REG-SThree SThree: FY20 Trading Update

SThreeAnnouncement

14/12/2020 07:05

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   SThree (STEM)
   SThree: FY20 Trading Update

   14-Dec-2020 / 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 2020

                                        

                                        

                                   SThree plc

                              FY20 Trading Update

                                        

    resilient performance WITH MARKET EXPECTATIONS RECENTLY UPGRADED, DRIVEN
                     BY FOCUS ON STEM AND FLEXIBLE WORKING

    

    

   SThree plc ("SThree" or the "Group"), the only global pure-play specialist
   staffing business focused on roles in Science, Technology, Engineering and
   Mathematics ('STEM'),  is pleased  to issue  a trading  update(1) for  the
   financial year ended 30 November 2020.

    

   Highlights

    

     • Group net fees for the full year down 8% YoY, demonstrating resilience
       against Covid-19's impact and the continued recovery of the underlying
       business in H2
     • Continued to take market share in the US, Germany and the Netherlands
     • Full year profit before tax  recently upgraded, driven by better  than
       expected Q4 which saw net fees down 7% and stand out performances from
       the US (up 11%) and Germany (down 3%)
     • Significant sequential improvement of Group performance Q4 vs Q3

     • Contract  net  fees  demonstrating  impressive  resilience,  down  7%.
       Contract represents 76% of Group net fees (FY 2019: 74%)

     • Permanent net fees also showing resilience down 13%
     • 89% of  Group net  fees generated  from international(2)  markets  (FY
       2019: 87%)
     • Strong balance sheet, with  net cash at 30  November 2020 of £50m  (30
       November 2019: £11m)

    

   Mark Dorman, Chief Executive, commented:

    

   "FY2020 has been  far from  what was expected  when we  entered the  year.
   However, guided  by  our  purpose  and our  strategy,  we  have  responded
   thoughtfully and executed  well. I  am proud to  be reporting  today on  a
   resilient performance.

    

   The crisis has  clearly demonstrated, not  just for our  business but  for
   many businesses, how important it is  to be anchored with a clear  purpose
   and a  robust  strategy. From  these  foundations our  teams  have  worked
   incredibly hard to  strengthen bonds  with clients  and candidates  whilst
   quickly adapting their services to suit the dramatic changes in 2020.

    

   Our unique position at  the centre of STEM  and flexible working means  we
   are perfectly poised to capitalise on the opportunities available to us."

    

                                        FY 2020     Q4     Q3     Q2     Q1
                                                   2020   2020   2020   2020
   Net Fees            FY 2020  FY 2019   YOY      YOY    YOY    YOY    YOY
                                                                          
   Contract             £235.3m £254.6m   -7%      -6%    -12%   -10%   +2%
   Permanent            £75.6m  £87.8m   -13%      -10%   -19%   -17%   -6%
   GROUP                £310.9m £342.4m   -8%      -7%    -14%   -12%   +0%
                                                                          
   Management                                                             
   structure
   DACH(3)             £105.8m  £109.3m   -3%      -2%    -9%    -9%    +9%
   EMEA Exc DACH(4)     £117.8m £141.2m  -16%      -20%   -22%   -17%   -6%
   USA                  £77.2m  £76.7m    +2%      +11%   -3%    -2%    +0%
   APAC                 £10.1m  £15.2m   -26%      -30%   -27%   -36%   -11%
   GROUP                £310.9m £342.4m   -8%      -7%    -14%   -12%   +0%
                                                                          
   Top 5 countries                                                        
   Germany              £96.9m  £101.6m   -4%      -3%    -10%   -10%   +7%
   Netherlands          £47.3m  £52.3m   -10%      -15%   -13%   -12%   +3%
   UK                   £35.2m  £43.9m   -19%      -22%   -28%   -19%   -8%
   USA                  £77.2m  £76.7m    +2%      +11%   -3%    -2%    +0%
   Japan                 £5.9m   £7.8m   -25%      -25%   -27%   -36%   -11%
   ROW(5)               £48.4m  £60.1m   -17%      -19%   -23%   -19%   -7%
   GROUP                £310.9m £342.4m   -8%      -7%    -14%   -12%   +0%
                                                                          
   Division Mix        FY 2020                                            
   Contract              76%                                              
   Permanent             24%                                              
                                                                          
   Sector Mix          FY 2020                                            
   Technology            45%                                              
   Life Sciences         23%                                              
   Engineering(6)        22%                                              
   Banking & Finance      8%                                              
   Other                  2%                                              

    

    

   Business Performance

    

   Group net fees for  the year declined 8%  with performance across all  our
   markets impacted  by declines  in  aggregate demand  as  a result  of  the
   COVID-19 pandemic. The sequential trend Q4 vs Q3 showed an improvement  in
   performance in net fees across the  Group, as the underlying business  saw
   activity levels strengthening.

    

   Our Contract-focused business model has shown its greater resilience  with
   net fees  down just  7% and  now represents  76% of  Group net  fees.  The
   contractor order book(7) on 30 November has declined 10% YoY, compared  to
   Q3 down 14%. This is a result  of increased sales activity levels for  the
   Group along with increased contractor retention levels.

