TIDMCPS
RNS Number : 7231L
CPL Resources PLC
10 September 2019
10 September 2019
Cpl delivers record results with exceptional earnings
growth.
Launch of Covalen, Cpl's managed solutions brand.
Cpl Resources Plc
Results for the Full Year Ended 30 June 2019
Dublin, 10 September 2019: Cpl Resources Plc ('Cpl', the 'Group'
or the 'Company'), Ireland's leading workforce solutions group,
today announced its results for the year ended 30 June 2019.
Key Financial Highlights
-- 8% increase in revenues to EUR564.9m
-- 16% increase in gross profit (net fee income) to EUR96.3m
-- 33% increase in profit before tax to EUR24.6m
-- 37% increase in earnings per share to 77.3 cent
-- 41% increase in total dividend per share to 19.0 cent per share
-- Gross profit margin up 110 basis points to 17%
-- Operating margin up 100 basis points to 4.4%
-- Strong net cash position of EUR40.1m, up from EUR24.2m in 2018
Key Operational Highlights
-- Continued growth across all segments, Flexible Talent now representing 71% of gross profit
-- Launch of Covalen, Cpl's managed solutions brand
-- Further investment in technology team and development of new innovative technology solutions
-- Further investment in the Future of Work Institute, Cpl's
platform for thought leadership and the co-creation of workforce
solutions with our clients
John Hennessy, Chairman, commented:
"I am very pleased to report exceptionally strong earnings
growth for the Group for the year ended 30 June 2019, reflecting a
strong performance across all of our business. This result
highlights our clear focus on continuing to grow the business,
while evolving our offering to meet shifting market demands and
continuing to manage our cost base to improve margins.
At its heart Cpl is a people business and our culture is one of
openness, respect and clear communication. We believe that this
culture and the calibre of our people enables us to deliver
consistently outstanding service to our clients and candidates, and
that it has contributed significantly to an excellent performance
across the business in the past year."
Anne Heraty, CEO, added:
"Cpl has delivered another year of exceptional earnings growth
and strong cash conversion, while increasing our net fee income by
16% and our profit before tax by 33%.
We continue to embrace a global demand for workforce solutions
and our business model has evolved and adapted in response. Our
managed solutions division is experiencing strong, consistent
growth and we have recently branded this division Covalen, clearly
defining our value proposition and positioning ourselves for future
growth both domestically and internationally."
For further information, please contact:
Cpl Resources Plc + 353 1 614 6000
Anne Heraty, CEO
Lorna Conn, CFO
Davy Corporate Finance (Nomad and Euronext Growth Advisor)
Ivan Murphy/ Daragh O'Reilly: +353 1 679 6363
FTI Consulting (Media Relations)
Melanie Farrell/ Jonathan Neilan: +353 1 765 0888
About Cpl Resources Plc
Cpl Resources Plc is a global provider of talent and workforce
solutions, with over 13,000 employees across 47 offices worldwide.
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 and we operate across the full talent spectrum
from permanent, contract and temporary recruitment to the provision
of managed solutions and strategic talent advisory services.
Forward-Looking Statements
This announcement contains forward-looking statements, which are
subject to risks and uncertainties. These forward-looking
statements are based on current expectations and projections about
future events. The Group believes that current expectations and
assumptions with respect to these forward-looking statements are
reasonable. However, because they involve known and unknown risks,
uncertainties and other factors, which are in some cases beyond the
Group's control, actual results or performance may differ
materially from those expressed or implied by such forward-looking
statements.
Cpl Resources Plc
Chairman's Statement
The Group has delivered exceptional earnings growth in the year
to 30 June 2019, reflecting strong growth across all our business
sectors and markets. This performance reflects the clear focus by
our team on continuing to grow our business, expanding our product
offering to meet shifting market demands and concentrating on
managing our cost base and improving margins.
