1st Mar 2006 07:02
Michael Page International PLC01 March 2006 1 March 2006 Full Year Results for the year ended 31 December 2005 Michael Page International plc ("Michael Page"), the specialist professionalrecruitment company, announces its full year results for the year ended 31December 2005. £m 2005 2004 ChangeTurnover 523.8 433.7 + 21%Gross profit 267.6 210.6 + 27%Operating profit 66.5 38.9 + 71%Profit before tax 66.1 38.9 + 70%Basic earnings per share 14.8p 9.8p + 51%Adjusted earnings per share (note 5) 14.8p 7.2p + 106%Dividend 5.0p 4.0p + 25% Key Points • Results demonstrate strong operational gearing• United Kingdom operating profits up from £22.9m to £31.9m• Continental European operating profits up by over 370% to £19.4m• Record results from Asia Pacific, operating profits of £14.1m• Very strong cash flow from operations, up from £35.7m to £65.4m• 16.8m shares repurchased during 2005 at a cost of £34.2m• Steve Ingham to succeed Terry Benson as Chief Executive in May 2006 Commenting on the results, Terry Benson, Chief Executive of Michael Page, said: "2005 was another year of considerable progress for the Group and Michael Pagedelivered significantly improved results over the previous year. All ourbusinesses recorded increased profits, but the outstanding performance came fromContinental Europe which grew operating profits by over 370% to £19.4m (2004:£4.1m). "The short term outlook is encouraging for Michael Page. Against a backgroundof relatively favourable trading conditions in all regions across the Group, wewill continue our strategy of organic growth and controlled investment for thefuture." Enquiries:Michael Page International plc 020 7831 2000 (after 8:00am)Terry Benson, Chief ExecutiveStephen Puckett, Finance DirectorSteve Ingham, Chief Executive Designate Financial Dynamics 020 7269 7291Richard Mountain / David Yates CHAIRMAN'S STATEMENT I am pleased to report another year of considerable progress for the Group andsignificantly improved results for 2005. Our outstanding performance is, we believe, clear endorsement of our longer term strategic decision only togrow organically, to maintain our infrastructure during economic slowdowns andto continue to make controlled investments for the future. This is particularlyevident in the improved performance of our businesses in Continental Europewhere, despite the economic conditions remaining difficult, we have increasedgross profits by 40% and operating profits by over 370%. Financial highlights Turnover for the year ended 31 December 2005 increased 20.8% to £523.8m (2004:£433.7m). Gross profits from permanent placements again grew more rapidly thanfrom temporary placements. This movement in business mix, together with anincrease in margins on temporary placements, contributed to a strong increase ingross profit of 27.0% to £267.6m (2004: £210.6m). Given the Group's highoperational gearing, operating profit increased by 71.2% to £66.5m (2004:£38.9m). Profit before tax was £66.1m (2004: £38.9m) and adjusted earnings per shareincreased by 105.6% to 14.8p (2004: 7.2p before exceptional tax items). Dividends and share repurchases It is the Board's intention to pay dividends at a level which it believes issustainable throughout economic cycles and to continue to use share repurchasesas an additional mechanism for returning surplus cash to shareholders. As a consequence of our strong growth in profits and excellent cash generation,the Board is recommending an increase in the total dividend per share for theyear of 25%. A final dividend of 3.5p (2004: 2.75p) per share is proposed which,together with the interim dividend of 1.5p (2004: 1.25p) per share paid inOctober, makes a total dividend for the year of 5.0p (2004: 4.0p) per share. Thefinal dividend will be paid on 5 June 2006 to those shareholders on the registerat 5 May 2006. The total dividend is covered 3.0 times by basic earnings pershare of 14.8p. We continued to make share repurchases throughout 2005 acquiring 16.8m sharesfor £34.2m, representing an average cost per share of 203.7p. These shares wereinitially held in Treasury but were subsequently cancelled along with 7.8mshares that were held in Treasury from purchases made in 2004. We will be seeking shareholders' consent for a renewal of the authority torepurchase up to 10% of the issued shares at the Annual General Meeting on 23May 2006. 