Empresaria Group PLC
18 April 2008
Empresaria Group plc
Full Year Results for the Year Ended 31 December 2007
Adjusted profit before tax up 114% to £6.2m as group reports a transformational
April 18, 2008: The AIM-quoted staffing and recruitment group Empresaria today
announced a doubling in revenue and pre-tax profits for the year ended 31
December 2007, and said it had made further significant strides in diversifying
its operations internationally.
The group also announced a strong start to 2008, with revenues and net fee
income on a like-for-like basis ahead of 2007.
Adjusted pre-tax profits for the year increased 114% to £6.2 million on revenue
up 96% to £147.8 million.
The group said the figures reflected the impact of the acquisition of Headway,
its German based operation as well as a strong performance from its UK
Empresaria's strategy is to achieve balanced growth by developing its existing
businesses, investing in start-up businesses and making selective acquisitions.
To manage its exposure to fluctuations in any one economy the Group has
continued its strategy of diversifying into international markets offering
opportunities for high growth. In addition, it has focused on increasing the
contribution of its temporary and contract businesses, which offer greater
visibility of revenues and resilience to economic down turns.
For the first time, just over 50% of the Group's net fee income was generated
outside of the UK (2006 -19%) and 72% of its net fee income was generated by its
temporary and contract businesses compared to 56% in 2006.
Empresaria has operations in 18 countries across Europe, Asia, Australia and the
Americas trading through 49 companies.
Chairman Tony Martin said the investments made in Germany and Chile had
transformed the Group and commented, "Empresaria can for the first time be
accurately described as a truly international specialist staffing group,
becoming increasingly balanced in terms of sector, geography and operational
mix. The fact that it is not weighed down by large clerical and industrial
staffing operations, we believe creates significant potential for future
relative out-performance. Further, the natural diversification of investment
across sectors and geographies should provide resilience in times of economic
"The group has enjoyed a good start to 2008. Revenues and net fee income on a
like-for-like basis are ahead of 2007 and there is no evidence of any material
change in demand for group services. The heavy investment in start up companies
made in recent years, particularly in the Asia region, is now starting to
generate financial returns. We continue to see strong revenue growth in our
Continental European operations and, particularly in Germany, see opportunities
to improve operating margins."
A presentation of these results will be made to analysts and investors at 9.00am
on 18 April 2008 and an edited copy of this will be made available later that
morning on the Empresaria Group plc website: www.empresaria.com.
For further information contact:
Miles Hunt, Chief Executive, Empresaria Group plc: 01293 649 900
Stuart Kilpatrick, Group Finance Director, Empresaria Group plc: 01293 649 900
Allan Piper, First City Financial Public Relations: 020 7242 2666
Nicholas How, Kaupthing Singer & Friedlander: 020 3205 7620
Full results announcement attached
Empresaria Group plc
Preliminary Announcement for the Year Ended 31 December 2007
- Revenues of £147.8m (2006: £75.5m) up 96%.
- Gross profit of £42.4m (2006: £21.8m) up 95%
- Profit before tax of £6.0m (2006: £2.9m) up 107%
- Adjusted profit before tax* of £6.2m (2006: £2.9m) up 114%
- Earnings per share of 8.4p (2006: 6.7p) up 25%
- Adjusted earnings per share* 9.2p (2006 : 7.2p) up 28%
- Group cash at bank at year end £4.1m (2006: £3.3m)
- Group net debt at year end £4.2m (2006: £1.4m)
- Proposed dividend of 0.55p (2006: 0.50p)
- Strong organic growth from UK businesses
- Completion of the acquisition of Headway Group (Germany) in May 2007
- Entry into the Dutch staffing market through the investment in EAR in May
- Entry into the South American market with investment in Alternattiva of
Chile in November 2007
- Further expansion in Japan by investment in FINES KK in June 2007
- Strong progress in the ASEAN ** market with the establishment of start-up
operations in Singapore and the Philippines as well as the acquisition of a
training business in Indonesia
- Senior management team strengthened
- Encouraging start to 2008
£ 000's 2007 2006 2005 2004 2003
Revenue 147,827 75,459 54,060 45,430 29,367
Gross Profit 42,351 21,840 15,393 13,141 10,589
Total Operating Profit 6,738 3,505 1,914 1,067 817
Adjusted Operating Profit * 6,918 3,505 2,532 1,715 1,234
Adjusted Profit Before Tax * 6,170 2,894 2,225 1,390 1,113
Basic Earnings per share (pence) 8.4 6.7 3.1 1.4 1.9
Adjusted Earnings per share (pence) * 9.2 7.2 5.7 4.2 3.9
Dividend Proposed per share (pence) 0.55 0.50 0.45 0.40 0.38
* Figures based on underlying profits excluding amortisation of intangible
assets and any exceptional items. See reconciliation on page 24.
