TIDMEMR
RNS Number : 6384S
Empresaria Group PLC
18 March 2021
18 March 2021
Empresaria Group plc
("Empresaria" or the "Group")
Results for the year ended 31 December 2020
Profitability, operational resilience and financial strength
Empresaria, the global specialist staffing group, reports its
unaudited preliminary results for the year ended 31 December
2020.
% change
(constant
Highlights 2020 2019 % change currency)(2)
------------------------------- ---------- ---------- ----------- ---------------
Revenue GBP256.5m GBP358.0m -28% -27%
Net fee income GBP54.0m GBP74.5m -28% -27%
Operating (loss)/profit GBP(1.0)m GBP4.0m -125%
Adjusted operating profit(1) GBP6.2m GBP10.4m -40% -39%
Loss/(profit) before tax GBP(2.0)m GBP2.9m -169%
Adjusted profit before tax(1) GBP5.2m GBP9.3m -44%
Diluted loss per share (6.2)p (1.6)p -288%
Adjusted diluted earnings
per share(1) 4.1p 8.5p -52%
-- Strong start to 2020 with year-on-year operating profit
growth in every month of the first quarter
-- Benefits of diversification by sector and geography demonstrated throughout the year
-- Resilience of the Group's balance sheet proven - adjusted net
debt reduced to GBP13.6m (2019: GBP19.1m)
-- Net fee income down 28% to GBP54.0m as a result of the impact of COVID-19
-- Adjusted operating profit down 40% to GBP6.2m - profitable in every quarter of 2020
-- Strategic and operational investments protected
-- 2021 guidance reinstated
-- Resumption of dividend with a final dividend of 1.0p per share proposed (2019: nil)
1 Adjusted to exclude amortisation of intangible assets
identified in business combinations, impairment of goodwill and
other intangible assets, exceptional items, fair value charges 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 2019 results at the 2020 exchange rates.
An interview with management covering the Group's performance is
available here: http://bit.ly/EMR_FY20_overview
Chief Executive Officer, Rhona Driggs, commented:
"Our results for 2020 demonstrated the resilience of our
operating model and the benefits of our diversification by sector
and geography. The swift actions we took early in the pandemic
helped to protect our profitability. While cost was a key
consideration, our focus on the Group's operations did not waiver
as we protected, and in several cases accelerated, our key
operational initiatives and investments. Early indications of
trading in 2021 are positive and although, due to our strong start
to last year, adjusted profits for the first half of 2021 are
likely to be behind the first half of 2020 we expect for the full
year to deliver adjusted profits in line with or better than 2020.
We enter 2021 well positioned to exit the pandemic stronger than we
entered it and to take advantage of recovery in our markets."
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 Thursday 18 March 2021 at 4:15pm
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 via Alma PR
Rhona Driggs, Chief Executive Officer
Tim Anderson, Chief Financial Officer
N+1 Singer (Nominated Adviser and
Broker)
Shaun Dobson / James Moat 020 7614 5900
Alma PR (Financial PR) 020 3405 0205
Sam Modlin empresaria@almapr.com
David Ison
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 in 20 countries 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: empresaria.com
Chair's statement
2020 performance
The past year has been extremely challenging for the staffing
industry, the global economy and society as a whole. Our full-year
results have once again demonstrated the resilience of the Group in
the face of economic uncertainty and the benefits of our
diversification by sector and geography. Our Offshore Recruitment
Services sector, which is a key differentiator for the Group, also
proved resilient and bounced back strongly after the initial impact
from COVID-19.
We started 2020 strongly, realising the benefits of the
operational initiatives we made in 2019, and delivering
year-on-year operating profit growth in each of the first three
months of the year. As COVID-19 started to impact us in March, the
benefits of our Stronger Together initiative were evident as we
responded swiftly and effectively, facing the challenges we
encountered together as a Group through sharing experiences and
ideas. A key factor in helping to deliver in this environment was
the responsiveness and expertise of our Board which has significant
experience in the Group and the wider staffing industry. Our
governance processes were very effective during this period.
Our diversification delivered key benefits. For example, in
Germany, the surge in supermarket sales increased demand for
staffing from our logistics operation. This helped to partially
offset some of the more significant adverse impacts, such as in our
aviation business where demand for pilots fell substantially.
This diversity, combined with our swift actions on costs,
ensured that despite a significant fall in net fee income, the
Group remained profitable (adjusted profit before tax) through each
quarter of the year. As we moved into the second half of 2020 our
markets and clients started to adjust to the new normal and we saw
some positive momentum going into the final months of the year. The
improved level of demand, combined with our strong cost controls
and the benefits from operational initiatives, enabled us to
deliver a higher level of adjusted profit before tax in the second
half of the year compared with the first, despite net fee income
being lower.
We have continued to push forward with our operational
initiatives, including seeking to improve and optimise our
operating models to enable us to deliver more efficiently and
effectively and providing the flexibility to take advantage as and
when demand returns. Our investment in a common technology platform
has continued to progress and will be implemented in the majority
of the Group within the next 18 months.
People
It is the dedication and hard work of all our teams around the
world that has enabled us to successfully navigate the challenges
of 2020 and the Board would like to thank all of our employees for
their contributions under difficult circumstances.
Our Stronger Together initiative, launched in 2019, has enabled
our staff to operate more effectively, feel part of a global
operation and realise the benefits that brings. A great example of
this is a recent internal networking event which brought 235 of our
people together in an online event to share ideas and best
practice.
Dividend
In common with many businesses, the Group took the decision not
to pay a dividend in the first half of 2020, reflecting the
uncertainties at the time and the significant potential impact of
COVID-19 on the business. While the pandemic is not over, the
situation has stabilised and the Group has demonstrated the
resilience of
its operations and its balance sheet. As a result, we are
planning to reinstate the dividend and propose a dividend of 1.0p
per share for the year ended 31 December 2020. Subject to
shareholder approval at the
Annual General Meeting, the dividend will be paid on 4 June 2021
to shareholders on the register on 14 May 2021.
Outlook
COVID-19 will continue to be a significant influence for the
year ahead. However, we have shown in 2020 that we can continue to
deliver effectively to our clients in this 'new normal' and do so
while delivering profits (adjusted profit before tax) for our
shareholders. With the benefit of the operational investments and
initiatives we have continued to drive forward in the year, we
believe we are well placed to exit the pandemic stronger than we
entered it. The increased level of national lockdowns and
restrictions in several of our markets at the start of 2021 means
we remain cautious on the immediate outlook, but believe we are
well placed to take advantage as and when markets recover.
Tony Martin
Chairman
17 March 2021
Chief Executive's Review
Performance and operational review
At the beginning of the year we started to realise the benefits
of the operational initiatives we put in place in 2019. As a result
we delivered year-on-year increases in operating profit in each of
the first three months of 2020. We started to see impact from
COVID-19 in March, which resulted in first quarter net fee income
falling 5% against 2019.
The benefits of our operational initiatives gave us a solid
foundation as COVID-19 started to impact the business. This
confidence and belief in what we were doing shaped how we
approached the pandemic and fed our determination to capitalise on
these benefits and continue to deliver change in the challenging
months ahead.
When we started to see the impact on net fee income and demand
in March we took swift action on cost across
the Group, especially in businesses where net fee income was
expected to be hardest hit. These actions included a Group-wide
hiring freeze alongside pay and headcount reductions. We did not
take these decisions
lightly as we sought to protect our employees and our business
at a very uncertain time.
We had strong and consistent communication across the Group and
our geographic diversity meant that we were able to share
experiences and learning from those countries that went into
lockdown earliest.
The work we have done on building culture helped us not only in
our communication across the Group, but also in the sharing of
ideas and experiences. We provided regular training and webinars
focused first and foremost on the safety and well-being of our
employees, our clients and our candidates and then quickly launched
into managing productivity in a remote environment. We ensured the
focus in each of our businesses was on areas where they were seeing
demand in order to maximise opportunities and net fee income and
supported our businesses with training so they could broaden their
offering into areas where we had the opportunity to easily
pivot our services.
Our Board was also extremely responsive, which, combined with
their significant experience in the Group and the wider staffing
industry, helped enable us to execute changes rapidly.
As initial cost reductions took place we kept our focus on
client retention and sales, and on keeping client and candidate
engagement high. We were also determined to take advantage of this
time to make the operational changes needed in the business to
ensure we come out of the pandemic stronger than we went in.
Communication and engagement were key for us. Our internal
communication technology, implemented in December 2019, enabled us
to instantly and effectively communicate across the entire Group.
It also provided us with a platform to leverage and share best
practices and experiences, which was extremely beneficial given our
markets were being impacted at different times. Lessons learned and
shared were vital for us in navigating this pandemic.
