Empresaria Group Regulatory News (EMR)

24 Apr 2006 07:02

Empresaria Group PLC24 April 2006 Empresaria Group plc Full Year Results for the Year Ended 31 December 2005 Strong UK growth boosts adjusted profits 60% as group expands overseas April 24, 2006: The AiM-quoted specialist staffing group Empresaria todayannounces a 60% increase in adjusted* pre-tax profits to £2.23 million for theyear ended December 31, 2005. Headline profit before tax increased by 129% to£1.6 million. The group also reported strong trading during the early months of 2006. Revenues during 2005 climbed 19% to £54 million following moves into new marketsin the US, Australia, China and South-East Asia. Although overseas revenuescontributed less than 10% to overall sales for the year, the company said thisexceeded expectations, and expects the figure to rise nearer to 20% during 2006. Chairman Tony Martin said: "The year 2005 was one of continued growth forEmpresaria in the UK and of specific development focus abroad -- in line withour strategy to develop an international specialist staffing group with revenuesdistributed across a range of economies, emerging staffing markets and industrysectors." He added that the group is exploring a number of opportunities in industrysectors and countries where it does not currently operate. Empresaria moved on to AiM in November 2004 and has followed a strategy aimed atachieving consistent, balanced growth. In addition to overseas diversification,this has also seen a greater emphasis on temporary recruitment, which nowaccounts for about 55% of UK business. With adjusted* earning per share of 5.7p, up 36% and headline earnings per shareof 3.1p, up 121%, the board is proposing a dividend of 0.45p (2004: 0.4p). For further information contact: Tony Martin, Chairman, Empresaria Group plc: 01293 649900 Miles Hunt, Chief Executive, Empresaria Group plc: 01293 649903 Nick Hall-Palmer, Group Finance Director, Empresaria Group plc: 01293 649906 Allan Piper, First City Financial Public Relations: 020 7436 7486 07736 064 982 *Figures based on underlying profits excluding goodwill amortisation andexceptional costs. In 2005 there were no exceptional costs. See note 7 for areconciliation. Overview of Performance for 2005 £ 000's 2005 2004 2003 2002 2001 Turnover 54,060 45,430 29,367 22,902 18,938Gross Profit 15,393 13,141 10,589 8,603 8,273Total Operating Profit 1,914 1,067 817 709 732Adjusted Operating Profit * 2,532 1,715 1,234 927 527Adjusted Profit Before Tax * 2,225 1,390 1,113 830 487Basic Earnings per share (pence) 3.12 1.38 1.85 0.4 1.1Adjusted Earnings per share (pence) * 5.7 4.2 3.9 2.8 1.1Dividend per share (pence) 0.45 0.40 0.375 0.25 0 * Figures based on underlying profits excluding goodwill amortisation andexceptional costs. See Note 7 for reconciliation. In 2005 there were noexceptional costs. Headlines • Revenues of £54m (2004: £45.4m) up 19%. • Gross profit of £15.4m (2004: £13.1m) up 17% • Profit before tax of £1.6m (2004: £0.7m) up 129% • Adjusted profit before tax* of £2.23m (2004: £1.39m) up 60% • Earnings per share of 3.12p (2004: 1.38p) up 126% • Adjusted earnings per share* 5.7p (2005 : 4.2p) up 36% • Adjusted operating profit on revenues 4.7% (2004: 3.8%) up 24% • Adjusted operating profit on gross profit 16.4% (2004: 13%) up 26% • Operating cash inflow £2.5m (2004: £2m) up 25% • Cash at bank at year end £2.4m (2004: £2.9m) • Net debt at year end £2.4m (2004: £1.6m) • Proposed dividend of 0.45p (2004: 0.4p) up 12.5% Operational highlights • Growth and development of existing businesses. • Entry into new markets: US, Australia, Japan, China, Indonesia and Thailand as well as more recent investment in Eastern Europe. • Start up operations in Japan and US exceeding expectations. • Board strengthened with the appointment of Penny Freer, as a non-executive director. Chairman's Statement Overview 2005 The year 2005 was a year of continued growth for Empresaria in the UK and ofspecific development focus abroad in line with our strategy to develop aninternational specialist staffing group with revenues distributed across a rangeof economies, emerging staffing markets and industry sectors. The core UKbusiness continues to perform strongly and new businesses started or acquiredduring the course of 2005 exceeded expectations. The Group has made encouraginginitial progress in obtaining access to new markets which is expected toaccelerate during 2006. Financial performance Revenues for the year ended 31 December 2005 increased by 19% to £54m and netfee income (gross profit) increased 17% to £15.4m. A combination of