REG - SThree plc - FY24 Final Results
28/01/2025 07:00
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RNS Number : 8675U SThree plc 28 January 2025
SThree plc
FINAL RESULTS FOR THE YEAR ENDED 30 NOvember 2024
FY24 PERFORMANCE IN LINE
LONG TERM STRATEGIC POSITIONING ADVANCED
SThree plc ('SThree' or the 'Group'), the only global specialist talent
partner focused on roles in Science, Technology, Engineering and Mathematics
(STEM), today announces its financial results for the year ended 30 November
2024.
FINANCIAL HIGHLIGHTS
Continuing operations FY24 FY23 Variance
Reported Like-for-like ((1))
Revenue (£ million) 1,492.9 1,663.2 -10% -8%
Net fees (£ million) 369.1 418.8 -12% -9%
Operating profit (£ million) 66.2 76.4 -13% -9%
Operating profit conversion ratio 17.9% 18.2% -0.3% pts +0.1% pts
Profit before tax (£ million) 67.6 77.9 -13% -9%
Basic earnings per share (pence) 37.4 42.4 -12% -8%
Proposed final dividend per share (pence) 9.2 11.6 -21% -21%
Total dividend (interim and final) per share (pence) 14.3 16.6 -14% -14%
Net cash (£ million)((2)) 69.7 83.2 -16% -16%
((1)) Variance compares the reported results for FY24 against FY23 on a
constant currency basis, whereby the prior year foreign exchange rates are
applied to current and prior financial year results to remove the impact of
exchange rate fluctuations.
((2)) Net cash represents cash and cash equivalents less borrowings and
excluding leases.
( )
Full-Year Highlights
· Group net fees down 9% YoY((3)), against a strong prior year (FY23: YoY decline of 4% on record performance) and protracted challenging global economic conditions.
o Net fees across our three largest countries represent 72% of Group: Netherlands down 6%, Germany and USA both down 12%.
o The Group's Engineering net fees for the full year were largely stable, down 1% against a record prior year performance. Technology and Life Sciences performance reflected the tougher market conditions throughout the year, declining 10% and 17% respectively.
· Contract net fees, which represent 84% of Group net fees (FY23: 82%), were down 7% due to the ongoing softness in new business activity, partially offset by continued strong client extensions; a demonstration of our strength in meeting our clients' needs to retain critical STEM skills and flexible talent.
· Permanent net fees, representing 16% of Group net fees (FY23: 18%), were down 18% reflecting the challenging market conditions.
· Contractor order book((4)) of £161.3 million, down 10% YoY, whilst continuing to represent sector-leading visibility with the equivalent of circa four months' net fees.
· Resilient profit performance, in line with expectations, with operating profit conversion ratio maintained at 18% and profit before tax of £67.6 million, down 9% YoY on a like-for-like basis due to decline in net fees partially offset by cost savings and higher net interest.
· Robust balance sheet, with £69.7 million in net cash at year end (FY23: £83.2 million). Post period end, commenced a share buyback programme of up to £20m in light of the Group's strong cash generation and balance sheet.
· Final dividend proposed of 9.2 pence per share (FY23: 11.6 pence per share), taking full year dividend to 14.3 pence per share (FY23: 16.6 pence per share), down 14% YoY. This is in line with the previously communicated dividend cover target between 2.5x and 3.0x.
· Technology Improvement Programme (TIP) remains on track with around 80% of our business now successfully onboarded and actively using the platform.
Outlook
· The challenging economic conditions, impacting new business activity, are expected to persist throughout FY25.
· The financial implication of these challenges is expected to be partly mitigated by the accelerated realisation of further operational efficiencies.
· As previously announced, the Board expects FY25 profit before tax to be c.£25 million which includes up to £7m of one-off costs to deliver the additional operational efficiencies.
· The Board remains confident that the Group's strategic focus on STEM and
Contract, the completed rollout of the TIP, alongside the actions being taken,
will position the Group for sustained profitable growth when markets recover.
((3)) All YoY growth rates expressed at constant currency.
((4)) The contractor order book represents value of net fees until contractual
end dates, assuming all contractual hours are worked.
Timo Lehne, Chief Executive Officer, commented:
"Against a protracted challenging market environment, which has weighed on new
business activity, the Group delivered a resilient FY24 performance, testament
to the quality of our STEM and Contract focus and supported by careful cost
management. As previously reported, whilst Contract extensions remain robust,
the Board has taken a prudent view of FY25 given the weak new business
environment which is expected to persist through the current year.
"Whilst we navigate this extended cycle, we continue to drive material
operational enhancements through the Group to position us in line with the
structural opportunities arising as a result of clear trends, such as rapid
technological change and new ways of working. We continue to believe this
future world of work is based on hard-to-find STEM skills, with 63% of
employers identifying skills gaps as the biggest barrier to business
transformation over the coming years(1). Our deep experience of identifying
niche global talent means we sit at the heart of these global trends, a
position which is being further enhanced through the continued roll-out of our
TIP programme. We start the new financial year as a stronger organisation,
which, combined with a robust business model and energised team, leaves us
well placed as we progress on our vision for future success."
(1) World Economic Forum, Future of Jobs Report 2025.
Analyst conference call
SThree is hosting a webinar for analysts and investors today at 08:30 to
present the Group's results for the financial year ended 30 November 2024. If
you would like to register for the webinar, please contact
SThree@almastrategic.com (mailto:SThree@almastrategic.com) .
Forward looking dates
The Group will present its FY25 Q1 Trading Update on 18 March 2025.
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 (mailto: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 around 6,000 clients across 11 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 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.
CHair's statement
The past year has been another difficult one, as the market backdrop within
which the Group has been operating remained challenging. While it has been a
tough couple of years for the industry, our people and clients, we have
delivered a resilient performance in line with market expectations, supported
by our Contract and STEM-focused business model, of which we are proud.
The Board and I appreciate the efforts that have been made by our teams around
the world to deliver these results. My thanks go to every member of our team
as their hard work, dedication and skill have been instrumental in driving the
business forward this year. I would also like to express thanks to our
shareholders and other stakeholders for their ongoing support during this
challenging period as we continue to strive to deliver growth and shareholder
value over the mid-to-long term.
Our unique strategic focus on STEM skills and flexible talent continues to
underpin our overall performance, supported by the global megatrends that are
driving demand for workers with these specialist skills. This gives us
confidence that we are in the right markets and focusing on the right sectors
where we can make a real difference, drive growth and increase market share.
In line with the Group's capital allocation policy, the Board is proposing a
final dividend at 9.2 pence per share this year. This, combined with the
interim dividend of 5.1 pence per share, gives the total dividend for the year
of 14.3 pence per share. We remain committed to maximising shareholder value
while ensuring effective and pragmatic capital allocation across the Group
that allows us to deliver growth in net fees and margin, maintain a healthy
balance sheet, invest in our people and technologies and grow through
acquisition, should we find the right opportunity to do so.
Post-period end we were pleased to announce the launch of a share buyback
programme of up to £20 million to reduce the share capital of the Company; we
consider this to be in the best interests of the Company and its shareholders,
returning surplus capital to shareholders while maintaining the financial
flexibility to invest in the Group's strategy.
In spite of the challenging market dynamics and political change in some of
our key markets, the Group has taken great steps forward towards its long-term
growth strategy. While cognisant of the market backdrop, we have remained
disciplined in our continued investment in our teams, technology and places of
work to ensure we are in the best position possible to seize the opportunity
as the market improves.
Having had the pleasure of being able to catch up with colleagues in our
offices around the world throughout the year, one thing that has clearly shone
through is the real sense of pride and community across SThree; something Timo
has been instrumental in delivering. April 2025 will mark his third
anniversary as Chief Executive Officer of the Group and his clarity of vision
and drive are bearing fruit in the form of early signs of benefits from our
Technology Improvement Programme, industry recognition and improved staff
retention and talent acquisition.
The new leadership team established in the US has had a positive impact and we
are confident in the people and platform we have in place to seize our clear
opportunity in the region as market sentiment improves. The team there has a
clear sense of direction and the opportunities for us are large. Similarly,
the Executive Committee has been performing very well and is delivering for
the Group. The stability and obvious trust between each member of the
Committee is filtering across the business and helping drive the Group
forward.
Our Technology Improvement Programme is hugely exciting and is positioning us
at the forefront of the industry with a roadmap to deliver cutting edge,
Artificial Intelligence (AI)-enhanced tools to our teams. In what is a major
achievement, I am pleased to say that the roll-out continues on track and on
budget, with around 80% of our team now successfully onboarded and actively
using the platform. As a result of the programme, we are starting to see
efficiencies across the business, from Placement Support, Payroll and our
internal support teams. These benefits are already having a tangible impact,
and we look forward to talking further to them in the future.
Our strategy, focused on STEM and Contract talent, and our underlying
performance have seen us earn recognition across the industry. Being named a
'great place to work' in Belgium, Japan and the Netherlands is testament to
the culture in our offices around the world. I am delighted that this culture,
coupled with our focus on STEM, is also creating opportunities for us in the
recruitment market, with an increase in experienced hires being made across
the Group.
Alongside our people and platform, we have also invested in our offices around
the world, including the opening of our new headquarters in London. We are
striving to be seen as an employer of choice in our industry and this
investment comes in conjunction with our efforts to boost the time our teams
spend with clients, both physically and virtually, compared to recent years as
we are committed to remaining close to the market.
We remain committed to our pledge to be a responsible and sustainable employer
and ESG considerations remain embedded within our strategy. We were proud to
be named in the Financial Times' list of Europe's Climate Leaders 2024 and
Time Magazine and Statista's World Best Companies for Sustainable Growth, in
what we see is a clear indication of our dedication to the environment and a
greener economy.
We were delighted to welcome Sanjeevan Bala as a Non-Executive Director to the
Board in April 2024. His expertise in customer-centric technology and AI
transformation has been invaluable and he has made an immediate contribution
to the business. In H2 FY24, the Board commissioned an external Board
evaluation to benchmark on various levels. I am pleased to report that the
results were extremely positive, with the Board's effectiveness, impact and
general governance all being highlighted. I would like to thank the whole
Board for their hard work and commitment this year and look forward to
continuing to build on this in the period ahead.
In 2019, we set ourselves some ambitions to strive for by the end of 2024.
While we did not anticipate Covid-19 and the subsequent challenging market
backdrop of the past two years when setting the ambitions, looking back I
believe we have done a good job in executing against them.
Looking ahead, whilst FY25 is set to see challenging market conditions
persist, I believe there is a lot to be excited about. We are of the view that
the recruitment industry will change more in the next five years than it has
in the last 20, driven by effective implementation of technology. We have led
the industry in harnessing the latest tools available and see this head start
as an opportunity for us. This technological advantage, coupled with our
strategic focus on STEM and Contract mean we are well placed to grow once the
market backdrop improves.
Chief executive officer's statement
The strength of the Group's operating model and differentiated STEM value
proposition has been demonstrated this year with a resilient financial
performance in a prolonged challenging market environment. Despite softer
trading conditions, which have persisted longer than market participants
predicted, the Group was able to withstand the external pressures of this
extended cycle through FY24, delivering a financial result in line with
expectations. Notwithstanding the trading environment, we have taken the time
to strengthen our position for future growth, making meaningful progress in
line with our technology and operational enhancement plans.
Our unique business model is rooted in our conviction that the future of work
is flexible STEM talent. The Group has grown from a heritage of doing things
differently and embracing opportunities arising from a changing world. As
industries evolve and shifts in labour markets unfold, driven by the forces of
global megatrends, we have acted early and decisively to position our business
at the centre. It is this pioneering ethos that continues to govern our
evolution today. We proactively took the important step over two years ago to
initiate a journey to become a digitally-enabled business through our
Technology Improvement Programme (TIP), setting us on a path to be a fitter,
more scalable organisation.
