REG-SThree SThree: Half Year Results
19/07/2021 07:05
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SThree (STEM)
SThree: Half Year Results
19-Jul-2021 / 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
("SThree" or the "Group")
RESULTS FOR THE HALF YEAR ENDED 31 MAY 2021
strong profit growth versus 2020 & 2019
CURRENTLY TRACKING AHEAD OF FY21 EXPECTATIONS
SThree plc, the only global pure-play specialist staffing business focused on roles in Science, Technology, Engineering and
Mathematics ('STEM'), is today announcing its financial results for the six months ended 31 May 2021.
FINANCIAL HIGHLIGHTS
HY 2021 HY 2020 Variance
Constant
Continuing operations (1) Adjusted (2) Reported Adjusted (2) Reported Movement (3) currency
movement (4)
Revenue (£ million) 615.1 615.1 596.0 596.0 +3% +4%
Net fees (£ million) 164.3 164.3 149.9 149.9 +10% +10%
Operating profit (£ million) 28.1 28.2 13.9 14.3 +102% +106%
Conversion ratio (%) 17.1% 17.2% 9.2% 9.5% +7.9% pts +8.0% pts
Profit before tax (£ million) 27.6 27.7 13.1 13.6 +110% +114%
Basic earnings per share (pence) 14.4 14.5 6.1 6.4 +136% +140%
Interim dividend per share (pence) 3.0 3.0 nil nil n/a n/a
Net cash (£ million) (5) 47.5 47.5 31.0 31.0 +53% +53%
(1) Excluding discontinued operations in Australia.
(2) Excluding the impact of £0.1 million in net exceptional income recognised (HY 2020: £0.4 million).
(3) Variance compares adjusted HY 2021 against adjusted HY 2020 to provide a like-for-like view.
(4) Variance compares adjusted HY 2021 against adjusted HY 2020 on a constant currency basis, whereby the prior period
foreign exchange rates are applied to current and prior financial period results to remove the impact of exchange rate
fluctuations.
(5) Net cash represents cash and cash equivalents less borrowings and bank overdrafts and excluding leases.
HALF-YEAR HIGHLIGHTS
• Very strong operating profit growth, up 106% (1), driven by better market conditions, high demand for STEM skills, and
elevated contractor working hours that improved productivity.
• Net fees up 10% YoY:
◦ Strong growth achieved in DACH (2) and the USA.
◦ Life Sciences and Technology net fees up significantly across the Group.
◦ Q2 net fees up 22% YoY (21% adjusted for working days (3)).
• Contract and Permanent net fees up 8% and 18% respectively YoY.
• Contractor order book (4) up 33% YoY.
• Top five countries represent 86% of Group net fees, with Germany accounting for 33% and USA 25%.
• Strong balance sheet with net cash as at 31 May 2021 of £47.5 million (HY 2020: £31.0 million).
• Interim dividend approved at 3 pence per share, set at a level consistent with dividend cover target for the year in
the range of 2.5x to 3.0x.
• Making good progress against our ESG targets, including
◦ Over 16,500 lives positively impacted in HY 2021.
◦ SThree's renewables business (6% of net fees) up 37% versus HY 2020, ahead of our target to double the share of
this business by 2024.
As Q2 2020 was significantly impacted by COVID-19, the Group has provided comparisons against 2019 for net fees and profit.
The growth seen in 2021 vs 2019, across several regions and sectors, as well as for the Group, demonstrates very strong
underlying performance across all of our businesses and the relevance of its differentiated, STEM-focused offering.
Highlights vs 2019 include:
• Q2 net fees up 8% vs 2019.
• Group net fees for HY up 3% vs 2019.
• Adjusted operating profit up 18% vs 2019.
(1) All YoY growth rates are expressed at constant currency and exclude Australia, which we exited in Q4 2020.
(2) DACH - Germany, Austria and Switzerland.
(3) Q2 2021 has one more working day vs Q2 2020 and flat vs Q2 2019.
(4) The contractor order book represents value of net fees until contractual end dates, assuming all contractual hours are
worked.
Mark Dorman, CEO, commented:
"We are delighted to report strong overall performance in the first half, driven by the hard work of our teams across the
globe. Our profit has grown substantially from HY 2020, and has surpassed the pre-pandemic levels of 2019, reflecting the
strength of the business and our growth trajectory.
Profit growth was driven by improving market conditions, including especially strong demand for STEM skills, and
productivity growth.
We are making good progress towards our key strategic ambitions, taking market share in our core regions and investing in
our infrastructure to build a world class operational platform.
In line with our commitment to building a sustainable future for all, we are proud to report that over 16,500 lives were
positively impacted by SThree in the first half of the 2021 financial year. We significantly strengthened our position as
talent providers to the low carbon transition and grew our renewables business by 37% in the first half of 2021 compared to
HY 2020.
The momentum built across the first half has continued into current trading, with strong KPIs on new placement activity and
contractor retention rates; consequently, we now anticipate we will be ahead of current market consensus expectations for
FY 2021.
As previously communicated, we remain mindful of changing contractor behaviour and annual leave backlogs in the second
half. We will be increasing investment in our people and our "go-to-market" proposition in the coming months, which,
although crucial in driving our long-term success, will impact on productivity in the short term. Nevertheless, we continue
to be focused on the execution of our strategy, whatever the external circumstances, and remain fully committed to the
ongoing delivery of the long-term ambitions for all of our stakeholders."
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
1 SThree@almapr.co.uk
A video overview of the results from the CEO, Mark Dorman, and CFO, Alex Smith, is available to watch here:
https://bit.ly/STEM_H1_overview
SThree will issue its Q3 trading update on 13 September 2021.
Enquiries:
SThree plc +44 7825122523
Rebecca Matts, Group Communications Director 2 r.matts@sthree.com
Alma PR 020 3405 0205
Susie Hudson 3 Sthree@almapr.co.uk
John Coles
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 14 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.
Chief Executive Officer's STATEMENT
We are proud to deliver a strong set of first half results. Our purpose of 'bringing skilled people together to build the
future' and our strategy, positioned at the centre of the secular trends of STEM and flexible working, enabled us to
deliver a strong performance despite the ongoing uncertainty in the external environment. It is evident from our
performance that we have the right strategy, are in the right markets, and our teams are executing well against our
strategy. I would like to take this opportunity to sincerely thank our people, who have persevered despite the
circumstances to achieve these results.
We continue to implement a number of strategic initiatives including strengthening our leadership capability and building
diversity and inclusion across the business, in line with our focus on finding, developing and retaining great people. At
the same time, we are investing in our technology infrastructure, our marketing and communications team and our
go-to-market positioning, as part of our strategy to create a world-class operational platform. Our core purpose guides the
business and therefore our position as a responsible business is central to all we do; I am pleased to provide further
details on progress against our ESG commitments in this report.
While progress is being made in the vaccination programmes under way in our key markets, this is a global health crisis
with a greater human impact globally in the first half of 2021 than the whole of 2020. The crisis continues, and our
operations remain in the 'ongoing management' stage of our three-stage crisis response framework. In a number of markets,
we are putting in place our policy around hybrid working, in which our people will be able to choose the most effective
balance between home and office working, leading to greater workplace flexibility and the ability to attract diverse and
top talent in every market.
Financial performance overview
The Group's trading performance in the first half was strong, with a pleasing performance in Q1 accelerating into Q2, with
excellent results across all regions and sectors. We are delighted to record net fees of £164.3m, a 10% increase in
constant currency on the prior year, with both Contract and Permanent performing well. This compares favourably against the
pre-COVID operating environment, and we achieved growth versus 2019, demonstrating the relevance of our offering.
Adjusted operating profit for the period was £28.1 million (reported operating profit was £28.2 million). This was driven
primarily by net fee growth, as well as increased productivity per head which was up 32% YoY in the period. While we expect
this to revert to more normal levels as less hours are worked on average per day as COVID-19 restrictions ease, we still
aim to retain an increased level of productivity compared to 2019 as we increase investment in headcount, by leveraging the
operational improvements we have established over the last year.
STEM skills in demand
Over the last six months, demand for our specialist STEM candidates has risen significantly which is reflected in the
increase in underlying placement activity. A proportion of this is the result of a general rebound in the overall
recruitment market, but there is no doubt that the demand for STEM skills is higher than the majority of the market and has
been accelerated by the pandemic. The call for STEM expertise is also coming from a broader client base than before, as
businesses in every sector are employing people with these particular skills.
Over the period we leveraged our position at the centre of STEM to ensure we have the best pipeline of candidates, through
initiatives including nurturing specialist candidate communities and encouraging new entrants to the market with
educational virtual events.
Technology and Life Sciences have been in particular demand in the period, with net fees up 12% and 24% in constant
currency, respectively. Within Technology, skills such as Mobile Development and Business Intelligence/data have seen
increasing demand, as businesses focus on re-building their supply chains and business operations for a more digital world.
For example, our US business supplied 30 roles into a large regional store chain in the period, to help the client upgrade
its content management systems, improve its site and its mobile app to better connect with customers.
