Empresaria Group Regulatory News (EMR)

26 May 2020

Empresaria Group plc

("Empresaria", "the Group" or "the Company")

Trading and COVID-19 update, acquisition of non-controlling interest and related party transaction

Empresaria, the global specialist staffing group, will hold its Annual General Meeting today at 1.00pm. At the meeting the Chairman, Tony Martin, will make the following statement:

"Update on 2020 trading and outlook

The Group had a strong start to the year delivering year on year operating profit growth in each of the first three months. Net fee income for the quarter was down 5% compared to the prior year with the vast majority of this reduction coming in March as COVID-19 started to impact the Group. The strong profit performance in the first quarter was an early demonstration that the operational initiatives we put in place last year are having a positive impact on the business.

The Group remained profitable in April, the first full month of COVID-19 impact, despite net fee income being down 30% against prior year.

As previously announced, we have responded quickly and decisively to make necessary cost reductions and other changes to mitigate the impact and we are continuing to develop and adjust these measures as the situation evolves. The leadership team throughout the Group have agreed to temporary reductions in pay, and the Board has, temporarily, reduced all directors' fees by 20%.

Despite the worldwide impact of COVID-19, the Group continues to benefit from the diversity of our operations. While some areas, particularly our Professional sector, which includes our aviation, domestic services, corporate events and new home sales sectors, have seen very significant impact from COVID-19, others, such as our IT sector and our logistics business in Germany, have continued to perform well.

The situation across the globe continues to develop and we are encouraged by the positive developments of countries exiting lockdown and the selective reopening of businesses and general return of economic activity. While it is still not possible to provide any meaningful guidance, we continue to believe that the actions we have taken and continue to take will leave us well placed to successfully come through the current situation and deliver on our long-term growth ambitions.

Financing

The Group entered the current situation with significant headroom in both its facilities and covenants and well positioned to weather the downturn. We are focused on maximising our cash flows in the current environment to preserve this headroom. Alongside cost measures, we have taken a number of cash flow measures including the cancellation of the Group's dividend, reduction or deferral of capex, renegotiation of cash flow timing on contracts and deferral of VAT or other tax payments as permitted in each jurisdiction in which we operate.

At 30 April 2020 adjusted net debt was £11.9m (31 December - £19.1m), with headroom of £12.5m (31 December 2019 - £11.5m), excluding invoice financing facilities. The significant reduction in our net debt reflects working capital inflows resulting from the reduction in temporary staffing activity levels along with the benefit of the cash flow measures we have put in place.

The Group has modelled a number of scenarios for profits and cash flows. In each of these the Group continues to have sufficient cash headroom and would remain compliant with its covenants in all but the most severe scenarios modelled. As a precautionary measure, given the ongoing uncertainties over the impact on the global economy, the Group has agreed with its principal bankers an extension of its UK overdraft by £2.5m and a relaxing of the revolving credit facility covenants until March 2021 with the net debt to EBITDA covenant increasing to 4.5x (from 2.5x) and the interest cover covenant reduced to 3x (from 5x).

The Group remains in close communication with its principal bankers and is in the early stages of refinancing its £15m RCF facility, which expires in June 2021. The bank remains supportive and the Board believes that, with the actions taken, the Group has sufficient liquidity to cope with the current uncertainties.

Acquisition of non-controlling interest

The Group is pleased to announce the acquisition of a further 14.2% of shares in ConSol Partners (Holdings) Limited ("ConSol") taking its total interest to 96.7%. ConSol is a specialist recruitment business in the IT sector with a focus on niche sectors across communications, cloud and digital. With offices in London, Los Angeles and Austin, they work with clients across the world and have placed candidates in more than 55 countries.

The shares were acquired from Graeme Hubert and Marc Cohen, the founders of ConSol who left the business in December 2019 and reduces their shareholding in ConSol to nil. The remaining shares not owned by Empresaria are held by current employees of ConSol.

Total consideration is £1.4m with £0.8m paid immediately and the balance to be paid in April 2021. The terms agreed were substantially reduced from the acquisition of their shares in 2016 and 2019, reflecting both the founders' desire to sell their remaining shares now as they are no longer directly involved in the business and all parties appreciation of the current situation.

The Group has received credit approval to activate the remaining £1m of its accordion facility which is reserved for share acquisitions and could not be drawn for working capital. As a result, this investment does not reduce available cash headroom in 2020.

ConSol has performed well since joining the Group in 2016 and is a business in which we see great potential for further growth. The business contributed £2.1m to the adjusted profit before tax of Empresaria in 2019 and the acquisition is expected to be earnings accretive in the current year. In 2020, ConSol has so far proven to be one of our more resilient businesses in the face of the impact of COVID-19.

Related party transaction

The acquisition of non-controlling interests from Graeme Hubert and Marc Cohen, former directors of ConSol, are considered related-party transactions for the purposes of Rule 13 of the AIM Rules for Companies. The directors consider, having consulted with N+1 Singer, the Company's nominated adviser, that the terms of the non-controlling interest acquisition are fair and reasonable in so far as Empresaria's shareholders are concerned."

- Ends -

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Notes for editors:

§ Empresaria Group plc is a global specialist staffing group offering temporary and contract recruitment, permanent recruitment and offshore recruitment services across 6 sectors: Professional, IT, Healthcare, Property, Construction and Engineering, Commercial and Offshore Recruitment Services.

§ Empresaria operates from locations across the world including the 4 largest staffing markets of the US, Japan, UK and Germany along with a strong presence elsewhere in Asia Pacific and Latin America.

§ Empresaria is listed on AIM under ticker EMR. For more information: empresaria.com