** ASEAN stands for Association of Southeast Asian Nations
Financial summary by region
In accordance with our strategy of creating a diversified international
specialist staffing business we review the regional performance of our
operations, a summary of which is provided below. As the Group develops we
expect to provide further analysis in relation to the Rest of the World once the
size of individual regions justifies it.
Our businesses in the UK
The UK Group provides permanent and temporary staffing solutions across five
main sectors; Construction and Property Services, Financial Services, Supply
Chain, Public Sector and Other Brands.
Financial highlights for the UK 2007 2006
Revenue (£'000s) 81,168 65,976
Net Fee Income (£'000's) 1 20,958 17,689
Adjusted Operating Profit (£'000's) 2 4,055 2,732
Number of Trading Companies 3 18 20
Number of Employees 265 249
Our businesses in Continental Europe
Following the acquisition of headwayholdings GmbH ("Headway") in May 2007, the
Group has a significant foothold in the German recruitment market. In addition
the Group has interests in companies based in Holland, Poland, Slovakia and the
Financial highlights for Continental Europe 2007 2006
Revenue (£'000s) 52,444 455
Net Fee Income (£'000's) 1 16,826 401
Adjusted Operating Profit (£'000's) 2 2,497 45
Number of Trading Companies 3 10 4
Number of Employees 298 34
Our businesses in the rest of the world
The Group has interests in companies based in Japan, South East Asia, Australia,
India, China and Chile.
Financial highlights for the rest of the world 2007 2006
Revenue (£'000s) 14,215 9,028
Net Fee Income (£'000's) 1 4,567 3,750
Adjusted Operating Profit (£'000's) 2 366 728
Number of Trading Companies 3 21 10
Number of Employees 197 82
1 Net fee income is equivalent to gross profit.
2 Figures based on underlying profits excluding amortisation of intangible
assets and any exceptional items. See reconciliation on note 8.
3 Reduction due to consolidation within the Public and Logistics Sectors during
2007 was a transformational and highly successful year for the group. Revenues,
net fee income (gross profit) and pre-tax profits doubled in the year, driven by
a combination of strong organic growth from established businesses, increasing
contribution from recent start up investments and strong profits from
acquisitions. Of greater significance, however, was the transformation in the
shape and mix of the business. In 2005 the group derived 97% of its net fee
income from the UK. In 2007 the net fee income split was approximately 50:50
and in 2008 we expect almost 70% to come from markets outside the UK.
It is not just the proportion of income generated outside the UK that is of
importance but where that income derives from. Group development focus is on
emerging economies and developing staffing markets. Following the acquisition
of Headway in May 2007, the group generates approximately the same net fee
income from Germany - one of the fastest growing staffing markets in Europe - as
it does the UK. In addition, Empresaria has high growth operations in countries
such as Japan, India, China and Indonesia, each with high development potential.
Empresaria can for the first time be accurately described as a truly
international specialist staffing group, becoming increasingly balanced in terms
of sector, geography and operational mix. The fact that it is not weighed down,
as other staffing groups are, by large clerical and industrial staffing
operations, we believe creates significant potential for future relative
out-performance. Further, the natural diversification of investment across
sectors and geographies should provide resilience in times of economic
Revenues for the year ended 31 December 2007 increased by 96% to £147.8m and net
fee income increased by 95% to £42.4m, a slightly higher figure than indicated
in the February trading statement following revision of the impact of currency
fluctuations and a review of the fair value of acquisitions. Profit before tax
(adjusted for amortisation of intangible assets) increased by 114% to £6.2m.
Although these figures include seven months of contribution from our acquisition
of Headway in Germany, they also reflect the strong organic growth contribution
from our established UK companies and the benefit of improved profitability as
central costs are absorbed across a broader group network.
Empresaria's strategy is to develop an international specialist staffing group,
balanced in terms of sector, geography and operational mix and driven by a
combination of organic and acquisitive growth.
Both group strategy and structure follow the underpinning philosophy of
management equity and the importance of aligning the interests of shareholders
and individual group company management teams through sharing risk and reward by
way of equity participation. Investments are made where management hold and
retain a meaningful stake in the business. The group's decentralised structure
also reflects this philosophy with local management retaining operational
autonomy and central functions focussing on financial planning and control,
group development and administration. For individual management teams this
arrangement offers a combination of support, responsibility and independence.
