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PageGroup plc - Annual Report and Annual General Meeting

RNS Number : 9929K
PageGroup plc
27 April 2020
 

27 April 2020

 

PageGroup plc ("PageGroup" or the "Company")

Annual Report and Accounts and Notice of Annual General Meeting

PageGroup's Annual General Meeting will be held at 9:30am on Thursday 4 June 2020 at Page House, 1 Dashwood Lang Road, The Bourne Business Park, Addlestone, Weybridge, Surrey, KT15 2QW.

In connection with this, the following documents are being posted or made available to shareholders:

- Annual Report and Accounts for the year ended 31 December 2019;

- Notice of Annual General Meeting; and

- Proxy form for the Annual General Meeting.

The Annual Report and Accounts and the Notice of Annual General Meeting are now available to view or download from the following webpage: www.page.com. Copies of these documents have also been submitted to the National Storage Mechanism ("NSM") and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.  The Company has also filed with the NSM a copy of its current Articles of Association which details the rights attaching to its shares.

A condensed set of the Company's financial statements and relevant extracts of the Company's management report were included in the Company's preliminary results announcement for the year ended 31 December 2019 which was published on 5 March 2020.  That information, together with the additional information contained in the Appendix to this announcement (which has been extracted from the Annual Report and Accounts) constitutes the material required to be communicated to media in unedited full text through a Regulatory Information Service for the purposes DTR 6.3.5R. This announcement should be read in conjunction with, and is not a substitute for, reading the full Annual Report and Accounts. 

 

 

For further information contact:

Kaye Maguire

General Counsel & Company Secretary

+44(0)20 3077 8069

 

 

 

 

 

 

 

 

 

 

 

Appendix

Principal risks and uncertainties

 

Strategic Risks

 

Shift in Business Model

The emergence of new technology platforms and providers offering HR solutions and consulting may lead to increased competition and pressure on margins which may adversely affect the Group's results if it is unable to respond effectively.

 

We fail to take advantage of technology opportunities to support our drive on productivity and customer and candidate experience.

 

Actions to mitigate risk

·      We actively monitor developments in new technologies and their use in the recruitment sector.

 

·      As well as our ongoing day-to-day interaction with clients and candidates we conduct formal surveys through our Exact Target programme which we have standardised across the Group to understand how candidate and client needs are developing.

 

·      We have established an innovation infrastructure with Executive Board Governance and regional innovations groups embedded globally. These teams continually generate ideas that are evaluated and those that pass our criteria are developed and piloted through an externally managed innovations lab. The team is focused on driving both productivity and provision of new services.

 

·      We partner with the large media providers, such as LinkedIn and Facebook, to ensure that we use this form of media effectively to enhance our value to clients. All consultants are trained in utilising the benefits of social media in their day-to-day activity.

 

·      We train our consultants in the use of the new technologies to enable them to resource candidates for our clients at an overall cost that they cannot match.

 

·      Our Global IT strategy and organisation structure enables us to act rapidly in rolling out new technologies across the Group.

 

·      We are driving improved quality and use of data including accessibility to enable greater insights. Improvements in data, tools and processes will enable increased sales performance.

 

Transformation and change

The Group continues to invest in new systems and processes. These are required to support our capabilities to continue to deliver appropriate services to our clients and candidates in a cost effective, flexible manner.

 

These investments bring inherent change risks of quality, cost or time.

 

Having delivered a Global Finance System, Shared Service Centres and transformed our IT capability into a global service, the key programme in progress is the change of our global front end systems which commenced in 2019 and has so far been successfully implemented in two countries.

 

Actions to mitigate risk           

·      We have a COO function that ensures effective Governance of our programmes which are reviewed by our Executive management team on a regular basis to ensure delivery to plan.

 

·      This is supported by a Group Programme Management Office, PMO, which defines policies and processes to deliver programme change activities.

 

·      We establish and resource business change programmes for each of our major initiatives. Each has a dedicated management team working across all areas of the business to ensure effective planning implementation and decision making. A team led by experienced operations personnel has been established to lead the change to our front end systems.

 

·      We support our programmes with third party systems implementation expertise.

 

·      We have selected best in class software that has a global capability and can be rolled out to all our operating units.

 

·      A global finance structure with Global Process Owners, shared service centres and a technical Hub has been established to ensure our processes support the Global Finance System across all regions.

 

PageGroup brands and services

As the way clients and candidates source information changes, the awareness of the PageGroup brand and services for clients and candidates could deteriorate.

 

The quality and relevance of service we provide to both clients and candidates, could have a significant impact on how our brand is viewed.

