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Empresaria Group plc: THE INVESTMENT CASE

Multi-brand, global strategy helping drive record growth for staffing firm Empresaria

It saw more than two thirds of its 2016 net fee income generated from outside the UK, with Asia Pacific and UK both at 32%, Continental Europe at 28% and Americas at 8%.
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The company is a niche player but in a lot of high-growth niches

Last year was a challenging one for global recruitment agencies, but Empresaria Group plc (LON:EMR) weathered the storm better than most thanks to its global reach.

The specialist staffing group’s international-focus helped it report record 2016 profits as its net fee income grew for the fourteenth consecutive quarter.

The AIM-listed firm saw its adjusted pre-tax profit increase by 23% to £9.2mln in the year to December 31, up from £7.5mln in 2015, as net fee income rose by 20% to £59.0mln.

READ: Empresaria’s record 2016 …

Empresaria highlighted strong profit growth in its German business, as well as in the IT sector in Japan and Executive search in South East Asia.

In the results statement, the group’s chief executive Joost Kreulen said: “Alongside the solid performances across a number of countries, we are particularly pleased to have secured two significant international investments during the year; Rishworth Aviation and ConSol Partners.

“Both brands operate in sectors with good long-term growth prospects and complement the Group's 'Invest & Develop' strategy.  We look forward to the growth opportunities that these businesses have as part of the Group.”

Kreulen concluded: “We continue to see exciting growth opportunities to develop our Group and deliver increased profits and we look to 2017 with confidence."

Think globally, act locally …

Founded in 1996, and listed on AIM since 2004, the company has a seemingly paradoxical philosophy, being both heavy on specialisation and averse to putting all of its eggs in one basket.

It achieves this through a multi-brand approach; each brand is a semi-autonomous unit specialising in its chosen fields, but there are enough brands under the Empresaria umbrella to ensure the group has a decent geographical and sectoral spread.

The group operates 20 brands in 19 countries across seven separate sectors: Technical & Industrial; IT, digital & design; professional services; retail; executive search; healthcare; and other services.

Each brand seeks to be a leader in its field, tailoring the brand to the specific needs and requirements of the clients and the candidates.

"It's more like an inch wide and a mile deep, than a mile wide and an inch deep," Kreulen has said, explaining the company's philosophy.

The bulk of the company's net fee income (NFI) comes from providing temporary staff, with the split increasing to 60% temps and 40% permanent staff in 2016.

WATCH: Capital Network analyst expects impressive growth ...

Geographical spread ….

More than half of the group's brands operate in more than one country, and geographically the group's operations divide into four areas: the UK; continental Europe; Asia Pacific; and the Americas.

On the European mainland, it is represented in Germany, Austria and Finland, with the focus very much on Germany.

The German staffing market was only deregulated in 2004, which means temporary staffing is still a relatively emerging sector within the German economy.

In the Americas, the group has long been represented in Mexico and Chile, and recently dipped a substantial toe into the USA with the acquisition of Pharmaceutical Strategies in October 2015.

For 2016, the group saw more than two thirds of its net fee income generated from outside the UK, with Asia Pacific and UK both at 32%, Continental Europe at 28% and Americas at 8%.

That slight emphasis on reliance on the UK did the company few favours in 2016, what with all the uncertainty in the run-up to the EU referendum vote and the brouhaha that followed it.

Happily, the UK region saw stable activity levels return in the second half of the year, though the tricky first half meant UK profitability in 2016 was lower year-on-year.

As for the sectors in which Empresaria operates, the big earners are Technical & Industrial; IT, Digital & Design; and Professional Services.

The acquisition of Pharmaceutical Strategies saw it establish a presence in the Healthcare niche, while a swoop for New Zealand-based Rishworth Aviation in July gave it the chance to build its Aviation Services interests.

The purchase of a majority stake in ConSol Partners last November boosted its IT presence into mobile and cloud technology recruitment in Europe and the US.

In a people business, keep the people …

Empresaria is not alone in pursuing a buy-and-build strategy, but it seems to have worked out that when buying a people business, it is wise to keep the people.

Management  believes in giving the brands a lot of independence, and encouraging staff to hold a stake in the group, in the hope this will keep the entrepreneurial flame alive in any companies it acquires, and will engage the loyalty of the group's own talent pool.

It means the company is not typically interested in buying a business where the founder is looking to get out of the business and into a deck chair on a beach in the Bahamas; it is interested in buying, or taking stakes in, businesses that are not for sale.



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Empresaria Group plc Timeline

Article
January 24 2017

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