Revision: Trading Update and Notice of Results

RNS Number : 6951U

Empresaria Group PLC

31 July 2020

 

REVISION: TRADING UPDATE and NOTICE OF RESULTS

The following amendments have been made to the "Trading Update and Notice of Results" announcement released on 22/07/2020 at 7:00am under RNS No 6819T.

· The original announcement stated that net debt reduced to £11.6m. This has now been revised to an improved position of £8.9m.

· The original announcement stated a £7.5m reduction in net debt from 31 December 2019. This has now been revised to an increased reduction of £10.2m.

All other details remain unchanged. The full amended announcement is set out below.

Empresaria Group plc

("Empresaria" or the "Group")

Trading Update and Notice of Results

Profitability and financial strength demonstrated in face of COVID-19 impact

Empresaria (AIM: EMR), the international specialist staffing group, provides a trading update ahead of announcing its interim results for the six months ended 30 June 2020 on Wednesday 12 August 2020.

Trading update

· Profitable in both the first and second quarters despite impact of COVID-19 (adjusted profit before tax)

· Year on year profit growth in the first quarter pre-pandemic

· Net debt significantly reduced to £8.9m and headroom increased to £18.1m

· Operational investments and initiatives continue to position the Group for long-term growth

As we communicated in our May trading update, the Group had a strong start to the year and in the first quarter to the end of March delivered year on year growth in operating profit in every month as the operational initiatives put in place last year started to have a positive impact.  Net fee income for the first quarter was down 5% on 2019 with the vast majority of this reduction being in March as COVID-19 started to impact the Group.

The second quarter was fully impacted by COVID-19 with net fee income for the quarter down 39% on 2019 resulting in 2020 first half net fee income being 22% lower than last year.  While nearly all our businesses were adversely affected, the degree of impact varied due to the diverse nature of the Group in sector and geography.  Our diversification has once again proven beneficial even in this extreme economic downturn.  Illustrating this, our logistics business in Germany saw a positive short-term benefit helping to partially offset the more significant adverse impacts elsewhere such as in our businesses supporting the aviation and new home sales sectors which saw very significant falls in net fee income.

As detailed in our previous updates, the Group took swift and decisive action on costs, with costs in the second quarter 30% lower than in 2019 and 23% lower than the first quarter.  As a result, the Group remained profitable in the second quarter (at an adjusted profit before tax level), despite the significant fall in net fee income.

The significant cost cutting measures put in place were targeted to protect the ability of the Group to rebuild effectively as its markets recover.  Key investment plans, including in core technology, were protected to ensure that those benefits can continue to be realised.

Financial position

Adjusted net debt at 30 June 2020 was £8.9m, a £10.2m reduction from 31 December 2019.  While profits have been adversely impacted, the reduction in activity levels in the second quarter have created significant working capital inflows which have reduced net debt.  Additionally, the Group took advantage of various government schemes to delay payment of certain taxes such as VAT in the UK.  These deferrals total £3.5m and will start to be paid as we move through the second half of the year.  As communicated in May, the Group also agreed an increase of £2.5m in its UK overdraft facilities.  At 30 June 2020, headroom (excluding invoice financing facilities) had increased to £18.1m (31 December 2019 £11.5m).

Performance by sector

Net fee income by sector for the six months ended 30 June:

£m	2020	2019	% change	% change (constant currency)*
Professional	8.8	13.7	-36%	-35%
IT	6.7	6.8	-1%	-2%
Healthcare	1.2	1.4	-14%	-14%
Property, Construction & Engineering	0.4	2.3	-83%	-83%
Commercial	8.0	9.1	-12%	-10%
Offshore Recruitment Services	3.4	3.2	+6%	+8%
Intragroup	(0.3)	(0.2)	n/a	n/a
Total	28.2	36.3	-22%	-21%

* The constant currency movement is calculated by translating the 2019 results at the 2020 exchange rates.

The Group's Professional sector has seen a significant impact from COVID-19 with a 36% fall in net fee income compared with 2019.  The greatest impact was on our aviation recruitment business which has experienced very substantial reductions in demand.  We do not expect to see a recovery to pre-COVID-19 levels in the short term, but believe that this business continues to have good growth potential in the medium and long term.  We have taken action to restructure this business to right size its cost base and ensure it is well placed to rebuild as the market comes back.

