Empresaria Share Discussion Threads

[bigbigdave] 13/9/2014 06:49

john09, I need to employ you as a fortune teller :o)

[gucci] 12/9/2014 13:07

24k delayed buy

[john09] 12/9/2014 09:41

And I expect more action this afternoon and Monday because we all know it'll be a main write up in SCSW tomorrow ...

[john09] 12/9/2014 09:36

You seem like a fair weather investor Santangello. Not heard a. Peep from you as the price was dropping! It's only up 1p (after falling 4p this week!) so keep your knickers on!

[santangello] 12/9/2014 08:44

Tipped....??

[john09] 06/9/2014 15:48

Well a bid would suit me!

[daneswooddynamo] 06/9/2014 14:39

this used to be rated very highly but then hit a few banana skins, the most recent of which has obviously been their German problem.

The collapse in the share price making it a measly market cap stock and the very illiquid nature of the register with Hunt and Martin controlling a very big chunk and Caledonia taking 20 odd percent early in its listed life (and Ennismore having a big chunk which Martin took out at 38p odd) from the off has created problems and now caledonia are offloading...the good news is that they are finding some willing homes for their stake but it may take a bit more time to offload the rest.

The debt level is a bit of an issue but problem has been exacerbated by buying in minorities and is now starting to come down sharply..hopefully it continues to be a focus (and why the dividend will not be increased imo).

I actually think they navigated the substantial German issue very well but the frustration is that the share price is not even back to the mid 60s it was trading at before Germany struck.

Meanwhile it is building a nice well-diversified business and the market is rating it harshly. As Jeff H says above, Martin could effectively deliver this business to someone if he wanted and you could wake up with a 50-100% gain overnight (he said with the rose-tinteds on!)

[jeff h] 06/9/2014 14:28

I don't think maintaining a minimal dividend rather than a progressive dividend policy helps.....it's not as though it would cost much to increase the dividend by say 10% a year.

Tony Martin isn't getting any younger though...think he's 74 now, so who knows he may decide to cash his chips in and sell out as he has done previously.

[john09] 06/9/2014 14:01

My only problem with this one is if you look historically at it's valuation it has ALWAYS been on a lower PE of about 7 anyway so it's not like it's slipped off the pace it's always been off the pace .

I hold anyway for now. SCSW will make it the main write up next weekend which will no doubt get this back over 50p

[jeff h] 06/9/2014 12:28

Shore Capital note posted by Willow67 over on iii

Strong interim results

Empresaria has issued pleasing results for the six months to June 2014, delivering strong growth in the bottom line. Adj. EBITA and adj. PBT grew by an impressive 20% and 24% respectively, on underlying net fee income (NFI) 11% higher, with adj. EPS up by a quarter. This signals the upwards move in the conversion rate (EBITA/NFI) to 10.9% (H1 2013A: 9.4%), which highlights a combination of improving productivity, focus on margins, the jump in permanent activity and last year’s action on costs. The progress once again demonstrates that the management’s brand-led strategy, focusing on growth sectors and markets is working, underlined by the investment in four new offices and an acquisition during H1. We highlight below the increase in adj. EPS expectations following today’s positive announcement.

Good underlying fee income growth
Revenues improved 4% on a constant currency basis to £94.0m, albeit declined 1.7% on a reported basis. Net fee income improved 11% on an underlying basis to £21.6m, driven predominantly by stronger permanent activity levels. A number of factors reduced the level of growth in reported NFI, including: the impact of currency (-£1.2m), 2013 branch closures (-£0.5m) and M&A (a net £0.0m). The bulk of the currency issue reflected the group’s businesses in Asia and Chile (-£1.0m), with the remainder accounted for by the strength of sterling relative to the euro. On a reported basis, NFI increased 3% year-on-year.
In March 2014, the company purchased an Executive Search business in Dubai (BW&P FZ LLC), which delivered fee income of £0.6m during H1, although owing to investment in headcount (reflecting the opportunities available in the Gulf region), it ‘washed its face’ at the EBITA level. Branches were closed in the UK (one within the Technical & Industrial sector in the West Country) and in Germany (rationalisation of the Technical & Industrial business last year, focusing on the industrial regions of Bavaria and Austria), reflecting a focus on higher productivity and margin. The group disposed of a UK payroll services business during 2013, which was deemed non-core in view of the brand-led strategy and contributed £0.6m to NFI during H1 last year.
By sector, the greatest improvement in fee income was seen within the two areas hardest hit by the recession, the Financial Services and Technical & Industrial sectors. In addition, NFI within the Professional & Specialist areas also grew as a proportion of group fees, to 81% (H1 2013A: 79%). The Finnish Healthcare business experienced ongoing market weakness, while the Executive Search business was flat on an underlying basis (currency weakness in Asia).

