REG - SThree plc - Trading Update

SThreeAnnouncement

12/12/2024 07:00

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RNS Number : 7714P  SThree plc  12 December 2024

12 December 2024

 

SThree plc

 

Trading Update

 

FY24 performance in line, challenging conditions persist

 

Intention to launch share buyback programme of up to £20m

 

SThree plc ("SThree" or the "Group"), the only global specialist talent
partner focused on roles in Science, Technology, Engineering and Mathematics
('STEM'), today issues a trading update for the financial year ended 30
November 2024.

 

 

Full Year Highlights

 

 ·             Group net fees for the full year down 9% YoY((1)) against the backdrop of
               ongoing challenging market conditions, with Contract down 7%, representing 84%
               of net fees.
 ·             Contractor order book((2)) down 10% YoY to £161 million, whilst continuing to
               represent sector-leading visibility (c.4 months of net fees).
 ·             Robust balance sheet with net cash of £70 million at 30 November 2024 (30
               November 2023: £83 million).
 ·             Technology Improvement Programme (TIP) remains on track with deployment across
               four of the Group's largest markets, and latest roll-out in the Netherlands
               initiated this quarter. US and UK are live and the deployments in Germany and
               Netherlands progressing as anticipated.
 ·             Performance for FY24 expected to be in line with market expectations((3)).

 

Outlook

 

 ·             Whilst the Group continues to expect robust contract extensions, new business
               activity remained weak throughout FY24 driven by the protracted challenging
               economic conditions, impacting FY25 performance. The latter part of FY24 saw
               increased political and macro-economic uncertainty, particularly in Europe,
               further delaying decision making and the anticipated easing of market
               conditions.
 ·             The Board is now making the prudent assumption that these challenges will
               persist throughout FY25, impacting net fees.
 ·             Following early efficiencies from the TIP and insights into its full
               potential, we now have the confidence to accelerate the realisation of further
               operational efficiencies to reduce the financial implications of these
               challenges which will drive in year net savings of c.£6m.
 ·             The Board now expects FY25 profit before tax to be c.£25m which includes up
               to £7m of one-off costs to deliver the additional operational efficiencies.
 ·             The Board remains confident that the Group's strategic focus on STEM and
               Contract, the completed rollout of the TIP, alongside the actions being taken,
               will position the Group for sustained profitable growth when markets recover.

Intention to launch a share buyback programme

 ·             SThree announces its intention to launch a share buyback programme of up to
               £20m, to be completed over the next six months.
 ·             In light of SThree's cash generation and strong balance sheet, the Board
               considers it prudent to launch the buyback, in line with its stated capital
               allocation policy.
 ·             Following completion of the buyback programme the Group expects to retain a
               net cash position reflecting the overall capital needs of the business.

 

Timo Lehne, Chief Executive, commented:

 

"As has been widely reported across our industry, the past year has been
characterised by protracted challenging market conditions which have impacted
new business activity. Nonetheless, we continued to see robust contract
extensions through the year which demonstrates the value our customers place
on the critical STEM roles we provide and the skills on which they rely to
power their organisations. It is our specialism in STEM and Contract, combined
with careful cost management, that has delivered a resilient performance, with
FY24 expected to be in line with market consensus.

 

"There is no doubt that the labour market is undergoing changes driven by new
technology and new ways of working. We recognised these megatrends early which
has informed both our strategy to target niche specialisms where we see
structural growth, being STEM and Contract, but also our own approach to how
we pursue these opportunities. Our Technology Improvement Programme is a core
component of where we see our mid-to-long term opportunity, and its phased
implementation which continues to progress to plan, underpinned by a robust
financial position, takes us closer to our digital-first vision.

 

"The nature of our business model has meant we have been able to withstand the
external pressures until now. However, the anticipated easing of market
conditions has not yet materialised, with delayed decision making continuing
to impact new placement activity whilst Contract extensions remain robust.
With this dynamic expected to persist through next year, the Board has taken a
prudent view of FY25. We nonetheless remain confident that we have the right
strategy, an energised team, and a robust technology platform which is
becoming more powerful as we roll-out additional functionality, leaving us
well placed for when market conditions improve."

 

Business performance highlights

 

In challenging market conditions Group net fees were down 9% YoY reflecting
the continued softness in new business across Contract and Permanent,
partially offset by strong Contract extensions.

 

The Group's Engineering net fees for the full year, were down 1% against a
record prior year performance. Technology and Life Sciences performance
reflected the tough market conditions throughout the year and declined 10% and
17% respectively.