The Group's IT sector has proven to be one of our most resilient in the face of COVID-19, reflecting the roles and niches we work with, and delivering net fee income in line with 2019 for the first half of 2020.  Our US business has performed particularly strongly delivering net fee income growth of more than 40% over 2019, although this was offset by the UK business which has had a weaker start to 2020.

The Group's Healthcare sector has been adversely impacted by COVID-19 with patients unable or unwilling to engage with healthcare services unless absolutely necessary resulting in lower demand for temporary staff.

The Group's Property, Construction & Engineering sector, which is based in the UK, was impacted by the enforced lockdown restrictions, particularly in our business supplying sales staff to the new home sector.  Prior year net fee income includes the UK engineering business a substantial part of which was closed in late 2019.

The Group's Commercial sector has seen a 12% fall in net fee income compared with 2019 with performance varying across geographies.  In Germany our logistics business had a positive impact from COVID-19, with increased demand from its clients as a result of the initial demand from supermarkets and then benefiting from the ongoing trend towards online deliveries for products rather than going to shops.  Elsewhere in Germany this was offset by our businesses with major clients in the automotive sector which continues to face challenges.  While factories are now reopening, consumer demand remains low suppressing the need for temporary workers.  The impact of COVID-19 was felt later in Peru and Chile and it looks as if they have not yet seen the peak impact.  Our business in Chile has received some protection from the impact with supermarkets forming a large part of their client base.

The Group's Offshore Recruitment Services business in India experienced a significant drop in demand from its recruitment industry clients, particularly in the US, as they have passed on the impact of COVID-19 on their own businesses.  Despite this, the sector delivered year on year growth in net fee income in the first half and responded extremely well to local lockdowns, successfully moving hundreds of staff to home working in a very short period of time while continuing to meet clients demands.  Although the net fee income of this business has been impacted in the short term, we see increased opportunities as clients seek to make efficiency improvements in their operating models.

Rhona Driggs, CEO of Empresaria, commented:

"The last few months have been the most challenging period I have experienced in the staffing industry.  I am extremely proud of how our teams have responded given the unprecedented impact of COVID-19 on all of our lives and on the global economy.  I would like to take this opportunity to thank all of our employees around the world for their adaptability, resilience and for their significant contributions in enabling us to deliver the financial performance we achieved in the first half of 2020. 

There are still challenges to overcome as we continue to navigate through COVID-19 and our focus remains on the health and safety of our employees and candidates.  There have, however, been a number of positives in the period as this pandemic has united our teams even further, enabling us to leverage our strength and expertise across the globe.  Despite the significant falls in the global economy and in the markets in which we operate, we have remained profitable, demonstrating the strength of our operating model and the progress we have made over the last year with our Stronger Together initiative.

Having weathered the initial impact of COVID-19 our focus has turned to recovery and ensuring we continue to identify and deliver on the opportunities ahead.  While difficult decisions had to be made during this turbulent time, this has enabled us to accelerate changes to our operating models that will result in a more efficient and effective group.  We have protected key investment spend to ensure we continue to deliver on our strategy and build the platform for a strong recovery as the markets improve.

The risks of COVID-19 remain, and while we are cautious on the speed of recovery, we believe we are well placed to take advantage as and when demand returns."

Investor presentation

In line with Empresaria's commitment to ensuring appropriate communication structures are in place for all sections of its shareholder base, management will deliver an online results presentation open to all existing and potential investors via the Investor Meet Company platform on Wednesday 12 August 2020 at 4pm 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.

- Ends -

Enquiries:

Empresaria Group plc Rhona Driggs, Chief Executive Officer Tim Anderson, Chief Financial Officer	via Alma PR
N+1 Singer (Nominated Adviser and Broker) Shaun Dobson / James Moat	020 7614 3000
Alma PR (Financial PR) Rebecca Sanders-Hewett Sam Modlin David Ison	020 3405 0205 [e-mail]

Notes for editors:

§ Empresaria Group plc is a global specialist staffing group offering temporary and contract recruitment, permanent recruitment and offshore recruitment services across 6 sectors: Professional, IT, Healthcare, Property, Construction and Engineering, Commercial and Offshore Recruitment Services.

§ Empresaria operates from locations across the world including the 4 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 visitempresaria.com

 

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