Emerson Electric Annual Report 2017

FY2017 Annual Report · Emerson Electric

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Diversity drives
our opportunities

Annual Report & Accounts 2017

Empresaria Group plc
An international specialist staffing group

Business

Vision

Empresaria is an international specialist staffing group, following
a multi-branded business model which addresses global talent
and skills shortages.

Our vision is to be a leading international, specialist staffing
group. Our purpose is to help people to realise their potential.
We will achieve this by continuously developing our staff and
in turn delivering a quality service to our clients and candidates.

United Kingdom

Continental Europe

Asia Pacific

Americas

Net fee income (2017)

£23.4m

Brands: LMA, FastTrack, McCall,
Greycoat, Become, Ball and Hoolahan,
Teamsales, ConSol Partners

Net fee income (2017)

£16.5m

Brands: Headway, Medikumppani

Net fee income (2017)

£22.2m

Brands: Skillhouse, FINES, Become,
Monroe Consulting, IMS, BW&P, McCall,
LMA, Greycoat, Rishworth Aviation

£7.3m

Brands: Alternattiva, Monroe
Consulting, Pharmaceutical Strategies,
ConSol Partners

See page 22

See page 23

See page 24

See page 25

Finland

United Kingdom

Germany

Austria

India

United
Arab Emirates

China

Japan

Hong Kong

Thailand

Philippines

Vietnam

Malaysia
Singapore

Indonesia

Chile

Australia

New Zealand

Governance

Financials

36 Corporate governance statement

Independent auditor's report

42 Board of Directors

44 Directors' report

47 Directors' responsibilities

60 Consolidated income statement

61 Consolidated statement
of comprehensive income

62 Consolidated balance sheet

United States

Mexico

Contents

Strategic report

01 Strategy

10 Chairman’s statement

11 Highlights of 2017

12 Our business model

14 Market drivers in our industry

48 Audit Committee report

63 Consolidated statement of changes in equity

15 How we meet our objectives

50 Nomination Committee report

64 Consolidated cash flow statement

16 Our growth strategy

51 Directors’ remuneration report

65 Notes to the Consolidated financial statement

18 Chief Executive’s review

22 Operating review

26 Finance review

30 Risks and uncertainties

34 Corporate social responsibility

94 Parent Company balance sheet

95 Parent Company statement of changes

in equity

96 Notes to the Parent Company financial

statements

104 Officers and professional advisers

Our vision is to be a
leading international,
specialist staffing group.
Our purpose is to help
people to realise their
potential.

Our strategy is to
develop leading brands
and to be diversified
and balanced across
geographies and
sectors.

Strategy

To realise our vision, we continually respond to trends and changes in our
marketplace to help our clients and candidates fulfil their potential. Our
strategy is to develop leading brands and to be diversified and balanced
across geographies and sectors. Our spread of operations minimises the
dependence on any single market, so reducing the impact from market
fluctuations and other external factors. Each brand is a specialist in their
niche market, enabling them to understand the needs of clients and
candidates alike, allowing them to attack the market vertically rather than
horizontally. We differentiate ourselves in the marketplace by our four core
business model pillars:

Multi-branded model

See page 02

Management equity
philosophy

See page 04

Focus on growth
markets

See page 06

Operational focus
on temporary and
contract recruitment

See page 08

Cautionary statement

The Chairman’s statement and Strategic report (‘the reviews’) have been prepared solely to provide additional information to shareholders to assess the Company’s strategies and the
potential for those strategies to succeed. The reviews should not be relied on by any party or for any other purpose.

The reviews contain certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their
approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such
forward looking information.

Strategic reportGovernanceFinancials
2

Multi-branded
model

We target different segments of the
market with different brands. Each
brand has in-depth knowledge and
expertise in their specific market,
enabling them to help their clients
and candidates to make the best
matches. We think candidates and
clients want to deal with experts
who understand their industry and
can advise both on the best match
of experience, skills and job
requirements.

KEY PERFORMANCE INDICATOR

NET FEE INCOME FROM
PROFESSIONAL AND SPECIALIST
ROLES

This demonstrates the proportion of our
business generated from professional and
specialist positions.

Target: We want to maximise our exposure
to professional and specialist job levels as
these are generally higher margin sectors
where specialist brands can offer added
value services.

Progress: The ratio has increased to 87%.

2017:

2016:

87%

86%

Empresaria Group plcAnnual Report & Accounts 2017
3

Why this is important

Our brands are experts in their niche
markets, so able to understand the
requirements of both clients and
candidates to help deliver the best
staffing solution or candidate match.
We have a global reach but operate
with local knowledge, helping our
brands to spot and react to
opportunities quickly.

Their expertise means they know how and
where to find the best candidates, providing
clients with the best fit and helping
candidates with their career development.
Our primary focus is on professional and
specialist job roles where we believe the
biggest talent shortages exist and where
recruitment agencies are needed to help
identify hard-to-find candidates.

With different markets exhibiting different
growth rates we have brands operating
across multiple sectors and geographies,
so we are not dependent on any single
market. Our central team provides
management experience, expertise and
support, as well as resources to help
each brand deliver to their goals.

Building scale by investing in our brands

We have a clear focus to deliver organic
growth, by continually investing in and
developing our brands.

This can be through adding new staff,
opening new offices or expanding
operations into new areas, be that sector
niches or geographies. We also identify
examples of best practice across the
Group to help brands find opportunities
to improve productivity or collaborate.
Our brands operate from 20 countries
and seven core sectors, so we have

expertise in operating in multiple locations
and industries. Brands are able to make
use of other Group offices and know-how
when looking to enter new geographies,
so reducing their risk and costs.

We look at bolt-on opportunities where
this can help accelerate entry into a new
sector niche or geography. We use external
investments to enter new markets, filling
in gaps in our existing sector or geographic
coverage.

Brands

Countries

Strategic reportGovernanceFinancials

Management
equity philosophy

The Group applies a philosophy of
management equity to align the
interests of shareholders and key
management through the sharing
of risk and reward, with operating
company management teams
owning shares directly in their own
businesses. This helps attract and
then retain ambitious and talented
managers. Our decentralised
structure and entrepreneurial
culture enables managers to run
their businesses effectively, reacting
to local opportunities but also
benefitting from being part of a
global organisation and the support
and advice this provides.

KEY PERFORMANCE INDICATOR

NUMBER OF MANAGERS HOLDING
EQUITY

This demonstrates how many senior
managers around the Group are incentivised
through equity ownership in their companies,
a key element of our business model.

Target: All brands have management holding
equity.

Progress: The total number of managers
holding equity in their company is 51, down
6 on the prior year due to the mergers and
divestment in the year. Currently one brand has
no management holding equity (2016: one).

2017:

2016:

Empresaria Group plcAnnual Report & Accounts 2017
5

Why this is important

The staffing industry is a people business,
run by people, for people. The success of
our business is dependent on having the
best staff available and giving them the
operational freedom to run their business.
It is important to develop staff who are
passionate about what they do, who want
to help their clients and candidates to
realise their potential.

We use management equity to first
attract, and then retain key management
across our Group. This ensures they
take a longer term view and aligns the
interests of all shareholders, to build
businesses that can deliver sustainable
returns.

How it works

Senior management have the
opportunity to retain or acquire shares
in the operating company they are
responsible for.

Management can create a meaningful
capital value over time if they grow the profit
in their business. This works well with
our decentralised structure, as the local
management team run their business with
a high level of operational autonomy.

This aligns the interests of management
with Empresaria as a majority shareholder,
encouraging a long-term view for the
business.

Acquisition of shares

Holding period

Valuation

• At least 51% of the shares are

owned by Empresaria.

• A minority share position is
retained by management or
acquired by them at fair value.

• Shares can be offered for sale after
a specified holding period, typically
between 4 and 5 years.

• Shares can be offered for sale over

a minimum 2 to 3 year period.

• The decision to purchase the
shares is at Empresaria’s sole
discretion. There are no put options
in place.

• The decision to buy shares is based

on each specific situation, with
consideration given to management
succession plans, recent trading
performance and potential of the
business in the next few years.

• Valuation basis is agreed

up-front and documented in
a shareholders’ agreement.

• The valuation is typically based
on the average profit after tax
for the previous three full years
before the shares are sold,
using Empresaria’s trading
multiple (share price divided
by last EPS) less 0.5, to
ensure it is earnings-accretive
to Empresaria’s shareholders.
The multiple is capped at
a maximum of 10.

Strategic reportGovernanceFinancials

Focus on growth
markets

We target businesses that operate
in growth regions and sectors. We
have a good spread across both
established and emerging staffing
markets and across different
industry sectors. By having a
balanced and diversified spread of
operations across different markets
we are not reliant on any single
market and can mitigate the
impacts of a slow-down in any
particular market.

Net fee income by geography (%)

UK (34%)

Germany & Austria (22%)

Americas (11%)

Australia & New Zealand (11%)

Japan (8%)

South East Asia (7%)

India (4%)

Middle East (1%)

China & Hong Kong (1%)

Other (1%)

Professional services (10%)

IT, digital & design (26%)

Technical & industrial (31%)

Retail (7%)

Executive search (6%)

Healthcare (5%)

Aviation (8%)

Other services (7%)

Net fee income by sector (%)

Empresaria Group plcAnnual Report & Accounts 2017
7

Finland

United Kingdom

Germany

Austria

Finland

India

United
Arab Emirates

United Kingdom

Germany

Austria

China

Finland

Japan

Hong Kong

Thailand

Philippines

Vietnam

Malaysia
Singapore

Indonesia

India

China

Australia

Japan

Hong Kong

Philippines

Indonesia

Vietnam

Malaysia
Singapore

Australia

New Zealand

India

United
Arab Emirates

China

Japan

Hong Kong

Thailand

Philippines

Vietnam

Malaysia

Singapore

Indonesia

Australia

New Zealand

India

Chile

New Zealand

We have a fast-growing Offshore
Recruitment Services business
operating out of India and providing a
range of recruitment services, primarily
to clients in the USA and UK. We see
this having good potential for future
growth as agencies in established
markets look to manage their cost base
and increase operational flexibility
by outsourcing certain parts of the
recruitment process.

Germany

Austria

Germany and Austria

United
Arab Emirates

The German staffing market is the least
mature of these markets, having only
de-regulated in 2004, but is already
the fourth largest staffing market in the
world and we expect it to grow to be the
biggest in Europe over the medium term.

China

India

Japan

Hong Kong

Thailand

Philippines

Vietnam

Malaysia
Singapore

Indonesia

Australia

New Zealand

Why this is important

Finland

United Kingdom

Germany

Austria

United States

Mexico

Market size

United States
India

Chile

United
Arab Emirates

Mexico

We have a good spread of operations
across both established and emerging
staffing markets, with 71% of our
net fee income derived from the UK,
Germany, Japan and USA, which
are the four largest staffing markets
in the world.

These markets provide a significant
market opportunity for our brands to
operate as niche market experts as well
as making it easier to find experienced
managers who have the passion, skills
and expertise to develop international
brands.

The World Employment Confederation
estimates in their 2017 Economic report
that the global staffing market generates
€417 billion in sales revenue, which
includes €279 billion from agency sales
(temporary and contract), €36.8 billion
from direct recruitment (permanent)
and €3.3 billion from RPO (Offshore
recruitment services).

Global market staffing sales

(2017)

¤417bn

See page 22 for Operating review

We want to operate in markets where there
are good growth prospects, to help us
deliver a sustainable growth in profit. We
know that markets operate at different
speeds and economies go through cycles,
so our spread of operations across sectors
and geographies reduces the risk from a
downturn in any single market.

United States

Mexico

United Kingdom

Germany

Austria

China

Japan

United States

Hong Kong

Thailand

Philippines

Chile

Mexico

Vietnam

Malaysia
Singapore

Indonesia

Australia

Asia and Latin America

New Zealand

Chile

With the exception of Japan and Australia,
the Asian and Latin American staffing
markets are relatively immature. There
are low levels of temporary recruitment in
South East Asia, but as this staffing market
develops we expect temporary staffing to
grow and we are well positioned to benefit
from this. There is a significant long-term
growth potential in these emerging staffing
markets due to the size of their populations,
concentration of work in large cities and
increasing levels of middle class with better
education levels than previous generations.
We have a good presence across the
emerging staffing markets with a particular
focus on Asia Pacific, India and
Latin America.

United States

Mexico

In these markets we focus on the key
economic centres, where we will see the
best return on our investment. We do not
have large networks of branch offices,
but focus on where the workers and clients
are concentrated, so having access to the
greatest pool of vacancies and candidates.

Chile

Strategic reportGovernanceFinancials
8

Operational focus on
temporary and
contract recruitment

Providing ongoing temporary and
contract recruitment services
develops long-term client
relationships and helps financial
planning through more predictable
earnings. Temporary staffing is
generally more stable throughout
the economic cycle and provides
clients and candidates with the
flexibility to organise their business
and careers.

Split of net fee income from temporary
and contract services (%)

4
3

4
6

4
3

2
6

1
4

5
5

5
3

0
6

6
3

0
6

2013

2014

2015

2016

2017

Permanent
Temporary and contract

Offshore Recruitment Services

Split of net fee income by service type (%)

Permanent (36%)

Temporary and contract (60%)

Offshore Recruitment Services (4%)

Empresaria Group plcAnnual Report & Accounts 2017
9

Why this is important

The Group has three main service lines,
temporary and contract recruitment,
permanent recruitment and Offshore
Recruitment Services. Overall we aim
for a bias in temporary and contract
recruitment, which is generally more stable
throughout the economic cycle, although
this also depends on the maturity of the

staffing sector in each country, with
some low maturity markets focused
purely on permanent sales. With
temporary and contract recruitment,
we typically have a long-term
relationship with our clients and a more
predictable income stream, which helps
with resourcing and planning.

Temporary staffing in key
markets

As a Group we have an overall bias
towards contract and temporary
recruitment, providing workers with
the flexibility to work when they want
and also helping people to enter the
working environment.

In the established staffing markets we have
a high proportion of temporary and contract
recruitment. The established markets are
typically larger and more regulated. We
monitor changes in regulations across our
territories and we participate in consultation
exercises with the regulators, to help them
understand the benefits to their economies

and businesses from temporary labour
solutions. In those markets where there
is no or little regulation of labour markets
we focus more on permanent
recruitment, but with the expertise
around the Group we are well placed to
develop temporary recruitment solutions
as these markets develop.

Temporary penetration
rates in key markets

The most regulated markets typically
have the highest temporary penetration
rate, which represents the number
of agency workers in a country as
a percentage of the total working
population. The rates for selected
key staffing markets are shown below.

In established staffing markets there is
an ongoing trend towards flexible working
practices. This is being driven by both
clients wanting solutions for specific
projects, to manage their costs or deal
with seasonal demand, and by candidates
wanting flexibility on when, where and
how they work. This could be through
self-employment, part-time work or remote
working, with project work enabling them
to build up a wide portfolio of relevant
experience. With the rise of the digital world,

it is increasingly easy for candidates
to work from anywhere in the world,
reducing geographic boundaries and
time zone issues.

Penetration rate
by country (2015)

3.8%
UK

3.7%
Australia

3.0%
Netherlands

2.4%
Germany

2.2%
USA

2.0%
Japan

1.2%
Finland

0.5%
Chile

Source: World Employment Confederation
Economic report 2017.

Strategic reportGovernanceFinancials
10

Chairman’s statement

The market

As we enter 2018 the worldwide economic
conditions are largely positive, with
synchronised growth forecast for the
first time since the global financial crisis.
The main markets that we operate in are
expected to grow, and this includes the
UK where we continue to operate under
a cloud of Brexit uncertainty. We are seeing
candidate shortages across our markets
and regions. We play a vital role in helping
client companies find the right resources
they need to grow.

The positive economic outlook suggests
a good year ahead for the staffing sector,
with “Staffing Industry Analysts” forecasting
6% growth in the global staffing sector in
2018. Against this is ongoing geo-political
uncertainty, which could derail growth in
any territory, as well as the impact of new
legislation in our markets, with particular
changes in Germany and Japan impacting
the temporary staffing markets in 2018.
Our diversity puts us in a good position
to both manage the impact of localised
issues and make the most of positive
market conditions.

People, values & culture

The Board has over 100 years of combined
experience in the staffing industry and
during the year we took steps to strengthen
the board with Spencer Wreford taking
on the role of Chief Operating Officer.
We look forward to welcoming Tim Anderson
to the board as Group Finance Director
by the end of March 2018.

As we have continued to invest in our
brands, the average number of staff across
the Group in the year has increased to
1,367 (2016: 1,282). The success of the
Group is down to the hard work of every
one of them and the Board would like to
thank each individual for their contribution
to our success.

A key part of our business model, and
one that aligns key operating company
management and Empresaria shareholder
interests, is subsidiary management equity,
where management hold shares in their
operating companies. This approach helps
Empresaria to attract and retain the best
people. At the end of the year we had
51 management shareholders owning
shares in the operating companies they
are responsible for.

It is important for businesses to have a clear
vision to help frame all decision making and
identify priorities for investment. We operate
in a people business and our purpose is
to help people to achieve their potential,
whether this is our internal staff who can
develop meaningful careers within the
Group, our candidates who we help to find
work, or our clients who we help to identify
the best candidates.

We operate with a decentralised structure,
with local management responsible
for running their businesses but clear
governance and control oversight from
the centre. We believe in a strong and clear
governance approach and expect high
standards and compliance across the
Group. Our culture is based on shared
ownership and reward. We are a Group
of like-minded people with a passion for
helping people realise their potential.

We take stakeholder engagement seriously.
We have regular communication with
Group companies and staff through our
newsletters, we present to investors to
explain our strategy and results, both
to institutional investors and private
shareholders and we engage with
regulators and Government agencies
both directly in response to consultations
or proposals and through our membership
of worldwide trade associations.

Shareholder returns

The Group has delivered six consecutive
years of double-digit growth in adjusted
diluted earnings per share as we look
to build a sustainable business for the
long-term benefit of shareholders and other
key stakeholders. The adjusted measures
exclude amortisation, exceptional items,
profit or loss on business disposals and
fair value charges on equity instruments.
We use the adjusted measures as we
believe they reflect the underlying trading
results and are measures typically used
by investors and the analyst community.

The Board has reviewed the dividend and
in line with our progressive dividend policy,
for the year ended 31 December 2017,
we propose an increase of 15% to 1.32p
per share (2016: 1.15p per share) to be
approved by shareholders at the Annual
General Meeting. The dividend will be paid
on 31 May 2018 to shareholders on the
register on 4 May 2018.

The Group has delivered
another record year of profit.
Our business model and
strategy is delivering
consistently, with 18 quarters
of year-on-year net fee
income growth for the period
to December 2017.

As well as the growth in profit, our
diversification across sectors and geographies
helps to reduce risk and insulate the Group
from difficulties in individual markets.

Empresaria is a global business, operating
from locations in 20 countries. Whilst global
reach is clearly important, local focus is key
with our management teams running their
businesses in alignment with local market
conditions and opportunities.

As part of our strategy to develop leading
brands, we invest to help them develop and
take a leading position within their niche
sector area of expertise. It is important that
each brand has the potential to develop
within the Group and where changes are
needed, we identify and implement them.
In line with this ethos, we ended 2017 with
18 brands, having merged two brands and
exited from another. The Board sees good
opportunities for growth across the Group
and we will continue to invest in our brands
to build capacity and coverage.

Empresaria Group plcAnnual Report & Accounts 2017
11

Highlights of 2017

Finland

United Kingdom

Germany

Austria

KEY PERFORMANCE INDICATOR

United States

Financial highlights

Operational highlights

China

ADJUSTED DILUTED EARNINGS
PER SHARE GROWTH

Mexico

Net fee income (£m)

This demonstrates return to shareholders,
in line with our strategy of delivering a
sustainable growth in earnings per share.

Progress: Adjusted diluted EPS grew
by 11%, representing the sixth year of
consecutive growth.

Adjusted diluted EPS (p)

Chile

3
.
1
1

9
.
9

5
2
1

0
.
8

2
.
6

2013

2014

2015

2016

2017

At the end of the year we initiated a small
share buy-back programme, which
concluded in January 2018 with the total
purchase of 260,384 shares at a cost
of £249,445. These shares are held in an
Employee Benefit Trust to cover potential
exercises of vested share options thus
reducing the dilutive effect of issuing new
shares. Based on the number of vested
options and the share price at the time, this
was a sensible use of capital for the benefit
of all shareholders.

Outlook

The Group has a strong platform from
which to deliver the next phase of growth.
The economic conditions are positive and
whilst we maintain a cautious view on
political risk, we see good opportunities
to develop our Group further during the
year ahead. We have a proven strategy
and brands that have the potential to grow
their profit.

Tony Martin
Chairman

13 March 2018

4
.
9
6

0
.
9
5

6
.
2
4

6
.
4
4

2
.
9
4

2013

2014

2015

2016

2017

Adjusted profit before tax (£m)

0
.
1
1

2
.
9

9
.
7

1
.
8

1
.
7

5
.
7

1
.
6

9
.
5

4
.
5

9
.
4

2013

2014

2015

2016

2017

Profit before tax

Adjusted profit before tax (£m)

Strengthening
India
a multi-branded
group

Vietnam

• Entry into Vietnam through Monroe
Consulting. As a Group we provide
a global service, now operating from
20 countries.

• UK brands merged (Mansion House
Australia
merged into LMA, Reflex HR merged
into FastTrack).

Investing in staff with focus on
productivity

• Average staff numbers increased to

1,367 (2016: 1,282).

Management change

• Spencer Wreford appointed Chief

Operating Officer in September 2017.

Dividend (p)

Operating excellence

1.4

1.2

1.0

0.8

0.6

0.4

0.2

7
.
0

5
3
.
0

2
3
.
1

5
1
1

0
.
1

2013

2014

2015

2016

2017

Brand awards in 2017

Partners
Connecting the Next Generation

ConSol Partners: Staffing
Industry Analysts Executive
Forum recognised as
2017 best staffing firm
to work for in the USA
(up to 51 employees).

IMS: Times Ascent
Dream company to work
for (IOAP The Global
Outsourcing 100).

Become celebrates
20 years in business.

McCall celebrates
25 years in business.

LMA: Global Recruiter
APAC winner.

Monroe Consulting: Global Recruiter
Best In-house training APAC; Best small
recruitment business (commended);
Best Newcomer (Malaysia Gold); Best
Candidate Experience (Malaysia Bronze).

Strategic reportGovernanceFinancials
12

Our business model

We leverage our
resources

Through our four
strategic pillars

Our people

The skills and expertise of our staff.

Our financial strength

Our ability to invest in the business.

Our brand reputation

Our brands are experts in their
markets.

Our values & culture

Our decentralised structure
provides operational autonomy
for managers.

Our network

Our brands are servicing clients
and candidates in 20 countries
across the world.

Our technology

Our ability to connect with clients
and candidates and operate our
business effectively.

F o c u s o n
g r o w t h m a r kets
S e e p a g e 6

Operational
focus on
temporary
and contract
recruitment
See page 8

e n t
M ana g e m
equity p hilo
See p a g e 4

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c r u it m e n t Services 4%* P

Offshore R

R
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c
r

u
i
t
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6%*
nt 6 0 %*

i
t

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ti

*OF NET FEE INCOME

OPERATING WITH
EXCELLENCE

porary and contra c t

R e c

u it m

OUR GROWTH STR AT E G Y
Maintain diversificat i o n a n d
balance by geograph y a n d s e c t o r

p
i
n

I
n

s
:

liti

s
t

d b

y g
o

n
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s

cial c
rly e

c
ute

Accelerate growth by filling in
gaps in our sectors and geogra p h i e s
See page 15

ernance and risk management:
e 2. Economic environment 3. Loss of key staff
d 5. Financial 6. IT & Cyber related

See pages 30-33

Our unique

business model

We target different

segments of the market

with different brands.

Each brand has specific

in-depth knowledge and

expertise in their market.

p a

cial fo

elo

fin

Financial disciplin

See page 15

Empresaria Group plcAnnual Report & Accounts 2017

To generate good returns and
sustainable long-term value

Investors

We aim to deliver sustainable
returns for shareholders with
growth in adjusted diluted
earnings per share and a
progressive dividend policy in
line with trading performance.

Growth in profit and cash-flow
allows us to re-invest in our
businesses to grow their profit
into the future.

Dividend (p)

1.32p

Adjusted diluted EPS (p)

12.5p

People

Average employee numbers (2017)

Our culture and values allow
staff to develop and flourish,
so they can achieve their goals
and improve their careers.

1,367

Average staff numbers

1,282

1,367

861

942

1,096

2013

2014

2015

2016

2017

Community

We make a direct social and
economic contribution in
the countries we operate in.
We help people to find work,
to develop their careers and
support their families, and we
contribute to the local economy
through tax payments and
use of local suppliers.

We help local businesses meet
their objectives by helping them
find suitable workers that fit
their needs and requirements.
By providing a quality value
added service to our clients
and candidates we enhance
our brand reputation which
should help generate repeat
and new business.

e n t

M ana g e m

equity p hilo

See p a g e 4

e 2

F o c u s o n

g r o w t h m a r kets

S e e p a g e 6

Operational

focus on

temporary

and contract

recruitment

See page 8

A T E G I C P I LLARS

R S

H O U R F O

Offshore R

c r u it m e n t Services 4%* P

*OF NET FEE INCOME

OPERATING WITH

EXCELLENCE

nt 3

6%*

nt 6 0 %*

u it m

porary and contra c t

R e c

u it m

R e c

OUR GROWTH STR AT E G Y

Maintain diversificat i o n a n d

balance by geograph y a n d s e c t o r

liti

d b

y g

cial c

rly e

ute

Accelerate growth by filling in

gaps in our sectors and geogra p h i e s

ute

See page 15

ernance and risk management:

e 2. Economic environment 3. Loss of key staff

d 5. Financial 6. IT & Cyber related

See pages 30-33

Our unique
Our unique
Our unique
business model
business model
business model
We target different
We target different
We target different
segments of the market
segments of the market
segments of the market
with different brands.
with different brands.
with different brands.
Each brand has specific
Each brand has specific
Each brand has specific
in-depth knowledge and
in-depth knowledge and
in-depth knowledge and
expertise in their market.
expertise in their market.
expertise in their market.

n
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Financial disciplin
Financial disciplin
Financial disciplin
See page 15
See page 15
See page 15

Strategic reportGovernanceFinancials

Market drivers in our industry

Economic conditions

Talent shortages

Confidence drives client’s hiring activity and
investment in staff, and confidence makes
candidates more comfortable to move job.
Confidence builds with good economic
conditions, with growing economies
creating new roles and candidates moving
between existing roles. This dual impact
means staffing markets are generally
expected to grow at higher rates than
country GDP, but different geographies and
sectors exhibit different economic conditions
and so demand is not spread evenly.

Market opportunity is also based on the size
of the market and the level of specialism,
with larger markets having a greater
degree of specialism. The world economy
is increasingly inter-connected with
businesses operating in global markets
across international boundaries. The labour
markets are reacting to this with people
becoming more mobile and working outside
their country of birth.

Talent shortages exist in many sectors,
making it difficult for clients to find suitable
staff, as there are insufficient workers with
the necessary skills to meet demand.
Clients have a number of routes to find
candidates but where there is a scarcity of
talent a staffing agency is invaluable to help
with difficult to find candidates. There is an
ageing population in developed economies
which further exacerbates this skills shortage
and in emerging economies where there
are growing populations they often lack
the skills and experience needed by clients.

Advances in technology and automation
are reducing the requirement for a number
of low skilled jobs, making them obsolete.
However, these advances also lead to the
creation of new roles that did not exist a few
years ago, although there are shortages of
people with experience in these new areas.
There is an increasing divide between the
qualifications and skills of workers and the
evolving demands of the labour market.

There is an ongoing trend for urbanisation,
leading to a concentration of workers in
the key economic centres, especially in
emerging markets. The concentration of
workers to the largest cities means these
cities are the main drivers of economic
growth and business opportunities.

2018 staffing market growth (%)

Populations (millions)

USA

Japan

Germany

Australia

China

India

Global

10%

Source: SIA forecast.

1,379

1,282

China

India

USA

Indonesia

Japan

Mexico

327

261

126

125

16%

Philippines

104

Vietnam

Germany

Thailand

Malaysia

Australia

Source: CIA World Factbook (July 2017 estimates).

Changes in market
regulations and new
technologies

Market regulations can be a driver of
growth, with well-regulated markets
encouraging temporary employment by
protecting the rights of temporary workers,
for example by providing the right to equal
pay and conditions. New business models
can create opportunities for workers, as
seen with the growth of workers in the gig
economy. They also create uncertainties
as authorities review how to deal with the
taxation of income and profits, which could
lead to changes in regulations around how
workers can be engaged.

New technologies and tools in staffing are
changing how we interact with candidates
and clients, with some models helping the
staffing industry to be more productive
and some looking to bypass the agency.
In established staffing markets we see an
increasing use of Vendor Management
Systems (‘VMS’) and Managed Service
Providers (‘MSP’) where software solutions
or external advisers act as the mechanism
for providing staffing services to clients,
reducing or removing the interaction
between the end client and staffing agency.
With the supply and demand for job
markets becoming increasingly digitalised
it can be difficult to sift through the sheer
volume of data online to find the best
match. This is where the experience of a
staffing agency can be vital to find the right
candidate.

Empresaria Group plcAnnual Report & Accounts 2017
Strategic report

Governance

Financials

How we meet
our objectives

We follow an Invest and Develop
approach to deliver on our strategy.
We are a strategic investor, looking to
invest in like-minded people who share
our values and are passionate about
their business.

DEVELOP

INVEST

It is important for our existing
brands to develop and grow their
profits over the long-term. Organic
investment helps them to develop
their services and grow scale and
coverage. This is done by the
following:

• Increase the headcount in an

existing brand

• Add a new vertical specialism to

an existing brand

• Enter a new or existing geography

with an existing brand

• Start up in a niche sector

To accelerate our growth we also
look at external investments, to fill
gaps in our sector or geographic
coverage or to bring in specific
market knowledge into the Group.

