ANNUAL REPORT AND ACCOUNTS 2017
Contents
Strategic Report
Chairman’s Introduction
Overview
Business Model
Strategic Review
South East Asia and Greater China
KPIs
Q&A with Steve Ingham, CEO
Corporate Social Responsibility
Regional Perspectives
Risk Management
Principal Risks and Uncertainties
Review of the Year
Corporate Governance
Chairman’s Introduction to Corporate Governance
Our Board of Directors
The Executive Board
Corporate Governance Report
Nomination Committee Report
Audit Committee Report
Directors’ Remuneration Report – Annual Statement
Directors’ Remuneration Report
Directors’ Report
Directors’ Statements of Responsibility
Financial Statements
Independent Auditor’s Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated and Parent Company Balance Sheets
Consolidated Statement of Changes in Equity
Statement of Changes in Equity – Parent Company
Consolidated and Parent Company Cash Flow Statements
Notes to the Financial Statements
Additional Information
Shareholder information and advisers
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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 139
offices across 36 countries.
Our vision is to increase the scale
and diversification of PageGroup by
organically growing existing and
new teams, offices, disciplines
and markets.
Highlights
Revenue
£1,371.5m
2016: £1,196.1m
+9.8%*
Gross Profit
£711.6m
Operating Profit
£118.3m
2016: £621.0m
+9.8%*
2016: £101.0m
+11.3%*
Basic Earnings Per Share
26.5p
2016: 23.1p
+14.7%
* In constant currency at prior year rates
Business model
PageGroup’s business model has proved itself both through economic cycles and as the
business has expanded into a global enterprise. At its core is a focus on organic growth.
Career
development
structure
Agile and
responsive
Global
management
mobility
Organic
Growth
Team
profit-led
compensation
Experienced
management pool
Productivity-led
expansion
Our strategy
We have established three categories into which we have grouped each of our
geographical markets based on criteria including the size of the opportunity and the
potential for future growth.
Large,
High
Potential
Large,
Proven
Small
and Medium,
High Margin
Typically under-
developed markets,
but where we have
a successful track
record and confidence
in our ability to
scale our operations
substantially.
These are large
markets where we
are already proven
with a strong
track record and a
significant presence.
Markets which are, or
could be, significant
profit contributors with
attractive conversion
margins, but each
are unlikely (or not
yet proven) to be able
to grow to more than
300 fee earners.
Ordinary and Special Dividend
25.23p
2016: 18.44p
Our competitive advantage
Our true competitive advantage is the combination of these three factors and the
balance we have achieved in the business over the past 40 years.
% Non-UK Gross Profit
80.2%
2016: 76.4%
% Non-Accounting and
Financial Services Gross Profit
63.3%
2016: 61.6%
Conversion rate*
16.6%
* Operating profit as a percentage of gross profit
2016: 16.3%
Brand
Scale
Culture
Gross profit by discipline
£711.6m
Total
Accounting and Financial Services
Legal, Technology, HR etc
Engineering, Property & Construction,
Procurement & Supply Chain
Marketing, Sales & Retail
£261.1m
£161.4m
£158.7m
£130.4m
Shift in business model
Transformation
and change
PageGroup brands
and reputation
Where we operate
36
Countries across
the world
Headcount
7,029
EMEA (47% of Group)
£332m
Gross Profit
Page 31 for EMEA Performance Review
UK (20% of Group)
£141m
Gross Profit
Page 31 for the UK Performance Review
Asia Pacific (19% of Group)
£137m
Gross Profit
Page 32 for Asia Pacific Performance Review
The Americas (14% of Group)
£101m
Gross Profit
Page 32 for The Americas Performance Review
EMEA
62 offices
2,996 employees
Asia
17 offices
1,135 employees
UK
27 offices
1,407 employees
Australasia
9 offices
398 employees
North America
10 offices
478 employees
Latin America
14 offices
615 employees
Principal risks
Shift in business model
Transformation
and change
PageGroup brands
and reputation
Strategic
People
People attraction,
development and retention
Risk
Categories
Financial
Operational
Information systems
Cyber security
Fiscal and
legal compliance
Financial management
and control
Data protection regulation
Macro-economic
exposure
Foreign exchange –
translation risk
Sustainability
Being a responsible corporate citizen is not only the
right thing to do, it is good for the long-term health
of our business.
54%
Working population is female
83%
Positive score to Employee Engagement Survey
10%
Reduction in energy derived emissions
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Chairman’s Introduction
David Lowden
Chairman
2017 Performance
It gives me great pleasure to report that
the Group delivered a strong trading
performance for the year ended
31 December 2017.
As we entered 2017, there were
challenging trading conditions in many
of our core markets, including in the UK,
Brazil, Singapore, Australia and Financial
Services in New York. Upcoming
elections across Europe were also
adding to the uncertainty.
Whilst some of these uncertainties
proved to be less severe than originally
anticipated, our continued focus on the
strategy and strong performances in key
markets, helped us to deliver well ahead
of the market expectations in existence
at the start of the year.
Market expectations continued to
increase significantly as the year
progressed as a result of this strong
performance as we delivered against
our strategy. Even with these upgrades
taking place throughout the year, our
performance still finished towards the
top end of market expectations, with
yet another year of continued profitable
growth.
The management team has continued
to make strong progress in delivering
our long-term strategy, with 2017
total shareholder return being ranked
amongst the highest in our peer
group, and higher than our FTSE
250 index comparators. Strategic
initiatives regarding people, efficiency,
risk management and diversity have
continued to be successfully rolled
out, with measurable outcomes being
seen. Full details of how this strong
performance has been measured and
reflected in the remuneration of the
management team, is shown in the
Remuneration Report on pages 63
to 76.
The Group again achieved a record
level of gross profit in 2017 of £711.6m,
an increase of 14.6% over the prior
year in reported rates and 9.8% in
constant currency. We delivered strong
performances in Continental Europe,
Asia and the Americas and were
encouraged by improvements and
a return to growth in Australia, Brazil
and Singapore as 2017 progressed.
Overall, 22 of our 36 countries
delivered their best recorded level of
gross profit. However, our growth was
1 | Strategic Report
impacted in the UK where we continued
to experience challenging market
conditions, with the macro environment
impacting some clients and senior
candidates.
We continued to invest in new markets
and disciplines and finished the year
with an increase of 786 fee earners to
5,497, another record for the Group.
During the year, new headcount was
added at a ratio of 85 fee earners for
every 15 operational support staff as
we continued to move towards our
target ratio of 82:18. At the same time
we continued to deliver efficiencies in
our back office activities and finished
the year with a fee earner to operational
support staff ratio of 78:22.
Our largest region, Europe, Middle East
and Africa, which now represents just
under 50 percent of the Group, grew
gross profit 22.2% in reported rates over
the prior year and 15.0% in constant
currency, an outstanding result. In terms
of gross profit, France and Germany, the
two largest countries in the region, grew
25% and 12% percent respectively, with
The Netherlands up 14% and Spain up
16%. The UK was the only region not
to improve on the prior year but was
broadly in line, down 3.8% compared to
down 3.5% in 2016.
“
Yet another year of
continued profitable
“
growth
Both Asia Pacific and the Americas
returned to positive growth. Asia Pacific
grew 10.2% in 2017 after a decline
of 2.2% in 2016. Greater China, the
Group's third largest market after the UK
and France, grew 14%, after a decline
of 4% in 2016 and this was the main
driver for the region’s return to growth.
We grew 16.4% in the Americas in
2017 after a decline of 0.9% in 2016.
Growth in this region was driven by a
strong recovery in the US, up 21% and a
return to growth for Brazil, up 3%, after
respective declines of 3% and 21%
in 2016.
The PageGroup leadership team
also made further progress on the
Group's strategic priorities. In 2017,
we continued to invest in our five
Large High Potential Markets, namely
the US, Germany, South East Asia,
Greater China and Latin America. Gross
profit growth in this market was above
the Group average at 14.6%. These
strategic investments will continue in
2018, as well as in those businesses
where we are seeing strong growth.
To enable us to grow our market
presence, we have continued to expand
our disciplines into new countries, such
as oil, gas and mining in Chile. We have
also made further investments into
markets such as the Nikkei market in
Japan, regional and domestic markets in
Mainland China, as well as investments
in US markets outside Financial Services
in New York. These investments have
helped us achieve record levels of
growth in these businesses.
We have also benefited from the
transition into our European Shared
Service Centre in Barcelona, which
completed in 2016. In this region,
operational support cost per fee earner
has fallen by around 20% since 2014,
attributed to process alignment across
all 14 European countries, wage
arbitrage and other efficiencies.
These efficiencies are demonstrated
further with fee earner headcount
additions of over 400 in the region, but
only requiring relatively few operational
support additions.
Dividends
In 2017, in addition to paying over
£38m in ordinary dividends, we returned
£40m to shareholders by way of a
special dividend. We have now paid
special dividends totalling £110m in the
last three years.
The Group’s first use of cash remains
the satisfaction of operational and
investment requirements, as well as to
hedge 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.
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 2017, we generated cash from
operations of £130.0m and ended the
year with cash balances of £95.6m
and a level of distributable reserves
that support more than three times
this annual dividend. Given this cash
position, levels of distributable reserves
and our results for the year, we propose
to increase the final dividend to 8.60p.
When taken together with the interim
dividend paid in October of 3.90p, this
implies a total dividend of 12.50p, an
increase of 4.3% on 2016.
Dividend Per Share (p)
30
24
18
12
6
27.5
16.0
Special dividend
25.23
12.73
18.44
6.46
11.98
12.50
11.5
10.5
10.5
11.0
2013
2014
2015
2016
2017
Five-year Ordinary Dividend CAGR +4.4%
Board
Since I became Chairman of the Board
in December 2015, I have consistently
focused on Board composition as one of
the most important aspects of my role.
Today’s continually evolving business
world presents a range of risks and
opportunities, which is why it is essential
to maintain the right mix of skills and
experience on the Board to mitigate
these risks effectively and to work with
the Executive team to deliver the
Group’s strategy.
We strive for a diversified Board with a
wide range of experience, thought and
perspective. We are pleased to have
appointed two female Non-Executive
Directors this financial year and now
have 44% female representation on
the Board.
Strategic Report | 2
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Chairman’s Introduction
In September 2017, we welcomed Sylvia
Metayer onto the Board. Sylvia brings
extensive experience to the PageGroup
Board, having held a variety of finance
and general management roles in
companies operating in a number of
different sectors, including Mattel Inc,
Vivendi SA and Houghton Mifflin Harcourt
& Co. Her understanding of international
markets is extensive and includes the
US, Europe, China, India and South East
Asia. She is currently Chief Executive,
Worldwide Corporate Services Segment
of the Euronext Paris listed company
Sodexo SA. She is also a member of the
Sodexo Group Executive Committee.
Sylvia holds a chartered accountancy
qualification, is a Trustee of the Quebec
Labrador Foundation, and sits on the
Research Orientation Committee of the
Foundation of HEC Business School in
Paris.
In October 2017, we welcomed Angela
Seymour-Jackson onto the Board. She
has a wealth of experience in service
focused organisations and has a Masters
degree in Marketing and a Diploma from
the Chartered Institute of Marketing.
Angela is currently Deputy Chairman,
Senior Independent Director and Chair
of the Remuneration Committee at
GoCompare.com Group, and a Non-
Executive Director at Janus Henderson
Group plc, esure plc and Rentokil Initial
plc. Angela has previously held Executive
Director roles at Aegon UK, RAC Motoring
Services Limited and Aviva UK Limited,
and was a Senior Adviser at Lloyds
Banking Group (insurance). Prior to that,
Angela held senior marketing roles with
Bluecycle.com Limited, CGU Insurance
plc, General Accident plc and the Norwich
Union Insurance Group.
As mentioned last year, Baroness Ruby
McGregor-Smith informed us that
she would not renew the term of her
appointment when it expired on 23 May
2017. Ruby had been a Non-Executive
Director of PageGroup for 10 years. She
made an outstanding contribution over
this time and played an important role in
helping to drive the Group’s growth and
development. I would like to thank her
again on behalf of the Board for all she did
for PageGroup.
Danuta Gray has decided not to stand
for re-election as a Director of the
Company at the forthcoming AGM,
so will step down from the Board on
7 June 2018. I would like to thank Danuta
for her significant contribution to the
Company since she joined the Board
in December 2013.
As a Board, we also look to internal
experience as being one of the core
perspectives we review in terms of
appointments to the Board. Discussions
are held each year, focusing on the
development and succession of the
Executive Directors, Executive Board
members and other senior managers
in the Group. This ensures a pipeline
of talented senior individuals is present
within the business and that existing
senior executives are being developed.
All 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. The addition of Sylvia and
Angela to the Board, and their respective
depth and breadth of experience, will
complement the experience of other
Board members and will bring great
benefit to PageGroup. Both will also be
members of the Audit, Nomination and
Remuneration Committees.
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 Corporate
Governance Report.
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
diversity, inclusion and equality agenda.
The report also details our approach
to corporate and social responsibility,
including how we engage with our
stakeholders.
Looking Ahead
We exited 2017 with a record quarter
and the best quarterly growth rate since
the third quarter of 2011. We also saw
improvements and a return to growth
in Australia, Brazil and Singapore. As a
result, we go into 2018 optimistic, but
remain cautious in some key markets.
3 | Strategic Report
In the UK political uncertainty remains,
impacting some clients and senior
candidates. Here, we will continue to
focus on protecting margins whilst
investing in structural opportunities.
Australia remains challenging in the
markets in which we operate, but we
have invested in headcount and a new
office in Canberra. Brazil had a good
end to the year, but is still suffering from
macroeconomic headwinds and will have
elections this year.
However, our proven strategy remains
unchanged. Investment will continue in
our Large High Potential Markets, as well
as in markets with favourable trading
conditions. This includes the newer
markets such as the Nikkei market in
Japan. We will, as always, continue to
focus on driving profitable growth while
being able to respond quickly to changes
in market conditions.
Last, but by no means least, on behalf
of the Board I would like to thank our
people, as the success of PageGroup
depends on the quality of its staff.
PageGroup is a people business with a
clear and tangible culture, and this year
we have redefined our PageVision, please
see page 13 for more details. Our staff are
dedicated, hard-working and committed
to the brands. They have a very strong
team ethos which is evident in everything
they do.
Delivering our strategy against rapidly
changing markets in terms of technology
and macroeconomic environment,
can only be done successfully with
excellent people. On behalf of the Board,
therefore, I would like to thank all our staff
for their very considerable efforts in the
past year.
David Lowden
Chairman
Overview
Business
Model
P5
Strategy
P8
Risks
P33
KPIs
P21
Remuneration
P63
Dividend
Policy
P12
Financial
Strategic
People
Operational
Highly profitable
Sustainable organic growth
Team-based service delivery
Strong brands
Diversification to mitigate
cyclicality by geography,
brand and discipline
Focus on operational
efficiency
To be the leading specialist
recruiter in each of the
markets in which we operate
Maintain a strong balance
sheet
Highly cash generative
Long-term investment into
core markets:
Large, High Potential;
Large, Proven; and
Small and Medium,
High Margin
Talent and skills
development/retention
Effective use of technology
Career development
structure
Assurance of a quality
service
Effective recruitment process
Macro-economic exposure
Shift in business model
People development
Foreign exchange translation
risk
Delivery of operational
efficiencies
Attraction and retention
Technology; systems
transformation and
change; data security;
brand reputation; financial
management and control;
fiscal and legal compliance
Employee satisfaction survey
Management experience
Measurement performed
at a granular level
Fee earner headcount
growth
Gross profit per fee earner
Fee earner:operational
support staff ratio
Conversion rate
Strategic targets
Systems and innovation
Gross profit growth
Gross profit diversification
Earnings per share
Net cash
Perm:Temp ratio
EPS growth: three year
cumulative
PBT performance
Comparator gross profit
growth
Leadership and people
development
Retention/succession
Maintain a strong balance
sheet
Return surplus cash to
shareholders by special
dividends and/or share
buybacks
Ensure dividends are paid at
sustainable levels such that
investment in the business
and its people is maintained
Cost and financial
management
Risk management and
internal controls
IT strategic development
First use of cash is to satisfy
operational and investment
needs, as well as to hedge
liabilities under the Group’s
share plans
Strategic Report | 4
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Business Model
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 139 offices across 36 countries.
Discipline expertise
We organise our consultants into 14 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.
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.
Perm and temp mix
PageGroup is the international market leader for permanent recruitment in
the majority of the 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.
Page Executive
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 14 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, temporary or contract staff at technical and
administrative support, professional clerical and junior management levels.
Page Outsourcing
Page Outsourcing, the Group’s newest brand, was created to meet the
growing demands of our clients. Leveraging the internal capabilities of our elite
recruitment specialists in offering customised solutions for high-volume hiring
and specific project recruitment needs. Page Outsourcing recruits across all
levels of the market.
5 | Strategic Report
A focus on organic growth
PageGroup’s business model has proved itself both 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.
Career
development
structure
Recruitment is a fast-paced and dynamic business.
Our agility gives us the confidence to respond quickly to
opportunities and challenges as they appear.
Agile and
responsive
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.
Global
management
mobility
Organic
Growth
Team
profit-led
compensation
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
Experienced
management pool
reduces our learning curve, maximises
scalability and is crucial for placing resources
where they will add the most value.
Productivity-led
expansion
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.
Our objectives
Diversified
organic
growth
Scalable
and flexible
capacity
Talent
and skills
development
Sustainable
growth
Diversification helps
to mitigate the cyclical
nature of 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 us the resilience
to cope with market
downturns without damaging
the business’s long-term
prospects.
Strategic Report | 6
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Business Model
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 40 years.
We generate funds through fees earned for placing candidates in permanent and temporary roles.
Brand
Page Executive, Michael Page, Page Personnel
and Page Outsourcing are brands which inspire
high levels of confidence, trust and assurance of
quality service. We have a consistent commitment
to the markets in which we operate, which
combined with our level of expertise, enables
these brands to operate strongly in their market
place.
The recruitment sector’s marketing and delivery
channels have been reshaped by the digital
revolution 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
provide a high quality service, to be committed
and to be there for the long term.
Scale
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,
even in our new markets, with participation from
multiple disciplines.
The ability to offer diverse expertise across a
broad range of complementary specialisms and
geographies enhances our offering to the market
and the candidate pools we can access. Our
scale enables us to build an unrivalled skillset and
level of experience, which is available equally to
the smallest and largest of 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.
Culture
PageGroup’s culture is unique in the sector. We
have ingrained values of how to do business
ethically and to make long term decisions. It is a
global culture that delivers a consistent approach
both internally and externally, though we always
remain accepting of each of our markets' local
characteristics.
The global nature of our 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.
Our purpose and our values that are the key to
our success are set out on page 25.
Our 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 36 countries
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.
Large, High Potential
Typically under-developed markets, but where we have a successful track record and confidence in our
ability to scale our operations substantially, for example Latin America and South East Asia.
Large, Proven
These are large markets where we are already proven with a strong track record and a significant
presence, for example the UK and Australia.
Small and Medium, High Margin
Markets which are, or could be, significant profit contributors with attractive conversion margins, but each
are unlikely (or not yet proven) to be able to grow to more than 300 fee earners, for example Belgium and
Switzerland.
7 | Strategic Report
See page 8 for more on our Strategic Vision
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.
This review will take you through the source of
our competitive advantage and the relationship
to our Strategic Plan. Then following on from
this, how we approach our investment plan in
our markets.
We continue this year to relate how we
measure performance, through our KPIs – both
financial and non financial – with associated
risks. These risks then directly link to the four
elements (financial, strategic, people and
operational) of the performance criteria in our
current executive remuneration plans.
Steve Ingham
CEO PageGroup
Strategic Report | 8
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Strategic Review
Our value proposition
We offer a premium service which is valued by clients and attracts the highest calibre of candidates, due to our focus on opportunities
where our market and industry knowledge can set us apart.
Our value proposition is based around expertise and specialism and for this to be delivered in a consistent manner, supported by high
quality processes.
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
Strategic
framework
PageGroup is focused on delivering
against three key objectives to achieve its
strategic vision and sustainable financial
returns.
These are to:
1) look for organic, high margin and
diversified growth;
2) position the business to be efficiently
scalable and highly flexible to react to
market conditions; and
3) nurture and develop our people,
driving our meritocratic growth model.
Organic, high margin
and Diversified growth
enables us to offer a premium service
that is valued by clients and attracts the
highest calibre of candidates.
Our business model is centred
around organic growth. The key
elements are derived from our team-
led approach as set out on page 10,
with great value placed on structured
career development and the value that
experienced management brings to
the business.
PageGroup’s diversification strategy has
led to a well-balanced business profile
and mitigation of exposure to any one
geographic area, brand or discipline.
Through global diversification, we have
a clear strategic vision: to be the leading
specialist recruiter in the markets in
which we operate. Our presence in major
global economies enables the greatest
potential for long-term growth in gross
profit at attractive conversion rates. This
PageGroup’s historic success in each
our markets has helped identify which
geographies will likely produce high
margin growth, with the greatest potential
for long-term success. The challenges
to achieving a significant market position
vary across these markets, as does their
attractiveness to PageGroup. These
features, when taken together, helped
define our strategic vision.
Our background is in permanent
recruitment, but 25% of the business
is now in the temporary market, with
this being dependent on local culture
and market conditions. Our service
offering covers a broad set of disciplines
and specialisations, solely within the
professional and clerical recruitment
market.
9 | Strategic Report
Efficiently scalable and highly flexible
Our scale enables us to build an
unrivalled skillset, together with the ability
to respond quickly to changing market
conditions, which are explained in more
detail on page 11.
Our flexibility enables 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 proportion of
recruitment that is outsourced, as
opposed to undertaken in-house by
HR departments.
PageGroup's strategic vision was
developed by reviewing the markets
in which we operate, to identify which
had the greatest potential and therefore
likely future impact on Group revenue.
Set out on page 15 is an explanation of
these categorisations and our approach
to these different markets.
Our global footprint requires high
levels of operational efficiency in order
to achieve this strategic objective.
Our focus is centred around attaining
operational efficiencies while controlling
the fixed asset base.
We focus relentlessly on sharing best
practice across the Group to enhance
the quality and consistency of our
service offering. We have continued to
centralise many of our support functions
into regional shared service centres
enabling the capture and leverage of
skills and expertise for the benefit of
the whole Group, whilst maintaining the
robustness of the operational platform.
Nurture and develop our people, driving our meritocratic growth model
We recognise that it is our people who
are at the heart of everything we do,
particularly as an organically grown
business.
The mobility of our people, the significant
loyalty of the management team
and constant depth of talent greatly
enhances the flexibility of our business
model. The senior executive team
can flex the business exposure to any
of our markets, both up and down,
allowing the business to progress even in
uncertain markets. They take decisions
as to where PageGroup can achieve the
greatest return on investment from the
allocation of management resource.
PageGroup’s strong record of internal
career moves and promotion from
within, means that people who join
us know that they could be our future
Senior Managers and Executive Board
Members. Our consultants quickly come
to understand that we can offer a long-
term and fulfilling career in recruitment.
The experience acquired throughout
their career is valued greatly, and, as
such, our management team has some
of the longest tenure and experience in
the industry.
We therefore invest significantly in our
people, as the recruitment, retention and
development of talent is fundamental
in our ability to achieve long-term
sustainable growth.
Innovation
At PageGroup we are clear on the
role innovation can play in driving our
business. We use three principles in
pursuit of innovation.
1) improve the client and candidate
experience;
2) identify tools we can deploy at scale
to make our processes more efficient;
and
3) measure the efficiency of
investments.
Innovation will be core for PageGroup
growth. The impact of technology on
behaviours and expectations of all the
people PageGroup works with, be
they clients, candidates or our own
people, continues to grow at pace. At
PageGroup, we will take a pragmatic
approach to our adoption and use of
innovative ideas and technologies, as
we have in successfully building our
business to date.
Innovation is not just limited to
technology. Innovation allows us to look
at new business models and recruitment
markets to evolve what PageGroup
offers as part of our service.
We have structures in place to ensure
we secure the best ideas coming from
the market and our own people. Our
approach will remain agile, initiating
innovation in measurable pilots before
implementing successful ideas with
industrial and international scale.
We have established an infrastructure
from top to bottom of our business
addressing innovation: Our Executive
Board reviews and steers our
programme on a quarterly basis.
Functional experts in Marketing, HR,
Finance and Business Technology
identify and pilot new technologies
and processes. Additionally we have
established and embedded regional
innovation groups via our internal social
media network to surface opportunities
from our consultants.
Strategic Report | 10
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Strategic Review
Market Dynamics
The professional recruitment sector has always been
highly sensitive to fluctuating economic conditions and
is strongly influenced by 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.
In a number of geographic regions, such as Latin America or
Greater China, our potential markets are very large, yet relatively
immature. This provides not only 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.
It can also be localised, whether by geography or discipline, and
differ between temporary and permanent placements in the same
market. We intend to maintain our strategy of retaining our market
presence throughout downturns, whilst closely controlling our
cost base.
As set out in the table below, PageGroup views certain key
features as defining a particular recruitment market profile,
categorised by the proportion of roles filled through a recruitment
agency (“market penetration”).
Emerging markets
Developing markets
Mature markets
Market
penetration
0-15%
15-30%
30-70%
Over 70%
Competition
Limited international
operators present
Few well-established
regional players
Well developed markets
with many international
operators
Highly
competitive
Examples
Latin America,
SE Asia
Germany, Greater China
France, Australasia,
Holland, Spain, Italy
UK, US
11 | Strategic Report
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 that 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 align rapidly, and this has a
dramatic impact on PageGroup’s overall performance and
conversion margins.
Impact
Comment
Financial Impact
Market
liquidity
Candidate
availability
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.
Mainly visible through
improvement in gross
profit, but a buoyant
market helps to drive
productivity, principally
through reducing the
time to hire, but also
in wage inflation and
increased fee rates.
Gross
profit and
productivity
Impact
Comment
Financial Impact
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.
Notable influence
on both gross profit
and also conversion
rate. Productivity,
especially in permanent
recruitment, is
significantly enhanced
as these market drivers
positively align.
Capital Allocation Policy
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.
Strategic Report | 12
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Strategic Review
Clear on people
Clear on investment
• Consistent performance culture reflecting
• 3 geographic market categories each with
our values
clear investment strategies
• Evolving the way we work to allow flexibility
towards how, where and when we work
• Leading the way on Diversity and Inclusion
via initiatives such as Women@Page, Ability@
Page, Parents@Page, Pride@Page
• Capitalising on the structural opportunity for
Page Personnel and Page Executive
• Growing the proportion of our revenues from
temp/contract/interim as this becomes more
culturally accepted
Continued focus on increasing discipline
diversity and specialisation
•
In
v
e
s
t
m
e
n
t
• Consistent approach to CSR
• Market leading and blended
approach to learning
• Consistent focus on improving
the quality of people we hire,
retain and grow
People
Clear on brand
• One clear global Group brand
B
r
a
One
Clear Vision
To increase the scale and
diversification of PageGroup by
organically growing existing
and new teams, offices,
disciplines and markets.
Clear on
e rational Support
operational support
p
O
• Continue to standardise and
simplify as far as possible our
operational support functions
• Centralise into Shared Service Centres
to drive efficiencies and improved controls
• Roll-out the Global Finance System (GFS)
programme and transition to a new Target
Operating Model in IT
• Build Innovation into all areas of the
organisation, whether that be through the use
of new technologies, evolving the role of the
consultant, or changing our interaction with
clients and candidates
• Continue to build effective customer
relationships through efficient digital
platforms
• Enhance our approach to succession
planning and talent management
n
d
• Huge potential to have increasing
representation in every Page market
• Qualified professional recruitment – in 36
countries with significant opportunities to
expand in new markets, disciplines and cities
• Clerical professional recruitment – in 19
countries with huge potential to launch and
expand in new markets, disciplines and in
particular to increase the proportion of Group
revenues generated from temporary, contract
and Interim placements
• Page’s newest brand – offering customised
solutions, delivered by one or all of our brands,
for high-volume and specific project needs
13 | Strategic Report
OUR Purpose
PAGEGROUP
CHANGES LIVES
for
PEOPLE
through creating
OPPORTUNITY
to reach
POTENTIAL
OUR Values
WE MAKE A DIFFERENCE
WE ENJOY WHAT WE DO
WE VALUE DETERMINATION
WE WORK AS A TEAM
WE ARE PASSIONATE
Strategic Report | 14
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
Strategic Review
How we categorise the markets
In 2013, PageGroup categorised each of its geographic
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 36 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
Investment in the business has been focused on
developing the long-term sustainability of the business
and is supported by significant balance sheet strength
and cash flow generation. 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.
15 | Strategic Report
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 15% for the
year and gross profit records in all
markets. Strong growth in US +21%
and Latin America +14%.
Continue investment in new
headcount and management team,
whilst improving conversion rates.
N
O
I
I
T
A
S
R
O
G
E
T
A
C
S
E
L
P
M
A
X
E
T
N
E
M
T
S
E
V
N
I
H
C
A
O
R
P
P
A
I
C
G
E
T
A
R
T
S
I
N
O
S
V
I
S
T
L
U
S
E
R
7
1
0
2
N
A
L
P
8
1
0
2
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 each not likely to be in excess of
300 fee earners.
UK, France, Australia,
the Netherlands, Italy
and Spain.
Japan, Middle East, Africa,
India, Canada, Turkey and other
European countries.
Investment reflects gross profit
growth and market conditions.
Respond to market conditions, focus
on high margin opportunities.
Collectively return to 2007 peak levels
of operating profit and 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.
Gross profit growth of +7%, tough
trading conditions in the UK.
Excluding this, growth was +15%.
Gross profit growth of 10% for the
year. Strong gross profit growth in
Japan of +23% and Belgium +22%.
Continue to drive future growth
through existing capacity, as well as
improving conversion rates.
Continued focus on growth and
improving our conversion rates.
C
A
T
E
G
O
R
S
A
T
I
I
O
N
E
X
A
M
P
L
E
S
A
P
P
R
O
A
C
H
I
N
V
E
S
T
M
E
N
T
I
V
S
O
N
I
S
T
R
A
T
E
G
C
I
2
0
1
7
R
E
S
U
L
T
S
2
0
1
8
P
L
A
N
Strategic Report | 16
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
South East Asia
17 | Strategic Report
South East Asia
South East Asia is one of the Group’s Large, High Potential Markets, with exceptional
performance since 1996 when we opened our first office in Singapore. With a 10 year
CAGR of 9.8%, its gross profit has increased from £4.6m in 2007 to £19.7m in 2017.
During the same 10 year period, we invested in fee earners with a CAGR of 20% to
bring our fee earner headcount to nearly 200. This has been achieved in line with
our strategy of diversification where we have expanded throughout South East Asia,
opening Malaysia in 2011, Indonesia in 2014, Thailand in 2016 and we will be opening
in Vietnam in 2018. Our success in this market enables us to operate out of all
4 brands across 14 disciplines.
Growth for South East Asia for the year was 12% despite the challenging conditions
experienced in Singapore, where gross profit declined by 5%. Although the economy
in Singapore had experienced a slow down, it returned to growth by the end of the
year, driven by our Finance & Accounting and Technology disciplines. Singapore offers
11 disciplines across our Michael Page, Page Personnel and Page Executive brands.
Our Malaysia office has grown strongly, with a CAGR of 27% over the last five years
and now has 65 fee earners. Our office in Thailand opened at the end of 2016 is
performing well and is profitable. Indonesia’s growth rate for 2017 was 48%, where
we now offer 7 disciplines with stand out performances from Sales and Finance &
Accounting over the last year. Following our expansion into Thailand and Indonesia
and the addition of 105 fee earners, our 5 year CAGR in South East Asia excluding
Singapore was 43%.
We believe this market presents great opportunities for the future, where we can
expand both the breadth of our disciplines and brands across the countries we already
operate in, but also with opportunity of opening offices in other countries across South
East Asia.
Gross Profit and Fee Earner Headcount
y
c
n
e
r
r
u
C
t
n
a
t
s
n
o
C
s
’
0
0
0
£
20,000
15,000
10,000
5,000
0
200
150
100
50
0
F
e
e
E
a
r
n
e
r
H
e
a
d
c
o
u
n
t
N
u
m
b
e
r
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Gross Profit
Fee Earner Headcount
Gross Profit by business
2007
100%
18%
4%
50%
2017
28%
Singapore
Malaysia
Thailand
Indonesia
Strategic Report | 18
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
Greater China
19 | Strategic Report
Greater China
Our other Large, High Potential market in Asia Pacific is Greater China and comprises
Mainland China, Hong Kong and Taiwan, now representing 8% of the Group and 43%
of our Asia Pacific market. We are considered the leading player across Greater China
and have achieved a CAGR of 10.2% over the last ten years, where our gross profit
has increased from £14.0m to £58.7m. This has been achieved alongside fee earner
investment with a CAGR of 19% over the same period, where our headcount has
increased from 88 to over 500.
We opened our first business in Greater China in Hong Kong in 1995. Hong Kong
now consists of 145 fee earners operating out of 5 offices across our Michael Page,
Page Personnel and Page Executive brands. In Hong Kong where we have a large
number of multinational clients, we offer 12 disciplines, with Accounting & Financial
Services and our Technical disciplines performing strongly in 2017, up 13% and
23% respectively.
