REG-SThree SThree: Q1 Trading Update

SThreeAnnouncement

15/03/2021 07:05

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   SThree (STEM)
   SThree: Q1 Trading Update

   15-March-2021 / 07:00 GMT/BST
   Dissemination of a Regulatory Announcement that contains inside
   information according to REGULATION (EU) No 596/2014 (MAR), transmitted by
   EQS Group.
   The issuer is solely responsible for the content of this announcement.

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   15 March 2021

                                        

                                   SThree plc

                               Q1 Trading Update

                                        

    Q1 performance ahead of management expectations, with net fees equalling
                                    Q1 2020

    

   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 a trading update(1) covering the
   period from 1 December 2020 to date; financial information relates to  the
   quarter ending 28 February 2021.

    

   Highlights

    

     • Group net fees at the same level as Q1 2020, pre Covid-19, when
       adjusted for working days(2) (Q4 2020: -7%) reflecting SThree's
       resilient model and strategy
     • Net fee momentum delivered by management focus and execution
     • Growth in a number of regions and sectors despite the Covid-19 impact

          ◦ Encouraging growth in DACH, with net fees up 3% 
          ◦ Strong growth in USA with net fees up 19%
          ◦ Net fees in Life Sciences up 14% and Technology up 1% across  the
            Group

     • Continued   sequential   improvement    in   underlying    performance
       quarter-on-quarter

          ◦ Contractor order book(3) up 1%, (Q4 2020: -9%)
          ◦ Sustained improvements in the Contractor retention rate

     • Both Contract and Permanent net fees flat YoY(2)
     • Top five countries represent 85% of Group net fees, with Germany being
       33% and USA 24%  
     • Strong balance sheet with net cash  at 28 February 2021 of circa  £57m
       (28 Feb 2020: £9m)

    

   Mark Dorman, Chief Executive, commented:

    

   "I'm pleased  to announce  that we've  seen improved  underlying  activity
   across each region of the Group during the first quarter. This follows the
   significant sequential quarterly  improvement in the  previous half.  With
   Germany and the  USA now in  growth, and with  a growing contractor  order
   book at the Group level, we have demonstrated that our strategy of meeting
   sectoral demands for STEM skills, whatever the external market conditions,
   continues to deliver results.

    

   Looking ahead, we continue to pursue strategic initiatives we believe will
   drive further success. We  are investing in our  platform and are  further
   enhancing our go-to-market strategy to position ourselves for regional and
   sector-specific  opportunities.  We  are  committed  to  accelerating  our
   approach in  tackling important  ESG issues  for the  benefit of  all  our
   stakeholders and are working hard to drive positive change throughout  the
   business. While further volatility  is likely as  our markets emerge  from
   the pandemic in different ways, our strategy and purpose means we are very
   well placed to provide a strong and stable platform for long-term growth."

    

    

    

                                    Q1 2021   Q4 2020 Q3 2020 Q2 2020 Q1 2020
   Net Fees         Q1 2021 Q1 2020 YOY(1)    YOY(1)  YOY(1)  YOY(1)  YOY(1)
                                                                          
   Contract         £56.5m  £56.2m    -2%       -6%    -12%    -10%     +2%
   Permanent        £19.0m  £18.5m     -       -10%    -19%    -17%     -6%
   GROUP            £75.5m  £74.7m    -1%       -7%    -14%    -12%     +0%
                                                                          
   Management                                                             
   structure
   DACH(4)          £27.3m  £25.2m    +3%       -2%     -9%     -9%     +9%
   EMEA Exc DACH(5) £28.1m  £31.5m   -14%      -20%    -22%    -17%     -6%
   USA              £18.3m  £16.0m   +19%      +11%     -3%     -2%     +0%
   APAC              £1.8m   £2.0m   -14%      -30%    -27%    -36%    -11%
   GROUP            £75.5m  £74.7m    -1%       -7%    -14%    -12%     +0%
                                                                          
   Top 5 countries                                                        
   Germany          £25.0m  £23.2m    +3%       -3%    -10%    -10%     +7%
   Netherlands      £11.9m  £11.8m    -4%      -15%    -13%    -12%     +3%
   UK                £8.1m   £9.7m   -17%      -22%    -28%    -19%     -8%
   USA              £18.3m  £16.0m   +19%      +11%     -3%     -2%     +0%
   Japan             £1.2m   £1.5m   -21%      -25%    -27%    -36%    -11%
   ROW(6)           £11.0m  £12.5m   -16%      -19%    -23%    -19%     -7%
   GROUP            £75.5m  £74.7m    -1%       -7%    -14%    -12%     +0%
                                                                          
