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Michael Page Intl (MPI)

  Print      Mail a friend       Annual reports

Monday 15 August, 2011

Michael Page Intl

Half Year Results for Period Ended 30 June 2011

RNS Number : 3262M
Michael Page International PLC
15 August 2011
 



 

 

15 August 2011

 

MICHAEL PAGE INTERNATIONAL PLC

 

Half Year Results for the Period Ended 30 June 2011

 

Michael Page International plc ("Michael Page"), the specialist professional recruitment company, announces its unaudited half year results for the period ended 30 June 2011.

 

Financial summary (6 months to 30 June 2011)

2011

2010

Change

Change CER*

Revenue

£502.1m

£393.5m

+27.6%

+25.8%

Gross profit

£275.1m

£209.6m

+31.3%

+29.5%

Operating profit before NRI †

£45.4m

£32.5m

+39.6%

+36.5%

Profit before tax before NRI

£45.5m

£33.0m

+37.9%


Basic earnings per share before NRI

10.0p

6.6p

+51.5%


Diluted earnings per share before NRI

9.7p

6.5p

+49.2%






Operating profit

£45.4m

£49.6m

-8.5%


Profit before tax

£45.5m

£61.4m

-26.0%


Basic earnings per share

10.0p

13.1p

-23.7%

Diluted earnings per share

9.7p

12.8p

-24.2%





Interim dividend per share

3.25p

2.88p

+12.8%

 

*Constant Exchange Rates      Non-recurring items (related to VAT refund of £17.1m and related interest of £11.3m, both net of fees)

 

Highlights

 

·      Group gross profit up 31% (30%*) with growth in every geography

·      50% of the Group growing at over 50% year-on-year in gross profit

·      76% of gross profits generated from outside the UK

·      55% of gross profit generated from non Finance and Accounting disciplines

·      Launched businesses in India, Malaysia and Qatar

·      Additional space in Beijing, Hong Kong and new offices in Houston, Pudong Shanghai and Porto

·      Gross profit from permanent placements growing at 35% (33%*)

·      Gross profit from temporary placements growing at 20% (18%*)

·      Headcount up 623 (13.9%) in first half of 2011

·      Share repurchases of £30.3m during the first half of 2011

·      Strong balance sheet with net cash at 30 June 2011 of £23.6m

·      Interim dividend up 12.8% at 3.25p

 

 

Commenting on the results, Steve Ingham, Chief Executive of Michael Page, said:

 

"We delivered a strong performance in the first half of 2011 with gross profit up 31% to £275.1m. Operating profit before non-recurring items grew by 40% to £45.4m as we continue to make significant investments for the longer-term growth and prosperity of the Group.

 

"In the first 6 months, our banking business grew strongly. However, following the recently announced hiring freezes in the last few weeks, gross profit growth in this sector, which accounts for approximately 10% of Group gross profit, has slowed. With the exception of banking, trading in July has been broadly consistent with recent trends. While the recent turbulence in the financial markets has added an additional element of uncertainty, we expect market conditions in the UK to remain challenging, but anticipate that our UK business will maintain modest growth and continue to gain market share. In Europe, we expect to continue our progress and our outlook for Asia and Latin America remains strong.

 

"Over the last 10 years we have diversified significantly and altered radically the composition of the Group, entirely through organic investment and development, with over three quarters of the Group's gross profits now being generated from outside the UK. Our Latin America and Asia businesses combined now represent over 20% of the Group's gross profit, with 31 offices across 9 countries and 1,000 staff.

 

"We have entered and achieved a market-leading presence in relatively underdeveloped recruitment markets with numerous opportunities for further growth. In these markets, we now have approaching 50% of our fee earners and grew gross profit at over 50% in the first half of 2011. We remain mindful of the macroeconomic risks and uncertainties, however, we are continuing to invest significantly in developing our faster growing markets, as well as exploring opportunities for new openings".

 

 

Analyst meeting

 

The company will be presenting to a meeting of analysts at 9.00am today.  The presentation and a recording of the meeting will be available on the company's website later on today at http://investors.michaelpage.co.uk/presentations

 

Enquiries:

Michael Page International plc

01932 264144

Steve Ingham, Chief Executive


Stephen Puckett, Finance Director




Financial Dynamics

020 7269 7291

Richard Mountain/Sophie Moate


 

 

 



INTERIM MANAGEMENT REPORT

 

To the members of Michael Page International plc

 

Cautionary Statement

 

This Interim Management Report ("IMR") has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. The IMR should not be relied on by any other party or for any other purpose. This IMR contains certain forward-looking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

 

This IMR has been prepared for the Group as a whole and therefore gives greater emphasis to those matters that are significant to Michael Page International plc and its subsidiary undertakings when viewed as a whole.

 

STRATEGY

 

The Group's strategy is to expand and diversify the business by industry sectors, by professional disciplines, by geography and by level of focus, be it Page Personnel, Michael Page or Michael Page Executive Search, with the objective of being the leading specialist recruitment consultancy in each of our chosen markets. As recruitment activity is dependent upon economic cycles, by being more diverse, the dependency on individual businesses or markets is reduced, making the overall Group more resilient. This strategy is pursued entirely through the organic growth of existing and new teams, offices, disciplines and countries, with a consistent team and meritocratic culture.

 

Our organic growth is achieved by drawing upon the skills and experiences of proven Michael Page management, ensuring we have the best and most experienced, home-grown talent in each key role. When we invest in a new business, we do so only with a long-term objective and in the knowledge that at some point there will be periods when economic activity slows. While it is difficult to predict accurately when these slowdowns will occur and how severe they will be, it has been our practice in the past and our intention in the future to maintain our presence in our chosen markets, but with close control over our cost base. Our team-based structure and primarily profit share business model is scalable and the small team size also means that we can rapidly increase our headcount to achieve and maintain growth.

 

The focus of our organic growth over the past ten years has been into emerging markets, where the outsourcing of recruitment, particularly for specialist roles, is underdeveloped and where there is limited competition. In many of these markets, we have achieved a market leading position and intend to fully embrace the opportunity by investing rapidly in headcount and opening in new cities and countries. The investment to grasp these opportunities in terms of new headcount, international transfers of management, new office space and start-up losses will limit short-term profitability, but should provide a substantial platform for longer-term returns.

 

Our intention is to always maintain a strong balance sheet. As the business grows, there is a need for additional working capital, which is funded from operating cash flow, with surplus cash being returned to shareholders through dividends and share repurchases. 

 

GROUP RESULTS

 

The Group's revenue for the six months ended 30 June 2011 increased by 27.6% to £502.1m (2010: £393.5m) and gross profit increased by 31.3% to £275.1m (2010: £209.6m). At constant exchange rates, the Group's revenue increased by 25.8% and gross profit by 29.5%. In the first half, the mix of the Group's revenue and gross profit between permanent and temporary placements has increased to 45:55 (2010: 43:57) and 80:20 (2010: 78:22), respectively. Typically, as economic conditions improve, permanent grows faster than temporary recruitment. This trend is compounded by the Group's faster growing regions in Latin America and Asia being predominantly permanent rather than temporary recruitment in the specialist sectors. The gross margin on temporary placements in the first half of 2011 was 20.2% (2010: 20.7%). Pricing has been relatively stable throughout the first half of 2011, with a stronger pricing environment in rapidly growing markets being offset by competitive pressures in the weaker UK market.

