REG-SThree SThree: Half Year Results
25/07/2022 07:15
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SThree (STEM)
SThree: Half Year Results
25-Jul-2022 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR),
transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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SThree plc
RESULTS FOR THE six months ENDED 31 MAY 2022
VERY STRONG PROFIT GROWTH DRIVEN BY demand for stem TALENT and high productivity
SThree plc ("SThree" or the "Group"), the only global pure-play specialist staffing business focused on roles in Science,
Technology, Engineering and Mathematics ('STEM'), today issues its financial results for the six months to 31 May 2022.
FINANCIAL HIGHLIGHTS
HY 2022 HY 2021 Variance
Continuing operations Reported and adjusted Adjusted(1) Reported Reported Like-for-like (2)
Revenue (£ million) 772.2 615.1 615.1 +26% +27%
Net fees (£ million) 203.1 164.3 164.3 +24% +25%
Operating profit (£ million) 44.6 28.1 28.2 +58% +62%
Operating profit conversion ratio (%) 22.0% 17.1% 17.2% +4.8% pts +5.1% pts
Profit before tax (£ million) 44.3 27.6 27.7 +60% +64%
Basic earnings per share (pence) 24.1 14.4 14.5 +67% +71%
Interim dividend per share (pence) 5.0 3.0 3.0 +67% +67%
Net cash (£ million) (3) 48.4 47.5 47.5 +2% +2%
HALF-YEAR HIGHLIGHTS
• Excellent performance across the Group. Record net fees, up 25% YoY(2) with double-digit net fees growth across all regions
and sectors. This has been driven by continuing high demand from our clients for STEM skills and flexible talent.
• Contract and Permanent net fees for H1 up 30% and 11% respectively YoY.
• In line with our strategic focus on flexible talent, Contract has grown to represent 77% of Group net fees (HY 2021: 74%),
with a strong contractor order book(4) up 35% YoY.
• Operating profit was £44.6 million, reflecting a 62% like-for-like increase (HY 2021: £28.1 million) and an exceptional
operating profit conversion ratio of 22%. We expect the conversion ratio to reduce significantly in H2 as we incur the costs
of our investments in people and digital transformation.
• Very strong growth in profit before tax, up 64% like-for-like to £44.3 million (HY 2021: £27.6 million).
• Robust balance sheet with net cash as at 31 May 2022 of £48.4 million (HY 2021: £47.5 million).
• Interim dividend approved at 5.0 pence per share. We intend to remain in line with our current dividend policy of cover in
the range of 2.5x to 3.0x for the full year.
• Making good progress against our ESG targets, including
◦ Over 16,540 lives positively impacted in H1 2022.
◦ SThree’s renewables business (7% of net fees) up 22% versus HY 2021. We are well ahead of our target to double the
share of this business by 2024, up 79% since 2019.
(1) Prior period results exclude the impact of £0.1 million in net exceptional income.
(2) All variances compare adjusted HY 2022 against adjusted HY 2021 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.
(3) Net cash represents cash and cash equivalents less borrowings and bank overdrafts and excluding leases.
(4) The contractor order book represents the value of future net fees until contractual end dates, assuming all contractual
hours are worked.
Timo Lehne, Chief Executive, commented:
“Our Group has generated another excellent period of growth, surpassing the milestone of £200 million of net fees in a half year,
driven by a strong performance across all our regions and STEM disciplines. Our focus on flexible talent, providing our clients
with both independent and employed contractors, continues to deliver, with Contract representing an increasing proportion of our
net fee income.
The macro challenges that we face globally - the need for digital transformation, climate change, supply chain disruption - drive
an ever-increasing need for people with STEM skills. Our clients know that they can come to us for the provision of highly
skilled experts, drawing on our global network and expertise. Similarly, candidates know that by coming to SThree their skills
will be fully appreciated and they will have access to a huge pool of employment opportunities with dynamic organisations across
the world, accelerating their professional growth.
In order to build on the strength of our strategic positioning we are also constantly improving all aspects of our business
operations, with further investment in our people, talent acquisition and digital infrastructure moving forward as planned. This
investment is designed to underpin our long-term success, with most of the current year cost due to fall in the second half as
previously signalled.
Whilst we are mindful of the wider macro-economic uncertainties, the demand for STEM talent, and flexible STEM talent in
particular, is structural. Our position as the number one destination for talent in the best STEM markets and our strong
contractor order book underpins our continued confidence.”
Analyst conference call
SThree is hosting a webinar for analysts today at 08:30 BST. If you would like to register, please contact
1 SThree@almapr.co.uk
The Group will issue its Q3 trading update on 19 September 2022.
Enquiries:
SThree plc
Timo Lehne, CEO via Alma
Andrew Beach, CFO
Alma PR +44 20 3405 0205
Hilary Buchanan 2 Sthree@almapr.co.uk
Susie Hudson
Sam Modlin
Will Ellis Hancock
Notes to editors
SThree plc brings skilled people together to build the future. We are the only global pure-play specialist staffing business
focused on roles in Science, Technology, Engineering and Mathematics ('STEM'), providing permanent and flexible contract talent
to a diverse base of over 8,000 clients across 14 countries. Our Group's c.2,800 staff primarily cover the Technology, Life
Sciences, and Engineering sectors. SThree is part of the Industrial Services sector. We are listed on the Premium Segment of the
London Stock Exchange's Main Market, trading with the ticker code STEM.
Important notice
Certain statements in this announcement are forward looking statements. By their nature, forward looking statements involve a
number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed
or implied by those statements. Forward looking statements regarding past trends or activities should not be taken as
representation that such trends or activities will continue in the future. Certain data from the announcement is sourced from
unaudited internal management information and is before any exceptional items. Accordingly, undue reliance should not be placed
on forward looking statements.
Chief Executive Officer’s STATEMENT
I am pleased to report the first set of results since my appointment as permanent CEO. The excellent performance delivered in the
first half is testament to the strength of our strategy: yet again, our focus on recruiting STEM specialists, in markets with
high demand and limited supply, has underpinned our continued success. The execution of this strategy has been made possible by
the hard work and dedication of our people. Across 45 locations in 14 countries, our consultants have worked tirelessly
throughout the last six months to place a record 10,400 STEM specialists, delivering on our purpose of ‘bringing skilled people
together to build the future.’
Alongside the strong sales performance, key highlights in the period include the work we’ve undertaken to improve our employer
value proposition, the launch of a new global brand identity, and significant strides made against our ESG objectives. Each is
explored in more detail below.
Growth against an uncertain economic backdrop
While there has clearly been heightened macro-economic uncertainty in the last six months, demand from our clients for the skills
our candidates possess has continued to grow strongly, while supply remains tight. This supply constraint is acute, entrenched,
and increasing YoY across our core markets. This dynamic represents a huge opportunity for SThree and our creative approach to
talent acquisition.
Over the last two years we have proven beyond doubt that our focus on STEM and flexible talent has been in greater demand than
more generalist recruitment strategies, as demonstrated by our performance throughout the pandemic and the speed of our
subsequent recovery. In 2020, the year which was most affected by the pandemic crisis, our net fees only declined by 8% YoY; in
the following year, the resilience of our business model, coupled with the accelerating demand for STEM talent needed to overcome
the challenges brought on by the pandemic, helped us to deliver an exceptionally fast recovery with net fees growing by 19% YoY.
This resilience, together with the forward visibility of our growing contractor order book, allows us to retain a confident
outlook going into the second half, despite the uncertain economic backdrop.
Record H1 net fees and good profit growth
Net fee growth has been strong throughout the first half, driven by continued high demand from clients for candidates with STEM
skills. This increase has been seen across the breadth of the Group, with all our top five largest markets delivering
double-digit growth. Similarly, our top three STEM disciplines (Technology, Life Sciences and Engineering) have all generated YoY
growth greater than 15%. As announced in our half-year trading update, this performance was ahead of expectations, leading to an
upgrade to expectations for full-year profitability.
It has been a record six months for net fees. Particularly pleasing is the fact that Q2 was the first period where we were able
to show true like-for-like growth against the previous year, as in the second quarter of 2021 we had largely recovered from the
impact of the pandemic. We can now say with confidence that the growth we are delivering is more than merely a post-Covid
rebound.
Our focus on Contract has seen this area grow faster than Permanent, growing by 30% YoY (in constant currency) and now
representing 77% (HY 2021: 74%) of our net fee generation in the period. Again, this was driven by good performances across the
business, with double-digit growth in Contract net fees delivered by all regions and sectors, demonstrating a widespread,
excellent execution of our strategy. Permanent also delivered a good performance, up 11% YoY (in constant currency), despite
making a conscious decision to focus headcount growth into Contract teams.
Reported operating profit for the period was £44.6 million, up 61% YoY (in constant currency) (HY 2021: £28.2 million). This was
driven primarily by net fee growth, but also benefited from increased productivity per head, which was up 14% YoY. Our operating
profit conversion ratio was very high in the period at 22% (HY 2021: 17%); in line with previous guidance on headcount and other
investments that will flow through in the second half, we expect this to decline in the short term, before rising again as we
begin to see the longer-term benefit from those investments. While we expect productivity to revert to more normal levels over
time as headcount grows, we are confident it will remain above pre-pandemic levels.
Demand for STEM skills continues to grow at pace
Demand for candidates with STEM skills has continued to grow, underpinned by the urgent need to tackle global challenges. Whether
it is increasing the renewable energy supply, supporting the increasing digitalisation of its business or strengthening supply
chains, we have the expert knowledge to find the talent that our clients need.