External investment will occur where
we don’t currently have a presence in
a region or sector or to help develop
an existing brand by filling in gaps in
their service offering:

• Enter a new geography or sector

with a new brand

• Grow an existing brand with

a bolt-on acquisition

It is important to have the right culture
fit with any external investment,
typically finding businesses that
have potential but have reached
a point where they need help to move
forward to the next level. We want to
work with them to develop a leading
staffing brand.

e n t
M ana g e m
equity p hilo
See p a g e 4

FINANCIAL
DISCIPLINE

Our investment activity is dependent
on the resources we have available.
We are in an overall debt position
and we target a ‘debt to debtors’
ratio of 25%.

Our preference is for investments
to be funded through equity or from
operating cash flows and debt to
be used for working capital funding.
We review investment opportunities
and funding options based on our
expectations for the business and
the costs of raising new funds to
deliver the best overall result for
shareholders.

F o c u s o n
g r o w t h m a r kets
S e e p a g e 6

Operational
focus on
temporary
and contract
recruitment
See page 8

FULL BUSINESS MODEL:

Discover the full business model
on page 12 of this report.

Our unique
business model
We target different
segments of the market
with different brands.
Each brand has specific
in-depth knowledge and
expertise in their market.

n
o
i
t
a
d
n
u

d
i
ol
s
p a
cial fo
elo
v
n
e
a
D
fin

Financial disciplin
See page 15

d
e
d
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a
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M

el
d
o
m

e 2

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a
p
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e
S

H O U R F O

G
U
O
R
H
T

A T E G I C P I LLARS

R S

c r u it m e n t Services 4%* P

Offshore R

R
e
c
r

u
i
t
m
e
nt 3
6%*
nt 6 0 %*

i
t

r
ti

*OF NET FEE INCOME

OPERATING WITH
EXCELLENCE

porary and contra c t

R e c

u it m

OUR GROWTH STR AT E G Y
Maintain diversificat i o n a n d
balance by geograph y a n d s e c t o r

p
i
n

I
n

s
:

liti

s
t

d b

y g
o

n
t
s

cial c
rly e

c
ute

Accelerate growth by filling in
gaps in our sectors and geogra p h i e s
See page 15

ernance and risk management:
e 2. Economic environment 3. Loss of key staff
d 5. Financial 6. IT & Cyber related

See pages 30-33

Our growth strategy

The Group’s strategy is
focused on growth, facilitating
our vision to be a leading
international, specialist
staffing group.

1. Develop leading specialist
brands with sector expertise

We invest in our brands to ensure they have sufficient
scale and strength to deliver sustainable profits. Leading
brands should be more financially stable during the
economic cycle and will benefit from synergies in
operational processes, training, systems and marketing.

2. Maintain diversification and

balance by geography and sector

3. Develop a solid

financial foundation

Having a spread of operations across geographies

Having a strong financial foundation is key to delivering

and sectors reduces the reliance on any single market

long-term sustainable results for the Group.

and minimises the impact on the Group from market

fluctuations and external shocks.

Our strategic
objectives

• Focus on professional and specialist job levels where

there are the greatest talent shortages.

• Sectors with good long-term growth prospects where
our niche sector expertise helps us to deliver to the needs
of both clients and candidates.

• Footprint in key economic centres where there is

• Funding being available to allow the Group to pursue

the highest concentration of workers and business so

internal and external investment opportunities.

delivering the best return on investment.

• Established and emerging staffing markets allows

access to both stable mature markets and high growth

emerging markets.

Our progress in 2017

We successfully integrated two new brands into the Group
from external investments made in 2016.

Rishworth Aviation provides us with a leading position
in Aviation, a new high growth global sector.

ConSol Partners increases our presence in high growth
IT sectors, operating across the UK, Continental Europe
and US markets.

In 2017, we merged a number of brands in the UK, to bring
operational synergies and cost savings to the businesses.
In Professional services the Mansion House insurance
brand was merged into LMA, adding a further specialism
to their offering. In the Technical & Industrial sector, Reflex
HR merged into FastTrack, strengthening their combined
position in the market and giving clients a better national
coverage.

We exited a training business in Indonesia as we focus
on our core staffing business.

With economic forecasts generally positive in the regions
we are operating in, we see potential to continue to grow
our Group profit into 2018.

With the restructuring undertaken in 2017 we have a
stronger platform across the Group and the focus in 2018 is
on investing in new staff and improving productivity. We see
good opportunities to use technology tools to help our staff
operate more effectively and efficiently and to invest more
in staff training.

We also look for cost efficiencies within our operating
structures and are working on a number of projects to
improve reporting and streamline back office functions.

Our opportunities

With the investments in Rishworth Aviation and ConSol

With our record profit in 2017 we have generated positive

Partners in 2016, we now have a better diversification

across our sectors, including a new sector in Aviation.

Our Monroe Consulting brand opened a new office in

Vietnam, our first venture in this country. This builds their

South East Asia coverage, now operating in six countries

cashflows. With the deferred consideration payment related

to ConSol Partners paid in the year, we have seen an

increase in our debt to debtors ratio to 45%, up on 38%

in 2016. Whilst this remains higher than our target of 25%,

it only represents 1.5 times adjusted net debt to EBITDA.

in Asia Pacific and two in Latin America.

We have not made any external investments in 2017, with

The investment in ConSol Partners has increased our

a focus to reduce the Group debt level.

presence in the USA through their office in Los Angeles.

With our diversified Group we have delivered a record profit

From the London office they service clients in the UK and

in the year. Our business is highly cash generative and with

Continental Europe. With our existing IT, digital & design

our committed bank facilities we end the year in a strong

brand in Japan, Skillhouse, this sector now operates across

financial position.

all of our regions.

10 of our 18 brands operate in more than one geographic

In 2018 we do not currently anticipate making any

region. We think this is important for leading brands to help

significant external investments, as we continue to target

spread their exposure and to deliver to the needs of clients

a reduction in our net debt and our debt to debtors ratio.

However, we continue to look at opportunities, both organic

and external, to grow the Group where there is a strong

strategic fit.

across different geographies. We see ongoing opportunities

to increase our brands’ geographic coverage across

the Group.

Although we do not currently expect to make any significant

external investments in 2018, we continue to look at

opportunities to further diversify our geographic or sector

coverage either through new brands or bolt-on acquisitions.

Empresaria Group plcAnnual Report & Accounts 2017
17

1. Develop leading specialist

brands with sector expertise

We invest in our brands to ensure they have sufficient

scale and strength to deliver sustainable profits. Leading

brands should be more financially stable during the

economic cycle and will benefit from synergies in

operational processes, training, systems and marketing.

2. Maintain diversification and
balance by geography and sector

3. Develop a solid
financial foundation

Having a spread of operations across geographies
and sectors reduces the reliance on any single market
and minimises the impact on the Group from market
fluctuations and external shocks.

Having a strong financial foundation is key to delivering
long-term sustainable results for the Group.

Our strategic

objectives

• Focus on professional and specialist job levels where

there are the greatest talent shortages.

• Sectors with good long-term growth prospects where

our niche sector expertise helps us to deliver to the needs

of both clients and candidates.

Our progress in 2017

We successfully integrated two new brands into the Group

from external investments made in 2016.

Rishworth Aviation provides us with a leading position

in Aviation, a new high growth global sector.

ConSol Partners increases our presence in high growth

IT sectors, operating across the UK, Continental Europe

and US markets.

In 2017, we merged a number of brands in the UK, to bring

operational synergies and cost savings to the businesses.

In Professional services the Mansion House insurance

brand was merged into LMA, adding a further specialism

to their offering. In the Technical & Industrial sector, Reflex

HR merged into FastTrack, strengthening their combined

position in the market and giving clients a better national

coverage.

We exited a training business in Indonesia as we focus

on our core staffing business.

our Group profit into 2018.

With the restructuring undertaken in 2017 we have a

stronger platform across the Group and the focus in 2018 is

on investing in new staff and improving productivity. We see

good opportunities to use technology tools to help our staff

operate more effectively and efficiently and to invest more

in staff training.

We also look for cost efficiencies within our operating

structures and are working on a number of projects to

improve reporting and streamline back office functions.

Our opportunities

With economic forecasts generally positive in the regions

we are operating in, we see potential to continue to grow

• Footprint in key economic centres where there is

• Funding being available to allow the Group to pursue

the highest concentration of workers and business so
delivering the best return on investment.

• Established and emerging staffing markets allows

access to both stable mature markets and high growth
emerging markets.

With the investments in Rishworth Aviation and ConSol
Partners in 2016, we now have a better diversification
across our sectors, including a new sector in Aviation.

Our Monroe Consulting brand opened a new office in
Vietnam, our first venture in this country. This builds their
South East Asia coverage, now operating in six countries
in Asia Pacific and two in Latin America.

The investment in ConSol Partners has increased our
presence in the USA through their office in Los Angeles.
From the London office they service clients in the UK and
Continental Europe. With our existing IT, digital & design
brand in Japan, Skillhouse, this sector now operates across
all of our regions.

internal and external investment opportunities.

With our record profit in 2017 we have generated positive
cashflows. With the deferred consideration payment related
to ConSol Partners paid in the year, we have seen an
increase in our debt to debtors ratio to 45%, up on 38%
in 2016. Whilst this remains higher than our target of 25%,
it only represents 1.5 times adjusted net debt to EBITDA.

We have not made any external investments in 2017, with
a focus to reduce the Group debt level.

With our diversified Group we have delivered a record profit
in the year. Our business is highly cash generative and with
our committed bank facilities we end the year in a strong
financial position.

10 of our 18 brands operate in more than one geographic
region. We think this is important for leading brands to help
spread their exposure and to deliver to the needs of clients
across different geographies. We see ongoing opportunities
to increase our brands’ geographic coverage across
the Group.

Although we do not currently expect to make any significant
external investments in 2018, we continue to look at
opportunities to further diversify our geographic or sector
coverage either through new brands or bolt-on acquisitions.

In 2018 we do not currently anticipate making any
significant external investments, as we continue to target
a reduction in our net debt and our debt to debtors ratio.

However, we continue to look at opportunities, both organic
and external, to grow the Group where there is a strong
strategic fit.

Strategic reportGovernanceFinancials
18

Chief Executive’s review

Group performance in the year

We are pleased to have delivered another
record year of profit, further demonstrating
that our strategy of being diversified by
sector and geography is working, with
adjusted profit before tax growing 20%
to £11.0m (2016: £9.2m). The 2017 results
include a full year of contribution from
the investments made in 2016 in Rishworth
Aviation and ConSol Partners.

Group revenue increased by 32% to
£357.1m (2016: £270.4m), with net fee
income up 18% to £69.4m (2016: £59.0m).
Our strongest results were in Japan (IT &
design sector), Chile (retail sector) and in
the professional services and other
specialist sectors of the UK. Permanent
revenue was up 14% and temporary and
contract revenue was up 34%.

The two investments made in 2016 have
integrated well into the Group. Rishworth
Aviation has performed in line with our
expectations. The decision was taken
to incur professional fees to support the
set-up of new bases of operations for
key clients, which are already generating
profitable returns and further consolidate
their position as a key business partner.
Our investment in ConSol has also been
positive, with the UK office trading well and
expanding their operations in Continental
Europe. We have invested in the US office,
bringing in more experienced staff and
increasing their focus on temporary sales.
There has been a positive contribution
in the second half of the year from these
changes and we see a good momentum
moving into 2018.

We have continued to invest in our Group,
with Monroe Consulting launching in
Vietnam, a new country for the Group. This
operation has started well and complements
their existing footprint across South East
Asia. The Group has also seen average
staff numbers increase by 7% as we
continue to invest in line with our leading
brands strategy. In the UK, two brands
were merged into FastTrack (technical &
industrial) and LMA (professional services),
which are expected to provide both
operational and cost synergies in the
coming years.

Trading summary

£m

Revenue

Net fee income

Operating profit

Adjusted operating profit*

Profit before tax

Adjusted profit before tax*

2017

357.1

69.4

8.7

11.6

8.1

11.0

2016

270.4

59.0

8.5

9.8

7.9

9.2

% change

32%

18%

20%

% change
constant
currency**

28%

13%

(3%)

13%

(2%)

14%

* Adjusted to exclude amortisation of intangible assets, exceptional items, gain or loss on disposal of business and fair value charges on acquisition of non-controlling interests. See note 11

for a reconciliation between profit before tax and adjusted profit before tax.

** The constant currency movement is calculated by translating the 2016 results at the 2017 exchange rates.

Empresaria Group plcAnnual Report & Accounts 2017
19

KEY PERFORMANCE INDICATOR

STAFF PRODUCTIVITY

This is the key productivity ratio we monitor,
demonstrating staff efficiency, calculated
as the ratio of net fee income generated per
£1 of staff cost. The staff cost includes all
sales and administrative staff, reflecting the
true cost of operating the Group.

Progress: At 1.75 in 2017 we have seen
a small decline on 1.79 in 2016, but this
Staff productivity
remains above all other years since 2013.

1.73

1.72

1.73

1.79

1.75

2013

2014

2015

2016

2017

The Group temporary margin was 12.7%
(2016: 14.5%) with the reduction mainly due
to the full year impact of Rishworth Aviation,
which has a high revenue and relatively low
gross margin percentage, and the lower
margins in Germany. The mix of net fee
income was consistent with the prior year,
with 60% from temporary and contract
sales and 40% from permanent sales. The
share of net fees from professional and
specialist levels increased to 87% (2016:
86%). The Group generated 66% of net fee
income from outside the UK (2016: 68%).

We have seen another improvement in our
conversion ratio, albeit a small increase to
16.7% (2016: 16.6%). This represents six
years of consecutive improvement, although
the rate of growth was held back by costs
incurred on exiting property leases in the
UK, non-exceptional restructuring costs
and investing in new staff. We have a clear
focus to manage our costs, allowing
investment in building the teams, but always
looking for ways to operate more efficiently,
with a particular focus on staff productivity.

With a Group operating in 20 countries
and across various sectors, it is unrealistic
to expect all brands to be performing at
their peak at the same time. Our organic
performance in the year has been impacted
by weaker performances, primarily within
the technical & industrial sector, and actions
have been taken to make changes where
required. At the net fee income level, the
growth was driven by the investments
made in 2016, with organic growth of 1%,
although once currency benefits are
removed, the constant currency organic
net fees decreased by 3%. Germany and
the Middle East were our weaker markets
in the period. We saw a reduction in net
fee income in Germany following the
introduction of new legislation to limit the
amount of time a worker can be treated as
a temporary worker at the same client to
18 months as well as new minimum wage
rules. We have been proactive in managing
this position with worker rotations but this
has resulted in lower temporary margins
and a subsequent decline in profit. In the
Middle East we have incurred restructuring
costs in the year, bringing the cost base
in line with current trading and whilst loss
making, it was an improvement on the prior
year and we saw a positive trend across the
second half. In the UK a mixture of changes
within the sales team and merger costs
have put pressure on the results. As part of
a mid-term growth plan, we will be investing
further. The fact that we were able to deliver
a record result in 2017, despite difficulties in
certain markets, underlines the benefit of
our strategy to be diversified across sectors
and geographies and so not being reliant
on any single market.

Permanent revenue

Temporary and contract revenue

+14%

+34%

Net fee income

Adjusted profit before tax

£69.4m

2016: £59.0m

£11.0m

2016: £9.2m

Strategic reportGovernanceFinancials
20

Chief Executive’s review
continued

Within our English speaking brands we have
started to use our offshore recruitment
outsourcing business in India to take over
certain internal accounting processes, to
deliver consistency, build scale and manage
costs. Operating profit grew by 2% to
£8.9m (2016: £8.7m), with higher
amortisation costs of £1.7m (2016: £1.1m)
reflecting the recent investments made by
the Group, as well as a £0.9m loss on
disposal for exiting the training business in
Indonesia. The adjusted operating profit,
stated before amortisation, exceptional
items, profit or loss on business disposals
and fair value charges on equity instruments
grew by 18% to £11.6m (2016: £9.8m).
The disposal was of a non-core business,
which joined the Group in 2007. There was
a need for a significant cash investment
to restructure it for growth and we did not
believe it was an ongoing fit with the Group.
This was an accounting loss only and
meant we did not need to make any further
cash injections.

Profit before tax was up 3% to £8.1m (2016:
£7.9m), with the underlying adjusted profit
before tax up 20% to £11.0m (2016: £9.2m).
Interest costs were level year on year,
despite the increase in net debt. We also
had a benefit from the weakness in Sterling
on the translation of our overseas results.
On a constant currency basis adjusted
profit before tax was up 14% but reported
profit before tax was down 2%. Currency
has been beneficial for the last two years,
following the Brexit vote, but based on the
exchange rates at year end we would not
expect to see the same benefit during 2018.

Diluted earnings per share was down 15%
to 7.9p (2016: 9.3p), also impacted by the
higher amortisation charges and loss on
disposal. On an adjusted basis there was
an 11% growth to 12.5p (2016: 11.3p),
representing the sixth year of double digit
percentage growth.

Five year plan
2014-2018

As we enter 2018 we start
the last year of our most
recent five year growth plan.
We are pleased with the
progress we have made in all
three key measures. We will
continue to work on improving
the conversion ratio and all
three targets remain ongoing
areas of focus for the Group.

KEY PERFORMANCE INDICATOR

NET FEE INCOME GROWTH

CONVERSION RATIO

Sustainable growth in net fee income is needed
to deliver long-term growth in net profit and
earnings per share.

Target: Average annual growth of 10%.

Progress: 18% (13% in constant currency).
The last three years have been at or above our
target level.

This demonstrates how efficiently the business
is operating and how well the cost base is being
managed. It is calculated as the percentage
of adjusted operating profit to net fee income.

Target: Reach 20% ratio by 2018.

Progress: 16.7%, being the sixth consecutive
year of improvement. After the small growth
in 2017 we do not expect to reach 20% in 2018
but continue to focus on balancing costs,
productivity improvements and investments
to grow net fee income to reach our target.

Net fee income growth (%)

Conversion ratio (%)

16.3

16.6

16.7

14.9

14.2

-3

2013

2014

2015

2016

2017

2013

2014

2015

2016

2017

Empresaria Group plcAnnual Report & Accounts 2017
21

Over the first four years of
our plan we have delivered
a 63% growth in net fee
income, with 26% from
organic growth (for
businesses in the Group
in 2013), 43% from new
investments and 6% lost
through divestments. The
Board’s decision to operate
above the long-term debt to
debtors target is explained
in the Finance review.

KEY PERFORMANCE INDICATOR

DEBT AS A % OF DEBTORS

This demonstrates how leveraged the Group is.
The Group needs a sound financial foundation
for long-term sustainability and to be able to
react to opportunities in the market.

Target: To reduce this to 25% by 2018.

Progress: This increased to 45% from 38%
in the prior year due to the acquisition based
payments made in the year. Having reached
the target in 2015 we took the decision to make
two strategic investments using cash and
debt in 2016, knowing this would significantly
increase this ratio in the short-term. We expect
to see this rate reduce in 2018 but not to reach
the target level.

Total debt as % of trade debtors (%)

2013

2014

2015

2016

2017

Focus into 2018

Organic growth has always been a core
part of our business model and despite
the low overall organic growth in the year,
this remains a key focus of management.
We agree specific plans with each brand
to help them develop into leading brands in
their sectors and we will continue to invest
in new staff, locations and markets where
we see opportunities to grow. We are
confident that the plans we are following
will help the Group deliver profitable organic
growth in 2018.

We have not made any external investments
during 2017, concentrating on integrating
the three investments we made over
a 12 month period from October 2015 to
October 2016. It was important to settle
them into the Group before looking for new
investment opportunities. With the main
focus on organic growth in 2018, we do
not currently expect to make any significant
external investments, but we will continue
to work on identifying suitable opportunities
to further develop the Group in line with
our strategy. As part of balancing our sector
and geographic coverage, we have
a particular interest in increasing our
presence in the Latin American region and
the healthcare and professional services
sectors. We also work with our brands to
identify and execute sector specific bolt-on
acquisition opportunities, to help accelerate
their growth plans.

Joost Kreulen
Chief Executive Officer

13 March 2018

Strategic reportGovernanceFinancials
22

Operating review

United Kingdom

£m

Revenue

Net fee income

Adjusted operating profit

% of Group net fee income

Average number of employees

2017

86.7

23.4

2.2

34%

294

2016

70.1

19.0

1.5

32%

262

2015

62.7

18.4

2.2

37%

224

2014

65.8

15.9

2.2

35%

197

Revenue increased by 24% and net fee
income was up 23%, helped by having a full
year of contribution from ConSol Partners.
However, excluding this the underlying
movement in net fee income was a
reduction of 2%, due to lower sales within
our insurance and technical & industrial
brands. Our UK based brands in technical
& industrial merged at the beginning of 2017
and overall the integration has run smoothly.
The sector has been challenging, with
candidate shortages and delays to key
projects and at the same time the credit
community has also been very cautious
in this sector and this is unlikely to improve
following recent well publicised company
collapses. We are working closely with the
business to help them make improvements
in structure and process to recover their
profit levels including the introduction of an
improved training programme during the
year. We plan to invest in adding more staff
in 2018.

In professional services we have seen
positive conditions, with activity levels high
throughout the year. We have merged the
insurance brand into LMA, our leading
professional services brand, with effect
from January 2018, with resulting cost and
operational synergies. We have not seen
any impact on client demand due to Brexit
and staff numbers have increased 10% year
on year. The LMA business has a good
track record of adding new service lines
and we are confident they will be able
to maximise the opportunities with
a dedicated insurance division.

We were also pleased with the contributions
in domestic services and retail (new house
sales), with both growing year on year
and looking to strengthen their regional
presence in 2018.

In IT & digital we have strengthened our
presence with ConSol Partners. From their
office in London they cover the UK and
Continental Europe markets and they have
seen the mix shift more towards Europe
over the course of the year. In the digital &
design sector our two brands have invested
in staff and systems, such that their net
contribution has been steady with the prior
year, but we have seen an improving trend
over the second half of the year, in particular
with stronger temporary sales, and see
good opportunities to grow into 2018.

Countries:
UK

Brands:
LMA
FastTrack
McCall
Greycoat
Become
Ball and Hoolahan
Teamsales
ConSol Partners

Net fee income by sector (%)

Net fee income by services (%)

Net fee income by job level (%)

Professional services

IT, digital & design

Technical & industrial

Retail

Other services

50%

Permanent

Temporary
and contract

17%

21%

20%

37%

Professional
& specialist

General

92%

Empresaria Group plcAnnual Report & Accounts 2017
23

Continental Europe

£m

Revenue

Net fee income

Adjusted operating profit

% of Group net fee income

Average number of employees

2017

98.8

16.5

5.1

23%

125

2016

92.0

16.8

4.9

28%

127

2015

75.2

14.5

3.9

30%

123

2014

76.8

15.0

3.2

34%

132

Revenue grew by 7% but net fee income
was down by 2%, with the temporary
margin down 2% in Germany. The adjusted
operating profit of £5.1m was up £0.2m on
2016, helped by a lower allocation of central
charges due to the lower share of Group
net fee income.

The Headway business in Germany and
Austria continues to dominate the region.
The Austrian business was positive, with
investments made in staff. The German
temporary staffing division has integrated
new sales staff and invested in training and
marketing and is well positioned to benefit
from these investments in 2018. The
Logistics division in Germany delivered
strong profits but was negatively impacted
by new legislation that was implemented
in April 2017 and the set up costs related
to taking on new clients.

The new regulations limit the time a worker
can be on a temporary contract with
a client to 18 months, with new equal pay
regulations also introduced. With this
division operating at lower pay brackets,
these changes have increased pressure
on margins and projects are being
managed to meet client service period
restrictions. We expect there will be a
continuing impact into 2018 as clients get
used to the new rules. We are confident that
the high quality service we provide in the
market will see us well placed to respond
to ongoing client needs into the long-term.

Our Finnish healthcare business has had
a solid year. We oversaw a change in the
senior management team during the year
and are investing in marketing initiatives
in 2018 to improve candidate attraction.

Countries:
Germany
Austria
Finland

Brands:
Headway
Medikumppani

Net fee income by sector (%)

Net fee income by services (%)

Net fee income by job level (%)

94%

Technical
& industrial
Healthcare

Temporary

Permanent

97%

33%

67%

Professional
& specialist
General

Strategic reportGovernanceFinancials
24

Operating review
continued

Asia Pacific

£m

Revenue

Net fee income

Adjusted operating profit

% of Group net fee income

Average number of employees

2017

132.7

22.2

3.5

33%

816

2016

77.3

18.6

2.7

32%

795

2015

29.2

14.2

1.6

29%

673

2014

27.7

12.3

1.2

28%

545

Revenue grew by 72% and net fee income
grew 19%. This was largely due to the full
year contribution from Rishworth Aviation,
which has a low temporary margin of 6%,
so there is a larger impact on revenue.
Excluding this, net fee income was up 3%.

The Rishworth business has performed in
line with expectations and has settled well
into the Group, providing a new sector
specialism. A key focus in the year has
been on setting up new pilot bases for their
largest client. Whilst this has required them
to incur additional professional fees, we
expect the costs to reduce for 2018 and
the new bases are already making profitable
contributions.

There were particularly strong
performances from Skillhouse in Japan
(IT, digital & design sector) where the
positive economic conditions, combined
with an ageing population, has created
strong client demand. Candidates are in
short supply and new legislation takes
effect in 2018 which limits the time workers
can be on temporary or outsourced
contracts with clients. We have yet to see
how clients will react to these changes.

In South East Asia our executive search
brand, Monroe Consulting, launched in
Vietnam and now operate in six countries
across the region. There were good results
in Thailand, Malaysia and Indonesia and
investments in staff across all offices.
In India there was good growth in the
outsourcing services to the UK, in particular
in the healthcare sector, although their
profit growth was dampened by currency
impacts. They invested in additional sales
resources for the key UK and US markets
and we see good opportunities for 2018.
We exited our non-core training business
in Indonesia, with a sale to the management
team as it would have required significant
cash and time investments to turn it around
and we felt it would be more successful
as an independent company.

In professional services the LMA business
in Singapore grew net fee income and
profit. They continue to invest in new staff
to capitalise on their market position.

Following a difficult period, our business
in the technical & industrial sector in the
Middle East has been fully restructured,
with a new manager in place, and a cost
base in line with current trading levels.
There were additional bad debt write offs for
historic issues and the UK base has been
closed down. There has been an increase in
oil price in the second half of the year, which
should help local economic confidence and
we expect a positive contribution in 2018.

Brands:
Skillhouse
FINES
Become
Monroe Consulting
IMS
BW&P
McCall
LMA
Greycoat
Rishworth Aviation

Countries:
UAE
India
China
Japan
Hong Kong
Singapore
Vietnam
Thailand
Malaysia
Philippines
Indonesia
Australia
New Zealand

Net fee income by sector (%)

Net fee income by services (%)

Net fee income by job level (%)

Professional services

IT, digital & design

29%

Technical & industrial

12%

44%

26%

Retail

Executive search

Healthcare

Aviation

Other services

44%

18%

Permanent

Temporary
and contract

Offshore
Recruitment
Services

100%

Professional
& specialist
General

Empresaria Group plcAnnual Report & Accounts 2017
25

Americas

£m

Revenue

Net fee income

Adjusted operating profit

% of Group net fee income

Average number of employees

2017

38.9

7.3

0.8

10%

132

2016

31.0

4.6

0.7

2015

20.2

2.1

0.3

2014

17.6

1.4

0.0

In healthcare, we have seen an improving
performance from Pharmaceutical
Strategies in the second half of the year.
Following a change in client mix during 2016
they have made progress in broadening
their client base and penetration in key
clients with a wider service offering. There
have been positive changes in the sales
and recruitment teams and we are confident
that this will deliver improved returns.

Countries:
USA
Mexico
Chile

Brands:
Alternattiva
Monroe Consulting
Pharmaceutical
Strategies
ConSol Partners

Revenue grew by 25% with net fee income
up 59%, helped by the first full year
contribution from ConSol Partners. Excluding
this, the net fee income was up 17%.

In Chile, we were pleased with another
year of growth, with record profits. There
was growth in all key divisions, with the
strongest growth in the newer permanent
and temporary staffing areas but also 12%
growth in net fees from the outsourcing
business.

In the IT digital & design sector, we had
the first full year of ConSol Partners.
We invested in staff to build the temporary
sales service, increased the management
resource and changed the mix in favour of
more experienced consultants. The growth
in temporary sales is slow and we expect
this will take time to see any meaningful
change in the sales mix. However, the other
staff changes have had a more immediate
impact, with a much improved second half
result to offset the first half year and this
positive momentum gives us confidence
moving into 2018.

Net fee income by sector (%)

Net fee income by services (%)

Net fee income by job level (%)

IT, digital & design

37%

Retail

Executive search

Healthcare

53%

24%

33%

47%

Permanent

Temporary
and contract

19%

Professional
& specialist

General

81%

Strategic reportGovernanceFinancials
26

Finance review

Proposed final dividend
increased by 15%, in line
with our progressive
dividend policy.

Performance overview

Revenue (£m)

Net fee income (£m)

Operating profit (£m)

Adjusted operating profit (£m)*

Profit before tax (£m)

Adjusted profit before tax (£m)*

Diluted earnings per share (p)

Adjusted diluted earnings per share (p)*

Proposed dividend per share (p)

2017

357.1

69.4

8.7

11.6

8.1

11.0

7.9

12.5

1.32

2016

270.4

59.0

8.5

9.8

7.9

9.2

9.3

11.3

1.15

2015

187.3

49.2

7.6

8.0

7.1

7.5

9.3

9.9

1.0

2014

187.9

44.6

6.4

6.6

5.9

6.1

7.5

8.0

2013

194.4

42.6

5.5

6.0

4.9

5.4

5.2

6.2

0.70

0.35

Tax

The total tax charge in the year is £3.6m
(2016: £3.5m), representing an effective
tax rate of 44% (2016: 44%). The effective
rate based on the adjusted profit before tax,
so excluding the effect of amortisation,
exceptional items, profit or loss on business
disposals and fair value charges on equity
instruments is 37% (2016: 40%). This rate
is higher than the UK rate due to a number
of factors:

• The mix of profits is weighted towards

higher tax jurisdictions, including
Germany, Japan, India, Australia and
New Zealand (£1.1m).