Contract and STEM provided resilience in uncertain markets
This year we have connected over 12,150 highly skilled STEM professionals to
their next career role, which we facilitate through our unique combination of
niche vertical focus and operational scale. As a STEM partner to our customers
in diverse markets and sectors, we uncover the scarce, highly skilled STEM
specialists needed to power their businesses. We deliver this through an
adaptable suite of solutions, whether that be Independent Contractors,
Employed Contractors or Permanent placements, coupled with a best-in-class
consultative service wrapper. Our strategic focus on flexible talent
(representing contract, part-time specialists and project-based teams) now
contributes 84% to Group net fees, and is aligned to the needs of our clients
and preferences of our candidate communities.
As widely reported across regions and industries, the market backdrop over the
year has been characterised by economic weakness coupled with geopolitical
uncertainty, with a notable impact on client confidence. With the protracted
length of this uncertainty, we believe this has contributed to a rise in
status quo bias on the part of decision-makers, exacerbating an ingrained
preference for stability and inhibiting investment decisions which could
otherwise be beneficial in the longer-run.(1) This heightened, broad
resistance to change is resulting in delayed decision-making in the
short-term.
The result of this can be seen in softer new placement activity as clients put
on hold investment initiatives, particularly acute in permanent roles. This
has resulted in net fees for the year of £369.1 million, down 9% YoY on a
like-for-like basis, which, together with prudent cost control, delivered an
operating profit of £66.2 million. Our bias toward flexible talent
underpinned our resilience in the year, providing a visible runway of
monthly-recognised Contract net fees in the form on a contractor order book.
Whilst Contract extensions continued to be robust through the year, reflecting
the desire of our customers to retain key STEM skills, persistently weak new
business activity meant that new business did not outpace the rate of Contract
finishers, resulting in the contractor order book declining 10% YoY. Despite
this, our Contract focus continues to provide sector-leading net fee
visibility of £161.3 million, equivalent to around four months of net fees.
Embracing change and aligning to structural opportunity
The unprecedented speed of adoption of new technology is taking hold across
industries and we are starting to see this shaping business leaders' views of
the skillsets they need. The reported productivity gains and growth potential
enabled through Artificial Intelligence (AI) adoption is in turn changing the
skills sought by employers.(2) As we have reported in our own research (How
the STEM World Works), AI is no longer the spectre that threatens job
security; it is the catalyst for unprecedented growth. Crucially, it has been
shown that AI is often performing best in collaboration with people, and that
"the biggest performance improvements come when humans and smart machines work
together."(3) We believe this to be particularly acute in highly complex
roles, a view which is supported by industry experts(4). It is these
specialist markets where we focus, and which require experts to find and
place.
We believe we are at the centre of this evolving landscape, both in terms of
what we deliver to clients, but also our own operations. To our clients, as
well as candidates, we provide advice and guidance. Not only are we helping
our clients to leverage the benefits of modern technology by finding the
skills they need in order to do so, but we are also embracing it ourselves in
ways that make work more fulfilling and impactful for our teams. We are on our
own journey of creating a bespoke insights and data platform that will deliver
exceptional value to our customers, candidates, employees and shareholders.
Working for our communities and the planet
Notwithstanding transient economic cycles, we remain resolute in our focus on
executing our ESG commitments. In doing so, we are ensuring we are building a
business that works for our communities and the planet, a central component to
our sustainable growth ambitions and long-term resilience. Our commitment to
the environment is two-fold: as a Group, we are actively transitioning to be a
net zero business before 2050 in line with SBTi verified targets, and this
year our net zero working group has been working on a five-year transition
roadmap (FY25-FY30) to ensure we remain on track. Secondly, our role extends
much broader than our own business footprint - the STEM skills we place play a
critical role in enabling the transition to a net zero world, and in FY24, we
delivered 923 placements within clean energy. Since FY19 we have seen 161%
growth in our clean energy business net fees. Clean energy, which now accounts
for 11% of Group net fees, remains an exciting growth opportunity for SThree.
In 2019 we set our 2024 sustainable business practice and ESG ambitions
(refreshed in FY22). The following provides an overview of our in-year
performance and progress towards our overall goals:
· During FY24, our clean energy business grew by 5% compared to FY23 (FY23: up
28% versus FY22). We have achieved our target of doubling the size of our
global clean energy business from FY19 to FY24.
· In FY24, we achieved a 21% reduction in carbon emissions compared to FY19, our
baseline year for our SBTi net zero target. Our goal was to reduce absolute
carbon emissions by 25% from FY19 levels. We surpassed this target in FY22
with a 44% reduction, but fell slightly short in FY24.
· Throughout FY24, we positively impacted over 48,500 lives (FY23: over 25,700).
Since FY19, we have positively impacted 163,028 lives and successfully met our
ambition of impacting more than 150,000 lives by the end of 2024.
· As of FY24, 37% of leadership positions are held by women (FY23: 39%) as we
progress towards our short-term goal of 40% of women in leadership roles, with
the longer-term ambition of achieving 50/50 representation.
We also recognise our responsibility in helping to shape an equitable and
diverse STEM talent pipeline. As such, in FY24 our Elevate Careers programme
delivered career advice, CV reviews, and sharing our intellectual capital to
help 1,739 people at risk of unemployment to access career paths. Internally,
we continue to invest in our diversity and in FY24 we welcomed 39 women to be
our fourth leadership accelerator cohort.
Strategic execution
Places: To be a leader in the markets we choose to serve
A key component of our growth ambition is ensuring our market coverage remains
aligned to the best STEM markets and skills verticals through continuous
evaluation under our market investment model. During the year, we remained
focused on our active market coverage of 11 countries, giving us access to
approximately 71% of the global STEM staffing opportunity, and which we
service from our footprint of 33 offices. This deliberate and targeted
coverage follows a streamlining of our markets in preceding years, and as a
result, this simplified structure has enabled us to channel all of our efforts
during FY24 on strengthening our operations in each of our core markets for
long-term success.
For example, in the US we have invested in refining our go-to-market
strategies to ensure our teams are better positioned to capitalise on growth
opportunities there, with a focus on having a more balanced portfolio in each
of our core markets, particularly given that we expect the region to rebound
faster than other markets. More broadly, other areas of focus in the year
have been investing in our technology and capacity to embed data-driven
insights throughout our operations, both to enhance the services we provide to
clients and to also inform our pricing and skill vertical investments in each
market. We have also evolved our global client approach to emphasise greater
client collaboration and service. Lastly, we have brought our global
Permanent community together to strengthen our Permanent offering in
preparation for recovery in the market. These initiatives leave us with
stronger foundations to grow both organically and through selected M&A,
positioning us well to capitalise when markets recover.
Platform: Create a world-class operational platform through data, technology
and infrastructure
This year has marked a considerable step-change in our transition to a
digitally-enabled organisation, with the TIP roll-out now initiated across
four of our five largest global markets. Importantly, we have taken the
learnings from our first major roll-out in the US, and applied it to our
subsequent implementations initiated in FY24 in Germany, UK and the
Netherlands, helping us to be more efficient in our deployment. This has
enabled us to introduce, for the first time, back-office process automation,
with the early efficiency benefits highlighting the scale of the potential we
can unlock. We now have five AI-enabled processes across placement support,
payroll and IT help desks live and working in our four initiated markets, with
another five processes to be onboarded in FY25. Taking a look at the US as our
first major region to go live, over a 12-month period we have reduced the
manual intervention on c.4,400 new placement onboardings or extension updates;
removed the need for the manual management and approval of c.43,000
timesheets; and decreased the number of tickets created by the IT help desk by
28%.
In addition, the implications of our global system roll-out is starting to
resonate much more broadly. This year we have designed the automation of sales
processes and begun digitising the 'SThree Way' best practice blueprint to
support sales effectiveness of our consultants. In doing so, we have made a
concerted effort in ensuring that our technology roll-out is inextricably
delivered together with change management initiatives across our teams,
through focus groups, leadership days and training. Already we can see that
our new, standardised and accessible systems are tying the whole organisation
closer together, helping to bring greater alignment around our strategy. We
are becoming better at utilising the power of the Group through knowledge
sharing and transporting client relationships across regions, helping to open
up new opportunities and build deeper relationships with our clients.
As we enter the new year, we will be completing the rollout out of TIP
globally, and introducing new functions onto the platform. As we look ahead to
our mid-to-long term opportunity, this is only the start of our journey. The
more we do, the more that it is clear that the benefits of TIP will continue
to expand, with its global implementation providing the foundational
infrastructure for continued enhancement, development and innovation in the
years to come. We believe this will position us as game-changers in the
industry, driving high margin growth over the medium term.
Position: Leverage our position at the centre of STEM to deliver sustainable
value to our candidates and clients
Our go-to market strategy is rooted in our 'house of brands' approach, with a
focus on leveraging the strong brand value we have in our specialist vertical
markets across the full Group. Through a more unified brand portfolio we are
working to tie our brands closer together to elevate the collective power of
the Group and enhance our position within our markets and skills verticals. We
are already seeing evidence that our proposition as a STEM partner is gaining
increased momentum with larger enterprise clients, evidenced by 8% YoY net fee
growth within our top client cohort. We see a large opportunity within this
customer segment, and we have new initiatives planned for launch in FY25 to
build on this momentum further.
To support our efforts, we launched the latest of our thought leadership
initiatives in H2 FY24 with our global STEM survey report, 'How the STEM world
works: Navigating the new era of AI and trust'. The report is the culmination
of an in-depth survey of over 2,500 STEM professionals worldwide, spanning
Technology, Engineering and Life Sciences. The report provides insight for our
clients looking to create the right environment and workforce to embrace AI
and digital transformation to drive productivity and innovation. Findings
such as the fact STEM professionals are losing nearly six hours each week due
to insufficient AI support, and the prevalence of digital illiteracy in
leadership are just some findings that help our clients make the right
workforce decisions.
People: Attract, develop and retain great people
Our longstanding relationships and best-in-class consultative service wrapper
are made possible by our dedicated global team of c.2,700 people. Our
performance culture is guided by an ethos that everyone plays a part in our
journey, and I would like to take the opportunity to thank all SThree team
members for their continued commitment and determination in delivering
outstanding value to our clients and candidates. A highlight of my role
continues to be interacting with our teams on the ground across our global
markets, and I was particularly inspired following our two-day leadership
conference in London where our teams and customers came together to share
views on the future of work. We were able to give additional insight on our
technology improvement plans and the progress we have made in enhancing
service delivery through standardisation of the 'SThree Way'.
During the year we have seen early positive impact from enhanced processes to
improve employee retention, including a reduction in sales consultant churn
this year. Specific initiatives in the period include the launch of a Global
Benefits Network and Reward Governance Group, and the introduction of refined
global hybrid working policies. In addition, we have dedicated considerable
effort through our change programme, with a focus on upskilling, ensuring that
our teams have been prepared for the demands of a new system as we progressed
the global roll-out of our new technology infrastructure. In addition, there
have been big investments in leadership development and we successfully
activated and embedded our new company values.
Looking into FY25, we will be implementing new initiatives with the key
objective to impact our retention and productivity of our 0-24 months sales
population. With this programme we aim to develop our SThree Way of managing
sales by ensuring we develop globally consistent best practices for hiring,
onboarding and performance managing sales talent across all regions.