This growth trend is forecast to continue, particularly in Germany, Netherlands, the UK and the US. For example, according to the
US Bureau for Labor statistics, employment of computer and information research scientists is projected to grow 22% from 2020 to
2030, much faster than the average for all occupations. In the UK, the Institution of Engineering and Technology has recently
estimated that there is a shortfall of over 173,000 workers in the STEM sector.
The trend is also reflected in SThree’s internal data analysis. For example, in Germany we saw the total number of job postings
in Technology increase 46% YoY (April 2022 vs. April 2021). Particular skill sets driving the growth include cybersecurity (with
postings up +71% year on year), application management and data science.
As a long-established STEM recruiter, we are situated at the centre of the sector, and ideally placed to help our customers
source their much-needed STEM talent. As an example, our DACH business worked closely with a new client, a major and highly
innovative aviation company offering electrically powered personal air vehicles, to place a number of experts who are leading
efforts to develop the first to-market flying taxis (Flugtaxis). Our DACH business also continued to support their clients to
fully embrace digital transformation, for example by placing more than 30 IT specialists to support a major international bank in
a transition towards agile banking.
Within the US, we have closely collaborated with the only fully integrated biopharmaceutical solutions organisation, which has
nearly doubled its size in the last six months. In order to help fuel their growth we have increased our Clinical Operations
contractor book by more than 90% YoY.
Flexible talent remains the preference for many
UK unemployment has reached its lowest level for nearly 50 years, and the number of available US jobs has grown for 17
consecutive months (as of May 2022). In our core markets demand is extremely high and, in order to fill vacancies, we are
continuing to see employers turn to a flexible and contingent workforce. In the UK, research shows demand for contract workers
generally was up 24% YoY at the end of March 2022, and similar levels of demand for skilled STEM workers are seen across Europe.
These trends, reflected across all our core markets, are particularly severe for STEM roles, as is clear in the growth of our
contractor order book, up 35% YoY at the end of May 2022.
In addition, demand for the Employed Contractor Model (‘ECM’) continues to be strong. ECM is a model whereby contractors are
directly employed by SThree and is an area in which SThree has built a leading position. ECM now represents 33% of all Contract
work undertaken by the Group, compared to 31% in H1 2021.
While our focus has for many years been on Contract, we also continue to provide customers with access to a wealth of quality
Permanent STEM specialists.
Our ability to offer a compliant end-to-end service across both Permanent and Contract means we are able to service all companies
that would like to work with us, whatever staffing solution they are looking for.
Building a sustainable future for everyone
Whether it is scientists helping to develop life-changing medicine, tech specialists supporting digital transformation or
engineers building clean energy solutions, specialist STEM talent plays a vital role in tackling the most complex issues facing
our world. We continue to focus on our role in bringing skilled people together to build a sustainable future for everyone.
During the first half of this year, we witnessed the Ukraine crisis unfold and responded to support our colleagues who were
impacted by what they witnessed in the media and the experiences of those in their community. As a result, SThree made a donation
of £50,000 to the UN High Commissioner for Refugees and hundreds of colleagues utilised their 40 hours of paid volunteering leave
to support the humanitarian relief efforts.
Whilst we have responded to world events, we have also remained focused on the clear targets and metrics we have in place to
measure our commitment to ESG. In the first half of this year, we continued to make steady progress towards our targets.
A key focus has been on the development of a robust, outcome-focused roadmap to improve gender representation across the business
to ensure we make significant progress towards our ambition to achieve 50/50 representation of women in leadership.
An additional area of focus has been in relation to carbon reduction. We have achieved our target for this and continue to
monitor our carbon emissions as the world re-opens from the pandemic. We have focused our time on developing a science-based net
zero target and transition plan for the business. This target is currently being validated by the Science Based Target Initiative
and will be announced later this year.
Our latest Impact Report for the full year 2021 is available on our corporate website. Below we present an update on the progress
we have made against our stated ESG targets during the first half of the current year:
To reduce our absolute To increase gender
To positively impact To double the share of our global carbon emissions by 20% by representation at
150,000 lives by 2024 renewables business by 2024 2024 leadership levels to
50/50 by 2024
Progress 72,315 lives positively 79% growth in our renewables -71% reduction in 2021 from 30% women currently in
impacted by SThree business net fees since 2019. 2019 (baseline year). leadership positions.
since 1 Dec 2019.
16,544 lives positively
impacted:
22% growth in our renewables
10,414 accessed Decent business net fees in HY YoY. -44% reduction in carbon
Work through SThree emissions in 2021 compared
placements. Our clean energy business to 2020.
continues to grow YoY as the world Launched IdentiFy+ with
2022 half year 2,769 accessed our tackles energy security issues We utilised Earth Day and a second cohort of
activities career support alongside net zero transition World Environment Day to emerging women leaders
programme. requirements. We have introduced educate and influence to accelerate their
new data insight tools to scope sustainable behaviours progression and career
422 accessed community new energy projects and across the business. Our paths.
programmes we support. investments where STEM talent is colleagues volunteered over
required to ensure we maximise the 490 hours to environmental
120 accessed career growing opportunities in the causes so far this year.
development energy sector.
opportunities hosted by
SThree.
Leveraging our position
at the centre of STEM
to deliver sustainable Create a world-class
Alignment to value to our candidates To be a leader in the best STEM operational platform through Find, develop and
strategic pillars and clients. markets we choose to serve. data, technology and retain great people.
infrastructure.
Find, develop and
retain great people.
SDG 4. Quality SDG 10. Reduced
Education SDG 7. Affordable and clean energy SDG 13. Climate action inequalities
Relevant UN
Sustainable SDG 8. Decent Work and SDG 13. Climate action
Development Goals economic growth
SDG 17. Partnerships for the goals
SDG 10. Reduced
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. Our Position: Leveraging our position at the centre of STEM to deliver sustainable value to our candidates and clients.
2. Our Platform: Create a world-class operational platform through data, technology and infrastructure.
3. Our Markets: To be a leader in the markets we choose to serve.
4. Our People: Find, develop and retain great people.
We launched a new brand identity in H1, with a refresh across our corporate website and all other materials, which better
reflects our focus on STEM. The new brand identity is modern, dynamic and distinctive. We’ve also improved the website usability
for clients, candidates and all other core audiences. This new brand identity articulates who we are more clearly, with a new
brand promise to ‘elevate expertise and energise progress’.
The Group’s planned strategic investments - in our people, talent acquisition and digital infrastructure - are weighted towards
the second half of the year, with progress made so far in line with plan.
To strengthen our leadership position in our core markets, we have enhanced our focus on targeting particular niche skills within
each STEM discipline. Currently, our DACH business has a best-in-class methodology for matching headcount investment with skills
in demand, and we are in the process of rolling out this capability across our other regions. We have also strengthened our
commercial discipline, ensuring that our contractor rates are in line with market rates in this inflationary environment.
We are particularly proud of the work implemented to improve our offering for our people. Over the current period we have
improved our employer value proposition globally and used our enhanced SThree career branding to attract staff. We have built on
our talent acquisition capability and invested in reward schemes to support headcount growth and retention going forward. Last
but not least we have enhanced our structured staff training and development programmes, which is not only attractive to our
people but also bolsters our operational excellence and adherence to regional regulations.
Investments
We have commenced a multi-year investment programme to drive towards our FY24 ambitions and deliver sustainable returns over the
longer term. Our investments in new Customer Relationship Management (“CRM”), Enterprise Resource Planning (“ERP”) and Human
Resource Information System (“HRIS”) tools together with our Go To Market brands across our major markets will be focused on
delivering enhanced sales effectiveness as well as scalable and automated end-to-end processes for the flexible talent models we
provide.
While impacting our operating profit conversion ratios in the short term, we are confident the investments will enable us to
deliver sustainably higher conversion ratios over the longer term.
Current trading and outlook
We are very pleased with the continued momentum in the business. Sales remain robust, with good new placement activity.
Productivity levels remain high, even as we hire new heads into the Group, and we are executing very well against all elements of
our strategy.
While mindful of the changing macro-economic situation, we are confident in the resilience of our business and the macro trends
that underpin our continued growth. Our relentless focus on delivering the skills our customers require to succeed means we
occupy an important role as trusted talented provider at the heart of their operations, a position we value and take great care
to fulfil.
The addition of our strategic investments will provide us with an exciting opportunity ahead, though will impact on the
conversion ratio in the very short term. We are well placed to build on our position as one of the leaders in the sector and
continue to deliver very good growth for our stakeholders.
Group OPERATIONAL REVIEW
Overview
The Group delivered an excellent H1 2022 performance across all regions and sectors, which we confirmed in our H1 trading update
was ahead of management and market expectations at the time.
Overall, Group net fees were up 25% 3 1 YoY, primarily attributable to our strategic focus on Contract business, which now
accounts for 77% of the Group net fees and delivered growth of 30% YoY. We are well positioned for the second half of the year as
we continue to build and benefit from a strong contractor book. Our contractor order book increased by 35% YoY reflecting the
ongoing high demand for skilled contractors across all our markets. Permanent net fees were up 11% YoY primarily driven by
growing demand for technology talent in the EMEA excluding DACH region.
The Group is well diversified, in line with our strategy, as we are represented in five of the six largest STEM markets in the
world. Our top three countries represent 73% of Group net fees, with Germany representing 31%, USA 25% and the Netherlands 17%.
