22 August 2023

 

Empresaria Group plc ("Empresaria" or the "Group")

 

Unaudited interim results for the six months ended 30 June 2023

 

Challenging market conditions impacting results

 

Empresaria Group plc (AIM: EMR), the global specialist staffing group, announces its unaudited interim results for the six months ended 30 June 2023.

 

Overview of the half year

	2023	2022	% change	% change (constant currency)2
Revenue	£125.7m	£129.8m	-3%	-6%
Net fee income	£29.7m	£32.6m	-9%	-10%
Adjusted operating profit1	£1.3m	£4.5m	-71%	-71%
Operating profit	£0.6m	£3.8m	-84%
Adjusted profit before tax1	£0.5m	£4.0m	-88%
(Loss)/profit before tax	£(0.2)m	£3.3m	-106%
Adjusted, diluted (loss)/earnings per share1	(0.8)p	3.7p	-122%
Diluted (loss)/earnings per share	(2.0)p	2.7p	-174%

 

·    Challenging market conditions from H2 2022 continued into 2023 impacting net fee income

o  Reduced by 9% year-on-year to £29.7m against a strong comparator

o  Offshore services up 15%

o  Permanent placement down 24%

o  Temporary and contract down 8%

·    Adjusted operating profit down 71% to £1.3m year-on-year reflecting a higher cost base at the start of 2023 following 2022 investment and inflationary pressures

·    Measures to manage cost base taken in Q2 2023, with benefit due to be seen in H2 2023

·    Adjusted, diluted loss per share of 0.8p reflecting the strong contribution from Offshore Services where there is 28% non-controlling interest

·    Adjusted net debt increased slightly to £8.7m (31 December 2022: £7.9m) with headroom increased to £18.4m

·    Adjusted profit before tax for the full year expected to be in line with current market expectations

 

1    Adjusted to exclude amortisation of intangible assets identified in business combinations, impairment of goodwill and other intangible assets, exceptional items, fair value charge on acquisition of non-controlling shares and, in the case of earnings, any related tax.

2    The constant currency movement is calculated by translating the 2022 results at the 2023 exchange rates.

 

 

Chief Executive Officer, Rhona Driggs, commented:

 

"The challenging market conditions that developed during the second half of 2022 remained through the first half of 2023.  The market has yet to show any significant or sustained signs of improvement as client and candidate confidence remains at lower levels across the majority of our markets and sectors.

 

Our cost base at the start of 2023 was elevated compared to the first half of 2022 reflecting inflationary pressures and targeted investments we made in headcount during 2022 in response to client demand in the first half of that year.  As a result, the fall in net fee income has had a material impact on our profits.  We have taken action to make appropriate reductions to our cost base which will benefit the second half of the year and we will continue cost control measures until we see sustained signs of improvement.

 

While we are disappointed with the start to 2023, we are making progress on our key strategic actions to deliver growth.  Given current market conditions we continue to review our operational and investment priorities to ensure the Group is best placed to realise our medium-term ambition."

 

 

Investor presentation

 

In line with Empresaria's commitment to ensuring appropriate communication structures are in place for all shareholders, management will deliver an online presentation, available to all existing and potential shareholders, on the interim results for the six months ended 30 June 2023 via the Investor Meet Company platform on Tuesday 22 August 2023 at 4:30pm UK time.

 

Questions can be submitted pre-event through the platform or at any time during the live presentation.  Management may not be in a position to answer every question it receives but will address those it can while remaining within the confines of information already disclosed to the market.

 

Q&A responses will be published at the earliest opportunity on the Investor Meet Company platform.

 

Investors can sign up for free via: https://www.investormeetcompany.com/empresaria-group-plc/register-investor.  Those who have already registered and requested to meet the Company will be automatically invited.

 

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the UK version of the EU Market Abuse Regulation (2014/596) which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended and supplemented from time to time.

