PageGroup plc Half-year Report

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PageGroup plc Half-year Report

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RNS Number : 1602I

PageGroup plc

07 August 2019

7 August 2019

Half Year Results for the Period Ended 30 June 2019

PageGroup plc ("PageGroup"), the specialist professional recruitment company, announces its unaudited half year results for the period ended 30 June 2019.

 
 Financial summary                2019        2018      Change   Change 
  (6 months to 30 June 2019)                                       CC* 
 Revenue                        GBP820.5m   GBP751.6m    +9.2%    +9.5% 
                               ----------  ----------  -------  ------- 
 Gross profit                   GBP433.5m   GBP396.0m    +9.5%    +9.5% 
                               ----------  ----------  -------  ------- 
 Operating profit                GBP75.6m    GBP67.2m   +12.5%   +11.4% 
                               ----------  ----------  -------  ------- 
 Profit before tax               GBP74.6m    GBP67.2m   +10.9% 
                               ----------  ----------  ------- 
 Basic earnings per share           16.8p       15.5p    +8.4% 
                               ----------  ----------  ------- 
 Diluted earnings per share         16.8p       15.4p    +9.1% 
                               ----------  ----------  ------- 
 
 Interim dividend per share         4.30p       4.10p    +4.9% 
                               ----------  ----------  ------- 
 Special dividend per share        12.73p      12.73p 
                               ---------- 
 

HIGHLIGHTS

   --       Group operating profit increased +11.4%* to GBP75.6m, +12.5% in reported rates 
   --       Increase in fee earner productivity of 2.2%** 
   --       Conversion rate*** increased to 17.4% (H1 2018: 17.0%) 
   --       Reduction of 81 (-1.3%) fee earners in H1 2019 
   --       Strong Balance Sheet with net cash of GBP81.7m (H1 2018: GBP87.0m) 
   --       Interim dividend up 4.9% to 4.30 pence per share, totalling GBP13.9m 
   --       Special dividend of 12.73 pence per share, totalling GBP41.0m 

* in constant currency at prior year rates

** gross profit per fee earner

*** operating profit as a percentage of gross profit

Commenting, Kelvin Stagg, Chief Financial Officer, said:

"PageGroup delivered an increase of 9.5%* in gross profit and 11.4%* in operating profit in the first half of 2019, with fee earner productivity increasing 2.2% and the Group's conversion rate rising from 17.0% to 17.4%. This reflects our continued focus on productivity and conversion.

"Fee earner headcount fell by 81 (-1.3%) in the first half, to 6,035, mainly in markets where conditions were more challenging, such as Greater China and the UK. We continued to invest in markets where we saw the greatest growth, such as the US and India. We completed the implementation of our new Global Finance System, with roll-outs in Latin America and Europe during the first half. Our operational support staff headcount increased by 72 (4.3%), the majority of which were temporary, to support these roll-outs.

"We are announcing today an interim dividend of 4.30 pence per share, an increase of 4.9% over last year. In addition, in line with our policy of returning surplus capital to shareholders, we are also pleased to announce a special dividend of 12.73 pence per share (2018: 12.73 pence per share) totalling GBP41.0m, a fifth consecutive year of special dividends. Taking both dividend payments together, this amounts to a cash return to shareholders of GBP54.9m, payable on 9 October. Together with the 2018 final dividend paid in June of GBP29.0m, this represents a total of GBP83.9m returned to shareholders in 2019, or 26.03 pence per share.

"We are pleased with our first half performance, however we remain mindful of challenging macro-economic conditions seen in a number of our regions. 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."

PageGroup will host a conference call, with on-line slide presentation, for analysts and investors at 8.30am on 7 August 2019, the details of which are below.

Link:

https://www.investis-live.com/pagegroup/5d35b72e9add6d1100148e3b/usas

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

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

Please quote participant access code 41 06 07 to gain access to the call.

A presentation and recording to accompany the call will be posted on the PageGroup website during the course of the morning of 7 August 2019 at:

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

Enquiries:

 
 PageGroup                                     +44 (0)20 3077 8425 
 Kelvin Stagg, Chief Financial Officer 
  Jeremy Tatham, Group Financial Controller 
 
 
 FTI Consulting                                +44 (0)20 3727 1340 
 Richard Mountain / Susanne Yule 
 

INTERIM MANAGEMENT REPORT

GROUP RESULTS

 
 GROSS PROFIT                       GBPm            Growth Rates 
                 % of Group   H1 2019   H1 2018   Reported     CC 
                -----------  --------  --------  ---------  ------- 
 EMEA               49%        213.1     194.9     +9.3%     +10.2% 
                -----------  --------  --------  ---------  ------- 
 Asia Pacific       19%        81.8      74.1      +10.4%    +9.0% 
                -----------  --------  --------  ---------  ------- 
 UK                 16%        69.4      69.7      -0.3%     -0.3% 
                -----------  --------  --------  ---------  ------- 
 Americas           16%        69.2      57.3      +20.7%    +19.6% 
                -----------  --------  --------  ---------  ------- 
 Total              100%       433.5     396.0     +9.5%     +9.5% 
                -----------  --------  --------  ---------  ------- 
 
 Permanent          76%        330.6     304.2     +8.7%     +8.5% 
                -----------  --------  --------  ---------  ------- 
 Temporary          24%        102.9     91.8      +12.1%    +12.8% 
                -----------  --------  --------  ---------  ------- 
 

The Group's revenue for the six months ended 30 June 2019 increased 9.2% to GBP820.5m (2018: GBP751.6m) and gross profit increased 9.5% to GBP433.5m (2018: GBP396.0m). In constant currencies, the Group's revenue and gross profit both increased by 9.5%. The Group's revenue mix between permanent and temporary placements was 41:59 (2018: 41:59) and for gross profit was 76:24 (2018: 77:23).

Revenue from temporary placements comprises the salaries of those placed, together with the margin charged. Overall, pricing has remained relatively stable across all regions. Fee earner productivity increased by 2.2%, reflecting our continued focus on productivity and conversion, following our COO office appointment last year.

Fee earner headcount fell by 81 (-1.3%) in the first half, to 6,035, mainly in markets where conditions were more challenging, such as Greater China and the UK. We continued to invest in markets where we saw the greatest growth, such as the US and India. We completed the implementation of our new Global Finance System, with roll-outs in Latin America and Europe during the first half. Our operational support staff headcount increased by 72 (4.3%), the majority of which were temporary, to support these roll-outs. Total headcount at the end of the first half was 7,763.

The Group's organic growth model and profit-based team bonus ensures costs remain tightly controlled. 79% of first half costs were employee related, including salaries, bonuses, share-based long-term incentives, and training and relocation costs.

In total, administrative expenses in the first half increased 8.9% to GBP357.9m (2018: GBP328.8m), driven by increases in headcount relative to H1 2018. In constant currency administrative expenses were up 9.1% and operating profit increased 11.4% to GBP75.6m (2018: GBP67.2m), an increase of 12.5% at reported rates.

The Group views its conversion rate, which represents the ratio of operating profit to gross profit, as a key metric for the business. This conversion rate is affected by macro-economic conditions, the level of investment, particularly in fee earners and the degree of spare capacity within the business. The Group's conversion rate of 17.4% (2018:17.0%) was an improvement on H1 2018, driven by a strong performance in EMEA, partially offset by more challenging trading conditions in Asia Pacific.

FOREIGN EXCHANGE

Movements in foreign exchange had a negligible impact on the Group's results. Overall, foreign exchange movements impacted the Group's gross profit and operating profit by less than GBP1m.