Permanent fee income improved by 10% year-on-year, driven by a markedly stronger performance in the UK (+20%), while temporary fees improved by a more modest 2%, on an underlying basis over the same period. In terms of the NFI margin, this improved 110 bps to 23.0% reflecting the rising proportion of permanent fees (up to 40% of group NFI, compared to 35% in H1 2013A). The average temporary placement margin was flat year-on-year at 15.3%, despite the disposal of the higher margin UK payroll services business (temporary) in H2 last year. This reflected the improving temporary margin in Germany, as market conditions and, with it confidence levels, improved.

EBITA rises 20% year-on-year

With costs held in check (+1.5% to £19.2m), highlighting the rationalisation of the cost base in Germany, Austria and to a lesser extent the UK during FY2013A, the higher underlying fee income levels saw the group’s EBITA grow by an impressive 20% to £2.4m. The growth in profitability would have been higher but for the opening of four offices during H1 (Hong Kong, Malaysia, Chile and Mexico) and investment in headcount (UK, Asia and in the group’s acquisition in Dubai). Nevertheless, the group delivered strong progress in the conversion ratio, which improved 150 bps to 10.9%, the highest reported H1 level since FY2010A.
By region, the greatest uplift in conversion rate was in Continental Europe, rising from 4.5% to 10.3%, an improvement in excess of 130% and due to the steadily improving market in Germany during H1, coupled with the aforementioned cost reductions last year. In the UK, the improvement in conversion rate to 12.8% (H1 2013A: 11.5%), reflected lower costs (branch closure and the disposal of the payroll services business, falling £0.1m to £6.8m). In the RoW region, the conversion rate declined to 10% (H1 2013A: 12.5%), owing to the investment in new offices and headcount (including the recent acquisition in Dubai), with costs rising £0.7m year-on-year to £6.3m and in spite of the higher NFI (up 9.4% y-o-y, again led by permanent activity). We expect the additional headcount to begin delivering a positive contribution during H2, with more mature levels delivered during FY2015F.
Management’s long term target is for a conversion ratio of 20%, suggesting there is both some way to go and a likely improvement in operational gearing from here, especially as few of the markets in which the group operates in are yet to be ‘firing on all cylinders’.

German provision

The notes to the results highlight that the provision against retrospective pay claims and social security liability in Germany was unchanged at the end of H1 2014A, at £0.7m. We think there is a reasonable possibility that this sum will be paid to the German authorities during H2 2014F, which would then result in the closure of the issue, which is welcome.

Balance sheet and cash flow

Net debt increased modestly from the year end to £6.5m (December 2013: £5.8m and compares very favourably to £8.9m in June 2013). This reflected increased working capital (£2.0m higher) and the acquisition of BW&P FZ LLC (+£0.3m), offsetting the improvement in operating profit (+£0.4m). The increase in working capital largely reflects a rise in the number of large scale projects within the UK Technical & Industrial division, where payment terms were less favourable. As a result, debtor days increased to 52, from 49 a year ago. However, it is important to note that the contracts are largely with established major UK-wide customers.
In terms of cash flow estimates, we anticipate that net debt is likely to fall below the FY2013F levels of £5.8m, subject to the scale of minority interest purchased within the Chinese business (unlikely to be material in cash terms) and payment of the German provision during H2. We estimate that net debt / EBITDA is likely to fall from the 0.9x at the end of H1 2014A to 0.7x by the year end, with interest cover of 10.9x, comfortably within the bank covenant tests. Hence, Empresaria operates with strong solvency ratios.

