(EMR) Empresaria Group

EMPRESARIA GROUP PLC

Results for the year ended 31 December 2011

Good performances from UK and Rest of the World regions.  Performance in Continental Europe impacted by previously highlighted issues in Germany, but overall business model has shown resilience and there are encouraging opportunities for growth.

·     21% growth in permanent revenue

·     Temporary revenue flat year on year

·     Net fee income growth of 1%

·     Conversion ratio declines to 11% (2010: 16%)

·     Exceptional charge of £1.7m for potential retrospective pay claims in Germany following legal rulings on collective bargaining agreements, reduced from £3.0m at the half year

·     Net debt of £5.6m at year end (2010: £6.1m), after investing £2.1m in working capital and £1.3m on purchasing minority shares

* Adjusted results exclude amortisation of intangible assets, movements on values of put and call options and exceptional items.  

Operational Highlights

·     Operational focus on delivering organic growth from our existing operations

·     Net fee income growth in two out of three reporting regions

o  +19% in Rest of the World

o  -10% in Continental Europe

o  +5% in UK

·     New offices established in Singapore, Australia and China

Tony Martin, Chairman of Empresaria, commented:

"The UK and Rest of the World regions grew net fee income by 5% and 19% respectively.  However, the Group as a whole experienced a 1% growth in revenue and net fee income, with adjusted profit before tax down 32% to £4.5m and adjusted EPS down 35% to 4.0p.  The major reason for this was lower profits in Germany, where the adoption of new collective bargaining agreements, following court rulings, required us to increase the pay rates for some of our temporary workers and to incur significant legal fees.  This has had a negative impact on margins and while we have seen an improvement in gross margin over the second half of the year, it still remains below historic levels.  We have obtained greater clarity on the potential exposure against retrospective pay claims from temporary workers and social security contributions in relation to these court rulings.  This has lead us to reduce the provision that we made at the half year of £3.0m to £1.7m at the year end, reflecting the lower expected exposure.

Global economic conditions remain uncertain and, while we continue to see generally good candidate and client demand, confidence is fragile and necessitates a cautious approach, especially in the UK and Continental Europe.  The Group trades in many emerging markets across the world and we see opportunities for organic growth across these regions and expect to see improved returns for the year ahead."

A presentation of these results will be made to analysts and investors on 21 March 2012 and an edited copy of this will be made available late that morning on the Empresaria Group plc website: www.empresaria.com

For further information contact:  

Chairman's statement

Overview of performance in 2011

The UK and Rest of the World regions grew net fee income by 5% and 19% respectively. However, the Group as a whole experienced a 1% growth in revenue and net fee income, with adjusted profit before tax down 32% to £4.5m and adjusted EPS down 35% to 4.0p.  The major reason for this was lower profits in Germany, where the adoption of new collective bargaining agreements, following court rulings, required us to increase the pay rates for some of our temporary workers and to incur significant legal fees.  This has had a negative impact on margins and while we have seen an improvement in gross margin over the second half of the year, it still remains below historic levels.  We have obtained greater clarity on the potential exposure against retrospective pay claims from temporary workers and social security contributions in relation to these court rulings.  This has lead us to reduce the provision that we made at the half year of £3.0m to £1.7m at the year end, reflecting the lower expected exposure. 

The year also saw the terrible earthquake and tsunami in Japan which resulted in the Japanese economy entering into recession by the end of the year.  We are thankful that all of our staff were safe and the strong leadership exhibited by our local management teams helped both our businesses to achieve comparable profits with the prior year.

We have continued to reduce our reported net debt, which was down to £5.6m at year end (2010: £6.1m), despite further investment in working capital to support the revenue growth and set up of new offices in the Rest of the World region. This investment has seen four of our existing brands establish themselves in new markets during the year and demonstrates our continued commitment to generate organic profit growth from our existing Group.

