Diversification is strength for Empresaria

Recruiter Empresaria operates primarily through its 'invest and develop' model, buying specialised staffing companies across sectors and countries and ensuring each business's management owns a healthy chunk of the operation they are running to align interests. It makes for a complicated model, but it also makes for a well-diversified one. And, importantly, it's a model that seems to work.

One-third of last year's turnover came from the UK, 31 per cent from Europe, 26 per cent from the Asia Pacific region and the remainder from the Americas. The group also has a bias towards temporary work, which tends to be less volatile through the economic cycle due to the less onerous commitments made by employers when taking on temporary workers than when hiring permanent staff.

The group owns companies with focuses ranging from IT in Japan to logistics in Germany. It added to these in the past year with Rishworth Aviation, which contracts pilots out to airlines in Sweden and the Asia Pacific region, and Consol Partners, an IT, digital and design company operating in the UK and US. The group expects the full benefits of these acquisitions to filter through this year, refilling its coffers ready for it to make more earnings-enhancing purchases in 2018.

The acquisitions are helping the group move towards hitting some of the key targets set out in its current five-year plan, which was introduced in 2014. The plan targets net fee income growth of 10 per cent, a conversion ratio (the ratio at which net fees convert into operating profit and a key measure of profitability used by the industry) of 20 per cent and a 'debt-to-debtors' ratio of 25 per cent, all by 2018.

Debt-to-debtors is an internal ratio the group uses for measuring its balance sheet strength and compares debt to what management regards as the company's main asset - trade receivables (work on which money is owed by clients). At present, the ratio, excluding £5.2m of restricted cash, is at 38 per cent. This may be causing some nerves, as it is well above both the 2018 target and its 2015 level of 23 per cent. However, the move is due to last year's acquisition spending and operating cash conversion has held up. Importantly, the contribution from the acquisition that the extra debt was taken on to fund should now contribute to getting borrowings swiftly down to target levels.

There has been no disappointment regarding net fee income growth, which came in at 20 per cent in 2016 - twice the target level and up from 5 per cent in the first year of the plan. The conversion ratio, meanwhile, rose for the fifth year running in 2016 to 16.6 per cent and towards the 2018 target. In a sign of management's confidence about prospects, the company plans to increase its headcount further this year.