28th Feb 2007 07:01
Michael Page International PLC28 February 2007 Michael Page International plc RECORD REVENUES AND PROFITS Full Year Results for the year ended 31 December 2006 Michael Page International plc ("Michael Page"), the specialist professionalrecruitment company, announces its full year results for the year ended 31December 2006. 2006 2005 Change £m £mTurnover 649.1 523.8 + 24%Gross profit 348.8 267.6 + 30%Operating profit 97.4 66.5 + 46%Profit before tax 97.0 66.1 + 47%Basic earnings per share (pence) 19.6 14.8 + 32%Diluted earnings per share (pence) 19.0 14.4 + 32%Dividend 6.0p 5.0p + 20% Key Points • Record levels of turnover and profits • Gross profit increase of 30% • Operating profit increase of 46% • Strong gross profit growth in EMEA (up 47%) and Americas (up 67%) • Significant investment during 2006 - Offices opened in five new countries: Russia, Mexico, South Africa, the United Arab Emirates and the Republic of Ireland - Headcount increased by 28% to 3,758 employees • £78.8m of cash generated from operations (2005: £65.4m) • 23.3m shares repurchased at a cost of £83.4m • 20% increase in total dividend Commenting on the results, Steve Ingham, Chief Executive of Michael Page, said: "The outlook for Michael Page is highly encouraging. We are currentlyexperiencing favourable trading conditions in all the regions in which weoperate. During 2006, we invested heavily and this will continue in order tocapitalise on the numerous opportunities for further medium and longer-termgrowth. Whilst this investment will be across all regions, the most significantin terms of senior management, office openings and headcount will be in NorthAmerica and Northern Europe where we see the greatest opportunities. "With the current short-term economic outlook looking relatively favourable, andwith our Australian business getting back on track, I am confident of reportingfurther progress in 2007." Enquiries: Michael Page International plc 01932 264144Steve Ingham, Chief ExecutiveStephen Puckett, Group Finance Director Financial Dynamics 020 7269 7121Richard Mountain / David Yates / Susanne Walker CHAIRMAN'S STATEMENT I am delighted to report on another year of tremendous growth for the Group withrecord levels of turnover and profits. At the beginning of April, Steve Inghamwas appointed Chief Executive and under his stewardship we have continued ourstrategy of growing organically, with start-ups in five new countries, openingand expanding offices in our established countries and broadening thedisciplines offered in existing markets. The Group has many opportunities to continue its growth and is particularly wellpositioned with its strong brand, international network of offices,multi-disciplinary offering and, above all, its high quality management andstaff. Financial highlights Turnover for the year ended 31 December 2006 increased 23.9% to £649.1m (2005:£523.8m). Gross profits grew by 30.4% to £348.8m (2005: £267.6m). Gross profitsfrom permanent placements grew more rapidly than from temporary placements. Thismovement in business mix, together with an increase in margins on temporaryplacements, contributed to an increase in gross margin to 53.7% (2005: 51.1%).Given the Group's high operational gearing, combined with management's closeattention to costs, operating profits increased by 46.4% to a record £97.4m(2005: £66.5m). Profit before tax was £97.0m (2005: £66.1m) and basic earnings per shareincreased by 32.4% to 19.6p (2005: 14.8p). Dividends and share repurchases With strong growth in earnings, it is the Board's intention to continue itspolicy of continually reviewing the annual dividend with a view to maintainingit at a level which it believes is sustainable throughout economic cycles. Cashgenerated in excess of these levels will continue to be returned to shareholdersthrough share repurchases. With the strong growth in profits, earnings and cash generation, the Board isrecommending an increase in the total dividend per share for the year of 20%. Afinal dividend of 4.2p (2005: 3.5p) per share is proposed which, together withthe interim dividend of 1.8p (2005: 1.5p) per share paid in October, makes atotal dividend for the year of 6.0p (2005: 5.0p) per share. The final dividendwill be paid on 5 June 2007 to those shareholders on the register at 4 May 2007.The total dividend is covered 3.3 times by basic earnings per share of 19.6p. We continued to make share repurchases throughout 2006 acquiring 23.3m sharesfor £83.4m, including related expenses, at an average price per share of 355.8p.At the Annual General Meeting on 23 May 2007, we will be seeking shareholders'consent for a renewal of the authority to repurchase up to 10% of the issuedshares. Employees I wish to express my thanks to the staff worldwide for their commitment, loyaltyand efforts throughout the year which has delivered this outstandingperformance. Board of Directors On 6 April 2006, Steve Ingham was formally appointed as Chief Executive,succeeding Terry Benson who announced his decision to retire as Chief Executivein December 2005. Steve Ingham, who has been with the Group for 20 years, has been a member of thesenior management for much of that time and a key contributor to establishingthe current Group strategy. Prospects The Group has excellent growth prospects across all its regions. We areparticularly excited about the opportunities in North America where, havingalready successfully established a foot-hold, we will