Life Sciences has clearly been at the forefront over the past six months, and this trend should continue as investment in
healthcare increases and the sector becomes increasingly digital. Deloitte predicts that health spending will be US$8.3
trillion in the USA alone by 2040 4 1 . Across our markets we see strong demand for Clinical Operations, Quality
Assurance, Clinical Research & Development skills. As an example, one of our clients, a major medical device organisation,
was faced in 2021 with new legislation requiring automation of quality management systems to ensure a more stringent
digital process. Over the past six months we partnered them, placing 10 subject matter experts onto the project who were
able to accurately guide it to FDA compliance.
Flexible working
The secular trend of flexible working has accelerated as a result of the pandemic and the increased adoption of technology.
We believe that working habits have changed forever as businesses and candidates adopt new working practices for the long
term. There is a global move towards increased use of contingent workforces, shorter job tenures and rapidly growing
societal preferences towards remote or hybrid working arrangements.
The requirements of clients and contractors are now more complicated than before and, as a result, the potential
opportunities are broader. For example, with the rise of remote working, clients have access to larger pools of talent, as
they are not restricted to recruiting candidates within their close proximity. Tighter regulation has also meant that
contractors place more value on working with fully compliant recruiters, and all businesses must manage different
challenges such as virtual onboarding, cultural integration and structuring hybrid working.
Within the broader demand for flexible working, we are now seeing the Employed Contractor Model ('ECM') becoming
increasingly popular. ECM, where contractors are directly employed by SThree rather than the client, has many benefits
including the removal of complexity and compliance concerns for our clients. It is the predominant model in the US and fast
growing in Europe. For SThree, it brings attractive margins, c.40% higher than the freelance model. We have seen ECM grow
as a proportion of our Contract net fees, from 22% in 2019, to 29% in 2020, reaching 31% in 2021.
As experienced providers of both Permanent and Contract staff we offer our clients fully compliant, end-to-end,
full-service staffing solutions. We respond at scale to the most complex STEM hiring needs. We are increasingly finding
this point of differentiation means we are gaining market share.
Building a sustainable future
Our purpose of 'bringing skilled people together to build the future' guides all our activities. We are committed to
empowering a sustainable future through STEM.
The Group's long-term commitment to the environment and society has laid the foundations for our ESG strategy, which
focuses on three key areas of building:
• a green future;
• an inclusive workforce for the future;
• on our business ethics.
These areas are aligned with the United Nations Sustainable Development Goals and are integral to the successful execution
of the Group's broader growth strategy.
We are delighted to have strengthened our position as talent providers to the low-carbon transition, including growing our
renewables business by 37% in the first half of 2021 compared to HY 2020, ahead of our target to double the share of this
business by 2024. To engage both clients and candidates in the growth of renewable energy we delivered learning and
development events to over 160 people in the energy industry in the first half of 2021.
We are passionate about gender equality in STEM and collaborated with clients to deliver impactful events to their
colleagues and to women within our candidate community. In the first half of this year, we delivered 14 events to support
women in the tech industry, with over one thousand people attending on topics such as self-advocacy, imposter syndrome and
equal pay.
The Group's ESG targets and initial progress delivered were outlined in our Impact Report published on 29 April 2021 and we
continue to see strong progress against our targets:
To double the share of our To reduce our absolute To increase gender
To positively impact global renewables business by carbon emissions by 20% by representation at
150,000 lives by 2024 2024 2024 leadership levels to
50/50 by 2024
Progress 40,425 lives positively 37% growth in our renewables -56% reduction in 2020 from 36% women in leadership
impacted by SThree net fees in HY YoY. 2019 (baseline year). positions.
since 1 Dec 2019.
16,532 lives positively
impacted:
10,345 accessed Decent
Work through SThree At HY 2021 our renewables
placements. business has increased by 47% -73% carbon reduction in HY
versus HY 2019 (baseline in comparison to 2020.
2021 half year 1,644 accessed our year). Maintained levels of
activities career support (Please note COVID-19 women represented
programme. Completed climate related restrictions continue to across leadership
scenario analysis for the impact our offices and roles.
1,770 accessed energy market to identify therefore carbon
community programmes we risks and opportunities. emissions.)
support.
2,773 accessed career
development
opportunities hosted by
SThree.
Deliver sustainable
value to our candidates To be a leader in the best Create a world-class
Alignment to and customers. STEM markets we chose to operational platform Find, develop and
strategic pillars serve. through data, technology retain great people.
Find, develop and and infrastructure.
retain great people.
SDG 4. Quality SDG 7. Affordable and clean SDG 13. Climate action SDG 10. Reduced
Education energy inequalities
Relevant UN
Sustainable SDG 8. Decent Work and SDG 13. Climate action
Development Goals economic growth
SDG 17. Partnerships for the
SDG 10. Reduced goals
inequalities
Strategy and execution
Our strategic pillars guide how we drive the business and reflect how we build on our unique position in the market:
1. Leveraging our position at the centre of STEM to deliver sustainable value to our candidates and clients.
2. Create a world-class operational platform through data, technology and infrastructure.
3. To be a leader in the markets we choose to serve.
4. Find, develop and retain great people.
We made good progress in the period, for example, in finding, retaining and developing great people with the strengthening
of the senior team. At Board level, this includes the recent appointment of Andrew Beach as CFO designate. Andrew has over
13 years' experience in listed companies and global experience of business transformation; we are confident he will be very
valuable to the business as we pursue long-term sustainable growth. We appointed a new President of the US business, Sunny
Akerman, who brings experience in driving significant growth, reflecting the strength of our ambitions in the region - the
biggest global STEM market and one which is highly fragmented. To help us further articulate our unique position in the
market and reflecting the importance of the more complex information landscape we operate in, we have also appointed
Rebecca Matts as the Group Communications Director to lead our Corporate Communications and Corporate Affairs.
Diversity, Equality and Inclusion has never been more of an imperative, both internally at SThree as well as for our
clients. In the first half we launched several projects to drive these values across the business and move us towards our
stated goal of increasing gender representation at all leadership levels to 50/50 by 2024. This includes updating our
talent acquisition and career progression processes. In addition, we have designed and developed in-house executive
leadership DE&I training, grown our DE&I network, and delivered key awareness days and internal webinars with over 1,000
attendees. We recognise the importance of external expertise and have partnered with leading experts to advance our
knowledge and strategy; this includes our CEO Action Pledge in the US and Investing in Ethnicity in the UK. More detail on
our Diversity, Equality and Inclusion work is available in the ESG Impact Report published in April 2021.
Keeping in mind our 2024 ambitions, as outlined at the 2019 Capital Markets Day, we have also maintained a focus on taking
market share and improving productivity. We are confident we have continued to make sustainable gains in both over the
period. Investments in our world-class operational platform include opening a number of offices as well as upgrading our
technology to reduce risk. The strides we have made improving our operational execution are demonstrated in the continued
growth of our net promoter score, which stands at 53 over the first half, up one point on FY 2020.
Current trading and outlook
The second half began strongly, as the sales activity momentum built across the first half continued into current trading.
New placement activity remains buoyant, contractor retention rates are strong, and consequently the Group now anticipates
it will be ahead of current market consensus expectations for FY 2021.
As previously communicated, we remain mindful of changing contractor behaviour and annual leave backlogs in the second
half. We will be increasing investment in our people and our "go-to-market" proposition in the coming months, which,
although crucial in driving our long-term success, will impact on productivity in the short term. Nevertheless, we continue
to be focused on the execution of our strategy, whatever the external circumstances, and we remain fully committed to the
ongoing delivery of the long-term ambitions for all of our stakeholders.
Group OPERATIONAL REVIEW
Overview
The Group is encouraged by its performance in the first half with net fees up 10%* and strong growth achieved in Q2 (up
22%* YoY) following a Q1 performance which was pleasing against a challenging backdrop (down 1%YoY). The Group is well
diversified. Its top five countries representing 86% of Group net fees, with Germany accounting for 33% and USA 25%.
Net fees were also up 3%* on HY 2019, with a strong Q2 performance in Contract up 6%* driven by the majority of our top
countries. We saw strong growth in Permanent net fees in Q2 up 13%* driven by our two largest Permanent markets, USA and
Germany.
Our strategic focus on our Contract business continues to deliver good growth with net fees up 8%* YoY in HY and up 18%* in
Q2. The contractor order book increased by 33%* YoY (Q1 up 1%* YoY), reflecting the high demand for skilled contractors
across our markets. Our Contract business accounts for 74% of Group net fees.
Permanent net fees were up 18%* YoY in HY driven by a rise of 36%* in Q2 as we saw a strong rebound in demand for Permanent
placements. DACH and USA, our two largest Permanent markets, were up 13%* and 57%* respectively YoY. Our Japan business,
which is predominately Permanent, saw net fees grow by 24%* YoY.
Adjusted operating profit was £28.1 million (HY 2020: £13.9 million), up 106%* YoY and we are well positioned for the
second half of the year as we continue to make targeted investments and benefit from a strong contractor book.
Encouragingly, adjusted operating profit was also up 18%* on 2019 levels.
