REG-SThree SThree: FINAL RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2022
30/01/2023 07:15
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SThree (STEM)
SThree: FINAL RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2022
30-Jan-2023 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information in accordance with the Market Abuse Regulation
(MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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SThree plc
FINAL RESULTS FOR THE YEAR ENDED 30 NOvember 2022
Record profit performance up 24% driven by continued demand for flexible STEM talent and well-established strategy
SThree plc (‘SThree’ or the ‘Group’), the only global specialist talent partner focused on roles in Science, Technology,
Engineering and Mathematics (STEM), today announces its financial results for the year ended 30 November 2022.
Financial Highlights
2022 2021 Variance
Continuing operations Reported Adjusted (1) Reported Movement (2) Like-for-like (3)
Revenue (£ million) 1,639.4 1,330.7 1,330.7 +23% +22%
Net fees (£ million) 430.6 355.7 355.7 +21% +19%
Operating profit (£ million) 77.6 60.8 61.0 +28% +23%
Operating profit conversion ratio 18.0% 17.1% 17.1% +0.9% pts +0.6% pts
Profit before tax (£ million) 77.0 60.0 60.2 +28% +24%
Basic earnings per share (pence) 41.0 31.8 31.9 +29% +24%
Proposed final dividend per share (pence) 11.0 8.0 8.0 +38% +38%
Total dividend (interim and final) per share (pence) 16.0 11.0 11.0 +45% +45%
Net cash (£ million) (4) 65.4 57.5 57.5 +14% +14%
(1) Excludes the impact of £0.2 million in net exceptional income recognised in 2021.
(2) Variance compares reported 2022 against adjusted 2021 to provide a like-for-like view. There were no adjusting items in
2022.
(3) Variance compares reported 2022 against adjusted 2021 on a constant currency basis, whereby the prior year foreign
exchange rates are applied to current and prior financial year results to remove the impact of exchange rate fluctuations.
(4) Net cash represents cash and cash equivalents less bank borrowings and bank overdrafts and excluding leases.
Full Year Highlights
• A second consecutive record net fee performance, materially ahead of initial expectations, up 19% YoY(5), benefitting
from the continued successful execution of our well-established strategy, momentum in demand for STEM and flexible
talent, and supported by global megatrends.
• Strong growth achieved in our three largest countries: Germany up 14%, USA up 13% and the Netherlands up 34% YoY,
together accounting for 73% of Group net fees.
• Strong growth seen across Technology, up 23%, and Engineering, up 27%, with Life Sciences growing 6% against a
very strong prior year comparator.
• In line with our strategic focus on flexible talent, Contract net fees were up 23%; Permanent net fees up 6% YoY.
• Contract net fees represent 78% of Group net fees (2021: 75%), with the contractor order book(6) value of £186m up 19%
YoY, reflecting the high demand for skilled contractors across our markets, and providing good visibility going into
2023.
• Record profit before tax of £77 million for the Group, up 24% YoY(5).
• Robust balance sheet, with £65 million in net cash at year end (2021: £58 million).
• Final dividend proposed of 11.0 pence per share (2021: 8.0 pence per share), taking full year dividend to 16.0 pence
per share (2021: 11.0 pence per share). This is in line with the dividend cover target between 2.5x and 3.0x previously
communicated.
• Trading early in the new financial year in line with expectations, supported by healthy contract order book.
• Sustainable business practice and ESG commitments demonstrated by:
• Over 32,900 lives positively impacted in 2022.
• SThree’s renewables business (7% of net fees) up 29% versus 2021, ahead of our target to double the share of this
business from 2019 to 2024.
• 44% carbon reduction in 2022 in comparison to 2019.
• Technology improvement programme underway with successful CRM pilot completed and integrated platform under
development.
• Phased geographical roll out of unified technology platform to commence in 2023, onto which SThree’s methodologies
will be layered to systematise best practice.
• Improved data and workflows will drive operational leverage.
Timo Lehne, Chief Executive, commented:
“The exceptional, record-breaking, full year performance reported today demonstrates that our well-established strategy,
focused on STEM and flexible talent, has continued to deliver and puts us in a unique position to win now and in the
future.
Our relentless focus on the implementation of our strategy has not wavered. We have a clear strategic vision and an
execution plan centred on an analytical and fact-based approach which is widely bought-in to across the Group with our
technology improvement programme at the heart of this to drive a future step change in the business. We are focused and
committed on building a business of scale with sustainable margins and the targeted investment in our people, talent
acquisition and digital infrastructure is moving forward as planned. I would like to thank everyone within our Group for
their dedication and hard work throughout the year.”
As we enter the new financial year, trading continues to track in line with expectations, supported by a healthy contract
orderbook. The macro landscape remains consistent with the softer conditions seen toward the end of the year. However, our
global reach combined with a specialist niche focus in structural STEM disciplines is underpinned by a proven resilient
business model and a robust balance sheet. This provides us with a strong position from which to pursue our unique
opportunity over the medium to long term."
Analyst conference call
SThree is hosting a conference call for analysts and investors today at 08:30 GMT to present the Group’s results for the
financial year ended 30 November 2022. If you would like to register for the conference call, please contact
1 SThree@almapr.co.uk.
Second Investor Briefing
SThree is hosting its second in a series of investor briefings at 13:00 GMT today, which will be focused on the Group’s
technology improvement programme. The session will last around 60 minutes and is open to institutional investors and
analysts. To register for the webinar, please contact 2 SThree@almapr.co.uk. A recording of the event and presentation
materials will be available on the Group’s website shortly after the event at 3 www.sthree.com.
SThree will issue its Q1 trading update on 21 March 2023.
(5) All YoY growth rates in this announcement are expressed at constant currency.
(6) The contractor order book represents value of net fees until contractual end dates, assuming all contractual hours are
worked.
The information contained within this announcement is deemed by the Company to constitute inside information under the
Market Abuse Regulation (Regulation (EU) No.596/2014) as it forms part of UK Domestic Law by virtue of the European Union
(Withdrawal) Act 2018.
The person responsible for this announcement is Kate Danson, Company Secretary.
Enquiries:
SThree plc
Timo Lehne, CEO via Alma
Andrew Beach, CFO
Alma PR +44 20 3405 0205
Hilary Buchanan 4 Sthree@almapr.co.uk
Sam Modlin
Will Ellis Hancock
Notes to editors
SThree plc brings skilled people together to build the future. We are the only global specialist talent partner focused on
roles in STEM, providing permanent and flexible contract talent to a diverse base of over 8,200 clients across 14
countries. Our Group’s c.3,100 staff 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
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.
CHair’s statement
This has been a challenging year for many. Following the gradual normalisation post the Covid pandemic, a challenging
macro-economic and geopolitical backdrop affected consumers as well as businesses around the world. Although unemployment
rates in our key markets have remained low, a global energy crisis has resulted in the cost of living rising, with surging
inflation leading to a decline in real-term incomes for many across major markets. However, despite these macro challenges,
I am proud that our Group has remained resolute in our focus to deliver for our clients and candidates as we continue to
make progress towards our 2024 ambitions and beyond. We have delivered an exceptional financial performance, materially
above initial market expectations, as we realise the benefits of our well-established strategy, focused on STEM and
flexible talent.
In April 2022, after a thorough and extensive search process, reviewing both internal and external candidates, the Board
was delighted to appoint Timo Lehne as permanent CEO. Since his appointment Timo has shown strategic thinking, drive and
passion, drawing on his extensive experience and building a strong team around him. Across our Group there is a renewed
sense of energy, unity and excitement which I felt acutely as I had the opportunity to meet again in person with a number
of our regional teams during the year across Europe, the US and APAC. I would like to take this opportunity to thank
SThree’s exceptional teams around the world for their hard work and dedication which has supported the delivery of our
record financial results.
Following the strong trading performance in the year, coupled with a healthy balance sheet position, the Board is proposing
a final dividend at 11.0 pence per share, which taken together with the interim dividend of 5.0 pence per share, gives the
total dividend for the year of 16.0 pence per share, an increase of 45% on the prior year. This is in line with the Board’s
aim to offer shareholders long-term ordinary dividend growth within a targeted cover range of 2.5x to 3.0x.
We were pleased to appoint Elaine O’Donnell as Audit & Risk Committee Chair and Non-Executive Director in October. Elaine
brings to SThree both broad and deep business experience and financial capability, plus highly developed commercial and
people judgement. Her extensive experience of working with high-growth, FTSE-listed businesses will serve to strengthen our
Board as the Company continues to execute our growth strategy. In addition, we were delighted to welcome Imogen Joss to the
Board in November. Imogen has extensive experience of growing global services businesses and driving technology-led change,
as well as a strong focus on people, sales and culture. I am also pleased that Imogen’s appointment will ensure that
SThree’s Board will have in excess of 40% female representation, in accordance with the FCA’s Board diversity targets. I
would also like to extend my thanks to Anne Fahy, who stepped down from the Board in April, for her valued contribution to
the Company over many years.
The Board has once again worked hard during the year to act in the long-term interests of all stakeholders, balancing
complex interests and priorities. The SThree Board aspires to adopt FTSE 250-level governance best practice wherever
possible and was an early adopter of the UK Corporate Governance Code. Our purpose, values and culture demonstrate a
commitment to taking long-term decisions and to treating all clients, candidates, employees, suppliers and communities with
respect as key stakeholders and partners in our business. I would like to thank my Board colleagues for their hard work and
engagement during the year.
Lastly, but importantly, during the year we have increased our focus on the Group’s impact on the wider world and the
communities in which we operate. We continue to invest in our business and grow our talent with environmental, social and
governance (ESG) considerations embedded in our strategy, values and culture. We are committed to building a sustainable
future, developing a more inclusive workforce and ensuring that we operate our business to the highest ethical standards.
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 for the future. 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. We remain inspired and
focused on our mission – bringing skilled people together to build the future.
Chief executive officer’s statement
Exceptional year of growth
This has been another record year of double-digit growth and strong profitability, materially ahead of initial
expectations, together with clear operational achievements. Our focus as a specialist staffing partner in STEM and flexible
talent means we are uniquely positioned to service the structural demand of a changing world, work which we significantly
progressed during the year.
