FINANCIAL REPORTING

Financial Reporting



Table of Contents

Company Overview1

Industry Analysis1

Industry Outlook1

Current Performance2

Competition2

Determinants of Demand3

Key Success Factors4

Ability to effectively communicate and negotiate4

Must have license4

Ability to quickly adopt new technology4

Effective cost controls4

Providing client confidentiality5

Access to highly skilled workforce5

Financial Analysis5

Profitability5

Liquidity8

Debt Management10

Asset Management12

Per Share15

Earnings Management17

Earnings Management Techniques21

Cookie-Jar Reserve Techniques22

Big Bath Techniques22

Big Bet on the Future23

Capital Markets Explanation for Managing Earnings23

Executive Compensation Explanation for Managing Earnings24

Meeting or Beating Analysts' Forecasts by Expectations Management24

Earnings Management and Analyst Response25

Conclusion26

Financial Reporting

Company Overview

The Michael Page International is an executive search and recruitment company based in Weighbridge, Surrey. Michael Page International is in the UK market since 1976, its first overseas office was opened in 1985 in Sydney. In 1995, company founder Michael Page retired and Terry Benson took over from 1990 to 2006 as CEO. His successor, Steve Ingham held the position until today. In 1991, Michael Page International started in Germany with an office in Dusseldorf. In 1995, the second branch opened in Frankfurt. This was followed by further offices in Munich, Berlin, Hamburg and Stuttgart. The company is listed on the London Stock Exchange and is listed in the FTSE 250. It operates 164 offices in 34 countries; there are more than 5300 employees. In fiscal year 2011, they generated sales in excess of £ 1 billion.

Industry Analysis

Industry Outlook

Continued improvement in the labor market is projected to occur in 2013 and beyond as the economy continues to recover. During the five years to 2017, research forecasts that revenue will increase at an annualized rate of 3.8% to $18.4 billion. Despite this increase, much of the growth will actually be recovery. The unemployment rate is expected to remain elevated throughout the next five years. Consequently, industry revenue is not expected to surpass its 2007 level until 2017. Nevertheless, outsourcing of employee placement services is expected to grow from its current level during the next five years. Despite continued price competition, research expects that industry profit margins will rise to 4.2% by 2017, up from 3.7% in 2012. The consolidation of the past five years and increasing labor demand will aid profit.

Current Performance

The recession was bad news for the Employment and Recruiting Agencies industry. In 2008 and 2009, demand for industry services plummeted when companies started reducing staff numbers and delaying hiring decisions. While the industry continues to cope with extremely high unemployment, the labor market is showing signs of improvement. In 2012, the unemployment rate is expected to fall to 8.5% from 9.0% in 2011 and its high average of 9.6% in 2010. Industry operators will reap the benefit of this decline, with a 6.1% increase of revenue to $15.3 billion in 2012.

Following the recession, laid-off workers continued to seek help from employment placement services, but agencies were not able to place many job seekers because not enough jobs were available. Clients started to scale back on the industry's services to cut costs, preferring to move recruiting operations in-house. Because of eroding revenue and profit in 2008 and 2009, many employment and recruiting agencies reduced costs, causing workers to lose ...