• The level of non-deductible expenses

in the year (£0.5m).

• A deferred tax asset has not been

recognised for certain of the tax losses
around the Group (£0.4m).

Treasury

The Group’s treasury function is managed
centrally. Under the Group’s treasury policy
speculative transactions are not permitted
and where possible liabilities, typically debt,
match the location and currency of the
related assets. The following matters are
reserved for Board approval:

– Changes to the Group’s capital structure.

– Approval of Group financing arrangements

or significant changes to existing
arrangements.

– Approval of treasury policies and any
activity involving forward contracts,
derivatives, hedging activity and
significant foreign currency exposures.

– Approving the appointment of any of the

Group’s principal bankers.

Capital management and allocation
The Board monitors the overall level of debt
across the Group, to ensure we operate in
line with our facilities and investment plans.
There is a constant need to balance the
conflicting priorities of reducing the debt
level, investing in the business and returning
funds to shareholders through dividend
payments. Any increase in bank facilities
needs Board approval and treasury
management is part of the monthly Board
reporting. The Board has set a target debt
to debtors ratio of 25% and we also monitor
other key debt ratios as follows:

2017

2016

2015

2014

2013

Adjusted
net debt to
EBITDA

Adjusted
net debt to
equity

1.5

0.8

1.3

2.2

46% 39% 24% 41% 70%

The principle followed by the Board is that
debt should be available to fund working
capital and that equity should be used for
significant external investments. During
2016, the decision was taken to use debt
to fund the external investments, taking into
account shareholder dilution, the available
funding options and the relative costs of
raising new funds at the time. This was
believed to be the best overall result for
shareholders, based on our expectations of
the business after making the investments.
The Group reported net debt increased
to £12.0m at 31 December 2017 (2016:
£10.5m), as expected with the £5.6m
deferred consideration payable on ConSol
Partners in 2017. We expect to see a
reduction in debt by the end of 2018 as we
do not currently plan to make any significant
external investments in the year.

Empresaria Group plcAnnual Report & Accounts 2017
27

Dividend
During the year, the Group paid a dividend
of £0.6m in respect of the year ended
31 December 2016, amounting to 1.15p per
share. For the year ended 31 December
2017, the Board is proposing a dividend
of 1.32p per share, which if approved by
shareholders at the Annual General
Meeting, will be paid on 31 May 2018 to
shareholders on the register on 4 May 2018.

Liquidity and funding risk
The Group maintains a range of appropriate
facilities to manage its working capital
and medium-term financing requirements.
At the year end, the Group had banking
facilities totalling £50.5m (2016: £52.0m).
This included a reduction in the UK invoice
financing facility as ConSol Partners joined
the Group arrangement and so closed their
previous facility. We also increased the
overall level of overdrafts across the Group,
with the UK term loan reducing in line with
the agreed repayment terms. The amount
of facility undrawn of £19.3m (2016: £15.4m)
excludes the headroom on the invoice
financing facility, which is available to the
UK companies only. The £10.0m revolving
credit facility is with HSBC Bank plc,
entered into for investment funding in 2016.
Connected to this facility is a £5.0m
accordion arrangement which has been
agreed in principle by the bank, but would
need new credit approval for any draw
down from this amount. As part of the bank
facilities with HSBC Bank plc, security is
provided by companies in the UK, Germany
and New Zealand.

Overdrafts (UK)

Revolving credit
facility (UK)

Term loan (UK)

Overdrafts and
other loans (non-UK)

Total overdrafts
and loans

Invoice financing
facility (UK)

2017
£m

8.6

10.0

2.0

2016
£m

6.2

10.0

3.5

16.9

15.3

37.5

35.0

13.0

50.5

17.0

52.0

Amount of overdraft
and loan facility
undrawn at year end

19.3

15.4

The Group generates positive cash each
year, with a strong correlation between
operating cash flow and adjusted profit
before tax.

KEY PERFORMANCE INDICATOR

CASH GENERATED FROM
OPERATIONS

This demonstrates how much cash is
available for the Group to cover tax,
financing and investments. It is measured
as the operating profit of the Group,
excluding non-cash items and including
working capital movements.

Progress: £12.6m (2016: £11.1m).

Cash generated from operations (£m)

5
.
4

6
.
2
1

1
.
1
1

3
.
9

8
.
8

2013

2014

2015

2016

2017

The cash generated from operations has
been utilised in 2017 as follows:

Cash generated from operations (£m)

Cash at bank
and in hand

Overdraft facilities

Invoice financing

Bank loans

Reported net debt

Pilot bonds

Adjusted net debt

2017
£m

25.9

(20.4)

(9.7)

(7.8)

(12.0)

(7.5)

(19.5)

2016
£m

20.3

(5.1)

(8.9)

(16.8)

(10.5)

(5.2)

(15.7)

The cash held by Rishworth Aviation at
31 December 2017 includes £7.5m for pilot
bonds (2016: £5.2m), amounts which are
repayable to pilots or the client throughout
the contract or if it ends early. There is no
legal restriction over this cash, but given
the requirement to repay it over a three year
period, when calculating our ‘debt to
debtors’ ratio we exclude the cash held as
pilot bonds, giving an adjusted net debt of
£19.5m (2016: £15.7m) at year end. The
‘debt to debtors’ ratio has increased to
45%, from 38% last year, impacted by the
deferred consideration spend in the year.

Adjusted net debt (£m)

-5

-10

-15

-20

(7.3)

(9.8)

(15.2)

(15.7)

(19.5)

2013

2014

2015

2016

2017

Net interest (£0.6)

Taxation (£5.5m)

Net deferred consideration (£5.5m)

Capital expenditure on tangible
fixed assets and software (£0.9m)

Dividends to shareholders (£0.6m)

Dividends to non-controlling
interests in subsidiaries (£0.1m)

The deferred consideration includes £5.6m
paid in relation to the investment in ConSol
Partners. There are no further payments
remaining on any existing investments. The
taxation payment of £5.5m includes £0.8m
of advance withholding tax on dividends,
which is expected to be recovered in 2018.

Strategic reportGovernanceFinancials
28

Finance review
continued

As part of the revolving credit facility we
need to meet bank covenant tests on a
quarterly basis. All tests have been met
during the year. The covenants and our
performance against them at year end are
as follows:

Covenant

Target

Actual

Net debt: EBITDA*

< 2.5 times

Interest cover

> 5.0 times

Debt service cover

> 1.25 times

0.6

17.6

5.8

* Target started at 3.0, reducing to 2.75 from the quarter
ended 31 December 2016 and to 2.5 from the quarter
ended 31 December 2017

Interest rate risk
The Group’s bank facilities are subject to
floating interest rates. This is expected to
match the interest costs with the economic
cycle (eg when interest rates are higher
there is typically better economic growth
and so for a cyclical industry such as
recruitment, profits should be greater when
the economy is performing positively). The
overdraft and invoice financing facilities are
used to fund working capital requirements
for temporary and contract recruitment
businesses. During a downturn there is
typically an unwinding of working capital as
trade receivables are collected, so reducing
the financing requirement and subsequent
interest cost.

The majority of UK bank accounts are
included in a cash pooling arrangement.
An interest optimisation model allows
currency balances (including overdrafts)
to be included within the cash pooling
arrangement. With interest income not
generally paid on current accounts, the
Group aims to minimise the external interest
cost by pooling surplus funds from around
the Group to minimise the use of the
overdraft facilities.

Finance income was £0.1m (2016: £0.1m),
all being bank interest income. Finance
costs were £0.7m (2016: £0.7m), which
related to interest payable on invoice
discounting, bank loans and overdrafts.
The effective interest rate for bank facilities
for the year was 2.6% (2016: 2.6%).

Foreign exchange risk
There was no foreign exchange from trading
in the year (2016: Nil).

The Group remains open to translation risk
from reporting overseas results in Sterling.
We do not actively hedge this exposure,
with the diversity of operations across
different countries providing an element
of natural hedge. During the year we were
positively impacted overall by movements in
exchange rates on the translation of Group
results, the largest are detailed below:

Currency

Japanese Yen

Indonesian Rupiah

US Dollar

Australian Dollar

Euro

Chilean Peso

Thai Bhat

New Zealand Dollar

Decline/(increase)
in Sterling in the year
using average rates (P&L)

(2%)

There are a small number of forward
currency contracts in place at IMS (to sell
US dollars and Pounds sterling) and ConSol
Partners (to sell Euros). The amount
covered by these at year end was £0.8m
(2016: £0.6m).

Credit risk
The main credit risks arise through the use
of different banks across the Group and on
the Group’s trade receivables. The credit
ratings of the banks used within the Group
are monitored with a target that no more
than 10% of Group cash is held in banks
with a rating below BBB (Fitch rating) or
equivalent. This target was fully met
throughout the year.

Debtor days are reviewed monthly with
high balances followed up with local
management. Average debtor days for the
Group in 2017 were 41 (2016: 47), with
a year-end balance of 40 (2016: 41 days).
This has reduced with Rishworth Aviation
joining the Group as they have low debtor
days, with airlines typically paying either in
advance or within a short period of pilots
being paid.

The debtor days in UAE remain higher than
the Group average, although good progress
has been made in managing this position.
The outstanding debtor balance has
reduced at the end of December 2017,
although there have been further bad debt
write downs on historic debts during the
year. The Group’s bad debt expense was
£0.8m in the year (2016: £0.6m).

Average debtor days

2
5

1
5

0
5

7
4

1
4

2013

2014

2015

2016

2017

Investments and non-controlling
interests

Goodwill and intangibles
Goodwill and intangibles represent the
largest assets on the balance sheet and
arise due to the acquisitive strategy followed
by the Group. As at 31 December 2017
the balance was £54.1m (2016: £56.8m).
The movements in the year were £1.7m
of amortisation (2016: £1.1m) and foreign
exchange loss of £1.0m (2016: gain of
£4.7m).

There was no impairment in the year
(2016: £0.6m). The details of the impairment
review can be found in note 14 to the
accounts.

Investments and disposals
A deferred consideration payment of £5.6m
was paid in cash in relation to the
investment in ConSol Partners in October
2016, being the final payment due for the
purchase of the 65% interest.

The Group received £0.1m in deferred
consideration from disposals made in 2013
of the Bar 2 payroll business and in March
2015 of the GiT business.

Empresaria Group plcAnnual Report & Accounts 2017
29

Post balance sheet events

There were no post balance sheet events.

Going concern

The Board has undertaken a recent and
thorough review of the Group’s budget,
forecasts and associated risks and
sensitivities. The Group’s UK and German
overdraft facilities were renewed in March
2018 for a further 12 months. Given the
business forecasts and early trading
performance, the Group is expected to
be able to continue in operational existence
for the foreseeable future, being a period
of at least 12 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. Further details on going
concern are found in note 1.

Spencer Wreford
Group Finance Director
and Chief Operating Officer

13 March 2018

In September 2017 the Group disposed
of its 51% investment in PT Learning
Resources, a non-core training business
in Indonesia. This resulted in a loss on
disposal of £0.9m, after consideration
received of £0.1m. The loss represents the
write off of historic funding balances with
no cash paid to the purchaser. Further cash
consideration of £0.2m could be receivable,
but is contingent on the outcome of a local
tax investigation. No asset has been
recognised at this stage.

Management equity philosophy
and non-controlling interests
A key component of our business model
is management equity, where senior
management own shares directly in the
operating companies they are responsible
for. Details of how this operates can be
found in the Strategic review on page 4.

When we acquire a majority stake in a
business, the shares remaining with the
founder are called ‘first generation shares’.
There are no material changes to the rights
belonging to these first generation shares
retained by founder management. We also
enable senior management to acquire
‘second generation shares’. This will often
be when the first generation shares have
been acquired by Empresaria and we want
to incentivise the next tier of management
in the operating company to grow the
business to the next level. Management
need to buy the second generation shares
at market value, investing their own cash,
which is at risk if the business does not
perform. To help lower the market value
of the second generation shares (to make
it affordable for management to acquire
a meaningful stake in the business they
are responsible for) and to protect the profit
that we have already acquired, we set
a ‘threshold profit’ level. These second
generation shares only start creating value
for management if the profit grows above
the ‘threshold profit’ level. The second
generation shares typically have restrictions,
such as limited or no entitlement to
dividends and the price paid by the
management shareholder reflects these
restricted rights.

Based on the results for the year ended
31 December 2017, the total value of all
non-controlling interests (shares held by
management in the operating companies
they are responsible for), if purchased in
full in 2018 using the valuation mechanisms
in existing shareholders agreements,
would total £9.4m (2016: £9.0m), ignoring
any potential discounts under the
shareholders agreements for shares being
acquired before the end of the holding
period. There is no legal obligation on
the Group to acquire the shares held by
management at any time.

In some situations the consideration
payable under the shareholders’ agreement
for second generation equity may be
greater than the fair value of the shares
under IFRS 13, where there are restrictions
over the rights of the shares, typically over
dividends. The valuation mechanism in the
majority of shareholders’ agreements uses
an earnings multiple, which does not
differentiate between shares with restricted
rights and those without restrictions. If the
price paid for the shares is in excess of this
fair value, this additional amount paid is
recognised as a charge in the income
statement. These charges are treated as
adjusting items when presenting the
adjusted operating profit, adjusted profit
before tax and adjusted earnings per share.

In April 2017, we increased our interest
in Monroe Consulting (executive search
in the Philippines) from 70% to 90%. The
consideration was £0.1m, all paid in cash.
This purchase is treated as a fair value
charge in the income statement.

In May 2017, we increased our shareholding
in Monroe Consulting (executive search
in Thailand) by 10%, taking our interest up
to 80%. The consideration of £0.2m was
paid in cash. This purchase is treated as a
fair value charge in the income statement.
At the same time we have sold 10% second
generation equity (taking our interest back
to 70%) to local managers who became
first time shareholders in the company.
In line with our equity model, the second
generation shares only create value if the
profits exceed historic levels.

Strategic reportGovernanceFinancials
30

Risks and uncertainties – Managing our risk

The Board has ultimate responsibility
for effective risk management across the
Group. The risk management process
followed by the Board is designed to
improve the likelihood of delivering against
strategy, to protect the interests of
shareholders, to improve the quality of
decision-making and to help safeguard
our assets. We have an established
process for identifying and monitoring the
key operational and strategic risks in the
Group. The risk management process
consists of a Group risk register and
a Risk appetite policy.

Risk appetite policy
The Board wishes to minimise the exposure
to risks but accepts and recognises a trade-
off exists between risk and reward in
delivering to a growth strategy. The risk
appetite has been reviewed and approved
by the Board and is presented as part of the
annual budgeting process. The Board has
set a number of internal targets that frame
its appetite for risk, with boundaries defining
the limits the Group should operate within
and trigger points to help monitor and
identify where there is an increased risk of
reaching the boundaries.

Group control environment
Group companies operate under a system
of internal controls which includes, but
is not limited to, a clear delegated authority
to operational management, formal risk
appraisals through the annual budget
process, a comprehensive financial
reporting system, investment evaluation
and significant capital expenditure approval
process and the self-certification by
operating company management of
compliance with controls and Group
policies and procedures. The day to day
risk management is the responsibility of
the brand Managing Directors and this
is regularly reviewed during meetings with
the Executive Directors.

The risk management process identified
a number of risks across the Group, as
detailed in the chart below. The principal
risks, that are most likely to affect business
operations and hence the financial results
and delivery of strategy, are explained
in more detail in the following pages.

Risk register
This is reviewed by the Board at each
meeting with risks added, amended or
removed as appropriate and actions
updated. The Group register is prepared
based on individual brand registers which
are updated during the annual budget cycle
and reviewed regularly during the year with
senior management at brand-level Board
meetings. The Audit Committee oversees
the internal control and financial control
frameworks to help mitigate risk.

Risk matrix chart

Investments poorly executed
Financial (funding and foreign exchange)

1 Political and social changes
2 Economic environment
3 Loss of key staff
4
5
6 Cyber security
7 Management capacity
8 Competition
9 Exposure to key clients
10 Data protection
11 Payments to temporary workers
12 Protection of assets

h
g
H

d
o
o
h

i
l

e
k
L

m
u
d
e
M

w
o
L

Medium

Impact

Low

High

Empresaria Group plcAnnual Report & Accounts 2017
31

1. Political and social change

IMPACT ON THE BUSINESS

CHANGE IN RISK PROFILE

ACTIONS TAKEN TO MITIGATE RISK

The Group’s businesses are subject to legislation,
regulations and changes in political sentiment in
each of their locations. In particular, this impacts
temporary recruitment which is regulated to protect
the rights and treatment of temporary workers and
in developing staffing markets where new
regulations are introduced as the market develops.
Any changes to labour regulations, tax laws or
political views on the staffing industry could impact
on the manner in which any business, or the Group
as a whole, conducts its business and could
therefore affect the financial performance of the
Group. In some territories a recruitment licence
is required. If local laws and regulations are not
followed it could lead to sanctions being taken
against the Company, including penalties, fines
and licences being revoked.

Social changes impact how people search for jobs
and where they are likely to live. Our businesses
need to target the locations where people want
to work. They need to be able to identify and
communicate with candidates to ensure job
vacancies are filled.

In the UK new legislation was introduced for
public sector staffing (IR35) and there is an
ongoing consultation about whether to apply this
to the private sector from 2019.

In the USA President Trump continues to look to
reduce the cost related to the Affordable Care Act.
At this stage there have not been any changes
that have made a significant impact on our
business.

In Germany new legislation started in April 2017
to limit the length of time a worker can be a
temporary worker to 18 months. There are also
new minimum wage regulations that apply after
9 months. This has negatively impacted our
temporary staffing business in Germany and we
expect this will continue into 2018 through
continuing pressure on margins.

The Brexit negotiations create uncertainty for
businesses operating in the UK and Continental
Europe. At this stage there is no clarity about the
UK’s future trading relationship with the EU or
what the UK’s immigration policy will be after
March 2019. There has been a benefit on
translating Group results into Sterling from the
devaluation of the currency, but rates remain
volatile.

In Japan two pieces of new legislation take effect
in 2018. The first limits the time a worker can work
on a temporary contract with a client to 3 years.
The second limits the time a position can be
outsourced to 5 years before the worker can insist
on being taken on for an “indefinite term”.

The Group closely monitors the legal and
regulatory environment in our markets, in
particular where we operate temporary
recruitment as this is an area with greater
levels of regulations. The Group has
membership of many local industry
associations and we use professional advisers
with good local knowledge and understanding
of the relevant laws and labour regulations to
ensure we are compliant in the territories in
which we operate.

Our strategy is designed to minimise the
negative impact from any political and social
changes:

• Diversification and balance across sectors
and regions helps to reduce the potential
impact in any one area

• Focus on professional and specialist job

levels reduces the exposure to changes in
legislation, which are typically introduced
to protect the most vulnerable and lowest
paid workers

• Focus on key economic centres means
we are targeting the main centres where
candidates want to work

By developing leading brands in our sectors
we are experts in our markets, helping us to
react to changes in legislation, as well as
making it easier to attract candidates because
of our reputation and knowledge.

2. Economic environment

IMPACT ON THE BUSINESS

CHANGE IN RISK PROFILE

ACTIONS TAKEN TO MITIGATE RISK

The performance of staffing businesses has
historically shown a strong correlation with the
performance of the economies in which they
operate. An economic slowdown will impact on
the demand for recruitment services and could
reduce the Group’s profits.

The global economy overall is expected to grow
in 2018, with all key economies forecasting growth
for the first time since the financial crisis. However,
these economies are increasingly inter-linked and
there are many areas of uncertainty, so we take
a cautious view on these forecasts.

The full impact on the UK economy from the
decision to leave the EU remains unclear and
such uncertainty can negatively impact on
investment in staff.

Governments around the world are increasingly
adopting protectionist trade policies which could
impact on economic growth and the ability to
bring overseas workers into a market.

The oil price has recovered from recent lows, but
remains significantly below historic highs. The
economies of the Middle East are particularly
reliant on the oil price and our business in UAE
has suffered from a slow-down in the local
economy in the last few years.

The Group’s strategy is designed to minimise
the negative impact from an economic
downturn in any one market, whilst
acknowledging that a significant economic
downturn will impact all businesses:

• Sector and geographic diversification
This has improved with the full year impact
from the investments made in 2016 in
Rishworth Aviation and ConSol Partners

• Develop core brands
By creating more robust businesses they
should be able to better withstand any
economic downturn

We focus on temporary recruitment as this
is typically less volatile than permanent
recruitment during the economic cycles.
Overall we continue to have a bias towards
temporary and contract staffing.

Strategic reportGovernanceFinancials
32

Risks and uncertainties – Managing our risk
continued

3. Loss of key staff

IMPACT ON THE BUSINESS

CHANGE IN RISK PROFILE

ACTIONS TAKEN TO MITIGATE RISK

The Group’s success relies on recruiting and
retaining key staff.

The loss of a key staff member without a suitable
successor in place could lead to a reduction in
trading and profitability. The choice of the wrong
manager for a business could lead to sub-optimal
decision-making and losing ground to competitors
or failing to operate procedures properly and
so being liable to reputational damage, fines or
penalties.

4. Investments poorly executed

There have been a number of changes in senior
management during 2017 as part of business
restructuring which we believe will help the
business to develop positively in 2018.

A key part of the Group’s business model
is management equity, incentivising key
management through equity ownership and
tying them to the business for the long term.
We monitor the number of managers with
equity in their own businesses and work with
existing shareholders to identify key staff to
purchase equity in the future.

Currently there is one brand in the Group
with no management shareholder
(2016: one brand).

IMPACT ON THE BUSINESS

CHANGE IN RISK PROFILE

ACTIONS TAKEN TO MITIGATE RISK

There is a risk of losing value from poorly executed
investments. If an investment is overvalued the
Group will pay too much for it and risks a lower
return on investment in the future from profits being
generated. A poorly executed integration into the
Group could lead to lost value or lost opportunities.

Organic investments in new offices will generally
be loss making in the first 1-2 years so this needs
to be carefully managed to minimise the costs to
the business. New office openings increase the
risk of lower returns than planned if costs are not
managed well.

We have opened a new office in Vietnam with
the Monroe Consulting brand.

The external investments made in 2016 have been
integrated into the Group and we continue to work
with them to identify opportunities to develop their
businesses.

We continue to look for new investment
opportunities for the Group.

All material investments, whether organic
or external, must have Board approval.
Investments must have a clearly defined
integration plan, with the Executive Directors
having responsibility for implementation of the
plan. Due diligence findings need to be acted
upon to minimise any risks identified pre-
acquisition. Any funding requirements must
be taken into account for Group cash flow
forecasts to ensure sufficient and appropriate
funding is in place.

When investing in organic growth or bolt-on
acquisitions for existing brands it is key that
local management are fully involved and
driving the process to ensure the best chance
of success.

With any investment activity the fit of the
people is the most important factor. This is
especially important in our Group where there
is a highly decentralised structure. This is
the first criteria that must be met before any
investment activity is pursued.

Empresaria Group plcAnnual Report & Accounts 2017
33

5. Financial

IMPACT ON THE BUSINESS

CHANGE IN RISK PROFILE

ACTIONS TAKEN TO MITIGATE RISK

The Group is reliant on debt financing to fund the
working capital of the business.

By operating from 20 countries the Group is
exposed to movements in foreign currency rates.
The Group reports in Sterling but has operations in
countries with different currencies. Negative
movements in exchange rates would impact the
reporting of Group profitability and may devalue the
cash and assets around the Group.

If the Group was unable to secure funding at current
levels it could be forced to dispose of parts of the
business to repay the existing debt. An increase in
interest rates will increase costs and so reduce the
profit in the business.

If debt levels are too high there is an opportunity
cost from not being able to pursue investment
opportunities to further develop the Group.

In 2017 we have continued to benefit from
movements in currency rates to translate results
into our reporting currency, however, the Sterling
exchange rates remain volatile.

The Group’s total debt has increased during 2017
as a result of the investments made in 2016.

There have been increases in interest rates in
the UK and USA (two regions that are important
to us for our debt exposure). It is expected there
will be further increases in interest rates during
2018, but this should also be in response to
positive economic conditions.

The Group finances its operations by a
combination of cash reserves from retained
profit, bank borrowings and issuing new
equity. Treasury management is led by the
Group finance team, which manages and
monitors external and internal funding
requirements and maintains the key Group
banking relationships.

The Group is exposed to movements in
interest rates for its primary facilities. The
Group does not currently hedge this exposure
but monitors movements in the relevant
interest rates to be able to react if the rates
move adversely.

Approximately two thirds of the Group’s
business is transacted outside of the UK so
we are exposed to movements in exchange
rates. The Group does not currently hedge
translation risk as there is to some degree
a natural hedge from our strategy of being
diversified by region. Intra-Group balances
are hedged, where possible, using cash or
overdraft balances to act as a natural currency
hedge, for US Dollar, Euro, Japanese Yen,
Singapore Dollar, Australian Dollar, Mexican
Peso and UAE Dirham.

A limited number of forward contracts have
been used to hedge trading currency risks for
IMS in India and ConSol Partners in
Continental Europe.

6. IT & Cyber related

IMPACT ON THE BUSINESS

CHANGE IN RISK PROFILE

ACTIONS TAKEN TO MITIGATE RISK

The risk of cyber-attacks has increased in the wider
business environment, with threats from hackers,
viruses or sensitive information being accessed
without authorisation.

A successful breach could lead to the loss of
sensitive data on clients or candidates, damage
to our brand reputation, business disruption or the
loss of commercially sensitive information.

With increasingly stringent regulatory environments
around data protection there is an ongoing risk of
failing to comply with regulations, leading to fines
and damage to brand reputation.

There have been a number of high profile cyber-
attacks around the world in 2017. The threat from
this is always changing and as we grow our
brands in size, they are more likely to be a target
for hackers and criminals.

New legislation is being introduced in the EU in
May 2018 (General Data Protection Regulation),
which introduces new rights for individuals
and promotes good data governance and
accountability amongst organisations. This will
lead to changes in how the Group companies
operate and deal with data. There are significant
fines for non-compliance.

We have policies in place to safeguard assets
and data within the Group. We also use
external advisers to monitor the security of
our Group websites and systems to meet
a minimum standard of security and we
continue to monitor ongoing cyber-security
threats.

We are working through the GDPR legislation
to ensure that all Group companies are
compliant by May 2018.

Strategic reportGovernanceFinancials
34

Corporate social responsibility

Empresaria believes that corporate and social
responsibility is an important part of the
Group’s culture and looks to adopt good
practice in these areas. The Board gives due
consideration to risks arising from social,
environmental and ethical issues as part of
its ongoing risk review process. We have
a responsibility towards all stakeholders and
believe this is an important consideration
for the long-term growth of the business.

Greycoat –
Richmond Park run
fundraising for Royal
Marsden Cancer Charity

IMS blood donation camp –
more than 150 units of
blood donated

March
2017

April
2017

1. Local communities

2. Candidates, clients,

3. Our staff

4. Society at large

suppliers and

shareholders

Upholding high ethical and corporate

Making it a good place to work with

Environmental impact

governance standards, promoting integrity in

opportunities to develop skills and experience

dealing with all stakeholders

to improve staff careers and help staff to

Empresaria’s business is all about finding people

jobs and so helping them develop their careers.

This is important to enable people to provide for

themselves and their families and we aim to

provide candidates and clients with the best

possible service.

The Group actively promotes integrity in its dealings

with employees, shareholders, customers and

suppliers and the authorities of the countries in

realise their potential

As a diversified international business, we

Whilst it is recognised that the Group operates

in a business sector that has a low environmental

impact, the Group remains committed to

minimising its impact on the environment. The

recognise the importance of working in a culturally

Group is aware that this is an area of increasing

sensitive way with local communities and follow

importance to employees, shareholders and

non-discriminatory employment policies. We

customers alike. The Group is not involved in the

encourage the employment of local nationals at

manufacture of any tangible products and has

all levels in the Group.

Employees are selected and promoted on the

basis of merit and ability, regardless of age,

which it operates. Empresaria recognises that its

gender, race, religion, sexual orientation or

reputation is a valuable asset gained over a long

disability.

period.

The Group promotes high ethical standards in

The Group recognises the need to provide a safe

working environment for its staff and clients. Each

carrying on its business activities and has Codes

office is responsible for ensuring that their business

of Conduct for dealing with gifts, hospitality,

operates in compliance with Group policies and

corruption, fraud and the use of inside information.

local health and safety legislation.

All staff must comply with the laws and regulations

of the country in which they operate.

The Group operates an employee exchange

impact, with a much smaller summary report sent

programme which allows staff to spend between

to all shareholders.

The Group aims to provide a high quality service

a week and a month working in an office of another

to clients and candidates alike and seeks to build

Group company in another country, to learn how

strong and lasting relationships with all parties.

their business operates and to swap ideas and

The Group ensures that advertising and public

best practice.

identified the principal areas of environmental

impact as energy use, waste recycling, paper

and printing and travel.

The Group encourages the recycling of office

waste and waste paper and has seen a continued

reduction in the use of printed materials around the

Group by increasingly relying on electronic media

for its primary marketing activity. The full Annual

Report is also provided to the majority of

shareholders in an electronic format to further

reduce our printing costs and environmental

As an internationally diverse group we recognise

that some travel is inevitable and necessary for

the effective management of the business,

however, full use is made of remote conferencing

facilities and working from home to minimise this

The Group communicates with staff by providing

regular Group news through a quarterly newsletter.

as far as is practical.

News is also made available on its intranet site,

which also stores key Group policies and

procedures.

communications avoid untruths or overstatements.