Full year highlights Year ended Year ended % change
EUR000s except where indicated 2019 2018
--------------------------------- ----------- ----------- ---------
Revenue 564,858 522,691 8%
Gross profit 96,258 83,150 16%
Adjusted Operating profit* 25,726 19,737 30%
Adjusted Profit before tax* 25,492 20,402 25%
Operating profit 24,818 17,881 39%
Profit before tax 24,584 18,546 33%
Earnings per share 77.3 cent 56.6 cent 37%
Dividend per share 19.0 cent 13.5 cent 41%
--------------------------------- ----------- ----------- ---------
Conversion ratio **
Adjusted Operating profit 26.7% 23.7%
Adjusted Profit before tax 26.5% 24.5%
Operating profit 25.8% 21.5%
Profit before tax 25.5% 22.3%
--------------------------------- ----------- ----------- ---------
* 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
Revenue grew by EUR42.2 million to EUR564.9m, up 8% on the prior
year. Group gross profit grew by 16% and profit before tax grew by
33% in the year. The global demand for flexible workforce solutions
continues and our Flexible Talent fee income grew by 21% during the
year.
Operating profit margin was 4.4% (2018: 3.4%) which, given the
shifting mix of business from permanent recruitment to flexible
talent, is testament to our commitment to improving margins.
Adjusted for non-cash charges relating to the Group's Long-Term
Incentive Plan (LTIP) and currency translation, the operating
margin increased by 80 basis points to 4.6% in the financial
year.
At year end, the Group had a strong balance sheet, with net
assets of EUR110.4 million, up from EUR92.5 million in the prior
year. We ended the year with net cash of EUR40.1 million, up
EUR15.9 million from the prior year, after funding the working
capital demands of our growing Flexible Talent division. 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.
Culture and Values
Cpl's culture is one of openness, respect and clear
communication. We encourage innovation and remain focused at all
times on our customers, responding quickly to their changing needs.
We believe that this culture enables us to deliver consistently
outstanding service to our clients and candidates, and that it has
contributed significantly to an excellent performance across the
business in the past year.
People
At its heart Cpl is a people business. We provide workforce
solutions by matching people with opportunities and by connecting
people to other people. We do this to a consistent standard of
excellence because of the quality of our own people and their
commitment to our culture and values.
On behalf of the Board, I would like to thank all of our people
for their dedication and hard work during the year. I would also
like to thank our clients and candidates for their continuing
support and loyalty to Cpl.
Board Developments
In October 2018, Elaine Coughlan was appointed to the Board as
an independent Non-Executive Director. Elaine is a highly regarded
technology investor and has extensive experience in scaling
technology companies worldwide. She has contributed very positively
to the Board since her arrival and we look forward to continuing to
work with her in the future.
In January 2019, Oliver Tattan retired from the Board having
been a Non-Executive Director of the Group since 2007. On behalf of
my fellow Directors and all of our people, I would like to thank
Oliver for the outstanding contribution he made to Cpl's success
during his tenure.
As part of the ongoing process of refreshing the Board and as
previously indicated, Breffni Byrne will retire from the Board
during the current financial year ending 30 June 2020. We look
forward to Breffni's continuing valuable contribution, as a Board
member and as Chairman of the Audit Committee, until then. The
Company intends to appoint an additional, independent Non-Executive
Director and will begin a process to identify suitable candidates.
A further update will be provided in due course.
Mark Buckley will leave the Group and will step down from the
Board on 30 September 2019. Mark joined Cpl in 2013 as Chief
Financial Officer and since then has been appointed to the Board
and to the executive positions of Chief Operations Officer and
Deputy Chief Executive. Since Mark joined us Cpl has enjoyed
substantial profitable growth and he has contributed significantly
to that success. We are grateful to Mark for his commitment and
contribution and wish him well for the future.
Cash
The Group had a net cash balance of EUR40.1 million as at 30
June 2019 (2018: EUR24.2 million). In the twelve months to 30 June
2019, EUR27.1 million was generated in cash flow from operating
activities before tax and changes in working capital (2018: EUR20.6
million). Although the growth in our Flexible Talent business
requires significant investment in working capital, we recorded a
strong net cash inflow of EUR15.9 million in the year (2018:
EUR15.7 million (excluding impact of tender offer)), demonstrating
the profitable, cash generative nature of our business and the
effectiveness of our working capital management.