Group period-end headcount was down 14% YoY with average headcount down 16% YoY. Sequentially, Group headcount is down 3%
on the year-end 2020. Over the next six months we will be accelerating our headcount investment, in line with our
previously stated strategy to focus on specific niches within sectors and markets where we continue to drive market share
gains. We increased productivity per head 32% YoY in the period, although we do expect this to normalise to some extent.
Our ambition overall is to use what we have learned in the last year and retain an increased focus on productivity
alongside headcount growth, as we continue to deliver our 2024 ambitions.
In what has been a challenging period for our teams, the quality of our management and increasing expertise in our niche
markets is 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.
* In constant currency
Group
Net fees by division
Growth year-on-year (In constant currency) HY 2021 Mix
Contract Permanent Total Contract Permanent
Q1 21 (2%) - (1%) 75% 25%
Q2 21 +18% +36% +22% 74% 26%
HY 21 +8% +18% +10% 74% 26%
Breakdown of net fees HY 2021 HY 2020 FY 2020
Geographical split
EMEA excluding DACH 36% 40% 38%
DACH 36% 33% 34%
USA 25% 24% 25%
APAC 3% 3% 3%
100%
100% 100%
Sector split
Technology 47% 45% 45%
Life Sciences 24% 22% 23%
Engineering 20% 22% 22%
Banking & Finance 7% 9% 8%
Other sectors 2% 2% 2%
100% 100% 100%
Business Mix
Contract is well suited to our STEM market focus and geographical mix, and it remained the key area of focus throughout the
period.
Our Contract business showed good growth, testament to the strength of our strategy and ongoing demand for contractors,
with net fees up 8%* in the period. Average Contract sales headcount was down in the period, though we saw strong
productivity growth across all regions. Contract now accounts for 74% of Group net fees. Contract margin is at 21.3% up
from 20.3% in HY 2020. The period ended with contractor numbers of 10,041 (HY 2020: 8,774), up 14% YoY.
Our Permanent business saw net fees increase 18%* in the period. DACH, our largest Permanent market was up 13%* in the
period with USA net fees up 57%*. Our business in Japan saw growth of 24%*. We have seen an increase in Permanent average
fee up 4%* YoY in the period. Whilst average Permanent sales headcount was down in the half year, we saw strong
productivity growth across all regions and investing strategically in our key Permanent markets will be a core focus in the
period ahead.
* In constant currency
Operational review by reporting segment
EMEA excluding DACH (36% of Group net fees)
Net fees by division
Growth year-on-year (In constant currency) HY 2021 Mix
Contract Permanent Total Contract Permanent
Q1 21 (11%) (27%) (14%) 87% 13%
Q2 21 +9% +18% +10% 85% 15%
HY 21 (2%) (7%) (2%) 86% 14%
EMEA excluding DACH is our largest region comprising businesses in Belgium, Dubai. France, Ireland, Luxembourg, the
Netherlands, Spain and the UK.
The Netherlands, our largest country in the region, delivered a robust performance in the period with net fees up 8%*.
Notable performances were delivered in Life Sciences, up 13%* YoY, driven by increased placements across Clinical Research
and Development and Quality Assurance, as well as Engineering up 24%* YoY, with particular focus on Project Management and
Construction. Contract was up 8%* in the period and Permanent up 7%*.
The UK saw progress during the first half, with net fees starting to grow in Q2. We are also encouraged by improving
productivity in the region. Life Sciences saw growth of 6%* in the period with strong demand from the healthcare sector.
Contract net fees were down 7%* with Permanent net fees down 8%*.
France net fees were down 9%* with Dubai net fees declining 14%* and Belgium down 13%* for the period.
Average headcount for the region was down 25% YoY, with period-end headcount down 23%.
* In constant currency
DACH (36% of Group net fees)
Net fees by division
Growth year-on-year (In constant currency) HY 2021 Mix
Contract Permanent Total Contract Permanent
Q1 21 +1% +6% +3% 63% 37%
Q2 21 +33% +20% +28% 69% 31%
HY 21 +17% +13% +16% 66% 34%
DACH is our second largest region comprising businesses in Austria, Germany and Switzerland, with Germany accounting for
91% of net fees.
The region delivered a strong performance in the first half, up 16%* YoY, with our Technology business up 25%* and Life
Sciences business up 21%* YoY. Technology was driven by demand in Software Development and Infrastructure. Life Sciences
saw demand in Quality Assurance and Clinical Research and Development skills.
DACH, which is our largest Permanent market, saw strong growth in net fees up 13%* YoY with Contract net fees growing 17%*.
Germany's net fees were up 15%* YoY with Technology and Life Sciences both up 24%* YoY. Switzerland saw net fees grow 15%*
and Austria increased net fees by 31%*.
Average headcount was down 12% YoY, with period-end headcount also down at 9%.
* In constant currency
USA (25% of Group net fees)
Net fees by division
Growth year-on-year (In constant currency) HY 2021 Mix
Contract Permanent Total Contract Permanent
Q1 21 +14% +37% +19% 78% 22%
Q2 21 +16% +74% +28% 71% 29%
HY 21 +15% +57% +24% 74% 26%
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 strategically invest in the region as we align our resources with the best long-term
opportunities.
Our US business demonstrated its sustained strength with net fees up 24%* YoY and 22%* vs 2019. We saw high demand in our
key sectors. Life Sciences, our largest sector, saw strong growth of 30%* YoY, with robust demand in Clinical Operations,
Quality Assurance and Product Development. Net fees in Engineering saw a growth of 12%* YoY, driven by renewable
energy-focused Construction. Our growing Technology sector saw net fees increase by 33%* YoY with increased demand in
Mobile Applications, Adobe, Salesforce and Software Development.
Contract net fees were up 15%* YoY, with Life Sciences up 17%*, Technology up 33%* and Engineering up 11%*.
Our Permanent business, the second largest for the Group, saw net fees perform very strongly, up 57%* YoY, with growth
across all our sectors. Life Sciences was the standout performer growing 73%*, with Technology and Engineering both up
29%*.
Average headcount was down 15% YoY, with period-end headcount down 11%.
* In constant currency
APAC (3% of Group net fees)
Net fees by division
Growth year-on-year (In constant currency) HY 2021 Mix
Contract Permanent Total Contract Permanent
Q1 21 (2%) (17%) (14%) 20% 80%
Q2 21 +18% +69% +59% 16% 84%
HY 21 +8% +22% +20% 17% 83%
Our APAC business principally includes Japan and Singapore and accounts for 3% of Group net fees.
APAC net fees were up 20%* YoY in the period, with Japan our largest country in the region, up 23%*.
Our Japan business is predominantly Permanent and saw Permanent net fees grow 24%* YoY, driven by Technology up 29%* and
Life Sciences up 65%*. Singapore net fees were up 11%*.
Average headcount was down 9% YoY, with period-end headcount down 10%.
* In constant currency
chief financial officer's REVIEW
The Group delivered a very strong performance in HY 2021, with both net fees and profit not only up vs 2020 but also
surpassing 2019 levels. This is a considerable achievement given the ongoing volatility in the global markets in which
SThree operates. The Group saw an encouraging performance in Q1, which was followed by a further strengthening in Q2 across
all sectors and regions.
Income statement
Revenue for the half year was up 4% on a constant currency basis to £615.1 million (HY 2020: reported £596.0 million) and
3% on a reported basis. Net fees increased by 10% on both constant currency and reported basis to £164.3 million (HY 2020
£149.9 million). The increase is due to good progress made across the Group, led by very strong growth achieved in DACH and
the USA, with Life Sciences and Technology net fees up significantly across the Group. The Group's performance in HY 2020
was impacted by the COVID-19 health crisis across all the Group's territories and sectors but during the current period the
aggregate demand for staffing has again gained momentum with improvements in our Contract and Permanent businesses.
Overall, the Group net fees margin1 was 26.7% (HY 2020: 25.2%), driven by higher contract margins and the relative
outperformance of Permanent. At the end of the reported period, Contract represented 74% of the Group net fees in the
period (HY 2020: 76%).
Operating expenses increased by 1% YoY on a reported basis, mainly driven by increases in personnel costs as a result of
higher average salaries, bonuses, commissions, share-based payment charges and temp costs across the organisation.
Technology costs also increased following a decline in the prior period as the Group's operations were restrained by
COVID-19.
In the six months ended 31 May 2021, the Group's financial results were impacted by the following two items of other income
that are unusual because of their nature and incidence:
• The Group took advantage of the job retention scheme launched by the national government of France, whereby it was
reimbursed for a portion of salaries of furloughed personnel. A benefit of £0.2 million (HY 2020: £0.7 million from the
UK and Singapore national governments) was recognised and presented as a deduction in reporting the related staff
expense. In H2 2020, the Group repaid all furlough support received from the UK government.
• The Group also recognised a net exceptional income of £0.1 million (HY 2020: £0.4 million) in relation to a legacy
restructuring programme partially funded by a grant receivable from Scottish Enterprise. The Group is entitled to the
grant until the end of 2021, subject to the terms of the grant being met.
The reported operating profit was £28.2 million, up 101% YoY on a constant currency basis (HY 2020: £14.3 million). This is
also up 26% in constant currency on the reported operating profit announced for HY 2019.