Our business in Mainland China opened in 2003 and now operates out of 4 offices
and represents over 50% of Greater China. Due to local laws, we offer predominately
permanent recruitment from our Michael Page and Page Executive brands.
Following the addition of 93 fee earners in 2017, our performance has been excellent
throughout Mainland China, where we have seen growth of 18%. Our offices in
Beijing, Taipei and Shanghai delivered particularly strong performances up 21%, 18%
and 18% respectively. Mainland China offers 11 disciplines, with our Procurement &
Supply Chain, Financial Services and Marketing disciplines all with growth in excess of
30% for the year.
Despite experiencing challenging economic conditions through 2016, Greater China
performed strongly in 2017, delivered a record gross profit and grew 14%.
Looking forward, we believe our main opportunities for growth are expanding our
offering of technical disciplines and increasing our presence in the regional and
domestic Chinese market. Where local laws allow we will also look to diversify further
into temporary and contracting recruitment.
Gross Profit and Fee Earner Headcount
y
c
n
e
r
r
u
C
t
n
a
t
s
n
o
C
s
’
0
0
0
£
60,000
50,000
40,000
30,000
20,000
10,000
0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
F
e
e
E
a
r
n
e
r
H
e
a
d
c
o
u
n
t
N
u
m
b
e
r
600
500
400
300
200
100
0
Gross Profit
Fee Earner Headcount
Gross Profit by business
18%
2007
82%
4%
37%
2017
59%
Mainland China
Hong Kong
Taiwan
Strategic Report | 20
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
Key Performance Indicators
We measure our progress against our strategic objectives using the following key performance indicators:
I
L
A
C
N
A
N
F
I
Gross profit growth (%)*
9.8
2017
2016
2015
2014
2013
3.0
4.4
3.7
-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 gross profit 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 2017: Gross profit increased 14.6% in reported rates, 9.8% in
constant currencies, as favourable currency movements benefited the full year figures.
Relevant strategic objective: Organic growth.
* Increase in gross profit in constant currency over the prior year
Gross profit
diversification (%)
80.2%
63.3%
Ex-UK
Ex-
Accounting
and Financial
Services
2013
2014
2015
2016
2017
Ex-UK
Ex-Finance
75.9
58.8
74.0
60.3
72.7
60.4
76.4
61.6
80.2
63.3
Basic earnings per share (p)
2017
2016
2015
2014
2013
26.5
23.1
21.3
18.4
15.1
How measured: Total gross profit from a) geographic regions outside the UK; and b)
disciplines outside of Accounting and Financial Services, 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
Accounting and Financial Services discipline.
How we performed in 2017: Geographies: the percentage increased to 80.2% from 76.4%
in 2016, demonstrating a high degree of diversification. This also reflected strong trading
conditions in the majority of our overseas businesses, along with the weakness of Sterling.
Disciplines: The percentage increased to 63.3% (2016: 61.6%), as our professional
disciplines of HR, IT, Executive Search and Secretarial performed strongly, combined with
good growth in our technical disciplines, comprising Property & Construction, Procurement &
Supply Chain and Engineering.
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 2017: The Group saw an 14.7% rise in Basic EPS to 26.5p.
Improvements in trading and favourable foreign exchange movements drove strong growth in
the Group’s EPS in 2017.
Relevant strategic objective: Sustainable growth.
Net cash (£m)
2017
2016
2015
2014
2013
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 2017: Net cash remained broadly flat at £95.6m (2016: £92.8m). This
was after dividend payments of £78.3m, including a special dividend of £40m.
Relevant strategic objective: Sustainable growth.
95.6
92.8
95.0
90.0
85.4
Ratio of permanent vs
temporary placements
Gross profit
2013
2014
2015
2016
2017
Permanent
Temporary
76
24
76
24
76
24
76
24
75
25
How measured: Gross profit from each type of placement expressed as a percentage of
total gross profit.
Why it’s important: This ratio reflects both the current stage of the economic cycle and our
geographic spread, as a number of countries culturally have minimal temporary placements.
It gives a guide as to the operational gearing potential in the business, which is significantly
greater for permanent recruitment.
How we performed in 2017: The ratio improved slightly to 75:25, with strong growth in
temporary placements in our more mature markets as well the emerging temporary market in
places such as Asia and Latin America.
Relevant strategic objective: Diversification.
21 | Strategic Report
Fee earner
headcount growth (%)
2017
2016
2015
2014
2013
16.7
5.1
4.8
5.1
12.3
Gross profit per
fee earner (£’000)
I
C
G
E
T
A
R
T
S
2017
2016
2015
2014
2013
133.8 139.9
135.2
126.8
130.3
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 2017: Fee earner headcount grew at 16.7% in the year, resulting in
5,497 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 2017: In reported rates, this increased to £139.9k from £135.2k.
However, in constant currency, it fell slightly to £133.8k as a result of the 16.7% investment
in fee earners during 2017.
139.2
Relevant strategic objective: Organic growth.
Fee earner:operational
support staff ratio
2013
2014
2015
2016
2017
Fee earner
Support
74
26
77
23
77
23
77
23
78
22
Conversion rate (%)
2017
2016
2015
2014
2013
16.6
16.3
16.2
14.7
13.3
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 2017: The ratio improved to a record 78:22 from 77:23 in 2016.
This was driven by 16.7% fee earner headcount growth, as well as operational support
initiatives. The ratio of new joiners in the year was 85:15.
Relevant strategic objective: Sustainable growth.
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.
How we performed in 2017: The Group’s conversion rate increased to 16.6% (2016:
16.3%) with 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 the UK and Brazil.
Relevant strategic objective: Sustainable growth.
Employee index
83%
Positive
engagement
score
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 2017: We recorded an 83% positive score for employee engagement in
the 2017 Employee Survey. Our previous survey was in 2015 where we recorded 81%. 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.
E
L
P
O
E
P
Management experience
How measured: Average tenure of front-office management measured as years of service for
directors and above.
2017
2016
2015
2014
2013
11.9 years
11.6 years
11.2 years
10.8 years
11.1 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 2017: The average tenure of the Group’s management increased from
11.6 years to 11.9 years, with a particular increase in EMEA.
Relevant strategic objective: Talent and Skills development.
Strategic Report | 22
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Key Performance Indicators
I
I
S
N
O
S
S
M
E
G
H
G
Total GHG emissions
Total energy-derived emissions
(CO2e tonnes)
Source of emissions
Direct GHG emissions
Indirect GHG emissions
2016
1,832
4,689
2017
1,627
4,948
How measured: Direct and Indirect GHG emissions calculated in line with the UK
Government’s 2017 DEFRA reporting standards. Principally based on data from a sample
of our offices, covering 63% 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 2017: Direct GHG emissions relating to the combustion of fuel
decreased by 11.2% to 1,627 tonnes CO2e, while Indirect GHG emissions, through the
purchase of energy such as electricity, increased by 5.5% to 4,948 tonnes.
Relevant strategic objective: Sustainable growth.
Intensity values of
GHG emissions
CO2e tonnes per 1,000 employees
Energy-derived emissions
2016
2017
1,078
974
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 and is unaffected by issues such as business mix or
foreign exchange variations.
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 2017: Energy-derived emissions were reduced by 9.6% compared with
2016, largely due to relocations to more energy efficient offices, changes in fuel sources, and an
increase in headcount without a corresponding increase in the number of offices.
Relevant strategic objective: Sustainable growth.
2016 Direct and Indirect GHG emissions were originally reported as 1,662 and 4,703 respectively. These have been restated to reflect the latest DEFRA fuel conversion rates in 2017. The 2016 Intensity value of
energy-derived emissions has been restated from 1,052 to 1,078 on the same basis. The source of data and calculation methods year-on-year are on a consistent basis. The movements in KPIs are in line with
expectations.
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).
Since 2014, we have gathered energy data from our major offices. This is in conjunction with our
environmental policy that focuses on implementing efficiency measures in our offices to reduce energy
consumption and carbon emissions. We have continued to enhance the quality of our data collation
process. Fugitive emissions are not reported as the company is not responsible for maintenance of air
conditioning in any of its offices.
The Group’s total 2017 emissions from energy and fuel used in its properties and vehicles, together
with comparable data for the previous three years, are reported below
Total energy derived emissions (tonnes CO2e) properties and vehicles
Source of emissions
2014
2015
2016
2017
Direct GHG emissions (relating to the combustion of fuel and the operation of any facility)
1,647
1,705
1,832
1,627
Indirect GHG emissions (through the purchase of electricity, heat, steam or cooling)
4,898
4,981
4,689
Total emissions
6,545
6,686
6,521
4,948
6,575
Emissions derived from property energy consumption directly under the Company’s control have been
calculated by using a sample of offices across the world (including the entire UK business). These
offices represent 63% of the global headcount in 2017. The emissions for the remaining offices were
calculated by extrapolating headcount. Emissions from fuel consumed by company owned or leased
vehicles in 2017 were calculated using the fuel consumed by the company car fleets in UK, Germany,
Sweden and Italy (in prior years this calculation was based only on the German company car fleet).
For 2017 these fleets represented around 25% of the Company’s global car fleet of just under
1,200 vehicles. The emissions for vehicles in other countries were calculated by first extrapolating
the Germany’s fuel consumption per vehicle and then calculating the resulting emissions. Emissions
derived from property energy consumption amounted to just under 80% of total emissions.
Emissions have been calculated in line with
the 2017 DEFRA reporting standards, and
calculated using 2017 DEFRA conversion
factors for fuels, gases and UK electricity, and
International Energy Agency conversion factors
for non UK electricity generation.
The intensity values are based on emissions
derived from property energy and vehicle fuel
per 1,000 headcount. This factor was chosen as
being most representative of the Group’s activity
levels, and being unaffected by issues such as
business mix or foreign exchange variations.
Energy derived emissions – CO2e tonnes
per 1,000 employees
2014
1,189
2015
1,209
2016
1,078
2017
974
2017 emissions intensity improved by 9.6%
compared with 2016 due to better occupation
efficiency and to the number of offices being
reduced by one over the year. In addition, the
Company continued to relocate to more energy
efficient offices. This programme started in 2016,
and initiatives have included installing more
energy efficient windows in the Milan offices. In
addition, in UK offices, a focus on more energy
efficient printers resulted in savings in running
costs of 75% between 2015 and 2017, with
emissions and energy consumption due to print
activities being reduced by nearly 80% over that
period and paper used being reduced by nearly
45%. In another environmental initiative, the UK
business introduced dedicated recycling bins for
use by all its staff.
23 | Strategic Report
Q&A with Steve Ingham, CEO
previously in 2015. It means more
people engage with our content and
presence on LinkedIn than any other
recruiter. The content we put on to
LinkedIn is meaningful and relevant,
helping to build our brand awareness
so that we are the recruiter of choice.
Q You’ve paid special dividends over
the last three years. Do you anticipate
that continuing into 2018?
A We continue to operate a policy of
financing the activities and development
of the Group from our retained earnings
and to operate while consistently
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 2017, after
consultation with our shareholders, we
made a supplementary return of 12.73p
per share. We will continue to monitor
our liquidity in 2018 and will make
returns to shareholders in line with the
above policy.
Q What do you consider the outlook to
be for 2018 and what do you consider
to be your biggest challenge?
A Our strategy to invest in our Large,
High Potential Markets remains
unchanged and we are pleased that
we are seeing strong growth in all five
of these markets. We will continue
to diversify in the US, invest in Latin
America and South-East Asia, develop
the domestic market in China and
expand our temporary and contracting
businesses in Germany. Where we are
seeing strong growth elsewhere, such as
in Continental Europe, India and Japan,
we will continue to add heads selectively,
but remain mindful of the impact on our
conversion rate.
A number of our markets remain
challenging. In the UK we remain
cautious, as considerable uncertainty
remains around the timing and terms
of Brexit. While Australia, Brazil and
Singapore have shown improvement
in Q4, we remain cautious on these
markets as we go into 2018. As ever,
we will continue to focus on driving
profitable growth whilst retaining the
flexibility to adjust rapidly to changing
market conditions.
Q What are the progression
opportunities at PageGroup and how do
you invest in tour leaders of the future?
A More than most companies, being
an organically grown business means
there are plenty of opportunities for
rapid progression within PageGroup,
from consultant to the senior leadership
team, and we have many examples of
this across the Group. The management
team, and myself as CEO, started
as consultants, demonstrating the
significant progression opportunities
that we can offer. To facilitate this
progression, we have clearly defined
career paths, a global succession
planning process and a talent
development learning roadmap, which
supports the professional development
of all our staff at every stage of their
career.
We are serious about succession
planning and talent development in order
to grow consultants to be the leaders
of tomorrow. We offer a competitive
remuneration package, we run executive
coaching schemes, internal and
external mentor programmes, Personal
Development Plan development,
Management Development
programmes, a Global Directors
Academy and an Executive Leadership
programme. To enable all of our people
to develop their skills and capabilities
whether in a classroom or virtually, we
have also recently invested in a global
digital learning platform BOOST! Our
international mobility programme gives
opportunities to our people at all levels
to develop themselves even further in
different countries and regions so that
they can take on new challenges and
grow as individuals.
Strategic Report | 24
Q Do you see LinkedIn as a threat
to the recruitment market and what
impact does disintermediation have?
A Technology, such as job boards
and LinkedIn has given the perception
that everyone has complete and equal
access to potential candidates. However,
in such a candidate driven market, our
skill is putting the human touch back into
this process. We know more about our
candidates than would ever be possible
through online profiles, and are best
placed to deliver our client requirements.
We have a number of global strategic
partnerships of which LinkedIn is one
and it plays a key role in our acquisition
landscape. We work alongside them
to constantly improve our use of their
inventory and as part of their panel we
contribute to steering their product
development of tools specifically for
recruitment. Each of our consultants
is trained on optimising their use of
LinkedIn and as a company we have
over 1.2m followers. Whilst LinkedIn
is a social network we measure the
effectiveness of each part of its inventory
for the functionality it provides. For
example: we compare their job slots
against job boards and aggregators.
A key success of our global platform
is how we execute at regional level.
For example in Mainland China our
social strategy is focused on WeChat.
For those of you who haven’t heard of
it, WeChat is Facebook, WhatsApp,
Instagram and Paypal all rolled into one
and has over 550m users. We are the
world’s first recruitment company to
deploy job alerts to WeChat.
We were also very proud to win once
again in 2017, LinkedIn’s Most Socially
Engaged Recruiter, having won this
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Corporate Social Responsibility
OUR Purpose
PageGroup Changes Lives for People through creating Opportunity to reach Potential
OUR Values
We make a Difference We Enjoy what we do We value Determination
We work as a Team We are Passionate
25 | Strategic Report
Our Commitment to our Stakeholders
Our people
Make PageGroup a great place to work
creating opportunity for people
to reach potential
A diverse and inclusive team
Focused on
wellbeing and flexibility
Our
stakeholder
commitments
Society
Minimise and mitigate
our environmental footprint
Provide responsible
global citizenship
and business practices
Candidates
Clients
Suppliers
Changing people’s lives
through creating opportunity
Highest ethical standards
Communities
Contribute positively
to the communities we serve
Shareholders
Maintain the highest standards
of corporate governance
Our People
People are at the heart
of our business. Our
purpose is to change lives for people
through creating opportunity to reach
potential. That starts with our own
people. Our organic business model
promotes from within based on merit
and has always been at the heart
of our success, with the majority
of our Executive Board starting here
as consultants, including CEO
Steve Ingham.
In a video message to employees
across the world, Steve Ingham said:
“We’ve talked about our purpose
– about changing people’s lives.
PageGroup does that. It changes
our candidates’ lives by placing
them in better jobs. It changes
our clients’ lives by helping them
to improve and grow, but most
importantly it changes our lives –
by helping us develop, get promoted,
and move in many cases.”
We listen to what our people tell us and
use that feedback to drive improvement.
In our bi-annual ‘Have Your Say’
employee survey in September 2017,
81% of our people completed the
survey worldwide (up from 77% in 2015)
with a positive engagement score of
83% (up from 81% in 2015). Using
the feedback from the survey, we are
developing action plans to improve our
business and make PageGroup an even
better place to work. The next survey is
planned for 2019.
Strategic Report | 26
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
Corporate Social Responsibility
Public recognition:
UK
Best Places to
Work 2017
Glassdoor Employees’ Choice Awards
‘100 Best Companies
to Work For’
Winner of the ‘Diversity
& Inclusion’ award
PageGroup CEO, Steve Ingham ranked
seventh in the ‘Highest Rated CEOs’
The Sunday Times
HR Excellence Awards 2017
Glassdoor Employees’ Choice Awards
USA
APAC
EUROPE
Forum for Expatriate
Management Awards
Winner in the ‘Best Redesign
of Global Mobility Strategy’
Runner-up in the ‘Global
Mobility Team of the Year’
Liepin Extraordinary Hunter 2017
Award: Michael Page China
LATAM
Michael Page Brazil recognised by
Gestão & RH Magazine as one of the
‘Top 10 HR Providers’ and ‘Top 25
Most Admired HR Partners In The
Country’
Top Employer Europe: Germany,
France, Switzerland, Poland, Spain,
Netherlands, Belgium and Italy
7
GLOBAL
PageGroup named
winner of the ‘Most
Socially Engaged
Recruitment
Company’ on LinkedIn
27 | Strategic Report
Our Employee Value Proposition
Passionate about your progress
Enjoying rewards and wellbeing
Gender diversity
We have a clear and transparent career
path with international opportunities,
supported by our industry-renowned
training and development.
2,010 Global
promotions in 2017
98 International
moves in 2017
Determined to learn
In 2017 we rolled out our innovative
online learning system Boost! across all
regions. Supporting our existing training
and development framework, Boost!
provides online learning modules, the
ability to request and track training, and
self-help materials. All designed to help
our people continuously develop and
improve their skills and abilities.
During the year we embedded our
performance management toolbox,
providing a consistent framework for
managing and rewarding our people.
We continued to introduce initiatives
supporting more flexible ways of
working and flexible benefits to suit our
people’s lifestyles.
A team that’s diverse
Our diverse, global team continues to
bring different perspectives and insight
to our business, generating creativity,
problem-solving capability and
sustainability that would not otherwise
be possible.
We want our people to reflect the
communities in which we work, and to
create an inclusive culture of trust and
support where people can achieve their
potential and feel comfortable being
themselves.
OpenPage (our commitment to
inclusivity and diversity) includes a
broad range of support materials,
activities, networks and memberships.
We are continuing to globalise
their impact by extending support
throughout all regions and through
worldwide communication campaigns,
for example supporting International
Women’s Day, Pride Month and World
Mental Health Day.
As at 31 December 2017
Board
Directors
Senior
Management
Other
employees
5 (56%)
4 (44%)
310 (77%)
90 (23%)
3,224 (46%) 3,805 (54%)
As at 31 December 2016
Board
Directors
Senior
Management
Other
employees
5 (62%)
3 (38%)
293 (81%)
70 (19%)
2,867 (47%) 3,232 (53%)
Strategic Report | 28
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Corporate Social Responsibility
The communities
we serve
Making a
difference
Our commitment to changing people’s
lives extends to the communities in which
we live and work. Giving back to others
is in our DNA and we actively encourage
our people to get involved in a huge
variety of ways.
During 2017, we saw our people involved
with fundraising through sport, bake sales
and joining major events such as the
Three Peaks Challenge in the UK and the
Light the Night walk in Boston. In Mexico
we raised funds which will be used to
build homes for victims of the earthquake.
Other ways of using our combined talents
to give back to society included providing
and serving meals to people in need in
multiple countries. Our association with
Mencap in the UK saw us raise funds and
help people with learning disabilities into
the workplace through sharing practical
skills and advice.
We continue to promote our payroll-
based donation scheme with fund-
matching. We encourage our people to
take a volunteer day annually, using their
time to support good causes – often
coming together in teams to help make
a real difference. Steve Ingham, our
CEO, remains a serving Board member
of Great Ormond Street Hospital as well
as supporting and taking part in our
PageGroup charitable activities.
Our PageTalent
programme helps
students looking
for internships,
apprenticeships and
advice. It helps connect them with
employers who are able to advertise
their opportunities at no cost. In
the UK alone there are currently
212 companies involved including
Barclays, Nike, Lloyds Bank and
Bosch.
UK Yorkshire
3 peaks challenge
Australia giving Christmas
presents to under-privileged
children
UK Mencap workshop
France AFM Telethon
Belgium
Red Cross
blood
donation
UAE Smart Life Foundation
feeding workers in a Dubai
labour camp during Ramadan
Mexico
Aldeas
Infantiles
children’s
villages
Belgium
Red Cross
Christmas
donation
North America Dress for Success
and A New Suit, a New Start
Houston Food
Bank Raised and
Served 12,068
Meals
29 | Strategic Report
Boston – Light the Night
Walk to support Leukemia &
Lymphoma Society
Canada raising funds and
distributing breakfasts to schools
Society
As a service based
organisation, our
environmental impacts
are small compared
All our offices are rented or serviced and
we continue to seek premises which are
energy efficient and where the landlords
are able to provide us with data to
support that aim.
with many other businesses. However,
we are committed to managing and
minimising the impacts resulting from
our day to day business.
We have processes in place to monitor
and report on our greenhouse gas
emissions. Our impact is predominantly
through energy consumption and
business travel. See page 23 for GHG
reporting for 2017.
Further mitigation of our impacts during
2017 included:
• Implementing our managed print
solution in the UK with further
roll-out planned;
• Routinely replacing light fittings with
environmentally friendly alternatives
during refurbishment;
• Continuing to work with our landlords
and co-tenants to make changes
to HVAC systems, reducing energy
consumption; and
• Replacing franking machines with
pre-printed envelopes to reduce ink
and label use.
Our candidates;
clients; suppliers;
shareholders
1. Highest ethical standards
PageGroup is a leading global recruiter,
with strong brands and a reputation for
integrity. We continue to reinforce that
position by building trust and loyalty with
all our stakeholders.
The way we do business is as important
as what we do. We encourage a culture
which puts our customers first and
empowers our people to make the right
decisions. We continuously look for
ways to improve and involve our people
in that process.
Our independently hosted whistleblowing
facility gives our employees the ability
to easily and anonymously report
any perceived wrongdoing. For more
information see the Audit Committee
Report in the governance section of this
report – we’re pleased that in 2017, once
again, we had no reportable issues.
We expect the same high standards
from our suppliers and our supplier code
of conduct is now an integral part of all
our procurement activities.
During 2017 we formalised our approach
to modern slavery and continued to
undertake further work. Our commitment
to that policy is published on our
corporate website www.page.com.
We constantly review our communication
and engagement with our shareholders,
and will continue to hold our successful
investor relations events which give the
opportunity to meet our Directors and
regional leadership teams.
2. Highest standards of corporate
governance
At PageGroup we believe high standards
of governance underpin 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 Group’s
strategies and policies.
The Corporate Governance section
of this report sets out details of the
activities undertaken by the Board
and its Standing Committees
during 2017.
“
One of the key aspects of our
partnership with PageGroup is
the opportunity it gives people
with a learning disability to
benefit from the expertise
of their recruitment
consultants.
“
Mark Capper, Business
Development Manager
at Mencap
Strategic Report | 30
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Regional Perspectives
EMEA
What are your priorities for 2018?
If trading conditions from 2017 continue into 2018, we will continue to drive growth
and make investments in our fee earner headcount to maximise our performance.
We remain mindful of some political uncertainty in the region, though with our
flexible business model, we remain able to react quickly to any changes in
market conditions.
How did you deliver against your
2017 priorities?
We delivered a record performance in 2017, with overall growth of 15%. This was
driven by particularly strong performances in France and Germany, up 25% and
12% respectively. Reflecting our confidence, we grew our fee earner headcount
in the region by 352, or 18% compared to December 2016. We anticipate this
investment will drive further growth in the future. This record performance, combined
with efficiency savings from the completed transition to our Shared Service Centre in
Barcelona, led to an increase in our operating profit from £51.7m in 2016 to £69.7m
in 2017, which represents an improvement in the conversion rate to 21.0% (2016:
19.0%).
Gross profit £m
2017
2016
2015
£332.3m
£271.9m
£217.0m
Permanent to temporary ratio
30%
Permanent
Temporary
70%
Headcount
2017
2016
2015
2,996
2,553
2,295
UK
What are your priorities for 2018?
Gross profit £m
We remain mindful of the political and economic uncertainty, and anticipate this will
continue throughout 2018. We will continue to respond to market conditions and look
to progressively consolidate our position in all of our markets. We will also continue
to make selective investments in specific disciplines and regions where we see
opportunities for growth.
2017
2016
2015
£140.8m
£146.3m
£151.6m
How did you deliver against your
2017 priorities?
The UK continued to be impacted by subdued client and candidate confidence
through 2017 as a result of the political and economic uncertainty. Consequently,
we saw a reduction in our gross profit of -3.8%. All disciplines, regions and brands
were impacted to a greater or lesser extent, as were both Permanent and Temporary
recruitment. We did, however, see growth in some individual disciplines, with growth
of 4% from our Technical disciplines.
With our flexible business model, we were able to manage our headcount and
therefore cost base through natural attrition. We ended the year with just over 1,000
fee earners, broadly in line with 2016.
Permanent to temporary ratio
30%
Permanent
Temporary
70%
Headcount
2017
2016
2015
1,407
1,411
1,516
31 | Strategic Report
Asia Pacific
What are your priorities for 2018?
We expect current trading conditions to prevail and will continue to make investments
into our fee earner headcount, particularly into the Group’s Large, High Potential
markets of Greater China and South East Asia. Following highly encouraging progress in
2017, we will continue to drive growth in the domestic markets in China and Japan, as
well as building further upon our established platform in India.
We will also focus on growth in our businesses in Australia and New Zealand, having
made significant investment in our fee earner headcount during 2017 to support recent
management changes and the successful launch of a new office in Canberra.
How did you deliver against your
2017 priorities?
The region saw overall growth of 10.2% for the year, a significant improvement on
2016. There were notable performances from Greater China and Japan, up 14% and
23% respectively. In South East Asia, we delivered growth of 12% and, despite tough
trading conditions in Singapore for the majority of the year, we did see an improvement
in Q4. Conditions in Australasia were more challenging, with gross profit up 1%.
We made significant fee earner headcount investments during 2017, with an overall
increase of 305, or 33%. This was most noticeable in the markets of Australia, Greater
China and Japan.
The Americas
What are your priorities for 2018?
In North America we will continue to grow our business through investment in fee
earner headcount, particularly in our regional offices. We are focused on a small number
of large discipline opportunities in our existing offices and we see this continuing in
2018, before exploring further diversification in 2019 and beyond. Developing our
management infrastructure and retaining top talent is key to delivering these future
goals.
In Latin America, we will continue to invest in our fee earner headcount to take
advantage of the growth opportunities that exist. There will also be a particular focus
on the emerging temporary recruitment market.
How did you deliver against your
2017 priorities?
In North America, our strategy of diversification out of the New York Financial Services
(“NYFS”) market continued, and led to overall growth of 21% for the US, a record year.
We saw standout results from our offices in Boston, Chicago and Los Angeles. Our
business outside of NYFS collectively grew 32% and now represents almost three
quarters of our US business. Reflecting these favourable trading conditions, we made
a significant investment in fee earner headcount, up 21% compared to 2016.
Latin America, one of the Group’s Large, High Potential markets, delivered a record
year, up 14%. Brazil saw improvement in 2017 and was up 3% for the year. Elsewhere,
we saw collective growth of 20% with record performances from all five countries.
Reflecting our confidence and strategy of investing in our Large, High Potential markets,
fee earner headcount increased 15%.
Gross profit £m
2017
2016
2015
£137.2m
£119.7m
£109.1m
Permanent to temporary ratio
13%
87%
Headcount
2017
2016
2015
Permanent
Temporary
1,533
1,205
1,180
Gross profit £m
2017
2016
2015
£101.3m
£83.1m
£78.4m
Permanent to temporary ratio
15%
85%
Permanent
Temporary
Headcount
2017
2016
2015
1,093
930
844
Strategic Report | 32
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
Risk Management
Principal Risks
The Group recognises that the effective
management of risk is key in achieving
our objectives.
A Group risk review process is in place
which identifies the strategic and
operational risks which could impact
our business and determines the
mitigating actions required to ensure that
these risks are controlled to an acceptable
level. Our agreed level of risk appetite,
approved by the Board, guides the level
of acceptable risk.
The process of risk management is an
integral part of our business, forming part
of our strategy review, our business plans
and the delivery of our daily activity.
It is supported by risk registers that are
maintained locally at country and process
level and consolidated twice a year. This is
then combined with a top-down review of
risks conducted with senior management
and the summarised output formally
reviewed 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 also have well established compliance
teams: IT risks and security, who focus
on delivery of activity to mitigate our IT
risks and systems and data security; and
regional revenue recognition compliance
teams who ensure accurate reporting of
our revenue worldwide.
Our Internal Audit programme of activity
aligns the provision of assurance to 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.
Our Risk and Control Framework
Risk and Control Framework
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 9.
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.
The risks around data security (cyber risk)
is one such exception which is reviewed
at Board level on an ongoing basis.
Our risk evaluation includes matters
relating to all our key stakeholders
and encompasses considerations of
governance, social, environmental and
legal requirements.
Controls
Functions
Review
Executive
Board
Board/Audit Committee
Business Reviews/
Internal Control Checklists
Management
Policies and Procedures
Revenue Compliance Teams
IT Security Team
Risk Registers
Group Finance
Risk Management/
Group Financial Control
Audit Reports
Quarterly Updates
Internal Audit
Group Governance Framework
33 | Strategic Report
Risk Appetite and
Net Risk Levels
Recruitment is inherently cyclical and
provides limited forward visibility. This
makes it sensitive to the economic
environment and thus financially volatile
creating a higher gross 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.
Shift in business model
Transformation
and change
PageGroup brands
and reputation
Strategic
People
development and retention
People, attraction,
Risk
Categories
Macro-economic
exposure
Foreign exchange –
translation risk
Financial
Operational
Information systems
Cyber security
Fiscal and legal compliance
Financial management and control
Data protection regulation
Unacceptable to
take risk
Higher willingness to take risk
Risk level
Intended improvements
1. Shift in business model
2. Transformation and change
3. PageGroup brands and reputation
4. People
5. Macro economic exposure
6. Foreign exchange translation
7. Information systems
8. Cyber security
9. Fiscal and legal compliance
10. Financial management and control
11. Data protection regulation
2016
/17
2016
/17
2016
/17
2016
/17
2016
/17
2016
/17
2017
2016
2017
2016
/17
2016
/17
Risk appetite range
PageGroup actual net risk assessment
Further planned improvements
2016 2017
Strategic Report | 34
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Principal Risks and Uncertainties
Strategic Risks
Actions to Mitigate Risk
Shift in Business Model
The emergence of new platforms
technology providers offering HR solutions
and consulting may lead to increased
competition and pressure on margins which
may adversely affect the Group’s results if it
is unable to respond effectively.
Transformation and change
We have a programme of activity which
will complete the transformation of our IT
capability to a Group wide service delivery
model. This is a two year programme
which will build on the work done to date
on centralising our IT in shared service
centres, standardising our infrastructure
and applications and migrating to cloud
services. This level of activity poses
a change management risk to both
successfully deliver the new model
maintain service levels to the business.
The Group is in the process of
implementing a Global Finance System.
This has been developed centrally and has
been successfully rolled out to the UK, US
and ROW businesses with the plan to roll
out to all remaining regions by 2019.
PageGroup brands and reputation
The quality and relevance of service we
provide to both clients and candidates,
could have a significant impact on how
our brand is seen.
As the way clients and candidates source
information changes the awareness of the
PageGroup brand and services of clients
and candidates could deteriorate.
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 reach, increasing the
impact of an incident.
35 | Strategic Report
• We actively monitor developments in
new technologies and their use in the
recruitment sector.
• As well as our ongoing day to day
interaction with clients and candidates,
we conduct formal surveys through
the Exact Target programme which we
are standardising across the Group to
understand how candidate and client
needs are developing.
• We continue to develop Page Outsourcing
in response to RPO’s and the expansion
of internal recruitment functions.
• 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.
• Our revenue attribution model built using
google analytics and AI provides data
driven ROI implementation addressing
online and offline conversions and spend
allocations.
• We have developed a transformation
programme which will manage the
change activities we have defined. This
programme will be governed by the senior
IT leadership Team who are responsible
for both the programme and the provision
of IT services. The components of the
programme have been defined such that
they can be implemented in discrete
phases allowing us to determine the
success of each prior to progressing to
the next stage. We are being supported in
the programme by a specialist third party
organisational change implementation
partner.
• We have built and implemented the
global template into the UK, US and
ROW regions. We have a phased rollout
• Our highly trained and often specialist
consultants maintain an extensive
qualified candidate database which we
use to resource candidates for our clients
at an overall cost that they cannot match.
• We have established an innovation
infrastructure with Executive Board
Governance and regional innovations
groups embedded globally. These
teams continually generate ideas that
are evaluated and those that pass our
criteria are developed and piloted. (For
Audit Committee – we have hired a Group
Insights innovations manager).
• We have also set up a review, led by our
Group Marketing Director on how we can
capitalise on the data we have with the
developments in data analytics and AI.