Progress against strategic initiatives
Our organic growth was impacted, however I am pleased with the
progress we made on many of our other strategic initiatives and in
fact we were able to accelerate several of these from our initial
target dates.
We accelerated our initiatives to leverage our Offshore
Recruitment Services sector to move recruiting and back office
functions to a lower cost environment while maintaining
quality.
We protected key investments such as our technology initiatives
and launched a new offering in our Offshore Recruitment Services
sector in the US market, which is a key growth area for the
Group.
We restructured our operations in a number of our businesses
which will provide greater focus on sales and recruiting while
providing more scalable operating models.
Opportunities to learn from adversity
The biggest initial benefit was the acceleration of the unity we
had been building in the Group as a result of facing the common
challenge of COVID-19. This helped us to adapt and respond quickly
and further prove our Stronger Together initiatives.
We learned that in many cases we can be effective working
remotely and will be able to take advantage of a more flexible
workforce in those businesses that have shown increased
productivity, enabling us to recruit the best talent regardless of
where they live.
It is more important than ever to have a flexible cost base and
we acted quickly as a group on cost, and no businesses were exempt
from that. As a result we have rightsized our cost base moving into
2021.
Additionally, we demonstrated the strength of our balance sheet
and illustrated that our funding structure responds as we would
expect in a downturn, with our net debt reducing significantly as
working capital requirements fell in line with trading.
Industry dynamics
The staffing industry has always proven to be extremely
resilient. We are first to see the impact from an economic downturn
but also generally first to show signs of recovery as companies
look to leverage a more flexible workforce in times of uncertainty.
Our clients will be looking for flexible staffing solutions as
their businesses recover.
I would expect to see greater demand for outsourcing and
offshore solutions given the lessons learned during the pandemic
and the greater acceptance of remote workers. I would also expect
to see a significant reduction in office space as companies make
permanent moves to a more remote or hybrid work environment.
We will also see continued acceleration of the digitalisation
and automation of staffing processes including hiring (video
interviewing), onboarding and candidate engagement platforms.
Technology solutions such as our investment in a common platform
will play a pivotal role post pandemic.
Outlook
We have been focused on exiting the pandemic stronger than we
went in. The operational changes and efficiencies we have made, and
will continue to make, leave us well positioned to take advantage
of recovery in our markets.
Successful implementation and adoption of our IT initiatives
will be a competitive advantage, harnessing the power of a global
organisation with the strength of local market knowledge and
expertise.
While we cannot control how COVID-19 will continue to impact us
and our clients around the world, we are cautiously optimistic and
focused on what we can control: how we respond to each challenge;
how we grow our market share with our clients; and how we best
position ourselves for market recovery.
Rhona Driggs
Chief Executive Officer
17 March 2021
Operating Review
Professional
GBPm 2020 2019
--------------------------- ----- ------
Revenue 55.3 125.0
Net fee income 15.4 27.3
Adjusted operating profit 0.2 3.5
% of Group net fee income 28% 37%
Average number of staff 342 413
Our Professional sector saw the greatest impact from COVID-19,
with revenue down by 56% (55% in constant currency), net fee income
down by 44% (43% in constant currency) and adjusted operating
profit decreasing to GBP0.2m. All of our operations in this sector
were significantly impacted by COVID-19 with large falls in net fee
income. Swift cost-cutting actions ensured that losses were kept to
a minimum and the sector as a whole remained profitable.
The greatest impact on net fee income was in our business
supplying pilots to the aviation industry. This industry has been
badly affected, and the ongoing impact of travel restrictions and
passenger attitudes to flying mean that we do not expect this to
recover in the short term. As a result, an impairment charge has
been booked against the goodwill and other intangible assets
related to this business (see notes 9 and 10 for details). The
business has been restructured in order to rightsize its cost base
and ensure it is well placed to take advantage when the market
recovers. Although we are cautious on short-term recovery, this
sector has a strong track record of bouncing back after significant
adverse events and we believe there is good growth potential in the
medium and long term.
In Asia we currently operate primarily in permanent recruitment
focused markets and we saw a significant impact from COVID-19 in
each country, but with the timing of the peak impact varying by
location. With the exception of Vietnam, where we delivered
year-on-year growth in net fee income, and China, which was in
line
with 2019, all countries saw double-digit falls in net fee
income against the prior year. Some improvements were seen in the
second half of the year but markets have remained subdued as second
and third
waves of COVID-19 and associated localised restrictions continue
to impact.
In the UK our operation focused on clients in the financial
services sector, which had previously been impacted by Brexit
uncertainty, was significantly impacted by COVID-19. This impact
continued through the second half of the year with Brexit
uncertainty muting any early signs of recovery from COVID-19. Our
domestic services business was very badly hit in the first UK
lockdown as clients were unwilling to invite new staff into their
homes. Demand recovered well as the year went on although the
localised restrictions in place at the end of the year have had an
adverse impact.
During 2020 we reviewed our smaller operations and consolidated
loss-making offices in Chile and New Zealand and closed one in
Mexico.
IT
GBPm 2020 2019
--------------------------- ----- -----
Revenue 41.8 45.2
Net fee income 12.7 14.4
Adjusted operating profit 1.8 3.2
% of Group net fee income 23% 19%
Average number of staff 105 116
Our IT sector was one of our more resilient sectors in the face
of COVID-19, with revenue down by 8% (8% in constant currency), net
fee income down by 12% (12% in constant currency) and adjusted
operating profit decreasing to GBP1.8m.
In Japan, although the impact of COVID-19 was felt earlier in
the year than in many countries, it was also one of the most
resilient markets with a relatively effective response to the
virus. Our operation there was one of our most successful, with a
low single-digit percentage fall in net fee income and profits in
line with 2019.
In the US, a very strong start to 2020 was followed by a weaker
second half to the year and full-year net fee income fell by a mid
single-digit percentage. Our US business is currently almost 90%
permanent recruitment, leaving it exposed to greater fluctuations
in net fee income, particularly in the face of significant market
impacts such as those seen this year. We are focused on growing our
temporary and contract business in the US and see this as a key
market for delivering future growth.
Our UK business, where 80% of our net fee income is derived from
placements outside the UK, had a difficult year and saw a much
greater impact from COVID-19 than we saw elsewhere in this sector,
with net fee income falling by 20% and operating profit by more
than half. Actions have been taken to restructure this business,
reducing costs and improving the operating model so they are better
placed to drive sales and deliver profits as demand returns.
During the year we invested further in this sector by acquiring
the remaining shares in ConSol Partners, taking our ownership to
100%. This investment was done on substantially reduced terms
compared to the original acquisition in 2016, reflecting both the
founders' desire to sell their remaining shares now that they were
no longer directly involved in the business, and all parties'
appreciation of the impact of COVID-19 on the Group. This business
has performed well since joining the Group and although it has had
a challenging 2020, we believe it continues to have great potential
for growth given the strong demand for IT and our investment
reflects the Group's commitment to investing in high potential
sectors.
Healthcare
GBPm 2020 2019
--------------------------- ----- -----
Revenue 13.2 11.3
Net fee income 2.5 2.8
Adjusted operating profit 0.4 0.5
% of Group net fee income 5% 4%
Average number of staff 17 21
Our Healthcare sector was our most resilient in the face of
COVID-19, with revenue up by 17% (17% in constant currency), net
fee income down by 11% (11% in constant currency) and adjusted
operating profit decreasing only slightly to GBP0.4m.
In the US, our revenues increased but net fee income reduced
with higher volumes offset by lower margins at our major clients.
An adverse impact was seen from 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, we have started to see a more
positive benefit with strong momentum developing at the end of the
year driven by testing and vaccination programmes.
In Finland, both revenue and net fee income increased year on
year. An adverse impact from COVID-19 was seen in the second
quarter of 2020 in line with the US, but demand recovered strongly
through the second half with the final months of the year showing
significant increases over 2019.
Property, Construction & Engineering
GBPm 2020 2019
--------------------------- ------ ------
Revenue 3.6 22.4
Net fee income 0.7 3.8
Adjusted operating loss (0.2) (1.2)
% of Group net fee income 1% 5%
Average number of staff 17 61
The restructuring of our UK engineering business late in 2019,
which resulted in the closure of a substantial part of the
business, is the main driver for the year-on-year movements in this
sector.
Our remaining operations are focused on supplying sales staff to
the new home sector and on building management systems which will
be complemented by expansion into the white collar end of the
construction sector as we target our investment at higher skilled
roles where we see greater opportunity and less risk.
Lockdown restrictions in the UK have had a particularly
significant impact on our supply of sales staff to the new home
sector, with sites forced to close and sales activity transferred
online. Demand is yet to show any significant signs of recovery but
this business has a strong track record of bouncing back when
demand recovers.
