REG-SThree SThree: Final Results
31/01/2022 07:05
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SThree (STEM)
SThree: Final Results
31-Jan-2022 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR),
transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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SThree plc
FINAL RESULTS FOR THE YEAR ENDED 30 NOvember 2021
RECORD profit PERFORMANCE up 111%,
FY22 upgrade TO double-digit growtH
SThree plc ("SThree" or the "Group"), the only global pure-play specialist staffing business focused on roles in Science,
Technology, Engineering and Mathematics ('STEM'), today announces its financial results for the year ended 30 November 2021.
FINANCIAL HIGHLIGHTS
2021 2020 Variance
Constant
Reported Reported
Continuing operations (1) Adjusted (2) Adjusted (2) Movement (3) currency
movement (4)
Revenue (£ million) 1,330.7 1,330.7 1,202.6 1,202.6 +11% +14%
Net fees (£ million) 355.7 355.7 308.6 308.6 +15% +19%
Operating profit (£ million) 60.8 61.0 31.3 31.8 +94% +106%
Operating profit conversion ratio % 17.1% 17.1% 10.1% 10.3% +7% pts +7% pts
Profit before tax (£ million) 60.0 60.2 30.1 30.6 +99% +111%
Basic earnings per share (p) 31.8 31.9 13.9 14.2 +129% +143%
Proposed final dividend per share (p) 8.0 8.0 5.0 5.0 +60% +60%
Total dividend (interim and final) per share (p) 11.0 11.0 5.0 5.0 +120% +120%
Net cash (£ million) (5) 57.5 57.5 49.9 49.9 +15% +15%
(1) Excluding discontinued operations in Australia. (2) Excluding the impact of £0.2 million in net exceptional income
(2020: £0.5 million in net exceptional income).
(3) Variance compares adjusted 2021 against adjusted 2020 to provide a like-for-like view. (4) Variance compares adjusted
2021 against adjusted 2020 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.
(5) Net cash represents cash and cash equivalents less bank borrowings and bank overdrafts, excluding leases.
FULL YEAR HIGHLIGHTS
• Record performance for the year, driven by focused execution of strategy and increased demand for STEM skills.
• Net fees at an all-time high, up 19% (1) YoY:
• Strong growth achieved in Germany up 23%, USA up 24% and the Netherlands up 19%, which are the Group's three
largest countries and account for 74% of Group net fees.
• Growth in Technology, Life Sciences and Engineering sectors across the Group.
• Contract and Permanent net fees up 17% and 24% YoY, respectively.
• Contract net fees represent 75% of Group net fees (2020: 76%), with the contractor order book (2) up 43% YoY.
• Record adjusted profit before tax of £60 million for the Group, up 111% YoY.
• Robust balance sheet, with £58 million net cash at year end (2020: £50 million net cash).
• Final dividend proposed of 8.0 pence per share (2020: 5.0 pence per share), taking full year dividend to 11.0 pence per
share (2020: 5.0 pence per share). This is in line with the dividend cover target between 2.5x and 3.0x previously
communicated.
• Strength of contractor order book and recent trading is tracking ahead of expectations; we now anticipate double-digit
net fee and profit growth for 2022.
• Sustainable business practice and ESG commitments demonstrated by:
• Over 33,000 lives positively impacted in 2021.
• Company of the year at the European Diversity Awards.
• Recognised as a climate leader by the Financial Times, placed 69th of the top 300 companies on its European Climate
Leaders list.
• SThree's renewables business (6% of net fees) up 22% versus 2020, ahead of target to double the share of this
business from 2019 to 2024.
As 2020 was significantly impacted by Covid-19, the Group has provided comparisons against 2019 for net fees and profit.
Highlights include:
• Full year net fees up 9%.
• Our three largest markets, Germany, US and Netherlands all up strongly vs 2019.
• Adjusted profit before tax up 7%.
(1) All growth rates are expressed in constant currency and exclude Australia, which the Group exited in Q4 2020.
(2) The contractor order book represents value of net fees until contractual end dates, assuming all contractual hours are
worked.
Timo Lehne, Interim CEO, commented:
"Having been part of the Group for over 16 years and leading its most successful region, I am delighted to take on the role
of Interim CEO and continue to help the Group deliver excellent results.
Our record-breaking full-year performance reported today demonstrates that we have a robust strategy focusing on STEM and
flexible working, implemented by a talented management team, and the hard work of our people globally.
As the market rebounded in 2021 following the impact of Covid-19, we saw demand for STEM skills increase across all of our
key markets. Whether it is engineers building green infrastructure, developers aiding digital transformation or the
scientists helping to develop the next life-changing drug, we are proud to have placed more than 22,000 skilled people and,
combined with our ESG efforts, we impacted over 33,000 lives this financial year.
Within our contractor markets, we see particular client demand for our employed contractor model, a market segment where we
lead in many countries, and now accounts for 32% of Group net fees.
I am confident and excited about the future of SThree. Momentum is strong and demand for the talent we provide is expanding,
driving anticipated double-digit growth in 2022. We are well positioned, we demonstrated our ability to navigate through
unforeseen challenges, such as Covid-19, and we continue to evolve our delivery model. We will further invest in our
infrastructure and our people in 2022, enhancing our Group-wide platform to drive accelerated margins in future years. We
remain positive about our growth prospects as we continue to position ourselves as the leading STEM talent provider in the
best global STEM markets."
Analyst conference call
SThree is hosting a webinar for analysts today at 09:30 GMT. If you would like to register for the webinar, please contact
sthree@almapr.co.uk
SThree will issue its Q1 trading update on 21 March 2022.
The information contained within this announcement is deemed by the Company to constitute inside information under the
Market Abuse Regulation (Regulation (EU) No.596/2014) as it forms part of UK Domestic Law by virtue of the European Union
(Withdrawal) Act 2018.
Enquiries:
SThree plc +44 7825122523
Rebecca Matts, Group Corporate Affairs Director 1 r.matts@sthree.com
Alma PR +44 20 3405 0205
Susie Hudson 2 Sthree@almapr.co.uk
Notes to editors
SThree plc brings skilled people together to build the future. We are the only global pure-play specialist staffing
business focused on roles in Science, Technology, Engineering and Mathematics ('STEM'), providing permanent and flexible
contract talent to a diverse base of over 8,000 clients across 14 countries. Our Group's c.2,700 staff cover the Technology,
Life Sciences, Engineering and Banking & Finance sectors. SThree is part of the Industrial Services sector. We are listed on
the Premium Segment of the London Stock Exchange's Main Market, trading with ticker code STEM.
Important notice
Certain statements in this announcement are forward looking statements. By their nature, forward looking statements involve
a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those
expressed or implied by those statements. Forward looking statements regarding past trends or activities should not be taken
as representation that such trends or activities will continue in the future. Certain data from the announcement is sourced
from unaudited internal management information and is before any exceptional items. Accordingly, undue reliance should not
be placed on forward looking statements.
CHair's statement
Our purpose is 'Bringing skilled people together to build the future'. A key measure of our performance is how well we lived
that purpose. In our 2021 financial year, we placed over 22,000 STEM specialists with companies which need their talents to
build a better future. We ran skills development programmes that improved our staff's capabilities, and our environmental,
social and governance ('ESG') efforts enhanced lives in the communities where we operate. In total, SThree positively
impacted over 33,000 lives in the past year. Everyone at SThree is extremely proud to provide meaningful, decent work and
job opportunities to tens of thousands of people around the world.
As the world changed at the outset of the pandemic, and then fuelled by recovery in 2021 and a war for talent, our clients
needed STEM talent fast, often on a project basis. We were ready to serve that demand, thanks to our strategy, as set out in
our Capital Markets Day presentation in late 2019. Our approach was developed in response to two long-term trends: one, the
growing need for STEM skills and two, the increased demand for flexible contract work to deliver time-limited projects,
alongside focusing on best-in-class operational execution.
As a result, we are pleased to report excellent year-end figures with net fees up 19% in constant currency at £356 million
and adjusted operating profit up 106% in constant currency from £31 million in 2020 to £61 million in 2021. Both net fees
and operating profit were also comfortably ahead of 2019 levels, which had been a record year in SThree's history. We took
share from competitors in several key markets and our performance compares well to our UK-listed peer group.
Progress in pursuing our strategy
Governance
One of my priorities as Chair is to move the Group towards FTSE 250 standards of governance and last year, we made good
progress towards this goal with many new initiatives including the Board's focus on climate-related disclosures and
governance framework to oversee a robust climate change management strategy.
Our positioning as leaders in STEM and flexible working
We honed our value proposition through the year. The value we deliver for clients is our deep understanding of the STEM
skills they need and the ability to supply candidates with those skills. That same deep understanding allows us to build
strong relationships with candidates so that we can find the right roles for them and help guide their careers.
In addition to being a leader in STEM, we want to be known as a leader in flexible working. While we remain a full-service
business for our clients with around 25% of our net fees from the placement of permanent candidates, largely in leadership
roles, the biggest part of our business is now helping our clients' teams with highly skilled, flexible contract workers.
That ratio of 75:25 contract to permanent hasn't changed materially during the year but there has been a continued shift
within the contract group. Our Employed Contractor Model ('ECM'), where contractors are directly employed by SThree rather
than the client, is proving an increasingly compelling proposition alongside freelancing. At the beginning of the year the
mix was 46% independent contractors and 30% ECM. Now it is 43% independent contractors and 32% ECM.
ESG and DE&I are central to our business model
ESG and delivering on our purpose is a core part of our business. Every economy in which we operate will need to build back
better and greener by investing in infrastructure. The COP26 UN climate change conference marked a step forward in global
efforts to address climate change, including a material increase in ambitions to reduce emissions across the world.
Within environment, many of our clients are either in the renewable energy sector or navigating the low carbon transition.
Social policy is essential to our operation as people are at the heart of our performance. We need our culture to be
diverse, equitable and inclusive in order to attract and retain capable talent for our own business but also to source the
candidates our clients need. As for governance, clients need assurances we have the legal resources and governance
structures to deliver employee contracts that are fully compliant.