risingrevenues, increased operating efficiencies and reduced start up costs resultedin a growth in profit before tax (before goodwill amortisation and exceptionals)to £2.23m from £1.39m, a rise of 60%. Operating cash inflows were up 25% to£2.5m and, despite investing cash of £1.6m on acquisitions and start upoperations during the year, cash at bank at the year end was £2.4m, only £0.5mdown on 2004. Adjusted earnings per share (before amortisation of goodwill and exceptionals)increased by 36% to 5.7p (2004: 4.2p) with basic earnings per share (afterdeducting amortisation of goodwill and exceptionals) increasing 121% to 3.1p(2004: 1.4p). Corporate Development Empresaria has achieved a track record of consistent revenue and earnings growthover the course of its history since the late 1990s. The Group has adopted astrategy of balanced growth (combining organic, start up and acquisitive growth)with investment risk management (through diversifying across differentspecialist staffing market sectors). Central to this dual growth/riskmanagement approach has been the philosophy of "management equity", the conceptthat key, entrepreneurial people are attracted and motivated by the opportunityto acquire a meaningful stake in the companies they run. Each of the 26operating companies in the Group is run by managers holding significant stakesin their companies or alternatively stakes in Empresaria itself. This philosophy extends to Group structure, which is totally de-centralised withautonomous managers running self-contained companies, enjoying high levels ofcommercial freedom combined with strict financial discipline and controls.Empresaria head office is kept deliberately small, focussing on financialmanagement and Group development. It is the nature of this structure thatcreates increased operational economies of scale at the centre as the Groupgrows and enables the consequent underlying growth in net profit margins. As reported last year, the Group coincided its transfer from OFEX to AiM inNovember 2004 with an extension of existing strategy to include operationsoverseas. The rationale for this shift in development focus is a combination ofgaining access to economies and staffing markets that are enjoying high growthrates and extending the risk management concept of diversification one stagefurther. It is the objective of the Board and the strategy of the Group toreposition Empresaria over the coming years as a truly international, growingspecialist staffing business with revenues and profits broadly distributedacross established and emerging staffing markets. With over £50m revenues beinggenerated in the UK and with a continued focus on growing Empresaria's UKbusinesses, such a transformation requires accelerated investment in overseasmarkets. 2005 was a year in which a number of encouraging first steps were made. Gainingaccess to the high growth Japanese staffing market is already beginning toproduce dividends with the Group's two Japanese operations expected to generatesubstantial organic growth in revenue and profit over the coming years. As wellas Japan, the Group has made small but significant investments in the US, China,Australia, Indonesia and Thailand. Perhaps even more encouraging than thesefirst investment steps made overseas in 2005 is the progress made during thattime in investigating new markets, exploring and assessing in which countriesthe Empresaria approach might best succeed and establishing business networksthat will enable the Group to take advantage of new opportunities as they emergein the future. At the beginning of 2006 the Group announced further investmentin the Czech Republic and Slovakia. The Board The Empresaria board was strengthened in the year by the appointment of PennyFreer as non-executive director. Penny was formerly Head of Equities in Londonfor Robert W Baird, the US Investment bank. The Board is now balanced with twoexecutive directors, two non-executive directors and with myself as Chairman. Empresaria's people Empresaria is a growing and rapidly changing organisation. This in itselfcreates pressures and challenges on all those involved in driving both growthand change across the entire organisation. We wish to extend our appreciationfor all their hard work and success. Current trading and prospects The economic forecasts for the markets where the Group operates are generallypositive. The Group has started 2006 strongly in line with expectations.Empresaria's UK businesses currently perform ahead of 2005. The Group'soverseas companies, particularly in Japan, have made an encouraging start to theyear