Outlook: bringing skilled people together to build the future
As previously indicated, market conditions continue to be challenging
particularly in Europe, and we prudently expect this to persist through FY25.
Whilst the wider landscape remains in a state of status quo bias in the short
term, we would expect this to transition to tailwinds over the medium term as
businesses resume investment to avoid stagnation and pent-up investment demand
is unleashed. Importantly, we are not shaping our thinking and decision making
around this cycle. We maintain our forward-looking view, focusing on the right
markets, with the right people and the right strategy over the mid-to-long
term.
We are using this time to move further ahead in our positioning, investing in
our future, supported by a resilient business model and robust cash position.
We believe the actions we are taking are providing us with competitive,
first-mover advantage and we will emerge fitter and ready to capitalise when
markets recover. Our scale, robust business foundations and deep STEM networks
fostered over decades, combined with a plan to drive the benefit realisation
of our infrastructure investment, sets us on a path to be game changers in
STEM.
(1) https://online.wharton.upenn.edu/blog/status-quo-bias/
(https://online.wharton.upenn.edu/blog/status-quo-bias/)
(2 )
https://www.pwc.com/gx/en/news-room/press-releases/2024/pwc-2024-global-ai-jobs-barometer.html
(https://www.pwc.com/gx/en/news-room/press-releases/2024/pwc-2024-global-ai-jobs-barometer.html)
(3)
https://hbr.org/2018/07/collaborative-intelligence-humans-and-ai-are-joining-forces
(https://hbr.org/2018/07/collaborative-intelligence-humans-and-ai-are-joining-forces)
(4)
https://www.peoplemanagement.co.uk/article/1895039/michael-wooldridge-ai-doesnt-depth-replace-complex-roles
(https://www.peoplemanagement.co.uk/article/1895039/michael-wooldridge-ai-doesnt-depth-replace-complex-roles)
Group financial and OPERATIONAL REVIEW
Overview
Our strategic focus on Contract underpinned the Group's performance against a
prolonged challenging backdrop for the sector, where conditions have had an
ongoing impact on new business activity throughout the year; overall, the
Group net fees declined 9% YoY on a like-for-like basis.
Our Contract business, which represents 84% of Group, saw net fees decline by
7% YoY on a like-for-like basis. The contractor order book closed at £161.3
million, down 10% YoY, but continues to provide sector-leading visibility into
FY25. Permanent net fees were down 18% reflecting both global market
conditions together with our targeted investment towards Contract. Average
permanent headcount was down 7% YoY.
From a skill perspective, the Group saw continued demand for Engineering
roles, down only 1% YoY, driven primarily by the Energy sector, with the clean
energy (renewables) segment still in growth (up 5% YoY), while net fees for
placements into Technology roles, our largest discipline, were down 10% YoY
and Life Sciences declined 17% YoY primarily driven by the global market
conditions in the sector, though still broadly in-line with pre-Covid levels.
Overall, the Group reported operating profit was £66.2 million (FY23: £76.4
million), down 9% YoY on a like-for-like basis, driven primarily by the
decline in net fees across key markets, the impact of additional licensing
costs as the Technology Improvement Programme (TIP) continued to roll out in
FY24, offset by prudent management of discretionary costs. The operating
profit conversion ratio for the year remained stable at 18%.
Productivity for the year was down only 4% against the prior year, as the rate
of net fee decline was higher than average headcount decline of 6%, reflecting
careful management of our business whilst ensuring we are ready to respond
when the market improves.
Update against 2024 ambitions
At our Capital Markets Day in FY19 (refreshed in FY22), we announced our 2024
ambitions, which have guided our actions and strategic initiatives in our
journey to become the number one STEM talent provider in the best global STEM
markets:
· Grow market share/grow net fees faster than our peer group across the
aggregate of our top five markets compared to FY19. Based on the market data
available to us as at the end of Q3 FY24, we have outperformed our local peer
group on a net fee basis versus FY19.
· Deliver a sustainable operating profit conversion ratio in excess of 21%. The
current macro-economic headwinds have negatively impacted net fees and
dampened the overall margin progression, however the Group has continued to
invest in its people and platform. While 21% could have been achieved, we have
prioritised investing in our longer-term ambitions while still maintaining a
sector-leading conversion ratio of 18% in FY24 despite the difficult market
conditions.
· Our aim was to target eNPS scores in the top quartile of the professional
services industry. Over the course of the year, we ran two full surveys and
our average Group-wide eNPS score was 40 points(1), which is within the top
quartile. Survey findings highlighted SThree's strengths in setting
performance goals, giving feedback, and performance recognition. Sentiment was
influenced in part by the ongoing TIP roll-out. Large-scale transformations
often impact eNPS short-term, and the implementation of our TIP is a big
change for our people as it takes time to get acquainted with a completely new
end-to-end system. Despite this, we are seeing a great commitment from our
teams, reflected in above-benchmark eNPS scores for TIP-related questions,
demonstrating their understanding and support for the transformation.
· We aimed to reduce absolute carbon emissions by 25% compared to FY19 levels
(the base year). This target was surpassed in FY22 with a 44% reduction.
However, in FY24, we fell slightly short of the target, achieving a reduction
of 21% compared to FY19.
( )
(1) FY24 average eNPS score based on H1 eNPS of 45 (top quartile 40), and H2
eNPS of 35 (top quartile 36).
Group net fees by geography, skills and service
Group net fees % of Group FY24 FY23 Variance
(£'000) (£'000)
Reported Like-for-like((1))
Geographical mix
DACH 35% 127,546 148,925 -14% -12%
USA 22% 82,034 96,410 -15% -12%
Netherlands including Spain 21% 78,532 82,149 -4% -2%
Rest of the Europe 17% 61,314 70,439 -13% -12%
Middle East & Asia 5% 19,653 20,852 -6% +4%
Total 100% 369,079 418,775 -12% -9%
Skills mix
Technology 48% 177,694 202,510 -12% -10%
Engineering 29% 105,330 108,820 -3% -1%
Life Sciences 17% 60,926 75,516 -19% -17%
Other 7% 25,129 31,929 -21% -18%
Total 100% 369,079 418,775 -12% -9%
Service mix
Contract 84% 310,617 343,502 -10% -7%
Permanent 16% 58,462 75,273 -22% -18%
Total 100% 369,079 418,775 -12% -9%
((1)) Like-for-like YoY growth rates are expressed in constant currency.
Business mix
The Group is well diversified, both geographically and by the skills we place
across multiple sectors. Our top three countries represent 72% of Group net
fees, with Germany accounting for 30%, USA 22% and the Netherlands 19%.
Our Contract business declined by 7% on a like-for-like basis against a record
prior year performance and now represents 84% of the Group net fees. Our
Permanent business, which now represents 16% of the Group net fees, saw net
fees decline 18% in the year on a like-for-like basis, with average Permanent
headcount down 7% YoY. Our market invest model enables us to continually
review our markets to prioritise investments where we see opportunities for
growth and the strongest returns.
Engineering, which represents 29% of the Group net fees, declined by 1%, with
the resilient performance against a record prior year driven primarily by the
Energy sector. Clean energy business (renewables) remains the fastest growing
segment, up 5% YoY. This was offset by the decline in Technology of 10% YoY,
and in Life Sciences of 17% YoY due to reduced global sector expenditure.
Technology and Life Sciences now represent 48% and 17% of the Group net fees
respectively.
Operational review by reporting segment
DACH (35% of Group net fees)
FY24 FY23 Variance
Performance highlights Reported Like-for-like
Revenue (£'000) 456,051 524,732 -13% -11%
Net fees (£'000) 127,546 148,925 -14% -12%
Average total headcount (FTE) 811 877 -8% n/a
· DACH is our largest region comprising businesses in Austria, Germany and
Switzerland, with Germany accounting for 88% of net fees. Net fees declined by
12% YoY, with Contract down 6% and Permanent down 28%.
· Germany, our largest country in the region (88% of DACH net fees), saw
Contract down 6%, with overall net fees down 12%, predominantly reflecting
lower levels of demand for Technology skills (down 13%). In addition, new
business activity and trading in Germany were affected by the fragile state of
the German coalition government in Q4 FY24.
· Switzerland saw net fees decline 7% YoY driven by Life Sciences down 26%,
though we did see strong growth in Engineering, up 42% YoY.
· Austria net fees declined 18% YoY.
USA (22% of Group net fees)
FY24 FY23 Variance
Performance highlights Reported Like-for-like
Revenue (£'000) 299,229 328,293 -9% -6%
Net fees (£'000) 82,034 96,410 -15% -12%
Average total headcount (FTE) 411 473 -13% n/a
· The USA is the world's largest specialist STEM staffing market and our
second-largest region on a net fee basis. It remains a key area of focus for
the Group, and we will continue to invest in the region as we align our
resources with the best long-term opportunities.
· USA saw net fees decline 12% YoY with trading partly reflecting uncertainty
throughout the year relating to the US election at the end of Q4. At the skill
level, the decline was led by Life Sciences where an abundance of roles during
the pandemic has led to a subsequent decline in demand. Engineering delivered
a solid performance with 5% growth YoY driven by both Contract and Permanent.
· Contract net fees, which now account for 90% of the region's net fees, were
down 11%, impacted by declines in Life Sciences and Technology.
· Permanent net fees declined 24% YoY, due to poor performance in Life Sciences.
Netherlands including Spain (21% of Group net fees)
FY24 FY23 Variance
Performance highlights Reported Like-for-like
Revenue (£'000) 343,571 367,643 -7% -4%
Net fees (£'000) 78,532 82,149 -4% -2%
Average total headcount (FTE) 411 422 -3% n/a
· The region saw net fees decline by 2% YoY, with Contract down 2% and Permanent
down 5%.
· The Netherlands, our largest country in the region (90% of net fees),
delivered a resilient performance despite an ongoing challenging macro
environment resulting in a drop in new hiring demand. Overall net fees
generated in the Netherlands were down 6%, with Contract down 6% and Permanent
down 5%.
· From a sector perspective, Technology in the region was flat, Engineering was
down 4% and Life Sciences was down 5%.
· Spain had another impressive year, with net fee growth of 52% driven primarily
by Technology.
Rest of the Europe (17% of Group net fees)
FY24 FY23 Variance
Performance highlights Reported Like-for-like
Revenue (£'000) 353,150 399,862 -12% -11%
Net fees (£'000) 61,314 70,439 -13% -12%
Average total headcount (FTE)((9)) 441 499 -12% n/a
((9)) Excludes central headcount located in the UK.
· Rest of Europe comprises businesses in the UK, Belgium and France, where given
the persistent market uncertainty, business confidence remained subdued
causing many large projects to be put on hold.
· Net fees saw a decline of 12% YoY. Contract, which represents 97% of net
fees for the region, declined 11%, with Permanent declining 41%, driven by
both market conditions and the transition towards Contract.
· The UK, our largest country in the region (64% of net fees), saw net fees
decline 14%, with growth in Engineering, up 4% YoY, outweighed by declines in
Life Sciences, down 22%, and Technology, down 10%.
· France and Belgium traded broadly in line with the prior year, with net fees
flat and down 1% respectively.
Middle East & Asia (5% of Group net fees)
FY24 FY23 Variance
Performance highlights Reported Like-for-like
Revenue (£'000) 40,905 42,637 -4% +3%
Net fees (£'000) 19,653 20,852 -6% +4%
Average total headcount (FTE) 202 185 +9% n/a
· Our Middle East & Asia business includes Japan and UAE, and accounts for
5% of Group net fees.
· Overall, FY24 was a good year with stable, consistent growth for the region,
net fees increased by 4% YoY. On Permanent we saw our net fees grow by 14%
YoY.