• Our IT strategy and transformation
initiative recognises the need for us to be
able to respond more rapidly in rolling out
enabling technologies.
plan, by region, of the global template
which is appropriately resourced to
ensure we can protect business as usual
and support regional management in
the successful delivery. We continue to
utilise the expertise of our third party
systems implementation partner and
have dedicated resource within our
IT programme management office to
co-ordinate GFS activity requirements
alongside business as usual and IT
transformation.
• We have programmes that gain feedback
actively from our clients and candidates.
We utilise Exact Target, an event based
survey, and are developing an event based
approach of feedback gathering through
the use of Qualtrix.
• We actively monitor media online through
Brandwatch to identify where there are
unusual references to the PageGroup,
Michael Page, Page Personnel, Page
Executive and Page Outsourcing
trademarks.
• 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 have a programme of activity which
ensures that we communicate effectively
the Page brands, keeping awareness high
among both current and potential clients
and candidates.
• We train our consultants to use new media
effectively, making the channels available
to them as part of their day-to-day activity.
• We have a comprehensive brand
management policy which includes
key areas such as social media, data
protection and information security.
• We have in place a tested incident
response process with clear escalation
and activity guidelines to ensure any
incidents are managed effectively.
• We are supported by external advisers
who provide ongoing advice on the
protection and management of our brand.
People
Actions to Mitigate Risk
People attraction, development
and retention
PageGroup needs to hire, train and retain
a large number of appropriately skilled
people across the Group to achieve its
vision.
The factors that motivate, encourage and
enable individuals to perform to their best
have and will continue to evolve with an
emphasis on work life balance, flexibility
and the working environment.
Diversity is a key enabler to any
successful business. A lack of diversity
in our people will impact on the
achievement of our objectives.
Our biggest challenge is still to address
attrition levels during the first year of
training.
• We have made significant investment
in HR resources, adding a Group Talent
Director and business partners in Europe
and a North America HR Director. We
have also appointed a new Group HR
Director. These will all support our HR
programmes which are focused on
addressing issues around attraction,
development and retention.
• We are also addressing issues such
as work-life balance, flexible working
and benefits schemes and equality
that are seen to have a positive impact
on employees. Our Page programmes
covering these areas have been rolled
out around the Group. We conduct exit
interviews to ensure that we are aware
of any underlying issues that need to
be addressed.
• We have invested more in online learning
capabilities, BOOST!, which commenced
in the UK in February, has now been
rolled out in Europe, LATAM and APAC
and will be rolled out to all operations by
early 2018.
• We have Group-wide initiatives which
look at the issues around achieving
diversity. These are part of our wider
PageGroup programmes which
combined will ensure we create an open
environment where working practices suit
and encourage diversity in all its aspects.
• We have also established mentoring
programmes, a Group-wide appraisal
process and are reviewing our reward
packages.
• We conduct regular employee surveys,
with the last one in September 2017.
This shows us how our people view
working in PageGroup and provides us
with feedback to address and focus
on improving.
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.
Brexit has increased the levels of
uncertainty in the UK.
Foreign exchange translation
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 Group’s
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,
Singapore and US Dollars.
• We maintain our investment in Large, High
Potential markets. Our strategy recognises
Large, High Potential markets in which we
operate, namely Germany, Greater China,
Latin America, South East Asia and the
US, where we believe it is appropriate to
continue to invest through the economic
cycle 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 efficiencies.
• We look for opportunities to develop our
brands and disciplines in each geography.
We have diversified our business by
expanding geographically, by increasing
the number of disciplines we support, and
by establishing four brands to address
the different levels of the recruitment
market: the clerical professional sector;
the qualified professional market and
the executive search sector. We have
expanded our presence in IT recruitment,
initially in Germany, but also in the UK
region and have expanded our US
footprint so that we are not as dependent
on financial services in New York. Overall
• We do not anticipate any hedging for
translation and focus on ensuring the
market correctly adjusts for any impact.
• We are, however, repatriating funds and
converting them back to Sterling to
protect against a Sterling recovery. Our
Group Treasury function takes a much
more proactive role in the management of
our cash resources.
we have also reduced our dependence on
Accounting and Financial Services.
• Driving domestic business in new
markets. In newer markets, for example
Japan and China, we are driving to shift
our client base to include more domestic
businesses.
• We are expanding our variable costs
structure. This enables us to respond
to changes in business levels driven
by economic circumstances. As well
as our variable front end staffing costs,
principally bonus payments, our move to
an IT service based model and the rollout
of a cloud and service based finance
system solution enhances this capability.
Our regional shared service centre
approach to support activities gives us
greater flexibility in resource reallocations.
• We continue to balance our mix of
permanent and temporary recruitment.
This is 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 have a relatively small amount of
cross border trading activity so the
impact on transactions is limited to
intercompany activity.
Strategic Report | 36
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Principal Risks and Uncertainties
Operational Risks
Actions to Mitigate Risk
Information Systems
Our systems are an integral part of our
operations. A major 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.
Failure of our IT systems to adapt to
levels of business activity could result in
lost opportunity during periods of rapid
expansion or excessive costs during
periods of contraction.
The 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.
Our systems must be able to adapt
to the evolving technologies around
Cloud to allow faster implementation of
innovation or we could miss business
opportunities.
Cyber 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.
Our move to the delivery of IT as a
flexible service increases our reliance
on third parties. As a consequence, we
also have an increased reliance on the
third parties’ IT security to secure our
confidential and sensitive data.
We operate in an external environment
that is seeing an increase in, and
sophistication of, cyber attacks from
organised crime and nation states. In
addition, the increased use of social
media and digital communications
channels, as well as reliance on third
parties, Cloud computing and mobile
data facilities, increase our exposure.
ensures that relationships with third party
suppliers are appropriately defined and
operationalised.
• We have invested in resource to support
vendor and asset management. We have
in place service delivery contracts with
our key vendors which include levels of
resilience appropriate to the nature of our
business.
• Our new Global Service Delivery model
will enable faster rollout of our piloted
new services as we standardise our
infrastructure and applications across
the Group. Our Global Service Delivery
model will ensure these services operate
effectively and achieve the benefits
planned before they are deployed.
• Our IT strategy and infrastructure team
are changing our model to one which is
common applications based, enabling
faster adoption of innovation.
• Our core operating systems standards
have been defined globally and under
tighter global governance are delivered
regionally. We have and continue
to migrate to standard platforms,
procedures and processes which gives
us a greater degree of resilience. In
addition, the current transformation in IT
creates global accountability to adopt
and implement the defined standards.
• We now have a standard disaster
recovery plan appropriate for all regions
with the option of transferring to a
Cloud service for each of our services
in the event of a disaster with our core
systems. Our core finance systems
are in the process of migrating onto a
Cloud service. Our IT transformation
programme includes the migration of
core IT services to third party providers
on a SAAS basis. Activity can quickly and
economically be scaled up or down with
business requirements.
• 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. Our central procurement
team, in addition to supporting
management in commercial negotiations,
• We have information security policies in
• Supplier contracts are negotiated and
place for the management of confidential,
sensitive and personal data. Security
risks are identified through a structured
process of assessment and a programme
of remediation activities is executed,
with activities prioritised according to the
associated level of business risk.
• We have a dedicated Global Information
Security team that ensures our
information remains protected. This
includes ensuring appropriate multi-
layered protection at network and system
levels, regular monitoring and third
party testing of our capabilities. The
Information Security team comprises
Security Operations, Security Architecture
and Information Security Management.
The team not only deals with IT security
matters, but also works directly with
suppliers and key business stakeholders
to ensure everyone across the business
protects the data of our Group, clients
and candidates.
• We have technical security protections in
place that mitigate the risks posed by the
use of modern communications media,
Cloud services and mobile devices. The
threat landscape is under constant review
to ensure our technology provides the
right level of protection.
reviewed to ensure data protection and
IT security obligations are included as a
standard requirement.
• New IT projects and initiatives are
reviewed for security risk, to ensure new
technologies are adopted safely.
• Security vulnerabilities are assessed
regularly and the remediation of identified
risks and alerts is tracked to conclusion.
Regular security assurance checks take
place across all regions and penetration
testing is undertaken by specialist third
parties.
• The Board and Audit Committee reviews
data security on a regular basis and
receives updates on the status of our
security programme.
• We continue to review our processes
and resource requirements in line with
developments in how our business
operates, the level of reliance on
third party suppliers and the level of
external risk. During the year we further
strengthened the team with additional
resource to maintain this focus.
37 | Strategic Report
Operational Risks
Actions to Mitigate Risk
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.
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.
Data Protection Regulations
New European data protection legislation
comes into force in May 2018. This
increases data governance and
management requirements significantly,
as well as increasing the potential
penalties for non compliance or
data breaches.
Legislation was also introduced in
June 2017 in the People’s Republic of
China, which requires data of Chinese
citizens to be held and processed in
Mainland China.
• The Company Secretary and local legal
and compliance teams are advised by
leading external advisers, as required,
with 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, sanctions and
pre-employment checks.
• The Group has central tax and treasury
functions, which manage 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.
• Sales and procurement contracts include
clauses to ensure the Group’s rights are
protected. All non standard contracts are
legally reviewed and where appropriate
approved by senior management.
• The Group has financial policies and
procedures which are reviewed on a
regular basis. Changes are approved by
the Audit Committee.
• Regional and local finance teams ensure
that Group reporting requirements adhere
to these policies as well as ensuring local
statutory requirements are met. The Group
Finance function reviews submissions to
ensure policies are adhered to.
• Monthly management information is
produced that supports effective financial
management.
• The Group operates regional shared
service centres which, as well as driving
efficiencies, enable more effective control
of activities through common processes
and segregation of control activities.
• The Finance structure mirrors and
supports local, regional and Group
management structures.
• There are compliance teams located
in each region that support the local,
regional and Group management in
ensuring revenues are appropriately
recognised.
• Internal Audit regularly review local and
regional financial controls and report on
the results to the Executive Board and the
Audit Committee.
• We have convened a GDPR Steering
Committee to agree requirements,
champion implementation and monitor
progress to ensure that we are compliant
with the regulatory requirements by
the implementation date. We are being
supported by external specialists in data
protection.
• A gap analysis has been performed and
we are implementing the new processes
and procedures required. Amongst others,
we are updating the Company’s Data
Protection Policy and Data Retention
Policy, updating contracts with all suppliers
that process personal data, creating the
documentation required to demonstrate
compliance at all times and updating
our procedures to respond to statutory
requests from data subjects in good time.
• A programme of data protection
awareness and training has been put
together to ensure that personnel and
management are aware of the new
legislation. Training will be delivered in
a repeatable, tracked manner, allowing
staff to receive regular refresher training.
Specialist training will be provided where
required.
• We have engaged with third party
consultants to assist in interpreting the
highly complex high-level law and advise
on an appropriate course of action.
• Where necessary, this could include
migrating the data of Chinese nationals
(including candidates, clients and
employees) into datacentres and Cloud
services in Mainland China for the
purpose of processing candidate data,
finance and payroll and our own data
processing activities.
• Management have appointed a Group
Data Protection Officer, who, together
with the legal teams in our regions, will
proactively monitor the ever-changing
legislative landscape to ensure we remain
ready and able to respond as necessary.
The Board’s view of direction of travel of gross risk:
Similar to prior year
Lower than prior year
Increased since prior year
Strategic Report | 38
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Principal Risks and Uncertainties
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
35 to 38. 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 8 to 16 and 35
to 38. 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 Vision. These are
typically three years. Our Strategic Vision
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 2016 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 31 December
2020. This period 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, while
still providing an appropriate longer-term
outlook. While 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.
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 pages 35 to 38, or a
combination of those risks. We considered
cyber incidents, disintermediation by way
of innovation, changes in technology,
movements in foreign exchange rates,
and a global downturn. We have assumed
that, as in the past, as downside risks
materialise our headcount will flex through
natural attrition in line with the drop in
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 35 to 38.
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 31
December 2020. However, we operate
in an environment of limited visibility,
dependent upon confidence in the global
marketplace. Further weakness in the
macro-economic outlook may cause us
to adapt our strategy during the three-
year period in response, leading to a
re-evaluation of additional risks involved
which might impact the business model.
39 | Strategic Report
Review of the Year
Financial summary
Revenue
Gross profit
Operating profit
Profit before tax
Basic earnings per share
Diluted earnings per share
Total dividend per share (excl. special dividend)
Total dividend per share (incl. special dividend)
*In constant currency at prior year rates
At constant exchange rates, the
Group’s revenue and gross profit for
the year ended 31 December 2017
both increased 9.8%. At reported rates,
revenue increased 14.7% to £1,371.5m
(2016: £1,196.1m) and gross profit
increased 14.6% to £711.6m (2016:
£621.0m).
The Group’s revenue mix between
temporary and permanent placements
was 60:40 (2016: 60:40) and for gross
profit our permanent to temporary ratio
was 75:25 (2016: 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 21.2% in 2017 (2016: 21.0%).
Overall, pricing remained relatively stable
across all regions, although a stronger
pricing environment was experienced
Regional Reviews
2017
2016
£1,371.5m
£1,196.1m
£711.6m
£118.3m
£118.2m
26.5p
26.4p
12.50p
25.23p
£621.0m
£101.0m
£100.0m
23.1p
23.1p
11.98p
18.44p
Change
CER*
+9.8%
+9.8%
+11.3%
Change
+14.7%
+14.6%
+17.2%
+18.2%
+14.7%
+14.3%
+4.3%
in markets and disciplines where there
were increased instances of candidate
shortages.
Our Large, High Potential Markets
category increased 14.8% in constant
currencies and achieved a record
gross profit of £222.7m and growth of
19.9% in reported rates. All five markets
included within this category achieved
record gross profit and delivered double
digit growth.
Total Group headcount increased by 930
in the year, up 15.2% to a record 7,029.
This comprised a net increase of 786
fee earners (+16.7%) and an increase of
144 operational support staff (+10.4%),
reflecting the continued strong focus on
operational efficiency. The ratio of net
additions in the year was 85 fee earners
to 15 operational support staff.
As a result, our fee earner to operational
support staff ratio improved to a record
level of 78:22. In total, administrative
expenses increased 14.1% to £593.2m
(2016: £520.1m). The Group's operating
profit from trading activities totalled
£118.3m (2016: £101.0m), an increase
of 11.3% at constant rates and 17.2% in
reported rates.
The Group’s conversion rate of gross
profit to operating profit from trading
activities increased to 16.6% (2016:
16.3%). 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 Australia, Brazil, Singapore and
the UK.
Gross profit
Year-on-year
EMEA
UK
Asia Pacific
Americas
Total
Permanent
Temporary
% of Group
47%
20%
19%
14%
100%
75%
25%
2017
332.3
140.8
137.2
101.3
711.6
536.0
175.6
Reported (£m)
2016
271.9
146.3
119.7
83.1
621.0
470.0
151.0
%
+22.2%
-3.8%
+14.6%
+21.9%
+14.6%
+14.1%
+16.2%
CER
%
+15.0%
-3.8%
+10.2%
+16.4%
+9.8%
+9.4%
+11.1%
Strategic Report | 40
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Review of the Year
Europe, Middle East and Africa (EMEA)
EMEA
Gross profit (£m)
Growth rates
(47% of Group in 2017)
Gross profit
Operating profit
2017
332.3
69.7
2016
271.9
51.7
Reported
CER
+22.2%
+34.8%
+15.0%
+26.2%
Market Presence
EMEA is the Group’s largest region,
contributing 47% 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 70% and temporary
placements 30% 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 (markets
where less than 30% of recruitment
is outsourced) and significant growth
potential, particularly in temporary
recruitment. In addition, there are a
United Kingdom
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 2017, the EMEA region saw strong
market conditions, with 10 countries
delivering record gross profit for the year.
In constant currency, revenue increased
18.1% on 2016 and gross profit increased
by 15.0%. In reported rates, revenue in the
region was up 25.6% to £676.0m (2016:
£538.4m), and gross profit increased
22.2% to £332.3m (2016: £271.9m). The
region benefited from favourable foreign
exchange movements that increased
revenue and gross profit by £40m and
£20m, respectively.
UK
Gross profit (£m)
Growth rates
(20% of Group in 2017)
Gross profit
Operating profit
2017
140.8
16.0
2016
146.3
24.2
-3.8%
-33.8%
Market Presence
The UK represented 20% of the Group’s
gross profit in 2017 and is the Group’s
largest single market, operating from
27 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
market leading 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 four
brands of Michael Page, Page Personnel,
Page Executive and Page Outsourcing
with representation in 12 specialist
disciplines via the Michael Page brand.
There remains opportunity to roll-out new
discipline businesses under the lower-
level Page Personnel brand, which now
represents 22% of UK gross profit. Our
Michael Page business was impacted
the most by the current macro-economic
uncertainty, with activity levels stronger
at the lower salary levels and in Page
Personnel.
Performance
Revenue of £312.9m (2016: £324.5m)
and gross profit of £140.8m (2016:
£146.3m) declined 3.6% and 3.8%
respectively, reflecting continued
Our larger businesses in France, Germany
and the Netherlands, together representing
nearly 60% of the region by gross profit,
grew 25%, 12% and 14% respectively, for
the full year in constant currencies. Michael
Page Interim in Germany, where last year
we invested heavily in temporary and
contracting recruitment, grew 19%. Overall,
9 countries, representing 84% of the region,
delivered double-digit growth during the
year.
The Middle East and Africa, which
represented 4% of the region, saw an
improvement compared to the prior year
with a decline of -1% (2016: -7%).
The 34.8% increase in operating profit for
2017 to £69.7m (2016: £51.7m) and the
increase in the conversion rate to 21.0%
(2016: 19.0%) was the result of continued
favourable market conditions in the region,
combined with good control over costs as
a result of our transition in to our European
Shared Service Centre.
Headcount across the region increased by
443 (+17.4%) to 2,996 at the end of 2017
(2016: 2,553). The majority of this increase
was fee earners, as the business added
headcount where growth opportunities
were strongest, predominately in France,
Germany and Southern Europe.
economic uncertainty.
UK disciplines such as Engineering
(+6%), Property & Construction (+10%)
and Technology (+7%), performed well.
However, market conditions in our Legal
discipline (-11%) and Sales and Marketing
disciplines were more challenging, with
Marketing down 11%. Michael Page and
Page Personnel were affected relatively
equally, down 4% and 3%, respectively.
These challenging market conditions
resulted in a decline in operating profit of
33.8% to £16.0m (2016: £24.2m) and a
reduction in the conversion rate to 11.4%
(2016: 16.5%). Excluding the effect of share
plan charges, for which the UK takes a
disproportionate charge due to location of
senior management, conversion would have
been around two percentage points higher.
Headcount remained broadly flat at 1,407
at the end of December 2017 (2016:
1,411). With a relatively high staff turnover
of newer, less experienced consultants,
we will continue to monitor activity and
will, if needed, use that turnover to lower
headcount, and therefore costs, by natural
attrition.
41 | Strategic Report
Asia Pacific
Asia Pacific
Gross profit (£m)
Growth rates
(19% of Group in 2017)
Gross profit
Operating profit
2017
137.2
23.5
2016
119.7
20.7
Reported
+14.6%
+13.5%
CER
+10.2%
+8.6%
Market Presence
Asia Pacific represented 19% of the
Group’s gross profit in 2017, with
73% of the region being Asia and
27% 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 markets
at good conversion rates. Two of our
Large, High Potential Markets, Greater
China and South East Asia, are in
this region. With a highly experienced
management team, over 1,000 staff
and limited competition, the size of the
opportunity in Asia is significant. Across
Asia, driven by cultural attitudes towards
white collar temporary recruitment,
permanent placements accounted for
95% and temporary placements 5% of
gross profit.
The Americas
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 and grow market
share.
Performance
In Asia Pacific, in constant currencies,
revenue increased 7.4% and gross profit
increased by 10.2%. In reported rates,
revenues increased 12.7% to £236.3m
(2016: £209.7m), while gross profit rose
14.6% to £137.2m (2016: £119.7m).
Asia, representing 14% of the Group,
delivered gross profit growth of 15%.
Greater China returned to growth in
the year up 14% (2016 -4%), driven
Americas
Gross profit (£m)
Growth rates
(14% of Group in 2017)
Gross profit
Operating profit
2017
101.3
9.2
2016
83.1
4.4
Reported
+21.9%
+108.6%
CER
+16.4%
+96.5%
Market Presence
The Americas represented 14% of the
Group’s gross profit in 2017, being
North America (56% of the region) and
Latin America (44% of the region). Both
the US and Latin America are two of
the Large, High Potential Markets in
our growth strategy. The US, where
we have eight 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 over 600 employees in six
countries and 14 offices. There are few
international competitors and none with
regional scale. Across Latin America,
permanent placements accounted
for 91% of gross profit and temporary
placements 9%.
Performance
In constant currencies, revenue
increased by 12.8% and gross profit
increased by 16.4%. In reported
rates, revenue increased by 18.5% to
£146.3m (2016: £123.5m) while gross
profit improved 21.9% to £101.3m
(2016: £83.1m). During the year, the
region benefited from favourable foreign
exchange movements that increased
by Mainland China where our offices
in Beijing and Shanghai performed
particularly well. In Hong Kong, where
we have a large number of multinational
clients, we also saw an improvement in
market conditions and delivered growth
of 7%. South East Asia was up 12%
on the prior year driven by growth in
Indonesia and Malaysia up 48% and
11% respectively. Singapore, despite
challenging market conditions, returned
to growth in the second half of the year.
Japan, where we invested heavily in
fee earners, saw growth of 23% and
delivered a record year. In Australia,
where we were up 1% against the prior
year, we saw an improvement towards
the end of the year following a 25%
investment in our fee earner headcount
and the opening of a new office in
Canberra.
Operating profit rose 13.5% to £23.5m
(2016: £20.7m), with the conversion
rate broadly flat at 17.1% (2016: 17.3%)
despite our fee earner investment in the
region. Headcount across the region
rose by 327 (27.1%) in the year, ending
the year at 1,532 (2016: 1,205). The
majority of these headcount additions
were in Asia, particularly Greater China
and Japan.
revenue and gross profit by £7m and
£5m, respectively.
In North America, our gross profit
increased by 18% in constant
currencies. This was driven by the
US (+ 21%) where we saw strong
performances from our regional offices
including Boston, Chicago and Los
Angeles, as our strategy of diversification
continued into disciplines outside of
Financial Services in New York.
In Latin America, gross profit was
up 14% year-on-year in constant
currencies. Our business in Brazil
returned to growth, up +3%, as we saw
an improvement in trading conditions as
the year progressed. Excluding Brazil,
the other countries in the region, which
made up two thirds of Latin America,
saw growth of 20% and all delivered
record years.
Operating profit increased 108.6% to
£9.2m (2016: £4.4m), with a conversion
rate of 9.0% (2016: 5.3%). Headcount
increased by 164 (+17.6%) in 2017 to
1,094 (2016: 930).
Strategic Report | 42
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 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
three-quarters of costs were employee
related, including wages, bonuses, share-
based long-term incentives, and training &
relocation costs.
Our fee earner to operational support staff
ratio improved to a record level of 78:22,
with our ongoing focus on conversion
rates and maximising productivity from
the investment of 227 fee earners added
in 2016, as well as the further 786 added
in 2017. Net additions in the year were at
a ratio of 85 fee earners to 15 operational
support staff.
The combination of gross profit growth,
the weakness in Sterling and the ongoing
focus on cost control resulted in operating
profit of £118.3m (2016: £101.0m), an
increase of 17.2% in reported rates and
11.3% in constant currencies.
Depreciation and amortisation for the
year totalled £19.1m (2016: £17.1m).
This included amortisation relating to our
operating system, PRS, of £8.1m (2016:
£7.6m).
The Group’s conversion rate for the period
of 16.6% was an improvement from 16.3%
in 2016. This was achieved alongside the
Group’s investment programme, which
was focused in particular on our Large,
High Potential Markets, and despite the
tough market conditions faced in some of
the Group’s core markets as well as our
operational support programmes.
In EMEA, conversion increased from
19.0% to 21.0%. This was driven by the
benefits of operational gearing coming
through, combined with cost benefits from
our new European shared service centre in
Barcelona. In the UK, the conversion rate
fell from 16.5% to 11.4%, while Asia Pacific
remained broadly flat at 17.1% (2016:
17.3%), despite our high level of fee earner
investment in the region. The America’s
conversion rate increased from 5.3% to
9.0% due to an improvement in trading
conditions.
The Group benefited from movements
in foreign exchange rates, as Sterling
weakened against almost all currencies in
which the Group operates. The weakness
of Sterling increased the Group’s revenue,
gross profit and operating profit by £58m,
£29m and £6m, respectively.
A net interest charge of £0.2m reflected the
continuing low interest rate environment.
Interest of £0.2m was received on cash
balances held through the year, offset by
financial charges relating to the Group’s
invoice discounting facility and overdrafts
used to support local operations of £0.4m.
Earnings Per Share and
Dividends
In 2017, basic earnings per share
increased 14.7% to 26.5p (2016:
23.1p), reflecting the improved business
performance, as well as some favourable
foreign exchange movements. Diluted
earnings per share, which takes into
account the dilutive effect of share options,
was up 14.3% to 26.4p (2016: 23.1p).
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 8.60p (2016: 8.23p) per ordinary share
is proposed. When taken together with the
interim dividend of 3.90p (2016: 3.75p) per
ordinary share, this would imply an increase
in the total dividend for the year of 4.3%
over 2016 to 12.50p per ordinary share.
The proposed final dividend, which
amounts to £27.1m, will be paid on 18
June 2018 to shareholders on the register
as at 18 May 2018, subject to shareholder
approval at the Annual General Meeting on
7 June 2018.
After consultation with our shareholders,
we also paid a special dividend of 12.73p
per share on 11 October 2017, totalling
£40m. We will continue to monitor our cash
position in 2018 and will make returns to
shareholders in line with the above policy.
Cash Flow and Balance Sheet
Cash flow in the year was strong, with
£124.5m (2016: £121.3m) generated from
operations. The closing net cash balance
was £95.6m at 31 December 2017, an
increase of £2.8m on the prior year. The
movements in the Group’s cash flow in
2017 reflected the underlying trading
conditions, with a £19.6m increase in
working capital.
The Group had a £50m invoice financing
arrangement and £13m uncommitted
overdraft facilities to support cash flows
across its operations and ensure rapid
access to funds should they be required.
None of these were in use at the year end.
Income tax paid in the year was £38.2m
(2016: £32.5m). The increase of £5.7m
over 2016 arose largely because of a
payment in the UK on agreeing the taxation
of prior year repayments of VAT which had
been fully provided for.
Net capital expenditure in 2017 was
£16.2m (2016: £23.4m). Spending on
software decreased from 2016 when we
completed the implementation of our
new operating system, PRS and started
the transition to our new Global Finance
System. Spending on property, plant and
equipment decreased due to large office
moves in 2016 in New York, Tokyo and
Neuilly, Paris, which is now the Group’s
largest office by headcount. There were no
such significant moves in 2017.
Dividend payments were up on the prior
year at £78.3m (2016: £56.3m), as a
result of the larger special dividend paid
in 2017. There was also a significant
increase in cash receipts from share option
exercises. In 2017, £12.7m was received
by the Group from the exercise of options
compared to £0.4m received in 2016,
driven by the higher share price. In 2016,
£15.1m was also spent on the purchase
of 3.7m shares by the Employee Benefit
Trust to satisfy future obligations under our
employee share plans. No such purchase
was made in 2017.
The most significant item in our balance
sheet was trade receivables, which
amounted to £245.4m at 31 December
2017 (2016: £205.1m), comprising
permanent fees invoiced and salaries and
fees invoiced in the temporary placement
business, but not yet paid. Day’s sales in
debtors at 31 December 2017 were 53
days (2016: 50 days).
43 | Strategic Report
Cash flow waterfall 2017
250
225
200
175
150
125
100
75
50
£m
92.8
(19.6)
(39.8)
144.1
(16.2)
12.7
Cash
Increase
Decrease
(38.2)
(40.1)
(0.1)
95.6
Dec 2016
EBITDA
Working
Capital
Tax and net
interest
Net
Capex
Net option
exercises/
EBT purchases
Dividends
Paid
Exchange
Dec 2017
Options were exercised over 3.2m
shares, generating £12.7m in cash,
and options lapsed over 1.0m shares.
At the end of 2017, options remained
outstanding over 15.5m shares, of which
8.6m had vested, but had not been
exercised. During 2017, no shares were
repurchased by the Company or the
Group’s Employee Benefit Trust, and
no shares were cancelled (2016: 3.7m
shares were purchased at a cost of
£15.1m).
Approved by the Board on 6 March
2018 and signed on its behalf by:
Kelvin Stagg
Chief Financial Officer
Foreign Exchange
Foreign exchange provided a substantial
benefit to our reported results for the
year, increasing gross profit by £29m,
administrative expenses by £23m and
therefore operating profit by £6m. This
impact was felt globally, but the largest
impact was within EMEA, where gross
profit increased by £20m.
Taxation
The tax charge for the year was £35.1m
(2016: £27.9m). This represented
an effective tax rate of 29.7% (2016:
27.9%). The rate is higher than the
effective UK rate for the calendar year of
19.25% (2016: 20.0%) principally due to
the impact of disallowable expenditure
and higher tax rates in overseas
countries. There are some countries
in which the tax rate is lower than the
UK, but the impact is very small either
because the countries are not significant
contributors to Group profit or the tax
rate difference is not significant.
The effective rate was impacted
principally by the US tax reform which
reduced the headline rate of tax from
35% to 21% from 1 January 2018. This
resulted in a write down of deferred tax
assets representing the future value
for accumulated losses and other
deductions which, together with other
adjustments in the US, increased the
tax charge by 2.4%. Going forwards,
depending on the relative profitability of
the US within PageGroup and having
regard to the interaction of federal
tax with state tax, we may expect the
headline rate to benefit the Group ETR
by c. 0.5 percentage points. In addition,
the tax rate was impacted by tax on
share based payments (0.7% decrease),
a reduction in provisions for tax risk
(0.6%) and the recognition/derecognition
of losses (0.3% decrease).
The tax charge for the year reflects the
Group’s tax strategy, which is aligned
to business goals. It is PageGroup’s
policy to pay its fair share of taxes in the
countries in which it operates and deal
with its tax affairs in a straightforward,
open and honest manner. The Group’s
tax strategy is set out in detail on our
website in the Investor section under
“Responsibilities”.
Share Options and Share
Repurchases
At the beginning of 2017 the Group
had 17.9m share options outstanding,
of which 7.8m had vested, but had
not been exercised. During the year,
options were granted over 1.7m shares
under the Group’s share option plans.
Strategic Report | 44
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Chairman’s Introduction to Corporate Governance
overall strategic direction of PageGroup
and supports its core values, policies
and procedures, which in turn, creates
an environment in which our business
and employees can act with integrity
and effectiveness, while driving profitable
growth. 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.
The Board continued to build a strong and
well balanced Board with the appointment
of Sylvia Metayer and Angela Seymour-
Jackson as Non-Executive Directors of
the Company. Sylvia brings extensive
experience to the PageGroup Board,
having held a variety of finance and
general management roles in companies
operating in a number of different sectors.
She is also a Chartered Accountant,
so adds to the financial experience of
the Audit Committee. Angela has a
wealth of experience in service focused
organisations and has both executive and
non-executive director experience from a
number of different companies. The skills
and experience of both Sylvia and Angela
complement that of the other Board
members, providing a balanced Board.
Baroness Ruby McGregor-Smith stepped
down from the Board in May 2017 and,
in March 2018, Danuta Gray decided
not to offer herself for re-election at the
forthcoming Annual General Meeting on
7 June 2018. Danuta will also cease to be
Chair of the Remuneration Committee and
Angela Seymour-Jackson will be appointed
in her stead. I would like to thank both
Ruby and Danuta for their contribution to
the Company.
I hope you find our Corporate Governance
Report informative. I will be available at the
2018 Annual General Meeting to respond
to any questions you may have on this
Report.
David Lowden
Chairman
6 March 2018
David Lowden,
Chairman
Dear Shareholder,
I am pleased to present the Company’s
Corporate Governance Report for the
financial year ended 31 December
2017. Your Board believes that sound
governance, both in the boardroom and
throughout the Group, is fundamental to
the long-term success of the business.
It remains committed to high standards
of governance and the fostering of an
effective governance framework. This
underpins the Board’s ability to set the
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 52 to 55
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 51
Chief Financial
Officer (CFO)
Responsible for managing the
financial risks, reporting and
planning of the Group.
Company Secretary
Responsible for ensuring the
Board complies with all legal,
regulatory and governance
requirements.
Nomination
Committee
Responsible for ensuring that the
Company has the executive and non-
executive Board leadership it requires.
Details on page 56
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 58
Remuneration Committee
Responsible for the review,
recommendation and implementation
of the Group’s remuneration strategy,
its framework and cost.
Details on page 64
45 | Corporate Governance
Our Board of Directors
David Lowden, Chairman
Date of Appointment:
Director August 2012
Chairman December 2015
Past Roles: David was a member of the Board of Taylor Nielson Sofres plc, the marketing
services business, from 1999 to 2009, becoming Chief Executive Officer in 2006. Before
joining Taylor Nielson Sofres plc David held senior financial positions in Asprey plc, A.C.