and it is anticipated that the share of Group revenues attributable tointernational operations is expected to rise sharply in 2006. The Board isexploring a number of opportunities in industry sectors and countries where theGroup does not currently operate. Consequently, the Board anticipates a year offurther significant progress towards achieving its objectives and developing abroad based international specialist staffing group. Tony Martin Chairman Chief Executive's Review Growth Our focus has been and remains on business growth combined with maintainingearnings stability and consistency through managing business risk. Over thepast four years revenues have increased by an average of 30% annually, adjustedprofit before tax by 46% and EPS by 50% on the same basis. We achieve thisgrowth through a balance between organic growth, start ups and acquisitions. Organic growth Empresaria backs up its commitment to organic growth with financial prioritygiven to developing existing operations where market conditions allow. Thefinancial planning process ties into each company's strategic growth plans withcash generated by each business being considered first for the re-investment innew staff or expansion into new locations or markets. Illustrations of thisapproach being applied in practice include TRB (Creative and Design staffing)opening up a new office in Manchester, FastTrack (Construction and PropertyServices) developing new divisions covering the Security and Access Systemsindustries and Greycoat Placements (Domestic staffing) establishing a newinternational section focussing primarily on the US market. Start ups and acquisitions Following the decision to concentrate development efforts in internationalmarkets, corporate activity has centred on markets and territories where webelieve we are able to achieve significant and sustainable long term growth.During the course of 2005 we have made the following investments overseas: US - Gerard Stewart: Gerard Stewart is an extension of an existing UK brandwithin the "recruitment to recruitment" sector. The company was set up inAtlanta to provide staffing services to the US staffing industry. Empresariaacquired an initial 40% stake with an option to acquire a further 20% withinthree years. The new company has had a strong start and is expected tocontribute to earnings in 2006. Australia, Japan, Indonesia and Thailand - Monroe Consulting Group. MonroeConsulting Group operates directly in Australia and Japan and through jointventure arrangements in Indonesia and Thailand. Empresaria acquired a 60% stakein Monroe Consulting in December 2005, too late in the year to have a materialimpact on group financial performance. The company focuses on a number ofspecialist markets, predominantly the IT, financial services and call centreindustries. As well as providing temporary and permanent staffing services itoffers clients a range of managed service solutions. The investment byEmpresaria took the form primarily of a new share issue to pay down existingMonroe debt and fund future expansion. China - Aston HR Consulting. Aston HR Consulting was formed in December 2005 toacquire, alongside an experienced management team, an interest in a smallexisting HR outsourcing company based in Shanghai, Tian Yun Human Resources Co.Ltd. In the months following that initial investment we have managed to secureGovernment licences to provide a combination of staffing, training and HRoutsourcing services within China and are now targeting new business withparticular focus on the IT, financial services and FMCG sectors. Czech Republic and Slovakia - GIT Consult. We announced, following the yearend, that we had acquired a 60% stake in GIT, a market leading Prague based ITstaffing company with a second office in Bratislava. The investment made was acombination of consideration for acquiring shares and injection of developmentand working capital to fund growth. In addition we have continued to apply resource to developing the UK basedbusinesses. In February 2005 we completed the acquisition of a 65% stake inTRB, a temporary and permanent staffing company operating within the creativeand design market place under the MacPeople, WebPeople and CreativePeoplebrands. TRB has fitted well within the Group, has made a significant profitcontribution in its first year as an Empresaria company and demonstrated theambition and capability to generate strong organic growth. Sector overview The development of overseas operations followed the move to AiM in November2004. Since that date we have made significant progress with the new