Trading Update and Notice of Results

Empresaria (AIM: EMR), the global specialist staffing group, provides a trading update for the financial year ended 31 December 2023 ahead of announcing its full year results on 26 March 2024.

Trading update

• Net fee income down 12% to £57.5m (down 11% in constant currency)
• Adjusted profit before tax expected to be at the top end of the range guided to in November 2023 of £3.0m to £3.5m
• Offshore Services continues to perform well with net fee income up 4% despite challenging market conditions (up 9% in constant currency)
• Taking actions to maximise short and long term value

The macroeconomic backdrop remained challenging throughout 2023 and this had an impact across the Group. As detailed in the table below, all of our regions have shown year-on-year reductions in net fee income with the exception of Offshore Services which has delivered year-on-year growth despite the adverse market conditions. Permanent placement activity has been most significantly impacted with net fee income down 25% year-on-year. Temporary and contract net fee income was down 10%, primarily driven by our exposure to the global IT sector and the US Healthcare sector, both of which had significant reductions in demand in 2023.

Net fee income by region for the year ended 31 December was as follows:

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

Adjusted net debt increased to £11.1m, £3.2m higher than 31 December 2022. The increase is primarily driven by a higher proportion of tax cash payments reflecting the impact of loss-making subsidiaries, adverse foreign exchange movements and the impact on working capital requirements from the shift of revenue mix. Headroom, excluding invoice financing facilities, remains strong at £17.8m.

Taking actions to maximise short and long term value

During 2023 we took strong action on costs, including reducing our headcount (excluding Offshore Services) by 17%, which delivered a significant benefit in the second half of the year and will continue to do so in 2024. We have also been further streamlining our operations, bringing businesses in key markets under a single leader and common operating structure. In countries where we operate in more than one of our core sectors this will enable us to provide our full range of services and increase penetration of key clients as well as helping us to operate more efficiently and effectively. By consolidating our leadership structure we have also been able to reduce the size of our senior management team, without adversely impacting our Group-wide initiatives.

We are focussing on our core sectors of Professional, IT and Healthcare and on the markets where we see the greatest opportunity for growth. As part of this we continue to review the sub-sectors and markets in which the Group operates. As a result, in 2023 we closed our Vietnam operation. We have also merged our UK marketing brand into our lead Professional brand enabling us to offer marketing recruitment services seamlessly to a wider client base. We expect a small number of further actions in the short term.

Our Offshore Services operation continues to perform strongly. This business delivered year-on-year growth in net fee income despite the challenging market conditions and has grown at a compound annual rate of 32% since 2017. The Board believes that our share price does not reflect the value and potential of this business. Given M&A activity that has occurred in the sector in recent years, such as the acquisition of PSG Global by Teleperformance in late 2022, the Board is of the belief that our 72% investment in this operation is likely worth significantly more than the value attributed to the entire Group based on its share price over the last 12 months.

Rhona Driggs, CEO of Empresaria, commented:

"Challenging market conditions persisted throughout 2023 across our markets and sectors. We took significant action to adjust our cost base and continued to manage this closely as the year progressed. I am proud of the resilience of our team in navigating these difficult times.

While the global economic environment remains challenging, we are confident that the actions we are taking to create greater focus on our core sectors and operations will enable us to execute our strategy more quickly and effectively to realise our long term growth ambitions."