DJ SThree: Replacement Final Results
SThree (STEM) SThree: Replacement Final Results 27-Jan-2020 / 08:52 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. A number of non-material typographical changes have been made to the Final Results announcement released on 27.01.2020 at 07:00, specifically a number of figures in the Consolidated Income Statement. SThree plc ("SThree" or the "Group") Final results for the year ended 30 November 2019 STHREE ANNOUNCES RECORD REVENUE AND OPERATING PROFIT SThree, the only global pure play specialist staffing business focused on roles in STEM (Science, Technology, Engineering and Mathematics), is today announcing its final results for the year ended 30 November 2019. FINANCIAL HIGHLIGHTS 2019 2018 Variance Adjusted Reported Adjusted Reported Movement Constant (1) (2) (3) Currency Movement (4) Revenue (GBP 1,345.0 1,345.0 1,258.2 1,258.2 +7% +6% million) Contract 254.6 254.6 232.1 232.1 +10% +8% net fees (GBP million) Permanent 87.8 87.8 89.0 89.0 -1% -3% net fees (GBP million) Net Fees 342.4 342.4 321.1 321.1 +7% +5% (GBP million) Operating 60.0 57.7 53.9 47.5 +11% +9% profit (GBP million) Conversion 17.5% 16.9% 16.8% 14.8% +0.7% +0.6% ratio (%) pts pts Profit 59.1 56.8 53.4 47.0 +11% +9% before taxation (GBP million) Basic 33.2p 31.8p 30.7p 26.6p +8% +7% earnings per share (pence) Proposed 10.2p 10.2p 9.8p 9.8p +4% +4% final dividend (pence) Total 15.3p 15.3p 14.5p 14.5p +6% +6% dividend (pence) Net 10.6 10.6 (4.1) (4.1) - - cash/(debt ) (GBP million) (1) 2019 figures exclude the impact of GBP2.3 million in net exceptional strategic restructuring costs and CEO change costs. (2) 2018 figures exclude the impact of GBP6.4 million in exceptional strategic restructuring costs. (3) Variance compares adjusted 2019 against adjusted 2018 to provide a like-for-like view. (4) Variance compares adjusted 2019 against adjusted 2018 on a constant currency basis, whereby the prior financial year foreign exchange rates are applied to current financial year results to remove the impact of exchange rate fluctuations. (5) Net cash/(debt) represents cash & cash equivalents less borrowings and bank overdrafts. HIGHLIGHTS · Record revenue and profit for the Group · Revenue of GBP1.35bn up by 6%* · Adjusted operating profit grew by 9%* to GBP60.0m, a record level for the Group · Adjusted profit before tax up 11% YoY to GBP59.1m (2018: GBP53.4m) · Reported profit before tax up 21% YoY to GBP56.8m (2018: GBP47.0m) · Strategic focus driving net fees growth for the full year of 5%* · Strong growth in USA, Continental Europe and Asia Pacific & Middle East · Good growth across Technology, Life Sciences, Energy & Engineering · 86% of Group net fees generated from international markets (2018: 83%) · Strong growth in Contract net fees up 8%*, in line with strategy, now representing 74% of Group net fees (2018: 72%) · Permanent net fees down 3%* · Further improvements in operational performance · 0.6% pts* improvement in conversion ratio to 17.5%, reflecting strong trading performance and cost savings delivered from the restructuring of support functions · Bolstered management teams · Implemented new strategic process and defined new strategic pillars · Strong cash conversion underpins 6% increase in full year dividend to 15.3p (2018: 14.5p) · Year-end net cash position of GBP10.6m; underlining the cash flow resilience of our Contract emphasis and tighter working capital management. * In constant currency Mark Dorman, CEO, commented: "I am pleased to be reporting today on a record year for the Group, during which we delivered an adjusted operating profit of GBP60.0m. This performance is a result of the hard work delivered throughout the business over the period. Our focus on STEM and flexible working is delivering good overall growth despite a challenging trading background. Looking to the year ahead, we will continue to build our scalable platform. We will continue to invest in our people, data and technology as we execute against our focused strategy as outlined at our recent Capital Markets Day. Whilst early in the year, we can see that broader macro-economic and political uncertainties may well persist, and the trading environment remains similar to Q4. We have the right strategy, are in the right sectors and geographies, and our Contract focus will allow us to drive another year of progress towards our ambitions. We have a unique position at the centre of long-term secular global trends and are focused on the right markets which will stand us in good stead for the future. In addition, we are building a platform business with the systems to increase the effectiveness of our execution. The opportunity for us is significant, and we are very well placed to capitalise on it, driving sustainable value for all of our stakeholders." 