Board

As reported at the half year, Miles Hunt has decided to leave the Group to pursue other opportunities.  He ceased to be the Chief Executive Officer as at 31 December 2011, but remains on the Board until 31 March 2012 as a Non-executive Director.  He has overseen a smooth transition to Joost Kreulen, who became Chief Executive Officer on 1 January 2012.

Joost has been with the Group since 2009, initially responsible for our Asian operations and more recently also for a number of our UK based businesses.  Prior to joining Empresaria Joost was head of specialist staffing operations for Vedior in the Netherlands as well as being responsible for business development within Northern Europe and Germany.

The Board would like to thank Miles for his enormous contribution to the development of Empresaria since formation in 1996, during which time the Group has grown from a start up in one office, armed only with a management philosophy and a vision for growth, into a specialist staffing group stretching across 19 countries.

People

The number of people working within the Group fell to 803 at the end of 2011, down from 883 the previous year.  The average number of staff throughout the year was 848, up from 832 in the previous year.  The lower number at the year-end reflects the loss of 85 staff from businesses that were disposed of during the year. Empresaria's success is largely dependent on the efforts and contribution of its people and the Board would like to thank them for all of their hard work in the year.

Dividend

The priorities for our free cash flow remain to invest in developing our business and to strengthen our balance sheet, while supporting a sustainable dividend policy.  For the year ended 31 December 2011, the Board is proposing to maintain a dividend of 0.35p per share (2010: 0.35p per share) which, if approved by shareholders at the Company's Annual General Meeting, will be paid on 16 July 2012 to shareholders on the register on 15 June 2012.

Governance

Development and delivery of Group strategy must be supported by sound corporate governance practices that are appropriate to the size and philosophy of the Group. Since the Group moved to AIM in late 2004, strategic development has lead to an increase in the size and spread of the Group, in terms of both sector and geography, with a focus on developing staffing markets and emerging economies. Underpinning Group strategy we continue with the philosophy of management equity, with operating company management teams investing directly in their own businesses thereby aligning management and shareholder interests. The increased size and spread of the Group, together with the philosophy of management equity, has required the development and provision of a sound corporate governance framework. The Board continue to develop and enhance the Group's corporate governance arrangements in line with the principles of the UK Corporate Governance Code, balancing the need to operate the Group in an efficient, effective and ethical manner whilst allowing entrepreneurial management teams to operate to deliver the strategic goals of the Group. 

We were delighted to receive external recognition for the communication of our corporate governance reporting, winning the 2011 ICSA Hermes Transparency in Governance award for best annual report in the AIM/small cap companies category.

Current trading and outlook

Global economic conditions remain uncertain and while we continue to see generally good candidate and client demand, confidence is fragile and necessitates a cautious approach, especially in the UK and Continental Europe.  The Group trades in many emerging markets across the world and we see opportunities for organic growth across these regions and expect to see improved returns for the year ahead.

Chief Executive Officer's business review

Introduction

This is my first set of results as Chief Executive Officer, which I became with effect from 1 January 2012.  I initially joined Empresaria at the beginning of 2009 with a focus on the Asia region only.  Since assuming the role of CEO I have had the opportunity to extend my knowledge of the Group across all of its regions and to work closely with all of our businesses.  I am encouraged by the management strength throughout our regions and I believe this will help us deliver good organic growth. 

Group results overview

The Group generated revenue of £208.9m, an increase of 1% over the prior year and net fee income (gross profit) of £46.9m, also up 1% on 2010.  Within this, performance across our operating regions was variable, reflecting their different market conditions during the year. 

