DJ SThree: Final Results
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SThree (STHR)
SThree: Final Results
28-Jan-2019 / 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.
SThree plc
("SThree" or the "Group")
Final results for the year ended 30 November 2018
SThree, the international specialist staffing business, is today announcing its final results for the
year ended 30 November 2018.
FINANCIAL HIGHLIGHTS
2018 2017 Variance (3)
Adjusted Reported Adjusted Reported Actual Constant
(1) (2)
Movement Currency
Movement
GBPm GBPm GBPm GBPm % %
Revenue 1,258.2 1,258.2 1,114.5 1,114.5 +13% +13%
Contract 232.1 232.1 203.5 203.5 +14% +14%
gross
profit
Permanent 89.0 89.0 84.2 84.2 +6% +6%
gross
profit
Gross 321.1 321.1 287.7 287.7 +12% +12%
profit
Operating 53.9 47.5 44.9 38.2 +20% +20%
profit
Conversion 16.8% 14.8% 15.6% 13.3% +1.2% +1.2%
ratio (%) pts pts
Profit 53.4 47.0 44.5 37.7 +20% +20%
before
taxation
Basic 30.7p 26.6p 25.7p 21.5p +19% +20%
earnings
per share
Proposed 9.8p 9.8p 9.3p 9.3p +5% +5%
final
dividend
Total 14.5p 14.5p 14.0p 14.0p +4% +4%
dividend
(interim
and final)
per share
Net (4.1) (4.1) 5.6 5.6 - -
(debt)/cas
h
(1) 2018 figures were adjusted for the impact of GBP6.4 million of net exceptional strategic
restructuring costs.
(2) 2017 figures were adjusted for the impact of GBP6.7 million of exceptional strategic restructuring
costs.
(3) All variances compare adjusted 2018 against adjusted 2017 to provide a like-for-like view.
OPERATIONAL HIGHLIGHTS
* Strong full year financial performance, ahead of expectations
* Growth in gross profit ('GP') driven by Continental Europe (up 20%*), USA (up 8%*), and APAC & ME
(up 11%*)
* Restructured UK&I delivering in line with expectations, with GP down 5%* and productivity up 5%*
* 83% of GP now generated outside UK&I (2017: 81%)
* Contract GP up 14%* YoY, with growth across all sectors
* Permanent GP up 6%* YoY, with Permanent productivity up 7%
* Contract accounted for 72% of Group GP (2017: 71%)
* Successful relocation of circa 240 roles from London to Centre of Excellence in Glasgow
* Final dividend up 0.5p to 9.8p (2017: 9.3p), with cover now in target range of 2.0 to 2.5 times
* Strong Q4 exit run rate underpins expectations heading into 2019
* Variances in constant currency
Gary Elden, CEO, commented: "The Group continued to make good progress throughout 2018. This resulted
in a strong financial performance which, demonstrating our resilience, was delivered despite the
ongoing macro-economic and political uncertainties. Alongside the financial metrics, we delivered
further structural and operational progress which will enable us to attain our vision of being the
number one Science, Technology, Engineering and Mathematics ('STEM') recruiter in the best STEM
markets. We are on track with the delivery of the five-year plan as set out at the November 2017
Capital Market Day."
"Looking forward to the year ahead, our post-year end trading is in line with expectations and we
remain well positioned to benefit from the growth opportunities in our chosen STEM markets."
SThree will host a live presentation and conference call for analysts at 0930 GMT today. The
conference call participant telephone details are as follows:
Dial in: 0800 358 9473
Call passcode: 21768800#
This event will also be simultaneously audio webcast, hosted on the SThree website at www.sthree.com
[1]. Note that this is a listen only facility and an archive of the presentation will be available
via the same link later.
SThree will be announcing its Q1 Trading Update on Friday 15 March 2019.
Enquiries:
SThree plc 020 7268 6000
Gary Elden, Chief Executive Officer
Alex Smith, Chief Financial Officer
Kirsty Mulholland, Company Secretariat
Alma PR 020 3405 0205
Rebecca Sanders-Hewett SThree@almapr.co.uk
Josh Royston
Susie Hudson
Sam Modlin
Notes to editors
SThree is a leading international specialist recruitment business, providing Permanent and Contract
specialist staff to a diverse client base of over 9,000 clients. From its well-established position
as a major player in the Information & Communications Technology sector, the Group has broadened the
base of its operations to include businesses serving the Banking & Finance, Energy, Engineering and
Life Sciences sectors.
Since launching its original business, Computer Futures, in 1986, the Group has adopted a multi-brand
strategy, establishing new operations to address growth opportunities. SThree brands include
Progressive, Computer Futures, Huxley Associates and Real Staffing Group. The Group has circa 3,000
employees in sixteen countries.
SThree plc is quoted on the Official List of the UK Listing Authority under the ticker symbol STHR
and also has a US level one ADR facility, symbol SERTY.
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. Data from the announcement is sourced from
unaudited internal management information. Accordingly, undue reliance should not be placed on
forward looking statements.
CHIEF EXECUTIVE OFFICER'S REVIEW
Overview[1]
The Group continued to make good progress throughout 2018. This resulted in a strong financial
performance which, demonstrating our resilience, was delivered despite the ongoing macro-economic and
political uncertainties. Alongside the financial metrics, we delivered further structural and
operational progress which will enable us to attain our vision of being the number one Science,
Technology, Engineering and Mathematics ('STEM') recruiter in the best STEM markets. We are on track
with the delivery of the five-year plan as set out at the November 2017 Capital Market Day.
At the start of 2018, I stated that after two years of political, market and economic pressure, we
entered the year in good shape. That turbulence and pressure increased throughout the year and yet we
delivered a creditable performance. As we enter 2019, I believe that we are in even better shape.
The STEM markets in which we operate continue to be affected by the ongoing global shortage of
skilled workers and the resulting supply and demand imbalances which underpin the need for our
services.
Group gross profit ('GP') was up 12%* in the year. The growth was largely delivered, as expected,
through our key territories of Continental Europe and the USA; the former was driven by our
market-leading businesses in Germany and the Netherlands which together saw growth of 20%*, whilst
the latter was up 8%*. We also made improvements in our other target markets, including a stand-out
performance from our growing team in Japan, up 85%*. From a sector point of view, we saw robust
growth across the Group, with Information and Communication Technology ('ICT') up 12%*, Life Sciences
up 8%*, Engineering up 16%* and Global Energy up 30%*.
Our specialist focus on STEM and being in the right STEM markets is helping us to build a growing
reputation, using a multi-brand approach where each brand is well regarded within its own specialist
field. This is a key differentiator for SThree. In technology, for example, where other companies
position themselves as IT specialists, we are recognised as experts in specific fields such as JAVA,
Salesforce or .Net. This approach is the same across all our markets, so clients know that we can
access the very best people for highly skilled positions.
