Empresaria Group Regulatory News (EMR)

20 Apr 2007 07:01

Empresaria Group PLC20 April 2007 Empresaria Group plc Full Year Results for the Year Ended 31 December 2006 Adjusted profit before tax up 30% as group sees further rapid expansion April 20, 2007: The AIM-quoted staffing and recruitment group Empresaria todayannounced sharp increases in sales and profits for the year to 31 December 2006,and said it is now positioned to continue growing its operations rapidly acrossthe globe. Adjusted profit before tax increased 30% to £2.89 million on sales up 40% to£75.5 million. The group said the figures reflected solid investments during the year inbusinesses acquired in Asia, Continental Europe and the UK. Empresaria's strategy is to achieve balanced growth by developing its existingbusinesses, investing in start-up businesses and making selective acquisitions.To help smooth out cyclical downturns the group aims to maintain a balancebetween temporary and permanent recruitment across a range of specialistsectors. International net fee income rose over eight fold to £4.2 million from £0.5million in 2005, representing 19% of the group total - up from only 3% lasttime. Empresaria is now positioned in 14 countries across Europe, Asia, Australia andNorth America. Empresaria Chief Executive Miles Hunt said the group has made significantinternal investments to accelerate future growth, and added, "In terms ofstrategy and structure, several important steps have been taken which shouldallow Empresaria to increase its scale of operations at a rapid pace." These include this month's earlier announcement of an agreement to acquire 60%of the German recruitment company headwayholding GmbH for £9.9 million,following a £12 million fundraising that included £3.6 million invested by groupChairman Tony Martin and Chief Executive Miles Hunt. Empresaria was last month named International Business of the Year in the 2007Fast Growth Business Awards. For further information contact: Miles Hunt, Chief Executive, Empresaria Group plc: 01293 649 903 Nick Hall-Palmer, Group Finance Director, Empresaria Group plc: 01293 649 906 Allan Piper, First City Financial Public Relations: 020 7242 2666 James Wellesley Wesley, Bridgewell Limited: 020 7003 3000 Overview of Performance for 2006 £ 000's 2006 2005 2004 2003 2002 Revenue 75,459 54,060 45,430 29,367 22,902Gross Profit 21,840 15,393 13,141 10,589 8,603Total Operating Profit 2,743 1,914 1,067 817 709Adjusted Operating Profit * 3,505 2,532 1,715 1,234 927Adjusted Profit Before Tax * 2,894 2,225 1,390 1,113 830Basic Earnings per share (pence) 4.21 3.12 1.38 1.85 0.4Adjusted Earnings per share (pence) * 7.2 5.7 4.2 3.9 2.8Dividend Proposed per share (pence) 0.50 0.45 0.40 0.38 0.25 Headlines Revenues of £75.5m (2005: £54.1m) up 40%.Gross profit of £21.8m (2005: £15.4m) up 42%Profit before tax of £2.13m (2005: £1.61m) up 33%Adjusted profit before tax* of £2.89m (2005: £2.23m) up 30%Earnings per share of 4.21p (2005: 3.12p) up 35%Adjusted earnings per share* 7.2p (2005 : 5.7p) up 26%Operating cash inflow £5.2m (2005: £2.5m) up 108%Group cash at bank at year end £3.3m (2005: £2.4m)Group net debt at year end £1.3m (2005: £2.4m)Proposed dividend of 0.50p (2005: 0.45p) * Figures based on underlying profits excluding goodwill amortisation andexceptional cost. See Note 7 for reconciliation. In 2006 there were noexceptional costs. Operational highlights Strong organic growth from existing businesses Entry into new markets with investment in India, Indonesia, Malaysia, Poland,Czech Republic and Slovakia Asian operations exceeding expectations Management team strengthened to accelerate overseas expansion German acquisition agreed, subject to shareholders' approval Good start to 2007 Chairman's statement Overview 2006 The year 2006 has been one of strong performance with rapid progress being madein creating a balanced international specialist staffing group. Empresaria is aleading example of a new generation of international staffing company seeking todevelop a multi-specialist sector, multi-geographical presence without theburden of a significant trading presence in the traditional clerical andindustrial staffing markets. It has now been just over two years since Empresaria began its transformationfrom a UK focused organisation to a truly international operation. Since movingfrom OFEX/Plus Markets to AiM in November 2004 the company has invested in 22new companies in 13 different countries, targeting economies and staffingmarkets that the Board believes have high growth potential. Empresaria is nowrepresented in India and China, in Japan