Interim Results

Michael Page International PLC 14 August 2001 PART 1 14 August 2001 Interim Results for the Six Months Ended 30 June 2001 Michael Page International plc ('Michael Page') announces its interim results for the six months ended 30 June 2001. As explained in Note 1 to the Financial Statements, proforma figures have been prepared to reflect the operating results of the Michael Page businesses for the full six month period. PROFORMA RESULTS SUMMARY 6 months ended 6 months ended Change % 30 June 2001 30 June 2000 Turnover £242.7m £203.4m +19.3 Revenue (gross profit) £135.6m £115.0m +17.9 Operating profit* £42.1m £42.5m** -1.0 Profit before tax* £38.3m £34.7m** +10.5 Basic earnings per share 5.6p 5.3p +5.7 Adjusted earnings per share* 6.7p 5.3p +26.4 * Before exceptional items ** Pre Spherion bonuses Key points - Flotation on London Stock Exchange in March 2001 - Strong revenue growth in UK and Continental Europe - Weakening demand in all permanent recruitment markets towards end of second quarter led to reduction in rate of revenue growth - Page Interim continues strong growth in temporary business in France - New office in Tokyo opened on schedule in June 2001 - Strong operational cash flows Commenting on the interim results, Lord Wakeham, Chairman of Michael Page, said: 'The uncertain economic outlook in most of the markets and segments in which we operate make it particularly difficult to forecast business levels into the second half of 2001. Despite this, we believe that, with the strength of the Michael Page brand, its experienced management team and the geographical and sectoral diversity of our business, we are well equipped to meet the challenges of these difficult conditions. We are continuing to invest in businesses with long term growth potential which will allow us to take full commercial advantage when more favourable market conditions return.' Enquiries: Michael Page International plc 020 7269 2205 Terry Benson, Chief Executive Stephen Puckett, Finance Director Financial Dynamics 020 7831 3113 David Yates / Richard Mountain CHAIRMAN'S STATEMENT This is my first report since your company's flotation at the end of March 2001. We have prepared proforma figures to reflect the operating results of the Michael Page businesses for the full six month period and these proforma figures are referred to in my statement. As explained in Note 1 to the Financial Statements, a pre-flotation reorganisation was completed at the end of February 2001 and this is reflected in the company's statutory financial reporting. Consequently the statutory results are not representative of the full period's results of the Michael Page businesses which were floated. The flotation prospectus gave details of a Restricted Share Scheme to be put in place on flotation and on which an exceptional charge of £7.0m was anticipated for National Insurance and social security charges. This is now estimated at £6.0m and has been taken as an exceptional charge in the six months results. Turnover for the six months ended 30 June 2001 grew 19.3% to £242.7m (2000: £ 203.4m). As a result of investment in new offices and hiring of additional consultants, together with their associated infrastructure costs in the latter half of 2000, operating profit before exceptional items was marginally lower at £42.1m (2000: £42.5m pre Spherion bonuses). Profit before tax for the six months ended 30 June 2001 was £38.3m (2000: £34.7m pre Spherion bonuses). Towards the end of the second quarter of 2001, the difficult trading conditions first experienced in the USA and Australia extended to the UK, Continental Europe and elsewhere. The Group's results for the six months ended 30 June 2001 reflect these more challenging conditions. The results also reflect strong growth in the temporary business in the UK and Continental Europe with the first half permanent/temporary revenue mix being 77/23 compared to 80/20 in the first half of 2000. UNITED KINGDOM Turnover of the UK operations advanced 18.8% to £127.4m (2000: £107.2m) and operating profit, before exceptional items, increased 1.5% to £20.2m (2000: £ 19.9m pre Spherion bonuses). We opened several new offices in the UK and continued to expand existing businesses into a number of new locations. In addition, we established Michael Page Engineering at the start of the year. Despite the reduced level of recruitment activity in financial services, our finance and accountancy businesses produced good