The Group operating profit conversion ratio 5 2 increased to 17% (HY 2020: 10%) which reflects the recovery in the Group
trading activity in the aftermath of the health crisis, partially offset by higher personnel costs and technology spend.
The discontinued Australian operations have been excluded from the results quoted above for both the current and prior
period. In HY 2021, these discontinued operations incurred an operating loss of £0.3 million (HY 2020: operating loss £0.6
million) mainly 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 income
statement.
Net finance costs
Net finance costs, which predominantly relate to lease interest, decreased to £0.5 million (HY 2020: £0.7 million). The
higher cost in the previous period was a result of the full drawdown of the RCF to ensure strong liquidity during the
health crisis. The RCF has been subsequently repaid.
Foreign exchange exposure
For HY 2021, the YoY movements in exchange rates between Sterling, the Euro and the US Dollar (the main functional
currencies of the Group) provided a moderate net headwind to the reported performance of the Group, reducing our reported
net fees by approximately £1.4 million and operating profit by £0.5 million.
Income tax
The tax charge for the half year on the Group's profit before tax was £8.6 million (HY 2020: £5.2 million), representing an
estimated full year effective tax rate ('ETR') on continuing operations of 31%. In the prior period, due to higher losses
in certain jurisdictions not recognised for deferred tax purposes, the reported ETR was 38%. 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 £27.7 million, up 108% YoY in constant currency and
up 104% on a reported basis (HY 2020: reported £13.6 million and adjusted £13.1 million).
The reported profit after tax from continuing operations was £19.2 million, up 132% YoY in constant currency and up 128% on
a reported basis (HY 2020: reported £8.4 million and adjusted £8.1 million).
Earnings per share ('EPS')
The reported and adjusted EPS was 14.5 pence and 14.4 pence respectively (HY 2020: reported 6.4 pence and adjusted 6.1
pence) on continuing operations. The YoY growth is attributable to a significant improvement in trading performance, a
decrease in the Group's ETR, offset by an increase of 0.4 million in the weighted average number of shares. Reported
diluted EPS was 14.1 pence (HY 2020: 6.2 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 proposes to pay an interim dividend of 3.0 pence (HY 2020: nil pence; HY 2019: 5.1 pence), amounting to £4.0
million in total. This will be paid on 3 December 2021 to shareholders on record on 5 November 2021. As previously stated
in the recent trading update of June 14, 2021, the Board expects dividend cover for the year as a whole to be in the range
of 2.5x to 3.0x, which it considers to be prudent given ongoing uncertainty relating to the pandemic. Going forward, the
Board expects that the level of cover will continue to be assessed in the light of prevailing trading conditions.
Liquidity management
In HY 2021, cash generated from operations on an adjusted basis was £20.5 million (HY 2020: £42.7 million). It represented
the improved adjusted EBITDA 6 3 offset by the continued growth of the contractor order book increasing our working
capital. Income tax paid increased to £9.7 million (HY 2020: £5.6 million) reflecting the improved underlying trading
performance across our markets and sectors. In the prior period, the Group also benefited from the short-term government
incentive to defer VAT payments; this stimulus provided the Group with a short-term cash relief of £5.1 million reducing
working capital in HY 2020.
Capital expenditure decreased to £1.6 million (HY 2020: £2.1 million), the majority of which related to IT equipment
(laptops, server refresh in data centres) and spend on assets designed to deliver the Group's strategic priorities under
the fast-evolving market conditions.
The Group paid £6.8 million in rent (HY 2020: £6.7 million) and £0.2 million in net interest cost (HY 2020: £0.4 million)
during the half year. The Group paid £2.5 million (HY 2020: £1.3 million) for the purchase of its own shares to satisfy
employee share schemes in future periods. Cash inflows of £0.2 million (HY 2020: £0.8 million) were generated from Save As
You Earn employee schemes. Only immaterial dividend payments were made to shareholders who had unclaimed dividends from
previous years and subsequently electing to receive them (HY 2020: £6.7 million, being the interim dividend paid in
December 2019). The final dividend 2020 was paid on 4 June 2021.
Foreign exchange had a moderate negative impact of £2.3 million (HY 2020: immaterial impact).
Overall, in the first half of 2021, the Group free cash conversion ratio3 decreased to 14% on a reported basis compared to
the prior period of 215%, primarily reflecting increased working capital. We started the period with net cash of £49.9
million and closed the period with net cash of £47.5 million.
Borrowings
On 31 May 2021, the Group had total accessible liquidity of £102.5 million, made up of £47.5 million in net cash (HY 2020:
£31.0 million), a £50.0 million Revolving Credit Facility, which is committed to 2023, and a £5.0 million overdraft. The
increased net cash balance, achieved despite the growth in Contract placements made, is an encouraging performance and
reflects the Group's keen focus on cash management. 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.
Any funds borrowed under RCF bear a minimum annual interest rate of 1.3% above the three-month Sterling LIBOR. During the
current period, the Group did not draw down any of these facilities (HY 2020: £50.0 million). In the prior period, average
interest rate paid on drawdown was 1.9%.
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 this Interim Financial Report. The Board therefore considers
it appropriate to adopt the going concern basis of accounting in preparing the Condensed Consolidated Financial Statements.
For further details, including our scenarios, please refer to note 1 of the financial statements.
PRINCIPAL and Emerging RISKS
At SThree we recognise the importance of ongoing risk management to deliver on our strategic pillars and strengthen our
performance. Periodically, we adjust our approach as markets and operating landscapes evolve.
Emerging risk - climate change
In 2020 we committed to early adopting the recommendations of the Taskforce for Climate-related Financial Disclosure
('TCFD') which includes climate-related scenario analysis to identify and respond to the businesses' exposure to
climate-related risks and opportunities.
During the first half of this year, we undertook a detailed climate-related scenario analysis project with an emphasis on
the most material transitional risks and opportunities to SThree. By engaging in scenario analysis, we have explored a wide
range of economic, regulatory, technological and societal conditions, and considered how SThree may respond under varying
commercial and operating environments.
Within this work we have identified three key scenarios by which we assess the implications of climate change on our
business: (1) Renewable led growth (orderly), (2) Disruptive change (disorderly), and (3) Fossil fuelled future (hot house
world). Our scenarios, and the underlying data used in modelling, are based on the Network for Greening the Financial
System's ("NGFS") climate scenario framework.
Although our own climate action will increasingly focus on the decarbonisation of our business, the implications of climate
action have much further reach into how our clients operate and the skills they require. We have identified the following
risks within our scenario analysis:
Market:
• Fossil fuel sector net fees will likely reduce within scenario 1 and 2.
• Maintaining market share in rapidly expanding markets such as low carbon transition.
Reputation:
• STEM skills are required across multiple sectors with emerging trends such as green tech. Sector aligned brand
strategies and cross selling opportunities may be missed.
• Shifting candidate and client preferences to eco-brands will make service delivery to high emitting clients
challenging.
Political:
• Exposure to changing Government policy and varying investment in renewable energy infrastructure projects.
Following the recent completion of the climate-related scenario project we have mobilised an internal committee to develop
our response to these risks. Our strategic planning is informed by these risks and how we limit exposure and maximise
opportunities.
A full risk review and detailed mitigation plan will be included in our Annual Report and TCFD year report.
Identifying and maximising climate action opportunities
The transition to a low carbon economy requires STEM skills and climate-related scenario analysis has highlighted the
growing opportunity for SThree as the only global pure-play STEM staffing specialist. The transition to a low-carbon future
could lead to an increase in jobs in renewables to 29 million globally by 2030 7 4 .
Additionally, low carbon innovations will create new STEM roles which are not currently in demand, or even may not yet
exist. These opportunities are particularly prevalent in geographies with strong net zero ambitions, including the EU and
the USA (under the Biden administration), where we have a large, growing market.
The opportunities identified are as follows:
Market
• Dynamic and flexible services ensure SThree is agile and responsive to changing markets under each scenario.
• Growth of clean energy and associated technologies requires the specialist STEM skills SThree provides.
Reputation
• Growth in sustainable procurement; sustainable supplier credentials such as SThree's climate leadership position
(Carbon Disclosure Project (CDP) and Financial Times Climate Leaders 2021 positioning) is a differentiator to
competitors.
• The growing brand value of green companies provides an opportunity to be a staffing partner to the growing number of
climate conscious businesses.
The opportunities identified through scenario analysis have, and will continue to inform, our strategic and financial
planning.
Integrating climate-related risks and opportunities into our business strategy, activities and overall risk management
The outcome of the above analysis is the integration of emerging transitional climate risks within SThree Enterprise Risk
Management 8 5 and governance framework. The analysis and modelling also informs strategic planning and market growth
considerations, for example our target to double the share of our global renewables business by 2024.
Climate-related risks and opportunities are discussed at the Environment, Social and Governance Committee which includes
our Chair, CEO, CFO and Group General Counsel and will be reported to the Board on an annual basis.
Looking forward, we remain committed to early adoption of the TCFD recommendations and will provide a detailed report on
our governance, strategy, risk management and targets and metrics in our 2021 Annual Report.
Full details of this integration will be reported in our Annual Report 2021.