The Group is globally diversified, but at the same time specialises at a local level. We can source
the right people for clients in multiple territories whilst also understanding the nuances and
dynamics of each individual market. These include legislative requirements where our local knowledge
can help us to advise clients on choosing the right contracts and also help successful candidates
navigate the necessary requirements.
The Group's central purpose is 'Bringing skilled people together to build the future', and we have
six core principles that will enable us to achieve this purpose and generate returns for all of our
stakeholders. These are: grow and extend regions, sectors and services; develop and sustain great
customer relationships; focus on Contract, drive Permanent profitability; generate incremental
revenues through innovation and M&A; build infrastructure for leveraged growth; and find, retain and
develop great people. We have made considerable progress against the majority of our strategic
priorities. I will touch on two of them in more detail below with our Chief Sales Officer and Chief
Operational Officer providing further detail on the other four aspects.
Find, retain and develop great people
One of the most pleasing aspects of the year was the ongoing development of the Group's culture.
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Having collectively agreed on what kind of organisation we want to be and the principles to which we
would hold ourselves, it has been particularly rewarding to see adoption across the Group and the
benefits are already being seen. We have a vision that is shared across all of our operations and the
mindset has noticeably changed from thinking as individuals to considering wider Group opportunities,
shifting from a 'me' to a 'we' culture.
We have started to see the benefits of changes that we made about a year ago, including the
appointments of Dave Rees as Chief Sales Officer and Justin Hughes as Chief Operating Officer. As
anticipated, this has helped us to align our sales and operational strategies and ensure we have the
right services, infrastructure and people to execute our global growth strategy and provide our
customers with the best possible experience.
Pleasingly, the year's results were achieved despite the inevitable disruption caused by relocating
our London-based support services to Glasgow where we have created a Centre of Excellence. All roles
were fulfilled through our own recruitment teams and the project has delivered ahead of our
expectations. Any disruption caused was addressed promptly and professionally and our customers
experienced a smooth transition. We are delighted with the progress being made by the Glasgow team
which will give us greater conversion margin and competitive advantage.
Cultural changes do not happen overnight and there is still plenty for us to do. Our Female
Leadership Development Programme, IdentiFy, has been running throughout the year. It was introduced
to help us identify and nurture top female staff and give them the tools and support that they need
to thrive, as in the past we have seen female staff as a proportion of the total drop away when they
reach management levels. It has already given us greater insight, with initial feedback suggesting
that female candidates will put themselves forward for a role only where they feel comfortable in
executing 80% of the tasks involved in that role, whereas the corresponding figure for male
applicants is 20%. Through this level of understanding we can take initiatives to redress that
balance and encourage females to stay with us longer and progress further. This mirrors many of the
initiatives that we are conducting externally on behalf of our clients to ensure that female talent
is able to thrive in all of the STEM industries. During the year we have seen 14 female promotions to
management positions across the Group (out of 27 participants) with one to Director level.
We have made a great start in bringing our people together and encouraging them to behave in a way
that is representative of our five Leadership Principles, Know Me, Focus Me, Develop Me, Care For Me
and Include Me, providing the necessary coaching and training to help them succeed. As a result, I
believe that we are becoming increasingly meritocratic and expect that trend to continue.
Generate incremental revenues through innovation and M&A
Ours remains a people business and one which thrives on the strength of its relationships. Our
clients are looking for highly skilled workers and they choose us to source them because of our
specialist sector focus and expertise in all aspects of our chosen markets. As such we believe that
we are resilient to pure play technology competition that naturally suits more commoditised
offerings.
At the same time, our extensive industry expertise means that we are able to develop tools that can
help deliver different products for different markets, diversifying our business and opening up new
revenue streams where clients and candidates are less focused on the service elements that are so
important in our chosen STEM markets. During 2018, we made significant progress with both our
HireFirst and Showcaser initiatives.
HireFirst is an easy to use platform that uses Artificial Intelligence ('AI') to offer candidates
live matches to a diverse spectrum of roles and companies, whilst allowing companies the opportunity
to market their employer brand and attract the best people. It was officially launched in beta
testing in October in both Paris and London and I am pleased to say that the early results are
encouraging.
Showcaser is a video platform which gives candidates the ability to highlight certain aspects of
their CV, career to date or other areas that they may choose to differentiate themselves. Showcaser
was exhibited at UNLEASH Amsterdam in November and, again, the feedback has been encouraging.
We would not anticipate material revenue from HireFirst or Showcaser in 2019 but do believe they have
the ability to generate strong returns on investment over the medium term.
Management succession
Having been with the Company for nearly 30 years and as CEO for the last six, I shall be stepping
down before the Annual General Meeting of Shareholders being held on 24 April 2019. The process for
finding my successor is well underway. I am very proud of everything that we have achieved as a
business in that time and, as these results demonstrate, I will be handing over the reins of a
business that is in very good shape. I will be fully committed to the role until that time and will
work with the Board and the leadership team to ensure a smooth handover to my successor.
Outlook
At the start of 2018, I stated that after two years of turbulent political markets and economic
pressure we entered the year in good shape. Despite that turbulence and pressure increasing
throughout the year, we delivered a strong set of results. Looking forward to the year ahead, our
post-year end trading is in line with expectations and we remain well positioned to benefit from the
growth opportunities in our chosen STEM markets.
CHIEF SALES OFFICER'S OPERATING REVIEW
Group[2]
Gross Profit 2018 2017 YoY Variance*
Contract GBP232.1m GBP203.5m +14%
Permanent GBP89.0m GBP84.2m +6%
Group GBP321.1m GBP287.7m +12%
2018 was a year of strong growth across the Group, with both Contract and Permanent showing an
increase in gross profit ('GP'). Permanent was up 6%*, with productivity in the division increasing
by 7%. Reflecting the industry megatrends driving our markets, and the Group's focus, the Contract
division grew more strongly, up 14%*. In line with our strategy, the mix of Contract GP increased
slightly to represent 72% of total Group GP, up from 71% in 2017.
Regionally we saw stand out performances across the key regions of Germany, the Netherlands, and
Japan. We also saw continued growth in the USA. These strong performances were driven by a mixture of
structural growth in our markets, strong management execution and the benefits of our strategic
business decisions becoming realised. We also saw growth in all but one of our sectors within STEM,
with Information and Communication Technology ('ICT') up 12%*, Life Sciences up 8%*, Energy up 30%*
and Engineering up 16%*. Banking & Finance was broadly level year on year.