The effort of our dedicated team meant we placed over 20,000 STEM specialists into highly skilled positions in 2022,
helping to deliver vital talent that will tackle many of the complex issues facing our world. We are proud of the work we
do in delivering our purpose of connecting skilled people with opportunities to build the future. With a heritage as
specialist STEM staffing pioneers for almost 40 years, I believe the business has a huge and exciting opportunity ahead as
we execute our vision to be the number one STEM talent provider in the best STEM markets.
The Group’s strong performance in the year was against a market backdrop characterised by a return to a more normalised
trading environment, followed by an increasingly uncertain and weakening macro-economic environment towards the end of the
period. Through this, and against very strong post-Covid comparators, the Group delivered net fee growth of 19% in constant
currency (21% on a reported basis) to £430.6 million and profit before tax growth of 28% to £77.0 million. Overall, the
performance in the year reinforces our confidence in our strategic vision for the long term and demonstrates that our
mid-term ambitions are within reach.
Strong foundations with a unique and resilient business model
Our overarching mission is consistent: placing STEM specialists in markets with high demand and limited supply. Supply
constraints of STEM talent continues to intensify, offering huge opportunity in a global market estimated to be worth over
£100 billion in revenue and of which we currently have, on average, a 2% share across our top five markets which account
for 75% of the addressable share of the global market.
We capitalise on the STEM opportunity with a conscious focus on Contract placements, which grew strongly at 23% and now
represents 78% of Group net fee income, up from 75% a year ago. This focus enables us to service the changing world of work
with a clear and growing preference toward flexible talent, a structure highly suited to STEM roles and a key motivator for
candidates. Motivations for work are changing, with candidates aligning their careers to life priorities, of which flexible
work is a top consideration. Our own recent survey demonstrated that flexible working options are now expected to be a
standard given of employment.
Within this context, our core and differentiated value proposition is a deep understanding of our clients’ requirements
together with an unparalleled candidate network, meaning we often know of candidates before formal searches are needed and
this enables us to be proactive in our approach to clients. Operating across 46 locations in 14 countries from the USA,
across Europe to Japan, our combination of global reach and expert local recruitment knowledge across specialist STEM
skills means we can deliver quality at speed. We are trusted talent partners, helping more clients to succeed and more
candidates to accelerate their careers.
In addition, demand for the Employed Contractor Model (ECM) continues to be a strong driver of growth. ECM is a model
whereby contractors are directly employed by SThree for the duration of the contract and is an area in which SThree has
built a leading position. ECM now represents 45% of all Contract work undertaken by the Group, compared to 43% in 2021.
Permanent placements also play an important role in our overall offering, providing clients with a full-service solution
depending on their requirements. Permanent grew 6%, and we continue to focus our efforts on Permanent in markets where we
can achieve the best returns.
Over time the Group has shown that the specialist focus on STEM and flexible talent has proven more resilient and adaptable
relative to the generalist staffing market. The strength of our contractor order book, which ended FY22 up 19% YoY,
provides a good degree of comfort against a more challenging and volatile backdrop. The strength of our business platform,
combining global scale with the flexibility of an agile business able to deploy resources as appropriate, has provided a
robust foundation from which we advanced our disciplined and focused strategy during the year.
A responsible business for now and the future guided by purpose
We believe in empowering a sustainable future through STEM skills, whether that is placing engineers to build wind
turbines, medical researchers to create new vaccines or cyber specialists to provide financial security. This purpose is
grounded in our ESG commitments, which are focused around promoting green jobs, encouraging diversity in STEM and
contributing to a renewable future.
We set ourselves targets related to ESG which are aligned to the UN Sustainable Development Goals, and we are pleased to
have progressed against these during the year, including:
• Having positively impacted 88,741 lives since December 2019, meaning we are over halfway to our goal of 150,000 by
2024.
• Making further strides in our ambition to tackle climate change, with 88% growth in net fees from our renewables
business since 2019, in line with our ambition to double our share by 2024 from 2019.
• Having reduced our carbon emissions by 44% in 2022 as compared to the base year 2019, achieving our initial target of
20% reduction. In doing so, we have set ourselves a more challenging target going forward of a 25% reduction against
2019.
• Progressing our focus on increasing gender representation in the business, with 32% of all leadership positions
occupied by women.
Building a business for sustainable scale
In taking up the CEO role a year ago, I spent my first months, with the senior leadership team across our regions,
reviewing, analysing and assessing the Group’s operations and strategy. Working together we agreed our strategic vision and
an execution plan centred on an analytical and fact-based approach. We have articulated and collaboratively achieved buy-in
to this clear vision across the Group, and in doing so, evolved our 2024 ambitions to be more relevant to our aspirations
under a new leadership team. The direction of travel remains the same and we are unanimously committed to these ambitions.
We are relentlessly focused on building a business of scale with sustainable margins, driven by our energised team.
As we step into execution mode, we look to advance our vision across four main strategic pillars:
Our Places – to be a leader in the markets we choose to serve
The Group’s performance in the year was driven by broad-based, double-digit growth across all our four regions, which
demonstrates that we are already operating as a leader in key markets where we know we can win. We spent time assessing and
honing our market approach to understand deeply the specific dynamics that enable us to scale, making sure we are in
exactly the right niches and specific skill areas across the different life cycles of each market.
This approach, crystallised during the year into a ‘market investment model’, meant that we segmented our focus into large,
proven and scalable markets and small-to-medium high-margin markets. A good example of our focus and commercial discipline
is our approach in the Netherlands, where we set appropriate strategic goals aligned to the market context, delivering 34%
growth during the year. This continuous analytical assessment also informed our decision to restructure our operations in
Singapore and Ireland. We continue to actively optimise and invest in those markets where we can generate the strongest
returns.
Our Platform – create a world class operational platform through data, technology and infrastructure
A focus of the year was ensuring we have in place the structure to deliver best-in-class operational execution and
understand where we can make improvements to continue to lead the pack. As part of this, we have made good progress with
planned strategic investments in our systems through which we are fundamentally re-engineering, simplifying and automating
some of our most manual and complex processes. The majority of the year’s costs were recognised in the second half of the
year and, as we progress into the new financial year, phasing and budget remains in line with plans.
We believe these improvements, along with implementing and systemising best practice across the Group, has created, and
will continue to create, an environment where colleagues are happier, more productive and ultimately have an improved
experience which will ultimately improve the experience of our candidates. The outputs we aspire to are better data-driven
insights, improved productivity, empowered regions and enhanced operational excellence through secure infrastructure, all
contributing to our long-term success and sustainable margin improvement in 2024 and beyond.
Our People – find, develop and retain great people
A key objective in the year, and one that I am passionate about, was improving our employee value proposition to be a
destination employer in our regions. We are a people business and our colleagues are our most valuable asset. A focus for
me was engaging with our global teams to bring everyone in the business toward one strategic focus. Our objective is to
enable and excite people to perform at their best by creating a high performance, inclusive culture, which attracts the
best talent, provides the best training and targets the best markets to support the meaningful work we do every day.
As part of this we standardised best talent acquisition practices across the Group, implemented a new sales compensation
scheme in our key markets, launched a new on-boarding programme (Elements) in all regions, as well as enhanced our training
and development programmes to provide clear pathways for career progression. An example of this is Identify, our programme
to develop women at SThree to become future leaders. As a result of these initiatives, I was very pleased to see our eNPS
score improve to the highest level we’ve ever achieved, and I believe this is just the beginning.
Everyone plays a part in our journey. As we look forward, we will continue our policy of highly targeted headcount
investments, in the markets and skill verticals that provide the best growth opportunities and where we can drive the
strongest returns. I would like to thank everyone for their dedication and hard work throughout the year.
Our Position – leveraging our position at the centre of STEM to deliver sustainable value to our candidates and clients
Our position at the heart of STEM is illustrated through the deep market value of our niche brands, aligned to our
specialist focused areas across target markets. We are proud of the power of our brands which continue to have high local
recognition.
A major achievement during the year was the launch of a new overarching corporate brand identity, to tie our ‘house of
brands’ together and leverage the power of SThree as a whole. This was an important step in uniting the business together
as a STEM specialist company and represents a clear expression of our intent to seize the market as a refreshed, energised
and innovative business.
In addition, we made further improvements to how we engage with our candidates and clients and further cemented our
position as a trusted resourcing and placement partner. We undertook a number of digital and in-person candidate forums,
career support programmes, and our ‘Breaking the Glass’ programme in the US continues to provide a meaningful resource for
supporting professional women in technology. This work ensures we retain our enviable, market-leading position as the
business the world comes to for flexible STEM talent.
Technology Improvement Programme
Our technology improvement programme will enable us to adopt modern, scalable, and innovative technologies and processes,
driving market leading, data driven insights, greater operational excellence and productivity. This programme will enable
us to deliver a world-class digital experience differentiating SThree and delivering our vision to be the number one STEM
talent provider in the best STEM markets.
The programme underpins the delivery of a value shift in our sales consultants’ productivity by enabling them to achieve
their best more quickly and more consistently. The programme will drive standardisation, simplification and automation
though our back-office technologies and processes enabling us to operate effectively at greater scale. The programme
supports the continuing shift towards ECM from the historic independent contracting model and positions the Group at the
forefront of the industry as it continues to evolve from a traditional, analogue recruitment model driven primarily by
headcount.
In 2022, we successfully piloted a CRM module in our Houston office. This is enabling us to systematise existing group best
practice, developed over many years, across an integrated platform to empower our people to be their best. We will deliver
this through a sequenced rollout across the Group, starting with our US and German businesses later in 2023. In 2022, we
incurred programme costs of £4.1m. In 2023, we expect to incur programme costs of £15m-£17m, of which £6m-£7m will be
expensed with the remainder of the £30-£35m programme costs anticipated to be incurred in 2024, of which £5m-£6m will be
expensed. We also expect to realise the initial financial benefits of this programme from 2024, and a positive return on
investment by the end of 2025. This is expected to support the delivery of a sustainable operating profit conversion ratio
of 21% or greater by 2024 and beyond.
Outlook underpinned by long-term megatrends
Following 17 years at SThree, and having spent my first year as CEO, it is clear to me that the Group has a huge
opportunity to build on the foundations and success to date to create a differentiate proposition within the market. We
have the team in place to execute our vision and our expert knowledge of our chosen markets. Along with a deep insight into
our clients’ needs and the preferences of our candidate communities, this means we look ahead with a significant amount of
experience and understanding of where our best opportunities lie. With our team energised around a clear strategy, it is
time to unleash the power of SThree.
