TIDMPAGE

RNS Number : 9512R

PageGroup plc

06 March 2019

6 March 2019

Full Year Results for the Year Ended 31 December 2018

PageGroup plc ("PageGroup"), the specialist professional recruitment company, announces its full year results for the year ended 31 December 2018.

 
 Financial summary                         2018          2017   Change   Change 
                                                                            CC* 
 Revenue                            GBP1,549.9m   GBP1,371.5m   +13.0%   +14.0% 
                                   ------------  ------------  -------  ------- 
 Gross profit                         GBP814.9m     GBP711.6m   +14.5%   +15.9% 
                                   ------------  ------------  -------  ------- 
 Operating profit                     GBP142.5m     GBP118.3m   +20.4%   +20.7% 
                                   ------------  ------------  -------  ------- 
 Profit before tax                    GBP142.3m     GBP118.2m   +20.4% 
                                   ------------  ------------  ------- 
 Basic earnings per share                 32.5p         26.5p   +22.6% 
                                   ------------  ------------  ------- 
 Diluted earnings per share               32.4p         26.4p   +22.7% 
                                   ------------  ------------  ------- 
 
 Total dividend per share (excl. 
  special dividend)                      13.10p        12.50p    +4.8% 
                                   ------------  ------------  ------- 
 Total dividend per share (incl. 
  special dividend)                      25.83p        25.23p 
                                   ------------  ------------ 
 

HIGHLIGHTS*

   --     Group gross profit up 15.9% to GBP814.9m, a record year for the Group 
   --     Operating profit up 20.7% to GBP142.5m 
   --     Conversion rate** up to 17.5% (2017: 16.6%) 
   --     EPS +22.6% to a record 32.5p 
   --     Record gross profit for 23 countries and all five Large, High Potential markets: 

o Germany +29%, Greater China +19%, Latin America +30%, South East Asia +23% and the US +25%

   --     Net increase of 619 fee earners (+11.3%); total headcount at a record level of 7,772 
   --     Improvement in fee earner to support staff headcount ratio, now 79:21 
   --     Total ordinary dividend increased 4.8% to 13.1p 
   --     GBP40.8m special dividend paid in October of 12.73p per share 

*At constant currency - all growth rates in constant currency at prior year rates unless otherwise stated

**Operating profit as a percentage of gross profit

Commenting on the results and the outlook, Steve Ingham, Chief Executive Officer of PageGroup, said:

"2018 was a record year for the Group and we delivered our best ever gross profit performance in each of our five Large, High Potential Markets.

"Gross profit increased 15.9%, operating profit was up 20.7%, and importantly, our conversion rate increased to 17.5%. This result was due to a combination of improved business performance and increased operational efficiencies, balanced by the level of investment, which has produced positive operational gearing. We delivered Earnings Per Share growth of 22.6% to 32.5 pence, a record for the Group.

"We have made further progress on our strategic transformation programmes, completing our network of regional shared service centres, three out of four of which are now on our new global finance system. We are also making good progress on the transformation of our business technology function, which will standardise our systems globally and move them into the Cloud. Our progress was illustrated by our fee earner to operational support staff ratio ending the year at a new record of 79:21.

"Today the Board has proposed a final dividend of 9.00 pence per share, an increase of 4.7% on 2017, subject to Shareholders' approval at the AGM. Combined with the interim dividend of 4.10 pence per share and the special dividend of 12.73 pence per share, this represents a total dividend yield of 5.7% at the year end share price.

"We are mindful of the macro-economic uncertainties that exist, but we will continue to focus on driving profitable growth, while continuing our strategic investments towards our Vision of 10,000 headcount, GBP1bn of gross profit and GBP200m - GBP250m of operating profit. Our flexible and diversified business model ensures that we are able to respond quickly to changes in market conditions."

Analyst meeting

The Company will be presenting to a meeting of analysts at 8.30am today at

FTI Consulting

200 Aldersgate

Aldersgate Street

London EC1A 4HD

If you are unable to attend in person, you can also follow the presentation on the following link:

https://www.investis-live.com/pagegroup/5c5da00fcad1ac0c009dfd39/tgfs

Please use the following dial-in numbers to join the conference:

   United Kingdom (Local)          020 3936 2999 
   All other locations                    +44 20 3936 2999 

Please quote the access code 49 27 03 to gain access to the call

The presentation and a recording of the meeting will be available on the Company's website later today at

http://www.page.com/investors/investor-library/2019.aspx

Enquiries:

 
 PageGroup plc                            01932 264446 
 Steve Ingham, Chief Executive Officer 
 Kelvin Stagg, Chief Financial Officer 
 
 FTI Consulting                           020 3727 1340 
 Richard Mountain/Susanne Yule 
 

MANAGEMENT REPORT

CAUTIONARY STATEMENT

This Management Report has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed.

This Management Report contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward looking information.

GROUP STRATEGY

At PageGroup we have a clear strategic vision. We aim to be the leading specialist recruiter in each of the markets in which we operate. We have sought to achieve this by developing a significant market presence in major global economies, as well as targeting new markets where we see the greatest potential for long-term gross profit growth at attractive conversion rates.

We offer our services across a broad range of disciplines and specialisms, solely within the professional recruitment market. Our origins are in permanent recruitment, but a quarter of our gross profit is in temporary placements, where local culture and market conditions allow. In particular, we focus on opportunities where our industry and market expertise can set us apart from our competition. This enables us to offer a premium service that is valued by clients and attracts the highest calibre of candidates.

Our mix of permanent to temporary recruitment reflects the balance of our business mix, both in terms of brands, where Michael Page, our largest brand, operating at higher salary levels, has a naturally higher level of permanent recruitment, as well as our geographic mix. We are market leaders in regions such as Latin America, Greater China and South East Asia, where for cultural reasons, white collar temporary recruitment has only recently emerged.

PageGroup is focused on delivering against three key objectives to achieve its strategic vision and provide sustainable financial returns. These are: 1) to look for organic, high margin and diversified growth; 2) to position the business to be efficiently scalable and highly flexible to reflect market conditions; and 3) as a people-oriented, organically driven business, to nurture and develop talent and skills which are fundamental to us achieving long-term sustainable growth.

We therefore invest significantly in our people, as the recruitment, retention and development of the best talent available is central to our ability to grow the business and to manage our resources through economic cycles. Investment in the business has been focused on developing the long-term sustainability of the business and is supported by significant balance sheet strength and cash flow generation.

Organic, scalable growth

Our strategy is to grow organically, achieved by drawing upon the skill and experience of proven PageGroup management, ensuring we have the best and most experienced home-grown talent in each key role. Our team-based structure and profit share business model is highly scalable. The small size of our specialist teams means we can increase headcount rapidly to achieve growth when market conditions are favourable.

Conversely, when market conditions tighten, these entrepreneurial, profit-sharing teams reduce in size largely through natural attrition. Consequently, our cost base contracts in downturns. Our strategy for organic growth has served the business well over the 42 years since its inception and we believe it will continue to do so. We have grown from a small, single-discipline recruitment company operating in one country to a large multidiscipline, multinational business, operating in 36 countries represented by our four key brands of Page Executive, Michael Page, Page Personnel and Page Outsourcing.

Diversification by region and discipline

Our strategy is to expand and diversify the Group by industry sectors, professional disciplines, geography and level of focus, be it Page Executive, Michael Page, Page Personnel or Page Outsourcing, with the objective of being the leading specialist recruitment consultancy in each of our chosen markets.

As recruitment is a cyclical business, impacted significantly by the strength of economies, diversification is an important element of our strategy as it reduces our dependency on individual businesses or markets, thereby increasing the resilience of the Group. This strategy is pursued entirely through the organic growth of existing and new teams, offices, disciplines and countries, maintaining a consistent team and meritocratic culture as we grow.

Talent and skills development

We recognise that it is our people who are at the heart of everything we do, particularly as an organically grown business where ensuring we have a talent pool with experience through economic cycles and across both geographies and disciplines is critical. Investing in our people is, therefore, a vital element of our strategy. We seek to find the highest calibre staff from a diverse range of backgrounds and then do our very best to retain them through offering a fulfilling career and an attractive working environment.