Commercial
GBPm 2020 2019
--------------------------- ------ ------
Revenue 132.3 142.4
Net fee income 17.2 19.7
Adjusted operating profit 4.6 5.4
% of Group net fee income 32% 26%
Average number of staff 256 273
Our Commercial sector was one of our more resilient sectors in
the face of COVID-19, with revenue down by 7% (5% in constant
currency), net fee income down by 13% (12% in constant currency)
and adjusted operating profit reducing by 15% to GBP4.6m.
In Germany, our logistics business benefited from the impact of
COVID-19, with increased demand from its clients, which include a
number of supermarkets, as they saw increases in trading,
particularly during lockdown restrictions. This was offset by
weaker demand in our other German businesses where we have major
clients in the automotive sector which continued to face
significant challenges in the first half of the year. We started to
see demand increase in the second half of 2020 and have
restructured our operations to improve focus and efficiency and
ensure we are well placed to take advantage as the market
recovers.
In Latin America, the impact of COVID-19 started to be felt
later than in our other markets but nonetheless had a significant
impact on our businesses there. In Chile we received some
protection with supermarkets forming a significant part of the
client base, which helped offset impacts from other clients.
In Japan we place staff in the retail sector and demand was
significantly impacted in the first half of the year with retail
outlets shut during Tokyo lockdowns and reduced demand when they
reopened. Demand has partially recovered during the second half of
the year but conditions remain challenging.
Offshore Recruitment Services
GBPm 2020 2019
--------------------------- ------ ------
Revenue 10.9 12.2
Net fee income 6.1 7.0
Adjusted operating profit 2.6 3.2
% of Group net fee income 11% 9%
Average number of staff 1,019 1,051
Our Offshore Recruitment Services sector was initially
significantly impacted by COVID-19 but rebounded quickly with full
year revenue reducing by 11% (6% in constant currency), net fee
income by 13% (8% in constant currency) and adjusted operating
profit by 19% to GBP2.6m.
Our operations, which primarily support 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. However, the business has recovered strongly through
the second half of 2020 and is now back at the level seen at the
start of the year with headcount in our India operation back over
1,000.
We have continued to invest in this sector with the launch of a
managed direct sourcing and Recruitment Process Outsourcing
solution which will further accelerate the growth and
diversification of this business.
Regional Summary
Adjusted operating
Revenue Net fee income profit
GBPm 2020 2019 2020 2019 2020 2019
--------------------------- ------ ------ -------- ------- ---------- ---------
UK 46.4 77.6 13.4 22.6 0.6 1.2
Continental Europe 91.1 93.1 14.0 14.7 3.8 4.0
Asia Pacific 63.9 126.4 19.4 27.7 3.6 7.2
Americas 55.7 61.4 7.8 10.0 1.4 2.2
Central and consolidation (0.6) (0.5) (0.6) (0.5) (3.2) (4.2)
--------------------------- ------ ------ -------- ------- ---------- ---------
Total 256.5 358.0 54.0 74.5 6.2 10.4
--------------------------- ------ ------ -------- ------- ---------- ---------
The UK was one of our worst performing regions, with revenue
down 40%, net fee income down 41% and adjusted operating profit
down 50%. All of our sectors with a presence in the UK were
significantly impacted, but strong action on costs ensured this
region remained profitable.
Continental Europe was our best performing region, with revenue
down just 2%, net fee income down 5% and adjusted operating profit
down 5%. The region benefited from positive performances from our
logistics business in our Commercial sector in Germany and our
Healthcare operation in Finland, which helped to offset the adverse
impact elsewhere, particularly in our operations that supply the
automotive sector in Germany.
Asia Pacific had a difficult year, with revenue down 49%, net
fee income down 30% and adjusted operating profit down 50%. Our
Professional sector was the biggest contributor to this, with our
New Zealand based operation that supplies the aviation industry
particularly badly affected. Our IT operation in Japan performed
well under the circumstances with only a small fall in net fee
income, while our Offshore Recruitment Services business, primarily
based in India, saw results fall compared to the prior year but
ended the year strongly. Our other operations in Asia are largely
reliant on permanent recruitment which is typically more heavily
impacted in times of economic disruption.
In the Americas, revenue fell 9%, net fee income fell 22% while
adjusted operating profit was down 36%. Our Healthcare business in
the US saw revenue rise but net fee income fall, reflecting lower
margins with key clients. Our US IT business had a good start to
the year but saw demand fall in the second half. In Latin America
COVID-19 had a significant impact in both Peru and Chile, with our
Chile business receiving some protection with its client base
including supermarkets.
Finance Review
Overview
The Group's results for 2020 reflect a challenging year that has
been dominated by the impact of COVID-19. After a strong start that
saw three successive months of year-on-year operating profit
growth, COVID-19 had a substantial impact across our operations. In
the second quarter net fee income fell by 39% against the same
period in 2019 with smaller year-on-year falls of 38% and 27% in
the third and fourth quarters, respectively, as our markets and
clients started to adapt to the new normal. Net fee income and
revenue for the full year both fell by 28% against 2019.
Swift and decisive cost actions at the start of the second
quarter, along with benefits from the diversity of our sectors and
markets, meant that at an adjusted operating profit level we
delivered profits in every quarter of the year. The ongoing
benefits of our cost actions and operational initiatives helped
deliver an increased level of adjusted profit before tax in the
second half of the year, compared to the first, despite a lower
level of net fee income. Adjusted profit before tax for the full
year was GBP5.2m (2019: GBP9.3m) while reported loss before tax was
GBP2.0m (2019: profit before tax GBP2.9m).
Despite the fall in profits, the Group's adjusted net debt
reduced during the year to GBP13.6m (2019: GBP19.1m) reflecting
significant working capital inflows as trading levels dropped and
demonstrating the resilience of the Group's balance sheet in
economic downturns. The level of adjusted net debt is expected to
increase again if trading levels continue to recover.
Income statement
% change
2020 2019 constant
GBPm GBPm % change currency(2)
Revenue 256.5 358.0 -28% -27%
Net fee income 54.0 74.5 -28% -27%
Operating (loss)/profit (1.0) 4.0 -125%
Adjusted operating profit(1) 6.2 10.4 -40% -39%
(Loss)/profit before tax (2.0) 2.9 -169%
Adjusted profit before tax(1) 5.2 9.3 -44%
Diluted loss per share (6.2)p (1.6)p -288%
Adjusted diluted earnings
per share(1) 4.1p 8.5p -52%
1 Adjusted to exclude amortisation of intangible assets
identified in business combinations, impairment of goodwill and
other intangible assets, exceptional items, fair value charges on
acquisition of non-controlling shares and, in the case of earnings,
any related tax. See note 7 for a reconciliation between profit
before tax and adjusted profit before tax.
2 The constant currency movement is calculated by translating
the 2019 results at the 2020 exchange rates.
Revenue and net fee income both reduced by 28%, and 27% in
constant currency. Adjusted operating profit reduced by 40%, 39% in
constant currency. A detailed analysis by sector is provided in the
Operating Review.
Central costs have decreased to GBP3.2m (2019: GBP4.2m)
reflecting the impact of cost-saving initiatives, along with
reduced costs for bonuses and share schemes.
The Group utilised government support schemes introduced to help
protect jobs and minimise redundancies. These varied by country but
typically involved payments from governments to support part of the
salary of staff working either no or reduced hours due to the
impact of COVID-19. All funds received were paid out to employees
and in most cases did not cover 100% of the cost of the lost time.
Payments of GBP1.9m were received in respect of internal staff and
these are offset in administrative costs in the income statement.
Had these payments not been received, the Group would most likely
have made further permanent reductions to head count in order to
reduce these costs. We also worked with our clients to help protect
the jobs of our temporary workers, with a further GBP3.6m of
support offset against cost of sales in the income statement. Had
the government schemes not been available, in most cases this would
have resulted in those temporary assignments being ended.
Adjusted profit before tax has reduced by 44% to GBP5.2m
reflecting the lower adjusted operating profit. The reported loss
before tax of GBP2.0m reflects impairment charges on goodwill and
other intangible assets of GBP5.0m (2019: GBP2.5m), exceptional
costs of GBP0.2m (2019: GBP2.1m), a fair value charge on
acquisition of non-controlling shares of GBP0.3m (2019: GBPnil) and
amortisation of intangible assets identified in business
combinations of GBP1.7m (2019: GBP1.8m).
The impairment charges arose in our Professional sector where
our operation providing pilots to the aviation industry has seen a
very significant impact on its operations due to COVID-19. Although
actions have been taken to rightsize the cost base, the aviation
industry is not expected to recover as quickly as other areas and
in the short term this business is expected to make substantially
lower profits than in the past. As a result, an impairment charge
has been booked on both goodwill and other intangible assets
related to this operation. Further details are provided in notes 9
and 10.