 

As the demand for recruitment services increases, the number of positions to be filled rises, candidate shortages begin to emerge, the time-to-hire period starts to reduce and there is less pressure on pricing. All of these factors trended positively in the first half, albeit to differing degrees in our different geographic regions, creating an environment for increased productivity and the generation of more gross profit per fee earner. The Group's strategy of only growing organically using home-grown talent, maintaining market presence and a degree of spare capacity, means that the Group is operationally geared with a significant proportion of gross profits from increased activity levels being converted into operating profit. The extent of the conversion to operating profit is reduced by the amount of investment being made to facilitate and maintain growth. The investment comprises additional headcount, up 32.7% year-on-year, office space and the relocation costs of senior people, together with the start-up losses when we roll-out and start new disciplines, open in new cities and start businesses in new countries, some 16 since 2005.

 

In the first half of 2011, we have added 623 (13.9%) new staff,  taken additional space in Beijing and Hong Kong, opened three new offices in Houston, Pudong and Porto, as well as additional offices in Sao Paulo and Rome. We also launched businesses in Qatar, Malaysia and India.

 

With strong underlying growth and investment for the future, operating profit for the first half of 2011 increased to £45.4m (2010: £32.5m†). The Group's conversion rate of gross profit to operating profit is now 16.5% (2010: 15.5%).

 

EUROPE, MIDDLE EAST AND AFRICA (EMEA)

 

Europe, Middle East and Africa (EMEA) is the Group's largest region, contributing 44% of Group gross profit in the first half. Revenue in the region increased by 29.9% to £209.5m (2010: £161.3m) and gross profit increased by 31.7% to £120.3m (2010: £91.3m), due to increased activity, primarily in permanent placements. In constant currency, revenue increased by 28.2% on the first half of 2010 and gross profit increased by 29.9%. The 31.7% increase in gross profit generated a 76.1% increase in operating profit for the first half of 2011 to £17.0m (2010: £9.6m), a conversion rate of 14.1% (2010: 10.5%).

 

In the majority of countries across the region, market conditions have improved and we are achieving good growth. In the Middle East, we did experience some impact from the recent troubles, but all our businesses in the region showed growth. While there remains some surplus capacity in our more established markets of France, the Netherlands, Italy and Spain, in our more recently established countries, we have increased our level of investment in new headcount, offices and launched in Qatar. Headcount across the region increased by 295 (16%) in the first half of 2011 to 2,126.

 

UNITED KINGDOM

 

In the UK, representing 24% of the Group's gross profit in the first half, revenue increased by 14.2% to £163.0m (2010: £142.8m), gross profit increased by 7.9% to £66.0m (2010: £61.2m) and operating profit was up 8.1% at £10.4m (2010: £9.6m).

 

In the UK, market conditions have been tough, but stable throughout the first half of 2011, with growth in the private sector being held back by a more restrained public sector. Our UK business has performed well, clearly gaining share in a very competitive market, with operating profit increasing in line with gross profit, up 8.1%, with the conversion rate stable at 15.8% (2010: 15.7%). Headcount in the UK has remained largely flat over the first half of 2011 and stands at 1,343 at the end of June 2011 (1,324 at 31 December 2010), with the increase in gross profit being the result of improved productivity.

 

ASIA PACIFIC

 

In Asia Pacific, representing 18% of the Group's gross profit in the first half, revenue increased by 43.4% to £76.7m (2010: £53.5m) and gross profit increased by 55.8% to £48.6m (2010: £31.2m). In constant currency, revenue increased by 35.0% and gross profit by 49.2%. Operating profit rose by 28.8% to £12.2m (2010: £9.5m), with the large investments in additional headcount and new country start-ups in Malaysia and India, partially offset by operational gearing and increased productivity, resulting in a net decrease in the conversion rate to 25.2% (2010: 30.5%).

 

Australia, our largest business in the region, grew gross profits by 23% in constant currency. Market conditions have remained stable throughout the first half of 2011, particularly in Western Australia, which is benefiting from the demand for natural resources.  In Asia, where the business is almost entirely permanent placements, activity is at record levels in many locations. Gross profits from our Asian businesses grew 80% in constant currency. In Japan, where our growth of 30% in constant currency was impacted by the effects of the tsunami in March, we finished the half year with a record ever month for gross profit, demonstrating the resilience and talent in our business there. At the end of June, we had 874 staff in the region, an increase of 183 (26%) since the start of the year and assuming market conditions remain strong, further headcount will be added during the second half of 2011.

 

THE AMERICAS

 

In the Americas, representing 14% of the Group's gross profit in the first half, revenue increased by 47.1% to £52.7m (2010: £35.8m) and gross profit increased by 55.4% to £40.3m (2010: £25.9m). In constant currency, revenue increased by 47.5% and gross profit by 54.7%. With the investment in additional headcount and new offices, operating profit increased by 54.0% to £5.8m (2010: £3.8m), with a conversion rate of 14.4% (2010: 14.5%).

 

In North America, gross profit grew by 28% in constant currency and while there is some evidence of a steady improvement, particularly in Canada, market conditions remain tough.  In Latin America, where gross profits grew in the first half of 2011 by 70% in constant currency, market conditions are strong and we have continued to invest heavily in the region. In the last twelve months, we have added 241 staff, an increase of 80.9%, we have doubled the number of offices in the region to 16 and launched a business in Chile. Brazil, which we established in 2000, is now the Group's third largest country business and we are the clear market leader, growing at exceptionally strong rates. The newer businesses in Mexico, Argentina and Chile are also performing strongly and offer tremendous scope for further profitable growth. We now have 778 staff in the region, an increase of 126 (19%) since the start of the year.

 

OPERATING PROFIT AND CONVERSION RATES

 

As a result of the Group's organic long-term growth strategy, tight control on costs and profit-based bonuses, we have a business model that is operationally geared. The majority of our cost base, around 75%, relates to our staff, with the other main components being property and information technology costs. With a strategy of organic growth, the Group incurs start-up costs and operating losses as investments are made to grow existing and new businesses, open new offices and launch businesses in new countries. Furthermore, significant increases in headcount mean that it takes time to train staff before they become fully productive. These characteristics of our growth strategy and the levels of investment impact on the conversion rates in any one reporting period.

 

Generally, in years when economic conditions are benign, revenue and gross profit grow, with operating profit growing at a faster rate due to a combination of higher productivity, stronger pricing and greater utilisation of infrastructure. In order to grow, we need to increase our headcount and ensure that we have the infrastructure to house and support them. When economic conditions weaken and recruitment activity slows, these factors work in reverse and are compounded by a shortening of earnings visibility.