 

 - Ends -

 

 

Enquiries:

 

Empresaria Group plc Rhona Driggs, Chief Executive Officer Tim Anderson, Chief Financial Officer	via Alma PR
Singer Capital Markets (Nominated Adviser and Joint Broker) Shaun Dobson / James Moat	020 7496 3000
Cenkos Securities plc (Joint Broker) Katy Birkin / Charlie Combe (Corporate Finance) Michael Johnson / Jasper Berry (Sales)	020 7397 8900
Alma PR (Financial PR) Sam Modlin Rebecca Sanders-Hewett Hilary Buchanan	020 3405 0205 empresaria@almapr.com

 

The investor presentation of these results will be made available during the course of today on Empresaria's website: www.empresaria.com.

 

Notes for editors:

§ Empresaria Group plc is a global specialist staffing group.  We are driven by our purpose to positively impact the lives of people, while delivering exceptional talent to our clients globally.  We offer temporary and contract recruitment, permanent recruitment and offshore services across six sectors: Professional, IT, Healthcare, Property, Construction & Engineering, Commercial and Offshore Services.

 

§ Empresaria is structured in four regions (UK & Europe, APAC, Americas and Offshore Services) and operates from locations across the world including the four largest staffing markets of the US, Japan, UK and Germany along with a strong presence elsewhere in Asia Pacific and Latin America.

 

§ Empresaria is listed on AIM under ticker EMR.  For more information visit www.empresaria.com.

 

 

Cautionary statement regarding forward-looking statements

This document may contain forward-looking statements which are made in good faith and are based on current expectations or beliefs, as well as assumptions about future events.  You can sometimes, but not always, identify these statements by the use of a date in the future or such words as "will", "anticipate", "estimate", "expect", "project", "intend", "plan", "should", "may", "assume" and other similar words.  By their nature, forward-looking statements are inherently predictive and speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future.  You should not place undue reliance on these forward-looking statements, which are not a guarantee of future performance and are subject to factors that could cause our actual results to differ materially from those expressed or implied by these statements.  Except as required by applicable law or regulation, Empresaria undertakes no obligation to update any forward-looking statements contained in this document, whether as a result of new information, future events or otherwise.

 

Finance and operating review

 

The Group has been impacted by challenging market conditions in the six months ended 30 June 2023 with net fee income falling by 9% to £29.7m and adjusted operating profit reducing by 71% to £1.3m.  This performance has been driven by a number of factors as set out below.

 

 

Challenging market conditions

 

The softening of demand and slowing of hiring decisions seen across the Group's businesses in the second half of 2022 have continued into 2023.  These difficult market conditions have been experienced across the Group, but particularly in the US where both IT and Healthcare have seen significant declines.  The greatest impact has been on permanent recruitment, with net fee income down 24% year-on-year, with the greatest falls in the US and UK.  Temporary and contract was down 8% and, although this has been more resilient, we have not seen the improvements we expected to see in this market.

 

 

Managing our cost base

 

In 2022, the Group made targeted investments in its teams in order to meet customer demand in the first half of that year.  This, combined with inflationary impacts, meant that the Group started 2023 with a higher cost based than in the first half of 2022.  As market conditions developed and the ongoing impact became clear, the Group implemented a number of targeted measures to manage this cost base.  As a result, headcount as at 30 June 2023, excluding our offshore services operation, has reduced by 5% from 31 December 2022, and the full benefit of these actions will be seen in the second half of the year.  We will maintain cost control measures while ensuring that we have the resources in place to maximise opportunities as and when market confidence returns.

 

 

Continued strength in Offshore Services

 

Our Offshore Services operation delivered year-on-year net fee income growth of 15% against the first half of 2022.  Our sales to US clients, the majority of which support the IT sector, have been impacted by the wider market conditions in the US and the fall in client demand seen in the second half of 2022 has continued into 2023.  Growth in sales to our UK clients, the majority of which are in Healthcare, remains strong and we have not seen the same challenges in UK Healthcare as have been seen in the US.  As a result, adjusted operating profit has increased by 6% year-on-year and headcount has grown by 4% in the period.  We continue to see strong growth opportunities and are investing in the future of this business, including in the infrastructure to support ongoing growth.

