REG-SThree SThree: Q3 Trading Update

SThreeAnnouncement

13/09/2021 07:05

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   SThree (STEM)
   SThree: Q3 Trading Update

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

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   13 September 2021

                                        

                                        

                                   SThree plc

                                        

                               Q3 Trading Update

                                        

       Full year profit performance expected to be significantly ahead of
                                   consensus

    

   SThree plc ("SThree" or the "Group"), the only global pure-play specialist
   staffing business focused on roles in Science, Technology, Engineering and
   Mathematics ('STEM'), today issues a trading update covering the period  1
   June 2021 to 31 August 2021.

    

   Highlights

    

     • Group net fees for Q3 up 29% YoY(1)
     • Very strong growth in our three largest countries: Germany up 35%, USA
       up 31% and Netherlands up 24%
     • Top five  countries represent  87%  of Group  net fees,  with  Germany
       representing 33% and USA 26% 
     • Contract and Permanent net fees up 27% and 36% YoY, respectively
     • Contract net fees represents 76% of Group net fees (Q3 2020: 77%)
     • Contractor order book(2) up 41% YoY (H1 2021: up 33%)
     • Strong balance sheet, with  net cash at 31  August 2021 of circa  £51m
       (31 August 2020: £39m; 31 May 2021: £48m)
     • The Board now expects that profit before  tax for the 12 months to  30
       November 2021 will  be significantly above  market consensus*,  driven
       primarily by the timing of the planned increase in investment shifting
       from H2  FY21 to  FY22  and beyond,  and  the Group's  strong  trading
       performance.

    

   As Q3 2020 was  the quarter most significantly  impacted by Covid-19,  the
   Group has also provided comparisons against Q3 2019 in the table below.

    

   The growth  in  2021  vs  2019 demonstrates  the  very  strong  underlying
   performance  of  the  Group  and  the  relevance  of  its  differentiated,
   STEM-focused offering. Highlights vs 2019 include:

    

     • Q3 net fees up 11%
     • Germany net fees up 22%, USA up 28% and Netherlands up 8%
     • Contractor order book up 20%

    

   *Current consensus  Analyst PBT  expectations are  £51.4m. Source:  SThree
   compiled consensus

    

   Mark Dorman, Chief Executive, commented:

    

   "The momentum in our performance from the start of the financial year  has
   continued through the  third quarter  with net fees  up 11%  on 2019.  Our
   strategy, positioned  at the  centre of  the secular  trends of  STEM  and
   flexible  working,  alongside   a  strengthening   staffing  market,   has
   contributed to this strong performance.

    

   The  planned   acceleration  of   investment  into   our  people,   talent
   acquisition, infrastructure  and go-to-market  proposition to  drive  long
   term sustainable  growth will  gather pace  through the  remainder of  the
   financial year but the full effect is now likely to be felt in FY22. This,
   together with the strong  net fees performance  delivered in the  quarter,
   and the impact  of a potential  return to more  normal working and  annual
   leave patterns not having been felt  as yet, means that we now  anticipate
   being significantly ahead  of consensus profit  expectations for the  full
   year, following the upwards revision provided in June 2021.

    

   Our rigorous focus on  strategic execution has not  wavered and we  remain
   fully committed to the ongoing delivery of our long-term ambitions for all
   of our stakeholders, whatever the external circumstances."

    

    

    

    

    

                                                                          
                                    Q3     Q2     Q1       Q3     Q2     Q1
   Net Fees       Q3 2021 Q3 2020  2021   2021   2021     2021   2021   2021
                                   YOY    YOY    YOY       vs     vs     vs
                                                          2019   2019   2019
                                                                          
   Contract       £68.8m  £57.5m   +27%   +18%   -2%      +11%   +6%     -
   Permanent      £22.2m  £17.6m   +36%   +36%    -       +10%   +13%   -6%
   GROUP          £91.0m  £75.1m   +29%   +22%   -1%      +11%   +8%    -1%
                                                                          
   Management                                                             
   structure
   DACH (3)       £33.2m  £25.8m   +35%   +28%   +3%      +23%   +17%   +12%
   EMEA ex DACH   £31.7m  £27.5m   +21%   +10%   -14%     -6%    -9%    -19%
   (4)
   USA            £23.4m  £19.6m   +31%   +28%   +19%     +28%   +26%   +19%
   APAC            £2.7m   £2.2m   +33%   +59%   -14%     -2%    +2%    -24%
   GROUP          £91.0m  £75.1m   +29%   +22%   -1%      +11%   +8%    -1%
                                                                          
   Top five                                                               
   countries
   Germany        £30.3m  £23.5m   +35%   +28%   +3%      +22%   +15%   +10%
   Netherlands    £13.9m  £11.8m   +24%   +21%   -4%      +8%    +7%    -1%
   UK              £9.6m   £7.9m   +24%   +3%    -17%     -10%   -16%   -24%
   USA            £23.5m  £19.7m   +31%   +28%   +19%     +28%   +26%   +19%
   Japan           £1.8m   £1.7m   +23%   +77%   -21%     -11%   +14%   -30%
   ROW (5)        £11.9m  £10.5m   +21%   +10%   -16%     -8%    -11%   -21%
   GROUP          £91.0m  £75.1m   +29%   +22%   -1%      +11%   +8%    -1%
                                                                          
   Division mix   Q3 2021                                                 
   Contract         76%                                                   
   Permanent        24%                                                   
                                                                          
   Sector mix     Q3 2021                                                 
   Technology       46%                                                   
   Life Sciences    24%                                                   
   Engineering      20%                                                   
   Banking &        7%                                                    
   Finance
   Other            3%                                                    

    

    

   Business Performance highlights

    

   The Group's strong performance has continued into Q3 with net fees up  29%
   YoY.