overseasadditions to the Group and expect them to make significant contribution to Grouprevenues in 2006, perhaps as high as 20%. If we make further acquisitions orinvest in further start up operations then this percentage figure is expected torise. It is therefore our intention in future years to report alonggeographical territory lines instead of by market sector. As the absolutepercentage revenue contribution from overseas in 2005 was less than 10% thisreport for 2005 will focus on market sectors in what was still a predominantlyUK based operation. Construction and Property Services Revenues in 2005 were £27.5m (2004: £24.8m) a rise of 11%. This encouragingperformance was driven by strong organic growth within our FastTrack brand, withFastTrack management taking advantage of positive market conditions to increasefee earner headcount and develop new products (including new divisions to focuson the Security and Access Control industries). FastTrack is one of the toptier sector brands within the London area and is well placed to take advantageof the imminent development work planned in advance of the 2012 London Olympics. Specialist Brands Revenues in 2005 were £7.8m (2004: £3.1m) a rise of 152%. The increase waspartly generated by the revenue contribution of TRB, acquired in February, butmasks strong organic growth of 25% across the established companies within thisreporting sector. Greycoat Placements continues to consolidate its position as the UK's principaldomestic recruitment brand, and has increased headcount to take advantage ofincreased demand for its services and developed its own training operation,Greycoat Academy, to diversify revenue streams as well as increase candidateflow. McCall (recruitment to the recruitment industry) took advantage of positivetrading conditions within the UK staffing sector and established new revenuestreams in the areas of senior management recruitment and introductory brokeragefor the sale and purchase of UK staffing companies. Supply Chain Revenues in 2005 were flat at £6.9m (2004 - £6.9m). DriveLink, our temporarydriver staffing business continued to experience challenging market conditions.It continued its branch network development, acquiring More Driving, a small onebranch operation based in Bournemouth as well as increasing headcount in itsNorthern branches. As the business increases its operating footprint across theUK the market opportunities and operating efficiencies are expected to increase,resulting in improved trading performance. Public Sector Revenues in 2005 were flat at £6.7m (2004 - £6.7m). Our Public Sectorbusinesses experienced a year of two halves. The first half of 2005, asreported in September, was much stronger than expected. However, the tighteningof the market in the second half, particularly within healthcare staffing, waspronounced and resulted in underperformance towards the end of the year. Thebrake placed on Government spending, particularly within the NHS, has created adegree of market uncertainty although there are still widespread opportunitiesfor growth in this sector. It is encouraging to note that Healthcare First(allied healthcare recruitment) has recently been awarded a place on the NHScontract for allied healthcare professionals. Financial Services Revenues in 2005 were £3.6m (2004: £3.7m) a fall of 3%. Our Financial Servicesbusinesses experienced a degree of disruption and change in 2005 with managementchanges within both our banking and insurance staffing businesses. LMa (bankingand asset management recruitment) failed to take advantage of positive marketconditions. The issue was addressed and we have seen a rapid turnaround andimprovement in trading performance in the first quarter of 2006. We expect abetter result in the current year. International Revenues in 2005 were £1.2m (2004: £nil), the first year of the Group'sinternational development plan. The large proportion of these revenues weregenerated by Skillhouse Staffing in Japan (IT and office support) following thatcompany becoming a subsidiary of the group. The company, which commencedtrading as a start up company at the end of 2004, has exceeded expectations bothin terms of growth rates and absolute performance. The Japanese economy appearsto be improving rapidly after many years of low or negative growth and thestaffing market continues to outpace economic growth. We expect continuedstrong performance from our operations in Japan during 2006. Miles Hunt Chief Executive Financial Review Turnover Group turnover rose by 19% in the year. Gross margin The Group achieved a 28% gross margin in