 

 

Continuing to deliver on strategic initiatives

 

Despite overall market conditions we continue to be focussed on delivering on our strategic initiatives.  We have now officially launched our Professional operation in the US, under our lead Professional brand, LMA Recruitment.  As part of this launch, we took the opportunity to refresh the positioning and identity of this brand which will also benefit operations elsewhere in the Group.  In line with our strategy, we are focussed on leveraging our existing US client base and are already seeing some good early success from this.

 

Our other key strategic priority for 2023 is Empresaria Solutions, focussed on delivering a wider breadth of services to our clients as well as leveraging our expertise in delivering to MSP clients, across multiple disciplines and locations.  We are continuing to make progress on developing this solution and expect a soft launch by the end of the year.

 

Outlook

The first half of 2023 has been challenging and we expect the current market conditions to continue to impact through the rest of the year.  Underlying drivers, such as relatively low levels of unemployment and skills shortages, remain across our markets, and we expect these to underpin and accelerate recovery as and when confidence returns.

 

Regional Performance

 

Net fee income by region:

£'m	6 months ended 30 June 2023	6 months ended 30 June 2022	% change	% change (constant currency)
UK & Europe	12.6	14.5	-13%	-15%
APAC	7.3	7.9	-8%	-8%
Americas	3.4	4.6	-26%	-31%
Offshore Services	7.0	6.1	+15%	+17%
Intragroup eliminations	(0.6)	(0.5)
Total	29.7	32.6	-9%	-10%

 

Performance in each of the regions is analysed below.

 

UK & Europe

 

£'m	6 months ended 30 June 2023	6 months ended 30 June 2022	% change	% change (constant currency)
Revenue	58.7	63.2	-7%	-10%
Net fee income	12.6	14.5	-13%	-15%
Adjusted operating profit	0.9	2.0	-55%	-55%
% of Group net fee income	42%	44%

 

In UK & Europe revenue was down 7%, with net fee income down 13% reflecting a greater decline in permanent placements compared to temporary and contract.  Adjusted operating profit was down 55%.

 

The UK saw the weakest results with net fee income down 25%, driven by reductions in permanent hiring.  The impact was across all of our UK operations with our Professional and IT sectors seeing the most significant reductions in demand.

 

The performance in Germany was more solid with net fee income down just 1% reflecting year-on-year growth in our logistics business which partially offset reductions elsewhere.

 

 

 

APAC

 

£'m	6 months ended 30 June 2023	6 months ended 30 June 2022	% change	% change (constant currency)
Revenue	26.0	23.0	+13%	+15%
Net fee income	7.3	7.9	-8%	-8%
Adjusted operating (loss)/profit	(0.6)	0.5	-220%	-220%
% of Group net fee income	24%	24%

 

In APAC, revenues increased by 13% reflecting revenue growth in our aviation business.  However, this is lower margin business and net fee income for the region was down 8% reflecting performances elsewhere.  There were pockets of net fee income growth with aviation, China and Philippines all showing strong year-on-year increases.  However, in Japan IT demand fell sharply at the start of the year and in Thailand political uncertainty has significantly impacted client confidence while Singapore also performed poorly during the first half of the year.  Our performance in Australia continues to be of concern with net fee income down significantly on the prior year and stringent actions have been taken on cost to stabilise the business.

 

Overall, the region has made a loss in the first half of the year reflecting results in Australia, Singapore and ongoing losses in aviation.  We believe that the right actions are in place to address these and bring those operations back to profitability.

 

Americas

 

£'m	6 months ended 30 June 2023	6 months ended 30 June 2022	% change	% change (constant currency)
Revenue	28.4	32.7	-13%	-19%
Net fee income	3.4	4.6	-26%	-31%
Adjusted operating (loss)/profit	(0.3)	0.8	-138%	-133%
% of Group net fee income	11%	14%

 

In the Americas, revenue was down 13%, with a sharp drop in permanent hiring reflected in a 26% reduction in net fee income.  The region generated an adjusted operating loss, driven by the performance in the US.