Reported operating profit was £44.6 million (HY 2021: £28.2 million), up 61% YoY. A very strong conversion ratio was recorded in
the half, and although this is anticipated to decline in the second half as a result of the investments that we have planned, it
demonstrates the ability of the business to deliver a high conversion ratio. The investments are designed to allow us to
sustainably deliver these levels of margins from 2024 onwards.
Total Group period-end headcount was up 13% YoY with average headcount up 10% YoY. We continued to see our productivity per head
grow, up 14% YoY, but as previously guided, the expectation is that productivity will reduce over time, as the Group’s headcount
grows.
Update and evolution of 2024 ambitions
In line with our 2024 Capital Markets Day ambitions to deliver growth and value for our Group and all stakeholders, we made
further progress in the period in our journey to become the number one STEM talent provider in the best global STEM markets. Our
key achievements so far this year included:
• Gained market share in all five top countries in the first half of the year.
• Achieved operating profit conversion ratio of 22.0%, up 5.1 percentage points on H1 2021.
• Launched IdentiFy+ with a second cohort of emerging women leaders to accelerate their progression and career paths.
• In the fight against climate change, we launched several actions to educate and influence sustainable behaviours across the
business and grew our renewables business by 22% YoY.
• Positively impacted over 16,500 lives through work-related initiatives and career opportunities.
As a new management team, we have taken the last six months to assess the evolution of the market backdrop, evaluate our business
priorities, and clarify the metrics on which we will judge our success. As a result of this exercise, we remain committed to our
ambition to sustainably deliver an operating profit conversion ratio in excess of 21%. We will focus on growing market share on a
net fee basis rather than revenue, and will reflect our intent to be an employer of choice via eNPS benchmarking, while linking
our societal goals to our path to Net Zero carbon emissions. Our free cash conversion metric will no longer be reported as a key
ambition as it no longer reflects our current business model.
The updated ambitions for 2024 are therefore as follows:
• To grow our net fees faster than our peer group across the aggregate of our top five markets compared to 2019
• To deliver an operating profit conversion ratio in excess of 21%
• To deliver an eNPS scored in the upper quartile of the range achieved in the Professional Services sector
• To reduce scope 1, 2 and 3 emissions by 25% compared to 2019
Group
Net fees (£’000) % of Group HY 2022 HY 2021 Variance
Reported Like-for-like(1)
Geographical mix
DACH 35% 70,489 59,067 +19% +24%
EMEA excluding DACH 37% 74,605 59,845 +25% +28%
USA 25% 51,683 40,921 +26% +21%
APAC 3% 6,276 4,434 +42% +47%
Total 203,053 164,267 +24% +25%
Sector mix
Technology 47% 96,339 76,659 +26% +30%
Life Sciences 23% 46,293 39,578 +17% +16%
Engineering 21% 41,679 33,016 +26% +27%
Other sectors(2) 9% 18,742 15,014 +25% +24%
Total 203,053 164,267 +24% +25%
Division mix
Contract 77% 156,944 121,913 +29% +30%
Permanent 23% 46,109 42,354 +9% +11%
Total 203,053 164,267 +24% +25%
(1) All variances are presented 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.
(2) Other sectors include primarily the results of Banking & Finance sector, which was previously presented separately.
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 very strong growth, testament to the strength of our strategy and ongoing demand for contractors,
with net fees up 30% in the period. We saw growth in our Contract sales headcount with average headcount up 8% YoY and strong
productivity growth of 21% YoY. Contract now accounts for 77% (HY 2021: 74%) of Group net fees. Average contract net fee margin
(calculated as Contract net fees as a percentage of Contract revenue) is 21.7%, up from 21.3% in HY 2021. The period ended with a
record number of contractors of 12,492 (HY 2021: 10,013), up 25% YoY.
Our Permanent business saw net fees increase 11% in the period. DACH, our largest Permanent market was up 8% in the period with
net fees in EMEA excluding DACH up 11%. USA net fees were in line with the prior year and APAC up 51%. Our business in Japan,
which accounts for 80% of APAC Permanent, saw growth of 45%. We have seen an increase in Permanent average fee up 3% YoY in the
period. Average permanent fee margin is 25.1%, broadly in line YoY (HY 2021: 25.2%). Average Permanent sales headcount was up 6%
YoY and we will continue to invest strategically in our key Permanent markets.
Operational review by reporting segment
DACH (35% of Group net fees)
HY 2022 HY 2021 Variance
Reported Like-for-like(1)
Revenue (£’000) 258,144 204,493 +26% +32%
Net fees (£’000) 70,489 59,067 +19% +24%
Average total headcount (FTE) 848 831 +2% -
NPS 57 59 -2pts -
(1) All variances are presented 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.
DACH is our second largest region comprising businesses in Austria, Germany and Switzerland, with Germany accounting for 89% of
net fees.
The region delivered a strong performance in the first half, up 24% YoY, with our Technology business up 31% and Engineering
business up 27% YoY. Technology was driven by higher demand for Data Scientists, Open-Source Software Development and Leadership
& Strategic roles. Engineering saw good demand for Construction Management and Automation roles.
DACH, which is our largest Permanent market, saw growth in net fees up 8% YoY with Contract net fees delivering a very strong
performance, growing 32%.
Germany’s net fees were up 22% YoY with Technology up 28% YoY and Engineering up 27%.
Switzerland saw net fees grow 41% and Austria increased net fees by 67%.
Average headcount was up 2% YoY, with period-end headcount up 4%.
EMEA excluding DACH (37% of Group net fees)
HY 2022 HY 2021 Variance
Reported Like-for-like(1)
Revenue (£’000) 348,495 285,855 +22% +25%
Net fees (£’000) 74,605 59,845 +25% +28%
Average total headcount (FTE) 937 897 +4% -
NPS 47 48 -1pts -
(1) All variances are presented 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.
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 which accounts for 46% of net fees, delivered a very strong performance in the
period with net fees up 41%. Notable performances were delivered in Engineering, up 44% YoY, with increased demand for Process
Engineers, Electrical Engineers and Health and Safety advisors, as well as Technology up 40% YoY with higher demand for Project
Managers, Front End Developers, ERP consultants and Business Intelligence and Data Sciences roles.
Following a strong start to the year, the UK continued its momentum by delivering net fee growth of 28% in the first half, driven
by Technology up 38%, as demand increased for roles within IT Leadership and Strategy, Development and Testing, Cloud and Data &
Business Intelligence.
Dubai net fees were up 27% with Belgium net fees up 8%, and France declining by 8% for the period, mainly due to ongoing low
levels of headcount post the pandemic crisis.
Average headcount for the region was up 4% YoY, with period-end headcount up 10%.
USA (25% of Group net fees)
HY 2022 HY 2021 Variance
Reported Like-for-like(1)
Revenue (£’000) 155,132 116,527 +33% +27%
Net fees (£’000) 51,683 40,921 +26% +21%
Average total headcount (FTE) 522 456 +14% -
NPS 55 54 +1pts -
(1) All variances are presented 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.
The USA is the world’s largest specialist STEM staffing market and our third-largest region. It remains a key area of focus for
the Group, and we will continue to invest in the region as we align our resources with the best long-term opportunities.
Our US business saw net fees grow 21% YoY. Life Sciences, our largest sector, saw growth of 16% YoY, with demand for STEM skills
in Clinical Operations, Quality Assurance and Product Development. Net fees in Engineering saw strong growth of 27% YoY, with a
particular focus on Project Management roles within the Utilities sector. Our growing Technology sector saw net fees increase by
25% YoY with increased demand for specialists within Adobe, Mobile Applications, Software Development and Salesforce.
We achieved strong growth in Contract with net fees up 28% YoY; Life Sciences was up 31%, Technology was up 24% and Engineering
was up 30%.
Our Permanent business, the second largest for the Group, saw net fees remain in line with prior year against a strong
comparator.
Average headcount was up 14% YoY, with period-end headcount up 23%.
APAC (3% of Group net fees)
HY 2022 HY 2021 Variance
Reported Like-for-like(1)
Revenue (£’000) 10,478 8,243 +27% +30%
Net fees (£’000) 6,276 4,434 +42% +47%
Average total headcount (FTE) 149 97 +54% -
NPS 40 31 +9pts -
(1) All variances are presented 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.
Our APAC business principally includes Japan and Singapore and accounts for 3% of Group net fees.
APAC net fees were up 47% YoY in the period, with Japan our largest country in the region, up 44%.
Our Japan business is predominantly Permanent and saw Permanent net fees grow 45% YoY, driven by Technology up 31% and Life
Sciences up 15%.
Singapore net fees were up 58%.
Average headcount was up 54% YoY, with period-end headcount up 61%.
Chief financial officer’s REVIEW
In line with the Board's expectations, the strong momentum of 2021 has continued into the first half of 2022, with all of our
core markets and sectors generating year-on-year growth in revenues.
The Group delivered another period of record net fee performance, driven by our well-established strategy positioned at the
centre of high market demand for STEM skills and flexible talent, and our teams’ capabilities to provide excellent customer
service.
Income statement
Revenue for the half year was up 27% 4 2 to £772.2 million (HY 2021: reported £615.1 million) while net fees increased by 25%
to £203.1 million (HY 2021 £164.3 million).