Exceptional costs of GBP0.2m have been recognised in the year
with costs of GBP0.3m in respect of the restructuring of senior
management positions across the Group and GBP0.2m incurred in
closing our operation in Mexico, offset by credits of GBP0.3m in
respect of exceptional items booked in prior years. Some additional
one-off costs have been incurred as a result of cost-cutting
exercises undertaken in response to COVID-19. The Group has not
disclosed these as exceptional costs as they do not meet our
definition of exceptional items and so they are included as a cost
within our adjusted profit measures. Further details on exceptional
items are provided in note 3.
A GBP0.3m fair value charge on acquisition of non-controlling
shares (2019: GBPnil) has been recognised on the acquisition of
shareholdings from management shareholders on their exit from the
Group (see note 4 for more details).
The total tax charge for the year is GBP1.2m (2019: GBP2.4m),
with the effective tax rate of -60% (2019: +83%) distorted by the
mix of profits by jurisdiction and the non-deductible goodwill
impairment charge. On an adjusted basis, the effective rate is 46%
(2019: 37%). The effective tax rate is higher than the underlying
tax rates due to a number of factors, including:
-- the level of non-deductible expenses in the year (GBP0.5m);
-- withholding and dividend taxes resulting from overseas operations (GBP0.2m); and
-- deferred tax assets not recognised for certain tax losses around the Group (GBP0.3m).
Adjusted, diluted earnings per share fell by 52% to 4.1p. This
reflects the reduction in adjusted profit before tax, along with an
increase in the proportion of profits allocated to non-controlling
interests. Those businesses with higher non-controlling ownership,
particularly in our Offshore Recruitment Services sector, have
performed relatively strongly compared to much of the rest of the
Group in 2020, resulting in this increased allocation. Reported
diluted loss per share was 6.2p (2019: loss per share 1.6p)
reflecting the impact of impairment charges discussed above.
Balance sheet
2019
2020 restated*
GBPm GBPm
Goodwill and other intangible
assets 43.0 49.0
Trade and other receivables 44.9 55.2
Cash and cash equivalents 20.8 17.6
Right-of-use assets 9.0 10.2
Other assets 4.4 4.7
------------------------------- ------- -----------
Assets 122.1 136.7
------------------------------- ------- -----------
Trade and other payables (33.4) (37.7)
Borrowings (33.4) (35.2)
Lease liabilities (9.4) (10.8)
Other liabilities (3.5) (5.0)
------------------------------- ------- -----------
Liabilities (79.7) (88.7)
------------------------------- ------- -----------
Net assets 42.4 48.0
------------------------------- ------- -----------
* see note 1
Goodwill and intangible assets arose from the investments the
Group has made. As at 31 December 2020 the balance was GBP43.0m
(2019: GBP49.0m) with the movement from 2019 due to GBP1.8m of
amortisation of intangible assets (2019: GBP1.9m), foreign exchange
gains of GBP0.5m (2018: losses of GBP1.5m), impairment charges of
GBP5.0m (2019: GBP2.5m) related to the Group's aviation business in
the Professional sector and additions of GBP0.3m (2019:
GBP0.1m).
Trade and other receivables includes trade receivables of
GBP37.0m (2019: GBP45.6m) with the reduction from 2019 reflecting
the impact of COVID-19 on trading levels. Average debtor days for
the Group in 2020 were 47 (2019: 44), with debtor days at 31
December 2020 of 47 (2019: 44). The increase in debtor days
reflects the reduction in our aviation business which has a low
working capital requirement. The income statement includes GBP0.6m
(2019: GBP0.6m) in respect of impairment losses on trade
receivables.
Cash and borrowings are discussed in the financing section
below.
Cash flow
The Group is typically highly cash generative with a
historically strong correlation between pre-tax profits and cash
flows. The Group measures its free cash flow as a key performance
indicator and defines this as net cash from operating activities
per the cash flow statement excluding cash flows related to pilot
bond liabilities (see financing section below) and after deducting
payments made under lease agreements.
2020 2019
GBPm GBPm
Net cash inflow from operating activities
per cash flow statement 14.2 7.5
Cash flows related to pilot bonds 0.5 3.8
Payments under lease agreements (6.2) (6.5)
------------------------------------------- ------ ------
Free cash flow 8.5 4.8
Taxation 3.0 5.6
------------------------------------------- ------ ------
Free cash flow (pre-tax) 11.5 10.4
------------------------------------------- ------ ------
In 2020 the Group saw an increase in free cash flow with the
falls in trading due to COVID-19 driving significant working
capital inflows, more than offsetting the fall in profit, and
illustrating the resilience of the Group's funding model in a
downturn. In the first half of 2020, the Group deferred UK VAT and
payments under similar schemes totalling GBP3.5m. The majority of
this was repaid in the second half of the year with the remaining
GBP0.9m to be settled in the first quarter of 2021. While the
working capital outflows started to reverse in the second half of
the year, trading levels and working capital requirements remain
below the levels at the end of 2019. Were trading levels to
continue to recover, we would expect working capital requirements
to continue to increase.
The Group also presents a pre-tax free cash flow measure as tax
payments in a global business can be volatile. Tax payments in the
year were substantially lower than 2019, reflecting both the
reduction in profit levels and payments in 2019 to settle tax
liabilities in jurisdictions where multi-year tax audits are the
norm.
In 2020 the Group utilised its free cash flow as follows:
2020 2019
GBPm GBPm
Free cash flow 8.5 4.8
Acquisition of businesses (net of
cash acquired) (0.1) (0.2)
Purchase of shares in existing subsidiaries (1.5) (3.5)
Purchase of property, plant and equipment
and software (0.7) (1.5)
Dividends paid to owners of Empresaria
Group plc - (1.0)
Dividends paid to non-controlling
interests (0.5) (0.6)
Purchase of own shares in Employee (0.2) -
Benefit Trust
--------------------------------------------- ------ ------
Decrease/(increase) in adjusted net
debt 5.5 (2.0)
--------------------------------------------- ------ ------
The purchase of shares in existing subsidiaries mainly relates
to the acquisition of further shares in ConSol Partners in May
2020. Following further smaller purchases later in the year the
Group now owns 100% of this business. A number of smaller purchases
of shares in other subsidiaries were made primarily as a result of
the departure of management shareholders (see note 4).
Purchase of property, plant and equipment and software of
GBP0.7m is substantially reduced from 2019 which included costs to
relocate our Indian operation into a single office. Dividends paid
to our shareholders were GBPnil (2019: GBP1.0m) reflecting the
cancellation of the 2019 final dividend. Empresaria shares
purchased and transferred into the Employee Benefit Trust totalled
GBP0.2m while dividends paid to non-controlling interests were
GBP0.5m (2019: GBP0.6m).
Financing
The Group's treasury function is managed centrally and the
Group's financial risk management policies are set out in note 23
of the Annual Report.
2020 2019
GBPm GBPm
Cash and cash equivalents 20.8 17.6
Pilot bonds (1.0) (1.5)
--------------------------- ------- -------
Adjusted cash 19.8 16.1
--------------------------- ------- -------
Overdraft facilities (22.1) (17.9)
Invoice financing (4.9) (6.9)
Bank loans (6.4) (10.4)
--------------------------- ------- -------
Total borrowings (33.4) (35.2)
--------------------------- ------- -------
Adjusted net debt (13.6) (19.1)
--------------------------- ------- -------
Adjusted net debt at 31 December 2020 decreased to GBP13.6m
(2019: GBP19.1m) reflecting the cash flows discussed above.
Adjusted net debt excludes cash of GBP1.0m (2019: GBP1.5m) held to
match pilot bonds within our aviation business. Where required by
the client, pilot bonds are taken at the start of the pilot's
contract and are repayable to the pilot or the client during the
course of the contract or if it ends early. There is no legal
restriction over this cash, but given the requirement to repay it
over a three-year period, and that to hold these is a client
requirement, we exclude cash equal to the amount of the bonds when
calculating our adjusted net debt measure. The level of bonds held
has continued to reduce during the year, reflecting the drop in the
level of activity in that business. These movements have no impact
on our adjusted net debt measure.
During 2020, the month-end average adjusted net debt position
was GBP12.8m (2019: GBP18.7m) with a high of GBP17.7m at 31 March
(2019: GBP23.0m at 30 September) and a low of GBP8.9m at 30 June
(2019: GBP15.3m at 31 January).
Our debt to debtors ratio (adjusted net debt as a percentage of
trade receivables) has reduced to 37% (2019: 42%) with the
reduction in adjusted net debt more than offsetting the fall in
trade receivables. We continue to be focused on reducing our debt
levels with the aim of lowering the debt to debtor ratio to
25%.