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 On 16 December 2005 Terry Benson announced his decision to retire as ChiefExecutive at the forthcoming Annual General Meeting on 23 May 2006. Terry hasworked for the Group for over 26 years, the last 12 as Chief Executive, duringwhich the company has enjoyed phenomenal success. On behalf of all stakeholders in the Group, I sincerely thank him for histremendous contribution and he has our best wishes for his retirement. Steve Ingham, who has been with the Group for 19 years, will succeed Terry asChief Executive. He has been a member of the senior management for many yearsand a key contributor in establishing the current Group strategy. I, and therest of the Board, am delighted that we have an exceptional successor who we areconfident will continue the successful development of the Group. On 25 April 2005, Rob Lourey, a Non-Executive Director resigned as he wasrelocating to Sydney, Australia. Tim Miller was appointed on 15 August 2005 as aNon-Executive Director and as Chairman of the Remuneration Committee. StephenBurke, the former UK Managing Director, left the company in May 2005. Outlook The short term outlook is encouraging for Michael Page. Against a background of favourable trading conditions in all regions across theGroup, we plan to continue the controlled growth of our businesses by furtherincreasing our headcount, continuing the discipline roll out, opening newoffices in countries where we already have a presence and establishing newbusinesses in other countries. On 6 April 2006 we will make a statement in respect of our trading for thefirst quarter. Sir Adrian Montague CBEChairman1 March 2006 CHIEF EXECUTIVE'S REVIEW I am delighted with our performance in 2005, particularly as I believe itdemonstrates the benefits of our longer term approach to the development of theCompany. We have achieved good levels of growth in all of our businessesreflecting the quality of our staff and the high levels of service they provideto clients and candidates. A product of our strategy to maintain our infrastructure in a downturn is thatfor a period we may carry spare capacity and consequently have high operationalgearing. When economic conditions improve, we believe this approach puts us in abetter position than the majority of our competitors to grow our business, andat a far faster rate. As this spare capacity is utilised through growth, webenefit from this operational gearing as evidenced by the 71.2% increase inoperating profit from a 27.0% growth in gross profit. Staff and office numbers The investments we have made in new staff, discipline roll outs, officeexpansion and start ups have resulted in an increase in fee generating andsupport staff to 2,926 (2004: 2,551), operating from 118 (2004: 110) offices in18 (2004: 16) countries at the end of the year. United Kingdom In the UK, turnover increased by 14.8% to £269.6m (2004: £234.8m) and grossprofit by 17.8% to £129.5m (2004: £110.0m). Operating profitswere £31.9m (2004: £22.9m), an increase of 39.3%. The gross profits of the finance and accounting businesses of Michael PageFinance, Michael Page City and Accountancy Additions, which generated 57% of UKgross profit, were 10% higher than in 2004 with both permanent and temporaryrecruitment fees growing well. Michael Page Finance, the largest of the threebusinesses, opened an office in Liverpool and achieved the highest growth rateof the three finance businesses. Michael Page City, which accounts for less than10% of UK gross profits, recorded the lowest level of growth. AccountancyAdditions, which specialises in lower level finance and accounting positions,again expanded its office network from 30 to 32 locations with new offices inLiverpool and Edinburgh. The combined gross profits of Michael Page Marketing, Michael Page Sales andMichael Page Retail, were 19% higher than in 2004 and represented 22% of the UKtotal. The Marketing and Sales businesses produced strong growth from allindustry sectors, with growth from temporary placement fees exceeding permanentas we continue to develop the temping business in these disciplines. Retail'sgrowth rate, while lower, was still over 10% despite another tough year on theHigh Street. The remaining businesses together produced gross profit growth in 2005 of 44%and represent a significant opportunity for further strong growth as they arerolled out progressively across the UK network. Michael Page Legal and MichaelPage Technology both performed well in the year. Michael Page Human Resourcesachieved another year of strong growth benefiting from its increased geographiccoverage. The separation of Michael Page Engineering & Supply Chain Managementinto Michael Page Engineering & Manufacturing, and Michael Page Procurement &Supply Chain at the beginning of 2005 was particularly successful, with bothbusinesses having significant scope for further expansion. Michael PageSecretarial which only started at the end of 2003 had a successful year withgross profit more than doubling. In order to capitalise on the opportunity in Scotland, at the beginning of 2005we created a separate management structure to drive growth from our existingoffices in Glasgow and Edinburgh. This has proved to be a successful developmentwith gross profits in Scotland increasing in 2005 by over 50%. Continental Europe Turnover in Continental Europe for the year increased by 28.0% to £159.2m (2004:£124.3m) and gross profit increased by 40.1% to £86.1m (2004: £61.5m). As a result of the increased revenue and high operational gearing, theregion produced an increase of over 370% in operating profit at £19.4m (2004:£4.1m). In France, our second largest business after the UK and representing 48% of theregion, gross profit increased by 18%. The growth rate in our French businessimproved each quarter throughout the year, exceeding 20% in the fourth quarter.The