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PageGroup sees 10% increase in gross profit at year end

Financial summary

2014

2013

Change

Change CER*

Revenue

&pound1,046.9m

&pound1,005.5m

4.1%

9.9%

Gross profit

&pound532.8m

&pound513.9m

3.7%

10.0%

Operating profit before exceptional items **

&pound78.5m

&pound68.2m

15.1%

23.8%

Profit before tax before exceptional items

&pound78.4m

&pound67.1m

Basic earnings per share before

exceptional items

18.4p

15.1p

21.9%

Diluted earnings per share before

exceptional items

18.2p

14.9p

22.1%

Operating profit after exceptional items

&pound80.1m

&pound65.7m

Profit before tax after exceptional items

&pound80.4m

&pound64.1m

Basic earnings per share

19.3p

13.8p

Diluted earnings per share

19.1p

13.7p

Total dividend per share

11.0p

10.5p

*Constant Exchange Rates (CER)    

**Exceptional charge in 2013 of &pound2.5m as a result of a transfer pricing audit in France, resulting in increased payment of profit share to employees. Confirmation was received from the French tax authorities in 2014 that no adjustments were required from 2010,so this part of the provision was released (&pound1.6m income) (Note 4).

Commenting on the results and the outlook, Steve Ingham, chief executive officer of PageGroup, said, "PageGroup delivered an increase of 10% year-on-year in gross profit in constant currencies.  We saw solid performances across our regions, including strong results from the major economies of the UK, Germany, US and Greater China. The Group's conversion rate rose to 14.7% from 13.3%, reflecting steadily improving market conditions and the full run-rate of cost savings from our 2013 operational support process review.

"The underlying business environment is more positive in some of our key markets, with improving momentum in the second half. However, adverse FX impacted gross profit by &pound33m and operating profit by &pound6m in 2014. This has continued into 2015, if the 2014 results were restated at February 2015 exchange rates, gross profit and operating profit would have reduced by a further 4%.

"PageGroup has made good progress against its strategic objectives in 2014. With two new countries launched, and additional disciplines rolled out in both the Michael Page and Page Personnel brands, the business continued to grow its market presence in core target areas. Both our temporary and permanent recruitment businesses saw growth, further diversifying our service offering.

"At the end of 2014, fee-earner and total headcounts were at record levels for the Group. This was achieved together with the best fee earner to operational support ratio to date, reflecting operational efficiencies delivered within the business. The roll-out of our next-generation website was successfully completed and the new Page Recruitment System was rolled out to one-third of our consultants.

"With our clear strategic vision, we look forward to capitalising on our strong market positions in the year ahead. Where market conditions are favourable, we will look to grow our business and headcount, while at the same time looking to achieve productivity gains. As a result, we would expect our reported Group conversion rate to improve at a similar rate of growth as that seen over the past couple of years."

MANAGEMENT REPORT

CAUTIONARY STATEMENT

The Management Report 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 Management Report 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.

GROUP STRATEGY

At PageGroup we have a clear strategic vision.  We aim to be the leading specialist recruiter in each of the markets in which we operate.  We have sought to achieve this by developing a significant market presence in major global economies, as well as targeting new markets where we see the greatest potential for long-term gross profit growth at attractive conversion rates. 

We offer our services across a broad set of disciplines and specialisms, solely within the professional recruitment market.  Our origins are in permanent recruitment, but nearly a quarter of the business is now in temporary placements, where local culture and market conditions make it attractive.  In particular, we focus on opportunities where our industry and market expertise can set us apart from our competition.  This enables us to offer a premium service that is valued by clients and attracts the highest calibre of candidates.

PageGroup is focused on delivering against three key strategic objectives to achieve its strategic vision and sustainable financial returns.  These are: 1) to look for organic and diversified growth 2) to position the business to be efficiently scalable and highly flexible to reflect market conditions and 3) as a people-oriented, organically-driven business, to nurture and develop talent and skills which are fundamental to us achieving long-term sustainable growth.

We therefore invest significantly in our people, as the recruitment, retention and development of the best talent available is central to our ability to grow the business and to manage our resources through economic cycles.  Investment in the business has been focused on developing the long-term sustainability of the business and is supported by significant balance sheet strength and cash flow generation. 

Organic, scalable growth

Our strategy is to grow organically, achieved by drawing upon the skill and experience of proven PageGroup management, ensuring we have the best and most experienced, home-grown talent in each key role. Our team-based structure and profit share business model is highly scalable. The small size of our specialist teams means we can increase headcount rapidly to achieve growth when market conditions are favourable.