    

   Contract

     • Growth in contract net fee income accelerated in Q3 and was up 27%
     • Our contractor order book(2)  was up 41%  YoY, reflecting the  ongoing
       high  demand   for  skilled   contractors  across   our  markets   and
       underpinning our positive outlook

    

   Permanent

     • Permanent net fee  income was  up 36%, maintaining  the strong  growth
       seen in the second quarter
     • DACH and USA, our two largest Permanent regions, were up 21% and  80%,
       respectively

    

   Headcount and Productivity:

     • Group average headcount was down 7% YoY with period end headcount down
       2%
     • Sequentially, Group period end headcount is up 3% vs Q2 2021
     • We continue to invest in line  with our previously stated strategy  of
       focusing on specific niches  within sectors and  markets where we  can
       gain valuable market share, with  investment in people a priority  for
       the business.  We  expect  to deliver  further  sequential  growth  in
       headcount in Q4, and plan continued acceleration into FY22
     • Q3 Productivity is up  by 38% YoY.  We expect this  to revert, but  to
       remain higher than historic levels

    

   Regional highlights:

    

   DACH delivered another strong quarter of  performance in Q3 with net  fees
   up 35% YoY

     • Germany, our largest country  in the region, saw  very strong net  fee
       growth of 35%
     • Technology up 43%, driven by Software Development, Infrastructure  and
       ERP
     • Life Sciences up 33%, with  increased demand in Quality Assurance  and
       Clinical Research & Operations

    

   EMEA ex DACH saw net fees grow 21% YoY

     • The Netherlands,  our largest  country in  the region,  continued  its
       strong performance into Q3 with net fees up 24%
     • The UK's net fees were also up 24%, with Technology up 30%
     • Technology  up  26%   in  the  Netherlands,   a  particularly   strong
       performance driven by demand  in Software Development and  Application
       Management & Support
     • Life Sciences  up 17%  in  the Netherlands  with increased  demand  in
       Quality Assurance  and Engineering  up 23%  with particular  focus  on
       Project Management and Electrical Engineering

    

   USA, home to  the world's largest  STEM staffing market,  recorded a  very
   strong performance in Q3, up 31% YoY

     • Technology was  up  44%  driven  by  Adobe,  Mobile  Applications  and
       Salesforce
     • Life Sciences, our  largest sector  in the USA,  continues its  strong
       performance with net fees up 28% YoY driven by increased placements in
       Quality Assurance and Clinical Operations
     • Engineering up 10%, driven by increased demand in Project Management

    

   APAC net fees were up 33% YoY

     • Japan, our largest country in the region, saw net fees grow 23%
     • Technology up 22% in Japan, with Life Sciences up 31%

    

   Balance sheet

    

   SThree remains in a strong financial position, with net cash at 31  August
   2021 of circa £51m (31 August 2020:  net cash £39m). As at 31 August  2021
   the Group has total  accessible liquidity of £106m.  This is comprised  of
   £51m net  cash,  a  £50m  revolving credit  facility  ("RCF")  and  a  £5m
   overdraft facility (RCF and overdraft fully undrawn). In addition,  SThree
   has a £20m  accordion facility as  well as a  substantial working  capital
   position, reflecting  net cash  due to  the Group  for placements  already
   undertaken.

    

   Analyst conference call

    

   SThree is hosting a webinar for analysts and investors today at 0830am  to
   discuss the Q3 Trading Update.

    

   If you would  like to register  for the webinar  please follow this  link:
    1 https://bit.ly/STEM_Q3_TUwebinar

           

   The Group plans to issue a trading update for the year ended 30 November
   2021 on 13 December 2021.

    

    

   (1)  All YoY growth rates in this announcement are Q3 2021 versus Q3 2020,
   expressed at constant currency and  exclude Australia, which we exited  in
   Q4 2020

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

   (3) DACH - Germany, Austria and Switzerland

   (4) EMEA ex DACH - UK, Ireland, Belgium, Netherlands, Luxembourg,  France,
   Spain and Dubai

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

    

    

   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.

    

                                    - Ends -

    

    

   Enquiries:                                                      

    
   SThree plc                                   +44 7825 122523
   Rebecca Matts, Group Communications Director

                                                 r.matts@sthree.com

    
                                                020 3405 0205
   Alma PR
                                                 
   Susie Hudson

   John Coles                                   SThree@almapr.co.uk

    

    

    

   Notes to editors

    

   SThree plc brings skilled people together to build the future.  It is  the
   only global pure-play  specialist staffing  business focused  on roles  in
   Science,  Technology,  Engineering  and  Mathematics  ('STEM'),  providing
   permanent and flexible  contract talent to  a diverse base  of over  9,000
   clients in 14 countries.

    

   The Group's c.2,600 staff cover the Technology, Life Sciences, Engineering
   and Banking & Finance sectors.

    

   SThree plc is quoted on  the Premium Segment of  the Official List of  the
   Financial Conduct Authority under the ticker symbol STEM.

    

   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: QRT
   TIDM:          STEM
   LEI Code:      2138003NEBX5VRP3EX50
   Sequence No.:  121992
   EQS News ID:   1232782


    
   End of Announcement EQS News Service

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