growth in France came entirely from permanent recruitment with temporaryrecruitment fees flat on 2004 levels. While the market in France improved during2005, our rate of growth clearly indicates that we are well positioned tobenefit and gain market share. Elsewhere in the region, collectively our businesses achieved gross profitgrowth in excess of 65%. There remains considerable scope for these businessesto grow with numerous opportunities for expanding teams in existing offices anddisciplines, rolling out the disciplines to existing offices and opening newoffices. In addition to the roll out of disciplines, during the year we started abusiness in Warsaw, Poland, our first expansion into Central Europe, and haveopened a fourth office in the Netherlands in Amersfoort, and a Michael Pageoffice in Toulouse. Page Personnel opened in Nantes, Strasbourg and Rouen inFrance, and Geneva in Switzerland. As market conditions in Continental Europe continue to improve, we are reapingthe benefit of our strategy to maintain and invest in our businesses during thedownturn. As predicted last year, with gross profit growth maintained throughout2005, profitability has improved considerably as spare capacity is utilised.There is still some spare capacity within a number of our businesses but inothers we now need to invest to exploit the growth opportunities. Asia Pacific Our businesses in Asia Pacific produced a record set of results for the region.Turnover was 22.2% higher at £76.7m (2004: £62.8m), gross profitwas 23.8% higher at £39.0m (2004: £31.5m) and operating profit increased 23.3%to £14.1m (2004: £11.4m). In Australia gross profit grew a healthy 17.1% despite a disappointing fourthquarter which was impacted by an IT implementation. There continued to be strongdemand from financial services, business services, mining and resources. Duringthe year we opened a seventh office, in Chatswood, North Sydney and completed alarge office relocation of our business in Melbourne. In Hong Kong, Shanghai, Tokyo and Singapore, we achieved another year ofsubstantial gross profit growth. In Tokyo we moved into larger offices at thebeginning of the year which provides sufficient accommodation to achieve adoubling of our headcount. The Americas Turnover for the region was 54.6% higher at £18.3m (2004: £11.8m), gross profitincreased by 68.9% to £12.9m (2004: £7.6m) and operating profit increased 161%to £1.0m (2004: £0.4m). In North America we continued our rapid expansion opening offices in Toronto,Canada and in Philadelphia, USA. We have now established a network of sevenoffices in North America, providing only recruitment in Finance and Accounting.These investments, together with the continuing development of our otheroffices, incur significant start up costs ahead of gross profit growth. We are extremely pleased with our progress in North America and during 2006, wewill be investigating the opportunities for further office openings as well asstarting other recruitment disciplines. In Brazil we achieved another very successful year growing headcount in theSao Paulo and Rio de Janeiro offices to nearly 100 staff. We have now reachedthe stage where we have a number of experienced and talented local staff whowill further drive our expansion in Brazil and elsewhere in South America. Executive Committee In September 2005 the Board approved the establishment of an Executive Committeecomprising Chris Adams, Regional MD Asia Pacific, Andrew Wayland, Chief Information Officer, and the four executive Main Board Directors. The committee,which is headed by the Chief Executive, is focused on the operational managementof the Group and meets formally every quarter. It was formed to facilitate greater communication and cooperation between the regions, and to ensure that the deployment of our resources is considered from a global perspective. Strategy I am delighted with our performance in 2005 as it clearly demonstrates thestrength of our longer term strategy. Having worked for Michael Page for 26years, the last 12 as Chief Executive I believe the business is in excellentcondition for many more years of successful growth and development. However I believe the time is right for me to retire from the business and inDecember 2005 we announced the plans for succession. Steve Ingham,who joined Michael Page in 1987, will formally take over as Chief Executive atthe Annual General Meeting in May. In my opinion he and the senior managementteam are second to none in our sector, and they possess the energy andenthusiasm to continue the track record of achievement. I am sure our shareholders, clients, candidates and staff will welcome the factthat the overall long term strategy of the Group will remain absolutelyunchanged following the change in leadership. The Group intends to stay focusedon its core competency of specialist recruitment, and will continueto grow organically by the expansion of existing businesses in their localmarkets, the introduction of new disciplines into existing locations andby entering new geographic markets. There exist numerous opportunities to grow the business in all our regions