 

The majority of our permanent placement activity is undertaken on a contingent basis, which means on those assignments we only generate revenue when a candidate is successfully placed in a role. Our short-term visibility on these earnings is provided by the number of assignments we are working on, the number of candidates we have at interview and the stage they are at in the interview process. The average time to complete a placement, from taking on an assignment to successfully placing a candidate, tends to lengthen in a downturn, reducing productivity and the risk of the candidate being rejected or the assignment being cancelled increases, thereby further reducing our earnings visibility.

 

In a downturn, activity levels can slow quickly and revenue can decline even faster, due to the contingent nature of a large proportion of our placements. The main opportunity for reducing our own cost base is headcount, but these reductions tend to lag the declines in revenue due to the shortening visibility. The majority of the initial reductions in our headcount occur through natural attrition, without incurring significant restructuring charges. However, as greater reductions become necessary, such charges may be incurred, but these are treated as a component of our normal operating expenses.

 

As economic conditions begin to improve, the confidence levels of both candidates and clients also improves and the churn rate of people moving jobs starts to increase. This increase in activity is serviced from the spare capacity we maintain during a downturn and therefore profits can increase rapidly. As different markets recover and grow at different rates, we invest in infrastructure and additional headcount in some markets to maintain their growth, while carrying some spare capacity in others. Where possible, we redeploy resources to match market conditions. The Group's conversion rate for the period was 16.5% (2010: 15.5%), which reflects the improved market conditions, partially offset by the effects of new investments. The movement in the conversion rates of the four regions and the levels of conversion now being achieved reflects the pace of recovery in those regions, the levels of investment in each region and the levels of spare capacity still available to be utilised.

 

TAXATION AND EARNINGS PER SHARE

 

The charge for taxation is based on the expected effective annual tax rate of 33.0% (2010: 36.4%†) on profit before taxation and non recurring items.

 

Basic and diluted earnings per share for the six months ended 30 June 2011 were 10.0p (2010: 13.1p) and 9.7p (2010: 12.8p) respectively. Before 2010's non-recurring income, basic and diluted earnings per share for the six months ended 30 June 2010 were 6.6p and 6.5p respectively.

 

CASH FLOW

 

The Group started the year with net cash of £80.5m. In the first half we generated £21.8m from operations after funding an increase in working capital of £35.1m, reflecting the increased level of activity throughout the Group. Tax paid was £19.1m and net capital expenditure was £13.0m, with net interest received of £0.1m. During the first half, £30.3m was spent repurchasing shares for cancellation, £1.0m was received from the exercise of share options and dividends of £18.8m were paid. After favourable currency movements of £1.3m, the Group had net cash of £23.6m at 30 June 2011.

 

DIVIDENDS AND SHARE REPURCHASES

 

It is the Board's intention to pay dividends at a level that it believes is sustainable throughout economic cycles and to continue to use share repurchases to return surplus cash to shareholders. Reflecting the Group's first half performance and the Board's confidence in the longer-term prospects for the Group, it has decided to increase the interim dividend by 12.8% to 3.25p (2010: 2.88p) per share. The interim dividend will be paid on 7 October 2011 to shareholders on the register at 9 September 2011.

 

In the first half, the Group purchased and cancelled 5.7m shares for £30.3m, at an average price of £5.28.

 

NON-RECURRING ITEMS: VAT CLAIM

 

On 30 April 2010, a formal agreement was signed between MPI and HMRC for a refund of £17.1m of overpaid VAT plus £11.3m of statutory interest, both net of fees.

 

In respect of the amended claims for a refund of overpaid VAT, we continue to correspond and discuss our claim with HMRC, but the eventual outcome remains uncertain. For further information, see Note 4.

 

CURRENT TRADING AND FUTURE PROSPECTS

 

We delivered a strong performance in the first half of 2011 with gross profit up 31% to £275.1m. Operating profit before non-recurring items grew by 40% to £45.4m as we continue to make significant investments for the longer-term growth and prosperity of the Group.

 

In the first 6 months, our banking business grew strongly. However, following the recently announced hiring freezes in the last few weeks, gross profit growth in this sector, which accounts for approximately 10% of Group gross profit, has slowed. With the exception of banking, trading in July has been broadly consistent with recent trends. In the short-term, market conditions in the UK will remain challenging, but we anticipate that our UK business will maintain modest growth and continue to gain market share. In Europe, we expect to continue our progress and our outlook for Asia and Latin America remains strong.

 

Over the last 10 years we have diversified significantly and altered radically the composition of the Group, entirely through organic investment and development, with over three quarters of the Group's gross profits now being generated from outside the UK. Our Latin America and Asia businesses combined now represent over 20% of the Group's gross profit, with 31 offices across 9 countries and over 1,000 staff.

 

We have entered and achieved a market-leading presence in relatively underdeveloped recruitment markets with numerous opportunities for further growth. In these markets, we now have over 50% of our staff and grew gross profit at over 50% in the first half of 2011. We remain mindful of the macroeconomic risks and uncertainties, however, we are continuing to invest significantly in developing our faster growing markets, as well as exploring opportunities for new openings.

 

 

KEY PERFORMANCE INDICATORS

 

Financial and non-financial key performance indicators (KPIs) used by the Board to monitor progress are listed in the table below. The source of data and calculation methods year-on-year are on a consistent basis.

 

KPI

H1 2011

H1 2010

Definition, method of calculation and analysis

Gross margin

54.8%

53.3%

Gross profit as a percentage of revenue. Gross margin has increased largely as a result of the mix of permanent and temporary placements. In improving trading conditions, there tends to be a swing to higher margin permanent placements. Additionally the Group's fastest growing geographic regions are predominantly permanent recruitment markets. Source: Condensed consolidated income statement in the financial statements.

Fee earner : support staff ratio

72:28

71:29

Represents the balance between operational and non-operational staff. The balance in the period reflects the faster growth in new fee earners into the existing infrastructure as market conditions improve.

Source: Internal data.

Productivity (gross profit per fee earner)

£76.9k

£79.8k

Represents productivity of fee earners and is calculated by dividing the gross profit for the period by the average number of fee earners and directors. The higher the number, the higher their productivity. Productivity is a function of the numbers and experience of fee earners, the impact of pricing and the general conditions of the recruitment market. The decrease in productivity this period is as a result of the substantial increase in new fee earners (32.7% or 1,261 in the last 12 months) and increased competition in some markets, partially offset by a general improvement in market conditions.

Source: Internal data.

Conversion before NRI

16.5%

15.5%

Operating profit as a percentage of gross profit showing the Group's effectiveness at controlling the costs and expenses associated with its normal business operations and the level of investment for future growth. Conversion has increased compared to last year, reflecting the utilisation of a proportion of the spare capacity created during the downturn, partially offset by a reduction in productivity.

Source: Condensed consolidated income statement in the financial statements.