In the Rest of the World region revenue grew by 13% to £39.2m (2010: £34.7m) and net fee income grew by 19% to £11.2m (2010: £9.4m). Our Asian and South American businesses continued to improve their gross profit contribution to the Group with good performances from Indonesia, Thailand and Chile in particular.  This region was the main focus for expansion in the year, with new offices and branches opened in Singapore, Australia and China across six of our brands.  The economic conditions in this region are generally more positive than in Europe and we see further opportunities for growth.  In March 2011 Japan suffered from a natural disaster with an earthquake and resulting tsunami having a devastating effect on the country.  Despite this, our two businesses performed very well with revenue and net fee income growth year on year and adjusted operating profit level with 2010.  In total the adjusted operating profit for the region was down on the prior year at £1.1m, mainly due to the significant investment in setting up the new offices.

In the UK revenue was down 8% to £67.0m (2010: £72.7m) but net fee income was up 5% at £16.0m (2010: £15.2m). As highlighted last year, our infrastructure and construction operations are moving away from lower margin contracts to focus on more value added and higher margin business.  Adjusted operating profit was £2.0m, level with 2010, following increases in staff costs and bad debts.

In Continental Europe, revenue increased by 3% to £102.7m (2010: £99.4m), but net fee income declined by 10% to £19.7m (2010: £21.9m).  The operations in Continental Europe are primarily temporary staffing and heavily weighted to Germany and Austria, which together represent 86% of the regional net fee income.  The reduction in profit is mainly due to the lower margins in Germany resulting from the change in pay tariffs for temporary workers following the legal ruling at the end of 2010 relating to certain collective bargaining agreements.  These costs were not able to be fully passed on to clients or offset through cost savings elsewhere and, while margins improved in the second half of the year, they are still below historic levels.  We saw improved results in our healthcare business in Finland, however, overall adjusted operating profit for Continental Europe declined to £2.2m (2010: £3.9m).

Overall Group gross margin was 22.5%, the same as last year, with a 21% increase in permanent revenue helping to offset flat temporary revenue and a reduced temporary margin of 17.3% (2010: 18.1%).  Permanent sales contributed 29% of the Group net fee income (2010: 26%).

Cash generated from operations in the year was £3.9m (2010:  £8.3m).  After accounting for tax and interest, the Group generated free cash flow (being net cash from operating activities) of £1.2m (2010: £5.1m), with £2.0m used to acquire equity held by management in subsidiary companies and fixed assets and £0.3m to pay dividends to shareholders and to holders of minority shares in subsidiaries. There was a cash inflow of £1.0m from disposal proceeds.  Group net debt at the year-end was £5.6m (2010: £6.1m).

Priorities

There are some clear immediate priorities; improving the margins in Germany and ensuring that the lower profit businesses and the investments made in 2011 deliver growth and increased profit for 2012 are the key focus areas for the whole management team.  While we remain open to external investment opportunities, we do expect to focus on our existing operations over the next year. 

Business development

The Group has continued to invest in new geographic markets as part of its diversification strategy.  With the help of the hub concept in Singapore, four brands are now established in this market and are expected to make a positive contribution to profits in 2012.  We have also invested in new branches in China and Australia.  In January 2012 we opened our first office in Hong Kong, focussing on the financial services sector.

We continue to position the Group to increase our exposure to white collar and professional recruitment and to improve conversion ratios and working capital efficiency.  In the first half of the year we disposed of our interest in a primarily blue collar UK logistics operation to its management team and in the second half of the year we sold our Indonesian payroll outsourcing business to an Australian trade buyer.  These transactions have removed low margin, low profit businesses from the Group, generated cash proceeds of £1.0m and reduced our exposure to overseas debt finance.

Regional review

UK

Revenue decreased by 8% to £67.0m (2010: £72.7m), with a 12% increase in permanent revenue being offset by a 9% reduction in temporary revenue.  Despite this, net fee income grew by 5% to £16.0m (2010: £15.2m) helped by the temporary margin improving by 2% on 2010. The reduction in revenue was largely as a result of our infrastructure and construction operations targeting higher margin and more value added contracts and reducing its exposure to the higher volume, low margin, highly competitive contracts, which also typically have longer payment terms.  Overall UK gross margin increased to 24% (2010: 21%).  Temporary staffing accounted for 60% of net fee income (2010: 64%) reflecting the improved permanent market.  Adjusted operating profit of £2.0m was level with the prior year.

