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RNS Number : 7621P

Empresaria Group PLC

31 March 2009

EMPRESARIA GROUP PLC PRESS RELEASE

Revenue up 41% and net fee income increases by 21% as Empresaria continues
global expansion

Significant growth in more resilient temporary business and overseas operations


Crawley, UK: 31 March 2009:- Empresaria Group plc, the AIM-quoted international
specialist staffing company, today announced strong growth in revenue and gross
profit for the year ended 31 December 2008. Further progress has also been made
in diversifying its operations internationally and growing net fee income from
its contract and temporary businesses.

Revenue increased by 41% to £207.7 million, net fee income was up 21% to £51.5
million and adjusted profit before tax grew 3% to £6.4 million. Adjusted
earnings per share reduced from 9.2p to 8.6p.

The Group also announced that 76% of its net fee income was generated by its
temporary and contract businesses, compared to 72% in 2007.

The contribution from the Group's international businesses grew significantly,
contributing 59% of net fee income, up from 51% last year.

Empresaria has operations in 20 countries through more than 130 offices and with
more than 1,000 staff.

Chairman Tony Martin commented, "2008 was a satisfactory year for the Group in
what was an increasingly challenging global economic environment.

The Group is in the early stages of its development. Investment is heavily
focused on emerging economies and staffing markets, in particular those that are
relatively new to the concept of flexible employment solutions. Our objective is
to establish a footprint in those markets where we anticipate staffing industry
development over time. Our priority at this stage is to establish and grow this
business base, delivering high quality services. In each case we have been
investing for growth and sustainable returns rather than short term profit,
although we have seen profits grow in individual companies and markets as they
develop. In each of our geographical territories our market share is relatively
small, leaving significant scope for expansion.

With the steps that have already been taken and that are planned to shield the
Group against the present slowdown and with the growth opportunities that are
apparent even now, Empresaria has started the current year with optimism,
although we are, at the same time, realistic as to the current market
challenges. Any assessment of outlook for the year is difficult given the
prevailing uncertain economic outlook; however, the Board remains confident of
the prospects for the Group."

A presentation of these results will be made to analysts and investors at 9.00am
on 31 March 2009 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

Nicholas How, Singer Capital Markets Ltd: 020 3205 5000

Full Stock Exchange announcement follows:

Empresaria Group plc

Preliminary Announcement for the Year Ended 31 December 2008

Headlines 2008

Financial headlines


* Revenues up 41% to £207.7m (2007: £147.8m)
* Gross profit up 21% to £51.5m (2007: £42.4m)
* Adjusted profit before tax* up 3% to £6.4m (2007: £6.2m)
* Adjusted operating profit* up 9% to £7.5m (2007: £6.9m)
* Adjusted earnings per share** 8.6p (2007: 9.2p)
* Operating profit of £2.4m (2007: £6.7m)
* Profit before tax of £1.3m (2007: £6.0m)
* (Loss) / earnings per share of (4.8)p (2007: 8.4p)
* Group cash at bank at year end £5.7m (2007: £4.1m)
* Group net debt at year end £9.1m (2007: £4.2m)
* Proposed dividend of 0.35p (2007: 0.55p)


Operational headlines


* A year of continued revenue growth with strong performance
into the last quarter
* Expansion into new international markets (Finland, Estonia
and Romania)
* 76% of gross profit from more resilient temporary staffing
* Significant financial contribution from recent investment
in South America
* Strong performance from German operations
* Prompt and decisive action taken to equip our businesses
for a more demanding market in 2009


Financial Highlights


Overview of performance 2008 2007 2006 2005 2004

Revenue (£m) 207.7 147.8 75.5 54.1 45.4
Gross Profit (£m) 51.5 42.4 21.8 15.4 13.1
Adjusted Profit Before Tax (£m) * 6.4 6.2 2.9 2.2 1.4
Adjusted Operating Profit (£m) * 7.5 6.9 3.5 2.5 1.7
Adjusted Earnings per share (pence) ** 8.6 9.2 7.2 5.7 4.2
Operating Profit (£m) 2.4 6.7 3.5 1.9 1.1
Earnings per share (pence) (4.8) 8.4 6.7 3.1 1.4
Proposed dividend per share (pence) 0.35 0.55 0.5 0.45 0.4


* Figures based on underlying profits excluding amortisation of intangible
assets and any exceptional items.