 

In the US we operate primarily in the Healthcare and IT sectors, both of which experienced sharp declines in demand in the period.  In IT, we were impacted by a combination of the general decline in permanent IT demand, alongside the collapse of Silicon Valley Bank which impacted a large number of our clients.  Healthcare has also dropped significantly from the high levels during COVID, with demand, particularly for travel nurses, dropping significantly and pay rates, which had been at elevated levels, also falling.

 

In LATAM, we delivered solid increases in both net fee income and adjusted operating profit with demand for our retail outsourcing services remaining strong.

 

 

 

Offshore Services

 

£'m	6 months ended 30 June 2023	6 months ended 30 June 2022	% change	% change (constant currency)
Revenue	13.2	11.7	+13%	+16%
Net fee income	7.0	6.1	+15%	+17%
Adjusted operating profit	3.7	3.5	+6%	+9%
% of Group net fee income	23%	18%

 

Offshore Services delivered solid growth with revenue up 13% and net fee income up 15%.  Investment in infrastructure is reflected in the 6% growth in adjusted operating profit.

 

The first half of 2023 has continued in the same vein as the second half of 2022 with sales to our UK Healthcare clients remaining the main driver of growth with the number of billable seats increasing by 17% compared to 31 December 2022.  Sales to our US clients, who mainly operate in the IT sector, have continued to be impacted by weak demand resulting in an 11% fall in billable seat numbers compared to 31 December 2022.  We have continued to invest in the infrastructure of the business to ensure it remains well positioned for future growth.

 

Financing

 

Net finance costs have increased significantly to £0.8m (2022: £0.5m) reflecting higher interest rates across the Group's facilities offset by lower average levels of borrowings and the benefit of actions taken to improve cash efficiency.

 

Net cash inflow from operating activities was £4.6m (2022: £7.3m), while free cash flow, which excludes movements related to pilot bonds and includes cash outflows on leases, was an inflow of £2.0m (2022: £4.8m). 

 

Capital expenditure in the first half of 2023 was £0.9m (2022: £0.8m) and mainly reflected infrastructure investment to support growth in Offshore Services.  The Group's dividend to its shareholders resulted in a £0.7m outflow (2022: £0.6m), dividends to non-controlling interests were £0.4m (2022: £0.4m), while a cash outflow of £0.1m (2022: £0.2m) is shown for Empresaria shares purchased and transferred into the Employee Benefit Trust.

 

Adjusted net debt (which excludes £0.5m cash held in respect of pilot bonds and does not include lease liabilities recognised under IFRS 16) was £8.7m as at 30 June 2023, an increase of £0.8m from 31 December 2022.  Average month end adjusted net debt was £7.9m during the period (six months ended 30 June 2022: £12.9m).

 

As at 30 June 2023, the Group had financing facilities totalling £54.0m (31 December 2022: £54.8m).  Excluding invoice financing, undrawn facilities have increased to £18.4m (31 December 2022: £17.9m) reflecting the small increase in the overall net debt position being more than offset by improvements in cash management.

 

The Group's revolving credit facility covenants are tested on a quarterly basis.  The covenants, and our performance against them as at 30 June 2023, are as follows:

 

Measure	Target	Actual
Net debt to EBITDA	< 2.5 times	0.6 times
Interest cover	> 4.0 times	6.6 times

 

Dividend

In line with prior years, the Board is not recommending the payment of an interim dividend for 2023 (2022: nil).