The market conditions were good in the first half of 2011, but growth rates slowed in the second half and in particular in the final quarter.  However, net fee income grew each quarter against 2010.

Our Infrastructure and Construction businesses experienced lower temporary revenue, albeit at higher margins, and an increase in permanent revenue, so delivering an improved net fee income.  Costs increased due to staff costs and bad debts.  The outlook for publicly sponsored infrastructure projects appears to be improving and the new regional and airport offices performed well in the year.

In Financial services, revenues grew again, in particular from permanent positions.  Competition is strong in this market and this is keeping temporary margins in line with the prior year.  The outlook for the sector is cautious, given the ongoing euro crisis and potential impact on the banking industry.  The LMA Recruitment brand expanded into Singapore in 2011 and more recently opened an office in Hong Kong, to help deliver growth outside of the London market.

Within our Other brands category we have experienced mixed performances, with improved results in particular from our creative and retail brands and investment in our domestic services brand.  However, the recruitment-to-recruitment business, McCall, experienced slow market conditions, especially in the second half, as a number of recruitment companies ceased investing.

In May 2011 the Group disposed of its UK Supply Chain business operated by The Logistics Network Limited and More Driving Limited to a management lead team.  This was a low margin and low profit operation which was exposed to the fragile UK retail sector.  The transaction resulted in a loss on disposal, largely due to the write off of goodwill but did generate cash inflow for the Group of £0.2m in the year, with a further £0.1m due by the end of 2014.

Continental Europe

Revenue grew by 3% to £102.7m (2010: £99.4m) but there was a decline in net fee income of 10% to £19.7m (2010: £21.9m).  There has been pressure on margins across the region, with gross margin falling to 19% (2010: 22%).  While cost savings were achieved, these were not sufficient to offset the fall in gross profit, resulting in adjusted operating profit of £2.2m (2010: £3.9m).

The German economy has been the most resilient in Europe and currently enjoys historically low unemployment rates.  However, we were not able to benefit fully from this during 2011.  Revenue in Germany was slightly down against 2010 but the pressure on margins resulted in significantly lower net fee income.  This decline is a result of changes required to the pay tariffs used for our temporary workers in Germany, following a legal ruling at the end of 2010 relating to certain collective bargaining agreements.  Many temporary workers have received an increase in pay and it was not possible to fully pass this on to all of our customers in the year.  The total impact of the reduced margins, together with unplanned legal costs amounted to £2.6m lower profits when compared with 2010.  There was an improvement in gross margin in the second half of the year, but it remains below historic levels and further action is ongoing, as a management team priority, to improve this position.

As a result of the legal challenge against certain collective bargaining agreements some of our German operations may be subject to retrospective pay claims and social security contributions.  At the half year we recognised a provision for £3.0m as a best estimate of these potential costs.  Since then we have received the audit results from the social security agency for the majority of our branches which provides a clearer estimate of their maximum claim and the likely timing for making payments to them.  With this and an updated estimate of potential claims from workers for retrospective pay, at year-end we are recognising a reduced total provision of £1.7m, which we believe is sufficient to cover any potential liabilities from this issue albeit there remains some uncertainty as to the final outcome.  It should be noted that the legal position in relation to the validity of retrospective claims is still subject to further court rulings.  We have registered objections against the social security claims to protect our position in the event of a positive court ruling in the future.

As announced on 13 March 2012, since the year-end we have appointed a new managing director for our German business.  We have reached an agreement with the previous managing director, who is a minority shareholder in the business, to re-structure the timings of the put and call options over his minority shares.  We have agreed to purchase 6.7% of the shares in the German business from him for Euro 1.3m and have call options over the remaining 13.3% of the shares in the German business not already owned by us, which are exercisable through to January 2014.

