Empresaria Share Discussion Threads

[interceptor2] 28/2/2011 09:33

Bodes well for EMR, I read the STAF results this morning, and wondered where the growth would come in the future being so UK focussed. EMR has a much better Geographic spread, about 38% UK but large exposure to Germany and Austria plus they are gaining much business in developing regions.

Regards ic2

[paleje] 28/2/2011 09:20

Good results from HAYS today. The UK struggled to tread water but Europe and rest of world were strongly up with Asia Pacific and Germany the stars, in fact Germany at its highest ever level for the company. Bit disappointing UK performance but then HAYS works differently to EMR. STAF also reported good results, purely UK.

[paleje] 14/2/2011 09:42

HVN issued an excellent trading update this morning and the share price rose 12%, expect EMR to get another lift when their prelims come out end March, if not before.
The whole sector is on watch, STHR update on 4th Mar and I'll be particularly listening for hints on their UK business as HVN indicated the UK had fared better than expected. EMR, in spite of their attractive global spread, still get about 40% UK revenue so it's important.

[interceptor2] 01/2/2011 17:03

Added to my holding today, after struggling to add yesterday.

Trading update yesterday was confirmation to me, about how strong EMR are trading. And to state that 2011 results will be ahead with 11 months still to run, shows how confident management are about prospects worldwide. That was the clincher for me.

Regards ic2............

[glasshalfull] 01/2/2011 06:59

Similar in sentiment to my post last night. Edmond J also indicates the likelihood that EMR will surpass the newly upgraded forecasts for 2011.

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Stock to watch: Empresaria Group
Tue, 01/02/2011 - 00:00 | Edmond Jackson

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

From a macro perspective of judging the global economy, to micro cap stock-picking, it is interesting to note how Crawley-based international specialist staffing group Empresaria Group (EMR) has made another announcement saying it is ahead of expectations.

A previous update I noted was at last June's AGM; and now management says its trading has benefited from exposure to developing countries, "with solid organic growth being generated particularly in Germany, the group's largest market, and in Asia".

This affirms a general sense that emerging markets have been doing well; and is a pointer that without any further significant shocks to the global economy the recovery trend ought to continue. A smaller recruiter like this is a particularly sensitive indicator of business conditions. Depending on the industry, the upshot could be positive for other cyclical shares where investors are wondering about further upside.

I drew attention to the AIM-listed shares at 45p last June, noting an attractive risk/reward profile after the AGM update and with various directors having bought shares - in particular, a new finance director. This was the first sign of Empresaria being ahead of expectations and the situation shows how it pays to be alert for such companies, in case of a trend.

Obviously, the global economy is not without risks, but it is notable how a board of directors has already gone on the record anticipating full-year 2011 results ahead of market expectations.

The shares entertained 60p last autumn then drifted near 50p towards the end of the year.

Sometimes the tighter market in small caps just has vagaries, as Empresaria has since recovered poise and touched 65p after this update. At this level, the forward price-earnings multiple is most likely still about eight times: the last consensus earnings per share forecast for 2011 (as published in Company REFS) was 7.26p last autumn and the update implies at least 8p is now in the frame.

This share's history has seen its P/E multiple vary from 20 times in 2007, as low as three during 2009, showing how wildly sentiment towards small cap cyclicals can swing. When the economy is booming the market is prone to rate cyclicals more akin to growth shares; then when a downturn sets in there is a sharp reversal in the rating.

Empresaria's P/E multiple ought to steadily improve now the earnings outlook is firming, such that 80p may be a reasonable medium-term target.

This is really a capital growth play (and trying to avoid loss, with decent timing), although there is a dividend probably to satisfy institutions, the yield is sub 1%.

Last June I noted now net debt was projected to fall to about £6 million by end-2010 and £4 million by end-2011; the update already cites £5.5 million at end-2010 as a result of strong cash generation, despite investing £2 million to buy out minority shareholdings and boosting working capital to support increased revenue.

While full-year revenue rose by 17% to £223 million, net fee income (which tends to be the real yardstick for a recruiter) rose 20% to £49 million. After a particularly strong first half 2010, second half net fee income rose 14% (like-for-like) to £25 million.

Despite some adverse effect from December's weather in the UK and continental Europe, this was compensated for by stronger performance elsewhere. A few years ago I recall Empresaria's Asian business being largely in start-up phase; now maturing they have made a "material profit contribution".

