Empresaria Group plc Interim Results for the six months ended 30 June 2010

The Group has delivered a strong performance in the period, benefiting from exposure to emerging economies and developing staffing markets, and experiencing double digit Revenue and Net fee income growth across each of the three reporting regions. The Group now operates from over 100 branches in 17 countries. In the current period 66% of Net fee income was derived from markets outside of the UK.

Highlights

  • Revenue increased 20% to £108.2m (June 2009: £89.9m)
  • Permanent revenue increased 54% and temporary staffing revenues increased 19%
  • Net fee income/gross profit increased 29% to £23.8m (June 2009: £18.5m)
  • Increased international diversification with 66% of Net fee income from outside the UK (61% in 2009)
  • Revenue and Net fee income growth across all reporting regions driven particularly by increased demand for temporary staff in Germany, permanent staff in the UK and by market growth in Asia
  • Continued focus on cost control
  • Adjusted profit before tax* of £2.6m (June 2009: loss of £0.3m)
  • Profit before tax of £2.3m (June 2009: loss of £1.6m)
  • Earnings per share# of 2.2p (June 2009: loss of 3.8p)
  • Net debt reduced to £7.6m (June 2009: £11.3m)
  • Trading continues to be strong into the third quarter with full year results expected to be ahead of current market expectations

* adjusted to exclude amortisation of intangible assets, exceptional items (of which there were none in the 6 months to 30 June 2010) and movements in the fair values of put and call options

# earnings per share is from continuing and discontinued operations

Chief Executive Miles Hunt said:
"The Group has delivered a strong performance in the period. Revenue and Net fee income grew at double digit rates in each of the reporting regions with particularly strong improvements seen in Germany where temporary staffing demand contributed towards 39% net fee income growth for the Continental European region as well as in the developing Asia markets which contributed towards 36% Net fee income growth for the Rest of the World region.

Empresaria's strategy is to develop a leading international specialist staffing group, balanced in terms of sector, geography and operational coverage. This diversification strategy helped to limit the downside effects to the Group in 2009 from the worldwide economic decline. Our exposure to emerging economies and developing staffing markets helped to drive the growth in the first half of 2010.

The operational focus has been to develop temporary staffing operations, which are generally more stable than permanent recruitment, and to invest in business models and sectors that we perceive to offer attractive long term growth potential, particular examples being our Recruitment Process Outsourcing business in India and our Corporate Training/e-Learning operations in South East Asia.

Trading continues to be strong into the third quarter with full year results expected to be ahead of current market expectations. We are maintaining a firm control on costs and a cautious approach to investment. We continue to strengthen our existing operations both in terms of management and service capability and to identify areas for further expansion. As a consequence we are well placed to take advantage of current and future growth opportunities and to respond to changes in the economic environment."

Notes for editors:


  • Empresaria Group plc (AIM: EMR; Sector: Support Services, Staffing) Operates in 17 countries with over 100 offices and over 800 internal staff.
  • Empresaria Group plc applies a management equity philosophy and business model with each group company management team holding significant equity in their own business.


Chief Executive's Statement

Results
The Group has delivered a strong performance in the period, reporting Revenue of £108.2m, an increase of 20% on the prior year and Net fee income (gross profit) of £23.8m, up 29% on 2009. These results reflect a combination of improved market conditions and growth in demand for our services in emerging staffing markets.

Adjusted operating profit, before exceptional items and amortisation of intangible assets, was £3.1m, significantly up on £0.1m the year before. At the Adjusted profit before tax level, a profit of £2.6m was achieved, against a loss of £0.3m in the prior year. There have been no exceptional costs this period, compared with £1.4m charged in 2009.

Strategic progress
Empresaria's strategy is to develop a leading international specialist staffing group, balanced in terms of sector, geography and operational coverage. This diversification strategy helped to limit the downside effects to the Group in the prior year from the worldwide economic decline. Our exposure to emerging economies and developing staffing markets helped to drive the growth in the first half of 2010. The Group now operates from over 100 branches in 17 countries. In the current period 66% of Net fee income was derived from markets outside of the UK (2009: 61%).

The operational focus has been to develop temporary staffing operations, which are generally more stable than permanent recruitment, and to invest in business models and sectors that we perceive to offer attractive long term growth potential, particular examples being our Recruitment Process Outsourcing business in India and our Corporate Training/e-Learning operations in South East Asia.

