REG-SThree SThree: FY17 Trading Update <Origin Href="QuoteRef">STHR.L</Origin>
15/12/2017 07:05
============
SThree (STHR)
SThree: FY17 Trading Update
15-Dec-2017 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside
information according to REGULATION (EU) No 596/2014 (MAR), transmitted by
EQS Group.
The issuer is solely responsible for the content of this announcement.
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15 December 2017
FY17 Trading Update
SThree plc ("SThree" or the "Group"), the international specialist
staffing business, is today issuing a trading update for the financial
year ended 30 November 2017.
Highlights
• Strong finish to the year with Group gross profit ("GP") up 8%* in Q4
• Excellent Q4 performance in Continental Europe up 16%*, including
Contract up 24%*
• Adjusted profit before tax for the year expected to be slightly ahead
of current market consensus
• Group GP up 4%* for FY17
◦ Strong growth in USA, up 18%*, with Permanent up 12%* and
Contract up 21%*
◦ Robust growth in Continental Europe up 9%* driven by Netherlands
up 20%* YoY
◦ Continued recovery in Energy up 25%* and solid growth in Life
Sciences up 7%*
◦ 80% of Group GP generated from markets outside the UK&I (2016:
75%)
◦ UK&I continued to be challenging, impacted by IR35 in the public
sector
• Contract GP up 10%*
◦ Growth across all sectors
◦ Continental Europe up 17%* and USA up 21%*
◦ Strong exit rate on Contract, with a new record number of runners
at year end, up 12%
• Permanent GP down 8%*, with average sales headcount down 10%
• Group period-end sales headcount up 10% YoY and up 7% sequentially vs
Q3 2017
1 Market expectations for adjusted profit before tax for the year ended 30
November 2017 are in the range of £42.0m to £45.6m, with a consensus of
£43.8m
Gary Elden, Chief Executive, commented: "We have delivered an encouraging
overall result for the year, and now expect full year profit to be
slightly ahead of consensus. Strong performances in the USA and
Continental Europe, particularly from our market-leading business in the
Netherlands and our business in Germany, were key to the delivery of this
result. Our Contract business continued to perform robustly, with GP
increasing by 10%* year on year and with contract runners at the period
end reaching in excess of ten thousand, a milestone for the Group.
"Looking ahead to 2018, the momentum of our Contract business and the
strength of our performances in the USA and Continental Europe leave us
well-positioned for growth."
Financial Highlights -
Group Gross Profit
FY Q4 Q3 Q2 Q1
2017 2017 2017 2017 2017
Gross Profit FY 2017 FY 2016 YoY % YoY % YoY % YoY % YoY %
1 1 1 1 1
Contract £203.4m £173.6m +10% +14% +9% +9% +7%
Permanent £84.2m £85.1m -8% -5% -6% -6% -14%
Group £287.6m £258.7m +4% +8% +5% +4% -
UK&I £55.6m £64.0m -14% -12% -10% -14% -19%
Continental Europe £150.6m £127.6m +9% +16% +6% +7% +7%
USA £64.4m £50.7m +18% +17% +20% +20% +12%
Asia Pac & Middle £17.0m £16.4m -4% -7% +1% +5% -14%
East
Group £287.6m £258.7m +4% +8% +5% +4% -
ICT £124.6m £115.8m +1% +1% +1% +1% +2%
Banking & Finance £43.5m £41.7m -2% -1% +1% -1% -8%
Energy £26.5m £19.6m +25% +51% +35% +23% -8%
Engineering £25.9m £23.3m +5% +11% +5% +3% -1%
Life Sciences £62.4m £54.3m +7% +13% +3% +7% +4%
Other3 £4.7m £4.0m +15% +19% +24% +13% +4%
Group £287.6m £258.7m +4% +8% +5% +4% -
Contract / Perm
Split
Contract 71% 67%
Permanent 29% 33%
100% 100%
Geographical Split
UK&I 20% 25%
Continental Europe 52% 49%
USA 22% 20%
Asia Pac & Middle 6% 6%
East
100% 100%
Sector Split
ICT 44% 45%
Banking & Finance 15% 16%
Energy 9% 8%
Engineering 9% 9%
Life Science 22% 21%
Other 1% 1%
100% 100%
FY Q4 Q3 Q2 Q1
2017 2017 2017 2017 2017
Operating Metrics FY 2017 FY 2016 YoY % YoY % YoY % YoY % YoY %
Contract Runners2
UK&I 2,616 2,663 -2% -2% -7% -6% -8%
Continental Europe 5,535 4,572 +21% +21% +18% +19% +19%
USA 1,552 1,363 +14% +14% +24% +23% +14%
Asia Pac & Middle 494 480 +3% +3% +19% +25% +19%
East
Group 10,197 9,078 +12% +12% +11% +12% +9%
1 *At constant currency
2 Period-end number of contractors onsite with
clients
3 Other includes Procurement & Supply Chain and Sales
& Marketing
Business performance
Group GP for the year was up 4%* as we experienced strong growth in
Continental Europe and the USA, while UK&I and APAC & ME remained
challenging.
