meets
at least four times a year.
Chairman
The Chairman, Robin Buchanan, is responsible for the
leadership and efficient operation of the Board, setting its
agenda and ensuring all Directors provide an effective
contribution. The Chairman is also responsible for ensuring
the provision of accurate and timely information to the
Board and effective communications with shareholders.
It is the Group’s policy that the roles of Chairman
and Chief Executive Officer are separate. The division of
responsibilities between the Chairman and Chief Executive
Officer are clearly established, set out in writing and agreed
by the board.
Senior Independent Director (SID)
The Senior Independent Director, Ruby McGregor-Smith,
is available to shareholders when they may have issues or
concerns where contact through the normal channels of
Chairman, Chief Executive Officer or Chief Financial Officer
has either failed to resolve concerns, or contact is deemed
inappropriate.
The SID also provides a sounding board for the Chairman
and serves as an intermediary for the other Directors when
required. The SID works with the Chairman, other directors
and / or shareholders to resolve significant
issues or if there is a dispute between the Chairman
and Chief Executive.
The SID also leads meetings with the other Non-Executive
Directors without the Chairman present in order to evaluate
and appraise the performance of the Chairman, at least
on an annual basis and on such other occasions as are
deemed appropriate.
Attendance at meetings
The number of meetings of the Board and Committees and
individual attendance by the members of the Committees
only are shown in the tables overleaf.
effectiveness
The composition of the Board complies with Code
Provision B.1.2. The Board annually reviews the
composition of the Board and considers that there is an
appropriate balance of Executive and Non-Executive
Directors on the Board.
Board appointments and diversity
The Board follows formal and transparent procedures
when appointing directors. All shortlisted candidates are
interviewed by the Chairman and the Chief Executive Officer,
and all candidates in the final shortlist are interviewed by the
Michael Page International plc is an
organisation founded on the principle of
encouraging talented people to realise their
full potential at all levels in the business.
47
Nomination Committee. Evaluations of all candidates are
discussed with all members of the Nomination Committee
and recommendations are made to the Board.
Michael Page International plc is an organisation founded
on the principle of encouraging talented people to realise
their full potential at all levels in the business and has in
place a wide range of activities to support the development
and promotion of talented individuals, including women.
Our management philosophy is to create a culture in the
business that recognises and rewards our people for their
achievements. We actively encourage and pursue diversity,
including diversity in gender, throughout the business.
paramount need to create a talented high-performing board
with a suitable mix of experience and capability, in sector,
geography, financing, management and governance. We
focus especially on the importance in diversity at the time
of each new board appointment and in framing instructions
to the search consultants we retain to assist us in such
appointments. In each of the two Non-Executive Director
appointments this year, instructions included explicit
requests for candidates with broad international experience.
Gender diversity was also stressed.
Nomination Committee
The Nomination Committee comprises the Non-Executive
Directors and is chaired by Robin Buchanan. 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, the balance
between Executive and Non-Executive Directors
appointed to the Board and reviewing any conflicts of
interest. The terms of reference of the Nomination
Committee can be found on our website.
Diversity at Board level is as important as diversity at every
other level in the business. In a small Board it is our policy
to seek diversity, including diversity in gender, as part of the
Meetings attended
Steve Ingham
Attendance at Board Meetings (Committee attendance shown for Committee members only)
Andrew Bracey (appointed 23 April 2012)
Charles-Henri Dumon (left the Board on 28 February 2012)
Stephen Puckett (resigned 18 May 2012)
Board
11
11
6
2
5
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
Total Non-Executive Meetings
Meetings attended
Robin Buchanan
Simon Boddie (appointed 24 September 2012)
David Lowden (appointed 22 August 2012)
Ruby McGregor-Smith
Dr Tim Miller
Hubert Reid (resigned 18 May 2012)
Reg Sindall (resigned 22 August 2012)
11
11
3
3
9
9
6
4
8
8
2
2
7
7
4
4
7
7
4
4
7
5
2
2
4
4
-
-
4
4
4
2
48
During the year, the Nomination Committee oversaw the
search for two new non-executive directors assisted by
The Inzito Partnership. Detailed role profiles were agreed
by the Committee. Then a shortlist of suitable candidates
was selected to go forward to an interview process.
This resulted in the recommendation of the appointment
of David Lowden who joined on 22 August 2012 and
Simon Boddie who joined on 24 September 2012.
Re-election of Directors
All Directors are subject to election by the shareholders
at the first Annual General Meeting following their
appointment. In accordance with the Code, the Directors
have resolved that they will all submit themselves for
annual re-election at the AGM. Accordingly, at the
forthcoming AGM to be held on 6 June 2013,
Simon Boddie and David Lowden will offer themselves
for election, with the remaining Directors offering
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.
Induction and training programme
On appointment to the Board, each Director discusses with
the Company Secretary the extent of training required and
a tailored induction programme to cover their individual
requirements is then compiled. Elements of the programme
typically consist of meeting senior management, site visits
and attending internal conferences. In addition, information
is provided on the Company’s services, Group structure,
Board arrangements, financial information, major
competitors and major risks. After an initial induction phase,
updates are provided on a periodic basis.
Performance evaluation
In line with the requirements of the UK Corporate
Governance Code for an external Board evaluation
every three years, the Board, as part of its commitment
to ensuring effectiveness and evaluating its performance,
together with that of its Directors and Committees, has
engaged the services of an external company to conduct
a Board Evaluation exercise. Due to the extensive changes
to the Executive and Non-Executive Directors in the year,
the Board agreed to defer the start of the review until April
2013 to allow the Board as a whole and in particular the
newer directors time to provide meaningful feedback into
the process.
The review will be conducted by Board and Committee
meeting observations, and interviews of each of the
directors and key non-Board contributors. The findings
will be presented to the individual directors to give
feedback on their performance and also presented to
the Board as a whole. Where areas of improvement are
identified, actions will be agreed upon and training will
be provided as required. This report will also be used to
measure progress against the improvement areas in the
following year’s review. The scope of the review will cover
directors’ performance individually and collectively, overall
composition and diversity of the board, and all aspects of
procedure and effectiveness.
Due to this philosophy of nurturing our own talent,
succession planning is an inherent part of the business
process. We do not make promotions or move people within
the business unless there is a clear successor for the vacant
position. It is 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, and for themselves.
Conflicts of interest
The Company has implemented robust procedures, in line
with the Companies Act 2006, requiring Directors to seek
appropriate authorisation prior to entering into any outside
business interests. In all cases where a potential conflict is
identified, it is Board policy that the Director in question is
not involved in any discussion of the area or issue giving
rise to the conflict. During the course of the year, the Board
reviewed and authorised, in accordance with the
Company’s Articles of Association, a small number of
external directorships and other business interests held by
individual directors. However, none were regarded as being
of such significance as to give rise to a conflict of interest.
All Directors are aware of their continuing obligation to
report any new interests or changes in existing interests that
might amount to a possible conflict of interest in
order that these may be considered by the Board and
appropriate authorisations given.
Succession planning
One of the basic premises behind the strategic
development of the PageGroup business, is that growth is
organic. It is therefore one of the fundamental principles 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.
Company Secretary
All Directors have access to the advice and services of
the Company Secretary, who is responsible for ensuring that
Board procedures and applicable rules and regulations are
observed. There is an agreed procedure for Directors
to obtain independent professional advice, if necessary,
at the Company’s expense.
49
accountaBilitY
Responsibilities
The Directors acknowledge their responsibility for the
preparation of the Annual Report. The Statement of
Directors’ Responsibilities is shown on page 130.
A statement by the auditors about their reporting
responsibilities is shown in the Independent Auditors’
Report on page 68.
Strategy
A detailed discussion of results, strategy and outlook
is contained within the Business Review of this
Annual Report.
Audit Committee
The Audit Committee comprises the independent
Non-Executive Directors and is chaired by Ruby
McGregor-Smith. The Committee members have broad
experience and knowledge of financial reporting. Their
relevant qualifications and experience are shown in their
biographies on the Board of Directors (pages 30 and 31).
The Board believes that Ruby McGregor-Smith, Simon
Boddie and David Lowden have recent and relevant
financial experience. The other member of the Audit
The Audit Committee comprises
the independent Non-Executive
Directors and is chaired by Ruby
McGregor-Smith.
Committee, Dr Tim Miller has wide experience in regulatory
and risk issues. The Committee met eight times in 2012
to fulfil its duties and included attendance by the external
auditor where required. The Chairman of the Audit
Committee also met with the external auditors during the
year without the presence of management.
In 2012, the Audit Committee discharged its
responsibilities as set out in the terms of reference, which
can be found on our website www.page.com/investors
Its principal tasks are to ensure the integrity of the
Company’s Financial Reporting process, review the
effectiveness of the Group’s risk management and internal
control systems, review the scope of the external audit,
consider issues raised by the external auditor, and review
The objectivity and independence of the external auditor
is safeguarded by:
a. obtaining assurances from the external auditor that
adequate policies and procedures exist within its firm
to ensure the firm and its staff are independent of the
Group by reason of family, finance, employment,
investment and business relationships (other than in
the normal course of business);
b. enforcing a policy concerning the provision of non-audit
services by the auditor which governs the types of work:
i.
from which the external auditor is excluded;
ii. for which the external auditor can be engaged
without referral to the Audit Committee; and
iii. for which a case-by-case decision is required,
includes all engagements over certain fee limits.
Ernst & Young LLP are the Group’s
external auditors.
The following areas are considered to be unacceptable
for the external auditor to undertake:
the half-yearly and annual accounts before they are
presented to the Board, focusing in particular on
accounting policies and compliance, and areas of
management judgement and estimates, as well as
ensuring the independence of the external auditor and
the provision of additional services to the Company.
It reports to the Board annually on how it has discharged
its responsibilities.
Objectivity and independence of external auditor
Ernst & Young LLP is 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 auditor. All other work is awarded on
the basis of competitive tender.
•
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 outsourced financial systems;
• provision of outsource operational management
functions;
•
recruitment of senior finance or other executives;
• secondment of senior finance or other executives;
• provision of internal audit services;
• valuation services or fairness opinions; and
• any services specifically prohibited to be provided
by a listed company’s external auditors under
UK regulations.
50
Listing Rules that incorporate a Code of Practice known
as the UK Corporate Governance Code, which requires
that Directors review, at least annually, the effectiveness of
the Group’s system of internal controls. This requirement
stipulates that the review shall cover all material controls
including operational, compliance and risk management,
as well as financial. Internal Control Guidance for Directors
on the Combined Code (“the Turnbull Report”) was
published in 1999 (updated in 2005) and sets out best
practice on internal audit for UK listed companies and
assists them in applying Section C.2 of the Code.
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 Chief Financial Officer and, if the fee
exceeds a certain level, the Audit Committee.
• the robustness and perceptiveness of the auditors in
their handling of the key accounting and audit
judgements; and
• the content of the external auditor’s reporting on
internal control.
Effectiveness of External Audit
The effectiveness of the external audit process is
dependent on appropriate audit risk identification. At the
start of the audit cycle we receive a detailed audit plan
from Ernst & Young LLP, identifying their assessment of
these key risks. These risks are tracked through the year
whenever we receive reporting from them.
The Directors review, at least annually,
the effectiveness of the Group’s system
of internal controls.
c. enforcing a policy of reviewing all cases where it is
proposed that a former employee of the external auditor
be employed by the Group in a senior management
position; and
d. monitoring the external auditors’ compliance with
applicable UK ethical guidance on the rotation of
audit partners.
The Committee has also considered the likelihood of a
withdrawal of the auditor from the market and noted that
there are no contractual obligations to restrict the choice
of external auditors. To assess the effectiveness of the
external auditors, the Audit Committee reviewed:
Meetings are held between the Chairman of the Audit
Committee and the external auditor during the year
without management being present to provide additional
opportunity for open dialogue and feedback from the
Committee and the auditor. Matters typically discussed may
include, amongst other items, the auditor’s assessment of
business risks and related management activity, external
auditor independence and confirmation that there has been
no restriction in scope placed on them by management,
the transparency and openness of interactions with
management and records made available, and how they
have exercised their professional scepticism.
In the previous year, with Deloitte LLP having been
the group auditors since 1998, the Audit Committee
recommended to the Board that is was appropriate to put
the Group audit out to competitive tender. Ernst & Young
LLP were successful in that process. Following the above,
the Audit Committee has recommended to the Board that
Ernst & Young LLP is re-appointed.
• the arrangements for ensuring the external auditors’
independence and objectivity;
• the external auditors’ fulfilment of the agreed audit plan
and any variations from the plan;
Internal control
The responsibilities of the Directors in respect of internal
control are defined by the Financial Services Authority’s
51
The Board has assessed existing risk management and
internal control processes during the year ended 31
December 2012. The Group operates in accordance with
the current Turnbull guidance. The Board believes it has
the procedures in place such that the Group has fully
complied for the financial year ended 31 December 2012
and at the date of this report.
safeguard Group assets, ensure proper accounting records
are maintained and that the financial information used
within the business and for publication is reliable. Any
system of internal control can only provide reasonable,
but not absolute, assurance against material misstatement
and loss. Key elements of the system of internal control
are as follows:
The Directors are responsible for the Group’s system of
internal financial and operational controls, which are
designed to meet the Group’s particular needs and aim to
Group organisation
The Board of Directors meets at least ten times a year,
focusing mainly on strategic issues, and operational and
financial performance. There is also a defined policy on
matters reserved strictly for the Board. The Managing
Director of each operating division is accountable for
establishing and monitoring internal controls within
that division;
The Group operates in accordance with
the current Turnbull guidance.
Annual business plan
The Group has a comprehensive budgeting system with
an annual budget approved by the Board;
Quarterly re-forecasting
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;
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 issues
trading updates to shareholders on a quarterly basis;
Audit Committee
There is an established Audit Committee whose activities
are previously described;
Financial and operational controls
Individual operations complete an annual controls self
assessment and certification statement. Each operational
manager, in addition to the finance function for that
operation, confirms the adequacy of their systems of
internal control and compliance with Group policies.
The statement also requires the reporting of any significant
control issues, including suspected or reported fraud,
that have emerged so that areas of Group concern can be
identified and investigated as required;
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)
The audit committee has reviewed arrangements by which
staff of the company may, in confidence, raise concerns
about possible improprieties in matters of financial
reporting or other matters. Arrangements are in place for
the proportionate and independent investigation of such
matters and for appropriate follow-up action; and
Internal audit activities
The internal audit function is an independent, dedicated
Internal Audit team, comprising the Head of Internal Audit
and a team of Internal Auditors. Businesses are visited on a
risk-based and rotational basis to assess the effectiveness
of controls in mitigating specific risks. In addition, risks are
regularly reviewed and changes are made to the risk profile
where necessary. All internal audit activities are reported to
the Audit Committee.
52
During the year, the Board monitored and reviewed the
effectiveness of the internal audit activities. The Board has
applied principle C.2 of the Code and confirms that there
is an ongoing process for identifying, evaluating and
managing the significant risks faced by the Group and
that the processes have been in place for the year under
review and up to the date of approval of the annual report
and accounts.
The Remuneration Committee comprises
the independent Non-Executive Directors
and, since 22 August 2012, is chaired by
David Lowden.
RemuneRation
Remuneration Committee
The Remuneration Committee comprises the independent
Non-Executive Directors and, since 22 August 2012, is
chaired by David Lowden, who took over the Chairmanship
from Reg Sindall. 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 three times a year and
is also attended by the Chief Executive Officer, except
when his own remuneration is under consideration.
The Remuneration Report includes information on the
Directors’ service contracts. The terms of reference of the
Remuneration Committee can be found on our website.
The Report of the Remuneration Committee can be found
on pages 54 to 67 of this Annual Report.
Relations With shaReholDeRs
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 Officer and the
Chief Financial Officer. 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
the Non-Executive Directors.
When requested by shareholders, individual matters can be
discussed with the Chairman or if appropriate, the Senior
Independent Director. In addition, the Chairman of the
Remuneration Committee consulted widely on the changes
to Executive Director Remuneration and is available to
discuss remuneration topics with shareholders. The Group
has a website with an investor section (www.page.com/
investors) 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 Business Review provides an assessment
of the Group’s affairs and position. The Annual Report and
Interim Report are sent to all shareholders on the Register.
The Group has a website with an investor
section (www.page.com/investors) that
contains Company announcements and
other shareholder information.
53
RemuneRation RePoRt
54
Dear shareholder
As the new Chairman of the Remuneration Committee of
PageGroup, I am writing to explain the rationale for the
changes we are proposing to our executive remuneration
framework.
While it was our intention to introduce changes with
effect from January 2012, as you will be aware, the
business leadership underwent significant change with the
departures of Stephen Puckett and Charles-Henri Dumon
and the arrival of Andrew Bracey. There were also a number
of changes in the Non-Executive Directors on the Board,
with Sir Adrian Montague, Hubert Reid and Reg Sindall all
leaving the Board, Robin Buchanan becoming Chairman,
and Simon Boddie and myself joining.
The executive changes have had a significant impact on
the roles and responsibilities of the executive directors
and senior management team. The Committee therefore
considered it appropriate to further review the remuneration
structure in the context of these changes, whilst maintaining
the core principles and ensuring it continues to be aligned
with the business strategy and creation of shareholder
value.
This review has now been completed and the Remuneration
Committee has determined that a number of changes
should be made to the existing structure for 2013 and
subsequent years. These include shifting the mix of fixed
and variable remuneration to a greater percentage fixed
component and reducing the volatility of pay, by introducing
caps on annual bonuses, long-term incentives and on total
pay. The review also reduces the cash components of the
annual bonus, setting performance criteria against all of the
long-term incentives and enhancing shareholding guidelines.
A full disclosure of the proposed changes is provided in this
2012 remuneration report and shareholders will be asked to
approve the revised remuneration framework at the AGM on
6 June.
to profit, it is no longer fit for purpose due to significant
changes in the size and shape of the business, the
increased responsibilities of the Chief Executive, and also
the changes to UK corporate governance in the last decade.
In particular, both shareholders and the Board have had
increasing concerns that the current remuneration structure
is too focused on short-term performance and may not
adequately encourage longer-term decision-making. This
structure has also resulted in remuneration being unduly
volatile. It has created the dual risk of potential overpayment
in years of significant profit and did not provide a strong
retention tool for the strong management team in periods
of economic downturn. This management continuity and
retention is critical for a company that has built its success
on organic growth and promotion from within the business.
Indeed, the importance of senior management retention is
raised frequently in meetings with shareholders. PageGroup
has an entirely home-grown operational management
team that has typically between 15 and 25 years each of
PageGroup experience, including the CEO with 26 years.
That longevity is particularly important in such a cyclical
people business.
PRinciPles of the RevieW
As we have explained previously, the current remuneration
structure was established in 2001 when PageGroup was
appreciably smaller. When that structure was introduced,
PageGroup had 109 offices in 14 countries and employed
1,506 fee earners. It was making a gross profit of £243m
and had a market capitalisation of £656m. PageGroup
now has 164 offices in 34 countries, gross profit in 2012 of
£527m and as at the end of 2012, a market capitalisation of
£1,255m. While the existing remuneration structure served
the business well since the IPO, being strongly aligned
This has led the Remuneration Committee to seek to
establish pay arrangements that keep the clear link to
delivery of performance to shareholders and that have
a greater retentive element, more suitable for a more
mature and global business. At the same time the
remuneration scheme should recognise the recent changes
to the management structure, which removed four senior
executives, leading to annual savings of c. £3m p.a., and
a considerable increase in the responsibilities of the Chief
Executive. The Remuneration Committee also took the
opportunity to ensure that the remuneration arrangements
are in compliance with the Corporate Code.
The Remuneration Committee believes it is in shareholders’
interests to pay competitive market salaries, profit based
bonuses, which are less vulnerable to excessive fluctuations
and introduce a long-term incentive plan based on more
conventional three-year performance time horizons rather
than driven by short-term annual performance.
In summary, we are therefore proposing:
• Rebalancing the fixed vs. variable weighting of
remuneration components towards lower volatility;
• Capping the previously uncapped maximum bonus and
reducing the cash bonus available;
• Introducing an element of the bonus focused on key
strategic objectives;
• Capping the previously uncapped maximum long term
incentive and making the entire award subject to EPS
targets as well as the achievement of specific strategic
objectives;
• Introducing enhanced shareholding requirements; and
• Introducing clawback arrangements.
The Committee appreciates all the feedback received from
shareholders and hopes to receive your support at the
forthcoming AGM.
