ANNUAL REPORT AND ACCOUNTS 2017 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
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ectors’ Remuneration Report ectors’ Report ectors’ Statements of Responsibility ectors’ Remuneration Report – Annual Statement ectors’ Remuneration Report – Annual Our Boar The Executive Boar Corporate Gover Nomination Committee Report Audit Committee Report Dir Dir Dir Dir Consolidated Income Statement Consolidated Statement of Compr Consolidated and Par Statement of Changes in Equity – Par Consolidated and Par Notes to the Financial Statements Shareholder information and advisers Shareholder Additional Information Independent Auditor’s Report Independent Auditor’s Consolidated Statement of Changes in Equity Strategic Review Gr South East Asia and KPIs Q&A with Steve Ingham, CEO Regional Perspectives Risk Management Principal Risks and Uncertainties Review of the Y Financial Statements Corporate Governance to Corporate Governance Introduction Chairman’s Corporate Social Responsibility 4 Overview Business Model Contents Strategic Report Introduction Chairman’s We are one of the world’s best Business model known and most respected PageGroup’s business model has proved itself both through economic cycles and as the specialist recruitment consultancies. business has expanded into a global enterprise. At its core is a focus on organic growth. We deliver recruitment services to clients through a network of 139 Agile and Career responsive development offices across 36 countries. structure Our vision is to increase the scale Team and diversification of PageGroup by profit-led Organic compensation organically growing existing and Global management Growth new teams, offices, disciplines mobility and markets. Productivity-led Experienced expansion management pool Highlights
Revenue 2016: £1,196.1m * Our strategy £1,371.5m +9.8% We have established three categories into which we have grouped each of our geographical markets based on criteria including the size of the opportunity and the potential for future growth. Gross Profit 2016: £621.0m
+9.8%* Large, Small £711.6m Large, High and Medium, Proven Potential High Margin Operating Profit 2016: £101.0m Typically under- These are large Markets which are, or £118.3m +11.3%* developed markets, markets where we could be, significant but where we have are already proven profit contributors with a successful track with a strong attractive conversion Basic Earnings Per Share 2016: 23.1p record and confidence track record and a margins, but each in our ability to significant presence. are unlikely (or not scale our operations yet proven) to be able 26.5p +14.7% substantially. to grow to more than 300 fee earners. * In constant currency at prior year rates Ordinary and Special Dividend Our competitive advantage 25.23p 2016: 18.44p Our true competitive advantage is the combination of these three factors and the Shift in business model balance we have achieved in the business over the past 40 years. Transformation and change % Non-UK Gross Profit PageGroup brands Brand Scale Culture and reputation 80.2% 2016: 76.4%
% Non-Accounting and Financial Services Gross Profit Gross profit by discipline
63.3% 2016: 61.6% Accounting and Financial Services £261.1m Legal, Technology, HR etc £161.4m Conversion rate* £711.6m Engineering, Property & Construction, Total Procurement & Supply Chain £158.7m 16.6% 2016: 16.3% Marketing, Sales & Retail £130.4m
* Operating profit as a percentage of gross profit STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
(14% of Group) EMEA Asia
62 offices 17 offices 2,996 employees 1,135 employees Australasia 9 offices 398 employees 54% (47% of Group) 83% 10%
Reduction in energy derived emissions Page 31 for EMEA Performance Review £332m Positive score to Employee Engagement Survey Sustainability Being a responsible corporate citizen is not only the it is good for the long-term health right thing to do, of our business. population is female Working Gross Profit EMEA Page 32 for The Americas Performance Review The Page 32 for The Americas £101m Gross Profit
(19% of Group) Information systems
Cyber security Fiscal and legal compliance Financial management development and retention UK 27 offices 1,407 employees and control People attraction, People attraction, Data protection regulation 7,029 Headcount
People Operational sia Pacific Page 32 for Asia Pacific PerformancePage 32 for Review A £137m Gross Profit Risk Categories
Strategic Financial Latin America 14 offices 615 employees Countries acrossCountries the world exposure translation risk (20% of Group) and change
Transformation Transformation
Foreign exchange –
North America 10 offices 478 employees Macro-economic Macro-economic Page 31 for the UK Performance Review Shift in business model £141m Gross Profit
UK 36
Where we operate Where Principal risks and reputation PageGroup brands PageGroup brands Chairman’s Introduction
David Lowden Chairman
2017 Performance Market expectations continued to out, with measurable outcomes being increase significantly as the year seen. Full details of how this strong It gives me great pleasure to report that progressed as a result of this strong performance has been measured and the Group delivered a strong trading performance as we delivered against reflected in the remuneration of the performance for the year ended our strategy. Even with these upgrades management team, is shown in the 31 December 2017. taking place throughout the year, our Remuneration Report on pages 63 As we entered 2017, there were performance still finished towards the to 76. top end of market expectations, with challenging trading conditions in many The Group again achieved a record yet another year of continued profitable of our core markets, including in the UK, level of gross profit in 2017 of £711.6m, growth. Brazil, Singapore, Australia and Financial an increase of 14.6% over the prior Services in New York. Upcoming The management team has continued year in reported rates and 9.8% in elections across Europe were also to make strong progress in delivering constant currency. We delivered strong adding to the uncertainty. our long-term strategy, with 2017 performances in Continental Europe, Whilst some of these uncertainties total shareholder return being ranked Asia and the Americas and were proved to be less severe than originally amongst the highest in our peer encouraged by improvements and anticipated, our continued focus on the group, and higher than our FTSE a return to growth in Australia, Brazil strategy and strong performances in key 250 index comparators. Strategic and Singapore as 2017 progressed. markets, helped us to deliver well ahead initiatives regarding people, efficiency, Overall, 22 of our 36 countries of the market expectations in existence risk management and diversity have delivered their best recorded level of at the start of the year. continued to be successfully rolled gross profit. However, our growth was
1 | Strategic Report STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
2017
25.23 12.50 12.73 Special dividend Strategic Report | 2 Strategic 6.46 11.98 18.44 16.0 11.5 2015 2016 27.5 11.0 2014 Five-year Ordinary Dividend CAGR +4.4% Five-year 2013 10.5 10.5 6 30 24 18 12 Dividend Per Share (p) Dividend Per during downturns, as increasing as well times. prosperous it during more cash fromIn 2017, we generated and ended theoperations of £130.0m of £95.6myear with cash balances reservesand a level of distributable times three that support more than Given this cashthis annual dividend. reservesposition, levels of distributable year, we proposeand our results for the dividend to 8.60p.to increase the final with the interimWhen taken together dividend paid in October of 3.90p, this implies a total dividend of 12.50p, an increase of 4.3% on 2016. the Executive team to deliver the strategy. Group’s with a strive for a diversified Board We wide range of experience, thought and pleased to have are perspective. We appointed two female Non-Executive this financial year and now Directors on have 44% female representation Board Since I became Chairman of the Board in December 2015, I have consistently composition as one of focused on Board the most important aspects of my role. continually evolving business Today’s a range of risks and world presents opportunities, which is why it is essential to maintain the right mix of skills and to mitigate experience on the Board and to work with these risks effectively the Board.
Large High Potential Markets, namelyLarge High East Asia, South the US, Germany, Gross China and Latin America. Greater in this market was above growth profit average at 14.6%. These the Group will continue instrategic investments businesses2018, as well as in those growth. seeing strong we are where market our to grow enable us To to expand we have continued presence, countries, suchour disciplines into new have in Chile. We as oil, gas and mining also made further investments into markets such as the Nikkei market in and domestic markets in Japan, regional Mainland China, as well as investments in US markets outside Financial Services These investments have in New York. levels of helped us achieve record these businesses. in growth the also benefited from have We Shared transition into our European which in Barcelona, Service Centre completed in 2016. In this region, operational support cost per fee earner 20% since 2014, has fallen by around alignment across attributed to process countries, wage all 14 European arbitrage and other efficiencies. demonstrated These efficiencies are further with fee earner headcount but additions of over 400 in the region, few operational relatively only requiring support additions. Dividends In 2017, in addition to paying over dividends, we returned £38m in ordinary by way of a £40m to shareholders have now paid special dividend. We special dividends totalling £110m in the years. last three remains first use of cash The Group’s the satisfaction of operational and as well as to investment requirements, hedge its liabilities under the Group’s plans. Our second use of cash is share by way to make returns to shareholders dividend. Cash generated of an ordinary in excess of these first two priorities will through be returned to shareholders using specialsupplementary returns, buybacks. dividends and/or share dividend policy is to grow Our ordinary the dividend over the course of the economic cycle in line with our long- rate. In this way we can term growth sustain the level of dividend payment
“ Yet another year of Yet continued profitable growth “ we continued to invest in our five Group's strategic priorities. In 2017, Group's also made further progress on the also made further progress The PageGroup leadership team The PageGroup in 2016. respective declines of 3% and 21% respective return to growth for Brazil, up 3%, after to growth return strong recovery in the US, up 21% and a in recovery strong Growth in this region was driven by a in this region Growth 2017 after a decline of 0.9% in 2016. We grew 16.4% in the Americas in 16.4% in grew We driver for the region’s return to growth. to growth. return driver for the region’s of 4% in 2016 and this was the main and France, grew 14%, after a decline and France, grew Group's third largest market after the UK largest third Group's of 2.2% in 2016. Greater China, the of 2.2% in 2016. Greater grew 10.2% in 2017 after a decline grew returned to positive growth. Asia Pacific to positive growth. returned Both Asia Pacific and the Americas down 3.5% in 2016. broadly in line, down 3.8% compared to line, down 3.8% compared in broadly to improve on the prior year but was to improve 16%. The UK was the only region not 16%. The UK was the only region The Netherlands up 14% and Spain up 25% and 12% percent respectively, with respectively, 25% and 12% percent two largest countries in the region, grew grew two largest countries in the region, of gross profit, France and Germany, the France and Germany, profit, of gross currency, an outstanding result. In terms an outstanding result. currency, the prior year and 15.0% in constant gross profit 22.2% in reported rates overreported 22.2% in profit gross under 50 percent of the Group, grew grew of the Group, under 50 percent and Africa, which now represents just and Africa, which now represents Our largest region, Europe, Middle East Europe, Our largest region, support staff ratio of 78:22. support staff the year with a fee earner to operational our back office activities and finished we continued to deliver efficiencies in target ratio of 82:18. At the same time we continued to move towards our we continued to move towards every 15 operational support staff as support staff every 15 operational added at a ratio of 85 fee earnersadded at a ratio of 85 for During the year, new headcount was new headcount During the year, 5,497, another record for the Group. for the Group. 5,497, another record with an increase of 786 fee earners towith an increase and disciplines and finished the yearand disciplines and finished We continued to invest in new markets continued to invest in new We candidates. impacting some clients and seniorimpacting some clients conditions, with the macro environment environment conditions, with the macro to experience challenging marketto experience challenging impacted in the UK where we continued the UK where impacted in Chairman’s Introduction
In September 2017, we welcomed Sylvia for her significant contribution to the In the UK political uncertainty remains, Metayer onto the Board. Sylvia brings Company since she joined the Board impacting some clients and senior extensive experience to the PageGroup in December 2013. candidates. Here, we will continue to Board, having held a variety of finance focus on protecting margins whilst As a Board, we also look to internal and general management roles in investing in structural opportunities. experience as being one of the core companies operating in a number of Australia remains challenging in the perspectives we review in terms of different sectors, including Mattel Inc, markets in which we operate, but we appointments to the Board. Discussions Vivendi SA and Houghton Mifflin Harcourt have invested in headcount and a new are held each year, focusing on the & Co. Her understanding of international office in Canberra. Brazil had a good development and succession of the markets is extensive and includes the end to the year, but is still suffering from Executive Directors, Executive Board US, Europe, China, India and South East macroeconomic headwinds and will have members and other senior managers Asia. She is currently Chief Executive, elections this year. in the Group. This ensures a pipeline Worldwide Corporate Services Segment of talented senior individuals is present However, our proven strategy remains of the Euronext Paris listed company within the business and that existing unchanged. Investment will continue in Sodexo SA. She is also a member of the senior executives are being developed. our Large High Potential Markets, as well Sodexo Group Executive Committee. as in markets with favourable trading Sylvia holds a chartered accountancy All Board members have considerable conditions. This includes the newer qualification, is a Trustee of the Quebec experience of working internationally in markets such as the Nikkei market in Labrador Foundation, and sits on the different parts of the world. Indeed, the Japan. We will, as always, continue to Research Orientation Committee of the Board has a good mix of relevant skills, focus on driving profitable growth while Foundation of HEC Business School in experience, gender and backgrounds. being able to respond quickly to changes Paris. This diversity is of great benefit to the in market conditions. business. The addition of Sylvia and In October 2017, we welcomed Angela Angela to the Board, and their respective Last, but by no means least, on behalf Seymour-Jackson onto the Board. She depth and breadth of experience, will of the Board I would like to thank our has a wealth of experience in service complement the experience of other people, as the success of PageGroup focused organisations and has a Masters Board members and will bring great depends on the quality of its staff. degree in Marketing and a Diploma from benefit to PageGroup. Both will also be PageGroup is a people business with a the Chartered Institute of Marketing. members of the Audit, Nomination and clear and tangible culture, and this year Angela is currently Deputy Chairman, Remuneration Committees. we have redefined our PageVision, please Senior Independent Director and Chair see page 13 for more details. Our staff are of the Remuneration Committee at Your Board remains diligent in both dedicated, hard-working and committed GoCompare.com Group, and a Non- supporting and challenging the executive to the brands. They have a very strong Executive Director at Janus Henderson team’s strategy recommendations and team ethos which is evident in everything Group plc, esure plc and Rentokil Initial their responses to changing market they do. plc. Angela has previously held Executive conditions. Full details of the work of the Director roles at Aegon UK, RAC Motoring Board and subjects discussed in the Delivering our strategy against rapidly Services Limited and Aviva UK Limited, year are set out in the Corporate changing markets in terms of technology and was a Senior Adviser at Lloyds Governance Report. and macroeconomic environment, Banking Group (insurance). Prior to that, can only be done successfully with Angela held senior marketing roles with Strategic Report excellent people. On behalf of the Board, Bluecycle.com Limited, CGU Insurance therefore, I would like to thank all our staff This report sets out PageGroup’s strategic plc, General Accident plc and the Norwich for their very considerable efforts in the vision and how we address the various Union Insurance Group. past year. markets and the opportunities before As mentioned last year, Baroness Ruby us. We have highlighted areas which are McGregor-Smith informed us that critical to achieving this vision, such as our she would not renew the term of her diversity, inclusion and equality agenda. appointment when it expired on 23 May David Lowden The report also details our approach 2017. Ruby had been a Non-Executive Chairman to corporate and social responsibility, Director of PageGroup for 10 years. She including how we engage with our made an outstanding contribution over stakeholders. this time and played an important role in helping to drive the Group’s growth and Looking Ahead development. I would like to thank her again on behalf of the Board for all she did We exited 2017 with a record quarter for PageGroup. and the best quarterly growth rate since the third quarter of 2011. We also saw Danuta Gray has decided not to stand improvements and a return to growth for re-election as a Director of the in Australia, Brazil and Singapore. As a Company at the forthcoming AGM, result, we go into 2018 optimistic, but so will step down from the Board on remain cautious in some key markets. 7 June 2018. I would like to thank Danuta
3 | Strategic Report STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Strategic Report | 4 Strategic Strong brands Effective use of technology Assurance of a quality service Effective recruitment process Technology; systems Technology; transformation and change; data security; brand reputation; financial management and control; fiscal and legal compliance Measurement performed at a granular level Cost and financial management Risk management and internal controls IT strategic development First use of cash is to satisfy operational and investment as well as to hedge needs, liabilities under the Group’s share plans Team-based service delivery Team-based and skills Talent development/retention Career development structure People development Attraction and retention Employee satisfaction survey Management experience Leadership and people development Retention/succession Ensure dividends are paid at sustainable levels such that investment in the business and its people is maintained Sustainable organic growth Diversification to mitigate cyclicality by geography, brand and discipline Focus on operational efficiency To be the leading specialist To recruiter in each of the markets in which we operate Shift in business model Delivery of operational efficiencies Fee earner headcount growth Gross profit per fee earner Fee earner:operational support staff ratio Conversion rate Strategic targets Systems and innovation Return surplus cash to shareholders by special dividends and/or share buybacks
Financial Strategic People Operational Highly profitable Maintain a strong balance sheet Highly cash generative Long-term investment into core markets: High Potential; Large, Proven; and Large, Small and Medium, High Margin Macro-economic exposure Foreign exchange translation risk Gross profit growth Gross profit diversification Earnings per share Net cash ratio Perm:Temp EPS growth: three year EPS growth: cumulative PBT performance Comparator gross profit growth Maintain a strong balance sheet
P8 P5 P21 P33 P12 P63 KPIs
Risks Policy Model Strategy Dividend Business Remuneration Overview Business Model
A Global Leader
What we do Discipline expertise We are one of the world's best known and most respected specialist We organise our consultants into 14 specialist discipline teams, grouped into recruitment consultancies. We deliver recruitment services to clients through a four broad categories. We then specialise further (e.g. digital marketing within network of 139 offices across 36 countries. marketing) to ensure we provide expert recruitment services to our clients.
Geographic reach Perm and temp mix PageGroup has a truly global reach, with a substantial and well-balanced PageGroup is the international market leader for permanent recruitment in business across all regions, including Latin America and Asia. We source the majority of the countries in which we operate. We also have a substantial candidates from domestic and international markets and provide a and growing temporary recruitment business in markets where temporary comprehensive service to both local and multinational clients. placements for professionally qualified candidates are culturally accepted.
Page Executive Michael Page Page Executive is the Group’s executive search business and offers a range Michael Page is the original PageGroup brand and is normally established of search, selection and management solutions for organisations needing to as the first business in each new country that we enter. Michael Page is attract and retain their leadership talent. The roles on which we focus typically comprised of 14 broad disciplines, each providing a service to a specialist area sit at the sub-Board and Board levels. of the market. Operating at the qualified professional and management level, Michael Page recruits on a permanent, temporary, contract or interim basis.
Page Personnel Page Outsourcing Page Personnel offers specialist recruitment services to organisations Page Outsourcing, the Group’s newest brand, was created to meet the requiring permanent employees, temporary or contract staff at technical and growing demands of our clients. Leveraging the internal capabilities of our elite administrative support, professional clerical and junior management levels. recruitment specialists in offering customised solutions for high-volume hiring and specific project recruitment needs. Page Outsourcing recruits across all levels of the market.
5 | Strategic Report STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Strategic Report | 6 Strategic A focus on team-based performance rather than the individual promotes positive corporate behaviour and consistent quality of service for both clients and candidates. Our operational metrics focus on productivity, by team, discipline and by team, productivity, opportunities and challenges as they appear. as theyopportunities and challenges appear. geography. This bottom-up approach aligns geography. growth Our agility gives confidence to respond quickly us the to Recruitment is a fast-paced and dynamic business. and dynamic business. Recruitment is a fast-paced expansion criteria throughout the Group, focusing expansion criteria throughout the Group, Sustainable Team The combination of these objectives has enabled PageGroup to deliver strong cash flows and have the financial strength to prosper through economic cycles. It also gives us the resilience to cope with market downturns without damaging long-term the business’s prospects. profit-led and optimising investment on key priorities. and optimising investment on key priorities. compensation
expansion Productivity-led Agile and responsive Talent Talent and skills development Our business is reliant on having the experience to manage the challenges and identify the opportunities across our local markets. Our scalability is dependent on having the right people available to grow the business and nurture the next generation. Growth Organic Experienced management pool Career lexible
structure development Scalable capacity and f Global mobility The ability to respond quickly to changing market conditions is critical to managing the business efficiently throughout economic cycles. ensure that we We always have the ability to flex our capacity up and while maintaining down, a core presence in each market to service clients properly and retain management experience to enable a quick recovery. management growth organic where they will add the most value. PageGroup offers consultants its Diversified Diversification helps to mitigate the cyclical nature of recruitment which for us markets, is combined with high operational gearing given our permanent recruitment bias. Our broad-based capabilities enable us to capitalise on market opportunities across avoiding the globe, on any one over-reliance geography or discipline. reduces our learning curve, maximises reduces our learning curve, opportunities for talented. the most scalability and is crucial for placing resources motivate key senior talent. Experience through economic cycles and across geographies and disciplines
most value and guide the business
a well-defined and varied career in recruitment. This career in recruitment. a well-defined and varied through the challenges of a market into markets where they can add the cycle, while allowing us to retain and cycle,
Our objectives A focus on organic growth on organic A focus
a focus on organic growth. PageGroup’s business model has proved itself both through economic cycles and as the business has expanded into a global enterprise. At its core is has expanded into a global enterprise. through economic cycles and as the business business model has proved itself both PageGroup’s We regularly move experienced directors We includes a clear development structure with significantincludes a clear development Business Model
Our competitive advantage
Brand Scale Culture
Our true competitive advantage is the combination of these three factors and the balance we have achieved in the business over the past 40 years. We generate funds through fees earned for placing candidates in permanent and temporary roles.
Brand Scale Culture Page Executive, Michael Page, Page Personnel Our scale enables PageGroup to commit to PageGroup’s culture is unique in the sector. We and Page Outsourcing are brands which inspire markets through cycles giving clients the have ingrained values of how to do business high levels of confidence, trust and assurance of confidence to build long-term relationships with ethically and to make long term decisions. It is a quality service. We have a consistent commitment us. It also enables a broader client offering, global culture that delivers a consistent approach to the markets in which we operate, which even in our new markets, with participation from both internally and externally, though we always combined with our level of expertise, enables multiple disciplines. remain accepting of each of our markets' local these brands to operate strongly in their market The ability to offer diverse expertise across a characteristics. place. broad range of complementary specialisms and The global nature of our culture is aided by a high The recruitment sector’s marketing and delivery geographies enhances our offering to the market degree of management mobility. It is reinforced channels have been reshaped by the digital and the candidate pools we can access. Our through our consultant training programmes, the revolution and we are a highly active online scale enables us to build an unrivalled skillset and processes by which we do business, and our participant. However, high quality candidates level of experience, which is available equally to team based approach which is at the heart of will only continue to place key decisions on their the smallest and largest of clients. everything we do. future in the hands of consultants who have Our strong financial standing has also been Our purpose and our values that are the key to substance behind their online marketing profile. increasingly important for many clients who prefer our success are set out on page 25. We are trusted by our clients and candidates to not to work with the smaller market players, provide a high quality service, to be committed particularly in times of economic uncertainty. and to be there for the long term. Temporary staff also derive comfort from our financial strength that their salaries will be paid.
Our strategy Our strategy aims to fulfil our vision of being Large, High Potential the leading specialist recruiter in each Typically under-developed markets, but where we have a successful track record and confidence in our of the markets in which we operate. Our ability to scale our operations substantially, for example Latin America and South East Asia. service offering is spread across a broad set of disciplines and geographies, focusing on opportunities where our industry and Large, Proven market experience can set us apart from These are large markets where we are already proven with a strong track record and a significant the competition. Operating in 36 countries presence, for example the UK and Australia. and in highly diverse cultures, we have established three categories into which we have grouped each of our markets based on Small and Medium, High Margin criteria including the size of the opportunity Markets which are, or could be, significant profit contributors with attractive conversion margins, but each and the potential for future growth. This are unlikely (or not yet proven) to be able to grow to more than 300 fee earners, for example Belgium and structure has provided a clear investment Switzerland. framework for the business.
See page 8 for more on our Strategic Vision
7 | Strategic Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION Strategic Report | 8 Strategic
Steve Ingham CEO PageGroup I would like to welcome you to our Strategic to like I would we outlined how we have where Review, together with dynamics, market see current business model and strategy. PageGroup’s of you through the source will take This review and the relationship our competitive advantage on fromThen following Plan. to our Strategic our investment plan in we approach how this, our markets. we how to relate this year continue We through our KPIs – both performance, measure financial and non financial – with associated link to the fourThese risks then directly risks. people and strategic, elements (financial, of the performanceoperational) criteria in our plans. remuneration executive current Strategic Review Strategic Strategic Review
Our value proposition We offer a premium service which is valued by clients and attracts the highest calibre of candidates, due to our focus on opportunities where our market and industry knowledge can set us apart. Our value proposition is based around expertise and specialism and for this to be delivered in a consistent manner, supported by high quality processes. When these elements are brought together, the potential for a successful outcome for both client and candidate is maximised. Such successes enhance our reputation; bring greater repeat business; and turn candidates into clients and vice-versa.
MODEL AT WO OUR RK Clients Leads to... • Sector expertise • Repeat business • Appropriate candidate • Greater exclusivity Specialist industry and shortlist • Future candidates market knowledge • Professional high quality service Global reach, with deep local knowledge Consultants Leads to... • Team-based structure and • Rapid career promotion compensation • Career opportunities Expertise in premium • Access to jobs across entire • Reward and recognition candidate sourcing PageGroup • Consistent process Experienced advocate for client and candidate Candidates Leads to... • Professional high quality • Career-long relationship service • Peer recommendations Consistent, high quality • Market understanding and • Future client processes client profiling • Career advice
Organic, high margin enables us to offer a premium service Strategic that is valued by clients and attracts the and Diversified growth framework highest calibre of candidates. Our business model is centred PageGroup’s historic success in each PageGroup is focused on delivering around organic growth. The key our markets has helped identify which against three key objectives to achieve its elements are derived from our team- geographies will likely produce high strategic vision and sustainable financial led approach as set out on page 10, margin growth, with the greatest potential returns. with great value placed on structured for long-term success. The challenges These are to: career development and the value that to achieving a significant market position experienced management brings to vary across these markets, as does their 1) look for organic, high margin and the business. attractiveness to PageGroup. These diversified growth; features, when taken together, helped PageGroup’s diversification strategy has define our strategic vision. 2) position the business to be efficiently led to a well-balanced business profile scalable and highly flexible to react to and mitigation of exposure to any one Our background is in permanent market conditions; and geographic area, brand or discipline. recruitment, but 25% of the business is now in the temporary market, with 3) nurtur e and develop our people, Through global diversification, we have this being dependent on local culture driving our meritocratic growth model. a clear strategic vision: to be the leading and market conditions. Our service specialist recruiter in the markets in offering covers a broad set of disciplines which we operate. Our presence in major and specialisations, solely within the global economies enables the greatest professional and clerical recruitment potential for long-term growth in gross market. profit at attractive conversion rates. This
9 | Strategic Report STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION Strategic Report | 10 Strategic The experience acquired throughout throughout The experience acquired and, as is valued greatly, their career such, our management team has some and experience in of the longest tenure the industry. in our invest significantly therefore We and retention people, as the recruitment, development of talent is fundamental in our ability to achieve long-term sustainable growth. We focus relentlessly on sharing best focus relentlessly We to enhance the Group practice across of ourthe quality and consistency have continued to We service offering. support functionscentralise many of our service centres shared into regional of and leverage enabling the capture the benefit ofskills and expertise for the whilst maintaining the whole Group, of the operational platform. robustness innovation in measurable pilots before innovation in measurable pilots before implementing successful ideas with industrial and international scale. have established an infrastructure We top to bottom of our business from innovation: Our Executive addressing steers our and reviews Board on a quarterly basis. programme Functional experts in Marketing, HR, Finance and Business Technology identify and pilot new technologies Additionally we have and processes. established and embedded regional via our internal socialinnovation groups media network to surface opportunities our consultants. from uncertain markets. They take decisions can achieve the PageGroup as to where the on investment from return greatest allocation of management resource. internal of record strong PageGroup’s from and promotion moves career within, means that people who join us know that they could be our future Senior Managers and Executive Board Members. Our consultants quickly come a long- to understand that we can offer recruitment. in term and fulfilling career PageGroup's strategic vision was PageGroup's the markets developed by reviewing to identify whichin which we operate, therefore potential and had the greatest revenue. impact on Group likely future an explanation ofSet out on page 15 is and our approach these categorisations markets. to these different high Our global footprint requires levels of operational efficiency in order to achieve this strategic objective. attaining around Our focus is centred operational efficiencies while controlling the fixed asset base. they clients, candidates or our own at pace. At people, continues to grow we will take a pragmatic PageGroup, to our adoption and use of approach innovative ideas and technologies, as we have in successfully building our business to date. Innovation is not just limited to Innovation allows us to look technology. at new business models and recruitment markets to evolve what PageGroup as part of our service. offers in place to ensure have structures We the best ideas coming from we secure the market and our own people. Our agile, initiating will remain approach
Innovation Nurture and develop our people, driving our meritocratic growth model driving Nurture and develop our people, Efficiently scalable and highly flexible Efficiently scalable e the efficiency of ove the client and candidate investments. measur identify tools we can deploy at scale efficient; more to make our processes and impr experience; people PageGroup works with, be people PageGroup behaviours and expectations of all the growth. The impact of technology on growth. Innovation will be core for PageGroup for PageGroup Innovation will be core 1) 3) pursuit of innovation. 2) business. We use three principles in use three business. We role innovation can play in driving our role allowing even in the business to progress clear on the we are At PageGroup of our markets, both up and down, can flex the business exposure to any can flex the business exposure model. The senior executive team model. enhances the flexibility of our business and constant depth of talent greatly and constant depth of talent greatly HR departments. loyalty of the management team The mobility of our people, the significant business. particularly as an organically grown particularly as an organically grown opposed to undertaken in-house by heart of everything we do, at the are recruitment that is outsourced, as that is outsourced, recruitment that it is our people who recognise We this culture include the proportion of include the proportion this culture to professionals. Other aspects of to professionals. placement opportunities are acceptable placement opportunities are as the degree to which temporary as the degree particular recruitment culture, such culture, particular recruitment in very diverse markets, each with ain very diverse markets, Our flexibility enables us to operateOur flexibility enables detail on page 11. conditions, which are explained in more in more explained conditions, which are to respond quickly to changing market quickly to changing to respond unrivalled skillset, together with the abilityunrivalled skillset, together Our scale enables us to build anOur scale enables us Strategic Review
Market Dynamics The professional recruitment sector has always been In a number of geographic regions, such as Latin America or highly sensitive to fluctuating economic conditions and Greater China, our potential markets are very large, yet relatively is strongly influenced by client and candidate confidence. Market immature. This provides not only significant market share liquidity can change rapidly, whether in terms of availability of jobs opportunities, but also business development challenges. New and candidates, or candidate confidence in taking the next step in markets can take time to crack, but the advantages of being an their career. early participant and building scale can be considerable. It can also be localised, whether by geography or discipline, and As set out in the table below, PageGroup views certain key differ between temporary and permanent placements in the same features as defining a particular recruitment market profile, market. We intend to maintain our strategy of retaining our market categorised by the proportion of roles filled through a recruitment presence throughout downturns, whilst closely controlling our agency (“market penetration”). cost base.
Emerging markets Developing markets Mature markets
Market 0-15% 15-30% 30-70% Over 70% penetration
Well developed markets Limited international Few well-established Highly with many international Competition operators present regional players competitive operators
Latin America, France, Australasia, Germany, Greater China UK, US Examples SE Asia Holland, Spain, Italy
11 | Strategic Report STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION Strategic Report | 12 Strategic Notable influence on both gross profit and also conversion Productivity, rate. especially in permanent is recruitment, significantly enhanced as these market drivers positively align. Financial Impact Financial Impact Mainly visible through improvement in gross but a buoyant profit, market helps to drive principally productivity, through reducing the but also time to hire, in wage inflation and increased fee rates. gross profit and consultant productivity. It is the nature of the It is the nature and consultant productivity. profit gross conditions market market that strong recruitment professional and this has a elements align rapidly, will see drivers in both overall performance and dramatic impact on PageGroup’s conversion margins. Comment Comment Our policy is to grow this ordinary dividend over the course of this ordinary Our policy is to grow rate; we the economic cycle, in line with our long-term growth dividend believe this enables us to sustain the level of ordinary payments during a downturn it during well as increasing as times. prosperous more Cash generated in excess of these first two priorities will be using supplementary returns, through to shareholders returned buybacks. special dividends or share A major influence on market liquidity where macro- candidates will look to environment is sufficiently stable, which helps to drive job liquidity. progress their careers, Group average a 10% range over historically moves within (19.5%-22%). the cycle As candidates become scarcer, companies reduce the As candidates become scarcer, number of interviews making and shorten the decision process in order not to lose preferred candidates. Reflects level of candidate shortage within a and liquidity plus macro-economic particular discipline or geography, conditions. Often highly discipline/geography-specific, especially especially at Often highly discipline/geography-specific, This is confidence grows. as client midpoints in the cycle as the quality of a a key driver of most other elements, demonstrated through their ability to recruiter is most clearly source difficult-to-find candidates. Impact Impact Fees/rates Wage inflation Candidate confidence Candidate availability Time to hire Time Market drivers of PageGroup performance of PageGroup Market drivers of the general macro- As well as the influence are there activity, on business economic environment Capital Allocation Policy The Group’s strategy is to operate a policy of The Group’s financing the activities and development of the Market liquidity Gross profit and productivity elements which affect market liquidity and those which influence market elements which affect impact PageGroup’s financial performance. These are split into performance. These are financial impact PageGroup’s a number of specific market-based drivers that can materiallya number of specific shareholders, firstly by way of ordinary dividend. firstly by way of ordinary shareholders, liquidity over and above this requirement to make returns to liquidity over and above this requirement liabilities under the Group’s share plans. We then review our then review plans. We share liabilities under the Group’s operational and investment requirements and to hedge our operational and investment requirements balance sheet position. We first use our cash to satisfy our balance sheet position. We Group from our retained earnings and to maintain a strong our retained from Group Strategic Review
Clear on people Clear on investment • Consistent performance culture reflecting • 3 geographic market categories each with our values clear investment strategies • Evolving the way we work to allow flexibility • Capitalising on the structural opportunity for towards how, where and when we work Page Personnel and Page Executive • Leading the way on Diversity and Inclusion • Growing the proportion of our revenues from via initiatives such as Women@Page, Ability@ temp/contract/interim as this becomes more Page, Parents@Page, Pride@Page culturally accepted • Consistent approach to CSR • Continued focus on increasing discipline
diversity and specialisation • Market leading and blended In v approach to learning le es p t o m e e • Consistent focus on improving P n t
the quality of people we hire, One retain and grow
Clear Vision
To increase the scale and
diversification of PageGroup by
organically growing existing
and new teams, offices,
t Clear on brand r Clear on o p B disciplines and markets. p • One clear global Group brand ra u n S operational support
d al n tio
ra • Continue to standardise and
pe
O simplify as far as possible our
operational support functions • Huge potential to have increasing representation in every Page market • Centralise into Shared Service Centres to drive efficiencies and improved controls
• Qualified professional recruitment – in 36 • Roll-out the Global Finance System (GFS) countries with significant opportunities to programme and transition to a new Target expand in new markets, disciplines and cities Operating Model in IT • Build Innovation into all areas of the • Clerical professional recruitment – in 19 organisation, whether that be through the use countries with huge potential to launch and of new technologies, evolving the role of the expand in new markets, disciplines and in consultant, or changing our interaction with particular to increase the proportion of Group clients and candidates revenues generated from temporary, contract • Continue to build effective customer and Interim placements relationships through efficient digital platforms
• Page’s newest brand – offering customised • Enhance our approach to succession solutions, delivered by one or all of our brands, planning and talent management for high-volume and specific project needs
13 | Strategic Report STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION Strategic Report | 14 Strategic PASSIONATE PASSIONATE WHAT WE DO WHAT WE ENJOY WE ARE f to reach PAGEGROUP PEOPLE thrgh eating POTENTIAL OPPORTUNITY DETERMINATION WE VALUE CHANGES LIVES CHANGES
WE WORK AS A TEAM WE MAKE A DIFFERENCE
Purpose OUR Purpose Values OUR Values Strategic Review
How we categorise the markets In 2013, PageGroup categorised each of its geographic markets around the globe based on criteria such as the potential for future growth. This growth potential was assessed on a combination of expectations for economic growth, size of the existing PageGroup Large, operations relative to the market, and competitive landscape. High Potential The outcome was three categories (as set out in the table to the right), into which the 36 geographical markets in which we operate were placed. Five markets Substantial, high potential markets were identified as Large, High Potential markets. These for recruitment. Typically under- include the large economies of the US, Germany and Greater China, together with the regions of Latin developed, but where PageGroup America and South East Asia. Typically under-developed has a successful track record, and from a recruitment perspective, each satisfied key confidence in its ability to successfully criteria, including: CATEGORISATION scale operations. • Positive PageGroup track record; • Ability to adapt PageGroup culture to local culture; • Ability to hire and retain local consultants; Germany, Greater China, Latin • Ability to roll-out disciplines and open offices; America, South East Asia and • Attractive conversion rate potential; and the US. EXAMPLES • Large-scale economies. Six historically successful geographies were categorised as Large, Proven, reflecting the fact that PageGroup had, within the last economic cycle, operated Sustained investment through substantial businesses in each. While currently below cycle – adding headcount/offices/ peak levels, they have a proven track record, and, as disciplines.
a group, the potential to return to historic high levels – APPROACH albeit with a different mix of headcount and disciplines. INVESTMENT Finally, the remaining businesses were categorised as Small and Medium, High Margin. This reflects the fact Create a market leading network of that each individually will not have the scale or potential offices, management and headcount. to be a significant contributor to gross profit. However, c. 40% of Group gross profit/fee
they each offer the prospect of attractive margins and VISION
include countries with some of the highest fee rates and STRATEGIC earners; 30% conversion rates. conversion margins in the Group. Within this category are three markets – Japan, India and Africa – that all have the long-term potential to achieve Large, High Gross profit growth of 15% for the Potential status. year and gross profit records in all markets. Strong growth in US +21% Investment approach and Latin America +14%. Investment in the business has been focused on RESULTS 2017 developing the long-term sustainability of the business and is supported by significant balance sheet strength and cash flow generation. The market categorisation Continue investment in new provides an investment framework for the business. headcount and management team, Investment comes in a range of forms including whilst improving conversion rates. headcount, new offices and infrastructure, marketing 2018 PLAN spend and minimum levels of market presence through the economic cycle.
15 | Strategic Report STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION Strategic Report | 16 Strategic
INVESTMENT STRATEGIC 2017 RESULTS CATEGORISATION EXAMPLES APPROACH VISION 2018 PLAN
Have been, or could be, significant or could be, Have been, profit contributors for PageGroup, but each not likely to be in excess of 300 fee earners. Africa, East, Middle Japan, and other Turkey Canada, India, European countries. Investment responsive to market Expected to represent conditions. c.15% of Group gross profit/fee earners; 30% conversion rates. Gross profit growth of 10% for the Strong gross profit growth in year. Japan of +23% and Belgium +22%. Continued focus on growth and improving our conversion rates. High Margin Small and Medium, Medium, Small and Respond to market conditions, focus Respond to market conditions, on high margin opportunities.
Large markets in which PageGroup is already proven with a strong track record and a significant presence. Large, Large, Proven Collectively return to 2007 peak levels of operating profit and conversion 45% of Group rates; equivalent to c. gross profit/fee earners. and Spain. UK, France, Australia, Australia, France, UK, Italy the Netherlands, tough Gross profit growth of +7%, trading conditions in the UK. growthwas +15%. Excluding this, Continue to drive future growth as well as through existing capacity, improving conversion rates. Investment reflects gross profit growth and market conditions. South East Asia
17 | Strategic Report STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Fee Earner Headcount Number
200 150 100 50 0 Strategic Report | 18 Strategic 20172016201520142013201220112010200920082007 50% 2017 18% 28% 4% Indonesia Thailand Fee Earner Headcount Fee Malaysia 2007 100% 0 5,000 Gross Profit 20,000 15,000 10,000
Singapore Gross Profit and Fee Earner Headcount Fee Earner Gross Profit and Currency Constant £000’s Gross Profit by business South East Asia South East exceptional Markets, with Large, High Potential Asia is one of the Group’s South East With office in Singapore. we opened our first since 1996 when performance a 10 year £19.7m in 2017. £4.6m in 2007 to from has increased profit its gross CAGR of 9.8%, earners we invested in fee same 10 year period, During the CAGR of 20% to with a bring our fee earner been achieved in line with headcount to nearly 200. This has Asia, South East we have expanded throughout where our strategy of diversification and we will be opening Indonesia in 2014, Thailand in 2016 opening Malaysia in 2011, in Vietnam operate out of allOur success in this market enables us to in 2018. 14 disciplines. 4 brands across conditions the year was 12% despite the challenging for South East Asia for Growth 5%. Although the economy declined by profit gross where experienced in Singapore, the by the end of a slow down, it returned to growth had experienced in Singapore offers disciplines. Singapore & Accounting and Technology driven by our Finance year, brands. Page, Page Personnel and Page Executive our Michael 11 disciplines across a CAGR of 27% over the last five years with strongly, Our Malaysia office has grown and now has 65 fee earners. is Our office in Thailand opened at the end of 2016 rate for 2017 was 48%, where growth Indonesia’s performing well and is profitable. Sales and Finance & 7 disciplines with stand out performances from we now offer Following our expansion into Thailand and Indonesia Accounting over the last year. and the addition of 105 fee earners, our 5 year CAGR in South East Asia excluding was 43%. Singapore we can where opportunities for the future, great this market presents believe We the countries we already of our disciplines and brands across expand both the breadth South offices in other countries across operate in, but also with opportunity of opening East Asia. Greater China
19 | Strategic Report STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Fee Earner Headcount Number
600 500 400 300 200 100 0 Strategic Report | 20 Strategic 59% 20172016201520142013201220112010200920082007 2017 4% 37% Taiwan Hong Kong 18% Fee Earner Headcount Fee 2007 82% 0
60,000 50,000 40,000 30,000 20,000 10,000 Mainland China
Gross Profit £000’s Constant Currency Constant £000’s Gross Profit and Fee Earner Headcount Fee Earner Gross Profit and Gross Profit by business Greater China Greater China and comprises is Greater market in Asia Pacific High Potential Our other Large, 43%and Group the of 8% representing now Taiwan, and Kong Hong China, Mainland China Greater player across the leading considered We are Pacific market. of our Asia profit our gross years, where 10.2% over the last ten a CAGR of and have achieved earner This has been achieved alongside fee £14.0m to £58.7m. from has increased has our headcount of 19% over the same period, where investment with a CAGR 88 to over 500. from increased China in Hong Kong in 1995. Hong Kong in Greater opened our first business We our Michael Page,fee earnersnow consists of 145 across operating out of 5 offices a large we have Page Executive brands. In Hong Kong where Page Personnel and & Financial 12 disciplines, with Accounting clients, we offer number of multinational up 13% and in 2017, disciplines performing strongly Services and our Technical 23% respectively. 23% respectively. out of 4 offices China opened in 2003 and now operates Our business in Mainland predominately to local laws, we offer China. Due over 50% of Greater and represents brands. our Michael Page and Page Executive from permanent recruitment Following the addition of 93 fee earnersexcellent in 2017, our performance has been of 18%. Our offices in we have seen growth Mainland China, where throughout performances up 21%, 18% strong particularly and Shanghai delivered Beijing, Taipei & 11 disciplines, with our Procurement Mainland China offers and 18% respectively. in excess of disciplines all with growth Supply Chain, Financial Services and Marketing 30% for the year. China 2016, Greater conditions through Despite experiencing challenging economic 14%. and grew profit gross a record in 2017, delivered performed strongly expanding our are we believe our main opportunities for growth Looking forward, and in the regional our presence technical disciplines and increasing of offering local laws allow we will also look to diversify further domestic Chinese market. Where into temporary and contracting recruitment. Key Performance Indicators
We measure our progress against our strategic objectives using the following key performance indicators:
How measured: Gross profit growth represents revenue less cost of sales expressed as the Gross profit growth (%)* percentage change over the prior year. It consists principally of placement fees for permanent candidates and margin earned on the placement of temporary candidates. 2017 9.8 Why it’s important: This metric indicates the degree of gross profit growth in the business. 2016 3.0 It can be impacted significantly by foreign exchange movements in our international markets. 2015 4.4 Consequently, we look at both reported and constant currency metrics. 2014 3.7 How we performed in 2017: Gross profit increased 14.6% in reported rates, 9.8% in constant currencies, as favourable currency movements benefited the full year figures. 2013 -2.5 Relevant strategic objective: Organic growth.
* Increase in gross profit in constant currency over the prior year
Gross profit How measured: Total gross profit from a) geographic regions outside the UK; and b) disciplines outside of Accounting and Financial Services, each expressed as a percentage of diversification (%) total gross profit. Why it’s important: These percentages give an indication of how the business has 80.2% 63.3% diversified its revenue streams away from its historic concentrations in the UK and from the Accounting and Financial Services discipline. Ex- How we performed in 2017: Geographies: the percentage increased to 80.2% from 76.4% Ex-UK Accounting and Financial in 2016, demonstrating a high degree of diversification. This also reflected strong trading Services conditions in the majority of our overseas businesses, along with the weakness of Sterling. Disciplines: The percentage increased to 63.3% (2016: 61.6%), as our professional 2013 2014 2015 2016 2017 disciplines of HR, IT, Executive Search and Secretarial performed strongly, combined with good growth in our technical disciplines, comprising Property & Construction, Procurement & Ex-UK 75.9 74.0 72.7 76.4 80.2 Supply Chain and Engineering. Ex-Finance 58.8 60.3 60.4 61.6 63.3 Relevant strategic objective: Diversification.
FINANCIAL How measured: Profit for the year attributable to the Group’s equity shareholders, divided by Basic earnings per share (p) the weighted average number of shares in issue during the year, and compared to the prior year. 2017 26.5 Why it’s important: This measures the underlying profitability of the Group and the progress 2016 23.1 made against the prior year. 2015 21.3 How we performed in 2017: The Group saw an 14.7% rise in Basic EPS to 26.5p. 2014 18.4 Improvements in trading and favourable foreign exchange movements drove strong growth in the Group’s EPS in 2017. 2013 15.1 Relevant strategic objective: Sustainable growth.
Net cash (£m) How measured: Cash and short-term deposits less bank overdrafts and loans. Why it’s important: The level of net cash reflects our cash generation and conversion 2017 95.6 capabilities and our success in managing our working capital. It determines our ability to 2016 92.8 reinvest in the business, to return cash to shareholders and ensure we remain financially robust through cycles. 2015 95.0 How we performed in 2017: Net cash remained broadly flat at £95.6m (2016: £92.8m). This 2014 90.0 was after dividend payments of £78.3m, including a special dividend of £40m. 2013 85.4 Relevant strategic objective: Sustainable growth.
Ratio of permanent vs How measured: Gross profit from each type of placement expressed as a percentage of temporary placements total gross profit. Why it’s important: This ratio reflects both the current stage of the economic cycle and our geographic spread, as a number of countries culturally have minimal temporary placements. Gross profit 2013 2014 2015 2016 2017 It gives a guide as to the operational gearing potential in the business, which is significantly Permanent 76 76 76 76 75 greater for permanent recruitment. Temporary 24 24 24 24 25 How we performed in 2017: The ratio improved slightly to 75:25, with strong growth in temporary placements in our more mature markets as well the emerging temporary market in places such as Asia and Latin America. Relevant strategic objective: Diversification.
21 | Strategic Report STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Strategic Report | 22 Strategic Sustainable growth. growth. Organic Sustainable growth. Sustainable growth. Talent and Skills development. Talent In reported rates, this increased to £139.9k from £135.2k. to £139.9k from rates, this increased In reported The ratio improved to a record 78:22 from 77:23 in 2016. 78:22 from to a record The ratio improved to 16.6% (2016: increased conversion rate The Group’s The average tenure of the Group’s management increased from from management increased of the Group’s The average tenure This reflects the operational efficiency in the business in terms of our This reflects the level of fee earner and the Group’s productivity This reflects Our indicator of productivity; affected by levels of activity in the market,the in activity of levels by affected productivity; of indicator Our A positive working environment and motivated team helps productivity and motivated team helps productivity A positive working environment both geographies and the economic cycle and across Experience through Gross profit divided by the average number of fee-generating staff, of fee-generating staff, divided by the average number profit Gross at to operational support staff of fee earners compared The percentage Number of fee earners and directors involved in revenue-generating involved in revenue-generating fee earnersNumber of and directors Average tenure of front-office management measured as years of service for management measured of front-office tenure Average A key output of the employee surveys undertaken periodically within How measured: of the 16.7% investment it fell slightly to £133.8k as a result in constant currency, However, in fee earners during 2017. Relevant strategic objective: activities at the year end, expressed as the percentage change compared to the prior year. change compared as the percentage expressed activities at the year end, in fee earners and is a guide to our confidence in the business important: Growth Why it’s demand above expectations as to the level of future outlook, as it reflects macro-economic the business. the existing capacity within in resulting at 16.7% in the year, 2017: Fee earnerHow we performed in grew headcount for the Group. a record 5,497 fee earners at the end of the year, Relevant strategic objective: How measured: average basis. monthly calculated on a rolling important: Why it’s not yetfee earners who are hired of recently capacity within the business and the number can also impact this figure. movements Currency at full productivity. How we performed in 2017: How measured: as a ratio. expressed the year-end, important: Why it’s as a exceptional items expressed (EBIT) before Operating profit How measured: profit. of gross percentage important: Why it’s ability to grow the revenue-generating platform at a faster rate than the staff needed to than the staff platform at a faster rate the revenue-generating ability to grow support this growth. How we performed in 2017: as well as operational supportThis was driven by 16.7% fee earner headcount growth, was 85:15. initiatives. The ratio of new joiners in the year Relevant strategic objective: of investment being in the business, together with the degree at cost control effectiveness growth. made for future How we performed in 2017: conditions in a number of markets, offset 16.3%) with a combination of steadily improving individual markets, larger challenging conditions in some of the Group’s in part by more such as the UK and Brazil. Relevant strategic objective: the business. important: Why it’s disciplines is critical for a cyclical business operating across the globe. Our organic business the globe. Our organic disciplines is critical for a cyclical business operating across and senior resourcing on an experienced management pool to enable flexibility in model relies management succession planning. How we performed in 2017: in EMEA. 11.6 years to 11.9 years, with a particular increase Relevant strategic objective: and encourages retention of key talent within the business. and encourages retention for employee engagement in an 83% positive score recorded How we performed in 2017: We 81%. This was we recorded survey was in 2015 where Our previous the 2017 Employee Survey. to work they were a combination of questions, including: how valued our people felt; how proud for their work. they received and the level of trust and recognition for PageGroup; Relevant strategic objective: Sustainable growth. How measured: and above. directors important: Why it’s How measured: 78 22 2017 16.6 16.3 16.2 139.2 139.9 11.9 years 11.6 years 11.2 years 11.1 years 135.2 133.8 10.8 years 130.3 16.7 14.7
126.8 13.3 12.3
74 77 77 77 26 23 23 23 5.1 5.1 2013 2014 2015 2016 4.8 83% score Positive Positive engagement
ee earner:operational 2014 2017 2016 2017 2015 2014 2013 2015 2014 2013 2015 2013 2016 2017 2016 2017 2016 2015 2014 2013
Fee earner Fee Support Gross profit per headcount growth (%) headcount growth Fee earnerFee support staff ratio F fee earner (£’000) Management experience Employee index Conversion rate (%)
PEOPLE STRATEGIC Key Performance Indicators
How measured: Direct and Indirect GHG emissions calculated in line with the UK Total GHG emissions Government’s 2017 DEFRA reporting standards. Principally based on data from a sample of our offices, covering 63% of the Group by headcount, and extrapolated for the Group Total energy-derived emissions as a whole. (CO2e tonnes) Source of emissions 2016 2017 Why it’s important: The emissions calculations look at the CO2e impact of our operations in Direct GHG emissions 1,832 1,627 absolute terms. Indirect GHG emissions 4,689 4,948 How we performed in 2017: Direct GHG emissions relating to the combustion of fuel
decreased by 11.2% to 1,627 tonnes CO2e, while Indirect GHG emissions, through the purchase of energy such as electricity, increased by 5.5% to 4,948 tonnes. Relevant strategic objective: Sustainable growth.
