Annual report &
accounts 2015
A Global Leader
What we do
We are one of the world’s best known and most
respected specialist recruitment consultancies.
We deliver recruitment services to clients through
a network of over 150 offices across 35 countries.
Geographic reach
PageGroup has a truly global reach, with a
substantial and well-balanced business
across all regions, including Latin America
and Asia. We source candidates from domestic
and international markets and provide a
comprehensive service to both local and
multinational clients.
Discipline expertise
We organise our consultants into 15 specialist
discipline teams, grouped into four broad categories.
We then specialise further (e.g. digital marketing
within Marketing) to ensure we provide expert
recruitment services to our clients.
Perm and Temp mix
PageGroup is the international market-leader
for permanent recruitment in the majority of
countries in which we operate. We also have a
substantial and growing temporary recruitment
business in markets where temporary placements
for professionally qualified candidates are
culturally accepted.
The Americas
£78m
Gross Profit
Page 33 for The Americas Performance Review
Argentina
Brazil
Canada
Chile
Colombia
Mexico
Peru
USA
UK
£152m
Gross Profit
Page 29 for the UK performance review
EMEA
£217m
Gross Profit
Page 27 for EMEA Performance Review
Austria
Belgium
France
Germany
Ireland
Italy
Luxembourg
Morocco
The Netherlands
Poland
Portugal
Qatar
Spain
South Africa
Sweden
Switzerland
Turkey
UAE
Asia Pacific
£109m
Gross Profit
Page 31 for Asia Pacific Performance Review
Australia
Greater China
India
Indonesia
Japan
Malaysia
New Zealand
Singapore
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information ANNUAL REPORT 2015 ANNUAL REPORT 2015
ANNUAL REPORT 2015
Welcome
PageGroup is organised into three
brands operating at different levels
of the market.
TARGETED SECTORS
QUALIFIED
PROFESSIONAL
CLERICAL
PROFESSIONAL
GENERALIST
STAFFING
Page Executive
Contents
Page Executive is the Group’s executive search business
and offers a range of search, selection and management
solutions for organisations needing to attract and retain
their leadership talent. The roles on which we focus
typically sit at the sub-board and board levels.
Michael Page
Michael Page is the original PageGroup brand and is
normally established as the first business in each new
country that we enter. Michael Page is comprised of 15
broad 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 or interim basis.
Page Personnel
Page Personnel offers specialist recruitment services to
organisations requiring permanent employees or temporary
or contract staff at technical and administrative support,
professional clerical and junior management levels.
Business Model
41 Review of the Year
84 Directors’ Statements
of Responsibility
1
3
5
7
Chairman’s
Introduction
Strategic
Framework
Strategic
Review
15
KPIs
19 Q&A with
Steve Ingham,
CEO
21 Corporate
Social
Responsibility
27 Regional
Perspectives
35 Risk Management
Structure
37
Principal Risks and
Uncertainties
50 Chairman’s
Introduction to
Corporate Governance
86
Independent Auditor’s
Report
51 Our Board of
Directors
55
Executive Board
56 Corporate
Governance Report
61 Nomination
Committee Report
62 Audit Committee
Report
67 Directors’
Remuneration Report
80 Remuneration
Policy Table
82 Directors’ Report
93 Consolidated Income
Statement
93 Consolidated Statement
of Comprehensive Income
94 Consolidated and Parent
Company Balance Sheets
95 Consolidated Statement of
Changes in Equity
96
Statement of Changes in
Equity – Parent Company
97 Consolidated and
Parent Company
Cash Flow Statements
98 Notes to the financial
statements
126 Notice of AGM
Our vision is to be the leading specialist recruiter
in the markets in which we operate
Highlights
Gross profit up by 9%*
Operating profit
before exceptional
items up 20.2%*
Conversion rate
improved by
1.5 percentage points
to 16.2%
Strong balance sheet
with £95.0m net cash
Special dividend of
16.0p
£556.1m 5,835
£90.1m 11.5p**
Gross Profit (+4.4%)
Headcount (+4.6%)
Operating Profit (+14.8%)
Dividend (+4.5%)
£m
Revenue
Gross profit (net fee income)
Operating profit before exceptional items
Operating profit after exceptional items
Profit before tax
Basic earnings per share (pence)
Conversion rate (operating profit/gross profit)
Year end staff headcount
2015
1,064.9
556.1
90.1
90.1
90.7
21.3p
16.2%
5,835
2014
1,046.9
532.8
78.5
80.1
80.4
19.3p
14.7%
5,578
2013
1,005.5
513.9
68.2
65.7
64.1
13.8
13.3%
5,130
2012
989.9
526.9
65.1
57.3
57.0
11.9
12.4%
5,099
2011
1,019.1
553.8
86.0
86.0
86.1
18.7
15.5%
5,286
* In constant currency
** Underlying dividend
Gross profit (£m)
2015
2014
2013
2012
Basic EPS (pence)
556.1
532.8
513.9
526.9
2015
2014
2013
2012
21.3
19.3
13.8
11.9
Operating Profit Before Exceptionals (£m)
Disciplines 2015 Gross Profit (£m)
2015
2014
2013
2012
90.1
220.1
39.6 %
Finance & Accounting
78.5
68.2
65.1
109.9
19.8 %
Marketing, Sales & Retail
119.8
21.6 %
Legal, Technology, HR, etc
106.3
19.1%
Engineering, Property & Construction,
Procurement & Supply Chain
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information EXECUTIVE SEARCH
Business Model
PageGroup’s business model has proved itself through
economic cycles and as the business has expanded into a
global enterprise. At its core is a focus on organic growth.
PageGroup offers its consultants
a well-defined and varied career
in recruitment. This includes a
clear development structure with
significant opportunities for the most
talented.
Recruitment is a fast-paced and
dynamic business. Our agility gives
us the confidence to respond quickly
to the opportunities and challenges
as they appear.
We regularly
move
experienced
directors into
markets where
they can add
the most value
and guide the
business through
the challenges of
a market cycle,
while allowing
us to retain and
motivate key
senior talent.
Career
development
structure
Agile and
responsive
Global
management
mobility
Organic
Growth
Team
profit-led
compensation
Experienced
management pool
Productivity-led
expansion
A focus on
team-based
performance
rather than
the individual
promotes
positive
corporate
behaviour and
consistent quality
of service for
both clients and
candidates.
Experience through economic
cycles and across geographies and
disciplines reduces our learning
curve, maximises scalability and is
crucial for placing resources where
they will add the most value.
Our operational metrics focus on
productivity, by team, discipline and
geography. This bottom-up approach
aligns expansion criteria throughout
the Group, focusing and optimising
investment on key priorities.
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ANNUAL REPORT 2015 Our Competitive Advantage
Brand
Scale
Culture
Our true competitive advantage is the combination of these three factors and
the balance we have achieved in the business over the past 39 years.
Brand
Scale
Culture
Page Executive, Michael Page and
Page Personnel are brands which
inspire high levels of confidence,
trust and assurance of quality
service. Our consistent commitment
to the markets in which we operate
and level of expertise enables these
brands to resonate strongly in
their marketplace.
The digital revolution has reshaped
the recruitment sector’s marketing
and delivery channels, and we are
a highly active online participant.
However, high quality candidates will
only continue to place key decisions
on their future in the hands of
consultants who have substance
behind their online marketing profile.
We are trusted by our clients and
candidates to remain committed, to
provide a high quality service and to
be there for the long term.
Our scale enables PageGroup to
commit to markets through cycles
giving clients the confidence to build
long-term relationships with us. It
also enables a broader client offering
with participation from multiple
disciplines, even in some of our
newest markets.
The ability to offer diverse
expertise across a broad range of
complementary specialisms and
geographies enhances our offering
and the candidate pools we can
access. Our scale enables us to
build an unrivalled skillset and
level of experience, equally
available to the smallest and largest
of our clients.
Our strong financial standing has
also been increasingly important
for many clients who prefer not
to work with the smaller market
players, particularly in times of
economic uncertainty. Temporary
staff also derive comfort from our
financial strength that their salaries
will be paid.
PageGroup’s culture is unique in
the sector and has ingrained values
of how to do business properly,
ethically and to make decisions for
the long term.
It is a global culture that delivers a
consistent approach both internally
and externally, while being accepting
of the particular character of each
local market. The global nature of
the culture is aided by a high degree
of management mobility.
It is reinforced through our
consultant training programmes,
the processes by which we do
business, and our team-based
approach which is at the heart of
everything we do. It also encourages
us to challenge ourselves with
confidence, and to respect the
successes of our colleagues.
See page 13 for a case study
on one of our High Potential
Markets in 2015
See more on our culture in
Our Employee Value Proposition
on page 25
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ANNUAL REPORT 2015 Chairman’s Introduction
2015 Performance
This was another year of continued growth for the Group. In
2015 we have seen outstanding performances in some of our
businesses such as North America which grew 18% in constant
currencies and Southern Europe which grew over 28%. In total,
20 countries achieved growth rates of over 10% with 17 countries
including the US, Greater China and Japan having record years.
Gross profit in 2015 was £556.1m, an increase of 9.3% in
constant currencies and 4.4% in reported rates. Operating profit
grew 20% in constant currencies and basic EPS rose over 10%.
However, the performance of Brazil and Australia was once again
impacted by difficult trading conditions. The macroeconomic
environment in Brazil, in particular, continues to impact our growth
rates with negative growth in constant currency of 23% in 2015.
In the fourth quarter, we also saw trading conditions deteriorate
in a number of our markets, particularly the UK, Asia Pacific, and
the Middle East. Although it was pleasing to see continued strong
performances in Europe, our largest region, North America and
Latin America (excluding Brazil).
We continue to invest in and see encouraging growth from our
five Large High-Potential Markets, namely the US, Germany,
South East Asia, Greater China and Latin America. In 2015,
collectively they grew 9% in constant currency in the year and
now represent 31% of Group gross profit.
David Lowden
Chairman
“
Another year of positive
growth and development
across the Group
”
Although we have achieved strong double digit growth in
constant currency in regions such as North America and Europe,
foreign exchange continues to impact our reported results, with
gross profit £26m lower and operating profit £4m lower due to
the impact of foreign exchange rates.
We have continued to increase headcount, not only in our large
high potential markets, but also those regions where market
conditions support investment. As a consequence, we finished
the year with 4,484 fee earners, a record for the Group. We also
finished the year with a record fee earner to support staff ratio of
77:23, reflecting our continued focus on the cost base.
We have made good progress towards implementing a
European Shared Service Centre. As well as improving quality
and consistency, through improved operational efficiency, it is
anticipated that this will lead to cost savings in 2017 and beyond.
The implementation of the European Shared Service Centre is an
important step towards achieving our new operational to support
staff target ratio of 80:20.
The PageGroup leadership team also continues to make progress
on the strategic priorities. Expanding the Property & Construction
disciplines into countries such as the USA and Switzerland, and
Sales into Japan and Malaysia, enables us to grow our market
presence. During 2015, we have also continued to roll-out
our new Page Recruiting System (PRS), and as at the end of
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ANNUAL REPORT 2015 December 2015, around 85% of our fee earners were on the new
system. Initial feedback has been very positive, with consultants
benefiting from the enhanced speed and functionality of the new
system. Each PRS roll-out also sees the introduction of our next
generation website to that country, one part of our approach to
ongoing candidate acquisition. LinkedIn is another significant
channel for us to acquire candidates and clients. We are therefore
very proud that LinkedIn named PageGroup as globally the Most
Socially Engaged Recruiter in 2015.
One of the key factors of our continued success is the retention of
our talented people. It is therefore pleasing that the work we have
undertaken on our Employee Value Proposition has once again
improved retention rates and increased management mobility. The
importance of the willingness of our staff to move to the business
where they can add most value cannot be underestimated and
their continued dedication is greatly appreciated. This focus
on staff retention, mobility and development has enabled us to
improve productivity in constant currency and conversion rates.
We took the very difficult decision in 2015 to close our Russian
business. Every one of our businesses must have the ability to
achieve a minimum conversion rate of 30%. Having reviewed the
Russian market, we did not believe this was achievable in the
short or medium-term.
Continued focus on our highest potential markets, the roll-out of
new disciplines, increasing headcount where market conditions
support investment and investment in the skills of our people
will enable us to achieve longer term growth and deliver robust
shareholder returns.
Dividend
In 2015 we returned £50m to shareholders by means of a special
dividend, the first time we have returned cash in this way. The
Group’s first use of cash remains to satisfy operational and
investment requirements, as well as hedging its liabilities under
the Group’s share plans. Our second use of cash is to make
returns to shareholders by way of an ordinary dividend. Cash
generated in excess of these first two priorities will be returned
to shareholders through supplementary returns, using special
dividends and/or share buybacks. Historically, the Group has
returned cash to shareholders through share buybacks and
cancelling the shares. Over the 14 years since flotation, the Group
has returned over £275m by share buybacks and cancelled
around 30% of its issued share capital. This is on top of almost
£300m of ordinary dividend payments during the same period.
Our ordinary dividend policy is to grow the dividend over the
course of the economic cycle in line with our long-term growth
rate. In this way we can sustain the level of dividend payment
during downturns, as well as increasing it during more prosperous
times. In 2015 we generated cash from underlying operations
of £101.6m and ended the year with cash balances of £95.0m.
Given this cash position and our results for the year, we propose
to increase the final dividend to 7.9p. When taken together with
the interim dividend paid in October of 3.6p, this implies a total
increase of 4.5% on 2014.
Board
At the end of 2015, the previous Chairman, Robin Buchanan,
decided to step down, having served on the Board since August
2011. On behalf of the Board, I would like to thank him for his
leadership and his many contributions to the success of our
company.
Following Robin’s departure, I was appointed Chairman of
PageGroup and Chairman of the Nomination Committee with
effect from 31 December 2015 and Danuta Gray was appointed
Chair of the Remuneration Committee also with effect from
31 December 2015.
In August this year we also welcomed Patrick de Smedt onto the
Board. Patrick is an experienced Non-Executive Director who
has built an international business career in multiple countries. He
has deep experience in leading people, and brings considerable
knowledge of the importance of social media and information
technology to a business like ours.
Your Board remains diligent in both supporting and challenging
the executive team’s strategy recommendations and their
responses to changing market conditions. Full details of the work
of the Board and subjects discussed in the year are set out in the
Directors’ and Committees’ reports. For information on Board
priorities please see page 59.
Board members have considerable experience of working
internationally in different parts of the world. Indeed, the Board
has a good mix of relevant skills, experience, gender and
backgrounds. This diversity is of great benefit to the business.
Strategic Report
This report sets out PageGroup’s strategic vision and how we
address the various markets and the opportunities before us.
We have highlighted areas which are critical to achieving this
vision, such as our Employee Value Proposition shown on page
25. The report also details our approach to corporate and social
responsibility, including how we engage with our stakeholders.
Looking Ahead
The investment in the PRS system and additional headcount in
our growth markets in 2015 will enable us to continue to build
profitable growth in 2016. However, while the global outlook
remains mixed, we will continue to increase our investment in
growing markets and actively manage our exposure in those
markets which remain challenging.
Last, but by no means least, on behalf of the Board I would like
to thank our people. PageGroup is a people business with a clear
and tangible culture. Our staff are dedicated, hard working and
committed to the Brand. They have a very strong team ethos
which is evident in everything we do. Thanks to them, over the
last 39 years we have achieved great things. I have no doubt that
together, we will achieve many more.
4
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ANNUAL REPORT 2015 Strategic Framework
Business Model
We have had a consistent business model for 39 years
founded on the principle of team-based service delivery and
reward, rather than by individual consultant. The reward
model is structured to ensure a focus on profit rather than
just revenue generation, which helps drive operational
efficiencies throughout the business.
Management experience and resource mobility are both
valued highly. They are also key to achieving organic growth,
with PageGroup able to offer its consultants a structured
path throughout a highly rewarding career.
See page 1 for more on our business model
Career
development
structure
Agile and
responsive
Global
management
mobility
Organic
Growth
Team
profit-led
compensation
Experienced
management pool
Productivity-led
expansion
Objectives
Diversified
organic
growth
Scalable
and flexible
capacity
Talent
and skills
development
Sustainable
growth
Diversification helps
to mitigate the cyclical
nature of the recruitment
markets, which for us
is combined with high
operational gearing
given our permanent
recruitment bias.
Our broad-based
capabilities enable us
to capitalise on market
opportunities across
the globe, avoiding
over-reliance on any one
geography or discipline.
The ability to respond
quickly to changing
market conditions is
critical to managing
the business efficiently
throughout economic
cycles.
We ensure that we
always have the ability to
flex our capacity up and
down, while maintaining
a core presence in each
market to service clients
properly and retain
management experience
to enable a quick
recovery.
Our business is reliant on
having the experience to
manage the challenges
and identify the
opportunities across our
local markets.
Our scalability is
dependent on having
the right people available
to grow the business
and nurture the next
generation.
The combination of
these objectives has
enabled PageGroup to
deliver strong cash flows
and have the financial
strength to prosper
through economic
cycles.
It also gives the resilience
to cope with market
downturns without
damaging the business’s
long-term prospects.
See page 21 for more on our
business sustainability
5
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ANNUAL REPORT 2015 Strategy
Our strategy aims to fulfil our vision of being the leading specialist recruiter in each of the markets in which we operate.
Our service offering is spread across a broad set of disciplines and geographies, focusing on opportunities where our
industry and market experience can set us apart from the competition. Operating in 35 geographies and in highly diverse
cultures, we have established three categories into which we have grouped each of our markets based on criteria including
the size of the opportunity and the potential for future growth. This structure has provided a clear investment framework for
the business.
We categorise our markets as follows:
Large, High
Potential Markets
Typically under-developed
markets, but where we have
a successful track record and
confidence in our ability to scale
our operations substantially.
See page 11 for more on our strategic plan
Large, Proven
These are large markets where we
are already proven with a strong
track record and a significant
presence.
Small and Medium,
High Margin
Markets which are, or could be,
significant profit contributors with
attractive conversion margins, but
are unlikely (or not yet proven) to
be able to grow to more than 300
fee earners.
How We Measure Our Performance
PageGroup measures itself against a range of financial and non-financial performance metrics, and monitors a number of
related risk indicators. Our full KPIs are set out on pages 15 to 18.
Set out below are those metrics which have been identified as being aligned with the categories identified by the
Remuneration Committee as appropriate for the assessment of the Executive Directors and senior team, and embodied
in the executive remuneration policy and plans currently in force. They encompass a broad range of areas, focused on
financial performance, strategy and people development.
KPIs
Risks
Remuneration
Financial
- Gross profit growth
- Conversion rate
- Macro downturn
- FX on reported rates
EPS growth:
- three year: cumulative
Strategic
- Gross profit diversification
- Fee earner headcount
- Fee earner: operational support
- Business model
- Delivery of operational
efficiencies
- Strategic plan milestones
- IT transformation
People
- Management experience
- Employee index
- Management development
- Attraction/retention
- Leadership development
- Retention/succession
See the Directors’ Remuneration Report on pages 67 to 79
6
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ANNUAL REPORT 2015 Strategic Review
I would like to welcome you to our
Strategic Review, where we have
outlined how we see current market
dynamics, together with PageGroup’s
business model and strategy.
Over these pages, I will take you through where we see our
competitive advantage; how this relates to our strategic plan; and
then following on from this, how we approach our investment plan
in our markets. We continue this year to provide linkage as to how
we measure performance, through our KPIs – both financial and
non financial – together with the related risks. These risks then
directly relate to the three elements (financial, strategic, people) of
the performance criteria of our current executive remuneration plan.
Steve Ingham
CEO PageGroup
Global Vision
At PageGroup we have a clear strategic vision: to be the leading
specialist recruiter in the markets in which we operate. We have
sought to achieve this by developing a significant market presence
in major global economies, as well as targeting new markets where
we see the greatest potential for long-term growth in gross profit at
attractive conversion rates.
We offer our services across a broad set of disciplines and
specialisations, solely within the professional recruitment market.
Our origins are in permanent recruitment, but nearly 25% of the
business is now temporary placements, where local culture and
market conditions make this attractive. We focus in particular on
opportunities where our industry and market expertise can set us
apart from the competition. That enables us to offer a premium
service which is valued by clients and attracts the highest calibre
of candidates.
Strategic Framework
PageGroup is focused on delivering against three key objectives to
achieve its strategic vision and sustainable financial returns. These
are 1) to look for organic and diversified growth; 2) to position
the business to be efficiently scalable and highly flexible to react
to market conditions; and 3) to nurture and develop our people,
driving our meritocratic growth model.
Our consistent business model has organic growth as its
cornerstone. As set out on page 1, key elements of our business
model are derived from this team-led approach, with great value
placed on structured career development and the value that
experienced management brings to the business.
“
At PageGroup we have a clear
strategic vision: to be the leading
specialist recruiter in the markets
in which we operate.
”
7
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ANNUAL REPORT 2015 Our Value Proposition
Our value proposition is centred around expertise and specialism, and for this to be delivered in a consistent manner and supported by
high quality processes. As shown in the chart below, when these elements are brought together, the potential for a successful outcome for
both client and candidate is maximised. Such successes enhance our reputation; bring greater repeat business; and turn candidates into
clients and vice-versa.
O U R M O DEL AT WORK
Leads to...
• Repeat business
• Greater exclusivity
• Future candidates
Clients
• Sector expertise
• Appropriate candidate
shortlist
• Professional high quality
service
Consultants
• Team-based structure and
compensation
• Access to jobs across entire
PageGroup
• Consistent process
Candidates
• Professional high quality
service
• Market understanding and
client profiling
• Career advice
Leads to...
• Rapid career promotion
• Career opportunities
• Reward and recognition
Leads to...
• Career-long relationship
• Peer recommendations
• Future client
• Specialist industry and market knowledge
• Global reach, with deep local knowledge
• Expertise in premium candidate sourcing
• Experienced advocate for client and candidate
• Consistent, high quality processes
People and Management
Our business model provides us flexibility and agility, which
together with the significant loyalty of the management team,
allows the business to progress, even in uncertain markets. Our
consultants quickly come to understand that we can offer more
than a long term and fulfilling career in recruitment. We encourage
our star performers to expand their horizons through career moves
to both new disciplines and new regions, allowing them to broaden
their experience, but also their value to the Group. They know how
greatly we value the experience acquired throughout their career,
and as such our management team has some of the longest
tenure and experience in the industry. Moreover, the mobility of our
people greatly enhances the flexibility of our business model.
Due to this constant depth of talent that is available to the business,
the senior executive team can flex the business exposure to any
of our markets, both up and down, according to prevailing market
conditions and take decisions as to where PageGroup can achieve
the greatest return on investment from allocation of management
resource.
8
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ANNUAL REPORT 2015 Strategic Review
Market Dynamics
Professional recruitment has always been highly sensitive to
prevailing economic conditions, together with client and candidate
confidence. Market liquidity can change rapidly, whether in terms
of availability of jobs and candidates, or candidate confidence in
taking the next step in their career. It can also be very localised,
whether by geography or discipline, and differ between temporary
and permanent placements in the same market.
Strategic Plan
In 2013, PageGroup put in place a Strategic Plan which defined
its aspirations within various markets. It has provided a disciplined
framework to focus investment plans on geographies with the
greatest long-term potential, and to help structure the career
moves of the rising stars in the business. A portion of the Directors’
remuneration is also linked to the performance against milestones
within this Plan, and its overall achievement.
PageGroup therefore has a well-balanced business profile,
in order to mitigate the exposure to any one revenue stream.
This strategy requires us to operate in very diverse markets,
each with a particular recruitment culture, such as the degree
to which temporary placement opportunities are acceptable to
professionals. Other aspects of this culture include the degree of
outsourced recruitment undertaken, as opposed to in-house by
HR departments.
In a number of geographic regions, such as Latin America or
Greater China, our potential markets are very large yet relatively
immature. This provides significant market share opportunities,
but also business development challenges. New markets can take
time to crack, but the advantages of being an early participant and
building scale can be considerable.
PageGroup views certain key features as defining a particular
recruitment market profile, as set out in the table below and
categorised by the proportion of roles filled through a recruitment
agency (“market penetration”).
The challenges to achieving a significant market position vary
across markets, as does their attractiveness to PageGroup.
These features, when taken together with PageGroup’s historic
success in a particular market, helped define the Strategic Plan
and to identify which geographies would have the highest potential
for long-term success.
An essential part of the development of this Plan was to review the
markets in which PageGroup operated, and to identify which had
the greatest potential and likely future impact on Group revenue.
Set out on page 11 is an explanation of these categorisations and
our approach to these different markets.
Our market categorisation has provided the business with a
framework within which investment decisions can be judged,
and guidance as to where management expertise and fee earner
headcount is best placed. These decisions are continuously
reviewed in order to best align them to the business needs and
the prevailing market environment, which is often fast moving and
highly dynamic.
Operational Efficiency
PageGroup is very aware of the need for high levels of operational
efficiency in a recruitment business, and especially one with such a
global footprint. Central to the strategic objective of scalable growth
and flexibility through the cycle is for this to be achieved while
controlling the fixed asset base.
We have a relentless focus on sharing best practice across the
Group as a way to enhance the quality and consistency of the
service offering. In this way we can capture and leverage skills
and expertise for the benefit of the whole Group. We are then
also able to centralise many of the support functions into regional
service centres, while maintaining the robustness of the operational
platform.
Emerging
Developing
Mature
Market penetration
0-15%
15-30%
30-70%
Over 70%
Competition
Limited international
operators present
Few well-established
regional players
Examples
LatAm, SE Asia
Germany, China
Well developed markets
with many international
operators
Highly competitive
France, Australasia,
Holland, Spain, Italy
UK, US
9
PB
ANNUAL REPORT 2015 Market Drivers of PageGroup Performance
As well as the influence of the general macro-economic environment on business activity, there are a number of specific market-based
drivers which can materially impact PageGroup’s financial performance. These are split into elements which affect market liquidity and
those which influence gross profit and consultant productivity. It is the nature of the professional recruitment market that strong market
conditions will see drivers in both elements rapidly align, and this has a dramatic impact on PageGroup’s overall performance and
conversion margins.
Impact
Comment
Financial Impact
Candidate shortages
Often highly discipline/geography-specific, especially at midpoints in the cycle
as client confidence grows. This is a key driver of most other elements, as
the quality of a recruiter is most clearly demonstrated through their ability to
source difficult-to-find candidates.
Candidate confidence
A major influence on market liquidity where macro-environment is sufficiently
stable, candidates will look to progress their careers, which helps to drive job
liquidity.
Fees/rates
Group average historically moves within a 10% range over the cycle
(19.5%-22%).
Wage inflation
Reflects level of candidate shortage and liquidity within a particular discipline
or geography, plus macro-economic conditions.
Time to hire
As candidates become scarcer, companies reduce the number of interviews
and shorten the decision making process in order not to lose preferred
candidates.
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Mainly visible through
improvement in gross profit,
but a buoyant market helps to
drive productivity, principally
through reducing the time
to hire.
Notable influence
on both gross profit and also
conversion rate. Productivity,
especially in permanent
recruitment, is significantly
enhanced as these market
drivers positively align.
Our 2015 Achievements
PageGroup made good progress against its three strategic
objectives in 2015. With additional disciplines rolled out in both the
Michael Page and Page Personnel brands, the business continued
to grow its market presence in core target areas.
Growth was in temporary as well as permanent recruitment
segments, further diversifying the service offering. At the end of
2015, the fee earner and total headcount was at record levels for
the Group. This was achieved together with the continued best
operational support ratio to date, reflecting operational efficiencies
delivered within the business.
As well as progress in headcount and market presence, there has
been a strong focus on operational flexibility across the Group. The
technology upgrade and our new Page Recruitment System was
rolled out to 85% of our fee earners, ahead of our target of 80%.
This will offer significant benefits to consultants in their day-to-day
activities and provide for expansion flexibility and efficient future
upgrades, together with lower maintenance costs.
Finally, further work on YourPage, our Employer Value Proposition
programme has looked to provide greater clarity of individual
career paths, and to increase retention of identified talent at key
career points and in key markets.
10
PB
ANNUAL REPORT 2015
Strategic Review
How we categorise the markets
In 2013, PageGroup categorised each of its markets around the
globe based on criteria such as the potential for future growth. This
growth potential was assessed on a combination of: expectations
for economic growth; size of the existing PageGroup operations
relative to the market; and competitive landscape.
The outcome was three categories (as set out in the table to the
right), into which the 35 geographical markets in which we operate
were placed: five markets were identified as Large, High Potential
markets. These include the large economies of the US, Germany
and Greater China, together with the regions of Latin America and
South East Asia. Typically under-developed from a recruitment
perspective, each satisfied key criteria, including:
• Positive PageGroup track record;
• Ability to adapt PageGroup culture to local culture;
• Ability to hire and retain local consultants;
• Ability to roll-out disciplines and open offices;
• Attractive conversion rate potential; and
•
Large-scale economies.
Six historically successful geographies were categorised as Large,
Proven, reflecting the fact that PageGroup had, within the
last economic cycle, operated substantial businesses in each.
While currently below peak levels, they have a proven track record,
and, as a group, the potential to return to historic high levels –
albeit with a different mix of headcount and disciplines.
Finally, the remaining businesses were categorised as Small
and Medium, High Margin. This reflects the fact that each
individually will not have the scale or potential to be a significant
contributor to gross profit. However, they each offer the prospect of
attractive margins and include countries with some of the highest
fee rates and conversion margins in the Group. Within this category
are three markets – Japan, India and Africa – that all have the long-
term potential to achieve Large, High Potential status.
Investment Approach
The market categorisation provides an investment framework for
the business. Investment comes in a range of forms including
headcount, new offices and infrastructure, marketing spend and
minimum levels of market presence through the economic cycle.
Large,
High Potential
Substantial, high potential markets
for recruitment. Typically under-
developed, but where PageGroup
has a successful track record, and
confidence in its ability to successfully
scale operations.
Germany, Greater China,
Latin America, South East
Asia and the US.
Sustained investment through cycle -
adding headcount/offices/disciplines.
Create a market leading network of
offices, management and headcount.
c. 40% of Group gross profit/fee
earners; 30% conversion rates.
Gross profit growth of 9%, strong
growth in the US, development of the
German temp business. Conditions
difficult in Brazil.
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Continue investment in new
headcount and management team,
while improving conversion rates.
11
PB
ANNUAL REPORT 2015
Large,
Proven
Small and Medium,
High Margin
Large markets in which PageGroup
is already proven with a strong track
record and a significant presence.
Have been or could be significant
profit contributors for PageGroup,
but not likely to be in excess of
300 fee earners.
CATEGORISATION
UK, France, Australia,
the Netherlands, Italy
and Spain.
Japan, Middle East, Africa,
India, Canada, Turkey and
other European countries.
EXAMPLES
Investment reflects gross profit
growth and market conditions.
Respond to market conditions, focus
on high margin opportunities.
INVESTMENT
APPROACH
Collectively return to 2007 peak levels
of operating profit & conversion rates;
equivalent to c. 45% of Group gross
profit/ fee earners.
Investment responsive to market
conditions. Expected to represent
c.15% of Group gross profit/fee
earners; 30% conversion rates.
Continued roll-out of new disciplines
within the office network.
Gross profit records in eight
countries, improving profitability.
Conditions difficult in the Middle
East.
STRATEGIC
PLAN
2015
RESULTS
Utilise capacity to drive productivity,
improving conversion rates in the
process.
Focus on growth and improving
conversion rates.
2016
PLAN
12
PB
ANNUAL REPORT 2015 Large, High Potential Markets
Maximising Growth Markets:
Large, High Potential Markets – a case study
USA
13
PB
ANNUAL REPORT 2015 2015 was a record breaking year for our Large, High Potential
Markets, both as a whole and for three of the constituent regions,
namely the US, Greater China and South East Asia. Our Large
High Potential Markets now account for nearly 31% of the Group,
up from 23% five years ago, with 50 offices and nearly 1,500 fee
earners. We have also seen an improvement in our conversion
rate for these markets, with conversion in 2015 of 14.8%, an
increase of over two percentage points from 2014. This is further
increased to 17% excluding Brazil.
Greater China saw 11% growth in 2015 with a five year
compound annual growth rate of 20%, during which time it
became PageGroup’s third largest market. Our offices in Hong
Kong, where we are clearly the largest international recruiter
with the broadest penetration of the market, and Taipei, had
record years but we saw good growth in all our locations as we
continued to build on our market-leading capabilities. We saw in
2015 a lower dependency on multinationals as we focused on
gaining greater penetration of the domestic market. Our Page
Personnel businesses in China saw 17% growth in the year, with
80% growth for our temporary business.
Germany enjoyed 14% growth in 2015 and by the end of the
year we had just under 275 fee earners, a five year compound
annual growth rate of 15%. Page Personnel Germany and Michael
Page Interim each had a record year, as our temporary business
saw 35% growth in the year, to account for over one third of
Germany’s Gross Profit. We are now beginning to see a return
from the significant investment we made in our German temporary
business.
Our Latin America region, where we are the market leader, was
impacted by Brazil, which saw a decline of 23% in Gross Profit
over 2014 due to the political and economic uncertainty in the
country. However, the other five countries (Mexico, Argentina,
Colombia, Chile and Peru) collectively saw growth of 29% and all
enjoyed record years. Mexico, which grew over 30% in the year,
is now approximately two thirds the size of Brazil.
In our South East Asia region, Malaysia and Indonesia enjoyed
record years but tougher market conditions in Singapore and a
slowdown in the fourth quarter in Malaysia limited growth over
2014 to less than 2%. The five year compound annual growth
rate, however, remains robust at 20%, with fee earner headcount
nearly tripling in the last five years.
TOTAL
USA
50
Offices
8
1,447
12%
9%
14%
Fee earners
2015
Fee earners
2009-15 CAGR
Gross profit
2015 vs 2014
Gross profit
2010-15 CAGR
255
8%
19%
16%
The US had a record breaking year in 2015, up 19% and enjoyed
a five year compound annual growth rate of 16%. The country
closed the year with 255 fee earners in eight offices. This is up
from 175 fee earners in 2010, a compound growth rate of 8%.
Stamford and New Jersey offices both saw 2015 growth of over
20%. From a lower base, temporary recruitment grew 20% in
2015 and represents a significant potential market across all of
our locations.
Our New York office, which saw 26% growth, is our largest office
and has a strong presence in the Financial Services sector, with
our Finance, Legal and Marketing disciplines also making strong
contributions to the gross profit of the office. This growth has led
us to move office locations to give the opportunity to invest in our
fee earner headcount and maximise this growth opportunity. Our
new location adds c. 50% to our New York fee earner capacity.
Our Chicago office had a record year, up 13% and has laid a
strong platform for future growth in a market with huge potential.
Boston, whilst flat for the year, has turned a corner under new
management. Los Angeles, which nearly doubled in 2015, and
has further potential. Our Houston office suffered from the tough
market conditions in the Oil and Gas market, but our consultants
adapted to develop new skills and new market knowledge. Our
We continue to focus on our staff retention in the region and to
continue to diversify our business to increase the proportion of our
fee earners operating outside New York and outside the traditional
disciplines. The implementation of our new PRS operating system
and a move towards shared services with the UK emphasised
the continued development and improvement of the infrastructure
needed to support front office growth and further raise our
conversion rate.
We have significant scope for growth in our current locations and
while we have no plans to open new offices this year, we see the
US as a significant opportunity for growth going forward. We have
a strong and increasingly experienced management team and we
are starting to achieve sufficient scale in our operations to drive
future profitability.
14
PB
ANNUAL REPORT 2015 Key Performance Indicators
We measure our progress against our strategic objectives using the
following key performance indicators:
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F
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Gross profit growth (%)
4.4
3.7
2015
2014
2013
2012
-4.9
2011
-2.5
How measured: Gross profit growth represents revenue less cost of sales expressed as the
percentage change over the prior year. It consists principally of placement fees for permanent
candidates and margin earned on the placement of temporary candidates.
Why it’s important: This metric indicates the degree of revenue growth in the business.
It can be impacted significantly by foreign exchange movements in our international markets.
Consequently, we look at both reported and constant currency metrics.
How we performed in 2015: Gross profit increased 4.4% in reported rates, 9.3% in constant
currencies, as adverse currency movements impacted on the full year figures.
25.2
Relevant strategic objective: Organic growth.
Gross profit
diversification (%)
72.7%
60.4%
Ex-UK
Ex-Finance
&
Accounting
2011
2012
2013
2014
2015
n Ex-UK
n Ex-Finance
76.5
55.2
77.0
58.1
75.9
58.8
74.0
60.3
72.7
60.4
Basic earnings per share
pre-exceptional items (p)
2015
2014
2013
2012
2011
15.1
13.6
Net cash (£m)
2015
2014
2013
2012
2011
61.4
58.2
21.3
18.4
18.7
95.0
90.0
85.4
How measured: Total gross profit from a) geographic regions outside the UK; and b) disciplines
outside of finance and accounting, each expressed as a percentage of total gross profit.
Why it’s important: These percentages give an indication of how the business has diversified
its revenue streams away from its historic concentrations in the UK and from the finance and
accounting discipline.
How we performed in 2015: Geographies: the percentage fell slightly to 72.7% from 74.0% in
2014, but still demonstrated a high degree of diversification. This decline reflects the continuing
degree of economic recovery felt in the UK, along with the strength of Sterling.
Disciplines: The percentage remained broadly flat at 60.4% (2014: 60.3%), as our newer
disciplines of Legal, HR, IT and Secretarial, performed strongly, with good growth from our core
Finance discipline.
