SThree: Q1 Trading Update (997705)
March 16 2020 - 3:00AM
UK Regulatory
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
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March 16, 2020 03:00 ET (07:00 GMT)
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