REG-SThree INTERIM RESULTS FOR THE HALF YEAR ENDED 31 MAY 2017 <Origin Href="QuoteRef">STHR.L</Origin> - Part 1
24/07/2017 07:05
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SThree (STHR)
INTERIM RESULTS FOR THE HALF YEAR ENDED 31 MAY 2017
24-Jul-2017 / 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.
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SThree plc
("SThree" or the "Group")
Interim results for the half year ended 31 May 2017
FINANCIAL HIGHLIGHTS
As Reported Adjusted(1) As Reported Adjusted Adjusted
Constant
Actual
H1 2017 H1 2016 H1 2016 Currency
Growth(2)
Growth
£m £m £m % %
Revenue 521.0 443.5 443.5 +17% +7%
Contract gross profit 94.2 79.7 79.7 +18% +8%
Permanent gross profit 40.2 40.1 40.1 - -10%
Gross profit 134.4 119.8 119.8 +12% +2%
Operating profit 19.3 15.3 13.0 +26% +5%
Conversion ratio 14.4% 12.8% 10.9% +1.6% pts +0.3% pts
Profit before taxation 19.2 15.1 12.8 +27% +5%
Basic earnings per share 11.0p 8.6p 7.3p +29% +6%
Interim dividend per share 4.7p 4.7p 4.7p - -
Net cash 5.2 (4.4) (4.4)
(1) H1 2016 figures were adjusted for the impact of £2.3m of restructuring costs. There were no adjustments to
H1 2017 figures.
(2)All variances compare reported H1 2017 against adjusted H1 2016 to provide a like-for-like view.
OPERATIONAL HIGHLIGHTS
• Encouraging first half performance with accelerated momentum in Q2
• Operating profit ('OP') up 26% year on year ("YoY") to £19.3m (H1 2016 adjusted: £15.3m) with an improved
operating profit conversion ratio of 14.4% (H1 2016 adjusted: 12.8%)
• Foreign exchange increased reported OP by £3.3m. OP was up 5%* at constant currency and up 8%* excluding
innovation spend of £0.6m
• Group gross profit ('GP') up 2%* YoY
◦ Strong performance in the USA (up 16%* YoY), now representing 22% of Group GP (H1 2016: 19%)
◦ Robust performance in Continental Europe (up 7%* YoY)
◦ Continued strong growth in Life Sciences (up 6%* YoY)
◦ UK&I performance, as expected, continues to be adversely impacted by the EU Referendum result, General
Election and Public Sector reforms, with GP down 16%* YoY
• 80% of Group GP generated from markets outside the UK&I (H1 2016: 73%)
• Contract GP, which represented 70% of Group GP (H1 2016: 67%), ahead by 8%* YoY with strong growth across
Engineering up 17%*, Life Sciences up 15%* and Energy up 9%*
• Permanent GP down 10%* YoY, with productivity up 8%* YoY
• Group period-end sales headcount up 1% on the 2016 year-end position, but down 4% YoY. Average sales
headcount down 7% YoY
• Strong financial position with net cash of £5.2m (H1 2016: net debt £4.4m)
• SThree will host a Capital Markets Day in London on the afternoon of 15 November 2017
* Variances in constant currency
Gary Elden, CEO, commented: "We are encouraged by our first half performance, with a step up in growth achieved
in Q2 against a background of mixed trading conditions. The growing breadth and scale of our international
operations, which now account for four fifths of gross profit, underline how far the Group has grown from its UK
roots, with particularly strong performances in Continental Europe and the USA, which is now our second largest
region.
"Our strategic focus on Contract business continues to deliver good growth across almost all regions, as well as
a greater resilience in more uncertain economic conditions. Our Permanent business made good progress in
increasing productivity and remains focused on achieving further gains in the balance of the year.
"Looking ahead to our seasonally more important second half, the continued momentum of our Contract business and
improved Permanent yields give us a solid base from which to grow in a macro-economic environment which remains
uncertain."
SThree will host a live presentation and conference call for analysts at 0900 GMT today. The conference call
participant telephone details are as follows:
Dial in: +44 (0) 20 3003 2666
Call passcode: SThree
This event will also be simultaneously audio webcast, hosted on the SThree website at 1 www.sthree.com. Note
that this is a listen only facility and an archive of the presentation will be available via the same link
later.
SThree will be announcing its Q3 Trading Update on Friday 15 September 2017.