How measured: Intensity values for GHG emissions are based on property and vehicle energy- Intensity values of derived emissions per 1,000 headcount. Headcount is viewed as being the most representative metric for PageGroup’s activity levels and is unaffected by issues such as business mix or
GHG EMISSIONS GHG emissions foreign exchange variations. CO e tonnes per 1,000 employees 2 2016 2017 Why it’s important: Intensity values help to normalise the GHG metrics and place them in Energy-derived emissions 1,078 974 the context of the Group’s changing business profile, particularly in terms of increases in headcount. It helps to identify where progress has been made on emission reduction. How we performed in 2017: Energy-derived emissions were reduced by 9.6% compared with 2016, largely due to relocations to more energy efficient offices, changes in fuel sources, and an increase in headcount without a corresponding increase in the number of offices. Relevant strategic objective: Sustainable growth.
2016 Direct and Indirect GHG emissions were originally reported as 1,662 and 4,703 respectively. These have been restated to reflect the latest DEFRA fuel conversion rates in 2017. The 2016 Intensity value of energy-derived emissions has been restated from 1,052 to 1,078 on the same basis. The source of data and calculation methods year-on-year are on a consistent basis. The movements in KPIs are in line with expectations.
Greenhouse Gas Emissions (“GHG”) Emissions have been calculated in line with the 2017 DEFRA reporting standards, and In line with the requirements of the Companies Act 2006 (Strategic Report and Directors’ Report calculated using 2017 DEFRA conversion Regulations), PageGroup reports on all direct greenhouse gas (GHG) emissions (relating to the factors for fuels, gases and UK electricity, and combustion of fuel and the operation of any facility, together with any fugitive emissions); and indirect International Energy Agency conversion factors GHG emissions (through the purchase of electricity, heat, steam or cooling). for non UK electricity generation. Since 2014, we have gathered energy data from our major offices. This is in conjunction with our The intensity values are based on emissions environmental policy that focuses on implementing efficiency measures in our offices to reduce energy derived from property energy and vehicle fuel consumption and carbon emissions. We have continued to enhance the quality of our data collation per 1,000 headcount. This factor was chosen as process. Fugitive emissions are not reported as the company is not responsible for maintenance of air being most representative of the Group’s activity conditioning in any of its offices. levels, and being unaffected by issues such as The Group’s total 2017 emissions from energy and fuel used in its properties and vehicles, together business mix or foreign exchange variations. with comparable data for the previous three years, are reported below
Energy derived emissions – CO2e tonnes per 1,000 employees Total energy derived emissions (tonnes CO2e) properties and vehicles 2014 2015 2016 2017 Source of emissions 2014 2015 2016 2017 1,189 1,209 1,078 974 Direct GHG emissions (relating to the combustion of fuel and the operation of any facility) 1,647 1,705 1,832 1,627
Indirect GHG emissions (through the purchase of electricity, heat, steam or cooling) 4,898 4,981 4,689 4,948 2017 emissions intensity improved by 9.6% Total emissions 6,545 6,686 6,521 6,575 compared with 2016 due to better occupation efficiency and to the number of offices being Emissions derived from property energy consumption directly under the Company’s control have been reduced by one over the year. In addition, the Company continued to relocate to more energy calculated by using a sample of offices across the world (including the entire UK business). These efficient offices. This programme started in 2016, offices represent 63% of the global headcount in 2017. The emissions for the remaining offices were and initiatives have included installing more calculated by extrapolating headcount. Emissions from fuel consumed by company owned or leased energy efficient windows in the Milan offices. In vehicles in 2017 were calculated using the fuel consumed by the company car fleets in UK, Germany, addition, in UK offices, a focus on more energy Sweden and Italy (in prior years this calculation was based only on the German company car fleet). efficient printers resulted in savings in running For 2017 these fleets represented around 25% of the Company’s global car fleet of just under costs of 75% between 2015 and 2017, with 1,200 vehicles. The emissions for vehicles in other countries were calculated by first extrapolating emissions and energy consumption due to print the Germany’s fuel consumption per vehicle and then calculating the resulting emissions. Emissions activities being reduced by nearly 80% over that derived from property energy consumption amounted to just under 80% of total emissions. period and paper used being reduced by nearly 45%. In another environmental initiative, the UK business introduced dedicated recycling bins for use by all its staff.
23 | Strategic Report STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION Strategic Report | 24 Strategic What are the progression most companies, being than More we will continue to add heads selectively, to add heads selectively, we will continue on our mindful of the impact but remain conversion rate. remain A number of our markets we remain challenging. In the UK uncertaintycautious, as considerable the timing and terms around remains While Australia, Brazil and of Brexit. have shown improvement Singapore these cautious on in Q4, we remain 2018. As ever, markets as we go into on drivingwe will continue to focus theretaining whilst growth profitable flexibility to adjust rapidly to changing market conditions. Q A business means an organically grown plenty of opportunities for are there within PageGroup, rapid progression to the senior leadership consultant from team, and we have many examples of The management the Group. this across team, and myself as CEO, started as consultants, demonstrating the opportunities significant progression facilitate this To that we can offer. we have clearly defined progression, a global succession paths, career and a talent planning process whichdevelopment learning roadmap, development supports the professional at every stage of their of all our staff career. succession serious about are We planning and talent development in order consultants to be the leaders to grow a competitive offer We of tomorrow. package, we run executive remuneration coaching schemes, internal and external Personal mentor programmes, Development Plan development, Management Development a Global Directors programmes, Academy and an Executive Leadership enable all of our people To programme. to develop their skills and capabilities we or virtually, whether in a classroom invested in a global have also recently digital learning Our platform BOOST! international gives mobility programme opportunities to our people at all levels to develop themselves even further in so that and regions countries different they can take on new challenges and as individuals. grow opportunities at PageGroup and how do opportunities at PageGroup you invest in tour leaders of the future?
What do you consider the outlook to Our strategy to invest in our Large, You’ve paid special dividends over You’ve We continue to operate a policy of continue to operate a policy We
High Potential Markets remains High Potential Markets remains pleased that unchanged and we are in all five growth seeing strong we are will continue of these markets. We to diversify in the US, invest in Latin America and South-East Asia, develop the domestic market in China and expand our temporary and contracting we are Where businesses in Germany. such as elsewhere, growth seeing strong India and Japan, in Continental Europe, Q be for 2018 and what do you consider to be your biggest challenge? A financing the activities and development earnings our retained from of the Group and to operate while consistently balance sheet maintaining a strong first use our cash to position. We satisfy our operational and investment and to hedge our liabilities requirements, plans. We share under the Group’s our liquidity over and above then review to make returns to this requirement firstly by way of ordinary shareholders, dividend. this ordinary Our policy is to grow dividend over the course of the economic cycle, in line with our long- rate; we believe this enables term growth us to sustain the level of ordinary dividend payments during a downturn, it during more as well as increasing times. prosperous Cash generated in excess of these returned to first two priorities will be supplementary through shareholders returns, using special dividends buybacks. In 2017, after or share we consultation with our shareholders, of 12.73p made a supplementary return continue to monitor will We per share. our liquidity in 2018 and will make in line with the returns to shareholders above policy. Q A the last three years. Do you anticipate Do you the last three years. 2018?that continuing into so that we are the recruiter of choice. the recruiter so that we are previously in 2015. It means more means more in 2015. It previously content andpeople engage with our other on LinkedIn than any presence The content we put on to recruiter. and relevant, LinkedIn is meaningful awareness helping to build our brand
Do you see LinkedIn as a threat Technology, such as job boards such as job boards Technology,
Q&A with Steve Ingham, CEO Ingham, with Steve Q&A Engaged Recruiter, having won this Engaged Recruiter, again in 2017, LinkedIn’s Most Socially again in 2017, LinkedIn’s We were also very proud to win once proud also very were We deploy job alerts to WeChat. deploy job alerts to WeChat. world’s first recruitment company to first world’s and has over 550m users. We are the are and has over 550m users. We Instagram and Paypal all rolled into one Instagram and Paypal all rolled it, WeChat is Facebook, WhatsApp, it, WeChat For those of you who haven’t heard of heard For those of you who haven’t social strategy is focused on WeChat. social strategy is focused on WeChat. For example in Mainland China our is how we execute at regional level. is how we execute at regional A key success of our global platform against job boards and aggregators. against job boards example: we compare their job slots example: we compare for the functionality it provides. For for the functionality it provides. effectiveness of each part of its inventory effectiveness is a social network we measure the is a social network we measure over 1.2m followers. Whilst LinkedIn LinkedIn and as a company we have is trained on optimising their use of recruitment. Each of our consultants recruitment. development of tools specifically for contribute to steering their product contribute to steering their product inventory and as part of their panel we to constantly improve our use of their to constantly improve landscape. We work alongside them landscape. We and it plays a key role in our acquisition and it plays a key role partnerships of which LinkedIn is one We have a number of global strategic have We placed to deliver our client requirements. placed to deliver our client requirements. through online profiles, and are best and are profiles, online through candidates than would ever be possible this process. We know more about our know more We this process. skill is putting the human touch back into in such a candidate driven market, our access to potential candidates. However, However, candidates. potential to access that everyone has complete and equal A and LinkedIn has given the perception Q
impact does disintermediation have? to the recruitment market and what Corporate Social Responsibility
OUR Purpose PageGroup Changes Lives for People through creating Opportunity to reach Potential
OUR Values We make a Difference We Enjoy what we do We value Determination We work as a Team We are Passionate
25 | Strategic Report STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION Strategic Report | 26 Strategic
We listen to what our people tell us and We use that feedback to drive improvement. Say’ In our bi-annual ‘Have Your employee survey in September 2017, 81% of our people completed the 77% in 2015) survey worldwide (up from of with a positive engagement score 81% in 2015). Using 83% (up from we are the survey, the feedback from our developing action plans to improve an even business and make PageGroup better place to work. The next survey is planned for 2019.
Candidates Clients Suppliers Changing people’s lives through creating opportunity Highest ethical standards
Shareholders Maintain the highest standards of corporate governance great place to work Our Focused on Our people to reach potential stakeholder commitments wellbeing and flexibility A diverse and inclusive team creating opportunity for people Make PageGroup a In a video message to employees the world, Steve Ingham said: across talked about our purpose “We’ve lives. – about changing people’s does that. It changes PageGroup our candidates’ lives by placing them in better jobs. It changes our clients’ lives by helping them most but and grow, to improve importantly it changes our lives – by helping us develop, get promoted, and move in many cases.”
Contribute positively to the communities we serve Communities
Society Minimise and mitigate our environmental footprint Provide responsible global citizenship and business practices People are at the heart People are of our business. Our Our People Our People
of our success, with the majority starting here of our Executive Board as consultants, including CEO Steve Ingham. and has always been at the heart promotes from within based on merit within from promotes people. Our organic business model potential. That starts with our own through creating opportunity to reach to reach opportunity creating through purpose is to change lives for people Our Commitment to our Stakeholders Our Commitment Corporate Social Responsibility
Public recognition:
UK
Best Places to ‘100 Best Companies Winner of the ‘Diversity PageGroup CEO, Steve Ingham ranked Work 2017 to Work For’ & Inclusion’ award seventh in the ‘Highest Rated CEOs’ Glassdoor Employees’ Choice Awards The Sunday Times HR Excellence Awards 2017 Glassdoor Employees’ Choice Awards
USA APAC EUROPE
Top Employer Europe: Germany, France, Switzerland, Poland, Spain, 7 Netherlands, Belgium and Italy Liepin Extraordinary Hunter 2017 Award: Michael Page China Forum for Expatriate Management Awards Winner in the ‘Best Redesign of Global Mobility Strategy’ LATAM GLOBAL Michael Page Brazil recognised by PageGroup named Runner-up in the ‘Global Gestão & RH Magazine as one of the winner of the ‘Most Mobility Team of the Year’ ‘Top 10 HR Providers’ and ‘Top 25 Socially Engaged Most Admired HR Partners In The Recruitment Country’ Company’ on LinkedIn
27 | Strategic Report STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION (54%) (53%) (23%) (19%) (44%) (38%)
4 3 3,805 90 3,232 70 Strategic Report | 28 Strategic (46%) (47%) (77%) (81%) (56%) (62%)
5 310 3,224 5 293 2,867
As at 31 December 2017
As at 31 December 2016
Board Board Directors Senior Management Other employees Other Board Board Directors Senior Management employees Gender diversity A team that’s diverse A team that’s Our diverse, global team continues to and insight perspectives bring different to our business, generating creativity, capability and problem-solving sustainability that would not otherwise be possible. the want our people to reflect We communities in which we work, and to of trust and an inclusive culture create people can achieve their support where potential and feel comfortable being themselves. OpenPage (our commitment to inclusivity and diversity) includes a range of support materials, broad activities, networks and memberships. to globalise continuing are We their impact by extending support and through all regions throughout worldwide communication campaigns, for example supporting International Pride Month and World Day, Women’s Mental Health Day. Enjoying rewards and wellbeing Enjoying rewards During the year we embedded our performance management toolbox, a consistent framework for providing our people. managing and rewarding initiatives to introduce continued We flexible ways of supporting more working and flexible benefits to suit our lifestyles. people’s Global
International
moves in 2017 moves 98 2,010 promotions in 2017 promotions
improve their skills and abilities. improve our people continuously develop and self-help materials. All designed to help ability to request and track training, and ability to request provides online learningprovides modules, the and development framework, Boost! regions. Supporting our existing training regions. online learning all system Boost! across In 2017 we rolled out our innovative In 2017 we rolled Determined to learn training and development. supported by our industry-renowned supported by our industry-renowned path with international opportunities, We have a clear and transparent career career a clear and transparent have We
Our Employee Value Proposition Our Employee Value Passionate about your progress Corporate Social Responsibility
The communities we raised funds which will be used to CEO, remains a serving Board member build homes for victims of the earthquake. of Great Ormond Street Hospital as well we serve Other ways of using our combined talents as supporting and taking part in our to give back to society included providing PageGroup charitable activities. Making a and serving meals to people in need in difference multiple countries. Our association with Our PageTalent Our commitment to changing people’s Mencap in the UK saw us raise funds and programme helps lives extends to the communities in which help people with learning disabilities into students looking we live and work. Giving back to others the workplace through sharing practical for internships, is in our DNA and we actively encourage skills and advice. apprenticeships and advice. It helps connect them with our people to get involved in a huge We continue to promote our payroll- employers who are able to advertise variety of ways. based donation scheme with fund- their opportunities at no cost. In matching. We encourage our people to During 2017, we saw our people involved the UK alone there are currently take a volunteer day annually, using their with fundraising through sport, bake sales 212 companies involved including time to support good causes – often and joining major events such as the Barclays, Nike, Lloyds Bank and coming together in teams to help make Three Peaks Challenge in the UK and the Bosch. Light the Night walk in Boston. In Mexico a real difference. Steve Ingham, our
UK Yorkshire 3 peaks challenge
Australia giving Christmas presents to under-privileged children UK Mencap workshop France AFM Telethon
Belgium Red Cross blood donation
Mexico Aldeas Belgium UAE Smart Life Foundation Infantiles Red Cross feeding workers in a Dubai children’s Christmas labour camp during Ramadan villages donation
North America Dress for Success and A New Suit, a New Start Boston – Light the Night Houston Food Walk to support Leukemia & Bank Raised and Lymphoma Society Canada raising funds and Served 12,068 distributing breakfasts to schools Meals
29 | Strategic Report STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Strategic Report | 30 Strategic and its Standing Committees during 2017. We expect the same high standards high standards expect the same We code our suppliers and our supplier from integral part of allof conduct is now an activities. our procurement our approach During 2017 we formalised to modern and continued to slavery Our commitmentundertake further work. on ourto that policy is published . corporate website www.page.com our communication constantly review We our shareholders, and engagement with our successfuland will continue to hold events which give the investor relations and opportunity to meet our Directors teams. leadership regional of corporate 2. Highest standards governance we believe high standards At PageGroup of governance underpin sustainable is collectively performance. The Board financial for the Group’s responsible and operational performance as well as the success of the business. promoting responsibilities by fulfils its The Board and supervising the Group’s directing strategies and policies. The Corporate Governance section sets out details of the of this report activities undertaken by the Board Our candidates; Our candidates; suppliers; clients; shareholders
All our offices are rented or serviced andrented or serviced are All our offices which are we continue to seek premises landlords the where energy efficient and us with data to able to provide are support that aim. 1. Highest ethical standards 1. Highest ethical standards is a leading global recruiter, PageGroup for brands and a reputation with strong that continue to reinforce We integrity. position by building trust and loyalty with all our stakeholders. The way we do business is as important encourage a culture as what we do. We which puts our customers first and empowers our people to make the right continuously look for decisions. We and involve our people ways to improve in that process. Our independently hosted whistleblowing facility gives our employees the ability to easily and anonymously report For more wrongdoing. any perceived information see the Audit Committee Report in the governance section of this pleased that in 2017, once – we’re report issues. again, we had no reportable
ds
“
Society As a service based organisation, our impacts environmental small compared are eplacing light fittings with
Mark Capper, Business Mark Capper, Development Manager at Mencap One of the key aspects of ourOne of the key partnership with PageGroup is the opportunity it gives people with a learning disability to expertisebenefit from the of their recruitment consultants.
roll-out planned; roll-out friendly alternativesenvironmentally during refurbishment; and co-tenants to make changes energy systems, reducing to HVAC consumption; and Replacing franking machines with ink envelopes to reduce pre-printed and label use. Continuing to work with our landlor solution in the UK with further Routinely r Implementing our managed print • • • • 2017 included: Further mitigation of our impacts during reporting for 2017. reporting business travel. See page 23 for GHG minimising the impacts resulting from from resulting minimising the impacts consumption and energy through we are committed to managing and committed to managing we are is predominantly emissions. Our impact with many other businesses. However, However, with many other businesses. gas on our greenhouse and report We have processes in place to monitor have processes We our day to day business. “ Regional Perspectives EMEA What are your priorities for 2018? Gross profit £m If trading conditions from 2017 continue into 2018, we will continue to drive growth 2017 £332.3m and make investments in our fee earner headcount to maximise our performance. 2016 £271.9m We remain mindful of some political uncertainty in the region, though with our flexible business model, we remain able to react quickly to any changes in 2015 £217.0m market conditions. How did you deliver against your Permanent to temporary ratio
2017 priorities? 30% We delivered a record performance in 2017, with overall growth of 15%. This was Permanent driven by particularly strong performances in France and Germany, up 25% and Temporary 12% respectively. Reflecting our confidence, we grew our fee earner headcount 70% in the region by 352, or 18% compared to December 2016. We anticipate this investment will drive further growth in the future. This record performance, combined with efficiency savings from the completed transition to our Shared Service Centre in Headcount Barcelona, led to an increase in our operating profit from £51.7m in 2016 to £69.7m in 2017, which represents an improvement in the conversion rate to 21.0% (2016: 2017 2,996 19.0%). 2016 2,553 2015 2,295
UK
What are your priorities for 2018? Gross profit £m We remain mindful of the political and economic uncertainty, and anticipate this will 2017 £140.8m continue throughout 2018. We will continue to respond to market conditions and look to progressively consolidate our position in all of our markets. We will also continue 2016 £146.3m to make selective investments in specific disciplines and regions where we see £151.6m opportunities for growth. 2015 How did you deliver against your 2017 priorities? Permanent to temporary ratio
The UK continued to be impacted by subdued client and candidate confidence 30% through 2017 as a result of the political and economic uncertainty. Consequently, we saw a reduction in our gross profit of -3.8%. All disciplines, regions and brands Permanent were impacted to a greater or lesser extent, as were both Permanent and Temporary Temporary 70% recruitment. We did, however, see growth in some individual disciplines, with growth of 4% from our Technical disciplines. With our flexible business model, we were able to manage our headcount and therefore cost base through natural attrition. We ended the year with just over 1,000 fee earners, broadly in line with 2016. Headcount 2017 1,407 2016 1,411 2015 1,516
31 | Strategic Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION 1,093 1,533 930 844 1,205 £101.3m £137.2m £83.1m 1,180 £78.4m £119.7m £109.1m Permanent Temporary Permanent Temporary Strategic Report | 32 Strategic
85% 87% 13% 15% 2017 2016 2015 2015 2016 2015 2016 2017 2017 2016 2015 2017 Gross profit £m Headcount Permanent to temporary ratio Permanent Headcount Gross profit £m to temporary ratio Permanent
The Americas advantage of the growth opportunities that exist. There will also be a particular focus opportunities that exist. There advantage of the growth In Latin America, we will continue to invest in our fee earner headcount to take goals. management infrastructure and retaining top talent is key to delivering these future top talent is key to delivering these future and retaining management infrastructure 2018, before exploring further diversification in 2019 and beyond. Developing our 2018, before market. on the emerging temporary recruitment of large discipline opportunities in our existing offices and we see this continuing in earner headcount, particularly in our regional offices. We are focused on a small number We are offices. earner regional headcount, particularly in our In North America we will continue to grow our business through investment in fee our business through In North America we will continue to grow What are your priorities for 2018? your priorities What are fee earner 15%. headcount increased quarters of our US business. Reflecting these favourable trading conditions, we made Reflecting our confidence and strategy of investing in our Large, High Potential markets, business outside of NYFS collectively grew 32% and now represents almost three almost three 32% and now represents business outside of NYFS collectively grew all five countries. performances from of 20% with record we saw collective growth We saw standout results from our offices in Boston, Chicago and Los Angeles. Our our offices in Boston, Chicago and from saw standout results We Elsewhere, in 2017 and was up 3% for the year. up 14%. Brazil saw improvement year, (“NYFS”) market continued, and led to overall growth of 21% for the US, a record year. year. of 21% for the US, a record (“NYFS”) market continued, and led to overall growth a record Large, High Potential markets, delivered Latin America, one of the Group’s York Financial Services In North America, our strategy of diversification out of the New York a significant investment in fee earner to 2016. headcount, up 21% compared 2017 priorities? How did you deliver against your How China and Japan. increase of 305, or 33%. This was most noticeable in the markets of Australia, Greater of 305, or 33%. This was most noticeable in the markets of Australia, Greater increase We made significant fee earner made investments during 2017, with an overallWe headcount in Q4. Conditions in Australasia were more challenging, with gross profit up 1%. up profit gross challenging, with more in Q4. Conditions in Australasia were trading conditions in Singapore for the majority of the year, we did see an improvement we did see an improvement for the majority of the year, trading conditions in Singapore 23% respectively. In South East Asia, we delivered growth of 12% and, despite tough of 12% and, growth In South East Asia, we delivered 23% respectively. 2016. There were notable performances from Greater China and Japan, up 14% and China and Japan, up 14% Greater notable performances from were 2016. There on a significant improvement of 10.2% for the year, saw overall growth The region management changes and the successful launch of a new office in Canberra.management changes and the successful 2017 priorities? made significant investment in our fee earner headcount during 2017 to support recent in our fee earnermade significant investment during 2017 to support headcount your did you deliver against How We will also focus on growth in our businesses in Australia and New Zealand, having in our businesses will also focus on growth We well as building further upon our established platform in India. well as building further 2017, we will continue to drive growth in the domestic markets in China and Japan, as in the domestic markets in China to drive growth 2017, we will continue markets of Greater China and South East Asia. Following highly encouraging progress in progress South East Asia. Following highly encouraging China and markets of Greater into our fee earner headcount, particularly into the Group’s Large, High Potential into our fee earner headcount, particularly into the Group’s We expect current trading conditions to prevail and will continue to make investments prevail trading conditions to expect current We What are your priorities for 2018? your What are Asia Pacific Risk Management
Principal Risks In the intervening periods the risks The Executive Board and the Board associated with changes in either the continue to focus on Strategic, People The Group recognises that the effective external environment or as a result of and Financial risks. For these, we disclose management of risk is key in achieving internal proposals are discussed as part KPIs which we use to monitor the risk our objectives. of our ongoing business reviews and are impact, and the rewards and incentives A Group risk review process is in place responded to accordingly. we apply to ensure effective management. which identifies the strategic and We also have well established compliance See strategic framework on page 9. operational risks which could impact teams: IT risks and security, who focus Our Operational risks are those that the our business and determines the on delivery of activity to mitigate our IT Executive Board have agreed can be mitigating actions required to ensure that risks and systems and data security; and managed by our people on a day-to-day these risks are controlled to an acceptable regional revenue recognition compliance basis. These are included within our risk level. Our agreed level of risk appetite, teams who ensure accurate reporting of registers and are reviewed by the Board approved by the Board, guides the level our revenue worldwide. of acceptable risk. on an exceptions basis. Our Internal Audit programme of activity The risks around data security (cyber risk) The process of risk management is an aligns the provision of assurance to the is one such exception which is reviewed integral part of our business, forming part controls that mitigate the risks identified at Board level on an ongoing basis. of our strategy review, our business plans from this process. and the delivery of our daily activity. Our risk evaluation includes matters Our risk management process relating to all our key stakeholders It is supported by risk registers that are categorises our principal risks into and encompasses considerations of maintained locally at country and process Strategic, Financial, People and governance, social, environmental and level and consolidated twice a year. This is Operational. then combined with a top-down review of legal requirements. risks conducted with senior management Within this process we assess all risks and the summarised output formally that could have a significant impact on the reviewed by the Executive Board and the ability of the business to deliver its short- Audit Committee on behalf of the Board. term plans and medium and long-term strategy.
Our Risk and Control Framework
Risk and Control Framework
Controls Functions Review
Business Reviews/ Internal Control Checklists Management
Policies and Procedures Executive Revenue Compliance Teams Risk Management/ Board IT Security Team Board/Audit Committee Group Financial Control Risk Registers Group Finance
Audit Reports Internal Audit Quarterly Updates
Group Governance Framework
33 | Strategic Report STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION Strategic Report | 34 Strategic 2017 2016 Information systems Cyber security Fiscal and legal compliance development and retention Financial management and control People, attraction, attraction, People, Data protection regulation Higher willingness to take risk People Operational
/17 2016 /17 2016 Risk Categories 2016 2017 Further planned improvements 2017
/17 2016 Strategic
Financial /17 /17 /17 2016 2016 2016
/17 2016 exposure
and change translation risk Transformation Transformation
/17 2016 and reputation Shift in business model Foreign exchange – Macro-economic Macro-economic PageGroup brands
Unacceptable to take risk
PageGroup actual net risk assessment PageGroup
Risk appetite range xchange translation
Intended improvements
ageGroup brands and reputation
Foreign e P Risk level 11. Data protection regulation 11. 10. Financial management and control 10. 6. 6. Fiscal and legal compliance 9. 5. Macro economic exposure 5. Cyber security 8. 4. People 4. Information systems 7. 3. 3. 2. Transformation and change Transformation 2. 1. Shift in business model 1. success globally. risk ensures we are best placed for we are risk ensures This measured approach to taking approach This measured the business. balance sheet, reflecting the degree the degree balance sheet, reflecting in of operational gearing inherent financial position with a strong financial position with a strong We will always operate a conservative will always We sustainable manner. to operating in an ethical, legal and meritocratic culture with a commitment meritocratic culture We maintain a strong sales driven, a strong maintain We culture across the Group. across culture consistency of model and business from within the business, ensuring within from by developing and promoting our people by developing and promoting wide geographic spread. We drive this We wide geographic spread. the proven disciplines for brands to a the proven Our growth model is organic, rolling out model is organic, rolling Our growth experience and capability to manage. taking the operational risks it has the a strong financial position and only a strong mitigate its strategic risks, maintainmitigate its strategic with a low risk appetite, seeking towith a low risk appetite, PageGroup operates in this environment operates in this environment PageGroup creating a higher gross risk environment. a higher gross creating environment and thus financially volatile and thus financially environment makes it sensitive to the economicmakes it sensitive to provides limited forward visibility. This visibility. limited forward provides Net Risk Levels and cyclical Recruitment is inherently Risk Appetite and Risk Appetite Principal Risks and Uncertainties
Strategic Risks Actions to Mitigate Risk
Shift in Business Model • We actively monitor developments in • Our highly trained and often specialist The emergence of new platforms new technologies and their use in the consultants maintain an extensive technology providers offering HR solutions recruitment sector. qualified candidate database which we and consulting may lead to increased • As well as our ongoing day to day use to resource candidates for our clients competition and pressure on margins which interaction with clients and candidates, at an overall cost that they cannot match. may adversely affect the Group’s results if it we conduct formal surveys through • We have established an innovation is unable to respond effectively. the Exact Target programme which we infrastructure with Executive Board are standardising across the Group to Governance and regional innovations understand how candidate and client groups embedded globally. These needs are developing. teams continually generate ideas that • We continue to develop Page Outsourcing are evaluated and those that pass our in response to RPO’s and the expansion criteria are developed and piloted. (For of internal recruitment functions. Audit Committee – we have hired a Group • We partner with the large providers, such Insights innovations manager). as LinkedIn and Facebook, to ensure that • We have also set up a review, led by our we use this form of media to enhance our Group Marketing Director on how we can value to clients. All consultants are trained capitalise on the data we have with the in utilising the benefits of social media in developments in data analytics and AI. their day-to-day activity. • Our IT strategy and transformation • Our revenue attribution model built using initiative recognises the need for us to be google analytics and AI provides data able to respond more rapidly in rolling out driven ROI implementation addressing enabling technologies. online and offline conversions and spend allocations.
Transformation and change • We have developed a transformation plan, by region, of the global template We have a programme of activity which programme which will manage the which is appropriately resourced to will complete the transformation of our IT change activities we have defined. This ensure we can protect business as usual capability to a Group wide service delivery programme will be governed by the senior and support regional management in model. This is a two year programme IT leadership Team who are responsible the successful delivery. We continue to which will build on the work done to date for both the programme and the provision utilise the expertise of our third party on centralising our IT in shared service of IT services. The components of the systems implementation partner and centres, standardising our infrastructure programme have been defined such that have dedicated resource within our and applications and migrating to cloud they can be implemented in discrete IT programme management office to services. This level of activity poses phases allowing us to determine the co-ordinate GFS activity requirements a change management risk to both success of each prior to progressing to alongside business as usual and IT successfully deliver the new model the next stage. We are being supported in transformation. maintain service levels to the business. the programme by a specialist third party organisational change implementation The Group is in the process of partner. implementing a Global Finance System. This has been developed centrally and has • We have built and implemented the been successfully rolled out to the UK, US global template into the UK, US and and ROW businesses with the plan to roll ROW regions. We have a phased rollout out to all remaining regions by 2019.
PageGroup brands and reputation • We have programmes that gain feedback • W e have a programme of activity which The quality and relevance of service we actively from our clients and candidates. ensures that we communicate effectively provide to both clients and candidates, We utilise Exact Target, an event based the Page brands, keeping awareness high could have a significant impact on how survey, and are developing an event based among both current and potential clients approach of feedback gathering through and candidates. our brand is seen. the use of Qualtrix. • W e train our consultants to use new media As the way clients and candidates source • W e actively monitor media online through effectively, making the channels available information changes the awareness of the Brandwatch to identify where there are to them as part of their day-to-day activity. PageGroup brand and services of clients unusual references to the PageGroup, and candidates could deteriorate. • We have a comprehensive brand Michael Page, Page Personnel, Page management policy which includes In the short-term, any event that could Executive and Page Outsourcing key areas such as social media, data cause reputational damage is a risk to trademarks. protection and information security. the Group, such as a failure to comply • Our marketing strategy recognises the with legislation, or other regulatory • We have in place a tested incident need to engage with candidates and requirements, or confidential data lost response process with clear escalation clients using the latest media available in or stolen. Use of new social media and activity guidelines to ensure any a way that reflects changing behaviours. network sites has increased the speed of incidents are managed effectively. We conduct ongoing surveys of clients and communication and reach, increasing the candidates to ensure that we understand • W e are supported by external advisers impact of an incident. their requirements and can adapt our who provide ongoing advice on the processes and procedures accordingly. protection and management of our brand.
35 | Strategic Report STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Strategic Report | 36 Strategic e have a relatively small amount of e have a relatively e continue to balance our mix of e are expanding our variable costs expanding e are e have Group-wide initiatives which e have Group-wide mentoringe have also established employee surveys, e conduct regular W trading activity so the border cross impact on transactions is limited to activity. intercompany we have also reduced our dependence on we have also reduced Accounting and Financial Services. Driving domestic business in new markets. In newer markets, for example driving to shift Japan and China, we are domestic our client base to include more businesses. W W permanent and temporary recruitment. This is in line with the ratio of our permanent to temporary business in each of the markets in which we operate. The temporary business tends to be more in times of economic downturn.resilient This enables us to respond structure. to changes in business levels driven As well by economic circumstances. end staffing costs, as our variable front principally bonus payments, our move to an IT service based model and the rollout of a cloud and service based finance system solution enhances this capability. service centre shared Our regional to support activities gives us approach reallocations. resource flexibility in greater on improving. in the UK in February, has now been in the UK in February, and APAC LATAM out in Europe, rolled by out to all operations and will be rolled early 2018. W achieving look at the issues around part of our wider These are diversity. which programmes PageGroup an open we create combined will ensure working practices suit where environment in all its aspects. and encourage diversity W appraisal a Group-wide programmes, our reward reviewing and are process packages. W with the last one in September 2017. This shows us how our people view us and provides working in PageGroup and focus with feedback to address
• • • • • • •
e are, however, repatriating funds and repatriating however, e are, e have invested more in online learninge have invested more e are also addressing issues such also addressing e are e look for opportunities to develop our Actions to Mitigate Risk W W converting them back to Sterling to Our against a Sterling recovery. protect function takes a much Treasury Group in the management of role proactive more our cash resources. translation and focus on ensuring the adjusts for any impact. market correctly W capabilities, BOOST!, which commenced W W workingas work-life balance, flexible and equalityand benefits schemes seen to have a positive impact that are on employees. Our Page programmes have been rolled covering these areas conduct exit We the Group. out around aware that we are interviews to ensure of any underlying issues that need to be addressed. in HR resources, adding a Group Talent Talent adding a Group in HR resources, in Europe and business partners Director We Director. and a North America HR HR new Group have also appointed a will all support our HR These Director. focused on which are programmes attraction, issues around addressing development and retention. brands and disciplines in each geography. brands and disciplines in each geography. have diversified our business by We by increasing expanding geographically, the number of disciplines we support, and by establishing four brands to address levels of the recruitment the different sector; market: the clerical professional market and the qualified professional have We sector. the executive search in IT recruitment, expanded our presence but also in the UK initially in Germany, and have expanded our US region not as dependent footprint so that we are York. Overall on financial services in New W W Potential markets. Our strategy recognises in which we High Potential markets Large, China, Greater operate, namely Germany, Latin America, South East Asia and the to we believe it is appropriate US, where the economic continue to invest through cycle for the long-term. This investment is principally in our people in these areas by balancing against and can be offset we seek to where costs in other regions drive efficiencies.
• e donotanticipateanyhedgingfor • • • madesignificantinvestmente have • • High e maintainourinvestmentinLarge, • Actions to Mitigate Risk
Financial Risks People The majority of the Group’s operating The majority of the Group’s operations outside is derived from profit of the UK, so material changes in the of Sterling against the Group’s strength could have an main functional currencies reported on the Group’s adverse effect in the financial statements. Sterling profits in addition The main functional currencies Australian the Euro, to Sterling are Swiss Franc, Chinese Renminbi, Dollar, and US Dollars. Singapore Foreign exchange translation Foreign Recruitment activity is driven largely by Recruitment activity is driven largely economic cycles and the levels of business less likely to confidence. Businesses are less and employees are need new hires likely to move jobs when they do not have confidence in the market so leading to activity. recruitment reduced of the Group’s A substantial proportion contingent fees that are arises from profit upon the successful placement of a candidate in a position. If the client cancels the assignment at any stage in the process, no remuneration. receives the Group the levels of has increased Brexit uncertainty in the UK. Macro-economic exposure Macro-economic PageGroup needs to hire, train and retain train and retain needs to hire, PageGroup skilled number of appropriately a large its to achieve the Group people across vision. encourage andThe factors that motivate, to their bestenable individuals to perform to evolve with anhave and will continue balance, flexibilityemphasis on work life and the working environment. Diversity is a key enabler to any successful business. A lack of diversity in our people will impact on the achievement of our objectives. Our biggest challenge is still to address attrition levels during the first year of training. People attraction, development and retention Principal Risks and Uncertainties
Operational Risks Actions to Mitigate Risk
Information Systems • Our core operating systems standards ensures that relationships with third party Our systems are an integral part of our have been defined globally and under suppliers are appropriately defined and operations. A major loss of systems tighter global governance are delivered operationalised. capability would have a high impact on regionally. We have and continue • W e have invested in resource to support our performance, impacting the quality to migrate to standard platforms, vendor and asset management. We have of service we provide to clients and procedures and processes which gives in place service delivery contracts with candidates and our ability to deliver our us a greater degree of resilience. In our key vendors which include levels of financial performance. addition, the current transformation in IT resilience appropriate to the nature of our creates global accountability to adopt business. Failure of our IT systems to adapt to and implement the defined standards. levels of business activity could result in • Our new Global Service Delivery model lost opportunity during periods of rapid • We now have a standard disaster will enable faster rollout of our piloted expansion or excessive costs during recovery plan appropriate for all regions new services as we standardise our periods of contraction. with the option of transferring to a infrastructure and applications across Cloud service for each of our services The move to the delivery of IT as a the Group. Our Global Service Delivery in the event of a disaster with our core model will ensure these services operate flexible service increases our reliance on systems. Our core finance systems third party vendors for service delivery. effectively and achieve the benefits are in the process of migrating onto a planned before they are deployed. Should one of these vendors fail we are Cloud service. Our IT transformation at risk of a service disruption. programme includes the migration of • Our IT strategy and infrastructure team Our systems must be able to adapt core IT services to third party providers are changing our model to one which is to the evolving technologies around on a SAAS basis. Activity can quickly and common applications based, enabling Cloud to allow faster implementation of economically be scaled up or down with faster adoption of innovation. innovation or we could miss business business requirements. opportunities. • We select vendors through a robust vendor selection process which ensures those chosen have the ongoing capability to support our business requirements effectively. This is reviewed and managed on an ongoing basis through the Services Delivery team. Our central procurement team, in addition to supporting management in commercial negotiations,
Cyber Security • We have information security policies in • Supplier contracts are negotiated and Confidential, sensitive and personal place for the management of confidential, reviewed to ensure data protection and data is held across the Group. Failure sensitive and personal data. Security IT security obligations are included as a to secure and handle this data properly risks are identified through a structured standard requirement. could expose the Group to loss of process of assessment and a programme • New IT projects and initiatives are business, financial penalties and/or of remediation activities is executed, reviewed for security risk, to ensure new reputational damage. with activities prioritised according to the technologies are adopted safely. associated level of business risk. Our move to the delivery of IT as a • Security vulnerabilities are assessed flexible service increases our reliance • We have a dedicated Global Information regularly and the remediation of identified on third parties. As a consequence, we Security team that ensures our risks and alerts is tracked to conclusion. also have an increased reliance on the information remains protected. This Regular security assurance checks take third parties’ IT security to secure our includes ensuring appropriate multi- place across all regions and penetration confidential and sensitive data. layered protection at network and system testing is undertaken by specialist third levels, regular monitoring and third parties. We operate in an external environment party testing of our capabilities. The that is seeing an increase in, and Information Security team comprises • The Board and Audit Committee reviews sophistication of, cyber attacks from Security Operations, Security Architecture data security on a regular basis and organised crime and nation states. In and Information Security Management. receives updates on the status of our addition, the increased use of social The team not only deals with IT security security programme. media and digital communications matters, but also works directly with • W e continue to review our processes channels, as well as reliance on third suppliers and key business stakeholders and resource requirements in line with parties, Cloud computing and mobile to ensure everyone across the business developments in how our business data facilities, increase our exposure. protects the data of our Group, clients operates, the level of reliance on and candidates. third party suppliers and the level of • W e have technical security protections in external risk. During the year we further place that mitigate the risks posed by the strengthened the team with additional use of modern communications media, resource to maintain this focus. Cloud services and mobile devices. The threat landscape is under constant review to ensure our technology provides the right level of protection.
37 | Strategic Report STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
oup Strategic Report | 38 Strategic e mirrors and e mirrors ocurement contracts include ocurement oup tax function regularly monitors oup tax function regularly oup holds all normal business e necessary, this could include e necessary, nal Audit regularly review local and review nal Audit regularly e are compliance teams located e are Increased since prior year Increased e have engaged with third party e have engaged with third Ther Inter efficiencies, enable more effective control control effective efficiencies, enable more common processes of activities through activities. of control and segregation The Finance structur and Group supports local, regional management structures. that support the local, in each region management in and Group regional appropriately are ensuring revenues recognised. report on and financial controls regional and the to the Executive Board the results Audit Committee. who, together Officer, Data Protection will with the legal teams in our regions, monitor the ever-changing proactively we remain legislative landscape to ensure as necessary. and able to respond ready legislation. Training will be delivered in will be delivered legislation. Training allowing tracked manner, a repeatable, training. refresher regular to receive staff where Specialist training will be provided required. W Wher migrating the data of Chinese nationals (including candidates, clients and and Cloud employees) into datacentres services in Mainland China for the candidate data, purpose of processing and our own data finance and payroll activities. processing Management have appointed a Gr The Gr The Gr Sales and pr rights are the Group’s clauses to ensure contracts are All non standard protected. appropriate and where legally reviewed by senior management. approved the consultants to assist in interpreting highly complex high-level law and advise course of action. on an appropriate transfer pricing requirements and transfer pricing requirements appropriate that developments to ensure being taken and appropriate actions are maintained todocumentation is being and compliance meet local reporting requirements. employers’insurance cover including public liability and professional liability, indemnity insurance.
• • • • • • • • • e
etary and local legal f receive induction training andf receive Similar to prior year Lower than prior year oup has central tax and treasury oup has central tax and treasury oup operates regional shared shared oup operates regional oup has financial policies and ogramme of data protection ogramme of data protection e have convened a GDPR Steering we are implementing the new processes we are Amongst others, required. and procedures Data updating the Company’s we are Policy and Data RetentionProtection updating contracts with all suppliers Policy, the personal data, creating that process to demonstrate documentation required compliance at all times and updating to statutory to respond our procedures data subjects in good time. from requests A pr and training has been put awareness that personnel and together to ensure of the new aware management are W A gap analysis has been performed and requirements, Committee to agree champion implementation and monitor compliant that we are to ensure progress by requirements with the regulatory being are the implementation date. We supported by external specialists in data protection. The Company Secr Our staf The Gr functions, which manage the Group’s cash position and tax compliance. by advised are and compliance teams leading external advisers, as required, to changes in legislation that with regard business, including the Group’s affect tax and corporateemployment, legislation, governance. the Group’s updates regarding regular and compliance policies and procedures for legislation covering with relevant legislation, anti- example, discrimination bribery and corruption, sanctions and checks. pre-employment The Gr which, as well as driving service centres The Gr on a reviewed which are procedures by approved basis. Changes are regular the Audit Committee. Regional and local finance teams ensur Monthly management information is financial that supports effective produced management. that Group reporting requirements adhere adhere requirements reporting that Group to these policies as well as ensuring local met. The Group are statutory requirements submissions to Finance function reviews to. adhered policies are ensure
Actions to Mitigate Risk • • • • • • • • • •
Operational Risks Data Protection Regulations Data Protection legislation data protection New European in May 2018. This comes into force data governanceincreases and significantly, management requirements the potential as well as increasing penalties for non compliance or data breaches. in Legislation was also introduced June 2017 in the People’s Republic of June 2017 in the People’s data of Chinese China, which requires in citizens to be held and processed Mainland China. Fiscal and legal compliance number operates in a large The Group have varyingof legal jurisdictions that requirements. legal, tax and compliance client contractAny non-compliance with and legislation or regulatory requirements could have an adverse requirements brands or financial on the Group’s effect results. Failure to maintain adequate financial Failure and and management processes could lead to poor quality controls in the management decisions, resulting not achieving its financial targets Group financial in the Group’s or in errors reporting. Financial management and control The Board’s view of direction of travel of gross risk: of travel of gross view of direction The Board’s Principal Risks and Uncertainties
Going Concern typically three years. Our Strategic Vision The scenarios were designed to be provides a clear vision for the Group, severe, but plausible and were modelled In adopting the going concern basis for aligns the Group to one clear culture, individually and in combination. In preparing the financial statements for provides clarity on investment priorities, each case, the Group remained viable accounting purposes under International branding, belief in achievable goals, and throughout. However, it is considered Accounting Standard 1 “Presentation clarity on the goals for our financial vision. extremely unlikely that this combination of of Financial Statements”, the Directors events would ever occur. Controls are also The period over which we confirm have considered the business activities in place, where possible, to mitigate longer-term viability of the Group as well as the principal risks the impact of these scenarios and these and uncertainties as set out on pages Within the context of the above, in are described on pages 35 to 38. 35 to 38. Based on the Group’s level accordance with provision C.2.2 of Various events may also alert the Main of cash, the level of borrowing facilities the 2016 revision of the UK Corporate and Executive Boards to a potential threat available, the geographical and discipline Governance Code, the Board has to viability for example, macro-events diversification, the limited concentration assessed the viability of the Group. drive the recruitment industry, a drop in risk, as well as the ability to manage the Given the inherent uncertainty involved, the GDP in a particular country may lead to a cost base, the Directors are satisfied that period over which the Directors consider it reduction in gross profit growth rates. the Group has adequate resources to possible to form a reasonable expectation We consider that this stress testing based continue in operational existence for the as to the Group’s longer-term viability is assessment of the Group’s prospects is foreseeable future, being a period of at the three year period to 31 December reasonable in the circumstances given the least 12 months from the date of approval 2020. This period has been selected as it inherent uncertainty involved. of these accounts. As a result, the going is short enough to present the Board and, concern basis continues to be appropriate therefore, users of the Annual Report with Confirmation of longer-term viability in preparing the financial statements. a reasonable degree of confidence, while The Directors confirm that their still providing an appropriate longer-term assessment of the principal risks and Viability Statement outlook. While the Board has no reason to uncertainties facing the Group was robust. believe the Group will not be viable over Assessing the prospects of the a longer period, the Board has taken into Based upon the robust assessment of the Company account the short-term visibility inherent in principal risks and uncertainties facing the Our strategy and the key risks we face a recruitment business with a permanent Company and the stress testing-based are described on pages 8 to 16 and 35 recruitment bias. assessment of the Company’s prospects, to 38. A full business forecasting process all of which are described above, the is performed on a quarterly basis, with a Stress testing Directors have a reasonable expectation full budget for the following year created The forecasting and budgeting process that the Company will be able to continue during October and November, being is also supported by scenarios that in operation and meet its liabilities as presented to the Board in December. encompass a broad range of potential they fall due over the period to 31 The Board reviews the Group’s strategy outcomes. These scenarios are designed December 2020. However, we operate and approves an annual Group budget. to explore the resilience of the Group in an environment of limited visibility, Performance is then monitored by the to the potential impact of the significant dependent upon confidence in the global Board through the review of monthly risks as set out on pages 35 to 38, or a marketplace. Further weakness in the reports showing comparisons of results combination of those risks. We considered macro-economic outlook may cause us against budget, quarterly forecasts and cyber incidents, disintermediation by way to adapt our strategy during the three- the prior year, with explanations provided of innovation, changes in technology, year period in response, leading to a for significant variances. Discussion movements in foreign exchange rates, re-evaluation of additional risks involved around strategy is undertaken by the and a global downturn. We have assumed which might impact the business model. Board in its normal course of business, as that, as in the past, as downside risks well as at an annual dedicated strategy materialise our headcount will flex through day. natural attrition in line with the drop in gross profit, such that the impact on We also prepare longer-term projections operating profit is partially mitigated. which drive our Strategic Vision. These are
39 | Strategic Report STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION % CER CER* -3.8% +9.8% Change Strategic Report | 40 Strategic % +4.3% Change +14.3% +14.7% +14.7% +9.8% +14.6%+17.2%+18.2% +9.8% +11.3% 83.1 +21.9% +16.4% 2016 As a result, our fee earner to operationalAs a result, to a record ratio improved support staff level of 78:22. In total, administrative 14.1% to £593.2m expenses increased operating (2016: £520.1m). The Group's trading activities totalled from profit £118.3m (2016: £101.0m), an increase of 11.3% at constant rates and 17.2% in rates. reported conversion rate of gross The Group’s tradingfrom operating profit to profit to 16.6% (2016: activities increased a combination 16.3%). This reflected conditions in a of steadily improving in part by number of markets, offset conditions in some challenging more larger individual markets of the Group’s and such as Australia, Brazil, Singapore the UK. 2016 23.1p 23.1p 18.44p 11.98p £621.0m £101.0m £100.0m £1,196.1m Reported (£m) 137.2711.6 119.7 +14.6% 621.0 +14.6% +10.2% 2017 26.4p 26.5p 25.23p 12.50p £711.6m £118.3m £118.2m £1,371.5m 19% 14% 101.3 75%25% 536.0 175.6 470.0 151.0 +14.1% +16.2% +9.4% +11.1% 47%20% 332.3 140.8 271.9 146.3 +22.2% -3.8% +15.0% 100% % of Group 2017 in markets and disciplines where there there in markets and disciplines where instances of candidate increased were shortages. Our Large, High Potential Markets 14.8% in constant category increased and achieved a record currencies of of £222.7m and growth profit gross rates. All five markets 19.9% in reported included within this category achieved double and delivered profit gross record digit growth. by 930 headcount increased Group Total 7,029. up 15.2% to a record in the year, of 786 This comprised a net increase offee earners (+16.7%) and an increase (+10.4%), 144 operational support staff focus on the continued strong reflecting The ratio of net operational efficiency. additions in the year was 85 fee earners to 15 operational support staff.