revenue growth. Our sales, legal, retail and human resources businesses also achieved significantly increased revenues. However, our marketing business was particularly affected by the weakness in the Telecoms and IT sectors. CONTINENTAL EUROPE Our operations in Continental Europe produced an excellent performance growing turnover by 30.0% to £84.7m (2000: £65.2m) and operating profit before exceptional items by 12.6% to £17.4m (2000: £15.4m pre Spherion bonuses). However, towards the end of the second quarter our businesses in France, the Group's second largest geographic market, experienced a marked weakening in the permanent recruitment market but Page Interim, our temporary business, continues to produce strong growth. Your Board is confident that Continental Europe will present major growth opportunities in the coming years. In the first six months of 2001 new offices were opened in Rome, Geneva and Orleans. ASIA PACIFIC Despite weakening market conditions across the region, turnover for the first six months of 2001 was maintained at the same level as the first six months of 2000 at £27.7m, but operating profit, before exceptional items, fell to £4.1m (2000: £6.1m pre Spherion bonuses). These results reflect the downturn in the Telecoms and IT sectors, with our business in Hong Kong being particularly impacted by the slowdown in financial services. Our office in Tokyo opened on schedule in June 2001 and whilst requiring considerable initial investment we are confident that Japan will provide excellent longer term opportunities. THE AMERICAS In the Americas, turnover declined by 11.0% to £2.9m (2000: £3.3m) and our operating profit before exceptional items reduced to £0.4m (2000: £1.1m pre Spherion bonuses) reflecting a particularly difficult period for our New York business. Our South American business in Sao Paulo, Brazil is now firmly established with an increasing revenue stream and produced a small operating profit in the first six months of 2001. INTEREST, CASH FLOW AND BORROWINGS In the first six months of 2001 the net interest charge was £3.8m (2000: £ 7.8m). The reduced interest charge reflects the change in the Group's capital structure prior to the flotation. At 31 December 2000 the Group had net debt of £204.0m (including amounts due to Spherion Corporation) which was reduced on flotation by way of a capital contribution of £168m from Spherion Corporation. As a result of the Group's strong operational cash flows, net debt at 30 June 2001 was £12.7m. This includes £10m of borrowings to finance the purchase of the company's own shares on flotation to hedge against the National Insurance and social security charges arising on the restricted and share option schemes. EARNINGS PER SHARE AND DIVIDEND Proforma earnings per share were 5.6p (2000: 5.3p) and adjusted earnings per share before exceptional items were 6.7p (2000: 5.3p) reflecting the lower interest charge and the cessation of the Spherion bonus scheme in 2001. In accordance with the guidance set out in our flotation prospectus, an interim dividend of 0.275p per share will be paid on 19 October 2001 to shareholders on the register at 21 September 2001. This interim payment represents a maintained position with the level of notional 2000 dividend indicated in the prospectus. CURRENT TRADING AND FUTURE PROSPECTS Our July results showed 7% revenue growth over July 2000, however we continue to operate in challenging market conditions. The uncertain economic outlook in most of the markets and segments in which we operate make it particularly difficult to forecast business levels into the second half of 2001. Despite this, we believe that, with the strength of the Michael Page brand, its experienced management team and the geographical and sectoral diversity of our business, we are well equipped to meet the challenges of these difficult conditions. We are continuing to invest in businesses with long term growth potential which will allow us to take full commercial advantage when more favourable market conditions return. John Wakeham 14 August 2001 MICHAEL PAGE INTERNATIONAL PLC Unaudited Proforma Consolidated Profit and Loss Account for the six months ended 30 June 2001 Six months ended 30 June Notes Before Exceptional After Six Year Exceptional Items Exceptional Months Ended Items 2001 Items Ended 31 2001 (Note 3) 2001 30 June December £'000 £'000 2000 2000 £'000 £'000 Turnover 2 242,718 - 242,718 203,421 426,886 Cost of sales (107,125) - (107,125) (88,407) (187,222) __________ __________ __________ ________ ________ Gross profit 2 135,593 - 135,593 115,014 239,664 Administrative expenses - Spherion - - - (4,380) (9,075) bonuses - Other (93,502) (6,000) (99,502) (72,488) (157,210) administrative expenses __________ __________ __________ ________ ________ Total (93,502) (6,000) (99,502) (76,868) (166,285) administrative expenses Operating 42,091 (6,000) 36,091 38,146 73,379 profit Net interest (3,778) - (3,778) (7,840) (15,377) payable and similar charges __________ __________ __________ ________ ________ Profit on 2 38,313 (6,000) 32,313 30,306 58,002 ordinary activities before taxation __________ __________ __________ ________ ________ Taxation 4 (13,333) 1,800 (11,533) (10,313) (20,766) __________ __________ __________ ________ ________ Profit on 24,980 (4,200) 20,780 19,993 37,236 ordinary activities after taxation Equity minority - - - (197) (197) interest __________ __________ __________ ________ ________ Profit for 24,980 (4,200) 20,780 19,796 37,039 the financial period Equity (1,016) - (1,016) - - dividends __________ __________ __________ ________ _________ Retained 23,964 (4,200) 19,764 19,796 37,039 profit for the financial period ========= ========= ========= ======== ======== Basic 5 5.6 5.3 9.9 earnings per share (pence) Diluted 5 5.6 5.3 9.9 earnings per share (pence) Adjusted 5 6.7 5.3 9.9 earnings per share (pence) Proforma statement of total recognised gains and losses Profit for the 20,780 19,796 37,039 financial period Foreign currency (1,453) 260 371 translation differences __________ ________ ________ Total recognised 19,327 20,056 37,410 gains and losses for the period ======== ======= ======== MICHAEL PAGE INTERNATIONAL PLC Notes to the unaudited proforma financial information 1. Proforma financial information The proforma financial information for the 6 months ended 30 June 2001 has been prepared using consistent accounting policies used in the preparation of the statutory information except that they have been prepared to reflect the combined financial information of Michael Page International Inc and MP International Pte Limited (MPI USA and MPI Singapore) which were transferred to the Group by Spherion Corporation, (the Group's previous ultimate parent company) on 27 February 2001 and which have been included as they were commonly controlled and managed by the Group prior to that date (see note 8 of the statutory accounts), and excluding the results of Plusbox Limited and its subsidiaries which were transferred to Spherion Corporation on 27 February 2001 as they were not commonly controlled or managed by the Group prior to that date (see note 9 of the statutory accounts). The statutory profit after taxation and exceptional items is reconciled to the proforma basis as follows: Six months ended Six months ended Year ended June 2001 June 2000 December £'000 £'000 2000 £'000 Profit after taxation and exceptional items Per statutory financial 29,084 19,174 37,205 information Results of MPI USA and 105 814 832 MPI Singapore Results of Plusbox 8 5 (801) Limited Profit on disposal of (8,417) - - Plusbox Limited __________ __________ __________ Per proforma financial 20,780 19,993 37,236 information ========= ========= ========= 2. Segmental analysis (a) Turnover Turnover by geographic Six months Six months Year ended region ended ended December June 2001 June 2000 2000 £'000 £'000 £'000 UK 127,370 107,235 224,469 Continental Europe 84,743 65,204 137,862 Asia Pacific: Australia 22,802 23,295 47,999 Other 4,902 4,428 9,570 Americas 2,901 3,259 6,986 __________ __________ __________ Total turnover 242,718 203,421 426,886 ========= ========= ========= Six months Six months Year ended ended ended December June 2001 June 2000 2000 £'000 £'000 £'000 Turnover by discipline Finance and Accounting 175,905 149,528 311,963 Marketing and Sales 37,894 30,646 65,995 Other 28,919 23,247 48,928 __________ __________ __________ Total turnover 242,718 203,421 426,886 ========= ========= ========= MICHAEL PAGE INTERNATIONAL PLC Notes to the unaudited proforma financial information (continued) 2. Segmental analysis (continued) (b) Gross profit Six months Six months Year ended ended ended December June 2001 June 2000 2000 £'000 £'000 £'000 Gross profit by geographic region UK 66,706 57,275 118,022 Continental Europe 52,709 41,654 87,355 Asia Pacific: Australia 9,405 9,877 20,503 Other 4,280 3,778 8,262 Americas 2,493 2,430 5,522 __________ __________ __________ Total gross profit 135,593 115,014 239,664 ========= ========= ========= Six months Six months Year ended ended ended December June 2001 June 2000 2000 £'000 £'000 £'000 Gross profit by discipline Finance and Accounting 87,351 76,361 158,520 Marketing and Sales 29,358 23,794 49,799 Other 18,884 14,859 31,345 __________ __________ __________ Total gross profit 135,593 115,014 239,664 ========= ========= ========= (c) Profit on ordinary activities before taxation Six months Six months Year ended ended ended December June 2001 June 2000 2000 £'000 £'000 £'000 Profit before interest, taxation, exceptional items and Spherion bonus by geographic region UK 20,219 19,930 39,765 Continental Europe 17,369 15,425 29,676 Asia Pacific: Australia 3,129 4,369 8,363 Other 962 1,741 3,141 Americas 412 1,061 1,509 __________ __________ __________ Profit before interest, taxation, 42,091 42,526 82,454 exceptional items and Spherion bonus __________ __________ __________ Exceptional items (note 3) (6,000) - - Spherion bonus - (4,380) (9,075) __________ __________ __________ Profit before interest 36,091 38,146 73,379 and taxation Net interest (3,778) (7,840) (15,377) __________ __________ __________ Profit on ordinary activities 32,313 30,306 58,002 before taxation ========= ========= ========= MICHAEL PAGE INTERNATIONAL PLC Notes to the unaudited proforma financial information (continued) 3. Exceptional items Six months Six months Year ended ended ended December June 2001 June 2000 2000 £'000 £'000 £'000 National Insurance and 6,000 - - Social Security liabilities on Restricted Share Scheme ======== ======== ======== Bonuses paid by the Group's previous parent company, Spherion Corporation, historically formed part of the remuneration of the Group's senior executives. On flotation this arrangement ceased and as compensation Spherion granted Restricted Shares to certain senior executives. The Restricted Shares represent 6% of the issued ordinary shares of the Group owned by Spherion prior to flotation. The grant of Restricted Shares gives rise to National Insurance and Social Security liabilities amounting to £6.0m based on the flotation price of 175p. These liabilities are expected to be payable in March 2004 when the shares vest to those senior executives. 4. Taxation The charge for taxation is based on the expected annual tax rate of 34.8% on proforma profit before taxation and exceptional items. 5. Earnings per share Earnings per share have been calculated on the following: Basic Exceptional Adjusted EPS Items EPS £'000 £'000 £'000 Six months ended 30 June 2001 Profit after taxation 20,780 4,200 24,980 __________ __________ __________ Average shares (number '000) 372,127 - 372,127 __________ __________ __________ Six months ended 30 June 2000 Profit after taxation and equity 19,796 - 19,796 minority interests __________ __________ __________ Average shares (number '000) 375,000 - 375,000 __________ __________ __________ Year ended 31 December 2000 Profit after taxation and equity 37,039 - 37,039 minority interests __________ __________ __________ Average shares (number '000) 375,000 - 375,000 __________ __________ __________ There is no dilutive effect of unexercised share options. 6. Number of employees As at As at As at 30 June 30 June 31 December 2001 2000 2000 Total employees 2,929 2,187 2,666 ======== ======== ======== MICHAEL PAGE INTERNATIONAL PLC Unaudited Statutory Consolidated Profit and Loss Account for the six months ended 30 June 2001 Six months ended 30 June Notes Before Except After Six Year Exceptional ional Except Months Ended Items Items ional Ended 31 2001 2001 Items 30 June December £'000 (Note 3) 2001 2000 2000 £'000 £'000 £'000 Turnover - Continuing 239,351 - 239,351 199,287 418,422 - Acquisitions 2,141 - 2,141 - - - Discontinued 5,753 - 5,753 16,666 39,643 __________ _________ _________ _________ __________ Turnover 2 247,245 - 247,245 215,953 458,065 Cost of sales (110,786) - (110,786) (98,148) (211,736) __________ _________ _________ ________ ________ Gross profit 136,459 - 136,459 117,805 246,329 Administrative expenses - Spherion - - - (4,380) (9,075) bonuses - Other (94,425) (6,000) (100,425) (75,969) (163,152) administrative expenses __________ ________ ________ ________ ________ Total (94,425) (6,000) (100,425) (80,349) (172,227) administrative expenses Operating profit - Continuing 41,535 (6,000) 35,535 36,926 72,108 - Acquisitions 395 - 395 - - - Discontinued 104 - 104 530 