Enquiries:
SThree plc 020 7268 6000
Gary Elden, Chief Executive Officer
Alex Smith, Chief Financial Officer
Sarah Anderson, Deputy Company Secretary/ Investor Relations
Citigate Dewe Rogerson 020 7638 9571
Kevin Smith / Jos Bieneman
Notes to editors
SThree is a leading international specialist staffing business, providing permanent and contract specialist
staff to a diverse client base of over 7,000 clients. From its well-established position as a major player in
the Information and Communication Technology ('ICT') sector the Group has broadened the base of its operations
to include businesses serving the Banking & Finance, Energy, Engineering and Life Sciences sectors.
Since launching its original business, Computer Futures, in 1986, the Group has adopted a multi-brand strategy,
establishing new operations to address growth opportunities. SThree brands include Computer Futures, Huxley
Associates, Progressive and The Real Staffing Group. The Group has circa 2,600 employees in sixteen countries.
SThree plc is quoted on the Official List of the UK Listing Authority under the ticker symbol STHR 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.
Accordingly, undue reliance should not be placed on forward looking statements.
INTERIM MANAGEMENT REPORT
CHIEF EXECUTIVE OFFICER'S REVIEW
Overview
We delivered Group GP for the period up 2%* YoY, driven by positive results from our continued investment in
Contract, our drive to build productivity in Permanent and our ability to capitalise on opportunities in key
markets, especially Continental Europe and the USA.
Underlying performances by region and sector were mixed. We saw some continued strong performances:
◦ Contract GP up 8%* YoY
◦ Strong growth in the USA up 16%* YoY
◦ Continental Europe up 7%* YoY
◦ Continued robust growth in Life Sciences up 6%* YoY
This good progress was offset by the UK&I, due to the adverse impact of the UK's decision to leave the EU and
Public Sector reforms, with GP down 16%* YoY.
The rate of growth for the Group improved from flat* YoY in Q1 to up 4%* YoY in Q2.
The conversion ratio for GP into operating profit improved slightly as we benefited from improved yields.
Headcount build remained modest, with Group period-end sales headcount up 1% on the 2016 year-end position and
down 4% YoY, as we managed our sales heads to reflect the current trading environment. Our focus in H2 is on
selective headcount investment to facilitate further growth.
GP Average Sales Headcount
Growth* YoY HY 2017 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
Q1 17 +7% (14%) - (1%) (18%) (8%)
Group Q2 17 +9% (6%) +4% - (15%) (6%)
HY 17 +8% (10%) +2% 70% 30% - (17%) (7%)
HY 2017 HY 2016 FY 2016
Breakdown of GP
% % %
Geographical Split
UK&I 20% 27% 25%
Continental Europe 51% 48% 49%
USA 22% 19% 20%
Asia Pac & Middle East 7% 6% 6%
100%
100% 100%
Sector Split
ICT 44% 45% 45%
Banking & Finance 15% 16% 16%
Energy 9% 8% 8%
Engineering 9% 9% 9%
Life Sciences 21% 20% 21%
Other Sectors 2% 2% 1%
100% 100% 100%
Operating Review
Business Mix
Contract is well suited to our STEM market focus and geographical mix. It remained the key area of investment
and growth throughout the period, while improving productivity per head was the prime focus in Permanent,
following a restructuring in 2016.
Our Contract business maintained its robust performance. Contract GP was up 8%* YoY, with average sales
headcount flat YoY and an increase in productivity of 8%* YoY. Q2 was the 14th consecutive quarter of GP growth
achieved by Contract since it was given greater strategic focus. We exit the period with runners up 12% YoY, but
period-end gross profit per day rates down 3%* YoY. As well as being an important driver of GP growth, our
investment in Contract makes us more resilient in times of economic uncertainty and measured expansion of our
Contract teams will be a key focus for the remainder of 2017.
Permanent GP, which represented 30% of Group GP, was down 10%* YoY, with the Group being successful in driving
up productivity by 8%* YoY.
Permanent is more sensitive to market sentiment and has been hit harder by continuing weakness in the Banking &
Finance market globally and the UK's decision to leave the EU. Average Permanent fees were up 3%* YoY as we
focus on more niche recruitment. Average sales headcount in our Permanent business was down 17% YoY, largely due
to restructuring in the UK and our continued efforts to remix towards Contract. We expect to invest in Permanent
selectively in the remainder of 2017, where there is clear evidence of improving candidate and client
confidence, but our primary focus will be on improving consultant yields.
