TIDMSTEM
RNS Number : 2190D
SThree plc
20 June 2023
20 June 2023
SThree plc
FY23 Half Year Trading Update
Resilient performance in H1 driven by our Contract business
SThree plc ("SThree" or the "Group"), the only global pure-play
specialist staffing business focused on roles in Science,
Technology, Engineering and Mathematics ('STEM'), today issues a
trading update for the half year ended 31 May 2023.
H1 Highlights
-- Resilient performance with Group net fees down 2% YoY (1) on a
constant currency basis, against the strong post-Covid comparative
period (H1 FY22 YoY growth: 25%) and backdrop of global macro-economic
conditions.
-- Contract net fees up 3% YoY with growth across the majority of
regions, and Contract now representing 81% of Group net fees (H1
FY22: 77%).
-- Permanent net fees down 19% YoY, reflecting both market conditions
and tough comparatives, particularly in Life Sciences, together
with our targeted investment towards Contract in specific markets.
-- In our largest three markets, which represent 73% of net fees,
the Netherlands grew 3%, while Germany was down 1% and USA was
down 11%.
-- Technology up 1% and Engineering up 17%, while Life Sciences was
down 21% driven by global sector trends.
-- Contractor order book (2) remained flat YoY as robust extensions
offset new placement activity.
-- Strong balance sheet, with GBP72 million net cash as at 31 May
2023 (31 May 2022: GBP48 million).
-- Technology Improvement Programme is on track and on budget, with
sequenced rollout across the Group starting in late FY23 as previously
announced.
Timo Lehne, Chief Executive, commented:
"The Group has delivered a robust net fee performance in the
first half of FY23 with fees down 2% YoY on a constant currency
basis against the strong post-Covid performance in H1 of FY22. On a
reported basis net fees were up 3%, as we benefited from FX
tailwinds. The macro-economic environment has remained uncertain
with varied effects across our markets impacting new placements.
However, a continued healthy extensions performance has seen our
Contract business (now representing 81% of Group net fees) grow 3%
as our clients remain committed to retaining highly sought after
skills. This demonstrates the strength of our well-established
strategy, focused on STEM and flexible talent.
We are delighted with the strategic progress we have made,
centred on an analytical and fact-based approach of knowing where
to play and playing where we can win. Our highly disciplined and
targeted investment in talent acquisition within Contract remains a
priority for the business. Our Technology Improvement Programme is
on track and on budget and is key to delivering a differentiated
proposition within the market, driving both scale and higher
margins over the mid-to-long term.
Our long-term opportunity is unchanged, underpinned by
structural megatrends which drive the acute need for scarce STEM
talent. In the short term w e remain responsive to the macro
backdrop and how that plays out on the mix of new placements and
extensions, while tightly managing costs. Supported by a resilient
business model and robust financial position, we remain well
positioned to source and place the best STEM talent the world needs
and will be in a position of strength once the macro-economic
environment eases."
H1 H1 H1 2023 Q2 2023 Q1 2023
Net fees 2023 2022 YoY (1) YoY (1) YoY (1)
------------------------------- ---------- -------- -------- --------
Contract GBP170.0m GBP157.0m +3% -1% +8%
Permanent GBP38.6m GBP46.1m -19% -25% -12%
GROUP GBP208.6m GBP203.1m -2% -7% +4%
Regions
DACH (3) GBP74.5m GBP70.5m - -7% +8%
Netherlands (incl. Spain) (4) GBP39.4m GBP35.9m +5% +4% +6%
Rest of Europe (5) GBP35.2m GBP35.4m -2% -7% +4%
USA GBP49.4m GBP51.7m -11% -15% -6%
Middle East & Asia (6) GBP10.1m GBP9.6m +6% -5% +19%
GROUP GBP208.6m GBP203.1m -2% -7% +4%
Top five countries
Germany GBP65.7m GBP62.8m -1% -8% +7%
Netherlands GBP37.3m GBP34.6m +3% +1% +4%
UK GBP21.9m GBP22.2m - -6% +6%
USA GBP49.4m GBP51.7m -11% -15% -6%
Japan GBP4.4m GBP4.5m +2% -2% +7%
ROW (7) GBP29.9m GBP27.3m +4% -2% +12%
Group GBP208.6m GBP203.1m -2% -7% +4%
------------------------------- ---------- -------- -------- --------
Service mix H1 2023 H1 2022
----------
Contract 81% 77%
Permanent 19% 23%
----------
Skills mix H1 2023 H1 2022
----------
Technology 49% 47%
Life Sciences 19% 23%
Engineering 24% 21%
Other 8% 9%
---------- ----------
Business performance highlights
Group net fees for Q2 were down 7% YoY against the strong
post-Covid peak performance (Q2 FY22 YoY growth: 23%).