** See reconciliation in note 2.

The amounts disclosed for 2004 to 2005 are stated on the basis of UK GAAP
because it is not practicable to restate amounts for periods prior to the date
of transition to IFRSs. The principal difference between UK GAAP and IFRSs is
amortisation of goodwill as it applies to Empresaria.

Our Business

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 breakdown the highlights for the "Rest of the World" region into the
individual regions within this group.


UK Financial highlights 2008 2007

The UK Group provides permanent and temporary staffing Revenue (£m) 83.6 81.2
solutions across four main sectors; Construction and Property
Services, Financial Services, Supply Chain and Other Brands.
Net Fee Income (£m) 1 20.9 21.0
Adjusted Operating Profit (£m) 2 3.8 4.0
Number of Trading Companies 18 18
Average number of Employees 281 265



Continental Europe Financial highlights 2008 2007

Following the acquisition of headwayholdings GmbH ("Headway") Revenue (£m) 92.1 52.4
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, Finland, Slovakia and the
CzechRepublic.
Net Fee Income (£m) 1 22.9 16.8
Adjusted Operating Profit (£m) 2 3.0 2.5
Number of Trading Companies 13 10
Average number of Employees 278 206




Rest of the World Financial highlights 2008 2007

The Group has interests in companies based in Japan, South Revenue (£m) 32.0 14.2
East Asia, Australia, India, China and South America.
Net Fee Income (£m) 1 7.7 4.6
Adjusted Operating Profit (£m) 2 0.7 0.4
Number of Trading Companies 21 21
Average number of Employees 342 197


1 Net fee income is equivalent to gross profit.

2 Figures based on underlying profits excluding amortisation of intangible
assets and any exceptional items.

Chairman's Statement

Overview 2008

2008 was a satisfactory year for the Group in what was an increasingly
challenging global economic environment. Revenues and net fee income increased
significantly in the year, underlying profit levels remained constant and the
mix of business continued to change with the majority (59%) of net fee income
being derived from outside the UK (2007: 51%).

Group strategy

During 2008, Empresaria continued to implement its strategy of developing an
international specialist staffing group balanced both in terms of sector focus
and geographical coverage. In the year, the Group invested in a number of small
companies as well as start-up operations and new branches for the existing
network. It now operates through approximately 140 individual branches, spread
over 20 different countries and with more than 1,000 internal staff.

The Group is in the early stages of its development. Investment is heavily
focused on emerging economies and staffing markets, in particular those that are
relatively new to the concept of flexible employment solutions. Our objective is
to establish a footprint in those markets where we anticipate staffing industry
development over time. Our priority at this stage is to establish and grow this
business base, delivering high quality services. In each case we have been
investing for growth and sustainable returns rather than short term profit,
although we have seen profits grow in individual companies and markets as they
develop. In each of our geographical territories our market share is relatively
small, leaving significant scope for expansion.

This geographic diversity is aligned to a management equity philosophy, enabling
business managers to hold significant equity stakes in their business. This
ownership culture, combined with a decentralised management structure and a
balance of industry sector exposure, has in previous market downturns
contributed significant, valuable resilience and flexibility to our operations.

The rapid change in the economic environment poses tough challenges to all
companies but equally creates opportunities. Our focus is on managing within the
current constraints of an increasingly difficult trading environment whilst
being aware of, and attuned to, market opportunities. We view the Group as a
portfolio of companies, in each case supported by us as they develop and grow.
These holdings are constantly reviewed in terms of performance levels and their
potential to contribute to Group success.

