Empresaria bucks recruitment trend

Recruitment agencies are slippery businesses to analyse. Many of the biggest listed recruiters have been making record profits after a difficult lockdown, and are still upbeat about the months ahead. However, recession fears are weighing heavily on their shares. What happens to the job market over the next few months will be key.

In many ways, Empresaria Group (EMR) is more straightforward. The company, which recruits across a variety of sectors and 19 countries, has not experienced a strong Covid bounceback. In contrast to larger peers such as Robert Walters (RWA) and Pagegroup (PAGE), its revenue remains significantly below pre-pandemic levels, and 2022’s operating profits have yet to overtake 2019’s, despite climbing year-on-year.

Offshore services - which focus on India and the Philippines - are booming. Adjusted operating profit almost doubled year-on-year and the division now generates almost 80 per cent of group profits. However, business in the UK, Europe and the Americas declined, and profits in Asia Pacific remained flat. 

According to management, a reduction in health care recruitment clients offset growth elsewhere, particularly in the US. Meanwhile, “ongoing supply chain issues” and increased illness rates have impacted margins across various geographies.

Empresaria said it has “yet to see any significant adverse impact” of inflation, and demand from clients remains “strong”. The group also seems to be managing its own cost base well: while administrative costs rose by 17 per cent, this was more than offset by a lower cost of sales.

However, the macro fears that dog the largest recruitment agencies also impact Empresaria, and its performance in the wake of Covid-19 doesn’t inspire confidence. Sell. 

Last IC View: Hold, 87p, 22 Aug 2018