Good morning and welcome to the Empresaria Group PLC Full Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged, and they can be submitted at any time using the Q&A tab situated on the right-hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses when it is appropriate to do so. Before we begin, I would like to submit the following poll, and I would now like to hand you over to CEO Rhona Driggs. Good morning to you.
Good morning, and thank you for joining us for our 2024 full-year results. The financial overview for the year, as many of you are aware, challenging market conditions persisted throughout the year. Net fee income reduced by 6%, constant currency excluding operations that we exited. Permanent placements saw the greatest impact, down 21%. Temporary and contract net fee income, my apologies, was more resilient, up 2% for the year. Offshore services was down 6%, reflecting the wider recruitment market environment. Adjusted operating profit was down 21%, constant currency, with reported figure down 25% to GBP 3.8 million, reflecting the impact of the reduction in net fee income. Our adjusted profit before tax down 37% to GBP 2.2 million, and adjusted diluted loss per share of GBP 0.01, reflecting the reduction in profits and the allocation of earnings to non-controlling interest.
Our net debt increased to GBP 15.3 million with headroom of GBP 4.1 million, and Tim will go through a bit more of that in the financial review. For the operating review for the year, we continue to deliver on our strategic initiatives. We did complete the exit of individual operations in Finland, China, Japan, Australia, and in the U.K. in our small property and construction business. We are starting to deliver benefits from our streamlined management structure and alignment of operations under a single leader in each country. For example, in Germany, we are now aligned under a single leader for the multiple businesses we have in Germany and in our core sector operations in the U.K. As a reminder, we were already aligned under a single leader in the U.S.
We've seen a notable shift from transactional to relationship-based selling, which is really important in a market where we are trying to get existing market share as opposed to a lot of new order volume. We have made continued progress on technology with full adoption and implementation of an analytics tool now embedded across the group. I will now turn it over to Tim to talk about the financial reviews.
Thanks, Rhona. Rhona's talked through most of the items on this slide, but just to re-emphasize that we've included a constant currency like-for-like measure here, and that's excluding the operations that we exited in both 2023 and 2024. Revenue, as you can see, is down 2% but up 5% on a constant currency like-for-like basis. That reflects that relative strength in temporary and contract that Rhona mentioned, particularly in some of the lower margin temporary and contract in our commercial sector. The other thing to highlight, I'll talk about the adjusted operating profit by region in a second. Central costs were up slightly year on year, and this really reflects some credits that we had in 2023. For example, in share-based payments, we had a GBP 0.3 million credit in 2023 with a GBP 0.1 million charge in 2024.
Moving on to our net debt positions, our net debt has increased during the year to GBP 15.3 million. That reflects the trading but also the impact of the exceptional bad debt we had in H1 last year. Our average month-end net debt has therefore increased from just under GBP 8 million in 2023 to GBP 12.1 million in 2024. Headroom has reduced GBP 4.1 million, partly reflecting that increase in net debt. Also, we did see reductions in the number of facilities during 2024. This is partly smaller facilities that we have not used in a long time, so we know that those were taken off. Also, we were able to put a significant reduction in our Germany facility after implementing cash pooling in 2023.
This has made that business much more efficient from an income perspective but meant that it did not need the larger facility that it had in place before. As well as this headroom, we do have significant cash in some of the overseas entities in the group, such as in India, which could be accessed if we needed it, although sometimes that could come as a withholding tax cost. Net finance costs remain unchanged on the prior year. Despite that net debt, we have been increasingly efficient with how we are managing cash and trying to keep the interest figure as low as possible. Subsequent to the [branching] date, we have extended our GBP 15 million RCF total by a further six months to September 2026. As part of that, we have agreed on easing of the covenants for the remaining life of that facility.
Moving on to the review by region. In the U.K. and Europe, within that, the U.K. saw NFI fall by 9%, driven primarily by permanent placements, which reduced by 16%. Temporary and contract was relatively resilient with a fall of just 2% in net fee income. IT and professional was primarily the driver of this, with demand continuing to fall through the year. Our private household and corporate hospitality business did have a strong year, and that was up year on year. In Germany, results were fairly solid, so there was a 1% increase in net fee income, and that was converted to a 12% increase in profits, reflecting a more efficient cost base off the back of aligning all our businesses under a single leader at the start of 2024.
