REG-SThree SThree: Half Year Trading Update

SThreeAnnouncement

14/06/2021 07:05

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   SThree (STEM)
   SThree: Half Year Trading Update

   14-Jun-2021 / 07:01 GMT/BST
   Dissemination of a Regulatory Announcement, transmitted by EQS Group.
   The issuer is solely responsible for the content of this announcement.

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   14 June 2021

                                        

                                   SThree plc

                                        

                            Half Year Trading Update

                                        

   Performance ahead of expectations in Q2 drives HY net fees up both YoY and
                                    vs 2019

                                        

   SThree plc ("SThree" or the "Group"), the only global pure-play specialist
   staffing business focused on roles in Science, Technology, Engineering and
   Mathematics ('STEM'), is pleased to issue its scheduled trading  update(1)
   for the half year ended 31 May 2021.

    

   Highlights                             

    

     • Profit expectations for FY 2021 recently upgraded, as announced 3 June
       2021
     • Q2 net fees up 22% YoY (21% adjusted for working days(2)),  reflecting
       a very strong  underlying performance with  sustained improvements  in
       new deal activity and Contractor retention rates
     • Group net fees for H1 up 10% YoY

          ◦ Very strong growth achieved in DACH(3) and the USA
          ◦ Life Sciences and Technology net fees up significantly across the
            Group

     • Contractor order book(4) up 33% YoY
     • Contract and Permanent net fees for H1 up 8% and 18% respectively YoY
     • Top five countries represent 86% of Group net fees, with Germany being
       33% and USA 25% 
     • Strong balance sheet with net  cash at 31 May  2021 of circa £48m  (31
       May 2020: £31m; 28 Feb 2021: £57m)
     • Ranked at 69 out of  the top 300 companies  across Europe in the  FT's
       inaugural Climate Leaders list
     • Guidance re-instated
     • Andrew Beach to join as CFO on 5 July 2021, also announced  separately
       today

    

   As Q2 2020  was significantly  impacted by  Covid-19, the  Group has  also
   provided comparisons against 2019 net fees in the table below. The  growth
   seen in 2021 vs 2019,  across several regions and  sectors as well as  for
   the group as a whole, demonstrates the very strong underlying  performance
   of the  Group  and  the  relevance  of  its  differentiated,  STEM-focused
   offering. Highlights vs 2019 include:

    

     • Q2 net fees up 8% vs 2019
     • Group net fees for H1 up 3% vs 2019

    

   Dividend

    

   The Board intends to recommend the  payment of an interim dividend in  the
   current financial year, to be  announced with the Group's interim  results
   on July  19th. Given  the  continuing degree  of  uncertainty due  to  the
   pandemic, the Group intends  that dividend cover for  the year as a  whole
   will be  in the  range  of 2.5x  to 3.0x  and  the interim  dividend  will
   therefore be set at a level consistent with that target.

    

   Mark Dorman, Chief Executive, commented:

    

   "We are delighted to announce that our teams have delivered a very  strong
   performance in Q2, driving significant growth across the Group on H1 2020.
   Very encouragingly, given the Covid-19 impact in Q2 last year, net fees in
   Q2 2021  were  8% ahead  of  the equivalent  period  in 2019.  This  is  a
   considerable achievement  given the  ongoing  volatility of  the  external
   markets we operate in globally  and is testament to  the hard work of  our
   people, our  unwavering  focus on  the  quality  of our  service  and  the
   continued strength of demand for  the exceptional candidates we work  with
   and their STEM skills. 

    

   We have continued to  pursue strategic initiatives  and to strengthen  our
   leadership capability across the Group,  as we position ourselves to  take
   further advantage of new  opportunities within the world  of work as  they
   emerge. We have  also continued  to deliver  on our  commitment to  tackle
   important ESG issues, as seen in the recent publication (on 29 April 2021)
   of our 2020 ESG  Impact report and our  ranking at 69 out  of the top  300
   companies across  Europe  in  the FT's  inaugural  Climate  Leaders  list.
   Further progress against  our ESG targets  across the first  half will  be
   detailed in our interim results announcement.

    

   Although the trading background remains  uncertain our continued focus  is
   on execution,  whatever  the external  circumstances,  as we  continue  to
   provide the critical services which our clients have come to expect."

