REG-SThree SThree: Q1 Trading Update

SThreeAnnouncement

16/03/2020 07:05

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   SThree (STEM)
   SThree: Q1 Trading Update

   16-March-2020 / 07:00 GMT/BST
   Dissemination of a Regulatory Announcement that contains inside
   information according to REGULATION (EU) No 596/2014 (MAR), transmitted by
   EQS Group.
   The issuer is solely responsible for the content of this announcement.

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   16 March 2020

                                        

                                   SThree plc

                               Q1 Trading Update

                                        

            Net fees flat in Q1 in line with management expectations

    

   SThree plc  ("SThree" or  the "Group"),  the global  pure-play  specialist
   staffing business focused on roles in Science, Technology, Engineering and
   Mathematics ('STEM'),  issues the  below trading  update(1)  covering  the
   period from 1 December 2019 to date; financial information relates to  the
   quarter ending 29 February 2020.

    

   Highlights

    

     • Group net fees for Q1 flat, in what is our seasonally quietest quarter

          ◦ Strong growth in Germany, with net fees up 7% 
          ◦ Robust growth of 3% in Netherlands with USA flat
          ◦ Growth across Technology, Life Sciences and Engineering

     • Contract net fees up 2%, in  line with our strategy, now  representing
       75% of Group net fees (2019: 74%)
     • 87% of Group net fees  generated from international(2) markets  (2019:
       86%)
     • Group average headcount up 5% YoY
     • Continued strong balance sheet  with net cash at  29 February 2020  of
       circa £9m

    

   Mark Dorman, Chief Executive, commented:

    

   "We have delivered  these results  despite a backdrop  of significant  and
   increasing  global  macro-economic   uncertainties  and  challenges.   The
   performance  of  our  businesses  in  Germany  and  the  Netherlands   was
   particularly impressive  and demonstrates  the benefits  of our  strategy,
   focusing on Contract and STEM across diverse markets. This, combined  with
   the efforts of  our employees  worldwide, has  enabled us  to continue  to
   deliver a robust level of net fees despite the wider economic headwinds.

    

   "Whilst the macro uncertainties are increasingly apparent, we continue  to
   invest selectively in our business, reflecting our commitment to  building
   for the future and driving the  long-term success of our Group. We  remain
   confident that we have the right  strategy, as we are uniquely  positioned
   as the only global pure-play STEM specialist.

    

   "The  uncertainties  the  market  faces  are,  however,  potentially  very
   significant, given  the fast-developing  situation with  Covid-19,  recent
   large falls in oil prices, and increasing concerns about global confidence
   and GDP growth. Notwithstanding this,  demand for key STEM skills  remains
   robust."

    

    

   Reporting structure change

    

   SThree has changed its reporting structure, as shown in the tables below,
   in line with the updated strategy announced at its recent Capital Markets
   Day and internal management structures. Going forward SThree will apply
   the new groupings of DACH, EMEA excluding DACH, USA and APAC, as well as
   presenting an analysis of net fees by its five key markets: Germany,
   Netherlands, USA, UK and Japan. On a sector basis, the Energy and
   Engineering sectors will be reported under Engineering.

    

    

    

                                       Q1 2020   Q4 2019   Q3     Q2     Q1
                                                          2019   2019   2019
   Net fees            Q1 2020 Q1 2019   YOY       YOY    YOY    YOY    YOY
    

   Management                                                             
   Structure

    
   DACH(3)             £25.2m  £24.2m    +9%       +5%    +8%    +18%   +12%
   EMEA excl DACH(4)   £31.5m  £34.4m    -6%       -5%    -2%     -     +5%
   USA                 £16.0m  £16.4m     -        +6%    +5%    +10%   +17%
   APAC                 £2.6m   £3.1m   -15%       +1%    +21%   +25%   -4%
   GROUP               £75.3m  £78.1m     -        +1%    +4%    +9%    +9%
    
                                                                          
   Top five countries 
   Germany             £23.2m  £22.6m    +7%       +5%    +6%    +16%   +9%
   Netherlands         £11.8m  £12.0m    +3%       +4%    +7%    +9%    +13%
   UK                   £9.7m  £10.6m    -8%      -10%    -8%    -12%   -9%
   USA                 £16.0m  £16.4m     -        +6%    +5%    +10%   +17%
   Japan                £1.5m   £1.7m   -11%       +1%    +82%   +63%   +44%
   ROW(5)              £13.1m  £14.8m    -8%       -5%    -2%    +10%   +10%
   GROUP               £75.3m  £78.1m     -        +1%    +4%    +9%    +9%
                                                                          
   Division Mix        Q1 2020                                            
   Contract              75%                                              
   Permanent             25%                                              
                                                                          
   Sector Mix          Q1 2020                                            
   Technology            46%                                              
   Life Sciences         21%                                              
   Engineering(6)        22%                                              
   Banking & Finance     10%                                              
   Other                 1%                                               

    

   Impact of Covid-19

    

   The  Coronavirus  outbreak  continues  to  develop  globally,  and  it  is
   difficult to predict the potential impact it may have on our business. The
   Group  is  continuing  to  monitor  the  situation  closely  and  regional
   management teams are ready to react as developments unfold.