Empresaria builds relationships with suppliers

based on mutual trust and endeavours to pay

suppliers on time and in accordance with agreed

terms of business.

The Group builds relationships with candidates

based on trust and quality of service. It recognises

that information about candidates is sensitive and

confidential and must be kept securely and not

disclosed without their permission.

A positive contributor to the community

The Group and senior management are fully supportive and
encourage staff to work with their local communities and
charitable concerns. The decision on what contribution to make
is down to the local staff in each country.

Group companies are involved in a range of activities to provide
help, support or money to local communities in their country
of operation. Some examples of the work being done are
detailed below.

• In Indonesia, staff at Monroe Consulting continued their

annual tradition of helping run a health clinic for
disadvantaged children and their families at the Bantar
Gebang rubbish dump in Jakarta.

• The Thailand team increased their sponsorship to The Gift Of

Happiness Foundation, a respected charity for poverty-
stricken children and their families. This enabled the
Foundation to expand and extend its reach.

• In the UK, LMA team members paid a weekly visit to an inner
city school in London to read with children. They also raised
over £6,000 for the NSPCC through a variety
of different fundraising initiatives including a London to
Brighton bike ride, sky diving and a sponsored hair shave.

• Teamsales supported a fundraising event in aid of the

children’s charity, Variety. Greycoat Lumleys donated items
to the Grenfell Tower clothing appeal and Christmas Shoe
Box appeal for South Africa as well as donating prizes in
support of the RHC Inaugural Family Gala and NSPCC,
Sparkles in aid of Downs Syndrome. Staff also took part in
a Richmond Park run to raise money for The Royal Marsden
Cancer Charity.

• Become Manchester successfully appointed three

apprentices through local government funded apprenticeship
organisations. The apprentices gained comprehensive
training and work experience while studying to achieve
NVQs in Business Administration and all were offered full
time roles. Become Manchester also supported students
at Shilington Education by giving interview, CV and portfolio
advice at the end of their courses and running creative
competitions where winners and runners up had the
chance to attend The Roses Creative Awards which
Become sponsors.

• During the Christmas period, staff at ConSol Partners
donated brand new toys to the Great Ormond Street
Children’s Hospital. The staff also took part in various
fundraising activities throughout the year, such as hosting
Cake Sales to raise money for Daisy, a charity funding
research into treating a rare form of brain cancer found
in children.

• In Japan, FINES Tokyo provided more than 20 free lectures

to high school students in the suburban areas giving
guidance on how to find good jobs, interview preparation
and industry updates.

• In India the IMS team were involved in a range of activities
from giving blood, sponsoring a fund raising dance event
as part of their support of a winter jacket distribution project
and joining the Joy of giving festival celebration for
underprivileged children.

Empresaria Group plcAnnual Report & Accounts 2017
35

1. Local communities

2. Candidates, clients,

3. Our staff

4. Society at large

A positive contributor to the community

The Group and senior management are fully supportive and

encourage staff to work with their local communities and

charitable concerns. The decision on what contribution to make

is down to the local staff in each country.

Group companies are involved in a range of activities to provide

help, support or money to local communities in their country

of operation. Some examples of the work being done are

detailed below.

• In Indonesia, staff at Monroe Consulting continued their

annual tradition of helping run a health clinic for

disadvantaged children and their families at the Bantar

Gebang rubbish dump in Jakarta.

• The Thailand team increased their sponsorship to The Gift Of

Happiness Foundation, a respected charity for poverty-

stricken children and their families. This enabled the

Foundation to expand and extend its reach.

• In the UK, LMA team members paid a weekly visit to an inner

city school in London to read with children. They also raised

over £6,000 for the NSPCC through a variety

of different fundraising initiatives including a London to

Brighton bike ride, sky diving and a sponsored hair shave.

• Teamsales supported a fundraising event in aid of the

children’s charity, Variety. Greycoat Lumleys donated items

to the Grenfell Tower clothing appeal and Christmas Shoe

Box appeal for South Africa as well as donating prizes in

support of the RHC Inaugural Family Gala and NSPCC,

Sparkles in aid of Downs Syndrome. Staff also took part in

a Richmond Park run to raise money for The Royal Marsden

Cancer Charity.

• Become Manchester successfully appointed three

apprentices through local government funded apprenticeship

organisations. The apprentices gained comprehensive

training and work experience while studying to achieve

NVQs in Business Administration and all were offered full

time roles. Become Manchester also supported students

at Shilington Education by giving interview, CV and portfolio

advice at the end of their courses and running creative

competitions where winners and runners up had the

chance to attend The Roses Creative Awards which

Become sponsors.

• During the Christmas period, staff at ConSol Partners

donated brand new toys to the Great Ormond Street

Children’s Hospital. The staff also took part in various

fundraising activities throughout the year, such as hosting

Cake Sales to raise money for Daisy, a charity funding

research into treating a rare form of brain cancer found

in children.

• In Japan, FINES Tokyo provided more than 20 free lectures

to high school students in the suburban areas giving

guidance on how to find good jobs, interview preparation

and industry updates.

• In India the IMS team were involved in a range of activities

from giving blood, sponsoring a fund raising dance event

as part of their support of a winter jacket distribution project

and joining the Joy of giving festival celebration for

underprivileged children.

suppliers and
shareholders

Upholding high ethical and corporate
governance standards, promoting integrity in
dealing with all stakeholders

Empresaria’s business is all about finding people
jobs and so helping them develop their careers.
This is important to enable people to provide for
themselves and their families and we aim to
provide candidates and clients with the best
possible service.

The Group actively promotes integrity in its dealings
with employees, shareholders, customers and
suppliers and the authorities of the countries in
which it operates. Empresaria recognises that its
reputation is a valuable asset gained over a long
period.

The Group promotes high ethical standards in
carrying on its business activities and has Codes
of Conduct for dealing with gifts, hospitality,
corruption, fraud and the use of inside information.
All staff must comply with the laws and regulations
of the country in which they operate.

The Group aims to provide a high quality service
to clients and candidates alike and seeks to build
strong and lasting relationships with all parties.
The Group ensures that advertising and public
communications avoid untruths or overstatements.
Empresaria builds relationships with suppliers
based on mutual trust and endeavours to pay
suppliers on time and in accordance with agreed
terms of business.

The Group builds relationships with candidates
based on trust and quality of service. It recognises
that information about candidates is sensitive and
confidential and must be kept securely and not
disclosed without their permission.

Making it a good place to work with
opportunities to develop skills and experience
to improve staff careers and help staff to
realise their potential

As a diversified international business, we
recognise the importance of working in a culturally
sensitive way with local communities and follow
non-discriminatory employment policies. We
encourage the employment of local nationals at
all levels in the Group.

Employees are selected and promoted on the
basis of merit and ability, regardless of age,
gender, race, religion, sexual orientation or
disability.

The Group recognises the need to provide a safe
working environment for its staff and clients. Each
office is responsible for ensuring that their business
operates in compliance with Group policies and
local health and safety legislation.

The Group operates an employee exchange
programme which allows staff to spend between
a week and a month working in an office of another
Group company in another country, to learn how
their business operates and to swap ideas and
best practice.

The Group communicates with staff by providing
regular Group news through a quarterly newsletter.
News is also made available on its intranet site,
which also stores key Group policies and
procedures.

Environmental impact

Whilst it is recognised that the Group operates
in a business sector that has a low environmental
impact, the Group remains committed to
minimising its impact on the environment. The
Group is aware that this is an area of increasing
importance to employees, shareholders and
customers alike. The Group is not involved in the
manufacture of any tangible products and has
identified the principal areas of environmental
impact as energy use, waste recycling, paper
and printing and travel.

The Group encourages the recycling of office
waste and waste paper and has seen a continued
reduction in the use of printed materials around the
Group by increasingly relying on electronic media
for its primary marketing activity. The full Annual
Report is also provided to the majority of
shareholders in an electronic format to further
reduce our printing costs and environmental
impact, with a much smaller summary report sent
to all shareholders.

As an internationally diverse group we recognise
that some travel is inevitable and necessary for
the effective management of the business,
however, full use is made of remote conferencing
facilities and working from home to minimise this
as far as is practical.

LMA fundraising –
London to Brighton
bike ride

IMS winter jackets
distribution – More than
2,500 jackets distributed
by employees to
underprivileged children

June
2017

December
2017

Strategic reportGovernanceFinancials
36

Corporate governance statement

Dear Shareholder

I am pleased to present the Board’s annual report on corporate governance.

The Board continues to recognise that good corporate governance encourages effective and entrepreneurial management. It is a vital
component to support management in their delivery of the Group’s strategic objectives and to operate a sustainable business for the
benefit of all stakeholders.

The Board seeks to follow best practice in corporate governance appropriate with the size of the Company and the regulatory framework
that applies to AIM companies and to align these practices with the expectations of the Company’s stakeholders. We recognise the
importance of adopting effective corporate governance practices in the best interests of all shareholders.

We continue to review updates to the principles and provisions of the UK Corporate Governance Code (the ‘Code’) and consider and
implement any changes to the Company’s corporate governance practices as appropriate. Although the Company is not required to report
on compliance with the Code, since its shares are traded on the AIM market, the Company applies the Main Principles of the Code as
outlined in the overview provided below and provides further explanation for areas of deviation.

Our corporate governance framework is described in more detail on the following pages.

Tony Martin
Chairman

13 March 2018

BOARD OF DIRECTORS

Protecting and advancing shareholders’
interests, providing overall direction for the
Group and maintaining a framework of
delegated authorities and controls.

AUDIT COMMITTEE

NOMINATION COMMITTEE

REMUNERATION COMMITTEE

Monitors and reviews the integrity of
financial statements, oversees the
relationship with the external auditor and
has oversight for internal control and risk.

See the Audit Committee report on
pages 48 to 49.

Monitors and reviews the structure,
size and composition of the Board and
considers succession planning, to ensure
the right skills and expertise are
maintained for effective management.

See the Nomination Committee report
on page 50.

Considers and sets remuneration policy
for Executive Directors and the Chairman
and monitors the level and structure of
remuneration for senior management.

See the Directors’ remuneration report
on pages 51 to 54.

Empresaria Group plcAnnual Report & Accounts 2017
Corporate governance framework

Leadership

The Board challenges the strategy and performance of the
Group to ensure the advancement of shareholders’ interests.

This section provides information on the division of
responsibilities of the Board, that enable it to provide effective
direction to the Group and ensure efficient management of the
Group’s operations.

Effectiveness

The balance of skills, experience and independence of the
Directors and their knowledge of the Group is regularly monitored
by the Board.

This section provides information on the annual review of the
independence of Directors and any conflicts of interest. It also
details the development activities undertaken by, and support
provided to, Directors in order for them to effectively carry out
their duties.

Accountability

The Board is responsible for identifying and managing any
significant risks to the Group.

This section provides information on the approval process for
reporting to the Board, the systems employed to manage risks
and other internal control procedures.

Remuneration

The Company’s remuneration policies are regularly assessed
by the Board, to ensure that they remain fair and responsible.

This section provides information on the Company’s
remuneration policies and practices.

Relations with
shareholders

The Board holds regular events to maintain an open dialogue
with investors.

This section provides information on the provision of information
to, and other communications with both existing and potential
new shareholders, to convey the Group’s performance, strategy
and objectives.

See page 38

See page 39

See page 40

See page 41

Strategic reportGovernanceFinancials
38

Corporate governance framework
continued

Leadership

The role of the Board
The Company is controlled through the Board, which has established Audit, Remuneration and Nomination Committees (the
‘Committees’), to which it delegates clearly defined powers. The Board is collectively responsible for the long-term success of
the Company.

There is a formal schedule of matters reserved for consideration by the Board (‘Schedule of Matters Reserved’) which includes
responsibility for the following:

• approval of overall Group strategy and objectives

• approval of the Group annual budget and monitoring progress towards its achievement

• changes to the Group’s capital structure

• changes to the Group’s principal activities

• review and approval of the annual financial statements

• changes to the senior management structure

• approval of Group financing arrangements and treasury policy

• approval of major investments, disposals and additional investments in existing operations

• approval of major unbudgeted expenditure

The Schedule of Matters Reserved is reviewed by the Board, at least annually, to ensure it remains appropriate and complete. In tandem,
the Board also reviews an approved schedule of operational matters, which are delegated to management of the operating subsidiaries.

The Terms of Reference for each of the Committees are available to view on the Company’s website (empresaria.com). Details of
Committee membership and the work carried out by the Committees can be found in the Audit Committee report on pages 48 to 49.
Directors’ remuneration report on pages 51 to 54 and Nomination Committee report on page 50.

During the year, the number of formal scheduled meetings of the Board and Committees and individual attendance by the members were
as follows:

Tony Martin (Chairman)

Joost Kreulen (Chief Executive Officer)

Spencer Wreford (Group Finance Director and Chief Operating Officer)

Penny Freer (Joint Senior Independent Director)

Zach Miles (Joint Senior Independent Director)

Main
Board*

Audit
Committee

Remuneration
Committee

Nomination
Committee

9/9

–

5/5

–

3/3

–

1/1

* The Board held nine scheduled meetings in the year, which were each attended by all Directors. There was also one meeting outside the normal course of events, which was also attended

by all Directors.

There is a clear division of responsibilities between the Chairman and Chief Executive Officer, with no one individual having unfettered
powers of decision. The statement of division of responsibilities can be found on the Company’s website (empresaria.com).

The Chairman is primarily responsible for the running of the Board, promoting high standards of corporate governance and ensuring the
effectiveness of the Board. The Chief Executive Officer is responsible for the executive leadership and management of the Group, to ensure
implementation and delivery of Group strategy.

All Board meetings have a pre-agreed formal agenda setting out those matters for discussion, together with supporting papers. Time is
allocated at all meetings to discuss any other business, which all Directors are invited by the Chairman to raise.

All Non-Executive Directors participate in strategy development and decisions required to implement actions to progress towards meeting
the objectives of the Company.

Empresaria Group plcAnnual Report & Accounts 2017
39

Effectiveness

Composition of the Board
The Board has a balance and depth of skills and experience, together with suitable knowledge of the Group, to enable them to discharge
their respective duties and responsibilities effectively.

Conflicts of interest of all Directors are reviewed on an annual basis and Directors have continuing obligations to update the Board on
any changes to these conflicts. Situations which may create a conflict of interest are presented to the Board for review and approval as
appropriate.

Independence
The independence of all Non-Executive Directors is reviewed on an annual basis, with reference to their independence of character and
judgement and whether any circumstances or relationships exist that could affect their judgement. The review of independence is also
considered in relation to Committee memberships in line with recommendations of the Code. The Chairman, Tony Martin, is considered
to be non-independent due to his significant shareholding in the Company. The Board considers Penny Freer and Zach Miles to be
independent, notwithstanding their periods of tenure. The Board notes in particular their skills and external experience, their involvement
and insight in Board meetings and their ability to objectively challenge management. Penny Freer holds a shareholding in the Company
but the Board considers this to be highly immaterial and does not affect her independence.

Appointments to the Board
A Nomination Committee is in place to review the appointment of new Directors. Details of the work of the Nomination Committee
and the process used for Board appointments can be found in the Nomination Committee report on page 50.

Commitment
The Chairman and Non-Executive Directors serve under letters of appointment, which are available for inspection at the Company’s
registered office and at the Annual General Meeting.

The annual time commitments are as follows:

• Chairman – not less than 25 days

• Non-Executive Directors – not less than 20 days

During 2017 Penny Freer served three additional days and Tony Martin served three and a half additional days. The time commitments
were reviewed by the Nomination Committee, which was satisfied with the current letters of appointment.

Neither Executive Director holds any external Non-Executive Director role.

Development
On appointment, the Directors receive a tailored introduction to the Group. Throughout their period of office, Directors are provided
with regular business updates. Developments in corporate governance are reported to the Board by the Company Secretary.

All Directors determine the training requirements appropriate to their role and the needs of the Company’s business. Examples of events
include the attendance by the Chairman at two annual Staffing Industry Analysts Executive Conferences and workshops, in San Diego
California, USA, and in London. The Chief Executive Officer joined the Chairman for the San Diego California event. The Chairman of the
Audit Committee regularly refreshes his skills and knowledge by attending seminars and reviewing publications including those published
by the FRC on the New Code principles and accounting standards. The Chairman of the Remuneration Committee regularly attends
seminars delivered by Deloitte LLP on audit, corporate governance, remuneration and succession planning, as well as attending one-on-
one sessions with industry experts at a specialist remuneration consultancy. It has not been deemed appropriate to formalise a training and
development programme for each Director.

Strategic reportGovernanceFinancials
40

Corporate governance framework
continued

Information and support
Prior to the beginning of each year, Board meetings are scheduled in line with the key financial reporting dates. A more detailed agenda,
together with the Board papers, is distributed in a timely manner before each Board meeting. All Directors receive sufficient relevant
information on financial, business and corporate issues to enable informed decisions to be taken by them at the Board meetings. Any
specific actions arising during meetings are agreed by the Board and a follow-up procedure monitors their completion. Monthly financial
and operational reviews are distributed to the Board, irrespective of whether a scheduled meeting is to take place. This assists the Board
to keep informed of developments on a regular basis.

The Directors are advised by the Company Secretary, a solicitor since 2001, and are able to take independent professional advice in the
furtherance of their duties as necessary.

Evaluation
The Board has considered the benefits from undertaking formal evaluations of its performance and those of its Committees and individual
Directors. Formal Executive Director performance evaluations are conducted annually in preparation for the review and approval of the
annual remuneration packages. Each Non-Executive Director’s performance is evaluated as an outcome of the formal performance
evaluations of the Committee(s) of which they are a member.

The Audit and Remuneration Committees oversee an annual self-evaluation process, which is used by the Board and by each Committee
to determine their effectiveness and opportunities for improvement. Further details of the Committee performance reviews can be found
in the Audit Committee report as set out on page 49 and the Directors’ remuneration report as set out on page 51.

The Board considers that the evaluation of the Executive Directors and the Committees provides an appropriate review of each Director’s
performance in relation to their specific roles. A formal evaluation of Board performance has not been deemed necessary due to the size
and composition of the Board.

Details on the Director appointments by shareholders can be found in the Directors’ Report on page 45.

Accountability

Financial and business reporting
The Board reviews and approves all reports on the Company’s position and prospects to present a fair, balanced and understandable
assessment of the Company’s position, performance, business model and strategy. This includes reports of a statutory and regulatory
nature, as required by the AIM rules, which are of a price-sensitive nature.

Risk management and internal control
Risk management remains the responsibility of the Board. The Audit Committee has delegated responsibility to keep under review
the adequacy and effectiveness of the Company’s internal financial controls and internal control and risk management system. Risk
management is reviewed at every Board meeting as part of the formal Board process.

The Board has identified and evaluated the significant risks faced by the Group for the delivery of the Group strategy. The Board has
agreed how each risk is to be addressed and the necessary actions to be taken. Details of the principle risks identified are set out in
the Strategic report on pages 1 to 35.

The Audit Committee meets specifically to review the effectiveness of the Group’s risk management and internal control systems and
to review the Group and subsidiary risks identified and progress of actions taken to manage the risks. Following the review, progress
and actions are reported to the Board. A separate Audit Committee report is set out on pages 48 to 49 and provides details of the
role and activities of the Audit Committee and its relationship with the external auditor.

Remuneration

A separate Directors’ remuneration report is set out on pages 51 to 54 and provides details of the remuneration policy, level and
components of remuneration and procedure for fixing the individual remuneration packages of individual Directors.

Empresaria Group plcAnnual Report & Accounts 2017
41

Relations with shareholders

Dialogue with shareholders
The Directors seek to maintain a mutual understanding of objectives between the Company and its shareholders by:

• making annual and interim presentations to institutional investors;

• meeting shareholders to discuss long-term issues and obtain their views;

• presenting to shareholders at externally run events; and

• communicating regularly during the year.

Relations with shareholders are managed principally by the Executive Directors. The views of shareholders are communicated to the
Board as a whole through regular Board meetings and communication between meetings. Although primary responsibility for effective
communication with shareholders lies with the Chairman, the Executive Directors prepare presentations for institutional and private
investors following the interim and preliminary announcements. The annual and interim presentations made to investors are made available
to all shareholders on the Company’s website, as well as any recorded interviews with the Executive Directors.

Constructive use of the Annual General Meeting
The Board seeks to use the Annual General Meeting to communicate with shareholders. Shareholders are encouraged to participate
in the Annual General Meetings, at which the Chairman presents updates on the Group’s performance. The Board, together with the
Chairmen of the Committees, will be available at the 2018 Annual General Meeting to answer questions from shareholders.

Strategic reportGovernanceFinancials

Board of Directors

Tony Martin
Chairman

Joost Kreulen
Chief Executive Officer

Appointed: July 2004

Appointed: January 2012

Committee Membership: None

Committee membership: None

Spencer Wreford
Group Finance Director
and Chief Operating Officer

Appointed: May 2010

Committee Membership: None

Skills and experience:

Joost has 30 years’ experience of working
in the staffing sector. He has been with
Empresaria since 2009. He was initially
responsible for its Asian operations and
more recently also for a number of its UK
based businesses before being appointed
Chief Executive Officer in January 2012.
Prior to joining Empresaria, Joost had spent
20 years working in various roles for
businesses which now form part of
Randstad N.V., most recently as head
of specialist staffing operations in the
Netherlands.

Other key external appointments:

None

Spencer has been with Empresaria for nearly
eight years, during which time he has gained
a deep understanding of the Group and has
worked closely with the operating companies
on a wide range of financial and operational
matters. He joined as Group Finance
Director, before taking on the role of Chief
Operating Officer in September 2017. Prior to
joining Empresaria Spencer worked in senior
finance roles, particularly with international
businesses in the services sector. He joined
Empresaria from BPP Group, where he was
the Finance Director of the BPP Professional
Education division, a provider of international
professional training. Prior to this he spent
eight years at ITE Group Plc, the international
conference and exhibition organising group,
as Deputy Finance Director, during which
time he also spent six months as Acting
Group Finance Director. Spencer is a
member of the Institute of Chartered
Accountants of England and Wales,
qualifying with Arthur Andersen.

Other key external appointments:

None

Tony has over 30 years’ experience of
running international specialist staffing
companies. He served as Chairman and
CEO of Select Appointments (Holdings) Plc
(‘Select’) from 1992 to 1999 when he
became Vice Chairman and member of the
Board of Management of Vedior N.V., the
world’s third largest staffing services group.
In August 2000 he assumed the role of
Chairman and CEO, which he served until
his retirement in February 2004. Tony held
the position of Executive Chairman at
Corporate Services Group until standing
down in September 2007. Prior to his
appointment at Select, he was responsible
for half of the operations of Adia S.A, the
world’s second largest Staffing Services
group at that time and now part of Adecco.
Before joining Adia, he resided in the United
States for 20 years and served as President
and Chief Operating Officer of a state-wide
Financial Services group based in California.

Tony is a former Chairman of the Federation
of Recruitment and Employment Services,
now known as the Recruitment and
Employment Confederation, the recognised
representative of the Staffing Services
Industry. He is also a Founder Member of
the Recruitment International Hall of Fame
and was recipient of the Staffing Industry
Analysts Leadership Award 2014.

Other key external appointments:

None

Empresaria Group plcAnnual Report & Accounts 2017
43

Zach Miles
Non-Executive Director

Penny Freer
Non-Executive Director

Appointed: October 2008

Appointed: December 2005

Committee membership:
Audit Committee (Chairman),
Remuneration Committee,
Nomination Committee

Committee membership:
Remuneration Committee
(Chairman), Nomination Committee
(Chairman), Audit Committee

Skills and experience:

Zach has 30 years’ experience working
in the staffing sector, as a Finance Director,
CEO and Chairman. Before joining
Empresaria, Zach held the position of
Chairman and Chief Executive Officer of
Vedior N.V. He was a member of the Board
of Management from 1999, and Chairman
since February 2004. Before joining Vedior,
Zach was CFO and a member of the
Board of Directors of Select Appointments
(Holdings) Plc. His career in the recruitment
industry began in 1988. He was formerly
a partner in the international accountancy
firm Arthur Andersen and is a qualified
Chartered Accountant. Together with
Penny Freer, Zach performs the role of
Senior Independent Director.

Other key external appointments:

Chairman of the Board of Trustees of
Rapport Housing and Care.

Penny has worked in investment banking for
over 25 years. She is a partner of London
Bridge Capital, a corporate finance advisory
firm. Until 2004 Penny was Head of Equity
Capital Markets at Robert W Baird and
from 2004 to 2005, Deputy Chairman of
Robert W Baird Limited. Prior to this she
was Head of Small/Mid Cap Equities for
Credit Lyonnais. Together with Zach Miles,
Penny performs the role of Senior
Independent Director.

Other key external appointments:

Senior Independent Director, Advanced
Medical Solutions plc; Non-Executive
Director, Crown Place VCT plc;
Non-Executive Director, Centric Health.

Strategic reportGovernanceFinancials
44

Directors’ report

The Directors present their annual report on the affairs of Empresaria Group plc, together with the financial statements and auditor’s report,
for the year ended 31 December 2017. The Corporate governance statement set out on pages 36 to 41 forms part of this report.

Post balance sheet events

There have not been any significant events since the balance sheet date. An indication of likely future developments in the business of the
Group is included in the Strategic report.

Financial instruments

Information about the use of financial instruments by the Group is given in note 22.

Dividends

For the year ended 31 December 2017 the Directors recommend a final dividend of 1.32p per ordinary share of 5p in the Company
(‘ordinary share’) to be paid on 31 May 2018 to shareholders on the register on 4 May 2018. For the year ended 31 December 2016 a final
dividend was paid of 1.15p per ordinary share on 31 May 2017.

Capital structure

Details of the issued share capital is shown in note 21. There has not been any movement in the issued share capital of the Company
during the year. The Company has one class of ordinary shares, which carry no right to fixed income. Each share carries the right to one
vote at general meetings of the Company.

There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions
of the Company’s Articles of Association (the ‘Articles’) and prevailing legislation. The Directors are not aware of any agreements between
holders of the Company’s shares that may result in restrictions on the transfer of securities or on voting rights.

No person has any special rights of control over the Company’s share capital and all issued shares are fully paid.

Issue and acquisition of the Company’s own shares

Further to shareholders’ resolutions passed on 3 May 2017, in December 2017 the Company commenced a limited share purchase
program. During December 2017, the Company purchased 96,500 ordinary shares (representing 0.2% of the Company’s called up
ordinary share capital) for an aggregate consideration of £93,445. During January 2018, the Company purchased 163,884 ordinary shares
(representing 0.3% of the Company’s called up ordinary share capital) for an aggregate consideration of £156,000. The ordinary shares
purchased were transferred to the Company’s Employee Benefit Trust and the Company intends that they will be used to satisfy the
exercise of options vested under the Company’s Long Term Incentive Plan (‘LTIP’).

At the end of the year, the Directors had authority, under the shareholders’ resolutions passed on 3 May 2017, as follows:

Resolution

Issue shares
(1/3 of issued share capital plus additional)

Issue shares by way of rights issue
(2/3 of issued share capital)

Purchase through the market
(5% of issued share capital)

Resolution
number

Number of shares

Number of shares issued
or purchased under
the authority as at the
date of the report

7(a)

7(b)

20,436,492

32,679,421

2,450,957

260,384

All authorities expire on the earlier of the conclusion of the 2018 Annual General Meeting or 31 July 2018.

Details of employee share schemes

The Company may issue options over ordinary shares to Directors and other senior executives under the Company’s LTIP. Details of all
Awards made and vested under the LTIP can be found in the Directors’ remuneration report on pages 53 to 54 and in note 28.

Empresaria Group plcAnnual Report & Accounts 2017
45

Directors

The Directors who held office during the year were:

Director

Tony Martin

Joost Kreulen

Position

Chairman

Chief Executive Officer

Spencer Wreford

Group Finance Director and Chief Operating Officer

Zach Miles

Penny Freer

Joint Senior Independent Director

Appointment, retirement and replacement of Directors

Last appointed
by shareholders

Full years in role
at 2017 AGM

3 May 2017

20 May 2015

5 May 2016

20 May 2015

The Board of Directors of the Company (the ‘Board’) support and comply with the requirement of the UK Corporate Governance Code (the
‘Code’) that all Directors submit themselves for re-election at least every three years. The Articles require that a third of the Directors retire
by rotation each year. The Articles may be amended by special resolution of the shareholders. Any Directors appointed to the Board during
the year will submit themselves for re-election at the next Annual General Meeting following their appointment.

At the 2017 Annual General Meeting, Tony Martin was re-elected to the Board. At the 2018 Annual General Meeting, Joost Kreulen, Penny
Freer and Zach Miles will retire by rotation and submit themselves for re-election, having been last appointed by shareholders on 20 May
2015. Tim Anderson is due to be appointed to the Board on 21 March 2018, when he joins the Company as the new Group Finance
Director, and will submit himself for re-election at the 2018 Annual General Meeting.

Biographical details of all Directors who held office during the year can be found on pages 42 to 43.

Directors’ powers

The Directors’ powers are conferred on them by the Articles and applicable legislation. Further details can be found in the Corporate
governance statement on pages 36 to 41.

Directors’ insurance

The Company maintains Directors’ and Officers’ Liability insurance which gives appropriate cover for any legal action brought against
its Directors.

Directors’ indemnities

The Group has made no qualifying third party indemnity provisions for the benefit of its Directors during the year.

Political contributions

The Group did not make any political donations during the year (2016: Nil).

