TIDMPAGE
RNS Number : 0410W
PageGroup plc
12 April 2019
PageGroup plc ("PageGroup" or the "Company")
Annual Report and Accounts and Notice of Annual General
Meeting
PageGroup's Annual General Meeting will be held at 9:30am on
Friday 24 May 2019 at Page House, 1 Dashwood Lang Road, The Bourne
Business Park, Addlestone, Weybridge, Surrey, KT15 2QW.
In connection with this, the following documents have been
posted or made available to shareholders today:
- Annual Report and Accounts for the year ended 31 December
2018;
- Notice of Annual General Meeting; and
- Proxy form for the Annual General Meeting.
The Annual Report and Accounts and the Notice of Annual General
Meeting are now available to view or download from the following
webpage: www.page.com. Copies of these documents have also been
submitted to the National Storage Mechanism and will shortly be
available for inspection at:
http://www.morningstar.co.uk/uk/NSM.
A condensed set of the Company's financial statements and
relevant extracts of the Company's management report were included
in the Company's preliminary results announcement for the year
ended 31 December 2018 which was published on 6 March 2019. That
information, together with the additional information contained in
the Appendix to this announcement (which has been extracted from
the Annual Report and Accounts) constitutes the material required
to be communicated to media in unedited full text through a
Regulatory Information Service for the purposes DTR 6.3.5R. This
announcement should be read in conjunction with, and is not a
substitute for, reading the full Annual Report and Accounts.
For further information contact:
Kaye Maguire
General Counsel & Company Secretary
+44(0)20 3077 8069
Appendix
Principal risks and uncertainties
Strategic Risks
Shift in Business Model
The emergence of new platforms technology and providers offering
HR solutions and consulting may lead to increased competition and
pressure on margins, which may adversely affect the Group's results
if it is unable to respond effectively.
Actions to mitigate risk
-- We actively monitor developments in new technologies and
their use in the recruitment sector.
-- As well as our ongoing day-to-day interaction with clients
and candidates, we conduct formal surveys through our Exact Target
programme which we have standardised across the Group to understand
how candidate and client needs are developing.
-- We continue to develop Page Outsourcing in response to
Recruitment Process Outsourcing (RPO's) and the expansion of
internal recruitment functions.
-- We partner with the large media providers, such as LinkedIn
and Facebook, to ensure that we use this form of media effectively
to enhance our value to clients. All consultants are trained in
utilising the benefits of social media in their day-to-day
activity.
-- Our revenue attribution model built using Google Analytics
and AI provides data-driven ROI information addressing online and
offline conversions and spend allocations.
-- Our highly trained and often specialist consultants maintain
an extensive qualified candidate database which we use to resource
candidates for our clients at an overall cost that they cannot
match.
-- We have established an innovation infrastructure with
Executive Board governance and regional innovations groups embedded
globally. These teams continually generate ideas that are evaluated
and those that pass our criteria are developed and piloted using an
externally managed innovation lab.
-- Our IT strategy and transformation initiative recognises the
need for us to be able to act rapidly in rolling out enabling
technologies.
Transformation and change
The Group continues to invest in new systems and processes.
These support our capabilities to continue to deliver appropriate
services to our clients and candidates in a cost effective flexible
manner. This change process brings inherent risks of quality, cost
and time.
Key programmes in the current process are our new Global Finance
System, successfully delivered in the UK, US, Middle East and
Africa and Asia Pacific regions and our new Global Operating System
which will be rolled out, starting in 2019.
Actions to mitigate risk
-- We have established and resourced business change programmes
for each of our major initiatives. Each has a dedicated management
team working across all areas of the business to ensure effective
planning implementation and decision making.
-- We have a COO function that ensures effective governance of
our programmes which are reviewed by our Executive Board on a
regular basis to ensure delivery to plan.
-- We support our programmes with third party systems implementation expertise.
-- We have selected best-in-class software that has a global
capability and can be rolled out to all our operating units.
-- We have a Group Programme Management Office (PMO) that
supports our programme management teams with policies and processes
to deliver programme change activities.
PageGroup brands and services
The quality and relevance of service we provide to both clients
and candidates, could have a significant impact on how our brand is
viewed.
As the way clients and candidates source information changes,
the awareness of the PageGroup brand and services of clients and
candidates could deteriorate.
In the short-term, any event that could cause reputational
damage is a risk to the Group, such as a failure to comply with
legislation, or other regulatory requirements, or confidential data
lost or stolen. Use of new social media network sites has increased
the speed of communication and reach, increasing the impact of an
incident.
Actions to mitigate risk
-- We have programmes that gain feedback actively from our
clients and candidates. We utilise Exact Target, an event-based
survey, and have developed an event-based approach of feedback
gathering through the use of Qualtrix.