the year, compared with 29% in 2004.The reduction in gross margin reflects our stated aim of growing our temporaryand contract revenue contribution. In 2005 55% of the Group's gross margin wasgenerated by the temporary and contract businesses compared with 51% in 2004. Asthe contribution to gross margin from the temporary and contracts businessesincreases, the overall gross margin percentage is expected to reduce further inthe coming years. Profitability The Group uses adjusted profit before taxation (PBT) (as defined and calculatedin 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 in2005. Adjusted PBT for the year rose by 60% to £2.23m (2004: £1.39m) for the wholeGroup. Adjusted PBT from continuing operations rose by 52% to £2.23m (2004:£1.47m). The increase in the Group's operating margins is particularly encouraging.Adjusted operating margin on revenues grew by 24% to 4.7% (2004: 3.8%) andadjusted operating margin on net fee income grew by 26% to 16.4% (2004: 13.0%). This reflects improved productivity from our existing businesses, as well as theperformance of acquired businesses. Taxation The effective rate of corporation tax to headline profit before tax has reducedfrom 47% in 2004 to 45% in 2005. The decrease is mainly due to reduction inlosses, on which no corporation tax relief could be obtained. These lossesremain unrelieved due to the group's share ownership structure, which leavesseveral companies outside the tax group. The effective rate of tax to adjustedprofit before tax was 35% (2004: 31%). Deferred taxation has been provided on timing differences where required by FRS19. Minority interests The Group's share of profit after tax rose from 57% in 2004 to 74% in 2005,reflecting a greater proportion of profits made in those more mature operatingcompanies with lower minority interests. Earnings per share Earnings per share, adjusted for the effects of goodwill amortisation andexceptional costs, were 5.7 pence, an increase of 36% over 2004 (4.2 pence). The Group's weighted average issued share capital, as used to calculate EPS,increased by 29% during the year, as a result of the full year effect of theissue of shares when the Group listed on AiM in late 2004, together with sharesissued during the course of the year to acquire new operations or increases theGroup's holding in existing operations. Dividends The Directors have recommended the payment of a dividend of 0.45 pence pershare, an increase of 12.5% over 2004 (0.4 pence). Acquisitions and disposals Acquisitions During the year the Group acquired three businesses and significantly increasedits shareholding in three existing operations, as detailed below: Purchase of The Recruitment Business ("TRB") In February 2005, the Group acquired a 65% interest in TRB, a companyspecialising in the placement of temporary and permanent staff for rolesincluding graphic and web designers, copywriters, typographers, art workers, Macoperators, studio managers and print buyers. The initial consideration was £1.3million, which has been satisfied by £950,000 in cash and the balance in sharesin Empresaria. The initial consideration included a payment, on a pound forpound basis, of £300,000 for the net cash within the business. Deferredconsideration of up to £725,000 may be payable based on the operating profit andcash position of TRB in the two year period to 31 December 2006. Purchase of More Driving Limited In July 2005, the Group completed the acquisition of a 66% shareholding in MoreDriving Limited, a company based in Bournemouth providing contract drivers tothe transport industry, for a consideration of £300,000, of which £260,000 wassatisfied in cash and £40,000 satisfied by the issue of 63,191 ordinary sharesin Empresaria Group plc. Purchase of Monroe Consulting Group In December 2005, the Group completed an investment of AUS$1.8m (£775,000) intwo connected businesses, Monroe Consulting Group Pty Ltd ("MCG") and MonroeConsulting Group kk ("MCG KK"), acquiring a 60% shareholding in each companythrough the issue of new shares. The existing management team retains theremaining shareholding. Further deferred consideration of up to £850,000 may be payable in cash orshares at the Group's option based on the financial performance of thebusinesses in 2006 and 2007. Purchase of minority share holdings In July 2005, the Group acquired shares from the minority shareholders ofGreycoat Placements limited and Social Work Associates Limited by issuing anaggregate 937,048 shares at a value of £595,000. Following the transaction, theGroup held 82% of Greycoat Placements Limited and 100% of