Debtor days (30 June)

52

47

Represents the length of time before the Group receives payments from its debtors. Calculated by comparing how many days' billings it takes to cover the debtor balance. The increase in the period reflects the growth of permanent activity, with the average debtor days being higher for the permanent business compared to the temporary business and also a temporary impact related to the implementation of a new temp billing system in the UK.

Source: Internal data.

                                                                                                                                   

The movements in KPIs are in line with expectations.

 

 

PRINCIPAL RISKS AND UNCERTAINTIES

 

The management of the business and the execution of the Company's strategy are subject to a number of risks. The following section comprises a summary of what the Group believes are the main risks that could potentially impact the Group's operating and financial performance.

 

People

 

The resignation of key individuals and the inability to recruit talented people with the right skill-sets could adversely affect the Group's results. This is further compounded by the Group's organic growth strategy and its policy of not externally hiring senior operational positions. Mitigation of this risk is achieved by succession planning, training of staff, competitive pay structures linked to the Group's results and career progression.

 

Macroeconomic environment

 

Recruitment activity is largely driven by economic cycles and the levels of business confidence. The Board looks to reduce the Group's cyclical risk by expanding geographically, by increasing the number of disciplines, by building part-qualified and clerical businesses and by continuing to build the temporary business.

 

A substantial portion of the Group's gross profit arises from fees which are contingent upon the successful placement of a candidate in a position. If a client cancels the assignment at any stage in the process, the Group receives no remuneration. As a consequence, the Group's visibility of gross profits is generally quite short and tends to reduce further during periods of economic downturn.

 

Competition

 

The degree of competition varies in each of the Group's main regions. In the UK, Australia and North America, the recruitment market is well developed, highly competitive and fragmented. The characteristics of a developed market are greater competition for clients and candidates, as well as pricing pressure. In EMEA, Latin America and Asia, the recruitment market is generally less developed, with a large proportion of all recruitment being carried out by companies' internal resources, rather than through recruitment specialists. This is changing rapidly due to changes in legislation, increasing job mobility and the difficulty internal resources face in sourcing suitably qualified candidates and managing compliance.

 

If the Group does not continue to compete in its markets effectively, by hiring new staff, opening and expanding offices and continuing the discipline roll-outs, there is a risk that competitors may beat us to key strategic opportunities, which may result in lost business and a reduction in market share. This risk is mitigated by meetings of the Main Board, Executive Board and Regional and Country Management Boards, where Group strategy is continually reviewed and decisions made over the allocation of the Group's resources, principally people.

 

Technology

 

The Group is reliant on a number of technology systems to provide services to clients and candidates. These systems are dependent on a number of important suppliers that provide the technology infrastructure and disaster recovery solutions. The performance of these suppliers are continually monitored to ensure business critical services are available and maintained as far as practically possible. Due to the rapid advancement of technology, there is a risk that systems could become outdated, with the potential to affect efficiency and have an impact on revenue and client service. This risk is mitigated by regular reviews of the Group's technology strategy to ensure that it supports the overall Group strategy. The Group has invested in a new generation of technology systems, which will begin to be implemented in our operating businesses from later this year. The systems implementation risks are being managed by staged roll-outs, generally increasing the size and complexity of the businesses transitioning to the new systems.

 

Legal

 

The Group operates in a large number of jurisdictions which have varying regulatory environments. As the employment laws are changed and harmonised in certain geographies, they bring with them new risks and opportunities. The temporary market is heavily regulated, and changes in legislation, which have the effect of increasing the cost or restricting the flexibility of movement of temporary workers, could, other things being equal, have a detrimental effect on the Group's financial performance. The Group takes its obligations and responsibilities seriously and ensures that its policies, systems and procedures are continually upgraded to reflect best practice and to comply with the legal requirements in all of the markets in which it operates. In order to reduce the legal and compliance risks, fee earners and support staff receive regular training and updates of changes in legal and compliance requirements.

 

Financial

 

The Group has a risk management process to assess risks and places emphasis on maintaining adequate financial and management controls. The risk management process is viewed as a dynamic part of operations and is assessed globally on an annual basis.  The Group has developed a framework to manage risk and respond to the global financial crisis, with emphasis upon credit exposure, management of currency risk and business and operational continuity.

 

 

TREASURY MANAGEMENT, BANK FACILITIES AND CURRENCY RISK

 

It is the Directors' intention to continue to finance the activities and development of the Group from retained earnings and to operate the Group's business while maintaining a strong balance sheet position. When there is a generally benign economic outlook, this equates to maintaining the Group's net cash/debt position within a relatively narrow band, with cash generated in excess of these requirements being used to buy back the Group's shares. In an economic downturn, a more cautious funding position is adopted, with the Group being managed in a net cash position. The £56.9m reduction, from £80.5m to £23.6m, in the amount of net cash held during the period is in line with the relative improvement in economic conditions and the Group's outlook across the various regions in which it operates.

 

Cash surpluses are invested in short-term deposits, with any working capital requirements being provided from Group cash resources, Group facilities, or by local overdraft facilities. The Group has a multi-currency notional cash pool between the Euro-zone subsidiaries and the UK-based Group Treasury subsidiary. The structure facilitates interest and balance compensation of cash and bank overdrafts.

 

The Group has a £50m, three-year multi-currency, committed revolving credit facility with Deutsche Bank that expires in June 2012.

 

The main operational currencies of the Group are Sterling, Euro, Australian Dollar and Brazilian Real. The Group does not have material transactional currency exposures, nor is there a material exposure to foreign denominated monetary assets and liabilities. The Group is exposed to foreign currency translation differences in accounting for its overseas operations. Our policy is not to hedge this exposure.

 

In certain cases, where the Group gives or receives short-term loans to and from other Group companies with different reporting currencies, it may use foreign exchange swap derivative financial instruments to manage the currency and interest rate exposure that arises on these loans. It is the Group's policy not to seek to designate these derivatives as hedges.

 

 

GOING CONCERN

 

The Board has undertaken a recent and thorough review of the Group's forecasts and associated risks and sensitivities. Despite the significant uncertainty in the economy and its inherent risk and impact on the business, the Board has concluded, given the level of cash in the business and Group borrowing facilities, the geographical and discipline diversification, limited concentration risk, as well as the ability to manage the cost base, that the Group has adequate resources to continue in operational existence for the foreseeable future being a period of at least 12 months.