In April 2021 we published our first Impact Report, setting out ESG progress, metrics and targets. We are an early adopter
of the robust Taskforce on Climate-related Financial Disclosures ('TCFD') reporting standard, and you will find our first
performance data in the Responsible business section of the Annual Report. Also in April 2021, we were delighted to be
recognised as a climate leader by the Financial Times, joining the top 300 companies on their European Climate Leaders list.
We were placed number 69 and are the only staffing sector company to achieve that distinction.
Our DE&I policies are critical to attract and retain talent and help people perform at the top of their game. In November
2021, SThree was awarded Company of the Year at the 2021 European Diversity Awards joining the ranks of best practitioners
such as Lego, HSBC and Vivendi. Again, we were the only staffing sector company to be recognised.
We measured our current make-up and set challenging targets for gender, aspiring to increase gender representation at
leadership levels to 50/50 by 2024. Our NED representation at the Board level is 50/50, in our Senior Leadership Team it is
40/60 and women currently occupy 31% of leadership roles more widely within the Group.
Platform and people development
We took great strides this year in improving our team members' development. We launched a new learning and development
platform that is accessible to all from anywhere. New leadership training programmes were also put in place which achieved
92% participation. We gave bias training to our recruiters so they could reduce its influence in staffing decisions. We
have exceeded the target percentage of the Group adjusted operating profit spend on our people development set out in our
Capital Markets Day plan, achieving 5.5% in 2021 versus the target of 5.0%.
It is critical for us to be hiring the right people in the right places as we increase our headcount. We therefore reviewed
our talent acquisition and succession planning processes, refining them before training our recruiters in best practice.
Having culture and values endorsed by our entire business, including every member of the senior management team, is also
critically important. Extended parental leave, family leave, support for mental well-being and extended paid volunteering
hours for everyone are just a few examples of this year's initiatives to develop an inclusive culture around our people.
All these investments in our culture help us better fulfil our purpose: bringing skilled people together to build a better
future.
Markets and operating where STEM demand is strongest
We made a deliberate shift through the pandemic to adjust our portfolio and focus on the five core markets: US, UK,
Netherlands, Germany and Japan. Together, these represent over 75% of the world STEM market and over 86% of our net fees.
Our strategy is to aim for leadership in those markets by achieving scale and using that scale to add value to our offer.
Segment recovery in core markets
The standout segmental performance during the pandemic was in life sciences in the US, where demand was particularly strong.
This was not just a result of Covid-19 programmes as other areas, such as medical devices, also contributed. There was
strong adoption of technology, especially amongst some of the more traditional retailers who realised that, with consumers
at home, they needed to improve their online business models. Infrastructure investment in Germany was strong and
engineering project growth in the Netherlands supported strong demand for technology candidates.
Technology really helped drive a renaissance in the UK business as well, with public sector investment and other industries
such as education and healthcare, which had been tech laggards, now rapidly adopting technology. Companies needed new
channels to engage with their customers and drive more resilience in their supply chain. They also needed artificial
intelligence experts and data analytics to understand their business and customers better.
Both trends drove demand for programmers. Engineers were needed to increase automation as did the energy and other sectors
to support their decarbonisation journeys. After elective surgeries and treatment were artificially depressed during
lockdowns, backlogs finally began to be addressed, which required health technology and engineering experts. Although
certain niche skills that were out of favour, generally the story was one of strong recovery in demand.
Our approach to the pandemic
Our own response to the pandemic was to establish a framework approach, developing tactics for the three phases of the
pandemic. First, there was the 'emergency response' phase, which we referred to in last year's annual report. Our approach
here was to revise the way we supported our clients and our candidates, whilst still maintaining capacity for when demand
began to return. We shifted to having all our people working from home and provided them with the IT equipment, training and
personal support they needed.
The next phase, which we are thankfully emerging from in many of our markets, is the 'ongoing management of a rolling
crisis' phase. Until it is fully resolved, we won't get the cross-sector recovery required to say with confidence that we
have reached the final phase, 'a new normal'. Throughout the year, we were still in the ongoing management phase and there
was always going to be a level of volatility. As all the evidence suggested our strategy remained sound, the questions we
focussed on throughout the year were, 'how do we operate in this period?' and, 'how do we implement the strategy given the
uncertain background?'.
Inevitably, some of the investment priorities we had a year ago changed. We formally changed to a global hybrid working
policy for all staff that allows us to flex to uncertain times. It has been well received by our people. Remote working was
putting heavier demands on our IT systems, so we further invested in our IT infrastructure. As cyber security is an ongoing
issue, we invested in better-quality systems to protect our candidates' and clients' data. In the final quarter of the year,
we hired Nick Folkes, a highly skilled technology and transformation leader as our Chief Technology and Information Officer.
Management appointments
In July we welcomed Andrew Beach as our new Chief Financial Officer and said goodbye to Alex Smith, who had served as CFO
for 12 years. I'd like to thank Alex again for his achievements in that time. At the close of the financial year, the Board
announced that Mark Dorman would be stepping down from the Board and as CEO of the Group on 31 December 2021. Timo Lehne,
who was serving as the Senior Managing Director of SThree's largest and most successful region, DACH (Germany, Austria and
Switzerland), was appointed Interim CEO and joined the Board as Executive Director from 1 January 2022. Mark will continue
to assist the Group in facilitating a smooth handover and transition until 1 April 2022. On behalf of the Board, I would
like to thank Mark for his vision, drive and unique service to the Group over the past three years.
A strong team effort
I must sincerely thank all of SThree's employees for their exceptional productivity and adaptability throughout 2021, in
what have been extremely difficult circumstances. My colleagues on the Board who navigated a situation that was without
precedent, also deserve thanks. They provided excellent stewardship of the Company over the year. I would also like to thank
our external stakeholders for their support. Candidates trusted us for advice and to guide their career development choices.
Clients turned to us to meet their STEM talent requirements as they adapted to new challenges. Investors also showed
confidence in us, having the full understanding of our strategy as well as our great operational and financial performance
of the Group in 2021.
Outlook
Our year started with strong forward momentum. We will continue to build sustainable growth and will resume our plans for
internal investment during the year, particularly in the infrastructure that will allow us to expertly harness data and
efficiencies, for example in further enhanced CRM and ERP platforms. We expect to deliver double-digit growth in net fees
and profits in 2022, maintaining our operating conversion ratio at similar levels to 2021 to allow for the impact from
investment of between 1% and 2% of net fees to further strengthen our operational and sales platforms. We anticipate payback
on the investment, delivering an acceleration of margins from 2023.
I believe we have good reason to be confident: we are in the right markets, we are focused on the right sectors, and we have
a team that is flexible and resilient enough to seize the opportunities ahead of us.
Group OPERATIONAL REVIEW
Overview
The Group delivered a very strong performance for the year, driven by the benefits of our business model and our strategy at
the centre of two secular, long-term trends: an increasing demand for STEM skills and an accelerating trend towards flexible
working.
Overall, Group net fees were up 19%* YoY, primarily attributable to our strategic focus on our Contract business, which now
accounts for 75% of the Group net fees and delivered growth in net fees of 17%* YoY. Our contractor order book increased by
nearly 43% YoY reflecting the high demand for skilled contractors across our markets. Permanent net fees were up 24%* YoY.
Adjusted operating profit was £60.8 million (2020: £31.3 million), up 106%* YoY.
Total Group year-end headcount was up 6% YoY with average headcount down 11% YoY. Over the next year we are focussing our
strategy for talent attraction and retention where we continue to drive market share gain. We increased productivity per
head 31% YoY in the year, although we do expect this to normalise to some extent going into 2022.
This has been a challenging period for our teams. The quality of our management and increasing expertise in our target
markets are driving us forward on our journey to become the number one STEM talent provider in the best global STEM markets.
We are committed to ensuring that SThree is well positioned over the long term and are confident we can continue to exploit
the accelerating secular trends of STEM and flexible working across global markets and deliver our long-term ambitions.
2024 ambitions
In 2019, looking ahead to 2024 we set ourselves several ambitions to deliver growth and value for our Company and all
stakeholders:
• to grow Group market share by 50%;
• to reach an operating profit conversion ratio in the range of 21-24%; and
• to drive a free cash conversion ratio of at least 75%.
We also committed to several targets regarding our people and society that reflect the importance we put on being a
people-centric and purpose-driven business. For example, we committed to achieve 50/50 gender representation at all
leadership levels by 2023, to maintain our Learning & Development ('L&D') spend at 5% of operating profit, to grow
productivity per head over the period by 1% to 2% per annum, to reduce our absolute CO2 emissions by 20% and to double the
size of our renewable energy business by 2024.
We have made good progress taking market share in the USA, Germany and the Netherlands in the year. While the free cash flow
conversion declined to 40% (2020: 178%) due to increased demand for contractors, our operating profit conversion ratio
rapidly accelerated to 17.1% (2020: 10.1%), driven by our productivity and improved hiring conditions.
Within our People and Society goals we have slightly exceeded the target of the Group spend on people development, being
5.5% in 2021 versus the target of 5.0%, to support our people in their efforts and strategic focus in the post-pandemic
times.
In 2021, we have also made a significant contribution towards climate action. We have grown our renewables business net fees
by 22%* YoY, delivering nearly 46%* growth since 2019 (the baseline year). We have reduced our CO2 emissions by 44% YoY and
have carried out a scenario analysis to provide our stakeholders with more transparency and better understanding of our
business's exposure to climate-related risks and opportunities, and feed into the Group's first Task Force on
Climate-related Financial Disclosures Report.
* All growth variances expressed in constant currency.
Group net fees by division, geography and sector
Growth year-on-year (In constant currency) 2021 mix
Contract Permanent Total Contract Permanent
17% 24% 19% 75% 25%
Breakdown of net fees 2021 2020
Geographical split
EMEA excluding DACH 36% 38%
DACH 36% 34%
USA 25% 25%
APAC 3% 3%
Sector split
Technology 47% 45%
Life Sciences 24% 23%
Engineering 20% 22%
Banking & Finance 7% 8%
Other sectors 2% 2%
The Group is well diversified both geographically and by sector. Our top five countries now represent 86% of Group net fees,
with Germany accounting for 33%, USA 25%, the Netherlands 16%, UK 10% and Japan 2% of Group net fees. More detail is
provided in the section that follows.