· Japan, which represents 54% of the region's net fees, delivered an impressive
performance up 26% YoY, reflecting growth in both Engineering and Technology,
up 68% and 16% respectively. Japan's Contract net fees were up 117% and
Permanent up 20%.
· UAE saw net fees decline 11% YoY driven by Engineering.
chief financial officer's STATEMENT
In FY24, the Group was impacted by increased political and macro-economic
uncertainty, particularly in Europe, further delaying businesses' investment
plans and the anticipated easing of market conditions. The Group's net fees
performance, down 9% YoY on a like-for-like basis, was therefore significantly
impacted by the continued weak new business activity, partially offset by
robust contract extensions.
Income statement
On a reported basis revenue for the year was down 10% 1 (#_ftn1) and amounted
to £1.5 billion (FY23: £1.7 billion) while net fees declined by 12% to
£369.1 million (FY23 £418.8 million). The weakening of our two main trading
currencies, the US Dollar and the Euro, against Sterling during the year,
decreased the total net fees by £9.5 million. Therefore, when presented on a
constant currency basis, the net fees decreased by 9% YoY.
Net fees in our Contract business, which represented 84% of the Group net fees
for the current year (FY23: 84%), declined by 7%, driven by the ongoing
softness in new business but partially offset by continued strong contract
extensions. Across our core regions, Netherlands (including Spain) saw a
decline of 2% in Contract net fee income, driven by Engineering, down 3% YoY.
In the US, Contract net fees, which now account for over 90% of the region
total net fees, were down 11% YoY primarily due to its exposure to Life
Sciences, while DACH was down 6%, reflecting softer demand for Technology
skills. Rest of Europe's Contract performance was down 11% YoY. Middle East
& Asia was down 15%. Skills-wise, Engineering was flat YoY, with Life
Sciences down 16% and Technology down 7%, reflecting global market conditions.
The Group Contract net fee margin, calculated as Contract net fees as a
percentage of Contract revenue 2 (#_ftn2) remained flat YoY at 21.7% (FY23:
21.7%).
The contractor order book closed at £161.3 million, down 10% YoY, and
accounts for approximately four months' worth of net fees, providing us with
good forward visibility into FY25. Under the contractor model, net fees are
earned on a month-by-month basis, with the contractor order book reflecting
the value of net fees under contract but yet to be recognised. During softer
market conditions, this provides resilience with visibility over the
recurring-like nature of monthly contract fees as contracts run their course
(contract 'finishers'). In a market recovery context, the Board would expect
the contractor order book to gradually increase as and when new placements
outpace finishers over a sustained period through the year.
Permanent net fee income was down 18% reflecting market conditions across most
regions, together with our targeted investment towards Contract. Our largest
Permanent region, DACH, reported a decline of 28%. Rest of Europe was also
down 41%, and USA down 24%. Netherlands (including Spain) declined 5% YoY.
Meanwhile our second largest Permanent region, Middle East & Asia,
delivered a strong performance with growth of 14%. Permanent average fees
increased by 9% YoY in the year, with average permanent fee margin (net fees
as a percentage of salary) now at 27.2% (FY23: 27.1%).
Operating expenses decreased by 12% YoY on a reported basis, amounting to
£302.9 million (FY23: £342.4 million) due to careful management of costs.
Overall, the reported operating profit was £66.2 million (FY23: £76.4
million), down 9% YoY in constant currency, while the Group operating profit
conversion ratio(2) remained stable at 17.9% (FY23: 18.2%). Operating profit
conversion ratio reflects the decline in net fees across key markets, as well
as the impact of additional licensing costs as the Technology Improvement
Programme continued to roll out this year, offset by prudent management of
discretionary costs. The net currency movements versus Sterling were
unfavourable to the operating profit, reducing it by £3.0 million.
Fluctuations in foreign currency exchange rates are expected to remain a
material sensitivity to the Group's reported results. By way of illustration,
each 1% movement in annual exchange rates of the Euro and US Dollar against
Sterling impacts the Group's operating profit by £0.8 million and £0.3
million respectively per annum.
Net finance income
The Group received net finance income of £1.4 million (FY23: £1.6 million)
which included interest income of £2.9 million (FY23: £2.2 million), earned
on the Group's bank deposits, partially offset by the interest charge on lease
liabilities, £1.4 million (FY23: £0.6 million).
Income tax
The total tax charge for the year on the Group's profit before tax was £19.9
million (FY23: £21.9 million), representing a full-year effective tax rate
(ETR) of 26.5% (FY23: 28.1%). The YoY decrease in the Group's ETR is primarily
driven by the release of an uncertain tax provision following settlement of
the state aid case heard at the European Court of Justice. The Group ETR can
also vary YoY due to the mix of taxable profits by territory,
non-deductibility of the accounting charge for LTIPs and other one-off tax
items.
Overall, the reported profit before tax was £67.6 million, down 9% YoY in
constant currency and down 13% on a reported basis (FY23: £77.9 million).
The reported profit after tax was £49.7 million, down 7% YoY in constant
currency and down 11% on a reported basis (FY23: £56.1 million).
Earnings per share (EPS)
The EPS was 37.4 pence (FY23: 42.4 pence). The YoY movement is attributable to
the overall resilient trading performance, combined with lower average
headcount, tight cost control and net interest income, partially offset by an
increase of 0.7 million in the weighted average number of shares.
The diluted EPS was 37.1 pence (FY23: 41.5 pence). Share dilution mainly
results from various share options in place and expected future settlement of
vested tracker shares. The dilutive effect on EPS from tracker shares will
vary in future periods, depending on the profitability of the underlying
tracker businesses and the settlement of vested arrangements.
Dividends
The Board monitors the appropriate level of dividend, considering achieved and
expected trading of the Group, together with its balance sheet position. The
Board aims to offer shareholders long-term ordinary dividend growth within a
targeted dividend cover(2) range of 2.5x to 3.0x through the cycle.
The Board has proposed to pay a final dividend of 9.2 pence (FY23: 11.6 pence)
per share, which together with the interim dividend of 5.1 pence (FY23: 5.0
pence) per share, will give the total dividend of 14.3 pence (FY23: 16.6
pence) per share for FY24.
The final dividend, which amounts to approximately £12.2 million, will be
subject to shareholder approval at the 2025 Annual General Meeting. It will be
paid on 6 June 2025 to shareholders on the register on 9 May 2025.
Balance sheet
Total Group net assets increased to £248.6 million (FY23: £222.9 million),
driven by the excess of net profit over the dividend payments and £5.1
million increase in intangible assets attributable to development costs
capitalised under the TIP, partially offset by cost of shares purchased by the
Employee Benefit Trust (EBT).
Net working capital, including contract assets, increased by £21.7 million on
the prior year, driven mainly by increased days sales outstanding (DSO)
partially offset by the slowdown in trading, including reduced contractor
order book. The year-end net cash position of £69.7 million was robust; the
YoY decline reflected the timing of certain client payments related to a small
number of clients. As we roll out TIP in each new market, there is a
short-term impact as clients get used to a new billing process. It has created
a little volatility as we roll out each market, but what we see is that it
returns towards more normalised levels over a period of months. In FY24, this
resulted in a temporary increase in DSO to 55 days (FY23: 46 days), but we
expect to continue to return to a more normalised cash flow profile over the
coming months.
Overall, our business model remains highly cash generative, and we have no
undue concentration of repayment obligations in respect of trade payables or
borrowings.
Investments in subsidiaries
During the year, the Directors reviewed the recoverable amount of the
Company's own portfolio of investments. Due to the prolonged challenging
market conditions, in December 2024 the Group announced a downgrade to the
forecast trading outlook for the Group. As a result, an impairment loss of
£46.5 million was recognised in respect of the UK operations. In FY24, both
Permanent and Contract divisions across all sectors experienced reduced
margins impacting the profitability of the UK region. After booking this
impairment, the Company's distributable retained earnings were £44.4 million
(FY23: £118.4 million).
For all the other Company's investments in trading subsidiaries, despite the
latest trading forecasts having been revised downwards compared to
expectations, their impact was absorbed by significant headroom in the
recoverable amounts which had accumulated in prior years. The recoverable
amounts of the Company's investments in non-UK subsidiaries provided
sufficient headroom to not trigger impairment.
In the prior year, an impairment loss of £0.1 million was recognised by the
Company in relation to two discontinued businesses, Luxembourg and Canada.
Tracker shares
In FY24, the Group settled certain vested tracker shares for a total
consideration of £4.8 million (FY23: £4.5 million) which was determined
using a formula set out in the Articles of Association underpinning the
tracker share businesses. The consideration was settled in SThree plc shares;
508,396 (FY23: 320,457) new shares were issued and 776,000 (FY23: 928,483) of
shares held by the EBT were utilised. The arrangement is deemed to be an
equity-settled share-based payment arrangement under IFRS 2 Share-based
payments. There was no charge to the income statement as initially the tracker
shareholders subscribed to the tracker shares at their fair value.
All current tracker share businesses remaining in existence will continue to
be reviewed for settlement based on the pre-agreed criteria each year, until
the full closure of the scheme in the next few years. As at the year end, the
valuation of the outstanding shareholdings was approximately £2.1 million.
These settlements may either dilute the earnings of SThree plc's existing
ordinary shareholders if funded by a new issue of shares or result in a cash
outflow if funded via treasury shares or shares held in the EBT.
Liquidity management
In FY24, cash generated from operations was £59.8 million (FY23: restated
£86.9 million, see note 1 to the consolidated financial statements for
details). The decrease was primarily driven by lower profit before tax and a
significant increase in working capital as the rate of new placement activity
slowed, partially offset by robust Contract extensions. Income tax paid
increased to £23.0 million (FY23: £19.5 million).
Capital expenditure increased to £13.2 million (FY23: £8.2 million), due to
the Group-wide TIP and related IT hardware costs. The capital expenditure also
included costs of leasehold improvements and fitting out certain parts of our
office portfolio.
The Group paid £14.4 million in rent (principal and interest portion) (FY23:
£14.9 million). The Group spent £10.0 million (FY23: £10.0 million) for the
purchase of its own shares to satisfy employee share incentive schemes. Cash
inflows of £0.5 million (FY23: £0.3 million) were generated from
Save-As-You-Earn employee scheme.
Dividend payments were £15.9 million comprising primarily the final dividend
paid in June 2024. This is significantly lower as compared to FY23, when in
total £21.0 million in funds were transferred to the share administrator for
settlement of the FY23 interim dividend and the FY22 final dividend. £21.0
million in funds transferred for the settlement of dividends in FY23 is a
restated amount, reduced by £6.4 million. During the year, the Directors
identified a presentation error of the FY22 interim dividend in the FY23
Consolidated Statement of Cash Flows. £6.4 million worth of funds, required
for the settlement of the FY22 interim dividend, were transferred to a share
administrator before 30 November 2022; this was recorded as a dividend
prepayment within trade and other receivables and as an operating cash outflow
in FY22. Subsequently, it was determined that £6.4 million accounted for as a
dividend prepayment and operating cash outflow in FY22 should have been
presented within financing activities in the FY22 Consolidated Statement of
Cash Flows, in a separate line item 'Prepayment of dividend', to reflect
appropriately the nature of this cash outflow. Accordingly, this £6.4 million
would not have impacted the FY23 Consolidated Statement of Cash Flows. For
further information, please see note 1 to the Consolidated Financial
Statements.
Foreign exchange had a negative impact of only £0.1 million (FY23: positive
impact £2.1 million).