    

                                                                          
                                    H1     Q2     Q1       H1     Q2     Q1
   Net Fees       H1 2021 H1 2020  2021   2021   2021     2021   2021   2021
                                   YOY    YOY    YOY       vs     vs     vs
                                                          2019   2019   2019
                                                                          
   Contract       £121.9m £113.5m  +8%    +18%   -2%      +3%    +6%     -
   Permanent      £42.4m  £36.4m   +18%   +36%    -       +4%    +13%   -6%
   GROUP          £164.3m £149.9m  +10%   +22%   -1%      +3%    +8%    -1%
                                                                          
   Management                                                             
   structure
   DACH           £59.1m  £50.1m   +16%   +28%   +3%      +15%   +17%   +12%
   EMEA Exc DACH  £59.9m  £60.5m   -2%    +10%   -14%     -14%   -9%    -19%
   (5)
   USA            £40.9m  £35.4m   +24%   +28%   +19%     +22%   +26%   +19%
   APAC            £4.4m   £3.9m   +20%   +59%   -14%     -10%   +2%    -24%
   GROUP          £164.3m £149.9m  +10%   +22%   -1%      +3%    +8%    -1%
                                                                          
   Top five                                                               
   countries
   Germany        £54.0m  £46.0m   +15%   +28%   +3%      +13%   +15%   +10%
   Netherlands    £25.6m  £23.2m   +8%    +21%   -4%      +3%    +7%    -1%
   UK             £17.3m  £18.6m   -8%    +3%    -17%     -20%   -16%   -24%
   USA            £40.9m  £35.3m   +24%   +28%   +19%     +22%   +26%   +19%
   Japan           £3.3m   £2.8m   +23%   +77%   -21%     -7%    +14%   -30%
   ROW (6)        £23.2m  £24.0m   -4%    +10%   -16%     -16%   -11%   -21%
   GROUP          £164.3m £149.9m  +10%   +22%   -1%      +3%    +8%    -1%
                                                                          
   Division mix   H1 2021                                                 
   Contract         74%                                                   
   Permanent        26%                                                   
                                                                          
   Sector mix     H1 2021                                                 
   Technology       47%                                                   
   Life Sciences    24%                                                   
   Engineering      20%                                                   
   Banking &        7%                                                    
   Finance
   Other            2%                                                    

    

    

   Business performance

    

   The Group's performance in Q1 was  followed by a further strengthening  in
   Q2 across  all regions  and sectors.  Q2 was  up 22%  YoY, driving  an  H1
   performance up 10%.

    

   We saw strong growth in our Contract business with net fees up 8% YoY. The
   contractor order book has increased by 33% YoY (Q1 up 1% YoY),  reflecting
   the high demand for skilled contractors across our markets.

    

   Our Permanent  business was  up 18%  YoY. DACH  and USA,  our two  largest
   Permanent markets, were up 13% and 57% respectively YoY. Our Life Sciences
   business in USA has shown very strong growth and was up 73% YoY, driven by
   increased placements in Clinical Operations and Quality Assurance.

    

   DACH delivered a strong performance in the first half up 16% YoY. Germany,
   which accounts for 91% of  DACH, was up 15%  YoY with Technology and  Life
   Sciences both up  24% YoY.  Technology was  driven by  demand in  Software
   Development and  Infrastructure.  Life  Sciences  saw  demand  in  Quality
   Assurance and Clinical Research & Development skills.

    

   The results  for EMEA  excluding  DACH saw  the Netherlands,  our  largest
   country in the region,  deliver a robust performance  in H1 with net  fees
   growing 8% YoY. Notable  performances were achieved  in Life Sciences,  up
   13% YoY,  driven  by  increased  placements  across  Clinical  Research  &
   Development and  Quality  Assurance,  and Engineering  up  24%  YoY,  with
   particular focus  on  Project  Management and  Construction.  The  UK  saw
   progress and  we are  encouraged  by the  increasing productivity  in  the
   region.

