Interim Results
Empresaria Group PLC
19 September 2005
Empresaria Group plc
Interim results for the six months ended 30th June 2005
Empresaria Group plc ('Empresaria' or 'the Group') is pleased to announce its
unaudited interim results for the six months ended 30th June 2005.
Financial highlights
• Turnover increased by 17% to £24.5m (2004: £20.9m)
• Net fee income increased by 13% to £7m (2004: £6.2m)
• Adjusted operating profit increased by 46% to £861,000 (2004:
£591,000)*
• Adjusted profit before tax increased by 70% to £749,000 (2004: £440,000)*
• Adjusted earnings per share increased by 50% to 1.8p (2004: 1.2p)*
Operating highlights
• Strong organic growth in existing businesses (net fee income up by
11%)
• Investments in Japan and the US exceeding expectations
• UK start-up investment already moving into profitability earlier than
anticipated
• Strong financial contribution from recent acquisitions
Tony Martin, Chairman, commented that 'The Group is making progress in its
development of international staffing operations and its first investments in
international markets, particularly Empresaria's Japanese venture, are
performing strongly. The Group's strategy is to build a portfolio of staffing
companies both by geography and sector. Markets are generally buoyant and the
group continues to perform in line with expectations. A combination of solid
organic growth and increasing exposure to new investment opportunities gives the
Board confidence as to Empresaria's future prospects.'
*Figures based on underlying profits, adjusted for goodwill amortisation and
exceptional costs. There were no exceptional costs in the period to 30 June
2005.
The directors of the issuer accept responsibility for this announcement.
For further enquiries please contact:
Empresaria Group Plc 01293 649 900
Tony Martin (Chairman)
Miles Hunt (Chief Executive)
Nick Hall-Palmer (Finance Director)
Robert W. Baird Limited 020 7488 1212
Nick Tulloch/David Rae
Notes for editors:
Empresaria Group plc is a international recruitment group diversified by
geography and sector. Its aim is to grow through organic growth, investment in
start-up businesses, by providing funding for management buy outs and
acquisitions.
The philosophy of the Group is for management teams to have a substantial equity
interest in their business.
Empresaria was formed in 1996 by Miles Hunt and consists of 21 staffing
companies. Its business model, allows founder managers and key staff within
Empresaria's subsidiaries to acquire or retain a meaningful stake in the
businesses they run or work in.
Empresaria currently provides recruitment services across five sectors in the
UK; namely:
1. Construction, Property Services & Engineering;
2. Supply Chain;
3. Public Sector;
4. Financial Services; and
5. Specialist Brands.
In addition, Empresaria is actively expanding internationally and has
established operations in both the US and Japan.
Chairman's Statement
Results
In the six month period to June 2005 the Group once again produced an excellent
set of results with EPS growth of 50% and adjusted EPS growth also up 50%, when
adjusted to exclude goodwill amortisation and exceptional costs. This earnings
growth was driven by an increase in turnover of 17% to £24.5m (2004: £20.9m), an
increase in net fee income, of 13% to £7.0m (2004: £6.2m) and an increase in
adjusted pre-tax profit of 70% to £749,000 (2004: £440,000).
Earnings per share before amortisation of goodwill were 1.8p. Earnings per
share after amortisation of goodwill were 0.9p. There were no exceptional costs
in the period.
Dividend
The Board is not recommending the payment of an interim dividend for the six
months to 30 June 2005 (2004 interim: nil, 2004 final 0.4p).
Group development
The Group's development is focussed on combining controlled growth with managing
and reducing business risk. The Group's strategy can be distilled into the
following components:
i) International expansion
The Group is committed to investing in international staffing markets through
investment in start-ups, acquisitions and, where appropriate, through its
existing successful UK brands. Investment overseas will provide exposure to high
growth staffing markets and further reduce business risk through
diversification. The Group's first international investment was made at the end
of 2004 when it started an IT temporary staffing company, Skillhouse Staffing,
in Tokyo. The company is growing rapidly in a very strong recruitment market and
is performing well ahead of initial expectations.
In June this year Empresaria invested in Gerard Stewart Inc, an Atlanta based
recruitment to recruitment company and an extension of an existing successful UK
brand in this sector. The financial performance of this company is also
exceeding initial expectations.
The Group continues to investigate overseas markets, and has a pipeline of
opportunities.
ii) A portfolio of specialist staffing businesses
There are 24 staffing companies in the Group (including associate company
investments) in sectors ranging from insurance to healthcare to construction.
Focussing on a range of sectors allows the Group to switch resources according
to the business cycles of each sector and protects the Group from downturns in
individual markets. This approach has resulted in consistent turnover and
earnings growth over the last five years.
iii) Management equity
The structure and strategy of the Group is underpinned by the philosophy of
management equity. Each company in the Group is being developed by management
teams holding a meaningful equity stake. The culture of ownership,
entrepreneurship and responsibility created by this philosophy and model drives
organic growth and generates robust businesses with low turnover of key staff.