In the year, we did sell our loss-making operation in Finland, which is a small healthcare business, and we also sold our small U.K. operation focused on the new homes market. In the CPAC, overall, net income declined more steeply in this region than in others, so we were down 13% on a constant currency like-for-like basis. The market challenges we've seen across the group in the last couple of years and across the sector have had a greater impact in 2024, having had a relatively modest impact in 2023. This region was catching up in terms of those market challenges. IT has continued to be the most challenged area. This year, we saw a particularly big reduction in Japan, where net fee income was down by 25%, and Japan businesses are 100% focused on IT.
Aviation, which is our aviation business, has been generating fairly significant losses in the last few years. We did see some good progress with net fee income increasing and a very significant reduction in losses, although it did still generate a small loss. We also closed two small operations, professional operations in China and Australia, and we sold our small commercial operation in Japan. Moving on to the Americas, relatively strong performance across this region as a whole. Revenue did increase year on year by 23%, constant currency like-for-like, and net fee income was up 5% in constant currency. The U.S. has remained challenging for the IT sector, and net fee income did reduce. However, the cost actions that we've been doing in that business meant that our losses significantly reduced year on year.
Healthcare, we started to see some improvements in the second half after a weaker first half in the year 2023, delivering both NFI and profit growth, and we see a much more positive outlook there than we had done before. In South America, Chile grew strongly with net fee income up 9% and profits up 23%. Moving on to offshore services, net fee income did reduce for the first time in a number of years here, so we were down 6% in constant currency. That is the first decline we have seen since 2020. This is a business that grew in 2023 despite the wider market challenges in the sector. However, in 2024, we did see an impact from U.K. healthcare in particular, which meant our total U.K. billable seats fell 6% in the year.
We do see still some pressure on NHS agencies then, and that is expected to continue, but we feel that that is at least stabilizing. U.S. demand, which had been challenged for a couple of years, was still flat during the first half of the year, but we did see some increases in the second half. Actually, our billable seats closed the year up 8% for the U.S. We have been continuing to invest in our sales team, and what we've seen historically is that as the staffing market recovers, that can be a catalyst for more rapid growth in our offshore services businesses. When clients need to, in a case where they want to look to add resource to meet demand, they can do that much more quickly with an offshore service and with lower risk.
That does tend to push them more in our direction when the market recovers. We are looking to capitalize on that at the moment opportunity exists. That is why we are continuing to invest in our sales team and our marketing efforts. Back over to Rhona.
All right. Thank you, Tim. As we announced in February, we are taking steps to accelerate our strategy. We remain committed to our three key pillars for growth, which were focused on our core sectors of IT, professional, and healthcare, diversifying our service offerings to clients, and continued growth in our offshore services business. Our acceleration does refine pillar one to focus on specific markets in the U.S. and the U.K., creating a streamlined group. This is really important as we continue to look at the U.S. and the U.K. being two of the largest staffing markets in the world. U.K. currently focused on IT and professional, and in the U.S., we are IT, professional, and healthcare. Of course, offshore services remains critical to our ongoing focus.
Our plan is to complete the exit from all other operations in the next two years to deliver sales proceeds that are expected to eliminate the group's net debt and provide a significant reduction in the central overhead once exits are complete. As I mentioned, the U.K. and the U.S. are two of the largest staffing markets and provide significant opportunity for us in the future. Our operations have a strong presence with all three core sectors represented in the U.S. and two in the U.K., with the potential to expand in the future into healthcare in the U.K. We have a proven track record, although we've been significantly impacted by market conditions the last two years and have underperformed. We strongly believe in our ability to really more effectively derive our operations and investment in those markets through the exit of the other markets that we're in currently today.