and countries across South East Asia,in Poland and other Eastern European countries. The positive impact of thischange in strategic focus is now beginning to be reflected in the Group'sfinancial performance. Financial performance Revenues for the year ended 31 December 2006 increased by 40% to £75.5m and netfee income (gross profit) increased by 42% to £21.8m. Profit before tax (beforegoodwill amortisation) increased to £2.89m from £2.23m, a rise of 30%. For thefirst time we experienced the impact of the increasing contribution ofinternational companies to Group net fee income. In 2005, contribution of non-UKcompanies was 3%. In 2006 it rose to 19%. This figure would have been higher butfor the strong growth experienced in the UK and the excellent financialperformance of a number of the Group's UK companies. Group strategy Empresaria's strategy is to develop an international specialist staffing group,balanced in terms of sector, geographic and operational coverage, as well asorganic and acquisitive growth. Underpinning this strategy is the philosophy of management equity. Since theGroup started operations ten years ago both strategy and structure have beenshaped by the importance attached to aligning the interests of shareholders andmanagement teams through sharing risk and reward through equity participation.There are now over 34 companies within the Group and each one, in each country,is characterised by management retaining a shared interest in long term successthrough a meaningful equity stake. The Group structure reflects this philosophy. Operations are decentralised withday to day management autonomy remaining local. A small central operationfocuses on financial planning and control, group development and administration.For individual management teams the arrangements offer a combination of support,responsibility and independence. For the Group, the structure offers thebenefits of scale. Central costs will not rise over time in line with revenuegrowth. As Empresaria continues to grow the conversion rate of gross margin tonet margin will improve. Moving from strategy to objective, the Group's long term objective is toestablish a geographic footprint in diverse markets and economies. The primaryfocus is on emerging markets or markets where structural changes have createdstaffing industry opportunities. In emerging markets it is often the case thatthere is little or no current sign of market segmentation into specialist sectoroperations. Where this is the case the Group's approach is to identify apartner that shares a common goal to develop specialist staffing niches as themarket evolves. In the longer term, Empresaria will operate in both developingand developed economies, targeting business environments where the Empresariamanagement equity philosophy, structure and operational strategy are wellreceived. The sequence and timing of investments across different countries willdepend to a degree on where opportunities emerge. The rationale for developing this portfolio of operations diversified both bygeography and market sector is to maintain consistent, sustainable high growthwhilst managing risk and reducing volatility. Acquisition On 5th April Empresaria announced that it had reached agreement, subject toshareholder approval and funding, to acquire 60% of headwayholding GmbH(Headway). Headway is based close to Munich in Germany. Germany has one of themost rapidly growing staffing markets in Europe moving from a €5.9billion perannum market in 2003 to a €8.6 billion per annum market in 2006. The market ischaracterised by recent regulatory liberalisation, a growing desire forflexibility amongst clients and an increasing acceptance of the concept oftemporary and contract staffing which is beginning to extend to businessprofessionals, facilitating further specialisation of the market in the future.The company has grown rapidly over the last two years, developing verticalmarket specialisations as the staffing market has evolved. As well as operatingfrom 47 branches, most of which are in Germany, the company also has a presencein both Austria and the Czech Republic. This acquisition represents asignificant accelerator in the Group's development and in Empresaria's expansioninto new emerging markets. Empresaria's people As ever, the success we have enjoyed this year would not have been possiblewithout the commitment and enthusiasm of all those working within the Group. Wewould like to take this opportunity to express our appreciation for all theirhard work. Current trading and outlook As reported in our trading update in February, the Group has