Substantial shareholdings

The Company had been notified, in accordance with chapter 5 of the Disclosure and Transparency Rules, of the following voting rights
as a shareholder of the Company:

Name of holder

A V Martin (Director)

Liontrust Investment Partners LLP

Beleggingsclub ‘t Stockpaert

Close Brothers Asset Management

H M van Heijst

M W R Hunt (former Director)

No. of
Ordinary Shares

Percentage of
voting rights and
issued share capital

No. of
Ordinary Shares

Percentage of
voting rights and
issued share capital

as at 31 December 2017

as at 13 March 2018

13,924,595

6,406,844

3,005,000

2,472,324

2,400,000

1,880,000

28.41%

13.07%

6.13%

5.04%

4.90%

3.84%

13,924,595

6,361,334

3,005,000

2,472,324

2,400,000

1,880,000

28.41%

12.98%

6.13%

5.04%

4.90%

3.84%

Strategic reportGovernanceFinancials

Directors’ report
continued

Disabled employees

Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned.
In the event of members of staff becoming disabled every effort is made to ensure that their employment with the Group continues and
that appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of disabled persons
should, as far as possible, be identical to that of other employees.

Employee consultation

The Group places considerable value on the involvement of its employees and has continued to keep them informed on matters affecting
them as employees and on the various factors affecting the performance of the Group. This is achieved through formal and informal
meetings, a quarterly newsletter to all staff, the Group’s website and intranet.

Greenhouse gas emissions reporting

The regulations concerning the reporting of greenhouse gas emissions do not apply to the Company.

Auditor

Each of the persons who is a Director at the date of approval of this Annual Report confirms that:

• so far as the Director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and

• the Director has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any relevant

audit information and to establish that the Company’s auditor is aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.

Deloitte LLP has expressed its willingness to continue in office as auditor of the Company and a resolution to reappoint them will be
proposed at the 2018 Annual General Meeting.

By order of the Board

James Chapman
Company Secretary

Old Church House
Sandy Lane
Crawley Down
Crawley
West Sussex
RH10 4HS

13 March 2018

Empresaria Group plcAnnual Report & Accounts 2017
47

Directors’ responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and
regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to
prepare the Group financial statements in accordance with International Financial Reporting Standards (‘IFRSs’) as adopted by the
European Union and the AIM rules and have chosen to prepare the Parent Company financial statements in accordance with Financial
Reporting Standard 102 (‘FRS 102’). Under company law the Directors must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing the Parent Company financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting estimates that are reasonable and prudent;

• state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained

in the financial statements; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in

business.

In preparing the Group’s financial statements, International Accounting Standard 1 requires that Directors:

• properly select and apply accounting policies;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable

information;

• provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand

the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and

• make an assessment of the Company’s ability to continue as a going concern.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions
and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial
statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s
website (empresaria.com). Legislation in the UK governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.

Directors’ responsibility statement

We confirm that to the best of our knowledge:

1. the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets,

liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;
2. the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and

the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that
they face; and

3. the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information

necessary for shareholders to assess the Company’s position, performance, business model and strategy.

This responsibility statement was approved by the Board on 13 March 2018 and is signed on its behalf by:

By order of the Board

Joost Kreulen
Chief Executive Officer

Spencer Wreford
Group Finance Director and Chief Operating Officer

13 March 2018

Strategic reportGovernanceFinancials

Audit Committee report

Zach Miles
Chairman of the Audit Committee

Monitoring and reviewing
the integrity of financial
statements with an oversight
for internal control and risk.

Role and composition
of the Audit Committee

The Audit Committee is appointed by the
Board from the independent Non-Executive
Directors of the Company, with a minimum
requirement of two such Directors, one
of whom should be a financially qualified
member. Appointments are for a period of
up to three years, which may be extended
for further periods of up to three years,
provided the Director still meets the criteria
for membership of the Committee. The
independent Non-Executive Directors
who served on the Committee during the
year are:

Audit Committee activity

Financial and business reporting
Since the beginning of 2017 to the date
of this report, the Audit Committee has
reviewed the 2016 and 2017 financial
statements, the 2017 interim statement
(unaudited) and carried out a going concern
review. Reviews of the financial statements
included the accounting policies, significant
financial reporting issues and key
judgements and estimates underpinning
the financial statements, including:

• going concern;

The Audit Committee has responsibility, on
behalf of the Board, to monitor the integrity
of the financial statements of the Company,
review the adequacy of internal control and
risk management systems and oversee the
relationship with the external auditor. The
Terms of Reference for the Audit Committee
can be found on the Company’s website
(empresaria.com).

Name

Zach Miles
(Chairman)

Penny Freer

Meetings

Date of
appointment to
the Committee

• carrying value of goodwill, intangible

Qualification

assets and investments;

1 October
2008

Chartered
accountant

2 November
2011

• appropriateness of provision balances;

and

• tax accounting, including deferred tax

assets value.

The Audit Committee makes whatever
recommendations to the Board it deems
appropriate, on any area within its remit,
where action or improvement is needed.

The Audit Committee is required to meet
formally twice per year. During 2017, the
Committee held five formal meetings, which
were scheduled around the financial
reporting timetable. The Audit Committee
invites the Group Finance Director and
senior representatives of the external
auditor to attend all of its meetings, although
it reserves the right to request any of these
individuals to withdraw from the meeting.

Empresaria Group plcAnnual Report & Accounts 2017
49

Assessment of the Audit Committee
Following completion of the 2017 audit
process, the Audit Committee conducted
a self-assessment of its performance during
the year. The evaluation process measured
performance against its Terms of Reference
including:

• presentation of compliance reports by the

Compliance Officer

• review and implementation of risk

management processes by subsidiaries

• ongoing, regular reviews of internal

controls

• monitoring developments in corporate

governance and compliance.

The Board concluded that the Audit
Committee has acted in accordance with
its Terms of Reference and had ensured
the independence and objectivity of the
external auditor.

The Chairman of the Audit Committee will
be available at the 2018 Annual General
Meeting to answer any questions about the
work of the Committee.

On behalf of the Audit Committee

Zach Miles
Chairman of the Audit Committee

13 March 2018

For the going concern and the carrying
value of goodwill and investments, the
Committee examined the assumptions
supporting the Group’s profit and cash
flow forecasts and the sensitivities applied
to those forecasts, the banking facilities
available and the assessment of the
Group’s covenant compliance based
on the forecasts. Details of the matters
reviewed are included in notes 1 to 3
and 14.

For the other key judgements and estimates,
the Committee was satisfied with the
assumptions made and the accounting
treatments adopted.

Risk management and internal control
Risk management is the responsibility
of the Board. Further details about the
process followed and principal risks and
uncertainties that could affect business
operations can be found in the Strategic
report on pages 30 to 33. The Audit
Committee keep under review the
adequacy and effectiveness of the
Company’s internal controls and risk
management systems.

Due to the size of the Group, and the costs
involved, the Audit Committee continues to
recommend to the Board that there is no
requirement for a separate internal audit
function. A summary of the internal controls
for Group companies is presented to the
Audit Committee, including updates on
the resolution of any control weaknesses
identified. The internal controls are reviewed
by the Group finance function. During the
year the Audit Committee reviewed and
approved a change in approach for the
internal control reviews in the year.

Every year the Audit Committee review the
Group’s treasury policy, for approval by the
Board. The Audit Committee also review
the Group’s risk framework reports, to be
presented to and discussed by the Board.

The Group’s whistleblowing policy contains
arrangements for the Company Secretary
to receive, in confidence, complaints on
accounting, risk issues, internal controls,
auditing issues and related matters.

The Group has a mandatory Code of
Conduct, which sets out the minimum
expected behaviours for all employees.
A copy of this can be found on the
Company’s website (empresaria.com).

External audit
The Audit Committee is responsible for
the development, implementation and
monitoring of the Group’s policy on external
audit. The Terms of Reference assign
responsibility to the Audit Committee for
overseeing the relationship with the external
auditor. During 2017, the Audit Committee
has continued to manage the relationship
with the external auditor, including in
relation to the 2016 and 2017 Audit
Committee reports.

The Group’s policy on non-audit related
services prescribes the types of engagements
for which the external auditor can be used
and those engagements which are
prohibited. For engagement for services
which are non-recurring in nature, prior
approval must be sought from the Audit
Committee. The auditor has not performed
any non-audit services during the year.

Note 7 includes disclosure of the auditor’s
remuneration for the year, including an
analysis of audit services, audit related
services and other non-audit services
under those headings prescribed by law.

Deloitte LLP was first appointed as the
Company’s auditor in October 2002.
Following an external tender process during
2013 Deloitte LLP was reappointed for
the 2014 and subsequent audits, resulting
in a current tenure of 15 years.

Following completion of the 2017 audit
process, the Audit Committee is satisfied
with the performance of Deloitte LLP and
has recommended to the Board that
Deloitte LLP is reappointed.

Strategic reportGovernanceFinancials

Nomination Committee report

Penny Freer
Chairman of the Nomination Committee

Monitoring and reviewing
the structure, size and
composition of the Board
and ensuring the right skills
and expertise are maintained
for effective management.

The independent Non-Executive Directors
who served on the Nomination Committee
during the year are:

Date of
appointment to
the Committee

5 November
2013

Name

Penny Freer (Chairman)

Zach Miles

Meetings

Role and composition of
the Nomination Committee
The Nomination Committee has
responsibility, on behalf of the Board, to
keep under review the structure, size
and composition of the Board and the
leadership needs of the Group. The Terms
of Reference for the Nomination Committee
can be found on the Company’s website
(empresaria.com).

The Nomination Committee is required to
meet formally once per year. During 2017,
the Nomination Committee held one formal
meeting. Since the beginning of 2017 to
the date of this report, the Nomination
Committee has been involved in changes
to the composition of the board and the
new director appointment process as well
as focusing on a review of its role and
responsibilities.

Composition of the Board and Committees
The Nomination Committee reviewed
the composition of the Board and the
Committees. As the Group continues to
grow, the role of Chief Operating Officer
was created. This change was supported
by the Nomination Committee. All Directors
continue to serve in their roles and no other
compositional changes were proposed by
the Nomination Committee.

The Nomination Committee is required
to report to the Board on its proceedings
and make recommendations it deems
appropriate, on any area within its remit,
where action or improvement is needed.

The Nomination Committee is appointed
by the Board from the Non-Executive
Directors, with a minimum requirement of
two such Directors. Appointments to the
Committee are made by the Board and are
for a period of up to three years, which
may be extended for further periods of up
to three years, provided the Director still
meets the criteria for membership of the
Committee.

Appointment process
Tim Anderson is to be appointed to
the Board as an Executive Director on
21 March 2018 and will take over as
Group Finance Director.

At the beginning of the appointment
process, the Nomination Committee
considered in detail which areas of
expertise the Board would most benefit
from and reviewed the detailed role
specification accordingly. Each candidate
was thoroughly assessed against the role
specification and those shortlisted
underwent a comprehensive interview
process with the whole Board.

Succession planning
The Nomination Committee continues to
consider the adequacy of the succession
plan approved by the Board.

Time commitments of Non-Executive
Directors
The Nomination Committee continues
to keep under review the Non-Executive
Directors’ time commitments. Currently the
Board does not have a separate policy or
objectives on diversity, including gender.
The Nomination Committee, in making
recommendations to the Board, will give
due regard to the benefits of diversity in
the Boardroom, including gender.

On behalf of the Nomination Committee

Penny Freer
Chairman of the Nomination Committee

13 March 2018

Empresaria Group plcAnnual Report & Accounts 2017
51

Directors’ remuneration report

The Board has considered the principles of Schedule 8 to the Accounting Regulations under the Companies Act 2006 and has complied
where practical and where it supports the Board’s policies. This Directors’ remuneration report meets the relevant requirements of the
AIM rules and describes how the Board has applied, where appropriate, the principles relating to Directors’ remuneration in the Code.

A resolution to approve the Directors’ remuneration report will be proposed at the 2018 Annual General Meeting. The Companies Act 2006
requires the auditor to report to the Company’s members on certain parts of the Directors’ remuneration report and to state whether in
their opinion those parts of the report have been properly prepared in accordance with the Accounting Regulations. The Directors’
remuneration report therefore highlights those parts that have been audited.

The information provided in this part of the Director’s remuneration report is not subject to audit.

Role and composition of the Remuneration Committee

The Remuneration Committee has responsibility, on behalf of the Board, for setting the remuneration policy for all Executive Directors and
the Company’s Chairman and recommending and monitoring the level and structure of remuneration for senior management. The Terms
of Reference for the Remuneration Committee can be found on the Company’s website (empresaria.com).

The Remuneration Committee is required to report to the Board on its proceedings after each meeting on all matters within its duties
and responsibilities.

The Remuneration Committee is appointed by the Board from the independent Non-Executive Directors, with a minimum requirement
of two such Directors. No Director is involved in any decisions as to their own remuneration.

The independent Non-Executive Directors who served on the Remuneration Committee during the year were:

Name

Penny Freer (Chairman)

Zach Miles

Meetings

Date of appointment
to the Committee

13 December 2005

1 October 2008

The Remuneration Committee is required to meet at such times as the Chairman of the Remuneration Committee shall require. During
2017, the Remuneration Committee held three formal meetings. The Chairman of the Company has been invited to attend meetings where
appropriate.

Remuneration practices

The Remuneration Committee recommended and monitored the level and structure of remuneration for senior management as well as
monitoring remuneration trends across the Group. A review was carried out on the ongoing appropriateness and relevance of the
remuneration policy.

The Remuneration Committee determined the 2018 individual remuneration packages, targets for annual bonus scheme and pension
arrangements for the Executive Directors and the 2018 fees for the Non-Executive Directors.

Assessment of the Remuneration Committee

The Remuneration Committee conducted a self-assessment of its performance during the year. The evaluation process measured
performance against its Terms of Reference including:

• executive bonus and LTIP schemes reviewed and assessed considering current best practice and performance measures

• succession planning for Directors and senior executives developed

The Chairman of the Remuneration Committee will be available at the 2018 Annual General Meeting to answer any questions about
the work of the Remuneration Committee.

Strategic reportGovernanceFinancials
52

Directors’ remuneration report
continued

Remuneration policy for the Executive Directors
Executive remuneration packages are designed to attract, retain, motivate and reward Executive Directors, whilst aligning rewards with the
business objectives and performance and the interests of shareholders.

Link between business objectives and remuneration policy
It is the Company’s policy for performance-related pay of Executive Directors to be linked to key performance indicators of the Company.
The Company’s key objectives include developing sustainable growth in earnings, through a combination of organic growth and
investments, alongside a gradual reduction in debt levels. The performance measures chosen to link executive remuneration to the
achievement of these objectives are growth in earnings per share, conversion ratio and debtor days.

Director’s contracts and letters of appointment
It is the Company’s policy that Executive Directors should have contracts with indefinite terms providing for a maximum of 12 months’
notice by the Company or the individual. In the event of early termination, the Executive Directors’ contracts provide for compensation up
to a maximum of the basic salary for the notice period.

The details of the Executive Directors’ contracts are summarised as follows:

Director

Chief Executive Officer (Joost Kreulen)

Group Finance Director and Chief Operating Officer (Spencer Wreford)

Effective date of contract

Notice period

1 January 2012

4 May 2010

12 months

6 months

Non-Executive Directors, including the Chairman, serve under letters of appointment, which either party can terminate on three months’
written notice.

Annual fees of Directors
The basic annual salary of each Executive Director is reviewed annually by the Remuneration Committee with changes taking effect on
1 January. The remuneration for the Non-Executive Directors (including the Chairman) is determined by the Board within the limits set by
the Articles and is based on information on fees paid in similar companies and the skills and expected time commitment of the individual
concerned. The fees are reviewed each year as part of the annual budgeting process. The Non-Executive Directors do not receive any
additional remuneration for chairing Committees.

Aggregate Directors’ remuneration

The information provided in the table below is subject to audit.

The total amounts for Directors’ remuneration were as follows:

Name of Director

Executive

Joost Kreulen

Spencer Wreford

Non-Executive

Tony Martin

Penny Freer

Zach Miles

2018

2017

2016

Salary
£000

Benefits-
in-kind*
£000

Annual
bonuses
£000

Money
purchase
pension
contributions
£000

Additional
fees
£000

Total
£000

Salary
£000

Benefits-
in-kind*
£000

Annual
bonuses
£000

Money
purchase
pension
contributions
£000

Additional
fees
£000

221

175

–

226

185

557

–

291

219

659

216

170

–

Total
£000

306

231

680

* Benefits-in-kind include private medical insurance and travel and accommodation costs for Joost Kreulen and car allowance and private medical insurance for Spencer Wreford.

The amounts for additional fees represent the fees incurred as a result of additional days worked in excess of the number of days referred
to in the letter of appointment.

Empresaria Group plcAnnual Report & Accounts 2017

The following information is not subject to audit.

Pension and other benefits-in-kind
In addition to the basic remuneration payable under the service agreements, each of the Executive Directors is entitled to a pension
provision and a range of other benefits, including private medical insurance and car allowance. The Company has agreed to make
contributions into the Executive Directors’ private pension schemes as follows:

• Chief Executive Officer – 15% of basic salary

• Group Finance Director and Chief Operating Officer – 10% of basic salary

The Non-Executive Directors (including the Chairman) have no right to compensation on the early termination of their appointments and
do not participate in the LTIP or receive any other benefits.

Annual bonus
The Remuneration Committee establishes the objectives that must be met for each financial year if a cash bonus is to be paid to the
Executive Directors. The annual bonus for the 2017 financial year was based on three specific strategic Key Performance Indicators:
adjusted earnings per share, conversion ratio and debtor days. Based on the Remuneration Committee’s assessment of the financial
performance against those KPIs, it has determined that bonus payments amounting to 12% of the maximum bonus (100% of basic salary)
should be made to the Executive Directors.

Long Term Incentive Plan (LTIP)
The Remuneration Committee has responsibility for supervising the Company’s LTIP and making Awards under its terms. The maximum
value of ordinary shares that could be Awarded in a year is 175% of basic salary. The current policy is to review the final audited results
of the Company prior to agreeing if Awards are to be made.

Five Awards have been made up to the date of this report. For each Award the performance targets are 70% earnings per share (‘EPS’)
growth and 30% share price growth. The percentage of Awards vesting would be in accordance with performance at the following levels
(subject to the terms of the LTIP):

Performance below the threshold

Performance at the threshold level

Performance at the maximum level

No Award

20% of the relevant part of the Award vests

100% of the relevant part of the Award vests

Between these points there is a straight-line release of the Award.

A summary of the qualifying conditions with respect to performance for the three Awards yet to vest as at 31 December 2017 is as follows:

Date of award

Expected vesting date

Performance targets

1) EPS growth

Measurement period

Threshold

Maximum

2) Share price growth

Measurement period

Threshold

Maximum

12 March 2014

9 March 2016

15 March 2017

March 2018

March 2019

March 2020

31/12/2014 –
31/12/2017

10% + RPI

30% + RPI

31/12/2015 –
31/12/2018

10% + RPI

30% + RPI

31/12/2017 –
31/12/2019

10% + RPI

30% + RPI

12/03/2014 – close
of business on
the day following
announcement of
the preliminary
results for the year
ended 31/12/2017

09/03/2016 – close
of business on
the day following
announcement of
the preliminary
results for the year
ended 31/12/2018

15/03/2017 – close
of business on
the day following
announcement of
the preliminary
results for the year
ended 31/12/2019

50%

100%

50%

100%

50%

100%

EPS growth is the annual growth in EPS over the relevant measurement period. Share price growth is the absolute share price growth over
the relevant measurement period.

Strategic reportGovernanceFinancials
54

Directors’ remuneration report
continued

The information provided in the table below is subject to audit.

Details of the options for Officers who served during the year are as follows:

Name of officer

Joost Kreulen

Spencer Wreford

James Chapman

Maximum
awards as
at 1 January
2017

720,000

563,380

379,630

244,892

Maximum
awards
granted
during the
year

–

192,368

500,000

394,366

277,778

192,963

–

151,686

19,124

Vested
awards
(options
granted)

Options
exercised

Lapsed
awards

–

720,000

165,416

397,964

–

500,000

115,791

278,575

–

Date of award

28/09/2011

06/09/2013

12/03/2014

09/03/2016

15/03/2017

28/09/2011

06/09/2013

12/03/2014

09/03/2016

15/03/2017

The following information is not subject to audit.

Shareholding guidelines
There are no requirements for Executive Directors or senior executives to hold shares in the Company.

The Directors had the following interests in the Company’s share capital:

Executive Directors

Joost Kreulen (Chief Executive Officer)

Spencer Wreford (Group Finance Director and Chief Operating Officer)

Non-Executive Directors

Tony Martin (Chairman)

Penny Freer

Zach Miles

Total

31 December 2017

31 December 2016

Number
of ordinary
shares

Percentage
holding

Number
of ordinary
shares

Percentage
holding

60,000

15,000

0.12%

0.03%

60,000

15,000

13,924,595

28.41% 13,924,595

15,000

–

0.03%

0.00%

15,000

–

0.12%

0.03%

28.41%

0.03%

0.00%

14,014,595

28.59% 14,014,595

28.59%

No Director had any interest(s) in the share capital of any other Group company.

During the period between 31 December 2017 and 13 March 2018, no changes took place in the above interests.

This report was approved by the Board of Directors on 13 March 2018 and signed on its behalf by:

Penny Freer
Chairman of the Remuneration Committee

13 March 2018

Empresaria Group plcAnnual Report & Accounts 2017

Independent auditor’s report
to the members of Empresaria Group plc

Report on the audit of the financial statements

Opinion
In our opinion:

• the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2017

and of the Group’s profit for the year then ended;

• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs)

as adopted by the European Union;

• the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted

Accounting Practice including Financial Reporting Standard 102 “The Financial Reporting Standard applicable in the UK and Republic
of Ireland”; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements of Empresaria Group plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) which comprise:

• the Consolidated income statement;

• the Consolidated statement of comprehensive income;

• the Consolidated and Parent Company balance sheets;

• the Consolidated and Parent Company statements of changes in equity;

• the Consolidated cash flow statement;

• the Statement of accounting policies; and

• the related notes 1 to 28 for the Group and notes 1 to 10 for the Parent Company.

The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and IFRSs
as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the Parent Company
financial statements is applicable law and United Kingdom Accounting Standards, including FRS 102 “The Financial Reporting Standard
applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice).

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report.

We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of
the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.

Summary of our audit approach

Key audit matter

The key audit matter that we identified in the current year was the carrying value of goodwill and other
intangible assets.

Materiality

Scoping

The materiality that we used for the Group financial statements was £675,000 which was determined on
the basis of 7.5% of reported profit before tax after adding back the loss on disposal.

Our global testing approach was focused primarily on UK, Germany, New Zealand, Chile, Japan, India and
Indonesia and were subject to a combination of full scope audits and audit of specified account balances.
These locations account for 85% of the Group’s net assets, 91% of the Group’s revenue and 82% of the
Group’s profit before tax.

Strategic reportGovernanceFinancials
56

Independent auditor’s report
to the members of Empresaria Group plc
continued

Conclusions relating to going concern

We are required by ISAs (UK) to report in respect of the following matters where:
• the Directors’ use of the going concern basis of accounting in preparation of the financial

We have nothing to report
in respect of these matters.

statements is not appropriate; or

• the Directors have not disclosed in the financial statements any identified material uncertainties that
may cast significant doubt about the Group’s or the Parent Company’s ability to continue to adopt
the going concern basis of accounting for a period of at least twelve months from the date when the
financial statements are authorised for issue.

Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of
the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified.
These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and
directing the efforts of the engagement team.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.

Carrying value of goodwill and other intangible assets

Key audit matter description Empresaria plc has achieved growth through a mix of organic growth and acquisition of recruitment

How the scope of our audit
responded to the key audit
matter

businesses. As at 31 December 2017 it holds goodwill of £35.9m and associated intangible assets of
£18.2m on its consolidated balance sheet. IAS 36 requires that management perform an impairment
review annually using projected cash flows discounted at a rate which takes into account the risks within
those cash flows.

Management must apply their judgement in preparing the discounted cash flow which forms the basis of
the impairment review. In particular management must consider the supportability of the bridge between
results achieved for the year ended 31 December 2017 and the forecast results for 2018 and beyond with
a focus on those CGUs that have under-performed. Pharmaceutical Strategies was identified as the CGU
sensitive to movements to the inputs in the model. Management has included a disclosure in note 14
explaining the impact of reasonably possible changes in assumptions.

The Group’s accounting policy in relation to impairment of intangible assets including goodwill is included
in note 2 and is further described in note 14. This is discussed by the Audit Committee on pages 48 to 49.

In order to address this key audit matter we have:

• Evaluated the design and implementation of management’s controls over the preparation and review

of impairment assessments

• Challenged the supportability of the bridge between actual results as at 31 December 2017 and forecast

results for 2018 and beyond. For territories that had under-performed we discussed business
performance with both local and Group management and obtained corroborative evidence to validate
explanations received. Key procedures included reviewing newly signed contracts for both clients and
consultants, reviewed external market research to understand pipeline and reviewed post year end
performance against budget to assess accuracy of initial forecast

• Recalculated the country specific discount factors using our internal specialists to assess whether those

employed in management’s model were within the predicted range

• Assessed historical forecasting accuracy through comparing 2017 actuals to 2017 budgets

• Challenged growth rates through a combination of using internal specialists to review industry and

country specific data provided by management

• Assessed management’s sensitivities as well as applying an additional set of our own sensitivities

• Checked the mathematical accuracy of the schedules supporting the cash flow model

• Reviewed the disclosures explaining the impact of reasonably possible changes in assumptions.

Key observations

From the work performed above, we concluded that the inputs and assumptions applied in the valuation
model, and the disclosures made, were appropriate.

Empresaria Group plcAnnual Report & Accounts 2017
57

Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of
a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and
in evaluating the results of our work.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Materiality

Basis for determining materiality

Group financial statements
£675,000

7.5% of reported profit before tax after
adding back the loss on disposal of £0.9m
associated with PT Learning Resources.

Parent Company financial statements
£472,500

1.2% of net assets as capped by the upper
limit of the component materiality range

Rationale for the benchmark applied

Group materiality equates to approximately
0.2% of revenue and 1.4% of net assets.

In determining our materiality benchmark
we considered a number of benchmarks
and the performance indicators most
applicable to the users of the financial
statements, the nature of the business and
comparative audit reports for listed entities.
We determined that profit before tax is a
key measure used by analysts in presenting
business performance to users of the
financial statements.

Net assets is the key measure used by
users of the financial information of a parent
company being that of a holding company
for the investments.

PBT after adding back
the loss on disposal £9m

PBT after adding back
the loss on disposal
Group materiality

Group materiality
£0.7m
Component
materiality range
£0.34m to £0.47m

Audit Committee
reporting threshold
£0.034m

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £33,750, as well as
differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee
on disclosure matters that we identified when assessing the overall presentation of the financial statements.

Strategic reportGovernanceFinancials

Independent auditor’s report
to the members of Empresaria Group plc
continued

An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the Group and its environment, including internal control, how the Group is
organised, the consolidation process, the performance and financial position of each component as a proportion of the total for the Group
and assessing the risks of material misstatement throughout the Group. Based on that assessment, we focused our Group audit scope
primarily on the Group operations in the UK, Germany, New Zealand, Chile, Japan, India and Indonesia.

UK, Germany, New Zealand, Chile and Indonesia were subject to a full audit, whilst Japan and India were subject to audit procedures on
specified account balances. Our testing in these locations was based on our assessment of the risks of material misstatement and of the
materiality of the Group’s operations at those locations. These locations account for 85% of the Group’s net assets, 91% of the Group’s
revenue and 82% of the Group’s profit before tax. The materiality used in each location where we performed an audit or audit of specified
account balances procedures ranged from £337,500 to £472,500.

18%

15%

Revenue

13%

Profit
before tax

Net assets

86%

69%

82%

Full audit scope
Specified audit procedures
Review at group level

The group audit engagement team visited the German component audit team as part of our oversight of their work. For the other locations
set out above a senior member of the group audit engagement team held detailed discussions with the component teams in order to
update our understanding of the operations, risks and control environments of each component as well as a review of the component
auditors’ working papers. The group audit engagement team performed the audit of the UK businesses without the involvement of
a component team.

For all other locations the group audit engagement team performed analytical review procedures at Group level to confirm our conclusion
that there were no significant risks of material misstatement of the aggregated financial information of the remaining components not
subject to audit or audit of specified account balances. At the parent entity level we also tested the consolidation process.

Other information

The Directors are responsible for the other information. The other information comprises the information
included in the annual report, other than the financial statements and our auditor’s report thereon.

We have nothing to report
in respect of these matters.

Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether there is a material misstatement in the financial statements or a material misstatement
of the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.

Empresaria Group plcAnnual Report & Accounts 2017
59

Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary
to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue
as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Report on other legal and regulatory requirements

Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:

• the information given in the strategic report and the Directors’ report for the financial year for which the financial statements are prepared

is consistent with the financial statements; and

• the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the Group and or the Parent Company and their environment obtained in the course
of the audit, we have not identified any material misstatements in the Strategic report or the Directors’ report.

Matters on which we are required to report by exception

Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or

• adequate accounting records have not been kept by the parent company, or returns adequate for our

audit have not been received from branches not visited by us; or

• the Parent Company financial statements are not in agreement with the accounting records and returns.

We have nothing to report
in respect of these matters.

Directors’ remuneration

Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of
Directors’ remuneration have not been made.

We have nothing to report
in respect of this matter.

James Wright FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Crawley, United Kingdom

13 March 2018

Strategic reportGovernanceFinancials
60

Consolidated income statement

Continuing operations

Revenue

Cost of sales

Net fee income

Administrative costs

Adjusted operating profit*

Exceptional items

Fair value on acquisition of non-controlling shares

Loss on business disposal

Intangible amortisation

Operating profit

Finance income

Finance costs

Profit before tax

Tax

Profit for the year

Attributable to:

Equity holders of the Parent

Non-controlling interest

Note

2017
£m

2016
£m

4, 7

357.1

(287.7)

270.4

(211.4)

69.4

(57.8)

11.6

59.0

(49.2)

9.8

–

(0.3)

(0.9)

(1.7)

8.7

0.1

(0.7)

8.1

(3.6)

–

(0.2)

–

(1.1)

8.5

0.1

(0.7)

7.9

(3.5)

4.5

4.4

4.1

0.4

4.5

4.8

(0.4)

4.4

* ‘Adjusted operating profit’ is stated before exceptional items, gain or loss on business disposal, intangible amortisation and fair value on acquisition of non-controlling shares.