IFRS 16 - LEASES AND OTHER ITEMS

The Group is reporting under the new accounting standard, IFRS 16 Leases, for the first time. Under IFRS 16, the straight line rental expense for the first half of GBP20.4m has been replaced with a depreciation charge in respect of the right of use assets of GBP19.6m. This has resulted in an increase to EBITDA of GBP20.4m and an increase to EBIT of GBP0.8m. An interest charge in respect of the lease liabilities of GBP1.1m has also been recognised resulting in a decrease in profit before tax of GBP0.3m.

Underlying interest received and interest paid was consistent with 2018. The charge for taxation at the half year was 27.5% (2018: 26.5%). It is based on the full year forecast tax rate, allowing for prior year items arising from tax returns in the half year to 30 June.

Basic earnings per share for the six months ended 30 June 2019 was 16.8p, an increase of 8.4% and diluted earnings per share was also 16.8p, an increase of 9.1% (2018: basic earnings per share 15.5p; diluted earnings per share 15.4p).

CASH FLOW

The Group started the year with net cash of GBP97.7m. In the first half, GBP63.2m was generated from operations after funding an increase in working capital of GBP45.8m, mainly due to growth in our temporary and contracting business, which has a higher working capital requirement. Tax paid was GBP20.8m and net capital expenditure was GBP13.4m. During the first half, GBP3.5m was received from exercises of share options (2018: GBP19.1m). No shares were purchased in the Employee Benefit Trust to hedge exposures under share-based awards (2018: GBP9.9m) and dividends of GBP29.0m were paid to shareholders. As a result, the Group had net cash of GBP81.7m at 30 June 2019 (30 June 2018: GBP87.0m).

DIVIDS AND SHARE REPURCHASES

It is the Directors' intention to continue to finance the activities and development of the Group from retained earnings and to operate while maintaining a strong balance sheet position.

The Group's first use of cash is to satisfy operational and investment requirements, as well to hedge its liabilities under the Group's share plans. The level of cash required for this purpose will vary depending upon the revenue mix of geographies, permanent and temporary recruitment, and point in the economic cycle.

Our second use of cash is to make returns to shareholders by way of an ordinary dividend. Our policy is to grow the ordinary dividend over the course of the economic cycle in a way that we believe we can sustain the level of ordinary dividend payment during downturns, as well as increasing 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 and/or share buybacks.

The Board has announced an interim dividend of 4.30 pence per share, an increase of 4.9% over last year. In addition, in line with its policy of returning surplus capital to shareholders, the Group is pleased to announce today a special dividend of 12.73 pence per share or GBP41.0m (2018: 12.73 pence per share), making it a fifth consecutive year of special dividends. Taking both dividend payments together, this amounts to a cash return to shareholders of GBP54.9m. Together with the 2018 final dividend paid in June of GBP29.0m, this represents a total of GBP83.9m returned to shareholders in 2019.

This special dividend will be paid, as in previous years, at the same time as the interim dividend on 9 October 2019 to shareholders on the register as at 6 September 2019.

During the first half, no purchases of shares into the Employee Benefit Trust to hedge exposures under share-based awards were made (2018: GBP9.9m).

All growth rates given below are in constant currency unless otherwise stated.

EUROPE, MIDDLE EAST AND AFRICA (EMEA)

 
 EMEA                          GBPm           Growth rates 
 (49% of Group in H1    H1 2019   H1 2018   Reported     CC 
  2019) 
                       --------  --------  ---------  ------- 
 Gross Profit            213.1     194.9     +9.3%     +10.2% 
                       --------  --------  ---------  ------- 
 Operating Profit        45.6      40.9      +11.4%    +12.2% 
                       --------  --------  ---------  ------- 
 Conversion Rate (%)     21.4%     21.0% 
                       --------  --------  ---------  ------- 
 

EMEA is the Group's largest region, contributing 49% of Group first half gross profit. In reported rates, revenue in the region increased by 9.7% to GBP427.7m (2018: GBP389.7m) and gross profit increased 9.3% to GBP213.1m (2018: GBP194.9m). In constant currency, revenue increased 10.6% on the first half of 2018 and gross profit increased by 10.2%.

The EMEA region performed strongly, with Michael Page and Page Personnel growing gross profit 9% and 11%, respectively. France, which now represents around a third of the region and 16% of the Group, grew gross profit by 7%. In Germany, one of our Large, High Potential markets, we grew 24%, with a standout performance from our Technology focused Interim business, which was up 37%. Southern Europe grew 9%, with Italy up 12% and Spain up 6%, however conditions became more challenging as the second quarter drew to a close. Benelux grew 12%, with Belgium and the Netherlands up 13% and 12% respectively. The Middle East and Africa grew 7%, driven mainly by growth in the UAE of 11%.

The 11.4% increase in operating profit for the first half of 2019 to GBP45.6m (2018: GBP40.9m) and improvement in the conversion rate to 21.4% (2019: 21.0%) was driven by a combination of improved fee earner productivity and generally favourable macro-economic conditions. Headcount across the region was broadly flat in the first half at 3,316 at the end of June 2019 (3,299 at 31 December 2018).

ASIA PACIFIC

 
 Asia Pacific                        GBPm           Growth rates 
 (19% of Group in H1 2019)    H1 2019   H1 2018   Reported    CC 
                             --------  --------  ---------  ------ 
 Gross Profit                  81.8      74.1      +10.4%    +9.0% 
                             --------  --------  ---------  ------ 
 Operating Profit               8.8       9.0      -1.6%     -4.8% 
                             --------  --------  ---------  ------ 
 Conversion Rate (%)           10.8%     12.1% 
                             --------  --------  ---------  ------ 
 

In Asia Pacific, representing 19% of Group first half gross profit, revenue increased 7.5% in reported rates to GBP135.0m (2018: GBP125.6m), and gross profit increased 10.4% to GBP81.8m (2018: GBP74.1m). In constant currency, revenue increased 6.7% in the first half and gross profit increased by 9.0%.

Conditions in Asia Pacific in the first half were challenging due to the trade tariff uncertainty in Greater China, which overall grew gross profit 3%. South East Asia, another of the Group's Large, High Potential markets grew 9%. However, we saw more challenging conditions in Singapore during the second quarter, impacted by contagion from trade tariff uncertainty. Elsewhere in the region we saw standout performances from India and Japan, which grew 50% and 22% respectively. Australia was up 8%, driven by our Page Personnel business.

Reflecting these more challenging conditions in the region, particularly in Greater China, alongside our year on year investment in fee earners in South East Asia, India and Japan, our conversion rate fell from 12.1% to 10.8%. Headcount across the region increased by 28 (1.6%) to 1,737 at the end of June 2019 (1,709 at 31 December 2018), with investments in India and Japan offset by a reduction in our fee earner headcount in Greater China.

UNITED KINGDOM

 
 UK                                  GBPm         Growth rate 
 (16% of Group in H1 2019)    H1 2019   H1 2018 
                             --------  --------  ------------ 
 Gross Profit                  69.4      69.7        -0.3% 
                             --------  --------  ------------ 
 Operating Profit              12.5      10.5       +19.6% 
                             --------  --------  ------------ 
 Conversion Rate (%)           18.0%     15.0% 
                             --------  --------  ------------ 
 

In the UK, representing 16% of Group first half gross profit, revenue increased 1.5% to GBP157.4m (2018: GBP155.0m), but gross profit declined 0.3% to GBP69.4m (2018: GBP69.7m), with Brexit related uncertainty continuing to impact decision-making from clients and candidates at the more senior levels of the market. Page Personnel, which has a higher proportion of temporary recruitment, grew 9%, while Michael Page, which is focused on more senior candidates, declined 3%.