enjoyed a strongstart to the year from most markets. Investments made in start up companiesduring 2006 are now beginning to bear fruit. When combined with the contributionfrom more established companies operating in growing markets, this potentmixture gives confidence for the current year. Tony MartinChairman Chief Executive's review Performance review 2006 The last two years have proven to be a transition period as the Group hasundertaken the transformation from a diversified, specialist UK staffing groupto an international one. In financial terms the Group has taken a number ofsmall steps in its overseas development. In terms of strategy and structure,however, several significant steps have been taken which will allow Empresariato increase its scale of operations at a rapid pace as opportunities, such asthe acquisition of Headway in Germany, emerge. One of the features of the strong financial performance in 2006 has been thedifferential between profit growth and revenue growth. The explanationhighlights the core of our "balanced growth" strategy. In the year we committedover £1m to fund start up operations in Asia, Europe and UK, incurring start uplosses during this period. In addition the Group invested in additionalmanagement, finance and technical skills and resource, to provide a platform forfurther growth. Where we have made small acquisitions in the year we have alsomade significant further internal investment in order to accelerate futuregrowth. In making these investments, in companies, people and infrastructure weare seeking to develop sustainable, long term, growing revenue streams. Theconsequence of investment now is expected to be strong organic growth in thefuture. Highlights A number of regional and company performances stand out in the year. The fastestgrowth is, as expected, being experienced internationally. The Asian marketshave all been buoyant. Our Japanese operations with particular contribution fromSkillhouse (IT staffing) experienced spectacular growth in revenues and grossmargins from a small base. The Monroe Consulting operations, acquired inDecember 2005, saw growth in Asia both in terms of revenues but also sectordiversification with new temporary and outsourcing services added in bothIndonesia and Thailand and, following the end of the year, new operationslaunched in Malaysia. In Europe, we have used the IT staffing platform offered by GIT (a Czech companyacquired in early 2006) to launch new services in Slovakia. We have alsoinvested further in ITC (a Polish company acquired in October 2006) to develop abroader regional branch presence in Poland. While Group development focus has been concentrated on internationalopportunities, it is encouraging to see the UK companies deliver such a positiveperformance, particularly in the second half of the year. It is equallyencouraging that these strong results were delivered by a combination ofsectors, specifically Property Services and Construction, Financial Services andOther Brands. Within Other Brands our creative staffing company The RecruitmentBusiness had a particularly successful year with contribution coming for thefirst time from the Manchester office, set up in 2005, and with a successfullaunch of a new office in Australia. Group structure The Group is managed by a small, balanced board of directors with a Chairman,two executives and two non-executives. Historically there has been a direct lineof reporting from individual managing directors to the Chief Executive. Thisflat structure is changing, reflecting the rapid development of ourinternational operations. The appointment of Armin Preisig as head of Europeanoperations (a position he previously held with Vedior and Select Appointments)has resulted in an apportionment of both management and developmentresponsibility across different regions. Separately, we have re-structured thecentral finance function bringing in additional skills and expertise both atcentral and regional level. The net result of these changes is that we haveincreased our capacity to manage growth. Market overview The international staffing industry is expanding. Growth rates and marketopportunities differ from country to country with each country retainingdifferent regulatory environments, political and cultural perceptions, economicand market characteristics. Countries such as Japan and Germany represent matureeconomies but at the same time, mainly as a consequence of structural change,represent high growth staffing markets. India combines both a high growtheconomy and staffing market but, for reasons of demography, represents acompletely