Following an exceptional 2022 performance, trading early in the new financial year continues to track in line with full
year expectations, and we continue to monitor how the markets are evolving in the short term. Our opportunity is large,
underpinned by structural megatrends, and the requirement for scarce STEM talent across industries and regions is acute.
The work we have done over the year is aligned to building a business with long-term sustainable growth potential, in line
with our 2024 ambitions and beyond. We will continue to monitor how the markets are evolving in the short term however our
belief in the Group’s medium to long-term prospects remains as strong as ever.
Group OPERATIONAL REVIEW
Overview
The Group delivered an excellent performance throughout the year which was ahead of initial expectations with net fee
growth of 19%(7) YoY. This performance was driven by the successful execution of our well-established strategy and good
momentum in demand for STEM skills. Our main strategic area, Contract business which now accounts for 78% of the Group net
fees, delivered growth in net fees of 23% YoY. The contractor order book grew by 19% YoY, providing strong visibility to
the year ahead.
Permanent net fees were up 6% YoY primarily driven by growing demand for technology talent in the EMEA excluding DACH
region.
Our three largest countries represent 73% of Group net fees, with Germany up 14%, USA up 13% and Netherlands up 34% YoY.
This strong growth was delivered across Technology, up 23% and Engineering, up 27%, with Life Sciences growing 6% against a
very strong prior year comparator.
Total Group average headcount was up 12% YoY. We continue to make highly targeted investments in the markets and skill
verticals that provide the best growth opportunities and where we can drive the strongest returns. As a result of this
discipline and focus, headcount remains slightly below the pre-pandemic peak despite material net fee growth. Our 2022
productivity was exceptionally high, up 7% YoY, reflecting net fee growth that has outpaced growth in headcount. As
previously guided, we expect productivity to reduce from these exceptional levels, though we do expect to maintain some of
the gains achieved over the past couple of years, and are investing in tools through the technology improvement programme
to sustain more of these gains in the long term.
Operating profit was £77.6 million (2021: adjusted £60.8 million), up 23% YoY (there were no adjusting items in 2022).
Update and evolution of 2024 ambitions
In line with our 2024 ambitions announced at our Capital Markets Day in 2019 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:
• Outperforming our peer group on a net fee basis versus 2019 in four out of five largest markets (the USA, Germany, the
Netherlands and the UK), which together form the backbone of our financial strength.
• Achieving an operating profit conversion ratio of 18.0%, up 0.9 percentage points on 2021.
• Reducing our carbon emissions by 44% versus 2019.
• Reaching a groupwide eNPS of 51, supported by DE&I networks and the Identify leader programme.
• In the fight against climate change, the launch of several actions to educate and influence sustainable behaviours
across the business and grow our renewables business by 29% YoY.
• Positively impacting over 32,970 lives through delivering recruitment solutions and community programmes in 2022 alone.
(7) Unless specifically stated, all growth rates are expressed in constant currency.
Group net fees by geography, sector and division
2022 2021 Variance
Group net fees % of Group
(£’000) (£’000) Reported Like-for-like (8)
Geographical mix
EMEA excluding DACH 36% 156,540 127,197 +23% +24%
DACH 35% 148,922 129,420 +15% +17%
USA 26% 111,545 89,260 +25% +13%
APAC 3% 13,609 9,836 +38% +42%
Total 100% 430,616 355,713 +21% +19%
Sector mix
Technology 47% 203,184 166,538 +22% +23%
Life Sciences 22% 95,172 85,439 +11% +6%
Engineering 22% 92,083 70,563 +30% +27%
Other sectors (9) 9% 40,177 33,173 +21% +17%
Total 100% 430,616 355,713 +21% +19%
Division mix
Contract 78% 334,215 266,163 +26% +23%
Permanent 22% 96,401 89,550 +8% +6%
Total 100% 430,616 355,713 +21% +19%
(8) All variances are presented on a constant currency basis, whereby the prior year foreign exchange rates are applied to
current and prior financial year results to remove the impact of exchange rate fluctuations.
(9) Other sectors include the results of Banking & Finance sector, which was previously presented separately.
Business mix
The Group is well diversified, both geographically and by sector. Our top three countries now represent 73% of Group net
fees, with Germany accounting for 31%, USA 26% and the Netherlands 17% of Group net fees. More detail is provided in the
section that follows.
Our largest sector, Technology was up by 23% YoY, driven by increased demand for infrastructure and software development
roles across all major geographies, followed closely by the Engineering sector, which was up by 27% YoY, driven by DACH and
EMEA excluding DACH, with increased demand for construction and data scientist roles.
Our Contract business delivered a double-digit growth in net fees at 23% YoY, reflecting the high demand for skilled
contractors across our markets and key sectors.
Permanent net fee income was up 6% YoY. Within our regions, DACH, our largest Permanent market, was up 6% YoY, with EMEA
excluding DACH also reporting growth of 6% YoY. USA was down 8% following our strategic shift towards Contract and strong
prior year comparatives. Our business in Japan, which is predominately Permanent, saw net fees grow by 45% YoY.
Operational review by reporting segment
EMEA excluding DACH (36% of Group net fees)
2022 2021 Variance
Performance highlights Reported Like-for-like
Revenue (£’000) 739,409 606,248 +22% +22%
Net fees (£’000) 156,540 127,197 +23% +24%
Average total headcount (FTE) 989 899 +10% n/a
NPS 48 46 +2pts n/a
Market presence and strategic focus
EMEA excluding DACH is the largest region of the Group and comprises businesses in Belgium, Dubai, France, Ireland,
Luxembourg, the Netherlands, Spain and the UK.
Overall, the market position of the segment is strong. We saw an increased demand for STEM talent across the majority of
the markets. There were a number of drivers behind this trend; decarbonisation and the ‘great transition’ to sustainability
led to a shift towards power and renewables in the energy sector in the Netherlands. Whilst Healthcare, Engineering and' IT
were the most attractive segments in the UK, with Life Sciences having the highest proportion of temporary workers.
During the year, management reviewed the regional performance of Ireland, one of our smaller markets, when it became clear
that our returns had been sub-optimal in the past few years, and decided to restructure its operations, reducing it to a
satellite office.
Performance
The segment saw net fees grow by 24% YoY like-for-like with growth in both our Contract and Permanent divisions. The
Netherlands, our largest country in the region, saw very strong net fee growth of 34%, due to solid performance in
Technology, up 36%, which was driven by demand for Project Managers, Front and Back End Developers, ERP Consultants and
Business Intelligence and Data Science roles. Engineering was up 34% YoY, mainly due to demand for Process Engineers,
Electrical Engineers and Health and Safety Advisers.
Net fees in the UK were up 23% YoY driven by Technology up 30% as demand increased for roles within IT Leadership and
Strategy, Software Development and Testing, Cloud and Data & Business Intelligence.
We also saw net fee growth of 10% in Belgium driven by Technology, and 32% in Dubai driven by Engineering.
Outlook for the region
Overall, the region has set strong foundations in 2022 to continue our growth and momentum into 2023. STEM talent is
critical across our core sectors in the region and is in short supply. Whilst we understand that both geopolitical and
economic uncertainty will remain, STEM talent is hotly contested, and over the long term we expect demand for talent to
accelerate across core STEM verticals and geographies and underpins our growth prospects across the region.
DACH (35% of Group net fees)
2022 2021 Variance
Performance highlights Reported Like-for-like
Revenue (£’000) 539,014 452,456 +19% +20%
Net fees (£’000) 148,922 129,420 +15% +17%
Average total headcount (FTE) 874 823 +6% n/a
NPS 57 56 +1pts n/a
Market presence and strategic focus
DACH is the second largest region of the Group and represents 35% of the Group’s net fees (2021: 36%). The year was
characterised by a very strong market environment in the first half of the year and a second half that was overshadowed by
geo-political challenges, the ongoing crisis in Ukraine, supply chain bottlenecks, sharply rising inflation and the
associated rise in interest rates. Despite these uncertainties, there has been a positive impact on demand for STEM skills
driven by the government’s efforts to stimulate the economy and address key goals including energy infrastructure and
digitalisation projects. However, job opportunities decreased in Life Sciences as Covid-19 research ramped down whilst
interest rate increases, inflation and supply chain blockages put a brake on the Construction sector.
Overall, our clear strategic positioning in this region helped the business deliver a resilient performance in the year.
Performance
The DACH region delivered a strong performance in the year with net fees up 17% YoY like-for-like. The Contract business
grew 22% and Permanent grew 6%.
Germany, our largest country in the region, delivered strong net fee growth of 14%. Technology was up 18% with higher
demand for roles within infrastructure, Cyber Security, Open-Source Software Development and Leadership and Strategic
positions. Engineering was up 27% due to demand for Construction roles.
Switzerland and Austria also grew strongly up 37% and 51% YoY respectively, both driven by the Technology sector.
Outlook for the region
Despite the macro-economic uncertainties, the prospects for the DACH market are very encouraging. We believe that the
shortage of skilled workers, especially in STEM professions, will ensure an increasing demand for the talents we place over
the long term. As the leading STEM provider in the region, we have an excellent platform to continue to grow, address
market demand and create sustainable value for candidates and clients. Our strong investment focus on ECM will also allow
us to meet increasing market demand for flexible workforces and reinforce our ambition to be leaders in these markets.
USA (26% of Group net fees)
2022 2021 Variance
Performance highlights Reported Like-for-like
Revenue (£’000) 338,221 254,338 +33% +20%
Net fees (£’000) 111,545 89,260 +25% +13%
Average total headcount (FTE) 539 472 +14% n/a
NPS 56 53 +3pts n/a
Market presence and strategic focus
The USA is the world’s largest specialist STEM staffing market and our third largest region. Research-led healthcare and
digitalisation were both significant drivers of top-line growth as was decarbonisation driving demand from our utilities
clients who are adapting their businesses towards clean energy. In addition, demographic changes and shifting attitudes to
work led our candidates to desire career flexibility, a greater work-life balance and interesting projects. This, in turn,
has driven demand for STEM skills and contract hire, which is our strategic focus.
Our Technology sector benefitted from the high demand for software developers to cope with the growth for new technological
software, and we’ve deepened our partnership with Salesforce, the world’s most used CRM.