We have already aligned management structures with a single leader in each market. A more focused group will enable us to rebuild the profits more quickly and scale our operations more effectively through investment in technology, strengthening our training. We have just launched a training initiative right now for the U.S. and the U.K., and that is starting this month. Investing in a single go-to-market brand, which I think will be game-changing when it comes to our clients and the ease of buying with our clients going forward. Continuing to grow our service offerings to clients, for example, RPO, expanding and leveraging the success we have already had in RPO and expanding our temp offering in the U.S.
Specifically too, as well to note, we have started to make some significant traction in growing our MSP delivery in the U.K., and we will continue to focus on that area as MSPs are continuing to become much more prominent in the U.K. market. We will also look at appropriate time to accelerate growth through inorganic means as well. Offshore services, we remain extremely confident in our offshore services operation and its value to the group. It is a key differentiator from our peers, and maximizing the value of this operation is one of our key pillars. Priorities for 2025 include continued investment in our sales team to drive accelerated growth as and when the staffing market recovers. As Tim mentioned earlier, historically, market recovery has been a trigger for accelerated growth in the offshore services space.
We are also expanding our back-office client base and have been really focused on driving sales in that area. Our services can be used by sectors outside of the recruitment area, which primarily today we service the recruitment sector largely, but we are looking to reduce our reliance on a single client sector moving forward in the future. We're continuing to identify and develop additional service offerings as well to drive sales with our existing client base, and we've made some traction in both offering marketing services to clients as well as some limited IT offshore services. Delivering value from our non-core, those are expected to be sold over the next two years to generate significant sales value from those businesses. These operations did contribute GBP 4.5 million to the group's adjusted operating profit in 2024, so we do see some real value in these operations.
We have approximately 12 operations to be sold. The vast majority were profitable in 2024. To note that there were many operations that are also, well, we have a few that will probably be later on in the cycle of sale as they recover. Many of these businesses, or several of these businesses specifically in commercial and some of the businesses in Asia, are ahead of pre-COVID numbers. We do feel like we will be very successful in selling those operations. Flexibility on sales timing will help ensure that we get the best value for those operations. In summary, while 2024 was a difficult year for the market, for the wider recruitment market, we have relatively solid performance in what was, again, a tough market. We do not see any significant signs of market recovery currently, so we are not assuming any significant improvement in 2025.
However, we are focused right now on improving performance in the current environment. Our accelerated strategy will drive clear benefits over the next few years. Focusing on core markets in the U.S. and U.K. will enable us to accelerate our growth and invest appropriately in those markets, continue to drive the value of our differentiating offshore services operation, eliminating net debt from the sales of non-core operations, and allow us at the same time to significantly reduce central costs. In 2025, we will improve our effectiveness and speed of investment in technology and training in our core sectors. As you can imagine, being in 15 countries, rolling out technology and training is much more challenged in trying to find something that works for every single market we are in.
I think the effectiveness and speed of what we're able to do in the U.K. and U.S. specifically will be a huge leverage point for us going forward. Launching a single brand in our U.K. and U.S. operations will allow us to accelerate our cross-selling abilities and really, again, make it easier for us to provide a single face to our clients and our candidates in those markets. We ensure that our U.S., U.K., and offshore services operations are well positioned for market recovery. We feel extremely confident in that today. We are currently preparing, of course, our non-core operations for sale. Finally, we will improve our financial position through the initial sales of non-core operations with the first significant sale expected in late 2025. I will now take questions or turn it back over.
Fantastic. Rhona, Tim, thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the Q&A tab situated on the top right corner of your screen. While the company takes a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via Investor Dashboard. Rhona, Tim, as you can see, we have received a number of questions throughout today's presentation. If I may now hand back to you and kindly ask you to read out the questions where appropriate to do so, I'll pick up from you both at the end. Thank you.
Yes, so we've got a few questions in. The first one is asking about offshore services and noting that it has fairly high profitability in terms of margins and that that's not that usual in a staffing business. The question is, what is driving that?
The key answer there is that it is not a staffing business. It is an offshore services business that is supporting the staffing market, obviously operating in low-cost markets. As a reminder, our offshore businesses do operate in two locations in India as well as a location in the Philippines.
