Empresaria (EMR) first warned of challenging markets in November last year, when the recruiter highlighted changing legislation in Germany as an obstacle to profit growth. In spite of continued top-line growth from the 2017 year-end, those challenges have started to manifest in the half-year figures, with net fee income growth effectively stalling, up just 1 per cent at constant currencies.
Alongside Germany, management highlighted further regulatory changes in Japan, with the executive search business in South East Asia and low productivity in the UK also highlighted as areas of difficulty. Even with the group’s wide geographic diversity, this is concerning. Together, those four markets account for more than 65 per cent of net fee income.
However, a focus on efficiency looks to be paying off. Cost controls led to a 0.5 percentage point jump in the conversion ratio – operating profit divided by net fee income – to 14.7 per cent. Operating profits were up 11 per cent in the period. Of course, the group must find a balance between cutting costs and investing in the business, and management is targeting both acquisitive and organic growth. Headcount was up on the prior year, and the group began operating in Peru post period end with the acquisition of temporary recruiter Grupo Solimano.
Broker Arden Partners is forecasting adjusted pre-tax profits of £11.3m in 2018, giving EPS of 12.7p (£11m and 12.6p in 2017).
| EMPRESARIA (EMR) | ||||
| ORD PRICE: | 87p | MARKET VALUE: | £42.6m | |
| TOUCH: | 85-89p | 12-MONTH HIGH: | 146p | LOW: 69.5p |
| DIVIDEND YIELD: | 1.5% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 102p* | NET DEBT: | 39% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 173 | 3.5 | 4.1 | nil |
| 2018 | 178 | 3.9 | 3.8 | nil |
| % change | +3 | +11 | -7 | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £53.1m, or 108p a share | ||||