David Lowden
Remuneration Committee Chairman
5 March 2013
55
This report has been prepared in accordance with Schedule
8 to The Accounting Regulations under the Companies Act
2006. The report also meets the relevant requirements of
the Listing Rules of the Financial Services Authority and
describes how the Board has applied the principles relating
to Directors’ remuneration in the UK Corporate Governance
Code. As required by the Act, a resolution to approve the
report will be proposed at the Annual General Meeting of
the Company at which the financial statements will
be approved.
scoPe anD memBeRshiP of
RemuneRation committee
The Remuneration Committee, which meets not less
than three times a year, comprises the independent Non-
Executive Directors. The Chief Executive Officer attends the
meetings as required, except when his own remuneration
is under consideration. The purpose of the Remuneration
Committee is to review, on behalf of the Board, the
remuneration policy for the Chairman, Executive Directors
and other senior executives and to determine the level of
remuneration, incentives and other benefits, compensation
The purpose of the Remuneration
Committee is to review the
remuneration policy for the
Chairman, Executive Directors and
other senior executives.
payments and the terms of employment of the Executive
Directors and other senior executives. It seeks to provide a
remuneration package that aligns strongly the interests of
Executive Directors with those of the shareholders. David
Lowden was appointed as Chairman of the Remuneration
Committee on 22 August 2012 replacing Reg Sindall who
retired from the Main Board and its Committees on 22
August 2012. The Board would like to thank Reg Sindall for
his valuable contribution in this role. As well as reviewing the
overall executive remuneration structure for the business
going forward, the Committee has continued to review
the current year remuneration of the Executive Directors
with regard to the need to maintain a balance between the
constituent elements of salary, annual bonus and long-term
incentives and other benefits.
The Committee retained independent remuneration
consultants (Deloitte LLP) and has taken advice during the
year from them in relation to certain executive remuneration
matters. Deloitte LLP has no other connection to the
company and is a member of the Remuneration Consultants
Group and as such voluntarily operates under the code of
conduct in relation to executive remuneration consulting
in the UK. No Directors, other than the members of the
Remuneration Committee, provided material advice to the
Committee on Directors’ remuneration.
It seeks to provide a remuneration package
that aligns strongly the interests of Executive
Directors with those of the shareholders.
RemuneRation PolicY
The objective of the Group’s remuneration policy is
to drive shareholder value by attracting and retaining
management with the appropriate professional, managerial
and operational expertise necessary to realise the Group’s
strategic objectives, as well as to establish a framework for
remunerating all employees.
It is the Company’s policy that all Executive Directors’
service contracts contain a 12 month notice period. The
Non-Executive Directors do not have service contracts with
the Company. They are appointed for an initial three year
term and thereafter may be reappointed for a further two
terms of three years, subject to annual re-election at Annual
General Meetings. Additional details of service contracts
are shown on page 66. As the Remuneration Committee
has proposed changes to the remuneration structure for
the Executive Directors from 2013, this report details the
current year remuneration policies and then separately the
proposals for 2013 onwards.
executive DiRectoRs’
RemuneRation foR 2012
The remuneration for 2012 agreed by the Committee for the
Executive Directors contains the following elements: a base
salary and benefits, an annual bonus, share plan awards and
pension benefits. The remuneration of the Non-Executive
Directors is determined by the Board and is disclosed on
page 59.
Base salaRY anD Benefits
The Committee establishes salaries and benefits by
reference to those prevailing in the employment market
generally for Executive Directors of companies of
comparable status and market value, taking into account
the range of incentives described elsewhere in this
56
report, including a performance bonus. Reviews of such
base salary and benefits are conducted annually by the
Committee. Since flotation the Group has operated a
policy of providing below median salaries, with the balance
of the package provided through incentives aligned with
Group performance and shareholder value to ensure a total
remuneration package geared to performance.
Incentives are aligned with Group
performance and shareholder value to
ensure a total remuneration package
geared to performance.
As outlined above, there were a number of changes to the
board of directors during 2012, with Charles-Henri Dumon
leaving the Board in February 2012 and Stephen Puckett
being replaced by Andrew Bracey in April 2012. This led
to a change in the roles and responsibilities of the Chief
Executive Officer. In light of these changes and as part of a
future transition to a new remuneration structure described
in further detail later in this report, Steve Ingham’s salary
for 2012 was increased by 14.8% to £450,000. No further
changes were made to his benefits for 2012. The Committee
decided not to increase the base salaries for Charles-Henri
Dumon or Stephen Puckett during 2012. Andrew Bracey
received a base salary of £360,000 p.a. effective from his
appointment on 23 April 2012. The table below shows the
base salaries of each Executive Director in 2011 and 2012,
in the currency in which they were paid.
annual Bonus Plan
In 2012, the Annual Bonus Plan operated for Steve Ingham
and, for the proportion of the year during which he served,
Stephen Puckett. Charles-Henri Dumon did not receive a
bonus during 2012. Andrew Bracey did not participate in the
bonus pool in 2012 and had a maximum bonus opportunity
of 150% of salary, subject to the achievement of stretching
financial and personal targets set by the Committee.
The Annual Bonus Plan makes awards from a pool of
profits earned during the financial year. In 2012, the bonus
pool for the participating Executive Directors was equal
to 3.85% of profits earned above a threshold equal to half
of targeted profits for the year. Had profits exceeded 1.1
times the targeted level, then an additional 1.3% of profits
earned above the targeted level would have been added to
the bonus pool. The Remuneration Committee retains the
discretion to review this arrangement and set different rates
and thresholds as it deems appropriate for the business.
Profits are defined as Group profit before taxation,
exceptional items and before the Executive Directors’
annual bonus charges and charges or credits resulting from
the Incentive Share Plan described below or other share
option grants. The bonus pool calculation is not entirely
formulaic as the Committee has the ability to vary the pool
both up and down, by up to 10%, to reflect its view of the
performance of the Company relative to its
directly comparable peers. Despite what the Committee
believed was a strong performance of the business in tough
trading conditions, due to the overall reduction in profit the
Committee decided not to vary the 2012 bonus pool.
The targeted level of profits for 2012 was £93.0m, as
defined above, and was set at the start of 2012 by reference
to market expectations and internal forecasts at that time.
Due to the downturn in market conditions during 2012, the
targeted level of profits was not achieved by the business
and, as a result, the bonus pool from which the executive
directors individual bonuses are drawn for the participating
executive directors reduced by 23.4% compared to 2011.
However, the amount of the bonus pool for the Executive
Directors was adjusted down further as a result of taking
into account the changes to the Board, both in terms of
those executive directors included in the pool and the
changes to Steve Ingham’s responsibilities during the
year. This resulted in the overall pool being allocated being
reduced from the 3.85% of profits (as defined above) used
in previous years, to 2.59%.
Currency
2012 (‘000s)
2011 (‘000s)
% Change
Director
Steve Ingham
Stephen Puckett
Andrew Bracey
Sterling
Sterling
Sterling
Charles-Henri Dumon
Swiss Francs
450
299
360
653
392
299
-
653
14.8
-
-
-
57
Unlike all other employees who receive all their annual
bonuses in cash, the Executive Directors’ cash element
of their annual bonus is restricted to a multiple of salary.
In the event that the Executive Director’s annual bonus
entitlement is greater than 150% of salary, only an amount
equal to 150% of the executive’s salary is paid in cash.
To reward service over a longer period, any amount of the
bonus pool above 150% of the individual’s salary level is
deferred, paid into an employee benefit trust and invested
in the Company’s shares with no matching investment by
the Company. Such shares are reserved for the executive
and vest in equal annual tranches over two years, normally
so long as the executive is still in employment at that time.
The Income Statement for the year carries a charge for the
Directors’ annual bonus paid in cash while the deferred
amount is charged in subsequent years until the shares vest.
Based on the 2012 results, the total amount deferred for the
Executive Directors is £0.1m (2011: £0.1m).
assessed from a maximum bonus opportunity of 150% of
salary. The Committee decided to award 75% of the 100%
opportunity that was subject to the achievement of financial
targets and 100% of the 50% opportunity that was subject
to personal targets. As a result, Andrew Bracey received a
bonus of 125% of his base salary, or £450,000.
long-teRm incentives
The Company currently operates two forms of long-term
incentive for Executive Directors and senior management,
being the Incentive Share Plan and the Executive Share
Option Scheme. As in 2011, no awards were made in 2012
under the Executive Share Option Scheme.
As mentioned previously, Andrew Bracey did not participate
in the bonus pool in 2012, but received a bonus that was
incentive shaRe Plan (isP)
The ISP, which was approved by shareholders in 2003, is
funded with a percentage, currently 6%, of Group profits.
Not more than 30% of this amount is available for awards
to the Executive Directors, the balance being available
for awards to senior employees. Awards under the ISP
are satisfied in shares of the Company, which are market
purchased and held by the employee benefit trust. The
Committee retains the discretion to review the proportion
of profits dedicated to the ISP in the light of the growth in
the size of the Company, its profitability and the number of
Executive Directors. Awards vest after a three year period.
Two thirds of these shares (“Deferred Share Awards”) are
subject to a three-year deferral period, during which they
will be forfeited if the relevant director or senior employee
leaves, other than in “compassionate circumstances”.
The remaining third (“Performance Share Awards”) are also
deferred for three years, but are subject to the following
earnings per share (“EPS”) growth targets over the three
year period:
• Performance share awards of up to 50% of a Director’s
or senior employee’s salary only vest if EPS grows by an
average of 5% over the growth in UK RPI per annum over
the three year period;
• Any excess between 50% and 75% of salary only vests
to the extent that EPS grows by 7.5% over the growth in
UK RPI per annum over the three year period;
• Finally, to the extent that the performance share award is
greater than 75% of an executive’s salary, the hurdle is
10% over the growth in UK RPI per annum over the three
year period; and
• If awards do not vest after three years, they automatically
lapse.
Based on the 2012 results, the total award available to
be made in 2013 was £4,664,148. Of this, £556,500 was
allocated to Steve Ingham, being an award of 12% of the
pool, slightly up on the proportion awarded in previous years
in recognition of his increased responsibilities (2011: 10%).
Andrew Bracey was awarded £360,000, being 100% of
his base salary. Awards totalling £3,750,000 will be made
to other senior employees. Details of the awards made in
2012 to the Executive Directors are disclosed on page 61.
As reported in the 2009 Remuneration Report, due to the
highly uncertain outlook at the time of making the awards,
the Remuneration Committee concluded that performance
shares awarded in March 2009 would vest over the four
year period to March 2013. As such, the performance
criteria on the Performance Shares and Performance Share
Options awarded under the Incentive Share Plan in 2009
were tested at the end of 2012 and having exceeded the
required 10% over the growth in UK RPI per annum over the
four year period, they will vest in full on 10 March 2013. No
awards were made under the Incentive Share Plan in 2010
and thus there are no other Incentive Share Plan awards to
test for performance against the 2012 results.
58
shaRe aWaRD
Andrew Bracey was granted a deferred share award on
appointment of 75,472 shares, being one-times base salary
of £360,000 converted into shares at 477p. This grant was
made in two equal awards, which will vest after one and two
years from the date of Andrew’s appointment, subject to his
continuing employment.
emoluments
The aggregate emoluments, excluding pensions, of the
Directors of the Company who served during the year
are shown in the table opposite. Emolument notes:
1. Steve Ingham is the highest paid director.
2. Charles-Henri Dumon’s salary, benefits and
compensation amounts were paid in Swiss Francs.
3. Benefits include, inter alia, items such as company car
or cash alternative, fuel and medical insurance.
4. Represents the performance proportion of the Incentive
Share Plan awarded in March 2009 and the non-
performance proportion of the Incentive Share plan to
be awarded in March 2013.
2012
Executive
Steve Ingham (Note 1)
Andrew Bracey
Charles-Henri Dumon (Note 2)
Stephen Puckett
Non-Executive
Robin Buchanan
Ruby McGregor-Smith
Dr Tim Miller
Simon Boddie
David Lowden
Hubert Reid
Reg Sindall
Total
2011
Executive
Steve Ingham (Note 1)
Charles-Henri Dumon (Note 2)
Stephen Puckett
Non-Executive
Sir Adrian Montague CBE
Reg Sindall
Ruby McGregor-Smith
Dr Tim Miller
Hubert Reid
Robin Buchanan
Total
Salary
& Fees
Benefits
(Note 3)
Annual
Bonus
Deferred
Annual Bonus
Incentive Share
Plan (Note 4)
Compensation
Amounts
£’000
£’000
£’000
450
249
59
159
220
58
47
13
21
19
36
28
17
19
15
-
-
-
-
-
-
-
675
450
-
250
-
-
-
-
-
-
-
£’000
76
-
-
-
-
-
-
-
-
-
-
£’000
659
360
-
-
-
-
-
-
-
-
-
£’000
-
-
2,531
-
-
-
-
-
-
-
-
Total
£’000
1,888
1,076
2,609
424
220
58
47
13
21
19
36
1,331
79
1,375
76
1,019
2,531
6,411
Salary
& Fees
Benefits
(Note 3)
Annual
Bonus
Deferred
Annual Bonus
Incentive
Share Plan
Compensation
Amounts
£’000
£’000
£’000
392
460
299
150
51
51
46
49
18
28
68
29
-
-
-
-
-
-
588
299
520
-
-
-
-
-
-
£’000
77
£’000
391
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,516
125
1,407
77
391
£’000
-
-
-
-
-
-
-
-
-
-
Total
£’000
1,476
827
848
150
51
51
46
49
18
3,516
59
Pension Benefits
Executive Directors are eligible to participate in the Group
pension plan which is a defined contribution scheme.
In 2012, each Executive Director received a pension
contribution or a cash alternative as a percentage of their
base salary, as shown opposite.
Director
Steve Ingham
Stephen Puckett
Andrew Bracey
Charles-Henri Dumon
2012
113
40
48
22
% of Base Salary
2011
% of Base Salary
25
25
20
25
98
75
-
115
25
25
-
25
DiRectoRs’ inteRests anD
shaRe oWneRshiP ReQuiRements
It is PageGroup policy that Executive Directors are required
to build and hold, as a minimum, a direct beneficial interest
in the Company’s ordinary shares equal to their base salary.
As at 31 December 2012, both Executive Directors
complied 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 in the adjacent table.
For the Directors in office at the balance sheet date there
has been no change in these interests from 31 December
2012 to 5 March 2013.
1. Steve Ingham transferred 146,511 shares from the
Incentive Share Plan and 33,422 from the Deferred
Annual Bonus Plan into his direct holding in the year.
2. Andrew Bracey was awarded 75,472 shares on 23 April
2012 that will vest in equal annual tranches over two
years, subject to his remaining in employment at that time.
3. Charles-Henri Dumon disposed of 615,110 out of his
direct holding in the year.
4. Stephen Puckett transferred 146,511 shares from the
Incentive Share Plan and 26,636 from the Deferred
Annual Bonus Plan into his direct holding and also
disposed of 173,147 out of his direct holding in the year.
60
Ordinary
shares
of 1p
At
1 January
2012
Transferred in year
ISP
ABP
Total
transferred
in year
Acquired
in year
Disposal
in year
As at 31
December
2012
Robin Buchanan
Steve Ingham
Direct
Holding
Direct
Holding
39,678
-
-
-
1,387,241
146,511
33,422
179,933
Andrew Bracey
Direct
Holding
-
Charles-Henri Dumon
Direct
Holding
615,110
-
-
-
-
-
-
Stephen Puckett
Direct
Holding
-
146,511
26,636
173,147
-
-
75,472
-
-
-
39,678
1,567,174
75,472
-
-
(615,110)
(173,147)
-
-
incentive shaRe Plan
DefeRReD annual Bonus
Details of awards made under the Incentive Share Plan that
remain outstanding at 31 December 2012 are as follows
in the below table.
1. The value of the award made under the PageGroup
Incentive Share Plan to Steve Ingham in 2012 was
£586,786 and was based on the purchase price of the
Company’s ordinary shares on 12 March 2012 of 477.0p.
The market value at the date of their award of the shares
that vested in the year was 187.5p.
2. The total value of the awards at 31 December 2012 for
Steve Ingham and Charles-Henri Dumon was £1,496,497
and £1,010,584 respectively. This is calculated using the
closing market price of the Company’s ordinary shares
at 31 December 2012 of 395.0p.
3. For the awards made in 2012, the performance shares
vest over three years and have a base EPS for the
performance criteria of 22.01p.
As described on page 57, in the event that the Executive
Directors’ bonus entitlement is greater than 150% of salary,
the excess 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 respect of 2012, a total of £0.1m will be awarded to
Steve Ingham, being the only Executive Director to whom
this applies, in March 2013, representing this excess and
has been included in the emoluments table for the year as
shown on page 59.
There has been no charge made to the income statement in
the year for the deferred element of the 2012 Annual Bonus
Plan. The charge for the year will be spread over future
periods as described in the accounting policies in Note 1
on page 82. For full descriptions of the vesting conditions,
see “Annual Bonus Plan” on page 57.
Total award at 1 January 2012
Awarded during the year
Total award at 31 December 2012
Perf.
Shares
Non-perf.
Shares
Total
Shares
Perf.
Shares
Non-perf.
Shares
Total
Shares
Vested
in year
Perf.
Shares
Non-perf.
Shares
Total
Shares
Steve Ingham
187,805
375,608
563,413
41,005
82,011
123,016
(307,569)
228,810
150,050
378,860
Charles-Henri Dumon
187,805
375,608
563,413
Stephen Puckett
187,805
375,608
563,413
-
-
-
-
-
-
(307,569)
187,805
68,039
255,844
(563,413)
-
-
-
61
Details of awards made under the deferred Annual Bonus Plan that remain outstanding at 31 December 2012 are as
shown in the table below. The average market value at the date of their award of the shares that vested in the year
was 491p.
Total award at
1 January 2012
Awarded
during the year
Vested in year
Total award at
31 December 2012
Steve Ingham
140,325
16,232
(70,163)
Charles-Henri Dumon
111,898
Stephen Puckett
111,898
-
-
(55,949)
(111,898)
-
86,394
55,949
Beneficial inteRests in oPtions
The beneficial interests of the Executive Directors who served during the year and their families in share options of the
Michael Page International plc Executive Share Option Scheme at 31 December 2012 were as shown in the table below.
The market price of the shares at 31 December 2012 was 395.0p with a range during the year of 341.4p to 497.0p.
Date of
grant
At 1
January
2012 (shares)
Exercised
in year
Lapsed
in year
At 31
December
2012 (shares)
Exercise
price
(shares)
Period of
exercise
Steve Ingham
2005
50,000
2010
400,000
Charles-Henri Dumon
2010
400,000
-
-
-
Stephen Puckett
2010
400,000
(400,000)
-
-
-
-
50,000
190.75
2008-2015
400,000
381.5
2013-2020
400,000
381.5
2013-2020
-
381.5
2013-2020
62
DiRectoRs leaving the BoaRD
Stephen Puckett announced his intention to leave the
Board on 8 July 2011 and having remained in office until
Andrew Bracey’s appointment on 23 April 2012, retired
from the Board on 18 May 2012. Stephen Puckett, who was
employed under a service contract with the company dated
31 December 2010, was entitled to one year’s salary and
benefits on termination in accordance with his contractual
entitlements. Accordingly, he received salary and benefits
until 11 July 2012, being £174,000 in 2012. Stephen Puckett
was also eligible for a bonus for the period served during
2012 and having regard to his individual performance
and the performance of the Group in the period up until
18 May 2012, the Committee determined that a payment
of £250,000 was appropriate and in line with a time
apportioned amount of what he would have received, based
on a forecast of the full year’s profit at date of his leaving,
had he remained in office throughout the year.
As regards long-term incentives, restricted shares previously
granted under the Incentive Share Plan and Annual Bonus
Plan and share options under the Executive Share Option
Scheme were transferred to Stephen Puckett with the
restrictions lifted at the discretion of the Committee.
Further details of these awards are set out in pages 61
and 62. The company reimbursed legal fees of £4,250 in
connection with his termination arrangements.
Charles-Henri Dumon left the Board on 28 February 2012.
Charles-Henri Dumon, who was employed under a service
contract with the company dated 13 June 2003, will receive
salary and benefits until 31 March 2013, he also received
compensation for loss of office, termination of a Swiss
employment contract dated 13 June 2003, termination of a
suspended French contract dated 15 July 1986, and a non-
compete agreement until 31 March 2013. In total for salary
and benefits and all other elements, including legal fees
in connection with his termination arrangements, from the
date of his leaving the Board he will receive Swiss Francs
3,758,849. Charles-Henri Dumon did not receive a bonus
for either 2012 or 2013. As regards long-term incentives,
restricted share options previously granted under the
Incentive Share Plan and Annual Bonus Plan will be vested
to Charles-Henri Dumon with the restrictions lifted at the
discretion of the Committee on 31 March 2013. Further
details of these awards are set out in pages 61 and 62.