Operating profit increased by 19.6% to GBP12.5m (2018: GBP10.5m), with the conversion rate increasing to 18.0% (2018: 15.0%). Given the more challenging trading conditions, we reduced our fee earner headcount to increase our focus on productivity and therefore improve our conversion rate. As we have highlighted previously, the UK takes a higher proportion of the Group's share scheme charges, as the majority of the Group's senior management are based in the UK. The charge for H1 2019 was less than H1 2018, which contributed to the conversion rate improvement.

Headcount decreased by 68 (4.7%) during the first half of 2019 to 1,368 at the end of June 2019 (1,436 at 31 December 2018).

THE AMERICAS

 
 Americas                            GBPm           Growth rates 
 (16% of Group in H1 2019)    H1 2019   H1 2018   Reported     CC 
                             --------  --------  ---------  ------- 
 Gross Profit                  69.2      57.3      +20.7%    +19.6% 
                             --------  --------  ---------  ------- 
 Operating Profit               8.7       6.8      +26.8%    +15.7% 
                             --------  --------  ---------  ------- 
 Conversion Rate (%)           12.5%     11.9% 
                             --------  --------  ---------  ------- 
 

In the Americas, representing 16% of Group first half gross profit, revenue increased 23.6% in reported rates to GBP100.5m (2018: GBP81.3m), while gross profit increased 20.7% to GBP69.2m (2018: GBP57.3m). In constant currency, revenue increased by 23.4% and gross profit increased by 19.6%.

North America grew gross profit 20% overall, with growth of 23% in the US offset by an 8% decline in Canada. In the US, we saw particularly strong performances from our offices outside of New York, with notable results from our offices in Boston, Chicago, Houston and Los Angeles.

In Latin America, we increased fee earner headcount by 10% year-on-year and grew gross profit 19%. This investment was spread across the region, including the four countries outside of Brazil and Mexico, being Argentina, Chile, Colombia and Peru, where we now have a total headcount of over 300 and grew 14%, collectively. Elsewhere, Mexico, our largest business in Latin America, grew 31% and Brazil grew 14%.

Headcount in the Americas was up 14 (1.1%) in the first half, to 1,342 at the end of June 2019 (1,328 at 31 December 2018). Operating profit increased by 26.8% to GBP8.7m (2018: GBP6.8m), with an increase in the conversion rate to 12.5% (2018: 11.9%), due primarily to the increase in productivity.

KEY PERFORMANCE INDICATORS ("KPIs")

We measure our progress against our strategic objectives using the following key performance indicators:

 
 KPI                       Definition, method of calculation and analysis 
 
 Gross profit              How measured: Gross profit represents revenue less 
  growth                    cost of sales and consists of the total placement 
                            fees of permanent candidates, the margin earned on 
                            the placement of temporary candidates and the margin 
                            on advertising income, i.e. it represents net fee 
                            income. The measure used is the increase or decrease 
                            in gross profit as a percentage of the prior year 
                            gross profit. 
 
                            Why it's important: The growth of gross profit relative 
                            to the previous year is an indicator of the growth 
                            in net fees of the business as a whole. It demonstrates 
                            whether we are in line with our strategy to grow the 
                            business. 
 
                            How we performed in H1 2019: With strong growth in 
                            many of our markets, gross profit in H1 2019 increased 
                            by 9.5% in both constant currency and at reported 
                            rates (H1 2018: 14.2% in constant currency, 12.5% 
                            in reported rates). 
 
                            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 and 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 and Financial Services discipline. 
 
                            How we performed in H1 2019: Geographies: the percentage 
                            outside the UK increased to 84.0% from 82.4% in 2018, 
                            demonstrating further diversification. This increase 
                            reflected the strength of growth outside the UK, as 
                            well as the continued weakness of Sterling. 
                            Disciplines: the percentage outside of Accounting 
                            and Financial Services was broadly flat at 65.3% (2018: 
                            65.5%), with Accounting and Financial Services growth 
                            of 10.4%, compared to 9.0% elsewhere. 
 
                            Relevant strategic objective: Diversification 
                          -------------------------------------------------------------- 
 Ratio of gross            How measured: Gross profit from each type of placement 
  profits generated         expressed as a percentage of total gross profit. 
  from permanent 
  and temporary             Why it's important: This ratio helps us to understand 
  placements                where we are in the economic cycle, since the temporary 
                            market tends to be more resilient when the economy 
                            is weak. However, in several of our core strategic 
                            markets, working in a temporary role or as a contractor 
                            or interim employee is not currently normal practice, 
                            for example Mainland China. 
 
                            How we performed in H1 2019: 76% of our gross profit 
                            was generated from permanent placements, marginally 
                            below the 77% in 2018. 
 
                            Relevant strategic objective: Organic growth 
                          -------------------------------------------------------------- 
 Gross profit              How measured: Gross profit for the year divided by 
  per fee earner            the average number of fee earners in the year. 
 
                            Why it's important: This is a key indicator of productivity. 
 
                            How we performed in H1 2019: Gross profit per fee 
                            earner was GBP70.7k in H1 2019 compared to GBP69.2k 
                            in H1 2018, an increase of 2.2%. This is in line with 
                            an increased focus on productivity and conversion, 
                            following our COO office appointment last year. 
 
                            Relevant strategic objective: Organic growth 
                          -------------------------------------------------------------- 
 Conversion rate           How measured: Operating profit before interest and 
                            taxation (EBIT) as a percentage of gross profit. 
 
                            Why it's important: This demonstrates the Group's 
                            effectiveness at controlling the costs and expenses 
                            associated with its normal business operations. It 
                            will be impacted by the level of productivity and 
                            the level of investment for future growth. 
 
                            How we performed in H1 2019: Operating profit as a 
                            percentage of gross profit increased to 17.4% in 2019, 
                            up from 17.0% in the prior year, driven by a strong 
                            performance in EMEA, offset by more challenging trading 
                            conditions in Asia Pacific. 
 
                            Relevant strategic objective: Build for the long-term 
                          -------------------------------------------------------------- 
 Basic earnings            How measured: Profit for the year attributable to 
  per share                 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 overall profitability 
                            of the Group. 
 
                            How we performed in H1 2019: Earnings per share (EPS) 
                            in H1 2019 was 16.8p, an 8.4% improvement on the EPS 
                            in 2018 of 15.5p. 
 
                            Relevant strategic objective: Build for the long-term, 
                            organic growth 
                          -------------------------------------------------------------- 
 Fee-earner: operational   How measured: The percentage of fee-earners compared 
  support staff             to operational support staff at the period-end, expressed 
  headcount ratio           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 H1 2019: The ratio was in line 
                            with H1 2018 at 78:22, but down on the year end ratio 
                            of 79:21. We reduced our fee earner headcount by 81 
                            in the first half of 2019, in response to more challenging 
                            market conditions in markets such as France, Greater 
                            China and the UK. Our operational support headcount 
                            increased by 72, these additions were mainly temporary 
                            in nature to support the implementation of our new 
                            Global Finance System. 
 
                            Relevant strategic objective: Sustainable growth 
                          -------------------------------------------------------------- 
 Fee-earner headcount      How measured: Number of fee-earners and directors 
  growth                    involved in revenue-generating activities at the period 
                            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 expectations as to the level 
                            of future demand above the existing capacity within 
                            the business. 
 
                            How we performed in H1 2019: We reduced our fee earner 
                            headcount by 81 in H1 2019 (H1 2018: 319 increase). 
                            Fee earner headcount fell in markets where we saw 
                            more challenging conditions, such as France, Greater 
                            China and the UK, but we continued to invest in markets 
                            where we saw the greatest growth such as the US and 
                            India. 
 
                            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 is a key 
                            measure of our success in managing our working capital 
                            and determines our ability to reinvest in the business 
                            and to return cash to shareholders. 
 