Overall, the net cash has declined to £69.7 million in FY24 versus the prior
year balance of £83.2 million, driven primarily by reduced EBITDA and
increased investments in technology.
Accessible funding
The Group's capital allocation priorities are financed mainly by retained
earnings, cash generated from operations, and a £50.0 million RCF. This has
remained undrawn during the year, but any funds borrowed under the RCF would
bear a minimum annual interest rate of 1.2% above the benchmark Sterling
Overnight Index Average. The Group also maintains a £30.0 million accordion
facility as well as a substantial working capital position reflecting net cash
due to SThree for placements already undertaken.
At the end of the current financial year, the Group had not drawn down any of
the credit facilities (FY23: £nil).
On 30 November 2024, the Group had total accessible liquidity of £124.7
million, made up of £69.7 million in net cash (FY23: £83.2 million), the
£50.0 million RCF and a £5.0 million overdraft facility (of which only £0.1
million was drawn at the year end).
Capital allocation
SThree remains disciplined in its approach to allocating capital, with the
core objective at all times being to maximise shareholder value. The Group's
capital allocation policy is reviewed periodically by the Board and was
refreshed at the start of FY24:
· Balance sheet - our intention is to maintain a strong balance sheet at all
times to provide operational flexibility throughout the business cycle.
· Dividend - we aim to pay a sustainable dividend, with a commitment to a
through-the-cycle dividend cover range of 2.5x to 3.0x of EPS.
· Deployment of capital prioritised in the order of:
1. Organic growth: investing in our people and ensuring sufficient working
capital on hand to fund growth in the contractor order book while developing
new business opportunities.
2. Business improvement: digitalising our business, putting in place the
technology and tools that are key to driving both scale and higher margins.
3. Acquisitions: strict inorganic growth discipline, with a focus on
complementary and value enhancing acquisitions.
4. Capital return to shareholders: after all organic and inorganic opportunities
within an appropriate time horizon have been assessed, further cash returns to
shareholders may be considered.
PRINCIPAL AND EMERGING RISKS
Principal risks and uncertainties affecting the business activities of the
Group will be detailed within the Strategic Report section of the Group's 2024
Annual Report and Accounts, a copy of which will be available on the Group's
website www.sthree.com (http://www.sthree.com) .
Delivering on our strategy requires all parts of our business to work
together. In isolation risk mitigation helps SThree manage specific subjects
and areas of the business. However, when brought into our day-to-day
activities, successful risk management has helped us to maximise our
competitive advantage and deliver on our strategic pillars in FY24. While the
ultimate responsibility for risk management rests with the Board, the
effective day-to-day management of risk is in the way we do business and our
culture.
Aligning risks and strategy by using risk to help make the right strategic
decisions - in order to deliver our strategy and competitive advantage
throughout the business we must ensure that we maintain a balance between
safeguarding against potential risks and taking advantage of all potential
opportunities.
consolidated income statement
for the year ended 30 November 2024
£'000 Note 2024 2023
Revenue 2 1,492,906 1,663,167
Cost of sales 2 (1,123,827) (1,244,392)
Net fees 2 369,079 418,775
Administrative expenses 3 (301,972) (336,076)
Impairment losses on financial assets (913) (6,343)
Operating profit 66,194 76,366
Finance income 2,891 2,257
Finance costs (1,445) (698)
Profit before income tax 67,640 77,915
Income tax expense 4 (17,948) (21,864)
Profit for the year attributable to the owners of the Company 49,692 56,051
Earnings per share attributable to shareholders
pence
Basic 5 37.4 42.4
Diluted 5 37.1 41.5
consolidated statement of comprehensive income
for the year ended 30 November 2024
£'000 2024 2023
Profit for the year 49,692 56,051
Other comprehensive loss:
Items that may be subsequently reclassified to income statement
Exchange differences on retranslation of foreign operations (4,304) (1,437)
Other comprehensive loss for the year (net of tax) (4,304) (1,437)
Total comprehensive income for the year attributable to owners of the Company 45,388 54,614
The accompanying notes form an integral part of these Consolidated Financial
Statements.
consolidated statement of financial position
as at 30 November 2024
30 November 30 November
£'000 Note 2024 2023
ASSETS
Non-current assets
Property, plant and equipment 46,217 31,116
Intangible assets 6 12,122 7,066
Deferred tax assets 3,408 5,799
Total non-current assets 61,747 43,981
Current assets
Trade and other receivables 364,907 345,120
Current tax assets 10,315 -
Cash and cash equivalents 7 69,756 83,202
Total current assets 444,978 428,322
Total assets 506,725 472,303
EQUITY AND LIABILITIES
Equity attributable to owners of the Company
Share capital 8 1,356 1,349
Share premium 8 42,098 39,700
Other reserves (7,195) (3,597)
Retained earnings 212,385 185,432
Total equity 248,644 222,884
Current liabilities
Bank overdraft 7 88 -
Trade and other payables 198,223 200,132
Lease liabilities 9, 10 10,419 11,297
Provisions 4,068 7,373
Current tax liabilities 12,275 10,746
Total current liabilities 225,073 229,548
Non-current liabilities
Lease liabilities 9, 10 29,362 17,720
Provisions 2,784 2,151
Deferred tax liabilities 862 -
Total non-current liabilities 33,008 19,871
Total liabilities 258,081 249,419
Total equity and liabilities 506,725 472,303
The accompanying notes form an integral part of these Consolidated Financial
Statements.
consolidated statement of changes in equity
for the year ended 30 November 2024
Share Share Capital Capital Treasury reserve Currency Fair value reserve of equity investments Retained Total equity attributable to owners of the Company
capital
premium
redemption
reserve
translation
earnings
reserve
reserve
£'000
Balance at 1 December 2023 1,349 39,700 172 878 (7,939) 3,305 (13) 185,432 222,884
Profit for the year - - - - - - - 49,692 49,692
Other comprehensive loss for the year - - - - - (4,304) - - (4,304)
Total comprehensive (loss)/income for the year - - - - - (4,304) - 49,692 45,388
Transfer of loss on disposal of equity investments through other comprehensive - - - - - - 13 (13) -
income to retained earnings
Dividends paid to equity holders (note 11) - - - - - - - (15,860) (15,860)
Distributions payable to tracker shareholders - - - - - - - (44) (44)
Settlement of vested tracker shares (note 8) 5 1,901 - - 3,324 - - (4,167) 1,063
Settlement of share-based payments (note 8) 2 497 - - 7,369 - - (7,539) 329
Purchase of shares by Employee Benefit Trust (note 8) - - - - (10,000) - - - (10,000)
Credit to equity for equity-settled share-based payments - - - - - - - 4,894 4,894
Current and deferred tax on share-based payment transactions - - - - - - - (10) (10)
Total movements in equity 7 2,398 - - 693 (4,304) 13 26,953 25,760
Balance at 30 November 2024 1,356 42,098 172 878 (7,246) (999) - 212,385 248,644
Balance at 1 December 2022 1,345 38,239 172 878 (6,581) 4,742 (13) 161,610 200,392
Profit for the year - - - - - - - 56,051 56,051
Other comprehensive loss for the year - - - - - (1,437) - - (1,437)
Total comprehensive (loss)/income for the year - - - - - (1,437) - 56,051 54,614
Dividends paid to equity holders (note 11) - - - - - - - (27,373) (27,373)
Distributions to tracker shareholders - - - - - - - (94) (94)
Settlement of vested and unvested tracker shares (note 8) 3 1,198 - - 3,987 - - (4,795) 393
Settlement of share-based payments (note 8) 1 263 - - 4,655 - - (4,870) 49
Purchase of shares by Employee Benefit Trust (note 8) - - - - (10,000) - - - (10,000)
Credit to equity for equity-settled share-based payments - - - - - - - 4,871 4,871
Current and deferred tax on share-based payment transactions - - - - - - - 32 32
Total movements in equity 4 1,461 - - (1,358) (1,437) - 23,822 22,492
Balance at 30 November 2023 1,349 39,700 172 878 (7,939) 3,305 (13) 185,432 222,884
The accompanying notes form an integral part of these Consolidated Financial
Statements.
consolidated statement of cash flows
for the year ended 30 November 2024
Note 2024 2023
£'000 (restated*)
Cash flows from operating activities
Profit before tax 67,640 77,915
Adjustments for:
Depreciation and amortisation charge 15,254 15,914
Loss on disposal of property, plant and equipment other than right-of-use 135 160
assets
Gain on lease modification (69) -
Finance income (2,891) (2,257)
Finance costs 1,445 698
Gain on disposal of subsidiary 3 (135) -
Non-cash charge for share-based payments 4,986 4,871
Operating cash flows before changes in working capital and provisions 86,365 97,301
(Increase)/decrease in receivables (28,382) 3,636
Increase/(decrease) in payables 3,667 (11,821)
Decrease in provisions (1,861) (2,220)
Cash generated from operations 59,789 86,896
Interest received 2,891 2,257
Income tax paid (23,002) (19,495)
Net cash generated from operating activities 39,678 69,658
Cash flows from investing activities
Purchase of property, plant and equipment (6,830) (1,975)
Purchase of intangible assets 6 (6,339) (6,237)
Net cash used in investing activities (13,169) (8,212)
Cash flows from financing activities
Interest paid 10 (1,445) (698)
Lease principal payments 10 (13,111) (14,250)
Proceeds from exercise of share options 499 264
Purchase of shares by Employee Benefit Trust 8 (10,000) (10,000)
Dividends paid to equity holders 11 (15,860) (20,990)
Distributions to tracker shareholders - (94)
Net cash used in financing activities (39,917) (45,768)
Net (decrease)/increase in cash and cash equivalents (13,408) 15,678
Cash and cash equivalents at beginning of the year 83,202 65,386
Exchange (losses)/gains relating to cash and cash equivalent (126) 2,138
Net cash and cash equivalents at end of the year 7 69,668 83,202
* Certain amounts shown here do not correspond to the FY23 financial
statements and reflect the restatement made. Refer to note 1 to the
Consolidated Financial Statements for further information.
The accompanying notes form an integral part of these Consolidated Financial
Statements.
Notes to the Financial information
for the year ended 30 November 2024
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
Basis of preparation
The financial information in this preliminary announcement has been extracted
from the Group audited financial statements for the year ended 30 November
2024 and does not constitute statutory accounts within the meaning of section
434 of the Companies Act 2006. The Group financial statements and this
preliminary announcement were approved by the Board of Directors on 27 January
2025.
The auditors have reported on the Group's financial statements for the years
ended 30 November 2024 and 30 November 2023 under s495 of the Companies Act
2006. The auditors' reports are unqualified and do not contain a statement
under section 498(2) or (3) of the Companies Act 2006. The Group's statutory
financial statements for the year ended 30 November 2023 were filed with the
Registrar of Companies and those for the year ended 30 November 2024 will be
filed following the Company's Annual General Meeting.
The Consolidated Financial Statements have been prepared in accordance with
UK-adopted International Accounting Standards (IAS) and in accordance with the
requirements of the Companies Act 2006 as applicable to companies reporting
under those standards.
Going concern
The Consolidated Financial Statements have been prepared on a going concern
basis. The Directors have reviewed the Group's cash flow forecasts, considered
the assumptions contained in the budget and medium-term forecasts, and
considered associated principal risks which may impact the Group's performance
over the going concern assessment period to 31 January 2026.
At 30 November 2024, the Group had no debt except for lease liabilities of
£39.8 million. Credit facilities relevant to the review period comprise a
committed £50.0 million Revolving Credit Facility (RCF) (with the expiry date
of 26 July 2027) and an uncommitted £30.0 million accordion facility, both
jointly provided by HSBC and Citibank. All these facilities remained undrawn
on 30 November 2024. A further uncommitted £5.0 million bank overdraft
facility is also held with HSBC, of which £0.1 million (FY23: £nil) was
drawn at the year end.
