Empresaria slashes costs after 'most challenging period' for staffing sector

Specialist staffing company Empresaria said on Wednesday that it was profitable in both the first and second quarters, despite the impact of Covid-19.

The AIM-traded firm reported year-on-year profit growth in the first quarter, before the outbreak of the novel coronavirus, while net debt was “significantly” reduced to £11.6mm, and its headroom increased to £18.1m.

It said net fee income for the first quarter was down 5% on 2019, with the “vast majority” of that reduction coming in March as Covid-19 began to impact trading.

The second quarter, meanwhile, was “fully impacted” by Covid-19, with net fee income down 39% year-on-year, resulting in first half net fee income being 22% lower than in 2019.

On a divisional basis, net fee income was down 35% at constant currency in the professional sector, plunged 83% in property, construction and engineering.

IT net fee income was off 2%, healthcare slid 14%, and commercial was 10% weaker.

Offshore recruitment services were the odd one out, with net fee income there rising 8% for the six months ended 30 June on a constant currency basis.

Empresaria said it took “swift and decisive” action on costs, with costs in the second quarter 30% lower than in 2019 and 23% lower than the first quarter.

That resulted in the company remaining profitable in the second quarter, at an adjusted profit before tax level, despite the significant fall in net fee income.

The board said the “significant” cost cutting measures were targeted to protect the ability of the group to rebuild effectively as its markets recovered.

Key investment plans, including in core technology, were protected to ensure that those benefits could still be realised.

Adjusted net debt at 30 June totalled £11.6m, which was a £7.5m reduction from 31 December.

It noted that, while profits were adversely impacted, the reduction in activity levels in the second quarter created “significant” working capital inflows, which reduced net debt.

Additionally, the group took advantage of various government schemes to delay payment of certain taxes such as VAT in the UK, with those totalling £3.5m, and would start to be paid as the company moved through the second half of the year.

As it announced in May, Empresaria also agreed an increase of £2.5m in its UK overdraft facilities, with headroom at period-end, excluding invoice financing facilities, increasing to £18.1m, from £11.5m at the end of December.

“The last few months have been the most challenging period I have experienced in the staffing industry,” said chief executive officer Rhona Driggs.

“There are still challenges to overcome as we continue to navigate through Covid-19 and our focus remains on the health and safety of our employees and candidates.

“There have, however, been a number of positives in the period as this pandemic has united our teams even further, enabling us to leverage our strength and expertise across the globe.”

Driggs noted that, despite the significant falls in the global economy and in the markets in which the company operates, it remained profitable.

“Having weathered the initial impact of Covid-19 our focus has turned to recovery and ensuring we continue to identify and deliver on the opportunities ahead.

“While difficult decisions had to be made during this turbulent time, this has enabled us to accelerate changes to our operating models that will result in a more efficient and effective group.

“We have protected key investment spend to ensure we continue to deliver on our strategy and build the platform for a strong recovery as the markets improve.”

At 1426 BST, shares in Empresaria Group were up 10.81% at 41p.