Strong performance in Germany and Austria (90% of continental European net fee income) relates to a burgeoning temporary staffing market amid a strong German economy; and in the UK, new initiatives in non-public sector temporary staffing have boosted revenue.

Empresaria has also enjoyed the benefit of professional/financial services employment markets recovering. Key points operationally from this update are its showing Empresaria diversified in international staffing markets that should offer structural long-term growth; and where there are challenges it is adjusting adeptly.

With new offices in China and Australia, a "hub" approach is being applied through four group companies to develop Far Eastern regional offices at reduced cost and risk. The kind of risk you might worry about concerning a small British PLC operating from 17 countries, is logistically taking on too much, although Empresaria is proving its mettle.

As tax rises nudge the UK back to a risk of recession, this is a small cap with a difference: about two thirds of its net fee income from outside the UK. You can find other small caps with overseas exposure but they are typically UK-oriented. So the trend in events increases Empresaria's appeal to smaller company funds.

The main drawback, however, is tight liquidity in this near £30 million share: Caledonia Investments owns 23.1%, the chairman Tony Martin 20.8%, chief executive Miles Hunt nearly 9% and four other committed institutions over 21%.

While the strong management ownership aligns their interests with outsiders, it adds to the shares' inherent volatility as a small cap recruiter; for example the 2007-09 plunge from 179p to a low of 23p. More positively, if the company is now on an improving trend the tight market will help to steadily squeeze the shares' rating higher.

As regards the balance sheet, at end-June there was £25.6 million goodwill in context of £27.1 million net assets; such is the nature of a "people business" which may deter some investors, being mainly intangible assets, however market value will essentially be driven by earnings.

Prelims are due Thursday 31 March. For more information see empresaria.com.

Regards
GHF

[jeff h] 01/2/2011 00:31

GHF you are correct and I made an error, Edison for 2011 are forecasting
Pre Tax of £7.4m and EPS of 7.4p

[glasshalfull] 31/1/2011 21:43

Here's the link to the updated Edison note.



Jeff H - Just to clarify you've probably a typo re. your last sentence - GECR have moved their forecasts by the amount that you state, rather than Edison.

However, Edison have also raised their forecasts from 7.2p to 7.4p and state that:

"...the rating continues to be at the low end of the range of peers, despite the exposure to both recovery in developed markets and the high growth in its developing markets."

We should also remember that EMR would in all likelihood have materially beaten the upgraded forecasts if not for the impact of poor weather across Europe and the UK in December. They are also demonstrating strong cash generation with excellent organic growth from Germany and RoW which accounts for approx. 2/3rds of NFI.

I think that forecasts will be raised further as the year progresses. V few companies would state that full year profit forecasts will be exceeded a full 11 months prior to year end which suggests to me considerable confidence in the business model and growth opportunities moving forward....so I think EPS forecasts of 7.4p and 7.7p will be comfortably beaten.

Regards,
GHF

[jeff h] 31/1/2011 18:53

Yes, Growth Equity forecast for 2011 which was previously lagging the other brokers forecasts has now caught up.

The article that Stegrego has posted then gives the following forecasts:-

Y/E 31/12/11 Pre Tax £7.7m EPS 7.77p Div 0.35p

Y/E 31/12/12 Pre Tax £9.9m EPS 10.02p Div 0.35p


Edison have moved their 2011 forecast up slightly to £7.7m and 7.7p EPS.

[stegrego] 31/1/2011 18:43

Empresaria Group, the multinational specialist staffing group, has today issued an upbeat trading statement indicating that financial results for the year ending 31st December 2010, are slightly ahead of expectations and suggesting that 2011 market estimates are too low. At £223 million revenues were £1 million ahead of our forecasts and Net Fee Income of £49 million was broadly in line with our expectation. Full year adjusted pre-tax profits are expected to be slightly ahead of expectations and we have increased our forecast marginally to £6.5 million (£6.2 million).

Cash conversion has been excellent and the company has reported that net debt has been reduced to £5.5 million, some £2 million less than our previous expectation. Empresaria expects, even at this early stage, that results for the year ending December 2011 will be ahead of expectations.

We are therefore increasing our 2011 estimates. Although we have only marginally increased our revenue estimates to £233.9 million (£231 million) our pre- tax profit estimates have be increased by 20% to £7.7 million partly driven by a decrease in finance charges, aided by the improving debt position.

