Empresaria Group PLC
25 April 2005




â.¢ Turnover up 55% year on year
â.¢ Adjusted profit before tax up 25% year on year
â.¢ Successful move to AiM and raising £2.5m (gross) of funds
â.¢ New business lines and organic growth in UK
â.¢ Launch of international development programme
â.¢ Announcement of start up investment in the US

Empresaria Group plc Tel: 01293 649 900
Tony Martin, Chairman
Miles Hunt, Chief Executive
Nick Hall-Palmer, Finance Director


Empresaria Group plc ('Empresaria') has achieved good results in its first
period as an AiM listed company. It has made progress in strengthening and
expanding its UK businesses and made an encouraging start in the development of
its international operations. This follows several years of continued growth
and increased profitability.


Turnover: Turnover £45.4m (2003: £29.4m), an increase of 55%. Net fee income
(Gross profit) £13.1m (2003: £10.6m), an increase of 24%

Profitability: Excluding amortisation of goodwill and exceptional costs, profit
before taxation was £1.39m (2003: £1.11m), an increase of 25%

Earnings per share: Excluding amortisation of goodwill and exceptional costs EPS
were 4.2 pence (2003: 3.9 pence), an increase of 8%

Proposed dividend: The directors are recommending payment of a dividend of 0.4
pence per share (2003: 0.375 pence), an increase of 7%

Cash flow: During the year the Group generated operating cash flow of £2m
(2003: £2m) . Net debt at the year end was £1.6m (2003: £1.3m)


Empresaria has a dual focus on managing growth and managing business risk. The
group has achieved sustained, consistent turnover and profit growth through the
development of specialist staffing brands. It has done this by a combination of
organic investment, start up and acquisition. Investment across a range of
market sectors has reduced exposure to individual market volatility and enabled
the group to channel resources where market conditions are most favourable. It
has improved both earnings visibility and consistency by shifting the mix of the
business from one of predominantly permanent staffing operations to one weighted
more to contract/temporary recruitment. This shift in business mix fuels
turnover growth at the expense of percentage gross margin. Underpinning this
strategy has been the consistent application of the philosophy of management
equity which helps to ensure that every member of the group company management
teams is highly motivated.

The move from OFEX to AiM in October 2004 and the raising of £2.5m has enabled
Empresaria to extend this approach to international development. It is the
company's intention to identify and enter selected international staffing
markets with particularly high potential and where the management equity
philosophy and the Empresaria structure will prove inspirational. This
evolution to an international staffing business will also diversify risk away
from the UK economic and regulatory environment.

Empresaria's first investment overseas was in Japan in the second half of 2004.
The Japanese staffing market is growing rapidly following the decision by the
Japanese government to liberalise the industry and create more flexible working
practices in order to stimulate economic growth. The new company, Skillhouse
Staffing, operates within the IT staffing market. It commenced trading in
December last year and already the financial performance is exceeding our

We announce today the completion of our second international investment with the
start up of a new company, Gerard Stewart Inc based in Atlanta Georgia. The new
company will provide recruitment services to the US staffing industry, an
extension of our successful existing operations within this market sector in the
UK where we operate under the McCall and Gerard Stewart brands.

Empresaria will seek out similar opportunities in international markets and move
quickly to take advantage of them.


These positive results have only been possible because of the hard work,
dedication and motivation of all those working within the group. I would like
to thank all of them for their efforts this year.


We thank our shareholders for their confidence and support in the company and
particularly those new investors who subscribed to our November 2004 equity


The group has started 2005 well. We are seeing positive activity in all our
markets with only financial services experiencing a slow start to the year in
comparison with the strong first quarter of 2004 and our public sector
businesses in particular are performing well. This gives confidence as to the
outcome for the year. Your group is meanwhile pursuing a number of
opportunities both within the UK and overseas that, if converted, will continue
our path towards developing a broad based international specialist staffing

Tony Martin



Since its inception Empresaria has been firmly committed to growth. Over the
past three years turnover has increased by an average of 34% annually, adjusted
profit before tax by 42% and EPS by 55% on the same basis. This has been
achieved by a balanced combination of organic growth, investment in start-ups
and acquisition, and the sustained development of each of these three strands
remains the strategy for the future.