Financial performance

Revenues for the year ended 31 December 2008 increased by 41% to £207.7m and net
fee income increased by 21% to £51.5m. Profit before tax (adjusted for
intangible amortisation and exceptional items) increased by 3% to £6.4m. The
Group did incur one off exceptional costs of £4.8m in the year which reduced
statutory profits. These exceptional costs related to asset impairments for
certain of our portfolio companies and restructuring costs. Restructuring costs
incurred or provided for totaled £1.6m and the actions taken are expected to
reduce annual operating costs by approximately £3.0m in 2009.

Although trading cash inflows were £4.6m (2007: £1.4m), net debt increased in
the year to £9.1m from £4.2m reflecting the revenue growth of the Group with the
resultant increase in working capital requirements as well as continued
investment activity. In December 2008 the Group increased its revolving credit
facility with HSBC to meet its financing requirements, details of which are set
out in the Financial Review.

Chairman's Statement (continued)

Empresaria's people

Empresaria's success is built on the passion, commitment and hard work of our
people. In increasingly challenging market conditions, our ability to adapt and
to seek out the opportunities that exist depends on the flexibility, support and
positive attitude of all of those working in the Group. Now, more than ever, we
would like to take this opportunity to thank them for their contribution to our
success.

Current trading and outlook

As stated in the trading statement in January the Group was able to grow
revenues during the last quarter of 2008, counter to industry and market trends.


Our Continental European operations, particularly in Germany, have been affected
by the longer than anticipated factory shut downs in January which, combined
with reduced demand for technical workers within the manufacturing sectors, has
led to a decline in revenues in the first few months of the year.

The UK and Rest of the World regions have started the year in January in line
with expectations. Performance in February was more mixed. The Rest of the World
region has continued to show year on year growth at revenue and net fee income
levels and the UK has continued to grow in revenue terms. However UK net fee
income year to date is down on the prior year.

With the steps that have already been taken and that are planned to shield the
Group against the present slowdown and with the growth opportunities that are
apparent even now, Empresaria has started the current year with optimism,
although we are, at the same time, realistic as to the current market
challenges. Any assessment of outlook for the year is difficult given the
prevailing uncertain economic outlook; however, the Board remains confident of
the prospects for the Group.

Tony Martin

Chairman

30 March 2009

Chief Executive's Review

Performance review 2008

In 2008 the Group generated organic growth from both established Group
operations and recent new additions. We entered new markets (including Finland,
Estonia and Romania) and new sectors (including engineering in China, corporate
training in SE Asia and healthcare in the Nordics and the Baltics). In addition,
we added new fee earners where growth opportunities allowed, strengthened our
central management team and invested in new financial management systems.

We started 2008 expecting to experience more challenging trading conditions at
some point in the year. Caution as to the market outlook prompted us to call off
negotiations on a number of potential investments in Europe and South America as
well as reduce the planned number of start-up investments and new branch
openings. However, trading conditions over the first three quarters remained
benign across our markets. Only in the financial services sector did we see
evidence of significant market deterioration and, despite this, we were still
able to generate significant profits from our financial services companies in
London and Tokyo. Despite the change in the economic environment in the last
quarter, the Group continued to grow revenues.

In the UK, the Construction and Property Services sector continued its strong
organic growth, driven principally by demand within the transport and
infrastructure industries. This was supported by a consistent contribution from
our Financial Services and Other Brands. Trading in the last quarter of 2008 for
our Supply Chain division declined reflected challenging conditions within the
retail sector.

In Continental Europe, Headway, our German business, which is by some margin the
largest of our operations, grew revenues by 7% in the year. Growth rates stalled
in the last quarter, reflecting the impact of a weakening German economy. In
July 2008 we invested in MediradiX, a supplier of medical staff operating in
Finland and Estonia, which made a positive contribution in the second half of
the year and continues to perform well.

Our Rest of the World division grew revenues and net fee income in 2008
significantly ahead of the previous year, mainly from a combination of start-ups
and small acquisitions made in 2006 and 2007. Alternattiva in Chile contributed
strongly in its first full year in the Group.