1,994 __________ ________ ________ _________ __________ Operating profit 42,034 (6,000) 36,034 37,456 74,102 Profit on 9 - 8,417 8,417 - - disposal of subsidiary _________ _________ ________ ________ ________ Profit on 2 42,034 2,417 44,451 37,456 74,102 ordinary activities before interest Net interest (3,820) - (3,820) (7,888) (15,566) payable and similar charges __________ _________ _________ ________ ________ Profit on 38,214 2,417 40,631 29,568 58,536 ordinary activities before taxation __________ _________ _________ ________ ________ Taxation 4 (13,347) 1,800 (11,547) (10,394) (21,331) __________ _________ _________ ________ ________ Profit on 24,867 4,217 29,084 19,174 37,205 ordinary activities after taxation Equity minority - - - (197) (197) interest __________ _________ _________ ________ ________ Profit for the 24,867 4,217 29,084 18,977 37,008 financial period Equity 5 (1,016) - (1,016) - - dividends __________ _________ _________ ________ ________ Retained profit 23,851 4,217 28,068 18,977 37,008 for the financial period ========= ========= ========= ======= ======= Basic 6 7.8 5.1 9.9 earnings per share (pence) Diluted 6 7.8 5.1 9.9 earnings per share (pence) Adjusted 6 6.7 5.1 9.9 earnings per share (pence) MICHAEL PAGE INTERNATIONAL PLC Unaudited Consolidated Balance Sheet at 30 June 2001 Notes 30 June 30 June 31 December 2001 2000 2000 £'000 £'000 £'000 Fixed assets Intangible assets 1,784 22,338 22,096 Tangible assets 28,527 21,654 25,659 Investments in own shares 7 10,000 - - __________ __________ __________ 40,311 43,992 47,755 Current assets Debtors 101,420 98,301 103,651 Cash at bank and in hand 11,229 15,429 17,035 __________ __________ __________ 112,649 113,730 120,686 Creditors: amounts falling (72,941) (155,992) (163,313) due within one year __________ __________ __________ Net current assets / 39,708 (42,262) (42,627) (liabilities) __________ __________ __________ Total assets less current 80,019 1,730 5,128 liabilities __________ __________ __________ Creditors: amounts falling (18,000) (158,500) (142,000) due after more than one year __________ __________ __________ Provisions for liabilities 10 (6,056) - (1,757) and charges __________ __________ __________ Net assets / (liabilities) 2 55,963 (156,770) (138,629) ========= ========= ========= Capital and reserves Called up share capital 3,750 50 50 Capital contribution reserve 306,487 142,187 142,187 Profit and loss account (254,274) (299,007) (280,866) __________ __________ __________ Equity shareholders' funds 11 55,963 (156,770) (138,629) / (deficit) ========= ========= ========= MICHAEL PAGE INTERNATIONAL PLC Unaudited Consolidated Cash Flow Statement for the six months ended 30 June 2001 Notes Six months Six months Year ended ended ended December June 2001 June 2000 2000 £'000 £'000 £'000 Net cash inflow from 12 40,943 34,068 77,578 operating activities excluding Spherion Bonus Net cash outflow (9,075) (7,731) (7,731) from Spherion Bonus _________ _________ _________ Net cash inflow from 31,868 26,337 69,847 operating activities Returns on investment and (3,788) (5,894) (11,506) servicing of finance Taxation paid (6,389) (3,490) (15,992) Purchase of own shares 7 (10,000) - - Net capital expenditure (6,860) (4,080) (11,124) Acquisitions and disposals 814 (2,179) (2,179) _________ _________ _________ Net cash inflow 5,645 10,694 29,046 before financing _________ _________ _________ Financing Repayment of loan notes (464) - (539) Capital contribution 168,000 - - (Repayment) / advances of (51,543) 1,034 (1,378) amounts owed to / by group undertakings Decrease in bank loans (124,000) (3,000) (19,500) _________ _________ _________ Net cash inflow from (8,007) (1,966) (21,417) financing _________ _________ _________ (Decrease) / increase in 13, 14 (2,362) 8,728 7,629 cash in the year ======== ======== ======== Included within the repayment of amounts owed to group undertakings is the net consideration from the Spherion Group of £7.4m for the disposal of Plusbox Limited and its subsidiaries. Statement of total recognised gains and losses Six months Six months Year ended ended ended December June 2001 June 2000 2000 £'000 £'000 £'000 Profit for the financial period 29,084 18,977 37,008 Foreign currency translation (1,476) 319 429 differences __________ ________ ________ Total recognised gains 27,608 19,296 37,437 and losses for the period ========= ======= ======= MORE TO FOLLOW

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