Allocation of our cash surplus is closely monitored by the
Board. We prioritise organic expansion and are selective in our
acquisition activity, making acquisitions only where we perceive a
strong fit with our existing business or to drive innovation in our
organisation. We continue to adopt a progressive dividend policy
and are pleased to have delivered a 41% increase in the dividend
per share for the year, further details of which are outlined
below.
Earnings per Share & Proposed Dividend
Cpl has delivered earnings per share in the twelve months to 30
June 2019 of 77.3 cent, a 37% increase on the prior year,
reflecting the growth in profitability in the year. The Board is
recommending a final dividend of 11.0 cent per share. This will
bring the total dividend for the year to 19.0 cent per share. The
dividend, if approved by the shareholders, will be payable on 4
November 2019 to shareholders on the Company's register at the
close of business on the record date of 11 October 2019.
Outlook
We operate in a cyclical industry which is sensitive to changes
in economic activity within our core markets. While our business
model has evolved over the years to include more secure revenue
streams, the visibility of a material proportion of our net fee
income remains short term.
As long as the terms of the UK's planned departure from the EU
remain unclear Brexit will continue to give rise to uncertainty for
businesses in all sectors, including our own. We will continue to
monitor developments closely and assess and respond to their
implications for our business.
Aside from the risks posed by Brexit uncertainty, economic
indicators in our most important markets are broadly positive, and
we expect to achieve further profitable growth in the months
ahead.
John Hennessy
Chairman
10 September 2019
Chief Executive's Review
In the financial year to 30 June 2019, Cpl delivered exceptional
earnings growth and strong cash conversion. We continue to embrace
a global demand for workforce solutions and our business model has
evolved and adapted in response. Our managed solutions division is
experiencing strong, consistent growth and we have recently branded
this division Covalen, clearly defining our value proposition and
positioning ourselves for future growth both domestically and
internationally.
Financial Highlights
Group revenue increased by EUR42.2 million to EUR564.9 million
in the year to 30 June 2019 (2018: EUR522.7 million). Gross profit
grew by 16% to EUR96.3 million (2018: EUR83.2 million) and gross
margin was 17.0% (2018: 15.9%). We delivered a 33% increase in
profit before tax to EUR24.6 million (2018: EUR18.5 million) and
our earnings per share is up 37% to 77.3 cent (2018: 56.6
cent).
Group operating expenses (excluding non-cash charges) were
EUR70.5 million, an 11% increase on last year, in line with the
increase in gross profit and reflecting the fact that the majority
of our cost base comprises staff related costs. Our conversion of
gross profit to adjusted profit before tax was 26.5% (2018:
24.5%).
Our balance sheet is strong with net assets of EUR110.4 million
at 30 June 2019 (2018: EUR92.5 million). Cash flow in the year was
excellent with a closing net cash balance of EUR40.1 million, up
from EUR24.2 million in the prior year. This was achieved despite
the 21% growth in our Flexible Talent division, demonstrating the
profitable, cash generative nature of our business and the
effectiveness of our working capital management.
We paid an interim dividend of 8.0 cent per share during the
year. The Board is recommending a final dividend of 11.0 cent per
share for the year to 30 June 2019, resulting in a total dividend
per share for the year of 19.0 cent, a 41% increase from the prior
year.
Operations Review
Cpl's capability spans the full talent spectrum and we deliver a
range of services through two operating segments - flexible
workforce solutions ('Flexible Talent') and permanent recruitment
('Permanent'). Flexible Talent includes managed solutions,
temporary and contract recruitment, training 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 competition for talent has never been more pronounced.
Our managed solutions business (Covalen) is experiencing strong
growth, 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 is typically
engaged on multi-year contracts, becoming trusted strategic
partners to our clients and adding significant value to their
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 optimum 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 and given the highly
competitive environment for talent, a people centric approach to
talent management is a must.