Nielsen Corporation and Federal Express Corporation. David was also Senior Independent
Director and Chairman of the Remuneration Committee of Berensden plc from March 2010
until September 2017.
Other Current Appointments: Non-Executive Director and Chairman of the Audit and
Risk 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
• Strong financial, marketing and commercial skills
•
Experienced non-executive in several sectors
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 several 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:
•
•
•
•
•
•
•
30 years’ service with the Group and recruitment industry
12 years as a CEO of a FTSE 250 public company, 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
over 7,000 employees
Experience in other sectors and industries having worked on the Boards of a major
charity and retailer
• Awarded the Institute of Recruitment Professionals Lifetime Achievement Award in
2017
Corporate Governance | 46
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Our Board of Directors
Kelvin Stagg, Chief Financial Officer, Executive Director
Date of Appointment: June 2014
Past Roles: Kelvin joined PageGroup 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 ten years in the Group with a detailed knowledge of the Group’s operations
Extensive experience in finance, audit and risk management
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
Simon Boddie, Independent Non-Executive Director
Date of Appointment: September 2012
Past Roles: Simon qualified as a Chartered Accountant with Price Waterhouse. He was
Group Finance Director of Electrocomponents plc from 2005 until 2015. Prior to that
Simon held a variety of senior finance positions with Diageo over a 13-year career, latterly
Finance Director of Key Markets.
Other Current Appointments: Chief Financial Officer, Coats Group plc.
Board Committees: Audit (Chairman), Nomination, Remuneration
Skills and Experience:
• CFO of FTSE 250 public company for over ten years
•
Extensive experience in financial, audit and risk management
• Many years of operating within international businesses with cultural diversity
•
Emerging markets experience
• Strong strategic and commercial understanding
• Broad industry experience, including consumer goods, distribution and manufacturing
47 | Corporate Governance
Danuta Gray, Independent Non-Executive Director
Date of Appointment: December 2013
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, was a Director of Business in the Community Ireland and Aer
Lingus plc and a Non-Executive Director of Paddy Power Betfair plc.
Other Current Appointments: Non-Executive Director and Remuneration Committee
Chairman, Old Mutual plc; Interim Chair of Aldermore Bank PLC; Non-Executive Director,
Direct Line Insurance Group 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
Michelle Healy, Independent Non-Executive Director
Date of Appointment: October 2016
Past Roles: Before joining ISS in April 2015 Michelle was Director, Group Integrated
Change Programme at SABMiller plc. Prior to this, Michelle was General Manager UK
& Ireland for British American Tobacco plc, having previously held a number of senior
roles within the Group. Michelle’s earlier career included assignments with Kerry Group
plc and Trust Management Consultants in Germany.
Other Current Appointments: Group Chief People & Culture Officer, ISS World
Services A/S.
Board Committees: Audit, Nomination, Remuneration
Skills and Experience:
•
•
•
Extensive experience in global human resources leadership
Leading and delivering change
Extensive experience in general management
Corporate Governance | 48
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Our Board of Directors
Patrick De Smedt, Senior Independent Director
Date of Appointment: August 2015
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: 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.
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
Sylvia Metayer, Independent Non-Executive Director
Date of Appointment: September 2017
Past Roles: Sylvia has previously held a variety of finance and general management roles
in companies operating in a number of sectors, including Mattel Inc, Vivendi SA, and
Houghton Mifflin Harcourt & Co.
Other Current Appointments: Chief Executive, Worldwide Corporate Services of
Sodexo SA and member of the Sodexo Group Executive Committee. Trustee of the
Quebec-Labrador Foundation and member of the Research Orientation Committee of the
Foundation of HEC Business School, Paris.
Board Committees: Audit, Nomination, Remuneration
Skills and Experience:
•
•
•
•
Extensive experience and understanding of international markets, including the USA,
Europe, China, India, and South East Asia
Extensive experience in general and financial management
Leading and delivering change
Finance, HR, IT and Supply Chain management
• Proven ability for delivering shareholder value
• Strong strategic understanding
49 | Corporate Governance
Angela Seymour-Jackson, Non-Executive Director
Date of Appointment: October 2017
Past Roles: Angela has previously held Executive Director roles with Aegon UK, RAC
Motoring Services Limited and Aviva UK Limited, and was Senior Advisor to Lloyds
Banking Group (insurance). Prior to that Angela held senior marketing roles with
Bluecycle.com Limited, CGU Insurance plc, General Accident plc and the Norwich Union
Insurance Group.
Other Current Appointments: Deputy Chairman, Senior Independent Director and
Chair of the Remuneration Committee at GoCompare.com Group plc; Non-Executive
Director at Janus Henderson Group plc, esure plc and Rentokil Initial plc.
Board Committees: Audit, Nomination, Remuneration
Skills and Experience:
• Wealth of experience in service focused organisations
•
Experienced executive and non-executive in several sectors
• Strong marketing and commercial skills
• Strong strategic understanding
• Member of the Chartered Institute of Marketing
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.
Skills and Experience:
• Over 25 years’ experience as a Chartered Secretary
•
Extensive public company, compliance and corporate governance experience
• General counsel experience in FTSE 250 companies from a number of
business sectors
Corporate Governance | 50
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION The Executive Board
Steve Ingham
Gary James
Patrick Hollard
Chief Executive Officer,
Executive Director
Executive Board Director,
Asia Pacific
Executive Board Director,
Latin America, Middle East and Africa
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.
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.
See biography on page 46.
Kelvin Stagg
Chief Financial Officer,
Executive Director
See biography on page 47.
Anthony Thompson
Executive Board Director,
Asia (excluding Japan)
Oliver Watson
Executive Board Director,
UK, USA and Canada
Anthony moved from South Australia
to commence his Michael Page career
in Hong Kong in 2001. He managed
and established several disciplines and
brands in Hong Kong and China and was
appointed Managing Director, Hong Kong
and Southern China in 2006. In 2012,
he was appointed Regional Managing
Director for Greater China with several
offices established across China, Hong
Kong and Taiwan. In 2015, Anthony moved
to Singapore with additional responsibility
for PageGroup in South East Asia which
now encompasses offices in Singapore,
Malaysia, Indonesia and Thailand. In
2016 he also became responsible for
India. Anthony is currently responsible for
PageGroup's operations in Greater China,
South-East Asia and India.
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.
51 | Corporate Governance
Corporate Governance Report
Compliance with the UK
Corporate Governance Code
During the year ended 31 December
2017 and to the date of this document,
the Company has complied with the
provisions of the UK Corporate
Governance Code 2016 (the “Code”).
The Code is publicly available on the
FRC website (www.frc.org.uk). In this
Corporate Governance section, together
with the Strategic Report on pages 1 to
44, the Directors’ Remuneration Report
on pages 63 to 76 and the Directors’
Report on pages 82 to 84, we describe
how we have applied the main principles
of the Code.
The Board and its operation
The Board of PageGroup 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 six Non-Executive
Directors. The biographies of each of
these Directors can be found on pages
46 to 50.
Sylvia Metayer and Angela Seymour-
Jackson were appointed as Non-
Executive Directors of the Company
on 1 September 2017 and 1 October
2017 respectively. Baroness Ruby
McGregor-Smith ceased to be a Non-
Executive Director of the Company
on 23 May 2017. All other Directors
served throughout the year. The Board
considers that during the year under
review, and in the case of Sylvia Metayer
and Angela Seymour-Jackson from
their respective dates of appointment
onwards, each of Simon Boddie, Patrick
De Smedt, Danuta Gray and Michelle
Healy were independent. In addition, the
Board determined that David Lowden
was independent at the time of his
appointment as Chairman.
There is a clear division of responsibilities
between the role of the Chairman and
that of the Chief Executive Officer. While
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 46. The Board considers
that these are not a constraint on the
Chairman’s agreed time commitment to
the Company.
Patrick De Smedt as Senior Independent
Director acts as an alternative channel
of communication for shareholders. He
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.
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
Corporate Governance | 52
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Corporate Governance Report
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.
The Board uses a third party board
portal to distribute information 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
all Non-Executive Directors and is 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 58 to 60;
the Nomination Committee Report on
pages 56 and 57; and the Directors’
Remuneration Report on page 64.
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 51. 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
and North America, Continental Europe,
Asia Pacific and Latin America, Middle East
and Africa. Each regional board usually
meets at least four times a year.
Board and Committee
Attendance
The table below sets out the number of
meetings of the Board held during the
year and individual attendance by the
Directors at these meetings, demonstrating
commitment to their role as Directors of
the Company. Attendance by the relevant
members of each Committee can be found
on page 58 (Audit Committee), page 57
(Nomination Committee) and page 64
Director
David Lowden
Simon Boddie
Patrick De Smedt
Danuta Gray
Michelle Healy
Steve Ingham
Baroness Ruby McGregor-Smith1
Sylvia Metayer2
Angela Seymour-Jackson2
Kelvin Stagg
Notes:
(Remuneration Committee). The Board
met eight times during the year. 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 without
the presence of the Chairman.
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 Board level and the Group
as a whole can be found in the Nomination
Committee Report on page 56 and the
Strategic Report on page 28.
No. of meetings
Held
Attended
8
8
8
8
8
8
8
8
8
8
8
8
8
8
8
8
3
1
2
8
1. Baroness Ruby McGregor-Smith ceased to be a member of the Committee on 23 May 2017 so was only eligible
to attend three meetings.
2. Sylvia Metayer and Angela Seymour-Jackson were appointed to the Committee on 1 September 2017 and
1 October 2017 respectively, so were only eligible to attend two Committee meetings. Sylvia Metayer was
unable to attend one of the two meetings as she had a prior engagement which had been scheduled prior to her
appointment as a Director of the Company.
53 | Corporate Governance
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. In accordance with the
Code, in 2016 an externally facilitated
evaluation was undertaken by Lintstock
Limited (an advisory firm that specialises
in Board performance reviews) of the
Board and each of the Audit, Nomination
and Remuneration Committees. The
2017 review of the Board and its
Committees followed up on the themes
of and actions points from the 2016
review, to ensure that year-on-year
progress was measured. The review was
facilitated by Lintstock through the use
of questionnaires with anonymity of all
respondents being ensured throughout
the process in order to promote the
open and frank exchange of views.
Apart from the provision of this service,
Lintstock has no other connection with
the Group. The Senior Independent
Director conducted a review of the
Chairman and the Chairman evaluated
the performance of the individual
Directors, by means of interviews for
both review processes.
Whilst material progress has been made
on the 2016 action points, the Directors
agreed that the actions were still relevant
and further work would be undertaken in
2018. The action points were:
•
Focus on future Board composition
priorities, taking into account
the likely tenure of current Non-
Executive Directors
• Continue enhancing the
understanding of PageGroup
through site visits and by engaging
with management outside of Board
meetings
• Assess the quality of information
provided to the Board, particularly
on strategic initiatives
• Continue to focus on key strategic
•
issues and investments
Focus on overseeing the
development of the senior
leadership team, with the support of
the Group HR Director
In addition it was agreed to:-
•
•
conduct, in 2018, a third party
quality assessment of the Group’s
Internal Audit function; and
carry out a further review of the
Board’s risk appetite, due to the
change in composition of the Board
over the past calendar year.
The key elements of our system of
internal control are as follows:
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 Danuta Gray, Sylvia
Metayer and Angela Seymour-Jackson,
will submit themselves for re-election at
the forthcoming Annual General Meeting.
Danuta Gray will cease to be a Director
of the Company from 7 June 2018.
Sylvia Metayer and Angela Seymour-
Jackson, both of whom were appointed
as Directors 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 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 Vision.
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.
•
Group Organisation – The
Board of Directors meets eight
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 33 to 39.
•
Internal Audit – The Group’s
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
Corporate Governance | 54
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 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.
David Lowden
Chairman
6 March 2018
Corporate Governance Report
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 33 to 39. 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 2017 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. In addition,
during 2017 the Company carried out an
extensive shareholder consultation process
in respect of the Directors' Remuneration
Policy which was put to shareholders at
the June 2017 Annual General Meeting.
The Executive Directors also visited nine
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 118 investor meetings. The Annual
Report and Accounts is available to all
shareholders either in hard copy or via 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
55 | Corporate Governance
Nomination Committee Report
Seymour-Jackson became members of
the Committee on 1 September 2017
and 1 October 2017 respectively, on
their appointment as Directors of the
Company. All other members served
throughout the year. Details of David
Lowden’s other significant commitments
can be found on page 46.
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. This
arrangement fosters appropriate
challenge, questioning and debate of
the recommendations made by the
Committee to the Board.
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. It is assisted in its search
for new non-executive directors by an
independent executive search company.
With each new search the Committee
selects the executive search company
which it considers the most appropriate
and relevant for the assignment. These
executive search companies have no
connection with the Company other than
the provision of the search services. With
each assignment a detailed candidate
profile is compiled and discussed by the
Committee, taking into consideration
the balance of skills and experience
of existing Board members and the
requirements of the Company and its
David Lowden,
Committee Chairman
Dear Shareholder,
It is with pleasure that I present the
Nomination Committee Report for the
year ended 31 December 2017. Board
and senior leadership succession
planning continued to be a major priority
for the Board and is something the
Nomination Committee keeps under
continuous review. As I mentioned in
my Chairman’s statement on page 2,
during the year, we announced the
appointment of two new Non-Executive
Directors, Sylvia Metayer and Angela
Seymour-Jackson. Since the end of the
period under review Danuta Gray has
decided not to stand for re-election at
the June 2018 Annual General Meeting
and will, consequently, cease to be a
Director from that date. I would like to
thank Danuta for her contribution to the
Company, especially as Chair of the
Remuneration Committee.
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 David
Lowden, who was Chairman of the
Committee, Simon Boddie, Patrick De
Smedt, Danuta Gray, Michelle Healy,
Baroness Ruby McGregor-Smith, Sylvia
Metayer and Angela Seymour-Jackson.
Baroness Ruby McGregor-Smith
resigned from the Board on
23 May 2017 and ceased to be a
member of the Committee on that
date. Sylvia Metayer and Angela
future strategy. Once finalised the profile
is recommended by the Committee to
the Board for its approval.
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, geographic experience and
gender in order to create a talented
high-performing Board. Details on the
Company’s work in respect of diversity
below Board level can be found in the
Strategic Report on page 28.
Corporate Governance | 56
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Nomination Committee Report
Activities During the Year
During 2017 the Committee met on four occasions. Details of the members’ attendance at
meetings of the Committee are as follows:
Director
David Lowden
Simon Boddie
Patrick De Smedt
Danuta Gray
Michelle Healy
Baroness Ruby McGregor-Smith1
Sylvia Metayer2
Angela Seymour-Jackson2
No. of meetings
Held
Attended
4
4
4
4
4
4
4
4
4
4
4
4
4
1
0
1
Notes:
Baroness Ruby McGregor-Smith ceased to be a member of the Committee on 23 May 2017 so was eligible to
attend only one Nomination Committee meeting.
Sylvia Metayer and Angela Seymour-Jackson were appointed to the Committee on 1 September 2017 and
1 October 2017 respectively, so were only eligible to attend one Committee meeting. Sylvia Metayer was unable
to attend this meeting as she had a prior engagement which had been scheduled prior to her appointment as a
Director of the Company.
The Committee continues to focus on
succession planning both for senior
management and the Board. The
Committee undertook the selection of
two new Non-Executive Directors which
resulted in the appointment of Sylvia
Metayer on 1 September 2017 and
Angela Seymour-Jackson on 1 October
2017. The independent executive search
agency, The Inzito Partnership, were
engaged for these appointments.
Baroness Ruby McGregor-Smith stepped
down as a Non-Executive Director on 23
May 2017, having completed 10 years
service to the Company. I would like to
thank Ruby, on behalf of the Board, for
her contribution to the Company.
The Committee also considered the
pipeline of talent for the Executive Board
to ensure there is sufficient bench
strength to run key parts of PageGroup.
During the year under review the
Committee members met Executive
Committee members, and executives
at the level below the Executive Board,
through presentations at the Company’s
annual Strategy Day and at Board
Meetings, and during a site visit to
the Group's European Shared Service
Centre in Barcelona. The management
and development of the talent pipeline is
the responsibility of the Chief Executive
Officer so that the independence of
the Committee and its members is
maintained.
The activities of the Committee were
reviewed as part of the annual Board
evaluation process which, in 2017, was
facilitated by Lintstock Limited. Details
of the evaluation process can be found
in the Corporate Governance Report on
page 54.
Plan for 2018
In 2018 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.
57 | Corporate Governance
Audit Committee Report
Company’s business model and strategy as well as the principal risks of the Company.
Training of all members of the Committee takes place on a regular and ongoing basis
through updates, provided by the Company’s external auditor, on developments in
corporate reporting and regulation.
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. Sylvia
Metayer has relevant financial and accounting experience and other members of the
Committee 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 47 to 50. 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.
Principal areas of focus
During the year, under review the Committee has continued to focus on maintaining
the quality and integrity of financial reporting, as well as monitoring the Company’s
risk management systems and internal control environment to ensure they remain
appropriate. In response to the increase in importance of data security, a Director of
Information Security was appointed during the year and has reported on their activities
to the Committee and the Board. The Committee has also continued to monitor the
interaction between the Internal Audit function and the external auditors, to monitor and
review the effectiveness of the external audit process and to ensure that the Group’s
governance standards are maintained. The Company's tax strategy was considered
by the Committee and recommended for approval by the Board. It is published on the
Company's website www.page.com. Set out in the table on page 59 is a summary of
the main activities of the Committee during 2017. Key issues covered by the Committee
are reported to the Board.
The Committee met on seven occasions. Committee meetings are set to coincide
with key dates of the financial reporting calendar and the audit cycle. The Committee
is provided with sufficient resources to undertake its duties. Details of the members’
attendance at the meetings of the Committee are as follows:
Director
Simon Boddie
Patrick De Smedt
Danuta Gray
Michelle Healy
Sylvia Metayer1
Angela Seymour-Jackson1
No. of meetings
Held
Attended
7
7
7
7
7
7
7
7
7
7
1
2
Notes:
Sylvia Metayer and Angela Seymour-Jackson were appointed to the Committee on 1 September 2017 and 1
October 2017 respectively, so were eligible to attend only two Audit Committee meetings. Sylvia Metayer was
unable to attend one of those meetings as she had a prior engagement which had been scheduled prior to her
appointment as a Director of the Company.
Corporate Governance | 58
Simon Boddie,
Committee Chairman
Dear Shareholder,
As Chairman of the Audit Committee
I am pleased to present the Audit
Committee Report for the year ended
31 December 2017. This Report
provides an overview of the Committee's
principal areas of focus during the year
under review, which includes ensuring
the integrity of the Company's published
financial information, the independence
and effectiveness of the Group's external
auditor, and the effectiveness of the
internal audit process.
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, Michelle Healy, Sylvia Metayer and
Angela Seymour-Jackson. All served
throughout the year except Sylvia
Metayer and Angela Seymour-Jackson
who were appointed as members of
the Committee on their appointment
as Directors of the Company on 1
September 2017 and 1 October 2017
respectively. As part of the director
induction programme both Sylvia and
Angela were, amongst other things,
provided with a copy of the Committee’s
Terms of Reference and an indication of
the expected time commitment required
as a Director of the Company. They were
also provided with an overview of the
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Audit Committee Report
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 2017 Annual Report and
Accounts. It provided comments that
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.
Main Activities of the Audit Committee During 2017
The Committee has an agreed, rolling programme of agenda items to ensure that relevant matters are properly considered. The list below
summarises the key items considered by the Committee during the year.
January
Review of Financial Statements
• Quarter 4 trading update
March
Review of Financial Statements
• Draft preliminary
announcement and 2016
Annual Report and Accounts
External auditor’s year-end
report
•
• Revenue recognition
• Going concern analysis
Viability Statement
•
Fair, balanced and
•
understandable review
• Management letter of
representation
Risk and Internal Control
• Ratification of principal risks
•
Internal audit update
Compliance
• Meeting with external auditor
without Executive Directors
External Auditor
•
External auditor satisfaction
survey
• Reappointment of external
auditor
Regulatory update
•
Implications of IFRS 15
(Revenue)
59 | Corporate Governance
April
Review of Financial Statements
• Quarter 1 trading update
July
Review of Financial Statements
• Quarter 2 trading update
August
Review of Financial Statements
• Draft interim report
Risk and Internal Control
Internal audit update
•
• Risk management update
• Cyber security
External Auditor
•
External auditor’s 2016 year
end management letter
External auditor’s interim
review
•
• Scope of the full year audit
•
Interim review management
letter of representation
• Review of the external
auditor’s fee and non-audit
services fees
• Review of external auditor
independence and objectivity
Compliance
• Meeting with external auditor
without Executive Directors
October
Review of Financial Statements
• Quarter 3 trading update
December
Review of Financial Statements
• Review of 2017 Annual Report
and Accounts process
• Review of FRC Letter to Audit
Chairs
• Revenue recognition
Risk and Internal Control
Internal audit update
•
• Approval of internal audit plan
for 2018
• Risk review and confirmation of
principal risks
• Crisis management plan review
• Annual review of anti-bribery
compliance
External Auditor
• Audit progress update report
Compliance
•
Year-end legislative and
procedural matters
Tax and Treasury
• Review of Tax Strategy
• Annual review of Treasury
Policy
Regulatory update
•
Implications of IFRS 15
(Revenue) and IFRS 16
(Leases)
Significant Accounting Issues and Areas of Judgement
The Committee focuses in particular on key accounting policies and practices adopted by the Group and any significant areas of
judgement 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 96 to 100.
The significant issues and areas of judgement 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). There is a risk that a candidate
reverses their decision to take up a placement before the start date and as such the revenue recognised
would be reversed. A provision is made by management, based on past historical experience, for the
proportion of those placements where this expected to occur.
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 assesses the Group's revenue recognition policies relative to IFRS and the
sector to ensure they are appropriate, and challenges management on the internal control and compliance
processes over revenue recognition, taking into account the views of Internal Audit and the external auditors.
Conclusions and rationale: The Committee concluded that the approach to revenue recognition was
consistent with the policies and the judgements made were appropriate.
In the Audit Committee Report for the 2016 financial year, transfer pricing was included as a significant issue. In determining the risks
for the 2017 financial year it is the Audit Committee's opinion that this is no longer a significant issue. This is based on the Committee's
assessment of the risk of challenge by tax authorities which has decreased due to the passage of time and the overall decrease in the
relevant provision.
The Committee discussed the methodology used to test the assumptions and estimates made by management in each of these areas
with Ernst & Young, the external auditor.
Corporate Governance | 60
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 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 2014 and EU audit
legislation as regards audit firm rotation
and the provision of non-audit services.
Ernst & Young LLP, the Company’s
current external auditor, was appointed
in 2011 following a tender process. In
accordance with audit regulation, Ernst
& Young LLP operate a policy of rotating
the Audit Partner every five years. The
Audit Partner who had served as the
Company’s Audit Partner since 2011
stepped down after the completion of
the 2015 year end audit and a new Audit
Partner, Bob Forsyth, was appointed in
2016.
The Committee approved and
implemented in 2014 a policy for the
tender of external audit services. This
policy provides that the Company will
retender the external audit at least every
ten years and will change the external
auditor at least every 20 years. Thus,
the Company expects to tender the
external audit in respect of the 2021 year
end during the course of 2020, but this
position is subject to annual review by the
Audit Committee.
The Committee considers that in 2017 it
has complied with the Competition and
Market Authority Audit Order 2014.
The Committee has regularly reviewed its
policy on the use of the external auditor
for non-audit services, with the last review
taking place in 2016. The policy prohibits
the external auditor from providing
certain services which could give rise to
independence threats such as computing
tax provisions, payroll services, acting as
an advocate, internal audit and system
design. In line with the FRC Revised
Ethical Standard for external auditors,
the Audit Committee has operated a
more restrictive policy from 1 January
2017 which prohibits the external auditor
from providing a more extensive range
of services which includes, inter alia, tax
advice, tax compliance services and
global mobility support. All such services
provided by Ernst & Young LLP were
transferred to other service providers
prior to the end of the 2016 financial year.
However, the finalisation and transition
of the employee mobility services to the
new service provider were not ultimately
finalised until early 2017. In addition, a
role on the board of the statutory auditors
in Italy, performed by Ernst & Young,
will transition to a new service provider
in 2018. No further services have been
supplied by Ernst & Young in respect
of employee mobility services. The total
non-audit fees in respect of these services
for the year under review amounted to
£28,000, of which £4,000 was pre-
approved by the Audit Committee. The
remainder were approved retrospectively
by the Audit Committee on notification by
Ernst & Young that these fees had been
incurred. At the half year Ernst & Young
LLP carried out audit related services
when they reviewed the interim statement.
The fees in respect of this work amounted
to £52,000 which, together with the non-
audit fees mentioned above, represent
10.2% of the total fees payable to Ernst
& Young. No other non-audit services
were provided by the external auditor. The
Audit Committee reviewed the safeguards
in place to deal with the independence
threats from this work and concluded
that Ernst & Young LLP remained
independent.
Further, during the year under review,
the Committee discussed and agreed
the scope of the year-end audit and
approved the audit fee of £784,000.
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 external auditor by
shareholders at the Annual General
Meeting to be a fundamental safeguard.
The performance and effectiveness of
the external 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 (including the
audit's team's ability to challenge
management) and perceptiveness of
the external auditor in handling key
accounting and audit judgements
including demonstrating professional
scepticism and independence;
• 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 2017 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 54 and 55.
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
61 | Corporate Governance
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 is regularly reviewed and
updated when required. The training is
undertaken by all managers and all staff
in risk areas across the Group 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 and reported to
the Committee. The review undertaken
in 2017 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 Human
Resources function and audited by
Internal Audit. It is run by an external
third party and is available to all
employees in the Group. There were
no reportable whistleblowing incidents
reported during the year under review.
Simon Boddie
Chairman of the Audit Committee
6 March 2018
system of internal control and on its
effectiveness in managing material risks
and identifying any control failings or
weaknesses.
process, including Group functions and
change programmes as those around
governance, environmental and social
related matters
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 33 to 38. Key performance
indicators and management incentives
are highlighted for the main financial,
strategic and people risks in the
Strategic Report on pages 21 to 22.
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. To ensure there is breadth
and depth of risk and internal control
experience to this function, the Group’s
Internal Audit function comprises a
Director of Internal Audit and a team of
internal auditors. 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. He also has
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
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. The 2017 evaluation process
was facilitated by an external third
party, Lintstock Limited. Details and the
outcome of the evaluation process, and
the agreed actions to be taken during
2018, can be found in the Corporate
Governance Report on page 54.
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 significant
nature were reported.
Anti-Bribery and Corruption
and Business Ethics
The Company has a Code of Conduct
which can be found on its 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.
Corporate Governance | 62
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Directors’ Remuneration Report
remain relevant and specific in a volatile
environment, while still aligned to long-
term performance.
60% of any ESIP award is deferred in to
shares that vest over three years. This
represents an increase in deferral at most
levels of performance including on target
performance when compared with the
annual bonus and fair value of LTIP awards
under the previous policy. The majority of
any award is now in shares.
Additionally, a number of shareholders
wanted reassurance on the level of
disclosure that would be provided
on performance metrics, targets and
assessment, specifically with regard to
personal and non-financial measures.
As can be seen from the disclosures on
pages 66 to 68, we are committed to
providing full and transparent disclosure
for each ESIP award made, including
disclosure of the targets set and
narrative outlining the performance and
corresponding weighting achieved for
personal targets and the threshold, target
and stretch performance levels, and the
outcome for all financial metrics.
2017 performance
Despite some ongoing economic and
market uncertainty, PageGroup has
had a very successful year, significantly
outperforming both internal and external
expectations. Financial performance has
been strong and PBT is 18.2% higher than
in 2016. The Group has also continued to
make good progress in delivering its long-
term strategy objectives of:
•
•
delivering organic, diversified growth;
building an efficiently scalable and
highly flexible business; and
• nurturing and developing our people.
This good progress is reflected in a total
shareholder return in 2017 of 26% which
includes the payment of a special dividend
of £40m during the year. EPS is 14.7%
up on 2016, and 2017 total shareholder
return is ranked amongst the highest in
our peer group, and higher than our FTSE
250 index comparator.
ESIP outcomes
The ESIP awards directly reflect the
strong 2017 performance as well as
individual achievement of the targets set
for each Executive Director aligned with
the strategic objectives. Targets were set
in early 2017 when the business outlook
for the recruitment sector was negatively
impacted by an uncertain political and
economic environment. Financial targets
for the ESIP took into account the
internal budget, the prevailing consensus
forecasts for PageGroup performance,
and long-term growth rates. Very strong
performance at PageGroup over 2017 as
set out in the previous section resulted in
the achievement of the maximum targets
Steve Ingham, Chief Executive Officer,
received £2,053,469 which represents
91% of the maximum under the ESIP.
Kelvin Stagg, Chief Financial Officer,
received £1,073,800 which represents
94.4% of the maximum. 60% of each
award will be deferred into shares over
three years. Full details of the performance
targets, assessment and outcomes are
set out on pages 66 to 68.
Legacy Long-Term Incentive Plan
outcomes
The legacy 2015 LTIP vested at the end of
its performance period on 31 December
2017. The performance metrics for these
awards were cumulative EPS, relative
gross profit against peer companies, and
a range of strategic objectives for each
Director. Following an assessment of
performance against each performance
metric, the CEO received 55.35% of his
maximum award and the CFO received
55.98% of his maximum award.
Further detail is set out on pages 69
and 70.
Total remuneration figure for 2017
As we move from the old to the new
policy, total remuneration figures will
include legacy awards from the LTIP. As
a result, the Total Remuneration Figures
shown in the Report include both the grant
of the 2017 ESIP award, of which 60%
is deferred in shares, and the vesting of
the legacy 2015 LTIP award. There are no
further grants under this LTIP after 2017.
The payments from these two schemes
have been separated clearly on page 65.
Conclusion
The outcomes of these awards reflect
the Company’s performance over the
short and longer term and achievement of
targets set.
Looking ahead, performance expectations
for the sector have much improved during
the course of 2017 and there has been
a significant upwards shift in earnings
consensus forecasts for PageGroup,
reflecting the more positive environment.
These revised expectations have been
reflected in our targets for the year ahead,
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 2017.
Our remuneration policy
Last year we reviewed and refreshed our
remuneration policy (the “Policy”) following
an extensive consultation with shareholders,
shareholder bodies and proxy advisory
firms. Given the cyclical nature of our
industry and ongoing economic uncertainty
following the Brexit vote in the UK, we
wanted to ensure that our pay structure
continued to encourage long-term decision
making while also recognising the volatile
environment in which we operate and the
need for flexibility and agile thinking. We
therefore decided to replace our Annual
Bonus and LTIP with a new Executive
Single Incentive Plan (“ESIP”), a single
performance scorecard incorporating
a balance of metrics aligned with the
Company’s long-term strategic vision.
Our new Policy was approved by 66%
of shareholders at the June 2017
Annual General Meeting. The majority of
shareholders who engaged with us to
discuss the Policy during the consultation
process recognised the challenges
the Company faces and gave us their
support. But a number of shareholders
raised concerns which we have sought to
address:
Addressing shareholder concerns
Some shareholders asked whether the new
ESIP would result in a move away from
long-term remuneration.
The ESIP’s annual performance metrics
are fully aligned with the Company’s long-
term strategic vision and objectives which
have remained broadly consistent since
2013. We also seek to ensure metrics
63 | Corporate Governance
The Committee met a total of nine times
during 2017 and discussed the following
matters:
•
•
The remuneration policy that was
put to shareholders at the 2017
AGM;
The shareholder consultation
process associated with the
proposed remuneration policy and
dealing with shareholder feedback,
including the significant vote against
the proposed remuneration policy;
• Monitoring the progress of incentive
plan strategic objectives;
•
The setting of performance targets
for the 2017 incentive awards made
to the Executive Directors under the
LTIP and the ESIP;
• Reviewing reporting regulations
regarding remuneration;
• Approving the quantum of share
plan vesting 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 2016 Annual Report and Accounts
the PageGroup Remuneration Policy
which was approved by shareholders at
the Company’s Annual General Meeting
held on 8 June 2017. Full details of the
shareholder voting in this respect can
be found on page 76. A copy of the
Remuneration Policy in full can be found
on pages 77 to 80. The Committee
continued to operate this Remuneration
Policy during 2017 and intends to
continue its operation during 2018.
including our target for EPS, which take
account of the positive outlook for the
Company. The stretch performance
level for 2018 has been set to be very
demanding. Full disclosure of targets will
be provided in next year's Annual Report
on Remuneration.
We continue to engage with our
shareholders openly and constructively
to ensure we understand and reflect
their views. At the 2018 Annual General
Meeting, the Annual Statement and
Annual Report on Remuneration for 2017
will be subject to an advisory vote and
I very much hope that we will receive
your support.
Danuta Gray
Chairman of the Remuneration
Committee
6 March 2018
Directors’ Remuneration Report
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 64 to 76 has
been audited where required under
the Regulations. The elements of the
Directors’ Annual Remuneration Report
subject to audit are the:
(a) Single total figure for remuneration
and the accompanying 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 2017; and
(d) Section on outstanding share
awards.