Life Sciences saw an increase in project managers and quality assurance personnel enabling our clients to cope with the
production and approvals of medicines and devices.
Power infrastructure and renewable energy investments maintained strong momentum in 2022 aided by legislative tailwinds
such as the Inflation Reduction Act resulting in high demand for key verticals in engineering and project management. In
addition, we experienced demand from manufacturers continuing investments into modernising facilities and developing new
product lines.
Performance
The USA segment saw net fee growth of 13% YoY like-for-like. There was strong growth in Contract of 19%. Permanent was down
8% following our strategic shift towards Contract and very strong prior year comparatives, when Life Sciences was the
standout performer with high demand from Covid-19-related activity.
Technology was up 18% with a particular focus on roles within Adobe, Software Developers, Mobile Applications and
Salesforce.
Engineering was up 32%, driven by demand for roles within Electrical Engineering and Project Management.
Outlook for the region
We will continue to invest strategically in the region as we align our resources with the best long-term opportunities. The
focus in 2023 will be to capture market share through continued growth within our core vertical markets of Technology,
Engineering and Life Sciences. Despite the economic uncertainty forecasted for 2023 and the potential consequences to the
labour market, the STEM market continues to show resilience providing an opportunity for the US region to grow its market
share.
Asia Pacific (3% of Group net fees)
2022 2021 Variance
Performance highlights Reported Like-for-like
Revenue (£’000) 22,802 17,684 +29% +28%
Net fees (£’000) 13,609 9,836 +38% +42%
Average total headcount (FTE) 156 111 +41% n/a
NPS 36 31 +5pts n/a
Market presence and strategic focus
Our APAC business is principally focused on Japan which accounts for 69% of APAC net fees. 2022 was an encouraging year for
the region, with net fees growing significantly for the second year in a row, following the impact of Covid-19 in 2020.
During the year, management reviewed the regional performance of Singapore, one of our smaller markets, when it became
clear that our returns remained sub-optimal in the past few years, and decided to restructure its operations, reducing it
to a satellite office.
Performance
Total net fees for the region were up 42% YoY like-for-like. Our two largest sectors showed strong growth with Technology
up 34% and Life Sciences up 24%.
An excellent performance in Japan saw net fee growth of 47% which was driven by the Technology sector, up 32% YoY with
increased demand for Software Engineering roles.
Outlook for the region
In line with our global strategy, we are continuing to increase our investment into the APAC region, with a focus on
growing our business in Japan whilst reducing our activities in Singapore. The STEM opportunity in Japan has a positive
outlook for the next year, and we will be strengthening our position in Technology, Life Sciences and Engineering
accordingly.
chief financial officer’s STATEMENT
In line with the Board’s expectations, the strong momentum of 2021 continued into 2022, with all our core markets and
sectors delivering strong YoY growth in net fees. This year’s performance demonstrates the strength of our strategy, which
was designed to focus on recruiting STEM specialists in markets with high demand and limited supply, and is underpinned
with ongoing investments in our people, talent acquisition and digital infrastructure.
On a reported basis revenue for the year was up 23% to £1.6 billion (2021: £1.3 billion) while net fees increased by 21% to
£430.6 million (2021: £355.7 million). When presented on a constant currency basis, the net fees increased by 19% YoY; the
strengthening of our two main trading currencies, the US Dollar and the Euro, against Sterling during the year, increased
the total net fees by £8.1 million.
Net fee growth has been strong throughout the year, driven by continued high demand from clients for candidates with STEM
skills. Our Contract business experienced excellent momentum and activity levels across all regions and all key sectors,
with net fee growth of 23%(10). This was led by EMEA excluding DACH which was up 27%, DACH, up 22%, USA, up 19% and APAC,
up 27%. From a sector perspective, Technology and Engineering were both up 27% YoY, with a more modest growth in Life
Sciences, up 13%, due to very strong prior year comparatives. Our ECM proposition also continued to deliver encouraging
performance and was up by 28%. Group Contract net fees as a percentage of Contract revenue(11) increased marginally to
21.7% (2021: 21.5%), and at the end of the year Contract represented 78% of the Group net fees in the year (2021: 75%).
The contractor order book was up 19% YoY, reflecting the strong demand for skilled contractors that we have seen across our
markets, and providing good visibility into 2023.
Permanent net fee income was up 6% which was driven by DACH, our largest Permanent market delivering net fee growth of 6%.
EMEA excluding DACH also reported growth of 6%, with USA down 8% following our strategic focus on Contract and strong prior
year comparatives. APAC was up by 45%. This was reflected in growth in Technology up 10% and Engineering up 24%. Life
Sciences was down 14% YoY reflecting very strong prior year comparators. Group Permanent net fees as a percentage of salary
increased marginally to 25.3% (2021: 25.0%).
Operating expenses increased by 20% YoY on a reported basis, amounting to £353.1 million (2021: £294.7 million), mainly
attributable to higher personnel costs due to investments in headcount across the business, higher average salaries and
bonuses and increased share-based payment charges. Other operating expenses included spend on technology and improved
systems, as well as a loss on disposal of legacy development costs capitalised in previous years. In addition, following
the Board approval of the plan to restructure two businesses in Ireland and Singapore, and to close the Hong Kong business,
due to continued underperformance, the Group incurred £2.4 million in personnel termination costs (see further details in
the Investment section below or note 5 to the Consolidated Financial Statements).
The reported operating profit was £77.6 million (2021: £61.0 million), up 23% YoY in constant currency, driven by strong
performance in Contract net fees. The net currency movements versus Sterling provided a moderate net tailwind to the
operating profit, providing a £2.8 million benefit.
The Group operating profit conversion ratio(11) increased to 18.0% (2021: 17.1%), which reflects the positive momentum in
net fee growth and operational leverage partially offset by the impact of the technology and people investments and costs
associated with the restructuring activities undertaken in Ireland and APAC in the second half of the year.
Net finance costs
Net finance costs, which predominantly related to lease interest, decreased to £0.5 million (2021: £0.8 million) in line
with the reduction in lease liabilities.
Income tax
The total tax charge for the year on the Group’s profit before tax was £22.8 million (2021: £17.9 million), representing a
full year effective tax rate (ETR) on continuing operations of 29.6%, broadly in line with the prior year reported ETR on
continuing operations of 29.8%.
The Group’s ETR 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 £77.0 million, up 23% YoY in constant currency and up 28% on a reported basis
(2021: reported £60.2 million and adjusted £60.0 million, both excluding the discontinued operations).
The reported profit after tax was £54.2 million, up 24% YoY in constant currency and up 28% on a reported basis (2021:
reported £42.3 million and adjusted £42.1 million, both excluding the discontinued operations).
Foreign exchange exposure
Fluctuations in foreign currency exchange rates remain a material sensitivity to the Group’s reported results. By way of
illustration, each 1% movement in annual exchange rates of the Euro and US Dollar against Sterling impacts the Group’s net
fees by £2.4 million and £1.1 million respectively per annum, and operating profit by £0.8 million and £0.4 million
respectively per annum. Our foreign exchange risk management strategy involves using certain derivative financial
instruments to minimise the transactional exposure arising from currency fluctuations.
Earnings per share (EPS)
The reported and adjusted EPS was 41.0 pence (2021: reported 31.9 pence and adjusted 31.8 pence). The YoY growth reflects
the exceptionally strong trading performance, largely stable Group ETR, and the weighted average number of shares reducing
by 0.1 million YoY.
The reported diluted EPS was 39.9 pence (2021: 30.9 pence excluding discontinued operations). Share dilution mainly results
from various share options in place and 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(11) range of 2.5x to 3.0x through the cycle.
The Board has proposed to pay a final dividend at 11.0 pence (2021: 8.0 pence) per share. Taken together with the interim
dividend of 5.0 pence (2021: 3.0 pence) per share, it gives the total dividend for the year of 16.0 pence (2021: 11.0
pence) per share.
The final dividend, which amounts to approximately £14.5 million, will be subject to shareholder approval at the 2023
Annual General Meeting. It will be paid on 9 June 2023 to shareholders on the register on 12 May 2023.
Balance sheet
Total Group net assets increased to £200.4 million (2021: £158.2 million), driven by the excess of net profit over the
dividend payments, and favourable foreign currency movements, partially offset by share buy-backs. Net working capital,
including contract assets, increased by £45.1 million on the prior year, driven mainly by the accelerated growth in revenue
and a strong contractor order book increasing our working capital. Our days sales outstanding increased slightly to 45 days
(2021: 44 days) due to the challenging economic environment experiences in various countries we operate in.
Our business model remains highly cash generative, and we have no undue concentration of repayment obligations in respect
of trade payables or borrowings.
Investments
In March 2022, SThree’s Board approved the Group-wide infrastructure investment programme which will help us achieve our
2024 ambitions and deliver sustainable returns over the longer term. This business transformation programme aims to
modernise our core systems within sales and supporting functions delivering enhanced sales effectiveness as well as
scalable and automated end-to-end processes for the flexible talent models we provide. The programme started in June this
year and will last until the end of 2024. For the year ended 30 November 2022, the Group spent £4.1 million primarily on
the initial research-related stages of the programme. These costs did not meet the capitalisation criteria. The entire
amount was therefore immediately expensed in the Group income statement.
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.
Investments in subsidiaries
During the year, the Group’s businesses delivered a very strong financial performance, ahead of market and management’s
expectations. No significant indicators of impairment were identified when reviewing recoverable amounts of the Company’s
key trading subsidiaries.
However, the commencement of restructuring activities undertaken in Ireland and Singapore in Q4 2022, and the Board
decision to close the Hong Kong business, acted as a trigger to the impairment charge which was recognised in the SThree
plc’s (the Parent Company) separate books (for the total amount of £0.9m) in 2022. All three businesses underperformed in
the past few years, with Hong Kong in particular remaining at sub-optimal level. The Group's presence in the APAC region
was already subject to the review in 2017, when the Board significantly downsized operations in Hong Kong, reducing it to a
satellite office. Most recently, it became clear that our continued trading in Hong Kong was no longer a viable investment
option.
This impairment charge did not impact the Group consolidated results.
In the prior year, no impairment loss was recognised by the Parent Company.