 

 

 

 

Page House

The Bourne Business Park

1 Dashwood Lang Road

Addlestone

Weybridge

Surrey

KT15 2QW

 

By order of the Board,

 

 

 

Steve Ingham                           Stephen Puckett

Chief Executive                       Group Finance Director

 

15 August 2011                      15 August 2011

 

 

 



INDEPENDENT REVIEW REPORT TO MICHAEL PAGE INTERNATIONAL PLC

 

Introduction

 

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flows and related notes 1 to 14. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

 

Directors' Responsibilities

 

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

 

Our Responsibility

 

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

 

Scope of Review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

 

Ernst & Young LLP

London

15 August 2011

 



Condensed Consolidated Income Statement

Six months ended 30 June 2011

                                                                                                                                Six months ended                                Year ended





30 June


30 June


31 December





2011


2010


2010





Unaudited


Unaudited


Audited



Note


£'000


£'000


£'000










Revenue


3


502,077


393,515


832,296

Cost of sales




(226,983)


(183,961)


(390,089)

Gross profit


3


275,094


209,554


442,207

Administrative expenses




(229,692)


(177,034)


(370,680)

Operating profit before non-recurring items


3


45,402


32,520


71,527

Other income - non-recurring items


4


-


17,125


17,125

Operating profit


3


45,402


49,645


88,652

Financial income


5


398


744


1,107

Financial income - non-recurring items


5


-


11,335


11,335

Financial expenses


5


(335)


(290)


(438)

Profit before tax


3


45,465


61,434


100,656

Income tax expense


6


(15,006)


(11,997)


(25,203)

Income tax expense - non-recurring items


4


-


(7,969)


(7,969)

Profit for the period




30,459


41,468


67,484

 

Attributable to:

Owners of the parent




 

 

30,459


 

 

41,468


 

 

67,484










Earnings per share









Basic earnings per share (pence)


9


10.0


13.1


21.6

Diluted earnings per share (pence)


9


9.7


12.8


21.1

 

 

The above results all relate to continuing operations.

 

 

 

 

Condensed Consolidated Statement of Comprehensive Income

Six months ended 30 June 2011

 




                    Six months ended

Year ended





30 June


30 June


31 December





2011


2010


2010





Unaudited


Unaudited


Audited





£'000


£'000


£'000










Profit for the period




30,459


41,468


67,484










Other comprehensive income for the period









 

Currency translation differences




 

3,812


 

(747)


 

290










Total comprehensive income for the period




34,271


40,721


67,774










Attributable to:









Owners of the parent




34,271


40,721


67,774

 



Condensed Consolidated Balance Sheet

At 30 June 2011

 









 

 

 

Note


30 June

2011

Unaudited

£'000


30 June

2010

Unaudited

£'000


31 December

2010

Audited

£'000

Non-current assets









Property, plant and equipment


10


32,019


27,795


28,526

Intangible assets  - Goodwill and other intangible




2,087


1,539


1,539

                             - Computer software




30,206


21,125


26,035

Deferred tax assets




11,098


11,136


12,441

Other receivables


11


1,916


2,745


1,145





77,326


64,340


69,686










Current assets









Trade and other receivables


11


224,984


152,301


168,305

Current tax receivable




2,810


14,143


2,810

Cash and cash equivalents


14


62,724


67,177


80,531





290,518


233,621


251,646










Total assets


3


367,844


297,961


321,332










Current liabilities









Trade and other payables


12


(144,743)


(106,325)


(122,795)

Bank overdrafts


14


(39,142)


(1,503)


-

Current tax payable




(11,772)


(18,695)


(16,583)





(195,657)


(126,523)


(139,378)










Net current assets




94,861


107,098


112,268










Non-current liabilities









Other payables


12


(2,709)


(2,267)


(4,156)

Deferred tax liabilities




(364)


(324)


(364)





(3,073)


(2,591)


(4,520)










Total liabilities


3


(198,730)


(129,114)


(143,898)










Net assets




169,114


168,847


177,434










Capital and reserves









Called-up share capital




3,164


3,240


3,216

Share premium




56,638


52,986


55,607

Capital redemption reserve




932


838


875

Reserve for shares held in the employee benefit trust




(66,186)


(75,952)


(75,361)

Currency translation reserve




37,503


32,654


33,691

Retained earnings




137,063


155,081


159,406

Total equity




169,114


168,847


177,434

 

 



Condensed Consolidated Statement of Changes in Equity

Six months ended 30 June 2011

 

 


 

 

 

Called-up share

capital

£'000

 

 

 

 

Share

premium

£'000

 

 

 

Capital

redemption

reserve

£'000

Reserve for  shares held in the employee benefit trust
£'000

 

 

 

Currency

translation

reserve

£'000

 

 

 

 

Retained

earnings

£'000

 

 

 

 

Total

equity

£'000

Balance at 1 January 2010

3,234

51,589

838

(19,409)

33,401

127,363

197,016

Currency translation differences

-

-

-

-

(747)

-

(747)

Net loss recognised directly in equity

-

-

-

-

(747)

-

(747)

Profit for the six months ended 30 June 2010

-

-

-

-

-

41,468

41,468

Total comprehensive (loss)/income for the period

-

-

-

-

(747)

41,468

40,721

Purchase of shares held in employee benefit trust

-

-

-

(61,757)

-

-

(61,757)

Issue of share capital

6

1,397

-

-

-

-

1,403

Reserve transfer when shares held in the employee benefit trust vest

-

-

-

5,214

-

(5,214)

-

Credit in respect of share schemes

-

-

-

-

-

5,216

5,216

Credit in respect of tax on share schemes

-

-

-

-

-

2,314

2,314

Dividends

-

-

-

-

-

(16,066)

(16,066)


6

1,397

-

(56,543)

-

(13,750)

(68,890)









Balance at 30 June 2010

3,240

52,986

838

(75,952)

32,654

155,081

168,847









Currency translation differences

-

-

-

-

        1,037

-

1,037

Net income recognised directly in equity

-

-

-

-

        1,037

-

1,037

Profit for the six months ended 31 December 2010

-

-

-

-

-

26,016

26,016

Total comprehensive income for the period

-

-

-

-

1,037

26,016

27,053

Purchase of own shares for cancellation

(37)

-

37

-

-

(15,086)

(15,086)

Issue of share capital

13

2,621

-

-

-

-

2,634

Reserve transfer when shares held in the employee benefit trust vest

-

-

-

591

-

(591)

-

Credit in respect of share schemes

-

-

-

-

-

4,833

4,833

Debit in respect of deferred tax on share schemes

-

-

-

-

-

(2,034)

(2,034)

Dividends

-

-

-

-

-

(8,813)

(8,813)


(24)

2,621

37

591

-

(21,691)

(18,466)









Balance at 31 December 2010 and 1 January 2011

3,216

55,607

875

(75,361)

33,691

159,406

177,434









Currency translation differences

-

-

-

-

3,812

-

3,812

Net income recognised directly in equity

-

-

-

-

3,812

-

3,812

Profit for the six months ended 30 June 2011

 -

-

 -

-

-

30,459

30,459

Total comprehensive income for the period

-

-

-

-

3,812

30,459

34,271

Purchase of own shares for cancellation

(57)

-

57

-

-

(30,322)

(30,322)

Issue of share capital

5

1,031

-

-

-

-

1,036

Reserve transfer when shares held in the employee benefit trust vest

-

-

-

9,175

-

(9,175)

-

Credit in respect of share schemes

-

-

-

-

-

5,991

5,991

Debit in respect of tax on share schemes

-

-

-

-

-

(473)