The Group delivered a resilient net fee performance in the first
half of the year, down 2% YoY against the strong post-Covid peak
performance in H1 of FY22 . On a like for like basis (excluding our
restructured businesses in Singapore, Hong Kong and Ireland) net
fees were down 1% YoY. Contract, our strategic focus, was up 3%
(also up 3% on a like for like basis) and now represents 81% of net
fees. Our Permanent business was down 19% (or down 16% on a like
for like basis), reflecting global market conditions and the
continuing strategic transition from Permanent to Contract in
several markets.
Contract
-- Net fee growth of 3% YoY.
o Growth across majority of regions: DACH up 1% YoY, Netherlands
up 7%, Rest of Europe up 5% and Middle East & Asia up 52%,
while USA was down 2%.
o Strong growth in Engineering, up 20% YoY, with Technology up
3%. Life Sciences was down 14% in line with global sector trends.
-- The contractor order book remained flat YoY .
Permanent
-- Permanent net fees in the first half of the year were down 19% YoY,
reflecting market conditions across all regions, together with the
planned transition from Permanent to Contract , particularly in the
USA and UK.
o Net fees declined across all regions with DACH down 3% YoY,
Netherlands down 19%, Rest of Europe down 48%, USA down 43%,
and Middle East & Asia down 10%.
o From a skills perspective, Technology was down 6%, Engineering
down 5% and Life Sciences down 43%.
Headcount and productivity
-- Group average headcount in the first half was up 5% YoY, with Contract
up 9% and Permanent down 10%.
-- Group period-end headcount was down 9% vs Q4 FY22, in part impacted
by the restructure of the Singapore, Hong Kong and Ireland businesses.
On a like-for-like basis, Group period-end headcount was down 7%
vs Q4 FY22.
-- While we are managing costs tightly, we continue to prioritise targeted
investments focusing on Contract in specific niches within sectors
and markets that provide the best growth opportunities.
-- As expected, and as previously communicated, we have seen some normalisation
of productivity from the exceptional levels experienced in H1 FY22
as new hires come on board. Productivity in the first half was down
7% YoY, however it remains 28% above pre-pandemic levels achieved
in H1 FY19.
-- The Technology Improvement Programme is expected to deliver sustainable
enhancements in productivity over the medium to long term.
Regional highlights
DACH saw net fees remain flat YoY.
-- Growth in Contract, up 1% YoY and Permanent down 3%.
-- Germany, our largest country in the region, also saw net fees decline
1%, with:
o Technology up 2% due to demand for roles within Cyber Security
and Software Development.
o Engineering up 13%, with increased demand for Construction
roles.
o Offset by Life Sciences, down 22%, driven by market conditions
across that sector.
Netherlands region saw net fees grow 5% YoY.
-- The Netherlands, which represents 95% of the region, saw net fee
growth of 3% driven by:
o Technology up 3% with higher demand for Project Managers, ERP
Consultants, Data Engineers and Data Science roles.
o Engineering up 4% driven by increased demand for Process Engineers,
Electrical Engineers and Health & Safety Advisors.
-- Spain saw strong growth of 63% in the first half driven by Technology.
Rest of Europe saw net fees decline 2% YoY.
-- Contract, which represents 94% of net fees for the region, grew 5%,
with Permanent declining 48%, driven by both market conditions and
the transition towards Contract, particularly in the UK.
-- The UK, our largest country in the region, saw net fees remain flat,
with:
o Engineering up 3%, as demand increased for roles within Project
and Construction Management, Electrical Engineering and Mechanical
Engineering.
o Offset by declines in both Technology, down 2% and Life Sciences,
down 22%.
USA saw net fees decline 11% YoY.
-- Contract, which represents 86% of net fees, was down 2% YoY driven
by:
o Life Sciences, down 16% YoY in line with the market conditions
for that sector.
o This was partly offset by Engineering up 23%, with increased
demand for roles within Project Management and Electrical Engineering.
-- Permanent, which represents 14% of net fees, declined 43% driven
by Life Sciences and the accelerated transition towards Contract
during FY22.