We have a question here just asking about the bad debt provision that we have in the year and provide more detail on the nature and recovery prospects of it. This is an issue in Germany. Clients of ours essentially went into what they call provisional administration in Germany. There is very little you can do when that situation happens. What we did do is respond very well in terms of moving workers to other clients, or we ended up negotiating with our client's client to get cash directly from them and continue to service in the short term to help minimize our costs in terms of sort of employment risk that you have in Germany. The recovery prospects are unfortunately very low.
We understand that it's still not like we'll get anything material back from that, but we are certainly still engaging with that process and looking to see what we can do on that. We've then got just a question about the U.S. How repeatable is the U.S. momentum in 2025? I think that's referring to the healthcare new store.
Yes, and I do think it's very repeatable. We're very optimistic about our healthcare business in particular. We do leverage our offshore services team to deliver into that business, and we've got a good, solid— we're seeing good, solid demand in that business right now and good, solid delivery. I think IT and professional will take a little bit of time depending on how the U.S. market recovers. I do believe that in particular in the healthcare business, I think we will see some very good momentum this year in 2025.
Okay. Another question is, how confident are we in achieving meaningful deleveraging in 2025? I think I would be a little bit cautious about the timeline because clearly we have a number of disposals to work through. Some of them are larger, some of them are smaller, and of course, we are looking to maximize the benefit we get. Although we do expect to complete some disposals this year, and we do certainly expect that will include one or two of the more significant ones, we are still a little bit cautious on the timeline because, of course, if we run a process and we find maybe the market is not quite right in that area for us to get the best value, then we will want to pause that slightly and make sure we are getting proper value for share.
We do expect to see some deleveraging this year. I think exactly what level we see will depend on which disposals we're able to get across the line in that period. Another question about AI. What role do we anticipate for AI in our business to reduce costs?
I think that question is probably best answered by saying that I think certainly AI is helping us, and the technology that we have been deploying across the group over the last several years has been helping us to create efficiencies in our business. What it is more likely to do is enable us to provide more service to our clients and reduce those administrative tasks. It is not necessarily a reduction in headcount that we are going to see as opposed to a greater impact in our ability to do more client-facing activities and reducing our administrative. I am not sure if you have anything else you want to add to that, Tim.
Yeah. I guess what I would add is that we work with a number of technology suppliers. We partner with them very closely on these sorts of developments such as AI. We are seeing it come through in the software we are using, in the software we are implementing, and it is going to be an important part of how we operate going forward. I would agree with Rhona, it is not really about reducing costs as such. It is about maybe improving productivity to an extent, but also improving the service and improving the quality of what we are delivering to clients. There is just a question on offshore, noting that revenue was constant. Asking what drove the reduction of margins in offshore services.
The revenue in offshore this year did include some payroll services that we were being provided for clients in India, often actually clients of other parts of the group. The revenue line has some low-margin payroll there. That is part of the reason. We are in a tough market. Clients are looking to hold costs. They are negotiating harder on fees. Of course, our cost base, which within net of the income includes the cost of our staff that are providing that service, that cost base is clearly continuing to increase. That is also the other reason why we have seen a bit of a dip in margin in 2024. I think that is everything.
That's great. Tim, Rhona, thank you for addressing those questions for investors today. Of course, the company can review all questions submitted today and will publish those responses on the Investor Meet Company platform. Rhona, before we redirect investors to provide you with their feedback, which is particularly important to the company, could I please ask you for a few closing comments?
Sure. Thank you so much. I would like to close by saying that we are absolutely confident in the actions that we've already taken and specifically the actions that we took in 2024. With our more targeted strategy, we are confident that it will enable us to drive faster growth in our chosen sectors and markets while at the same time strengthening our financial position and enhancing shareholder value. I would like to thank everyone for taking their time to listen in today and appreciate your continued support.
Fantastic. Rhona, Tim, thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations? This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of Empresaria Group PLC, we would like to thank you for attending today's presentation, and good afternoon to you all.