Market Overview
2009 was a challenging year for the Group and wider world economy. Market conditions in the first half of 2010 were much improved (and in stark contrast) to those experienced last year with positive trends experienced across all the regions where the Group is represented. These trends have continued into the third quarter of the year. The improvement in financial performance in the period was driven by a combination of increased demand for our services and the cost benefits of restructuring carried out in 2009. Increased demand has been partly a function of the recovery in the macro-economy and confidence amongst clients to invest in permanent staff. In addition, uncertainty as to the future economic outlook is causing companies to invest more in flexible labour and innovative resourcing solutions. In the case of developing staffing markets we are experiencing a combination of underlying growth and, as is the case in Germany, continued stimulus from recent structural changes to labour markets. The reductions made to our cost base in 2009 have put the Group in a stronger position, not only to benefit from the improved operational gearing in the current market environment but also to adapt quickly to potential adverse changes to that environment. Whilst costs have increased this period, these are in line with trading performance and are primarily linked to the variable remuneration structures operated throughout the Group. We maintain a strong focus on cost control at the same time as investing selectively within the Group where growth opportunities are identified. Group internal headcount has increased to 840 from 760 as at December 2009, with most of the growth in Asia.

Operations

UK
Revenue increased by 11% to £41.1m in the period (2009: £37.1m) and Net fee income rose by 14% to £8.1m (2009: £7.1m). Both were helped by the improved revenue from permanent recruitment, rising £600k to £2.9m, a 26% increase over the prior year. Revenue from temporary recruitment also increased, up 10% on the prior year to £38.2m (2009: £34.8m). Growth came from all sectors, in particular in Financial Services, Supply Chain and within Other Brands, our Recruitment-to-Recruitment and Creative sector operations.

Continental Europe
Revenue increased by 33% to £47.0m in the period (2009: £35.3m) and Net fee income increased by 39% to £10.4m (2009: £7.5m). Within Continental Europe Group operations are primarily temporary staffing and outsourced HR services and are dominated by Headway, operating in Germany and Austria and accounting for approximately 90% of the regional Net fee income. The strong rebound in demand for our services in Germany in particular is reflective of the country's economic recovery, the continued market stimulus created by labour reforms in 2004 and the success of Headway's innovative labour solutions in the Logistics and Engineering sectors. In recent months we have invested in new Healthcare and Training operations in Germany.

After Headway, our largest operation in Continental Europe is Mediradix, a healthcare staffing business based in Finland and Estonia and where we also experienced strong growth with an increase in Net fee income in excess of 50%.

In April 2010 the Group sold its Dutch subsidiary, EAR. This had been a loss making concern for some time and with its dependency on the struggling Dutch construction sector, there were concerns over the outlook for the business.

Rest of the World
Revenue increased by 15% to £20.1m in the period (2009: £17.5m) and Net fee income increased by 36% to £5.3m (2009: £3.9m). This region, which includes Asia Pacific and South America, has the highest proportion of permanent revenue contribution, at 80% of total regional Net fee income, and this increased by 91% over the prior year to £3.1m. Revenue from temporary recruitment also increased, up 8% to £17.0m.

The three main markets of Japan, Indonesia and Chile account for approximately 70% of regional Net fee income. The Japanese market was the last of the Group's markets affected by the economic downturn to recover lost ground with a strong rebound in the IT and Financial Services sectors in early 2010 and some tentative signs in recent months of an improvement in the retail sector. In Indonesia there were strong results from the our executive recruitment and corporate training businesses in particular, with Indonesia in total up over 100% at the Net fee income level over the prior year. Recent investment in e-Learning capabilities is starting to reap rewards with new business opportunities being converted across South East Asia. In Chile, the earthquake in February 2010 disrupted operations for a number of months but trading is now showing a recovery and revenue is up against the prior year, albeit at lower margins.

In the South Asia region, our Indian based Recruitment Process Outsourcing operations continue to grow with Net fee income up 36% on the prior year, driven by growing demand for innovative resourcing solutions in the UK, Australia and, most recently, the US. We have now established sales distribution channels in Australia and the US, and in January 2010 invested in a dedicated sales operation based in the UK.

Finance
Net borrowings decreased to £7.6m in the first half of 2010 from £11.3m at June 2009. Net cash from operating activities was £1.0m, an improvement of £3.7m over the prior half year. Cash payments included £0.5m on dividends to non-controlling interests, capital expenditure of £0.3m and £0.1m on the disposal of EAR.

Dividend
In line with previous years, the Board is not recommending the payment of an interim dividend for the six months ended 30 June 2010 (2009: nil).

Management
Spencer Wreford joined the Group in May 2010 as Group Finance Director, following the departure of Stuart Kilpatrick to James Fisher & Sons plc. The Board would like to thank Stuart for his contribution over the past two years. There have been no further Board changes.

Prospects
This strong performance reflects the benefits of our diversified investment portfolio and the decision to focus investment activity in recent years on emerging staffing markets. In addition, however, the relative financial performance of the Group in 2010 against 2009 does reflect also the changing macro-economic environment and recent improvement in sentiment. We have had a good first half year and trading continues to be strong into the third quarter with full year results expected to be ahead of current market expectations. We are maintaining a firm control on costs and a cautious approach to investment. We continue to strengthen our existing operations both in terms of management and service capability and to identify areas for further expansion. As a consequence we are well placed to take advantage of current and future growth opportunities and to respond to changes in the economic environment.

Miles Hunt
Chief Executive
8 September 2010

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