-- We actively monitor media online through Brandwatch to
identify where there are unusual references to the PageGroup,
Michael Page, Page Personnel, Page Executive and Page Outsourcing
trademarks.
-- Our marketing strategy recognises the need to engage with
candidates and clients using the latest media available in a way
that reflects changing behaviours. We conduct ongoing surveys of
clients and candidates to ensure that we understand their
requirements and can adapt our processes and procedures
accordingly.
-- We have a programme of activity which ensures that we
communicate effectively the Page brands, keeping awareness high
among current and potential clients and candidates.
-- We train our consultants to use new media effectively, making
the channels available to them as part of their day-to-day
activity.
-- We have a comprehensive brand management policy which
includes key areas such as social media, data protection and
information security.
-- We have in place a tested incident response process with
clear escalation and activity guidelines to ensure any incidents
are managed effectively.
-- We are supported by external advisers who provide ongoing
advice on the protection and management of our brand.
People
People attraction, development and retention
PageGroup needs to hire, train and retain a large number of
appropriately skilled people across the Group to achieve our
Vision.
The factors that motivate, encourage and enable individuals to
perform to their best have and will continue to evolve with an
emphasis on work-life balance, flexibility and the working
environment.
Diversity is a key enabler to any successful business. A lack of
diversity in our people will impact on the achievement of our
objectives.
Our biggest challenge is to address attrition levels during the
first year of training.
Actions to mitigate risk
-- We continue to make significant investment in HR resources,
adding a Group Talent Director and business partners in each
Region. These all support our HR programmes, which are focused on
addressing issues around attraction, development and retention.
-- We are also addressing issues such as work-life balance,
flexible working, benefits schemes and equality that are seen to
have a positive impact on employees. Our programmes covering these
areas have been rolled out across the Group. We conduct exit
interviews to ensure that we are aware of any underlying issues
that need to be addressed.
-- We have invested more in online learning capabilities, with
BOOST!, our Global training application rolled out across the
Group.
-- We have a talent, succession and development process that
ensures a strong talent pipeline and addresses any gaps at senior
management level.
-- We have Group-wide initiatives that look to address the
issues around achieving diversity. These are part of our wider
PageGroup programmes which combined ensure we have an open
environment where working practices suit and encourage diversity in
all its aspects.
-- We conduct employee surveys. This helps us to see how our
people view working at PageGroup and provides feedback to address
and focus on improving.
Financial Risks
Macro-economic exposure
Recruitment activity is driven largely by economic cycles and
levels of business confidence. Businesses are less likely to need
new hires and employees are less likely to move jobs when they do
not have confidence in the market, thus leading to reduced
recruitment activity.
The majority of the Group's revenue arises from fees that are
contingent upon the successful placement of a candidate. If the
client cancels the assignment at any stage in the process, the
Group receives no remuneration.
The geopolitical tensions around trade tariffs between the US
and China and the West's relationships with North Korea continue to
drive uncertainty into the global economy.
In the UK, as Brexit nears, the level of uncertainty of the
economic impact has increased.
Actions to mitigate risk
-- We continue to diversify our business to mitigate this risk.
Firstly in terms of geography, we have diversified away from our
historical reliance on the UK. We now operate in 36 countries and
with 83% of Group gross profit being generated outside of the UK.
In the fourth quarter, France also overtook the UK to become the
largest single market in the Group.
-- We also look for opportunities to diversify through the
brands and disciplines in which we operate. We have increased the
number of disciplines we support, and continue to roll these out
through our current office network. Overall we have also reduced
our dependence on Accounting and Financial Services, with 65.3% of
Group gross profit now being generated from disciplines outside of
Accounting and Financial Services. We have established four brands
to address the different levels of the recruitment market: the
clerical professional sector; the qualified professional market;
and the executive search sector.
-- We have also diversified our offering through the mix of
permanent and temporary recruitment that we offer to the market.
Temporary recruitment now epresents around a quarter of the Group,
and we are seeing new temporary markets start to emerge in places
such as Asia and Latin America, where historically one didn't exist
due to cultural reasons. The temporary business tends to be more
resilient in times of economic downturn.
-- We have also diversified by focusing on the local, domestic
markets in which we operate. When we first enter a market, our
brand awareness is stronger with multinational clients. We have
particularly grown our domestic businesses in markets such as
Mainland China and Japan, giving us a more balanced portfolio, less
sensitive to global macro economic trends.
-- We continue to focus on our costs structure, ensuring that is
variable to levels of demand. As well as our variable operational
staffing costs, principally bonus payments, our move to an IT
service based model, as well as our transition in to the Cloud,
enhances this capability. Our regional Shared Service Centre
approach to support activities gives us greater flexibility in
resource reallocations.