This includes a team-based structure, a profit share business model and continuous training and career development, often internationally. Our strong track record of internal career moves and promotion from within means that people who join us know that they could be our future senior managers and main Board Directors.

Sustainable growth

When we invest in a new business, be it a new country, a new office or a new discipline, we do so for the long term. Our organic and team-based business model allows us to grow strongly when market conditions are favourable, enabling us to increase our fee earner headcount investment rapidly. Conversely, downturns in the general economy of a country or in specific industries will inevitably have a knock-on effect on the recruitment market. However, it has been our practice in the past, and remains our intention, to maintain our presence in our chosen markets through these downturns, while closely controlling our cost base. In this way, we are able to retain our highly capable management teams in whom we have invested. Normally, we find that we gain market share during downturns, which positions our business for market-leading rates of growth when the economy improves. Pursuing this approach means that we carry spare capacity during downturns, which can have a negative effect on profitability in the short term. A strong balance sheet is, therefore, essential to support the business at these times.

Our strategic priorities comprise the following:

-- increase the scale and diversification of PageGroup by organically growing existing and new teams, offices, disciplines, brands and countries;

-- manage the business with a team and meritocratic culture, while delivering a consistent and high quality client and candidate experience;

-- invest through cycles in our Large, High Potential markets of Germany, Greater China, Latin America, South East Asia and the US to achieve scale and a market leading position;

-- manage our fee earner headcount in all other markets to reflect prevailing market conditions, by adding selectively to geographies and disciplines where there is positive growth momentum, while reducing headcount where the outlook for growth or fee earner productivity is weak;

   --     focus on operational support consistency; and 

-- focus on succession planning and international career paths to encourage retention and development of key staff.

The main factors that could affect the business and the financial results are described in the "Principal Risks and Uncertainties" section in the PageGroup plc 2018 Annual Report and Accounts, which will be available to shareholders in April 2019.

GROUP RESULTS

 
 GROSS PROFIT                              Reported                  CC 
 Year-on-year    % of Group   2018 (GBPm)   2017 (GBPm)     %        % 
                -----------  ------------  ------------  -------  ------- 
 EMEA               48%          394.3         332.3      +18.7%   +17.9% 
                -----------  ------------  ------------  -------  ------- 
 Asia Pacific       20%          161.2         137.2      +17.5%   +20.6% 
                -----------  ------------  ------------  -------  ------- 
 UK                 17%          138.4         140.8      -1.7%    -1.7% 
                -----------  ------------  ------------  -------  ------- 
 Americas           15%          121.0         101.3      +19.4%   +27.2% 
                -----------  ------------  ------------  -------  ------- 
 Total              100%         814.9         711.6      +14.5%   +15.9% 
                -----------  ------------  ------------  -------  ------- 
 
 Permanent          76%          621.7         536.0      +16.0%   +17.7% 
                -----------  ------------  ------------  -------  ------- 
 Temporary          24%          193.2         175.6      +10.0%   +10.4% 
                -----------  ------------  ------------  -------  ------- 
 

At constant exchange rates, the Group's revenue increased 14.0% and gross profit increased 15.9% for the year ended 31 December 2018. At reported rates, revenue increased 13.0% to GBP1,549.9m (2017: GBP1,371.5m) and gross profit increased 14.5% to GBP814.9m (2017: GBP711.6m).

The Group's revenue mix between temporary and permanent placements was 59:41 (2017: 60:40) and for gross profit our permanent to temporary ratio was 76:24 (2017: 75:25). Revenue from temporary placements comprises the salaries of those placed, together with the margin charged. This margin on temporary placements decreased slightly to 21.0% in 2018 (2017: 21.2%). Overall, pricing remained relatively stable across all regions, although a stronger pricing environment was experienced in markets and disciplines where there were increased instances of candidate shortages.

Our Large, High Potential markets' category increased gross profit by 25% in constant currencies and achieved a record gross profit of GBP270.3m. All five markets included within this category achieved record gross profit.

Total Group headcount increased by 743 in the year, up 10.6% to a record 7,772. This comprised a net increase of 619 fee earners (+11.3%) and an increase of 124 operational support staff (+8.1%), reflecting the continued strong focus on operational efficiency. The ratio of net additions in the year was 83 fee earners to 17 operational support staff. As a result, our fee earner to operational support staff ratio improved to a new record level of 79:21. In total, administrative expenses increased 13.3% to GBP672.4m (2017: GBP593.2m). The Group's operating profit from trading activities totalled GBP142.5m (2017: GBP118.3m), an increase of 20.7% at constant rates and 20.4% in reported rates.

The Group's conversion rate of gross profit to operating profit from trading activities increased to 17.5% (2017: 16.6%). This reflected a combination of steadily improving conditions in a number of markets, as well as the benefits from our recent investment to drive operational efficiencies. These were offset in part by more challenging conditions in markets such as the UK, as well as our continued investment in fee earner headcount.

OPERATING PROFIT AND CONVERSION RATES

The Group's organic growth model and profit-based team bonus ensures cost control remains tight. Approximately three-quarters of costs were employee related, including wages, bonuses, share-based long-term incentives, and training & relocation costs.

The combination of gross profit growth and the ongoing focus on cost control resulted in operating profit of GBP142.5m (2017: GBP118.3m), an increase of 20.4% in reported rates and 20.7% in constant currencies.

Depreciation and amortisation for the year totalled GBP19.7m (2017: GBP19.1m). This included amortisation relating to our operating system, PRS, of GBP6.9m (2017: GBP8.1m).

We have completed our transition to a shared service centre delivery model, and also now have around half of the Group, by fee earners, live on our new Global Finance System. We are continuing with the transition of our Business Technology function to a global model, closing data centres and transitioning to the Cloud. These strategic investments have driven an improvement in both our fee earner to operational support staff ratio and our conversion rate.

Our fee earner to operational support staff ratio improved to a record level of 79:21, with our ongoing focus on conversion rates and maximising productivity from the investment of 786 fee earners added in 2017, as well as the further 619 added in 2018. Net additions in the year were at a ratio of 83 fee earners to 17 operational support staff.

The Group's conversion rate for the year of 17.5% was an improvement from 16.6% in 2017. This was achieved alongside the Group's investment programme, which was focused in particular on our Large, High Potential markets, and despite the tough market conditions faced in some of the Group's markets such as the UK, as well as our operational support programmes.

In EMEA, conversion increased from 21.0% to 21.7%. This was driven by the benefits of operational gearing coming through. In the UK, the conversion rate fell from 11.4% to 9.7%, in line with the tough trading conditions. In Asia Pacific, conversion fell slightly to 16.6% (2017: 17.1%), due to our high level of fee earner investment in the region. The Americas' conversion rate increased from 9.0% to 13.8% in line with our increased growth rate throughout the region.

The Group was adversely impacted by movements in foreign exchange rates, as Sterling strengthened marginally against a number of currencies in which the Group operates. The strengthening of Sterling decreased the Group's revenue and gross profit by GBP14m and GBP10m respectively, with a negligible impact on operating profit.

A net interest charge of GBP0.2m reflected the continuing low interest rate environment. Interest of GBP0.6m was received on cash balances held through the year, offset by financial charges relating to the Group's invoice discounting facility and overdrafts used to support local operations of GBP0.8m.

Earnings per share and dividends

In 2018, basic earnings per share increased 22.6% to 32.5p (2017: 26.5p), reflecting the improved business performance. Diluted earnings per share, which takes into account the dilutive effect of share options, was up 22.7% to 32.4p (2017: 26.4p).

The Group's strategy is to operate a policy of financing the activities and development of the Group from our retained earnings and to maintain a strong balance sheet position. We first use our cash to satisfy our operational and investment requirements and to hedge our liabilities under the Group's share plans. We then review our liquidity over and above this requirement to make returns to shareholders, firstly by way of ordinary dividend.

Our policy is to grow this ordinary dividend over the course of the economic cycle, in line with our long-term growth rate. We believe this enables us to sustain the level of ordinary dividend payments during a downturn as well as to increase it during more prosperous times.

Cash generated in excess of these first two priorities will be returned to shareholders through supplementary returns, using special dividends or share buybacks.