From continuing operations

Earnings per share:

Basic

Diluted

Earnings per share (adjusted):

Basic

Diluted

8.0

7.9

9.6

9.3

12.6

12.5

11.7

11.3

Empresaria Group plcAnnual Report & Accounts 2017
Consolidated statement of comprehensive
income

Items that may be reclassified subsequently to income statement:

Exchange differences on translation of foreign operations

Items that will not be reclassified to income statement:

Exchange differences on translation of foreign operations of non-controlling interest

Net (expense) / income recognised directly in equity

Profit for the year

Total comprehensive income for the year

Attributable to:

Equity holders of the Parent

Non-controlling interest

2016
£m

5.1

0.5

5.6

4.4

10.0

9.9

0.1

10.0

2017
£m

(1.2)

(0.1)

(1.3)

4.5

3.2

2.9

0.3

3.2

Strategic reportGovernanceFinancials
62

Consolidated balance sheet

ASSETS

Non-current assets

Property, plant and equipment

Goodwill

Other intangible assets

Deferred tax assets

Current assets

Trade and other receivables

Cash and cash equivalents

Total assets

LIABILITIES

Current liabilities

Trade and other payables

Current tax liabilities

Borrowings

Non-current liabilities

Borrowings

Deferred tax liabilities

Total non-current liabilities

Total liabilities

Net assets

EQUITY

Share capital

Share premium account

Merger reserve

Retranslation reserve

Equity reserve

Other reserves

Retained earnings

Equity attributable to owners of the Company

Non-controlling interest

Total equity

* See note 1.

Note

2017
£m

2016
£m
Revised*

1.4

35.9

18.2

1.0

56.5

53.1

25.9

79.0

1.6

36.0

20.8

1.0

59.4

50.2

20.3

70.5

135.5

129.9

42.0

2.6

36.6

81.2

1.3

4.1

5.4

86.6

48.9

2.4

22.4

0.9

5.0

(7.5)

(0.7)

19.6

42.1

6.8

48.9

44.9

3.1

15.7

63.7

15.1

4.4

19.5

83.2

46.7

2.4

22.4

0.9

6.1

(7.3)

(0.4)

16.2

40.3

6.4

46.7

These financial statements of Empresaria Group plc were approved by the Board of Directors and authorised for issue on 13 March 2018.

Signed on behalf of the Board of Directors

Joost Kreulen
Director

Spencer Wreford
Director

Empresaria Group plcAnnual Report & Accounts 2017

Total
equity
£m

33.7

4.4

(0.5)

5.6

2.6

1.0

(0.3)

0.2

46.7

4.5

(0.6)

(1.3)

Consolidated statement of changes in equity

Share
capital
£m

Share
premium
account
£m

Merger
reserve
£m

Retranslation
reserve
£m

Equity
reserve
£m

Other
reserves
£m

Retained
earnings
£m

Non-
controlling
interest
£m

(7.2)

(0.6)

Balance at 31 December 2015

2.4

22.4

0.9

Profit for the year

Dividend

Currency translation differences

Share of non-controlling interest in Intangibles
related balances on business acquisition

Share of non-controlling interest in other net
assets on business combination

Non-controlling interest acquired and other
movements during the year

Share based payment

–

Balance at 31 December 2016

2.4

22.4

0.9

Profit for the year

Dividend

Currency translation differences

Non-controlling interest acquired and other
movements during the year

Purchases of own share in Employee Benefit
Trust

Share based payment

–

1.0

–

5.1

–

6.1

–

(1.1)

–

(0.1)

–

(7.3)

–

(0.2)

–

Balance at 31 December 2017

2.4

22.4

0.9

5.0

(7.5)

Equity comprises the following:
• ‘Share capital’ represents the nominal value of equity shares.

2.9

(0.4)

–

0.5

2.6

1.0

(0.2)

–

6.4

0.4

–

(0.1)

–

0.2

(0.4)

–

(0.1)

–

(0.2)

(0.7)

11.9

4.8

(0.5)

–

16.2

4.1

(0.6)

–

(0.1)

–

19.6

0.1

(0.1)

–

6.8

(0.1)

(0.2)

48.9

• ‘Share premium account’ represents the excess over nominal value of the fair value of consideration received for equity shares,

net of expenses of the share issue.

• ‘ Merger reserve’ relates to premiums arising on shares issued subject to the provisions of section 612 ‘Merger relief’ of the Companies

Act 2006.

• ‘Retranslation reserve’ represents the exchange differences arising from the translation of the financial statements of foreign subsidiaries.

• ‘ Equity reserve’ represents movement in equity due to acquisition of non-controlling interests under IFRS 3 Business combination.

• ‘Other reserves’ represents the share based payment reserve of £0.6m (2016: £0.8m) and exchange differences on intercompany

long-term receivables amounting (£1.3m) (2016: (£1.2m)) which are treated as a net investment in foreign operations.

• ‘Retained earnings’ represents accumulated profits less distributions and income / expense recognised in equity from incorporation.

• ‘Non-controlling interest’ represents equity in a subsidiary not attributable, directly or indirectly, to the Group.

Strategic reportGovernanceFinancials
64

Consolidated cash flow statement

Profit for the year

Adjustments for:

Depreciation and software amortisation

Intangible amortisation (identified as per IFRS 3 ‘Business combinations’)

Taxation expense recognised in income statement

Loss on business disposal

Share based payments

Net finance charge

Increase in trade receivables

Increase in trade payables

Cash generated from operations

Interest paid

Income taxes paid

Net cash from operating activities

Cash flows from investing activities

Cash acquired with business acquisitions

Consideration paid for business acquisitions

Consideration received for business disposals

Purchase of property, plant and equipment and software

Finance income

Net cash used in investing activities

Cash flows from financing activities

Purchases of own shares in Employee Benefit Trust

Non-restricted shares acquired in existing subsidiaries

Increase in borrowings

Proceeds from bank loan

Repayment of bank and other loan

Increase in invoice discounting

Dividends paid to shareholders

Dividends paid to non-controlling interest in subsidiaries

Net cash from financing activities

Net increase in cash and cash equivalents

Effect of foreign exchange rate changes

Cash and cash equivalents at beginning of the year

Cash and cash equivalents at end of the year

Bank overdrafts at beginning of the year

Increase in the year

Effect of foreign exchange rate changes

Bank overdrafts at end of the year

Cash, cash equivalents and bank overdrafts at end of the year

* See note 1.

Note

2017
£m

4.5

1.0

1.7

3.6

0.9

(0.2)

0.6

12.1

(2.8)

3.3

12.6

(0.7)

(5.5)

6.4

–

(5.6)

0.1

(0.9)

0.1

(6.3)

(0.1)

–

15.3

0.1

(9.2)

0.7

(0.6)

(0.1)

6.1

6.2

(0.6)

20.3

25.9

2017
£m

(5.1)

(15.3)

–

(20.4)

5.5

2016
£m
Revised*

4.4

0.9

1.1

3.5

–

0.2

0.6

10.7

(1.2)

1.6

11.1

(0.8)

(4.7)

5.6

7.9

(14.3)

0.1

(0.8)

0.1

(7.0)

–

(0.2)

2.4

11.3

(1.2)

0.8

(0.5)

(0.2)

12.4

11.0

1.6

7.7

20.3

2016
£m

(2.3)

(2.4)

(0.4)

(5.1)

15.2

Empresaria Group plcAnnual Report & Accounts 2017

Notes to the Consolidated financial statements

1 Basis of preparation and general information
Empresaria Group plc is a company incorporated in the United Kingdom under the Companies Act 2006. The address of the registered
office is Old Church House, Sandy Lane, Crawley Down, Crawley, West Sussex, RH10 4HS. Its company registration number is 3743194.

The consolidated financial statements are for the twelve months ended 31 December 2017. The financial statements have been prepared
in accordance with IFRS as adopted by the European Union (EU) and therefore the Group financial statements comply with AIM rules.

The financial statements have been prepared under the historical cost convention except that they have been modified to include the
revaluation of certain financial assets and liabilities at fair value. The measurement bases and principal accounting policies of the Group
are set out below.

These consolidated financial statements are presented in Pounds Sterling (£) because that is the presentational currency of the Group.
Foreign operations are included in accordance with the policies set out in note 2.

Changes in accounting policies
Adoption of new and revised standards
In the current year, the following new and revised Standards and Interpretations have been adopted.
Amendments to IAS 7:
Amendments to IAS 12:
Annual Improvements to IFRSs: 2014-2016:

Disclosure Initiative
Recognition of Deferred Tax Assets for Unrealised Losses
Amendments to: IFRS 12 Disclosure of Interests in Other Entities

No amendments to these financial statements have been made as a result of adopting new and revised standards and interpretations.

Standards and Interpretations in issue but not yet effective
At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these
financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

IFRS 9
IFRS 15
IFRS 16
IFRS 17
IFRS 2 (amendments)
IFRS 4 (amendments)
IAS 40 (amendments)

Financial Instruments
Revenue from Contracts with Customers (and the related Clarifications)
Leases
Insurance Contracts
Classification and Measurement of Share-based Payment Transactions
Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts
Transfers of Investment Property

IFRS 10 and IAS 28 (amendments): Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

Annual Improvements to IFRSs 2014-2016 Cycle: Amendments to IFRS 1 First-time Adoption of International Financial Reporting
Standards and IFRS 28 Investments in Associates and Joint Ventures

IFRIC 22
IFRIC 23

Foreign Currency Transactions and Advanced Consideration
Uncertainty over Income Tax Treatments

IFRS 9 Financial Instruments (effective 1 January 2018)
IFRS 9 introduces a new classification approach for financial assets and liabilities. The categories of financial assets will be reduced from
four to three and financial liabilities will be measured at amortised cost or fair value through profit and loss. The standard also prescribes an
‘expected credit loss’ model for determining the basis of providing for bad debts. The Directors do not expect this to have a material impact
on the financial statements.

IFRS 15 Revenue from Contracts with Customers (effective 1 January 2018)
An assessment of the impact of IFRS 15 has been completed following review of the contracts that exist across the Group’s revenue
streams. The review has concluded that revenue recognition under IFRS 15 is expected to be consistent with current practice for the
Group’s revenue and had IFRS 15 been applied in the current reporting period, it would not have had a material impact on the financial
statements.

IFRS 16 Leases (effective 1 January 2019)
IFRS 16 is expected to have a significant impact on the amounts recognised in the Group’s consolidated financial statements. On adoption
of IFRS 16 the Group will recognise within the balance sheet a right of use asset and lease liability for all applicable leases. Within the
income statement, operating lease rentals payable will be replaced by depreciation and interest expense. This will result in an increase
in operating profit and an increase in finance costs.

Strategic reportGovernanceFinancials

Notes to the Consolidated financial statements
continued

1 Basis of preparation and general information continued
The standard will also impact a number of statutory measures such as operating profit, and cash generated from operations, and
alternative performance measures used by the Group. The full impact of IFRS 16 is currently under review, including understanding the
practical application of the principles of the standard. A reasonable estimate of the financial effect of the standard is not available until
this review is complete. IFRS 16 will become effective in the Group’s financial year 2019.

Going concern
The Group’s activities are funded by a combination of long-term equity capital and bank facilities, primarily term loans, a revolving credit
facility, invoice discounting and overdrafts. The day-to-day operations are funded by cash generated from trading and the use of invoice
discounting and overdraft facilities. The board has reviewed the Group’s profit and cash flow projections, and applied sensitivities to the
underlying assumptions.

These projections demonstrate that the Group will meet its obligations as they fall due with the use of existing facilities. The revolving
credit facility has a term until 2021, the UK term loan will be fully repaid during 2018 and the Group’s primary overdraft facilities are due
for renewal in January and February 2019. Based on informal discussions the Board has had with its lenders, we have no reason to believe
that these facilities will not continue to be available to the Group for the foreseeable future. The financial statements do not reflect the
adjustments that would be necessary were the trading performance of the Group to deteriorate significantly or if the funding available from
invoice discounting or overdrafts were to become unavailable. Thus the Group continues to prepare the financial statements on a going
concern basis.

Revised presentation of cash pooling arrangements
Following an agenda decision by the IFRS Interpretation Committee regarding offsetting and cash pooling arrangements, the Group
has revised its disclosure of its cash pooling arrangements. This requires grossing up cash and overdraft balances associated with cash
pooling arrangements. As a result we revised the comparative balance sheet and cash flow presentation at 31 December 2016. The impact
is to increase cash and cash equivalents and short term borrowings by £2.3m at 31 December 2016 (2015: £Nil). There was no impact
on net debts.

The impact of this change as at 31 December 2015 was £Nil and therefore a ‘Consolidated balance sheet’ for 2015 has not been
presented.

2 Summary of significant accounting policies
Basis of consolidation
The Group financial statements consolidate those of the Company and all of its subsidiaries including the Employee Benefit Trust (EBT)
from the date on which the Group obtains control and cease to be consolidated from the date on which the Group ceases its control.
Control is achieved when the Group:

• has the power over the investee;

• is exposed, or has rights, to variable return from its involvement with the investee; and

• has the ability to use its power to affects its returns.

Intra-group transactions and profits are eliminated fully on consolidation. Amounts reported in the financial statements of subsidiaries
have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. Non-
controlling interest consists of the amount of those interests at the date of the original business combination and the non-controlling
interest’s share of changes in equity since the date of the combination taking into accounting any restrictions on non-controlling interests.
Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interest having a deficit
balance.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective
date of acquisition or up to the effective date of disposal, as appropriate.

Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying
amount of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the
subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration
paid or received is recognised directly in equity and attributed to the owners of the Company.

Empresaria Group plcAnnual Report & Accounts 2017
67

Business combinations
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate
of the fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group
in exchange for control of the acquiree. Acquisition related costs are recognised in profit or loss as incurred. Where applicable, the
consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its
acquisition date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as
measurement period adjustments. The measurement period is the period from the date of acquisition to the date the Group obtains
complete information about facts and circumstances that existed as at the acquisition date and is a maximum of one year. All other
subsequent changes in the fair value of contingent consideration classified as an asset or liability are recognised in the income statement.
Changes in the fair value of contingent consideration classified as equity is accounted for within equity. Consideration linked to post-
combination employee services are identified separately from the business combination. Payment for these services is accounted for
as post-acquisition remuneration separately from the acquisition accounting.

The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 (2008) are
recognised at their fair value at the acquisition date, except for deferred tax assets and liabilities or assets related to employee benefit
arrangements which are recognised and measured in accordance with IAS 12 Income taxes and IAS 19 Employee Benefits respectively.

Non-controlling interest
In applying the Group’s management equity philosophy, subsidiary management may be offered the opportunity to acquire shares in the
subsidiary that they are responsible for, at market value. There are no services supplied by any employee in relation to this purchase of the
shares in the subsidiary. After an agreed period, management may offer to sell the shares back to the Company. The Company does not
have any obligation to acquire these shares.

If amounts are paid for non-controlling interests in a subsidiary that exceed the fair value of the equity acquired this excess amount
is charged to the income statement.

Goodwill
Goodwill arising on a business combination is recognised as an asset at the date that control is acquired and is stated after separating
out identifiable intangible assets.

Goodwill represents the excess of acquisition cost over the fair value of the Group’s share of the identifiable net assets of the acquired
subsidiary at the date of acquisition. If, after measurement, the Group’s interest in the net fair value of the identifiable assets, liabilities
and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss as a bargain
purchase gain.

Goodwill is not amortised but is tested at least annually for impairment. Goodwill is allocated to each of the Group’s cash-generating units.
If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is first allocated
against goodwill and then to the other assets of the unit on a pro-rata basis. An impairment loss recognised for goodwill is not reversed
in a subsequent period. Goodwill is carried at cost less accumulated impairment losses.

On disposal of a subsidiary, the attributable goodwill is included in the calculation of profit or loss on disposal.

Goodwill arising on acquisitions before the date of transition to IFRS (1 January 2006) has been retained at the previous UK GAAP
carrying amount.

Intangible assets
An intangible asset, which is an identifiable non-monetary asset without physical substance, is recognised to the extent that it is probable
that the expected future economic benefits attributable to the asset will flow to the Group and that its cost can be measured reliably.

Intangible assets acquired separately – intangible assets with finite useful lives that are acquired separately are carried at cost less
accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated
useful life. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with any changes being
accounted for on a prospective basis.

Intangible assets acquired in a business combination – Intangible assets acquired in a business combination and recognised separately
from goodwill are initially recognised at their fair value at the acquisition date (regarded as their cost). They are subsequently reported
at cost less accumulated amortisation and accumulated impairment on the same basis as intangible assets acquired separately.

Strategic reportGovernanceFinancials
68

Notes to the Consolidated financial statements
continued

2 Summary of significant accounting policies continued
Amortisation of intangible assets
Amortisation is charged to the income statement and calculated using the straight-line method over its estimated useful life as follows:
Customer relations
Trademarks
Software

up to fifteen years
up to fifteen years
up to three years

Impairment of tangible and intangible assets excluding goodwill
The carrying amounts of the Group’s tangible and intangible assets are reviewed against their recoverable amount for any indication of
impairment at each balance sheet date or whenever there is an indication that the asset may be impaired. An impairment loss is recognised
in the income statement whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable
amount, such that it does not exceed the carrying amount that would have existed had no impairment loss been recognised. The reversal
of the impairment loss is recognised in profit or loss.

Property, plant and equipment
Property, plant and equipment is stated at historical cost, net of accumulated depreciation and any recognised impairment loss.
Depreciation is calculated using the straight-line method to write off the cost or valuation of the assets less their residual values over
their useful lives as follows:

Leasehold property
Fixtures, fittings and equipment
Motor vehicles

over the term of the lease up to a maximum of 10 years
up to three years
up to five years

The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with any changes
accounted for on a prospective basis.

Gains and losses on disposals are determined by comparing proceeds with carrying amounts. These are included in the income
statement.

Borrowing costs
Interest costs are recognised as an expense in the period in which they are incurred. Facility arrangement fees incurred in respect
of borrowings are amortised over the term of the agreement.

Cash and cash equivalents
Cash and cash equivalents comprise cash-in-hand, deposits held at call with banks and other short-term highly liquid investments
with original maturities of three months or less. Bank overdrafts are included within the balance sheet in current liabilities – short-term
borrowings.

Invoice financing
The Group’s operating activities in the UK are part funded by an invoice discounting facility. The debt provider has full recourse to the
Group for any irrecoverable debt; these debts are presented within current borrowings and the asset due from the customer in current
assets in the Group’s balance sheet.

Movements in the invoice discounting balance are treated as ‘Cash flow from financing activities’ in the Group’s Cash flow statement.

Interest charges on invoice discounting are included in finance costs and service charges are included in administrative costs in the
Group’s income statement.

Financial assets
Financial assets are assigned to the different categories on initial recognition, depending on the characteristics of the instrument and
its purpose. A financial instrument’s category is relevant for the way it is measured and whether resulting income and expenses are
recognised in profit or loss or charged directly against equity.

Generally, the Group recognises all financial assets using transfer value basis. An assessment of whether a financial asset is impaired is
made at least at each reporting date. For receivables, this is based on the latest credit information available, (i.e. recent third-party defaults
and external credit ratings). Financial assets that are substantially past due are also considered for impairment. All income and expense
relating to financial assets are recognised in the income statement line item Finance costs or Finance income, respectively.

Empresaria Group plcAnnual Report & Accounts 2017

Financial assets are recognised in the Group’s balance sheet and, other than hedging instruments, can be divided into the following
categories:

• financial assets at fair value through profit and loss (FVPL)

• loans and receivables

Financial assets at fair value through profit and loss (FVPL)
Financial assets are classified as at FVPL when the financial assets is (i) contingent consideration that may be paid by an acquiree as
part of the business combination; (ii) held for trading; or (iii) it is designated as at FVPL.

Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
The Group’s trade and other receivables are considered for impairment when they are past due at the balance sheet date or when
objective evidence is received that a specific third party will default. Any change in their value is recognised in profit or loss.

Financial liabilities and equity instruments
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements.

Financial liabilities
The Group’s financial liabilities include borrowings and trade and other payables (including finance lease liabilities). They are recognised
initially at fair value, net of transaction costs and are subsequently measured at amortised cost using the effective interest method.

Financial liabilities are recognised when the Group becomes a party to the contractual agreements of the instrument. All interest-related
charges and, if applicable, changes in the instrument’s fair value that are reported in the profit or loss are included in the income statement
line items Finance costs or Finance income.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least
12 months after the balance sheet date.

Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, it is probable that the Group will be required
to settle that obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the directors’ best
estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect
is material.

Revenue and revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of services provided in the ordinary course
of the Group’s activities. Revenue is shown net of value added tax, trade discounts, rebates and other sales-related taxes.

Permanent placement revenue is recognised at the point when the candidate commences employment. Contract placement revenue
(including outsourced services) is recognised on the basis of actual work performed in the relevant period based on timesheets submitted.
Training revenue is recognised at the point when the training is provided to clients.

An assessment of the impact of IFRS 15 has been completed following review of the contracts that exist across the Group’s revenue
streams. The review has concluded that revenue recognition under IFRS 15 is expected to be consistent with current practice for the
Group’s revenue and had IFRS 15 been applied in the current reporting period, it would not have had a material impact on the financial
statements.

Net fee income
Net fee income represents revenue less the remuneration cost of temporary workers. For permanent placements net fees are equal to
revenue. For Training and Offshore recruitment services net fee income represents revenue less costs of staff directly providing those services.

Strategic reportGovernanceFinancials
70

Notes to the Consolidated financial statements
continued

2 Summary of significant accounting policies continued
Employee benefits
Retirement benefit costs
Payments made to defined contribution retirement benefit schemes are charged to the income statement as they fall due.

Severance payment provision
As per local legislation in certain territories severance payment provisions have been provided. These are charged to the income statement.

Share based payments
The Group issues equity-settled share-based payments to senior management, which are measured at fair value (excluding the effect
of non-market-based vesting conditions) at the date of grant and expensed on a straight-line basis over the vesting period, based on
the Group’s estimate of shares that will eventually vest and adjusted for the effect of non-market-based vesting conditions.

The fair value of the options granted is measured using a Monte Carlo simulation model and Black-Scholes model, taking into account
the terms and conditions upon which the options were granted.

The Group provides finance to an Employee Benefit Trust (EBT) to purchase company shares to partly meet the obligation to provide
shares when employees exercise their options or awards. Costs of running the EBT are charged to the income statement. Shares held
by the EBT are deducted from other reserves. A transfer is made between other reserves and retained earnings over the vesting periods
of the related share options or awards.

Leases
Leases that result in the Group receiving substantially all of the risks and rewards of ownership of an asset are treated as finance leases.
An asset held under a finance lease is recorded in the balance sheet and depreciated over the shorter of its estimated useful life and the
lease term. Future instalments net of finance charges are included within borrowings. Minimum lease payments are apportioned between
the finance charge element, which is allocated to each period to produce a constant periodic rate of interest on the remaining liability and
charged to the income statement and the principal element which reduces the outstanding liability.

Rental costs arising from operating leases are charged on a straight-line basis over the period of the lease. Where an incentive is received
to enter into an operating lease, such incentive is treated as a liability and recognised as a reduction to the rental expense on a straight-line
basis over the period of the lease.

Forward contract for foreign currency
Forward currency contracts are stated at fair value, with any gain or losses arising on remeasurement recognised in profit or loss.

Taxes
Current tax
Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or paid to the
taxation authorities. The tax rates and the tax laws used to compute the amount are those that are enacted or substantively enacted by
the balance sheet date.

Deferred tax
Deferred income tax is provided, using the liability method, on temporary differences at the balance sheet date between the tax bases
of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences, except:

• where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is
not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary

differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Empresaria Group plcAnnual Report & Accounts 2017

Deferred income tax assets are recognised on an undiscounted basis for all deductible temporary differences, carry forward of unused tax
credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary
differences and the carry-forward of unused tax credits and unused tax losses can be utilised except:

• where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or

liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor
taxable profit or loss; and

• in respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognised only

to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available
against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised
deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable
that future taxable profit will allow the deferred tax asset to be recovered.

Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they
relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly
to equity.

Foreign currencies
(i) Functional and presentational currency
Items included in the individual financial statements of each Group company are measured using the individual currency of the primary
economic environment in which that subsidiary operates (its ‘functional currency’). The consolidated financial statements are presented
in Pounds Sterling which is the Company’s functional and presentational currency.

(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Exchange
differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to
occur (therefore forming part of the net investment in the foreign operation) are recognised initially in other comprehensive income.
These exchange differences are reclassified from equity to profit or loss on disposal or partial disposal of the net investment.

(iii) Group companies
The results and financial position of Group companies (none of which has the currency of a hyper-inflationary economy) that have
a functional currency different from the Company’s presentation currency are translated into the presentation currency as follows:

• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

• income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable

approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated
at the dates of the transactions); and

• all resulting exchange differences are recognised as a separate component of equity within the retranslation reserve.

(iv) Hedges of net investments in foreign operations
Any gain or loss on the hedging instrument relating to the effective portion of net investment hedge is recognised in equity in the foreign
currency translation reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss. Gains and losses
accumulated in the foreign currency translation reserve are reclassified to profit or loss on disposal of the foreign operation.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity
and translated at closing rate.

Strategic reportGovernanceFinancials
72

Notes to the Consolidated financial statements
continued

3 Critical accounting judgements and key sources of estimation uncertainty
In applying the Group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying
values of assets and liabilities that are not clear from other sources. These estimates and judgements are continually evaluated and are
based on historical experience and other relevant factors. Actual results may differ from these estimates.

Critical judgements in applying the Group’s policies
The following are the critical judgements, that the directors have made in the process of applying the Group’s accounting policies and
that have the most significant effect on the amounts recognised in financial statements:

Business combinations, contingent consideration , intangible assets (including goodwill)
In prior periods the directors have been required to make judgements, estimates and assumptions related to business combinations,
including determining contingent consideration and the value of intangible assets. No such judgements or estimations were made in
relation to the 2017 financial statements.

Key source of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting period that may have
a significant risk of causing a material adjustment to the carrying amount of assets and liabilities with the next financial year, are
discussed below:

Impairment of goodwill
The Group is required to test whether goodwill has suffered any impairment. The recoverable amount is determined based on the
value-in-use calculations. The use of this method requires the estimation of future cash flows and the choice of a suitable discount rate in
order to calculate the present value of these cash flows. Details of the impairment review calculation and sensitivities are set out in note 14.
The same estimations are required if intangibles are tested for impairment.

4 Segment analysis
Information reported to the Group’s Chief Executive, who is considered to be chief operating decision maker of the Group for the purpose
of resource allocation and assessment of segment performance, is based on geographic region. The Group’s business is segmented into
four regions, UK, Continental Europe, Asia Pacific and the Americas.

The Group has one principal activity, the provision of staffing and recruitment services. Each unit is managed separately with local
management responsible for implementing local strategy.

The analysis of the Group’s business by geographical origin is set out below:

Year ended 31 December 2017

Revenue

Net fee income

Adjusted operating profit*

Operating profit

Continental
Europe
£m

98.8

16.5

5.1

4.9

UK
£m

86.7

23.4

2.2

1.7

Asia
Pacific
£m

132.7

22.2

3.5

1.8

Americas
£m

Total
£m

38.9

357.1

7.3

0.8

0.3

69.4

11.6

8.7

* ‘Adjusted operating profit’ is stated before exceptional items, gain or loss on business disposal, intangible amortisation and fair value on acquisition of non-controlling shares.

Revenue of Continental Europe includes £83.9m from Germany and revenue of Asia Pacific includes £97.5m from New Zealand.

Empresaria Group plcAnnual Report & Accounts 2017

Property, plant and equipment

Goodwill

Other intangibles assets

Deferred tax assets

Other segmental assets

Segmental liabilities

Net assets

Capital expenditure incurred (including intangibles)

Significant non-cash expenses (depreciation,
amortisation and trade receivable impairment)

Continental
Europe
£m

0.2

14.5

1.0

–

22.5

(22.5)

15.7

0.2

0.4

UK
£m

0.3

11.9

6.5

0.2

29.3

(37.3)

10.9

0.2

1.0

Asia
Pacific
£m

0.7

6.3

5.9

0.5

31.5

(27.5)

17.4

0.4

1.5

Americas
£m

Eliminations
£m

–

(27.6)

18.8

(8.8)

0.2

3.2

4.8

0.3

23.3

(18.1)

13.7

0.1

0.6

Total
£m

1.4

35.9

18.2

1.0

79.0

(86.6)

48.9

0.9

3.5

Non-current assets of Continental Europe include £14.1m from Germany, non-current assets of Asia Pacific include £9.7m from
New Zealand and non-current assets of Americas include £7.4m from United States of America.

The analysis of the Group’s revenue and net fee income by client destination is set out below:

Year ended 31 December 2017

Revenue

Net fee income

The analysis of the Group’s business by geographical origin is set out below:

Year ended 31 December 2016

Revenue

Net fee income

Adjusted operating profit*

Operating profit

Continental
Europe
£m

UK
£m

107.8

20.8

129.8

22.9

Asia
Pacific
£m

78.7

17.0

Americas
£m

40.8

8.7

Total
£m

357.1

69.4

Continental
Europe
£m

Asia Pacific
£m

Americas
£m

92.0

16.8

4.9

4.7

77.3

18.6

2.7

1.7

31.0

4.6

0.7

0.8

UK
£m

70.1

19.0

1.5

1.3

Total
£m

270.4

59.0

9.8

8.5

* ‘Adjusted operating profit’ is stated before exceptional items, gain or loss on business disposal, intangible amortisation and fair value on acquisition of non-controlling shares.

Revenue of Continental Europe includes £78.2m from Germany and revenue of Asia Pacific includes £43.3m from New Zealand.