During the year under review the
members of the Committee were
Danuta Gray, who was Chairman of the
Committee, Simon Boddie, Patrick De
Smedt, Michelle Healy, Sylvia Metayer
and Angela Seymour-Jackson. All
served throughout the year except
Sylvia Metayer and Angela Seymour-
Jackson who became members of
the Committee on their appointment
as Directors of the Company on 1
September 2017 and 1 October 2017
respectively. Details of the members’
attendance at meetings of the
Committee were as follows:
Director
No of meetings
Held
Attended
Danuta Gray
Simon Boddie
Patrick De Smedt
Michelle Healy
Sylvia Metayer1
Angela Seymour
- Jackson1
9
9
9
9
9
9
9
9
9
9
2
3
Note:
1. Sylvia Metayer and Angela Seymour-
Jackson were appointed to the Committee
on 1 September 2017 and 1 October 2017
respectively so were eligible to attend only three
Remuneration Committee meetings. Sylvia
Metayer was unable to attend one of those three
meetings due to an existing commitment which
had been arranged prior to her appointment as a
Director of the Company.
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 re-tendering 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.
During the year New Bridge Street has
provided independent advice to the
Committee on the remuneration policy
and the Executive Single Incentive
Plan; the setting of performance criteria
for the Company’s various incentive
arrangements; benchmarking of
remuneration against market levels; and
advised on the remuneration report.
The fees paid to New Bridge Street
totalled £106,733 . New Bridge Street
did not provide any other services to the
Company. The Committee also received
input from Caddow Consulting Limited
for a fee of £18,077, the Chairman, Chief
Executive Officer, Company Secretary
and Group Human Resources Director.
Corporate Governance | 64
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
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 2017 and
31 December 2016.
ESIP -
Cash
(note 4)
£’000
821
430
ESIP -
Deferred
Shares
(note 4)
£'000
1,232
644
Legacy
Long-term
incentives
(note 5)
£’000
Dividends
paid on
unvested
shares
£’000
547
220
192
89
2017
Salary
and Fees
(note 1)
£’000
Benefits
(note 2)
£’000
Pensions
(note 3)
£’000
Executive
Steve Ingham
Kelvin Stagg
Non-Executive
David Lowden
Simon Boddie
Patrick De Smedt
Danuta Gray
Michelle Healy
Sylvia Metayer8
Angela Seymour-Jackson8
Ruby McGregor-Smith9
2016
602
350
203
67
60
67
53
18
13
22
37
23
–
–
–
–
–
–
–
–
150
70
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Salary
and Fees
(note 1)
£’000
Benefits
(note 2)
£’000
Pensions
(note 3)
£’000
Short-term
incentives
(note 6)
£’000
Long-term
incentives
(Note 7)
£’000
Executive
Steve Ingham
Kelvin Stagg
Non-Executive
David Lowden
Simon Boddie
Patrick De Smedt
Danuta Gray
Michelle Healy10
Ruby McGregor-Smith
Notes:
587
325
200
66
55
66
12
55
35
26
–
–
–
–
–
–
147
65
605 584
303 189
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£’000
3,581
1,826
203
67
60
67
53
18
13
22
Total
£’000
2,089
960
200
66
55
66
12
55
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Dividends
paid on
unvested
shares
£’000
131
52
–
–
–
–
–
–
1. Salary and fees represent the salary and fees paid in cash in respect of the financial 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; in respect of the Chief Executive Officer, golf club membership used for corporate entertaining and a long service award.
3. Pension includes the cash value of Company contributions to defined contribution pension plans and cash payments in lieu of pension contributions.
4. The ESIP payment is determined using a balanced scorecard of short-and long-term performance measures as set out on pages 66 and 67. 40% of the ESIP award is
delivered in cash and as shown in the “ESIP – Cash” column above. The remaining 60% of the ESIP is delivered in shares which vest over a three-year time period, and is
shown in the “ESIP – Deferred Shares” column above.
The value of shares vesting under the 2015 LTIP, for which the performance period ended in the financial year. Following the assessment of performance, 211,413 shares
will vest to Steve Ingham and 84,191 shares will vest to Kelvin Stagg. The figures shown in the table are based on the average share price in the three months to 31
December 2017, which is 467.52p. The figure will be restated next year using the actual share price on the relevant date. Further details relating to performance targets,
weightings and outcomes can be found on pages 69 and 70.
The “Short-Term Incentives” figure for 2016 includes the annual cash bonus. No cash bonus awards were made in 2017 with the introduction of the Executive Single
Incentive Plan.
The long-term incentives were earned in the 2016 year but paid in March 2017. In addition 2,000 share options awarded on 9 March 2009 to Kelvin Stagg (before he was
appointed a Director of the Company) became exercisable in March 2017. These options have not been exercised. The figures provided in the 2016 single figure table
above represent the actual value of those awards on the vesting and exercise date, this being 428.09p.
Sylvia Metayer and Angela Seymour-Jackson were appointed as Directors of the Company on 1 September 2017 and 1 October 2017 respectively. The fees shown
in the 2017 table reflect the amount paid to them from the date of their respective appointments to 31 December 2017.
Baroness Ruby McGregor-Smith ceased to be a Director of the Company on 23 May 2017. The fees noted in the 2017 table cover the period 1 January 2017 to
23 May 2017.
5.
6.
7.
8.
9.
10. Michelle Healy was appointed a Director of the Company on 10 October 2016. The fees shown in the 2016 table reflect the amount paid to her from the date of
appointment to 31 December 2016.
65 | Corporate Governance
2017 ESIP
Annual performance element
PBT element:
Successful execution of our strategy in 2017 resulted in strong PBT performance, which was significantly above internal and external
expectations at the start of the year when targets were set and has resulted in a payment for this element of 100% of maximum. To
ensure no benefit is received from favourable foreign exchange movements, the actual PBT is measured at constant exchange rates.
How the PBT targets were set:
Targets were set for 2017 taking account of internal goals, planned investments, and broker forecasts and the business outlook at the
time targets were considered. In the final quarter 2016 when targets were being considered, the business outlook for the recruitment
sector was negatively affected by a very uncertain political and economic environment following the EU referendum result, and concerns
about the potential impact of US elections in November 2016 and forthcoming elections in France and The Netherlands in spring 2017.
During the course of 2017 some of the risks and uncertainties envisaged did not materialise to the extent expected, or were mitigated.
The UK declined by only 3.8%, which was lower than our expectation at the beginning of the year. In markets such as France, China
and the US, we saw far stronger growth than anticipated as investments we made into additional capabilities delivered results ahead
of plan.
There has also been a significant upwards shift in earnings consensus forecasts for 2017, not only for PageGroup, but for the majority
of PageGroup’s competitors. Performance expectations for the sector have significantly improved during the course of 2017. It is
important to consider PageGroup’s 2017 targets in the light of these changes.
Strategic element
Strategic objectives for the year included growing revenue in Large, High Potential Markets, successfully executing the Shared Service
Centre programme and embedding a culture of innovation across the Group. Strong performance was delivered throughout 2017 in
all these areas. Fee earners and directors in Large, High Potential Markets increased by 22.7%, and in particular Large, High Potential
Markets growth was 14.8% in constant currencies. The SSC programme was successfully executed. An innovation group was created
to prioritise the adoption of innovations across the business and resulted in the assessment of 288 ideas of which 25 were piloted.
Personal element
Personal objectives covered the development of a Senior Leadership programme to facilitate succession planning; progress on talent
development; and continuing to further our diversity agenda. During the year, a Senior Leadership programme was successfully
launched to ensure development of potential successors to the Board. In addition, a new Global Talent Review is being developed.
Commitment to gender diversity was demonstrated by the improved progress of women in director roles and the increased women
in the succession planning process. Other personal objectives covered risk management and internal controls; cost management,
financial and strategic information; and tax and treasury management. Further disclosure can be found on pages 67 to 68.
Long-term trailing performance element:
In 2017, this element was based on targets for 2017 EPS and gross profit growth relative to comparators.
EPS element:
Over 2017, PageGroup has delivered strong performance through the implementation of efficiency measures and driving growth in our
key markets. As a result, we have delivered 2017 EPS of 26.5p, which represents year-on-year growth of 14.7% and three-year growth
of 13.3% per annum. 26.5p is above the stretch performance level set at the beginning of the year.
Although not a metric used in the ESIP, the Company also achieved total shareholder return of +26% for the year, exceeding the FTSE
All-share by 13 percentage points.
How the targets were set:
Targets for EPS were set at the start of the year taking account of consensus expectations at that time. At the start of 2017, the market
outlook for the year was very challenging; the Committee set a wide range for the ESIP which would take into account the high level
of market uncertainty. The stretch was set at 25p, more than 4p above consensus. The threshold target was set at 19p. The prevailing
market consensus of approximately 20.9p, which represented a three-year growth of around 4.7% per annum, was towards the bottom
of this range.
The EPS range that was set represented a target cumulative three-year growth range of 7% to 12% per annum, if measured on the
same cumulative basis as for the legacy LTIP.
Corporate Governance | 66
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Directors’ Remuneration Report
Relative Gross Profit element:
PageGroup delivered strong gross profit growth of +9.8% in 2017. This was above the upper quartile of the peer group and resulted in this
element being paid in full.
The performance metrics, weightings and targets, together with the determination of the ESIP award, are as set out in the tables below for
both Executive Directors:
CEO ESIP disclosure
Performance
metric
Weighting (max
% of max)
Achievements
Outcome
(% of max)
Annual performance
2017 PBT
30%
Non-financial strategic
Strategy
development
10%
Systems and
Innovation
5%
Personal performance
Executive Leadership 6%
Page People
Development
4%
Longer-term metrics
2017 EPS growth
35%
2017 Relative Gross
Profit growth
10%
Total
100%
67 | Corporate Governance
• Threshold – £69.0m (20% award)
• Target – £86.7m (60% award)
• Maximum – £115.0m (100% award)
• Actual PBT – £118.2m
Record results achieved in the Large, High Potential Markets and grew 14.8% in
Gross Profit vs prior year (in constant currency). Excellent progress in the year in
the USA with prior investments in new offices, sectors and headcount delivering
21% growth. Latin America, despite continued challenging macro-economic
conditions in Brazil, grew by 14%. China and SE Asia growth was 14% and
12% respectively. Germany improved 12% vs 2016 with the largest opportunity
in Germany in Page Interim grew by 19.2% with headcount up by 84.3%. The
achievement against this objective was judged to be strong in the year with still
some opportunity for improvements in Germany and Latam in particular and
overall an increased percent of GP from these markets.
Delivery of benefits from the European Shared Service Centre implementation
with a reduction in back office HR, Finance and standardisation of processes
across the Group. The Group initiated an innovation team and continued to
invest in the digital strategy, winning the LinkedIn global award for Most Socially
Engaged Recruitment Company for the second time. Refreshed execution of
information security and cyber security resilience plans. Roll out of a new HR
learning system and Global Finance System is expected to deliver benefits in
future years.
Good progress on the development of the executive pipeline to ensure future
succession plans. A new leadership assessment and development programme
was introduced in the year together with organisational structure development.
These will provide opportunities to enable future leadership progression.
The Group ended the year with a record level of fee earner headcount. We
continued to grow the diversity of our leadership population in terms of gender
and nationality. There was an increase in women in director roles by year end
from 29% to 32% and we have less reliance on expat resources as leaders
are developed from local in-country talent through targeted local leadership
development activity.
• Threshold EPS – 19p (0% award)
• Max EPS – 25p (100% award)
• Actual EPS – 26.5p
• Median comparator group gross profit growth – 6.6% (25% award)
• Upper quartile comparator group gross profit growth – 8.8% (100% award)
• PageGroup actual gross profit growth – 9.8%
30%
7%
3%
3%
3%
35%
10%
91% of max
CFO ESIP disclosure
Performance
metric
Weighting (max
% of max)
Achievements
• Threshold – £69.0m (20% award)
• Target – £86.7m (60% award)
• Maximum – £115.0m (100% award)
• Actual PBT – £118.2m
Outcome
(% of max)
30%
Annual performance
2017 PBT
30%
Non-financial strategic
Risk Management
and Internal Controls
3%
9%
Cost Management,
Financial, Strategic
and Management
information
Tax and Treasury
Management
3%
Personal performance
Leadership
Development
10%
Longer-term metrics
2017 EPS growth
35%
Group risk management plan and mitigation planning enhanced. Risk and
control environment has been improved through the implementation of
standard processes across the Group together with supporting IT systems.
Improved systems resilience and delivery with the in time, on budget delivery
of Global Finance System, Shared Service Centre and HR digital learning
system.
European Shared Service Centre – during 2017 Finance and Marketing
transitioned 100% into the SSC, other functions partially transferred
with benefits in in-country back office staff reductions between 30-70%.
Standardised processes and systems have resulted in the cost per fee earner
reducing by 21%. Extension of the centre concept is being planned for
extension to other geographies. The Global Finance System went live in the
UK Shared Service Centre with further countries to be rolled out, introducing
standards and simplifying processes to drive efficiency.
2.1%
6.3%
Resource and capability in Group Treasury enhanced. Treasury Management
System fully implemented and integrated into Global Finance System and
group standardisation of Treasury and Cash management functions and
processes. Improved efficiency by transfer of local bank relationship to one
global provider.
3%
Enhancement of global finance leadership group with development programme
succession plans now in place for all key leadership roles. Enhanced capability
in several finance functions
8%
• Threshold EPS – 19p (0% award)
• Max EPS – 25p (100% award)
• Actual EPS – 26.5p
35%
10%
2017 Relative Gross
Profit growth
10%
• Median comparator group gross profit growth – 6.6% (25% award)
• Upper quartile comparator group gross profit growth – 8.8% (100% award)
• PageGroup actual gross profit growth – 9.8%
Total
100%
94.4% of max
Corporate Governance | 68
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
Directors’ Remuneration Report
Legacy Long-Term Incentives included in the Single Figure Table
The long-term incentive figures reported in the single figure table relate to the legacy awards granted in March 2015 to Steve Ingham and
Kelvin Stagg. These awards were subject to EPS (62.5% of the award), Relative Gross Profit (12.5% of the award) and Strategic targets
(25% of the award), measured over a three-year period. Cumulative EPS over the 3-year period was 70.9p compared to a threshold
level of 66p and a stretch of 87p. As a result, 42.5% of the EPS element vested. Strong gross profit performance over the three-year
performance period was above upper quartile compared to the comparator group and resulted in 100% of this element vesting, whilst
progress against our long-term strategic objectives resulted in 65% of that element vesting for Steve Ingham and 67.5% of that element
vesting for Kelvin Stagg. Taking into account the weightings of each performance measure, the overall LTIP vesting outcome was 55.35%
for Steve Ingham, and 55.98% for Kelvin Stagg. This resulted in 117,017 and 47,130 shares vesting to Steve Ingham and Kelvin Stagg
respectively. The determination of these vesting outcomes is set out in the table below:
Performance
metric
Weighting (max
% of award)
Achievements
Financial
Cumulative EPS
62.5%
Relative Gross Profit
Growth
12.5%
Strategic
Executive Leadership
and Page People
Development
CEO: 10%
Outcome
(% of award)
26.6%
12.5%
• Threshold EPS – 66p
• Maximum EPS – 87p
• Actual EPS – 70.9p
• Median comparator group gross profit growth – 5.7 %
• Upper quartile comparator group gross profit growth – 6.5%
• PageGroup actual gross profit growth – 7.4%
Target – development of executive and senior leadership through talent pipeline
development and rotation of executives in order to facilitate succession
planning.
5%
Over the three-year period progress has been made in developing the
executive talent pipeline. The planned international rotation of executives
has been developed further. In the latter part of the period, organisational
development and the creation of Chief Operating Officer roles provide for
greater opportunity for development into the executive committee of the
business. In addition, more formal development programmes have been
introduced to identify and develop talent for the future.
CFO: 10%
Development of a global finance team and facilitate succession planning in
finance.
7.5%
The central finance team has been developed in capability and capacity.
A more aligned global finance team have driven standardisation in systems
and processes across the Group and have enabled the implementation of
programmes such as the Global Finance System and Shared Service Centre.
A formal rotation of executives internationally and between the centre and
businesses has further developed the executive pipeline in Finance and helped
to facilitate succession planning for future Finance leadership.
Strategy
Development
CEO: 7.5%
CFO: 7.5%
Target – Growth in Large High Potential Markets in line with Strategic Plan
measured by improvements in market presence; growth in Gross Profit by
market; growth in percentage of Group Gross Profit represented by the Large
High Potential Markets.
4.88%
Good progress has been made in all Large High Potential Markets against the
business growth goals. Measured in constant currency over the three-year
period, LHPMs grew by 7.6%. As a percentage of Group Gross Profit, these
markets increased from 30.3% to 31.3%. Fee earners and directors grew
10.5% CAGR. Latam performance suffered from difficult macro-economic
conditions. Investment in diversifying the USA market in terms of locations
and sectors served paid off in the latter part of the period. The achievement
reflects strong growth in some markets with slower and later improvements in
Germany and the USA.
Page People
Development
CEO: 7.5%
There has been substantial and measurable progress made in the development
of broader talent in Page. Women@Page is an example of one programme
developed in the UK during the three-year period for which the Group
won recognition in the UK HR Excellence Diversity & Inclusion Award. The
percentage of female managers rose from 41% to 48% in the period and at
director level from 26% to 32%. Attrition has reduced from 39% to 36%.
6.37%
69 | Corporate Governance
Performance
metric
Weighting (max
% of award)
Achievements
Outcome
(% of award)
Cost Management,
Financial, Strategic
and Management
Information
CFO: 7.5%
Target – introduction of standardised and more global processes and systems
to enable improved cost management and productivity across the Group.
4.5%
Shared Service Centre programme was planned, and successfully
implemented in the three-year period. Execution on time and in budget
and with Finance and Marketing functions fully transitioned with Business
Technology to be completed in 2018. In-country back office teams have been
reduced in size between 30-75% and helped to achieve a reduction in cost per
fee earner of 21% over the plan.
Global Finance System commenced implementation in 2016 and has been
partially completed with productivity improvements to be delivered from 2018.
Total CEO (% of max)
100%
Total CFO (% of max)
100%
Legacy 2015 Long-Term Incentive Plan Performance Outcome
CEO maximum
opportunity
CEO actual
CFO maximum
opportunity
CFO actual
0
25
50
75
% of maximum
Cumulative EPS
Relative Gross Profit Growth
Executive Leadership Development
Strategy Development
Page People Development
Cost Management, Financial, Strategic and Management Information
55.35%
55.98%
Maximum
Maximum
100
Percentage Change in Remuneration for the Chief Executive Officer
The following table provides a summary of the 2017 increase in base salary for the Chief Executive Officer compared to the average
increase for the UK employee population in the same period. Also included is the proposed 2018 salary increase for the purpose of
comparison.
Chief Executive Officer
UK Employee Population
Chief Executive Officer
UK Employee Population
Chief Executive Officer
UK Employee Population
Salary
Benefits
Annual Cash
Incentive
Note:
1. Represents average increase.
Proposed
2018 increase %
2017
increase %
2016
increase %
2.3
2.31
_
_
_
_
2.6
2.81
5.7
_
35.8
_
2.0
2.01
_
_
-11.3
3.01
2. For 2017, PageGroup replaced both annual bonus and LTIP with the new ESIP. For like-for-like comparison, the table shows the change in the cash element of the 2016
annual bonus and 2017 ESIP. For information, the total ESIP award for the performance period ending 31 December 2017 was £2,053k (of which 60% is deferred) which is
239.5% above the total annual bonus for 2016 (of which 0% was deferred).
The UK employee population was chosen as the most relevant population comparison as the Chief Executive Officer is based in the UK.
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Details of the Legacy Long-Term Incentive Award made in 2017
On 16 March 2017 an award of shares under the legacy 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
Steve Ingham
276,387 shares
200% of salary
£1,203,499
Kelvin Stagg
140,662 shares
175% of salary
£612,498
Note:
The market price of the shares as at the date of grant was 435.50p.
% of Award
if vesting at
threshold
End of performance
period
25
25
31 December 2019
31 December 2019
The performance conditions attaching to the Long-Term Incentive Plan awards can be found below and on page 72.
Outstanding Share Awards
This section sets out the share interests of the Executive Directors under the legacy Executive Share Option Scheme, the 2009 Share
Option Scheme and the Long-Term Incentive Plan.
Long-Term Incentive Plan
Details of awards made under the Long-Term Incentive Plan that remain outstanding at 31 December 2017 are as follows:
Number
of shares
at 1
January
2017
Grant
date
Granted
during
the
year
Vested
during
the
year
Lapsed
during
the
year
Number of
shares at 31
December
2017
End of
performance
period
Vesting
date
Executive
Steve Ingham
11 March 2014
227,273
Steve Ingham
20 March 2015
211,413
Steve Ingham
18 March 2016
284,865
–
–
–
Steve Ingham
16 March 2017
–
276,387
(136,363)
(90,910)
–
31 December 2016
11 March 2017
–
–
–
–
–
–
211,413
31 December 2017
20 March 2018
284,865
31 December 2018
18 March 2019
276,387
31 December 2019
16 March 2020
Total
723,551
276,387
(136,363)
(90,910)
772,665
Kelvin Stagg
11 March 2014
Kelvin Stagg
20 March 2015
70,248
84,191
Kelvin Stagg
18 March 2016
133,298
–
–
–
Kelvin Stagg
16 March 2017
–
140,662
(42,149)
(28,099)
–
31 December 2016
11 March 2017
–
–
–
–
–
–
84,191
31 December 2017
20 March 2018
133,298
31 December 2018
18 March 2019
140,662
31 December 2019
16 March 2020
Total
287,737
140,662
(42,149)
(28,099)
358,151
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 last LTIP award was granted in March 2017 under the existing policy before the new Directors' Remuneration policy came into force.
The face value of awards were 200% of base salary for the Chief Executive Officer and 175% of base salary for the Chief Financial Officer.
From 2018 there will be no further awards under the LTIP, with future awards being made under the ESIP. 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 69p;
100% of the shares will vest for achieving three-year cumulative EPS of 84p; and
• Between 25% to 100% of the shares will vest for three-year cumulative EPS in between 69p and 84p.
71 | Corporate Governance
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 for each of the awards once the final vesting outcome has been determined. The performance targets for the 2015 award can
be found on pages 69 and 70. The outturn of performance against the comparator group for the 2015 award can be found on page 69.
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 2017 are as follows:
The Michael Page Executive Share Option Scheme
Executive
Number of
options at
1 January
2017
Grant
date
Exercised
during the
year
Lapsed
during the
year
Number of
options at
31 December
2017
Steve Ingham
10 March 2010
374,147
Total
374,147
Kelvin Stagg
10 March 2010
50,000
Total
Note:
50,000
1. At 31 December 2017 all options had vested and were available for exercise.
–
–
–
–
–
–
–
–
1
374,147
374,147
1
50,000
50,000
Exercise
price (p)
Exercise
period
381.5
2013-2020
381.5
2013-2020
The market price of the shares as at 29 December 2017 (the last business day of 2017 when the London Stock Exchange was open)
was 464.50p per share, with a range during the year of 393.10p to 525.50p per share.
The Michael Page 2009 Share Option Scheme
Executive
Grant date
Kelvin Stagg
9 March 2009
Kelvin Stagg
11 March 2011
Kelvin Stagg
12 March 2012
Total
Note:
Number of
options at
1 January
2017
Exercised
during
the
year
Lapsed
during the
year
Number of
options at
31 December
2017
Exercise
price (p)
Exercise
period
20,000
30,000
30,000
80,000
–
–
–
–
–
–
–
–
20,0001
187.5
2012-2019
30,000
491.0
2014-2021
477.0
2015-2022
30,0001
80,000
1. At 31 December 2017 45,030 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.
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
Corporate Governance | 72
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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
No specific term
6 June 2014
No specific term
12 months
12 months
Non-Executive Directors
Letter of Appointment Date Unexpired Term at 31 December 2017
Simon Boddie
Patrick De Smedt
Danuta Gray
Michelle Healy
David Lowden
Sylvia Metayer
Angela Seymour-Jackson
24 September 2015
1 August 2015
9 December 2016
2 September 2016
9 December 2015
22 August 2017
22 August 2017
7 months
6 months
24 months
22 months
6 months
32 months
33 months
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 2017 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 2017, 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 page 71 or share options which have vested but have
not been exercised, as set out on page 72.
Ordinary
shares
as at
1 January
2017
Ordinary shares
acquired on
vesting of legacy
ISP share award
Executive
Directors
Purchased
in year
Disposal
in year
No
longer a
connected
person
Ordinary
shares
as at 31
December
2017
Value of
holding
as at
31
December
2017
Executive
Directors’ value
of holding as at
31 December
2017 as a
% of salary
Steve Ingham
1,323,955
Kelvin Stagg
29,759
136,363
42,149
–
–
–
(14,386)
1,445,932
£6,759,732
(19,860)
–
52,048
£243,324
1,123
70
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 page 71 as
outstanding awards under the Long-Term Incentive Plan.
2. Steve Ingham: During the year under review 136,363 Ordinary shares vested under the LTIP.
3. Kelvin Stagg: During the year under review 42,149 Ordinary shares vested under the LTIP.
4. The value of the Executive Directors’ holdings uses the closing share price on 29 December 2017 (the last business day of 2017 when the London Stock Exchange
was open) of 467.5p per share.
Non-Executive Directors
Ordinary shares of 1p
As at 1 January 2017
Purchased in the year
As at 31
December 2017
Longer-term metrics
EPS growth
David Lowden
Connected person
10,000
–
10,000
No other Non-Executive Director held Ordinary shares in the Company during the year under review.
Pensions
There have been no changes to the Directors’ shareholdings since 31 December 2017 to the date of this Directors’ Remuneration
Report.
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.
73 | Corporate Governance
Relative Importance of Spend on Pay
The graph below shows details of the Company’s retained profit after tax, distributions by way of dividend, shares purchased by the
Michael Page Employees’ Benefit Trust, overall spend on pay to all employees (see Note 4 in the financial statements on page 103) overall
spend on Directors’ pay as included in the single figure table on page 65 and the tax paid in the financial year. The percentage change to
the prior year is also shown.
£m
300
500
400
200
100
0
+14%
454.4
398.5
2017
2016
+15%
83.1
72.1
+39%
78.3
56.3
Profit after
tax (£m)
Dividends
paid (£m)
Overall spend
on pay (£m)
-100%
0
15.1
Shares
purchased by
the EBT (£m)
+69%
5.9
3.5
Overall spend
on Directors’
pay (£m)
+17%
38.2
32.5
Tax paid
(£m)
Implementation of the Remuneration Policy for Executive Directors in 2018
Base Salary
The base salaries of the Executive Directors were considered with reference to the general salaries across the UK employee population.
The Remuneration Committee decided to increase the salary of each of the Chief Executive Officer and the Chief Financial Officer by 2.3%
which is in line with the increase awarded to the UK employee population.
Executive Single Incentive Plan
As set out in the Annual Statement and Directors’ Remuneration Policy, the first ESIP award will be paid in 2018. This award replaced
the annual bonus and LTIP award that operated under the previous policy. The next ESIP award will be paid in April 2019 subject to both
annual performance over 2018, and long-term trailing performance over 2017 and 2018. The scorecard and weightings for this award are
set out below. Full retrospective disclosure will be provided in next year’s Annual Report on Remuneration.
Measure
Annual Performance
PBT
Non-financial, strategic
Personal performance
Relative Gross Profit
Weightings
30%
15%
10%
35%
10%
Relative Importance of Spend on Pay
The graph below shows details of the Company’s retained profit after tax, distributions by way of dividend, shares purchased by the
Michael Page Employees’ Benefit Trust, overall spend on pay to all employees (see Note 4 in the financial statements on page 103) overall
spend on Directors’ pay as included in the single figure table on page 65 and the tax paid in the financial year. The percentage change to
the prior year is also shown.
500
400
£m
300
200
100
0
+14%
454.4
398.5
2017
2016
+15%
83.1
72.1
+39%
78.3
56.3
Profit after
tax (£m)
Dividends
paid (£m)
-100%
0
15.1
Shares
purchased by
the EBT (£m)
Overall spend
on pay (£m)
+69%
5.9
3.5
Overall spend
on Directors’
pay (£m)
+17%
38.2
32.5
Tax paid
(£m)
Implementation of the Remuneration Policy for Executive Directors in 2018
Base Salary
The base salaries of the Executive Directors were considered with reference to the general salaries across the UK employee population.
The Remuneration Committee decided to increase the salary of each of the Chief Executive Officer and the Chief Financial Officer by 2.3%
which is in line with the increase awarded to the UK employee population.
Executive Single Incentive Plan
As set out in the Annual Statement and Directors’ Remuneration Policy, the first ESIP award will be paid in 2018. This award replaced
the annual bonus and LTIP award that operated under the previous policy. The next ESIP award will be paid in April 2019 subject to both
annual performance over 2018, and long-term trailing performance over 2017 and 2018. The scorecard and weightings for this award are
set out below. Full retrospective disclosure will be provided in next year’s Annual Report on Remuneration.
Measure
Annual Performance
PBT
Non-financial, strategic
Personal performance
Longer-term metrics
EPS growth
Relative Gross Profit
Weightings
30%
15%
10%
35%
10%
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.
Corporate Governance | 74
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Implementation of the Remuneration Policy for the Chairman and Non-Executive Directors in 2018
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
31 December 2017
From March 2018
£205,000
£53,300
£7,000
£14,000
£14,000
£209,000
£54,300
£7,000
£14,000
£14,000
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 2017.
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. The table on page 76 shows the total remuneration of the Chief Executive Officer over the same nine year period.
31 Dec 2008
31 Dec 2009
31 Dec 2010
31 Dec 2011
31 Dec 2012
31 Dec 2013
31 Dec 2014
31 Dec 2015
31 Dec 2016
31 Dec 2017
416.80
353.88
353.78
291.47
305.21
231.51
331.78
286.12
273.64
287.90
263.63
255.28
298.43
265.27
220.68
270.71
191.91
163.24
217.66
201.72
201.83
173.64
172.60
162.60
PageGroup
FTSE 250
E
FTSE SS
450
400
350
300
250
200
181.31
150.64
132.50
150
100
100.0
75 | Corporate Governance
2009
2010
2011
2012
2013
2014
2015
2016
2017
£1,010,000
£2,184,000
£1,647,000
£2,723,000
£1,318,000
£1,494,000
£2,074,000
£2,089,000
£3,581,000
N/A
N/A
N/A
N/A
58%
71%
68%
60%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
60%
55.35%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
91%
CEO
Single
remuneration
total
Short-term
incentives
(% of maximum)
(note 1)
Long-term
incentives
(% of maximum)
Executive Single
Incentive Plan
(% of maximum)
Notes:
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, 2015 and 2016.
Statement of Voting at the Annual General Meeting
At the Company’s Annual General Meeting held on 8 June 2017, shareholders approved the current Remuneration Policy. The table
below shows the results of the voting on the Remuneration Policy and the Directors’ Remuneration Report put to shareholders at
the 2017 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
8 June 2017
163,167,784
66.18
83,370,082
33.82
134,123
Directors’ Remuneration Report
8 June 2017
239,274,272
97.00
7,397,717
3.00
0
A full schedule in respect of shareholder voting on all the resolutions put to shareholders at the 2017 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 (2016: £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
6 March 2018
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Directors' Remuneration Policy
PageGroup is a global business that operates in a cyclical industry in which the retention and ongoing motivation of Executives and
management continuity is critical to the success of the Company. As a result, the Directors’ Remuneration Policy set out in this report has
been designed to encourage long-term decision making, to avoid undue volatility in remuneration outcomes, and to act as an effective
retention tool during market downturns.
The Remuneration Policy set out below was approved by shareholders at the Company's Annual General Meeting held on 8 June
2017 and became effective from that date. This new policy replaced the Annual Bonus and LTIP with a single plan, the Executive Single
Incentive Plan (‘ESIP’) but did not increase the maximum total quantum available to executives. It simplified remuneration; introduced
a single balanced scorecard; incorporated deferral of a significant portion of any award; introduced post-vesting holding periods on all
vesting shares for executives who have not met the shareholding requirement; maintained both annual and longer-term performance
measurement; and results in simpler disclosure of remuneration outcomes. There are no other new components in the remuneration policy.
Policy Table for Executive Directors
Element
Salary
(Fixed
pay)
Benefits
(Fixed
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
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.
Aim for market competitive
salaries.
Competitive benefits in line
with market practice.
77 | Corporate Governance
Element
Executive
Single
Incentive
Plan (ESIP)
Purpose and link
to strategy
Operation
Rewards both
short and long
term performance
Awards are paid in cash (40%), and deferred shares (60%)
which vest in equal tranches over a minimum three-year
period.
Aligns interests of
Executive Directors
with shareholders
The plan consists of annual awards with performance
measured over both one year and trailing long-term
performance periods. At least 40% of any award will
depend on trailing longer-term metrics.
Maximum opportunity
The ESIP allows for annual
awards of up to a maximum
of 375% of base salary for
each Executive Director.
Performance will be measured against a balanced
scorecard, to support the company’s strategy.
Performance targets will be a mix of financial, strategic/
operational and personal targets which may comprise,
but are not limited to, the following: PBT; key strategic
projects; people development; cost management; relative
Gross Profit vs a comparator group; and EPS.