Market and Business Overview

Empresaria's strategy has been to gain access to international growth markets
and to reduce exposure to individual economies through geographic and sector
diversification. Whilst, as a specialist staffing organisation our financial
performance is somewhat dependent on the fortunes of the specific markets we
serve, our strategy has proven successful over time and given the relatively low
market share of our companies there remains scope to grow share even in more
challenging trading conditions.

Over the last six months we have seen a substantial change in the global
economy. In the face of this change we expect the Group to be resilient relative
to the staffing industry as a whole, aided by the fact that the majority of our
net fee income is derived from more stable temporary staffing operations and
because of our strong ownership culture. The sense of responsibility that this
culture engenders, and the levels of creativity and entrepreneurialism that it
generates, sets Empresaria apart from more traditional business structures.

Due to challenging market conditions, and the expectation that it will take time
for the global economy to see any material improvement, the Group has adjusted
its short term priorities and approach. We look at the Group as an investment
portfolio with each company challenged, monitored and, above all, assisted in
achieving its growth plans. Where Group companies have been adversely affected
by the economic conditions, represent a commercial risk or have limited growth
potential, we are taking appropriate action.

Chief Executive's Review (continued)

In some cases this has led to a write down in the carrying value of investments
in our balance sheet. This not withstanding, in the current economic climate we
still have a number of strong and successful businesses that are growing and we
are committed to provide the resources required to support this growth.

Miles Hunt

Chief Executive

30 March 2009

Operational Review

UK

Revenues from UK operations increased 3% to £83.6m (2007: £81.2m) whilst net fee
income was slightly lower at £20.9m (2007: £21.0m). This apparent disparity
reflects the growth in temporary revenues in our Construction and Property
Services sector which operate at lower margins and a decline in the margin of
historically higher margin temporary revenue streams, such as our Public Sector
businesses which we divested during the year. This is reflected in the reduction
in UK gross profit margin from 25.9% to 25.0%. The mix of temporary staffing net
fee income to permanent recruitment net fee income remained stable at 58:42.

Within our Construction and Property Services sector our FastTrack brand
continued to show strong growth, benefitting from its focus on the
infrastructure market. This growth was partially offset by the worsening markets
faced by our housing sales and shop-fitting businesses.

Our Other Brands sector performed well in generally tightening markets. Greycoat
Placements (domestic staff) benefitted from its leading position in a resilient
market segment, whilst McCall (recruitment to recruitment) and Bar 2 (payroll
services) also grew revenues. The Recruitment Business (creative design) also
delivered a good performance.

Within the Financial Services sector LMA, our banking operations brand, saw a
31% growth in revenues; a strong performance from its temporary operation offset
lower permanent sales, which weakened in the second half year. Towards the end
of the year both of the Insurance businesses were merged, allowing our clients
to benefit from a more comprehensive, integrated service under the Mansion House
brand.

After trading ahead of expectations in the first eight months of the year, our
Supply Chain businesses experienced reduced demand driven by the sharp decline
in the UK retail market. As a result we have reorganised our operations and
adjusted the cost base.

The outlook for our UK operations in 2009 is mixed. We expect our Construction
and Property Services sector to perform well due to its focus on infrastructure
and transport projects. The Financial Services and Supply Chain sectors are
likely to face a challenging trading environment and will focus on cost control
and developing solutions for their clients appropriate to their changed market
conditions. Our Other Brands should have sufficient strength and diversity to
remain profitable.

Continental Europe

2008 was a year of continued growth. Sales grew from £52.4m in 2007 to £92.1m in
2008 and net fee income increased from £16.8m to £22.9m. In Germany, our most
important market, sales grew by 7% for the full year (on a proforma basis). In
the first half year sales growth was 14% and in the second half, sales increased
by 1%, reflecting a sudden change in market conditions in the last quarter. The
decline in sales growth in the latter half of the year stems from the generalist
businesses only, with the specialist businesses performing very well,
particularly the Engineers division which almost doubled its sales and the
Logistics division which increased revenues by over 30% in the year. Changing
product mix, pricing pressure and factory closings in December resulted in a
drop in gross margin in the last quarter of the year, however targeted cost
savings taken over the course of the year compensated at the net profit level.