Today's announcement underlines the strength of Empresaria's diversified geographical spread. The Group's second half performance was positive across all regions. Empresaria is now seeing tangible returns from its investment in developing international staffing markets. Although the poor weather in the UK and Continental Europe in December had some financial impact, this was compensated for by stronger than expected performance in the Group's other regions.

New offices in Asia and a hub in Singapore will allow the company to further drive expansion in the high growth Asian market. Structural changes in the Teutonic regions of continental Europe continue to benefit the Group's largest division, and in the UK, the focus on developing temporary staffing operations away from the public sector has created stable and growing revenue streams.

The company continues to be wary of the macro-economic environment but is performing well, and we are comfortable about raising our forecasts. Continuing to value the company on 11x 2011 earnings we are raising our target price to 85p (78p) and reiterate our stance of buy.

 
GECR

[cfro] 31/1/2011 18:28

Interceptor2 - Im pretty confident that KBT will also come good! :o))

[stegrego] 31/1/2011 12:18

HB

Empresaria (EMR, 65.5p, £29.19m) Trading update for the year ending December 2010 from the international staffing specialist reports revenues of £223m (£191m), a rising trend of £108m in H1 and £115m in H2, with net fee income of £49m (£41m) leading to results slightly ahead of market expectations (currently some £6.2m PBT with 6.3p EPS). Despite investing £2m in minorities etc the group will report a net debt of some £5.5m (£7.6m at the half year stage). The outlook for next year is also being increased on the back of solid growth from Germany, its largest market and in Asia. We expect current expectations for 2011 of some £6.4m PBT to increase towards the £6.7m with 7.5p EPS putting the group on a 8.7x PER. We maintain the BUY with a slightly increased fair value target of 75p. (Julian Tolley)

[sailing john] 31/1/2011 12:12

Bought in first thing on the strength of the TS and fundamentals.
GL - SJ

[interceptor2] 31/1/2011 12:06

Yes very pleased indeed cfro, I hope KBT can pay you back just as well :-)

Regards......

[cfro] 31/1/2011 10:27

Cracking statement. Bet you're pleased i got you into this one interceptor2! :o))

What i like about EMR is its exposure to emerging market growth and nice to see countries like Germany contributing too.

[glasshalfull] 31/1/2011 08:46

Well done EMR.

Excellent long term hold in my book, especially when they are flagging that expectations for the current year will be beaten...A FULL 11 MONTHS PRIOR TO YEAR END.

V content holder.

Regards
GHF

[interceptor2] 31/1/2011 08:33

Agree solid update and strong cash generation with net debt falling rapidly, looks like EMR should be heading towards net cash in 2011. Looks like 2011 is going to be a very exciting period with bullish comments about Germany and Austria and Asia which should drive growth.

Interesting comment about the December weather in the UK and Europe which effected trading, but was more than made up from other regions. Just shows that the UK GDP figures in Q4 are looking like just like a blip imo.

Lucky I topped up my holdings last week, because unable to buy any more this morning.

Regards ic2........

[topvest] 31/1/2011 08:06

Great update today. Looking very strong for 2011.

[paleje] 31/1/2011 07:28

Good update, still only January and they're telling the market plainly that 2011 will exceed current market expectations. Analysts sharpen your pencils.

[stegrego] 30/1/2011 20:49

Ic2,

I hold all 7 of those and concur they are all steaming ahead.

[interceptor2] 30/1/2011 20:09

This month has seen some very strong trading statements for some of my holdings, with CLL, JDG, KBT, KENZ, SAG, and SDM being among the strongest imo.

But I have a feeling that EMR statement due tomorrow could be the best yet, with Germany the driving force.

Must set the alarm clock nice and early.

Regards ic2..........

[saucepan] 28/1/2011 16:31

Interesting post, paleje. EMR crept up to a 52-week high today, too.

[paleje] 28/1/2011 16:06

RBS issued an upbeat note for the recruitment sector in general today saying its at the point in the cycle where it should be on premium ratings, they upped targets on some of the bigger players incl STHR which went from 300 to 700, they also increased Walters, Page and Hays.

Didn't mention EMR (too small) but the same has to apply and probably more so as we've been lagging behind.

Cheers nellie on STHR board for spotting it.