   Division Mix     Q1 2021                                               
   Contract           75%                                                 
   Permanent          25%                                                 
                                                                          
   Sector Mix       Q1 2021                                               
   Technology         48%                                                 
   Life Sciences      23%                                                 
   Engineering        20%                                                 
   Banking &          7%                                                  
   Finance
   Other              2%                                                  

    

    

   Business performance

    

   The Group  delivered  a  strong  performance  in  the  quarter,  ahead  of
   management expectations, with  net fees  flat YoY on  an adjusted  working
   days basis. This was a strong result considering the comparative period in
   the prior year  did not suffer  from any Covid-19  impact. The  sequential
   trend in Q1 2021  compared to Q4 2020  showed a continuing improvement  in
   performance in  net fees  across  the Group,  as the  underlying  business
   activity strengthened.

    

   Our Contract business showed strong  sequential improvement with net  fees
   flat on an  adjusted working  days basis (down  by 2%  YoY reported).  The
   Contractor order book(3)  was up  1% YoY, demonstrating the resilience  of
   our Contract focused business model.

    

   Permanent net fees also displayed a robust performance, being flat in  the
   quarter YoY, with strong performances in our two largest markets,  Germany
   up 4% and USA up 37%.

    

   Overall DACH saw a strong increase in net fees, up 3%, returning to growth
   despite the impact of Covid-19. Germany,  which accounts for 92% of  DACH,
   delivered a robust performance up 3%, driven by Technology up 14% and Life
   Sciences up 7%. Technology was  driven by demand in Software  Development,
   Cyber Security  and  Data Science  skills.  Life Sciences  saw  demand  in
   Quality Assurance and Clinical Research & Development skills.

    

   EMEA excluding  DACH  saw net  fees  declining 14%,  reflecting  the  UK's
   performance, which was down 17% YoY. The Netherlands, our largest  country
   in the region, saw  a clear improvement  in performance sequentially  with
   net fees down 4% (Q4 FY20:  -15%). Our Dutch Engineering business grew  by
   16% in the quarter  driven by demand  in Project Management,  Construction
   and Maintenance,  while  Life  Sciences  grew by  2%  driven  by  Clinical
   Research, Quality Assurance and Regulatory Affairs.

    

   The USA is the world's largest STEM staffing market and our business there
   has demonstrated its strength with net  fees up 19%. This has been  driven
   by high  demand for  our key  sectors in  the region.  Life Sciences,  our
   largest sector in the USA,  saw strong growth of  25%. We continue to  see
   robust demand  in  Clinical  Operations,  Quality  Assurance  and  Product
   Development. Net fees in Engineering saw  a modest growth of 1% driven  by
   Construction and Project management.  Technology net fees  grew by 43%  in
   the quarter  with  increased  demand in  Mobile  Applications  &  Software
   Development.

    

   APAC net fees declined 14% in the quarter impacted by Japan which declined
   21%. However,  the team  in Japan  is encouraged  by underlying  new  deal
   activity at the end of quarter which is up significantly.

    

   Group period end and average headcount  was down 17%. 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.

    

   Balance sheet

    

   SThree remains  in  a strong  financial  position,  with net  cash  at  28
   February 2021 of circa £57m (29 February 2020: Net cash £9m).

    

   As at 28 February 2021 the  Group has total accessible liquidity of  £112m
   (excluding the £50m  CCFF). This  is comprised of  £57m 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. SThree has not drawn
   and does not intend to use the CCFF facility before it closes on 23  March
   2021.

    

   Analyst conference call

    

   SThree is hosting a webinar for analysts and investors today at 0830am  to
   discuss the Q1  Trading Update and  to present the  Group's recent  market
   trends insights.

    

   If you would  like to register for  the webinar please  follow this  link:
    1 http://bit.ly/STEM_Q1_update

                  

   The Group will issue its trading update for six months ended 31 May 2021
   on 14 June 2021.

    

    

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

   (2) Q1 2021 has one less working day vs Q1 2020

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

   (4) DACH - Germany, Austria and Switzerland

   (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   
    Steve Hornbuckle, Company Secretary
                                          
    
                                         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 15 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: QRF
   TIDM:          STEM
   LEI Code:      2138003NEBX5VRP3EX50
   Sequence No.:  95470
   EQS News ID:   1175354


    
   End of Announcement EQS News Service

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