Our contract net fees were up 30% YoY and were led by DACH up 32%, EMEA excluding DACH up 31%, USA up 28% and APAC up 28%. The
contractor order book 5 3 was up 35% YoY with substantial growth across all key sectors reflecting the ongoing high demand for
skilled contractors across our markets. Our ECM proposition also continued to deliver encouraging performance; it was up 37% YoY.
The excellent momentum and activity levels across geographies were reflected in all key sectors - Technology, Life Sciences and
Engineering. Permanent net fee income was up 11% which was largely driven by DACH up 8%, EMEA excluding DACH up 11%, whilst USA
was in line with prior year and APAC up 51%.
Contract represented 77% of the Group net fees in the half year (HY 2021: 74%) and the Group Contract margin increased slightly
to 21.7% (HY 2021: 21.3%).
Operating expenses increased by 16% YoY on a reported basis, mainly attributable to increased personnel costs across the
business, as a result of higher headcount, average salaries and bonuses, and increased share-based payment charges.
In the prior period ended 31 May 2021, the Group’s reported financial results were impacted by a net exceptional income of £0.1
million in relation to a legacy restructuring programme. No exceptional items have been recognised in the current period.
However, in the lead-up to the Group-wide infrastructure investment programme, management have reviewed all legacy development
costs capitalised in previous periods, and this has resulted in a number of write offs, totalling £1.7 million, which have been
expensed in the income statement.
The reported operating profit was £44.6 million, up 61% YoY on a constant currency basis (HY 2021: £28.2 million) driven by
strong performance in Contract net fees.
The Group operating profit conversion ratio 6 4 increased to 22% (HY 2021: 17%) which reflects the positive momentum in net fee
growth and operational leverage. However, we expect this to reduce during the second half of the year due to the planned
investments in people, talent acquisition and digital infrastructure.
Net finance costs
Net finance costs, which predominantly related to lease interest, decreased to £0.4 million (HY 2021: £0.5 million) in line with
a reduction in lease liabilities.
Foreign exchange exposure
In HY 2022, the YoY net currency movements versus Sterling resulted in a modest net headwind to the reported performance of the
Group, reducing net fees by approximately £2.5 million and operating profit by £0.9 million. This was mainly attributable to
Sterling strengthening against the Euro and the US Dollar, the two main trading currencies of the Group.
Income tax
The tax charge for the half year on the Group’s profit before tax was £12.3 million (HY 2021: £8.6 million). It represents an
estimated full-year effective tax rate (‘ETR’) of 28% (HY 2021: 31%). 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 was £44.3 million, up 63% YoY in constant currency and up 60% on a reported basis (HY
2021: reported £27.7 million and adjusted £27.6 million, both excluding the discontinued operations).
The reported profit after tax was £32.0 million, up 70% YoY in constant currency and up 67% on a reported basis (HY 2021:
reported £19.2 million and adjusted £19.1 million, both excluding the discontinued operations).
Earnings per share (‘EPS’)
The reported and adjusted EPS was 24.1 pence (HY 2021: reported 14.5 pence and adjusted 14.4 pence). The YoY growth is
attributable to the exceptionally strong trading performance, lower Group ETR, slightly offset by an increase of 0.3 million in
the weighted average number of shares. Reported diluted EPS was 23.4 pence (HY 2021: 14.1 pence, excluding discontinued
operations). Share dilution results from various share options in place and the 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 monitors the appropriate level of dividend, taking into account achieved and expected trading of the Group, together
with its balance sheet position. The Board aims to offer shareholders long-term ordinary dividend growth within a targeted
dividend cover range of 2.5x to 3.0x through the cycle.
The Board proposes to pay an interim dividend of 5.0 pence (HY 2021: 3.0 pence), amounting to c.£6.7 million in total. This will
be paid on 2 December 2022 to shareholders on record on 4 November 2022. The dividend will be paid from distributable reserves.
Liquidity management
In HY 2022, cash generated from operations was £24.2 million (HY 2021: £20.5 million). This represented the improved adjusted
EBITDA4 offset by the continued growth of the contractor order book increasing our working capital consumption. Income tax paid
increased to £15.1 million (HY 2021: £9.7 million) reflecting the improved underlying trading performance across our markets and
sectors.
Capital expenditure increased to £1.9 million (HY 2021: £1.6 million), the key drivers being the spend on leasehold improvements,
including fitting out a new office in Japan, and IT hardware costs.
The Group paid £7.0 million in rent (HY 2021: £6.8 million), £6.7 million in principal and £0.3 million in interest portion. Net
interest cost (excluding interest on lease payments) was £0.1 million (HY 2021: £0.2 million) during the period. The Group spent
£4.7 million (HY 2021: £2.5 million) for the purchase of its own shares to satisfy employee share incentive schemes, with a
further £5.2m prepaid for shares purchased early in June 2022 (reflected within the HY 2022 net working capital movement). Cash
inflows of £0.3 million (HY 2021: £0.2 million) were generated from Save As You Earn employee scheme.
Dividend payments were £4.0 million (HY 2021: £nil). The final dividend of £10.6 million for the year ended 30 November 2021 was
paid subsequent to the half year, on 10 June 2022.
Foreign exchange had a moderate negative impact on operating profit of £0.8 million (HY 2021: £2.3 million).
Overall, in the first half of 2022, we delivered 5% conversion of operating profit into free cashflow4 (HY 2021: 14%), primarily
reflecting the significant increase in working capital driven by strong growth in the contract order book. We started the period
with net cash of £57.5 million and closed the period with net cash of £48.4 million. This strong cash balance positions us well
for the Group-wide strategic investments in our people, talent acquisition and digital infrastructure, which is weighted towards
the second half of the year and will require significant expenditure over the coming years.
Accessible funding
On 31 May 2021, the Group had total accessible liquidity of £103.4 million, made up of £48.4 million in net cash (HY 2021: £47.5
million), a £50.0 million Revolving Credit Facility, and a £5.0 million overdraft. The net cash position reflected the cash
generated by the Group’s significantly improved YoY trading performance offset by the increased working capital requirements. 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.
During the current period, the Group did not draw down any of the above credit facilities (HY 2021: £nil).
On 21 July 2022, management successfully negotiated a new £50.0 million three-year revolving credit facility to refinance the
existing £50.0 million facility, which was due to mature in May 2023, with key terms and conditions remaining largely similar to
the previous facility. Since this is a new credit facility, it was treated as an extinguishment of the original facility, and all
associated costs and legal fees incurred were recognised immediately in the income statement.
The new facility is subject to financial covenants and any funds borrowed under the new facility will bear a minimum annual
interest rate of 1.2% above the benchmark Sterling Overnight Index Average (SONIA).
The Group continues to retain 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, please refer to note 1 of the financial statements.
PRINCIPAL RISKS AND UNCERTAINTIES
Risk management is a key part of our business, values and culture. Effective risk management enables us to both protect the value
of our business and to proactively manage threats to the delivery of strategic and operational objectives, while enhancing the
realisation of opportunities.
Our approach to risk management is flexible to ensure that it remains relevant at all levels of the business, and dynamic to
ensure we can be responsive to changing business/macro-economic conditions.
In collaboration with the Audit Committee in 2021 the Board conducted a robust assessment of SThree’s business environment and
risk appetite. As a result, the Company’s principal and emerging risks were updated, reframing the Future Growth risk, removing
FX risk, adding Health and Safety risk and giving greater emphasis to the emergent risk of climate change. The Company continues
to evolve its processes in monitoring and assessing risks and opportunities associated with Covid-19.
During 2022, there has been continued focus on the principal risks and oversight of the activities and controls to further
mitigate these risks. The Board agreed during its half year review of principal and emerging risks that climate change would
remain as an emerging risk and as climate change has multiple areas of impact considerations around climate will be embedded into
all the Company’s principal risks, thereby ensuring it forms a part of risk discussions, monitoring and strategy.
In 2022 we have been closely monitoring the impact of the geo-political situation in Ukraine, together with the broader
macro-economic impact of inflation and governments’ response to our business across all markets and sectors. To date, we have
seen no material adverse impact on our business as demand for STEM skills remains strong, with further opportunities related to
renewables, as governments seek to both decarbonise and strengthen energy security. The existing customer portfolio continues to
be reviewed in light of the sanctions imposed on Russian businesses.
For the remainder of the financial year, management will continue to monitor the aforementioned macro-economic circumstances and
related risks to be able to respond as and when required to changes in the market.
Other than the above, the principal risks and uncertainties that the Company expects to be exposed to in the second half of 2022
are substantially the same as those described in the 'Risk management' section of SThree plc Annual Report and Accounts 2021
(pages 82-90). Those principal risks which have changed from 2021 year-end are detailed below. All other principal risks for the
Group: Commercial Relationships; Contractual Liability; People, Talent Acquisition and Retention; Data Privacy, Regulatory
Compliance, and Health and Safety remain unchanged but with positive movement on mitigating activities.
Change
Risk Mitigation
from 2021 year-end
• Strategically diversified business,
geographically, by sector and by
product.
• Strategic focus on STEM markets which
Macro-economic Environment/Cyclicality Risk are less sensitive to economic cycles.
• Strategic focus on Contract market Increase in risk due to external
Rapid changes in the macro-economic environment which is more resilient in less environment with the war in
result in SThree suffering financial exposure certain economic conditions than Ukraine, rising energy prices and
and/or loss. Permanent and provides a counter inflation.
cyclical cash hedge working capital
release with each contract finisher.
• Regular cycle of review of Country
business performance and
macro-economic risks.