 

An event such as a failure to comply with legislation, or other regulatory requirements, or confidential data lost or stolen could cause reputational damage to the Group. Use of new social media network sites has increased the speed of communication and reach, increasing the impact of any such event.

 

Incidents such as the outbreak of the COVID-19 virus could impact on our ability to deliver services to our clients and candidates.

 

Actions to mitigate risk

·      We actively monitor media online through Brandwatch to identify where there are unusual references to the PageGroup, Michael Page, Page Personnel, Page Executive and Page Outsourcing trademarks.

 

·      Our marketing strategy recognises the need to engage with candidates and clients using the latest media available in a way that reflects changing behaviours. We conduct ongoing surveys of clients and candidates to ensure that we understand requirements and can adapt our processes and procedures accordingly.

 

·      Our innovations process enables ongoing development of our proposition from idea generation and piloting through to industrialisation, which is effective at filtering innovations to focus on higher quality ideas.

           

·      We have a programme of activity which ensures that we communicate effectively the Page brands, keeping awareness high among both current and potential clients and candidates.

 

·      We train our consultants to use new media effectively, making the channels available to them as part of their day-to-day activity.

 

·      We have centralised and developed a comprehensive brand management policy which includes key areas such as social media, data protection and information security.

 

·      We are supported by external advisers who provide ongoing advice on the protection and management of our brand.

 

·      We have in place a tested incident response process with clear escalation and activity guidelines to ensure any incidents are managed effectively.

People

 

People attraction, development and retention

PageGroup needs to hire, train and retain a large number of appropriately skilled people across the Group to achieve its vision.

 

The factors that motivate, encourage and enable individuals to perform to their best have and will continue to evolve with an emphasis on work life balance, flexibility and the working environment.

 

Diversity is a key enabler to any successful business. A lack of diversity in our people will impact on the achievement of our objectives.

 

Our biggest challenge is still to address attrition levels during the first year of training.  The wellbeing of our people is an important aspect of our business.

 

The recent outbreak and uncertainty around the COVID-19 virus has put this clearly into focus.

 

Actions to mitigate risk

·      We promote the Group's purpose through our value proposition to ensure we can attract the right quality of individual and retain our current people.

 

·      We continue to make significant investment in HR resources at Group and Regional levels. These all support our HR programmes which are focused on addressing issues around attraction, development and retention.

 

·      We are also addressing issues such as work-life balance, flexible working, benefits schemes and equality that are seen to have a positive impact on employees. Our Page programmes covering these areas have been rolled out around the Group. We conduct exit interviews to ensure that we are aware of any underlying issues that need to be addressed.

 

·      We have invested in online learning capabilities. BOOST!, our Global training application is incorporated into a blended learning experience for our people.

 

·      We have a truly Global talent, succession and development process that ensures a strong talent pipeline and addresses any gaps at senior management level.

 

·      We have Group-wide initiatives which look at the issues around achieving diversity. These are part of our wider PageGroup programmes which combined will ensure we create an open environment where working practices suit and encourage diversity in all its aspects.

 

·      We conduct regular employee surveys, the latest in 2019. This helps us to see how our people view working at PageGroup and provides feedback to enhance areas we do well and address areas for improvement.

 

·      We have in place both a Group-wide health and safety policy, which places the health and safety of our people and the wider community involved with Page at the heart of our business. It also defines operational requirements which when combined with a tested incident response process enables us to effectively manage incidents which impact on our personnel.

 

Operational Risks

 

Information Systems

Our systems are an integral part of our operations. A major loss of systems' capability would have a high impact on our performance, impacting the quality of service we provide to clients and candidates and our ability to deliver our financial performance.

 

Failure of our IT systems to adapt to levels of business activity could result in lost opportunity during periods of rapid expansion or excessive costs during periods of contraction.

 

The move to the delivery of IT as a flexible service increases our reliance on third party vendors for service delivery. Should one of these vendors fail we are at risk of a service disruption.

 

Our systems must be able to adapt to the evolving technologies around Cloud to allow faster implementation of innovation or we could miss business opportunities.

 

Actions to mitigate risk

·      We have aligned our IT management structure to meet business requirements with a focus on demand management and the processes to manage the delivery of IT change.

 

·      We have increased the quality of support services implementing self service capabilities, simplifying and standardising our technology including the user desktop experience.

 

·      Focus is given to programmes delivering the greatest benefits with greater engagement with business users to ensure that we build relevant IT systems.

 

·      We have transitioned our activities to a Cloud based service model providing scalable and resilient services.

 

·      Our central procurement team, in addition to supporting management in commercial negotiations, ensures that relationships with third parties are appropriately defined and managed. This includes strategic reviews, service delivery, compliance and process resilience.