PRoPoseD changes to the
executive DiRectoRs’
RemuneRation stRuctuRe
foR 2013
Base salary
We are proposing to increase the CEO’s base salary to
£550,000 from 1 January 2013 and reduce the upper end of
the incentives the CEO can earn.
Steve Ingham was promoted to CEO at the end of 2005.
Following a successful first year, his salary was set at
£360,000 in 2007. Over the next four years Steve’s salary
increased by 3% in 2008 to £371,000, 0% in 2009 being
£371,000, 2% in 2010 to £380,000, and 3% in 2011 to
£392,000, i.e. below the level of inflation despite the growth
and success of the business.
The proposed move to £550,000 for the CEO’s base salary
is the second part of a transition to a new remuneration
structure started last year, when the CEO’s salary was
increased to £450,000. While the overall increase is part
of a transition to a new remuneration structure, there has
also been an increase in his responsibilities due to the
management changes that were effected at the start of 2012.
In order to check that the base salary level proposed was
reasonable the Committee looked at a number of data
points, including overall FTSE 250, FTSE 250 companies
with a similar market capitalisation, FTSE 250 companies
with a similar market capitalisation excluding businesses
that were in very different sectors (for example financial
services and natural resources), and our competitors.
Within these datasets the base salary median for the FTSE
250 was £500,000, while our nearest competitor, was
£650,000. When viewed against similar market capitalisation
companies excluding businesses in very different sectors
the median was £565k. Therefore we felt that being slightly
below median on the base salary, but with a total maximum
opportunity slightly above was appropriate.
The new element of the bonus opportunity...
is designed to further encourage executives
to focus on delivering the strategy of the
business at the same time as growing profits.
While we had proposed originally to make the full change
to £550,000 in 2012, in our discussions in late 2011
shareholders recommended that we staged the increase
over two years. We agreed to this and, as such, this is now
the second part of that staged transition. The change to the
CEO’s base salary should not be viewed in isolation, but
considered within the context of considerable restraint over
the last five years, the increase in his responsibilities, the
overall proposed changes to the executive remuneration
structure, and that this is the second half of a transition
recommended previously by shareholders.
In particular, this increase in the base salary reflects the
Remuneration Committee’s intention to move away from the
volatility in the executive directors’ earnings that is inherent
in the current scheme with a fixed to variable remuneration
ratio of 18:82 to the new scheme that would have a ratio of
25:75 at the maximum opportunity. The salary for the Chief
Financial Officer was deemed to have been set at the market
median on appointment and at 31 December 2012 he had
only been in role for eight months. Therefore his salary will
increase by 1.4% to £365,000 (2012: £360,000), bringing him
onto the annual review process.
Annual bonus
The current annual bonus for executive directors is a total
of 3.85% of profit above a threshold equal to half of the
targeted profits for the year, with an additional 1.3% of
profit above a further hurdle. However, this exacerbates
the volatility of the business cycle within the remuneration
framework.
The proposed annual bonus will be capped at 175% of base
salary, with 125% against achievement of a PBT target and
50% assessed against strategic targets. The actual level of
the award related to PBT targets will be made on a straight-
line pro-rated basis within a PBT range of the target.
The new element of the bonus opportunity, up to a maximum
of 50% of salary, will be based on the achievement of key
strategic goals for the relevant financial year. This is designed
to further encourage executives to focus on delivering the
strategy of the business at the same time as growing profits.
This element of the bonus will be subject to the Committee
being satisfied with the underlying performance of the
business.
The strategic goals for the annual bonus plan awards would
be set by the Remuneration Committee at the time of award
and progress against them be fully disclosed on vesting.
These measures would be for the achievement of specific
63
strategic objectives for the business and the delivery of them
by the executive. Therefore, while the strategic objectives
would be against business performance, the executive to
whom the award is made would be directly responsible for
its delivery. At the time of any award the Committee will
ensure that appropriate disclosure is made on the strategic
targets and the executive’s progress against these targets
to allow shareholders to understand the level of
performance achieved.
Cash bonus
The current framework has a maximum cash bonus of 150%
of salary. We are proposing that the maximum cash element
of the bonus will reduce to 125% of salary.
Long-Term Incentive awards will be tested over a three year
performance period. Currently only one-third of the ISP
is subject to longer-term performance conditions. Unless
the executive director has already met the shareholding
requirement, vested shares will have to be held for a
further two years, other than to settle any tax liability. This
requirement will be increased to 200% of base salary. This
change increases the emphasis on remuneration being
linked to the longer term performance of the Company.
However, it should be noted that at 31 December 2012 the
Chief Executive’s shareholding was already at 14 times base
salary and had averaged 13 times over the previous six
years, further emphasising a commitment to the longer term
strategy of the Group.
Deferred Annual Bonus Plan
Any remaining bonus will be deferred into shares to vest
in equal amounts after one and two years, which is in line
with the current arrangements. These changes to the
bonus arrangements maintain the link to company profit,
whilst providing an increased focus on the longer term
performance of the company and further align the interests
of management with shareholders.
Long-Term Incentive
To moderate the volatility in the remuneration package and
address the Remuneration Committee and shareholders’
concerns regarding the uncapped nature of the current ISP, it
is proposed that future long-term incentive share awards be
capped, rather than set as a percentage of annual profit.
Annual awards of up to a maximum opportunity of 200% of
salary will be made. 62.5% of any award would vest subject
to a stretching cumulative EPS performance condition.
The remaining 32.5% would be subject to longer term
strategic objectives. Of the portion linked to longer term
strategic objectives, one third will be set against a specific
measurement of relative growth to a comparator group.
As with the Annual Bonus, we will ensure that appropriate
retrospective disclosure is made on the strategic objectives
and the executive’s progress against these objectives to
allow shareholders to understand the level of performance
achieved.
The EPS targets are anticipated to be real three-year
cumulative targets and would be disclosed in the
remuneration report in the year of award. The first award
under this scheme is due to be made in 2014. Therefore the
level of cumulative targets will be disclosed in next year’s
remuneration report. The levels at which these are set would
take into account market conditions, analysts’ consensus,
the long-range strategic plan and other appropriate
information available at the time. Were they to be set at
this time, it is anticipated that the targets would be no less
challenging than those within the performance element of the
current LTIP plan, which require EPS growth over the three
year vesting period to be in excess of UK RPI plus 10% for
full vesting.
For the relative growth measure in the longer term strategic
objectives, the Committee are proposing to use a relative
organic growth measure against industry competition, the
composition of which would be disclosed at the time of the
award, but could be based on relative gross profit growth or
similar.
Pensions
It is not proposed to change the pension contributions from
the current 25% of base salary (CFO: 20%).
Shareholding guidelines
As previously mentioned, to further align executives’ interests
with those of shareholders it is proposed to increase the
current shareholding guidelines from 100% of salary to
200% of salary.
Introduction of Claw-back Arrangements
Having considered the recommendation in the UK Corporate
Governance Code, in order to protect the Company and
shareholders in exceptional circumstances of misstatement
or misconduct, the Committee is proposing the introduction
of a ‘clawback’ provision to allow the Company to reclaim
variable components of remuneration under certain
circumstances.
The proposed structure will reduce the amount that can be
earned at high levels of future profitability and will moderate
the impact of short-term falls in profits. This moderation is
critical given the volatility of the recruitment sector, which is
so sensitive to the general economic cycle. The changes will
ensure that the total remuneration will be competitive in the
market place, while the maximum opportunity available to
the executives will be broadly in line with previous years.
Additionally, through a combination of the changes being
considered and the changes to the executive directors on the
Board, the total spend on executive directors’ remuneration
going forward will be lower than historic levels.
64
total shaReholDeR RetuRn (tsR)
The graph below shows Total Shareholder Return (TSR) relative to a base index of 100 for the Group and the FTSE
Support Services index, which is the sector in which the Company operates, as well as the FTSE 250 index.
Versus FTSE 250 and FTSE Support Services
31 Dec 2007
31 Dec 2008
31 Dec 2009
31 Dec 2010
31 Dec 2011
31 Dec 2012
250
210
170
130
90
50
100.0
76.6
72.9
61.8
207.5
119.0
118.7
138.9
96.6
93.2
154.6
147.1
134.6
133.1
118.5
106.7
Michael Page
Support Services
FTSE250
outsiDe aPPointments
The Remuneration Committee recognises that Non-
Executive Directorships have 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 executives are permitted to retain any
fees for their service.
Steve Ingham was appointed as a non-executive director at
Debenhams plc on 8 January 2013. Details of fees received
as compensation for this role will be disclosed in the 2013
Remuneration Report.
65
seRvice contRacts
A general review of all the Executive Directors’ contracts
was carried out during 2011 to ensure they remain legally
current and a number of minor amendments were made.
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,
including mitigation, as appropriate. The chart opposite
shows the review of all Executive Directors’ contracts.
Contract
Date
Unexpired
term at
31 December
2012
Notice
Period
Provision for
compensation
on early
termination
Other
termination
provisons
Executive
Steve Ingham
31/12/2010
No specfic
term
12 months
12 months salary plus
other contractual benefits
Charles-Henri Dumon
13/06/2003
Stephen Puckett
31/12/2010
-
-
12 months
12 months salary plus
other contractual benefits
12 months
12 months salary plus
other contractual benefits
Andrew Bracey
24/04/2012
No specfic
term
12 months
12 months salary plus
other contractual benefits
Charles-Henri Dumon left the Board on 28 February 2012.
Stephen Puckett retired from the Board on 18 May 2012.
Non-Executive
Andrew Bracey was appointed on 23 April 2012.
Hubert Reid retired from the Board on 18 May 2012.
Reg Sindall retired from the Board on 22 August 2012.
David Lowden was appointed to the Main Board, as
Chairman of the Remuneration Committee and a member of
the Audit and Nomination Committees on 22 August 2012.
Simon Boddie was appointed to the Main Board and
a member of the Audit, Remuneration and Nomination
Committees on 24 September 2012.
Hubert Reid
25/02/2009
Reg Sindall
14/12/2010
-
-
Ruby McGregor-Smith
23/05/2010
5 months
None
None
None
Tim Miller
13/08/2011
20 months
None
Robin Buchanan
10/08/2011
20 months
None
David Lowden
22/08/2012
32 months
None
Simon Boddie
24/09/2012
33 months
None
None
None
None
None
None
None
None
66
None
None
None
None
None
None
None
None
None
None
None
chaiRman
The fee for the Chairman reflects the level of commitment
and responsibility of the role and is determined by the
Remuneration Committee and other members of the
Board. The fees for the Chairman were set at £220,000 on
appointment in 2011. There was no increase to these fees
in 2012. These are paid monthly in cash, inclusive of all
committee roles and are not performance related
or pensionable. There are no benefits. No increase in
fees paid to the Chairman is anticipated in 2013.
The revised fee structure is as follows:
Basic annual fee:
Committee Chairman:
Senior Independent Director
1 Inclusive of all committee memberships
2 Audit and Remuneration Committees only
£48,0001
£10,0002
£5,000
The Directors’ emoluments table on page 59 shows the
fees paid during the year to each non-executive director.
No fee increases for non-executive directors are anticipated
in 2013.
non-executive DiRectoRs
annual Resolution
The Non-Executive Directors do not receive any other
benefits, other than out-of pocket expenses, from the
Group, nor do they participate in any of the bonus or
share schemes. The fees recognise the responsibility of
the role and the time commitments required, and are not
performance related or pensionable. They are paid monthly
in cash and there are no other benefits.
A review of non-executive director fees was carried out
in March 2012 which indicated that they were no longer
appropriate in the current market (fees, although reviewed
annually, had not been increased since June 2010). As a
result, the fee structure was realigned from 30 June 2012.
The basic annual fees were increased by £2,000 to £48,000.
In addition, the fee for the role of Audit and Remuneration
Committee Chairman was increased from £5,000 to
£10,000, and for the role of Senior Independent Director
from £3,000 to £5,000.
Shareholders will be given the opportunity to approve
the Remuneration Report at the Annual General Meeting
(resolution 10) on 6 June 2013.
auDit ReQuiRement
Within the Remuneration Report, the sections on
Emoluments and Directors’ interests and share ownership
requirements, on pages 59 to 62 inclusive, are audited.
All other sections of the Remuneration Report are unaudited.
David Lowden
Remuneration Committee Chairman
5 March 2013
67
inDePenDent auDitoR’s RePoRt
to the memBeRs of michael Page
inteRnational Plc
We have audited the financial statements of Michael Page
International plc for the year ended 31 December 2012
which comprise the Consolidated Income Statement,
the Consolidated Statement of Comprehensive Income,
the Consolidated and Parent Company Balance Sheets,
the Consolidated and Parent Company Statements of
Changes in Equity, the Consolidated and Parent Company
Cash Flow Statements and the related notes 1 to 26. The
financial reporting framework that has been applied in their
preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European
Union and, as regards the parent company financial
statements, as applied in accordance with the provisions of
the Companies Act 2006.
This report is made solely to the company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the company’s members those
matters we are required to state to them in an auditor’s 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 auditor
As explained more fully in the Directors’ Responsibilities
Statement set out on page 130, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view. Our responsibility
is to audit and express an opinion on the financial statements
in accordance with applicable law and International
Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing
Practices Board’s Ethical Standards for Auditors.
Opinion on other matters prescribed by the Companies
Act 2006
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to
give reasonable assurance that the financial statements
are free from material misstatement, whether caused by
fraud or error. This includes an assessment of: whether
the accounting policies are appropriate to the group’s
and the parent company’s circumstances and have
been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made
by the directors; and the overall presentation of the financial
statements. In addition, we read all the financial and non-
financial information in the Annual Report and Accounts
2012 to identify material inconsistencies with the audited
financial statements. If we become aware of any apparent
material misstatements or inconsistencies we consider the
implications for our report.
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the
state of the group’s and of the parent company’s affairs as
at 31 December 2012 and of the group’s profit for the year
then ended;
• the group financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union;
• the parent company financial statements have been
properly prepared in accordance with IFRSs as adopted
by the European Union and as applied in accordance with
the provisions of the Companies Act 2006; and
• the financial statements have been prepared in
accordance with the requirements of the Companies Act
2006 and, as regards the group financial statements,
Article 4 of the IAS Regulation.
In our opinion:
• the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance with
the Companies Act 2006; and
• the information given in the Directors’ Report for the
financial year for which the financial statements are
prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to
you if, in our opinion:
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the parent company financial statements and the part of
the Directors’ Remuneration Report to be audited are not
in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by
law are not made; or
• we have not received all the information and explanations
we require for our audit.
Under the Listing Rules we are required to review:
• the directors’ statement set out on page 27 in relation to
going concern;
• the part of the Corporate Governance Statement relating
to the company’s compliance with the nine provisions
of the UK Corporate Governance Code specified for our
review; and
• certain elements of the report to shareholders by the
Board on directors’ remuneration.
Iain Wilkie (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London, 5 March 2013
68
financial statements
CONSOLIDATED INCOME STATEMENT ............................................................................... 70
11. Property, plant and equipment ........................................................................................ 92
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ......................................... 71
12. Intangible assets .............................................................................................................. 93
CONSOLIDATED AND PARENT COMPANY BALANCE SHEETS ........................................ 72
13. Investments ...................................................................................................................... 94
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ................................................... 74
14. Trade and other receivables ............................................................................................. 96
STATEMENT OF CHANGES IN EQUITY – PARENT COMPANY ........................................... 75
15. Trade and other payables ................................................................................................ 97
CONSOLIDATED AND PARENT COMPANY CASH FLOW STATEMENTS .......................... 76
16. Bank overdrafts ................................................................................................................ 97
NOTES TO THE FINANCIAL STATEMENTS .......................................................................... 77
17. Deferred tax ...................................................................................................................... 98
1. Significant accounting policies ........................................................................................ 77
18. Called-up share capital .................................................................................................... 99
2. Segment reporting ........................................................................................................... 84
19. Reserves ......................................................................................................................... 102
3. Profit for the year.............................................................................................................. 87
20. Cash flows from operating activities ............................................................................. 103
4. Employee information ...................................................................................................... 87
21. Cash and cash equivalents ............................................................................................ 104
5. Exceptional items ............................................................................................................. 88
22. Financial risk management ............................................................................................ 104
6. Financial income/(expenses) ........................................................................................... 88
23. Commitments ................................................................................................................. 111
7. Taxation on profits on ordinary activities ......................................................................... 89
24. Contingent liabilities ....................................................................................................... 111
8. Current tax assets and liabilities ...................................................................................... 90
25. Events after the balance sheet date .............................................................................. 111
9. Dividends ......................................................................................................................... 90
26. Related party transactions ............................................................................................. 112
10. Earnings per share ........................................................................................................... 91
69
consoliDateD income statement
For the year ended 31 December 2012
note
Before exceptional
items 2012
£’000
exceptional items
(note 4) 2012
£’000
after exceptional
items 2012
£’000
Revenue
Cost of sales
gross profit
Administrative expenses
operating profit
Financial income
Financial expenses
Profit before tax
Income tax (expense)/income
Profit for the year
attributable to:
Owners of the parent
earnings per share
Basic earnings per share (pence)
Diluted earnings per share (pence)
The above results relate to continuing operations.
2
2
2
6
6
2
7
3
10
10
989,882
(463,013)
526,869
(461,748)
65,121
907
(1,191)
64,837
(23,332)
41,505
–
–
–
–
–
–
(7,834)
(7,834)
–
–
(7,834)
2,526
(5,308)
–
–
–
70
2011
£’000
1,019,087
(465,306)
553,781
(467,746)
86,035
953
(841)
86,147
(29,290)
56,857
989,882
(463,013)
526,869
(469,582)
57,287
907
(1,191)
57,003
(20,806)
36,197
36,197
56,857
11.9
11.7
18.7
18.2
consoliDateD statement of comPRehensive income
For the year ended 31 December 2012
Profit for the year
other comprehensive loss for the year
Currency translation differences
total comprehensive income for the year
attributed to:
Owners of the parent
2012
£’000
36,197
(5,171)
31,026
31,026
2011
£’000
56,857
(3,405)
53,452
53,452
71
consoliDateD anD PaRent comPanY Balance sheets
As at 31 December 2012
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
current liabilities
Trade and other payables
Bank overdrafts
Current tax payable
net current assets/(liabilities)
non-current liabilities
Other payables
Deferred tax liabilities
total liabilities
net assets
72
note
2, 11
2, 12
13
17
14
14
8
21
2
15
16
8
15
17
2
-
group
company
2012
£’000
28,913
44,097
-
9,192
3,310
85,512
182,507
6,970
70,769
260,246
345,758
(138,733)
(9,396)
(12,612)
(160,741)
99,505
(2,779)
(850)
(3,629)
(164,370)
181,388
2011
£’000
33,210
39,744
-
8,351
2,612
83,917
196,455
3,980
64,417
264,852
348,769
(147,413)
(6,249)
(11,591)
(165,253)
99,599
(2,685)
(233)
(2,918)
(168,171)
180,598
2012
£’000
2011
£’000
-
-
-
-
493,544
478,791
-
-
-
-
493,544
478,791
511,799
485,871
-
20
511,819
1,005,363
-
23
485,894
964,685
(622,085)
(564,173)
-
-
(622,085)
(110,266)
-
-
-
(622,085)
383,278
-
-
(564,173)
(78,279)
-
-
-
(564,173)
400,512
consoliDateD anD PaRent comPanY Balance sheets (continueD)
As at 31 December 2012
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
note
18
19
19
19
19
group
company
2012
£’000
3,178
60,221
932
(62,071)
25,115
154,013
181,388
2011
£’000
3,167
57,215
932
(65,652)
30,286
154,650
180,598
2012
£’000
3,178
60,221
932
(62,071)
–
381,018
383,278
2011
£’000
3,167
57,215
932
(65,652)
–
404,850
400,512
These financial statements of Michael Page International plc, Company Number 3310225, were approved by the Board of Directors and authorised for issue on 5 March 2013. On behalf of
the Board of Directors.