Our healthcare staffing operations, based in Finland and Estonia, performed well again in 2011, with high revenue and net fee income growth.  However, there was a reduction in margins due to both an investment in new dental clinics and a correction to the tax treatment of certain benefits provided to candidates.  This resulted in an exceptional charge of £0.3m for one-off historic costs which, together with other non-recurring costs in the year, resulted in a lower increase in operating profit than in gross profit.  The structural shortage of healthcare staff in Finland is expected to continue for the foreseeable future, so providing opportunities for the business to continue to grow.

Our specialist businesses in Czech Republic and Slovakia saw good growth in revenue and net fee income, following improving economic conditions and must now start delivering profitable growth.

Rest of the World

Revenue grew by 13% to £39.2m (2010: £34.7m) and net fee income grew by 19% to £11.2m (2010: £9.4m).  This region has been the fastest growing again this year and now represents 24% of the Group net fee income. Permanent revenue grew by 27% and temporary revenue grew by 10%, with temporary margins also improving over the prior year.  Permanent recruitment, which includes the training and Recruitment Process Outsourcing ("RPO") businesses in Indonesia and India respectively, contributed 60% of net fee income.  Temporary recruitment revenue is primarily delivered from our businesses in Chile, Japan and Australia.    The investment in new offices in Singapore, China and Australia had a negative impact on profit of approximately £0.6m, which is the main factor for the decline in adjusted operating profit to £1.1m (2010: £1.5m).

In Japan our operations were disrupted by the earthquake and tsunami in March 2011 and the resulting radiation scare, which stopped temporary workers from being able to work and slowed down the recruitment process across the country.  Despite this, our businesses demonstrated resilience with revenue and net fee income growth.  Profit was delivered at the same level as the prior year.

Within the South East Asia region we have seen continued strong growth in revenue and net fee income, although operating profit was down as a result of the investments in new office openings.  There were particularly good performances from Indonesia and Thailand and the new operations in Singapore established themselves with good teams of consultants.  The floods that paralysed large parts of Bangkok in the last quarter of 2011 had short-term timing issues for our business but we do not expect any more disruption from this in 2012.

In the second half of the year we disposed of our payroll outsourcing business in Indonesia to an Australian trade buyer.  This was a low margin and low profit business that required a high level of working capital financing, and while it resulted in a marginal accounting loss on disposal, it generated cash proceeds of £0.8m, with a further £0.1m paid by the end of February 2012.  Following this transaction our Indonesian businesses still represent 6% of the Group's net fee income.

In India revenue was flat year-on-year but profitability was down due to the need to restructure the business following the loss of a key client in the RPO operation.  There is also an exceptional provision of £0.2m in relation to a long-running historic contractual dispute.  Aside from this there was good growth in other parts of the business, especially with outsourcing operations to US clients and in the global candidate sourcing division.

In China there has been a growth in profits due to a higher proportion of permanent recruitment.  Investment has also been made in a new business which focuses on the recruitment process from a candidate perspective rather than the traditional company focus.  This business is becoming well established and is expected to deliver good returns over the next few years.

In South America, our outsourcing business in Chile had good revenue and profit growth, after recovering from the market disruption in 2010 caused by the earthquake.  Gross margin has improved, and remains a key area of focus.

Finance review

Revenue and gross profit

Revenue for the year was £208.9m (2010: £206.8m), a 1% increase. Gross profit also increased 1% to £46.9m (2010: £46.5m).  Gross margin was 22.5% (2010: 22.5%) as an increase in permanent revenue was offset by a lower temporary margin.  Permanent sales grew by 21% and accounted for 29% of the gross profit (2010: 26%).  Temporary revenue was level with 2010, but the margin reduced to 17.3% (2010: 18.1%).

The proportion of gross profit from non-UK operations increased slightly to 66% (2010: 65%).  On a constant currency basis, gross profit would have been level with 2010.