Americas Temporary Asia Pacific Total Permanent UK Gross profit Year-on-year EMEA Total dividend per share (incl. special dividend) dividend per share (incl. Total Total dividend per share (excl. special dividend) dividend per share (excl. Total Diluted earnings per share Diluted earnings per share Basic earnings per share Basic earnings per share Revenue Financial summary Gross profit Operating profit Profit before tax *In constant currency at prior year rates *In constant currency pricing environment was experienced pricing environment across all regions, although a stronger although a stronger all regions, across Overall, pricing remained relatively stable relatively Overall, pricing remained slightly to 21.2% in 2017 (2016: 21.0%). on temporary placements increased on temporary placements increased with the margin charged. This margin the salaries of those placed, together from temporary placements comprises temporary from was 75:25 (2016: 76:24). Revenue profit our permanent to temporary ratio our profit was 60:40 (2016: 60:40) and for gross was 60:40 (2016: 60:40) and for gross temporary and permanent placements The Group’s revenue mix between revenue The Group’s £621.0m). increased 14.6% to £711.6m (2016: increased (2016: £1,196.1m) and gross profit profit (2016: £1,196.1m) and gross revenue increased 14.7% to £1,371.5m increased revenue both increased 9.8%. At reported rates, 9.8%. At reported both increased the year ended 31 December 2017 Group’s revenue and gross profit for profit and gross revenue Group’s At constant exchange rates, the
Regional Reviews Review of the Year of the Review Review of the Year
Europe, Middle East and Africa (EMEA) Our larger businesses in France, Germany and the Netherlands, together representing EMEA Gross profit (£m) Growth rates nearly 60% of the region by gross profit, grew 25%, 12% and 14% respectively, for (47% of Group in 2017) 2017 2016 Reported CER the full year in constant currencies. Michael Page Interim in Germany, where last year Gross profit 332.3 271.9 +22.2% +15.0% we invested heavily in temporary and Operating profit 69.7 51.7 +34.8% +26.2% contracting recruitment, grew 19%. Overall, 9 countries, representing 84% of the region, Market Presence number of markets such as Poland, Turkey delivered double-digit growth during the and Africa that are less developed, with year. EMEA is the Group’s largest region, limited competition, but are increasingly The Middle East and Africa, which contributing 47% of the Group’s gross looking for professional recruitment represented 4% of the region, saw an profit in the year. With operations in services. The Middle East, where improvement compared to the prior year 18 countries, PageGroup has a strong PageGroup is the largest international with a decline of -1% (2016: -7%). presence in the majority of EMEA recruiter, has some of the Group’s highest markets, and is the clear leader in conversion rates. The 34.8% increase in operating profit for specialist permanent recruitment in the 2017 to £69.7m (2016: £51.7m) and the two largest, France and Germany. Across Performance increase in the conversion rate to 21.0% the region, permanent placements (2016: 19.0%) was the result of continued In 2017, the EMEA region saw strong accounted for 70% and temporary favourable market conditions in the region, market conditions, with 10 countries placements 30% of gross profit. combined with good control over costs as delivering record gross profit for the year. a result of our transition in to our European The region comprises a number of large, In constant currency, revenue increased Shared Service Centre. proven markets, such as France, Spain, 18.1% on 2016 and gross profit increased Italy and the Netherlands, across which by 15.0%. In reported rates, revenue in the Headcount across the region increased by there is a broad range of competition. region was up 25.6% to £676.0m (2016: 443 (+17.4%) to 2,996 at the end of 2017 EMEA also includes one of the Group’s £538.4m), and gross profit increased (2016: 2,553). The majority of this increase Large, High Potential Markets, Germany, 22.2% to £332.3m (2016: £271.9m). The was fee earners, as the business added which has low penetration rates (markets region benefited from favourable foreign headcount where growth opportunities where less than 30% of recruitment exchange movements that increased were strongest, predominately in France, is outsourced) and significant growth revenue and gross profit by £40m and Germany and Southern Europe. potential, particularly in temporary £20m, respectively. recruitment. In addition, there are a
United Kingdom economic uncertainty. UK disciplines such as Engineering UK Gross profit (£m) Growth rates (+6%), Property & Construction (+10%) and Technology (+7%), performed well. (20% of Group in 2017) 2017 2016 However, market conditions in our Legal Gross profit 140.8 146.3 -3.8% discipline (-11%) and Sales and Marketing disciplines were more challenging, with Operating profit 16.0 24.2 -33.8% Marketing down 11%. Michael Page and Page Personnel were affected relatively Market Presence Page Executive and Page Outsourcing equally, down 4% and 3%, respectively. with representation in 12 specialist These challenging market conditions The UK represented 20% of the Group’s disciplines via the Michael Page brand. resulted in a decline in operating profit of gross profit in 2017 and is the Group’s There remains opportunity to roll-out new 33.8% to £16.0m (2016: £24.2m) and a largest single market, operating from discipline businesses under the lower- reduction in the conversion rate to 11.4% 27 offices covering all major cities. It level Page Personnel brand, which now (2016: 16.5%). Excluding the effect of share is a mature, highly competitive and represents 22% of UK gross profit. Our plan charges, for which the UK takes a sophisticated market with the majority Michael Page business was impacted disproportionate charge due to location of of vacant positions being outsourced the most by the current macro-economic senior management, conversion would have to recruitment firms. PageGroup has a uncertainty, with activity levels stronger been around two percentage points higher. market leading presence in permanent at the lower salary levels and in Page recruitment across the UK and a growing Personnel. Headcount remained broadly flat at 1,407 presence in temporary recruitment. In the at the end of December 2017 (2016: UK, permanent placements accounted for Performance 1,411). With a relatively high staff turnover 70% and temporary placements 30% of of newer, less experienced consultants, gross profit. Revenue of £312.9m (2016: £324.5m) we will continue to monitor activity and and gross profit of £140.8m (2016: will, if needed, use that turnover to lower The UK business operates under the four £146.3m) declined 3.6% and 3.8% headcount, and therefore costs, by natural brands of Michael Page, Page Personnel, respectively, reflecting continued attrition.
41 | Strategic Report STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION Strategic Report | 42 Strategic revenue and gross profit by £7m and by profit gross and revenue £5m, respectively. profit In North America, our gross by 18% in constant increased This was driven by the currencies. we saw strong US (+ 21%) where offices our regional performances from including Boston, Chicago and Los Angeles, as our strategy of diversification continued into disciplines outside of Financial Services in New York. was profit In Latin America, gross in constant up 14% year-on-year Our business in Brazil currencies. up +3%, as we saw to growth, returned in trading conditions as an improvement Excluding Brazil, the year progressed. which the other countries in the region, of Latin America, made up two thirds of 20% and all delivered saw growth years. record 108.6% to increased Operating profit £9.2m (2016: £4.4m), with a conversion rate of 9.0% (2016: 5.3%). Headcount by 164 (+17.6%) in 2017 to increased 1,094 (2016: 930). by Mainland China where our offices China where by Mainland performedin Beijing and Shanghai Kong, where particularly well. In Hong of multinationalwe have a large number in an improvement clients, we also saw growth delivered market conditions and was up 12%of 7%. South East Asia in by growth on the prior year driven up 48% andIndonesia and Malaysia despite Singapore, 11% respectively. returnedchallenging market conditions, the year. in the second half of to growth in we invested heavily Japan, where fee earners, of 23% and saw growth In Australia, year. a record delivered up 1% against the prior were we where towards we saw an improvement year, the end of the year following a 25% investment in our fee earner headcount and the opening of a new office in Canberra. rose 13.5% to £23.5m Operating profit (2016: £20.7m), with the conversion flat at 17.1% (2016: 17.3%) rate broadly despite our fee earner investment in the the region across Headcount region. ending (27.1%) in the year, by 327 rose the year at 1,532 (2016: 1,205). The majority of these headcount additions China particularly Greater in Asia, were and Japan. Growth rates Growth rates Reported CER Reported CER Performance revenue In constant currencies, profit by 12.8% and gross increased by 16.4%. In reported increased by 18.5% to increased rates, revenue £146.3m (2016: £123.5m) while gross to £101.3m 21.9% improved profit the (2016: £83.1m). During the year, favourable foreign benefited from region exchange movements that increased Performance In Asia Pacific, in constant currencies, profit 7.4% and gross increased revenue rates, by 10.2%. In reported increased 12.7% to £236.3m increased revenues rose profit (2016: £209.7m), while gross 14.6% to £137.2m (2016: £119.7m). 14% of the Group, Asia, representing of 15%. growth profit gross delivered in returned to growth China Greater the year up 14% (2016 -4%), driven Australasia is a mature, well-developed Australasia is a mature, recruitment and highly competitive has a meaningful market. PageGroup in permanent recruitment presence in the majority of the professional disciplines and major cities in Australia and New Zealand. Page Personnel and significant presence has a growing market potential to expand and grow share. position with over 600 employees in six few are countries and 14 offices. There international with competitors and none Latin America, scale. Across regional permanent placements accounted and temporary profit for 91% of gross placements 9%. 4.4 +108.6% +96.5% 83.1 +21.9% +16.4% 2016 20.7 +13.5% +8.6% 2016 119.7 +14.6% +10.2% Gross profit (£m) Gross profit (£m) 9.2 2017 23.5 101.3 2017 137.2
Americas (14% of Group in 2017) Asia Pacific (19% of Group in 2017) Operating profit Gross profit Operating profit Gross profit The Americas PageGroup enjoys the leading market PageGroup is a very under-developed region, where where region, is a very under-developed competitive advantage. Latin America reach is uncommon and provides a is uncommon and provides reach professional specialisms and geographic professional any scale. PageGroup’s breadth of breadth any scale. PageGroup’s there is limited national competition of there many disciplines, especially technical, developed recruitment industry, but in industry, developed recruitment we have eight offices, has a well- our growth strategy. The US, where The US, where strategy. our growth the Large, High Potential Markets in the US and Latin America are two of the US and Latin America are Latin America (44% of the region). Both Latin America (44% of the region). North America (56% of the region) and North America (56% of the region) Group’s gross profit in 2017, being profit gross Group’s The Americas represented 14% of the The Americas represented Market Presence Asia Pacific gross profit. profit. gross 95% and temporary placements 5% of permanent placements accounted for white collar temporary recruitment, white collar temporary recruitment, Asia, driven by cultural attitudes towards Asia, driven by cultural attitudes towards opportunity in Asia is significant. Across opportunity in Asia is significant. Across and limited competition, the size of the management team, over 1,000 staff management team, over 1,000 staff this region. Withthis region. a highly experienced China and South East Asia, are in China and South East Asia, are Large, High Potential Markets, Greater Large, High Potential Markets, Greater at good conversion rates. Two of our at good conversion rates. Two international and domestic markets offers attractive opportunities in both attractive offers generally highly under-developed, but generally highly under-developed, and Hong Kong, the Asian market is financial centres of Tokyo, Singapore Tokyo, Singapore of financial centres 27% Australasia. Other than in the 73% of the region being Asia and 73% of the region Group’s gross profit in 2017, with profit gross Group’s Asia Pacific represented 19% of the represented Asia Pacific Market Presence Review of the Year
Operating Profit and A net interest charge of £0.2m reflected the position in 2018 and will make returns to continuing low interest rate environment. shareholders in line with the above policy. Conversion Rates Interest of £0.2m was received on cash The Group's organic growth model and balances held through the year, offset by Cash Flow and Balance Sheet financial charges relating to the Group’s profit-based team bonus ensures cost Cash flow in the year was strong, with invoice discounting facility and overdrafts control remains tight. Approximately £124.5m (2016: £121.3m) generated from used to support local operations of £0.4m. three-quarters of costs were employee operations. The closing net cash balance related, including wages, bonuses, share- was £95.6m at 31 December 2017, an based long-term incentives, and training & Earnings Per Share and increase of £2.8m on the prior year. The relocation costs. Dividends movements in the Group’s cash flow in 2017 reflected the underlying trading Our fee earner to operational support staff In 2017, basic earnings per share conditions, with a £19.6m increase in ratio improved to a record level of 78:22, increased 14.7% to 26.5p (2016: working capital. with our ongoing focus on conversion 23.1p), reflecting the improved business rates and maximising productivity from performance, as well as some favourable The Group had a £50m invoice financing the investment of 227 fee earners added foreign exchange movements. Diluted arrangement and £13m uncommitted in 2016, as well as the further 786 added earnings per share, which takes into overdraft facilities to support cash flows in 2017. Net additions in the year were at account the dilutive effect of share options, across its operations and ensure rapid a ratio of 85 fee earners to 15 operational was up 14.3% to 26.4p (2016: 23.1p). access to funds should they be required. support staff. None of these were in use at the year end. The Group’s strategy is to operate a policy The combination of gross profit growth, of financing the activities and development Income tax paid in the year was £38.2m the weakness in Sterling and the ongoing of the Group from our retained earnings (2016: £32.5m). The increase of £5.7m focus on cost control resulted in operating and to maintain a strong balance sheet over 2016 arose largely because of a profit of £118.3m (2016: £101.0m), an position. We first use our cash to satisfy our payment in the UK on agreeing the taxation increase of 17.2% in reported rates and operational and investment requirements of prior year repayments of VAT which had 11.3% in constant currencies. and to hedge our liabilities under the been fully provided for. Depreciation and amortisation for the Group’s share plans. We then review our liquidity over and above this requirement to Net capital expenditure in 2017 was year totalled £19.1m (2016: £17.1m). £16.2m (2016: £23.4m). Spending on This included amortisation relating to our make returns to shareholders, firstly by way of ordinary dividend. software decreased from 2016 when we operating system, PRS, of £8.1m (2016: completed the implementation of our £7.6m). Our policy is to grow this ordinary dividend new operating system, PRS and started The Group’s conversion rate for the period over the course of the economic cycle, the transition to our new Global Finance of 16.6% was an improvement from 16.3% in line with our long-term growth rate; we System. Spending on property, plant and in 2016. This was achieved alongside the believe this enables us to sustain the level equipment decreased due to large office Group’s investment programme, which of ordinary dividend payments during a moves in 2016 in New York, Tokyo and was focused in particular on our Large, downturn as well as increasing it during Neuilly, Paris, which is now the Group’s High Potential Markets, and despite the more prosperous times. largest office by headcount. There were no such significant moves in 2017. tough market conditions faced in some of Cash generated in excess of these first two the Group’s core markets as well as our priorities will be returned to shareholders Dividend payments were up on the prior operational support programmes. through supplementary returns, using year at £78.3m (2016: £56.3m), as a In EMEA, conversion increased from special dividends or share buybacks. result of the larger special dividend paid in 2017. There was also a significant 19.0% to 21.0%. This was driven by the In line with the improved growth rates and increase in cash receipts from share option benefits of operational gearing coming increase in operating profits, a final dividend exercises. In 2017, £12.7m was received through, combined with cost benefits from of 8.60p (2016: 8.23p) per ordinary share by the Group from the exercise of options our new European shared service centre in is proposed. When taken together with the compared to £0.4m received in 2016, Barcelona. In the UK, the conversion rate interim dividend of 3.90p (2016: 3.75p) per driven by the higher share price. In 2016, fell from 16.5% to 11.4%, while Asia Pacific ordinary share, this would imply an increase £15.1m was also spent on the purchase remained broadly flat at 17.1% (2016: in the total dividend for the year of 4.3% of 3.7m shares by the Employee Benefit 17.3%), despite our high level of fee earner over 2016 to 12.50p per ordinary share. investment in the region. The America’s Trust to satisfy future obligations under our conversion rate increased from 5.3% to The proposed final dividend, which employee share plans. No such purchase 9.0% due to an improvement in trading amounts to £27.1m, will be paid on 18 was made in 2017. June 2018 to shareholders on the register conditions. The most significant item in our balance as at 18 May 2018, subject to shareholder sheet was trade receivables, which The Group benefited from movements approval at the Annual General Meeting on amounted to £245.4m at 31 December in foreign exchange rates, as Sterling 7 June 2018. weakened against almost all currencies in 2017 (2016: £205.1m), comprising which the Group operates. The weakness After consultation with our shareholders, permanent fees invoiced and salaries and of Sterling increased the Group’s revenue, we also paid a special dividend of 12.73p fees invoiced in the temporary placement gross profit and operating profit by £58m, per share on 11 October 2017, totalling business, but not yet paid. Day’s sales in £29m and £6m, respectively. £40m. We will continue to monitor our cash debtors at 31 December 2017 were 53 days (2016: 50 days).
43 | Strategic Report STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION Cash Increase Decrease Strategic Report | 44 Strategic 95.6 Options were exercised over 3.2m exercised Options were generating £12.7m in cash, shares, and options lapsed over 1.0m shares. At the end of 2017, options remained of which outstanding over 15.5m shares, 8.6m had vested, but had not been were During 2017, no shares exercised. by the Company or the repurchased Trust, and Employee Benefit Group’s cancelled (2016: 3.7m were no shares a cost of at purchased were shares £15.1m). on 6 March the Board by Approved 2018 and signed on its behalf by: Kelvin Stagg Chief Financial Officer (0.1) Exchange Dec 2017 Paid (40.1) (38.2) Dividends 12.7 exercises/ exercises/ Net option EBT purchases Net Capex (16.2) deductions which, together with other the adjustments in the US, increased tax charge by 2.4%. Going forwards, of profitability depending on the relative and having the US within PageGroup to the interaction of federal regard tax with state tax, we may expect the ETR headline rate to benefit the Group points. In addition, by c. 0.5 percentage the tax rate was impacted by tax on payments (0.7% decrease), based share for tax risk in provisions a reduction (0.6%) and the recognition/derecognition of losses (0.3% decrease). the The tax charge for the year reflects which is aligned tax strategy, Group’s to business goals. It is PageGroup’s of taxes in the policy to pay its fair share countries in which it operates and deal in a straightforward, with its tax affairs The Group’s open and honest manner. tax strategy is set out in detail on our website in the Investor section under “Responsibilities”. Share Options and Share Repurchases At the beginning of 2017 the Group options outstanding, had 17.9m share of which 7.8m had vested, but had During the year, not been exercised. granted over 1.7m shares options were option plans. share under the Group’s (39.8) interest x and net Ta (19.6) Capital EBITDA Working 144.1 92.8 Dec 2016 75 50
125 100 250 225 200 175 150
£m for accumulated losses and other assets representing the future value the future assets representing resulted in a write down of deferred tax in a write down of deferred resulted 35% to 21% from 1 January 2018. This 35% to 21% from reduced the headline rate of tax from the headline rate of tax from reduced principally by the US tax reform which principally by the US tax reform The effective rate was impacted The effective rate difference is not significant. is not rate difference contributors to Group profit or the tax profit contributors to Group because the countries are not significant because the countries are UK, but the impact is very small either in which the tax rate is lower than the countries. There are some countries are countries. There and higher tax rates in overseas the impact of disallowable expenditure the impact of disallowable expenditure 19.25% (2016: 20.0%) principally due to effective UK rate for the calendar year of effective 27.9%). The rate is higher than the an effective tax rate of 29.7% (2016: an effective profit increased by £20m. increased profit (2016: £27.9m). This represented impact was within EMEA, where gross gross impact was within EMEA, where The tax charge for the year was £35.1m impact was felt globally, but the largest impact was felt globally, Taxation therefore operating profit by £6m. This operating profit therefore administrative expenses by £23m and year, increasing gross profit by £29m, profit gross increasing year, benefit to our reported results for the reported benefit to our Foreign exchange provided a substantial provided exchange Foreign Foreign Exchange Cash flow waterfall 2017 waterfall Cash flow Chairman’s Introduction to Corporate Governance
overall strategic direction of PageGroup non-executive director experience from a and supports its core values, policies number of different companies. The skills and procedures, which in turn, creates and experience of both Sylvia and Angela an environment in which our business complement that of the other Board and employees can act with integrity members, providing a balanced Board. and effectiveness, while driving profitable Baroness Ruby McGregor-Smith stepped growth. The following pages of this down from the Board in May 2017 and, Corporate Governance Report set out how in March 2018, Danuta Gray decided the Company has complied with the UK not to offer herself for re-election at the Corporate Governance Code, the work forthcoming Annual General Meeting on and activities of each Board Committee 7 June 2018. Danuta will also cease to be and the annual evaluation process. David Lowden, Chair of the Remuneration Committee and Chairman The Board continued to build a strong and Angela Seymour-Jackson will be appointed Dear Shareholder, well balanced Board with the appointment in her stead. I would like to thank both of Sylvia Metayer and Angela Seymour- Ruby and Danuta for their contribution to I am pleased to present the Company’s Jackson as Non-Executive Directors of the Company. Corporate Governance Report for the the Company. Sylvia brings extensive financial year ended 31 December I hope you find our Corporate Governance experience to the PageGroup Board, 2017. Your Board believes that sound Report informative. I will be available at the having held a variety of finance and governance, both in the boardroom and 2018 Annual General Meeting to respond general management roles in companies throughout the Group, is fundamental to to any questions you may have on this operating in a number of different sectors. the long-term success of the business. Report. She is also a Chartered Accountant, It remains committed to high standards so adds to the financial experience of David Lowden of governance and the fostering of an the Audit Committee. Angela has a effective governance framework. This Chairman wealth of experience in service focused underpins the Board’s ability to set the organisations and has both executive and 6 March 2018 Our Corporate Governance Framework
The Board The Board’s role is to provide entrepreneurial leadership of the Group within a framework of prudent and effective controls which enable risk to be assessed and managed. It has a formal schedule of matters reserved for its decision. More details on pages 52 to 55
Chief Executive Chief Financial Nomination Officer (CEO) Officer (CFO) Committee Key responsibility is to develop Responsible for managing the Responsible for ensuring that the and deliver the Group’s strategy financial risks, reporting and Company has the executive and non- within the policies and values planning of the Group. executive Board leadership it requires. established by the Board. Details on page 56
Audit Committee Executive Board Responsible for the integrity of the The Executive Board is chaired Company’s financial statements and by the CEO and includes the performance, ensuring the necessary CFO. The Executive Board is internal controls and risk management responsible for overseeing systems are in place and effective. operations in our regions and for Details on page 58 overseeing business operational functions Group-wide. Details on page 51 Remuneration Committee Company Secretary Responsible for the review, Responsible for ensuring the recommendation and implementation Board complies with all legal, of the Group’s remuneration strategy, regulatory and governance its framework and cost. requirements. Details on page 64
45 | Corporate Governance STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ds of a major nagement Corporate Governance | 46 Corporate oup grow from 200 to 200 from oup grow , with strong IR skills, delivering , with strong national businesses with cultural diversity
oup and recruitment industry oup and recruitment
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national experience including the emerging markets of SE Asia, China,
ong entrepreneurial and strategic skills having initiated and grown many businesses many and strategic skills having initiated and grown ong entrepreneurial ong strategic understanding skills ong financial, marketing and commercial oven ability for delivering shareholder value oven ability for delivering shareholder warded the Institute of Recruitment Professionals Lifetime Achievement Award in Lifetime Achievement Award the Institute of Recruitment Professionals warded over 7,000 employees Experience in other sectors and industries having worked on the Boar charity and retailer A 2017 30 years’ service with the Gr 12 years as a CEO of a FTSE 250 public company value shareholder Str Extensive experience in business development and account management Significant inter Latin America and India Leadership of a global people business having seen PageGr Extensive experience in both general management and financial ma Extensive experience in both general management Many years of operating within inter Str Pr Str Experienced non-executive in several sectors
• • • February 2001 • • • • • • Date of Appointment: Chief Executive Officer April 2006 with Michael PagePast Roles: Steve joined Michael Page in 1987 as a consultant for setting up the London Marketing and Sales Marketing and Sales. He was responsible in 1990. He was appointed Managing to Operating Director business and was promoted of Michael Page Marketing and Sales in 1994. Subsequently Steve took additional Director as Executive Director to the Board for several businesses. He was promoted responsibility of UK of UK Operations in February 2001 and subsequently to Managing Director Operations in May 2005. Steve was appointed Chief Executive Officer in April 2006. Debenhams plc. Member of the Appointments: Non-Executive Director, Other Current Hospital. Ormond Street Great Corporate Partnership Board, Committees: Board Skills and Experience: • • • Executive Director Steve Ingham, Chief Executive Officer, Chairman December 2015 Chairman December plc, the marketing Nielson Sofres of Taylor of the Board Past Roles: David was a member in 2006. Before 2009, becoming Chief Executive Officer 1999 to services business, from plc, A.C. in Asprey plc David held senior financial positions Nielson Sofres joining Taylor Independent Corporation. David was also Senior and Federal Express Nielsen Corporation 2010 March plc from Committee of Berensden and Chairman of the Remuneration Director until September 2017. of the Audit and and Chairman Non-Executive Director Appointments: Other Current Risk Committee, William Hill plc. Nomination (Chairman) Committees: Board Skills and Experience: • • David Lowden, Chairman David Lowden, Date of Appointment: August 2012 Director Our Board of Directors Board of Our Our Board of Directors
Kelvin Stagg, Chief Financial Officer, Executive Director Date of Appointment: June 2014
Past Roles: Kelvin joined PageGroup plc in July 2006 as Group Financial Controller and Company Secretary. He was appointed Acting Chief Financial Officer in October 2013. He held the title of Company Secretary until December 2013. In June 2014 Kelvin was appointed Chief Financial Officer. Prior to joining the Group, Kelvin spent six years at Allied Domecq and three years at Unilever in a variety of finance functions. He has significant international experience and has high levels of compliance, change management, large teams and systems experience, across almost every finance discipline. He is a Chartered Management Accountant.
Other Current Appointments: None
Board Committees: None
Skills and Experience: • More than ten years in the Group with a detailed knowledge of the Group’s operations • Extensive experience in finance, audit and risk management • Significant international experience including roles in the UK, Continental Europe and Asia • High levels of compliance, change management, large teams and systems experience, across almost every finance discipline • Strong network of finance professionals
Simon Boddie, Independent Non-Executive Director Date of Appointment: September 2012
Past Roles: Simon qualified as a Chartered Accountant with Price Waterhouse. He was Group Finance Director of Electrocomponents plc from 2005 until 2015. Prior to that Simon held a variety of senior finance positions with Diageo over a 13-year career, latterly Finance Director of Key Markets.
Other Current Appointments: Chief Financial Officer, Coats Group plc.
Board Committees: Audit (Chairman), Nomination, Remuneration
Skills and Experience: • CFO of FTSE 250 public company for over ten years • Extensive experience in financial, audit and risk management • Many years of operating within international businesses with cultural diversity • Emerging markets experience • Strong strategic and commercial understanding • Broad industry experience, including consumer goods, distribution and manufacturing
47 | Corporate Governance STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION Corporate Governance | 48 Corporate esources leadership esources Non-Executive Director and Remuneration Committee and Remuneration Non-Executive Director World ISS Officer, Chief People & Culture Group ong strategic understanding oven ability for delivering shareholder value oven ability for delivering shareholder Extensive experience in global human r Leading and delivering change Extensive experience in general management Chairman and CEO experience Experienced non-executive in several sectors Extensive experience in general management Pr Str customer services and technology Extensive experience in sales, marketing, Leading and changing large businesses
• • • Non-Executive Director Independent Michelle Healy, Date of Appointment: October 2016 Integrated Group joining ISS in April 2015 Michelle was Director, Past Roles: Before at SABMiller plc. Prior to this, Michelle was General Manager UK Change Programme held a number of senior plc, having previously for British American Tobacco & Ireland included assignments with Kerry Group earlier career Michelle’s within the Group. roles Management Consultants in Germany. plc and Trust Appointments: Other Current Chairman, Old Mutual plc; Interim Chair of Aldermore Bank PLC; Non-Executive Director, Bank PLC; Non-Executive Director, Aldermore Chairman, Old Mutual plc; Interim Chair of UK Ministry of Defence. plc; Member of the Defence Board, Insurance Group Line Direct Remuneration (Chairman), Audit, Nomination Committees: Board Skills and Experience: • • • • • • Services A/S. Committees: Audit, Nomination, Remuneration Board Skills and Experience: • Danuta was Chairman of Telefonica O2 in Ireland until December 2012, 2012, until December O2 in Ireland of Telefonica Past Roles: Danuta was Chairman 2001 to 2010. Prior to that Danuta Executive from been its Chief having previously gained in Germany and during her career BT Europe for was Senior Vice President and in leading and customer services and technology experience in sales, marketing, Irish of Board served for seven years on the She previously changing large businesses. Aer and of Business in the Community Ireland was a Director Life and Permanent plc, of Paddy Power Betfair plc. Director Lingus plc and a Non-Executive Appointments: Other Current Danuta Gray, Independent Non-Executive Director Independent Danuta Gray, December 2013 Date of Appointment: Our Board of Directors
Patrick De Smedt, Senior Independent Director Date of Appointment: August 2015
Past Roles: Patrick spent 23 years at Microsoft during which time he founded the Benelux subsidiaries, led the development of its Western European business and served as Chairman of Microsoft for Europe, Middle East and Africa. Since leaving Microsoft in 2006, Patrick has served on the boards of a number of European public and private companies. He has deep knowledge of international markets and information technology, and experience as a non-executive in diverse industry sectors.
Other Current Appointments: Senior Independent Director of KCOM Group plc; Senior Independent Director and Remuneration Committee Chairman of Morgan Sindall Group plc; Non-Executive Director of Kodak Alaris Holdings Ltd.
Board Committees: Audit, Nomination, Remuneration
Skills and Experience: • Extensive experience of technology and customer services • Experienced non-executive in several sectors • Extensive experience in general management • Many years of operating within international businesses with cultural diversity • Proven ability for delivering shareholder value • Leading and changing large businesses
Sylvia Metayer, Independent Non-Executive Director Date of Appointment: September 2017
Past Roles: Sylvia has previously held a variety of finance and general management roles in companies operating in a number of sectors, including Mattel Inc, Vivendi SA, and Houghton Mifflin Harcourt & Co.
Other Current Appointments: Chief Executive, Worldwide Corporate Services of Sodexo SA and member of the Sodexo Group Executive Committee. Trustee of the Quebec-Labrador Foundation and member of the Research Orientation Committee of the Foundation of HEC Business School, Paris.
Board Committees: Audit, Nomination, Remuneration
Skills and Experience: • Extensive experience and understanding of international markets, including the USA, Europe, China, India, and South East Asia • Extensive experience in general and financial management • Leading and delivering change • Finance, HR, IT and Supply Chain management • Proven ability for delivering shareholder value • Strong strategic understanding
49 | Corporate Governance STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Corporate Governance | 50 Corporate om a number of ed Secretary Deputy Chairman, Senior Independent Director and Independent Director Deputy Chairman, Senior , compliance and corporate governance experience ed Institute of Marketing ong marketing and commercial skills ong marketing and commercial ong strategic understanding ealth of experience in service focused organisations business sectors Over 25 years’ experience as a Charter Extensive public company General counsel experience in FTSE 250 companies fr W in several sectors Experienced executive and non-executive Str Str Member of the Charter
• Elaine Marriner, Company Secretary Company Elaine Marriner, Date of Appointment: December 2013 and General Past Roles: Prior to this appointment Elaine was Company Secretary plc. Counsel of HMV Group Skills and Experience: • • Date of Appointment: October 2017 Date of Appointment: • • • • Angela has previously held Executive Director roles with Aegon UK, RAC roles Director held Executive Past Roles: Angela has previously to Lloyds UK Limited, and was Senior Advisor and Aviva Motoring Services Limited with to that Angela held senior marketing roles (insurance). Prior Banking Group plc and the Norwich Union CGU Insurance plc, General Accident Bluecycle.com Limited, Insurance Group. Appointments: Other Current plc; Non-Executive Group Committee at GoCompare.com Chair of the Remuneration and Rentokil Initial plc. plc esure plc, at Janus Henderson Group Director Audit, Nomination, Remuneration Committees: Board Skills and Experience: • Angela Seymour-Jackson, Non-Executive Director Angela Seymour-Jackson, The Executive Board
Steve Ingham Gary James Patrick Hollard Chief Executive Officer, Executive Board Director, Executive Board Director, Executive Director Asia Pacific Latin America, Middle East and Africa
See biography on page 46. Gary joined Michael Page Finance in Patrick joined Michael Page in France in 1996, London in 1984. He was appointed having worked previously for KPMG Peat director of Michael Page UK Sales and Marwick. Prior to that, he had been Vice- Marketing in 1994 and Managing Director President of AISEC International, the student-led of Michael Page UK Marketing in 1997. organisation, from 1991 to 1992. Appointed In 2002 he transferred to the USA on his director in 1999, he moved to Sao Paulo to appointment as Managing Director of launch Michael Page Brazil, and then launched our business in North America. He was offices in Mexico in 2006, Argentina in 2008, appointed Regional Managing Director of Chile in 2010 and Colombia in 2011. Appointed the Asia Pacific region in August 2006. Regional Managing Director in 2007, he is now responsible for PageGroup’s operations in Latin Kelvin Stagg America, Middle East and Africa. Chief Financial Officer, Executive Director
See biography on page 47.
Anthony Thompson Oliver Watson Executive Board Director, Executive Board Director, Asia (excluding Japan) UK, USA and Canada
Anthony moved from South Australia Oliver joined Michael Page in 1995 as a to commence his Michael Page career consultant in London. He was appointed in Hong Kong in 2001. He managed director of Michael Page UK Sales in and established several disciplines and 1997 and then managing director in 2002. brands in Hong Kong and China and was In 2006, he was appointed Regional appointed Managing Director, Hong Kong Managing Director for Michael Page UK and Southern China in 2006. In 2012, Sales, Marketing and Retail. In 2007, he he was appointed Regional Managing launched Michael Page Middle East and has Director for Greater China with several since developed our office network across offices established across China, Hong the region. In 2009, he became Regional Kong and Taiwan. In 2015, Anthony moved Managing Director for Michael Page UK to Singapore with additional responsibility Finance, Marketing and Sales, Middle East, for PageGroup in South East Asia which Scotland and Ireland. He is now responsible now encompasses offices in Singapore, for PageGroup’s operations in the UK, USA Malaysia, Indonesia and Thailand. In and Canada. 2016 he also became responsible for India. Anthony is currently responsible for PageGroup's operations in Greater China, South-East Asia and India.
51 | Corporate Governance STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
e, scope e oup’s capital oup’s Corporate Governance | 52 Corporate nance matters; eporting, audit and tax oval of Nomination Committee oval of the annual budget; matters; Major changes to the natur Major changes of theor scale of the business Group; Corporate gover Appr on the recommendations of appointment and removal and succession planning; Directors Changes to the Gr of any and approval structure a new entitybusiness plan prior to new territory; being established in a Financial r Material contracts and transactions course of not in the ordinary business; Material capital expenditur projects; Appr Obtaining major finance; and Communications with stakeholders and complying with regulatory requirements.
• • • • • • • • • • Induction, training and Induction, information for the The Chairman is responsible and is induction of new directors assisted by the Company Secretary. On appointment to the Board, each On appointment to the Board, with the Chairman discusses Director the extent of and the Company Secretary induction A tailored the training required. to cover their individual programme compiled. Elements is then requirements typically consist of of the programme meetings with senior executives, site visits, attending internal and conferences consultant shadowing to understand the day-to-day activities of a recruitment consultant. In addition, information is services, on the Company’s provided arrangements, Board structure, Group social financial and environmental, and governance information, major competitors and major risks. their update and refresh Directors knowledge and familiarity with the visits, participation site through Group at meetings with and receiving senior management. from presentations This is in addition to the access that has to the Company every Director is The Company Secretary Secretary. for ensuring to the Board responsible complied are procedures that Board on with as well as advising the Board e and extent oup strategy and corporate of the significant risks the Board of the significant risks the Board is willing to take in achieving the strategic objectives of the Company; Gr objectives; Determining the natur
• Healy were independent. In addition, the independent. Healy were determined that David Lowden Board time of hiswas independent at the appointment as Chairman. is a clear division of responsibilities There and of the Chairman between the role While Officer. that of the Chief Executive is collectively responsible the Board the Company, for the success of the to ensure Board Chairman manages the appropriate that the Company has He strategy. objectives and an effective is a Chief Executive there that ensures Officer with a team to implement the in procedures are strategy and that there of performance place to inform the Board against objectives. The Chairman also the Company is operating that ensures with the principles of in accordance corporate governance. The Chairman’s other significant commitments are considers noted on page 46. The Board not a constraint on the that these are time commitment to agreed Chairman’s the Company. Patrick De Smedt as Senior Independent as an alternative acts channelDirector He of communication for shareholders. for the also acts as a sounding board Chairman and serves as an intermediary for other Directors. Steve Ingham, the Chief Executive responsibility for the has overall Officer, day-to-day management of the Group’s operations. He develops the vision review, and strategy for the Board’s approved implements the Board’s strategy and chairs the Executive as Committee (known within the Group which executes the “Executive Board”) the delivery of the annual operating of plans. He also leads the programme communication with shareholders. Executive and Non-Executive Directors and equal members of the Board are for Board have collective responsibility decisions. The Non-Executive Directors bring a wealth of skills and experience to and its Committees. the Board has a formal schedule of The Board for its decision which matters reserved includes: •
De Smedt, Danuta Gray and Michelle onwards, each of Simon Boddie, Patrick onwards, their respective dates of appointment their respective and Angela Seymour-Jackson from from and Angela Seymour-Jackson review, and in the case of Sylvia Metayer review, considers that during the year under served throughout the year. The Board The Board the year. served throughout on 23 May 2017. All other Directors on 23 May 2017. All other Directors Executive Director of the Company Executive Director McGregor-Smith ceased to be a Non- McGregor-Smith 2017 respectively. Baroness Ruby Baroness 2017 respectively. on 1 September 2017 and 1 October Executive Directors of the Company Executive Directors Jackson were appointed as Non- Jackson were Sylvia Metayer and Angela Seymour- effective operation. effective 46 to 50. has met the Code’s requirements for its requirements has met the Code’s can be found on pages these Directors Company. The Board is satisfied that it The Board Company. The biographies of each of Directors. shareholders for the success of the shareholders Financial Officer and six Non-Executive collectively responsible to the Company’s to the Company’s collectively responsible the Chief the Chief Executive Officer, be assessed and managed. The Board is be assessed and managed. The Board comprised the Chairman, the Board effective controls which enables risk to controls effective As at the end of the year under review within a framework of prudent and Composition of the Board entrepreneurial leadership of the Group leadership of the Group entrepreneurial The Board’s role is to provide is to provide role The Board’s of Association. England and Wales and in its Articles England and Wales and duties set out in relevant laws of and duties set out in relevant Group’s business and has the powers Group’s of the Code. for the overall conduct of the responsible how we have applied the main principles plc is the body of PageGroup The Board Report on pages 82 to 84, we describe The Board and its operation on pages 63 to 76 and the Directors’ on pages 63 to 76 and the Directors’ 44, the Directors’ Remuneration Report Remuneration 44, the Directors’ with the Strategic Report on pages 1 towith the Strategic Report Corporate Governance section, together FRC website (www.frc.org.uk). In this FRC website (www.frc.org.uk). The Code is publicly available on theThe Code is publicly Governance 2016 (the “Code”). Code 2017 and to the date of this document,2017 and to the date with thethe Company has complied of the UK Corporate provisions Corporate Governance Code 31 DecemberDuring the year ended Compliance with the UK with the UK Compliance Corporate GovernanceCorporate Report Corporate Governance Report
new legislation and corporate governance of meetings are circulated to all Committee (Remuneration Committee). The Board matters. Board Committees and Directors members and to all members of the Board met eight times during the year. During are also given access to independent unless it would be inappropriate to do so. the year under review the Non-Executive professional advice at the Group’s expense Directors met on several occasions without The Group also has an Executive Board if the Directors deem it necessary in order the Executive Directors being present. The which is chaired by the Chief Executive for them to carry out their responsibilities. Non-Executive Directors also met without Officer. It comprises the Chief Financial the presence of the Chairman. For each Board and Committee meeting Officer and other senior executives, Directors receive a pack of relevant biographies for whom can be found on Succession Planning information on the matters to be discussed. page 51. The Executive Board usually The Board uses a third party board meets four times a year and is responsible Executive development and succession portal to distribute information quickly for assisting the Chief Executive Officer planning discussions are held each and securely. The Chief Executive Officer in the performance of his duties. year. These discussions focus on the presents a comprehensive update on These include the development and development and succession of the the business issues across the Group implementation of strategy, operational Executive Directors, Executive Board to the Board and the Chief Financial plans, policies, procedures and budgets. members and other senior managers in the Officer presents a detailed analysis of the These activities are performed at a regional Group with the aim of ensuring that existing financial performance. The Board also level by regional boards for each of the UK senior executives are being developed receives at each Board Meeting an Investor and North America, Continental Europe, and that there is a pipeline of talented Relations Report, including any feedback Asia Pacific and Latin America, Middle East senior individuals within the business. from investors and Investor Roadshows. and Africa. Each regional board usually Development and succession planning is a Regional Managing Directors and other meets at least four times a year. critical part of the Chief Executive Officer’s senior managers also attend relevant parts performance objectives for annual bonus of Board meetings and the Board Strategy Board and Committee and long-term remuneration. Day in order to make presentations on their In addition, the Nomination Committee areas of responsibility. Attendance also considers the breadth and depth The table below sets out the number of of experience of the Non-Executive meetings of the Board held during the Board Committees Directors and considers on a regular basis year and individual attendance by the succession planning for the Board as a The Board has three principal Board Directors at these meetings, demonstrating whole. Information on the Board’s policy on Committees, each of which regularly commitment to their role as Directors of diversity both at Board level and the Group reports to the Board: the Audit Committee, the Company. Attendance by the relevant as a whole can be found in the Nomination Nomination Committee and Remuneration members of each Committee can be found Committee Report on page 56 and the Committee. The Audit and Remuneration on page 58 (Audit Committee), page 57 Strategic Report on page 28. Committees are comprised solely of (Nomination Committee) and page 64 independent Non-Executive Directors.
The Nomination Committee is comprised of Director No. of meetings all Non-Executive Directors and is chaired Held Attended by the Chairman of the Board who was independent on appointment. Details of David Lowden 8 8 the composition and activities of each Simon Boddie 8 8 Committee can be found in the respective reports of each Committee: Audit Patrick De Smedt 8 8 Committee Report on pages 58 to 60; Danuta Gray 8 8 the Nomination Committee Report on pages 56 and 57; and the Directors’ Michelle Healy 8 8 Remuneration Report on page 64. Steve Ingham 8 8 Each Committee has clear terms of 1 reference, copies of which can be Baroness Ruby McGregor-Smith 8 3 found on the Company’s website Sylvia Metayer2 8 1 www.page.com. Each Committee also reviews its effectiveness and makes Angela Seymour-Jackson2 8 2 recommendations to the Board of any Kelvin Stagg 8 8 appropriate changes as and when required. The Chairman of each of the Board Notes: Committees will be available to answer 1. Baroness Ruby McGregor-Smith ceased to be a member of the Committee on 23 May 2017 so was only eligible shareholders’ questions at the forthcoming to attend three meetings. Annual General Meeting. 2. Sylvia Metayer and Angela Seymour-Jackson were appointed to the Committee on 1 September 2017 and 1 October 2017 respectively, so were only eligible to attend two Committee meetings. Sylvia Metayer was The Company Secretary acts as secretary unable to attend one of the two meetings as she had a prior engagement which had been scheduled prior to her to each of these Committees and minutes appointment as a Director of the Company.