Adj. EPS estimates upgraded, while adj. PBT outlook unchanged

We believe our unchanged adj. EBITA expectations to be conservative, should trends seen in the last four years continue into FY2014F. For example, the ‘traditional’ one-third / two-thirds H1 / H2 EBITA split, whereby the higher H2 volumes have resulted in an average conversion rate uplift of 7.6% from H1 levels suggests that our FY2014F EBITA estimate of £6.5m is strongly underpinned.
Our expectation is that we should witness a continued improvement in UK activity levels during H2, led by permanent activity, thereby further improving the gross margin mix of the business. In addition, we have assumed a strengthening performance in the group’s Asian businesses, notwithstanding a slowing of the high H1 growth levels in India. Meanwhile, Continental Europe is likely to be broadly flat half-on-half during H2, in view of our cautious stance on the recent political and economic issues relating to the Ukraine.
In terms of adj. EPS, we have increased our FY2014F and FY2015F estimates by 7.5% and 3.9% respectively. There are a number of reasons for this, not least: a lower tax charge in H1 of 35% (compared to our expectation of 36% previously), a reduction in the level of minorities (highlighting levels in H1) and, modestly offset by a higher number of fully diluted shares than we had initially assumed.
In terms of the dividend, we have left our 0.35p FY2014F and FY2015F estimates unchanged, covered c20x by earnings. Our belief continues to be that management is likely to focus on using cash generation to invest in the business, particularly in terms of brand expansion (office openings and an increase in disciplines), followed by a reduction in debt levels.

Undervalued relative to peers

While Empresaria’s shares have risen recently, closing in on its one-year high, the rating remains depressed in our opinion, failing to fully reflect the turnaround in the group’s fortunes over the last 18 to 24 months. On this basis, we think that a single digit forward PER (7.4x to December 2014F) undervalues the outlook for the group and as such, we expect the shares to outperform its peers’ over the next six to 12 months.

[john09] 05/9/2014 18:11

Ok thanks. I glossed over

John

[jeff h] 05/9/2014 17:52

I note that sale relates to May john09.

Shore Capital increased EPS figures for this year and next on the back of the results.

[john09] 05/9/2014 16:27

Another II selling down I see

[santangello] 05/9/2014 12:35

Traders out....investors in...... Results were very encouraging and I am happy to add and remain long here.

[daneswooddynamo] 04/9/2014 18:31

and there go the short termers!

[paleje] 04/9/2014 09:52

Won't the worsening outlook for EU economies, incl Germany, be a bit of a concern and, depending what action is taken by Draghi/Germany won't a weaker Euro increase the currency headwinds already mentioned in the rns. I don't know the answer just putting the point.

[daneswooddynamo] 04/9/2014 08:30

a solid statement as far as emr statements go! shares remain very cheap but need to find a home for that caledonia stake and second half bias means the short term pa brigade will be moving on

[lanzarote666] 04/9/2014 08:27

Trading at a c60% discount to its peers, expect that gap to narrow -

[john09] 03/9/2014 17:44

Ok thanks . Let's see.

[daneswooddynamo] 03/9/2014 17:35

because they are a large organisation and are following a policy of dumping all their holdings in "sub-scale" investments. To be honest it is much better for them to dump the lot as the "overhang" will then disappear, rather than them sit with a rump holding and the market then waiting for them to start selling again. The fact that they have recently managed to dump a reasonable chunk is a good sign as it shows there is institutional appetite for them...if the results tomorrow bear fruit we might well see the dumping process accelerate and be cleared.

[john09] 03/9/2014 17:15

How do you know they are sellin their entire holding?

[daneswooddynamo] 03/9/2014 16:03

I am sure the results will be good and outlook positive. But there are 7 and a half million shares from caledonia to go and that will hold the share price back for a while unless a few instis are waiting for results and swallow them up

[john09] 03/9/2014 14:47

Good luck tomorrow folks. I'm in for a little trade

[john09] 01/9/2014 13:21

How so Santangello?