andexpand into new regions. There is an exceptional pool of ambitious and talentedpeople in the Group who are highly motivated to build on our success. With theshort term economic outlook set to be relatively favourable, the plan during2006 is to slightly increase the pace of our controlled development. Terry BensonChief Executive1 March 2006 FINANCE DIRECTOR'S REVIEW International Financial Reporting Standards (IFRS) The 2005 financial statements are our first to have been prepared under IFRS andaccordingly the comparative results for 2004 have been restated. The most significant impact from the application of IFRS on reported profits isa charge of £2.7m (2004: £1.2m) in respect of share options. Full details of theapplication of IFRS are set out in note 9. Income statement Turnover 2005 was another successful year for the Group with all regions deliveringstrong growth. Turnover for the year increased by 20.8% to £523.8m (2004:£433.7m). Turnover from temporary placements increased by 15.7% to £318.3m(2004: £275.2m) and represented 60.8% (2004: 63.5%) of Group turnover. Turnoverfrom permanent placements was £205.5m (2004: £158.5m), an increase of 29.6%. Gross profit Gross profit for the year increased by 27.0% to £267.6m (2004: £210.6m)representing an overall gross margin of 51.1% (2004: 48.6%). The percentageincrease in gross profit is greater than the increase in turnover due primarilyto the higher proportion of gross profit derived from permanent placements in2005, together with a higher volume of temporary placements at slightly highergross margin. Gross profit from temporary placements was £72.6m (2004: £62.0m)and represented 27.1% (2004: 29.4%) of Group gross profit. The gross marginachieved on temporary placements was 22.8% (2004: 22.5%). Operating profit As a result of the Group's organic growth strategy and the profit based bonuses,we have a business which is operationally geared as evidenced by the 71.2%increase in operating profits from a 27.0% increase in gross profit. This strategy means the Group incurs start up costs and operating losses asinvestments are made to grow existing businesses, start new businesses, open newoffices and start up in new countries. The Chief Executive's review describes anumber of these investments including starting businesses in Canada and Poland. As a result of the increased numbers of staff, start up costs and higher profitrelated bonuses, administrative expenses in the year increased by 17.0% to£201.1m (2004: £171.8m). The Group's largest category of expenditure is the remuneration of ourconsultants and support staff. Headcount of the Group was 2,551 at 1 January2005 and increased to 2,747 at 30 June 2005. The Group's headcount increasedfurther during the second half of the year reflecting both the growth ofexisting businesses and continuing investment for the future. At 31 December2005 we employed 2,926 consultants and support staff. Net interest While we started the year with net cash of £12.2m there is a substantial cashoutflow in January every year as quarter four and annual bonuses are paid. As aresult of the decision to spend £34.2m repurchasing shares, the Group hadlimited surplus cash to invest. As a consequence a net interest charge wasincurred of £0.4m (2004: £nil). Taxation Tax on profits was £16.5m (2004: £4.5m after an exceptional tax credit of£9.0m), representing an effective tax rate of 25.0% (2004: 34.8% beforeexceptional items). The rate is lower than the UK corporation tax rate of 30%primarily as a result of utilising and recognising tax losses incurred inearlier years. The majority of these tax losses arose in Continental Europe andhave largely been recognised this year as profits in the region havegrown significantly. Earnings per share and dividends In 2005, basic earnings per share were 14.8p (2004: 9.8p) and adjusted earningsper share in 2005 were 14.8p (2004: 7.2p before exceptional tax items). Theweighted average number of shares for the year was 336.3m (2004: 351.6m)reflecting the impact of the share repurchases during the year. An increase in the final dividend to 3.5p (2004: 2.75p) per ordinary share hasbeen proposed which, together with the interim dividend of 1.5p (2004: 1.25p)per ordinary share, makes a total dividend for the year of 5.0p (2004: 4.0p) perordinary share, an increase of 25%. The final dividend, which amounts to £11.5m,will be paid on 5 June 2006 to those shareholders on the register at 5 May 2006. Balance sheet The Group had net assets of £68.9m at 31 December 2005 (2004: £60.5m) of which£13.1m (2004: £12.2m) is represented by net cash. The increase in net assets relates to the profit of £49.6m and the credit relating to shareschemes of £6.9m, more than offsetting share repurchases of £34.2m and dividendspaid of £14.4m. In accordance with IFRS there is no provision in the balancesheet for the 2005 final dividend as this has not yet been approved by ourshareholders. Capital expenditure, net of disposal proceeds, increased to £6.8m (2004: £4.4m).Our capital expenditure is driven primarily by two main factors; headcount andthe maintenance and enhancement of our