REG-SThree SThree: Half Year Trading Update

SThreeAnnouncement

20/06/2022 07:15

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   SThree (STEM)
   SThree: Half Year Trading Update

   20-Jun-2022 / 07:00 GMT/BST
   Dissemination of a Regulatory Announcement, transmitted by EQS Group.
   The issuer is solely responsible for the content of this announcement.

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   20 June 2022

                                        

                                   SThree plc

                                        

                            Half Year Trading Update

                                        

           Double-digit net fee growth across all regions and sectors

                                        

                      Trading ahead of market expectations

                                        

   SThree plc ("SThree" or the "Group"), the only global pure-play specialist
   staffing business focused on roles in Science, Technology, Engineering and
   Mathematics (‘STEM’), is pleased  to issue a trading  update for the  half
   year ended 31 May 2022.

    

   Highlights                             

    

     • Q2 net fees  up 23%  YoY(1) against a  non-Covid impacted  comparative
       period, demonstrating excellent new placement activity
     • H1 highlights:

          ◦ Group net fees up 25% YoY
          ◦ Very strong YoY growth in our three largest markets: Germany up
            22%, USA up 21%, Netherlands up 41%
          ◦ Largest three countries represent 73% of Group net fees, with
            Germany representing 31%, USA 25% and Netherlands 17%
          ◦ Strong double digit growth across all our key sectors: Technology
            up 30%, Life Sciences up 16% and Engineering up 27%
          ◦ Contract and Permanent net fees for H1 up 30% and 11%
            respectively
          ◦ Contractor order book(2) up 35% YoY, providing good visibility
            into H2 and underpinning continued confidence in the near term
            outlook

     • Robust balance sheet  with net cash  at 31  May 2022 of  £48m (31  May
       2021: £48m)
     • The Board now expects that profit before  tax for the 12 months to  30
       November 2022 will be at least 5% ahead of market consensus(3).

    

   Timo Lehne, Chief Executive, commented:

    

   “Our Group has delivered  another excellent quarter  of growth, driven  by
   successes across all key regions and STEM disciplines. As a result of this
   strong performance, we are  now trading ahead  of market expectations  for
   the 2022 full year.

   Our business had largely recovered from  the pandemic in Q2 last year,  so
   this is the  first period in  which we have  been able to  provide a  true
   like-for-like comparison;  net fee  growth of  23% in  Q2 is  therefore  a
   significant achievement. Our focus  on flexible working, both  independent
   and employed contractors,  is delivering, and  for the second  consecutive
   quarter we are delighted to be able to report that all regions,  including
   the UK, have demonstrated clear positive momentum.

   Good progress has also  been made in the  execution of our strategy,  with
   the planned  investment  in our  people,  talent acquisition  and  digital
   infrastructure moving forward as planned.  This investment is designed  to
   underpin our long-term success, with most of the cost in the current  year
   falling in the second half of the year, as expected.

   We are mindful  of the  macro-economic uncertainties  which are  currently
   being felt  across  our key  regions  and beyond,  with  all  developments
   monitored closely, alongside lead  indicators of the Group’s  performance.
   However, the demand from our clients for people with STEM skills, together
   with our strong  contractor order  book, underpins our  confidence in  the
   future.”  

    

    

                          H1      H1     H1 2022  Q2 2022  Q1 2022
   Net fees              2022    2021   YoY (1)  YoY (1)  YoY (1)
   Contract             £157.0m £121.9m   +30%     +29%     +32%
   Permanent            £46.1m  £42.4m    +11%     +5%      +18%
   GROUP                £203.1m £164.3m   +25%     +23%     +29%
                                                              
   Management structure                                       
   DACH(4)              £70.5m  £59.1m    +24%     +23%     +26%
   EMEA excl. DACH(5)   £74.6m  £59.9m    +28%     +26%     +29%
   USA                  £51.7m  £40.9m    +21%     +16%     +27%
   APAC                  £6.3m   £4.4m    +47%     +32%     +71%
   GROUP                £203.1m £164.3m   +25%     +23%     +29%
                                                              
   Top five countries                                         
   Germany              £62.8m  £54.0m    +22%     +20%     +24%
   Netherlands          £34.6m  £25.6m    +41%     +38%     +45%
   UK                   £22.2m  £17.3m    +28%     +28%     +29%
   USA                  £51.7m  £40.9m    +21%     +16%     +27%
   Japan                 £4.5m   £3.3m    +44%     +25%     +78%
   ROW(6)               £27.3m  £23.2m    +20%     +21%     +19%
   GROUP                £203.1m £164.3m   +25%     +23%     +29%
                                                           
   Division mix         H1 2022                            
   Contract               77%                              
   Permanent              23%                              
                                                           
   Sector mix           H1 2022                            
   Technology             47%                              
   Life Sciences          23%                              
   Engineering            21%                              
   Other                  9%                               

    

    

   Business performance highlights

    

   The Group delivered  a very strong  performance in the  first half of  the
   year with net fee growth of 25% YoY;  growth of 29% in Q1 was followed  by
   23% growth in Q2. The performance in Q2 is particularly pleasing as it  is
   against a tough  comparative quarter  in the  prior year,  the first  true
   like-for-like, non-Covid impacted comparison we  have been able to  report
   for two years.

    

   Contract

     • Very strong net fee growth, up 30% YoY in the first half.

     ◦ Regionally, DACH was up 32%  YoY, EMEA excl. DACH  up 31%, USA up  28%
       and APAC up 28%.
     ◦ Strong growth across all key sectors with Technology up 35% YoY,  Life
       Sciences up 25% and Engineering up 28%.