(473)

Dividends

-

-

-

-

-

(18,823)

(18,823)


(52)

1,031

57

9,175

-

(52,802)

(42,591)









Balance at 30 June 2011

3,164

56,638

932

(66,186)

37,503

137,063

169,114

 



Condensed Consolidated Statement of Cash Flows

Six months ended 30 June 2011

 

 




Six months ended


Year ended


 

 

 

Note


30 June  2011

Unaudited

£'000

 


 30 June  2010

Unaudited

£'000

 


31 December

2010

Audited

£'000

Cash generated from underlying operations

13


21,789


27,073


81,650

Net cash paid in respect of VAT claim



-


(12,558)


(12,558)

Cash generated from operations

13


21,789


14,515


69,092

Income tax paid



(19,052)


(5,326)


(12,408)

Net cash from operating activities



2,737


9,189


56,684









Cash flows from investing activities








Purchases of property, plant and equipment



(7,980)


(2,556)


(7,371)

Purchases of computer software



(5,156)


(3,297)


(8,774)

Proceeds from the sale of property, plant and equipment, and computer software



173


1,338


1,392

Interest received



398


744


1,107

Net cash used in investing activities



(12,565)


(3,771)


(13,646)









Cash flows from financing activities








Dividends paid



(18,823)


(16,066)


(24,879)

Interest paid



(281)


(290)


(439)

Issue of own shares for the exercise of options



1,036


1,403


4,037

Purchase of own shares for cancellation



(30,322)


-


(15,086)

Purchase of shares into the employee benefit trust



-


(61,757)


(61,757)

Net cash used in financing activities



(48,390)


(76,710)


(98,124)

















Net decrease in cash and cash equivalents



(58,218)


(71,292)


(55,086)

Cash and cash equivalents at the beginning of the period



80,531


137,185


137,185

Exchange gain/(loss) on cash and cash equivalents



1,269


(219)


(1,568)

Cash and cash equivalents at the end of the period

14


23,582


65,674


80,531

 

 

 

 

 

 

 

 



Notes to the condensed set of interim financial statements

Six months ended 30 June 2011

 

 

1.             General information

 

The information for the year ended 31 December 2010 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

 

 

2.             Accounting policies

 

Basis of preparation

 

The unaudited interim condensed consolidated financial statements for the six months ended 30 June 2011 have been prepared in accordance with IAS 34 'Interim financial reporting' and with the Disclosure and Transparency Rules of the Financial Services Authority.

 

The unaudited interim condensed consolidated financial statements do not constitute the Group's statutory financial statements. The Group's most recent statutory financial statements, which comprise the annual report and audited financial statements for the year ended 31 December 2010, were approved by the directors on 4 March 2011. The interim condensed consolidated financial statements should be read in conjunction with the Annual Report and Accounts for the year ended 31 December 2010, which have been prepared in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union.

 

Going concern

 

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the interim management report. The interim management report also includes a summary of the Group's financial position, its cash flows and its borrowing facilities. 

 

The directors believe the Group is well placed to manage its business risks successfully, despite the current uncertain economic outlook. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current committed facilities.

 

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly financial report.

 

 

New accounting standards, interpretations and amendments

 

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2010, except for the adoption of new standards and interpretations as of 1 January 2011, noted below:













IAS 24 Related Party Transactions (Amendment)

The IASB has issued an amendment to IAS 24 that clarifies the definitions of a related party. The new definitions emphasise a symmetrical view of related party relationships, as well as clarifying in which circumstances persons and key management personnel affect related party relationships of an entity. Secondly, the amendment introduces an exemption from the general related party disclosure requirements for transactions with a government and entities that are controlled, jointly controlled or significantly influenced by the same government as the reporting entity. The adoption of the amendment did not have any impact on the financial position or performance of the Group.

 

IAS 32 Financial Instruments: Presentation (Amendment)

The amendment alters the definition of a financial liability in IAS 32 to enable entities to classify rights issues and certain options or warrants as equity instruments. The amendment is applicable if the rights are given pro rata to all of the existing owners of the same class of an entity's non-derivative equity instruments, to acquire a fixed number of the entity's own equity instruments for a fixed amount in any currency. The amendment has had no effect on the financial position or performance of the Group.

 

IFRIC 14 Prepayments of a Minimum Funding Requirement (Amendment)

The amendment removes an unintended consequence when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover such requirements. The amendment permits a prepayment of future service cost by the entity to be recognised as a pension asset. The amendment to the interpretation had no effect on the financial position or performance of the Group.

 

Improvements to IFRSs (issued May 2010)

In May 2010, the IASB issued its third omnibus of amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions for each standard. The adoption of the following amendments did not have any impact on the financial position or performance of the Group.

 

IFRS 3 Business Combinations: The measurement options available for non-controlling interest (NCI) have been amended. Only components of NCI that constitute a present ownership interest that entitles their holder to a proportionate share of the entity's net assets in the event of liquidation shall be measured at either fair value or at the present ownership instruments' proportionate share of the acquiree's identifiable net assets. All other components are to be measured at their acquisition date fair value.

 

IFRS 7 Financial Instruments - Disclosures: The amendment was intended to simplify the disclosures provided by reducing the volume of disclosures around collateral held and improving disclosures by requiring qualitative information to put the quantitative information in context.

 

IAS 1 Presentation of Financial Statements: The amendment clarifies that an option to present an analysis of each component of other comprehensive income may be included either in the statement of changes in equity or in the notes to the financial statements. The Group has opted not to present further analysis.

 

IAS 34 Interim Financial Statements: The amendment requires additional disclosures for fair values and changes in classification of financial assets, as well as changes to contingent assets and liabilities in interim condensed financial statements.

 

Other amendments resulting from Improvements to IFRSs to the following standards did not have any impact on the accounting policies, financial position or performance of the Group:

 

 

IFRS 3 Business Combinations: Clarification that contingent consideration arising from business combination prior to adoption of IFRS 3 (as revised in 2008) are accounted for in accordance with IFRS 3 (2005).

 

IAS 27 Consolidated and Separate Financial Statements: applying the IAS 27 (as revised in 2008) transition requirements to consequentially amended standards.

 

IFRS 3 Business Combinations: Unreplaced and voluntarily replaced share-based payment awards and its accounting treatment within a business combination.

 

IFRIC 13 Customer Loyalty Programmes: in determining the fair value of award credits, an entity shall consider discounts and incentives that would otherwise be offered to customers not participating in the loyalty programme.

 

The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

 

3.             Segment reporting

 

All revenues disclosed are derived from external customers.

 

The accounting policies of the reportable segments are the same as the Group's accounting policies. Segment operating profit represents the profit earned by each segment without allocation of central administration costs including certain recharges. This is the measure reported to the Group's Chief Executive for the purpose of resource allocation and assessment of segment performance.