Relevant strategic objective: Diversification.
How measured: Profit for the year attributable to the Group’s equity shareholders, divided by the
weighted average number of shares in issue during the year; and compared to the prior year.
Why it’s important: This measures the underlying profitability of the Group and the progress made
against the prior year.
How we performed in 2015: The Group saw a 15.8% rise in pre-exceptional EPS to 21.3p, which
represented a 10.4% rise in post-exceptional EPS. Despite the impact of adverse foreign exchange
movements which lowered the Group’s EPS by one percentage point in the year, improvements in
trading, as well as our improved conversion rate, drove strong growth in the Group’s EPS in 2015.
Relevant strategic objective: Sustainable growth.
How measured: Cash and short-term deposits less bank overdrafts and loans.
Why it’s important: The level of net cash reflects our cash generation and conversion capabilities
and our success in managing our working capital. It determines our ability to reinvest in the
business, to return cash to shareholders and ensure we remain financially robust through cycles.
How we performed in 2015: After an increase in cash paid on ordinary dividends of 7% and a
further £50m paid as a special dividend, net cash rose to £95m from £90m.
Relevant strategic objective: Sustainable growth.
15
PB
ANNUAL REPORT 2015 Ratio of Permanent vs
Temporary placements
Gross Profit
2011
2012
2013
2014
2015
n Permanent
n Temporary
79
21
78
22
76
24
76
24
76
24
How measured: Gross profit from each type of placement expressed as a percentage of total
gross profit.
Why it’s important: A guide to the operational gearing potential in the business, which is
significantly greater for permanent recruitment.
How we performed in 2015: The ratio was flat at 76.2%, with strong growth in temporary
placements in our more mature markets matched by permanent fee growth at lower salary levels in
both mature and less developed markets.
Relevant strategic objective: Diversification.
Fee earner
headcount growth (%)
4.8
5.1
12.3
2015
2014
2013
2012
-4.6
2011
16.0
Gross profit per
fee earner (£’000)
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C
G
E
T
A
R
T
S
2015
2014
2013
2012
2011
126.8 132.7
130.3
139.2
140.4
How measured: Number of fee earners and directors involved in revenue-generating activities at
the year end, expressed as the percentage change compared to the prior year.
Why it’s important: Growth in fee earners is a guide to our confidence in the business and
macro-economic outlook, as it reflects expectations as to the level of future demand above the
existing capacity within the business.
How we performed in 2015: Fee earner headcount grew at 4.8% in the year, resulting in
4,484 fee earners at the end of the year, a record for the Group.
Relevant strategic objective: Sustainable growth.
How measured: Gross profit divided by the average number of fee generating staff, calculated
on a rolling monthly average basis.
Why it’s important: Our indicator of productivity; affected by levels of activity in the market,
capacity within the business and the number of recently hired fee earners who are not yet at full
productivity. Currency movements can also impact this figure.
How we performed in 2015: In reported rates, the ratio fell to £126.8k from £130.3k.
However, in constant currency it increased to £132.7k, despite the level of fee earners added
and the greatest level of activity being at lower salary placement levels.
149.5
Relevant strategic objective: Organic growth.
Fee earner: operational
support staff ratio
2011
2012
2013
2014
2015
n Fee earner
n Support
72
28
71
29
74
26
77
23
77
23
How measured: The percentage of fee earners compared to operational support staff at the
year-end, expressed as a ratio.
Why it’s important: This reflects the operational efficiency in the business in terms of our
ability to grow the revenue-generating platform at a faster rate than the staff needed to support
this growth.
How we performed in 2015: The ratio remained at the record 77:23, in line with 2014. This
was facilitated by operational efficiencies achieved in the business that enabled 4.8% fee earner
headcount growth. The ratio of joiners in the year was 80:20.
Relevant strategic objective: Sustainable growth.
Conversion rate before
exceptional items (%)
How measured: Operating profit (EBIT) before exceptional items expressed as a percentage
of gross profit.
Why it’s important: This reflects the level of fee earner productivity and the Group’s
effectiveness at cost control in the business, together with the degree of investment being
made for future growth.
16.2
2015
2014
2013
2012
2011
16
14.7
13.3
12.4
15.5
How we performed in 2015: The Group conversion ratio improved 1.5 percentage points, to
16.2% from 14.7%, helped by the business achieving a record fee earner to support staff ratio,
as well as enjoying improved activity levels. The lower conversion rate of 14.5% in constant
currency in the Large, High Potential Markets was a reflection of higher headcount growth, as
well as continued challenging trading conditions in Brazil.
Relevant strategic objective: Sustainable growth.
PB
ANNUAL REPORT 2015 Key Performance Indicators
Employee index
How measured: A key output of the employee surveys undertaken periodically within
the business.
Why it’s important: A positive working environment and motivated team helps productivity and
encourages retention of key talent within the business.
How we performed in 2015: We recorded an 81% positive score for Employee Engagement in
the latest Employee Survey in 2015 (2014: 75%). This was a combination of questions including:
how valued our people felt; how proud they were to work for PageGroup; and the level of trust and
recognition they received for their work.
Relevant strategic objective: Sustainable growth.
81%
Positive
engagement
score
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L
P
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Management experience
How measured: Average tenure of front-office management measured as years of service for
directors and above.
2015
2014
2013
2012
2011
11.2 years
10.8 years
11.1 years
10.5 years
10.6 years
Why it’s important: Experience through the economic cycle and across both geographies and
disciplines is critical for a cyclical business operating across the globe. Our organic business
model relies on an experienced management pool to enable flexibility in resourcing and senior
management succession planning.
How we performed in 2015: The average tenure of the Group’s management increased from
10.8 years to 11.2 years, with a particular increase in the UK.
Relevant strategic objective: Talent and Skills development.
Total GHG emissions
Total energy derived emissions
(CO2e tonnes)
Source of emissions
Direct GHG emissions
Indirect GHG emissions
2014
1,395
4,742
2015
1,527
4,935
How measured: Direct and Indirect GHG emissions calculated in line with UK Government’s
2014 DEFRA reporting standards. Principally based on data from our 20 largest offices, covering
approximately 44% of the Group by headcount, and extrapolated for the Group as a whole.
Why it’s important: The emissions calculations look at the CO2e impact of our operations in
absolute terms.
How we performed in 2015: Direct GHG emissions relating to the combustion of fuel increased
by 9.5% to 1,527 tonnes CO2e, while Indirect GHG emissions, through the purchase of energy
such as electricity, rose by 4.1% to 4,935 tonnes.
Relevant strategic objective: Sustainable growth.
Intensity values of
GHG emissions
CO2e tonnes per 1,000 employees
2014
2015
Energy derived emissions
1,115
1,118
Business travel (air, car and rail)
related emissions
507
463
How measured: Intensity values for GHG emissions are based on property and vehicle energy-
derived emissions per 1,000 headcount. Headcount is viewed as being the most representative
metric for PageGroup’s activity levels.
Why it’s important: Intensity values help to normalise the GHG metrics and place them in the
context of the Group’s changing business profile, particularly in terms of increases in headcount. It
helps to identify where progress has been made on emission reduction.
How we performed in 2015: Energy derived emissions increased by 0.2% and business travel
related emissions fell by 8.7%, in part due to a continued Group-wide focus on reduction in travel
late in 2014 and during 2015, and an increase in Group headcount of just over 4% in the year.
Relevant strategic objective: Sustainable growth.
The source of data and calculation methods year-on-year are on a consistent basis. The movements in KPIs are in line with expectations.
I
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H
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17
PB
ANNUAL REPORT 2015
Greenhouse Gas Emissions (‘GHG’)
In line with the requirements of the Companies Act 2006 (Strategic
Report and Directors’ Report Regulations), PageGroup reports
on all direct greenhouse gas (GHG) emissions (relating to the
combustion of fuel and the operation of any facility, together with
any fugitive emissions); and indirect GHG emissions (through the
purchase of electricity, heat, steam or cooling).
Intensity values
The intensity values are based on property and vehicle energy
derived emissions per 1,000 headcount. This was chosen as being
most representative of the Company’s activity levels, and being
unaffected by issues such as business mix or foreign exchange
variations. The intensity value of 2015 emissions increased by
0.2% compared with 2014.
In addition to the mandatory reporting of emissions, we also
calculated our business travel related emissions, and the intensity
of emissions for 2014 and 2015.
Since 2014, we have gathered energy data from our major offices.
This is in conjunction with our environmental policy which focuses
on implementing efficiency measures in our offices to reduce
energy consumption and carbon emissions. As a result, for the
2014 emissions reporting, we reviewed all our 2013 data as well as
enhancing the quality of our 2014 data collection. The 2015 data
collection has continued this process. In order to provide improved
consistency between the 2014 and 2015 data, the calculations
behind the 2015 data have been revised.
Emissions have been calculated in line with the 2015 DEFRA
reporting standards, and calculated using the UK Government
conversion factors for Company Reporting produced for DEFRA
and DECC.
Property energy emissions (direct emissions relating to gas and
fuel oil and indirect emissions relating to electricity) derived from
consumption in properties directly under the Group’s control have
been calculated by using a sample of offices across the world
(including those for the entire UK business). These offices represent
44% of the global headcount in 2015. The emissions for the
remaining offices were calculated by extrapolating headcount.
Direct emissions from fuel consumed by Company owned or
leased vehicles were calculated using the fuel consumed by the
German based car fleet. This represents 12% of the Group’s global
car fleet of just under 1,100 vehicles. The German business has
one of the highest vehicle fleet per headcount in the Group. The
emissions for vehicles in other countries were calculated by first
extrapolating the fuel consumption of the German business per
vehicle and then calculating the resulting emissions.
There were no fugitive emissions related to refrigerants topped up
as part of air conditioning maintenance.
18
PB
ANNUAL REPORT 2015 Q&A
with Steve Ingham, CEO
Q. How do you use technology effectively in
the business?
A. At a high level, technology delivers speed and efficiency
for teams, boosting productivity. It also drives candidate
acquisition and gives management the tools to drive sales
on an ongoing basis.
Efficient use of technology to carry out the recruitment process
effectively allows the teams to spend more time working with our
clients and candidates to better deliver on their requirements. It
minimises the time they spend on administration, whether that
be searching, loading vacancies on job boards, or compliance.
In turn, this maximises their exposure talking to candidates
and clients with a system focused on streamlining processes,
resulting in an increase in productivity.
Technology also gives us easy access to visual KPI information.
These are on each manager’s homepage and each consultant
has their own KPIs, against which they monitor their
progression. These can be tailored to each consultant daily,
to ensure they are focusing on the relevant task needed to
deliver on their targets. Managers can track against targets set,
enabling them to manage performance effectively down to an
individual level with a sales focus.
Our greatest assets are our people. This real time data allows
us to manage them more effectively on a day-to-day basis and
develop them more quickly into great recruiters. We can quickly
identify a training need, for example, where a consultant making
100 business development calls, but not generating enough
new jobs, clearly needs training around the content of their
calls to ensure success. They benefit from the training via new
skills and increased remuneration, the Group benefits from a
motivated workforce and improved productivity.
19
PB
ANNUAL REPORT 2015 Q. What impact does disintermediation,
such as LinkedIn and social media have
on your business?
A. LinkedIn is another significant channel for us to acquire
candidates and clients, as well as an opportunity to build our
brands. Technology, including CV boards and networks like
LinkedIn, has driven a perception that everyone has equal
access to every candidate. Our skill at PageGroup is putting
the human initiative and contact back into that process, which
is crucial in such a candidate driven market. We know more
about our candidates than any publicly available data ever will:
their motivations; requirements; skills; personality; culture; style;
image and desires.
We were also very proud to receive an award from LinkedIn
in 2015, where we were named as globally the Most Socially
Engaged Recruiter in 2015. More people engage with our
content and presence on LinkedIn than any other recruiter.
Meaningful and relevant content allows us to interact everyday
with our potential and returning customers, providing the insight
they need to help them, but also helping us increase our brand
awareness and to build affinity so that we are their recruiter
of choice.
Q. Do you anticipate further special returns
to shareholders in 2016?
A. We continue to operate a policy of financing the activities
and development of the Group from our retained earnings and
to operate while maintaining a strong balance sheet position.
We first use our cash to satisfy our operational and investment
requirements, and to hedge our liabilities under the Group’s
share plans.
We then review our liquidity over and above this requirement to
make returns to shareholders, firstly by way of ordinary dividend.
Our policy is to grow this ordinary dividend over the course of
the economic cycle, in line with our long-term growth rate; we
believe this enables us to sustain the level of ordinary dividend
payments during a downturn as well as increasing it during more
prosperous times.
Cash generated in excess of these first two priorities will be
returned to shareholders through supplementary returns, using
special dividends or share buybacks. In 2015, after consultation
with our shareholders, we made a supplementary return of 16p
per share. We will continue to monitor our liquidity in 2016 and
will make returns to shareholders in line with the above policy.
Q. What do you consider the outlook to be for
2016 and what do you consider to be your
biggest challenge?
A. We are cautiously optimistic over the outlook for 2016.
There are macro-economic challenges in a number of our larger
markets and the current cycle is proving to be unpredictable in
nature. We have limited visibility of the economic outlook and as
such we will continue to focus on driving profitable growth, as
we have throughout 2015. Managing the business through this
economic volatility will be our key challenge for 2016, though I
am highly confident that we have the best management team in
place to do this.
Q. How far can someone go in their career at
PageGroup?
A. As an organically grown business, there is plenty of
opportunity to progress rapidly within PageGroup, from
consultant to the senior leadership team, and we have many
examples of this across the Group. As far as myself, and all the
Chief Executive Officers before me are concerned, we started
out as consultants and worked our way through the business.
This is also true of every member of the senior operational
management team; none were recruited in.
To facilitate this progression, we have a clearly defined talent
development training roadmap, supporting the professional
development of all our staff at every stage of their career.
Q. How is PageGroup developing its Directors
to become senior leaders of the future?
A. We invest a significant amount of resource to succession
planning, talent development and talent retention. As well as
offering a competitive remuneration package, we also run
executive coaching schemes, internal and external mentor
programmes, 360 degree feedback assessments, Personal
Development Plan development and a Global Directors
Academy in which we partner with an external leadership
development company.
All this investment generates the necessary skills with which our
consultants of today can become the leaders of tomorrow.
20
PB
ANNUAL REPORT 2015 Corporate Social Responsibility
Being a responsible corporate citizen is not only the right thing to do,
it is good for the long-term health of our business.
We are responsible to our stakeholders
Our people
Our candidates
Our clients
Our suppliers
Our shareholders
The communities
in which
we operate
Society at large
Our obligations to these stakeholders
• To make PageGroup
the best place to work
• To ensure we have
the highest ethical
standards
• To maintain the highest
standards of corporate
governance
• To contribute
positively to the
communities
we operate in
• To minimise and
mitigate our
environmental
footprint
s
e
i
r
o
g
e
t
a
C
Workplace
Marketplace
Governance
Community
Environment
We have identified five categories as being key to our CSR efforts and over time we will look to build metrics and targets to monitor our
performance within each category.
We fulfil our obligations in a
sustainable way
Our organic business model, together with our focus on team
culture and career development, has helped to develop long-term
sustainability within the business. We have procedures in place to
track and report our broader CSR efforts on a more formal and
documented basis and with reference to industry best practice on
Environmental Social Governance (ESG) principles.
Many of the key elements which make up responsible management
in our business have been firmly in place for many years.
We have worked to better codify these existing elements, to help
them be more scalable and have delivered consistently across our
global network.
This work categorised our CSR elements into the five elements
of Workplace, Marketplace, Governance, Community and
Environment. Our CEO, Steve Ingham, the Executive Board
Director, is responsible for CSR matters. From time to time the
Board reviews the outputs which encompass all of the ESG topical
areas relevant for our business. The development of these CSR
elements is continuing in nature and the Company will report its
progress under these CSR categories in future years.
21
PB
ANNUAL REPORT 2015 The quality and integrity of our people is fundamental to our
reputation as both an employer and as a business. People are
at the centre of everything we do and form the basis of the
proposition we offer to clients and candidates alike. We therefore
place great value on ensuring that our workplace environment,
our employees’ wellbeing and their work-life balance are as good
as we can make it.
We strive to ensure that PageGroup is a great place to work
and employ a broad range of initiatives aimed at maintaining
employee commitment to the business and increasing overall
staff retention. We conduct regular “temperature checks” through
our global employee survey which in 2015 received record levels
of engagement. Respondents highlighted an improving work-life
balance, while effective teamwork and a respectful, appreciative
working environment were cited as particular strengths.
The feedback from the 2015 global employee engagement survey
has been used to refine our employee value proposition, in which
continuing the good work to improve work-life balance and
supporting health and wellbeing will be priorities. Such initiatives
have helped us to win numerous awards including Top Employers
Europe 2016 by the Top Employers Institute, with individual
awards for Germany, France and Spain. We have received similar
awards for our teams in Asia and Hong Kong as well as in the UK.
We enjoy a diverse cultural and ethnic profile within the business
and now have a 48:52 male/female gender balance globally.
Our diversity programmes, OpenPage and Women@Page,
were recognised in 2014 with four national awards in the UK.
These awards, including the award for Best Diversity Initiative
in the Chartered Institute of Personnel & Development People
Management Awards 2014, recognised our success in retaining
female employees and for helping women return to work after
maternity leave.
In 2015 we continued these initiatives resulting in OpenPage,
Women@Page and the recently launched Pride@Page being
recognised with a number of national awards in the UK. These
awards, including the award for Most Effective Diversity and
Inclusion Strategy in the Recruiter Investing in Talent Awards
2015, recognised our continued efforts at promoting equal
opportunities and inclusion in the workplace both as an employer
and as a provider of services.
Over one-third of employees participated in the “Global Corporate
Challenge 100 Day Journey” for improved health and well-being.
Additional detail on these initiatives, and our other efforts focused
on ensuring a positive workplace, can be seen on pages 21 to
24.
Gender diversity
At 31 December 2015
Board Directors
Senior
Management
5
247
Total employees
2,813
At 31 December 2014
Board Directors
Senior
Management
5
251
Total employees
2,739
%
71
79
48
%
71
79
49
2
66
3,022
2
67
2,839
%
29
21
52
%
29
21
51
INVESTING IN TALENT
AWARDS 2015
WINNER
Passion fo r p e
o
p le
22
PB
ANNUAL REPORT 2015
Corporate Social Responsibility
Highest ethical standards in our
marketplace engagement
Highest standards of
corporate governance
At PageGroup we are committed to high standards
of governance and believe it underpins sustainable
performance. The Board is collectively responsible for the
Group’s financial and operational performance as well
as promoting the success of the business. The Board
fulfils its responsibilities by directing and supervising the
Company’s strategies and policies.
Set out in the Corporate Governance section are
details of the activities undertaken by the Board and its
Standing Committees during 2015. These include a
detailed bottom-up project reviewing and measuring the
significant risks facing the business and putting in place
processes to monitor and mitigate them. These risks are
discussed on pages 37 to 39.
Key to the sustainability of our business is our reputation
for integrity. We are mindful that our contact with
candidates is always highly sensitive and often at critical
points in their career. Similarly, we assist clients with
finding the right team to ensure the continuing success of
their business. These are important responsibilities so we
demand high ethical standards and confidentiality from
both our consultants and our suppliers.
We actively seek feedback from clients to help improve
our service. We investigate and respond to any issues
raised with us. We operate an external whistleblowing
line for employees to raise any concerns that they may
have. We again achieved our target in 2015 of no issues
requiring Board notification, no material regulatory
breaches and no fines.
In 2014 we revised our supplier code of conduct. In 2015
we began incorporating this into our agreements with
all of our key suppliers, as well as continuing to drive a
programme of efficient procurement. During 2016 we will
consider the provisions of the Modern Slavery Act.
We continue to improve our transparency and dialogue
with all stakeholders and increased engagement with
shareholders. We held another well received Investor
Relations event in September, where analysts and
investors had the opportunity to meet our regional
leadership teams.
23
PB
ANNUAL REPORT 2015 Positive contributions
to communities
Minimise environmental
footprint
We are conscious that the day-to-day running of our
business will inevitably have environmental consequences,
particularly in terms of energy consumption and business
travel. We have in place processes to monitor our CO2
emissions from air travel and seek to minimise any
unnecessary journeys. For example, we look to alternative
methods such as video conferencing to assist in the
management of the business wherever possible.
Our operations are office-based. As such, we believe
we have a relatively low impact on the environment in
comparison to many other global businesses. We utilise
rented or serviced offices in all locations and consequently
rely heavily on our landlords for environmentally-friendly
facilities. We continue to include environmental criteria
when considering the location and specification of
new properties and our programme for collecting GHG
emission data also continues with an increased number
of properties returning more accurate data, and a single
resource now responsible for ensuring timely collation of
that data.
See pages 17 and 18 for our GHG reporting for 2015.
As a business which has people at the centre of
everything we do, it is essential that we make a
positive impact on the communities where we operate.
We value the significant impact altruistic activities can
have on our employees’ personal and professional
development and encourage all staff members to
actively support charities, not-for-profit organisations
and community based activities.
All members of staff are encouraged to take a
Corporate Social Responsibility day annually where
they can volunteer their time to support community or
charity. In many regions these efforts are coordinated
and teams or offices join together on an activity.
In the UK we have raised over £1m for our charity
partners over the last nine years. To raise these funds
our UK employees have donated their time and money
in a variety of ways, whether it is a bake sale or a
triathlon. We also run a schools CSR programme,
visiting schools and colleges to provide young adults
with invaluable career advice. Globally, PageGroup
has many longstanding charity commitments; such as
our work with the Leukaemia and Lymphoma Society
in the USA, the RSPCA in Australia or Habitat for
Humanity in Indonesia and Singapore. Across Europe
offices have conducted clothing drives, donating
clothing and blankets to aid refugees, while in the UK
our partnership with Smart Works helps job seekers
with access to professional attire donated by our
employees. Additionally, PageGroup actively promotes
tax-efficient payroll-based employee donations which
we then match.
24
PB
ANNUAL REPORT 2015 Providing a Great Place to Work:
Our Employee Value Proposition
Our EVP – Employee Value Proposition
defines the unique set of rewards from
which our employees benefit in return for
their skills, capabilities and the results they
bring to PageGroup.
It provides our employees with a clear
career and reward structure and is core
to why they are proud and motivated to
work here.
We work hard to provide our most
ambitious people with new opportunities
and challenges to build rewarding careers
with us for the long term.
The EVP covers five elements:
alth made fu n
e
h
d
n
a
s
d
r
a
w
e
R
A
t
e
a
m
P a s s i onate about
y o u r progress
N
e
v
e
r
g
i
v
e
u
p
l
e
a
r
n
i
n
g
t
h
at’s diverse
d to give
o m e t hin g back
o
u
P r
s
Passionate About Your Progress
We are passionate about our people’s career progression.
Consultants who join us know that one day they can be our future
managers, directors and managing directors.
The culture is one of meritocracy and there is strong company
and peer group recognition for achievements. We score highly
in our employee surveys for encouraging pride, fun, passion and
commitment to the job.
Never Give Up Learning
We are renowned for our first class investment in developing
talent. We have customised our programmes to offer the right
training to suit different cultures and working environments.
Training encompasses initial induction, a trainee academy and a
management and leadership development programme.
At all levels we deliver a programme that fully adapts to the
skill-set needed and that will engender self-development and
personal growth.
Proud to Give Something Back
Giving back is part of the PageGroup culture. We have a strong
commitment and drive towards giving something back to the
communities in which we live and work.
We encourage staff to be proactive in seeking projects within their
own community and making a telling contribution.
This approach enriches our working lives and ensures we are
engaged with the world around us and in which we do business.
More detail on our community activities in 2015 are included in
the CSR review on page 24.
A Team that’s Diverse
We promote a diverse, open and inclusive working environment
which leverages our global footprint, rich in diverse people, talent
and ideas. Our OpenPage philosophy comprises: Age is just
a number; Disability doesn’t hold you back; Sexual orientation
doesn’t matter; Families and carers come first; A multicultural
workforce thrives; and Women succeed at work.
This programme has helped lower turnover, increase the
number of new mothers returning to work, and increase senior
representation of both ethnic groups and females across the
business. We are also an outspoken industry advocate for
ensuring recruitment activities follow best practice.
Rewards and Health Made Fun
Celebrating success and making the job fun is part of our
culture. We believe reward and recognition of top talent is key
to motivating and getting the best from our consultant teams.
Recognition of a job well done and being an active team
contributor is an essential part of the quarterly review process.
This is combined with team celebrations and high-flier events for
reaching key performance targets.
Our Feel Good programme for well-being and health includes
active promotion of a variety of services such as gym
membership, health workshops and an online health
coaching platform.
25
PB
ANNUAL REPORT 2015
Our International Mobility Programme
PageGroup has a proud history of growing organically
over many years, successfully taking our brand into new
countries and diversifying across new disciplines.
We regularly campaign for employees to move to specific locations
where we are growing our business and every year we have more
than 100 international moves across all regions.
We have grown our business with confidence through moving
some of our most talented employees to new countries and cities
where they will have the most beneficial impact on the business.
Moving to new places and accepting international assignments
has become an intrinsic part of the PageGroup culture and what
attracts many consultants to the business.
Our global “Unlock Your Potential” relocation programme matches
an individual’s ambitions, talents and skills to the needs of the
business by supporting them to move within the Group to where
we see good opportunities.
We pride ourselves on ensuring they and their families are
supported through their move and have every opportunity to
settle quickly in their new location.
Not everyone is suited to such an international career and the
cultural and market differences between regions can be significant.
With nearly 30 years of international growth we have the experience
to know who is likely to be best suited to a particular market profile.
We also keep track of the skills and experience of our identified
top talent and look to ensure they have the breadth of international
experience necessary in order to take senior leadership roles when
these become available.
26
PB
ANNUAL REPORT 2015 Regional Perspectives:
EMEA
How did you deliver against your 2015 priorities?
We delivered a strong performance in 2015. Market conditions were sufficiently robust so that
the investment we made in our teams, new disciplines and rolling out our Page Recruiting
System (“PRS”), started to benefit our performance. We delivered gross profit growth for the
year of 12%. We also continued to monitor our costs, resulting in our conversion rate improving
to 14.7%. We had notable results in our German Page Personnel business, which grew 32%
for the year, as we started to see the return on the headcount investment we made in 2014.
We also delivered a record year in Southern Europe, with collective growth of 28%.
“
We anticipate growth to
continue into 2016, as we
seek to maximise returns
made on our investment in
headcount and the roll-out of
our PRS operating system.
”
Olivier Lemaitre
Regional Managing Director
What are your priorities
for 2016?
In 2016 we anticipate good growth to continue and so
we will focus on maximising the returns we have made
in our fee earner headcount and the roll-out of our PRS
operating system. We will continue to focus on our fee
earner productivity, ensuring that the new fee earners we
added in 2015 get up to full productivity. We will continue
our transition to the European Shared Service Centre in
Barcelona, and anticipate that we will be able to transfer
the majority of the finance functions in the region
during 2016.
27
PB
ANNUAL REPORT 2015 2015 Highlights
Revenue
Gross profit (net fee income)
Operating profit before exceptional items
Conversion (operating profit/gross profit)
Year end staff headcount
Percentage of Group gross profit
2015
2014
£421.3m
£419.7m
£217.0m
£212.0m
£31.9m
£30.1m
14.7%
2,295
39%
14.2%
2,113
40%
Page Personnel
Record year for
Page Personnel
in Europe
Germany
Strong growth
in our German
Temp business
Southern
Europe
Gross profit up
by 28%
EMEA
Gross profit
records in four
countries
Gross profit £m
Permanent to temporary ratio
£217.0m
£212.0m
£207.8m
£218.4m
2,295
2,113
1,886
2,040
2015
2014
2013
2012
Headcount
2015
2014
2013
2012
28
28%
%
Permanent
Temporary
72%
22%
20%
38%
20%
Discipline mix
£m
Finance and Accounting
Marketing, Sales and Retail
Legal, Technology, HR,
Secretarial and Healthcare
Engineering, Property &
Construction, Procurement
& Supply Chain
2015
2014
72
28
71
29
2015
84.6
42.4
2014
83.9
41.4
43.2
39.1
46.8
47.6
PB
ANNUAL REPORT 2015 Regional Perspectives:
UK
How did you deliver against your 2015 priorities?
The UK continued to perform well in 2015. We saw growth of 10% over the course of the year.
Within this we saw a notable result from our Page Personnel brand with growth of 19%.
We continued to develop our people through our new Sales Academy, as well as our leadership
and management training. We also placed considerable emphasis on our Employee Value
Proposition (“EVP”) programme to ensure we nurtured and retained the best talent in our
business, as these individuals are key to our future growth opportunities.
“
The UK continued to perform
well in 2015, with overall growth
of 10%, and a notable result
from Page Personnel, up 19%.
Oliver Watson
Regional Managing Director
”
What are your priorities
for 2016?
We want to continue to develop the business. We saw a
slight tempering of growth during the fourth quarter of 2015
and, if this was to be prolonged into 2016, we may need
to rethink our projected growth trajectory. We will continue
to develop our existing disciplines and, in particular, we will
seek to drive the business into areas where margins are
good and market dynamics are positive.
29
PB
ANNUAL REPORT 2015 2015 Highlights
Revenue
Gross profit (net fee income)
Operating profit before exceptional items
Conversion (operating profit/gross profit)
Year end staff headcount
Percentage of Group gross profit
2015
2014
£337.7m
£325.7m
£151.6m
£138.4m
£29.2m
£24.1m
19.3%
1,516
27%
17.4%
1,441
26%
Gross profit for
Page Personnel
up 19%
Growth of over
20% in Legal and
Financial Services
Most socially
engaged recruiter
on LinkedIn
Multiple awards
for workplace
environment/
diversity initiatives
Gross profit £m
2015
2014
2013
2012
Headcount
2015
2014
2013
2012
£151.6m
£138.4m
£124.1m
£121.4m
1,516
1,441
1,319
1,237
30
Permanent to temporary ratio
29%
%
Permanent
Temporary
71 %
71%
18%
18%
20%
44%
Discipline mix
£m
Finance and Accounting
Marketing, Sales and Retail
Legal, Technology, HR,
Secretarial and Healthcare
Engineering, Property &
Construction, Procurement
& Supply Chain
2015
2014
71
29
70
30
2015
68.2
30.0
2014
60.5
29.9
26.7
23.6
26.7
24.4
PB
ANNUAL REPORT 2015 Regional Perspectives:
Asia Pacific
How did you deliver against your 2015 priorities?
Overall for the year, Asia Pacific delivered growth of 5% in constant currencies. We have
diversified our offerings in the Asian markets throughout 2015 and sought to improve consultant
productivity over the course of the year. Trading conditions became more difficult as the year
progressed, with concern over macro-economic conditions in China affecting confidence
throughout the region. We reacted by focusing more on our domestic clients rather than the
multi-nationals. In Australia, gross profit was down 2% in constant currency. We made
leadership and management changes in Australia during the second half, which, we believe,
will enable us to better react to the current environment and growth opportunities that exist.
“
We will continue to diversify our
offerings across the region, with
particular focus on the domestic
client base, where there are
significant opportunities.
”
Gary James
Regional Managing Director
What are your priorities
for 2016?
We will continue to monitor levels of demand
throughout the region to ensure that we have the
appropriate strategy to maximise future growth. We
will look to diversify our offerings across the region into
the domestic client base, where there are significant
opportunities. Our focus will be on increasing
productivity of our existing fee earners, but we will
also seek to roll-out new disciplines to our existing
office network.
31
PB
ANNUAL REPORT 2015 2015 Highlights
Revenue
Gross profit (net fee income)
Operating profit before exceptional items
Conversion (operating profit/gross profit)
Year end staff headcount
Percentage of Group gross profit
2015
2014
£191.3m
£193.5m
£109.1m
£105.5m
£22.7m
£20.0m
20.8%
1,180
20%
18.9%
1,141
20%
Australia
Down 2%;
management restructure
in H2 to maximise
future growth
Greater China
Another record year, with
five year CAGR of over
20%; diversification into
domestic clients
Asia Pacific
Record year in
six countries,
including Greater
China
South East Asia
A record year,
with five year gross
profit CAGR
of 20%
Gross profit £m
2015
2014
2013
2012
Headcount
2015
2014
2013
2012
32
£109.1m
£105.5m
£105.8m
£114.9m
1,180
1,141
1,111
1,036
Permanent to temporary ratio
13%
87%
%
Permanent
Temporary
16%
34%
28%
22%
Discipline mix
£m
Finance and Accounting
Marketing, Sales and Retail
Legal, Technology, HR,
Secretarial and Healthcare
Engineering, Property &
Construction, Procurement
& Supply Chain
2015
2014
87
13
86
14
2015
36.5
24.5
2014
36.2
21.8
30.9
28.4
17.2
19.1
PB
ANNUAL REPORT 2015 Regional Perspectives:
Americas
How did you deliver against your 2015 priorities?
In North America, 2015 was a record year, with growth of 18% in a business that now
represents 8% of the Group. This continues to be driven by our financial services business in
New York and the tri-state area. We have also sought to improve our profitability throughout the
region. Latin America continued to be a divergent market, with very tough economic conditions
in Brazil, but very strong growth in the rest of the region. We responded by actively managing
our headcount in Brazil to ensure it remained profitable, but where possible moved these people
to other countries where we saw strong growth.
“
North America delivered a record
year, with particularly impressive
growth of 18%, now representing
8% of the Group.
Regional Managing Director ”
Patrick Hollard
What are your priorities
for 2016?
We will continue to actively manage our operations in
Brazil to retain profitability. In the rest of Latin America,
we will continue to diversify our offerings through
new disciplines being rolled out in our existing office
network, as well as increasing our brand awareness.
In North America our priorities are to continue to drive
the growth we have seen, particularly in our New
York office. We will continue to focus on retaining
the best people, to drive further improvements in our
conversion rate.
33
PB
ANNUAL REPORT 2015 2015 Highlights
Revenue
Gross profit (net fee income)
Operating profit before exceptional items
Conversion (operating profit/gross profit)
Year end staff headcount
Percentage of Group gross profit
2015
2014
£114.7m
£108.0m
£78.4m
£76.9m
£6.2m
£4.3m
7.9%
844
14%
5.6%
883
14%
USA
Growth of 18%,
driven by Financial
Services
Latin America
Excluding Brazil, growth
of 29%, with Mexico now
two thirds the size of Brazil;
Brazil down 23%
Americas
Brazil apart, all
countries in the region
had record years
Canada
Growth of 15%
despite economic
conditions
Gross profit £m
Permanent to temporary ratio
£78.4m
£76.9m
£76.2m
£72.2m
844
883
814
786
15%
85%
20%
40%
24%
16%
%
Permanent
Temporary
Discipline mix
£m
Finance and Accounting
Marketing, Sales and Retail
Legal, Technology, HR,
Secretarial and Healthcare
Engineering, Property &
Construction, Procurement
& Supply Chain
2015
2014
85
15
87
13
2015
31.0
12.8
2014
30.7
13.3
19.0
16.2
15.6
16.7
2015
2014
2013
2012
Headcount
2015
2014
2013
2012
34
PB
ANNUAL REPORT 2015 Risk Management Structure
Principal Risks
The Group recognises that the effective management of risk is
important in achieving our Strategic Objectives.
A Group risk review process is in place which identifies both the
risks and the mitigating actions required to ensure that all risks are
controlled to an acceptable level as defined in the Group’s Risk
Appetite statement.
The process of risk management is ongoing throughout our
business forming part of our strategy, our business plans and the
delivery of our daily activity.
It is supported by operational risk registers that are maintained
locally at country and process level and consolidated twice a
year with a formal review by the Executive Board and the Audit
Committee on behalf of the Board.
In the intervening periods the risks associated with changes in
either the external environment or as a result of internal proposals
are discussed as part of our ongoing business reviews and are
responded to accordingly.
We have also established compliance teams within our Group
Information Systems team, who focus on IT risks and security,
together with regional revenue recognition compliance teams who
ensure accurate reporting of our revenue worldwide.
Our internal audit programme of activity focuses on ensuring that
assurance is provided over the controls that mitigate the risks
identified from this process.
Our risk management process categorises our principal risks into
Strategic, Financial, People and Operational.
Within this process we assess all risks that could have a significant
impact on the ability of the business to deliver its short-term plans
and medium and long-term strategy.
The Executive Board and the Board continue to focus on Strategic,
People and Financial risks. For these we disclose KPIs which we
use to monitor the risk impact, and the rewards and incentives we
apply to ensure effective management.
See strategic framework on page 5.
Our operational risks are those that the Executive Board have
agreed can be managed by our people on a day-to-day basis.
These are included within our risk registers and are reviewed by the
Board on an exceptions basis, with the exception of data security
(cyber risk) which has a more prominent position in the reviews.
Our risk evaluation includes matters relating to all our key
stakeholders and encompasses considerations of governance,
social, environmental and legal requirements.