Breakdown of GP 2018 2017
Contract/Permanent Split
Contract 72% 71%
Permanent 28% 29%
100% 100%
Geographical Split
Continental Europe 57% 52%
USA 21% 22%
UK&I 17% 19%
Asia Pacific & Middle East 5% 7%
100% 100%
Sector Split
ICT 44% 43%
Life Sciences 21% 22%
Banking & Finance 13% 15%
Energy 10% 9%
Engineering 10% 9%
Other 2% 2%
100% 100%
Regions
Gross Profit 2018 2017 YoY Variance*
Continental Europe GBP183.3m GBP150.6m +20%
USA GBP66.7m GBP64.4m +8%
UK&I GBP53.1m GBP55.7m -5%
Asia Pacific & Middle East GBP18.0m GBP17.0m +11%
Group GBP321.1m GBP287.7m +12%
SThree is a well-diversified business by geography, with non-UK GP now representing 83% of the
Group's total GP. SThree is strategically located in regions where there are clear growth
opportunities within STEM industries, and we are pleased that this resulted in growth across the vast
majority of our businesses in the year.
SThree built upon its strong position in Continental Europe, with GP up 20%*, driven by strong growth
in both DACH (up 21%*) and Benelux, France & Spain (together up 18%*). Our key aims in this region
are to dominate the STEM space in both Germany and the Netherlands. We delivered a particularly
strong performance in the Netherlands, which is a key business hub for many multi-national companies,
with GP up 25%*. During the year, we opened a new location in Eindhoven, improving client proximity
and reaffirming our position as the market leader in STEM professional recruitment. In our largest
country of operation, Germany, the team delivered another year of strong growth, with GP up 18%* year
on year. Germany benefited from the expansion of its Contract service to include ECM, which we
launched in 2017.[3]
The USA saw robust GP growth of 8%* year on year, as we expanded our office footprint with a new
office in Washington DC, having previously serviced this market remotely from New York. This growth
was pleasing given the organisational changes implemented in the region in Q1 2018, which included
the move from a regional to brand management structure.
The increased economic uncertainty seen in the UK and Ireland continued to impact the region, causing
overall GP to decline by 5%*. The UK is a mature recruitment market and is seeing slower industry
growth than other geographies, although it remains a strategic priority for the Group. In the first
half of 2018, we restructured parts of our Permanent business, consolidating into key hubs and
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implemented a change of management. These actions showed clear signs of delivery with Permanent
productivity in the region up by 7%* on the prior year. As expected, the Contract business
demonstrated its resilience, remaining broadly stable.
Our Asia Pacific & Middle East ('APAC & ME') businesses delivered growth of 11%*. This was driven
largely by an excellent performance from the team in Japan, delivering GP up 85%* year on year. Japan
is an important technical market, with an immature recruitment industry, and the Group has
capitalised well on these opportunities. Japan now represents 29% of the APAC & ME GP, up from 17% in
2017. The Middle Eastern team also capitalised on its specialist knowledge, driving growth from
Contract placements across the Energy and Banking & Finance sectors.
Sectors
Gross Profit 2018 2017 YoY Variance*
ICT GBP142.0m GBP124.7m +12%
Life Sciences GBP66.3m GBP62.4m +8%
Banking & Finance GBP42.4m GBP43.5m -1%
Energy GBP33.4m GBP26.5m +30%
Engineering GBP30.6m GBP25.9m +16%
Other GBP6.4m GBP4.7m +28%
Group GBP321.1m GBP287.7m +12%
Our largest sector continues to be ICT and our strong technology capability across all verticals is
becoming increasingly recognised across our key regions. ICT represented 44% of Group GP, driven by
an increase in GP across Continental Europe of 22%*. In total, ICT GP increased by 12%*, with the
year-end headcount up 7%.
Our Life Sciences sector is already a market leader across several of our regions, and we saw another
robust performance delivered across the Group, with GP up 8%* year on year. This was driven by strong
performances in both APAC up 29%* and Benelux, France & Spain up 15%*. Additionally, DACH and the USA
delivered solid growth of 8% and 6% respectively.
Banking & Finance was down 1%* year on year, with Contract GP up 4%*, driven by a robust performance
in Continental Europe, where average headcount was up 5% on the prior year. The decline in Permanent
GP seen in the UK and the USA was partially offset by growth in APAC and ME, leaving Banking &
Finance at 13% of the Group GP.
We saw strong growth across both our Engineering and Energy sectors in 2018, up 16%* and 30%*
respectively, year on year. Within Engineering we pleasingly saw growth across all major regions with
the UK up 7%*, DACH up 21%*, Benelux, France & Spain up 19%* and the USA up 29%*.
Within Energy, where 94% of GP is derived from Contract, we had very strong performances in both
Continental Europe, up 25%*, and in the USA where our position in renewable energy helped deliver
40%* growth in GP. At the year end, global headcount was up 20% on the prior year, with Continental
Europe up 28% and the USA up 27%.
Focus on Contract, drive Permanent profitability
In 2018 we delivered on our stated strategy by further investing in Contract growth, and improving
Permanent productivity.
At the year end, Contract headcount was up 8% year on year, and all regions excluding UK&I reported
increased headcount and GP growth in Contract. Since 2012 we have doubled our runners, ending on
11,203 and for the sixth consecutive year are able to report an all-time high number of runners at
our financial year end. Our increased weighting towards Contract is creating a business that is more
resilient in times of uncertainty, as well as providing stronger and more sustainable profits. The
introduction of a Contract-specific management team has worked to increase accountability and focus.
Our freelancer model is continuing to perform well, and the focus on growing the Employed Contractor
Model ('ECM') is also paying dividends, as this model continues to grow in popularity across our key
territories. This was a key focus in 2018 and now accounts for 21% of our Contract runners, up from
19% in 2017. [4]
Permanent productivity per head was up 7%, achieved through our focus on the best Permanent markets,
with average salaries up 1% and average fees up 4%. Over the year we focused on reallocating our
headcount into our key growth markets, rather than focussing on net growth in our Permanent
headcount. We know that Permanent recruitment is more sensitive to overall market sentiment and
therefore we have a clear strategy to actively invest in Permanent headcount in our key markets of
Japan, the Netherlands, Germany and the USA, so that we are best-positioned for the future.
Maintaining a strong base of Permanent business in markets where there is space to grow continues to
be important to the business. From a strategic viewpoint, Permanent is key in building client
relationships, provides a Contractor development pipeline, and has strong cash generation
characteristics.
