REG - SThree plc - FY23 Full Year Trading Update

SThreeAnnouncement

14/12/2023 07:00

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RNS Number : 7110W  SThree plc  14 December 2023

 

14 December 2023

 

SThree plc

 

FY 2023 Trading Update

 

Performance in line, driven by resilience of STEM specialism and Contract
focus

 

SThree plc ("SThree" or the "Group"), the only global specialist talent
partner focused on roles in Science, Technology, Engineering and Mathematics
('STEM'), today issues a trading update for the financial year ended 30
November 2023.

 

Highlights

 

 ·             Group net fees for the full year down 4% YoY((1)) (down 3% excluding
               restructured businesses((2))), against a record prior year performance((3)())
               and challenging global macro-economic backdrop.
 ·             Robust client extensions drive Contract net fees up 1% YoY, now representing
               82% of Group net fees (FY22: 78%).
 ·             Permanent net fees (representing 18% of Group) down 22% YoY, reflecting both
               difficult market conditions and our strategic transition towards Contract in
               specific markets (average Permanent headcount down 17%).
 ·             In our three largest markets, which represent 73% of net fees, the Netherlands
               grew 3%, while Germany and the USA were down 4% and 14%, respectively.
 ·             Against record prior-year comparatives, Engineering up 17%, whilst Technology
               was down 2% and Life Sciences down 21%.
 ·             Contractor order book((4)) of £184m, whilst down 3% YoY, represents
               sector-leading visibility with the equivalent of c.4 months' net fees,
               providing a robust platform for the year ahead.
 ·             Strong balance sheet with net cash of £83 million at 30 November 2023 (30
               November 2022: £65 million).
 ·             Technology Improvement Programme remains on budget, and has now successfully
               gone live across the US business, with sequenced rollout across the rest of
               the Group progressing in line with plan.
 ·             Performance in line with FY23 market expectations((5)).

 

 

Timo Lehne, Chief Executive, commented:

 

"Following a record prior year, the Group has delivered a consistently robust
performance within a challenging macro-economic environment. This gives us
confidence that our strategic focus, aligned to structural growth drivers of
critical STEM skills and flexible talent, gives us a resilient and financially
robust platform from which to deliver our ambitions.

 

We continue to make good progress with our Technology Improvement Programme,
with our new end-to-end integrated platform now deployed and live across the
whole of our US business, providing our teams with the technology and tools
which will be key to driving both scale and higher margins over the
mid-to-long term.

 

As we enter the start of the new financial year, we haven't yet seen an easing
of the macro-economic environment, which continues to drive soft trading
conditions. Our strategic focus, exposure to long-term megatrends, and
progress to date delivering operational enhancements provide us with a strong
platform for sustained growth.  We remain excited by the opportunities
ahead."

 

 

 

 

 

 

 

 

                                  FY        FY            FY 2023              Q4 2023           Q3 2023             Q2 2023           Q1 2023
 Net fees                         2023      2022          YoY ((1))            YoY ((1))         YoY ((1))           YoY ((1))         YoY ((1))
 Contract                         £343.6m   £334.2m       +1%                  -2%               -                   -1%               +8%
 Permanent                        £75.3m    £96.4m        -22%                 -17%              -31%                -25%              -12%
 GROUP                            £418.8m   £430.6m       -4%                  -5%               -7%                 -7%               +4%

 Regions
 DACH ((6))                       £148.9m   £148.9m       -3%                  -5%               -6%                 -7%               +8%
 Netherlands (incl. Spain) ((7))  £82.1m    £75.7m        +6%                  +5%               +9%                 +4%               +6%
 Rest of Europe ((8))             £70.4m    £73.1m        -4%                  -8%               -5%                 -7%               +4%
 USA                              £96.4m    £111.5m       -14%                 -14%              -19%                -15%              -6%
 Middle East & Asia ((9))         £20.9m    £21.4m        +3%                  +16%              -14%                -5%               +19%
 GROUP                            £418.8m   £430.6m       -4%                  -5%               -7%                 -7%               +4%

