LONDON PARIS SYDNEY NEW YORK MICHAEL PAGE INTERNATIONAL INTERIM RESULTS 2007 August 2007
Agenda LONDON Financial Results... 4-10 Segmental Analysis... 11-23 How we are achieving these results...24-32 Current Trading...33-35 Michael Page International Overview...36-40 Our Strategy...41-53 Appendix... 54-61 2
Overview Interim Results 2007 HONG KONG Record gross profits Group gross profit increased by 36.0% to 226.5m (2006: 166.6m) Operating profit increased by 54.9% to 69.8m (2006: 45.1m) Conversion rate* 30.8% (2006: 27.1%) 58.8m of cash generated from operations (2006: 26.7m) Basic earnings per share up 57.1% to 14.3p (2006: 9.1p) Interim dividend increased by 33.3% to 2.4p per share (2006: 1.8p) 8.36m shares repurchased during first half at an average price of 534.5p per share Staff numbers up 33.8% to 4,323 (2006: 3,230) *Operating profit over gross profit 3
LONDON PARIS SYDNEY NEW YORK FINANCIAL RESULTS
Profit and Loss Interim Results 2007 MADRID 2007 m 2006 m Change Turnover 395.8 312.0 26.8% Gross profit 226.5 166.6 36.0% Operating profit 69.8 45.1 54.9% Net interest (0.6) 0.1 Profit before tax 69.2 45.2 53.1% Conversion rate 30.8% 27.1% Conversion rate before share based charges 32.7% 30.2% 5
Taxation, earnings per share and dividends MILAN 2007 2006 Effective tax rate on profits 31.5% 32.5% Earnings per share Basic 14.3p 9.1p +57.1% Diluted 14.0p 8.8p +59.1% Weighted average number of shares Full year estimate Half year Half year Basic (000 s) 328,986 330,317 336,276 Diluted (000 s) 336,030 337,361 345,115 Dividend Interim - per share 2.4p 1.8p +33.3% Payable on 12 October 2007 6
Share Repurchases and Share Options LONDON Share Repurchases Repurchased and cancelled 8.36m shares (2.5% of total share capital) in H1 Cost of repurchases 45.0m Average repurchase price 534.5p per share Range 489.6p to 568.7p Share Options Options exercised over 5.0m shares (1.5%) in H1 with proceeds of 7.7m 3.8m options (1.1%) vested but not exercised Further 8.2m options (2.5%) outstanding (details in Appendix) 7
Cash Flow PARIS 2007 m 2006 m Operating profit 69.2 45.1 Depreciation/amortisation/share scheme charges 7.2 5.4 Increase in receivables (30.6) (28.4) Increase in payables 13.1 4.7 Decrease in provisions (0.1) (0.2) Net cash inflow from operating activities 58.8 26.6 Net interest (paid)/received (0.6) 0.1 Taxation paid (13.2) (10.5) Net capital expenditure (5.4) (3.0) 39.6 13.2 Dividends paid (14.0) (12.1) Issue of own shares for share options 7.7 33.2 Purchase of own shares (45.0) (39.7) Net cash outflow (11.7) (5.4) 8
Balance Sheet SAO PAULO 30 June 2007 m 31 December 2006 m Intangible assets - Goodwill 1.5 1.5 - Computer software 2.0 2.1 Tangible assets 23.6 21.6 27.1 25.2 Trade and other receivables 176.5 145.7 Trade and other payables (97.9) (84.7) 78.6 61.0 Current and deferred taxes (8.1) (2.0) Net debt (15.4) (3.6) Provisions (0.1) (0.2) Net assets 82.1 80.4 9
Perm/Temp analysis SINGAPORE Turnover 2007 m 2006 m Change 2007 % share 2006 % share Permanent 186.2 132.4 40.6% 47.1% 42.4% Temporary 209.6 179.6 16.7% 52.9% 57.6% 395.8 312.0 26.8% Gross profit Permanent 176.1 124.9 41.0% 77.7% 75.0% Temporary 50.4 41.7 20.9% 22.3% 25.0% 226.5 166.6 36.0% Gross margin Group 57.2% 53.4% Permanent 94.6% 94.3% Temporary 24.1% 23.2% 10
LONDON PARIS SYDNEY NEW YORK SEGMENTAL ANALYSIS
Discipline analysis of gross profit LONDON H1 2006 H1 2007 GP: 166.6m GP: 226.5m 9.0% 11.1% 12.9% 14.8% 19.6% 58.5% 36.0% Growth 55.3% 18.8% Growth Finance & Accounting +28.7% Marketing, Sales & Retail +29.8% Legal, HR, Technology, Secretarial and Other Engineering, Property & Construction, Procurement & Supply Chain +56.0% +67.6% 12