Our Risk and Control Framework
Risk and Control Framework
Controls
Functions
Review
Business Reviews/
Internal Control Checklists
Policies and Procedures
Revenue Compliance
Teams
IT Security Team
Risk Registers
Risk Management/
Management
Group Financial Control
Executive
Board
Board/Audit Committee
Audit Reports
Quarterly Updates
Internal Audit
Group Governance Framework
35
PB
ANNUAL REPORT 2015 People development
Attraction and retention
Shift in
business model
Delivery of
operational
efficiencies
Macro-economic
exposure
Foreign exchange –
translation risk
Strategic
People
Risk
Categories
Financial
Operational
Technology
Key systems vendors
IT Transformation and change
Data Management
PageGroups brands reputation
Fiscal and legal compliance and contracts
Financial management and control
Risk Appetite
Recruitment is inherently cyclical and provides limited forward
visibility. This makes it sensitive to the economic environment and
thus financially volatile creating a higher risk environment.
PageGroup operates in this environment with a low risk appetite,
seeking to mitigate its strategic risks, maintain a strong financial
position and only taking the operational risks it has the experience
and capability to manage.
Our growth model is organic, rolling out the proven disciplines for
brands to a wide geographic spread. We drive this by developing
and promoting our people from within the business, ensuring
consistency of model and business culture across the Group.
We maintain a strong sales driven, meritocratic culture with a
commitment to operating in an ethical, legal and sustainable
manner.
We will always operate a conservative financial position with a
strong balance sheet, reflecting the degree of operational gearing
inherent in the business.
This measured approach to taking risk ensures we are best
placed for success globally.
1
2
3
4
5
6
7
8
9
10
Risk level
1. Macro economic exposure
2. Foreign Exchange – translation risk
3. Shift in Business Model
4. People – attraction, development
and retention
5. Information systems – technology
and key systems vendors
6. Systems transformation and change
7. Data security
8. PageGroup brands and reputation
9. Fiscal and legal compliance
10. Financial management and control
Risk appetite range
PageGroup Actual
Net Risk assessment
Further planned
improvements
36
PB
ANNUAL REPORT 2015 Principal Risks and Uncertainties
Financial Risks
Actions to Mitigate Risk
Macro-economic exposure
Recruitment activity is driven largely by
economic cycles and the levels of business
confidence. Businesses are less likely to need
new hires and employees are less likely to
move jobs when they do not have confidence
in the market so leading to reduced
recruitment activity.
A substantial proportion of the Group’s profit
arises from fees that are contingent upon the
successful placement of a candidate in a
position. If the client cancels the assignment at
any stage in the process, the Group receives
no remuneration.
Foreign exchange – translation risk
The majority of the Group’s operating profit
is derived from operations outside of the UK,
so material changes in the strength of Sterling
against the main functional currencies could
have an adverse effect on the Group’s reported
Sterling profits in the financial statements. The
main functional currencies in addition to Sterling
are the Euro, Australian Dollar, Swiss Franc,
Chinese Renminbi and Singapore Dollar.
Strategic Risks
Shift in business model
The emergence of new technology
platforms including, for example, social media,
may lead to increased competition and
pressure on margins which may adversely
affect the Group’s results if it is unable to
respond effectively.
Delivery of operational efficiencies
(assessed under systems transformation
and Change Risk Appetite)
As our business grows we may be unable to
support our front end activities in an efficient
and effective manner.
• We have diversified our business by expanding
geographically, by increasing the number of
disciplines we support, and by establishing
three brands to address the different levels of
the recruitment market: the clerical professional
sector; the qualified professional market; and
the executive search sector.
• We continue to balance our permanent and
temporary staff in line with the ratio of our
permanent to temporary business in each
of the markets in which we operate. The
temporary business tends to be more resilient
in times of economic downturn.
• We maintain a relatively low fixed cost base
• Our strategy recognises large high potential
markets in which we operate, principally
Germany, Greater China, Latin America, South
East Asia and the US, where we believe it
is appropriate to continue to invest through
the economic cycles for the long-term. This
investment is principally in our people in these
areas and can be offset by balancing against
costs in other regions where we seek to drive
further efficiencies.
which allows the Group to scale up and down
according to the economic environment. Our
information systems model is service based
and we have centralised support activities
at a Group and Regional level to ensure we
benefit from the efficiency of scale and standard
processes where possible.
• The Group does not actively attempt to hedge
the exposure from translation risk as this is a
reporting risk only and not an operational risk.
In 2015 the Company entered into hedges to
cover its investment in foreign entities in the US
and Canada.
• The Group does not have material exposure
to foreign denominated monetary assets and
liabilities.
• Note 21 of the financial statements includes
a sensitivity analysis showing the effect of a
10% strengthening of Sterling against other key
currencies.
• We actively monitor developments in new
• Our highly trained and often specialised
technologies and their use in the recruitment
sector, and we have a pro-active social media
strategy.
• We partner with the large providers, such as
LinkedIn and Facebook, to ensure that we
use this form of media to enhance our value
to clients. All consultants are trained in
utilising the benefits of social media in their
day-to-day activity.
consultants maintain an extensive qualified
candidate database which we use to resource
for our clients at an overall cost that they
cannot match.
• We have established an Innovations Group
comprising senior management who focus on
developments in the marketplace.
• Our systems strategy will ensure IT is delivered
on a service model managed by a Global IT
capability which not only ensures an efficient
service provision but one which is highly
resilient and scalable.
• Our back office support activity covering IT,
Finance, HR and Marketing will be provided via
shared service centres to ensure we maximise
our opportunities for process standardisation
and gain the benefits of scale.
37
PB
ANNUAL REPORT 2015 Operational Risks
Actions to Mitigate Risk
Information Systems – Technology
Our systems are an integral part of our
operations. Loss of systems capability would
have a high impact on our performance
impacting the quality of service we provide
to clients and candidates and our ability to
deliver our financial performance.
Information Systems – Key systems
vendors
Our move to the delivery of IT as a flexible
service increases our reliance on third party
vendors for service delivery. Should one of
these vendors fail we are at risk of a service
disruption.
(Assessed under technology in our risk
appetite)
System Transformation and change
The Group is in the process of implementing
a new suite of IT applications. This has now
been successfully delivered to c.85% of our
users. We have a working application suitable
for our business which will deliver benefits on a
global basis. There are still some residual risks
around timing.
Data security
Confidential, sensitive and personal data is held
across the Group. Failure to secure and handle
this data properly could expose the Group to
loss of business, financial penalties and/or
reputational damage.
Fiscal and legal compliance
The Group operates in a large number of legal
jurisdictions that have varying legal, tax and
compliance requirements. Any non-compliance
with client contract requirements and legislation
or regulatory requirements could have an
adverse effect on the Group’s brands or
financial results.
• Our core operating systems are governed on
a global basis but are regionally based. We
recognise the need to ensure best practice is
applied throughout the Group and therefore
our approach is to ensure common platforms,
standards and processes are being applied.
Within regions we have developed highly
resilient IT operations environments.
• We have a dedicated security team who ensure
our systems are protected from unauthorised
access. This includes ensuring appropriate
multi-layered protection at network and local
levels and regular monitoring and testing of
our capabilities.
• We select vendors through a robust vendor
selection process which ensures those chosen
have the ongoing capability to support our
business requirements effectively. This is
reviewed and managed on an ongoing basis
through the services delivery team.
• We have in place disaster recovery plans for
each of our services at global and regional
levels which provide a level of service agreed
with the business in the event of a disaster.
• We are in the process of migrating our services
to a cloud-based infrastructure which will
further enhance resilience and our disaster
recovery capabilities.
• We have in place service delivery contracts
with our key vendors which include levels
of resilience appropriate to the nature of
our business.
• Our service roll-out strategy is to fully pilot new
services to ensure they operate effectively and
achieve the benefits planned before they are
deployed across the Group.
• We have successfully rolled-out our Page
Recruitment System to the majority of the
Group. The next stage in the programme is
to ensure the business is deriving the benefits
from the enhanced capability and common
platforms.
• We have established a dedicated Group
Programme Management Office which
co-ordinates the delivery of Group-wide
projects and ensures appropriate prioritisation
of activity through regular reporting into regional
and Group executive meetings.
• We have comprehensive data protection
policies and procedures in place for the
management of confidential, sensitive and
personal data.
• Security vulnerability is assessed as part of
our IT security strategy and the remediation of
identified risks and alerts is tracked. Regular
security assurance checks take place across all
regions and penetration testing is undertaken
by specialist third parties.
• The Board reviews data security on a regular
basis and receives updates on the status of
our security activity and statistics on attempted
data breaches, both internal and external.
• The Company Secretary and local legal and
compliance teams are advised by leading
external advisers, as required, in regard to
changes in legislation that affect the Group’s
business, including employment, legislation,
tax and corporate governance.
• Our staff receive induction training and regular
updates regarding the Group’s policies and
procedures and compliance with relevant
legislation covering for example, discrimination
legislation, anti-bribery and corruption and
pre-employment checks.
• The Group has central tax and treasury
functions, which manages the Group’s cash
position and tax compliance.
• The Group tax function regularly monitors
transfer pricing requirements and developments
to ensure that appropriate actions are being
taken and appropriate documentation is
being maintained to meet local reporting and
compliance requirements.
• The Group holds all normal business insurance
cover including employers’ liability, public
liability and professional indemnity insurance.
• Contracts include clauses to ensure the
Group’s rights are protected.
38
PB
ANNUAL REPORT 2015
Principal Risks and Uncertainties
Operational Risks
Actions to Mitigate Risk
PageGroups brands and reputation
Our brands are material assets of the Group
and maintaining their reputation is key to
continued success.
In the short term any event that could cause
reputational damage is a risk to the Group,
such as a failure to comply with legislation, or
other regulatory requirements, or confidential
data lost or stolen. Use of new social media
network sites has increased the speed of
communication and the reach, increasing the
impact of an incident.
In the medium to longer term, a lack of
awareness of the Group brands, or a
deterioration in the quality of service we
provide to both clients and candidates, could
have a significant impact.
Financial management and control
Failure to maintain adequate financial and
management processes and controls could
lead to poor quality management decisions,
resulting in the Group not achieving its
financial targets or in errors in the Group’s
financial reporting.
• We have comprehensive policies for key areas
including social media, data protection and
information security.
• We actively monitor media to identify where
there are unusually high references to the
PageGroup, Michael Page, Page Personnel
and Page Executive names. We have a clear
escalation/reporting path so that any potential
incidents can be managed effectively.
• We are supported by external advisers who
provide ongoing advice on the protection and
management of our brand.
• Our marketing strategy recognises the need
to engage with candidates and clients using
the latest media available in a way that reflects
changing behaviours. We conduct ongoing
surveys of clients and candidates to ensure
that we understand their requirements and
can adapt our processes and procedures
accordingly.
• We train our consultants to effectively use new
media making the channels available to them
as part of their day-to-day activity.
• We have a programme of activity which
ensures that we effectively communicate the
Page brands, keeping awareness high
amongst both current and potential clients
and candidates.
• The Group has financial policies and procedures
that support effective financial management and
financial control and reporting.
• The Finance structure mirrors and
supports the local, regional and Group
management structure.
• Monthly management information is produced
and reconciled which facilitates regular
performance reviews.
• There are compliance teams located in
each region which ensure revenues are
appropriately recognised.
• The Group operates regional share or service
centres which, as well as driving efficiencies,
enable more effective control of activities.
People
Actions to Mitigate Risk
People attraction, development
and retention
The Group’s strategy of organic growth, with
nearly all senior operational positions being
filled from within, relies on its ability to develop
high performing individuals.
The failure to attract and retain employees
with the right skill set, particularly the
resignation of key individuals, may adversely
affect the Group’s operational performance
and financial results.
• We have a well established appraisal process
applied throughout the organisation which
reviews performance against objectives
supported by personal development plans.
• We make significant investments in employees’
training and development across the
organisation including the opportunity for
international career development supported by
a global mobility policy. Training is aligned at
the consultant level, set at a high standard and
is both broad based and individually focused
with a “9 step” modular programme to support
leaders as they develop through the Group.
• Key high performing individuals are identified
and have progression plans recognising their
specific needs at different stages of their
development.
• We have a strong focus on succession planning
at all levels of the business with particular
focus on the development of high performing
individuals identified as future team leaders.
• We continue to have a strategy of filling senior
operational positions from within which is a key
part of our retention strategy. Our employees
observe high performers being rewarded with
promotion and know that the Group provides
sustainable career opportunities.
• The Group targets its recruitment process to
attract and employ high quality individuals.
• We are committed to a competitive pay and
benefits structure and use benchmarking to
ensure we remain competitive. We incorporate
a performance-led culture with bonus
representing a proportion of pay. This bonus
structure is based on team profitability which
has been shown to encourage the retention of
high-performing individuals even in economic
downturns.
• We make awards of share options linked to the
Group’s financial performance to key senior
employees. This provides a long-term retention
incentive and aligns their motivations with those
of our shareholders.
• The Group employment contracts contain
protection in the event of an employee leaving,
which at our senior level usually contain notice
periods and provisions relating to confidentiality
and non-solicitation.
• We have a strong sense of pride in everything
we do, with a firm belief in teamwork being core
to the Group culture. This drives determination
to succeed both individually and as a team,
increasing the motivation of our staff and
making their careers more rewarding.
The Board’s view of direction of travel of gross risk:
Similar to prior year
Lower than prior year
Increased since prior year
39
PB
ANNUAL REPORT 2015 Stress testing
The forecasting and budgeting process is also supported by
scenarios that encompass a broad range of potential outcomes.
These scenarios are designed to explore the resilience of
the Group to the potential impact of the significant risks as
set out on page 37 to 39, or a combination of those risks. A
range of scenarios were considered, including cyber incidents,
disintermediation by way of innovation, changes in technology,
movements in foreign exchange rates, and a global downturn,
amongst others. We have assumed that, as in the past, as
downside risks materialise our headcount will flex through natural
attrition in line with the drop of gross profit, such that the impact
on operating profit is partially mitigated.
The scenarios were designed to be severe, but plausible and
were modelled individually and in combination. In each case,
the Group remained viable throughout. However, it is considered
extremely unlikely that this combination of events would ever
occur. Controls are also in place, where possible, to mitigate
the impact of these scenarios and these are described on
pages 37 to 39.
Various events may also alert the Main and Executive Boards to
a potential threat to viability, for example, macro-events drive the
recruitment industry, a drop in GDP in a particular country may
lead to a reduction in gross profit growth rates.
We consider that this stress-testing based assessment of the
Group’s prospects is reasonable in the circumstances given the
inherent uncertainty involved.
Confirmation of longer-term viability
The Directors confirm that their assessment of the principal risks
and uncertainties facing the Group was robust.
Based upon the robust assessment of the principal risks and
uncertainties facing the Company and the stress-testing based
assessment of the Company’s prospects, all of which are
described above, the Directors have a reasonable expectation
that the Company will be able to continue in operation and meet
its liabilities as they fall due over the period to December 2018.
Going Concern
In adopting the going concern basis for preparing the financial
statements for accounting purposes under International
Accounting Standard 1 “Presentation of Financial Statements”,
the Directors have considered the business activities of the
Group as well as the principal risks and uncertainties as set out
on pages 37 to 39 . Based on the Group’s level of cash, the level
of borrowing facilities available, the geographical and discipline
diversification, the limited concentration risk, as well as the
ability to manage the cost base, the Directors are satisfied that
the Group has adequate resources to continue in operational
existence for the foreseeable future, being a period of at least 12
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.
Viability Statement
Assessing the prospects of the Company
Our strategy and the key risks we face are described on pages 6
and 37 to 39. A full business forecasting process is performed on
a quarterly basis, with a full budget, for the following year created
during October and November, being presented to the Board in
December. The Board reviews the Group’s strategy and approves
an annual Group budget. Performance is then monitored by
the Board through the review of monthly reports showing
comparisons of results against budget, quarterly forecasts and
the prior year, with explanations provided for significant variances.
Discussion around strategy is undertaken by the Board in its
normal course of business, as well as at an annual dedicated
strategy day.
We also prepare longer term projections which drive our strategic
plan. These are typically three years. Our strategic plan provides
a clear vision for the Group, aligns the Group to one clear
culture, provides clarity on investment priorities, branding, belief
in achievable goals; and clarity on the goals for our financial vision.
The period over which we confirm longer-term viability
Within the context of the above, in accordance with provision
C.2.2 of the 2014 revision of the UK Corporate Governance
Code, the Board has assessed the viability of the Group.
Given the inherent uncertainty involved, the period over which the
Directors consider it possible to form a reasonable expectation
as to the Group’s longer term viability is the three year period to
December 2018. This period, which represents the period used
for strategic planning, has been selected as it is short enough
to present the Board and, therefore, users of the annual report
with a reasonable degree of confidence, whilst still providing an
appropriate longer term outlook. Whilst the Board has no reason
to believe the Group will not be viable over a longer period, the
Board has taken into account the short-term visibility inherent in a
recruitment business with a permanent recruitment bias.
40
PB
ANNUAL REPORT 2015 Review of the Year
Financial summary
Revenue
Gross profit
Operating profit before exceptional items **
Profit before tax before exceptional items
Basic earnings per share before exceptional items
Diluted earnings per share before exceptional items
Operating profit after exceptional items
Profit before tax after exceptional items
Basic earnings per share
Diluted earnings per share
Total dividend per share (excl. special dividend)
Total dividend per share (incl. special dividend)
* Constant Exchange Rates (CER)
Change
CER*
7.1%
9.3%
20.2%
2015
2014
Change
£1,064.9m
£556.1m
£1,046.9m
£532.8m
£90.1m
£90.7m
21.3p
21.1p
£90.1m
£90.7m
21.3p
21.1p
11.5p
27.5p
£78.5m
£78.4m
18.4p
18.2p
£80.1m
£80.4m
19.3p
19.1p
11.0p
11.0p
1.7%
4.4%
14.8%
15.6%
15.8%
15.9%
12.5%
12.9%
10.4%
10.5%
4.5%
150.0%
** Exceptional charge in 2013 of £2.5m as a result of a transfer pricing audit in France, resulting in increased payment of profit share to employees. Confirmation was
received from the French tax authorities in 2014 that no adjustments were required from 2010, so the related part of the provision of £1.6m was released (Note 5).
At constant exchange rates, the Group’s revenue for the year
ended 31 December 2015 increased 7.1% and gross profit by
9.3%. In reported rates, revenue increased 1.7% to £1,064.9m
(2014: £1,046.9m) and gross profit increased 4.4% to £556.1m
(2014: £532.8m).
The Group’s revenue mix between permanent and temporary
placements was 41:59 (2014: 40:60) and for gross profit was 76:24
Perm/Temp gross profit
2015 (£m)
2014 (£m)
Permanent
Temporary
Total Gross Profit
Ratio (Perm/Temp)
424.0
132.1
556.1
76:24
406.1
126.7
532.8
76:24
(2014: 76:24). Revenue from temporary placements comprises
the salaries of those placed, together with the margin charged.
This margin on temporary placements increased slightly to 20.8%
in 2015 (2014: 20.1%). Overall, pricing remained relatively stable
across all regions, although a stronger pricing environment was
experienced in markets and disciplines where there were increased
instances of candidate shortages.
We saw strong growth from our Large, High Potential Markets
category, with gross profit up 9% in constant currencies, another
record performance from the category as a whole. Excluding
Brazil, where we saw difficult economic conditions, the growth
rate would have been 15%. Three of the five markets achieved
record gross profit, and Germany delivered record gross profit from
temporary recruitment, in line with the nature of our investment.
Total Group headcount increased by 257 in the year, up 4.6% to
a record 5,835. This comprised a net increase of 206 fee earners
(+4.8%) and an increase of 51 operational support staff (+3.9%),
reflecting the continued strong focus on operational efficiency.
41
PB
ANNUAL REPORT 2015
Group Quarterly Headcount and Gross Profit
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Q4Q3Q2Q1
2003
Q4Q3Q2Q1
2004
Q4Q3Q2Q1
2005
Q4Q3Q2Q1
2006
Q4Q3Q2Q1
2007
Q4Q3Q2Q1
2008
Q4Q3Q2Q1
2009
Q4Q3Q2Q1
2010
Q4Q3Q2Q1
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2015
6000
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As a result, our fee earner to operational support staff ratio was
maintained at the record level of 77:23. In total, administrative
expenses increased 2.6% to £466.0m (2014: £454.4m before
exceptional items). The Group’s operating profit from trading
activities totalled £90.1m (2014: £78.5m before exceptional items),
an increase of 20.2% at constant rates, although the growth was
lower at 14.8% in reported rates.
The Group’s conversion rate of gross profit to operating profit
from trading activities improved 1.5 percentage points to 16.2%
(2014: 14.7%). This reflected a combination of steadily improving
conditions in a number of markets, offset in part by more
challenging conditions in some of the Group’s larger individual
markets such as Brazil and Australia.
Regional Reviews
Gross profit
Year-on-year
EMEA
UK
Asia Pacific
Americas
Total
Reported (£m)
Constant
% of Group
39%
27%
20%
14%
100%
2015
217.0
151.6
109.1
78.4
556.1
2014
212.0
138.4
105.5
76.9
532.8
%
2.3%
9.6%
3.4%
2.0%
4.4%
%
11.9%
9.6%
4.9%
7.4%
9.3%
42
PB
ANNUAL REPORT 2015
Review of the Year
Europe, Middle East and Africa (EMEA)
EMEA
(39% of Group in 2015)
Gross profit (£m)
Growth rates
FY 2015
FY 2014
Reported
217.0
212.0
2.3%
(CER)
11.9%
Market Presence
EMEA is the Group’s largest region, contributing 39% of
the Group’s gross profit in the year. With operations in 18
countries, PageGroup has a strong presence in the majority of
EMEA markets, and is the clear leader in specialist permanent
recruitment in the two largest, France and Germany. Across the
region, permanent placements accounted for 71% and temporary
placements 29% of gross profit.
The region comprises a number of large, proven markets, such
as France, Spain, Italy and the Netherlands, across which there
is a broad range of competition. EMEA also includes one of the
Group’s Large, High Potential Markets, Germany, which has low
penetration rates and significant growth potential, particularly in
temporary recruitment. In addition, there are a number of markets
such as Poland, Turkey and Africa that are less developed, with
limited competition, but are increasingly looking for professional
recruitment services. The Middle East, where PageGroup is the
largest international recruiter, has some of the Group’s highest
conversion rates.
Performance
In 2015, the EMEA region generally saw strong market conditions,
but was impacted significantly by the weakness of the Euro. In
constant currency, revenue increased 10.4% on 2014 and gross
profit increased by 11.9%. In reported rates, revenue in the region
was up slightly at £421m, and gross profit increased 2.3% to
£217m (2014: £212m). The region suffered from adverse foreign
exchange movements that reduced revenue and gross profit by
£42m and £20m, respectively.
Our larger businesses in France and Germany, together
representing 47% of the region by gross profit, grew 7% and
14%, respectively, for the full year in constant currencies. Page
Personnel in Germany, where last year we invested heavily in
temporary and contracting, grew 32%. Page Personnel now
represents approximately a third of our German business. Overall,
13 countries, representing around 95% of the region, grew in
constant currencies compared to 2014. Our businesses in the
Middle East, which represented 4% of the region, saw a decline of
8% in gross profit compared to 2014 due to political uncertainty
and the weakness in the oil and gas sector.
The 5.9% increase in operating profit for 2015 to £31.9m (2014:
£30.1m) and in the conversion rate to 14.7% (2014: 14.2%) were
driven by improvements in market conditions, offset by headcount
increases. Headcount across the region increased by 182 (8.6%)
to 2,295 at the end of 2015 (2014: 2,113). The majority of the
increase was fee earners as the business added headcount where
growth opportunities were strongest, mainly in Southern Europe.
43
PB
ANNUAL REPORT 2015
United Kingdom
UK
(27% of Group in FY 2015)
Gross profit (£m)
Growth rates
FY 2015
FY 2014
151.6
138.4
Reported
9.6%
Market Presence
The UK represented 27% of the Group’s gross profit in 2015 and
is the Group’s largest single market, operating from 28 offices
covering all major cities. It is a mature, highly competitive and
sophisticated market with the majority of vacant positions being
outsourced to recruitment firms. PageGroup has a leading
market presence in permanent recruitment across the UK and a
growing presence in temporary recruitment. In the UK, permanent
placements accounted for 70% and temporary placements 30%
of gross profit.
The UK business operates under the three brands of Michael
Page, Page Personnel and Page Executive, with representation
in 13 specialist disciplines via the Michael Page brand. There is
significant opportunity to roll-out new discipline businesses under
the lower-level Page Personnel brand, which now represents
21% of UK gross profit. The Michael Page business has limited
competition of any scale, particularly in regional centres, and is
growing its market share.
Performance
The UK business enjoyed steady growth through the first three
quarters and saw signs of greater client confidence both in
London and the regions. Revenue of £338m (2014: £326m) and
gross profit of £152m (2014: £138m) were up 3.7% and 9.6%,
respectively, reflecting continued progress in the business.
However, as we approached the end of the year, clients became
increasingly reluctant to make decisions, but activity levels,
such as job acquisitions and first interviews, remained positive.
Activity levels were stronger at the lower salary levels and in
Page Personnel.
UK disciplines such as Finance & Accounting (+13%), Property &
Construction (+42%), Legal (+20%) and HR (+15%), performed
strongly. Market conditions in our technical disciplines were more
challenging, with Engineering down 3%. Michael Page was up
7%, while Page Personnel was up 19% for the full year, reflecting
stronger activity in temporary and permanent recruitment at the
professional clerical level, as well as the roll-out of new disciplines.
These improvements in market conditions enabled operating
profit in the UK to increase 21.5% to £29.2m (2014: £24.1m) and
the conversion rate to increase to 19.3% (2014: 17.4%).
Headcount rose 5.2% during the year to 1,516 at the end of
December 2015 (2014: 1,441). Headcount was added selectively
to strongly performing disciplines. Support headcount rose 1% to
support the roll-out of our new operating system, PRS.
44
PB
ANNUAL REPORT 2015 Review of the Year
Asia Pacific
Asia Pacific
(20% of Group in 2015)
Gross profit (£m)
Growth rates
FY 2015
FY 2014
Reported
109.1
105.5
3.4%
(CER)
4.9%
Market Presence
Asia Pacific represented 20% of the Group’s gross profit in 2015,
with 72% of the region being Asia and 28% Australasia. Other
than in the financial centres of Tokyo, Singapore and Hong
Kong, the Asian market is generally highly under-developed, but
offers attractive opportunities in both international and domestic
marketplaces at good conversion rates. Two of our Large, High
Potential Markets, South East Asia and Greater China, are in this
region. With a highly experienced management team, a network
of 16 offices, over 750 staff and limited competition, the size of
the opportunity in Asia is huge. Across the region, permanent
placements accounted for 87% and temporary placements 13%
of gross profit.
Australasia is a mature, well-developed and highly competitive
recruitment market. PageGroup has a meaningful presence
in permanent recruitment in the majority of the professional
disciplines and major cities in Australia and New Zealand. Page
Personnel has a growing presence and significant potential to
expand this business and grow market share.
Performance
In Asia Pacific, in constant currencies, revenue increased 3.6%
and gross profit increased by 4.9%. In reported rates, revenues
declined 1.1% to £191m (2014: £193m), while gross profit rose
3.4% to £109m (2014: £106m).
Asia enjoyed stronger trading conditions than Australasia and also
benefited from the increasing experience and maturity of our local
consultants. This helped Greater China to achieve gross profit
growth of 11% in constant currencies, despite growth slowing
in the second half of the year. This was most notable amongst
multi-nationals, with concerns over economic news from Greater
China. South East Asia was flat on the prior year, due to difficult
trading conditions in Singapore and Malaysia. In Australia, gross
profit was down 2% in constant currency. We made leadership
and management changes in Australia during the second half,
which, we believe, will enable us to better react to the current
environment and growth opportunities that exist.
Operating profit rose 13.7% to £22.7m (2014: £20.0m), resulting
in an increase in the conversion rate to 20.8% (2014: 18.9%).
Headcount across the region rose by 39 (3.4%) in the year,
ending the year at 1,180 (2014: 1,141). The majority of these
headcount additions were in Asia.
45
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ANNUAL REPORT 2015 The Americas
Americas
(14% of Group in FY 2015)
Gross profit (£m)
Growth rates
FY 2015
FY 2014
Reported
78.4
76.9
2.0%
(CER)
7.4%
Market Presence
The Americas represented 14% of the Group’s gross profit in
2015, being North America (54% of region) and Latin America
(46% of region). Both the US and Latin America are considered
to be Large, High Potential Markets in our growth strategy.
The US, where we have 8 offices, has a well-developed
recruitment industry, but in many disciplines, especially technical,
there is limited national competition of any scale. PageGroup’s
breadth of professional specialisms and geographic reach is
uncommon and provides a competitive advantage.
Latin America is a very under-developed region, where
PageGroup enjoys the leading market position with around
500 employees in 6 countries and 20 offices. There are few
international competitors and none with any regional scale.
Across the region, permanent placements accounted for 85%
and temporary placements 15% of gross profit.
Performance
In constant currencies, revenue increased 11.2% and gross profit
increased by 7.4%. In reported rates, revenue increased 6.1%
to £115m (2014: £108m) while gross profit improved 2.0% to
£78.4m (2014: £76.9m). During the year, the region suffered from
significant adverse foreign exchange movements that reduced
revenue and gross profit by £5m and £4m, respectively.
In North America, our businesses performed well, with gross profit
up 18% in constant currencies. This was driven in particular by
our Financial Services business in New York and tri-state area,
with the US up 19%. Our Canadian business performed strongly,
up 15% despite the prevailing economic conditions and the
challenging oil and gas market.
In Latin America, gross profit was down 2% year-on-year in
constant currencies. The region continued to operate in two
divergent markets, with tough economic conditions in Brazil,
which led to a fall in gross profit of 23%, partially offset by strong
performances elsewhere. Our business in Brazil reacted by
reducing the number of fee earners by 73 during the year and, as
a consequence, remained profitable. Excluding Brazil, the other
countries in the region, which made up 58% of Latin America,
saw growth of 29%.
Operating profit rose 44.9% to £6.2m (2014: £4.3m), with a
conversion rate of 7.9% (2014: 5.6%). Headcount decreased by
39 (-4.4%) in 2015 to 844, (2014: 883).
46
PB
ANNUAL REPORT 2015 Review of the Year
Operating Profit and Conversion Rates
The Group’s organic growth model and profit-based team bonus
ensures cost control remains tight. Approximately 75% of costs
were employee related, including wages, bonuses, share-based
long-term incentives, and training and relocation costs.
Our fee earner to operational support staff ratio maintained its
record level of 77:23, with our ongoing focus on conversion
rates and maximising productivity from the investment in 468 fee
earners added in 2014, as well as the further 206 added in 2015.
The combination of slowly improving market conditions up to
the latter part of the year, and the ongoing focus on cost control
resulted in operating profit before exceptional items of £90.1m
(2014: £78.5m) an increase of 14.8% in reported rates and 20.2%
in constant currencies.
Our two key initiatives, outside of the operational performance
of the business, the roll-out of our new operating system, PRS,
and the creation of a shared service centre for Europe, have
progressed well with c. 85% of our fee earners live on PRS at
year end, ahead of our 80% target. The completion of our shared
service centre should further improve our fee earner to operational
support staff ratio.
Depreciation and amortisation for the year totalled £15.4m (2014:
£17.9m). This included amortisation relating to PRS of £6.7m
(2014: £8.8m). With the majority of the Group’s fee earners going
live on our new operating system, PRS, in 2015, we aligned the
useful life of the system with the timing of the benefit.
The Group’s conversion rate for the period of 16.2% (2014:
14.7%) was a strong improvement on 2014, as it was achieved
alongside the Group’s investment programme, which was
focused in particular on its Large, High Potential Markets, and
despite the tough market conditions faced in a number of the
Group’s core markets.
The conversion rate for the Large, High Potential Markets
category was 14.8%, which was 1.4 percentage points lower
than the rest of the Group of 16.2%. This was due to a
combination of the headcount investment, which meant that a
greater proportion of fee earners were new to the business, and
the particularly difficult trading conditions in Brazil. Excluding
Brazil, the conversion rate was above the Group average at
17.0%.
Conversion rates improved in all our regions. In EMEA, conversion
increased from 14.2% to 14.7% and in the UK it increased from
17.4% to 19.3%. Within our two less developed regions, Asia
Pacific increased from 18.9% to 20.8%, while the Americas
increased from 5.6% to 7.9%, driven by an improved result in
North America, partially offset by difficult trading conditions
in Brazil.
The Group was affected by the impact of movements in foreign
exchange rates, as Sterling strengthened against almost all
currencies in which the Group operates. This reduced the Group’s
revenue, gross profit and operating profit when expressed in
Sterling by £57m, £26m and £4m, respectively.
A net interest income of £0.6m reflected the continuing low
interest rate environment, with £1.1m of interest income on cash
balances held through the year, partially offset by financial charges
relating to the Group’s Invoice Discounting Facility and overdrafts
used to support local operations of £0.5m.
Earnings Per Share and Dividends
In 2015, basic earnings per share, before exceptional items,
increased 15.8% to 21.3p (2014: 18.4p), reflecting the improved
business performance and our improved conversion rate. Diluted
earnings per share, before exceptional items, which takes into
account the dilutive effect of share options, was 21.1p (2014:
18.2p). After exceptional items, basic earnings per share rose
10.4% to 21.3p (2014: 19.3p) and diluted earnings per share was
21.1p (2014: 19.1p).
The Group’s strategy is to operate a policy of financing the
activities and development of the Group from our retained
earnings and to maintain a strong balance sheet position. We
first use our cash to satisfy our operational and investment
requirements, and to hedge our liabilities under the Group’s
share plans. We then review our liquidity over and above this
requirement to make returns to shareholders, firstly by way of
ordinary dividend.
Our policy is to grow this ordinary dividend over the course of the
economic cycle, in line with our long-term growth rate; we believe
this enables us to sustain the level of ordinary dividend payments
during a downturn as well as increasing it during more prosperous
times. Cash generated in excess of these first two priorities will be
returned to shareholders through supplementary returns, using
special dividends or share buybacks.
In line with the improved growth rates and increase in operating
profits, a final dividend of 7.9p (2014: 7.58p) per ordinary share is
proposed. When taken together with the interim dividend of 3.6p
(2014: 3.42p) per ordinary share, this would imply an increase
in the total dividend for the year of 4.5% over 2014 to 11.5p per
ordinary share.
The proposed final dividend, which amounts to £24.7m, will be
paid on 20 June 2016 to shareholders on the register as at 20
May 2016, subject to shareholder approval at the Annual General
Meeting on 9 June 2016.
In 2015, after consultation with our shareholders, we also paid
a special dividend of 16.0p per share on 2 October 2015. We
will continue to monitor our cash position in 2016 and will make
returns to shareholders in line with the above policy.
47
PB
ANNUAL REPORT 2015 £12.7m). Spending on software development reduced slightly on
the prior year to £6.0m (2014: £6.5m) as the roll-out phase of the
Group’s new operating system continued during the year.
Dividend payments were up on the prior year at £85.1m (2014:
£32.7m) as a result of the special dividend paid in October of
£50m. There was also a significant cash receipt from share
option exercises, with our employees benefiting from the higher
share price. In 2015, £22.6m was received by the Group from
the exercise of options compared to £4.0m received in 2014.
In 2015, no payments were made to purchase shares to satisfy
future employee share awards (2014: £25.4m).
The most significant item in our balance sheet was trade
receivables which amounted to £163.4m at 31 December 2015
(2014: £156.1m), comprising permanent fees invoiced and
salaries and fees invoiced in the temporary placement business,
but not yet paid. Days sales in debtors at 31 December 2015
were 46 days (2014: 45 days), reflecting continued strong
credit control.
Cash Flow and Balance Sheet
Cash flow in the year was strong, with £101.6m (2014: £88.1m)
generated from underlying operations. The closing net cash
balance was £95m at 31 December 2015, an increase of £5m on
the prior year. The movements in the Group’s cash flow in 2015
reflected increased activity in a number of the Group’s markets
as the year progressed. The increase of 1.7% in the Group’s
revenue drove a £11.4m increase in working capital, principally in
the temporary placement business. This comprised an increase
of £20.2m in receivables (2014: £22.2m increase), as well as an
increase in payables of £8.8m (2014: £6.8m increase).
The Group has a £50m invoice financing arrangement and a
£10m committed overdraft facility to facilitate cash flows across
its operations and ensure rapid access to funds should they be
required, but neither of these were in use at the year end.
Income tax paid in the year was £19.1m (2014: £15.4m) an
increase of £3.7m on the prior year. The increase reflects an
increase in tax paid in the UK, plus withholding tax suffered in
respect of repatriated cash plus a mix of lower net tax payments
in EMEA and higher net payments in Asia Pacific and the
Americas. Capital expenditure in 2015 was £15.2m (2014:
Cash flow waterfall 2015 year to date
200
175
150
125
100
£m
75
50
25
48
14.2
1.1
103.5
11.4
113.1
18.7
11.4
18.3
21.5
14.8
22.6
200
175
150
125
100
75
85.4
Dec 2013
50
90.0
EBITDA Working
Capital
Exceptional
item
Tax and
net
interest
Net
Capex
Working
Capital
Tax and net
interest
Net
Capex
Dividends
Paid
Net option
exercises /
EBT
Net option
purchases
exercises/
EBT
purchases
25
Dec 2014
EBITDA
Cash
Increase
Decrease
Cash
Increase
Decrease
32.7
85.1
1.5
1.1
90.0
Exchange Dec 2014
95.0
Dividends
Paid
Exchange
Dec 2015
PB
ANNUAL REPORT 2015 Review of the Year
Foreign Exchange
Foreign exchange had a substantial impact on our results for the
year, causing a decrease in gross profit of £26m, in administrative
expenses of £22m and therefore in operating profit of £4m. This
impact was felt globally, but by far the largest impact was within
EMEA, where gross profit was impacted by over £20m as a result
of the weakening of the Euro.