A post-vesting holding period applies. Directors who have
not reached the shareholding requirement of 200% of
base salary will be required to hold vested shares from
each tranche of the ESIP for a further two years post-
vesting, except for sales for the purposes of meeting tax
liabilities on vesting and exercise.
A minimum of 70% of the possible award will normally be
linked to financial metrics.
Dividend equivalents accrue during the vesting period but
are only released to the extent awards vest.
Malus and clawback provisions will apply to the total
award, including cash and deferred portions, for
misstatement of performance, substantial failure of risk
control, and gross 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.
To avoid measuring performance over periods already known at implementation, the trailing element for the first ESIP award to be made
in 2018 was based on 2017 EPS. For the second ESIP award, performance will be measured over a two-year performance period. For
the third and subsequent awards, performance will be measured over a three-year performance period.
Choice of performance
measures and target setting
Information on performance measures
and targets for each annual award
is disclosed in detail in the Directors’
Annual Remuneration Report. When
choosing performance measures and
setting targets the Committee is guided
by the following principles:
•
performance measures should drive
and reward the achievement of key
short and long-term financial and
strategic goals
•
•
performance measures should
provide alignment between the
interests of management and those
of shareholders
a significant proportion of any
incentive scheme should be linked
to Group financial performance
• PBT and EPS are used currently
because they are key measures
of business performance and
profitability
Strategic measures will focus Executives
on key drivers that underpin long-term
financial performance. The Committee
are mindful that:
•
targets for financial and strategic
measures should be stretching yet
achievable, and set with reference
to internal plans and external
expectations
•
targets should not incentivise
excessive risk taking
Legacy arrangements
In approving this Directors’ Remuneration
Policy Report, authority is given to the
Corporate Governance | 78
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Directors’ Remuneration Report
Company to honour any commitments
entered into with current or former Directors
(such as the payment of a pension or
awards pursuant to the terms of the legacy
share schemes such as the Long-Term
Incentive Plan and the Deferred Bonus
Plan) granted prior to the date that this
policy takes effect. Details of any such
payments will be set out in the Directors’
Annual Remuneration Report as they arise.
Consistency with
remuneration for the wider
group
The Committee reviews and considers
remuneration across PageGroup
when setting the Executive Director
remuneration policy. Remuneration levels
for all employees are set in the context
of internal relativities and market levels
of remuneration for comparable roles.
Policy for Executive Directors differs
from other senior executives in that
Executive Director variable remuneration
is capped, whereas for other senior
executives it is uncapped. This is in line
with practice in the recruitment industry
where variable remuneration is funded
from an uncapped profit pool. This
arrangement provides a strong incentive
for employees to grow PageGroup profit.
Executive shareholding
requirements
Shareholding requirements are operated
to align Executive Directors’ interests
with those of shareholders. The current
requirement is 200% of base salary.
This will be achieved through the retention
of half of any vesting share award (net
of tax) made under the legacy deferred
bonus arrangement, and through the
application of two-year post-vest holding
periods (net of tax) if the award was made
under the legacy LTIP or the new ESIP.
Our approach to recruitment
Remuneration will be subject to the maximum levels as set out in the Directors Remuneration Policy in force at the time of appointment. As
a result, the maximum level of variable remuneration is 375% of base salary under the ESIP (excluding any “buy out” payments).
Individuals will participate in the ESIP up to the normal annual limit subject to:
• Award levels in the year of appointment being pro-rated to reflect the proportion of the financial year worked
• Performance measures and/or measurement periods may be adjusted for newly appointed Executive Directors, taking account of the
timing of appointment and the individual’s role
The table below sets out our approach to the treatment of outstanding awards of variable remuneration when recruiting externally
or internally:
Element of
remuneration
Treatment of
outstanding
awards
of variable
remuneration
External recruits
Internal recruits
Any variable pay element awarded in
respect of the prior role may be allowed
to pay out according to its terms on
grant.
May offer additional cash and/or share-based elements when
considered to be in the best interests of the Company and, therefore,
shareholders, in order to ‘buy out’ forfeited remuneration.
Any ‘buy-out’ payments would be based solely on remuneration
lost when leaving the former employer and would be on terms that
are no more favourable than the delivery mechanism (i.e. cash,
shares, options) and time horizons. Where forfeited remuneration
is performance related, any ‘buy-out’ payment would be subject to
performance conditions determined by the Committee.
The Committee may need to avail itself of the current Listing Rule
9.4.2 R to make such awards where doing so is necessary to facilitate,
in exceptional circumstances, the recruitment of the relevant individual.
In addition, the structure of remuneration for a new Executive Director may differ temporarily from that in effect for other Executive
Directors. The circumstances in which this may occur are as follows:
• when it is appropriate to offer a below market salary initially, a series of salary increases may be given over the following few years
subject to individual performance and experience in role which bring the incumbent to the determined salary level, reflective of the
policy to pay market competitive salaries
•
the Committee may agree that the Company will meet certain costs associated with the recruitment (for example legal fees)
79 | Corporate Governance
An Executive Director who resigns or is
dismissed for cause will not be eligible
for an ESIP award and will forfeit any
deferred awards.
•
•
Policy on payment for loss
of office
On termination, any compensation
payments due to an Executive Director
are calculated in accordance with normal
legal principles, including mitigation, as
appropriate. Should notice be served by
either party, an Executive Director can
continue to receive basic salary, benefits
and pension for the duration of his notice
period during which time the Company
may require the individual to continue to
fulfil his current duties or may place the
individual on garden leave. The Company
can make a payment in lieu of notice
(PILON) as a lump sum equivalent to
the amount of base salary, benefits and
pension that would have been payable
to the executive. This payment can be
phased over the remainder of the notice
period and be subject to reduction
if there are alternative earnings. The
phasing and reduction of PILON will not
apply to Executive Directors in post at
31 December 2013. A payment may be
made in respect of accrued but untaken
holiday.
In respect of the ESIP, an Executive
Director may be deemed a ‘good leaver’,
for example due to:
• Redundancy, retirement, injury,
disability, ill health or death in
service;
• A transfer of employment in
connection with the disposal of a
business or undertaking;
•
The company with which the
Executive Director holds office
or employment ceasing to be a
member of the Group; or
• Other appropriate circumstances at
the discretion of the Committee.
As a ‘good leaver’ they will be eligible
for an ESIP award for their last year of
employment pro-rated for the portion
of the year worked and subject to
performance. Unvested deferred ESIP
awards may be retained by the Executive
Director and will normally vest at the
established vesting dates and will
continue to be subject to malus and
clawback. They may also be subject
to time pro-ration at the Remuneration
Committee’s discretion.
The extent to which any awards made
under legacy share plans prior to the
effective date of this policy would vest
upon cessation of employment would
be determined in accordance with their
terms and the plan rules.
In considering the exercise of discretion
as set out above, the Committee will take
into account all relevant circumstances.
Factors that the Committee may (but
shall not be obliged to) take into account
will include, but not be limited to, the
following:
•
•
•
•
the best interests of the Company
the contribution of the Executive
Director to the success of the
Company during their tenure
the need to ensure continuity
the need to compromise any claims
that the Executive Director may
have
• whether the Executive Director
received a PILON payment
• whether a greater proportion of the
outstanding award may have vested
had the Executive Director served
out his notice
whether the Executive Director has
presided over an orderly handover
adjustment of performance
outcomes to ensure that payout is
fair and reasonable in the context of
the Company’s overall performance.
Illustration of the application
of our remuneration policy
The chart below gives an indication of
the total remuneration which could be
received by the Chief Executive Officer
and Chief Financial Officer under the
policy. Three scenarios are presented:
the minimum remuneration receivable;
the amount receivable if they perform in
line with the Company’s expectations;
and the maximum remuneration
receivable.
Note that the charts are only indicative,
as share price movement and dividend
accruals have been excluded and
performance outcomes are assumed.
Assumptions for each illustrative scenario
are as follows:
• Minimum: fixed remuneration only
(i.e. salary, benefits and pension)
Target: fixed remuneration plus 60%
of the maximum payable under the
annual elements of the ESIP, and
50% of the maximum payable under
the longer-term trailing elements of
the ESIP
•
• Maximum: fixed remuneration plus
maximum ESIP opportunity
The charts are based on an annual salary
for 2017, when the policy was approved,
for the Chief Executive Officer for the
Chief Financial Officer, and assume a
maximum ESIP opportunity of 375% and
325% of maximum salary for the Chief
Executive Officer and Chief Financial
Officer respectively.
Chief Executive Officer
Chief Financial Officer
3500
3000
2500
2000
1500
1000
500
0
£3,044k
74%
£2,040k
61%
£787k
100%
39%
26%
2000
1500
1000
500
0
£1,584k
72%
£1,077k
59%
£446k
100%
41%
28%
Minimum Target
Max
Minimum Target
Max
Corporate Governance | 80
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Directors’ Remuneration Report
Statement of consideration
of employment conditions
elsewhere in the Group
PageGroup does not consult directly
with employees when determining
remuneration policy for Executive
Directors. However, increases in
pay across the senior management
population and the wider workforce are
taken into account when setting pay
levels for Executive Directors.
Statement of consideration of
shareholder views
The Committee considers shareholder
feedback received in relation to the AGM
each year at its first meeting following
the AGM. The Remuneration Committee
Chairman will seek to inform major
shareholders of any material changes to
the Remuneration Policy in advance and
will generally offer a meeting to discuss
these changes.
Key areas of discretion
Key areas of Committee discretion in the
Remuneration Policy include (but are not
limited to):
payment for loss of office” section on
page 80)
•
•
•
the choice of financial performance
measures in variable remuneration
and the choice of performance
targets for those measures
the treatment of leavers in the ESIP
(as described in the “Policy on
payment for loss of office” section
on page 80)
certain discretions as set out in the
ESIP plan rules such as:
– the timing of grant of award and/
or payment
– the size of an award and/
or a payment (subject to the
maximums set out in the Future
Policy Table for Executive
Directors)
– determination of a good leaver
(in addition to any specified
categories) for incentive plan
purposes based on the rules
of the ESIP, and the resulting
treatment of the award (as
described in the “Policy on
– adjustments required in certain
circumstances (e.g. rights issues,
corporate restructuring and
special dividends)
– the ability to adjust existing
performance conditions for
exceptional events so that they
can still fulfil their original purpose
(subject to the amended
condition not being materially
less challenging)
External Non-Executive
Director positions
Subject to Board approval, Executive
Directors are permitted to take on
non-executive positions with other
companies. Executive Directors are
permitted to retain their fees in respect
of such positions. Details of outside
directorships held by the Executive
Directors and any fees that they
received are provided on page 76 of the
Directors’ Annual Remuneration Report.
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
Attract, retain and
fairly reward high
calibre individuals.
Operation
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 March.
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.
The above principles will also be applied for the recruitment of new Non-Executive Directors.
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 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.
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 one month’s written
notice or in accordance with 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
Annual General Meetings.
Further detail on service contracts and
letters of appointment are set out on
page 72 and copies are available for
inspection at the Company’s registered
office during normal business hours.
81 | Corporate Governance
Directors’ Report
The Directors present their Report together with the consolidated financial statements for the year
ended 31 December 2017.
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.
Elaine Marriner, Company Secretary
Likely future developments
Policy on disability
Employee engagement
Greenhouse gas emissions
Names and biographies of Directors who served during the year
Corporate Governance Report
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
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
3
83
26-28
23
46-50
52-55
71-73
82
83
84
84
39
39
54
124-126
125-126
83
125
124
124
116-117
108-112
117-121
122
121
Directors
The Directors who served throughout
the year under review were David
Lowden, Simon Boddie, Patrick De
Smedt, Danuta Gray, Steve Ingham,
Michelle Healy and Kelvin Stagg.
Baroness Ruby McGregor-Smith
ceased to be a Director on 23 May
2017. Sylvia Metayer and Angela
Seymour-Jackson were each appointed
as a Non-Executive Director of the
Company on 1 September 2017 and
1 October 2017 respectively. Danuta
Gray has decided not to offer herself for
re-election at the forthcoming Annual
General Meeting so will cease to be a
Director from 7 June 2018.
Results and Dividends
The results for the year are set out in
the Consolidated Income Statement on
page 91. An analysis of revenue, profit
and net assets by region is shown in
Note 2 on pages 101 and 102. A final
dividend for 2016 of 8.23p per Ordinary
share was paid on 19 June 2017; an
interim dividend for 2017 of 3.90p per
Ordinary share was paid on 11 October
2017; and a special dividend of 12.73p
per share was also paid on 11 October
2017.
The Directors recommend the payment
of a final dividend for the year ended
31 December 2017 of 8.60p per
Ordinary share on 18 June 2018
to shareholders on the register of
members on 18 May 2018. If approved
by shareholders at the Annual General
Meeting, this will result in a total ordinary
dividend for the year of 12.5p per
Ordinary share (2016: 11.98p). This,
together with the payment of the special
dividend, gives a total dividend for the
year of 25.23p (2016: 18.44p).
Corporate Governance | 82
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Directors’ Report
Share Capital
As at 31 December 2017 the Company’s
issued capital comprised a single class of
326,808,701 Ordinary shares of 1p each,
totalling £3,268,087.01. At the Annual
General Meeting held on 8 June 2017 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 833,246 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.
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 Group’s employment
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,
Yammer (the Group’s internal social
collaboration site), 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
26 to 28.
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
20 on pages 117 to 121.
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 and
share option schemes for the benefit of its
Executive Directors and employees, the
rules of which contain provisions which
may cause options and share awards
granted to vest on a change of control.
Substantial Shareholders
At 31 December 2017 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
Sanne Fiduciary Services Ltd as Trustee of the Michael Page Employees’ Benefit Trust
16,243,053
4.98
Baillie Gifford & Co
Heronbridge Investment Management LLP
16,512,860
Below 5%
16,546,842
5.067
The following notifications were received during the period 1 January 2018 to 6 March 2018:
Shareholder
No. of Ordinary shares
% of voting
rights
Sanne Fiduciary Services Ltd as Trustee of the Michael Page Employees’ Benefit Trust
13,007,956
3.96%
Since the date of disclosure, the above shareholdings may have changed.
83 | Corporate Governance
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
2017.
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)
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;
(ii) state whether the parent company
financial statements have been
prepared in accordance with IFRS as
adopted for use in the EU;
(iii) select suitable accounting policies and
apply them consistently;
(iv) make judgements and estimates that
are reasonable and prudent;
(v) present information, including
accounting policies, in a manner that
provides relevant, reliable, comparable
and understandable information; 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.
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:
(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
(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 Annual 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.
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.
Annual General Meeting
The Annual General Meeting of the
Company will be held on 7 June 2018.
The notice of meeting can be found in
the document which accompanies this
Annual Report and Accounts. It is also
available on the Company’s website
www.page.com.
By order of the Board
Elaine Marriner
Company Secretary
6 March 2018
Corporate Governance | 84
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Independent Auditor’s Report to the Members of PageGroup plc
Opinion
In our opinion:
• PageGroup 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 2017 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.
We have audited the financial statements of PageGroup plc which comprise:
Group
Consolidated income statement
Consolidated statement of comprehensive income
Parent company
Consolidated balance sheet
Balance sheet
Consolidated statement of changes in equity
Statement of changes in equity
Consolidated statement of cash flows
Statement of cash flows
Related notes 1 to 24 to the financial statements, including a summary
of significant accounting policies
Related notes 1 to 24 to the financial statements including a summary
of significant accounting policies
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.
Basis for opinion
We conducted our audit in accordance
with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards
are further described in the Auditor’s
responsibilities for the audit of the financial
statements section of our report below.
We are independent of the group and
parent company in accordance with the
ethical requirements that are relevant to
our audit of the financial statements in the
UK, including the FRC’s Ethical Standard
as applied to listed public interest entities,
and we have fulfilled our other ethical
responsibilities in accordance with these
requirements.
We believe that the audit evidence we
have obtained is sufficient and appropriate
to provide a basis for our opinion.
Use of our report
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.
Conclusions relating to principal
risks, going concern and viability
statement
We have nothing to report in respect of
the following information in the annual
report, in relation to which the ISAs (UK)
require us to report to you whether we
have anything material to add or draw
attention to:
•
•
the disclosures in the annual report
set out on pages 35 to 38 that
describe the principal risks and
explain how they are being managed
or mitigated;
the directors’ confirmation set out
on page 39 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 directors’ statement set
out on page 84 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
• whether the directors’ statement
in relation to going concern
required under the Listing Rules
in accordance with Listing Rule
9.8.6R(3) is materially inconsistent
with our knowledge obtained in the
audit; or
•
the directors’ explanation set out
on page 39 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.
85 | Financial Statements
Overview of our audit approach
Key audit matters
• Revenue recognition for permanent and temporary placements
Audit scope
• We performed a full scope audit of 6 components of the Group and audit procedures on specific balances for a further
5 components.
• The components where we performed full or specific audit procedures accounted for 83% of revenue, 83% of profit
before tax and 82% of total assets.
Materiality
• Overall Group materiality of £5.4 million which is based on 5% of profit before tax
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of
the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified.
These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a
whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
Risk
Our response to the risk
Revenue recognition for permanent and
temporary placements
Refer to the Audit Committee Report
(page 58); Accounting policies (page 96);
and Note 2 of the Consolidated Financial
Statements (page 101)
The Group has reported permanent
placement revenues of £543.3million
(2016: £476.3million) and temporary
placement revenue of £828.3million (2016:
£719.8million).
For permanent placements there is a risk
around the timing of revenue recognition
as revenue is recognised when customer
and candidate agreement is achieved,
which may be several months in advance
of the start of employment. Consequently,
there is a risk that:
• recognition occurs before revenue
recognition criteria have been met;
• period end cut-off is performed
incorrectly; or
• management judgement is incorrectly
applied in estimating the level of
provision required for potential revenue
reversals when placements are not
taken up as agreed.
Temporary placement revenue is
recognised when the customer has
approved the timesheet. Consequently
there is a risk that:
• revenue is recognised before an
approved timesheet has been
submitted; or
• that period end cut-off is performed
incorrectly.
For both permanent and temporary
placements we have identified the
following risk:
• Management override by manipulation
of revenue through manual or top-side
journals.
We performed the following full and specific scope audit procedures
over this risk area at 11 components, which covered 83% of the
revenue balance:
• For permanent and temporary revenue streams, we identified
and assessed the design of key controls to validate that revenue
recognition was appropriate and applied in accordance with the
Group’s accounting policies.
• For 9 of the components, we used data analytics covering all
revenue transactions in the year to test the correlation between
revenue, accrued revenue, accounts receivable and cash.
• For the remaining 2 components we tested the operating
effectiveness of key controls over revenue recognition and selected
a sample of permanent and temporary revenue placements for
detailed transaction testing to verify that the revenue recognition
criteria had been met and revenue was recorded at the correct
value.
• Performed period-end cut off testing for samples of revenue
transactions to check all revenue recognition criteria for the
permanent and temporary placements had been met and that
revenue had been recognised in the correct period.
• Compared the level of permanent placement revenue reversals over
the last 12 months, which occur as a result of non-completion of
contractual placements, to the provision recorded against accrued
income to determine if the assumptions used to calculate the
provision were appropriate. We also re-performed the provision
calculation to confirm its accuracy.
• Performed sampling procedures to validate the existence of
accrued revenue and trade receivable balances.
• Performed journal entry testing around revenue, focusing on manual
entries and top-side adjustments specifically around year end.
For all other components which represent 17% of the revenue
balance:
• For any component representing greater than 2% of the Group’s
revenue we performed period-end cut off testing over for a sample
of revenue transactions to check all revenue recognition criteria for
the permanent and temporary placements had been met and that
revenue had been recognised in the correct period.
• We performed audit procedures centrally on a country-by-country
basis to address the risk of an undetected material error occurring
in these components. These comprised analytical review of revenue
and gross profit, and ratio analysis of key performance indicators
including revenue and gross profit per fee earner.
Key observations
communicated to
the Audit Committee
We concluded that
revenue recognised
for permanent and
temporary placements
is correctly recorded
in accordance with
the Group’s revenue
recognition criteria
and IFRS, and that the
provision for expected
revenue reversals was
appropriate.
Financial Statements | 86
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION balances tested for the Group.
The 11 reporting components where we
performed audit procedures accounted
for:
Revenue
Full scope
components
2017 2016
59% 62%
Specific scope
components
24% 23%
Profit
before
tax
Total
Full scope
components
Specific scope
components
Total
Total
assets
Full scope
components
83% 85%
57% 68%
26% 22%
83% 90%
60% 57%
Specific scope
components
22% 21%
Total
82% 78%
Of the remaining 25 components that
together represent 17% of the Group’s
profit before tax, none are individually
greater than 3% of the Group’s profit
before tax. 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
and assessing the results of the Internal
Audit reviews to identify any potential
risks of material misstatement to the
Group financial statements. We have
also verified bank reconciliations to test
cash balances and performed revenue
cut-off procedures around year-end at
some of the larger locations within these
remaining 25 components.
The charts below illustrate the coverage
obtained from the work performed by our
audit teams.
17%
59%
24%
Revenue
17%
57%
Profit
before
tax
26%
18%
60%
Total assets
22%
Full Scope components
Specific Scope components
Other procedures
Changes from the prior year
To incorporate an element of
unpredictability and change into our
audit approach we rotated the smallest
component from last year’s audit
(Switzerland) and replaced it with the
next largest component, Belgium
(specific scope). This year we also
performed additional revenue cut-off
procedures centrally for the next
4 largest components not identified
as full or specific scope, namely
Switzerland, Japan, Mexico and Brazil.
In the prior year, our auditor’s report
included a key audit matter in relation to
the provision for transfer pricing. We have
determined that this no longer represents
a key audit matter. This judgement
is based on our assessment that the
likelihood of a material misstatement is
lower, taking into account the risk of tax
authority challenge, and that the overall
provision is less than audit materiality.
An overview of 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.
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 11 of the 36
reporting components that represent
the principal business units within the
Group within the following countries:
United Kingdom, France, United States,
Australia, China, Hong Kong, Italy,
Germany, Spain, Netherlands and
Belgium.
Of the 11 components selected, we
performed an audit of the complete
financial information of 6 components
(“full scope components”) which were
selected based on their size or risk
characteristics. For the remaining
5 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. The
audit scope of these components may
not have included testing of all significant
accounts of the component but will have
contributed to the coverage of significant
87 | Financial Statements
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 component
auditors from other EY global network
firms operating under our instruction
or in some cases by us, as the primary
audit engagement team. For the 6 full
scope components, audit procedures
were performed by component audit
teams. Procedures on the Group’s Head
Office were performed directly by the
primary audit team. Of the 5 specific
scope components, audit procedures on
one of the components were performed
directly by the primary audit team. For 2
of the full scope components, the United
Kingdom and the US, the component
audit team included the Group audit
senior manager from the primary audit
team. For the remaining 4 full scope
components and the 4 specific scope
components, where the work was
performed by component auditors,
we determined the appropriate level of
group team involvement as described
below to 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 continued to
follow a programme of planned visits
that has been designed to ensure that
the Senior Statutory Auditor visits all full
scope locations at least once every 3
years. During the current year’s audit
cycle, visits were undertaken by the
Senior Statutory Auditor to the UK and
Italy. A visit to France and the Group’s
EMEA shared service centre (SSC)
based in Spain was undertaken by the
Group audit senior manager. These visits
involved discussing the audit approach
with the component teams and any
issues arising from their work, reviewing
key audit working papers on risk areas
and attending the audit closing meeting
for the Italian component with local
management. The purpose of the visit to
the SSC was to obtain an understanding
of the SSC operations, perform
walkthrough procedures for all significant
processes in relation to the countries
now supported by the SSC, perform
independent testing of management
controls on some of the processes and
perform audit procedures on one of the
components for which Group audit team
was directly responsible. The Group
audit team attended 3 regional audit
closing meetings or calls with regional
management and the Group CFO, at
which key areas of local judgement and
audit findings were discussed.
The Group audit team interacted
regularly with the component teams
where appropriate during various stages
of the audit, 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 £5.4million (2016: £4.9million),
which was based on 5% of profit
before tax (2016: 5% profit before tax).
We believe that profit before tax is the
principal consideration for stakeholders
in assessing the financial performance of
the Group.
We determined materiality for the Parent
company to be £5.8million (2016:
£5.8million), which is 0.5% (2016: 0.5%)
of total assets.
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 75% (2016: 75%) of our
planning materiality, namely £4.1million
(2016: £3.6million).
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 £0.8million
to £1.8million (2016: £0.7million to
£1.18million).
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 £0.27m (2016: £0.24m), 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.
Other information
The other information comprises the
information included in the Annual
Report and accounts other than the
financial statements and our auditor’s
report thereon. The directors are
responsible for the other information.
Our opinion on the financial statements
does not cover the other information
and, except to the extent otherwise
explicitly stated in this report, we do
not express any form of assurance
conclusion thereon.
In connection with our audit of the
financial statements, our responsibility
is to read the other information and, in
doing so, consider whether the other
information is materially inconsistent
with the financial statements or our
knowledge obtained in the audit or
Financial Statements | 88
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION otherwise appears to be materially
misstated. If we identify such material
inconsistencies or apparent material
misstatements, we are required to
determine whether there is a material
misstatement in the financial statements
or a material misstatement of the other
information. If, based on the work we
have performed, we conclude that there
is a material misstatement of the other
information, we are required to report
that fact.
We have nothing to report in this regard.
In this context, we also have nothing to
report in regard to our responsibility to
specifically address the following items
in the other information and to report as
uncorrected material misstatements of the
other information where we conclude that
those items meet the following conditions:
•
Fair, balanced and
understandable (set out on
page 84) – the statement given by
the directors that they consider
the annual report and financial
statements taken as a whole is fair,
balanced and understandable and
provides the information necessary
for shareholders to assess the
group’s performance, business
model and strategy, is materially
inconsistent with our knowledge
obtained in the audit; or
• Audit committee reporting (set out
on page 58) – the section describing
the work of the audit committee does
not appropriately address matters
communicated by us to the audit
committee; or
• Directors’ statement of
compliance with the UK
Corporate Governance Code
(set out on page 52) – the parts of
the directors’ statement required
under the Listing Rules relating to
the company’s compliance with the
UK Corporate Governance Code
containing provisions specified for
review by the auditor in accordance
with Listing Rule 9.8.10R(2) do
not properly disclose a departure
from a relevant provision of the UK
Corporate Governance Code.
Opinions 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.
In our opinion, based on the work
undertaken in the course of the audit:
•
•
•
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 and those reports have
been prepared in accordance with
applicable legal requirements;
the information about internal control
and risk management systems
in relation to financial reporting
processes and about share capital
structures, given in compliance
with rules 7.2.5 and 7.2.6 in the
Disclosure Rules and Transparency
Rules sourcebook made by the
Financial Conduct Authority (the FCA
Rules), is consistent with the financial
statements and has been prepared
in accordance with applicable legal
requirements; and
information about the company’s
corporate governance code
and practices and about its
administrative, management
and supervisory bodies and their
committees complies with rules
7.2.2, 7.2.3 and 7.2.7 of the FCA
Rules.
Matters on which we are required
to report by exception
In the light of the knowledge and
understanding of the Group and the
Parent company and its environment
obtained in the course of the audit,
we have not identified material
misstatements in:
• the strategic report or the directors’
report; or
• the information about internal control
and risk management systems in
relation to financial reporting processes
and about share capital structures,
given in compliance with rules 7.2.5
and 7.2.6 of the FCA Rules
We have nothing to report in respect of
the following matters in relation to which
the Companies Act 2006 requires us 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
•
a Corporate Governance Statement
has not been prepared by the
company
Responsibilities of directors
As explained more fully in the directors’
responsibilities statement set out on page
84, the directors are responsible for the
preparation of the financial statements
and for being satisfied that they give a
true and fair view, and for such internal
control as the directors determine is
necessary to enable the preparation of
financial statements that are free from
material misstatement, whether due to
fraud or error.
In preparing the financial statements, the
directors are responsible for assessing
the Group and Parent company’s ability to
continue as a going concern, disclosing,
as applicable, matters related to going
concern and using the going concern
basis of accounting unless the directors
either intend to liquidate the Group or the
Parent company or to cease operations,
or have no realistic alternative but to
do so.
89 | Financial Statements
Auditor’s responsibilities for the
audit of the financial statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from
material misstatement, whether due to
fraud or error, and to issue an auditor’s
report that includes our opinion.
Reasonable assurance is a high level
of assurance, but is not a guarantee
that an audit conducted in accordance
with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud
or error and are considered material
if, individually or in the aggregate,
they could reasonably be expected
to influence the economic decisions
of users taken on the basis of these
financial statements.
Explanation as to what extent the
audit was considered capable of
detecting irregularities, including
fraud
The objectives of our audit, in respect
to fraud, are: to identify and assess
the risks of material misstatement of
the financial statements due to fraud;
to obtain sufficient appropriate audit
evidence regarding the assessed risks
of material misstatement due to fraud,
through designing and implementing
appropriate responses; and to respond
appropriately to fraud or suspected fraud
identified during the audit. However, the
primary responsibility for the prevention
and detection of fraud rests with both
those charged with governance of the
entity and management.
Our approach was as follows:
• We obtained an understanding of
the legal and regulatory frameworks
that are applicable to the Group
and determined that the most
significant are those that relate to
the reporting framework (IFRS, FRS
101, the Companies Act 2006 and
UK Corporate Governance Code)
and the relevant tax compliance
regulations in the jurisdictions in
which the group operates. There are
no significant, industry specific laws
or regulations that we considered in
determining our approach.
• We understood how PageGroup plc
is complying with those frameworks
making enquiries of management,
internal audit, those responsible for
legal and compliance procedures
and the company secretary. We
corroborated our enquiries through
our review of board minutes and
papers provided to the Audit
Committee. Our assessment
included the tone from the top and
the emphasis on a culture of honest
and ethical behaviour.
• We assessed the susceptibility of
the Group’s financial statements to
material misstatement, including
how fraud might occur by meeting
with management from various
parts of the business to understand
where it considered there was
susceptibility to fraud. We also
considered performance targets
and their propensity to influence on
efforts made by management to
manage earnings. We considered
the programmes and controls
that the Group has established
to address risks identified, or that
otherwise prevent, deter and detect
fraud; and how senior management
monitors those programmes and
controls.
• Based on this understanding we
designed our audit procedures
to identify non-compliance with
such laws and regulations. Our
procedures were focused on
revenue recognition, which is
described in more detail in our Key
audit matters and journal entry
testing, with a focus on manual or
top-side adjustments.
• Our audit procedures were
communicated to and performed by
our component teams.
A further description of our
responsibilities for the audit of the
financial statements is located on
the Financial Reporting Council’s
website at https://www.frc.org.uk/
auditorsresponsibilities. This description
forms part of our auditor’s report.
Other matters we are required to
address
• We were appointed by the company
in June 2011 to audit the financial
statements for the year ended
31 December 2011 and subsequent
financial periods.
The period of total uninterrupted
engagement including previous
renewals and reappointments is
7 years, covering the years ending
31 December 2011 to 2017.
The non-audit services prohibited
by the FRC’s Ethical Standard were
not provided to the Group or the
Parent company and we remain
independent of the Group and the
Parent company in conducting the
audit.
The audit opinion is consistent with
the additional report to the audit
committee.
•
•
Bob Forsyth (Senior Statutory
Auditor)
for and on behalf of Ernst & Young LLP,
Statutory Auditor
London
6 March 2018
Notes:
1. The maintenance and integrity of
the PageGroup 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.
Financial Statements | 90
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2017
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Financial income
Financial expenses
Profit before tax
Income tax expense
Profit for the year
Attributable to:
Owners of the parent
Earnings per share
Basic earnings per share (pence)
Diluted earnings per share (pence)
Note
2
2
2
5
5
2
6
3
9
9
The above results relate to continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2017
Profit for the year
Other comprehensive income/(loss) for the year
Items that may subsequently be reclassified to profit and loss:
Currency translation differences
Gains/(Loss) on hedging instruments
Total comprehensive income for the year
Attributed to:
Owners of the parent
2017
£’000
1,371,534
(659,966)
711,568
(593,246)
118,322
229
(389)
118,162
(35,082)
83,080
2016
£’000
1,196,125
(575,091)
621,034
(520,082)
100,952
117
(1,073)
99,996
(27,900)
72,096
83,080
72,096
26.5
26.4
23.1
23.1
2017
£’000
83,080
(2,888)
1,340
81,532
2016
£’000
72,096
22,105
(2,468)
91,733
81,532
91,733
91 | Financial Statements
CONSOLIDATED AND PARENT COMPANY BALANCE SHEETS
As at 31 December 2017
Note
Group
2017
£’000
Company
2016
£’000
2017
£’000
2016
£’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
10
11
11
12
16
13
13
7
19
2
14
7
14
16
2
17
18
18
18
18
30,158
29,461
1,685
1,696
32,473
36,187
–
–
–
–
–
–
–
14,637
10,513
89,466
–
516,681
509,872
16,547
7,640
–
–
–
–
91,531
516,681
509,872
299,089
259,328
647,607
664,008
15,652
95,605
12,743
92,796
–
–
–
–
410,346
364,867
647,607
664,008
499,812
456,398
1,164,288
1,173,880
(187,730)
(175,059)
(848,476)
(798,503)
(22,166)
(24,404)
–
–
(209,896)
(199,463)
(848,476)
(798,503)
200,450
165,404
(200,869)
(134,495)
(19,489)
(370)
(9,944)
(430)
(19,859)
(10,374)
–
–
–
–
–
–
(229,755)
(209,837)
(848,476)
(798,503)
270,057
246,561
315,812
375,377
3,268
92,677
932
3,259
90,458
932
(58,931)
(72,941)
32,746
29,858
202,253
270,057
3,268
92,677
932
–
–
3,259
90,458
932
–
–
192,107
218,935
246,561
315,812
280,728
375,377
The financial statements of PageGroup plc (Company Number 3310225) set out on pages 91 to 122 were approved by the Board of
Directors and authorised for issue on 6 March 2018. The Company’s profit for the financial year amounted to £9.6m (2016: £8.8m).