S Ingham
Chief Executive Officer
A Bracey
Chief Financial Officer
73
consoliDateD statement of changes in eQuitY
For the year ended 31 December 2012
called-up
share capital
£’000
share premium
£’000
note
capital
redemption
reserve
£’000
Reserve
for shares held
in the employee
benefit trust
£’000
currency
translation
reserve
£’000
Retained
earnings
£’000
total equity
£’000
group
Balance at 1 January 2011
Currency translation differences
Net expense recognised directly in equity
Profit for the year
Total comprehensive (loss)/income for the year
Purchase of own shares for cancellation
Issue of share capital
Transfer from reserve for shares held in the employee benefit trust
Credit in respect of share schemes
Debit in respect of tax on share schemes
Dividends
Balance at 31 December 2011 and 1 January 2012
Currency translation differences
Net expense recognised directly in equity
Profit for the year
Total comprehensive (loss)/income for the year
Purchase of shares held in the employee benefit trust
Issue of share capital
Transfer from reserve for shares held in the employee benefit trust
Credit in respect of share schemes
Debit in respect of tax on share schemes
Dividends
Balance at 31 December 2012
9
9
74
3,216
–
–
–
–
(57)
8
–
–
–
–
(49)
3,167
–
–
–
–
–
11
–
–
–
–
11
3,178
55,607
–
–
–
–
–
1,608
–
–
–
–
1,608
57,215
–
–
–
–
–
3,006
–
–
–
–
3,006
60,221
875
–
–
–
–
57
–
–
–
–
–
57
932
–
–
–
–
–
–
–
–
–
–
–
932
(75,361)
–
–
–
–
–
–
9,709
–
–
–
9,709
(65,652)
–
–
–
–
(17,952)
–
21,533
–
–
–
3,581
(62,071)
33,691
(3,405)
(3,405)
–
(3,405)
–
–
–
–
–
–
–
30,286
(5,171)
(5,171)
–
(5,171)
–
–
–
–
–
–
–
25,115
159,406
–
–
56,857
56,857
(30,322)
–
(9,709)
12,703
(5,774)
(28,511)
(61,613)
154,650
–
–
36,197
36,197
–
4,799
(21,533)
11,843
(1,309)
(30,634)
(36,834)
154,013
177,434
(3,405)
(3,405)
56,857
53,452
(30,322)
1,616
–
12,703
(5,774)
(28,511)
(50,288)
180,598
(5,171)
(5,171)
36,197
31,026
(17,952)
7,816
–
11,843
(1,309)
(30,634)
(30,236)
181,388
statement of changes in eQuitY – PaRent comPanY
For the year ended 31 December 2012
company
Balance at 1 January 2011
Profit for the year
Total comprehensive income for the year
Purchase of own shares for cancellation
Issue of share capital
Transfer from reserve for shares held in the employee benefit trust
Credit in respect of share schemes
Dividends
Balance at 31 December 2011 and 1 January 2012
Profit for the year
Total comprehensive income for the year
Purchase of shares held in the employee benefit trust
Issue of share capital
Transfer from reserve for shares held in the employee benefit trust
Credit in respect of share schemes
Dividends
Balance at 31 December 2012
called-up
share capital
£’000
share
premium £’000
note
capital
redemption
reserve
£’000
Reserve for
shares held in
the employee
benefit trust
£’000
Retained
earnings
£’000
total equity
£’000
3,216
–
–
(57)
8
–
–
–
(49)
3,167
–
–
–
11
–
–
–
11
3,178
55,607
–
–
–
1,608
–
–
–
1,608
57,215
–
–
–
3,006
–
–
–
3,006
60,221
875
–
–
57
–
–
–
–
57
932
–
–
–
–
–
–
–
–
932
(75,361)
–
–
–
–
9,709
–
–
9,709
(65,652)
–
–
(17,952)
–
21,533
–
–
3,581
(62,071)
440,026
20,663
20,663
(30,322)
–
(9,709)
12,703
(28,511)
(55,839)
404,850
11,693
11,693
–
4,799
(21,533)
11,843
(30,634)
(35,525)
381,018
424,363
20,663
20,663
(30,322)
1,616
–
12,703
(28,511)
(44,514)
400,512
11,693
11,693
(17,952)
7,816
–
11,843
(30,634)
(28,927)
383,278
9
9
75
consoliDateD anD PaRent comPanY cash floW statements
For the year ended 31 December 2012
group
company
note
20
5
Cash generated from underlying operations
Exceptional items
Cash generated from operations
Income tax (paid)/received
net cash from operating activities
cash flows from investing activities
Purchases of investments
Purchases of property, plant and equipment
Purchases of intangibles
Proceeds from the sale of property, plant and equipment, and computer software
Interest received
net cash used in investing activities
cash flows from financing activities
Dividends paid
Interest paid
Issue of own shares for the exercise of options
Purchase of own shares for cancellation
Purchase of shares held in the employee benefit trust
net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Exchange loss on cash and cash equivalents
cash and cash equivalents at the end of the year
21
76
2012
£’000
94,471
(7,834)
86,637
(24,371)
62,266
–
(7,919)
(9,012)
449
907
(15,575)
(30,634)
(1,218)
7,816
–
(17,952)
(41,988)
4,703
58,168
(1,498)
61,373
2011
£’000
103,325
–
103,325
(37,109)
66,216
–
(16,319)
(13,325)
237
953
(28,454)
(28,511)
(807)
1,616
(30,322)
–
(58,024)
(20,262)
80,531
(2,101)
58,168
2012
£’000
48,482
–
48,482
–
48,482
2011
£’000
59,067
–
59,067
1,303
60,370
(2,908)
(3,141)
–
–
–
76
(2,832)
(30,634)
(84)
3,017
–
(17,952)
(45,653)
(3)
23
–
20
–
–
–
11
(3,130)
(28,511)
–
1,616
(30,322)
–
(57,217)
23
–
–
23
notes to the financial statements
For the year ended 31 December 2012
1. Significant accounting policies
Statement of compliance
Michael Page International plc is a company incorporated in
the United Kingdom under the Companies Act. The financial
statements have been prepared under the historical cost
convention and in accordance with current International
Financial Reporting Standards (IFRS) as adopted by the
European Union and therefore comply with Article 4 of the
EU IAS Regulation.
Basis of preparation
The financial statements of Michael Page International plc
consolidate the results of the Company and all its subsidiary
undertakings. As permitted by Section 408 of the Companies
Act 2006, the profit and loss account of the Company has
not been included as part of these financial statements. The
Company’s profit for the financial year amounted to £11.7m
(2011: £20.7m). The decrease in the Company’s profit
this year is as a result of decreased dividend income. The
financial statements have been prepared on a going concern
basis. Refer to page 27 for further details.
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 losses are eliminated in the same
way as unrealised gains, but only to the extent that there is
no evidence of impairment.
amount will be recovered through sale. It includes the
requirement that deferred tax on non-depreciable assets that
are measured using the revaluation model in IAS 16 should
always be measured on a sale basis. The amendment is
effective for annual periods beginning on or after 1 January
2012 and had no effect on the Group’s financial position,
performance or its disclosures.
(iii) Employee Benefit Trust
Shares in Michael Page International plc held by the trust are
shown as a reduction in shareholders’ funds.
Change in accounting policy - New accounting
standards, interpretations and amendments
The accounting policies adopted are consistent with those
of the previous financial year, except for the following
amendments to IFRS effective as of 1 January 2012:
• IAS 12 Income Taxes (Amendment) – Deferred Taxes:
Recovery of Underlying Assets
• IFRS 1 First-Time Adoption of International Financial
Reporting Standards (Amendment) – Severe
Hyperinflation and Removal of Fixed Dates for
First-Time Adopters
• IFRS 7 Financial Instruments: Disclosures – Enhanced
Derecognition Disclosure Requirements
The adoption of the standards or interpretations is described
below and did not have any impact on the accounting
policies, financial position or performance of the Group:
IAS 12 Income Taxes (Amendment) – Deferred Taxes:
Recovery of Underlying Assets
The amendment clarified the determination of deferred
tax on investment property measured at fair value and
introduces a rebuttable presumption that deferred tax on
investment property measured using the fair value model in
IAS 40 should be determined on the basis that its carrying
IFRS 1 First-Time Adoption of International Financial
Reporting Standards (Amendment) – Severe
Hyperinflation and Removal of Fixed Dates for
First-Time Adopters
The IASB provided guidance on how an entity should
resume presenting IFRS financial statements when its
functional currency ceases to be subject to hyperinflation.
The amendment is effective for annual periods beginning
on or after 1 July 2011. The amendment had no impact to
the Group.
IFRS 7 Financial Instruments: Disclosures — Enhanced
Derecognition Disclosure Requirements
The amendment requires additional disclosure about
financial assets that have been transferred but not
derecognised to enable the user of the Group’s financial
statements to understand the relationship with those assets
that have not been derecognised and their associated
liabilities. In addition, the amendment requires disclosures
about the entity’s continuing involvement in derecognised
assets to enable the users to evaluate the nature of, and
risks associated with, such involvement. The amendment
is effective for annual periods beginning on or after 1
July 2011. The Group does not have any assets with
these characteristics so there has been no effect on the
presentation of its financial statements.
77
Standards issued but not yet effective
The standards and interpretations that are issued, but not yet
effective, up to the date of issuance of the Group’s financial
statements are disclosed below. The Group intends to adopt
these standards, if applicable, when they become effective.
IAS 1 Presentation of Items of Other Comprehensive
Income – Amendments to IAS 1
The amendments to IAS 1 change the grouping of items
presented in other comprehensive income (OCI). Items
that could be reclassified (or ‘recycled’) to profit or loss
at a future point in time (for example, net gain on hedge
of net investment, exchange differences on translation of
foreign operations, net movement on cash flow hedges
and net loss or gain on available-for-sale financial assets)
would be presented separately from items that will never
be reclassified (for example, actuarial gains and losses on
defined benefit plans and revaluation of land and buildings).
The amendment affects presentation only and has no
impact on the Group’s financial position or performance. The
amendment becomes effective for annual periods beginning
on or after 1 July 2012.
IAS 19 Employee Benefits (Revised)
The IASB has issued numerous amendments to IAS 19.
These range from fundamental changes such as removing
the corridor mechanism and the concept of expected returns
on plan assets to simple clarifications and re-wording. The
amendment becomes effective for annual periods beginning
on or after 1 January 2013 and is not expected to have any
impact on the Group.
IAS 28 Investments in Associates and Joint Ventures (as
revised in 2011)
As a consequence of the new IFRS 11 Joint Arrangements,
and IFRS 12 Disclosure of Interests in Other Entities, IAS
28 Investments in Associates, has been renamed IAS 28
Investments in Associates and Joint Ventures, and describes
the application of the equity method to investments in joint
ventures in addition to associates. The revised standard
becomes effective for annual periods beginning on or after
1 January 2013 and is not expected to have any impact on
the Group.
IAS 32 Offsetting Financial Assets and Financial
Liabilities — Amendments to IAS 32
These amendments clarify the meaning of “currently has
a legally enforceable right to set-off”. The amendments
also clarify the application of the IAS 32 offsetting criteria
to settlement systems (such as central clearing house
systems) which apply gross settlement mechanisms that are
not simultaneous. These amendments are not expected to
impact the Group’s financial position or performance and
become effective for annual periods beginning on or after
1 January 2014.
IFRS 1 Government Loans – Amendments to IFRS 1
These amendments require first-time adopters to apply the
requirements of IAS 20 Accounting for Government Grants
and Disclosure of Government Assistance, prospectively to
government loans existing at the date of transition to IFRS.
Entities may choose to apply the requirements of IFRS 9
(or IAS 39, as applicable) and IAS 20 to government loans
retrospectively if the information needed to do so had been
obtained at the time of initially accounting for that loan.
The exception would give first-time adopters relief from
retrospective measurement of government loans with a
below-market rate of interest. The amendment is effective for
annual periods on or after 1 January 2013. The amendment
has no impact on the Group.
IFRS 7 Disclosures — Offsetting Financial Assets and
Financial Liabilities — Amendments to IFRS 7
These amendments require an entity to disclose information
about rights to set-off and related arrangements (e.g.,
collateral agreements). The disclosures would provide
users with information that is useful in evaluating the
effect of netting arrangements on an entity’s financial
position. The new disclosures are required for all recognised
financial instruments that are set off in accordance with
IAS 32 Financial Instruments: Presentation. The disclosures
also apply to recognised financial instruments that are
subject to an enforceable master netting arrangement or
similar agreement, irrespective of whether they are set off
in accordance with IAS 32. These amendments will not
impact the Group’s financial position or performance and
become effective for annual periods beginning on or after
1 January 2013.
IFRS 9 Financial Instruments: Classification and
Measurement
IFRS 9, as issued, reflects the first phase of the IASB’s work
on the replacement of IAS 39 and applies to classification
and measurement of financial assets and financial liabilities
as defined in IAS 39. The standard was initially effective for
annual periods beginning on or after 1 January 2013, but
Amendments to IFRS 9 Mandatory Effective Date of IFRS
9 and Transition Disclosures, issued in December 2011,
moved the mandatory effective date to 1 January 2015. In
subsequent phases, the IASB will address hedge accounting
and impairment of financial assets. The adoption of the first
phase of IFRS 9 is not expected to have any impact on the
Group.
IFRS 10 Consolidated Financial Statements, IAS 27
Separate Financial Statements
IFRS 10 replaces the portion of IAS 27 Consolidated
and Separate Financial Statements that addresses the
accounting for consolidated financial statements. It also
addresses the issues raised in SIC-12 Consolidation —
Special Purpose Entities. IFRS 10 establishes a single control
model that applies to all entities including special purpose
entities. The changes introduced by IFRS 10 will require
78
management to exercise significant judgement to determine
which entities are controlled and therefore are required to be
consolidated by a parent, compared with the requirements
that were in IAS 27. Based on the preliminary analyses
performed, IFRS 10 is not expected to have any impact on
the currently held investments of the Group. This standard
becomes effective for annual periods beginning on or after 1
January 2013.
IFRS 11 Joint Arrangements
IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-
13 Jointly-controlled Entities — Non-monetary Contributions
by Venturers. IFRS 11 removes the option to account
for jointly controlled entities (JCEs) using proportionate
consolidation. Instead, JCEs that meet the definition of a
joint venture must be accounted for using the equity method
and is not expected to impact the Group.
IFRS 12 Disclosure of Interests in Other Entities
IFRS 12 includes all of the disclosures that were previously
in IAS 27 related to consolidated financial statements, as
well as all of the disclosures that were previously included
in IAS 31 and IAS 28. These disclosures relate to an entity’s
interests in subsidiaries, joint arrangements, associates
and structured entities. This standard becomes effective for
annual periods beginning on or after 1 January 2013 is not
expected to have any impact on the Group.
IFRS 13 Fair Value Measurement
IFRS 13 establishes a single source of guidance under
IFRS for all fair value measurements. IFRS 13 does not
change when an entity is required to use fair value, but
rather provides guidance on how to measure fair value
under IFRS when fair value is required or permitted. This
standard becomes effective for annual periods beginning
on or after 1 January 2013 is not expected to have any
impact on the Group.
IFRIC 20 Stripping Costs in the Production Phase of a
Surface Mine
This interpretation applies to waste removal (stripping) costs
incurred in surface mining activity, during the production
phase of the mine. The interpretation addresses the
accounting for the benefit from the stripping activity. The
interpretation is effective for annual periods beginning on or
after 1 January 2013. The new interpretation will not have an
impact on the Group.
Annual Improvements May 2012
IAS 34 Interim Financial Reporting
The amendment aligns the disclosure requirements for
total segment assets with total segment liabilities in interim
financial statements. This clarification also ensures that
interim disclosures are aligned with annual disclosures.
These improvements are effective for annual periods
beginning on or after 1 January 2013.
The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not
yet effective.
These improvements will not have an impact on the Group,
but include:
Going concern
IFRS 1 First-time Adoption of International Financial
Reporting Standards
This improvement clarifies that an entity that stopped
applying IFRS in the past and chooses, or is required, to
apply IFRS, has the option to re-apply IFRS 1. If IFRS 1 is not
re-applied, an entity must retrospectively restate its financial
statements as if it had never stopped applying IFRS.
IAS 1 Presentation of Financial Statements
This improvement clarifies the difference between voluntary
additional comparative information and the minimum
required comparative information. Generally, the minimum
required comparative information is the previous period.
IAS 16 Property Plant and Equipment
This improvement clarifies that major spare parts and
servicing equipment that meet the definition of property,
plant and equipment are not inventory.
IAS 32 Financial Instruments, Presentation
This improvement clarifies that income taxes arising
from distributions to equity holders are accounted for in
accordance with IAS 12 Income Taxes.
The directors have, at the time of approving the financial
statements, a reasonable expectation that the Company
and the Group have adequate resources to continue in
operational existence for the foreseeable future. Thus, they
continue to adopt the going concern basis of accounting in
preparing the financial statements. Further detail is contained
in the Business Review on page 27.
a) Revenue and income recognition
Revenue, which excludes value added tax (“VAT”),
constitutes the value of services undertaken by the
Group from 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;
79
(“the functional currency”). The consolidated financial
statements are presented in sterling, which is the Company’s
functional and presentation currency.
least 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) Transactions and balances
(ii) Computer software
• revenue from permanent placements is typically 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.
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
c) Gross profit
• all resulting exchange differences are recognised in other
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.
comprehensive income.
e) Intangible assets
(i) Goodwill
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
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 at
80
Computer software acquired or developed by the Group is
stated at cost less accumulated amortisation (see below).
(iii) Software under construction
Software under construction relates to cost capitalised in
relation to the development of a new IT platform. Costs
have been capitalised when they fulfil the criteria in IAS 38
regarding internally developed intangible assets.
Amortisation of the asset will begin when development is
complete and the asset is available for use. It is expected
that this will be in 2013. Amortisation will be expensed over
the period of expected future benefit. Whilst still under
construction, the asset is tested for impairment annually. The
Group has performed the impairment test on the carrying
amount of software under construction and noted no
impairment being necessary at 31 December 2012.
(iv) Trademark
Acquired trademarks are stated at cost and are written down
over five years on a straight line basis, which represents the
estimated useful life of the intangible.
(v) Amortisation
Amortisation is charged to the income statement on
a straight-line basis over the estimated useful lives of
intangible assets unless such lives are indefinite. Goodwill
has an indefinite useful life. Computer software is amortised
at 20% per annum unless it is considered to have a shorter
life, in which case the period of amortisation is reduced.
The cumulative amount of goodwill written off directly
to retained earnings in respect of acquisitions prior to
31 December 1997 is £311.7m (2011: £311.7m).
f) Property, plant and equipment
Property, plant and equipment are stated at original cost
less accumulated depreciation. Depreciation is calculated to
write off the cost less estimated residual value of each asset
evenly over its expected useful life at the following rates:
• Leasehold improvements 10% per annum or period of
lease if shorter
• Furniture, fixtures and equipment 10-20% per annum
• Motor vehicles 25% per annum
g) Investments
Fixed asset investments are stated at cost less provision for
impairment.
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 the income statement.
i) Taxation
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.
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.
Income tax expense represents the sum of the corporation
tax and deferred tax charges. 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 charged or credited to the income statement,
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.
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
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.
81
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.
The Group does not currently have any finance 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
IFRS 8 requires operating segments to be identified on the
basis of internal reports about components of the Group
that are regularly reviewed by the Chief Executive Officer
to allocate resources to the segments and to assess their
performance. Information provided to the Chief Executive
Officer is focused on regions and as a result, reportable
segments are on a regional basis.
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 (for final
dividends) or paid to (for interim dividends) the Company’s
shareholders.
n) Share-based compensation
The Group operates a number of equity-settled, share-based
compensation plans. The accounting treatments for the
Group and parent company are similar and 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 in
the income statement of the Group with a corresponding
adjustment to equity. In the parent company, it is capitalised
as an investment, with a corresponding adjustment to equity.
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. In the parent company, it is capitalised as an
investment, with a corresponding adjustment to equity.
(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 of the Group
on a straight-line basis over the vesting period to which
the award relates. In the parent company, it is capitalised as
an investment, with a corresponding adjustment to equity.
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
Borrowing costs directly attributable to the acquisition,
construction or production of an asset that necessarily takes
a substantial period of time to get ready for its intended use
or sale are capitalised as part of the cost of the asset. All
other borrowing costs are expensed in the period they occur.
Borrowing costs consist of interest and other costs that an
entity incurs in connection with the borrowing of funds. The
Group has not capitalised any borrowing costs in either the
current or preceding years.
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 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.
82
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 derivative contracts at the balance sheet
date that have been valued at fair value through the income
statement.
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.
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
In making its judgement, management considered the
detailed criteria for the recognition of revenue from
permanent placements where a position has been accepted
by a candidate, a start date agreed, but employment has
not yet commenced. A provision is made by management,
based on past historical experience, for the proportion
of those placements where the candidate is expected to
reverse their acceptance prior to the start date.