continue to roll-out ourstrategy. In Continental Europe, market deregulation will continue to have apositive impact on our business. With its strong brand, international network ofoffices, multi-discipline offering and, above all, its high quality managementand staff, Michael Page is well positioned in all of its markets. We will make a statement in respect of our trading for the first quarter on 5April 2007. Sir Adrian Montague CBEChairman28 February 2007 CHIEF EXECUTIVE'S REVIEW 2006 was another very strong year for Michael Page and I am delighted to reportan excellent set of results, my first as Chief Executive of the Group. Theseresults reflect not only the efforts put in during the year, but also thedecisions made in earlier periods which laid the foundations to achieve theserecord numbers. It always has been, and will continue to be, our intention totake decisions and make investments for the longer-term benefit of ourstakeholders. These decisions and investments may impact the profits reportedin an individual period, but, we believe, they will deliver greater returns overthe longer-term. Staff and office numbers We have made a number of new investments during 2006, opening in five countries,hiring new staff, opening and expanding offices and continuing the disciplineroll-outs. At the end of the year, the Group had 3,758 (2005: 2,926) feegenerating and support staff, operating from 133 (2005: 118) offices in 23(2005: 18) countries. United Kingdom In the UK, turnover increased by 15.9% to £312.4m (2005: £269.6m) and grossprofit by 20.3% to £155.8m (2005: £129.5m). Operating profits were £44.3m (2005:£31.9m), an increase of 38.6%. The gross profits of the Finance and Accounting businesses of Michael PageFinance, Michael Page Financial Services and Accountancy Additions, whichgenerated 54% of UK gross profit, were 14% higher than in 2005 with bothpermanent and temporary recruitment fees growing well. Michael Page Finance, thelargest of the three businesses, opened offices in Sheffield and, in January2007, Leicester. Michael Page Financial Services had a very strong year ofgrowth and now accounts for around 10% of UK gross profits. AccountancyAdditions, which specialises in part-qualified and clerical accountingpositions, continued to expand its office network from 32 to 35 locations withnew offices in Peterborough, Sheffield and Cardiff. We have a medium-term goalof building the network towards 50 offices by 2010. The combined gross profits of Michael Page Marketing, Michael Page Sales andMichael Page Retail, were 13% higher than in 2005 and combined represented 21%of the UK gross profit. The Marketing and Sales businesses, which operate from 8locations, produced strong growth from all industry sectors. Despite thecontinuing tough conditions on the High Street, Retail, the smallest of thethree businesses, still achieved year-on-year growth. Michael Page Legal, Michael Page Technology, Michael Page Human Resources andMichael Page Secretarial achieved strong growth of 44% and combined represent15% of UK gross profit. Legal grew strongly both in London and the regions withnew teams being added in Liverpool and Guildford. Human Resources now operatefrom 7 locations having opened in Leeds. Secretarial, which operates from asingle office in London, had a very successful year. Technology, the smallest ofthe four businesses, operating only in London, has achieved good growth and inJanuary 2007 opened a second location in Weybridge. The more recently created Michael Page Engineering & Manufacturing, Michael PageProcurement & Supply Chain and the newly launched Michael Page Property andConstruction grew at over 40% and now represent 5% of UK gross profit. Thepotential for all of these businesses is significant and we are investingheavily in them, adding headcount and opening in new locations. We also had an outstanding year in Scotland growing gross profit by 62%, addingfee earners to the existing disciplines, as well as launching Legal and HumanResources. Scotland now represents 4% of UK gross profit. Continental Europe, Middle East and Africa (EMEA) Turnover in EMEA for the year increased by 40.1% to £223.0m (2005: £159.2m) andgross profit increased by 46.9% to £126.6m (2005: £86.1m). As a result of theincreased revenue and high operational gearing, the region produced an increaseof 75.7% in operating profit at £34.2m (2005: £19.4m). In France (38% of EMEA), our second-largest and most established business afterthe UK, gross profit increased by 22%. As a result of the "Borloo" law in Francewe have restructured our businesses. Page Personnel, which was purely atemporary placement business, can now make permanent placements, some of whichin the past would have been made by Michael Page. The businesses wererestructured during the second half of 2006, with Page Personnel now makingtemporary and permanent placements from middle-management positions and below.Michael Page still only does permanent placements, but now concentrates onmiddle-management positions and above. We have established Michael Page Interimto service senior level temporary positions. Elsewhere in the region, collectively our businesses achieved gross profitgrowth of 68%. In Holland (19% of EMEA), Germany (12% of EMEA) and Spain (11% ofEMEA) our businesses grew by over 60%. We have also achieved strong growth inBelgium, Italy, Poland, Portugal, Sweden and Switzerland. In each of thesecountries we added additional staff, expanded