                            How we performed in H1 2019: Net cash at 30 June 2019 
                            was GBP81.7m (H1 2018: GBP87.0m). This was as a result 
                            of GBP3.5m received in H1 2019 as a result of the 
                            exercise of share options, compared to GBP19.1m in 
                            H1 2018. No share purchases were made into the Employee 
                            Benefit Trust in H1 2019 (H1 2018 GBP9.9m). The balance 
                            was principally driven by movements in working capital. 
 
                            Relevant strategic objective: Build for the long-term 
                          -------------------------------------------------------------- 
 

The source of data and calculation methods year-on-year are on a consistent basis. The movements in KPIs are in line with expectations. Disclosure for GHG emissions and People KPIs is provided annually.

PRINCIPAL RISKS AND UNCERTAINTIES

The management of the business and the execution of the Group's strategy are subject to a number of risks. The main risks that PageGroup believes could potentially impact the Group's operating and financial performance for the remainder of the financial year remain those as set out in the Annual Report and Accounts for the year ending 31 December 2018 on pages 31 to 35.

There have been no changes to these risk categories in the first half to 30 June 2019. However, there remains a degree of uncertainty in the UK as a result of Brexit, Greater China due to trade tariff uncertainty and slower economies in parts of continental Europe.

We have a proven track record of being able to manage our headcount and costs effectively throughout the economic cycle and it should be noted that the UK is now only 16% of the Group, but a more resilient market due to its size and maturity. Whilst some of our other markets are also more challenging, we expect them to remain positive. In light of these mixed trading conditions, we will continue to focus on activity levels, adjusting headcount during the second half to react to market conditions. As always, we remain focused on driving profitable growth, whilst remaining able to respond quickly and effectively to any changes in market conditions.

TREASURY MANAGEMENT, BANK FACILITIES AND CURRENCY RISK

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 receivables in order to advance cash. The Group also has a Revolving Credit Facility with BBVA, with a total drawable amount of GBP30m. Neither of these facilities were in use as at 30 June. These facilities are only used on an ad hoc basis to fund any major Group GBP cash outflows.

The main functional currencies of the Group are Sterling, Euro, Chinese Renminbi, US Dollar, Singapore Dollar, Hong Kong Dollar and Australian Dollar. The Group does not have material transactional currency exposures. The Group is exposed to foreign currency translation differences in accounting for its overseas operations. The Group policy is not to hedge translation exposures.

In certain cases, where the Group gives or receives short-term loans to and from other Group companies, which differ from the Group's reporting currency, it may use short-dated foreign exchange swap derivative financial instruments to manage the currency and interest rate exposure that arises on these loans. The Group had entered into hedges to cover its investment in foreign entities in the US and Canada.

GOING CONCERN

The Board has undertaken a recent and thorough review of the Group's forecasts and associated risks and sensitivities. Despite the uncertainty in the economy and its inherent risk and impact on the business, the Board has concluded, given the level of cash in the business and Group borrowing facilities, the geographical and discipline diversification, limited concentration risk, as well as the ability to manage the cost base, that the Group has adequate resources to continue in operational existence for the foreseeable future, being a period of at least 12 months from the date of this announcement.

CAUTIONARY STATEMENT

This Interim Management Report ("IMR") has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. The IMR should not be relied on by any other party or for any other purpose. This IMR 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.

This IMR has been prepared for the Group as a whole and therefore gives greater emphasis to those matters that are significant to PageGroup plc and its subsidiary undertakings when viewed as a whole.

Page House

The Bourne Business Park

1 Dashwood Lang Road

Addlestone

Weybridge

Surrey

KT15 2QW

By order of the Board,

 
 Steve Ingham              Kelvin Stagg 
 Chief Executive Officer   Chief Financial Officer 
 
 6 August 2019             6 August 2019 
 

INDEPENT REVIEW REPORT TO PAGEGROUP PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2019 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flows and the related notes 1 to 12. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Ernst & Young LLP

London

6 August 2019

Condensed Consolidated Income Statement

For the six months ended 30 June 2019

 
                                                Six months ended       Year ended 
                                                30 June     30 June   31 December 
                                                   2019        2018          2018 
                                              Unaudited   Unaudited       Audited 
                                       Note     GBP'000     GBP'000       GBP'000 
 
 Revenue                                  3     820,515     751,580     1,549,941 
 Cost of sales                                (386,978)   (355,561)     (735,039) 
 Gross profit                             3     433,537     396,019       814,902 
 Administrative expenses                      (357,927)   (328,795)     (672,439) 
                                             ----------  ----------  ------------ 
 Operating profit                         3      75,610      67,224       142,463 
 Financial income                         4         208         182           631 
 Financial expenses                       4     (1,234)       (176)         (819) 
 Profit before tax                        3      74,584      67,230       142,275 
 Income tax expense                       5    (20,511)    (17,818)      (38,572) 
                                             ----------  ----------  ------------ 
 Profit for the period                           54,073      49,412       103,703 
                                             ----------  ----------  ------------ 
 
 Attributable to: 
 Owners of the parent                            54,073      49,412       103,703 
                                             ----------  ----------  ------------ 
 
 Earnings per share 
 Basic earnings per share (pence)         8        16.8        15.5          32.5 
 Diluted earnings per share (pence)       8        16.8        15.4          32.4 
                                             ----------  ----------  ------------ 
 

The above results all relate to continuing operations

Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2019

 
                                                  Six months ended       Year ended 
                                                  30 June     30 June   31 December 
                                                     2019        2018          2018 
                                                Unaudited   Unaudited       Audited 
                                                  GBP'000     GBP'000       GBP'000 
 
 Profit for the period                             54,073      49,412       103,703 
 
 Other comprehensive income/(loss) for 
  the period 
 Items that may subsequently be reclassified 
  to profit and loss: 
 
 Currency translation differences                   2,208       (525)         4,359 
 Gain/(Loss) on hedging instruments                   283       (612)         (988) 
 
 Total comprehensive income for the period         56,564      48,275       107,074 
                                               ----------  ----------  ------------ 
 
 Attributable to: 
 Owners of the parent                              56,564      48,275       107,074 
                                               ----------  ----------  ------------ 
 

Condensed Consolidated Balance Sheet

As at 30 June 2019

 
                                                            30 June     30 June   31 December 
                                                               2019        2018          2018 
                                                          Unaudited   Unaudited       Audited 
                                                   Note     GBP'000     GBP'000       GBP'000 
 Non-current assets 
 Property, plant and equipment                      9        35,505      31,868        35,564 
 Right-of-use assets                                        129,541           -             - 
 Intangible assets - Goodwill 
  and other intangible                                        2,047       1,681         2,019 
                            - Computer software              34,474      31,697        31,377 
 Deferred tax assets                                         21,045      17,100        17,487 
 Other receivables                                  10       14,439      11,680        12,746 
                                                            237,051      94,026        99,193 
                                                         ----------  ----------  ------------ 
 Current assets 
 Trade and other receivables                        10      378,767     335,033       349,111 
 Current tax receivable                                      18,138      15,617        17,206 
 Cash and cash equivalents                          12       81,704      87,048        97,673 
                                                            478,609     437,698       463,990 
                                                         ----------  ----------  ------------ 
 
 Total assets                                       3       715,660     531,724       563,183 
                                                         ----------  ----------  ------------ 
 
 Current liabilities 
 Trade and other payables                           11    (193,020)   (187,625)     (204,353) 
 Lease liabilities                                         (33,159)           -             - 
 Current tax payable                                       (18,549)    (21,695)      (20,145) 
                                                          (244,728)   (209,320)     (224,498) 
                                                         ----------  ----------  ------------ 
 
 Net current assets                                         233,881     228,378       239,492 
                                                         ----------  ----------  ------------ 
 
