REG-SThree SThree: Q1 Trading Update

SThreeAnnouncement

19/03/2018 14:26

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   SThree (STHR)
   SThree: Q1 Trading Update

   16-March-2018 / 07:00 GMT/BST
   Dissemination of a Regulatory Announcement that contains inside
   information according to REGULATION (EU) No 596/2014 (MAR), transmitted by
   EQS Group.
   The issuer is solely responsible for the content of this announcement.

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   16 March 2018

                                        

                                        

                               Q1 Trading Update

    

   SThree plc ("SThree" or the  "Group"), the international STEM+  specialist
   staffing business, is today issuing  a trading update covering the  period
   from 1 December 2017 to date; financial information relates to the quarter
   ended 28 February 2018.

    

   Highlights

    

     • Encouraging start to the new financial year
     • Group gross profit ("GP") up 8%* YoY

          ◦ Strong growth in Continental Europe up 15%* (Q4 2017: +16%*),
            with standout performances from DACH++ up 15%* and the
            Netherlands up 20%*
          ◦ USA GP up 1%* with Contract up 10%*
          ◦ UK&I GP down 3%* YoY, a significant moderation over Q4 (Q4 2017:
            -13%*)
          ◦ Strong growth in Life Sciences up 9%*, ICT up 5%*, Engineering up
            14%* and Energy up 35%*

     • 82% of Group GP generated from markets outside the UK&I (2017: 80%)
     • Contract GP up 11%* (Q4 2017: +14%*) with strong growth across
       Continental Europe up 19%*, ICT up 6%* and Life Sciences up 10%*
     • Contract represented 72% of Group GP (Q1 2017: 70%)
     • Permanent GP up 2%*
     • Group period-end sales headcount up 12% YoY

    

   +Science, Technology, Engineering & Mathematics

   ++ Germany, Austria and Switzerland

    

   Gary Elden, Chief Executive, commented:

    

   "While Q1  is our  least significant  quarter, we've  made an  encouraging
   start to the new financial year. 

    

   "Our Contract business continues to go from strength to strength, with  GP
   increased by 11%* in Q1, driven by continued strong growth in  Continental
   Europe, especially key markets such as the Netherlands and Germany. Growth
   in Contract GP from our Life Sciences, ICT and Energy businesses has  also
   been particularly pleasing.

    

   "As anticipated, the growth  rate in our US  business reflected the  tough
   prior year comparatives from  Q1 2017. The market  opportunity in the  USA
   remains very strong  and we expect  to see an  improving performance  from
   this business.

    

    "Our Permanent  GP increased  by 2%*,  driven by  strong performances  in
   Germany up 13%* and in Japan up 75%*.

    

   "Looking ahead,  we will  continue  to invest  in our  highest  performing
   teams, consistent  with  our vision  to  be  the number  one  STEM  talent
   provider in the best STEM markets. Our focus on Contract and the continued
   strength of our performance in  Continental Europe and across key  sectors
   leave us confident that there are good growth opportunities available  for
   us this year."

    

    

    

   Financial Highlights -                                                
   Group Gross Profit                                                    
                                       Q1      Q4    Q3    Q2    Q1      
                                      2018    2017  2017  2017  2017
   Gross Profit       Q1 2018 Q1 2017 YoY %   YoY % YoY % YoY % YoY %    
                                        1       1     1     1     1
                                                                         
   Contract           £50.5m  £45.6m  +11%    +14%   +9%   +9%   +7%     
   Permanent          £19.8m  £19.5m   +2%     -5%   -6%   -6%  -14%     
   Group              £70.3m  £65.1m   +8%     +8%   +5%   +4%    -      
                                                                         
   UK&I               £12.7m  £13.0m   -3%    -13%  -10%  -14%  -19%     
   Continental Europe £40.3m  £34.0m  +15%    +16%   +6%   +7%   +7%     
   USA                £13.1m  £14.2m   +1%    +17%  +20%  +20%  +12%     
   Asia Pac & Middle   £4.2m   £3.9m  +15%     -7%   +1%   +5%  -14%     
   East
   Group              £70.3m  £65.1m   +8%     +8%   +5%   +4%    -      
                                                                         
                                                                   
                                                                         
   ICT                £31.8m  £29.5m   +5%     +1%   +1%   +1%   +2%
   Banking & Finance   £9.5m   £9.8m    -      -1%   +1%   -1%   -8%     
   Energy              £6.1m   £5.1m  +35%    +50%  +35%  +24%   -8%     
   Engineering         £6.7m   £5.6m  +14%    +11%   +5%   +3%   -1%     
   Life Sciences      £14.8m  £14.1m   +9%    +12%   +3%   +7%   +4%     
   Other3              £1.4m   £1.0m  +32%    +19%  +24%  +13%   +4%     
   Group              £70.3m  £65.1m   +8%     +8%   +5%   +4%    -      
                                                                         
   Contract / Perm                                                       
   Split
   Contract             72%     70%                                      
   Permanent            28%     30%                                      
                       100%    100%                                      
                                                                         
