Annual Report
and Accounts 2018
Contents
Strategic Report
Chairman’s Introduction
Overview
Business Model
Strategic Review
Connected to Customers – Technology
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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3
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Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018
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
Gross Profit
Operating Profit
Basic Earnings Per Share
2017: £1,371.5m
2017: £711.6m
2017: £118.3m
£1,549.9m
+14.0%*
£814.9m
+15.9%*
£142.5m
+20.7%*
2017: 26.5p
32.5p
+22.6%*
% Non-UK
Gross Profit
2017: 80.2%
83.0%
% Non-Accounting
and Financial Services
Gross Profit
Conversion rate**
Ordinary and Special
Dividend
2017: 63.3%
65.3%
2017: 16.6%
17.5%
2017: 25.23p
25.83p
*in constant currency at prior year rates **Operating Profit as a percentage of Gross Profit
Business model
Our strategy
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.
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.
Career
development
structure
Agile and
responsive
Global
management
mobility
Organic
Growth
Team
profit-led
compensation
Experienced
management pool
Productivity-led
expansion
Large,
High Potential
Large,
Proven
Small and Medium,
High Margin
These are large
markets where we
are already proven
with a strong
track record and a
significant presence.
Typically under-
developed markets,
but where we
have a successful
track record and
confidence in our
ability to scale
our operations
substantially.
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.
Shift in business model
Transformation
and change
PageGroup brands
and reputation
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%
83%
9%
Working population
is female
Positive score to Employee
Engagement Survey
Reduction in energy
derived emissions
Annual Report and Accounts 2018 North America
10 offices
528 employees
Latin America
13 offices
800 employees
the world
Where we operate
36 Countries across
Headcount
7,772
EMEA
62 offices
3,299 employees
Asia
18 offices
1,329 employees
UK
27 offices
1,436 employees
EMEA (48% of Group)
£394m
Gross Profit
Page 27 for EMEA Performance Review
Australasia
9 offices
380 employees
UK (17% of Group)
£138m
Gross Profit
Page 28 for the UK Performance Review
Asia Pacific (20% of Group)
£161m
Gross Profit
Page 27 for Asia Pacific Performance Review
The Americas (15% of Group)
£121m
Gross Profit
Page 28 for The Americas Performance Review
Principal risks
Gross profit by discipline
Shift in business model
Transformation
and change
PageGroup brands
and reputation
Macro-economic
exposure
Foreign exchange –
translation risk
People attraction,
development and retention
Engineering, Property &
Construction, Procurement &
Supply Chain
£194.6m
Accounting and
Financial Services
£282.7m
Strategic
People
Risk
Categories
Financial
Operational
£814.9m
Total
Information systems
Cyber security
Fiscal and
legal compliance
£196.8m
Legal, Technology,
HR etc.
Financial management
and control
Data protection regulation
£140.8m
Marketing, Sales & Retail
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 42 years.
Brand
Scale
Culture
Annual Report and Accounts 2018
Chairman’s Introduction
David Lowden
Chairman
2018 Performance
I am delighted to report that the Group
delivered another record performance in
the year ended 31 December 2018. The
strong performance this year demonstrates
the consistent execution of our strategy
and is testimony to the dedication, ability
and hard work of our people across
the Group.
We, as a Board, continue to be impressed
by our staff, both operational and non-
operational, who have responded with
enthusiasm, dedication and commitment
over the pace of change within the Group
over recent years.
We entered the year optimistically, but with
caution, in some key markets. Following
the successful delivery of our strategy
throughout 2018, market expectations rose
further as the year progressed, with the
actual result again being delivered in line
with this increased expectation.
Gross profit was up 15.9% in constant
currencies, with operating profit up 20.7%
at £142.5m. Our largest region, Europe,
Middle East and Africa, delivered a record
year, up 17.9% in gross profit terms. There
was strong growth from Germany, up 29%,
with our Interim business now representing
20% of the business. France was up 16%
and ended the year as our largest country
in terms of gross profit, representing 17%
of the Group in the fourth quarter.
Our Asia Pacific region grew 20.6%, with
records in many of our businesses including
Greater China, which was up 19%. All
1 | Strategic Report
businesses performed strongly and there
were many highlights. In 2017, we made
significant investment in Australia. This
investment delivered a strong 2018, exiting
with growth of 25% in the fourth quarter.
We opened a new office in Vietnam, our
fifth country in South East Asia, and India
delivered growth of 49% and now has over
120 fee earners.
As I anticipated in my statement last year,
the UK remained challenging. Market
sentiment remained weak, with Brexit
related uncertainty impacting decision-
making by both clients and candidates,
particularly at the more senior end of
the market. However, Page Personnel,
our clerical and part qualified business
representing 25% of the UK, had a
record year, up 8%.
The Americas was our fastest growing
region, up 27%. In North America, the
US also had a record year, growing 25%,
with our strategy of diversification, both in
terms of location and discipline, delivering
notable performances from our regional
offices in Boston, Chicago, Houston and
Los Angeles. Latin America, now 6% of the
Group and with a headcount of over 800,
also had a record year, up 30%. Mexico
ended the year as the largest country in
the region (+33%) and Brazil returned
to growth (+20%). The remaining four
countries, Argentina, Chile, Colombia and
Peru, now have a combined headcount of
over 300 and also delivered a record year.
strategic priorities. Our Large, High Potential
markets, namely the US, Germany, South
East Asia, Greater China and Latin America,
now representing around a third of the
Group, grew 25% in the year with all
countries delivering record performances.
These strategic investments will continue in
2019, as well as in those businesses where
we are seeing strong growth.
The Group delivered another
record performance.
Dividends
We paid over £40m in ordinary dividends
in 2018 and returned over £40m to
shareholders by way of a special dividend.
We have now paid special dividends
totalling £150m in the last four years.
We generated cash from operations of
£131.7m in 2018 and ended the year with
cash balances of £97.7m 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 9.0p. When taken together with the
interim dividend paid in October of 4.1p,
this implies a total dividend of 13.1p, an
increase of 4.8% on 2017.
The PageGroup leadership team continued
to make further progress on the Group’s
This ordinary dividend of 13.1p is covered
2.5 times by earnings, with a yield of 2.9%.
Annual Report and Accounts 2018 If the special dividend is taken into
account, using the year end share price
of 450.8p, the yield increases to just
under 6%.
Dividend Per Share (p)
30
24
18
12
6
27.5
16.0
Special dividend
25.23
25.83
12.73
12.73
18.44
6.46
11.5
11.98
12.50
13.1
12.50
11.0
10.5
2014
2015
2016
2017
2018
Five-year Ordinary Dividend CAGR +4.5%
Board
Today’s business world is continually
evolving and presents a range of risks
and opportunities. This 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.
One of the key elements of my role as
Chairman is to oversee a Board with
a diverse range of thought, experience,
and perspective. To that extent,
I have consistently focused on Board
composition since I became Chairman
of the Board in December 2015.
We support the Hampton-Alexander
review and the requirement to
disclose the gender balance of senior
management. I am pleased to say that
we have already exceeded the target
for FTSE 350 Boards to have 33%
representation by women by 2020 for
the Main Board. However, we note that
we have further to go with the Executive
Board, where the representation is
currently 100% male. This outcome
has been driven by our organic growth
strategy of promoting from within, which
means addressing this imbalance will
take time. We have however been
working actively on this. In 2012, we
launched our Women@Page network,
which allows women from all over the
world to network, meet virtually and offer
peer support. We also have a successful
maternity coaching programme, and as
a result have seen our maternity return
rates increase.
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.
As mentioned last year, Danuta Gray
decided not to stand for re-election as
a Director of the Company and stepped
down from the Board at the AGM on
7 June 2018. We are extremely grateful
to Danuta for her hard work and
expertise over the last four years and
on behalf of the Board of PageGroup,
I would like to thank Danuta for her
significant contribution and wish her
every success in the future.
Full details of the work of the Board
and subjects discussed in the year
are set out in the Corporate
Governance Report.
Culture and Purpose
PageGroup’s culture is unique in the
sector. It is a global culture that delivers
a consistent approach both internally
and externally. It is one of meritocracy,
with strong Company and peer group
recognition for achievements. The
processes by which we do business,
and our team based approach is the
foundation of the Group.
Our purpose is to change lives for
people through creating opportunity
to reach their potential. We aim to
ensure that everyone is a step closer
to realising their potential and achieving
their ambitions. We change lives by
identifying and matching people with
the roles that they thrive in.
Your Board attended the Global
Leadership Conference in Frankfurt in
September, where it was clear that the
culture and purpose of PageGroup was
strong. There is no doubt that this has
helped to deliver the strategy and to
contribute to the performance of the
Group, as well as to attract and retain
the best talent.
Stakeholder and Workforce
Engagement
The Board at PageGroup already has
procedures in place to understand the
concerns of the workforce and these are
discussed regularly in Board meetings.
Where decisions are made at Board
level that affect staff, their views and
concerns are taken into account by the
Directors.
Following the issue of the new UK
Corporate Governance Code, we will
revisit these procedures to allow greater
emphasis on these areas. This will allow
us to further understand the views of
the Company’s key stakeholders and
to describe in the Annual Report from
next year how their interests have been
considered in Board discussions.
Looking Ahead
With the emergence of what has been
described as the fourth industrial
revolution, it is clear that we are in a
period of innovation on many fronts.
From artificial intelligence and machine
learning, to digitalisation, there is a range
of technologies that are likely to impact
businesses in the near future. Our
ongoing investment in this technology
is helping us to deliver a more bespoke
and targeted service to our clients
and candidates.
As we enter 2019, we are also
increasingly mindful of the
heightened uncertainty regarding the
macroeconomic outlook. Headlines of
global disruption, political instability, such
as Brexit in the UK, the impact of trade
tariffs particularly in Mainland China,
social unrest in France and broader
macroeconomic uncertainties globally,
do not encourage candidates to make
job moves, or for clients to make
hiring decisions.
However, our proven strategy remains
unchanged. Investment will continue in
our Large, High Potential markets, as
well as in those markets with favourable
trading conditions. We continue to work
towards our Vision of 10,000 headcount,
£1bn gross profit and £200m-£250m of
operating profit.
Challenges arising from changes in
technology, markets, economies and
behaviours makes the delivery of our
strategy even more important. This
can only be done successfully with
excellent people. On behalf of the
Board, therefore, I would like to thank
all our staff again for their continued
contribution and for all their significant
achievements in 2018.
David Lowden
Chairman
Strategic Report | 2
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Overview
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
Business
Model
P4
Strategy
P7
Risks
P29
KPIs
P17
Remuneration
P58
Dividend
Policy
P9
3 | Strategic Report
Annual Report and Accounts 2018 Business Model
A Global Leader
What we do
PageGroup is a worldwide leader in specialised recruitment. We have
over 40 years recruitment experience and deliver recruitment services
to clients across 36 countries through our network of 139 offices.
Discipline expertise
We’ve developed PageGroup’s reputation as a global recruitment leader
through our focus on specialist areas of the market, replicated across our
international network. Within our four broad categories we operate across
14 specialist discipline teams. We then specialise further within these
(e.g. digital marketing within marketing) to ensure we provide expert
recruitment services to our clients.
Geographic reach
Our substantial and well-balanced business reaches across all regions,
including Latin America and Asia. Our global model allows us to 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
Our executive search division of PageGroup provides a range of search,
selection and talent management solutions for organisations on a permanent
and interim basis. Recognised for our powerful in-house research function,
speed and flexibility of response and assignment completion rates,
organisations worldwide use Page Executive to secure their senior talent. The
roles on which we focus typically sit at the sub-board and Board levels.
Michael Page
The original PageGroup brand is normally established as the first business
in each new country that we enter. Michael Page is comprised of
25 specialisms, each providing a service to a specialist area of the market,
recruiting permanent, temporary, contract and interim opportunities,
typically at qualified professional and management level. The businesses
we work with range from SMEs to global blue-chip organisations.
Page Personnel
Page Personnel offers specialist recruitment services to clients requiring
permanent employees, temporary or contract staff. Mirroring the geographical and
sector coverage of Michael Page, it provides specialist services to organisations
requiring talent at professional clerical and support levels.
Page Outsourcing
Our newest brand, Page Outsourcing, harnesses the power of the other
PageGroup brands. Our flexible recruitment outsourcing solution allows our
clients to focus on their core business. We manage a range of recruitment
activity from high volume needs to specialist support for HR departments
across all levels of the recruitment market.
Strategic Report | 4
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018
Business Model
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. This
allows us 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.
5 | Strategic Report
Annual Report and Accounts 2018 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 42 years.
We generate funds through fees earned for placing candidates in permanent and temporary roles.
Brand
We are trusted by clients and candidates to
provide a committed, high quality service over the
long-term via our Page Executive, Michael Page,
Page Personnel and Page Outsourcing brands.
Our superior level of expertise inspires high levels
of confidence, trust and assurance of quality
service, enabling our brands to outperform other
recruitment businesses.
The digital revolution has transformed the
recruitment market and the impact of technology
on behaviours and expectations of both clients
and candidates continues to grow at pace.
The first class reputation of our brands and
the knowledge of our consultants behind our
online presence, gives high quality candidates
confidence to place key decisions on their future
in their hands.
Scale
Our scale enables PageGroup to commit to
markets through economic cycles, which
combined with our strong financial standing
has given clients confidence to build lasting
relationships with us. Temporary staff also derive
comfort from our financial strength that their
services will be paid for.
The breadth of our client base, even in our new
markets, gives us the ability to offer diverse
expertise across a wide range of complementary
specialisms and geographies, enhancing our
offering to the market and the candidate pools we
can access.
Our scale has facilitated us building an unrivalled
skillset with high levels of experience, which is
available to clients of any size and across all
sectors in which we operate.
Culture
PageGroup’s culture is unique in the sector.
Our global culture delivers a consistent approach
both internally and externally, whilst remaining
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 central to
everything we do.
We have ingrained values of how to do business
ethically and to make long term decisions.
Our purpose and our values that are the key to
our success are set out on page 22.
Our strategy
The Group’s strategy aims to expand and diversify the business by industry sectors, professional disciplines, geography across our brands, with the
objective of being the leading specialist recruitment consultancy in each of our chosen markets.
Our structure has provided a clear investment framework for the business by establishing three categories into which we operate. The grouping is
based on set criteria, including the size of the opportunity and the potential for future growth.
Within these categories we focus on opportunities where our industry and market experience sets us apart from the competition.
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.
It consists of five markets;
Germany, Greater China, Latin
America, the US and South East
Asia.
These are large markets where
we are already proven with
a strong track record and a
significant presence, for example
Australia, France and the UK.
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 Canada.
See page 7 for more on our Strategic Vision
Strategic Report | 6
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 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.
I will also outline our updated Vision
for the Group, as we presented at our
Investor Afternoon in May 2018.
We continue this year to relate how
we measure performance, through our
KPIs – both financial and non financial
– with associated risks. These risks
then link directly to the four elements
(financial, strategic, people and
operational) of the performance
criteria in our current executive
share plans.
Steve Ingham
CEO PageGroup
7 | Strategic Report
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Annual Report and Accounts 2018
Our value proposition
Our value proposition is based around expertise and specialism and for this to be delivered in a consistent manner, supported by high
quality processes.
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.
When these elements are brought together, the potential for a successful outcome for both client and candidate is maximised. Such
successes enhance our reputation, brings greater repeat business and turns 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.
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Organic, high margin and diversified growth
Our business model is centred around
organic and diverse growth. The key
elements are derived from our team-
led approach as set out on page 9,
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.
In 2007 the UK represented 39% of
our business. Over a decade later this
has fallen to 17% as we have invested
heavily in our Large, High Potential
markets.
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 enables us to offer a premium
service that is valued by clients
and attracts the highest calibre of
candidates.
PageGroup’s historic success in each
of our markets has helped identify
which geographies will likely produce
high margin growth, with the greatest
potential for long-term success.
Our background is in permanent
recruitment, but 24% 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.
Strategic Report | 8
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018
Market dynamics
Strategic Review
Efficiently scalable and highly flexible
Innovation
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 10.
Our global footprint requires
high levels of operational
efficiency in order to achieve
this strategic objective. Our
focus on Shared Service
Centres has delivered greater
economies of scale and
greater efficiencies. It has
driven consistency, increased
flexibility and improved the
quality of service provided
to our operational business.
Collectively these Shared
Service Centres allow us to be
more agile, reduce our fixed
costs and remove constraints
on how fast we can react to
changing market conditions.
During 2018 we also created a
new Chief Operational Officer
role that is jointly held by two of
our Executive Board members.
This new role will allow us to
build capability, deliver initiatives
more rapidly and then translate
this into increased productivity.
The world in which we operate
is continually changing. Newly
emerging technologies affect
the behaviour of our clients,
candidates and own people.
Our Innovation approach is
focussed on how best to
acquire, engage and nurture
customers to build long-term
relationships.
In our operational business, we
are utilising technologies such
as Salesforce and Thunderhead
to engage with customers
throughout their career journey.
Our use of these technologies
has resulted in click-through
rates twice the industry
average.
Our internal Business
Technology function focuses
on designing, implementing
and exploiting scalable global
systems. By improving our
processes and tools we
empower consultants to be
more productive.
The use of technology allows
us to leverage growth in the
business and improve our
conversion rate.
Nurture and develop our people, driving
our meritocratic growth model
Capital Allocation Policy
Our PageVision is to increase
our total headcount to 10,000
in the near-term and this starts
with retaining our best and
brightest.
The recruitment, retention
and development of talent is
fundamental in our ability to
achieve long-term sustainable
organic growth. We create
worldwide opportunities and
clear career paths for our
consultants on their journeys
to become Senior Managers or
Executive Board members.
Internal moves also ensure
that best practice knowledge
is shared throughout countries
and across disciplines.
The mobility and loyalty of
our people enable Senior
Management to react to market
conditions and ensure we
allocate resources efficiently to
achieve the greatest returns.
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 dividends.
Our policy is to grow the
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.
9 | Strategic Report
Annual Report and Accounts 2018 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
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.
Fees/rates
Group average historically moves within a 10% range over
the cycle (19.5%-22%).
Gross
profit and
productivity
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.
Mainly visible through
improvement in gross
profit, but a buoyant
market helps to drive
productivity.
Notable influence
on both gross profit
and also conversion
rate. Productivity,
especially in permanent
recruitment, is
significantly enhanced
as these market drivers
positively align.
Strategic Report | 10
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Strategic Review
Page Vision
Headcount
10,000
Gross Profit
£1bn
Operating Profit
£200m-£250m
At our Investor Afternoon in May 2018, we outlined our Vision for
the Group. Our updated vision remains consistent – to increase
the scale and diversification of PageGroup by organically growing
existing and new teams, offices, disciplines and markets. In
numbers, our Vision is to deliver Group gross profit of a billion
pounds, which, depending on how fast we get to that figure,
will generate operating profit of between £200m - £250m. To
deliver these results, at current productivity, we will require a total
Aiming to double Operating Profit
Group headcount of 10,000. We believe that with our focus on
operational support, we are now better placed to improve our fee
earner to operational support staff ratio. The work we have done
to standardise and simplify our support functions will enable us to
grow our fee earner headcount without a corresponding increase
in our support headcount. We believe we can achieve a ratio of
82:18.
Total Headcount
Gross Profit
Operating Profit
Vision
2018
2017
2009
10,000
7,772
7,029
3,549
3,549
£1bn
£815m
£712m
£712m
£352m
£200m - £250m
£142.5m
£118m
£20m
In 2018, we have made significant progress against our Vision in
terms of gross profit, operating profit and total headcount. We have
also achieved a new record fee earner to operational support staff
ratio of 79:21.
currency compared to the prior year. We have continued to invest
heavily in fee earners, up 20% year-on-year, as well as launching in
a new country in South East Asia, Vietnam, our fifth country in that
region.
We also have made considerable progress in growing our Large,
High Potential markets, which delivered a record year, both
collectively and all five individually. Overall, they grew 25% in constant
We will continue to focus on driving profitable growth, while
progressing our strategic investments to achieve our new Vision for
the Group.
Investing in Large, High Potential market fee earners
369
676
934
2,304
1,230
3,280
10%
17%
2007
15%
38%
15%
40%
2018
Vision
73%
2,792
47%
2,878
3,690
45%
Large, High Potential
Large, Proven
Medium, High Margin
11 | Strategic Report
Annual Report and Accounts 2018 Clear on people
Clear on investment
• Consistent performance culture reflecting
• 3 geographic market categories each
our values
with 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
In
• Continued focus on increasing
discipline diversity and
v
e
s
t
m
e
n
t
specialisation
Clear on
One
Clear Vision
To increase the scale and
diversification of PageGroup by
organically growing existing
and new teams, offices,
disciplines and markets.
B
r
a
n
d
e rational Support
operational support
p
O
• Continue to standardise and
simplify as far as possible our
• 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
• 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
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
Strategic Report | 12
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018
Strategic Review
How we categorise our 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 two markets – Japan and India – that all have the
medium-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.
13 | 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; 20% conversion rates.
Gross profit growth of 25% for the
year and gross profit records in all
markets. Strong growth in Germany
+29% and Latin America +30%.
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
8
1
0
2
N
A
L
P
9
1
0
2
Annual Report and Accounts 2018
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 +9%, tough
trading conditions in the UK.
Excluding this, growth was +15%.
Gross profit growth of 21% for the
year. Strong gross profit growth in
India of +49% and Japan +30%.
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
8
R
E
S
U
L
T
S
2
0
1
9
P
L
A
N
Strategic Report | 14
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018
CONNECTED TO CUSTOMERS
CREATING BETTER CUSTOMER RELATIONSHIPS
We are building a connected customer experience, this is how we acquire, engage with, and
then nurture our customers on an ongoing basis.
ACQUIRE
Our Digital & Technology strategy is agile,
working within a rapidly changing media
landscape, to ensure how we acquire our
customers, be that clients or candidates, is
efficient and effective.
ENGAGE
ENGAGE
We are delivering customers for
the longer term. Our programmes
engage with customers across
their whole career journey, not just
delivering more, but better, more
relevant candidates and clients. We
see Digital and Technology doing
more of the heavy lifting in the
‘Acquire’ and ‘Engage’ stages.
NURTURE
By using technology to do this work, it allows our people to focus
on building and nurturing relationships, which will always remain at
the heart of our business. We are seeking to use technology from
outside of recruitment, through our scale, capability and investment,
to give our people the best tools to do their jobs.
15 | Strategic Report
Annual Report and Accounts 2018 Annual Report and Accounts 2018
Strategic partners in recruitment media
Targeting digital media
Job matching technology
Mobile App
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
ACQUIRE
We have strategic partnerships with all of the
key recruitment sector players in candidate
acquisition – LinkedIn, Seek, Zhaopin. Our
global scale and capability allows us to work
closely with traditional digital media such as
Facebook, Baidu, WeChat and Google, where
we see fast deployment of our jobs on Google
for Jobs through code integrated into our
single global web platform.
A key element of our technology strategy is
Mobile. Just under half of our traffic comes
through mobile devices and we believe that
we are ahead of the competition. We were the
first recruiter to develop a responsive website,
which adjusts to whichever device people use
to access it. We are running a pilot mobile app
in France, the UK, Japan and the Netherlands,
using native technologies such as push
messaging, facial recognition and thumbprint
log-in to make the candidate journey easier.
This allows us to deliver a service which is far
in advance of that currently available elsewhere
in the market.
We have job matching technology deployed
in seven of our markets. Here, a candidate
uploads their CV and the tool matches them
with available jobs. The candidate can then
adjust and refine as necessary. Displaying
more relevant jobs gives a better customer
experience but also creates efficiencies by
surfacing better qualified candidates to our
consultants.
ENGAGE
Salesforce Marketing Cloud has been running in all of our
markets for a number of years, helping us send relevant content
automatically, driven by the candidate’s own actions. Based
on a career lifecycle, we undertake continuous contact with
candidates, supporting them with tools and guidance so that we
remain front of mind and are their recruiter of choice. Our open
rates are twice the industry average and our engagement rates
are three times that of the benchmark.
Going further we now run Salesforce Interaction Studio,
previously Thunderhead, to understand more about individual
customer journeys enabling us to deliver personalised
interactions to our candidates. We know where each of them
are on their journey, and can offer them the best next step on
their career path. Based on their interactions, we deliver them
personalised communications and opportunities. We have seen
that this has generated levels of engagement that are sector
leading.
The final component of our engagement programme is using
Salesforce Pardot to enable a lead generation programme of
clients. Measuring likelihood of clients to recruit through their
interaction across the PageGroup digital landscape allows us
to inform our consultants of what call to make and when to
generate or recapture business.
Critical to all of our programme is data-driven decision making
investments in technology, digital partners and innovation pilots
are measured in detail. We will not shy away from an impressive
partner logo, but each time it is based against a solid decision
framework backed by data to make a sound business case. Any
case for investment is considered and must lead to meaningful
output.
Strategic Report | 16
Additional InformationCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018
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 (%)*
15.9
9.8
2018
2017
2016
2015
2014
3.0
4.4
3.7
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 2018: Gross profit increased 14.5% in reported rates, 15.9% in constant
currencies, as adverse currency movements impacted the full-year figures.
Relevant strategic objective: Organic growth.
* Increase in gross profit in constant currency over the prior year
Gross profit
diversification (%)
83.0%
65.3%
Ex-UK
Ex-
Accounting
and Financial
Services
2014
2015
2016
2017
2018
Ex-UK
Ex-Finance
74.0
60.3
72.7
60.4
76.4
61.6
80.2
63.3
83.0
65.3
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 2018:
Geographies: The percentage increased to 83.0% from 80.2% in 2017, demonstrating a
high degree of diversification. This reflects strong trading conditions in the majority of our
overseas businesses.
Disciplines: The percentage increased to 65.3% (2017: 63.3%), as our professional services
disciplines performed strongly, combined with good growth in our technical disciplines,
comprising Property & Construction, Procurement & Supply Chain and Engineering.
Relevant strategic objective: Diversification.
Basic earnings per share (p)
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.
2018
2017
2016
2015
2014
32.5
Why it’s important: This measures the underlying profitability of the Group and the progress
made against the prior year.
How we performed in 2018: The Group saw a 22.6% rise in Basic EPS to 32.5p. Improvements
in trading and operational efficiencies drove strong growth in the Group’s EPS in 2018.
Relevant strategic objective: Sustainable growth.
26.5
23.1
21.3
18.4
Net cash (£m)
2018
2017
2016
2015
2014
How measured: Cash and short-term deposits less bank overdrafts and loans.
97.7
95.6
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.
92.8
95.0
90.0
How we performed in 2018: Net cash increased to £97.7m (2017: £95.6m). This was after
dividend payments of £81.3m (including a special dividend of £40.8m).
Relevant strategic objective: Sustainable growth.
Ratio of permanent vs
temporary placements
Gross profit
2014
2015
2016
2017
2018
Permanent
Temporary
76
24
76
24
76
24
75
25
76
24
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 2018: The ratio increased slightly to 76:24 (2017: 75:25), with strong growth
in markets where we have a higher ratio of permanent recruitment such as Asia and Latin America.
Relevant strategic objective: Diversification.