Future Growth • Clear strategy with regular planning
and review meetings. Decrease in risk due to robust
Ineffective execution of our strategic initiatives • Oversight of strategic workstreams and strategic and Board review of
and investments could lead to a failure to deliver technology investments through project ongoing projects.
planned growth and value creation. governance committee.
• Embedding global information security
Cyber Security framework.
• Mandatory cyber security and data
SThree suffers a serious system or third-party privacy training for all employees. Decrease in risk due to a
disruption, loss of data or security breach that • Vulnerability scanning to early continued implementation programme
disrupts business critical activities and its identify weaknesses across the estate. of internal control improvement.
ability to meet its contractual and regulatory • Insurance cover in place that provides
compliance. access to helpline in the event of an
incident.
• Priority of investment decisions and
Strategic Change Management approval of business cases through
project governance committee. Decrease in risk due to enhanced
The inability to effectively manage and implement • Full Executive Committee and Board project management team structure
strategic change, resulting in poorly implemented oversight of portfolio dashboard and resource to ensure continued
projects, could lead to wasted resource and/or showing Red, Amber, Green (RAG) visibility and discussion of
adverse financial impact and ability to execute status, timeline, spend and escalation strategic projects.
strategy impacting future growth or the Group. of risks and issues.
The materialisation of our principal risks, either separately or in combination, could have an adverse effect on the
implementation of our strategic priorities, our business model, financial performance, cash flows, liquidity, shareholder value
and other key stakeholders.
Please refer to our 2021 Annual Report and Accounts for further detail on our risks, available at
7 www.sthree.com/en/investors/financial-results/.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge:
(a) the Condensed Consolidated Interim Financial Statements of the Group have been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted for use in the United Kingdom 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 2022 as
required by the Disclosure Guidance and Transparency Rules sourcebook of the UK FCA (‘DTR’) 4.2.4R; and
(b) the half-year results announcement includes a fair review of the significant events during the six months ended 31 May 2022
and a description of the principal risks and uncertainties for the remaining six months of the year ending 30 November 2022;
(c) there have been no significant individual related party transactions during the first six months of the financial year; and
(d) there have been no significant changes in the Group’s related party relationships from those reported in the 2021 Annual
Report and Accounts for SThree plc and its subsidiaries for the year ended 30 November 2021.
The Directors of SThree Plc are listed in the SThree plc Annual Report and Accounts for 30 November 2021. A list of the current
Directors is maintained on the Group’s website 8 www.sthree.com.
The Group’s Condensed Consolidated Interim Financial Statements, and related notes, were approved by the Board and authorised for
issue on 22 July 2022 and were signed on its behalf by:
Timo Lehne Andrew Beach
Chief Executive Officer Chief Financial Officer
22 July 2022
Condensed consolidated income statement
for the six months ended 31 May 2022
(Unaudited) (Unaudited)
Six Months ended Six Months ended
31 May 2022 31 May 2021
£'000 Note Total Before exceptional items Exceptional items Total
Continuing operations
Revenue 2 772,249 615,118 - 615,118
Cost of sales (569,196) (450,851) - (450,851)
Net fees 2 203,053 164,267 - 164,267
Administrative (expenses)/income 3 (157,290) (135,740) 121 (135,619)
Impairment losses on financial assets (1,118) (425) - (425)
Operating profit 44,645 28,102 121 28,223
Finance income 15 10 - 10
Finance costs (366) (501) - (501)
Profit before income tax 44,294 27,611 121 27,732
Income tax expense 4 (12,314) (8,541) (23) (8,564)
Profit for the period from continued operations 31,980 19,070 98 19,168
Discontinued operations
Loss after tax for the period from discontinued 5 - (276) - (276)
operations
Profit for the period
31,980 18,794 98 18,892
attributable to the owners of the Company
Earnings per share
attributable to shareholders pence
Basic 6 24.1 14.2 0.1 14.3
Diluted 6 23.4 13.9 - 13.9
Continuing operations
Basic 6 24.1 14.4 0.1 14.5
Diluted 6 23.4 14.1 - 14.1
The accompanying notes form an integral part of these Condensed Consolidated Interim Financial Statements.
Condensed consolidated statement of comprehensive income
For the six months ended 31 May 2022
(Unaudited) (Unaudited)
Six months ended Six months ended
£'000 Note 31 May 2022 31 May 2021
Profit for the period 31,980 18,892
Other comprehensive income/(loss):
Items that may be subsequently reclassified to income statement
Exchange differences on retranslation of foreign continuing operations 3,018 (4,854)
Other comprehensive income/(loss) for the period (net of tax) 3,018 (4,854)
Total comprehensive income for the period
34,998 14,038
attributable to owners of the Company
Total comprehensive income for the period
attributable to owners of the Company arises from:
Continuing operations 34,998 14,314
Discontinued operations 5 - (276)
34,998 14,038
The accompanying notes form an integral part of these Condensed Consolidated Interim Financial Statements.
Condensed consolidated statement of financial position
as at 31 May 2022
(Unaudited) (Audited)
As at As at
£'000 Note 31 May 2022 30 November 2021
ASSETS
Non-current assets
Property, plant and equipment 34,364 38,073
Intangible assets 848 2,459
Investments 1 1
Deferred tax assets 4,165 4,491
Total non-current assets 39,378 45,024
Current assets
Trade and other receivables 342,450 298,024
Current tax assets 333 -
Cash and cash equivalents 8 48,416 57,526
Total current assets 391,199 355,550
Total assets 430,577 400,574
EQUITY AND LIABILITIES
Equity attributable to owners of the Company
Share capital 9 1,338 1,337
Share premium 9 35,759 35,466
Other reserves (3,533) (4,683)
Retained earnings 142,974 126,033
Total equity 176,538 158,153
Current liabilities
Bank overdraft 8 13 24
Trade and other payables 213,511 196,080
Lease liabilities 10 11,392 13,081
Provisions 6,412 6,258
Current tax liabilities - 2,987
Total current liabilities 231,328 218,430
Non- current liabilities
Lease liabilities 10 19,777 21,987
Provisions 2,934 2,004
Total non-current liabilities 22,711 23,991
Total liabilities 254,039 242,421
Total equity and liabilities 430,577 400,574
The accompanying notes form an integral part of these Condensed Consolidated Interim Financial Statements.
Condensed consolidated statement of changes in equity
for the six months ended
31 May 2022
Capital Currency Fair value Total equity
£'000 Notes Share Share redemption Capital Treasury translation reserve of Retained attributable
capital premium reserve reserve reserve reserve equity earnings to owners of
investments the Company
Balance as at
1 December 1,330 33,026 172 878 (1,496) 340 (12) 94,279 128,517
2020 (Audited)
Profit for the - 18,892 18,892
period - - - - - -
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) (7)
holders
Dividends
payable to 7 - - - - - - - (6,619) (6,619)
equity holders
Settlement of
vested tracker - 93 - - - - - (73) 20
shares
Settlement of
share-based 6 1,465 - - 702 - - (1,975) 198
payments
Purchase of
shares by (2,450) - - (2,450)
Employee - - - - -
Benefit Trust
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
Balance as at
31 May 2021 1,336 34,584 172 878 (3,244) (4,514) (12) 105,168 134,368
(Unaudited)
Balance as at
1 December 1,337 35,466 172 878 (3,367) (2,354) (12) 126,033 158,153
2021 (Audited)
Profit for the - - - - - - - 31,980 31,980
period
Other
comprehensive - - - - - 3,018 - - 3,018
income for the
period
Total
comprehensive - - - - - 3,018 - 31,980 34,998
income for the
period
Dividends paid
to equity 7 - - - - - - - (3,965) (3,965)
holders
Dividends
payable to 7 - - - - - - - (10,636) (10,636)
equity holders
Distributions
to tracker - - - - - - - (7) (7)
shareholders
Settlement of
vested tracker - - - - - - - 183 183
shares
Settlement of
share-based 1 293 - - 2,850 - - (2,850) 294
payments
Purchase of
shares by 9 - - - - (4,718) - - - (4,718)
Employee
Benefit Trust
Credit to
equity for
equity-settled - - - - - - - 2,236 2,236
share-based
payments
Total
movements in 1 293 - - (1,868) 3,018 - 16,941 18,385
equity
Balance as at
31 May 2022 1,338 35,759 172 878 (5,235) 664 (12) 142,974 176,538
(Unaudited)
The accompanying notes form an integral part of these Condensed Consolidated Interim Financial
Statements.
Condensed consolidated statement of cash flows
for the six months ended 31 May 2022
(Unaudited) (Unaudited)
Six months ended Six months ended
£'000 Note 31 May 2022 31 May 2021
Cash flows from operating activities
Profit from continuing operations before tax after exceptional items 44,294 27,732
Loss before tax from discontinued operations - (276)
Profit before tax 44,294 27,456
Adjustments for:
Depreciation and amortisation charge 8,468 9,317
Write off of intangible assets 1,705 -
Loss on disposal of property, plant and equipment 11 14
Finance income (15) (10)
Finance costs 366 501
Loss on liquidation of subsidiaries - 243
Non-cash charge for share-based payments 2,236 671
Operating cash flows before changes in working capital and provisions
57,065 38,192
Increase in receivables (37,514) (11,226)
Increase/(decrease) in payables 3,503 (1,899)
Increase/(decrease) in provisions 1,184 (4,597)
Cash generated from operations 24,238 20,470
Interest received 15 10
Income tax paid - net (15,129) (9,697)
Net cash generated from operating activities 9,124 10,783
Cash flows from investing activities
Purchase of property, plant and equipment (1,873) (1,132)
Purchase of intangible assets - (522)
Net cash used in investing activities (1,873) (1,654)
Cash flows from financing activities
Interest paid (366) (193)
Lease principal payments (6,722) (6,767)
Proceeds from exercise of share options 294 197
Purchase of shares by Employee Benefit Trust (4,718) (2,450)
Dividends paid to equity holders 7 (3,965) (7)
Net cash used in financing activities (15,477) (9,220)
Net decrease in cash and cash equivalents (8,226) (91)
Cash and cash equivalents at beginning of the period 57,502 49,895
Exchange losses relating to cash and cash equivalents (873) (2,282)
Net cash and cash equivalents at end of the period 8 48,403 47,522
The accompanying notes form an integral part of these Condensed Consolidated Interim Financial Statements.