Total borrowings were GBP33.4m (2019: GBP35.2m) being bank
overdrafts of GBP22.1m (2019: GBP17.9m), invoice financing of
GBP4.9m (2019: GBP6.9m) and bank loans of GBP6.4m (2019: GBP10.4m).
The Group's borrowings are principally held to fund working capital
requirements and are predominantly due within one year. As at 31
December 2020, GBP1.2m of borrowings are shown as non-current.
The Group maintains a range of facilities to manage its working
capital and financing requirements. At 31 December 2020 the Group
had facilities totalling GBP57.3m (2019: GBP55.1m).
2020 2019
GBPm GBPm
UK facilities
Overdrafts 10.0 7.5
Revolving credit facility 15.0 14.0
Invoice financing facility 10.0 13.0
----- -----
Total UK facilities 35.0 34.5
Continental Europe facilities 12.9 12.2
Asia Pacific facilities 3.2 2.4
Americas facilities 6.2 6.0
----- -----
57.3 55.1
----- -----
Undrawn facility (excluding invoice
financing) 17.6 11.5
----- -----
During the year the revolving credit facility was extended to
GBP15.0m from GBP14.0m by activating the remaining GBP1.0m of the
GBP5.0m accordion arrangement in order to purchase additional
shares in ConSol Partners in May. During the year the UK invoice
financing facility was reduced to GBP10.0m following the closure of
a substantial part of our UK engineering business at the end of
2019 which reduced our financing requirements.
In the second quarter of 2020, when uncertainty over the impact
of COVID-19 was at its highest, the Group agreed a precautionary
GBP2.5m increase in its UK overdraft facility. Alongside this, the
Group agreed a relaxation of the covenant tests on the revolving
credit facility for the remainder of its term. These covenants are
tested on a quarterly basis and have been met throughout the
period, even if measured against the original unadjusted covenants.
The covenants, and our performance against them as at 31 December
2020, are as follows:
Covenant Target (original) Target (adjusted) Actual
Net debt: EBITDA < 2.5 times < 4.5 times 0.8
Interest cover > 5.0 times > 3.0 times 10.4
Debt service cover > 1.25 times > 1.25 times 5.6
Subsequent to the reporting date, in March 2021, the revolving
credit facility was refinanced. The facility continues to be for
GBP15.0m and has a 2.5 year term to September 2023. For more
details see note 11.
Management equity
As highlighted in our 2019 Annual Report, the Group has moved
away from issuing second generation equity schemes for incoming
management and has put in place appropriate alternative incentive
schemes. Existing shareholdings and commitments remain in place and
continue to be reflected in these accounts.
Based on results for the year ended 31 December 2020, and using
applicable valuation mechanisms in shareholders' agreements but
ignoring any holding period requirements, the payment to acquire
all those shares not held by Empresaria would be approximately
GBP9.0m were the maximum valuation multiples to apply. Of this,
approximately 98% relates to first generation shares accounted for
as non-controlling interests in the consolidated financial
statements. There is no legal obligation on the Group to acquire
the shares held by management at any time. Further information on
the management equity scheme is provided in note 27 to the annual
report.
During the year the Group acquired the remaining shares in
ConSol Partners for consideration of GBP1.7m taking our ownership
to 100%. Other shares were acquired from management across a number
of subsidiaries for total consideration of GBP0.4m. Further details
are provided in note 4.
Dividend
In April 2020, as it became clear that COVID-19 had the
potential to significantly impact the global economy and the
prospects of the Group, the Board considered it prudent to cancel
the proposed dividend in respect of the year ended 31 December 2019
in order to strengthen the Group's balance sheet and aid
liquidity.
The economic environment has begun to stabilise and, while
COVID-19 continues to have a significant negative impact on the
global economy, most businesses, including Empresaria, have found
ways of working effectively in the new normal. The resilience of
the Group and the strength of its balance sheet were evident
throughout 2020 and as a result the Board is proposing a dividend
of 1.0p per share for the year ended 31 December 2020. Subject to
shareholder approval at the Annual General Meeting, the dividend
will be paid on 4 June 2021 to shareholders on the register on 14
May 2021.
Going concern
The Board has undertaken a recent and thorough review of the
Group's budget, forecasts and associated risks and sensitivities,
which included consideration of the potential ongoing impact of
COVID-19. Given the business forecasts and early trading
performance, the Group is expected to be able to continue in
operational existence for the foreseeable future, being a period of
at least 12 months from the date of approval of the accounts. As a
result, the going concern basis continues to be appropriate in
preparing the financial statements. Further details on going
concern are found in note 1 in the annual report.
Tim Anderson
Chief Financial Officer
17 March 2021
Consolidated income statement
2020
unaudited 2019
Note GBPm GBPm
Revenue 2 256.5 358.0
Cost of sales (202.5) (283.5)
Net fee income 2 54.0 74.5
Administrative costs (including GBP0.6m (2019: GBP0.6m) in respect of trade receivable
impairment
losses) (47.8) (64.1)
----------- --------
Adjusted operating profit 2 6.2 10.4
Exceptional items 3 (0.2) (2.1)
Fair value charge on acquisition of non-controlling shares 4 (0.3) -
Impairment of goodwill 9 (1.6) (2.5)
Impairment of other intangible assets 10 (3.4) -
Amortisation of intangible assets identified in business combinations 10 (1.7) (1.8)
----------- --------
Operating (loss)/profit (1.0) 4.0
----------- --------
Finance income 5 0.2 0.2
Finance costs 5 (1.2) (1.3)
----------- --------
Net finance costs 5 (1.0) (1.1)
(Loss)/profit before tax (2.0) 2.9
Taxation 6 (1.2) (2.4)
(Loss)/profit for the year (3.2) 0.5
----------- --------
Attributable to:
Owners of Empresaria Group plc (3.1) (0.8)
Non-controlling interests (0.1) 1.3
----------- --------
(3.2) 0.5
----------- --------
Pence Pence
(Loss)/earnings per share
Basic 8 (6.2) (1.6)
Diluted 8 (6.2) (1.6)
Details of adjusted earnings per share are shown in note 8.
Consolidated statement of comprehensive income
2020
unaudited 2019
GBPm GBPm
(Loss)/profit for the year (3.2) 0.5
----------- ------
Other comprehensive income
Items that may be reclassified subsequently to the income statement:
Exchange differences on translation of foreign operations 0.4 (1.9)
Items that will not be reclassified to the income statement:
Exchange differences on translation of non-controlling interests in foreign operations (0.1) (0.3)
----------- ------
Other comprehensive income/(loss) for the year 0.3 (2.2)
Total comprehensive loss for the year (2.9) (1.7)
----------- ------
Attributable to:
Owners of Empresaria Group plc (2.7) (2.7)
Non-controlling interests (0.2) 1.0
----------- ------
(2.9) (1.7)
----------- ------
Consolidated balance sheet
2019
2020 restated
unaudited and unaudited
Note GBPm GBPm
Non-current assets
Property, plant and equipment 1.6 2.3
Right-of-use assets 9.0 10.2
Goodwill 9 32.5 33.5
Other intangible assets 10 10.5 15.5
Deferred tax assets 2.8 2.4
----------- ---------------
56.4 63.9
----------- ---------------
Current assets
Trade and other receivables 13 44.9 55.2
Cash and cash equivalents 12 20.8 17.6
----------- ---------------
65.7 72.8
----------- ---------------
Total assets 122.1 136.7
----------- ---------------
Current liabilities
Trade and other payables 14 33.4 37.7
Current tax liabilities 1.1 1.4
Borrowings 11 32.2 25.2
Lease liabilities 5.3 5.6
----------- ---------------
72.0 69.9
----------- ---------------
Non-current liabilities
Borrowings 11 1.2 10.0
Lease liabilities 4.1 5.2
Deferred tax liabilities 2.4 3.6
----------- ---------------
7.7 18.8
----------- ---------------
Total liabilities 79.7 88.7
----------- ---------------
Net assets 42.4 48.0
----------- ---------------
Equity
Share capital 2.4 2.4
Share premium account 22.4 22.4
Merger reserve 0.9 0.9
Retranslation reserve 4.2 4.0
Equity reserve (10.2) (9.8)
Other reserves (0.6) (0.6)
Retained earnings 18.1 21.4
----------- ---------------
Equity attributable to owners of Empresaria
Group plc 37.2 40.7