Sector Highlights
Continued robust growth in Life Sciences. Modest growth in ICT up 1%* YoY. Growth trends in Energy are picking
up in Q2 up 23%* YoY, especially in the USA up 77%* YoY. Strong growth in Engineering in the Contract Division,
up 17%* YoY while Banking and Finance is showing early signs of recovery for H2.
GP Average Sales Headcount
Growth* YoY HY 2017 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
ICT Q1 17 +7% (10%) +2% - (14%) (5%)
Q2 17 +3% (6%) +1% - (14%) (5%)
44% of GP HY 17 +5% (8%) +1% 74% 26% - (14%) (5%)
ICT is our largest and most established sector representing 44% of the Group GP and 46% of the Group average
sales headcount, with the majority of its business in the more mature UK&I and European markets. GP for the
period was up 1%* YoY, against strong comparatives (H1 2016 was up 18%* YoY). Average headcount in ICT was down
5% YoY, with a decline in Permanent headcount following a restructuring of underperforming teams in 2016, while
Contract was flat YoY. The performance of ICT was mixed by market with strong growth in ICT in Continental
Europe up 13%* YoY, offset with weak growth in the UK&I down 19%* YoY, in particular driven by a challenging UK
Public Sector (specifically IR35 and rate caps).
GP Average Sales Headcount
Growth* YoY HY 2017 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
Life Sciences Q1 17 +17% (13%) +4% +3% (17%) (7%)
Q2 17 +12% - +7% +2% (9%) (3%)
21% of GP HY 17 +15% (7%) +6% 64% 36% +3% (13%) (5%)
GP growth in Life Sciences, which is our second largest sector after ICT, improved quarter-on-quarter in the
period. Contract continued to post double digit growth and was up 15%* YoY in H1, against a strong comparative
of +10%* YoY in H1 2016. Permanent was down 7%* YoY at the end of H1, with average sales headcount down 13%. The
emergence of new technology and data analytics in this sector are enhancing the ability of our highly skilled
people to find the best candidates to support business and capitalise on market opportunities.
GP Average Sales Headcount
Growth* YoY HY 2017 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
Banking & Finance Q1 17 (5%) (12%) (8%) (1%) (20%) (11%)
Q2 17 +3% (6%) (1%) (9%) (18%) (14%)
15% of GP HY 17 (1%) (9%) (5%) 55% 45% (5%) (19%) (13%)
Uncertainty in the global banking markets impacted our Banking & Finance business since Q2 2016, with GP down
5%* YoY. Hiring freezes continue at a number of major clients. This impacted our Permanent businesses in the
UK&I and APAC & ME, while the USA saw improvements in this sector, up 11%* YoY. Contract performance in Q2 (up
3%* YoY) is showing improvement from Q1, driven by a more resilient performance in Continental Europe.
GP Average Sales Headcount
Growth* YoY HY 2017 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
Energy Q1 17 (10%) +1% (8%) (13%) (48%) (17%)
Q2 17 +29% (35%) +23% (6%) +2% (6%)
9% of GP HY 17 +9% (15%) +7% 92% 8% (9%) (32%) (12%)
Overall conditions in the Oil and Gas market have stabilised and the sector is showing early signs of
improvement. Continental Europe which is 42% of Global Energy grew by 2%* YoY, showing sequential improvement
from Q1, (down 2%* YoY) to Q2, (up 5%* YoY). The USA is showing an improving exit rate into H2. Contract Runners
in Global Energy were up 39% YoY and exceeded our 2016 year end peak; however, average GP per day was down 14%*
YoY and down 9%* from year end. We will continue to review the Energy business and selectively invest where we
can maximise market opportunities.
GP Average Sales Headcount
Growth* YoY HY 2017 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
Engineering Q1 17 +22% (34%) (1%) +6% (28%) (10%)
Q2 17 +14% (17%) +3% +15% (17%) +1%
9% of GP HY 17 +17% (26%) +1% 72% 28% +10% (23%) (5%)
The Engineering business showed moderate growth YoY up 1%*, despite a 5% decrease in sales headcount. The
performance varied considerably by division, with a strong and improving performance in Contract. Average sales
headcount in Permanent was down 23% YoY, with GP down 26%* YoY, following a restructuring in 2016. Contract was
up 17%* YoY, with average sales headcount up 10% YoY. This sector operates predominantly from Continental
Europe, but a weak Sterling boosted the UK&I performance where GP grew by 9%* YoY.