Notes to the CONDENSED CONSOLIDATED Financial REPORT
for the six months ended 31 May 2022
1. basis of preparation and Accounting policies
Basis of preparation
SThree plc 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.
These Condensed Consolidated Financial Statements ('Interim Financial Report') as at and for the six months ended 31 May 2022
comprise SThree plc ('the Company') and its subsidiaries (referred to as the ‘Group’).
The Group’s Interim Financial Report has been prepared in accordance with International Accounting Standard 34, ‘Interim
Financial Reporting’ as adopted for use in the United Kingdom (UK), and the Disclosure Guidance and Transparency Rules sourcebook
of the UK’s Financial Conduct Authority. It should be read in conjunction with the SThree plc' Annual Report and Accounts 2021,
prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and
the international financial reporting standards ('IFRS') adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union.
The Interim Financial Report does not constitute statutory accounts as defined by section 434 of the Companies Act 2006. A copy
of the statutory accounts for the year ended 30 November 2021 has been 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 22 July 2022.
Going concern
The financial information contained in this Interim Financial Report has been prepared on the going concern basis. The Directors
have at the time of approving the half year financial report, a reasonable expectation that the Group have adequate resources to
continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting
in preparing the financial statements.
In the assessment of the going concern basis of preparation, the Directors considered the future performance of the Group,
including its cashflows and liquidity position. The Directors also assessed the Group’s financial position, including accessible
liquidity with committed borrowing facilities, as set out in note 8 and note 11 to the financial statements. At 31 May 2022, the
Group had £48.4 million in net cash, with no debt except for IFRS 16 lease liabilities of £31.2 million. Debt facilities relevant
to the review period comprise a committed £50.0 million RCF facility expiring in May 2023 (with all covenants met as at 31 May
2022) and an uncommitted £20.0 million accordion facility, both jointly provided by HSBC and Citibank. A further uncommitted £5.0
million bank overdraft facility is also held with HSBC. These facilities remained undrawn on 31 May 2022. Refer to note 11 for
further details on the new credit facility which will replace the existing RCF as mentioned here.
In line with the Board's expectations, the strong momentum of 2021 continued into the first half of 2022. For the six months
ended 31 May 2022, the Group delivered exceptionally strong results across its core markets and sectors, driven by the continued
execution of the well-established strategy and reflecting ongoing strength in new placement activity. 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. In addition, the Group made significant progress in the previously
guided investment in its people, talent acquisition and infrastructure to drive long-term sustainable growth.
The Group has prepared a base case forecast reflecting the trading performance in the first half of the year and expectations for
market developments over the period to 30 November 2023. The base case scenario was sensitised to reflect a severe but plausible
downside scenario including the recent geo-political crisis in Europe (its possible unfavourable impact on the demand for STEM
experts, inflation rates and interest rates), and other principal risks on the Group's performance. In the severe but plausible
downside scenario there remains a strong significant liquidity position and significant headroom against banking covenants.
In light of the war in Ukraine which commenced on 24 February 2022, the Group has considered whether any adjustments are required
to reported amounts in the financial statements. The Group does not have any operations in Ukraine or Russia, nor it is directly
affected by trading restrictions or sanctions. Whilst we are conscious of the broader uncertainties arising from the war in
Ukraine and its potential macro-economic consequences, our direct exposure is minimal. There is no impact on the Group’s ability
to continue as a going concern because of this event and the Management continues to monitor the above risks in order to be able
to react agilely to changes in the market.
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 2021 as set out below.
New and amended standards effective in 2022 and adopted by the Group
The following amendment to the accounting standards, issued by the IASB and endorsed by the UK and EU, have been adopted by the
Group which became applicable as of 1 December 2021. 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 7, IFRS 9, IFRS 16 and IAS 39, Interest Rate Benchmark Reform - phase 2.
The replacement of Interbank Offered Rates ('IBORs') with Alternative Reference Rates ('ARRs') began from December 2021. Where
floating interest-bearing receivables and payables exist (currently based on IBORs) the Group applied suitable replacement
benchmark rates and account for the instruments in accordance with the amendments to IFRS 9 Financial Instruments published in
2019 (Phase 1) and 2020 (Phase 2). The adoption of these amendments and the transition to ARRs have an immaterial financial
impact. The implications on the trading results of our segments of IBOR reform have also been assessed and the expected impact is
immaterial.
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 amendments to existing standards were in issue
but not yet effective. Where already endorsed by the UKEB, these changes will be adopted on the effective dates noted. Where not
yet endorsed by the UKEB, the adoption date is less certain. These amendments are not expected to have a material impact on the
Group in the current or future periods.
- Reference to the Conceptual Framework (amendments to IFRS 3)
- Property, plant and equipment - proceeds before intended use (amendments to IAS 16)
- Onerous contracts - cost of fulfilling a contract (amendments to IAS 37)
- Annual improvements to IFRS 2018-2020 (amendments to the following standards: IFRS 1, IFRS 9, IFRS 16 and IAS 41).
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 includes the use of estimates and assumptions. Although the estimates used are
based on the management's best information about current circumstances and future events and actions, actual results may differ
from these estimates.
In preparing this Interim Financial Report, the judgements made by management in applying the Group’s accounting policies and the
key sources of estimation uncertainty were the same as those applied in the Group's 2021 Annual Report and Accounts 2021.
Alternative Performance Measures
The Group presents certain measures of financial performance, position or cash flows in the Interim Financial Report that are not
defined or specified according to IFRS. These measures, referred to as APMs, are defined and reconciled to IFRS in note 16 to the
Condensed Consolidated Financial Statements, and were prepared on a consistent basis for all periods presented.
2. operating segments
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-making body, 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-making body 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 Belgium, France, Luxembourg, 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 (independent contractors, employed contractors and permanent
candidates); and
- the class of candidates (candidates who are placed with SThree's clients, represent skill sets in Science, Technology,
Engineering and Mathematics disciplines).
The Group's management reporting and controlling systems use accounting policies that are the same as those described in these
financial statements and in the Group's 2021 annual financial statements.
Revenue and net fees by reportable segment
The Group assesses the performance of its operating segments through a measure of segment profit or loss which is referred to as
'net fees' in the management reporting and controlling systems. Net fees is the measure of segment profit comprising revenue less
cost of sales.
Intersegment revenue is recorded at values which approximate third-party selling prices and is not significant.
Revenue (Unaudited) Net fees (Unaudited)
Six months ended Six months ended
£’000 31 May 2022 31 May 2021 31 May 2022 31 May 2021
EMEA excluding DACH 348,495 285,855 74,605 59,845
DACH 258,144 204,493 70,489 59,067
USA 155,132 116,527 51,683 40,921
APAC 10,478 8,243 6,276 4,434
772,249 615,118 203,053 164,267
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
For the six months ended 31 May 2022
excluding DACH USA APAC Total
£’000
DACH
Timing of revenue recognition
Over time 338,178 237,556 143,993 5,182 724,909
At a point in time 10,317 20,588 11,139 5,296 47,340
348,495 258,144 155,132 10,478 772,249
EMEA
For the six months ended 31 May 2021
excluding DACH USA APAC Total
£’000
DACH
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
Major customers
In the six months ended 31 May 2022 (HY 2021: none) 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 (Unaudited) Net fees (Unaudited)
Six months ended Six months ended
£'000 31 May 2022 31 May 2021 31 May 2022 31 May 2021
Germany 225,859 184,060 62,838 53,952
USA 155,132 116,527 51,683 40,921
Netherlands 146,137 116,788 34,620 25,576
UK 123,818 91,233 22,185 17,283
Japan 5,130 3,968 4,475 3,327
RoW(1) 116,173 102,542 27,252 23,208
772,249 615,118 203,053 164,267
(1) RoW (Rest of the World) includes all countries other than listed.
(Unaudited) (Audited)
As at As at
£'000 31 May 2022 30 November 2021
Non-current assets
USA 11,105 5,304
Germany 8,133 12,079
Netherlands 4,415 2,400
UK 4,352 11,027
Japan 2,393 4,211
RoW 4,815 5,512
35,213 40,533
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 (Unaudited) Net fees (Unaudited)
Six months ended Six months ended
£'000 31 May 2022 31 May 2021 31 May 2022 31 May 2021
Brands
Computer Futures 267,129 204,989 68,110 53,818
Progressive 215,725 174,560 56,687 46,356
Real Staffing Group 174,484 134,778 50,237 41,683
Huxley Associates 114,911 100,791 28,019 22,410
772,249 615,118 203,053 164,267
Other brands including Global Enterprise Partners, JP Gray, Madison Black, Newington International and Orgtel are rolled into the
above brands.