Conversely, when market conditions tighten, these entrepreneurial, profit sharing teams reduce in size through natural attrition. Consequently, our cost base contracts during the lean times. Our strategy for organic growth has served the business well over the thirty eight years since its inception and we believe it will continue to do so. We have grown from a small, single discipline management recruitment company operating in one country to a large multidiscipline, multinational business, operating in 36 countries represented by three key brands of Page Executive, Michael Page and Page Personnel.

Diversification by region and discipline

Our strategy is to expand and diversify the Group by industry sectors, professional disciplines, geography and level of focus, be it Page Executive, Michael Page or Page Personnel, with the objective of being the leading specialist recruitment consultancy in each of our chosen markets.

As recruitment is a cyclical business, impacted significantly by the strength of economies, diversification is an important element of our strategy in order to reduce our dependency on individual businesses or markets, increasing the resilience of the Group. This strategy is pursued entirely through the organic growth of existing and new teams, offices, disciplines and countries, maintaining a consistent team and meritocratic culture as we grow.

Talent and skills development

We recognise that it is our people who are at the heart of everything we do, particularly as an organically grown business where ensuring we have a talent pool with experience through economic cycles and across both geographies and disciplines is critical. Investing in our people is, therefore, a vital element of our strategy. We seek to find the highest calibre staff from a wide range of backgrounds and then do our very best to retain them through offering a fulfilling career and an attractive working environment. 

This includes a team-based structure, a profit share business model and continuous training and career development, often internationally. Our strong track record of internal career moves and promotion from within means that people who join us know that they could be our future senior managers and main Board directors.

Sustainable Growth

When we invest in a new business, be it a new country, a new office or a new discipline, we do so for the long-term. Downturns in the general economy of a country or in specific industries will inevitably have a knock-on effect on the recruitment market. However, it has been our practice in the past, and remains our intention, to maintain our presence in our chosen markets through these downturns, while closely controlling our cost base. In this way, we are able to retain our highly capable management teams in whom we have invested and, normally, we find that we gain market share during downturns which positions our business for market-leading rates of growth when the economy improves. Pursuing this approach means that we carry spare capacity during downturns, which can have a negative effect on profitability in the short-term. A strong balance sheet is, therefore, essential to support the business at these times.

Our strategic priorities comprise the following:

• increase the scale and diversification of PageGroup by growing organically existing and new teams, offices, disciplines and countries

• manage the business with a team and meritocratic culture, whilst delivering a consistent and high quality client and candidate experience

• invest through cycles in our Large, High Potential Markets of Germany, Greater China, Latin America, South East Asia and the US to achieve scale and market position

• manage our fee earner headcount in all other markets to reflect prevailing market conditions, by selectively adding to geographies and disciplines where there is positive growth momentum, while reducing headcount where the outlook for growth or fee earner productivity is poor

• focus on operational support consistency and efficiency including the roll-out of our new technology operating platform, 'Page Recruitment System' (PRS) and

• focus on succession planning and international career paths to encourage retention and development of key staff.

The main factors that could affect the business and the financial results are described in the 'Risk Factors' section in the current Michael Page International plc's Annual Report and Accounts 2014.

GROUP RESULTS

GROSS PROFIT

Reported

CER

Year-on-year

% of Group

2014 (&poundm)

2013 (&poundm)

%

%

EMEA

40%

212.0

207.8

2.1%

8.6%

UK

26%

138.4

124.1

11.5%

11.5%

Asia Pacific

20%

105.5

105.8

(0.3)%

9.4%

Americas

14%

76.9

76.2

0.8%

13.2%

Total

100%

532.8

513.9

3.7%

10.0%

Permanent

76%

76%

Temporary

24%

24%

The Group's revenue for the twelve months ended 31 December 2014 increased 4.1% to &pound1,046.9m (2013: &pound1,005.5m) and gross profit increased 3.7% to &pound532.8m (2013: &pound513.9m). At constant exchange rates, the Group's revenue increased 9.9% and gross profit by 10.0%. 

The Group's revenue mix between permanent and temporary placements was 40:60 (2013: 40:60) and for gross profit was 76:24 (2013: 76:24). Revenue from temporary placements comprises the salaries of those placed, together with the margin charged. This margin on temporary placements decreased slightly to 20.1% (2013: 20.2%) in 2014. Overall, pricing has remained relatively stable across all regions, although a stronger pricing environment has been experienced in markets and disciplines where there have been increased instances of candidate shortages.