In line with the improved growth rates and increase in operating profits, a final dividend of 9.00p (2017: 8.60p) per ordinary share is proposed. When taken together with the interim dividend of 4.10p (2017: 3.90p) per ordinary share, this would imply an increase in the total dividend for the year of 4.8% over 2017 to 13.1p per ordinary share.

The proposed final dividend, which amounts to GBP29.2m, will be paid on 17 June 2019 to shareholders on the register as at 17 May 2019, subject to shareholder approval at the Annual General Meeting on 24 May 2019.

After consultation with our shareholders, we also paid a special dividend of 12.73p per share (2017: 12.73p per share) on 10 October 2018, totalling GBP40.8m (2017: GBP40.1m). We will continue to monitor our cash position in 2019 and will make returns to shareholders in line with the above policy.

Cash flow and balance sheet

Cash flow in the year was strong, with GBP131.7m (2017: GBP124.5m) generated from operations. The closing net cash balance was GBP97.7m at 31 December 2018, broadly in line with the prior year. The movements in the Group's cash flow in 2018 reflected the underlying trading conditions, with a GBP37.7m increase in working capital.

The Group had a GBP50m invoice financing arrangement and GBP21m uncommitted overdraft facilities to support cash flows across its operations and ensure rapid access to funds should they be required. None of these were in use at the year end.

Income tax paid in the year was GBP41.0m (2017: GBP38.2m) and net capital expenditure in 2018 was GBP24.4m (2017: GBP16.2m). Spending on software increased from 2017 as we continued the roll-out of our new Global Finance System. Spending on property, plant and equipment increased, mainly due to the increase in our fee earner and operational support headcount.

Dividend payments were up on the prior year at GBP81.3m (2017: GBP78.3m), as a result of the increased ordinary and special dividends paid in 2018. There was also a significant increase in cash receipts from share option exercises. In 2018, GBP26.9m was received by the Group from the exercise of options compared to GBP12.7m received in 2017, driven by the higher share price. In 2018, GBP11.6m was also spent on the purchase of shares by the Employee Benefit Trust to satisfy future obligations under our employee share plans. No such purchase was made in 2017.

The most significant item in our balance sheet was trade receivables, which amounted to GBP288.2m at 31 December 2018 (2017: GBP245.4m), comprising permanent fees invoiced and salaries and fees invoiced in the temporary placement business, but not yet paid. Day's sales in debtors at 31 December 2018 were 54 days (2017: 53 days).

EUROPE, MIDDLE EAST AND AFRICA (EMEA)

EMEA is the Group's largest region, contributing 48% of the Group's gross profit in the year. With operations in 17 countries, PageGroup has a strong presence in the majority of EMEA markets, and is the clear leader in specialist permanent recruitment in the two largest, France and Germany. Across the region, permanent placements accounted for 70% and temporary placements 30% of gross profit.

The region includes four of our Large, Proven markets, France, Spain, Italy and the Netherlands, across which there is a broad range of competition. EMEA also includes Germany, one of the Group's Large, High Potential markets, which has low penetration rates (markets where less than 30% of recruitment is outsourced) and significant growth potential, particularly in temporary recruitment. In addition, there are a number of markets such as Poland, Turkey and Africa, which are less developed, with limited competition, but are increasingly looking for professional recruitment services. The Middle East, where PageGroup is the largest international recruiter, has one of the Group's highest conversion rates.

 
 EMEA                          GBPm          Growth rates 
 (48% of Group in 2018)    2018    2017    Reported     CC 
                          ------  ------  ---------  ------- 
 Gross Profit              394.3   332.3    +18.7%    +17.9% 
                          ------  ------  ---------  ------- 
 Operating Profit          85.6    69.7     +22.8%    +21.9% 
                          ------  ------  ---------  ------- 
 Conversion Rate (%)       21.7%   21.0% 
                          ------  ------  ---------  ------- 
 

In 2018, the EMEA region saw strong market conditions, with 11 countries delivering record gross profit for the year. In constant currency, revenue increased 17.1% on 2017 and gross profit increased by 17.9%. In reported rates, revenue in the region was up 18.0% to GBP797.4m (2017: GBP676.0m), and gross profit increased 18.7% to GBP394.3m (2017: GBP332.3m). The region benefited from favourable foreign exchange movements which increased revenue and gross profit by GBP6m and GBP2m, respectively.

Our largest businesses in the region, France and Germany, together representing nearly half of the region by gross profit, grew 16% and 29% respectively, for the full year in constant currencies. Michael Page Interim in Germany, where we continue to invest heavily in temporary and contracting recruitment, grew 42%. Elsewhere we saw strong growth in Benelux of +19%, Italy +23% and Spain +8%, despite challenging trading conditions in Catalonia.

The Middle East and Africa, which represented 4% of the region, saw a notable improvement compared to the prior year, with growth of 17% (2017: -1%).

The 22.8% increase in operating profit for 2018 to GBP85.6m (2017: GBP69.7m) and the increase in the conversion rate to 21.7% (2017: 21.0%) were the result of the benefit of operational gearing coming through, partially offset by significant investments in our Interim and contracting businesses, such as Germany, which have driven gross profit growth, but in the short-term impacted our conversion rate.

Headcount across the region increased by 303 (+10.1%) to 3,299 at the end of 2018 (2017: 2,996). The majority of this increase was fee earners, as the business added headcount where growth opportunities were strongest, predominately in France and Germany.

ASIA PACIFIC

Asia Pacific represented 20% of the Group's gross profit in 2018, with 75% of the region being Asia and 25% Australasia. Other than in the financial centres of Hong Kong, Singapore and Tokyo, the Asian market is generally highly under-developed, and offers attractive opportunities in both international and domestic markets at good conversion rates. Two of our Large, High Potential Markets, Greater China and South East Asia, are in this region. With a highly experienced management team, over 1,300 staff and limited competition, the size of the opportunity in Asia is significant. Across Asia, driven by cultural attitudes towards white collar temporary recruitment, permanent placements accounted for 95% and temporary placements 5% of gross profit.

Australasia is a mature, well-developed and highly competitive recruitment market. PageGroup has a meaningful presence in permanent recruitment in the majority of the professional disciplines and major cities in Australia and New Zealand. Page Personnel has a growing presence and significant potential to expand and grow market share.

 
 ASIA PACIFIC                  GBPm          Growth rates 
 (20% of Group in 2018)    2018    2017    Reported     CC 
                          ------  ------  ---------  ------- 
 Gross Profit              161.2   137.2    +17.5%    +20.6% 
                          ------  ------  ---------  ------- 
 Operating Profit          26.8    23.5     +13.8%    +16.6% 
                          ------  ------  ---------  ------- 
 Conversion Rate (%)       16.6%   17.1% 
                          ------  ------  ---------  ------- 
 

In Asia Pacific, in constant currencies, revenue increased 16.6% and gross profit increased by 20.6%. In reported rates, revenue increased 12.9% to GBP266.7m (2017: GBP236.3m), while gross profit rose 17.5% to GBP161.2m (2017: GBP137.2m). The region was adversely impacted by foreign exchange movements, which reduced reported revenue and gross profit by GBP9m and GBP4m, respectively.

Asia, representing 15% of the Group, delivered gross profit growth of 23%. Greater China delivered a record year, up 19% (2017: +14%) with strong growth throughout. In Hong Kong, where we have a large number of multinational clients, we saw an improvement in market conditions and delivered growth of 23%. However, Mainland China experienced more challenging trading conditions in the fourth quarter, driven by trade tariff uncertainty. South East Asia was up 23% on the prior year, with a strong performance in Singapore, up 29%. We also opened in Vietnam during the year, giving us our fifth country in South East Asia. India, where we now have over 120 fee earners, delivered a record year with growth of 49%. Japan, where we invested heavily in fee earners, saw growth of 30% and delivered a record year. In Australia, following our investment in fee earners and a new office in Canberra, we delivered growth of 14%.

Operating profit rose 13.8% to GBP26.8m (2017: GBP23.5m), with the conversion rate marginally down at 16.6% (2017: 17.1%), due to our fee earner investment in the region. Headcount across the region rose by 177 (11.6%) in the year, ending the year at 1,709 (2017: 1,532). The majority of these headcount additions were in Asia, particularly Greater China, India and Japan.

