Interim Results

Michael Page International PLC 19 August 2002 19 August 2002 MICHAEL PAGE INTERNATIONAL PLC HALF YEAR RESULTS AND ANNOUNCEMENT OF SHARE BUY BACK Half Year Results for the period ended 30 June 2002 Michael Page International plc ("Michael Page"), the specialist professional recruitment company, announces its half year results for the period ended 30 June 2002. Key Points â€¢ Revenue of Â£100.9m and profit before tax of Â£18.0m, despite difficult trading conditions â€¢ 3.8% revenue increase in Q2 2002 over Q1 2002 â€¢ Earnings per share of 3.2p â€¢ Gross margin on temporary placements increased to 24.6% â€¢ Strong cash generation, with cash generated from operating activities of Â£17.5m â€¢ Dividend maintained at 1.1p â€¢ Intention to buy back shares up to a value of Â£40m over the next 12 months Commenting on the results, Terry Benson, Chief Executive of Michael Page, said: "Michael Page has produced a solid performance in difficult conditions. Although business confidence remains weak, the Group is well positioned to produce considerably better results when market conditions improve. "We are continuing to manage the business on the basis that conditions will remain challenging but stable for the remainder of this year. We will maintain our tight control over costs, whilst at the same time ensuring that the longer-term prospects of the business are protected. "Today's announcement of our intention to repurchase up to Â£40m of shares over the next 12 months reflects the Board's view that the earnings accretion and the more effective capital structure that this will create will enhance shareholder value." Enquiries: Michael Page International plc 020 7269 2205 Terry Benson, Chief Executive Stephen Puckett, Finance Director Financial Dynamics 020 7269 7291 Richard Mountain/Robert Gurner CHAIRMAN'S STATEMENT The first six months of 2002 presented us with difficult trading conditions. Nevertheless I am pleased to report a solid Group performance for the six months ended 30 June 2002. During 2001, as market conditions deteriorated, the Group's quarterly revenue (gross profit) fell sequentially from the end of the first quarter. As we reported at our Annual General Meeting in May 2002, the Group's revenue of Â£49.5m in the first quarter of 2002, whilst below that of the first quarter of 2001, represented a marked slowing in the sequential rate of decline. In the second quarter we achieved increased revenue of Â£51.4m. This very welcome increase arrests the already slowing downward trend and provides firm evidence of the strength of our brand in difficult times. Turnover for the six months ended 30 June 2002 was Â£197.8m (2001: Â£247.2m) and revenue was Â£100.9m (2001: Â£136.5m). Operating profit was Â£17.8m (2001: Â£42.0m before exceptional items). Profit before tax was Â£18.0m (2001: Â£38.2m before exceptional items) and earnings per share were 3.2p (2001: 6.7p before exceptional items). We believe these results demonstrate our ability to respond effectively to rapidly changing market conditions, keeping a tight control on costs, whilst continuing to focus on the identification and development of new opportunities for the longer term. In the first six months of 2002 new offices were opened in Rotterdam, Stockholm and Brussels and existing businesses were extended into more locations. We started the year with 2,657 staff operating from 109 offices in 14 countries. Mostly through a process of natural attrition, at 30 June 2002, staff numbers have been reduced to 2,440 (2001: 2,929) operating from 115 offices in 16 countries. The challenging market conditions, whilst impacting virtually all elements of the Group's businesses, had a greater effect on permanent rather than temporary recruitment. In the first half of 2002 the mix of the Group's turnover and revenue between permanent and temporary placements was 39:61 (2001: 47:53) and 70:30 respectively (2001: 77:23). Despite the challenging conditions the Group's gross margin on temporary placements increased slightly to 24.6% (2001: 24.3%). UNITED KINGDOM Turnover of the UK operations was Â£105.8m (2001: Â£133.1m), revenue was Â£51.9m (2001: Â£68.6m) and operating profit was Â£10.3m (2001: Â£20.4m). Revenue in the first quarter of 2002 increased over that achieved in the last quarter of 2001. Second quarter revenues were similar to those in the first quarter despite an unusually quiet June, which was affected by the long Golden Jubilee weekend and the World Cup. Finance and Accounting revenue was 22% lower than the first half of 2001; Marketing and Sales was 26% lower whilst the Other disciplines were 15% lower. These