Geographical analysis of gross profit ATLANTA H1 2006 H1 2007 GP: 166.6m GP: 226.5m 5.8% 7.5% 12.9% 12.0% 40.6% 45.6% 36.0% Growth 35.7% 39.9% Growth United Kingdom +21.0% EMEA +52.5% Asia Pacific +25.2% Americas +76.1% 13
United Kingdom LONDON H1 2006 H1 2007 Gross Profit: 76.0m Gross Profit: 92.0m Operating Profit: 19.6m +46.2% Operating Profit: 28.6m Headcount: 1,387 +16.4% Headcount: 1,615 15% 5% Gross profit 16% 6% 4% 55% 21.0% Growth 4% 52% 21% Growth Finance & Accounting +14% Marketing, Sales & Retail +21% Legal, HR, Technology, Secretarial and Other Engineering, Property & Construction, Procurement & Supply Chain +29% +52% Scotland +49% 22% 14
United Kingdom Overview MANCHESTER Banking and Retail improved on 2006 growth Similar pattern of growth in the other disciplines to 2006 Consistent rate of growth throughout first half Conversion rate* increased to 34% (31% in 2006) MP opened 2 new offices in Leicester and London s West End AA opened in Leicester and Swindon *Before share based charges 15
EMEA ROTTERDAM H1 2006 H1 2007 Gross Profit: 59.3m Gross Profit: 90.4m Operating Profit: 16.1m +76.5% Operating Profit: 28.5m Headcount: 1,181 +51.1% Headcount: 1,785 5% 7% 18% Gross profit 18% 33% 11% 40% 52.5% Growth 11% 8% 7% *Growth rates are based on local currency Growth* France +29% Holland +62% Germany +82% Spain +74% Italy +51% Switzerland +107% Belgium, South Africa, UAE, Sweden, Poland, Portugal, Russia, Ireland, Luxembourg +95% 13% 12% 8% 9% 16
EMEA Overview - France MILAN Gradual improvement in growth rate throughout H1 Now 33% of region (40% H1 2006) Changes in Borloo Law created growth opportunity for perm in Page Personnel Headcount 589 (+31%) New office in Bordeaux 17
EMEA Overview - Rest of EMEA JOHANNESBURG High growth rates continue as largest competitor (HR depts.) outsource Strong brand office network first mover consistent business model creating very significant advantages Italy improved growth rate on 2006 (Europe s 4th largest economy) New offices in Luxembourg, Valencia and Hamburg Several larger replacement offices in existing locations to accomodate headcount growth Headcount 1,196 (+63% on H1 2006) New countries Ireland, UAE, South Africa, Luxembourg, Russia ahead of plan 18
Asia Pacific PARRAMATTA H1 2006 H1 2007 Gross Profit: 21.6m Gross Profit: 27.0m Operating Profit: 7.8m +26.4% Operating Profit: 9.8m Headcount: 390 +28.5% Headcount: 501 Gross profit 40% 60% 25.2% Growth 43% 57% Growth* Australia +20% Rest of Asia Pacific +49% *Growth rates are based on local currency 19
Asia Pacific Overview TOKYO Australia restructure completed and having beneficial impact on gross profit growth rate (+20%) Newest disciplines (HR/Legal/Engineering/Supply Chain) growth +45% Investing heavily in new headcount, making up for lost momentum (+30%) Rest of Asia seeing strong growth Candidate shortages in rest of Asia resulting in highest conversion rate before share based charges of 40.7% with high salaries and fee rates Newest office Shatin (New Territories) ahead of plan 20
The Americas SAO PAULO H1 2006 H1 2007 Gross Profit: 9.7m Gross Profit: 17.1m Operating Profit: 1.6m +83.4% Operating Profit: 2.9m Headcount: 272 +55.1% Headcount: 422 Gross profit 76.1% Growth 41% 59% 42% 58% Growth* North America +90% Latin America +85% *Growth rates are based on local currency 21
