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SThree (STHR)
SThree: FY18 Trading Update
14-Dec-2018 / 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.
14 December 2018
FY18 Trading Update
Growth across STEM sectors underpins gross profit and profit before tax
ahead of expectations
SThree plc ("SThree" or the "Group"), the international specialist STEM(1)
staffing business, is today issuing a trading update(2) for the financial
year ended 30 November 2018.
Highlights
· Adjusted profit before tax for the year expected to be slightly ahead of
the top end of the current market consensus range(3)
· Strong finish to the year with Group gross profit ("GP") up 12% for both
Q4 and for FY18
· Robust growth across the Group, with ICT up 12%, Life Sciences up 8%,
Engineering up 16% and Energy up 30%
· Strong growth in Continental Europe, up 20%, with DACH(4) up 21% and
Benelux up 23% and USA up 8%
· UK&I productivity up 5 % following the Q2 restructuring of our
Permanent business in the region
· 83% of Group GP generated from markets outside the UK&I (2017: 80%)
· Contract GP up 14%, with growth across all sectors - ICT up 12%, Life
Sciences up 12%, Engineering up 14%, Banking & Finance up 4% and Energy up
33%
· Strong exit rate on Contract, with a new record number of runners at
year end
· Contract GP now represents 72% of Group GP (2017: 71%)
· Permanent GP up 6%, with Continental Europe up 15% and Japan up 88%
· Group period-end sales headcount up 3% YoY and up 3% versus the third
quarter position
(1) STEM - Science, Technology, Engineering and Mathematics
(2) All year on year financial growth rate %s in this announcement are
expressed at constant currency
(3) Market expectations for adjusted profit before tax for the year ended 30
November 2018 are in the range of GBP49.0m to GBP51.4m, with a consensus of
GBP50.3m
(4) DACH - Germany, Austria and Switzerland
Management Succession
The Board also announces that Gary Elden OBE will step down as Chief
Executive Officer early in the new year, at a date yet to be determined but
expected to be by the time of the Company's AGM in April, after leading the
Company for six years. A process to appoint his successor is now underway.
Gary Elden, Chief Executive, commented:
"We are pleased to have delivered another strong quarter in Q4 continuing
the momentum from Q2 and Q3, resulting in an overall GP result for the year
of +12%. The Group is benefiting both from the broad geographic reach of its
operations, with 83% of GP now generated in international markets, and from
its focus on the best STEM markets, where the demand for niche, skilled
candidates continues to be driven by a shortage of supply.
"Strong performances in Continental Europe, particularly from our
market-leading businesses in the Netherlands and Germany, as well as the USA
were key to the delivery of this result. Our Contract businesses continued
to perform well, with GP increasing by 14% year on year and with Contract
runners at the period end reaching a record level for the Group. We expect
full year profit to be ahead of consensus.
"At the start of 2018 I stated that after two years of turbulent political,
market and economic pressure, we entered the year in good shape. That
turbulence and pressure has increased throughout the year and yet we have
delivered strong results. Looking ahead to 2019, we are in better shape, and
well positioned to continue to benefit from the growth opportunities in our
chosen STEM markets.
"I have been privileged to be part of SThree for almost 30 years and am
proud to have led the Group as CEO during a major period of growth and
development. As today's results demonstrate, the Company is in great shape
to make further progress and I look forward to following its continued
development as a shareholder. I am grateful to the Board for their support
and encouragement, and to SThree staff around the world for all their
commitment and hard work."
James Bilefield, Chairman, commented:
"Gary has made a significant contribution to SThree since joining the Group
in 1990, before being appointed to the Board in July 2008 and to the role of
CEO in January 2013. On behalf of the Board I would like to thank him for
his unswerving commitment over the last three decades. During his tenure as
CEO, SThree has more than doubled its profitability and has scaled
significantly in size and scope around the world, becoming a leading player
in the STEM recruitment market. Gary will leave SThree with a strong and
experienced leadership team focused on delivering SThree's strategic
priorities, and we have a clear and rigorous process in place to ensure a
smooth transition to his successor. Gary's precise leaving date will be
confirmed in due course, and the search for his successor is underway to
take the business forward to its next stage of growth and development."