different challenge in fulfilling the needs of local clients. Chinarepresents a high growth economy but with a small staffing industry still, forthe moment, held back by legislative restrictions. A common characteristic in all our geographic markets is the positive tradingenvironment and the number of new opportunities at both local and at Grouplevel. As service industries become a bigger part of the industrial mix themanagement of human resource expenses and the utilisation of a flexible workforce will take on increasing importance. Strategic focus Group development focus is to strengthen and grow our existing businesses andlook for new investment opportunities in growing international staffing markets.To date our resources have been applied to the developing economies and staffingmarkets of Eastern Europe and Asia. These regions remain a focus of attentionand offer a number of incremental investment opportunities. In addition, we areresearching and targeting opportunities in Western Europe and Latin America. Ineach case we are seeking partners who are motivated by our management equityphilosophy, structure and the opportunity to create a new multi-specialist,multi-national staffing group with high growth prospects. Miles HuntChief Executive Operational review UK operations At Group level the development focus since moving to AiM has been on identifyinginvestment opportunities in staffing markets outside the UK. At the same time,however, there is equal attention given to growing the existing operations inthe UK. UK revenues grew in the year to £66m, up 25% and net fee income of £18mwas up 19% in the period. Construction and Property Services This sector enjoyed high organic growth in the period with revenues increasing36% to £37.8m and net fee income rising 36% to £5.3m on the back of strongdemand in the London and South East region. Companies in the sector continued toinvest for future expansion with FastTrack (construction trades) opening newbranches and increasing headcount, Reflex (building management services)benefiting from both increased scale and new international candidate resourcingcapability and TeamSales (sales staff for new build housing) extending theiroperations to Spain. Other Brands The UK "Other Brands" sector is made up of a number of specialist brands rangingfrom creative design recruitment to domestic staffing, PR and marketing andpayroll services. In each case the company or the market it services is not ofsufficient scale to warrant separate reporting. Revenues in 2006 were £10.2m, up31% and net fee income increased 25% to £6.2m. Financial Services There are three UK financial services brands, two in the insurance and broaderfinancial services sector and one supporting investment banking and assetmanagement operations. Revenues in the year were £4.7m, up 31% with net feeincome up 21% to £2.9m. 2006 was a year of investment and expansion with new feeearners being added within LMA (banking) and Mansion House (insurance). Supply Chain After two years of minimal growth, revenues grew in 2006 by 15%. Thisencouraging progress was offset, however, by an erosion in percentage grossmargins with net fee income up only 2% to £2.2m. The sector consists of bothpermanent and temporary staffing operations. Historically, these differentbusinesses have operated independently and separately. The decision was takenduring the year to integrate the businesses into one network. The restructuringwas concluded at the end of 2006 and will generate both cost savings as well asenhanced business development opportunities. Early indications suggest thatthese structural changes are having a positive financial impact with clientsappearing to support the integrated solution that the Group is now able tooffer. Public Sector Public sector recruitment in the UK was difficult in 2006. The widely publicisedreduction in government spending combined with customer buying decisionsbecoming price rather than service focused, resulted in a drop in revenues to£5.4m, down 20% with net fee income down 27% to £1.0m and a move from operatingprofit to loss. The pain was felt particularly in the allied healthcare marketwith the demand for physiotherapists and other second line professionalsdropping significantly. As a reaction to the changing market the decision wastaken in mid-2006 to integrate the Group's public sector operations. Thisresulted in changes being made to the management and operations teams. As withthe Supply Chain sector, the early indications suggest that the structuralchanges made are having a significant positive impact on financial performance. International operations The shift in strategic focus from UK to international development took place atthe end of 2004. In 2005 only 3% of net fee income was generated outside of theUK. In 2006 this increased to 19%. 