TIDMCPS
RNS Number : 3176A
CPL Resources PLC
11 September 2018
11 September 2018
Cpl delivers record revenues in excess of EUR500m and
double-digit growth across all key metrics
Cpl Resources Plc
Results for the Full Year Ended 30 June 2018
Dublin, 11 September 2018: Cpl Resources Plc ('Cpl', the 'Group'
or the 'Company'), Ireland's leading employment services group,
today announced results for the year ended 30 June 2018.
Financial Highlights
-- Revenue increased by 15% to EUR522.7m
-- Gross profit increased by 16% to EUR83.2m
-- 18% increase in Profit before tax to EUR18.5m
-- Earnings per share of 56.6 cent, a 30% increase on 2017
-- Total Dividend per share of 13.5 cent, up 17% on 2017
-- Capital return of EUR25m to shareholders during the year
Operational Highlights
-- Continued growth in flexible talent segment, representing 68.4% of gross profit
-- Development of new innovative technology solutions to enhance recruitment process
-- Lorna Conn appointed as Group CFO in October 2017 and to the Board in July 2018
John Hennessy, Chairman commented:
"The Group's results for the year ended 30 June 2018 show
double-digit growth across all key metrics, reflecting strong
growth across our business sectors and markets. This performance
reflects the clear focus by our team on continuing to grow our
business, evolving our product offering to meet shifting workforce
preferences and concentrating on managing our cost base and
improving margins.
Our success is driven by the talent, expertise and commitment of
our people and their dedication to delivering service excellence to
our candidates and clients. We are fortunate to have the calibre of
people we have in Cpl, who believe deeply in what we do and are
committed to delivering service standards to the highest level.
Current market conditions are favourable with high demand for
talent and low unemployment rates in our key markets. We expect
that these factors, together with the efforts of our people, will
allow us to deliver further growth in our business during the
financial year to 30 June 2019."
Anne Heraty, CEO added:
"In the financial year to June 2018 revenue increased by 15% to
EUR522.7 million, gross profit increased by 16% to EUR83.2 million
and profit before tax increased by 18% to EUR18.5 million. After
returning EUR25 million to shareholders by way of fixed price
tender offer, we closed the year with a net cash balance of EUR24.2
million demonstrating the strong cash generating characteristics of
the business.
Our vision as we grow is to be the world's best at transforming
our clients through total talent solutions and experiences. As the
world of work evolves and employee and employer expectations
change, the demand for flexibility has strengthened. As a result,
we grew our flexible talent net fee income by 24.5% to EUR56.9
million during the year (2017: EUR45.7 million). We finished the
year with 12,296 skilled people working on behalf of Cpl on client
engagements."
For Further Information:
Anne Heraty, CEO, Cpl Resources Plc: +353 1 614 6000
Mark Buckley, Deputy CEO & COO, Cpl Resources Plc: +353 1
614 6000
Lorna Conn, CFO, Cpl Resources Plc: +353 1 614 6000
Ivan Murphy/ Daragh O'Reilly, Davy Corporate Finance: +353 1 679
6363
Melanie Farrell/ Jonathan Neilan, FTI Consulting: +353 1 765
0888
Cpl Resources Plc
Chairman's Statement
The financial year ended 30 June 2018 has been another year of
growth for Cpl.
Financial highlights of the Group's performance include:
- Revenue increased by 15% to EUR522.7m
- Gross profit increased by 16% to EUR83.2m
- 18% increase in Profit before tax to EUR18.5m
- Earnings per share of 56.6 cent (2017: 43.7 cent)
- Total Dividend per share of 13.5 cent (2017: 11.5 cent)
Full year highlights Year ended Year ended % change
EUR000s except where indicated 2018 2017
--------------------------------- ----------- ----------- ---------
Revenue 522,691 455,194 15%
Gross profit 83,150 71,822 16%
Adjusted Operating profit* 19,737 16,030 23%
Adjusted Profit before tax* 20,402 16,420 24%
Operating profit 17,881 15,387 16%
Profit before tax 18,546 15,777 18%
Earnings per share 56.6 cent 43.7 cent 30%
Dividend per share 13.5 cent 11.5 cent 17%
--------------------------------- ----------- ----------- ---------
Conversion ratio **
Adjusted Operating profit 23.7% 22.3%
Adjusted Profit before tax 24.5% 22.9%
Operating profit 21.5% 21.4%
Profit before tax 22.3% 22.0%
--------------------------------- ----------- ----------- ---------
* Adjusted operating profit and adjusted profit before tax
exclude non-cash charges relating to the Group's Long-Term
Incentive Plan (LTIP) and currency translation
** As a % of gross profit
The Group's results for the year ended 30 June 2018 show
double-digit growth across all key metrics, reflecting strong
growth across our business sectors and markets. This performance
reflects the clear focus by our team on continuing to grow our
business, evolving our product offering to meet shifting workforce
preferences and concentrating on managing our cost base and
improving margins.