Non-controlling interests 5.2 7.3
----------- ---------------
Total equity 42.4 48.0
----------- ---------------
Consolidated statement of changes in equity
Equity attributable to owners of Empresaria Group plc
------------------------------------------------------------------------------------
Share
Share premium Merger Retranslation Equity Other Retained Non-controlling Total
capital account reserve reserve reserve reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 31
December
2018 2.4 22.4 0.9 5.8 (7.7) (0.7) 23.2 46.3 8.3 54.6
-------- -------- -------- -------------- -------- --------- --------- ------ ---------------- -------
(Loss)/profit
for the
year - - - - - - (0.8) (0.8) 1.3 0.5
Exchange
differences
on translation
of foreign
operations - - - (1.8) - (0.1) - (1.9) (0.3) (2.2)
-------- -------- -------- -------------- -------- --------- --------- ------ ---------------- -------
Total
comprehensive
(loss)/income
for the
year - - - (1.8) - (0.1) (0.8) (2.7) 1.0 (1.7)
Dividend paid to
owners
of Empresaria
Group
plc - - - - - - (1.0) (1.0) - (1.0)
Dividend paid to
non-controlling
interests - - - - - - - - (0.6) (0.6)
Acquisition of
non-controlling
shares - - - - (2.1) - - (2.1) (1.4) (3.5)
Share-based
payments - - - - - 0.2 - 0.2 - 0.2
Balance at 31
December
2019 2.4 22.4 0.9 4.0 (9.8) (0.6) 21.4 40.7 7.3 48.0
-------- -------- -------- -------------- -------- --------- --------- ------ ---------------- -------
Loss for the
year - - - - - - (3.1) (3.1) (0.1) (3.2)
Exchange
differences
on translation
of foreign
operations - - - 0.2 - 0.2 - 0.4 (0.1) 0.3
-------- -------- -------- -------------- -------- --------- --------- ------ ---------------- -------
Total
comprehensive
income/(loss)
for the
year - - - 0.2 - 0.2 (3.1) (2.7) (0.2) (2.9)
Dividend paid to
non-controlling
interests - - - - - - - - (0.5) (0.5)
Acquisition of
non-controlling
shares - - - - (0.4) - - (0.4) (1.4) (1.8)
Purchase of own
shares
in Employee
Benefit
Trust - - - - - - (0.2) (0.2) - (0.2)
Share-based
payments - - - - - (0.2) - (0.2) - (0.2)
Balance at 31
December
2020
(unaudited) 2.4 22.4 0.9 4.2 (10.2) (0.6) 18.1 37.2 5.2 42.4
-------- -------- -------- -------------- -------- --------- --------- ------ ---------------- -------
Consolidated cash flow statement
2020
unaudited 2019
GBPm GBPm
(Loss)/profit for the year (3.2) 0.5
Adjustments for:
Depreciation of property, plant and equipment
and software amortisation 1.1 1.2
Depreciation of right-of-use assets 6.3 6.4
Fair value charge on acquisition of non-controlling
shares 0.3 -
Impairment of goodwill 1.6 2.5
Impairment of other intangible assets 3.4 -
Amortisation of intangible assets identified
in business combinations 1.7 1.8
Share-based payments (0.2) 0.2
Net finance costs 1.0 1.1
Taxation 1.2 2.4
----------- -------
13.2 16.1
Decrease in trade and other receivables 10.9 0.3
Decrease in trade and other payables (including
pilot bonds outflow of GBP0.5m (2019: GBP3.8m)) (5.8) (2.0)
Cash generated from operations 18.3 14.4
Interest paid (1.1) (1.3)
Income taxes paid (3.0) (5.6)
----------- -------
Net cash inflow from operating activities 14.2 7.5
----------- -------
Cash flows from investing activities
Consideration paid for business acquisitions
(net of cash acquired) (0.1) (0.2)
Purchase of property, plant and equipment, and
software (0.7) (1.5)
Finance income 0.2 0.2
----------- -------
Net cash outflow investing activities (0.6) (1.5)
----------- -------
Cash flows from financing activities
Increase/(decrease) in overdrafts 3.8 (3.6)
Proceeds from bank loans 1.8 5.0
Repayment of bank loans (5.7) (0.2)
Decrease in invoice financing (2.0) (2.7)
Payment of obligations under leases (6.2) (6.5)
Purchase of shares in existing subsidiaries (1.5) (3.5)
Purchase of own shares in Employee Benefit Trust (0.2) -
Dividends paid to owners of Empresaria Group
plc - (1.0)
Dividends paid to non-controlling interests (0.5) (0.6)
----------- -------
Net cash outflow from financing activities (10.5) (13.1)
----------- -------
Net increase/(decrease) in cash and cash equivalents 3.1 (7.1)
Foreign exchange movements 0.1 (0.7)
Cash and cash equivalents at beginning of the
year 17.6 25.4
Cash and cash equivalents at end of the year 20.8 17.6
----------- -------
2020
unaudited 2019
GBPm GBPm
Bank overdrafts at beginning of the year (17.9) (22.0)
(Increase)/decrease in the year (3.8) 3.6
Foreign exchange movements (0.4) 0.5
----------- -------
Bank overdrafts at end of the year (22.1) (17.9)
Cash, cash equivalents and bank overdrafts at
end of the year (1.3) (0.3)
----------- -------
1 Basis of preparation and general information
The financial information set out above does not constitute the
Company's consolidated statutory accounts for the years ended 31
December 2020 or 2019. The financial information for the year ended
31 December 2019 is derived from the statutory accounts for that
year and restated for the prior year adjustment outlined below.
Statutory accounts for 2019 have been delivered to the Registrar of
Companies. The Auditors have reported on those accounts; their
reports were unqualified, did not draw attention to any matters by
way of emphasis without qualifying their reports and did not
contain statements under s498(2) or (3) Companies Act 2006 or
equivalent preceding legislation. The audit of the statutory
accounts for the year ended 31 December 2020 is not yet complete.
These accounts will be finalised on the basis of the financial
information presented by the Directors in this preliminary
announcement and will be delivered to the Registrar of Companies
following the Company's Annual General Meeting.
Accounting policies have been applied consistently with those
set out in the 2019 financial statements, as amended when relevant
to reflect the adoption of new standards, amendments and
interpretations which became effective in the year. During 2020 no
new standards, amendments or interpretations had a significant
impact on the financial statements.
While the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards ('IFRS'), this announcement does not itself contain
sufficient financial information to comply with IFRS. The Group
will be publishing full financial statements that comply with IFRS
in April 2021.
2019 financial information has been restated to reflect an error
in the accounting for leases in 2019, the first year of transition
to IFRS 16 Leases. This has resulted in a reduction in the net book
value of right-of-use assets as at 31 December 2019 of GBP0.4m and
a reduction in the current lease liability of GBP0.4m. There is no
impact on net assets as at 31 December 2019, nor on profit for the
year ended 31 December 2019. As the Group applied the modified
retrospective approach to the adoption of IFRS 16, there is no
impact on the 31 December 2018 balance sheet.
2 Segment and revenue analysis
Information reported to the Group's Executive Committee,
considered to be the chief operating decision maker of the Group
for the purpose of resource allocation and assessment of segment
performance, is based on the Group's six operating sectors.
The Group has one principal activity, the provision of staffing
and recruitment services, delivered across a number of service
lines, being permanent placement, temporary and contract placement,
and offshore recruitment services.
The analysis of the Group's results by sector is set out
below:
2020 2019
Adjusted Adjusted
Net fee operating Net fee operating
Revenue income profit Revenue income profit
GBPm GBPm GBPm GBPm GBPm GBPm
Professional 55.3 15.4 0.2 125.0 27.3 3.5
IT 41.8 12.7 1.8 45.2 14.4 3.2
Healthcare 13.2 2.5 0.4 11.3 2.8 0.5
Property, Construction
& Engineering 3.6 0.7 (0.2) 22.4 3.8 (1.2)
Commercial 132.3 17.2 4.6 142.4 19.7 5.4
Offshore Recruitment
Services 10.9 6.1 2.6 12.2 7.0 3.2
Central costs - - (3.2) - - (4.2)
Intragroup eliminations (0.6) (0.6) - (0.5) (0.5) -
-------- -------- ----------- -------- -------- -----------
256.5 54.0 6.2 358.0 74.5 10.4
-------- -------- ----------- -------- -------- -----------
3 Exceptional items
Exceptional items are those items that in the Directors' view
are required to be separately disclosed by virtue of their size,
nature or incidence. Adjusted operating profit, adjusted profit
before tax and adjusted earnings are considered to be key measures
in understanding the Group's financial performance and exclude
exceptional items.