Principal risks - trend and outlook
Other than the changes and details set out above, the Directors consider that principal risks faced by the Group remain
substantially the same as those set out on pages 68 to 75 of our Annual Report and Accounts for the year ended 30 November
2020. The principal risks and the trend direction have been summarised below:
1. Macro-economic environment/cyclicality (Decreased)
2. Competitive environment and business model (Increased)
3. Commercial relationships and customer risk (Decreased)
4. Contractual risk (No change)
5. Foreign exchange translation (No change)
6. People, talent acquisition and retention (Increased)
7. Information technology and cyber risks (Increased)
8. Data processing (No change)
9. Compliance (Increased)
10. Strategic change management (Increased)
Please refer to our 2020 Annual Report and Accounts for further detail on our risks, available at
9 www.sthree.com/en/investors/financial-results/.
Governance and internal control
"Restoring trust in audit and corporate governance: Consultation on the government's proposals"
SThree alignment and implementation
In March 2021, the Department for Business, Energy & Industrial Strategy ('BEIS') issued the consultation paper with the
proposed reforms aimed at restoring trust in audit and corporate governance. One of the key proposals is the new reporting
and attestation requirement covering internal controls, dividend and capital maintenance decisions, and resilience
planning.
During the half year, we continued to improve and evolve our Enterprise Risk Management framework by developing and
embedding the necessary capabilities within our organisation to support informed risk taking by our businesses.
We made significant progress towards reaching the fully integrated system of SThree internal controls, risk management and
ESG policies, largely aligned with the selected benchmarks - the COSO framework as a benchmark for BEIS UK SOx requirements
and TCFD framework as a benchmark for ESG strategies and policies. We identified areas that should be strengthened to drive
a future-proof, appropriately resourced and fully compliant system of internal control and corporate governance policies.
We further reviewed and revised risk limits setting out risks that should be avoided and those that can offer sustainable
and positive returns and established a process for regular self-assessment style attestation by risk relating to internal
controls over financial reporting and their owners. We embedded tools to report control weaknesses, any deficiencies or
control failures to support management in real-time monitoring and remediating any areas of concern.
In the second half of the year, we plan to define the enhancements to our internal control framework testing programme
focusing on full compliance with the emerging BEIS UK SOx requirements, with the implementation of the new testing
programme from early 2022. Together with the enhanced internal audit activities aligned with the new UK SOx framework, we
plan to build upon increased management capabilities in reviewing and attesting the control environment. We also intend to
further improve the reporting suite to enable informed decisions based upon clear, quality data over the control
environment, available to all levels through a risk management system.
Ultimately, by investing in systems, processes and people, we seek to create and maintain a world-class risk management and
internal control environment that is aligned with the operational risk exposures across our global operating model, but
which also drives the ongoing efficiencies to benefit profitability and shareholder value.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge:
(a) the Condensed Consolidated Interim Financial Statements have been prepared in accordance with IAS 34 Interim Financial
Reporting as adopted by the European Union and give a true and fair view of the assets, liabilities, financial position and
profit or loss of the undertakings included in the consolidation as a whole for the period ended 31 May 2021 as required by
the Disclosure Guidance and Transparency Rules sourcebook of the UK FCA ('DTR') 4.2.4R; and
(b) the Interim Management Report includes a fair review of the information required by:
DTR 4.2.7R of the DTRs, being an indication of important events that have occurred during the first six months of the
current financial year and their impact on the Condensed Consolidated Interim Financial Statements; and a description of
the principal risks and uncertainties for the remaining six months of the financial year; and
DTR 4.2.8 R of the DTRs, being related party transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or performance of the Group during that period, and
any changes in the related party transactions described in the 2020 Annual Report and Accounts for SThree plc and its
subsidiaries for the year ended 30 November 2020, that could have a material effect on the financial position or
performance of the Group in the first six months of the current financial year.
The Directors of SThree Plc are listed in the SThree plc Annual Report and Accounts for 30 November 2020. A list of the
current Directors is maintained on the Group's website 10 www.sthree.com.
Signed on behalf of the Board:
Mark Dorman Alex Smith
Chief Executive Officer Chief Financial Officer
16 July 2021
Condensed Consolidated Interim Financial Report
Condensed consolidated income statement - unaudited
for the half year ended 31 May 2021
31 May 2021 31 May 2020
Before exceptional Exceptional Total Before Exceptional Total
items items exceptional items items
Note £'000 £'000 £'000 £'000 £'000 £'000
Continuing operations
Revenue 2 615,118 - 615,118 596,002 - 596,002
Cost of sales (450,851) - (450,851) (446,096) - (446,096)
Net fees 2 164,267 - 164,267 149,906 - 149,906
Administrative (expenses)/income 3 (135,740) 121 (135,619) (134,765) 416 (134,349)
Impairment losses on financial assets (425) - (425) (1,281) - (1,281)
Operating profit 28,102 121 28,223 13,860 416 14,276
Finance income 10 - 10 36 - 36
Finance costs (501) - (501) (752) - (752)
Profit before income tax 27,611 121 27,732 13,144 416 13,560
Income tax expense 4 (8,541) (23) (8,564) (5,072) (79) (5,151)
Profit for the period
19,070 98 19,168 8,072 337 8,409
from continued operations
Discontinued operations
Loss after tax for the period from 6 (276) - (276) (595) - (595)
discontinued operations
Profit for the period attributable
18,794 98 18,892 7,477 337 7,814
to the owners of the Company
Earnings per share 7 pence pence pence pence pence pence
Basic 14.2 0.1 14.3 5.7 0.2 5.9
Diluted 13.9 - 13.9 5.5 0.3 5.8
Earnings per share for profit
7 pence pence pence pence pence pence
from continued operations
Basic 14.4 0.1 14.5 6.1 0.3 6.4
Diluted 14.1 - 14.1 5.9 0.3 6.2
The above Condensed Consolidated Income Statement should be read in conjunction with the accompanying notes.
Condensed consolidated statement of comprehensive income - unaudited
for the half year ended 31 May 2021
31 May 31 May
2021 2020
Note £'000 £'000
Profit for the period 18,892 7,814
Other comprehensive (loss)/income:
Items that may be subsequently reclassified to profit or loss:
Exchange differences on retranslation of foreign continuing operations (4,854) 6,949
Exchange differences on retranslation of foreign discontinued operations - (268)
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 period (net of tax) (4,854) 6,669
Total comprehensive income for the period
14,038 14,483
attributable to owners of the Company
Total comprehensive income for the period
attributable to owners of the Company arises from:
Continued operations 14,314 15,346
Discontinued operations 6 (276) (863)
14,038 14,483
The above Condensed Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying
notes.
Condensed consolidated statement of financial position - unaudited
as at 31 May 2021
Unaudited Audited
31 May 30 November
2021 2020
Note £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 39,468 40,818
Intangible assets 3,680 4,409
Investments 1 1
Deferred tax assets - 1,482
Total non-current assets 43,149 46,710
Current assets
Trade and other receivables 242,413 237,042
Current tax assets 3,496 377
Cash and cash equivalents 8 47,529 50,363
Total current assets 293,438 287,782
Total assets 336,587 334,492
EQUITY AND LIABILITIES
Equity attributable to owners of the Company
Share capital 9 1,336 1,330
Share premium 9 34,584 33,026
Other reserves (6,720) (118)
Retained earnings 105,168 94,279
Total equity 134,368 128,517
Current liabilities
Bank overdraft 8 7 468
Lease liabilities 10 12,275 12,078
Provisions 5,409 9,915
Trade and other payables 158,782 157,499
Total current liabilities 176,473 179,960
Non- current liabilities
Lease liabilities 10 22,969 23,426
Provisions 2,223 2,589
Deferred tax liabilities 554 -
Total non-current liabilities 25,746 26,015
Total liabilities 202,219 205,975
Total equity and liabilities 336,587 334,492
The above Condensed Consolidated Statement of Financial Position should be read in conjunction with the
accompanying notes.