UNITED KINGDOM

The UK represented 17% of the Group's gross profit in 2018, operating from 27 offices covering all major cities. It is a mature, highly competitive and sophisticated market with the majority of vacant positions being outsourced to recruitment firms. PageGroup has a market leading presence in permanent recruitment across the UK and a growing presence in temporary recruitment. In the UK, permanent placements accounted for 69% and temporary placements 31% of gross profit.

The UK business operates under the four brands of Michael Page, Page Personnel, Page Executive and Page Outsourcing, with representation in 13 specialist disciplines via the Michael Page brand. There remains opportunity to roll-out new discipline businesses under the lower salary level Page Personnel brand, which now represents 25% of UK gross profit.

 
 UK                            GBPm 
 (17% of Group in 2018)    2018    2017     Growth rate 
                          ------  ------  ------------- 
 Gross Profit              138.4   140.8      -1.7% 
                          ------  ------  ------------- 
 Operating Profit          13.4    16.0       -16.2% 
                          ------  ------  ------------- 
 Conversion Rate (%)       9.7%    11.4% 
                          ------  ------  ------------- 
 

In the UK, revenue increased 0.2% to GBP313.5m (2017: GBP312.9m), whereas gross profit declined 1.7% to GBP138.4m (2017: GBP140.8m), reflecting continued economic uncertainty.

The UK experienced challenging market conditions throughout the year due to continued Brexit uncertainty impacting candidate and client confidence. Page Personnel, which represents a quarter of the UK, grew 8% and delivered a record year. Michael Page, which is focused on more senior opportunities and was impacted to a greater extent by the uncertainty, declined -4%. These challenging market conditions resulted in a decline in operating profit of 16.2% to GBP13.4m (2017: GBP16.0m) and a reduction in the conversion rate to 9.7% (2017: 11.4%).

Headcount marginally increased to 1,436 at the end of December 2018 (2017: 1,407). The additions were in operational support, to deliver the Group's operational support strategic transformation programmes, with our fee earner headcount broadly flat in the year. With a relatively high staff turnover of newer, less experienced consultants, we will continue to monitor activity and will, if needed, use that turnover to lower headcount, and therefore costs, by natural attrition.

THE AMERICAS

The Americas represented 15% of the Group's gross profit in 2018, being North America (58% of the region) and Latin America (42% of the region). The US and Latin America are two of the Large, High Potential Markets in our growth strategy. The US, where we have eight offices, has a well-developed recruitment industry, but in many disciplines, especially technical, there is limited national competition of any scale. PageGroup's breadth of professional specialisms and geographic reach is uncommon and provides a competitive advantage. Latin America is a very under-developed region, where PageGroup enjoys the market leading position with over 800 employees in six countries and 13 offices. There are few international competitors and none with regional scale. Across Latin America, permanent placements accounted for 93% of gross profit and temporary placements 7%.

 
 AMERICAS                      GBPm          Growth rates 
 (15% of Group in 2018)    2018    2017    Reported     CC 
                          ------  ------  ---------  ------- 
 Gross Profit              121.0   101.3    +19.4%    +27.2% 
                          ------  ------  ---------  ------- 
 Operating Profit          16.7     9.2     +82.7%    +87.3% 
                          ------  ------  ---------  ------- 
 Conversion Rate (%)       13.8%   9.0% 
                          ------  ------  ---------  ------- 
 

In constant currencies, revenue increased by 25.5% and gross profit increased by 27.2%. In reported rates, revenue increased by 17.7% to GBP172.3m (2017: GBP146.3m) while gross profit improved 19.4% to GBP121.0m (2017: GBP101.3m). During the year, the region was impacted by adverse foreign exchange movements that decreased revenue and gross profit by GBP11m and GBP8m, respectively.

In North America, our gross profit increased by 25% in constant currencies with both the US and Canada delivering record years. In the US, which grew 25%, our strategy of diversification continued, with particularly strong performances from our regional offices of Boston, Chicago, Houston and Los Angeles. We increased our US fee earner headcount by 15% compared to last year, as we continued to invest in this Large, High Potential market.

In Latin America, gross profit was up 30% year-on-year in constant currencies. We added nearly 150 fee earners in the year, an increase of 30%, as we continued to invest in this Large, High Potential market. Our business in Brazil delivered growth of 20%, with Mexico, our largest country in Latin America, delivering a record year, with growth of 33%. Elsewhere, the other four countries in the region, with a fee earner headcount of over 250, saw growth of 36% collectively, and all delivered record years.

Operating profit increased 82.7% to GBP16.7m (2017: GBP9.2m), with a conversion rate of 13.8% (2017: 9.0%). Headcount increased by 234 (+21.4%) in 2018 to 1,328 (2017: 1,094).

OTHER FINANCIAL ITEMS

Foreign exchange

Foreign exchange had an adverse impact on our reported results for the year, decreasing gross profit by GBP10m, administrative expenses by GBP10m and therefore no impact on operating profit. This impact was mainly within the Americas and Asia Pacific regions, partially offset by a favourable impact in EMEA.

Taxation

The tax charge for the year was GBP38.6m (2017: GBP35.1m). This represented an effective tax rate of 27.1% (2017: 29.7%). The rate is higher than the effective UK rate for the calendar year of 19% (2017: 19.25%) principally due to the impact of higher tax rates in overseas countries and to a lesser extent disallowable expenditure. There are some countries in which the tax rate is lower than the UK, but the impact is very small either because the countries are not significant contributors to Group profit or the tax rate difference is not significant.

The effective rate in 2017 was impacted principally by the US tax reform which reduced the headline rate of tax from 35% to 21% from 1 January 2018. This resulted in a write down of US deferred tax assets which, together with other adjustments in the US, increased the tax charge by 2.4%. In 2018, the tax rate was impacted primarily by tax on share based payments (1.2% decrease) and the recognition/derecognition of losses (0.6% increase).

The tax charge for the year reflects the Group's tax strategy, which is aligned to business goals. It is PageGroup's policy to pay its fair share of taxes in the countries in which it operates and deal with its tax affairs in a straightforward, open and honest manner. The Group's 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 2018 the Group had 15.5m share options outstanding, of which 8.6m had vested, but had not been exercised. During the year, options were granted over 1.7m shares under the Group's share option plans. Options were exercised over 6.1m shares, generating GBP26.9m in cash, and options lapsed over 0.5m shares. At the end of 2018, options remained outstanding over 10.6m shares, of which 4.3m had vested, but had not been exercised. During 2018, 2.2m shares were purchased for the Group's Employee Benefit Trust, and no shares were cancelled (2017: no shares were purchased or cancelled).

KEY PERFORMANCE INDICATORS (KPIs)