Contract GP was up 10%*, with growth across all sectors. Contract growth
was driven by Continental Europe, which was up 17%* and by USA up 21%*.
Continental Europe and USA combined now represent 70% of our contract
runners (2016: 65%).
Permanent GP was down 8%*, with average sales headcount down 10%. USA
posted a 12%* increase, driven by supportive Energy and Banking markets.
This was offset by declines in all other regions, with Continental Europe
down 7%* and UK&I down 22%*. Our Permanent productivity per head improved
by 3%* over last year.
Group period end sales headcount was up 10% to 2,257, with Contract up 15%
and Permanent up 3%. Contract represented 65% of total sales headcount at
the period end. Sequentially vs Q3 2017, period end Group sales headcount
was up 7%, with Continental Europe up 12%, USA up 4% and UK&I down 2%.
Average Group sales heads for the year were down 1%.
Support functions relocation
A proposed relocation of our central support functions from London to
Glasgow was announced in early November at an estimated total exceptional
cost of £13m, with circa £7m recognised in 2017 as an exceptional item
with most of the balance expected to be recognised in 2018. Annualised
savings of £4-5m are anticipated from 2019.
Foreign exchange impact
The Group experienced a translational FX benefit of circa £19m on GP
during the year, as a result of the strengthening of the euro and US
dollar versus sterling.
Balance sheet
SThree remains in a strong financial position. Net cash at 30 November
2017 was circa £6m (30 November 2016: £10m). The Group has a £50m
revolving credit facility ("RCF") with HSBC and Citibank, which is
committed to 2019.
Office Network
The Group has a network of 40 offices in 16 countries, of which 32 are
outside the UK. The Group generated 80% of GP for the period from markets
outside the UK&I (2016: 75%).
*at constant currency
SThree is hosting an analyst conference call today at 0830 GMT. The
details are as follows:
Telephone number: +44 (0) 20 3003 2666
For access to the call please quote passcode SThree
A replay facility will be available for seven days on +44 (0) 208 196 1998
Passcode: 3205004#
The Group will issue its results for the financial year ended 30 November
2017 on 29 January 2018.
- Ends -
Enquiries:
SThree plc 020 7268 6000
Gary Elden, Chief Executive Officer
Alex Smith, Chief Financial Officer
Sarah Anderson, Deputy Company Secretary/IR Enquiries
Citigate Dewe Rogerson 020 7638 9571
Kevin Smith/Jos Bieneman
Notes to editors
SThree is a leading international specialist staffing business, providing
permanent and contract specialist staff to a diverse client base of over
7,000 clients. From its well-established position as a major player in the
information and communications technology ('ICT') sector the Group has
broadened the base of its operations to include businesses serving the
Banking & Finance, Energy, Engineering and Life Sciences sectors.
Since launching its original business, Computer Futures, in 1986, the
Group has adopted a multi-brand strategy, establishing new operations to
address growth opportunities. SThree brands include Computer Futures,
Huxley Associates, Progressive and The Real Staffing Group. The Group has
circa 2,700 employees in sixteen countries.
SThree plc is quoted on the Official List of the UK Listing Authority
under the ticker symbol STHR and also has a US level one ADR facility,
symbol SERTY.
Important notice
Certain statements in this announcement are forward looking statements. By
their nature, forward looking statements involve a number of risks,
uncertainties or assumptions that could cause actual results or events to
differ materially from those expressed or implied by those statements.
Forward looking statements regarding past trends or activities should not
be taken as representation that such trends or activities will continue in
the future. Certain data from the announcement is sourced from unaudited
internal management information and is before any exceptional items.
Accordingly, undue reliance should not be placed on forward looking
statements.
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ISIN: GB00B0KM9T71
Category Code: FR
TIDM: STHR
LEI Code: 2138003NEBX5VRP3EX50
Sequence No.: 5022
End of Announcement EQS News Service
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639275 15-Dec-2017
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