   Geographical Split                                                    
   UK&I                 18%     20%                                        
   Continental Europe   57%     52%                                      
   USA                  19%     22%                                          
   Asia Pac & Middle    6%      6%                                       
   East
                       100%    100%                                      
                                                                         
   Sector Split                                                          
   ICT                  45%     45%                                      
   Banking & Finance    14%     15%                                      
   Energy               9%      8%                                       
   Engineering          9%      9%                                       
   Life Science         21%     22%                                      
   Other                2%      1%                                       
                       100%    100%                                      
                                                                         
                                       Q1      Q4    Q3    Q2    Q1      
                                      2018    2017  2017  2017  2017
   Operating Metrics  Q1 2018 Q1 2017 YoY %   YoY % YoY % YoY % YoY %    
                                                                         
   Contract Runners2                                                     
   UK&I                2,537   2,568   -1%     -2%   -7%   -6%   -8%     
   Continental Europe  5,408   4,390  +23%    +21%  +18%  +19%  +19%     
   USA                 1,427   1,419   +1%    +14%  +24%  +23%  +14%     
   Asia Pac & Middle    473     501    -6%     +3%  +19%  +25%  +19%     
   East
   Group               9,845   8,878  +11%    +12%  +11%  +12%   +9%     
                                                                         
                                                                         
   1 *At constant currency                                               
   2 Period-end number of contractors onsite with                        
   clients
   3 Other includes Procurement & Supply Chain and Sales                 
   & Marketing
                                                                         

    
                                                                           

    

    

    

   Q1 Group gross profit ("GP")  was up 8%* YoY  (Q4 2017: +8%*), driven,  in
   particular, by strong growth in Continental Europe. 

    

   Contract remains the driving force of this strong performance, with GP  up
   11%* YoY. This growth was driven by Continental Europe up 19%* and the USA
   up 10%*, which together represent 76% of Group Contract GP.

    

   Permanent GP  was  up 2%*  YoY  (Q4 2017:  -5%*),  with Germany  up  13%*,
   supported by  growth in  APAC  & MENA  up 44%*.  The  USA was  down  18%*,
   reflecting the previously highlighted  strong prior year comparatives  (Q1
   2017: +16%*).

    

   Average Group sales headcount  was up 12% YoY  with Continental Europe  up
   20%, USA up 16% and  UK&I down 2%. Average  Permanent headcount was up  4%
   and  average  Contract  headcount  was  up  17%.  Contract  headcount  now
   represents 66% of Group sales headcount (Q1 2017: 63%).

    

   The strategic restructuring  and relocation  of our  London based  support
   functions to Glasgow,  as previously  announced, is  progressing well.  We
   remain on track to deliver the expected benefits.

    

   The Group opened two new offices  in Eindhoven and Washington D.C.  during
   the period to  better service its  clients. We  now have a  network of  43
   offices in  16  countries, of  which  35 are  outside  the UK.  The  Group
   generated 82% of GP  for the period from  markets outside the UK&I  (2017:
   80%).

   SThree remains in  a strong financial  position. Net debt  at 28  February
   2018 was circa £2m (28 February 2017: £1m). The Group has a £50m revolving
   credit facility ("RCF") with HSBC and Citibank, which is committed to  May
   2019.

    

   *at constant currency

    

   SThree is  hosting an  analyst  conference call  today  at 0830  GMT.  The
   details are as follows:

    

   Telephone number: +44 (0) 20 3003 2666

    

   For access to the call please quote passcode SThree

    

   A replay facility will be available for seven days on +44 (0) 208 196 1998
   Passcode: 5497258#

                 

   The Group will issue its trading update for the six months ended 31 May
   2018 on 15 June 2018.

    

                                    - Ends -

    

    

   Enquiries:                                                          
    SThree plc                                            020 7268 6000
    Gary Elden, Chief Executive Officer                    
    Alex Smith, Chief Financial Officer                    
    Sarah Anderson, Deputy Company Secretary/IR enquiries
                                                           
    
    Citigate Dewe Rogerson                                020 7638 9571
    Kevin Smith/Jos Bieneman                               

    

    

    

   Notes to editors

    

   SThree is a leading international specialist staffing business, providing
   permanent and contract specialist staff to a diverse client base of over
   9,000 clients. From its well-established position as a major player in the
   information and communications technology ('ICT') sector the Group has
   broadened the base of its operations to include businesses serving the
   Banking & Finance, Energy, Engineering and Life Sciences sectors.

    

   Since launching its original business, Computer Futures, in 1986, the
   Group has adopted a multi-brand strategy, establishing new operations to
   address growth opportunities. SThree brands include Computer Futures,
   Huxley Associates, Progressive and The Real Staffing Group. The Group has
   circa 2,800 employees in sixteen countries.

    

   SThree plc is quoted on the Official List of the UK Listing Authority
   under the ticker symbol STHR and also has a US level one ADR facility,
   symbol SERTY.

    

    

   Important notice

    

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

    

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   ISIN:          GB00B0KM9T71
   Category Code: QRF
   TIDM:          STHR
   LEI Code:      2138003NEBX5VRP3EX50
   Sequence No.:  5307


    
   End of Announcement EQS News Service

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   664713  16-March-2018 

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