Empresaria Group (EMR: AIM) the international specialist staffing firm reported revenue of £178.3 million for the half year ending 30 June 2018, an increase of 5% in constant currency (CC) from £173.4 million last year.

The group said its net fee income (gross profit) was held back in the first half by labour legislation changes in Germany and Japan. The legal changes resulted in higher pay rates and limits on the length of temporary working contracts, which impacted the group’s German logistics and Japanese IT operations, specifically leading to a reduction in temporary worker numbers. Empresaria said it is working to improve its results in Germany and Japan, and overall trading is in-line with market expectations.

“While these impact negatively on our results in the short-term, both markets remain attractive in the medium-term and we are taking action to improve our results and get back to previous levels,” the group stated.

Despite the previously mentioned regulatory changes in Germany and Japan, the group said it has seen a number of strong performances, notably in India with its Offshore Recruitment Services (ORS) business, in the UK with Professional services, in the group’s business in Chile and in the recent investments in ConSol Partners, Rishworth Aviation and Pharmaceutical Strategies.

“In Professional services, we are pleased that the restructuring undertaken last year is delivering the desired results, with a strong performance across all divisions,” the group stated. “In Chile our strategy of diversifying into traditional temporary and permanent recruitment continues to deliver growth, alongside the steady outsourcing business.”

By geography, Empresaria Group reported revenue during H1 2018 as follows:

In the UK, revenue decreased by 4.1%, however the group reported improved performance from Professional services.

Within Continental Europe, the group said that the impact from the introduction of equal pay legislation for temporary workers, with higher rates being paid to workers with no corresponding increase in net fees, resulted in lower temporary margins. The largest impact from the new legislation has been in the logistics business in Germany, which saw a 15% drop in revenue against the prior year.

Though revenue improved in Asia Pacific, Empresaria said conditions have been challenging in Japan, with new legislation impacting its business in IT, resulting in a decline in revenue and profit against the prior year.

The legislations include the "five-year rule", applied from April 2018, which enables workers to request an indefinite term contract with the agency after working for five years. Furthermore, the "three-year rule" applies from October 2018 and limits a temporary role and worker to a three year period.

“These legislative changes have caused some clients to review their policies on temporary workers and led to delayed hiring decisions at the beginning of the year,” the group stated. “With the legislation impacts now widely understood by clients we expect there will be a smaller impact in October, although at this time it is not possible to be certain.”

In the Americas, the group’s business in Chile reported growth mainly from the permanent and temporary recruitment divisions. In the US, the group reported positive results from its Pharmaceutical Strategies with the business continuing to make progress in diversifying its service lines and building up its client base. ConSol Partners also saw a significant improvement against the prior year.

In May 2018, Empresaria announced that Joost Kreulen stepped down as CEO. COO Spencer Wreford took over as CEO of the group. Earlier in March 2018, the group added Tim Anderson as the new group finance director.

In July 2018, Empresaria Group announced the acquisition of a 60% interest in Grupo Solimano, a provider of outsourced and temporary staffing services in Peru. Empresaria will consolidate Group Solimano from the date of acquisition and so their results will be included for the first time in the full year financial statements.

Chief Executive Officer, Spencer Wreford, commented, "We are investing in our brands to drive growth and productivity improvements through new staff and technology solutions. We are working through the effects of regulatory changes in two of our key markets, Germany and Japan, and are well positioned to return those businesses to growth.”

"We continue to look at external investment opportunities and are building a pipeline of possible investments as we look for businesses that will fit with our Group culture and help us to deliver future growth,” Wreford said.

"The group is trading in line with market expectations and we have confidence in our prospects and ability to deliver growth,” Wreford said.

As of last trade, Empresaria Group traded at £88.00, up 1.73% on the day and 27.54% above the 52 week low of £69.00 set on 30 May 2018. Based on its current share price the company has a market value of £42.40 million.