Revenue (Unaudited) Net fees (Unaudited)
Six months ended Six months ended
£'000 31 May 2022 31 May 2021 31 May 2022 31 May 2021
Recruitment classification
Contract 724,909 571,724 156,944 121,913
Permanent 47,340 43,394 46,109 42,354
772,249 615,118 203,053 164,267
Revenue (Unaudited) Net fees (Unaudited)
Six months ended Six months ended
£'000 31 May 2022 31 May 2021 31 May 2022 31 May 2021
Sectors
Technology 397,218 309,766 96,339 76,659
Engineering 155,816 124,170 41,679 33,016
Life Sciences 154,966 126,187 46,293 39,578
Other(2) 64,249 54,995 18,742 15,014
772,249 615,118 203,053 164,267
(2) Other includes the results of Banking & Finance sector, which was previously presented separately, and Procurement & Supply
Chain and Sales & Marketing.
3. PROFIT AND LOSS INFORMATION
a. Operating profit from continuing operations is stated after charging/(crediting):
(Unaudited) (Unaudited)
Six months ended Six months ended
£'000 31 May 2022 31 May 2021
Staff costs 121,298 104,195
Depreciation 8,250 8,099
Amortisation, including write off of intangible assets(1) 1,923 1,218
Impairment loss on financial assets 1,118 425
Loss on disposal of property, plant and equipment 11 14
Service lease charges
• Buildings 789 1,079
• Cars 147 104
Foreign exchange losses 284 377
Other operating income (see note 3(b)) - (296)
1. Write off of intangible assets
In line with one of the Group’s strategic priorities to create a world-class operational platform through data, technology and
infrastructure, the Board approved of the Group-wide infrastructure investment programme due to start in H2 2022. Accordingly,
the management took this opportunity to review the entire book of legacy development costs and assets under construction
capitalised in previous periods. Hence, the decision was taken to expense nearly £1.7 million worth of the legacy intangible
assets immediately to the income statement.
b. Profit for the prior period included the following items that were unusual because of their nature, size or incidence:
(Unaudited) (Unaudited)
Six months ended Six months ended
£’000 31 May 2022 31 May 2021
Net exceptional income - 121
Impact of Covid-19
Government assistance income - 175
- 296
Net exceptional income
In the prior period, the Group recognised a net exceptional income of £0.1 million in relation to a legacy restructuring
programme which was partially funded by a grant receivable from Scottish Enterprise. The Group was entitled to the grant until
the end of 2021.
Impact of Covid-19
The Covid-19 health crisis had implications on certain items of income in the Group Condensed Consolidated Financial Statements,
affecting the profit before tax for the prior period. These items were not treated as exceptional.
Government assistance income
In the prior period, 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 was recognised and presented as a
deduction in reporting the related staff expense. No such benefits were received in the current period.
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 £12.3 million (HY 2021: £8.6 million) at an ETR of 27.8% (HY
2021: 30.9%) on continuing operations. 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. The ETR was higher in the prior period mainly
due to an increase in the Uncertain Tax Provision in 2021 relating to transfer pricing risks.
In the prior year, the Group held a provision of £1.4 million in respect of an appeal to the General Court (‘GC’) of the European
Court of Justice on state aid. On 8 June 2022, the GC dismissed the appeal. The Group has decided not to appeal this decision. As
the £1.4 million liability has already been settled pending resolution of the case, there is no additional financial impact.
A deferred tax asset of £4.2 million (as at 30 November 2021: deferred tax asset of £4.5 million) is in the financial statements
for the six months ended 31 May 2022. This comprised deferred tax assets of £4.2 million (as at 30 November 2021: £4.6 million)
and deferred tax liabilities of £nil (as at 30 November 2021: £0.1 million). The deferred tax assets arise on accelerated
depreciation, share based payments and provisions. The movement in the period is primarily as a result of reclassing the
Uncertain Tax Provisions from deferred tax to current tax.
At the reporting date, the Group had unused tax losses of £35.4 million (as at 30 November 2021: £34.1 million) available for
offset against future profits. No deferred tax asset was recognised against these losses.
5. Discontinued operations
In the financial year ending 30 November 2020, the Group liquidated the Australian subsidiary ('SThree Australia'), the
operations of which represented a separate major line of business for SThree. Since then, SThree Australia was treated as
discontinued operations and its results were reported separately from the continuing operations of the Group.
In the prior period, the post-tax loss of £0.3 million from discontinued operations was reported on the face of the Condensed
Consolidated Income Statement, which comprised the following items of income and expense after intra-group eliminations.
(Unaudited) (Unaudited)
Six months ended Six months ended
£'000 31 May 2022 31 May 2021
Cost of sales - (21)
Administrative expenses - (12)
Operating loss - (33)
Loss before and after income tax of discontinued operations - (33)
Reclassification of foreign currency translation reserve - (243)
Total comprehensive loss on liquidation of the subsidiary - (276)
Net cash flows used by discontinued operations were as follows in the prior period:
Operating activities - (704)
6. Earnings per share
Basic earnings per share ('EPS') is calculated by dividing the profit for the year attributable to owners of the Company by the
weighted average number of ordinary shares outstanding during the period 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.
Diluted EPS is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all
dilutive ordinary shares arising from exercising employee stock options and tracker shares.
The calculation of basic and diluted earnings per share is based on the following data:
(Unaudited) (Unaudited)
Six months ended Six months ended
£'000 31 May 2022 31 May 2021
Earnings
Continuing operations before exceptional items 31,980 19,070
Exceptional items net of tax - 98
Discontinued operations - (276)
Profit for the period attributable to the owners of the Company 31,980 18,892
(Unaudited) (Unaudited)
Six months ended Six months ended
millions 31 May 2022 31 May 2021
Number of shares
Weighted average number of shares used for basic EPS 132.6 132.3
Dilutive effect of share plans 4.1 3.4
Diluted weighted average number of shares used for diluted EPS 136.7 135.7
(Unaudited) (Unaudited)
Six months ended Six months ended
pence 31 May 2022 31 May 2021
Basic EPS
Continuing operations before exceptional items 24.1 14.4
Exceptional items - 0.1
Discontinued operations - (0.2)
24.1 14.3
Diluted EPS
Continuing operations before exceptional items 23.4 14.1
Exceptional items - -
Discontinued operations - (0.2)
23.4 13.9
7. Dividends
(Unaudited) (Unaudited)
Six months ended Six months ended
£'000 31 May 2022 31 May 2021
Amounts recognised as distributions to equity holders in the period
Interim dividend of 3.0 pence (2020: nil pence) per share 3,965 -
Final dividend of 8.0 pence (2020: 5.0 pence) per share 10,636 6,626
14,601 6,626
The interim dividend for the year ending 30 November 2021 of 3.0 pence (2020: nil pence) per share was paid on 3 December 2021 to
those shareholders on the register of SThree plc on 5 November 2021.
The final dividend for the year ending 30 November 2021 of 8.0 pence (2020: 5.0 pence) per share was approved by shareholders at
the Annual General Meeting on 20 April 2022 and has been included as a liability in this Interim Financial Report. The dividend
was paid on 10 June 2022 to those shareholders on the register of SThree plc on 6 May 2022. The dividend was paid from
distributable reserves of SThree plc, as presented in the annual financial statements for the year ended 30 November 2021.
8. Cash and cash equivalents
(Unaudited) (Audited)
As at As at
£'000 31 May 2022 30 November 2021
Cash at bank 48,416 57,526
Bank overdraft (13) (24)
Net cash and cash equivalents 48,403 57,502
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 120,438 (HY 2021: 556,320) new ordinary shares were issued, resulting in a share premium of £0.3 million (HY
2021: £1.6 million). These shares were issued pursuant to the exercise of share awards under the Save As You Earn scheme.
Treasury Reserve
Treasury reserve represent SThree plc shares repurchased and available for specific and limited purposes.
In the six months ended 31 May 2022, no shares were purchased or utilised from the treasury reserve. At the period end, 35,767
(HY 2021: 35,767) shares were held in treasury.
Employee Benefit Trust
The Group holds shares in the Employee Benefit Trust ('EBT'). The EBT is funded entirely by the Company and acquires shares in
SThree plc to satisfy future requirements of the employee share-based payment schemes.
For accounting purposes shares held in the EBT are treated in the same manner as shares held in the treasury reserve by the
Company and are, therefore, included in the financial statements as part of the treasury reserve for the Group.
In the six months ended 31 May 2022, the EBT purchased 1,189,306 (HY 2021: 700,928) of SThree plc shares. The average price paid
per share was 397 pence (HY 2021: 350 pence). The total acquisition cost of the purchased shares was £4.7 million (HY 2021: £2.5
million), for which the treasury reserve was reduced. During the period, the EBT utilised 687,858 (HY 2021: 290,905) shares on
settlement of Long-Term Incentive Awards. At the period end, the EBT held 1,424,810 (HY 2021: 1,098,463) shares.