Condensed consolidated statement of changes in equity - unaudited
for the half year
ended 31 May 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
Audited
balance at 30 1,326 32,161 172 878 (5,005) (2,387) (1,996) 91,622 116,771
November 2019
Effect of a
change in - - - - - - - (978) (978)
accounting
policy
Restated total
equity at 1 1,326 32,161 172 878 (5,005) (2,387) (1,996) 90,644 115,793
December 2019
Profit for the
half year - 7,814 7,814
ended 31 May - - - - - -
2020
Other
comprehensive 6,681 (12)
income for the - - - - - - 6,669
period
Total
comprehensive - - - - - 6,681 (12) 7,814 14,483
income for the
period
Transfer of
loss on
disposal of
equity
investments - 1,996 -
through other - - - - - (1,996)
comprehensive
income to
retained
earnings
Dividends paid
to equity - (6,656)
holders (note - - - - - - (6,656)
5)
Settlement of
vested tracker - - - - 61 - - 55 116
shares
Settlement of
share-based 4 787 - - 4,901 - - (4,901) 791
payments
Purchase of
own shares by
Employee - - - - (1,329) - - - (1,329)
Benefit Trust
(note 9)
Credit to
equity for
equity-settled - - - - - - - 496 496
share-based
payments
Total
movements in 4 787 - - 3,633 6,681 1,984 (5,188) 7,901
equity
Unaudited
balance at 31 1,330 32,948 172 878 (1,372) 4,294 (12) 85,456 123,694
May 2020
Audited
balance at 30 1,330 33,026 172 878 (1,496) 340 (12) 94,279 128,517
November 2020
Profit for the
half year - - - - - - - 18,892 18,892
ended 31 May
2021
Other
comprehensive - - - - - (4,854) - - (4,854)
loss for the
period
Total
comprehensive - - - - - (4,854) - 18,892 14,038
income for the
period
Dividends paid
to equity - - - - - - - (7) (7)
holders (note
5)
Dividends
payable to - - - - - - - (6,619) (6,619)
equity holders
(note 5)
Settlement of
vested tracker - 93 - - - - - (73) 20
shares
Settlement of
share-based 6 1,465 - - 702 - - (1,975) 198
payments
Purchase of
own shares by
Employee - - - - (2,450) - - - (2,450)
Benefit Trust
(note 9)
Credit to
equity for
equity-settled - - - - - - - 671 671
share-based
payments
Total
movements in 6 1,558 - - (1,748) (4,854) - 10,889 5,851
equity
Unaudited
balance at 31 1,336 34,584 172 878 (3,244) (4,514) (12) 105,168 134,368
May 2021
The above Condensed Consolidated Statement of Changes in Equity should be read in conjunction with
the accompanying notes.
Condensed consolidated statement of cash flows - unaudited
for the half year ended 31 May 2021
31 May 31 May
2021 2020
Note £'000 £'000
Cash flows from operating activities
Profit from continuing operations before tax after exceptional items 27,732 13,560
Loss before tax from discontinued operations (276) (595)
Profit before tax 27,456 12,965
Adjustments for:
Depreciation and amortisation charge 3,133 3,058
Lease asset depreciation 6,184 6,137
Loss on disposal of property, plant and equipment 14 11
Impairment of intangible assets - 34
Loss on liquidation of subsidiaries 243 -
Finance income (10) (36)
Finance cost 501 760
Non-cash charge for share-based payments 671 496
Operating cash flows before changes in working capital and provisions
38,192 23,425
(Increase)/decrease in receivables (11,226) 57,320
Decrease in payables (1,899) (40,968)
(Decrease)/increase in provisions (4,597) 2,281
Cash generated from operations 20,470 42,058
Interest received 10 36
Income tax paid - net (9,697) (5,590)
Net cash generated from operating activities 10,783 36,504
Cash generated from operating activities before exceptional items 10,783 37,255
Net cash outflow from exceptional items - (751)
Net cash generated from operating activities 10,783 36,504
Cash flows from investing activities
Purchase of property, plant and equipment (1,132) (2,028)
Purchase of intangible assets (522) (41)
Net cash used in investing activities (1,654) (2,069)
Cash flows from financing activities
Proceeds from borrowings 10 - 50,000
Interest paid (193) (352)
Lease principal payments (6,767) (6,700)
Proceeds from exercise of share options 197 791
Employee subscription for tracker shares - 268
Purchase of own shares (2,450) (1,329)
Dividends paid to equity holders 5 (7) (6,656)
Net cash (used in)/generated from financing activities (9,220) 36,022
Net (decrease)/increase in cash and cash equivalents (91) 70,457
Cash and cash equivalents at beginning of the period 49,895 10,555
Exchange (losses)/gains relating to cash and cash equivalents (2,282) 28
Net cash and cash equivalents at end of the period 8 47,522 81,040
The above Condensed Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
Notes to the CONDENSED CONSOLIDATED Interim Financial REPORT - unaudited
for the half year ended 31 May 2021
1. Accounting policies
Corporate information
SThree plc ('the Company') and its subsidiaries (collectively 'the Group') operate predominantly in Continental Europe, the
USA, the United Kingdom & Ireland, Asia Pacific and the Middle East. The Group provides both Contract and Permanent
specialist recruitment services, primarily in the Life Sciences, Technology, Engineering and Banking & Finance sectors.
The Company is a public limited company listed on the London Stock Exchange and incorporated and domiciled in the United
Kingdom and registered in England and Wales. Its registered office is 1st Floor, 75 King William Street, London, EC4N 7BE.
This Condensed Consolidated Interim Financial Report ('Interim Financial Report') of the Group as at and for the half year
ended 31 May 2021 comprises that of the Company and all its subsidiaries. The Interim Financial Report is unaudited and has
not been reviewed by external auditors. It does not constitute statutory accounts as defined in section 434 of the
Companies Act 2006. Statutory accounts for the year ended 30 November 2020 were approved by the Board of Directors on 22
January 2021 and a copy was delivered to the Registrar of Companies. The auditors reported on those accounts, their report
was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498
(2) or (3) of the Companies Act 2006.
The Interim Financial Report of the Group was approved by the Board for issue on 16 July 2021.
Basis of preparation
This Interim Financial Report for the half-year reporting period ended 31 May 2021 has been prepared in accordance with the
Accounting Standard IAS 34 Interim Financial Reporting ('IAS 34'). The Interim Financial Report does not include all the
notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction
with the Annual Report for the year ended 30 November 2020 and any public announcements made by SThree Plc during the
interim reporting period.
Going concern
The Interim Report has been prepared on the going concern basis. This is considered appropriate, given the financial
resources of the Group including its immediately accessible liquidity of £102.5 million, together with Group's future
trading performance, capital expenditure and working capital requirements.
The Directors of the Group have performed an assessment of the overall position and future forecasts for the purposes of
going concern in light of the current environment. Although the global pandemic continues to create a moderate degree of
uncertainty to economic activities across all of our markets, the Group's business model is effective and resilient.
In HY 2021 our teams have delivered a very strong performance across the Group. Our profit has not only grown on HY 2020,
but it has also surpassed the pre-pandemic levels of 2019, reflecting the strength of the business and the growth
trajectory we are on. This is a considerable achievement given the ongoing volatility of the external markets and is
testament to the continued strength of demand for the exceptional candidates we work with and their STEM skills.
DACH and USA regions achieved very strong net fees growth, especially in Life Sciences and Technology sectors. Top five
countries now represent 86% of Group net fees, with Germany being 33% and USA 25%. Performance in EMEA excluding DACH has
been mixed, with the 8% YoY net fees growth in constant currency in the Netherlands, our biggest country in the region,
offset by slightly weaker performances in the UK and France, neither of which given their relative size causes a
significant risk to the ongoing position of the Group from a going concern and cash flow perspective.
The Directors of the Group have considered the future position based on current trading and strategic initiatives designed
to take further advantage of new market opportunities. This has been further stress tested by considering a range of
potential downside scenarios which may occur, either through further COVID-19 related impacts, general economic uncertainty
or other risks. This assessment has 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 scenarios modelled are based on medium-term forecasts out to the end of 2022. The first scenario considers the downside
impact of economic uncertainty over the forecast period, reflected in reduced sales activity for the remainder of 2021 and
into H1 2022, with net fees decline of 3% in 2021 compared to base 2021 and net fees decline of 10% in 2022 compared to
base 2022. The second scenario, considered most severe but plausible, includes further potential COVID-19 outbreaks in key
strategic countries, USA and Germany, with further restrictions introduced in the UK, leading to slower demand back to 2020
levels. Mitigating actions are included in the form of delayed capital expenditure and future dividends, together with
flexibility in managing the cost base. Under all scenarios, the Group forecasts to be in a strong cash position throughout
2021 and into 2022 with significant headroom against its banking covenants.
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 this Interim Report.
Accounting policies
The accounting policies used in the preparation of the Condensed Consolidated Financial Statements are consistent with
those applied in the previous financial year and corresponding interim reporting period, 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 IFRS 3, Definition of a business;
- Amendments to IAS 1 and IAS 8, Definition of material; and
- Amendments to IFRS 16, COVID-19 Rent Related Concessions.
New and amended standards that are applicable to the Group but not yet effective
As at the date of authorisation of this Interim Financial Report, the following key amendments to existing standards were
in issue but not yet effective. 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 Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of the Interim Financial Report requires the Directors to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported amounts of assets and liabilities at the end of the
reporting period, and the reported amounts of revenue and expenses during the reporting period. Although these estimates
are based on the Directors' best knowledge of the amounts, the actual results may ultimately differ from these estimates.
In preparing the Interim Financial Report, the significant judgements made by the Directors in applying the Group's
accounting policies and the key sources of estimation uncertainty were the same as those that applied in the Group's 2020
annual financial statements, with the exception of changes in estimates that are required in determining the provision for
income taxes.
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, the 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 fees margin and
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 (freelance 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
note 1 in the summary of significant accounting policies in the Group's 2020 annual financial statements.
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.
The segmental information has been presented for continuing operations only, excluding closed business in Australia. The
comparative numbers have been restated accordingly throughout this note.