lower revenues mainly reflect the weakness of the banking and TMT sectors. In our newer disciplines of retail, human resources and engineering, despite themselves facing difficult market conditions, year on year revenue growth has been achieved. CONTINENTAL EUROPE Turnover of the Continental European operations was Â£66.3m (2001: Â£84.7m), revenue was Â£35.2m (2001: Â£52.7m) and operating profit was Â£4.4m (2001: Â£17.4m). All of our Continental European operations have experienced extremely difficult conditions in the last six months particularly our permanent recruitment business in France. Notwithstanding the challenging environment which we have faced, we remain committed to sensible and well structured plans to further develop our European network. In the first half new offices were opened in Rotterdam, Stockholm and Brussels. Our temporary recruitment business, Page Interim, has now been extended to Germany and The Netherlands. ASIA PACIFIC Turnover of the Asia Pacific operations was Â£22.6m (2001: Â£27.3m), revenue was Â£11.3m (2001: Â£13.4m) and operating profit was Â£3.5m (2001: Â£3.7m). Activity levels in the region were very low at the end of 2001 and into the first quarter of 2002, particularly in Sydney, Hong Kong and Singapore. There has, however, been some improvement in conditions in the second quarter of 2002. The Tokyo office, which opened in June 2001, has progressed well and covered its costs in the first half of 2002. AMERICAS Turnover was Â£3.1m (2001: Â£2.0m), revenue was Â£2.5m (2001: Â£1.8m) and we recorded an operating loss of Â£0.3m (2001: Â£0.5m profit). Market conditions in New York continue to be difficult, although our New Jersey office, which opened in December, is performing to plan. In Sao Paulo the office continues to increase revenue and generate profits. CASH FLOW The Group started the year with net cash of Â£14.3m. In the first half we generated Â£17.5m from operations and after tax of Â£8.4m, net capital expenditure of Â£1.3m and dividends of Â£8.5m we ended the period with Â£14.2m of net cash. Interest income in the first six months was Â£0.1m (2001: Â£3.8m payable). SHARE BUY BACK Following a detailed review of the Group's balance sheet and an assessment of the most appropriate uses for the excess cash generated by the business, the Board has taken the decision to instruct its broker to conduct an on-market buy back program. It is the Board's current intention to repurchase up to Â£40m of shares over the course of the next 12 months. In the Board's view the earnings accretion and the more efficient capital structure that this will create will enhance the shareholder value. DIVIDENDS Whilst the Group's profits have declined, our cash position remains strong and the Board has decided to pay an interim dividend of 1.1p (2001: 0.275p) per share on 18 October 2002 to shareholders on the register at 20 September 2002. This represents a maintenance of the dividend level to that paid in 2001 as if the shares had been listed for the whole of 2001. CURRENT TRADING AND FUTURE PROSPECTS Business confidence remains weak, but I believe the Group is well positioned to produce considerably better results when market conditions improve. We are continuing to manage the business on the basis that market conditions will remain challenging but stable for the remainder of this year. We will maintain our tight control over costs, whilst at the same time, ensuring that the longer-term prospects of the business are protected. Adrian Montague 19 August 2002 Unaudited Consolidated Profit and Loss Account for the six months ended 30 June 2002 Six months ended Year ended 30 June 30 June 31 December 2002 2001 2001 audited Notes Â£'000 Â£'000 Â£'000 Turnover - Continuing 197,822 241,492 453,794 - Discontinued - 5,753 5,753 -------------- -------------- --------------- Turnover 2 197,822 247,245 459,547 Cost of sales (96,971) (110,786) (214,467) -------------- --------------- --------------- Gross profit 2 100,851 136,459 245,080 Total administrative expenses (83,037) (100,425) (187,061) Operating profit - Continuing 17,814 35,930 57,915 - Discontinued - 104 104 --------------- --------------- --------------- Operating profit 17,814 36,034 58,019 Profit on disposal of subsidiary 3 - 8,417 8,417 --------------- --------------- --------------- Profit on ordinary activities before 17,814 44,451 66,436 interest Net interest receivable/(payable) and similar income/(charges) 137 (3,820) (4,110) --------------- --------------- --------------- Profit on ordinary activities before taxation 2 17,951 40,631 62,326 Taxation on profit on ordinary 4 (6,137) (11,547) (18,673) activities --------------- --------------- --------------- Profit on ordinary activities after taxation being the profit for the financial period 11,814 29,084 43,653 --------------- --------------- --------------- Equity dividends 5 (4,062) (1,016) (9,510) --------------- --------------- --------------- Retained profit for the financial period 7,752 28,068 34,143 ========= ========= ========= Basic earnings per share (pence) 6 3.2 7.8 11.8 Diluted earnings per share (pence) 6 3.2 7.8 11.8 Adjusted earnings per share (pence) 6 3.2 6.7 10.6 ========= ========= ========= Unaudited Consolidated Balance Sheet at 30 June 2002 Year ended 30 June 30 June 31 December 2002 2001 2001 audited Notes Â£'000 Â£'000 Â£'000 Fixed assets Intangible assets 1,683 1,784 1,731 Tangible assets 26,762 28,527 28,663 Investments in own shares 10,000 10,000 10,000 --------------- --------------- --------------- 38,445 40,311 40,394 --------------- --------------- --------------- Current assets Debtors 84,762 101,420 80,747 Cash at bank and in hand 11 21,615 11,229 22,104 --------------- --------------- --------------- 106,377 112,649 102,851 --------------- --------------- --------------- Creditors: Amounts falling due within one year (66,698) (72,941) (74,812) --------------- --------------- --------------- Net current assets 39,679 39,708 28,039 --------------- --------------- --------------- Total assets less current liabilities 78,124 80,019 68,433 --------------- --------------- --------------- Creditors: Amounts falling due after more than one year - (18,000) - --------------- --------------- --------------- Provisions for liabilities and charges 7 (6,000) (6,056) (6,000) --------------- --------------- --------------- Net assets 2 72,124 55,963 62,433 ========= ========= ========= Capital and reserves Called up share capital 3,750 3,750 3,750 Capital contribution reserve 306,487 306,487 306,487 Profit and loss account (238,113) (254,274) (247,804) --------------- --------------- --------------- Equity shareholders' funds 8 72,124 55,963 62,433 ========= ========= ========= Unaudited Consolidated Cash Flow Statement for the six months ended 30 June 2002 Six months ended Year Ended 30 June 30 June 31 December 2001 2002 2001 audited Notes Â£'000 Â£'000 Â£'000 Net cash inflow from operating activities excluding 9 17,514 40,943 84,944 Spherion Bonus Net cash outflow from Spherion Bonuses - (9,075) (9,075) --------------- --------------- --------------- Net cash inflow from operating activities 17,514 31,868 75,869 Returns on investments and servicing of finance 137 (3,788) (4,024) Taxation paid (8,440) (6,389) (18,073) Purchase of own shares - (10,000) (10,000) Purchases less disposal of fixed assets (1,251) (6,860) (11,226) Acquisitions and disposals - 814 814 Equity dividends paid (8,494) - (1,016) --------------- --------------- --------------- Net cash (outflow)/inflow before financing (534) 5,645 32,344 --------------- --------------- --------------- Financing Repayment of loan notes - (464) (915) Capital contribution - 168,000 168,000 Repayment of amounts owed to group undertakings - (51,543) (51,531) Decrease in bank loans - (124,000) (142,000) --------------- --------------- --------------- Net cash outflow from financing - (8,007) (26,446) --------------- --------------- --------------- (Decrease) / increase in net cash 11 (534) (2,362) 5,898 ========= ========= ========= Unaudited Consolidated Statement of total recognised gains and losses Six months ended Year Ended 30 June 30 June 31 December 2001 2002 2001 audited Â£'000 Â£'000 Â£'000 Profit for the financial period 11,814 29,084 43,653 Foreign currency translation differences 1,939 (1,476) (1,081) --------------- --------------- --------------- Total recognised gains and losses for the period 13,753 27,608 42,572 ========= ========= ========= Notes to the unaudited financial information 1. Basis of accounting The consolidated interim financial statements have been prepared under the historical cost convention and in accordance with applicable United Kingdom accounting and financial reporting standards. The accounting policies are the same as those set out in the financial statements of the Group for the year ended 31 December 2001. The interim financial statements are unaudited but have been reviewed by the auditors and their report is set out on page 15. The comparative figures for the year ended 31 December 2001 have been extracted from the Group's financial statements which have been delivered to the Registrar of Companies. The auditors' report on those statements was unqualified and did not include a statement under Section 237(2) or (3) of the Companies Act 1985. 