In addition, the Group has £69.7 million of cash and cash equivalents
available to fund its short-term needs, as well as a substantial working
capital position, reflecting net cash due to SThree for placements already
undertaken.
In FY24, the Group's trading performance declined against the record prior
year, driven by persisting challenging market conditions, which have extended
beyond the industry's expectations. The total Group net fees declined by 9%
YoY on a like-for-like basis, reflecting protracted soft new placement
activity across Permanent and Contract, partially offset by ongoing strong
Contract extensions. Despite market uncertainties, the Group's long-term
prospects and competitive positioning remain strong, underpinned by its
strategic focus on STEM and Contract, supported by a robust financial position
and significant operational enhancements gradually materialising via our
Technology Improvement Programme.
Based on this evaluation, the Directors have formed a judgement that the Group
has adequate resources to continue in operational existence for the period to
31 January 2026, there are no plausible downside scenarios that would cause an
issue for the Group's going concern status, and considered it appropriate to
prepare them on the going concern basis.
Climate change consideration
Climate change is a significant issue for the world and the transition to a
low-carbon economy will create both risks and opportunities for the Group. The
management team has considered the impact of climate change in preparing these
Consolidated Financial Statements in the areas as listed below. These
considerations are not viewed to be key areas of judgements or sources of
estimation uncertainty in the current financial year.
The management team considered the impact from climate change on the following
areas:
- The going concern and viability of the Group over the next five years,
including the potential impact of climate-related risks, such as SThree's
offices impacted by heightened physical risks affecting our operational
ability to place contractors and service the existing contracts, resulting in
lower revenue and income. This is subject to the ongoing assessment by the
management team performed using three climate-related scenarios for 2024-2040.
The assessment helps to continually test SThree's strategic resilience and its
flexibility to adapt operations to ever-changing risks and opportunities as a
consequence of climate change to drive continued
growth.
- Useful lives of fixed assets: the impact of climate change is not considered
to be material on our existing asset base including on factors like residual
values, useful lives and depreciation methods which determine the carrying
value of non-current assets. Although the Group invests in low-carbon
technology as part of its net zero commitment, there is no immediate risk of
material adjustment to the carrying values of the existing assets in the next
financial year's results. Over the course of our net zero path, the existing
fixed assets are expected to be fully depreciated within the next five to
seven
years.
- Recoverability of trade receivables and contract assets: the impact of
climate-related matters could have an impact on the Group's clients in the
future, especially, clients whose businesses/operations could be negatively
affected by the introduction of emission-reduction legislation, energy
transition plans or by extreme weather and other physical conditions, which
could lead to increase in manufacturing costs, dilapidation of their asset
base and their ability to pay debts. No material climate-related issues have
arisen during the current year that have impacted our assessment of the
recoverability of receivables. Given the short-term maturity of trade
receivables including contract assets, climate change is unlikely to
materially increase our credit
risk.
- Share-based payments: some performance conditions of the Long-Term Incentive
Plan (LTIP) for members of the Executive Committee are linked and measured
against ESG metrics since the 2022 financial year. This could impact the
future amount of the recognition of the share-based payment expense in the
Group income statement. However, as the ESG-related performance condition
constitutes 10% of each grant, the impact is low.
- Segmental reporting: in our response to climate change and transition to a
net zero target, there has been yet no change to the management information
provided to, and reviewed by, the chief operating decision maker each month.
Whilst there is currently no material medium-term impact expected from climate
change, the management team is aware of the ever-changing risks and will
continue to regularly monitor these risks against judgements and estimates
made in preparation of the Group's financial statements.
Prior year restatement
During the year, the FRC's Corporate Reporting Review Team (CRRT) reviewed the
Group's FY23 financial statements. The FRC sought clarification on the
recognition and disclosure of the FY22 interim dividend £6.4 million, which
was declared in July 2022 but only paid to shareholders at the start of the
subsequent financial year (8 December 2022). This review resulted in the Group
restating the comparatives for the year ended 30 November 2023 in these
financial statements to correct a presentation error of the FY22 interim
dividend in the FY23 Consolidated Statement of Cash Flows. The FRC has
subsequently closed its review.
Funds transferred to the share administrator before 30 November 2022 were
presented in operating cash flows in the Consolidated Statement of Cash Flows
for the year ended 30 November 2022. The cash flow was a partial prepayment of
the interim dividend paid in December 2022. Consequently, the Directors have
determined that this cash flow should have been reflected in financing
activities in the Consolidated Statement of Cash Flows for the year ended 30
November 2022 rather than in the year to 30 November 2023 as previously
presented.
The cash balance for FY23 was not misstated.
The error has been corrected by restating each of the affected line items in
the FY23 Consolidated Statement of Cash Flows, as follows:
£'000 30 November 2023 (Decrease)/increase 30 November 2023
(restated)
Impact on the Consolidated Statement of Cash Flows
Cash flows from operating activities
Decrease in receivables 10,019 (6,383) 3,636
Cash generated from operations 93,279 (6,383) 86,896
Net cash generated from operating activities 76,041 (6,383) 69,658
Cash flows from financing activities
Dividends paid to equity holders (27,373) 6,383 (20,990)
Net cash used in financing activities (52,151) 6,383 (45,768)
Accounting policies
The accounting policies used in the preparation of the Consolidated Financial
Statements are consistent with those applied in the previous financial year,
except for the adoption of new and amended standards effective as of 1
December 2023 as set out below.
New and amended standards effective in FY24 and adopted by the Group
The following amendments to the accounting standards, issued by the IASB and
endorsed by the UK and EU, have been adopted by the Group and became
applicable as of 1 December 2023. The Group did not have to change its
accounting policies or make retrospective adjustments as a result of adopting
these amended standards.
- Disclosure of Accounting Policies (Amendments to IAS 1 Presentation of
Financial Statements and IFRS Practice Statement 2).
- Definition of Accounting Estimates (Amendments to IAS 8 Accounting policies,
Changes in Accounting Estimates and Errors).
- Deferred Tax Related to Assets and Liabilities Arising from a Single
Transaction (Amendments to IAS 12 Income Taxes).
- International Tax Reform - Pillar Two Model Rules (Amendments to IAS 12
Income Taxes).
- IFRS 17 Insurance Contracts.
New and amended standards that are applicable to the Group but not yet
effective
As at the date of the financial information in this preliminary announcement,
the following amendments to existing standards were in issue and endorsed by
the UKEB, but not yet effective. These changes are effective for the SThree's
financial year beginning 1 December 2024. These amendments are not expected to
have a material impact on the Group in the current or future financial years.
- New disclosure requirements for characteristics of supplier finance
arrangements (Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial
Instruments:
Disclosures).
- New requirements for measuring lease liability arising in a sale and
leaseback transaction (Amendments to IFRS 16 Leases).
- New classification requirements for liabilities as current or non-current
(Amendments to IAS 1 Presentation of Financial Statements).
The Group has not early adopted any standard, interpretation or amendment that
has been issued but is not yet effective.
2. OPERATING SEGMENTS
The Group's operating segments are established on the basis of those
components of the Group that are regularly reviewed by the Group's chief
operating decision making body, in deciding how to allocate resources and in
assessing performance. The Group's business is considered primarily from a
geographical perspective.
The Directors have determined the chief operating decision-making body (CODM)
to be the Executive Committee made up of the Chief Executive Officer, the
Chief Financial Officer, the Chief Operations Officer, the Chief Commercial
Officer and the Chief People Officer and Regional Managing Directors, with
other senior management attending via invitation.
The Group also presents separately the net fees of its five key markets:
Germany, the Netherlands, the USA, the UK and Japan, as well as a breakdown of
net fees per Contract and Permanent, referred to as 'service mix'.
DACH region comprises Austria, Germany and Switzerland. Rest of Europe
comprises the UK, Belgium and France, and Middle East & Asia includes
Japan and the UAE.
Countries aggregated into DACH, Rest of Europe, Netherlands (including Spain),
and separately into Middle East & Asia have similar economic risks and
prospects, i.e. they are expected to generate similar average gross margins
over the long term, and are similar in each of the following areas:
- the nature of the services (recruitment/candidate placement);
- the class of candidates (candidates, who we place with our clients,
represent skill-sets in Life Sciences, Technology, Engineering and Mathematics
disciplines); and
- the methods used in which they provide services to clients (independent
contractors, employed contractors and permanent candidates).
The Group's management reporting and controlling systems use accounting
policies that are the same as those described in these financial statements
and the accompanying notes.
Revenue, cost of sales and net fees by reportable
segment
The Group assesses the performance of its operating segments through a measure
of segment profit or loss which is referred to as 'net fees' in the management
reporting and controlling systems. Net fees is the measure of segment profit
comprising revenue less cost of sales.
Revenue Cost of sales Net fees
£'000 2024 2023 2024 2023 2024 2023
DACH 456,051 524,732 328,505 375,807 127,547 148,925
Rest of Europe 353,150 399,862 291,836 329,423 61,314 70,439
Netherlands including Spain 343,571 367,643 78,532 82,149
265,039 285,494
USA 299,229 328,293 217,195 231,883 82,034 96,410
Middle East & Asia 40,905 42,637 21,252 21,785 19,653 20,852
1,492,906 1,663,167 1,123,827 1,244,392 369,079 418,775
Split of revenue from contracts with customers
The Group derives revenue from the transfer of services over time and at a
point in time in the following geographical regions:
2024 DACH Rest of Europe Netherlands including Spain USA Middle East & Asia Total
£'000
Timing of revenue recognition
Over time 427,228 351,135 334,802 290,774 27,194 1,431,133
At a point in time 28,823 2,015 8,769 8,455 13,711 61,773
456,051 353,150 343,571 299,229 40,905 1,492,906
2023 DACH Rest of Europe Netherlands including Spain USA Middle East & Asia Total
£'000
Timing of revenue recognition
Over time 483,491 396,354 358,122 316,866 29,382 1,584,215
At a point in time 41,241 3,508 9,521 11,427 13,255 78,952
524,732 399,862 367,643 328,293 42,637 1,663,167
Major customers
In FY24 and FY23, no single customer generated more than 10% of the Group's
revenue.
Other information
The following segmental analysis has been included as additional disclosure to
the requirements of IFRS 8 Operating Segments.
The Group's revenue from external customers, its net fees and information
about its segment assets (non-current assets excluding deferred tax assets) by
key location are detailed below:
Revenue Cost of sales Net fees
£'000 2024 2023 2024 2023 2024 2023
Germany 393,850 453,537 282,082 322,662 111,768 130,875
Netherlands 318,665 350,295 247,706 273,222 70,959 77,073
USA 299,229 328,293 217,195 231,883 82,034 96,410
UK 226,904 263,461 188,575 218,508 38,329 44,953
Japan 13,356 10,813 2,764 1,496 10,592 9,317
RoW((1)) 240,902 256,768 185,505 196,621 55,397 60,147
1,492,906 1,663,167 1,123,827 1,244,392 369,079 418,775
30 November 30 November
£'000 2024 2023
Non-current assets
UK 28,334 11,458
Germany 13,887 11,891
USA 7,553 2,687
Netherlands 4,245 5,678
Japan 1,792 2,730
RoW((1)) 2,528 3,738
58,339 38,182
(1) RoW (Rest of the World) includes all countries other than listed.
Non-current assets do not include Deferred Tax Assets as they are not reviewed
by the CODM.