existing or opened new offices andcontinued the roll-out of disciplines. In addition, we launched businesses in four new countries where we sawsignificant scope for longer-term growth. We opened offices in Moscow,Johannesburg, Dubai and, at the end of October 2006, Dublin. These offices wereall opened with experienced senior Michael Page management and we have quicklyadded additional staff with all offices generating gross profits in 2006. The growth in 2006 has been partly achieved by utilising spare capacity andpartly by investment. The better utilisation of capacity is reflected in theoperating profits increasing by 75.7% from an increase in gross profit of 46.9%.There is now little spare capacity remaining in the businesses and we willcontinue to invest sensibly to exploit the numerous growth opportunities thatremain. Asia Pacific In the Asia Pacific region, turnover was 8.9% higher at £83.6m (2005: £76.7m),gross profit was 15.2% higher at £45.0m (2005: £39.0m) and operating profitincreased 21.0% to £17.1m (2005: £14.1m). In Australia (58% of Asia Pacific) gross profit grew by 5.2% and operatingprofit increased by 5.6%. The weak performance in the fourth quarter of 2005when the business was impacted by an IT implementation continued during thefirst half of 2006. Following a review of the business a number of managementand structural changes were implemented. These changes were completed at theend of the third quarter. While the full benefits of these changes are expectedto become evident as we progress through 2007, we were encouraged by the 16.8%growth in fourth quarter gross profits. In Hong Kong, Shanghai, Tokyo and Singapore, we achieved another year ofsubstantial gross profit growth with all locations growing at or above 30%.During the year, we have expanded the office in Shanghai and at the end of theyear opened an office in Sha Tin which will allow us to penetrate moreeffectively the market in the New Territories and across the border in SouthernChina, particularly the Pearl River Delta. The Americas Turnover for the region was 64.3% higher at £30.1m (2005: £18.3m), gross profitincreased by 66.8% to £21.5m (2005: £12.9m) and operating profit increased 81.4%to £1.9m (2005: £1.0m). In North America, following our rapid expansion to seven offices, weconsolidated our presence by significantly increasing the staff in existinglocations and launching new disciplines. Having previously focused only onFinance and Accounting, and Banking we started Sales, Marketing, HumanResources, Engineering, and Procurement & Supply Chain, initially in one office.These disciplines will be rolled-out to the existing network of offices in 2007. We have also invested further in our senior management in North America, witha number of experienced transfers, creating a regional structure to capitaliseon the size of the opportunity. This structure will enable us to expand furtherwith a new office already opened in Hartford, Connecticut in January 2007 andothers planned for later in the year. This scale and pace of investment will ofcourse have some impact on the operating margin we generate from the region inthe short-term. However, we believe structurally, in the medium-term, we canachieve margins similar to those we generate in the UK and EMEA. We are extremely pleased with our continued development in Latin America. InBrazil, we achieved another very successful year growing headcount and expandingthe Sao Paulo and Rio de Janeiro offices, as well as opening a third officein Campinas. In the second half of the year, we opened in Mexico City, startingwith Finance and Accounting, and Banking and plan to start another disciplineduring the first quarter of 2007. Latin America provides another tremendousopportunity for the Group to expand and we now have some highly-talented,home-grown, experienced staff that can drive this growth. Strategy Having worked for Michael Page for 20 years and been a significant contributorto the development of the Group's strategy, my appointment reinforces theintention to maintain that strategy. I have, and will, continue to place greatemphasis on the key components of the strategy and where appropriate acceleratethe pace of implementation. For instance, communication across the Group andbetween the regions has considerably improved with the establishment of anExecutive Committee. We will continue to expand organically, graduallydiversifying and reducing the dependency upon any single geographic market orindividual discipline. Investment in 2007 We have made significant investment in 2006, opening in five new countries andincreasing headcount by 28% to 3,758. We plan further expansion in 2007, withheadcount expected to increase by 21% to around 4,550 by the end of the year.Whilst this investment will be across all regions, the most significant in termsof senior management, office openings and headcount, will be in North Americaand Northern Europe where we see the greatest opportunities. The investments wehave made, and plan to make, will increase the 2007 pre-bonus cost base toapproximately £260m, including all share-based charges. Outlook The outlook for Michael Page is highly encouraging. We are currentlyexperiencing favourable trading conditions in all the regions in which weoperate. During 2006, we invested heavily and this will continue in order tocapitalise on the numerous opportunities for future medium and longer-termgrowth. We have an exceptional pool of ambitious and talented