2020 2019
GBPm GBPm
Restructuring of UK engineering business - 1.1
Restructuring of marketing and digital business (0.1) 0.5
Change of Chief Executive Officer (0.2) 0.5
Closure of Mexico operation 0.2 -
Restructure of senior management 0.3 -
------ -----
0.2 2.1
------ -----
4 Shares acquired in existing subsidiaries
In 2020, the Group acquired a further 17.5% interest in ConSol
Partners (Holdings) Limited ('ConSol'), an existing subsidiary,
taking its total interest to 100%. The shares were acquired for
consideration of GBP1.7m, with GBP1.1m paid in 2020 and the balance
to be paid in April 2021. The terms were substantially reduced from
the acquisition of shares in 2016 and 2019, reflecting both the
founders' desire to sell their remaining shares now they were no
longer directly involved in the business and all parties'
appreciation of the impact of COVID-19. ConSol is a specialist
recruitment business in the IT sector with a focus on niche sectors
across communications, cloud and digital.
Combined with other minor acquisitions of shareholdings
accounted for as non-controlling interest, these transactions were
recorded within equity as a movement in non-controlling interests
of GBP1.4m and the remaining GBP0.4m was recorded in the equity
reserve.
A number of smaller shareholdings were acquired from management
during the year, principally on their exit from the Group, for
consideration totalling GBP0.3m. These shareholdings were not
accounted for as non-controlling interests and the GBP0.3m cost has
been recognised in the income statement as fair value charge on
acquisition of non-controlling shares.
5 Finance income and costs
2020 2019
GBPm GBPm
Finance income
Bank interest receivable 0.2 0.2
------ ------
0.2 0.2
------ ------
Finance costs
Invoice financing (0.1) (0.2)
Bank loans and overdrafts (0.5) (0.6)
Interest on lease payments (0.4) (0.4)
Interest on tax payments (0.2) (0.1)
------ ------
(1.2) (1.3)
------ ------
Net finance costs (1.0) (1.1)
------ ------
6 Taxation
The tax expense for the year is as follows:
2020 2019
GBPm GBPm
Current tax
Current year income tax expense 2.9 3.8
Adjustment in respect of prior years (0.1) 0.2
------ ------
Total current tax expense 2.8 4.0
Deferred tax
Deferred tax credit - on origination and reversal
of temporary differences (1.6) (1.6)
------ ------
Total income tax expense in the income statement 1.2 2.4
------ ------
7 Reconciliation of adjusted profit before tax to profit before tax
2020 2019
GBPm GBPm
(Loss)/profit before tax (2.0) 2.9
Exceptional items 0.2 2.1
Fair value charge on acquisition of non-controlling
shares 0.3 -
Impairment of goodwill 1.6 2.5
Impairment of other intangible assets 3.4 -
Amortisation of intangible assets identified in
business combinations 1.7 1.8
------ -----
Adjusted profit before tax 5.2 9.3
------ -----
8 Earnings per share
Basic earnings per share is assessed by dividing the earnings
attributable to the owners of Empresaria Group plc by the weighted
average number of shares in issue during the year. Diluted earnings
per share is calculated as for basic earnings per share but
adjusting the weighted average number of shares for the diluting
impact of shares that could potentially be issued. For 2020 and
2019 these are all related to share options. Reconciliations
between basic and diluted measures are given below.
The Group also presents adjusted earnings per share which it
considers to be a key measure of the Group's performance. A
reconciliation of earnings to adjusted earnings is provided
below.
2020 2019
GBPm GBPm
Earnings attributable to owners of Empresaria
Group plc (3.1) (0.8)
Adjustments:
Exceptional items 0.2 2.1
Fair value charge on acquisition of non-controlling
shares 0.3 -
Impairment of goodwill 1.6 2.5
Impairment of other intangible assets 3.4 -
Amortisation of intangible assets identified in
business combinations 1.7 1.8
Tax on the above (1.2) (1.0)
Non-controlling interests in respect of the above (0.8) (0.2)
--------- ---------
Adjusted earnings 2.1 4.4
--------- ---------
Number of shares Millions Millions
Weighted average number of shares- basic 50.3 50.4
Dilution effect of share options 1.3 1.0
--------- ---------
Weighted average number of shares- diluted 51.6 51.4
--------- ---------
Earnings per share Pence Pence
Basic (6.2) (1.6)
Dilution effect of share options - -
--------- ---------
Diluted (6.2) (1.6)
--------- ---------
Adjusted earnings per share Pence Pence
Basic 4.2 8.6
Dilution effect of share options (0.1) (0.1)
--------- ---------
Diluted 4.1 8.5
--------- ---------
All share options are anti-dilutive for the purpose of assessing
diluted earnings per share in accordance with IAS 33 Earnings Per
Share. As such, diluted earnings per share and basic earnings per
share are equal. As these options are nil-cost options these have
been reflected as dilutive in assessing adjusted, diluted earnings
per share presented above.
The weighted average number of shares (basic) has been
calculated as the weighted average number of shares in issue during
the year plus the number of share options already vested less the
weighted average number of shares held by the Empresaria Employee
Benefit Trust. The Trustees have waived their rights to dividends
on the shares held by the Empresaria Employee Benefit Trust.
9 Goodwill
2020 2019
GBPm GBPm
At 1 January 33.5 37.1
Impairment charge (1.6) (2.5)
Foreign exchange movements 0.6 (1.1)
------ ------
At 31 December 32.5 33.5
------ ------
Goodwill is reviewed and tested for impairment on an annual
basis or more frequently if there is an indication that goodwill
might be impaired. Goodwill has been tested for impairment by
comparing the carrying amount of the group of cash-generating units
('CGUs') the goodwill has been allocated to, with the recoverable
amount of those CGUs. The recoverable amounts of the CGUs are
considered to be their value in use. The key assumptions in
assessing value in use are as follows:
Operating profit and pre-tax cash flows
The operating profit and pre-tax cash flows are based on the
2021 budgets approved by the Group's Board. The budgets were
reviewed in light of the ongoing impact of COVID-19 and adjusted as
required. These adjusted budgets are extrapolated using short-term
industry growth rate forecasts and long-term growth rates and
margins that are consistent with the business plans approved by the
Group's Board. These cash flows are discounted to present value to
assess the value in use.
Discount rates
The pre-tax, country-specific rates used to discount the
forecast cash flows range from 9.2% to 16.9% (2019: 9.0% to 16.1%)
reflecting current local market assessments of the time value of
money and the risks specific to the relevant business. These
discount rates reflect the estimated industry weighted average cost
of capital in each market and are based on the Group's weighted
average cost of capital adjusted for local factors.
Pre-tax discount rates used by sector are as follows:
Professional: 10.0% to 16.9% (2019: 9.0%
to 16.1%)
IT: 9.5% to 11.3% (2019: 9.6% to 11.7%)
Healthcare: 9.8% to 12.3% (2019: 10.5% to
10.6%)
Property, Construction & Engineering: 11.0%
(2019: 10.5%)
Commercial: 9.2% to 16.0% (2019: 9.0% to
13.7%)
Offshore Recruitment Services: 16.6% (2019:
15.4%)
Growth rates
The growth rates used to extrapolate beyond the most recent
budgets and forecasts and to determine terminal values are based
upon IMF GDP growth forecasts for 2022 and the IMF longer-term
expectation for global growth of 2.6% which is then adjusted to
reflect the specific markets we are in. Longer-term growth rates
used range from 1.0% to 3.0%. GDP growth is a key driver of our
business and is therefore an appropriate assumption in developing
long-term forecasts.
Long-term growth rates used by sector are as follows:
Professional: 2.0% to 3.0% (2019: 1.5% to
5.7%)
IT: 1.0% to 2.0% (2019: 0.5% to 3.8%)
Healthcare: 2.0% (2019: 1.4% to 1.5%)
Property, Construction & Engineering: 2.0%
(2019: 1.5%)
Commercial: 1.0% to 2.0% (2019: 0.5% to
3.9%)
Offshore Recruitment Services: 2.0% (2019:
6.0%)
In 2020, an impairment charge of GBP1.6m has been recognised in
respect of a business in the Professional sector which has been
heavily impacted by the decline in the aviation industry due to the
impact of COVID-19. Before the impairment charge was recognised the
carrying value of the goodwill was GBP3.7m and the recoverable
amount, based on value in use, was assessed as GBP2.1m.
In 2019, an impairment charge of GBP2.5m was recognised in
respect of a business in the Property, Construction &
Engineering sector following the decision to close a substantial
part of it, reducing the carrying amount of goodwill in respect of
that business to nil.
As part of the impairment review, reasonably possible changes in
the growth rate and discount rate assumptions have been considered
to assess the impact on the recoverable amount of each business.
Were the long-term growth rate to reduce to nil no impairment
charge would be recorded (2019: GBPnil), while if the discount rate
were to increase by 2% an impairment charge of GBP0.5m would be
recorded in respect of one business in our Professional sector
(2019: GBPnil).