• Note 12 – intangibles
The Group determines whether goodwill and other intangible
assets are impaired on an annual basis or otherwise when
changes in events or situations indicate that the carrying
value may not be recoverable. This requires an estimation of
the recoverable amount of the cash generating unit to which
the assets are allocated. Estimating the value-in-use requires
the Group to make an estimate of the future cash flows
from the cash-generating unit and also to choose a suitable
discount rate in order to calculate the present value of those
cash flows.
• Note 14 – trade and other receivables
There is uncertainty regarding customers who may not
be able to pay as their invoices fall due. In reviewing the
appropriateness of the provisions in respect of recoverability
of trade receivables, consideration has been given to the
economic climate in the respective markets, the ageing of
the debt and the potential likelihood of default.
• Note 17 – deferred tax
Management has estimated the likely value of deferred tax
assets in respect of trading losses carried forward.
• Note 18 – share-based payments
The Group’s policy for share-based payments is stated
in note 1 (n). The fair value of equity settled share-based
payments is partly derived from estimates of factors such
as lapse rates and achievement of performance criteria. It is
also derived from assumptions such as the future volatility
of the Company’s share price, expected dividend yields and
risk-free interest rates.
t) Exceptional items
Exceptional items are those items the Group considers
to be one-off or material in nature that should be brought
to the reader’s attention in understanding the Group’s
financial performance.
83
2. Segment reporting
All revenues disclosed are derived from external customers.
The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 1. Segment operating profit represents the profit earned by each
segment including allocation of central administration cost. This is the measure reported to the Group’s Chief Executive Officer, the chief operating decision maker, for the purpose of resource
allocation and assessment of segment performance.
(a) Revenue, gross profit and operating profit by reportable segment
Revenue
gross Profit
operating Profit
EMEA
United Kingdom
Asia Pacific
Australia and New Zealand
Asia
Americas
Operating profit
Financial (expense)/income
Revenue/gross profit/profit before tax
2012
£’000
403,223
295,876
119,344
72,853
192,197
2011
£’000
421,240
324,863
106,196
59,862
166,058
2012
£’000
218,382
121,408
51,677
63,177
114,854
2011
£’000
239,581
129,991
50,172
53,179
103,351
Before
exceptional
items 2012
£’000
exceptional
items
2012 (note 4)
£’000
after
exceptional
items 2012
£’000
22,070
15,771
14,164
14,803
28,967
(6,090)
(1,744)
–
–
–
–
15,980
14,027
14,164
14,803
28,967
2011
£’000
31,676
18,317
11,453
14,702
26,155
98,586
106,926
72,225
80,858
(1,687)
(1,687)
9,887
–
–
989,882
–
–
1,019,087
–
–
526,869
–
–
553,781
65,121
(284)
64,837
(7,834)
–
(7,834)
57,287
(284)
57,003
86,035
112
86,147
The above analysis by destination is not materially different to the analysis by origin.
The analysis opposite is of the carrying amount of reportable segment assets, liabilities and non-current assets. 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 reportable segments exclude income tax assets and liabilities. Non-current assets include property, plant and equipment, computer software, goodwill and other intangibles.
84
(b) Segment assets, liabilities and non-current assets by reportable segment
EMEA
United Kingdom
Asia Pacific
Australia and New Zealand
Asia
Americas
Segment assets/liabilities
Income tax
EMEA
United Kingdom
Asia Pacific
Australia and New Zealand
Asia
Americas
total assets
total liabilities
2012
£’000
125,560
104,392
26,842
43,159
70,001
38,835
338,788
6,970
345,758
2011
£’000
131,772
106,455
28,323
37,299
65,622
40,940
344,789
3,980
348,769
2012
£’000
70,596
48,414
11,809
9,182
20,991
11,757
151,758
12,612
164,370
2011
£’000
71,687
51,100
11,855
9,411
21,266
12,527
156,580
11,591
168,171
Property, Plant and equipment
2011
£’000
2012
£’000
9,034
7,968
1,454
2,599
4,053
7,858
28,913
10,396
9,680
1,594
2,648
4,242
8,892
33,210
intangible assets
2012
£’000
495
42,712
100
116
216
674
44,097
2011
£’000
669
38,187
168
105
273
615
39,744
85
The analyses below in notes (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 IFRS 8 “Operating Segments”.
(c) Revenue and gross profit by discipline
Revenue
gross Profit
2012
£’000
465,378
219,980
177,883
126,641
989,882
2011
£’000
521,380
205,184
164,656
127,867
1,019,087
2012
£’000
220,561
106,422
102,817
97,069
526,869
2011
£’000
248,028
105,575
101,291
98,887
553,781
Revenue
gross Profit
2012
£’000
422,005
567,877
989,882
2011
£’000
453,105
565,982
1,019,087
2012
£’000
409,660
117,209
526,869
2011
£’000
438,382
115,399
553,781
Finance and Accounting
Legal, Technology, HR, Secretarial and Other
Engineering, Property & Construction, Procurement & Supply Chain
Marketing, Sales and Retail
(d) Revenue and gross profit generated from permanent and temporary placements
Permanent
Temporary
86
3. Profit for the year
Profit for the year is stated after charging/(crediting):
Employment costs (Note 4)
Net exchange losses
Depreciation of property, plant and equipment – owned
Amortisation of intangibles
Impairment of trade receivables
(Profit)/loss on sale of property, plant and equipment and computer software
Fees payable to the company’s auditor for the audit of the company’s annual accounts
Fees payable to the company’s auditor and associates for other services:
– The audit of the company’s subsidiaries pursuant to legislation
– Audit related assurance services
total audit fees
– Tax compliance services
– Tax advisory services
– Other assurance services
total non-audit fees
total fees
Operating lease rentals – Land and buildings
– Plant and machinery
4. Employee information
2012
£’000
321,010
439
10,549
4,538
5,620
5
114
341
32
487
37
298
–
335
822
28,596
5,563
2011
£’000
328,502
107
10,524
1,133
8,148
(22)
54
319
32
405
20
240
10
270
675
28,126
4,647
The average number of employees (including Executive Directors) during the year and total number of employees (including Executive Directors) at 31 December 2012 were as follows:
Management
Client services
Administration
2012 average no.
237
2011 average no.
216
3,519
1,527
5,283
3,456
1,388
5,060
2012 no.
261
3,364
1,474
5,099
2011 no.
227
3,570
1,489
5,286
87
Employment costs (including Directors’ emoluments) comprised:
Wages and salaries
Social security costs
Pension costs – defined contribution plans
Share-based payments and deferred cash plan
2012
£’000
261,152
34,129
12,763
12,966
321,010
2011
£’000
268,177
35,272
11,767
13,286
328,502
Details of Directors’ remuneration for the year are provided in the Directors’ Remuneration Report on pages 54 to 67.
No staff are employed by the parent company (2011: none) hence no remuneration has been disclosed. Remuneration for Directors for their services on behalf of the parent company are
included in the Director’s Remuneration Report on pages 54 to 67.
5. Exceptional items
During the first half of 2012, we restructured the Group’s regional management structure, which resulted in the removal of the Continental Europe and Americas regional management team,
including one Executive Director. Severance packages for this team, who had been employed by the Group for many years and were largely based in France, with accompanying high
employment protection and social charges, totalled £7.8m within which are £1.5m of share plan related charges which have been accelerated to their date of departure.
6. Financial income/(expenses)
financial income
Bank interest receivable
financial expenses
Bank interest payable
88
2012
£’000
907
(1,191)
2011
£’000
953
(841)
7. Taxation on profits on ordinary activities
The charge for taxation is based on the effective annual tax rate of 36.5% on profit before tax (2011: 34.0%).
Analysis of charge in the year
UK income tax at 24.5% (2011: 26.5%) for year
Adjustments in respect of prior year
Overseas income tax
Deferred tax expense
Adjustment in respect of prior year
Origination and reversal of temporary differences
(Benefit)/charge of tax losses recognised
Deferred tax (income)/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 overseas losses
Higher tax rates on overseas earnings
Movement of rate difference
Adjustment to tax charge in respect of prior periods
Tax expense and effective rate for the year
2012
£’000
8,045
35
13,507
21,587
354
509
(1,644)
(781)
20,806
%
24.5
3.1
2.2
(0.4)
(0.4)
6.8
(0.1)
0.8
36.5
2012
£’000
57,003
13,965
1,786
1,244
(207)
(209)
3,897
(59)
389
20,806
2011
£’000
86,147
22,829
3,336
1,312
(370)
(1,032)
4,526
218
(1,529)
29,290
2011
£’000
9,383
(1,840)
21,682
29,225
311
(393)
147
65
29,290
%
26.5
3.9
1.5
(0.4)
(1.2)
5.2
0.3
(1.8)
34.0
89
tax recognised directly in equity
Relating to equity settled transactions
8. Current tax assets and liabilities
2012
£’000
(1,309)
2011
£’000
(5,774)
The current tax asset of £7.0m (2011: £4.0m), and current tax liability of £12.6m (2011: £11.6m) for the Group, and current tax asset and liability of £nil (2011: £nil) for the parent company,
represent the amount of income taxes recoverable and payable in respect of current and prior periods.
9. Dividends
amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 December 2011 of 6.75p per ordinary share (2010: 6.12p)
Interim dividend for the year ended 31 December 2012 of 3.25p per ordinary share (2011: 3.25p)
amounts proposed as distributions to equity holders in the year:
Proposed final dividend for the year ended 31 December 2012 of 6.75p per ordinary share (2011: 6.75p)
2012
£’000
20,779
9,855
30,634
20,503
2011
£’000
18,739
9,772
28,511
20,458
The proposed final dividend had not been approved by shareholders at 31 December 2012 and therefore has not been included as a liability. The comparative final dividend at 31 December
2011 was also not recognised as a liability in the prior year.
The proposed final dividend of 6.75p (2011: 6.75p) per ordinary share will be paid on 21 June 2013 to shareholders on the register at the close of business on 24 May 2013, 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.
90
10. 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)
Exceptional items (£’000) (note 5)
earnings for basic and diluted earnings per share before exceptional items (£’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)
Basic earnings per share before exceptional items (pence)
Diluted earnings per share before exceptional items (pence)
The above results relate to continuing operations.
Basic
2012
36,197
5,308
41,505
305,345
3,136
308,481
11.9
11.7
13.6
13.5
2011
56,857
–
56,857
304,458
7,941
312,399
18.7
18.2
18.7
18.2
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.
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.
91
11. Property, plant and equipment
group
cost
At 1 January
Additions
Disposals
Effect of movements in foreign exchange
At 31 December
Depreciation
At 1 January
Charge for the year
Disposals
Effect of movements in foreign exchange
At 31 December
net book value
At 31 December
2012
2011
leasehold
improvements
£’000
furniture,
fixtures and
equipment
£’000
motor vehicles
£’000
total
£’000
leasehold
improvements
£’000
furniture,
fixtures and
equipment
£’000
motor vehicles
£’000
total
£’000
35,158
2,421
(1,393)
(1,202)
34,984
20,041
4,280
(1,419)
(596)
22,306
50,415
3,932
(2,081)
(1,636)
50,630
33,927
5,513
(2,101)
(993)
36,346
2,585
1,566
(889)
(133)
3,129
980
756
(510)
(48)
1,178
88,158
7,919
(4,363)
(2,971)
88,743
54,948
10,549
(4,030)
(1,637)
59,830
29,794
7,824
(1,723)
(737)
35,158
17,797
4,249
(1,727)
(278)
20,041
45,135
7,259
(1,137)
(842)
50,415
29,777
5,686
(1,084)
(452)
33,927
2,162
1,236
(753)
(60)
2,585
991
589
(576)
(24)
980
77,091
16,319
(3,613)
(1,639)
88,158
48,565
10,524
(3,387)
(754)
54,948
12,678
14,284
1,951
28,913
15,117
16,488
1,605
33,210
92
12. Intangible assets
group
cost
At 1 January
Additions
Disposals
Transfers
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
2012
2011
computer
software,
assets under
construction
£’000
computer
software
£’000
goodwill
£’000
trademark
£’000
total
£’000
computer
software,
assets under
construction
£’000
computer
software
£’000
goodwill
£’000
trademark
£’000
total
£’000
10,845
3,038
(79)
3,153
(332)
16,625
8,541
4,427
(38)
(258)
12,672
35,435
5,777
–
(3,153)
(6)
38,053
–
–
–
–
–
1,539
–
–
–
–
1,539
–
–
–
–
–
549
197
–
–
–
746
83
111
–
–
194
48,368
9,012
(79)
–
(338)
56,963
8,624
4,538
(38)
(258)
12,866
9,766
1,354
(99)
–
(176)
23,986
11,422
–
–
27
10,845
35,435
7,717
1,050
(110)
(116)
8,541
–
–
–
–
–
1,539
–
–
–
–
1,539
–
–
–
–
–
–
549
–
–
–
549
–
83
–
–
83
35,291
13,325
(99)
–
(149)
48,368
7,717
1,133
(110)
(116)
8,624
3,953
38,053
1,539
552
44,097
2,304
35,435
1,539
466
39,744
Impairment tests for goodwill
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
2012
£’000
1,274
214
51
1,539
2011
£’000
1,274
214
51
1,539
93
In assessing value in use, the estimated future cash flows are calculated by preparing cash flow forecasts derived from the most recent financial budget, management projections for five
years, followed by an assumed growth rate of 3%, which does not exceed the long-term average growth rate of the relevant markets and reflects long-term wage inflation fee growth.
Management applied a discount rate of 10%, representing the weighted average cost of capital for the Group, to the estimated future cash flows to calculate the terminal value of those
cash flows. 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. Management believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of goodwill allocated to any
CGU to materially exceed its recoverable amount.
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. It is the opinion of the Directors that at 31 December 2012 there
was no impairment of goodwill.
Impairment tests for computer software, assets under construction
The Group tests computer software, assets under construction annually for impairment, or more frequently if there are indications that computer software, assets under construction might
be impaired. It is the opinion of the Directors that at 31 December 2012 there was no impairment of computer software, assets under construction.
13. Investments
company
Cost at 1 January 2012
Additions
Cost at 31 December 2012
subsidiary undertakings
£’000
478,791
14,753
493,544
The additions in the year represent investment in Michael Page International Inc and a credit to the share schemes for subsidiaries employees. The Company’s principal subsidiary
undertakings at 31 December 2012, their principal activities and countries of incorporation are set out below:
Name of undertaking
Michael Page International Argentina SA
Michael Page International (Australia) Pty Limited
Michael Page International GmbH
Michael Page International (Belgium) NV/SA
Page Interim (Belgium) NV/SA
Michael Page International (Brasil) SC Ltd
Page Personnel Recruit. Especializ. E Servs. Corpor. Ltda
Michael Page International Canada Limited
Michael Page International Chile Ltda
94
Country of incorporation
Principal activity
Argentina
Australia
Austria
Belgium
Belgium
Brazil
Brazil
Canada
Chile
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Name of undertaking
Michael Page (Beijing) Recruitment Co. Ltd
Michael Page (Shanghai) Recruitment Co. Ltd
Michael Page International (Shanghai) Consulting Ltd
Michael Page International Colombia SAS
Michael Page International (France) SAS
Michael Page Financial Services SAS
Page Personnel SAS
Michael Page International (Deutschland) GmbH
Page Interim (Deutschland) GmbH
Michael Page International (Hong Kong) Limited
Michael Page International Recruitment Pvt Ltd
Michael Page International (Ireland) Limited
Michael Page International Italia Srl
Page Personnel Italia SpA
Michael Page International (Japan) K.K.
Michael Page International (Malaysia) Sdn Bhd
Michael Page International Mexico Reclutamiento Especializado, S.A. de C.V.
Michael Page International (Maroc) SARL AU
Michael Page International (Nederland) BV
Page Interim BV
Michael Page International (New Zealand) Limited.
Michael Page International (Poland) Sp.z.o.o
Michael Page International Empressa de Trabalho Temporário e Serviços de Consultadoria Lda
Michael Page International Qatar
Michael Page International RU LLC
Michael Page International Pte Limited*
Michael Page International (SA) (Pty) Limited
Michael Page International (España) SA
Michael Page Holding (España) SL
Page Personnel Seleccion España SA
Michael Page International (Sweden) AB
Michael Page International (Switzerland) SA
Michael Page International NEM Istihdam Danismanligi Limited Sirketi
Country of incorporation
Principal activity
China
China
China
Colombia
France
France
France
Germany
Germany
Hong Kong
India
Ireland
Italy
Italy
Japan
Malaysia
Mexico
Morocco
Netherlands
Netherlands
New Zealand
Poland
Portugal
Qatar
Russia
Singapore
South Africa
Spain
Spain
Spain
Sweden
Switzerland
Turkey
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
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
Holding company
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
95
Name of undertaking
Michael Page International (UAE) Limited
Michael Page Holdings Limited
Michael Page International Holdings Limited
Michael Page International Recruitment Limited*
Michael Page International Southern Europe Limited*
Michael Page UK Limited
Michael Page Limited
Page Personnel (UK) Limited
Michael Page Recruitment Group Limited
Michael Page International Inc*
Country of incorporation
Principal activity
United Arab Emirates
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United States
Recruitment consultancy
Support services
Holding company
Recruitment consultancy
Holding company
Recruitment consultancy
Recruitment consultancy
Recruitment consultancy
Holding company
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.
14. 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
group
company
2012
£’000
148,438
(6,732)
141,706
–
4,653
36,148
182,507
2011
£’000
164,072
(7,093)
156,979
–
4,566
34,910
196,455
2012
£’000
–
–
–
511,734
–
65
511,799
2011
£’000
–
–
–
485,862
–
9
485,871
3,310
2,612
–
–
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 22.
96
15. 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
2012
£’000
9,605
–
39,709
16,679
71,920
820
138,733
2,653
126
2,779
2011
£’000
8,664
–
44,415
22,612
71,115
607
147,413
2,515
170
2,685
2012
£’000
–
622,085
–
–
–
–
622,085
–
–
–
2011
£’000
–
564,162
–
–
11
–
564,173
–
–
–
The fair values of trade and other payables are not materially different to those disclosed above. There is no material effect on pre-tax profit if the instruments are accounted for at fair value
or amortised cost.
The total liability relating to other tax and social security includes a balance of £1.3m (2011: £2.2m) 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 22.
16. Bank overdrafts
Bank overdrafts
The carrying amounts of the Group’s borrowings are denominated in sterling.
Bank overdrafts are repayable on demand.
group
company
2012
£’000
9,396
2011
£’000
6,249
2012
£’000
–
2011
£’000
–
The Group has a £10m committed overdraft facility with Deutsche Bank. All other bank overdrafts and facilities are repayable on demand.
At 31 December 2012, the Group had available £10m (2011: £37.5m) of undrawn committed borrowing facilities with Deutsche Bank and £23.8m of undrawn borrowing facilities under the
Invoice Discounting arrangement with HSBC. All conditions precedent on each of these facilities had been met.
The Group’s exposure to interest rate, foreign currency and liquidity risk for financial assets and liabilities is disclosed in Note 22.
97
17. Deferred tax
The following are the major deferred tax (assets)/liabilities recognised by the Group, and the movements thereon, during the current and prior reporting periods.
at 1 January 2011
Recognised in equity for the year
Recognised in profit or loss for the year
Reserve
Exchange differences
at 1 January 2012
Recognised in equity for the year
Recognised in profit or loss for the year
Exchange differences
at 31 December 2012
share-based
payments
£’000
tax losses
£’000
(6,952)
3,322
392
467
–
(2,771)
330
926
–
(1,515)
(917)
–
(623)
–
4
(1,536)
–
(1,637)
–
(3,173)
other
£’000
(4,208)
–
267
–
130
(3,811)
–
(70)
227
(3,654)
total
£’000
(12,077)
3,322
36
467
134
(8,118)
330
(781)
227
(8,342)
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
2012
£’000
(9,192)
850
(8,342)
2011
£’000
(8,351)
233
(8,118)
At 31 December 2012, unremitted earnings of overseas Group companies amounted to £88.6m (2011: £80.7m). Unremitted earnings may be liable to some overseas tax, but should not be
liable to UK tax if they were to be distributed as dividends.
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 £8.1m (2011: £20.7m) in respect of tax losses of overseas companies. These tax losses are available to offset future taxable profits in the respective jurisdictions.
All of the deferred tax asset for losses of £3.2m is dependent on generating future taxable profits. Of the recognised deferred tax asset, £1.5m is recognised within territories that were loss
making in the current year.
98
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
Share Option Plans
2012
2011
£’000
number of shares
£’000
number of shares
5,713
571,250,000
5,713
571,250,000
3,167
11
–
3,178
316,678,415
1,071,660
–
317,750,075
3,216
8
(57)
3,167
321,590,147
789,366
(5,701,068)
316,678,415
The Group has share option awards currently outstanding under an Executive share option scheme (ESOS) and a share option scheme (SOS). These plans are described opposite.