 

a)             Revenue, gross profit and operating profit by reportable segment

 



Revenue


Gross Profit


          Six months ended


Year ended

31 December

2010

£'000


Six months ended

Year ended

31 December

2010

£'000




30 June

2011

£'000


30 June

2010

£'000



30 June

     2011

£'000


30 June

2010

£'000















EMEA


209,548


161,343


332,202


120,268


91,314


188,706














United Kingdom


163,047


142,807


302,567


66,010


61,168


124,858















Asia Pacific


49,120


37,979


81,676


23,806


17,316


37,645



27,620


15,540


38,630


24,747


13,850


34,569


Total


76,740


53,519


120,306


48,553


31,166


72,214



























Americas


52,742


35,846


77,221


40,263


25,906


56,429














502,077


393,515


832,296


275,094


209,554


442,207

 

 




Operating Profit




Six months ended


Year ended

31 December

2010

£'000




30 June

2011

£'000


30 June

2010

£'000










EMEA


             

16,958


9,628


22,272



                                                                         






United Kingdom



10,407


9,623


19,630









Asia Pacific

Australia and

New Zealand


5,026


4,787


9,754


Other


7,213


4,716


12,562


Total


12,239


9,503


22,316









Americas



5,798


3,766


7,309









Operating profit before non-recurring items

45,402


32,520


71,527

Non-recurring items (NRI) (note 4)

-


17,125


17,125

Operating profit after non-recurring items

45,402


49,645


88,652

Financial income

63


11,789


12,004

Profit before tax

45,465


61,434


100,656

 

The above analysis by destination is not materially different to analysis by origin.

 

The analysis below is of the carrying amount of reportable segment assets and liabilities and non-current assets. Segment assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. The individual reportable segments exclude income tax assets and liabilities. Non-current assets include property, plant and equipment, computer software, goodwill and other intangible.

 

Non-recurring items (NRI) items relate wholly to the United Kingdom.

 

b)                   Segment assets, and liabilities and non-current assets by reportable segment

 



Total Assets


Total Liabilities




 

31 December

2010

£'000



 

31 December

2010

£'000




30 June

2011

£'000


30 June

2010

£'000



30 June

     2011

£'000


30 June

2010

£'000















EMEA


149,074


125,655


136,159


69,902


52,016


60,744














United Kingdom


116,813


88,770


96,563


88,859


41,692


41,359















Asia Pacific


26,618


22,669


28,292


11,818


7,853


10,410



28,810


18,904


24,471


6,054


3,124


5,352


Total


55,428


41,573


52,763


17,872


10,977


15,762



























Americas


43,719


27,820


33,037


10,325


5,734


9,450













Segment assets/liabilities

365,034


283,818


318,522


186,958


110,419


127,315













Income tax 

2,810


14,143


2,810


11,772


18,695


16,583














367,844


297,961


321,332


198,730


129,114


143,898

 

 



Property, Plant & Equipment


Intangible Assets




 

31 December

2010

£'000




 

31 December

2010

£'000



30 June

2011

£'000


30 June

2010

£'000



30 June

     2011

£'000


30 June

2010

£'000















EMEA


10,762


10,755


10,104


665


899


776














United Kingdom


9,835


8,919


9,090


30,652


20,791


25,810














Asia Pacific

Australia and New Zealand       

1,696


2,042


2,104


160


204


148


Other

1,794


622


996


246


346


369


Total

3,490


2,664


3,100


406


550


517














Americas


7,932


5,457


6,232


570


424


471
















32,019


27,795


28,526


32,293


22,664


27,574

 

The below analysis in notes (c) revenue and gross profit by discipline (being the professions of candidates placed) and (d) revenue and gross profit generated from permanent and temporary placements, have been included as additional disclosure over and above the requirements of IFRS 8 "Operating Segments".


 

c)             Revenue and gross profit by discipline

 


Revenue


Gross Profit


Six months ended


Year ended

31 December

2010

£'000


Six months ended


Year ended

31 December

2010

£'000



30 June

2011

£'000


30 June

2010

£'000



30 June

     2011

£'000


30 June

2010

£'000















Finance and Accounting


261,023


214,440


450,573


123,824


99,167


209,176














Marketing, Sales and Retail


65,381


53,252


111,661


50,809


39,696


82,834














Legal, Technology, HR, Secretarial and Other


98,560


73,391


156,993


51,794


38,527


81,597














Engineering, Property & Construction, Procurement & Supply Chain


77,113


52,432


113,069


48,667


32,164


68,600
















502,077


393,515


832,296


275,094


209,554


442,207

 

 

d)             Revenue and gross profit generated from permanent and temporary placements

 


Revenue


Gross Profit


Six months ended


Year ended

31 December

2010

£'000


Six months ended


Year ended

31 December

2010

£'000



30 June

2011

£'000


30 June

2010

£'000



30 June

     2011

£'000


30 June

2010

£'000















Permanent


227,160


169,127


355,979


219,429


163,006


343,787














Temporary


274,917


224,388


476,317


55,665


46,548


98,420
















502,077


393,515


832,296


275,094


209,554


442,207

 

 

 

4.             Non-recurring items (NRI)

 

In 2003, Michael Page submitted an initial claim to Her Majesty's Revenue and Customs (HMRC) for overpaid VAT which was rejected. Michael Page appealed and subsequently filed amended claims for £26.5m, net of fees, covering the period from 1980 to 2004. In March 2009, Michael Page filed amended claims for a further refund of an additional £80m, net of fees, of overpaid VAT covering the same period.                          

                                                                                                                                                                                                                                                                                                                                                                    In June 2009, Michael Page received a payment from HMRC of £26.5m, net of fees, as part settlement of these claims and in July 2009 received £10.5m, net of fees, of statutory interest. As a result, the principal and interest amounts were recognised in the June 2009 half year results.                                                                                                                                                                     

 

On 25 September 2009, Michael Page received a letter from HMRC which stated that, 'HMRC have reviewed the recent payment and are now of the view that the claim in whole or in part should not have been paid'. 

 

A number of discussions and meetings with HMRC then took place and on 5 March 2010, Michael Page International plc (MPI) announced that an agreement had been reached in principle, subject to legal contract, between MPI and HMRC in respect of the initial claim for a refund of overpaid VAT plus statutory interest to retain £28.4m (net of fees) of the £37.4m it received. However, given the background to the initial receipt and the subsequent review and reversal of its decision by HMRC, the Group reversed out the balances originally recognised in the 2009 half year results and as such did not recognise any amount in the Income Statement at the 2009 full year, due to the remaining uncertainty pending formal contractual agreement.

 

On 30 April 2010, a formal agreement was signed with HMRC. As a result, of the £50m originally received from HMRC, MPI retained £38m and returned £11.9m in May 2010. Accordingly, after fees, MPI recognised £28.4m as non-recurring income in the prior year 2010 Income Statement. Taxation of £8.0m on non-recurring items, net of expenses, was also provided in 2010, representing an effective tax rate of 28.0%.    

 

During the period, we had correspondence and discussions with HMRC concerning the amended claims for a further refund of VAT and related interest, but the eventual outcome still remains uncertain.