10 Other intangible assets
Intangible assets identified
in business combinations
--------------------------------------
Trade
Customer names
relationships & marks Sub Total Software Total
GBPm GBPm GBPm GBPm GBPm
Cost
At 1 January 14.2 9.1 23.3 1.0 24.3
Additions 0.1 - 0.1 0.2 0.3
Foreign exchange movements 0.1 (0.1) - - -
--------------- --------- ---------- --------- ------
At 31 December 14.4 9.0 23.4 1.2 24.6
--------------- --------- ---------- --------- ------
Accumulated amortisation
At 1 January 5.5 2.5 8.0 0.8 8.8
Charge for the year 1.3 0.4 1.7 0.1 1.8
Impairment 2.8 0.6 3.4 - 3.4
Foreign exchange movements 0.1 - 0.1 - 0.1
--------------- --------- ---------- --------- ------
At 31 December 9.7 3.5 13.2 0.9 14.1
--------------- --------- ---------- --------- ------
Net book value
--------------- --------- ---------- --------- ------
At 31 December 2019 8.7 6.6 15.3 0.2 15.5
--------------- --------- ---------- --------- ------
At 31 December 2020 4.7 5.5 10.2 0.3 10.5
--------------- --------- ---------- --------- ------
As required under IFRS, the Group reviewed its assets for
indications of impairment as at 31 December 2020. The current
global economic environment has had a significant impact on the
Group, reducing revenues and profits in the short term to varying
degrees in many businesses across the Group. Where businesses have
been adversely impacted and this is significant enough to be
considered an indication of impairment of these intangible assets,
an impairment review has been carried out.
As a result of those impairment reviews, an impairment charge of
GBP3.4m has been booked in respect of an operation in our
Professional sector which supplies the aviation industry. This
industry has been hit hard by COVID-19 and we do not expect a
short-term recovery to pre-COVID levels. The decline in net fee
income, particularly with those customers present on acquisition
and included in the customer relationship intangible asset, is the
prime driver of this impairment.
11 Borrowings
2020 2019
GBPm GBPm
Current
Bank overdrafts 22.1 17.9
Invoice financing 4.9 6.9
Bank loans 5.2 0.4
----- -----
32.2 25.2
----- -----
Non-current
Bank loans 1.2 10.0
----- -----
1.2 10.0
----- -----
Borrowings 33.4 35.2
----- -----
The following key bank facilities are in place at 31 December
2020:
A revolving credit facility of GBP15.0m, expiring in June 2021.
As at 31 December 2020 the amount outstanding is GBP5.0m (2019:
GBP10.0m). Interest is payable at 1.5% plus LIBOR or EURIBOR.
During the year, the remaining GBP1.0m of the GBP5.0m extension to
the revolving credit facility was activated, increasing the
facility to GBP15.0m. The revolving credit facility is subject to
financial covenants and these are disclosed in the Finance Review.
In March 2021 the revolving credit facility was refinanced. The new
facility of GBP15.0m expires in September 2023. LIBOR is currently
in the process of being phased out and therefore this new facility
will be based on the SONIA (Sterling Over Night Index Average)
interest rate. The margin on the facility will vary based on the
Group's net debt to EBITDA ratio and will range from 2.0% to
3.0%.
Overdraft facilities are in place in the UK with a limit of
GBP10.0m, which was increased from GBP7.5m in the first half of
2020. The balance on this facility as at 31 December 2020 was
GBP7.4m (2019: GBP5.9m). The interest rate was fixed at 1% above
applicable currency base rates. A $2.0m overdraft facility to
provide working capital funding in the United States had a balance
as at 31 December 2020 of $2.0m (2019: $1.5m). Interest on this USD
facility is payable at 2% over LIBOR. A EUR13.0m (2019: EUR13.0m)
overdraft facility is in place in Germany. The balance at 31
December 2020 was EUR11.6m (2019: EUR10.9m). Interest is payable at
EURIBOR plus 2.3%. A NZ$2.0m overdraft facility is in place in New
Zealand. The overdraft has not been utilised and attracts interest
at 2% over the base lending rate. Bank overdrafts in the table
reflects the requirement under IFRS to gross up certain cash and
overdraft balances which are netted for banking facility purposes.
This amount is GBP6.5m in 2020 (2019: GBP1.7m).
The UK facilities are secured by a first fixed charge over all
book and other debts given by the Company and certain of its UK,
German and New Zealand subsidiaries.
There is an invoice financing facility in the UK of GBP10.0m
(2019: GBP13.0m). As at 31 December 2020 the amount outstanding was
GBP3.3m (2019: GBP6.0m). Interest is payable at 1.47% over UK base
rate. Following the Group's decision to close a substantial part of
the UK engineering business, the invoice financing facility was
reduced to GBP10.0m in March 2020. There are also invoice financing
facilities in Chile of GBP4.0m (2019: GBP4.0m). As at 31 December
2020 the amount outstanding was GBP1.6m (2019: GBP0.8m). Interest
is payable at approximately 5.5%.
12 Net debt
a) Net debt
2020 2019
GBPm GBPm
Borrowings (33.4) (35.2)
Cash and cash equivalents 20.8 17.6
------- -------
Net debt (12.6) (17.6)
------- -------
Cash and cash equivalents at 31 December 2019 includes cash of
GBP0.5m (2019: GBP0.3m) held by a subsidiary in China which is
subject to currency exchange restrictions.
b) Adjusted net debt
2020 2019
GBPm GBPm
Cash and cash equivalents 20.8 17.6
Less cash held in respect of pilot bonds (1.0) (1.5)
------- -------
Adjusted cash 19.8 16.1
Borrowings (33.4) (35.2)
------- -------
Adjusted net debt (13.6) (19.1)
------- -------
The Group presents adjusted net debt as its principal debt
measure. Adjusted net debt is equal to net debt excluding cash held
in respect of pilot bonds within our aviation business. Where
required by the client, pilot bonds are taken at the start of the
pilot's contract and are repayable to the pilot or the client
during the course of the contract or if it ends early. There is no
legal restriction over this cash, but given the requirement to
repay it over a three-year period, and that to hold these is a
client requirement, cash equal to the amount of the bonds is
excluded in calculating adjusted net debt.
c) Movement in adjusted net debt
2020 2019
GBPm GBPm
At 1 January (19.1) (17.1)
Net increase/(decrease) in cash and cash equivalents
per consolidated cash flow statement 3.1 (7.1)
Decrease/(increase) in overdrafts and loans 0.1 (1.2)
Decrease in invoice financing 2.0 2.7
Foreign exchange movement (0.2) (0.2)
Adjusted for decrease in cash held in respect
of pilot bonds 0.5 3.8
------- -------
At 31 December (13.6) (19.1)
------- -------
13 Trade and other receivables
2020 2019
GBPm GBPm
Current
Gross trade receivables 37.9 46.3
Less provision for impairment
of trade receivables (0.9) (0.7)
------ ------
Trade receivables 37.0 45.6
Prepayments 1.5 1.7
Accrued income 3.6 4.6
Corporation tax receivable 1.0 1.0
Other receivables 1.8 2.3
------ ------
44.9 55.2
------ ------
Trade receivables include GBP22.5m (2019: GBP31.8m) on which
security has been given as part of bank facilities.
14 Trade and other payables
2020 2019
GBPm GBPm
Current
Trade payables 1.6 2.1
Other tax and social security 8.0 7.4
Pilot bonds 1.0 1.5
Client deposits 0.4 0.6
Temporary recruitment worker wages 4.3 4.0
Other payables 1.3 1.6
Accruals 16.2 20.5
Deferred consideration 0.6 -
----- -----
33.4 37.7
----- -----
Pilot bonds represent unrestricted funds held by our aviation
business at the request of clients that are repayable to the pilot
over the course of a contract, typically between three and five
years. If the pilot terminates their contract early, the
outstanding bond is payable to the client. For this reason the
bonds are shown as a current liability. As at 31 December 2020, if
the bonds were to be repaid in line with existing contracts,
GBP0.6m (2019: GBP1.1m) would be repayable in more than one
year.
15 Dividends
2020 2019
GBPm GBPm
Amount recognised as distribution to equity holders in the year:
Final dividend for the year ended 31 December 2019 of nil (2018: 2.0p) per share - 1.0
------ -----
Proposed final dividend for the year ended 31 December 2020 of 1.0p (2019: nil) per share 0.5 -
------ -----
In April 2020, as it became clear that COVID-19 had the
potential to significantly impact the global economy and the
prospects of the Group, the Board considered it prudent to cancel
the dividend in respect of the year ended 31 December 2019 that had
been initially proposed and disclosed in our 2019 Annual Report, in
order to strengthen the Group's balance sheet and aid
liquidity.
The proposed final dividend for the year ended 31 December 2020
is subject to approval by shareholders at the Annual General
Meeting and has not been included as a liability in these financial
statements.
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END
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