We have seen strong growth from our Large, High Potential Markets category, with gross profit up 14.2% in constant currency, a record performance from the category as a whole.  Four of the five markets had individual gross profit records, while Germany delivered record gross profit from temporary recruitment and headcount, in line with the nature of our investment.

35% of new fee-earner headcount was invested in these markets, bringing them to a record level of 1,423 for the category. Total Group headcount increased by 448 in the year, up 8.7% to 5,578.  This comprised a net increase of 468 fee earners (12.3%) and a reduction of 20 operational support staff, reflecting the continued strong focus on operational efficiency.

As a result, our fee earner: support ratio was 77:23, also a record for the Group. In total, administrative expenses increased 1.9% to &pound454.4m (2013: &pound445.7m).  The Group's operating profit from trading activities totalled &pound78.5m (2013: &pound68.2m), an increase of 23.8% at constant rates, although the growth was lower at 15.1% in reported rates. 

The Group's conversion rate of gross profit to operating profit from trading activities improved 1.4 percentage points to 14.7% (2013: 13.3%).  This reflected a combination of steadily improving conditions in a number of markets, offset in part by more challenging conditions in some of the Group's larger individual markets such as Brazil and Australia.

OPERATING PROFIT AND CONVERSION RATES

The Group's organic growth model and profit-based team bonus structure ensures cost control remains tight. Approximately 75% of costs were employee related, including wages, bonuses, share-based long-term incentives, cars and other benefits, training and relocation costs. These costs totalled &pound340.0m (2013: &pound335.9m), and included the annual inflationary salary increase which averaged 3% across the Group, and &pound5.8m of share-based payment charges (2013: &pound6.8m). 

Other costs comprised principally information technology and property costs, which together totalled &pound114.4m (2013: &pound109.8m), up 11% in constant currency. Within this, property costs were flat in constant currency, with other costs, being technology and office expenditure, up 19% to &pound67m. This was driven by the increase in headcount, as well as the first full year charge for our technology programme, which increased amortisation by &pound3.5m. Total amortisation, which is almost entirely software-related was &pound10m, and depreciation was &pound7.9m. Together our depreciation and amortisation was flat on last year. 

The Group is currently undertaking a significant technology upgrade including the development and roll-out of its new PRS, new responsive websites and related infrastructure improvements. This roll-out accelerated through the year and achieved its target of one third of the Group's consultant network fully migrated onto PRS by the end of the year, principally being the businesses in the UK and the US.

In total, administrative expenses increased 1.9% to &pound454.4m (2013: &pound445.7m) reflecting the increase in costs as detailed above, offset by cost benefits of &pound6.6m from the consistency and efficiency exercise undertaken in 2013. The combination of slowly improving market conditions and the ongoing focus on cost control resulted in operating profit before exceptional items of &pound78.5m (2013: &pound68.2m) an increase of 15.1% in reported rates and 23.8% in constant currencies.

Depreciation and amortisation for the year totalled &pound17.9m (2013: &pound17.5m). This included amortisation relating to PRS of &pound8.8m (2013: &pound5.4m), an increase of &pound3.5m on 2013, due principally to a full year charge compared to eight months in 2013.

The Group's conversion rate for the period of 14.7% (2013: 13.3%) was a good improvement on 2013, as it was achieved alongside the Group's investment programme, focused in particular on its identified Large, High Potential Markets, despite the tough market conditions faced in a number of the Group's core markets.

The conversion rate for the Large, High Potential Markets category was 12.7%, which was 2 percentage points lower than the rest of the Group of 14.7%.  This was due to a combination of the headcount investment, which meant that a greater proportion of fee earners were new to the business, and these markets being less penetrated, requiring greater business development efforts than in more mature markets. 

Conversion rates improved in our more established regions: EMEA performed well, increasing from 12.5% to 14.2% and UK was up strongly from 14.8% to 17.4%.  Within our two less developed regions, Asia Pacific increased from 18.2% to 18.9%, while the Americas fell slightly, from 6.1% to 5.6%, impacted by difficult trading conditions in Brazil and headcount investment into the US. 