2. Segmental analysis Six months ended Year Ended 30 June 30 June 31 December 2001 2002 2001 audited Â£'000 Â£'000 Â£'000 (a) Turnover by geographic region: United Kingdom - continuing operations 105,790 127,370 243,614 - discontinued operations - 5,753 5,753 --------------- --------------- --------------- 105,790 133,123 249,367 Continental Europe 66,348 84,743 154,335 Asia Pacific 22,631 27,347 51,306 Americas 3,053 2,032 4,539 --------------- --------------- --------------- Turnover 197,822 247,245 459,547 ========= ========= ========= Six months ended Year ended 30 June 30 June 31 December 2001 2002 2001 audited Â£'000 Â£'000 Â£'000 (b) Turnover by discipline: Finance and accounting 114,288 174,679 333,324 Marketing and sales 28,251 37,894 67,581 Other continuing operations 25,283 28,919 52,889 discontinued operations - 5,753 5,753 --------------- --------------- --------------- 25,283 34,672 58,642 --------------- --------------- --------------- Turnover 197,822 247,245 459,547 ========= ========= ========= Six months ended Year Ended 30 June 30 June 31December 2001 2002 2001 audited Â£'000 Â£'000 Â£'000 (c) Gross profit by geographic region: United Kingdom continuing operations 51,946 66,706 122,769 discontinued operations - 1,919 1,919 --------------- --------------- --------------- 51,946 68,625 124,688 Continental Europe 35,151 52,709 91,644 Asia Pacific 11,296 13,368 24,879 Americas 2,458 1,757 3,869 --------------- --------------- --------------- Gross profit 100,851 136,459 245,080 ========= ========= ========= Six months ended Year ended 30 June 30 June 31 December 2001 2002 2001 audited Â£'000 Â£'000 Â£'000 (d) Gross Profit by discipline: Finance and accounting 66,108 86,298 159,049 Marketing and sales 20,847 29,358 51,429 Other continuing operations 13,896 18,884 32,683 discontinued operations - 1,919 1,919 --------------- --------------- --------------- 13,896 20,803 34,602 --------------- --------------- --------------- Gross profit 100,851 136,459 245,080 ========= ========= ========= Six months ended Year ended 30 June 30 June 31 December 2001 2002 2001 audited Â£'000 Â£'000 Â£'000 (e) Profit before taxation, interest and exceptional items by geographic region: United Kingdom continuing operations 10,316 20,322 34,926 discontinued operations - 104 104 --------------- --------------- --------------- 10,316 20,426 35,030 Continental Europe 4,370 17,369 22,453 Asia Pacific 3,471 3,713 7,243 Americas (343) 526 (707) -------------- -------------- -------------- Profit before taxation, interest and exceptional items 17,814 42,034 64,019 Exceptional items - 2,417 2,417 -------------- -------------- -------------- Profit before interest and taxation 17,814 44,451 66,436 Net interest 137 (3,820) (4,110) -------------- -------------- -------------- Profit on ordinary activities before taxation 17,951 40,631 62,326 ========= ========= ========= Six months ended Year ended 30 June 30 June 31 December 2001 2002 2001 audited Â£'000 Â£'000 Â£'000 (f) Net assets / (liabilities) by geographic region: United Kingdom 40,351 10,923 30,413 Continental Europe 28,716 32,425 26,384 Asia Pacific 4,768 12,242 6,893 Americas (1,711) 373 (1,257) -------------- -------------- -------------- Net assets 72,124 55,963 62,433 ========= ========= ========= 3. Exceptional Items Six months ended Year ended 30 June 30 June 31 December 2001 2002 2001 audited Â£'000 Â£'000 Â£'000 National Insurance and Social Security liabilities on Restricted Share Scheme (a) - (6,000) (6,000) Profit on disposal of Plusbox Limited (b) - 8,417 8,417 -------------- -------------- -------------- - 2,417 2,417 Taxation on exceptional items - 1,800 1,800 -------------- -------------- -------------- - 4,217 4,217 ========= ========= ========= (a) 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 with Spherion granting 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 Â£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. (b) Disposal of Plusbox Limited As a result of the restructuring prior to flotation, on 28 February 2001, the Group disposed of its 100% investment in Plusbox Limited and its subsidiaries, including Spherion UK plc (formerly Crone Corkill Group plc) generating a net profit before taxation on disposal of Â£8.4m. 4. Taxation The charge for taxation is based on the expected annual tax rate of 34.1% (2001: 34.9% before exceptional items) on profit before taxation and amortisation of goodwill. 5. Dividends An interim dividend of 1.1 pence (2001: 0.275 pence) per ordinary share will be paid on 18 October 2002 to shareholders on the register at the close of business on 20 September 2002. 