In July 2008, we invested in a 60% stake in MediradiX, a healthcare business
focusing on doctors, dentists and nurses, mainly recruited in Estonia, but
working in Finland. Consistent historic growth and limited exposure to economic
cycles are the main features of this business.

Operational Review (continued)

In reviewing our European investment portfolio, we decided at the end of the
year to sell our interest in our investment in Poland to local management. The
business was originally established to source Polish workers for the UK and
Ireland. This "work abroad" market has been in recent decline and has little
prospect of short term recovery.

Rest of the World

Revenues grew 125% to £32.0m (2007: £14.2m) and net fee income grew 67% to £7.7m
(£4.6m). Growth was generated largely through a combination of strong organic
growth in South East Asia and the first full year contribution from Alternattiva
in Chile. The difference between revenue and net fee income growth rates
reflects the increasing contribution from temporary staffing businesses in the
region, particularly from South America.

In South East Asia we operate three brands, Monroe Consulting (executive
recruitment), Advanced Career (payroll services and temporary staffing) and
Learning Resources (corporate training). Each brand has grown substantially in
the year: Monroe adding both new branches and fee earners in the year, Advanced
Career passing the 2,500 contractor mark and Learning Resources rapidly
developing into a regional force in the corporate training sector with over
forty trainers and support staff. All these operations were established over the
last three years and are in the early stages of development, with some branches
still to move to profitability.

Our Japanese and Australian businesses generated net fee income in the year at
similar levels to 2007. Our Japanese operations are expected to benefit in 2009
from FINES (fashion industry staffing) contributing for the first time as a
subsidiary company. In Australia, although TRB (creative sector) is continuing
to grow, our IT staffing operations continue to underperform and we have acted
to reduce costs.

In July 2008 we invested in a new Shanghai based joint venture, Empresaria
Intelligence, backing into this vehicle the assets and goodwill of Shanghai
Intelligence, one of mainland China's principal recruitment businesses focusing
on technical engineering operations.

Our Indian company, IMS, set up in 2006, was profitable in the last quarter and
is benefiting from the demand from more developed countries for a range of low
cost resourcing and HR related solutions.

In Chile, Alternattiva has made a significant financial contribution, despite
the requirement to adapt to changing regulation in the Chilean staffing sector.
The company continues to develop innovative outsourcing solutions and pricing
structures to its retail and telecommunications clients and is seeking to
develop new revenue streams in 2009 from training and permanent recruitment
operations.

Financial Review

Introduction

International Financial Reporting Standards (IFRS) require that items of income
and expenditure that are material in terms of their nature or amount be
disclosed separately. Certain items have been disclosed as exceptional and the
Board considers that the information presented in the tables in this report
provides useful additional information relating to the underlying performance of
the Group. This information should not be considered as alternative but
supplementary to the full IFRS income statement on page 18.

Group results

Group revenue increased in 2008 by 41% to £207.7m (2007: £147.8m). Revenues on a
like for like basis, from businesses owned throughout the current and prior
year, increased by £10.1m, with increases achieved in all regions.


Revenue
Reported Like for like increase/ (decrease) Like for like (decrease) / increase Effect of (disposals) / acquisitions (1) Foreign exchange (2) Reported
2007 Temporary Permanent 2008
£m £m £m £m £m £m

UK 81.2 6.9 (0.5) (4.0) - 83.6
Continental Europe 52.4 1.6 (0.5) 31.9 6.7 92.1
Rest of World 14.2 2.0 0.6 13.6 1.6 32.0
Total 147.8 10.5 (0.4) 41.5 8.3 207.7

(1) All businesses acquired or disposed in 2007 and 2008.
(2) Adjusts 2007 reported results to 2008 exchange rates.