 Top five countries
 Germany                          £130.9m   £131.9m       -4%                  -6%               -6%                 -8%               +7%
 Netherlands                      £77.1m    £72.9m        +3%                  +2%               +5%                 +1%               +4%
 UK                               £45.0m    £46.7m        -3%                  -8%               -4%                 -6%               +6%
 USA                              £96.4m    £111.5m       -14%                 -14%              -19%                -15%              -6%
 Japan                            £9.3m     £9.4m         +6%                  +24%              -4%                 -2%               +7%
 ROW ((10))                       £60.2m    £58.2m        +2%                  +4%               -5%                 -2%               +12%
 Group                            £418.8m   £430.6m       -4%                  -5%               -7%                 -7%               +4%

 Service mix                      FY 2023    FY 2022
 Contract                         82%       78%
 Permanent                         18%       22%

 Skills mix                       FY 2023    FY 2022
 Technology                       48%       47%
 Life Sciences                    18%       22%
 Engineering                      26%       22%
 Other                            8%        9%

 

 

 

Business performance highlights

 

The Group delivered a robust performance for FY23 against a record prior year,
with net fees down 4% YoY. This performance was driven by our significant
Contract business up 1%, following robust Contract extensions, offset by
Permanent, down 22%, in a large part impacted by the strategic decision to
reduce our average Permanent headcount by 17% YoY. Excluding our restructured
businesses((2)) net fees were down 3% YoY, with Contract, our strategic focus,
up 2% and Permanent down 19%.

 

 

Contract

 ·             Contract net fees up 1% YoY.
               o                                      Regionally, Netherlands (incl. Spain) was up 7% and Rest of Europe up 3%,
                                                      while DACH was down 1%, USA down 4% and Middle East & Asia was up 29%.
               o                                      Strong growth in Engineering, up 18% YoY, with Technology up 1% and Life
                                                      Sciences down 14%.
 ·             The contractor order book closed at £184m, down 3% YoY and accounts for
               around 4 months' worth of net fees.

 

Permanent

 

 

 ·             Permanent net fees down 22% YoY, with challenging market conditions across all
               regions, together with the planned transition from Permanent to Contract which
               started in FY22, particularly in the USA and UK.  Average Permanent headcount
               was down 17% YoY.
               o                                         In our strategic Permanent markets, DACH was down 8%, Netherlands down 1% and
                                                         Japan up 5%.
               o                                         Modest growth in Engineering, up 4%, with Technology down 12% and Life
                                                         Sciences down 44%.

 

 

Headcount and productivity

 ·             Group average headcount for the year was down 2% YoY. Year-end headcount was
               down 15%, which was partly impacted by the restructure of the Singapore, Hong
               Kong and Ireland businesses. On a like-for-like basis, Group period-end
               headcount was down 13% vs FY22 Q4 as we navigate the uncertain macro-economic
               environment.
 ·             While we are managing costs tightly, targeted investment in talent acquisition
               within Contract remains a priority.
 ·             Productivity((11)) for the year was down only 2% YoY with the impact of a
               strong prior year comparator for net fees partially offset by the 2% reduction
               in average headcount. Productivity remains 34% above pre-pandemic levels
               achieved in FY19.

 

Regional highlights

 

DACH saw net fees decline 3% YoY.

 ·             Germany, our largest country in the region (88% of net fees), saw Contract
               down 1% with overall net fees down 4%, driven by Engineering up 13%, offset by
               Technology and Life Sciences, down 4% and 16% respectively.

 

Netherlands (incl. Spain) region saw net fees grow 6% YoY.

 ·             Strong growth in Contract up 7% YoY, partially offset by Permanent down 2%.
 ·             The Netherlands, which represents 94% of the region, saw Contract up 4% with
               overall net fee growth of 3% driven by Engineering up 8% and Technology up 3%.
 ·             Spain saw strong growth of 82% in the year driven by Technology.

 

Rest of Europe saw net fees decline 4% YoY.

 ·             Contract, which represents 95% of net fees for the region, grew 3%.
 ·             The UK, our largest country in the region (64% of net fees), saw Contract up
               1% with overall net fees down 3%, reflecting Engineering up 10%, offset by
               declines in both Technology, down 5% and Life Sciences, down 27%.

 

USA saw net fees decline 14% YoY.

 ·             Strategic shift toward Contract in region, which now represents 88% of net
               fees, with Contract net fees down 4% YoY reflecting Life Sciences, down 16%
               YoY in line with the market conditions for that sector, partly offset by
               Engineering up 19%.