 
 KPI                     Definition, method of calculation and analysis 
                                     Financial 
 Gross profit            How measured: Gross profit growth represents 
  growth                  revenue less cost of sales expressed as the 
                          percentage change over the prior year. It consists 
                          principally of placement fees for permanent 
                          candidates and the margin earned on the placement 
                          of temporary candidates. 
                          Why it's important: This metric indicates the 
                          degree of income growth in the business. It 
                          can be impacted significantly by foreign exchange 
                          movements in our international markets. Consequently, 
                          we look at both reported and constant currency 
                          metrics. 
                          How we performed in 2018: Gross profit increased 
                          14.5% in reported rates, 15.9% in constant currencies, 
                          as adverse currency movements impacted the full-year 
                          figures. 
                          Relevant strategic objective: Organic growth 
                        ----------------------------------------------------------- 
 Gross profit            How measured: Total gross profit from: a) geographic 
  diversification         regions outside the UK; and b) disciplines outside 
                          of Accounting & Financial Services, each expressed 
                          as a percentage of total gross profit. 
                          Why it's important: These percentages give an 
                          indication of how the business has diversified 
                          its revenue streams away from its historic concentrations 
                          in the UK and from the Accounting & Financial 
                          Services disciplines. 
                          How we performed in 2018: Geographies: the percentage 
                          increased to 83.0% from 80.2% in 2017, demonstrating 
                          a high degree of diversification. This reflects 
                          strong trading conditions in the majority of 
                          our overseas businesses. 
                          Disciplines: the percentage increased to 65.3% 
                          (2017: 63.3%), as our professional services 
                          disciplines performed strongly, combined with 
                          good growth in our technical disciplines, comprising 
                          Property & Construction, Procurement & Supply 
                          Chain and Engineering. 
                          Relevant strategic objective: Diversification 
                        ----------------------------------------------------------- 
 Ratio of gross          How measured: Gross profit from each type of 
  profit generated        placement expressed as a percentage of total 
  from permanent          gross profit. 
  and temporary           Why it's important: This ratio reflects both 
  placements              the current stage of the economic cycle and 
                          our geographic spread, as a number of countries 
                          culturally have minimal temporary placements. 
                          It gives a guide as to the operational gearing 
                          potential in the business, which is significantly 
                          greater for permanent recruitment. 
                          How we performed in 2018: The ratio increased 
                          slightly to 76:24 (2017: 75:25), with strong 
                          growth in markets where we have a higher ratio 
                          of permanent recruitment such as Asia and Latin 
                          America. 
                          Relevant strategic objective: Diversification 
                        ----------------------------------------------------------- 
 Basic earnings          How measured: Profit for the year attributable 
  per share (EPS)         to the Group's equity shareholders, divided 
                          by the weighted average number of shares in 
                          issue during the year. 
                          Why it's important: This measures the underlying 
                          profitability of the Group and the progress 
                          made against the prior year. 
                          How we performed in 2018: The Group saw a 22.6% 
                          rise in Basic EPS to 32.5p. Improvements in 
                          trading and operational efficiencies drove strong 
                          growth in the Group's EPS in 2018. 
                          Relevant strategic objective: Sustainable growth 
                        ----------------------------------------------------------- 
 Net cash                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 capabilities 
                          and our success in managing our working capital. 
                          It determines our ability to reinvest in the 
                          business, to return cash to shareholders and 
                          to ensure we remain financially robust through 
                          cycles. 
                          How we performed in 2018: Net cash increased 
                          to GBP97.7m (2017: GBP95.6m). This was after 
                          dividend payments of GBP81.3m (including a special 
                          dividend of GBP40.8m). 
                          Relevant strategic objective: Sustainable growth 
                        ----------------------------------------------------------- 
                                     Strategic 
 Fee earner headcount    How measured: Number of fee earners and directors 
  growth                  involved in revenue-generating activities at 
                          the year end, expressed as the percentage change 
                          compared to the prior year. 
                          Why it's important: Growth in fee earners is 
                          a guide to our confidence in the business and 
                          macro-economic outlook, as it reflects our expectations 
                          as to the level of future demand for our services 
                          above the existing capacity currently within 
                          the business. 
                          How we performed in 2018: Fee earner headcount 
                          grew by 619, or 11.3% in the year, resulting 
                          in 6,116 fee earners at the end of the year, 
                          a record for the Group. 
                          Relevant strategic objective: Sustainable growth 
                        ----------------------------------------------------------- 
 Gross profit            How measured: Gross profit divided by the average 
  per fee earner          number of fee-generating staff, calculated on 
                          a rolling monthly average basis. 
                          Why it's important: This is our indicator of 
                          productivity, which is affected by levels of 
                          activity in the market, capacity within the 
                          business and the number of recently hired fee 
                          earners who are not yet at full productivity. 
                          Currency movements can also impact this figure. 
                          How we performed in 2018: In constant currency, 
                          it increased slightly to GBP140.0k (2017: GBP139.9k) 
                          as a result of the improved trading conditions. 
                          However, in reported rates, this decreased to 
                          GBP138.3k. 
 
                          Relevant strategic objective: Organic growth 
                        ----------------------------------------------------------- 
 Fee earner:             How measured: The percentage of fee earners 
  support staff           compared to operational support staff at the 
  headcount ratio         year end, expressed as a ratio. 
                          Why it's important: This reflects the operational 
                          efficiency in the business in terms of our ability 
                          to grow the revenue-generating platform at a 
                          faster rate than the staff needed to support 
                          this growth. 
                          How we performed in 2018: The ratio improved 
                          to a new record of 79:21 from 78:22 in 2017. 
                          This was driven by 11.3% fee earner headcount 
                          growth, as well as benefiting from our operational 
                          support initiatives. The ratio of new joiners 
                          in the year was 83:17. 
 
                          Relevant strategic objective: Sustainable growth 
                        ----------------------------------------------------------- 
 Conversion rate         How measured: Operating profit (EBIT) before 
                          exceptional items expressed as a percentage 
                          of gross profit. 
                          Why it's important: This reflects the level 
                          of fee-earner productivity and the Group's effectiveness 
                          at cost control in the business, together with 
                          the degree of investment being made for future 
                          growth. 
                          How we performed in 2018: The Group's conversion 
                          rate increased to 17.5% (2017: 16.6%), with 
                          a combination of steadily improving conditions 
                          in a number of markets and the benefits of operational 
                          efficiencies, offset by sustained investment 
                          in our fee earner headcount. 
 
                          Relevant strategic objective: Sustainable growth 
                        ----------------------------------------------------------- 
                                       People 
 Employee engagement     How measured: A key output of the employee surveys 
  index                   undertaken periodically within the business. 
                          Why it's important: A positive working environment 
                          and motivated team helps productivity and encourages 
                          retention of key talent within the business. 
                          How we performed in 2018: We recorded an 83% 
                          positive score for employee engagement in the 
                          latest Employee Survey in 2017. This was a combination 
                          of questions, including: how valued our people 
                          felt; how proud they were to work for PageGroup; 
                          and the level of trust and recognition they 
                          received for their work. No survey was performed 
                          in 2018 and the next one is planned for 2019. 
                          Relevant strategic objective: Sustainable growth 
                        ----------------------------------------------------------- 
 Management experience   How measured: Average tenure of front-office 
                          management measured as years of service for 
                          directors and above. 
                          Why it's important: Experience through the economic 
                          cycle and across both geographies and disciplines 
                          is critical for an organic cyclical business 
                          operating across the globe. Our organic business 
                          model relies on an experienced management pool 
                          to enable flexibility in resourcing and senior 
                          management succession planning. 
                          How we performed in 2018: The average tenure 
                          of the Group's management increased from 11.9 
                          years to 12.0 years, with a particular increase 
                          in the Americas. 
                          Relevant strategic objective: Talent and Skills 
                          development 
                        ----------------------------------------------------------- 
 Total GHG emissions     How measured: Direct and Indirect GHG emissions 
                          calculated in line with the UK Government's 
                          2018 DEFRA reporting standards. Principally 
                          based on data from a sample of our offices, 
                          covering 68% of the Group by headcount, and 
                          extrapolated for the Group as a whole. 
                          Why it's important: The emissions calculations 
                          look at the CO2e impact of our operations in 
                          absolute terms. 
                          How we performed in 2018: Direct GHG emissions 
                          relating to the combustion of fuel decreased 
                          by 4.3% to 1,882 tonnes CO2e, while Indirect 
                          GHG emissions, through the purchase of energy 
                          such as electricity, increased by 10.4% to 5,379 
                          tonnes. 
                          Relevant strategic objective: Sustainable growth. 
                        ----------------------------------------------------------- 
 Intensity values        How measured: Intensity values for GHG emissions 
  of GHG emissions        are based on property and vehicle energy-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 foreign exchange 
                          variations. 
                          Why it's important: Intensity values help to 
                          normalise the GHG metrics and place them in 
                          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 emissions reduction. 
                          How we performed in 2018: Energy-derived emissions 
                          were reduced by 9.2% compared with 2017, largely 
                          due to an increase in headcount without a corresponding 
                          increase in the number of offices, along with 
                          changes in fuel sources and improvements in 
                          office energy efficiencies. 
                          Relevant strategic objective: Sustainable growth. 
                        ----------------------------------------------------------- 
 

The source of data and calculation methods year-on-year are on a consistent basis, including changes resulting from the use of 2018 DEFRA conversion factors. The movements in KPIs are in line with expectations.