Our largest sector, Technology was up by 23%* YoY, driven by increased demand for infrastructure and software development
roles across all major geographies, followed closely by the Life Sciences sector, which was up by 25%* YoY, driven by USA
and Germany with increased demand for laboratory staff and quality assurance roles.
Within our regions, USA and DACH are our two largest Permanent markets, and were up 53%* and 15%* YoY respectively. Our
Japan business, which is predominately Permanent, saw net fees grow by 28%* YoY.
Operational review by geography
DACH is the largest region of the Group and represented 36% of Group's net fees in 2021
The DACH region comprises businesses in Austria, Germany and Switzerland, with Germany accounting for 91% of its net fees.
Net fees by division
Growth year-on-year (in constant currency) 2021 mix
Contract Permanent Total Contract Permanent
28% 17% 24% 68% 32%
The year was characterised by excellent market recovery due to strong demand for a flexible workforce, delivering strong net
fees up 24%* YoY. Market demand for specialists in the fields of Technology, Life sciences and Engineering increased
dramatically, with Technology representing the largest share of the business at 65% followed by Life Sciences at 18% and
Engineering at 13%.
A key feature of the year was the growth in ECM revenue, which now accounts for 18% of net fees, up nine percentage points
versus 2019. ECM will continue to be strategically important going into 2022 due to the growth in customer demand for this
solution, coupled with the higher margins it delivers. Technology, our largest sector in the region, was up 34%*, driven by
demand for infrastructure and open-source software development roles, while Life Sciences was up 25%*, with demand for
laboratory staff and quality assurance roles continuing to increase. Germany, our largest country in the region, delivered
strong net fee growth of 23%*, with the Contract business growing 28%* and Permanent up 15%*. Switzerland and Austria also
grew strongly up 28%* and 43%* YoY respectively, both driven by the Technology sector.
Outlook
The prospects for the DACH market are very encouraging. We believe that the shortage of skilled workers, especially in STEM
professions, will ensure an increasing demand for the talent we provide. As one of the top three STEM providers in the
region, we have an excellent platform to continue to grow, addressing market demand and delivering sustainable value for
candidates and clients. Our strong investment focus on ECM will also allow us to meet increased market demand for flexible
workers and strengthen our drive to be the leader in these markets.
* In constant currency
EMEA excluding DACH, representing 36% of Group net fees
EMEA excluding DACH is the joint largest region of the Group and comprises businesses in Belgium, Dubai. France, Ireland,
Luxembourg, the Netherlands, Spain and the UK.
Net fees by division
Growth year-on-year (in constant currency) 2021 mix
Contract Permanent Total Contract Permanent
10% 6% 9% 87% 13%
Overall, the market position of the EMEA excluding DACH segment is strong. The segment saw net fees grow by 9%* YoY, as a
result of a significant recovery in trading in the second half of 2021. There has been a growing demand for STEM talent
within all the geographies and markets that it serves, particularly within the Technology and Life Sciences sectors.
Strong demand for Technology skills in both the private and public sectors was mainly attributable to accelerating
investments in technology transformation by our clients. Within Life Sciences demand across pharmaceuticals, as well as
medical devices, provided an 18%* growth versus 2020 and 14%* growth versus 2019.
The Netherlands, our largest country in the region, finished the year strongly with net fees up 19%*, due to solid
performances in Technology, up 15%*, which was driven by demand for SAP and ERP specialists, as well as cybersecurity
experts. Engineering was up 28%* YoY, mainly due to demand for project management and quality assurance skills, as well as
health, safety and environment roles. Net fees in the UK were up 8%* YoY reflecting strong sequential quarter-on-quarter
improvement throughout the year. This was driven by Technology, up 11%*, as demand increased for skills such as business
analysts, project managers and product owners. We also saw net fee growth of 12%* in Ireland, driven by Life Sciences, and
14%* in Dubai, driven by Banking & Finance.
Outlook
We have set strong foundations in 2021 to continue our growth, despite the pandemic and we aim to continue our momentum into
2022. STEM talent is critical across our core sectors in the region and is in short supply. Whilst competition is fierce and
STEM talent is hotly contested, we expect demand for talent to accelerate across core STEM verticals and geographies and
underpins our growth prospects across the region.
* In constant currency
USA, representing 25% of Group net fees
The USA is the world's largest specialist STEM staffing market and our third-largest region. It remains a key area of focus
for the Group, and we will continue to invest strategically in the region as we align our resources with the best long-term
opportunities.
Net fees by division
Growth year-on-year (in constant currency) 2021 mix
Contract Permanent Total Contract Permanent
16% 53% 24% 75% 25%
The USA delivered an excellent performance in 2021 with net fees up 24%* YoY. There was good growth in Contract of 16%*
driven by Technology, and a very strong performance in Permanent, up 53%*. The ever-increasing demand for technology and for
e-commerce, as well being a partner for Salesforce, drove the growth of the segment's client base within the sector, with
growth of 35%*. 2021 saw a significant increase in the demand for clinical research and quality assurance personnel,
driving the 25%* growth in the Life Sciences sector. With the surge in medicines and devices that have approvals to enter
the manufacturing phase, we expect this trend to continue through 2022. Engineering was up 11%*, driven by an increase in
roles in renewables sectors such as wind and solar farms as well as battery storage. Power infrastructure and gas
distribution saw record levels of investment in 2021 to minimise environmental impacts as well as maximise safety and
efficiency. This gave us a strong pipeline of demand, which is expected to continue into 2022.
Outlook
The focus in 2022 will be to capture market share through continued growth within our target vertical markets of Technology,
Engineering and Life Sciences. We expect to deliver growth in productivity through efficiencies achieved in key customer
accounts and client and candidate acquisitions, as well as through sales and marketing initiatives and continued investment
in L&D programmes that drive retention and career development and enable hybrid working.
* In constant currency
Asia Pacific, representing 3% of Group net fees
Our APAC business principally includes Japan and Singapore.
Net fees by division
Growth year-on-year (in constant currency) 2021 mix
Contract Permanent Total Contract Permanent
19% 37% 34% 17% 83%
2021 was an encouraging year for the region with net fees returning to growth following the impact of Covid-19 in 2020.
Total net fees for the region were up 34%* YoY, with a 64%* increase in Q4 YoY. Our two largest sectors showed strong growth
with Technology up 29%* and Life Sciences up 63%*.
An excellent performance in Japan saw net fee growth of 27%* which was driven by Technology sector, up 29%* YoY, and Life
Sciences sector, up 48%* YoY. Singapore net fees were up 54%* driven by Banking & Finance, up 33%* YoY, and Life Sciences,
up 80%* YoY.
Outlook
We will continue to invest in our business in the region as we look to position ourselves to take advantage of market
opportunities. We will strengthen our position in STEM with a clear focus on Technology and Life Sciences, in line with our
strategy.
* In constant currency
chief financial officer's REVIEW
The Group delivered a very strong performance in 2021, with both net fees and operating profit not only up strongly versus
2020 but also surpassing the record 2019 levels. The Group saw an encouraging performance in the first half, which was
followed by a further strengthening in the second half across all sectors and regions. Our strong balance sheet and
immediately accessible liquidity of £112.5 million positions us well for the future.
Income statement
Revenue for the year was up 14%(1) to £1.3 billion (2020: £1.2 billion) while net fees increased by 19% to £355.7 million
(2020: £308.6 million). The weakening of our two main trading currencies, US Dollar and Euro, against Sterling during the
year, reduced total net fees by £11.3 million.
The Group's performance in 2020 was impacted by the Covid-19 health crisis but during the current year demand for staffing
regained momentum and excellent progress was made with the Group surpassing 2019 levels. The increase was led by strong
growth in net fees in our three largest countries: Germany up 23% YoY, USA up 24% and Netherlands up 19% which was driven by
growth in the Technology, Life Sciences and Engineering sectors. The contractor order book was up by 43% at the end of the
year, reflecting the ongoing high demand for skilled contractors across our markets and underpinning our positive outlook.
Permanent net fee income was up 24% which was largely driven by DACH and USA, our two largest Permanent regions which were
up 17% and 53% respectively.
At the end of the year, Contract represented 75% of the Group net fees in the year (2020: 76%). Overall, the Group Contract
margin(2) increased marginally to 21.5% (2020: 20.7%).
Operating expenses saw an increase of 6% YoY on a reported basis. The increase was mainly attributable to personnel costs as
a result of higher average salaries, bonuses, commissions, share-based payment charges and temporary personnel costs across
the organisation. Technology costs also increased mainly to drive innovation and reduce operational risk, by moving towards
improved systems in support of the SThree strategy.
The Group's financial results were impacted by the following two items of other income which are unusual because of their
nature and incidence:
• The Group took advantage of the job retention scheme launched by the national governments of France and Singapore,
whereby it was reimbursed for a portion of salaries of furloughed personnel. A benefit of £0.3 million (2020: £1.2
million from the national governments in a number of our smaller markets) was recognised and presented as a deduction in
reporting the related staff expense.
• The Group also recognised a net exceptional income of £0.2 million (2020: £0.5 million) in relation to a legacy
restructuring programme partially funded by a grant receivable from Scottish Enterprise. The Group was entitled to the
grant and remained fully compliant with the terms of the grant until the end of 2021.
The adjusted operating profit was £60.8 million (2020: £31.3 million), up 106% YoY in constant currency. The reported
operating profit of £61.0 million (2020: £31.8 million) included a small exceptional income of £0.2 million as described
above.
The Group operating profit conversion ratio increased to 17.1% (2020: 10.1%) which reflects the recovery in the Group
trading activity as the impact of the pandemic eased, partially offset by higher personnel costs and technology spend. The
conversion ratio was also favourably affected by elevated contractor working hours that improved productivity.
The discontinued Australian operations have been excluded from the results presented above for both the current and prior
year. In 2021, these discontinued operations incurred a loss of £0.3 million (2020: operating loss £1.8 million) mainly
reflecting a true-up of exit costs/redundancy costs of gradually reduced staff following the business closure and the
reclassification of accumulated foreign exchange differences from the Group currency reserve to the Group income statement.