At 31 December 2012 the following options had been granted and remained outstanding in respect of the Company’s ordinary shares of 1p under both the Michael Page Executive Share
Option Scheme and the 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.
99
Year of grant
2002 (Note 1)*
2002 (Note 1)*
2003 (Note 1)*
2004 (Note 1)*
2005 (Note 1)*
2006 (Note 1)*
2008 (Note 1)
2009 (Note 2)
2010 (Note 1)
2011 (Note 2)
2012 (Note 2)
total 2012
Balance at
1 January 2012 granted in year
exercised in
year
lapsed in
year
no. of options
outstanding at 31
December 2012
Base ePs/
oP range†
exercise price per
share
exercise period
30,000
29,800
115,300
221,500
406,619
507,585
431,000
6,069,167
11,041,583
4,052,278
–
22,904,832
–
–
–
–
–
–
–
–
–
–
(30,000)
(29,800)
(115,300)
(116,322)
(147,730)
(259,918)
–
(2,549,856)
(398,470)
–
–
–
–
–
–
–
(431,000)
(104,985)
(296,888)
(309,958)
–
–
–
105,178
258,889
247,667
–
10.6
5.8
5.8
4.1
7.5
15.5
30.4
186p
186p
march 2005 – march 2012
march 2006 – march 2012
81.5p-86.1p
april 2006 – april 2013
171p-190.3p
march 2007 – march 2014
190.75p-191.5p
march 2008 – march 2015
309.9p
march 2009 – march 2016
255.94p-285p
march 2011 – march 2018
3,414,326
oP range
187.5p-211.84p
march 2012 – march 2019
10,346,225
6.6
381.5p-383.0p
march 2013 – march 2020
3,742,320
oP range
491.0p-492.9p
march 2014 – march 2021
4,961,000
4,961,000
–
(3,647,396)
(272,440)
(1,415,271)
4,688,560
22,803,165
oP range
477.0p
march 2015 – march 2022
Weighted average exercise price 2012 (£)
3.39
4.77
2.14
3.70
3.85
total 2011
23,096,716
4,127,000
(860,308)
(3,458,576)
22,904,832
Weighted average exercise price 2011 (£)
2.98
4.91
2.02
2.80
3.39
*These options have fully vested
†The Operating Profit ranges for each award are fully disclosed in Note 2 of this Note.
3,191,075 options were exercisable at the end of 2012 at a weighted average exercise price of £2.02 (2011: £2.24). The weighted average share price at the date of exercise was £4.48.
100
Share Option valuation and measurement
In 2012, options were granted on 11 March with the
estimated fair value of the options granted on that day
of £1.38. In 2011, options were granted on 11 March.
The estimated fair values of the options granted on that
date was £1.28.
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.
Note 1
Executive Share Option Scheme (ESOS)
Using the ESOS, awards of share options can be made
to key management personnel and senior employees to
receive shares in PageGroup. Share options are exercisable
at the market price of the shares at the date of the grant.
No awards were made under the ESOS scheme in 2009,
2011 or 2012.
For grants under the ESOS plan, the performance condition
is tested on the third anniversary and no retesting will
occur thereafter. These options were granted subject to a
performance condition requiring that an option may only
be exercised, in normal circumstances, if there has been
an increase in base earnings per share of at least 3% per
annum above the growth in the UK Retail Price Index. The
respective base earnings per share for each grant are shown
in the table on page 100.
For the 2010 share option grant for Executive Directors only,
the vesting of awards will be subject to profit before tax
performance conditions measured over a three year period.
Vesting will occur on a phased basis, with 30% of the award
vesting for threshold performance, increasing on a straight
line basis to 100% of the award for maximum performance.
Share Option Scheme (SOS)
Note 2
Executive Directors of the Company are not eligible
to participate in this scheme. Any exercises of awards
made under this plan must be settled by market
purchased shares.
This new scheme was created in 2009 to provide an
effective plan under which to grant awards in 2009. It was
the Board’s view that grants made under the existing ESOS
plan, which would have required an increase over the 2008
base earnings per share of at least 3% per annum above
the growth in the UK Retail Price Index by 2011, would not
be achievable due to the impact of the global downturn on
the Group’s EPS and thus would not provide the required
retention incentive.
The 2009 grant made under the SOS plan is subject to a
performance condition that will be tested, initially, three
years after the date of grant and then annually until either
the entire grant has vested, or ten years from the date of the
award have elapsed, in which case any awards outstanding
under the grant will lapse. The performance condition is
directly linked to the Group’s Operating Profit. If Operating
Profit is £30m then 30% of the award would vest. For every
£1m of Operating Profit over £30m, a further 1% would
vest. 100% of the award would vest if Operating Profit
was £100m.
As the Group’s 2011 Operating Profit was £86.0m, 86%
of this award vested on 10 March 2012. The remaining
14% was retested in March 2013, but with 2012 Operating
Profit at £65.1m being lower than in 2011, no additional
options vested.
Further grants under the SOS plan were made in 2011 and
2012. The performance conditions for these grants are also
directly linked to the Group’s Operating Profit.
For the 2011 grant, if Operating Profit is in excess of
£100m, 1% of the award will vest for every additional £1m
of Operating Profit achieved, up to a maximum of 100% at
Operating Profit of £200m or more.
For the 2012 grant, if Operating Profit is in excess of £50m,
a proportion of the award equivalent to the amount of
Operating Profit achieved will vest up to a maximum of
100% if the Operating Profit is £100m or more.
101
Share Option valuation and measurement
The options outstanding at 31 December 2012 have an exercise price in the range of 171.0 pence to 492.9 pence and a weighted average contractual life of 7.5 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 Plans
2012
4.77
4.77
1.38
40%
5 years
0.87%
2.10%
2011
4.91
4.91
1.28
31%
5 years
2.84%
1.83%
incentive share scheme
2011
2012
Deferred Bonus shares
2011
2012
4.77
nil
4.47
40%
3 years
0.73%
nil
4.91
nil
4.65
31%
3 years
2.84%
nil
4.77
nil
4.56
40%
2 years
0.50%
nil
4.91
nil
4.73
31%
2 years
2.84%
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 £13.2m (2011: £12.7m) related to equity-settled share-based payment transactions during the year.
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 61, 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 proceeds over the nominal value for all share issues, including the excess of the exercise share price over the
nominal value of the shares on the exercise of share options.
Capital redemption reserve
The movement in the capital redemption reserve relates to the cancellation of the Company’s own shares.
102
Reserve for shares held in the employee benefit trust
At 31 December 2012, the reserve for shares held in the employee benefit trust consisted of 15,715,157 ordinary shares (2011: 16,739,896 ordinary shares) held for the purpose of satisfying
awards made under the Incentive Share Plan, the Annual Bonus Plan and the Share Option Scheme (SOS), representing 4.9% of the called-up share capital with a market value of £62.1m
(2011: £58.4m).
There are 13,768,635 of these shares held in the trust on which dividends are waived.
Currency translation reserve
Since first-time adoption of the International Financial Reporting Standards, the currency translation reserve comprises all foreign exchange differences arising from the translation of the
financial statements of foreign operations that are integral to the operations of the Company.
20. Cash flows from operating activities
Profit before tax
Exceptional items
Profit before tax and exceptional items
Depreciation and amortisation charges
Loss/(profit) on sale of property, plant and equipment, and computer software
Share scheme charges
Net finance costs/(income)
operating cash flow before changes in working capital and exceptional items
Decrease/(increase) in receivables
(Decrease)/increase in payables
cash generated from underlying operations
note
5
group
company
2012
£’000
57,003
7,834
64,837
15,073
5
11,884
284
92,083
7,454
(5,066)
94,471
2011
£’000
86,147
–
86,147
11,657
(22)
12,732
(112)
110,402
(32,688)
25,611
103,325
2012
£’000
11,686
–
11,686
–
–
–
8
11,694
(21,125)
57,913
48,482
2011
£’000
20,663
–
20,663
–
–
–
(10)
20,653
(14,927)
53,341
59,067
103
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
net funds
group
company
2012
£’000
62,431
8,338
70,769
(9,396)
61,373
61,373
2011
£’000
57,758
6,659
64,417
(6,249)
58,168
58,168
2012
£’000
2011
£’000
20
–
20
–
20
20
23
–
23
–
23
23
The Group operates a multi-currency notional cash pool. 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.
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.
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.
104
(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. 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 31 December 2012 amounted to £141.7m (2011: £157.0m).
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 150 days because historical experience is such that receivables past due beyond 150 days are generally
not recoverable. Trade receivables below 150 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 receivables balance are debtors with a carrying amount of £58.6m (2011: £69.6m) 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 58 days in excess of the initial credit
period (2011: 51 days).
The ageing 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 trade
receivables 2012
(£’000)
Provision 2012
(£’000)
gross trade
receivables 2011
(£’000)
Provision 2011
(£’000)
83,890
41,157
17,930
5,461
148,438
779
215
586
5,152
6,732
88,099
47,951
22,680
5,342
164,072
721
35
995
5,342
7,093
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 3% 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, ageing profile, maturity and existence of previous financial difficulties.
105
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
2012
£’000
7,093
5,620
(1,644)
(2,237)
(2,100)
6,732
2011
£’000
6,397
8,148
(1,086)
(3,611)
(2,755)
7,093
The majority of the allowance for doubtful debts are individually impaired trade receivables with a balance of £1.6m (2011: £3.5m) which have been placed in litigation, as well as a further
provision for debts more than 150 days past their due date.
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
106
carrying amount
2012
£’000
71,741
33,262
23,613
13,090
141,706
2011
£’000
78,694
40,965
23,514
13,806
156,979
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
2012
£’000
1,363
10,184
10,244
4,301
26,092
2011
£’000
1,265
9,925
8,755
5,541
25,486
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 and in note 14. There is no material
effect on pre-tax profit if the instruments are accounted for at fair value or amortised cost.
(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.
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.
107
The following are the contractual maturities of financial liabilities:
2012
Trade payables
Accruals and other payables
Bank overdraft
2011
Trade payables
Accruals and other payables
Bank overdraft
less than
1 month
£’000
6,162
40,386
9,396
less than
1 month
£’000
6,038
48,445
6,249
1-3 months
£’000
3-12 months
£’000
2,950
39,653
–
493
29,410
–
1-3 months
£’000
3-12 months
£’000
2,048
30,960
–
578
33,919
–
more than
12 months
£’000
–
2,779
–
more than
12 months
£’000
–
2,685
–
Capital is equity attributable to the equity holders of the parent. The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy
capital ratios to support its business and maximise shareholder value. The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To
maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders through share repurchases with subsequent cancellation,
or issue new shares. No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December 2012 and 31 December 2011.
(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 page 110. 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 Business Review.
108
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 Group’s only interest bearing assets and liabilities at 31 December 2012 relate to cash and bank overdrafts.
The average interest rate paid on bank overdrafts was 2.02% (2011: 1.91%).
Currency rate risk
The Group publishes its results in Pounds Sterling and conducts its business in many foreign currencies. As a result, the Group is subject to foreign currency exchange risk due to exchange
rate movements. The Group is exposed to foreign currency exchange risk as a result of transactions in currencies other than the functional currencies of some of its subsidiaries and the
translation of the results and underlying net assets of 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 Company 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.
All derivative financial instruments not in a hedge relationship are classified as derivatives at fair value through the income statement. The group does not use derivatives for speculative
purposes. All transactions in derivative financial instruments are undertaken to manage the risks arising from underlying business activities.
Information on the fair value of derivative financial instruments held at the balance sheet date is shown in the table below. Derivatives are disclosed within cash on the face of the
balance sheet.
Derivative financial instruments
Derivative Assets
Derivative Liabilities
Net Derivative (Liabilities)/Assets
Sensitivity analysis – currency risk
contract amounts
Derivatives at fair value
2012
£m
40.7
(40.7)
–
2011
£m
49.1
(49.1)
–
2012
£m
40.6
(40.6)
–
2011
£m
49.1
(49.8)
(0.7)
A 10% strengthening of Sterling against the following currencies at 31 December would have increased/(decreased) equity and profit or loss by the amounts shown on page 110. 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 2011.
109
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.
Euro
Australian Dollar
Swiss Franc
Hong Kong Dollar
Brazilian Real
United States Dollar
Chinese Renminbi
Japanese Yen
Other
Euro
Australian Dollar
Hong Kong Dollar
Swiss Franc
Brazilian Real
United States Dollar
Other
2012 equity
£’000
(3,361)
(1,988)
(1,948)
(754)
(1,194)
764
(618)
(671)
(1,556)
2011 equity
£’000
(3,291)
(1,833)
(1,800)
(711)
(1,572)
578
(3,025)
PBt
£’000
457
(477)
(464)
(83)
68
1,241
(221)
(165)
(167)
PBt
£’000
185
(324)
(381)
(114)
(676)
859
(1,382)
A 10 percent weakening of sterling against the above currencies at 31 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.
110
23. Commitments
Operating lease commitments
At 31 December 2012 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
2012
£’000
4,423
51,547
28,301
84,271
2011
£’000
4,042
60,085
29,853
93,980
2012
£’000
617
6,509
–
7,126
2011
£’000
553
7,386
–
7,939
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 varying notice for the termination of these agreements.
Capital commitments
The Group had contractual capital commitments of £0.5m as at 31 December 2012 relating to property, plant and equipment (2011: £1.1m). The Group had contractual capital commitments
of £2.3m as at 31 December 2012 relating to computer software (2011: £5.3m).
24. Contingent liabilities
The Company has provided guarantees to other Group undertakings amounting to £78k (2011: £80k) in the ordinary course of business. It is not anticipated that any material liabilities will
arise from the contingent liabilities.
VAT group registration
As a result of group registration for VAT purposes, the Company is contingently liable for VAT liabilities arising in other companies within the VAT group which at 31 December 2012
amounted to £4.7m (2011: £5.5m).
25. Events after the balance sheet date
Between 31 December 2012 and 4 March 2013, 306,000 options were exercised, leading to an increase in share capital of £3,060 and an increase in share premium of £1,156,200.
111
26. Related party transactions
Identity of related parties
The Company has a related party relationship with its Directors and members of the Executive Board, and subsidiaries (Note 13).
Transactions with key management personnel
Key management personnel are deemed to be the Directors and members of the Executive Board as detailed in the biographies on pages 30-31. 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 54 to 67. Over and above these transactions, equity settled transactions for the year were £1.7m (2011: £2.2m). Transactions with the remaining members of
the Executive Board are disclosed below:
Related party transactions
Short-term employee benefits
Pension costs – defined contribution plans
2012
£’000
4,817
125
2011
£’000
3,413
139
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, summaries of which are given in Note 1.
Company
Transactions between the Company 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
2011
£’000
amounts owed by related parties
2011
£’000
2012
£’000
amounts owed to related parties
2011
£’000
2012
£’000
20,654
511,734
485,862
622,085
564,162
2012
£’000
11,695
Transactions
112
five YeaR summaRY
Revenue
Gross profit
Operating profit before exceptional items
Operating profit after exceptional items
Profit before tax
Profit attributable to equity holders
Conversion†
Basic earnings per share (pence)
*Includes exceptional items.
†Operating profit before exceptional items as a percentage of gross profit.
2008
£’000
972,782
552,702
140,501
140,501
140,056
97,339
25.4%
30.3
2009
£’000
716,722
351,694
20,203
20,203
21,068
12,430
5.7%
3.9
2010
£’000
832,296
442,207
71,527
88,652*
100,656*
67,484*
20.0%*
21.6*
2011
£’000
1,019,087
553,781
86,035
86,035
86,147
56,857
15.5%
18.7
2012
£’000
989,882
526,869
65,121
57,287*
57,003*
36,197*
12.4%
12.4
113
shaReholDeR infoRmation anD aDviseRs
Annual General Meeting
To be held on 6 June 2013 at 12.00 noon at Page
House, The Bourne Business Park, 1 Dashwood Lang
Road, Addlestone, Weybridge, Surrey, KT15 2QW. Every
shareholder is entitled to attend and vote at the meeting.
Solicitors
Herbert Smith LLP
Exchange House
Primrose Street
London EC2A 2HS
Final dividend for the year ended 31 December 2012
Registrars
Key dates
22 May 2013
Ex-Dividend date
24 May 2013
Record date
Annual General Meeting
6 June 2013
Payment of proposed final ordinary dividend 21 June 2013
13 August 2013
Interim results announcement
To be paid (if approved) on 21 June 2013 to shareholders
on the register on 24 May 2013.
Company Secretary
Kelvin Stagg
Company number
3310225
Registered office, domicile and legal form
The Company is a limited liability company incorporated
and domiciled within the United Kingdom.
The address of its registered office is:
Page House,
The Bourne Business Park,
1 Dashwood Lang Road,
Addlestone,
Weybridge,
Surrey KT15 2QW.
Tel: 01932 264144
Fax: 01932 264297
Auditor
Ernst & Young LLP
1 More London Place
London SE1 2AF
114
Capita Registrars Ltd
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Joint corporate brokers
Citigroup
33 Canada Square
Canary Wharf
London E14 5LB
Deutsche Bank
Winchester House
1 Great Winchester Street
London EC2N 2DB
Bankers
HSBC Bank plc
West End Business
Banking Centre
70 Pall Mall
London SW1Y 5GZ
Deutsche Bank Netherlands N.V.
De Entree 99
1101 HE Amsterdam
The Netherlands
aRticles of association
The following summarises certain provisions of the
Company’s Articles of Association (as adopted on 21 May
2010) and applicable English Law. The summary is qualified
in its entirety by reference to the Companies Act 2006 of
Great Britain (the “Act”), as amended, and the Company’s
Articles of Association.
Under the Act, the Memorandum of Association of the
Company has now become a document of record, and no
longer contains any operative provisions.
Incorporation
The Company is incorporated under the name Michael Page
International plc and is registered in England and Wales with
registered number 3310225.
Share capital
The Act abolished the concept of, and requirement for a
company to have, an authorised share capital. As such, the
Company no longer has an authorised share capital.
Alteration of capital
The Company may from time to time by ordinary resolution:
(a) consolidate and divide all or any of its share capital into
shares of larger amount than its existing shares;
(b) sub-divide its shares, or any of them, into shares of a
smaller amount than its existing shares; and
(c) 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.
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 16 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
all general meetings (which shall be called extraordinary
general meetings) shall be called by at least 21 clear days’
notice. Subject to the provisions of the Act, the Company
may resolve to reduce the notice period for general
meetings (other than annual general meetings) to 14 days
on an annual basis. The Company proposes to renew its
authority to hold general meetings on 14 days’ notice for
another year in item 17 of the Annual General Meeting
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 and every duly appointed proxy present shall
have one vote. Every corporate representative present who
has been duly authorised by a corporation has the same
voting rights as the corporation would be entitled to. On a
poll every member present in person or by a duly appointed
proxy or corporate representative shall have one vote for
every share of which he is a holder or in respect of which his
appointment as proxy or corporate representative has been
made. 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 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 conferred 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 member is entitled to appoint another person
as his proxy to exercise all or any of his rights to attend and
speak and vote at a meeting of the Company. 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
If at any time the capital of the Company is divided into
different classes of shares, the rights attached to any class
may be varied either:
(a) in such manner (if any) as may be provided by those
rights; or
115
(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 (excluding any shares of
that class held as treasury shares) or with the sanction of
a special 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 (excluding
any shares of that class held as treasury shares), save
that at any adjourned meeting any holder of shares of the
class (other than treasury shares) present 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 or the holding of such shares as
treasury 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 partly
by the distribution of specific 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 shares 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 (to not more than four transferees) by the
relevant system concerned.
The Directors may in their absolute discretion 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
(whether fully paid or not) 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 transferees.
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 2001 to register the transfer.
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 Articles of Association and
any directions given by special resolution. If the quorum is
not fixed by the Directors, the quorum shall be two.
Subject to the provisions of the Company’s Articles of
Association, the Directors may delegate any of their powers:
(a) to such person or committee;
(b) by such means (including power of attorney);
(c) to such an extent;
(d) in relation to such matters or territories; and
(e) on such terms and conditions
as in each case they think fit, 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
116
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) the giving to him of any other indemnity which is on
substantially the same terms as indemnities given or to
be given to all of the other directors and/or the funding
by the Company of this expenditure on defending
proceedings or the doing by the Company of anything
to enable him to avoid incurring such expenditure where
all other directors have been given or are to be given
substantially the same arrangements;
(d) the purchase or maintenance for any director or directors
of insurance against liability;
(e) 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;
(f) any arrangement for the benefit of the employees and
directors and/or former employees and former directors
of the Company or any of its subsidiaries and/or the
members of their families or any person who is or was
dependent on such persons, including but without
being limited to a retirement benefits scheme and an
employees’ share scheme, which does not accord to
him any privilege or advantage not generally accorded
to employees and/or former employees to whom the
arrangement relates; and
(g) any transaction or arrangement with any other company
in which he is interested, directly or indirectly (whether
as a director or shareholder or otherwise), provided that
he is not the holder of or beneficially interested in at least
1% 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 1% of the voting rights
available to members of the relevant company.