 
 Steve Ingham              Kelvin Stagg 
 Chief Executive Officer   Chief Financial Officer 
 5 March 2019 
 

Consolidated Income Statement

For the year ended 31 December 2018

 
                                                   2018        2017 
                                       Note     GBP'000     GBP'000 
 
 Revenue                                3     1,549,941   1,371,534 
 Cost of sales                                (735,039)   (659,966) 
 Gross profit                           3       814,902     711,568 
 Administrative expenses                      (672,439)   (593,246) 
                                             ----------  ---------- 
 Operating profit                       3       142,463     118,322 
 Financial income                       4           631         229 
 Financial expenses                     4         (819)       (389) 
 Profit before tax                      3       142,275     118,162 
 Income tax expense                     5      (38,572)    (35,082) 
                                             ----------  ---------- 
 Profit for the year                            103,703      83,080 
                                             ----------  ---------- 
 
 Attributable to: 
 Owners of the parent                           103,703      83,080 
                                             ----------  ---------- 
 
 Earnings per share 
 Basic earnings per share (pence)       8          32.5        26.5 
 Diluted earnings per share (pence)     8          32.4        26.4 
                                             ----------  ---------- 
 

The above results all relate to continuing operations

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2018

 
                                                        2018      2017 
                                                     GBP'000   GBP'000 
 
 Profit for the year                                 103,703    83,080 
 
 Other comprehensive income/(loss) 
  for the year 
 Items that may subsequently be reclassified 
  to profit and loss: 
 
 Currency translation differences                      4,359   (2,888) 
 (Loss) / gain on hedging 
  instruments                                          (988)     1,340 
 
 Total comprehensive income for the 
  year                                               107,074    81,532 
                                                    --------  -------- 
 
 Attributable to: 
 Owners of the parent                                107,074    81,532 
                                                    --------  -------- 
 

Consolidated Balance Sheet

As at 31 December 2018

 
                                                               2018        2017 
                                                   Note     GBP'000     GBP'000 
 Non-current assets 
 Property, plant and equipment                      9        35,564      30,158 
 Intangible assets - Goodwill and other 
  intangibles                                                 2,019       1,685 
                            - Computer software              31,377      32,473 
 Deferred tax assets                                         17,487      14,637 
 Other receivables                                  10       12,746      10,513 
                                                             99,193      89,466 
                                                         ----------  ---------- 
 Current assets 
 Trade and other receivables                        10      349,111     299,089 
 Current tax receivable                                      17,206      15,652 
 Cash and cash equivalents                          12       97,673      95,605 
                                                            463,990     410,346 
                                                         ----------  ---------- 
 
 
 Total assets                                       3       563,183     499,812 
                                                         ----------  ---------- 
 
 
 Current liabilities 
 Trade and other payables                           11    (204,353)   (187,730) 
 Current tax payable                                       (20,145)    (22,166) 
                                                          (224,498)   (209,896) 
                                                         ----------  ---------- 
 
 Net current assets                                         239,492     200,450 
                                                         ----------  ---------- 
 
 Non-current liabilities 
 Other payables                                     11     (19,474)    (19,489) 
 Deferred tax liabilities                                     (630)       (370) 
                                                           (20,104)    (19,859) 
                                                         ----------  ---------- 
 
 
 
 Total liabilities                                  3     (244,602)   (229,755) 
 
 
 Net assets                                                 318,581     270,057 
                                                         ----------  ---------- 
 
 
 Capital and reserves 
 Called-up share capital                                      3,284       3,268 
 Share premium                                               98,502      92,677 
 Capital redemption reserve                                     932         932 
 Reserve for shares held in the employee 
  benefit trust                                            (50,673)    (58,931) 
 Currency translation reserve                                34,217      29,858 
 Retained earnings                                          232,319     202,253 
 Total equity                                               318,581     270,057 
                                                         ----------  ---------- 
 

Consolidated Statement of Changes in Equity

For the year ended 31 December 2018

 
                                                           Reserve 
                                                        for shares 
                                                           held in 
                     Called-up                Capital          the      Currency 
                         share     Share   redemption     employee   translation   Retained      Total 
                                                           benefit 
                       capital   premium      reserve        trust       reserve   earnings     equity 
                       GBP'000   GBP'000      GBP'000      GBP'000       GBP'000    GBP'000    GBP'000 
 Balance at 1 
  January 2017           3,259    90,458          932     (72,941)        32,746    192,107    246,561 
                    ----------  --------  -----------  -----------  ------------  ---------  --------- 
 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 ended 31 
  December 
  2017                       -         -            -            -             -     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                   -         -            -            -             -   (78,251)   (78,251) 
                             9     2,219            -       14,010             -   (74,274)   (58,036) 
                    ----------  --------  -----------  -----------  ------------  ---------  --------- 
 
 
 Balance at 31 
  December 2017 
  and 1 January 
  2018                   3,268    92,677          932     (58,931)        29,858    202,253    270,057 
                    ----------  --------  -----------  -----------  ------------  ---------  --------- 
 Currency 
  translation 
  differences                -         -            -            -         4,359          -      4,359 
                    ----------  --------  -----------  -----------  ------------  ---------  --------- 
 Net income 
  recognised 
  directly 
  in equity                  -         -            -            -         4,359          -      4,359 
 Loss on hedging 
  instruments                -         -            -            -             -      (988)      (988) 
 Profit for the 
  year ended 31 
  December 
  2018                       -         -            -            -             -    103,703    103,703 
                    ----------  --------  -----------  -----------  ------------  ---------  --------- 
 Total 
  comprehensive 
  income for the 
  year                       -         -            -            -         4,359    102,715    107,074 
                    ----------  --------  -----------  -----------  ------------  ---------  --------- 
 Purchase of 
  shares held in 
  employee 
  benefit trust              -         -            -     (11,567)             -          -   (11,567) 
 Exercise of share 
  plans                     16     5,825            -            -             -     21,072     26,913 
 Transfer from 
  reserve for 
  shares held 
  in the employee 
  benefit trust              -         -            -       19,825             -   (19,825)          - 
 Credit in respect 
  of share 
  schemes                    -         -            -            -             -      7,048      7,048 
 Credit in respect 
  of tax on 
  share schemes              -         -            -            -             -        368        368 
 Dividends                   -         -            -            -             -   (81,312)   (81,312) 
                            16     5,825            -        8,258             -   (72,649)   (58,550) 
                    ----------  --------  -----------  -----------  ------------  ---------  --------- 
 
 Balance at 31 
  December 2018          3,284    98,502          932     (50,673)        34,217    232,319    318,581 
                    ----------  --------  -----------  -----------  ------------  ---------  --------- 
 

Consolidated Statement of Cash Flows

For the year ended 31 December 2018

 
                                                                     2018       2017 
                                                          Note    GBP'000    GBP'000 
 
 
 
 Profit before tax                                                142,275    118,162 
 Depreciation and amortisation charges                             19,661     19,094 
 Loss/(Income) on sale of property, plant and 
  equipment and computer software                                     281      (159) 
 Share scheme charges                                               7,043      6,796 
 Net finance costs                                                    181        160 
                                                                ---------  --------- 
 Operating cash flow before changes in working 
  capital                                                         169,441    144,053 
                                                                ---------  --------- 
 Increase in receivables                                         (49,278)   (42,629) 
 Increase in payables                                              11,534     23,040 
                                                                ---------  --------- 
 Cash generated from operations                                   131,697    124,464 
                                                                ---------  --------- 
 Income tax paid                                                 (41,001)   (38,154) 
                                                                ---------  --------- 
 Net cash from operating activities                                90,696     86,310 
                                                                ---------  --------- 
 
 
 Cash flows from investing activities 
 Purchases of property, plant and equipment                      (15,668)   (13,415) 
 Purchases and capitalisation of intangible 
  assets                                                          (9,944)    (7,508) 
 Proceeds from the sale of property, plant and equipment, 
  and computer software                                             1,204      4,688 
 Interest received                                                    631        229 
                                                                ---------  --------- 
 Net cash used in investing activities                           (23,777)   (16,006) 
                                                                ---------  --------- 
 
 
   Cash flows from financing activities 
 Dividends paid                                                  (81,312)   (78,251) 
 Interest paid                                                      (818)    (1,845) 
 Issue of own shares for the exercise of options                   26,913     12,686 
 Purchase of shares into the employee benefit 
  trust                                                          (11,567)          - 
 Net cash used in financing activities                           (66,784)   (67,410) 
                                                                ---------  --------- 
 
 
   Net increase in cash and cash equivalents                          135      2,894 
 Cash and cash equivalents at the beginning 
  of the year                                                      95,605     92,796 
 Exchange gain/(loss) on cash and cash equivalents                  1,933       (85) 
 Cash and cash equivalents at the end of the 
  year                                                     12      97,673     95,605 
                                                                ---------  --------- 
 

Notes to the consolidated preliminary results

For the year ended 31 December 2018

   1.         Corporate information 

PageGroup plc (the "Company") is a limited liability company incorporated in Great Britain and domiciled within the United Kingdom whose shares are publicly traded. The consolidated preliminary results of the Company as at and for the year ended 31 December 2018 comprise the Company and its subsidiaries (together referred to as the "Group").