Tracker shares
The Group settled certain vested and unvested tracker shares during the year for a total consideration of £6.0 million
which was determined using a formula set out in the Articles of Association underpinning the tracker share businesses. The
consideration was settled in SThree plc shares; 623,219 new shares were issued and 983,637 of shares held by the EBT were
utilised. The arrangement is deemed to be an equity-settled share-based payment arrangement under IFRS 2 Share-based
payments. There was no charge to the income statement as initially the tracker shareholders subscribed to the tracker
shares at their fair value.
All current tracker share businesses remaining in existence will continue to be reviewed for settlement based on the
pre-agreed criteria each year, until the full closure of the scheme in the next few years. We expect all future tracker
share settlements to be between £2.0 million to £10.0 million per annum. These settlements may either dilute the earnings
of SThree plc’s existing ordinary shareholders if funded by a new issue of shares or result in a cash outflow if funded via
treasury shares or shares held in the EBT.
Liquidity management
In 2022, cash generated from operations was £64.4 million (2021: £54.5 million). It represented the improved EBITDA(11)
offset by the continued growth of the contractor order book increasing our working capital investment. Income tax paid
increased to £18.9 million (2021: £16.7 million), reflecting the improved underlying trading performance across our markets
and sectors.
Capital expenditure increased to £3.7 million (2021: £2.6 million), the key drivers being the spend on leasehold
improvements and IT hardware costs including our network infrastructure.
The Group paid £14.3 million in rent (principal and interest portion) (2021: £13.1 million). Net interest cost (excluding
interest on lease payments) was £nil (2021: £0.2 million) in the year. The Group spent £9.9 million (2021: £5.2 million)
for the purchase of its own shares to satisfy employee share incentive schemes. Cash inflows of £0.5 million (2021: £0.2
million) were generated from the Save As You Earn employee scheme.
Dividend payments were £14.7 million (2021: £6.6 million, being the final dividend paid in June 2021) and there was a small
cash outflow of £0.1 million (2021: £0.1 million) representing distributions to tracker shareholders.
Foreign exchange had a positive impact on operating profit of £4.5 million (2021: negative impact £2.6 million).
Overall, the underlying cash performance in 2022 was strong, reflecting excellent trading performance across the Group
offset by increased working capital driven by strong growth in the contract order book. We started the year with net cash
of £57.5 million and closed the year with net cash of £65.4 million.
Capital allocation and accessible funding
SThree remains disciplined in its approach to allocating capital, with the core objective at all times being to maximise
stakeholder value:
• Balance sheet - our intention is to maintain a strong balance sheet at all times.
• Organic growth - our top priority is to invest in the organic growth of the business. We will actively invest in
delivering scalable growth in net fees and margins - focusing on our people, systems and processes to improve
operational efficiencies as well as developing new business opportunities.
• Acquisitions - we may seek to accelerate our growth by acquiring businesses that complement our strategy as well as
offer value-enhancing financial profiles.
• Dividend - we aim to pay a dividend that is sustainable through the cycle, and which will be driven by long-term
earnings growth.
• Surplus cash - whilst unlikely in the foreseeable future, we will consider returning excess capital to shareholders by
way of special dividends and/or share repurchases in the event of there not being suitable organic or inorganic
opportunities.
The Group’s capital allocation priorities are financed mainly by retained earnings, cash generated from operations, a £50.0
million Revolving Credit Facility (‘RCF’), which has been refinanced and is now committed to at least 2025. Any funds
borrowed under the RCF bear a minimum annual interest rate of 1.2% above the benchmark Sterling Overnight Index Average
(SONIA). The Group also maintains a £30.0 million accordion facility as well as a substantial working capital position
reflecting net cash due to SThree for placements already undertaken.
During the year, the Group did not draw down any of the above credit facilities (2021: £nil).
On 30 November 2022, the Group had total accessible liquidity of £120.4 million, made up of £65.4 million in net cash
(2021: £57.5 million), the £50.0 million RCF, and a £5.0 million overdraft of which £0.4 million was used at the year end.
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 these financial statements.
(10) Unless specifically stated, all growth rates in revenue and net fees are expressed in constant currency.
(11) The Group has identified and defined certain alternative performance measures (APMs). 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 15 to the Consolidated Financial Statements.
PRINCIPAL AND EMERGING RISKS
Principal risks and uncertainties affecting the business activities of the Group will be detailed within the Strategic
Report section of the Group’s 2022 Annual Report, a copy of which will be available on the Group’s website
5 www.sthree.com.
Delivering on our strategy requires all parts of our business to work together. In isolation risk mitigation helps SThree
manage specific subjects and areas of the business. However, when brought into our day-to-day activities successful risk
management has helped us to maximise our competitive advantage and deliver on our strategic pillars in 2022. While the
ultimate responsibility for risk management rests with the Board, the effective day-to-day management of risk is in the way
we do business and our culture.
Aligning risks and strategy by using risk to help make the right strategic decisions - in order to deliver our strategy and
competitive advantage throughout the business we must ensure that we maintain a balance between safeguarding against
potential risks and taking advantage of all potential opportunities.
consolidated income statement
for the year ended 30 November 2022
2022 2021
£'000 Note Total Before exceptional items Exceptional items Total
Continuing operations
Revenue 2 1,639,446 1,330,726 - 1,330,726
Cost of sales (1,208,830) (975,013) - (975,013)
Net fees 2 430,616 355,713 - 355,713
Administrative (expenses)/income 3 (349,301) (292,325) 184 (292,141)
Impairment losses on financial assets 3 (3,763) (2,579) - (2,579)
Operating profit 77,552 60,809 184 60,993
Finance income 141 34 - 34
Finance costs (667) (869) - (869)
Profit before income tax 77,026 59,974 184 60,158
Income tax expense 4 (22,824) (17,872) (35) (17,907)
Profit for the year from continuing operations 54,202 42,102 149 42,251
Discontinued operations
Loss after tax for the year from discontinued 5 - (269) - (269)
operations
Profit for the year
54,202 41,833 149 41,982
attributable to owners of the Company
Earnings per share attributable to shareholders
pence
Total Group
Basic 6 41.0 31.6 0.1 31.7
Diluted 6 39.9 30.6 0.1 30.7
Continuing operations
Basic 6 41.0 31.8 0.1 31.9
Diluted 6 39.9 30.8 0.1 30.9
The accompanying notes form an integral part of these Consolidated Financial Statements.
consolidated statement of comprehensive income
for the year ended 30 November 2022
£'000 Note 2022 2021
Profit for the year 54,202 41,982
Other comprehensive income/(loss):
Items that may be subsequently reclassified to profit or loss:
Exchange differences on retranslation of foreign continuing operations 7,096 (2,694)
Items that will not be subsequently reclassified to profit or loss:
Net loss on equity instruments at FVOCI (1) -
Other comprehensive income/(loss) for the year (net of tax) 7,095 (2,694)
Total comprehensive income for the year
61,297 39,288
attributable to owners of the Company
Total comprehensive income/(loss) for the year
attributable to owners of the Company arises from:
Continued operations 61,297 39,557
Discontinued operations 5 - (269)
61,297 39,288
The accompanying notes form an integral part of these Consolidated Financial Statements.
consolidated statement of financial position
at 30 November 2022
30 November 30 November
£'000 Note 2022 2021
ASSETS
Non-current assets
Property, plant and equipment 35,249 38,073
Intangible assets 846 2,459
Investments - 1
Deferred tax assets 4,616 4,491
Total non-current assets 40,711 45,024
Current assets
Trade and other receivables 363,884 298,024
Current tax assets - -
Cash and cash equivalents 8 65,809 57,526
Total current assets 429,693 355,550
Total assets 470,404 400,574
EQUITY AND LIABILITIES
Equity attributable to owners of the Company
Share capital 11 1,345 1,337
Share premium 38,239 35,466
Other reserves (802) (4,683)
Retained earnings 161,610 126,033
Total equity 200,392 158,153
Current liabilities
Bank overdraft 8 423 24
Trade and other payables 216,842 196,080
Lease liabilities 9, 10 11,102 13,081
Provisions 7,871 6,258
Current tax liabilities 7,391 2,987
Total current liabilities 243,629 218,430
Non-current liabilities
Lease liabilities 9, 10 22,600 21,987
Provisions 3,783 2,004
Total non-current liabilities 26,383 23,991
Total liabilities 270,012 242,421
Total equity and liabilities 470,404 400,574
The accompanying notes form an integral part of these Consolidated Financial Statements.
consolidated statement of changes in equity
for the year ended
30 November 2022
Capital Currency Fair value Total equity
Share Share redemption Capital Treasury translation reserve of Retained attributable
capital premium reserve reserve reserve reserve equity earnings to owners of
£'000 investments the Company
Balance at 1 33,026 172 (1,496) 340 (12) 94,279 128,517
December 2020 1,330 878
Profit for the - 41,982 41,982
year - - - - - -
Other
comprehensive (2,694) -
loss for the - - - - - - (2,694)
year
Total
comprehensive (2,694) - 41,982 39,288
income for the - - - - -
year
Dividends paid
to equity - - - - - - - (6,616) (6,616)
holders
Distributions
to tracker - - - - - - - (87) (87)
shareholders
Settlement of
vested tracker 2 964 - - 2,494 - - (3,635) (175)
shares
Settlement of
share-based 5 1,476 - - 967 - - (2,057) 391
payments
Purchase of
shares by EBT, - - - - (5,332) - - - (5,332)
including
share gift
Credit to
equity for
equity-settled - - - - - - - 1,520 1,520
share-based
payments
Current and
deferred tax
on share-based - - - - - - - 647 647
payment
transactions
Total
movements in 7 2,440 - - (1,871) (2,694) - 31,754 29,636
equity
Balance at 30
November 2021 1,337 35,466 172 878 (3,367) (2,354) (12) 126,033 158,153
and 1 December
2021
Profit for the - - - - - - - 54,202 54,202
year
Other
comprehensive - - - - - 7,096 (1) - 7,095
income for the
year
Total
comprehensive - - - - - 7,096 (1) 54,202 61,297
income for the
year
Dividends paid
to equity - - - - - - - (14,650) (14,650)
holders
Distributions
to tracker - - - - - - - (116) (116)
shareholders
Settlement of
vested tracker 6 2,265 - - 3,835 - - (5,629) 477
shares
Settlement of
share-based 2 508 - - 2,851 - - (2,851) 510
payments
Purchase of
shares by - - - - (9,900) - - - (9,900)
Employee
Benefit Trust
Credit to
equity for
equity-settled - - - - - - - 4,999 4,999
share-based
payments
Current and
deferred tax
on share-based - - - - - - - (378) (378)
payment
transactions
Total
movements in 8 2,773 - - (3,214) 7,096 (1) 35,577 42,239
equity
Balance at 30 1,345 38,239 172 878 (6,581) 4,742 (13) 161,610 200,392
November 2022
The accompanying notes form an integral part of these Consolidated Financial Statements.