Our revenue grew by EUR67.5 million in the financial year, up
15% on the prior year. Group gross profit grew by 16% and profit
before tax grew by 18% in the year. The global demand for flexible
labour solutions continues to build, with our flexible talent fee
income growing by 24.5% during the year.
The impact of changes in regulation in the UK healthcare sector
continue to be felt, contributing to modest permanent fee growth to
EUR26.3 million (2017: EUR26.1m). Our operating profit margin is in
line with the previous financial year at 3.4%, which, given the
shifting mix of business from permanent recruitment to flexible
talent solutions, is a positive performance. Adjusted for non-cash
charges relating to the Group's Long-Term Incentive Plan (LTIP) and
currency translation, the operating margin increased by 30 basis
points to 3.8% in the financial year.
At year end, the Group had a strong balance sheet, with net
assets in excess of EUR92 million, down from EUR103.7 million in
the prior year. We ended the year with net cash in excess of EUR24
million, after returning EUR25.0 million to our shareholders and
funding the working capital demands of our growing flexible talent
business. Cpl is a profitable, cash generative business and the
continued strength of the Group's balance sheet, its access to
external financing and its capabilities in working capital
management positions the Company well for future growth.
Tender Offer
During the year, the Group returned EUR25.0 million of cash to
its shareholders by way of a fixed price tender offer. Having
considered a range of strategic and financial options to enhance
shareholder value, particularly taking account of the continued
generation of positive cash flows by the Group, the Board
considered this to be the most effective use of those shareholder
funds. The tender offer was over-subscribed and successfully
executed, with the Company repurchasing and cancelling 3,703,703
shares at a price of EUR6.75 per share and reducing the issued
share capital by approximately 12%. This process was overseen by an
independent committee of the Board.
People
A key driver of our success is our ability to connect with
people and match them to the needs of our clients. We can only do
this as well as we do by having great people ourselves. Our success
is driven by the talent, expertise and commitment of our people and
their dedication to delivering service excellence to our candidates
and clients. We are fortunate to have the calibre of people we have
in Cpl, who believe deeply in what we do and are committed to
delivering service standards to the highest level.
On behalf of the Board, I would like to thank all of our people
for their commitment, dedication and hard work during the year. I
would also like to thank our clients and candidates for their
support and their continued loyalty to the Cpl Group.
Board & Executive announcements
In July 2018, Lorna Conn was appointed to the Board of Cpl.
Since joining as CFO in October 2017, Lorna has made a significant
impact on all areas of the business and we look forward to having
the benefit of her experience, energy and expertise on the Board as
Cpl pursues its next phase of growth.
Earnings per Share, Proposed Dividend & Dividend Policy
Cpl has delivered earnings per share in the twelve months to 30
June 2018 of 56.6 cent, a 30% increase on the prior year,
reflecting the growth in profitability in the year and the benefit
of the reduced share capital base arising from the tender offer. In
deciding how best to use our free cash flow, the Board continues to
prioritise the maintenance of a strong balance sheet, to allow us
to take advantage of opportunities to invest in future growth, both
organically and through acquisition. The Group also has a
progressive dividend policy which reflects the underlying earnings
growth and continued financial strength of Cpl.
The Board is recommending a final dividend of 7.15 cent per
share. This will bring the total dividend for the year to 13.5 cent
per share. The dividend, if approved by the shareholders, will be
payable on 5 November 2018 to shareholders on the Company's
register at the close of business on the record date of 12 October
2018.
Outlook
Economic indicators and employment trends are broadly positive
in our principal markets. Our industry remains highly competitive
and our continued growth is sensitive to the impact of political,
regulatory and economic events globally. With the terms of the UK's
planned departure from the EU still unclear, Brexit continues to
give rise to uncertainty. We will continue to monitor developments
closely and assess and respond to their implications for our
business.