IT systems. The most significant item in the balance sheet is trade receivables which were£82.7m at 31 December 2005 (2004: £69.3m) representing debtor days of 49 (2004:47 days). Cash flow At the start of the year the Group had net cash of £12.2m. During the year the Group generated net cash from operating activities of £65.4m(2004: £35.7m) being £72.7m (2004: £45.3m) of EBITDA, an increase in workingcapital requirements of £8.5m (2004: £5.8m), movements in provisions of £0.6m(2004: £5.1m), and profit on disposal of our French contractors business of£0.6m. The principal payments have been: • £6.8m (2004: £4.4m) of capital expenditure, net of disposal proceeds, on property, infrastructure, information systems and motor vehicles for staff;• taxes on profits of £10.1m (2004: £4.8m);• dividends of £14.4m (2004: £12.6m); and• share repurchases of £34.2m (2004: £24.1m). At 31 December 2005 the Group had net cash balances of £13.1m (2004: £12.2m). 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 business while maintaining the net debt/cash position within a relatively narrowband. Cash generated in excess of these requirements will be used to buy backthe Company's shares for which renewal of the existing general authority isbeing sought at the forthcoming Annual General Meeting. Cash surpluses are invested in short-term deposits with any working capitalrequirements being provided from Group cash resources or by localoverdraft 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. Stephen PuckettGroup Finance Director1 March 2006 Consolidated Income Statement for the year ended 31 December 2005 2005 2004 Note £'000 £'000 Turnover 2 523,810 433,731 Cost of sales (256,229) (223,090) Gross profit 2 267,581 210,641 Administrative expenses (201,062) (171,783) Operating profit 2 66,519 38,858 Financial income 393 369 Financial expenses (776) (368) Profit before tax 66,136 38,859 Income tax expense 3 (16,506) (4,523) Profit for the year 49,630 34,336 Attributable to:Equity holders of the parent 49,630 34,336 Earnings per share Basic earnings per share (pence) 5 14.8 9.8Diluted earnings per share (pence) 5 14.4 9.7 The above results relate to continuing operations. Consolidated Statement of Changes in Equity at 31 December 2005 Capital Currency Share redemption EBT Treasury translation Retained Total capital reserve reserve shares reserve earnings equity Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 January 2004 3,637 113 (9,871) - - 67,628 61,507 Currency translation differences - - - - (188) - (188) Net expense recognised directly in - - - - (188) - (188)equity Profit for the year - - - - - 34,336 34,336 Total recognised (expense)/income - - - - (188) 34,336 34,148for the year Purchase of own shares (65) 65 - (13,122) - (10,999) (24,121) Credit in respect of share schemes - - - - - 1,559 1,559 Dividends 4 - - - - - (12,593) (12,593) (65) 65 - (13,122) - (22,033) (35,155) Balance at 31 December 2004 3,572 178 (9,871) (13,122) (188) 79,931 60,500 Balance at 1 January 2005 3,572 178 (9,871) (13,122) (188) 79,931 60,500 Currency translation differences - - - - 492 - 492 Net income recognised directly in - - - - 492 - 492equity Profit for the year - - - - - 49,630 49,630 Total recognised income for the - - - - 492 49,630 50,122year Purchase of own shares - - - (34,216) - - (34,216) Cancellation of treasury shares (246) 246 - 47,338 - (47,338) - Credit in respect of share schemes - - - - - 6,922 6,922 Dividends 4 - - - - - (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 Sheet at 31 December 2005 2005 2004 Note £'000 £'000Non-current assetsProperty, plant and equipment 19,666 18,739Intangible assets - Goodwill 1,539 1,539 - Computer software 2,212 2,194Deferred tax assets 9,255 2,423Other receivables 1,106 1,692 33,778 26,587 Current assetsTrade and other receivables 104,935 86,214Current tax receivable 336 1,183 Cash and cash equivalents 7 20,060 12,532 125,331 99,929 Total assets 2 159,109 126,516 Non-current liabilitiesOther payables (662) (1,678)Provisions for liabilities and charges (192) (612)Deferred tax liabilities (147) (689) (1,001) (2,979) Current liabilitiesTrade and other payables (71,624) (60,694)Bank overdrafts 7 (281) (317) Bank loans (6,700) -Current tax payable (10,223) (1,450)Provisions for liabilities and charges (384) (576) (89,212) (63,037) Total liabilities 2 (90,213) (66,016) Net assets 68,896 60,500 Capital and reservesCalled up share capital 3,326 3,572Capital redemption reserve 424 178EBT reserve (9,871) (9,871)Treasury shares - (13,122)Currency translation reserve 304 (188)Retained earnings 74,713 79,931Total equity 68,896 60,500 Consolidated Cash Flow Statement for the year ended 31 December 2005 2005 2004 Note £'000 £'000 Cash generated from operations 6 65,432 35,690 Income tax paid (10,127) (4,825) Net cash from operating activities 55,305 30,865 Cash flows from investing activities Purchases of property, plant and equipment (7,167) (5,324) Purchases of computer software (965) (500) Proceeds from the sale of property, plant and equipment, 1,354 1,416and computer software Proceeds from the sale of business 1,353 - Interest