 Non-current liabilities 
 Other payables                                     11     (10,604)    (16,702)      (19,474) 
 Deferred tax liabilities                                   (3,892)     (1,339)         (630) 
 Lease liabilities                                        (105,331)           -             - 
                                                          (119,827)    (18,041)      (20,104) 
                                                         ----------  ----------  ------------ 
 
 
 Total liabilities                                  3     (364,555)   (227,361)     (244,602) 
                                                         ----------  ----------  ------------ 
 
 Net assets                                                 351,105     304,363       318,581 
                                                         ----------  ----------  ------------ 
 
 Capital and reserves 
 Called-up share capital                                      3,285       3,279         3,284 
 Share premium                                               99,206      96,676        98,502 
 Capital redemption reserve                                     932         932           932 
 Reserve for shares held in the 
  employee benefit trust                                   (41,225)    (53,427)      (50,673) 
 Currency translation reserve                                36,425      29,333        34,217 
 Retained earnings                                          252,482     227,570       232,319 
 Total equity                                               351,105     304,363       318,581 
                                                         ----------  ----------  ------------ 
 

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2019

 
                                                          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 2018          3,268    92,677          932     (58,931)        29,858    202,253    270,057 
                   ----------  --------  -----------  -----------  ------------  ---------  --------- 
 Currency 
  translation 
  differences               -         -            -            -         (525)          -      (525) 
                   ----------  --------  -----------  -----------  ------------  ---------  --------- 
 Net expense 
  recognised 
  directly 
  in equity                 -         -            -            -         (525)          -      (525) 
 Loss on hedging 
  instruments               -         -            -            -             -      (612)      (612) 
 Profit for the 
  six months 
  ended 
  30 June 2018              -         -            -            -             -     49,412     49,412 
 Total 
  comprehensive 
  (loss)/income 
  for the period            -         -            -            -         (525)     48,800     48,275 
                   ----------  --------  -----------  -----------  ------------  ---------  --------- 
 Purchase of 
  shares held in 
  employee 
  benefit trust             -         -            -      (9,898)             -               (9,898) 
 Exercise of 
  share plans              11     3,999            -            -             -     15,116     19,126 
 Reserve transfer 
  when shares 
  held 
  in the employee 
  benefit trust 
  vest                      -         -            -       15,402             -   (15,402)          - 
 Credit in 
  respect of 
  share 
  schemes                   -         -            -            -             -      3,684      3,684 
 Credit in 
  respect of tax 
  on 
  share schemes             -         -            -            -             -        552        552 
 Dividends                  -         -            -            -             -   (27,433)   (27,433) 
                           11     3,999            -        5,504             -   (23,483)   (13,969) 
                   ----------  --------  -----------  -----------  ------------  ---------  --------- 
 
 
 Balance at 30 
  June 2018             3,279    96,676          932     (53,427)        29,333    227,570    304,363 
                   ----------  --------  -----------  -----------  ------------  ---------  --------- 
 
 Currency 
  translation 
  differences               -         -            -            -         4,884          -      4,884 
                   ----------  --------  -----------  -----------  ------------  ---------  --------- 
 Net income 
  recognised 
  directly 
  in equity                 -         -            -            -         4,884          -      4,884 
 Loss on hedging 
  instruments               -         -            -            -             -      (376)      (376) 
 Profit for the 
  six months 
  ended 
  31 December 
  2018                      -         -            -            -             -     54,291     54,291 
 Total 
  comprehensive 
  income for 
  the period                -         -            -            -         4,884     53,915     58,799 
                   ----------  --------  -----------  -----------  ------------  ---------  --------- 
 Purchase of 
  shares held in 
  employee 
  benefit trust             -         -            -      (1,669)             -          -    (1,669) 
 Exercise of 
  share plans               5     1,826            -            -             -      5,956      7,787 
 Reserve transfer 
  when shares 
  held 
  in the employee 
  benefit trust 
  vest                      -         -            -        4,423             -    (4,423)          - 
 Credit in 
  respect of 
  share 
  schemes                   -         -            -            -             -      3,364      3,364 
 Debit in respect 
  of tax on 
  share schemes             -         -            -            -             -      (184)      (184) 
 Dividends                  -         -            -            -             -   (53,879)   (53,879) 
                            5     1,826            -        2,754             -   (49,166)   (44,581) 
                   ----------  --------  -----------  -----------  ------------  ---------  --------- 
 
 
 Balance at 31 December 2018          3,284   98,502   932   (50,673)   34,217    232,319    318,581 
                                     ------  -------  ----  ---------  -------  ---------  --------- 
 Loss on adoption of IFRS 16 
  - (note 2)                              -        -     -          -        -    (2,140)    (2,140) 
 Balance at 1 January 2019 
  (restated)                          3,284   98,502   932   (50,673)   34,217    230,179    316,441 
 Currency translation differences         -        -     -          -    2,208          -      2,208 
                                     ------  -------  ----  ---------  -------  ---------  --------- 
 Net income recognised directly 
  in equity                               -        -     -          -    2,208          -      2,208 
 Profit on hedging instruments            -        -     -          -        -        283        283 
 Profit for the six months ended 
  30 June 2019                            -        -     -          -        -     54,073     54,073 
 Total comprehensive income for 
  the period                              -        -     -          -    2,208     54,356     56,564 
                                     ------  -------  ----  ---------  -------  ---------  --------- 
 Exercise of share plans                  1      704     -          -        -      2,833      3,538 
 Reserve transfer when shares held 
  in the employee benefit trust 
  vest                                    -        -     -      9,448        -    (9,448)          - 
 Credit in respect of share 
  schemes                                 -        -     -          -        -      3,477      3,477 
 Credit in respect of tax on 
  share schemes                           -        -     -          -        -         63         63 
 Dividends                                -        -     -          -        -   (28,978)   (28,978) 
                                          1      704     -      9,448        -   (32,053)   (21,900) 
                                     ------  -------  ----  ---------  -------  ---------  --------- 
 
 Balance at 30 June 2019              3,285   99,206   932   (41,225)   36,425    252,482    351,105 
                                     ------  -------  ----  ---------  -------  ---------  --------- 
 

Condensed Consolidated Statement of Cash Flows

For the six months ended 30 June 2019

 
                                                     30 June     30 June   31 December 
                                                        2019        2018          2018 
                                                   Unaudited   Unaudited       Audited 
                                            Note     GBP'000     GBP'000       GBP'000 
 
 Profit before tax                                    74,584      67,230       142,275 
 Depreciation and amortisation charges                29,890       9,486        19,661 
 Loss on sale of property, plant 
 and equipment, and computer software                    100          39           281 
 Share scheme charges                                  3,477       3,684         7,043 
 Net finance costs/(income)                            1,026         (6)           181 
                                                  ----------  ----------  ------------ 
 Operating cash flow before changes 
  in working capital                                 109,077      80,433       169,441 
 Increase in receivables                            (32,968)    (38,688)      (49,278) 
 (Decrease)/increase in payables                    (12,864)     (1,255)        11,534 
                                                  ----------  ----------  ------------ 
 Cash generated from operations                       63,245      40,490       131,697 
 Income tax paid                                    (20,763)    (19,747)      (41,001) 
                                                  ----------  ----------  ------------ 
 Net cash from operating activities                   42,482      20,743        90,696 
                                                  ----------  ----------  ------------ 
 
 Cash flows from investing activities 
 Purchases of property, plant and 
  equipment                                          (5,326)     (6,841)      (15,668) 
 Purchases of intangible assets                      (8,431)     (4,022)       (9,944) 
 Proceeds from the sale of property, plant 
  and equipment, and computer software                   317          83         1,204 
 Interest received                                       208         182           631 
                                                  ----------  ----------  ------------ 
 Net cash used in investing activities              (13,232)    (10,598)      (23,777) 
                                                  ----------  ----------  ------------ 
 
