Staffing company Empresaria (LON: EMR) warns that trading will continue to be difficult in the second half. The weak IT recruitment market is a major factor, and the demise of Silicon Valley Bank has not helped.
The decline in the AIM company’s net fee income happened in all the regions, so the international spread of the business has not helped during this period. The bright spot was the outsourcing services division, which continues to grow rapidly.
Outsourcing services increased net fee income from £6.1m to £7m and the profit contribution was higher even though costs have been increased ahead of growth. The growth came from the Indian operations because the Philippines base is focused on the US where demand was flat.
In the six months to June 2023, net fee income fell 9% to £29.7m and operational gearing meant that underlying pre-tax profit slumped from £4m to £500,000. There was a loss per share because of the minority interest in the better performing outsourcing services business.
Net debt rose slightly to £8.7m after paying dividends and tax. A decision on this year’s dividend will be made when the full year results are reported. There is still plenty of headroom in the invoice discounting facilities, so Empresaria is comfortable financially.
Empresaria has launched a US professional services business to broaden the scope of the US business. Empresaria Solutions, which will operate in the managed services sector, will be launched in the second half. This shows that management is still thinking in terms of growth.
Cost cutting should help the second half outcome. Cenkos forecasts a full year profit decline from £9m to £5m. The share price has fallen by one-quarter during 2023. At 40.5p, the shares are trading on less than 14 times prospective earnings.