The year under review saw a substantial increase in investment in organic
growth. This was partly driven by improved market conditions in general, but
also by specific opportunities in certain sectors.

A number of companies invested in branch network expansion as well as IT
projects during the year. In particular, DriveLink, our contract HGV business,
invested in new branches in the Midlands and North West as well as developing
and successfully commissioning a new automated back office system. Our
insurance recruitment businesses, Lime Street Recruitment and Mansion House
Executive, opened up new offices in Birmingham, Manchester and Maidstone. We
also invested in new branches within our social work and property sales
recruitment operations. We expect to see benefits of these investments
accruing in 2005 and 2006.

The total revenue cost of this additional programme, combined with the
investment in start up companies was approximately £500,000 in 2004. Adding
this sum back to our adjusted PBT figure, organic PBT growth was 17% year on
year and underlying organic EPS grew by 6%.


We invested in two start ups in 2004. The first of these, established in
September, was Second City Resourcing, providing contract and permanent
marketing and PR professionals. The company is performing in line with
expectations but is not expected to contribute to earnings in 2005.

The second investment was in Skillhouse Staffing, a Tokyo based contract IT
company, an opportunity introduced to us by Tony Martin. The investment was
made in September but, owing to the length of the registration process in Japan,
commenced trading in December. The investment in Skillhouse Staffing was made
through an investment vehicle with shared ownership and funding commitments
shared equally between Tony and Empresaria. It was always the intention for
Empresaria to acquire the shares held by Tony once the business was up and
running. Early indications are positive and we anticipate seeking shareholder
approval to buy Tony's share in the business as soon as summer 2005.

We announce today the formation of a new company, Gerard Stewart Inc, based in
Atlanta, Georgia. The Gerard Stewart brand is used by McCall, our UK based '
recruitment to recruitment' business for the provision of retained search and
senior recruitment management services. The new company will provide similar
services to the US staffing industry. We expect to benefit from the access to
US market knowledge and staffing contacts that this investment provides and with
these the potential to gain access to further US investment opportunities.


The group made three acquisitions in 2004. The first two of these were bought
at the same time in early 2004, FastTrack Management Services, a provider of
contract trades to the construction and property services sector and also Bar 2,
a provider of payroll and administration services to contract staff operating
under composite company arrangements. The performance of both companies
exceeded expectations in the year. This was due partly to cost savings, partly
to increased geographical coverage and, most encouragingly, to cross selling and
sharing of key customers with other companies within the Group. This is a trend
which is being fostered at all levels of management.

The third acquisition, made in July 2004 was that of Reflex HR a specialist
contract and permanent staffing business in the building management services
sector. Reflex performed in line with expectations.

We have made one acquisition since the year end, acquiring a total of 65% of The
Recruitment Business ('TRB') in February 2005. TRB comprises three separately
branded divisions, MacPeople, WebPeople and CreativePeople, each supplying
creative and design related staff on both a permanent and contract basis to a
range of markets including the media, public and financial services sectors.
This acquisition is expected to make a substantial contribution to profits in
the current year.


We view the Empresaria group of companies as a portfolio to be managed for
maximum growth and long term returns. The performance and perceived potential
of group companies are under constant review. Where appropriate we will
consider selling, restructuring or closing businesses that are possibly
under-performing or deemed best-suited outside rather than inside the group.

In 2004 we re-branded our existing TMR businesses 'FastTrack' following the
acquisition of FastTrack Management Services. In April we sold off the
under-performing permanent recruitment operations of the TMR business based in
Maidstone and, in October, relocated the more successful TMR contract
recruitment operations to the FastTrack head office in Watford.