53 | Corporate Governance STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
– The – The Board – The Board om Executive Corporate Governance | 54 Corporate – ocedures – The Group’s nal Audit – The Group’s Confirmations fr Board reviews the Group’s strategy the Group’s reviews Board an annual Group and approves budget. Performance is then the through by the Board monitored showing monthly reports of review against comparisons of results and budget, quarterly forecasts with explanations the prior year, for significant variances. provided Policies and Pr are Policies and procedures documented over both financial non-quantifiable areas and controls whistleblowing such as the Group’s to anti- policy and its policy relating bribery and corruption, gifts and hospitality. Risk Management Inter Internal Audit function examines controls business process on a risk the Group throughout the findings to basis and reports and Audit the Executive Board actions are Committee. Agreed to the and reported monitored Audit Committee. Management – The Managing of and Finance Director Director our operations in each country formally certify twice a year whether the business has adhered to the system of internal control during the period, including policies. compliance with Group the The statement also requires Annual Business Plan has established a framework for identifying and managing risk, both at a strategic and operational level. An overview of this framework and a summary of the principal risks identified, together with mitigating actions, can be found in the Strategic Report on pages 33 to 39. Group Group – The Organisation meets eight of Directors Board on focusing both times a year, operationalstrategic issues and There and financial performance. on mattersis also a defined policy strictly for the Board. reserved Director, The Regional Managing Financesupported by a Regional of each of our four regions Director, andis accountable for establishing monitoring internal within controls regions. our respective
• • • • The key elements of our system of of our system The key elements as follows: are internal control • • change in composition of the Board composition of the Board change in year. over the past calendar Internal Control and Risk Management with the Code, the In accordance for the overall responsibility has Board system of of the Group’s effectiveness internal and risk management. control established by the The procedures been designed and have Board implemented to meet the particular the risks and of the Group requirements to which it is exposed. an provide also These procedures for identifying, ongoing process evaluating and managing principal risks. The system of internal includes control financial, compliance and operational designed to meet the which are controls, particular needs. These controls Group’s assets, ensure Group aim to safeguard are accounting records that proper maintained, that the financial information used within the business and for and to support the publication is reliable Vision. successful delivery of the Group’s Any system of internal can only control but not absolute, reasonable, provide assurance against material misstatement delegates or loss. In practice the Board the implementation of the Board’s to executive policy on risks and control by management and this is monitored an Internal Audit function which reports the Audit through back to the Board Committee. Re-election of Directors Articles of Association The Company’s must retire that each Director provide years. The Code office every three from Directors all goes beyond this, requiring at each and stand for re-election to retire The CompanyAnnual General Meeting. All requirement. complies with the Code Sylvia except Danuta Gray, Directors, Metayer and Angela Seymour-Jackson, at will submit themselves for re-election Meeting.General forthcoming Annual the Danuta Gray will cease to be a Director 7 June 2018. of the Company from Sylvia Metayer and Angela Seymour- appointed Jackson, both of whom were after the Company’s as Directors last Annual General Meeting will, in Articles with the Company’s accordance of Association, stand for election at the Annual General Meeting.
d party eview of the e Board composition e Board
quality assessment of the Group’s quality assessment of the Group’s Internal Audit function; and carry out a further r risk appetite, due to the Board’s conduct, in 2018, a thir Focus on overseeing the development of the senior leadership team, with the support of HR Director the Group Continue to focus on key strategic Assess the quality of information particularly to the Board, provided on strategic initiatives issues and investments Continue enhancing the Focus on futur understanding of PageGroup site visits and by engaging through with management outside of Board meetings priorities, taking into account Non- of current the likely tenure Executive Directors
• • 2018. The action points were: and further work would be undertaken in agreed that the actions were still relevant still relevant the actions were that agreed • on the 2016 action points, the Directors on the 2016 action points, the Directors to:- In addition it was agreed Whilst material progress has been made Whilst material progress both review processes. both review Directors, by means of interviews for Directors, the performance of the individual • • Chairman and the Chairman evaluated Director conducted a review of the a review conducted Director the Group. The Senior Independent the Group. Lintstock has no other connection with • Apart from the provision of this service, the provision Apart from open and frank exchange of views. • the process in order to promote the to promote in order the process respondents being ensured throughout throughout being ensured respondents of questionnaires with anonymity of all of questionnaires facilitated by Lintstock through the use facilitated by Lintstock through progress was measured. The review was review The was measured. progress review, to ensure that year-on-year that year-on-year to ensure review, of and actions points from the 2016 of and actions points from Committees followed up on the themes 2017 review of the Board and its of the Board 2017 review and Remuneration Committees. Theand Remuneration Committees. Board and each of the Audit, Nomination Board in Board performance reviews) of the performance reviews) in Board Limited (an advisory firm that specialisesLimited (an advisory evaluation was undertaken by Lintstockevaluation was undertaken Code, in 2016 an externally facilitated Directors. In accordance with the In accordance Directors. of its Committees and its individualof its Committees and evaluation of its own performance, thatevaluation of its own Board undertakes a formal and rigorous rigorous undertakes a formal and Board In line with the Code, each year theIn line with the Code, Performance Evaluation Performance Corporate Governance Report
reporting of any significant control Executive Officer and the Chief Financial responsible for reviewing possible conflicts issues that have emerged, including Officer. They make themselves available, of interest. It makes recommendations suspected or reported frauds, so where possible, to meet with shareholders to the Board as to whether a conflict that areas of Group concern can and analysts at their request. In addition, should be authorised and the terms and be identified and investigated as during 2017 the Company carried out an conditions on which any such authorisation required. These confirmations and extensive shareholder consultation process should be given by the Board. Only supporting controls self-assessment in respect of the Directors' Remuneration Directors without an interest in the matter questionnaires are reviewed by Policy which was put to shareholders at being considered will be involved in the the Internal Audit function and a the June 2017 Annual General Meeting. decision and each Director must act in summary of findings is provided to The Executive Directors also visited nine a way they consider, in good faith, will the Audit Committee for review. cities on roadshows across the United promote the success of the Group. All Kingdom, Europe and North America. Directors are aware of their continuing In accordance with the requirements of They also held investor conferences and obligation to report any new interests, or the Code and the recommendations of equity sales teams’ briefings, as well as changes in existing interests, that might the FRC’s Guidance on Risk Management over 118 investor meetings. The Annual amount to a possible conflict of interest in and Related Financial and Business Report and Accounts is available to all order that these may be considered by the Reporting, the Board has reviewed and shareholders either in hard copy or via the Board and appropriate authorisation given. agreed its approach to risk and its risk Company’s website www.page.com. The appetite when considering its strategy website contains up-to-date information on and the management of its risks. It has the Group’s activities, published financial also considered its longer-term viability. results and the presentations used for Details on the Board’s risk appetite and David Lowden briefings and investor meetings held during its assessment of its longer-term viability Chairman the year. These are available to download. can be found in the Strategic Report on 6 March 2018 pages 33 to 39. Further, the Board, with The Annual General Meeting is an the assistance of the Audit Committee, has additional opportunity for all Board carried out a review of the effectiveness of members to meet with shareholders and the Group’s risk management and internal investors and give them the opportunity control systems, including a review of the to ask questions. Final voting results are Internal Audit activities and the financial, published through a Regulatory Information operational and compliance controls for the Service and on the Company’s website period from 1 January 2017 to the date of following the Meeting. this Annual Report. No significant failings or weaknesses were identified. A confirmation Conflicts of any necessary actions is, therefore, not provided. However, had there been any The Company has implemented robust such failings or weaknesses the Board procedures in line with the Companies confirms that necessary actions would Act 2006, requiring Directors to seek have been taken to remedy them. appropriate authorisation from the Board prior to entering into any outside business interests which have, or could have, a Relations with Shareholders direct or indirect interest that conflicts, or Communications with shareholders may conflict, with the Group’s interests. are given a high priority. The majority These procedures have operated of contact between the Board and effectively throughout the year under shareholders is through the Chief review. The Nomination Committee is
55 | Corporate Governance STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION Corporate Governance | 56 Corporate future strategy. Once finalised the profile the profile Once finalised strategy. future to by the Committee is recommended for its approval. the Board and selection a search If approved, is based on that profile process identified are undertaken. Candidates againstand selected on merit with due regard objective criteria and on theto the benefits of diversity A shortlist including gender. Board, interviewedof candidates is then the Board, by the Chairman of the Chief Executive Officer and members a of the Committee. Thereafter of appointment is made recommendation to the Board. Geographic and gender diversity is level and at important both at Board every other level in the business. It the Committee’s remains therefore policy to seek diversity of experience, geographic experience and capability, a talented to create gender in order Details on the high-performing Board. of diversity work in respect Company’s level can be found in the below Board Strategic Report on page 28.
, ectors, taking into ecommendations to the ove job descriptions and Board on development and on Board succession plans for members of and senior management; the Board Appr written terms of appointment for and Directors; Review the independence of Non- Executive Dir account their other directorships. Assess and nominate members to the Board; Maintain the right mix of character skills and experience on the Board and its Committees; Make r
• • The Committee follows formal and for appointing procedures transparent It is assisted in its search Directors. by an for new non-executive directors company. independent executive search With the Committee each new search company selects the executive search which it considers the most appropriate for the assignment. These and relevant companies have no executive search connection with the Company other than services. With of the search the provision each assignment a detailed candidate is compiled and discussed by the profile Committee, taking into consideration the balance of skills and experience members and the of existing Board Company and its of the requirements Responsibilities of the Committee The key responsibilities to: are • • • Seymour-Jackson became members of became members Seymour-Jackson September 2017the Committee on 1 on respectively, and 1 October 2017 of the Directors their appointment as served All other members Company. Details of David the year. throughout significant commitments other Lowden’s 46.can be found on page Committee are Only members of the Otherentitled to attend meetings. Chief Executiveindividuals, such as the Human Resources the Group Officer, external and Director advisers, may attend meetings by invitation when This and necessary. appropriate arrangement fosters appropriate challenge, questioning and debate of made by the the recommendations Committee to the Board.
date. Sylvia Metayer and Angela member of the Committee on that 23 May 2017 and ceased to be a resigned from the Board on Board the from resigned Baroness Ruby McGregor-Smith Ruby McGregor-Smith Baroness Metayer and Angela Seymour-Jackson. Metayer and Angela Seymour-Jackson. Baroness Ruby McGregor-Smith, Sylvia Ruby McGregor-Smith, Baroness Smedt, Danuta Gray, Michelle Healy, Michelle Healy, Smedt, Danuta Gray, Remuneration Committee. Committee, Simon Boddie, Patrick De Company, especially as Chair of the Company, Lowden, who was Chairman of the thank Danuta for her contribution to the David members of the Committee were Director from that date. I would like to from Director Membership the During the year under review and will, consequently, cease to be a and will, consequently, the June 2018 Annual General Meeting Company has the executive and and for the future. both now requires, decided not to stand for re-election at decided not to stand for re-election for ensuring that the responsible leadership it non-executive Board period under review Danuta Gray has period under review The Nomination Committee is Seymour-Jackson. Since the end of the Seymour-Jackson. Purpose Directors, Sylvia Metayer and Angela Directors, appointment of two new Non-Executive during the year, we announced the during the year, my Chairman’s statement on page 2, my Chairman’s continuous review. As I mentioned in continuous review. Nomination Committee keeps under for the Board and is something the for the Board planning continued to be a major priority and senior leadership succession year ended 31 December 2017. Board year ended 31 December 2017. Board Nomination Committee Report for the It is with pleasure that I present the that I present It is with pleasure Dear Shareholder, Nomination Committee Report Committee Nomination Committee Chairman David Lowden, Nomination Committee Report
Activities During the Year During 2017 the Committee met on four occasions. Details of the members’ attendance at meetings of the Committee are as follows:
Director No. of meetings Held Attended David Lowden 4 4
Simon Boddie 4 4
Patrick De Smedt 4 4
Danuta Gray 4 4
Michelle Healy 4 4
Baroness Ruby McGregor-Smith1 4 1
Sylvia Metayer2 4 0
Angela Seymour-Jackson2 4 1
Notes: Baroness Ruby McGregor-Smith ceased to be a member of the Committee on 23 May 2017 so was eligible to attend only one Nomination Committee meeting. Sylvia Metayer and Angela Seymour-Jackson were appointed to the Committee on 1 September 2017 and 1 October 2017 respectively, so were only eligible to attend one Committee meeting. Sylvia Metayer was unable to attend this meeting as she had a prior engagement which had been scheduled prior to her appointment as a Director of the Company.
The Committee continues to focus on The Committee also considered the The activities of the Committee were succession planning both for senior pipeline of talent for the Executive Board reviewed as part of the annual Board management and the Board. The to ensure there is sufficient bench evaluation process which, in 2017, was Committee undertook the selection of strength to run key parts of PageGroup. facilitated by Lintstock Limited. Details two new Non-Executive Directors which During the year under review the of the evaluation process can be found resulted in the appointment of Sylvia Committee members met Executive in the Corporate Governance Report on Metayer on 1 September 2017 and Committee members, and executives page 54. Angela Seymour-Jackson on 1 October at the level below the Executive Board, 2017. The independent executive search through presentations at the Company’s Plan for 2018 agency, The Inzito Partnership, were annual Strategy Day and at Board engaged for these appointments. Meetings, and during a site visit to In 2018 the Committee will continue to the Group's European Shared Service review the size of the Board, its mix of Baroness Ruby McGregor-Smith stepped Centre in Barcelona. The management skills and experience, and succession down as a Non-Executive Director on 23 and development of the talent pipeline is plans for both Executive and Non- May 2017, having completed 10 years the responsibility of the Chief Executive Executive Directors. service to the Company. I would like to Officer so that the independence of thank Ruby, on behalf of the Board, for the Committee and its members is her contribution to the Company. maintained.
57 | Corporate Governance STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION 7 7 7 7 1 2 Corporate Governance | 58 Corporate 7 7 7 No. of meetings 7 7 7 Held Attended -Jackson were appointed to the Committee on 1 September 2017 and 1 appointed to the Committee on 1 September -Jackson were 1 1 Danuta Gray Michelle Healy Sylvia Metayer Patrick De Smedt Director Simon Boddie Angela Seymour-Jackson Notes: Sylvia Metayer and Angela Seymour eligible to attend only two Audit Committee meetings. Sylvia Metayer was so were October 2017 respectively, scheduled prior to her unable to attend one of those meetings as she had a prior engagement which had been of the Company. appointment as a Director Principal areas of focus to focus on maintaining the Committee has continued under review During the year, reporting, as well as monitoring the Company’s the quality and integrity of financial they remain to ensure environment risk management systems and internal control of Director a in importance of data security, to the increase In response appropriate. on their activities the year and has reported Information Security was appointed during The Committee has also continued to monitor the to the Committee and the Board. interaction between the Internal Audit function and the external auditors, to monitor and that the Group’s ensure of the external and to effectiveness audit process the review maintained. The Company's tax strategy was considered are governance standards It is published on the by the Board. for approval by the Committee and recommended of. Set out in the table on page 59 is a summary Company's website www.page.com by the Committee 2017. Key issues covered the main activities of the Committee during to the Board. reported are set to coincide The Committee met on seven occasions. Committee meetings are reporting calendar and the audit cycle. The Committee with key dates of the financial the members’ to undertake its duties. Details of resources with sufficient is provided as follows: attendance at the meetings of the Committee are Company’s business model and strategy as well as the principal risks of the Company. risks of the Company. well as the principal and strategy as business model Company’s basis and ongoing the Committee takes place on a regular of all members of Training in on developments external auditor, by the Company’s updates, provided through and regulation. corporate reporting such entitled to attend meetings. Other individuals, Committee are Only members of the Officer, the Chief Financial the Chief Executive Officer, Board, as the Chairman of the of Internal Audit and the external the Director audit partner are the Company Secretary, The Committee can and necessary. as appropriate invited to attend meetings regularly as appropriate. invite others to attend relevant and Chairman of the Committee has the current is satisfied that the The Board of the Code. Sylvia by the provisions required experience financial and accounting of the and accounting experience and other members financial Metayer has relevant of business experience and expertise suchCommittee have a sufficiently wide range relevant qualifications and experience role. The fulfil its that the Committee can effectively shown in their biographies on pages 47 to 50. The of the Committee members are ofCommittee met with the external auditor during the year without the presence discussion. The Director an opportunity for confidential to provide management in order of Internal of the Audit and the external access to the Chairman auditor have direct the year. Committee throughout
also provided with an overview of the also provided as a Director of the Company. They were They were of the Company. as a Director the expected time commitment required the expected time commitment required Terms of Reference and an indication of of Reference Terms provided with a copy of the Committee’s with a copy of the Committee’s provided Angela were, amongst other things, Angela were, induction programme both Sylvia and induction programme respectively. As part of the director As part of the director respectively. September 2017 and 1 October 2017 as Directors of the Company on 1 as Directors the Committee on their appointment who were appointed as members of who were Metayer and Angela Seymour-Jackson Metayer and Angela Seymour-Jackson throughout the year except Sylvia throughout Angela Seymour-Jackson. All served Angela Seymour-Jackson. and effective. Sylvia Metayer and Michelle Healy, Gray, Committee, Patrick De Smedt, Danuta Boddie, who was the Chairman of the members of the Committee were Simon members of the Committee were management systems are in place management systems are Membership the During the year under review necessary internal and risk controls the responsibility for ensuring that the the responsibility reporting of performance. It also has reporting internal audit process. financial statements and external auditor, and the effectiveness of the and the effectiveness auditor, of the integrity of the Company’s and effectiveness of the Group's external of the Group's and effectiveness The Audit Committee is the guardian financial information, the independence Purpose the integrity of the Company's published under review, which includes ensuring which under review, principal areas of focus during the year principal areas Committee Report for the year ended an overview of the Committee's provides I am pleased to present the Audit I am pleased to present 31 December 2017. This Report As Chairman of the Audit Committee Dear Shareholder, Dear Shareholder, Committee Chairman Simon Boddie, Audit Committee Report Committee Audit Audit Committee Report
Financial Reporting and clarity of the data and language; and and Accounts taken as a whole is fair, a detailed review by all appropriate parties balanced and understandable and provides In its financial reporting to shareholders and including external advisers. A checklist the information necessary to assess the other interested parties, the Board aims to of all the elements of the process was Company’s performance, business model present a fair, balanced and understandable completed to document the process and and strategy. assessment of the Group’s position and cascaded sign-off implemented through prospects, providing necessary information the Group’s management structure to for shareholders to assess the Company’s provide assurance to the Committee that business model, strategy and performance. the appropriate procedures had been The Company has an established process undertaken by all Group companies. for reviewing the Annual Report and Accounts to ensure it is fair, balanced and The Committee has reviewed the understandable. This was used again this Company’s 2017 Annual Report and year. It included a thorough understanding Accounts. It provided comments that of the regulatory requirements for the were incorporated into the Annual Report Annual Report and Accounts; a process and Accounts and has advised the Board to determine the accuracy, consistency that, in its opinion, the Annual Report
Main Activities of the Audit Committee During 2017 The Committee has an agreed, rolling programme of agenda items to ensure that relevant matters are properly considered. The list below summarises the key items considered by the Committee during the year.
January April October Review of Financial Statements Review of Financial Statements Review of Financial Statements • Quarter 4 trading update • Quarter 1 trading update • Quarter 3 trading update
March July December Review of Financial Statements Review of Financial Statements Review of Financial Statements • Draft preliminary • Quarter 2 trading update • Review of 2017 Annual Report announcement and 2016 and Accounts process Annual Report and Accounts August • Review of FRC Letter to Audit Chairs • External auditor’s year-end Review of Financial Statements report • Revenue recognition • Draft interim report • Revenue recognition Risk and Internal Control Risk and Internal Control • Going concern analysis • Internal audit update • Internal audit update • Viability Statement • Approval of internal audit plan • Fair, balanced and • Risk management update for 2018 understandable review • Cyber security • Risk review and confirmation of • Management letter of External Auditor principal risks representation • External auditor’s 2016 year • Crisis management plan review Risk and Internal Control end management letter • Annual review of anti-bribery • Ratification of principal risks • External auditor’s interim compliance • Internal audit update review External Auditor Compliance • Scope of the full year audit • Audit progress update report • Meeting with external auditor • Interim review management Compliance letter of representation without Executive Directors • Year-end legislative and External Auditor • Review of the external procedural matters auditor’s fee and non-audit • External auditor satisfaction services fees Tax and Treasury survey • Review of external auditor • Review of Tax Strategy • Reappointment of external independence and objectivity • Annual review of Treasury auditor Compliance Policy Regulatory update • Meeting with external auditor Regulatory update • Implications of IFRS 15 without Executive Directors (Revenue) • Implications of IFRS 15 (Revenue) and IFRS 16 (Leases)
59 | Corporate Governance STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Corporate Governance | 60 Corporate The Committee concluded that the approach to revenue recognition was recognition to revenue The Committee concluded that the approach How the Committee addressed the issue addressed How the Committee consistent with the policies and the judgements made were appropriate. made were consistent with the policies and the judgements Revenue recognition for permanent and temporary placements, with particular focus on period end and temporary placements, with particular for permanent Context: Revenue recognition accounting policies. with IFRS and Group in accordance accounting treatment appropriate and cut off on assignments (income recognised both retained permanent placements is derived from Revenue from recognised at the date an offer assignments (income non-retained completion of defined stages of work) and is a risk that a candidate a start date has been determined). There is accepted by a candidate and where recognised date and as such the revenue the start their decision to take up a placement before reverses on past historical experience, for the is made by management, based A provision would be reversed. this expected to occur. of those placements where proportion amounts billed for the services of temporary staff, temporary placements, which represents Revenue from the service has been provided. when is recognised including the salary cost of these staff, IFRS and the to policies relative recognition revenue Actions taken: The Committee assesses the Group's and challenges management on the internal and compliance control appropriate, they are sector to ensure taking into account the views of Internal Audit and the external recognition, auditors. over revenue processes Conclusions and rationale:
Significant issue Revenue Recognition standards and the relevant requirements around financial and governance reporting. Details on accounting policies can be foundreporting. Details on accounting financial and governance around requirements and the relevant standards as follows: judgement that may materially impact reported results as well as the clarity of disclosures, compliance with financial reporting compliance with financial as well as the clarity of disclosures, results materially impact reported judgement that may and practices adopted by the Group and any significant areas of and any significant areas by the Group and practices adopted in particular on key accounting policies The Committee focuses Significant Accounting Issues and Areas of Judgement Issues and Areas Accounting Significant The significant issues and areas of judgement considered by the Committee during the year and how these were addressed were were addressed the year and how these were by the Committee during of judgement considered and areas The significant issues on pages 96 to 100. with Ernst & Young, the external auditor. with Ernst & Young, The Committee discussed the methodology used to test the assumptions and estimates made by management in each of these areas made by management in each of these areas The Committee discussed the methodology used to test the assumptions and estimates relevant provision. relevant assessment of the risk of challenge by tax authorities which has decreased due to the passage of time and the overall decrease in the of time and the overall decrease due to the passage authorities which has decreased assessment of the risk of challenge by tax that this is no longer a significant issue. This is based on the Committee's opinion that this is no longer a significant issue. This Committee'sfor the 2017 financial year it is the Audit In the Audit Committee Report for the 2016 financial year, transfer pricing was included as a significant issue. In determining the risks transfer pricing was included financial year, In the Audit Committee Report for the 2016 Audit Committee Report
External Auditor’s prior to the end of the 2016 financial year. The Committee considers the annual However, the finalisation and transition appointment of the external auditor by Independence and of the employee mobility services to the shareholders at the Annual General Effectiveness new service provider were not ultimately Meeting to be a fundamental safeguard. finalised until early 2017. In addition, a The performance and effectiveness of The Committee monitors the objectivity, role on the board of the statutory auditors the external auditor is also reviewed independence and effectiveness of the in Italy, performed by Ernst & Young, annually by the Committee. This covers external auditor. The Company is mindful will transition to a new service provider qualification, expertise, resources and of the provisions of the Code, best in 2018. No further services have been reappointment as well as assurance that practice, the Competition and Market supplied by Ernst & Young in respect there are no issues which could adversely Authority Audit Order 2014 and EU audit of employee mobility services. The total affect the external auditor’s independence legislation as regards audit firm rotation non-audit fees in respect of these services and objectivity taking into account the and the provision of non-audit services. for the year under review amounted to relevant standards. In this respect the £28,000, of which £4,000 was pre- Ernst & Young LLP, the Company’s Committee reviewed the: current external auditor, was appointed approved by the Audit Committee. The in 2011 following a tender process. In remainder were approved retrospectively • Robustness of the external auditor’s accordance with audit regulation, Ernst by the Audit Committee on notification by plan and its identification of key risks; & Young LLP operate a policy of rotating Ernst & Young that these fees had been • Fulfilment of the agreed external audit the Audit Partner every five years. The incurred. At the half year Ernst & Young plan and any variations from the plan; Audit Partner who had served as the LLP carried out audit related services • Robustness (including the Company’s Audit Partner since 2011 when they reviewed the interim statement. audit's team's ability to challenge stepped down after the completion of The fees in respect of this work amounted management) and perceptiveness of the 2015 year end audit and a new Audit to £52,000 which, together with the non- the external auditor in handling key Partner, Bob Forsyth, was appointed in audit fees mentioned above, represent accounting and audit judgements 2016. 10.2% of the total fees payable to Ernst including demonstrating professional & Young. No other non-audit services scepticism and independence; The Committee approved and were provided by the external auditor. The • Content of reports provided to the implemented in 2014 a policy for the Audit Committee reviewed the safeguards Committee by the external auditor tender of external audit services. This in place to deal with the independence including reporting on internal policy provides that the Company will threats from this work and concluded control; and retender the external audit at least every that Ernst & Young LLP remained ten years and will change the external independent. • Feedback from management which auditor at least every 20 years. Thus, is ascertained from staff surveys the Company expects to tender the Further, during the year under review, completed by staff involved in the external audit in respect of the 2021 year the Committee discussed and agreed audit process. end during the course of 2020, but this the scope of the year-end audit and position is subject to annual review by the approved the audit fee of £784,000. Following a full evaluation of the external Audit Committee. The objectivity and independence of the auditor at the end of the 2017 audit, the external auditor is safeguarded by: Committee recommended to the Board The Committee considers that in 2017 it the reappointment of Ernst & Young • Obtaining assurances from the has complied with the Competition and LLP as Auditor of the Company at the external auditor that adequate Market Authority Audit Order 2014. forthcoming Annual General Meeting. policies and procedures exist within The Committee has regularly reviewed its its firm to ensure that the firm policy on the use of the external auditor and staff are independent of the Internal Control and for non-audit services, with the last review Group by reason of family, finance, Risk Management taking place in 2016. The policy prohibits employment, investment and The Board’s responsibilities for, and the external auditor from providing business relationship (other than in their report on, risk management and certain services which could give rise to the normal course of business); the systems of internal control and their independence threats such as computing • Enforcing a policy of reviewing all effectiveness are set out in the Corporate tax provisions, payroll services, acting as cases where it is proposed that a Governance Report on pages 54 and 55. an advocate, internal audit and system former employee of the external design. In line with the FRC Revised auditor be employed by the Group in On behalf of the Board the Committee Ethical Standard for external auditors, a senior management position or at reviewed the Group’s risk assessment the Audit Committee has operated a Board level; procedures for identifying its principal more restrictive policy from 1 January risks and its longer-term viability. The • Monitoring the external auditor’s 2017 which prohibits the external auditor risk assessment takes account of all compliance with applicable UK from providing a more extensive range risks, including environmental, social ethical guidance on the rotation of of services which includes, inter alia, tax and governance matters, inherent in the audit partners; and advice, tax compliance services and strategy of the business and its plan. global mobility support. All such services • Enforcing a policy concerning the These procedures include regular reports provided by Ernst & Young LLP were provision of non-audit services by the to the Committee from the Director of transferred to other service providers external auditor. Internal Audit on the performance of the
61 | Corporate Governance STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Corporate Governance | 62 Corporate
The Group maintains a zero tolerance a zero maintains The Group has an against corruption. It approach and corruptionestablished anti-bribery guidance on which includes policy, of gifts and the giving and receiving throughout This policy applies hospitality. training The policy and the the Group. and reviewed of employees is regularly The training is updated when required. and all staff undertaken by all managers by means the Group across in risk areas of standard and presentation of review training material. Group-prepared A gifts and entertainments register is A gifts and entertainments register transparency. maintained to ensure of compliance with the policy A review to is undertaken annually and reported undertaken the Committee. The review was a good in 2017 showed there understanding of the issue and no reported. were breaches In accordance with the provisions of the with the provisions In accordance for Code, the Committee is responsible the arrangements whereby reviewing in confidence, raise concerns may, staff in financial about possible improprieties or other matters and ensuring reporting that these concerns investigated are This is and escalated as appropriate. by the Human in all regions promoted function and audited by Resources Internal Audit. It is run by an external is available to all party and third were There employees in the Group. whistleblowing incidents no reportable during the year under review. reported Simon Boddie Chairman of the Audit Committee 2018 6 March Whistleblowing
process, including Group functions and functions including Group process, around as those change programmes and socialgovernance, environmental matters related the improve Actions to maintain and environment of the control effectiveness with the Executive Board agreed are to the and reported monitored and are also regularly Committee. Risks are changes are and required reviewed where and, made to the risk profile of Internal to the activity necessary, Audit. All changes to the Internal Audit with the Chairman of agreed plan are to the the Committee and reported and the Committee. Executive Board with integrity. Anti-Bribery and Corruption and Business Ethics The Company has a Code of Conduct which can be found on its website . This sets out the www.page.com of behaviour by which all standards bound and are employees of the Group commitment is based on the Company’s fairly and to acting professionally, The Committee reviews the procedures the procedures The Committee reviews and detection of for the prevention Suspected cases fraud in the Group. to the Chief of fraud must be reported of Financial Officer and the Director Internal Audit and investigated by operational management and Internal Audit. The outcome of any investigation to the Committee. A register is reported of all suspected fraudulent activity and the outcome of any investigation is to the Committee kept and is circulated basis. During the year in on a regular question, no frauds of a significant reported. were nature Committee Evaluation The activities of the Committee were evaluation as part of the Board reviewed during the year under performed process evaluation process The 2017 review. was facilitated by an external third Lintstock Limited. Details and the party, and outcome of the evaluation process, actions to be taken during the agreed 2018, can be found in the Corporate Governance Report on page 54. Fraud
All major risks are addressed in this addressed All major risks are mitigate risks to an acceptable level. assess the effectiveness of controls to of controls assess the effectiveness on a rotational risk-based approach to risk-based approach on a rotational Audit Committee. Businesses are visited Audit Committee. Businesses are reported to the Executive Board and the to the Executive Board reported the findings from internalthe findings from audits being agreed with the Committee annually with agreed of work for the Internal is Audit function for frank and open dialogue. The scope Board. This ensures there is opportunity there This ensures Board. direct access to the Committee and the direct of the Audit Committee. He also has material losses. line to the Chairman has a reporting weaknesses that resulted in unforeseen in unforeseen weaknesses that resulted Officer on a day-to-day basis, but also review there were no control failings or no control were there review to the Chief Financial Audit reports until complete. During the period under internal of Internal auditors. The Director in this respect are regularly monitored monitored regularly are in this respect of InternalDirector Audit and a team of system are put in place. Action plans system are Internal a Audit function comprises level, plans to strengthen the control the control level, plans to strengthen experience to this function, the Group’s mitigation of risks to an acceptable and depth of risk and internal control in the internal control system for thein the internal control is breadth there ensure function. To Where weaknesses have been identified weaknesses Where of the Internal Auditthe effectiveness Strategic Report on pages 21 to 22. and reviewed Committee monitored strategic and people risks in the the During the year under review are highlighted for the main financial, highlighted are Internal Audit Activities indicators and management incentives on pages 33 to 38. Key performance are described in the Strategic Report described are been identified and mitigating actions key risks and their indicators, have The risk process, together with the The risk process, purpose of making its public statement. control and the residual risk for the and the residual control assessment on the systems of internalassessment on the systems risks, allows the Board to make the to make risks, allows the Board updates to the Board on material updates to the Board the Board. This, together with regular regular This, together with the Board. with the outcome being reported to reported with the outcome being risk management process annually, annually, risk management process The Committee also reviews the Group’s Group’s the reviews The Committee also weaknesses. and identifying any control failings or failings and identifying any control effectiveness in managing material risks in managing material effectiveness system of internal control and on itsinternal and on system of control Directors’ Remuneration Report
remain relevant and specific in a volatile economic environment. Financial targets environment, while still aligned to long- for the ESIP took into account the term performance. internal budget, the prevailing consensus forecasts for PageGroup performance, 60% of any ESIP award is deferred in to and long-term growth rates. Very strong shares that vest over three years. This performance at PageGroup over 2017 as represents an increase in deferral at most set out in the previous section resulted in levels of performance including on target the achievement of the maximum targets performance when compared with the annual bonus and fair value of LTIP awards Steve Ingham, Chief Executive Officer, under the previous policy. The majority of received £2,053,469 which represents any award is now in shares. 91% of the maximum under the ESIP. Danuta Gray, Kelvin Stagg, Chief Financial Officer, Additionally, a number of shareholders Committee Chairman received £1,073,800 which represents wanted reassurance on the level of 94.4% of the maximum. 60% of each disclosure that would be provided award will be deferred into shares over ANNUAL STATEMENT on performance metrics, targets and three years. Full details of the performance assessment, specifically with regard to Dear Shareholder, targets, assessment and outcomes are personal and non-financial measures. set out on pages 66 to 68. On behalf of the Board, I am pleased to As can be seen from the disclosures on present the Directors’ Remuneration Report pages 66 to 68, we are committed to Legacy Long-Term Incentive Plan for the year ended 31 December 2017. providing full and transparent disclosure outcomes for each ESIP award made, including Our remuneration policy The legacy 2015 LTIP vested at the end of disclosure of the targets set and its performance period on 31 December Last year we reviewed and refreshed our narrative outlining the performance and 2017. The performance metrics for these remuneration policy (the “Policy”) following corresponding weighting achieved for awards were cumulative EPS, relative an extensive consultation with shareholders, personal targets and the threshold, target gross profit against peer companies, and shareholder bodies and proxy advisory and stretch performance levels, and the a range of strategic objectives for each firms. Given the cyclical nature of our outcome for all financial metrics. industry and ongoing economic uncertainty Director. Following an assessment of following the Brexit vote in the UK, we 2017 performance performance against each performance metric, the CEO received 55.35% of his wanted to ensure that our pay structure Despite some ongoing economic and maximum award and the CFO received continued to encourage long-term decision market uncertainty, PageGroup has 55.98% of his maximum award. making while also recognising the volatile had a very successful year, significantly environment in which we operate and the outperforming both internal and external Further detail is set out on pages 69 need for flexibility and agile thinking. We expectations. Financial performance has and 70. therefore decided to replace our Annual been strong and PBT is 18.2% higher than Total remuneration figure for 2017 Bonus and LTIP with a new Executive in 2016. The Group has also continued to Single Incentive Plan (“ESIP”), a single make good progress in delivering its long- As we move from the old to the new performance scorecard incorporating term strategy objectives of: policy, total remuneration figures will a balance of metrics aligned with the • delivering organic, diversified growth; include legacy awards from the LTIP. As Company’s long-term strategic vision. a result, the Total Remuneration Figures • building an efficiently scalable and shown in the Report include both the grant Our new Policy was approved by 66% highly flexible business; and of shareholders at the June 2017 of the 2017 ESIP award, of which 60% Annual General Meeting. The majority of • nurturing and developing our people. is deferred in shares, and the vesting of the legacy 2015 LTIP award. There are no shareholders who engaged with us to This good progress is reflected in a total further grants under this LTIP after 2017. discuss the Policy during the consultation shareholder return in 2017 of 26% which The payments from these two schemes process recognised the challenges includes the payment of a special dividend have been separated clearly on page 65. the Company faces and gave us their of £40m during the year. EPS is 14.7% support. But a number of shareholders up on 2016, and 2017 total shareholder Conclusion raised concerns which we have sought to return is ranked amongst the highest in The outcomes of these awards reflect address: our peer group, and higher than our FTSE the Company’s performance over the 250 index comparator. Addressing shareholder concerns short and longer term and achievement of Some shareholders asked whether the new ESIP outcomes targets set. ESIP would result in a move away from The ESIP awards directly reflect the Looking ahead, performance expectations long-term remuneration. strong 2017 performance as well as for the sector have much improved during The ESIP’s annual performance metrics individual achievement of the targets set the course of 2017 and there has been are fully aligned with the Company’s long- for each Executive Director aligned with a significant upwards shift in earnings term strategic vision and objectives which the strategic objectives. Targets were set consensus forecasts for PageGroup, have remained broadly consistent since in early 2017 when the business outlook reflecting the more positive environment. 2013. We also seek to ensure metrics for the recruitment sector was negatively These revised expectations have been impacted by an uncertain political and reflected in our targets for the year ahead,
63 | Corporate Governance STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
eview and eholder ogress of incentive of ogress Corporate Governance | 64 Corporate eporting regulations eporting regulations eholder consultation emuneration policy that wasemuneration policy that oving the quantum of share oving the quantum of share Reviewing various shar Undertaking its annual r The r The shar associated with the process policy and remuneration proposed feedback, dealing with shareholder vote againstincluding the significant policy; remuneration the proposed Monitoring the pr The setting of performance targets made for the 2017 incentive awards under the to the Executive Directors and the ESIP; LTIP Reviewing r remuneration; regarding Appr plan vesting for the Executive based on pre-set Directors performance targets; bodies’ communications and of remuneration; policies in respect and salaries and incentives of approval and other of the Executive Directors senior executives. put to shareholders at the 2017 put to shareholders AGM; plan strategic objectives;
• • • • • The Remuneration Committee set out in the 2016 Annual Report and Accounts Remuneration Policy the PageGroup at by shareholders which was approved Annual General Meeting the Company’s held on 8 June 2017. Full details of the can voting in this respect shareholder be found on page 76. A copy of the Remuneration Policy in full can be found on pages 77 to 80. The Committee continued to operate this Remuneration Policy during 2017 and intends to continue its operation during 2018. • • The Committee met a total of nine times met a total of nine The Committee the followingduring 2017 and discussed matters: • - 99 2 3 No of meetings 9 9 9 9 9 9 9 9 Held Attended
1 1 Sylvia Metayer and Angela Seymour appointed to the Committee Jackson were on 1 September 2017 and 1 October 2017 eligible to attend only three so were respectively Remuneration Committee meetings. Sylvia Metayer was unable to attend one of those three meetings due to an existing commitment which had been arranged prior to her appointment as a the Company. of Director Danuta Gray Director Angela Seymour - Jackson Simon Boddie Patrick De Smedt Michelle Healy Sylvia Metayer
Only members of the Committee are Only members of the Committee are entitled to attend meetings. Other individuals, such as the Chairman of who attends meetings of the the Board, the Chief Executive Committee regularly, the the Chief Financial Officer, Officer, and Director Resources Human Group external advisers, may attend meetings and by invitation when appropriate takes part No Director necessary. to their own in discussions relating remuneration. The Committee appointed New Bridge consultants as its remuneration Street of a in September 2013 as a result process. competitive re-tendering is a member of the New Bridge Street and Remuneration Consultants Group as such voluntarily operates under the to executive code of conduct in relation consulting in the UK. remuneration has During the year New Bridge Street independent advice to the provided policy Committee on the remuneration and the Executive Single Incentive Plan; the setting of performance criteria various incentive for the Company’s arrangements; benchmarking of against market levels; and remuneration report. advised on the remuneration The fees paid to New Bridge Street totalled £106,733 . New Bridge Street any other services to the did not provide The Committee also received Company. Caddow Consulting Limited input from for a fee of £18,077, the Chairman, Chief Company Secretary Executive Officer, Director. Human Resources and Group Note: 1.
e e for remuneration e for remuneration
Details of the long-term variable pay and the accompanying notes; Details of the performance against Single total figur metrics for variable awards included metrics for variable awards in the single sum; in 2017; and awarded Section on outstanding shar awards.
Committee were as follows: Committee were attendance at meetings of the respectively. Details of the members’ respectively. September 2017 and 1 October 2017 as Directors of the Company on 1 as Directors the Committee on their appointment Jackson who became members of Sylvia Metayer and Angela Seymour- served throughout the year except served throughout and Angela Seymour-Jackson. All and Angela Seymour-Jackson. Smedt, Michelle Healy, Sylvia Metayer Smedt, Michelle Healy, Committee, Simon Boddie, Patrick De Danuta Gray, who was Chairman of the Danuta Gray, members of the Committee were members of the Committee were During the year under review the During the year under review (a) subject to audit are the: subject to audit are (b) Directors’ Annual Remuneration Report Directors’ the Regulations. The elements of the been audited where required under required been audited where information on pages 64 to 76 has (Amendment) Regulations 2013. The and Groups (Accounts and Reports) and Groups (c) (d) the Large and Medium-sized Companies prepared in accordance with Part 3 of with in accordance prepared This part of the report has been This part of the report will be subject to an advisory vote and Remuneration Report Directors’ Annual Report on Remuneration for 2017 Danuta Gray 2018 6 March Meeting, the Annual Statement andMeeting, the Annual Statement your support. Committee their views. At the 2018 Annual Generaltheir views. At the 2018 I very much hope that we will receive Chairman of the Remuneration to ensure we understand and reflect reflect we understand and to ensure shareholders openly and constructively shareholders We continue to engage with our We on Remuneration. be provided in next year's Annual Report in next year's Annual be provided demanding. Full disclosure of targets will of demanding. Full disclosure level for 2018 has been set to be verylevel for 2018 has been Company. The stretch performance The stretch Company. account of the positive outlook for theaccount of the positive including our target for EPS, which take target for EPS, which including our Directors’ Remuneration Report
Directors’ Remuneration as a Single Figure The tables below report a single figure for total remuneration for each Director for the years ended 31 December 2017 and 31 December 2016. 2017 ESIP - Legacy Dividends Salary ESIP - Deferred Long-term paid on and Fees Benefits Pensions Cash Shares incentives unvested (note 1) (note 2) (note 3) (note 4) (note 4) (note 5) shares Total Executive £’000 £’000 £’000 £’000 £'000 £’000 £’000 £’000 Steve Ingham 602 37 150 821 1,232 547 192 3,581 Kelvin Stagg 350 23 70 430 644 220 89 1,826 Non-Executive David Lowden 203 – – – – – – 203 Simon Boddie 67 – – – – – – 67 Patrick De Smedt 60 – – – – – – 60 Danuta Gray 67 – – – – – – 67 Michelle Healy 53 – – – – – – 53 Sylvia Metayer8 18 – – – – – – 18 Angela Seymour-Jackson8 13 – – – – – – 13 Ruby McGregor-Smith9 22 – – – – – – 22 2016
Dividends Salary Short-term Long-term paid on and Fees Benefits Pensions incentives incentives unvested (note 1) (note 2) (note 3) (note 6) (Note 7) shares Total Executive £’000 £’000 £’000 £’000 £’000 £’000 £’000 Steve Ingham 587 35 147 605 584 131 2,089 Kelvin Stagg 325 26 65 303 189 52 960 Non-Executive David Lowden 200 – – – – – 200 Simon Boddie 66 – – – – – 66 Patrick De Smedt 55 – – – – – 55 Danuta Gray 66 – – – – – 66 Michelle Healy10 12 – – – – – 12 Ruby McGregor-Smith 55 – – – – – 55
Notes: 1. Salary and fees represent the salary and fees paid in cash in respect of the financial year. 2. Benefits epresentr the taxable value of the benefits provided in the year and comprise a company car or cash equivalent; fuel; permanent health insurance; medical insurance; life insurance; in respect of the Chief Executive Officer, golf club membership used for corporate entertaining and a long service award. 3. Pension includes the cash value of Company contributions to defined contribution pension plans and cash payments in lieu of pension contributions. 4. The ESIP payment is determined using a balanced scorecard of short-and long-term performance measures as set out on pages 66 and 67. 40% of the ESIP award is delivered in cash and as shown in the “ESIP – Cash” column above. The remaining 60% of the ESIP is delivered in shares which vest over a three-year time period, and is shown in the “ESIP – Deferred Shares” column above. 5. The value of shares vesting under the 2015 LTIP, for which the performance period ended in the financial year. Following the assessment of performance, 211,413 shares will vest to Steve Ingham and 84,191 shares will vest to Kelvin Stagg. The figures shown in the table are based on the average share price in the three months to 31 December 2017, which is 467.52p. The figure will be restated next year using the actual share price on the relevant date. Further details relating to performance targets, weightings and outcomes can be found on pages 69 and 70. 6. The “Short-Term Incentives” figure for 2016 includes the annual cash bonus. No cash bonus awards were made in 2017 with the introduction of the Executive Single Incentive Plan. 7. The long-term incentives were earned in the 2016 year but paid in March 2017. In addition 2,000 share options awarded on 9 March 2009 to Kelvin Stagg (before he was appointed a Director of the Company) became exercisable in March 2017. These options have not been exercised. The figures provided in the 2016 single figure table above represent the actual value of those awards on the vesting and exercise date, this being 428.09p. 8. Sylvia Metayer and Angela Seymour-Jackson were appointed as Directors of the Company on 1 September 2017 and 1 October 2017 respectively. The fees shown in the 2017 table reflect the amount paid to them from the date of their respective appointments to 31 December 2017. 9. Baroness Ruby McGregor-Smith ceased to be a Director of the Company on 23 May 2017. The fees noted in the 2017 table cover the period 1 January 2017 to 23 May 2017. 10. Michelle Healy was appointed a Director of the Company on 10 October 2016. The fees shown in the 2016 table reflect the amount paid to her from the date of appointment to 31 December 2016.
65 | Corporate Governance STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Corporate Governance | 66 Corporate
same cumulative basis as for the legacy LTIP. same cumulative basis as for the legacy LTIP. The EPS range that was set represented a target cumulative three-year growth range of 7% to 12% per annum, if measured on the range of 7% to 12% per annum, if measured growth a target cumulative three-year The EPS range that was set represented of this range. market consensus of approximately 20.9p, which represented a three-year growth of around 4.7% per annum, was towards the bottom 4.7% per annum, was towards of around growth a three-year 20.9p, which represented market consensus of approximately of market uncertainty. The stretch was set at 25p, more than 4p above consensus. The threshold target was set at 19p. The prevailing target was set at 19p. The prevailing than 4p above consensus. The threshold was set at 25p, more The stretch of market uncertainty. leveloutlook for the year was very challenging; the Committee set a wide range for the ESIP which would take into account the high Targets for EPS were set at the start of the year taking account of consensus expectations at that time. At the start of 2017, the market for EPS were Targets How the targets were set: All-share by 13 percentage points. by 13 percentage All-share Although not a metric used in the ESIP, the Company also achieved total shareholder return of +26% for the year, exceeding the FTSE return of +26% for the year, the Company also achieved total shareholder Although not a metric used in the ESIP, of 13.3% per annum. 26.5p is above the stretch performance level set at the beginning of the year. performance level set at the beginning of the year. of 13.3% per annum. 26.5p is above the stretch key markets. As a result, we have delivered 2017 EPS of 26.5p, which represents year-on-year growth of 14.7% and three-year growth growth of 14.7% and three-year growth year-on-year 2017 EPS of 26.5p, which represents we have delivered key markets. As a result, Over 2017, PageGroup has delivered strong performance through the implementation of efficiency measures and driving growth in our and driving growth the implementation of efficiency measures performance through strong has delivered Over 2017, PageGroup EPS element: In 2017, this element was based on targets for 2017 EPS and gross profit growth relative to comparators. growth profit In 2017, this element was based on targets for 2017 EPS and gross Long-term trailing performance element: financial and strategic information; and tax and treasury management. Further disclosure can be found on pages 67 to 68. management. Further disclosure financial and strategic information; and tax and treasury in the succession planning process. Other personal objectives covered risk management and internal controls; cost management, risk management and internal controls; Other personal objectives covered in the succession planning process. Commitment to gender diversity was demonstrated by the improved progress of women in director roles and the increased women and the increased roles of women in director progress by the improved Commitment to gender diversity was demonstrated launched to ensure development of potential successors to the Board. In addition, a new Global Talent Review is being developed. In addition, a new Global Talent development of potential successors to the Board. launched to ensure ring the year, a Senior Leadership programme was successfully a Senior Leadership programme diversity agenda. During the year, development; and continuing to further our Personal objectives covered the development of a Senior Leadership programme to facilitate succession planning; progress on talent to facilitate succession planning; progress the development of a Senior Leadership programme Personal objectives covered and the US, we saw far stronger growth than anticipated as investments we made into additional capabilities delivered results ahead results investments we made into additional capabilities delivered than anticipated as growth and the US, we saw far stronger Personal element The UK declined by only 3.8%, which was lower than our expectation at the beginning of the year. In markets such as France, China lower than our expectation at the beginning of the year. The UK declined by only 3.8%, which was piloted. in the assessment of 288 ideas of which 25 were the business and resulted to prioritise the adoption of innovations across During the course of 2017 some of the risks and uncertainties envisaged did not materialise to the extent expected, or were mitigated. and uncertainties envisaged did not materialise to the extent expected, or were During the course of 2017 some of the risks was created group was successfully executed. An innovation programme The SSC was 14.8% in constant currencies. Markets growth about the potential impact of US elections in November 2016 and forthcoming elections in France and The Netherlands in spring 2017. in November 2016 and forthcoming elections in France and The Netherlands in spring about the potential impact of US elections by 22.7%, and in particular Large, High Potential in Large, High Potential Markets increased Fee earners and directors all these areas. sector was negatively affected by a very uncertain political and economic environment following the EU referendum result, and concerns result, following the EU referendum environment by a very uncertain political and economic affected sector was negatively 2017 in throughout was delivered performance Strong the Group. of innovation across and embedding a culture programme Centre time targets were considered. In the final quarter 2016 when targets were being considered, the business outlook for the recruitment business outlook for the the being considered, quarter 2016 when targets were In the final considered. time targets were Service Large, High Potential Markets, successfully executing the Shared in revenue growing Strategic objectives for the year included Targets were set for 2017 taking account of internal goals, planned investments, and broker forecasts and the business outlook at the and the business forecasts taking account of internal set for 2017 planned investments, and broker goals, were Targets Strategic element How the PBT targets wereHow the PBT targets set: in the light of these changes. 2017 targets important to consider PageGroup’s ensure no benefit is received from favourable foreign exchange movements, the actual PBT is measured at constant exchange rates. movements, the actual PBT is measured exchange favourable foreign received from no benefit is ensure during the course of 2017. It is expectations for the sector have significantly improved competitors. Performance of PageGroup’s expectations at the start of the year when targets were set and has resulted in a payment for this element of 100% of maximum. To To payment for this element of 100% of maximum. in a set and has resulted of the year when targets were expectations at the start but for the majority for 2017, not only for PageGroup, shift in earnings also been a significant upwards consensus forecasts has There Successful execution of our strategy in 2017 resulted in strong PBT performance, which was significantly above internal PBT performance, and external in strong of our strategy in 2017 resulted Successful execution of plan. PBT element: Annual performance element Annual performance 2017 ESIP Directors’ Remuneration Report
Relative Gross Profit element: PageGroup delivered strong gross profit growth of +9.8% in 2017. This was above the upper quartile of the peer group and resulted in this element being paid in full. The performance metrics, weightings and targets, together with the determination of the ESIP award, are as set out in the tables below for both Executive Directors: CEO ESIP disclosure
Performance Weighting (max Outcome metric % of max) Achievements (% of max) Annual performance 2017 PBT 30% • Threshold – £69.0m (20% award) 30% • Target – £86.7m (60% award) • Maximum – £115.0m (100% award) • Actual PBT – £118.2m
Non-financial strategic Strategy 10% Record results achieved in the Large, High Potential Markets and grew 14.8% in 7% development Gross Profit vs prior year (in constant currency). Excellent progress in the year in the USA with prior investments in new offices, sectors and headcount delivering 21% growth. Latin America, despite continued challenging macro-economic conditions in Brazil, grew by 14%. China and SE Asia growth was 14% and 12% respectively. Germany improved 12% vs 2016 with the largest opportunity in Germany in Page Interim grew by 19.2% with headcount up by 84.3%. The achievement against this objective was judged to be strong in the year with still some opportunity for improvements in Germany and Latam in particular and overall an increased percent of GP from these markets.
Systems and 5% Delivery of benefits from the European Shared Service Centre implementation 3% Innovation with a reduction in back office HR, Finance and standardisation of processes across the Group. The Group initiated an innovation team and continued to invest in the digital strategy, winning the LinkedIn global award for Most Socially Engaged Recruitment Company for the second time. Refreshed execution of information security and cyber security resilience plans. Roll out of a new HR learning system and Global Finance System is expected to deliver benefits in future years.
Personal performance Executive Leadership 6% Good progress on the development of the executive pipeline to ensure future 3% succession plans. A new leadership assessment and development programme was introduced in the year together with organisational structure development. These will provide opportunities to enable future leadership progression.
Page People 4% The Group ended the year with a record level of fee earner headcount. We 3% Development continued to grow the diversity of our leadership population in terms of gender and nationality. There was an increase in women in director roles by year end from 29% to 32% and we have less reliance on expat resources as leaders are developed from local in-country talent through targeted local leadership development activity.