Net finance costs
Net finance costs, which predominantly related to lease interest, decreased to £0.8 million (2020: £1.2 million). The higher
cost in the previous year was a result of the drawdown of the RCF in the course of 2020 to ensure strong liquidity in the
face of the global health crisis. The RCF was subsequently repaid and remains available for future drawdowns.
Foreign exchange exposure
In 2021, the net currency movements versus Sterling provided a significant net headwind to the reported performance of the
Group, reducing net fees by £11.3 million and operating profit by £3.6 million. This was mainly attributable to Sterling
strengthening against the Euro and the US Dollar, the two main trading currencies of the Group.
Fluctuations in foreign currency exchange rates 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 net
fees by £2.1 million and £0.9 million respectively per annum, and operating profit by £0.7 million and £0.3 million
respectively per annum. Our foreign exchange risk management strategy involves using certain derivative financial
instruments to minimise the transactional exposure arising from currency fluctuations.
Income tax
The tax charge for the year on the Group's profit before tax was £17.9 million (2020: £11.7 million), representing a full
year effective tax rate ('ETR') on continuing operations of 30%. In the prior year, the reported ETR on continuing
operations was 39%, significantly above the current year due to higher losses in certain jurisdictions not recognised for
deferred tax purposes.
The Group's ETR primarily varies depending on 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 from continuing operations was £60.2 million (2020: £30.6 million), up 109% YoY in
constant currency and up 97% on a reported basis.
The reported profit after tax from continuing operations was £42.3 million (2020: £18.8 million), up 139% YoY in constant
currency and up 125% on a reported basis.
Earnings per share ('EPS')
The reported EPS was 31.9 pence (2020: 14.2 pence) on continuing operations, up 138% YoY in constant currency and up 125%
YoY in reported currency. The YoY growth reflects higher operating profit given the significant improvement in trading
performance post the pandemic, and a decrease in the Group's ETR. This was partially offset by an increase of 0.2 million in
the weighted average number of shares. Exceptional items had an immaterial impact on the reported EPS (further information
is provided in note 6 to the Group Consolidated Financial Statements).
The reported diluted EPS was 30.9 pence (2020: 13.8 pence) on continuing operations. Share dilution mainly results from
various share options in place and expected future settlement of certain 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 aims to maintain a sustainable dividend, within the range of 2.5x and 3.0x earnings cover(2).
The Board has proposed to pay a final dividend at 8.0 pence (2020: 5.0 pence) per share. Taken together with the interim
dividend of 3.0 pence (2020: nil pence) per share, this gives a total dividend for the year of 11.0 pence (2020: 5.0 pence)
per share.
The final dividend, which amounts to approximately £10.7 million, will be subject to shareholder approval at the 2022 Annual
General Meeting. It will be paid on 10 June 2022 to shareholders on the register on 6 May 2022.
Balance sheet
Total Group net assets increased to £158.2 million (2020: £128.5 million), driven by the excess of net profit over the
dividend payments, partially offset by unfavourable foreign currency movements and share buy-backs. Net working capital,
including contract assets, increased by £22.4 million on the prior year, driven mainly by the accelerated growth in revenue,
due to continued growth of the contractor order book increasing our working capital, partially offset by our continued focus
on credit risk management and normalisation in client payment times post the pandemic. Our days sales outstanding remained
stable YoY at 44 days (2020: 44 days), following significant improvement last year.
Our business model remains highly cash generative, and we have no undue concentration of repayment obligations in respect of
trade payables or borrowings.
Investment in subsidiaries
During the year, the Group's businesses delivered a very strong financial performance, ahead of market and management's
expectations. With candidate and client confidence improving across most of our global footprint, significant growth rates
were reported in contractor order books among most of the Group's businesses to levels not seen since the peak of 2019.
Accordingly, no significant indicators of impairment were identified when reviewing recoverable amounts of the Company's
investment portfolio. For comparison, in the prior year the Company recognised an impairment loss of £12.9 million mainly in
respect of the UK operations which were affected by heightened uncertainty and reduced economic activity caused by the
pandemic.
Tracker shares
The Group settled certain vested tracker shares during the year for a total consideration of £4.6 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; 200,372 new shares were issued and 672,157 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.
In 2021 the Directors decided to close the tracker share scheme for any new entrants/investments. 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. We expect all future tracker share settlements to be between
£2.0 million to £10.0 million per annum. 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 2021, cash generated from operations was £54.5 million (2020: £76.9 million). It represented the improved adjusted EBITDA
(2) offset by the continued growth of the contractor order book increasing our working capital and having fully repaid £2.3
million in VAT deferrals from the prior year.
Income tax paid increased to £16.7 million (2020: £10.5 million) reflecting the improved underlying trading performance
across our markets and sectors.
Capital expenditure decreased to £2.6 million (2020: £5.3 million), the majority of which related to IT equipment and
digitisation of our internal processes, with emphasis on greater automation and tools to improve efficiency, speed and
effectiveness.
The Group paid £13.1 million in rent (principal and interest portion) (2020: £13.6 million). Net interest cost (excluding
interest on lease payments) was £0.2 million (2020: £0.4 million) in the year. The Group spent £5.2 million (2020: £2.0
million) for the purchase of its own shares to satisfy vesting employee share incentive schemes. Cash inflows of £0.2
million (2020: £0.9 million) were generated from the Save As You Earn employee scheme.
Dividend payments were £6.6 million (2020: £6.7 million, being the interim dividend paid in December 2019) and there was a
small cash outflow of £0.1 million (2020: £nil) representing distributions to tracker shareholders.
Foreign exchange had a significant negative impact of £2.6 million (2020: £0.3 million).
Overall, the underlying cash performance in 2021 was solid with 40% conversion of operating profit into operating cash flow
(2) (2020: 175%), primarily reflecting very strong trading performance across the Group offset by increased working capital.
We started the year with net cash of £49.9 million and closed the year with net cash of £57.5 million.
Capital allocation and accessible funding
SThree remains disciplined in its approach to allocating capital, with the core objective at all times being to maximise
shareholder value:
• Balance sheet - our intention is to maintain a strong balance sheet at all times.
• Organic growth - our top priority is to invest in the organic growth of the business. We will actively invest in
delivering scalable growth in net fees and margins - focusing on our people, systems and processes to improve
operational efficiencies as well as developing new business opportunities.
• Acquisitions - we will seek to accelerate our growth by acquiring businesses that complement our strategy as well as
offer value-enhancing financial profiles.
• Dividends - we aim to pay a dividend which is sustainable through the cycle, and which will be driven by long-term
earnings growth.
• Surplus cash - whilst unlikely in the foreseeable future, we will consider returning excess capital to shareholders by
way of special dividends and/or share repurchases in the event of there not being suitable organic or inorganic
opportunities.
The Group's capital allocation priorities are financed mainly by retained earnings, cash generated from operations, a £50.0
million Revolving Credit Facility ('RCF') which is committed to 2023, and a £5.0 million overdraft. The Group also maintains
a £20.0 million accordion facility as well as a substantial working capital position reflecting net cash due to SThree for
placements already undertaken.
On 30 November 2021, the Group had total accessible liquidity of £112.5 million. This was made up of £57.5 million net cash,
£50.0 million in RCF and £5.0 million overdraft (both undrawn at the year-end). The increased net cash balance, achieved
despite the growth in Contract placements made, reflects the Group's strong focus on cash management.
Any funds borrowed under the RCF bear a minimum annual interest rate of 1.3% above three-month Sterling LIBOR. During the
year, the Group did not draw down any of these facilities. In the prior year, the average interest rate paid on drawdown was
1.3%.
The Group remains in a strong financial position and has sufficient cash reserves to meet its obligations as they fall due
for a period of at least 12 months from the date of signing of these financial statements.
1 Unless specifically stated, all growth rates in revenue and net fees are expressed in constant currency and exclude
Australia, which the Group exited in Q4 2020.
2 The Group has identified and defined certain alternative performance measures ('APM'). 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.
PRINCIPAL AND EMERGING RISKS
Principal risks and uncertainties affecting the business activities of the Group are detailed within the Strategic Report
section of the Group's 2021 Annual Report, a copy of which will be available on the Group's website 3 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 2021. 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 2021
2021 2020
Before exceptional Exceptional Total Before exceptional items Exceptional Total
items items items
Note £'000 £'000 £'000 £'000 £'000 £'000
Continuing operations
Revenue 2 1,330,726 - 1,330,726 1,202,622 - 1,202,622
Cost of sales (975,013) - (975,013) (894,047) - (894,047)
Net fees 2 355,713 - 355,713 308,575 - 308,575
Administrative 3 (292,325) 184 (292,141) (275,594) 468 (275,126)
(expense)/income
Impairment losses on (2,579) - (2,579) (1,689) - (1,689)
financial assets
Operating profit 60,809 184 60,993 31,292 468 31,760
Finance costs (869) - (869) (1,279) - (1,279)
Finance income 34 - 34 114 - 114
Profit before income tax 59,974 184 60,158 30,127 468 30,595
Income tax expense 4 (17,872) (35) (17,907) (11,744) (89) (11,833)
Profit for the year
42,102 149 42,251 18,383 379 18,762
from continuing operations
Discontinued operations
Loss after tax for the year
5 (269) - (269) (1,809) - (1,809)
from discontinued operations
Profit for the year attributable 41,833 149 41,982 16,574 379 16,953
to owners of the Company
Earnings per share 6 pence pence pence pence pence pence
Basic 31.6 0.1 31.7 12.5 0.3 12.8
Diluted 30.6 0.1 30.7 12.2 0.3 12.5
Earnings per share
6 pence pence pence pence pence pence
from continuing operations
Basic 31.8 0.1 31.9 13.9 0.3 14.2
Diluted 30.8 0.1 30.9 13.5 0.3 13.8
The accompanying notes form an integral part of these Consolidated Financial Statements.
