SThree: Q1 Trading Update (997705)

 
 SThree (STEM) 
SThree: Q1 Trading Update 
 
16-March-2020 / 07:00 GMT/BST 
Dissemination of a Regulatory Announcement that contains inside information 
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group. 
The issuer is solely responsible for the content of this announcement. 
 
16 March 2020 
 
    SThree plc 
 
    Q1 Trading Update 
 
    Net fees flat in Q1 in line with management expectations 
 
       SThree plc ("SThree" or the "Group"), the global pure-play specialist 
  staffing business focused on roles in Science, Technology, Engineering and 
Mathematics ('STEM'), issues the below trading update(1) covering the period 
  from 1 December 2019 to date; financial information relates to the quarter 
        ending 29 February 2020. 
 
        Highlights 
 
  · Group net fees for Q1 flat, in what is our seasonally quietest quarter 
 
    · Strong growth in Germany, with net fees up 7% 
 
    · Robust growth of 3% in Netherlands with USA flat 
 
    · Growth across Technology, Life Sciences and Engineering 
 
  · Contract net fees up 2%, in line with our strategy, now representing 75% 
  of Group net fees (2019: 74%) 
 
  · 87% of Group net fees generated from international(2) markets (2019: 
  86%) 
 
  · Group average headcount up 5% YoY 
 
  · Continued strong balance sheet with net cash at 29 February 2020 of 
  circa GBP9m 
 
        Mark Dorman, Chief Executive, commented: 
 
      "We have delivered these results despite a backdrop of significant and 
        increasing global macro-economic uncertainties and challenges. The 
        performance of our businesses in Germany and the Netherlands was 
      particularly impressive and demonstrates the benefits of our strategy, 
   focusing on Contract and STEM across diverse markets. This, combined with 
       the efforts of our employees worldwide, has enabled us to continue to 
    deliver a robust level of net fees despite the wider economic headwinds. 
 
   "Whilst the macro uncertainties are increasingly apparent, we continue to 
   invest selectively in our business, reflecting our commitment to building 
    for the future and driving the long-term success of our Group. We remain 
 confident that we have the right strategy, as we are uniquely positioned as 
        the only global pure-play STEM specialist. 
 
        "The uncertainties the market faces are, however, potentially very 
significant, given the fast-developing situation with Covid-19, recent large 
falls in oil prices, and increasing concerns about global confidence and GDP 
   growth. Notwithstanding this, demand for key STEM skills remains robust." 
 
        Reporting structure change 
 
SThree has changed its reporting structure, as shown in the tables below, in 
line with the updated strategy announced at its recent Capital Markets Day 
and internal management structures. Going forward SThree will apply the new 
groupings of DACH, EMEA excluding DACH, USA and APAC, as well as presenting 
an analysis of net fees by its five key markets: Germany, Netherlands, USA, 
UK and Japan. On a sector basis, the Energy and Engineering sectors will be 
reported under Engineering. 
 
                               Q1 2020    Q4    Q3    Q2    Q1 
                                         2019  2019  2019  2019 
Net fees          Q1   Q1 2019   YOY     YOY    YOY   YOY   YOY 
                 2020 
 
Management 
Structure 
 
DACH(3)         GBP25.2m  GBP24.2m     +9%     +5%    +8%  +18%  +12% 
EMEA excl       GBP31.5m  GBP34.4m     -6%     -5%    -2%    -    +5% 
DACH(4) 
USA             GBP16.0m  GBP16.4m      -      +6%    +5%  +10%  +17% 
APAC            GBP2.6m   GBP3.1m    -15%     +1%   +21%  +25%   -4% 
GROUP           GBP75.3m  GBP78.1m      -      +1%    +4%   +9%   +9% 
 
Top five 
countries 
Germany         GBP23.2m  GBP22.6m     +7%     +5%    +6%  +16%   +9% 
Netherlands     GBP11.8m  GBP12.0m     +3%     +4%    +7%   +9%  +13% 
UK              GBP9.7m   GBP10.6m     -8%     -10%   -8%  -12%   -9% 
USA             GBP16.0m  GBP16.4m      -      +6%    +5%  +10%  +17% 
Japan           GBP1.5m   GBP1.7m    -11%     +1%   +82%  +63%  +44% 
ROW(5)          GBP13.1m  GBP14.8m     -8%     -5%    -2%  +10%  +10% 
GROUP           GBP75.3m  GBP78.1m      -      +1%    +4%   +9%   +9% 
 
Division Mix      Q1 
                 2020 
Contract         75% 
Permanent        25% 
 
Sector Mix        Q1 
                 2020 
Technology       46% 
Life Sciences    21% 
Engineering(6)   22% 
Banking &        10% 
Finance 
Other             1% 
 
        Impact of Covid-19 
 
 The Coronavirus outbreak continues to develop globally, and it is difficult 
   to predict the potential impact it may have on our business. The Group is 
   continuing to monitor the situation closely and regional management teams 
        are ready to react as developments unfold. 
 