Taxation
The tax charge for the year was £24.5m (2014: £21.0m). There
being no exceptional items in 2015, this represented an effective
tax rate of 27.0% both before and after exceptional items (2014:
26.2% after exceptional items and 27.9% before exceptional
items). The rate is higher than the effective UK Corporation Tax
rate for the year of 20.25% (2014: 21.5%) principally due to the
impact of disallowable expenditure and higher tax rates in overseas
countries which was partially offset by the recognition of tax losses.
For 2015, the underlying tax rate was 29.4% (2014: 31.0%
including deduction in China of 2.2% for costs incurred in the
prior periods). The reduction from 2014 was predominantly due to
greater profits from territories with lower tax rates, such as the UK
where the corporation tax rate has fallen from 21.5% to 20.25%.
In addition to the movement in the underlying rate, the effective tax
rate in 2015 was impacted by further recognition of US losses and
deferred tax on share options which together reduced the rate
by 2.4%.
The tax charge for the year reflects the Group’s tax policy which
is aligned to business goals. It is PageGroup’s policy to pay its fair
share of tax in the countries in which it operates and to deal with its
tax affairs in a straightforward, open and honest manner.
Share Options and Share Repurchases
At the beginning of 2015 the Group had 24.1m share options
outstanding, of which 7.7m had vested, but had not been
exercised. During the year, options were granted over 1.9m shares
under the Group’s share option plans. Options were exercised over
6.0m shares, generating £22.6m in cash, and options lapsed over
2.1m shares. At the end of 2015, options remained outstanding
over 17.9m shares, of which 5.4m had vested, but had not
been exercised. During 2015, no shares were purchased by the
Group’s Employee Benefit Trust to satisfy future employee share
plan awards (2014: £25.4m). No shares were repurchased by the
Company or cancelled during the year (2014: nil).
Approved by the Board on 9 March 2016 and signed on its
behalf by:
Steve Ingham
Chief Executive Officer
49
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ANNUAL REPORT 2015 Chairman’s Introduction to
Corporate Governance
Dear Shareholder,
Your Board remains committed to high standards of governance and the fostering of an effective
governance framework. This underpins the Board’s ability to set the overall strategic direction of
PageGroup and supports its core values. The following pages of this Corporate Governance Report
set out how the Company has complied with the UK Corporate Governance Code; the work and
activities of each Board Committee; and the annual evaluation process.
During the year under review the Board continued to build a strong and well balanced Board. It
appointed Patrick De Smedt as a Non-Executive Director in August. Patrick brings a wealth of
experience to the Board, complementing that of the other Non-Executive Directors. At the end of
December Robin Buchanan stood down as Chairman of the Board and I was appointed as Chairman in his stead. The Board is grateful to Robin
for his contribution over the last four years and thanks him for his service to the Company. Baroness Ruby McGregor-Smith will complete nine years
on the Board in May 2016. Due to the recent Board changes and Ruby’s extensive experience, gained through the different parts of the economic
cycle, the Directors have requested, and Ruby has agreed, to continue to serve on the Board as a Non-Executive Director. Consequently Ruby will
stand for re-election at the forthcoming Annual General Meeting. Ruby will cease to be a member of the Audit and Remuneration Committees with
effect from 23 May 2016 and will also step down as Senior Independent Director in due course. Finally, the Board also wishes to note its thanks to
Fabrice Lacombe, who joined the Group in 1996 and served as an Executive Board member from 2010 until his passing last December.
I hope you find our Corporate Governance Report informative and I will be available at the 2016 Annual General Meeting to respond to any
questions you may have on this Report.
David Lowden
Chairman
9 March 2016
Our Corporate Governance Framework
The Board
The Board’s role is to provide entrepreneurial leadership of the Group within a framework of prudent and effective controls which
enable risk to be assessed and managed. It has a formal schedule of matters reserved for its decision.
More details on pages 56 to 60
Chief Executive
Officer (CEO)
Key responsibility is to develop
and deliver the Group’s strategy
within the policies and values
established by the Board.
Executive Board
The Executive Board is chaired
by the CEO and includes the
CFO. The Executive Board
is responsible for overseeing
operations in our regions
and for overseeing business
operational functions
Group-wide.
Details on page 55
Chief Financial
Officer (CFO)
Responsible for managing the
financial risks, reporting and
planning of the Group.
Nomination Committee
Responsible for ensuring that the
Company has the executive and non-
executive Board leadership it requires.
Details on page 61
Audit Committee
Responsible for the integrity of the
Company’s financial statements and
performance, ensuring the necessary
internal controls and risk management
systems are in place and effective.
Details on page 62
Remuneration Committee
Responsible for the review,
recommendation and implementation
of the Group’s remuneration strategy,
its framework and cost.
Details on page 67
Company Secretary
Responsible for ensuring
the Board comply with all
legal, regulatory and
governance requirements.
50
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ANNUAL REPORT 2015 Our Board of Directors
Our business is led by our Board of Directors. Biographical details of
the Directors as at 9 March 2016 are as follows:
David Lowden,
Chairman
Date of appointment:
Director – August 2012
Chairman – 31 December 2015
Past Roles: 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 David held senior
financial positions in Asprey plc, A.C. Nielsen Corporation and
Federal Express Corporation.
Other Current Appointments:
Senior Independent Director and Chairman of the Remuneration
Committee, Berensden plc; Non-Executive Director and Chairman
of the Audit Committee, William Hill plc.
Board Committees: Nomination (Chairman)
Skills and Experience:
• Extensive experience in both general management and
financial management
• Many years of operating within international businesses with
cultural diversity
• Strong strategic understanding
• Proven ability for delivering shareholder value
Steve Ingham,
Chief Executive Officer, Executive Director
Date of appointment:
February 2001
Chief Executive Officer April 2006
Past Roles: 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 business and
was promoted to Operating Director in 1990. He was appointed
Managing Director of Michael Page Marketing and Sales in 1994.
Subsequently Steve 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 February 2001 and subsequently
to Managing Director of UK Operations in May 2005. Steve was
appointed Chief Executive Officer in April 2006.
Other Current Appointments:
Non-Executive Director, Debenhams plc. Member
of the Corporate Partnership Board, Great Ormond Street
Hospital.
Board Committees: None
Skills and Experience:
• More than 29 years’ service with the Group and recruitment
• Strong financial, marketing and commercial skills
industry
• Experienced non-executive in several sectors
• Ten years as a CEO of a public company, now FTSE 250, with
strong IR skills, delivering shareholder value
• Strong entrepreneurial and strategic skills having initiated and
grown many businesses
• Extensive experience in business development and account
management
• Significant international experience including the emerging
markets of SE Asia, China, Latin America and India
• Leadership of a global people business having seen
PageGroup grow from 200 to 5,800 employees
• Experience in other sectors and industries having worked on
the Board of a major charity and retailer
51
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ANNUAL REPORT 2015 Kelvin Stagg,
Chief Financial Officer, Executive Director
Baroness Ruby McGregor-Smith CBE,
Senior Independent Director
Date of appointment:
June 2014
Date of appointment:
May 2007
Past Roles: Kelvin joined Michael Page International plc
in July 2006 as Group Financial Controller and Company
Secretary. He was appointed Acting Chief Financial
Officer in October 2013. He held the title of Company
Secretary until December 2013. In June 2014 Kelvin
was appointed Chief Financial Officer. Prior to joining
the Group, Kelvin spent six years at Allied Domecq and
three years at Unilever in a variety of finance functions.
He has significant international experience and has high
levels of compliance, change management, large teams
and systems experience, across almost every finance
discipline. He is a Chartered Management Accountant.
Other Current Appointments: None
Board Committees: None
Skills and Experience:
• More than nine years in the Group with a detailed
knowledge of the Group’s operations
Past Roles: Ruby qualified as a Chartered Accountant
with BDO Stoy Hayward. In December 2002 Ruby joined
Mitie Group plc as Group Finance Director and was
appointed Chief Operating Officer in September 2005
before being appointed Chief Executive in March 2007.
Other Current Appointments:
Chief Executive, Mitie Group plc; Chairperson of the
Women’s Business Council; Non-Executive Director of
the Department of Education.
Board Committees: Audit, Nomination, Remuneration*
Skills and Experience:
• CEO, COO and CFO experience with a FTSE 250
public company for over 13 years
• Strong strategic and commercial understanding
• Proven ability for delivering shareholder value
• Extensive experience in customer services
• Extensive experience in finance, audit and risk
• Significant financial, audit and risk management
management
systems experience
• Significant international experience including roles in
the UK, Continental Europe and Asia
• High levels of compliance, change management, large
teams and systems experience, across almost every
finance discipline
• Strong network of finance professionals
* Ruby will cease to be a member of the Audit and
Remuneration Committees from 23 May 2016
52
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ANNUAL REPORT 2015 Our Board of Directors
Simon Boddie,
Independent Non-Executive Director
Danuta Gray,
Independent Non-Executive Director
Date of appointment:
September 2012
Date of appointment:
December 2013
Past Roles: Simon is a Chartered Accountant. He was Group
Finance Director of Electrocomponents plc from September 2005
to September 2015. Simon joined Electrocomponents plc from
Diageo where he held a variety of senior finance positions over a
13 year career, latterly Finance Director of Key Markets.
Board Committees: Audit (Chairman), Nomination,
Remuneration
Skills and Experience:
• CFO of FTSE 250 public company for ten years
• Extensive experience in financial, audit and risk management
systems
• International operations and emerging markets experience
• Strong strategic and commercial understanding
Past Roles: Danuta was Chairman of Telefonica O2 in Ireland until
December 2012, having previously been its Chief Executive from
2001 to 2010. Prior to that Danuta was Senior Vice President for
BT Europe in Germany and during her career gained experience in
sales, marketing, customer services and technology and in leading
and changing large businesses. She previously served for seven
years on the Board of Irish Life and Permanent plc and was a
Director of Business in the Community Ireland and Aer Lingus plc.
Other Current Appointments:
Non-Executive Director and Remuneration Committee Chairman,
Old Mutual plc; Non-Executive Director, Paddy Power plc; Non-
Executive Director and Senior Independent Director of Aldermore
Bank PLC; Member of the Defence Board, UK Ministry of Defence.
Board Committees: Remuneration (Chairman), Audit,
Nomination
Skills and Experience:
• Chairman and CEO experience
• Experienced non-executive in several sectors
• Extensive experience in general management
• Proven ability for delivering shareholder value
• Strong strategic understanding
• Extensive experience in sales, marketing, customer services
and technology
• Leading and changing large businesses
53
PB
ANNUAL REPORT 2015 Patrick De Smedt,
Independent Non-Executive Director
Date of appointment:
August 2015
Elaine Marriner,
Company Secretary
Date of appointment:
December 2013
Past Roles: Prior to this appointment Elaine was Company
Secretary and General Counsel of HMV Group plc.
Past Roles: Patrick spent 23 years at Microsoft during which time
he founded the Benelux subsidiaries, led the development of its
Western European business and served as Chairman of Microsoft
for Europe, Middle East and Africa. Since leaving Microsoft in
2006, Patrick has served on the boards of a number of European
public and private companies. He has deep knowledge of
international markets and information technology, and experience
as a non-executive in diverse industry sectors.
Other Current Appointments:
Non-Executive Director and Remuneration Committee Chairman
of Victrex plc; Senior Independent Director of KCOM Group
plc; Senior Independent Director and Remuneration Committee
Chairman of Morgan Sindall Group plc; Non-Executive Director
of Kodak Alaris Holdings Ltd; Non-Executive Director of
Nexinto GmbH.
Board Committees: Audit, Nomination, Remuneration
Skills and Experience:
• Extensive experience of technology and customer services
• Experienced non-executive in several sectors
• Extensive experience in general management
• Many years of operating within international businesses with
cultural diversity
• Proven ability for delivering shareholder value
• Leading and changing large businesses
54
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ANNUAL REPORT 2015 The Executive Board
Steve Ingham
Chief Executive Officer,
Executive Director
Kelvin Stagg
Chief Financial Officer,
Executive Director
See biography on page 51.
See biography on page 52.
Patrick Hollard
Executive Board Director,
Latin America, Middle East and Africa
Olivier Lemaitre
Executive Board Director,
Continental Europe
Patrick joined Michael Page in France in 1996, having worked
previously for KPMG Peat Marwick. Prior to that, he had
been Vice-President of AISEC International, the student led
organisation, from 1991 to 1992. Appointed director in 1999,
he moved to Sao Paulo to launch Michael Page Brazil, and then
launched offices in Mexico in 2006, Argentina in 2008, Chile
in 2010 and Colombia in 2011. Appointed Regional Managing
Director in 2007, he is now responsible for PageGroup’s
operations in Latin America, Middle East and Africa.
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,
the Netherlands, Luxembourg and Switzerland. Since 2012
he has been responsible for PageGroup’s operations in
Continental Europe.
Gary James
Executive Board Director,
Asia Pacific
Oliver Watson
Executive Board Director,
UK, USA and Canada
Gary joined Michael Page Finance in London in 1984. He was
appointed director of Michael Page UK Sales and Marketing in
1994 and managing director of Michael Page UK Marketing in
1997. In 2002 he transferred to the USA on his appointment as
managing director of our business in North America. He was
appointed Regional Managing Director of the Asia Pacific region in
August 2006.
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 PageGroup’s operations in the
UK, USA and Canada.
The Group sadly notes that Fabrice Lacombe, our Executive Board Director for France, Central and Eastern Europe, passed away after a
long battle with illness in January 2016. Fabrice had a profound influence on PageGroup during his 21 years with the Company and also the
recruitment sector in France, within which he was highly respected. We will remember Fabrice for his drive, intelligence, enthusiasm, integrity,
commitment to fair play and great capacity for work. Many of our specialisations and offices, in France in particular, trace their origins back to
Fabrice as do many colleagues who have gone on to become directors and managing directors who will remember his support and guidance.
55
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ANNUAL REPORT 2015 Corporate Governance Report
Compliance with the UK Corporate
Governance Code
During the year ended 31 December 2015 and to the date of
this document, the Company has complied with the provisions
of the UK Corporate Governance Code 2014 (the “Code”). The
Code is publicly available on the FRC website (www.frc.org.uk).
In the following Corporate Governance section, together with the
Strategic Report on pages 1 to 49, the Directors’ Remuneration
Report on pages 67 to 79 and the Directors’ Report on pages 82
to 85, we describe how we have applied the main principles of the
Code.
The Board and its Operation
The Board of Michael Page International plc is the body
responsible for the overall conduct of the Group’s business and
has the powers and duties set out in relevant laws of England and
Wales and in its Articles of Association.
The Board’s role is to provide entrepreneurial leadership of the
Group within a framework of prudent and effective controls
which enables risk to be assessed and managed. The Board is
collectively responsible to the Company’s shareholders for the
success of the Company. The Board is satisfied that it has met the
Code’s requirements for its effective operation.
Composition of the Board
As at the end of the year under review the Board comprised the
Chairman, the Chief Executive Officer, the Chief Financial Officer
and four Non-Executive Directors. The biographies of each of
these Directors can be found on pages 51 to 54.
Patrick De Smedt was appointed a Non-Executive Director of the
Company on 1 August 2015. Robin Buchanan served as Non-
Executive Chairman of the Company until his resignation from the
Board on 31 December 2015. On the same date David Lowden
was appointed Chairman of the Company. All other Directors
served throughout the year. The Board considers that during the
year under review, and in the case of Patrick De Smedt from his
date of appointment onwards, each of Simon Boddie, Danuta
Gray, David Lowden and Baroness Ruby McGregor-Smith were
independent. In addition, the Board determined that each of Robin
Buchanan and David Lowden were independent at the time of
their respective appointments as Chairman.
Baroness Ruby McGregor-Smith will complete nine years on the
Board in May 2016. Due to the recent Board changes and Ruby’s
extensive experience, gained through the different parts of the
economic cycle, the Directors have requested, and Ruby has
agreed, to continue to serve on the Board as a Non-Executive
Director. Consequently Ruby will stand for re-election at the
forthcoming Annual General Meeting. Ruby will cease to be a
member of the Audit and Remuneration Committees with effect
from 23 May 2016 and will also step down as Senior Independent
Director in due course.
There is a clear division of responsibilities between the role of
the Chairman and that of the Chief Executive Officer. Whilst the
Board is collectively responsible for the success of the Company,
the Chairman manages the Board to ensure that the Company
has appropriate objectives and an effective strategy. He ensures
that there is a Chief Executive Officer with a team to implement
the strategy and that there are procedures in place to inform
the Board of performance against objectives. The Chairman
also ensures that the Company is operating in accordance with
the principles of corporate governance. The Chairman’s other
significant commitments are noted on page 51. The Board
considers that these are not a constraint on the Chairman’s
agreed time commitment to the Company.
Baroness Ruby McGregor-Smith is the Senior Independent
Director and acts as an alternative channel of communication for
shareholders. She also acts as a sounding board for the Chairman
and serves as an intermediary for other Directors.
Steve Ingham, the Chief Executive Officer, has overall responsibility
for the day-to-day management of the Group’s operations. He
develops the vision and strategy for the Board’s review, implements
the Board’s approved strategy and chairs the Executive Committee
(known within the Group as the “Executive Board”) which executes
the delivery of the annual operating plans. He also leads the
programme of communication with shareholders.
Executive and Non-Executive Directors are equal members of the
Board and have collective responsibility for Board decisions. The
Non-Executive Directors bring a wealth of skills and experience to
the Board and its Committees.
The Board has a formal schedule of matters reserved for its
decision which includes:
• Group strategy and corporate objectives;
• Determining the nature and extent of the significant risks the
Board is willing to take in achieving the strategic objectives of
the Company;
• Major changes to the nature, scope or scale of the business of
the Group;
• Corporate governance matters;
• Approval of Nomination Committee recommendations on
the appointment and removal of Directors and succession
planning;
• Changes to the Group’s capital structure and approval of any
business plan prior to a new entity being established in a new
territory;
• Financial reporting, audit and tax matters;
• Material contracts and transactions not in the ordinary course
of business;
• Material capital expenditure projects;
• Approval of the annual budget;
• Obtaining major finance; and
• Communications with stakeholders and complying with
regulatory requirements.
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ANNUAL REPORT 2015 Corporate Governance Report
Induction, Training and Information
The Chairman is responsible for the induction of new directors
and is assisted by the Company Secretary. On appointment to
the Board, each Director discusses with the Chairman and the
Company Secretary the extent of the training required. A tailored
induction programme to cover their individual requirements is
then compiled. Elements of the programme typically consist of
meetings with senior executives, site visits, attending internal
conferences and consultant shadowing to understand the
day-to-day activities of a recruitment consultant. In addition,
information is provided on the Company’s services, Group
structure, Board arrangements, financial and environmental, social
and governance information, major competitors and major risks.
Directors update and refresh their knowledge and familiarity
with the Group through site visits, participation at meetings with
and receiving presentations from senior management. This is in
addition to the access that every Director has to the Company
Secretary. The Company Secretary is responsible to the Board
for ensuring that Board procedures are complied with as well as
advising the Board on new legislation and corporate governance
matters. Board Committees and Directors are also given access
to independent professional advice at the Group’s expense if the
Directors deem it necessary in order for them to carry out their
responsibilities.
For each Board and Committee meeting Directors receive a pack
of relevant information on the matters to be discussed. In 2014
the Board moved to using a third party board portal to distribute
information more quickly and securely. The Chief Executive Officer
presents a comprehensive update on the business issues across
the Group to the Board and the Chief Financial Officer presents
a detailed analysis of the financial performance. The Board also
receives at each Board Meeting an Investor Relations Report,
including any feedback from investors and Investor Roadshows.
Regional Managing Directors and other senior managers also
attend relevant parts of Board meetings and the Board Strategy
Day in order to make presentations on their areas of responsibility.
Board Committees
The Board has three principal Board Committees, each of which
regularly reports to the Board: the Audit Committee, Nomination
Committee and Remuneration Committee. The Audit and
Remuneration Committees are comprised solely of independent
Non-Executive Directors. The Nomination Committee is comprised
of independent Non-Executive Directors and chaired by the
Chairman of the Board who was independent on appointment.
Details of the composition and activities of each Committee
can be found in the respective reports of each Committee:
Audit Committee Report on pages 63 and 64; the Nomination
Committee Report on page 61; and the Directors’ Remuneration
Report on pages 67 and 68.
Each Committee has clear terms of reference, copies of
which can be found on the Company’s website www.page.
com. Each Committee also reviews its effectiveness and makes
recommendations to the Board of any appropriate changes
as and when required. The Chairman of each of the Board
Committees will be available to answer shareholders’ questions at
the forthcoming Annual General Meeting.
The Company Secretary acts as secretary to each of these
Committees and minutes of meetings are circulated to all
Committee members and to all members of the Board unless
it would be inappropriate to do so.
The Group also has an Executive Board which is chaired by the
Chief Executive Officer. It comprises the Chief Financial Officer
and other senior executives, biographies for whom can be found
on page 55. The Executive Board usually meets four times a year
and is responsible for assisting the Chief Executive Officer in the
performance of his duties. These include the development and
implementation of strategy, operational plans, policies, procedures
and budgets. These activities are performed at a regional level by
regional boards for each of the UK, EMEA, Asia Pacific and the
Americas. Each regional board usually meets at least four times
a year.
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ANNUAL REPORT 2015 Board and Committee Attendance
The table below sets out the number of meetings of the Board and each of the Audit, Nomination and Remuneration Committees during
the year and individual attendance by the relevant members at these meetings, demonstrating commitment to their role as Directors of the
Company. The Board met nine times during the year.
Director
Board
Audit
Nomination
Remuneration
Meetings
Held
Meetings
Attended
Meetings
Held
Meetings
Attended
Meetings
Held
Meetings
Attended
Meetings
Held
Meetings
Attended
Robin Buchanan1
Simon Boddie
Patrick De Smedt2
Danuta Gray
Steve Ingham
David Lowden
Baroness Ruby McGregor-Smith3
Kelvin Stagg
Notes:
9
9
4
9
9
9
9
9
8
9
3
9
9
9
8
9
N/A
N/A
7
3
7
7
3
7
6
6
3
6
4
6
2
6
N/A
N/A
3
2
3
3
2
3
N/A
N/A
N/A
N/A
N/A
N/A
7
7
7
6
6
6
6
5
3
3
3
2
N/A
N/A
N/A
N/A
N/A
N/A
1. Robin Buchanan was unable to attend the Board Meeting held on 12 October 2015 and the Nomination Committee Meetings held on 12 October 2015 and 9 December
2015 as these Meetings were devoted to the succession planning of the Chairman.
2. Patrick De Smedt was appointed a Director of the Company on 1 August 2015 and, therefore, was eligible to attend only four Board meetings, three Audit and Nomination
Committee meetings and two Remuneration Committee meetings. He was unable to attend one Board and one Nomination Committee meeting, both of which were held
on the same day and on short notice.
3. Baroness Ruby McGregor-Smith was unable to attend the August Board and Committee meetings, all of which were held on the same day, due to a prior engagement
which she was unable to rearrange.
During the year under review the Non-Executive Directors met on several occasions without the Executive Directors being present.
The Non-Executive Directors also met on several occasions without the presence of the Chairman.
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ANNUAL REPORT 2015 Corporate Governance Report
Succession Planning
Executive development and succession planning discussions are
held each year. These discussions focus on the development and
succession of the Executive Directors, Executive Board members
and other senior managers in the Group with the aim of ensuring
that existing senior executives are being developed and that there
is a pipeline of talented senior individuals within the business.
Development and succession planning is a critical part of the Chief
Executive Officer’s performance objectives for annual bonus and
long-term remuneration.
In addition, the Nomination Committee also considers the breadth
and depth of experience of the Non-Executive Directors and
considers on a regular basis succession planning for the Board
as a whole. Information on the Board’s policy on diversity both
at the Board level and the Group as a whole can be found in the
Nomination Committee Report on page 61 and the Strategic
Report on pages 22 and 25.
Performance Evaluation
In line with the Code, each year the Board undertakes a formal
and rigorous evaluation of its own performance, that of its
Committees and its individual Directors. An externally facilitated
evaluation was undertaken in 2013 and in accordance with
the Code will be undertaken again in 2016. In 2015 the Board
undertook an internal evaluation of the Board and each of the
Audit, Nomination and Remuneration Committees. This process
involved an objective and comprehensive evaluation of the
balance of skills, knowledge and experience of the Board, how the
Board works together, whether it is effective and well supported.
The 2015 evaluation also considered whether the 2014 action
points (see below) had been dealt with adequately. The evaluation
was conducted by the Company Secretary by means of detailed
questionnaires completed by the Board, Committee members and
regular attendees of the Committees. The results of the evaluation
for each of the Committees were reviewed and discussed by each
of the relevant Committees and then reported to the Board as a
whole, together with the results of the appraisal of the Board itself.
The 2014 internal evaluation noted the following action plan of
matters for 2015:
• The continued development of the Board’s approach to
strategic planning;
• Continued focus on development and succession planning;
• Continued development and embedding of risk management
throughout the business;
• Development of a clear Corporate Social Responsibility plan;
and
• Redesign of the schedule of Board and Audit Committee
meetings.
These action points were followed up and further work was
completed in respect of each item.
The 2015 evaluation concluded that the Board is well set up to
be effective; it has the right Executive leadership team in place;
and continues to build bench strength from within the Group. It
confirmed that the Board has continued to develop its approach
to its strategic planning and its focus on development and
succession planning. Much work had been undertaken during the
year under review in respect of risk appetite, risk management
and the Group’s longer term viability as detailed in the Strategic
Report on page 40. The Corporate Social Responsibility plan
was further reviewed by a number of senior executives in the
Group with a view to improving data gathering and reporting.
The Group’s corporate and social responsibility activities are
disclosed in the Strategic Report on pages 21 to 24. The number
of Board and Committee meetings were reviewed and redesigned
leading to a reduction in the number of Committee meetings,
while ensuring that the effectiveness of the Committees was not
compromised.
An action plan of the more significant matters for further attention
during 2016 was agreed as follows:
• Continue to build the bench strength as part of the ongoing
succession planning process;
• With the recent Board changes, review the Board’s ongoing
improvement of its composition, practices and processes; and
• Further investigate the strategic investment opportunities in
key markets which will deliver competitive advantage.
These action points will be reviewed by the Board and its relevant
Committees in the second quarter of 2016 to ensure they are
dealt with accordingly.
In addition, the Chairman appraises the performance of the
individual Board members and meets with the Directors
individually to discuss their appraisals. The Senior Independent
Director is responsible for the evaluation of the Chairman and the
views of the other Directors are canvassed in this respect. The
results of the performance evaluation of each Director and the
Chairman are reported to the Board.
Re-election of Directors
The Company’s Articles of Association provide that each Director
must retire from office every three years. The Code goes beyond
this, requiring all Directors to retire and stand for re-election at
each Annual General Meeting. The Company complies with the
Code requirement. All Directors, except Patrick De Smedt, will
submit themselves for re-election at the forthcoming Annual
General Meeting. Patrick De Smedt, who was appointed a
Director after the Company’s last Annual General Meeting will, in
accordance with the Company’s Articles of Association, stand for
election at the Annual General Meeting.
Internal Control and Risk Management
In accordance with the Code the Board has overall responsibility
for the effectiveness of the Group’s system of internal control
and risk management. The procedures established by the Board
have been designed and implemented to meet the particular
requirements of the Group and the risks to which it is exposed.
These procedures also provide an ongoing process for identifying,
evaluating and managing principal risks. The system of internal
control includes financial, compliance and operational controls,
which are designed to meet the Group’s particular needs. These
controls aim to safeguard Group assets, ensure that proper
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ANNUAL REPORT 2015 accounting records are maintained, that the financial information
used within the business and for publication is reliable and to
support the successful delivery of the Group’s Strategic Plan. Any
system of internal control can only provide reasonable, but not
absolute assurance against material misstatement or loss.
In practice the Board delegates the implementation of the Board’s
policy on risks and control to executive management and this is
monitored by an Internal Audit function which reports back to the
Board through the Audit Committee.
The key elements of our system of internal control are as follows:
• Group Organisation – The Board of Directors meets nine
times a year, focusing both on strategic issues and operational
and financial performance. There is also a defined policy on
matters reserved strictly for the Board. The Regional Managing
Director, supported by a Regional Finance Director, of each of
our four regions is accountable for establishing and monitoring
internal controls within our respective regions.
• Annual Business Plan – The Board reviews the Group’s
strategy and approves an annual Group budget. Performance
is then monitored by the Board through the review of monthly
reports showing comparisons of results against budget,
quarterly forecasts and the prior year, with explanations
provided for significant variances.
• Policies and Procedures – Policies and procedures are
documented over both financial controls and non-quantifiable
areas such as the Group’s whistleblowing policy and its policy
relating to anti-bribery and corruption, gifts and hospitality.
• Risk Management – The Board has established a framework
for identifying and managing risk, both at a strategic and
operational level. An overview of this framework and a summary
of the principal risks identified, together with mitigating actions,
can be found in the Strategic Report on pages 37 to 39.
• Internal Audit – The Group Internal Audit function examines
business process controls throughout the Group on a risk
basis and reports the findings to the Executive Board and Audit
Committee. Agreed actions are monitored and reported to the
Audit Committee.
• Confirmations from Executive Management – The
Managing Director and Finance Director of our operations in
each country formally certify twice a year whether the business
has adhered to the system of internal control during the period,
including compliance with Group policies. The statement also
requires the reporting of any significant control issues that
have emerged including suspected or reported frauds so that
areas of Group concern can be identified and investigated as
required. These confirmations and supporting controls self-
assessment questionnaires are reviewed by the Internal Audit
function and a summary of findings is provided to the Audit
Committee for review.
In accordance with the requirements of the Code and the
recommendations of the FRC’s Guidance on Risk Management
and Related Financial and Business Reporting, the Board has
reviewed and agreed its approach to risk and its risk appetite
when considering its strategy and the management of its risks.
It has also considered its longer term viability. Details on the Board’s
risk appetite and its assessment of its longer term viability can be
found in the Strategic Report on pages 36 and 40. Further, the
Board, with the assistance of the Audit Committee, has carried
out a review of the effectiveness of the Group’s risk management
and internal control systems, including a review of the internal audit
activities and the financial, operational and compliance controls for
the period from 1 January 2015 to the date of this Annual Report.
No significant failings or weaknesses were identified. A confirmation
of any necessary actions is, therefore, not provided. However, had
there been any such failings or weaknesses the Board confirms that
necessary actions would have been taken to remedy them.
Relations with Shareholders
Communications with shareholders are given a high priority.
The majority of contact between the Board and shareholders
is through the Chief Executive Officer and the Chief Financial
Officer. They make themselves available, where possible, to meet
with shareholders and analysts at their request. During 2015
the Executive Directors visited 10 cities on roadshows across
the United Kingdom, Europe and North America. They also held
investor conferences and equity sales teams’ briefings, as well
as over 121 investor meetings. In addition, in September, the
Company undertook an Investor Relations event showcasing the
regional leadership teams. This event was attended by a majority of
the Company’s coverage analysts.
The Annual Report and Accounts is sent to all shareholders
and is also available on the Company’s website www.page.com.
The website contains up-to-date information on the Group’s
activities, published financial results and the presentations used
for briefings and investor meetings held during the year. These are
available to download.
The Annual General Meeting is an additional opportunity for all
Board members to meet with shareholders and investors and give
them the opportunity to ask questions. Final voting results are
published through a Regulatory Information Service and on the
Company’s website following the Meeting.
Conflicts
The Company has implemented robust procedures in line with
the Companies Act 2006, requiring Directors to seek appropriate
authorisation from the Board prior to entering into any outside
business interests which have or could have a direct or indirect
interest that conflicts, or may conflict, with the Group’s interests.
These procedures have operated effectively throughout the year
under review. The Nomination Committee is responsible for
reviewing possible conflicts of interest. It makes recommendations
to the Board as to whether a conflict should be authorised and the
terms and conditions on which any such authorisation should be
given by the Board. Only Directors without an interest in the matter
being considered will be involved in the decision and each Director
must act in a way they consider, in good faith, will promote the
success of the Group. 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
authorisation given.
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ANNUAL REPORT 2015 Nomination Committee Report
David Lowden
Chairman
Purpose
The Nomination Committee is responsible for ensuring that the
Company has the executive and non-executive Board leadership
it requires, both now and for the future.
Membership
During the year under review the members of the Committee were
Robin Buchanan, who was Chairman of the Committee, Simon
Boddie, Patrick De Smedt, Danuta Gray, David Lowden and
Baroness Ruby McGregor-Smith. Patrick De Smedt became a
member of the Committee on 1 August 2015 on his appointment
as a Director of the Company. All other members served
throughout the year. On 31 December 2015 Robin Buchanan
ceased to be a member, and Chairman, of the Committee when
he resigned as a Director of the Company. On the same date
David Lowden was appointed Chairman of the Committee on his
appointment as Chairman of the Company. During the year under
review Robin Buchanan’s other significant commitments were
non-executive director of each of Schroders plc and Lyondell
Basell Industries NV, and senior adviser to Bain & Company.
Details of David Lowden’s other significant commitments can be
found on page 51.
Only members of the Committee are entitled to attend meetings.
Other individuals, such as the Chief Executive Officer, the Group
Human Resources Director and external advisers, may attend
meetings by invitation when appropriate and necessary.
Responsibilities
The key responsibilities of the Committee are to:
• Assess and nominate members to the Board;
• Maintain the right mix of character, skills and experience on the
Board and its Committees;
• Make recommendations to the Board on development and
succession plans for members of the Board and senior
management;
• Approve job descriptions and written terms of appointment for
Directors; and
• Review the independence of Non-Executive Directors, taking
into account their other directorships.
The Committee follows formal and transparent procedures
for appointing Directors and is assisted in its search for new
non-executive directors by an independent executive search
company, The Zygos Partnership. Zygos has no connection with
the Company other than the provision of this service. A detailed
candidate profile is recommended by the Committee to the Board.
If approved, a search and selection process based on that profile
is undertaken. Candidates are identified and selected on merit
against objective criteria and with due regard to the benefits of
diversity on the Board, including gender. A shortlist of candidates
is then interviewed by the Chairman of the Board, the Chief
Executive Officer and members of the Committee. Thereafter a
recommendation of appointment is made to the Board.
Geographic and gender diversity is important both at Board level
and at every other level in the business. It therefore remains the
Committee’s policy to seek diversity of experience, capability,
geography and gender in order to create a talented high-
performing Board. Detail of diversity below Board level can be
found in the Strategic Report on pages 22 and 25.
Activities During the Year
During 2015 the Committee met on six occasions. Details of
the members’ attendance at meetings of the Committee can
be found in the Corporate Governance Report on page 58. The
Committee continues to focus on succession planning both for
senior management and the Board. The Committee undertook the
selection of a new Non-Executive Director which resulted in the
appointment of Patrick De Smedt on 1 August 2015.
The Committee also considered the extension of the term of
appointment for each of David Lowden and Simon Boddie whose
respective letters of appointment had reached the end of their
initial three-year term in August and September respectively.
Neither David nor Simon took part in discussions about the
extension of their own term. The Committee extended both letters
of appointment, each for a further three year period.
Further, in October 2015 Robin Buchanan informed the Board
of his intention to step down from the Board at a date to be
determined. He subsequently resigned as Chairman of the
Board on 31 December 2015. The process for the selection of
a chairman to succeed Robin Buchanan on his retirement was
conducted by the Committee, led by Baroness Ruby McGregor-
Smith, Senior Independent Director. Ruby was assisted by the
independent executive search company, The Zygos Partnership.
Following a thorough process during which the Nomination
Committee considered both internal and external candidates,
David Lowden was unanimously recommended to the Board
as the Company’s next Chairman. The Board approved the
appointment with effect from 31 December 2015. Neither David
Lowden nor Robin Buchanan took part in the selection process.
The activities of the Committee were reviewed as part of the
Board evaluation process performed during the year under review.
Details of the evaluation process can be found in the Corporate
Governance Report on page 59.
Plan for 2016
In 2016 the Committee will continue to review the size of the
Board, its mix of skills and experience, and succession plans for
both Executive and Non-Executive Directors.
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ANNUAL REPORT 2015 Audit Committee Report
Simon Boddie
Committee Chairman
Purpose
The Audit Committee is the guardian of the integrity of the
Company’s financial statements and external reporting of
performance. It also has the responsibility for ensuring that the
necessary internal controls and risk management systems are in
place and effective.
Membership
During the year under review the members of the Committee
were Simon Boddie, who was the Chairman of the Committee,
Patrick De Smedt, Danuta Gray, David Lowden and Baroness
Ruby McGregor-Smith. All served throughout the year except
Patrick De Smedt who was appointed a member of the
Committee on 1 August 2015 on his appointment as a Director
of the Company. David Lowden ceased to be a member of the
Committee on his appointment as Chairman of the Board on 31
December 2015. Only members of the Committee are entitled
to attend meetings. Other individuals, such as the Chairman of
the Board, the Chief Executive Officer, the Chief Financial Officer,
the Company Secretary, the Director of Internal Audit and the
external audit partner are regularly invited to attend meetings as
appropriate and necessary. The Committee can invite others to
attend as appropriate.