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 proposed transaction or arrangement with the
company to declare the nature of his interest at a meeting
of the Directors of the company (save that a director need
not declare an interest if it cannot reasonably be regarded
as giving rise to a conflict of interest). The definition of
“interest” includes the interests of spouses, civil partners,
children, companies and trusts.
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, retirement and removal
At each annual general meeting, there shall retire from office
by rotation:
(a) all Directors of the Company who held office at the time
of the two preceding annual general meetings and who
did not retire by rotation at either of them; and
117
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 as soon
as:
Amendments to the articles of association
Subject to the Act, 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 a special 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.
(a) that person ceases to be a director under the provisions
of the Act or is prohibited by law from being a Director;
(b) a bankruptcy order is made against that person;
(c) a composition is made with that person’s creditors
generally in satisfaction of that person’s debts;
(d) by reason of that person’s mental health, a court makes
an order which wholly or partly prevents that person from
personally exercising any powers or rights which that
person would otherwise have;
(e) notification is received by the Company from that person
that he is resigning or retiring from his office as director,
and such resignation or retirement has taken effect in
accordance with its terms;
(f) in the case of an Executive Director, his appointment as
such is terminated or expires and the Directors resolve
that he should cease to be a Director;
(g) that person is absent from Directors’ meetings for more
than six consecutive months (without permission of the
other Directors) and the Directors resolve that he should
cease to be a Director; or
(h) a notice in writing is served on him signed by all the
Directors stating that that person shall cease to be a
Director with immediate effect.
There is no requirement of share ownership for a Director’s
qualification.
(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 the 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.
In addition to any power of removal under the Act, the
Company may, by special 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 who is willing to act as
a director, and is permitted by law to do so, to be a director
instead of him. The newly appointed person shall be treated,
for the purposes of determining the time at which he or
any other director is to retire as if he had become a director
118
annual geneRal meeting
notice of meeting
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, KT15 2QW on Thursday 6 June 2013 at
12.00 noon for the following purposes:
11.
To re-appoint Ernst & Young LLP as auditors of the
Company to hold office until the conclusion of the
next Annual General Meeting of the Company.
12.
To authorise the directors to determine the
remuneration of the auditors.
13. To propose the following ordinary resolution (Note 9):
1.
2.
3.
4.
5.
6.
7.
8.
9.
To receive the accounts and the reports of the
directors and the auditors for the year ended 31
December 2012.
To declare a final dividend on the ordinary share
capital of the Company for the year ended 31
December 2012 of 6.75p per share.
To re-elect Robin Buchanan as a director of the
Company (Note 8).
To re-elect Steve Ingham as a director of the
Company (Note 8).
To re-elect Andrew Bracey as a director of the
Company (Note 8).
To re-elect Ruby McGregor-Smith as a director of the
Company (Note 8).
To re-elect Dr. Tim Miller as a director of the Company
(Note 8).
To elect Simon Boddie as a director of the Company
(Note 8).
To elect David Lowden as a director of the Company
(Note 8).
10. To propose the following ordinary resolution:
That the Directors’ Remuneration Report for the year
ended 31 December 2012 be received and approved.
(a)
(b)
(c)
That in accordance with section 366 and 367 of the
Companies Act 2006 (the ‘2006 Act’) the Company,
and all companies that are subsidiaries of the
Company at the date on which this Resolution 13
is passed or during the period when this Resolution
13 has effect, be generally and unconditionally
authorised to:
make political donations to political parties (or
independent election candidates), as defined in the
2006 Act, not exceeding £25,000 in total;
make political donations to political organisations
other than political parties, as defined in the 2006 Act,
not exceeding £25,000 in total; and
incur political expenditure, as defined in the 2006 Act,
not exceeding £25,000 in total;
during the period commencing on the date of passing
this resolution and ending on the date of the next
Annual General Meeting of the Company 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 on which the
Company enters into any contract or undertaking in
relation to the same provided that, in any event, the
aggregate amount of political donations and political
expenditure made or incurred by the Company and
its subsidiaries pursuant to this Resolution shall not
exceed £75,000.
14. To propose the following ordinary resolution (Note 10):
That the directors be and they are hereby generally
and unconditionally authorised in accordance with
section 551 of the Companies Act 2006 to exercise
all the powers of the Company to allot shares in the
Company and to grant rights to subscribe for, or to
convert any security into, shares in the Company
(‘Rights’) up to an aggregate nominal amount of
£1,052,006, provided that this authority, shall expire at
the conclusion of the next Annual General Meeting of
the Company or, if earlier, on 6 September 2014, save
that the Company shall be entitled to make offers or
agreements before the expiry of such authority which
would or might require shares to be allotted or Rights
to be granted after such expiry and the directors shall
be entitled to allot shares and grant Rights pursuant
to any such offer or agreement as if this authority had
not expired; and all unexercised authorities previously
granted to the directors to allot shares and grant
Rights be and are hereby revoked.
119
15. To propose the following special resolution (Note 11):
16. To propose the following special resolution (Note 12):
18. To propose the following ordinary resolution (note 14):
(a)
(b)
That the directors be and they are hereby empowered
pursuant to section 570 and section 573 of the
Companies Act 2006 to allot equity securities (within
the meaning of section 560 of that Act) for cash either
pursuant to the authority conferred by Resolution
14 above or by way of a sale of treasury shares as if
section 561(1) of that Act did not apply to any such
allotment provided that this power shall be limited to:
the allotment of equity securities in connection with an
offer of securities in favour of the holders of ordinary
shares on the register of members at such record
date as the directors may determine where the equity
securities respectively attributable to the interests of
the ordinary shareholders are proportionate (as nearly
as may be practicable) to the respective numbers of
ordinary shares held or deemed to be held by them
on any such record date, subject to such exclusions
or other arrangements as the directors may deem
necessary or expedient to deal with treasury shares,
fractional entitlements or legal or practical problems
arising under the laws of any overseas territory or
the requirements of any regulatory body or stock
exchange or by virtue of shares being represented by
depositary receipts or any other matter; and
the allotment (otherwise than pursuant to sub-
paragraph (a) of this Resolution 15) to any person
or persons of equity securities up to an aggregate
nominal amount of £159,395, and shall expire upon
the expiry of the general authority conferred by
Resolution 14 above, save that the Company shall
be entitled to make offers or agreements before the
expiry of such power which would or might require
equity securities to be allotted after such expiry and
the directors shall be entitled to allot equity securities
pursuant to any such offer or agreement as if the
power conferred hereby had not expired.
120
That the Company be generally and unconditionally
authorised to make market purchases (within the
meaning of section 693(4) of the Companies Act 2006)
of ordinary shares of 1p each of the Company on such
terms and in such manner as the directors may from
time to time determine, provided that:
the maximum number of ordinary shares hereby
authorised to be acquired is 31,878,970 representing
approximately 10% of the issued ordinary share
capital of the Company as at 12 April 2013;
(a)
(b)
(a)
(b)
(c)
(d)
(e)
the minimum price which may be paid for each
ordinary share is 1p;
the maximum price which may be paid for any such
ordinary share is an amount equal to 105% of the
average of the middle market quotations for an
ordinary share in the Company as derived from The
London Stock Exchange Daily Official List for the
five business days immediately preceding the day on
which such share is contracted to be purchased;
the authority hereby conferred shall expire at the
conclusion of the next Annual General Meeting or 6
September 2014 whichever is earlier unless previously
renewed, varied or revoked by the Company in
general meeting; and
the Company may make a contract to purchase its
ordinary shares under the authority hereby conferred
prior to the expiry of such authority, which contract
will or may be executed wholly or partly after the
expiry of such authority, and may purchase its
ordinary shares in pursuance of any such contract.
17. To propose the following special resolution (Note 13):
That a General Meeting other than an Annual General
Meeting, may be called on not less than 14 clear days’
notice.
That:
the rules of the Michael Page International Long Term
Incentive Plan (“LTIP”), in the form produced at the
Annual General Meeting and initialled by the Chairman
of the Annual General Meeting for the purposes of
identification (and a summary of which is set out in
Appendix 1 to the Notice of Annual General Meeting),
be and are hereby approved; and
the Board of the Company be and is hereby
authorised to establish further schemes based on
the LTIP for the benefit of directors and employees of
the Company and/or its subsidiaries who are located
outside the United Kingdom, with such modifications
as may be necessary or desirable in order to take
account of local tax, exchange control or securities
laws as they consider appropriate, provided that any
ordinary shares made available under such other
schemes shall be treated as counting against any
individual or overall limits contained in the LTIP.
19. To propose the following ordinary resolution (note 14):
That:
(a)
(b)
the rules of the Michael Page International Deferred
Bonus Plan (“DBP”), in the form produced at the
Annual General Meeting and initialled by the Chairman
of the Annual General Meeting for the purposes of
identification (and a summary of which is set out in
Appendix 1 to the Notice of Annual General Meeting),
be and are hereby approved; and
the Board of the Company be and is hereby
authorised to establish further schemes based on the
DBP for the benefit of directors and employees of
the Company and/or its subsidiaries who are located
outside the United Kingdom, with such modifications
as may be necessary or desirable in order to take
account of local tax, exchange control or securities
laws as they consider appropriate, provided that any
ordinary shares made available under such other
schemes shall be treated as counting against any
individual or overall limits contained in the DBP.
The Board consider that all the proposals to be considered
at the Annual General Meeting are likely to promote the
success of the Company and are in the best interests of the
Company and its shareholders as a whole. The directors
unanimously recommend that you vote in favour of the
resolutions as they intend to do in respect of their own
beneficial holdings which amount to 1,682,324 shares
representing 0.5% of the existing issued share capital of the
Company excluding treasury shares.
By order of the Board
Kelvin Stagg
Company Secretary – Michael Page International plc
Page Group
Page House,
1 Dashwood Lang Road,
The Bourne Business Park
Addlestone, Surrey KT15 2QW
Registered in England No. 3310225
12 April 2013
Notes
1.
2.
3.
4.
A member entitled to attend and vote at the Annual
General Meeting (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 proxy form which may be used to make this
appointment and give proxy instructions accompanies
this notice. If you do not have a proxy form and
believe that you should have one, please contact
Capita Registrars on 0871 664 0300 (calls cost 10p
per minute plus network extras), lines are open
Monday to Friday, 8.30am to 5.30pm. If you require
additional copies you may photocopy the proxy.
In order to be valid an appointment of proxy must be
returned (together with any authority under which it
is executed or a copy of the authority certified (or in
some other way approved by the directors)) by one of
the following methods:
5.
6.
•
•
in hard copy form by post, by courier or by hand to
the Company’s Registrar, at, PXS, 34 Beckenham
Road, Beckenham BR3 4TU;
in the case of CREST members, by utilising the
CREST electronic proxy appointment service in
accordance with the procedures set out in
Note 6 below;
and in each case must be received by the Company
not less than 48 hours before the time of the Meeting.
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 146
of the Companies Act 2006 (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.
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 on the
Euroclear website (www.euroclear.com/CREST).
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
121
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 – RA10) 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 35(5)(a) of the
Uncertificated Securities Regulations 2001.
CREST members and, where applicable, their CREST
sponsors or voting service providers should note that
EUI does not make available special procedures in
CREST for any particular messages. Normal system
timings and limitations will therefore apply in relation
to the input of CREST Proxy Instructions. It is the
responsibility of the CREST member concerned to
take (or, if the CREST member is a CREST personal
member or sponsored member or has appointed a
voting service provider(s), to procure that his CREST
sponsor or voting service provider(s) take(s)) such
action as shall be necessary to ensure that a message
is transmitted by means of the CREST system by any
particular time. In this connection, CREST members
and, where applicable, their CREST sponsors or
voting service providers are referred, in particular,
to those sections of the CREST Manual concerning
practical limitations of the CREST system and timings.
8.
Resolutions 3 to 9 – election/re-election of directors:
Resolutions 3 to 9 deal with the election/re-election
of the directors in accordance with the UK Corporate
Governance Code. The Governance Code provides
for all directors of FTSE 350 companies to be subject
to election/re-election by their shareholders every
year. The Governance Code applies on a “comply or
explain” basis and applies to financial years beginning
on or after 29 June 2010. Accordingly, in keeping with
the Board’s aim of following best corporate practice,
each member of the board is standing for re-election,
and in the case of David Lowden and Simon Boddie
for election, by the shareholders at this year’s Annual
General Meeting. Biographical information on each of
the directors is contained on pages 30 and 31 of the
Annual Report and Accounts. The Chairman confirms
that, following formal performance evaluation, all
directors standing for election/re-election continue
to perform effectively and demonstrate commitment
to the role.
9.
Resolution 13 - political donations:
For the purpose of this resolution, ‘political donations’,
‘political organisations’ and ‘political expenditure’
have the meanings given to them in Section 363-365
of the 2006 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 2006 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 not made a
political donation in the past, and has no intention
of, either now or in the future, 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 13 to renew the
authority granted by shareholders at the last Annual
General Meeting of the Company. 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 2006 Act,
Resolution 13 has also been extended to cover any of
these activities by the Company’s subsidiaries.
10. Resolution 14 - directors’ authority to allot shares:
If passed, Resolution 14 will give the directors
authority to allot ordinary shares in the capital of
the Company up to a maximum nominal amount of
£1,052,006 representing approximately 33% of the
Company’s issued ordinary share capital (excluding
treasury shares) as at 12 April 2013 (the latest
practicable date before publication of this notice). This
power will last until the conclusion of the next Annual
General Meeting in 2014.
The directors have no present intention of exercising
this authority.
As at the date of this letter the Company does
not hold any ordinary shares in the capital of the
Company in treasury.
11. Resolution 15 – disapplication of pre-emption rights:
Resolution 15 will give the directors authority to allot
shares in the capital of the Company pursuant to
the authority granted under Resolution 14 for cash
7.
122
without complying with the pre-emption rights in the
Companies Act 2006 in certain circumstances. This
authority will permit the directors to allot:
this notice) and sets minimum and maximum prices.
This authority will expire at the conclusion of the
Annual General Meeting of the Company in 2014.
this year’s AGM) were to be exercised in full, these
options would represent 8.0% of the Company’s
issued share capital (excluding treasury shares).
(a)
(b)
shares up to a nominal amount of £1,052,006,
(representing one-third of the Company’s issued share
capital) on an offer to existing shareholders on a pre-
emptive basis (in each case subject to adjustments for
fractional entitlements and overseas shareholders as
the directors’ see fit); and
shares up to a maximum nominal value of £159,395,
representing approximately 5% of the issued ordinary
share capital of the Company as at 12 April 2013
(the latest practicable date prior to publication of this
notice) otherwise than in connection with an offer to
existing shareholders.
The directors have no present intention of exercising
this authority.
The directors confirm their intention to follow the
provisions of the Pre-emption Group’s Statement of
Principles regarding cumulative usage of authorities
within a rolling three-year period. The Principles
provide that companies should not issue for cash
shares representing in excess of 7.5% of the
Company’s issued share capital in any rolling three-
year period, other than to existing shareholders,
without prior consultation with shareholders.
12. Resolution 16 – buyback authority:
Resolution 16 gives the Company authority to
buy back its own ordinary shares in the market
as permitted by the Companies Act 2006. The
authority limits the number of shares that could be
purchased to a maximum of 31,878,970 (representing
approximately 10% of the Company’s issued ordinary
share capital (excluding treasury shares) as at 12 April
2013 (the latest practicable date prior to publication of
The directors have no present intention of exercising
the authority to purchase the Company’s ordinary
shares but will keep the matter under review, taking
into account the financial resources of the Company,
the Company’s share price and future funding
opportunities. The authority will be exercised only if
the directors believe that to do so would result in an
increase in earnings per share and would be in the
interests of shareholders generally. Any purchases
of ordinary shares would be by means of market
purchases through the London Stock Exchange.
Listed companies purchasing their own shares are
allowed to hold them in treasury as an alternative to
cancelling them. No dividends are paid on shares
while they are held in treasury and no voting rights
attach to treasury shares.
If Resolution 16 is passed at the Meeting, it is the
Company’s current intention to cancel all of the shares
it may purchase pursuant to the authority granted
to it. However, 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.
As at 12 April 2013 (the latest practicable date prior to
the publication of this notice), there were 22,803,165
warrants and options to subscribe for shares in the
capital of the Company representing 7.2% of the
Company’s issued share capital (excluding treasury
shares). If this authority to purchase the Company’s
ordinary shares and the existing authority to purchase
taken at last year’s AGM (which expires at the end of
13. Resolution 17 – length of notice for general meetings:
This is a resolution to allow the Company to hold
general meetings (other than Annual General
Meetings) on 14 days’ notice.
Before the introduction of the Companies
(Shareholders’ Rights) Regulations 2009 (the
‘Shareholders’ Rights Regulations’) on 3 August 2009,
the minimum notice period permitted by the 2006
Act for general meetings (other than annual general
meetings) was 14 days. One of the amendments
made to the 2006 Act by the Shareholders’ Rights
Regulations was to increase the minimum notice
period for general meetings of listed companies to
21 days, but with an ability for companies to reduce
this period back to 14 days (other than for annual
general meetings) provided that two conditions are
met. The first condition is that the Company offers a
facility for shareholders to vote by electronic means.
This condition is met if the Company offers a facility,
accessible to all shareholders, to appoint a proxy
by means of a website. The second condition is
that there is an annual resolution of shareholders
approving the reduction of the minimum notice period
from 21 days to 14 days.
The Board is therefore proposing Resolution 17
as a special resolution to approve 14 days as the
minimum period of notice for all general meetings of
the Company other than annual general meetings. The
approval will be effective until the Company’s next
annual general meeting, when it is intended that the
approval be renewed. The Board will consider on a
case by case basis whether the use of the flexibility
offered by the shorter notice period is merited, taking
123
into account the circumstances, including whether the
business of the meeting is time sensitive.
14.
Resolution 18 and 19 – approval of the Michael
Page International Long Term Incentive Plan and the
Michael Page International Deferred Bonus Plan.
The Board has undertaken a review of the Company’s
existing remuneration structure, which was
established when the Company was appreciably
smaller, and as part of this review the Company
proposes to implement a new long term incentive
plan, and a new deferred bonus plan which will
operate in connection with the new cash bonus
arrangements the Company will be implementing for
Executive Directors.
Michael Page International Long-Term
Incentive Plan
It is proposed that the Michael Page International
Long Term Incentive Plan (the “LTIP”) will be
introduced, and will replace the Company’s current
primary long term incentive vehicle for Executive
Directors, the Michael Page Incentive Share Plan
(“ISP”), which will expire during 2013.
Awards under the existing ISP were not capped as a
percentage of salary and only one-third of each award
to Executive Directors was subject to longer term
performance targets. The Company now proposes
that long term incentive awards are to be capped as
a percentage of salary and that the entire awards to
Executive Directors will be subject to performance
targets, and this is reflected in the proposed new LTIP.
It is proposed that the new LTIP will be the primary
plan to be used to make annual awards to the
Company’s Executive Directors, and that Executive
Directors will not be granted awards under the
Company’s other executive share plan, the 2010
Executive Share Option Plan (the “2010 ESOS”) in the
same year in which they are granted Awards under
the LTIP. However, awards may be made under each
plan in the same year if the Remuneration Committee
determines it appropriate to do so. If awards are
made under the new LTIP and the ESOS in the same
year, the Committee will take into account the total
expected value of award levels when determining the
size of the grants under each.
It is also proposed that, following vesting of an award
under the LTIP, Executive Directors will be required to
hold the shares received for a further two years, other
than to settle any tax liability, unless the individual has
already met the shareholding requirement, which will
be increased to a requirement of 200% of base salary.
This change, and the performance targets proposed
for Executive Directors under the new LTIP, places a
greater emphasis on remuneration being linked to the
longer term performance of the Company.
It is proposed that the first awards under the LTIP will
be granted in 2014.
Michael Page International Deferred Bonus Plan
The Company currently operates a deferred bonus
arrangement. However, because as part of the
review of the Company’s remuneration structure
the Company proposes to introduce new cash
bonus arrangements for the Executive Directors (as
explained below) and introduce the new LTIP, the
Company proposes to take this opportunity to also
implement the new Deferred Bonus Plan.