consolidated statement of comprehensive income
for the year ended 30 November 2021
2021 2020
Note £'000 £'000
Profit for the year 41,982 16,953
Other comprehensive (expense)/income:
Items that may be subsequently reclassified to profit or loss:
Exchange differences on retranslation of foreign continuing operations (2,694) 2,955
Exchange differences on retranslation of foreign discontinued operations - (228)
Items that will not be subsequently reclassified to profit or loss:
Net loss on equity instruments at fair value through other comprehensive income - (12)
Other comprehensive (loss)/income for the year (net of tax) (2,694) 2,715
Total comprehensive income for the year
39,288 19,668
attributable to owners of the Company
Total comprehensive income/(loss) for the year
attributable to owners of the Company arises from:
Continued operations 39,557 21,705
Discontinued operations 5 (269) (2,037)
39,288 19,668
The accompanying notes form an integral part of these Consolidated Financial Statements.
consolidated statement of financial position
as at 30 November 2021
30 November 30 November
2021 2020
Note £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 38,073 40,818
Intangible assets 2,459 4,409
Investments 1 1
Deferred tax assets 4,491 1,482
Total non-current assets 45,024 46,710
Current assets
Trade and other receivables 298,024 237,042
Current tax assets - 377
Cash and cash equivalents 8 57,526 50,363
Total current assets 355,550 287,782
Total assets 400,574 334,492
EQUITY AND LIABILITIES
Equity attributable to owners of the Company
Share capital 11 1,337 1,330
Share premium 35,466 33,026
Other reserves (4,683) (118)
Retained earnings 126,033 94,279
Total equity 158,153 128,517
Current liabilities
Bank overdraft 8 24 468
Trade and other payables 196,080 157,499
Lease liabilities 9, 10 13,081 12,078
Provisions 6,258 9,915
Current tax liabilities 2,987 -
Total current liabilities 218,430 179,960
Non-current liabilities
Lease liabilities 9, 10 21,987 23,426
Provisions 2,004 2,589
Total non-current liabilities 23,991 26,015
Total liabilities 242,421 205,975
Total equity and liabilities 400,574 334,492
The accompanying notes form an integral part of these Consolidated Financial Statements.
consolidated statement of changes in equity
for the year ended
30 November 2021
Capital Currency Fair value Total equity
Share Share redemption Capital Treasury translation reserve of Retained attributable
capital premium reserve reserve reserve reserve equity earnings to owners of
investments the Company
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 1,326 32,161 172 (5,005) (2,387) (1,996) 90,644 115,793
December 2019 878
Profit for the - 16,953 16,953
year - - - - - -
Other
comprehensive 2,727 (12)
income for the - - - - - - 2,715
year
Total
comprehensive (12) 16,953
income for the - - - - - 2,727 19,668
period
Transfer of
loss on
disposal of
equity
investments 1,996 (1,996) -
through other - - - - - -
comprehensive
income to
retained
earnings
Dividends paid
to equity - (6,659)
holders (note - - - - - - (6,659)
7)
Settlement of
vested tracker - - - - 103 - - 16 119
shares
Settlement of
share-based 4 865 - - 5,437 - - (5,437) 869
payments
Purchase of
own shares by - - - - (2,031) - - - (2,031)
EBT (note 11)
Credit to
equity for
equity-settled - - - - - - - 916 916
share-based
payments
Current and
deferred tax
on share-based - - - - - - - (158) (158)
payment
transactions
Total
movements in 4 865 - - 3,509 2,727 1,984 3,635 12,724
equity
Balance at 30
November 2020 1,330 33,026 172 878 (1,496) 340 (12) 94,279 128,517
and 1 December
2020
Profit for the - - - - - - - 41,982 41,982
year
Other
comprehensive - - - - - (2,694) - - (2,694)
loss for the
year
Total
comprehensive - - - - - (2,694) - 41,982 39,288
income for the
year
Dividends paid
to equity - - - - - - - (6,616) (6,616)
holders (note
7)
Distributions
to tracker - - - - - - - (87) (87)
shareholders
Settlement of
vested tracker 2 964 - - 2,494 - - (3,635) (175)
shares
Settlement of
share-based 5 1,476 - - 967 - - (2,057) 391
payments
Purchase of
shares by EBT,
including - - - - (5,332) - - - (5,332)
share gift
(note 11)
Credit to
equity for
equity-settled - - - - - - - 1,520 1,520
share-based
payments
Current and
deferred tax
on share-based - - - - - - - 647 647
payment
transactions
Total
movements in 7 2,440 - - (1,871) (2,694) - 31,754 29,636
equity
Balance at 30 1,337 35,466 172 878 (3,367) (2,354) (12) 126,033 158,153
November 2021
The accompanying notes form an integral part of these Consolidated Financial Statements.
consolidated statement of cash flows
for the year ended 30 November 2021
30 November 30 November
2021 2020
Note £'000 £'000
Cash flows from operating activities
Profit from continuing operations before tax after exceptional items 60,158 30,595
Loss before tax from discontinued operations (269) (1,809)
Profit before tax 59,889 28,786
Adjustments for:
Depreciation and amortisation charge 17,717 19,440
Impairment of intangible assets 608 1,124
Loss on disposal of property, plant and equipment 199 136
Loss on disposal of intangible assets 74 -
Finance income (34) (114)
Finance costs 869 1,293
Loss on liquidation of subsidiaries 5 236 -
Non-cash charge for share-based payments 1,520 916
Operating cash flows before changes in working capital and provisions 81,078 51,581
(Increase)/decrease in receivables (63,559) 41,225
Increase/(decrease) in payables 41,074 (20,088)
(Decrease)/increase in provisions (4,065) 4,175
Cash generated from operations 54,528 76,893
Interest received 34 114
Income tax paid - net (16,771) (10,504)
Net cash generated from operating activities 37,791 66,503
Cash flows from investing activities
Purchase of property, plant and equipment (1,923) (4,669)
Purchase of intangible assets (726) (609)
Net cash used in investing activities (2,649) (5,278)
Cash flows from financing activities
Proceeds from borrowings 10 - 50,000
Repayment of borrowings 10 - (50,000)
Interest paid 10 (869) (481)
Lease principal payments 10 (12,460) (13,579)
Proceeds from exercise of share options 209 869
Employee subscription for tracker shares - 291
Purchase of own shares 11 (5,150) (2,031)
Dividends paid to equity holders 7 (6,616) (6,659)
Distributions to tracker shareholders (87) -
Net cash used in financing activities (24,973) (21,590)
Net increase in cash and cash equivalents 10,169 39,635
Cash and cash equivalents at beginning of the year 49,895 10,555
Exchange losses relating to cash and cash equivalent (2,562) (295)
Net cash and cash equivalents at end of the year 8 57,502 49,895
The accompanying notes form an integral part of these Consolidated Financial Statements.
Notes to the Financial information
for the year ended 30 November 2021
1. 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 2021 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 28 January 2022.
The auditors have reported on the Group's financial statements for the years ended 30 November 2021 and 30 November 2020
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 2020 were
filed with the Registrar of Companies and those for the year ended 30 November 2021 will be filed following the Company's
Annual General Meeting.
In 2021, selected UK subsidiaries were exempt from the requirements of the UK Companies Act 2006 ('the Act') relating to the
audit of individual accounts by virtue of s479A of the Act. The Company provides a guarantee concerning the outstanding
liabilities of these subsidiaries under section 479C of the Act.
The Group's financial statements have been prepared in accordance with international accounting standards in conformity with
the requirements of the Companies Act 2006 and the international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union.
Going concern
In determining the appropriate basis of preparation of this year's financial statements, the Directors are required to
assess whether the Group can continue in operational existence for the foreseeable future. The Directors have undertaken a
review of the Group's forecasts and associated risks and sensitivities for at least 12 months from the date of approval of
this year's financial statements.
Although the global pandemic and its aftermath continue to create a moderate degree of uncertainty to economic conditions
across all of our markets, the Group's business model has proven to be effective and resilient. In 2021 the Group delivered
a very strong performance across key markets and sectors, with profit before tax surpassing the pre-pandemic levels of 2019,
reflecting the continued strength of demand for the exceptional candidates we work with, their STEM skills and the growth
trajectory of our business.
In the assessment of the going concern basis of preparation, the Directors considered the future financial performance based
on current trading and its growth trajectory, expected operating cash flows, as well as people and capital resources
required to implement strategic initiatives in response to identified market opportunities and emerging risks. The Directors
also assessed the Group's financial position, including accessible liquidity with committed borrowing facilities.
At 30 November 2021, the Group had £57.5 million of cash, with no debt except for IFRS 16 lease liabilities of £35.1
million. As set out in note 10 to the financial statements, debt facilities relevant to the review period comprise a
committed £50.0 million RCF (facility expiring in May 2023 with all covenants met) and an uncommitted £20.0 million
accordion facility, both jointly provided by HSBC and Citibank. A further uncommitted £5.0 million bank overdraft facility
is also held with HSBC. The RCF is subject to covenants that are measured biannually in May and November, on a trailing
12-month basis, being (i) net debt to EBITDA of a maximum of 3.0x and (ii) interest cover of a minimum of 4.0x, based on
measures as defined in the facilities agreements which are adjusted from the equivalent IFRS amounts. The ratio of net debt
to EBITDA at 30 November 2021 was nil, as no debt was drawn at the year end, and interest cover was 92.4 times.
The Group developed a base case that demonstrates the Board's best estimate for the review period (to the end of Q1 2023),
as well as a range of downside scenarios which may occur, either through further Covid-19 related impacts, general economic
uncertainty or any of the Group's principal risks. This assessment considered the Group's potential responses to changing
market conditions and business risks, resilience of its business model and overall level of Group funding and covenant
requirements.
The key assumptions of the downside scenarios linked to certain principal risks are shown below.
Scenario 1 Downside scenario - economic downturn
The first scenario considers the downside impact of economic uncertainty triggered by the new Covid-19 variants over the
review period, reflected in reduced sales activity for the remainder of 2022 and into Q1 2023.
Under this plausible scenario, productivity is forecast to decline between 14% and 18% against the base case over 2022.
While variable costs are forecast to reduce in line with net fees, all other costs are assumed to remain in line with the
base case.