GP* Average Headcount
GP Contract Permanent Total Contract Permanent Total
USA +14% -5% +8% +15% +2% +11%
APAC & ME -2% +24% +11% +13% -3% +3%
Continental +22% +15% +20% +19% +8% +15%
Europe
UK&I 0% -20% -5% -1% -25% -9%
Total +14% +6% +12% +13% -1% +8%
Develop and sustain great customer relationships
Throughout 2018 we evolved our client segmentation strategy, allowing us to more effectively
categorise our client types to ensure we develop our relationships with them in a more tailored
manner. We developed our first onshore delivery centre based in Glasgow, which allows for larger and
more nimble and scalable delivery mechanisms for project recruitment.
We have fully integrated the Net Promoter Score ('NPS') metric into the organisation and it now feeds
into the rewards process across the business.
NPS scores were broadly flat in 2018, reflecting the move of our London support services to Glasgow.
Looking ahead, we are confident that we are well positioned to improve in 2019.
REGIONAL OVERVIEW
Continental Europe (57% of Group GP)
GP Average Sales
Headcount
Growth* YoY FY 2018 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
2018 +22% +15% +20% 72% 28% +19% +8% +15%
Performance in 2018
DACH
Germany, Austria and Switzerland ('DACH'), representing 31% of Group GP, had a strong year in 2018,
building on our market-leading position in this region. Changes made to the management set-up
delivered productivity gains as expected, and during the year, we rolled out a new employer
proposition, which helps us to attract and retain talent. It also allowed us to deepen our customer
relationships, and offer tailored solutions to major clients with complex needs. This is a barrier to
entry to our competitors.
This translated into tangible benefits; in Germany our Permanent GP grew 16%* with just 4% additional
headcount. ICT remains our largest sector.
Our Contract business grew by 22%*, with a 16% investment in headcount, and the dilutive effect on
average tenure of our expansion was fully compensated by a more focused customer strategy.
The Employed Contractor Model ('ECM') has been steadily gaining ground and has been regionalised
further across our existing office infrastructure.
We successfully completed an office launch in Austria, which has more than doubled its freelance
business year on year, whilst its Permanent business has increased its headcount by 50% year on year.
Benelux, France & Spain[5]
Benelux, France & Spain is the second largest region after DACH, representing 26% of the Group GP.
Benelux, France & Spain GP was up 18%* year on year.
Overall, we delivered strong growth in the region, supported by strong economic growth, tight labour
markets and high quality execution from our team there.
The Netherlands was the stand-out performer with GP up 25%* year on year, which was an improvement on
the 20% delivered in the prior year. Belgium grew GP by 16%* year on year, while France and
Luxembourg showed more modest growth.
Strong growth was achieved in Contract across the region with GP up 21%* year on year. The
Netherlands Contract business grew 27%* and Belgium Contract up 17%* year on year. We enter 2019 with
a strong Contract runner book up 14% on prior year.
Permanent also showed GP growth of 5%* year on year, with average sales headcount up 5%.
ICT, our largest sector, grew 20%* and continues to be the strongest growth market in the region,
with ICT Contract up 23%* and Permanent up 6% year on year*.
Our relatively new offices in Barcelona, Eindhoven, Lille, Lyon and Toulouse, all of which have
strong STEM opportunities, will enable us to more closely support our clients in these locations.
Expectations for 2019
DACH
We exit the year with a strong Contract runner book, which combined across the DACH region is 25%
bigger than in the prior year, a strong starter pipeline, and our largest ECM order book to date.
In line with our Group strategy, we will continue to invest in all divisions with particular focus on
further strengthening our ECM throughout 2019.
Benelux, France & Spain
We exit the year with a strong Contract pipeline, Permanent starter pipeline and a highly focused
management team with a clear strategy.
In line with our Group strategy, we will continue to invest in Contract throughout 2019, where we see
market opportunity. We will focus on improving Permanent productivity, with selective headcount
investments.
Our investment in the ECM in 2018 helped the region increase the number of Contractors. We expect to
leverage this further in 2019 across the region.
We exit 2018 in good shape across our European business. Regional management objectives are fully
aligned with our corporate vision and we start 2019 with strong pipelines in both Contract and
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Permanent, and our largest ECM order book to date. Despite ongoing macro-economic challenges, we
remain optimistic in our growth potential for the year ahead.
USA (21% of Group GP)
GP Average Sales
Headcount
Growth* YoY FY 2018 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
2018 +14% -5% +8% 73% 27% +15% +2% +11%
Performance in 2018
The USA is our second largest region and represents 21% of Group GP.[6]
Contract continued to deliver a strong performance in 2018 with GP up 14%*, balanced by the decline
of 5%* seen in Permanent, leaving the region having delivered overall GP growth of 8%*.
Growth in the region was across Energy, Life Sciences, ICT, and creative markets. Energy GP was up
40%* as we continued to build our customer portfolio, build on our strong position in renewable
energy, and broaden our service offering. Life Sciences, our largest sector in the region grew by
6%*. ICT grew by 8%. We continue to see further opportunities for growth in all our markets.
We continued to prioritise growth in Contract sales headcount, with an average increase of 15%* year
on year.
Overall, average headcount across the region was up 11%* in 2018, period end sales headcount was up
5%.
In our Permanent division, we made critical leadership and strategic changes to create a platform for
more consistent and balanced growth. The effect of these structural changes impacted performance in
the year, as we expected. We are fully confident we have made the right strategic decisions and we
expect the positive impact of these changes to be seen in performance during 2019 and beyond.
Expectations for 2019
With a stable exit rate in Contract runners, especially in Energy and ICT, we expect to continue our
strong growth into 2019. We expect Permanent to return to growth in 2019.
We are confident that we have the right team and structure to deliver a high quality service to our
clients and continue to penetrate the largest recruitment market in the world. We remain agile to
cater for any risks or opportunities that are posed by the market.
UK&I (17% of Group GP)
GP Average Sales
Headcount
Growth* YoY FY 2018 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
2018 0% -20% -5% 82% 18% -1% -25% -9%
Performance in 2018
Despite the continued uncertainty around Brexit, we have made very good progress in laying the
foundations to maximise our performance in the UK in 2019 through focusing on key strategic targets.
We significantly reduced our headcount in our Permanent division during the year and moved to a
specialist hub and onshore delivery model. This resulted in a strong productivity gain of 7%*.
Permanent GP declined 20%* against a 25% reduction in headcount. Our increased productivity also
resulted in a strong performance on profitability. Contract GP (flat* year on year) was largely due
to a more cautious approach to headcount build in H1 which we ramped up in H2. Contract productivity
was up 1%. The UK remains regionally well diversified with strong GP growth in Glasgow (up 12%*),
Bristol (up 13%*), and Leeds (up 9%*). We also restructured a management team in Dublin (up 9%*) to
better maximise the market opportunity.