The consolidated preliminary results of the Group for the year ended 31 December 2018 were approved by the directors on 5 March 2019. The Annual General Meeting of PageGroup plc will be held at the registered office, Page House, The Bourne Business Park, 1 Dashwood Lang Road, Addlestone, Surrey, KT15 2QW on 24 May 2019 at 9.30am.

   2.         Accounting policies 

Basis of preparation

Whilst the information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRSs") as adopted for use in the European Union and as issued by the International Accounting Standards Board, this announcement does not itself contain sufficient information to comply with IFRSs.

The consolidated financial statements comprise the financial statements of the Group as at 31 December 2018 and are presented in UK Sterling and all values are rounded to the nearest thousand (UK GBP'000), except when otherwise indicated.

Going concern

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

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

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

Nature of financial information

The financial information contained within this preliminary announcement for the 12 months to 31 December 2018 and 12 months to 31 December 2017 do not comprise statutory financial statements for the purpose of the Companies Act 2006, but are derived from those statements. The statutory accounts for PageGroup plc for the 12 months to 31 December 2017 have been filed with the Registrar of Companies and those for the 12 months to 31 December 2018 will be filed following the Company's Annual General Meeting.

The auditor's reports on the accounts for both the 12 months to 31 December 2018 and 12 months to 31 December 2017 were unqualified and did not include a statement under Section 498 (2) or (3) of the Companies Act 2006.

The Annual Report and Accounts will be available for Shareholders in April 2019.

New accounting standards, interpretations and amendments adopted by the Group

The accounting policies adopted in the preparation of the consolidated preliminary results are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2018.

During the year the Group completed the transition to "IFRS 15 - Revenue from Contracts with Customers" and IFRS 9 - Financial Instruments". No adjustment was required for the transition to either standard.

We are continuing with our review and implementation of "IFRS 16 - Leases". The potential impact on our accounts of this Standard is disclosed in our Annual Report and Accounts for the year ended 31 December 2018.

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

   3.    Segment reporting 

All revenues disclosed are derived from external customers.

The accounting policies of the reportable segments are the same as the Group's accounting policies. Segment operating profit represents the profit earned by each segment 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 such as geography, market maturity and economic environment. No judgements were applied to identify the reportable segments.

   (a)   Revenue, gross profit and operating profit by reportable segment 
 
                                                 Revenue            Gross Profit 
                                         ----------------------  ------------------ 
                                               2018        2017      2018      2017 
                                            GBP'000     GBP'000   GBP'000   GBP'000 
 
 
 EMEA                                       797,427     675,983   394,337   332,288 
 
 
 United Kingdom                             313,525     312,915   138,392   140,768 
 
 
                      Australia and New 
 Asia Pacific                   Zealand     112,930     110,602    40,592    37,703 
                  Asia                      153,794     125,688   120,566    99,469 
                                         ----------  ----------  --------  -------- 
                 Total                      266,724     236,290   161,158   137,172 
 
 
 Americas                                   172,265     146,346   121,015   101,340 
 
 
                                          1,549,941   1,371,534   814,902   711,568 
                                         ----------  ----------  --------  -------- 
 
 
                                          Operating Profit 
                                         ----------------- 
                                                      2018      2017 
                                                   GBP'000   GBP'000 
 
 
 EMEA                                               85,586    69,674 
 
 
 United Kingdom                                     13,392    15,978 
 
 
                      Australia and New 
 Asia Pacific                   Zealand              4,291     5,480 
                  Asia                              22,474    18,039 
                                         -----------------  -------- 
                 Total                              26,765    23,519 
 
 
 Americas                                           16,720     9,151 
 
 
 Operating profit                                  142,463   118,322 
 Financial expense                                   (188)     (160) 
 Profit before tax                                 142,275   118,162 
                                         -----------------  -------- 
 
 

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

The analysis below is of the carrying amount of reportable segment assets, 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 current income tax assets and liabilities. Non-current assets include property, plant and equipment, computer software, goodwill and other intangible.

   (b)   Segment assets and liabilities by reportable segment 
 
                                            Total Assets         Total Liabilities 
                                         ------------------  ------------------------ 
                                             2018      2017           2018       2017 
                                          GBP'000   GBP'000        GBP'000    GBP'000 
 
 
 EMEA                                     246,687   219,024        131,948    109,100 
 
 United Kingdom                           121,058   123,423         40,398     51,193 
 
                      Australia and New 
 Asia Pacific                   Zealand    29,719    24,639         11,059     10,349 
                  Asia                     85,501    61,176         18,744     18,132 
                                         --------  --------      ---------  --------- 
                 Total                    115,220    85,815         29,803     28,481 
 
 
 Americas                                  63,012    55,898         22,308     18,815 
 
 Segment assets/liabilities               545,977   484,160        224,457    207,589 
 
 
 Income tax                                17,206    15,652         20,145     22,166 
 
 
                                          563,183   499,812        244,602    229,755 
                                         --------  --------      ---------  --------- 
 
 
 
                                           Property, Plant & 
                                               Equipment         Intangible Assets 
                                         --------------------  -------------------- 
                                              2018       2017       2018       2017 
                                           GBP'000    GBP'000    GBP'000    GBP'000 
 
 EMEA                                       13,654     12,218      3,171      3,668 
 
 United Kingdom                              6,254      6,894     29,554     30,116 
 
                      Australia and New 
 Asia Pacific                   Zealand      1,557      1,174        274          2 
                  Asia                       5,604      3,397        207         31 
                                         ---------  ---------  ---------  --------- 
                 Total                       7,161      4,571        481         33 
 
 Americas                                    8,495      6,475        190        341 
                                         ---------  ---------  ---------  --------- 
                                            35,564     30,158     33,396     34,158 
                                         ---------  ---------  ---------  --------- 
 

The below analyses in notes (c) revenue and gross profit by discipline (being the professions of candidates placed) relates to the requirements of IFRS 15 to disclose disaggregated revenue streams.

(c) Revenue and gross profit by discipline

 
                                                     Revenue            Gross Profit 
                                             ----------------------  ------------------ 
                                                   2018        2017      2018      2017 
                                                GBP'000     GBP'000   GBP'000   GBP'000 
 
 Accounting and Financial 
  Services                                      609,131     559,480   282,653   261,062 
 
 Legal, Technology, HR, Secretarial 
  and Other                                     402,321     337,857   196,773   161,424 
 
 Engineering, Property & Construction, 
  Procurement & Supply Chain                    345,654     290,830   194,562   158,714 
 
 Marketing, Sales and Retail                    192,835     183,367   140,914   130,368 
 
                                              1,549,941   1,371,534   814,902   711,568 
                                             ----------  ----------  --------  -------- 
 

The analysis in Notes (d) revenue and gross profit generated from permanent and temporary placements and (e) revenue and gross profit by strategic markets have been included as additional disclosure over and above the requirements of IFRS 8 "Operating Segments".