 Cash flows from financing activities 
 Dividends paid                                     (28,978)    (27,433)      (81,312) 
 Interest paid                                         (172)       (174)         (818) 
 Lease liability principal repayment                (20,662)           -             - 
 Issue of own shares for the exercise 
  of options                                           3,538      19,126        26,913 
 Purchase of shares into the employee 
  benefit trust                                            -     (9,898)      (11,567) 
 Net cash used in financing activities              (46,274)    (18,379)      (66,784) 
                                                  ----------  ----------  ------------ 
 
 Net (decrease)/increase in cash 
  and cash equivalents                              (17,024)     (8,234)           135 
 Cash and cash equivalents at the 
  beginning of the period                             97,673      95,605        95,605 
 Exchange gain/(loss) on cash and 
  cash equivalents                                     1,055       (323)       (1,933) 
 Cash and cash equivalents at the 
  end of the period                          12       81,704      87,048        97,673 
                                                  ----------  ----------  ------------ 
 

Notes to the condensed set of interim results

For the six months ended 30 June 2019

   1.         General information 

The information for the year ended 31 December 2018 does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

The unaudited interim condensed consolidated financial statements of PageGroup plc and its subsidiaries (collectively, the Group) for the six months ended 30 June 2019 were authorised for issue in accordance with a resolution of the directors on 6 August 2019.

   2.         Accounting policies 

Basis of preparation

The unaudited interim condensed consolidated financial statements for the six months ended 30 June 2019 have been prepared in accordance with IAS 34 'Interim financial reporting' and with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority.

The unaudited interim condensed consolidated financial statements do not constitute the Group's statutory financial statements. The Group's most recent statutory financial statements, which comprise the annual report and audited financial statements for the year ended 31 December 2018, were approved by the directors on 5 March 2019. The interim condensed consolidated financial statements should be read in conjunction with the Annual Report and Accounts for the year ended 31 December 2018, which have been prepared in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union.

During the period the Group adopted 'IFRS 16 - Leases' with an explanation of the impact on these financial statements provided below. The Group also adopted IFRIC Interpretation 23 - Uncertainty over Income Tax Treatment. All other accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2018.

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 interim management report. The interim 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 half-yearly financial report.

New accounting standards, interpretations and amendments adopted by the Group

As at 1 January 2019 the Group adopted the new accounting standard IFRS 16 - Leases. The impact this has had on these financial statements is detailed below.

The Group also adopted IFRIC Interpretation 23 - Uncertainty over Income Tax Treatment. The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 Income Taxes. The adoption of IFRIC 23 did not have a material impact on the Group's results.

The Group applies judgement in identifying uncertainties over income tax treatments. Since the Group operates in a complex multinational environment, it assessed whether the Interpretation had an impact on its consolidated financial statements. The Company's and the subsidiaries' tax filings in different jurisdictions include deductions related to transfer pricing and the taxation authorities may challenge those tax treatments. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

a) Adoption of IFRS 16 Leases

IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. A lessee can choose to apply the standard using either a full retrospective approach or a modified retrospective approach.

The Group adopted IFRS 16 using the modified retrospective method of adoption, with the date of initial application of 1 January 2019. Under this method, the standard is applied retrospectively, with the cumulative effect of initially applying the standard recognised at the date of initial application. The Group elected to use the practical expedient on transition allowing the standard to be applied only to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 at the date of initial application. The Group also elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option ('short-term leases'), and lease contracts for which the underlying asset is of low value ('low-value assets').

The adoption under the Modified Retrospective approach is a combination of both the Modified (a) and Modified (b) method, depending on the specific lease. The application of the two methods is set out below:

-- Modified (a) method - an adjustment to reserves is made on transition. The lease liability is calculated on a retrospective basis and a discount rate at the date of initial application has to be used. A full restatement of comparatives is not necessary.

-- Modified (b) method - an adjustment to reserves is made on transition. The present value of the future lease payments is equal to the lease liability. A full restatement of comparatives is not necessary.

Impact on the Condensed Consolidated Statement of Financial Position (increase/(decrease)) as at 1 January 2019

 
                          GBP'000 
 
 Right-of-use assets      131,462 
 Prepayments              (2,204) 
 Total Assets             129,258 
                       ========== 
 
 Liabilities 
 Lease liabilities      (140,519) 
 Deferred income            9,121 
 Total Liabilities      (131,398) 
                       ========== 
 
 Equity                   (2,140) 
                       ========== 
 

b) Nature of the effect of adoption of IFRS 16

The Group recognised right-of-use assets and lease liabilities for those leases previously classified as operating leases, except for short-term leases and leases of low-value assets. The GBP131.5m right of use asset recognised on transition related to Property leases for offices rented (GBP115.0m), Motor Vehicles of (GBP15.9m) and Other Assets of (GBP0.6m). The right-of-use assets for most leases were recognised based on the carrying amount as if the standard had always been applied, apart from the use of the incremental borrowing rate at the date of initial application. The right-of-use assets were recognised based on the amount equal to the lease liabilities, adjusted for any related prepaid and accrued lease payments previously recognised. Lease liabilities were recognised based on the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application.

c) Amounts recognised in the Condensed Consolidated Statement of Financial Position and Condensed Consolidated Income Statement

Set out below, are the carrying amounts of the Group's right-of-use assets and lease liabilities and the movements during the period:

 
 Condensed Consolidated Income Statement                   GBP'000 
 
 Depreciation expense (included in Administrative 
  expenses)                                               (19,561) 
 Rental expenses (included in Administrative expenses)      20,386 
 Operating profit                                              825 
 
 Finance costs                                             (1,062) 
 
 Profit before tax                                           (237) 
                                                         ========= 
 

Condensed Consolidated Statement of Financial Position

 
                                         Right-of-use Assets                   Lease Liabilities 
                         Property   Motor Vehicles   Other Assets      Total               Total 
                          GBP'000          GBP'000        GBP'000    GBP'000             GBP'000 
 
 As at 1 January 2019     115,031           15,870            561    131,462           (140,519) 
 Additions                 13,844            3,166            717     17,727            (17,658) 
 Disposals                      -             (67)           (20)       (87)                  87 
 Depreciation expense    (14,289)          (4,985)          (287)   (19,561)                   - 
 Interest expense               -                -              -          -             (1,062) 
 Payments                       -                -              -          -              20,662 
 As at 30 June 2019       114,586           13,984            971    129,541           (138,490) 
                        =========  ===============  =============  =========  ================== 
 

d) Summary of new accounting policies

Set out below are the new accounting policies of the Group upon adoption of IFRS 16, which have been applied from the date of initial application:

   --      Right-of-use assets 

The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.

   --      Lease liabilities 

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

   --      Short-term leases and leases of low-value assets 

The Group applies the short-term lease recognition exemption to its short-term leases of property, motor vehicles and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value (i.e., below $5,000 or c. GBP4,000). Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a straight-line basis over the lease term.

   --      Significant judgement in determining the lease term of contracts with renewal options 

The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.

The Group has the option, under some of its leases, to lease the assets for additional terms of one to ten years. The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew (e.g., a change in business strategy).

   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.