Key Performance Indicators 2019 2018
Gross margin 17.0% 15.9%
Adjusted Operating margin*
4.6% 3.8%
Operating margin
4.4% 3.4%
Conversion Ratio**
Adjusted Operating profit
26.7% 23.7%
Adjusted Profit before tax
26.5% 24.5%
Operating profit 25.8% 21.5%
Profit before tax 25.5% 22.3%
Permanent fees as % of the total gross profit 28.8%
31.6%
Flexible Talent fees as % of the total gross profit 71.2%
68.4%
Flexible Talent staff headcount at the year-end 12,493
12,296
Average number of recruiters during the year 567
590
* Adjusted operating margin excludes non-cash charges relating
to the Group's Long-Term Incentive Plan (LTIP) and currency
translation
** as % of gross profit
Gross margin in the year to 30 June 2019 was 17.0%, an increase
of 110 basis points from the prior year. An increase in our
Permanent net fee income contributed in part to this growth but it
was primarily driven by our Flexible Talent division through a
combination of volume and pricing improvements.
Our permanent placement business, which generates almost 100%
gross margin, represented 29% of total gross profit compared to 32%
in the prior year. Despite the developments in our business mix,
our operating margin was 4.4%, up 100 basis points on last year and
80 basis points when adjusted for non-cash charges. The full yearly
cost of recent key hires and the investment in our technology team
will not be accounted for until next year but, nonetheless, it
underlines our commitment to improve the Group's operating
margin.
Flexible Talent
As the world of work evolves and both employee and employer
expectations change, the demand for flexible workforce solutions
continues to strengthen. As a result, we grew our Flexible Talent
net fee income by 21% to EUR68.5 million during the year (2018:
EUR56.9 million). Gross margin in the year to 30 June 2019 was
12.8% (2018: 11.5%) and we finished the year with 12,493 skilled
people working on client engagements on behalf of Cpl.
Flexible workforce 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 desire for greater
flexibility among candidates. Highly skilled professionals,
particularly in ICT, finance and engineering, are increasingly
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
Covalen.
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 enough to ensure that an
individual is the right fit for a business. Cpl combines 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
due to changes in regulation and continuing Brexit uncertainty.
Nonetheless, there continues to be high demand for nurses and
healthcare professionals, and we feel there is great opportunity in
the UK healthcare market in the longer-term.
Permanent net fee income increased by 6% to EUR27.8 million
(2018: EUR26.3 million). Divisions such as technology, pharma and
financial services performed particularly well during the year,
where demand for skilled talent is at a premium. In today's
digitally driven marketplace companies are becoming increasingly
dependent on technology to deliver for their customers and drive
efficiency. This combined with increased regulation, compliance and
the growing risks of cyber security indicates that the demand for
technology and finance professionals will continue to grow.
Technology
Technology is cited as the biggest driver of change in the world
today. It is revolutionising our industry and changing the way in
which we traditionally recruit. As a market leader we are committed
to staying at the forefront of technological shifts and we have
taken many initiatives this year to drive our technology
capabilities forward. Our objective is two-fold - to drive
differentiation in our value proposition and achieve further
operational excellence in our service delivery.
We continue to partner with innovative technology companies and
have custom built and deployed three scalable AI applications based
on the latest machine learning and deep learning toolsets. These
applications are transforming the way in which we source and match
candidates, improving some of the most important hiring metrics for
our clients such as quality of hire, time to hire and cost to hire.
Our web and mobile based rostering app ('MyCpl') has been
successfully deployed to over 50% of our flexible healthcare
workers in Ireland and the feedback has been very positive. Clients
and candidates alike have embraced this new way of working,
recognising the efficiency and service excellence it provides.
We recently appointed a Technology Advisory Board to advise and
guide us on our technology and digital strategy. This has proven to
be a great outlet to channel our technological curiosity and to
validate our thinking when it comes to investment in technology.
Technology is a key enabler of our business strategy and we have
strengthened our IT team during the year with the creation of new
roles including the appointment of a Chief Information Officer,
James Louttit.