2006 was a year of significant steps forwardin developing a balanced international specialist staffing group. Total revenuesgenerated in the year from outside the UK amounted to £9.5m up from £1.2m in2005 and net fee income reached £4.2m up from £0.5m. Japan The Group's first overseas investment was made at the end of 2004 in Japan inthe form of a start up operation in the IT staffing sector. A second associatecompany operating in FMCG executive recruitment was added to the portfolio inearly 2006. In the second year of trading Japanese operations contributedrevenues of £5.2m and net fee income of £2.0m, excellent results from a start upbusiness. The Japanese economy has returned to growth. The structural changesexperienced by the Japanese staffing industry, with the liberalisation of lawsrelating to temporary staffing, continue to fuel strong market growth andprovide opportunities for our existing businesses as well as for investment innew companies. South East Asia and Australia The second significant international investment was made at the end of 2005through the acquisition of a majority stake in Monroe Consulting Group. Monroestarted operations in 2001 in Sydney, focusing primarily on the IT staffingsector. In 2004 the company embarked on an expansion programme in South EastAsia and it is this fledgling international network that offers substantialdevelopment opportunity. The Group now operates separately capitalised companiesin Indonesia (2), Thailand (1) and Malaysia (1). These regional companiesprovide a combination of executive recruitment, large scale temporary staffingservices and training solutions. In 2006 revenues from this regional group were£3.8m contributing net fee income of £1.8m. The original Australian operationshave proven to be a challenge, necessitating management changes and investmentin new systems and infrastructure. The South East Asian operations have, incontrast, demonstrated great potential, combining entrepreneurial managementwith buoyant economies and high demand for the services offered. Earlyindications in 2007 suggest that this region will be a strong contributor oforganic growth this year. Europe Net fee income contribution of £0.4m in the year reflects the relatively smallscale of the Group's European business but masks the progress that has been madesince applying focus to the region. At the beginning of 2006 the Group acquired a 60% stake in GIT Consult, a Czechbased permanent IT recruitment company, representing Empresaria's firstinvestment in Europe. A new operation was launched in Slovakia in May, withbranches established initially in Bratislava as well as more recently in Kosice,Slovakia's second largest city. Increased focus has been given to temporarystaffing operations with this area of the business expected to grow in 2007. In October Empresaria acquired a 51% stake in ITC Group based in Krakow Poland.ITC has two primary focuses of operation: temporary staffing services to thelocal Polish market and work abroad services, finding and managing the logisticsof migrant workers moving from Poland to other EU countries. ITC has recentlylaunched a new branch office in Katowice. Rest of the world The Group's other operations are currently held as associate companyinvestments, in each case, where the local legislation allows, there is anoption to increase the Group's shareholding from a minority position to amajority position. The most significant investment made and the most ambitious start up operationlaunched by Empresaria to-date has been in India. From a standing start in April2006, IMS Empresaria, the Indian investment vehicle has grown a branch networkacross 8 cities in India and developed services including permanent andtemporary staffing, training and Recruitment Process Outsourcing (RPO) supportedby a team of over 125 employees. In China, Empresaria invested in Aston HR Consulting. Aston HR acquired aninterest in a small existing Shanghai based outsourced staffing company and hasgained additional licences to provide both permanent staffing and trainingsolutions within the Shanghai region. Both the Indian and Chinese staffing markets are growing strongly, reflective ofthe underlying economic success of both countries. The Group's investment in the US, Gerard Stewart, is a permanent staffingbusiness focused on supporting the US staffing industry. The company continuedto trade profitably