people in theGroup, in particular at the senior management level, with the expertise andskills required to launch new businesses successfully, and who are highlymotivated to build on our success. With the current near-term economic outlook looking relatively favourable, andwith our Australian business getting back on track, I am confident of reportingfurther progress during 2007. Steve InghamChief Executive28 February 2007 FINANCE DIRECTOR'S REVIEW Income statement Turnover 2006 was another successful year for the Group with all regions deliveringstrong growth. Turnover for the year increased by 23.9% to £649.1m (2005:£523.8m). Turnover from temporary placements increased by 17.1% to £372.7m(2005: £318.3m) and represented 57.4% (2005: 60.8%) of Group turnover. Turnoverfrom permanent placements was £276.3m (2005: £205.5m), an increase of 34.5%. Gross profit Gross profit for the year increased by 30.4% to £348.8m (2005: £267.6m)representing an overall gross margin of 53.7% (2005: 51.1%). The percentageincrease in gross profit is greater than the increase in turnover due primarilyto the higher proportion of gross profit derived from permanent placements in2006, together with a higher volume of temporary placements at a slightly highergross margin. Gross profit from temporary placements was £87.8m (2005: £72.6m)and represented 25.2% (2005: 27.1%) of Group gross profit. The gross marginachieved on temporary placements was 23.6% (2005: 22.8%). Operating profit As a result of the Group's organic growth strategy, tight control on costs andprofit-based bonuses, we have a business which is operationally geared asevidenced by the 46.4% increase in operating profits from a 30.4% increase ingross profit. This strategy means the Group incurs start-up costs and operating losses asinvestments are made to grow existing and new businesses, by opening new officesor launching in new countries. The Chief Executive's review describes a numberof these investments including new businesses in Russia, Mexico, South Africa,the United Arab Emirates and the Republic of Ireland. As a result of the increased numbers of staff and offices, plus start-up costsand higher bonuses due to the increased profits, administrative expenses in theyear increased by 25.1% to £251.5m (2005: £201.1m). Administrative expensesalso includes a £4.6m charge (2005: £2.9m) in respect of executive share optionschemes, the increase over the 2005 charge being largely due to the impact ofemployers' social charges as a consequence of the 68% increase in the shareprice from 270p at the end of 2005 to 452.25p at the end of 2006. The Group's largest category of expenditure, approximately 75%, is theremuneration of our consultants and support staff. Headcount of the Group was2,926 at 1 January 2006 and increased during the year by 28% to 3,758consultants and support staff. One of the anticipated benefits of the roll-outof our new recruitment system, which started in 2003 and was completed in 2005,was a reduction in the ratio of support staff to fee earners. The proportion ofsupport staff has reduced from 36% in 2003 to 26% in 2006. Net interest While we started the year with net cash of £13.1m, there is a substantial cashoutflow in January every year as fourth-quarter and annual bonuses, are paid,and as profits have increased by 46% the bonuses have increased by a similarproportion. We aim to manage the balance sheet with a broadly neutral cash/debtposition using surplus cash to repurchase shares and, as necessary, drawing onborrowing facilities. As a consequence, a net interest charge similar to lastyear was incurred of £0.4m (2005: £0.4m). Taxation Tax on profits was £31.5m (2005: £16.5m), representing an effective tax rate of32.5% (2005: 25.0%). The rate is higher than the UK Corporation Tax rate of 30%due to disallowable items of expenditure and profits being generated incountries where the corporate tax rates are higher than 30%. The effective ratewas lower in 2005 as a result of utilising and recognising tax losses incurredin earlier years. Share repurchases and share options During the year, 23.3m shares were repurchased at an average price of 355.8p.These shares have all been cancelled. At the beginning of 2006, the Group had options outstanding over 38.1m shares,21.2m of which were granted at the time of the IPO in 2001, the balance beingaccumulated by annual grants since 2001 with a further grant of 2.1m sharesduring the year under review. In 2006, on achieving performance targets, 27.3mshare options vested, including 15.9m of the IPO grant referred to above. At 31December 2006, option holders had exercised 23.9m of these share options. At theend of 2006, 14.5m share options remain outstanding of which 3.5m have vested,but not yet been exercised by option holders. Earnings per share and dividends In 2006, basic earnings per share were 19.6p (2005: 14.8p) and diluted earningsper share were 19.0p (2005: 14.4p). The weighted average number of shares forthe year was 334.7m (2005: 336.3m) reflecting the impact of the sharesrepurchased during the year and the new shares issued to satisfy optionexercises. An increase in the final dividend to 4.2p (2005: 3.5p) per ordinary share hasbeen proposed which, together with the interim dividend of 1.8p (2005: 1.5p) perordinary share, makes a total dividend for the year of 6.0p (2005: 5.0p) perordinary share, an increase of 20%. The proposed final dividend, which amountsto £13.9m, will be paid on 5 June 