Social Work AssociatesLimited. In September 2005 the Group increased its effective interest in its Japaneseoperation, Skillhouse Staffing Solutions K.K, to 90% acquiring the outstanding50% of the intermediate holding company, Interim Management International, fromthe Chairman Mr Tony Martin for a consideration of £345,000, paid in shares. Post year end purchases Following the end of the year, the Group purchased 60% of the share capital ofEmpresaria GIT Holdings Limited ("GIT") for an initial cash consideration of£90,000. GIT operates two small businesses in the Czech Republic and Slovakia, mainlysupplying IT staff. The Group also acquired, through a special purpose vehicle, from SSR PersonnelServices its operating division providing staffing services in the UK publicsector for an initial cash consideration of £350,000. Intangible assets The carrying value of intangible assets in the Group Balance Sheet increased by£3.2m, from £4.8m to £8.0m. The major constituents of this increase arose fromthe acquisition of the Recruitment Businesses Limited, More Driving Limited andMonroe Consulting Group, together with the increase in the Group's shareholdingin the three existing operations mentioned 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. Treasury Management Cash Flow Net cash of £2.5m (2004 - £2m) was generated from operating activities duringthe year. After returns on investments and servicing of finance and taxationflows of £1m, the surplus was reduced to £1.5m. The Group spent £2m of cash on acquisitions and capital expenditure, resultingin a cash outflow before financing of £0.6m. In the year, the Group acquired further invoice discounting liabilities of£0.3m, resulting in an overall increase in net debt at the year end of £0.8m to£2.4m (2004: £1.6m). Cash Management The Group maintains a range of facilities appropriate to the funding of itsstrategy of expansion by a mixture of organic growth and acquisition. At the year end, the Group's financing arrangements comprised: • cash at bank of £2.4m; • an unutilised overdraft facility of £1.25m; • outstanding term loans of £1.6m repayable over the next three years; and • amounts owed in respect of factoring and invoice discounting agreements of £3.3m. The Group banks with HSBC Bank plc. Nick Hall-PalmerGroup Finance Director Consolidated profit and loss accountYear ended 31 December 2005 Notes 2005 2004 £'000 £'000 £'000 £'000 TURNOVERExisting operations 48,342 28,730Acquisitions 5,718 14,991 Continuing operations 54,060 43,721Discontinued operations - 1,709 Total turnover 54,060 45,430Cost of sales (38,667) (32,289) GROSS PROFIT 15,393 13,141 Administrative expenses - normal (13,479) (11,771) - exceptional - (303) Total administrative expenses (13,479) (12,074) OPERATING PROFITExisting operations 1,217 1,246Acquisitions 697 - Continuing operations 1,914 1,246Discontinued operations - (179) Total operating profit 1,914 1,067 Share of losses in Associated companies (44) - 1,870 1,067 Interest payable and similar charges (263) (325) PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 1,607 742 Tax on profit on ordinary activities (726) (350) PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 881 392 Equity minority interests (233) (169) PROFIT ON ORDINARY ACTIVITIES ATTRIBUTABLE TOTHE MEMBERS OF EMPRESARIA GROUP PLC ANDTRANSFERRED TO RESERVES 648 223 Earnings per share (pence)Basic and diluted 2 3.12 1.38 There are no recognised gains and losses for the current and preceding yearsother than as stated above. Accordingly no statement of total recognised gainsand losses is presented. Following the adoption of FRS21 (Events after the balance sheet date), dividendshave been restated to be recorded when approved. Consolidated balance sheet31 December 2005 Note 2005 2004 £'000 £'000 £'000 £'000 (Restated)*FIXED ASSETSIntangible assets 7,981 4,836Tangible assets 535 284Investment in associates 39 145 8,555 5,265 CURRENT ASSETSDebtors 10,169 8,328Cash at bank and in hand 2,405 2,921 12,574 11,249 CREDITORS: amounts falling due within one year (10,992) (7,892) NET CURRENT ASSETS 1,582 3,357 TOTAL ASSETS LESS CURRENT LIABILITIES 10,137 8,622 CREDITORS: amounts falling due after more than oneyear (1,449) (1,669) NET ASSETS 8,688 6,953 CAPITAL AND RESERVESCalled up share capital 1,113 997Other reserve 1,539 991Share premium account 3,822 2,895Profit and loss account 1,447 1,189 EQUITY SHAREHOLDERS' FUNDS 7,921 6,072 Equity minority interests 767 881 8,688 6,953 * The dividend creditor has been restated following the introduction of FRS21(Events after the balance sheet