received 393 369 Net cash used in investing activities (5,032) (4,039) Cash flows from financing activities Dividends paid (14,432) (12,593) Interest paid (773) (367) Proceeds from bank loan 6,700 - Purchase of own shares (34,216) (24,120) Net cash used in financing activities (42,721) (37,080) Net increase/(decrease) in cash and cash equivalents 7,552 (10,254) Cash and cash equivalents at the beginning of the year 12,215 22,434 Exchange gains on cash and cash equivalents 12 35 Cash and cash equivalents at the end of the year 7 19,779 12,215 Notes to the financial information 1. Significant accounting policies Basis of preparation The preliminary results have been prepared under the historical cost conventionand in accordance with current International Financial Reporting Standards(IFRS), and are covered by IFRS 1, "First-time Adoption of InternationalFinancial Reporting Standards", because they are the Group's first consolidatedIFRS financial statements. The disclosures required by IFRS 1 concerning thetransition from UK GAAP to IFRS are given in note 9. The financial statementshave been prepared in accordance with IFRS adopted for use in the European Unionand therefore comply with Article 4 of the EU IAS Regulation. The financial information in the preliminary announcement does not constitutethe Group's statutory financial statements for 2005 but has been extracted fromthe Group's 2005 financial statements and, as such, does not contain allinformation required to be disclosed in the financial statements prepared inaccordance with International Financial Reporting Standards. Statutoryfinancial statements for 2005 will be filed following the Annual GeneralMeeting. The auditors have reported on these financial statements; their reportwas unqualified and did not contain a statement under section 237 (2) or (3) ofthe Companies Act 1985. The financial information for the 2004 comparatives does not constitutestatutory financial statements as defined in section 240 of the Companies Act1985 but has been extracted from the reconciliations of UK GAAP to IFRSpresented with the Interim Financial Information published on 15 August 2005.The UK GAAP financial information as at 31 December 2004 within the document hadbeen extracted from the 2004 statutory financial statements which have beenfiled with the Registrar of Companies. The auditors have reported on thosefinancial statements; their report was unqualified and did not contain astatement under section 237 (2) or (3) of the Companies Act 1985. The financial information has been prepared in accordance with InternationalFinancial Reporting Standards, using the same accounting policies as set out inthe Interim Financial Information. Whilst the financial information included inthis preliminary announcement has been computed in accordance with InternationalFinancial Reporting Standards (IFRS), this announcement does not itself containsufficient information to comply with IFRS. The Company expects to publish fullfinancial statements that comply with IFRS in April 2006. The preliminary announcement was approved by the board of directors on 1 March2006. The Annual General Meeting of Michael Page International plc will be held atVictoria House, Southampton Row, London, WC1B 4JB on 23 May 2006 at 12.00 noon. 2. Segment reporting Business is the Group's primary segment. The consolidated entity operates in onebusiness segment being that of recruitment services. As a result, no additionalbusiness segment information is required to be provided. The Group's secondarysegment is geography. The segment results by geography are shown below: (a) Turnover and gross profit by geographicregion Turnover Gross Profit 2005 2004 2005 2004 £'000 £'000 £'000 £'000 United Kingdom 269,623 234,822 129,535 109,984 Continental Europe 159,157 124,293 86,138 61,503 Asia Pacific Australia 61,152 51,286 24,722 21,105 Other 15,565 11,484 14,315 10,429 Total 76,717 62,770 39,037 31,534 Americas 18,313 11,846 12,871 7,620 523,810 433,731 267,581 210,641 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 2005 2004 2005 2004 2005 2004 £'000 £'000 £'000 £'000 £'000 £'000 United Kingdom 66,379 55,897 39,159 30,924 3,117 3,106 Continental Europe 64,932 50,222 31,648 27,246 2,403 1,404 Asia Pacific Australia 12,256 10,134 5,547 4,178 773 610 Other 6,877 5,157 1,694 1,295 584 98 Total 19,133 15,291 7,241 5,473 1,357 708 Americas 8,329 3,923 1,942 923 1,255 606 Segment assets/liabilities/capital 158,773 125,333 79,990 64,566 8,132 5,824expenditure Income tax 336 1,183 10,223 1,450 159,109 126,516 90,213 66,016 (c) Turnover and gross profit by discipline Turnover Gross Profit 2005 2004 2005 2004 £'000 £'000 £'000 £'000 Finance and accounting 336,207 290,151 159,463 129,687 Marketing, sales and retail 84,591 73,985 55,111 44,894 Other 103,012 69,595 53,007 36,060 523,810 433,731 267,581 210,641 (d) Operating profit by geographic region 2005 2004 £'000 £'000 United Kingdom 31,939 22,928 Continental Europe 19,449 4,101 Asia Pacific Australia 8,509 7,551 Other 5,593 3,883 Total 14,102 11,434 Americas 1,029 395 66,519 38,858 The above analysis in notes (b) segment liabilities by geographic region, (c)turnover and gross profit by discipline (being the professions of candidatesplaced), and (d) by operating profit, have been included as additionaldisclosure over and above the requirement of IAS 14 "Segment Reporting". 