 

Cyber Security

Confidential, sensitive and personal data is held across the Group. Failure to secure and handle this data properly could result in loss of data or impairment of data quality, exposing the Group to loss of business, financial penalties and/or reputational damage.

 

The business relies on the use of systems to operate our activities effectively - any unauthorised access to these systems could disrupt their operation.

 

Our migration to a Cloud based service model, significant use of digital communications and the developing social media environment has increased the Group's exposure to external threats. We operate in an external environment that is seeing an increase in number and sophistication of cyber attacks from sources including organised crime and nation states.

 

Actions to mitigate risk

·      We have information security policies in place for the management of confidential, sensitive and personal data. Security risks are identified through a structured process of assessment and a programme of remediation activities is executed with activities prioritised according to the associated level of business risk.

 

·      We have a dedicated Global Information Security team that ensures our information remains protected. This includes ensuring appropriate multi-layered protection at network and system levels, and regular monitoring and third party testing of our capabilities. The team comprises Security Operations, Security Architecture and Information Security Management. The team deals with IT security matters and works directly with suppliers and key business stakeholders to ensure everyone across the business protects the data of our Group, our clients and our candidates.

 

·      We have technical security protections in place that mitigate the risks posed by the use of modern communications media, Cloud services and mobile devices. The threat landscape is under constant review to ensure our technology provides the right level of protection.

           

·      Supplier contracts are negotiated and reviewed to ensure data protection and IT security obligations are included as a standard requirement.

 

·      New IT projects and initiatives are reviewed for security risk, to ensure new technologies are adopted safely.

 

·      Security vulnerabilities are assessed regularly and the remediation of identified risks and alerts is tracked to conclusion. Regular security assurance checks take place across all regions and penetration testing is undertaken by specialist third parties.

 

·      The Board and Audit Committee reviews data security on a regular basis and receives updates on the status of our security programme.

 

·      We run an employee security awareness programme which includes training and security simulations.

 

Fiscal and legal compliance

The Group operates in a large number of legal jurisdictions that have varying legal, tax and compliance requirements. Any non-compliance with either client contract requirements or legislation and regulatory requirements could have an adverse effect on the Group's brands or financial results.

 

Actions to mitigate risk

·      The General Counsel & Company Secretary and local legal and compliance teams are advised by leading external advisers, as required, with regard to changes in legislation that affect the Group's business, including employment, legislation, tax and corporate governance.

 

·      Our staff receive induction training and regular updates regarding the Group's policies and procedures and compliance with relevant legislation covering, for example, discrimination, anti-bribery and corruption, sanctions and pre-employment checks.

 

·      The Group has central tax and treasury functions, which support the management of the Group's tax and cash compliance including sanctions.

 

·      The Group tax function regularly monitors transfer pricing requirements and developments to ensure that appropriate actions are being taken and appropriate documentation is being maintained to meet local reporting and compliance requirements.

 

·      The Group holds all normal business insurance cover including employers' liability, public liability and professional indemnity insurance.

 

·      Sales and procurement contracts include clauses to ensure the Group's rights are protected. All non standard contracts are legally reviewed and where appropriate approved by senior management.

 

Financial management and control

Failure to maintain adequate financial and management processes and controls could lead to either poor quality management decisions or errors in the Group's financial reporting.

 

Actions to mitigate risk

·      The Group has in place financial policies and procedures which are reviewed on a regular basis.

 

·      Regional and local finance teams ensure that Group reporting adheres to these policies as well as ensuring local statutory requirements are met. The Group Finance function reviews submissions to ensure policies are adhered to.

 

·      Monthly management information is produced that supports effective financial management

 

·      The Group operates regional shared service centres under a Global reporting structure which, as well as driving efficiencies, enables more effective control of activities through common processes and segregation of control activities.

 

·      The Finance Structure supports local, regional and Group management structures.

 

·      There are compliance teams located in each region that support the local, regional and Group management in ensuring revenues are appropriately recognised.

 

·      Internal Audit regularly review local and regional financial controls and report on the results to the Executive Board and the Audit Committee.

 

Data Protection Regulations

A Global operating business which relies on effective management of data needs to ensure it complies with the varying legislative requirements. These requirements have evolved significantly.

 

New European data protection legislation which came into force in May 2018 increased data governance and management requirements significantly, as well as increasing the potential penalties for non compliance or data breaches.

 

Legislation introduced in June 2017 in the People's Republic of China, requires data of Chinese citizens to be held and processed in Mainland China.

 

Change proposals are in process in countries such as Brazil which will continue to change the requirements on how business processes are operated.

 

Failure to maintain compliance in this changing environment could lead to increasing levels of penalty, legal consequences and reputational damage.