Group trading summary

* The adjusted operating profit and adjusted profit before tax figures exclude exceptional items, intangible amortisation and movements in the values of put and call options.

Operating profit

Administrative costs increased by 6% to £41.6m, mostly due to higher staff costs and bad debts.  Costs in the UK were broadly level with the prior year, in Continental Europe were down year-on-year, especially for commissions, but were 19% higher in the Rest of the World through staff costs and rent.  This increase in the Rest of the World included the investment in new offices in the year.  Adjusted operating profit was £5.3m, down 28% on the prior year.  The conversion ratio of 11.3% was also down from 15.9% in 2010.

Operating profit, after intangible amortisation and exceptional costs was £2.8m (2010: £7.2m).

Finance income and costs

Finance income was £0.6m (2010: £0.4m).  Bank interest income was £0.1m (2010: £0.1m).  Finance costs were £1.5m (2010: £1.1m).  Interest payable on invoice discounting and bank loans and overdrafts was £0.9m (2010: £1.0m).  There was a net loss of £0.1m from the movement in the fair value of put and call options over minority shares in Group companies (2010: £0.2m gain).

Exceptional charges

International Financial Reporting Standards (IFRS) require that items of income and expenditure that are material in terms of their nature or amount should be disclosed separately.  Such items have been disclosed as exceptional charges in these accounts.  The total provision is £2.2m (2010: Nil) and is made up of three items.  Firstly is the provision of £1.7m against potential liabilities to social security and worker claims in Germany following court rulings on the validity of certain collective bargaining agreements.  There is also a provision of £0.3m for social security and tax penalties on historic benefits provided to candidates in Finland.  Finally there is a £0.2m provision in India arising from a long running dispute with a former client over the basis for charging fees for work performed.

Taxation

The total tax charge in the year is £1.1m (2010: £2.1m) representing an effective tax rate of 58%.  Against the adjusted profit before tax and after excluding the tax on the exceptional provisions the effective tax rate reduced to 36%.  This is relatively high because of a combination of prior year tax charges, no tax benefit on certain accumulated losses and non-deductible costs in the year.  The profits earned by the Group are subject to different tax rates in the countries in which the Group operates.

Discontinued operations

On 20 May 2011, the Group disposed of the trade and assets of the Supply chain business in the UK.  A loss of £0.2m arose on the disposal, being the carrying amount of net assets transferred and attributable goodwill.  Consideration received was £0.2m with deferred consideration of £0.1m receivable through to 2014.

On 15 July 2011 the Group disposed of Advanced Career Indonesia (ACI) in Indonesia.  There was a £0.1m loss on disposal after the write off of attributable goodwill and carrying value of net assets.  Consideration received was £0.8m, with a further £0.1m received after year-end.

Both of these have been accounted for as discontinued operations.

Loss/earnings per share

Basic loss per share from continuing and discontinued operations in the year ended 31 December 2011 was a loss of 0.4p (2010: earnings of 7.0p).

The Group achieved adjusted earnings per share of 4.0p (2010: 6.2p).  This measure excludes exceptional items, intangible amortisation and fair value movements on put and call options and provides a better understanding of underlying trading.

There were no movements in the number of shares in issue during the year. However 1.2m share options were issued to the executive directors.  The dilution effect of these share options was insignificant in the year.

Dividend

During the year the Group paid a dividend of £0.2m in respect of the year ended 31 December 2010, amounting to 0.35p per share.  For the year ended 31 December 2011 the Board is proposing a dividend of 0.35p per share, which if approved by shareholders at the Annual General Meeting, will be paid on 16 July 2012 to shareholders on the register on 15 June 2012.

Treasury

The Group maintains a range of facilities appropriate to manage its working capital and medium-term financing requirements.  At the year-end the Group had banking facilities totalling £29.8m (2010: £30.1m) of which £6.3m was undrawn (2010: £4.2m).