Longer-term metrics 2017 EPS growth 35% • Threshold EPS – 19p (0% award) 35% • Max EPS – 25p (100% award) • Actual EPS – 26.5p
2017 Relative Gross 10% • Median comparator group gross profit growth – 6.6% (25% award) 10% Profit growth • Upper quartile comparator group gross profit growth – 8.8% (100% award) • PageGroup actual gross profit growth – 9.8%
Total 100% 91% of max
67 | Corporate Governance STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Outcome (% of max) 8% 30% 2.1% 35% 6.3% 10% 3% 94.4% of max Corporate Governance | 68 Corporate Achievements Enhancement of global finance leadership group with development programme development programme with Enhancement of global finance leadership group Enhanced capability roles. succession plans now in place for all key leadership in several finance functions • Threshold – £69.0m (20% award) • Threshold (60% award) – £86.7m • Target (100% award) • Maximum – £115.0m • Actual PBT – £118.2m Risk and risk management plan and mitigation planning enhanced. Group the implementation of through has been improved environment control together with supporting IT systems. the Group across processes standard budget delivery and delivery with the in time, on systems resilience Improved learning and HR digital Service Centre of Global Finance System, Shared system. • Threshold EPS – 19p (0% award) • Threshold • Max EPS – 25p (100% award) • Actual EPS – 26.5p European Shared Service Centre – during 2017 Finance and Marketing Service Centre Shared European partially transferred transitioned 100% into the SSC, other functions 30-70%. reductions between with benefits in in-country back office staff earner in the cost per fee and systems have resulted processes Standardised for concept is being planned by 21%. Extension of the centre reducing System went live in theextension to other geographies. The Global Finance out, introducing with further countries to be rolled Service Centre UK Shared to drive efficiency. and simplifying processes standards • Median comparator group gross profit growth – 6.6% (25% award) growth profit gross • Median comparator group – 8.8% (100% award) growth profit gross • Upper quartile comparator group – 9.8% growth profit actual gross • PageGroup Resource and capability in Group Treasury enhanced. Treasury Management enhanced. Treasury Treasury and capability in Group Resource Global Finance System andSystem fully implemented and integrated into functions and and Cash management of Treasury standardisation group to onerelationship efficiency by transfer of local bank Improved processes. global provider. Weighting (max Weighting % of max) 10% 30% 3% 35% 9% 10% 3% 100%
Performance metric Leadership Development Personal performance Non-financial strategic Risk Management and Internal Controls 2017 PBT Annual performance Longer-term metrics Longer-term 2017 EPS growth Cost Management, Financial, Strategic and Management information 2017 Relative Gross 2017 Relative Gross growth Profit Tax and Treasury Treasury and Tax Management Total CFO ESIP disclosure CFO ESIP Directors’ Remuneration Report
Legacy Long-Term Incentives included in the Single Figure Table The long-term incentive figures reported in the single figure table relate to the legacy awards granted in March 2015 to Steve Ingham and Kelvin Stagg. These awards were subject to EPS (62.5% of the award), Relative Gross Profit (12.5% of the award) and Strategic targets (25% of the award), measured over a three-year period. Cumulative EPS over the 3-year period was 70.9p compared to a threshold level of 66p and a stretch of 87p. As a result, 42.5% of the EPS element vested. Strong gross profit performance over the three-year performance period was above upper quartile compared to the comparator group and resulted in 100% of this element vesting, whilst progress against our long-term strategic objectives resulted in 65% of that element vesting for Steve Ingham and 67.5% of that element vesting for Kelvin Stagg. Taking into account the weightings of each performance measure, the overall LTIP vesting outcome was 55.35% for Steve Ingham, and 55.98% for Kelvin Stagg. This resulted in 117,017 and 47,130 shares vesting to Steve Ingham and Kelvin Stagg respectively. The determination of these vesting outcomes is set out in the table below:
Performance Weighting (max Outcome metric % of award) Achievements (% of award) Financial Cumulative EPS 62.5% • Threshold EPS – 66p 26.6% • Maximum EPS – 87p • Actual EPS – 70.9p
Relative Gross Profit 12.5% • Median comparator group gross profit growth – 5.7 % 12.5% Growth • Upper quartile comparator group gross profit growth – 6.5% • PageGroup actual gross profit growth – 7.4%
Strategic Executive Leadership CEO: 10% Target – development of executive and senior leadership through talent pipeline 5% and Page People development and rotation of executives in order to facilitate succession Development planning. Over the three-year period progress has been made in developing the executive talent pipeline. The planned international rotation of executives has been developed further. In the latter part of the period, organisational development and the creation of Chief Operating Officer roles provide for greater opportunity for development into the executive committee of the business. In addition, more formal development programmes have been introduced to identify and develop talent for the future.
CFO: 10% Development of a global finance team and facilitate succession planning in 7.5% finance. The central finance team has been developed in capability and capacity. A more aligned global finance team have driven standardisation in systems and processes across the Group and have enabled the implementation of programmes such as the Global Finance System and Shared Service Centre. A formal rotation of executives internationally and between the centre and businesses has further developed the executive pipeline in Finance and helped to facilitate succession planning for future Finance leadership.
Strategy CEO: 7.5% Target – Growth in Large High Potential Markets in line with Strategic Plan 4.88% Development CFO: 7.5% measured by improvements in market presence; growth in Gross Profit by market; growth in percentage of Group Gross Profit represented by the Large High Potential Markets. Good progress has been made in all Large High Potential Markets against the business growth goals. Measured in constant currency over the three-year period, LHPMs grew by 7.6%. As a percentage of Group Gross Profit, these markets increased from 30.3% to 31.3%. Fee earners and directors grew 10.5% CAGR. Latam performance suffered from difficult macro-economic conditions. Investment in diversifying the USA market in terms of locations and sectors served paid off in the latter part of the period. The achievement reflects strong growth in some markets with slower and later improvements in Germany and the USA.
Page People CEO: 7.5% There has been substantial and measurable progress made in the development 6.37% Development of broader talent in Page. Women@Page is an example of one programme developed in the UK during the three-year period for which the Group won recognition in the UK HR Excellence Diversity & Inclusion Award. The percentage of female managers rose from 41% to 48% in the period and at director level from 26% to 32%. Attrition has reduced from 39% to 36%.
69 | Corporate Governance STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Outcome (% of award) 4.5% 55.35% 55.98% Maximum Maximum Corporate Governance | 70 Corporate
100 1 1 _ _ 2.0 2.0 3.0 -11.3 2016 increase % increase Strategy Development 5
1 _ _ 2.6 5.7 2.8 35.8 2017 increase % increase
1 _ _ _ _ 07 2.3 2.3 Executive Leadership Development Proposed Proposed % of maximum 2018 increase % 2018 increase 55 Achievements Target – introduction of standardised and more global processes and systems global processes and more of standardised – introduction Target the Group. across and productivity cost management to enable improved and successfully was planned, programme Service Centre Shared Execution on time and in budget period. implemented in the three-year functions fully transitioned with Businessand with Finance and Marketing been 2018. In-country back office teams have to be completed in Technology in cost per and helped to achieve a reduction in size between 30-75% reduced fee earner over the plan. of 21% been commenced implementation in 2016 and has Global Finance System 2018. from to be delivered improvements productivity partially completed with Cost Management, Financial, Strategic and Management Information Relative Gross Profit Growth Profit Relative Gross Weighting (max Weighting % of award) 02 100% 100% CFO: 7.5% Page People Development Cumulative EPS Chief Executive Officer UK Employee Population Chief Executive Officer UK Employee Population UK Employee Population Chief Executive Officer oup replaced both annual bonus and LTIP with the new ESIP. For like-for-like comparison, the table shows the change in the cash element of the 2016 comparison, For like-for-like with the new ESIP. both annual bonus and LTIP oup replaced CFO actual opportunity opportunity CEO actual CFO maximum CEO maximum
Legacy 2015 Long-Term Incentive Plan Performance Outcome Incentive Plan Performance Legacy 2015 Long-Term
Performance metric annual bonus and 2017 ESIP. For information, the total ESIP award for the performance period ending 31 December 2017 was £2,053k (of which 60% is deferred) which is 2017 was £2,053k (of which 60% is deferred) for the performance period ending 31 December For information, the total ESIP award annual bonus and 2017 ESIP. 239.5% above the total annual bonus for 2016 (of which 0% was deferred). For 2017, PageGr Salary Benefits Total CEO (% of max) CEO Total (% of max) CFO Total Annual Cash Incentive Cost Management, Financial, Strategic and Management Information comparison. increase for the UK employee population in the same period. Also included is the proposed 2018 salary increase for the purpose of 2018 salary increase for the UK employee population in the same period. Also included is the proposed increase The following table provides a summary of the 2017 increase in base salary for the Chief Executive Officer compared to the average in base salary for the Chief Executive Officer compared a summary of the 2017 increase The following table provides Percentage Change in Remuneration for the Chief Executive Officer Percentage The UK employee population was chosen as the most relevant population comparison as the Chief Executive Officer is based in the UK. population comparison as the Chief Executive Officer is based in the The UK employee population was chosen as the most relevant 2. 1. Represents average increase. 1. Represents Note: Directors’ Remuneration Report
Details of the Legacy Long-Term Incentive Award made in 2017 On 16 March 2017 an award of shares under the legacy Long-Term Incentive Plan was made to each of the Chief Executive Officer and the Chief Financial Officer as follows:
% of Award if vesting at End of performance Executive Type of Award Basis of Award Face Value threshold period
Steve Ingham 276,387 shares 200% of salary £1,203,499 25 31 December 2019
Kelvin Stagg 140,662 shares 175% of salary £612,498 25 31 December 2019
Note: The market price of the shares as at the date of grant was 435.50p. The performance conditions attaching to the Long-Term Incentive Plan awards can be found below and on page 72. Outstanding Share Awards This section sets out the share interests of the Executive Directors under the legacy Executive Share Option Scheme, the 2009 Share Option Scheme and the Long-Term Incentive Plan. Long-Term Incentive Plan Details of awards made under the Long-Term Incentive Plan that remain outstanding at 31 December 2017 are as follows:
Number of shares Granted Vested Lapsed Number of at 1 during during during shares at 31 End of Grant January the the the December performance Vesting Executive date 2017 year year year 2017 period date
Steve Ingham 11 March 2014 227,273 – (136,363) (90,910) – 31 December 2016 11 March 2017
Steve Ingham 20 March 2015 211,413 ––– 211,413 31 December 2017 20 March 2018
Steve Ingham 18 March 2016 284,865 ––– 284,865 31 December 2018 18 March 2019
Steve Ingham 16 March 2017 – 276,387 –– 276,387 31 December 2019 16 March 2020
Total 723,551 276,387 (136,363) (90,910) 772,665
Kelvin Stagg 11 March 2014 70,248 – (42,149) (28,099) – 31 December 2016 11 March 2017
Kelvin Stagg 20 March 2015 84,191 – –– 84,191 31 December 2017 20 March 2018
Kelvin Stagg 18 March 2016 133,298 – –– 133,298 31 December 2018 18 March 2019
Kelvin Stagg 16 March 2017 – 140,662 –– 140,662 31 December 2019 16 March 2020
Total 287,737 140,662 (42,149) (28,099) 358,151
The performance criteria relating to the Long-Term Incentive Plan awards granted in the year are as follows:
Performance Measure Weighting (% of award) % of award vesting at threshold
Cumulative 3-year real EPS 62.5 25
Comparator gross profit growth 12.5 25
Strategic targets 25 25 The last LTIP award was granted in March 2017 under the existing policy before the new Directors' Remuneration policy came into force. The face value of awards were 200% of base salary for the Chief Executive Officer and 175% of base salary for the Chief Financial Officer. From 2018 there will be no further awards under the LTIP, with future awards being made under the ESIP. The shares subject to the cumulative three-year EPS performance condition will vest as follows after the completion of the three-year performance period: • 25% will vest for achieving three-year cumulative EPS of 69p; • 100% of the shares will vest for achieving three-year cumulative EPS of 84p; and • Between 25% to 100% of the shares will vest for three-year cumulative EPS in between 69p and 84p.
71 | Corporate Governance STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION period period Exercise Exercise Exercise Corporate Governance | 72 Corporate 187.5 2012-2019 477.0 2015-2022 381.5 2013-2020 381.5 2013-2020 price (p) Exercise price (p) Exercise Exercise
1 1
1 1 2017 2017 30,000 491.080,000 2014-2021 20,000 30,000 50,000 50,000 374,147 374,147 options at Number of options at Number of 31 December 31 December – – – – – – – – year year Lapsed Lapsed during the during the – – – – – – – – the year year during Exercised Exercised Exercised Exercised during the 2017 20,000 30,000 80,000 30,000 2017 50,000 50,000 1 January 374,147 374,147 options at Number of oss profit growth of the comparator group; growth oss profit e available for exercise. 1 January options at Number of es will vest for achieving gross profit growth in between median and upper quartile. in growth profit gross es will vest for achieving date Grant Grant date 9 March 2009 9 March 10 March 2010 10 March 10 March 2010 10 March 11 March 2011 11 March 12 March 2012 12 March es will vest for achieving the upper quartile gross profit growth of the comparator group; and of the comparator group; growth profit the upper quartile gross es will vest for achieving
25% will vest for achieving the median gr 25% will vest for achieving 100% of the shar of the shar Between 25% to 100%
At 31 December 2017 all options had vested and wer
Executive Executive
Kelvin Stagg Kelvin Stagg Steve Ingham Kelvin Stagg Total Kelvin Stagg Total Total
contracts with the Company. They are appointed for a fixed term of three years, during which period the appointment may be terminated appointed for a fixed term of three They are contracts with the Company. Non-Executive Directors, including the Chairman of the Board, are engaged under letters of appointment and do not have service engaged are including the Chairman of the Board, Non-Executive Directors, the event of termination. companies for twelve months following termination of employment. The Remuneration Committee has the right to exercise mitigation in mitigation Committee has the right to exercise companies for twelve months following termination of employment. The Remuneration preventing the Executive Directors from soliciting key employees, clients and candidates of the employing company and Group and candidates of the employing company and Group soliciting key employees, clients from the Executive Directors preventing preventing the Executive Directors from competing with the Group for six months following the termination of their employment and for six months following the termination of their employment competing with the Group from the Executive Directors preventing All Executive Directors’ service contracts contain a twelve month notice period. The service contracts also contain restrictive covenants service contracts contain a twelve month notice period. The service contracts also contain restrictive All Executive Directors’ Service Letters of Appointment Contracts and Steve Ingham does not hold any options under The Michael Page 2009 Share Option Scheme. Steve Ingham does not hold any options under The Michael Page 2009 Share Note: available for exercise. 1. At 31 December 2017 45,030 of the options had vested and were The Michael Page 2009 Share Option Scheme The Michael Page 2009 Share was 464.50p per share, with a range during the year of 393.10p to 525.50p per share. was 464.50p per share, The market price of the shares as at 29 December 2017 (the last business day of 2017 when the London Stock Exchange was open) as at 29 December 2017 (the last business day of 2017 when The market price of the shares 1. Note: The Michael Page Executive Share Option Scheme The Michael Page Executive Share Option Scheme that remain outstanding at 31 December 2017 are as follows: outstanding at 31 December 2017 are Option Scheme that remain Details of options granted under The Michael Page International plc Executive Share Option Scheme and The Michael Page 2009 Share 2009 Share Page International Option Scheme and The Michael Page Details of options granted under The Michael Share plc Executive be found on pages 69 and 70. The outturn of performance against the comparator group for the 2015 award can be found on page 69. can for the 2015 award and 70. The outturnbe found on pages 69 against the comparator group of performance Option Scheme Executive Share targets for each of the awards once the final vesting outcome has been determined. The performance targets for the 2015 award can the 2015 award determined. The performance targets for once the final vesting outcome has been awards targets for each of the currently considers the targets for the other performance measures to be commercially sensitive and will disclose the performance sensitive to be commercially for the other performance measures considers the targets currently against relevant divisions: Adecco, Hays, Hudson, Manpower, Randstad, Robert Half, Robert Walters and SThree. The Committee and SThree. Half, Robert Walters Randstad, Robert Hays, Hudson, Manpower, divisions: Adecco, against relevant • • only against organic growth is measured and practical, relevant the following companies and where comprises The comparator group • The shares subject to the comparator gross profit measure will vest as follows after the completion of the three year performance period: year completion of the three as follows after the will vest measure profit to the comparator gross subject The shares Directors’ Remuneration Report
Relative Importance of Spend on Pay by either party upon giving one month’s written notice or in accordance with the provisions of the Articles of Association of the Company. There are no provisions on payment for early termination in the letters of appointment. After the initial three-year term, they may be The graph below shows details of the Company’s retained profit after tax, distributions by way of dividend, shares purchased by the reappointed for a further term of three years, subject to annual re-election at the Annual General Meeting. Copies of the service contracts Michael Page Employees’ Benefit Trust, overall spend on pay to all employees (see Note 4 in the financial statements on page 103) overall and letters of appointment are available for inspection during normal business hours at the Company’s registered office. spend on Directors’ pay as included in the single figure table on page 65 and the tax paid in the financial year. The percentage change to the prior year is also shown. Executive Director Service Contract Date Unexpired Term Notice Period
Steve Ingham 31 December 2010 No specific term 12 months
Kelvin Stagg 6 June 2014 No specific term 12 months +14% Non-Executive Directors Letter of Appointment Date Unexpired Term at 31 December 2017 500 454.4 Simon Boddie 24 September 2015 7 months 398.5 2017 400 Patrick De Smedt 1 August 2015 6 months 2016 Danuta Gray 9 December 2016 24 months £m 300
Michelle Healy 2 September 2016 22 months 200 +15% +39% David Lowden 9 December 2015 6 months 83.1 72.1 +69% +17% 100 78.3 56.3 -100% Sylvia Metayer 22 August 2017 32 months 38.2 32.5 0 15.1 5.9 3.5 Angela Seymour-Jackson 22 August 2017 33 months 0 Profit after Dividends Shares Overall spend Overall spend Tax paid Statement of Directors’ Shareholdings tax (£m) paid (£m) purchased by on pay (£m) on Directors’ (£m) It is the Company’s policy that Executive Directors are required to build and hold a direct beneficial holding in the Company’s Ordinary the EBT (£m) pay (£m) shares of an amount equal to two times their base salary. As at 31 December 2017 Steve Ingham complied with this requirement. Kelvin Stagg who was appointed a Director during 2014 is in the process of building the required minimum holding. The beneficial interests of the Directors who served during 2017, and their connected persons, in the Ordinary shares of the Company are shown in the table below. The table shows interests which are held outright and does not include interests held in shares which are subject to ongoing vesting and/or performance conditions which are set out on page 71 or share options which have vested but have Implementation of the Remuneration Policy for Executive Directors in 2018 not been exercised, as set out on page 72. Base Salary The base salaries of the Executive Directors were considered with reference to the general salaries across the UK employee population. Value of Executive The Remuneration Committee decided to increase the salary of each of the Chief Executive Officer and the Chief Financial Officer by 2.3% Ordinary Ordinary holding Directors’ value which is in line with the increase awarded to the UK employee population. shares Ordinary shares No shares as at of holding as at as at acquired on longer a as at 31 31 31 December Executive 1 January vesting of legacy Purchased Disposal connected December December 2017 as a Executive Single Incentive Plan Directors 2017 ISP share award in year in year person 2017 2017 % of salary As set out in the Annual Statement and Directors’ Remuneration Policy, the first ESIP award will be paid in 2018. This award replaced the annual bonus and LTIP award that operated under the previous policy. The next ESIP award will be paid in April 2019 subject to both Steve Ingham 1,323,955 136,363 –– (14,386) 1,445,932 £6,759,732 1,123 annual performance over 2018, and long-term trailing performance over 2017 and 2018. The scorecard and weightings for this award are Kelvin Stagg 29,759 42,149 – (19,860) – 52,048 £243,324 70 set out below. Full retrospective disclosure will be provided in next year’s Annual Report on Remuneration.
Notes: 1. In addition to the Ordinary shares shown in the table above, Steve Ingham and Kelvin Stagg have a beneficial interest in the Ordinary shares shown on page 71 as outstanding awards under the Long-Term Incentive Plan. Measure Weightings 2. Steve Ingham: During the year under review 136,363 Ordinary shares vested under the LTIP. Annual Performance PBT 30% 3. Kelvin Stagg: During the year under review 42,149 Ordinary shares vested under the LTIP. 4. The value of the Executive Directors’ holdings uses the closing share price on 29 December 2017 (the last business day of 2017 when the London Stock Exchange Non-financial, strategic 15% was open) of 467.5p per share. Personal performance 10%
As at 31 Longer-term metrics EPS growth 35% Non-Executive Directors Ordinary shares of 1p As at 1 January 2017 Purchased in the year December 2017 Relative Gross Profit 10% David Lowden Connected person 10,000 – 10,000
No other Non-Executive Director held Ordinary shares in the Company during the year under review. Pensions There have been no changes to the Directors’ shareholdings since 31 December 2017 to the date of this Directors’ Remuneration In line with the Remuneration Policy the Executive Directors receive a contribution to a defined contribution pension scheme or a cash Report. equivalent. The Chief Executive Officer receives a contribution equivalent to 25% of his base salary. The Chief Financial Officer receives a contribution equivalent to 20% of his base salary.
73 | Corporate Governance STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2017 32.5 2016 (£m) +17% Tax paid Tax 38.2 Corporate Governance | 74 Corporate 3.5 +69% pay (£m) 5.9 on Directors’ on Directors’ Overall spend 398.5 +14% on pay (£m) Overall spend 454.4 Weightings 30% 15% 10% 35% 10% s 15.1 -100% 0 Share the EBT (£m) purchased by purchased 56.3 +39% paid (£m) Dividends 78.3 PBT Non-financial, strategic Personal performance Profit Relative Gross EPS growth 72.1 +15% tax (£m) Profit after Profit 83.1
0
Measure Annual Performance Longer-term metrics Longer-term contribution equivalent to 20% of his base salary. equivalent. The Chief Executive Officer receives a contribution equivalent to 25% of his base salary. The Chief Financial Officer receives a The Chief Financial Officer receives a contribution equivalent to 25% of his base salary. equivalent. The Chief Executive Officer In line with the Remuneration Policy the Executive Directors receive a contribution to a defined contribution pension scheme or a cash receive In line with the Remuneration Policy the Executive Directors Pensions set out below. Full retrospective disclosure will be provided in next year’s Annual Report on Remuneration. in next year’s will be provided disclosure Full retrospective set out below. annual performance over 2018, and long-term trailing performance over 2017 and 2018. The scorecard and weightings for this award are are and weightings for this award 2018. The scorecard annual performance over 2018, and long-term trailing performance over 2017 and the annual bonus and LTIP award that operated under the previous policy. The next ESIP award will be paid in April 2019 subject to both The next ESIP award policy. that operated under the previous award the annual bonus and LTIP As set out in the Annual Statement and Directors’ Remuneration Policy, the first ESIP award will be paid in 2018. This award replaced will be paid in 2018. This award the first ESIP award Remuneration Policy, As set out in the Annual Statement and Directors’ which is in line with the increase awarded to the UK employee population. to the UK employee awarded which is in line with the increase Executive Single Incentive Plan The Remuneration Committee decided to increase the salary of each of the Chief Executive Officer and the Chief Financial Officer by 2.3% the salary of each of the Chief Executive increase The Remuneration Committee decided to The base salaries of the Executive Directors were considered with reference to the general salaries across the UK employee population. to the general salaries across with reference considered were The base salaries of the Executive Directors Base Salary Implementation of the Remuneration Policy for Executive Directors in 2018 for Executive Directors in Policy Implementation of the Remuneration the prior year is also shown. the prior year is also spend on Directors’ pay as included in the single figure table on page 65 and the tax paid in the financial year. The percentage change change to The percentage tax paid in the financial year. table on page 65 and the in the single figure pay as included spend on Directors’ Michael Page Employees’ Benefit Trust, overall spend on pay to all employees (see Note 4 in the financial statements on page 103) overallall employees (see Note 4 in the financial Trust, overall spend on pay to Benefit Michael Page Employees’ The graph below shows details of the Company’s retained profit after tax, distributions by way of dividend, shares purchased by the purchased distributions by way of dividend, shares after tax, profit retained details of the Company’s The graph below shows Relative Importance of Spend on Pay Importance of Relative 100 200 300 400 500 £m Directors’ Remuneration Report
Implementation of the Remuneration Policy for the Chairman and Non-Executive Directors in 2018 The fees per annum for the Board Chairman and the Non-Executive Directors have been agreed as follows:
31 December 2017 From March 2018 Chairman £205,000 £209,000 Non-Executive basic fee £53,300 £54,300 Additional fees payable: Senior Independent Director £7,000 £7,000 Chairman of the Audit Committee £14,000 £14,000 Chairman of the Remuneration Committee £14,000 £14,000
Total Shareholder Return The performance graph below shows the movement in the value of £100 invested in the shares of the Company compared to an investment in the FTSE 250 index and the FTSE Support Services index over the period 31 December 2008 to 31 December 2017. The graph shows the Total Shareholder Return generated by the movement in the share price and the reinvestment of dividends. The FTSE 250 index and the FTSE Support Services indexes have been selected as the Company was a member of each index throughout the period. The table on page 76 shows the total remuneration of the Chief Executive Officer over the same nine year period.
31 Dec 2008 31 Dec 2009 31 Dec 2010 31 Dec 2011 31 Dec 2012 31 Dec 2013 31 Dec 2014 31 Dec 2015 31 Dec 2016 31 Dec 2017
450
416.80
400
353.88 353.78
350 331.78
305.21 298.43 291.47 300 287.90 286.12
270.71 265.27 263.63 273.64
250 255.28 231.51
217.66
220.68 201.72 191.91 200 181.31 201.83 173.64
163.24 172.60 150.64 162.60 150 132.50 PageGroup FTSE 250 FTSEE SS
100 100.0
75 | Corporate Governance STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION 0 134,123 Votes Withheld Votes Corporate Governance | 76 Corporate % Votes Votes Against % Votes For Votes 163,167,784 66.18239,274,272 83,370,082 97.00 33.82 7,397,717 3.00 y definition, did not have the concept of “maximum”. As a result it is not possible to provide this result it is not possible to provide As a y definition, did not have the concept of “maximum”. AGM 8 June 2017 8 June 2017
N/A N/A N/A N/A 58% 71% 68% 60% N/A 2009 2010 2011 2012 2013 2014 2015 2016 2017 £1,010,000 £2,184,000 £1,647,000 £2,723,000 £1,318,000 £1,494,000 £2,074,000 £2,089,000 £3,581,000
Prior to 2012 the Company operated uncapped incentives which, b Prior to 2012 the Company operated uncapped incentives information historically. However, following the changes in 2012 it is possible to provide this information for the years 2013, 2014, 2015 and 2016. following the changes in 2012 it is possible to provide However, information historically. Resolutions CEO
Single remuneration total Remuneration Policy Report Remuneration Report Directors’ (% of maximum) (note 1) Short-term incentives Long-term incentives (% of maximum) N/A N/A N/A N/A N/A N/A N/A 60% 55.35% Executive Single Incentive Plan (% of maximum) N/A N/A N/A N/A N/A N/A N/A N/A 91% Danuta Gray Chairman of the Remuneration Committee Signed on behalf of the Board of Directors Signed on behalf of the Board The Directors’ Remuneration Report has been approved by the Board of Directors. by the Board Remuneration Report has been approved The Directors’ 2018 6 March non-executive director of Debenhams plc. No other Executive Director earned external directorships. of Debenhams plc. No other Executive Director any fees from non-executive director During the year Steve Ingham, Chief Executive Officer, earned and retained £42,500 (2016: £42,500) in respect of fees from his role as a his respect of fees from earnedretained £42,500 (2016: £42,500) in and During the year Steve Ingham, Chief Executive Officer, . website at www.page.com on the Company’s External Directorships A full schedule in respect of shareholder voting on all the resolutions put to shareholders at the 2017 Annual General Meeting is available at the 2017 Annual General put to shareholders voting on all the resolutions of shareholder A full schedule in respect resolutions to be passed. resolutions the 2017 Annual General Meeting. Each resolution required a simple majority of the votes cast to be in favour in order for each of the in order a simple majority of the votes cast to be in favour required the 2017 Annual General Meeting. Each resolution below shows the results of the voting on the Remuneration Policy and the Directors’ Remuneration Report put to shareholders at Remuneration Report put to shareholders of the voting on the Remuneration Policy and the Directors’ below shows the results At the Company’s Annual General Meeting held on 8 June 2017, shareholders approved the current Remuneration Policy. The table Remuneration Policy. current the approved Annual General Meeting held on 8 June 2017, shareholders At the Company’s 1. at the Annual General Meeting Statement of Voting Notes: Directors’ Remuneration Report
Directors' Remuneration Policy PageGroup is a global business that operates in a cyclical industry in which the retention and ongoing motivation of Executives and management continuity is critical to the success of the Company. As a result, the Directors’ Remuneration Policy set out in this report has been designed to encourage long-term decision making, to avoid undue volatility in remuneration outcomes, and to act as an effective retention tool during market downturns. The Remuneration Policy set out below was approved by shareholders at the Company's Annual General Meeting held on 8 June 2017 and became effective from that date. This new policy replaced the Annual Bonus and LTIP with a single plan, the Executive Single Incentive Plan (‘ESIP’) but did not increase the maximum total quantum available to executives. It simplified remuneration; introduced a single balanced scorecard; incorporated deferral of a significant portion of any award; introduced post-vesting holding periods on all vesting shares for executives who have not met the shareholding requirement; maintained both annual and longer-term performance measurement; and results in simpler disclosure of remuneration outcomes. There are no other new components in the remuneration policy.
Policy Table for Executive Directors
Purpose and link Element to strategy Operation Maximum opportunity
Salary Attract, retain and Salary levels (and subsequent increases) are set after Salaries will not increase by (Fixed reward high calibre reviewing various factors including individual and Company more than RPI +5% except pay) Executive Directors performance, role and responsibility, internal relativities increases in excess of this such as the increases awarded to other employees may be awarded in the case and prevailing market levels for Executive Directors at of new Executive Directors companies of comparable status and market value, taking where it is appropriate to into account the total remuneration package. offer a below market salary initially on appointment and Salaries are normally reviewed annually. a series of staged increases, Salary is paid monthly and increases are generally effective subject to performance and from 1 January. experience in role, to bring to a market competitive salary. Aim for market competitive salaries.
Benefits Attract, retain Competitive benefits including car allowance or company Competitive benefits in line (Fixed and reward high car (including running costs), private medical insurance for with market practice. pay) calibre Executive the individual and family, permanent health insurance and Directors four times salary life assurance. Provision of Provision of relocation assistance and any associated opportunities for costs or benefits (including but not limited to housing connecting with benefits, personal tax advice and school fees) upon clients, investors appointment if/when applicable. The Company may also and staff to provide tax equalisation arrangements. facilitate growth Membership of clubs as appropriate for the development strategy of business.
77 | Corporate Governance STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Corporate Governance | 78 Corporate CEO: 25% of salary. Other Executive Directors: 20% of salary. The ESIP allows for annual of up to a maximum awards forof 375% of base salary each Executive Director. Maximum opportunity measures should be stretching yet should be stretching measures achievable, and set with reference to internal plans and external expectations targets should not incentivise excessive risk taking targets for financial and strategic
• financial performance. The Committee mindful that: are • Legacy arrangements Legacy Remuneration this Directors’ In approving Policy Report, authority is given to the
es should ed against a balanced e used currently e used currently oportion of any performance measur a significant pr PBT and EPS ar key measures because they are of business performance and profitability provide alignment between the provide of management and those interests of shareholders incentive scheme should be linked financial performance to Group
Strategic measures will focus Executives Strategic measures on key drivers that underpin long-term • • • Executive Directors may receive a defined contribution may receive Executive Directors pension benefit or cash supplement. scorecard, to support the company’s strategy. strategy. to support the company’s scorecard, strategic/ Performance targets will be a mix of financial, comprise,operational and personal targets which may strategic key limited to, the following: PBT; not but are people development; cost management; relative projects; and EPS. vs a comparator group; Profit Gross who have A post-vesting holding period applies. Directors of 200% of requirement the shareholding not reached from to hold vested shares base salary will be required years post- each tranche of the ESIP for a further two of meeting taxvesting, except for sales for the purposes liabilities on vesting and exercise. will normally be A minimum of 70% of the possible award linked to financial metrics. period butDividend equivalents accrue during the vesting vest. to the extent awards only released are will apply to the total Malus and clawback provisions portions, for cash and deferred including award, of risk failure misstatement of performance, substantial misconduct. gross and control, Performance will be measur Awards are paid in cash (40%), and deferred shares (60%) shares paid in cash (40%), and deferred are Awards over a minimum three-year which vest in equal tranches period. with performance annual awards The plan consists of and trailing long-term over both one year measured will At least 40% of any award performance periods. metrics. depend on trailing longer-term Operation
es should drive Attract, retain Attract, retain and fairly reward high calibre Executive Directors Rewards both Rewards short and long term performance of Aligns interests Executive Directors with shareholders to strategy Purpose and linkPurpose and
performance measur and reward the achievement of key the achievement and reward short and long-term financial and strategic goals
Pension (Fixed pay) Executive Single Incentive Plan (ESIP) Element
the third and subsequent awards, performance will be measured over a three-year performance period. a three-year over performance will be measured and subsequent awards, the third in 2018 was based on 2017 EPS. For the second ESIP award, performance will be measured over a two-year performance period. For performance will be measured in 2018 was based on 2017 EPS. For the second ESIP award, To avoid measuring performance over periods already known at implementation, the trailing element for the first ESIP award to be made known at implementation, the trailing element for the first ESIP award avoid measuring performance over periods already To • by the following principles: setting targets the Committee is guided choosing performance measures and choosing performance measures Annual Remuneration Report. When is disclosed in detail in the Directors’ is disclosed in detail in the Directors’ and targets for each annual award and targets for each annual award measures and target setting Information on performance measures Choice of performance Directors’ Remuneration Report
Company to honour any commitments when setting the Executive Director Executive shareholding entered into with current or former Directors remuneration policy. Remuneration levels (such as the payment of a pension or for all employees are set in the context requirements awards pursuant to the terms of the legacy of internal relativities and market levels Shareholding requirements are operated share schemes such as the Long-Term of remuneration for comparable roles. to align Executive Directors’ interests Incentive Plan and the Deferred Bonus Policy for Executive Directors differs with those of shareholders. The current Plan) granted prior to the date that this from other senior executives in that requirement is 200% of base salary. policy takes effect. Details of any such Executive Director variable remuneration This will be achieved through the retention payments will be set out in the Directors’ is capped, whereas for other senior of half of any vesting share award (net Annual Remuneration Report as they arise. executives it is uncapped. This is in line of tax) made under the legacy deferred with practice in the recruitment industry bonus arrangement, and through the Consistency with where variable remuneration is funded application of two-year post-vest holding remuneration for the wider from an uncapped profit pool. This periods (net of tax) if the award was made arrangement provides a strong incentive under the legacy LTIP or the new ESIP. group for employees to grow PageGroup profit. The Committee reviews and considers remuneration across PageGroup
Our approach to recruitment Remuneration will be subject to the maximum levels as set out in the Directors Remuneration Policy in force at the time of appointment. As a result, the maximum level of variable remuneration is 375% of base salary under the ESIP (excluding any “buy out” payments). Individuals will participate in the ESIP up to the normal annual limit subject to: • Award levels in the year of appointment being pro-rated to reflect the proportion of the financial year worked • Performance measures and/or measurement periods may be adjusted for newly appointed Executive Directors, taking account of the timing of appointment and the individual’s role The table below sets out our approach to the treatment of outstanding awards of variable remuneration when recruiting externally or internally:
Element of remuneration External recruits Internal recruits
Treatment of May offer additional cash and/or share-based elements when Any variable pay element awarded in outstanding considered to be in the best interests of the Company and, therefore, respect of the prior role may be allowed awards shareholders, in order to ‘buy out’ forfeited remuneration. to pay out according to its terms on of variable grant. Any ‘buy-out’ payments would be based solely on remuneration remuneration lost when leaving the former employer and would be on terms that are no more favourable than the delivery mechanism (i.e. cash, shares, options) and time horizons. Where forfeited remuneration is performance related, any ‘buy-out’ payment would be subject to performance conditions determined by the Committee. The Committee may need to avail itself of the current Listing Rule 9.4.2 R to make such awards where doing so is necessary to facilitate, in exceptional circumstances, the recruitment of the relevant individual.
In addition, the structure of remuneration for a new Executive Director may differ temporarily from that in effect for other Executive Directors. The circumstances in which this may occur are as follows: • when it is appropriate to offer a below market salary initially, a series of salary increases may be given over the following few years subject to individual performance and experience in role which bring the incumbent to the determined salary level, reflective of the policy to pay market competitive salaries • the Committee may agree that the Company will meet certain costs associated with the recruitment (for example legal fees)
79 | Corporate Governance STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
72% £1,584k rget Max 59% Ta £1,077k emuneration plus Corporate Governance | 80 Corporate emuneration only £446k 100% 41% 28% Minimum arget: fixed remuneration plus 60% arget: fixed 0 (i.e. salary, benefits and pension) (i.e. salary, of the maximum payable under the and annual elements of the ESIP, 50% of the maximum payable under trailing elements of the longer-term the ESIP Maximum: fixed r maximum ESIP opportunity Minimum: fixed r T 500 2000 1500 1000 Chief Financial Officer
• the minimum remuneration receivable; receivable; the minimum remuneration • based on an annual salary The charts are for 2017, when the policy was approved, for the Chief Executive Officer for the and assume a Chief Financial Officer, maximum ESIP opportunity of 375% and 325% of maximum salary for the Chief Executive Officer and Chief Financial respectively. Officer Illustration of the application of the application Illustration policy of our remuneration an indication ofThe chart below gives be which could the total remuneration Officer by the Chief Executive received under theand Chief Financial Officer presented: scenarios are Three policy. in if they perform the amount receivable expectations; line with the Company’s and the maximum remuneration receivable. only indicative, Note that the charts are price movement and dividend as share accruals have been excluded and assumed. performance outcomes are Assumptions for each illustrative scenario as follows: are •
74% 26% ector ector has £3,044k omise any claims rget Max e continuity 61% Ta £2,040k ests of the Company eater proportion of the eater proportion £787k 100% 39% Minimum adjustment of performance the need to ensur the need to compr whether the Executive Dir whether a gr may have vested outstanding award served had the Executive Director out his notice whether the Executive Dir that payout is outcomes to ensure in the context of fair and reasonable overall performance. the Company’s the best inter the contribution of the Executive may that the Executive Director have a PILON payment received handover over an orderly presided Director to the success of the to Director Company during their tenure 0
500 Chief Executive Officer • The extent to which any awards made to which any awards The extent to the plans prior under legacy share vest date of this policy would effective wouldupon cessation of employment with their be determined in accordance terms and the plan rules. discretion of In considering the exercise Committee will takeas set out above, the circumstances. into account all relevant may (butFactors that the Committee take into accountshall not be obliged to) limited to, thewill include, but not be following: • • • • • • • 1500 1000 3500 3000 2500 2000
, retirement, injury, injury, , retirement, opriate circumstances at opriate circumstances
Other appr of the Committee. the discretion The company with which the disability, ill health or death in disability, service; A transfer of employment in Redundancy connection with the disposal of a business or undertaking; holds office Executive Director or employment ceasing to be a or member of the Group;
Committee’s discretion. discretion. Committee’s to time pro-ration at the Remuneration to time pro-ration clawback. They may also be subject continue to be subject to malus and established vesting dates and will Director and will normally vest at the Director awards may be retained by the Executive may be retained awards performance. Unvested deferred ESIP performance. Unvested deferred of the year worked and subject to • for the portion employment pro-rated for example due to: for their last year of for an ESIP award Director may be deemed a ‘good leaver’, may Director As a ‘good leaver’ they will be eligible In respect of the ESIP, an Executive of the ESIP, In respect dismissed for cause will not be eligible awards. deferred An Executive Director who resigns or is who resigns An Executive Director and will forfeit any for an ESIP award holiday. • made in respect of accrued but untaken made in respect 31 December 2013. A payment may be • • apply to Executive Directors in post at apply to Executive Directors phasing and reduction of PILON will not phasing and reduction if there are alternative earnings. are if there The period and be subject to reduction period and be subject to reduction phased over the remainder of the notice phased over the remainder to the executive. This payment can be pension that would have been payable the amount of base salary, benefits and the amount of base salary, (PILON) as a lump sum equivalent to can make a payment in lieu of notice individual on garden leave. The Company individual on garden fulfil his current duties or may place the fulfil his current may require the individual to continue to the individual to continue may require period during which time the Companyperiod during which time and pension for the duration of his noticeand pension for the duration continue to receive basic salary, benefits basic salary, continue to receive either party, an Executive Director can an Executive Director either party, appropriate. Should notice be served by Should notice be served appropriate. legal principles, including mitigation, aslegal principles, including are calculated in accordance with normal calculated in accordance are payments due to an Executive Director Executive Director payments due to an of office On termination, any compensation Policy on payment for loss on payment Policy Directors’ Remuneration Report
Statement of consideration Remuneration Policy include (but are not payment for loss of office” section on limited to): page 80) of employment conditions • the choice of financial performance – adjustments required in certain elsewhere in the Group measures in variable remuneration circumstances (e.g. rights issues, PageGroup does not consult directly and the choice of performance corporate restructuring and with employees when determining targets for those measures special dividends) remuneration policy for Executive • the treatment of leavers in the ESIP – the ability to adjust existing Directors. However, increases in (as described in the “Policy on performance conditions for pay across the senior management payment for loss of office” section exceptional events so that they population and the wider workforce are on page 80) can still fulfil their original purpose taken into account when setting pay • certain discretions as set out in the (subject to the amended levels for Executive Directors. ESIP plan rules such as: condition not being materially Statement of consideration of – the timing of grant of award and/ less challenging) or payment shareholder views – the size of an award and/ External Non-Executive The Committee considers shareholder or a payment (subject to the Director positions feedback received in relation to the AGM maximums set out in the Future each year at its first meeting following Policy Table for Executive Subject to Board approval, Executive the AGM. The Remuneration Committee Directors) Directors are permitted to take on Chairman will seek to inform major non-executive positions with other – determination of a good leaver shareholders of any material changes to companies. Executive Directors are (in addition to any specified the Remuneration Policy in advance and permitted to retain their fees in respect categories) for incentive plan will generally offer a meeting to discuss of such positions. Details of outside purposes based on the rules these changes. directorships held by the Executive of the ESIP, and the resulting Directors and any fees that they Key areas of discretion treatment of the award (as received are provided on page 76 of the described in the “Policy on Key areas of Committee discretion in the Directors’ Annual Remuneration Report. Policy Table for Board Chairman and Non-Executive Directors The Board Chairman and Non-Executive Directors receive a fee for their services and do not receive any other benefits from the Group, nor do they participate in any of the bonus or share schemes. The fees recognise the responsibility of the role and the time commitments required, and are not performance related or pensionable. They are paid monthly in cash and there are no other benefits.
Purpose and link Element to strategy Operation Maximum opportunity Fees Attract, retain and Reviewed by the Board after recommendation by the The maximum aggregate fairly reward high Chairman and Chief Executive (and by the Committee in fees for all Directors allowed calibre individuals. the case of the Chairman) taking into account individual by the Company’s Articles of responsibilities, such as committee Chairmanship, time Association is £600,000. commitment, general employee pay increases, and Current fee levels are set prevailing market levels at companies of comparable status out in the Directors’ Annual and market value. Remuneration Report. Fee increases are normally reviewed annually and are generally effective from 1 March.
The above principles will also be applied for the recruitment of new Non-Executive Directors.
Service contracts and letters and Group companies for twelve months are no provisions on payment for early following termination of employment. termination in the letters of appointment. of appointment After the initial three year term they may Non-Executive Directors, including the be reappointed for a further term of three All Executive Directors’ service contracts Chairman of the Board, are engaged years, subject to annual re-election at contain a twelve month notice period. under letters of appointment and do Annual General Meetings. The service contracts also contain not have service contracts with the restrictive covenants preventing the Company. They are appointed for a fixed Further detail on service contracts and Executive Directors from competing term of three years, during which period letters of appointment are set out on with the Group for six months following the appointment may be terminated by page 72 and copies are available for the termination of employment and either party upon one month’s written inspection at the Company’s registered preventing the Executive Directors from notice or in accordance with the Articles office during normal business hours. soliciting key employees, clients and of Association of the Company. There candidates of the employing company
81 | Corporate Governance STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Corporate Governance | 82 Corporate Results and Dividends set out in for the year are The results the Consolidated Income Statement on profit An analysis of revenue, page 91. is shown in and net assets by region A final and 102. on pages 101 Note 2 per Ordinary dividend for 2016 of 8.23p was paid on 19 June 2017; an share interim dividend for 2017 of 3.90p per paid on 11 October was share Ordinary 2017; and a special dividend of 12.73p was also paid on 11 October per share 2017. the payment recommend The Directors of a final dividend for the year ended Directors who served throughout The Directors David were the year under review Lowden, Simon Boddie, Patrick De Steve Ingham, Smedt, Danuta Gray, Michelle Healy and Kelvin Stagg. Ruby McGregor-Smith Baroness on 23 May ceased to be a Director 2017. Sylvia Metayer and Angela each appointed were Seymour-Jackson of the as a Non-Executive Director Company on 1 September 2017 and Danuta 1 October 2017 respectively. herself for Gray has decided not to offer at the forthcoming Annual re-election General Meeting so will cease to be a 7 June 2018. from Director per 31 December 2017 of 8.60p June 2018 18 on share Ordinary of on the register to shareholders May 2018. If approved members on 18 at the Annual General by shareholders in a total ordinary Meeting, this will result per dividend for the year of 12.5p 11.98p). This, (2016: share Ordinary together with the payment of the special dividend, gives a total dividend for the (2016: 18.44p). year of 25.23p 3 82 83 84 84 39 39 54 83 83 23
122 121 125 124 124
71-73 26-28 46-50 52-55 108-112 117-121 124-126 125-126 116-117
The Directors present their Report together with the consolidated financial statements for the year statements for the consolidated financial together with their Report present The Directors 2017. ended 31 December Report can be found elsewhere of the Directors’ requirements fulfils the Certain information that into this Directors’ This information is incorporated in the table below. in this document as noted made in, and incorporated into, to be required disclosures A summary of the Report by reference. below. Report is given this Directors’
tement
ormation auditor in respect of the audit to the
gement
raphies who served of Directors during the year gement
bility ttaching to shares y and associated undertakings and branches pital and shareholder rights pital and acquisition of own shares te Governance Report
ted party transactions bility Statement
Subsidiar Financial risk mana Rela Post balance sheet events – Substantial shareholders Results and dividends Share ca Directors’ disclosure of inf Directors’ Responsibility Sta Going concern Via Appointment and replacement of Directors Articles of Association Powers of Directors Share ca – Restriction on transfer of shares – Rights a – Restrictions on voting – Details of employee share schemes Likelydevelopments future Policy on disa Employee enga Greenhouse gas emissions Names and biog Corpora Directors’ interests
Elaine Marriner, Company Secretary Company Elaine Marriner, Directors’ Report Directors’ Directors’ Report
Share Capital and abilities. The Group’s employment Financial Instruments and policy includes, where practicable, the As at 31 December 2017 the Company’s continued employment of those who may Financial Risk Management issued capital comprised a single class of become disabled during their employment Details of the Group’s use of financial 326,808,701 Ordinary shares of 1p each, and the provision of training and career instruments, including financial risk totalling £3,268,087.01. At the Annual development and promotion, where management objectives and policies of General Meeting held on 8 June 2017 the appropriate. The Group also remains the Group, and exposure of the Group to shareholders authorised the Company committed to employee involvement certain financial risks can be found in Note to purchase up to a maximum of 10% of throughout the business. Employees are 20 on pages 117 to 121. the issued share capital in the market. No kept well informed of the performance shares were repurchased during the year. and strategy of the Group through Significant Agreements A further resolution in this respect will be personal briefings, regular meetings, put to shareholders at the forthcoming Yammer (the Group’s internal social Containing Change of Control Annual General Meeting. collaboration site), emails and other Provisions During the year 833,246 shares were communications from the Chief Executive The Company has an invoice discounting issued to satisfy share options exercised. Officer and members of the Executive facility that terminates on a change of The Company reviews the award of Board. Further details of employment control, with prepaid amounts being shares made under the various employee policies and employee involvement can repayable. and executive share plans in terms of their be found in the Strategic Report on pages effect on dilution limits and complies with 26 to 28. Directors’ and employees’ contracts the dilution limits recommended by The do not normally provide for payment for Investment Association. Directors’ Indemnities loss of office or employment as a result of a change of control. However, the The Company has not granted separate Company operates several share and Employment Policy and indemnities to the Directors. The share option schemes for the benefit of its Company purchased and maintained Employee Involvement Executive Directors and employees, the Directors’ and Officers’ Liability Insurance rules of which contain provisions which The Group continues to give full and throughout the period under review, which may cause options and share awards fair consideration to applications for gives appropriate cover for legal actions granted to vest on a change of control. employment made by disabled persons, brought against the Directors. having regard to their respective aptitudes
Substantial Shareholders At 31 December 2017 the Company had been notified, in accordance with the FCA Disclosure and Transparency Rules, of the undermentioned noted interests in its Ordinary share capital. The percentage of voting rights shown below are as at the date of notification.
% of voting Shareholder No. of Ordinary shares rights
Sanne Fiduciary Services Ltd as Trustee of the Michael Page Employees’ Benefit Trust 16,243,053 4.98
Baillie Gifford & Co 16,512,860 Below 5%
Heronbridge Investment Management LLP 16,546,842 5.067
The following notifications were received during the period 1 January 2018 to 6 March 2018:
% of voting Shareholder No. of Ordinary shares rights
Sanne Fiduciary Services Ltd as Trustee of the Michael Page Employees’ Benefit Trust 13,007,956 3.96%
Since the date of disclosure, the above shareholdings may have changed.