        Business performance 
 
      Group net fees for the year were flat in Q1, in what is our seasonally 
quietest quarter. Contract, our more resilient business, grew net fees by 2% 
  and now accounts for 75% of Group net fees. Permanent net fees declined 6% 
   in the quarter, due to weaker performances in Japan, USA and UK. Germany, 
  our largest Permanent market, saw solid growth of 4%, up from Q4 2019 +3%. 
 
   DACH saw strong growth in the quarter with net fees up 9%. Germany, which 
  accounts for 92% of DACH, continues to outperform with growth of 7% driven 
  by Technology up 10% and Life Sciences up 12%. All other sectors also grew 
  and the region saw a strong growth in net fees in Switzerland and Austria. 
 
  EMEA excluding DACH saw net fees declining 6%, largely reflecting the UK's 
performance, which was down 8%. As expected, we have begun to see the impact 
    of IR35 prompting change in our client and candidate behaviour in the UK 
   business in the quarter, as decision making processes extend ahead of the 
 April 2020 implementation date. The Netherlands, our largest country in the 
   region, saw growth of 3%, which was impressive given the market backdrop, 
        with notable performances in Engineering and Life Sciences. 
 
Net fees in USA were flat in the quarter and short of our expectations. Life 
 Sciences saw good growth of 14% with Engineering growing 10% and Technology 
    up a modest 3%. This growth was offset by a decline in Banking & Finance 
     with net fees down 38%, broadly reflecting the challenges faced in this 
  sector globally. As a key area of focus for the Group we have continued to 
 invest in the region and are aligning our resources with the best long term 
        opportunities. 
 
        Despite a good performance from the Technology sector, APAC net fees 
      declined 15% in the quarter, impacted by several factors including the 
        wildfires in Australia and the outbreak of Covid-19. 
 
        Group period end headcount was up 3% with average headcount up 5%, 
    reflecting ongoing investment in Germany and USA offset by reductions in 
        EMEA excluding DACH and APAC. 
 
        Balance sheet 
 
 SThree remains in a strong financial position, with net cash at 29 February 
   2020 of circa GBP9m (28 February 2019: Net debt GBP12m). The Group has a GBP50m 
revolving credit facility ("RCF") with HSBC and Citibank, which is committed 
        to 2023. 
 
        Analyst conference call 
 
 SThree is hosting an analyst conference call today at 0830 GMT. The details 
        are as follows: 
 
Telephone number: 0800 358 9473 
 
For access to the call please enter PIN: 31046987# 
 
A replay facility will be available for 90 days on 0800 358 2049 Passcode: 
301312966# 
 
The Group will issue its trading update for six months ended 31 May 2020 on 
15 June 2020. 
 
        (1) All year-on-year financial growth rates in this announcement are 
        expressed at constant currency 
 
        (2) International represents our businesses outside the UK 
 
        (3) DACH - Germany, Austria and Switzerland 
 
 (4) EMEA excl DACH - UK, Ireland, Belgium, Netherlands, Luxembourg, France, 
        Spain and Dubai 
 
 (5) ROW - All other countries we operate in excluding Germany, Netherlands, 
        UK, USA and Japan 
 
        (6) Engineering now includes Energy, which was previously reported 
    separately. Up-stream oil and gas comprises approximately 10% of the new 
        Engineering sector 
 
    - Ends - 
 
                           Enquiries: 
 
                           SThree plc 020 7268 6000 
Mark Dorman, Chief Executive Officer 
Alex Smith, Chief Financial Officer 
Steve Hornbuckle, Company Secretary 
 
                              Alma PR 020 3405 0205 
 
Rebecca Sanders-Hewett                SThree@almapr.co.uk 
 
Hilary Buchanan 
 
        Notes to editors 
 
        SThree is a leading international STEM specialist staffing business, 
  providing permanent and contract specialist staff to a diverse client base 
        of over 9,000 clients. 
 
 The Group's operations cover the Technology, Banking & Finance, Engineering 
        and Life Sciences sectors. With a multi-brand strategy, the Group 
   establishes new operations to address growth opportunities. SThree brands 
       include Computer Futures, Huxley Associates, Progressive and The Real 
   Staffing Group. The Group has a network of 47 offices in 16 countries, of 
   which 41 are in our international(2) markets, with circa 3,100 employees. 
 
 SThree plc is quoted on the Official List of the UK Listing Authority under 
     the ticker symbol STEM and also has a US level one ADR facility, symbol 
        SERTY. 
 
        Important notice 
 
  Certain statements in this announcement are forward looking statements. By 
        their nature, forward looking statements involve a number of risks, 
   uncertainties or assumptions that could cause actual results or events to 
      differ materially from those expressed or implied by those statements. 
Forward looking statements regarding past trends or activities should not be 
 taken as representation that such trends or activities will continue in the

        future. Certain data from the announcement is sourced from unaudited 
        internal management information and is before any exceptional items. 
        Accordingly, undue reliance should not be placed on forward looking 
        statements. 
 
ISIN:          GB00B0KM9T71 
Category Code: TST 
TIDM:          STEM 
LEI Code:      2138003NEBX5VRP3EX50 
Sequence No.:  52476 
EQS News ID:   997705 
 
End of Announcement EQS News Service

(END) Dow Jones Newswires

March 16, 2020 03:00 ET (07:00 GMT)

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