Focus on Talent Annual Report 2017 THE YEAR IN REVIEW A Year of Solid Progress 15.8% 2017 3.4% 2017 16.2% 2016 3.6% 2016 Gross Margin Operating Margin 21.4% 2017 22.0% 2017 22.0% 2016 22.0% 2016 Conversion Ratio – Operating Prot Conversion Ratio – Prot Before Tax 36.3% 2017 63.7% 2017 41.5% 2016 58.5% 2016 Permanent Fees as % Temporary Fees as % of the Total Gross Prot of the Total Gross Prot 11,504 2017 547 2017 11,367 2016 503 2016 Contractor & temporary staff Average number of recruiters during the year headcount at the year end (incl. RIG) Cpl Resources has had a strong year; broadening our suite of products, bringing Recruitment Process Outsourcing (RPO) to clients in the UK and expanding our managed service and business process outsourcing programmes. Geographically, we have entered new territories with offices now open in the USA and Germany and the acquisition of RIG Healthcare Group in the UK to complement our existing healthcare business. That expansion and positive market trends – like the adoption of contingent workforce as the ‘new normal’ – mean we can look forward with enthusiasm to continuing on a global growth trajectory. CONTENTS 02-15 16-19 20-79 OVERVIEW FOCUS ON TALENT ACCOUNTS Chairman’s Statement 2 Corporate Responsibility 16 Directors Report 20 Chief Executive’s Review 6 Our Board of Directors 18 Statement of Directors’ Responsibilities Overview 12 in respect of the Annual Report and the Financial Statements 28 Where We Are 14 Independent Auditor’s Report 29 Group Statement of Comprehensive Income 34 Group Statement of Changes in Equity 35 Company Statement of Changes in Equity 36 Group and Company Balance Sheets 37 Group and Company Cash Flow Statements 39 Notes forming part of the Financial Statements 41 2 Focus on Talent CHAIRMAN’S STATEMENT “ The financial year ended 30 June 2017 has been a year of growth in revenue and profit before tax for Cpl.” John Hennessy Focus on Talent Cpl Annual Report 2017 3 Financial highlights of the Full Year Highlights Groups performance include: Highlights 2017 2016 % €000 €000 change Revenue 455,194 433,391 5% Gross profit 71,822 70,053 3% Revenue increased by Operating profit 15,387 15,384 €21.8m to Profit before tax 15,777 15,390 3% Earnings per share 43.7 cent 43.9 cent €455.2m Dividend per share 11.5 cent 11.0 cent 5% Conversion ratios* Operating profit 21.4% 22.0% Profit before tax 22.0% 22.0% * as % of gross profit Gross Profit increased by The Group’s results for the year ended 30 June 2017 show growth in revenue and profit before tax, reflecting 3% to expansion of our team, development of our service offering and broadening of our geographical footprint. €71.8m Our revenue grew by €22 million in the financial year, up 5% on the prior year, and Group gross profit and profit before tax grew by 3% in the year. The demand for talented temporary staff among our clients grew at a stronger pace than for permanent employees across most sectors during the year, with temporary Profit before Earnings per fees growing by 12%. The demand for permanent tax of share of staff was adversely affected by changes in regulation in the healthcare sector and concerns about Brexit, €15.8m 43.7 cent which slowed recruitment decisions by certain employers. Our profit before tax is modestly ahead of the prior financial year, which, in light of the changed mix of business between temporary and permanent recruitment in the year, is a positive performance. At year end the Group had a strong balance sheet, Total dividend with net assets of €104 million at 30 June 2017, up per share of from €94 million in the prior year. We ended the year with net cash of more than €33 million, after investing €10 million in RIG Healthcare Group and funding the 11.5 cent working capital demands arising from the continued growth in our temporary business. It is in this context that we are pleased to announce the intention to return capital to shareholders by way of a tender offer. 