2007 to those shareholders on the register asat 4 May 2007. Balance sheet The Group had net assets of £80.4m at 31 December 2006 (2005: £68.9m). Theincrease in net assets principally relates to the profit of £65.4m, the creditrelating to share schemes of £12.4m and the exercise of share options of £38.2m,offset by share repurchases of £83.4m and dividends paid of £18.1m. Our capital expenditure is driven primarily by two main factors: headcount, interms of office accommodation and infrastructure; the maintenance andenhancement of our IT systems. Capital expenditure, net of disposal proceeds,increased to £8.7m (2005: £6.8m) reflecting the 28% increase in headcount andthe opening and expansion of a number of offices. The most significant item in the balance sheet is trade receivables which were£118.2m at 31 December 2006 (2005: £82.7m) representing debtor days of 55 (2005:49 days). Cash flow At the start of the year, the Group had net cash of £13.1m. During the year, the Group generated net cash from operating activities of£78.8m (2005: £65.4m) being £103.8m (2005: £72.7m) of EBITDA, an increase inworking capital requirements of £28.7m (2005: £8.5m) and movements in provisionsof £0.4m (2005: £0.6m). The principal payments have been: • £8.7m (2005: £6.8m) of capital expenditure, net of disposal proceeds, on property, infrastructure, information systems and motor vehicles for staff; • taxes on profits of £21.7m (2005: £10.1m); • dividends of £18.1m (2005: £14.4m); and • share repurchases of £83.4m (2005: £34.2m). £38.2m (2005: £nil) was received in the year from the issue of new shares tosatisfy share option exercises. At 31 December 2006, the Group had net debt of £3.6m. Treasury management and currency risk It is the Directors' intention to continue to finance the activities anddevelopment of the Group from retained earnings, and to operate the Group'sbusiness while maintaining the cash/debt position within a relatively narrowband. Cash generated in excess of these requirements will be used to buyback theCompany's shares for which renewal of the existing general authority is beingsought at the forthcoming Annual General Meeting. Cash surpluses are invested in short-term deposits with any working capitalrequirements being provided from Group cash resources, Group facilities, or bylocal overdraft facilities. 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. Key Performance Indicators ("KPIs") Financial and non-financial key performance indicators (KPIs) used by the Boardto monitor progress are listed in the table below. Certain of these indicatorsare used in the appraisal of senior management on a global basis. The source ofdata and calculation methods year-on-year are on a consistent basis. This is thefirst year this information has been presented. KPI 2006 2005 Definition, method of calculation and analysis Job count data 35,336 24,496 Represents the number of live jobs on the Michael Page website. It is not necessarily an indication of the financial performance or prospects of Michael Page International and should not be considered in isolation; the "global" figure does not include all business lines (Accountancy Additions and Page Personnel vacancies are not included). Source: Internal data. Gross margin 53.7% 51.1% Gross profit as a percentage of revenue. Gross margin has slightly improved on last year as a result of the mix of permanent and temporary placements, and improvements in the gross margins on temporary placements. Source: Consolidated income statement in the financial statements. Conversion 27.9% 24.9% Operating profit as a percentage of revenue showing how effective the Group is at controlling the costs and expenses associated with its normal business operations and the level of investment for the future. Conversion has improved over last year as a result of better utilisation of existing capacity, and improved pricing. Source: Consolidated income statement in the financial statements. Productivity £126.2k £129.0k Represents how productive fee earners are in the business and is calculated by dividing the gross profit for the year by the(revenue per fee number of fee earners and directors at the year end. Theearner) higher the number, the higher their productivity. Productivity is a function of the rate of investment in new fee earners, the impact of pricing and the general conditions of the recruitment market. Source: Consolidated financial statements. Fee earner : support 74:26 71:29 Represents the balance between operational and non-operationalstaff ratio staff. The movement this year demonstrates faster growth in fee earners in relation to support staff. Source: Internal data. Return on capital 119.4% 95.2% A measure of the returns that a company is making from itsemployed capital. Calculated as profit before interest, tax and dividends, divided by total assets less current liabilities. The ratio shows how efficiently capital is being used to generate revenue. Source: Consolidated financial statements. Current ratio 1.3 1.4 This ratio is derived by dividing current assets by current liabilities, and is a good indicator of a company's ability to meet short-term debt obligations; the higher the ratio, the more liquid the company is. The current ratio is in line with our expectations and broadly consistent with last year. Source: Consolidated financial statements. We achieved a higher level of organic operating profit growth than gross profitgrowth as a result of our