Strategy
We believe deeply in the transformational effect of matching the
right candidate to the right organisation. Our vision as we grow is
to be world-class at supporting transformation in our clients
through total talent solutions and experiences. The Group's strong
performance in the year to June 2019 is a testament to the success
of our strategy for growth. Our strategy is founded on three
strategic pillars to deliver growth - 'Future Ready', 'Client
First' and 'Total Solutions'.
Future Ready
We continue to be at the leading edge of the future of work and
have recently strengthened the capabilities within our Future of
Work Institute, where we focus on co-creating new solutions with
our clients. We continue to adopt a people centred, strategic
approach to how we deal with our clients ('the Cpl Way') and to
design and deploy 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
the support of our partners provides us with a strong platform for
future growth.
Client First
Our strategy is based upon building broader and deeper
relationships with clients. During the year we implemented a new
strategic account management structure. This structure enables us
to provide clients with the full suite of our talent solutions and
it enables us to generate new business.
Total Solutions
Given the new opportunities arising from an increasingly
solutions-oriented market, during the year Cpl embarked on the
development of a defined managed solutions proposition to best
position this division for further growth. The new brand Covalen is
already operating in Ireland and will be launched in target
European countries later in the financial year. Covalen will
provide a range of people-centric managed & design solutions
which will include Managed Services Provision, Business Process
Outsourcing and Consulting & Solution Design. These solutions
will be fully customised based on clients' requirements and
engagements will be supported by world-class experts, curated
technology platforms and a set of unique processes developed
through real-world experiences. This signals an exciting chapter
for Cpl as we drive further momentum in our managed solutions
offering.
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.
These values underpin our culture and ensure the excellence of our
services and solutions. In addition to our shared commitment to
deliver for our clients and candidates, there is a strong,
collective passion for helping others to reach their full potential
through the support of local communities and charitable
organisations.
In 2019, Cpl was recognised in the Great Place to Work
programme's large workplace category for the fifth consecutive
year. This recognition is of great value to Cpl as it demonstrates
the positive employee experience that our people are having. It
also supports us in attracting and retaining the best talent which
is key to our continued success. 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
Mark Buckley has resigned as Chief Operations Officer and Deputy
Chief Executive of the Group with effect from 30 September 2019 to
pursue other opportunities. Mark has made a great contribution to
the success of Cpl's business since he joined the Group in July
2013, first as Chief Financial Officer and latterly as COO/Deputy
CEO. On behalf of the Group as a whole, I would like to thank Mark
for his commitment to Cpl and wish him every success in his future
career.
I am delighted to welcome James Louttit to the newly created
role of Chief Information Officer. This is an important leadership
appointment for Cpl as we move forward with our growth strategy and
further investment in technology.
I am also delighted to welcome all 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
Our record results and progress achieved in the year to June
2019, has positioned us well for the year ahead. We have
strengthened our managed solutions offering with the launch of
Covalen, where we have already had some strong business wins. We
are also seeing strong demand for skilled talent particularly in
the technology, finance and pharma sectors.
Trading in the current year has started well and we are positive
about the sectors in which we operate. We are mindful of the
potential macro-economic challenges driven by Brexit and the
potential for changes to levels of investment and employment within
our client base. Should conditions change, we are prepared, we have
flexibility in our cost base and we can moderate our growth
plans.
Our goal for 2020 is to produce another year of growth in
revenue and profitability, we are encouraged by our pipeline and
the opportunities for growth that we have identified. We will
continue to invest in technology which we believe will improve our
productivity and enable us to better support our clients by
delivering innovative and impactful talent solutions that can grow
and transform their businesses.
Cpl has a strong balance sheet with net assets in excess of
EUR110 million, generated over 30 years of continuous
profitability. We believe our balance sheet and strong cash flow
generation gives us the resources to withstand potential
macro-economic challenges, and also to invest in the growth and
expansion of our business and provide an attractive return to
shareholders.
Anne Heraty
Chief Executive Officer
10 September 2019
Financial Statements
The financial statements for the year ended 30 June 2019 can be
accessed below:
http://www.rns-pdf.londonstockexchange.com/rns/7231L_1-2019-9-9.pdf
This information is provided by RNS, the news service of the
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END
FR LLMFTMBBMBAL
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