The Board is satisfied that the Chairman of the Committee has
the current and relevant financial and accounting experience
required by the provisions of the Code. Other members of the
Committee also have recent and relevant financial experience
and have a sufficiently wide range of business experience and
expertise such that the Committee can effectively fulfil its role.
The relevant qualifications and experience of the Committee
members are shown in their biographies on pages 51 to 54.
The Committee met with the external auditor during the year
without the presence of management in order to provide an
opportunity for confidential discussion. The Director of Internal
Audit and the external auditor have direct access to the Chairman
of the Committee throughout the year.
During the year under review the Committee met on seven
occasions. Details of the members’ attendance at the meetings of
the Committee can be found in the Corporate Governance Report
on page 58. Set out in the table below is a summary of the main
activities of the Committee during 2015. Key issues covered by
the Committee are reported to the Board.
Financial Reporting
In its financial reporting to shareholders and other interested
parties, the Board aims to present a fair, balanced and
understandable assessment of the Group’s position and
prospects, providing necessary information for shareholders
to assess the Company’s business model, strategy and
performance. The Company has an established process for
reviewing the annual report and accounts to ensure it is fair,
balanced and understandable. This was used again this year. It
included a thorough understanding of the regulatory requirements
for the annual report and accounts; a process to determine the
accuracy, consistency and clarity of the data and language; and
a detailed review by all appropriate parties including external
advisers. A checklist of all the elements of the process was
completed to document the process and cascaded sign-off
implemented through the Group’s management structure
to provide assurance to the Committee that the appropriate
procedures had been undertaken by all Group companies.
The Committee has reviewed the Company’s 2015 Annual Report
and Accounts. It provided comments which were incorporated
into the Annual Report and Accounts and has advised the Board
that in its opinion, the Annual Report and Accounts taken as
a whole is fair, balanced and understandable and provides the
information necessary to assess the Company’s performance,
business model and strategy.
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ANNUAL REPORT 2015 Audit Committee Report
Main Activities of Audit Committee During 2015
January
August
Review of Financial Statements
• Quarter 4 trading update
March
Review of Financial Statements
• Draft preliminary announcement and 2014 Annual Report
and Accounts
• External auditor’s year-end report
• Going concern analysis
• Review of non-audit fees
• Fair, balanced and understandable review
• Management letter of representation
Risk and Internal Control
• Ratification of principal risks
• Internal audit update
Compliance
Review of Financial Statements
• Draft interim report
Risk and Internal Control
• Internal audit update
• Risk management update
• Review of the requirements to incorporate a viability
statement in the 2015 Annual Report and Accounts
External Auditor
• External auditor’s 2014 management letter
• External auditor’s interim review
• Assessment of risk of material misstatement
• Scope of the full year audit
• Interim review management letter of representation
• Review of external auditor independence and objectivity
• External auditor partner rotation
Compliance
• Meeting with external auditor without Executive Directors
• Meeting with external auditor without Executive Directors
External Auditor
• External auditor satisfaction survey
• Reappointment of external auditor
April
Review of Financial Statements
• Quarter 1 trading update
July
Review of Financial Statements
• Quarter 2 trading update
October
Review of Financial Statements
• Quarter 3 trading update
December
Review of Financial Statements
• Review of 2015 Annual Report and Accounts process
Risk and Internal Control
• Internal audit update
• Approval of internal audit plan for 2016
• Confirmation of principal risks
• Review of the approach to incorporate a viability statement
in the 2015 Annual Report and Accounts
External Auditor
• Updated assessment of risk of material misstatement
• Updated scope of the full year audit
• Approval of the external auditor’s letter of engagement
• Approval of the external auditor’s fees
• Review of non-audit fees policy
Compliance
• Year end legislative and procedural matters
• Regulatory update
63
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ANNUAL REPORT 2015 Significant Accounting Issues and Areas of Judgment
The Committee focuses in particular on key accounting policies and practices adopted by the Group and any significant areas of judgment
that may materially impact reported results as well as the clarity of disclosures, compliance with financial reporting standards and the
relevant requirements around financial and governance reporting. Details on accounting policies can be found on pages 98 to 101.
The significant issues and areas of judgment considered by the Committee during the year and how these were addressed were
as follows:
Significant issue
How the Committee addressed the issue
Revenue recognition
Context: Revenue recognition for permanent and temporary placements, with particular
focus on period end cut off and appropriate accounting treatment in accordance with IFRS
and Group accounting policies. Revenue from permanent placements 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). Revenue from temporary placements, which
represents amounts billed for the services of temporary staff, including the salary cost of
these staff, is recognised when the service has been provided.
Actions taken: The Committee reviews and discusses revenue recognition with
management, the internal audit team and the external auditor.
Conclusions and rationale: The Committee concluded that the approach to revenue
recognition was consistent with the policies and that any judgments made were appropriate.
Accounting for Page Recruitment
System
Context: Accounting for the Page Recruitment System and related applications relating
to the intangible assets, with particular focus on appropriate cost capitalisation, carrying
value and useful economic life and its revision.
Deferred tax and assets and
transfer pricing provisions
Actions taken: The Committee reviews the cost capitalisation and carrying value twice a
year to ensure that the judgments made by the Company remain appropriate. The Group
extended the useful life of specific components of the PRS intangible asset during the year
to align the useful life of the system with the timing of the benefit.
Conclusion and rationale: The Committee concluded that the appropriate costs have
been capitalised and the carrying value is fairly stated.
Context: Deferred tax assets and transfer pricing provisions with particular reference to their
recoverability and adequacy. With c.75% of its operations in overseas territories, the Group
is subject to significant international tax legislation which impacts the determination of the
transfer pricing provision.
Actions taken: The Committee reviews this area on a six monthly basis to ensure transfer
pricing provisions remain appropriate and that deferred tax assets are properly recognised
and remain recoverable.
Conclusions and rationale: The Committee agreed with management’s assessment of the
deferred tax assets and provisions held around transfer pricing.
The Committee reviewed with Ernst & Young LLP, the Company’s External Auditor, the methodology used to test the assumptions and
estimates made by management in each of these areas.
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ANNUAL REPORT 2015 Audit Committee Report
External Auditor’s Independence
and Effectiveness
The Committee monitors the objectivity, independence and
effectiveness of the external auditor. The Company is mindful of
the provisions of the Code, best practice, the Competition and
Market Authority Audit Order and EU audit legislation as regards
audit firm rotation and the provision of non-audit services. The
Committee considered both matters in 2014 and 2015.
Ernst & Young LLP, the Company’s current external auditor, were
appointed in 2011 following a tender process. In accordance
with professional standards, Ernst & Young LLP operate a policy
of rotating the Audit Partner every five years. The current Audit
Partner, Iain Wilkie, who has served as the Company’s Audit
Partner since the appointment Ernst & Young LLP, a period of
four years and six months, will step down after the completion of
the 2015 year end audit. A new Audit Partner will be appointed for
the 2016 Audit.
The Committee considered and approved a formal policy for
the tender of the external audit in 2014. This provided that the
Company will retender the external audit at least every ten years
and it will change the external auditor at least every 20 years. This
policy remains unchanged.
The Committee reviewed its policy on the use of the external
auditor for non-audit services again in 2015 and determined
that the policy should remain unchanged. This policy places a
prohibition on using the external auditor for:
• Tax services such as the preparation of tax forms; payroll tax;
support regarding tax inspections unless support is required
by law; the calculation of direct and indirect tax and deferred
tax; and the provision of tax advice (except for employee global
mobility advice);
• Services related to the Group’s internal audit function; and
• The design and implementation of internal control or
risk management procedures related to the preparation
and/or control of financial information or the design and
implementation of financial information technology systems.
Since the approval of the new policy in 2014 the external auditor
has not been given new instructions for such matters and, where
such activities were previously performed by the external auditor,
arrangements have been made to ensure they cease this activity
by the end of December 2016.
The Committee considers that in 2015 it has complied with the
Competition and Market Authority Audit Order.
Further, during the year under review, the Committee negotiated
the terms of the external auditor’s engagement letter, discussed
and agreed the scope of the year end audit and approved the
audit fee. Details of the fees paid to Ernst & Young LLP during
2015 in respect of non-audit services are shown on page 104.
The objectivity and independence of the external auditor is
safeguarded by:
• Obtaining assurances from the external auditor that adequate
policies and procedures exist within its firm to ensure that
the firm and staff are independent of the Group by reason
of family, finance, employment, investment and business
relationship (other than in the normal course of business);
• 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 or at Board level;
• Monitoring the external auditor’s compliance with applicable
UK ethical guidance on the rotation of audit partners; and
• Enforcing a policy concerning the provision of non-audit
services by the external auditor.
The Committee considers the annual appointment of the
auditor by shareholders at the Annual General Meeting to be a
fundamental safeguard.
The performance and effectiveness of the auditor is also reviewed
annually by the Committee. This covers qualification, expertise,
resources and reappointment as well as assurance that there
are no issues which could adversely affect the external auditor’s
independence and objectivity taking into account the relevant
standards. In this respect the Committee reviewed the:
• Robustness of the external auditor’s plan and its identification
of key risks;
• Fulfilment of the agreed external audit plan and any variations
from the plan;
• Robustness and perceptiveness of the external auditor in
handling key accounting and audit judgments;
• Content of reports provided to the Committee by the external
auditor including reporting on internal control; and
• Feedback from management which is ascertained from staff
surveys completed by staff involved in the audit process.
Following a full evaluation of the external auditor at the end of
the 2015 audit, the Committee recommended to the Board the
reappointment of Ernst & Young LLP as Auditor of the Company
at the forthcoming Annual General Meeting.
Internal Control and Risk Management
The Board’s responsibilities for and their report on risk
management and the systems of internal control and their
effectiveness are set out in the Corporate Governance Report on
pages 59 and 60.
On behalf of the Board the Committee reviewed the Group’s risk
assessment procedures for identifying its principal risks and its
longer term viability. The risk assessment takes account of all
risks, including environmental, social and governance matters,
inherent in the strategy of the business and its plan. These
procedures include regular reports to the Committee from the
Director of Internal Audit on the performance of the system of
internal control and on its effectiveness in managing material risks
and identifying any control failings or weaknesses.
65
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ANNUAL REPORT 2015 The Committee also reviews the Group’s risk management
process annually, with the outcome being reported to the Board.
This, together with regular updates to the Board on material risks,
allows the Board to make the assessment on the systems of
internal control and the residual risk for the purpose of making
its public statement. The risk process, together with the key
risks and their indicators, have been identified and mitigating
actions are described in the Strategic Report on pages 35 to
39. Key performance indicators and management incentives are
highlighted for the main financial, strategic and people risks in the
Strategic Report on page 6.
Where weaknesses have been identified in the internal control
system for the mitigation of risks to an acceptable level, plans to
strengthen the control system are put in place. Action plans in this
respect are regularly monitored until complete. During the period
under review there were no control failings or weaknesses that
resulted in unforeseen material losses.
Internal Audit Activities
During the year under review the Committee monitored and
reviewed the effectiveness of the Internal Audit function. The
Group’s Internal Audit function comprises a Director of Internal
Audit and a team of internal auditors. A new Director of Internal
Audit was appointed during 2014 which brought an increased
breadth and depth of risk and internal control experience to
the function. The Director of Internal Audit reports to the Chief
Financial Officer on a day-to-day basis, but also has a reporting
line to the Chairman of the Audit Committee as well as direct
access to the Committee and the Board. This ensures there is
opportunity for frank and open dialogue. The scope of work for
the Internal Audit function is agreed with the Committee annually
with the findings from internal audits being reported to the
Executive Board and the Audit Committee. Businesses are visited
on a rotational risk-based approach to assess the effectiveness of
controls to mitigate risks to an acceptable level. All major risks are
addressed in this process, including those around governance,
environmental and social related matters.
Actions to maintain and improve the effectiveness of the control
environment are agreed with the Executive Board and are
monitored and reported to the Committee. Risks are also
regularly reviewed and required changes are made to the risk
profile and, where necessary, to the activity of Internal Audit. All
changes to the Internal Audit plan are agreed with the Chairman
of the Committee and reported to the Executive Board and
the Committee.
Committee Evaluation
The activities of the Committee were reviewed as part of
the Board evaluation process performed during the year under
review. Details and the outcome of the evaluation process can be
found in the Corporate Governance Report on page 59.
Fraud
The Committee reviews the procedures for the prevention and
detection of fraud in the Group. Suspected cases of fraud must
be reported to the Chief Financial Officer and the Director of
Internal Audit and investigated by operational management and
Internal Audit. The outcome of any investigation is reported to
the Committee. A register of all suspected fraudulent activity and
the outcome of any investigation is kept and is circulated to the
Committee on a regular basis. During the year in question, no
frauds of a material nature were reported.
Anti-Bribery and Corruption and
Business Ethics
The Company has a Code of Conduct which can be found on our
website www.page.com. This sets out the standards of behaviour
by which all employees of the Group are bound and is based on
the Company’s commitment to acting professionally, fairly and
with integrity.
The Group maintains a zero tolerance approach against
corruption. It has an established anti-bribery and corruption policy,
which includes guidance on the giving and receiving of gifts and
hospitality. This policy applies throughout the Group. The policy
and the training of employees was reviewed and updated during
2014. It was implemented by means of policy guidelines and
the training of Regional Finance Directors who then cascaded
the training and guidelines to all relevant employees within each
operating unit.
All managers and all staff in risk areas across the Group
are required to undertake training by means of review and
presentation of standard Group prepared training material. A gifts
and entertainments register is maintained to ensure transparency.
A review of compliance with the policy is undertaken annually.
The review undertaken in 2015 showed there was a good
understanding of the issue and no breaches were reported.
Whistleblowing
In accordance with the provisions of the Code, the Committee
is responsible for reviewing the arrangements whereby staff
may, in confidence, raise concerns about possible improprieties
in financial reporting or other matters and ensuring that these
concerns are investigated and escalated as appropriate. This is
promoted in all regions by the Internal Audit function and is run
by an external third party and is available to all employees in the
Group. There were no whistleblowing incidents reported during
the year under review.
Simon Boddie
Chairman of the Audit Committee
9 March 2016
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ANNUAL REPORT 2015 Directors’ Remuneration Report
Danuta Gray
Committee Chairman
Annual Statement
Dear Shareholder,
On behalf of the Board, I am pleased to present the Directors’
Remuneration Report for the year ended 31 December 2015.
I was delighted to be appointed as Chair of the Remuneration
Committee from 31 December 2015 when David Lowden
stepped down on his appointment as Chairman of the Board.
My thanks go to David who served as Chair of the Committee
for the past four years.
This Director’s Remuneration Report is split into three parts:
this Statement; the Annual Report on Remuneration; and the
Remuneration Policy Table for Executive Directors and Non-
Executive Directors. (The full Remuneration Policy Report can
be found on our website at www.page.com). The Remuneration
Policy Report was first published in 2013 and was put to, and
approved by, shareholders at the June 2014 Annual General
Meeting. There were no changes to this policy in 2015. Further, it
is the intention of the Remuneration Committee not to make any
changes to the remuneration policy in 2016.
The approach of PageGroup’s Remuneration Committee has
remained consistent with previous years; Executive Directors and
senior executives receive a mix of annual and long term incentives
which reward strong business and financial performance in line
with the Company’s strategy. These are measured against robust
benchmarks. Using financial, strategic and people objectives,
the business looks to achieve a coherence of assessment and
measurement across agreed KPIs, risks and remuneration. The
Committee believes it has the proportions appropriately balanced,
with a combination of financial metrics and other criteria. It is
the achievement of the combination of these objectives that we
believe maximises the potential for long-term and sustainable
shareholder value.
The Remuneration Committee addressed the following matters
in 2015:
Base Salary
In 2015 base salaries for the Chief Executive Officer and the Chief
Financial Officer were increased by 1.8% and 2.5% respectively.
For 2016, the Committee has decided to increase the Chief
Executive Officer’s base salary by 2%. Kelvin Stagg was
appointed as PageGroup’s Chief Financial Officer in June 2014
and was awarded a below market salary on his appointment.
Since his appointment Kelvin has taken on additional areas of
responsibility. In line with the Company’s Remuneration Policy,
the Committee has decided to award Kelvin a staged salary
increase of 5.7% for 2016. This will bring his salary in line with
his benchmarked peer group. These base salary increases for
the Chief Executive Officer and the Chief Financial Officer are,
respectively, in line with and above the increase for the UK Head
Office workforce.
Annual Bonus
As in previous years, the performance criteria in 2015 remained a
mix of profit before tax and the achievement of strategic targets.
Targeted performance for annual bonus purposes was a growth
in profit before tax and exceptional items of 17.1% in constant
currency. Details of the strategic targets and the assessment of
performance against those targets can be found on page 70.
With the delivery of the 2015 financial, strategic and people
objectives, the total annual bonus payout for the Chief Executive
Officer was determined at £681,932, being 68% of the maximum
bonus opportunity and for the Chief Financial Officer was
£309,276, being 67% of the maximum bonus opportunity.
Long-Term Incentives
The Remuneration Committee awarded shares under the
PageGroup Long Term Incentive Plan to both Executive
Directors. The awards made in 2015, together with the
relevant performance criteria, are detailed on pages 72 and 74
respectively. For 2016 an award, as a percentage of base salary,
will be 200% for the Chief Executive Officer and an increase in
award to 175% of base salary for the Chief Financial Officer. This
increased award was made as part of the staged remuneration
increase noted above. The performance criteria relating to
these awards, which the Committee believe are appropriately
challenging, are 62.5% measured against cumulative EPS targets,
12.5% against comparative growth rates and 25% against
strategic objectives. The Committee consider the strategic targets
are commercially sensitive and performance against these will be
reported retrospectively.
On behalf of the Committee I thank you for your continued
support and trust that you find the Directors’ Remuneration
Report informative. I very much hope that we will receive your
support at the 2016 AGM.
Danuta Gray
Chairman of the Remuneration Committee
9 March 2016
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ANNUAL REPORT 2015 This part of the report has been prepared in accordance with
Part 3 of the Large and Medium-sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2013. The
information on pages 68 to 79 has been audited where required
under the Regulations. The elements of the Directors’ Annual
Remuneration Report subject to audit are the:
The 2014 Board and Committee evaluation process
recommended that meetings of the Board standing committees
could be streamlined into fewer but longer meetings. As a
consequence the Committee met a total of three times during
2015 and discussed the following matters:
• The setting of performance targets for the 2015 incentive
(a) Single total figure for remuneration and the accompanying
awards made to the Executive Directors;
• Monitoring the progress of strategic objectives;
• Reviewing reporting regulations regarding remuneration;
• Approving the amount of bonuses and share plan awards for
the Executive Directors based on pre-set performance targets;
• Reviewing various shareholder bodies’ communications and
policies in respect of remuneration; and
• Undertaking its annual review and approval of salaries
and incentives of the Executive Directors and other senior
executives.
The Remuneration Committee set out in the 2013 Annual Report
and Accounts the PageGroup Remuneration Policy which was
approved by shareholders at the Company’s Annual General
Meeting held on 5 June 2014. Full details of the shareholder
voting in this respect can be found on page 79. A copy of the
Remuneration Policy in full can be found in the 2013 Annual
Report and Accounts in the Investors section of our website www.
page.com. A summary of the key aspects of the Remuneration
Policy can be found on pages 80 to 81. The Committee
continued to operate this Remuneration Policy during 2015 and
intends to continue its operation during 2016.
notes;
(b) Details of the performance against metrics for variable awards
included in the single sum;
(c) Details of the long-term variable pay awarded in 2015;
(d) Details on the payments to past Directors;
(e) Details on payments for loss of office; and
(f) Section on outstanding share awards.
During the year under review the members of the Committee
were David Lowden who was Chairman of the Committee, Simon
Boddie, Patrick De Smedt, Danuta Gray and Baroness Ruby
McGregor-Smith. All served throughout the year except Patrick
De Smedt who became a member of the Committee on his
appointment as a Director of the Company on 1 August 2015.
Further, on 31 December 2015 David Lowden ceased to be a
member and Chairman of the Committee on his appointment
as Chairman of the Company. On the same date Danuta Gray
was appointed Chairman of the Committee. Details of the
members’ attendance at meetings of the Committee can be
found on page 58.
Only members of the Committee are entitled to attend meetings.
Other individuals, such as the Chairman of the Board, who
attends meetings of the Committee regularly, the Chief Executive
Officer, the Chief Financial Officer, the Group Human Resources
Director and external advisers, may attend meetings by invitation
when appropriate and necessary. No Director takes part in
discussions relating to their own remuneration.
The Committee appointed New Bridge Street as its remuneration
consultants in September 2013 as a result of a competitive
retendering process. New Bridge Street 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. New Bridge Street is a
member of the Aon Group who provided insurance services to
the Company during the year under review. £97,000 was paid
to Aon in respect of broker fees. During the year New Bridge
Street has provided independent advice to the Committee on
the setting of performance criteria for the Company’s various
incentive arrangements; benchmarking of remuneration against
market levels, renewal of share schemes for senior employees
and advised on the remuneration report. The fees paid to New
Bridge Street totalled £17,395. New Bridge Street did not
provide any services to the Company. The Committee also
received input from the Chairman, Chief Executive Officer,
Company Secretary and Group Human Resources Director.
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ANNUAL REPORT 2015 Directors’ Remuneration Report
Directors’ Remuneration as a single figure
The tables below report a single figure for total remuneration for each Director for the years ended 31 December 2015
and 31 December 2014.
2015
Executive
Steve Ingham
Kelvin Stagg
Non Executive
Robin Buchanan
Simon Boddie
Patrick De Smedt
Danuta Gray
David Lowden
Ruby McGregor-Smith
2014
Executive
Steve Ingham
Kelvin Stagg
Non Executive
Robin Buchanan
Simon Boddie
Danuta Gray
David Lowden
Ruby McGregor-Smith
Tim Miller
Notes:
Salary
and Fees
(note 1)
£’000
Benefits
(note 2)
£’000
Pensions
(note 3)
£’000
Short-term
incentives
(note 4)
£’000
Long-term
incentives
£’000
575
307
233
66
22
52
67
58
35
24
–
–
–
–
–
–
144
61
–
–
–
–
–
–
682
309
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Dividends
paid on
unvested
shares
£’000
153
50
–
–
–
–
–
–
Salary
and Fees
(note 1)
£’000
Benefits
(note 2)
£’000
Pensions
(note 3)
£’000
Short-term
incentives
(note 4)
£’000
Long-term
incentives
£’000
Dividends
paid on
unvested
shares
£’000
565
171
228
64
51
64
56
31
37
14
–
–
–
–
–
–
138
34
–
–
–
–
–
–
702
178
–
–
–
–
–
–
–
–
–
–
–
–
–
–
52
11
–
–
–
–
–
–
Total
£’000
1,589
751
233
66
22
52
67
58
Total
£’000
1,494
408
228
64
51
64
56
31
1. (a) Salary and fees represent the salary and fees paid in cash in respect of the financial year.
(b) The salary and fees paid to Kelvin Stagg for the 2014 financial year reflect that he was appointed part way through the year.
2. Benefits represent the taxable value of the benefits provided in the year and comprise a company car or cash equivalent; fuel; permanent health insurance; medical
insurance; life insurance; and in respect of the Chief Executive Officer, golf club membership used for corporate entertaining.
3. Pension includes the cash value of Company contributions to defined contribution pension plans and cash payments in lieu of pension contributions.
4. The “Short-Term Incentives” figure for each of the 2014 and 2015 years includes the annual cash bonus.
5. Patrick De Smedt was appointed a Director of the Company on 1 August 2015. The fees shown in the 2015 table reflect the amount paid to him from the date of
appointment to 31 December 2015.
6. Robin Buchanan ceased to be a Director of the Company on 31 December 2015. The fees noted above cover the period 1 January 2015 to 31 December 2015.
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ANNUAL REPORT 2015
Determination of Annual Bonus for the Financial Year Ended 31 December 2015
The annual bonus payment for the Executive Directors for the financial year ended 31 December 2015 was determined as follows:
Bonus for Profit Before Tax
(PBT) performance
Bonus for Strategic
Performance
Total bonus
Role
CEO
£’000
% of salary
% of maximum
total bonus
Potential
718,750
Actual
417,432
Potential
287,500
Actual
264,500
Potential
1,006,250
125
71
73
41
50
29
46
27
175
100
Actual
681,932
119
68
CFO
£’000
307,500
178,588
153,750
130,688
461,250
309,276
% of salary
% of maximum
100
67
58
39
50
33
43
28
150
100
101
67
As in prior years, the PBT thresholds and maximum targets for 2015 were set having considered both internal budgets and market
expectations, being adjusted for the impact of foreign currency in the financial year.
The PBT thresholds and maximum targets were £68.9m and £114.8m. The actual outcome of PBT before exceptional items was £90.7m
which resulted in the payment of £417,432 to Steve Ingham which represented 58% of £718,750, this being the maximum payable under
this measure. Kelvin Stagg received £178,588 which represented 58% of £307,500, this being the maximum payable under this measure.
Performance against the strategic measures was assessed against a number of areas, both financial and environmental, social and
governance. The maximum payment for the delivery of strategic performance objectives in 2015 was equal to 50% of base salary. The
Committee assessed performance against these measures at the end of 2015 in line with the framework set out at the beginning of the
year. These areas, together with the Committee’s assessment of performance, are set out in the table below:
Strategic performance
Assessment of 2015 performance
Succession planning and additional training of senior management were completed
in the year. Many people development initiatives were undertaken throughout the
year, with diversity being of particular note. Good progress was made in all three
strategic markets with operational efficiencies being implemented. Significant
progress had been made in respect of PRS with an 85% Group roll-out having been
achieved by the year end.
The development of a global financial executive team was completed during 2015.
Risk management and internal control continued to operate effectively, with risk
management being further embedded into the Group’s operations and divisions.
Significant work was completed in respect of risk appetite and risk assessment.
The cost management, financial, strategic and management information processes;
and the tax and treasury functions made further progress since the previous year.
Steve Ingham – CEO
Areas of focus:
- Executive Leadership Development
- Strategy Development
- PageGroup People Development
- PageGroup IT systems
Kelvin Stagg – CFO
Areas of focus:
- Executive Leadership Development
- Risk Management and
Internal Controls
- Cost Management, Financial,
Strategic and Management
Information
- Tax and Treasury Management
Based on this assessment the Remuneration Committee determined that 46% of salary was payable to Steve Ingham, representing
92% of the maximum payable under this element and 43% was payable to Kelvin Stagg representing 85% of the maximum payable under
this element.
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ANNUAL REPORT 2015 Directors’ Remuneration Report
Deferred Annual Bonus
Any bonus above 125% for each of the Chief Executive Officer and the Chief Financial Officer is deferred into Ordinary shares of the
Company. As shown on page 70 the annual bonus for the financial year ended 31 December 2015 for the Chief Executive Officer and the
Chief Financial Officer was 119% and 101% of salary respectively and, therefore, no bonus was deferred.
Long-Term Incentives included in the Single Figure Table
The “long-term incentives” figure represents the Performance Awards granted under The Michael Page International Incentive Share Plan
(ISP). The 2015 value represents the value of the percentage of the Performance Award held by each of the Chief Executive Officer
and the Chief Financial Officer that was granted on 12 March 2013. The performance period of the 2013 Performance Award ended on
31 December 2015 and details of the performance condition are set out on page 72 with the description of outstanding share awards on
page 72. Over the performance period, the Company’s average annual EPS growth was equal to 11.0%. This resulted in no shares vesting
and, therefore, there is no value for this award in the single figure table. The EPS calculation is as follows:
2013 LTIP Award – performance condition measurement
Base year 2012 adjusted* EPS
Actual 2015 adjusted* EPS
RPI index for December 2012
RPI index for December 2015
Earnings growth across the period
RPI growth across the period
EPS growth across the period
Average annual EPS growth
17.40
24.16
231.90
245.50
38.82%
5.86%
33.0%
11.0%
* To ensure that EPS measurement is consistent across years, adjustments are made to exclude the charge for share options and incentive plans, together with related taxation,
from both the base and the measurement year. The EPS is not adjusted for the cost of the Executives Directors’ deferred bonus shares where relevant.
Percentage Change in Remuneration for the Chief Executive Officer
The following table provides a summary of the 2015 increase in base salary for the Chief Executive Officer compared to the average
increase for the Group Head Office population in the same period. Also included is the proposed 2016 salary increase for the purpose
of comparison.
Salary
Chief Executive Officer
Group Head Office population
2
21
1.8
2.51
2.7
3.01
Proposed
2016 increase %
2015
increase %
2014
increase %
Note:
1. Represents average increase.
The Group Head Office population was chosen as the most relevant population comparison as the Chief Executive Officer is based in the
UK, as are the Group Head Office staff, and the Group Head Office population does not include operational staff incentivised against sales
targets.
71
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ANNUAL REPORT 2015 Details of the Long-Term Incentive Award made in 2015
On 20 March 2015 an award of shares under the Long-Term Incentive Plan was made to each of the Chief Executive Officer and the Chief
Financial Officer as follows:
Executive
Type of Award
Basis of Award
Face Value
% of Award
if vesting at
threshold
End of performance
period
Steve Ingham
211,413 shares
200% of salary
£1,130,000
25% 31 December 2017
Kelvin Stagg
84,191 shares
150% of salary
£450,000
25% 31 December 2017
Note:
The market price of the shares as at the date of grant was 534.50p.
The performance conditions attaching to the Long-Term Incentive Plan awards can be found on page 74.
Outstanding Share Awards
This section sets out the share interests of the Executive Directors under the old ISP, the old Annual Bonus plan, the legacy Executive
Share Option Scheme, the 2009 Share Option Scheme, Long-Term Incentive Plan and the Deferred Cash Plan.
Incentive Share Plan – Performance Award
Details of Performance Awards made under the Incentive Share Plan were as follows:
Number
of shares
at
1 January
2015
Grant
date
Granted
during
the
year
Vested
during
the
year
Lapsed
during the
year
Number of
shares at
31 December
2015
Executive
Steve Ingham
12 March 2012
41,005
Steve Ingham
11 March 2013
41,968
Total
Kelvin Stagg
11 March 2013
Total
82,973
9,427
9,427
–
–
–
–
–
–
–
–
–
–
(41,005)
–
–
(41,005)
–
–
41,968
41,968
9,427
9,427
End of
performance
period
31 December
2014
31 December
2015
Vesting
date
12 March
2015
11 March
2016
31 December
2015
11 March
2016
The performance conditions relating to the Performance Awards made to the Executive Directors are noted below.
Value of Shares subject to Performance
conditions vesting on Award Date
Shares with greater value than 75% of Participant’s salary at Award Date
Shares with value between 50% and 75% of Participant’s salary at Award Date
Shares with value up to 50% of Participant’s salary at Award Date
Average annual growth in Company EPS in
excess of the increase in the Retail Prices Index
over three years
10%
7.5%
5%
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ANNUAL REPORT 2015 Directors’ Remuneration Report
Incentive Share Plan – Deferred Awards
Details of the Deferred Awards under the Incentive Share Plan that remain outstanding at 31 December 2015 are as follows:
Executive
Steve Ingham
Steve Ingham
Total
Kelvin Stagg
Total
Grant
date
12 March
2012
11 March
2013
11 March
2013
Number of
shares at
1 January
2015
Granted
during
the
year
Vested
during
the
year
Lapsed
during
the year
Number of
shares at
31 December
2015
End of
performance
period
82,011
83,937
165,948
18,854
18,854
–
–
–
–
–
(82,011)
–
(82,011)
–
–
–
–
–
–
–
–
83,937
83,937
18,854
18,854
N/A
N/A
N/A
Vesting
date
12 March
2015
11 March
2016
11 March
2016
Long-Term Incentive Plan
Details of awards made under the Long-Term Incentive Plan that remain outstanding at 31 December 2015 are as follows:
Grant
date
11 March
2014
20 March
2015
11 March
2014
20 March
2015
Number of
shares at
1 January
2015
Granted
during
the
year
Vested
during
the
year
Lapsed
during
the year
Number of
shares at
31 December
2015
227,273
–
–
211,413
227,273
211,413
70,248
–
–
84,191
70,248
84,191
–
–
–
–
–
–
–
–
–
–
–
–
227,273
211,413
438,686
70,248
84,191
154,439
End of
performance
period
31 December
2016
31 December
2017
31 December
2016
31 December
2017
Vesting
date
11 March
2017
20 March
2018
11 March
2017
20 March
2018
Executive
Steve Ingham
Steve Ingham
Total
Kelvin Stagg
Kelvin Stagg
Total
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ANNUAL REPORT 2015 The performance criteria relating to the Long-Term Incentive Plan awards granted in the year are as follows:
Performance measure
Weighting (% of award)
% of award vesting at threshold
Cumulative 3-year real EPS
Comparator gross profit growth
Strategic targets
62.5%
12.5%
25%
25%
25%
25%
The shares subject to the cumulative three-year EPS performance condition will vest as follows after the completion of the three year
performance period:
• 25% will vest for achieving three-year cumulative EPS of 66p;
• 100% of the shares will vest for achieving three-year cumulative EPS of 87p; and
• Between 25% to 100% of the shares will vest for three-year cumulative EPS in between 66p and 87p.
The shares subject to the comparator gross profit measure will vest as follows after the completion of the three year performance period:
• 25% will vest for achieving the median gross profit growth of the comparator group;
• 100% of the shares will vest for achieving the upper quartile gross profit growth of the comparator group; and
• Between 25% to 100% of the shares will vest for achieving gross profit growth in between median and upper quartile.
The comparator group comprises the following companies and where relevant and practical, is measured only against organic growth
against relevant divisions: Adecco, Hays, Hudson, Manpower, Randstad, Robert Half, Robert Walters and SThree.
The Committee currently considers the targets for the other performance measures to be commercially sensitive and will disclose the
performance targets once the final vesting outcome has been determined.
Annual Bonus Plan
Details of awards which vested under the old Annual Bonus Plan during 2015 were as follows:
Executive
Steve Ingham
Total
Grant
date
11 March
2013
Number of
shares at
1 January
2015
Granted
during
the
year
Vested
during
the
year
Lapsed
during
the year
Number of
shares at
31 December
2015
End of
performance
period
8,631
8,631
–
–
(8,631)
(8,631)
–
–
–
–
N/A
Vesting
date
11 March
2015
Kelvin Stagg does not hold any awards under the Annual Bonus Plan. No awards were made under the Annual Bonus Plan during 2015.
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ANNUAL REPORT 2015 Directors’ Remuneration Report
Executive Share Option Scheme
Details of options granted under The Michael Page International plc Executive Share Option Scheme and the Michael Page 2009 Share
Option Scheme that remain outstanding at 31 December 2015 are as follows:
The Michael Page Executive Share Option Scheme
Executive
Grant date
Steve Ingham
10 March 2010
Total
Kelvin Stagg
10 March 2010
Total
Number of
options at
1 January
2015 or
date of
appointment
374,147
374,147
50,000
50,000
Exercised
during
the
year
Lapsed
during
the year
Number of
options at
31 December
2015
–
–
–
–
–
–
–
–
374,1471
374,147
50,0001
50,000
Exercise
price (p)
Exercise
period
381.5
2013-2020
381.5
2013-2020
Note:
1. At 31 December 2015 all options had vested and were available for exercise.
The market price of the shares as at 31 December 2015 was 484.30p per share, with a range during the year of 399.40p to 560.50p
per share.
The Michael Page 2009 Share Option Scheme
Grant date
9 March 2009
11 March 2011
12 March 2012
Number of
options at
1 January
2015
Exercised
during
the
year
Lapsed
during
the year
Number of
options at
31 December
2015
20,0001
30,000
30,0001
80,000
–
–
–
–
–
–
–
–
20,000
30,000
30,000
80,000
Exercise
price (p)
187.50
491
477
Exercise
period
2012-2019
2014-2021
2015-2022
Executive
Kelvin Stagg
Kelvin Stagg
Kelvin Stagg
Total
Note:
1. At 31 December 2015 40,720 of the options had vested and were available for exercise.
Steve Ingham does not hold any options under The Michael Page 2009 Share Option Scheme.
Deferred Cash Plan
Details of awards made under the Deferred Cash Plan that remain outstanding at 31 December 2015 are set out below:
Executive
Kelvin Stagg
Total
Grant date
12 March 2012
Award at
1 January
2015
£40,000
£40,000
Awards
made
during the
year
–
–
Vested
during
the year
£40,000
£40,000
Lapsed
during the
year
Awards at
31 December
2015
–
–
–
–
Vesting date
12 March 2015
Steve Ingham does not hold an award under the Deferred Cash Plan.
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ANNUAL REPORT 2015 Statement of Directors’ Shareholdings
It is the Company’s policy that Executive Directors are required to build and hold a direct beneficial holding in the Company’s Ordinary
shares of an amount equal to two times their base salary. As at 31 December 2015 Steve Ingham complied with this requirement. Kelvin
Stagg who was appointed a Director during 2014 is in the process of building the required minimum holding.
The beneficial interests of the Directors who served during 2015, and their connected persons, in the Ordinary shares of the Company are
shown in the table below. The table shows interests which are held outright and does not include interests held in shares which are subject
to ongoing vesting and/or performance conditions which are set out on pages 72 and 73 or share options which have vested but have not
been exercised, as set out on page 75.