SThree has a diversified sector offering in UK&I, with strong GP performances within Life Sciences
(up 7%*), Engineering (up 7%*) and Energy (up 28%*). We have conversely seen greater challenges in
some of the more competitive spaces such as ICT (down 10%*) and Banking & Finance (down 7%*).
However, we believe that we are focussing on the right markets and customer segments to see this
improve in 2019.
Expectations for 2019
We are well diversified both regionally and from a sector perspective within UK&I. We will continue
to invest in headcount based on customer and sector needs, mindful of the broader economic and
political backdrop. We have an agile model that allows us to meet a broad spectrum of our clients'
demands.[7]
APAC & ME (5% of Group GP)
GP Average Sales
Headcount
Growth* YoY FY 2018 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
2018 -2% +24% +11% 45% 55% +13% -3% +3%
Performance in 2018
APAC & ME represented 5% of Group GP, a reduction from the 7% contribution in 2017. Whilst the aim of
the region is to outperform the Group average, 2018 was a return to growth for APAC & ME after a
period of recovery in Energy and a realignment of market focus in other sectors. The region includes
Australia, Singapore, Japan, Malaysia, Hong Kong and Dubai.
Our market exposure is broad with a balanced approach to all STEM markets and alignment to our Group
strategic priorities. Our exposure to Energy and Banking & Finance was lower than in previous years.
The bulk of our headcount investment was within ICT, Life Sciences and Engineering.
Our Japanese business delivered a stand-out performance this year, with Japan growing its GP by 85%*.
We also saw a strong performance in ME Contract where GP grew by 48%*, driven by both the ICT and
Energy sectors. We are confident in both businesses continuing that performance in 2019 and are
investing in headcount and the correct infrastructure to provide a platform for further growth.
Expectations for 2019
We expect to maintain good growth in 2019. We will continue to invest in our Japanese Permanent
business where we expect to continue seeing strong future growth. We will also continue to invest in
ME Contract across both Energy and ICT.
CHIEF FINANCIAL OFFICER'S REVIEW
In 2018, our improved operational performance delivered strong growth in gross profit and profit
before tax, ahead of market expectations.
Income statement
Revenue for the year was up 13% on constant currency and reported bases to GBP1,258.2 million (2017:
GBP1,114.5 million). On constant currency and reported bases, gross profit ('GP') increased by 12% to
GBP321.1 million (2017: GBP287.7 million). Growth in revenue exceeded the growth in GP as the business
continued to remix towards Contract. Contract represented 72% of Group GP in the year (2017: 71%).
This change in mix resulted in a slight decrease in the overall GP margin to 25.5% (2017: 25.8%) as
Permanent revenue has no cost of sale, whereas the cost of paying the contractor is deducted to
derive Contract GP. The Contract margin increased slightly to 19.9% (2017: 19.8%).
Reported profit before tax was up 25% at GBP47.0 million. The adjusted profit before tax ('PBT') was
GBP53.4 million up 20% year on year (2017: adjusted GBP44.5 million and reported GBP37.7 million). The
adjusted PBT excludes restructuring costs of GBP6.4 million that were incurred during the year in
respect of the relocation of our support function to Glasgow (2017: GBP6.7 million). In 2018, this
exceptional restructuring delivered savings which drove an increase in our operating profit
conversion ratio of 1.2 percentage points to 16.8% on an adjusted basis and 1.5 percentage points to
14.8% on a reported basis (2017: adjusted 15.6% and reported 13.3%).
Restructuring costs ('adjusting items')
A strategic relocation of the majority of our central support functions away from our London
headquarters to a new facility located within Glasgow was announced on 1 November 2017. The
transition to the Glasgow Centre of Excellence is now substantially complete and we anticipate this
restructuring will realise cost savings ahead of expectations, in excess of GBP5 million per annum. In
line with the project implementation timescale, benefits started to be realised in the second half of
the financial year and have led to the recognition of GBP2.6 million in savings in the year. The
trajectory of the realised savings is expected to result in additional support costs savings of GBP2.9
million in 2019.
We continue to anticipate that one-off restructuring costs will be in the region of GBP14.0 million,
with circa GBP12.9 million of operating expenses, including personnel costs and professional advisor
fees, and circa GBP1.1 million of property related costs. The project is being partially funded by a
grant receivable from Scottish Enterprise of circa GBP2.1 million which is receivable and recognisable
over several years, subject to the terms of the grant being met within a fixed timeframe.
Net exceptional costs of GBP6.4 million have been charged to the Consolidated Income Statement during
the year, bringing the total costs recognised to date to GBP13.1 million. The exceptional charge in the
year included personnel costs of GBP4.1 million and other costs of GBP2.7 million (primarily professional
and property costs). During the year, the grant income of GBP0.4 million was recognised as an offset to
the exceptional costs.
The strategic nature and material cost of the restructuring of support functions announced in 2017
continues to be of sufficient magnitude to warrant separate disclosure as an exceptional item on the
face of the Consolidated Income Statement, in line with our accounting policies. The separate
disclosure of the exceptional items helps readers understand the Group's underlying results for the
year ('Adjusted'). The Group adjusted profit KPIs for the year are presented in various sections of
this Annual Report.
A reconciliation of 'Adjusting items' is provided below:
GBP'million 2018 2017
Reported profit before tax after exceptional items 47.0 37.7
Exceptional strategic restructuring costs (net of 6.4 6.7
government grant)
Reported profit before tax and exceptional items 53.4 44.5
('Adjusted')
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Operating costs
Adjusted operating costs, excluding one-off net restructuring costs of GBP6.4 million (2017: GBP6.7
million), increased by 10% to GBP267.2 million (2017: GBP242.8 million). The increase was mainly driven
by additional investment in headcount (8% increase year on year), 10% increase in personnel costs
(GBP11.0 million* increase in salaries; GBP3.5 million* increase in commissions and bonuses in line with
the improved GP), and GBP0.9 million increase in property costs reflecting demand for new and
modernised office space.[8]
Payroll costs represented 79% of our cost base. Average total headcount was up by 10% at 2,926 (2017:
2,668), with average sales headcount up 8%. The increase in average sales headcount was in response
to supportive market conditions across the majority of our geographies as well as improvements in
consultant productivity, attributable primarily to Continental Europe (Benelux & France and DACH
regions) and the USA, (headcount up 15% and 11% respectively). 2% of the average total headcount was
attributable to the relocation of the support function to Glasgow. The year-end total headcount was
up 4% at 2,979.
The year-end sales headcount represented 78% of the total Group headcount.
The full benefits of the restructure of our UK support function on personnel and property costs are
expected to be realised from the financial year 2019 onwards.