Strategic reportGovernanceFinancials
74

Notes to the Consolidated financial statements
continued

4 Segment analysis continued

Property, plant and equipment

Goodwill

Other intangibles assets

Deferred tax assets

Other segmental assets

Segmental liabilities

Net assets

Capital expenditure incurred (including intangibles)

Goodwill and intangible impairment

Significant non-cash expenses (depreciation, amortisation and

trade receivable impairment and reversal of contingent consideration)

Continental
Europe
£m

0.1

14.0

1.1

–

20.5

(21.0)

14.7

0.2

–

0.4

UK
£m

0.4

11.9

7.0

0.2

36.7

(38.6)

17.6

0.3

–

0.5

Asia
Pacific
£m

0.9

6.6

6.9

0.6

27.3

(27.4)

14.9

0.3

0.6

1.1

Americas
£m

Eliminations
£m

–

(34.9)

20.1

(14.8)

0.2

3.5

5.8

0.2

20.9

(16.3)

14.3

–

Total
£m

1.6

36.0

20.8

1.0

70.5

(83.2)

46.7

0.8

0.6

2.0

Non-current assets of Continental Europe include £13.7m from Germany, non-current assets of Asia Pacific include £10.8m from
New Zealand and non-current assets of Americas include £8.7m from United States of America.

The analysis of the Group’s revenue and net fee income by client destination is set out below:

Year ended 31 December 2016

Revenue

Net fee income

Continental
Europe
£m

100.5

18.3

UK
£m

81.8

19.5

Asia
Pacific
£m

54.5

15.3

Americas
£m

33.6

5.9

Total
£m

270.4

59.0

The following segmental analysis by sector has been included as additional disclosure to the requirements of IFRS 8:

Professional services

IT, digital & design

Technical & industrial

Retail

Healthcare

Executive search

Aviation

Other services

Revenue
2017
£m

Revenue
2016
£m

14.3

56.4

129.7

35.2

13.5

4.7

97.4

5.9

12.8

34.4

127.4

28.9

12.5

4.1

43.3

7.0

Net fee
income
2017
£m

6.9

17.9

21.3

4.9

3.5

4.5

5.7

4.7

Net fee
income
2016
£m

5.8

11.9

22.9

3.9

3.4

3.9

2.5

4.7

357.1

270.4

69.4

59.0

Empresaria Group plcAnnual Report & Accounts 2017

5 Exceptional items and fair value on acquisition of non-controlling shares
Exceptional items
Exceptional items are those which, in management’s judgement, need to be disclosed separately by virtue of their size or incidence in
order for the reader to obtain a proper understanding of the financial information.

Impairment of goodwill (note 14)

Impairment of intangibles

Contingent consideration (credit)

Further details can be found in the Finance review section on page 28.

Fair value on acquisition of non-controlling shares
The following purchases of non-controlling shares are treated as a fair value charge in the income statement.

Fair value on acquisition of non-controlling shares

2017
£m

–

2016
£m

0.5

0.1

(0.6)

–

2017
£m

0.3

2016
£m

0.2

In April 2017, the Group increased its interest in Monroe Consulting (Executive search in the Philippines) from 70% to 90%. The consideration
of £0.1m was paid in cash.

In May 2017, the Group increased its interest in Monroe Consulting (Executive search in Thailand) by 10%, taking its interest up to 80%.
The consideration of £0.2m was paid in cash.

6 Loss on business disposal
In September 2017 the Group disposed of its 51% investment in PT Learning Resources, a training business in Indonesia. Group’s share
of net assets of this subsidiary at the date of disposal were as follows:

Property, plant and equipment

Trade and other receivables

Trade and other payables

Cash and cash equivalents

Tax prepayments and deferred tax assets

Net assets (funded by historic Intercompany loan)

Non-controlling interest and foreign exchange balances

Consideration received*

Loss on business disposal

* Further cash consideration of £0.2m could be receivable, but is contingent on the outcome of an ongoing local tax investigation. No asset for this has been recognised at this stage.

During the year PT Learning Resources contributed £0.7m (2016: £1.9m) to the Group’s revenue. Apart from the loss on business
disposal, its operations contributed a loss of £0.2m (2016: £Nil) to the Group’s profit after tax. It contributed operating cash out flow
of £0.2m (2016: £0.1m) to the Group’s net operating cash flows.

2017
£m

0.1

0.9

(0.4)

0.1

0.8

0.2

1.0

(0.1)

0.9

Strategic reportGovernanceFinancials

Notes to the Consolidated financial statements
continued

7 Profit before tax
Profit before tax is stated after charging / (crediting):

Depreciation of property, plant and equipment

Amortisation of software

Intangible amortisation (identified as per IFRS 3 ‘Business combinations’)

Fair value on acquisition of non-controlling shares

Loss on business disposal

Operating lease charges:

– Land and buildings (office)

– Motor vehicles (office)

– Project based accommodation

– Project based transportation

Net foreign exchange gain

Share based payments

Acquisition related costs

Trade receivable impairments

Auditor’s remuneration

The analysis of auditor’s remuneration is as follows:

Fee payable to the Company’s auditor for the audit of the Group annual accounts

2017
£m

0.9

0.1

1.7

0.3

0.9

2.5

0.4

1.8

0.3

–

(0.2)

–

0.8

0.3

2017
£000

342

Auditor’s remuneration includes fees payable of £238,000 (2016: £264,000) for the audit of the Company’s subsidiaries pursuant to
legislation. There were no non-audit fees payable during the year (2016: £Nil).

8 Directors and employees

Staff costs

Wages and salaries

Social security costs

Pension costs

Share based payments

2017
£m

35.9

3.3

0.7

(0.2)

39.7

2016
£m

0.8

0.1

1.1

0.2

–

2.1

0.3

1.3

0.3

–

0.2

0.3

0.6

0.4

2016
£000

358

2016
£m

29.6

2.6

0.6

0.2

33.0

Details of Directors’ remuneration are given on pages 51 to 54.

Average monthly number of persons employed (including directors)

Sales, distribution and administration

2017
No.

2016
No.

1,367

1,282

Empresaria Group plcAnnual Report & Accounts 2017

2017
£m

2016
£m

0.1

(0.2)

(0.5)

–

(0.7)

(0.6)

2017
£m

(3.8)

–

(3.8)

0.1

(0.2)

(0.4)

(0.1)

(0.7)

(0.6)

2016
£m

(3.3)

(0.1)

(3.4)

0.2

(0.1)

(3.6)

(3.5)

2017
£m

8.1

(1.6)

(0.3)

(0.2)

(0.3)

(0.1)

–

(1.1)

(3.6)

2016
£m

7.9

(1.6)

(0.2)

–

(0.3)

(0.2)

(0.1)

(1.0)

(3.5)

9 Finance income and cost

Finance income

Bank interest receivable

Finance cost

On amounts payable to invoice discounters

Bank loans and overdrafts

Interest on tax payments

Net finance cost

10 Taxation
(a) The tax charge for the year is based on the following:

Current taxation

Current tax charge

Adjustment to tax charge in respect of previous periods

Deferred tax charge – current year

Tax expense

(b) Factors affecting the tax charge for the year

Profit before taxation

Profit before tax at standard rate of corporation tax in the UK of 19.25% (2016: 20%)

Effects of:

Expenses not deductible for tax purposes

Loss on business disposal and Fair value on acquisition of non-controlling shares not deductible for tax purposes

Current year losses not recognised for tax purposes

Write down of losses previously recognised for tax purposes

Adjustment to tax charge in respect of previous periods

Amortisation disallowed

Overseas tax at different tax rates

Tax expense

The movement in deferred tax is explained in note 20.

There was Nil tax recognised in the Consolidated statement of comprehensive income (2016: £Nil).

The reduction in the tax rate from 20% to 19.25% reflects a reduction in the standard rate of corporation tax in the UK from 20% to 19%
with effect from 1 April 2017. The 19.25% rate is the average UK rate applicable for the year ended 31 December 2017 (2016: 20%).

Strategic reportGovernanceFinancials

Notes to the Consolidated financial statements
continued

11 Reconciliation of adjusted profit before tax to profit before tax

Profit before tax

Loss on disposal

Fair value on acquisition of non-controlling shares

Intangible amortisation

Adjusted profit before tax from continuing operations

2017
£m

8.1

0.9

0.3

1.7

11.0

2016
£m

7.9

–

0.2

1.1

9.2

12 Earnings per share
The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the average
number of shares in issue during the year. A reconciliation of the earnings and weighted average number of shares used in the calculations
is set out below.

The calculation of the basic and diluted earnings per share is based on the following data:

Earnings

Earnings attributable to equity holders of the parent

Adjustments:

Loss on disposal

Fair value on acquisition of non-controlling shares

Intangible amortisation

Non-controlling shares of intangible amortisation

Tax on intangible amortisation

Earnings for the purpose of adjusted earnings per share

Number of shares

Weighted average number of shares – basic

Dilution effect of share options

Weighted average number of shares – diluted

Earnings per share

Basic

Dilution effect of share options

Diluted

Earnings per share (adjusted)

Basic

Dilution effect of share options

Diluted

2017
£m

2016
£m

4.1

4.8

0.9

0.3

1.7

(0.2)

(0.4)

6.4

–

0.2

1.1

–

(0.2)

5.9

Millions

50.9

0.5

51.4

50.2

1.7

51.9

Pence

8.0

(0.1)

7.9

9.6

(0.3)

9.3

Pence

12.6

(0.1)

12.5

11.7

(0.4)

11.3

Basic earnings per share has been calculated by dividing the profit attributable to shareholders by the weighted average number of shares
in issue during the period after deducting shares held by the Employee Benefit Trust, although the impact of this in 2017 was minimal since
the shares were purchased in December 2017. The Trustees have waived their rights to dividends on the shares held by the Employee
Benefit Trust.

The dilution on the number of shares is from share options. Further details of these share options can be found in note 28 and the Directors
remuneration report on pages 51 to 54.

Empresaria Group plcAnnual Report & Accounts 2017

Total
£m

6.9

0.8

(0.9)

(0.2)

6.6

5.3

0.9

(0.8)

(0.2)

5.2

1.6

1.4

Total
£m

5.5

0.7

0.5

(0.5)

0.7

6.9

4.0

0.8

0.4

(0.4)

0.5

5.3

1.5

1.6

Leasehold
property
£m

Fixtures,
fittings and
equipment
£m

Motor
vehicles
£m

0.6

–

0.6

0.2

–

0.2

0.4

6.1

0.8

(0.9)

(0.2)

5.8

5.0

0.9

(0.8)

(0.2)

4.9

1.1

0.9

0.2

–

0.2

0.1

–

0.1

Leasehold
property
£m

Fixtures,
fittings and
equipment
£m

Motor
vehicles
£m

0.6

–

0.6

0.2

–

0.2

0.4

4.6

0.7

0.5

(0.4)

0.7

6.1

3.6

0.8

0.4

(0.3)

0.5

5.0

1.0

1.1

0.3

–

(0.1)

–

0.2

–

(0.1)

–

0.1

13 Property, plant and equipment

2017

Cost

At 1 January 2017

Additions

Disposals

Exchange differences

At 31 December 2017

Accumulated depreciation

At 1 January 2017

Depreciation

Disposals

Exchange differences

At 31 December 2017

Net book value

At 31 December 2016

At 31 December 2017

Fixtures, fittings and equipment includes £0.1m (2016: £0.1m) of secured finance leases.

2016

Cost

At 1 January 2016

Additions

Assets acquired with business acquisition

Disposals

Exchange differences

At 31 December 2016

Accumulated depreciation

At 1 January 2016

Depreciation

Acquisition

Disposals

Exchange differences

At 31 December 2016

Net book value

At 31 December 2015

At 31 December 2016

Fixtures, fittings and equipment includes £0.1m (2015: £0.1m) of secured finance leases.

Strategic reportGovernanceFinancials

Notes to the Consolidated financial statements
continued

14 Goodwill

At 1 January

Acquisition of new subsidiary undertakings

Impairment (note 5)

Foreign exchange

At 31 December

2017
£m

36.0

–

(0.1)

35.9

2016
£m

25.2

8.1

(0.5)

3.2

36.0

Goodwill arising on business combinations is reviewed and tested for impairment on an annual basis or more frequently if there is
an indication that goodwill might be impaired. Goodwill has been tested for impairment by comparing the carrying amount of each
cash-generating unit (CGU) at lowest level of cash flow, including goodwill, with the recoverable amount of that income-generating unit.
The recoverable amounts of the CGUs are determined from value-in-use calculations.

The key assumptions for the value-in-use calculations are as follows:
Operating profit and pre-tax cash flows
The operating profit and pre-tax cash flow is based on approved annual budget for the CGUs approved by the Group’s Management Board
which are compiled using expectations of fee growth, consultant productivity and operating costs. The Group prepares cash flow
forecasts derived from the most recent financial forecasts approved by Management and extrapolates cash flows in perpetuity based
on the long-term growth rates using margins that are consistent with the business plan approved by the Group’s Management Board.

Discount rates
The pre-tax, country specific rate used to discount the forecast cash flows ranges from 8% to 15% (2016: 10% to 20%) reflecting current
local market assessments of the time value of money and the risks specific to the relevant CGUs. These discount rates reflect estimated
industry weighted average cost of capital in each market.

Pre-tax discount rates used for various cash generating units in operating segments are as follows:

UK:
Continental Europe:
Asia Pacific:
Americas:

9%
8%
10% to 15%
10% to 13%

Growth rates
Growth rates used to extrapolate beyond the most recent forecasts and to determine terminal values are based upon the long term
average GDP growth forecast, which are consistent with external sources, for the relevant country. Growth rates range from 1.8% to 7.9%.
Any growth rate in excess of 6.0% was capped for the purpose of this calculation. GDP growth is a key driver of our business, and is
therefore a key consideration in developing long-term forecasts.

Growth rates used for various cash generating units in operating segments are as follows:
UK:
Continental Europe:
Asia Pacific:
Americas:

1.5%
1.4% to 1.6%
0.6% to 6.0% (capped)
3.0%

Empresaria Group plcAnnual Report & Accounts 2017

Impairment reviews were performed at the year-end by comparing the carrying value of goodwill with the recoverable amount of the CGUs
to which goodwill has been allocated.

As part of the impairment review, management has considered the sensitivity of the recoverable amount for each unit to changes in the
growth rates and discount rate. This sensitivity analysis showed that the long-term growth rate could reduce to nil without giving rise to
any additional impairment of goodwill. The discount rates were also increased by adding an additional 3% to the country specific pre-tax
discount rates. None of these changes in the key assumptions are expected to reasonably occur.

As at 31 December 2017 the Group holds goodwill of £2.5m and intangible assets of £4.8m related to Pharmaceutical Strategies. This
has been tested for impairment and there is no indication that there has been any impairment. Given the reduction in profit contribution
since the business was acquired, the assumptions in the value in use calculation are based on a return to the pre-acquisition profit level
within 3 years, following an improving trading performance through 2017 and management projections of growth, with industry growth
rates thereafter. The market remains positive and the business is geared to deliver an increased trading level, in line with the pre-acquisition
performance. We have set our targets and growth model to get back to this position. As part of the impairment review we have calculated
separate sensitivity analysis based on a 5 year period to get back to pre-acquisition profit levels, an increase of 2% in the weighted
average cost of capital and a lower long-term growth rate. In all cases no impairment is indicated. However, a change in these assumptions
increases the risk of an impairment in future periods. As an indication of the possible range of outcomes, if the growth rate is reduced
after 2018 to industry rates, there is an impairment risk of £1.3m, whilst an additional 1% increase in the weighted average cost of capital
(on top of the 2% increase in the sensitivity) would lead to an impairment risk of £0.6m.

Goodwill acquired in a business combination is allocated, at acquisition, to the groups of CGUs that are expected to benefit from that
business combination.

The carrying amount of goodwill as per operating segments has been allocated as follows:

Goodwill by region

United Kingdom

Continental Europe

Asia Pacific

Americas

15 Intangible assets

2017

Carrying amount at 1 January 2017

Additions

Foreign exchange

Gross carrying amount at 31 December 2017

Amortisation

Carrying amount at 1 January 2017

Charge for year

Accumulated amortisation at 31 December 2017

Net book value as at 31 December 2016

Net book value as at 31 December 2017

2017
£m

11.9

14.5

6.3

3.2

35.9

Intangible assets identified
as per IFRS 3 ‘Business combination’

Customer
relationship
& candidate
database
£m

Trade
name
& marks
£m

Sub total
£m

Software
£m

14.2

–

(0.5)

13.7

2.2

1.1

3.3

12.0

10.4

9.6

–

(0.4)

9.2

0.9

0.6

1.5

8.7

7.7

23.8

–

(0.9)

22.9

3.1

1.7

4.8

20.7

18.1

0.6

0.1

–

0.7

0.5

0.1

0.6

0.1

2016
£m

11.9

14.0

6.6

3.5

36.0

Total
£m

24.4

0.1

(0.9)

23.6

3.6

1.8

5.4

20.8

18.2

Strategic reportGovernanceFinancials

Notes to the Consolidated financial statements
continued

15 Intangible assets continued

2016

Carrying amount at 1 January 2016

Additions

Acquisition

Impairment

Foreign exchange

Gross carrying amount at 31 December 2016

Amortisation

Carrying amount at 1 January 2016

Charge for year

Impairment

Accumulated amortisation at 31 December 2016

Net book value as at 31 December 2015

Net book value as at 31 December 2016

Intangible assets identified as per
IFRS 3 ‘Business combination’

Customer
relationship
& candidate
database
£m

Trade
name
& marks
£m

Sub total
£m

Software
£m

6.1

–

7.4

(0.2)

0.9

14.2

1.5

0.8

(0.1)

2.2

4.6

12.0

3.2

–

5.8

–

0.6

9.6

0.6

0.3

–

0.9

2.6

8.7

9.3

–

13.2

(0.2)

1.5

23.8

2.1

1.1

(0.1)

3.1

7.2

20.7

0.5

0.1

–

0.6

0.4

0.1

–

0.5

0.1

Total
£m

9.8

0.1

13.2

(0.2)

1.5

24.4

2.5

1.2

(0.1)

3.6

7.3

20.8

16 Subsidiaries
A list of the investments in subsidiaries, including the name, country of incorporation, proportion of ownership interest, change of
ownership interest not resulting in loss of control is given in note 6 to the Company’s financial statements.

The following consolidated UK subsidiary companies are exempt from an annual audit under section 479A of the Companies Act 2006
for which the Company has provided a guarantee under section 479C of the Companies Act 2006. This guarantees all outstanding
liabilities to which the subsidiary is subject to as at 31 December 2017 until they are settled in full. The guarantee is enforceable against
the Company by any person to whom the subsidiary is liable in respect of those liabilities.

Name of subsidiary

Mansion House Recruitment Limited

Reflex HR Limited

Alpion Recruitment Limited

Empresaria Americas Finco Limited

Empresaria Healthcare Limited

Empresaria Malaysia Holdings Limited

Empresaria NZ Limited

Interim Management International Limited

Oval (888) Limited

TLN 1004 Limited

TLN 1006 Limited

Empresaria Americas Limited

Empresaria GIT Holdings Limited

Empresaria GIT Limited

Empresaria Asia Limited

Empresaria Indonesia Holdings Limited

Empresaria NZ Finco Limited

Empresaria T&I Limited

Empresaria Technology (Holdings) Limited

Empresaria Vietnam Holdings Limited

Company number

Type of subsidiary

03276279

05150663

09949926

09917053

09946765

08701593

10164295

04067140

04819545

04598490

03570249

08926961

05669458

05669176

07384224

10362003

10804049

10432476

10322758

10485853

Active

Active Non-Trading

Holding Non-Trading

Active Non-Trading

Holding Non-Trading

Empresaria Group plcAnnual Report & Accounts 2017

17 Trade and other receivables

Current

Trade receivables

Less provision for impairment of trade receivables

Net trade receivables

Prepayments

Accrued income

Deferred and contingent consideration

Corporation tax receivable

Other receivables

2017
£m

44.0

(0.8)

43.2

1.5

3.1

0.2

1.8

3.3

2016
£m

42.1

(1.0)

41.1

2.0

2.5

0.3

0.7

3.6

53.1

50.2

Trade receivables include £31.7m (2016: £30.4m) on which security has been given as part of bank facilities.

All amounts are due within one year. The carrying value of trade receivables is considered to be a reasonable approximation of fair value.

Further analysis on trade receivables is set out in note 22.

18 Trade and other payables

Current

Trade payables

Other tax and social security

Pilot bonds*

Client deposits

Temporary recruitment worker wages

Other payables

Accruals

Deferred and contingent consideration

2017
£m

2.1

8.4

7.5

0.7

3.9

2.0

17.4

–

42.0

2016
£m

1.5

8.8

5.2

0.8

4.3

1.5

17.2

5.6

44.9

All amounts are payable within one year. The fair values of trade and other payables are not materially different from those disclosed above.

* The pilot bonds represent unrestricted funds held by Rishworth Aviation that are typically repayable to the pilot over the course of a

contract, which typically last between three and five years. If the pilot terminates their contract early, the outstanding bond is payable to
the client. For this reason the full bond value is shown as a current liability. If the bonds are repaid in line with existing contracts, £4.5m
(2016: £3.3m) would be repayable in more than one year.

Strategic reportGovernanceFinancials

Notes to the Consolidated financial statements
continued

19 Financial liabilities
a) Borrowings

Current

Bank overdrafts

Amounts related to invoice financing

Current portion of bank loans

Non-current

Bank loans

Total financial liabilities

2017
£m

20.4

9.7

6.5

36.6

1.3

37.9

2016
£m

5.1

8.9

1.7

15.7

15.1

30.8

At 31 December 2017 the UK multi-currency revolving credit facility of £10.0m, expiring in 2021, had a balance of £1.0m (2016: £8.5m).
The facility was entered into in the year ending 31 December 2016 to part-fund the investments in Rishworth Aviation and ConSol Partners.
Interest is payable at 1.5% plus LIBOR or EURIBOR.

At 31 December 2017 the UK term loan, expiring in 2018, had a balance of £2.0m (2016: £3.5m). No drawdowns were made during the
year (2016: drawdowns of £2.9m to part fund the investment in Rishworth Aviation and also fund the contingent consideration payment
due for Pharmaceutical Strategies). £1.5m of this loan was repaid during the year and £2.0m is due to be repaid during the year ending
31 December 2018. Interest is payable at 1.5% above UK base rate. A German bank loan of Euro 5.0m (2016: Euro 5.0m) remains
outstanding with an expiry in 2018. Interest is payable at EURIBOR plus 3%.

Overdraft facilities are in place in the UK with a limit of £7.5 million (2016: £5.0m). The balance on this multi-currency facility as at
31 December 2017 was £4.1m (2016: £0.9m). The interest rate was fixed during the year at 1.0% above applicable currency base rates.
A UK based $1.5m overdraft facility to provide working capital funding to Pharmaceutical Strategies had a balance of $Nil (2016: $0.7m)
as at 31 December 2017. Interest on this USD facility is payable at 2% over currency base rates. During the year a $2.0m overdraft facility
was set up in the United States directly with Pharmaceutical Strategies to replace this facility which will not be renewed in 2018.
The balance at 31 December 2017 was $1.0m. Interest is payable at LIBOR plus 2%. An €8.0 million overdraft facility is also in place
in Germany. The balance at 31 December 2017 was €4.8m (2016: €1.2m). Interest is payable at EURIBOR plus 2.3%.

The UK facilities are secured by a first fixed charge over all book and other debts given by the Company and certain of its UK subsidiaries,
Headway in Germany and Rishworth Aviation in New Zealand.

Other overseas overdraft and loans had interest rates of between 1.6% and 7.4%.

b) Movement in net borrowings

As at 1 January

Net increase in cash and cash equivalents before cash / overdraft acquired with business acquisition

Net cash acquired with business acquisition

Amounts related to invoice financing acquired with business acquisition

Net increase in overdrafts and loans

Increase in invoice financing

Currency translation differences

As at 31 December

2017
£m

(10.5)

6.2

–

(6.2)

(0.7)

(0.8)

(12.0)

2016
£m

(7.3)

3.1

7.9

(1.2)

(12.5)

(0.8)

0.3

(10.5)

Empresaria Group plcAnnual Report & Accounts 2017

2017
£m

(37.9)

25.9

(12.0)

2016
£m

(30.8)

20.3

(10.5)

c) Analysis of net borrowings

Financial liabilities – borrowings

Cash and cash equivalents

As at 31 December

Cash and cash equivalents at 31 December 2017 include cash with banks of £253,000 (2016: £329,000) held by a subsidiary in China
which is subject to currency exchange restrictions.

The cash and cash equivalents above include £7.5m (2016: £5.2m) of pilot bonds held by Rishworth Aviation. See note 18 for more details.

20 Deferred tax

1 January

(Charge) / credit to income

Business disposal

Business acquisition

Foreign exchange difference

31 December

Analysis of deferred tax

Deferred tax asset

Deferred tax liability

Tax
losses
£000

Capital
allowances
£000

Holiday
pay
£000

Timing
differences
£000

Intangible
assets
£000

2017
Total
£000

134

(15)

–

(3)

116

(4)

–

139

–

(6)

192

540

(118)

(24)

–

(20)

378

(4,206)

(3,386)

262

–

114

184

(24)

–

Total
2016
£000

(135)

(132)

–

(3,099)

(20)

(3,830)

(3,141)

(3,386)

2017
£000

982

2016
£000

1,018

(4,123)

(4,404)

(3,141)

(3,386)

At the balance sheet date, the Group has unused tax losses of £2.1m (2016: £2.4m) available for offset against future taxable profits.
A deferred tax asset has been recognised in respect of £0.5m (2016: £0.6m) of such losses. No deferred tax asset has been recognised
in respect of the remaining £1.6m (2016: £1.8m) as it is not considered probable that the losses will be fully utilised before they expire.

No deferred tax liability is recognised on temporary differences of £5.5m (2016: £5.7m) relating to the unremitted earnings of overseas
subsidiaries as the Group is able to control the timing of the reversal of these temporary differences and it is probable that they will not
reverse in the foreseeable future. The tax impact of these temporary differences is £0.6m (2016: £0.9m) assuming all unremitted earnings
were remitted in full in the year.

Strategic reportGovernanceFinancials

Notes to the Consolidated financial statements
continued

21 Share capital and Share premium
Share capital

Issued, allotted and fully paid

Ordinary shares of 5p each

Share premium

Balance at 1 January and 31 December

Shares held by Employee Benefit Trust

Allotted and fully paid

Ordinary shares of 5p each

£m

2.4

2016
£m

22.4

2017
Number
of shares

2016
Number
of shares

£m

49,019,132

2.4

49,019,132

2017
£m

22.4

2017
Number
of shares

96,500

2016
Number
of shares

–

22 Financial instruments
The principal financial assets of the Group are cash and cash equivalents and trade and other receivables. The main purpose of these
financial instruments is to raise finance for the Group’s operations. The principal financial liabilities are trade and other creditors that arise
directly from operations, amounts owed to invoice discounters and bank loans. Further information on the Group’s treasury policy and
activities during the year can be found in the Finance review on pages 26 to 29.

Credit risk analysis
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting
date was:

Classes of financial assets – carrying amounts

Cash and cash equivalents

Trade and other receivables *

2017
£m

25.9

49.8

2016
£m

20.3

47.6

* Trade and other receivables exclude prepayments, tax and social security total amounting £3.3m (2016: £2.6m).

The credit risk on liquid funds is limited because the third parties are banks with high credit ratings assigned by international credit-rating
agencies.

The Group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances
for doubtful receivables. An allowance for impairment is made where there is an identified loss event which, based on previous experience,
is evidence of a likely reduction in the recoverability of the cash flows. The Group has no significant concentration of risk, with exposure
spread over a large number of third parties and customers.

Empresaria Group plcAnnual Report & Accounts 2017

2017
£m

22.9

13.5

5.1

1.7

43.2

2016
£m

25.1

10.0

4.1

1.9

41.1

Trade receivables ageing and impairment losses
The age of trade receivables net of impaired debts as of the reporting date is as follows:

0-30 days

31-60 days

61-90 days

Over 90 days

Total trade receivables (note 17)

Average trade receivables days during the year was 41 days (2016: 47 days).

All of the Group’s trade receivables have been reviewed for indicators of impairment and a provision of £0.8m (2016: £1.0m) has been
recorded accordingly.

Included in the Group’s trade receivable balance are debtors with a carrying amount of £34.0m (2016: £30.1m) which are not past due
and a carrying amount of £9.2m (2016: £11.0m) which are past due at the reporting date. For these balances the Group has not provided
as there has not been a significant change in credit quality and the amounts are still considered recoverable. The Group does not hold any
collateral over these balances.

The age of past due trade receivables net of impaired debts as of the reporting date is as follows:

0-30 days

31-60 days

61-90 days

Over 90 days

Total past due trade receivables

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:

Balance as 1 January

Impairment loss recognised

Impairment loss utilised

Balance at 31 December

2017
£m

6.1

1.9

0.8

0.4

9.2

2017
£m

1.0

0.8

(1.0)

0.8

2016
£m

6.5

2.3

1.1

11.0

2016
£m

0.4

0.6

–

1.0

Strategic reportGovernanceFinancials
88

Notes to the Consolidated financial statements
continued

22 Financial instruments continued
Liquidity risk analysis
The Group’s funding strategy is to ensure a mix of financing methods offering flexibility and cost effectiveness to match the requirements
of the Group. The Group monitors its liquidity risk on an ongoing basis with regular cash flow forecasts. In order to ensure continuity
of funding, the Group seeks to arrange funding ahead of business requirements and maintain sufficient undrawn committed borrowing
facilities.

As at 31 December 2017, the Group’s liabilities have contractual maturities which are summarised below:

Long-term bank loans

Trade and other payables

Other short-term financial liabilities

Total

Current within
6 months

6 to 12 months

Non-current
1 to 5 years

2017
£m

5.2

33.6

30.1

68.9

2016
£m

0.8

36.1

14.0

50.9

2017
£m

1.3

–

1.3

2016
£m

0.9

–

0.9

2017
£m

1.2

–

2016
£m

13.9

–

1.2

13.9

* Trade and other payables in above table exclude other tax and social security amounting £8.4m (2016: £8.8m).