    

   The USA is the world's largest STEM staffing market and our business there
   has demonstrated its strength with net fees up 24% YoY. We have seen  high
   demand in our key sectors in the region. Life Sciences, our largest sector
   in the USA, saw strong  growth of 30% YoY  with robust demand in  Clinical
   Operations,  Quality  Assurance  and  Product  Development.  Net  fees  in
   Engineering saw a  growth of  12% YoY driven  by renewable  energy-focused
   Construction. Our growing Technology sector  saw net fees increase by  33%
   YoY with increased  demand in Mobile  Applications, Adobe, Salesforce  and
   Software Development.

    

   APAC net fees were up 20% YoY in H1 with Japan, our largest country in the
   region, up 23%. The standout sectors in this region during the period were
   Life Sciences and Technology.

    

   Group period end headcount  was down 14% YoY  with average headcount  down
   16% YoY.  Sequentially,  Group headcount  is  down  3% vs  FY20.  We  will
   continue to invest in line with our previously stated strategy to focus on
   specific niches  within sectors  and markets  where we  can gain  valuable
   market share and further strengthen our position by focusing on increasing
   productivity per sales head. The Group has increased productivity 36%  YoY
   in the period.  Whilst we  expect this to  normalise to  some extent,  our
   ambition overall is to utilise the learnings gained over the last year and
   retain an  increased focus  on  productivity alongside  headcount  growth,
   aligned with our 2024 ambitions.

    

   Balance sheet

    

   SThree remains in  a strong financial  position, with net  cash at 31  May
   2021 of circa £48m (31 May 2020: Net cash £31m).

    

   As at 31 May 2021 the Group has total accessible liquidity of £103m.  This
   is comprised of £48m  net cash, a £50m  revolving credit facility  ("RCF")
   and a  £5m overdraft  facility  (RCF and  overdraft  not drawn  down).  In
   addition, SThree has a  £20m accordion facility as  well as a  substantial
   working capital position, reflecting net cash due to SThree for placements
   already undertaken.

    

   Analyst conference call

    

   SThree is hosting a webinar for analysts and investors today at 0830am  to
   discuss the H1 Trading Update.

    

   If you would like to register for the webinar please follow this link:
    1 http://bit.ly/SThree_H1_Trading_Update_webinar

           

   The Group plans to issue its interim results for the six months ended 31
   May 2021 on 19 July 2021.

    

    

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

   (2)  Q2 2021 has one more working day vs Q2 2020 and flat vs Q2 2019

   (3) DACH - Germany, Austria and Switzerland

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

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

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

    

    

                                    - Ends -

    

    

   Enquiries:
                                                                   
    

    
   SThree plc                                   020 7268 6000
   Mark Dorman, Chief Executive Officer          
   Alex Smith, Chief Financial Officer           
   Rebecca Matts, Group Communications Director
                                                 
    
                                                020 3405 0205
   Alma PR
                                                 
   Susie Hudson

   John Coles                                   SThree@almapr.co.uk

    

    

    

   Notes to editors

    

   SThree plc brings skilled people together to build the future.  It is  the
   only global pure-play  specialist staffing  business focused  on roles  in
   Science,  Technology,  Engineering  and  Mathematics  ('STEM'),  providing
   permanent and flexible  contract talent to  a diverse base  of over  9,000
   clients in 14 countries.

    

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

    

   SThree plc is quoted on  the Premium Segment of  the Official List of  the
   Financial Conduct Authority under the ticker symbol STEM and also has a US
   level one ADR facility, symbol SERTY.

    

   Important notice

    

   Certain statements in this announcement are forward looking statements. By
   their nature,  forward  looking  statements involve  a  number  of  risks,
   uncertainties or assumptions that could cause actual results or events  to
   differ materially from  those expressed  or implied  by those  statements.
   Forward looking statements regarding past trends or activities should  not
   be taken as representation that such trends or activities will continue in
   the future. Certain data from  the announcement is sourced from  unaudited
   internal management  information  and  is before  any  exceptional  items.
   Accordingly, undue  reliance  should  not be  placed  on  forward  looking
   statements.

    

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   ISIN:          GB00B0KM9T71
   Category Code: MSCU
   TIDM:          STEM
   LEI Code:      2138003NEBX5VRP3EX50
   Sequence No.:  110901
   EQS News ID:   1207305


    
   End of Announcement EQS News Service

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