consolidated statement of cash flows
for the year ended 30 November 2022
30 November 30 November
2022 2021
Note £'000 £'000
Cash flows from operating activities
Profit from continuing operations before tax after exceptional items 77,026 60,158
Loss before tax from discontinued operations - (269)
Profit before tax 77,026 59,889
Adjustments for:
Depreciation and amortisation charge 18,902 17,717
Loss on disposal of property, plant and equipment other than right-of-use assets 122 199
Gain on lease modification (266) -
Impairment of intangible assets 499 608
Loss on disposal of intangible assets 1,176 74
Finance income (141) (34)
Finance costs 667 869
Loss on liquidation of subsidiaries 5 - 236
Non-cash charge for equity-settled share-based payments 4,999 1,520
Operating cash flows before changes in working capital and provisions 102,984 81,078
Increase in receivables (59,288) (63,559)
Increase in payables 17,174 41,074
Increase/(decrease) in provisions 3,510 (4,065)
Cash generated from operations 64,380 54,528
Interest received 141 34
Income tax paid – net (18,922) (16,771)
Net cash generated from operating activities 45,599 37,791
Cash flows from investing activities
Purchase of property, plant and equipment (3,407) (1,923)
Purchase of intangible assets (265) (726)
Net cash used in investing activities (3,672) (2,649)
Cash flows from financing activities
Interest paid 10 (667) (869)
Lease principal payments 10 (13,721) (12,460)
Proceeds from exercise of share options 510 209
Purchase of shares by Employee Benefit Trust 11 (9,900) (5,150)
Dividends paid to equity holders 7 (14,650) (6,616)
Distributions to tracker shareholders (109) (87)
Net cash used in financing activities (38,537) (24,973)
Net increase in cash and cash equivalents 3,390 10,169
Cash and cash equivalents at beginning of the year 57,502 49,895
Exchange gains/(losses) relating to cash and cash equivalent 4,494 (2,562)
Net cash and cash equivalents at end of the year 8 65,386 57,502
The accompanying notes form an integral part of these Consolidated Financial Statements.
Notes to the Financial information
for the year ended 30 November 2022
1. Basis of preparation AND ACCOUNTING POLICIES
The financial information in this preliminary announcement has been extracted from the Group audited financial statements
for the year ended 30 November 2022 and does not constitute statutory accounts within the meaning of section 434 of the
Companies Act 2006. The Group financial statements and this preliminary announcement were approved by the Board of
Directors on 27 January 2023.
The auditors have reported on the Group's financial statements for the years ended 30 November 2022 and 30 November 2021
under s495 of the Companies Act 2006. The auditors’ reports are unqualified and do not contain a statement under section
498(2) or (3) of the Companies Act 2006. The Group's statutory financial statements for the year ended 30 November 2021
were filed with the Registrar of Companies and those for the year ended 30 November 2022 will be filed following the
Company’s Annual General Meeting.
In 2022, selected UK subsidiaries were exempt from the requirements of the UK Companies Act 2006 (the Act) relating to the
audit of individual accounts by virtue of s479A of the Act. The Company provides a guarantee concerning the outstanding
liabilities of these subsidiaries under section 479C of the Act.
On 31 December 2020, International Financial Reporting Standards as adopted by the European Union (EU) at that date were
brought into UK law and became UK-adopted International Accounting Standards, with future changes being subject to
endorsement by the UK Endorsement Board. The Group transitioned to UK-adopted International Accounting Standards in its
Consolidated Financial Statements on 1 December 2021. However, there was no impact on recognition, measurement or
disclosures, as well as no changes in the accounting policies from the transition. The Group's key accounting policies were
applied consistently throughout the year and preceding year.
Going concern
The Consolidated and Company-only Financial Statements have been prepared on a going concern basis. The Directors have
reviewed the Group’s cash flow forecasts, considered the assumptions contained in the budget, and considered associated
principal risks which may impact the Group’s performance in the 12 months from the date of approval of this year’s
financial statements and in the period immediately thereafter.
At 30 November 2022, the Group had no debt except for IFRS 16 lease liabilities of £33.7 million and a small bank overdraft
of £0.4 million. Credit facilities relevant to the review period comprise a committed £50.0 million RCF (a recently
refinanced facility expiring in May 2025, with extension options to 2027) and an uncommitted £30.0 million accordion
facility, both jointly provided by HSBC and Citibank. These facilities remained undrawn on 30 November 2022. A further
uncommitted £5.0 million bank overdraft facility is also held with HSBC of which £0.4 million was used at the year end.
In addition, the Group has £65.4 million of cash and cash equivalents available to fund its short-term needs, as well as a
substantial working capital position, reflecting net cash due to SThree for placements already undertaken.
The RCF is subject to covenants that are measured biannually in May and November, on a trailing 12-month basis, being (i)
net debt to EBITDA of a maximum of 3.0x and (ii) interest cover of a minimum of 4.0x. The ratio of net debt to EBITDA at 30
November 2022 was nil, as no debt was drawn at the year end, and interest cover was 125 times, and hence the going concern
assessment was primarily focused on available liquidity during the assessment period.
The Directors considered the current and possible future impact from the macro-economic environment on new placement
activity and in turn on the Group’s net fees performance. The Directors also considered expected cash outflows attributable
to investments in people, talent acquisition and infrastructure in response to identified market opportunities and emerging
risks.
The base case forecasts were sensitised to reflect a severe but plausible downside scenario on Group performance. The key
assumptions subject to the sensitivity analysis were a decline in net fees, but a flat cost base, resulting in reduced
margins and operating profit.
In the severe but plausible downside scenario, the Group has sufficient liquidity headroom through the whole period
covered. This stress test also did not incorporate potential mitigating actions at the Board’s disposal to improve the
position identified by the analysis, e.g. deferrals of capital expenditure, cash preservation initiatives, suspension of
dividends payment and/or share buyback programme, and a number of further reductions in operating expenditure across the
Group primarily related to workforce cost reductions.
Based on this evaluation, the Directors have formed a judgement that the Group has adequate resources to continue in
operational existence for at least the next 12 months from the date of approval of the Group's Consolidated Financial
Statements, and considered it appropriate to prepare them on the going concern basis.
Climate change consideration
Climate change is a significant issue for the world and the transition to a low-carbon economy will create both risks and
opportunities for the Group.
The management team considered the impact from climate change in preparing the Consolidated Financial Statements on the
following areas:
- The going concern and viability of the Group over the next five years, including the potential impact of climate-related
risks, such as SThree’s offices impacted by heightened physical risks affecting our operational ability to place
contractors and service the existing contracts, resulting in lower revenue and income. This is subject to the ongoing
assessment by the management team performed using three climate-related scenarios for 2022-2040. The assessment helps to
continually test SThree's strategic resilience and its flexibility to adapt operations to ever-changing risks and
opportunities as a consequence of climate change to drive continued growth.
- Useful lives of fixed assets: the impact of climate change is not considered to be material on our existing asset base
including on factors like residual values, useful lives and depreciation methods which determine the carrying value of
non-current assets. Although, the Group has plans to invest in low-carbon technology as part of its net zero commitment,
there is no immediate risk of material adjustment to the carrying values of the existing assets in the next financial
year’s results. Over the course of our net zero path, the existing fixed asset are expected to be fully depreciated within
the next five to seven years.
- Recoverability of trade receivables and contract assets: the impact of climate-related matters could have an impact on
the Group's clients in the future, especially, clients whose businesses/operations could be negatively affected by the
introduction of emission-reduction legislation, energy transition plans or by extreme weather and other physical
conditions, which could lead to increase in manufacturing costs, dilapidation of their asset base and affect their ability
to pay debts. No material climate-related issues have arisen during the current year that have impacted our assessment of
the recoverability of receivables. The Group's ECL allowance uses credit ratings which inherently include the market's
assessment of the climate change impact on credit risk of our clients. Given the short-term maturity of trade receivables
including contract assets, climate change is unlikely to have materially increase our credit risk.
- Share-based payments: some performance conditions of the Long-Term Incentive Plan for members of the Executive Committee
are linked and measured against ESG metrics from the 2022 financial year. This could impact the future amount of the
recognition of the share-based payment expense in the Group income statement. However, as the ESG-related performance
condition constitutes only 10% of each grant, the impact is considered immaterial.
- Segmental reporting: in our response to climate change and transition to a net zero target, there has been yet no change
to the management information provided to, and reviewed by, the chief operating decision maker each month.
Whilst there is currently no material medium-term impact expected from climate change, the management team is aware of the
ever-changing risks and will continue to regularly monitor these risks against judgements and estimates made in preparation
of the Group's financial statements.
Accounting policies
The accounting policies used in the preparation of the Consolidated Financial Statements are consistent with those applied
in the previous financial year, 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 amendments to the accounting standards, issued by the IASB and endorsed by the UK and EU, have been adopted
by the Group and 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 accounts 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 had an
immaterial financial impact. The implications on the trading results of our segments of IBOR reform were also assessed and
the expected impact was found to be immaterial.
New and amended standards that are applicable to the Group but not yet effective
As at the date of authorisation of this Annual Report, the following amendments to existing standards were in issue but not
yet effective. Where already endorsed by the UK, these changes will be adopted on the effective dates noted. Where not yet
endorsed by the UK, 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.
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 maker to be the Executive Committee made up of the Chief
Executive Officer, the Chief Financial Officer, the Chief Technology and Information Officer, the Chief People Officer,
Chief Legal Officer and Senior Managing Directors.
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.
The DACH region comprises Germany, Switzerland and Austria. The 'EMEA excluding DACH' region comprises primarily Belgium,
France, 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 we place with our clients, represent skillsets 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 the accompanying notes.