5.             Financial income/(expenses)

 



Six months ended


Year ended

31 December

2010

£'000



30 June

2011

£'000


30 June

2010

£'000


Financial income







Bank interest receivable


398


744


1,107

Interest on non-recurring items (note 4)


-


11,335


11,335



398


12,079


12,442








Financial expenses







Bank interest payable


(335)


(290)


(438)

 

 

6.             Taxation

 

Taxation for the six month period is charged at 33.0% (six months ended 30 June 2010: 32.5%; year ended 31 December 2010: 33.0%), representing the best estimate of the average annual effective tax rate expected for the full year, applied to the pre-tax income of the six month period.

 

 

7.             Dividends

 


Six months ended


Year ended

31 December

2010

£'000


30 June

2011

£'000


30 June

2010

£'000








Amounts recognised as distributions to equity holders in the period:






Final dividend for the year 31 December 2010 of 6.12p per ordinary share (2009: 5.12p)

18,823


16,066


16,066

Interim dividend for the period ended 30 June 2010 of 2.88p per ordinary share

-


-


8,813


18,823


16,066


24,879







Amounts proposed as distributions to equity holders in the period:






Proposed interim dividend for period ended 30 June 2011 of 3.25p per ordinary share (2010: 2.88p)

9,846


8,900


-

Proposed final dividend for the year ended 31 December 2010 of 6.12p per ordinary share (2009: 5.12p)

-


-


18,755

 

 

The proposed interim dividend had not been approved by the Board at 30 June 2011 and therefore has not been included as a liability. The comparative interim dividend at 30 June 2010 was also not recognised as a liability in the prior period.

 

The proposed interim dividend of 3.25 pence (2010: 2.88 pence) per ordinary share will be paid on 7 October 2011 to shareholders on the register at the close of business on 9 September 2011.

 

 

8.             Share-based payments

 

In accordance with IFRS 2 "Share-based Payment", a charge of £3.9m has been recognised for share options (including social charges) (30 June 2010: £2.0m, 31 December 2010: £5.6m), and £3.1m has been recognised for other share-based payment arrangements (including social charges) (30 June 2010: £3.3m, 31 December 2010: £6.9m).

 

During the period, options over 4.1m shares were granted at an average exercise price of £4.91p and 0.5m share options were exercised, which has led to an increase in share capital of £5k and an increase in share premium of £1,031k.

 

 

9.             Earnings per ordinary share

 

The calculation of the basic and diluted earnings per share is based on the following data:

 


Six months ended


Year ended

31 December

2010

 

 

 

 

Earnings

30 June

2011


30 June

2010


Earnings for basic and diluted earnings per share (£'000)

30,459


41,468


67,484

Non-recurring items (NRI) (£'000) (note 4)

-


(20,491)


(20,491)

Earnings for basic and diluted earnings per share before NRI (£'000)

30,459


20,977


46,993







Number of shares






Weighted average number of shares used for basic earnings per share ('000)

305,807


316,596


311,821

Dilution effect of share plans ('000)

9,653


7,490


7,653

Diluted weighted average number of shares used for diluted earnings per share ('000)

315,460


324,086


319,474







Basic earnings per share (pence)

10.0


13.1


21.6

Diluted earnings per share (pence)

9.7


12.8


21.1

Basic earnings per share before NRI (pence)

10.0


6.6


15.1

Diluted earnings per share before NRI (pence)

9.7


6.5


14.7







 

The above results all relate to continuing operations.

 

 

10.           Property, plant and equipment

 

Acquisitions and disposals

During the six months ended 30 June 2011 the Group acquired property, plant and equipment with a cost of £8.0m (30 June 2010: £2.6m, 31 December 2010: £7.4m).

 

Property, plant and equipment with a carrying amount of £0.2m were disposed of during the six months ended 30 June 2011 (30 June 2010: £1.4m, 31 December 2010: £1.5m), resulting in a profit on disposal of £7k (30 June 2010: loss of £42k, 31 December 2010: loss of £151k).

 

 

11.           Trade and other receivables

 


     30 June

2011

         £'000


30 June

2010

£'000


31 December

2010

£'000

Current






Trade receivables

180,736


122,737


134,723

Other receivables

5,894


3,552


5,035

Prepayments and accrued income

38,354


26,012


28,547


224,984


152,301


168,305













Non-current






Prepayments and accrued income

1,916


2,745


1,145

 

 

12.           Trade and other payables

 



     30 June

2011

         £'000


 30 June

2010

£'000


31 December

2010

£'000

Current







Trade payables


6,319


3,505


9,091

Other tax and social security


50,508


32,670


33,900

Other payables


23,238


19,355


20,340

Accruals


62,363


49,476


58,248

Deferred income


2,315


1,319


1,216



144,743


106,325


122,795

Non-current







Deferred income


2,091


1,972


1,830

Other tax and social security


618


295


2,326



2,709


2,267


4,156

 

 

13.           Cash flows from operating activities

 



Six months ended


Year ended

31 December

2010

£'000



30 June

2011

£'000


30 June

2010

£'000









Profit before tax


45,465


61,434


100,656

Non-recurring income


-


(17,125)


(17,125)

Profit before tax and non-recurring income


45,465


44,309


83,531

Depreciation and amortisation charges


5,522


5,212


10,579

(Profit)/loss on sale of property, plant and equipment, and computer software


(7)


42


151

Share scheme charges


5,991


5,216


10,049

Net financial income - including NRI


(63)


(11,787)


(12,004)

Operating cash flow before changes in working capital and NRI


56,908


42,992


92,306

Increase in receivables


(51,718)


(32,175)


(41,107)

Increase in payables


16,599


16,256


30,451

Cash generated from underlying operations


21,789


27,073


81,650

Decrease in HMRC related receivables


-


8,972


8,972

Decrease in HMRC related payables


-


(49,990)


(49,990)

Non-recurring income


-


28,460


28,460

Cash generated from operations


21,789


14,515


69,092

 

 

14.           Cash and cash equivalents

 



30 June

2011

£'000


30 June

2010

£'000


31 December

2010

£'000








Cash at bank and in hand


56,156


57,562


73,178

Short-term deposits


6,568


9,615


7,353

Cash and cash equivalents


62,724


67,177


80,531

Bank overdrafts


(39,142)


(1,503)


-

Cash and cash equivalents in the statement of cash flows


23,582


65,674


80,531

 



Responsibility statement:

 

The Directors confirm that, to the best of their knowledge:- 

 

a)            the condensed set of interim financial statements has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’;
b)           the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
c)            the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties’ transactions and changes therein).

  

 

On behalf of the Board

 

 

 

S Ingham                                                                                                 S Puckett

Chief Executive                                                                                       Group Finance Director

 

 

15 August 2011

 

 Copies of the Interim Financial Statements are now available and can be downloaded from the Company's website

 http://investors.michaelpage.co.uk/annual_reports

 

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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