REG-SThree SThree: Q3 Trading Update

SThreeAnnouncement

20/09/2022 07:15

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   SThree (STEM)
   SThree: Q3 Trading Update

   20-Sep-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 September 2022

                                        

                                   SThree plc

                                        

                               Q3 Trading Update

                                        

         Full year profit performance expected to be ahead of consensus

                                        

   SThree plc ("SThree" or the "Group"), the only global pure-play specialist
   staffing  business  focused  on   Science,  Technology,  Engineering   and
   Mathematics (‘STEM’) skills, is pleased to issue a trading update covering
   the period 1 June 2022 to 31 August 2022.

    

   Highlights                             

    

     • Group net fees  for the quarter  up 19% YoY(1)  against a very  strong
       comparative period, driven by the continued execution of our strategy
     • Continued YoY growth in  our three largest  countries with Germany  up
       13%, USA up 9%, and Netherlands  up 36%, together representing 73%  of
       Group net fees
     • Continued strong growth across Technology, up 25% and Engineering,  up
       25%, with Life Sciences  growing 2% against a  very strong prior  year
       comparator
     • In line with our strategic focus on flexible talent, Contract net fees
       are up 21%; Permanent net fees up 10%
     • Contractor order book(2) up 24% YoY, underpinning continued confidence
       in our full year performance
     • Strong balance  sheet with  net cash  of £57m  at 31  August 2022  (31
       August 2021: £51m)
     • The Board now expects that profit before  tax for the 12 months to  30
       November 2022 will be at least 7% 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,  together with  contractor  order visibility,  we  are
   again trading ahead of market expectations for the 2022 full year.

   The YoY growth for  Q3 builds on the  strong performance delivered in  the
   first half of the year. This further  period of growth is being driven  by
   our strategic focus on STEM and flexible working, through both independent
   and employed contractors.

   Good progress has also been made  in the execution of our wider  strategy,
   with  the  investment  in  our  people,  talent  acquisition  and  digital
   infrastructure moving forward as planned.  This investment is designed  to
   underpin our long-term success, with costs  starting to be incurred in  Q3
   as previously indicated.

   Whilst we remain mindful of  the macro-economic uncertainty across  global
   markets,  with  all  developments  and  lead  indicators  of  the  Group’s
   performance monitored closely,  our strong market  position underpins  our
   confidence in the medium to long-term future of the Group.”  

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

                          Q3     Q3     Q3 2022  Q2 2022  Q1 2022
   Net fees              2022    2021  YoY (1)  YoY (1)  YoY (1)
   Contract             £86.6m  £68.8m   +21%     +29%     +32%
   Permanent            £25.2m  £22.2m   +10%     +5%      +18%
   GROUP                £111.8m £91.0m   +19%     +23%     +29%
                                                             
   Management structure                                      
   DACH(4)              £38.5m  £33.2m   +16%     +23%     +26%
   EMEA excl. DACH(5)   £40.3m  £31.7m   +26%     +26%     +29%
   USA                  £29.3m  £23.4m   +9%      +16%     +27%
   APAC                  £3.7m  £2.7m    +40%     +32%     +71%
   GROUP                £111.8m £91.0m   +19%     +23%     +29%
                                                             
   Top five countries                                        
   Germany              £33.9m  £30.3m   +13%     +20%     +24%
   Netherlands          £18.9m  £13.9m   +36%     +38%     +45%
   UK                   £12.2m  £9.6m    +25%     +28%     +29%
   USA                  £29.3m  £23.5m   +9%      +16%     +27%
   Japan                 £2.5m  £1.8m    +44%     +25%     +78%
   ROW(6)               £15.0m  £11.9m   +23%     +21%     +19%
   GROUP                £111.8m £91.0m   +19%     +23%     +29%
                                                          
   Division mix         Q3 2022                           
   Contract               77%                             
   Permanent              23%                             
                                                          
   Sector mix           Q3 2022                           
   Technology             47%                             
   Life Sciences          22%                             
   Engineering            21%                             
   Other                  10%                             

    

    

    

   Business performance highlights

    

   The Group delivered a strong performance  in the quarter with net fees  up
   19% YoY; our  Contract and Permanent  businesses were up  21% and 10%  YoY
   respectively.

    

   Contract

     • Another strong quarter of net fee growth, up 21% YoY, the 6th  quarter
       in a row of double-digit growth.

     ◦ Regionally, DACH was up 18%  YoY, EMEA excl. DACH  up 27%, USA up  16%
       and APAC up 41%.
     ◦ Strong growth in Technology up 27% YoY and Engineering up 25%, with  a
       more modest growth in Life Sciences up 7%.