6. Earnings per share Basic and Exceptional Adjusted Diluted EPS Items (note 3) EPS 30 June 2002 Profit after taxation (Â£'000) 11,814 - 11,814 ------------- ------------- ------------- Average shares ('000) 369,286 - 369,286 ------------- ------------- ------------- Pence 3.2 - 3.2 ------------- ------------- ------------- 30 June 2001 Profit after taxation (Â£'000) 29,084 (4,217) 24,867 ------------- ------------- ------------- Average shares ('000) 372,127 - 372,127 ------------- ------------- ------------- Pence 7.8 - 6.7 ------------- ------------- ------------- 31 December 2001 Profit after taxation (Â£'000) 43,653 (4,217) 39,436 ------------- ------------- ------------- Average shares ('000) 370,714 - 370,714 ------------- ------------- ------------- Pence 11.8 - 10.6 ------------- ------------- ------------- 7. Provisions for liabilities and charges Six months ended Year ended 30 June 30 June 31 December 2002 2001 2001 audited Â£'000 Â£'000 Â£'000 Payroll tax liability on the Restricted Share Scheme (Note 3) 6,000 6,000 6,000 Deferred taxation - 56 - ------------- ------------- ------------- 6,000 6,056 6,000 ======== ======== ======== 8. Reconciliation of movements in consolidated shareholders' funds Six months ended Year ended 30 June 30 June 31December 2002 2001 2001 audited Â£'000 Â£'000 Â£'000 Profit for the financial period 11,814 29,084 43,653 Dividends (4,062) (1,016) (9,510) ------------- ------------- ------------- Retained profit for the financial period 7,752 28,068 34,143 Foreign currency translation differences 1,939 (1,476) (1,081) ------------- ------------- ------------- 9,691 26,592 33,062 Capital contribution - 168,000 168,000 Opening consolidated shareholders' funds / (deficit) 62,433 (138,629) (138,629) ------------- ------------- ------------- Closing consolidated shareholders' funds 72,124 55,963 62,433 ======== ======== ======== 9. Reconciliation of operating profit to net cash inflow from operating activities Six months ended Year ended 30 June 30 June 31December 2002 2001 2001 audited Â£'000 Â£'000 Â£'000 Operating profit 17,814 36,034 58,019 Depreciation and amortisation charges 3,867 3,566 7,670 Loss/(profit) on sale of fixed assets 14 (5) 159 (Increase)/decrease in debtors (3,480) (3,427) 17,289 (Decrease)/increase in creditors (701) 4,775 1,807 ---------------- ------------- ------------- Net cash inflow from operating activities 17,514 40,943 84,944 ======== ======== ======== 10. Reconciliation of net cashflow to movement in net cash/(debt) Six months ended Year ended 30 June 30 June 31 December 2002 2001 2001 audited Â£'000 Â£'000 Â£'000 (Decrease)/increase in cash in the period (534) (2,362) 5,898 Decrease in debt financing - 194,443 212,894 Foreign exchange movements 424 (778) (468) ------------- ------------- ------------- Movements in (net debt)/net cash in period (110) 191,303 218,324 Opening net cash/(debt) 14,347 (203,977) (203,977) ------------- ------------- ------------- Closing net cash/(debt) 14,237 (12,674) 14,347 ======== ======== ======== 11. Analysis of net cash At Foreign At 31 December Cash Exchange 30 June 2002 2001 Flow Movements Â£'000 Â£'000 Â£'000 Â£'000 Cash at bank and in hand 22,104 (913) 424 21,615 Bank overdrafts (2,305) 379 - (1,926) ------------- ------------- ------------- ------------- 19,799 (534) 424 19,689 Loan notes due within one year (5,452) - - (5,452) ------------- ------------- ------------- ------------- Total net cash 14,347 (534) 424 14,237 ======== ======== ======== ======== 12. Nature of financial information The interim financial statements were approved by a committee of the Board of Directors on 19 August 2002. Copies of this statement of interim results are available from the Company's Registrar - Capita IRG plc, Balfour House, 390/398 High Road, Ilford, Essex IG1 1NQ, at the Company's registered office - Page House, 39 - 41 Parker Street, London WC2B 5LN, and on the Company's website - www.michaelpage.co.uk. Independent review report to Michael Page International plc Introduction We have been instructed by the company to review the financial information for the six months ended 30 June 2002 which comprises the profit and loss account, the statement of total recognised gains and losses, the balance sheet, the cash flow statement and the related notes to the statutory financial information 1 to 12. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2002. Deloitte & Touche Chartered Accountants London 19 August 2002 This information is provided by RNS The company news service from the London Stock Exchange

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