Regional Growth
We are encouraged by the improvement across the business in the period. We saw strong growth in Contract across
most regions and Permanent continued to benefit from improved productivity. 80% of Group GP is now generated
from outside the UK, with the USA becoming our second largest region and remaining a key growth engine for the
Group. We opened a new office in Vienna in June 2017 and expanded our offering with the introduction of an
employed contractor model to help expedite growth across Continental Europe.
GP Average Sales Headcount
Growth* YoY HY 2017 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
Continental Europe Q1 17 +17% (11%) +7% +15% (9%) +5%
Q2 17 +15% (8%) +7% +20% (9%) +8%
51% of GP HY 17 +16% (9%) +7% 70% 30% +17% (9%) +6%
Continental Europe is our largest region with the key contributors to our business being Germany, Netherlands,
Belgium, France, Switzerland and Luxembourg. These regional markets vary significantly in their level of
maturity and competition, with Germany remaining the most significant structural growth opportunity.
The region delivered robust growth in the period, up 7%* YoY, with growth across all key countries. The
Netherlands performed particularly well, with GP ahead by 16%* YoY and average sales headcount up 10%. Germany,
our largest market in the region, was up 5%* YoY, against strong YoY comparatives (up 22%* YoY).
We saw double digit growth in contract runners YoY, creating a strong exit rate for Contract GP. Contract GP has
continued to post double digit growth in this region over the last six consecutive quarters. Contract growth in
ICT, Engineering and Life Sciences remains robust.
GP Average Sales Headcount
Growth* YoY HY 2017 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
USA Q1 17 +11% +16% +12% (17%) (28%) (21%)
Q2 17 +23% +13% +20% (19%) (17%) (18%)
22% of GP HY 17 +17% +14% +16% 68% 32% (18%) (23%) (20%)
The USA is the world's largest specialist STEM staffing market and has become our second largest region for the
first time. Representing 22% of our Group GP, the USA was our fastest growing region once again with GP up 16%*
YoY. Although the headline growth in H1 is boosted by relatively weak comparatives, we are encouraged by the
improvements in the USA.
Double digit GP growth YoY was achieved in all sectors except Banking & Finance (up 1%*), reflecting tough
trading conditions in the sector. Energy in this region saw significant improvement in the upstream business
where clients are moving to onshore shale opportunities. The Group is investing cautiously given the risks and
volatility inherent in the Energy market.
Permanent GP in the USA was up 14%* YoY across all sectors, with Banking & Finance up 11%* YoY and Life Sciences
up 8%* YoY. Average headcount in Permanent was down 23% YoY, but broadly in line with our year end position on
sales headcount.
Contract GP in the USA was up 17%* YoY across all sectors except Banking & Finance. Sales headcount was down 18%
YoY, but in line with the 2016 year end position.
We exit H1 with a strong and improving Contract runner book and a high yielding business. Future growth is
contingent on headcount investment and we plan to invest across both Permanent and Contract in H2 to expand our
service to clients and candidates.
GP Average Sales Headcount
Growth* YoY HY 2017 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
UK&I Q1 17 (13%) (37%) (19%) (12%) (27%) (18%)
Q2 17 (15%) (11%) (14%) (15%) (22%) (17%)
20% of GP HY 17 (14%) (25%) (16%) 79% 21% (14%) (24%) (17%)
The UK&I is our longest established region and the business is increasingly Contract focused as this is where we
see the best opportunities in the STEM market. Public Sector reforms and the UK's decision to leave the EU have
continued to dampen performance. GP in the region was down 16%* YoY, in line with average sales headcount which
was down 17% YoY.
In H1, GP across all sectors was down YoY with the exception of Engineering, which was up 9%*. Our aim is to
cautiously invest to maximise market opportunity.
Productivity per head has remained broadly flat* YoY.
GP Average Sales Headcount
Growth* YoY HY 2017 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
Asia Pacific & Middle East Q1 17 +11% (30%) (14%) (4%) (22%) (17%)
Q2 17 +53% (22%) +5% (12%) (19%) (17%)
7% of GP HY 17 +31% (26%) (4%) 53% 47% (8%) (21%) (17%)
Our Asia Pacific business principally includes Australia, Singapore, Japan and Hong Kong and the Middle East
mainly covers Dubai.