As Empresaria grows the group benefits from economies of scale and improved
rates of conversion of net fee income to operating margin as central costs are
absorbed across a wider community.
The evolution of Empresaria to date can be categorised broadly in two phases.
The first phase was the development from inception to the AiM float in late
2004. During this period it established itself as a diversified UK-based
specialist staffing group, known for its management equity philosophy and
recognised for its consistent strong financial performance. Since 2004, the
second phase, the group has been re-engineered. The strong philosophical
foundations and flexible corporate structure remain the same but the development
focus has shifted to new geographic markets in order to gain access to higher
growth economies and markets at the same time as reducing dependency on the UK
economic and regulatory environment. Empresaria is now a different company to
that of 2004 but its process of development is still at an early stage. The
Group is still unrepresented in the majority of Continental European countries
and also South America where Chile forms the only base of operations at present.
As other markets develop, particularly in the fast growing Asian countries,
there will be increased segmentation and creation of new vertical staffing
niches which in turn will offer new opportunities for investment. The speed of
further expansion will be dictated by market conditions and on identifying the
right investment opportunities.
The fantastic performance of the group in 2007 would not have been achieved
without the dedication, energy and enthusiasm of the more than 1,000 people
(including Associates) now working within the Group. We would like to thank
them all for their hard work and for their contribution to Empresaria's success.
Current trading and outlook
As stated in the trading statement in February, the group has enjoyed a good
start to 2008. Revenues and net fee income on a like-for-like basis are ahead
of 2007 and there is no evidence of any material change in demand for group
services. The heavy investment in start up companies made in recent years,
particularly in the Asia region, is now starting to generate financial returns.
We continue to see strong revenue growth in our Continental Europe operations
and, particularly in Germany, see opportunities to improve operating margins.
The outlook for the year needs to be considered with the economic forecasts in
mind. In this context the Board is mindful of the challenges and opportunities
that may be faced in the coming months. Empresaria has no meaningful direct
exposure to the US economy. Although Empresaria does have significant
operations in the UK, these are concentrated in large part on specialist sectors
where there is still a shortage of skilled staff and, in the case of our
Property Services operations, where demand is underpinned by long term
The diversification into emerging economies and countries where recent labour
market liberalisation is creating growing demand for staffing solutions is
anticipated to offset softening markets elsewhere. In both relative and
absolute terms we believe Empresaria is strongly positioned to take advantage of
increased opportunities created as a consequence of economic downturn or market
With these factors in mind the Board is cautiously optimistic as to the outlook
for the current year.
17 April 2008
Chief Executive's review
Performance review 2007
The rapid rate of development in 2007 has changed both the scale and scope of
Empresaria's operations. Reflecting these changes we are breaking down our
review of the business this year into three regions, UK, Continental Europe and
Rest of the World. This breakdown allows us to highlight not only relative
financial performance of each region but, of equal interest, the distinctive
growth strategies applied in each market.
The UK performed strongly in 2007. Development focus in the UK over recent
years has been to expand and strengthen our existing operations. This approach
is reflected in healthy organic growth rates at both revenue and net fee income
line of 20%, an improvement in the proportion of net fee income derived from
temporary staffing revenue to 58% and increased operational efficiency driving
the group's bottom line performance.
In Continental Europe, where labour markets tend to be more highly regulated and
economies of scale create greater competitive advantage, our approach has been
to build strong bridgeheads in individual country markets through acquisition
and then to use these as cornerstones for growth in each country. The clearest
example of this approach was the investment in Headway in Germany in May 2007.
Headway performed in line with expectations in 2007, generating year on year
revenue and net fee income growth of 25%.
Outside of the UK and Continental Europe we have targeted emerging economies and
staffing markets where the primary focus has been on investing in start up
operations with experienced local management teams. This approach has an
initial adverse impact on profits but, as we are already experiencing, creates
rapid organic growth in immature but fast developing markets. The year 2007 was
significant for this region as the large number of recent start up companies
moved collectively towards profitability.
On May 3, 2007 Empresaria acquired 60% in the German staffing company Headway, a
fast growing, partially specialised staffing company, based in Bavaria and
expanding its network rapidly in other parts of Germany. This acquisition was an
important strategic step in the internationalisation programme and gives
Empresaria a much more balanced stream of revenues and profits.