high operational gearing. The decrease in productivityis as a result of the large increase in headcount particularly in the secondhalf of the year, as new fee earners can take a number of months to become fullyproductive. Our ROCE increased this year with the current ratio remainingbroadly in line with expectations. These are important measures of our creationof value for shareholders. The increase in the ratio of number of fee earners tothe number of support staff has increased as a result of efficiencies made fromenhancing our IT systems. Principal risks and uncertainties The management of the business and the execution of the Company's strategy aresubject to a number of risks. The following section comprises a summary of whatMichael Page International plc believes are the main risks that couldpotentially impact the Group's operating and financial performance. People To continue to attract, train and retain high calibre individuals who are key toachieving these objectives. The resignation of key individuals and the inabilityto recruit talented people with the right skill-sets could adversely affect theGroup's results. This is further compounded by the Group's organic growthstrategy and its policy of not externally hiring senior positions. Mitigation ofthis risk is achieved by succession planning, training of staff, competitive paystructures linked to the Group's results and career progression. Economic cycle Recruitment is largely driven by economic cycles and the levels of businessconfidence. The Board look to reduce the cyclical risk by expandinggeographically, by increasing the number of disciplines, by buildingpart-qualified and clerical businesses and by continuing to build the temporarybusiness. Competition The Group operates in a highly competitive market around the world. If the Groupdoes not continue to compete in its market effectively by hiring new staff,opening and expanding offices and continuing the disciplines roll-outs, there isa risk that our competitors may beat us to key strategic opportunities, whichmay result in lost business and a reduction in market share. This risk ismitigated by meetings of the Main Board and Executive Committee where Groupstrategy is continually reviewed and discussed. Technology To utilise new technology or enhance existing technology to support the openingof new offices and the roll-out of new disciplines around the world. Due to therapid advancement of technology, there is a risk that systems could becomeoutdated with the potential to affect efficiency and have an impact on revenueand client service. This risk is mitigated by the appointment of a new ChiefInformation Officer in 2005 to oversee all IT strategy and innovation to supportthe wider business strategy. Legal risks The Group operates in a large number of jurisdictions which have varying legaland compliance regulations. In order to reduce the legal and compliance risks,fee earners and support staff receive regular training and updates of changes inlegal and compliance requirements. Stephen PuckettGroup Finance Director28 February 2007 Consolidated Income Statement for the year ended 31 December 2006 2006 2005 Note £'000 £'000 Turnover 3 649,060 523,810 Cost of sales (300,243) (256,229) Gross profit 3 348,817 267,581 Administrative expenses (251,450) (201,062) Operating profit 3 97,367 66,519 Financial income 821 393 Financial expenses (1,229) (776) Profit before tax 96,959 66,136 Income tax expense 4 (31,512) (16,506) Profit for the year 65,447 49,630 Attributable toEquity holders of the parent 65,447 49,630 Earnings per shareBasic earnings per share (pence) 7 19.6 14.8Diluted earnings per share (pence) 7 19.0 14.4 The above results relate to continuing operations. Consolidated Statement of Changes in Equity at 31 December 2006 Capital Reserve Currency Share Share redemption for own Treasury translation Retained Total capital premium reserve shares shares reserve earnings equity Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Balance at 1 January 2005 3,572 - 178 (9,871) (13,122) (188) 79,931 60,500 Currency translation - - - - - 492 - 492differences Net income recognised directly - - - - - 492 - 492in equity Profit for the year - - - - - - 49,630 49,630 Total recognised income for - - - - - 492 49,630 50,122the year Purchase of own shares - - - - (34,216) - - (34,216) Cancellation of treasury shares (246) - 246 - 47,338 - (47,338) - Credit in respect of share - - - - - - 6,922 6,922schemes Dividends 5 - - - - - - (14,432) (14,432) (246) - 246 - 13,122 - (54,848) (41,726) Balance at 31 December 2005 3,326 - 424 (9,871) - 304 74,713 68,896 Balance at 1 January 2006 3,326 - 424 (9,871) - 304 74,713 68,896 Currency translation - - - - - (3,116) - (3,116)differences Net expense recognised directly - - - - - (3,116) - (3,116)in equity Profit for the year - - - - - - 65,447 65,447 Total recognised (expense)/ - - - - - (3,116) 65,447 62,331income for the year Purchase of own shares for (232) - 232 - - - (83,363) (83,363)cancellation Issue of share capital 238 37,952 - - - - - 38,190 Transfer to reserve for own - - - 970 - - (970) -shares Credit in respect of share - - - - - - 12,425 12,425schemes Dividends 5 - - - - - - (18,088) (18,088) 6 37,952 232 970 - - (89,996) (50,836) Balance at 31 December 2006 3,332 37,952 656 (8,901) - (2,812) 50,164 80,391 Consolidated Balance Sheet at 31 December 2006 2006 2005 Note £'000 £'000Non-current assetsProperty, plant and equipment 21,550 