   (a)        Revenue, gross profit and operating profit by reportable segment 
 
                                               Revenue                          Gross Profit 
                                  ---------------------------------  --------------------------------- 
                                                                                                  Year 
                                    Six months ended     Year ended    Six months ended          ended 
                                    30 June   30 June   31 December    30 June   30 June     31 December 
                                       2019      2018          2018       2019      2018            2018 
                                    GBP'000   GBP'000       GBP'000    GBP'000   GBP'000         GBP'000 
 
 EMEA                               427,657   389,685       797,427    213,145   194,976         394,337 
 
 United Kingdom                     157,413   155,027       313,525     69,415    69,657         138,392 
 
                   Australia and 
 Asia Pacific        New Zealand     54,930    55,273       112,930     20,128    19,407          40,592 
                            Asia     80,059    70,336       153,794     61,669    54,676         120,566 
                                  ---------  --------  ------------  ---------  --------  -------------- 
                           Total    134,989   125,609       266,724     81,797    74,083         161,158 
 
 Americas                           100,456    81,259       172,265     69,180    57,303         121,015 
 
                                    820,515   751,580     1,549,941    433,537   396,019         814,902 
                                  ---------  --------  ------------  ---------  --------  -------------- 
 
 
 
                                                                              Operating Profit 
                                                                     --------------------------------- 
 
 
                                                                                                  Year 
                                                                       Six months ended          ended 
                                                                       30 June   30 June     31 December 
                                                                          2019      2018            2018 
                                                                       GBP'000   GBP'000         GBP'000 
 
 EMEA                                                                   45,594    40,945          85,586 
 
 United Kingdom                                                         12,497    10,453          13,392 
 
                   Australia and 
 Asia Pacific        New Zealand                                         1,499     1,467           4,291 
                            Asia                                         7,340     7,515          22,474 
                                                                     ---------  --------  -------------- 
                           Total                                         8,839     8,982          26,765 
 
 Americas                                                                8,680     6,844          16,720 
 
 Operating profit                                                       75,610    67,224         142,463 
 Financial (expense)/income                                            (1,026)         6           (188) 
 Profit before tax                                                      74,584    67,230         142,275 
                                                                     ---------  --------  -------------- 
 

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, right-of-use assets, goodwill and other intangibles.

   (b)        Segment assets, liabilities and non-current assets by reportable segment 
 
                                             Total Assets                    Total Liabilities 
                                  ---------------------------------  --------------------------------- 
                                                               Year                               Year 
                                     Six months ended         ended     Six months ended         ended 
                                                   30                                 30 
                                    30 June      June   31 December    30 June      June     31 December 
                                       2019      2018          2018       2019      2018            2018 
                                    GBP'000   GBP'000       GBP'000    GBP'000   GBP'000         GBP'000 
 
 EMEA                               317,334   244,044       246,687    196,619   124,352         131,948 
 
 United Kingdom                     146,316   112,813       121,058     51,210    35,335          40,398 
 
 Asia          Australia and New 
 Pacific                 Zealand     34,928    24,646        29,719     14,990    10,432          11,059 
                            Asia     98,065    72,152        85,501     29,972    14,072          18,744 
                                  ---------  --------  ------------  ---------  --------  -------------- 
                           Total    132,993    96,798       115,220     44,962    24,504          29,803 
 
 Americas                           100,879    62,452        63,012     53,215    21,475          22,308 
                                  ---------  --------  ------------  ---------  --------  -------------- 
 Segment assets/liabilities         697,522   516,107       545,977    346,006   205,666         224,457 
 
 Income 
  tax                                18,138    15,617        17,206     18,549    21,695          20,145 
 
                                    715,660   531,724       563,183    364,555   227,361         244,602 
                                  ---------  --------  ------------  ---------  --------  -------------- 
 
 
 
                                     Property, Plant & Equipment             Intangible Assets 
                                  ---------------------------------  --------------------------------- 
                                                               Year                               Year 
                                     Six months ended         ended     Six months ended         ended 
                                                   30                                 30 
                                    30 June      June   31 December    30 June      June     31 December 
                                       2019      2018          2018       2019      2018            2018 
                                    GBP'000   GBP'000       GBP'000    GBP'000   GBP'000         GBP'000 
 
 EMEA                                14,147    12,489        13,654      2,920     3,316           3,171 
 
 United Kingdom                       6,136     6,466         6,254     32,957    29,786          29,554 
 
 Asia          Australia and New 
 Pacific                 Zealand      1,675     1,323         1,557        243         1             274 
                            Asia      5,088     5,250         5,604        257        26             207 
                                  ---------  --------  ------------  ---------  --------  -------------- 
                           Total      6,763     6,573         7,161        500        27             481 
 
 Americas                             8,459     6,340         8,495        144       249             190 
                                  ---------  --------  ------------  ---------  --------  -------------- 
                                     35,505    31,868        35,564     36,521    33,378          33,396 
                                  ---------  --------  ------------  ---------  --------  -------------- 
 

The below tables are the right-of-use assets and corresponding lease liabilities recognised following the adoption of IFRS 16 - Leases accounting standard:-

 
                                   Right-of-use 
                                      Assets      Lease Liabilities 
                                  -------------  ------------------ 
 
                                        30 June             30 June 
                                           2019                2019 
                                        GBP'000             GBP'000 
 
 EMEA                                    73,940              77,019 
 
 United Kingdom                          22,130              24,221 
 
                   Australia and 
 Asia Pacific        New Zealand          3,742               4,093 
                            Asia         11,087              11,664 
                                  -------------  ------------------ 
                           Total         14,829              15,757 
 
 Americas                                18,642              21,493 
                                  -------------  ------------------ 
                                        129,541             138,490 
                                  -------------  ------------------ 
 

The below analyses in notes (c) revenue and gross profit by discipline (being the professions of candidates placed), (d) revenue and gross profit generated from permanent and temporary placements and (e) revenue and gross profit by strategic market have been included as additional disclosure over and above the requirements of IFRS 8 "Operating Segments".

   (c)        Revenue and gross profit by discipline 
 
                                               Revenue                          Gross Profit 
                                  ---------------------------------  --------------------------------- 
                                    Six months ended     Year ended    Six months ended     Year ended 
                                    30 June   30 June   31 December    30 June   30 June   31 December 
                                       2019      2018          2018       2019      2018          2018 
                                    GBP'000   GBP'000       GBP'000    GBP'000   GBP'000       GBP'000 
 
 
 Accounting and Financial 
  Services                          327,707   294,679       609,131    150,428   136,711       282,653 
 
 Legal, Technology, 
  HR, Secretarial and 
  Other                             217,130   193,604       402,321    107,373    94,448       196,773 
 
 Engineering, Property 
 & Construction, Procurement 
 & Supply Chain                     182,102   166,932       345,654    105,355    94,746       194,562 
 
 Marketing, Sales and 
  Retail                             93,576    96,365       192,835     70,381    70,114       140,914 
 
                                    820,515   751,580     1,549,941    433,537   396,019       814,902 
                                  ---------  --------  ------------  ---------  --------  ------------ 
 
   (d)        Revenue and gross profit generated from permanent and temporary placements 
 
                            Revenue                          Gross Profit 
               ---------------------------------  --------------------------------- 
                 Six months ended     Year ended    Six months ended     Year ended 
                 30 June   30 June   31 December    30 June   30 June   31 December 
                    2019      2018          2018       2019      2018          2018 
                 GBP'000   GBP'000       GBP'000    GBP'000   GBP'000       GBP'000 
 
 Permanent       333,978   308,948       629,136    330,650   304,202       621,746 
 
 Temporary       486,537   442,632       920,805    102,887    91,817       193,156 
 
                 820,515   751,580     1,549,941    433,537   396,019       814,902 
               ---------  --------  ------------  ---------  --------  ------------ 
 
   (e)        Revenue and gross profit by strategic market 
 
                                        Revenue                          Gross Profit 
                           ---------------------------------  --------------------------------- 
                             Six months ended     Year ended    Six months ended     Year ended 
                             30 June   30 June   31 December    30 June   30 June   31 December 
                                2019      2018          2018       2019      2018          2018 
                             GBP'000   GBP'000       GBP'000    GBP'000   GBP'000       GBP'000 
 