Investments
During the year, we continued to invest in in-house innovation initiatives, expensing a total of GBP2.4
million (2017: GBP2.0 million) across the year. Our intent is to build a more diverse portfolio of
products and services so that we capture a greater share of total customer spend on employment
matters and to ensure we are well positioned to benefit from potential disruption. The bulk of the
investment was made in our HireFirst and Showcaser initiatives. HireFirst launched in October 2018 is
at the beta testing stage, and no profits were generated during the year. Showcaser is progressing
well and it has received encouraging feedback from the prospective clients. We do not anticipate
material revenue from HireFirst or Showcaser in 2019.
We continued to hold non-controlling shareholdings in three innovation start-ups. (i) Ryalto Limited
which is designing and developing a mobile application for healthcare professionals. (ii)
RoboRecruiter Inc. which is building automated multichannel platforms connecting candidates with
recruiters and employers in real time; and (iii) The Sandpit Limited, a privately owned group that
specialises in developing early stage start-up companies within defined markets.
Taxation
The tax charge on pre-exceptional statutory profit before tax for the year was GBP13.9 million (2017:
GBP11.4 million), representing an effective tax rate ('ETR') of 25.9% (2017: 25.6%). The ETR on
post-exceptional statutory profit before tax was 27.1% (2017: 26.7%).
The ETR primarily reflects our geographical mix of profits and a cautious approach to recognising
deferred tax assets on tax losses. USA Tax Reform legislation passed in December 2017 saw a reduction
in the federal corporate tax rate from 35% to 21%. As previously indicated, this had a minimal impact
on the ETR because the tax credit associated with the current year profits was largely offset by the
reduction in the deferred tax asset. Whilst the Group benefited from a reduction in the USA cash tax
payable in 2018, the accounting ETR benefit of this change will occur in 2019 and beyond.
Other regulatory changes which may impact the Group in future years include:
(i) If the UK leaves the European Union, the Group will no longer be able to benefit from provisions
applying in certain tax treaties and in the EU Parent Subsidiary Directive. The Group is currently
planning mitigating actions against this and hence we do not expect any material costs to arise.
(ii) In October 2017, the European Commission opened a state aid investigation into the Group
Financing Exemption in controlled foreign company rules, introduced by the UK Government in 2013. The
Group has historically relied on this exemption in certain jurisdictions and we are therefore
monitoring the investigation. If the preliminary findings of the European Commission are upheld, we
calculate our maximum potential liability to be GBP3.2 million. Our current assessment is that no
provision is required in respect of this issue.
(iii) Increased transparency arising from the implementation of Country-By-Country reporting
provisions in various OECD member states may result in more frequent tax audits, particularly in the
area of transfer pricing. The Group is comfortable that its policies in this area are robust.
We will continue to monitor and assess the impact of any changes as they are implemented.
Earnings per share ('EPS')
On an adjusted basis, basic EPS was up by 5 pence, or 19%, at 30.7 pence (2017: adjusted 25.7 pence),
due to an increase in the adjusted profit before tax, partially offset by a marginal increase in
weighted average number of shares. On a reported basis, EPS increased to 26.6 pence, up 5.1 pence on
the prior year (2017: 21.5 pence). The weighted average number of shares used for basic EPS remained
stable at 128.7 million (2017: 128.6 million). Reported diluted EPS was 25.7 pence (2017: 20.8
pence), up 4.9 pence. Share dilution mainly results from various share options in place and expected
future settlement of certain tracker shares. The dilutive effect on EPS from tracker shares will vary
in future periods depending on the profitability of the underlying tracker businesses, the volume of
new tracker arrangements created and the settlement of vested arrangements.
Dividends
The Board monitors the appropriate level of the dividend, taking into account, inter alia, achieved
and expected trading of the Group, together with its balance sheet position. In line with the Board's
strategy of targeting a dividend cover of between 2.0x and 2.5x, based on underlying EPS, over the
short to medium term, the Board has proposed an increased final dividend of 9.8 pence per share
(2017: 9.3 pence). Taken together with the interim dividend of 4.7 pence per share (2017: 4.7 pence),
this brings the total dividend for the year to 14.5 pence per share (2017: 14.0 pence). This
represents a 4% increase in dividend per share versus the prior year. This dividend increase reflects
the Board's confidence in SThree's long-term strategy, with cover now in the target range of 2.0 to
2.5 times. The final dividend, which amounts to approximately GBP12.8 million, will be subject to
shareholder approval at the 2019 Annual General Meeting. It will be paid on 7 June 2019 to
shareholders on the register on 26 April 2019.
Share options and tracker share arrangements
We recognised a share-based payment charge of GBP4.7 million during the year (2017: GBP3.3 million) for
the Group's various share-based incentive schemes. The greater charge in 2018 is primarily due to
improved non-market vesting conditions, such as the adjusted earnings per share driven by increased
profit before tax. A portion of the annual charge also reflects the accelerated cost for all 'good
leavers' who left the Group as a result of restructuring and relocation of support functions away
from London.
We also operate a tracker share model to help retain and motivate our entrepreneurial management
within the business. The programme gives our most senior sales colleagues a chance to invest in a
business they manage with the support and economies of scale that the Group can offer them. In 2018,
68 employees invested an equivalent of GBP0.6 million in 25 Group businesses.
We settled certain tracker shares during the year for a total consideration of GBP3.7 million (2017:
GBP3.2 million) which was determined using a formula in the Articles of Association underpinning the
tracker share businesses. We settled the consideration in SThree plc shares either by issuing new
shares (398,298 new shares were issued on settlement of vested tracker shares in 2018) or treasury
shares (in total 700,200 were used in settlement of vested tracker shares in 2018). Consequently, the
arrangement is deemed to be an equity-settled share-based payment arrangement under IFRS 2
'Share-based payments'. There is no charge to the income statement as initially the tracker
shareholders subscribed to the tracker shares at their fair value. We expect future tracker share
settlements to be between GBP5 million to GBP15 million per annum. These settlements may either dilute
the earnings of SThree plc's existing ordinary shareholders if funded by new issue of shares or will
result in a cash outflow if funded via treasury shares. This year we purchased 411,354 of SThree
plc's ordinary shares for immediate cancellation to offset a negative impact on share dilution as a
result of tracker arrangements being funded via a new issue of shares.
Note 1 to the financial statements provides further details about all Group-wide discretionary share
plans, including the tracker share arrangements.
Balance sheet
At 30 November 2018, the Group's net assets increased to GBP101.7 million (2017: GBP80.7 million), mainly
due to the excess of net profit over the dividend payments supported by a strengthening of the Euro
vs Sterling, offset by share buy backs and share cancellations during the year.