in the year. Financial review Financial performance Revenue Group revenue rose by £21.4m (40%) in the year. Like for like sales increased by26%. Gross margin The Group's gross margin increased to 29%, compared with 28% in 2005. The Group's gross margin generated from the contract and temporary businessesstayed at the 2005 level of 56% of total gross margin. The Group aims toincrease the level of temporary and contract revenue contribution in the future. Profitability The Group uses adjusted profit before taxation (PBT) (as defined and calculatedon note 7) as its principal measure of operating performance. Profits before taxare adjusted to remove the effects of goodwill amortisation and any exceptionalcosts or gains incurred during the year. There were no exceptional costs in2006. A reconciliation of the statutory and adjusted profit is provided on note7. Adjusted PBT for the year - for existing and continuing operations - rose by 30%to £2.89m (2005: £2.23m) for the whole Group. Adjusted operating margin on revenues reduced slightly to 4.6% (2005: 4.7%). Taxation The effective rate of corporation tax to headline profit before tax has reducedfrom 45% in 2005 to 31% in 2006. The decrease is mainly due to the utilisationof deferred tax assets. Deferred taxation has been provided on timing differences where required by FRS19. Minority interests The Group's share of profit after tax reduced from 74% in 2005 to 66% in 2006.This reflects varying minority interests in each of the Group's operatingcompanies and the effect of consolidated goodwill amortisation. Earnings per share Earnings per share, (EPS), adjusted for the effects of goodwill amortisation andexceptional costs, were 7.2 pence, an increase of 26% over 2005 (5.7 pence). In 2006, the Group's weighted average issued share capital, as used to calculateEPS, increased by 11% as a result of shares issued to acquire new operations orincrease the Group's share in existing operations. Dividend The Directors have recommended the payment of a dividend of 0.50 pence per share(2005: 0.45 pence, representing an increase of 11%). If approved, the dividendwill be paid on 20th August 2007 to members registered on 20th July 2007. Acquisitions Details of the main transactions are explained below: Purchase of HEC In April 2006, the Group acquired from SSR Personnel Services, through a specialvehicle, its operating division providing staffing services in the UK publicsector for an initial cash consideration of £350,000. Deferred consideration of up to £400,000 may be payable in 2007, based on theresults to 31 March 2007. Purchase of the ITC Group In October 2006, the Group acquired 51% of the share capital of ITC PRACA Sp.Z.o.o., ITC APT Sp. Z.o.o. and ITC CS Sp. Z.o.o. for £632,000. Deferredconsideration of up to Zl 4,344k (approx £0.8m) may be payable dependent onfinancial performance of the ITC Group in 2006 and 2007. Based in Poland, the company specialises in three areas: the sourcing of Polishworkers on behalf of overseas organisations in Western and Southern Europe,temporary staffing focusing on the Polish local market and providing trainingservices to candidates. Purchase of minority share holdings During 2006, Empresaria acquired shares from the minority shareholders in anumber of Group companies. The companies involved and shareholdings held after the purchase were: LMARecruitment Limited (80%), Healthcare First Limited (100%), TeamSales Limited(100%), McCall Limited (62%) and Lime Street Recruitment Limited (69%). The purchases were satisfied by the payment of £144,650 in cash and the issue of224,316 shares at a value of £187,300. Post year end purchases On 5 April 2007, the Group announced its intention to purchase 60% of the sharecapital of Headway for a consideration of €14.6m. Headway is a provider oftemporary/ contract staffing based principally in Germany. The acquisition is subject to shareholder approval at an Extraordinary GeneralMeeting to be held on 30 April 2007. Intangible assets The carrying value of intangible assets in the Group Balance Sheet increased by£1.7m, from £8.0m to £9.7m. The major constituents of this increase arose fromthe acquisitions and increase in the Group's shareholding in existing Groupcompanies, as detailed above. Goodwill is amortised over its useful economic life up to a maximum period oftwenty years. The Directors regularly review the carrying value of goodwill forimpairment. Risk factors The principal risks that the Group face are: Growth management The Group's growth strategy includes the investment in and management of startup businesses and acquisitions. This