Revenue Net fees
31 May
31 May 31 May 31 May
2020
2021 2021 2020
restated restated
£'000 £'000 £'000 £'000
EMEA excluding DACH 285,855 303,273 59,845 60,509
DACH 204,493 176,055 59,067 50,139
USA 116,527 109,461 40,921 35,364
APAC 8,243 7,213 4,434 3,894
615,118 596,002 164,267 149,906
EMEA excluding DACH includes Dubai, Belgium, 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
31 May 2021 DACH USA APAC Total
excluding DACH
£'000 £'000 £'000 £'000 £'000
Timing of revenue recognition
Over time 276,553 184,644 105,954 4,573 571,724
At a point in time 9,302 19,849 10,573 3,670 43,394
285,855 204,493 116,527 8,243 615,118
31 May 2020 EMEA
DACH USA APAC Total
restated excluding DACH
£'000 £'000 £'000 £'000 £'000
Timing of revenue recognition
Over time 293,237 158,814 102,269 4,057 558,377
At a point in time 10,036 17,241 7,192 3,156 37,625
303,273 176,055 109,461 7,213 596,002
Major customers
In HY 2021 and HY 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
31 May 31 May 31 May 31 May
2021 2020 2021 2020
restated restated
£'000 £'000 £'000 £'000
Germany 184,060 158,859 53,952 45,967
Netherlands 116,788 118,407 25,576 23,137
USA 116,527 109,461 40,921 35,364
UK 91,233 97,667 17,283 18,632
Japan 3,968 3,458 3,327 2,854
ROW(1) 102,542 108,150 23,208 23,952
615,118 596,002 164,267 149,906
1. (1) ROW (Rest of the World) includes all countries other than listed.
Audited
31 May
30 November
2021 2020
Non-current assets £'000 £'000
Germany 13,761 10,725
UK 13,535 16,255
USA 5,390 6,466
Netherlands 3,116 3,928
Japan 179 118
ROW(1) 7,168 7,736
43,149 45,228
(1) ROW (Rest of the World) includes all countries other than listed.
Non-current assets from discontinued operations amounted to £nil (2020: £nil).
The following segmental analysis by brands, recruitment classification and sectors (being the profession of candidates
placed) have been included as additional disclosure to the requirements of IFRS 8.
Revenue Net fees
31 May 31 May 31 May 31 May
2021 2020 2021 2020
restated restated
Brands £'000 £'000 £'000 £'000
Computer Futures 204,989 183,791 53,818 46,152
Progressive 174,560 187,012 46,356 44,925
Real Staffing Group 134,778 124,412 41,683 35,633
Huxley Associates 100,791 100,787 22,410 23,196
615,118 596,002 164,267 149,906
Other brands including Global Enterprise Partners, JP Gray, Madison Black, Newington International and Orgtel are rolled
into the above brands.
Revenue Net fees
31 May 31 May 31 May 31 May
2021 2020 2021 2020
restated restated
Recruitment classification £'000 £'000 £'000 £'000
Contract 571,724 558,377 121,913 113,470
Permanent 43,394 37,625 42,354 36,436
615,118 596,002 164,267 149,906
Revenue Net fees
31 May 31 May 31 May 31 May
2021 2020 2021 2020
restated restated
Sectors £'000 £'000 £'000 £'000
Technology 309,766 293,086 76,659 67,611
Life Sciences 126,187 104,321 39,578 32,822
Engineering 124,170 138,469 33,016 33,117
Banking & Finance 45,943 52,896 11,772 13,960
Other 9,052 7,230 3,242 2,396
615,118 596,002 164,267 149,906
Other includes Procurement & Supply Chain and Sales & Marketing. Engineering includes Energy.
3. PROFIT AND LOSS INFORMATION
a. Operating profit from continuing operations is stated after charging/(crediting):
31 May 31 May
2021 2020
£'000 £'000
Staff costs 104,195 102,048
Depreciation 8,099 7,574
Amortisation 1,218 1,435
Loss on disposal of property, plant and equipment 14 11
Impairment of intangible assets - 34
Impairment loss on financial assets 425 1,281
Service lease charges
• Buildings 1,079 1,059
• Cars 104 198
Foreign exchange losses/(gains) 377 (120)
Other operating income (see note 3(b)) (296) (1,095)
b. Profit for the half-year includes the following items that are unusual because of their nature, size, or incidence:
31 May 31 May
2021 2020
£'000 £'000
1. Net exceptional income 121 416
2. Impact of COVID-19
Government assistance income 175 679
296 1,095
Net exceptional income
The Group recognised a net exceptional income of £0.1 million (HY 2020: £0.4 million) in relation to a legacy restructuring
programme partially funded by a grant receivable from Scottish Enterprise. The Group is entitled to the grant until the end
of 2021, subject to the terms of the grant being met.
Impact of COVID-19
The COVID-19 health crisis had implications on certain items of income in the Group Condensed Consolidated Financial
Statements, though not treated as exceptional items these items affect the profit before tax for the six months ended 31
May 2021.
Government assistance income
In the six months ended 31 May 2021, the Group took advantage of job retention schemes launched by the national government
of France, whereby it was reimbursed for a portion of salaries of furloughed personnel. A benefit of £0.2 million (HY
2020: £0.7 million from the UK and Singapore national governments) was recognised and presented as a deduction in
reporting the related staff expense.
4. income tax expense
Income tax for the half year is accrued based on the Directors' best estimate of the average annual effective tax rate
('ETR') for the financial year. The tax charge for the half year amounted to £8.6 million (HY 2020: £5.2 million) at an ETR
of 31% (HY 2020: 38%) on continuing operations. The tax rate was higher in the prior period mainly due to higher losses in
certain jurisdictions not recognised for deferred tax purposes. The Group's ETR primarily varies with the mix of taxable
profits by territory, non-deductibility of the accounting charge for LTIP's and other one-off tax items.
A deferred tax liability of £0.6 million (2020: deferred tax asset of £1.5 million) has been recognised in the financial
statements for the six months ended 31 May 2021. This comprises deferred tax assets of £4.6 million (2020: £5.4 million)
and deferred tax liabilities of £5.2 million (2020: £3.9 million), which arise on accelerated depreciation, share-based
payments, provisions and uncertain tax provisions. The movement in the period is primarily as a result of an increase in
the Uncertain Tax Provision relating to transfer pricing risks, and the utilisation of tax losses.
At the reporting date, the Group has unused tax losses of £30.0 million (2020: £34.2 million) available for offset against
future profits. No deferred tax asset was recognised against these losses.
5. Dividends
31 May 31 May
2021 2020
Amounts recognised as distributions to equity holders in the period
£'000 £'000
Interim dividend of nil (2019: 5.1 pence) per share - 6,656
Final dividend of 5.0 pence (2019: nil pence) per share 6,626 -
6,626 6,656
No interim 2020 dividend was paid due to the economic uncertainty caused by the COVID-19 health crisis (2019: 5.1 pence).
The 2020 final dividend of 5.0 pence (2019: nil pence) per share was approved by shareholders at the AGM on 22 April 2021
and has been included as a liability in this Interim Financial Report. The dividend was paid on 4 June 2021 to shareholders
on record on 7 May 2021.
6. 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 2020 and half year ended 31 May 2021.
A single amount was shown on the face of the Condensed Consolidated Income Statement comprising the post-tax loss from
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.
31 May 31 May
2021 2020
£'000 £'000
Revenue - 6,637
Cost of sales (21) (5,370)
Administrative expenses (12) (1,854)
Operating loss (33) (587)
Net finance cost - (8)
Loss before and after income tax of discontinued operations (33) (595)
Reclassification of foreign currency translation reserve (243) -
Loss on liquidation of the subsidiary before and after income tax (243) -
Loss from discontinued operations (276) (595)
Exchange differences on retranslation of discontinued operations - (268)
Total comprehensive loss from discontinued operations (276) (863)
Net cash flows (used)/generated by discontinued operations
Operating activities (704) 411
Financing activities - (165)
Net cash (outflow)/inflow (704) 246
7. 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 per share. Therefore, the dilutive effect on EPS will vary in future periods depending
on any changes in these factors.
31 May 31 May
2021 2020
£'000 £'000
Earnings
Continuing operations before exceptional items 19,070 8,072
Exceptional items net of tax 98 337
Discontinued operations (276) (595)
Profit for the period attributable to the owners of the Company 18,892 7,814
millions millions
Number of shares
Weighted average number of shares used for basic EPS 132.3 132.0
Dilutive effect of share plans 3.4 3.3
Diluted weighted average number of shares used for diluted EPS 135.7 135.3
31 May 31 May
2021 2020
pence pence
Basic EPS
Continuing operations before exceptional items 14.4 6.1
Exceptional items 0.1 0.3
Discontinued operations (0.2) (0.5)
14.3 5.9
Diluted EPS
Continuing operations before exceptional items 14.1 5.9
Exceptional items - 0.3
Discontinued operations (0.2) (0.4)
13.9 5.8
8. Cash and cash equivalents
Audited
31 May
30 November
2021 2020
£'000 £'000
Cash at bank attributable to continued operations 47,136 49,720
Bank overdraft attributable to continued operations (7) (468)
Net cash and cash equivalents for continued operations 47,129 49,252
Cash at bank attributable to discontinued operations 393 643
Net cash and cash equivalents per the statement of cash flows 47,522 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. SHARE CAPITAL
During the period 556,320 (HY 2020: 402,487) new ordinary shares were issued, resulting in a share premium of £1.6 million
(HY 2020: £0.8 million). These shares were issued pursuant to the exercise of share awards under the Save As You Earn
scheme, Long-Term Incentive Plan ('LTIP') and for certain vested tracker share awards.