 

Regionally, the Group delivered net fee growth in the Middle East and Asia,
underpinned by an impressive performance in Japan. Challenging macro-economic
conditions resulted in declines across the Group's three largest markets,
which now represent 72% of net fees. The performance in Germany reflected
lower levels of demand for Technology skills. Our USA performance was impacted
by declines in Life Sciences and Technology partially offset by a solid
Engineering performance, whilst the Netherlands saw lower levels of demand for
Technology and Engineering skills versus record levels in the prior year.

 

Group period-end headcount was up slightly from the end of the last financial
year.

 

                                  FY        FY            FY 2024              Q4 2024           Q3 2024             Q2 2024           Q1 2024
 Net fees                         2024      2023          YoY ((1))            YoY ((1))         YoY ((1))           YoY ((1))         YoY ((1))
 Contract                         £310.6m   £343.6m       -7%                  -12%              -8%                 -6%               -2%
 Permanent                        £58.5m    £75.3m        -18%                 -26%              -9%                 -15%              -21%
 GROUP                            £369.1m   £418.8m       -9%                  -15%              -8%                 -8%               -6%

 Regions
 DACH ((4))                       £127.5m   £148.9m       -12%                 -18%              -8%                 -10%              -13%
 Netherlands (incl. Spain) ((5))  £78.5m    £82.1m        -2%                  -10%              -10%                +5%               +8%
 Rest of Europe ((6))             £61.3m    £70.4m        -12%                 -14%              -13%                -10%              -10%
 USA                              £82.0m    £96.4m        -12%                 -13%              -10%                -15%              -10%
 Middle East & Asia ((7))         £19.7m    £20.9m        +4%                  -18%              +20%                +1%               +20%
 GROUP                            £369.1m   £418.8m       -9%                  -15%              -8%                 -8%               -6%

 Top five countries
 Germany                          £111.8m   £130.9m       -12%                 -17%              -7%                 -11%              -14%
 Netherlands                      £71.0m    £77.1m        -6%                  -13%              -15%                -                 +6%
 UK                               £38.3m    £45.0m        -14%                 -21%              -17%                -11%              -7%
 USA                              £82.0m    £96.4m        -12%                 -13%              -10%                -15%              -10%
 Japan                            £10.6m    £9.3m         +26%                 -1%               +60%                +16%              +41%
 ROW ((8))                        £55.4m    £60.2m        -6%                  -12%              -6%                 -2%               -4%
 Group                            £369.1m   £418.8m       -9%                  -15%              -8%                 -8%               -6%

 Service mix                      FY 2024   FY 2023
 Contract                         84%       82%
 Permanent                        16%        18%

 Skills mix                       FY 2024   FY 2023
 Technology                       48%       48%
 Life Sciences                    17%       18%
 Engineering                      29%       26%
 Other                            7%        8%

 

 

((1)) All YoY growth rates 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 £67.4m for FY24. Source: SThree
compiled consensus.

((4)) DACH - Germany, Austria and Switzerland.

((5)) Netherlands (incl. Spain) - Netherlands and Spain, which is managed from
the Netherlands.

((6)) Rest of Europe - UK, Belgium, France.

((7)) Middle East & Asia - Japan and UAE.

((8)) ROW - All other countries we operate in.

 

 

Analyst conference call

 

SThree is hosting a conference call for analysts and investors today at 8.30am
to discuss the Trading Update. If you would like to register for the
conference call, please contact SThree@almastrategic.com.

 

Forward looking dates

 

The Group will present its results for the financial year ended 30 November
2024 on 28 January 2025.

 Enquiries:

 SThree plc
 Timo Lehne, CEO                            via Alma

 Andrew Beach, CFO

 Keren Oser, Investor Relations Director

 Alma Strategic Communications             +44 20 3405 0205

 Rebecca Sanders-Hewett                    SThree@almastrategic.com

 Hilary Buchanan

 Sam Modlin

 Will Ellis Hancock

 

 

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation.  The person responsible for arranging the
release of this announcement on behalf of SThree is Kate Danson, Group Company
Secretary.

 

 

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 Science, Technology,
Engineering and Mathematics ('STEM'), providing permanent and flexible
contract talent to a diverse base of around 6,000 clients across 11 countries.
Our Group's c.2,700 staff cover the Technology, Life Sciences and Engineering
sectors. SThree is part of the Industrial Services sector. We are listed on
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.

 

 

 

 

 

 

 

- Ends -

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