Current market conditions are favourable with high demand for
talent and low unemployment rates in our key markets. We expect
that these factors, together with the efforts of our people, will
allow us to deliver further growth in our business during the
financial year to 30 June 2019.
John Hennessy
Chairman
11 September 2018
Chief Executive's Review
In the financial year to 30 June 2018, Cpl delivered
double-digit growth in revenues, gross profit and profit before
tax. Our revenue increased by 15% to EUR522.7 million, gross profit
increased by 16% to EUR83.2 million and profit before tax increased
by 18% to EUR18.5 million. We returned EUR25.0 million of cash to
our shareholders, closing the year with a net cash balance of
EUR24.2 million and demonstrating the strong cash generating
characteristics of the business. We continue to harness the global
shift in workforce preferences and our business model has evolved
and adapted to meet these needs.
Financial Highlights
The Group increased its revenue by EUR67.5m to EUR522.7 million
in the year to 30 June 2018 (2017: EUR455.2 million). Gross profit
grew by 16% to EUR83.2 million (2017: EUR71.8 million). The Group's
gross margin was 15.9% (2017: 15.8%). Profit before tax was EUR18.5
million (2017: EUR15.8 million) and our earnings per share was 56.6
cent (2017: 43.7 cent).
Our operating expenses (excluding non-cash charges) were EUR63.4
million, 14% higher than last year, correlating with our increase
in gross profit and reflecting the fact that the majority of our
cost base is made up of staff related costs. Our conversion of
gross profit to adjusted profit before tax was 24.5% (2017:
22.9%).
Our balance sheet is strong with net assets of EUR92.5 million
at 30 June 2018 (2017: EUR103.7 million). Cash flow in the year was
strong with a closing net cash balance of EUR24.2 million. This
follows the return of EUR25.0 million of cash to shareholders
during the year, demonstrating the profitable, cash generative
nature of our business and the effectiveness of our working capital
management.
The interim dividend paid was 6.35 cent per share. The Board is
recommending a final dividend of 7.15 cent per share for the year
to 30 June 2018, resulting in a total dividend per share for the
year of 13.5 cent, a 17% increase from the prior year.
Operations Review
Cpl's capability spans the full employment continuum and we
deliver a range of services through two operating segments -
flexible talent solutions ('Flexible Talent') and permanent
recruitment ('Permanent'). Flexible Talent includes managed
services, temporary and contract recruitment and strategic talent
advisory services. We operate through distinct specialist brands in
a wide range of sectors including technology, finance and legal,
healthcare, pharmaceutical, life sciences, sales, engineering, HR,
light industrial and office administration. We have a diverse range
of clients from market leading multinationals to small and medium
sized enterprises. Our clients operate in a challenging labour
market, characterised by labour and skill-set shortages, and where
the fight for talent has never been more pronounced.
Our managed services business is going from strength to
strength, delivering projects to multiple clients including leading
organisations in the financial services, technology, healthcare and
pharmaceutical sectors. Cpl assumes accountability for selected
business processes on behalf of clients, creating measurable
improvements and cost savings for our clients. Cpl are typically
engaged on multi-year contracts, becoming trusted partners to our
clients and it is the strategic nature of these partnerships that
add immeasurable value to our clients' businesses.
Our temporary and contract recruitment service offers clients
flexible recruitment solutions, including high-volume contingency
recruitment and seasonal ramp-ups. Cpl's dedicated recruiters work
with clients to identify the best short and long-term solutions,
each with the flexibility to increase or decrease headcount around
changing business needs.
Strategic talent advisory services cater for the broader
supports required by our clients to further evolve and transform
their businesses. These cover a wide range of services that include
talent strategy development, employee value proposition, employee
wellness and employer branding. The complexity of the world's
workforce preferences continues to evolve but one thing we can be
sure of is this - a people centric approach to talent management is
a must in today's fight for talent.
