Empresaria Group plc - Results for the year ended 31 December 2010

Strong performance with growth across all reporting regions

Financial Highlights


20102009 Restated% change% change (constant currency)
Revenue£223.4m£190.5m +17% +14%
Net fee income£49.0m£40.6m +21%+20%
Operating profit/(loss) £7.5m(£1.0m)
Adjusted operating profit£7.8m£4.3m +81%
Profit/(loss) before tax£6.7m(£1.5m)
Adjusted profit before tax£6.8m£3.5m+94%
Earnings/(loss) per share7.0p (11.6p)
Adjusted earnings per share6.2p3.1p+100%


  • 58% growth in permanent revenue
  • 15% growth in temporary revenue
  • Conversion ratio improved to 16%
  • Strong cash generation with cash generated from operations of £8.3m
  • Net debt reduced by £1.9m to £6.1m# despite investment of £2m in minority share purchases and investment in working capital for growth

# Net debt, as disclosed in the trading update released on 31 January 2011 was £5.5m, which included an adjustment of £0.6m for cash in transit

Note: Adjusted results exclude amortisation of intangible assets, movements on values of put and call options and exceptional items


Operational Highlights

  • Operational focus on strengthening and investing in existing operations as well as adding new capabilities  NFI growth across all reporting regions
    • +31% in Rest of World
    • +21% in Continental Europe
    • +15% in UK
  • Development of incubator concept in Asia with first "hub" established in Singapore with support from four group brands
  • Empresaria has operations in 18 countries through more than 100 offices and approximately 900 staff

Tony Martin Chairman commented,
"The Group performed strongly in the year, in line with expectations that were revised upwards on a number of occasions. The focus during 2010 has been on strengthening our operations throughout the world through investment in new capabilities and resources within our existing businesses. This approach has paid dividends in the form of impressive net fee income and profit growth, with revenues and profit before tax in the year exceeding previous highs.

Group operations around the world continue to benefit from broadly positive market environments. Our South East Asia markets have been particularly strong in recent months. The two geographies where we are experiencing some challenges and market uncertainty are Japan and Germany. In the case of Japan, our two trading companies have both been adversely affected by the earthquake and tsunami and we do expect some months of further disruption. In the case of Germany, recent legal challenges to certain collective labour agreements have created some short term market turbulence and gross margin erosion as well as exposed a significant number of staffing companies operating in Germany to possible future claims from third parties.

Forward visibility, as ever, remains somewhat limited but the Group is well positioned to benefit from its exposure to growing markets as well as from its continued investment in people and capabilities."

A presentation of these results will be made to analysts and investors at 9.00am on 31 March 2011 and an edited copy of this will be made available later that morning on the Empresaria Group plc website: www.empresaria.com


Chairman's statement

Overview 2010

The Group performed strongly in the year, in line with expectations that were revised upwards on a number of occasions. The focus during 2010 has been on strengthening our operations throughout the world through investment in new capabilities and resources within our existing businesses. This approach has paid dividends in the form of impressive net fee income and profit growth, with revenues and profit before tax in the year exceeding previous highs.

Group strategy

Group strategy is to continue to develop an international, multi-sector specialist staffing group balanced both in terms of sector and geographical coverage, with an investment focus on developing staffing markets and emerging economies. This combination of diversification and international market focus is designed to mitigate market volatility at the same time as creating greater growth opportunities. Underpinning this strategy is the philosophy of management equity, with operating company management teams investing directly in their own businesses, thereby aligning management and shareholder interests.

Since moving to AiM in late 2004 Empresaria has taken a number of steps in the implementation of this strategy. It has moved from being 100% UK focused to now having only one third of its net fee income generated in the UK, with meaningful exposure to some of the fastest growing staffing markets in the world. The Group has still though some way to go to achieve its strategic objectives. Focus will be on continuing to strengthen and expand our existing brands and capabilities, on re-shaping the Group to increase the contribution from professional staffing operations, and on expanding into new geographies with growth potential.