Link to risk:
Risk 1: Macro-economic environment/cyclicality risk
Risk 3: Commercial relationship/client risk
Scenario 2 Severe but plausible scenario - demand/operational shock
The second scenario, considered severe but plausible, includes further potential Covid-19 outbreaks and restrictions in all
key markets throughout 2022 and into 2023, leading to demand at similar levels to that experienced in 2020 over that period.
Under this severe but plausible scenario, the productivity is forecast to decline between 21% and 24% against the base case
over 2022 and in Q1 2023. The impact of this severe but plausible downside is mitigated by the reduction in variable costs
in line with net fees, together with further reductions in overheads resulting from the postponement of investment in
additional headcount.
Link to risk:
Risk 1: Macro-economic environment/cyclicality risk
Risk 3: Commercial relationship/client risk
Under both scenarios, the Group's day-to-day working capital requirements are expected to be met through existing cash
resources and cash equivalents and receipts from its continuing business activities, with sufficient cash headroom for the
Group to continue trading throughout 2022 and into 2023. In each of these scenarios the Group is also forecast to be
compliant with all covenants throughout the review period, with no requirement to utilise the existing credit facilities.
Through this process, together with their knowledge and experience of the recruitment services industry, STEM markets and
the principal risks, the Directors have a reasonable expectation that the Group has adequate resources to continue in
operational existence for at least the next 12 months, and therefore the Directors continue to adopt the going concern basis
in preparing the financial statements for the year ended 30 November 2021.
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 climate change scenario analyses conducted in line with TCFD recommendations undertaken
this year did not identify any material financial impact. The Group also constantly monitors the latest government
legislation in relation to climate-related matters.
The following considerations were also made in respect of the financial statements:
- The impact of climate-related risks as well as opportunities on the long-term viability of the Group. In line with the
Group long-term commitment to the environment and society the Directors refreshed the ESG strategy. The Directors carried
out a detailed assessment of how climate change may emerge across SThree's operations and impact its business model. Having
identified risks and opportunities relating to the transitional impact of climate change and using three scenarios of global
energy pathways for 2021-2040, SThree's strategic resilience was tested as well as its flexibility to adapt operations and
drive continued growth.
- The impact of the potential introduction of emission-reduction legislation in different jurisdictions may increase
manufacturing costs among the Group's clients, which in turn could negatively affect their ability to pay debts, resulting
in higher expected credit losses for trade and other receivables recognised by the Group. Management identified the need to
enhance the Group's existing tools and techniques to monitor and mitigate any potential deterioration in clients' credit
risk, in particular for a small proportion of the Group's clients within the Oil & Gas sector (circa 6% of Group net fees)
whose operations are heavily exposed to climate-related risks. At present management continue to monitor this sector and
provide guidelines to sales teams in line with climate change strategy.
At present, the impact of climate-related matters is not material to the Group's financial statements.
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 2020 as set
out below.
New and amended standards effective in 2021 and adopted by the Group
A number of amended standards became applicable as of 1 December 2020 and were adopted by the Group. The Group did not have
to change its accounting policies or make retrospective adjustments as a result of adopting these amended standards.
- Amendments to references to conceptual framework in IFRS standards;
- Amendments to IFRS 3, Definition of a business;
- Amendments to IAS 1 and IAS 8, definition of material;
- Extension of the temporary exemption from applying IFRS 9 (amendments to IFRS 4); and
- Amendments to IFRS 16, Covid-19 rent related concessions.
New and amended standards that are applicable to the Group but not yet effective
The following other amendments and interpretations were issued by the IASB but are effective from 1 January 2022. These
amendments are not expected to have a material impact on the Group in the current or future periods.
- Amendments to IFRS 7, IFRS 9, IFRS 16 and IAS 39, Interest Rate Benchmark Reform - phase 2.
The replacement of Interbank Offered Rates ('IBORs') with Alternative Reference Rates ('ARRs') will begin from December
2021. Where floating interest-bearing receivables and payables exist (currently based on IBORs) the Group will apply
suitable replacement benchmark rates and account for the instruments in accordance with the amendments to IFRS 9 Financial
Instruments published in 2019 (Phase 1) and 2020 (Phase 2). The adoption of these amendments and the transition to ARRs are
expected to have an immaterial financial impact. The implications on the trading results of our segments of IBOR reform have
also been assessed and the expected impact is immaterial. The Group is preparing to move to the new benchmark rates in
accordance with timelines as per regulatory guidelines.
The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
2. Segmental analysis
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 maker, 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 maker to be the Executive Committee made up of the Chief
Executive Officer, the Chief Financial Officer, the Chief Operating Officer and the Chief People Officer, with other senior
management attending via invitation.
The Group segments the business into the following reportable regions: DACH, EMEA excluding DACH, USA and APAC, as well as
presents an analysis of net fees by its five key markets: Germany, the Netherlands, USA, the UK and Japan.
DACH region comprises Germany, Switzerland and Austria. 'EMEA excluding DACH' region comprises primarily Belgium, France,
the Netherlands, Spain, the UK, Ireland, and Dubai. All these sub-regions were aggregated into two separate reportable
segments based on the possession of similar economic characteristics.
Countries aggregated into DACH and separately into 'EMEA excluding DACH' generate a similar average net fee margin together
with long-term growth rates, and are similar in each of the following areas:
- the nature of the services (recruitment/candidate placement);
- the methods used in which they provide services to clients (independent contractors, employed contractors, and permanent
candidates);
- the class of candidates (candidates, who we place with our clients, represent skillsets in Science, Technology,
Engineering and Mathematics disciplines).
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 and net fees by reportable segment
The Group measures 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.
Intersegment revenue is recorded at values which approximate third party selling prices and is not significant.
Revenue Net fees
2021 2020 2021 2020
£'000 £'000 £'000 £'000
EMEA excluding DACH 606,248 588,787 127,197 117,629
DACH 452,456 371,915 129,420 105,764
USA 254,338 227,523 89,260 77,243
APAC 17,684 14,397 9,836 7,939
1,330,726 1,202,622 355,713 308,575
EMEA excluding DACH includes Belgium, Dubai, France, Ireland, Luxembourg, the Netherlands, Spain and the UK.
DACH includes Austria, Germany and Switzerland.
APAC includes Hong Kong, Japan, Malaysia and Singapore.
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:
EMEA
DACH USA APAC Total
excluding DACH
2021 £'000 £'000 £'000 £'000 £'000
Timing of revenue recognition
Over time 587,220 410,510 231,812 9,558 1239,100
At a point in time 19,029 41,944 22,526 8,127 91,626
606,249 452,454 254,338 17,685 1,330,726
EMEA
DACH USA APAC Total
excluding DACH
2020 £'000 £'000 £'000 £'000 £'000
Timing of revenue recognition
Over time 569,715 335,298 211,800 8,004 1,124,817
At a point in time 19,072 36,617 15,723 6,393 77,805
588,787 371,915 227,523 14,397 1,202,622
Major customers
In 2021 and 2020, no single customer generated more than 10% of the Group's revenue.
Other information
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 Net fees
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Germany 405,308 336,259 117,827 96,866
USA 254,338 227,523 89,260 77,243
Netherlands 250,645 234,547 55,612 47,314
UK 202,368 186,146 37,798 35,057
Japan 8,189 7,044 6,868 5,899
RoW (1) 209,878 211,103 48,348 46,196
1,330,726 1,202,622 355,713 308,575
Non-current assets
30 November 30 November
2021 2020
£'000 £'000
Germany 12,079 10,725
UK 11,027 16,255
USA 5,304 6,466
Japan 4,211 118
Netherlands 2,400 3,928
RoW (1) 5,512 7,736
40,533 45,228
(1) RoW (Rest of the World) includes all countries other than listed.
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.
Revenue Net fees
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Brands
Computer Futures 448,325 376,053 117,384 95,530
Progressive 376,844 372,568 99,502 92,295
Real Staffing Group 294,309 253,682 90,394 75,884
Huxley Associates 211,248 200,319 48,433 44,866
1,330,726 1,202,622 355,713 308,575
Other brands including Global Enterprise Partners, JP Gray, Madison Black, Newington International and Orgtel are rolled
into the above brands.
Revenue Net fees
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Recruitment classification
Contract 1,239,100 1,124,817 266,163 233,343
Permanent 91,626 77,805 89,550 75,232
1,330,726 1,202,622 355,713 308,575
Revenue Net fees
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Sectors
Technology 674,072 591,333 166,538 138,234
Life Sciences 271,460 223,655 85,439 71,604
Engineering 267,407 271,861 70,563 68,083
Banking & Finance 96,071 101,196 25,379 25,760
Other 21,716 14,577 7,794 4,894
1,330,726 1,202,622 335,713 308,575
Other includes Procurement & Supply Chain and Sales & Marketing. Engineering includes Energy.
3. ADMINISTRATIVE EXPENSES
a. Operating profit from continuing operations is stated after charging/(crediting):
2021 2020
£'000 £'000
Staff costs 225,920 209,397
Depreciation 15,764 16,285
Amortisation 1,953 2,786
Impairment of intangible assets 608 1,124
Loss on disposal of property, plant and equipment 199 14
Loss on disposal of intangible assets 74 -
Impairment losses on financial assets 2,579 1,689
Service lease charges
• Buildings 2,156 1,892
• Cars 1,402 402
Foreign exchange losses 397 677
Other operating (income)/expenses (see 3(b)) (470) 1,666
b. Profit for the year includes the following items that are unusual because of their nature, size or incidence:
2021 2020
£'000 £'000
1. Net exceptional income 184 468
2. Impact of Covid-19:
Government assistance income 286 1,166
Business optimisation expenses - (3,300)
Total 470 (1,666)
Net exceptional income
The Group recognised a net exceptional income of £0.2 million (2020: £0.5 million) in relation to a legacy restructuring
programme partially funded by a grant receivable from Scottish Enterprise. The Group was entitled to the grant until the end
of 2021 and complied with all terms of the grant. The grant has now been fully utilised and no further income is due.