The following segmental analysis by brands, recruitment classification and
sectors (being the profession of candidates placed) has been included as
additional disclosure to the requirements of IFRS 8 Operating Segments.
Revenue Cost of sales Net fees
£'000 2024 2023 2024 2023 2024 2023
Brands
Progressive 560,519 565,938 422,172 422,272 138,347 143,666
Computer Futures 454,982 538,710 338,826 401,119 116,156 137,591
Real Staffing Group 239,976 316,062 176,938 232,322 63,038 83,740
Huxley Associates 237,429 242,457 185,891 188,679 51,538 53,778
1,492,906 1,663,167 1,123,827 1,244,392 369,079 418,775
Other brands including Global Enterprise Partners, JP Gray and Madison Black
are rolled into the above brands.
Revenue Cost of sales Net fees
£'000 2024 2023 2024 2023 2024 2023
Service mix
Contract 1,431,133 1,584,215 1,120,516 1,240,713 310,617 343,502
Permanent 61,773 78,952 3,311 3,679 58,462 75,273
1,492,906 1,663,167 1,123,827 1,244,392 369,079 418,775
Revenue Cost of sales Net fees
£'000 2024 2023 2024 2023 2024 2023
Skills mix
Technology 747,598 842,634 569,904 640,124 177,694 202,510
Engineering 422,984 415,357 317,654 306,537 105,330 108,820
Life Sciences 221,295 270,235 160,369 194,719 60,926 75,516
Other 101,029 134,941 75,900 103,012 25,129 31,929
1,492,906 1,663,167 1,123,827 1,244,392 369,079 418,775
3. ADMINISTRATIVE EXPENSES
Operating profit is stated after charging/(crediting):
£'000 2024 2023
Staff costs 234,741 255,007
Depreciation 15,230 15,898
Amortisation 24 16
Loss on disposal of property, plant and equipment 135 160
Gain on lease modification (69) -
Service lease charges - Buildings((1)) 2,464 2,176
Service lease charges - Cars((1)) 1,903 1,890
Foreign exchange losses 742 1,882
Research and development tax credits((2)) (1,647) -
Gain on disposal of subsidiary((3)) (135) -
Other income((4)) (2,690) -
1. Service lease charges represent payments that vary based on factors
other than an index or a rate, such as building maintenance, small repairs,
cleaning charges, and other management fees, and are not included in the
present value calculation of lease liabilities and are recognised in the
income statement and presented as operating cash flows.
2. During the year, management assessed the Group-wide Technology
Improvement Programme (TIP) for any claim for research and development
expenditure credits (RDEC). The claims were determined for TIP-related
expenditure incurred in the three years to 30 November 2024.
The underlying qualifying expenditure, based on which the claims were
quantified, was a mixture of costs expensed immediately to the income
statement for these financial periods, £1.6 million as presented in the above
table, and costs capitalised as part of assets under construction (intangible
assets in the Consolidated Statement of Financial Position - the RDEC claim
reduced the capitalised cost and will impact the Consolidated Income Statement
on a systematic basis over the useful life of the assets once the amortisation
starts).
3. The accumulated foreign exchange net gain reclassified from the
Group's currency translation reserve to the Consolidated Income Statement on
liquidation of two subsidiary companies.
4. £2.7 million in other income represents the release of accruals
for the historically unclaimed invoices by contractors who had delivered
service to our clients in prior years. Following a detailed review of the
unclaimed invoices, which were older than statutory limitations in each
relevant country, the decision was made to release these accruals to the
income statement.
4. INCOME TAX EXPENSE
(a) Analysis of tax charge for the year
£'000 2024 2023
Current income tax
Corporation tax charged on profits for the year 18,966 23,679
Adjustments in respect of prior periods (4,157) (447)
Total current tax charge 14,809 23,232
Deferred income tax
Origination and reversal of temporary differences 2,414 (1,117)
Adjustments in respect of prior periods 725 (251)
Total deferred tax charge/(credit) 3,139 (1,368)
Total income tax charge in the Consolidated Income Statement 17,948 21,864
(b) Reconciliation of the effective tax rate
The Group's tax charge for the year exceeds (FY23: exceeds) the UK statutory
rate and can be reconciled as follows:
£'000 2024 2023
Profit before income tax for the Group 67,640 77,915
Profit before income tax multiplied by the standard rate of corporation tax in 16,910 17,920
the UK at 25.0% (FY23: 23.0%)
Effects of:
Disallowable items 1,585 976
Uncertain tax positions - current year 826 261
Uncertain tax positions - prior year (3,054) -
Share-based payments 487 483
Differing tax rates on overseas earnings 1,744 2,524
Utilisation of tax losses brought forward (691) (454)
Adjustments in respect of prior periods (396) (697)
Adjustments due to tax rate changes 124 (1)
Tax losses for which deferred tax asset was not recognised or derecognised 413 852
Total tax charge for the year 17,948 21,864
At the effective tax rate 26.5% 28.1%
A more granular level of analysis has been included above when compared to the
prior year financial statements. The total tax charge has not changed.
(c) Current and deferred tax movement recognised
directly in equity
£'000 2024 2023
Equity-settled share-based payments:
Current tax credit 45 69
Deferred tax charge (55) (37)
(10) 32
The Group expects to receive additional tax deductions in respect of share
options currently unexercised. The Group is required to provide for deferred
tax on all unexercised share options. Where the amount of the tax deduction
(or estimated future tax deduction) exceeds the amount of the related
cumulative remuneration expense, this indicates that the tax deduction relates
not only to remuneration expense but also to an equity item. In this
situation, the excess of the current or deferred tax should be recognised in
equity. At 30 November 2024, a deferred tax asset of £0.5 million (FY23:
£1.4 million) was recognised in respect of these options.
On 17 November 2022, the UK Government confirmed its intention to implement
the G20-OECD Inclusive Framework Pillar 2 rules in the UK, including a
Qualified Domestic Minimum Top-Up Tax rule. This legislation, which was
enacted on 11 July 2023, will seek to ensure that UK-headquartered
multinational enterprises pay a minimum tax rate of 15% on UK and overseas
profit for accounting periods commencing after 31 December 2023. As the
majority of jurisdictions in which the Group operates are at a tax rate above
15%, the impact of these rules on the Group is not expected to be material. As
a result we are not providing for any additional current or deferred tax in
relation to Pillar 2.
The Group applies the exception to recognising and disclosing information
about deferred tax assets and liabilities related to Pillar Two income taxes,
as provided in the amendments to Section 29 issued in July 2023.
The safe harbour position has been analysed for each jurisdiction and we would
expect all material jurisdictions to pass safe harbour tests, therefore no
material impacts are expected.
5. EARNINGS PER SHARE
Basic earnings per share (EPS) is calculated by dividing the profit for the
year attributable to owners of the Company by the weighted average number of
ordinary shares outstanding during the year excluding shares held as treasury
shares and those held in the Employee Benefit Trust (EBT), which for
accounting purposes are treated in the same manner as shares held in the
treasury reserve.
Diluted EPS is calculated by adjusting the weighted average number of ordinary
shares outstanding to assume conversion of all dilutive ordinary shares
arising from exercising employee stock options and tracker shares.
The following tables reflect the income and share data used in the basic and
diluted EPS calculations.
£'000 2024 2023
Earnings
Profit for the year attributable to owners of the Company 49,692 56,051
million 2024 2023
Number of shares
Weighted average number of shares used for basic EPS 132.8 132.1
Dilutive effect of share plans 1.3 2.9
Diluted weighted average number of shares used for diluted EPS 134.1 135.0
pence 2024 2023
Basic EPS 37.4 42.4
Diluted EPS 37.1 41.5
6. INTANGIBLE ASSETS
During the current year, the Group increased its intangible assets book value
by a net amount of £5.1 million to £12.1 million (FY23: £7.1 million)
following the completion of the regional roll-out of the Technology
Improvement Programme (TIP) cohorts. This increase includes the £1.3 million
in reduction to the capitalised costs representing a deferred benefit from the
research and development expenditure credits (see note 3 Administrative
expenses for further details).
In FY24, the Group also incurred £2.6 million in costs which were not
directly attributable to the assets developed under the TIP (such as project
management and other administration-related tasks) and which were expensed
immediately to the income statement.
At the reporting date, all the costs capitalised in the statement of financial
position were classified as assets under construction.
The asset amortisation is expected to commence early next year at the earlier
of (i) US and Germany deployment, including interim ECM solution, be fully
completed, or (ii) US and Netherlands deployment be fully completed.
Successful resolution of the challenges faced during these deployments will
provide management with assurance that any possible insurmountable problems in
all other regions will be overcome, and the programme implementation will
ultimately succeed across the entire Group.
An amortisation charge for FY24 was immaterial, less than of £0.1 million
(FY23: £0.1 million), and was included in administrative expenses.
7. CASH AND CASH EQUIVALENTS
£'000 30 November 2024 30 November 2023
Cash at bank 69,756 83,202
Bank overdraft (88) -
Net cash and cash equivalents 69,668 83,202
Cash and cash equivalents comprise cash and short-term bank deposits with an
original maturity of three months or less, net of outstanding bank overdrafts.
The Group has four cash pooling arrangements in place at HSBC US (USD), HSBC
UK (GBP), NatWest (GBP) and Citibank (EUR).
8. EQUITY
During the year 698,585 (FY23: 409,818) new ordinary shares were issued,
resulting in a share premium of £2.4 million (FY23: £1.5 million). Of the
shares issued, 508,396 (FY23: 320,457) were issued to tracker shareholders on
settlement of vested tracker shares and 190,189 (FY23: 89,361) pursuant to the
exercise of share awards under the Save-As-You-Earn (SAYE) scheme.
The Company's issued share capital at 30 November 2024 consisted of
135,606,792 (FY23: 134,908,207) ordinary shares of £0.01 each, of which
35,767 (FY23: 35,767) were held in treasury reserve.
Employee Benefit Trust
The Group holds shares in the Employee Benefit Trust (EBT). The EBT is funded
entirely by the Company and acquires shares in SThree plc to satisfy future
requirements of the employee share-based payment schemes.
For accounting purposes, shares held in the EBT are treated in the same manner
as shares held in the treasury reserve by the Company and are, therefore,
included in the financial statements as part of the treasury reserve for the
Group.
During the year, the EBT purchased 2,340,585 (FY23: 2,198,735) of SThree plc
shares. The average price paid per share was 427 pence (FY23: 455 pence). The
total acquisition cost of the purchased shares was £10.0 million (FY23:
£10.0 million), for which the treasury reserve was reduced. During the year,
the EBT utilised 2,496,991 (FY23: 2,046,423) shares on settlement of vested
tracker shares and LTIP awards. At the year end, the EBT held 1,767,052 (FY23:
1,923,458) shares.
9. LEASES
The leases which are recognised in the consolidated statement of financial
position are principally in respect of buildings and cars. The Group's
right-of-use assets and lease liabilities are presented below:
£'000 30 November 30 November
2024 2023
Buildings 35,577 24,772
Cars 976 1,934
Total right-of-use assets 36,553 26,706
Current lease liabilities 10,419 11,297
Non-current lease liabilities 29,362 17,720
Total lease liabilities 39,781 29,017
The consolidated income statement includes the following amounts relating to
depreciation of right-to-use assets:
£'000 2024 2023
Buildings 11,868 11,955
Cars 1,076 1,219
Total depreciation charge of right-of-use assets 12,944 13,174
In the current year, interest expense on leases amounted to £1.3 million
(FY23: £0.6 million) and was recognised within finance costs in the
consolidated income statement.