In January 2005 we completed the sale of the MC(2) Management Consulting
business to the management team for total consideration of £491,000. MC(2) is
a permanent recruitment business servicing the property and construction
sectors. A combination of low growth and earnings volatility precipitated the
opening of negotiations with the management team. As part of the sale
negotiations with management it was agreed not to pursue a number of disputed
invoices, which we believed to be recoverable, and which would have been pursued
if the company had remained part of the Group. The impact of this decision was
the incurring of an exceptional loss of £135,000 and which is shown as an
exceptional operating cost from discontinued operations in the Group accounts.
Payment of £287,000 of the total consideration is deferred until 2006 and 2007.



Turnover in 2004 was £3.7m (2003: £3.1m), up 19%. We benefited in 2004 from the
upturn in the banking sector and a return to growth after two years of decline.
The banking recruitment market remains positive although we do not anticipate
recent growth rates to continue into 2005. The insurance market has been
characterised by consolidation within the client base and increasing trends
towards centralisation and outsourcing of HR functions, including recruitment.
In the short term we see this trend impacting on growth rates and possibly gross
margin but see long term benefit from the increased barriers to entry that these
trends create for new entrants to this market.


Turnover in 2004 was £6.9m (2003: £7.4m), a drop of 6%. 2004 was a year of
substantial structural change and development for our DriveLink driving
recruitment businesses. New branches were established in the Midlands and North
and substantial investment was made in centralised administration systems. As
reported in September 2004, the driving market was subdued in the second and
third quarters of the year with demand lower than previous years. This
slowdown, combined with flat performances from a number of established
South-East branches, held the sector back in growth terms in the year. The
final quarter of 2004 showed a return to normal anticipated seasonal demand and
we expect an improved performance in 2005.


Turnover in 2004 was £25m (2003: £10.4m), a rise of 140%. Year on year growth
was driven largely through the acquisition of FastTrack and Reflex supplemented
by strong underlying growth at our existing shop fitting and interiors
recruitment business (FastTrack Midlands) and steady progress at TeamSales. The
broader construction and property services markets remain strong.


Turnover in 2004 was £6.7m (2003: £5.1m), a rise of 31%. We saw strong growth
from both our allied healthcare staffing business, Healthcare First ('HCF'), and
also in contract social work through Social Work Associates ('SWA'). Both
companies increased staff numbers and turnover in their core operations, with
SWA also expanding into the Midlands with an office in Leicester and HCF
developing its specialist nursing operations from its new office in
Wolverhampton. Both the healthcare and social care markets continue to
experience significant changes. To date we have benefited from operating
flexible, low cost operations within specialist markets that have seen limited
impact from changing government procurement practices.


In 2004 turnover was £3.1m (2003: £2.9m after deducting 2003 contribution from
discontinued operations), a rise of 7%. Greycoat Placements (domestic
recruitment) continues to strengthen its position as the leading brand in its
sector and is looking at potential branch expansion.

Empresaria will continue to build a high quality portfolio of specialist brands
in this very fragmented industry.

Miles W R Hunt
Chief Executive

Financial Performancetc 'Financial review'


Group turnover rose by 55% in the year.

Gross margin

The Group achieved a 29% gross margin in the year, compared with 36% in 2003.
The reduction in gross margin reflects our stated aim of growing mainly through
temporary and contract revenue. In 2004, 51% of the Group's gross margin was
generated by the temporary and contract businesses, compared with 45% in 2003.
As the contribution to gross margin from the temporary and contracts businesses
increases, the overall gross margin percentage will reduce further in the coming


The Group uses adjusted profit before taxation (PBT) as its principal measure of
operating performance. Profits before tax are adjusted to remove the effects of
goodwill amortisation and any exceptional costs or gains incurred during the
year. A reconciliation of the statutory and adjusted profit is provided in the
additional information.