The Group renewed its bank facilities in March 2011.  The revolving credit facility has reduced to £6.25m from £7.25m and is for a 5 year term.  A new amortising term loan of £3.0m has been secured for 5 years, in addition to the remaining balances of the current term loans which continue to amortise on the same basis as before.  The overdraft facilities have increased from £4.8m to a maximum of £6.1m.  The Sterling overdraft facility is phased over the calendar year, starting at £4.0m until the end of July, reducing to £3.0m until the end of September and then reducing to £2.0m over the remainder of the year.  This is designed to match the Group's funding requirements which typically are greater in the first half of the year.  The overdrafts are renewable annually and were last renewed in February 2012.

Cash flow

Net borrowings decreased by £0.5m in the year to £5.6m at the end of the year (2010: £6.1m).  There was a cash outflow on working capital of £2.1m and £1.3m on acquiring minority shares in Group companies.  Tax payments were £1.8m with further cash outflows of £0.7m on capital expenditure, £0.8m on net interest costs and £0.3m on dividends, of which £0.1m was paid to minority shareholders and £0.2m was paid to Group shareholders.  Against this there was a cash inflow of £1.0m from the disposal of Group businesses.

Bank facilities

Group net debt decreased from £6.1m at 31 December 2010 to £5.6m at 31 December 2011, as detailed below:

This net debt excludes non-recourse invoice financing of £10.1m (2010: £8.5m) which is offset against trade receivables.

The Group's bank covenant tests at 31 December 2011 were net debt:EBITDA of 0.9 times (covenant < 2.5 times), interest cover of 7.4 times (covenant > 3 times) and debt service cover of 1.3 times (covenant > 1.25 times).

Acquisitions

In January 2011 the Group acquired 15% of the shares in Skillhouse Staffing Solutions K.K. (operating in Japan) for £0.6m.  In December 2011 the Group acquired 35% of the shares in Monroe Consulting Group (operating in Indonesia) for £0.5m, including contingent consideration of up to £0.1m payable in 2012 if certain performance criteria are met.  The Group also acquired small amounts of shares in a number of other subsidiaries for £0.1m in total.

The Group also made the final payments of contingent consideration of £0.1m for the Saleslink business, acquired in 2009.

Balance sheet

The Group's net assets as at 31 December 2011 were £28.2m (2010: £29.2m). There were decreases in the value of goodwill and intangible assets of £1.6m and £0.7m in trade receivables.  Against this was a net increase of £0.4m in the value of the put option liability and call option asset and reductions of £0.5m in trade payables and £0.5m in net debt.

Post balance sheet events

On 26 January 2012 the Group announced the acquisition of 14.5% of the shares in Bar 2 Limited, a UK based contractor services company, for cash consideration of £0.3m.  This takes the Group's ownership to 85.5%.  The remaining minority shares will be acquired in 2014, with consideration based on the financial performance of Bar 2 Limited in the three years ending 31 December 2013.

On 13 March 2012 the Group announced it had agreed to purchase 6.7% of the shares in Empresaria Holding Deutschland GmbH (the holding company for the Headway operating companies) for Euro 1.3m.  This takes the Group's ownership in the Headway business to 86.7%.  The call option agreements over the remaining 13.3% of minority shares have also been amended to extend the exercise period up to the end of January 2014.

Going concern

The Board has undertaken a recent and thorough review of the Group's budget, forecasts and associated risks and sensitivities. Despite the uncertainty in the economy and its inherent risk and impact on the business, the Board has concluded, given the level of borrowings and bank facilities, that the Group is expected to be able to continue in operational existence for the foreseeable future, being a period of at least twelve months from the date of approval of the accounts. As a result, the going concern basis continues to be appropriate in preparing the financial statements. 

Consolidated Income Statement 

Consolidated Statement of Comprehensive Income

Consolidated Balance Sheet