 

Actions to mitigate risk

·      A data protection office has been created with resources at Group and regional levels to ensure that processes continue to deliver against compliance requirements.

 

·      The Group has engaged with external specialist providers of DPO services in each region to support our processes and ensure they continue to meet good practice requirements.

 

·      A review of our processes and procedures in China has been conducted with the support of a third party specialist consultancy to validate compliance with an action plan in place to address any deficiencies.

 

·      A Privacy Director has been recruited to support local management in developing plans to address new requirements in Brazil and the USA.

 

·      Policies and processes such as crisis management, change management, contracts, third party service providers and HR and payroll policies have all been updated to reflect the additional requirements from data protection legislation.

 

Financial Risks

 

Macro-economic exposure

Recruitment activity is driven largely by economic cycles and the levels of business confidence. Businesses are less likely to need new hires and employees are less likely to move jobs when they do not have confidence in the market, so leading to reduced recruitment activity.

 

A substantial proportion of the Group's profits arise from fees that are contingent upon the successful placement of a candidate. In these cases if the client cancels the assignment at any stage in the process, the Group receives no remuneration.

 

The Geopolitical tensions around trade tariffs between the US and China continue to drive uncertainty into the Global economy.

 

In the UK, Brexit continues to create uncertainty, causing a nervous trading environment impacting on the performance of the economy.

 

The outbreak of the COVID-19 virus which has already impacted economic activity in China could have further significant impact on the economies in which we operate.

 

Actions to mitigate risk

·      We continue to diversify our business in terms of geography, and our historic reliance on the UK. We now operate in 36 countries with 84% of the Group's gross profit being generated outside of the UK.

 

·      We also look for opportunities to diversify through the brands and disciplines in which we operate. We have increased the number of disciplines we support and continue to roll these out through our current office network. We have established 4 brands to address the different levels of the recruitment market, the clerical professional sector, the qualified professional market and the executive market, as well as project or volume recruitment

 

·      We have also diversified our offering through the mix of permanent and temporary recruitment that we offer to the market. Temporary recruitment now represents over a quarter of the Group, and we are seeing new temporary markets start to emerge in places such as Asia and Latin America, where historically for cultural reasons one did not exist. The temporary business tends to be more resilient in times of economic downturn.

 

·      We have also diversified by focusing on the local, domestic markets in which we operate. When we first enter a market, our brand awareness is stronger with multinational clients.

 

·      We continue to focus on our cost structures, ensuring that costs are variable to levels of demand. As well as our variable operational staffing costs, our move to an IT service based model with our transition to the Cloud, enhances this capability. Our regional Shared Service Centre approach to support activities also gives us greater flexibility in resource allocations.

 

Foreign exchange translation

The majority of the Group's operating profit is derived from operations outside of the UK, so material changes in the strength of Sterling against the Group's main functional currencies could have an adverse effect on the Group's reported Sterling profits in the financial statements. The main functional currencies in addition to Sterling are the Euro, Australian Dollar, Swiss Franc, Chinese Renminbi, Hong Kong and US Dollars.

 

Actions to mitigate risk

·      We do not hedge our exposure to foreign exchange translation risk, instead focusing on ensuring the market adjusts correctly for any impact.

 

·      We repatriate funds converting them to Sterling to fund returns to shareholders. Our Group Treasury function takes a lead role in the management of our cash resources.

 

·      We have a negligible amount of cross border trading activity, so the impact on transactions is limited.

 

Related Party Transactions

Identity of related parties

The Company has a related party relationship with its Directors and members of the Executive Committee, and subsidiaries

Transactions with key management personnel

Key management personnel are deemed to be the Directors and members of the Executive Committee as detailed in the biographies on pages 53 to 57 of the Company's Annual Report and Accounts. The remuneration of Directors and members of the Executive Committee is determined by the Remuneration Committee having regard to the performance of individuals and market trends. The transactions for the year were:


 


Related party transactions

2019
£'000

2018
£'000

Wages and salaries

5,448

5,838

Social security costs

467

440

Short-term benefits

682

574

Pension costs - defined contribution plans

231

226

Share-based payments and deferred cash plan

4,225

3,981


11,053

11,059

 

Company

 

Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation.  Details of transactions between the parent company and subsidiary undertakings are shown below.

 


Dividends received

Amounts owed by related parties

Amounts owed to related parties


2019
£'000

2018
£'000

2019
£'000

2018
£'000

2019
£'000

2018
£'000

Transactions

49,927

5,963

607,159

642,855

962,221

913,094

 



 

 

 

 

 


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 [email protected] or visit www.rns.com.
 
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Quick facts: PageGroup

Price: 371.6

Market: LSE
Market Cap: £1.22 billion
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