   (d)   Revenue and gross profit generated from permanent and temporary placements 
 
                        Revenue          Gross Profit 
                ----------------------  ------------- 
                      2018        2017           2018      2017 
                   GBP'000     GBP'000        GBP'000   GBP'000 
 
 Permanent         629,136     543,262        621,746   536,010 
 
 Temporary         920,805     828,272        193,156   175,558 
 
                 1,549,941   1,371,534        814,902   711,568 
                ----------  ----------  -------------  -------- 
 
 
   (e)   Revenue and gross profit by strategic market 
 
                                            Revenue             Gross Profit 
                                    ----------------------  -------------------- 
                                          2018        2017      2018      2017 
                                       GBP'000     GBP'000   GBP'000   GBP'000 
 
 Large, Proven markets                 935,800     860,415   419,102   383,027 
 
 Large, High Potential markets         414,245     338,002   270,311   222,676 
 
 Small and Medium, High Margin 
 markets                               199,896     173,117   125,489   105,865 
 
                                     1,549,941   1,371,534   814,902   711,568 
                                    ----------  ----------  --------  -------- 
 
   4.    Financial income / (expenses) 
 
                                                           2018      2017 
                                                        GBP'000   GBP'000 
 Financial income 
 Bank interest receivable                                   631       229 
                                                       --------  -------- 
 
 Financial expenses 
 Bank interest payable                                    (598)     (241) 
 Interest on discounting of French construction 
  participation tax                                       (221)     (148) 
                                                          (819)     (389) 
                                                       --------  -------- 
 
   5.    Taxation 

Tax on profit was GBP38.6m (2017: GBP35.1m). This represented an effective tax rate ("ETR") of 27.1% (2017: 29.7%). The ETR was higher in 2017 mainly because of the impact of US tax reform which reduced the federal corporate income tax rate, resulting in the write-down of the US deferred tax assets. The rate is higher than the effective UK rate for the calendar year of 19% (2017: 19.25%) principally due to the impact of higher tax rates in overseas countries and to a lesser extent disallowable expenditure. There are some countries in which the tax rate is lower than the UK, but the impact is very small either because the countries are not significant contributors to Group profit or the tax rate difference is not significant.

   6.    Dividends 
 
                                                                           2018      2017 
                                                                        GBP'000   GBP'000 
 Amounts recognised as distributions to equity holders in the 
  year: 
 Final dividend for the year ended 31 December 2017 of 8.60p 
  per ordinary share (2016: 8.23p)                                       27,433    25,857 
 Interim dividend for the year ended 31 December 2018 of 4.10p 
  per ordinary share (2017: 3.90p)                                       13,117    12,287 
 Special dividend for the year ended 31 December 2018 of 12.73p 
 per ordinary share (2017: 12.73p)                                       40,762    40,107 
                                                                         81,312    78,251 
                                                                       --------  -------- 
 
 Amounts proposed as distributions to equity holders in the 
  year: 
 
 Proposed final dividend for the year ended 31 December 2018 
  of 9.00p per ordinary share (2017: 8.60p)                              29,171    27,144 
                                                                       --------  -------- 
 

The proposed final dividend had not been approved by the Board at 31 December and therefore has not been included as a liability. The comparative final dividend at 31 December 2017 was also not recognised as a liability in the prior year.

The proposed final dividend of 9.00p (2017: 8.60p) per ordinary share will be paid on 17 June 2019 to shareholders on the register at the close of business on 17 May 2019.

   7.    Share-based payments 

In accordance with IFRS 2 "Share-based Payment", a charge of GBP8.4m has been recognised for share options and other share-based payment arrangements (including social charges) (31 December 2017: GBP7.7m).

   8.    Earnings per ordinary share 

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

 
 Earnings                                                2018      2017 
 
 Earnings for basic and diluted earnings per share 
  (GBP'000)                                           103,703    83,080 
                                                     --------  -------- 
 
 Number of shares 
 Weighted average number of shares used for basic 
  earnings per share ('000)                           318,877   313,491 
 Dilution effect of share plans ('000)                  1,627     1,287 
 Diluted weighted average number of shares used 
  for diluted earnings per share ('000)               320,504   314,778 
                                                     --------  -------- 
 
 Basic earnings per share (pence)                        32.5      26.5 
 Diluted earnings per share (pence)                      32.4      26.4 
 

The above results all relate to continuing operations.

   9.    Property, plant and equipment 

Acquisitions and Disposals

During the year ended 31 December 2018 the Group acquired property, plant and equipment with a cost of GBP15.7m (2017: GBP13.4m).

Property, plant and equipment with a carrying amount of GBP1.2m were disposed of during the year ended 31 December 2018 (2017: GBP3.9m), resulting in a loss on disposal of GBP0.2m (2017: profit of GBP0.2m).

   10.   Trade and other receivables 
 
                                                     2018      2017 
                                                  GBP'000   GBP'000 
 Current 
 Trade receivables                                297,380   253,555 
 Less allowance for expected credit losses and 
  revenue reversals                               (9,174)   (8,161) 
                                                 --------  -------- 
 Net trade receivables                            288,206   245,394 
 Other receivables                                  3,814     9,839 
 Accrued income                                    44,430    31,938 
 Prepayments                                       12,661    11,918 
                                                  349,111   299,089 
                                                 --------  -------- 
 Non-current 
 Other Receivables                                 12,746    10,513 
                                                 --------  -------- 
 
   11.   Trade and other payables 
 
                                     2018      2017 
                                  GBP'000   GBP'000 
 Current 
 Trade payables                     6,594     6,240 
 Other tax and social security     58,186    54,615 
 Other payables                    26,870    28,312 
 Accruals                         111,040    97,467 
 Deferred income                    1,663     1,096 
                                  204,353   187,730 
                                 --------  -------- 
 Non-current 
 Accruals                          18,453    18,628 
 Other tax and social security      1,021       861 
                                   19,474    19,489 
                                 --------  -------- 
 
   12.   Cash and cash equivalents 
 
                                                             2018      2017 
                                                          GBP'000   GBP'000 
 
  Cash at bank and in hand                                 97,626    95,327 
  Short-term deposits                                          47       278 
                                                         --------  -------- 
  Cash and cash equivalents                                97,673    95,605 
  Cash and cash equivalents in the statement 
   of cash flows                                           97,673    95,605 
                                                         --------  -------- 
 

The Group operates multi-currency cash concentration and notional cash pools, and an interest enhancement facility. The Eurozone subsidiaries and the UK-based Group Treasury subsidiary participate in the cash concentration arrangement, the Group Treasury subsidiary retains the notional cash pool and the Asia Pacific subsidiaries operate the interest enhancement facility. The structures facilitate interest compensation of cash whilst supporting working capital requirements.

PageGroup maintains a Confidential Invoice Facility with HSBC whereby the Group has the option to discount facilities in order to advance cash on its receivables. The facility is used only ad hoc in case the Group needs to fund any major GBP cash outflow.

   13.   Annual General Meeting 

The Annual General Meeting of PageGroup plc will be held at Page House, The Bourne Business Park, 1 Dashwood Lang Road, Addlestone, Weybridge, Surrey, KT15 2QW on 24 May 2019 at 9.30am.

   14.   Publication of Annual Report and Accounts 

This preliminary statement is not being posted to shareholders. The Annual Report and Accounts will be posted to shareholders in due course and will be delivered to the Registrar of Companies following the Annual General Meeting of the Company.

Copies of the Annual Report and Accounts will be available from the Company's website in April 2019.

http://www.pagegroup.co.uk/investors/reports-and-presentations/annual-and-interim-reports/2018.aspx

Responsibility statement of the directors on the annual report

The responsibility statement below has been prepared in connection with the Company's full annual report for the year

ending 31 December 2018. Certain parts of the annual report are not included within this announcement.

We confirm that, to the best of our knowledge:-

a) the financial statements, prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and

b) the management report, which is incorporated into the directors' report, includes a fair review of the development and

performance of the business and the position of the company and the undertakings included in the consolidation taken

as a whole, together with a description of the principal risks and uncertainties they face.

On behalf of the Board

 
 
 S Ingham                  K Stagg 
 Chief Executive Officer   Chief Financial Officer 
 
 5 March 2019              5 March 2019 
 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

FR LFFVIVVIEIIA

(END) Dow Jones Newswires

March 06, 2019 02:01 ET (07:01 GMT)

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