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 Net fees
£’000 2022 2021 2022 2021
EMEA excluding DACH 739,409 606,248 156,540 127,197
DACH 539,014 452,456 148,922 129,420
USA 338,221 254,338 111,545 89,260
APAC 22,802 17,684 13,609 9,836
1,639,446 1,330,726 430,616 355,713
APAC includes Japan and Singapore. In 2022, the segment also included the results generated by Hong Kong, which was closed
as at 30 November 2022 (see note 5 for further details).
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
2022
excluding DACH USA APAC Total
£’000
DACH
Timing of revenue recognition
Over time 718,447 495,268 315,134 11,474 1,540,323
At a point in time 20,962 43,746 23,087 11,328 99,123
739,409 539,014 338,221 22,802 1,639,446
EMEA
2021
excluding DACH USA APAC Total
£’000
DACH
Timing of revenue recognition
Over time 587,220 410,510 231,812 9,558 1,239,100
At a point in time 19,029 41,944 22,526 8,127 91,626
606,249 452,454 254,338 17,685 1,330,726
Major customers
In 2022 and 2021, 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 Net fees
£'000 2022 2021 2022 2021
Germany 468,352 405,308 131,880 117,827
USA 338,221 254,338 111,545 89,260
Netherlands 314,156 250,645 72,931 55,612
UK 262,999 202,368 46,689 37,798
Japan 10,793 8,189 9,410 6,868
RoW (1) 244,925 209,878 58,161 48,348
1,639,446 1,330,726 430,616 355,713
30 November 30 November
£'000 2022 2021
Non-current assets
Germany 16,313 12,079
UK 5,374 11,027
Japan 4,144 4,211
USA 3,962 5,304
Netherlands 2,149 2,400
RoW (1) 4,153 5,512
36,095 40,533
(1) RoW (Rest of the World) includes all countries other than listed.
The following segmental analysis by brands, recruitment classification and sectors (being the profession of candidates
placed) has been included as additional disclosure to the requirements of IFRS 8.
Revenue Net fees
£'000 2022 2021 2022 2021
Brands
Computer Futures 564,844 448,325 143,932 117,384
Progressive 475,142 376,844 124,877 99,502
Real Staffing Group 365,708 294,309 104,901 90,394
Huxley Associates 233,752 211,248 56,906 48,433
1,639,446 1,330,726 430,616 355,713
Other brands including Global Enterprise Partners, JP Gray, Madison Black, Newington International and Orgtel are rolled
into the above brands.
Revenue Net fees
£'000 2022 2021 2022 2021
Recruitment classification
Contract 1,540,323 1,239,100 334,215 266,163
Permanent 99,123 91,626 96,401 89,550
1,639,446 1,330,726 430,616 355,713
Revenue Net fees
£'000 2022 2021 2022 2021
Sectors
Technology 838,649 674,072 203,184 166,538
Engineering 341,850 267,407 92,083 70,563
Life Sciences 319,734 271,460 95,172 85,439
Other(1) 139,213 117,787 40,177 33,173
1,639,446 1,330,726 430,616 355,713
(1) Other includes the results of Banking & Finance sector, which was previously presented separately, and Procurement &
Supply Chain and Sales & Marketing.
3. ADMINISTRATIVE EXPENSES
a. Operating profit from continuing operations is stated after charging/(crediting):
£'000 2022 2021
Staff costs 266,010 225,920
Depreciation 18,682 15,764
Amortisation 220 1,953
Loss on disposal of property, plant and equipment other than right-of-use assets 122 199
Gain on lease modification (266) -
Impairment of intangible assets 499 608
Loss on disposal of intangible assets 1,176 74
Impairment losses on financial assets(1) 3,763 2,579
Service lease charges
• Buildings 2,426 2,156
• Cars 1,391 1,402
Foreign exchange losses 1,164 397
Other operating income (see 3(b)) - (470)
(1) The YoY increase in impairment losses is mainly attributable to exposures written off as part of transformation data
cleanse exercise. During the year, in preparation for the start of the programme, management reviewed legacy exposures,
which had been in dispute for more than 180 days, and concluded they were no longer recoverable and therefore were provided
in full.
b. Profit for the prior year included the following items that were unusual because of their nature, size or incidence:
£'000 2022 2021
1. Net exceptional income - 184
2. Impact of Covid-19:
Government assistance income - 286
Total - 470
Net exceptional income
In the prior year, the Group recognised a net exceptional income of £0.2 million in relation to a legacy restructuring
programme 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 Consolidated Financial Statements,
affecting the profit before tax for the current and prior year. These items were not treated as exceptional.
Government assistance income
In the prior year, the Group took advantage of job retention schemes launched by the national governments of France and
Singapore, whereby it was reimbursed for a portion of salaries of furloughed personnel. A benefit of £0.3 million was
recognised and presented as a deduction in reporting the related staff expense. No such benefits were received in the
current year.
4. INCOME TAX EXPENSE
a. Analysis of tax charge for the year
2022 2021
£’000 Total Before exceptional items Exceptional items Total
Current income tax
Corporation tax charged on profits for the year 23,409 18,142 35 18,177
Adjustments in respect of prior periods (133) 1,989 - 1,989
Total current tax charge 23,276 20,131 35 20,166
Deferred income tax
Origination and reversal of temporary differences (395) (276) - (276)
Adjustments in respect of prior periods (57) (1,983) - (1,983)
Total deferred tax credit (452) (2,259) - (2,259)
Total income tax charge
22,824 17,872 35 17,907
in the Consolidated Income Statement
The total income tax charge relates entirely to continuing operations.
b. Reconciliation of the effective tax rate
The Group’s tax charge for the year exceeds (2021: exceeds) the UK statutory rate and can be reconciled as follows:
2022 2021
£’000 Total Before exceptional items Exceptional items Total
Profit before income tax from continuing operations 77,026 59,974 184 60,158
Loss before income tax from discontinued operations - (269) - (269)
Profit before income tax for the Group 77,026 59,705 184 59,889
Profit before income tax multiplied by the standard rate of 14,635 11,344 35 11,379
corporation tax in the UK at 19.00% (2021: 19.00%)
Effects of:
Disallowable items 1,905 1,650 - 1,650
Differing tax rates on overseas earnings 5,590 3,897 - 3,897
Adjustments in respect of prior periods (190) 6 - 6
Adjustments due to tax rate changes (294) (149) - (149)
Tax losses for which deferred tax asset was not recognised or 1,178 1,124 - 1,124
derecognised
Total tax charge for the year 22,824 17,872 35 17,907
At the effective tax rate 29.6% 29.9% 19.0% 29.9%
Effective tax rate attributable to continuing operations 29.6% 29.8% - 29.8%
c. Current and deferred tax movement recognised directly in equity
£'000 2022 2021
Equity-settled share-based payments:
Current tax 196 4
Deferred tax (charge)/credit (574) 643
(378) 647
The Group expects to receive additional tax deductions in respect of share options currently unexercised. Under IFRS, the
Group is required to provide for deferred tax on all unexercised share options. Where the amount of the tax deduction (or
estimated future tax deduction) exceeds the amount of the related cumulative remuneration expense, this indicates that the
tax deduction relates not only to remuneration expense but also to an equity item. In this situation, the excess of the
current or deferred tax should be recognised in equity. At 30 November 2022, a deferred tax asset of £1.1 million (2021:
£1.5 million) was recognised in respect of these options.
5. business disposals
Hong Kong
In September 2022, the Board approved the plan for the closure of our Hong Kong business due to continued underperformance
in trading in the past years and lack of realisable potential for growth.
Already in 2017 when reviewing the Group's presence in the APAC region, the Board significantly downsized operations in
Hong Kong, reducing it to a satellite office. Most recently, it became clear that our continued trading in Hong Kong
remained sub-optimal and was no longer a viable investment option.
At the end of November 2022, all current agreements with contractors were in the process of being terminated or being
transferred to an external agency. Overall, the closure of Hong Kong resulted in additional costs of £0.2 million incurred
by the Group, mainly in relation to personnel termination benefits.
This disposal did not meet the definition of discontinued operations given in IFRS 5 'Non-Current Assets Held for Sale and
Discontinued Operations' and, therefore, no disclosures in relation to discontinued operations were made.
Australia
In the financial year ended 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 year, the post-tax loss of £0.3 million from discontinued operations was reported on the face of the
Consolidated Income Statement, which comprised the following items of income and expense after intra-group eliminations.
£'000 2022 2021
Cost of sales - (20)
Administrative expenses - (13)
Operating loss - (33)
Loss before and after income tax from discontinued operations - (33)
Reclassification of foreign currency translation reserve - (236)
Total comprehensive loss on liquidation of the subsidiary - (269)
Net cash flows used by discontinued operations were as follows in the prior year:
Operating activities - (848)
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 year 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.
For diluted EPS, the weighted average number of shares in issue is adjusted to assume conversion of dilutive potential
shares. Potential dilution resulting from tracker shares takes into account profitability of the underlying tracker
businesses and SThree plc's earnings. Therefore, the dilutive effect on EPS will vary in future periods depending on any
changes in these factors.
The following tables reflects the income and share data used in the basic and diluted EPS calculations.
£'000 2022 2021
Earnings
Continuing operations before exceptional items 54,202 42,102
Exceptional items - 149
Discontinued operations - (269)
Profit for the year attributable to owners of the Company 54,202 41,982
Million 2022 2021
Number of shares
Weighted average number of shares used for basic EPS 132.2 132.3
Dilutive effect of share plans 3.7 4.4
Diluted weighted average number of shares used for diluted EPS 135.9 136.7
pence 2022 2021
Basic EPS
Continuing operations before exceptional items 41.0 31.8
Exceptional items - 0.1
Discontinued operations - (0.2)
41.0 31.7
Pence
Diluted EPS
Continuing operations before exceptional items 39.9 30.8
Exceptional items - 0.1
Discontinued operations - (0.2)
39.9 30.7
7. Dividends
£'000 2022 2021
Amounts recognised and paid as distributions to owners of the Company in the year
Interim dividend for the year ended 30 November 2021 of 3.0 pence (2020: nil pence) per share(1) 3,965 -
Final dividend for the year ended 30 November 2021 of 8.0 pence (2020: 5.0 pence) per share(2) 10,685 6,616
14,650 6,616
£’000 2022 2021
Amounts arising in respect of the year
Interim dividend for the year ended 30 November 2022 of 5.0 pence (2021: 3.0 pence) per share(3) 6,632 3,982
Proposed final dividend for the year ended 30 November 2022 of 11.0 pence (2021: 8.0 pence) per share(4) 14,547 10,690
21,179 14,672
(1) The 2021 interim dividend 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.