Ordinary
shares
as at
1 January
2015
Ordinary shares
acquired on vesting of
share awards
ISP
ABP
Total
Executive
Directors
Purchased
in year
Disposal
in year
No
longer a
connected
person
Ordinary
shares as at
31 December
2015
Value of
holding as at
31 December
2015
Steve Ingham
1,736,267
82,011
8,631
90,642
Kelvin Stagg
14,804
–
–
–
–
–
(42,902)
(500,000)
1,284,007
£6,218,446
–
–
14,804
£71,696
Executive
Directors
Value of
holding as at
31 December
2015 as a
% of salary
1,081
23
Notes:
1. In addition to the Ordinary shares shown in the table above, Steve Ingham and Kelvin Stagg have a beneficial interest in the Ordinary shares shown on pages 72 and73 as
outstanding awards under the Long-Term Incentive Plan and the Incentive Share Plan.
2. Steve Ingham: During the year under review 82,011 Ordinary shares vested pursuant to a deferred award under the ISP and 8,631 Ordinary shares vested pursuant to an
award under the old Annual Bonus Plan.
3. The value of the Executive Directors’ holdings uses the closing share price on 31 December 2015 of 484.30p per share.
Non-Executive Directors
Ordinary shares of 1p
As at 1 January 2015
Purchased in the year
As at 31 December 2015
Robin Buchanan
Direct Holding
138,027
–
138,027
No other Non-Executive Director held Ordinary shares in the Company during the year under review.
There have been no changes to the Directors’ shareholdings since 31 December 2015 to the date of this Directors’ Remuneration Report.
Relative Importance of Spend on Pay
The graph below shows details of the Company’s retained profit after tax, distributions by way of dividend, overall spend on pay to all
employees (see Note 4 in the financial statements on page 104) overall spend on Directors’ pay as included in the single figure table on
page 69 and the tax paid in the financial year. The percentage change to the prior year is also shown.
+14%
352.8
310.1
2015
2014
+12%
>100%
66.2
59.3
85.1
32.7
Profit after
tax (£m)
Dividends
paid (£m)
25.4
0
Shares
purchased by
the EBT (£m)
Overall spend
on pay (£m)
+19%
2.8
2.4
Overall spend
on Directors’
pay (£m)
+24%
19.1
15.4
Tax paid
(£m)
£m
400
300
200
100
0
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ANNUAL REPORT 2015 Directors’ Remuneration Report
Service Contracts and Letters of Appointment
All Executive Directors’ service contracts contain a twelve month notice period. The service contracts also contain restrictive covenants
preventing the Executive Directors from competing with the Group for six months following the termination of their employment and
preventing the Executive Directors from soliciting key employees, clients and candidates of the employing company and Group companies
for twelve months following termination of employment. The Remuneration Committee has the right to exercise mitigation in the event
of termination.
Non-Executive Directors, including the Chairman of the Board, are engaged under letters of appointment and do not have service
contracts with the Company. They are appointed for a fixed term of three years, during which period the appointment may be terminated
by either party upon giving one month’s written notice or in accordance with the provisions of the Articles of Association of the Company.
There are no provisions on payment for early termination in the letters of appointment. After the initial three-year term, they may be
reappointed for a further term of three years, subject to annual re-election at the Annual General Meeting. Copies of the service contracts
and letters of appointment are available for inspection during normal business hours at the Company’s registered office.
Executive Director
Service Contract Date
Unexpired Term
Notice Period
Steve Ingham
Kelvin Stagg
31 December 2010
6 June 2014
No specific term
No specific term
12 months
12 months
Non-Executive Directors
Letter of Appointment Date
Unexpired Term at 31 December 2015
Simon Boddie
Patrick De Smedt
Danuta Gray
David Lowden
Ruby McGregor-Smith
24 September 2015
1 August 2015
10 December 2013
22 August 2015
23 May 2013
31 months
30 months
11 months
30 months
5 months
Implementation of the Remuneration Policy for Executive Directors in 2016
Base Salary
The base salaries of the Executive Directors were considered with reference to the general salaries across the Group Head Office
population and other market benchmarks. The Remuneration Committee decided to increase the salary of the Chief Executive Officer and
the Chief Financial Officer by 2% and 5.7% respectively. Kelvin Stagg was appointed as PageGroup’s Chief Financial Officer in June 2014
and was awarded a below market salary on his appointment. Since his appointment Kelvin has taken on additional areas of responsibility.
In line with the Company’s Remuneration Policy, the Committee has decided to award Kelvin a staged salary increase of 5.7% for 2016.
Annual Bonus
The operation of the annual bonus will remain unchanged in 2016 with the same weighting between financial and other strategic measures
as in 2015. Performance against these measures and the relevant targets will be disclosed in next year’s Directors’ Remuneration Report.
Long-Term Incentive
It is currently the Committee’s intent that in 2016 the face value of Long-Term Incentive Plan awards as a percentage of base salary will be
200% of base salary for the Chief Executive Officer and an increase to 175% of base salary for the Chief Financial Officer. The increased
award for the Chief Financial Officer is part of a staged remuneration increase in accordance with the Company’s Remuneration Policy and
reflects an increase in his responsibilities. The performance measures and weightings for awards to be granted in 2016 will be the same as
for the awards granted in 2015:
• Cumulative 3-year EPS (62.5% of award);
• Comparator Gross Profit (12.5% of award); and
• Strategic measures (25% of award).
Between 25% to 100% of the shares subject to the EPS performance condition will vest for three-year cumulative EPS in between 66p
and 80.5p. The target range for the 2016 LTIP award is based on cumulative EPS. The threshold target is set to reward management
for generating a significant level of absolute growth whilst taking into account the prevailing economic circumstances. Given the current
uncertain economic outlook, the Committee believes it appropriate to maintain the threshold target for LTIP awards at 66p. To reach this
target would require cumulative EPS growth of 5.7p over 2015 EPS, which is equivalent to 4.6% per annum growth and is considered
sufficiently challenging in the prevailing climate. The maximum target has been set so that awards only vest for delivering a high level of
growth. As a result, the maximum target is 80.5p which is equivalent to growth of 15.2% per annum on top of the 2015 EPS in each year
of the performance period. The comparator gross profit growth measure will be the same as for those Long-Term Incentive Plan awards
granted in 2015. The Committee currently considers the targets for the strategic measures to be commercially sensitive and will disclose
the performance targets once the final vesting outcome has been determined.
77
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ANNUAL REPORT 2015 Pensions
In line with the Remuneration Policy the Executive Directors receive a contribution to a defined contribution pension scheme or a cash
equivalent. The Chief Executive Officer receives a contribution equivalent to 25% of his base salary. The Chief Financial Officer receives a
contribution equivalent to 20% of his base salary.
Implementation of the Remuneration Policy for the Chairman and
Non-Executive Directors in 2016
The fees per annum for the Board Chairman and the Non-Executive Directors have been agreed as follows:
Chairman
Non-Executive basic fee
Additional fees payable:
Senior Independent Director
Chairman of the Audit Committee
Chairman of the Remuneration Committee
£200,000
£52,000
£6,000
£14,000
£14,000
The Senior Independent Director fee was increased to £7,000 from March 2016.
Total Shareholder Return
The performance graph below shows the movement in the value of £100 invested in the shares of the Company compared to an
investment in the FTSE 250 index and the FTSE Support Services index over the period 31 December 2008 to 31 December 2015.
The graph shows the Total Shareholder Return generated by the movement in the share price and the reinvestment of dividends.
The FTSE 250 index and the FTSE Support Services indexes have been selected as the Company was a member of each index
throughout the period.
31 Dec 2008
31 Dec 2009
31 Dec 2010
31 Dec 2011
31 Dec 2012
e
31 Dec 2013
c
31 Dec 2014
e
31 Dec 2015
270.71
191.91
181.31
150.64
132.50
173.64
163.24
172.60
162.60
111
331.78
666
286.12
273.64
77
287.90
263.63
255.28
298.43
5
265.27
00
220.68
217.66
201.72
201.83
Michael Page
FTSE 250
5
EEEE
FTSE SS
E
350
300
250
200
150
100
100.0
78
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ANNUAL REPORT 2015 Directors’ Remuneration Report
The table below shows the total remuneration of the Chief Executive Officer over the same seven year period.
CEO
2009
2010
2011
2012
2013
2014
2015
Single remuneration total
£1,010,000
£2,184,000
£1,647,000
£2,723,000
£1,318,000
£1,494,000
£1,589,000
Short-term incentives
(% of maximum) (note 1)
Long-term incentives
(% of maximum) (note 1)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
58%
71%
68%
N/A
N/A
N/A
Note:
1. Prior to 2012 the Company operated uncapped incentives which, by definition, did not have the concept of “maximum”. As a result it is not possible to provide this
information historically. However, following the changes in 2012 it is possible to provide this information for the years 2013, 2014 and 2015.
Statement of voting at the Annual General Meeting
At the Company’s Annual General Meeting held on 5 June 2014, shareholders approved the Remuneration Policy Report. The
Remuneration Policy Report was not varied or amended so was not put to shareholders at the 4 June 2015 Annual General Meeting.
The table below shows the results of the voting on the Remuneration Policy Report at the 2014 Annual General Meeting and the
Directors’ Remuneration Report put to shareholders at the 2015 Annual General Meeting. Each resolution required a simple majority
of the votes cast to be in favour in order for each of the resolutions to be passed.
Resolutions
AGM
Votes For
% Votes Against
%
Votes
Withheld
Remuneration Policy Report
5 June 2014
263,878,771
98.70
3,467,477
1.30
10,806,402
Directors’ Remuneration Report
4 June 2015
252,210,920
94.01
16,072,998
5.99
3,383,141
A full schedule in respect of shareholder voting on all the resolutions put to shareholders at the 2015 Annual General Meeting is available
on the Company’s website at www.page.com.
External Directorships
During the year Steve Ingham, Chief Executive Officer, earned and retained £42,500 (2014: £42,500) in respect of fees from his role
as a non-executive director of Debenhams plc. No other Executive Director earned any fees from external directorships.
The Directors’ Remuneration Report has been approved by the Board of Directors.
Signed on behalf of the Board of Directors
Danuta Gray
Chairman of the Remuneration Committee
9 March 2016
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ANNUAL REPORT 2015 Remuneration Policy Table for Executive Directors
Element
Salary
(Fixed pay)
Benefits
(Fixed pay)
Annual
Bonus
(Variable
pay)
Purpose and link
to strategy
Operation
Attract, retain and
reward high calibre
Executive Directors
Salary levels (and subsequent increases) are set after reviewing
various factors including individual and Company performance,
role and responsibility, internal relativities such as the increases
awarded to other employees and prevailing market levels for
Executive Directors at companies of comparable status and
market value, taking into account the total remuneration package.
Salaries are normally reviewed annually.
Salary is paid monthly and increases are generally effective from
1 January.
Attract, retain
and reward high
calibre Executive
Directors
Provision of
opportunities for
connecting with
clients, investors
and staff to facilitate
growth strategy
Competitive benefits including car allowance or company car
(including running costs), private medical insurance for the
individual and family, permanent health insurance and four times
salary life assurance.
Provision of relocation assistance and any associated costs or
benefits (including but not limited to housing benefits, personal
tax advice and school fees) upon appointment if/when applicable.
The Company may also provide tax equalisation arrangements.
Membership of clubs as appropriate for the development
of business.
Maximum opportunity
Current CEO salary level is £575,000
which can be increased in line with
the parameters set out under the
column ‘Operation’.
Aim for market competitive salaries.
Salaries will not increase by more than
RPI +5% except increases in excess
of this may be awarded in the case
of new Executive Directors where it is
appropriate to offer a below market
salary initially on appointment and a
series of staged increases, subject
to performance and experience in
role, to bring to a market competitive
salary.
Competitive benefits in line with
market practice.
Incentivise the delivery
of annual financial and
strategic targets
At least half based on audited financial measures, such as
Profit Before Tax. No more than one half assessed against other
strategic targets.
Maximum award of 175% of salary.
Any strategic element will be payable only if the Committee
is also satisfied in the circumstances with the underlying
performance of the business.
Performance below the threshold of the financial performance
target will result in zero payment of the financial element of the
annual bonus. Payments rise from 20% to 100% of the maximum
opportunity for levels of performance between the threshold and
maximum targets.
Clawback provisions will be put in place for misstatement
and misconduct.
Deferred
Bonus Plan
(Variable
pay)
Focus Executive
Directors on long-term
performance and
align the interests of
Executive Directors
with shareholders
The terms of the new Deferred Bonus Plan, as referred to below,
were approved by shareholders at the 2013 AGM.
Not applicable (see “Annual Bonus”
section above).
Compulsory deferral in shares applies to any annual bonus
payment above a hurdle of 125% of salary. The Committee can
lower the hurdle for compulsory deferral.
Deferred shares vest in equal amounts after one and two years.
Deferred shares are not subject to further performance conditions
as they are awarded in lieu of previously earned annual bonus.
Dividends accrue or are paid on unvested awards over the
vesting period.
Clawback provisions are in place for misstatement
and misconduct.
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ANNUAL REPORT 2015 Directors’ Remuneration Report
Element
Long-term
Incentive
Plan
(Variable
pay)
Purpose and link
to strategy
Operation
Maximum opportunity
Incentivise share
ownership and long-
term performance in
line with Group strategy
The terms of the new Long-term Incentive Plan, as referred to below,
were approved by shareholders at the 2013 AGM.
Maximum award of 200%
of salary.
Awards are granted in the form of restricted shares or
nil-cost options.
Awards have a performance period of at least three financial years.
At least 62.5% of any award is based on financial measures, such as
EPS.
At least 12.5% of any award will be based on relative growth compared
to a peer group.
The remainder of any award is subject to performance measures based
on long-term strategic objectives, such as people and leadership
development, strategy development, IT strategy and Corporate
Centre development, which are disclosed in the Annual Report on
Remuneration in the year of grant.
Performance below the threshold of the performance target for the
financial performance results in no vesting for the financial element
of the LTIP award. For performance between the threshold target and
maximum target, vesting starts at 25% and rises to 100%.
There is no opportunity to re-test performance measures.
Vested shares must be held for a further two years if the shareholding
guideline (set out below in the section “Executive shareholding
guidelines”) has not been met.
Dividends accrue or are paid on unvested awards over the
vesting period.
Clawback provisions are in place for misstatement and misconduct.
Pension
(Fixed pay)
Attract, retain and fairly
reward high calibre
Executive Directors
Executive Directors may receive a defined contribution pension benefit
or cash supplement.
CEO: 25% of salary.
Other Executive Directors: 20%
of salary.
Policy Table for Board Chairman and Non-Executive Directors
The Board Chairman and Non-Executive Directors receive a fee for their services and do not receive any other benefits 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.
Element
Fees
Purpose and link
to strategy
Operation
Attract, retain and
fairly reward high
calibre individuals.
Reviewed by the Board after recommendation by the Chairman
and Chief Executive (and by the Committee in the case of the
Chairman) taking into account individual responsibilities, such as
committee Chairmanship, time commitment, general employee
pay increases, and prevailing market levels at companies of
comparable status and market value.
Fee increases are normally reviewed annually and are generally
effective from 1 January.
Maximum opportunity
The maximum aggregate fees for all
Directors allowed by the Company’s
Articles of Association is £600,000.
Current fee levels are set out in the
Directors’ Annual Remuneration
Report.
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ANNUAL REPORT 2015 Directors’ Report
Elaine Marriner
Company Secretary
The Directors present their Report together with the consolidated
financial statements for the year ended 31 December 2015.
This Report has been prepared in accordance with the
requirements outlined in The Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008 and forms
part of the management report as required under DTR4 of the
Disclosure and Transparency Rules. Certain information that fulfils
the requirements of the Directors’ Report can be found elsewhere
in this document as noted in the table below. This information is
incorporated into this Directors’ Report by reference. A summary
of the disclosures required to be made in, and incorporated into,
this Directors’ Report is given below.
Likely future developments
Policy on disability
Employee engagement
Greenhouse gas emissions
Names and biographies of Directors who served during the year
Directors’ interests
Results and dividends
Share capital and acquisition of own shares
Directors’ disclosure of information to the auditor in respect of the audit
Directors’ responsibility statement
Going Concern
Viability statement
Appointment and replacement of Directors
Amendment of Articles of Association
Powers of Directors
Share capital and shareholder rights
• Substantial shareholders
• Restriction on transfer of shares
• Rights attaching to shares
• Restrictions on voting
• Details of employee share schemes
Subsidiary and associated undertakings and branches
Financial risk management
Related party transactions
Post balance sheet events
Page No.
4
84
84
17-18
51-54
72-76
83
83
85
85
40
40
59
125
124
83
124
123
123
114-116
109-111
116-120
121
120
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ANNUAL REPORT 2015 Directors’ Report
Directors
The Directors who served throughout the year under review
where Robin Buchanan, Simon Boddie, Danuta Gray, Steve
Ingham, David Lowden, Baroness Ruby McGregor-Smith and
Kelvin Stagg. Patrick De Smedt was appointed a Non-Executive
Director of the Company on 1 August 2015. Robin Buchanan
resigned as a Director and Chairman of the Company on 31
December 2015. With effect from the same date David Lowden
was appointed Chairman of the Company and Chairman of the
Nomination Committee. On that date he ceased to be a member
and Chairman of the Remuneration Committee and a member of
the Audit Committee.
Results and Dividends
The results for the year are set out in the Consolidated Income
Statement on page 93. An analysis of revenue, profit and net
assets by region is shown in Note 2 on pages 102 and 103. A
final dividend for 2014 of 7.58p per Ordinary share was paid on
22 June 2015; an interim dividend for 2015 of 3.6p per Ordinary
share was paid on 2 October 2015; and a special dividend of 16p
per share was also paid on 2 October 2015.
The Directors recommend the payment of a final dividend for the
year ended 31 December 2015 of 7.9p per Ordinary share on 20
June 2016 to shareholders on the register of members on 20 May
2016. If approved by shareholders at the Annual General Meeting,
this will result in a total dividend for the year of 11.5p per Ordinary
share (2014:11p).
Share Capital
As at 31 December 2015 the Company’s issued capital
comprised a single class of 325,919,705 Ordinary shares of 1p
each, totalling £3,259,197.05. At the Annual General Meeting
held on 4 June 2015 the shareholders authorised the Company
to purchase up to a maximum of 10% of the issued share capital
in the market. No shares were repurchased during the year. A
further resolution in this respect will be put to shareholders at the
forthcoming Annual General Meeting.
During the year 4,018,915 shares were issued to satisfy share
options exercised. The Company reviews the award of shares
made under the various employee and executive share plans in
terms of their effect on dilution limits and complies with the dilution
limits recommended by The Investment Association.
Substantial Shareholders
At 31 December 2015 the Company had been notified, in accordance with the FCA Disclosure and Transparency Rules, of the
undermentioned noted interests in its Ordinary share capital. The percentage of voting rights shown below are as at the date of notification.
Shareholder
No of Ordinary shares
% of Voting Rights
Causeway Capital Management LLC
The Capital Group of Companies, Inc
UBS Trustees (Jersey) Limited as Trustees of the Michael Page Employee Benefit
Trust
Franklin Templeton Institutional LLC
FIL Limited
22,718,240
22,151,708
15,103,870
15,308,070
15,103,870
6.98
6.80
5.31
5.03
4.98
The following notifications were received during the period 1 January 2016 to 10 March 2016:
Shareholder
No of Ordinary shares
% of Voting Rights
UBS Trustees (Jersey) Limited as Trustees of the Michael Page Employees’ Benefit
Trust*
Nil
Sanne Fiduciary Services Limited in its capacity as trustee of the Michael Page
Employees’ Benefit Trust*
14,776,231
0
4.53
* These notifications were made as a result of a change of Trustee of the Michael Page Employees’ Benefit Trust.
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ANNUAL REPORT 2015 Employment Policy and
Employee Involvement
The Group continues to give full and fair consideration to
applications for employment made by disabled persons, having
regard to their respective aptitudes and abilities. The policy
includes, where practicable, the continued employment of those
who may become disabled during their employment and the
provision of training and career development and promotion,
where appropriate. The Group also remains committed to
employee involvement throughout the business. Employees are
kept well informed of the performance and strategy of the Group
through personal briefings, regular meetings, emails and other
communications from the Chief Executive Officer and members of
the Executive Board. Further details of employment policies and
employee involvement can be found in the Strategic Report on
pages 25 and 26.
Directors’ Indemnities
The Company has not granted separate indemnities to the
Directors. The Company purchased and maintained Directors’
and Officers’ Liability Insurance throughout the period under
review, which gives appropriate cover for legal actions brought
against the Directors.
Financial Instruments and Financial
Risk Management
Details of the Group’s use of financial instruments, including
financial risk management objectives and policies of the Group,
and exposure of the Group to certain financial risks can be found
in Note 21 on pages 116 to 120.
Significant Agreements Containing Change of
Control Provisions
The Company has an invoice discounting facility that terminates
on a change of control, with prepaid amounts being repayable.
Directors’ and employees’ contracts do not normally provide
for payment for loss of office or employment as a result of a
change of control. However the Company operates several share
schemes for the benefit of its Executive Directors and employees,
the rules of which contain provisions which may cause options
and awards granted to vest on a change of control.
Political Contributions
No political contributions were made during the year. The
Company has a policy of not making political donations to political
organisations or independent election candidates anywhere
in the world as defined by the Political Parties, Election and
Referendums Act 2000.
Post Balance Sheet Events
There have been no significant post balance sheet events since
31 December 2015.
Reappointment of Auditor
Ernst & Young LLP are willing to continue in office and accordingly
resolutions concerning their reappointment and to authorise
the Directors to set their remuneration will be proposed at the
forthcoming Annual General Meeting.
Directors’ Statements of
Responsibility
The Directors are responsible for preparing the Annual Report and
Accounts in accordance with applicable law and regulations and
keeping proper accounting records. Detailed below are statements
made by the Directors in relation to their responsibilities, disclosure
of information to the Company’s auditor and going concern.
1. Financial Statements and Accounting Records
Company law of England and Wales requires the Directors to
prepare for each financial year financial statements which give a
true and fair view of the state of affairs of the Company and of the
Group at the end of the financial year and of the profit or loss of
the Group for that period.
In preparing those financial statements the Directors are required to:
(i)
(ii)
(iii)
select suitable accounting policies and apply them
consistently;
make judgments and estimates that are reasonable and
prudent;
present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
(iv) state whether the Group financial statements have been
prepared in accordance with International Financial Reporting
Standards (‘IFRS’) as adopted for use in the EU and Article 4
of the EU IAS Regulations;
(v)
state whether the parent company financial statements have
been prepared in accordance with IFRS as adopted for use in
the EU; and
(vi) prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Company and
the Group will continue in business.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time
the financial position of the Company and of the Group and to
enable them to ensure that the financial statements and Directors’
Remuneration Report comply with the Companies Act 2006 and
for the consolidated financial statements, Article 4 of the EU IAS
Regulation. They are also responsible for the system of internal
control, for safeguarding the assets of the Company and the
Group and, hence, for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
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ANNUAL REPORT 2015 Directors’ Report
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.
2. Directors’ Responsibility Statement
The Board confirms to the best of its knowledge that:
Annual General Meeting
The Annual General Meeting of the Company will be
held on 9 June 2016 and the notice of meeting can be
found on pages 126 to 130. It is also available on the Company’s
website www.page.com.
By order of the Board
(i)
the Group and parent company financial statements,
prepared in accordance with IFRS as adopted by the EU, give
a true and fair view of the assets, liabilities, financial position
and profit of the Group and parent company; and
Elaine Marriner
Company Secretary
9 March 2016
(ii) the Directors’ Report and the Strategic Report include
a fair review of the development and performance of
the business and the position of the Group together with a
description of the principal risks and uncertainties that
it faces.
3. Directors’ Confirmation
The Directors are responsible for preparing the Annual Report in
accordance with applicable law and regulations. Having taken
advice from the Audit Committee, the Board considers the
Report and Accounts, taken as a whole, as fair, balanced and
understandable and that it provides the information necessary for
shareholders to assess the Company’s performance, business
model and strategy.
Neither the Company nor the Directors accept any liability to
any person in relation to the Annual Report except to the extent
that such liability could arise under English law. Accordingly,
any liability to a person who has demonstrated reliance on any
untrue or misleading statement or omission shall be determined in
accordance with section 90A and schedule 10A of the Financial
Services and Markets Act 2000.
4. Disclosure of Information to the Auditor
Having made the requisite enquiries, so far as the Directors are
aware as at the date of this Statement, there is no relevant audit
information (as defined by section 418(3) of the Companies
Act 2006) of which the Company’s auditor is unaware and the
Directors have taken all the steps they ought to have taken to
make themselves aware of any relevant audit information and to
establish that the Company’s auditor is aware of that information.
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ANNUAL REPORT 2015 Independent Auditor’s Report to the Members of
Michael Page International plc
Our opinion on the financial statements
Overview of our audit approach
Risks of material
misstatement
• Revenue recognition
• Accounting for Page Recruitment System
(PRS)
• Taxation matters
Audit scope
• We performed an audit of the complete
financial information of six components and
audit procedures on specific balances for a
further seven components
• The components where we performed full
or specific audit procedures accounted for
88% of revenue, 82% of gross profit, 83%
of profit before tax and 81% of total assets
• We performed other audit procedures over
the remaining 25 components
Materiality
• Overall Group materiality of £4.5m which
represents 5% of profit before tax
Our assessment of risk of material misstatement
We identified the risks of material misstatement described below as
those that had the greatest effect on our overall audit strategy, the
allocation of resources in the audit and the direction of the efforts
of the audit team. In addressing these risks, we have performed
the procedures below which were designed in the context of the
financial statements as a whole and, consequently, we do not
express any opinion on these individual areas.
In our opinion:
• Michael Page International plc’s Group financial statements and
Parent company financial statements (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 2015 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 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.
What we have audited
Michael Page International plc’s financial statements comprise:
Group
Parent company
Consolidated balance sheet as at
31 December 2015
Balance sheet as at
31 December 2015
Consolidated income statement for
the year then ended
Consolidated statement of
comprehensive income for the year
then ended
Consolidated statement of
changes in equity for the year
then ended
Statement of changes in
equity for the year then ended
Consolidated cash flow
statement for the year then ended
Cash flow statement for the
year then ended
Related notes 1 to 25 to the
financial statements
Related notes 1 to 25 to the
financial statements
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.
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ANNUAL REPORT 2015 What we concluded to the
Audit Committee
We concluded that revenue
recognised in the year is materially
correct on the basis of our
procedures performed both at
group and by component audit
teams.
No indicators of impairment were
identified.
We concur with the revised useful
life allocated to the PRS intangible
asset.
We conclude that the PRS
intangible asset balance at
31 December 2015 is materially
correct.
Risk
Our response to the risk
Revenue recognition
Refer to the Audit Committee Report
(page 64); Accounting policies (page 99);
and Note 2 of the Consolidated Financial
Statements (page 102).
The Group has reported revenues of
£1.06 billion (2014: £1.05 billion) and two
significant revenue streams: permanent
placement revenue and temporary
placement revenue.
For permanent placement revenue, there is
a risk around the timing of the recognition of
revenue as a contract may be agreed with
a customer and candidate several months
in advance of the start of employment.
Consequently, there is a risk that revenue
recognition may occur before revenue
recognition criteria have been met. There
is also a risk that the placement will not be
taken up as agreed, which would result in
the reversal of previously recorded revenue.
For temporary placement revenue,
revenue may be recognised when revenue
recognition criteria has not been met,
namely an approved timesheet has not
been submitted. Revenue may also be
recorded at the incorrect rate. This risk
can occur during the year or in particular
around year end cut-off when an accrual
is recorded for days worked prior to
submission of the weekly timesheets.
Accounting for Page Recruitment
System (PRS)
Refer to the Audit Committee Report (page
64); Accounting policies (page 99); and
Note 12 of the Consolidated Financial
Statements (page 108).
The net book value of this asset is £31.2
million (2014: £33.6 million).
The implementation and roll-out of the
PRS intangible asset has been in progress
for a number of years. We consider the
risk around the accounting for the PRS
intangible asset to have decreased from the
prior year due to the significant progress
made in the roll-out in the current year.
The risk concerns the carrying value of the
intangible asset and whether any potential
indicators of impairment exist.
There is a risk that the PRS intangible
asset is amortised over an inappropriate
useful life. The Group’s assessment of the
useful life requires judgement as to the
future utilisation of the operating system
applications.
The business also continues to capitalise
costs in relation to the asset as the roll-out
is still in progress. There is a risk that these
costs are capitalised when they do not meet
the criteria for capitalisation.
We updated our understanding of the revenue processes
at all full scope and specific scope locations and tested key
management controls around recognition and measurement of
revenue at all the full scope and four of seven specific scope
locations.
We selected a sample in all full scope and specific scope
locations of permanent and temporary placement revenue
transactions for detailed transaction testing to verify that
revenue had been appropriately recognised in the correct
period and to verify that the transaction occurred and was
recorded at the correct value. We performed analytical
procedures at all full scope and specific scope locations.
We compared the level of actual permanent placement
revenue reversals, which occur as a result of non-completion
of contractual placements, to the provision recorded against
accrued income in the group financial statements to determine
if the provision was appropriate.
We performed full and specific scope audit procedures over
this risk area in 13 locations, which covered 88% of the risk
amount.
For all other locations which covered 12% of the risk amount,
we performed audit procedures on a country by country basis
to address the risk of an undetected material error occurring
in these components. Such procedures included analytical
review of revenue and gross profit, and ratio analysis of key
performance indicators including revenue and gross profit per
fee earner. The processes and group-wide controls for these
locations are consistent with the rest of the Group.
We assessed the current status and future outlook of the
roll-out of the PRS operating system and considered if any
indicators of potential impairment exist which had not been
considered by management.
We met with the key individuals involved in the global roll-
out plan to understand the key progress milestones and
challenges to delivering against plan. We considered the
ability of the Group to deliver on the plan based on the Board’s
demonstrable commitment to complete the roll-out in 2016 and
the significant progress made in the roll-out during 2015.
We enquired about the use and benefits of the applications at
the full and specific scope locations in which PRS was rolled-
out during the year. We confirmed that the use and benefits of
the applications are similar to the positive observations made
in prior year for the United Kingdom and the United States roll-
outs. We also viewed the upgraded websites on a sample basis
to confirm that these are now used by the locations where PRS
were rolled out during the year.
The Group extended the useful life of specific components of
the PRS intangible asset during the year. We examined the
remaining useful life in comparison to the period over which
future economic benefits are expected to be realised.
We tested a sample of items capitalised in the year for
compliance with IFRS and Group asset capitalisation policy.
Audit procedures in relation to the PRS intangible asset were
performed by the group audit team, with the exception of
specific enquiries about the use and benefits of the applications
being performed by our component teams at the full and
specific scope locations.
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ANNUAL REPORT 2015 What we concluded to the
Audit Committee
We concluded that management’s
judgements in relation to the
potential risk around transfer
pricing are appropriate to not
result in a material misstatement.
We conclude that management’s
judgements in relation to deferred
tax asset recognition were
appropriate.
Our response to the risk
With assistance from our international tax specialists, we
analysed and challenged the method, assumptions and
judgements used by management to determine the Group’s
transfer pricing reserve. We challenged the tax exposures
estimated by management along with enquiries, claims or
assessments made by tax authorities to date.
Additionally, our specialists used their knowledge and
experience of the application of international and local legislation
to support our consideration of the appropriateness of the
reserve determined by management.
Our audit procedures on the recognition of deferred tax assets
included assessing and challenging the assumptions and
judgements included in the future profit forecasts in respect of
the relevant components of the Group’s long-term forecasts.
We considered historical levels of taxable profits, Group
management’s investment strategy and growth forecasts, and
consistency of the projections with other forecasts made by
management and approved by the Board.
We also considered the adequacy of the Group’s disclosures in
respect of transfer pricing and deferred tax assets.
The majority of our audit procedures were performed by the
group audit team in relation to the two areas of focus.
Risk
Taxation matters
Refer to the Audit Committee Report
(page 64); Accounting policies (page 100);
and Notes 8 and 17 of the Consolidated
Financial Statements (pages 106 and 113).
PageGroup operates across a large number
of jurisdictions and is subject to periodic
challenges by local tax authorities on a
range of tax matters during the normal
course of business including transfer
pricing.
We have focused on two matters relating
to the transfer pricing reserve and the
recognition of deferred tax assets.
Transfer pricing reserve: We consider
the risk around transfer pricing to have
increased from the prior year due to transfer
pricing being a continuing area of focus for
many tax authorities and subject to greater
challenge from them.
Recognition of deferred tax assets: This risk
concerns the judgements and estimates
applied in the recognition of deferred tax
assets in respect of unutilised losses and
other temporary differences as supported
by taxable profit forecasts in the relevant
jurisdictions. We consider the risk around
the recognition of deferred tax assets
to have decreased due to continued
profitability in jurisdictions and states
recognising a deferred tax asset. In addition,
off balance sheet deferred tax balances in
jurisdictions that have become profitable are
now recognised in full.
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ANNUAL REPORT 2015 The scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our
allocation of performance materiality determine our audit scope
for each entity within the Group. Taken together, this enables us
to form an opinion on the consolidated financial statements. We
take into account size, risk profile, the organisation of the group
and effectiveness of group-wide controls, changes in the business
environment and other factors such as recent Internal audit results
when assessing the level of work to be performed at each entity.
We used gross profit as a measure to determine our group audit
scope in addition to revenue and profit before tax as this is a
key measure used by management to determine the size of a
component in relation to the Group.
In assessing the risk of material misstatement to the Group financial
statements, and to ensure we had adequate quantitative coverage
of significant accounts in the financial statements, we selected
13 of the 38 reporting components that represent the principal
business units within the Group.
Of the 13 components selected, we performed an audit of the
complete financial information of six components (“full scope
components”), which comprised the United Kingdom, France,
China, Hong Kong, Australia and the Group’s Head Office.
These were selected based on their size, with the exception
of the Group’s Head Office, which was selected based on risk
characteristics. For the remaining seven components (“specific
scope components”), we performed audit procedures on specific
accounts within that component that we considered had the
potential for the greatest impact on the significant accounts in the
financial statements either because of the size of these accounts
or their risk profile: Brazil, Italy, Germany, the Netherlands, Spain,
Switzerland and the United States.
These 13 reporting components where we performed audit
procedures accounted for:
• 88% (2014: 88%) of the Group’s revenue;
• 82% (2014: 82%) of the Group’s gross profit;
• 83% (2014: 79%) of the Group’s profit before tax; and
• 81% (2014: 83%) of the Group’s total assets.
Of this, the full scope components contributed:
• 60% (2014: 47%) of the Group’s revenue;
• 53% (2014: 40%) of the Group’s gross profit;
• 59% (2014: 41%) of the Group’s profit before tax; and
• 56% (2014: 42%) of the Group’s total assets.
The specific scope components contributed:
• 27% (2014: 41%) of the Group’s revenue
• 29% (2014: 42%) of the Group’s gross profit;
• 24% (2014: 38%) of the Group’s profit before tax; and
• 25% (2014: 41%) of the Group’s total assets.
The audit scope of these specific scope components may not have
included testing of all significant accounts of the component but will
have contributed to the coverage of significant accounts tested for
the Group.
The remaining 25 components together represent:
• 13% of the Group’s revenue;
• 18% of the Group’s gross profit;
• 17% of the Group’s profit before tax; and
• 19% of the Group’s total assets.
None of the remaining 25 components are individually greater than
1.8% of the Group’s revenue, 2.1% of the Group’s gross profit,
3.8% of the Group’s profit before tax, and 1.9% of the Group’s
total assets. For these components, we performed other audit
procedures, including analytical review procedures on a country-
by-country basis, obtaining an understanding of the group wide
entity level controls over all components, including the level of CEO,
CFO and other group management visits, oversight and review,
and the scope of the annual Internal Audit programme and the
results of those visits to respond to any potential risks of material
misstatement to the Group financial statements.
The charts below illustrate the coverage obtained from the audit
work performed.
13%
60%
18%
53%
27%
Revenue
Gross
profit
29%
17%
59%
19%
56%
Profit
before
tax
24%
Total assets
25%
Full Scope
components
Specific Scope
components
Other procedures
Changes from the prior year
China, Hong Kong and Australia have been designated as full
scope components this year, whereas they were designated
as specific scope locations in the prior year. We have changed
the designation in order to obtain greater quantitative full scope
coverage of the Group’s key metrics. We do not perceive any
additional risk in these components and no additional risk areas
were discovered as a result of the increase in audit scope.
Involvement with component teams
In establishing our overall approach to the Group audit, we
determined the type of work that needed to be undertaken at
each of the components by us, as the Group audit team, or by
component auditors from other EY global network firms operating
under our instruction. Of the six full scope components, audit
procedures were performed on one of these, being the Group’s
Head Office, directly by the Group audit team. For the largest full
scope component, the United Kingdom, the component audit
team included several senior members from the Group audit team,
including the Group audit senior manager. For the remaining four
full scope components and the seven specific scope components,
where the work was performed by component auditors, we
determined the appropriate level of group team involvement to
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ANNUAL REPORT 2015 enable us to determine that sufficient audit evidence had been
obtained as a basis for our opinion on the Group as a whole.