Gross profit or net fee income was 21% higher at £51.5m (2007: £42.4m). Organic
growth across all regions from temporary contracts was partly offset by a fall
of £0.4m in permanent net fee income in the year.

Financial Review (continued)


Net fee income
Reported Like for like increase Like for like (decrease) / increase Effect of acquisitions (1) Foreign exchange (2) Reported
2007 Temporary Permanent 2008
£m £m £m £m £m £m

UK 21.0 0.4 (0.5) - - 20.9
Continental Europe 16.8 0.2 (0.5) 4.3 2.1 22.9
Rest of World 4.6 0.2 0.6 1.8 0.5 7.7
Total 42.4 0.8 (0.4) 6.1 2.6 51.5

(1) All businesses acquired or disposed in 2007 and 2008.
(2) Adjusts 2007 reported results to 2008 exchange rates.


Gross margin, the ratio of net fee income to revenue, decreased as expected to
25% in 2008 (2007: 29%). The full year effect of the Group's investments in 2007
increased the proportion of net fee income from temporary placements to 76%
(2007: 72%). This change in mix accounts for 2% of the decrease in gross margin.
In addition a change in mix of margin within the temporary business, in
particular a full year of Alternattiva and continued strong growth in the UK
Construction and Property Services sector, reduced the average margin from
temporary placements.

Adjusted operating profit

Operating profit, before exceptional items and intangible amortisation,
increased by 9% to £7.5m (2007: £6.9m). The net impact of acquisitions and
disposals added £2.0m in 2008 but this was partly offset by an investment in
start-ups in the South East Asia region of £1.4m.

Exceptional items

In anticipation of more challenging economic conditions, the Group focused on
identifying potential reductions to the cost base and ways of improving the
Group's efficiency. As a consequence the Group has taken an exceptional charge
of £4.8m in the year in respect of businesses sold or closed, goodwill
impairments and restructuring costs. An analysis of the cash and non-cash charge
is set out below:


Asset impairments Cash spent in 2008 Cash to be spent in 2009 Total
£m £m £m £m
1.4 0.2 0.3 1.9
UK
Continental Europe 1.4 0.5 - 1.9
Rest of World 0.4 0.6 - 1.0
3.2 1.3 0.3 4.8


Financial Review (continued)

The asset impairments relate to the Group's exit from the public sector in the
UK, reported at the half year, and the sale of investments in the UK, Poland and
China. The cash spend relates to one-time restructuring and redundancy costs in
the UK and Continental Europe. These actions are expected to reduce annual
operating costs by approximately £3.0m in 2009. In the Rest of World region, the
cash spend relates to the impact of significant legislative changes in Chile.

Interest

Net finance costs amounted to £1.0m (2007: £0.6m) in 2008. The increase in the
period was due to higher average borrowings. Interest cover, the ratio of
operating profit adjusted for exceptional items and intangible amortisation to
interest on bank loans and overdrafts was 6.5 times (2007: 9.5 times).

Taxation

The total tax charge for the year was £1.8m (2007: £1.9m). Tax on adjusted
profits before exceptional items and goodwill amortisation was £2.1m
representing an effective rate of 32.8% (2007: 31.0%). This is higher than the
standard rate in the UK of 28.5% due to a combination of unrelieved losses and
the mix of profits in the different jurisdictions in which the Group operates.

(Loss) / earnings per share

The diluted loss per share, based on profits after taxation and minority
interest charges, was 4.8p (2007: earnings of 8.4p). The deficit is principally
due to asset impairments, including goodwill write downs in the year which do
not attract tax relief or an adjustment for minority interest. To gain a better
understanding of the underlying performance for the year, the Group also reports
earnings per share excluding items classified as exceptional and intangible
amortization; adjusted earnings per share decreased by 7% to 8.6p (2007: 9.2p).