The total cash outflow for leases in FY24 was £14.4 million (FY23: £14.9
million) and comprised the principal and interest element of recognised lease
liabilities.
10. OTHER FINANCIAL LIABILITIES
The Group maintains a committed RCF of £50.0 million along with an
uncommitted £30.0 million accordion facility, both jointly provided by HSBC
and Citibank, giving the Group an option to increase its total borrowings
under the facility to £80.0 million. During the current and previous year,
the Group did not draw down under these facilities. The Group also has an
uncommitted £5.0 million overdraft facility with HSBC, of which £0.1 million
was drawn at the year end (FY23: £nil).
The RCF is subject to financial covenants and any funds borrowed under the
facility bear a minimum annual interest rate of 1.2% above the benchmark
Sterling Overnight Index Average (SONIA). As the Group did not draw down under
these facilities, the finance costs of £1.4 million (FY23: £0.7 million)
were mainly related to lease interest.
The covenants, which the RCF is subject to, require the Group to maintain
financial ratios over interest cover, leverage and guarantor cover. The Group
has complied with these covenants throughout the year.
Reconciliation of financial liabilities to cash flows arising from financing
activities:
£'000
Balance at 1 December 2022 33,702
Cash flows:
Interest paid to bank (93)
Payments of principal and interest element of lease liabilities (14,855)
Total cash flows (14,948)
Lease increases 11,479
Lease termination (1,558)
Other movements((1)) 342
Balance at 30 November 2023 and 1 December 2023 29,017
Cash flows:
Interest paid to bank (108)
Payments of principal and interest element of lease liabilities (14,448)
Total cash flows (14,556)
Lease increases 25,311
Lease terminations (868)
Other non-cash movements((1)) 877
Balance at 30 November 2024 39,781
1. Other movements in FY24 and FY23 primarily comprised unwind of the discount
on lease liabilities and forex revaluation.
11. DIVIDENDS
£'000 2024 2023
Amounts recognised as distributions to equity holders in the year
Interim dividend of 5.0 pence for FY22 per share (note a) - 6,605
Interim dividend of 5.0 pence for FY23 per share (note b) 494 6,383
Final dividend of 11.6 pence for FY23 (11.0 pence for FY22) per share (note c) 15,366 14,385
15,860 27,373
£'000 2024 2023
Amounts arising in respect of the financial year
Interim dividend of 5.1 pence for FY24 (5.0 pence for FY23) per share (note d) 6,824 6,383
Proposed final dividend of 9.2 pence for FY24 (11.6 pence for FY23) per share 12,221 15,327
(note e)
19,045 21,710
Note a
The FY22 interim dividend of 5.0 pence per share was paid on 2 December 2022
to those shareholders on the register of SThree plc on 4 November 2022. The
£6.4 million of the total £6.6 million in funds required for settlement of
the FY22 interim dividend, were transferred by the Group to the share
administrator before 30 November 2022. The remaining balance of £0.2 million
was transferred to the share administrator post the FY22 year end, in December
2022. In FY23, once the share administrator was in receipt of all funds
required for settlement of the interim dividend, the FY22 interim dividend was
recognised as distribution to equity holders within the Consolidated Statement
of Changes in Equity.
Note b
The FY23 interim dividend of 5.0 pence per share was paid on 8 December 2023
to those shareholders on the register of SThree plc on 10 November 2023. The
£6.4 million in funds, required for settlement of the FY23 interim dividend,
were transferred by the Group to the share administrator before 30 November
2023.
The £0.5 million shown as distributed in FY24 included £0.3 million in
payments to shareholders who claimed the FY23 interim dividend post the FY23
year end. The remaining balance, £0.2 million, relates to the historical
unclaimed dividends due to shareholders from prior years. As part of the
process of transitioning to the new share administrator, onboarded in January
2024, the £0.2 million in funds were transferred to the share administrator
during FY24 and are currently subject to the distribution to shareholders.
Note c
The FY23 final dividend of 11.6 pence (11.0 pence for FY22) per share was paid
on 7 June 2024 to shareholders on the register of SThree plc on 10 May 2024.
Note d
The FY24 interim dividend of 5.1 pence (5.0 pence for FY23) per share was paid
on 6 December 2024 to shareholders on record at 8 November 2024. The £6.8
million in funds, required for settlement of the FY24 interim dividend, were
transferred to the share administrator after 2 December 2024.
Note e
The Board has proposed the FY24 final dividend of 9.2 pence (11.6 pence for
FY23) per share, to be paid on 6 June 2025 to shareholders on record at 9 May
2025. This proposed final dividend is subject to approval by shareholders at
the Company's next Annual General Meeting on 29 April 2025, and therefore has
not been included as a liability in these financial statements.
12. CONTINGENT LIABILITIES
Legal
The Group is involved in various disputes and claims which arise from time to
time in the course of its business. These are reviewed on a regular basis and,
where possible, an estimate is made of the potential financial impact on the
Group. The Group has contingent liabilities in respect of these claims. In
appropriate cases a provision is recognised based on advice, best estimates
and management judgement.
The Directors currently believe the likelihood of any material liabilities to
be low, and that such liabilities, if any, will not have a material adverse
effect on its financial position.
13. RELATED PARTY DISCLOSURES
The Group's significant related parties are as disclosed in the Group's 2024
annual financial statements. There were no other material differences in
related parties or related party transactions in the year compared to the
prior year.
14. SUBSEQUENT EVENTS
Following 30 November 2024, SThree launched a share buyback programme of up to
£20.0 million, which will be completed no later than the Company's FY25 Half
Year Results. In light of SThree's cash generation and strong balance sheet,
the Board considers it prudent to launch the buyback, in line with its stated
capital allocation policy. Following completion of the buyback programme the
Group expects to retain a net cash position reflecting the overall capital
needs of the business.
15. ALTERNATIVE PERFORMANCE MEASURES (APMs): DEFINITIONS AND RECONCILIATIONS
In discussing the performance of the Group, comparable measures are used.
The Group discloses comparable performance measures to enable users to focus
on the underlying performance of the business on a basis which is common to
both periods for which these measures are presented. The reconciliation of
comparable measures to the directly related measures calculated in accordance
with UK-adopted International Accounting Standards (IAS) is as follows.
APMs in constant currency
As the Group operates in 11 countries, and with many different currencies, it
is affected by foreign exchange movements, and the reported financial results
reflect this. However, the Group business is managed against targets which are
set to be comparable between years and within them, for otherwise foreign
currency movements would undermine the management ability to drive the
business forward and control it. Within this results announcement, comparable
results have been highlighted on a constant currency basis as well as the
results on a reported basis which reflect the actual foreign currency effects
experienced.
The Group evaluates its operating and financial performance on a constant
currency basis (i.e. without giving effect to the impact of variation of
foreign currency exchange rates from year to year). Constant currency APMs are
calculated by applying the prior year foreign exchange rates to the current
and prior financial year results to remove the impact of exchange
rate.
Measures on a constant currency basis enable users to focus on the performance
of the business on a basis which is not affected by changes in foreign
currency exchange rates applicable to the Group's operating activities from
period to period.
The calculations of the APMs on a constant currency basis and the
reconciliation to the most directly related measures calculated in accordance
with UK-adopted IAS are as
follows:
£'000, unless otherwise stated 2024
Revenue Net fees Operating profit Operating profit conversion ratio* Profit before tax
Basic EPS (pence)
Reported 1,492,906 369,079 66,194 17.9% 67,640 37.4
Currency impact 33,786 9,515 3,043 0.4% 3,018 1.7
In constant currency 1,526,692 378,594 69,237 18.3% 70,658 39.1
£'000, unless otherwise stated 2023
Revenue Net fees Operating profit Operating profit conversion ratio* Profit before tax
Basic EPS (pence)
Reported 1,663,167 418,775 76,356 18.2% 77,915 42.4
*Operating profit conversion ratio represents operating profit over net fees.
To calculate the YoY variances in constant currency, management compared the
FY24 results in constant currency versus the FY23 reported results.
Other APMs
Net cash excluding lease liabilities
Net cash is an APM used by the Directors to evaluate the Group's capital
structure and leverage. Net cash is defined as cash and cash equivalents less
current and non-current borrowings excluding lease liabilities, less bank
overdraft, as illustrated below:
£'000 2024 2023
Cash and cash equivalents 69,756 83,202
Bank overdraft (88) -
Net cash 69,668 83,202
EBITDA
In addition to measuring financial performance of the Group based on operating
profit, the Directors also measure performance based on EBITDA. It is
calculated by adding back to the reported operating profit non-cash items such
as the depreciation of property, plant and equipment (PPE), the amortisation
and impairment of intangible assets, loss on disposal of PPE and intangible
assets, gain on lease modification and the employee share options charge.
Where relevant, the Group also uses EBITDA to measure the level of financial
leverage of the Group by comparing EBITDA to net debt.
A reconciliation of reported operating profit for the year, the most directly
comparable UK IAS measure, to EBITDA is set out
below.
£'000 2024 2023
Reported operating profit for the year 66,194 76,356
Depreciation of PPE 15,230 15,898
Amortisation and impairment of intangible assets 24 16
Loss on disposal of PPE and intangible assets 135 160
Gain on lease modification (69) -
Gain on disposal of subsidiaries (135) -
Employee share options charge 4,986 4,871
EBITDA 86,365 97,301
Dividend cover
The Group uses dividend cover as an APM to ensure that its dividend policy is
sustainable and in line with the overall strategy for the use of cash.
Dividend cover is defined as the number of times the Company is capable of
paying dividends to shareholders from the profits earned during a financial
year, and it is calculated as the Group's profit for the year attributable to
owners of the Company over the total dividend paid to ordinary shareholders.
£'000 2024 2023
Profit for the year attributable to owners of the Company A 49,692 56,051
Dividend proposed to be paid to shareholders (note 11) B 19,045 21,710
Dividend cover (A ÷ B) 2.6 2.6
Contract margin
The Group uses contract margin as an APM to evaluate contract business quality
and the service offered to customers. Contract margin is defined as contract
net fees as a percentage of contract revenue.
£'000, unless otherwise stated 2024 2023
Contract net fees A 310,617 343,502
Contract revenue B 1,431,133 1,584,215
Contract margin (A ÷ B) 21.7% 21.7%
Total shareholder return (TSR)
The Group uses TSR as an APM to measure the growth in value of a shareholding
over a specified period, assuming that dividends are reinvested to purchase
additional shares at the closing price applicable on the ex-dividend date. The
TSR is calculated by the external independent data-stream party.
pence, unless otherwise stated 2024 2023
SThree plc TSR return index value: three-month average to 30 Nov 2021 (FY23: 528.47 240.74
30 Nov 2020)
SThree plc TSR return index value: three-month average to 30 Nov 2024 (FY23: 382.78 365.25
30 Nov 2023)
Total shareholder return -27.6% 51.7%
16. ANNUAL REPORT AND ANNUAL GENERAL MEETING
The Annual General Meeting of SThree plc is to be held on 29 April 2025.
The 2024 Annual Report and Accounts and Notice of 2025 Annual General Meeting
will be sent to shareholders shortly. Copies will be available on the
Company's website www.sthree.com or from the Company Secretary, Level 16, 8
Bishopsgate, London, EC2N 4BQ.
1 (#_ftnref1) Unless specifically stated, all growth rates in revenue and
net fees are expressed in constant currency.
2 (#_ftnref2) The Group has identified and defined certain alternative
performance measures (APMs). These are the key measures the Directors use to
assess the SThree's underlying operational and financial performance. The APMs
are fully explained and reconciled to IFRS line items in note 15 to these
consolidated financial statements.
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