Impact of Covid-19
The Covid-19 health crisis had implications on certain items of income in the Group Consolidated Financial Statements,
affecting the profit before tax for the current and prior year. These items were not treated as exceptional.
Government assistance income
The Group took advantage of job retention schemes launched by the national governments of France and Singapore, whereby it
was reimbursed for a portion of salaries of furloughed personnel. A benefit of £0.3 million (2020: £1.2 million from local
national governments of Belgium, France, Hong Kong, Japan, Luxembourg, Singapore and Spain) was recognised and presented as
a deduction in reporting the related staff expense.
Business optimisation expense
In the prior year, in response to the significantly changed economic environment and increased risk and uncertainty caused
by Covid-19, the Directors took relevant steps to right-size the structure and strategy of certain local businesses. These
changes resulted in a charge of £3.3 million that was recognised in the previous year.
4. INCOME TAX EXPENSE
a. Analysis of tax charge for the year
2021 2020
Before exceptional Exceptional items Total Before exceptional Exceptional items Total
items items
£'000 £'000 £'000 £'000 £'000 £'000
Current income tax
Corporation tax charged on profits 18,142 35 18,177 8,651 89 8,740
for the year
Adjustments in respect of prior 1,989 - 1,989 438 - 438
periods
Total current tax charge 20,131 35 20,166 9,089 89 9,178
Deferred income tax
Origination and reversal of (276) - (276) 2,582 - 2,582
temporary differences
Adjustments in respect of prior (1,983) - (1,983) 73 - 73
periods
Total deferred tax (credit)/charge (2,259) - (2,259) 2,655 - 2,655
Total income tax charge in the 17,872 35 17,907 11,744 89 11,883
Consolidated Income Statement
The total income tax charge relates entirely to continuing operations.
b. Reconciliation of the effective tax rate
The Group's tax charge for the year exceeds (2020: exceeds) the UK statutory rate and can be reconciled as follows:
2021 2020
Before exceptional Exceptional items Total Before exceptional Exceptional items Total
items items
£'000 £'000 £'000 £'000 £'000 £'000
Profit before income tax
59,974 184 60,158 30,127 468 30,595
from continuing operations
Loss before income tax
(269) - (269) (1,809) - (1,809)
from discontinued operations
Profit before income tax for the 59,705 184 59,889 28,318 468 28,786
Group
Profit before income tax multiplied
by the standard rate of corporation 11,344 35 11,379 5,380 89 5,469
tax in the UK at 19.00% (2020:
19.00%)
Effects of:
Disallowable items 1,650 - 1,650 2,183 - 2,183
Differing tax rates on overseas 3,897 - 3,897 2,576 - 2,576
earnings
Adjustments in respect of prior 6 - 6 511 - 511
periods
Adjustment due to tax rate changes (149) - (149) 115 - 115
Tax losses for which deferred tax
asset was not recognised or 1,124 - 1,124 979 - 979
derecognised
Total tax charge for the year 17,872 35 17,907 11,744 89 11,833
At the effective tax rate 29.9% 19.0% 29.9% 41.5% 19.0% 41.1%
Effective tax rate attributable to 29.8% - 29.8% 39.0% - 38.7%
continuing operations
c. Current and deferred tax movement recognised directly in equity
2021 2020
£'000 £'000
Equity-settled share-based payments:
Current tax 4 192
Deferred tax 643 (350)
Deferred tax adjustment on transition to IFRS 16 - 342
647 184
The Group expects to receive additional tax deductions in respect of share options currently unexercised. Under IFRS, 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 2021, a deferred tax asset of £1.5 million (2020:
£0.7 million) was recognised in respect of these options.
On transition to IFRS 16 an adjustment to retained earnings was made at 1 December 2019, and a corresponding tax credit was
booked to equity of £0.3 million.
5. Discontinued operations
On 1 September 2020, the Group announced its intention to liquidate the Australian subsidiary ('SThree Australia'), the
operations of which represented a separate major line of business for SThree. As a result, SThree Australia was treated as
discontinued operations for the year ended 30 November 2021 and 30 November 2020.
A single amount was shown on the face of the Consolidated Income Statement comprising the post-tax result of discontinued
operations. That is, the income and expenses of SThree Australia were reported separately from the continuing operations of
the Group. With SThree Australia being classified as discontinued operations, the APAC segment no longer includes its
results in the segmental note. Financial information for SThree Australia operations after intra-group eliminations is
presented below.
2021 2020
£'000 £'000
Revenue - 11,538
Cost of sales (20) (9,361)
Administrative expenses (13) (3,972)
Operating loss (33) (1,795)
Net finance cost - (14)
Loss before and after income tax from discontinued operations (33) (1,809)
Reclassification of foreign currency translation reserve (236) -
Loss on liquidation of the subsidiary before and after income tax (236) -
Loss from discontinued operations (269) (1,809)
Exchange differences on translation of discontinued operations - (228)
Total comprehensive loss from discontinued operations (269) (2,037)
Net cash flows (used)/generated by discontinued operations are as follows:
Operating activities (848) 291
Investing activities - (16)
Financing activities - (343)
Net cash outflow (848) (68)
Closure-related costs
In the current year, the discontinued operations incurred a total comprehensive loss of £0.3 million (2020: total
comprehensive loss of £2.0 million) primarily reflecting a true-up of exit costs/redundancy costs of rolling off staff
following the business closure and the reclassification of accumulated foreign exchange differences from the Group currency
reserve to the Group Consolidated Income Statement.
The total comprehensive loss incurred in the prior year was mainly attributable to closure-related costs of nearly £1.1
million due to redundancy payments and property costs.
6. 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, which for accounting purposes are treated in the same manner as shares held in the
treasury reserve.
For diluted EPS, the weighted average number of shares in issue is adjusted to assume conversion of dilutive potential
shares. Potential dilution resulting from tracker shares takes into account profitability of the underlying tracker
businesses and SThree plc's earnings. Therefore, the dilutive effect on EPS will vary in future periods depending on any
changes in these factors.
The following table reflects the income and share data used in the basic and diluted EPS calculations.
2021 2020
£'000 £'000
Earnings
Continuing operations before exceptional items 42,102 18,383
Exceptional items 149 379
Discontinued operations (269) (1,809)
Profit for the year attributable to owners of the Company 41,982 16,953
Million Million
Number of shares
Weighted average number of shares used for basic EPS 132.3 132.1
Dilutive effect of share plans 4.4 4.3
Diluted weighted average number of shares used for diluted EPS 136.7 136.4
2021 2020
pence pence
Basic EPS
Continuing operations before exceptional items 31.8 13.9
Exceptional items 0.1 0.3
Discontinued operations (0.2) (1.4)
31.7 12.8
Diluted EPS
Continuing operations before exceptional items 30.8 13.5
Exceptional items 0.1 0.3
Discontinued operations (0.2) (1.3)
30.7 12.5
7. Dividends
2021 2020
£'000 £'000
Amounts recognised as distributions to equity holders in the year
Interim dividend of nil pence (2019: 5.1 pence) per share 1 - 6,659
Final dividend of 5.0 pence (2019: nil pence) per share 2 6,616 -
6,616 6,659
Amounts proposed as distributions to equity holders
Interim dividend of 3.0 pence (2020: nil pence) per share 3 3,982 -
Final dividend of 8.0 pence (2020: 5.0 pence) per share 4 10,690 6,645
1. No interim 2020 dividend was paid due to the economic uncertainty caused by the Covid-19 health crisis (2019: 5.1
pence).
2. 2020 final dividend of 5.0 pence (2019: nil pence) per share was paid on 4 June 2021 to shareholders on record at 7 May
2021.
3. 2021 interim dividend of 3.0 pence (2020: nil pence) per share was paid on 3 December 2021 to shareholders on record at
5 November 2021.
4. The Board has proposed a 2021 final dividend of 8.0 pence (2020: 5.0 pence) per share, to be paid on 10 June 2022 to
shareholders on record at 6 May 2022. This proposed final dividend is subject to approval by shareholders at the
Company's next Annual General Meeting on 20 April 2022, and therefore has not been included as a liability in these
financial statements.
8. Cash and cash equivalents
30 November 30 November
2021 2020
£'000 £'000
Cash at bank attributable to continued operations 57,526 49,720
Bank overdraft attributable to continued operations (24) (468)
Net cash and cash equivalents for continued operations 57,502 49,252
Cash at bank attributable to discontinued operations - 643
Net cash and cash equivalents per the statement of cash flows 57,502 49,895
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 carrying amount of these assets approximate their fair values. Substantially all of
these assets are categorised within level 1 of the fair value hierarchy.
The Group has four cash pooling arrangements in place at HSBC US (USD), HSBC UK (GBP), Natwest (GBP) and Citibank (EUR).
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:
30 November 30 November
2021 2020
£'000 £'000
Buildings 30,667 30,819
Cars 1,631 1,936
IT equipment 49 123
Total right-of-use assets 32,347 32,878
Current lease liabilities 13,081 12,078
Non-current lease liabilities 21,987 23,426
Total lease liabilities 35,068 35,504
The Consolidated Income Statement includes the following amounts relating to depreciation of right-to-use assets:
30 November
30 November 2021
2020
£'000 £'000
Buildings 10,882 11,658
Cars 1,052 1,263
IT equipment 74 128
Total depreciation charge of right-of-use assets 12,008 13,049
In the current year, interest expense on leases amounted to £0.6 million (2020: £0.7 million) and was recognised within
finance costs in the Consolidated Income Statement.
The total cash outflow for leases in 2021 was £13.1 million (2020: £13.6 million) and comprised the principal and interest
element of recognised lease liabilities.
10. Other financial liabilities
The Group maintains a committed Revolving Credit Facility ('RCF') of £50.0 million along with an uncommitted £20.0 million
accordion facility, both jointly provided by HSBC and Citibank, giving the Group an option to increase its total borrowings
under the facility to £70.0 million. The Group has an uncommitted £5.0 million overdraft facility with HSBC. The Group also
had access to the Bank of England's Covid-19 Corporate Financing Facility, a £50.0 million committed Commercial Paper
facility. While this provided the Group with access to an additional short-term form of financing up to March 2021, it was
never utilised.
