UK – Empresaria Group H1 revenue up slightly as net fee income rises 15%

August 11, 2022

Empresaria Group plc (AIM: EMR), the international specialist recruitment group, has announced its unaudited interim results for the six-month period ended 30 June 2022 with a marginal increase in revenue of 1% on a constant currency basis compared to the same period last year.

Net fee income increased in UK & Europe, APAC and Offshore Services but decreased in the Americas.

Adjusted operating income rose 5% year over year, reflecting ongoing investments to support future growth.

(£m) H1 2022 H1 2021 % change % change at constant currency
revenue 129.8 129.8 0% 1%
Net Fee Income (Gross Profit) 32.6 28.4 fifteen% fifteen%
Adjusted operating result 4.5 4.3 5% 5%
operating result 3.8 2.7 41%
profit before taxes 3.3 2.4 38%

Chief Executive Officer Rhona Driggs said: “We are pleased to report solid growth in net fee income and continued progress in growing our adjusted operating income as we continue to invest in our businesses. We are seeing the benefits of the investments made, our team, our technology and the expansion of our service offering, with early successes of our Recruitment Process Outsourcing (RPO) offering in APAC. These are key to our future growth and the achievement of our mid-term adjusted operating profit target of £20m.”

During the half year, Tony Martin CBE (Commander of the British Empire), Non-Executive Chair, announced his resignation from his position on the Board of Directors. Martin joined the Empresaria Board in 2004 as Chairman.

Penny Freer, a non-executive director since 2005, was appointed interim chair following Martin’s resignation.

Revenue by Region

(£m) H1 2022 H1 2021 % change constant currency
UK and Europe 63.2 67.9 -7% -5%
APAC 23.0 19.3 19% 22%
America 32.7 36.7 -11% -11%
offshore services 11.7 6.4 83% 77%

Net fee income by region

(£m) H1 2022 H1 2021 % change constant currency
UK and Europe 14.5 14.1 3% 4%
APAC 7.9 6.6 20% 22%
America 4.6 5.0 -8th% -12%
offshore services 6.1 3.2 91% 85%

The UK and Europe had a mixed performance for the first half of the year, with total net fee income up 3% (4% cc) but profits down 20%. The UK business reported a 12% increase in net fee income, reflecting strong performances in the professional business. UK IT operations results continued to be “disappointing” as net fee income fell year-on-year and the group said it was taking action to counteract this.

In APAC (excluding offshore services in India and the Philippines), net fee income grew 20% (22% at constant currency) with strong growth in most countries, including record first-half net fee income in Indonesia, the Philippines, and Thailand Japan . Earnings were in line with the prior year, reflecting a full period of regional overheads along with some challenges in Australia, where stiff competition for talent is leading to significant counteroffers. The growth in net fee income was complemented by the Group’s new RPO service offering in the region, which has already started to show results.

In the Americas, net fee and commission income decreased 8% (12% at constant currency) and operating income decreased 53%. The main reason for these results was the expected decline in healthcare after an extremely strong 2021, driven by demand related to Covid-19 vaccination and testing for a high volume of similar roles that the group could fulfill more efficiently.

The Group’s US IT operations saw a slight year-over-year decline in net fee income against a strong peer market in 2021 and in a highly competitive market where counter-offers have become the norm. In Latin America, the group saw a slight decline in net fee income due to a major election project in Chile last year and a slow recovery from Covid-19 in Peru.

Offshore Services has continued its strong momentum through 2021-2022 with net fee income growth of 91% (85% at constant exchange rates) and earnings growth of 94% annually. The UK operation has continued to grow significantly, with the number of billable jobs up by a third as of the end of 2021. Progress in the US market has slowed in the first half of the year, with new growth being offset by lower demand for healthcare workers from customers. The group added that it will invest in the second half of the year to increase capacity and enable entry into the next phase of growth.

The group said hiring has proven difficult in certain markets due to a lack of available talent and increased salary expectations for those willing to make the switch, but added that they have recently seen a surge in hiring in particular recorded in the APAC region. In addition, the group has made progress in complementing its recruitment teams with its offshore resources.

Empresaria said it had a solid start to 2022. Driggs added, “In the second half of the year we will continue to invest in headcount to take advantage of current market demand and we will also expand our offshore services capabilities as we continue to see significant growth potential.”

“We are optimistic about the year ahead as talent demand is strong despite global macroeconomic uncertainties,” continued Driggs. “Given the diversification of our business and the strength of our new leadership team, we are confident that we will continue to deliver on our strategic priorities and build on the positive momentum we have seen in the first half. We expect full-year earnings to be in line with market expectations.”

In a statement, the company said: “Global macroeconomic uncertainties are mounting and the impact of rising inflation in many of our markets has yet to be fully appreciated,” the group said. “However, we have not yet identified any significant negative impacts and customer demand remains strong.”

Empresaria shares last traded at £61.25, up 1.24% on the day. The company has a market capitalization of £30.41 million.

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