    

   Net fees in our DACH region  were particularly resilient, down 3% for  the
   year. Its Life Sciences business  delivered a strong performance with  net
   fees up  4%. This  is in  part driven  by an  exceptional Q1,  as well  as
   increased demand in  the second half  of the year  in Clinical Research  &
   Development. Technology was flat for  the year with increasing demand  for
   Cyber Security and Data Science skills.

    

   EMEA excl DACH saw net fees decline  16% in the year, primarily driven  by
   the UK's performance. The Netherlands, our largest country in the  region,
   saw net fees  decline 10%.  Our Dutch  Engineering business  had a  strong
   performance in the year with net fees  up 20% and Life Sciences up 6%.  We
   have seen good gains in market share in the Netherlands and Germany(8).

    

   The USA is the world's largest STEM staffing market and our business there
   has demonstrated its strength with net fees up 2% for the year and up  11%
   in Q4. We also gained  market share in the  US(8).  This region has  shown
   the benefits of investing in  the right vertical niches and  understanding
   customer needs.  Performance  in  our  Life  Sciences  business  has  been
   particularly strong with net fees growing 16% in the year as we have  seen
   robust demand  in the  second half  of the  year in  Clinical  Operations,
   Product Development  and Quality  Assurance. Our  Technology business  has
   grown  9%  with  increased  demand  in  Mobile  Applications  &   Software
   Development, and Engineering was  up 1%. As  a key area  of focus for  the
   Group we continue to make targeted investments in the region, aligning our
   resources with the best long-term opportunities. 

    

   APAC net fees were down 26% in the full year, primarily driven by the more
   transactional nature of our business in Japan, which is 94% permanent.

    

   Group average headcount was  down 6% YoY, with  period end headcount  down
   17%. We  will  continue to  invest  in  line with  our  previously  stated
   strategy to focus on specific niches  within sectors and markets where  we
   can gain valuable market share and cement our position.

    

   Liquidity and dividends

    

   SThree remains in a strong financial position, with net cash of £50m at 30
   November 2020 (30 November 2019: Net cash £11m).

    

   As at 30 November 2020 the Group has total accessible liquidity of  £155m.
   This is  made  up  of £50m net  cash, a  £50m  revolving  credit  facility
   ("RCF"), a £5m overdraft and £50m from  the CCFF (RCF, overdraft and  CCFF
   not drawn down). In addition, SThree has a £20m accordion facility as well
   as a substantial  working   capital  position reflecting   net  cash   due
   to SThree for placements already undertaken.

    

   We continue to recognise the  importance of dividends to our  shareholders
   and are keeping future dividend payments under active review.

    

   Analyst conference call

    

   SThree is hosting a webinar for  analysts and investors today at 0830  BST
   to discuss the FY Trading Update and to present the Group's STEM  staffing
   market pulse check.

    

   If  you   would   like  to   listen   to  the   webinar   please   contact
   SThree@almapr.co.uk

                  

   The Group plans to issue its results for the financial year ended 30
   November 2020 on 25 January 2021.

    

    

   (1) All YoY growth rates and business mix percentages in this announcement
   are expressed at constant currency and exclude Australia, which we  exited
   in Q4 2020

   (2) International represents our businesses outside the UK

   (3) DACH - Germany, Austria and Switzerland

   (4) EMEA  excl  DACH  - UK,  Ireland,  Belgium,  Netherlands,  Luxembourg,
   France, Spain and Dubai

   (5)  ROW  -  All  other   countries  we  operate  in  excluding   Germany,
   Netherlands, UK, USA and Japan

   (6)  Engineering  now  includes  Energy,  which  was  previously  reported
   separately. Up-stream oil and  gas comprises approximately  5% of the  new
   Engineering sector

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

   (8) The Netherlands temporary technical sector market turnover (ABU Data
   2020) and Global Staffing Industry Analysts ("SIA") data August 2020
   update and USA SIA September 2020 update

                                        

                                    - Ends -

    

    Enquiries:

                                                            

    
    SThree plc                           020 7268 6000
    Mark Dorman, Chief Executive Officer  
    Alex Smith, Chief Financial Officer   
    Steve Hornbuckle, Company Secretary
                                          
    
                                         020 3405 0205
    Alma PR
                                          
    Rebecca Sanders-Hewett

    Susie Hudson                         SThree@almapr.co.uk

    

    

    

   Notes to editors

    

   SThree plc brings skilled people together to build the future.  It is  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  9,000
   clients in 15 countries.

    

   The Group's c.2,600 staff cover the Technology, Life Sciences, Engineering
   and Banking & Finance sectors.

    

   SThree plc is quoted on  the Premium Segment of  the Official List of  the
   Financial Conduct Authority under the ticker symbol STEM 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:          STEM
   LEI Code:      2138003NEBX5VRP3EX50
   Sequence No.:  89597
   EQS News ID:   1154782


    
   End of Announcement EQS News Service

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