Dividend

During the year the Group paid a dividend in respect of the year ended 31
December 2007 of 0.55p per share. The Board is proposing a dividend of 0.35p per
share which, if approved, will be paid on 17 August 2009 to shareholders on the
register on 17 July 2009.

The proposed reduction in dividend payable reflects the more challenging market
conditions anticipated in 2009 and the desire of the Board to preserve cash in
order to support better the development opportunities within the Group.

Investments

The Group invested £0.3m in a number of start-ups during the year and took
majority shareholdings in three small businesses within its UK Supply Chain
operations. In addition, in April 2008 the Group acquired a majority stake in
Lumleys, a UK provider of in-house catering staff, for a total cash
consideration of £0.5m.

Empresaria expanded its operations in China in July 2008 with an investment in
Intelligence HR Consultants for a consideration of £0.4m. This business, based
in Shanghai, specialises in providing engineers and technicians to the
manufacturing industry. In July 2008, the Group invested £1.3m for a 60%
interest in MediradiX, which is based in Finland and Estonia. MediradiX supplies
medical professionals to the Finnish market.

Financial Review (continued)

The Group invested a further £2.0m contingent consideration in Alternattiva in
Chile and increased shareholdings in its existing businesses. Contingent
consideration payable in 2009 is expected to be £0.1m and amounts payable to
increase our shareholdings in existing businesses is expected to be £0.5m.

Cash flow

Net borrowings increased by £4.9m in the year to £9.1m. The Group increased
adjusted EBITDA (earnings before interest, tax, depreciation and amortisation
and adjusted for exceptional items) by 9% to £8.3m. A summary of the cash flow
is set out below:


Summarised cash flow 2008 2007
£m £m

Operating profit before exceptional items & intangible 7.5 6.9
amortisation
Depreciation 0.8 0.7
8.3 7.6

Working capital (3.2) (5.1)
Capital expenditure (0.5) (1.1)
Trading cash flows 4.6 1.4

Interest and tax (2.8) (2.0)
1.8 (0.6)

Cash spend on exceptional items (1.3) -
Investments (4.5) (1.4)
Other (1.4) (0.7)
(5.4) (2.7)

Net debt brought forward (4.2) (1.3)
Exchange differences 0.5 (0.2)
Net debt carried forward (9.1) (4.2)


The summarised cash flow is derived from the cash flow statement and note 3.

Trading cash flows increased by £3.2m to £4.6m and would have been higher had
debtor days not increased during November and December at two of the Group's
larger businesses. Extended plant shutdowns in Germany and computer systems
issues at FastTrack in the UK resulted in approximately £2.0m of additional
working capital funding being necessary. Since year end, this situation has
already substantially improved. Strong efforts will be made to improve cash
collection in 2009.

Cash flow on exceptional items comprised £1.3m of restructuring and redundancy
costs and the impact of legislative changes in Chile.

Financial Review (continued)

The Group invested a further £4.5m on development activity, which comprised
£2.2m of new investments and £2.3m of deferred consideration and minority
buy-ins of existing businesses. Full details are set out in the Group's 2008
Annual Report to be published shortly.

In the 2007 Annual Report, we commented on the impact of the government's
abolition of managed service companies and identified a negative cash flow
impact on the Group. In practice this has taken longer than anticipated and
approximately £0.6m was incurred in 2008 with the remainder likely to fall in
2009.

Bank facilities

The Group maintains a range of facilities appropriate to manage its working
capital requirements and to fund selective investment activities. At the year
end the Group's facilities comprised:


Type £m Expiry
Term loans 1.8 2011 / 2012
Revolving credit facility 7.5 Dec 2011
Invoice discounting facilities 13.8 Annual
Overdrafts 7.1 Annual
Total 30.2


The Group's bank covenants comprise net debt:EBITDA which must not exceed 2.5
times, interest cover, which must exceed 3 times and debt service cover, which
must exceed 1. Compliance with these covenants is tested semi-annually. At 31
December 2008, the Group reported substantial headroom under the covenants with
net debt:EBITDA being 1.1, interest cover being 8.2 and debt service cover being
3.5.