19,666Intangible assets - Goodwill 1,539 1,539 - Computer software 2,059 2,212Deferred tax assets 9,447 9,255Other receivables 1,927 1,106 36,522 33,778 Current assetsTrade and other receivables 143,813 104,935Current tax receivable 213 336Cash and cash equivalents 10 35,587 20,060 179,613 125,331 Total assets 3 216,135 159,109 Non-current liabilitiesOther payables (1,130) (662)Provisions for liabilities - (192)Deferred tax liabilities - (147) (1,130) (1,001) Current liabilitiesTrade and other payables (83,525) (71,624)Bank overdrafts 10 (43) (281)Bank loans 10 (39,150) (6,700)Current tax payable (11,704) (10,223)Provisions for liabilities (192) (384) (134,614) (89,212) Total liabilities 3 (135,744) (90,213) Net assets 80,391 68,896 Capital and reservesCalled-up share capital 3,332 3,326Share premium 37,952 -Capital redemption reserve 656 424Reserve for own shares (8,901) (9,871)Currency translation reserve (2,812) 304Retained earnings 50,164 74,713Total equity 80,391 68,896 Consolidated Statement of Cash Flows for the year ended 31 December 2006 2006 2005 Note £'000 £'000 Cash generated from operations 9 78,827 65,432 Income tax paid (21,705) (10,127) Net cash from operating activities 57,122 55,305 Cash flows from investing activities Purchases of property, plant and equipment (9,167) (7,167) Purchases of computer software (737) (965) Proceeds from the sale of property, plant and equipment, 1,210 1,354and computer software Proceeds from the sale of business - 1,353 Interest received 821 393 Net cash used in investing activities (7,873) (5,032) Cash flows from financing activities Dividends paid (18,088) (14,432) Interest paid (1,209) (773) Proceeds from bank loan 39,150 6,700 Repayment of bank loan (6,700) - Issue of own shares for the exercise of options 38,190 - Purchase of own shares (83,363) (34,216) Net cash used in financing activities (32,020) (42,721) Net increase in cash and cash equivalents 17,229 7,552 Cash and cash equivalents at the beginning of the year 19,779 12,215 Exchange (losses)/gains on cash and cash equivalents (1,464) 12 Cash and cash equivalents at the end of the year 10 35,544 19,779 Notes to the consolidated financial information 1. Corporate information Michael Page International plc is a limited liability company incorporated anddomiciled within the United Kingdom whose shares are publicly traded. Theconsolidated preliminary results of the Company as at and for the year ended 31December 2006 comprise the Company and its subsidiaries (together referred to asthe "Group"). The consolidated preliminary results of the Group for the year ended 31 December2006 were approved by the directors on 28 February 2007. The Annual GeneralMeeting of Michael Page International plc will be held at Victoria House,Southampton Row, London, WC1B 4JB on 23 May 2007 at 12.00 noon. 2. Basis of preparation and accounting policies Basis of preparation These consolidated preliminary results have been prepared in accordance with therecognition and measurement criteria of IFRS and the disclosure requirements ofthe Listing Rules. They do not include all the information required for fullannual financial statements, and should be read in conjunction with theconsolidated financial statements of the Group as at and for the year ended 31December 2005. Nature of financial information The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 31 December 2006 or 2005, but is derivedfrom those accounts. Statutory accounts for 2005 have been delivered to theRegistrar of Companies and those for 2006 will be delivered following theCompany's Annual General Meeting. The auditors have reported on those accounts;their reports were unqualified and did not contain statements under Section 237(2) or (3) of the Companies Act 1985. Significant accounting policies The accounting policies applied by the Group in these consolidated preliminaryresults are the same as those applied by the Group in its consolidated financialresults as at and for the year ended 31 December 2005. 3. Segment reporting The consolidated entity operates in one business segment being that ofrecruitment services and is the Group's primary segment. As a result, noadditional business segment information is required to be provided. The Group'ssecondary segment is geography. The segment results by geography are shownbelow: (a) Turnover, gross profit and operating profit by geographic region Turnover Gross Profit Operating Profit 2006 2005 2006 2005 2006 2005 £'000 £'000 £'000 £'000 £'000 £'000 United Kingdom 312,408 269,623 155,811 129,535 44,270 31,939 EMEA 222,993 159,157 126,577 86,138 34,171 19,449 Asia Pacific Australia 63,208 61,152 26,017 24,722 8,982 8,509 Other 20,370 15,565 18,944 14,315 8,077 5,593 Total 83,578 76,717 44,961 39,037 17,059 14,102 Americas 30,081 18,313 21,468 12,871 1,867 1,029 649,060 523,810 348,817 267,581 97,367 66,519 The above analysis by destination is not materially different to analysis byorigin. The analysis below is of the carrying amount of segment assets, segmentliabilities and capital expenditure. Segment assets and liabilities includeitems directly attributable to a segment as well as those that can be allocatedon a reasonable basis. The individual geographic segments exclude income taxassets and liabilities. Capital expenditure comprises additions to property,plant and equipment, motor vehicles and computer hardware/software. (b) Segment assets, segment liabilities and capital expenditure bygeographic region