Foreign exchange translation
The majority of the Group's operating profit is derived from
operations outside of the UK, so material changes in the strength
of Sterling against the Group's main functional currencies could
have an adverse effect on the Group's reported Sterling profits in
the financial statements. The main functional currencies in
addition to Sterling are the Euro, Australian Dollar, Swiss Franc,
Chinese Renminbi, Hong Kong Dollar and US Dollar.
Actions to mitigate risk
-- We do not hedge our exposure to foreign exchange translation
risk, instead focusing on ensuring the market correctly adjusts for
any impact.
-- We repatriate profits and convert them to Sterling to fund
returns to shareholders. Our Group Treasury function takes a
proactive role in the management of our cash resources.
-- We have a negligible amount of cross border trading activity
so the impact on transactions is limited.
Operational Risks
Information Systems
Our systems are an integral part of our operations. A major loss
of systems capability would have a high impact on our performance,
impacting the quality of service we provide to clients and
candidates and our financial performance.
Failure of our IT systems to adapt to levels of business
activity could result in lost opportunities during periods of rapid
expansion or excessive costs during periods of contraction.
The move to the delivery of IT as a flexible service increases
our reliance on third party vendors for service delivery. Should
one of these vendors fail we are at risk of a service
disruption.
Our systems must be able to adapt to the evolving technologies
around the Cloud to allow faster implementation of innovation or we
could miss business opportunities.
Actions to mitigate risk
-- Our core operating systems standards have been defined
globally and under tight global governance are delivered
regionally. We have standard platforms, procedures and processes,
which gives us a greater degree of resilience.
-- We have a standard disaster recovery plan appropriate for all
regions with the option of transferring to a Cloud service for each
of our services in the event of a disaster with our core systems.
Our core finance systems are in the process of migrating onto a
Cloud service. Our IT transformation programme includes the
migration of core IT services to third party providers on a SAAS
basis. Activity can quickly and economically be scaled up or down
with business requirements.
-- We select vendors through a robust vendor selection process
that ensures those chosen have the ongoing capability to support
our business requirements effectively. This is reviewed and managed
on an ongoing basis through our Service Delivery Team. Our Central
Procurement Team, in addition to supporting management in
commercial negotiations, ensures that relationships with third
party suppliers are appropriately defined and operationalised.
-- We have invested in resource to support vendor and asset
management. We have in place service delivery contracts with our
key vendors which include levels of resilience appropriate to the
nature of our business.
-- Our Global Service Delivery model enables fast rollout of our
piloted new services, which is possible as we have standardised our
infrastructure and applications across the Group. Our Global
Service Delivery model ensures these services operate effectively
and achieve the benefits planned before they are deployed.
Cyber Security
Confidential, sensitive and personal data is held across the
Group. Failure to secure and handle this data properly could expose
the Group to loss of business, financial penalties and/or
reputational damage.
Our flexible services IT model increases our reliance on third
parties. As a consequence, we also have an increased reliance on
the third parties' IT security to secure our confidential and
sensitive data.
We operate in an external environment that is seeing an increase
in, and sophistication of, cyber-attacks from organised crime and
nation states. In addition, the increased use of social media and
digital communications channels, as well as reliance on third
parties, Cloud computing and mobile data facilities, increase our
exposure.
Actions to mitigate risk
-- We have information security policies in place for the
management of confidential, sensitive and personal data. Security
risks are identified through a structured process of assessment and
a programme of remediation activities is executed, with activities
prioritised according to the associated level of business risk.
-- We have a dedicated Global Information Security team that
ensures our information remains protected. This includes ensuring
appropriate multi-layered protection at network and system levels,
and regular monitoring and third party testing of our capabilities.
The Information Security team comprises Security Operations,
Security Architecture and Information Security Management. The team
deals with IT security matters, and works directly with suppliers
and key business stakeholders to ensure everyone across the
business protects the data of our Group, clients and
candidates.
-- We have technical security protections in place that mitigate
the risks posed by the use of modern communications media, Cloud
services and mobile devices. The threat landscape is under constant
review to ensure our technology provides the right level of
protection.
-- Supplier contracts are negotiated and reviewed to ensure data
protection and IT security obligations are included as a standard
requirement.
-- New IT projects and initiatives are reviewed for security
risk, to ensure new technologies are adopted safely.
-- Security vulnerabilities are assessed regularly and the
remediation of identified risks and alerts is tracked to
conclusion. Regular security assurance checks take place across all
regions and penetration testing is undertaken by specialist third
parties.
-- The Board and Audit Committee reviews data security on a
regular basis and receives updates on the status of our security
programme.
