Company hires its way through the recession
The recruitment business has taken quite a battering and many firms have shut up shop since the onset of the recession.
However, one high-profile hirer has shown how to earn good money in the teeth of a recessionary gale.
With the publication of its latest full-year figures, CPL, the publicly quoted hirer of IT, professional, and healthcare staff, would appear to be well on the road to recovery.
Business is back up. Cash is being generated, some indeed being returned to shareholders. But happy days are not quite here again. The group’s long- serving CEO, Ann Heraty, while “optimistic” in an overall sense about our prospects, warns that a real rebound in the Irish jobs market could take years.
“Given the current environment, it is a strong set of results. Revenues are ahead of those in 2006/7. We have €28m in net cash — this is after returning €20m to shareholders by way of a tender offer.”
CPL recorded an operating profit of almost €10m in the year to Jun 30, an increase of almost 40% on the preceding year. While the figure was ahead of market expectations, it pales by comparison to 2007/8 when profits of €18m to €19m were recorded.
Still, the group has successfully diversified, a process underway since the early noughties when it found itself, as a filler of IT jobs, heavily exposed after the bursting of the dotcom bubble. In its most recent wave of expansion, CPL has been looking overseas like many of its clientele.
Ms Heraty says: “7% of our temporary, and 30% of our permanent placements are abroad. Our international business has been very strong for us.”
She believes in tidy housekeeping — hence the share buyback. “We have kept €28m as a war chest. Our approach to acquisitions is this: We look for good, steady businesses which we expect to be cash generative.”
At home, CPL has built up close relationships with clients such as the Irish clinical trials group ICON and the German software company SAP.
Abroad, CPL has a healthcare business in the UK and has targeted central and Eastern Europe, and Scandinavia where extensive infrastructural development is underway.
The CPL chief’s insights on the domestic jobs market are always worthy of note, given her long-term involvement in the sector.
“A considerable amount of new hiring is happening in Ireland in specific sectors despite a very tough environment. Finding people with the right skills and cultural fit can be very challenging for some companies.
“Group training for the unemployed is vital, but more widespread communication is needed with both employers and the unemployed for initiatives such as JobBridge and Springboard.
“These are excellent programmes,” she continues. “They prevent people getting demoralised and they get them reskilled for new opportunities.”
Ms Heraty also welcomes the work being done to train in recruits for the burgeoning IT sector, such as placements and training.
She believes the promoters of initiatives such as Springboard could be making greater use of social media and of the network of local jobs offices.
Concerns have recently been expressed by major recruiters such as PayPal about the shortage of Irish people with suitable language skills.
The German Irish Chamber of Commerce has also warned of the growing difficulties being encountered in attracting native German speakers to Ireland.
The CPL chief is sanguine about this. “At the end of the day, Ireland is a good place. We have no problem in sourcing people from the Nordic countries, from Germany or France. They come here for two to three years to polish up their English. The environment is good.”
“There is progress in aligning the skills of Irish graduates, school leavers to the requirements of employers. I really welcome the additional points for honours maths. You saw an immediate impact. The points have gone up for science and engineering courses — hard for some students, but good for the reputation of the courses.”
“The Irish education system is good. We are doing quite a lot of placements out of the country. Irish candidates are very much sought after — in accounting, in healthcare. A drain of skills is always a worry. On the other hand, it is good for people to get international experience.”
The temporary agency workers’ directive has met with deep opposition from employer organisations such as Ibec. There are fears it will discourage firms from taking on temporary labour. Ms Heraty believes it is too early to assess what impact the directive, enacted late last year, is having. She is, as she puts it, “just getting on with it”.
So is there any deceleration in the rate of recovery as indicated by some recent surveys? “This is very difficult to call. Foreign investment has held up well. There have been a number of announcements through Connect Ireland (linked to the diaspora),” she said.
The problem is that Ireland’s high-skill jobs market is small when placed against the sheer scale of the unemployment problem.
The ICT, professional, and finance sectors employ just one in six employees. The vast majority of people still work in areas exposed to a stagnating domestic economy.
Ms Heraty accepts there is a need for radical thinking when it comes to the jobs market as a whole. Initiatives such as JobsBridge are a move in the right direction, she says. “With the right approach, interns can create a job for themselves.”
There should, in her view, be more emphasis on proper skills assessment of people entering the State training system. “There is no point sending people on courses which are not relevant to them. The growing problem of long-term unemployment is a source of continuing concern. People out of work for any length of time lose confidence. They don’t realise that they have skills others need.”
On a positive, she believes Irish people’s IT readiness has “massively improved”.
So when is the jobs market here likely to show a sustained improvement? Ms Heraty says: “As for 2013, it is hard to call — one thing is sure it will be challenging. I would be hopeful it won’t go down any further. I started the business in late 1989 during another recession. It took seven, eight years, a decade, for the unemployment rate to get back down to 5%.
“I am optimistic. I do see encouraging stories coming through, though it is still very tough for small businesses, in particular. Some of the jobs we are recruiting for did not even exist six years ago; jobs for bloggers, jobs in the digital space. The workplace is changing at a phenomenal pace.”
So how would it be if you were starting out now? “It wouldn’t be hugely different; you have the same issues. When I left UCD in 1984, it was (almost) impossible to get a job. Most people emigrated. If you start a business in a recession, you become very efficient.”
In this respect, at least, little has changed about CPL despite an awful lot of growth and diversification in the intervening years..
With annual revenues of around €300m, CPL has long outgrown its baby clothes. It faces challenges such as the spread of social media and a stubbornly unresponsive domestic labour market, but the company has now successfully digested over 15 companies and has a widely spread customer base.
Davy stockbrokers raised the CPL share price target to €4.75c, still well off its boom-time peak of €7.
This company should be able to show a decent pair of running legs, assuming Europe’s labour market can stir from its long slumber.
Born: Longford — grew up in Ballinalea.
Education: UCD. BA : Maths, Economics. 1984.
Career: joined Xerox as a telesales employee.
1987: Joined Grafton recruitment.
1989: Set up CPL.
1999: CPL floated on the Irish stock exchange.
2002: CPL acquires larger rival, Marlborough Recruitment.
Married: Paul Carroll. Two children.
Residence: Rathgar, south Dublin.
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