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Empresaria Group : Buy at 65.5p – Trading statement ahead of expectations. Increase in forecasts and target price moved from 78p to 85p

Empresaria Group, the multinational specialist staffing group, has today issued an upbeat trading statement indicating that financial results for the year ending 31st December 2010, are slightly ahead of expectations and suggesting that 2011 market estimates are too low. At £223 million revenues were £1 million ahead of our forecasts and Net Fee Income of £49 million was broadly in line with our expectation. Full year adjusted pre-tax profits are expected to be slightly ahead of expectations and we have increased our forecast marginally to £6.5 million (£6.2 million).

Cash conversion has been excellent and the company has reported that net debt has been reduced to £5.5 million, some £2 million less than our previous expectation. Empresaria expects, even at this early stage, that results for the year ending December 2011 will be ahead of expectations.

We are therefore increasing our 2011 estimates. Although we have only marginally increased our revenue estimates to £233.9 million (£231 million) our pre- tax profit estimates have be increased by 20% to £7.7 million partly driven by a decrease in finance charges, aided by the improving debt position.

Today’s announcement underlines the strength of Empresaria’s diversified geographical spread. The Group’s second half performance was positive across all regions. Empresaria is now seeing tangible returns from its investment in developing international staffing markets. Although the poor weather in the UK and Continental Europe in December had some financial impact, this was compensated for by stronger than expected performance in the Group’s other regions.

New offices in Asia and a hub in Singapore will allow the company to further drive expansion in the high growth Asian market. Structural changes in the Teutonic regions of continental Europe continue to benefit the Group’s largest division, and in the UK, the focus on developing temporary staffing operations away from the public sector has created stable and growing revenue streams.

The company continues to be wary of the macro-economic environment but is performing well, and we are comfortable about raising our forecasts. Continuing to value the company on 11x 2011 earnings we are raising our target price to 85p (78p) and reiterate our stance of buy.