Financial control

During 2008, the Group commenced a project to update its systems for the
collection and consolidation of data from its 52 businesses around the world.
The upgrade to the consolidation process places no risk to the underlying
systems utilised by each operating company but collects data in a standardised
format from those underlying systems and provides a platform for data
consolidation and analysis. The system is expected to be fully rolled out during
2009, to improve the speed of financial reporting and strengthen the Group's
system of internal financial control.

Principal risks and uncertainties

The Group has a process that identifies certain risks that could affect business
operations and hence the financial results of Empresaria. Further information on
this process is set out in the Corporate Governance report in the Group's 2008
Annual Report to be published shortly.

Financial Review (continued)

Growth management

The Group's growth strategy includes the investment in and management of
start-up businesses and acquisitions. This strategy has certain risks and
failure to improve operating performance of start-up businesses and acquired
businesses may adversely impact results, including the Group's cash flow.
Failure to ensure the Group has sufficient senior management resources to manage
and control its growth could adversely impact its profitability. The Board
regularly assesses the strength and suitability of its senior management
resources and adapts this resource to the needs of the Group.

Dependence on key executives and personnel

The Group's future success is substantially dependent on retaining and
incentivising its senior management and certain key employees. The loss of the
service of key personnel may have an adverse impact on the Group's business and
relationships. However, the Group's philosophy of management equity ensures that
key management is appropriately incentivised through equity ownership. In
addition, as the Group grows and diversifies geographically, its reliance on any
one company and the individuals associated with that company reduces.

Operational risks

Empresaria's businesses are highly dependent on IT systems for the day to day
running of their operations. As a consequence there is an ongoing review process
to ensure that systems are maintained adequately and that repairs and upgrades
are made as necessary. It is Group policy that each business has a process in
place to protect against potential malicious attacks to its IT systems. In
common with many organisations, although preventative procedures are in place,
there remains a residual risk of disruption to voice and data infrastructure.

Financial risks

The Group maintains a comprehensive insurance programme with limits and
deductibles that are set so as to optimise the total cost of risk borne by the
Group. Empresaria works with underwriters and insurance brokers to ensure
appropriate cover is in place. As with all businesses there is the risk of
failure of financial controls. The Group's internal control framework is set out
in the Corporate Governance report in the Group's 2008 Annual Report to be
published shortly.

Market risks

Political environment

A change in government policy may impact on the level of public spending in the
key sectors in which the Group operates. Changes of this nature in the
macro-economic environment could adversely affect the financial performance of
the Company.

Economic environment

The performance of staffing businesses has historically shown a strong
correlation with performance of the economies in which they operate.
Empresaria's strategy of diversification within individual geographic markets
and its expansion internationally is designed to mitigate the effect of a
downturn in any one economy. Nevertheless, a significant global economic
downturn would result in reduced revenues and profits for the Group.

Financial Review (continued)

Legislative change

The Group's business is subject to European, UK and overseas employment
legislation. Any changes to this may impact on the manner in which Empresaria
conducts its business and could therefore affect the financial performance of
the Group.

Currency exposures

The Group operates in 20 countries and is exposed to potential changes in the
values of 15 different currencies. The revenues and costs of each of the Group's
businesses are typically in the currency of operation and Empresaria has little
exposure to transactional risk. The Group's reporting currency is sterling and
the results of each business are translated into sterling at average rates for
the year. Empresaria does not seek to hedge translation risk as there is to some
degree a natural hedge from operating in a wide range of countries.

Treasury risks

The Group operates a central treasury function which manages and monitors
external and internal funding requirements and the following treasury risks:

i) Credit risk

ii) Liquidity risk

iii) Market risk

The Group's policies and procedures to manage these risks are set out in the
Group's 2008 Annual Report to be published shortly.

Going concern

The Board has undertaken a recent and thorough review of the Group's budget,
forecasts and associated risks and sensitivities. Despite the significant


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