(2) The 2021 final dividend of 8.0 pence (2020: 5.0 pence) per share was paid on 10 June 2022 to shareholders on record on
6 May 2022.
(3) The 2022 interim dividend of 5.0 pence (2021: 3.0 pence) per share was paid on 2 December 2022 to shareholders on
record at 4 November 2022.
(4) The Board has proposed the 2022 final dividend of 11.0 pence (2021: 8.0 pence) per share, to be paid on 9 June 2023 to
shareholders on record at 12 May 2023. This proposed final dividend is subject to approval by shareholders at the Company's
next Annual General Meeting on 19 April 2023, and therefore has not been included as a liability in these financial
statements.
8. Cash and cash equivalents
£'000 30 November 2022 30 November 2021
Cash at bank 65,809 57,526
Bank overdraft (423) (24)
Net cash and cash equivalents 65,386 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. leases
The leases which are recognised in the 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:
£'000 30 November 2022 30 November 2021
Buildings 27,862 30,667
Cars 1,932 1,631
IT equipment - 49
Total right-of-use assets 29,794 32,347
Current lease liabilities 11,102 13,081
Non-current lease liabilities 22,600 21,987
Total lease liabilities 33,702 35,068
The Consolidated Income Statement includes the following amounts relating to depreciation of right-to-use assets:
£'000 2022 2021
Buildings 13,849 10,882
Cars 1,152 1,052
IT equipment 74 74
Total depreciation charge of right-of-use assets 15,075 12,008
In the current year, interest expense on leases amounted to £0.5 million (2021: £0.6 million) and was recognised within
finance costs in the Consolidated Income Statement.
The total cash outflow for leases in 2022 was £14.3 million (2021: £13.1 million) and comprised the principal and interest
element of recognised lease liabilities.
10. Other financial liabilities
The Group maintains a committed Revolving Credit Facility (RCF) of £50.0 million along with an uncommitted £30.0 million
accordion facility, both jointly provided by HSBC and Citibank, giving the Group an option to increase its total borrowings
under the facility to £80.0 million. During the current and previous year, the Group did not draw down under these
facilities. The Group has also an uncommitted £5.0 million overdraft facility with HSBC of which £0.4 million was used at
the year end.
On 21 July 2022, the management team negotiated a new credit facility which runs until 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). As the Group and the Company did not
draw down under these facilities, the net finance costs of £0.5 million (2021: £0.8 million) were mainly related to lease
interest.
The RCF is subject to certain covenants requiring the Group to maintain financial ratios over interest cover, leverage and
guarantor cover. The Group has complied with these covenants throughout the year.
Reconciliation of financial liabilities to cash flows arising from financing activities:
£’000
Balance at 1 December 2020 35,504
Cash flows:
Interest paid on borrowings, excluding lease liabilities (262)
Payments of principal and interest element of lease liabilities (13,067)
Total cash flows (13,329)
Lease increases 14,026
Lease termination (1,740)
Other movements(1) 607
Balance at 30 November 2021 35,068
Cash flows:
Interest paid on borrowings, excluding lease liabilities (137)
Payments of principal and interest element of lease liabilities (14,251)
Total cash flows (14,388)
Lease increases 14,773
Lease terminations (2,294)
Other non-cash movements(1) 543
Balance at 30 November 2022 33,702
(1) Other movements in 2022 and 2021 primarily comprise unwind of the discount on lease liabilities.
11. EQUITY
During the year 831,845 (2021: 734,155) new ordinary shares were issued, resulting in a share premium of £2.8 million
(2021: £2.4 million). Of the shares issued, 623,219 (2021: 200,372) were issued to tracker shareholders on settlement of
vested and unvested tracker shares and 208,626 (2021: 81,169) pursuant to the exercise of share awards under the Save As
You Earn (SAYE) scheme. In the previous year, 452,614 new shares were issued on settlement of Long-Term Incentive Plans
(LTIP).
Treasury Reserve
Treasury shares represent SThree plc shares repurchased and available for specific and limited purposes.
No shares were utilised from the treasury reserve during the current and previous year.
At the year end, 35,767 (2021: 35,767) shares were held in treasury.
Employee Benefit Trust (EBT)
The Group holds shares in the 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.
During the year, the EBT purchased 2,519,652 (2021: 1,220,854) of SThree plc shares. The average price paid per share was
393 pence (2021: 422 pence). The total acquisition cost of the purchased shares was £9.9 million (2021: £5.3 million), for
which the treasury reserve was reduced. During the year, the EBT utilised 1,671,868 (2021: 985,932) shares on settlement of
vested tracker shares and LTIP awards. At the year end, the EBT held 1,771,146 (2021: 923,362) shares.
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 2022 annual financial statements. There were no
other material differences in related parties or related party transactions in the year compared to the prior year.
14. Subsequent events
There were no subsequent events following 30 November 2022.
15. 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 year, 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
2022
£'000, unless Revenue Net fees Administrative expenses, incl. Operating Profit Tax Profit Basic EPS
otherwise stated impairment loss profit before tax after tax (pence)
As reported(1) 1,639,446 430,616 (353,064) 77,552 77,026 (22,824) 54,202 41.0p
(1) In 2022, there were no adjusting items.
2021
£'000, unless Revenue Net fees Administrative expenses, incl. Operating Profit Tax Profit Basic EPS
otherwise stated impairment loss profit before tax after tax (pence)
As reported 1,330,726 355,713 (294,720) 60,993 60,158 (17,907) 42,251 31.9p
Exceptional items - - (184) (184) (184) 35 (149) (0.1)p
Adjusted 1,330,726 355,713 (294,904) 60,809 59,974 (17,872) 42,102 31.8p
APMs in constant currency
As we are operating in 14 countries and with many different currencies, we are affected by foreign exchange movements, and
we report our financial results to reflect this. However, we manage the business against targets which are set to be
comparable between years and within them, for otherwise foreign currency movements would undermine our ability to drive the
business forward and control it. Within this results announcement, we highlighted comparable results 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 (without giving effect to the
impact of variation of foreign currency exchange rates from year to year). Constant currency APMs are calculated by
applying the prior year foreign exchange rates to the current and prior financial year 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.
2022
£’000, unless otherwise stated Operating profit conversion Profit before
Revenue Net fees Operating profit ratio(2) tax Basic EPS
(pence)
As reported(1) 1,639,446 430,616 77,552 18.0% 77,026 41.0p
Currency impact (22,830) (8,046) (2,804) 0.3% (2,774) (1.5)p
As reported in constant 1,616,616 422,570 74,748 17.7% 74,252 39.5p
currency
(1) In 2022, there were no adjusting items.
2021
£'000, unless otherwise stated Operating profit conversion Profit before
Revenue Net fees Operating profit ratio(2) tax Basic EPS
(pence)
Adjusted 1,330,726 355,713 60,809 17.1% 59,974 31.8p
Currency impact 35,686 11,325 3,648 0.5% 3,669 2.0p
Adjusted in constant currency 1,366,412 367,038 64,457 17.6% 63,643 33.8p
(2) 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:
£’000 2022 2021
Cash and cash equivalents 65,809 57,526
Bank overdraft (423) (24)
Net cash 65,386 57,502
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 non-cash items such as the
depreciation of property, plant and equipment (PPE), the amortisation and impairment of intangible assets, loss on disposal
of PPE and intangible assets, gain on lease modification and the employee share options charge.
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 year, the most directly comparable IFRS measure, to EBITDA and
adjusted EBITDA is set out below.
£’000 2022 2021
Reported operating profit for the year from continuing operations 77,552 60,993
Reported operating loss for the year from discontinued operations - (33)
Depreciation of PPE 18,682 15,764
Depreciation and impairment of intangible assets 719 2,561
Loss on disposal of PPE and intangible assets 1,298 273
Gain on lease modification (266) -
Employee share options 4,999 1,520
EBITDA 102,984 81,078
Exceptional items - (184)
Adjusted EBITDA 102,984 80,894
Dividend cover
The Group uses dividend cover as an APM to ensure that its dividend policy is sustainable and in line with the overall
strategy for the use of cash. Dividend cover is defined as the number of times the Company is capable of paying dividends
to shareholders from the profits earned during a financial year, and it is calculated as the Group's profit for the year
attributable to owners of the Company over the total dividend paid to ordinary shareholders.
£’000 2022 2021
Profit for the year attributable to owners of the Company A 54,202 41,982
Dividend proposed to be paid to shareholders (note 7) B 21,179 14,672
Dividend cover (A ÷ B) 2.6 2.9
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.
£’000 2022 2021
Contract net fees A 334,215 266,163
Contract revenue B 1,540,323 1,239,100
Contract margin (A ÷ B) 21.7% 21.5%
Total shareholder return (TSR)
The Group uses TSR as an APM to measure the growth in value of a shareholding over a specified period, assuming that
dividends are reinvested to purchase additional shares at the closing price applicable on the ex-dividend date. The TSR is
calculated by the external independent data-stream party.
£’000 2022 2021
SThree plc TSR return index value: three-month average to 30 Nov 2019 (2021: 30 Nov 2018) (pence) 262.41 284.75
SThree plc TSR return index value: three-month average to 30 Nov 2022 (2021: 30 Nov 2021) (pence) 355.43 528.47
Total shareholder return 35.4% 85.6%
16. Annual report and Annual general meeting
The Annual General Meeting of SThree plc is to be held on 19 April 2023.
The 2022 Annual Report and Notice of 2023 Annual General Meeting will be posted to shareholders shortly. Copies will be
available on the Company’s website www.sthree.com or from the Company Secretary, 1st Floor, 75 King William Street, London,
EC4N 7BE.
═══════════════════════════════════════════════════════════════════════════════════════════════════════════════════════════
ISIN: GB00B0KM9T71
Category Code: FR
TIDM: STEM
LEI Code: 2138003NEBX5VRP3EX50
Sequence No.: 219091
EQS News ID: 1545843
End of Announcement EQS News Service
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