3. Taxation on profits on ordinary activities The charge for taxation is based on the annual tax rate of 25.0% on profitbefore tax (2004: 34.8% before exceptional items). The exceptional item referredto in the prior year comparatives relates to a tax deduction received as aresult of the vesting of the Restricted Share Scheme in April 2004. Thisdeduction for income tax purposes arose in various tax jurisdictions andresulted in a non-operational exceptional credit of £9.0m to the income taxcharge. 2005 2004Analysis of charge in year £'000 £'000 UK income tax at 30% for year before exceptional tax credits 12,522 9,081UK exceptional tax credit - (7,935)UK income tax at 30% for year after exceptional tax credits 12,522 1,146 Adjustments in respect of prior periods (120) 152 Overseas income tax before exceptional tax credits 7,334 3,644Exceptional tax credit - (1,065)Overseas income tax after exceptional tax credits 7,334 2,579 19,736 3,877Deferred tax expenseOrigination and reversal of temporary differences (609) 646Benefit of tax losses recognised (2,621) -Deferred tax expense (3,230) 646 Total income tax expense in the income statement 16,506 4,523 4. Dividends 2005 2004 £'000 £'000 Amounts recognised as distributions to equity holders in the year: Final dividend for the year ended 31 December 2004 of 2.75p per ordinary share 9,444 8,248(2003: 2.3p) Interim dividend for the year ended 31 December 2005 of 1.5p per ordinary 4,988 4,345share (2004: 1.25p) 14,432 12,593 Amounts proposed as distributions to equity holders in the year: Proposed final dividend for the year ended 31 December 2005 of 3.5p per 11,497 9,444ordinary share (2004: 2.75p) The proposed final dividend had not been approved by shareholders at 31 December2005 and therefore has not been included as a liability. The comparative finaldividend at 31 December 2004 was also not recognised as a liability in the prioryear comparatives. A final dividend of 3.5p (2004: 2.75p) per ordinary share will be paid on 5 June2006 to shareholders on the register at the close of business on 5 May 2006. 5. Earnings per ordinary share The calculation of the basic, diluted and adjusted earnings per share is basedon the following data: 2005 2004Earnings Earnings after exceptional tax items for basic earnings per share (£'000) 49,630 34,336 Exceptional tax items (£'000) - (9,000) Earnings before exceptional tax items for adjusted earnings per share (£'000) 49,630 25,336 Number of shares Weighted average number of shares used for basic and adjusted earnings per 336,283 351,555share ('000) Dilution effect of share plans ('000) 9,014 3,744 Diluted weighted average number of shares used for diluted earnings per share 345,297 355,299('000) Basic earnings per share (pence) 14.8 9.8 Diluted earnings per share (pence) 14.4 9.7 Adjusted earnings per share (pence) 14.8 7.2 The above results relate to continuing operations. 6. Cash flows from operating activities 2005 2004 £'000 £'000 Profit before tax 66,136 38,859 Depreciation and amortisation charges 6,162 6,404 (Profit)/loss on sale of property, plant and equipment, and computer (183) 53software Profit on the sale of business (622) - Share scheme charges 2,694 1,178 Net finance cost/(income) 383 (1) Operating cash flow before changes in working capital and provisions 74,570 46,493 Increase in receivables (17,907) (17,739) Increase in payables 9,381 11,987 Decrease in provisions (612) (5,051) Cash generated from operations 65,432 35,690 7. Cash and cash equivalents 2005 2004 £'000 £'000 Cash at bank and in hand 11,095 10,091 Short term deposits 8,965 2,441 Cash and cash equivalents 20,060 12,532 Bank overdrafts (281) (317) Cash and cash equivalents in the statement of cash flows 19,779 12,215 8. Capital commitments The Group had contractual capital commitments of £0.4m as at 31 December 2005(2004: £0.8m) relating to property, plant and equipment. The Group hadcontractual capital commitments of £nil as at 31 December 2005 (2004: £0.1m)relating to computer software. 9. Adoption of IFRS in 2005 The accounting policies were changed on 1 January 2005 to comply with IFRS. Thetransition from UK GAAP to IFRS is accounted for in accordance with IFRS 1, "First-Time Adoption of International Financial Reporting Standards" with 1January 2004 as the date of transition. The changes in accounting policies as aconsequence of the transition to IFRS are described below, and thereconciliations of the effects of the transition to IFRS are summarised belowand presented in full in the notes to the first IFRS financial statements. The transition to IFRS resulted in the following changes in accounting policies: Goodwill is not amortised but measured at cost less impairment losses. Under UKGAAP, goodwill was amortised on a straight-line basis through profit and lossover its estimated useful economic life of 20 years. The effect of the changeis