Trading Update and Notice of Results

Empresaria (AIM: EMR), the global specialist staffing group, today provides a trading update ahead of announcing its interim results on 20 August 2024.

Trading update

• H1 revenue up 4% against prior year in constant currency, excluding exited operations (CC LFL), reflecting relative strength in temporary and contract. Reported revenue down 3% to £121.8m.
• H1 net fee income down 9% year-on-year CC LFL, largely driven by a fall in permanent placement. Reported net fee income down 15% to £25.3m.
• Adjusted net debt increased to £13.5m (31 December 2023: £11.1m).
• Full year adjusted results are expected to be in line with current market expectations although market conditions remain challenging.

The industry-wide weakening of demand and slowing of hiring decisions, that started in late 2022 and persisted across 2023, continued through the first half of 2024. This has impacted results across the Group with each of our regions showing a year-on-year decline in net fee income for the first half of the year. Permanent recruitment has been most heavily impacted with net fee income down 21% CC LFL (reported figure down 27%). Temporary and contract performed relatively strongly with net fee income down 1% CC LFL (reported figure down 8%), while Offshore Services, which delivered a record year in 2023, reduced by 10% CC (reported figure down 14%). The reduction in Offshore Services was driven by a fall in UK Healthcare at the end of 2023 and at the start of 2024 due to the NHS looking to reduce agency spend, a situation that has now stabilised. Offshore Services demand remains muted across both the UK and US, reflecting the current reliance on its recruitment industry client base, however our pipeline is strong.

As part of our focus on our core sectors and reducing the complexity of the Group, we announced in March our intention to exit four of our smaller operations in markets or sub-sectors where we do not plan to invest. In the first half of 2024 we have sold our loss-making Healthcare operation in Finland and closed our Professional operation in China.

We continue to maintain tight control of our cost base, with administrative costs for the first half of 2024 down £2.3m CC LFL on the prior year, while at the same time protecting our core consultant base to ensure we are positioned to take advantage when the market recovers.

Financial position

Adjusted net debt as at 30 June 2024 increased to £13.5m (31 December 2023: £11.1m) reflecting the trading results, normal H1 cash flows such as dividends, and a working capital outflow driven by an increase in trade debtors in Germany as a result of the issue highlighted in the paragraph below. Headroom remains strong at £10.5m.

We note the announcement on 16 July by weLOG, a significant client of the Group in Germany, regarding its entry into provisional self-administration in order to restructure its business. We are in discussions with weLOG regarding the recoverability of outstanding amounts which at 30 June 2024 stood at €3.5m (excluding recoverable sales taxes). Given the potential size of this item, it is anticipated that any associated write-off would be treated as exceptional in the Group's financial statements and therefore excluded from adjusted results presented.

Rhona Driggs, CEO of Empresaria, commented:

"Ongoing market conditions remain challenging across the industry and no significant improvement is expected in 2024. Permanent recruitment continues to see longer cycle times, lower acceptance rates and reduced demand as client and candidate confidence remains subdued. We are seeing improved demand in our temporary and contract business in some markets and sectors and this is reflected in more resilient year-on-year net fee income performance.

In our core sectors of Professional, IT and Healthcare, we have streamlined our operating structure, fully implemented our dedicated sales and delivery model, and have rolled out additional technology enhancements. These actions will help us to improve productivity and drive scale in these sectors.

With our strong operational leaders and our continued focus on reducing complexity in the Group, we feel confident in our ability to navigate the current market environment and maximise our growth when the market recovers."

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 Tuesday 20 August 2024 at 12:00pm UK time.

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.