Adjusted PBT for the year rose by 25% to £1.39m (2003: £1.11m) for the whole
Group. Adjusted PBT from continuing operations rose by 18% to £1.47m (2003:

Exceptional costs

Exceptional costs of £303,000 were incurred in the year, of which £168,000
related to costs in operations discontinued at the year end, principally in MC2
Management Consulting Ltd, the business of which was sold to its management team
shortly after the year end. A further £60,000 related to legal costs at MVP and
£41,000 was incurred in moving to AiM, with the majority of the balance being
due to the integration of FastTrack Management Services South East Limited into
FastTrack Management Services London Limited.


The effective rate of corporation tax to headline profit before tax has
increased from 36% in 2003 to 47% in 2004. The increase is due to a combination
of the rise in goodwill amortisation arising on consolidation and tax losses
arising in various companies including the MC(2) business, on which no
corporation tax relief could be obtained. These losses remain unrelieved due to
the group's share ownership structure, which leaves several companies outside
the tax group. The effective rate of tax to adjusted profit before tax was 31%
(2003: 29%).

Deferred taxation has been provided on timing differences where required by FRS

Minority interests

The Group's share of profit after tax fell from 63% in 2003 to 57% in 2004,
reflecting higher goodwill amortisation charges.

Earnings per share

After reflecting the share consolidation undertaken in the year (see below),
Earnings per share, adjusted for the effects of goodwill amortisation and
exceptional costs, were 4.2 pence, an increase of 8% over 2003 (3.9 pence,
adjusted to reflect the share consolidation).

The Group's weighted average issued share capital, as used to calculate EPS,
increased by 9% during the year, mainly due to the issue of shares when the
Group listed on AiM. The purpose of the fund-raising was to make earnings
enhancing investments, the benefits of which will be felt from 2005. Had the
share capital not been increased, adjusted EPS would have been 4.5 pence, an
increase of 15% over the previous year


The Directors have recommended the payment of a dividend of 0.4 pence per share,
an increase of 7% over 2003 (0.375 pence, adjusted to reflect the share

Move to AiM

Raising of funds

In November 2004 the Group listed its shares on the Alternative Investment
Market ('AiM'). As part of the process, £2.5 million before costs was raised
from the issue of new shares. These funds are being used to fund organic growth
and acquisitions in line with the Group's growth strategy.

Share Consolidation

In conjunction with the move to AiM, a share consolidation took place, whereby
one new ordinary share with a nominal value of 5 pence was issued for every two
and a half old shares with a nominal value of 2 pence.

The earnings per share figures quoted above have been adjusted to reflect the
effects of this consolidation.

Acquisitions and disposals


During the year the Group acquired three businesses and significantly increased
its shareholding in an existing subsidiary, as detailed below:

Purchase of FastTrack Management Services London Limited ('FastTrack')

On 6 February 2004, the Group completed the acquisition of a 66% shareholding in
FastTrack Management Services Limited for an initial consideration of £1,100,000
(£1m cash and £100,000 shares in Empresaria), deferred cash consideration of
£150,000 with potential further consideration of up to £730,000 being payable
dependent on financial performance in 2004 and 2005. The maximum cash element of
the remaining deferred consideration is £100,000, with the balance being payable
in Empresaria shares.

FastTrack is a provider of contract recruitment services to the construction
industry with offices in Watford and Blackburn.

Purchase of Bar 2 Limited

On 9 February 2004, the Group completed the acquisition of a 66% shareholding in
Bar 2 Limited, a provider of payroll administration services based in Chesham
for a nominal consideration.

Purchase of Reflex HR

On 2 August 2004, Empresaria acquired Reflex HR ('Reflex'), a recruitment
business focusing on the supply of contract and permanent staff to the Building
Services sector. The acquisition was made through a newly established company
(Reflex HR Limited) which paid £732,000 in cash for certain assets and the
goodwill of Reflex. Up to a further £168,000 of deferred consideration may be
payable in shares depending on the financial performance of Reflex HR limited
over the 12 months to 31 July 2005.

Empresaria holds 90% of Reflex HR Limited, with management holding the balance.