The above contractual maturities reflect the gross cash flows, which may differ to the carrying values of the liabilities at the balance
sheet date.

All bank loans are on floating interest rates.

At the year end the Group had £19.3m (2016: £15.4m) of undrawn bank facilities (excluding invoice financing).

There was no loan repayment default during the year (2016: Nil). At the year end past due loans were nil (2016: Nil).

Market risk analysis
The Group is exposed to market risk through its use of financial instruments and specifically to currency risk, interest rate risk and certain
other price risks.

Capital risk
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns whilst maximising the return
to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of net debt, which
includes the borrowings and cash and cash equivalents disclosed in note 19 and equity attributable to equity holders of the parent,
comprising issued capital, reserves and retained earnings as disclosed in note 21 and in the Consolidated statement of changes in equity.

The board reviews the capital structure of the Group on an ongoing basis, considering the cost of capital and the risks associated with
each class of capital. The Board closely monitors the level of borrowings.

Debt to debtors ratio

Total net borrowing

Trade receivables

Debt to debtors ratio

2017
£m

12.0

43.2

2016
£m

10.5

41.1

28%

26%

Empresaria Group plcAnnual Report & Accounts 2017

2017
£m

37.9

(25.9)

12.0

42.1

2016
£m

30.8

(20.3)

10.5

40.3

29%

26%

2017

95%

2016

98%

Gearing ratio

Gross borrowings

Less: Cash and cash equivalents

Net debts

Equity attributable to company shareholders

Net debt to equity ratio

Debt to EBITDA ratio
EBITDA represents earning before interest, tax, depreciation and amortisation

Debt to EBITDA ratio

Foreign currency risk
The majority of the Group’s transactions are carried out in the local currency of the respective country the business is operating in.
However, the Group does undertake transactions denominated in foreign currencies; consequently exposures to exchange rate fluctuation
arise. The majority of exposures to currency exchange rates arising from overseas sales are mitigated by incurring purchases and cost
of sales in the same currency.

To mitigate the Group’s exposure to foreign currency risk, non-local currency cash flows are monitored and if applicable, forward exchange
contracts are entered into in accordance with the Group’s risk management policies. Generally, the Group’s risk management procedures
distinguish short-term foreign currency cash flows (due within six months) from longer-term cash flows. Where the amounts to be paid and
received in a specific currency are expected to largely offset one another, no further hedging activity is undertaken.

As at 31 December 2017 there were a small number of forward currency contracts in place. The amount covered by these at year end was
£0.9m (2016: 0.6m). The fair value of these as at 31 December 2017 were £Nil (2016: £0.1m).

The Group’s currency exposures are on the translation of subsidiaries results into Pounds Sterling, sales and purchase transactions in
foreign currency and on foreign currency monetary items. There is an element of natural hedge by having operations in different countries.
The amount of currency retranslation loss recognised in equity was £1.2m (2016: gain £5.1m).

Strategic reportGovernanceFinancials
90

Notes to the Consolidated financial statements
continued

22 Financial instruments continued
Foreign currency monetary items and it’s sensitivity analysis
The carrying amounts of the Group’s significant foreign currency denominated monetary assets and monetary liabilities at the reporting
date are set out below:

A 10% weakening of the following currencies against relevant functional currency at 31 December would have (decreased) / increased
equity and the income statement by the amounts shown below. Calculations are performed based on net monetary items balances at
31 December for the same currency. The analysis assumes that all other variables, in particular interest rates, remain constant. Actual
results in the future may differ materially from those projected, due to the development in the global financial market.

2017

US Dollars

Euro

Japanese Yen

2016

US Dollars

Euro

Japanese Yen

Foreign currency
monetary items

Sensitivity analysis impact of non-functional
currency foreign exchange exposure

Assets
£m

Liabilities
£m

Sensitivity

5.6

11.2

0.2

(5.2) US Dollars (10%)

(10.3) Euro (10%)

0.1

Japanese Yen (10%)

Profit and
loss
£m

(0.1)

–

Foreign currency
monetary items

Sensitivity analysis impact of non-functional
currency foreign exchange exposure

Assets
£m

Liabilities
£m

Sensitivity

9.8

8.4

0.9

(11.4) US Dollars (10%)

(7.4) Euro (10%)

(0.2)

Japanese Yen (10%)

Profit and
loss
£m

0.2

(0.1)

Equity
£m

(0.1)

–

Equity
£m

0.2

(0.1)

A 10% strengthening of the above currencies against relevant functional currency at 31 December would have had the equal but opposite
effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

In Management’s opinion, the sensitivity analysis does not completely represent the inherent foreign exchange risk as the year end
exposure does not reflect the exposure during the year.

Interest rate risk
The Group manages its interest rate risk through a combination of cash pooling, shareholder funding and borrowing. Management
monitors movements in interest rates to determine the most advantageous debt profile for the Group. At 31 December 2017, the Group
is exposed to changes in market interest rates through its bank borrowings, which are subject to variable interest rates. For further
information see note 19.

Effective interest rate on borrowings in the year

2017

2.6%

2016

2.6%

An increase of 100 basis points in interest rates would have decreased equity and the income statement by the amounts shown below. The
analysis assumes that all other variables, in particular foreign currency rates, remain constant.

Interest rate

Net result for the year

Equity

Fair value
The carrying value of all financial instruments equates to fair value.

2017
£m

(0.3)

2016
£m

(0.3)

Empresaria Group plcAnnual Report & Accounts 2017

23 Financial commitments
Operating leases

Total minimum operating lease payments due:

Within one year

One to five years

After five years

24 Dividends

Motor vehicles

(office)

Land and buildings

Project based
accommodation

2017
£m

2016
£m

2017
£m

0.6

–

1.2

0.6

0.7

–

1.3

1.9

3.4

0.7

6.0

2016
£m

2.0

3.7

0.9

6.6

2017
£m

0.5

–

0.5

2016
£m

0.4

–

0.4

Amount recognised as distribution to equity holders in the year:

Final dividend for the year ended 31 December 2016 of 1.15p (2015: 1.0p) per share

Proposed final dividend for the year ended 31 December 2017 is 1.32p (2016: 1.15p) per share

2017
£000

2016
£000

564

490

644

564

The proposed dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability
in these financial statements.

25 Contingent liabilities
Guarantees
Cross guarantees exist in respect of bank loans and overdrafts between certain of the Group companies. Guarantees and contingencies
exist in the ordinary course of business.

26 Profit of Parent Company
As permitted by Section 408 of the Companies Act 2006, retained earnings of the Parent Company are not presented as part of these
financial statements. The Parent Company’s loss for the financial year was £2.2m (2016: £Nil).

Strategic reportGovernanceFinancials

Notes to the Consolidated financial statements
continued

27 Related party transactions
Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation
and are not disclosed in this note. These transactions include intra-group management charges and net interest charges to subsidiaries,
which amounted to £3.3m (2016: £3.1m) and £0.8m (2016: £0.5m), respectively.

Remuneration of key management personnel
The Group delegates operational decision making and day to day running of the operating companies to the subsidiary management,
however, key strategic decisions must be approved by the Parent Company. Therefore overall authority and responsibility for planning,
directing and controlling the entities of the Group sits with the Parent Company Board of Directors, who are considered the key
management personnel.

The remuneration of directors, who are the key Management personnel of the Group, is set out below in aggregate for each of the
categories specified in IAS 24. Further information about the remuneration of individual Directors is provided in the audited part of the
Directors’ remuneration report on page 52.

Short-term employee benefits

2017
£m

0.6

2016
£m

0.7

Directors’ transactions
Dividends totalling £161,168 (2016: £140,146) were paid in the year in respect of ordinary shares held by the Company’s Directors.

Management equity
As part of the Group’s management equity philosophy, the following transactions were entered into with related parties (subsidiary
management) during the year.

Purchased by the Group

Company

Empresaria Thailand Holdings Limited

Empresaria Philippines Holdings Limited

BWP Holdco Limited

Mansion House Recruitment Limited

Reflex HR Limited

Second generation shares sold by the Group

Company

Interactive Manpower Solutions Private Limited

Empresaria Thailand Holdings Limited

Aggregate
consideration
£000

% of shares

10%

20%

8.6%

1.1%

25.2%

17.5%

8.8%

15%

247

Nil

–

Nil

Aggregate
consideration
£000

% of shares

0.2%

10%

Seller

J Tolmie

S Gatland

M Banger

P Liffen

P Reynolds

J Coles

R Thompson

R Dobell

Purchaser

K Jayaram

I Yuenyao
L Laurel
N Jenudomsup
V Chutviriyacharoen

Empresaria Group plcAnnual Report & Accounts 2017

2017
Number of
share options

2016
Number of
share options

3,273,009

2,835,154

(281,207)

363,178

–

437,855

3,354,980

3,273,009

28 Share based payments
The Company operates a share option scheme for Directors and senior executives.

Outstanding at beginning of year

Expired during the year

Granted during the year

Outstanding at the end of the year

All the options have a zero cost exercise price. In 2017 a credit of £160,000 (2016: £226,000 expense) was recognised in the income
statement due to lower number of options expected to vest. The fair value was estimated using a Black-Scholes model for the EPS element
and a Monte Carlo model for the total shareholder return element. Details of the performance conditions can be found in the Directors’
remuneration report on pages 51 to 54.

The inputs into these models are as follows:

Share price at date of grant

Weighted average exercise price

Expected volatility

Expected life

Risk-free rate

Expected dividend yields

Vesting dates

Award in 2017

Award in 2016

Award in 2014

138.5p

Nil

36.3%

3 years

0.11%

0.83%

87.5p

Nil

36.1%

3 years

0.58%

1.03%

54p

Nil

43.7%

4 years

1.47%

0.65%

March 2020

March 2019

March 2018

The expected volatility is determined from the daily log normal distributions of the Company share price over a period equal to the expected
holding period calculated back from the date of grant. The risk free rate was the zero coupon bond yield derived from UK government
bonds at the date of grant, with a life equal to the expected holding period.

Included in the total number of share options above are 1,897,000 share options already vested. As of the date of this report none of those
options have been exercised. Further details can be found in the Directors’ remuneration report on page 54.

Strategic reportGovernanceFinancials
94

Parent Company balance sheet

Non-current assets

Tangible assets

Investments

Current assets

Debtors (including amounts falling due after more than one year of £Nil (2016: £Nil))

Cash at bank

Creditors: amounts falling due within one year

Net current assets

Total assets less current liabilities

Creditors: amounts falling due after more than one year

Net assets

Capital and reserves

Called up share capital

Share premium account

Merger reserve

Other reserves

Equity reserve

Profit and loss account

Shareholders’ funds

Note

2017
£m

–

49.0

4.3

–

(21.8)

(17.5)

31.5

(1.0)

30.5

2.4

22.4

0.9

0.7

(0.2)

4.3

30.5

2016
£m

–

41.9

12.4

–

(10.2)

2.2

44.1

(10.5)

33.6

–

2.4

22.4

0.9

(0.2)

7.2

33.6

These financial statements of Empresaria Group plc (Company registration number 03743194) were approved by the Board of Directors
and authorised for issue on 13 March 2018.

Signed on behalf of the Board of Directors

Joost Kreulen
Director

Spencer Wreford
Director

Empresaria Group plcAnnual Report & Accounts 2017

Parent Company statement of changes in equity

At 1 January 2016

Profit for the financial year and total comprehensive income

Dividend paid on equity shares

Movement in share options

At 31 December 2016

Loss for the financial year and total comprehensive loss

Dividend paid on equity shares

Movement in share options

Purchases of own shares by Employee Benefit Trust

Share
capital
£m

Share
premium
£m

Merger
reserve
£m

Other
reserve
£m

Equity
reserve
£m

2.4

22.4

0.9

0.7

(0.2)

–

2.4

22.4

0.9

–

0.2

0.9

–

(0.2)

–

0.7

–

(0.2)

–

(0.2)

Profit
and loss
account
£m

Total
Shareholders’
funds
£m

7.7

–

(0.5)

–

7.2

(2.2)

(0.6)

–

(0.1)

4.3

33.9

–

(0.5)

0.2

33.6

(2.2)

(0.6)

(0.2)

(0.1)

30.5

At 31 December 2017

2.4

22.4

0.9

Equity comprises the following:
• ‘Share capital’ represents the nominal value of equity shares.

• ‘Share premium account’ represents the excess over nominal value of the fair value of consideration received for equity shares,

net of expenses of the share issue.

• ‘Merger reserve’ relates to premiums arising on shares issued subject to the provisions of section 612 ‘Merger relief’ of the Companies

Act 2006.

• ‘Equity reserve’ represents amounts recognised in relation to historic expired options over a subsidiary company.

• ‘Other reserves’ primarily represents movements in relation to share based payments.

• ‘Retained earnings’ represents accumulated profits less distributions and income/expense recognised in equity from incorporation.

Strategic reportGovernanceFinancials
96

Notes to the Parent Company financial statements

1 Basis of preparation and significant accounting policies
The financial statements are for the twelve months ended 31 December 2017. The financial statements have been prepared under the
historical cost convention, modified to include certain items at fair value, and in accordance with Financial Reporting Standard 102
(FRS 102) issued by the Financial Reporting Council.

These financial statements are presented in Pounds Sterling (£).

The accounting policies have been applied consistently throughout the period for the purposes of preparation of these financial statements.
The Company has taken advantage of a disclosure exemption and has elected not to present a cashflow statement.

Accounting policy for the Company in the United Kingdom
Going concern
Details of going concern are given in note 1 to the Group accounts.

Foreign currencies
Monetary assets and liabilities in foreign currencies are translated into sterling at the rates ruling at the year end. Exchange rate differences
are dealt with through the income statement.

Tangible fixed assets
Depreciation is provided on cost in equal annual instalments over the estimated useful lives of the assets. The rates of depreciation are
as follows:

Fixtures, fittings and equipment: between one and five years.

Investments
Investments held as fixed assets are stated at cost less provision for any impairment in value.

Fixed asset investments
The Company’s investments in shares in Group companies are stated at cost less provisions for impairment. Any impairment is charged
to the income statement as it arises.

Leases
Assets obtained under finance leases and hire purchase contracts are capitalised at their fair value on acquisition and depreciated over
their estimated useful lives. The finance charges are allocated over the period of the lease in proportion to the capital element outstanding.

Operating lease rentals are charged to income in equal annual amounts over the lease term.

Financial Instruments
Short term debtors and creditors are measured at transaction price, less any impairment. Loans receivable and other financial liabilities,
including amounts due from and to subsidiary undertakings, are measured initially at fair value, net of transaction costs, and are measured
subsequently at amortised cost using the effective interest method, less any impairment.

Pension costs
Pension costs are charged to the income statement and relate to contributions made to pension schemes. Contributions to the scheme
are charged to the income statement as they become due for payment.

Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

2 Profit for the year
As permitted by section 408 of the Companies Act 2006 the Company has elected not to present its own income statement for the year.
The Company reported a loss after tax for the financial year ended 31 December 2017 of £2.2m (2016: £nil).

Empresaria Group plcAnnual Report & Accounts 2017
97

2017
£m

1.1

0.1

(0.2)

1.0

0.1

1.1

2016
£m

1.1

0.1

0.2

1.4

0.1

1.5

2017
Number

2016
Number

3 Directors and employees

Staff costs

Wages and salaries

Social security costs

Share based payments

Bonus costs

Average monthly number of persons employed (including directors)

Pension contributions made in the year were £92,430 (2016: £94,172).

Details of Directors’ remuneration are given on pages 51 to 54.

4 Dividends
During 2017 Empresaria Group plc paid a dividend of £0.6m to its equity shareholders (2016: £0.5m). This amounted to 1.15p per ordinary
share (2016: 1.0p).

A final dividend is proposed for the year ended 31 December 2017 of 1.32p per ordinary share (2016: 1.15p). The proposed dividend is
subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.
If approved, the dividend will be paid on 31 May 2018 to members registered on 4 May 2018.

5 Tangible assets
The following table shows the significant additions and disposals of property, plant and equipment:

Cost

At 1 January 2017

Additions

Disposals

At 31 December 2017

Accumulated depreciation

At 1 January 2017

Charge for the year

Disposals

At 31 December 2017

Net book value

At 31 December 2016

At 31 December 2017

Fixtures,
fittings and
equipment
£m

0.6

–

(0.1)

0.5

0.6

–

(0.1)

0.5

–

Strategic reportGovernanceFinancials

Notes to the Parent Company financial statements
continued

6 Investments held as fixed assets

Cost

At 1 January 2017

Additions

At 31 December 2017

Impairment

At 1 January 2017

Impairment charge

At 31 December 2017

Net book value

At 31 December 2016

As 31 December 2017

Shares in
subsidiary
undertakings
£m

49.2

8.4

57.6

7.3

1.3

8.6

41.9

49.0

Investments comprise of the following subsidiary companies:

Company

Registered office: Old Chuch House, Sandy Lane, Crawley Down, West Sussex. RH10 4HS UK

Alpion Recruitment Limited

Ball and Hoolahan Limited

Beresford Wilson and Partners Limited

BWP Holdco Limited

ConSol Partners (Holdings) Limited

ConSol Partners Limited

Creative People Limited

Empresaria Americas Finco Limited

Empresaria Americas Limited*

Empresaria Asia Limited*

Empresaria Indonesia Holdings Limited (formerly Empresaria China (Holdings) Ltd)

Empresaria GIT Holdings Limited*

Empresaria GIT Limited

Empresaria T&I Holdings Limited (formerly Empresaria Gulf Limited)*

Empresaria Healthcare Limited*

Empresaria Malaysia Holdings Limited

Empresaria Mexico Holdings Limited

Empresaria North America Limited

Empresaria NZ Limited*

Empresaria Philippines Holdings Limited

Empresaria T&I Limited* (formerly Empresaria Technical & Industrial Holdings Limited)*

Empresaria Technology (Holdings) Limited*

Empresaria Thailand Holdings Limited

Empresaria Vietnam Holdings Limited

EMR1000 Limited*

FastTrack Management Services Limited*

Global Crew UK Limited

Greycoat Investments Limited*

Greycoat Placements Limited*

Class of
share held

2017
Effective %
holding

2016
Effective %
holding

Ordinary

‘A’ Ordinary

Ordinary

‘A’ and ‘B’ Ordinary

Ordinary

‘A’ Ordinary

Ordinary

‘A’ Ordinary

Ordinary

‘A’ Ordinary

Ordinary

‘A’ Ordinary

Ordinary

‘A’ Ordinary

100

Empresaria Group plcAnnual Report & Accounts 2017
99

Class of
share held

Ordinary

‘A’ Ordinary

n/a

Ordinary

‘A’ Ordinary

‘A’ and ‘B’ Ordinary

Ordinary

‘A’ Ordinary

Ordinary

‘A’ and ‘B’ Ordinary

Ordinary

2017
Effective %
holding

2016
Effective %
holding

100

–

100

Company

Interim Management International Limited*

LMA Recruitment Limited*

Lumley Employment Company Limited (Dissolved 3 January 2017)

Become Recruitment Limited (formerly Mac People Limited)

Mansion House Recruitment Limited*

McCall Limited*

NMS Czech Holding Limited*

Oval (888) Limited*

Publishing People Limted

Reflex HR Limited*

Teamsales Limited*

The Recruitment Business Holdings Limited*

The Recruitment Business Limited

The Recruitment Store (2000) Limited

TLN 1004 Limited*

TLN 1006 Limited*

Web People Recruitment Limited

Registered office: Stanley & Williamson, Level 1 34 Burton Street, Kirribilli NSW 2061, Australia

The Recruitment Business Pty Limited

Ordinary

Registered office: Bahnofstrasse 22, 3300, Ametetten, Austria

headwayaustria GesmbH

Ordinary

100

Registered office: Ave. Isidore Goyenechea 3250, 13th Floor, Santiago, District of Las Condes,
Chile

Empresaria Group Chile Limitada*

Ordinary

100

Registered office: Alcade Jorge Monckebery 77, Santiago, Chile

A-Consulting Limitada

Alternattiva Empresa De Servicios Transitorios Limitada

Instituto De Capacitacion Complementaria De La Empresa Limitada

Marketing y Promociones S.A. ‘Alternattiva’

Ordinary

Registered office: Room 16F02, No. 828-838, Zhangyang Road, Pudong New Area,
Shanghai, China

Monroe Consulting China Group (formerly named Empresaria Intelligence HR Consultants)*

Ordinary

100

Registered office: Linnankatu 13a B32, 6th Floor, 20100 Turku, Finland

Mediradix Oy*

Registered office: Landshuter Strabe73, 84030, Ergolding, Germany

Empresaria Holding Deutschland GmbH*

headwaylogistic administration GmbH

headwayindustrie GmbH

headwaypersonal GmbH

Registered office: Kurt-Schumacher-Strasse 62, 45699 Herten, Germany

headwaylogistic GmbH

Registered office: 22/F, 3 Lockhart Road, Wanchai, Hong Kong

LMA Recruitment Limited

Ordinary

Series A and Series B

Ordinary

Series A and Series B

100

Ordinary

100

Registered office: Unit B, 10th Floor E168, nos 166-168 Des Voeux Road Central, Sheung Wan,
Hong Kong

The Recruitment Business Limited

Ordinary

Strategic reportGovernanceFinancials
100

Notes to the Parent Company financial statements
continued

6 Investments held as fixed assets continued

Company

Registered office: Ground Floor, 001 Raghupati Niketan, Opp. Ishita Appartments, Navrangpur,
Ahmedabad, Gujarat, 380 009, India

Interactive Manpower Solutions Private Limited*

Registered office: Jalan Wijaya 1 No. 71, Jakarta, 12170, Indonesia

PT. Learning Resources

Registered office: Gedung Soverein Plaza, Lt 16 UnitA-B, Jl. TB simatupang Kav. 36, Jakarta,
SELTAN 12430, Indonesia

PT. Monroe Consulting Group

Registered office: No. 2 TR Building, 2-10-4 Yoyogi, Shibuya-ku, Tokyo, Japan

FINES K.K.

FINES Tokyo K.K.

Registered office: 8-27 Toranomon 3-chome, Minato-ku, Tokyo, Japan

Skillhouse Staffing Solutions K.K.

Registered office: Portman House, Hue Street, St Helier, JE4 5RP, Jersey

Class of
share held

2017
Effective %
holding

2016
Effective %
holding

Ordinary

‘A’ Ordinary

Ordinary

–

Rhinefield Limited*

Ordinary

100

Registered office: 14A Jalan Tun Mohd Fuad, Taman Tun Dr Ismail, 60000, Kuala Lumpur, Wilayah
Persektuan, Malaysia

Monroe Consulting Group Malaysia Sdn. Bhd.

Registered office: Insurgentes 1796 4to Piso, Colonia Florida, DF 01030, Mexico

Monroe Consulting Mexico S.A. de C.V.

Registered office: GVW Accountants Limited, Level 1, 109 Carlton Gore Road, Newmarket, 1023
New Zealand

Global Resources Asia Limited

Rishworth Holdco Limited

Rishworth Aviation Asia Limited

Rishworth Aviation Asia Pacific Limited

Rishworth Aviation Europe Limited

Rishworth Aviation Limited

Rishworth Aviation International Limited

Rishworth Personnel Limited

Rishworth Solutions Limited

Ordinary

Class II Ordinary

Ordinary

Registered office: Unit 605 Richvill Corporate Tower, 1107 Alabang-Zapote Road, Madrigal
Business Park, 1780, Philippines

HR Philippines Holdings, Inc.

Ordinary

Registered office: Unit 2108 Trade & Financial Tower, 7th Avenue Corner 32nd Street, Global City,
Taguig, 1634, Philippines

Monroe Consulting Philippines Inc

Registered office: 10 Anson Road #35-06A, International Plaza, 079903, Singapore

Global Crew Asia Pte Ltd

Global Resources Aviation Singapore PTE Ltd

Registered office: 133 Cecil Street, #17-01B, Keck Seng Tower, 069535, Singapore

Learning Resources Solution Pte. Limited

LMA Recruitment Singapore Pte. Limited

McCall Singapore Pte. Limited

Ordinary

–

Empresaria Group plcAnnual Report & Accounts 2017
101

Company

Registered office: Postova3, 811 06, Bratislava, Slovakia

Gate1234 s.r.o.

Registered office: Norrtullsgatan 6, 4th Floor, 11329 Stockholm, Sweden

Rishworth Aviation AB

Class of
share held

2017
Effective %
holding

2016
Effective %
holding

Ordinary

100

Ordinary

Registered office: No. 209/1 K Towers B, 23rd Floor, unit2, Sukhumvit 21 (Asoke) Road, Bangkok,
10110, Thailand

Monroe Holdings (Thailand) Company Limited

Ordinary

Registered office: 28th Floor, Lake Rajada Office Complex Bldg, 193/119 Rachadapisek Rd,
Klongtoey, Bangkok, 10110, Thailand

Monroe Recruitment Consulting Group Company Limited

Ordinary

Registered office: Office 306, Building 19, Dubai Knowledge Village, PO Box 5000693,
United Arab Emirates

Beresford Wilson and Partners FZ-LLC

Registered office: 615 South Dunpont Highway, Dover, Kent County, DE 19903, United States

ConSol Partners LLC

Registered office: 2711 Centreville Road, Suite 400 City of Wilmington, New Castle County,
DE 19808, United States

Empresaria USA, Inc.

Registered office: 477 Main Street, Stoneham, MA 02180, United States

Medical Recruitment Strategies, LLC

Pharmaceutical Strategies, LLC

Recruitment Strategies Group, LLC

Recruitment Strategies, LLC

Ordinary

Common Stock

‘A’ and ‘B’ Ordinary

* These companies are directly held by Empresaria Group plc. The remaining investments are indirectly held. The percentage shown is as at 31 December 2017 and 31 December 2016.

The nature of each investment is the provision of staffing services and each entity operates in its country of incorporation.

7 Debtors

Amounts owed by subsidiary undertakings (including amounts falling due after more than one year of £nil (2016: £nil))

Other debtors

Prepayments and accrued income

2017
£m

3.3

0.5

4.3

2016
£m

11.2

0.4

0.8

12.4

Strategic reportGovernanceFinancials102

Notes to the Parent Company financial statements
continued

8 Creditors: amounts falling due within one year

Bank overdraft and loans due within one year

Trade creditors

Amounts owed to subsidiary undertakings

Other creditors

Accruals

9 Creditors: amounts falling due after more than one year

Bank loans

2017
£m

16.6

0.1

4.3

0.1

0.7

2016
£m

4.6

0.1

4.4

0.1

1.0

21.8

10.2

2017
£m

1.0

2016
£m

10.5

At 31 December 2017 the UK multi-currency revolving credit facility of £10.0 million, expiring in 2021, had a balance of £1.0 million (2016:
£8.5 million). The facility was entered into in the year ending 31 December 2016 to part-fund the investments in Rishworth Aviation and
ConSol Partners. Interest is payable at 1.5% plus LIBOR or EURIBOR.

At 31 December 2017 the UK term loan, expiring in 2018, had a balance of £2.0 million (2016: £3.5 million). No drawdowns were made
during the year ending 31 December 2017. In the year ending 31 December 2016 drawdowns from this term loan of £2.9 million were made
to part fund the investment in Rishworth Aviation and also fund the contingent consideration payment due for Pharmaceutical Strategies.
£1.5 million of this loan was repaid during the year and £2.0 million is expected to be repaid during the year ending 31 December 2018.
Interest is payable at 1.5% above UK base rate.

The interest rate on the UK bank overdraft was fixed during the year at 1.0% above applicable currency base rates. A $1.5 million overdraft
facility to provide working capital funding to Pharmaceutical Strategies had a balance of $nil (2016: $0.7 million) as at 31 December 2017.
Interest on this USD facility is payable at 2% over currency base rates:

Bank loans

Repayable within one year

Repayable between one and two years

Repayable between two and five years

2017
£m

2.0

–

1.0

3.0

2016
£m

1.5

9.0

12.0

Empresaria Group plcAnnual Report & Accounts 2017

103

10 Called up share capital

Allotted and fully paid

Ordinary shares of 5p each

Number
of shares

2017
£m

Number
of shares

2016
£m

49,019,132

2.4 49,019,132

2.4

The Company has one class of ordinary share which carries no rights to fixed income. All ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard
to the Company’s residual assets.

During the year ended 31 December 2017 the Company purchased 96,500 of its own shares for a total consideration of £93,445.
The shares have subsequently been transferred to the Employee Benefit Trust to meet the obligation to provide shares when employees
excercise their options or awards. Subsequent to 31 December 2017 the Company has purchased a further 163,884 shares for a total
consideration of £156,000 making the total number of shares purchased 260,834 for a total consideration of £249,445.

Strategic reportGovernanceFinancials

104

Officers and professional advisers

Directors
Joost Kreulen
Spencer Wreford
Tony Martin
Penny Freer
Zach Miles

Secretary
James Chapman

Registered office
Old Church House
Sandy Lane
Crawley Down
Crawley
West Sussex
RH10 4HS

Company registration number
03743194

Nominated Adviser
Arden Partners plc
125 Old Broad Street
London
EC2N 1AR

Nominated Broker
Arden Partners plc
125 Old Broad Street
London
EC2N 1AR

Solicitors
Osborne Clarke
2 Temple Back East
Temple Quay
Bristol
BS1 6EG

Bankers
HSBC plc
West & Wales Corporate Banking
3 Rivergate
Temple Quay
Bristol
BS1 6ER

Independent auditor
Deloitte LLP
London Gatwick Office
Global House
High Street
Crawley
West Sussex
RH10 1DL

Registrars
Link Asset Services
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
West Yorkshire
HD8 0GA

Empresaria Group plcAnnual Report & Accounts 2017

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Empresaria Group plc

Old Church House
Sandy Lane
Crawley Down
Crawley
West Sussex RH10 4HS

empresaria.com