REG-SThree SThree: FY18 Trading Update
14/12/2018 07:05
============
SThree (STHR)
SThree: FY18 Trading Update
14-Dec-2018 / 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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14 December 2018
FY18 Trading Update
Growth across STEM sectors underpins gross profit and profit before tax
ahead of expectations
SThree plc ("SThree" or the "Group"), the international specialist STEM(1)
staffing business, is today issuing a trading update(2) for the financial
year ended 30 November 2018.
Highlights
• Adjusted profit before tax for the year expected to be slightly ahead
of the top end of the current market consensus range(3)
• Strong finish to the year with Group gross profit ("GP") up 12% for
both Q4 and for FY18
◦ Robust growth across the Group, with ICT up 12%, Life Sciences up
8%, Engineering up 16% and Energy up 30%
◦ Strong growth in Continental Europe, up 20%, with DACH(4) up 21%
and Benelux up 23% and USA up 8%
◦ UK&I productivity up 5% following the Q2 restructuring of our
Permanent business in the region
◦ 83% of Group GP generated from markets outside the UK&I (2017:
80%)
• Contract GP up 14%, with growth across all sectors - ICT up 12%, Life
Sciences up 12%, Engineering up 14%, Banking & Finance up 4% and
Energy up 33%
◦ Strong exit rate on Contract, with a new record number of runners
at year end
◦ Contract GP now represents 72% of Group GP (2017: 71%)
• Permanent GP up 6%, with Continental Europe up 15% and Japan up 88%
• Group period-end sales headcount up 3% YoY and up 3% versus the third
quarter position
(1) STEM - Science, Technology, Engineering and Mathematics
(2) All year on year financial growth rate %s in this announcement are
expressed at constant currency
(3) Market expectations for adjusted profit before tax for the year ended
30 November 2018 are in the range of £49.0m to £51.4m, with a consensus of
£50.3m
(4) DACH - Germany, Austria and Switzerland
Management Succession
The Board also announces that Gary Elden OBE will step down as Chief
Executive Officer early in the new year, at a date yet to be determined
but expected to be by the time of the Company's AGM in April, after
leading the Company for six years. A process to appoint his successor is
now underway.
Gary Elden, Chief Executive, commented:
"We are pleased to have delivered another strong quarter in Q4 continuing
the momentum from Q2 and Q3, resulting in an overall GP result for the
year of +12%. The Group is benefiting both from the broad geographic reach
of its operations, with 83% of GP now generated in international markets,
and from its focus on the best STEM markets, where the demand for niche,
skilled candidates continues to be driven by a shortage of supply.
"Strong performances in Continental Europe, particularly from our
market-leading businesses in the Netherlands and Germany, as well as the
USA were key to the delivery of this result. Our Contract businesses
continued to perform well, with GP increasing by 14% year on year and with
Contract runners at the period end reaching a record level for the Group.
We expect full year profit to be ahead of consensus.
"At the start of 2018 I stated that after two years of turbulent
political, market and economic pressure, we entered the year in good
shape. That turbulence and pressure has increased throughout the year and
yet we have delivered strong results. Looking ahead to 2019, we are in
better shape, and well positioned to continue to benefit from the growth
opportunities in our chosen STEM markets.
"I have been privileged to be part of SThree for almost 30 years and am
proud to have led the Group as CEO during a major period of growth and
development. As today's results demonstrate, the Company is in great shape
to make further progress and I look forward to following its continued
development as a shareholder. I am grateful to the Board for their support
and encouragement, and to SThree staff around the world for all their
commitment and hard work."
James Bilefield, Chairman, commented:
"Gary has made a significant contribution to SThree since joining the
Group in 1990, before being appointed to the Board in July 2008 and to the
role of CEO in January 2013. On behalf of the Board I would like to thank
him for his unswerving commitment over the last three decades. During his
tenure as CEO, SThree has more than doubled its profitability and has
scaled significantly in size and scope around the world, becoming a
leading player in the STEM recruitment market. Gary will leave SThree
with a strong and experienced leadership team focused on delivering
SThree's strategic priorities, and we have a clear and rigorous process in
place to ensure a smooth transition to his successor. Gary's precise
leaving date will be confirmed in due course, and the search for his
successor is underway to take the business forward to its next stage of
growth and development."