Key Performance Indicators 2018 2017
Gross margin 15.9% 15.8%
Adjusted Operating margin*
3.8% 3.5%
Operating margin 3.4% 3.4%
Conversion Ratio**
Adjusted Operating profit
23.7% 22.3%
Adjusted Profit before tax
24.5% 22.9%
Operating profit 21.5% 21.4%
Profit before tax 22.3% 22.0%
Permanent fees as % of the total gross profit 31.6%
36.3%
Flexible Talent fees as % of the total gross profit 68.4%
63.7%
Flexible Talent staff headcount at the year-end 12,296
11,504
Average number of recruiters during the year 590
547
* Adjusted operating margin excludes non-cash charges relating
to the Group's Long-Term Incentive Plan (LTIP) and currency
translation
** as % of gross profit
Our gross margin in the year to 30 June 2018 was 15.9%, an
increase of 10 basis points from the prior year. Most of our growth
occurred in our flexible talent business, where we improved our
margin to 11.5% (2017: 10.7%), driven by a continuing focus on
margin.
Our permanent placement business which generates almost 100%
gross margin represented 31.6% of total gross profit whereas in the
year to 30 June 2017 it was 36.3% of total gross profit. Despite
the changed business mix, our operating margin was in line with the
previous year at 3.4% but ahead by 30 basis points when adjusted
for non-cash charges.
Taking a long-term view, we will continue to invest in people,
key technology areas and structured innovation processes as our
business adapts to new workforce preferences. Through these
measures we expect to see further improvement in our operating
margin.
Flexible Talent
As the world of work evolves and employee and employer
expectations change, the demand for flexible talent solutions has
strengthened. As a result, we grew our flexible talent net fee
income by 24.5% to EUR56.9 million during the year (2017: EUR45.7
million). Margin in the year to 30 June 2018 was 11.5% (2017:
10.7%). We finished the year with 12,296 skilled people working on
behalf of Cpl on client engagements.
Flexible talent solutions add a variable cost component to a
company's otherwise fixed labour costs. These solutions offer a
more dynamic workforce and address a growing need in candidates for
greater flexibility. Highly skilled professionals, particularly in
ICT, finance and engineering, are choosing to work on a project or
contract basis.
This global shift in working preferences presents a huge
opportunity for Cpl, with potential for significant growth within
our managed services division.
Permanent
Most of our permanent placement work is undertaken on a
contingent basis, which means we only generate revenue when the
candidate successfully starts in a role. We operate in a
competitive environment where the speed and quality of delivery is
a differentiator. We will continue to invest in Artificial
Intelligence (AI) now and into the future to optimise the placement
cycle. However, technology alone is not sufficient to ensure that
an individual is the right fit for a business. Cpl combine the
power of AI and analytics to support our skilled recruitment
professionals who bring the personal touch to the process,
focussing on the qualities of the candidate and culture fit in
recommending the right recruitment decision for our clients.
International nurse recruitment in the UK remains challenging as
a result of changes in regulation and continuing Brexit
uncertainty. The demand case remains for nurses and healthcare
professionals and we are committed to the UK healthcare market in
the longer-term. Divisions such as technology, pharma and financial
services performed well during the year.
Permanent net fee income increased by 1% to EUR26.3 million
(2017: EUR26.1 million). The economic outlook for the geographies
in which we operate is favourable and the demand for talent in the
technology, pharma and financial services sectors remains strong.
Cpl is continuing to add selectively to our teams in certain
sectors to support growth in permanent placement fees.
Future of Work & Technology
The world of work is changing and evolving, and Cpl is at the
centre of this evolution. Advancements in technology are reshaping
how, where and when we work with both employers and employees
adapting to a business environment that is more uncertain, global,
competitive and diverse. However, people remain at the centre of
business success and access to people with the right skills and
talent is one of the key issues of concern to CEOs. 77% of those
surveyed in the recent World Economic Forum CEO survey voiced
concern that skills shortages could threaten their organisation's
growth. In parallel, employees are adapting to new ways of working
and are looking for more flexibility, which is highlighting a
growing trend towards temporary and contract work - a trend which
plays to Cpl's strength, with over two thirds of our gross profit
coming from our Flexible Talent segment this year.
Technology is revolutionising our industry and changing the way
in which we traditionally recruit. As a market leader in our
industry we are committed to staying at the forefront of new
technology. Working with market leading technology partners, our IT
team have developed two scalable AI enabled apps, Apollo and
Merlin. Combining machine learning and people skills, Apollo and
Merlin empower our consultants to access and source candidates
faster and better, making the recruitment process more efficient.
By embracing AI we are using valuable data driven insights to
improve some of the most important hiring metrics for our clients
such as quality of hire, time to hire and cost to hire.