The Americas Overview TORONTO North America Now have presence in 3 regions in US East, Mid West, South East has 6 offices with addition of Hartford (Connecticut) in H1 Rollout of Sales, Marketing, HR continuing across network Midwest (Chicago) now established. New replacement office in H2 for increasing headcount South launched in H1 in Atlanta Headcount up (48%) on the back of significant senior management investment (transfers from UK/Europe) 22
The Americas Overview MEXICO Latin America Brazil s growth continues, now 8 disciplines Launched Page Personnel in H1 Headcount grown significantly +64% to 176 Newest office (Campinas) performing ahead of expectations Mexico ahead of plan and profitable Sales/Marketing discipline launched in H1 23
LONDON PARIS SYDNEY NEW YORK how WE are achieving these results
Business Model WEYBRIDGE Creates strong and consistent international brands Profit focus throughout business creates highest margins Promotion from within, long term careers ensures highest candidate/client customer service maximises repeat business Team rewards maximises internal candidate/client referrals Team profit centres enable rapid but safe headcount growth 25
Business Strategy LEICESTER Organic growth leads to one brand, one platform Consistent delivery, consistent culture Home grown management maximises reporting efficiencies, consistency, integrity, ownership Creates depth of Michael Page experience in management and our ability to rollout new disciplines, offices, countries Means we have a greater understanding of individual s stengths, weaknesses, capabilities 26
Scope for Growth - Headcount LONDON SYDNEY Ratio Fee earners: Non Fee earners 1999 59:41 2000 58:42 2001 57:43 2002 58:42 2003 60:40 2004 64:36 2005 71:29 2006 74:26 H1 2007 75:25 27
Scope for Growth - Conversion LONDON STOCKHOLM H1 conversion rates before share based charges 2007 2006 UK 34.0 30.9 EMEA 32.5 28.5 Asia Pac 37.5 37.3 Americas 19.5 18.7 28
Scope for Growth Number of UK offices per discipline 40 Added during 2007 Added during 2006 NEW YORK 37 Very competitive market but very fragmented (circa ten thousand agencies) 35 Very few strong national brands apart from MP 30 31 Increasing compliance/candidate shortages driving business towards national/international multi-disciplined agencies No MP discipline has more than 10% market share Number of offices 20 22 21 10 3 9 8 6 2 1 1 9 9 8 8 8 8 6 7 8 5 5 4 2 1 Accountancy Additions Page Personnel Finance Legal Secretarial Financial Services Marketing Sales Retail Human Resources Engineering & Manufacturing Procurement & Supply Chain Property & Construction Technology 29
Scope for Growth Number of offices in each country 50 Added during 2007 Added during 2006 STOCKHOLM 48 46 Ratio of offices to GDP when compared to what we have in UK presents huge scope 40 Many markets under developed e.g. Europe, Latin America, 80-90% of recruitment not outsourced Number of offices 30 20 28 23 Candidate shortages, complexity of on-line sourcing, harnessing international candidate supply plays to MP s strengths, HR departments weaknesses Strength of brand and management continue to grow increasing the ease with which offices can be opened 10 UK France 9 8 7 Spain The Netherlands 8 8 6 7 6 Australia USA 5 4 Germany 4 Italy 4 3 2 Switzerland 3 2 China 3 2 2 1 Brazil Belgium Sweden 1 1 1 1 1 1 1 1 1 1 1 1 Portugal Poland Canada Japan Singapore Mexico Russia Ireland South Africa UAE Luxembourg 30