Financial performance

Revenue for the year grew 17% to £223.4m (2009: £190.5m) and net fee income increased 21% to £49.0m (2009: £40.6m). Profit before tax (adjusted for intangible amortisation and exceptional items) increased 94% to £6.8m (2009: £3.5m). There were no exceptional items in the current year.

Revenue, net fee income and profits grew across all reporting regions. The significant increase in profit contribution from companies operating in Asia reflects the maturing nature of these companies, almost all green field start ups of recent years, and of their future growth potential.

The Group was strongly cash generative in the year such that, despite investments in working capital to support growth and the acquisition of minority shareholdings, reported net debt reduced by £1.9m to £6.1m at the year end (2009: £8.0m).

Dividend

For the year ended 31 December 2010, the Board is proposing a dividend of 0.35p per share (2009: 0.35p per share) which, if approved by shareholders at the Company‟s Annual General Meeting, will be paid on 15 August 2011 to shareholders on the register on 15 July 2011.

Empresaria people

The number of people working within the Group, across the world, grew in 2010 from 763 to 883 at the year end. Empresaria‟s success is largely dependent on their efforts and contribution. We recognise the importance of our people and seek to demonstrate this at Group level in a number of ways. These include the promotion of the newly launched International Recruitment MBA programme within the Group and the development of consultant exchange programmes between companies and countries. The board would like to thank them for all of their hard work and achievement in the year.

Current trading and outlook

Group operations around the world continue to benefit from broadly positive market environments. Our South East Asia markets have been particularly strong in recent months. The two geographies where we are experiencing some challenges and market uncertainty are Japan and Germany. In the case of Japan, our two trading companies have both been adversely affected by the earthquake and tsunami and we do expect some months of further disruption. In the case of Germany, recent legal challenges to certain collective labour agreements have created some short term market turbulence and gross margin erosion as well as exposed a significant number of staffing companies operating in Germany to possible future claims from third parties.

Forward visibility, as ever, remains somewhat limited but the Group is well positioned to benefit from its exposure to growing markets as well as from its continued investment in people and capabilities.

Chief Executive‟s operating review

Group results

The Group has delivered a strong performance in the year under review, reporting a 17% increase in revenue to £223.4m, and a 21% increase in net fee income (gross profit) to £49.0m. These results reflect a combination of improved market conditions generally, plus growth in demand for our services in our key staffing markets.

Each of our reporting regions delivered improved performances, most notably the Rest of the World region, where our maturing Asian businesses helped to contribute to a 31% increase in net fee income over 2009. The Asian economies were not as severely affected by the worldwide economic decline in 2009 and our investments over the past five years are now generating material profits. The region continues to be a focus for Group expansion. In January 2011 we opened a new hub office in Singapore which has allowed Group companies to enter this market at a lower cost and risk. At launch there were four brands operating for the first time in Singapore.

Our Continental Europe region also performed well, helped predominantly by the strength of the recovery of the German economy and by growing demand for healthcare workers in Scandinavia. Net fee income in this region grew by 21% to £21.9m (2009: £18.1m).

Growth was more modest in the UK, reflecting the maturity of the staffing market and the relatively poor economic environment. Despite this, net fee income still grew by 15% to £17.0m (2009: £14.8m).

Overall gross margin for 2010 was 22% (2009: 21%). This increase was mainly driven by growth in our permanent revenue, which increased by 58% over 2009 and contributed 26% of Group net fee income (2009: 20%). The Group‟s temporary revenue increased by 15%, with margins maintained at 18% despite some margin erosion in Germany.

Administrative costs increased by 13% to £41.2m (2009: £36.3m), a lower rate than the increase in net fee income, mainly as a result of higher staff costs, due to performance related commissions and bonuses and the start of investments in headcount to drive future growth in the business.

Cash generated from operations in the year was £8.3m (2009: £3.4m). After accounting for tax and interest, the Group generated free cash flow of £5.1m, with £2.9m used to acquire management equity and fixed assets and £1.1m to pay dividends to shareholders and to holders of minority interests in the subsidiaries. Group net debt reduced to £6.1m at the end of 2010 (2009: £8.0m).

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