an increase in equity and profit before tax of £96k at 31 December 2004. Thechange does not affect equity or profit before tax at 1 January 2004. Thechange has no tax effect as deferred taxes are not recognised for temporarydifferences arising from goodwill for which amortisation is not deductible fortax purposes. Dividends to shareholders declared after the balance sheet date but before thefinancial statements are authorised for issue are not recognised as a liabilityat the balance sheet date but are disclosed separately in the notes. Under UKGAAP dividends for the accounting year were recognised as a liability. Theeffect of the change is an increase in equity at 1 January 2004 of £8.2m and£9.5m at 31 December 2004. Share option costs under UK GAAP were based on the intrinsic value of the optionat the date of grant and as such, grants made under the Group's share optionplans did not result in a charge to the income statement. Under IFRS 2 "Share-based Payment", the Group measures the cost of all share options grantedsince 7 November 2002 that have not fully vested at the balance sheet date,using an option pricing model. A liability in respect of social charges hasalso been recognised in respect of the Group's share option schemes. Deferred tax relating to the new share option charges described above have beenrecognised as a deferred tax asset. Computer software has been reclassified from tangible fixed assets to intangiblefixed assets. Cumulative translation differences for all foreign operations have been deemedto be zero at the date of transition. After the date of transition, foreignexchange differences arising from the translation of accounts of overseasoperations are shown in a currency translation reserve as a separate componentof equity. RECONCILIATION OF PROFIT Year ended 31 December 2004 (end of last period presented under UK GAAP) Effect of Under transition Under UK GAAP to IFRS IFRS Ref £'000 £'000 £'000 Turnover 433,731 - 433,731 Cost of sales (223,090) - (223,090) Gross profit 210,641 - 210,641 Administrative expenses a,c (170,604) (1,179) (171,783) Operating profit 40,037 (1,179) 38,858 Net finance income 1 - 1 Profit before tax 40,038 (1,179) 38,859 Income tax expense d (4,933) 410 (4,523) Profit for the year 35,105 (769) 34,336 Attributable to: Equity holders of the parent 35,105 (769) 34,336 Earnings per shareBasic earnings per share (pence) 10.0 (0.2) 9.8Diluted earnings per share (pence) 9.9 (0.2) 9.7 Profit UK GAAP 35,105 Goodwill not amortised after a 96date of transition Share option charges c (1,275) Deferred tax on share scheme d 410charges (769) Profit IFRS 34,336 RECONCILIATION OF EQUITY At 1 January 2004 At 31 December 2004 (date of transition) (end of last period presented under UK GAAP) Opening Opening Effect of IFRS Effect of IFRS Under transition balance Under transition balance Ref UK GAAP to IFRS sheet UK GAAP to IFRS sheet £'000 £'000 £'000 £'000 £'000 £'000 Non-current assetsProperty, plant and equipment e 23,101 (2,444) 20,657 20,933 (2,194) 18,739Goodwill a 1,539 - 1,539 1,443 96 1,539Computer software e - 2,444 2,444 - 2,194 2,194Deferred income tax assets d 1,345 1,416 2,761 254 2,169 2,423Other receivables 1,570 - 1,570 1,692 - 1,692 27,555 1,416 28,971 24,322 2,265 26,587 Current assetsTrade and other receivables 68,615 - 68,615 86,214 - 86,214Current tax receivable 1,664 - 1,664 1,183 - 1,183Cash and cash equivalents 23,211 - 23,211 12,532 - 12,532 93,490 - 93,490 99,929 - 99,929 Total assets 121,045 1,416 122,461 124,251 2,265 126,516 Non-current liabilitiesOther payables c (444) (759) (1,203) (461) (1,217) (1,678)Provisions for liabilities and (1,376) - (1,376) (612) - (612)chargesDeferred tax liabilities d - (727) (727) - (689) (689) (1,820) (1,486) (3,306) (1,073) (1,906) (2,979) Current liabilitiesTrade and other payables b (57,356) 8,234 (49,122) (70,164) 9,470 (60,694)Borrowings (777) - (777) (317) - (317)Current tax payable (2,886) - (2,886) (1,450) - (1,450)Provisions for liabilities and (4,863) - (4,863) (576) - (576)charges (65,882) 8,234 (57,648) (72,507) 9,470 (63,037) Total liabilities (67,702) 6,748 (60,954) (73,580) 7,564 (66,016) Net assets 53,343 8,164 61,507 50,671 9,829 60,500 Capital and reservesCalled up share capital 3,637 - 3,637 3,572 - 3,572Capital redemption reserve 113 - 113 178 - 178EBT reserve (9,871) - (9,871) (9,871) - (9,871)Treasury shares - - - (13,122) - (13,122)Currency translation reserve f - - - - (188) (188)Profit and loss account 59,464 8,164 67,628 69,914 10,017 79,931 Total equity 53,343 8,164 61,507 50,671 9,829 60,500 Total equity UK GAAP 53,343 50,671 Goodwill not amortised after a - 96date of transitionDividend not recognised as a b 8,234 9,470liability until approved byshareholdersSocial charges on share option c (759) (1,217)schemesDeferred tax on share schemes d 689 1,480Computer software now classified e - -as intangibleCurrency translation reserve f - - Total adjustments to equity 8,164 9,829 Total equity IFRS 61,507 60,500 There are no material adjustments to the cash flow statement in either period. 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