17 | Strategic Report
Annual Report and Accounts 2018 Key Performance Indicators
Fee earner
headcount growth (%)
2018
2017
2016
2015
2014
11.3
16.7
5.1
4.8
12.3
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 2018: Fee earner headcount grew by 619, or 11.3% in the year,
resulting in 6,116 fee earners at the end of the year, a record for the Group.
Relevant strategic objective: Sustainable growth.
I
C
G
E
T
A
R
T
S
E
L
P
O
E
P
Gross profit per
fee earner (£’000)
2018
2017
2016
2015
2014
How measured: Gross profit divided by the average number of fee-generating staff,
calculated on a rolling monthly average basis.
138.3 140.0
139.9
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.
135.2
126.8
130.3
How we performed in 2018: In constant currency, it increased slightly to £140.0k (2017:
£139.9k) as a result of the improved trading conditions. However, in reported rates, this
decreased to £138.3k.
Relevant strategic objective: Organic growth.
Fee earner:operational
support staff ratio
2014
2015
2016
2017
2018
Fee earner
Support
77
23
77
23
77
23
78
22
79
21
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 2018: The ratio improved to a new record of 79:21 from 78:22 in
2017. This was driven by 11.3% fee earner headcount growth, as well as benefiting from
our operational support initiatives. The ratio of new joiners in the year was 83:17.
Relevant strategic objective: Sustainable growth.
Conversion rate (%)
How measured: Operating profit (EBIT) before exceptional items expressed as a
percentage of gross profit.
2018
2017
2016
2015
2014
17.5
16.6
16.3
16.2
14.7
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 2018: The Group’s conversion rate increased to 17.5% (2017:
16.6%), with a combination of steadily improving conditions in a number of markets and
the benefits of operational efficiencies, offset by sustained investment in our fee earner
headcount.
Relevant strategic objective: Sustainable growth.
Employee index
How measured: A key output of the employee surveys undertaken periodically within
the business.
83%
Positive
engagement
score
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 2018: We recorded an 83% positive score for employee engagement
in the latest Employee Survey in 2017. 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. No survey was performed in 2018 and the next one is
planned for 2019.
Relevant strategic objective: Sustainable growth.
Management experience
How measured: Average tenure of front-office management measured as years of service for
directors and above.
2018
2017
2016
2015
2014
12.0 years
11.9 years
11.6 years
11.2 years
10.8 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 2018: The average tenure of the Group’s management increased from
11.9 years to 12.0 years, with a particular increase in the Americas.
Relevant strategic objective: Talent and Skills development.
Strategic Report | 18
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Key Performance Indicators
Total GHG emissions
Total energy-derived emissions
(CO2e tonnes)
Source of emissions
Direct GHG emissions
Indirect GHG emissions
2017
1,966
4,872
2018
1,882
5,379
How measured: Direct and Indirect GHG emissions calculated in line with the UK Government’s
2018 DEFRA reporting standards. Principally based on data from a sample of our offices, covering
68% 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 2018: Direct GHG emissions relating to the combustion of fuel decreased
by 4.3% to 1,882 tonnes CO2e, while Indirect GHG emissions, through the purchase of energy such
as electricity, increased by 10.4% to 5,379 tonnes.
Relevant strategic objective: Sustainable growth.
Intensity values of
GHG emissions
CO2e tonnes per 1,000 employees
Energy-derived emissions
2017
2018
1,013
920
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 2018: Energy-derived emissions were reduced by 9.2% compared with
2017, largely due to an increase in headcount without a corresponding increase in the number of
offices, along with changes in fuel sources and improvements in office energy efficiencies
Relevant strategic objective: Sustainable growth.
I
I
S
N
O
S
S
M
E
G
H
G
2017 Direct and Indirect GHG emissions were originally reported as 1,627 and 4,948 respectively. These have been restated to reflect the latest DEFRA fuel conversion rates in 2018. The 2017 Intensity value of energy-
derived emissions has been restated from 974 to 1,013 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 accordance with 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 in conjunction
with our environmental policy that focuses
on implementing efficiency measures
to reduce energy consumption and
carbon emissions. We have continued to
enhance the quality of our data collation
process. As with 2017, fugitive emissions
are not reported as the Company is not
responsible for the maintenance of air
conditioning systems in the vast majority
of its offices and there were no reported
fugitive emissions for those in which it is.
The Company’s total 2018 emissions from
energy and fuel used in its properties and
vehicles, together with comparable data
for the previous three years, are reported
below.
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),
representing 68% of 2018 global
headcount. Emissions for the remaining
offices were calculated by extrapolating
headcount. Emissions from fuel
consumed by company owned or leased
vehicles in 2018 were calculated using
the fuel consumed by the company car
fleets in UK, Germany, Italy and Poland (a
32% increase in sample against 2017 and
much larger than prior to 2017 when the
calculation was based only on German
company car data). For 2018 these fleets
represent around 15% of the Company’s
global car fleet of just under 1,400
vehicles (representing a c.10% increase
in company vehicles). The increase in
vehicles reflects the increase in headcount
of 10.6% over the period, the majority
of new hires being at consultant level
(the most likely employee group to take
a company car). Emissions for vehicles
in other countries were calculated by
extrapolating the total known diesel and
petrol consumptions per vehicle across
the entire fleet and then calculating the
resulting emissions. Emissions derived
from property energy consumption
Total energy derived emissions (tonnes CO2e) properties and vehicles
Source of emissions
2015
2016
2017
2018
Direct GHG emissions (relating to the combustion of fuel and the operation of any facility)
2,310
1,835
1,966
1,882
Indirect GHG emissions (through the purchase of electricity, heat, steam or cooling)
4,907
4,614
4,872
5,379
Total emissions
7,217
6,449
6,838
7,261
19 | Strategic Report
amounted to around 74% of total emissions.
Emissions have been calculated in line with the
2018 DEFRA reporting standards and calculated
using 2018 DEFRA conversion factors for fuels,
gases and UK electricity, and International
Energy Agency (IEA) 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 being most
representative of the company’s activity levels,
and unaffected by issues such as business mix
or foreign exchange variations.
Energy derived emissions – CO2e tonnes
per 1,000 employees
2015
1,305
2016
1,066
2017
1,013
2018
920
2018 emissions intensity improved by 9%
against 2017 as the Company continued to
implement energy saving and environmentally
responsible initiatives wherever possible. During
2018 the cooling plant in our global Head
Office was replaced with more energy efficient
equipment and similar exercises took place at
other buildings in partnership with our landlords.
We continue to benefit from the use of energy
efficient printers and the use of dedicated
recycling bins placed throughout our offices.
The use of video conferencing equipment to
reduce business travel saw a 20% reduction in
the volume of 2018 business trips for our
UK business.
Annual Report and Accounts 2018
Q&A with Steve Ingham, CEO
Q
A
What is the impact of Brexit on PageGroup
expected to be, and how will you minimise
any disruption?
Uncertainty is not helpful when candidates are
thinking about making a job move or clients are
considering making a hire. However aspects of our
business have performed well. Page Personnel,
where the business is focussed on more junior
appointments, and has a higher proportion of
temporary recruitment, had a record year.
The UK business now represents 17% of the Group
and is very diverse in nature. In 2007 Financial
Services clients represented c.12% of the UK
business whereas now it’s 5%, with a far more
diverse spread across our 13 specialist disciplines.
Looking forward, we have limited visibility of the
macroeconomic impact that Brexit will have on our
UK business. However, there is very little candidate
or consultant cross border flow, and we have
domestic cost bases in both the UK and Europe. In
addition, our wide network of consultants in Europe
means that we are well placed if there is a significant
transfer of roles into Europe.
“We set out our Vision
to reach a headcount of
10,000, gross profit of £1bn
and operating profit of
£200m-£250m.”
Q
A
What do you consider the to be your biggest
challenges in 2019?
After several years of investment we have built a
strong team that are well prepared for the future.
Our largest challenges are external factors such
as heightened geopolitical and macro-economic
instability. In the UK, uncertainty exists around
the timing and terms of Brexit, in Greater China,
the economy and confidence have been affected
by trade tariff uncertainty, and we are cautious of
some political uncertainty in Europe, particularly in
France.
Our ability to scale up or down quickly works to
our advantage. We have strong cost control and
by way of natural attrition, we are able to quickly
react to any changes in market conditions.
Strategic report | 20
Q Looking forward what do you consider to be your
main strategic goals and how do you expect to
achieve them?
A
We outlined our updated Page Vision during our
Investor Afternoon in May 2018, where we set out
our Vision to reach a headcount of 10,000, gross
profit of £1bn and operating profit of £200m-£250m.
We have made good progress throughout the year,
with a significant investment in fee earners driving
both a record headcount and gross profit. This,
alongside our tightly controlled cost base, resulted in
an improvement in our conversion rate to 17.5%, the
highest since the global downturn in 2009.
To achieve our Vision, we will continue our focus on
market categorisation and ensure that our investment
approach remains aligned with this strategy. Our main
investment focus will be into our five Large, High
Potential markets, all of which delivered record years
in 2018. We will continue to diversify in the US, invest
in Latin America and South East Asia, develop the
domestic market in Mainland China and expand our
temporary and contracting businesses in Germany.
Improving our conversion rate and achieving our
operating profit target will be driven by many factors.
Our operational support projects such as the
centralisation of Shared Service Centres will drive
economies of scale and the implementation of our
Global Finance System will result in flexibility and
variability in our cost base. We have recently created
the role of Chief Operating Officer to build capability
and deliver initiatives quickly. This will drive future
productivity and improvements in efficiency.
Another key strategic area is to make further progress
on our diversity and inclusion agenda. For 2019 our
primary focus will be on gender. Gender Diversity is
a strategic goal for each Managing Director and an
element of their annual bonus is linked to the gender
balance in their business.
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Q&A with Steve Ingham, CEO
Q
A
As a business that has a higher focus on
permanent recruitment, how are you affected by
the increasing expectations of workers for more
flexible temporary or contract roles?
Whilst 76% of our gross profit is permanent
recruitment, which is only a reflection of the balance
that currently exists in the working populations of
the level, profession and countries in which we
work. Our level of expertise and knowledge is similar
in both. We do not prioritise one over the other and
our conversion rates in both are similar.
As we’ve expanded internationally we have found
that in several markets, typically, developing
economies our high level of permanent to temporary
recruitment is a reflection of the mix between
various factors, including where we are in the
cycle, the salary level at which we recruit and the
geographies in which we operate. In many of our
international markets we undertake little, or no
temporary placements, since for cultural reasons,
temporary is not yet a widely accepted practice for
white collar professionals.
We are seeing the emergence of a temporary
and interim market in Latin America and Asia and
as such, we have invested heavily. In Germany
we have invested in fee earners and offices for
our Interim business, which grew 42% in 2018,
and now represents 20% of Germany. Having
a business which has a good mix of temporary
and permanent is attractive from a diversification
perspective, and can help reduce revenue volatility
at certain points in the cycle. We are therefore
very open to market opportunities, wherever they
make sound financial and strategic sense, in both
permanent and temporary segments.
21 | Strategic report
“We are serious about succession
planning and talent development in
order to show our consultants how
to be the leaders of tomorrow.”
Q
A
What are the progression opportunities at
PageGroup and how do you invest in our leaders
of the future?
More than most companies, being an organically
grown business means there are many opportunities
for rapid progression within PageGroup, from
consultant to the senior leadership team. 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, that
supports the professional development of all our
staff at every stage of their career.
We are serious about succession planning and
talent development at all levels of the business in
order to show our consultants how to be the leaders
of tomorrow. We offer a competitive remuneration
package, run executive coaching schemes, internal
and external mentoring programmes, personal
development planning, management development
programmes, a Global Directors Academy and an
Executive Leadership programme. We now have
a particular emphasis on the development of our
senior management and are engaging with external
resources to help us assess and coach our top
talent ensuring we have succession plans across all
markets and roles.
We have recently invested in a global digital-learning
platform called BOOST! to enable all of our people
to develop their skills and capabilities, whether in
a classroom or virtually. There is also a particular
emphasis on diversity and inclusion through our
Women@Page and Ability@Page programmes,
to ensure everyone gets an equal opportunity.
We also have an international mobility programme,
which 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.
Annual Report and Accounts 2018 Corporate Social Responsibility
Corporate Social Responsibility
As one of the world’s largest recruitment companies, our purpose states that ‘PageGroup changes lives for people through
creating opportunity to reach potential’.
It is the reason we are in business and is underpinned by core values which have always been at the heart of our business.
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
Our values form a platform for motivation of our people, and our approach to business and society as a whole. More than just words,
our values are the essence of our brand and influence the way we work day in, day out.
Corporate responsibility at PageGroup demonstrates our focus on ensuring our business positively impacts all our stakeholders.
It shows our purpose and values in action.
Strategic Report | 22
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018
Corporate Social Responsibility
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
In 2018 we focused on embedding
our Purpose, bringing it to life using
personal stories from our people and
making sure it is highly visible to all
our people across the world. Every
region has been involved and we
have seen the words of our Purpose
becoming part of the daily approach
and language of PageGroup.
Opportunities we have created
through our success have helped
us change lives for our own people
including over 1,600 promotions
worldwide and over 100 people
achieving their dream of working in a
different country.
We are proud to be an inclusive
and diverse employer and we have
continued to reinforce that throughout
2018. We have run successful global
campaigns and activities supporting
International Women’s Day, Pride
Month and World Mental Health
Day and our focus on creating
and maintaining a truly inclusive
culture continues. There is always
more to do, particularly on gender
balance, and we reflect that in the
objectives of all our senior leaders
so their commitment to diversity is
considered when we assess their
performance.
This year we have invested
significantly in our programmes
for global talent development and
succession, which means we can
bring an even greater focus to
nurturing all our potential future
leaders. We have made sure our
Global Director Academy reflects our
Vision and Purpose as well as the
diversity of our teams – particularly
focusing on gender balance.
We have completed the global rollout
of our online learning system, Boost!
and have seen encouraging early
engagement with over 80,000 logins
so far. We provide consistent, tailored
training starting with on-boarding
and moving to ongoing training and
development needs. We also support
mandatory training including tracking
completion of training in areas of
high importance and compliance,
such as training on the General Data
Protection Regulations 2018.
We encourage engagement and
communication across the global
business by using multiple channels
including Yammer which supports
our employee networks including
Women@Page, Pride@Page,
Ability@Page and Parents@Page.
Gender diversity
Board Directors
2018
2017
5 (56%)
4 (44%)
5 (56%)
4 (44%)
Senior Management
2018
2017
312 (73%)
118 (27%)
310 (77%)
90 (23%)
Other employees
2018
2017
3,426 (46%) 4,022 (54%)
3,224 (46%) 3,805 (54%)
23 | Strategic Report
Annual Report and Accounts 2018
Corporate Social Responsibility
Our candidates; clients; suppliers; shareholders
We change lives for our candidates by helping them to develop their career and find jobs that bring them personal
satisfaction, security and happiness.
Our clients come to us to help them find the best talent for their organisation – creating the opportunity for them to
drive the success of their business.
In 2018 we introduced satisfaction surveys for our candidates and customers. Below is a small sample of feedback we received from
candidates and clients through Feefo, the independent business review experts.
Customer Experience Rating
4.9 /5
5
4
3
2
1
Based on 1,043 service ratings over the past year
955
80
4
1
3
Customer Experience
‘Personal approach’
Great communication and focussed on best outcome for the candidate.
Customer Experience
Really swift, professional and easy going. They understand your needs and
work hard to find the best match.
Customer Experience
Perceptive consultant identified that the role could be ideal for me
Kept me fully briefed with a friendly enthusiastic service
Customer Experience
The recruitment consultant kept in constant contact me with regard to the
positions that we were working on. I was very impressed with the level of
communication which has restored my faith in the recruitment profession.
Customer Experience
‘Great service’
Very good service, very professional. Always quick to return calls and provide
information. Made the process of changing jobs so much easier.
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 wrong doing. For more
information see the Audit Committee Report in the
governance section of this report.
We expect the same high standards from our
suppliers and our supplier code of conduct is an
integral part of all our procurement activities.
Our modern slavery policy reflects our commitment
to acting ethically and with integrity in all our
business relationships. The 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 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 Company’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 2018.
Strategic Report | 24
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Corporate Social Responsibility
Our Communities
Through every Page business across the world, we make a difference to the communities in which we work. This year
we have been using our expertise to help people enter the job market, shaved heads for charity, fundraised through
sport, helped with forest management and given blood, to name just a few.
We share our stories of giving back to others to help drive enthusiasm, commitment and pride in our community
initiatives which are an integral part of our culture.
Switzerland
Brazil
France
Germany
Spain
Italy
Dubai
Morocco
Portugal
UK
South Africa
Our Page Talent programme steers students searching for internships and apprenticeships in the right direction,
providing them with key skills and advice to help them make the right choices. Page Talent enables students to connect
with employers who are able to advertise a range of opportunities within their organisations.
In the UK alone, there are currently 280 big named companies involved including Volkswagen Group, Vodafone, BMW
Group, Telegraph, Fortnum and Mason, Conde Nast, Nike Inc. and Lloyds Banking Group.
25 | Strategic Report
Annual Report and Accounts 2018 Society
As a service based organisation,
our environmental impacts are
small compared with many other
businesses. However, we continue
to manage and minimise 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 19 for GHG
reporting for 2018.
In the UK, further mitigation of our
impacts during 2018 included:
•
Implementing more energy
efficient settings within our
building management systems
• Reducing business travel by
employing different ways of
working
• Moving from a paper-based to
online purchase order system
• Renewing central HVAC plant
in a number of offices to use
modern and most energy
efficient equipment
• Working with suppliers to
reduce waste packaging
All our offices are rented or serviced
and we seek premises which are
energy efficient and where the
landlords are able to provide us with
data to support that aim. We also
work with existing landlords and
co-tenants to explore new energy
and waste efficiency measures.
Public recognition:
We have won awards across the globe recognising our achievements, including:
GLOBAL
EUROPE
‘Most Socially
Engaged Staffing
Agency 2018’ for
the third time
8
PageGroup awarded the ‘2018 Top Employer
Europe’ certification in seven European
countries (Germany, France, Switzerland, Spain,
Netherlands, Belgium and Italy)
ASIA PACIFIC
Michael Page Japan awarded
‘The Diversity & Inclusion
Champion’ at the 2018
Recruitment International
Industry Awards – Japan
Michael Page China winner
of ‘Best International
Recruitment Agency
of the year’ at the 2018
Recruitment International
Industry Awards – China
Named one of the ‘Best
Places to Work in
2018’ via the Glassdoor
Employees’ Choice Awards
First recruitment company to
be ranked in the Stonewall
Top 100 Employer list
UK
USA
Michael Page China winner of the ‘China
Recruitment Industry Top 10 (Foreign
Enterprise)’ award by TopHR
PageGroup CEO, Steve Ingham
ranked thirteenth in the
‘Top CEOs’ list on Glassdoor,
forming part of Glassdoor’s
2018 Employees’ Choice
Awards
PageGroup named one
of the Times ‘Top 50
Employers for Women
2018’
Named the 2018 winner in the ‘Global Mobility
Team of the Year’ category by the Forum for
Expatriate Management Awards
Recognised by Forbes as one of
‘America’s Best Professional
Recruiting Firms’ in 2018
LATAM
Michael Page Brazil awarded best ‘HR Supplier’
by Melhores Fornecedores para R.H.
Strategic Report | 26
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Regional Perspectives
EMEA
What are your priorities for 2019?
If the favourable market conditions we saw in 2018 continue, we will continue to invest in
markets where we see opportunity for growth. We will also seek to drive improvements in our
productivity rate, as we seek to maximise the return on our significant fee earner headcount
investment over the past few years. We will continue to invest specifically in our Interim
business in Germany, as this is one of our key strategic investments.
Whilst we remain mindful of some political uncertainty in the region, with our flexible business
model, we remain able to react quickly to any changes in market conditions.
How did you deliver against your
2018 priorities?
We delivered our fourth consecutive record year with overall growth of 17.9%. 11 of our
countries in the region had record years and there were particularly strong performances
from France and Germany, up 16% and 29% respectively.
Gross profit £m
2018
2017
2016
£394.3m
£332.3m
£271.9m
Permanent to temporary ratio
30%
Permanent
Temporary
70%
Reflecting our continued confidence, we grew our fee earner headcount in the region by 253,
or 11% in the year. 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
£69.7m in 2017 to £85.6m in 2018, which represents an improvement in the conversion rate
to 21.7% (2017: 21.0%).
Headcount
2018
2017
2016
3,299
2,996
2,553
Asia Pacific
What are your priorities for 2019?
We will continue to invest in our two Large, High Potential markets of Greater China and
South East Asia, though we remain mindful of the uncertainty in Mainland China that we
experienced at the end of 2018. We also will drive investment in India and Japan, two of
our strongest performing markets in 2018, and two markets which have the potential to be
Large, High Potential markets in the future.
We will look to consolidate our improved position in Australia, where we saw strong growth
in all offices and brands in 2018, making a return on the significant fee earner investment we
made in 2017.
How did you deliver against your
2018 priorities?
Asia Pacific recorded its strongest ever year with growth of 20.6% compared to the prior
year. Greater China grew 19%, a record year, though we saw more challenging conditions
towards the end of 2018 in Mainland China.
South East Asia also had a record year, up 23%, with Singapore the standout performer, up
29%. We also launched in Vietnam in the year, our fifth country in the region.
In Japan, where we continue to focus on both the Gaishikei and Nikkei markets, we grew
30%. India, where we now have over 120 fee earners, grew 49%.
Growth in our Australian business accelerated from 1% in 2017 to 14% in 2018 following our
significant investment in fee earners in 2017 and the opening of a new office in Canberra.
We again made significant fee earner headcount investments during 2018, with an overall
increase of 162, or 13%. These investments were mainly into Australia, Greater China, India
and Japan.
27 | Strategic Report
Gross profit £m
2018
2017
2016
£161.2m
£137.2m
£119.7m
Permanent to temporary ratio
12%
88%
Headcount
2018
2017
2016
Permanent
Temporary
1,709
1,533
1,205
Annual Report and Accounts 2018 Permanent
Temporary
Permanent
Temporary
Gross profit £m
UK
What are your priorities for 2019?
Gross profit £m
Brexit remains the issue at the forefront of the UK political and economic agenda, and
this is likely to remain the case throughout 2019. We will continue to respond to market
conditions as they develop. With our flexible business model, we are able to manage
our headcount, and therefore our cost base, through natural attrition of our junior, less
productive consultants.
2018
2017
2016
£138.4m
£140.8m
£146.3m
We will look to increase fee earner headcount in disciplines and regions where we see
opportunities for growth, such as in Page Personnel.
How did you deliver against your
2018 priorities?
Whilst the UK business declined -1.7%, this was a marginal improvement on the
-3.8% decline in 2017. Our Michael Page business, which is more focused on senior
opportunities, was more impacted by uncertainty and declined 4%. Our Page Personnel
business, however, fared better and grew 8%, delivering a record year.
Our Professional Services discipline was the best performing, up 5%, driven by strong
growth in Technology.
During the year, our fee earner headcount remained broadly flat at around 1,000 fee
earners.
Permanent to temporary ratio
31%
Permanent
Temporary
69%
Headcount
2018
2017
2016
1,436
1,407
1,411
The Americas
What are your priorities for 2019?
In North America, we will continue to diversify, both in terms of the offices and
disciplines in which we operate. Our regional offices now account for over half of gross
profit and continue to increase the number of specialisms they service. Developing
our management infrastructure and retaining top talent is key to delivering these
future plans.
Gross profit £m
2018
2017
2016
£121.0m
£101.3m
£83.1m
In Latin America, where we increased our fee earner headcount by around 150 or
30% in 2018, we will look to increase the productivity of these new joiners. We will also
further our investment in this Large, High Potential market, particularly into the emerging
Temporary market.
Permanent to temporary ratio
10%
How did you deliver against your
2018 priorities?
The Americas continues to be our fastest growing region, up 27.2%, with both North
and Latin America having record years.
In the US, one of our Large, High Potential markets, our strategy of diversification
continues to bring success. Our regional offices grew 34%, with standout performances
from Boston, Chicago, Houston and Los Angeles.
Latin America, another of our Large, High Potential markets, delivered a record year,
up 30%. Our Brazilian business continued to recover, as market sentiment improved,
with growth increasing from 3% in 2017, to 20% in 2018. Mexico, now the largest
country in Latin America, delivered a record year, with growth of 33%. Collectively, the
other four countries in the region, with over 250 fee earners, saw growth of 36%, with
all delivering record years.
Reflecting the favourable trading conditions in the Americas we increased fee earners
by 210 or 23% in the year.
90%
Permanent
Temporary
Headcount
2018
2017
2016
1,328
1,093
930
Strategic Report | 28
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Risk Management
Principal Risks
The Group recognises that the effective
management of risk is key to achieving our
objectives.
A Group-wide risk review process is in
place which identifies the strategic and
operational risks that 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.
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.
The summarised output is 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 internal operations
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; programme
management office (PMO) who define
the process and support management
in delivering change activities, as well as
supporting the programmes governance
process; 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 principal risks
identified from this process.
Our risk management process categorises
our principal risks into Strategic, Financial,
People and Operational.
Within this process we assess all risks
that could have a significant impact on the
ability of the business to deliver its
short-term plans and medium and
long-term strategy.
The Executive Board and the Board
continue to focus on Strategic, People and
Financial risks. For these, we disclose KPIs
which we use to monitor the risk impact,
and the rewards and incentives we apply to
ensure effective management.
See strategic framework on page 8.
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 cyber security and
compliance with Data Protection legislation
are currently such exceptions which are
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.
Our Risk and Control Framework
Risk and Control Framework
Controls
Functions
Review
Executive
Board
Board/Audit Committee
Business Reviews/
Internal Control Checklists
Management
Policies and Procedures
Revenue Compliance Teams
IT Security Team and
Risk Registers
Group Finance
Risk Management/
Group Financial Control
Audit Reports
Quarterly Updates
Internal Audit
Group Governance Framework
29 | Strategic Report
Annual Report and Accounts 2018 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 continue to focus on the services
we provide to our clients and candidates
ensuring quality engagements in a
manner that meets both their needs and
expectations and our targets for process
efficiency.
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
Net risk level
Intended improvements
Unacceptable to take risk
Higher willingness to take risk
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
2017
/18
2017
/18
2017
/18
2017
/18
2017
/18
2017
/18
2017
/18
2017
/18
2017
/18
2017
2018
2017
/18
Risk appetite range
PageGroup actual net risk assessment
Further planned improvements
Strategic Report | 30
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Principal Risks and Uncertainties
Strategic Risks
Actions to mitigate risk
Shift in Business Model
The emergence of new platforms
technology and 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
The Group continues to invest in new
systems and processes. These support
our capabilities to continue to deliver
appropriate services to our clients and
candidates in a cost effective flexible
manner. This change process brings
inherent risks of quality, cost and time.
Key programmes in the current process
are our new Global Finance System,
successfully delivered in the UK, US,
Middle East and Africa and Asia Pacific
regions and our new Global Operating
System which will be rolled out, starting
in 2019.
• We actively monitor developments in new
• Our revenue attribution model built
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
our Exact Target programme which we
have standardised across the Group to
understand how candidate and client needs
are developing.
• We continue to develop Page Outsourcing
in response to Recruitment Process
Outsourcing (RPO’s) and the expansion of
internal recruitment functions.
• We partner with the large media providers,
such as LinkedIn and Facebook, to ensure
that we use this form of media effectively to
enhance our value to clients. All consultants
are trained in utilising the benefits of social
media in their day-to-day activity.
•
• We have established and resourced
business change programmes for each of
our major initiatives. Each has a dedicated
management team working across all areas
of the business to ensure effective planning
implementation and decision making.
• We have a COO function that ensures
effective governance of our programmes
which are reviewed by our Executive Board
on a regular basis to ensure delivery to plan.
• We support our programmes with third party
systems implementation expertise.
using Google Analytics and AI provides
data-driven ROI information addressing
online and offline conversions and spend
allocations.
• 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 using an externally managed
innovation lab.
• Our IT strategy and transformation initiative
recognises the need for us to be able to act
rapidly in rolling out enabling technologies.
• We have selected best-in-class software
that has a global capability and can be
rolled out to all our operating units.
• We have a Group Programme Management
Office (PMO) that supports our programme
management teams with policies and
processes to deliver programme change
activities.
PageGroup brands and services
The quality and relevance of service we
provide to both clients and candidates,
could have a significant impact on how
our brand is viewed.
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.
• We have programmes that gain feedback
actively from our clients and candidates.
We utilise Exact Target, an event-based
survey, and have developed 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 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.
31 | Strategic Report
Annual Report and Accounts 2018
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
our 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 to address
attrition levels during the first year of
training.
• We continue to make significant
investment in HR resources, adding
a Group Talent Director and business
partners in each Region. These 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,
benefits schemes and equality that
are seen to have a positive impact on
employees. Our programmes covering
these areas have been rolled out across
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, with BOOST!, our Global
training application rolled out across the
Group.
• We have a talent, succession and
development process that ensures a
strong talent pipeline and addresses any
gaps at senior management level.
• We have Group-wide initiatives that
look to address the issues around
achieving diversity. These are part of our
wider PageGroup programmes which
combined ensure we have an open
environment where working practices suit
and encourage diversity in all its aspects.
• We conduct employee surveys. This
helps us to see how our people view
working at PageGroup and provides
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 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, thus leading to
reduced recruitment activity.
The majority of the Group’s revenue arises
from fees that are contingent upon the
successful placement of a candidate. If the
client cancels the assignment at any stage
in the process, the Group receives
no remuneration.
The geopolitical tensions around trade
tariffs between the US and China and
the West’s relationships with North Korea
continue to drive uncertainty into the
global economy.
In the UK, as Brexit nears, the level of
uncertainty of the economic impact has
increased.
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, Hong
Kong Dollar and US Dollar.
• We continue to diversify our business
to mitigate this risk. Firstly in terms of
geography, we have diversified away from
our historical reliance on the UK. We now
operate in 36 countries and with 83%
of Group gross profit being generated
outside of the UK. In the fourth quarter,
France also overtook the UK to become
the largest single market in the Group.
• We also look for opportunities to diversify
through the brands and disciplines in
which we operate. We have increased
the number of disciplines we support,
and continue to roll these out through
our current office network. Overall we
have also reduced our dependence on
Accounting and Financial Services, with
65.3% of Group gross profit now being
generated from disciplines outside of
Accounting and Financial Services. We
have established 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 also diversified our offering
through the mix of permanent and
temporary recruitment that we offer to
the market. Temporary recruitment now
represents around a quarter of the Group,
and we are seeing new temporary markets
start to emerge in places such as Asia
and Latin America, where historically one
didn’t exist due to cultural reasons. The
temporary business tends to be more
resilient in times of economic downturn.
• We have also diversified by focusing on
the local, domestic markets in which we
operate. When we first enter a market,
our brand awareness is stronger with
multinational clients. We have particularly
grown our domestic businesses in
markets such as Mainland China and
Japan, giving us a more balanced
portfolio, less sensitive to global macro
economic trends.
• We continue to focus on our costs
structure, ensuring that is variable to
levels of demand. As well as our variable
operational staffing costs, principally
bonus payments, our move to an IT
service based model, as well as our
transition in to the Cloud, enhances this
capability. Our regional Shared Service
Centre approach to support activities
gives us greater flexibility in resource
reallocations.
• We do not hedge our exposure to foreign
• We have a negligible amount of cross
exchange translation risk, instead focusing
on ensuring the market correctly adjusts
for any impact.
• We repatriate profits and convert them to
Sterling to fund returns to shareholders.
Our Group Treasury function takes a
proactive role in the management of our
cash resources.
border trading activity so the impact on
transactions is limited.
Strategic Report | 32
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 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 financial
performance.
Failure of our IT systems to adapt to
levels of business activity could result
in lost opportunities 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 the
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 flexible services IT model
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.
• 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 Global Service Delivery model enables
fast rollout of our piloted new services,
which is possible as we have standardised
our infrastructure and applications across
the Group. Our Global Service Delivery
model ensures these services operate
effectively and achieve the benefits planned
before they are deployed.
• Our core operating systems standards have
been defined globally and under tight global
governance are delivered regionally. We
have standard platforms, procedures and
processes, which gives us a greater degree
of resilience.
• We 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 that ensures those chosen
have the ongoing capability to support
our business requirements effectively. This
is reviewed and managed on an ongoing
basis through our Service Delivery Team.
Our Central Procurement Team, in addition
to supporting management in commercial
negotiations, ensures that relationships
with third party suppliers are appropriately
defined and operationalised.
• We have information security policies in
• Supplier contracts are negotiated and
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 run an employee security awareness
programme which includes training and
security simulations.
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, and regular
monitoring and third party testing of our
capabilities. The Information Security team
comprises Security Operations, Security
Architecture and Information Security
Management. The team deals with IT
security matters, and 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.
33 | Strategic Report
Annual Report and Accounts 2018
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.
• The General Counsel & 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 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 continues to invest in systems
and processes to enable compliance
with requirements as they evolve. For
example we have established processes
to effectively manage the health and
safety requirements in the placement of
temporary workers in Australia.
• 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.
Data Protection Regulations
New European data protection
legislation came into force in May 2018.
This increased 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.
• A GDPR Steering Committee was
• Regional Steering Teams have
created with responsibility for ensuring
the business has in place appropriate
processes to ensure compliance
with the requirements of GDPR. This
Committee will continue to monitor
events and further developments in
practice to ensure we effectively maintain
compliance.
• A Data Protection Office has been
created with resources at Group and
regional levels to ensure that processes
continue to deliver compliance.
been established to ensure ongoing
compliance as legislation in different
regions evolves. Our other policies and
processes, such as crisis management,
change management, contracts, third
party service providers and HR and
payroll policies have all been updated to
reflect the additional requirements from
data protection legislation.
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 | 34
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 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
31 to 34. 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 7 to 14 and 31
to 34. 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
2021. 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 31 to 34, 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 31 to 34.
Various events may also alert the Main and
Executive Boards to a potential threat to
viability for example, 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
2021. 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.
35 | Strategic Report
Annual Report and Accounts 2018 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)
2018
2017
£1,549.9m
£1,371.5m
£814.9m
£142.5m
£142.3m
32.5p
32.4p
13.10p
25.83p
£711.6m
£118.3m
£118.2m
26.5p
26.4p
12.50p
25.23p
Change
CC*
+14.0%
+15.9%
+20.7%
Change
+13.0%
+14.5%
+20.4%
+20.4%
+22.6%
+22.7%
+4.8%
*At constant currency – all growth rates in constant currency at prior year rates unless otherwise stated
At constant exchange rates, the Group’s
revenue increased 14.0% and gross
profit increased 15.9% for the year
ended 31 December 2018. At reported
rates, revenue increased 13.0% to
£1,549.9m (2017: £1,371.5m) and gross
profit increased 14.5% to £814.9m
(2017: £711.6m).
The Group’s revenue mix between
temporary and permanent placements
was 59:41 (2017: 60:40) and for gross
profit our permanent to temporary ratio
was 76:24 (2017: 75:25). Revenue
from temporary placements comprises
the salaries of those placed, together
with the margin charged. This margin
on temporary placements decreased
slightly to 21.0% in 2018 (2017: 21.2%).
Overall, pricing remained relatively stable
across all regions, although a stronger
pricing environment was experienced
Regional reviews
in markets and disciplines where there
were increased instances of candidate
shortages.
Our Large, High Potential markets’
category increased gross profit by 25%
in constant currencies and achieved a
record gross profit of £270.3m. All five
markets included within this category
achieved record gross profit.
Total Group headcount increased by
743 in the year, up 10.6% to a record
7,772. This comprised a net increase
of 619 fee earners (+11.3%) and an
increase of 124 operational support
staff (+8.1%), reflecting the continued
strong focus on operational efficiency.
The ratio of net additions in the year
was 83 fee earners to 17 operational
support staff. As a result, our fee
earner to operational support staff
ratio improved to a new record level of
79:21. In total, administrative expenses
increased 13.3% to £672.4m (2017:
£593.2m). The Group’s operating profit
from trading activities totalled £142.5m
(2017: £118.3m), an increase of 20.7%
at constant rates and 20.4% in reported
rates.
The Group’s conversion rate of gross
profit to operating profit from trading
activities increased to 17.5% (2017:
16.6%). This reflected a combination
of steadily improving conditions in a
number of markets, as well as the
benefits from our recent investment to
drive operational efficiencies. These
were offset in part by more challenging
conditions in markets such as the UK,
as well as our continued investment in
fee earner headcount.
Gross profit
Year-on-year
EMEA
Asia Pacific
UK
Americas
Total
Permanent
Temporary
% of Group
2018 (£m)
2017 (£m)
Reported
48%
20%
17%
15%
100%
76%
24%
394.3
161.2
138.4
121.0
814.9
621.7
193.2
332.3
137.2
140.8
101.3
711.6
536.0
175.6
%
+18.7%
+17.5%
-1.7%
+19.4%
+14.5%
+16.0%
+10.0%
CC
%
+17.9%
+20.6%
-1.7%
+27.2%
+15.9%
+17.7%
+10.4%
Strategic Report | 36
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Review of the Year
Europe, Middle East and Africa (EMEA)
EMEA
(48% of Group in 2018)
Gross profit
Operating profit
Conversion rate (%)
Gross profit (£m)
Growth rates
2018
394.3
85.6
21.7%
2017
332.3
69.7
21.0%
Reported
+18.7%
+22.8%
CC
+17.9%
+21.9%
Market presence
EMEA is the Group’s largest region,
contributing 48% of the Group’s gross profit
in the year. With operations in 17 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 includes four of our Large,
Proven markets, France, Spain, Italy and the
Netherlands, across which there is a broad
range of competition. EMEA also includes
Germany, one of the Group’s Large, High
Potential markets, 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 number
of markets such as Poland, Turkey and
Africa, which 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 one of the Group’s highest
conversion rates.
Performance
In 2018, the EMEA region saw strong
market conditions, with 11 countries
delivering record gross profit for the year.
In constant currency, revenue increased
17.1% on 2017 and gross profit increased
by 17.9%. In reported rates, revenue in the
region was up 18.0% to £797.4m (2017:
£676.0m), and gross profit increased
18.7% to £394.3m (2017: £332.3m). The
region benefited from favourable foreign
exchange movements which increased
revenue and gross profit by £6m and £2m,
respectively.
United Kingdom
UK
(17% of Group in 2018)
Gross profit
Operating profit
Conversion rate (%)
Gross profit (£m)
Growth rate
2018
138.4
13.4
9.7%
2017
140.8
16.0
11.4%
-1.7%
-16.2%
Market presence
The UK represented 17% of the Group’s
gross profit in 2018, 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
69% and temporary placements 31% of
gross profit.
Page Executive and Page Outsourcing,
with representation in 13 specialist
disciplines via the Michael Page brand.
There remains opportunity to roll-out new
discipline businesses under the lower
salary level Page Personnel brand, which
now represents 25% of UK gross profit.
Performance
In the UK, revenue increased 0.2% to
£313.5m (2017: £312.9m), whereas gross
profit declined 1.7% to £138.4m (2017:
£140.8m), reflecting continued economic
uncertainty.
The UK business operates under the four
brands of Michael Page, Page Personnel,
The UK experienced challenging market
conditions throughout the year due to
37 | Strategic Report
Our largest businesses in the region, France
and Germany, together representing nearly
half of the region by gross profit, grew
16% and 29% respectively, for the full
year in constant currencies. Michael Page
Interim in Germany, where we continue to
invest heavily in temporary and contracting
recruitment, grew 42%. Elsewhere we saw
strong growth in Benelux of +19%, Italy
+23% and Spain +8%, despite challenging
trading conditions in Catalonia.
The Middle East and Africa, which
represented 4% of the region, saw a
notable improvement compared to the prior
year, with growth of 17% (2017: -1%).
The 22.8% increase in operating profit for
2018 to £85.6m (2017: £69.7m) and the
increase in the conversion rate to 21.7%
(2017: 21.0%) were the result of the benefit
of operational gearing coming through,
partially offset by significant investments
in our Interim and contracting businesses,
such as Germany, which have driven
gross profit growth, but in the short-term
impacted our conversion rate.
Headcount across the region increased by
303 (+10.1%) to 3,299 at the end of 2018
(2017: 2,996). The majority of this increase
was fee earners, as the business added
headcount where growth opportunities
were strongest, predominately in France
and Germany.
continued Brexit uncertainty impacting
candidate and client confidence. Page
Personnel, which represents a quarter
of the UK, grew 8% and delivered a
record year. Michael Page, which is
focused on more senior opportunities
and was impacted to a greater extent
by the uncertainty, declined -4%. These
challenging market conditions resulted in
a decline in operating profit of 16.2% to
£13.4m (2017: £16.0m) and a reduction in
the conversion rate to 9.7% (2017: 11.4%).
Headcount marginally increased to 1,436
at the end of December 2018 (2017:
1,407). The additions were in operational
support, to deliver the Group’s operational
support strategic transformation
programmes, with our fee earner
headcount broadly flat in the year. 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.
Annual Report and Accounts 2018 Asia Pacific
Asia Pacific
Gross profit (£m)
Growth rates
(20% of Group in 2018)
Gross profit
Operating profit
Conversion rate (%)
2018
161.2
26.8
16.6%
2017
137.2
23.5
17.1%
Reported
+17.5%
+13.8%
CC
+20.6%
+16.6%
Market presence
Asia Pacific represented 20% of the
Group’s gross profit in 2018, with 75%
of the region being Asia and 25%
Australasia. Other than in the financial
centres of Hong Kong, Singapore
and Tokyo, the Asian market is
generally highly under-developed, and
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 1,300 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.
Australasia is a mature, well-developed
and highly competitive recruitment
The Americas
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 16.6% and gross
profit increased by 20.6%. In reported
rates, revenue increased 12.9% to
£266.7m (2017: £236.3m), while
gross profit rose 17.5% to £161.2m
(2017: £137.2m). The region was
adversely impacted by foreign exchange
movements, which reduced reported
revenue and gross profit by £9m and
£4m, respectively.
Asia, representing 15% of the Group,
delivered gross profit growth of 23%.
Americas
Gross profit (£m)
Growth rates
(15% of Group in 2018)
Gross profit
Operating profit
Conversion rate (%)
2018
121.0
16.7
13.8%
2017
101.3
9.2
9.0%
Reported
+19.4%
+82.7%
CC
+27.2%
+87.3%
Market presence
The Americas represented 15% of the
Group’s gross profit in 2018, being
North America (58% of the region)
and Latin America (42% of the region).
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 market leading
position with over 800 employees in six
countries and 13 offices. There are few
international competitors and none with
regional scale. Across Latin America,
permanent placements accounted
for 93% of gross profit and temporary
placements 7%.
Performance
In constant currencies, revenue
increased by 25.5% and gross profit
increased by 27.2%. In reported
rates, revenue increased by 17.7% to
£172.3m (2017: £146.3m) while gross
profit improved 19.4% to £121.0m
(2017: £101.3m). During the year, the
region was impacted by adverse foreign
exchange movements that decreased
revenue and gross profit by £11m and
£8m, respectively.
In North America, our gross profit
increased by 25% in constant currencies
Greater China delivered a record year, up
19% (2017: +14%) with strong growth
throughout. In Hong Kong, where we
have a large number of multinational
clients, we saw an improvement in
market conditions and delivered growth
of 23%. However, Mainland China
experienced more challenging trading
conditions in the fourth quarter, driven
by trade tariff uncertainty. South East
Asia was up 23% on the prior year, with
a strong performance in Singapore, up
29%. We also opened in Vietnam during
the year, giving us our fifth country in
South East Asia. India, where we now
have over 120 fee earners, delivered a
record year with growth of 49%. Japan,
where we invested heavily in fee earners,
saw growth of 30% and delivered a
record year. In Australia, following our
investment in fee earners and a new
office in Canberra, we delivered growth
of 14%.
Operating profit rose 13.8% to £26.8m
(2017: £23.5m), with the conversion
rate marginally down at 16.6% (2017:
17.1%), due to our fee earner investment
in the region. Headcount across the
region rose by 177 (11.6%) in the
year, ending the year at 1,709 (2017:
1,532). The majority of these headcount
additions were in Asia, particularly
Greater China, India and Japan.
with both the US and Canada delivering
record years. In the US, which grew 25%,
our strategy of diversification continued,
with particularly strong performances from
our regional offices of Boston, Chicago,
Houston and Los Angeles. We increased
our US fee earner headcount by 15%
compared to last year, as we continued to
invest in this Large, High Potential market.
In Latin America, gross profit was up 30%
year-on-year in constant currencies. We
added nearly 150 fee earners in the year,
an increase of 30%, as we continued to
invest in this Large, High Potential market.
Our business in Brazil delivered growth
of 20%, with Mexico, our largest country
in Latin America, delivering a record
year, with growth of 33%. Elsewhere,
the other four countries in the region,
with a fee earner headcount of over 250,
saw growth of 36% collectively, and all
delivered record years.
Operating profit increased 82.7% to
£16.7m (2017: £9.2m), with a conversion
rate of 13.8% (2017: 9.0%). Headcount
increased by 234 (+21.4%) in 2018 to
1,328 (2017: 1,094).
Strategic Report | 38
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 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.
The combination of gross profit growth
and the ongoing focus on cost control
resulted in operating profit of £142.5m
(2017: £118.3m), an increase of 20.4%
in reported rates and 20.7% in constant
currencies.
Depreciation and amortisation for the
year totalled £19.7m (2017: £19.1m).
This included amortisation relating to our
operating system, PRS, of £6.9m (2017:
£8.1m).
We have completed our transition to a
Shared Service Centre delivery model, and
also now have around half of the Group,
by fee earners, live on our new Global
Finance System. We are continuing with
the transition of our Business Technology
function to a global model, closing data
centres and transitioning to the Cloud.
These strategic investments have driven
an improvement in both our fee earner
to operational support staff ratio and our
conversion rate.
Our fee earner to operational support staff
ratio improved to a record level of 79:21,
with our ongoing focus on conversion
rates and maximising productivity from
the investment of 786 fee earners added
in 2017, as well as the further 619 added
in 2018. Net additions in the year were at
a ratio of 83 fee earners to 17 operational
support staff.
The Group’s conversion rate for the year of
17.5% was an improvement from 16.6%
in 2017. 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 markets such as the UK, as well
as our operational support programmes.
In EMEA, conversion increased from 21.0%
to 21.7%. This was driven by the benefits
of operational gearing coming through. In
the UK, the conversion rate fell from 11.4%
to 9.7%, in line with the tough trading
conditions. In Asia Pacific, conversion fell
slightly to 16.6% (2017: 17.1%), due to
39 | Strategic Report
our high level of fee earner investment in
the region. The Americas’ conversion rate
increased from 9.0% to 13.8% in line with
our increased growth rate throughout the
region.
The Group was adversely impacted by
movements in foreign exchange rates, as
Sterling strengthened marginally against a
number of currencies in which the Group
operates. The strengthening of Sterling
decreased the Group’s revenue and gross
profit by £14m and £10m respectively, with
a negligible impact on operating profit.
A net interest charge of £0.2m reflected the
continuing low interest rate environment.
Interest of £0.6m 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 £0.8m.
Earnings per share and
dividends
In 2018, basic earnings per share
increased 22.6% to 32.5p (2017:
26.5p), reflecting the improved business
performance. Diluted earnings per share,
which takes into account the dilutive effect
of share options, was up 22.7% to 32.4p
(2017: 26.4p).
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 to increase 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 9.00p (2017: 8.60p) per ordinary share
is proposed. When taken together with the
interim dividend of 4.10p (2017: 3.90p) per
ordinary share, this would imply an increase
in the total dividend for the year of 4.8%
over 2017 to 13.1p per ordinary share.
The proposed final dividend, which
amounts to £29.2m, will be paid on 17
June 2019 to shareholders on the register
as at 17 May 2019, subject to shareholder
approval at the Annual General Meeting on
24 May 2019.
After consultation with our shareholders,
we also paid a special dividend of 12.73p
per share (2017: 12.73p per share) on 10
October 2018, totalling £40.8m (2017:
£40.1m). We will continue to monitor our
cash position in 2019 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
£131.7m (2017: £124.5m) generated
from operations. The closing net cash
balance was £97.7m at 31 December
2018, broadly in line with the prior year.
The movements in the Group’s cash flow
in 2018 reflected the underlying trading
conditions, with a £37.6m increase in
working capital.
The Group had a £50m invoice financing
arrangement and £21m 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 £41.0m
(2017: £38.2m) and net capital expenditure
in 2018 was £24.4m (2017: £16.2m).
Spending on software increased from
2017 as we continued the roll-out of our
new Global Finance System. Spending on
property, plant and equipment increased,
mainly due to the increase in our fee earner
and operational support headcount.
Dividend payments were up on the prior
year at £81.3m (2017: £78.3m), as a
result of the increased ordinary and special
dividends paid in 2018. There was also a
significant increase in cash receipts from
share option exercises. In 2018, £26.9m
was received by the Group from the
exercise of options compared to £12.7m
received in 2017, driven by the higher share
price. In 2018, £11.6m was also spent on
the purchase of shares by the Employee
Benefit Trust to satisfy future obligations
under our employee share plans. No such
purchase was made in 2017.
Annual Report and Accounts 2018 Cash flow waterfall 2018
280
240
200
£m
160
120
80
40
95.6
37.6
169.4
41.2
24.4
26.9
11.6
Cash
Increase
Decrease
81.3
(40.1)
1.9
97.7
Dec 2017
EBITDA
Working
Capital
Tax and net
interest
Net
Capex
Share options
exercised
EBT share
purchases
Dividends
paid
Exchange
Dec 2018
been exercised. During 2018, 2.2m
shares were purchased for the Group’s
Employee Benefit Trust, and no shares
were cancelled (2017: no shares were
purchased or cancelled).
Approved by the Board on 5 March
2019 and signed on its behalf by:
Kelvin Stagg
Chief Financial Officer
The most significant item in our balance
sheet was trade receivables, which
amounted to £288.2m at 31 December
2018 (2017: £245.4m), 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
2018 were 54 days (2017: 53 days).
Foreign exchange
Foreign exchange had an adverse
impact on our reported results for the
year, decreasing gross profit by £10m,
administrative expenses by £10m
and therefore no impact on operating
profit. This impact was mainly within
the Americas and Asia Pacific regions,
partially offset by a favourable impact in
EMEA.
Taxation
The tax charge for the year was £38.6m
(2017: £35.1m). This represented
an effective tax rate of 27.1% (2017:
29.7%). The rate is higher than the
effective UK rate for the calendar year
of 19% (2017: 19.25%) principally
due to the impact of higher tax rates
in overseas countries and to a lesser
extent disallowable expenditure. 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 in 2017 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 US deferred
tax assets which, together with other
adjustments in the US, increased the tax
charge by 2.4%. In 2018, the tax rate
was impacted primarily by tax on share
based payments (1.2% decrease) and
the recognition/derecognition of losses
(0.6% increase).
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 2018 the Group
had 15.5m share options outstanding,
of which 8.6m had vested, but had
not been exercised. During the year,
options were granted over 1.7m shares
under the Group’s share option plans.
Options were exercised over 6.1m
shares, generating £26.9m in cash,
and options lapsed over 0.5m shares.
At the end of 2018, options remained
outstanding over 10.6m shares, of
which 4.3m had vested, but had not
Strategic Report | 40
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Chairman’s Introduction to
Corporate Governance
It also supports its core values, policies
and procedures, which in turn, creates
a culture in which our business and
employees can act effectively and with
integrity, while driving profitable growth.
2018 has been a significant year in
terms of the development of corporate
governance standards, and as a Board
we have considered and welcome the
changes set out in the new Corporate
Governance Code. The following pages
of this Corporate Governance Report
set out how the Company has complied
with the UK Corporate Governance
Code 2016, the work and activities of
each Board Committee and the annual
evaluation process.
Having a Board that can draw upon a
wide range of experience to discharge
its responsibilities is also a pre-requisite
for any company’s success. The Board is
confident that it has built a strong and well
balanced team, able to assess the current
environment in which the Group operates,
but also able to consider and address
future challenges.
The Board made key additions to its
membership by appointing Sylvia Metayer
and Angela Seymour-Jackson as Non-
Executive Directors in the second half of
2017. Throughout 2018 both have added
additional strength and depth to the
Board’s deliberations. Sylvia’s extensive
experience in finance and general
management has proven invaluable to
the Board. Angela’s knowledge of service
focused organisations and her financial
service sector experience, in both an
executive and non-executive capacity, has
been a material addition to the work of the
Board and the Remuneration Committee,
which she chairs.
Danuta Gray decided not to offer herself
for re-election at the Annual General
Meeting on 7 June 2018 and I would like
to thank her for her contribution to the
Company.
I hope you find our Corporate
Governance Report informative. I will be
available at the 2019 Annual General
Meeting to respond to any questions you
may have on this Report.
David Lowden
Chairman
5 March 2019
David Lowden,
Chairman
Dear Shareholder,
I am pleased to present the Company’s
Corporate Governance Report for the
financial year ended 31 December
2018. Your Board believes that sound
governance, embedded throughout the
Group, is fundamental to the long-term
sustainability of the business. It remains
committed to the highest standards of
corporate governance and throughout
the year under review it has continued
to focus on fostering an effective
governance framework. This framework
underpins the Board’s ability to set the
overall strategic direction of PageGroup.
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 47 to 50
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 46
Chief Financial
Officer (CFO)
Responsible for managing the
financial risks, reporting and
planning of the Group.
General Counsel &
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 51
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 53
Remuneration Committee
Responsible for the review,
recommendation and implementation
of the Group’s remuneration strategy,
its framework and cost.
Details on page 61
41 | Corporate Governance
Annual Report and Accounts 2018 Our Board of Directors
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. From April 2011 to March 2019 he
was a Non-Executive Director and Chairman of the Audit and Risk Committee of William Hill plc.
Other Current Appointments: Non-Executive Director of Huntsworth plc with effect from 1 January
2019 and Chairman of the Board of Huntsworth plc and Nomination Committee with effect from 6 March
2019. Senior Independent Director from 1 January 2019 of Morgan Sindall Group plc.
David Lowden,
Chairman
Date of Appointment:
Director
August 2012
Chairman
December 2015
Board Committees: Nomination (Chairman)
Extensive experience in both general management and financial management
Many years of operating within international businesses with cultural diversity
Skills and Experience:
•
•
• 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:
Plc Board
February 2001
Chief Executive Officer
April 2006
Contribution: The Company’s long-term sustainability is safeguarded by having an effective chair of the
Board and David Lowden successfully fulfils this role. His experience is significant having held senior non-
executive and chair positions across a range of listed companies. The Board draws upon his experience
and guidance regularly and his deep understanding of the business enables him to ensure the needs of
the business are met across the range of strategic and governance matters affecting the Company.
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. Having launched several new discipline businesses, 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.
Prior to joining PageGroup Steve spent four years at Johnson Matthey in Sales and Marketing as a
qualified metallurgist.
Other Current Appointments: Non-Executive Director, Debenhams plc. Member of the Corporate
Partnership Board, Great Ormond Street Hospital.
Board Committees: None
Skills and Experience:
•
•
•
•
•
Over 30 years’ service with the Group and recruitment industry
13 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 new global 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
Taken the Group through a restructure to ensure total global consistency of all operational support
functions
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
Contribution: Steve Ingham’s contribution is necessary to enable the Company to deliver its strategy to
shareholders and its wider stakeholders. He has unparalleled understanding of the business, culture and
future goals of the Company. These skills are gained by his extensive experience of working within the
industry and for the organisation itself. He has 30 years’ experience of the Company and the recruitment
sector and has a strong record of delivering sustainable success for the Company over the last decade.
Corporate Governance | 42
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Our Board of Directors
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
Contribution: Kelvin Stagg is integral to the Company’s long-term success as he manages the financial
risks, reporting and planning of the business, contributes to the Company’s strategy and oversees global
delivery of all support services to the business including implementation of all large scale projects. He has
extensive experience of managing multi-discipline areas and having been employed for over 12 years at
the Company, he understands the operation of the business at all levels.
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
• Proven ability for delivering shareholder value
Contribution: Simon Boddie’s contribution to the Board and the Audit Committee can be summarised
by reference to his thorough understanding of financial matters facing large listed global entities. For over
10 years he has held executive director positions in global FTSE 250 businesses as a Chief Financial
Officer and, as such, is ideally placed to ensure scrutiny and rigour in respect of financial reporting and
internal and external controls.
Kelvin Stagg,
Chief Financial
Officer, Executive
Director
Date of Appointment:
June 2014
Simon Boddie,
Independent
Non-Executive
Director
Date of Appointment:
September 2012
43 | Corporate Governance
Annual Report and Accounts 2018 Michelle Healy,
Independent
Non-Executive
Director
Date of Appointment:
October 2016
Past Roles: Before joining Kerry Group plc, Michelle was Group People & Culture Officer for ISS World
Services A/S. Prior to this she has held a number of senior executive roles including Director, Group
Integrated Change Programme at SABMiller plc and General Manager UK & Ireland for British American
Tobacco plc, having previously undertaken a number of senior HR roles within the Group. Michelle’s
executive career spans four global listed companies and she has lived and worked in nine countries
across Europe and Asia.
Other Current Appointments: Chief Human Resources Officer, Kerry Group plc
Board Committees: Audit, Nomination, Remuneration
Skills and Experience:
•
•
Extensive experience in global human resources leadership
Extensive experience in leading and delivering organisational change and transformation
• Breadth and depth of leadership experience in global listed businesses in service, consumer and
business to business
• Strong strategic understanding
•
Extensive experience in general management
Contribution: The Company’s long-term success is highly influenced by ensuring it has a well thought
through human capital strategy. It recognises its people are at the heart of everything it does, particularly
as an organically grown business. Michelle Healy offers the Board deep insight into its approach in this
respect. She has held a number of senior HR leadership roles while also having run businesses at an
operational level.
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 was Non-Executive Director and Chairman
of the Remuneration Committee of Victrex plc and Senior Independent Director and Chairman of the
Remuneration Committee of Morgan Sindall plc. He has deep knowledge of international markets and
information technology, and experience as a non-executive in diverse industry sectors.
Other Current Appointments: Chairman (Interim) of KCOM Group plc; Non-Executive Director of
Kodak Alaris Holdings Ltd and Non-Executive Chairman of GCI Management Services Ltd.
Patrick De Smedt,
Senior Independent
Director
Date of Appointment:
August 2015
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
Contribution: Patrick De Smedt brings extensive understanding of technology to the Board, a key
consideration for any company’s long-term success. His experience at Microsoft and involvement with
a range of technological industries in international markets is invaluable in the Board’s decision making.
He understands large-scale transformation projects and can assist the Board in determining the benefits
and threats posed by technologies in the sector.
Corporate Governance | 44
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Our Board of Directors
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
Contribution: Sylvia Metayer has significant experience working for international organisations in finance and
general management leadership positions. Her guidance and observations on the demands and challenges in
the various international markets in which the Company operates strongly supports the Company’s expansion
and its ongoing success. Further, her financial acumen adds additional strength and depth to the Company’s
strategic decision-making.
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. Angela has also served as a Non-Executive Director of esure plc.
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 and Rentokil
Initial plc.
Board Committees: Audit, Nomination, Remuneration
Experienced executive and non-executive in several sectors
Skills and Experience:
• Wealth of experience in service focused organisations
•
• Strong marketing and commercial skills
• Strong strategic understanding
• Member of the Chartered Institute of Marketing
Contribution: Angela Seymour-Jackson has held numerous senior executive marketing roles and non-executive
director appointments in highly regulated environments. She therefore provides key skills to the Board in respect
of marketing and customer services which are significant areas of focus for the Company. Her experience in
the highly regulated industries means that Angela makes a valuable contribution as Chair of the Remuneration
Committee.
Past Roles: Prior to this appointment Kaye was Chief Resourcing & Legal Officer at Legal & General Investment
Management Limited.
Skills and Experience:
• Over 15 years’ experience in legal and company secretarial matters for public companies
Extensive public company, compliance and corporate governance experience
•
• Senior legal counsel experience in FTSE 250 companies across different sectors
Sylvia Metayer,
Independent
Non-Executive
Director
Date of Appointment:
September 2017
Angela Seymour-
Jackson,
Independent
Non-Executive
Director
Date of Appointment:
October 2017
Kaye Maguire,
General Counsel &
Company Secretary
Date of Appointment:
October 2018
45 | Corporate Governance
Annual Report and Accounts 2018 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
See biography on page 42.
Kelvin Stagg
Chief Financial Officer,
Executive Director
See biography on page 43.
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.
In 2018 Gary was appointed joint
COO with responsibility for increasing
productivity through innovation, technology
and people.
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.
Anthony Thompson
Oliver Watson
Executive Board Director,
Asia (excluding Japan)
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, Thailand and Vietnam.
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.
In 2018 Oliver was appointed joint COO
with responsibility for increasing productivity
through innovation, technology and people.
Corporate Governance | 46
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Corporate Governance Report
Compliance with the UK
Corporate Governance Code
During the year ended 31 December
2018 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
40, the Directors’ Remuneration Report
on pages 58 to 77 and the Directors’
Report on pages 78 to 80, we describe
how we have applied the main principles
of the Code.
The Board welcomes the evolution of the
Code in the revised edition published in
2018. The Board has appraised itself of
the changes to the Code through training
and discussions about the implications
for the Company. During 2019 we will
make governance changes where
appropriate, for example, key areas of
change include ensuring whistleblowing
is a matter for the Board as opposed
to the Audit Committee and oversight
by the Remuneration Committee of
Group wide remuneration policies. The
Board has considered its responsibilities
regarding employee engagement and
culture and has scheduled presentations
enabling it to ensure it has the ability
to fully assess and monitor culture
and proposed workforce engagement
mechanisms. As mentioned on page
52, the Board through the Nomination
Committee, will also be seeking to
build on the work done to strengthen
the Group’s pipeline and continue to
monitor progress on the Group’s diversity
agenda.
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 strategic
leadership of the Group within a
framework of prudent and effective
controls which enable 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.
47 | Corporate Governance
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 five Non-Executive
Directors. All Directors served throughout
the year except Danuta Gray who
ceased to be a Director on 7 June 2018.
The biographies of each of the current
Directors that served throughout the year
can be found on pages 42 to 45.
The Board keeps under regular review
the skills and experience of its members
and also monitors the independence
of Directors. The Board considers
all current Non-Executive Directors
to be 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 42. 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
include:
• 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
Relevant training, advice and information
is made available to Directors to enable
the Board to function effectively and
efficiently. As and when new Directors
join the Board, the Chairman assisted
by the General Counsel & Company
Secretary takes responsibility for their
induction. On appointment to the
Board, each Director discusses with the
Chairman and the General Counsel &
Company Secretary the extent of the
training required. A tailored induction
programme to cover their individual
requirements is then compiled. Elements
of the programme consist typically
Annual Report and Accounts 2018 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
advice and services of the General Counsel
& Company Secretary. The General
Counsel & Company Secretary is present
at all Board meetings and is responsible
to the Board for ensuring that Board
procedures are complied with as well as
advising the Board on new legislation and
corporate governance matters. Board
Committees and Directors are also given
access to independent professional advice
at the Group’s expense if the Directors
deem it necessary in order for them to
carry out their responsibilities.
Areas the Board covered in 2018 included
updates on culture, technology and
innovation programmes, several deep-dive
presentations on key markets around the
world in which the Group operates and
reviewing potential new areas of business
and locations. Given the importance of
data security the Board has monitored
on-going compliance with the General
Data Protection Regulation that came into
force on 25 May 2018. 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. All of the
above gives a comprehensive view on the
issues facing the business and enables
robust review of the current and future
performance of the Group.
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 53 to 57;
the Nomination Committee Report on
pages 51 and 52; and the Directors’
Remuneration Report on page 61.
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 General Counsel & 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 46. 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,
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 53 (Audit Committee), page 51
(Nomination Committee) and page
61 (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.
Director
David Lowden
Simon Boddie
No. of
meetings
attended
8 out of 8
8 out of 8
Patrick De Smedt
8 out of 8
Danuta Gray
Michelle Healy
Steve Ingham
Sylvia Metayer
Angela Seymour-
Jackson
3 out of 3
7 out of 8
8 out of 8
8 out of 8
8 out of 8
Kelvin Stagg
8 out of 8
Note: Danuta Gray ceased to be a Director on
7 June 2018 and was therefore eligible to attend
only three meetings.
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
Corporate Governance | 48
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Corporate Governance Report
long-term remuneration. The Group
operates an extensive Talent, Succession
& Development programme across the
business which assesses development
needs and nurtures high potential
employees throughout the various stages
of their careers. Diversity considerations are
a fundamental element of the programme.
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
can be found in the Nomination Committee
Report on page 52 and the Strategic
Report on page 23.
Performance evaluation
The Code requires that there is a formal
and rigorous annual evaluation of the
Board, its Committees and individual
Directors. In line with this requirement,
each year the Board carries out a thorough
review of its performance and that of
its Committees including assessing the
contribution of individual Directors. The
2017 review was facilitated by Lintstock
(an independent advisory firm specialising
in board evaluations with no connection
to the Group) and the Board monitored
progress on the outcomes of the review.
The Board believes it made good progress
in 2018 on the action points from that
review including ensuring fully on-boarding
the newer members of the Board,
improving the quality of information on
strategic initiatives and in strengthening
succession planning activity. For 2018 an
internal Board evaluation was conducted
by David Lowden, the Chairman, assisted
by the General Counsel & Company
Secretary. The review involved a detailed
series of written questions relating to the
effectiveness of the Board and of all of its
Committees. It covered areas such as:
•
•
•
understanding of technology affecting
the recruitment sector;
changes to the Corporate Governance
Code; and
adequacy of information and
presentations for the Board.
In addition to the question sets detailed
above each member of the Board had
a one-on-one private follow up with the
Chairman to discuss the findings from
the review. The Chairman provided a
49 | Corporate Governance
comprehensive report to Board members.
Overall the outcome of the review was
positive. A number of constructive areas of
focus for 2019 emerged including:
•
•
•
•
continued spotlight sessions on high
potential and other key markets
coupled with exposure to regional
management;
additional presentations on technology
being considered and trialled across
the Group as part of a focus on
innovation;
continued evaluation of emerging
trends and the competitive landscape
in the recruitment and services sector;
and
building upon the progress made in
relation to succession planning and
understanding the Group’s pipeline
with due regard to diversity objectives.
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.
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
will submit themselves for re-election at the
forthcoming Annual General Meeting on
24 May 2019.
Internal control and risk
management
The Board retains responsibility for the
Group’s overall risk appetite and for the
effectiveness of its risk management and
internal control systems. 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 and are
reviewed on a regular basis.
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.
The key elements of our system of internal
control are as follows:
•
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 29 to 34.
•
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
Annual Report and Accounts 2018 monitored and reported to the
Audit Committee.
• Confirmations from Executive
Management – The Managing
Director and Finance Director of
our operations in each country
formally certify twice a year whether
the business has adhered to the
system of internal control during
the period, including compliance
with Group policies. The statement
also requires the reporting of
any significant control issues
that have emerged, including
suspected or reported frauds, so
that areas of Group concern can
be identified and investigated as
required. These confirmations and
supporting controls self-assessment
questionnaires are reviewed by
the Internal Audit function and a
summary of findings is provided to
the Audit Committee for review.
In accordance with the requirements of
the Code and the recommendations of
the FRC’s Guidance on Risk Management
and Related Financial and Business
Reporting, the Board has reviewed and
agreed its approach to risk and its risk
appetite when considering its strategy
and the management of its risks. It has
also considered its longer-term viability.
Details on the Board’s risk appetite and its
assessment of its longer-term viability can
be found in the Strategic Report on pages
29 to 35. 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 2018 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.
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
position and 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.
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, wherever possible, to meet
with shareholders and analysts at their
request. There is a regular dialogue with
individual institutional shareholders and
quarterly trading update conference calls
and presentations after our half year and
full year results are made to analysts.
Meetings are also held with investors
and potential investors by members of
the Investor Relations team and senior
management ad hoc during the year.
Early in 2018, the Company performed
an Investor Perception study aimed at
identifying matters investors wished to be
informed about in the short to medium
term. Following that study, the Company
held an Investor Afternoon in London and
presented on the following items:
•
•
•
•
•
progress made against our Vision
set out in 2013 and our updated
Vision for the Group;
insight on how we are delivering
our Vision from a number of our
Regional Senior Managers;
how workplace trends are changing
customers’ recruitment needs
and how our business model
continues to evolve to meet their
requirements;
how we are leveraging technology
to drive customer acquisition and
customer engagement through
innovation and digital channels; and
how our transformation projects
have increased our business
flexibility and the subsequent impact
on past and future conversion.
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 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
5 March 2019
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Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Nomination Committee Report
Annual General Meeting. All other
members served throughout the year.
Several Directors’ appointment letters
were due to expire in 2018. Further
details can be found on page 70.
The Committee recommended all
appointments be extended for a further
three years. No Director was entitled to
vote in respect of their own continuing
appointment.
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 in accordance with the
process and diversity considerations
outlined below;
• 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.
When the Committee considers any
appointment it follows a formal and
transparent procedure. 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 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. The recruitment process
places importance on diversity
considerations. Candidates are
identified and selected on merit against
objective criteria while having due
regard to the benefits of diversity on
the Board. 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.
Activities during the year
During 2018 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
Sylvia Metayer
No. of
meetings
attended
4 out of 4
4 out of 4
4 out of 4
0 out of 2
3 out of 4
3 out of 4
Angela Seymour-Jackson
4 out of 4
Note: Danuta Gray ceased to be a member of the
Committee on 7 June 2018. One of the meetings
she did not attend was held on 6 June 2018.
Committee’s focus during
2018
The Committee focused on succession
planning both for senior management
and the Board. During the year under
review the Committee has ensured that
all key roles within the global organisation
have an identified succession plan in
place and, importantly, all critical roles
have an identified emergency successor.
The Committee recognises the need
for talent to be nurtured across the
Company and has overseen the
implementation of a Global Talent,
Succession & Development programme.
David Lowden,
Committee Chairman
Dear Shareholder,
I am pleased to present the Nomination
Committee Report for the year ended
31 December 2018. The Committee’s
main focus during the year under
review can broadly be summarised as
undertaking a thorough review of Board
and senior leadership succession, and
assessment and development of the
Group’s talent pipeline. The latter being
considered by the Committee as critical
to the Group’s future success. As I
mentioned in my Chairman’s statement
on page 2, in terms of changes to the
Board during the year, Danuta Gray
decided not to stand for re-election at
the June 2018 Annual General Meeting
and consequently, she ceased to be a
Director from that date. Angela Seymour-
Jackson was appointed to succeed her
as chair of the Remuneration Committee
and she has brought a wealth of
experience to this role.
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.
It reviews all key roles to ensure
comprehensive succession plans are in
place to ensure organisational stability
and to ensure talented individuals are
provided with opportunities to develop.
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, Michelle Healy, Sylvia Metayer
and Angela Seymour-Jackson. Danuta
Gray ceased to be a member from
7 June 2018 as she did not stand for
re-election at the Company’s 2018
51 | Corporate Governance
Annual Report and Accounts 2018 This means it has full line of sight of high
potential talent across management and
as mentioned in this report, has enabled
the Committee to ensure the Company’s
diversity and inclusion agenda is being
suitably considered.
The Committee is committed to a culture
of career progression and ensuring our
people reach their potential. In 2018 this
resulted in the Committee working with
the Group HR Director to review and
refresh its Global Directors Academy
and introduce new development
programmes for high potential talent.
Working with IESE Business School in
Barcelona and YSC, bespoke strategic
leadership training and development
has been introduced for those in key
leadership positions.
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, at Board Meetings
and during site visits. This year members
visited the Company’s Frankfurt Office
and also attended the Group Leadership
Conference. 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 2018 was
carried out internally. Details of the
evaluation process can be found in
the Corporate Governance Report on
page 49.
Diversity
As a recruitment company we are
passionately committed to promoting
diversity, inclusion and equality in the
workplace both internally and externally.
The Committee views diversity and
inclusion in its broadest sense. It is fully
committed across the organisation to
a diversity policy which seeks diversity
of experience, capability, geographic
experience, gender and all other qualities
which makes each of us unique. The
overarching objective of the policy is to
ensure different perspectives and insight
are brought to all areas of the business,
including the Board, generating
creativity, problem-solving capability and
sustainability that would otherwise not
be possible.
The Committee notes the
recommendations of the Parker Review
as regards ethnic representation
on Boards and exceeds the
recommendations of Lord Davies as
reiterated in the Hampton-Alexander
Review with over 33% of the Board
being female. We recognise, however,
that there is currently a lower proportion
of women holding senior roles below
Board level positions. The Company
has been working hard to address this
and actions taken include:
•
•
•
identifying high potential women
as part of the Global Talent,
Succession & Development
Programme;
continuing support for a global
mentoring programme and
Women@Page, a global network
aimed at engagement, enablement
and empowerment of women
across the organisation; and
reviewing the Global Directors’
Academy to have a greater gender
balance and to include a focus on
inclusion.
This year all Managing Directors’ have
gender diversity objectives included
in their strategic objectives and a
new sponsorship programme will
be launched in conjunction with the
Executive Board to encourage future
promotion of high potential women.
Details in respect of the objective of
increasing representation of women
across the organisation can also be
found on page 23 of the Strategic
Report.
Plan for 2019
In 2019 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. It will also seek to
build on the work done to strengthen the
Group’s pipeline and continue to monitor
progress on the Group’s diversity
agenda in line with the requirements of
the Corporate Governance Code 2018.
Corporate Governance | 52
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Audit Committee Report
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 General Counsel & 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 recent and
relevant financial experience required by
the Code. Sylvia Metayer also 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 as a whole has competence
relevant to the sector in which the Company
operates. The relevant qualifications and
experience of the Committee members are
shown in their biographies on pages 43 to
45. 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 met with, and have direct access to,
the Chairman of the Committee throughout
the year.
Principal areas of focus
The Committee is committed to maintaining
and monitoring the quality and integrity of
financial reporting, as well as assessing the
Company’s risk management systems and
internal control environment to ensure they
remain appropriate. The Committee has
reviewed the Company’s crisis management
plans and appraised itself of potential
cyber security issues. 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. In 2018 the
Committee commissioned an external
third party to conduct an assessment of
the Company’s Internal Audit function.
The review concluded that all areas were
assessed as ‘Good’ or ‘Satisfactory’ and
further details are provided at page 57.
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 54 is a summary of
the main activities of the Committee during
2018. 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 Metayer
No. of
meetings
attended
7 out of 7
7 out of 7
2 out of 3
7 out of 7
7 out of 7
Angela Seymour-Jackson
7 out of 7
Note: Danuta Gray ceased to be a Director on
7 June 2018 and therefore was only eligible to attend
three meetings.
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
long-term sustainability, 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.
During 2018 the FRC reviewed1 the 2017
Annual Report and Accounts, reporting no
Simon Boddie,
Committee Chair
Dear Shareholder,
I am pleased to present the Audit
Committee Report for the year ended
31 December 2018. This Report aims to
provide an overview of the Committee's
principal areas of focus during the year.
In the year under review, the Committee
has focused on ensuring the integrity
of the Company's published financial
statements, assessing the independence
and effectiveness of the Group's external
auditor, and reviewing the internal control
environment and effectiveness of the
internal audit process.
Purpose
The Audit Committee is a fundamental
part of the Group’s governance
framework being 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
In 2018 the members of the Audit
Committee were Simon Boddie, who
chairs the Committee, Patrick De Smedt,
Danuta Gray, Michelle Healy, Sylvia
Metayer and Angela Seymour-Jackson.
All members served throughout the year
except Danuta Gray who did not stand
for re-election at the Company’s AGM
in June. The most recent members,
Angela Seymour-Jackson and Sylvia
Metayer, have now had over 12
months’ experience as members of the
Committee and add much to the work
of the Committee given their strong
financial and business backgrounds.
Training of all members of the
Committee takes place on a regular
53 | Corporate Governance
Annual Report and Accounts 2018 significant issues, but noting some areas
for disclosure improvement which have
been addressed in the 2018 Annual Report
and Accounts. At the same time the FRC
inspected the 2017 audit performed by
Ernst & Young as external auditors, finding
no significant improvements but pointing
to some limited improvements in the audit,
which have been implemented by Ernst &
Young in the 2018 audit. The Committee
discussed the FRC review and the areas
for improvement with Ernst & Young and
monitored their implementation.
The Committee has reviewed the
Company’s 2018 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 2018
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 2017 Annual Report and
Accounts
External auditor’s year-end
report
•
• Going concern analysis
Viability Statement
•
Fair, balanced and
•
understandable review
Judgemental and Accounting
issues
•
• Management letter of
representation
• Confirmation of External
auditor’s Independence
Risk and Internal Control
• Ratification of principal risks
•
Internal Audit update and three
year strategy
External review of effectiveness of
the Internal Audit process
•
Compliance
• Meeting with external auditor
without Executive Directors
• Meeting with Head of Internal
Audit without Executive Directors
External Auditor
•
External auditor effectiveness and
rigour survey
• Reappointment of external
auditor
Engagement Letter
•
Regulatory update
•
Implications of IFRS 15 (Revenue)
and IFRS 16 (Leases)
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
•
• Confirmation of key risks
• Update on Internal Audit Strategy
External Auditor
•
External auditor’s 2017 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
Compliance
•
Meeting with external auditor,
Head of Internal Audit and
Company Secretary without
Executive Directors
Regulatory update
•
IFRS 16 (Leases)
October
Review of Financial Statements
• Quarter 3 trading update
Risk and Internal Control
• Culture assessment
• Cyber risk
December
Review of Financial Statements
• Review of 2018 Annual Report
•
•
and Accounts process
FRC Inspection of EY 2017
Audit
FRC Review of Annual Report
and Accounts 2017
Risk and Internal Control
•
Internal Audit update
• Approval of Internal Audit plan
for 2019
• 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
• UK Corporate Governance
Code 2018
1 The FRC stated that the scope of their review was based on the Company’s 2017 Annual Report and Accounts
and was conducted by staff of the FRC who have an understanding of the relevant legal and accounting
framework. The review did not benefit from detailed knowledge of the Company’s business or an understanding
of the underlying transactions entered into and therefore their review does not provide assurance that the 2017
Annual Report and Accounts are correct in all material respects.
Corporate Governance | 54
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Audit Committee Report
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 91 to 95.
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 is
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: As in previous years, 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. In 2018, the Committee also satisfied itself that the implementation of IFRS 15 had been appropriately
undertaken.
Conclusions and rationale: The Committee concluded that the approach to revenue recognition was consistent
with the policies and the judgements made were appropriate.
The Committee discussed the methodology used to test the assumptions, estimates made by management in each of these areas and IFRS
15 implementation with Ernst & Young LLP, the external auditor.
55 | Corporate Governance
Annual Report and Accounts 2018 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 in particular 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 competitive 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.
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. The
Committee considers it is in the best
interests of shareholders to commence
a competitive tender of external audit
services at this time as it is satisfied that
the current external auditor remains
independent and it favours retaining
continuity while a number of large
change programmes are ongoing, such
as implementation of the final phase of
the roll-out of the global finance system.
This position is subject to annual review
by the Audit Committee.
The Committee considers that in 2018 it
has complied with the Competition and
Market Authority Audit Order 2014.
The Committee regularly reviews its
policy on the use of the external auditor
for non-audit services. 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 except in relation
to a role on the board of the statutory
auditors in Italy, performed by Ernst
& Young LLP that was transitioned to
another provider in 2018 as intimated
in this report last year. The total non-
audit fees in respect of these services
for the year under review amounted to
£1,500, of which the Audit Committee
was aware and pre-approved. 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 the
Italian role 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 £810,000. The
Committee reviews the objectivity and
independence of the external auditor and
has concluded this 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 also 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;
• Approach to the agreed audit plan
and 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;
• Quality and content of reports
provided to the Committee by the
external auditor including reporting
on internal control;
•
Feedback from management which
is ascertained from staff surveys
completed by staff involved in the
audit process; and
• Communications in and outside
of meetings, between the external
auditor and the Committee.
Following a full evaluation of the external
auditor at the end of the 2018 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 49 and
50.
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
Corporate Governance | 56
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Audit Committee Report
strategy of the business and its plan. These
procedures include regular reports to the
Committee from the Director of Internal
Audit on the performance of the system of
internal control and on its effectiveness in
managing material risks and identifying any
control failings or weaknesses.
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
29 to 35. Key performance indicators and
management incentives are highlighted for
the main financial, strategic and people
risks in the Strategic Report on pages 17
to 18.
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.
During the year under review the Audit
Committee considered the requirements
of the new Corporate Governance Code
and ensured that emerging risks are being
monitored and considered.
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.
During 2018, in line with best practice
guidelines, an external assessment
was conducted of our Internal Audit
processes by the Chartered Institute of
Internal Auditors. The review provided
57 | Corporate Governance
an independent assessment, in addition
to the ongoing internal assessment, of
PageGroup’s internal audit processes
against the Institute of Internal Audit’s
International Professional Practice
framework. The Committee noted the
conclusion from the review that all areas
were assessed as ‘Good’ or ‘Satisfactory’.
Of 64 areas tested 59 areas were deemed
to conform, 5 partially conform, and overall
performance was described as very strong.
The Committee has reviewed the action
plan to address the limited number of
partially conforming areas.
The scope of work for the Internal Audit
function is agreed with the Committee
annually with the findings from internal
audits being reported to the Executive
Board and the Audit Committee.
Businesses are visited on a rotational
risk-based approach to assess the
effectiveness of controls to mitigate risks
to an acceptable level. All major risks are
addressed in this process, including Group
functions and change programmes as are
those around governance, environmental
and social related matters. Actions to
maintain and improve the effectiveness of
the control environment are agreed with
the Executive Board and are monitored
and reported to the Committee. Risks
are also regularly reviewed and required
changes are made to the risk profile and,
where necessary, to the activity of Internal
Audit. All changes to the Internal Audit
plan are agreed with the Chairman of the
Committee and reported to the Executive
Board and the Committee.
Committee evaluation
The activities of the Committee were
reviewed as part of the Board evaluation
process performed during the year under
review. The 2018 evaluation process was
conducted internally and details of the
outcome of the evaluation process, and the
areas of focus for 2019 can be found in the
Corporate Governance Report on page 49.
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.
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 2018 showed there was a good
understanding of the issue and no
breaches were reported.
Whistleblowing
The Committee takes its oversight duties
regarding whistleblowing very seriously
and reviews 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. The
whistleblowing helpline is run by an external
third party and is available to all employees
in the Group. The helpline was utilised once
in 2018 outside the UK for a non-financial
matter and the Company’s response was
reviewed by the Committee.
Simon Boddie
Chair of the Audit Committee
5 March 2019
Annual Report and Accounts 2018 Directors’ Remuneration Report
of the Corporate Governance Code (the
‘Code’) and the evolving perspectives
of shareholders in this area. We have
discussed the implications of the Code
as a Committee, balancing future
expectations against existing contractual
commitments in place for Executives.
We have started a process to review
the existing Policy ahead of tabling
an updated Policy to shareholders
at our AGM in 2020, and we will be
undertaking an engagement exercise
with shareholders during 2019 to seek
feedback on any changes we propose.
Company performance
2018 has been a strong year for the
business with profit performance
ahead of internal budgets and investor
forecasts at the end of 2017. Headline
Profit Before Tax (“PBT”) has grown by
20% over 2017, and we continue to
outperform many of our peers and our
gross profit performance has been in
the upper quartile of our peer group.
We have also seen robust strategic
achievement against stretching targets,
details of which can be seen within this
disclosure. Earnings per Share (“EPS”)
has grown by 22.6% over the last year
and has averaged 15.3% over the past
three years.
Although not a measure used within our
reward design, our Total Shareholder
Return (“TSR”) has grown over the past
year at a time when the FTSE 250 has
seen a significant fall.
How this performance is seen in
reward outcomes
This level of performance has resulted
in strong outcomes under all elements
of the 2018 ESIP measures, with Steve
Ingham (CEO) receiving an award of
87.7% of maximum and Kelvin Stagg
(CFO) 86.8% of maximum. As with all
awards under the ESIP, 60% of the
value is deferred into Company shares
which vest over the following three years
subject to continued employment.
Long-term awards granted in March
2016 (linked to Earnings per Share,
Strategic achievement and Gross Profit
against peers) have also vested at high
levels reflecting the achievement against
targets, both financial and non-financial
in nature. Full details of the performance
targets and corresponding achievement
are provided within the report. Overall,
96.1% of shares awarded to the CEO
in March 2016 will vest, as will 94.7% of
shares awarded to the CFO. In line with
our shareholding guideline, some of these
shares will be subject to an additional two
year holding period, depending on the
Executive’s overall level of holding at the
point of vesting.
Application of the Policy
This is the second report since the
Remuneration Policy was approved by
shareholders in 2017. We have seen the
single plan (ESIP) structure continue to
drive alignment with performance. We
are seeing two areas behind the design
of the ESIP come through in reward
outcomes for the Executives:
• Alignment of Executives to
business performance through
shareholding. The mandatory
deferral of a significant part of any
award into Company shares has
led to an increase in the level of
shareholding against the minimum
shareholding guideline for the CFO.
His shareholding (as a percentage
of salary) has increased from 36%
in December 2016 to 113% in
December 2018, which increases
further to 194% when deferred
shares awarded under the ESIP
in 2018 are included. Our CEO
has chosen to continue to hold
significant wealth in the Company,
with current shareholding in excess
of 550% of his salary.
• Reduction in volatility year on
year. We wanted a structure that
encourages Executives to make
appropriate long-term value creating
decisions for the business. Awards
under the ESIP continue to be
performance based and linked
to achievement against defined
targets. The significant levels of
deferral mean that Executives
are aligned to future Company
performance and movements
in the share price. Key to the
design is the phased vesting of
these deferred share awards. This
means that in a given year, part
of the shares awarded from three
previous ESIP plans vest. This
structure is expected to reduce
the volatility of reward received by
the individual year on year, while
not compromising our pay for
performance philosophy.
Angela Seymour-Jackson
Committee Chair
SECTION A:
ANNUAL STATEMENT
Dear Shareholder,
I am pleased to introduce my first report
as Chair of the Remuneration Committee
since joining PageGroup in October
2017 and becoming the chair of the
Remuneration Committee in June 2018.
I would like to thank my predecessor,
Danuta Gray, for her extensive
contribution to the business and the
Remuneration Committee.
In this year’s report to address feedback
from shareholders we have sought to
give enhanced disclosure to provide
more focus on the way we implement
our existing Policy. We are committed
to providing transparent and informative
disclosures on reward to demonstrate
how the Policy agreed by shareholders in
2017 is being implemented in practice.
In this disclosure we have therefore
also included a series of spotlight areas
designed to place specific focus on the
operation of the Policy and the way this
is addressing some of the aims identified
when the Policy was introduced.
This is the second year of the operation
of the single plan (“ESIP”) and
shareholders will recall some transition
measures within our Policy, designed
to enable us to move successfully from
the previous operation of annual bonus
and LTIP to a single plan structure. The
disclosure will highlight the way this has
operated in 2018 (consistent with that
explained when the Policy was agreed
by Shareholders) and additionally the
way we will operate the structure for
2019.
The Committee is aware of the
expectations cited within the publication
Corporate Governance | 58
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Directors’ Remuneration Report
Disclosure of the ESIP and
legacy long-term awards
As was the case in our 2017 Annual
Report, the transition to the single plan
means that any shares that are no longer
subject to Company performance are
included within the single figure value.
Therefore, the single total figure of
remuneration includes an estimate for
the value vesting under the 2016 LTIP
along with the value of both cash and
shares awarded under the 2018 ESIP.
Therefore, during this transition phase
the single figure value appears higher
than would otherwise be the case and
reflects the reporting requirements with
which we are obliged to comply.
Application of the Policy in 2019
2019 will be the third year of operation of
our ESIP – our single variable incentive
plan designed to reward achievement
against a balanced scorecard of
measures. We have agreed to implement
the structure in line with that operated
in 2018, with a balance of long-term
measures (measured over three years)
and annual performance. 40% of any
awards under the Plan will be paid in
cash, with 60% deferred into Company
shares for up to three years.
The Committee has reviewed salary
levels for the CEO and CFO and have
made amendments in line with the core
award to UK based employees of 2.3%.
Revised salary levels, effective from
1 January 2019, are £629,800 for the
CEO and £366,300 for the CFO.
Consideration and alignment to
the wider workforce
Our role as a Committee has broadened
over the past few years, very much
aligned to expectations of investors and
the corporate governance environment.
We have direct oversight of all reward
for the layer of management below the
Executives, and have discussed and
implemented changes to reward at this
level over the past year to drive greater
standardisation and consistency within
the business. More broadly, we have
discussed progress against certain key
people metrics, in particular around
diversity and inclusion, considering the
activities in place across the organisation
to ensure that PageGroup is an open
accessible place to work, where people
can advance careers based on the
contribution they make. We reviewed
in detail our Gender Pay position (the
disclosure of which can be found on
our website).
Corporate Governance Code
Following the publication of the amended
Corporate Governance Code we
considered the expectations described
against our current Policy and contractual
agreements in place with each Executive.
We recognise that our ESIP structure is
atypical within the market, designed to
reflect the cyclical nature of our business
model and align Executives effectively
to performance through the economic
cycle. In interpreting the Code we have
had to assess our variable reward
structure against a more standard annual
bonus and LTIP structure that aspects
of the Code reference. Given this is the
first year of standard operation of our
ESIP following introduction (i.e. with
a combination of one year and three
year metrics) we will look to operate
the structure unchanged for 2019 and
commit to a more detailed review as part
of our Policy review.
Additionally, we have confirmed that
we will introduce a post-cessation
shareholding policy as part of our
proposed Policy review, which we will
include as part of our consultation
process to ensure we gain feedback
from shareholders. We firmly believe
that alignment of Executives to business
performance through Company
shareholding is a key underlying principle
we want to support and you will see
details of the existing alignment (and
how this has been developed) within the
Directors’ Remuneration Report.
We recognise the external expectations
of pension contribution levels for
Executives. Current contribution
levels form part of our contractual
relationship with each Executive.
Future appointments will have lower
contribution levels than the existing
Executives and this will form part of the
new Remuneration Policy presented to
shareholders at next year’s AGM. In the
event we recruit a new Executive Director
in the intervening period the pension set
for this individual would be at a reduced
rate to the current incumbents.
Conclusion
We look to engage and discuss reward
topics with shareholders on a regular
basis to understand their perspectives
on the Policy and the way it has been
implemented. We also look to make
disclosures as clear and transparent
as possible, to demonstrate the way
the Policy is working and the success
in aligning reward with performance.
This section of the Annual Report
will be subject to an advisory vote
of shareholders at the 2019 Annual
General Meeting and I hope that the
disclosure means you will support
the implementation of the Policy by
shareholders. We look forward to
constructive dialogue ahead of tabling a
new Remuneration Policy in 2020.
Angela Seymour-Jackson
Chair of the Remuneration Committee
5 March 2019
59 | Corporate Governance
Annual Report and Accounts 2018 SECTION B: AT A GLANCE
This is a summary of reward achieved for each Executive in respect of 2018 that aligns to the “single figure” that we are required to
disclose. Significant parts of variable awards made under the ESIP are mandatorily deferred into Company shares accessible at a later
date subject to continued employment.
Further details of specific targets and performance achieved against them are provided elsewhere in the disclosure.
Reward Item and summary of performance
CEO Steve Ingham (£’000)
CFO Kelvin Stagg (£’000)
1
2
3
Fixed Compensation
Basic Salary
Pension Supplement 25% of salary for CEO and 20% of
salary of CFO
2018 ESIP
Balanced score card of metrics covering financial and non-
financial performance
Final PBT of £142.3m = 75% of maximum against target
range set
Non financial strategic = 75% of max for CEO and 82.5%
of max for CFO
Personal = 90% of max for CEO and 70% of max for CFO
Relative gross profit performance = upper quartile =
maximum award
Cumulative EPS for 2 years of 59p against stretch target of
53p = maximum award
2016 LTIP
Cumulative EPS of 82.1p compared to stretch target of 80.5p
Upper quartile Gross Profit performance against comparator
group
Strong performance against strategic metrics (84.5% of max
for CEO and 79% for CFO)
4
Total Remuneration
Salary
Benefits
TOTAL
616
190
806
Salary
Benefits
TOTAL
358
97
455
Overall award = 87.7% of maximum
Maximum opportunity = 375% of
salary
Total Award = 2,025
Of this £1,215 (60% of total) is
deferred into company shares and
£810 payable in cash
Overall award = 86.8% of
maximum
Maximum opportunity = 325%
of salary
Total Award = 1,011
Of this £607 (60% of total) is
deferred into company shares
and £404 payable in cash
Number of Shares Vesting = 273,755
Indicative Value £1,3661
Number of Shares Vesting =
126,233
Indicative Value £6301
Fixed
2018 ESIP
2016 LTIP
Dividends
TOTAL
806
2,025
1,366
143
4,340
Fixed
2018 ESIP
2016 LTIP
Dividends
TOTAL
455
1,011
630
70
2,166
1. Indicative value based on share price for last quarter of 2018
Strategy linkage
We structure reward in a way that rewards achievement of our core strategic priorities as a business. Our industry can be highly volatile,
and we structure our business model to ensure that we can operate through the business cycle, and ensure that Executives are targeted
to drive the business in pursuit of long-term gains and value creation for shareholders.
PageGroup Strategic Priorities
How we measure progress
Remuneration Metric (Variable Reward)
Organic, high margin and diversified growth
Efficiently scalable and highly flexible to
react to market conditions
Nurture and develop people
Innovation
Profitability of the business
Gross profit vs peer group companies
EPS performance over 3 year period
Business innovation and achievement
against strategic goals
PBT performance
3 year EPS growth
Gross profit growth compared to defined peer group
Strategic measures
Strategic measures
In 2017 the Company adopted a single incentive plan called the Executive Single Incentive Plan (ESIP) to replace the previous annual
bonus and LTIP. This operates as a balanced scorecard, and is designed to reward Executives for achievement against a range of
performance metrics. Overall the plan is designed to:
• Drive alignment of Executives to future business performance through shareholding; and
• Reduce volatility of reward outcomes received by Executives, through significant deferral and structured release of shares under
the plan.
Corporate Governance | 60
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Directors’ Remuneration Report
SECTION C:
ANNUAL REPORT
ON REMUNERATION
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 60 to 74 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 ESIP award made in
2018; and
(d) Section on outstanding share awards.
During the year under review the members
of the Committee were Angela Seymour-
Jackson, who was Chair of the Committee,
Simon Boddie, Patrick De Smedt, Michelle
Healy, Sylvia Metayer and Danuta Gray.
Danuta Gray did not stand for re-election
at the 2018 Annual General Meeting and
ceased to be a member of the Committee
on 7 June 2018. Details of the members’
attendance at meetings of the Committee
were as follows:
Director
No of meetings
attended
Angela Seymour-
Jackson
5 out of 5
Simon Boddie
5 out of 5
Patrick De Smedt
5 out of 5
Michelle Healy
5 out of 5
Sylvia Metayer
4 out of 5
Danuta Gray
2 out of 2
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 conducted a review of
its Remuneration Advisers in 2018 and
following a comprehensive tender process
appointed PricewaterhouseCoopers
(“PwC”) as the advisers to the Committee.
PwC is one of the founding members of
the Remuneration Consultants Group and
as such adheres to the code of conduct
in relation to executive remuneration
consulting in the UK. PwC’s appointment
commenced in November 2018. Prior to
this the Committee received advice from
Aon Hewitt remuneration consultants.
The Committee is satisfied the advice
received is objective and independent.
The advice provided by Aon Hewitt and
PwC, included the following: the operation
of 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, remuneration changes within
the Corporate Governance Code 2018
and review of this Remuneration Report.
The fees paid to Aon Hewitt totalled
£56,265. The fees paid to PwC totalled
£11,667. Aon Hewitt did not provide any
other services to the Company. Separate
teams within PwC provided unrelated tax
and mobility services during the year. The
Committee is satisfied that these activities
do not compromise the independence or
objectivity of the advice it has received from
PwC. The Committee also received input
from Caddow Consulting Limited for a fee
of £7,154.
The Committee met a total of five times
during 2018 and discussed the following
matters:
• Monitoring the progress of incentive
plan strategic objectives;
•
•
The assessment of performance
targets for the incentive awards made
to the Executive Directors under the
LTIP and the ESIP;
The setting of EPS targets and
gross profit growth comparator
methodology in respect of the ESIP
trailing measures;
• Considering the implications of the
changes to the Corporate Governance
Code and other key regulatory
developments;
• Approving the outturn quantum of
share plan vesting for the Executive
Directors based on pre-set
performance targets;
• Reviewing incentives schemes for
senior management below Executive
Directors;
• Undertaking its annual review and
approval of salaries and incentives
of the Executive Directors and other
senior executives; and
• Reviewing the Remuneration Advisers’
submissions as part of the tender
process.
The Remuneration Committee set out in
the 2017 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 74. A summary of the
Remuneration Policy can be found on
pages 75 to 77. The Committee continued
to operate this Remuneration Policy during
2018 and intends to continue its operation
during 2019.
61 | Corporate Governance
Annual Report and Accounts 2018 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 2018 and
31 December 2017.
2018
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 Gray10
Michelle Healy
Sylvia Metayer
Angela Seymour-Jackson
2017
616
358
208
68
61
30
54
54
62
36
25
–
–
–
–
–
–
–
154
72
–
–
–
–
–
–
–
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
Notes:
602
350
203
67
60
67
53
18
13
22
37
23
–
–
–
–
–
–
–
–
150
70
–
–
–
–
–
–
–
–
ESIP -
Cash
(note 4)
£’000
810
404
ESIP -
Deferred
Shares
(note 4)
£'000
Legacy
Long-term
incentives
(note 5)
£’000
1,215
607
1,366
630
Dividends
paid on
unvested
shares
(note 7)
£’000
143
70
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
ESIP -
Cash
(note 4)
£’000
821
430
ESIP -
Deferred
Shares
(note 4)
£’000
Legacy
Long-term
incentives
(note 6)
£’000
1,232
644
626
252
Dividends
paid on
unvested
shares
(note 7)
£’000
192
89
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£’000
4,340
2,166
208
68
61
30
54
54
62
Total
£’000
3,660
1,858
203
67
60
67
53
18
13
22
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 for 2017 only, 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.
5.
The ESIP payment is determined using a balanced scorecard of short and long-term performance measures. 40% of the ESIP award is delivered in cash and as shown
in the “ESIP – Cash” column. The remaining 60% of the ESIP is delivered in deferred shares which vest over a three-year time period, and is shown in the “ESIP –
Deferred Shares” column.
The value of shares vesting under the 2016 LTIP, for which the performance period ended in the financial year. Following the assessment of performance, 273,755
shares will vest to Steve Ingham and 126,233 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 2018, which is £4.99. The figure will be restated next year using the actual share price on the relevant date.
6.
The figures provided in the 2017 single figure table above represent the actual value of those awards at the point of vesting 20 March 2018 and the share price at this
date of £5.35.
7. This relates to dividends during the year on shares awarded under the legacy Long term Incentive Plan.
8.
9.
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.
10. Danuta Gray ceased to be a Director of the Company on 7 June 2018. The fees noted in the 2018 table cover the period 1 January 2018 to 7 June 2018.
Corporate Governance | 62
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018
Directors’ Remuneration Report
2018 ESIP
Annual performance element
PBT element:
£142.3m was delivered in terms of the
Group’s PBT, which can be compared
to £118.2m PBT in 2017. This was a
significant achievement, above external
expectations at the start of the year
and delivered against a backdrop of
a particularly challenging economic
environment in the final quarter of 2018 in
the UK, trade tariff uncertainty in Mainland
China and difficult market conditions
in France. Full disclosure of the PBT
range can be found on page 64 and 65.
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:
The target is designed to incentivise
the senior executive team and reward
exceptional performance through a sliding
scale with target being based on internal
budget and producing an outcome of 60%
of maximum. Targets were set for 2018
taking account of internal goals, planned
investments, broker forecasts and the
business outlook at the time targets were
put in place.
Strategic element
Long-term trailing performance element:
The Committee formulate strategic targets
by focusing on the key commercial
priorities that it considers will drive the long-
term success of the global business. The
Executive Directors are set clear goals at
the beginning of each performance year
and execution against these objectives is
assessed by the Committee. The areas of
delivery for 2018 centred around progress
in strategic markets, productivity and
modernisation. Detailed disclosures of each
of the CEO’s and CFO’s performance can
be found on page 64 and 65.
Personal element
The personal objectives set for the senior
executive team enable the Committee to
consider individual contribution in relation
to improving organisational capability,
talent development, people leadership
and management.
The Committee considers that the reward
outcomes for both CEO and CFO fairly
represent the significant achievements
made in both the strategic and personal
elements of the ESIP award.
In 2018, this element was based on targets
for 2017 and 2018 EPS and gross profit
growth relative to comparators.
EPS element:
Over 2017 and 2018, PageGroup has
delivered very strong performance through
the implementation of efficiency measures
and driving growth in key markets. As a
result, we delivered in 2017 EPS of 26.5p,
which represents year-on-year growth of
14.7%. In 2018, we delivered EPS of 32.5p,
representing year-on-year growth of 22.6%.
Although not a metric used in the ESIP, the
Company also achieved Total Shareholder
Return of 1% for the year, exceeding the
FTSE All-Share by 14% percentage points.
Relative Gross Profit element:
PageGroup delivered strong gross profit
growth of 15.9% in constant currency in
2018. This was in 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
overleaf for both Executive Directors.
Spotlight Area: Levels of Shareholding
• Both Executive Directors have a shareholding requirement of 200% of salary. They are required to hold onto deferred shares
once vested under the ESIP for additional time if this holding requirement is not met at the point of vesting.
•
•
The introduction of the ESIP drove far higher levels of deferral of awards into shareholding by the participants. This, coupled
with strong performance since introduction, has increased the level of shareholding by the CFO significantly to 113%
of salary.
The core calculation excludes shares which have not vested but have no further Company performance conditions (i.e.
deferred awards under the ESIP). These deferred shares further increase the level of shareholding of the CFO to 194% of
salary. We expect this to increase and be more than the 200% level when the share awards for the 2018 ESIP are made in
March 2019.
•
The CEO has held significantly more shares in the business for many years. His ordinary shareholding is currently over 550%
of his base salary.
63 | Corporate Governance
Annual Report and Accounts 2018 CEO ESIP disclosure
Performance
metric
Weighting
Achievements
Annual performance
2018 PBT
30%
Non-financial strategic
Strategic Markets
Development
7.5%
Productivity and
Modernisation
7.5%
Personal performance
Leadership
and People
Development
10%
Outcome
(% of max)
75%
90%
• Threshold – £118m (25% award)
• Target – £130m to £135m (60% award)
• Maximum – £155m (100% award)
• Actual PBT – £142.3m
In 2018, considerable progress was made in growing our Large, High Potential
Markets, which delivered a record year collectively and all five individually. Overall,
they grew 25% in Gross Profit vs the prior year (in constant currency). We have
continued to invest heavily in fee earners, up 20% year-on-year, as well as
launching in a new country in South East Asia, Vietnam, our fifth country in
that region.
Germany grew 29% and in particular our Interim business, one of our key
strategic initiatives, delivered growth of 42% to now represent 20% of the
German business. Greater China delivered growth of 19%, with strong growth
throughout, as well as opening a new office in Chengdu. Latin America delivered
a record year, up 30% with continued improvement in Brazil and strong growth
throughout the region. The US grew 25%, where we continued to benefit from our
strategy of diversification, with particularly strong performances from our offices
in Boston, Chicago, Houston and Los Angeles.
In 2018 key leadership changes were embedded including the creation of the
Chief Operating Officer (COO) roles which has enabled a strategic focus on how
we drive productivity via innovation, technology and people. The COO Office has
enabled a focus on prioritisation and investment across the functions leading to
progress on technology, innovation and digital strategy in 2018.
60%
We opened Shared Service Centres in Asia and Latin America to drive synergies,
process consistency, lower costs and ultimately improve conversion rates to
mirror the progress we saw in EMEA with the European Shared Service Centre.
Organisational changes and a significant investment in leadership development
were made in 2018 to develop greater succession bench strength below the
Executive Board. A new Senior Leadership Development programme has been
implemented with key leaders participating during 2018 to assess future executive
potential and to ensure continued high performance. We have invested in and
supported a range of Diversity and Inclusion initiatives and we are recognised as
a Top 50 employer for women in the UK.
90%
Longer-term metrics – 2017 to 2018 inclusive
EPS growth
35%
The cumulative EPS target for the two year target was as follows:
100%
Threshold: 42p (0% award)
Stretch: 53p (100% award)
Straight line vesting for points in the above range.
Final EPS for the period was 59p
Relative Gross
Profit growth
10%
Total
100%
• Median comparator group gross profit growth – 5.5% (25% award)
• Upper quartile comparator group gross profit growth – 9.3% (100% award)
• PageGroup actual gross profit growth – 12.9%
100%
87.7% of max
Corporate Governance | 64
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CFO ESIP disclosure
Performance
metric
Annual performance
Weighting
Achievements
2018 PBT
30%
Non-financial strategic
Strategic Markets
Development
7.5%
Productivity
7.5%
Outcome
(% of max)
75%
90%
• Threshold – £118m (25% award)
• Target – £130m to £135m (60% award)
• Maximum – £155m (100% award)
• Actual PBT – £142.3 m
In 2018, considerable progress was made in growing our Large, High Potential
Markets, which delivered a record year collectively and all five individually.
Overall, they grew 25% in Gross Profit vs the prior year (in constant currency).
We have continued to invest heavily in fee earners, up 20% year-on-year, as well
as launching in a new country in South East Asia, Vietnam, our fifth country in
that region.
Germany grew 29% and in particular our Interim business, one of our key
strategic initiatives, delivered growth of 42% to now represent 20% of the
German business. Greater China delivered growth of 19%, with strong growth
throughout, as well as opening a new office in Chengdu. Latin America delivered
a record year, up 30% with continued improvement in Brazil and strong growth
throughout the region. The US grew 25%, where we continued to benefit from
our strategy of diversification, with particularly strong performances from our
offices in Boston, Chicago, Houston and Los Angeles.
We opened Shared Service Centres in Asia and Latin America during the year
to drive synergies, process consistency, lower costs and ultimately improve
conversion rates to mirror the progress we saw in EMEA with the European
Shared Service Centre.
75%
We went live in the Asia Pacific region with our Global Finance System to enable
a simplification of management systems and more agile reporting capability
for the business. We also successfully transitioned share service activity from
Sydney to Singapore.
Key changes were made in leadership structure of the Global IT function
and material progress made in the establishment of the IT Target Operating
Model with the establishment of global IT business partners and Infrastructure
transition.
Personal performance
Leadership and
Talent Development
in Finance
10%
Finance organisation capability has been developed with a number of internal
moves and strategic external hires and an updated succession plan identifying
future senior management potential has been delivered.
70%
Longer-term metrics – 2017 to 2018 inclusive
EPS growth
35%
The cumulative EPS target for the 2 year period was as follows:
Threshold: 42p (0% award)
Stretch: 53p (100% award)
Straight line vesting for points in the above range.
Final EPS for the period was 59p
100%
Relative Gross
Profit growth
10%
• Median comparator group gross profit growth – 5.5% (25% award)
• Upper quartile comparator group gross profit growth – 9.3% (100% award)
• PageGroup actual gross profit growth – 12.9%
100%
Total
100%
86.8% of max
65 | Corporate Governance
Annual Report and Accounts 2018 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 2016 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 82.1p compared to a
threshold level of 66p and a stretch of 80.5p. As a result, 100% of the EPS element vested. Strong gross profit performance over the
three-year performance period was within the 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 84.5% of that element vesting for Steve Ingham and 79%
of that element vesting for Kelvin Stagg. Taking into account the weightings of each performance measure, the overall LTIP vesting
outcome was 96.1% for Steve Ingham, and 94.7% for Kelvin Stagg. This resulted in 273,755 and 126,233 shares vesting to Steve
Ingham and Kelvin Stagg respectively. The determination of these vesting outcomes is set out in the table below:
Performance
metric
Financial
Weighting
Achievements
Cumulative EPS
62.5%
• Threshold EPS – 66p
• Maximum EPS – 80.5p
• Actual EPS – 82.1p
Relative Gross Profit
Growth
12.5%
• Median comparator group gross profit growth – 4.3%
• Upper quartile comparator group gross profit growth – 7.3%
• PageGroup actual gross profit growth – 9.6%
Outcome
(% of max)
100%
100%
Strategic
Executive Leadership
Development
CEO: 7.5%
CFO: 7.5%
Strategy Development CEO: 10%
CFO: 7.5%
An assessment of the potential of senior executives has been carried out
over the last three years with key organisational changes being made to
ensure clarity on the succession pipeline.
85%
Succession plans developed for each Executive Board role with nominees
for short, medium and long-term succession and a new Senior Leadership
Development programme created to assess future potential.
Identifiable progression has been made by key members of the senior
management team with all the individuals taking significant extra
responsibility in terms of other regions or enhanced roles.
Over the past three years there has been a significant strengthening and
development of talent within the Finance function through internal talent
moves. To provide further support and ensure first class execution of
business strategy, where appropriate external hires have been added in
key areas such as Treasury, Global Process Leadership and Shared Service
Centre leadership.
Target – growth in Large, High Potential markets (‘LHPMs’) in line with
Strategic Plan measured by improvements in market presence; growth in
Gross Profit by market; growth in Group Gross Profit represented by the
Large, High Potential markets.
Good progress has been made in all Large, High Potential markets against
the business goals. Over the 3 year period in constant currency, LHPMs
grew by 12.4%. This is driven by investment in our fee earner headcount, up
16.8% CAGR. As a percentage of Group gross profit, they increased from
30.7% to 33.2%. The growth in gross profit was despite more challenging
trading conditions in Brazil and Singapore in the earlier part of this period,
but both of which have grown strongly in 2018. Our strategy of diversification
has seen improving performance in the US over the three years. In Germany
we have invested heavily in the Interim market, which now represents 20%
of Germany. We have opened in Vietnam in South East Asia, as well as a new
office in Chengdu, Greater China.
70%
85%
Corporate Governance | 66
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Directors’ Remuneration Report
Performance
metric
Weighting
Achievements
Support Function
Development
CEO: 7.5%
Considerable progress has been made in developing stronger functional
organisational capability in HR, Marketing and IT that has supported the
growth in revenue and fee earners and a reduction in fee earner attrition
(42%-37% over 3 years) in line with our business plan. We have invested
in senior external talent across all functions from 2016-2018 (eg Group HR
Director, Global Digital Marketing Director, Global IT Applications Director.)
We have also developed and implemented a global digital learning platform,
the build out of an innovation process and in Customer Engagement, a
robust content programme that has led to PageGroup being awarded
LinkedIn’s, the World’s Most Socially Engaged Staffing Agency in 2017
and 2018.
Outcome
(% of max)
83%
Financial
Cost Management,
Financial, Strategic
and Management
Information
CFO: 10%
Considerable change has been undertaken based upon a multi-function
strategy to simplify and standardise our support functions. We have opened
new Shared Service Centres in Barcelona, Buenos Aires and Singapore and
have transferred North America into the UK.
80%
We have also moved our diverse finance systems across the Group into one
global system, GFS which is live in 50% of our SSC’s and already driving
greater efficiencies.
We have improved the fee earner to support staff ratio from 77:23 in 2015 to
79:21 at the end of 2018.
Total CEO (% of max)
100%
Total CFO (% of max)
100%
96.1%
94.7%
Spotlight Area: Alignment of value creation with share price change
• We make awards over the Company’s shares to align Executives to the shareholder experience. Awards under
our LTIP made in March 2016 were made to both Executives with performance conditions linked to multiple
measures, covering EPS growth, strategic and personal achievement and relative gross profit growth against a
comparator group.
•
The performance achieved means that over 96% of the award made to the CEO will vest, and just under 95%
for the CFO. This, combined with the increase in the share price over the period leads to the value shown within
the single figure table. In the case of the CEO, this has led to an increase in value of the shares vesting from
£1.1m to £1.37m (£260k) reflecting the share price growth of nearly 24% over the vesting period.
67 | Corporate Governance
Annual Report and Accounts 2018 Percentage change in remuneration for the Chief Executive Officer
The following table provides a summary of the 2018 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 2019 salary increase for the purpose of
comparison.
Salary
Benefits
Annual Cash
Incentive
Chief Executive Officer
UK Employee Population
Chief Executive Officer
UK Employee Population
Chief Executive Officer
UK Employee Population
Notes:
1. Represents average increase.
2019
increase %
2018
increase %
2017
increase %
2.3
2.31
–
–
–
–
2.3
2.31
(2.7)
–
(1.3)
–
2.6
2.81
5.7
–
35.8
–
The UK employee population was chosen as the most relevant population comparison as the Chief Executive Officer is based
in the UK.
Shares awarded in the period from January 2018 to December 2018
Conditional awards of deferred shares were made in March 2018 in relation to deferred share awards made under the operation of the
2017 ESIP.
Steve Ingham
Kelvin Stagg
Number of shares
Awarded
Face Value at
date of award
232,907
121,792
£1,232,081
£644,280
Shares vest in three tranches on the first, second and third
anniversary of award, subject to continued employment.
Vesting
Awards were made on 15 March 2018. The share price used to make awards was £5.29 being the mid-market share price on
14 March 2018.
Outstanding share awards
This section sets out the share interests of the Executive Directors under the Executive Singe Incentive Plan, legacy Executive Share
Option Scheme, the 2009 Share Option Scheme and the Long-Term Incentive Plan.
Executive Single Incentive Plan
Number
of shares
at 1
January
2018
Grant
date
Granted
during
the
year
Vested
during
the
year
Lapsed
during
the
year
Number of
shares at 31
December
2018
End of
performance
period
Vesting
Executive
Steve Ingham
15 March 2018
Steve Ingham
15 March 2018
Steve Ingham
15 March 2018
Total
Kelvin Stagg
15 March 2018
Kelvin Stagg
15 March 2018
Kelvin Stagg
15 March 2018
Total
–
–
–
–
–
–
–
–
77,635
77,636
77,636
232,907
40,597
40,597
40,598
121,792
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
77,635
31 December 2017
15 March 2019
77,636
31 December 2017
16 March 2020
77,636
31 December 2017
15 March 2021
232,907
40,597
31 December 2017
15 March 2019
40,597
31 December 2017
16 March 2020
40,598
31 December 2017
15 March 2021
121,792
Corporate Governance | 68
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Directors’ Remuneration Report
Long-Term Incentive Plan
Details of awards made under the Long-Term Incentive Plan that remain outstanding at 31 December 2018 are as follows:
Number
of shares
at 1
January
2018
Grant
date
Granted
during
the
year
Vested
during
the
year
Lapsed
during
the
year
Number of
shares at 31
December
2018
End of
performance
period
Vesting
date
Executive
Steve Ingham
20 March 2015
211,413
Steve Ingham
18 March 2016
284,865
Steve Ingham
16 March 2017
276,387
Total
772,665
Kelvin Stagg
20 March 2015
84,191
Kelvin Stagg
18 March 2016
133,298
Kelvin Stagg
16 March 2017
140,662
Total
358,151
–
–
–
–
–
–
–
–
(117,017)
(94,396)
–
31 December 2017
20 March 2018
–
–
–
–
284,865
31 December 2018
18 March 2019
276,387
31 December 2019
16 March 2020
(117,017)
(94,396)
561,252
(47,130)
(37,061)
–
31 December 2017
20 March 2018
–
–
–
–
133,298
31 December 2018
18 March 2019
140,662
31 December 2019
16 March 2020
(47,130)
(37,061)
273,960
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 2018 are as follows:
The Michael Page Executive Share Option Scheme
Executive
Number of
options at
1 January
2018
Grant
date
Exercised
during the
year
Lapsed
during the
year
Number of
options at
31 December
2018
Steve Ingham
10 March 2010
Total
Kelvin Stagg
10 March 2010
Total
374,147
374,147
50,000
50,000
(374,147)1
(374,147)
(45,950)2
(45,950)
–
–
–
–
–
–
4,0503
4,050
Exercise
price (p)
Exercise
period
381.5
2013-2020
381.5
2013-2020
Note:
1. All shares arising pursuant to the exercise of options were sold.
2. A sufficient number of shares arising pursuant to the exercise of options were sold to cover the option cost and taxes incurred at exercise, with the balance of 6,137 shares
retained by Kelvin Stagg.
3. At 31 December 2018 all outstanding options had vested and were available for exercise.
The market price of the shares as at 31 December 2018 was 450.8p per share, with a range during the year of 436.8p to 627.5p per
share.
The Michael Page 2009 Share Option Scheme
Grant date
9 March 2009
11 March 2011
12 March 2012
Number of
options at
1 January
2018
20,000
30,000
30,000
80,000
Exercised
during
the
year
(20,000)1
–
–
(20,000)
Lapsed
during the
year
Number of
options at
31 December
2018
–
–
–
–
–
30,0002
30,000
60,000
Exercise
price (p)
187.5
491.0
477.0
Exercise
period
2012-2019
2014-2021
2015-2022
Executive
Kelvin Stagg
Kelvin Stagg
Kelvin Stagg
Total
Note:
1. A sufficient number of shares arising pursuant to the exercise of options were sold to cover the option cost and taxes incurred at exercise, with the balance of 6,941 shares
retained by Kelvin Stagg.
2. At 31 December 2018, 5,400 of the options granted to Kelvin Stagg on 11 March 2011 had vested and were available for exercise.
Steve Ingham does not hold any options under The Michael Page 2009 Share Option Scheme.
69 | Corporate Governance
Annual Report and Accounts 2018 Service Contracts and Letters of Appointment
All Executive Directors’ service contracts contain a twelve-month notice period. The service contracts also contain restrictive covenants
preventing the Executive Directors from competing with the Group for six months following the termination of their employment and
preventing the Executive Directors from soliciting key employees, clients and candidates of the employing company and Group
companies for twelve months following termination of employment. The Remuneration Committee has the right to exercise mitigation in
the event of termination.
Non-Executive Directors, including the Chairman of the Board, are engaged under letters of appointment and do not have service
contracts with the Company. They are appointed for a fixed term of three years, during which period the appointment may be terminated
by either party upon giving one month’s written notice or in accordance with the provisions of the Articles of Association of the Company.
There are no provisions on payment for early termination in the letters of appointment. After the initial three-year term, Directors may be
reappointed for a further term of three years, subject to annual re-election at each year’s Annual General Meeting. Several Directors’ letters
of appointment were renewed during the year as set out below. No Director was entitled to vote on their own re-appointment. 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 2018
Simon Boddie
Patrick De Smedt
Michelle Healy
David Lowden
Sylvia Metayer
Angela Seymour-Jackson
18 July 2018
18 July 2018
2 September 2016
18 July 2018
22 August 2017
22 August 2017
32 months
31 months
9 months
31 months
20 months
21 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 2018 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 2018, 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 68 and 69 or share options which have vested but
have not been exercised, as set out on page 69.
Ordinary
shares
as at
1 January
2018
Ordinary
shares
acquired on
vesting of
legacy LTIP
share award
Ordinary
shares
acquired
on exercise
of share
options
Executive
Directors
Purchased
in year
Disposal
in year
No
longer a
connected
person
Ordinary
shares
as at 31
December
2018
Value of
holding
as at
31
December
2018
Steve Ingham
1,445,932
117,017
–
Kelvin Stagg
52,048
47,130
13,078
–
–
(805,136)
(6,188)
751,625
£3,388,326
(22,207)
–
90,049
£405,941
Executive
Directors’
value of
holding
as at 31
December
2018 as a
% of
salary
550.4
113.4
Notes:
1. In addition to the Ordinary shares shown in the table above, Steve Ingham and Kelvin Stagg have a beneficial interest in the Ordinary shares shown on pages 68 and
69 as outstanding awards under the Long-Term Incentive Plan and the Executive Single Incentive Plan.
2. Steve Ingham: During the year under review, 117,017 Ordinary shares vested under the LTIP.
3. Kelvin Stagg: During the year under review, 47,130 Ordinary shares vested under the LTIP, 6,941 shares were acquired pursuant to the exercise of options under The
Michael Page 2009 Share Option Scheme and 6,137 shares were acquired pursuant to the exercise of options under The Michael Page Executive Share Option Scheme.
4. The value of the Executive Directors’ holdings uses the closing share price on 31 December 2018 of 450.8p per share.
Corporate Governance | 70
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Non-Executive Directors
Ordinary shares of 1p
As at 1 January 2018
Purchased in the year
As at 31 December 2018
David Lowden
Connected person
Angela Seymour-Jackson
–
10,000
–
–
915
10,000
915
No other Non-Executive Director held Ordinary shares in the Company during the year under review.
There have been no changes to the Directors’ shareholdings since 31 December 2018 to the date of this Directors’ Remuneration Report.
Relative importance of spend on pay
The graph below shows details of the Company’s retained profit after tax, distributions by way of dividend, shares purchased by the Michael
Page Employee Benefit Trust, overall spend on pay to all employees (see Note 4 in the financial statements on page 98) overall spend on
Directors’ pay as included in the single figure table on page 62 and the tax paid in the financial year. The percentage change to the prior year is
also shown.
£m
600
500
400
300
200
100
0
+15%
520.9
454.4
2018
2017
+25%
103.7
83.1
+4%
81.3
78.3
Profit after
tax (£m)
Dividends
paid (£m)
+100%
11.6
0
Shares
purchased by
the EBT (£m)
+17%
7.0
6.0
Overall spend
on Directors’
pay (£m)
+7%
41.0
38.2
Tax paid
(£m)
Overall spend
on pay (£m)
Implementation of the Remuneration Policy for Executive Directors in 2019
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. Revised salary levels, effective from 1 January 2019, are £629,800 for the
CEO and £366,300 for the CFO.
Executive Single Incentive Plan
As set out in the Annual Statement and Directors’ Remuneration Policy, the first ESIP award was 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 March 2019 subject to both annual
performance over 2018, and long-term trailing performance over 2017 and 2018. The 2019 ESIP that will be paid in March 2020 will be
assessed against both annual performance over 2019, and long-term trailing performance over period 2017 to 2019 inclusive. The scorecard
and weightings for this award are set out below. The maximum opportunity is 375% of salary for the CEO and 325% of salary for the CFO.
Measure
Annual Performance
PBT
Non-financial, strategic
Personal performance
Longer-term metrics
EPS growth
Relative Gross Profit
Weightings
30%
15%
10%
35%
10%
71 | Corporate Governance
Annual Report and Accounts 2018 ESIP Structure for 2019 – Assessment and Delivery
ESIP – 2019 Overview (Example for CEO – Total Opportunity = 375% of salary)
2019
Weighting
PBT (30%)
Strategic (15%)
Personal (10%)
Annual (2019)
Performance
Element (55%
weighting)
3 year
Performance
Element (2017-
2019) (45%
weighting)
EPS (35%)
Relative Gross
Profit growth
(10%)
Opportunity = 375% of salary
Award
determined
40% of
award in
cash
60% of
award in
deferred
shares
2020
2021
2022
2023
2024
Cash
paid
Dividends
Under the single plan dividend equivalents
will accrue in respect of any shares deferred
but not yet released.
1/3rd of shares
released
holding period
1 Year
deferral
2 Year deferral
3 Year deferral
1/3rd of shares
released
holding period
1/3rd of shares
released
holding period
Holding Period
Vested shares have to be held for two years if the shareholding
guidelines (200% of salary) have not been met at point of release.
The EPS targets for operation of the 2019 ESIP require cumulative EPS performance for the three year period from January 2017 to
December 2019 to deliver 69p (threshold performance = nil award) through to 84p (100% award) with straight line vesting for points in
between these values. The Committee consider the annual targets commercially sensitive and these will be disclosed retrospectively in
the next remuneration report. The relative gross profit growth measure will be assessed by reference to median performance resulting
in 25% vesting and upper quartile performance resulting in 100% vesting for this element of the award.
Pensions
In line with the Remuneration Policy the Executive Directors receive a contribution to a defined contribution pension scheme or a cash
equivalent. The Chief Executive Officer receives a contribution equivalent to 25% of his base salary. The Chief Financial Officer receives
a contribution equivalent to 20% of his base salary.
Implementation of the Remuneration Policy for the Chairman and Non-Executive Directors in 2019
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 2018
From 1 January 2019
£209,000
£54,300
£7,000
£14,000
£14,000
£213,800
£55,500
£9,000
£14,000
£14,000
Corporate Governance | 72
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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 2009 to 31 December 2018. 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 index have been selected as the Company was a member of each index throughout the
period. The table below shows the total remuneration of the Chief Executive Officer over the same ten year period.
CEO
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Single remuneration total
£1,010k
£2,184k
£1,647k
£2,723k
£1,318k
£1,494k
£2,074k
£2,089k
£3,660k
£4,340k
Short-term incentives
(% of maximum) (note 1)
Long-term incentives
(% of maximum)
Executive Single Incentive Plan (%
of maximum)
Notes:
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
N/A
60% 55.35%
96.1%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
91%
87.7%
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.
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
31 Dec 2018
300
270
240
210
180
150
120
100.0
90
276.69
266.99
245.44
240.02
234.92
230.34
160.76
162.04
198.96
191.12
200.20
198.11
220.25
215.93
150.93
140.80
121.72
127.69
PageGroup
FTSE 250
E
FTSE SS
149.31
127.40
123.20
152.32
144.49
111.26
122.71
114.58
95.77
Note:
1. Steve Ingham has been CEO of PageGroup since 2006.
73 | Corporate Governance
Annual Report and Accounts 2018 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
Remuneration Policy was not varied or amended and as such was not presented to shareholders for consideration at the Annual
General Meeting held on 7 June 2018. The table below shows the results of the voting on the Remuneration Policy at the 2017 Annual
General Meeting and the Directors’ Remuneration Report put to shareholders at the 2018 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
7 June 2018
243,508,598
93.53
16,852,085
6.47
2,086
A full schedule in respect of shareholder voting on all the resolutions put to shareholders at the 2018 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 (2017: £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
Angela Seymour-Jackson
Chair of the Remuneration Committee
5 March 2019
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SECTION D: 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 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 was approved by shareholders at the Company's Annual General Meeting held on 8 June 2017 and became
effective from that date. The full policy, including approach to recruitment, payments for loss of office and illustrations of the policy
can be found in our 2017 Annual Report which is available on our corporate website: www.page.com. There are no proposed
changes to the current policy for 2019 and therefore we do not propose to table a resolution seeking approval of the Policy at the next
Annual General Meeting. We will present the annual resolution seeking shareholder approval in respect of how the Policy has been
implemented. We also will continue to review the effectiveness of the Policy and engage with shareholders in advance of presenting an
updated Policy for shareholder approval in 2020.
Key aims of the Policy when it was introduced included incorporating deferral into the majority of the award, introducing post-vesting
holding periods for Executives who have not met the 200% shareholding requirement and ensuring annual and long-term measurement.
Tables summarising the Policy are set out below for information.
Policy Table for Executive Directors
Purpose and link
to strategy
Operation
Element
Salary
(Fixed
pay)
Attract, retain and
reward high calibre
Executive Directors
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.
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.
_________________________________________________
Performance details: an assessment of individual and
Company performance is used to determine each
Executive Directors’ salary review.
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.
__________________________________________________
Performance details: None
Benefits
(Fixed
pay)
Attract, retain
and reward high
calibre Executive
Directors
Provision of
opportunities for
connecting with
clients, investors
and staff to
facilitate growth
strategy
75 | Corporate Governance
Annual Report and Accounts 2018 Maximum opportunity
The ESIP allows for annual
awards of up to a maximum
of 375% of base salary for
each Executive Director.
In 2018 the CEO’s
maximum award was 375%
and the CFO’s maximum
award was 325% of salary.
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. A minimum of 70%
of the possible award will normally be linked to financial
metrics.
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.
Dividend equivalents accrue during the vesting period but
are only released to the extent awards vest.
Malus and clawback provisions apply to the total award,
including cash and deferred portions, for misstatement of
performance, substantial failure of risk control, and gross
misconduct.
_________________________________________________
Performance details: performance is measured against a
balanced scorecard, to support the Company’s strategy.
In 2018 performance targets were: annual PBT; key
strategic projects; personal performance in respect of
leadership and people development (CEO) and capability
and finance development in finance (CFO); relative Gross
Profit growth comparator group and EPS. Full disclosure
of performance against each target is set out at pages 64
to 67.
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.
Performance details: None
To avoid measuring performance over periods already known at implementation, the trailing element for the first ESIP was based on
2017 EPS. For the second ESIP award, performance was measured over a two-year performance period. For the third and subsequent
awards, performance will be measured over a three-year performance period.
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.
Corporate Governance | 76
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Key areas of discretion
Key areas of Committee discretion in the Remuneration Policy include (but are not limited to):
•
•
•
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
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 maximum set out in the 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
– 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 74 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
Operation
Attract, retain and
fairly reward high
calibre individuals.
Reviewed by the Board after recommendation by the Chairman and
Chief Executive (and by the Committee in the case of the Chairman)
taking into account individual responsibilities, such as committee
Chairmanship, time commitment, general employee pay increases,
and prevailing market levels at companies of comparable status and
market value.
Fee increases are normally reviewed annually. Changes in fees for
Non-Executive Directors were effective 1 January 2019.
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 70 and copies are available for inspection at the
Company’s registered office during normal business hours.
77 | Corporate Governance
Annual Report and Accounts 2018
Directors’ Report
The Directors present their Report together with the consolidated financial statements for the year
ended 31 December 2018.
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. Pages 47 to 57, 78 to 80 and 118 to 121 also comprise the Directors’
report for the year ended 31 December 2018
Kaye Maguire, General Counsel & 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
Directors
The Directors who served throughout the
year under review were David Lowden,
Simon Boddie, Patrick De Smedt, Steve
Ingham, Michelle Healy, Kelvin Stagg,
Sylvia Metayer and Angela Seymour-
Jackson. Danuta Gray decided not to
offer herself for re-election at the Annual
General Meeting and ceased 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
86. An analysis of revenue, profit and
net assets by region is shown in Note
2 on pages 96 and 97. A final dividend
for 2017 of 8.60p per Ordinary share
was paid on 18 June 2018; an interim
dividend for 2018 of 4.10p per Ordinary
share was paid on 10 October 2018; and
a special dividend of 12.73p per share
was also paid on 10 October 2018.
The Directors recommend the payment of
a final dividend for the year ended
31 December 2018 of 9.00p per Ordinary
share on 17 June 2019 to shareholders
on the register of members on 17 May
2019. If approved by shareholders at the
Annual General Meeting, this will result
in a total ordinary dividend for the year
of 13.10p per Ordinary share (2017:
12.50p). This, together with the payment
of the special dividend, gives a total
dividend for the year of 25.83p (2017:
25.23p).
2
79
22-23
19
42-45
47-50
68-71
78
79
80
80
35
35
49
119-121
120-121
79
120
119
119
110-112
103-108
112-116
117
116
Corporate Governance | 78
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Directors’ Report
Share Capital
As at 31 December 2018 the Company’s
issued capital comprised a single class of
328,339,724 Ordinary shares of 1p each,
totalling £3,283,397.24. At the Annual
General Meeting held on 7 June 2018 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 1,531,023 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,
townhalls, 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 22
to 23.
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 112 to 116.
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 2018 the Company had been notified, in accordance with the FCA Disclosure Guidance 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
Liontrust Investment Partners LLP
Merian Global Investors (UK) Limited
BlackRock Inc.
Heronbridge Investment Management LLP
Franklin Templeton Institutional LLC
No. of Ordinary shares
% of voting
rights
16,626,702
16,419,476
16,421,640
16,301,242
16,104,930
12,943,756
5.07%
5.01%
5.00%
4.98%
4.93%
3.96%
Sanne Fiduciary Services Ltd as Trustee of the Michael Page Employees’ Benefit Trust
The following notifications were received during the period 1 January 2019 to 6 March 2019
Shareholder
The Capital Group Companies, Inc
Merian Global Investors (UK) Limited
Since the date of disclosure, the above shareholdings may have changed.
79 | Corporate Governance
No. of Ordinary shares
% of voting
rights
16,379,435
4.99%
Below 5%
Annual Report and Accounts 2018 3. 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
as a Director 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 24 May 2019.
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
Kaye Maguire
General Counsel & Company Secretary
5 March 2019
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 2018.
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.
Corporate Governance | 80
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 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 2018 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
Overview of our audit approach
obtained is sufficient and appropriate to
provide a basis for our opinion.
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 29 to 34 that describe
the principal risks and explain how
they are being managed or mitigated;
the directors’ confirmation set out on
page 35 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 80 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 35 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.
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, 80% of profit
before tax and 75% of total assets.
Materiality
• Overall Group materiality is £6.7m which is based on 5% of profit before tax.
81 | Corporate Governance
Annual Report and Accounts 2018 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.
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.
Risk
Our response to the risk
Revenue recognition for permanent and
temporary placements
Refer to the Audit Committee Report
(page 55); Accounting policies (page 92);
and Note 2 of the Consolidated Financial
Statements (page 96)
The Group has reported permanent
placement revenue of £629.1million
(2017: £543.3million) and temporary
placement revenue of £920.8million (2017:
£828.3million).
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 10 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 one component we 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 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.
• 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 and trade receivables 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
for a sample of revenue transactions to check that 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.
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,
Germany, China, Hong Kong, Australia,
Italy, Spain, Netherlands and Belgium.
Corporate Governance | 82
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 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
balances tested for the Group.
The reporting components where we
performed audit procedures accounted
for:
Revenue
Full scope
components
Profit
before
tax
Specific scope
components
Total
Full scope
components
Specific scope
components
Total
Total
assets
Full scope
components
Specific scope
components
2018 2017
59% 59%
24% 24%
83% 83%
59% 57%
21% 26%
80% 83%
56% 60%
19% 22%
Total
75% 82%
Of the remaining 25 components that
together represent 20% of the Group’s
profit before tax, none are individually
greater than 4% 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.
83 | Corporate Governance
The charts below illustrate the coverage
obtained from the work performed by our
audit teams.
17%
59%
24%
Revenue
20%
59%
Profit
before
tax
21%
25%
56%
Total assets
19%
Full Scope components
Specific Scope components
Other procedures
Changes from the prior year
The key changes in audit scope since
2017 are:
• Germany which now represents 9% of
the Group’s 2018 revenue (2017 – 8%)
and 8% of the Group’s Profit before
tax (2017 – 5%) was identified as full
scope component (2017 – specific
scope). It represents 3rd biggest
location in terms of its contribution to
the Group’s revenue;
• Australia, which now is the 4th largest
contributor to the Group’s revenue and
represents 7% of the Group’s revenue
(2017 – 8%), was identified as specific
scope component (2017 – full scope
component).
Involvement with component teams
In establishing our overall approach to
the Group audit, we determined the type
of work that needed to be undertaken
at each of the components by us, as
the primary audit engagement team, or
by component auditors from other EY
global network firms operating under
our instruction. For the 6 full scope and
5 specific 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. For all full and 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 China and Australia. A visit to
the UK, 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 UK 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
and perform independent testing of
management controls on some of the
processes. The Group audit team led 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
Annual Report and Accounts 2018 and extent of our audit procedures.
Other information
We determined materiality for the Group
to be £6.7 million (2017: £5.4 million),
which is based on 5% (2017: 5%) of
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 £5.9 million (2017: £5.8
million), which is 0.5% (2017: 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% (2017: 75%) of
our planning materiality, namely £5.0m
(2017: £4.1m).
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 £1m to
£2.3m (2017: £0.8m to £1.8m).
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 £0.34m (2017: £0.27m), 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.
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
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 80) – 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 53) – 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 47) – 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
the strategic report and the
directors’ report have been
prepared in accordance with
applicable legal requirements.
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.
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
Corporate Governance | 84
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 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, 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
by 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 8 years, covering
the years ending 31 December 2011
to 2018.
•
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.
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.
Bob Forsyth (Senior Statutory Auditor)
for and on behalf of Ernst & Young LLP,
Statutory Auditor
London
5 March 2019
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.
Responsibilities of directors
As explained more fully in the directors’
responsibilities statement set out on page
80, 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.
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.
85 | Corporate Governance
Annual Report and Accounts 2018 CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2018
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 2018
Profit for the year
Other comprehensive income/(loss) for the year
Items that may subsequently be reclassified to profit and loss:
Currency translation differences
(Loss)/Gain on hedging instruments
Total comprehensive income for the year
Attributed to:
Owners of the parent
2018
£’000
1,549,941
(735,039)
814,902
(672,439)
142,463
631
(819)
142,275
(38,572)
103,703
2017
£’000
1,371,534
(659,966)
711,568
(593,246)
118,322
229
(389)
118,162
(35,082)
83,080
103,703
83,080
32.5
32.4
26.5
26.4
2018
£’000
103,703
4,359
(988)
107,074
2017
£’000
83,080
(2,888)
1,340
81,532
107,074
81,532
Financial statements | 86
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018
CONSOLIDATED AND PARENT COMPANY BALANCE SHEETS
As at 31 December 2018
Note
Group
2018
£’000
Company
2017
£’000
2018
£’000
2017
£’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
35,564
30,158
2,019
1,685
31,377
32,473
–
–
–
–
–
–
–
17,487
12,746
99,193
–
523,729
516,681
14,637
10,513
89,466
–
–
–
–
523,729
516,681
349,111
299,089
642,855
647,607
17,206
97,673
15,652
95,605
–
–
–
–
463,990
410,346
642,855
647,607
563,183
499,812
1,166,584
1,164,288
(204,353)
(187,730)
(913,232)
(848,476)
(20,145)
(22,166)
–
–
(224,498)
(209,896)
(913,232)
(848,476)
239,492
200,450
(270,377)
(200,869)
(19,474)
(19,489)
(630)
(370)
(20,104)
(19,859)
–
–
–
–
–
–
(244,602)
(229,755)
(913,232)
(848,476)
318,581
270,057
253,352
315,812
3,284
98,502
932
3,268
92,677
932
(50,673)
(58,931)
29,858
34,217
232,319
318,581
3,284
98,502
932
–
–
3,268
92,677
932
–
–
202,253
150,634
270,057
253,352
218,935
315,812
The financial statements of PageGroup plc (Company Number 3310225) set out on pages 86 to 117 were approved by the Board of
Directors and authorised for issue on 5 March 2019. The Company’s profit for the financial year amounted to £6.0m (2017: £9.6m).
Signed on behalf of the Board of Directors
Steve Ingham,
Chief Executive Officer
Kelvin Stagg,
Chief Financial Officer
87 | Financial statements
Annual Report and Accounts 2018
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2018
2017
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 2017
3,259
90,458
932
(72,941)
32,746
192,107
246,561
–
–
–
–
–
9
–
–
–
–
9
–
–
–
–
–
2,219
–
–
–
–
2,219
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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)
3,268
92,677
932
(58,931)
29,858
202,253
270,057
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
Balance at 31 December 2017
and 1 January 2018
2018
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 the
employee benefit trust
–
–
–
–
–
–
–
–
–
–
–
–
Exercise of share plans
16
5,825
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
–
–
–
–
–
–
–
–
Balance at 31 December 2018
16
3,284
5,825
98,502
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,359
4,359
–
–
–
–
(988)
4,359
4,359
(988)
103,703
103,703
4,359
102,715
107,074
(11,567)
–
19,825
–
–
–
8,258
–
–
–
–
–
–
–
–
(11,567)
21,072
26,913
(19,825)
–
7,048
7,048
368
368
(81,312)
(81,312)
(72,649)
(58,550)
932
(50,673)
34,217
232,319
318,581
Financial statements | 88
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 STATEMENT OF CHANGES IN EQUITY – PARENT COMPANY
For the year ended 31 December 2018
Company
Balance at 1 January 2017
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 2017
and 1 January 2018
2018
Profit for the year
Total comprehensive income for
the year
Exercise of share plans
Credit in respect of share schemes
Dividends
8
8
Note
Called-up
share capital
£’000
3,259
Share
premium
£’000
90,458
Capital
redemption
reserve
£’000
932
–
–
9
–
–
9
–
–
2,219
–
–
2,219
–
–
–
–
–
–
Retained
earnings
£’000
280,728
Total equity
£’000
375,377
9,649
9,649
9,649
–
6,809
(78,251)
(71,442)
9,649
2,228
6,809
(78,251)
(69,214)
3,268
92,677
932
218,935
315,812
–
–
16
–
–
16
–
–
5,825
–
–
5,825
98,502
–
–
–
–
–
–
932
5,963
5,963
5,963
–
7,048
(81,312)
(74,264)
150,634
5,963
5,841
7,048
(81,312)
(68,423)
253,352
Balance at 31 December 2018
3,284
89 | Financial statements
Annual Report and Accounts 2018 CONSOLIDATED AND PARENT COMPANY CASH FLOW STATEMENTS
For the year ended 31 December 2018
Group
Company
Note
2
10/11
Profit before tax
Depreciation and amortisation charges
Loss/(income) on sale of property, plant and
equipment, and computer software
Share scheme charges
Net finance cost
Operating cash flow before changes in working
capital
(Increase)/decrease in receivables
Increase in payables
Cash generated from operations
Income tax paid
Net cash from operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Purchases of intangibles
Proceeds from the sale of property, plant and
equipment, and computer software
Interest received
Net cash used in investing activities
Cash flows from financing activities
Dividends paid
Interest paid
Issue of own shares for the exercise of options
Purchase of shares held in the employee
benefit trust
Net cash used in financing activities
2018
£’000
142,275
19,661
281
7,043
181
169,441
(49,278)
11,534
131,697
(41,001)
90,696
2017
£’000
118,162
19,094
(159)
6,796
160
144,053
(42,629)
23,040
124,464
(38,154)
86,310
10
11
(15,668)
(9,944)
(13,415)
(7,508)
1,204
631
4,688
229
(23,777)
(16,006)
2018
£’000
5,963
2017
£’000
9,649
–
–
–
–
5,963
4,752
64,756
75,471
–
–
–
–
–
9,649
16,401
49,973
76,023
–
75,471
76,023
–
–
–
–
–
–
–
–
–
–
(81,312)
(78,251)
(81,312)
(78,251)
(818)
26,913
(11,567)
(66,784)
(1,845)
12,686
–
5,841
–
2,228
–
–
–
(67,410)
(75,471)
(76,023)
Net increase in cash and cash equivalents
135
2,894
Cash and cash equivalents at the beginning
of the year
Exchange gain/(loss) on cash and cash equivalents
Cash and cash equivalents at the end of the year
19
95,605
1,933
97,673
92,796
(85)
95,605
–
–
–
–
–
–
–
–
Financial statements | 90
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Notes to the Financial
Statements
For the year ended 31 December 2018
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
£6.0m (2017: £9.6m). The decrease in the
Company’s profit this year is as a result of
decreased 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 2018. 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.
91 | Financial statements
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 2018:
•
•
•
•
IFRS 9 Financial Instruments
IFRS 15 Revenue from Contracts
IFRS 2 Classification and
Measurement of Share-based
Payment Transactions
IFRIC Interpretation 22 Foreign
Currency Transactions and Advance
Consideration
• Annual Improvements to IFRSs
2015-2017 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 16 Leases; effective date
1 January 2019
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 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.
The standard became effective on 1
January 2018 and was adopted by the
Group. A fully retrospective approach was
adopted although no adjustment was
required.
Please see below for Group’s rationale for
the above conclusion.
Revenue earned on a contingent basis
(c. 27% of revenue)
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. The basis of revenue
recognition remains appropriate as our
only performance obligation (the placement
of the candidate) has been performed.
Therefore no adjustment was 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)
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 concluded that there is only one
performance obligation, being provision of
recruitment services.
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 also concluded that under an
Output or Input method the timing of
revenue recognition is 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 no adjustment
was required on transition to IFRS 15.
Annual Report and Accounts 2018 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 was 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 was required on transition
to IFRS 15 for this revenue stream.
IFRS 9 – Financial Instruments
The Directors have concluded that no
adjustment was required on transition
to IFRS 9 and this has been applied
on a fully retrospective basis. The only
financial instruments held by Group are
net trade receivables of £288.2m (2017:
£245.4m) and net fair value derivatives of
nil (2017: £0.2m).
The IFRS 9 expected credit losses
method is consistent with Group’s
current credit policy. The majority of
Group’s clients have been transacting
with the Group for several years, with
losses rarely occurring. Where a loss is
expected to occur or the recoverability is
uncertain a provision is made.
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. A lessee can choose to apply the
standard using either a full retrospective
or a modified retrospective approach.
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
remeasure 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.
During the year ended 2018, we
have concluded on our discount rate
methodology, accounting policies
and internal controls that will be
implemented. An external software
provider has been engaged to
implement a new IT system to manage
the lease portfolio and to calculate and
record the impact of IFRS 16.
Having concluded our modelling of IFRS
16, the Group has elected to adopt the
Modified retrospective approach on
transition. This will be a combination of
both the Modified (a) and Modified (b)
method depending on the specific lease.
Application of the two methods is set out
below:
• Modified (a) method - an
adjustment to reserves is made
on transition. The lease liability is
calculated on a retrospective basis
and a discount rate at the date of
initial application has to be used. A
full restatement of comparatives is
not necessary.
• Modified (b) method - an
adjustment to reserves is made on
transition. The present value of the
future lease payments is equal to
the lease liability.
The Group will apply both the short-term
(less than 12 months) and low value (less
than $5k) exemptions to the remaining
leases on transition.
As previously disclosed, the adoption
of IFRS 16 will increase EBITDA for
the Group as rentals are reclassified
as depreciation and interest expense.
There will also be a marginal impact
to our Operating Profit and therefore
Conversion Rate.
As at 1 January 2019, the Group
will recognise a right-of-use asset
and corresponding lease liability. The
balances recognised will be materially
in line with the current disclosures in
Note 21 – Commitments of c.£148m
discounted at the appropriate discount
rate.
There will be no quantitative impact
to cash flows, only a presentational
reclassification. The Group’s operating
cash flow will increase and financing
cash flows will decrease, as the straight
line rental payments are replaced by
financing costs and depreciation.
The Group will report for the first time
under IFRS 16 when our 2019 Interim
Results are announced.
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 35.
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
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
Financial statements | 92
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 •
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
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.
(i) Functional and presentation currency
(iii) Software under construction
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.
93 | Financial statements
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 (2017:
£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
The Group recognises an allowance
for expected credit losses (ECLs) for all
debt instruments not held at fair value
through profit or loss. ECLs are based on
the difference between the contractual
cash flows due in accordance with the
contract and all the cash flows that the
Group expects to receive, discounted at
an approximation of the original effective
interest rate.
ECLs are recognised in two stages. For
credit exposures for which there has not
been a significant increase in credit risk
since initial recognition, ECLs are provided
for credit losses that result from default
events that are possible within the next
12-months (a 12 month ECL). For those
credit exposures for which there has been
a significant increase in credit risk since
initial recognition, a loss allowance is
required for credit losses expected over the
remaining life of the exposure, irrespective
of the timing of the default (a lifetime ECL).
For trade receivables and contract assets,
the Group applies a simplified approach
in calculating ECLs. Therefore, the Group
does not track changes in credit risk, but
instead recognises a loss allowance based
on lifetime ECLs at each reporting date.
The Group has established a provision
matrix that is based on its historical credit
loss experience, adjusted for forward-
looking factors specific to the debtors and
the economic environment.
i) Taxation
Income tax expense represents the sum of
the current tax and deferred tax charges.
Annual Report and Accounts 2018 The tax currently payable is based on
taxable profit for the year. Taxable profit
differs from profit as reported in the
income statement because it excludes
items of income or expense that are
taxable or deductible in other years and
it further excludes items that are never
taxable or deductible. The Group’s
liability for current tax is calculated using
tax rates that have been enacted or
substantively enacted by the balance
sheet date.
Deferred tax is recognised on differences
between the carrying amounts of assets
and liabilities in the financial statements
and the corresponding tax bases used in
the computation of taxable profit and is
accounted for using the balance sheet
liability method.
Deferred tax liabilities are generally
recognised for all taxable temporary
differences and deferred tax assets are
recognised to the extent that it is probable
that taxable profits will be available against
which deductible temporary differences
can be utilised. Such assets and liabilities
are not recognised if the temporary
difference arises from goodwill or from the
initial recognition (other than in a business
combination) of other assets and liabilities
in a transaction that affects neither the
taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for
taxable temporary differences arising on
investments in subsidiaries, except where
the Group is able to control the reversal
of the temporary difference and it is
probable that the temporary difference will
not reverse in the foreseeable future. The
carrying amount of deferred tax assets is
reviewed at each balance sheet date and
reduced to the extent that it is no longer
probable that sufficient taxable profits will
be available.
Deferred tax is calculated at the tax rates
that are expected to apply in the period
when the liability is settled or the asset
realised.
Deferred tax is charged or credited to the
income statement, except when it relates
to items charged or credited directly to
equity, in which case the deferred tax
is also dealt with in equity. Deferred tax
assets and liabilities are offset when
there is a legally enforceable right to set
off current tax assets against current
tax liabilities and when they relate to
income taxes levied by the same taxation
authority and the Group intends to settle
its current tax assets and liabilities on a
net basis.
j) Pension costs
The Group operates defined contribution
pension schemes. The assets of the
schemes are held separately from
those of the Group in independently
administered funds. The pension costs
charged to the income statement
represent the contributions payable
by the Group to the funds during each
period.
k) Leased assets
Leases are classified as finance leases
whenever the terms of the lease transfer
substantially all the risks and rewards of
ownership to the lessee. All other leases
are classified as operating leases.
The Group does not currently have any
finance leases.
Rentals under operating leases are
charged to the income statement on a
straight-line basis over the term of the
lease. Benefits received and receivable
as an incentive to enter into an operating
lease are also spread on a straight-line
basis over the lease term.
l) Segment reporting
IFRS 8 requires operating segments
to be identified on the basis of internal
reports about components of the Group
that are regularly reviewed by the Board
to allocate resources to the segments
and to assess their performance.
Information provided to the Board is
focused on regions and as a result,
reportable segments are on a regional
basis. 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
the period in which the dividends are
approved by (for final dividends) or paid
to (for interim dividends) the Company’s
shareholders.
n) Share-based compensation
The Group operates a number of equity-
settled, share-based compensation
plans. The accounting treatments for
the Group and parent company are
described below:
(i) Share option schemes
The fair value of the employee services
received in exchange for the grant of the
options is recognised as an expense in
the income statement of the Group with
a corresponding adjustment to equity.
In the parent company, it is capitalised
as an investment, with a corresponding
adjustment to equity. The total amount
to be expensed over the vesting period
is determined by reference to the fair
value of the options granted, excluding
the impact of any non-market vesting
conditions (for example, earnings per
share). Non-market vesting conditions
are included in assumptions about the
number of options that are expected to
become exercisable. At each balance
sheet date, the estimate of the number
of options that are expected to become
exercisable is revised. The Group
recognises the impact of the revision of
original estimates, if any, in the income
statement, and the corresponding
adjustment to equity over the remaining
vesting period.
(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 in the
subsidiary that is receiving the employee
service, with a corresponding adjustment
to equity.
(iii) Employee Single Incentive Plan (ESIP)
Awards under the ESIP are paid in cash
(40%) and Shares (60%), which vest in 3
tranches over a 3 year period. The value
of expected award is charged to the
income statement of the Group relative to
these vesting periods.
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.
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.
Financial statements | 94
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 • Note 13 – Trade and other receivables
There is uncertainty regarding customers
who may not be able to pay as their
invoices fall due. In total the Group holds
£297.4m of Gross Trade Receivables. A
provision for £9.2m has been recognised
based on the expected credit losses,
revenue reversals or balances which are in
litigation.
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.
Whilst no debtor constitutes more than
3% of the total balance there is a risk that
if the economic climate were to deteriorate
across a number of countries the portfolio
could be impaired by an amount greater
than materiality. This scenario is however
considered sufficiently remote such
that no reasonably possible changes in
assumptions are likely to cause material
further impairment next year. Please see
note 20 for an analysis of expected credit
losses and revenue reversals.
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.
statement of cash flows. Prepayments
and Accrued Income are held at amortised
cost.
All financial liabilities are recognised initially
at fair value and, in the case of loans and
borrowings and payables, net of directly
attributable transaction costs.
The Group’s financial liabilities include trade
and other payables and derivative financial
instruments.
Financial liabilities are classified, at intital
recognition, as financial liabilities through
profit or loss, loans and borrowings,
payables, or as derivatives designated as
hedging instruments in an effective hedge,
as appropriate.
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:
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 are classified, at initial
recognition, as subsequently measured at
amortised cost, fair value through other
comprehensive income (OCI), and fair value
through profit or loss.
The classification of financial assets at initial
recognition depends on the financial assets
contractual cash flow characteristics and
the Group’s business model for managing
them. With the exception of trade
receivables that do not contain a significant
financing component or for which the
Group has applied the practical expedient,
the Group initially measures a financial
asset at its fair value plus, in the case of
a financial asset not at fair value through
profit or loss, transaction costs. Trade
receivables that do not contain a significant
financing component or for which the
Group has applied the practical expedient
are measured at the transaction price
determined under IFRS 15. The Group’s
financial assets at amortised cost includes
trade and other receivables.
In order for a financial asset to be classified
and measured at amortised cost or fair
value through OCI, it needs to give rise
to cash flows that are ‘solely payments
of principal and interest (SPPI)’ on the
principal amount outstanding. This
assessment is referred to as the SPPI test
and is performed at an instrument level.
The Group’s business model for managing
financial assets refers to how it manages its
financial assets in order to generate cash
flows. The business model determines
whether cash flows will result from
collecting contractual cash flows, selling
the financial assets, or both.
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
95 | Financial statements
Annual Report and Accounts 2018 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 such geography, market maturity and economic environment. No judgements were applied to identify the reportable
segments.
(a) Revenue, gross profit and operating profit by reportable segment
2018
EMEA
United Kingdom
Asia Pacific
Australia and New Zealand
Asia
Total – Asia Pacific
Americas
Operating profit
Financial expense
Revenue
2018
£’000
797,427
313,525
112,930
153,794
266,724
Gross
profit
2018
£’000
394,337
138,392
40,592
120,566
161,158
172,265
121,015
–
–
–
–
Operating
profit
2018
£’000
85,586
13,392
4,291
22,474
26,765
16,720
142,463
(188)
Revenue/gross profit/profit before tax
1,549,941
814,902
142,275
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
The above analysis by destination is not materially different to the analysis by origin.
The analysis over the page 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.
(b) Segment assets, liabilities, non-current assets and capital expenditure by reportable segment
EMEA
United Kingdom
Asia Pacific
Australia and New Zealand
Asia
Total – Asia Pacific
Americas
Segment assets/liabilities
Income tax
Total assets
Total liabilities
2018
£’000
246,687
121,058
29,719
85,501
115,220
63,012
545,977
17,206
563,183
2017
£’000
219,024
123,423
24,639
61,176
85,815
55,898
484,160
15,652
499,812
2018
£’000
131,948
40,398
11,059
18,744
29,803
22,308
224,457
20,145
244,602
2017
£’000
109,100
51,193
10,349
18,132
28,481
18,815
207,589
22,166
229,755
Financial statements | 96
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 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
Property, plant and
equipment
2018
£’000
13,654
6,254
1,557
5,604
7,161
8,495
2017
£’000
12,218
6,894
1,174
3,397
4,571
6,475
Intangible assets
2018
£’000
3,171
2017
£’000
3,668
29,554
30,116
274
207
481
190
2
31
33
341
34,158
35,564
30,158
33,396
Property, plant and
equipment
2018
£’000
2017
£’000
5,152
1,583
944
3,745
4,689
4,244
7,501
1,945
347
1,781
2,128
1,841
Intangible assets
2018
£’000
1,061
8,371
302
201
503
9
2017
£’000
1,220
6,237
–
28
28
23
15,668
13,415
9,944
7,508
The below analysis in note (c) relates to the requirement of IFRS 15 to disclose disaggregated revenue streams.
(c) Revenue and gross profit generated from permanent and temporary placements
Permanent
Temporary
Revenue
Gross profit
2018
£’000
629,136
920,805
2017
£’000
543,262
828,272
1,549,941
1,371,534
2018
£’000
621,746
193,156
814,902
2017
£’000
536,010
175,558
711,568
The analyses in notes d) revenue and gross profit by discipline (being the professions of candidates placed) and (e) revenue and gross profit
by strategic market have been included as additional disclosure over and above the requirements of IFRS 8 “Operating Segments”. Strategic
markets are defined in the Strategic Review on page 13.
(d) Revenue and gross profit by discipline
Accounting and Financial Services
Legal, Technology, HR, Secretarial and other
Engineering, Property & Construction, Procurement & Supply Chain
Marketing, Sales and Retail
(e) Revenue and gross profit by strategic market
Large, Proven markets
Large, High Potential markets
Medium and Small, High Margin markets
97 | Financial statements
Revenue
2018
£’000
609,131
402,321
345,654
192,835
2017
£’000
559,480
337,857
290,830
183,367
1,549,941
1,371,534
Revenue
2018
£’000
935,800
414,245
199,896
2017
£’000
860,415
338,002
173,117
1,549,941
1,371,534
Gross profit
2018
£’000
2017
£’000
282,653
261,062
196,773
194,562
140,914
814,902
Gross profit
2018
£’000
419,102
270,311
125,489
814,902
161,424
158,714
130,368
711,568
2017
£’000
383,027
222,676
105,865
711,568
Annual Report and Accounts 2018 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)
Loss/(income) 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:
2018
£’000
2017
£’000
520,907
454,398
1,625
9,251
1,726
8,477
10,410
10,617
22,348
18,426
281
(159)
32,810
30,160
7,258
9,079
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
226
219
Fees payable to the Company’s auditor and associates for other services:
– The audit of the Company’s subsidiaries pursuant to legislation
Total audit fees
– Tax advice for the Company, its subsidiaries and individual employees
in relation to moving employees internationally
– Audit related assurance services
in relation to moving employees internationally
– Other non-audit services
Total non-audit fees
Total fees
4. Employee information
532
758
–
52
2
54
513
732
22
52
6
80
812
812
The average number of employees (including Executive Directors) during the year and total number of employees (including Executive
Directors) at 31 December 2018 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
2018
Average
No.
2017
Average
No.
At 31 Dec
2018
No.
At 31 Dec
2017
No.
319
5,572
1,641
7,532
311
4,782
1,456
6,549
325
5,791
1,656
7,772
314
5,184
1,531
7,029
2018
£’000
2017
£’000
442,196
381,286
48,390
45,630
18,159
15,501
12,162
11,981
520,907
454,398
No staff are employed by the parent company (2017: 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 60 to 77.
Financial statements | 98
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018
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 27.1% on profit before tax (2017: 29.7%).
Analysis of charge in the year
UK income tax at 19.00% (2017: 19.25%) for year
Overseas income tax
Adjustments in respect of prior years
Deferred tax
Adjustment in respect of prior years
Origination and reversal of temporary differences
Recognition of previously unrecognised losses and other tax attributes
Impact of tax rate changes
Charge for tax losses recognised
Deferred tax (income)/expense
Total tax expense in the income statement
2018
£’000
631
631
(598)
(221)
(819)
2018
£’000
10,270
32,844
(3,625)
39,489
1,319
(3,023)
36
211
540
(917)
38,572
Reconciliation of effective tax rate
Profit before taxation
2018
£’000
142,275
%
2017
£’000
118,162
Profit before tax multiplied by the standard rate of corporation tax in the UK
27,032
19.0
22,746
Effects of:
Disallowable items and other permanent differences
Unrelieved overseas losses
Utilisation of losses not previously recognised
Derecognition/(recognition) of overseas losses and other tax attributes
Other tax movements
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
540
213
–
36
368
5,275
7,203
211
(2,306)
38,572
0.4
0.1
–
–
0.3
3.7
5.1
0.1
(1.6)
27.1
571
1,715
(64)
(661)
(1,579)
4,896
4,479
1,196
1,783
35,082
2018
£’000
(368)
2017
£’000
229
229
(241)
(148)
(389)
2017
£’000
9,726
23,076
456
33,258
1,327
(2,729)
(661)
1,315
2,572
1,824
35,082
%
19.3
0.5
1.5
(0.1)
(0.6)
(1.3)
4.1
3.8
1.0
1.5
29.7
2017
£’000
(720)
Other taxes overseas are secondary taxes on income, in addition to national corporate income tax, which are included in income tax expense
under IFRS. These taxes are primarily in France (CVAE), Germany (trade taxes), Italy (IRAP) and the US (state taxes).
99 | Financial statements
Annual Report and Accounts 2018 7. Current tax assets and liabilities
The current tax asset of £17.2m (2017: £15.7m), and current tax liability of £20.1m (2017: £22.2m) for the Group, and current tax asset
and liability of £nil (2017: £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 2017 of 8.60p per Ordinary share (2016: 8.23p)
Interim dividend for the year ended 31 December 2018 of 4.10p per Ordinary share (2017: 3.90p)
Special dividend for the year ended 31 December 2018 of 12.73p per Ordinary share (2017: 12.73p)
2018
£’000
2017
£’000
27,433
13,117
40,762
81,312
25,857
12,287
40,107
78,251
Amounts proposed as distributions to equity holders in the year:
Proposed final dividend for the year ended 31 December 2018 of 9.00p per Ordinary share (2017: 8.60p)
29,171
27,144
The proposed final dividend had not been approved by shareholders at 31 December 2018 and therefore has not been included as a
liability. The comparative final dividend at 31 December 2017 was also not recognised as a liability in the prior year.
The proposed final dividend of 9.00p (2017: 8.60p) per Ordinary share will be paid on 17 June 2019 to shareholders on the register at
the close of business on 17 May 2019, 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
2018
£’000
2017
£’000
103,703
83,080
number
number
318,877
313,491
1,627
1,287
320,504
314,778
pence
pence
32.5
32.4
26.5
26.4
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average
number of Ordinary shares in issue during the year, excluding unallocated 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.
Financial statements | 100
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018
2018
Leasehold
improve-
ments
£’000
Furniture,
fixtures and
equipment
£’000
Motor
vehicles
£’000
40,500
7,814
(3,454)
160
43,481
7,327
(1,614)
247
45,020
49,441
25,351
4,185
(2,825)
(29)
29,830
4,572
(1,367)
195
26,682
33,230
2,556
527
(837)
(144)
2,102
1,198
494
(541)
(64)
1,087
Total
£’000
86,537
15,668
(5,905)
263
96,563
56,379
9,251
(4,733)
102
60,999
18,338
16,211
1,015
35,564
2017
Leasehold
improve-
ments
£’000
Furniture,
fixtures and
equipment
£’000
Motor
vehicles
£’000
38,439
5,142
(2,536)
(545)
40,500
23,894
3,755
(2,009)
(289)
25,351
49,999
7,361
(13,630)
(249)
43,481
36,363
4,124
(10,507)
(150)
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
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
101 | Financial statements
Annual Report and Accounts 2018 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
2018
Computer
software,
assets under
construction
£’000
Computer
software
£’000
Subtotal
£’000
Goodwill
£’000
Trademark
£’000
Subtotal
£’000
Total
£’000
81,453
2,430
(436)
5,669
(11)
2,164
7,121
–
(5,669)
–
83,617
1,539
9,551
(436)
–
(11)
–
–
–
–
746
393
–
–
–
2,285
85,902
393
–
–
–
9,944
(436)
–
(11)
89,105
3,616
92,721
1,539
1,139
2,678
95,399
51,144
10,351
(123)
(28)
61,344
–
–
–
–
–
51,144
10,351
(123)
(28)
61,344
–
–
–
–
–
600
59
–
–
600
59
–
–
51,744
10,410
(123)
(28)
659
659
62,003
27,761
3,616
31,377
1,539
480
2,019
33,396
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
Financial statements | 102
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 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
2018
£’000
1,274
214
51
1,539
2017
£’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 2018 there was no impairment of goodwill.
12. Investments
Company
Cost at 1 January 2018
Transactions relating to share plans for subsidiaries’ employees
Cost at 31 December 2018
Subsidiary undertakings
£’000
516,681
7,048
523,729
The Company’s subsidiary undertakings at 31 December 2018, their principal activities and countries of incorporation are set
out below:
Name of undertaking
Michael Page International
Argentina SA
Country of
incorporation
Principal
activity
Registered office
Argentina
Recruitment Consultancy
Carlos Pellegrini 1265, Piso 12, Ciudad de Buenos
Aires, C1009ABY, Argentina
Page Personnel Argentina SA
Argentina
Recruitment Consultancy
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
Carlos Pellegrini 1265, Piso 12, Ciudad de Buenos
Aires, C1009ABY, Argentina
Australia
Recruitment Consultancy
Level 32, 225 George Street, Sydney, NSW 2000,
Australia
Michael Page International (Austria) GmbH
Austria
Recruitment Consultancy
Second floor, Gumpendorfer Strauße 72, Wien, Austria
Michael Page International (Belgium) NV/SA
Belgium
Recruitment Consultancy
Place du Champ de Mars 5 , 1050 Brussels, Belgium
Page Interim (Belgium) NV/SA
Belgium
Recruitment Consultancy
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
103 | Financial statements
Annual Report and Accounts 2018 Name of undertaking
Michael Page International
Chile Ltda
Page Personnel International
Chile Ltda
Country of
incorporation
Principal
activity
Registered office
Chile
Chile
Recruitment Consultancy
Magdalena 181, Piso 16, Las Condes, Santiago
7550055, Chile
Recruitment Consultancy
Magdalena 181, Piso 1, Las Condes, Santiago
7550055, Chile
Page Consulting Chile Ltda
Chile
Recruitment Consultancy
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
Recruitment Consultancy
China
Recruitment Consultancy
China
Non-Trading
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
Suite 1010, Shanghai Kerry Centre, 1515 Nanjing
West Road, Shanghai, China
Colombia
Recruitment Consultancy
Av. Calle 82 No. 10-33 - Oficina 801, Colombia
Page Interim Colombia SAS
Colombia
Non-Trading
Av. Calle 82 No. 10-33 - Oficina 801, Colombia
Michael Page Partnership Limited England and Wales Non-Trading
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
Michael Page Employment
Services Limited
England and Wales Recruitment Consultancy
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
LPM (Professional Recruitment)
Limited
England and Wales Holding company
Page House, 1 Dashwood Lang Road, Bourne
Business Park, Weybridge, Surrey KT15 2QW, UK
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
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
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
Financial statements | 104
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Name of undertaking
Country of
incorporation
Principal
activity
Registered office
Michael Page Holdings Limited
England and Wales
Support services
Page House, 1 Dashwood Lang Road, Bourne Business
Park, Weybridge, Surrey KT15 2QW, UK
Michael Page International
Holdings Limited
Michael Page International
Recruitment Limited*
England and Wales
Holding company
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
164 Avenue Achille Peretti, 92522 Neuilly-sur-Seine, Paris,
France
Page Personnel SAS
France
Recruitment Consultancy
164 Avenue Achille Peretti, 92522 Neuilly-sur-Seine, Paris,
France
Michael Page Business
Services EURL
France
Recruitment Consultancy
164 Avenue Achille Peretti, 92522 Neuilly-sur-Seine, Paris,
France
MP Ignenieurs et Informatique SARLU France
Recruitment Consultancy
Page Formation EURL
France
Support Services
Michael Page Tertiaire 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
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
Support Services
Page Consulting SARLU
France
Recruitment Consultancy
Michael Page EDP EURL
France
Support Services
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
164 Avenue Achille Peretti, 92522 Neuilly-sur-Seine, Paris,
France
164 Avenue Achille Peretti, 92522 Neuilly-sur-Seine, Paris,
France
Michael Page International
(Deutschland) GmbH
105 | Financial statements
Germany
Recruitment Consultancy
Carl Theodor Strasse 1, 40213 Dusseldorf, Germany
Annual Report and Accounts 2018 Name of undertaking
Country of
incorporation
Principal
activity
Registered office
Page Personnel Services GmbH
Germany
Recruitment Consultancy
Carl Theodor Strasse 1, 40213 Dusseldorf, Germany
Page Personnel (Deutschland)
GmbH
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
Page Personnel Italia SpA
Italy
Italy
Recruitment Consultancy
Via Spadari 1, 20123 Milan, Italy
Recruitment Consultancy
Via Spadari 1, 20123 Milan, Italy
Michael Page International
(Japan) K.K.
Michael Page International
(Malaysia) Sdn Bhd
Japan
Recruitment Consultancy
6F Hulic Kamiyacho Building, 4-3-13 Toranomon, Minato-ku,
Tokyo 105-0001, Japan
Malaysia
Recruitment Consultancy
10th Floor, Wisma Hamjah-Kwong Hing, No.1 Leboh
Ampang, 50100 Kuala Lumpur
Michael Page (Mauritius) Limited Mauritius
Recruitment Consultancy
La Chaussee Office 530 & 531, Medine Mews, Port-Louis,
Mauritius
Michael Page International
(Mauritius) Limited
Michael Page International
Mexico Reclutamiento
Especializado, S.A. de C.V.
Mauritius
Recruitment Consultancy
Corner of Suffren and Eugene Laurent Streets, 5th Floor,
Atchia Building, Port-Louis, Mauritius
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
Michael Page International
Peru SRL
Page Personnel Services
Temporales Peru S.R.L.
Michael Page International
(Poland) Sp.z.o.o
New Zealand
Recruitment Consultancy
Level 17, 191 Queen Street, Auckland NZ 1010
Peru
Peru
Recruitment Consultancy
Calle Las Orquídeas 665 esq. Andrés Reyes - Piso 2, Oficina
201 San Isidro, Peru
Recruitment Consultancy
Calle Las Orquídeas 665 esq. Andrés Reyes - Piso 2, Oficina
201 San Isidro, Peru
Poland
Recruitment Consultancy
ul. Zlota 59, 00-120 Warsaw, Poland
Financial statements | 106
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 Name of undertaking
Michael Page International Empressa
de Trabalho Temporário e Serviços de
Consultadoria Lda
Country of
incorporation
Principal
activity
Registered office
Portugal
Recruitment Consultancy
Avenida da Liberdade n 180A, 1250-146 Lisboa,
Portugal
Portugal MP Outsourcing
Portugal
Recruitment Consultancy
Michael Page International
(UAE) Limited – QFC Branch
UAE
Recruitment Consultancy
Michael Page International Pte Limited*
Singapore
Recruitment Consultancy
Page Personnel Recruitment Pte Ltd
Singapore
Recruitment Consultancy
Avenida da Liberdade n 180A, 1250-146 Lisboa,
Portugal
Qatar Financial Centre, Office 2, Ground Floor, Tornado
Tower, West Bay, PO Box 23153, Doha, Qatar
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
Paseo de la Castellana 28 -3ª, 28046 Madrid, Spain
Michael Page Holding (España) SL
Spain
Holding company
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
Support Services
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
8F-1 Shin Kong Xin Yi Financial Building, 36-1 Songren
Road Xin-Yi District, Taipei City, Taiwan 110
Michael Page Thailand Limited
Thailand
Holding company
Michael Page International Recruitment
(Thailand) Limited
Thailand
Recruitment Consultancy
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 Istihdam
Danismanligi Limited Sirketi
Turkey
Recruitment Consultancy
Buyukdere Caddesi, Kanyon Ofis, Binasi No. 185, Kat 5
34394 Levent, Istanbul, Turkey
Michael Page International Yonetim
Servisleri Danismanligi Ltd
Michael Page International (Vietnam)
Co. Limited
Turkey
Recruitment Consultancy
Buyukdere Caddesi, Kanyon Ofis, Binasi No. 185, Kat 5
34394 Levent, Istanbul, Turkey
Vietnam
Recruitment Consultancy
Level 9, Saigon Centre, Tower 2, 67 Le Loi Street, Ben
Nhge Ward, District 1, Ho Chi Minh City, Vietnam
Michael Page International (UAE) Limited United Arab Emirates Recruitment Consultancy
No. 202, Al Fattan Currency House, Tower 1, Dubai
International Finance Centre (DIFC), PO Box 506702,
Dubai, United Arab Emirates
Michael Page International Inc.*
United States
Recruitment Consultancy
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.
107 | Financial statements
Annual Report and Accounts 2018 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
13. Trade and other receivables
Current
Trade receivables
Less allowance for expected credit losses and revenue reversals
Net trade receivables
Amounts due from Group companies
Other receivables
Accrued Income
Prepayments
Non-current
Other receivables
Group
2018
£’000
2017
£’000
Company
2018
£’000
2017
£’000
297,380
253,555
(9,174)
(8,161)
288,206
245,394
–
–
–
–
–
–
–
3,814
44,430
12,661
–
642,855
647,607
9,839
31,938
11,918
–
–
–
–
–
–
349,111
299,089
642,855
647,607
12,746
10,513
–
–
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
Accruals
Other tax and social security
Group
2018
£’000
Company
2017
£’000
2018
£’000
2017
£’000
6,594
6,240
–
–
–
58,186
26,870
111,040
1,663
–
913,094
848,300
54,615
28,312
97,467
1,096
–
–
138
–
–
–
176
–
204,353
187,730
913,232
848,476
18,453
1,021
19,474
18,628
861
19,489
–
–
–
–
–
–
The fair values of trade and other payables are not materially different to those disclosed above.
All amounts due to Group undertakings are unsecured, interest-free and repayable on demand.
The total liability relating to other tax and social security includes a balance of £1.1m (2017: £0.9m) 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.
Financial statements | 108
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 15. Bank overdrafts
No bank overdrafts were utilised in respect of the year ended 31 December 2018 (2017: £Nil).
At 31 December 2018, the Group had available nil (2017: £10m) of undrawn uncommitted overdraft facility with Deutsche Bank, £20m with
HSBC, £1.0m elsewhere in the Group and £26.9m of undrawn borrowing facilities under the Invoice Discounting arrangement with HSBC.
Under the terms of the Invoice Discount Facility we are able to borrow up to £50m depending on the level of trade receivables held at any one
time. Based on the carrying amount of trade receivables at the year end we were able to borrow £26.9m of the £50m and hence no actual
amount was drawn down on the facility at the year end. The Group utilised the facility during the year on an ad-hoc basis.
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 2018
Recognised in equity for the year
Recognised in profit or loss for the year
Exchange differences
At 31 December 2018
At 1 January 2017
Recognised in equity for the year
Recognised in profit or loss for the year
Exchange differences
At 31 December 2017
Share-based
payments
£’000
Tax losses
£’000
1,828
2,567
300
130
–
2,258
1,416
540
(128)
–
1,828
–
242
(15)
2,794
5,061
–
(2,298)
(196)
2,567
Other
£’000
9,872
–
1,980
(47)
11,805
9,640
–
602
(370)
9,872
Total
£’000
14,267
300
2,352
(62)
16,857
16,117
540
(1,824)
(566)
14,267
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
2018
£’000
17,487
(630)
16,857
2017
£’000
14,637
(370)
14,267
No deferred tax liability has been recognised in respect of £144.1m (2017: £108.3m) 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 increase of the deferred tax asset balance by £2.6m in the year includes £0.1m for the effects of recognition and derecognition of
tax losses across a number of territories plus the utilisation of losses in other territories. “Other” deferred tax relates to two types of timing
difference. The first comprises differences between the Group GAAP, IFRS, and the local GAAP of each country in which PageGroup operates.
The second comprises timing differences between recognition of income and expense for accounting and tax purposes. This latter category
includes deferrals of deductions for internal Group charges until paid in some countries (£4.8m) and bonus accruals (£4.0m). This can vary
from year to year and in 2018 resulted in an increase in the deferred tax asset of £1.9m (2017: £0.2m increase). The amount recognised in
profit or loss for the year of £0.2m in relation to losses is a combination of the elements disclosed in Note 6.
The realisation of the deferred tax asset is dependent upon generating future taxable profits in the overseas territories in which the deferred
tax asset has arisen. There are carried forward losses of £22.5m (2017: £25.1m) arising in overseas territories for which no deferred tax
is recognised given the future utilisation of the tax losses is uncertain. The uncertainty relates to assessing the probability of being able to
use losses in the foreseeable future which relies on forecasting future profitability. It is well known that we have limited visibility of this in the
recruitment and staffing sector and this, together with restrictions in some countries on the quantum of losses that may be used in each year,
leads to the conclusion that a deferred tax asset should not be recognised in respect of certain tax attributes, principally losses. There were no
other tax attributes recognised in those territories in which losses are not recognised. 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.
109 | Financial statements
Annual Report and Accounts 2018 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
2018
2017
£’000
Number of
shares
£’000
Number of
shares
3,268
326,808,701
3,259
325,975,455
16
1,531,023
9
833,246
3,284
328,339,724
3,268
326,808,701
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 2018 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 2018
Granted
in year
Exercised
in year
Lapsed
in year
No. of
options
outstand-
ing at 31
December
2018
Base EPS/
OP range†
Exercise price
per share
Exercise period
2009 (Note 2)*
374,250
2010 (Note 1)*
1,815,500
2011 (Note 2)
2,074,569
2012 (Note 2)*
1,537,048
–
(290,650)
– (1,531,023)
(9,800)
73,800 OP range
187.5p-211.84p
March 2012 – March 2019
–
284,477
6.6
381.5p-383.0p
March 2013 – March 2020
–
–
(154,311)
(255,337)
1,664,921 OP range
491.0p-492.9p
March 2014 – March 2021
(893,675)
(15,000)
628,373 OP range
477.0p
March 2015 – March 2022
2013 (Note 2)*
1,975,833
– (1,251,851)
(25,000)
698,982 OP range
442.0p
March 2016 – March 2023
2014 (Note 2)*
2,903,333
– (1,575,000)
(25,000)
1,303,333 OP range
484.0p
March 2017 – March 2024
2015 (Note 2)*
1,577,372
2016 (Note 2)*
1,605,000
2017 (Note 2)
1,665,000
–
–
–
2018 (Note 2)
– 1,740,000
(441,363)
(41,009)
1,095,000 OP range
526.0p-534.0p
March 2018 – March 2025
–
–
–
(67,389)
1,537,611 OP range
406.0p-427.0p
March 2019 – March 2026
(60,000)
1,605,000 OP range
435.44p
March 2020 – March 2027
(35,000)
1,705,000 OP range
529.0p
March 2021 – March 2028
Total 2018
15,527,905 1,740,000 (6,137,873)
(533,535) 10,596,497
Weighted
average
exercise price
2018 (£)
4.51
5.29
4.38
4.71
4.70
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
* These options have fully vested
† The Operating Profit ranges for each award are fully disclosed in Note 2 of this Note. 4,303,076 options were exercisable at the end of 2018 at a weighted average exercise
price of £4.75 (2017: £4.39). 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.
Financial statements | 110
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018
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 2018’s operating profit, 42% 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 in
2017, the performance criteria have been fully achieved and these awards have fully vested.
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. As Operating Profit of £142.5m was achieved in 2018, the performance criteria
have been fully achieved and these awards have fully vested.
For the 2017 grant, if Operating Profit is in excess of £50m, 25% of the award will vest, 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.
For the 2018 grant, if Operating Profit is in excess of £75m, 25% of the award will vest. 1% of the award will vest for every additional £1m of
Operating Profit achieved, up to a maximum of 100% at Operating Profit of £150m 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 Chief Executive Officer and Chief Financial Officer. Details of these plans are disclosed in the Directors’ Remuneration Report and
are settled by the physical delivery of shares, currently satisfied by shares held in the Employee Benefit Trust, to the extent that service and
performance conditions are met. Movements on these plans are shown below:
As at 1 January 2018
Granted
Lapsed
Exercised
As at 31 December 2018
LTIP
MIP
1,130,816
2,183,256
354,699
(131,457)
(164,147)
1,189,911
634,207
(29,459)
(617,591)
2,170,413
Share option valuation and measurement
In 2018, options were granted on 16 March with the estimated fair value of the options granted on that day of £0.96. In 2017, options were
granted on 16 March with the estimated fair value of the options granted on that day of £1.11.
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 2018 have an exercise price in the range of 187.5p to 534.0p and a weighted average contractual
life of 5.9 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
2018
5.29
5.29
0.96
25.76%
5 years
1.19%
2017
4.35
4.35
1.11
38.19%
5 years
0.72%
2018
5.29
Nil
5.05
25.76%
3 years
1.19%
Expected dividend yield
2.36%
2.87%
Nil
111 | Financial statements
2017
4.35
Nil
3.99
38.19%
3 years
0.72%
Nil
2018
5.29
Nil
5.29
25.76%
3 years
1.19%
2.36%
2017
4.35
Nil
4.35
38.19%
3 years
0.72%
2.87%
Annual Report and Accounts 2018 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 £8.4m, including social security, (2017: £7.7m) 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 2018, the reserve for shares held in the employee benefit trust consisted of 11,024,316 Ordinary shares (2017:
14,311,816 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 3.4% of the called-up share capital with a market value of £49.7m (2017: £66.9m).
There are 7,775,732 (2017: 11,181,237) 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
Group
2018
£’000
2017
£’000
97,626
95,327
47
97,673
97,673
97,673
278
95,605
95,605
95,605
Company
2018
£’000
2017
£’000
–
–
–
–
–
–
–
–
–
–
The Group operates multi-currency cash concentration and notional cash pools, and an interest enhancement facility. The Eurozone
subsidiaries and the UK-based Group Treasury subsidiary participate in the cash concentration arrangement, the Group Treasury
subsidiary retains the notional cash pool and the Asia Pacific subsidiaries operate the interest enhancement facility. The structures
facilitate interest compensation of cash whilst supporting working capital requirements.
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.
Financial statements | 112
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 (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 2018 amounted to £288.2m (2017: £245.4m).
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. An impairment analysis is performed at each reporting date using a provision matrix to measure the expected credit losses. The Group
has established a provision matrix that is based on its historical credit loss experience adjusted for forward- looking factors specific to the
debtors and the economic environment. If there has been a significant increase in credit risk in a customer or group of customers the loss is
recognised immediately based on the future credit losses over the life of the contract.
Included in the Group’s trade receivables balance are debtors with a carrying amount of £146.5m (2017: £116.7m) 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 54 days in excess of the initial credit period (2017: 53 days).
In the table below, the provision includes expected credit losses and provision for revenue reversals.
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
2018
£’000
141,788
87,197
57,794
10,601
297,380
Provision
2018
£’000
(80)
(50)
(33)
(9,011)
(9,174)
Net trade
receivables
2018
£’000
Gross trade
receivables
2017
£’000
141,708
128,978
87,147
57,761
1,590
72,098
43,494
8,985
288,206
253,555
Provision
2017
£’000
(275)
(155)
(94)
(7,637)
(8,161)
Net trade
receivables
2017
£’000
128,703
71,943
43,400
1,348
245,394
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 expected credit losses and revenue reversals:
Balance at beginning of the year
Expected credit losses and provision for revenue reversals recognised on receivables
Amounts written off as uncollectable
Amounts recovered/reversed during the year
Balance at end of the year
2018
£’000
8,161
22,348
(786)
(20,549)
9,174
2017
£’000
5,070
18,426
(669)
(14,666)
8,161
The allowance for expected credit losses represents a provision for debts which the Group estimate may be irrecoverable, including £4.2m
(2017: £3.5m) of debts 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.
113 | Financial statements
Annual Report and Accounts 2018 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
Carrying amount
2018
£’000
2017
£’000
178,482
148,292
38,237
45,767
25,720
45,248
30,460
21,394
288,206
245,394
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
2018
£’000
1,573
12,316
18,925
11,616
44,430
2017
£’000
956
8,638
15,749
6,595
31,938
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:
2018
Trade payables
Accruals and other payables
2017
Trade payables
Accruals and other payables
Less than
1 month
£’000
6,293
92,039
Less than
1 month
£’000
5,178
92,918
1-3 months
£’000
3-12 months
£’000
209
92
18,282
27,589
1-3 months
£’000
3-12 months
£’000
216
846
17,001
15,860
More than
12 months
£’000
–
–
More than
12 months
£’000
–
–
Financial statements | 114
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 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 2018 and 31 December 2017.
(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 2018 relate to cash and bank overdrafts. The average interest rate
payable on bank overdrafts was 2.85% (2017: 1.52%).
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, Hong Kong 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 instruments are foreign currency forward contracts. 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 loss on effective hedging instruments deferred within other
comprehensive income as at 31 December 2018 is £1.0m (2017: £1.3m profit).
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 assets/(liabilities)
Sensitivity analysis – currency risk
Derivatives at fair value
2018
£m
1.0
(1.0)
–
2017
£m
0.7
(0.9)
(0.2)
A 10% strengthening of Sterling against the following currencies at 31 December 2018 would have increased/(decreased) equity and profit or
loss by the amounts shown over the page. This is reflective of the exchange rates movements experienced by the Group over the last 3 years.
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 2017. 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.
115 | Financial statements
Annual Report and Accounts 2018 Euro
Australian Dollar
Swiss Franc
Chinese Renminbi
Hong Kong Dollar
Singapore Dollar
Other
Euro
Australian Dollar
Swiss Franc
Chinese Renminbi
Hong Kong Dollar
Singapore Dollar
Other
2018 equity
£’000
(11,426)
2018 PBT
£’000
(2,048)
(1,363)
(1,956)
(943)
(1,949)
(1,458)
(4,416)
2017 equity
£’000
(9,290)
(1,248)
(1,754)
(1,229)
(852)
(1,302)
(3,494)
(159)
(157)
73
(524)
(41)
(671)
2017 PBT
£’000
(2,598)
(123)
(171)
(305)
(165)
(8)
(778)
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 2018 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
2018
£’000
30,916
81,096
21,451
2017
£’000
31,083
78,318
17,102
133,463
126,503
Other
2018
£’000
7,121
7,871
–
14,992
2017
£’000
4,930
4,456
–
9,386
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 £0.2m of contractual capital commitments as at 31 December 2018 relating to property, plant and equipment (2017:
£0.1m). The Group had contractual capital commitments of £nil as at 31 December 2018 relating to computer software (2017: £nil).
22. Contingent liabilities
Guarantees
The Company has provided guarantees to other Group undertakings amounting to £1.0m (2017: £1.0m) 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 2018 amounted to £5.9m (2017: £6.1m).
23. Events after the balance sheet date
Between 31 December 2018 and 5 March 2019 there were no post balance sheet events.
Financial statements | 116
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 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 42 to 46. 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
2018
£’000
6,412
440
226
3,981
11,059
2017
£’000
6,322
672
200
1,601
8,795
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
2018
£’000
5,963
2017
£’000
9,649
Amounts owed
by related parties
Amounts owed
to related parties
2018
£’000
2017
£’000
2018
£’000
2017
£’000
642,855
647,607
913,094
848,300
2014
£’000
2015
£’000
2016
£’000
2017
£’000
2018
£’000
1,046,887
1,064,945
1,196,125
1,371,534
1,549,941
532,817
556,105
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%
814,902
142,463
142,463
142,275
103,703
17.5%
19.3*
21.3
23.1
26.5
32.5
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.
117 | Financial statements
Annual Report and Accounts 2018 Shareholder information and advisers
Annual General Meeting
To be held on 24 May 2019 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 2018
To be paid (if approved) on 17 June 2019 to shareholders on the register of members on 17 May 2019.
General Counsel & Company Secretary
Kaye Maguire
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
Joint corporate brokers
Citigroup
33 Canada Square
Canary Wharf
London E14 5LB
HSBC Bank plc
8 Canada Square
Canary Wharf
London E14 5HQ
Registrars
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Financial PR
FTI Consultancy
200 Aldersgate
Aldersgate Street
London EC1A 4HD
Additional information | 118
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 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 17 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
119 | Additional information
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 18
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
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
Annual Report and Accounts 2018 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
Additional information | 120
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAnnual Report and Accounts 2018 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
the interests of spouses, civil partners,
children, companies and trusts.
Borrowing powers of the Directors
The Directors shall restrict the
borrowings of the Company and
exercise all powers of control exercisable
by the Company in relation to its
subsidiary undertakings so as to secure
(as regards subsidiary undertakings so
far as by such exercise they can secure)
that the aggregate principal amount
(including any premium payable on final
repayment) outstanding of all money
borrowed by the Group (excluding
amounts borrowed by any member of
the Group from any other member of
the Group), shall not at any time, save
with the previous sanction of an ordinary
resolution of the Company, exceed
an amount equal to three times the
aggregate of:
(a) the amount paid up on the share
capital of the Company
(b) the total of the capital and revenue
reserves of the Group, including
any share premium account,
capital redemption reserve, capital
contribution reserve and credit
balance on the profit and loss
account, but excluding sums set
aside for taxation and amounts
attributable to outside shareholders
in subsidiary undertakings of the
Company and deducting any debit
balance on the profit and loss
account, all as shown in the latest
audited consolidated balance sheet
and profit and loss account of the
Group, but adjusted as may be
necessary in respect of any variation
in the paid up share capital or share
premium account of the Company
since the date of that balance sheet
and further adjusted as may be
necessary to reflect any change
since that date in the companies
comprising the Group
Director’s appointment, retirement
and removal
At each annual general meeting, there
shall retire from office by rotation:
(a) all Directors of the Company who
held office at the time of the two
preceding annual general meetings
and who did not retire by rotation at
either of them
(b) such additional number of Directors
as shall, when aggregated with the
number of Directors retiring under
paragraph (a) above, equal either
one third of the number of Directors,
in circumstances where the number
of Directors is three or a multiple of
three, or in all other circumstances,
the whole number which is nearest
121 | Additional information
(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
Annual Report and Accounts 2018