Scope for Growth Number of disciplines in each country Added during 2007 FRANKFURT 15 13 14 13 Offices already established Brand already known Added during 2006 12 12 MP management already in situ Number of disciplines 10 5 11 9 11 10 8 9 8 5 10 6 5 9 7 5 7 8 6 8 6 Clients have similar issues across disciplines often prefer fewer suppliers Consistent pricing, similar salaries 7 5 5 7 5 6 5 4 4 4 4 4 3 3 3 3 3 3 3 2 2 2 2 2 2 2 2 2 1 1 UK France Spain The Netherlands Australia USA Germany Italy Switzerland China Brazil Belgium Sweden Portugal Poland Canada Japan Singapore Mexico Russia Ireland South Africa UAE Luxembourg 31
Market Opportunity ROTTERDAM Very few global, white-collar, multi-disciplined brands Many markets under-developed or very fragmented/poor quality Many other markets where MP has no presence e.g. India, other countries in Eastern Europe, other Asia Countries, West Coast of US, other countries in Latin America Global white-collar candidate shortages within professional disciplines Increasing international flow/movement of professional candidates and increasing drive from clients to source internationally 32
LONDON PARIS SYDNEY NEW YORK CURRENT TRADING
Group quarterly gross profit trend Q1 2001 to Q2 2007 120 121.0 LONDON SINGAPORE 105.5 100 93.1 87.4 89.1 80 79.2 Gross Profit ( m) 60 40 69.6 66.9 58.7 49.9 49.5 51.4 47.8 43.9 42.8 45.0 45.0 45.7 48.1 52.3 53.5 56.7 59.9 68.3 69.2 70.2 20 Q1 Q2 Q3 2001 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2002 2003 2004 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2005 2006 Q4 Q1 Q2 2007 34
Current trading TORONTO Similar pattern of growth and activity levels in all regions Invest in our businesses for future growth Discipline roll-outs continue Several offices are being replaced to cope with increasing headcount New offices planned for H2 Canary Wharf, Aberdeen, Paramus NJ 2007 year end headcount estimated at 4,800 2007 pre bonus cost base of approximately 275m (inclusive of share based charges) Q3 trading update will be issued on 5 October 2007 35
LONDON PARIS SYDNEY NEW YORK MICHAEL PAGE INTERNATIONAL OVERVIEW
Michael Page International Overview AMSTERDAM Specialist recruitment company focused on placing white-collar professionals into permanent, contract and temporary positions: - Gross profit ratio 78:22 Perm/Temp Specialisms: Finance & Accounting, Banking, Legal, Marketing, Sales, Technology, Engineering & Manufacturing, Procurement & Supply Chain, Property & Construction, Human Resources, Retail, Secretarial, Hotel and Catering and Healthcare 141 offices in 24 countries More than 4,300 employees: 37% UK, 41% EMEA, 12% Asia Pacific, 10% Americas Strong and diversified client base >90% of FTSE 100 and FTSE Eurotop 300 Extensive global database of more than a million potentially placeable candidates 37
Positioning BRUSSELS Executive Search Korn Ferry Egon Zehnder Spencer Stuart Whitehead Mann Russell Reynolds VALUE ADDED SALARY AND REMUNERATION Qualified Professional Recruitment Clerical Staffing (Professional) Harvey Nash OPD SThree Robert Walters Mercuri Urval Hudson Hays Reed Robert Half HIGHER FEES Generalist Staffing (Other) Adecco Manpower Randstad Kelly 38
Power of the Brand FRANKFURT The brand drives organic growth Attracts the best clients, candidates and employees Facilitates organic expansion in existing markets and entry into new markets Leading advertiser in the Financial Times (UK), South China Morning Post, Straits Times (Singapore), The Melbourne Age, The Sydney Morning Herald, The Australian Financial Review, FT (Deutschland), Süddeutsche Zeitung, FAZ (Deutschland), Les Echos, Le Figaro and Intermediare Superbrands - Voted one of Britain s strongest B2B brands for the last 7 consecutive years in the UK and the last 3 years in France Listed as one of The Sunday Times Best Companies to Work For in 2005, 2006 and 2007 Voted as one of the Best Places to work in Connecticut by the Hartford Business Journal Voted one of the Best Places to Work in Massachusetts by the Boston Business Journal Ranked No.1 Executive Recruiting Firm by Crains in 2007 (in New York) 39