The DBP will operate in respect of the new annual
bonus arrangements for the Executive Directors,
pursuant to which annual bonus will be capped at
175% of base salary, with bonus potential of 125%
of base salary assessed against achievement of a
PBT target and bonus potential of 50% of base salary
assessed against strategic targets. The maximum
amount of annual bonus that will be payable in cash
will be 125% of salary (reduced from 150% under the
current bonus arrangements), and the remainder will
be compulsorily deferred under the DBP.
Further detail in relation to the proposed cash annual
bonus arrangements are set out in the remuneration
report.
Plan documents
A summary of the rules of the LTIP and the DBP is
set out in Appendix 1 to this document on pages 126
to 129.
The rules of the LTIP and of the DBP are available for
inspection during normal business hours (Saturdays,
Sundays and public holidays excepted) at Herbert
Smith Freehills LLP, Exchange House, Primrose Street,
London EC2A 2EG up until the close of the meeting.
The rules of the LTIP will also be available at the place
of the Meeting from 8.00 am on the morning of the
Meeting until its conclusion.
To have the right to attend and vote (whether in
person or by proxy) 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 6.00 pm on 4 June 2013 (or if the
Meeting is adjourned, at 6.00 pm 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.
15.
16.
A member of the Company which is a corporation
may authorise a person or persons to act as its
124
20.
21.
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.
The Company must cause to be answered at the
Meeting any question relating to the business
being dealt with at the Meeting that is put by a
member attending the Meeting, except in certain
circumstances, including if it is undesirable in the
interests of the Company or the good order of the
Meeting that the question be answered or if to
do so would involve the disclosure of confidential
information.
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 8.00 am until its conclusion.
22.
You may not use any electronic address in this notice
of meeting to communicate with the Company for any
purpose other than those expressly stated.
17.
18.
19.
representative(s) at the Meeting. In accordance with
the provisions of the Companies Act 2006, each
such representative may exercise (on behalf of the
corporation) the same powers as the corporation
could exercise if it were an individual member of the
Company, provided that they do not do so in relation
to the same shares. It is no longer necessary to
nominate a designated corporate representative.
As at 12 April 2013 (being the latest business day
prior to the publication of this notice), the Company’s
issued share capital consists of 318,789,703 ordinary
shares. The Employee Benefit Trust holds 13,596,305
ordinary shares of the Company carrying no voting
rights. No shares are held in treasury. Therefore the
total voting rights in the Company are 305,193,398.
The contents of this notice of Meeting, details of
the total number of shares in respect of which
members are entitled to exercise voting rights at the
Meeting, details of the totals of the voting rights that
members are entitled to exercise at the Meeting and,
if applicable, any members’ statements, members’
resolutions or members’ matters of business received
by the Company after the date of this notice will be
available on the Company’s website: www.page.com/
investors
Members satisfying the thresholds in section 527 of
the Companies Act 2006 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 is 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
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aPPenDix 1
SUMMARY OF THE MICHAEL PAGE INTERNATIONAL PLC
LONG TERM INCENTIVE PLAN AND THE MICHAEL PAGE
INTERNATIONAL PLC DEFERRED BONUS PLAN
1.
STRUCTURE OF THE LONG TERM INCENTIVE PLAN
(THE “LTIP”) AND THE DEFERRED BONUS PLAN
(THE “DBP”)
1.1 Administration
Awards will be granted, and the LTIP and the DBP will
be administered by the Board, or a duly authorised
committee thereof. Awards for Executive Directors will
be determined by the Remuneration Committee.
1.2 Eligibility
Awards under the LTIP and the DBP may be granted
to employees (including Executive Directors) of the
Company and its subsidiaries (“Participants”).
1.3 Form of Awards
Under each plan, Awards will take the form of either:
• a conditional right to receive ordinary shares in the
Company (“Shares”) which will be automatically
transferred to the Participant following vesting (a
“Conditional Award”);
• a nil cost option, exercisable by the Participant
following vesting during any period permitted for
exercise (an “Option”); or
• an interest in Shares which will be held by a
trustee on behalf of the Participant until vesting (a
“Restricted Share Award”). The Participant will not
be entitled to call for or otherwise deal in the Shares
subject to a Restricted Share Award prior to vesting.
Awards are non-transferable (other than to a
Participant’s personal representatives following
his death).
1.4 Dividends
Participants granted a Restricted Share Award will,
unless the Board determines otherwise, be entitled
to receive any dividends paid on the Shares subject
to the Award. Where the Board so determines, or for
Participants granted a Conditional Award or Option,
the Board may determine that Participants will be
entitled at the time of vesting (or exercise of an Option)
to receive a cash payment or a transfer of additional
Shares equivalent to the dividends paid on the number
of Shares subject to the Award during the period from
grant until vesting of the Award.
1.5 Plan limits
ten years under the relevant plan and any other
employees’ share scheme adopted by the Company
to exceed ten per cent of the Company’s ordinary
share capital in issue immediately prior to the
proposed date of grant.
This second limit reflects the operation of the dilution
limit in the Company’s existing 2010 Executive Share
Option Scheme as approved by shareholders at the
2010 AGM.
Any option or award which the Board has determined
or which is granted on terms that it will only be satisfied
with existing Shares, and any Restricted Share Award
granted using existing Shares, will not be subject to
or counted in calculating these limits. Treasury shares
will count as new issue shares for the purposes of
these limits for so long as institutional investor bodies
consider that they should be so counted.
The following limits shall apply to each of the LTIP and
the DBP.
An Award may not be granted if it would cause the
number of Shares subject to the Award, when added
to the number of Shares subject to the outstanding
options or awards granted within the previous ten
years and the number of Shares issued for the
purpose of options and awards granted within the
previous ten years under the relevant plan and any
other discretionary share scheme adopted by the
Company to exceed five per cent of the Company’s
ordinary share capital in issue immediately prior to the
proposed date of grant.
An Award may not be granted if it would cause the
number of Shares subject to the Award, when added
to the number of Shares subject to the outstanding
options or awards granted within the previous ten
years and the number of Shares issued for the purpose
of options and awards granted within the previous
2.
PROVISIONS APPLICABLE TO THE GRANT OF LTIP
AWARDS
2.1
Individual limit
The maximum market value of the Shares over which a
Participant may be granted an Award under the LTIP in
any calendar year shall not exceed an amount equal to
two times the Participant’s basic salary at that time (or
such higher amount, if the Board decides otherwise in
exceptional circumstances).
The current intention is that LTIP Awards will be made
to Executive Directors with a value equal to two times
salary.
2.2 Timing of grant of LTIP Awards
LTIP Awards may only be granted within a period of
42 days commencing on (i) the date on which the LTIP
is adopted or (ii) the date of announcement by the
Company of its interim or final results (or as soon as
126
practicable thereafter if the Company is restricted from
being able to grant Awards during such period). An
LTIP Award may be granted at other times if the Board
determines that exceptional circumstances exist which
justify the grant of the Award. Awards may not be
granted under the LTIP more than ten years after the
LTIP is adopted.
Nothing is payable by participants for the grant of
LTIP Awards.
report. The levels at which these will be set will take
into account market conditions, analysts’ consensus,
the long-range strategic plan and other appropriate
information available at the time.
Appropriate retrospective disclosure will be made on
the strategic objectives and the Participant’s progress
against these objectives to allow shareholders to
understand the level of performance achieved.
2.4 Normal vesting
2.3 Performance Targets
The Board will specify prior to the date of grant
the performance targets which are to apply to LTIP
Awards. The performance target will be measured
over a period of not less than three years, ending no
later than the third anniversary of grant, and there will
be no provision for re-testing. The Board may alter a
performance target if events happen that cause the
Board to consider that the performance target is no
longer a fair measure of the Company’s performance,
provided that the revised target may not be materially
less challenging.
In respect of the first grant of LTIP Awards, it is
proposed that 62.5% of the LTIP Award will be subject
to a stretching cumulative EPS performance condition,
and 37.5% of the LTIP Award will be subject to longer
term strategic objectives. Of the part of the LTIP Award
linked to longer term strategic objectives, one-third
will be set against a specific measurement of relative
growth to a comparator group.
The EPS target is anticipated to be a three-year
cumulative target and will be disclosed in the
remuneration report in the year of grant. The first
Awards under the LTIP are intended to be granted in
2014, and therefore the details of the cumulative EPS
targets will be disclosed in next year’s remuneration
In normal circumstances, LTIP Awards will vest three
years after the date of grant, while the Participant
remains in office or employment with the Company or
any subsidiary (the “Group”), and to the extent that the
relevant performance targets have been met.
Shares subject to a Conditional Award will be
transferred as soon as reasonably practicable after
vesting. Shares subject to a Restricted Share Award
will be released as soon as reasonably practicable
after vesting. An Option may normally be exercised
after vesting until the tenth anniversary of grant (or
such shorter period as the Board may determine prior
to the date of grant).
If the Board so determines, the vesting of an LTIP
Award may be satisfied in whole or part by a cash
payment as an alternative to the issue or transfer
of Shares.
3.
PROVISIONS APPLICABLE TO THE GRANT OF
DBP AWARDS
3.1 Bonus deferral
The DBP shall operate in respect of the bonus
arrangements of such eligible employees (including
Executive Directors) as the Board may determine.
Where the DBP is operated, the Board may (i) specify a
proportion or amount of the eligible employee’s annual
bonus that shall be subject to compulsory deferral;
and/or (ii) invite the participant to elect to voluntarily
defer a proportion of the eligible employee’s annual
bonus up to such limit as the Board may specify.
An Award under the DBP shall be granted over such
number of Shares as have an aggregate market value
on the dealing day immediately prior to the date of
grant equal to the proportion of the eligible employee’s
annual bonus that is deferred.
3.2 Timing of grant of LTIP Awards
DBP Awards will be granted as soon as is reasonably
practicable following the determination of annual
bonuses.
3.3 Performance Targets
As Awards under the DBP reflect a deferral of earned
annual bonus, no further performance targets attach
to DBP Awards.
3.4 Normal vesting
In normal circumstances, Awards under the DBP will
vest in two equal parts, on each of the first and second
anniversary of the date of grant.
Shares subject to a Conditional Award will be
transferred as soon as reasonably practicable after
vesting. Shares subject to a Restricted Share Award
will be released as soon as reasonably practicable
after vesting. An Option may normally be exercised
after vesting until the tenth anniversary of grant (or
such shorter period as the Board may determine at
the date of grant).
If the Board so determines, the vesting of a DBP
Award may be satisfied in whole or part by a cash
payment as an alternative to the issue or transfer
of Shares.
127
127
4.
PROVISIONS APPLICABLE TO BOTH THE LTIP AND
THE DBP
4.1 Leavers
4.1.1 Cessation of office or employment
4.1.2 Death
In the event of a Participant ceasing to hold office or
employment with the Group due to death, an Award
will vest immediately, and an Award in the form of an
Option will be exercisable for a period of one year.
Where the vesting of an award would be prohibited
due to regulatory reasons, vesting shall be delayed.
Where at the expiry of any permitted exercise period,
the exercise of an Option would be prohibited due
to regulatory reasons, the relevant period shall be
extended.
In the event of a Participant ceasing to hold office or
employment with the Group other than due to any of
the reasons specified below, an Award will immediately
lapse.
An Award will not lapse where the cessation of
office or employment with the Group is due to injury,
disability, redundancy, retirement, the transfer of the
Participant’s employment due to the sale of a business
or undertaking (or part business or undertaking), or
the company with which the Participant holds office or
employment ceasing to be a member of the Group, or
any other reason if the Board so determines.
In the event that a Participant ceases to hold office
or employment due to one of these specified reasons
prior to the normal vesting date of an Award, the
Award will continue and vest on its normal vesting
date, and an Award in the form of an Option will be
exercisable for a period of six months thereafter. The
Board may determine that an Award will instead vest
on the date of cessation of office or employment, in
which case an Award in the form of an Option will be
exercisable during such period, of up to six months, as
the Board may determine.
In the event that a Participant ceases to hold office or
employment for one of these specified reasons on or
after the normal vesting date, an Award in the form of
an Option will be exercisable during such period, of up
to six months, as the Board may determine.
128
4.1.3 International transfers
4.2 Corporate Actions
If a Participant is transferred to work in another country
as a result of which the Participant will suffer a tax
disadvantage or become subject to restrictions on
their ability to receive or deal in Shares, or to exercise
an Option, the Board may determine that an Award will
vest prior to the date of such transfer, in which case
Award in the form of an Option will be exercisable
during a period of six months (or such shorter period
as the Board may determine).
4.1.4 Extent of vesting
LTIP Awards will only vest due to a Participant ceasing
to hold office or employment due to one of the reasons
specified above (other than death) or an international
transfer to the extent that the relevant performance
targets have been met. Where an LTIP Award vests
prior to the third anniversary of grant, the Board will
assess performance using such information (not
limited to published accounts) as it determines to be
appropriate.
Where an Award vests prior to the normal vesting
date due to one of the reasons specified above (other
than death) or an international transfer, the number of
Shares in respect of which an Award vests will, unless
the Board determines otherwise, be pro-rated to reflect
the time elapsed to the early vesting date. Options will
lapse at the expiry of any of the above periods to the
extent not exercised.
In the event that a person obtains control of the
Company by way of general offer, or if having obtained
Control of the Company, a person makes a general
offer, Awards will vest and Options may be exercised
for a period of six months.
If the Court sanctions a compromise or arrangement
that will result in a change of control of the Company,
Awards will vest and Options will be exercisable for
a period of six months. In the event of an approval
of a merger of the Company into another company
under European cross-border merger rules, Awards
will vest and Options will be exercisable until the
merger becomes effective. In the event of the passing
of a resolution for the voluntary winding-up of the
Company, Awards will vest and Options will be
exercisable for a period of two months. Options will
lapse at the expiry of any such period if not exercised.
In the event of a demerger of a substantial part of
the Group’s business, a special dividend or a similar
event affecting the value of the Shares to a material
extent, Awards will vest if the Board so determines,
in which case Options may be exercised for a period
of two months, or such longer period as the Board
may determine, and, unless the Board determines
otherwise, will lapse at the expiry of any such period
if not exercised.
LTIP Awards will only vest to the extent the relevant
performance targets have been met. Where the
4.6 Rights attaching to Shares
As soon as practicable after the vesting of an Award
(or exercise of an Option), the appropriate number of
Shares will be issued or transferred, as appropriate,
and the Company will apply to the London Stock
Exchange for a listing for any Shares for which a listing
has not previously been granted. Any Shares allotted
will rank equally with all other issued Shares save that
they will not be entitled to rights attaching to Shares
by reference to a record date before the Shares are
allotted or transferred.
Participants will be entitled to exercise any voting
rights in respect of Shares subject to Restricted Share
Awards, but not otherwise.
4.7 Benefits are non-pensionable
Benefits under the LTIP and the DBP are non-
pensionable.
corporate event occurs prior to the third anniversary of
grant, the Board will assess performance using such
information (not limited to published accounts) as it
shall determine.
Where the corporate action occurs prior to the normal
vesting date of Awards the number of Shares in
respect of which Awards vest will, unless the Board
determines otherwise, be pro-rated to reflect the
period to the date of the relevant event.
Where a company acquires the Company, or
substantially all the assets of the Company, as part of
an internal reorganisation (unless the Board determines
otherwise) an Award will not vest, and instead will be
rolled-over into an award over shares in the controlling
company of equivalent value (in the case of a
Restricted Share Award, unless the Board determines
otherwise, net of any tax liability that will arise as a
result of the roll-over).
4.3 Variation of capital
The number of Shares subject to Awards will be
adjusted, in such manner as the Board may determine,
following any variation of share capital of the Company
or (save where the Board determines that such event
will be a vesting event) a demerger of a substantial part
of the Group’s business, a special dividend or a similar
event affecting the value of the Shares to a material
extent.
4.4 Claw-Back
The Board may apply claw-back where at any time
within three years of vesting it determines that the
financial results of the Company were misstated, or an
error was made in assessing performance, that caused
an Award to be granted, or to vest, to a greater degree
than it should have done. The Board may also apply
a claw-back if it is discovered that the Participant
committed an act or omission that justified, or would
have justified, summary dismissal or service of notice
of termination of office or employment. The excess
number of Shares in respect of which the Award
vested can be subject to the claw-back, which shall
be applied in such manner as the Board determines,
including by lapsing other share or cash awards held
by the Participant.
4.5 Alterations
The Board may at any time alter or add to all or any of
the provisions of the LTIP or the DBP in any respect,
provided that any change to the advantage of present
or future Participants relating to eligibility, scheme
limits, the basis of individual entitlement to, and the
terms of, Shares or cash provided under the relevant
plan or the provisions for the adjustment of Awards in
the event of a variation of the Company’s share capital
must be approved in advance by the Company’s
shareholders in general meeting.
Any alteration or addition which is necessary or
desirable in order to comply with or take account of
the provisions of any proposed or existing legislation,
law or other regulatory requirements or to take
advantage of any changes in legislation, law or other
regulatory requirements, or to obtain or maintain
favourable taxation, exchange control or regulatory
treatment of the Company, any subsidiary or any
Participant or to make minor amendments to benefit
the administration of the LTIP or the DBP do not
need prior approval of the Company’s shareholders.
No alterations to the disadvantage of Participants’
subsisting rights can be made by the Board without
the approval of Participants holding Awards over
75% of the total Shares subject to Awards, or 75% of
Participants attending a meeting called in respect of
the proposed alteration.
129
cautionaRY statement
The Business Review has been prepared solely to provide
additional information to shareholders to assess the
Company’s strategies and the potential for those strategies
to succeed.
The Business Review contains certain forward-looking
statements. These statements are made by the directors in
good faith based on the information available to them up to
the time of their approval of this report and such statements
should be treated with caution due to the inherent
uncertainties, including both economic and business risk
factors underlying any such forward-looking information.
Directors’ responsibilities
The directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable laws and regulations. Company law requires
the directors to prepare such financial statements for each
financial year. Under that law the directors are required
to prepare group financial statements in accordance with
International Financial Reporting Standards (IFRSs) as
adopted by the European Union and Article 4 of the lAS
Regulation and have also chosen to prepare the parent
company financial statements under IFRSs as adopted by
the European Union. Under company law the directors
must not approve the accounts unless they are satisfied
that they give a true and fair view of the state of affairs of
the Company and of the profit or loss of the Company for
that period. In preparing these financial statements, the
directors are required to:
• properly select and apply accounting policies;
• present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
130
• provide additional disclosures when compliance with the
specific requirements in lFRSs are insufficient to enable
users to understand the impact of particular transactions,
other events and conditions on the entity’s financial
position and financial performance; and
• make an assessment of the Company’s ability to continue
as a going concern.
2. the Business Review, which is incorporated into
the directors’ report, includes a fair review of the
development and performance of the business and the
position of the Company and the undertakings included
in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that
they face.
On behalf of the Board
S Ingham
Chief Executive Officer
5 March 2013
A Bracey
Chief Financial Officer
5 March 2013
The directors are responsible for keeping proper accounting
records that are sufficient to show and explain the
Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities. The directors
are responsible for the maintenance and integrity of
the corporate and financial information included on the
Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Directors’ responsibility statement
We confirm to the best of our knowledge:
1. the financial statements, prepared in accordance
with International Financial Reporting Standards as
adopted by the EU, give a true and fair view of the
assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the
consolidation taken as a whole; and
notes
131
notes
132
contents
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54
HIGHLIGHTS
CHAIRMAN’S STATEMENT
REBRAND
BUSINESS REVIEW
Group strategy
Review of 2012
Regional review of 2012
Financial review of 2012
Balance sheet
Cash flow
68
69
70
71
AUDITOR’S REPORT
FINANCIAL STATEMENTS
Consolidated income statement
Consolidated statement of
comprehensive income
72
Consolidated and parent company
balance sheets
74
Consolidated statement of changes
in equity
75
Statement of changes in equity –
Net cash and group borrowing facilities
parent company
Key Performance Indicators (KPIs)
Going concern
Foreign exchange
Treasury management and currency risk
76
77
113
114
Cash flow statements
Notes to the financial statements
FIVE YEAR SUMMARY
SHAREHOLDER INFORMATION
Principal risks and uncertainties
AND ADVISERS
Summary and current trading
115 ARTICLES OF ASSOCIATION
BOARD OF DIRECTORS
DIRECTORS’ REPORT
CORPORATE GOVERNANCE
REMUNERATION REPORT
119 ANNUAL GENERAL MEETING
130
CAUTIONARY STATEMENT AND
STATEMENT OF DIRECTORS’
RESPONSIBILITIES
In just thirty-seven years, pageGroup has
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