     • The contractor order book was up 24% YoY (Q3 2021: up 41%), reflecting
       the strong demand for skilled contractors that we have seen across our
       markets.

    

   Permanent

     • Permanent net fee income for the quarter was up 10% YoY.

          ◦ DACH, our largest Permanent market, delivered net fee growth of
            11% YoY. EMEA excl. DACH reported very strong growth of 24% YoY
            with USA down 10% and APAC was up 40%.
          ◦ Strong growth in Technology up 17% and Engineering up 27% YoY.
            Life Sciences was down 13% YoY reflecting very strong prior year
            comparators.

    

    

   Headcount and productivity

     • Group average headcount in the quarter was up 13% YoY, with period-end
       headcount up 13% YoY.
     • Sequentially, Group period-end headcount was up  4% vs Q2 2022 and  up
       8% vs the FY21 year-end position.
     • Our investment in talent acquisition remains in line with our strategy
       of focusing on Contract, hiring consultants within specific niches  in
       our chosen sectors and markets.
     • Productivity continues to be at exceptional  levels, up 5% YoY in  Q3,
       reflecting strong net fee growth and headcount that remains below  the
       pre-pandemic  peak   in  FY19.   As  previously   guided,  we   expect
       productivity to  remain  above  pre-pandemic levels,  though  it  will
       reduce from the current exceptional  levels over time, as the  Group’s
       headcount grows. 

    

   Regional highlights

    

   DACH delivered another strong quarter of  performance in Q3 with net  fees
   up 16% YoY.

     • Germany, which accounts for 88% of  DACH net fees, saw net fee  growth
       of 13% driven by:

          ◦ Technology up 21% with higher demand for roles within
            Infrastructure, Cyber Security, Leadership and Strategic
            positions.
          ◦ Engineering up 13%, due to demand for Construction roles.

     • Very strong growth in Austria up 61% and Switzerland up 42%.

    

   EMEA excl. DACH saw very strong net fee growth in the quarter, up 26% YoY.

     • The Netherlands, our largest country in the region (47% of net  fees),
       saw a very strong performance with net fees up 36%, driven by:

          ◦ Engineering up 34% with increased demand for Process and
            Electrical Engineers.
          ◦ Technology up 39%, driven by higher demand for Project Managers,
            ERP Consultants and Data Scientists.

     • The UK’s recent strong performance  has continued with net fee  growth
       of 25% YoY. This was driven by Technology up 30%, as demand  increased
       for IT Leadership  and Strategy roles,  Software Developers,  Software
       Engineers and Testing roles.

    

   USA saw Q3 net fees grow 9% YoY.

     • Strong growth in Contract,  up 16%. Permanent  was down 10%  following
       our  strategic  focus   on  Contract  and   very  strong  prior   year
       comparatives, when Life  Sciences was  the standout  performer due  to
       particularly high demand from Covid-19 related activity.
     • Engineering up 37%, with a particular focus on roles within Electrical
       Engineering and Project Management.
     • Technology up 15%, driven by increased demand for roles within  Adobe,
       Microsoft.Net Developers, Mobile Applications and Infrastructure.

    

   APAC saw very strong net fee growth in the quarter, up 40% YoY.

     • Japan, which accounts for 67% of APAC  net fees, saw net fees grow  by
       44%.
     • Growth was  driven by  Technology  up 30%,  with demand  for  Business
       Analysts, Application Specialists and Infrastructure roles. 

    

    

   Balance sheet

    

   In July  2022, the  Group entered  into a  new £50m  three-year  revolving
   credit facility (‘RCF’) agreement to refinance the existing £50m  facility
   that was due  to mature  in May  2023. The  RCF key  terms and  conditions
   remained largely  unchanged,  and  extends  the  Group’s  credit  maturity
   profile to 2025, with extension options to 2027, and reinforces our strong
   financial position.

   As at 31 August 2022, the  Group had total accessible liquidity of  £112m.
   This comprised £57m  net cash  (31 August  2021: £51m;  30 November  2021:
   £58m), a £50m  RCF and a  £5m overdraft facility  (RCF and overdraft  both
   undrawn). 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
   8.00am to  discuss  the Q3  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 a trading update for the year ending 30 November
   2022 on 14 December 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 £71.2m 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.

    

                                    - 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
    

    
                      +44 20 3405 0205
   Alma PR
                       
   Hilary Buchanan

   Sam Modlin         SThree@almapr.co.uk

   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.2,900  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
   Sequence No.:  188788
   EQS News ID:   1444753


    
   End of Announcement EQS News Service

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References

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


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