-- We run an employee security awareness programme which
includes training and security simulations.
Fiscal and legal compliance
The Group operates in a large number of legal jurisdictions that
have varying legal, tax and compliance requirements. Any
non-compliance with client contract requirements and legislation or
regulatory requirements could have an adverse effect on the Group's
brands or financial results.
Actions to mitigate risk
-- The General Counsel & Company Secretary and local legal
and compliance teams are advised by leading external advisers, as
required, with regard to changes in legislation that affect the
Group's business, including employment, legislation, tax and
corporate governance.
-- Our staff receive induction training and regular updates
regarding the Group's policies and procedures and compliance with
relevant legislation covering for example, discrimination
legislation, anti-bribery and corruption, sanctions and
pre-employment checks.
-- The Group has central tax and treasury functions, which
manage the Group's cash and tax compliance.
-- The Group tax function regularly monitors transfer pricing
requirements and developments to ensure that appropriate actions
are being taken and appropriate documentation is being maintained
to meet local reporting and compliance requirements.
-- The Group holds all normal business insurance cover including
employers' liability, public liability and professional indemnity
insurance.
-- Sales and procurement contracts include clauses to ensure the
Group's rights are protected. All non-standard contracts are
legally reviewed and where appropriate approved by senior
management.
-- The Group continues to invest in systems and processes to
enable compliance with requirements as they evolve. For example we
have established processes to effectively manage the health and
safety requirements in the placement of temporary workers in
Australia.
Financial management and control
Failure to maintain adequate financial and management processes
and controls could lead to poor quality management decisions,
resulting in the Group not achieving its financial targets or in
errors in the Group's financial reporting.
-- The Group has financial policies and procedures which are
reviewed on a regular basis. Changes are approved by the Audit
Committee.
-- Regional and local finance teams ensure that Group reporting
requirements adhere to these policies as well as ensuring local
statutory requirements are met. The Group Finance function reviews
submissions to ensure policies are adhered to.
-- Monthly management information is produced that supports effective financial management.
-- The Group operates regional shared service centres which, as
well as driving efficiencies, enable more effective control of
activities through common processes and segregation of control
activities.
-- The Finance structure mirrors and supports local, regional and Group management structures.
-- There are compliance teams located in each region that
support the local, regional and Group management in ensuring
revenues are appropriately recognised.
-- Internal Audit regularly review local and regional financial
controls and report on the results to the Executive Board and the
Audit Committee.
Data Protection Regulations
New European data protection legislation came into force in May
2018. This increased data governance and management requirements
significantly, as well as increasing the potential penalties for
non-compliance or data breaches.
Legislation was also introduced in June 2017 in the People's
Republic of China, which requires data of Chinese citizens to be
held and processed in Mainland China.
Actions to mitigate risk
-- A GDPR Steering Committee was created with responsibility for
ensuring the business has in place appropriate processes to ensure
compliance with the requirements of GDPR. This Committee will
continue to monitor events and further developments in practice to
ensure we effectively maintain compliance.
-- A Data Protection Office has been created with resources at
Group and regional levels to ensure that processes continue to
deliver compliance.
-- Regional Steering Teams have been established to ensure
ongoing compliance as legislation in different regions evolves. Our
other policies and processes, such as crisis management, change
management, contracts, third party service providers and HR and
payroll policies have all been updated to reflect the additional
requirements from data protection legislation.
Related Party Transactions
Identity of related parties
The Company has a related party relationship with its Directors
and members of the Executive Committee, and subsidiaries
Transactions with key management personnel
Key management personnel are deemed to be the Directors and
members of the Executive Committee as detailed in the biographies
on pages 42 to 46 of the Company's Annual Report and Accounts. The
remuneration of Directors and members of the Executive Committee is
determined by the Remuneration Committee having regard to the
performance of individuals and market trends. The transactions for
the year were:
2018 2017
Related party transactions GBP'000 GBP'000
-------------------------------------------- --------- ---------
Wages and salaries 6,412 6,322
Social security costs 440 672
Pension costs - defined contribution plans 226 200
Share-based payments and deferred cash
plan 3,981 1,601
-------------------------------------------- --------- ---------
11,059 8,795
-------------------------------------------- --------- ---------
Company
Transactions between the Company and its subsidiaries, which are
related parties of the Company, have been eliminated on
consolidation. Details of transactions between the parent company
and subsidiary undertakings are shown below.
Dividends received Amounts owed by related Amounts owed to
parties related parties
2018 2017 2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ---------- --------- ------------ ------------ --------- ---------
Transactions 5,963 9,649 642,855 647,607 913,094 848,300
-------------- ---------- --------- ------------ ------------ --------- ---------
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END
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