During the year we launched a web and mobile based app ('MyCpl')
that deploys the latest in smartphone technology for booking and
managing temporary staff. The app manages all aspects of front
office administration, enabling workers to roster themselves on
available client shifts. To date, MyCpl has been successfully
deployed to over 30% of our flexible healthcare workers in Ireland
and the feedback has been very positive. People have embraced this
new way of working, recognising the efficiency and service
excellence it provides.
Our investment in technology always has the dual purpose of
making it easier for our clients to work with us and improving the
productivity of our people.
GDPR
To build on the existing strong data protection practices within
the Group, a number of additional measures were introduced to
support compliance with the new EU General Data Protection
Regulation that came in to force in May 2018. An updated privacy
policy was produced and circulated to all two million of our
candidates with options to unsubscribe from our services.
Additional automated procedures were implemented to provide further
transparency to our candidates on where their data is being stored
and transferred. All Cpl staff have also undergone additional
online training and assessment to ensure that the regulations are
embedded into our core business practices.
Strategy
Over the past 28 years Cpl's growth strategy has evolved and
continues to evolve with the changes taking place in the workplace.
We are delivering on our strategy of profitably growing our
business while developing a balanced business mix in order to avoid
an overdependence on any one service, sector or geography.
Our vision as we grow is to be the world's best at transforming
our clients through total talent solutions and experiences. The
world of work is changing. To help guide us into the future and
create solutions for our clients and candidates we have set
ourselves three areas of focus:
1. Future Ready - to continue be at the leading edge of the
future of work, so we can enable our clients, candidates and
consultants to be future ready.
2. Client First - to continue to adopt a people centred,
strategic approach to how we deal with our clients, called 'the Cpl
Way'.
3. Total Solutions - to continue to design and deploy real world
ready integrated solutions that will create transformational value
appropriate to the needs of our clients and our candidates.
This combined with our investment in technology and AI will
provide us with a strong platform for future growth.
People and Culture
Our talented and experienced people are central to Cpl's
success. They are committed to our core values of accountability,
respect, customer focus, effective communication and empowerment.
By holding ourselves to these values, we have created a culture in
Cpl that is engaging and motivating for our people. In 2018, Cpl
was recognised in the Great Place to Work program's large category
for the fourth consecutive year. This recognition is of great value
to Cpl, as attracting and retaining the best talent is key to our
continued operational excellence. I would like to thank our
colleagues for their commitment to putting our clients and
candidates first and for making Cpl a truly great place to
work.
Management Team & New Board Member
I am delighted to welcome our CFO, Lorna Conn, to the Board of
Cpl. Since joining in October 2017, Lorna has made a valuable
contribution to all aspects of Cpl's business and is adding depth
to the senior leadership team as we prepare for our next phase of
growth. I am delighted to welcome Barry Winkless, into the newly
created role of Strategy and Innovation Director, signalling an
exciting chapter for Cpl as we move forward with our growth
strategy.
I am also delighted to welcome our new colleagues who joined Cpl
during the year and I want to thank our loyal clients for their
partnership and support during the year.
Outlook
Market conditions across the sectors in which we operate are
positive. Economic trends are favourable with strong employment
growth in Ireland and across the Eurozone. The unemployment rate in
Ireland is the lowest recorded in over a decade at 5.6%. Investment
continues to be made within FDI across key sectors including
Financial Services, ICT and Pharma, with a renewed focus on
regional diversification in Ireland. Our national footprint will
serve us well in this regard.
Despite this, risks remain. We are mindful of the remaining
uncertainty that Brexit creates in our core markets and we are
monitoring any potential impacts, both positive and negative, of
Brexit on our business.
From a longer-term point of view, we have a strong business
model, operating in attractive markets, with a global client reach.
Our priorities for 2019 will be to further develop our strategy,
stay focused on growing our net fee income and profit before tax
and building on our footprint internationally. Our focus is to
support clients in delivering talent solutions that can grow and
transform their business, particularly in sectors facing cost or
scaling challenges.
Cpl has a strong balance sheet with net assets in excess of
EUR92 million, generated over 28 years of continuous profitability.
We believe our balance sheet and strong cash flow generation gives
us the resources to invest in the growth and expansion of our
business while also providing an attractive return to
shareholders.
Anne Heraty
Chief Executive Officer
11 September 2018
Financial Statements
The financial statements for the year ended 30 June 2018 can be
accessed below:
http://www.rns-pdf.londonstockexchange.com/rns/3176A_1-2018-9-10.pdf
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END
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