Purchase of DriveLink (South East) Limited minority holding

On 17 September 2004, Empresaria acquired the outstanding 32.63% of the issued
share capital of DriveLink (South East) Limited, for a maximum aggregate
consideration of £293,000.

The initial consideration of £146,500 was satisfied by the issue of shares in
Empresaria. Deferred consideration of £146,500 in Empresaria shares is to be
paid subject to the achievement by DriveLink of a profit target.

Post year end purchase

Following the end of the year, the Group acquired a 65% interest in The
Recruitment Business Limited ('TRB'), a company specialising in the placement of
temporary and permanent staff for roles including graphic and web designers,
copywriters, typographers, art workers, Mac operators, studio managers and print
buyers. The initial consideration was £1.3 million, which has been satisfied by
£950,000 in cash and the balance in shares in Empresaria. The initial
consideration includes a payment, on a pound for pound basis, of £300,000 for
the net cash currently within the business. Deferred consideration of up to
£725,000 may be payable based on the operating profit and cash position of TRB
in the two year period to 31 December 2006.

Post year end disposals

In January 2005, the Group made one disposal, in selling the trading assets and
goodwill of MC(2) Management Consulting Limited to the management team, who
purchased the business through a newly established company.

As the Group was irrevocably committed to the disposal at 31 December 2004 MC(2)
has been treated as a discontinued operation.

Intangible assets

The carrying value of intangible assets and investments in associates in the
Group Balance Sheet increased by £2m, from £3m to £5m. The major constituents of
this increase arose from the acquisition of the FastTrack Management Services
London and Reflex HR businesses, together with the purchase of the minority
shareholdings in DriveLink (South East) Limited.

Goodwill is amortised over its useful economic life up to a maximum period of
twenty years. The Directors regularly review the carrying value of goodwill for

Treasury Management

Cash Flow

Net cash of £2m (2003 - £2m) was generated from operating activities during the
year. After servicing of finance and taxation flows of £0.7m, the surplus was
reduced to £1.3m.

The Group spent £2.5m of cash on acquisitions and capital expenditure, resulting
in a cash outflow before financing of £1.2m.

The Group funded its investment activities by raising £2.3m in cash from the
issue of shares, giving rise to a reduction in net debt of £1m before accounting
for any debt acquired.

In the year, the Group acquired further invoice discounting liabilities, as part
of the FastTrack transaction, of £1.3m, resulting in a small overall increase in
net debt at the year end of £0.3m to £1.6m (2003: £1.3m).

Cash Management

The Group maintains a range of facilities appropriate to the funding of its
strategy of expansion by a mixture of organic growth and acquisition.

At the year end, the Group's financing arrangements comprised:

â.¢ cash at bank of £2.9m;
â.¢ an unutilised overdraft facility of £1.25m;
â.¢ outstanding term loans of £1.8m repayable over the next four years; and
â.¢ amounts owed in respect of factoring and invoice discounting of £2.7m.

The Group banks with HSBC Bank plc.

Nick Hall-Palmer
Finance Director

Year ended 31 December 2004

Audited Audited
2004 2003
£'000 £'000 £'000 £'000

Existing operations 28,730 25,598
Acquisitions 14,991 1,402

Continuing operations 43,721 27,000
Discontinued operations 1,709 2,367

Total turnover 45,430 29,367
Cost of sales (32,289) (18,778)

GROSS PROFIT 13,141 10,589

Administrative expenses - normal (11,771) (9,628)
- exceptional (303) (144)

Total administrative expenses (12,074) (9,772)

Existing operations 628 868
Acquisitions 618 171

Continuing operations 1,246 1,039
Discontinued operations (179) (222)

Total operating profit 1,067 817
Interest receivable and similar income - 62
Interest payable and similar charges (325) (196)


Tax on profit on ordinary activities (350) (246)


Equity minority interests (169) (163)


Equity dividends proposed (80) (56)

Retained profit for the year transferred to
reserves 143 218

Earnings per share (pence)
Basic and diluted 1.38 1.85

There are no recognised gains and losses for the current and preceding years
other than as stated above. Accordingly no statement of total recognised gains
and losses is presented.