83 | Corporate Governance STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Corporate Governance | 84 Corporate Annual General Meeting The Annual General Meeting of the Company will be held on 7 June 2018. The notice of meeting can be found in the document which accompanies this Annual Report and Accounts. It is also website available on the Company’s . www.page.com of the Board By order Elaine Marriner Company Secretary 2018 6 March 3. Directors’ Confirmation 3. Directors’ for responsible are The Directors the Annual Report in preparing and with applicable law accordance the from Having taken advice regulations. considers Board Audit Committee, the Accounts,the Annual Report and balanced and fair, taken as a whole, as the that it provides understandable and for shareholders information necessary performance, to assess the Company’s strategy. business model and Neither the Company nor the Directors accept any liability to any person in the Annual Report except to to relation the extent that such liability could arise under English law. of Information to 4. Disclosure the Auditor enquiries, Having made the requisite as at aware are so far as the Directors is no the date of this Statement, there information (as defined audit relevant by section 418(3) of the Companies Act auditor 2006) of which the Company’s have taken and the Directors is unaware all the steps they ought to have taken to of any relevant make themselves aware audit information and to establish that of that auditor is aware the Company’s information.
ectors’ Report and the Strategic oup and parent company oup and parent esent information, including on the financial statements epare accounting policies, in a manner thataccounting policies, in comparable reliable, relevant, provides information; and and understandable a going concern basis unless it is that the to presume inappropriate will continue Company and the Group in business. apply them consistently; make judgements and estimates that make judgements and and prudent; reasonable are pr pr select suitable accounting policies and accounting policies select suitable the Gr the Dir of the Report include a fair review development and performance of the business and the position of the Group together with a description of the principal risks and uncertainties that it faces. financial statements, prepared in financial statements, prepared with IFRS as adopted by accordance the EU, give a true and fair view of the assets, liabilities, financial position and parent of the Group and profit company; and
(vi) for keeping responsible are The Directors which disclose records accounting proper accuracy at any time with reasonable the financial position of the Company and to enable them to and of the Group the financial statements and that ensure Remuneration Report comply Directors’ with the Companies Act 2006 and, for the consolidated financial statements, Article 4 of the EU IAS Regulation. They for the system of also responsible are the internal for safeguarding control, assets of the Company and the Group steps and, hence, for taking reasonable and detection of fraud for the prevention and other irregularities. for responsible are The Directors the maintenance and integrity of the corporate and financial information website. included on the Company’s Legislation in the United Kingdom andgoverning the preparation dissemination of financial statements may in other jurisdictions. legislation from differ (iv) (v) (iii) 2. Directors’ Responsibility 2. Directors’ Statement confirms to the best of its The Board knowledge that: (i) (ii)
epared epared ent company oup financial
in accordance with Internationalin accordance (“IFRS”) Financial Reporting Standards as adopted for use in the EU and Article 4 of the EU IAS Regulations; state whether the par statements have been pr state whether the Gr financial statements have been with IFRS as in accordance prepared adopted for use in the EU;
(ii) (i) the Directors are required to: required are the Directors In preparing those financial statements In preparing profit or loss of the Group for that period. or loss of the Group profit at the end of the financial year and of the affairs of the Company and of the Group of the Company and of the Group affairs give a true and fair view of the state of and going concern. financial year financial statements which of information to the Company’s auditor of information to the Company’s for each to prepare the Directors requires relation to their responsibilities, disclosure disclosure their responsibilities, to relation Accounting Records Company law of England and Wales statements made by the Directors in statements made by the Directors 1. Financial Statements and accounting records. Detailed below are Detailed below are accounting records. law and regulations and keeping proper and keeping proper law and regulations Accounts in accordance with applicable Accounts in accordance preparing the Annual Report and preparing The Directors are responsible for responsible are The Directors of Responsibility forthcoming Annual General Meeting. Directors’ Statements remuneration will be proposed at the will be proposed remuneration to authorise the Directors to set their to authorise the Directors concerning their reappointment andconcerning their reappointment in office and, accordingly, resolutions in office and, accordingly, Ernst & Young LLP are willing to continue LLP are Ernst & Young 2017. Reappointment of Auditor and Referendums Act 2000. and Referendums since 31 Decemberbalance sheet events as defined by the Political Parties, Electionas defined by the Political post have been no significant There election candidates anywhere in the world election candidates anywhere Balance Sheet Events Post to political organisations or independentto political organisations policy of not making political donationspolicy of not making during the year. The Company has a The Company during the year. No political contributions were made were No political contributions Political Contributions Political Independent Auditor’s Report to the Members of PageGroup plc
Opinion In our opinion: • PageGroup plc’s Group financial statements and Parent company financial statements (the “financial statements”) give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2017 and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; • the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union as applied in accordance with the provisions of the Companies Act 2006; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006, and, as regards the group financial statements, Article 4 of the IAS Regulation. We have audited the financial statements of PageGroup plc which comprise:
Group Parent company Consolidated income statement Consolidated statement of comprehensive income Consolidated balance sheet Balance sheet Consolidated statement of changes in equity Statement of changes in equity
Consolidated statement of cash flows Statement of cash flows
Related notes 1 to 24 to the financial statements, including a summary Related notes 1 to 24 to the financial statements including a summary of significant accounting policies of significant accounting policies
The financial reporting framework that the Companies Act 2006. Our audit work • the directors’ statement set has been applied in their preparation is has been undertaken so that we might out on page 84 in the financial applicable law and International Financial state to the company’s members those statements about whether they Reporting Standards (IFRSs) as adopted matters we are required to state to them considered it appropriate to by the European Union and, as regards in an auditor’s report and for no other adopt the going concern basis of the parent company financial statements, purpose. To the fullest extent permitted accounting in preparing them, and as applied in accordance with the by law, we do not accept or assume their identification of any material provisions of the Companies Act 2006. responsibility to anyone other than the uncertainties to the entity’s ability to company and the company’s members as continue to do so over a period of at Basis for opinion a body, for our audit work, for this report, least twelve months from the date of or for the opinions we have formed. approval of the financial statements We conducted our audit in accordance • whether the directors’ statement with International Standards on Auditing Conclusions relating to principal in relation to going concern (UK) (ISAs (UK)) and applicable law. Our required under the Listing Rules responsibilities under those standards risks, going concern and viability in accordance with Listing Rule are further described in the Auditor’s statement 9.8.6R(3) is materially inconsistent responsibilities for the audit of the financial We have nothing to report in respect of with our knowledge obtained in the statements section of our report below. the following information in the annual audit; or We are independent of the group and report, in relation to which the ISAs (UK) parent company in accordance with the • the directors’ explanation set out require us to report to you whether we ethical requirements that are relevant to on page 39 in the annual report have anything material to add or draw our audit of the financial statements in the as to how they have assessed the attention to: UK, including the FRC’s Ethical Standard prospects of the entity, over what as applied to listed public interest entities, • the disclosures in the annual report period they have done so and why and we have fulfilled our other ethical set out on pages 35 to 38 that they consider that period to be responsibilities in accordance with these describe the principal risks and appropriate, and their statement as requirements. explain how they are being managed to whether they have a reasonable or mitigated; expectation that the entity will be We believe that the audit evidence we • the directors’ confirmation set out able to continue in operation and have obtained is sufficient and appropriate on page 39 in the annual report meet its liabilities as they fall due to provide a basis for our opinion. that they have carried out a robust over the period of their assessment, assessment of the principal risks including any related disclosures Use of our report facing the entity, including those that drawing attention to any necessary qualifications or assumptions. This report is made solely to the would threaten its business model, company’s members, as a body, in future performance, solvency or accordance with Chapter 3 of Part 16 of liquidity;
85 | Financial Statements STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION Financial Statements | 86 We concluded that We recognised revenue for permanent and temporary placements recorded is correctly with in accordance revenue the Group’s criteria recognition and IFRS, and that the for expected provision was reversals revenue appropriate. Key observations communicated to the Audit Committee
evenue streams, we identified evenue streams, f testing for samples of revenue f testing for samples of revenue ocedures to validate the existence of ocedures epresenting greater than 2% of the Group’s than 2% of the Group’s greater epresenting nal entry testing around revenue, focusing on manual revenue, nal entry testing around emaining 2 components we tested the operating ed the level of permanent placement revenue reversals over reversals ed the level of permanent placement revenue e performed audit procedures centrally on a country-by-country e performed audit procedures transactions to check all revenue recognition criteria for the recognition transactions to check all revenue permanent and temporary placements had been met and that period. in the correct had been recognised revenue balances. and trade receivable accrued revenue testing over for a sample we performed period-end cut off revenue criteria for recognition transactions to check all revenue of revenue the permanent and temporary placements had been met and that period. in the correct had been recognised revenue Performed sampling pr Performed jour For any component r W occurring the risk of an undetected material error basis to address of revenue in these components. These comprised analytical review and ratio analysis of key performance indicators profit, and gross per fee earner. profit and gross including revenue and assessed the design of key controls to validate that revenue revenue to validate that and assessed the design of key controls with the and applied in accordance was appropriate recognition accounting policies. Group’s For the r and selected recognition over revenue of key controls effectiveness for placements a sample of permanent and temporary revenue recognition revenue detailed transaction testing to verify that the at the correct was recorded criteria had been met and revenue value. Performed period-end cut of Compar of non-completion of the last 12 months, which occur as a result against accrued recorded contractual placements, to the provision income to determine if the assumptions used to calculate the the provision also re-performed We appropriate. were provision calculation to confirm its accuracy. year end. entries and top-side adjustments specifically around For permanent and temporary r covering all For 9 of the components, we used data analytics between transactions in the year to test the correlation revenue and cash. accounts receivable accrued revenue, revenue,
e we performed full or specific audit procedures accounted for 83% of revenue, 83% of profit revenue, 83% of profit accounted for 83% of specific audit procedures e we performed full or • • • • • • 17% of the revenue For all other components which represent balance: • We performed the following full and specific scope audit procedures performed the following full and specific scope audit procedures We 83% of the at 11 components, which covered over this risk area balance: revenue • • Our response to the risk Our response
ectly ecognition for permanent and temporary placements ecognition for permanent oup materiality of £5.4 million which is based on 5% of profit before tax before million which is based on 5% of profit oup materiality of £5.4 The components wher Revenue r W 5 components. before tax and 82% of total assets. before f is performed Overall Gr
• • • • onspecificbalancesforafurther procedures andaudit afullscopeauditof6componentstheGroup e performed f is performed
evenue is recognised before an before evenue is recognised ecognition occurs before revenue revenue ecognition occurs before of revenue through manual or top-side through of revenue journals. incorrectly. Management override by manipulation approved timesheet has been approved submitted; or that period end cut-of r applied in estimating the level of for potential revenue required provision not when placements are reversals taken up as agreed. management judgement is incorr recognition criteria have been met; recognition period end cut-of or incorrectly; r
For both permanent and temporary placements we have identified the following risk: • • Temporary placement revenue is placement revenue Temporary when the customer has recognised the timesheet. Consequently approved is a risk that: there • • • Revenue recognition for permanent and Revenue recognition temporary placements Refer to the Audit Committee Report (page 58); Accounting policies (page 96); and Note 2 of the Consolidated Financial Statements (page 101) permanent has reported The Group of £543.3million placement revenues (2016: £476.3million) and temporary of £828.3million (2016: placement revenue £719.8million). is a risk For permanent placements there recognition the timing of revenue around when customer is recognised as revenue is achieved, and candidate agreement which may be several months in advance of the start of employment. Consequently, is a risk that: there • Risk Materiality Audit scope Key audit matters Overviewour audit approach of whole, and in our opinion thereon, and we do not provide a separate opinion on these matters. a and we do not provide whole, and in our opinion thereon, directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as in a addressed were of the engagement team. These matters the efforts directing These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and in the of resources the allocation on: the overall audit strategy, effect the greatest These matters included those which had the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. period and include the most significant assessed risks of material misstatement (whether the current Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of most significance in our audit of judgment, were those matters that, in our professional Key audit matters are Key audit matters In the prior year, our auditor’s report balances tested for the Group. The charts below illustrate the coverage included a key audit matter in relation to obtained from the work performed by our The 11 reporting components where we the provision for transfer pricing. We have audit teams. performed audit procedures accounted determined that this no longer represents for: a key audit matter. This judgement is based on our assessment that the 2017 2016 17% likelihood of a material misstatement is 59% lower, taking into account the risk of tax Revenue Full scope 59% 62% components 24% authority challenge, and that the overall Revenue provision is less than audit materiality. Specific scope 24% 23% components An overview of the scope of Total 83% 85% Profit Full scope 57% 68% our audit before components tax 17% Tailoring the scope Specific scope 26% 22% 57% components Our assessment of audit risk, our Profit evaluation of materiality and our Total 83% 90% before 26% allocation of performance materiality Total Full scope 60% 57% tax determine our audit scope for each assets components entity within the Group. Taken together, Specific scope 22% 21% this enables us to form an opinion on components the consolidated financial statements. Total 82% 78% 18% We take into account size, risk profile, 60% the organisation of the group and effectiveness of group-wide controls, Of the remaining 25 components that Total assets changes in the business environment together represent 17% of the Group’s and other factors such as recent Internal 22% profit before tax, none are individually Audit results when assessing the level of greater than 3% of the Group’s profit work to be performed at each entity. before tax. For these components, we In assessing the risk of material performed other audit procedures, misstatement to the Group financial including analytical review procedures Full Scope components statements, and to ensure we had on a country-by-country basis, obtaining Specific Scope components adequate quantitative coverage of an understanding of the group wide Other procedures significant accounts in the financial entity level controls over all components statements, we selected 11 of the 36 and assessing the results of the Internal reporting components that represent Audit reviews to identify any potential the principal business units within the risks of material misstatement to the Changes from the prior year Group within the following countries: Group financial statements. We have To incorporate an element of United Kingdom, France, United States, also verified bank reconciliations to test unpredictability and change into our Australia, China, Hong Kong, Italy, cash balances and performed revenue audit approach we rotated the smallest Germany, Spain, Netherlands and cut-off procedures around year-end at component from last year’s audit Belgium. some of the larger locations within these (Switzerland) and replaced it with the remaining 25 components. next largest component, Belgium Of the 11 components selected, we (specific scope). This year we also performed an audit of the complete performed additional revenue cut-off financial information of 6 components procedures centrally for the next (“full scope components”) which were 4 largest components not identified selected based on their size or risk as full or specific scope, namely characteristics. For the remaining Switzerland, Japan, Mexico and Brazil. 5 components (“specific scope components”), we performed audit procedures on specific accounts within that component that we considered had the potential for the greatest impact on the significant accounts in the financial statements either because of the size of these accounts or their risk profile. The audit scope of these components may not have included testing of all significant accounts of the component but will have contributed to the coverage of significant
87 | Financial Statements STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION Financial Statements | 88 materiality was 75% (2016: 75%) of ourwas 75% (2016: 75%) materiality £4.1million namely planning materiality, (2016: £3.6million). locations forAudit work at component audit coveragethe purpose of obtaining statementover significant financial based onaccounts is undertaken of total performance a percentage materiality The performance materiality. is based on theset for each component scale and risk of the component relative as a whole and our to the Group assessment of the risk of misstatement year, at that component. In the current the range of performance materiality allocated to components was £0.8million to £1.8million (2016: £0.7million to £1.18million). Reporting threshold An amount below which identified misstatements are considered as being clearly trivial. with the Audit Committee agreed We to them all that we would report in excess audit differences uncorrected of £0.27m (2016: £0.24m), which is set as well as at 5% of planning materiality, that, below that threshold differences on warranted reporting in our view, qualitative grounds. any uncorrected evaluate We misstatements against both the of materiality quantitative measures discussed above and in light of other qualitative considerations in relevant forming our opinion. Other information The other information comprises the information included in the Annual Report and accounts other than the financial statements and our auditor’s are directors The thereon. report for the other information. responsible Our opinion on the financial statements does not cover the other information and, except to the extent otherwise we do explicitly stated in this report, any form of assurance not express conclusion thereon. In connection with our audit of the responsibility financial statements, our the other information and, in is to read doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or
audit team attended 3 regional audit attended 3 regional audit team with regional closing meetings or calls at CFO, Group management and the and of local judgement which key areas discussed. audit findings were audit team interacted The Group with the component teams regularly during various stages appropriate where key working of the audit, reviewed for the responsible papers and were process. of the audit scope and direction additionalThis, together with the level, performed at Group procedures evidence for gave us appropriate financial our opinion on the Group statements. Our application of materiality the concept of materiality apply We in planning and performing the audit, of identified in evaluating the effect misstatements on the audit and in forming our audit opinion. Materiality The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures. materiality for the Group determined We to be £5.4million (2016: £4.9million), which was based on 5% of profit tax). before tax (2016: 5% profit before tax is the before believe that profit We principal consideration for stakeholders in assessing the financial performance of the Group. determined materiality for the Parent We company to be £5.8million (2016: £5.8million), which is 0.5% (2016: 0.5%) of total assets. Performance materiality The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality. On the basis of our risk assessments, together with our assessment of the environment, overall control Group’s our judgement was that performance was directly responsible. The Group The Group responsible. was directly components for which Group audit team components for which Group perform audit procedures on one of the perform audit procedures controls on some of the processes and on some of the processes controls independent testing of management now supported by the SSC, perform processes in relation to the countries in relation processes walkthrough procedures for all significant procedures walkthrough of the SSC operations, perform the SSC was to obtain an understanding management. The purpose of the visit to for the Italian component with local and attending the audit closing meeting key audit working papers on risk areas key audit working papers on risk areas issues arising from their work, reviewing their work, reviewing issues arising from with the component teams and any involved discussing the audit approach involved discussing the audit approach Group audit senior manager. These visits audit senior manager. Group based in Spain was undertaken by the EMEA shared service centre (SSC) service centre EMEA shared Italy. A visit to France and the Group’s A visit to France and the Group’s Italy. Senior Statutory Auditor to the UK and cycle, visits were undertaken by the cycle, visits were years. During the current year’s audit year’s years. During the current scope locations at least once every 3 the Senior Statutory Auditor visits all full that has been designed to ensure that that has been designed to ensure follow a programme of planned visits follow a programme The Group audit team continued to The Group the Group as a whole. the Group obtained as a basis for our opinion on sufficient audit evidence had been below to enable us to determine that group team involvement as described team group we determined the appropriate level of we determined the appropriate performed by component auditors, components, where the work was components, where components and the 4 specific scope team. For the remaining 4 full scope team. For the remaining senior manager from the primary audit senior manager from audit team included the Group audit audit team included the Group Kingdom and the US, the component of the full scope components, the United directly by the primary audit team. For 2 by directly one of the components were performed one of the components were scope components, audit procedures on scope components, audit procedures primary audit team. Of the 5 specific Office were performed directly by the performed directly Office were teams. Procedures on the Group’s Head on the Group’s teams. Procedures were performed by component audit performed by component were scope components, audit procedures audit procedures scope components, audit engagement team. For the 6 fullaudit engagement team. or in some cases by us, as the primaryor in some cases by firms operating under our instructionfirms operating under auditors from other EY global network other EY global auditors from each of the components by componenteach of the components of work that needed to be undertaken atof work that needed the Group audit, we determined the type audit, we determined the Group In establishing our overall approach to approach In establishing our overall Involvement with component teams with component Involvement otherwise appears to be materially Opinions on other matters We have nothing to report in respect of misstated. If we identify such material prescribed by the Companies the following matters in relation to which inconsistencies or apparent material the Companies Act 2006 requires us to misstatements, we are required to Act 2006 report to you if, in our opinion: determine whether there is a material In our opinion, the part of the directors’ • adequate accounting records misstatement in the financial statements remuneration report to be audited has have not been kept by the parent or a material misstatement of the other been properly prepared in accordance company, or returns adequate for our information. If, based on the work we with the Companies Act 2006. audit have not been received from have performed, we conclude that there branches not visited by us; or is a material misstatement of the other In our opinion, based on the work • the parent company financial information, we are required to report undertaken in the course of the audit: statements and the part of the that fact. • the information given in the strategic Directors’ Remuneration Report to report and the directors’ report We have nothing to report in this regard. be audited are not in agreement with for the financial year for which the the accounting records and returns; In this context, we also have nothing to financial statements are prepared or report in regard to our responsibility to is consistent with the financial specifically address the following items statements and those reports have • certain disclosures of directors’ in the other information and to report as been prepared in accordance with remuneration specified by law are not uncorrected material misstatements of the applicable legal requirements; made; or other information where we conclude that • the information about internal control • we have not received all the those items meet the following conditions: and risk management systems information and explanations we • Fair, balanced and in relation to financial reporting require for our audit understandable (set out on processes and about share capital • a Corporate Governance Statement page 84) – the statement given by structures, given in compliance has not been prepared by the the directors that they consider with rules 7.2.5 and 7.2.6 in the company the annual report and financial Disclosure Rules and Transparency statements taken as a whole is fair, Rules sourcebook made by the Responsibilities of directors balanced and understandable and Financial Conduct Authority (the FCA provides the information necessary Rules), is consistent with the financial As explained more fully in the directors’ for shareholders to assess the statements and has been prepared responsibilities statement set out on page group’s performance, business in accordance with applicable legal 84, the directors are responsible for the model and strategy, is materially requirements; and preparation of the financial statements and for being satisfied that they give a inconsistent with our knowledge • information about the company’s true and fair view, and for such internal obtained in the audit; or corporate governance code control as the directors determine is • Audit committee reporting (set out and practices and about its necessary to enable the preparation of on page 58) – the section describing administrative, management financial statements that are free from the work of the audit committee does and supervisory bodies and their material misstatement, whether due to not appropriately address matters committees complies with rules fraud or error. communicated by us to the audit 7.2.2, 7.2.3 and 7.2.7 of the FCA committee; or Rules. In preparing the financial statements, the • Directors’ statement of directors are responsible for assessing compliance with the UK Matters on which we are required the Group and Parent company’s ability to Corporate Governance Code to report by exception continue as a going concern, disclosing, (set out on page 52) – the parts of as applicable, matters related to going the directors’ statement required In the light of the knowledge and concern and using the going concern under the Listing Rules relating to understanding of the Group and the basis of accounting unless the directors the company’s compliance with the Parent company and its environment either intend to liquidate the Group or the UK Corporate Governance Code obtained in the course of the audit, Parent company or to cease operations, containing provisions specified for we have not identified material or have no realistic alternative but to review by the auditor in accordance misstatements in: do so. with Listing Rule 9.8.10R(2) do • the strategic report or the directors’ not properly disclose a departure report; or from a relevant provision of the UK Corporate Governance Code. • the information about internal control and risk management systems in relation to financial reporting processes and about share capital structures, given in compliance with rules 7.2.5 and 7.2.6 of the FCA Rules
89 | Financial Statements STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
ohibited Financial Statements | 90 the additional report to the audit the additional report committee. W the financialin June 2011 to audit endedstatements for the year subsequent31 December 2011 and financial periods. The period of total uninterrupted previous engagement including is and reappointments renewals The non-audit services pr were Ethical Standard by the FRC’s or the to the Group not provided and we remain company Parent and the independent of the Group in conducting the company Parent audit. The audit opinion is consistent with 7 years, covering the years ending7 years, covering the 2017. 31 December 2011 to The maintenance and integrity of plc web site is the the PageGroup the work of the directors; responsibility carried out by the auditors does not involve consideration of these matters the auditors accept no and, accordingly, for any changes that may responsibility to the financial statements have occurred on the initially presented since they were web site. Legislation in the United Kingdom governing and the preparation dissemination of financial statements legislation in other from may differ jurisdictions.
Bob Forsyth (Senior Statutory Auditor) LLP, for and on behalf of Ernst & Young Statutory Auditor London 2018 6 March Notes: 1. 2. Other matters we are required to we are required Other matters address • appointedbythecompany e were • •
ocedures were were ocedures e assessed the susceptibility of e understood how PageGroup plc how PageGroup e understood communicated to and performed by our component teams. Based on this understanding we Our audit pr the Group’s financial statements to the Group’s material misstatement, including how fraud might occur by meeting various with management from parts of the business to understand was there it considered where also susceptibility to fraud. We performance targets considered to influence on and their propensity by management to made efforts manage earnings. considered We and controls the programmes has established that the Group risks identified, or that to address deter and detect otherwise prevent, fraud; and how senior management and monitors those programmes controls. designed our audit procedures to identify non-compliance with Our such laws and regulations. focused on were procedures which is recognition, revenue detail in our Key described in more audit matters and journal entry testing, with a focus on manual or top-side adjustments. is complying with those frameworksis complying with those making enquiries of management, forinternal those responsible audit, procedures legal and compliance We and the company secretary. our enquiries through corroborated minutes and of board our review to the Audit papers provided Committee. Our assessment and the top included the tone from of honest the emphasis on a culture and ethical behaviour. W W
A further description of our for the audit of the responsibilities financial statements is located on the Financial Reporting Council’s website at https://www.frc.org.uk/ This description auditorsresponsibilities. report. forms part of our auditor’s • • • • e obtained an understanding of
the legal and regulatory frameworks the legal and regulatory applicable to the Group that are and determined that the most relate to those that significant are framework (IFRS, FRS the reporting 101, the Companies Act 2006 and UK Corporate Governance Code) tax compliance and the relevant in the jurisdictions in regulations are operates. There which the group no significant, industry specific laws in that we considered or regulations determining our approach. W
• Our approach was as follows: Our approach entity and management. those charged with governancethe of and detection of fraud rests with both and detection of fraud rests primary responsibility for the prevention for the prevention primary responsibility identified during the audit. However, the identified during the audit. However, appropriately to fraud or suspected fraud appropriately appropriate responses; and to respond and to respond responses; appropriate through designing and implementing designing through of material misstatement due to fraud, evidence regarding the assessed risks evidence regarding to obtain sufficient appropriate audit to obtain sufficient appropriate financial statements. financial statements. the financial statements due to fraud; of users taken on the basis of these the risks of material misstatement of to influence the economic decisions to identify and assess to fraud, are: they could reasonably be expected they could reasonably fraud The objectives of our audit, in respect if, individually or in the aggregate, if, individually or in the aggregate, including detecting irregularities, or error and are considered material considered are and or error audit was considered capable of Misstatements can arise from fraud Misstatements can arise from the Explanation as to what extent material misstatement when it exists. with ISAs (UK) will always detect awith ISAs (UK) will always that an audit conducted in accordance in accordance that an audit conducted of assurance, but is not a guaranteeof assurance, but is not Reasonable assurance is a high levelReasonable assurance report that includes our opinion. report fraud or error, and to issue an auditor’s and to issue an auditor’s fraud or error, material misstatement, whether due tomaterial misstatement, statements as a whole are free from from free are statements as a whole assurance about whether the financialassurance about whether audit of the financial statementsaudit of the financial to obtain reasonable Our objectives are Auditor’s responsibilities for the for responsibilities Auditor’s CONSOLIDATED INCOME STATEMENT For the year ended 31 December 2017
2017 2016 Note £’000 £’000 Revenue 2 1,371,534 1,196,125 Cost of sales (659,966) (575,091) Gross profit 2 711,568 621,034 Administrative expenses (593,246) (520,082) Operating profit 2 118,322 100,952 Financial income 5 229 117 Financial expenses 5 (389) (1,073) Profit before tax 2 118,162 99,996 Income tax expense 6 (35,082) (27,900) Profit for the year 3 83,080 72,096
Attributable to: Owners of the parent 83,080 72,096
Earnings per share Basic earnings per share (pence) 9 26.5 23.1 Diluted earnings per share (pence) 9 26.4 23.1 The above results relate to continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2017
2017 2016 £’000 £’000 Profit for the year 83,080 72,096 Other comprehensive income/(loss) for the year Items that may subsequently be reclassified to profit and loss: Currency translation differences (2,888) 22,105 Gains/(Loss) on hedging instruments 1,340 (2,468) Total comprehensive income for the year 81,532 91,733 Attributed to: Owners of the parent 81,532 91,733
91 | Financial Statements STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION – – – – – – – – – – – – – 932 2016 3,259 £’000 90,458 509,872 509,872 664,008 664,008 280,728 375,377 375,377 (798,503) (798,503) (134,495) (798,503) 1,173,880 – – – – – – – – – – – – – Financial Statements | 92 932 2017 3,268 £’000 92,677 Company 516,681 516,681 647,607 647,607 218,935 315,812 315,812 (848,476) (848,476) (200,869) (848,476) 1,164,288 – 932 (430) 2016 1,696 7,640 3,259 £’000 (9,944) 29,461 16,547 91,531 12,743 92,796 36,187 32,746 90,458 (24,404) (72,941) (10,374) 259,328 364,867 165,404 192,107 246,561 246,561 456,398 (175,059) (199,463) (209,837) – 932 (370) 2017 Group 1,685 3,268 £’000 30,158 14,637 10,513 89,466 15,652 95,605 32,473 29,858 92,677 299,089 410,346 200,450 202,253 270,057 270,057 (22,166) (19,489) (58,931) (19,859) 499,812 (187,730) (209,896) (229,755) 7 2 7 2 10 11 12 16 13 13 19 11 14 14 18 16 17 18 18 18 Note
Kelvin Stagg, Chief Financial Officer e (including assets held under construction) Computer softwar -
Property, plant and equipment Property, receivables and other Trade Non-current assets Non-current Intangible assets and other intangibles - Goodwill Investments tax assets Deferred Other receivables assets Current tax receivable Current Cash and cash equivalents assets Total Trade and other payables and other Trade Other payables Current liabilities Current tax payable Current assets/(liabilities) Net current liabilities Non-current Currency translation reserve Currency Retained earnings equity Total Called-up share capital Called-up share Deferred tax liabilities Deferred liabilities Total Net assets Capital and reserves premium Share reserve Capital redemption held in the employee benefit trust Reserve for shares
As at 31 December 2017 As at 31 December CONSOLIDATED AND PARENT COMPANY BALANCE SHEETS BALANCE COMPANY PARENT AND CONSOLIDATED Chief Executive Officer Steve Ingham, Signed on behalf of the Board of Directors of Directors Signed on behalf of the Board The Company’s profit for the financial year amounted to £9.6m (2016: £8.8m). profit 2018. The Company’s and authorised for issue on 6 March Directors plc (Company Number 3310225) set out on pages 91 to 122 were approved by the Board of by the Board approved plc (Company Number 3310225) set out on pages 91 to 122 were The financial statements of PageGroup CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2017
Reserve for shares Capital held in the Currency Called-up Share redemption employee translation Retained Total share capital premium reserve benefit trust reserve earnings equity 2016 Note £’000 £’000 £’000 £’000 £’000 £’000 £’000 Balance at 1 January 2016 3,258 90,268 932 (61,365) 10,641 178,025 221,759
Currency translation differences – – – – 22,105 – 22,105 Net income recognised directly in equity – – – – 22,105 – 22,105 Loss on hedging instruments – – – – – (2,468) (2,468) Profit for the year – – – – – 72,096 72,096 Total comprehensive income for the year – – – – 22,105 69,628 91,733 Purchase of shares held in employee benefit trust – – – (15,058) – – (15,058) Exercise of share plans 1 190 – – – 173 364 Transfer from reserve for shares held in the employee benefit trust – – – 3,482 – (3,482) – Credit in respect of share schemes – – – – – 4,442 4,442 Debit in respect of tax on share schemes – – – – – (368) (368) Dividends 8 – – – – – (56,311) (56,311) 1 190 – (11,576) – (55,546) (66,931)
Balance at 31 December 2016 and 1 January 2017 3,259 90,458 932 (72,941) 32,746 192,107 246,561
2017 Currency translation differences – – – – (2,888) – (2,888) Net loss recognised directly in equity – – – – (2,888) – (2,888) Profit on hedging instruments – – – – – 1,340 1,340 Profit for the year – – – – – 83,080 83,080 Total comprehensive (loss)/income for the year – – – – (2,888) 84,420 81,532 Exercise of share plans 9 2,219 – – – 10,458 12,686 Transfer from reserve for shares held in the employee benefit trust – – – 14,010 – (14,010) – Credit in respect of share schemes – – – – – 6,809 6,809 Credit in respect of tax on share schemes – – – – – 720 720 Dividends 8 – – – – – (78,251) (78,251) 9 2,219 – 14,010 – (74,274) (58,036) Balance at 31 December 2017 3,268 92,677 932 (58,931) 29,858 202,253 270,057
93 | Financial Statements STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION 191 £’000 Total equity Total – – 2,228 Financial Statements | 94 £’000 earnings Retained – (51,869) (51,678) – (56,311) (56,311) – 4,442 4,442 – – 8,833 8,833 – 8,833 8,833 – 9,649 9,649 – 9,649 9,649 – – 6,809 6,809 – (78,251) (78,251) – (71,442) (69,214) 932 280,728 375,377 932 323,764 418,222 932 218,935 315,812 £’000 Capital Capital reserve reserve redemption redemption – – – – – – – – 190 190 Share Share £’000 premium premium – – – – 1 1 – – – – 9 2,219 9 2,219 3,259 90,458 3,258 90,268 £’000 3,268 92,677 Called-up share capital capital share 8 8 Note
and 1 January 2017 Balance at 31 December 2016 Dividends Credit in respect of share schemes of share respect in Credit Exercise of share plans of share Exercise the year Total comprehensive income for comprehensive Total Profit for the year for Profit Balance at 1 January 2016 Balance at 1 January Company Profit for the year Profit 2017 the year Total comprehensive income for income comprehensive Total Exercise of share plans of share Exercise Credit in respect of share schemes share of in respect Credit Dividends Balance at 31 December 2017
For the year ended 31 December 2017 ended 31 December For the year STATEMENT OF CHANGES IN EQUITY – PARENT COMPANY COMPANY EQUITY – PARENT CHANGES IN OF STATEMENT CONSOLIDATED AND PARENT COMPANY CASH FLOW STATEMENTS For the year ended 31 December 2017 Group Company 2017 2016 2017 2016 Note £’000 £’000 £’000 £’000 Profit before tax 2 118,162 99,996 9,649 8,833 Depreciation and amortisation charges 10/11 19,094 17,065 – – (Income)/Loss on sale of property, plant and equipment, and computer software (159) 186 – – Share scheme charges 6,796 4,235 – – Net finance cost 160 956 – – Operating cash flow before changes in working capital and finance costs 144,053 122,438 9,649 8,833 (Increase)/decrease in receivables (42,629) (21,061) 16,401 (27,407) Increase in payables 23,040 19,942 49,973 74,212 Cash generated from operations 124,464 121,319 76,023 55,638 Income tax paid (38,154) (32,499) – – Net cash from operating activities 86,310 88,820 76,023 55,638
Cash flows from investing activities Proceeds in respect of share scheme recharges to subsidiaries – – – 482 Purchases of property, plant and equipment 10 (13,415) (14,111) – – Purchases of intangibles 11 (7,508) (11,153) – – Proceeds from the sale of property, plant and equipment, and computer software 4,688 1,890 – – Interest received 229 117 – – Net cash (used in)/from investing activities (16,006) (23,257) – 482
Cash flows from financing activities Dividends paid (78,251) (56,311) (78,251) (56,311) Interest paid (1,845) (460) – – Issue of own shares for the exercise of options 12,686 364 2,228 191 Purchase of shares held in the employee benefit trust – (15,058) – – Net cash used in financing activities (67,410) (71,465) (76,023) (56,120)
Net increase/(decrease) in cash and cash equivalents 2,894 (5,902) – – Cash and cash equivalents at the beginning of the year 92,796 95,018 – – Exchange (loss)/gain on cash and cash equivalents (85) 3,680 – – Cash and cash equivalents at the end of the year 19 95,605 92,796 – –
95 | Financial Statements STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION Financial Statements | 96 The new revenue standard will standard revenue The new revenue all current supersede under IFRS. requirements recognition or application retrospective Either a full is application retrospective a modified on for annual periods beginning required or after 1 January 2018. providing is in the business of The group services. IFRS 15 requires recruitment once value to be recognised revenue and by the customer has been received obligations havewhen the performance the been satisfied. IFRS 15 also prohibits fees. of up-front recognition its concluded During 2017, the Group of IFRS 15. As adetailed assessment of this assessment, no material result in the 2018 adjustment will be required Annual Report and Accounts. A fully method will be adopted for retrospective and comparison purposes. transparency rationale Please see below for Group’s for the above conclusion. Revenue earned on a contingent basis (c. 27% of revenue) recognised revenue Currently placements on a permanent from contingent basis is typically based of the candidate’s on a percentage package, this income remuneration at the date an offer being recognised is accepted by a candidate and where a start date has been determined. It anticipated, but not includes revenue invoiced, at the balance sheet date, accrued on the which is correspondingly balance sheet within accrued income. is made against accrued A provision income for possible cancellations of placements prior to, or shortly after, the commencement of employment. Our view is that this basis of revenue as appropriate remains recognition our only performance obligation (the placement of the candidate) has been no adjustment will performed. Therefore of the transition as a result be required earned on ato IFRS 15 of revenue contingent basis. basisRevenue earned on a retained (c. 9% of revenue) from recognised revenue Currently permanent placements on a retained basis is typically based on a percentage remuneration of the candidate’s package, this income being recognised separate on the completion of three performance obligations. The defined “Retainer”, “Shortlist” and stages are “Completion”. is only have concluded that there We one performance obligation, being services. of recruitment provision
ed Tax ed Tax
om Contracts fective date e Initiative etation 22 Foreign etation 22 Foreign etation 23 Uncertainty ovements to IFRSs AS 7 Disclosur IFRIC Interpr IAS 28 Investments in Associates IFRS 15 Revenue fr IFRS 16 Leases; ef IFRS 2 Classification and IFRIC Interpr 1 January 2018 date effective and Joint Ventures; 1 January 2019 IFRS 9 Financial Instruments; 1 January 2018 date effective 1 January 2019 and Advance Transactions Currency date Consideration; effective Treatment; over Income Tax date 1 January 2019 effective I Deferr IAS 12 Recognition of Annual Impr 2014-2016 Cycle date with Customers; effective 1 January 2018 of Share-based Measurement effective Payment Transactions; date 1 January 2018 Assets for Unrealised Losses Assets for Unrealised
• Contracts IFRS 15 – Revenue from with Customers IFRS 15 was issued in May 2014 and establishes a five-step model to account contracts with arising from for revenue is customers. Under IFRS 15, revenue the reflects that amount an at recognised consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. (iii) Employee Benefit Trust Benefit (iii) Employee by plc held in PageGroup Shares in a reduction shown as the trust are funds. shareholders’ in accounting policyChanges – new accounting standards, and amendments interpretations adopted are The accounting policies of the previous consistent with those for the followingfinancial years except of as effective amendments to IFRS 1 January 2017: • • • • • or The adoption of these standards did not have any impact interpretations on the accounting policies, financial position or performance of the Group. issued but not yet Standards effective that and interpretations The standards up to but not yet effective, issued, are the date of issuance of the Group’s disclosed financial statements are intends to adopt The Group below. if applicable, when they these standards, become effective. • • • •
impairment. to the extent that there is no evidence of to the extent that there same way as unrealised gains, but only same way as unrealised Unrealised losses are eliminated in the losses are Unrealised the consolidated financial statements. transactions, are eliminated in preparing eliminated in preparing transactions, are expenses arising from intragroup intragroup expenses arising from gains and losses or income and Intragroup balances and any unrealised balances and any unrealised Intragroup consolidation (ii) Transactions eliminated on (ii) Transactions its power over the investee. the ability to affect those returns through through those returns the ability to affect involvement with the investee and has rights, to variable returns from its rights, to variable returns from when the Group is exposed, or has when the Group December 2017. Control is achieved December 2017. Control the Group and its subsidiaries as at 31 the Group comprise the financial statements of The consolidated financial statements (i) Subsidiaries Basis of consolidation result of increased dividend income. dividend of increased result the Company’s profit this year is as a profit the Company’s £9.6m (2016: £8.8m). The increase in £9.6m (2016: £8.8m). The increase profit for the financial year amounted for to profit financial statements. The Company’s financial statements. The Company’s has not been included as part of these profit and loss account of the Company and profit 408 of the Companies Act 2006, the undertakings. As permitted by Section Company and all its subsidiary plc consolidate the results of the plc consolidate the results The financial statements of PageGroup The financial statements of PageGroup Basis of preparation European Union. European with current IFRS as adopted by the with current cost convention and in accordance cost convention and in accordance have been prepared under the historical have been prepared The Company financial statements with Article 4 of the EU IAS Regulation. European Union and therefore complies Union and therefore European Standards (IFRS) as adopted by the Standards current Internationalcurrent Financial Reporting and loss. This is in accordance with and loss. This is in accordance instruments) at fair value through profit profit instruments) at fair value through and liabilities (including derivativeand liabilities (including by the revaluation of financial assets of financial by the revaluation historical cost convention modifiedhistorical cost convention have been prepared under the have been prepared The consolidated financial statementsThe consolidated financial under the Companies Act.under the Companies incorporated in the United Kingdomincorporated in the United PageGroup plc is a company PageGroup policies Statement of compliance 1. Significant accounting1. Significant For the year ended 31 December 2017 ended 31 December For the year Statements Notes to the Financial the Financial Notes to Whilst there is considerable work IFRS and may result in an increase in determine those payments). The lessee done at the Retainer stage, there is no the volume of disclosures required in will generally recognise the amount of the reference to a deliverable in the contract, the Group’s financial statements. IFRS re-measurement of the lease liability as an and therefore there is no separable requires an entity to provide users of adjustment to the right-of-use asset. performance obligation. On the second financial statements with comprehensive The transition to IFRS 16 is likely to stage of a shortlist, there is a specific information about the nature, amount, have a significant effect on the Group, deliverable i.e. production of a shortlist. timing and uncertainty of revenue and the main areas impacted being leases However, the client cannot use this with cash flows arising from the entity’s for properties and cars. It is considered their own resources without also paying contracts with customers. The Group is unlikely for there to be many other leases for the final stage regardless. Therefore confident it has the necessary appropriate in the Group either exceeding $5k, or a each stage is considered to be highly systems, internal controls, policies and term of more than 12 months. interrelated and so forms a single, distinct procedures necessary to collect and performance obligation. disclose the required information for IFRS 16 is expected to result in an disclosure. increase in EBITDA for the Group, as Furthermore the transfer of services rentals are reclassified as depreciation happens over a period of time since our IFRS 9 – Financial Instruments and interest expense. Margins may also work creates an asset with no alternative The directors have concluded that the appear higher as a result. IFRS 16 also use. We have concluded that under an implementation of IFRS 9 from 1 January requires us to make more extensive Output or Input method the timing of 2018 will not have a material impact disclosures than under IAS 17. Note revenue recognition would be the same. on Group. Currently the only financial 21 gives the current lease portfolio. As per our standard terms and conditions, instruments held by Group are net trade IFRS 16 is effective for annual periods there are 3 stage payments defined for receivables of £245.4m (2016: £205.1m) beginning on or after 1 January 2019. Retainer, Shortlist and Completion. They and net fair value derivatives of £0.2m Early application is permitted, but not are required to compensate us for our (2016: £0.5m). before an entity applies IFRS 15. A lessee performance to date as per the above can choose to apply the standard using requirement. Under the IFRS 9 estimated credit losses either a full retrospective or a modified method, the result would not be materially As a result of our review, we do not retrospective approach. The standard’s different to Group’s current credit policy. expect any adjustment to be material with transition provisions permit certain reliefs. The majority of Group’s clients have been our estimate being less than £1m. This transacting with the Group for several In 2018, the Group will continue to assess is as a result of retained revenue being a years, with losses rarely occurring. the potential effect of IFRS 16 on its relatively low proportion of total revenue, consolidated financial statements. combined with the adjustment only being With respect to the Parent company required to retained revenue earned in the only balances receivable are with Going concern the last few weeks of the year having to profitable entities based within the United The Directors have, at the time of be deferred or anticipated (in turn offset Kingdom. approving the financial statements, a by revenue coming into the start of the IFRS 16 – Leases reasonable expectation that the Company year being deferred or anticipated from an and the Group have adequate resources earlier period). IFRS 16 was issued in January 2016 to continue in operational existence and it replaces IAS 17 Leases, IFRIC 4 Temporary revenue (c. 60% of for the foreseeable future. Thus, they Determining whether an Arrangement revenue) continue to adopt the going concern contains a Lease, SIC-15 Operating basis of accounting in preparing the Revenue from temporary placements, Leases-Incentives and SIC-27 Evaluating financial statements. Further detail is which represents amounts billed for the the Substance of Transactions Involving contained in the Strategic Report on services of temporary staff, including the the Legal Form of a Lease. IFRS 16 sets page 39. salary cost of these staff is recognised out the principles for the recognition, when the service has been provided. measurement, presentation and a) Revenue and income recognition The performance obligation is satisfied disclosure of leases and requires lessees Revenue, which excludes value added when the service has been provided to account for all leases under a single tax (VAT), constitutes the value of services and is billed in arrears. Accordingly no on-balance sheet model similar to the undertaken by the Group from its adjustment will be required on transition accounting for finance leases under principal activities, which are recruitment to IFRS 15 for revenue earned from IAS 17. consultancy and other ancillary services. temporary placements. IFRS 16 requires all leases in excess These consist of: Other revenue (c. 4% of revenue) of $5k and 12 months in length to be • revenue from temporary placements, Other revenue earned, principally recognised as an asset on the balance which represents amounts billed advertising revenue representing amounts sheet, with a corresponding lease liability. for the services of temporary staff, billed to clients for expenses incurred Lessees will be required to separately including the salary cost of these on their behalf, is recognised when recognise the interest expense on staff. This is recognised when the the expense is incurred. Therefore no the lease liability and the depreciation service has been provided; expense on the right-of-use asset. adjustment will result on the transition to • revenue from permanent placements IFRS 15 for this revenue stream. Lessees will be also required to re- is typically based on a percentage of the candidate’s remuneration Presentation and disclosure measure the lease liability upon the requirements occurrence of certain events (e.g. a package and is derived from both change in the lease term, a change in retained assignments (income IFRS 15 also provides presentation future lease payments resulting from recognised on completion of defined and disclosure requirements, which a change in an index or rate used to stages of work) and non-retained are more detailed than under current
97 | Financial Statements STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
e stated at Financial Statements | 98 ovements 10% per niture, fixtures and equipment fixtures niture, Leasehold impr annum or period of lease if shorter Fur 10-20% per annum Motor vehicles 25% per annum
• • g) Investments Fixed asset investments ar for impairment. cost less provision h) Impairment of assets Non-financial assets Assets that have an indefinite useful subject to amortisation and not life are annually for impairment. An tested are for the impairment loss is recognised carrying amount by which the asset’s amount. amount exceeds its recoverable amount is the higher The recoverable fair value less costs to of an asset’s sell and value in use. For the purposes of assessing impairment, assets are at the lowest levels for which grouped identifiable cash separately are there flows (cash-generating units). Financial assets A financial asset is assessed at each date to determine whether reporting is any objective evidence that it is there impaired. to be A financial asset is considered if objective evidence indicates impaired events has had that one or more on the estimated a negative effect cash flows of that asset. For future certain categories of financial asset, assets such as trade receivables, assessed not to be impaired that are subsequently assessed individually are for impairment on a collective basis. (v) Amortisation is charged to the incomeAmortisation overon a straight-line basis statement useful lives of intangiblethe estimated indefinite. such lives are assets unless life. an indefinite useful Goodwill has at 20% is amortised Computer software to considered per annum unless it is which case thehave a shorter life, in The is reduced. period of amortisation goodwill written off cumulative amount of of earnings in respect to retained directly December 1997acquisitions prior to 31 is £311.7m (2016: £311.7m). plant and equipment f) Property, plant and equipment are Property, less accumulatedstated at original cost is calculated Depreciation depreciation. the cost less estimated to write off of each asset evenly over value residual its expected useful life at the following rates: •
esulting exchange differences esulting exchange differences income and expenses for each income and expenses all r in other recognised are income. comprehensive assets and liabilities for each assets and liabilities for are balance sheet presented rate at thetranslated at the closing sheet; date of that balance at translated income statement are and average exchange rates;
e) Intangible assets (i) Goodwill the excess of Goodwill represents the cost of an acquisition over the of the share fair value of the Group’s net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on the acquisition of subsidiaries is included in intangible assets. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised, but is tested at least annually for impairment (see accounting policy h). Gains and losses on the disposal of an entity include the to carrying amount of goodwill relating the entity sold. (ii) Computer software or acquired Computer software is stated at developed by the Group cost less accumulated amortisation (see intangible reviews below). The Group assets for any indication of software impairment annually. under construction (iii) Software under construction relates Software to the to cost capitalised in relation development of a new operating system applications. Costs are and related capitalised when they fulfil the criteria in internally developed IAS 38 regarding intangible assets. While still under tested for construction, assets are moved Assets are impairment annually. construction to under software from when they become computer software available for use. (iv) Trademark stated at cost trademarks are Acquired written down over five years on a and are the straight-line basis, which represents estimated useful life of the intangible. the Group entities (none of which has theof which has (none entities the Group economy) of a hyperinflationary currency different functional currency that have a are currency the presentation from currency into the presentation translated as follows: • • • evenue from amounts billed to evenue from r clients for expenses incurred on their behalf (principally when advertisements) is recognised the expense is incurred. assignments (income recognised recognised (income assignments is accepted by an offer at the date a start date and where a candidate The latterhas been determined). but anticipated, includes revenue at the balance sheetnot invoiced, date, which is correspondingly sheetaccrued on the balance A provision within accrued income. incomeis made against accrued offor possible cancellations or shortly after, placements prior to, of employment;the commencement and
The results and financial position of all The results (iii) Group companies (iii) Group recognised in the income statement. recognised denominated in foreign currencies are are currencies denominated in foreign rates of monetary assets and liabilities translation at year end exchange of such transactions and from the of such transactions and from and losses resulting from the settlement from and losses resulting transactions. Foreign exchange gains transactions. Foreign rates prevailing at the dates of the rates prevailing functional currency using the exchange functional currency are translated into the respective translated into the respective are Foreign currency transactions currency Foreign (ii) Transactions and balances (ii) Transactions presentation currency. presentation which is the Company’s functional and which is the Company’s statements are presented in Sterling, presented statements are currency”). The consolidated financial currency”). the entity operates (“the functional primary economic environment in which primary economic environment measured using the currency of the using the currency measured of each of the Group’s entities are entities are of each of the Group’s Items included in the financial statements (i) Functional and presentation currency (i) Functional and presentation d) Foreign currency translation currency d) Foreign the margin on advertising income. placement of temporary candidates and candidates, the margin earned on the total placement fees of permanent cost of sales and consists of the Gross profit represents revenue less represents profit Gross c) Gross profit c) Gross costs. behalf of clients, principally advertising of temporary staff and costs incurred on and costs incurred of temporary staff Cost of sales consists of the salary cost b) Cost of sales rate applicable. outstanding and at the effective interest interest outstanding and at the effective basis, by reference to the principal basis, by reference Interest income is accrued on a time income Interest • Objective evidence of impairment for a reviewed at each balance sheet date and the period in which the dividends are portfolio of receivables could include the reduced to the extent that it is no longer approved by (for final dividends) or paid Group’s past experience of collecting probable that sufficient taxable profits will to (for interim dividends) the Company’s payments, an increase in the number of be available. shareholders. delayed payments in the portfolio, as well Deferred tax is calculated at the tax rates n) Share-based compensation as observable changes in national or local that are expected to apply in the period economic conditions that correlate with The Group operates a number of equity- when the liability is settled or the asset default on receivables. settled, share-based compensation realised. plans. The accounting treatments for the The carrying amount of the financial asset Deferred tax is charged or credited to the Group and parent company are described is reduced by the impairment loss directly income statement, except when it relates below: for all financial assets with the exception to items charged or credited directly to of trade receivables, where the carrying (i) Share option schemes equity, in which case the deferred tax amount is reduced through the use of is also dealt with in equity. Deferred tax The fair value of the employee services an allowance account. When a trade assets and liabilities are offset when received in exchange for the grant of the receivable is considered uncollectible, it is there is a legally enforceable right to set options is recognised as an expense in written off against the allowance account. off current tax assets against current the income statement of the Group with Subsequent recoveries of amounts tax liabilities and when they relate to a corresponding adjustment to equity. previously written off are credited against income taxes levied by the same taxation In the parent company, it is capitalised the allowance account. Changes in the authority and the Group intends to settle as an investment, with a corresponding carrying amount of the allowance account its current tax assets and liabilities on a adjustment to equity. The total amount are recognised in the income statement. net basis. to be expensed over the vesting period i) Taxation is determined by reference to the fair j) Pension costs value of the options granted, excluding Income tax expense represents the The Group operates defined contribution the impact of any non-market vesting sum of the current tax and deferred pension schemes. The assets of the conditions (for example, earnings per tax charges. The tax currently payable schemes are held separately from share). Non-market vesting conditions is based on taxable profit for the those of the Group in independently are included in assumptions about the year. Taxable profit differs from profit administered funds. The pension costs number of options that are expected to as reported in the income statement charged to the income statement become exercisable. At each balance because it excludes items of income or represent the contributions payable by the sheet date, the estimate of the number expense that are taxable or deductible in Group to the funds during each period. of options that are expected to become other years and it further excludes items exercisable is revised. The Group that are never taxable or deductible. k) Leased assets recognises the impact of the revision of The Group’s liability for current tax is Leases are classified as finance leases original estimates, if any, in the income calculated using tax rates that have been whenever the terms of the lease transfer statement, and the corresponding enacted or substantively enacted by the adjustment to equity over the remaining substantially all the risks and rewards of balance sheet date. vesting period. ownership to the lessee. All other leases Deferred tax is recognised on differences are classified as operating leases. (ii) Management Incentive Plan and between the carrying amounts of assets Long-Term Incentive Plan The Group does not currently have any and liabilities in the financial statements finance leases. Where deferred awards are made to and the corresponding tax bases used in Directors and senior executives under the computation of taxable profit and is Rentals under operating leases are either the Management Incentive Plan accounted for using the balance sheet charged to the income statement on a or the Long-Term Incentive Plan, to liability method. straight-line basis over the term of the reflect that the awards are for services lease. Benefits received and receivable Deferred tax liabilities are generally over a longer period, the value of the as an incentive to enter into an operating recognised for all taxable temporary expected award is charged to the income lease are also spread on a straight-line differences and deferred tax assets are statement of the Group on a straight-line basis over the lease term. recognised to the extent that it is probable basis over the vesting period to which the that taxable profits will be available against l) Segment reporting award relates. In the Parent Company, which deductible temporary differences it is capitalised as an investment, with a IFRS 8 requires operating segments to be can be utilised. Such assets and liabilities corresponding adjustment to equity. identified on the basis of internal reports are not recognised if the temporary about components of the Group that are o) Deferred cash bonus difference arises from goodwill or from the regularly reviewed by the Board to allocate initial recognition (other than in a business The Group operates a bonus scheme for resources to the segments and to assess combination) of other assets and liabilities some members of staff whereby bonuses their performance. Information provided in a transaction that affects neither the are deferred for three years from date of to the Board is focused on regions and taxable profit nor the accounting profit. award. The bonuses are paid in full if the as a result, reportable segments are on employee remains employed for the entire Deferred tax liabilities are recognised for a regional basis. Transactions between three-year period. taxable temporary differences arising on segments are recorded and allocated on investments in subsidiaries, except where an arms-length basis. p) Repurchase of share capital the Group is able to control the reversal m) Dividend distribution When share capital recognised as of the temporary difference and it is equity is repurchased, the amount of the probable that the temporary difference will Dividend distribution to the Company’s consideration paid, including any directly not reverse in the foreseeable future. The shareholders is recognised as a liability attributable costs, is recognised as a carrying amount of deferred tax assets is in the Group’s financial statements in change in equity.