Growth in this region is primarily driven by Contract where GP was up 31%* YoY and Contract Runners up 25% YoY.
Contract growth is fuelled by ICT in Australia and Energy in Dubai. ICT which was 29% of the region was up 5%*
YoY, with Contract up 33%* YoY, offset by a 15%* YoY decline in Permanent. This region was significantly
impacted by a slowdown of the Energy and Banking & Finance markets last year, although early signs of recovery
have been noted in Energy Contract so far this year. Banking & Finance in the region has shown moderate growth,
up 1%* YoY, with this market remaining relatively flat.
Innovation
The Group launched a programme to foster greater innovation within its operations during the first half to help
future-proof the business against possible disruptive technologies and as a source of new revenue streams. The
programme encompasses investments in third-party start-ups and the introduction of new technology and systems
into its existing Contract and Permanent businesses. Operational expenditure on innovation totalled £0.6m
during the first half and the Group expects to spend circa £2m for the year as a whole.
Outlook
"We are encouraged by our first half performance, with a step up in growth achieved in Q2 against a background
of mixed trading conditions. The growing breadth and scale of our international operations, which now account
for four fifths of gross profit, underline how far the Group has grown from its UK roots, with particularly
strong performances in Continental Europe and the USA, which is now our second largest region.
"Our strategic focus on Contract business continues to deliver good growth across almost all regions, as well as
a greater resilience in more uncertain economic conditions. Our Permanent business made good progress in
increasing productivity and remains focused on achieving further gains in the balance of the year.
"Looking ahead to our seasonally more important second half, the continued momentum of our Contract business and
improved Permanent yields give us a solid base from which to grow in a macro-economic environment which remains
uncertain."
* Variances in constant currency
ChIEF FINANCIAL OFFICER'S ReVIEW
Operating Profit
Group revenue for the period was up by 17% to £521.0m (H1 2016: £443.5m) and up 7% at constant currency. Gross
profit ('GP') increased by 12% to £134.4m (H1 2016: £119.8m) and was up 2% at constant currency. There was a
positive foreign exchange impact on the revenue and GP growth YoY on a reported basis. Growth in revenue
exceeded growth in GP as the business continued to remix towards Contract. This resulted in a decline in the
overall GP margin to 25.8% (H1 2016: 27.0%) as Permanent has no cost of sale. The Contract margin reduced
slightly to 19.6% (H1 2016: 19.8%).
The Group delivered operating profit of £19.3m up 26% on an adjusted basis and up 48% on an as reported basis
(H1 2016: adjusted £15.3m, reported £13.0m) and the conversion ratio was up 1.6 percentage points to 14.4% (H1
2016: adjusted 12.8%, reported 10.9%). The H1 2016 "adjusted" profit excludes £2.3m of one-off costs that
resulted from the restructuring initiatives carried out for certain Group sales businesses and central support
functions. The increase in operating profit ("OP") was largely driven by a lower headcount generating an
increase in GP and a foreign exchange tailwind, net of an increase in investment in projects to support the
future growth of our business. Foreign exchange increased reported OP by £3.3m. OP was up 5%* at constant
currency and up 8%* excluding innovation spend of £0.6m.
Profit before tax ("PBT") was £19.2m (H1 2016: adjusted £15.1m, and reported £12.8m).
Taxation
The tax charge for the period was £5.0m (H1 2016: £3.5m), representing an effective tax rate ("ETR") of 26% (H1
2016: 27%). The ETR primarily reflects our geographical mix of profits and an ongoing prudent approach to the
treatment of tax losses.
Earnings per Share ("EPS")
Basic EPS increased to 11.0p (H1 2016: adjusted 8.6p, reported 7.3p). The weighted average number of shares used
for basic EPS remained broadly level at 128.7m (H1 2016: 128.5m). Diluted EPS were 10.6p (H1 2016: 7.0p), up
51%. Share dilution is primarily driven by the vesting impact of currently outstanding share awards, as well as
the expected future settlement of tracker shares. The dilutive effect on EPS from tracker shares will vary in
future periods depending on the profitability of the underlying tracker businesses, the volume of new tracker
arrangements created and the settlement practice for vested arrangements.
Dividends
The Board proposes to pay an interim dividend of 4.7p (H1 2016: 4.7p). This will be paid on 8 December 2017 to
shareholders on the register on 3 November 2017. The total payment to shareholders on this date will be
approximately £6.0m.
Cash Flow
We started the period with net cash of £10.0m.