Treasury Reserve
Treasury reserve represents SThree plc shares repurchased and available for specific and limited purposes. In the six
months ended 31 May 2021, none of its own shares were purchased or utilised by SThree plc treasury. At the period end,
35,767 (HY 2020: 49,773) 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.
In the six months ended 31 May 2021, the EBT purchased 700,928 (HY 2020: 380,000) of SThree plc shares. The average price
paid per share was 350 pence (HY 2020: 348 pence). In addition, SThree plc gifted 54,054 shares to the EBT. The total
acquisition cost of these shares was £2.6 million (HY 2020: £1.3 million), for which the treasury reserve was reduced.
During the period, the EBT utilised 290,905 (HY 2020: 1,560,539) shares on settlement of LTIP awards. At the period end,
the EBT held 1,098,463 (HY 2020: 532,013) shares.
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, with HSBC and Citibank, giving the Group an option to increase its total borrowings under the facility
to £70.0 million. The Group also has an uncommitted £5.0 million overdraft facility with HSBC. Any funds borrowed under the
RCF bear a minimum annual interest rate of 1.3% above the three-month Sterling LIBOR. During the current period, the Group
did not draw down under these facilities (HY 2020: £50.0 million). Accordingly, the net finance costs decreased to £0.5
million (HY 2020: £0.7 million) and are mainly related to lease interest. In the prior period, average interest rate paid
on drawdown was 1.9%.
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 current period. The RCF facility is available
under these terms and conditions until April 2023.
The Group's exposure to interest rates, liquidity, foreign currency and capital management risks is disclosed in the
Group's 2020 annual financial statements.
Leases
The leases which are recorded on the Condensed 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:
Audited
31 May 30 November
2021 2020
£'000 £'000
Buildings 30,774 30,819
Cars 1,717 1,936
IT equipment 80 123
Total right of use assets 32,571 32,878
Current lease liabilities 12,275 12,078
Non-current lease liabilities 22,969 23,426
Total lease liabilities 35,244 35,504
11. 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 Group currently believes 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.
12. RELATED PARTY DISCLOSURES
The Group's significant related parties are as disclosed in the Group's 2020 annual financial statements. There were no
other material differences in related parties or related party transactions in the period compared to the prior period.
13. Shareholder communications
SThree plc has taken advantage of regulations which provide an exemption from sending copies of its Interim Financial
Report to shareholders. Accordingly, the 2021 Interim Financial Report will not be sent to shareholders but will be
available on the Company's website www.sthree.com or can be inspected at the registered office of the Company.
14. Subsequent events
There were no subsequent events following 31 May 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 costs, which are considered as items impacting
comparability, due to their nature.
Restructuring costs
Support function relocation
This category currently comprises 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, 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
31 May 2021
Revenue Net fees Administrative expenses Operating Profit Tax Profit after Basic EPS
incl. impairment loss profit before tax tax
£'000 £'000 £'000 £'000 £'000 £'000 £'000 pence
As reported 615,118 164,267 (136,044) 28,223 27,732 (8,564) 19,168 14.5
Exceptional items - - (121) (121) (121) 23 (98) (0.1)
Adjusted 615,118 164,267 (136,165) 28,102 27,611 (8,541) 19,070 14.4
31 May 2020
Revenue Net fees Administrative expenses Operating Profit Tax Profit after Basic EPS
incl. impairment loss profit before tax tax
£'000 £'000 £'000 £'000 £'000 £'000 £'000 pence
As reported 596,002 149,906 (135,630) 14,276 13,560 (5,151) 8,409 6.4
Exceptional items - - (416) (416) (416) 79 (337) (0.3)
Adjusted 596,002 149,906 (136,046) 13,860 13,144 (5,072) 8,072 6.1
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 Interim Financial Report, 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 period to period). Constant currency APMs are calculated by
applying the prior period foreign exchange rates to the current and prior financial period 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:
31 May 2021
Revenue Net fees Operating profit Operating profit conversion Profit before tax Basic EPS
£'000 £'000 £'000 ratio* £'000 pence
Adjusted 615,118 164,267 28,102 17.1% 27,611 14.4
Currency impact 1,728 1,429 446 0.1% 457 0.2
Adjusted in constant currency 616,846 165,696 28,548 17.2% 28,068 14.6
31 May 2020
Revenue Net fees Operating profit Operating profit conversion Profit before tax Basic EPS
£'000 £'000 £'000 ratio* £'000 pence
Adjusted 596,002 149,906 13,860 9.2% 13,144 6.1
Currency impact 4,288 884 208 0.1% 226 0.1
Adjusted in constant currency 600,290 150,790 14,068 9.3% 13,370 6.2
*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:
31 May 2021 30 Nov 2020
£'000 £'000
Cash and cash equivalents 47,529 50,363
Bank overdraft (7) (468)
Net cash 47,522 49,895
Adjusted EBITDA
Adjusted EBITDA is calculated by adding back to the reported operating profit operating non-cash items such as the
depreciation and impairment of property, plant and equipment, the amortisation and impairment of intangible assets, the
employee share option and net exceptional items. See the table below illustrating how free cash conversion ratio is
calculated. EBITDA is the sum of operating profit and operating non-cash items. Adjusted EBITDA is intended to provide
useful information to analyse the Group's operating performance excluding the impact of operating non‑cash items as defined
above. The Group also uses adjusted EBITDA to measure the level of financial leverage of the Group by comparing adjusted
EBITDA to net debt.
Net fees margin for continuing operations
The Group uses net fees margin as an APM to evaluate business quality and the service offered to customers. Net fees margin
is defined as total net fees as a percentage of total revenue.
31 May 2021 31 May 2020
Total net fees (£'000) A 164,267 149,906
Total revenue (£'000) B 615,118 596,002
Net fees margin (A ÷ B) 26.7% 25.2%
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 period 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 free cash conversion ratio is calculated:
31 May 2021
Operating Operating Changes in Cash generated Tax and net Rent Free cash
profit non-cash items* working capital from operations interest paid payments conversion
ratio
(B+C+D)
A B C D
÷ A
£'000 £'000 £'000 £'000 £'000 £'000 %
As reported 27,947 10,245 (17,722) 20,470 (9,880) (6,767) 13.7%
Exceptional (121) - 121 - - - n/a
items
Adjusted 27,826 10,245 (17,601) 20,470 (9,880) (6,767) 13.6%
31 May 2020
Operating Operating Changes in Cash generated Tax and net Rent Free cash
profit non-cash items* working capital from operations interest paid payments conversion
ratio
(B+C+D)
A B C D
÷ A
£'000 £'000 £'000 £'000 £'000 £'000 %
As reported 13,689 9,736 18,633 42,058 (5,906) (6,700) 215.2%
Exceptional (416) - 1,100 684 - - n/a
items
Adjusted 13,273 9,736 19,733 42,742 (5,906) (6,700) 226.4%
* Operating non-cash items represent primarily depreciation, amortisation and impairment of intangible assets, and employee
share option and performance share costs as presented in the line 'non-cash charge for share-based payments' of the
Condensed Consolidated Statement of Cash Flows.
Financial Calendar
13 September 2021 Q3 trading update
30 November 2021 2021 financial year end
13 December 2021 Trading update for the year ended 30 November 2021
31 January 2022 Annual results for the year ended 30 November 2021
═══════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════
11 1 Based on article "Breaking the Cost Curve" by Deloitte published on 9 February 2021
(https://www2.deloitte.com/xe/en/insights/industry/health-care/future-health-care-spending.html).
12 2 The Group's alternative performance measures, used throughout this Interim Financial Report, are fully explained
and reconciled to IFRS line items in note 15 to the Condensed Consolidated Financial Statements.
13 3 The Group's alternative performance measures, used throughout this Interim Financial Report, are fully explained
and reconciled to IFRS line items in note 15 to the Condensed Consolidated Financial Statements.
14 4 Source: IRENA International Renewable Energy Agency
https://www.irena.org/DigitalArticles/2020/Sep/Future-Energy-Employment-Will-be-Driven-by-Renewables.
15 5 The Group's ERM framework ensures the ongoing monitoring of principal risks and controls by the Board and Audit
Committee. In this way, the Directors remain vigilant to changes within all SThree's operating environments, proactively
identify new risks and opportunities, whilst striving to mitigate any threats to business viability.
═══════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════
ISIN: GB00B0KM9T71
Category Code: IR
TIDM: STEM
LEI Code: 2138003NEBX5VRP3EX50
Sequence No.: 117852
EQS News ID: 1219741
End of Announcement EQS News Service
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16 fncls.ssp?fn=show_t_gif&application_id=1219741&application_name=news&site_id=refinitiv
References
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4. file:///data/ucdp/tmp/xhtmlconvert_parsn_eqs_36BPXjoz.html#_ftn1
5. file:///data/ucdp/tmp/xhtmlconvert_parsn_eqs_36BPXjoz.html#_ftn2
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