Power of the Brand Online Globally per month: GENEVA 13 million Page Views 1.6 million Visitors 300,000 Job Apps/General CV Submissions August 2007 40
LONDON PARIS SYDNEY NEW YORK OUR STRATEGY
Michael Page International Strategy LONDON To organically grow existing and new teams, offices, disciplines and countries with a consistent team and meritocratic culture Teams Countries Culture Offices Disciplines 42
Strategy - Organic PHILADELPHIA Ensures consistency around the World: Culture Customer Service Brand Values Reputation Quality Systems and software Avoids the risks associated with acquisitions: Lose key people Overlap Dilute reputation Brand confusion and dilution 43
Strategy - Existing GENEVA Existing teams every team adds one consultant that s 800 new fee earners Existing disciplines more focus, more knowledge, more value Existing offices increases margin, infrastructure established, improves referrals, culture Existing countries established client relationships, brand recognition, media discounts, momentum 44
Strategy - New SHANGHAI Always with experienced and proven Michael Page management New teams add value to clients and candidates as we offer more specialist knowledge New disciplines creates new profit streams adding value to existing clients. Builds awareness in overall white collar population New offices creates focus on new cities and regions New countries add value to International Clients MP benefits from increasing international flow of candidates. Many new countries have less/no established competition. Retains internationally mobile staff Invigorates and retains staff and entrepreneurs 45
Strategy - Culture Entrepreneurial MILAN Staff motivated by long term careers Scope for promotion Scope for international placement Organic growth maintains entrepreneurial culture Meritocratic The fittest get rewarded the most Retains the best performers Motivates for over achievement Avoids issues of discrimination Team-based Teams stronger than individuals Supporting/training colleagues Business referrals Profit share, not individual commission 46
30 years of organic growth LISBON 1986 1996 2006 Turnover m* 18.8 142.1 649.1 Operating Profit m* 2.3 28.9 97.4 Average number of staff 262 737 3,305 *as reported. 47
30 years of organic growth: Disciplines STOCKHOLM 1986 1996 2006 4 6 14 Finance & Accounting Finance & Accounting Finance & Accounting Banking Banking Banking Legal Legal Legal Marketing Marketing Marketing Sales Technology Sales Technology Engineering & Manufacturing Procurement & Supply Chain Property & Construction Human Resources Retail Secretarial Hotel and Catering Healthcare 48
30 years of organic growth: Countries CONNECTICUT 1986 1996 2006 3 7 24 UK UK UK Australia Australia Australia France France France Holland Holland Germany Germany China China Singapore *Added January 2007 Singapore Spain USA Italy Brazil Portugal Switzerland Japan Sweden Belgium Poland Canada Mexico Russia Republic of Ireland South Africa United Arab Emirates Luxembourg* 49