 

 

22 August 2023

Condensed consolidated income statement
Six months ended 30 June 2023
		6 months ended 30 June 2023	6 months ended 30 June 2022	Year ended 31 December 2022
		Unaudited	Unaudited
	Notes	£m	£m	£m
Revenue	3	125.7	129.8	261.3
Cost of sales		(96.0)	(97.2)	(195.9)
Net fee income	3	29.7	32.6	65.4
Administrative costs		(28.4)	(28.1)	(55.2)
Adjusted operating profit	3	1.3	4.5	10.2
Fair value charge on acquisition of non-controlling shares		(0.1)	-	-
Amortisation of intangible assets identified in business combinations		(0.6)	(0.7)	(1.4)
Operating profit		0.6	3.8	8.8
Finance income	4	0.2	0.1	0.3
Finance costs	4	(1.0)	(0.6)	(1.5)
Net finance costs	4	(0.8)	(0.5)	(1.2)
(Loss)/profit before tax		(0.2)	3.3	7.6
Taxation	6	(0.1)	(1.3)	(2.8)
(Loss)/profit for the period		(0.3)	2.0	4.8
Attributable to:
Owners of Empresaria Group plc		(1.0)	1.4	3.4
Non-controlling interests		0.7	0.6	1.4
		(0.3)	2.0	4.8
		Pence	Pence	Pence
		Unaudited	Unaudited
Earnings per share
Basic	7	(2.0)	2.8	6.9
Diluted	7	(2.0)	2.7	6.7
Details of adjusted earnings per share are shown in note 7.

 

 

Condensed consolidated statement of comprehensive income
Six months ended 30 June 2023
		6 months ended 30 June 2023	6 months ended 30 June 2022	Year ended 31 December 2022
		Unaudited	Unaudited
		£m	£m	£m
(Loss)/profit for the period		(0.3)	2.0	4.8
Other comprehensive income
Items that may be reclassified subsequently to the income statement:
Exchange differences on translation of foreign operations		(2.0)	2.2	2.6
Items that will not be reclassified to the income statement:
Exchange differences on translation of non-controlling interests in foreign operations		(0.2)	0.2	0.3
Other comprehensive (loss)/income for the period		(2.2)	2.4	2.9
Total comprehensive (loss)/income for the period		(2.5)	4.4	7.7
Attributable to:
Owners of Empresaria Group plc		(3.0)	3.6	6.0
Non-controlling interests		0.5	0.8	1.7
		(2.5)	4.4	7.7

 

 

Condensed consolidated balance sheet
As at 30 June 2023
		30 June 2023	30 June 2022	31 December 2022
		Unaudited	Unaudited
	Notes	£m	£m	£m
Non-current assets
Property, plant and equipment		2.8	2.2	2.8
Right-of-use assets		5.2	6.7	7.5
Goodwill		31.1	31.3	31.9
Other intangible assets		7.5	8.7	8.2
Deferred tax assets		5.2	4.2	4.4
		51.8	53.1	54.8
Current assets
Trade and other receivables	10	44.4	48.8	46.7
Cash and cash equivalents	9	19.6	23.1	22.3
		64.0	71.9	69.0
Total assets		115.8	125.0	123.8
Current liabilities
Trade and other payables	11	33.2	35.0	33.3
Current tax liabilities		1.2	1.6	1.5
Borrowings	8	18.8	22.7	29.1
Lease liabilities		2.2	3.3	5.3
		55.4	62.6	69.2
Non-current liabilities
Borrowings	8	9.0	10.5	0.5
Lease liabilities		3.4	3.7	2.6
Deferred tax liabilities		2.5	2.5	2.5
		14.9	16.7	5.6
Total liabilities		70.3	79.3	74.8
Net assets		45.5	45.7	49.0
Equity
Share capital		2.5	2.5	2.5
Share premium account		22.4	22.4	22.4
Merger reserve		0.9	0.9	0.9
Retranslation reserve		2.9	4.7	5.1
Equity reserve		(10.2)	(10.2)	(10.2)
Other reserves		0.1	(0.4)	(0.3)
Retained earnings		20.6	20.5	22.4
Equity attributable to owners of Empresaria Group plc		39.2	40.4	42.8
Non-controlling interests		6.3	5.3	6.2
Total equity		45.5	45.7	49.0