Trading Update and Notice of Results

RNS Number : 1272N

Empresaria Group PLC

28 January 2021

 

28 January 2021

Empresaria Group plc

("Empresaria" or the "Group")

Trading Update and Notice of Results

Profitability, operational resilience and financial strength

Empresaria (AIM: EMR), the global specialist staffing group, today provides a trading update for the financial year ended 31 December 2020 ahead of announcing its full year results on 18 March 2021.

Trading update

· Adjusted profit before tax expected to be approximately 5% above the top end of market guidance

· Net fee income of £54.0m, towards the higher end of market guidance, down 28% compared to 2019, (27% in constant currency)

· Profitable* in every quarter despite impact of COVID-19, demonstrating the benefits of the Group's diversity by sector and geography

· Maintained a strong balance sheet - adjusted net debt at 31 December 2020 of £13.6m, a reduction of £5.5m compared to 31 December 2019 and an increase of £4.7m from 30 June 2020 reflecting working capital outflows as trading started to recover

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

· Good momentum in Q4 2020, but cautious start to 2021 with increased lockdown and other restrictions across several markets

* adjusted profit before tax

The Group had a strong start to 2020 delivering year on year growth in operating profit in every month of the first quarter as operational initiatives, launched in 2019 and aimed at improving collaboration and delivering synergies and efficiency across the Group, started to have a positive impact.  COVID-19 started to impact the Group in March, resulting in net fee income for the first quarter being down 5% on 2019.

The second and third quarters saw the most significant impact from the COVID-19 pandemic on the Group with May, June and July being hit hardest as clients reacted to the impact of lockdowns on their own businesses and the wider economy.  Overall, second quarter net fee income was down 39% against 2019 while the third quarter was down 38%.  As markets and clients started adjusting to a new normal, we were pleased to see some positive momentum going into the final months of the year, with net fee income for the fourth quarter down 27% on prior year.

The swift and decisive actions taken on costs at the start of the pandemic translated into ongoing strong cost controls, while operating model efficiencies put in place both before and during the pandemic delivered benefits.  As a result, profits started to recover more quickly than net fee income in the second half of 2020 and the Group's adjusted operating profit for the second half of 2020 was greater than the first half.

The Group has continued to benefit from its diverse nature by both sector and geography.  In our Commercial sector our German logistics business performed strongly while our Healthcare operation in the US saw some good momentum starting to build towards the end of the year with increased COVID-19 testing and the commencement of vaccinations.  These have helped partially offset the more significant impacts we have seen elsewhere, particularly in our Professional sector where, for example, our business supporting the aviation industry saw very significant falls in net fee income.

We have taken the opportunity to accelerate and drive forward key operational investments and initiatives, particularly in technology where we are investing in the implementation of a common platform across the Group to help drive sales and improve operating efficiency.  These initiatives will help the Group to exit the pandemic more strongly than we entered it and to deliver a return to growth.

Financial position

Adjusted net debt at 31 December 2020 was £13.6m, a £5.5m reduction from 31 December 2019, and an increase of £4.7m against 30 June 2020.  The significant working capital inflows seen in the first half of the year began to unwind as trading levels started to recover.  Headroom, excluding invoice financing, remains strong at £17.6m and the Group is in the final stages of refinancing its revolving credit facility and expects to have a new facility in place in time for the full year results announcement.

Performance by sector

Net fee income by sector for the year ended 31 December:

£m	2020	2019	% change	% change (constant currency)*
Professional	15.4	27.3	-44%	-43%
IT	12.7	14.4	-12%	-12%
Healthcare	2.5	2.8	-11%	-11%
Property, Construction & Engineering	0.7	3.8	-82%	-82%
Commercial	17.2	19.7	-13%	-12%
Offshore Recruitment Services	6.1	7.0	-13%	-8%
Intragroup	(0.6)	(0.5)	+20%	+20%
Total	54.0	74.5	-28%	-27%

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

The Group's Professional sector has seen the greatest impact from COVID-19 with a 44% fall in net fee income compared with 2019.  Adverse impacts were seen across the sector but the most significant fall was in our aviation recruitment business which has experienced very substantial and sustained 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 and the aviation industry has a strong track record of rebounding after significant adverse events.  A substantial restructuring has been undertaken in this business to right size its cost base and ensure it is well placed to rebuild when the market returns.  Elsewhere in Professional we saw some signs of recovery in the second half of 2020, particularly in our domestic services and digital businesses, but remain cautious on outlook as we move into 2021.

The Group's IT sector has proven to be one of our more resilient sectors in the face of COVID-19 with net fee income falling by 12% against 2019.  Our US and Japan businesses have been the most resilient with single digit falls in net fee income although in the US, where the majority of our business is permanent recruitment, demand fell significantly after a very strong start to the year.  The UK, where the majority of sales are into Europe, was more heavily affected and demand remained muted in the second half of the year.  The UK business has been restructured to increase the focus on driving sales and creating a more efficient operating model.

The Group's Healthcare sector was adversely impacted by COVID-19, particularly during the first lockdowns, with patients unable or unwilling to engage with healthcare services unless absolutely necessary resulting in lower demand for temporary staff.  However, demand started to recover in the second half and the end of the year saw strong momentum in the US driven by the testing and vaccination programmes.

The Group's Property, Construction & Engineering sector, which is based in the UK, has been significantly impacted, with lockdown restrictions closing new home sales sites and significantly reducing demand.  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 saw a 13% fall in net fee income compared with 2019.  In Germany, our logistics business has had a positive impact from COVID-19, particularly during lockdown restrictions where demand from supermarkets increased.  This was offset by adverse impacts in our businesses with major clients in the automotive sector which faced significant challenges in the first half of the year, although we started to see some increase in demand in the second half of the year.  COVID-19 also had a negative impact on our businesses in Peru and Chile, however, our business in Chile has received some protection as supermarkets form a large part of its client base.

The Group's Offshore Recruitment Services business in India, which supports the staffing sector in the US and UK, experienced a significant drop in demand during the second quarter, particularly from its US clients, when staffing services started to see the initial impact of COVID-19 on their own businesses.  As a result, net fee income for the year was down 13%.  However, the business recovered strongly through the second half of 2020 and is now back at the levels seen at the beginning of the year.  We have continued investment in this business with the launch of a managed talent community solution supporting direct sourcing and recruitment process outsourcing (RPO) which we anticipate will further accelerate the growth and diversification of this business. 

Rhona Driggs, CEO of Empresaria, commented:

"I would like to acknowledge the incredible efforts of our teams around the world as we continue to navigate the uncertainty of COVID-19.  We have come together with purpose as a group, delivering resilient results under difficult trading conditions, and have remained committed to our strategy.

We took swift and decisive actions at the start of the pandemic which have translated into improved ongoing cost controls, while operating model efficiencies put in place both before and during the pandemic have delivered cost benefits and, along with our ongoing investment in technology initiatives, strengthen our position to capitalise on market recovery.  As a result of our actions we have delivered greater adjusted operating profit in the second half of 2020 than in the first.

The Group experienced positive momentum through the second half of 2020, particularly through the fourth quarter, delivering profits ahead of the guidance we issued at the start of December.  We have made good progress, although we are cautious on the immediate outlook given the increase in national lockdowns and local restrictions across our markets at the start of 2021.

We have proven we can deliver under adverse conditions and I believe the operational investments and initiatives we have continued to implement leave us well positioned to exit the pandemic stronger than we entered it."

- 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) 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 visit empresaria.com.

 

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