Financial Highlights -
Group Gross Profit
FY Q4 Q3 Q2 Q1
2018 2018 2018 2018 2018
Gross Profit FY 2018 FY 2017 YoY % YoY % YoY % YoY % YoY %
Contract £232.0m £203.4m +14% +15% +14% +16% +11%
Permanent £88.9m £84.2m +6% +6% +8% +7% +2%
Group £320.9m £287.6m +12% +12% +13% +13% +8%
Continental Europe £183.3m £150.6m +20% +20% +24% +20% +15%
USA £66.6m £64.4m +8% +8% +8% +16% +1%
UK&I £53.0m £55.6m -5% -4% -10% -2% -3%
Asia Pac & Middle East £18.0m £17.0m +11% +13% +16% +1% +15%
Group £320.9m £287.6m +12% +12% +13% +13% +8%
ICT £141.9m £124.6m +12% +18% +14% +13% +5%
Life Sciences £66.3m £62.4m +8% +1% +13% +12% +9%
Banking & Finance £42.4m £43.5m -1% +2% -7% +1% -0%
Energy £33.5m £26.5m +30% +26% +32% +28% +35%
Engineering £30.5m £25.9m +16% +16% +15% +20% +14%
Other(5) £6.3m £4.7m +28% +24% +33% +25% +32%
Group £320.9m £287.6m +12% +12% +13% +13% +8%
Contract / Perm Split
Contract 72% 71%
Permanent 28% 29%
100% 100%
Geographical Split
Continental Europe 57% 52%
USA 21% 22%
UK&I 17% 20%
Asia Pac & Middle East 5% 6%
100% 100%
Sector Split
ICT 44% 44%
Life Science 21% 22%
Banking & Finance 13% 15%
Energy 10% 9%
Engineering 10% 9%
Other(5) 2% 1%
100% 100%
(5) Other includes
Procurement & Supply
Chain and Sales &
Marketing
Business performance
Group GP for the year was up 12% with growth across all regions except
UK&I. In our UK&I business we drove improvements in productivity.
Contract GP was up 14%, with growth across all sectors. Contract growth
was driven by Continental Europe, which was up 22% and USA up 14%.
Continental Europe and USA combined now represent 78% of our Contract GP
(2017: 74%).
Permanent GP was up 6%, driven by Continental Europe up 15% and Japan up
88%. This progress was offset by USA which was down 5% against strong
comparatives in the previous year, and UK&I. As expected, UK&I GP was down
20%, following the planned restructure of our UK Permanent business in
early Q2, which reduced the average sales headcount for the year by 25%.
Permanent productivity across the Group improved by 7% over last year, as
a result of the Group's strategy to focus on the best performing Permanent
markets.
Group period end sales headcount was up 3% to 2,332, with Contract up 8%,
in line with the Group's strategy, and Permanent down 6%. Contract
represented 68% of total sales headcount at the period end. Sequentially
vs Q3, period end Group sales headcount was up 3%, with Continental Europe
up 5%, USA up 1% and UK&I level. Average Group sales headcount for the
year was up 8% with Continental Europe up 15% and USA up 11%.
The Group's move of its London-based support functions to Glasgow is
progressing well and to plan with completion expected in Q1 2019.
Balance sheet
SThree remains in a strong financial position. Net debt at 30 November
2018 was circa £4m (30 November 2017: Net cash £6m), reflecting a strong
financial performance, the working capital outflows associated with strong
Contract growth in Q4, and the one-off exceptional cash costs of the move
to Glasgow. The Group has a £50m revolving credit facility ("RCF") with
HSBC and Citibank, which is committed to 2023.
Office Network
The Group has a network of 44 offices in 16 countries, of which 38 are
outside the UK. The Group generated 83% of GP for the period from markets
outside the UK&I (2017: 80%).
SThree is hosting an analyst conference call today at 0830 GMT. The
details are as follows:
Telephone number: 0800 358 9473
For access to the call please enter PIN: 99322535#
A replay facility will be available for 90 days on 0800 358 2049 Passcode:
301273192#
The Group will issue its results for the financial year ended 30 November
2018 on 28 January 2019
- Ends -
Enquiries:
SThree plc 020 7268 6000
Gary Elden, Chief Executive Officer
Alex Smith, Chief Financial Officer
Kirsty Mulholland, Senior Company Secretary
Assistant/ IR Enquiries
020 3405 0205
Alma PR
SThree@almapr.co.uk
Rebecca Sanders-Hewett
Josh Royston
Susie Hudson
Sam Modlin
Notes to editors
SThree is a leading international STEM specialist staffing business,
providing permanent and contract specialist staff to a diverse client base
of over 9,000 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 3,000 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: TST
TIDM: STHR
LEI Code: 2138003NEBX5VRP3EX50
Sequence No.: 6889
EQS News ID: 758165
End of Announcement EQS News Service
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