10. 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:
(Unaudited) (Audited)
As at As at
£'000 31 May 2022 30 November 2021
Buildings 26,900 30,667
Cars 1,679 1,631
IT equipment 18 49
Total right of use assets 28,597 32,347
Current lease liabilities 11,392 13,081
Non-current lease liabilities 19,777 21,987
Total lease liabilities 31,169 35,068
The Condensed Consolidated Income Statement includes the following amounts relating to depreciation of right-of-use assets:
(Unaudited) (Unaudited)
Six months ended Six months ended
£'000 31 May 2022 30 May 2021
Buildings 5,869 5,578
Cars 560 561
IT equipment 35 44
Total depreciation charge of right-of-use assets 6,464 6,183
In the current period interest expense on leases amounted to £0.3 million (HY 2021: £0.3 million) and was recognised within
finance costs in the Condensed Consolidated Income Statement.
The total cash outflow for leases in six months ended 31 May 2022 was £7.0 million (HY 2021: £6.8 million) and comprised the
principal and interest element of recognised lease liabilities.
11. other financial liabilities
As at 31 May 2022, the Group maintained a committed Revolving Credit Facility ('RCF') of £50.0 million along with an uncommitted
£20.0 million accordion facility, with HSBC and Citibank. The Group also had an uncommitted £5.0 million overdraft facility with
HSBC. During the current and prior period, the Group did not draw down under these facilities. Accordingly, the net finance costs
remained stable YoY at £0.4 million (HY 2021: £0.5 million) and were mainly related to lease interest.
The RCF was subject to certain covenants requiring the Group to maintain financial ratios over interest cover, leverage and
guarantor cover. During the current period, the EBITDA guarantor cover for the period from 1 September 2021 until 22 April 2022
was assessed to be 83.3%, falling slightly short of the 85.0% requirement. This situation arose due to the increasing
profitability of SThree Austria GmbH, which at that time was not a guarantor, but subsequently acceded as a guarantor. Since the
facility has been undrawn throughout the current and prior period, the financial impact of the technical breach was limited to an
increase in the commitment fee base margin from 45.5 to 70.0 basis points. Subsequent to that and in light of immaterial size of
the breach on 27 April 2022 the lenders agreed to unconditionally waive the event of default with immediate effect.
On 21 July 2022, the management successfully negotiated a new credit facility that extends to June 2025 (with options to extend
it until 2027), with key terms and conditions remaining largely similar to the previous facility. Since this is a new credit
facility, it was treated as an extinguishment of the original facility, and all associated costs and legal fees incurred were
recognised immediately in the income statement.
The new facility is subject to financial covenants and any funds borrowed under the new facility will bear a minimum annual
interest rate of 1.2% above the benchmark Sterling Overnight Index Average (SONIA).
The Group's exposure to interest rates, liquidity, foreign currency and capital management risks is disclosed in the Group's 2021
annual financial statements.
12. Contingent liabilities
Legal
The Group is involved in various disputes and claims which arise from time to time in the course of its business. These are
reviewed on a regular basis and, where possible, an estimate is made of the potential financial impact on the Group. The Group
has contingent liabilities in respect of these claims. In appropriate cases a provision is recognised based on advice, best
estimates and management judgement.
The Directors currently believe the likelihood of any material liabilities to be low, and that such liabilities, if any, will not
have a material adverse effect on its financial position.
13. RELATED PARTY DISCLOSURES
The Group’s significant related parties are as disclosed in the Group's 2021 annual financial statements. There have been no
significant changes to the nature of its related party transactions as disclosed in note 23 of the SThree plc’s Annual Report and
Accounts 2021.
14. 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 2022 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.
15. Subsequent events
There were no subsequent events following 31 May 2022.
16. ALTERNATIVE PERFORMANCE MEASURES (‘APMs’): definitions and reconciliations
Adjusted APMs
In discussing the performance of the Group, comparable measures are used, which are calculated by deducting from the directly
reconcilable IFRS measures the impact of the Group’s restructuring income recognised in the prior period, which is considered as
an item impacting comparability, due to its nature. The restructuring income comprised government grant income arising from a
strategic relocation of SThree's central support functions away from the London headquarters to the Centre of Excellence located
in Glasgow in 2018.
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 2022 (Unaudited)
£’000, unless otherwise Administrative expenses Profit before Profit
stated Revenue Net fees incl. impairment loss Operating profit tax Tax Basic EPS
after tax
As reported and 772,249 203,053 (158,408) 44,645 44,294 (12,314) 31,980 24.1p
adjusted
31 May 2021 (Unaudited)
£’000, unless Administrative expenses Profit before Profit
otherwise stated Revenue Net fees incl. impairment loss Operating profit tax Tax Basic EPS
after tax
As reported 615,118 164,267 (136,044) 28,223 27,732 (8,564) 19,168 14.5p
Exceptional items - - (121) (121) (121) 23 (98) (0.1)p
Adjusted 615,118 164,267 (136,165) 28,102 27,611 (8,541) 19,070 14.4p
APMs in constant currency
As the Group operates in 14 countries and with many different currencies, it is affected by foreign exchange movements, and the
reported financial results reflect this. However, the Group business is managed against targets which are set to be comparable
between years and within them, for otherwise foreign currency movements would undermine the management ability to drive the
business forward and control it. Within this Interim Financial Report, comparable results have been highlighted 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 2022 (Unaudited)
£’000, unless otherwise stated Revenue Net fees Operating profit Operating profit conversion ratio* Profit before tax Basic EPS
Adjusted 772,249 203,053 44,645 22.0% 44,294 24.1p
Currency impact 11,331 2,482 919 0.2% 929 0.5p
Adjusted in constant currency 783,580 205,535 45,564 22.2% 45,223 24.6p
31 May 2021 (Unaudited)
£’000, unless otherwise stated Revenue Net fees Operating profit Operating profit conversion ratio* Profit before tax Basic EPS
Adjusted 615,118 164,267 28,102 17.1% 27,611 14.4p
Currency impact 1,728 1,429 446 0.1% 457 0.2p
Adjusted in constant currency 616,846 165,696 28,548 17.2% 28,068 14.6p
*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:
(Unaudited) (Audited)
As at As at
£’000 31 May 2022 30 November 2021
Cash and cash equivalents 48,416 57,526
Bank overdraft (13) (24)
Net cash 48,403 57,502
Adjusted EBITDA
In addition to measuring financial performance of the Group based on operating profit, the Directors also measure performance
based on EBITDA. It is calculated by adding back to the reported operating profit operating non-cash items such as the
depreciation and impairment of property, plant and equipment ('PPE'), the amortisation and impairment of intangible assets, and
the employee share options.
The Group also discloses adjusted EBITDA which is intended to provide useful information to analyse the Group’s operating
performance excluding the impact of operating non‑cash items as defined above and net exceptional items. Where relevant, the
Group also uses adjusted EBITDA to measure the level of financial leverage of the Group by comparing adjusted EBITDA to net debt.
A reconciliation of reported operating profit for the period, the most directly comparable IFRS measure, to EBITDA and adjusted
EBITDA is set out below.
(Unaudited) (Unaudited)
Six months ended Six months ended
£’000 31 May 2022 31 May 2022
Reported operating profit for the period from continuing operations 44,645 28,223
Reported operating loss for the period from discontinued operations - (33)
Depreciation and impairment of PPE 8,250 8,099
Amortisation and impairment of intangible assets 1,923 1,218
Loss on disposal of PPE 11 14
Employee share options 2,236 671
EBITDA 57,065 38,192
Exceptional items - (121)
Adjusted EBITDA 57,065 38,071
Contract margin for continuing operations
The Group uses Contract margin as an APM to evaluate Contract business quality and the service offered to customers. Contract
margin is defined as Contract net fees as a percentage of Contract revenue.
(Unaudited) (Unaudited)
Six months ended Six months ended
£'000, unless otherwise stated 31 May 2022 31 May 2022
Contract net fees A 156,944 121,913
Contract revenue B 724,909 571,724
Contract margin (A ÷ B) 21.7% 21.3%
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 2022 (Unaudited)
Operating Changes in Cash generated Tax and net Rent payments incld. interest Free cash
Operating profit non-cash working from operations interest paid portion conversion
items* capital on RCF ratio
£'000, unless (B+C+D)
otherwise stated A B C D
÷ A
As reported and adjusted 44,645 12,420 (32,827) 24,238 (15,218) (6,984) 4.6%
31 May 2021 (Unaudited)
Operating Changes in Cash generated Tax and net Rent payments incld. interest Free cash
Operating profit non-cash working from operations interest paid portion conversion
items* capital on RCF ratio
£'000, unless (B+C+D)
otherwise stated A B C D
÷ A
As reported 27,947 10,245 (17,722) 20,470 (9,880) (6,767) 13.7%
Exceptional items (121) - 121 - - - n/a
Adjusted 27,826 10,245 (17,601) 20,470 (9,880) (6,767) 13.6%
* Operating non-cash items represent depreciation, amortisation, loss on disposal of PPE and employee share options 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
19 September 2022 Q3 trading statement
30 November 2022 2022 financial year end
14 December 2022 Trading update for the year ended 30 November 2022
30 January 2023 Annual results for the year ended 30 November 2022
═════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════
9 1 All variances are presented 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.
10 2 All variances are presented 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.
11 3 The contractor order book represents value of net fees until contractual end dates, assuming all contractual hours are
worked.
12 4 The Group has identified and defined certain alternative performance measures ('APM'). These are the key measures the
Directors use to assess the SThree's underlying operational and financial performance. The APMs are fully explained and
reconciled to IFRS line items in note 16 to the Condensed Consolidated Financial Statements.
═════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════
ISIN: GB00B0KM9T71
Category Code: IR
TIDM: STEM
LEI Code: 2138003NEBX5VRP3EX50
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EQS News ID: 1404497
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