Signed on behalf of the Board of Directors
Steve Ingham,
Chief Executive Officer
Kelvin Stagg,
Chief Financial Officer
Financial Statements | 92
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2017
2016
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 2016
3,258
90,268
932
(61,365)
10,641
178,025
221,759
Currency translation differences
Net income recognised
directly in equity
Loss on hedging instruments
Profit for the year
Total comprehensive
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
8
Balance at 31 December 2016
and 1 January 2017
2017
Currency translation differences
Net loss recognised
directly in equity
Profit on hedging instruments
Profit for the year
Total comprehensive
(loss)/income for the year
Exercise of share plans
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
8
–
–
–
–
–
–
1
–
–
–
–
1
–
–
–
–
–
–
190
–
–
–
–
190
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
22,105
22,105
–
–
–
–
(2,468)
72,096
22,105
22,105
(2,468)
72,096
22,105
69,628
91,733
(15,058)
–
3,482
–
–
–
(11,576)
–
–
–
–
–
–
–
–
(15,058)
173
364
(3,482)
–
4,442
4,442
(368)
(368)
(56,311)
(56,311)
(55,546)
(66,931)
3,259
90,458
932
(72,941)
32,746
192,107
246,561
–
–
–
–
–
9
–
–
–
–
9
–
–
–
–
–
2,219
–
–
–
–
2,219
92,677
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14,010
–
–
–
14,010
(2,888)
(2,888)
–
–
(2,888)
–
–
–
–
–
–
–
–
1,340
(2,888)
(2,888)
1,340
83,080
83,080
84,420
10,458
81,532
12,686
(14,010)
–
6,809
6,809
720
720
(78,251)
(78,251)
(74,274)
(58,036)
932
(58,931)
29,858
202,253
270,057
Balance at 31 December 2017
3,268
93 | Financial Statements
STATEMENT OF CHANGES IN EQUITY – PARENT COMPANY
For the year ended 31 December 2017
Note
Called-up
share capital
£’000
3,258
Share
premium
£’000
90,268
Capital
redemption
reserve
£’000
932
–
–
1
–
–
1
–
–
190
–
–
190
–
–
–
–
–
–
Retained
earnings
£’000
323,764
Total equity
£’000
418,222
8,833
8,833
8,833
–
4,442
(56,311)
(51,869)
8,833
191
4,442
(56,311)
(51,678)
3,259
90,458
932
280,728
375,377
Company
Balance at 1 January 2016
Profit for the year
Total comprehensive income for
the year
Exercise of share plans
Credit in respect of share schemes
Dividends
Balance at 31 December 2016
and 1 January 2017
2017
Profit for the year
Total comprehensive income for
the year
Exercise of share plans
Credit in respect of share schemes
Dividends
8
8
–
–
9
–
–
9
Balance at 31 December 2017
3,268
–
–
2,219
–
–
2,219
92,677
–
–
–
–
–
–
932
9,649
9,649
9,649
–
6,809
(78,251)
(71,442)
218,935
9,649
2,228
6,809
(78,251)
(69,214)
315,812
Financial Statements | 94
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION CONSOLIDATED AND PARENT COMPANY CASH FLOW STATEMENTS
For the year ended 31 December 2017
Group
Company
Profit before tax
Depreciation and amortisation charges
(Income)/Loss on sale of property, plant and
equipment, and computer software
Share scheme charges
Net finance cost
Operating cash flow before changes in working
capital and finance costs
(Increase)/decrease in receivables
Increase in payables
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
Note
2
10/11
10
11
2017
£’000
118,162
19,094
(159)
6,796
160
144,053
(42,629)
23,040
124,464
(38,154)
86,310
–
(13,415)
(7,508)
4,688
229
2016
£’000
99,996
17,065
186
4,235
956
122,438
(21,061)
19,942
121,319
(32,499)
88,820
–
(14,111)
(11,153)
1,890
117
Net cash (used in)/from investing activities
(16,006)
(23,257)
2017
£’000
9,649
2016
£’000
8,833
–
–
–
–
9,649
16,401
49,973
76,023
–
–
–
–
–
8,833
(27,407)
74,212
55,638
–
76,023
55,638
–
–
–
–
–
–
482
–
–
–
–
482
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/(decrease) in cash and
cash equivalents
Cash and cash equivalents at the beginning
of the year
Exchange (loss)/gain on cash and cash equivalents
Cash and cash equivalents at the end of the year
19
(78,251)
(56,311)
(78,251)
(56,311)
(1,845)
12,686
–
(67,410)
(460)
364
(15,058)
(71,465)
–
2,228
–
–
191
–
(76,023)
(56,120)
2,894
(5,902)
92,796
(85)
95,605
95,018
3,680
92,796
–
–
–
–
–
–
–
–
95 | Financial Statements
Notes to the Financial
Statements
For the year ended 31 December 2017
1. Significant accounting
policies
Statement of compliance
PageGroup 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 PageGroup
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
£9.6m (2016: £8.8m). The increase in
the Company’s profit this year is as a
result of increased 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 2017. 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 PageGroup 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 2017:
•
•
I AS 7 Disclosure Initiative
IAS 12 Recognition of Deferred Tax
Assets for Unrealised Losses
• Annual Improvements to IFRSs
2014-2016 Cycle
The adoption of these standards or
interpretations did not have any impact
on the accounting policies, financial
position or performance of the Group.
Standards issued but not yet
effective
The standards and interpretations that
are issued, but not yet effective, up to
the date of issuance of the Group’s
financial statements are disclosed
below. The Group intends to adopt
these standards, if applicable, when they
become effective.
•
•
•
•
•
•
•
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
IFRS 2 Classification and
Measurement of Share-based
Payment Transactions; effective
date 1 January 2018
IFRIC Interpretation 22 Foreign
Currency Transactions and Advance
Consideration; effective date
1 January 2018
IFRIC Interpretation 23 Uncertainty
over Income Tax Treatment;
effective date 1 January 2019
IAS 28 Investments in Associates
and Joint Ventures; effective date
1 January 2019
IFRS 15 – Revenue from Contracts
with Customers
IFRS 15 was issued in May 2014 and
establishes a five-step model to account
for revenue arising from contracts with
customers. Under IFRS 15, revenue is
recognised at an amount that reflects the
consideration to which an entity expects
to be entitled in exchange for transferring
goods or services to a customer.
The new revenue standard will
supersede all current revenue
recognition requirements under IFRS.
Either a full retrospective application or
a modified retrospective application is
required for annual periods beginning on
or after 1 January 2018.
The group is in the business of providing
recruitment services. IFRS 15 requires
revenue to be recognised once value
has been received by the customer and
when the performance obligations have
been satisfied. IFRS 15 also prohibits the
recognition of up-front fees.
During 2017, the Group concluded its
detailed assessment of IFRS 15. As a
result of this assessment, no material
adjustment will be required in the 2018
Annual Report and Accounts. A fully
retrospective method will be adopted for
transparency and comparison purposes.
Please see below for Group’s rationale
for the above conclusion.
Revenue earned on a contingent
basis (c. 27% of revenue)
Currently revenue recognised
from permanent placements on a
contingent basis is typically based
on a percentage of the candidate’s
remuneration package, this income
being recognised at the date an offer
is accepted by a candidate and where
a start date has been determined. It
includes revenue anticipated, but not
invoiced, at the balance sheet date,
which is correspondingly accrued on the
balance sheet within accrued income.
A provision is made against accrued
income for possible cancellations of
placements prior to, or shortly after,
the commencement of employment.
Our view is that this basis of revenue
recognition remains appropriate as
our only performance obligation (the
placement of the candidate) has been
performed. Therefore no adjustment will
be required as a result of the transition
to IFRS 15 of revenue earned on a
contingent basis.
Revenue earned on a retained basis
(c. 9% of revenue)
Currently revenue recognised from
permanent placements on a retained
basis is typically based on a percentage
of the candidate’s remuneration
package, this income being recognised
on the completion of three separate
performance obligations. The defined
stages are “Retainer”, “Shortlist” and
“Completion”.
We have concluded that there is only
one performance obligation, being
provision of recruitment services.
Financial Statements | 96
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Whilst there is considerable work
done at the Retainer stage, there is no
reference to a deliverable in the contract,
and therefore there is no separable
performance obligation. On the second
stage of a shortlist, there is a specific
deliverable i.e. production of a shortlist.
However, the client cannot use this with
their own resources without also paying
for the final stage regardless. Therefore
each stage is considered to be highly
interrelated and so forms a single, distinct
performance obligation.
Furthermore the transfer of services
happens over a period of time since our
work creates an asset with no alternative
use. We have concluded that under an
Output or Input method the timing of
revenue recognition would be the same.
As per our standard terms and conditions,
there are 3 stage payments defined for
Retainer, Shortlist and Completion. They
are required to compensate us for our
performance to date as per the above
requirement.
As a result of our review, we do not
expect any adjustment to be material with
our estimate being less than £1m. This
is as a result of retained revenue being a
relatively low proportion of total revenue,
combined with the adjustment only being
required to retained revenue earned in
the last few weeks of the year having to
be deferred or anticipated (in turn offset
by revenue coming into the start of the
year being deferred or anticipated from an
earlier period).
Temporary revenue (c. 60% of
revenue)
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.
The performance obligation is satisfied
when the service has been provided
and is billed in arrears. Accordingly no
adjustment will be required on transition
to IFRS 15 for revenue earned from
temporary placements.
Other revenue (c. 4% of revenue)
Other revenue earned, principally
advertising revenue representing amounts
billed to clients for expenses incurred
on their behalf, is recognised when
the expense is incurred. Therefore no
adjustment will result on the transition to
IFRS 15 for this revenue stream.
Presentation and disclosure
requirements
IFRS 15 also provides presentation
and disclosure requirements, which
are more detailed than under current
IFRS and may result in an increase in
the volume of disclosures required in
the Group’s financial statements. IFRS
requires an entity to provide users of
financial statements with comprehensive
information about the nature, amount,
timing and uncertainty of revenue and
cash flows arising from the entity’s
contracts with customers. The Group is
confident it has the necessary appropriate
systems, internal controls, policies and
procedures necessary to collect and
disclose the required information for
disclosure.
IFRS 9 – Financial Instruments
The directors have concluded that the
implementation of IFRS 9 from 1 January
2018 will not have a material impact
on Group. Currently the only financial
instruments held by Group are net trade
receivables of £245.4m (2016: £205.1m)
and net fair value derivatives of £0.2m
(2016: £0.5m).
Under the IFRS 9 estimated credit losses
method, the result would not be materially
different to Group’s current credit policy.
The majority of Group’s clients have been
transacting with the Group for several
years, with losses rarely occurring.
With respect to the Parent company
the only balances receivable are with
profitable entities based within the United
Kingdom.
IFRS 16 – Leases
IFRS 16 was issued in January 2016
and it replaces IAS 17 Leases, IFRIC 4
Determining whether an Arrangement
contains a Lease, SIC-15 Operating
Leases-Incentives and SIC-27 Evaluating
the Substance of Transactions Involving
the Legal Form of a Lease. IFRS 16 sets
out the principles for the recognition,
measurement, presentation and
disclosure of leases and requires lessees
to account for all leases under a single
on-balance sheet model similar to the
accounting for finance leases under
IAS 17.
IFRS 16 requires all leases in excess
of $5k and 12 months in length to be
recognised as an asset on the balance
sheet, with a corresponding lease liability.
Lessees will be required to separately
recognise the interest expense on
the lease liability and the depreciation
expense on the right-of-use asset.
Lessees will be also required to re-
measure the lease liability upon the
occurrence of certain events (e.g. a
change in the lease term, a change in
future lease payments resulting from
a change in an index or rate used to
determine those payments). The lessee
will generally recognise the amount of the
re-measurement of the lease liability as an
adjustment to the right-of-use asset.
The transition to IFRS 16 is likely to
have a significant effect on the Group,
the main areas impacted being leases
for properties and cars. It is considered
unlikely for there to be many other leases
in the Group either exceeding $5k, or a
term of more than 12 months.
IFRS 16 is expected to result in an
increase in EBITDA for the Group, as
rentals are reclassified as depreciation
and interest expense. Margins may also
appear higher as a result. IFRS 16 also
requires us to make more extensive
disclosures than under IAS 17. Note
21 gives the current lease portfolio.
IFRS 16 is effective for annual periods
beginning on or after 1 January 2019.
Early application is permitted, but not
before an entity applies IFRS 15. A lessee
can choose to apply the standard using
either a full retrospective or a modified
retrospective approach. The standard’s
transition provisions permit certain reliefs.
In 2018, the Group will continue to assess
the potential effect of IFRS 16 on its
consolidated financial statements.
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 39.
a) Revenue and income recognition
Revenue, which excludes value added
tax (VAT), constitutes the value of services
undertaken by the Group from its
principal activities, which are recruitment
consultancy and other ancillary services.
These consist of:
•
•
revenue from temporary placements,
which represents amounts billed
for the services of temporary staff,
including the salary cost of these
staff. This is recognised when the
service has been provided;
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
97 | Financial Statements
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 accrued income. A provision
is made against accrued income
for possible cancellations of
placements prior to, or shortly after,
the commencement of employment;
and
revenue from amounts billed to
clients for expenses incurred
on their behalf (principally
advertisements) is recognised when
the expense is incurred.
•
Interest income is accrued on a time
basis, by reference to the principal
outstanding and at the effective interest
rate applicable.
b) Cost of sales
Cost of sales consists of the salary cost
of temporary staff and costs incurred on
behalf of clients, principally advertising
costs.
c) Gross profit
Gross profit represents revenue less
cost of sales and consists of the
total placement fees of permanent
candidates, the margin earned on the
placement of temporary candidates and
the margin on advertising income.
d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements
of each of the Group’s entities are
measured using the currency of the
primary economic environment in which
the entity operates (“the functional
currency”). The consolidated financial
statements are presented in Sterling,
which is the Company’s functional and
presentation currency.
(ii) Transactions and balances
Foreign currency transactions
are translated into the respective
functional currency using the exchange
rates prevailing at the dates of the
transactions. Foreign exchange gains
and losses resulting from the settlement
of such transactions and from the
translation at year end exchange
rates of monetary assets and liabilities
denominated in foreign currencies are
recognised in the income statement.
(iii) Group companies
The results and financial position of all
the Group entities (none of which has the
currency of a hyperinflationary economy)
that have a functional currency different
from the presentation currency are
translated into the presentation currency
as follows:
•
•
•
assets and liabilities for each
balance sheet presented are
translated at the closing rate at the
date of that balance sheet;
income and expenses for each
income statement are translated at
average exchange rates; and
all resulting exchange differences
are recognised in other
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.
(iv) Trademark
Acquired trademarks are stated at cost
and are written down over five years on a
straight-line basis, which represents the
estimated useful life of the intangible.
(v) Amortisation
Amortisation is charged to the income
statement on a straight-line basis over
the estimated useful lives of intangible
assets unless such lives are indefinite.
Goodwill has an indefinite useful life.
Computer software is amortised at 20%
per annum unless it is considered to
have a shorter life, in which case the
period of amortisation is reduced. The
cumulative amount of goodwill written off
directly to retained earnings in respect of
acquisitions prior to 31 December 1997
is £311.7m (2016: £311.7m).
f) Property, plant and equipment
Property, plant and equipment are
stated at original cost less accumulated
depreciation. Depreciation is calculated
to write off the cost less estimated
residual value of each asset evenly over
its expected useful life at the following
rates:
•
•
Leasehold improvements 10% per
annum or period of lease if shorter
Furniture, fixtures and equipment
10-20% per annum
• Motor vehicles 25% per annum
g) Investments
Fixed asset investments are stated at
cost less provision for impairment.
h) Impairment of assets
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.
Financial Statements | 98
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 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.
the period in which the dividends are
approved by (for final dividends) or paid
to (for interim dividends) the Company’s
shareholders.
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. Transactions between
segments are recorded and allocated on
an arms-length basis.
m) Dividend distribution
Dividend distribution to the Company’s
shareholders is recognised as a liability
in the Group’s financial statements in
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.
(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) Deferred cash bonus
The Group operates a bonus scheme for
some members of staff whereby bonuses
are deferred for three years from date of
award. The bonuses are paid in full if the
employee remains employed for the entire
three-year period.
p) 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.
99 | Financial Statements
• Note 13 – 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. Please see note 20 for an
analysis of credit risk.
• Note 17 – current tax assets and
liabilities – transfer pricing
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.
v) 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.
w) Employee Benefit Trust
The Employee Benefit Trust is
considered a separate legal entity and
not an extension of the parent company.
It is included in the consolidated results
of the Group as it is deemed to have
control of the entity.
q) 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.
r) 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.
s) 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.
t) 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.
u) Critical accounting estimates and
judgements
The preparation of financial statements
in conformity with IFRS requires the use
of certain critical accounting estimates
and judgements. It also requires
management to exercise judgement in
the process of applying the Company’s
accounting policies.
Estimates and judgements are
continually evaluated and are based on
historical experience and other factors,
including expectations of future events
that are believed to be reasonable under
the circumstances.
There are no accounting areas
which require significant judgements,
information about significant areas
of estimation uncertainty in applying
accounting policies that have the
most significant effect on the amount
recognised in the financial statements
are described in the following notes:
• Note 1 – revenue recognition
In making its judgement, management
considered the detailed criteria for the
recognition of revenue from permanent
placements where a position has been
accepted by a candidate, a start date
agreed, but employment has not yet
commenced. A provision is made by
management, based on past historical
experience, for the proportion of those
placements where the candidate is
expected to reverse their acceptance
prior to the start date.
Financial Statements | 100
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
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
2017
EMEA
United Kingdom
Asia Pacific
Australia and New Zealand
Asia
Total – Asia Pacific
Americas
Operating profit
Financial expense
Revenue
2017
£’000
675,983
312,915
110,602
125,688
236,290
Gross
profit
2017
£’000
332,288
140,768
37,703
99,469
137,172
146,346
101,340
–
–
–
–
Operating
profit
2017
£’000
69,674
15,978
5,480
18,039
23,519
9,151
118,322
(160)
Revenue/gross profit/profit before tax
1,371,534
711,568
118,162
2016
EMEA
United Kingdom
Asia Pacific
Australia and New Zealand
Asia
Total – Asia Pacific
Americas
Operating profit
Financial expense
Revenue/gross profit/profit before tax
The above analysis by destination is not materially different to the analysis by origin.
Revenue
2016
£’000
538,403
324,548
103,979
105,692
209,671
Gross
profit
2016
£’000
271,863
146,313
35,085
84,644
119,729
123,503
83,129
–
–
–
–
1,196,125
621,034
Operating
profit
2016
£’000
51,685
24,153
4,592
16,135
20,727
4,387
100,952
(956)
99,996
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.
101 | Financial Statements
(b) Segment assets, liabilities, non-current assets and capital expenditure by reportable segment
Total assets
Total liabilities
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
2017
£’000
219,024
123,423
24,639
61,176
85,815
55,898
484,160
15,652
499,812
2016
£’000
187,257
119,036
24,869
56,182
81,051
56,311
443,655
12,743
456,398
Property, plant and
equipment
2017
£’000
12,218
6,894
1,174
3,397
4,571
6,475
2016
£’000
10,707
7,142
1,376
3,053
4,429
7,183
30,158
29,461
Property, plant and
equipment
2017
£’000
2016
£’000
7,501
1,945
347
1,781
2,128
1,841
6,283
2,345
407
2,390
2,797
2,686
2017
£’000
109,100
51,193
10,349
18,132
28,481
18,815
207,589
22,166
229,755
2016
£’000
96,270
43,306
10,526
16,462
26,988
18,869
185,433
24,404
209,837
Intangible assets
2017
£’000
3,668
2016
£’000
3,862
30,116
33,278
2
31
33
22
31
53
341
34,158
690
37,883
Intangible assets
2017
£’000
1,220
6,237
–
28
28
23
13,415
14,111
7,508
2016
£’000
2,242
8,595
–
–
–
316
11,153
138,830
125,545
118,293
621,034
2016
£’000
469,960
151,074
621,034
Financial Statements | 102
Accounting and Financial Services
Legal, Technology, HR, Secretarial and other
Engineering, Property & Construction, Procurement & Supply Chain
Marketing, Sales and Retail
Revenue
2017
£’000
559,480
337,857
290,830
183,367
2016
£’000
511,449
294,972
227,908
161,796
1,371,534
1,196,125
(d) Revenue and gross profit generated from permanent and temporary placements
Gross profit
2017
£’000
2016
£’000
261,062
238,366
161,424
158,714
130,368
711,568
Permanent
Temporary
Revenue
2017
£’000
543,262
828,272
2016
£’000
476,321
719,804
1,371,534
1,196,125
Gross profit
2017
£’000
536,010
175,558
711,568
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 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 10)
Amortisation of intangibles (Note 11)
Impairment of trade receivables (Note 20)
(Income)/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:
2017
£’000
2016
£’000
454,398
398,530
1,726
8,477
10,617
1,207
7,917
9,148
18,426
12,264
(159)
186
30,160
29,980
9,079
7,252
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
219
207
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
– Other non-audit services
Total non-audit fees
Total fees
4. Employee information
513
52
784
–
22
–
6
28
812
477
52
736
60
153
48
–
261
997
The average number of employees (including Executive Directors) during the year and total number of employees (including Executive
Directors) at 31 December 2017 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
2017
Average
No.
2016
Average
No.
At 31 Dec
2017
No.
At 31 Dec
2016
No.
311
4,782
1,456
6,549
295
4,297
1,392
5,984
314
5,184
1,531
7,029
292
4,419
1,388
6,099
2017
£’000
2016
£’000
381,286
336,874
45,630
39,686
15,501
14,187
11,981
7,783
454,398
398,530
No staff are employed by the parent company (2016: 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 Directors’ Remuneration Report on pages 63 to 76.
103 | Financial Statements
5. Financial income/(expenses)
Financial income
Interest receivable
Financial expenses
Interest payable
Interest on discounting of French construction participation tax
6. Income tax expense
The charge for taxation is based on the effective annual tax rate of 29.7% on profit before tax (2016: 27.9%).
Analysis of charge in the year
UK income tax at 19.25% (2016: 20.00%) 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
Derecognition of previously recognised losses
Impact of tax rate changes
Charge/(credit) for tax losses recognised
Deferred tax expense/(income)
Total tax expense in the income statement
Reconciliation of effective tax rate
Profit before taxation
Profit on ordinary activities before tax multiplied by the
standard rate of corporation tax in the UK
Effects of:
Disallowable items and other permanent differences
Unrelieved overseas losses
Utilisation of losses not previously recognised
Recognition of overseas losses and other tax attributes
Other tax movements
Derecognition of overseas losses
Higher tax rates on overseas earnings
Other tax overseas
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
2017
£’000
229
229
(241)
(148)
(389)
2017
£’000
9,726
456
23,076
33,258
1,327
(2,729)
(661)
–
1,315
2,572
1,824
35,082
2016
£’000
117
117
(465)
(608)
(1,073)
2016
£’000
11,078
259
18,976
30,313
(2,015)
(53)
–
252
–
(597)
(2,413)
27,900
%
20.0
1.1
1.1
(0.2)
–
–
0.3
3.3
4.2
(0.1)
(1.8)
27.9
2016
£’000
368
Financial Statements | 104
2017
£’000
118,162
%
2016
£’000
99,996
22,746
19.3
19,999
571
1,715
(64)
(661)
(1,579)
–
4,896
4,479
1,196
1,783
35,082
0.5
1.5
(0.1)
(0.6)
(1.3)
–
4.1
3.8
1.0
1.5
29.7
1,134
1,180
(240)
–
–
252
3,346
4,153
(168)
(1,756)
27,900
2017
£’000
(720)
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 7. Current tax assets and liabilities
The current tax asset of £15.7m (2016: £12.7m), and current tax liability of £22.2m (2016: £24.4m) for the Group, and current tax asset
and liability of £nil (2016: £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.
8. Dividends
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 December 2016 of 8.23p per Ordinary share (2015: 7.90p)
Interim dividend for the year ended 31 December 2017 of 3.90p per Ordinary share (2016: 3.75p)
Special dividend for the year ended 31 December 2017 of 12.73p per Ordinary share (2016: 6.46p)
2017
£’000
2016
£’000
25,857
12,287
40,107
78,251
24,564
11,660
20,087
56,311
Amounts proposed as distributions to equity holders in the year:
Proposed final dividend for the year ended 31 December 2017 of 8.60p per Ordinary share (2016: 8.23p)
27,144
25,599
The proposed final dividend had not been approved by shareholders at 31 December 2017 and therefore has not been included as a
liability. The comparative final dividend at 31 December 2016 was also not recognised as a liability in the prior year.
The proposed final dividend of 8.60p (2016: 8.23p) per Ordinary share will be paid on 18 June 2018 to shareholders on the register at the
close of business on 18 May 2018, subject to approval by shareholders.
When the Company pays a dividend to shareholders, there may be income tax consequences. The impact will depend upon the individual
circumstances of the shareholder.
9. Earnings per Ordinary share
The calculation of the basic and diluted earnings per share is based on the following data:
Earnings
Earnings for basic and diluted earnings per share (£’000)
Number of shares
Weighted average number of shares used for basic earnings per share (‘000)
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
The above results relate to continuing operations.
Basic
2017
£’000
2016
£’000
83,080
72,096
number
number
313,491
311,534
1,287
802
314,778
312,336
pence
pence
26.5
26.4
23.1
23.1
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.
105 | Financial Statements
10. Property, plant and equipment
Group
Cost
At 1 January
Additions
Disposals
Effect of movements in foreign exchange
At 31 December
Depreciation
At 1 January
Charge for the year
Disposals
Effect of movements in foreign exchange
At 31 December
Net book value
At 31 December
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
2017
Leasehold
improve-
ments
£’000
Furniture,
fixtures and
equipment
£’000
Motor
vehicles
£’000
38,439
5,142
49,999
7,361
(2,536)
(13,630)
(545)
40,500
23,894
3,755
(249)
43,481
36,363
4,124
(2,009)
(10,507)
(289)
(150)
25,351
29,830
2,424
912
(704)
(76)
2,556
1,144
598
(502)
(42)
1,198
Total
£’000
90,862
13,415
(16,870)
(870)
86,537
61,401
8,477
(13,018)
(481)
56,379
15,149
13,651
1,358
30,158
2016
Leasehold
improve-
ments
£’000
Furniture,
fixtures and
equipment
£’000
Motor
vehicles
£’000
32,101
6,853
(4,977)
4,462
38,439
22,187
3,425
(4,718)
3,000
23,894
47,428
6,420
(10,155)
6,306
49,999
37,163
3,910
(9,322)
4,612
36,363
2,269
838
(829)
146
2,424
1,037
582
(552)
77
1,144
Total
£’000
81,798
14,111
(15,961)
10,914
90,862
60,387
7,917
(14,592)
7,689
61,401
14,545
13,636
1,280
29,461
Financial Statements | 106
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 2017
Computer
software,
assets under
construction
£’000
Computer
software
£’000
Subtotal
£’000
Goodwill
£’000
Trademark
£’000
Subtotal
£’000
Total
£000
70,054
612
(993)
6,936
6,896
–
11,690
(11,690)
90
22
76,990
1,539
746
2,285
79,275
7,508
(993)
–
112
–
–
–
–
–
–
–
–
–
–
–
–
7,508
(993)
–
112
81,453
2,164
83,617
1,539
746
2,285
85,902
40,803
10,606
(317)
52
51,144
–
–
–
–
–
40,803
10,606
(317)
52
51,144
–
–
–
–
–
589
11
–
–
589
11
–
–
41,392
10,617
(317)
52
600
600
51,744
30,309
2,164
32,473
1,539
146
1,685
34,158
2016
Computer
software,
assets under
construction
£’000
Computer
software
£’000
Subtotal
£’000
Goodwill
£’000
Trademark
£’000
Subtotal
£’000
Total
£000
66,762
2,773
(5,685)
4,648
1,556
3,204
8,380
–
(4,648)
69,966
11,153
(5,685)
–
–
1,556
1,539
746
2,285
–
–
–
–
–
–
–
–
–
–
–
–
72,251
11,153
(5,685)
–
1,556
70,054
6,936
76,990
1,539
746
2,285
79,275
35,433
9,111
(4,978)
1,237
40,803
–
–
–
–
–
35,433
9,111
(4,978)
1,237
40,803
–
–
–
–
–
552
37
–
–
552
37
–
–
35,985
9,148
(4,978)
1,237
589
589
41,392
29,251
6,936
36,187
1,539
157
1,696
37,883
11. Intangible assets
Group
Cost
At 1 January
Additions
Disposals
Transfers
Effect of movements in
foreign exchange
At 31 December
Amortisation
At 1 January
Charge for the year
Disposals
Effect of movements in
foreign exchange
At 31 December
Net book value
At 31 December
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
107 | Financial Statements
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
2017
£’000
1,274
214
51
1,539
2016
£’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 0%, 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 2017 there was no impairment of goodwill.