When Empresaria makes acquisitions it applies the same principles, either
co-investing with a management team (MBO/MBI structures) or allowing a partial
realisation for an existing ambitious management team.
iv) Balanced growth
The Group continues to take a balanced approach to growth, combining three core
strands; organic growth, investment in start-ups and acquisitions.
a) Organic growth
Turnover growth in the six months ended 30th June 2005 on a like for like basis
was 12% and gross profit increased on the same basis by 11%. Adjusted profit
before tax, again on the same basis, was up 21%. Continued investment is being
made in growth in consultant numbers and in branch network expansion. During
the period MVP (Supply Chain sector) established a branch in Manchester as did
The Recruitment Business (creative and design sectors staffing).
b) Start-ups
The Group invested in one start-up during the period, Gerard Stewart Inc in
Atlanta. We also continue to absorb the start-up costs of Skillhouse Staffing
in Tokyo although we expect it to move into profitability by the end of the
year. In the UK we started 2nd City Resourcing (marketing and PR staffing) in
September 2004, which is still in start-up mode and now moving to profitability.
It is not expected to contribute to earnings in the current year but is
growing, as with our overseas businesses, ahead of expectations.
c) Acquisitions
We continue to seek acquisitions that either complement existing group
operations or that extend group coverage into international staffing markets. In
February this year we announced the acquisition of The Recruitment Business ('
TRB'), a provider of creative and design staff to a range of markets including
the media, public and financial sectors. As expected, TRB is making a
significant contribution to group profits and, with the expansion through the
new Manchester office, identifying new areas of organic growth.
In July this year we announced the acquisition of More Driving, a South coast
based contract driving recruitment company. The company is currently being
absorbed within our existing DriveLink brand network. The acquisition extends
the geographic coverage of the DriveLink business and is expected to contribute
to earnings in 2006.
Prospects
The Group is making steady progress in its development of international staffing
operations and its first investments in international markets, particularly
Empresaria's Japanese venture, are performing strongly. The UK market is
generally buoyant and the Group continues to perform in line with expectations.
Our Financial Services companies, as outlined in the Chairman's report to the
accounts for the 2004 year end, experienced a slow start to the year but are now
all showing signs of picking up and are all producing encouraging current
results. A combination of solid organic growth and increasing exposure to new
investment opportunities gives the Board confidence as to Empresaria's future
prospects.
Tony Martin
Chairman
19th September 2005
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the 6 months ended 30th June 2005
Half Year Half Year Full Year
2005 2004 2004
£ 000 £ 000 £ 000
(unaudited) (unaudited) (audited)
Turnover
Existing operations 22,679 20,177 43,721
Acquisitions 1,848 - -
Continuing operations 24,527 20,177 43,721
Discontinued operations - 740 1,709
Total turnover 24,527 20,917 45,430
Cost of sales (17,507) (14,708) (32,289)
Gross profit 7,020 6,209 13,141
Administrative expenses (6,366) (5,736) (11,771)
Exceptional administrative expenses - (33) (303)
Total administrative expenses (6,366) (5,769) (12,074)
Operating profit
Existing operations 493 417 1,246
Acquisitions 183 - -
Continuing operations 676 417 1,246
Discontinued operations (22) 23 (179)
Group operating profit 654 440 1,067
Share of operating loss in associated company (34) - -
620 440 1,067
Net interest payable and similar charges (112) (136) (325)
Profit on ordinary activities before taxation 508 304 742
Tax on profit on ordinary activities (225) (119) (350)
Profit on ordinary activities after taxation 283 185 392
Minority equity interests (101) (92) (169)
Profit on ordinary activities attributable to
the members of Empresaria Group plc 182 93 223
Equity dividends proposed - - (80)
Retained profit for the period 182 93 143
Earnings per share (pence) basic 0.9 0.6 1.4
CONSOLIDATED BALANCE SHEET
As at 30th June 2005
June June December
2005 2004 2004
£ 000 £ 000 £ 000
(unaudited) (unaudited)
Fixed assets
Intangible assets 6,042 4,122 4,836
Tangible assets 301 297 284
Investment in associates 274 145
6,617 4,419 5,265
Current assets
Trade and other debtors 10,393 7,926 8,328
Cash 1,658 - 2,921
12,051 7,926 11,249
Creditors
Amounts falling due within one year (9,309) (5,845) (7,972)
Net current assets 2,742 2,081 3,277
Creditors
Amounts falling due after more than one year (1,595) (1,828) (1,669)