4 Focus on Talent CHAIRMAN’S STATEMENT (continued) Tender Offer People In recent months, the Board has considered a range of Once again our people have delivered outstanding strategic and financial options to enhance shareholder service to our clients and candidates during the value, particularly taking account of the continued year. The continuous growth in our business poses generation of positive cash flows by the Group. As part challenges to our teams, and they have responded well of this the Board has, and will continue to, review to these challenges. Our customers continue to give us acquisition and investment opportunities which may very positive feedback on the service they receive. optimise value for shareholders and in June this year we were pleased to announce the acquisition of a 91% On behalf of the Board, I would like to thank all of our shareholding in RIG Healthcare Group. people for their commitment, dedication and hard work, delivered daily for the benefit of the whole Cpl remains a profitable, cash generative business Group. I also wish to thank our clients and candidates and has built up a net cash position of €33.6 million for their continued support, their valuable input and as at 30 June 2017. Following careful consideration their loyalty to our business. and having taken appropriate advice, the Board has determined that a return of surplus capital is in the Board & Executive announcements best interests of shareholders. In March 2017, Colm Long was appointed to the Board as an independent non-executive director. Colm has Consequently, subject to shareholder approval, we extensive experience of media and digital businesses intend to return up to €25 million of surplus capital, and has contributed very positively to the Board since in the form of a tender offer, to shareholders. As was his arrival. We are delighted to welcome him and look the case in the Group’s previous return of capital to forward to working with him in the future. shareholders in 2011, the return of capital will be made by way of a fixed price tender offer structure. As the Group embarks on its next phase of growth, The tender offer will be made at a price per Ordinary the Board has appointed Mark Buckley, current CFO, Share of €6.75. to the position of Deputy CEO and COO for the Group, with responsibility for operational performance and The Board believes that a return of capital in the delivery of service to clients. We look forward to working amount proposed represents the most effective use with Mark as he takes on these important roles. of those shareholder funds and that the continued strength of the Group’s balance sheet, and its I am also delighted to announce that Lorna Conn has cashflow generation after the return of those funds, been appointed CFO of the Cpl Group. The Board and will be sufficient to pursue the Group’s stated growth management look forward to working with Lorna, who objectives. The tender offer provides all shareholders will join us on 2 October 2017. with choice (that is, the discretion to participate) and certainty of value. Those shareholders who do not wish to participate can retain their full existing investment in the company. Focus on Talent Cpl Annual Report 2017 5 Earnings per Share, Proposed Dividend & Dividend Policy Cpl has delivered earnings per share in the twelve months to 30 June 2017 of 43.7 cent. The Group also has a progressive dividend policy which reflects underlying earnings growth and our continued financial strength. The Board is recommending a final dividend of 5.75 cent per share. This will bring the total dividend for the year to 11.5 cent per share. The dividend, if approved by the shareholders, will be payable on 6 November 2017 to shareholders on the Company’s register at the close of business on the record date of 13 October 2017. Outlook Economic indicators, including employment trends, are generally positive in our principal markets. Our industry is highly competitive, and our continued growth remains sensitive to events affecting the wider European and global economies. As the UK moves towards its planned departure from the EU, the terms of which remain unclear, “Brexit” continues to give rise to uncertainty in our main markets. We will continue to monitor these developments closely, and assess and respond to their implications for our business. Based on current trends and circumstances in our main markets we expect to deliver further growth in our business during the financial year to 30 June 2018. John Hennessy Chairman 7 September 2017 6 Focus on Talent CHIEF EXECUTIVE’S REVIEW Focus on Talent Cpl Annual Report 2017 7 In the financial year to 30 June 2017 Cpl delivered Group on 6 June 2017. Trade and other receivables growth in revenues, gross profit and profit before stood at €99.7 million, up from €90.3 million at 30 tax. Our revenue increased by 5% to €455.2 million, June 2016. From a financial perspective managing gross profit and profit before tax increased by 3% working capital is key to our success. Cash flow in to €71.8 million and €15.8 million respectively. the year was strong with €10.1 million of net cash Our net cash balance is €33.6 million post our generated prior to the RIG acquisition, to bring the investment of €9.5 million in the acquisition of RIG closing net cash balance to €33.6 million.