strategy has certain risks and failure toimprove operating performance of start-up businesses and acquired businesses mayadversely impact results, including the Group's cash flow. Dependence on key executives and personnel The Group's future success is substantially dependent on retaining andincentivising its senior management and certain key employees. The loss of theservice of key personnel may have an adverse impact on the Group's business andrelationships. However, the Group's philosophy of management equity ensures that key managementare appropriately incentivised through equity ownership. Financial risks and treasury management As the Group expands internationally, it will become more exposed to risksassociated with currency fluctuations. The Directors intend to introduceappropriate exchange management strategies to address this risk. With regard to credit risk the company has implemented policies that requireappropriate credit checks on potential customers before contracts are commenced. In respect of interest rate risk the Group has interest bearing assets andliabilities. Interest bearing assets and liabilities include cash balances andoverdrafts, all of which have interest rates applied which are commensurate withthe scale of the Group's operations. Cash flow Net cash of £5.2m (2005: £2.5m) was generated from operating activities duringthe year. After returns on investments and servicing of finance and taxationflows of £1.5m, the surplus was reduced to £3.7m. The Group spent £3.3m of cash on acquisitions and capital expenditure, resultingin a cash inflow before financing of £0.3m. The Group raised £0.7m from financing activities, resulting in an overalldecrease in net debt at the year end of £1.1m to £1.3m (2005: £2.4m) Net operating cash flows are inflated due to an increase in the amount ofinvoice discounting subject to non-recourse arrangements. The Group expects that the cash position over the next two years will beadversely effected by the changes in the Managed Service Company legislation(introduced on 6 April 2007). This will be partly offset by cash inflows fromour growing operating activities but cash generation as a percentage ofoperating income for the coming two years is expected to be lower. Management of liquidity risk The Group maintains a range of facilities appropriate to fund its workingcapital requirements as well as its strategy of organic and acquisitiveexpansion. At the year end, the Group's financing arrangements comprised: • cash at bank of £3.3m• an unutilised overdraft facility £1.75m;• a revolving credit loan facility of £2.5m, of which £0.7m has been utilised;• outstanding term loans of £1.3m repayable over the next two years; and• amounts owed in respect of invoice discounting agreements of £2.6m. The Group banks with HSBC plc. Nick Hall-PalmerGroup Finance Director Consolidated profit and loss accountYear ended 31 December 2006 Notes 2006 2005 £'000 £'000 £'000 £'000TURNOVERExisting operations 72,946 48,342Acquisitions 2,513 5,718 Total turnover 75,459 54,060Cost of sales (53,619) (38,667) GROSS PROFIT 21,840 15,393 Administrative expenses (19,097) (13,479) OPERATING PROFITExisting operations 2,667 1,217Acquisitions 76 697 Total operating profit 2,743 1,914 Share of losses in Associated companies (203) (44) 2,540 1,870 Interest payable and similar charges (408) (263) PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 2,132 1,607 Tax on profit on ordinary activities (663) (726) PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 1,469 881 Minority interests (497) (233) PROFIT ON ORDINARY ACTIVITIES ATTRIBUTABLE TO THEMEMBERS OF EMPRESARIA GROUP PLC AND TRANSFERREDTO RESERVES 972 648 Earnings per share (pence)Basic and diluted 2 4.21 3.12 All results for the group are derived from continuing operations in both thecurrent and preceding years. Consolidated statement of total recognised gains and lossesYear ended 31 December 2006 2006 2005 £'000 £'000PROFIT FOR THE FINANCIAL YEAR Group 1,045 692 Associates (73) (44) TOTAL PROFIT FOR THE FINANCIAL YEAR 972 648Exchange difference on net assets of overseassubsidiaries (28) - TOTAL RECOGNISED GAIN AND LOSSES RELATING TO THEYEAR 944 648 Consolidated balance sheet31 December 2006 2006 2005 £'000 £'000 £'000 £'000 FIXED ASSETSIntangible assets 9,684 7,981Tangible assets 790 535Investment in associates 660 39 11,134 8,555 CURRENT ASSETSDebtors 11,480 10,169Cash at bank and in hand 3,342 2,405 14,822 12,574 CREDITORS: amounts falling due within one year (13,744) (10,992) NET CURRENT ASSETS 1,078 1,582 TOTAL ASSETS LESS CURRENT LIABILITIES 12,212 10,137 