The Group was affected by the impact of movements in foreign exchange rates, as Sterling strengthened against almost all currencies in which the Group operates. This reduced the Group's revenue, gross profit and operating profit when expressed in Sterling by &pound58m, &pound33m and &pound6m, respectively.

A net interest income of &pound0.3m reflects the continuing low interest rate environment, with &pound0.5m of interest income on cash balances held through the year, offset by financial charges related to the Group's Invoice Discounting Facility and overdrafts used to support local operations and &pound0.3m of exceptional interest income.

Earnings per share and dividends

In 2014, basic earnings per share before exceptional items increased 21.9% to 18.4p (2013: 15.1p), reflecting the improved business performance and a lower effective tax rate as a result of a number of one-off items as described in the taxation section below. Diluted earnings per share, before exceptional items, which takes into account the dilutive effect of share options, was 18.2p (2013: 14.9p). After exceptional items, basic earnings per share rose 39.9% to 19.3p (2013: 13.8p) and diluted earnings per share was 19.1p (2013: 13.7p).

The Group's strategy is to pay dividends to shareholders at a level that the Board believes is sustainable through economic cycles, while maintaining a strong balance sheet to support the required investment in the growth and development of the Group. In line with the improved growth rates and increase in operating profits, a final dividend of 7.58p (2013: 7.25p) per ordinary share is proposed.  When taken together with the interim dividend of 3.42p (2013: 3.25p) per ordinary share, this would imply an increase in the total dividend for the year by 4.8% over 2013 to 11p per ordinary share.

The proposed final dividend, which amounts to &pound23.2m, will be paid on 22 June 2015 to shareholders on the register as at 22 May 2015, subject to shareholder approval at the Annual General Meeting on 4 June.

Cash Flow and Balance Sheet

Cash flow in the year was strong, with &pound88.1m (2013: &pound78.5m) generated from underlying operations. The closing net cash balance was &pound90.0m at 31 December 2014, an increase of &pound4.6m on the prior year. The movements in the Group's cash flow in 2014 reflected increased activity in a number of the Group's markets as the year progressed. The increase of 4.1% in the Group's revenue drove a &pound15.4m increase in working capital, principally in the temporary placement business. This comprised an increase of &pound22.2m in receivables (2013: &pound8.5m increase), as well as an increase in payables of &pound6.8m (2013: &pound4.8m decrease), reflecting stronger growth in the last months of the year where invoices have yet to be submitted or are pending payment.

The Group has a &pound50m invoice financing arrangement and a &pound10m committed overdraft facility to facilitate cash flows across its operations and ensure rapid access to funds should they be required, but neither of these were in use at the year end.

Income tax paid in the year was &pound15.4m (2013: &pound24.4m) reflecting the lower effective rate of tax in the prior year, with capital expenditure &pound0.6m lower in 2014 at &pound12.7m (2013: &pound13.3m). Our capital expenditure is split broadly equally between headcount related expenditure, such as office accommodation and infrastructure, and the development and maintenance of our IT systems. Spending on software development increased to &pound6.5m (2013: &pound4.8m) as the Group's new operating system moved into roll-out phase during the year, offset by a reduction in leasehold improvements expenditure.

Dividend payments were up on the prior year at &pound32.7m (2013: &pound30.8m) as a result of the 5.2% increase in the interim dividend to 3.42p. However, the main differences in cash flow arose from the purchase and issuance of shares related to share awards. In 2014, only &pound4.0m was received by the Group from the exercise of options compared to &pound14.4m received in 2013, reflecting a significantly lower number of options exercised in the year. In addition, in 2014, &pound25.4m of cash (2013: &poundnil) was used to purchase shares to satisfy future employee share awards, as the business moved fully to a market-purchase share scheme.

The most significant item in our balance sheet was trade receivables which amounted to &pound156.1m at 31 December 2014 (2013: &pound146.7m), comprising permanent fees invoiced in the final quarter of the year, and salaries and fees invoiced in the temporary placement business, but not yet paid. Days sales in debtors at 31 December 2014 were 45 days (2013: 47 days), reflecting continued strong credit control.

EUROPE, MIDDLE EAST AND AFRICA (EMEA)

EMEA is the Group's largest region, contributing 40% of the Group's gross profit in the year. With operations in 19 countries, PageGroup has a strong presence in the majority of EMEA markets, and is the clear leader in specialist permanent recruitment in the two largest, France and Germany.  Across the region, permanent placements accounted for 71% and temporary placements 29% of gross profit.