 Large, Proven markets       481,814   459,324       935,800    218,724   208,869       419,102 
 
 Large, High Potential 
 markets                     233,552   194,396       414,245    148,062   126,266       270,311 
 
 Small and Medium, 
  High Margin markets        105,149    97,860       199,896     66,751    60,884       125,489 
 
                             820,515   751,580     1,549,941    433,537   396,019       814,902 
                           ---------  --------  ------------  ---------  --------  ------------ 
 
   4.         Financial income / (expenses) 
 
                                                    Six months ended     Year ended 
                                                    30 June   30 June   31 December 
                                                       2019      2018          2018 
                                                    GBP'000   GBP'000       GBP'000 
 Financial income 
 Bank interest receivable                               208       182           631 
                                                  ---------  --------  ------------ 
 
 Financial expenses 
 Bank interest payable                                (172)     (176)         (598) 
 Interest on discounting of French construction 
  participation tax                                       -         -         (221) 
 Interest on lease liabilities                      (1,062)         -             - 
                                                    (1,234)     (176)         (819) 
                                                  ---------  --------  ------------ 
 
   5.         Taxation 

Taxation for the six month period is charged at 27.5% (six months ended 30 June 2018: 26.5%; year ended 31 December 2018: 27.1%). It is based on the full year forecast tax rate, allowing for prior year items arising from tax returns in the half year to 30 June.

   6.         Dividends 
 
                                                    Six months ended     Year ended 
                                                    30 June   30 June   31 December 
                                                       2019      2018          2018 
                                                    GBP'000   GBP'000       GBP'000 
 Amounts recognised as distributions to 
  equity holders in the year: 
 Final dividend for the year ended 31 December 
  2018 of 9.00p per ordinary share (2017: 
  8.60p)                                             28,978    27,433        27,433 
 Interim dividend for the year ended 30 
  June 2018 of 4.10p per ordinary share 
  (2017: 3.90p)                                           -         -        13,117 
 Special dividend for the year ended 31 
  December 2018 of 12.73p per ordinary share 
  (2017: 12.73p)                                          -         -        40,762 
                                                     28,978    27,433        81,312 
                                                  ---------  --------  ------------ 
 
 Amounts proposed as distributions to equity 
  holders in the year: 
 
 Proposed interim dividend for the period 
  ended 30 June 2019 of 4.30p per ordinary 
  share (2018: 4.10p)                                13,853    13,078             - 
                                                  ---------  --------  ------------ 
 
 Proposed special dividend for the year 
  ended 31 December 2019 of 12.73p per ordinary 
  share (2018: 12.73p)                               41,011    40,606             - 
                                                  ---------  --------  ------------ 
 
 Proposed final dividend for the year ended 
  31 December 2018 of 9.00p per ordinary 
  share                                                   -         -        29,171 
                                                  ---------  --------  ------------ 
 

The proposed interim and special dividends have not been approved by the Board at 30 June 2019 and therefore have not been included as a liability. The comparative interim and special dividends at 30 June 2018 were also not recognised as a liability in the prior period.

The proposed interim dividend of 4.30p (2018: 4.10p) per ordinary share and special dividend of 12.73p (2018: 12.73p) per ordinary share will be paid on 9 October 2019 to shareholders on the register at the close of business on 6 September 2019.

   7.         Share-based payments 

In accordance with IFRS 2 "Share-based Payments", a charge of GBP4.1m has been recognised for share options and other share-based payment arrangements (including social charges) (30 June 2018: GBP4.8m, 31 December 2018: GBP8.4m).

   8.         Earnings per ordinary share 

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

 
                                               Six months ended     Year ended 
                                               30 June   30 June   31 December 
 Earnings                                         2019      2018          2018 
 
 Earnings for basic and diluted earnings 
  per share (GBP'000)                           54,073    49,412       103,703 
                                             ---------  --------  ------------ 
 
 Number of shares 
 Weighted average number of shares used 
  for basic earnings per share ('000)          321,031   317,795       318,877 
 Dilution effect of share plans ('000)             638     2,227         1,627 
 Diluted weighted average number of shares 
  used for diluted earnings per share 
  ('000)                                       321,669   320,022       320,504 
                                             ---------  --------  ------------ 
 
 Basic earnings per share (pence)                 16.8      15.5          32.5 
 Diluted earnings per share (pence)               16.8      15.4          32.4 
 

The above results all relate to continuing operations.

   9.         Property, plant and equipment 

Acquisitions and Disposals

During the period ended 30 June 2019 the Group acquired property, plant and equipment with a cost of GBP5.3m (30 June 2018: GBP6.8m, 31 December 2018: GBP15.7m).

Right-of-use assets of GBP131.5m were recognised as at 1 January 2019 following the adoption of the new IFRS 16 - Lease accounting standard. As at 30 June 2019 this had marginally decreased to GBP129.5m due to depreciation of these assets, partially offset by new leases taken out in the period.

   10.        Trade and other receivables 
 
                                               Six months ended     Year ended 
                                               30 June   30 June   31 December 
                                                  2019      2018          2018 
                                               GBP'000   GBP'000       GBP'000 
 Current 
 Trade receivables                             301,114   277,016       297,380 
 Less allowance for expected credit losses 
  and revenue reversals                       (10,596)   (7,923)       (9,174) 
                                             ---------  --------  ------------ 
 Net trade receivables                         290,518   269,093       288,206 
 Other receivables                               7,978     8,579         3,814 
 Accrued income                                 62,108    40,612        44,430 
 Prepayments                                    18,163    16,749        12,661 
                                               378,767   335,033       349,111 
                                             ---------  --------  ------------ 
 Non-current 
 Other Receivables                              14,439    11,680        12,746 
                                             ---------  --------  ------------ 
 
   11.        Trade and other payables 
 
                                   Six months ended     Year ended 
                                   30 June   30 June   31 December 
                                      2019      2018          2018 
                                   GBP'000   GBP'000       GBP'000 
 Current 
 Trade payables                      3,135     2,571         6,594 
 Other tax and social security      63,101    50,142        58,186 
 Lease liabilities                  33,159         -             - 
 Other payables                     31,443    28,125        26,870 
 Accruals                           94,919   104,966       111,040 
 Deferred income                       422     1,821         1,663 
                                   226,179   187,625       204,353 
                                 ---------  --------  ------------ 
 Non-current 
 Deferred income                     9,149    15,173        18,453 
 Other tax and social security       1,455     1,529         1,021 
 Lease liabilities                 105,331         -             - 
                                   115,935    16,702        19,474 
                                 ---------  --------  ------------ 
 
   12.        Cash and cash equivalents 
 
                                                 Six months ended     Year ended 
                                                 30 June   30 June   31 December 
                                                    2019      2018          2018 
                                                 GBP'000   GBP'000       GBP'000 
 
  Cash at bank and in hand                        81,704    86,543        97,626 
  Short-term deposits                                  -       505            47 
                                               ---------  --------  ------------ 
  Cash and cash equivalents                       81,704    87,048        97,673 
  Cash and cash equivalents in the statement 
   of cash flows                                  81,704    87,048        97,673 
                                               ---------  --------  ------------ 
 

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 receivables in order to advance cash. The Group also has a Revolving Credit Facility with BBVA, with a total drawable amount of GBP30m. Neither of these facilities were in use as at 30 June. These facilities are only used on an ad hoc basis to fund any major Group GBP cash outflows.

RESPONSIBILITY STATEMENT

The Directors confirm that to the best of their knowledge:-

a) the condensed set of interim financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting"

b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

On behalf of the Board

 
 S Ingham                  K Stagg 
 Chief Executive Officer   Chief Financial Officer 
 

6 August 2019

Copies of the condensed interim financial statements are now available and can be downloaded from the Company's website

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

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

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