The most significant item in our statement of financial position is trade receivables (including
accrued income) which increased to GBP274.6 million (2017: GBP217.7 million). The main drivers of this
increase were an almost four day growth in Days Sales Outstanding ('DSOs') to 44.7 days (2017: 40.6
days), reflecting a short-term impact from the move of support functions to Glasgow, a 12% increase
in Contract GP in Q4 year on year, and a GBP4.3 million increase due to movements in foreign exchange
rates. We expect DSOs to improve during the course of 2019. Trade and other payables increased from
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GBP159.6 million to GBP191.7 million, with GBP2.5 million due to movements in foreign exchange rates, and
the remainder primarily due to an increase in Contract GP. Creditor days were 17 days (2017: 18
days). Provisions decreased by GBP3.3 million primarily due to a GBP5.3 million utilisation in a
provision for the relocation of central support functions from London to Glasgow.
Investment in subsidiaries (Company only)
In the previous two years an impairment charge was recognised in respect of the Company's carrying
value of investments in subsidiaries. This was primarily in respect of the Group's UK operations. In
2018, we considered whether there were new indicators of impairment and did not identify any
circumstances or triggers which would require a formal impairment test to be performed. However, as
set out in the Risk section, at the date of signing the financial statements, there is ongoing
uncertainty surrounding the potential outcomes of Brexit. This is being monitored and there remains a
risk that Brexit outcome could trigger an impairment risk in 2019 or future periods.
Cash Flow
On an adjusted basis, we generated net cash from operations of GBP40.6 million (2017: GBP41.1 million on
an adjusted basis) due to continued growth of the Contract runner book increasing our working capital
and an increase in DSOs. This resulted in a lower cash conversion ratio of 67% (2017: 79%) on an
adjusted basis or 52% (2017: 90%) on a reported basis.
Capital expenditure (excluding GBP1.0 million in exceptional capital expenditure) reduced to GBP4.2
million (2017: GBP5.8 million), the majority of which was in relation to infrastructure investment in
offices in the Netherlands, Germany and UK, and investment in the Contractor Timesheet Portal
('Workflow') of GBP0.6 million. We expect capital expenditure will increase year on year in 2019, to
address security, out of support systems and a number of office moves. Investments in available for
sale financial assets were GBPnil (2017: GBP1.2 million) in the year.
During the year, SThree plc bought back shares for GBP1.5 million (2017: GBP7.8 million) to satisfy
employee share schemes in future periods, and repurchased 411,354 of its ordinary shares at an
average price of 357 pence for immediate cancellation. Small cash inflows were generated from share
based payment schemes.
Income tax payments increased to GBP14.4 million (2017: GBP10.9 million). Small cash outflows were made
for interest payments.
Dividend payments were GBP18.0 million (2017: GBP18.0 million) and there was a small cash outflow of GBP0.1
million representing distributions to tracker shareholders.
We started the year with the net cash of GBP5.6 million and closed the financial year with the net debt
of GBP4.1 million. The year-on-year decrease primarily reflected increased cash absorbed in working
capital as the Contract business continued to grow, increased DSOs, and the GBP11.5 million cash cost
of the restructuring of the support functions in the UK. We expect DSOs to improve in 2019 and the
restructuring cash costs to be significantly less in the first half of 2019, as the project is now
substantially complete.
Treasury management
We finance the Group's operations through equity and bank borrowings. The Group's cash management
policy is to minimise interest payments by closely managing Group cash balances and external
borrowings. We intend to continue this strategy while maintaining a strong balance sheet position.
We maintain a committed Revolving Credit Facility ('RCF') of GBP50 million, along with an uncommitted
GBP20 million accordion facility, with Citibank and HSBC, giving the Group an option to increase its
total borrowings to GBP70 million for general corporate purposes. This facility was successfully
renegotiated earlier in the year and extended to May 2023, on similar terms and conditions to the
previous facility. We also have an uncommitted GBP5 million overdraft facility with NatWest and a GBP5
million overdraft facility with HSBC.
At the year end, the Group had drawn down GBP37.4 million (2017: GBP12.0 million) on these facilities.
The RCF is subject to financial covenants requiring the Group to maintain financial ratios over
interest cover of at least 4.0, leverage of at least 3.0 and guarantor cover at 85% of EBITDA and
gross assets. In 2018, we ended the year with significant headroom on all our covenants.
The funds borrowed under this facility bear interest at a minimum annual rate of 1.3% above 3 month
LIBOR, giving an average interest rate of 1.8% during the year (2017: 1.5%). The finance costs for
the year amounted to GBP0.7 million (2017: GBP0.4 million).
The Group's UK-based treasury function manages the Group's treasury risks in accordance with policies
and procedures set by the Board, and is responsible for day-to-day cash management; the arrangement
of external borrowing facilities; the investment of surplus funds; and the management of the Group's
interest rate and foreign exchange risks. The treasury function does not engage in speculative
transactions or operate as a profit centre.
Foreign exchange
Foreign exchange volatility continues to be a significant factor in the reporting of the overall
performance of the business with the main functional currencies of the Group entities being Sterling,
the Euro and the US Dollar.
For 2018, movements in exchange rates between Sterling and the Euro and the US Dollar provided a
moderate net headwind to the reported performance of the Group with the highest impact coming from
the Euro and US Dollar. The exchange rate movements decreased our reported 2018 GP by approximately
GBP0.7 million and operating profit by GBP0.1 million.
Our financial performance KPIs remain materially sensitive to exchange rate movements. By way of
illustration, each one per cent movement in annual exchange rates of the Euro and US Dollar against
Sterling impacted our 2018 GP by GBP1.8 million and GBP0.7 million, respectively, and operating profit by
GBP0.5 million and GBP0.2 million, respectively.
The Board considers it appropriate in certain cases to use derivative financial instruments as part
of its day-to-day cash management to provide the Group with protection against adverse movements in
the Euro and US dollar during the settlement period. The Group does not use derivatives to hedge
translational foreign exchange exposure in its balance sheet and income statement.
Principal Risks and Uncertainties
Connecting risk, opportunity and strategy
Principal risks and uncertainties affecting the business activities of the Group will be detailed
within the Strategic Report section of the Group's 2018 Annual Report, a copy of which will be
available on the Group's website www.sthree.com [1].
Delivering on our strategy requires all parts of our business to work together. In isolation risk
mitigation helps SThree manage specific subjects and areas of the business. However, when brought
into our day-to-day activities successful risk management has helped us to maximise our competitive
advantage and deliver on our strategic priorities in 2018. Whilst the ultimate responsibility for
risk management rests with the Board, the effective day-to-day management of risk is in the way we do
business and our culture.