     • The contractor order book was up 35% YoY (H1 2021: up 33%), reflecting
       the ongoing high  demand for  skilled contractors  across our  markets
       which underpins our positive outlook.

    

   Permanent

     • Permanent net fee  income for the  first half  was up 11%  YoY in  the
       first half.

          ◦ DACH delivered net fee growth of 8% YoY, EMEA excl. DACH reported
            strong growth of 11%, USA in line with the prior year, and APAC
            up 51%.
          ◦ Growth was driven by Technology up 14% and Engineering up 17%
            YoY, whilst Life Sciences was down 6% versus very strong YoY
            comparators.

    

   Headcount and productivity

     • Group average  headcount  in the  first  half  was up  10%  YoY,  with
       period-end headcount up 13% YoY.
     • Sequentially, Group period-end headcount was up  2% vs Q1 2022 and  up
       4% vs the FY21 year-end position.
     • We continue to invest in talent acquisition in line with our strategy,
       primarily hiring Contract  consultants in specific  niches within  our
       chosen sectors and markets.
     • Based on record net fee growth we have seen another strong period with
       productivity up 14% YoY. As previously guided, we expect  productivity
       to remain above pre-pandemic levels,  though it will reduce over  time
       from the current exceptional levels, as the Group’s headcount grows.

    

   Regional highlights

    

   DACH saw net fees grow 24% YoY in the first half

     • Germany, which accounts for 89% of DACH net fees, delivered strong net
       fee growth of 22% driven by:

          ◦ Technology up 28% with higher demand for data scientists,
            open-source software development and leadership & strategic
            roles.
          ◦ Engineering up 27%, due to demand for construction management and
            automation roles.

     • Very strong growth in Contract up 32%.

    

   EMEA excl. DACH saw net fees grow 28% YoY in the first half

     • The Netherlands, our largest country in the region (46% of net  fees),
       saw a very strong performance with net fees up 41%, driven by:

          ◦ Engineering up 44% with increased demand for process engineers,
            electrical engineers and health and safety advisors.
          ◦ Technology up 40%, driven by higher demand for project managers,
            front end developers, ERP consultants and business intelligence &
            data science roles.

     • Following a strong start to the year, the UK continued its momentum by
       delivering net fee growth of 28% in the first half. This was driven by
       Technology up 38%, as demand increased for roles within IT  leadership
       and strategy,  development  and testing,  cloud  and data  &  business
       intelligence.

    

   USA saw net fees grow 21% YoY in the first half

     • Strong growth in Contract, up 28%
     • Engineering up 27%, with  a particular focus  on roles within  project
       management.
     • Technology up  25%,  driven  by increased  demand  for  Adobe,  mobile
       applications, software development and Salesforce.
     • Life Sciences, our largest  sector in the USA  (46% of net fees),  saw
       net fees  grow  16%,  driven  by  demand  for  roles  within  clinical
       operations, quality assurance and product development.

    

   APAC saw net fees grow 47% YoY in the first half

     • Japan, which accounts for 71% of APAC  net fees, saw net fees grow  by
       44%.
     • Growth was driven by Technology up 30%, driven by increased demand for
       technical sales roles and commercial candidates. 

    

    

   Balance sheet

    

   SThree has maintained its robust financial  position, with net cash as  at
   31 May 2022 of  £48m (31 May  2021: net cash £48m;  30 November 2021:  net
   cash £58m).

   As at 31 May 2022 the Group had total accessible liquidity of £103m.  This
   is comprised of £48m  net cash, a £50m  revolving credit facility  (‘RCF’)
   and a  £5m overdraft  facility  (RCF and  overdraft  not drawn  down).  In
   addition, SThree has a  £20m accordion facility as  well as a  substantial
   working capital position, reflecting net cash due to SThree for placements
   already undertaken.

    

   Analyst conference call

    

   SThree is hosting a  conference call for analysts  and investors today  at
   8.30am to  discuss  the H1  2022  trading update.  If  you would  like  to
   register for the conference call, please contact  1 SThree@almapr.co.uk.

           

   The Group plans to issue its interim results for the six months ended 31
   May 2022 on 25 July 2022.

    

    

   (1)  All YoY growth rates in  this announcement are expressed at  constant
   currency

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

   (3)  Current consensus PBT expectation is £66.2m for FY22. Source:  SThree
   compiled consensus

   (4)  DACH - Germany, Austria and Switzerland

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

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

    

                                    - Ends -

    

   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.
    

   Enquiries:
                                         
    
   SThree plc          
   Timo Lehne, CEO

   Andrew Beach, CFO   via Alma

    
   Alma PR            +44 20 3405 0205
   Hilary Buchanan

   Susie Hudson
                      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 pure-play  specialist staffing  business focused  on roles  in
   Science,  Technology,  Engineering  and  Mathematics  (‘STEM’),  providing
   permanent and flexible  contract talent to  a diverse base  of over  8,000
   clients  across  14  countries.  Our  Group’s  c.2,800  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.

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   ISIN:           GB00B0KM9T71
   Category Code:  TST
   TIDM:           STEM
   LEI Code:       2138003NEBX5VRP3EX50
   OAM Categories: 2.2. Inside information
   Sequence No.:   169220
   EQS News ID:    1378637


    
   End of Announcement EQS News Service

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References

   Visible links
   1. mailto:SThree@almapr.co.uk


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