date). Consolidated cash flow statementYear ended 31 December 2005 2005 2004 Notes £'000 £'000 £'000 £'000 Net cash inflow from operating activities 3 2,500 2,027 Returns on investments and servicing of financeInterest paid (263) (325)Dividends paid to minority shareholders insubsidiary undertakings (196) (78) Net cash outflow from returns oninvestments and servicing of finance (459) (403) Taxation - corporation tax paid (586) (297) Capital expenditure and financial investmentPayments to acquire tangible fixed assets (413) (206) Net cash outflow for capital expenditure (413) (206) AcquisitionsPurchase of businesses (1,993) (2,256)Cash acquired with subsidiary 462 -Investment in associates (21) - Net cash outflow from acquisitions (1,552) (2,256) Equity dividends paid (84) (59) Net cash outflow before financing (594) (1,194) FinancingIssue of new shares - 2,257Raising of long term loans - 1,000Repayment of loan (238) (215)Increase in invoice discounting balances 316 67Capital elements of hire purchase contracts - (2) Net cash inflow from financing 78 3,107 (Decrease)/increase in cash in the year (516) 1,913 NOTES 1. BASIS OF PREPARATION The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 31 December 2005 and 2004, but is derivedfrom those accounts. Statutory accounts for 2004 have been delivered to theRegistrar of Companies and those for 2005 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). 2. BASIC AND DILUTED EARNINGS PER SHARE 2005 2004 No. No. Ordinary shares of 5 pence (2004: 5 pence) each (weighted average) 20,798,075 16,127,987 £'000 Profit for the financial year 648 223 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 2005 2004 £'000 £'000 Operating profit 1,914 1,067Depreciation of tangible assets 262 272Loss on disposal of tangible fixed assets 73 -Amortisation of goodwill 618 346Increase in debtors (433) (1,218)Increase in creditors 66 1,560 Net cash inflow from operating activities 2,500 2,027 4. ANALYSIS OF NET DEBT Other 1 January non-cash 31 December changes 2005 Cash flow 2005 £'000 £'000 £'000 £'000 Cash at bank and in hand 2,921 (516) - 2,405 Amounts owed to factors (2,700) (316) (286) (3,302)Long term loans due within one year (239) 14 - (225)Long term loans due after one year (1,549) 224 - (1,325) (1,567) (594) (286) (2,447) 5. ACQUISITIONS AND DISCONTINUED OPERATIONS Acquisitions during the year contributed £329,000 to the group's net operatingcash flows, paid £10,000 in respect of returns on investments and servicing offinance and utilised £23,000 for capital expenditure. As part of theacquisitions the group acquired additional factored debts of £286,000 which is asignificant non-cash transaction. Discontinued operations contributed outflows of £nil (2004: £250,000) to thegroup's net operating cash flows, paid £ nil (2004: £63,000) in respect ofreturns on investments and servicing of finance and utilised £nil (2004:£39,000) for capital expenditure. 6 ANNUAL REPORT AND ACCOUNTS The annual report and accounts for the year ended 31 December 2005 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 ADJUSTEDINFORMATION INCLUDED WITHIN THE FINANCIAL HIGHLIGHTS A) All operations 2005 2004 £'000 £'000 Operating profit 1,914 1,067 Add back: Goodwill amortisation 618 345 Exceptional legal and professional costs - 101 Exceptional reorganisation costs - 67 Exceptional bad debt write off - 135 Adjusted operating profit 2,532 1,715 Share of loss in associated company (44) -Interest payable and similar charges (263) (325) Adjusted profit before tax 2,225 1,390 Taxation (*) (770) (427)Minority interests (*) (275) (288) Adjusted profit after tax and minority interests 1,180 675 Adjusted earnings per share (pence) 5.7 4.2 B) Continuing operations 2005 2004 £'000 £'000 Operating profit - continuing operations 1,914 1,246 Add back: Goodwill amortisation 618 345 Exceptional legal and professional costs - 101 Exceptional reorganisation costs - 44 Adjusted operating profit - continuing operations 2,532 1,736 Share of loss in associated company (44) -Interest receivable and similar income - -Interest payable and similar charges (263) (263) Adjusted profit before tax - continuing operations 2,225 1,473 Taxation (*) (770) (455)Minority interests (*) (275) (288) Adjusted profit after tax and minority interests -continuing operations 1,180 730 Adjusted earnings per share (pence) - continuingoperations 5.7 4.5 (*) - adjusted as necessary for tax and minority interest impact from goodwillamortisation and exceptional item adjustments. This information is provided by RNS The company news service from the London Stock Exchange