99 | Financial Statements STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Financial Statements | 100 ent tax assets and rade and otherrade oup, being a multinational Note 17 – curr liabilities – transfer pricing Note 13 – T Note receivables
The Gr international is subject to both company, and local transfer pricing legislation. the transfer Management has reviewed any potential pricing position to ensure is adequately provided. exposure v) Exceptional items those items Exceptional items are or considers to be one-off the Group that should be brought material in nature attention in understanding to the reader’s financial performance. the Group’s Trust w) Employee Benefit Trust is The Employee Benefit a separate legal entity and considered company. not an extension of the parent It is included in the consolidated results as it is deemed to have of the Group the entity. of control • customers regarding is uncertainty There their be able to pay as who may not the due. In reviewing invoices fall provisions of the appropriateness of trade of recoverability in respect been consideration has receivables, climate in thegiven to the economic of markets, the ageing respective likelihoodthe debt and the potential note 20 for anof default. Please see risk. analysis of credit •
evenue recognition Note 1 – r
considered the detailed criteria for the considered permanent from of revenue recognition a position has been placements where accepted by a candidate, a start date but employment has not yet agreed, is made by commenced. A provision management, based on past historical of those experience, for the proportion the candidate is placements where their acceptance expected to reverse prior to the start date. In making its judgement, management Trade and other payables are stated at are other payables and Trade financial liabilities, includingcost. Other at fair initially measured are borrowings, of transaction costs. value, net contracts at has derivative The Group been sheet date that have the balance the income valued at fair value through statement. t) Hedge accounting in aHedges of a net investment operation, including a hedge foreign is accountedof a monetary item that investment,for as part of the net to accounted for in a way similar are Gains or lossescash flow hedges. to relating on the hedging instrument are portion of the hedge the effective as Other Comprehensive recognised Income while any gains or losses relating recognised portion are to the ineffective or loss. On in the statement of profit operation, the disposal of the foreign cumulative value of any such gains or in equity is transferred losses recorded or loss. to the statement of profit u) Critical accounting estimates and judgements of financial statements The preparation the use in conformity with IFRS requires of certain critical accounting estimates and judgements. It also requires judgement in management to exercise of applying the Company’s the process accounting policies. Estimates and judgements are based on continually evaluated and are historical experience and other factors, events including expectations of future under believed to be reasonable that are the circumstances. areas no accounting are There judgements, significant which require information about significant areas of estimation uncertainty in applying accounting policies that have the on the amount most significant effect in the financial statements recognised described in the following notes: are • statement of cash flows. cash equivalents for the purpose of the included as a component of cash and the Group’s cash management are cash management are the Group’s demand and form an integral part of Bank overdrafts that are repayable on repayable that are Bank overdrafts maturities of three months or less. maturities of three highly liquid investments with original with banks, and other short-term cash-in-hand, deposits held at call Cash and cash equivalents includes interest would be immaterial. interest receivables when the recognition of when the recognition receivables interest rate, except for short-term interest recognised by applying the effective by applying the effective recognised any impairment. Interest income is any impairment. Interest the effective interest method, less interest the effective are measured at amortised cost using at amortised measured are and receivables. Loans and receivables Loans and receivables and receivables. active market are classified as loans active market are payments that are not quoted in an payments that are that have fixed or determinable Trade receivables and other receivables and other receivables receivables Trade payables. and borrowings and trade and other and borrowings cash and cash equivalents, loans comprise trade and other receivables, comprise trade and other receivables, Non-derivative financial instruments contractual provisions of the instrument. contractual provisions when the Group becomes a party to the when the Group recognised in the Group’s balance sheet in the Group’s recognised Financial assets and liabilities are Financial assets and liabilities are s) Financial assets and liabilities preceding years. preceding borrowing costs in either the current or costs in either the current borrowing The Group has not capitalised any The Group connection with the borrowing of funds. connection with the borrowing and other costs that an entity incurs in Borrowing costs consist of interest Borrowing are expensed in the period they occur. in the period they occur. expensed are the asset. All other borrowing costs the asset. All other borrowing are capitalised as part of the cost of capitalised are get ready for its intended use or sale get ready takes a substantial period of time to production of an asset that necessarily production to the acquisition, construction orto the acquisition, construction Borrowing costs directly attributable costs directly Borrowing r) Borrowing costs r) Borrowing the effect is material. the effect are discounted to present value where value where discounted to present are obligation at the balance sheet date, andobligation at the balance expenditure required to settle the required expenditure at the Directors’ best estimate of the best estimate at the Directors’ obligation. Provisions are measured measured are obligation. Provisions benefits will be required to settle the required benefits will be probable that an outflow of economic that an outflow probable as a result of a past event, and it is of a past as a result present legal or constructive obligation legal or constructive present balance sheet when the Group has a when the Group balance sheet A provision is recognised in the is recognised A provision q) Provisions 2. 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 described in Note 1. Segment operating profit represents the profit earned by each segment including allocation of central administration costs. This is the measure reported to the Group’s Board, the chief operating decision maker, for the purpose of resource allocation and assessment of segment performance. Segments are aggregated in accordance with management ownership, determined by the possession of similar characteristics. No judgements were applied to identify the reportable segments.
(a) Revenue, gross profit and operating profit by reportable segment
Gross Operating Revenue profit profit 2017 2017 2017 2017 £’000 £’000 £’000 EMEA 675,983 332,288 69,674 United Kingdom 312,915 140,768 15,978
Asia Pacific Australia and New Zealand 110,602 37,703 5,480 Asia 125,688 99,469 18,039 Total – Asia Pacific 236,290 137,172 23,519
Americas 146,346 101,340 9,151 Operating profit – – 118,322 Financial expense – – (160) Revenue/gross profit/profit before tax 1,371,534 711,568 118,162
Gross Operating Revenue profit profit 2016 2016 2016 2016 £’000 £’000 £’000 EMEA 538,403 271,863 51,685 United Kingdom 324,548 146,313 24,153
Asia Pacific Australia and New Zealand 103,979 35,085 4,592 Asia 105,692 84,644 16,135 Total – Asia Pacific 209,671 119,729 20,727
Americas 123,503 83,129 4,387 Operating profit – – 100,952 Financial expense – – (956) Revenue/gross profit/profit before tax 1,196,125 621,034 99,996 The above analysis by destination is not materially different to the analysis by origin. The analysis opposite is of the carrying amount of reportable segment assets, 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 intangibles.
101 | Financial Statements STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION – – – 22 31 53 690 316 2016 2016 2016 2016 2016 3,862 2016 8,595 2,242 £’000 £’000 £’000 £’000 £’000 37,883 33,278 96,270 43,306 10,526 16,462 26,988 18,869 24,404 11,153 185,433 209,837 621,034 118,293 125,545 138,830 621,034 151,074 238,366 469,960 2 – 31 33 23 28 28 341 Financial Statements | 102 2017 2017 2017 2017 Gross profit Gross 2017 2017 3,668 2017 Gross profit Gross 7,508 6,237 1,220 £’000 £’000 £’000 £’000 £’000 34,158 30,116 51,193 10,349 18,132 28,481 18,815 22,166 109,100 Total liabilities Total 207,589 229,755 711,568 130,368 158,714 161,424 261,062 711,568 175,558 536,010 Intangible assets Intangible assets 407 2016 2016 2016 2016 2016 7,183 7,142 3,053 4,429 1,376 2016 2,686 2,797 2,390 2,345 6,283 £’000 £’000 £’000 £’000 £’000 29,461 10,707 24,869 56,182 81,051 56,311 12,743 14,111 187,257 119,036 443,655 456,398 161,796 227,908 294,972 511,449 719,804 476,321 1,196,125 1,196,125 347 Revenue Revenue equipment equipment 2017 2017 2017 2017 6,475 6,894 3,397 4,571 1,174 1,841 2,128 1,781 1,945 7,501 £’000 £’000 2017 £’000 £’000 £’000 30,158 12,218 24,639 61,176 85,815 55,898 15,652 13,415 Total assets Total 219,024 123,423 484,160 499,812 183,367 290,830 337,857 559,480 828,272 543,262 Property, plant and Property, Property, plant and Property, 1,371,534 1,371,534 Australia and New Zealand Asia Total – Asia Pacific Total Total – Asia Pacific Total Asia Asia – Asia Pacific Total Australia and New Zealand Australia and New Zealand Americas Americas Asia Pacific Asia Pacific United Kingdom United Kingdom EMEA EMEA EMEA Capital expenditure United Kingdom Asia Pacific Americas Segment assets/liabilities Income tax Marketing, Sales and Retail Engineering, Property & Construction, Procurement & Supply Chain & Construction, Procurement Engineering, Property Legal, Technology, HR, Secretarial and other HR, Secretarial Legal, Technology, Temporary Accounting and Financial Services Permanent (c) Revenue and gross profit by discipline profit (c) Revenue and gross (b) Segment assets, liabilities, non-current assets and capital expenditure by reportable segment reportable by expenditure and capital assets non-current liabilities, assets, (b) Segment (d) Revenue and gross profit generated from permanent and temporary placements permanent and temporary generated from profit (d) Revenue and gross 3. Profit for the year 2017 2016 £’000 £’000 Profit for the year is stated after charging: Employment costs (Note 4) 454,398 398,530 Net exchange losses 1,726 1,207 Depreciation of property, plant and equipment – owned (Note 10) 8,477 7,917 Amortisation of intangibles (Note 11) 10,617 9,148 Impairment of trade receivables (Note 20) 18,426 12,264 (Income)/loss on sale of property, plant and equipment and computer software (159) 186 Operating lease rentals – Land and buildings 30,160 29,980 – Plant and machinery 9,079 7,252
Fees payable to the Company’s auditor: Fees payable to the Company’s auditor for the audit of the Company’s annual accounts 219 207 Fees payable to the Company’s auditor and associates for other services: – The audit of the Company’s subsidiaries pursuant to legislation 513 477 – Audit related assurance services 52 52 Total audit fees 784 736 – Tax compliance services for the Company and its subsidiaries – 60 – Tax advice for the Company, its subsidiaries and individual employees in relation to moving employees internationally 22 153 – Tax advisory services – 48 – Other non-audit services 6 – Total non-audit fees 28 261 Total fees 812 997
4. Employee information The average number of employees (including Executive Directors) during the year and total number of employees (including Executive Directors) at 31 December 2017 were as follows:
2017 2016 At 31 Dec At 31 Dec Average Average 2017 2016 No. No. No. No. Management 311 295 314 292 Client services 4,782 4,297 5,184 4,419 Administration 1,456 1,392 1,531 1,388 6,549 5,984 7,029 6,099
Employment costs (including Directors’ emoluments) comprised:
2017 2016 £’000 £’000 Wages and salaries 381,286 336,874 Social security costs 45,630 39,686 Pension costs – defined contribution plans 15,501 14,187 Share-based payments and deferred cash plan 11,981 7,783 454,398 398,530 No staff are employed by the parent company (2016: none) hence no remuneration has been disclosed for the Company. Remuneration for Directors for their services on behalf of the parent company are included in the Directors’ Remuneration Report on pages 63 to 76.
103 | Financial Statements STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION – – – – % 4.2 3.3 0.3 1.1 1.1 117 117 (1.8) (0.1) (0.2) 27.9 20.0 368 (53) (465) (608) 259 252 2016 £’000 2016 (597) 2016 £’000 (1,073) £’000 (2,015) (2,413) 18,976 30,313 11,078 27,900 – – 252 Financial Statements | 104 (168) (240) – 2016 4,153 3,346 1,180 1,134 2017 £’000 (720) £’000 229 229 (1,756) 27,900 19,999 99,996 456 2017 2017 (241) (148) (389) £’000 2017 (661) 1,327 1,315 2,572 1,824 9,726 £’000 23,076 33,258 35,082 (2,729) – % 1.5 1.0 3.8 4.1 1.5 0.5 29.7 19.3 (1.3) (0.6) (0.1) – 571 (64) (661) 2017 1,783 1,196 4,479 4,896 1,715 £’000 35,082 22,746 (1,579) 118,162
Tax expense and effective rate for the year expense and effective Tax Adjustment to tax charge in respect of prior periods Adjustment to tax charge in respect Movement of rate difference Other tax overseas Higher tax rates on overseas earnings Derecognition of overseas losses Derecognition Other tax movements Recognition of overseas losses and other tax attributes Utilisation of losses not previously recognised Utilisation of losses not previously Unrelieved overseas losses Unrelieved Disallowable items and other permanent differences Effects of: Effects standard rate of corporation tax in the UK standard Profit before taxation before Profit tax multiplied by the activities before on ordinary Profit Adjustment in respect of prior years Adjustment in respect Deferred tax Deferred Relating to settled transactions Overseas income tax of temporary differences Origination and reversal losses recognised of previously Derecognition Impact of tax rate changes for tax losses recognised Charge/(credit) tax expense/(income) Deferred Tax recognised directly in equity directly recognised Tax Adjustments in respect of prior year Adjustments in respect losses and other tax attributes unrecognised Recognition of previously tax expense in the income statement Total Reconciliation of effective tax rate Reconciliation of effective UK income tax at 19.25% (2016: 20.00%) for year UK income tax at 19.25% (2016: 20.00%) Analysis of charge in the year Analysis of charge in Interest receivable Interest Financial income Financial Interest payable Interest Financial expenses Interest on discounting of French construction participation tax construction participation on discounting of French Interest
5. Financial income/(expenses) 5. Financial
6. Income tax expense (2016: 27.9%). tax before on profit annual tax rate of 29.7% is based on the effective The charge for taxation 7. Current tax assets and liabilities The current tax asset of £15.7m (2016: £12.7m), and current tax liability of £22.2m (2016: £24.4m) for the Group, and current tax asset and liability of £nil (2016: £nil) for the parent company, represent the amount of income taxes recoverable and payable in respect of current and prior periods. The Group maintains a provision in relation to disputes and uncertain tax positions, including transfer pricing, which is included in the current tax liability. 8. Dividends 2017 2016 £’000 £’000 Amounts recognised as distributions to equity holders in the year: Final dividend for the year ended 31 December 2016 of 8.23p per Ordinary share (2015: 7.90p) 25,857 24,564 Interim dividend for the year ended 31 December 2017 of 3.90p per Ordinary share (2016: 3.75p) 12,287 11,660 Special dividend for the year ended 31 December 2017 of 12.73p per Ordinary share (2016: 6.46p) 40,107 20,087 78,251 56,311 Amounts proposed as distributions to equity holders in the year: Proposed final dividend for the year ended 31 December 2017 of 8.60p per Ordinary share (2016: 8.23p) 27,144 25,599 The proposed final dividend had not been approved by shareholders at 31 December 2017 and therefore has not been included as a liability. The comparative final dividend at 31 December 2016 was also not recognised as a liability in the prior year. The proposed final dividend of 8.60p (2016: 8.23p) per Ordinary share will be paid on 18 June 2018 to shareholders on the register at the close of business on 18 May 2018, subject to approval by shareholders. When the Company pays a dividend to shareholders, there may be income tax consequences. The impact will depend upon the individual circumstances of the shareholder. 9. Earnings per Ordinary share The calculation of the basic and diluted earnings per share is based on the following data: 2017 2016 £’000 £’000 Earnings Earnings for basic and diluted earnings per share (£’000) 83,080 72,096
Number of shares number number Weighted average number of shares used for basic earnings per share (‘000) 313,491 311,534 Dilutive effect of share plans (‘000) 1,287 802 Diluted weighted average number of shares used for diluted earnings per share (‘000) 314,778 312,336
pence pence Basic earnings per share 26.5 23.1 Diluted earnings per share 26.4 23.1 The above results relate to continuing operations. Basic Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of Ordinary shares in issue during the year, excluding Ordinary shares purchased by the Employee Benefit Trust and held in the reserve. Diluted Diluted earnings per share is calculated by adjusting the weighted average number of Ordinary shares outstanding to assume conversion of all dilutive potential Ordinary shares. This calculation determines the number of shares that could have been acquired at fair value (determined as the average market price of the Company’s shares) based on the monetary value of the subscription rights attached to the outstanding share options. The number of shares calculated in the basic earnings per share is then adjusted to reflect the number of shares deemed to be issued for nil consideration as a result of the potential exercise of existing share options. The remaining share options that are currently not dilutive and hence excluded from the dilutive earnings per share calculation remain potentially dilutive until they are either exercised or they lapse.
105 | Financial Statements STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION Total Total Total Total £’000 £’000 77 7,689 912 13,415 598 8,477 (76) (870) (42) (481) Financial Statements | 106 838 14,111 146 10,914 582 7,917 £’000 Motor Motor £’000 Motor Motor vehicles vehicles vehicles vehicles 2017 2016 £’000 £’000 Furniture, Furniture, Furniture, Furniture, equipment equipment equipment equipment fixtures and fixtures fixtures and fixtures (545) (249) (289) (150) 5,142 7,361 3,755 4,124 £’000 ments 6,853 6,420 4,462 6,306 3,425 3,910 3,000 4,612 £’000 38,439 49,999 2,424 90,862 40,500 43,481 2,556 86,537 23,894 36,363 1,144 61,401 25,351 29,830 1,198 56,379 15,149 13,651 1,358 30,158 (2,536) (13,630) (704) (16,870) (2,009) (10,507) (502) (13,018) ments (4,977) (10,155) (829) (15,961) (4,718) (9,322) (552) (14,592) 32,101 47,428 2,269 81,798 38,439 49,999 2,424 90,862 22,187 37,163 1,037 60,387 23,894 36,363 1,144 61,401 14,545 13,636 1,280 29,461 improve- improve- improve- improve- Leasehold Leasehold
Cost At 1 January Cost At 1 January Additions Additions Disposals Effect of movements in foreign exchange movements in foreign of Effect Disposals At 31 December Depreciation At 1 January Effect of movements in foreign exchange of movements in foreign Effect Charge for the year Disposals At 31 December Effect of movements in foreign exchange of movements in foreign Effect At 31 December Depreciation At 1 January Net book value At 31 December Charge for the year Disposals Effect of movements in foreign exchange of movements in foreign Effect At 31 December Net book value At 31 December Group
Group 10. Property, plant and equipment plant 10. Property, 11. Intangible assets
2017
Computer software, Computer assets under software construction Subtotal Goodwill Trademark Subtotal Total Group £’000 £’000 £’000 £’000 £’000 £’000 £000 Cost At 1 January 70,054 6,936 76,990 1,539 746 2,285 79,275 Additions 612 6,896 7,508 – – – 7,508 Disposals (993) – (993) – – – (993) Transfers 11,690 (11,690) – – – – – Effect of movements in foreign exchange 90 22 112 – – – 112 At 31 December 81,453 2,164 83,617 1,539 746 2,285 85,902 Amortisation At 1 January 40,803 – 40,803 – 589 589 41,392 Charge for the year 10,606 – 10,606 – 11 11 10,617 Disposals (317) – (317) – – – (317) Effect of movements in 52 – 52 – – – 52 foreign exchange At 31 December 51,144 – 51,144 – 600 600 51,744 Net book value
At 31 December 30,309 2,164 32,473 1,539 146 1,685 34,158
2016
Computer software, Computer assets under software construction Subtotal Goodwill Trademark Subtotal Total Group £’000 £’000 £’000 £’000 £’000 £’000 £000 Cost At 1 January 66,762 3,204 69,966 1,539 746 2,285 72,251 Additions 2,773 8,380 11,153 – – – 11,153 Disposals (5,685) – (5,685) – – – (5,685) Transfers 4,648 (4,648) – – – – – Effect of movements in 1,556 – 1,556 – – – 1,556 foreign exchange At 31 December 70,054 6,936 76,990 1,539 746 2,285 79,275 Amortisation At 1 January 35,433 – 35,433 – 552 552 35,985 Charge for the year 9,111 – 9,111 – 37 37 9,148 Disposals (4,978) – (4,978) – – – (4,978) Effect of movements in 1,237 – 1,237 – – – 1,237 foreign exchange At 31 December 40,803 – 40,803 – 589 589 41,392 Net book value At 31 December 29,251 6,936 36,187 1,539 157 1,696 37,883
107 | Financial Statements STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
51 214 2016 £’000 1,274 1,539 £’000 6,809 509,872 516,681 Financial Statements | 108 51 214 Subsidiary undertakings 2017 1,274 1,539 £’000 Registered office Registered Buenos Aires, C1009ABY, Argentina C1009ABY, Buenos Aires, 2000, Australia Gumpendorfer Strauße 72, Second floor, Wien, Austria Belgium Belgium Olimpia, CEP Rua Funchal 375, 7th Floor Vila 04551-060, Sao Paulo, Brazil Conjunto 41 - Edifício Mendes Caldeira, CEP Brazil 04578-900, São Paulo - SP, andar - CJ.12 - Cidade Monções, CEP 04571- Brazil 000, São Paulo - SP, Ontario, M5H 1J8, Canada Buenos Aires, C1009ABY, Argentina C1009ABY, Buenos Aires, Argentina C1009ABY, Buenos Aires, Principal activity Recruitment Consultancy NSW Sydney, Street, Level 32, 225 George Recruitment Consultancy Recruitment Consultancy Place du Champ de Mars 5 , 1050 Brussels, Recruitment Consultancy Place du Champ de Mars 5 , 1050 Brussels, Recruitment Consultancy Recruitment Consultancy das Nações Unidas, 10.989 - 4º Andar , Av. Recruitment Consultancy Luis Carlos Berrini, 716, 1º Engenheiro Av. Recruitment Consultancy Toronto, 21st Floor, West, 130 Adelaide Street Recruitment Consultancy Carlos Pellegrini 1265, Piso 12, Ciudad de Recruitment Consultancy Carlos Pellegrini 1265, Piso 12, Ciudad de Recruitment Consultancy Pellegrini 1265, Piso 12, Ciudad de Carlos Country of incorporation Australia Austria Belgium Belgium Brazil Brazil Brazil Canada Argentina Argentina Argentina
UK USA Singapore Cost at 1 January 2017 plans for subsidiaries’ employees to share relating Transactions Cost at 31 December 2017 Company Recrutamento Especializado Ltda Especializado Ltda Especializado e servicos corporativos Ltda Michael Page International (Australia) Pty Limited Michael Page International GmbH Michael Page International (Belgium) NV/SA Page Interim (Belgium) NV/SA Michael Page International Do Brasil - Page Interim Do Brasil - Recrutamento Page Personnel Do Brasil - Recrutamento Michael Page International Canada Limited Eventuales SA out below: SA Argentina SA Page Personnel Argentina Servicios Page Personnel Argentina Michael Page International Name of undertaking The Company’s principal subsidiary undertakings at 31 December 2017, their principal activities and countries of incorporation are set principal activities and countries of incorporation are principal subsidiary undertakings at 31 December 2017, their The Company’s opinion of the Directors that at 31 December 2017 there was no impairment of goodwill. was that at 31 December 2017 there opinion of the Directors The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. It is the indications that goodwill might be impaired. are if there frequently tests goodwill annually for impairment, or more The Group materially exceed its recoverable amount. materially exceed its recoverable reasonably possible change in any of the above key assumptions would cause the carrying value of goodwill allocated to any CGU to possible change in any of the above key assumptions would cause the carrying value reasonably 12. Investments of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense. Management believes that no as an expense. Management loss is recognised amount. An impairment to its recoverable of the asset is reduced value of those cash flows. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount to be less than its carrying amount, recoverable amount of an asset is estimated If the value of those cash flows. rate of 8%, representing the weighted average cost of capital for the Group, to the estimated future cash flows to calculate the terminal future to the estimated cost of capital for the Group, the weighted average rate of 8%, representing term average growth rate of the relevant markets and reflects long-term wage inflation fee growth. Management applied a discountgrowth. fee long-term wage inflation markets and reflects relevant rate of the term average growth financial budget, management projections for five years, followed by an assumed growth rate of 0%, which does not exceed the long- growth rate of 0%, which does not exceed assumed for five years, followed by an projections financial budget, management In assessing value in use, the estimated future cash flows are calculated by preparing cash flow forecasts derived from the most recent from the most derived cash flow forecasts preparing calculated by cash flows are use, the estimated future In assessing value in goodwill allocation is presented below: is presented goodwill allocation Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to the country of operation. A summary of theof operation. A summary to the country according units (CGUs) identified cash-generating allocated to the Group’s Goodwill is Impairment tests for goodwill tests Impairment Country of Principal Name of undertaking incorporation activity Registered office Michael Page International Canada Recruitment Consultancy 130 Adelaide Street West, 21st Floor, Toronto, Canada Limited Ontario, M5H 1J8, Canada
Page Personnel International Chile Recruitment Consultancy Magdalena 181, Piso 1, Las Condes, Santiago Chile Ltda 7550055, Chile
Page Consulting Chile Ltda Chile Recruitment Consultancy Magdalena 181, Piso 16, Las Condes, Santiago 7550055, Chile
Empresa de Servicios Transitorios Chile Recruitment Consultancy Magdalena 181, Piso 1, Las Condes, Santiago Page Interim Chile Limitada 7550055, Chile
Michael Page (Beijing) China Recruitment Consultancy Room 2701 & 2708, SK Tower Beijing, No.6 Recruitment Co., Ltd Jianguomenwai Avenue, Chaoyang District, Beijing 100022, China Michael Page (Shanghai) China Recruitment Consultancy Level 11, Tower 2, Jing An Kerry Centre, 1539 Recruitment Co., Ltd Nanjing Road West, Shanghai, 200040, China
Michael Page International China Recruitment Consultancy Suite 1010, Shanghai Kerry Centre, 1515 Nanjing (Shanghai) Consulting Limited West Road, Shanghai, China
Michael Page International Colombia Recruitment Consultancy Av. Calle 82 No. 10-33 - Oficina 801, Colombia Colombia SAS
Michael Page Partnership Limited England and Wales Trading Page House, 1 Dashwood Lang Road, Bourne Business Park, Weybridge, Surrey KT15 2QW, UK
Michael Page Employment England and Wales Recruitment Consultancy Page House, 1 Dashwood Lang Road, Bourne Services Limited Business Park, Weybridge, Surrey KT15 2QW, UK
LPM (Professional Recruitment) England and Wales Holding company Page House, 1 Dashwood Lang Road, Bourne Limited Business Park, Weybridge, Surrey KT15 2QW, UK
Accountancy Additions Limited England and Wales Non-trading Page House, 1 Dashwood Lang Road, Bourne Business Park, Weybridge, Surrey KT15 2QW, UK
Slamway Limited England and Wales Non-trading Page House, 1 Dashwood Lang Road, Bourne Business Park, Weybridge, Surrey KT15 2QW, UK
The Assessment Centre Limited England and Wales Non-trading Page House, 1 Dashwood Lang Road, Bourne Business Park, Weybridge, Surrey KT15 2QW, UK
LPM (Group Services) Limited England and Wales Non-trading Page House, 1 Dashwood Lang Road, Bourne Business Park, Weybridge, Surrey KT15 2QW, UK
The Page Partnership Limited England and Wales Non-trading Page House, 1 Dashwood Lang Road, Bourne Business Park, Weybridge, Surrey KT15 2QW, UK
Sales Recruitment Specialists England and Wales Non-trading Page House, 1 Dashwood Lang Road, Bourne Limited Business Park, Weybridge, Surrey KT15 2QW, UK
Michael Page International Limited England and Wales Non-trading Page House, 1 Dashwood Lang Road, Bourne Business Park, Weybridge, Surrey KT15 2QW, UK
Michael Page International England and Wales Non-trading Page House, 1 Dashwood Lang Road, Bourne 1982 Limited Business Park, Weybridge, Surrey KT15 2QW, UK
Michael Page International England and Wales Non-trading Page House, 1 Dashwood Lang Road, Bourne Investment Limited Business Park, Weybridge, Surrey KT15 2QW, UK
Michael Page International England and Wales Non-trading Page House, 1 Dashwood Lang Road, Bourne Finance Limited Business Park, Weybridge, Surrey KT15 2QW, UK
Page Personnel (UK) Limited England and Wales Non-trading Page House, 1 Dashwood Lang Road, Bourne Business Park, Weybridge, Surrey KT15 2QW, UK
Michael Page Holdings Limited England and Wales Support services Page House, 1 Dashwood Lang Road, Bourne Business Park, Weybridge, Surrey KT15 2QW, UK
109 | Financial Statements STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION Financial Statements | 110 Registered office Registered Seine, Paris, France Seine, Paris, France Seine, Paris, France Seine, Paris, France 92522 Neuilly-sur- Achille Peretti, 164 Avenue Seine, Paris, France Germany Germany Seine, Paris, France Page House, 1 Dashwood Lang Road, Bourne 1 Dashwood Lang Road, Page House, UK KT15 2QW, Surrey Weybridge, Business Park, UK KT15 2QW, Surrey Business Park, Weybridge, Lang Road, BournePage House, 1 Dashwood UK KT15 2QW, Surrey Business Park, Weybridge, Lang Road, BournePage House, 1 Dashwood UK KT15 2QW, Surrey Business Park, Weybridge, Lang Road, BournePage House, 1 Dashwood UK KT15 2QW, Surrey Business Park, Weybridge, Lang Road, BournePage House, 1 Dashwood UK KT15 2QW, Surrey Business Park, Weybridge, Seine, Paris, France 92522 Neuilly-sur- Achille Peretti, 164 Avenue Seine, Paris, France Seine, Paris, France Seine, Paris, France Seine, Paris, France Seine, Paris, France Seine, Paris, France Principal activity Recruitment Consultancy 92522 Neuilly-sur- Achille Peretti, 164 Avenue Recruitment Consultancy 92522 Neuilly-sur- Achille Peretti, 164 Avenue Recruitment Consultancy 7 Rue de l’Industrie, 98000 Monaco Recruitment Consultancy 92522 Neuilly-sur- Achille Peretti, 164 Avenue Non-trading Recruitment Consultancy Carl Theodor Strasse 1, 40213 Dusseldorf, Recruitment Consultancy Carl Theodor Strasse 1, 40213 Dusseldorf, Recruitment Consultancy 1, Rue Esquermoise, 59800 Lille, France Recruitment Consultancy France 48, Rue de la République, 69002 Lyon, Recruitment Consultancy 92522 Neuilly-sur- Achille Peretti, 164 Avenue Recruitment Consultancy 92522 Neuilly-sur- Achille Peretti, 164 Avenue Non-trading Non-trading Recruitment Consultancy 92522 Neuilly-sur- Achille Peretti, 164 Avenue Support services Recruitment Consultancy 92522 Neuilly-sur- Achille Peretti, 164 Avenue Recruitment Consultancy 92522 Neuilly-sur- Achille Peretti, 164 Avenue Recruitment Consultancy 92522 Neuilly-sur- Achille Peretti, 164 Avenue Recruitment Consultancy 92522 Neuilly-sur- Achille Peretti, 164 Avenue Recruitment Consultancy 92522 Neuilly-sur- Achille Peretti, 164 Avenue France France France France France Germany Germany France France France France England and WalesEngland and Recruitment ConsultancyEngland and Wales Dashwood Lang Road, Bourne Page House, 1 England and Wales Holding company England and Wales England and Wales Holding company France France France France France France France England and WalesEngland and Holding company Country of Country of incorporation
Page Consulting SARLU Michael Page EDP EURL Michael Page Monaco SARL MP Immobilier et Construction EURL for SARLU Talent Michael Page International (Deutschland) GmbH Page Personnel Services GmbH MP Nord EURL MP Nord MP Sud EURL Michael Page Advertising SARLU EURL Michael Page InternationalMichael Page Recruitment Limited* Michael Page Limited Michael Page International Southern Limited* Europe Michael Page UK Limited Michael Page Recruitment Limited Group Michael Page International (France) SAS Michael Page Financial Services SAS Page Personnel SAS EURL MP Commercial MP Ignenieurs et Informatique SARLU Page Formation EURL MP International – LRR EURL MP Finance et Comptabilitie Holdings Limited Michael Page InternationalMichael Page Name of undertaking Country of Principal Name of undertaking incorporation activity Registered office Page Personnel (Deutschland) Germany Recruitment Consultancy Carl Theodor Strasse 1, 40213 Dusseldorf, Germany GmbH
Michael Page Interim GmbH Germany Recruitment Consultancy Carl Theodor Strasse 1, 40213 Dusseldorf, Germany
Michael Page International (Hong Hong Kong Recruitment Consultancy 611 One Pacific Place, 88 Queensway, Hong Kong Kong) Limited
Michael Page International India Recruitment Consultancy 5th Floor, 2 North Avenue, Maker Maxity, Bandra-Kurla Recruitment Pvt Ltd Complex, Bandra (E), Mumbai 400051, India
PT Michael Page Internasional Indonesia Recruitment Consultancy One Pacific Place, Suites B-F, Level 12, Sudirman Central Indonesia Business District, Jl. Jend. Sudirman Kav 52-53, Jakarta 12190, Indonesia
Michael Page International (Ireland) Ireland Recruitment Consultancy c/o Mason Hayes & Curran, Southbank House, Barrow Limited Street, Dublin 4, Ireland
Michael Page International Italia Srl Italy Recruitment Consultancy Via Spadari 1, 20123 Milan, Italy
Page Personnel Italia SpA Italy Recruitment Consultancy Via Spadari 1, 20123 Milan, Italy
Michael Page International (Japan) Japan Recruitment Consultancy 6F Hulic Kamiyacho Building, 4-3-13 Toranomon, Minato-ku, K.K. Tokyo 105-0001, Japan
Michael Page International Malaysia Recruitment Consultancy 10th Floor, Wisma Hamjah-Kwong Hing, No.1 Leboh (Malaysia) Sdn Bhd Ampang, 50100 Kuala Lumpur
Michael Page International Mexico Mexico Recruitment Consultancy Av. Paseo de la Reforma, No. 115, Piso 10, Col. Lomas de Reclutamiento Especializado, S.A. Chapultepec, Z.C. 11000, CDMX, Mexico de C.V.
Michael Page International Mexico Mexico Recruitment Consultancy Av. Paseo de la Reforma, No. 115, Piso 10, Col. Lomas de Servicios Corporativos SA de CV Chapultepec, Z.C. 11000, CDMX, Mexico
Page Interim Mexico Servicios SA Mexico Recruitment Consultancy Av. Paseo de la Reforma, No. 115, Piso 10, Col. Lomas de de CV Chapultepec, Z.C. 11000, CDMX, Mexico
Michael Page International (Maroc) Morocco Recruitment Consultancy Residence Plein Ciel 9, Angle rue Mahassine Arrouyani et Ali SARL AU Abderrazak, Quartier Racine-20, 100 Casablanca, Morroco
Michael Page International Netherlands Recruitment Consultancy World Trade Center, Strawinskylaan 421, 107XX, Amsterdam, (Nederland) BV Netherlands
Page Interim BV Netherlands Recruitment Consultancy World Trade Center, Strawinskylaan 421, 107XX, Amsterdam, Netherlands
Michael Page International (New New Zealand Recruitment Consultancy Level 17, 191 Queen Street, Auckland NZ 1010 Zealand) Limited
Michael Page International Peru Peru Recruitment Consultancy Calle Las Orquídeas 665 esq. Andrés Reyes - Piso 2, Oficina SRL 201 San Isidro, Peru
Michael Page International Poland Recruitment Consultancy ul. Zlota 59, 00-120 Warsaw, Poland (Poland) Sp.z.o.o
Michael Page International Portugal Recruitment Consultancy Avenida da Liberdade n 180A, 1250-146 Lisboa, Portugal Empressa de Trabalho Temporário e Serviços de Consultadoria Lda
Portugal MP Outsourcing Portugal Recruitment Consultancy Avenida da Liberdade n 180A, 1250-146 Lisboa, Portugal
Michael Page International Qatar Recruitment Consultancy Qatar Financial Centre, Office 2, Ground Floor, Tornado Qatar (Branch) Tower, West Bay, PO Box 23153, Doha, Qatar
111 | Financial Statements STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION Financial Statements | 112 NY10017, USA Dubai International Finance Centre (DIFC), PODubai International Finance Centre Box 506702, Dubai, United Arab Emirates Buyukdere Caddesi, Kanyon Ofis, Binasi No. Buyukdere 185, Kat 5 34394 Levent, Instanbul, Turkey Buyukdere Caddesi, Kanyon Ofis, Binasi No. Buyukdere 185, Kat 5 34394 Levent, Instanbul, Turkey 689 Sukhumvit Road, Klongton Nuea, Vadhanna, 689 Sukhumvit Road, Klongton Nuea, Vadhanna, Bangkok 10110, Thailand 17th Floor, ITF Tower, No 140/36-37 Silom Road, ITF Tower, 17th Floor, Kwaeng Suriawong, Khet Banrak, Bangkok, Thailand Songren Road Xin-Yi District, Taipei City, Taiwan Taiwan City, District, Taipei Road Xin-Yi Songren 110 Switzerland Sweden Llobregat (Barcelona), Spain (Barcelona), Llobregat Spain Paseo de la Castellana 28 -3ª, 28046 Madrid,Paseo de la Castellana Spain Spain PO Box 653555, Benmore 2010, South Africa 2010, PO Box 653555, Benmore One Raffles Place, #09-61 Office Tower Two, Tower Place, #09-61 Office One Raffles 048616 Singapore One Raffles Place, #09-61 Office Tower Two, Tower Place, #09-61 Office One Raffles 048616 Singapore Registered office Registered • Michael Page Partnership Limited • Michael Page Employment Services Limited Recruitment Consultancy Recruitment Consultancy Recruitment Consultancy EmQuartier, Unit 3076, 30th Floor Bhiraji Tower, Holding company Recruitment Consultancy 36-1 Financial Building, 8F-1 Shin Kong Xin Yi Recruitment Consultancy Quai de la Poste 12, CH-1204 Geneva, Recruitment Consultancy Master Samuelsgatan 42, l4tr 111 57 Stockholm, Recruitment Consultancy Calle Julian Camarillo 42-4, 28037 Madrid, Spain Recruitment Consultancy 21-23 5ª, 08908 Hospitalet de Plaza Europa Recruitment Consultancy Paseo de la Castellana 28 -3ª, 28046 Madrid, Recruitment Consultancy Calle Julian Camarillo 42-4, 28037 Madrid, Spain Holding company Recruitment Consultancy-3ª, 28046 Madrid, Paseo de la Castellana 28 Non-trading Recruitment Consultancy Africa 2010, South PO Box 653555, Benmore Recruitment Consultancy Recruitment Recruitment Consultancy Recruitment Principal activity United States Recruitment Consultancy New York, 29th Floor, Avenue, 622 Third United Arab Emirates Recruitment Consultancy 1, House, Tower No. 202, Al Fattan Currency Turkey Turkey Thailand Thailand Taiwan Switzerland Sweden Spain Spain Spain Spain Spain Spain South Africa South Africa Singapore Singapore Country of Country of incorporation
Michael Page International Inc* Michael Page International (UAE) Limited Servisleri Danismanligi Ltd Michael Page International Yonetim Michael Page International Yonetim IstihdamDanismanligi Michael Page International NEM Limited Sirketi (Thailand) Limited Michael Page International Recruitment Michael Page Thailand Limited Taiwan Michael Page International Michael Taiwan Co Ltd Michael Page International (Switzerland) SA Michael Page International (Sweden) AB Page Personnel ETT SA Page Group Europe SL Europe Page Group Michael Page AD SL Page Personnel Seleccion SA Michael Page Holding (España) SL Michael Page Holding Michael Page International (España) SA Michael Page Africa (SA) (Pty) Limited Michael Page Africa (SA) Michael Page International (SA) (Pty) Limited Page Personnel Recruitment Pte Ltd Recruitment Pte Page Personnel • LPM (Professional Recruitment) Limited • LPM (Professional • Michael Page International Limited Holdings • Michael Page International Limited Southern Europe 479A of the Act: The following subsidiaries are exempt from the requirements of the Companies Act 2006 relating to the audit of accounts under section of the Companies Act 2006 relating the requirements exempt from The following subsidiaries are classes of issued share capital. The share capital of all the subsidiary undertakings comprise Ordinary shares. capital of all the subsidiary undertakings comprise Ordinary capital. The share classes of issued share The percentage of the issued share capital held is equivalent to the percentage of voting rights held. The Group holds 100% of all holds of voting rights held. The Group capital held is equivalent to the percentage of the issued share The percentage and operate principally in their country of incorporation. *The equity of these subsidiary undertakings is held directly by PageGroup plc. All companies have been included in the consolidation by PageGroup *The equity of these subsidiary undertakings is held directly Michael Page InternationalMichael Page Pte Limited* Name of undertaking 13. Trade and other receivables Group Company 2017 2016 2017 2016 £’000 £’000 £’000 £’000 Current Trade receivables 253,555 210,145 – – Less provision for impairment of receivables (8,161) (5,070) – – Net trade receivables 245,394 205,075 – – Amounts due from Group companies – – 647,607 664,008 Other receivables 9,839 9,612 – – Accrued Income 31,938 37,623 – – Prepayments 11,918 7,018 – – 299,089 259,328 647,607 664,008 Non-current Other receivables 10,513 7,640 – – The fair values of trade and other receivables are not materially different to those disclosed above. The Group’s exposure to credit and currency risks and impairment losses related to trade and other receivables is disclosed in Note 20. All amounts due from Group undertakings are unsecured, interest-free and repayable on demand.
14. Trade and other payables Group Company 2017 2016 2017 2016 £’000 £’000 £’000 £’000 Current Trade payables 6,240 7,515 – – Amounts owed to Group companies – – 848,300 798,493 Other tax and social security 54,615 46,813 – – Other payables 28,312 21,407 – – Accruals 97,467 98,084 176 10 Deferred income 1,096 1,240 – – 187,730 175,059 848,476 798,503 Non-current Deferred income 18,628 9,702 – – Other tax and social security 861 242 – – 19,489 9,944 – – The fair values of trade and other payables are not materially different to those disclosed above. All amounts due to Group undertakings are unsecured, interest-free and repayable on demand. The total liability relating to other tax and social security includes a balance of £0.9m (2016: £0.8m) relating to social charges on share-based payments. The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 20.