Aligning risks and strategy by using risk to help make the right strategic decisions - in order to
deliver our strategy and competitive advantage throughout the business we must ensure that we
maintain a balance between safeguarding against potential risks and taking advantage of all potential
opportunities.
consolidated income statement
For the year ended 30 November 2018
2018 2017
Before Exceptional Total Before Exceptional Total
except items except items
ional ional
items items
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Continuing
operations
Revenue 2 1,258, - 1,258, 1,114, - 1,114
152 152 530 ,530
Cost of (937,0 - (937,0 (826,8 - (826,
sales 26) 26) 58) 858)
Gross profit 2 321,12 - 321,12 287,67 - 287,6
6 6 2 72
Administrative 3 (267,2 (6,397) (273,6 (242,7 (6,741) (249,
expenses 11) 08) 52) 493)
Operating 4 53,915 (6,397) 47,518 44,920 (6,741) 38,17
profit 9
124
(439)
(147)
Finance 75 - 75 124 - 124
income
Finance (743) - (743) (439) - (439)
costs
Gain on 146 - 146 (147) - (147)
disposal/(Sh
are of
losses) of
associate
Profit before 53,393 (6,397) 46,996 44,458 (6,741) 37,71
taxation 7
Taxation 5 (13,85 1,127 (12,72 (11,39 1,303 (10,0
1) 4) 2) 89)
Profit for the 39,542 (5,270) 34,272 33,066 (5,438) 27,62
year attributable 8
to owners of the
Company
Earnings per 7 pence pence pence pence pence pence
share
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Basic 30.7 (4.1) 26.6 25.7 (4.2) 21.5
24.9
Diluted 29.7 (4.0) 25.7 24.9 (4.1) 20.8
consolidated statement of comprehensive income
For the year ended 30 November 2018
2018 2017
GBP'000 GBP'000
Profit for the year 34,272 27,628
Other comprehensive income/(loss):
Items that may be subsequently reclassified to
profit or loss:
Exchange differences on retranslation of 2,572 (1,083)
foreign operations
Total other comprehensive income/(loss) for 2,572 (1,083)
the year (net of tax)
Total comprehensive income for the year 36,844 26,545
attributable to owners of the Company
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 November 2018
30 November 30 November
2018 2017
Note GBP'000 GBP'000
Assets
Non-current assets
Property, plant and 6,915 6,746
equipment
Intangible assets 9,609 11,386
Investment in - 655
associate
Other investments 1,977 1,110
Deferred tax assets 2,750 4,199
21,251 24,096
Current assets
Trade and other 285,618 226,558
receivables
Current tax assets 2,751 1,534
Cash and cash 8 50,844 21,338
equivalents
339,213 249,430
Total assets 360,464 273,526
Equity and
Liabilities
Equity attributable to owners of the Company
Share capital 1,319 1,317
Share premium 30,511 28,806
Other reserves (5,275) (8,556)
Retained earnings 75,116 59,138
Total equity 101,671 80,705
Non-current
liabilities
Provisions for 1,569 2,172
liabilities and
charges
Current liabilities
Borrowings 9 37,428 12,000
Bank overdraft 8 17,521 3,717
Provisions for 9,614 12,352
liabilities and
charges
Trade and other 191,742 159,556
payables
Current tax 919 3,024
liabilities
257,224 190,649
Total liabilities 258,793 192,821
Total equity and 360,464 273,526
liabilities
consolidated statement of
changes in equity
for the year ended 30
November 2018
Share Share Capital Capital Treas Currency Retained Total
capital premium redemption reserve ury translation earnings equit
reserve reser reserve y
ve attri
butab
le to
owner
s of
the
Compa
ny
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 1,312 27,406 168 878 (6,44 16 52,333 75,67
December 2016 3) 0
Profit for - - - - - - 27,628 27,62
the year 8
Other - - - - - (1,083) - (1,08
comprehensive 3)
loss for the
year
Total - - - - - (1,083) 27,628 26,54
comprehensive 5
income for
the year
Dividends 6 - - - - - - (17,994) (17,9
paid to 94)
equity
holders
Distributions - - - - - - (115) (115)
to tracker
shareholders
Settlement of 4 1,185 - - 2,746 - (3,060) 875
vested
tracker
shares
Settlement of 1 215 - - 2,959 - (2,972) 203
share-based
payments
Purchase of - - - - (4,61 - - (4,61
own shares 8) 8)
Purchase of - - - - (3,17 - - (3,17
own shares by 9) 9)
Employee
Benefit Trust
Credit to - - - - - - 3,256 3,256
equity for
equity-settle
d share-based
payments
Current and 5 - - - - - - 62 62
deferred tax
on
share-based
payment
transactions
Total 5 1,400 - - (2,09 (1,083) 6,805 5,035
movements in 2)
equity
Balance at 30 1,317 28,806 168 878 (8,53 (1,067) 59,138 80,70
November 2017 5) 5
Profit for - - - - - - 34,272 34,27
the year 2
Other - - - - - 2,572 - 2,572
comprehensive
income for
the year
Total - - - - - 2,572 34,272 36,84
comprehensive 4
income for
the year
Dividends 6 - - - - - - (18,007) (18,0
paid to 07)
equity
holders
Distributions - - - - - - (124) (124)
to tracker
shareholders
Settlement of 4 1,306 - - 2,124 - (3,306) 128
vested
tracker
shares
Settlement of 2 399 - - 65 - (65) 401
share-based
payments
Cancellation (4) - 4 - - - (1,468) (1,46
of share 8)
capital
Purchase of - - - - (1,48 - - (1,48
own shares by 4) 4)
Employee
Benefit Trust
Credit to - - - - - - 4,697 4,697
equity for
equity-settle
d share-based
payments
Current and 5 - - - - - - (21) (21)
deferred tax
on
share-based
payment
transactions
Total 2 1,705 4 - 705 2,572 15,978 20,96
movements in 6
equity
Balance at 30 1,319 30,511 172 878 (7,83 1,505 75,116 101,6
November 2018 0) 71
consolidated statement of cash flows
For the year ended 30 November 2018
2018 2017
Note GBP'000 GBP'000
Cash flows from
operating activities
Profit before taxation 46,996 37,717
after exceptional items
Adjustments for:
Depreciation and 6,145 5,744
amortisation charge
Accelerated 709 309
amortisation and
impairment of
intangible assets
Finance income (75) (124)
Finance cost 743 439
Loss on disposal of 4 8 110
property, plant and
equipment
(Gain on (146) 147
disposal)/Share of
losses of associate
Loss on disposal of 70 144
subsidiaries
FX revaluation gain on (26) -
other investments
Non-cash charge for 4,697 3,256
share-based payments
Operating cash flows before changes in
working capital and provisions
59,121 47,742
Increase in receivables (55,372) (35,712)
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