    

   Business performance

    

   Group net fees for  the year were  flat in Q1, in  what is our  seasonally
   quietest quarter. Contract, our more resilient business, grew net fees  by
   2% and now accounts for 75% of Group net fees. Permanent net fees declined
   6% in  the quarter,  due to  weaker  performances in  Japan, USA  and  UK.
   Germany, our largest Permanent market, saw solid growth of 4%, up from  Q4
   2019 +3%.

    

   DACH saw strong growth in the quarter with net fees up 9%. Germany,  which
   accounts for 92% of DACH, continues to outperform with growth of 7% driven
   by Technology up 10% and Life Sciences up 12%. All other sectors also grew
   and the region saw a strong growth in net fees in Switzerland and Austria.

    

   EMEA excluding DACH saw net fees declining 6%, largely reflecting the UK's
   performance, which was  down 8%.  As expected, we  have begun  to see  the
   impact of IR35 prompting change in  our client and candidate behaviour  in
   the UK business in the quarter, as decision making processes extend  ahead
   of the  April  2020 implementation  date.   The Netherlands,  our  largest
   country in the region,  saw growth of 3%,  which was impressive given  the
   market  backdrop,  with  notable  performances  in  Engineering  and  Life
   Sciences.

    

   Net fees in USA were  flat in the quarter  and short of our  expectations.
   Life Sciences saw  good growth  of 14%  with Engineering  growing 10%  and
   Technology up a modest 3%. This growth was offset by a decline in  Banking
   & Finance with net fees down 38%, broadly reflecting the challenges  faced
   in this sector  globally. As a  key area of  focus for the  Group we  have
   continued to invest in the region and are aligning our resources with  the
   best long term opportunities.  

    

   Despite a  good performance  from  the Technology  sector, APAC  net  fees
   declined 15% in  the quarter,  impacted by several  factors including  the
   wildfires in Australia and the outbreak of Covid-19.

    

   Group period  end  headcount was  up  3%  with average  headcount  up  5%,
   reflecting ongoing investment in Germany  and USA offset by reductions  in
   EMEA excluding DACH and APAC.

    

   Balance sheet

    

   SThree remains  in  a strong  financial  position,  with net  cash  at  29
   February 2020 of circa  £9m (28 February 2019:  Net debt £12m). The  Group
   has a £50m revolving credit facility ("RCF") with HSBC and Citibank, which
   is committed to 2023.

    

   Analyst conference call

    

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

    

   Telephone number: 0800 358 9473

   For access to the call please enter PIN: 31046987#

    

   A replay facility will be available for 90 days on 0800 358 2049 Passcode:
   301312966#

                 

   The Group will issue its trading update for six months ended 31 May 2020
   on 15 June 2020.

    

    

   (1) All  year-on-year  financial growth  rates  in this  announcement  are
   expressed at constant currency

   (2) International represents our businesses outside the UK

   (3) DACH - Germany, Austria and Switzerland

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

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

   (6)  Engineering  now  includes  Energy,  which  was  previously  reported
   separately. Up-stream oil and gas  comprises approximately 10% of the  new
   Engineering sector

    

    

                                    - Ends -

    

    Enquiries:

                                                            

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

    Hilary Buchanan                      SThree@almapr.co.uk

    

    

   Notes to editors

    

   SThree is  a  leading  international STEM  specialist  staffing  business,
   providing permanent and contract specialist staff to a diverse client base
   of over 9,000 clients.

    

   The  Group's  operations   cover  the  Technology,   Banking  &   Finance,
   Engineering and Life  Sciences sectors. With  a multi-brand strategy,  the
   Group establishes new operations  to address growth opportunities.  SThree
   brands include Computer  Futures, Huxley Associates,  Progressive and  The
   Real Staffing  Group.  The  Group  has  a network  of  47  offices  in  16
   countries, of which  41 are  in our international(2)  markets, with  circa
   3,100 employees.

    

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

    

   Important notice

    

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

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   ISIN:          GB00B0KM9T71
   Category Code: TST
   TIDM:          STEM
   LEI Code:      2138003NEBX5VRP3EX50
   Sequence No.:  52476
   EQS News ID:   997705


    
   End of Announcement EQS News Service

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