The region comprises a number of large, proven markets, such as France, Spain, Italy and the Netherlands, across which there is a broad range of competition.  EMEA also includes one of the Group's Large, High Potential Markets, Germany, which has low penetration rates and significant growth potential, particularly in temporary recruitment. In addition, there are a number of markets such as Poland, Turkey and Africa that are less developed, with limited competition, but are increasingly looking for professional recruitment services. The Middle East, where PageGroup is the largest international recruiter, has some of the Group's highest conversion rates.  

EMEA

Gross Profit (&poundm)

Growth rates

(40% of Group in 2014)

FY 2014

FY 2013

Reported

CER

212.0

207.8

2.1%

8.6%

In 2014, the EMEA region experienced mixed market conditions, but saw improved momentum in the second half. Revenue in the region increased 3% to &pound420m (2013: &pound407m) and gross profit increased 2% to &pound212m (2013: &pound208m). The region suffered from adverse foreign exchange movements that reduced revenue and gross profit by &pound25m and &pound13m respectively. In constant currency, revenue increased 9% on 2013 and gross profit increased by 9%.

Our largest businesses in France and Germany, together representing 49% of the region by gross profit, grew 6% and 11% respectively for the full year in constant currency. Each saw strong growth in their Page Personnel businesses, offset by more challenging trading conditions in Michael Page, which focuses on higher salary and predominantly permanent placements. Overall, 14 countries, representing over 85% of the region, grew in constant currency compared to 2013.

The 16% increase in operating profit for 2014 to &pound30.1m (2013: &pound25.9m), and improvement in the conversion rate to 14.2% (2013: 12.5%) were due to a full year impact of the cost savings achieved in 2013.

Headcount across the region increased by 227 (12%) to 2,113 at the end of December 2014 (1,886 at 31 December 2013). The majority of the increase was fee earners as the business added headcount, particularly in Page Personnel in France and Germany, primarily focused on temporary recruitment.

UNITED KINGDOM

The UK represented 26% of the Group's gross profit in 2014 and is the Group's largest single market, operating from 28 offices in all major cities.  It is a mature, highly competitive and sophisticated market with the majority of vacant positions being outsourced to recruitment firms.  PageGroup has a leading market presence in permanent recruitment across the UK, and a growing presence in temporary recruitment.  In the UK, permanent placements accounted for 70% and temporary placements 30% of gross profit.

In the UK, the Group operates under the 3 brands of Michael Page, Page Personnel and Page Executive with representation in 13 specialist disciplines via the Michael Page brand. There is significant opportunity to roll out new discipline businesses under the lower-level Page Personnel brand, which now represents 19% of UK gross profit. The Michael Page business has limited competition of any scale, particularly in regional centres, and is growing its market share, particularly in technical disciplines. 

 UK 

Gross Profit (&poundm)

Growth rate

(26% of Group in FY 2014)

FY 2014

FY 2013

138.4

124.1

11.5%

The UK business enjoyed steady growth through the year and saw signs of greater client confidence both in London and the regions.  Instances of candidate shortages particularly in certain technical disciplines increased, but are still principally at the lower salary levels. Revenue of &pound326m (2013: &pound299m), and gross profit of &pound138m (2013: &pound124m) were up 9% and 12% respectively, reflecting continued progress in the business as the UK recovery maintained its steady momentum. 

UK disciplines such as Property & Construction (40%), HR (35%) and Finance & Accounting (14%) performed strongly. Other disciplines, whilst positive, grew less strongly, with Retail up 3% and Sales up 5%. Michael Page was up 9% while Page Personnel was up 22% for the full year, reflecting stronger activity in temporary and permanent recruitment at the professional clerical level, as well as the roll-out of new disciplines. These improvements in market conditions enabled operating profit in the UK to increase 31% to &pound24.1m (2013: &pound18.4m) and the conversion rate increased to 17.4% (2013: 14.8%).

Headcount rose 9% during the year to 1,441 at the end of December 2014 (2013: 1,319).  Headcount was added selectively to strongly performing disciplines and newly launched Page Personnel disciplines such as HR and Property & Construction, while other discipline businesses were also able to achieve consultant productivity gains.