113 | Financial Statements STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
566 392 430 Total Total (540) 2016 2016 £’000 1,824 £’000 (2,413) (1,208) (16,117) (16,117) (16,547) (14,267) – – 370 Financial Statements | 114 370 2017 (188) (602) Other £’000 £’000 (4,124) (9,640) (9,872) (14,267) (14,637) – – 196 949 £’000 2,298 (1,020) (5,061) (2,567) Tax losses losses Tax – – 128 392 762 (540) £’000 (2,570) (4,990) (5,328) (12,888) (1,416) (1,416) (5,061) (9,640) (16,117) (1,828) payments Share-based Share-based
Deferred tax assets Deferred Deferred tax liabilities Deferred At 1 January 2017 Recognised in equity for the year Recognised in profit or loss for the year Recognised in profit Exchange differences At 31 December 2017 At 1 January 2016 Recognised in equity for the year Recognised in profit or loss for the year Recognised in profit Exchange differences At 31 December 2016 prior reporting periods. prior reporting The following are the major deferred tax (assets)/liabilities recognised by the Group, and the movements thereon, during the current and during the current thereon, and the movements by the Group, (assets)/liabilities recognised tax the major deferred The following are The Group’s exposure to interest rate, foreign currency and liquidity risk for financial assets and liabilities is disclosed in Note 20. liquidity risk for financial assets and liabilities and currency foreign rate, to interest exposure The Group’s tax 16. Deferred demand. with HSBC. All conditions precedent on each of these facilities had been met. All other bank overdrafts and facilities are repayable on repayable and facilities are met. All other bank overdrafts on each of these facilities had been precedent with HSBC. All conditions £2m with HSBC, £1.6m elsewhere in the Group and £31.3m of undrawn borrowing facilities under the Invoice Discounting arrangement the Invoice Discounting facilities under borrowing and £31.3m of undrawn Group in the £1.6m elsewhere £2m with HSBC, At 31 December 2017, the Group had available £10m (2016: £10m) of undrawn uncommitted overdraft facility with Deutsche Bank, facility with overdraft of undrawn uncommitted £10m (2016: £10m) had available 2017, the Group At 31 December No bank overdrafts were utilised in respect of the year ended 31 December 2017 (2016: £Nil). 31 December 2017 of the year ended in respect utilised were No bank overdrafts 15. Bank overdrafts 15. Bank of the deferred tax balances (after offset) for balance sheet purposes: for balance sheet tax balances (after offset) of the deferred Certain deferred tax assets and liabilities have been offset in accordance with the Group’s accounting policy. The following is the analysis accounting policy. with the Group’s accordance in tax assets and liabilities have been offset Certain deferred they have arisen. The Group has not recognised a deferred tax asset in respect of any losses that we would expect to be impacted of any losses that we would expect to in respect tax asset a deferred has not recognised they have arisen. The Group by expiry. territories. These tax losses and other tax attributes remain available to offset future taxable profits in the respective territories where respective territories where in the taxable profits future available to offset territories. These tax losses and other tax attributes remain tax is recognised given the future utilisation of the tax losses is uncertain; there were no other tax attributes recognised in those no other tax attributes recognised were utilisation of the tax losses is uncertain; there given the future tax is recognised deferred tax has arisen. There are carried forward losses of £16.7m (2016: £14.0m) arising in overseas territories for which no deferred which no deferred losses of £16.7m (2016: £14.0m) arising in overseas territories for carried forward are tax has arisen. There deferred The realisation of the deferred tax asset is dependent upon generating future taxable profits in the overseas territories in which the in the overseas territories taxable profits tax asset is dependent upon generating future of the deferred The realisation deductions of £1.1m. to the financial statements is a write down of deferred tax assets representing the future value for accumulated losses and other value for accumulated losses the future representing tax assets to the financial statements is a write down of deferred interest that can be deducted for tax purposes and the introduction of other measures designed to combat base erosion. The impact designed to combat base erosion. of other measures that can be deducted for tax purposes and the introduction interest to the Group being the reduction in the federal rate of tax to 21%, from 35%. Other measures included a reduction in the amount of included a reduction 35%. Other measures in the federal rate of tax to 21%, from being the reduction to the Group In December 2017 the US Tax Cuts and Jobs Act was enacted. This Act made significant changes to US tax rules, the most relevant the most Cuts and Jobs Act was enacted. This Act made significant changes to US tax rules, In December 2017 the US Tax recognised of £2.6m. recognised loss for the year of £2.3m in relation to losses is a combination of the elements disclosed in Note 6 including the charge for tax losses loss for the year of £2.3m in relation year and in 2017 resulted in an increase in the deferred tax asset of £0.2m (2016: £4.3m increase). The amount recognised in profit or in profit The amount recognised (2016: £4.3m increase). tax asset of £0.2m in the deferred in an increase year and in 2017 resulted temporary differences between the recognition of income and expenditure for accounting and tax purposes. This can vary from year to vary from for accounting and tax purposes. This can of income and expenditure between the recognition temporary differences of tax losses across a number of territories plus the utilisation of losses in other territories. The movement in ‘Other’ is comprised of of tax losses across The net reduction of the deferred tax asset balance by £1.9m in the year includes £0.3m for the effects of recognition and derecognition derecognition and of recognition tax asset balance by £1.9m in the year includes £0.3m for the effects of the deferred The net reduction reverse in the foreseeable future. in the foreseeable reverse the Group is in a position to control the timing of the reversal of the temporary difference and it is not probable that such differences will that such differences and it is not probable temporary difference of the the timing of the reversal is in a position to control the Group No deferred tax liability has been recognised in respect of £108.3m (2016: £110.3m) of unremitted earnings(2016: £110.3m) of unremitted of subsidiaries because of £108.3m in respect tax liability has been recognised No deferred 17. Called-up share capital 2017 2016 Number of Number of £’000 shares £’000 shares Allotted, called-up and fully paid Ordinary shares of 1p each At 1 January 3,259 325,975,455 3,258 325,919,705 Shares issued 9 833,246 1 55,750 At 31 December 3,268 326,808,701 3,259 325,975,455 Shares issued in the year related to the Executive Share Option Scheme. Share option plans The Group has share option awards currently outstanding under an Executive Share Option Scheme (ESOS) and a Share Option Scheme (SOS). These plans are described below. At 31 December 2017 the following options had been granted and remained outstanding in respect of the Company’s Ordinary shares of 1p under both the Michael Page Executive Share Option Scheme and the Share Option Scheme. The Group has no legal or constructive obligation to repurchase or settle the options in cash.
No. of options outstand- ing at 31 Balance at 1 Granted Exercised Lapsed December Base EPS/ Exercise price Year of grant January 2017 in year in year in year 2017 OP range† per share Exercise period 2009 (Note 2)* 887,018 - (509,168) (3,600) 374,250 OP range 187.5p-211.84p March 2012 – March 2019 2010 (Note 1)* 2,458,917 - (643,417) - 1,815,500 6.6 381.5p-383.0p March 2013 – March 2020 2011 (Note 2) 2,269,569 - - (195,000) 2,074,569 OP range 491.0p-492.9p March 2014 – March 2021 2012 (Note 2)* 1,982,903 - (345,740) (100,115) 1,537,048 OP range 477.0p March 2015 – March 2022 2013 (Note 2)* 3,087,833 - (1,015,000) (97,000) 1,975,833 OP range 442.0p March 2016 – March 2023 2014 (Note 2)* 3,820,614 - (646,878) (270,403) 2,903,333 OP range 484.0p March 2017 – March 2024 2015 (Note 2) 1,712,427 - - (135,055) 1,577,372 OP range 526.0p-534.0p March 2018 – March 2025 2016 (Note 2) 1,700,000 30,000 - (125,000) 1,605,000 OP range 406.0p-427.0p March 2019 – March 2026 2017 (Note 2) - 1,693,000 - (28,000) 1,665,000 OP range 435.44p March 2020 – March 2027 Total 2017 17,919,281 1,723,000 (3,160,203) (954,173) 15,527,905 Weighted average exercise price 2017 (£) 4.45 4.35 4.02 4.74 4.51 Total 2016 17,916,355 1,790,000 (148,025) (1,639,049) 17,919,281 Weighted average exercise price 2016 (£) 4.48 4.14 2.47 4.55 4.45
* These options have fully vested
† The Operating Profit ranges for each award are fully disclosed in Note 2 of this Note. 8,605,964 options were exercisable at the end of 2017 at a weighted average exercise price of £4.39 (2016: £4.05). The weighted average share price at the date of exercise was £4.86. Note 1 Executive Share Option Scheme Using the ESOS, awards of share options can be made to key management personnel and senior employees to receive shares in the Company. No awards have been made under the ESOS since 2010 and this award has fully vested. For grants under the ESOS, the performance condition is tested on the third anniversary and no retesting will occur thereafter. These options were granted subject to a performance condition requiring that an option may only be exercised, in normal circumstances, if there has been an increase in base earnings per share of at least 3% per annum above the growth in the UK Retail Price Index. The respective base earnings per share for each grant are shown in the table above.
115 | Financial Statements STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION - Nil MIP 4.04 2016 2.75% 0.89% 25.7% 3 years 822,147 (697,601) 3.72-4.04 Financial Statements | 116 Nil 4.35 4.35 LTIP 2017 2.87% 0.72% 3 years 38.19% 417,049 (119,009) (178,512) 1,011,288 2,058,710 1,130,816 2,183,256 Management Incentive Plan Nil Nil 3.72 4.04 0.89% 25.7% 3 years Nil Nil 3.99 4.35 0.72% 3 years 38.19% 0.68 4.06 4.06 2.75% 0.89% 25.7% 5 years 1.11 4.35 4.35 2017 2016 2017 2016 2.87% 0.72% 5 years 38.19% Share Option PlansShare Incentive Plan Long-Term Expected dividend yield Risk free rate Risk free Expected life Expected volatility Weighted average fair value (£) Weighted Average exercise price (£) exercise Average Share price (£) Share As at 1 January 2017 Granted Lapsed Exercised As at 31 December 2017 conditions are met. Movements on these plans are shown below: met. Movements on these plans are conditions are physical delivery of shares, currently satisfied by shares held in the Employee Benefit Trust, to the extent that service and performance held in the Employee Benefit satisfied by shares currently physical delivery of shares, Plan for the Senior Executives. Details of these plans are disclosed in the Directors’ Remuneration Report and are settled by cash or the Remuneration Report and are disclosed in the Directors’ plans are Plan for the Senior Executives. Details of these The Company also operates a Management Incentive Plan for the Executive Directors and senior employees and a Long-Term Incentive employees and a Long-Term and senior Incentive Plan for the Executive Directors The Company also operates a Management Other share-based payment plans Other share-based achieved, up to a maximum of 100% at Operating Profit of £125m or more. Profit achieved, up to a maximum of 100% at Operating For the 2017 grant, if Operating Profit is in excess of £50m, 1% of the award will vest for every additional £1m of Operating Profit will vest for every additional £1m of Operating Profit is in excess of £50m, 1% of the award For the 2017 grant, if Operating Profit achieved, up to a maximum of 100% at Operating Profit of £125m or more. of £125m or more. Profit achieved, up to a maximum of 100% at Operating For the 2016 grant, if Operating Profit is in excess of £75m, 2% of the award will vest for every additional £1m of Operating Profit will vest for every additional £1m of Operating Profit is in excess of £75m, 2% of the award For the 2016 grant, if Operating Profit periods have elapsed. was achieved this year, the performance criteria have been fully achieved and these awards will vest in full when their three year time will vest in full when their three the performance criteria have been fully achieved and these awards was achieved this year, Operating Profit achieved will vest up to a maximum of 100% if the Operating Profit is £100m or more. As Operating Profit of £118.3m Operating As is £100m or more. achieved will vest up to a maximum of 100% if the Operating Profit Operating Profit For grants between 2012 and 2015, if Operating Profit is in excess of £50m, a proportion of the award equivalent to the amount of equivalent of the award is in excess of £50m, a proportion Profit For grants between 2012 and 2015, if Operating achieved, up to a maximum of 100% at Operating Profit of £200m or more. Following 2017’s operating profit, 18% of this award will vest. 18% of this award operating profit, Following 2017’s of £200m or more. Profit achieved, up to a maximum of 100% at Operating For the 2011 grant, if Operating Profit is in excess of £100m, 1% of the award will vest for every additional £1m of Operating Profit will vest for every additional £1m of Operating Profit is in excess of £100m, 1% of the award For the 2011 grant, if Operating Profit linked to the Group’s Operating Profit. Operating Profit. linked to the Group’s Further grants under the SOS have been made in each year from 2011. The performance conditions for these grants are also directly directly also are The performance conditions for these grants 2011. the SOS have been made in each year from Further grants under 2016 following the 2015 result. Following 2016’s Operating Profit of £101.0m, the final portion of the award vested on 10 March 2017. March vested on 10 the final portion of the award of £101.0m, Operating Profit Following 2016’s result. 2016 following the 2015 As the Group’s 2011 Operating Profit was £86.0m, 86% of this award vested on 10 March 2012, with a further 4% vesting on 10 March 10 March 2012, with a further 4% vesting on on 10 March vested was £86.0m, 86% of this award Operating Profit 2011 As the Group’s would vest. 100% of the award would vest if Operating Profit was £100m. would vest if Operating Profit the award would vest. 100% of Operating Profit. If Operating Profit is £30m then 30% of the award would vest. For every £1m of Operating Profit over £30m, a further 1% £1m of Operating would vest. For every £30m then 30% of the award is Profit If Operating Operating Profit. elapsed, in which case any awards outstanding under the grant will lapse. The performance condition is directly linked to the Group’s Group’s linked to the The performance condition is directly outstanding under the grant will lapse. any awards elapsed, in which case since then has been and will be tested annually until either the entire grant vests, or ten years from the date of grant of the award have award the date of grant of the vests, or ten years from grant entire and will be tested annually until either the since then has been The 2009 grant made under the SOS is subject to a performance condition that was tested, initially, three years after the date of grant and years after three condition that was tested, initially, under the SOS is subject to a performance The 2009 grant made downturn on the Group’s EPS and thus would not provide the required retention incentive. retention required the EPS and thus would not provide downturn the Group’s on of at least 3% per annum above the growth in the UK Retail Price Index by 2011, would not be achievable due to the impact of the global by 2011, would not be achievable due to in the UK Retail Price Index above the growth of at least 3% per annum Board’s view that grants made under the existing ESOS, which would have required an increase over the 2008 base earnings per share an increase have required made under the existing ESOS, which would view that grants Board’s This share option scheme was created in 2009 to provide an effective plan under which to grant awards from 2009 onwards. It was the 2009 onwards. from to grant awards plan under which an effective provide in 2009 to was created option scheme This share shares held in the Employee Benefit Trust. Employee Benefit held in the shares Executive Directors of the Company are not eligible to participate in this plan. Any exercises of awards made under this plan are settled by under this plan are made of awards plan. Any exercises to participate in this not eligible of the Company are Executive Directors Share Option Scheme Share Note 2 Note Scholes option pricing model. The inputs into the model were as follows: Scholes option pricing model. The inputs into the model were contractual life of 5.6 years. The fair values of options and other share awards granted during the year were calculated using the Black- granted during the year were awards contractual life of 5.6 years. The fair values of options and other share The options outstanding at 31 December 2017 have an exercise price in the range of 187.5p to 534.0p and a weighted average The options outstanding at 31 December 2017 have an exercise value measurement at grant date. There are no market conditions associated with the share option grants. with the share no market conditions associated are at grant date. There value measurement Share options are granted under service and non-market performance conditions. These conditions are not taken into account in the fair granted under service and non-market performance conditions. These conditions are options are Share were granted on 18 March with the estimated fair value of the options granted on that day of £0.68. granted on 18 March were In 2017, options were granted on 16 March with the estimated fair value of the options granted on that day of £1.11. In 2016, options granted on 16 March In 2017, options were Share option valuation and measurement Share Expected volatility was determined by reference to historical volatility of the Company’s share price in the last 12 months. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. Expectations of early exercise are incorporated into the Black-Scholes option pricing model. The Group recognised total expenses of £7.7m, including social security, (2016: £4.2m) related to share-based payment transactions during the year. 18. Reserves Share premium The share premium account has been established to represent the excess of proceeds over the nominal value for all share issues, including the excess of the exercise share price over the nominal value of the shares on the exercise of share options. Capital redemption reserve The capital redemption reserve relates to the cancellation of the Company’s own shares. Reserve for shares held in the Employee Benefit Trust At 31 December 2017, the reserve for shares held in the employee benefit trust consisted of 14,311,816 Ordinary shares (2016: 17,592,938 Ordinary shares) held for the purpose of satisfying awards made under the Management Incentive Share Plan, the Long-Term Incentive Plan and the SOS, representing 4.4% of the called-up share capital with a market value of £66.9m (2016: £68.7m). There are 11,181,237 (2016: 14,926,677) of these shares held in the trust on which dividends are waived. Currency translation reserve Since first-time adoption of the International Financial Reporting Standards, the currency translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations that are integral to the operations of the Company. 19. Cash and cash equivalents Group Company 2017 2016 2017 2016 £’000 £’000 £’000 £’000 Cash at bank and in hand 95,327 78,022 – – Short-term deposits 278 14,774 – – Cash and cash equivalents 95,605 92,796 – – Cash and cash equivalents in the statement of cash flows 95,605 92,796 – – Net funds 95,605 92,796 – – The Group operated a multi-currency notional cash pool. The main Eurozone subsidiaries and the UK-based Group Treasury subsidiary participated in this cash pool. It is the Group’s intention to extend the scope of the participation to other Group companies going forward. The structure facilitates interest and balance compensation of cash and bank overdrafts. 20. Financial risk management The Group has exposure to the following risks from its use of financial instruments: (i) credit risk (ii) liquidity risk (iii) market risk This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements. The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
117 | Financial Statements STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION 836 2016 £’000 2016 £’000 5,635 5,070 (1,259) (8,026) (3,544) 12,264 Net trade receivables receivables 53 31,489 102 60,603 179 112,147 Financial Statements | 118 2016 4,736 5,070 205,075 £’000 Provision Provision (669) 2017 £’000 5,070 8,161 18,426 (7,566) (7,100) 2016 5,572 £’000 31,542 60,705 112,326 210,145 receivables receivables Gross trade Gross 2017 £’000 Net trade receivables receivables 94 43,400 155 71,943 275 128,703 2017 8,161 245,394 7,637 1,348 £’000 Provision Provision 2017 8,985 £’000 43,494 72,098 128,978 253,555 receivables receivables Gross trade Gross eceivables at the reporting date was: eceivables at the reporting More than 150 days More Past due 31-150 days Past due 0-30 days Not past due Balance at beginning of the year on receivables Impairment losses recognised Amounts written off as uncollectable Amounts written off during the year Amounts recovered Impairment losses reversed Balance at end of the year the expected liquidation proceeds. The Group does not hold any collateral over these balances. The Group the expected liquidation proceeds. The impairment recognised represents the difference between the carrying amount of these trade receivables and the present value of and the present between the carrying amount of these trade receivables the difference represents The impairment recognised individually impaired trade receivables with a balance of £3.5m (2016: £2.4m) which have been placed in litigation. trade receivables individually impaired Most of the allowance for doubtful debts represents a provision for debts which the Group estimate may be irrecoverable, as well as estimate may be irrecoverable, which the Group for debts a provision Most of the allowance for doubtful debts represents Movement in the allowance for doubtful debts: Movement in the allowance for doubtful maturity and existence of previous financial difficulties. maturity and existence of previous client credit risk, clients are grouped according to their credit characteristics, including geographic location, industry, ageing profile, ageing profile, characteristics, including geographic location, industry, to their credit according grouped risk, clients are client credit The majority of the Group’s clients have been transacting with the Group for several years, with losses rarely occurring. In monitoring losses rarely for several years, with transacting with the Group clients have been The majority of the Group’s concentration of credit risk. concentration of credit revenue is attributable to sales transactions with a single client. The geographic diversification of the Group’s revenue also reduces the revenue also of the Group’s attributable to sales transactions with a single client. The geographic diversification is revenue Group’s client base, including the country in which clients operate, also has an influence on credit risk. Less than 3% of the Group’s risk. Less than 3% of the Group’s in which clients operate, also has an influence on credit client base, including the country Group’s The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each client. The demographics of the risk is influenced mainly by to credit exposure The Group’s 50 days). collateral over these balances. The days sales of these receivables at the year end is 53 days in excess of the initial credit period (2016: credit year end is 53 days in excess of the initial at the balances. The days sales of these receivables collateral over these the reporting date for which the Group has not provided as the amounts are still considered recoverable. The Group does not hold any does not hold The Group recoverable. still considered as the amounts are not provided has Group date for which the the reporting Included in the Group’s trade receivables balance are debtors with a carrying amount of £116.7m (2016: £92.9m) that are past due at past due of £116.7m (2016: £92.9m) that are debtors with a carrying amount balance are trade receivables Included in the Group’s irrecoverable amounts from the provision of our services, determined by reference to past default experience. services, determined by reference of our the provision amounts from irrecoverable The ageing of trade r this credit period. Thereafter, interest is charged on the outstanding balance. Trade receivables are provided for based on estimated provided are receivables outstanding balance. Trade is charged on the interest period. Thereafter, this credit An initial credit period is made available on invoices. No interest is charged on trade receivables from the date of the invoice during from receivables is charged on trade available on invoices. No interest period is made An initial credit Total trade receivables (net of allowances) held by the Group at 31 December 2017 amounted to £245.4m (2016: £205.1m). 2017 amounted to £245.4m (2016: at 31 December (net of allowances) held by the Group trade receivables Total Trade and other receivables Trade the carrying amount of each financial asset in the balance sheet. asset in the balance amount of each financial the carrying At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by represented is risk credit to The maximum exposure risk. credit concentrations of no significant were sheet date there At the balance to credit risk is monitored on an ongoing basis. on an risk is monitored to credit obligations, and arises principally from the Group’s receivables from clients. Management has a credit policy in place and the exposure in place and the exposure policy has a credit clients. Management from receivables Group’s the from and arises principally obligations, Credit risk is the risk of financial loss to the Group if a client or counterparty to a financial instrument fails to meet its contractualinstrument fails to to a financial if a client or counterparty Group of financial loss to the risk is the risk Credit (i) Credit risk (i) Credit Exposure to credit risk The maximum exposure to credit risk for net trade receivables at the reporting date by geographic region was: Carrying amount 2017 2016 £’000 £’000 EMEA 148,292 122,858 United Kingdom 45,248 37,028 Asia Pacific 30,460 27,290 Americas 21,394 17,899 245,394 205,075 The maximum exposure to credit risk for net accrued income at the reporting date by geographic region was: Carrying amount 2017 2016 £’000 £’000 EMEA 956 1,917 United Kingdom 8,638 15,617 Asia Pacific 15,749 12,620 Americas 6,595 7,469 31,938 37,623 The entire accrued income balance is not past due. The fair values of trade and other receivables are not materially different to those disclosed above and in note 13. There is no material effect on pre-tax profit if the instruments are accounted for at fair value or amortised cost. (ii) Liquidity risk management Ultimate responsibility for liquidity risk management rests with the Board, which has built an appropriate liquidity risk management framework that aims to ensure that the Group has sufficient cash or credit facilities at all times to meet all current and forecast liabilities as they fall due. It is the Directors’ intention to continue to finance the activities and development of the Group from retained earnings. Cash surpluses were 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 also operates a multi-currency notional cash pool to facilitate interest and balance compensation of cash and bank overdrafts. The following are the contractual maturities of financial liabilities: Less than More than 1 month 1-3 months 3-12 months 12 months 2017 £’000 £’000 £’000 £’000 Trade payables 5,178 216 846 – Accruals and other payables 92,918 17,001 15,860 –
Less than More than 1 month 1-3 months 3-12 months 12 months 2016 £’000 £’000 £’000 £’000 Trade payables 5,330 787 971 427 Accruals and other payables 58,796 16,236 44,459 –
119 | Financial Statements STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION £m 0.5 1.5 (1.0)
2016
Financial Statements | 120 £m 0.7 (0.2) (0.9) 2017 Derivatives at fair value Derivative assets Net derivative (liabilities)/assets Derivative liabilities Derivative financial instruments All derivative instruments are classified as level 2 instruments. All derivative instruments are Fair values are not adjusted for credit risk, as required by IFRS 13, because credit impact is not material given the low fair value levels. impact is not material given the low fair value by IFRS 13, because credit risk, as required not adjusted for credit Fair values are s held at the balance sheet date is shown in the table below. in the table below. instruments held at the balance sheet date is shown Information on the fair value of derivative financial manage the risks arising from underlying business activities. manage the risks arising from The Group does not use derivatives for speculative purposes. All transactions in derivative financial instruments are undertaken to financial instruments are does not use derivatives for speculative purposes. All transactions in derivative The Group All derivative financial instruments not in a hedge relationship are classified as derivatives at fair value through the income statement. classified as derivatives at fair value through relationship are a hedge All derivative financial instruments not in policy not to seek to designate these derivatives as hedges. policy not to seek to designate these derivatives currencies, it may use foreign exchange rate derivatives to manage the currency exposure that arises on these loans. It is the Group’s that arises on these loans. It is the Group’s exposure manage the currency exchange rate derivatives to it may use foreign currencies, In certain cases, where the Company gives or receives short-term loans to and from other Group companies with different reporting reporting companies with different other Group loans to and from short-term the Company gives or receives In certain cases, where December 2017 is £1.3m (2016: £2.5m loss). other comprehensive income. The pre-tax profit on effective hedging instruments deferred within other comprehensive income as at 31 within other comprehensive deferred hedging instruments on effective profit income. The pre-tax other comprehensive investment hedges. The portion of gains or losses on the hedging instruments determined to be an effective hedge is transferred to hedge is transferred losses on the hedging instruments determined to be an effective investment hedges. The portion of gains or The Group has entered into hedges to cover its investments in foreign entities in the US and Canada designating them as net entities in the US and Canada designating in foreign into hedges to cover its investments has entered The Group in accounting for its overseas operations. The Group policy is not to hedge translation exposure. policy is not to hedge translation exposure. The Group in accounting for its overseas operations. The Group does not have material transactional currency exposures. The Group is exposed to foreign currency translation differences translation differences currency is exposed to foreign The Group exposures. does not have material transactional currency The Group The main functional currencies of the Group are Sterling, Euro, Chinese Renminbi, Swiss Franc, Singapore Dollar and Australian Dollar. Dollar. Dollar and Australian Swiss Franc, Singapore Chinese Renminbi, Sterling, Euro, are of the Group The main functional currencies and underlying net assets of foreign subsidiaries. and underlying net assets of foreign as a result of transactions in currencies other than the functional currencies of some of its subsidiaries and the translation of the results translation of the results of some of its subsidiaries and the currencies other than the functional of transactions in currencies as a result subject to foreign currency exchange risk due to exchange rate movements. The Group is exposed to foreign currency exchange risk currency is exposed to foreign movements. The Group exchange risk due to exchange rate currency subject to foreign The Group publishes its results in Pounds Sterling and conducts its business in many foreign currencies. As a result, the Group is the Group As a result, currencies. its business in many foreign in Pounds Sterling and conducts publishes its results The Group Currency rate risk Currency rate payable on bank overdrafts was 1.52% (2016: 2.50%). overdrafts rate payable on bank The Group’s only interest bearing assets and liabilities at 31 December 2017 relate to cash and bank overdrafts. The average interest The average interest to cash and bank overdrafts. 2017 relate assets and liabilities at 31 December bearing only interest The Group’s liabilities are based on relevant national LIBOR equivalents. national based on relevant rate liabilities are rates for determining floating as significant. The benchmark Borrowings are arranged at floating rates, thus exposing the Group to cash flow interest rate risk. The Group does not consider this risk The rate risk. to cash flow interest thus exposing the Group arranged at floating rates, are Borrowings Interest rate risk management Interest market risks or the manner in which it manages and measures the risk. in which it manages and measures market risks or the manner the Group’s main exposure currencies is shown on the next page. There has been no material change in the Group’s exposure to exposure change in the Group’s has been no material shown on the next page. There is currencies main exposure the Group’s these risks are not deemed to be material. However, a sensitivity analysis showing hypothetical fluctuations in Pounds Sterling against hypothetical fluctuations in Pounds a sensitivity analysis showing material. However, not deemed to be these risks are The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates, but rates, exchange rates and interest currency of changes in foreign expose it primarily to the financial risks activities The Group’s (iii) Market risk and sensitivity analysis (iii) Market risk and managing capital during the years ended 31 December 2017 and 31 December 2016. 2017 and 31 December ended 31 December capital during the years managing repurchases with subsequent cancellation, or issue new shares. No changes were made in the objectives, policies or processes for or processes in the objectives, policies made No changes were new shares. cancellation, or issue with subsequent repurchases adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders through share share through to shareholders return capital to shareholders, the dividend payment may adjust the Group capital structure, adjust the to ensure that it maintains a strong credit rating and healthy capital ratios to support its business and maximise shareholder value. maximise shareholder its business and capital ratios to support rating and healthy credit a strong that it maintains to ensure or maintain To in economic conditions. it in light of changes adjustments to and makes its capital structure manages The Group Capital is equity attributable to the equity holders of the parent. The primary objective of the Group’s capital management is capital management the Group’s objective of primary The of the parent. holders to the equity attributable is equity Capital disclosed in the table over the page, which therefore should not be considered a projection of likely future events and losses. of likely future a projection should not be considered disclosed in the table over the page, which therefore nterest and exchange rates to vary from the hypothetical amounts and exchange rates to vary from in the global financial markets which may cause fluctuations in interest certain adverse market conditions occur. Actual results in the future may differ materially from those projected, due to developments those projected, materially from may differ in the future results Actual certain adverse market conditions occur. the same basis for 2016. The amounts generated from the sensitivity analysis are forward-looking estimates of market risk assuming forward-looking the sensitivity analysis are the same basis for 2016. The amounts generated from of currency correlation, and assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on constant. The analysis rates, remain and assumes that all other variables, in particular interest correlation, of currency profit or loss by the amounts shown over the page. This analysis is applied currency by currency in isolation, i.e. ignoring the impact by currency or loss by the amounts shown over the page. This analysis is applied currency profit A 10% strengthening of Sterling against the following currencies at 31 December 2017 would have increased/(decreased) equity and at 31 December 2017 would have increased/(decreased) of Sterling against the following currencies A 10% strengthening Sensitivity analysis – currency risk Sensitivity analysis – currency 2017 equity 2017 PBT £’000 £’000 Euro (9,290) (2,598) Australian Dollar (1,248) (123) Swiss Franc (1,754) (171) Chinese Renminbi (1,229) (305) Singapore Dollar (1,302) (8) Other (4,346) (943)
2016 equity 2016 PBT £’000 £’000 Euro (6,929) (1,992) Australian Dollar (1,247) 56 Swiss Franc (1,727) (182) Chinese Renminbi (1,178) (386) Singapore Dollar (1,203) 40 Other (4,040) (506) A 10% weakening of Sterling against the above currencies at 31 December would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant. 21. Commitments Operating lease commitments At 31 December 2017 the Group was committed to make the following payments in respect of non-cancellable operating leases: Land and buildings Other 2017 2016 2017 2016 £’000 £’000 £’000 £’000 Within one year 31,083 28,987 4,930 5,020 Within two to five years 78,318 63,684 4,456 5,301 After five years 17,102 20,319 – – Total 126,503 112,990 9,386 10,321 The Group leases various offices under non-cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights. The Group also leases various plant and machinery under operating lease agreements. The Group is required to give varying notice for the termination of these agreements. Capital commitments The Group had £0.1m of contractual capital commitments as at 31 December 2017 relating to property, plant and equipment (2016: £0.7m). The Group had contractual capital commitments of £nil as at 31 December 2017 relating to computer software (2016: £0.7m). 22. Contingent liabilities Guarantees The Company has provided guarantees to other Group undertakings amounting to £1.0m (2016: £nil) in the ordinary course of business. It is not anticipated that any material liabilities will arise from the contingent liabilities. VAT Group registration As a result of Group registration for VAT purposes, the Company is contingently liable for VAT liabilities arising in other companies within the VAT group which at 31 December 2017 amounted to £6.1m (2016: £4.8m). 23. Events after the balance sheet date Between 31 December 2017 and 6 March 2018, 111,763 options were exercised, leading to an increase in share capital of £1k and an increase in share premium of £425k.
121 | Financial Statements STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION 517 180 26.5 2017 2016 2016 2016 5,786 1,177 7,660 £’000 £’000 £’000 16.6% 83,080 118,162 118,322 118,322 711,568 798,493 1,371,534 Amounts owed Amounts owed to related parties to related 2017 2017 672 200 £’000 Financial Statements | 122 2016 2017 £’000 6,322 1,601 8,795 £’000 848,300 2016 2016 £’000 2015 664,008 £’000 Amounts owed Amounts owed by related parties by related 2017 2017 £’000 2014 £’000 647,607 2016 8,890 £’000 13.8* 19.3* 21.3 23.1 2013 £’000 13.3% 14.7% 16.2% 16.3% 68,178 78,461 90,071 100,952 42,604* 59,331* 66,208 72,096 64,057* 80,361* 90,697 99,996 65,725* 80,092* 90,071 100,952 513,881 532,817 556,105 621,034 1,005,502 1,046,887 1,064,945 1,196,125 Dividends received 2017 9,649 £’000 †
Conversion Profit attributable to equity holders Profit Profit before tax before Profit Operating profit after exceptional items Operating profit Operating profit before exceptional items before Operating profit Gross profit Gross Basic earnings per share (pence) Basic earnings per share Revenue Wages and salaries Wages Social security costs Pension costs – defined contribution plans Pension costs – defined cash plan payments and deferred Share-based
Transactions FIVE YEAR SUMMARY consolidation. Details of transactions between the parent company and subsidiary undertakings are shown below. are company and subsidiary undertakings the parent consolidation. Details of transactions between Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on parties of the Company, related between the Company and its subsidiaries, which are Transactions Company Related party transactions Committee having regard to the performance of individuals and market trends. The transactions for the year were: The transactions of individuals and market trends. to the performance Committee having regard on pages 46 to 51. The remuneration of Directors and members of the Executive Committee is determined by the Remuneration and members of the Executive of Directors remuneration on pages 46 to 51. The Key management personnel are deemed to be the Directors and members of the Executive Committee as detailed in the biographies Executive Committee as detailed in the and members of the deemed to be the Directors are Key management personnel Transactions with key management personnel with key management Transactions The Company has a related party relationship with its Directors and members of the Executive Committee, and subsidiaries (Note 12). and subsidiaries of the Executive Committee, and members its Directors with party relationship has a related The Company Identity of related parties related Identity of 24. Related party transactions 24. Related † Operating profit before exceptional items as a percentage of gross profit. of gross exceptional items as a percentage before † Operating profit * Includes exceptional items. Shareholder information and advisers Annual General Meeting To be held on 7 June 2018 at 9.30am at Page House, 1 Dashwood Lang Road, The Bourne Business Park, Addlestone, Surrey, KT15 2QW. Every shareholder is entitled to attend and vote at the Meeting. Final dividend for the year ended 31 December 2017 To be paid (if approved) on 18 June 2018 to shareholders on the register of members on 18 May 2018. Company Secretary Elaine Marriner Company number 3310225 Registered office, domicile and legal form The Company is a limited liability company incorporated and domiciled within the United Kingdom. The address of its registered office is: Page House, 1 Dashwood Lang Road, The Bourne Business Park, Addlestone, Surrey, KT15 2QW.
Auditor Joint corporate brokers Ernst & Young LLP Citigroup 1 More London Place 33 Canada Square London SE1 2AF Canary Wharf London E14 5LB Solicitors HSBC Bank plc Herbert Smith LLP 8 Canada Square Exchange House Canary Wharf Primrose Street London E14 5HQ London EC2A 2HS Registrars Bankers Capita Asset Services HSBC Bank plc The Registry West End Business 34 Beckenham Road Banking Centre Beckenham 70 Pall Mall Kent BR3 4TU London SW1Y 5GZ Financial PR Deutsche Bank Netherlands N.V. De Entree 99 FTI Consultancy 1101 HE Amsterdam 200 Aldersgate The Netherlands Aldersgate Street London EC1A 4HD
123 | Additional Information STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
ovision, Additional Information | 124 with the consent in writing of thewith the consent in writing in nominal holders of three-quarters of the value of the issued shares of that class (excluding any shares or with shares) class held as treasury the sanction of a special resolution passed at a separate general meeting of the holders of the shares of the class, in such manner (if any) as may be in such manner (if any) by those rights; or provided such pr in the absence of any
but not otherwise, and may be so varied either whilst the Company is a going concern or during, or in contemplation of, a winding-up. At every such separate general meeting the necessary quorum shall be at least two persons together at least by proxy holding or representing in nominal value of the issued one-third of the class (excluding any shares shares shares), of that class held as treasury save that at any adjourned meeting any of the class (other than holder of shares by proxy or present shares) treasury shall be a quorum. Unless otherwise by the rights provided expressly those attached to any class of shares, rights shall be deemed not to be varied by the Company of any by the purchase or the holding of such of its own shares shares. as treasury shares Dividend rights ordinary Holders of the Company’s resolution may by ordinary shares dividends but no such dividend declare shall exceed the amount recommended If, in the opinion of the by the Directors. of the Company the profits Directors, available for distribution justify such time from may, payments, the Directors to time, pay interim dividends on the of such amounts and on such shares of such periods as dates and in respect of the Company they think fit. The profits available for distribution and resolved to be distributed shall be apportioned to the amounts and paid proportionately during any paid up on the shares of which portion of the period in respect the dividend is paid. The members at a general meeting declaring a may, (b) Limitations and non-resident or non-resident and Limitations shareholders foreign persons who those treats English law UK neither are and hold the shares in the same way nor nationals residents They are or nationals. as UK residents any to own, vote on and transfer free they hold. shares of rights Variation of the CompanyIf at any time the capital classes of shares, is divided into different any class may bethe rights attached to varied either: (a) the provisions of the Act, the Companyof the Act, the provisions period the notice to reduce may resolve annual meetings (other than for general an to 14 days on general meetings) The Company proposes annual basis. to hold general its authority to renew notice for anothermeetings on 14 days’ Annual Generalyear in item 17 of the persons entitled to Meeting notice. Two to be transactedvote upon the business shall be a quorum. provide The Articles of Association or restrictions that subject to any rights of on a show attached to any shares, and every dulyhands every member shall have one present appointed proxy representative vote. Every corporate who has been duly authorised present by a corporation has the same voting rights as the corporation would be entitled to. On a poll every member person or by a duly appointed in present shall representative or corporate proxy of which have one vote for every share of which he is a holder or in respect or corporate his appointment as proxy has been made. No representative member shall be entitled to vote in held by him if any any share of respect call or other sum payable by him to the unpaid. Company remains If a member or any person appearing held by a in shares to be interested member has been duly served with a notice under the Act and is in default period in supplying for the prescribed to the Company information thereby otherwise unless the Directors required, determine, the member shall not be of the default shares entitled in respect or to vote (either in to be present or proxy) person or by representative at any general or class meeting of the Company or on any poll or to exercise by membership any other right conferred to such meeting or poll. In in relation any dividend due certain circumstances, shall be of the default shares in respect transferscertificated certain and withheld may be refused. than one A member entitled to more vote need not, if he votes, use all his votes or cast all the votes he uses in A member is entitled to the same way. to appoint another person as his proxy all or any of his rights to attend exercise and speak and vote at a meeting of need not be a A proxy the Company. A member may appoint more member. to attend on the same than one proxy the occasion. This does not preclude attending and voting at the member from meeting or at any adjournment of it.
es, or any of them,
determine that, as between the consolidate and divide all or any of shares resulting from such a sub- such from resulting shares division, any of them may have advantage as or any preference with the others. compared into shares of a smaller amount than into shares and its existing shares; sub-divide its shar of larger capital into shares its share amount than its existing shares;
least 21 clear days’ notice. Subject to general meetings) shall be called by at (which shall be called extraordinary (which shall be called extraordinary general meeting and all general meetings to the provisions of the Act, an annual to the provisions location they so determine. Subject whenever and at whatever time and The Directors may call general meetings The Directors General meetings and voting rights General Meeting notice. another year in item 16 of the Annual (a) for its own shares authority to purchase ordinary resolution: ordinary its to renew The Company proposes The Company may from time to time by The Company may from shares. including redeemable shares, Alteration of capital its own the Company may purchase share capital.share (c) of the Act, Subject to the provisions Company no longer has an authorised of own shares Purchase authorised share capital. As such, the authorised share account, in any way. premium requirement for a company to have, an requirement and any share reserve redemption The Act abolished the concept of, and (b) any capital capital, its share reduce Share capital Share the Company may by special resolution number 3310225. of the Act, Subject to the provisions in England and Wales with registered with registered in England and Wales name PageGroup plc and is registered plc and is registered name PageGroup The Company is incorporated under theThe Company is incorporated Incorporation operative provisions. operative provisions. of record, and no longer contains any of record, Company has now become a documentCompany has now become Memorandum of Association of theMemorandum of Association of Association. Under the Act, theof Association. Under amended, and the Company’s Articles amended, and the Company’s 2006 of Great Britain (the “Act”), as Britain (the “Act”), 2006 of Great by reference to the Companies Act by reference The summary is qualified in its entirety entirety is qualified in its The summary 2010) and applicable English Law. applicable English Law. 2010) and of Association (as adopted on 21 May (as adopted on 21 of Association provisions of the Company’s Articles of the Company’s provisions The following summarises certainThe following Articles Articles Association of dividend upon the recommendation of the Securities Regulations 2001 to register same terms as indemnities given or Directors, direct that it shall be satisfied the transfer. to be given to all of the other directors wholly or partly by the distribution of and/or the funding by the Company Directors specific assets. of this expenditure on defending The Company’s Articles of Association proceedings or the doing by the No dividend shall be paid otherwise than provide for a Board of Directors, Company of anything to enable him out of profits available for distribution as consisting of (unless otherwise to avoid incurring such expenditure specified under the provisions of the Act. determined by the Company by ordinary where all other directors have been Any dividend unclaimed after a period of resolution) not fewer than two Directors, given or are to be given substantially the same arrangements twelve years from the date of declaration who shall manage the business of the of such dividend shall, if the Directors so Company. The Directors may exercise (d) the purchase or maintenance for resolve, be forfeited and shall revert to the all the powers of the Company, subject any director or directors of insurance against liability Company. to the provisions of the Articles of Association and any directions given by (e) his interest arises by virtue of his Calls on shares special resolution. If the quorum is not being, or intending to become a participant in the underwriting or sub- Subject to the terms of allotment, the fixed by the Directors, the quorum shall underwriting of an offer of any shares Directors may make calls upon members be two. in or debentures or other securities in respect of any amounts unpaid on their Subject to the provisions of the of the Company for subscription, shares (whether in respect of nominal Company’s Articles of Association, the purchase or exchange value or premium) and each member shall Directors may delegate any of their (f) any arrangement for the benefit of pay to the Company as required by the powers: the employees and directors and/ notice the amount called on his shares. (a) to such person or committee or former employees and former Transfer of shares (b) by such means (including power of directors of the Company or any of attorney) its subsidiaries and/or the members Any member may transfer all or any of his of their families or any person who is (c) to such an extent shares in certificated form by instrument or was dependent on such persons, of transfer in the usual common form or (d) in relation to such matters or territories including but without being limited in any other form which the Directors may (e) on such terms and conditions to a retirement benefits scheme approve. The transfer instrument shall be as in each case they think fit, and such and an employees’ share scheme, signed by or on behalf of the transferor delegation may include authority to which does not accord to him any and, except in the case of fully-paid sub-delegate all or any of the powers privilege or advantage not generally shares, by or on behalf of the transferee. delegated, may be subject to conditions accorded to employees and/or former and may be revoked or varied. employees to whom the arrangement Where any class of shares is for the time relates being a participating security, title to The Directors may also, by power of attorney or otherwise, appoint any (g) any transaction or arrangement shares of that class which are recorded with any other company in which as being held in uncertificated form, person, whether nominated directly or indirectly by the Directors, to be the agent he is interested, directly or indirectly may be transferred (to not more than (whether as a director or shareholder four transferees) by the relevant system of the Company for such purposes and subject to such conditions as they think or otherwise), provided that he is not concerned. the holder of or beneficially interested fit, and may delegate any of their powers in at least 1% of any class of shares The Directors may in their absolute to such an agent. of that company (or of any other discretion refuse to register any transfer The Articles of Association place a general company through which his interest is of shares (being shares which are not prohibition on a Director voting on any derived), and is not entitled to exercise fully paid or on which the Company has a resolution concerning a matter in which at least 1% of the voting rights lien), provided that if the share is listed on he has, directly or indirectly, a material available to members of the relevant the Official List of the UK Listing Authority interest (other than an interest in shares, company such refusal does not prevent dealings in debentures or other securities of, or the shares from taking place on an open otherwise in or through the Company), If a question arises at a Directors’ and proper basis. unless his interest arises only because meeting as to the right of a Director to vote, the question may be referred to the The Directors may also refuse to register the case falls within one or more of the following: Chairman of the meeting (or if the Director a transfer of shares (whether fully paid or concerned is the Chairman, to the other not) unless the transfer instrument: (a) the giving to him of a guarantee, security, or indemnity in respect Directors at the meeting), and his ruling (a) is lodged at the registered office, or of money lent to, or an obligation in relation to any Director (or, as the case such other place as the Directors may incurred by him for the benefit of, may be, the ruling of the majority of the appoint, accompanied by the relevant the Company or any of its subsidiary other Directors in relation to the Chairman) share certificate(s) undertakings shall be final and conclusive. (b) is in respect of only one class of share (b) the giving to a third party of a The Act requires a Director of a company (c) is in favour of not more than four guarantee, security, or indemnity who is in any way interested in a transferees in respect of an obligation of the proposed transaction or arrangement Company or any of its subsidiary The Directors of the Company may with the company to declare the nature of undertakings for which the Director refuse to register the transfer of a share his interest at a meeting of the Directors has assumed responsibility in whole of the company (save that a director in uncertificated form to a person who or in part and whether alone or jointly need not declare an interest if it cannot is to hold it thereafter in certificated with others under a guarantee or reasonably be regarded as giving rise form in any case where the Company is indemnity or by the giving of security to a conflict of interest). The definition entitled to refuse (or is excepted from the (c) the giving to him of any other of “interest” includes the interests requirements) under the Uncertificated indemnity which is on substantially the
125 | Additional Information STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
om Additional Information | 126 eceived by theeceived by powers or rights which that person which that or rights powers have would otherwise divide among the members in kind vest the whole or any part of the notification is r notification in the case of an Executive fr that person is absent a notice in writing is served on him the whole or any part of the assets of the Company and, for that purpose, set such values as he deems fair to be divided and upon any property determine how the division shall be carried out between the members assets in trustees upon such trusts for the benefit of members as the liquidator shall think fit, but no member shall be compelled to accept any assets upon which there is a liability Company from that person that he that from Company his office from or retiring is resigning and such resignation as director, in has taken effect or retirement with its terms accordance his appointment as such Director, and the is terminated or expires that he should resolve Directors cease to be a Director than meetings for more Directors’ (withoutsix consecutive months Directors) permission of the other that he resolve and the Directors should cease to be a Director stating signed by all the Directors that that person shall cease to be a Director with immediate effect a Director
(a) (b) (e) (f) (g) (h)
There is no requirement of share share of requirement is no There qualification. ownership for a Director’s Amendments to the articles of association Subject to the Act, the Articles of Association of the Company can be of the special resolution by altered members. Winding-up If the Company is wound up, the with the sanction of a liquidator may, of the Company and special resolution by law: any other sanction required
ector ovisions of der is made against ovisions of this paragraphovisions of subject to the pr the Act and to the relevant of the Articles of provisions to Association, the Directors under this paragraph retire have(b) shall be those who sincebeen longest in office ortheir last appointment but as between reappointment, persons who became or were on Directors last reappointed the same day those to retire shall (unless they otherwise themselves) be among agree determined by lot the pr apply if the(b) shall only retiring Directors number of under paragraph (a) above is less than the Relevant Proportion
to but does not exceed one-third exceed one-third does not to but (the of Directors of the number that: provided “Relevant Proportion”) that person ceases to be a dir a bankruptcy or a composition is made with that by r (ii) (i) under the provisions of the Act or under the provisions being a by law from is prohibited Director that person generally in creditors person’s debts satisfaction of that person’s which health, a court makes an order that person wholly or partly prevents any personally exercising from
(a) (b) (c) (d) mental eason ofthatperson’s at the meeting at which If the Company, does not fill by rotation, retires a director shall, if Director the vacancy the retiring willing to act, be deemed to have been not to unless a resolution reappointed reappoint that fill the vacancy or not to passed. is Director In addition to any power of removal by under the Act, the Company may, a director remove special resolution, expiration of his period of the before to any claim for office (without prejudice of any contract of damages for breach and the service between the director Company) and, subject to the Articles of resolution, Association, may by ordinary appoint another person who is willing to and is permitted by law act as a director, instead of him. to do so, to be a director The newly appointed person shall be for the purposes of determining treated, the time at which he or any other as if he had become a is to retire director on the day on which the director director in whose place he is appointed was last as a Director. appointed or reappointed shall be disqualified from A Director holding office as soon as:
e ectors evenue such additional number of Dir all Dir the total of the capital and r the amount paid up on the shar as shall, when aggregated with the as shall, when aggregated under retiring number of Directors paragraph (a) above, equal either of the number of Directors, one third the number where in circumstances or a multiple of is three of Directors or in all other circumstances, three, the whole number which is nearest held office at the time of the two annual general meetings preceding at by rotation and who did not retire either of them reserves of the Group, including of the Group, reserves account, premium any share capital reserve, capital redemption and credit contribution reserve and loss balance on the profit account, but excluding sums set aside for taxation and amounts attributable to outside shareholders in subsidiary undertakings of the Company and deducting any debit and loss balance on the profit account, all as shown in the latest audited consolidated balance sheet and loss account of the and profit adjusted as may be but Group, of any variation necessary in respect capital or share in the paid up share account of the Company premium since the date of that balance sheet and further adjusted as may be any change necessary to reflect since that date in the companies comprising the Group capital of the Company
(b) (a) whoectors oftheCompany aggregate of: aggregate an amount equal to three times the an amount equal to three resolution of the Company, exceed of the Company, resolution with the previous sanction of an ordinary sanction of an ordinary with the previous the Group), shall not at any time, save shall not at any time, the Group), the Group from any other member of from the Group amounts borrowed by any member of by any member amounts borrowed (b) borrowed by the Group (excluding by the Group borrowed repayment) outstanding of all money repayment) (a) (including any premium payable on final payable (including any premium that the aggregate principal amount that the aggregate far as by such exercise they can secure) secure) they can far as by such exercise (as regards subsidiary undertakings so (as regards subsidiary undertakings so as to secure so as to secure subsidiary undertakings by the Company in relation to its to by the Company in relation exercise all powers of control exercisable exercisable all powers of control exercise borrowings of the Company and of the Company borrowings The Directors shall restrict the shall restrict The Directors Borrowing powers of the Directors powers Borrowing companies and trusts. companies of spouses, civil partners, children, children, partners, civil of spouses, shall retire from office by rotation: office by from shall retire At each annual general meeting, there At each annual general meeting, there and removal Director’s appointment, retirement appointment, retirement Director’s