Any funds borrowed under the RCF bear a minimum annual interest rate of 1.3% above the three-month Sterling LIBOR. At the
year end, the Group and the Company did not draw down under these facilities (2020: £nil). Accordingly, the net finance
costs decreased to £0.8 million (2020: £1.2 million) and were mainly related to lease interest. In the prior year, the
average interest rate paid on drawdown was 1.3%.
The RCF is subject to certain covenants requiring the Group to maintain financial ratios over interest cover, leverage and
guarantor cover. The Group has complied with these covenants throughout the year. The RCF facility is available under these
terms and conditions until May 2023.
Reconciliation of financial liabilities to cash flows arising from financing activities:
£'000
Balance at 1 December 2019 -
Recognition of leases on adoption of IFRS 16 43,019
Cash flows:
Proceeds from borrowings 50,000
Repayments of borrowings (50,000)
Interest paid on borrowings, excluding lease liabilities (481)
Payments of principal and interest element of lease liabilities (13,579)
Total cash flows (14,060)
Lease increases 5,848
Other movements (1) 697
Balance at 30 November 2020 35,504
Cash flows:
Interest paid on borrowings, excluding lease liabilities (262)
Payments of principal and interest element of lease liabilities (13,067)
Total cash flows (13,329)
Lease increases 14,026
Lease terminations (1,740)
Other non-cash movements (1) 607
Balance at 30 November 2021 35,068
(1) Other movements in 2021 and 2020 primarily comprise unwind of the discount on lease liabilities.
11. EQUITY
During the year 734,155 (2020: 441,306) new ordinary shares were issued, resulting in a share premium of £2.4 million (2020:
£0.9 million). Of the shares issued, 200,372 (2020: none) were issued to tracker shareholders on settlement of vested
tracker shares and 452,614 (2020: none) were issued on settlement of Long-Term Incentive Plans ('LTIP'), with the remaining
issued pursuant to the exercise of share awards under the Save As You Earn ('SAYE') scheme.
Treasury Reserve
Treasury shares represent SThree plc shares repurchased and available for specific and limited purposes.
During the year no shares were utilised from the treasury reserve. In the prior year 33,949 shares were utilised from
treasury reserve on settlement of vested tracker shares. At the year end, 35,767 (2020: 35,767) shares were held in
treasury.
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 1,220,854 (2020: 645,122) of SThree plc shares. The average price paid per share was 422
pence (2020: 315 pence). In addition, SThree plc gifted 54,054 shares to the EBT. The total acquisition cost of the
purchased and gifted shares was £5.3 million (2020: £2.0 million), for which the treasury reserve was reduced. During the
year, the EBT utilised 985,932 (2020: 1,723,288) shares on settlement of vested tracker shares and LTIP awards. At the year
end, the EBT held 923,362 (2020: 634,386) shares.
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 2021 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
There were no subsequent events following 30 November 2021.
15. ALTERNATIVE PERFORMANCE MEASURES ('APMs'): definitions and reconciliations
Adjusted APMs
In discussing the performance of the Group, comparable measures are used, which are calculated by deducting from the
directly reconcilable IFRS measures the impact of the Group's restructuring income, which is considered as an item impacting
comparability, due to its nature.
Restructuring income
Support function relocation
This category comprised government grant income arising from a strategic relocation of SThree's central support functions
away from the London headquarters to the Centre of Excellence located in Glasgow in 2018, further explained in note 3.
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 IFRS is as follows.
Reconciliation of adjusted financial indicators for continuing operations
2021
Revenue Net fees Administrative expenses, incl. Operating Profit before Tax Profit after Basic
impairment loss profit tax tax EPS
£'000 £'000 £'000 £'000 £'000 £'000 £'000 pence
As reported 1,330,726 355,713 (294,720) 60,993 60,158 (17,907) 42,251 31.9
Exceptional items - - (184) (184) (184) 35 (149) (0.1)
Adjusted 1,330,726 355,713 (294,904) 60,809 59,974 (17,872) 42,102 31.8
2020
Revenue Net fees Administrative expenses, incl. Operating Profit before Tax Profit after Basic
impairment loss profit tax tax EPS
£'000 £'000 £'000 £'000 £'000 £'000 £'000 pence
As reported 1,202,622 308,575 (276,815) 31,760 30,595 (11,833) 18,762 14.2
Exceptional items - - (468) (468) (468) 89 (379) (0.3)
Adjusted 1,202,622 308,575 (277,283) 31,292 30,127 (11,744) 18,383 13.9
APMs in constant currency
As we are operating in 14 countries and with many different currencies, we are affected by foreign exchange movements, and
we report our financial results to reflect this. However, we manage the business against targets which are set to be
comparable between years and within them, for otherwise foreign currency movements would undermine our ability to drive the
business forward and control it. Within this announcement, we highlighted comparable results on a constant currency basis as
well as the audited 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 IFRS are as follows.
2021
Revenue Net fees Operating profit Operating profit conversion Profit before tax
ratio* Basic EPS
£'000 £'000 £'000 £'000 pence
Adjusted 1,330,726 355,713 60,809 17.1% 59,974 31.8
Currency impact 35,686 11,325 3,648 0.5% 3,669 2.0
Adjusted in constant currency 1,366,412 367,038 64,457 17.6% 63,643 33.8
2020
Revenue Net fees Operating profit Operating profit conversion Profit before tax
ratio* Basic EPS
£'000 £'000 £'000 £'000 pence
Adjusted 1,202,622 308,575 31,292 10.1% 30,127 13.9
Currency impact 3,119 970 206 0.1% 203 0.1
Adjusted in constant currency 1,205,741 309,545 31,498 10.2% 30,330 14.0
*Operating profit conversion ratio represents operating profit over net fees.
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:
2021 2020
£'000 £'000
Cash and cash equivalents 57,526 50,363
Bank overdraft (24) (468)
Net cash 57,502 49,895
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 for the Group operating
non-cash items such as the depreciation and impairment of property, plant and equipment ('PPE'), the amortisation and
impairment of intangible assets, and the employee share options.
The Group also discloses adjusted EBITDA which is intended to provide useful information to analyse the Group's operating
performance excluding the impact of operating non‑cash items as defined above and net exceptional items. Where relevant, the
Group also uses adjusted EBITDA to measure the level of financial leverage of the Group by comparing adjusted EBITDA to net
debt.
A reconciliation of reported operating profit for the year, the most directly comparable IFRS measure, to EBITDA and
adjusted EBITDA is set out below.
2021 2020
£'000 £'000
Reported operating profit for the year from continuing operations 60,993 31,760
Reported operating loss for the year from discontinued operations (33) (1,795)
Depreciation and impairment of PPE 15,764 16,654
Depreciation and impairment of intangible assets 2,561 3,910
Loss on disposal of PPE and intangible assets 273 136
Employee share options 1,520 916
EBITDA 81,078 51,581
Exceptional items (184) (468)
Adjusted EBITDA 80,894 51,113
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.
2021 2020
Profit for the year attributable to owners of the Company (£'000) A 41,982 16,953
Dividend proposed to be paid to shareholders (£'000) (note 7) B 14,672 6,645
Dividend cover (A ÷ B) 2.9 2.6
Contract margin for continuing operations
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.
2021 2020
Contract net fees (£'000) A 266,163 233,343
Contract revenue (£'000) B 1,239,100 1,124,817
Net fees margin (A ÷ B) 21.5% 20.7%
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.
2021 2020
SThree plc TSR return index value: three-month average to 30 Nov 2018 (2020: 30 Nov 2017) (pence) 284.75 285.77
SThree plc TSR return index value: three-month average to 30 Nov 2021 (2020: 30 Nov 2020) (pence) 528.47 240.74
Total shareholder return 85.6% -15.8%
Free cash conversion ratio
The Group uses the free cash conversion ratio as an APM to measure the business's ability to convert profit into cash. It
represents cash generated from operations for the year after deducting tax, net interest cost and rent payments, stated as a
percentage of operating profit. The free cash flow can then be used to fund Group operations such as capex, share buy-backs,
dividends, etc.
The following table illustrates how adjusted cash conversion ratio is calculated.
2021
Rent
Operating Tax and net payments,
Operating non-cash Changes in Cash generated interest paid Free cash
profit items* working capital from operations on RCF incl. conversion ratio
interest
portion
A B C D (B+C+D) ÷ A
£'000 £'000 £'000 £'000 £'000 £'000 %
As reported 60,724 20,354 (26,550) 54,528 (16,999) (13,067) 40.3%
Exceptional (184) - 184 - - - n/a
items
Adjusted 60,540 20,354 (26,366) 54,528 (16,999) (13,067) 40.4%
2020
Rent
Operating Tax and net payments,
Operating non-cash Changes in Cash generated interest paid Free cash
profit items* working capital from operations on RCF incl. conversion ratio
interest
portion
A B C D (B+C+D) ÷ A
£'000 £'000 £'000 £'000 £'000 £'000 %
As reported 29,965 21,616 25,312 76,893 (10,871) (13,579) 175.0%
Exceptional (468) - 468 - - - n/a
items
Adjusted 29,497 21,616 25,780 76,893 (10,871) (13,579) 177.8%
* Operating non-cash items represent primarily depreciation, amortisation, impairment of intangible assets, loss on disposal
of PPE and intangible assets, and employee share options and performance share costs as presented in the line 'Non-cash
charge for share-based payments' of the Consolidated Statement of Cash Flows.
16. Annual report and Annual general meeting
The Annual General Meeting of SThree plc is to be held on 20 April 2022.
The 2021 Annual Report and Notice of 2022 Annual General Meeting will be posted to shareholders shortly. Copies will be
available on the Company's website www.sthree.com or from the Company Secretary, 1st Floor, 75 King William Street, London,
EC4N 7BE.
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ISIN: GB00B0KM9T71
Category Code: FR
TIDM: STEM
LEI Code: 2138003NEBX5VRP3EX50
OAM Categories: 1.1. Annual financial and audit reports
Sequence No.: 139703
EQS News ID: 1274390
End of Announcement EQS News Service
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References
Visible links
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2. mailto:Sthree@almapr.co.uk
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