The Group audit team followed a programme of planned visits
that has been designed to ensure that a senior member of the
Group audit team visits at least three (2014: two) of the full scope
components each year. The number of full scope locations visited
in the year has increased over the prior year as a result of the
increase in designated full scope locations. During the current
year’s audit cycle, visits were undertaken by the Senior Statutory
Auditor to the component teams performing the audit work for
the United Kingdom, France, China and Hong Kong components.
These visits involved discussing the audit approach with the
component team and any issues arising from their work and
reviewing key audit working papers on risk areas, and attending the
audit closing meeting with local management. A visit to the newly
established shared service centre in Barcelona was undertaken
by the Group audit senior manager. The purpose of this visit was
to obtain an understanding of the shared service centre (SSC)
operations, in relation to the countries now supported by the SSC.
The Group audit team attended all four regional audit closing
meetings with regional management and the Group CFO, at which
all key areas of judgement were discussed and challenged. The
Senior Statutory Auditor also attended a separate meeting with the
regional CFO of the Asia Pacific region at which the performance
of the region and key audit risk areas were discussed. The Asia
Pacific region includes three of our full scope components.
The Group audit team interacted regularly with the component
teams where appropriate during various stages of the audit,
including the planning, post-interim and final stages, reviewed key
working papers and were responsible for the scope and direction
of the audit process. This, together with the additional procedures
performed at Group level, gave us appropriate evidence for our
opinion on the Group financial statements.
Our application of materiality
We apply the concept of materiality in planning and performing the
audit, in evaluating the effect of identified misstatements on the
audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually
or in the aggregate, could reasonably be expected to influence
the economic decisions of the users of the financial statements.
Materiality provides a basis for determining the nature and extent of
our audit procedures.
We determined materiality for the Group to be £4.5 million (2014:
£3.9 million), which is 5% of profit before tax (2014: 5% profit
before tax and exceptional items). We believe that profit before
tax is the principal consideration for stakeholders in assessing
the financial performance of the Group and in 2014 adjusted this
figure to exclude the impact of exceptional items which were non-
recurring. There are no exceptional items in 2015. Materiality has
increased year over year solely due to the increase in profit before
tax (2014: profit before tax and exceptional items).
Performance materiality
The application of materiality at the individual account or balance
level. It is set at an amount to reduce to an appropriately low level
the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality.
On the basis of our risk assessments, together with our
assessment of the Group’s overall control environment, our
judgement was that performance materiality was 50% (2014: 50%)
of our planning materiality, namely £2.25m (2014: £1.95m).
Audit work at component locations for the purpose of obtaining
audit coverage over significant financial statement accounts is
undertaken based on a percentage of total performance materiality.
The performance materiality set for each component is based
on the relative scale and risk of the component to the Group
as a whole and our assessment of the risk of misstatement at
that component. In the current year, the range of performance
materiality allocated to components was £0.45m to £1.13m (2014:
£0.38m to £0.94m).
Reporting threshold
An amount below which identified misstatements are considered
as being clearly trivial.
We agreed with the Audit Committee that we would report to
them all uncorrected audit differences in excess of £0.23m (2014:
£0.20m), which is set at 5% of planning materiality, as well as
differences below that threshold that, in our view, warranted
reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the
quantitative measures of materiality discussed above and in light of
other relevant qualitative considerations in forming our opinion.
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 to identify material inconsistencies
with the audited financial statements and to identify any information
that is apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for
our report.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities
Statement set out on page 85, 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.
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.
90
PB
ANNUAL REPORT 2015 Opinion on other matters prescribed by the Companies Act 2006
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 Strategic Report and 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
ISAs (UK and Ireland)
reporting
We are required to report to you if, in our opinion, financial and non-financial information in
the annual report is:
We have no exceptions to
report.
• materially inconsistent with the information in the audited financial statements; or
• apparently materially incorrect based on, or materially inconsistent with, our knowledge
of the Group acquired in the course of performing our audit; or
• otherwise misleading.
In particular, we are required to report whether we have identified any inconsistencies
between our knowledge acquired in the course of performing the audit and the directors’
statement 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 the entity’s performance, business model and strategy; and whether the
annual report appropriately addresses those matters that we communicated to the Audit
Committee that we consider should have been disclosed.
Companies Act 2006
reporting
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.
We have no exceptions to
report.
Listing Rules review
requirements
We are required to review:
• the directors’ statement in relation to going concern, set out on page 40, and longer-
term viability, also set out on page 40; and
• the part of the Corporate Governance Statement relating to the company’s compliance
with the provisions of the UK Corporate Governance Code specified for our review.
We have no exceptions to
report.
91
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ANNUAL REPORT 2015 Statement on the directors’ assessment of the principal risks that would threaten the solvency or liquidity of the entity
We have nothing
material to add or to
draw attention to.
ISAs (UK and Ireland)
reporting
We are required to give a statement as to whether we have anything material to add
or to draw attention to in relation to:
• the directors’ confirmation in the annual report that they have carried out a robust
assessment of the principal risks facing the entity, including those that would
threaten its business model, future performance, solvency or liquidity;
• the disclosures in the annual report that describe those risks and explain how they
are being managed or mitigated;
• the directors’ statement in the financial statements about whether they considered
it appropriate to adopt the going concern basis of accounting in preparing them,
and their identification of any material uncertainties to the entity’s ability to continue
to do so over a period of at least twelve months from the date of approval of the
financial statements; and
• the directors’ explanation in the annual report as to how they have assessed the
prospects of the entity, over what period they have done so and why they consider
that period to be appropriate, and their statement as to whether they have a
reasonable expectation that the entity will be able to continue in operation and
meet its liabilities as they fall due over the period of their assessment, including
any related disclosures drawing attention to any necessary qualifications or
assumptions.
Iain Wilkie (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
9 March 2016
Notes:
1. The maintenance and integrity of the Michael Page International plc web site is the responsibility of the directors; the work carried
out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any
changes that may have occurred to the financial statements since they were initially presented on the web site.
2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation
in other jurisdictions.
92
PB
ANNUAL REPORT 2015 CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2015
Note
2
2
2
6
6
2
7
3
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)
10
10
The above results relate to continuing operations.
Before
exceptional
items 2014
£’000
Exceptional
items
(Note 5) 2014
£’000
2015
£’000
–
–
–
1,631
1,631
–
298
1,929
833
2,762
1,064,945
1,046,887
(514,070)
532,817
(454,356)
78,461
488
(517)
78,432
(21,863)
56,569
(508,840)
556,105
(466,034)
90,071
1,116
(490)
90,697
(24,489)
66,208
66,208
21.3
21.1
After
exceptional
items 2014
£’000
1,046,887
(514,070)
532,817
(452,725)
80,092
488
(219)
80,361
(21,030)
59,331
59,331
19.3
19.1
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2015
Profit for the year
Other comprehensive loss for the year
Items that may subsequently be reclassified to profit and loss:
Currency translation differences
Loss on hedging instruments
Total comprehensive income for the year
Attributed to:
Owners of the parent
2015
£’000
2014
£’000
66,208
59,331
(5,825)
(3,949)
(173)
–
60,210
55,382
60,210
55,382
93
PB
ANNUAL REPORT 2015
CONSOLIDATED AND PARENT COMPANY BALANCE SHEETS
As at 31 December 2015
Note
Group
2015
£’000
2014
£’000
Company
2015
£’000
2014
£’000
Non-current assets
Property, plant and equipment
Intangible assets
- Goodwill and other intangibles
- Computer software (including
assets held under construction)
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
Current tax payable
Net current assets/(liabilities)
Non-current liabilities
Other payables
Deferred tax liabilities
Total liabilities
Net assets
Capital and reserves
Called-up share capital
Share premium
Capital redemption reserve
Reserve for shares held in the employee benefit trust
Currency translation reserve
Retained earnings
Total equity
11
12
12
13
17
14
14
8
20
2
15
8
15
17
2
18
19
19
19
19
21,411
21,808
1,733
1,853
34,533
36,693
–
–
–
–
–
–
–
14,055
2,693
74,425
–
505,912
502,318
11,644
1,842
–
–
–
–
73,840
505,912
502,318
214,732
203,042
636,601
636,371
8,814
7,479
95,018
90,012
–
–
–
–
318,564
300,533
636,601
636,371
392,989
374,373
1,142,513
1,138,689
(141,935)
(135,888)
(724,291)
(660,925)
(22,738)
(14,910)
–
–
(164,673)
(150,798)
(724,291)
(660,925)
153,891
149,735
(87,690)
(24,554)
(5,390)
(1,167)
(6,557)
(4,743)
(2,609)
(7,352)
–
–
–
–
–
–
(171,230)
(158,150)
(724,291)
(660,925)
221,759
216,223
418,222
477,764
3,258
3,219
90,268
75,215
932
932
(61,365)
(72,407)
10,641
16,466
178,025
192,798
221,759
216,223
3,258
90,268
932
–
–
3,219
75,215
932
–
–
323,764
418,222
398,398
477,764
The financial statements of Michael Page International plc (Company Number 3310225) set out on pages 93 to 121 were approved by the
Board of Directors and authorised for issue on 9 March 2016.
Signed on behalf of the Board of Directors
Steve Ingham,
Chief Executive Officer
Kelvin Stagg,
Chief Financial Officer
94
PB
ANNUAL REPORT 2015
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2015
2015
Called-up
share capital
£’000
Share
premium
£’000
Note
Reserve
for shares
held in the
employee
benefit trust
£’000
Capital
redemption
reserve
£’000
Currency
translation
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
Balance at 1 January 2015
3,219
75,215
932
(72,407)
16,466
192,798
216,223
Currency translation differences
Net expense recognised
directly in equity
Loss on hedging instruments
Profit for the year
Total comprehensive
(loss)/income for the year
–
–
–
–
–
–
–
–
–
–
Exercise of share plans
39
15,053
–
–
–
–
–
–
–
–
–
–
–
–
Transfer from reserve for shares
held in the employee benefit trust
Credit in respect of share schemes
Credit in respect of tax on
share schemes
Dividends
9
–
–
–
–
–
–
–
–
39
15,053
–
11,042
–
–
–
–
–
–
–
11,042
(5,825)
(5,825)
–
–
(5,825)
(5,825)
–
–
(173)
(173)
66,208
66,208
(5,825)
66,035
60,210
–
–
–
–
–
–
7,770
22,862
(11,042)
–
6,801
6,801
728
728
(85,065)
(85,065)
(80,808)
(54,674)
Balance at 31 December 2015
3,258
90,268
932
(61,365)
10,641
178,025
221,759
2014
Note
Called-up
share
capital
£’000
Share
premium
£’000
Capital
redemption
reserve
£’000
Reserve
for shares
held in the
employee
benefit trust
£’000
Currency
translation
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
Balance at 1 January 2014
3,208
71,739
932
(50,022)
20,415
162,215
208,487
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
employee benefit trust
Exercise of share plans
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
9
Balance at 31 December 2014
95
–
–
–
–
–
–
–
–
–
–
11
3,476
–
–
–
–
–
–
–
–
11
3,219
3,476
75,215
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3,949)
(3,949)
–
–
–
59,331
(3,949)
(3,949)
59,331
(3,949)
59,331
55,382
(25,445)
–
3,060
–
–
–
(22,385)
–
–
–
–
–
–
–
–
467
(25,445)
3,954
(3,060)
7,069
–
7,069
(518)
(518)
(32,706)
(32,706)
(28,748)
(47,646)
932
(72,407)
16,466
192,798
216,223
PB
ANNUAL REPORT 2015 STATEMENT OF CHANGES IN EQUITY – PARENT COMPANY
For the year ended 31 December 2015
Note
Called-up
share capital
£’000
3,219
Share
premium
£’000
75,215
Capital
redemption
reserve
£’000
932
Company
Balance at 1 January 2015
Profit for the year
Total comprehensive income for
the year
Exercise of share plans
Credit in respect of share schemes
Dividends
9
Balance at 31 December 2015
3,258
–
–
15,053
–
–
15,053
90,268
–
–
–
–
–
–
932
Company
Note
Balance at 1 January 2014
Profit for the year
Total comprehensive income for
the year
Exercise of share plans
Credit in respect of share schemes
Dividends
9
Balance at 31 December 2014
3,219
Called-up
share capital
£’000
3,208
Share
premium
£’000
71,739
Capital
redemption
reserve
£’000
932
–
–
3,476
–
–
3,476
75,215
–
–
–
–
–
–
932
–
–
39
–
–
39
–
–
11
–
–
11
Retained
earnings
£’000
398,398
Total equity
£’000
477,764
3,630
3,630
3,630
–
6,801
(85,065)
(78,264)
323,764
3,630
15,092
6,801
(85,065)
(63,172)
418,222
Retained
earnings
£’000
415,699
Total equity
£’000
491,578
8,336
8,336
8,336
–
7,069
(32,706)
(25,637)
398,398
8,336
3,487
7,069
(32,706)
(22,150)
477,764
96
PB
ANNUAL REPORT 2015 CONSOLIDATED AND PARENT COMPANY CASH FLOW STATEMENTS
For the year ended 31 December 2015
Group
Company
Profit before tax
Exceptional items
Note
2
5
Profit before tax and exceptional items
Depreciation and amortisation charges
11/12
Loss on sale of property, plant and equipment, and
computer software
Share scheme charges
Net finance income
Operating cash flow before changes in working
capital, finance costs and exceptional items
Increase in receivables
Increase in payables
Cash generated from underlying operations
Cash flow on exceptional items
Cash generated from operations
Income tax paid
Net cash from operating activities
Cash flows from investing activities
Proceeds in respect of share scheme recharges
to subsidiaries
Purchases of property, plant and equipment
Purchases of intangibles
Proceeds from the sale of property, plant and
equipment, and computer software
Interest received
5
11
12
2015
£’000
90,697
–
90,697
15,417
690
6,869
(626)
113,047
(20,248)
8,804
101,603
–
101,603
(19,091)
82,512
–
(9,161)
(6,015)
374
1,116
2014
£’000
80,361
(1,929)
78,432
17,896
294
7,120
(269)
103,473
(22,212)
6,831
88,092
(1,098)
86,994
(15,357)
71,637
2015
£’000
3,630
–
3,630
–
–
–
–
3,630
(230)
63,366
66,766
–
2014
£’000
8,336
–
8,336
–
–
–
–
8,336
(33,317)
53,149
28,168
–
66,766
28,168
–
–
66,766
28,168
–
3,207
1,051
(6,231)
(6,468)
824
505
–
–
–
–
–
–
–
–
Net cash (used in)/from investing activities
(13,686)
(11,370)
3,207
1,051
Cash flows from financing activities
Dividends paid
Interest paid
Issue of own shares for the exercise of options
Purchase of shares held in the employee
benefit trust
Net cash used in financing activities
Net increase 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
20
(85,065)
(32,706)
(85,065)
(32,706)
(269)
22,619
–
–
3,954
15,092
–
3,487
–
(62,715)
(25,445)
(54,197)
–
–
(69,973)
(29,219)
6,111
6,070
90,012
(1,105)
95,018
85,394
(1,452)
90,012
–
–
–
–
–
–
–
–
97
PB
ANNUAL REPORT 2015 NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2015
The adoption of these standards or interpretations did not have
any impact on the accounting policies, financial position or
performance of the Group.
1. Significant accounting policies
Standards issued but not yet effective
Statement of compliance
Michael Page International plc is a company incorporated
in the United Kingdom under the Companies Act.
The consolidated financial statements have been prepared under
the historical cost convention modified by the revaluation of
financial assets and liabilities (including derivative instruments)
at fair value through profit and loss. This is in accordance with
current International Financial Reporting Standards (IFRS) as
adopted by the European Union and therefore complies with
Article 4 of the EU IAS Regulation.
The Company financial statements have been prepared under the
historical cost convention and in accordance with current IFRS as
adopted by the European Union.
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 £3.6m (2014: £8.3m). The
decrease in the Company’s profit this year is as a result of reduced
dividend income.
Basis of consolidation
(i) Subsidiaries
The consolidated financial statements comprise the financial
statements of the Group and its subsidiaries as at 31 December
2015. Control is achieved when the Group is exposed, or has
rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over
the investee.
(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.
(iii) Employee Benefit Trust
Shares in Michael Page International plc held by the trust are
shown as a reduction in shareholders’ funds.
Changes in accounting policy – new accounting standards,
interpretations and amendments
The accounting policies adopted are consistent with those of the
previous financial years except for the following amendments to
IFRS effective as of 1 January 2015:
• IFRS 2 Share-based Payment – Amendments to IFRS 2
• IFRS 8 Operating Segments – Amendments to IFRS 8
• IAS 24 Related Party Disclosures – Amendments to IAS 24
• IFRS 13 Fair Value Measurement – Amendments to IFRS 13
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 Disclosure Initiative – Amendments to IAS 1; effective
date 1 January 2016
• IAS 16 and IAS 38 Clarification of Acceptable Methods of
Depreciation and Amortisation; effective date 1 January 2016
• IFRS 9 Financial Instruments; effective date 1 January 2018
• IFRS 15 Revenue from Contracts with Customers; effective
date 1 January 2018
• IFRS 16 Leases; effective date 1 January 2019
The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not
yet effective.
No other issued but not endorsed amendments to IFRS will have
a material impact on the Group’s financial statements once they
become endorsed and effective.
Going concern
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 Strategic Report on
page 40.
Guarantee
The following UK subsidiaries of the Group are exempt from the
requirements of the Companies Act 2006 relating to the audit of
accounts by virtue of section 479A of this Act. The Company has
provided parent guarantees to these subsidiaries.
Accountancy Additions Limited (3573861)
Page Group Limited (2327468)
LPM (Group Services) Limited (1669129)
Michael Page International 1982 Limited (1676035)
Michael Page International Investment Limited (2329107)
Michael Page International Finance Limited (2319166)
Michael Page Limited (1609138)
Michael Page UK Limited (1273591)
Page Personnel (UK) Limited (2611561)
Sales Recruitment Specialists Limited (1475920)
Slamway Limited (1675975)
The Assessment Centre Limited (2049378)
The Page Partnership Limited (1675582)
98
PB
ANNUAL REPORT 2015 a) Revenue and income recognition
• all resulting exchange differences are recognised in other
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;
• 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
comprehensive income.
e) Intangible assets
(i) Goodwill
Goodwill represents the excess of the cost of an acquisition over
the fair value of the Group’s share of the net identifiable assets
of the acquired subsidiary at the date of acquisition. Goodwill
on the acquisition of subsidiaries is included in intangible assets.
Goodwill is stated at cost less any accumulated impairment
losses. Goodwill is allocated to cash-generating units and is not
amortised, but is tested at 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) Computer software
Computer software acquired or developed by the Group is stated
at cost less accumulated amortisation (see below). The Group
reviews intangible software assets for any indication of impairment
annually.
(iii) Software under construction
Software under construction relates to cost capitalised in relation
to the development of a new operating system and related
applications. Costs are capitalised when they fulfil the criteria in
IAS 38 regarding internally developed intangible assets. While still
under construction, assets are tested for impairment annually.
Assets are moved from software under construction to computer
software when they become available for use.
Cost of sales consists of the salary cost of temporary staff and
costs incurred on behalf of clients, principally advertising costs.
(iv) Trademark
c) Gross profit
Gross profit represents revenue less cost of sales and consists
of the total placement fees of permanent candidates, the margin
earned on the placement of temporary candidates and the margin
on advertising income.
d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s
entities are measured using the currency of the primary economic
environment in which the entity operates (“the functional
currency”). The consolidated financial statements are presented
in Sterling, which is the Company’s functional and presentation
currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the respective
functional currency using the exchange rates prevailing at the
dates of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the
translation at year end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the
income statement.
(iii) Group companies
The results and financial position of all the Group entities
(none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation
currency are translated into the presentation currency as follows:
• assets and liabilities for each balance sheet presented
are translated at the closing rate at the date of that
balance sheet;
• income and expenses for each income statement are
translated at average exchange rates; and
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 except PRS 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 (2014:
£311.7m).
The Group extended the useful life of specific components of the
PRS intangible asset during the year to align the useful life of the
system with the timing of the benefit. The effect of this was to
reduce the amortisation charge by c. £3m.
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.
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ANNUAL REPORT 2015
h) Impairment of assets
Non-financial 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).
Financial assets
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
Income tax expense represents the sum of the current 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 recognised on differences between the carrying
amounts of assets and liabilities in the financial statements
and the corresponding tax bases used in the computation of
taxable profit and is accounted for using the balance sheet
liability method.
Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised to
the extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilised.
Such assets and liabilities are not recognised if the temporary
difference arises from goodwill or from the initial recognition
(other than in a business combination) of other assets and liabilities
in a transaction that affects neither the taxable profit nor the
accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries, except where
the Group is able to control the reversal of the temporary difference
and it is probable that the temporary difference will not reverse in
the foreseeable future. The carrying amount of deferred tax assets
is reviewed at each balance sheet date and reduced to the extent
that it is no longer probable that sufficient taxable profits will
be available.
Deferred tax is calculated at the tax rates that are expected
to apply in the period when the liability is settled or the
asset realised.
Deferred tax is charged or credited to 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.
j) Pension costs
The Group operates defined contribution pension schemes.
The assets of the schemes are held separately from those of the
Group in independently administered funds. The pension costs
charged to the income statement represent the contributions
payable by the Group to the funds during each period.
k) Leased assets
Leases are classified as finance leases whenever the terms of the
lease transfer substantially all the risks and rewards of ownership
to the lessee. All other leases are classified as operating leases.
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 Board to allocate resources to the
segments and to assess their performance. Information provided
to the Board 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 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.
100
PB
ANNUAL REPORT 2015 (ii) Management Incentive Plan and Long-Term Incentive Plan
Where deferred awards are made to Directors and senior
executives under either the Management Incentive Plan or the
Long-Term Incentive Plan, 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.
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) Hedge accounting
Hedges of a net investment in a foreign operation, including a
hedge of a monetary item that is accounted for as part of the
net investment, are accounted for in a way similar to cash flow
hedges. Gains or losses on the hedging instrument relating
to the effective portion of the hedge are recognised as Other
Comprehensive Income while any gains or losses relating to the
ineffective portion are recognised in the statement of profit or
loss. On disposal of the foreign operation, the cumulative value of
any such gains or losses recorded in equity is transferred to the
statement of profit or loss. The Group uses a loan as a hedge of
its exposure to foreign exchange risk on its investments in foreign
subsidiaries.
t) Critical accounting estimates and judgments
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates and
judgments. It also requires management to exercise judgment in
the process of applying the Company’s accounting policies.
Estimates and judgments 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 judgments 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 judgment, 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 8 – current tax assets and liabilities
The Group, being a multinational company, is subject to both
international and local transfer pricing legislation. Management
has reviewed the transfer pricing position to ensure any potential
exposure is adequately provided.
• 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 equity settled share-based payments charge
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.
u) 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.
101
PB
ANNUAL REPORT 2015 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 costs. This is the measure
reported to the Group’s Board the chief operating decision maker, for the purpose of resource allocation and assessment of segment
performance. Segments are aggregated in accordance with management ownership, determined by the possession of similar
characteristics. No judgements were applied to identify the reportable segments.
(a) Revenue, gross profit and operating profit by reportable segment
Operating Profit
Revenue
2015
£’000
Gross
Profit
2015
£’000
Before
exceptional
items
2015
£’000
Exceptional
items
(Note 5)
2015
£’000
After
exceptional
items
2015
£’000
421,310
216,987
31,889
337,673
151,581
29,235
Asia Pacific
Australia and New Zealand
95,835
30,077
4,696
Asia
95,468
79,033
18,020
Total – Asia Pacific
191,303
109,110
22,716
Americas
Operating profit
Financial income
114,659
78,427
6,231
–
–
–
–
90,071
626
Revenue/gross profit/profit before tax
1,064,945
556,105
90,697
Operating Profit
Before
exceptional
items
2014
£’000
Exceptional
items
(Note 5)
2014
£’000
After
exceptional
items
2014
£’000
Gross
Profit
2014
£’000
Revenue
2014
£’000
419,667
212,042
30,120
1,631
31,751
325,708
138,361
24,066
Asia Pacific
Australia and New Zealand
110,025
34,400
4,675
Asia
83,454
71,139
15,301
Total – Asia Pacific
193,479
105,539
19,976
Americas
Operating profit
Financial (expense)/income
108,033
76,875
4,299
–
–
–
–
78,461
1,631
80,092
(29)
298
269
–
–
–
–
–
–
–
–
–
31,889
29,235
4,696
18,020
22,716
6,231
90,071
626
90,697
–
–
–
–
–
24,066
4,675
15,301
19,976
4,299
2015
EMEA
United Kingdom
2014
EMEA
United Kingdom
Revenue/gross profit/profit before tax
1,046,887
532,817
78,432
1,929
80,361
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.
102
PB
ANNUAL REPORT 2015 (b) Segment assets, liabilities, capital expenditure and non-current assets and capital expenditure by reportable segment
EMEA
United Kingdom
Asia Pacific
Australia and New Zealand
Asia
Total – Asia Pacific
Americas
Segment assets/liabilities
Income tax
EMEA
United Kingdom
Asia Pacific
Australia and New Zealand
Asia
Total – Asia Pacific
Americas
Capital expenditure
EMEA
United Kingdom
Asia Pacific
Australia and New Zealand
Asia
Total – Asia Pacific
Americas
(c) Revenue and gross profit by discipline
Finance and Accounting
Legal, Technology, HR, Secretarial and other
Total Assets
Total Liabilities
2015
£’000
143,621
128,699
21,953
48,213
70,166
2014
£’000
135,374
118,042
27,265
43,457
70,722
2015
£’000
74,687
40,499
8,008
12,616
20,624
2014
£’000
68,947
40,608
9,079
11,301
20,380
41,689
42,756
12,682
13,305
384,175
366,894
148,492
143,240
8,814
7,479
22,738
14,910
392,989
374,373
171,230
158,150
Property, Plant and
Equipment
2015
£’000
6,479
7,204
1,255
1,364
2,619
2014
£’000
6,142
7,175
1,643
1,643
3,286
5,109
21,411
5,205
21,808
Property, Plant and
Equipment
2015
£’000
2014
£’000
3,252
2,866
133
628
761
2,282
9,161
1,641
2,778
325
441
766
1,046
6,231
Intangible Assets
2015
£’000
2,449
2014
£’000
457
33,187
37,134
73
43
116
514
134
60
194
761
36,266
38,546
Intangible Assets
2015
£’000
709
5,149
8
7
15
142
6,015
2014
£’000
237
5,592
92
23
115
524
6,468
Revenue
2015
£’000
Gross Profit
2014
£’000
2015
£’000
2014
£’000
468,364
465,250
220,082
211,366
253,456
240,105
119,842
107,210
Engineering, Property & Construction, Procurement & Supply Chain
190,547
193,922
106,321
107,729
Marketing, Sales and Retail
152,578
147,610
109,860
106,512
1,064,945
1,046,887
556,105
532,817
(d) Revenue and gross profit generated from permanent and temporary placements
Permanent
Temporary
103
Revenue
2015
£’000
2014
£’000
Gross Profit
2015
£’000
2014
£’000
431,292
417,401
424,015
406,414
633,653
629,486
132,090
126,403
1,064,945
1,046,887
556,105
532,817
PB
ANNUAL REPORT 2015 3. Profit for the year
Profit for the year is stated after charging:
Employment costs (Note 4)
Net exchange losses
Depreciation of property, plant and equipment – owned (Note 11)
Amortisation of intangibles (Note 12)
Impairment of trade receivables (Note 21)
Loss on sale of property, plant and equipment and computer software
Operating lease rentals
– Land and buildings
– Plant and machinery
Fees payable to the Company’s auditor:
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 for the Company and its subsidiaries
– Tax advice for the Company, its subsidiaries and individual employees
in relation to moving employees internationally
– Tax advisory services
Total non-audit fees
Total fees
4. Employee information
2015
£’000
2014
£’000
352,753
310,122
827
7,366
8,051
7,167
690
150
7,922
9,974
7,230
294
24,926
26,211
2,895
4,721
194
410
87
691
78
194
29
301
992
156
424
120
700
172
143
18
333
1,033
The average number of employees (including Executive Directors) during the year and total number of employees (including Executive
Directors) at 31 December 2015 were as follows:
Management
Client services
Administration
Employment costs (including Directors’ emoluments) comprised:
Wages and salaries
Social security costs
Pension costs – defined contribution plans
Share-based payments and deferred cash plan
2015
Average
No.
2014
Average
No.
At 31 Dec
2015
No.
At 31 Dec
2014
No.
310
4,071
1,333
5,714
311
3,782
1,321
5,414
301
4,183
1,351
5,835
318
3,960
1,300
5,578
2015
£’000
2014
£’000
295,767
256,187
34,984
11,801
10,201
32,498
14,000
7,437
352,753
310,122
No staff are employed by the Parent Company (2014: none) hence no remuneration has been disclosed for the Company. Remuneration
for Directors for their services on behalf of the Parent Company are included in the Director’s Remuneration Report on pages 69 to 76.
104
PB
ANNUAL REPORT 2015
5. Exceptional items
French Profit Share
In October 2013, Page Personnel France (PPF) received notice from the Competent Authorities of the UK and France of their decision
regarding a transfer pricing case that had arisen as a result of a tax audit in March 2008. The decision, which was unexpected, increased the
profit generated by PPF, which, as per the mandatory profit share or “participation aux résultats de l’entreprise” that is particular to France,
drove a requirement to pay increased employee profit share, both to employees of PPF and also to the temporary workers placed by that
company. As a result, the Group took in 2013 an exceptional charge of £2.5m relating to prior periods, and £0.6m that was included within
operating profits from trading activities. In December 2014, PPF received notice from the French tax authorities that they would not be seeking
to make any further transfer pricing adjustments as a result of their audit of the tax years 2011 and 2012. In addition, as no assessment was
raised within the statutory timeframe, there would be no adjustment for the 2010 tax year. Accordingly, in 2014, the Group recorded £1.6m
relating to the reversal of amounts that were previously provided as an exceptional charge and a further £0.6m that was included within
operating profit. There was also a release of £0.3m of exceptional interest and £0.8m of income tax relating to this exceptional item.
There are no exceptional items in the current year.
6. Financial income/(expenses)
Financial income
Bank interest receivable
Financial expenses
Bank interest payable
Exceptional interest (Note 5)
7. Taxation on profits on ordinary activities
The charge for taxation is based on the effective annual tax rate of 27.0% on profit before tax (2014: 26.2%).
Analysis of charge in the year
UK income tax at 20.25% (2014: 21.5%) for year
Adjustments in respect of prior year
Overseas income tax
Deferred tax
Adjustment in respect of prior years
Origination and reversal of temporary differences
Recognition of previously unrecognised losses and other tax attributes
Charge of tax losses recognised
Deferred tax income
Total income tax expense in the income statement
2015
£’000
1,116
1,116
(490)
–
(490)
2015
£’000
13,462
64
14,289
27,815
(365)
(2,039)
(1,893)
971
(3,326)
24,489
Final determination of taxable impact of certain items has resulted in a prior year reclassification between current and deferred tax.
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 differences
Unrelieved overseas losses
Utilisation of losses not previously recognised
Recognition of overseas losses and other tax attributes
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
Tax recognised directly in equity
Relating to settled transactions
105
Financial Statements
2015
£’000
90,697
%
2014
£’000
80,361
18,364
20.2
17,278
1,840
568
(28)
(1,893)
5,951
(12)
(301)
24,489
2.0
0.6
–
(2.1)
6.6
–
(0.3)
27.0
91
288
(1,211)
(2,209)
6,784
(35)
44
21,030
2015
£’000
(728)
2014
£’000
488
488
(517)
298
(219)
2014
£’000
8,999
(2,097)
14,439
21,341
2,140
(709)
(2,209)
467
(311)
21,030
%
21.5
0.1
0.4
(1.5)
(2.7)
8.4
(0.1)
0.1
26.2
2014
£’000
518
PB
ANNUAL REPORT 2015 8. Current tax assets and liabilities
The current tax asset of £8.8m (2014: £7.5m), and current tax liability of £22.7m (2014: £14.9m) for the Group, and current tax asset
and liability of £nil (2014: £nil) for the Parent Company, represent the amount of income taxes recoverable and payable in respect of
current and prior periods. The Group maintains a provision in relation to disputes and uncertain tax positions, including transfer pricing,
which is included in the current tax liability. the Group has considered if there is a need to make a disclosure in relation to IAS 1 estimation
uncertainty and have concluded that as no material adjustment to the carrying value of the transfer pricing reserve at 31 December 2015 is
anticipated within the next financial year, no disclosure is required.
9. Dividends
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 December 2014 of 7.58p per Ordinary share (2013: 7.25p)
Interim dividend for the year ended 31 December 2015 of 3.60p per Ordinary share (2014: 3.42p)
Special dividend for the year ended 31 December 2015 of 16.0p per Ordinary share (2014: nil)
2015
£’000
2014
£’000
23,702
11,271
50,092
85,065
22,220
10,486
–
32,706
Amounts proposed as distributions to equity holders in the year:
Proposed final dividend for the year ended 31 December 2015 of 7.90p per Ordinary share (2014: 7.58p)
24,747
23,232
The proposed final dividend had not been approved by shareholders at 31 December 2015 and therefore has not been included as a
liability. The comparative final dividend at 31 December 2014 was also not recognised as a liability in the prior year.
The proposed final dividend of 7.90p (2014: 7.58p) per Ordinary share will be paid on 20 June 2016 to shareholders on the register at the
close of business on 20 May 2016, 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.
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)
Dilutive effect of share plans (‘000)
Diluted weighted average number of shares used for diluted earnings per share (‘000)
Basic earnings per share
Diluted earnings per share
Basic earnings per share before exceptional items
Diluted earnings per share before exceptional items
The above results relate to continuing operations.
2015
£’000
2014
£’000
66,208
–
66,208
59,331
(2,762)
56,569
number
number
311,436
308,020
2,368
2,303
313,804
310,323
pence
pence
21.3
21.1
21.3
21.1
19.3
19.1
18.4
18.2
Basic
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number
of Ordinary shares in issue during the year, excluding Ordinary shares purchased by the 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.
106
PB
ANNUAL REPORT 2015
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
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
2015
Leasehold
improve-
ments
£’000
Furniture,
fixtures and
equipment
£’000
Motor
vehicles
£’000
33,696
3,609
(3,868)
(1,336)
32,101
22,943
3,146
(3,195)
(707)
22,187
48,050
4,807
(3,833)
(1,596)
47,428
38,488
3,630
(3,838)
(1,117)
37,163
2,622
745
(951)
(147)
2,269
1,129
590
(579)
(103)
1,037
Total
£’000
84,368
9,161
(8,652)
(3,079)
81,798
62,560
7,366
(7,612)
(1,927)
60,387
9,914
10,265
1,232
21,411
2014
Leasehold
improve-
ments
£’000
Furniture,
fixtures and
equipment
£’000
Motor
vehicles
£’000
35,318
2,924
(3,784)
(762)
33,696
23,543
3,490
(3,556)
(534)
22,943
50,448
2,280
(3,170)
(1,508)
48,050
38,633
3,760
(2,735)
(1,170)
38,488
2,849
1,027
(1,162)
(92)
2,622
1,201
672
(707)
(37)
1,129
Total
£’000
88,615
6,231
(8,116)
(2,362)
84,368
63,377
7,922
(6,998)
(1,741)
62,560
10,753
9,562
1,493
21,808
107
PB
ANNUAL REPORT 2015 12. Intangible assets
2015
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
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
Computer
software,
assets under
construction
£’000
Computer
software
£’000
Subtotal
£’000
Goodwill
£’000
Trademark
£’000
Subtotal
£’000
Total
65,146
1,539
746
2,285
67,431
63,327
1,009
(384)
3,621
(811)
1,819
5,006
–
(3,621)
6,015
(384)
–
–
(811)
–
–
–
–
–
–
–
–
–
–
–
–
6,015
(384)
–
(811)
66,762
3,204
69,966
1,539
746
2,285
72,251
28,453
7,931
(359)
(592)
35,433
–
–
–
–
–
28,453
7,931
(359)
(592)
35,433
–
–
–
–
–
432
120
–
–
432
120
–
–
28,885
8,051
(359)
(592)
552
552
35,985
31,329
3,204
34,533
1,539
194
1,733
36,266
2014
Computer
software,
assets under
construction
£’000
Computer
software
£’000
Subtotal
£’000
Goodwill
£’000
Trademark
£’000
Subtotal
£’000
56,777
1,145
(39)
5,713
(269)
2,209
5,323
–
(5,713)
58,986
6,468
(39)
–
–
(269)
1,539
746
2,285
–
–
–
–
–
–
–
–
–
–
–
–
Total
61,271
6,468
(39)
–
(269)
63,327
1,819
65,146
1,539
746
2,285
67,431
18,860
9,856
(39)
(224)
28,453
–
–
–
–
–
18,860
9,856
(39)
(224)
28,453
–
–
–
–
–
314
118
–
–
314
118
–
–
19,174
9,974
(39)
(224)
432
432
28,885
34,874
1,819
36,693
1,539
314
1,853
38,546
108
PB
ANNUAL REPORT 2015 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
2015
£’000
1,274
214
51
1,539
2014
£’000
1,274
214
51
1,539
In assessing value in use, the estimated future cash flows are calculated by preparing cash flow forecasts derived from the most recent
financial budget, 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
8%, 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 2015 there was no impairment of goodwill.