CREDITORS: amounts falling due after more than (1,201) (1,449)one year NET ASSETS 11,011 8,688 CAPITAL AND RESERVESCalled up share capital 1,193 1,113Share premium account 5,185 3,822Other reserve 1,539 1,539Profit and loss account 2,285 1,447 SHAREHOLDERS' FUNDS 10,202 7,921 Minority interests 809 767 11,011 8,688 Consolidated cash flow statementYear ended 31 December 2006 2006 2005 Notes £'000 £'000 £'000 £'000 Net cash inflow from operating activities 3 5,155 2,500 Returns on investments and servicing of financeInterest paid (408) (263)Dividends paid to minority shareholders insubsidiary undertakings (333) (196) Net cash outflow from returns oninvestments and servicing of finance (741) (459) Taxation - corporation tax paid (739) (586) Capital expenditure and financial investmentPayments to acquire tangible fixed assets (528) (413) Net cash outflow for capital expenditure andfinancial investment (528) (413) AcquisitionsPurchase of businesses (2,069) (1,993)Cash acquired with subsidiary acquired 9 462Investment in associates (694) (21) Net cash outflow from acquisitions (2,754) (1,552) Dividends paid (106) (84) Net cash inflow / (outflow) before financing 287 (594) FinancingIssue of new shares 905 -Repayment of loan (247) (238)Raising of loan 725 -(Decrease) / increase in invoice discounting (733) 316balances Net cash inflow from financing 650 78 Increase / (decrease) in cash in the year 937 (516) NOTES 1. BASIS OF PREPARATION The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 31 December 2006 and 2005, but is derivedfrom those accounts. Statutory accounts for 2005 have been delivered to theRegistrar of Companies and those for 2006 will be delivered following theCompany's Annual General Meeting. The Auditors have reported on those accounts;their reports were unqualified and did not contain statements under theCompanies Act 1985, sections 237(2) or (3). Accounting policies have been consistently applied throughout 2005 and 2006,with exception of the policy for share-based payments which was introduced in2006 to reflect FRS 20. 2. BASIC AND DILUTED EARNINGS PER SHARE 2006 2005 No. No. Ordinary shares of 5 pence each (weighted average) 23,102,238 20,798,075 £'000 £'000 Profit for the financial year 972 648 Based on current trading conditions, the directors are of the opinion that therewould be no dilution to the earnings per share figure resulting from subsidiaryminority shareholders trading up. 3. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATINGACTIVITIES 2006 2005 £'000 £'000 Operating profit 2,743 1,914Depreciation of tangible assets 337 262Loss on disposal of tangible fixed assets - 73Amortisation of goodwill 762 618Increase in debtors (940) (433)Increase in creditors 2,253 66 Net cash inflow from operating activities 5,155 2,500 4. ANALYSIS OF NET DEBT Other 1 January non-cash 31 December 2006 Cash flow changes 2006 £'000 £'000 £'000 £'000 Cash at bank and in hand 2,405 937 - 3,342 Amounts owed to factors (3,302) 733 - (2,569)Loans due within one year (225) (500) (265) (990)Loans due after one year (1,325) 22 265 (1,038) (4,852) 255 - (4,597) (2,447) 1,192 - (1,255) 5. ACQUISITIONS Acquisitions during the year contributed £64,000 (2005: £329,000) to the group'snet operating cash outflows, paid £8,000 (2005: £10,000) in respect of returnson investments and servicing of finance and utilised £88,000 (2005: £23,000) forcapital expenditure. 6 ANNUAL REPORT AND ACCOUNTS The annual report and accounts for the year ended 31 December 2006 will beposted to shareholders shortly. Additional copies will be available from theCompany Secretary at the Company's registered office Empresaria Group Plc,Peveril Court, 6-8 London Road, Crawley, West Sussex, RH10 8JE. 7 RECONCILIATION OF STATUTORY FINANCIAL INFORMATION TO ADJUSTED INFORMATION INCLUDED WITHIN THE FINANCIAL HIGHLIGHTS 2006 2005 £'000 £'000 Operating profit 2,743 1,914 Add back: Goodwill amortisation 762 618 Adjusted operating profit 3,505 2,532 Share of loss in associated company (203) (44)Interest receivable and similar income - -Interest payable and similar charges (408) (263) Adjusted profit before tax 2,894 2,225 Taxation (663) (770)Minority interests (*) (562) (275) Adjusted profit after tax and minority 1,669 1,180interests Adjusted earnings per share (pence) 7.2 5.7 (*) - adjusted as necessary for minority interest impact from goodwillamortisation and exceptional item adjustments. All results for the group are derived from continuing operations in both thecurrent and preceding years. This information is provided by RNS The company news service from the London Stock Exchange