12. Investments
Company
Cost at 1 January 2017
Transactions relating to share plans for subsidiaries’ employees
Cost at 31 December 2017
Subsidiary undertakings
£’000
509,872
6,809
516,681
The Company’s principal subsidiary undertakings at 31 December 2017, their principal activities and countries of incorporation are set
out below:
Name of undertaking
Michael Page International
Argentina SA
Country of
incorporation
Principal
activity
Argentina
Recruitment Consultancy
Page Personnel Argentina SA
Argentina
Recruitment Consultancy
Registered office
Carlos Pellegrini 1265, Piso 12, Ciudad de
Buenos Aires, C1009ABY, Argentina
Carlos Pellegrini 1265, Piso 12, Ciudad de
Buenos Aires, C1009ABY, Argentina
Carlos Pellegrini 1265, Piso 12, Ciudad de
Buenos Aires, C1009ABY, Argentina
Page Personnel Argentina Servicios
Eventuales SA
Michael Page International (Australia)
Pty Limited
Argentina
Recruitment Consultancy
Australia
Recruitment Consultancy
Level 32, 225 George Street, Sydney, NSW
2000, Australia
Michael Page International GmbH
Austria
Recruitment Consultancy
Michael Page International (Belgium) NV/SA
Belgium
Recruitment Consultancy
Page Interim (Belgium) NV/SA
Belgium
Recruitment Consultancy
Second floor, Gumpendorfer Strauße 72,
Wien, Austria
Place du Champ de Mars 5 , 1050 Brussels,
Belgium
Place du Champ de Mars 5 , 1050 Brussels,
Belgium
Michael Page International Do Brasil -
Recrutamento Especializado Ltda
Brazil
Recruitment Consultancy
Rua Funchal 375, 7th Floor Vila Olimpia, CEP
04551-060, Sao Paulo, Brazil
Page Interim Do Brasil - Recrutamento
Especializado Ltda
Brazil
Recruitment Consultancy
Page Personnel Do Brasil - Recrutamento
Especializado e servicos corporativos Ltda
Brazil
Recruitment Consultancy
Michael Page International Canada Limited
Canada
Recruitment Consultancy
Av. das Nações Unidas, 10.989 - 4º Andar ,
Conjunto 41 - Edifício Mendes Caldeira, CEP
04578-900, São Paulo - SP, Brazil
Av. Engenheiro Luis Carlos Berrini, 716, 1º
andar - CJ.12 - Cidade Monções, CEP 04571-
000, São Paulo - SP, Brazil
130 Adelaide Street West, 21st Floor, Toronto,
Ontario, M5H 1J8, Canada
Financial Statements | 108
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Name of undertaking
Michael Page International
Canada Limited
Page Personnel International
Chile Ltda
Country of
incorporation
Principal
activity
Canada
Recruitment Consultancy
Chile
Recruitment Consultancy
Page Consulting Chile Ltda
Chile
Recruitment Consultancy
Registered office
130 Adelaide Street West, 21st Floor, Toronto,
Ontario, M5H 1J8, Canada
Magdalena 181, Piso 1, Las Condes, Santiago
7550055, Chile
Magdalena 181, Piso 16, Las Condes, Santiago
7550055, Chile
Empresa de Servicios Transitorios
Page Interim Chile Limitada
Chile
Recruitment Consultancy
Magdalena 181, Piso 1, Las Condes, Santiago
7550055, Chile
Michael Page (Beijing)
Recruitment Co., Ltd
Michael Page (Shanghai)
Recruitment Co., Ltd
Michael Page International
(Shanghai) Consulting Limited
Michael Page International
Colombia SAS
China
China
China
Recruitment Consultancy
Recruitment Consultancy
Room 2701 & 2708, SK Tower Beijing, No.6
Jianguomenwai Avenue, Chaoyang District, Beijing
100022, China
Level 11, Tower 2, Jing An Kerry Centre, 1539
Nanjing Road West, Shanghai, 200040, China
Recruitment Consultancy
Suite 1010, Shanghai Kerry Centre, 1515 Nanjing
West Road, Shanghai, China
Colombia
Recruitment Consultancy
Av. Calle 82 No. 10-33 - Oficina 801, Colombia
Michael Page Partnership Limited England and Wales
Trading
Michael Page Employment
Services Limited
LPM (Professional Recruitment)
Limited
England and Wales
Recruitment Consultancy
England and Wales
Holding company
Accountancy Additions Limited
England and Wales
Non-trading
Slamway Limited
England and Wales
Non-trading
The Assessment Centre Limited
England and Wales
Non-trading
LPM (Group Services) Limited
England and Wales
Non-trading
The Page Partnership Limited
England and Wales
Non-trading
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
Sales Recruitment Specialists
Limited
England and Wales
Non-trading
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
Michael Page International Limited England and Wales
Non-trading
Michael Page International
1982 Limited
Michael Page International
Investment Limited
Michael Page International
Finance Limited
England and Wales
Non-trading
England and Wales
Non-trading
England and Wales
Non-trading
Page Personnel (UK) Limited
England and Wales
Non-trading
Michael Page Holdings Limited
England and Wales
Support services
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
109 | Financial Statements
Name of undertaking
Michael Page International
Holdings Limited
Michael Page International
Recruitment Limited*
Country of
incorporation
Principal
activity
England and Wales
Holding company
Registered office
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
England and Wales
Recruitment Consultancy
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
Michael Page Limited
England and Wales
Non-trading
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
Michael Page International
Southern Europe Limited*
England and Wales
Holding company
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
Michael Page UK Limited
England and Wales
Non-trading
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
Michael Page Recruitment
Group Limited
Michael Page International
(France) SAS
Michael Page Financial
Services SAS
England and Wales
Holding company
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
France
Recruitment Consultancy
164 Avenue Achille Peretti, 92522 Neuilly-sur-
Seine, Paris, France
France
Support services
Page Personnel SAS
France
Recruitment Consultancy
MP Commercial EURL
France
Recruitment Consultancy
MP Ignenieurs et Informatique SARLU France
Recruitment Consultancy
Page Formation EURL
France
Recruitment Consultancy
MP International – LRR EURL
France
Recruitment Consultancy
164 Avenue Achille Peretti, 92522 Neuilly-sur-
Seine, Paris, France
164 Avenue Achille Peretti, 92522 Neuilly-sur-
Seine, Paris, France
164 Avenue Achille Peretti, 92522 Neuilly-sur-
Seine, Paris, France
164 Avenue Achille Peretti, 92522 Neuilly-sur-
Seine, Paris, France
164 Avenue Achille Peretti, 92522 Neuilly-sur-
Seine, Paris, France
164 Avenue Achille Peretti, 92522 Neuilly-sur-
Seine, Paris, France
MP Finance et Comptabilitie
EURL
France
Recruitment Consultancy
164 Avenue Achille Peretti, 92522 Neuilly-sur-
Seine, Paris, France
MP Nord EURL
MP Sud EURL
France
France
Recruitment Consultancy
1, Rue Esquermoise, 59800 Lille, France
Recruitment Consultancy
48, Rue de la République, 69002 Lyon, France
Michael Page Advertising SARLU
France
Recruitment Consultancy
Page Consulting SARLU
France
Recruitment Consultancy
Michael Page EDP EURL
France
Recruitment Consultancy
164 Avenue Achille Peretti, 92522 Neuilly-sur-
Seine, Paris, France
164 Avenue Achille Peretti, 92522 Neuilly-sur-
Seine, Paris, France
164 Avenue Achille Peretti, 92522 Neuilly-sur-
Seine, Paris, France
Michael Page Monaco SARL
France
Recruitment Consultancy
7 Rue de l’Industrie, 98000 Monaco
MP Immobilier et Construction EURL
France
Recruitment Consultancy
Talent for SARLU
France
Non-trading
Michael Page International
(Deutschland) GmbH
Germany
Recruitment Consultancy
Page Personnel Services GmbH
Germany
Recruitment Consultancy
164 Avenue Achille Peretti, 92522 Neuilly-sur-
Seine, Paris, France
164 Avenue Achille Peretti, 92522 Neuilly-sur-
Seine, Paris, France
Carl Theodor Strasse 1, 40213 Dusseldorf,
Germany
Carl Theodor Strasse 1, 40213 Dusseldorf,
Germany
Financial Statements | 110
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Name of undertaking
Page Personnel (Deutschland)
GmbH
Country of
incorporation
Principal
activity
Registered office
Germany
Recruitment Consultancy
Carl Theodor Strasse 1, 40213 Dusseldorf, Germany
Michael Page Interim GmbH
Germany
Recruitment Consultancy
Carl Theodor Strasse 1, 40213 Dusseldorf, Germany
Michael Page International (Hong
Kong) Limited
Michael Page International
Recruitment Pvt Ltd
PT Michael Page Internasional
Indonesia
Hong Kong
Recruitment Consultancy
611 One Pacific Place, 88 Queensway, Hong Kong
India
Recruitment Consultancy
5th Floor, 2 North Avenue, Maker Maxity, Bandra-Kurla
Complex, Bandra (E), Mumbai 400051, India
Indonesia
Recruitment Consultancy
One Pacific Place, Suites B-F, Level 12, Sudirman Central
Business District, Jl. Jend. Sudirman Kav 52-53, Jakarta
12190, Indonesia
Michael Page International (Ireland)
Limited
Ireland
Recruitment Consultancy
c/o Mason Hayes & Curran, Southbank House, Barrow
Street, Dublin 4, Ireland
Michael Page International Italia Srl
Italy
Recruitment Consultancy
Via Spadari 1, 20123 Milan, Italy
Page Personnel Italia SpA
Italy
Recruitment Consultancy
Via Spadari 1, 20123 Milan, Italy
Michael Page International (Japan)
K.K.
Japan
Recruitment Consultancy
6F Hulic Kamiyacho Building, 4-3-13 Toranomon, Minato-ku,
Tokyo 105-0001, Japan
Michael Page International
(Malaysia) Sdn Bhd
Michael Page International Mexico
Reclutamiento Especializado, S.A.
de C.V.
Malaysia
Recruitment Consultancy
10th Floor, Wisma Hamjah-Kwong Hing, No.1 Leboh
Ampang, 50100 Kuala Lumpur
Mexico
Recruitment Consultancy
Av. Paseo de la Reforma, No. 115, Piso 10, Col. Lomas de
Chapultepec, Z.C. 11000, CDMX, Mexico
Michael Page International Mexico
Servicios Corporativos SA de CV
Mexico
Recruitment Consultancy
Av. Paseo de la Reforma, No. 115, Piso 10, Col. Lomas de
Chapultepec, Z.C. 11000, CDMX, Mexico
Page Interim Mexico Servicios SA
de CV
Mexico
Recruitment Consultancy
Av. Paseo de la Reforma, No. 115, Piso 10, Col. Lomas de
Chapultepec, Z.C. 11000, CDMX, Mexico
Michael Page International (Maroc)
SARL AU
Morocco
Recruitment Consultancy
Residence Plein Ciel 9, Angle rue Mahassine Arrouyani et Ali
Abderrazak, Quartier Racine-20, 100 Casablanca, Morroco
Michael Page International
(Nederland) BV
Netherlands
Recruitment Consultancy
World Trade Center, Strawinskylaan 421, 107XX, Amsterdam,
Netherlands
Page Interim BV
Netherlands
Recruitment Consultancy
World Trade Center, Strawinskylaan 421, 107XX, Amsterdam,
Netherlands
Michael Page International (New
Zealand) Limited
New Zealand
Recruitment Consultancy
Level 17, 191 Queen Street, Auckland NZ 1010
Michael Page International Peru
SRL
Peru
Recruitment Consultancy
Calle Las Orquídeas 665 esq. Andrés Reyes - Piso 2, Oficina
201 San Isidro, Peru
Michael Page International
(Poland) Sp.z.o.o
Michael Page International
Empressa de Trabalho Temporário
e Serviços de Consultadoria Lda
Poland
Recruitment Consultancy
ul. Zlota 59, 00-120 Warsaw, Poland
Portugal
Recruitment Consultancy
Avenida da Liberdade n 180A, 1250-146 Lisboa, Portugal
Portugal MP Outsourcing
Portugal
Recruitment Consultancy
Avenida da Liberdade n 180A, 1250-146 Lisboa, Portugal
Michael Page International
Qatar (Branch)
Qatar
Recruitment Consultancy
Qatar Financial Centre, Office 2, Ground Floor, Tornado
Tower, West Bay, PO Box 23153, Doha, Qatar
111 | Financial Statements
Name of undertaking
Country of
incorporation
Principal
activity
Registered office
Michael Page International Pte Limited*
Singapore
Recruitment Consultancy
Page Personnel Recruitment Pte Ltd
Singapore
Recruitment Consultancy
One Raffles Place, #09-61 Office Tower Two,
Singapore 048616
One Raffles Place, #09-61 Office Tower Two,
Singapore 048616
Michael Page International (SA)
(Pty) Limited
South Africa
Recruitment Consultancy
PO Box 653555, Benmore 2010, South Africa
Michael Page Africa (SA) (Pty) Limited
South Africa
Non-trading
PO Box 653555, Benmore 2010, South Africa
Michael Page International
(España) SA
Spain
Recruitment Consultancy
Michael Page Holding (España) SL
Spain
Holding company
Paseo de la Castellana 28 -3ª, 28046 Madrid,
Spain
Paseo de la Castellana 28 -3ª, 28046 Madrid,
Spain
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
Spain
Spain
Spain
Spain
Recruitment Consultancy
Calle Julian Camarillo 42-4, 28037 Madrid, Spain
Recruitment Consultancy
Paseo de la Castellana 28 -3ª, 28046 Madrid,
Spain
Recruitment Consultancy
Plaza Europa 21-23 5ª, 08908 Hospitalet de
Llobregat (Barcelona), Spain
Recruitment Consultancy
Calle Julian Camarillo 42-4, 28037 Madrid, Spain
Sweden
Recruitment Consultancy
Master Samuelsgatan 42, l4tr 111 57 Stockholm,
Sweden
Switzerland
Recruitment Consultancy
Quai de la Poste 12, CH-1204 Geneva,
Switzerland
Taiwan Michael Page International
Co Ltd
Taiwan
Recruitment Consultancy
Michael Page Thailand Limited
Thailand
Holding company
Michael Page International Recruitment
(Thailand) Limited
Thailand
Recruitment Consultancy
8F-1 Shin Kong Xin Yi Financial Building, 36-1
Songren Road Xin-Yi District, Taipei City, Taiwan
110
17th Floor, ITF Tower, No 140/36-37 Silom Road,
Kwaeng Suriawong, Khet Banrak, Bangkok,
Thailand
Unit 3076, 30th Floor Bhiraji Tower, EmQuartier,
689 Sukhumvit Road, Klongton Nuea, Vadhanna,
Bangkok 10110, Thailand
Michael Page International NEM
IstihdamDanismanligi
Limited Sirketi
Michael Page International Yonetim
Servisleri Danismanligi Ltd
Turkey
Recruitment Consultancy
Buyukdere Caddesi, Kanyon Ofis, Binasi No.
185, Kat 5 34394 Levent, Instanbul, Turkey
Turkey
Recruitment Consultancy
Buyukdere Caddesi, Kanyon Ofis, Binasi No.
185, Kat 5 34394 Levent, Instanbul, Turkey
Michael Page International (UAE) Limited United Arab Emirates Recruitment Consultancy
Michael Page International Inc*
United States
Recruitment Consultancy
No. 202, Al Fattan Currency House, Tower 1,
Dubai International Finance Centre (DIFC), PO
Box 506702, Dubai, United Arab Emirates
622 Third Avenue, 29th Floor, New York,
NY10017, USA
*The equity of these subsidiary undertakings is held directly by PageGroup 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.
The following subsidiaries are exempt from the requirements of the Companies Act 2006 relating to the audit of accounts under section
479A of the Act:
• Michael Page International Southern Europe Limited
• Michael Page Partnership Limited
• Michael Page International Holdings Limited
• Michael Page Employment Services Limited
• LPM (Professional Recruitment) Limited
Financial Statements | 112
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 13. Trade and other receivables
Current
Trade receivables
Less provision for impairment of receivables
Net trade receivables
Amounts due from Group companies
Other receivables
Accrued Income
Prepayments
Non-current
Other receivables
Group
2017
£’000
2016
£’000
Company
2017
£’000
2016
£’000
253,555
210,145
(8,161)
(5,070)
245,394
205,075
–
–
–
–
–
–
–
9,839
31,938
11,918
–
647,607
664,008
9,612
37,623
7,018
–
–
–
–
–
–
299,089
259,328
647,607
664,008
10,513
7,640
–
–
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 20.
All amounts due from Group undertakings are unsecured, interest-free and repayable on demand.
14. Trade and other payables
Current
Trade payables
Amounts owed to Group companies
Other tax and social security
Other payables
Accruals
Deferred income
Non-current
Deferred income
Other tax and social security
Group
2017
£’000
Company
2016
£’000
2017
£’000
2016
£’000
6,240
7,515
–
–
–
54,615
28,312
97,467
1,096
–
848,300
798,493
46,813
21,407
98,084
1,240
–
–
176
–
–
–
10
–
187,730
175,059
848,476
798,503
18,628
861
19,489
9,702
242
9,944
–
–
–
–
–
–
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 £0.9m (2016: £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 20.
113 | Financial Statements
15. Bank overdrafts
No bank overdrafts were utilised in respect of the year ended 31 December 2017 (2016: £Nil).
At 31 December 2017, the Group had available £10m (2016: £10m) of undrawn uncommitted overdraft facility with Deutsche Bank,
£2m with HSBC, £1.6m elsewhere in the Group and £31.3m of undrawn borrowing facilities under the Invoice Discounting arrangement
with HSBC. All conditions precedent on each of these facilities had been met. All other bank overdrafts and facilities are repayable on
demand.
The Group’s exposure to interest rate, foreign currency and liquidity risk for financial assets and liabilities is disclosed in Note 20.
16. 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 2017
Recognised in equity for the year
Recognised in profit or loss for the year
Exchange differences
At 31 December 2017
At 1 January 2016
Recognised in equity for the year
Recognised in profit or loss for the year
Exchange differences
At 31 December 2016
Share-based
payments
£’000
Tax losses
£’000
Other
£’000
Total
£’000
(1,416)
(5,061)
(9,640)
(16,117)
(540)
128
–
–
2,298
196
–
(602)
370
(540)
1,824
566
(1,828)
(2,567)
(9,872)
(14,267)
(2,570)
(4,990)
(5,328)
(12,888)
392
762
–
(1,416)
–
949
(1,020)
(5,061)
–
(4,124)
(188)
(9,640)
392
(2,413)
(1,208)
(16,117)
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
2017
£’000
2016
£’000
(14,637)
(16,547)
370
430
(14,267)
(16,117)
No deferred tax liability has been recognised in respect of £108.3m (2016: £110.3m) 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 net reduction of the deferred tax asset balance by £1.9m in the year includes £0.3m for the effects of recognition and derecognition
of tax losses across a number of territories plus the utilisation of losses in other territories. The movement in ‘Other’ is 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 2017 resulted in an increase in the deferred tax asset of £0.2m (2016: £4.3m increase). The amount recognised in profit or
loss for the year of £2.3m in relation to losses is a combination of the elements disclosed in Note 6 including the charge for tax losses
recognised of £2.6m.
In December 2017 the US Tax Cuts and Jobs Act was enacted. This Act made significant changes to US tax rules, the most relevant
to the Group being the reduction in the federal rate of tax to 21%, from 35%. Other measures included a reduction in the amount of
interest that can be deducted for tax purposes and the introduction of other measures designed to combat base erosion. The impact
to the financial statements is a write down of deferred tax assets representing the future value for accumulated losses and other
deductions of £1.1m.
The realisation of the deferred tax asset is dependent upon generating future taxable profits in the overseas territories in which the
deferred tax has arisen. There are carried forward losses of £16.7m (2016: £14.0m) 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 not recognised a deferred tax asset in respect of any losses that we would expect to be impacted
by expiry.
Financial Statements | 114
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 17. 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
2017
2016
£’000
Number of
shares
£’000
Number of
shares
3,259
325,975,455
3,258
325,919,705
9
833,246
1
55,750
3,268
326,808,701
3,259
325,975,455
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 2017 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 2017
Granted
in year
Exercised
in year
Lapsed
in year
No. of
options
outstand-
ing at 31
December
2017
Base EPS/
OP range†
Exercise price
per share
Exercise period
2009 (Note 2)*
887,018
2010 (Note 1)*
2,458,917
2011 (Note 2)
2,269,569
2012 (Note 2)*
1,982,903
2013 (Note 2)*
3,087,833
2014 (Note 2)*
3,820,614
2015 (Note 2)
1,712,427
-
-
-
-
-
-
-
2016 (Note 2)
1,700,000
30,000
2017 (Note 2)
-
1,693,000
(509,168)
(3,600)
374,250 OP range
187.5p-211.84p
March 2012 – March 2019
(643,417)
-
1,815,500
6.6
381.5p-383.0p
March 2013 – March 2020
-
(195,000)
2,074,569 OP range
491.0p-492.9p
March 2014 – March 2021
(345,740)
(100,115)
1,537,048 OP range
(1,015,000)
(97,000)
1,975,833 OP range
(646,878)
(270,403)
2,903,333 OP range
477.0p
442.0p
484.0p
March 2015 – March 2022
March 2016 – March 2023
March 2017 – March 2024
-
-
-
(135,055)
1,577,372 OP range
526.0p-534.0p
March 2018 – March 2025
(125,000)
1,605,000 OP range
406.0p-427.0p
March 2019 – March 2026
(28,000)
1,665,000 OP range
435.44p
March 2020 – March 2027
Total 2017
17,919,281
1,723,000 (3,160,203)
(954,173) 15,527,905
Weighted
average
exercise price
2017 (£)
4.45
4.35
4.02
4.74
4.51
Total 2016
17,916,355
1,790,000
(148,025)
(1,639,049) 17,919,281
Weighted
average
exercise price
2016 (£)
4.48
4.14
2.47
4.55
4.45
* These options have fully vested
† The Operating Profit ranges for each award are fully disclosed in Note 2 of this Note. 8,605,964 options were exercisable at the end of 2017 at a weighted average exercise price of
£4.39 (2016: £4.05). The weighted average share price at the date of exercise was £4.86.
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.
115 | Financial Statements
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 share option 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 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, with a further 4% vesting on 10 March
2016 following the 2015 result. Following 2016’s Operating Profit of £101.0m, the final portion of the award vested on 10 March 2017.
Further grants under the SOS have been made in each year from 2011. 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. Following 2017’s operating profit, 18% of this award will vest.
For grants between 2012 and 2015, 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. As Operating Profit of £118.3m
was achieved this year, the performance criteria have been fully achieved and these awards will vest in full when their three year time
periods have elapsed.
For the 2016 grant, if Operating Profit is in excess of £75m, 2% of the award will vest for every additional £1m of Operating Profit
achieved, up to a maximum of 100% at Operating Profit of £125m or more.
For the 2017 grant, if Operating Profit is in excess of £50m, 1% of the award will vest for every additional £1m of Operating Profit
achieved, up to a maximum of 100% at Operating Profit of £125m or more.
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. Movements on these plans are shown below:
As at 1 January 2017
Granted
Lapsed
Exercised
As at 31 December 2017
LTIP
1,011,288
417,049
(119,009)
(178,512)
1,130,816
MIP
2,058,710
822,147
-
(697,601)
2,183,256
Share option valuation and measurement
In 2017, options were granted on 16 March with the estimated fair value of the options granted on that day of £1.11. In 2016, options
were granted on 18 March with the estimated fair value of the options granted on that day of £0.68.
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 2017 have an exercise price in the range of 187.5p to 534.0p and a weighted average
contractual life of 5.6 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
2017
4.35
4.35
1.11
38.19%
5 years
0.72%
2016
4.06
4.06
0.68
2017
4.35
Nil
3.99
25.7%
38.19%
5 years
0.89%
3 years
0.72%
2016
4.04
Nil
3.72
25.7%
3 years
0.89%
Expected dividend yield
2.87%
2.75%
Nil
Nil
2017
4.35
Nil
4.35
38.19%
3 years
0.72%
2.87%
2016
4.04
Nil
3.72-4.04
25.7%
3 years
0.89%
2.75%
Financial Statements | 116
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 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 £7.7m, including social security, (2016: £4.2m) related to share-based payment transactions during
the year.
18. 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 2017, the reserve for shares held in the employee benefit trust consisted of 14,311,816 Ordinary shares (2016: 17,592,938
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 4.4% of the called-up share capital with a market value of £66.9m (2016: £68.7m).
There are 11,181,237 (2016: 14,926,677) 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.
19. 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
2017
£’000
95,327
278
95,605
95,605
95,605
Group
2016
£’000
78,022
14,774
92,796
92,796
92,796
Company
2016
£’000
2017
£’000
–
–
–
–
–
–
–
–
–
–
The Group operated a multi-currency notional cash pool. The main Eurozone subsidiaries and the UK-based Group Treasury subsidiary
participated in this cash pool. 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.
20. 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.
117 | Financial Statements
(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 2017 amounted to £245.4m (2016: £205.1m).
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 £116.7m (2016: £92.9m) that are past due at
the reporting date for which the Group has not provided as the amounts are still considered recoverable. The Group does not hold any
collateral over these balances. The days sales of these receivables at the year end is 53 days in excess of the initial credit period (2016:
50 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
2017
£’000
Provision
2017
£’000
128,978
72,098
43,494
8,985
253,555
275
155
94
7,637
8,161
Net trade
receivables
2017
£’000
Gross trade
receivables
2016
£’000
128,703
112,326
71,943
43,400
1,348
60,705
31,542
5,572
245,394
210,145
Provision
2016
£’000
179
102
53
4,736
5,070
Net trade
receivables
2016
£’000
112,147
60,603
31,489
836
205,075
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
2017
£’000
5,070
18,426
(669)
(7,566)
(7,100)
8,161
2016
£’000
5,635
12,264
(1,259)
(8,026)
(3,544)
5,070
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 £3.5m (2016: £2.4m) 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.
Financial Statements | 118
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 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 net accrued income at the reporting date by geographic region was:
EMEA
United Kingdom
Asia Pacific
Americas
Carrying amount
2017
£’000
2016
£’000
148,292
122,858
45,248
30,460
21,394
37,028
27,290
17,899
245,394
205,075
Carrying amount
2017
£’000
956
8,638
15,749
6,595
31,938
2016
£’000
1,917
15,617
12,620
7,469
37,623
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 13. 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 were 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:
Less than
1 month
£’000
5,178
92,918
Less than
1 month
£’000
5,330
58,796
1-3 months
£’000
3-12 months
£’000
216
846
17,001
15,860
1-3 months
£’000
3-12 months
£’000
787
971
16,236
44,459
More than
12 months
£’000
–
–
More than
12 months
£’000
427
–
2017
Trade payables
Accruals and other payables
2016
Trade payables
Accruals and other payables
119 | Financial Statements
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 2017 and 31 December 2016.
(iii) Market risk and sensitivity analysis
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates, but
these risks are not deemed to be material. However, a sensitivity analysis showing hypothetical fluctuations in Pounds Sterling against
the Group’s main exposure currencies is shown on the next page. 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 2017 relate to cash and bank overdrafts. The average interest
rate payable on bank overdrafts was 1.52% (2016: 2.50%).
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 is transferred to
other comprehensive income. The pre-tax profit on effective hedging instruments deferred within other comprehensive income as at 31
December 2017 is £1.3m (2016: £2.5m loss).
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.
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.
All derivative instruments are classified as level 2 instruments.
Derivative financial instruments
Derivative assets
Derivative liabilities
Net derivative (liabilities)/assets
Sensitivity analysis – currency risk
Derivatives at fair value
2017
£m
0.7
(0.9)
(0.2)
2016
£m
1.5
(1.0)
0.5
A 10% strengthening of Sterling against the following currencies at 31 December 2017 would have increased/(decreased) equity and
profit or loss by the amounts shown over the page. 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 2016. 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 over the page, which therefore should not be considered a projection of likely future events and losses.
Financial Statements | 120
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Euro
Australian Dollar
Swiss Franc
Chinese Renminbi
Singapore Dollar
Other
Euro
Australian Dollar
Swiss Franc
Chinese Renminbi
Singapore Dollar
Other
2017 equity
£’000
(9,290)
(1,248)
(1,754)
(1,229)
(1,302)
(4,346)
2016 equity
£’000
(6,929)
(1,247)
(1,727)
(1,178)
(1,203)
(4,040)
2017 PBT
£’000
(2,598)
(123)
(171)
(305)
(8)
(943)
2016 PBT
£’000
(1,992)
56
(182)
(386)
40
(506)
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.
21. Commitments
Operating lease commitments
At 31 December 2017 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
2017
£’000
31,083
78,318
17,102
2016
£’000
28,987
63,684
20,319
126,503
112,990
Other
2017
£’000
4,930
4,456
–
9,386
2016
£’000
5,020
5,301
–
10,321
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 £0.1m of contractual capital commitments as at 31 December 2017 relating to property, plant and equipment (2016: £0.7m).
The Group had contractual capital commitments of £nil as at 31 December 2017 relating to computer software (2016: £0.7m).
22. Contingent liabilities
Guarantees
The Company has provided guarantees to other Group undertakings amounting to £1.0m (2016: £nil) 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 2017 amounted to £6.1m (2016: £4.8m).
23. Events after the balance sheet date
Between 31 December 2017 and 6 March 2018, 111,763 options were exercised, leading to an increase in share capital of £1k and an
increase in share premium of £425k.
121 | Financial Statements
24. 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 12).
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 46 to 51. 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
2017
£’000
6,322
672
200
1,601
8,795
2016
£’000
5,786
517
180
1,177
7,660
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
2017
£’000
9,649
2016
£’000
8,890
Amounts owed
by related parties
Amounts owed
to related parties
2017
£’000
2016
£’000
2017
£’000
2016
£’000
647,607
664,008
848,300
798,493
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.
2013
£’000
2014
£’000
2015
£’000
2016
£’000
2017
£’000
1,005,502
1,046,887
1,064,945
1,196,125
1,371,534
513,881
532,817
556,105
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%
621,034
100,952
100,952
99,996
72,096
16.3%
711,568
118,322
118,322
118,162
83,080
16.6%
13.8*
19.3*
21.3
23.1
26.5
Financial Statements | 122
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Shareholder information and advisers
Annual General Meeting
To be held on 7 June 2018 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 2017
To be paid (if approved) on 18 June 2018 to shareholders on the register of members on 18 May 2018.
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
HSBC Bank plc
8 Canada Square
Canary Wharf
London E14 5HQ
Registrars
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Financial PR
FTI Consultancy
200 Aldersgate
Aldersgate Street
London EC1A 4HD
123 | Additional Information
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 PageGroup plc and is registered
in England and Wales with registered
number 3310225.
Share capital
The Act abolished the concept of, and
requirement for a company to have, an
authorised share capital. As such, the
Company no longer has an authorised
share capital.
Alteration of capital
The Company may from time to time by
ordinary resolution:
(a) consolidate and divide all or any of
its share capital into shares of larger
amount than its existing shares;
(b) sub-divide its shares, or any of them,
into shares of a smaller amount than
its existing shares; and
(c) determine that, as between the
shares resulting from such a sub-
division, any of them may have
any preference or advantage as
compared with the others.
Subject to the provisions of the Act,
the Company may by special resolution
reduce its share capital, any capital
redemption reserve and any share
premium account, in any way.
Purchase of own shares
Subject to the provisions of the Act,
the Company may purchase its own
shares, including redeemable shares.
The Company proposes to renew its
authority to purchase its own shares for
another year in item 16 of the Annual
General Meeting notice.
General meetings and voting rights
The Directors may call general meetings
whenever and at whatever time and
location they so determine. Subject
to the provisions of the Act, an annual
general meeting and all general meetings
(which shall be called extraordinary
general meetings) shall be called by at
least 21 clear days’ notice. Subject to
the provisions of the Act, the Company
may resolve to reduce the notice period
for general meetings (other than annual
general meetings) to 14 days on an
annual basis. The Company proposes
to renew its authority to hold general
meetings on 14 days’ notice for another
year in item 17 of the Annual General
Meeting notice. Two persons entitled to
vote upon the business to be transacted
shall be a quorum.
The Articles of Association provide
that subject to any rights or restrictions
attached to any shares, on a show of
hands every member and every duly
appointed proxy present shall have one
vote. Every corporate representative
present who has been duly authorised
by a corporation has the same voting
rights as the corporation would be
entitled to. On a poll every member
present in person or by a duly appointed
proxy or corporate representative shall
have one vote for every share of which
he is a holder or in respect of which
his appointment as proxy or corporate
representative has been made. No
member shall be entitled to vote in
respect of any share held by him if any
call or other sum payable by him to the
Company remains unpaid.
If a member or any person appearing
to be interested in shares held by a
member has been duly served with a
notice under the Act and is in default
for the prescribed period in supplying
to the Company information thereby
required, unless the Directors otherwise
determine, the member shall not be
entitled in respect of the default shares
to be present or to vote (either in
person or by representative or proxy)
at any general or class meeting of the
Company or on any poll or to exercise
any other right conferred by membership
in relation to such meeting or poll. In
certain circumstances, any dividend due
in respect of the default shares shall be
withheld and certain certificated transfers
may be refused.
A member entitled to more than one
vote need not, if he votes, use all his
votes or cast all the votes he uses in
the same way. A member is entitled to
appoint another person as his proxy to
exercise all or any of his rights to attend
and speak and vote at a meeting of
the Company. A proxy need not be a
member. A member may appoint more
than one proxy to attend on the same
occasion. This does not preclude the
member from attending and voting at the
meeting or at any adjournment of it.
Limitations and non-resident or
foreign shareholders
English law treats those persons who
hold the shares and are neither UK
residents nor nationals in the same way
as UK residents or nationals. They are
free to own, vote on and transfer any
shares they hold.
Variation of rights
If at any time the capital of the Company
is divided into different classes of shares,
the rights attached to any class may be
varied either:
(a) in such manner (if any) as may be
provided by those rights; or
(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
Additional Information | 124
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION dividend upon the recommendation of the
Directors, direct that it shall be satisfied
wholly or partly by the distribution of
specific assets.
No dividend shall be paid otherwise than
out of profits available for distribution as
specified under the provisions of the Act.
Any dividend unclaimed after a period of
twelve years from the date of declaration
of such dividend shall, if the Directors so
resolve, be forfeited and shall revert to the
Company.
Calls on shares
Subject to the terms of allotment, the
Directors may make calls upon members
in respect of any amounts unpaid on their
shares (whether in respect of nominal
value or premium) and each member shall
pay to the Company as required by the
notice the amount called on his shares.
Transfer of shares
Any member may transfer all or any of his
shares in certificated form by instrument
of transfer in the usual common form or
in any other form which the Directors may
approve. The transfer instrument shall be
signed by or on behalf of the transferor
and, except in the case of fully-paid
shares, by or on behalf of the transferee.
Where any class of shares is for the time
being a participating security, title to
shares of that class which are recorded
as being held in uncertificated form,
may be transferred (to not more than
four transferees) by the relevant system
concerned.
The Directors may in their absolute
discretion refuse to register any transfer
of shares (being shares which are not
fully paid or on which the Company has a
lien), provided that if the share is listed on
the Official List of the UK Listing Authority
such refusal does not prevent dealings in
the shares from taking place on an open
and proper basis.
The Directors may also refuse to register
a transfer of shares (whether fully paid or
not) unless the transfer instrument:
(a) is lodged at the registered office, or
such other place as the Directors may
appoint, accompanied by the relevant
share certificate(s)
(b) is in respect of only one class of share
(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
(f)
(e) his interest arises by virtue of his
being, or intending to become a
participant in the underwriting or sub-
underwriting of an offer of any shares
in or debentures or other securities
of the Company for subscription,
purchase or exchange
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 declare an interest if it cannot
reasonably be regarded as giving rise
to a conflict of interest). The definition
of “interest” includes the interests
125 | Additional Information
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
(ii)
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
If the Company, at the meeting at which
a director retires by rotation, does not fill
the vacancy the retiring Director shall, if
willing to act, be deemed to have been
reappointed unless a resolution not to
fill the vacancy or not to reappoint that
Director is passed.
In addition to any power of removal
under the Act, the Company may, by
special resolution, remove a director
before the expiration of his period of
office (without prejudice to any claim for
damages for breach of any contract of
service between the director and the
Company) and, subject to the Articles of
Association, may by ordinary resolution,
appoint another person who is willing to
act as a director, and is permitted by law
to do so, to be a director instead of him.
The newly appointed person shall be
treated, for the purposes of determining
the time at which he or any other
director is to retire as if he had become a
director 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
(g) that person is absent from
(f)
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
Additional Information | 126
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION