23rd Feb 2005 07:00
Michael Page International PLC23 February 2005 23 February 2005 MICHAEL PAGE INTERNATIONAL PLC Full Year Results for the year ended 31 December 2004 Michael Page International plc ("Michael Page"), the specialist professionalrecruitment company, announces its full year results for the year ended 31December 2004. £m 2004 2003 Change Turnover 433.7 372.6 + 16%Revenue (Gross Profit) 210.6 178.5 + 18%Operating profit before exceptional items 40.0 22.9 + 75%Operating profit after exceptional items 40.0 21.8 + 84%Earnings per share before exceptional items 7.4p 4.1p + 80%Earnings per share after exceptional items 10.0p 3.8p + 163%Dividend 4.0p 3.4p + 18% Key Points • Considerably improved results as markets strengthened • Increased activity in the UK, Asia Pacific and the Americas • Trading conditions in Continental Europe improved • Operating profit before exceptional items increased 75%, reflecting high operational gearing • Higher growth for permanent placements over temporary placements • Strong balance sheet with £12.2m net cash Commenting on the results, Terry Benson, Chief Executive of Michael Page, said: "The investments made in our businesses over the course of the economic cyclepositioned us well to take advantage of the better conditions that prevailedduring 2004, resulting in substantial increases in revenue, profits anddividends. "The short term outlook is encouraging. Market conditions in the UK, AsiaPacific and the Americas are favourable and in Continental Europe marketconditions are improving, although they remain uncertain. Our strategy remainsunchanged and we see numerous opportunities to grow our business in all ourregions." Enquiries:Michael Page International plc 020 7269 2205Terry Benson, Chief ExecutiveStephen Puckett, Finance Director Financial Dynamics 020 7269 7291David Yates/Richard Mountain Chairman's Statement The professional employment markets are primarily driven by the levels ofeconomic activity and business confidence which move in cycles, the timing andextent of which vary from region to region around the world. Our fundamentalstrategy is to grow the Group organically and, during an economic slowdown,maintain our infrastructure while continuing to make sensible investments forthe future. As a result, we are particularly well positioned to benefit from anyimprovements in the market. During 2004 the markets improved in all the regionsin which we operate and accordingly, I am very pleased to report a considerablyimproved set of results for 2004. Financial highlights Turnover for the year ended 31 December 2004 increased 16.4% to £433.7m (2003:£372.6m). As expected in an improving market, permanent placements grew morerapidly than temporary placement activity, and this movement in business mixcontributed to a larger revenue (gross profit) increase of 18.0% to £210.6m(2003: £178.5m). Given the Group's high operational gearing, operating profitbefore exceptional items increased by 75.0% to £40.0m (2003: £22.9m). Profit before tax and exceptional items was £40.0m (2003: £23.5m) and adjustedearnings per share before exceptional items were 7.4p (2003: 4.1p). Dividends and share repurchases It is the Board's intention to pay dividends at a level which is sustainablethroughout economic cycles and to continue to use share repurchases as anadditional mechanism for returning surplus cash to shareholders. Accordingly wewill be seeking shareholders' consent for a renewal of the repurchase authorityat the Annual General Meeting on 27 May 2005. As the Group's profitability has increased considerably and the prospects areencouraging, the Board is proposing an increase in the dividend for the year of17.6%, the first such increase since flotation in March 2001. A final dividendof 2.75p (2003: 2.3p) per ordinary share is proposed which, together with theinterim dividend of 1.25p (2003: 1.1p) per ordinary share paid in October, makesa total dividend for the year of 4.0p (2003: 3.4p) per ordinary share. The finaldividend will be paid on 3 June 2005 to those shareholders on the register at 6May 2005. The total dividend is covered 1.9 times by adjusted earnings per sharebefore exceptional items of 7.4p. During the year we reinitiated share repurchases acquiring 14.2m shares for£24.1m, representing an average cost per share of 170p. Employees I wish to express my thanks to the staff worldwide for their commitment, loyaltyand efforts throughout the year. Having operated throughout a sustained periodof difficult trading conditions, they have maintained your Company's position asthe international leader in the specialist recruitment industry. Board of Directors It is with regret that Rob Lourey has informed the Board that he will beresigning as a Non-Executive Director in April 2005. Rob will be relocating toSydney, Australia and as a result, will be unable to continue as a Director ofthe Company. Since his appointment in 2003, Rob has been a valued member of theBoard and we wish him well for the future. A search for Rob's replacement iscurrently underway. Outlook The short term outlook is encouraging. Market conditions in the UK, Asia Pacificand The Americas are favourable and we plan to grow our businesses by increasingour headcount, continuing the discipline roll out and opening new offices. InContinental Europe where market conditions are improving but remain uncertain,we will increase headcount in some of our businesses but no new office openingsare planned for 2005. On 6 April 2005 we will make a statement in respect of our trading for the firstquarter which, unlike in 2004, includes Easter, an important holiday period. Adrian MontagueChairman22 February 2005 Chief Executive's Review My expectation at the start of 2004 was that whilst the prospects for the UK,Asia Pacific and The Americas were improving, our Continental Europeanbusinesses would face another difficult year as trading conditions remainedweak. These assumptions proved to be correct for the best part of the year.However, in Continental Europe, after the summer holiday period, we experiencedimproving activity levels which strengthened as the year ended. We continued our strategy of investing cautiously and sensibly in the organicdevelopment of our businesses, while maintaining our normal tight cost control.This strategy means that we are operationally geared and while profitabilitysuffered during the downturn, we gain the benefit as conditions improve. This isevidenced by our 18% increase in revenue (gross profit) for the year, yielding a75% increase in operating profits to £40.0m (2003: £22.9m before exceptionalitems). Staff and office numbers We started the year with 2,260 fee generating and support staff operating from105 offices in 16 countries. During the course of the year we opened fiveoffices and extended our existing disciplines into more locations. At 31December 2004 we employed 2,551 fee generating and support staff operating from110 offices in 16 countries. United Kingdom In the UK, turnover increased by 20.9% to £234.8m (2003: £194.3m) and revenue by21.4% to £110.0m (2003: £90.6m). Operating profits were £23.6m (2003: £15.6mbefore exceptional items). The revenues of the finance and accounting businesses of Michael Page Finance,Michael Page City and Accountancy Additions, which generated 62% of UK revenue,were 17% higher than in 2003. Michael Page Finance, the largest of the threebusinesses, opened an office in Maidstone and recorded its highest quarterlyrevenue of the year in the fourth quarter, which is encouraging given that thisquarter included the seasonally quieter Christmas period. The Finance businessin part benefited from increased demand for candidates, driven by the needs ofcompanies to prepare for the impact of International Accounting Standards andcompliance with Sarbanes-Oxley. The revenue of Michael Page City improvedsignificantly, particularly in the first half of the year, whilst AccountancyAdditions, which specialises in lower level finance and accounting positions,grew revenue at the fastest rate partly driven by its network expansion from 27to 30 locations with new offices in Cambridge, Glasgow and Nottingham. The combined revenues of Michael Page Marketing, Michael Page Sales and MichaelPage Retail, were 24% higher than in 2003 and represented 23% of the UK total.The national coverage of these businesses increased to eight offices in January2004 with the opening of an office in Bristol. The Marketing and Salesbusinesses produced strong growth from all industry sectors and continue todevelop a burgeoning temps business. Retail's growth rate was lower reflectingthe tougher market for retailers in general during 2004. Michael Page Legal which performed well throughout the downturn produced solidgrowth in 2004. Our small Technology business developed further during the yearproducing a trading profit compared to last year's breakeven. Michael Page HumanResources achieved very strong growth benefiting from its increased geographiccoverage. We believe there is substantial opportunity in Michael PageEngineering and Supply Chain Management having opened a fifth office (London).This business has now been separated into Michael Page Engineering andManufacturing, and Michael Page Procurement and Supply Chain. Michael PageSecretarial which started at the end of 2003 progressed well and continues tofocus on the City and West End of London. These businesses combined producedrevenue growth in 2004 of 40% and represent a significant opportunity forfurther strong growth as they are rolled out progressively across the UKnetwork. In order to capitalise on the opportunity in Scotland, we have created aseparate management structure to maximise revenue from our existing offices inGlasgow and Edinburgh, as well as to roll out other disciplines. Continental Europe Our two largest businesses in Continental Europe, France and the Netherlands,continued to experience challenging trading conditions during the first half ofthe year, recording like for like revenue declines. Elsewhere in ContinentalEurope, all our other businesses increased revenues in the first half of theyear. During the second half, market conditions marginally improved, includingin France and the Netherlands, which both contributed to our fourth quarterrevenue growth in Continental Europe of 21.8%. Turnover for the year as a whole increased by 3.3% to £124.3m (2003: £120.4m)and revenue increased by 5.6% to £61.5m (2003: £58.2m). As a result of theincreased revenue and tight control over costs, the region produced an operatingprofit of £4.4m (2003: operating loss before exceptional items of £0.3m). In France, our second largest business after the UK and representing nearly 55%of the region, revenue was 6% lower than in 2003. Trading conditions remainedvery difficult during 2004 with the business only achieving modest year on yearrevenue growth in the fourth quarter of 2004. The improved performance duringthe second half of the year was largely driven by permanent recruitmentresulting in revenue from permanent placements for the year totalling a similarlevel to 2003. The temporary and contracting businesses experienced a 15%decline in revenue year on year. We believe that the recent increase in ourrevenues is largely the result of our ability to service the market from ourleading position which we maintained during the downturn. Our businesses in the Netherlands, Italy, Spain and Germany collectivelyrepresent nearly 40% of the region. While the Netherlands did not achieve growthuntil the second half of 2004, our businesses in the other countries producedgood growth throughout the year as market conditions improved. In addition, webelieve we have made market share gains as conditions improved due to a numberof competitors downsizing and closing offices during the downturn. Our newer and smaller businesses in Switzerland, Sweden, Belgium and Portugaleach achieved 30% plus revenue growth in 2004. As market conditions in Continental Europe begin to improve we are starting toreap the benefit of our strategy to maintain and invest in our businesses duringa downturn. As part of this process, we have rebranded 'Page Interim' as 'PagePersonnel' in France, Italy, Spain and the Netherlands. If revenue growth ismaintained throughout 2005, profitability should improve considerably as thereremains spare capacity within a number of our businesses. Asia Pacific Our businesses in this region produced a very strong set of results for theyear. Turnover was 22.2% higher at £62.8m (2003: £51.4m), revenue was 26.0%higher at £31.5m (2003: £25.0m) and operating profit increased 52.5% to £11.6m(2003: £7.6m before exceptional items). In Australia revenue grew 16.7% driven largely by continued strong demand fromthe financial services, business services, mining and resources, andmanufacturing sectors. We opened an office in Brisbane at the beginning of theyear starting with financial recruitment. We also continued to progress the rollout of the newer businesses, starting Engineering and Supply Chain in Sydney. Our businesses in Hong Kong and Singapore both experienced substantial revenuegrowth in 2004 capitalising on our strong market position. In August we enteredinto a strategic alliance with Shanghai Tian Cai Network Co. Ltd., through whichwe can provide recruitment services to clients in Shanghai. 2004 was a very strong year in Tokyo and we substantially grew revenue andprofits. We expanded the range of disciplines by starting Sales and Marketing,and Human Resources. Our office is now at capacity and we intend doubling thesize of our office space early in 2005. The Americas Turnover for the region was 79.2% higher at £11.8m (2003: £6.6m) and revenueincreased by 65.8% to £7.6m (2003: £4.6m). During the year we opened new offices in Chicago and Boston and continued to addheadcount in the existing offices in the USA and Brazil. These investments,while increasing the cost base, contributed to the revenue growth resulting inthe region making an operating profit of £0.5m (2003: operating loss beforeexceptional items of £0.1m). We are extremely pleased with our progress in the USA and during early 2005 wewill be investigating the opportunities for further office openings in thesecond half of the year. In Brazil we enjoyed another very successful year growing headcount in both theSao Paulo and Rio de Janeiro offices and starting Sales and Marketingrecruitment. New IT system Our new front office recruitment system has been successfully rolled outthroughout the UK, Continental Europe and USA. The Asia Pacific region willstart implementing the system in the first quarter of 2005. Strategy Our overall long term strategy remains absolutely unchanged. We intend to stayfocused on our core competency of specialist recruitment and to grow thebusiness organically by the expansion of existing businesses in their localmarkets, the introduction of new disciplines into existing locations and byentering new geographic markets. We have numerous opportunities to grow ourbusiness in all our regions. As we continue to grow the business it naturally becomes broader-based in termsof disciplines, customers and geographies, although we cannot escape the factthat recruitment is tied to economic cycles. Our strategy of organicallygrowing, maintaining and sensibly investing in our business, even during adownturn, means that our financial performance will suffer during periods ofeconomic slowdown. However, our track record since 1976 demonstrates the longterm success of this strategy. As conditions improved throughout 2004 we againsaw the benefits of this approach, achieving a 75% increase in operating profiton an 18% increase in revenue. Terry BensonChief Executive22 February 2005 Finance Director's Review Profit and loss account Turnover Turnover for the year was 16.4% higher at £433.7m (2003: £372.6m). Turnover fromtemporary placements increased by 12.9% to £275.2m (2003: £243.8m) andrepresented 63.5% (2003: 65.4%) of Group turnover. Turnover from permanentplacements was £158.5m (2003: £128.8m), an increase of 23.0%. Gross profit (revenue) Revenue for the year increased by 18.0% to £210.6m (2003: £178.5m) representingan overall gross margin of 48.6% (2003: 47.9%). The percentage increase inrevenue is greater than the increase in turnover due to the higher proportion ofpermanent placements in 2004 countered by a lower gross margin on temps. Revenuefrom temporary placements was £62.0m (2003: £56.7m) and represented 29.4% (2003:31.7%) of Group revenue. The gross margin achieved on temporary placements was22.5% (2003: 23.2%). The Group's quarterly revenue has grown sequentially throughout 2004, with yearon year growth increasing from 12.4% in quarter 1 to 23.9% in quarter 4, anaverage for the year of 18% growth. Operating profit As a result of the Group's strategy and the profit based bonuses, we have a coststructure that is very operationally geared as evidenced by the 75% increase inoperating profits before exceptional items from an 18% increase in revenue. Administrative expenses in the year increased to £170.6m (2003: £155.6m beforeexceptional items) principally due to increased numbers of staff and higherprofit related bonuses. The Group's largest category of expenditure is the remuneration of ourconsultants and support staff. Headcount of the Group was 2,260 at 1 January2004 and increased to 2,435 at 30 June. The Group's headcount increased furtherduring the second half of the year reflecting both increased current activityand investment for future growth. At 31 December 2004 we employed 2,551consultants and support staff. Net interest The net interest receivable in the year was negligible (2003: £0.6m). While westarted the year with net cash of £22.4m there is a substantial cash outflow inJanuary each year as quarter four and annual bonuses are paid. During 2004,surplus cash balances were invested in the short-term money market prior tobeing utilised for share repurchases. Taxation Tax on profits before exceptional items was £13.9m (2003: £9.0m), representingan effective tax rate of 34.8% (2003: 38.3%). The rate is higher than the UKcorporation tax rate of 30% as a result of non-deductible business expenses,profits arising in higher tax rate jurisdictions, and losses which are unable tobe offset against profits in the current year and against which no deferred taxasset has been recognised. The rate is lower than 2003, primarily as a result ofthe higher profits in Continental Europe. The Company expects to obtain a deduction for corporation tax purposes for theRestricted Share Scheme which vested in 2004. This deduction reduces the currentyear's tax charge by £9.0m and is treated as an exceptional item in theseresults. Earnings per share and dividends Basic earnings per share were 10.0p (2003: 3.8p) and adjusted earnings per sharebefore exceptional items were 7.4p (2003: 4.1p). The weighted average number ofshares for the year was 351,555,000 (2003: 357,955,000). The 2004 average numberof shares was lower than 2003 due to the share repurchases made during 2004. An increase in the final dividend to 2.75p (2003: 2.3p) per ordinary share hasbeen proposed which, together with the interim dividend of 1.25p (2003: 1.1p)per ordinary share, makes a total dividend for the year of 4.0p (2003: 3.4p) perordinary share, an increase of 17.6%. The final dividend, which amounts to£9.5m, will be paid on 3 June 2005 to those shareholders on the register at 6May 2005. Balance sheet The Group had net assets of £50.7m at 31 December 2004 (2003: £53.3m) of which£12.2m (2003: £22.4m) is represented by net cash. The reduction in net assetsand net cash is a direct consequence of the share repurchases made during 2004. While our capital expenditure is fundamentally driven by the Group's headcount,2004 capital expenditure, net of disposal proceeds, decreased to £4.4m (2003:£6.3m). This is due to the 2003 expenditure reflecting the fit out costs of alarge building in London, and the implementation of the new IT system. Whileheadcount did increase in 2004, there remained surplus office space andfurnishings to accommodate the majority of the increase without furtherexpenditure. Trade debtors were £69.3m at 31 December 2004 (2003: £53.2m) representing debtordays of 47 (2003: 46 days). Cash flow At the start of the year the Group had net cash of £22.4m. During the year the Group generated net cash from operating activities of £35.7m(2003: £29.2m) being £47.0m (2003: £29.7m) of EBITDA, an increase in workingcapital requirements of £6.2m (2003: £0.8m) and movements in provisions of £5.1m(2003: inflow £0.2m). The increased working capital is largely due to the growthin the business, particularly in the fourth quarter of 2004. The settlement ofprovisions largely relates to the payroll taxes and social charges arising onthe vesting of the Restricted Share Scheme in April 2004. The principal payments have been: • £4.4m (2003: £6.3m) of capital expenditure, net of disposal proceeds, on property, infrastructure, information systems and motor vehicles for staff; • taxes on profits of £4.8m (2003: £10.7m); • dividends of £12.6m (2003: £12.2m); and • share repurchases of £24.1m (2003: nil). At 31 December 2004 the Group had net cash balances of £12.2m (2003: £22.4m). Treasury management and currency risk It is the Directors' intention to finance the activities and development of theGroup principally from retained earnings, and to operate the Group's businesswhile maintaining the net debt/cash position within a relatively narrow band.Cash generated in excess of these requirements will be used to buy back theCompany's shares for which renewal of the existing authority is being sought atthe forthcoming Annual General Meeting. Cash surpluses are invested in short-term deposits with any working capitalrequirements being provided from Group resources or by local overdraftfacilities. The main functional currencies of the Group are Sterling, Euro, US Dollar andAustralian Dollar. The Group does not have material transactional currencyexposures nor is there a material exposure to foreign-denominated monetaryassets and liabilities. The Group is exposed to foreign currency translationdifferences in accounting for its overseas operations although our policy is notto hedge this exposure. International Financial Reporting Standards (IFRS) Following the European Union's adoption of Regulation (EC) No 1606/2002, theconsolidated accounts of EU companies whose securities are publicly traded willbe required to adopt International Financial Reporting Standards ("IFRS")together with revised International Accounting Standards ("IAS"), in issue at 31March 2004, for their financial statements from 2005. Full year IFRSconsolidated financial statements will be produced for the first time to 31December 2005, with the first reported results under IFRS being our interims at30 June 2005. This year's consolidated financial statements remain in accordancewith UK GAAP. A significant amount of work has been performed in 2004 by members of the GroupFinance team, and this work is still ongoing. The work performed to date hasbeen as follows: • identification of key accounting changes and changes required to the Group's accounting policies; • quantification of these changes detailing impact on profit and net assets; • continued communication with the Audit Committee; • identification of matters requiring additional disclosure, leading to changes in internal procedures to capture and report additional data; and • preparation of a draft IFRS Annual Report based on the financial results to 31 December 2003. As a result of the work performed during 2004, the Group is confident that itwill be able to fully comply with the accounting and reporting requirements ofIFRS in 2005. The following areas that could have a material impact on the Group's financialstatements have been identified. This summary is not intended to be anexhaustive list. Further differences may arise as a result of the Group'songoing detailed assessment and interpretations of IFRS. a) Share-based payments - Under UK GAAP, the cost of share options is based onthe intrinsic value of the option at the date of grant and as such, grants madeunder the Group's share option plans have not resulted in a charge to the profitand loss account. Under IFRS 2 Share-based Payment, the Group is required tomeasure the cost of all share options granted since 7 November 2002 that havenot fully vested at the balance sheet date, using an option pricing model. IfIFRS 2 had been in effect for 2004 it would have resulted in a charge ofapproximately £0.9m (2003: £0.5m) in the income statement. b) Goodwill amortisation - Under UK GAAP, the Group's policy is to amortisecapitalised goodwill on a straight-line basis over its estimated useful economiclife of 20 years. On transition to IFRS, IFRS 1 First-time Adoption ofInternational Financial Reporting Standards requires the Group to review thecarrying value of capitalised goodwill for potential impairment. In accordance with IFRS 3 Business Combinations, from 1 January 2005,amortisation of goodwill will no longer be charged in the Group's consolidatedIFRS income statement. In 2004 under UK GAAP the Group recorded a charge forgoodwill amortisation of £0.1m (2003: £0.1m). Under IAS, instead of an annualcharge to the profit and loss, an impairment review will be carried out at eachbalance sheet date, and this is required irrespective of there being anindicator of impairment in existence. If impairment is identified, the resultingdebit will be charged to the income statement, rather than the currentamortisation charge made under existing UK GAAP. At 31 December 2004, the Group holds £1.4m of goodwill on its balance sheet. c) Proposed dividends - Under UK GAAP Accounting for Post Balance Sheet Events,proposed dividends for the accounting year are accrued for and recognised as aliability. Under IAS 10 Events after the Balance Sheet Date, dividends toshareholders declared after the balance sheet date but before the financialstatements are authorised for issue are no longer recognised as a liability atthe balance sheet date but are disclosed separately in the notes. Accordingly,the Group will no longer recognise an accrual for its final dividend in itscurrent year IFRS balance sheet but will report it in the consolidated IFRSstatement of changes in equity for the following financial period. At 31December 2004 the accrual for the 2004 final dividend amounted to £9.5m. Stephen PuckettGroup Finance Director22 February 2005 Consolidated Profit and Loss Account for the year ended 31 December 2004 2004 2003 Note £'000 £'000 Turnover 2 433,731 372,616 Cost of sales (223,090) (194,131) ________ ________ Gross profit 2 210,641 178,485 Administrative expenses (170,604) (156,702) ________ ________ Operating profit 40,037 21,783 Net interest 1 626 ________ ________ Profit on ordinary activities before taxation 2 40,038 22,409 Taxation on profit on ordinary activities 4 (4,933) (8,664) ________ ________ Profit on ordinary activities after taxation 35,105 13,745being profit for the financial year Equity dividends 5 (13,830) (12,171) ________ ________Retained profit for the financial year 8 21,275 1,574 ======== ======== Basic earnings per share (pence) 6 10.0 3.8 Diluted earnings per share (pence) 6 9.9 3.8 Adjusted earnings per share (pence) 6 7.4 4.1 ======== ======== The above results relate to continuing operations Consolidated Statement of Total Recognised Gains and Losses for the year ended31 December 2004 2004 2003 £'000 £'000 Profit for the financial year 35,105 13,745 Foreign currency translation differences (188) 2,786 ________ ________Total recognised gains and losses for the year 34,917 16,531 ======== ======== Consolidated Balance Sheet at 31 December 2004 2004 2003 Note £'000 £'000Fixed assets Intangible assets 1,443 1,539Tangible assets 20,933 23,101 ________ ________ 22,376 24,640 ________ ________Current assets Debtors 88,160 71,530Cash at bank and in hand 12,532 23,211 ________ ________ 100,692 94,741 Creditors:Amounts falling due within one year (70,748) (59,355) ________ ________ Net current assets 29,944 35,386 ________ ________ Total assets less current liabilities 52,320 60,026 ________ ________ Creditors:Amounts falling due after more than one year (461) (444) Provisions for liabilities and charges 7 (1,188) (6,239) ________ ________ Net assets 2 50,671 53,343 ======== ======== Capital and reserves Called up share capital 3,572 3,637 Capital redemption reserve 178 113 EBT reserve (9,871) (9,871) Treasury shares (13,122) - Profit and loss account 69,914 59,464 ________ ________ Equity shareholders' funds 8 50,671 53,343 ======== ======== Consolidated Cash Flow Statement for the year ended 31 December 2004 2004 2003 Note £'000 £'000 Net cash inflow from operating activities 9 35,690 29,179 Returns on investments and servicing of finance 2 625 Taxation paid (4,825) (10,657) Capital expenditure and financial investment (4,408) (6,349) Equity dividends paid (12,593) (12,170) ________ ________ Net cash inflow before financing 13,866 628 Financing Sale of shares held by the Employee Benefit Trust - 129 Purchase of own shares (24,120) - ________ ________ Net cash (outflow)/inflow from financing (24,120) 129 ________ ________ (Decrease)/increase in net cash in the year 10 (10,254) 757 ======== ======== Notes to the statutory accounts 1. Basis of accounting The preliminary results have been prepared under the historical cost conventionand in accordance with applicable United Kingdom accounting and financialreporting standards. The accounting policies are the same as those set out inthe financial statements of the Group for the year ended 31 December 2003. 2. Segmental analysis Turnover Gross Profit 2004 2003 2004 2003(a) Turnover and gross profit by geographic region £'000 £'000 £'000 £'000 United Kingdom 234,822 194,262 109,984 90,630 Continental Europe 124,293 120,363 61,503 58,227 Asia Pacific Australia 51,286 43,708 21,105 18,082 Other 11,484 7,673 10,429 6,951 ________ ________ _______ _______ Total 62,770 51,381 31,534 25,033 Americas 11,846 6,610 7,620 4,595 _______ _______ _______ _______ 433,731 372,616 210,641 178,485 ======= ======= ====== ====== Turnover Gross Profit 2004 2003 2004 2003(b) Turnover and gross profit by discipline £'000 £'000 £'000 £'000 Finance and accounting 290,151 256,731 129,687 113,599 Marketing and sales 73,985 61,832 44,894 37,704 Other 69,595 54,053 36,060 27,182 _______ _______ _______ _______ 433,731 372,616 210,641 178,485 ======= ======= ====== ====== 2004 2003(c) Profit before interest, taxation and exceptional items by geographic region £'000 £'000 United Kingdom 23,607 15,638 Continental Europe 4,401 (280) Asia Pacific Australia 7,649 6,303 Other 3,926 1,285 _______ _______ Total 11,575 7,588 Americas 454 (62) ________ ________ Profit before interest, taxation and exceptional items 40,037 22,884 Exceptional items - (1,101) _______ _______Profit before interest and taxation 40,037 21,783 Net interest 1 626 _______ _______ Profit on ordinary activities before taxation 40,038 22,409 ======= ======= (d) Net assets/(liabilities) by geographic region 2004 2003 £'000 £'000 United Kingdom 38,255 41,115 Continental Europe 7,331 9,791 Asia Pacific Australia 5,537 4,741 Other 2,965 811 _______ _______ Total 8,502 5,552 Americas (3,417) (3,115) _______ _______ 50,671 53,343 ======= ======= 3. Exceptional items As a result of the vesting of the Restricted Share Scheme in April 2004, theCompany is able to obtain deductions for corporation tax purposes in various taxjurisdictions, resulting in a non-operating exceptional credit of £9.0m to thecorporation tax charge. The exceptional items in the comparative period included in operating profitcomprise a release of the payroll tax provision on the Restricted Share Schemeof £1.9m, and rentals and other unavoidable costs on onerous lease agreements onvacant properties of £3.0m. The net effect of these two items of £1.1m wasincluded within administrative expenses. An exceptional tax credit on theseitems of £0.3m resulted in a net post tax exceptional item of £0.8m. 4. Taxation The taxation charge for the year is made up as follows: 2004 2003Taxation relating to current year £'000 £'000 UK Corporation tax at 30% for year before exceptional tax credits 9,081 6,566 UK exceptional tax credit (7,935) (330) _______ _______ UK Corporation tax at 30% for year after exceptional tax credits 1,146 6,236 Adjustment in respect of prior periods 90 (543) Overseas corporation tax before exceptional tax credits 3,644 2,013 Overseas exceptional tax credits (1,065) - _______ _______ Overseas corporation tax after exceptional tax credits 2,579 2,013 Total current tax charge 3,815 7,706 Deferred taxation Origination and reversal of timing differences 1,118 958 _______ _______Taxation on profit on ordinary activities 4,933 8,664 ======= ======= 5. Dividends 2004 2003 £'000 £'000 Interim dividend of 1.25p per ordinary share (2003: 1.1p) 4,360 3,937 Proposed final dividend of 2.75p per ordinary share (2003: 2.3p) 9,470 8,234 _______ _______Total dividend of 4.0p per ordinary share (2003: 3.4p) 13,830 12,171 ====== ====== The record date for the final dividend is 6 May 2005 and payment date is 3 June2005. 6. Earnings per ordinary share 2004 2003 Earnings after exceptional items for basic earnings per share (£'000) 35,105 13,745 Post tax exceptional items (net) (£'000) (9,000) 771 _______ _______ Earnings before exceptional items for adjusted earnings per share 26,105 14,516(£'000) _______ _______ Weighted average number of shares used for basic and adjusted earningsper share ('000) 351,555 357,955 Dilution effect of share plans ('000) 3,744 - ________ _______Diluted weighted average number of shares used for diluted earnings pershare ('000) 355,299 357,955 ________ _______ Basic earnings per share (pence) 10.0 3.8 Diluted earnings per share (pence) 9.9 3.8 Adjusted earnings per share (pence) 7.4 4.1 ________ _________ 7. Provisions for liabilities and charges 2004 2003 £'000 £'000 Payroll tax liability on the Restricted Share Scheme (a) - 4,114 Vacant property provision (b) 1,188 2,125 ______ ______ 1,188 6,239 ====== ====== (a) Payroll tax provision on Restricted Share Scheme The grant of Restricted Shares on flotation in 2001 gave rise to NationalInsurance and social security liabilities. These liabilities crystallised inApril 2004 when the Restricted Shares vested. (b) Vacant property provision The property cost provision represents rentals and other unavoidable costs ononerous lease agreements on vacant properties. 8. Consolidated Reconciliation of Movements in Shareholders' Funds for theyear ended 31 December 2004 2004 2003 £'000 £'000 Profit for the financial year 35,105 13,745 Dividends (13,830) (12,171) _______ _______Retained profit for the financial year 21,275 1,574 Foreign currency translation differences (188) 2,786 _______ _______ 21,087 4,360 Purchase of own shares (24,120) - Sale of shares held by the Employee Benefit Trust - 129 Credit in respect of share schemes 361 - _______ _______ Net (reduction in)/addition to shareholders' funds (2,672) 4,489 _______ _______ Opening shareholders' funds 53,343 48,854 _______ _______ Closing shareholders' funds 50,671 53,343 ======= ======= 9. Reconciliation of operating profit to net cash inflow from operatingactivities 2004 2003 £'000 £'000 Operating profit before exceptional items 40,037 22,884 Exceptional items (note 3) - (1,101) _______ _______Operating profit after exceptional items 40,037 21,783 Depreciation and amortisation charges 6,500 7,688 Loss on sale of fixed assets 53 241 Share scheme charges 361 - Increase in debtors (17,739) (313) Increase/(decrease) in creditors 11,529 (459) (Decrease)/increase in provisions (note 7) (5,051) 239 _______ _______ Net cash inflow from operating activities 35,690 29,179 ======= ======= 10. Reconciliation of net cash flow to movement in net cash 2004 2003 £'000 £'000 (Decrease)/increase in net cash in the year (10,254) 757 Foreign exchange movements 35 305 _______ _______Movements in net cash in year (10,219) 1,062 Opening net cash 22,434 21,372 _______ _______Closing net cash 12,215 22,434 ======= ======= 11. Analysis of net cash Foreign At Cash exchange At 1 January 2004 flow movements 31 December 2004 £'000 £'000 £'000 £'000 Cash at bank and in hand 23,211 (10,720) 41 12,532 Bank overdrafts (777) 466 (6) (317) _______ _______ _______ _______Total net cash 22,434 (10,254) 35 12,215 ======= ======= ======= ======= 12. Nature of financial information The financial information set out above does not constitute the Group'saudited statutory accounts within the meaning of Section 240 of the CompaniesAct 1985. The financial information for the year ended 31 December 2003 hasbeen extracted from the statutory accounts for that year which have beendelivered to the Registrar of Companies. The report of the auditors on thoseaccounts was unqualified and did not contain a statement under section 237 (2)or (3) of the Companies Act 1985. The Group accounts for the year ended 31December 2004 will be finalised on the basis of the financial informationpresented by the Directors in the preliminary announcement. 13. Issue of Annual Report and Accounts The 2004 Annual Report and Accounts will be posted to shareholders by12 April 2005. Copies may be obtained after this date from the CompanySecretary, 39-41 Parker Street, London WC2B 5LN. Telephone No. 020 7831 2000. 14. Annual General Meeting The Annual General Meeting of Michael Page International plc will beheld at 39-41 Parker Street, London, WC2B 5LN on 27 May 2005 at 12.00 noon. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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