Total net assets 7,764 4,672 6,873
Capital and reserves
Called up share capital 1,037 759 997
Other reserve 991 854 991
Share premium 3,463 906 2,895
Profit and loss account 1,291 1,058 1,109
Equity shareholders' funds 6,782 3,577 5,992
Minority interests 982 1,095 881
7,764 4,672 6,873
CONSOLIDATED CASH FLOW STATEMENT
For the 6 months ended 30th June 2005
June June December
2005 2004 2004
Note £ 000 £ 000 £ 000
(unaudited) (unaudited)
Net cash inflow/(outflow) from
operating activities 1 35 (288) 2,027
Returns on investments and
servicing of finance
Net interest paid (112) (151) (325)
Dividends paid to minority
shareholders in subsidiary
companies (33) - (78)
Net cash outflow for returns on
investments and servicing of
finance (145) (151) (403)
Taxation - corporation tax paid (95) (38) (297)
Capital expenditure and financial
investment
Payments to acquire tangible assets (189) (140) (206)
Net cash outflow for capital
expenditure (189) (140) (206)
Acquisitions and disposals
Purchase of subsidiaries (1,134) (1,181) (2,256)
Cash acquired with subsidiary 324 - -
Purchase of associates (162) - -
Net cash outflow for acquisitions
and disposals (972) (1,181) (2,256)
Equity dividends paid - - (59)
Net cash outflow before financing (1,366) (1,798) (1,194)
Financing
Issue of shares - 10 2,257
Raising of long term loan - 1,000 1,000
Repayment of loan (96) (94) (215)
Increase/(decrease) in factoring
balances
199 (437) 67
Capital elements of hire purchase
contracts - (2) (2)
Net cash inflow from financing 103 477 3,107
(Decrease)/increase in cash in the 3
period (1,263) (1,321) 1,913
1 Reconciliation of operating profit to net cash inflow from operating
activities
June June December
2005 2004 2004
Operating profit 620 440 1,067
Share of associates losses 34 - -
Depreciation of tangible assets 134 142 273
Amortisation of goodwill 241 118 345
Increase in debtors (1,224) (602) (1,218)
Increase/(decrease) in creditors 230 (386) 1,560
Net cash inflow from operating 35 (288) 2,027
activities
2 Reconciliation of net cash flow to movement in net debt
June June December 2004
2004 2004
£000's £000's £000's
(Decease)/increase in cash in the period (1,263) (1,321) 1,913
Cash outflow from decrease in debt (103) (467) (850)
Change in net debt resulting from cash (1,366) (1,788) 1,063
flows
Conversion and cancellation of loan - 32 32
stock
Factoring debt acquired - (1,376) (1,376)
(1,366) (3,132) (281)
Opening net debt (1,567) (1,286) (1,286)
Closing net debt (2,933) (4,418) (1,567)
3 Analysis of net debt
Other
31 December non-cash 30 June
2004 Cash flow changes 2005
£000's £000's £000's £000's
Net cash:
Cash at bank and in hand 2,921 (1,263) - 1,658
Amounts owed to factors (2,700) (199) - (2,899)
Long term Loans
Due within one year (239) 96 (71) (214)
Due after one year (1,549) 71 (1,478)
(1,567) (1,366) - (2,933)
NOTES TO INTERIM REPORT
1. Basis of preparation
The interim financial information has been prepared on the basis of accounting
policies consistent with those adopted for the year ended 31 December 2004. The
interim financial information has not been audited and does not constitute
statutory accounts within the meaning of section 240 of the Companies Act 1985.
The comparative results for this period present an abridged version of the full
accounts for the year ended 31 December 2004, which received an unqualified
audit report, and which have been filed with the Registrar of Companies.
The interim financial statements comprise the following:
• Profit and loss account for the six months ended 30 June 2005 with
comparative information for the year ended 31 December 2004 and for the
6 months ended 30 June 2004;
• Balance sheet as at 30 June 2005 with comparative information at
31 December 2004 and at 30 June 2004; and
• Cash flow statement for the 6 months ended 30 June 2005 with comparative
information for the year ended 31 December 2004 and the 6 months ended
30 June 2004.
2. Dividend
The directors do not propose the payment of a dividend for the period.
3. Earnings per share
Basic earnings per share are calculated by dividing the retained profit for
each period by the average number of shares in issue, 20,370,877
(December 2004: 16,127,987; June 2004: 15,124,895).
4. Reconciliation of basic to adjusted EPS
6 Months 6 Months Year
ended ended ended
30 June 30 June 31 Dec
2005 2004 2004
Basic EPS 0.9 0.6 1.4
Effect of goodwill amortisation 0.9 0.5 1.7
Effect of exceptional items - 0.1 1.1
Adjusted EPS 1.8 1.2 4.2
5. Reconciliation of adjusted profits
6 Months 6 Months Year
ended ended ended
30 June 30 June 31 Dec
2005 2004 2004
Operating profit 620 440 1,067
Profit before tax 508 304 742
Goodwill amortisation 241 118 345
Exceptional operating items - 33 303
241 151 648
Exceptional non-operating items (15) -
Adjusted operating profit 861 591 1,715
Adjusted profit before tax 749 440 1,390
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