13. Investments
Company
Cost at 1 January 2015
Transactions relating to share plans for subsidiaries’ employees
Cost at 31 December 2015
Subsidiary undertakings
£’000
502,318
3,594
505,912
The Company’s principal subsidiary undertakings at 31 December 2015, their principal activities and countries of incorporation are set
out below:
Name of undertaking
Michael Page International Argentina SA
Page Personnel Argentina SA
Page Personnel Argentina Servicios Eventuales 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
Page Personnel International Chile Limitada
Empresa de Servicios Transitorios Page Interim Chile Limitada
Michael Page (Beijing) Recruitment Co. Ltd
Michael Page (Shanghai) Recruitment Co. Ltd
Michael Page International Colombia SAS
Michael Page Partnership Limited
Michael Page Employment Services Limited
LPM (Professional Recruitment) Limited
Country of incorporation
Principal activity
Argentina
Argentina
Argentina
Australia
Austria
Belgium
Belgium
Brazil
Brazil
Canada
Chile
Chile
Chile
China
China
Colombia
England and Wales
England and Wales
England and Wales
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
Non-trading
Recruitment Consultancy
Holding company
109
PB
ANNUAL REPORT 2015 Name of undertaking
Accountancy Additions Limited
Slamway Limited
The Assessment Centre Limited
LPM (Group Services) Limited
The Page Partnership Limited
Sales Recruitment Specialists Limited
Burhill Park Limited
Michael Page International 1982 Limited
Michael Page International Investment Limited
Michael Page International Finance Limited
Page Personnel (UK) Limited
Michael Page International (France) SAS
Michael Page Financial Services SAS
Page Personnel SAS
MP Commercial EURL
MP Ignenieurs et Informatuque SARLU
Page Formation EURL
MP International – LRR EURL
MP Finance et Comptabilitie EURL
MP Services SASU
MP Nord EURL
MP Sud EURL
Michael Page Advertising SARLU
Page Consulting SARLU
Page Executive EURL
Michael Page EDP EURL
Michael Page Monaco SARL
MP Immobilier et Construction EURL
Michael Page IT Services SARLU
Talent for SARLU
Michael Page International (Deutschland) GmbH
Page Personnel Services GmbH
Page Personnel (Deutschland) GmbH
Michael Page Interim GmbH
Michael Page International (Hong Kong) Limited
Michael Page International Recruitment Pvt Ltd
PT Michael Page International Indonesia
Michael Page International (Ireland) Limited
Michael Page International Italia Srl
Page Personnel Italia SpA
Michael Page International (Japan) K.K.
Page Personnel Interim SA
Michael Page International (Malaysia) Sdn Bhd
Michael Page International Mexico
Reclutamiento Especializado, S.A. de C.V.
Michael Page International Mexico Servicios
Corporativos SA de CV
Country of incorporation
Principal activity
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
France
France
France
France
France
France
France
France
France
France
France
France
France
France
France
France
France
France
France
Germany
Germany
Germany
Germany
Hong Kong
India
Indonesia
Ireland
Italy
Italy
Japan
Luxembourg
Malaysia
Mexico
Mexico
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
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
Non-trading
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Non-trading
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
110
PB
ANNUAL REPORT 2015 Name of undertaking
Country of incorporation
Principal activity
Michael Page International (Maroc) SARL AU
Michael Page International (Nederland) BV
Page Interim BV
Michael Page International (New Zealand) Limited.
Michael Page International Peru SRL
Michael Page International (Poland) Sp.z.o.o
Michael Page International Empressa de Trabalho Temporário
e Serviços de Consultadoria Lda
Michael Page International Qatar (Branch)
Michael Page International Russia LLC
Michael Page International Pte Limited*
Michael Page International (SA) (Pty) Limited
Michael Page Africa (SA) (Pty) Limited
Michael Page International (España) SA
Michael Page Holding (España) SL
Page Personnel Seleccion SA
Michael Page AD SL
Page Group Europe SL
Page Personnel ETT SA
Michael Page International (Sweden) AB
Michael Page International (Switzerland) SA
Taiwan Michael Page International Co Ltd
Michael Page Thailand Limited
Michael Page International Recruitment (Thailand) Limited
Michael Page International NEM Istihdam Danismanligi
Limited Sirketi
Michael Page International Yonetim Servisleri Danismanligi Ltd
Morocco
Netherlands
Netherlands
New Zealand
Peru
Poland
Portugal
Qatar
Russia
Singapore
South Africa
South Africa
Spain
Spain
Spain
Spain
Spain
Spain
Sweden
Switzerland
Taiwan
Thailand
Thailand
Turkey
Turkey
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Non-trading
Recruitment Consultancy
Holding company
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Holding company
Recruitment Consultancy
Recruitment Consultancy
Recruitment Consultancy
Michael Page International (UAE) Limited
United Arab Emirates
Recruitment Consultancy
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
Michael Page Recruitment Group Limited
Michael Page International Inc*
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United States
Support services
Holding company
Recruitment Consultancy
Holding company
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.
111
PB
ANNUAL REPORT 2015 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
Other receivables
Group
2015
£’000
Company
2014
£’000
2015
£’000
2014
£’000
169,012
(5,635)
163,377
–
9,041
42,314
161,878
(5,818)
156,060
–
–
–
–
–
–
–
636,601
636,371
6,572
40,410
–
–
–
–
214,732
203,042
636,601
636,371
2,693
1,842
–
–
The fair values of trade and other receivables are not materially different to those disclosed above.
The Group’s exposure to credit and currency risks and impairment losses related to trade and other receivables is disclosed in Note 21.
All amounts due from Group undertakings are unsecured, interest-free and repayable on demand.
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
2015
£’000
2014
£’000
2015
£’000
2014
£’000
15,659
10,007
–
–
–
44,181
10,813
70,543
739
–
724,291
660,898
42,183
9,341
73,666
691
–
–
–
–
–
27
–
–
141,935
135,888
724,291
660,925
5,092
298
5,390
4,456
287
4,743
–
–
–
–
–
–
The fair values of trade and other payables are not materially different to those disclosed above.
All amounts due to Group undertakings are unsecured, interest-free and repayable on demand.
The total liability relating to other tax and social security includes a balance of £1.1m (2014: £0.8m) 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 21.
112
PB
ANNUAL REPORT 2015 16. Bank overdrafts
Bank overdrafts
Group
2015
£’000
–
2014
£’000
–
Company
2015
£’000
–
2014
£’000
–
The carrying amounts of the Group’s borrowings are denominated in Sterling.
The Group has a £10m committed overdraft facility with Deutsche Bank, as well as a £1m facility with HSBC. All other bank overdrafts and
facilities are repayable on demand.
At 31 December 2015, the Group had available £10m (2014: £10m) of undrawn committed borrowing facilities with Deutsche Bank, £1m
facility with HSBC, and £29.8m 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 21.
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 2015
Recognised in equity for the year
Recognised in profit or loss for the year
Exchange differences
At 31 December 2015
At 1 January 2014
Recognised in equity for the year
Recognised in profit or loss for the year
Exchange differences
At 31 December 2014
Share-based
payments
£’000
Tax losses
£’000
Other
£’000
(2,468)
(4,481)
(2,086)
(512)
410
–
–
(509)
–
–
(3,228)
(14)
Total
£’000
(9,035)
(512)
(3,327)
(14)
(2,570)
(4,990)
(5,328)
(12,888)
(3,078)
(3,317)
(3,091)
(9,486)
611
(1)
–
–
(1,164)
–
–
854
151
611
(311)
151
(2,468)
(4,481)
(2,086)
(9,035)
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
2015
£’000
(14,055)
1,167
(12,888)
2014
£’000
(11,644)
2,609
(9,035)
No deferred tax liability has been recognised in respect of £87.9m (2014: £88.9m) of unremitted earnings of subsidiaries because the
Group is in a position to control the timing of the reversal of the temporary difference and it is not probable that such differences will reverse
in the foreseeable future.
The movement in the deferred tax balance in the year includes the effect of further recognition of tax losses in the US of £1.1m offset
by the derecognition of losses in Taiwan and the utilisation of losses in other territories. The movement in Other comprised of temporary
differences between the recognition of income and expenditure for accounting and tax purposes. This can vary from year to year and in
2015 resulted in an increase in the deferred tax asset of £3.2m (2014: £0.9m decrease).
The realisation of the deferred tax asset is dependent on generating future taxable profits in the overseas territories in which the deferred
tax has arisen. Of the net deferred tax asset recognised, no amount relates to territories that were loss making in the current year. In
addition there are carried forward losses of £12.1m arising in overseas territories for which no deferred tax is recognised given the future
utilisation of the tax losses is uncertain; there were no other tax attributes recognised in those territories. These tax losses and other tax
attributes remain available to offset future taxable profits in the respective territories where they have arisen.
The Group has estimated the likely value of deferred tax assets in respect of trading losses carried forward and all other categories. The
Group has considered if there is a need to make a disclosure in relation to IAS 1 estimation uncertainty and have concluded that as no
material adjustment to the carrying value of the deferred tax asset at 31 December 2015 is anticipated within the next financial year, no
disclosure is required.
113
PB
ANNUAL REPORT 2015 18. Called-up share capital
Allotted, called-up and fully paid ordinary shares of 1p each
At 1 January
Shares issued
At 31 December
Shares issued in the year related to the Executive Share Option Scheme.
Share Option Plans
2015
2014
£’000
Number of
shares
£’000
Number of
shares
3,219
321,834,542
3,208
320,826,167
39
4,085,163
11
1,008,375
3,258
325,919,705
3,219
321,834,542
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 below.
At 31 December 2015 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. The Group has no legal or constructive
obligation to repurchase or settle the options in cash.
Year of grant
Balance at 1
January 2015
Granted
in year
Exercised
in year
Lapsed
in year
No. of
options
outstanding at
31 December
2015
Base EPS/
OP range†
Exercise price
per share
Exercise period
2005 (Note 1)*
51,399
2006 (Note 1)*
225,000
2009 (Note 2)
1,663,989
2010 (Note 1)*
6,406,540
2011 (Note 2)
3,090,820
2012 (Note 2)
3,806,261
2013 (Note 2)
4,057,567
2014 (Note 2)
4,800,833
–
–
–
–
–
–
–
–
2015 (Note 2)
–
1,860,000
(51,399)
(197,000)
–
–
–
7.5
190.75p-191.5p March 2008 – March 2015
28,000
15.5
309.9p March 2009 – March 2016
(536,441)
(84,183)
1,043,365 OP Range
187.5p-211.84p March 2012 – March 2019
(3,780,516)
–
2,626,024
6.6
381.5p-383.0p March 2013 – March 2020
–
(462,251)
2,628,569 OP Range
491.0p-492.9p March 2014 – March 2021
(1,402,270)
(239,673)
2,164,318 OP Range
477.0p March 2015 – March 2022
–
–
–
(490,094)
3,567,473 OP Range
442.0p March 2016 – March 2023
(652,227)
4,148,606 OP Range
484.0p March 2017 – March 2024
(150,000)
1,710,000 OP Range
526.0p March 2018 – March 2025
Total 2015
24,102,409
1,860,000
(5,967,626)
(2,078,428)
17,916,355
Weighted
average
exercise price
2015 (£)
4.27
5.26
3.83
4.66
4.48
Total 2014
21,783,855
4,932,500
(1,244,875)
(1,369,071)
24,102,409
Weighted
average
exercise price
2014 (£)
4.09
4.84
3.16
4.47
4.27
* These options have fully vested
† The Operating Profit ranges for each award are fully disclosed in Note 2 of this Note. 5,438,436 options were exercisable at the end of 2015 at a weighted average exercise price of
£3.83 (2014: £3.53). The weighted average share price at the date of exercise was £5.16.
Note 1
Executive Share Option Scheme
Using the ESOS, awards of share options can be made to key management personnel and senior employees to receive shares in the
Company.
No awards have been made under the ESOS since 2010 and this award has fully vested.
For grants under the ESOS, 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 above.
114
PB
ANNUAL REPORT 2015
Note 2
Share Option Scheme
Executive Directors of the Company are not eligible to participate in this plan. Any exercises of awards made under this plan are settled by
shares held in the Employee Benefit Trust.
This new scheme was created in 2009 to provide an effective plan under which to grant awards from 2009 onwards. It was the Board’s
view that grants made under the existing ESOS, 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 was tested, initially, three years after the date of grant
and since then has been and will be tested annually until either the entire grant vests, or ten years from the date of grant 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% has been retested in
each subsequent year. No additional options vested other than in 2015, when an additional 4% vested.
Further grants under the SOS plan were made in 2011, 2012, 2013 and 2014. 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. None of this award has yet vested.
For the 2012, 2013, 2014 and 2015 grants, 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. Operating Profit of £90.1m has so
far been achieved.
Other share-based payment plans
The Company also operates a Management Incentive Plan for the Executive Directors and senior employees and a Long-Term Incentive
Plan for the Senior Executives. Details of these plans are disclosed in the Directors’ Remuneration Report and are settled by cash or 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. These plans are described as follows:
As at 1 Jan 2015
Granted
Lapsed
Exercised
Outstanding as at 31 Dec 2015
Weighted average fair value at the date of measurement
LTIP
306,152
295,604
–
(8,631)
593,125
–
MIP
2,410,970
609,917
(278,016)
(734,551)
2,008,320
–
Share option valuation and measurement
In 2015, options were granted on 20 March with the estimated fair value of the options granted on that day of £0.84. In 2014, options were
granted on 11 March. The estimated fair values of the options granted on that date was £0.87.
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.
The options outstanding at 31 December 2015 have an exercise price in the range of 187.5p to 526.0p and a weighted average
contractual life of 6.5 years. The fair values of options and other share awards granted during the year were calculated using the Black-
Scholes option pricing model. The inputs into the model were as follows:
Share Option Plans
Long-Term Incentive
Plan
Management Incentive Plan
Share price (£)
Average exercise price (£)
Weighted average fair value (£)
Expected volatility
Expected life
Risk free rate
2015
2014
2015
5.26
5.26
0.84
4.84
4.84
0.87
5.26
Nil
5.26
23%
24%
23%
2014
4.84
Nil
4.84
24%
5 years
5 years
3 years
3 years
0.71%
1.40%
0.71%
0.83%
Expected dividend yield
2.09%
2.17%
Nil
Nil
2015
5.26
Nil
4.94-5.26
23%
3 years
0.71%
2.09%
2014
4.84
Nil
4.54
24%
3 years
0.93%
2.17%
115
PB
ANNUAL REPORT 2015 Expected volatility was determined by reference to historical volatility of the Company’s share price in the last 12 months. 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 £7.6m, including social security, (2014: £5.8m) related to share-based payment transactions
during the year.
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 capital redemption reserve relates to the cancellation of the Company’s own shares.
Reserve for shares held in the Employee Benefit Trust
At 31 December 2015, the reserve for shares held in the employee benefit trust consisted of 14,776,231 Ordinary shares (2014:
17,458,124 Ordinary shares) held for the purpose of satisfying awards made under the Management Incentive Share Plan, the Long Term
Incentive Plan and the SOS, representing 4.5% of the called-up share capital with a market value of £71.6m (2014: £71.9m).
There are 12,663,133 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 and cash equivalents
Cash at bank and in hand
Short-term deposits
Cash and cash equivalents
Cash and cash equivalents in the statement of cash flows
Net funds
2015
£’000
76,957
18,061
95,018
95,018
95,018
Group
2014
£’000
84,941
5,071
90,012
90,012
90,012
Company
2014
£’000
2015
£’000
–
–
–
–
–
–
–
–
–
–
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.
21. 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 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 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.
116
PB
ANNUAL REPORT 2015 (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 2015 amounted to £163.4m (2014: £156.1m).
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. Trade receivables 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 £67.4m (2014: £64.3m) 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 days sales of these receivables at the year end is 46 days in excess of the initial credit period (2014: 45
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
2015
£’000
Provision
2015
£’000
Net trade
receivables
2015
£’000
Gross trade
receivables
2014
£’000
Provision
2014
£’000
Net trade
receivables
2014
£’000
96,207
43,928
22,760
6,117
169,012
258
118
60
5,199
5,635
95,949
43,810
22,700
918
92,239
42,816
21,024
5,799
163,377
161,878
511
237
116
4,954
5,818
91,728
42,579
20,908
845
156,060
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.
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
2015
£’000
5,818
7,167
(1,405)
(2,579)
(3,366)
5,635
2014
£’000
6,658
7,230
(1,249)
(2,550)
(4,271)
5,818
Most of the allowance for doubtful debts represents a provision for debts which the Group estimate may be irrecoverable, as well as
individually impaired trade receivables with a balance of £2.9m (2014: £3.2m) which have been placed in litigation.
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.
117
PB
ANNUAL REPORT 2015 Exposure to credit risk
The maximum exposure to credit risk for net trade receivables at the reporting date by geographic region was:
EMEA
United Kingdom
Asia Pacific
Americas
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
2015
£’000
89,288
40,147
20,545
13,397
2014
£’000
79,964
37,323
23,287
15,486
163,377
156,060
Carrying amount
2015
£’000
1,262
16,502
13,138
6,845
37,747
2014
£’000
1,652
13,885
12,296
5,656
33,489
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. The Group also operates a multi-currency notional cash pool to facilitate interest
and balance compensation of cash and bank overdrafts.
The following are the contractual maturities of financial liabilities:
2015
Trade payables
Accruals and other payables
2014
Trade payables
Accruals and other payables
Less than
1 month
£’000
9,302
42,032
Less than
1 month
£’000
6,679
40,682
1-3 months
£’000
3-12 months
£’000
5,122
21,603
1,191
17,721
More than
12 months
£’000
44
–
1-3 months
£’000
3-12 months
£’000
3,328
20,969
–
21,356
More than 12
months
£’000
–
–
118
PB
ANNUAL REPORT 2015 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 2015 and 31 December 2014.
(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 below. 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.
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 2015 relate to cash and bank overdrafts. The average interest rate
paid on bank overdrafts was 2.23% (2014: 2.22%).
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, Chinese Renminbi Swiss Franc, Singapore Dollar and Australian Dollar.
The Group does not have material transactional currency exposures. The Group is exposed to foreign currency translation differences in
accounting for its overseas operations. The Group policy is not to hedge translation exposure.
The Group has entered into hedges to cover its investments in foreign entities in the US and Canada designating them as net investment
hedges. The portion of gains or losses on the hedging instruments determined to be an effective hedge are transferred to other
comprehensive income. The pre-tax loss on effective hedging instruments deferred within other comprehensive income as at 31 December
2015 is £0.2m.
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 rate derivatives to manage the currency 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.
Fair values are not adjusted for credit risk, as required by IFRS 13, because credit impact is not material given the low fair value levels
Derivative Financial Instruments
Derivative Assets
Derivative Liabilities
Net Derivative Liabilities
Sensitivity analysis – currency risk
Derivatives at fair value
2015
£m
0.3
(0.8)
(0.5)
2014
£m
0.3
(0.5)
(0.2)
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 below. 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 2014.
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.
119
PB
ANNUAL REPORT 2015 Euro
Australian Dollar
Swiss Franc
Chinese Renminbi
Singapore Dollar
Other
Euro
Australian Dollar
Swiss Franc
Hong Kong Dollar
Brazilian Real
United States Dollar
Chinese Renminbi
Japanese Yen
Singapore Dollar
Other
2015 equity
£’000
(5,287)
(1,232)
(1,355)
(964)
(1,044)
(3,099)
2015 PBT
£’000
(1,271)
(24)
(96)
(228)
(52)
(516)
2014 equity
£’000
2014 PBT
£’000
(4,259)
(1,447)
(614)
(1,527)
(767)
636
(849)
(590)
(864)
(576)
(246)
(183)
71
(184)
(148)
1,180
(40)
(349)
29
542
A 10% 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.
22. Commitments
Operating lease commitments
At 31 December 2015 the Group was committed to make the following payments in respect of non-cancellable operating leases:
Within one year
Within two to five years
After five years
Total
Land and buildings
2015
£’000
23,473
57,584
21,766
102,823
2014
£’000
24,780
49,221
15,227
89,228
Other
2015
£’000
3,399
3,602
–
7,001
2014
£’000
3,002
2,735
–
5,737
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 £2.6m of contractual capital commitments as at 31 December 2015 relating to property, plant and equipment (2014: £nil).
The Group had contractual capital commitments of £1.1m as at 31 December 2015 relating to computer software (2014: £nil).
23. Contingent liabilities
Guarantees
The Company has provided guarantees to other Group undertakings amounting to £0.3m (2014: £0.3m) 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 2015 amounted to £7.5m (2014: £4.7m).
24. Events after the balance sheet date
Between 31 December 2015 and 9 March 2016, 28k options were exercised, leading to an increase in share capital of £280 and an increase in
share premium of £0.1m.
120
PB
ANNUAL REPORT 2015 25. Related party transactions
Identity of related parties
The Company has a related party relationship with its Directors and members of the Executive Committee, and subsidiaries (Note 13).
Transactions with key management personnel
Key management personnel are deemed to be the Directors and members of the Executive Committee as detailed in the biographies on
pages 51 to 55. The remuneration of Directors and members of the Executive Committee is determined by the Remuneration Committee
having regard to the performance of individuals and market trends. The transactions for the year were:
Related party transactions
Wages and salaries
Social security costs
Pension costs – defined contribution plans
Share-based payments and deferred cash plan
Company
2015
£’000
5,420
1,000
189
1,882
8,491
2014
£’000
5,880
994
106
1,209
8,189
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
2015
£’000
3,630
2014
£’000
8,345
Amounts owed
by related parties
Amounts owed
to related parties
2015
£’000
2014
£’000
2015
£’000
2014
£’000
636,601
636,371
724,291
660,898
Transactions
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.
2011
£’000
2012
£’000
2013
£’000
2014
£’000
2015
£’000
1,019,087
989,882
1,005,502
1,046,887
1,064,945
553,781
526,869
513,881
532,817
556,105
86,035
86,035
86,147
56,857
15.5%
65,121
57,287*
57,003*
36,197*
12.4%
68,178
65,725*
64,057*
42,604*
13.3%
78,461
80,092*
80,361*
59,331*
14.7%
90,071
90,071
90,697
66,208
16.2%
18.7
11.9*
13.8*
19.3*
21.3
121
PB
ANNUAL REPORT 2015 Shareholder information and advisers
Annual General Meeting
To be held on 9 June 2016 at 9.30am at Page House, 1 Dashwood Lang Road, The Bourne Business Park, Addlestone, Surrey, KT15
2QW. Every shareholder is entitled to attend and vote at the Meeting.
Final dividend for the year ended 31 December 2015
To be paid (if approved) on 20 June 2016 to shareholders on the register of members on 20 May 2016.
Company Secretary
Elaine Marriner
Company number
3310225
Registered office, domicile and legal form
The Company is a limited liability company incorporated and domiciled within the United Kingdom.
The address of its registered office is:
Page House,
1 Dashwood Lang Road,
The Bourne Business Park,
Addlestone,
Surrey, KT15 2QW.
Auditor
Ernst & Young LLP
1 More London Place
London SE1 2AF
Solicitors
Herbert Smith LLP
Exchange House
Primrose Street
London EC2A 2HS
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
Joint corporate brokers
Citigroup
33 Canada Square
Canary Wharf
London E14 5LB
Deutsche Bank
Winchester House
1 Great Winchester Street
London EC2N 2DB
Registrars
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Financial PR
FTI Consultancy
200 Aldersgate
Aldersgate Street
London EC1A 4HD
122
PB
ANNUAL REPORT 2015 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;
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.
(b) sub-divide its shares, or any of them, into shares of a smaller
amount than its existing shares; and
Variation of rights
(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 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
(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.
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ANNUAL REPORT 2015 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
(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
(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 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
(f)
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
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
(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
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ANNUAL REPORT 2015 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
(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
(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
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
(ii)
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 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:
(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
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
(f)
(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
(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.
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
(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
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
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ANNUAL REPORT 2015
Michael Page International plc
(the “Company”) (Registered in England
and Wales No. 03310225)
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR
IMMEDIATE ATTENTION. If you are in any doubt as to the
action you should take, you are recommended to seek your
own independent financial advice from a stockbroker, bank
manager, solicitor, accountant, or other financial adviser
authorised under the Financial Services and Markets
Act 2000.
If you have sold or otherwise transferred all of your shares in
the Company, please send this document, together with the
accompanying documents (but not the personalised Form of
Proxy), as soon as possible to the purchaser or transferee, or to
the stockbroker, bank or other agent through whom the sale or
transfer was effected, for delivery to the purchaser or transferee.
Annual General Meeting
Notice of Meeting
NOTICE is hereby given that the Annual General Meeting of the
Company will be held at Page House, 1 Dashwood Lang Road,
The Bourne Business Park, Addlestone, Weybridge, Surrey
KT15 2QW on Thursday 9 June 2016 at 9.30am for the following
purposes:
Ordinary Business
As ordinary business to consider, and if thought fit, pass
Resolutions 1 to 12 inclusive, which will be proposed as Ordinary
Resolutions:
1.
2.
3.
4.
5.
6.
7.
8.
9.
To receive and consider the Directors’ and Auditor’s
Reports and the Statement of Accounts for the year ended
31 December 2015.
To approve the Directors’ Remuneration Report, other than
the Directors’ Remuneration Policy, in the form set out in the
Company’s Annual Report and Accounts, for the year ended
31 December 2015. (Note 1)
To declare a final dividend on the ordinary share capital of the
Company for the year ended 31 December 2015 of 7.9p per
share.
To re-elect David Lowden as a Director of the Company.
(Note 2)
To re-elect Simon Boddie as a Director of the Company.
(Note 2)
To re-elect Danuta Gray as a Director of the Company.
(Note 2)
To re-elect Steve Ingham as a Director of the Company.
(Note 2)
To re-elect Baroness Ruby McGregor-Smith CBE as a
Director of the Company. (Note 2)
To re-elect Kelvin Stagg as a Director of the Company.
(Note 2)
10. To elect Patrick De Smedt as a Director of the Company.
(Note 2)
11. To reappoint Ernst & Young LLP as Auditor of the Company
to hold office until the conclusion of the next Annual General
Meeting at which accounts are laid before the Company.
12. To authorise the Audit Committee to determine the
remuneration of the Auditor.
Special Business
To consider and, if thought fit, pass the following Resolutions, of
which 13 and 14 will be proposed as Ordinary Resolutions and
15,16, 17 and 18 will be proposed as Special Resolutions.
13. Ordinary Resolution – Authority to Allot Shares (Note 3)
THAT the Directors be and they are hereby generally and
unconditionally authorised in accordance with section 551 of
the Companies Act 2006 (the ‘Act’) 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
£1,086,493.18, provided that this authority, shall expire at the
conclusion of the next Annual General Meeting of the Company
or, if earlier, on 9 September 2017, 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.
14. Ordinary Resolution – Donations to Political Organisations and
Political Expenditure (Note 4)
THAT in accordance with sections 366 and 367 of the Companies
Act 2006 (the ‘Act’) the Company, and all companies that are
subsidiaries of the Company at the date on which this Resolution
14 is passed or during the period when this Resolution 14 has
effect, be generally and unconditionally authorised to:
(a) make political donations to political parties (or independent
election candidates) as defined in the Act, not exceeding
£25,000 in total;
(b) make political donations to political organisations other than
political parties, as defined in the Act, not exceeding £25,000
in total; and
(c) incur political expenditure, as defined in the Act, not
exceeding £25,000 in total;
during the period commencing on the date of passing this
Resolution 14 and ending on 9 September 2017 or at the
close of business of the next Annual General Meeting of
the Company (whichever is the earlier) 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 14 shall not exceed
£75,000.
15. Special Resolution – Disapplication of Pre-emption Rights
(Note 5)
THAT the Directors be and they are hereby empowered pursuant
to sections 570 and 573 of the Companies Act 2006 (the ‘Act’)
to allot equity securities (within the meaning of section 560 of
the Act) for cash either pursuant to the authority conferred by
Resolution 13 above or by way of a sale of treasury shares as
if section 561(1) of the Act did not apply to any such allotment
provided that this power shall be limited to:
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ANNUAL REPORT 2015
(a) 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
(b) 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 £162,973.97,
and shall expire upon the expiry of the general authority
conferred by Resolution 13 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.
16. Special Resolution – Power to Buy Back Shares in the Market
(Note 6)
THAT the Company be generally and unconditionally authorised
to make market purchases (within the meaning of section 693(4)
of the Companies Act 2006 (the ‘Act’)) 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:
(a) the maximum number of ordinary shares hereby authorised
to be acquired is 32,594,795 representing 10% of the issued
ordinary share capital of the Company as at 9 April 2016;
(b) the minimum price which may be paid for each ordinary share
is 1p;
(c) 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;
(d) the authority hereby conferred shall expire at the conclusion
of the next Annual General Meeting or 9 September 2017
whichever is earlier unless previously renewed, varied or
revoked by the Company in general meeting; and
(e) 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. Special Resolution - Change of Company Name (Note 7)
THAT the name of the Company be and it is hereby changed to
PageGroup plc.
18. Special Resolution – Notice of General Meetings (Note 8)
THAT a general meeting, other than an annual general meeting,
may be called on not less than 14 business days’ notice.
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
1,353,714 shares representing 0.41% of the existing issued share
capital of the Company.
By order of the Board
Elaine Marriner
Company Secretary – Michael Page International plc
Page House,
1 Dashwood Lang Road, The Bourne Business Park,
Addlestone,
Weybridge,
Surrey KT15 2QW
Registered in England No. 03310225
9 April 2016
Notes
1.
Resolution 2 – Approval of the Directors’ Remuneration
Report
New requirements were introduced in 2014 in relation to
the content of the Directors’ Remuneration Report and the
approval of the Report, following changes made to the Act.
In accordance with these new provisions, the Directors’
Remuneration Report in the Annual Report and Accounts
contains:-
(a) a statement by Danuta Gray, Remuneration Committee
Chairman;
(b) the Annual Report on Remuneration, which sets out
payments made in or relating to the financial year ending
2015; and
(c) the Directors’ Remuneration Policy Table (the ‘Table’) in
relation to future payments to the Directors and former
directors, which was approved by shareholders at the
Annual General Meeting held in June 2014. The Table
has been included in the Directors’ Remuneration Report
in accordance with good practice.
The statement by the Remuneration Committee
Chairman and the Annual Report on Remuneration is
put to an annual advisory shareholder vote by Ordinary
Resolution. The Remuneration Policy part of the Report,
which sets out the Company’s forward looking policy
on directors’ remuneration (including the approach
to exit payments to directors), is subject to a binding
shareholder vote by Ordinary Resolution at least every
three years. It will not, therefore, be put to a shareholder
vote at the Meeting.
The Directors’ Remuneration Report is set out in full
in the Annual Report and Accounts on pages 67 to
79. Resolution 2 is the Ordinary Resolution to approve
the Directors’ Remuneration Report. Resolution 2 is
an advisory resolution and does not affect the future
remuneration paid to any director.
2. Resolutions 4 to 10 – Election/Re-election of Directors
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 Patrick De Smedt, who
has been appointed a Director since the last Annual
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ANNUAL REPORT 2015
General Meeting, election by the shareholders at this year’s
Meeting. Biographical information on each of the Directors
is contained on pages 51 to 54 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.
3. Resolution 13 – Directors’ Authority to Allot Shares
If passed, Resolution 13 will give the Directors authority to
allot ordinary shares in the capital of the Company up to a
maximum nominal amount of £1,086,493.18 representing
approximately one-third of the Company’s issued ordinary
share capital as at 9 April 2016 (the latest practicable
date before publication of this Notice). This authority will
lapse 15 months from the passing of the Resolution or
at the next Annual General Meeting, whichever shall first
occur. Other than the allotment of shares arising from the
vesting of shares or the exercise of options in respect of the
Company’s share and share option schemes, the Directors
have no present intention of allotting new shares. As at the
date of this Notice the Company does not hold any ordinary
shares in the capital of the Company in treasury.
4. Resolution 14 – Donations to Political Organisations and
Political Expenditure
For the purpose of this Resolution, ‘political donations’,
‘political organisations’ and ‘political expenditure’ have the
meanings given to them in sections 363 to 365 of the 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 Act 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 these
terms. 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
14 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 Act, Resolution 14 also covers
any of these activities by the Company’s subsidiaries.
5. 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 13 for cash without complying with
the pre-emption rights in the Act in certain circumstances.
This authority will permit the Directors to allot:
(a) shares up to a nominal amount of £1,086,493.18,
(representing approximately 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
(b) shares up to a maximum nominal value of £162,973.97
representing approximately 5% of the issued ordinary
share capital of the Company as at 9 April 2016 (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.
6. Resolution 16 – Power to Buy Back Shares in the Market
Resolution 16 gives the Company authority to buy back
its own ordinary shares in the market as permitted by the
Act. The authority limits the number of shares that could
be purchased to a maximum of 32,594,795 (representing
10% of the Company’s issued ordinary share capital as at
9 April 2016 the latest practicable date prior to publication
of this Notice) and sets minimum and maximum prices.
This authority will expire 15 months from the passing of the
Resolution or at the next Annual General Meeting, whichever
shall first occur.
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 9 April 2016 (the latest practicable date prior to the
publication of this Notice), there were 2,626,024 options
to subscribe for shares in the capital of the Company
representing 0.80% of the Company’s issued share capital.
If this authority to purchase the Company’s ordinary shares
and the existing authority to purchase taken at last year’s
Annual General Meeting (which expires at the end of this
year’s Meeting) were to be exercised in full, these options
would represent 1% of the Company’s issued share capital.
Resolution 17 – Change of Company Name
This Resolution seeks to change the name of the Company
from its current name to PageGroup plc. The Company
underwent a rebranding exercise in 2013, but did not, at
that time, change its name. The Directors now wish the
Company to use PageGroup plc as its company name.
7.
8. Resolution 18 – Notice of General Meetings
This Resolution seeks to renew the authority granted at
the 2015 Annual General Meeting to allow the Company
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to call general meetings, other than an annual general
meeting, on 14 business days’ notice. The minimum notice
period for general meetings of listed companies is 21 days,
but companies may reduce this period to 14 business days
(other than for annual general meetings) provided that two
conditions are met. The first condition is that a company offers
a facility for shareholders to vote by electronic means. This
condition is met if a 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 clear days to 14 business days. If approved,
the Resolution will allow the Company to retain maximum
flexibility to seek shareholder approval for any future change
or transaction that may require such approval. This authority
will be effective until the next Annual General Meeting, when
it is intended that a similar resolution will be proposed. 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 into account the circumstances, including whether the
business of the meeting is time sensitive.
10.
9. To be entitled to attend and vote, whether in person or
by proxy, at the Annual General Meeting (the ‘Meeting’),
members must be registered in the Register of Members of
the Company at 6.00 pm on Tuesday 7 June 2016 (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 of Members after this time shall be disregarded
in determining the rights of persons to attend or vote (and the
number of votes they may cast) at the Meeting or adjourned
meeting. A member entitled to attend and vote at the Meeting
may appoint another person(s) (who need not be a member
of the Company) to exercise all or any of his rights to attend,
speak and vote at the Meeting. A member can appoint more
than one proxy in relation to the Meeting, provided that each
proxy is appointed to exercise the rights attaching to different
shares held by him. 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 Form of Proxy are set out in the notes to the
Form of Proxy.
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 Form of Proxy which may be used to make this appointment
and give proxy instructions accompanies this Notice. If you
do not have a Form of Proxy and believe that you should have
one, please contact Capita Asset Services on 0871 664 0300
or + 44 (0) 208 639 3399 (calls cost 12p per minute plus your
phone company’s access charges. Calls from outside the
United Kingdom will be charged at the applicable international
rate). Lines are open Monday to Friday, 9.00am to 5.30pm,
excluding public holidays in England and Wales. If you require
additional copies of the Form of Proxy you may photocopy the
Form of 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:
(a) in hard copy form by post, by courier or by hand to the
Company’s Registrar, at, PXS1, 34 Beckenham Road,
Beckenham BR3 4ZF;
12.
11.
(b) in the case of CREST members, by utilising the CREST
electronic proxy appointment service in accordance with
the procedures set out in Note 13 below;
and in each case must be received by the Company not less
than 48 hours before the time of the Meeting.
12.
13.
14.
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
cannot 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 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.
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15. A member of the Company which is a corporation may
authorise a person or persons to act as its representative(s)
at the Meeting. In accordance with the provisions of the
Act, 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.
16. As at 9 April 2016 (being the latest practicable date prior to
the publication of this Notice) the Company’s issued share
capital consisted of 325,947,955 ordinary shares. No shares
are held in treasury. Therefore the total voting rights in the
Company are 325,947,955.
17. The contents of this Notice, 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.
18. Members satisfying the thresholds in section 527 of the
Act 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 its expenses. Any statement placed on the
website must also be sent to the Company’s Auditor no later
than the time it makes the statement that the Company has
been required to publish on its website.
19. The Company must cause to be answered at the Meeting
20.
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 contract of service for each of Mr S Ingham and
Mr K Stagg and the letters of appointment for the Chairman
and each of the Non-Executive Directors of the Company are
available for inspection on the day of the Meeting, at the place
of the Meeting, from at least 30 minutes prior to the Meeting
until its conclusion. The same documents are otherwise
available for inspection at the Registered Office Address of
the Company during normal business hours Monday to Friday
(Bank Holidays excepted).
21. You may not use any electronic address in this Notice to
communicate with the Company for any purpose other than
those expressly stated.
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Part of
www.page.com
PageGroup is the trading name of Michael Page International plc