31 December 2004

Audited Audited
2004 2003
£'000 £'000 £'000 £'000
Intangible assets 4,836 3,014
Tangible assets 284 283
Investment in associates 145 -

5,265 3,297
Debtors 8,328 5,232
Cash at bank and in hand 2,921 1,008

11,249 6,240

CREDITORS: amounts falling due
within one year (7,972) (4,370)



CREDITORS: amounts falling after more
than one year (including convertible debt) (1,669) (810)

NET ASSETS 6,873 4,357

Called up share capital 997 751
Other reserve 991 854
Share premium account 2,895 814
Profit and loss account 1,109 966


Equity minority interests 881 972

6,873 4,357

Year ended 31 December 2004
Audited Audited
Note 2004 2003
£'000 £'000 £'000 £'000

Net cash inflow from operating activities A 2,027 1,997

Returns on investments and servicing of finance
Interest received 12
Interest paid (325) (183)
Dividends paid to minority shareholders in
subsidiary undertakings (78) -

Net cash outflow from returns on
investments and servicing of finance (403) (171)

Taxation - corporation tax paid (297) (286)

Capital expenditure and financial investment
Payments to acquire tangible fixed assets (206) (224)

Net cash outflow for capital expenditure (206) (224)

Acquisitions and disposals
Purchase of businesses D (2,256) (1,677)

Net cash outflow from acquisitions (2,256) (1,677)

Equity dividends paid (59) (37)

Net cash outflow before financing (1,194) (398)

Issue of new shares 2,257 -
Issue of new loan stock - 35
Raising of long term loans 1,000 1,200
Repayment of loan (215) (197)
Increase/(decrease) in factoring balances 67 (304)
Capital elements of hire purchase contracts (2) (15)

Net cash inflow from financing 3,107 719

Increase in cash in the year B 1,913 321

2004 2003

£'000 £'000

Operating profit 1,067 817
Depreciation of tangible assets 272 235
Loss on disposal of tangible fixed assets - 3
Loss on disposal of intangible fixed assets - 17
Amortisation of goodwill 346 273
(Increase)/decrease in debtors (1,218) 83
Increase in creditors 1,560 569

Net cash inflow from operating activities 2,027 1,997

2004 2003

£'000 £'000

Increase in cash in the year 1,913 321
Cash inflow from increase in debt (850) (719)

Change in net debt resulting from cash flows 1,063 (398)
Factoring debt acquired with subsidiary (1,376) -
Conversion and cancellation of loan stock 32 97

(281) (301)
Opening net debt (1,286) (985)

Closing net debt (1,567) (1,286)

1 January non-cash 31 December
2004 Cash flow 2004
£'000 £'000 £'000

Cash at bank and in hand 1,008 1,913 - 2,921

1,008 1,913 - 2,921

Amounts owed to factors (1,257) (67) (1,376) (2,700)
Loan stock (32) - 32 -
Finance leases (2) 2 - -
Long term loans due within one year (225) 225 (239) (239)
Long term loans due after one year (778) (1,010) 239 (1,549)

(1,286) 1,063 (1,344) (1,567)


Acquisitions during the year contributed £547,000 to the group's net operating
cash flows, paid £149,000 in respect of returns on investments and servicing of
finance and utilised £26,000 for capital expenditure. As part of the
acquisitions the group acquired additional factored debts of £1,376,000 which is
a significant non-cash transaction.

Discontinued operations contributed outflows £250,000 (2003: £315,000) to the
group's net operating cash flows, paid £63,000 (2003: £44,000) in respect of
returns on investments and servicing of finance and utilised £39,000 (2003:
£33,000) for capital expenditure.

This information is provided by RNS
The company news service from the London Stock Exchange

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