ASIA PACIFIC

Asia Pacific represented 20% of the Group's gross profit in 2014, with 67% of the region being Asia and 33% Australasia.  Other than in the financial centres of Tokyo, Singapore and Hong Kong, the Asian market is generally very under-developed, but offers highly attractive opportunities in both international and domestic marketplaces at good conversion rates.  Two of our Large, High Potential Markets, South East Asia and Greater China, are in this region.  With a highly experienced management team, a network of 16 offices, approaching 750 staff and limited competition, the size of the Asian opportunity is huge.  

Australasia is a mature, well-developed and highly competitive recruitment market. PageGroup has a meaningful presence in permanent recruitment in the majority of the professional disciplines and major cities in Australia, and New Zealand. Page Personnel has a growing presence and significant potential to expand this business and grow market share. Across the Asia Pacific region, permanent placements accounted for 86% and temporary placements 14% of gross profit.

Asia Pacific 

Gross Profit (&poundm)

Growth rates

(20% of Group in FY 2014)

FY 2014

FY 2013

Reported

CER

105.5

105.8

(0.3%)

9.4%

In Asia Pacific, revenues rose 2% to &pound193m (2013: &pound189m) while gross profit was constant at &pound106m (2013: &pound106m).  With the region being impacted significantly by foreign exchange translation that reduced revenue and gross profit by &pound21m and &pound10m respectively, in constant currency, revenue increased 13% and gross profit increased by 9%.

Asia enjoyed stronger trading conditions than Australasia and also benefited from the increasing experience and maturity of our local consultants. This helped Greater China to achieve Gross Profit growth of 22% in constant currency, despite growth slowing in the second half of the year. This was most notable in Hong Kong which was impacted by protestors over a 10 week period late in the year. All markets in South East Asia achieved gross profit growth in constant currency with the exception of Singapore which declined by 3%.  In Australia, gross profit was down 3% in constant currency. However, the Australian market stabilised progressively as the rate of decline slowed during the year, albeit against softer comparators, and turned positive in Q4.

Operating profit rose 4% to &pound20.0m (2013: &pound19.2m), and was up 16% in constant currency resulting in an increase in the conversion rate to 18.9% (2013: 18.2%). Headcount across the region rose by 30 (3%) in the year, ending at 1,141 at the 31 December 2014 (1,111 at 31 December 2013), with an increase in Asia partially offset by a modest reduction in Australia.

THE AMERICAS

The Americas represented 14% of the Group's gross profit in 2014, being North America and Canada (44% of region) and Latin America (56% of region).  Both the US and Latin America are considered to be Large, High Potential Markets in our growth strategy.  The US, where we have 9 offices, has a well-developed recruitment industry, but in many disciplines, especially technical, there is limited national competition of any scale.  PageGroup's breadth of professional specialisms and geographic reach is uncommon and provides a competitive advantage.  Latin America is a very under-developed region, where PageGroup enjoys the leading market position with around 550 employees in 6 countries and 20 offices. There are few international competitors and none with any regional scale.  Across the region, permanent placements accounted for 87% and temporary placements 13% of gross profit.

Americas

Gross Profit (&poundm)

Growth rates

(14% of Group in FY 2014)

FY 2014

FY 2013

Reported

CER

76.9

76.2

0.8%

13.2%

Americas' revenue decreased 2% to &pound108m (2013: &pound111m) while gross profit improved 1% to &pound77m (2013: &pound76m), as the region suffered from significant adverse foreign exchange movements that reduced revenue and gross profit by &pound12m and &pound10m respectively. In constant currency, revenue increased 9% and gross profit increased by 13%.

In North America, our businesses performed well, with gross profit up 22% in constant currency. This reflected continued strong market conditions and high levels of activity, particularly in the New York-focused financial services disciplines. Our Canadian business performed strongly and we opened a third Canadian office in Calgary in July.

In Latin America, gross profit was up 8% year-on-year in constant currency. Brazil experienced mixed market conditions, starting the year positively, before being impacted by the World Cup in June and elections in October, both of which disrupted business activity and delayed decision making. As a consequence, gross profit in Brazil declined in constant currency, albeit by only by 1%. Excluding Brazil, the other countries in the region (41% of Latin America) performed very strongly, up 22%, with record performances from Mexico, Argentina, Chile and Colombia. A new business was launched in Lima, making Peru our sixth country in the Latin American region.

Operating profit fell to &pound4.3m (2013: &pound4.6m), with a conversion rate of 5.6% (2013: 6.1%). Headcount increased modestly by 69 (8%) in 2014 to 883 at the end of December 2014 (814 at 31 December 2013) split equally between the US and Latin America, outside of Brazil.

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