Total Assets Total Liabilities Capital Expenditure 2006 2005 2006 2005 2006 2005 £'000 £'000 £'000 £'000 £'000 £'000 United Kingdom 88,364 66,379 73,228 39,159 3,113 3,117 EMEA 91,281 64,932 39,734 31,648 3,899 2,403 Asia Pacific Australia 14,592 12,256 5,457 5,547 958 773 Other 10,165 6,877 2,251 1,694 386 584 Total 24,757 19,133 7,708 7,241 1,344 1,357 Americas 11,520 8,329 3,370 1,942 1,548 1,255 Segment assets/liabilities/capital 215,922 158,773 124,040 79,990 9,904 8,132expenditure Income tax assets/liabilities 213 336 11,704 10,223 216,135 159,109 135,744 90,213 (c) Turnover and gross profit by discipline Turnover Gross Profit 2006 2005 2006 2005 £'000 £'000 £'000 £'000 Finance and accounting 408,250 336,207 202,542 159,463 Marketing, sales and retail 100,153 84,591 67,863 55,111 Legal, technology, HR, secretarial and 96,595 69,740 46,655 31,833other Engineering, property & construction, 44,062 33,272 31,757 21,174procurement & supply chain 649,060 523,810 348,817 267,581 (d) Turnover and gross profit generated from permanent and temporaryplacements Turnover Gross Profit 2006 2005 2006 2005 £'000 £'000 £'000 £'000 Permanent 276,346 205,482 261,000 194,967 Temporary 372,714 318,328 87,817 72,614 649,060 523,810 348,817 267,581 The above analysis in notes (a) operating profit by geographic region, (b)segment liabilities by geographic region, (c) turnover and gross profit bydiscipline (being the professions of candidates placed), and (d) turnover andgross profit generated from permanent and temporary placements, have beenincluded as additional disclosure over and above the requirement of IAS 14 "Segment Reporting". Note (d) turnover and gross profit generated from permanent and temporaryplacements has been included this year for the purpose of additionalinformation. 4. Taxation The Group's consolidated effective tax rate in respect of continuing operationsfor the year ended 31 December 2006 was 32.5% (31 December 2005: 25.0%). 2006 2005 £'000 £'000 Tax charge Tax charge - UK 16,695 9,191 Tax charge - Overseas 14,817 7,315 Income tax expense reported in the consolidated income statement 31,512 16,506 5. Dividends 2006 2005 £'000 £'000 Amounts recognised as distributions to equity holders in the year: Final dividend for the year ended 31 December 2005 of 3.5p per ordinary share 12,100 9,444(2004: 2.75p) Interim dividend for the year ended 31 December 2006 of 1.8p per ordinary 5,988 4,988share (2005: 1.5p) 18,088 14,432 Amounts proposed as distributions to equity holders in the year: Proposed final dividend for the year ended 31 December 2006 of 4.2p per 13,859 11,497ordinary share (2005: 3.5p) The proposed final dividend had not been approved by shareholders at 31 December2006 and therefore has not been included as a liability. The comparative finaldividend at 31 December 2005 was also not recognised as a liability in the prioryear. A final dividend of 4.2p (2005: 3.5p) per ordinary share will be paid on 5 June2007 to shareholders on the register at the close of business on 4 May 2007. 6. Share-based payments In accordance with IFRS 2 "Share-based Payment", a charge of £4.6m has beenrecognised for share options (including social charges) (2005: £2.9m), and £3.7mhas been recognised for other share-based payment arrangements (including socialcharges) (2005: £1.5m). 7. Earnings per ordinary share The calculation of the basic and diluted earnings per share is based on thefollowing data: 2006 2005Earnings Earnings for basic earnings per share (£'000) 65,447 49,630 Number of shares Weighted average number of shares used for basic earnings per share ('000) 334,744 336,283 Dilution effect of share plans ('000) 8,888 9,014 Diluted weighted average number of shares used for diluted earnings per share 343,632 345,297('000) Basic earnings per share (pence) 19.6 14.8 Diluted earnings per share (pence) 19.0 14.4 The above results relate to continuing operations. 8. Property, plant and equipment Acquisitions and disposals During the year ended 31 December 2006 the Group acquired property, plant andequipment with a cost of £9.2m (2005: £7.2m). Property, plant and equipment with a carrying amount of £1.2m were disposed ofduring the year ended 31 December 2006 (2005: £1.1m), resulting in a gain ondisposal of £48k (2005: gain of £0.2m), which is included in "AdministrativeExpenses". Capital commitments The Group had contractual capital commitments of £0.6m as at 31 December 2006(2005: £0.4m) relating to property, plant and equipment. 9. Cash flows from operating activities 2006 2005 £'000 £'000 Profit before tax 96,959 66,136 Depreciation and amortisation charges 6,445 6,162 Profit on sale of property, plant and equipment, and computer software (48) (183) Profit on the sale of business - (622) Share scheme charges 4,168 2,694 Net finance cost 408 383 Operating cashflow before changes in working capital and provisions 107,932 74,570 Increase in receivables (42,376) (17,907) Increase in payables 13,655 9,381 Decrease in provisions (384) (612) Cash generated from operations 78,827 65,432 10. Cash and cash equivalents 2006 2005 £'000 £'000 Cash at bank and in hand 23,355 11,095 Short term deposits 12,232 8,965 Cash and cash equivalents 35,587 20,060 Bank overdrafts (43) (281) Cash and cash equivalents in the statement of cash flows 35,544 19,779 Bank loans (39,150) (6,700) Net (debt)/funds (3,606) 13,079 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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