We generated higher cash from operations of £11.9m (H1 2016: £3.2m) principally due to a £6.3m increase in
reported operating profit. This helped drive a higher cash conversion ratio of 48% (H1 2016: 46%).
The cash outflow on capital expenditure decreased to £2.6m (H1 2016: £4.0m) with lower spend on new offices and
IT. An initial prepayment of £0.8m was made to acquire a minority interest in the share capital of HRecTech
Sandpit Limited.
Income tax paid increased to £3.4m (H1 2016: £2.3m) and dividends remained unchanged at £6.0m (H1 2016: £6.0m).
During the period the Group also paid £3.4m (H1 2016: £4.6m) for the purchase of its own shares to satisfy
future vesting of awards under employee share schemes. The cash outflow from previously recognised exceptional
items was £0.1m (H1 2016: £0.6m).
Foreign exchange had a negative impact of £0.3m (H1 2016: positive impact of £2.8m).
We closed the period with net cash of £5.2m (H1 2016: net debt £4.4m).
Treasury Management
We finance the Group's operations through equity and bank borrowings. We intend to continue this strategy while
maintaining a strong balance sheet position. We have a committed revolving credit facility ("RCF") of £50m in
place with Citibank and HSBC. This facility expires in May 2019 and £2.5m was drawn down at half year (H1 2016:
£26.0m). We also have a £5m overdraft facility with RBS. The RCF is subject to conventional covenants and the
funds borrowed under this facility bear interest at a minimum annual rate of 1.3% above 3 month Sterling LIBOR
giving an average interest rate of 1.6% during the period (H1 2016: 1.8%). The finance costs for the half-year
amounted to £0.2m (H1 2016: £0.3m).
Foreign Exchange
Foreign exchange volatility continues to be a significant factor in the reporting of the overall performance of
the business with the main functional currencies of the Group being Sterling, the Euro and the US Dollar.
For H1 2017, currency movements versus Sterling provided a strong tailwind for the reported performance of the
Group with the highest impact coming from Eurozone countries. Over the course of the period, the exchange rate
movements increased our reported H1 2017 GP and operating profit by circa £12.7m and £3.3m, respectively.
Exchange rate movements remain a material sensitivity. By way of illustration, each 1 percent movement in annual
exchange rates of the Euro and the US Dollar impacted our H1 2017 GP by £0.7m and £0.3m, respectively, per
annum; and H1 2017 operating profit by £0.2m and £0.1m, respectively, per annum.
The Board reviews its currency hedging strategy periodically to ensure that it remains appropriate. The Group
does not use derivatives to hedge balance sheet and income statement translation exposure.
Principal Risks and Uncertainties
Principal risks and uncertainties affecting the business activities of the Group are the same as those detailed
within the Strategic Report section of the Group's 2016 Annual report, a copy of which is available on the
Group's website 2 www.sthree.com.
In terms of macroeconomic environment risks, our strategy is to continue to grow the size of our international
business and newer sectors, in both financial terms and geographical coverage. This will help reduce our
exposure or reliance on any one specific economy, although a downturn in a particular market could adversely
affect the Group's key risk factors.
In the view of the Board, there is no material change expected to the Group's key risk factors in the
foreseeable future.
Directors' responsibility statement
The Directors confirm that to the best of their knowledge:
(a) the condensed consolidated interim financial information (unaudited) has been prepared in accordance
with IAS 34, "Interim Financial Reporting" as adopted by the European Union; and
(b) the interim management report includes a fair review of the information required by the Disclosure and
Transparency Rules ('DTR') paragraph 4.2.7R (an indication of important events that have occurred during the
first six months of the financial year and their impact on the condensed financial information, and description
of principal risks and uncertainties for the remaining six months of the financial year); and
(c) the interim management report includes a fair review of the information required by DTR paragraph 4.2.8R
(disclosure of material related parties' transactions and changes therein during the first six months of the
financial year).