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: 90161391# This event will also be simultaneously audio webcast, at http://bit.ly/STEM_FY19 [1]. Please note that this is a listen only facility. An archive of the presentation will be available via the same link following the event. SThree will issue Q1 trading update on Monday 16 March 2020. Enquiries: SThree plc 020 7268 6000 Mark Dorman, Chief Executive Officer Alex Smith, Chief Financial Officer Shaun Zulafqar, Senior Company Secretarial Assistant Alma PR 020 3405 0205 Rebecca Sanders-Hewett SThree@almapr.co.uk Hilary Buchanan Notes to editors SThree is the only global pure play specialist staffing business focused on roles in STEM (Science, Technology, Engineering and Mathematics). It brings skilled people together to build the future through the provision of specialist Contract and Permanent services to a diverse client base of over 9,000 clients. From its well-established position as a major player in the 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 3,100 employees in sixteen countries. SThree plc is quoted on the Official List of the UK Listing Authority under the ticker symbol STEM and also has a USA 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. CHairman's statement I'm proud that SThree delivered in 2019 a record performance in terms of revenue, profitability and market penetration as we focused more tightly on providing our customers with the best STEM talent, our candidates with the opportunity to fulfil their ambitions and potential, and our employees with engaging and rewarding work. This is all the more impressive given a complex and somewhat unpredictable macro-economic and political backdrop in some of our main markets. Our purpose remains compelling and unchanged: bringing skilled people together to build the future. It is this purpose that governs our responsibility to all stakeholders. We have spent considerable effort and attention during the year to ensure that we are closer to our customers and candidate communities, and this remains a key future priority of the Group, together with enhancing our offering to employees and communicating better with our investors. We are pleased about the role that our business plays in wider society and have re-energised our CSR activities and implemented new initiatives under our ESG strategy. It is also significant that we have set ourselves a bold new target of reducing our absolute carbon emissions by 20% by 2024, helping to address one of the world's key challenges. The achievements in the year are in no small part the result of our exceptional, committed and entrepreneurial team. As signalled last year, Gary Elden stepped down as CEO in March after nearly 30 years in the business, the last six of them as CEO. Gary was responsible for setting a number of the business foundations we have in place today and which provide an enviable springboard for future growth. We wish him all the best in his new endeavours and thank him for his leadership and direction. I would
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also like to thank Justin Hughes, who stepped down as COO in July, for his significant contribution over the last 25 years. We were pleased to welcome Mark Dorman as CEO in March, bringing to SThree a wealth of experience in scaling international business service operations, delivering compelling strategies and leading great teams. He has already shown himself to be an ambitious and insightful leader, and I look forward to continuing to work with him. The Board and I are confident that his relentless focus on value creation for all our stakeholders will be indispensable as we scale further. During the year we also made a number of significant appointments to our leadership teams around the world, bolstering our capabilities as we take the business into its next stages of growth. In November we held our Capital Markets Day in London to update investors on our vision, strategic evolution and blueprint for success. Our huge market opportunity is also clear, and we are proud to have crystallised our strategy and pathway to sustainable future growth. On behalf of the Board, I would like to express our thanks for the tireless effort our colleagues put in every day to make SThree a trusted partner to our many customers and candidates. It is their drive and dedication to our purpose that elevates SThree as a global leader and partner of choice. It has been a pleasure for the Board and individual Board members to spend time visiting a number of our offices over the year, seeing the work being delivered across our platform, from our excellent operations and technology activities in Glasgow to the local market leadership we enjoy in Amsterdam. Corporate governance remains a priority and focus of the business and we have set ourselves FTSE 250-appropriate targets and aspirations. We are also focused on initiatives to enhance diversity and inclusion across our organisation and remain committed to ensuring that all of our employees' voices are heard at every level. A sense of excitement for the future is palpable across SThree. Our recently refined and newly articulated strategy provides us with confidence in our long-term success, supported by strong structural market drivers around STEM and flexible working, a great team and a corporate purpose that seems ever more relevant to meet many of the world's future challenges and opportunities. CHIEF EXECUTIVE OFFICER'S STRATEGIC REVIEW The only global pure play STEM specialist[1] SThree is at the centre of STEM and this has enabled us to deliver a robust financial performance in what has been one of the