Emerging growth story, analysis of Empresaria results - City Comment
4 September 2014
Today’s strong interim results from Empresaria, the international specialist staffing firm, provide evidence that all the hard work of recent years in simplifying the business and putting in the platform for growth is working.
Thu, 4 Sep 2014 | By Nigel Parson, equity analyst, Hardman & Co.Today’s strong interim results from Empresaria, the international specialist staffing firm, provide evidence that all the hard work of recent years in simplifying the business and putting in the platform for growth is working.
EPS [earnings per share] was up 25%, with all regions delivering good underlying growth.
The share price leapt 50% at the end of last year, but has plateaued since then and continues to be valued at a material discount (around 60%) to its peers.
We would expect the discount to narrow as trading improves. Recruitment firms are particularly geared to recovery and Empresaria is no exception.
Interim results demonstrate trading in-line: The hike in earnings was driven by increases in both net fee income (NFI) and the conversion ratio to EBIT [earnings before interest and taxes].
NFI was up 10% in constant currency (+3% reported) for the period, the fourth consecutive quarter of underlying growth with the company reporting ‘market conditions more favourable’ than at any time in recent years.
The group conversion ratio increased by 150bps [basis points] to 10.9% in line with the long-term aim of achieving 20%. Pre-tax profit was up 42% on a constant currency basis, reducing to +24% on a reported basis primarily due to adverse currency movements in the Rest of World division.
We have left our full-year forecasts unchanged.
International expansion providing opportunities: Over the last seven years, Empresaria has established a strong and growing international network.
Initially, acquiring overseas businesses/brands was the primary growth driver; the emphasis is now on exporting expertise and brands as a lower-risk market development strategy.
In the period, it has opened new offices in Hong Kong, Malaysia, Chile and Mexico and bought a 51% stake in BW&P, a construction specialist based in Dubai.
Empresaria operates in six high growth segments and all activity is consistent with this focus.
Net borrowing stands at £6.5m (1H13: £8.9m) and should fall to a forecast £5.1m at year-end as the second half is seasonally stronger for cashflow.
EPS [earnings per share] was up 25%, with all regions delivering good underlying growth.
The share price leapt 50% at the end of last year, but has plateaued since then and continues to be valued at a material discount (around 60%) to its peers.
We would expect the discount to narrow as trading improves. Recruitment firms are particularly geared to recovery and Empresaria is no exception.
Interim results demonstrate trading in-line: The hike in earnings was driven by increases in both net fee income (NFI) and the conversion ratio to EBIT [earnings before interest and taxes].
NFI was up 10% in constant currency (+3% reported) for the period, the fourth consecutive quarter of underlying growth with the company reporting ‘market conditions more favourable’ than at any time in recent years.
The group conversion ratio increased by 150bps [basis points] to 10.9% in line with the long-term aim of achieving 20%. Pre-tax profit was up 42% on a constant currency basis, reducing to +24% on a reported basis primarily due to adverse currency movements in the Rest of World division.
We have left our full-year forecasts unchanged.
International expansion providing opportunities: Over the last seven years, Empresaria has established a strong and growing international network.
Initially, acquiring overseas businesses/brands was the primary growth driver; the emphasis is now on exporting expertise and brands as a lower-risk market development strategy.
In the period, it has opened new offices in Hong Kong, Malaysia, Chile and Mexico and bought a 51% stake in BW&P, a construction specialist based in Dubai.
Empresaria operates in six high growth segments and all activity is consistent with this focus.
Net borrowing stands at £6.5m (1H13: £8.9m) and should fall to a forecast £5.1m at year-end as the second half is seasonally stronger for cashflow.