Approved by the Board on 21 July 2017 and signed on its behalf by:
Gary Elden Alex Smith
Chief Executive Officer Chief Financial Officer
3 www.sthree.com/investors
Interim financial information
Condensed consolidated income statement - unaudited
for the half year ended 31 May 2017
31 May 31 May
2017 2016
Note £'000 £'000
Continuing operations
Revenue 2 520,961 443,495
Cost of sales (386,611) (323,654)
Gross profit 2 134,350 119,841
Administrative expenses (115,007) (106,837)
Operating profit 19,343 13,004
Finance income 30 56
Finance costs (217) (255)
Profit before taxation 19,156 12,805
Taxation 3 (4,981) (3,458)
Profit for the period attributable to owners of the Company 14,175 9,347
Earnings per share 5 pence pence
Basic 11.0 7.3
Diluted 10.6 7.0
Condensed consolidated statement of comprehensive income - unaudited
for the half year ended 31 May 2017
31 May 31 May
2017 2016
£'000 £'000
Profit for the period 14,175 9,347
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss:
Exchange differences on retranslation of foreign operations 337 2,588
Other comprehensive income for the period (net of tax) 337 2,588
Total comprehensive income for the period attributable to owners of the 14,512 11,935
Company
The accompanying notes form an integral part of this interim financial information.
Condensed consolidated statement of financial position - unaudited
as at 31 May 2017
Audited
Note 31 May 30 November
2017 2016
£'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 6,691 7,100
Intangible assets 11,585 11,597
Investments 727 727
Deferred tax assets 2,650 2,501
21,653 21,925
Current assets
Trade and other receivables 195,254 189,169
Current tax assets - 4,650
Cash and cash equivalents 6 13,831 15,707
209,085 209,526
Total assets 230,738 231,451
EQUITY AND LIABILITIES
Equity attributable to owners of the Company
Share capital 7 1,313 1,312
Share premium 27,560 27,406
Other reserves (5,494) (5,381)
Retained earnings 46,925 52,333
Total equity 70,304 75,670
Non-current liabilities
Provisions for liabilities and charges 794 907
Current liabilities
Bank overdraft 6 6,103 5,685
Provisions for liabilities and charges 4,560 4,953
Trade and other payables 144,010 138,859
Current tax liabilities 2,467 5,377
Borrowings 8 2,500 -
159,640 154,874
Total liabilities 160,434 155,781
Total equity and liabilities 230,738 231,451
The accompanying notes form an integral part of this interim financial information.
Condensed consolidated statement of changes in equity - unaudited
for the half year ended 31 May 2017
Capital Currency Total equity
Share Share redemption Capital Treasury translation Retained attributable
capital premium reserve reserve reserve reserve earnings to owners of
the Company
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Audited
balance at 30 1,295 23,140 168 878 (1,318) (10,758) 46,001 59,406
November 2015
Profit for the
half year
ended 31 May - - - - - - 9,347 9,347
2016
Other
comprehensive
income for the - - - - - 2,588 - 2,588
period
Total
comprehensive 2,588 9,347 11,935
income for the - - - - -
period
Dividends paid
to equity (6,044)
holders (Note - - - - - - (6,044)
4)
Dividends
payable to (11,934)
equity holders - - - - - - (11,934)
(Note 4)
Settlement of
share-based 2 500 - - 1,720 - (1,720) 502
payments
Purchase of (4,633) - (4,633)
own shares - - - - -
Credit to
equity for
equity-settled - - - - - - 1,659 1,659
share-based
payments
Total
movements in 2 500 - - (2,913) 2,588 (8,692) (8,515)
equity
Unaudited
balance at 31 1,297 23,640 168 878 (4,231) (8,170) 37,309 50,891
May 2016
Audited
balance at 30 1,312 27,406 168 878 (6,443) 16 52,333 75,670
November 2016
Profit for the
half year 14,175
ended 31 May - - - - - - 14,175
2017
Other
comprehensive
income for the - - - - - 337 - 337
period
Total
comprehensive 14,175
income for the - - - - - 337 14,512
period
Dividends paid
to equity (6,046)
holders (Note - - - - - - (6,046)
4)
Dividends
payable to (11,951)
equity holders - - - - - - (11,951)
(Note 4)
Settlement of
share-based 1 154 - - 2,959 - (2,971) 143
payments
Purchase of (3,409) -
own shares - - - - - (3,409)
Credit to
equity for
equity-settled - - - - - - 1,385 1,385
share-based
payments
Total
movements in 1 154 - - (450) 337 (5,408) (5,366)
equity
Unaudited
balance at 31 1,313 27,560 168 878 (6,893) 353 46,925 70,304
May 2017
The accompanying notes form an integral part of this interim financial information.
Condensed consolidated statement of cash flows - unaudited
for the half year ended 31 May 2017
31 May 31 May
Note 2017 2016
£'000 £'000
Cash flows from operating activities
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