In the period from May to the end of the year Headway contributed revenues of
£47m, net fee income of £15m and operating profit of £2m, in line with
The German market has experienced strong growth in 2007. Headway achieved sales
growth of 25.1%, exceeding the estimated market growth of approximately 20%,
running an ambitious expansion programme with a net total of 22 new branch
openings, starting from 47 branches in the beginning of 2006 and ending the year
with 69 branches. The investment made in new branch offices in 2007 will benefit
sales growth and profitability of Headway from 2008 onwards, as the immature
branch network starts to exploit its potential.
Particularly good progress was achieved in the specialised divisions Headway
Logistics, Headway Engineers and Headway Industry during 2007, increasing the
proportion of the company's specialist business to 56.2%, while Headway Austria
achieved profitability in 2007. The priorities for 2008 are to increase
profitability of the immature branch network, improving efficiencies throughout
the organisation as well as strengthening the successful existing divisions.
Management team and structure
The Group is managed by a small, balanced Board of Directors with a
non-executive Chairman, two executive directors and two non-executive directors.
Below the main board is a Board of Management chaired by the Chief Executive.
The executive directors are the Group Chief Executive and Group Finance
Director. In 2006 we created the role of Head of European Operations with
Continental Europe companies reporting to this new position. We have now created
a similar role for the UK. As previously announced, Nick Hall-Palmer steps down
as Group Finance Director and as a member of the main Board following the
reporting of our 2007 results after eight successful years in the role. His new
role is Group Development Director and Head of UK Operations. Nick is replaced
as Group Finance Director by Stuart Kilpatrick. We welcome Stuart to the team.
Staffing is a relatively young industry. Growth rates and growth dynamics
differ from country to country. As individual staffing markets evolve,
generalist clerical and industrial staffing services make way for individual
market specialists as the drivers of growth. Liberalisation of previously
restricted labour markets acts as a catalyst for super-normal growth rates,
specific recent examples being Japan and Germany. The penetration rate - the
percentage of the working population of a country in temporary work - varies
from country to country depending on the regulatory and cultural environment.
The UK has the highest penetration rate of all international staffing markets.
Temporary staffing tends to follow permanent staffing in each new market as
employers and workers acclimatise to the benefits of flexible staffing. Above
all, the industry as a whole is growing on the back of the rapid global and
regional demographic changes, the increasing shortages of skilled staff and the
increasing demand for flexible workforce solutions and flexible working
The short-term fortunes of generalist clerical and industrial staffing companies
are connected to the broad economic environment in which they operate. For
specialist staffing companies such as Empresaria, our short-term fortunes are
largely dictated by the performance of the specialist markets we serve.
In the case of the UK market, the most developed of all international markets,
we have deliberately invested in a portfolio of sectors with different economic
and market dynamics. This diversification strategy has worked well over time
and enabled us to grow consistently through previous difficult market
conditions. At the moment we are seeing no material change in our markets.
Investment banking (approximately 8% of UK net fee income) has seen a decline in
permanent revenues but, by way of compensation, has seen a significant increase
in temporary staffing revenues. With the exception of our Public Sector
division (4% of 2007 UK net fee income), which continues to encounter
challenging market conditions, all sectors are performing strongly and are ahead
of 2007 at both revenue and net fee income levels for the first two months of
trading in 2008. Our Property Services and Construction sector, in particular,
is experiencing strong demand for its services, particularly from infrastructure
and transportation clients associated with upcoming projects such as the 2012
Olympics and the new London Cross-Rail initiative.
In Continental Europe, Empresaria's principal exposure is to the German market,
one of the stronger economies and without doubt one of the fastest growing
staffing markets as a consequence of recent labour market liberalisation.
Although industry growth rates appear to have declined over the course of 2007,
they are still expected to remain at double digit levels for a number of years
to come. Outside of Germany we are experiencing growth in our Eastern European
operations and enjoying contribution from our new Dutch company, EAR, whose rate
of expansion is being restricted by the shortage of available skilled workers.
The developing markets of Asia and Latin America offer substantial long term
growth opportunities. In Asia in particular, we are well placed to take
advantage of developing economies and nascent staffing industries. Empresaria
now operates in China (and is looking to increase its investment there in 2008),
India, Thailand, Malaysia, Singapore, Indonesia and the Philippines. We are
experiencing rapid growth in each of these countries and foresee a continuation
of this trend in 2008.
Across all regions, Empresaria has a broad mix of temporary and permanent
staffing operations with a group wide split of net fee income in 2007 of 72%:28%
temporary to permanent.
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