Financial
Highlights -
Group Gross
Profit
FY 2018 Q4 2018 Q3 Q2 Q1
2018 2018 2018
Gross Profit FY 2018 FY 2017 YoY % YoY % YoY YoY YoY
% % %
Contract GBP232.0m GBP203.4m +14% +15% +14% +16% +11%
Permanent GBP88.9m GBP84.2m +6% +6% +8% +7% +2%
Group GBP320.9m GBP287.6m +12% +12% +13% +13% +8%
Continental GBP183.3m GBP150.6m +20% +20% +24% +20% +15%
Europe
USA GBP66.6m GBP64.4m +8% +8% +8% +16% +1%
UK&I GBP53.0m GBP55.6m -5% -4% -10% -2% -3%
Asia Pac & GBP18.0m GBP17.0m +11% +13% +16% +1% +15%
Middle East
Group GBP320.9m GBP287.6m +12% +12% +13% +13% +8%
ICT GBP141.9m GBP124.6m +12% +18% +14% +13% +5%
Life GBP66.3m GBP62.4m +8% +1% +13% +12% +9%
Sciences
Banking & GBP42.4m GBP43.5m -1% +2% -7% +1% -0%
Finance
Energy GBP33.5m GBP26.5m +30% +26% +32% +28% +35%
Engineering GBP30.5m GBP25.9m +16% +16% +15% +20% +14%
Other(5) GBP6.3m GBP4.7m +28% +24% +33% +25% +32%
Group GBP320.9m GBP287.6m +12% +12% +13% +13% +8%
Contract /
Perm Split
Contract 72% 71%
Permanent 28% 29%
100% 100%
Geographical
Split
Continental 57% 52%
Europe
USA 21% 22%
UK&I 17% 20%
Asia Pac & 5% 6%
Middle East
100% 100%
Sector Split
ICT 44% 44%
Life Science 21% 22%
Banking & 13% 15%
Finance
Energy 10% 9%
Engineering 10% 9%
Other(5) 2% 1%
100% 100%
(5) Other
includes
Procurement
& Supply
Chain and
Sales &
Marketing
Business performance
Group GP for the year was up 12% with growth across all regions except UK&I.
In our UK&I business we drove improvements in productivity.
Contract GP was up 14%, with growth across all sectors. Contract growth was
driven by Continental Europe, which was up 22% and USA up 14%. Continental
Europe and USA combined now represent 78% of our Contract GP (2017: 74%).
Permanent GP was up 6%, driven by Continental Europe up 15% and Japan up
88%. This progress was offset by USA which was down 5% against strong
comparatives in the previous year, and UK&I. As expected, UK&I GP was down
20%, following the planned restructure of our UK Permanent business in early
Q2, which reduced the average sales headcount for the year by 25%. Permanent
productivity across the Group improved by 7% over last year, as a result of
the Group's strategy to focus on the best performing Permanent markets.
Group period end sales headcount was up 3% to 2,332, with Contract up 8%, in
line with the Group's strategy, and Permanent down 6%. Contract represented
68% of total sales headcount at the period end. Sequentially vs Q3, period
end Group sales headcount was up 3%, with Continental Europe up 5%, USA up
1% and UK&I level. Average Group sales headcount for the year was up 8% with
Continental Europe up 15% and USA up 11%.
The Group's move of its London-based support functions to Glasgow is
progressing well and to plan with completion expected in Q1 2019.
Balance sheet
SThree remains in a strong financial position. Net debt at 30 November 2018
was circa GBP4m (30 November 2017: Net cash GBP6m), reflecting a strong
financial performance, the working capital outflows associated with strong
Contract growth in Q4, and the one-off exceptional cash costs of the move to
Glasgow. The Group has a GBP50m revolving credit facility ("RCF") with HSBC
and Citibank, which is committed to 2023.
Office Network
The Group has a network of 44 offices in 16 countries, of which 38 are
outside the UK. The Group generated 83% of GP for the period from markets
outside the UK&I (2017: 80%).
SThree is hosting an analyst conference call today at 0830 GMT. The details
are as follows:
Telephone number: 0800 358 9473
For access to the call please enter PIN: 99322535#
A replay facility will be available for 90 days on 0800 358 2049 Passcode:
301273192#
The Group will issue its results for the financial year ended 30 November
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