Rolling out the global strategy WHEELERS HILL Increase revenue from existing consultants New consultants into existing teams New teams into existing offices, e.g. MP Finance teams in New York, Boston, New Jersey, Stamford, Amsterdam, Dusseldorf, Frankfurt Rolling out existing disciplines into existing offices, e.g. MP Property & Construction in Toulouse, Rio MP Engineering into Liverpool, Campinas MP HR into Leeds, Edinburgh, Rotterdam MP Technology into Rotterdam, Eindhoven, Amersfoort Launching new disciplines into existing offices e.g. MP HR and MP Technology in Japan MP Sales and Marketing, MP HR & MP Engineering into USA MP Sales and Marketing into Switzerland Opening new offices in an existing country e.g. Sha Tin, Sheffield, Peterborough, Cardiff, Utrecht, Antwerp, Toulouse, Campinas Launching new countries in an existing region e.g. Dubai, Dublin, Moscow, Johannesburg, Mexico City 50
Spread of Investment MUNICH Allocation of the new headcount Estimated New consultants, existing teams 50% New teams/disciplines, existing offices 20% New disciplines, existing countries 15% New office, existing countries 10% New countries 5% Including bonuses and share based charges approximately 75% of costs are staff related. 51
Return on investment New Consultant Typically Month 3 Profitable SINGAPORE New Team, Existing Office Typically 2nd Quarter Profitable New Office, Existing Country Typically Year 1 Profitable New Discipline, Existing Country Typically Year 1 Breakeven Typically Year 2 Profitable New Country Typically Year 1 Loss (0.3m) Typically Year 2 Typically Year 3 Breakeven Profitable 52
Depth of management resource to drive organic growth Senior Management No. Tenure in MP PHILADELPHIA Executive Directors 3 16 years Regional Managing Directors 9 16 years Managing Directors 32 12 years Directors 117 8 years 161 Average c.10 years Retained by: Culture fit Clear long term career paths International opportunities LTIP (MD and above) Share options (Directors) 53
LONDON PARIS SYDNEY NEW YORK APPENDIX
United Kingdom Interim Results 2007 LONDON 2007 m 2006 m Change Turnover 176.6 153.1 15.3% Gross profit 92.0 76.0 21.0% Operating profit before share based charges 31.3 23.5 33.2% Share based charges (2.7) (3.9) Operating profit 28.6 19.6 46.2% Conversion rate 31.1% 25.7% Conversion rate before share based charges 34.0% 30.9% Headcount at half year 1,615 1,387 16.4% 55
EMEA Interim Results 2007 PARIS 2007 m 2006 m Change Turnover 149.2 104.4 43.0% Gross profit 90.4 59.3 52.5% Operating profit 28.5 16.1 76.5% Conversion rate 31.5% 27.2% Conversion rate before share based charges 32.5% 28.5% Headcount at half year 1,785 1,181 51.1% 56
Asia Pacific Interim Results 2007 SYDNEY 2007 m 2006 m Change Turnover 46.9 41.0 14.4% Gross profit 27.0 21.6 25.2% Operating profit 9.8 7.8 26.4% Conversion rate 36.5% 36.2% Conversion rate before share based charges 37.5% 37.3% Headcount at half year 501 390 28.5% 57
The Americas Interim Results 2007 NEW YORK 2007 m 2006 m Change Turnover 23.1 13.5 70.8% Gross profit 17.1 9.7 76.1% Operating profit 2.9 1.6 83.4% Conversion rate 17.1% 16.4% Conversion rate before share based charges 19.5% 18.7% Headcount at half year 422 272 55.1% 58
Share based charge JOHANNESBURG 2007 6m m 2006 6m m 2006 FY m Share option charges 2.0 3.2 4.6 LTIP* and deferred bonus plan* charges 2.3 2.0 3.7 4.3 5.2 8.3 If the share price was 525.5p at 31 December 2007, H2 combined charge would be 4.7m *Approved by shareholders in December 2003 59
Share Options Summary of Exercised and Outstandings WEYBRIDGE Shares millions Earliest exercise dates for non-vested share options 60
Debtor Days TOKYO H1 2007 H2 2006 H1 2006 Turnover (6 months) 395.8m 337.1m 312.0m Trade debtors (at period end) 143.3m 118.2m 106.6m Debtor days 51.2 days 55.4 days 50.8 days 61
LONDON PARIS SYDNEY NEW YORK