 

Middle East and Asia saw net fees up 3% YoY. On a like for like basis
(excluding our restructured businesses in Singapore and Hong Kong) net fees
were up 20% YoY.

 ·             Japan, which represents 45% of the region, was up 6% YoY driven by Engineering
               and Life Sciences.
 ·             Strong performance in UAE with net fees up 41% driven by Engineering.

 

Balance sheet

 

SThree retains a strong balance sheet, with net cash at 30 November 2023 of
£83m (30 November 2022: net cash £65m), partly reflecting the working
capital release from the Group's contractor model. Total accessible liquidity
of £138m comprises £83m net cash, an undrawn £50m revolving credit facility
('RCF'), which runs until 2025 (with options to extend it until 2027), and a
£5m overdraft facility. In addition, SThree has an undrawn £30m 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 FY 2023 Trading Update. If you would like to register for the
conference call, please contact SThree@almastrategic.com.

 

The Group will present its results for the financial year ended 30 November
2023 on 30 January 2024.

 

((1)) All YoY growth rates expressed at constant currency.

((2)) Businesses restructured in Ireland, Singapore and Hong Kong at the end
of FY22.

((3)) FY22 Group Net Fees up 19% YoY to £430.6m.

((4)) The contractor order book represents value of net fees until contractual
end dates, assuming all contractual hours are worked.

((5)) Current consensus PBT expectation is £71.3m for FY23. Source: SThree
compiled consensus.

((6)) DACH - Germany, Austria and Switzerland.

((7)) Netherlands (incl. Spain) - Netherlands and Spain, which is managed from
the Netherlands.

((8)) Rest of Europe - UK, Belgium, France, Luxembourg and Ireland.

((9)) Middle East & Asia - Japan, UAE & Singapore.

((10)) ROW - All other countries we operate in.

((11)) Productivity calculated as net fees divided by total average headcount.

 

 Enquiries:

 SThree plc
 Timo Lehne, CEO                            via Alma

 Andrew Beach, CFO

 Keren Oser, Investor Relations Director

 Alma Strategic Communications             +44 20 3405 0205

 Rebecca Sanders-Hewett                    SThree@almastrategic.com

 Hilary Buchanan

 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.2,700 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.

 

 

                     FY        FY        FY 2023        Q4 2023        Q3 2023      Q2 2023       Q1 2023
 Net fees            2023      2022      YoY ((1))      YoY ((1))     YoY ((1))     YoY ((1))     YoY ((1))
 Contract            £343.6m   £334.2m   +1%            -2%           -             -1%           +8%
 Permanent           £75.3m    £96.4m    -22%           -17%          -31%          -25%          -12%
 GROUP               £418.8m   £430.6m   -4%            -5%           -7%           -7%           +4%

 Regions
 DACH                £148.9m   £148.9m   -3%            -5%           -6%           -7%           +8%
 EMEA excl. DACH     £163.0m   £156.5m   +3%            +1%           +3%           -             +8%
 USA                 £96.4m    £111.5m   -14%           -14%          -19%          -15%          -6%
 APAC                £10.5m    £13.7m    -15%           -2%           -30%          -22%          -4%
 GROUP               £418.8m   £430.6m   -4%            -5%           -7%           -7%           +4%

 Top five countries
 Germany             £130.9m   £131.9m   -4%            -6%           -6%           -8%           +7%
 Netherlands         £77.1m    £72.9m    +3%            +2%           +5%           +1%           +4%
 UK                  £45.0m    £46.7m    -3%            -8%           -4%           -6%           +6%
 USA                 96.4m     £111.5m   -14%           -14%          -19%          -15%          -6%
 Japan               £9.3m     £9.4m     +6%            +24%          -4%           -2%           +7%
 ROW                 £60.2m    £58.2m    +2%            +4%           -5%           -2%           +12%
 GROUP               £418.8m   £430.6m   -4%            -5%           -7%           -7%           +4%

 Service mix         FY 2023   FY 2022
 Contract            82%       78%
 Permanent            18%      22%

 Skills mix          FY 2023   FY 2022
 Technology          48%       47%
 Life Sciences       18%       22%
 Engineering         26%       22%
 Other               8%        9%

 

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