Middle East and Asia saw net fees grow 6% YoY.
-- Japan, which represents 43% of the region, was up 2% YoY driven by
Engineering due to demand for roles within Renewable Energy.
-- Strong performance in UAE with net fees up 46% driven by Engineering.
Balance sheet
SThree retains a strong balance sheet, with net cash at 31 May
2023 of GBP72m (31 May 2022: net cash GBP48m, 28 February 2023: net
cash GBP64m). During H1 the Group purchased GBP10m in shares for
the employee benefit trust to satisfy future settlement of existing
awards. Total accessible liquidity of GBP125m comprises GBP72m net
cash, an undrawn GBP50m revolving credit facility ('RCF'), which
runs until 2025 (with options to extend it until 2027), and GBP3m
of undrawn overdraft facilities. In addition, SThree has an undrawn
GBP30m accordion facility as well as a substantial working capital
position, reflecting net cash due to the Group for placements
already undertaken.
Analyst conference call
SThree is hosting a conference call for analysts and investors
today at 8.30am to discuss the FY23 Half Year Trading Update . If
you would like to register for the conference call, please contact
SThree@almapr.co.uk.
The Group will issue its FY23 Half Year Results for the six
months ended 31 May 2023 on 25 July 2023.
(1) All YoY growth rates in this announcement are expressed at constant
currency.
(2) The contractor order book represents value of net fees until contractual
end dates, assuming all contractual hours are worked.
(3) DACH - Germany, Austria and Switzerland.
(4) Netherlands (incl. Spain) - Netherlands and Spain, which is managed
from the Netherlands.
(5) Rest of Europe - UK, Belgium, France, Luxembourg and Ireland.
(6) Middle East & Asia - Japan, UAE & Singapore.
(7) ROW - All other countries we operate in.
The information contained within this announcement is deemed by
the Group to constitute inside information under the Market Abuse
Regulation (Regulation (EU) No.596/2014) as it forms part of UK
Domestic Law by virtue of the European Union (Withdrawal) Act
2018.
Enquiries:
SThree plc
Timo Lehne, CEO via Alma
Andrew Beach, CFO
Alma PR +44 20 3405 0205
Hilary Buchanan SThree@almapr.co.uk
Sam Modlin
Will Ellis Hancock
Notes to editors
SThree plc brings skilled people together to build the future.
We are the only global specialist talent partner focused on roles
in Science, Technology, Engineering and Mathematics ('STEM') ,
providing permanent and flexible contract talent to a diverse base
of over 8,200 clients across 14 countries. Our Group's c.2,800
staff cover the Technology, Life Sciences and Engineering sectors.
SThree is part of the Industrial Services sector. We are listed on
the Premium Segment of the London Stock Exchange's Main Market,
trading with ticker code STEM.
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.
- Ends -
Appendix
Following the reporting structure change at the start of FY23
the table below provides the historical reporting structure.
H1 H1 H1 2023 Q2 2023 Q1 2023
Net fees 2023 2022 YoY (1) YoY (1) YoY (1)
-------------------- ---------- -------- -------- --------
Contract GBP170.0m GBP157.0m +3% -1% +8%
Permanent GBP38.6m GBP46.1m -19% -25% -12%
GROUP GBP208.6m GBP203.1m -2% -7% +4%
Regions
DACH GBP74.5m GBP70.5m - -7% +8%
EMEA excl DACH GBP79.6m GBP74.6m +4% - +8%
USA GBP49.4m GBP51.7m -11% -15% -6%
APAC GBP5.1m GBP6.3m -14% -22% -4%
GROUP GBP208.6m GBP203.1m -2% -7% +4%
Top five countries
Germany GBP65.7m GBP62.8m -1% -8% +7%
Netherlands GBP37.3m GBP34.6m +3% +1% +4%
UK GBP21.9m GBP22.2m - -6% +6%
USA GBP49.4m GBP51.7m -11% -15% -6%
Japan GBP4.4m GBP4.5m +2% -2% +7%
ROW GBP29.9m GBP27.3m +4% -2% +12%
Group GBP208.6m GBP203.1m -2% -7% +4%
-------------------- ---------- -------- -------- --------
Service mix H1 2023 H1 2022
----------
Contract 81% 77%
Permanent 19% 23%
----------
Skills mix H1 2023 H1 2022
----------
Technology 49% 47%
Life Sciences 19% 23%
Engineering 24% 21%
Other 8% 9%
---------- ----------
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