most uncertain macro-economic and political periods since 2008. Over the year we have built on the strong foundations that were in place when I took over. Our continued focus on STEM, and our scale and global footprint in the right markets, combined with our ability to provide a full staffing solution for all our clients' needs means that we have delivered an all-time record profit performance. Group net fees were up 5%* in the year. The growth was largely delivered, as expected, through our key territories of Continental Europe and USA; the former was driven by our market-leading businesses in Germany and the Netherlands which together saw growth of 8%*, whilst the latter was up 9%*. We also made improvements in our other target markets, including a stand-out performance from our growing team in Japan, up 43%*. From a sector point of view, we saw robust growth across the Group, with Technology up 7%*, Life Sciences up 5%*, and Energy & Engineering up 14%*. This performance is a result of the hard work delivered both strategically and operationally, and we continue to move closer to delivering on our vision of being the number one science, technology, engineering and mathematics ('STEM') recruiter in the best STEM markets. Bringing skilled people together to build the future It is clear to see our purpose of bringing skilled people together to build the future in action through the work that has been delivered in the period. The wide range of placements that we have made include, for example, a Regulatory Affairs Consultant, who ensures life-changing medical devices meet the highest possible safety standards before going to market, a Commissioning Manager whose planning and execution of key renewable energy projects is helping to make the world a greener place, as well as a significant number of solar technicians who are providing homes and businesses across the US with environmentally-friendly solar energy. We provide a company's most important asset - its people - to the businesses that are at the centre of some of the biggest challenges going on in the world today. We are very pleased to be a true partner to those businesses, helping them build the future. The scale of the growth and change as a result of the need for STEM skills going forward should not be underestimated. Addressing some of the biggest issues such as climate change and the huge demographic shifts is just the start. Skilled people are needed to solve these global challenges and drive the future. This creates a huge opportunity as many of those skills, while still in high demand, are also in short supply, irrespective of where we are in terms of economic cycle. We truly understand the dynamics of our markets, both as they are now and where they are headed. Our knowledge of the STEM markets, the needs of businesses operating within them and the niche, local talent we have built trusted relationships with is unrivalled. This is supported by our ability to deliver a full set of resourcing solutions to our clients, whether that be Contract or Permanent, to support with incoming legislation, and to develop supply though the cultivation of candidate communities. Alongside this, there are two factors driving the demand for flexible working. There is a generation of people entering the global labour force that have a very different view of the workplace. Millennials and Generation Z, particularly those with STEM skills, see their career through the lens of the various projects that they work on rather than the companies they work for. At the same time, more and more companies are looking for contingent workers and flexible workforces, whether on large scale capital projects in Engineering or Life Sciences, or whether they're looking to upgrade their technology and their innovation sphere project by project. These dynamics continue to drive the need for the right talent in a supply constrained environment. Our ability to find great talent and to curate that talent to make sure that it matches the right opportunity is the reason we are able to benefit from both of these trends. We are expert in engaging with both the client and the candidate all the way through a project, standardising our processes across the globe and ensuring the client and candidate come to our teams for their solutions going forward, making it a truly repeatable process. Our scale allows us to deliver this offering across the globe, in an increasingly complex regulatory environment for our clients. Our scale, expertise and culture make us the partner of choice. A scalable platform business able to drive further growth A key milestone of the year has been the development and articulation of a refocused strategy for the business that sets us up well to scale the business effectively and deliver consistently into the future. The long-term secular trends towards more flexible working manifests itself differently in the 70 different jurisdictions in which we place talent. In order to meet this opportunity, SThree has built a set of scalable service offerings, which are recurring in nature and which we deploy globally, allowing for long-term sustainable growth. One of the important defining characteristics of SThree is our entrepreneurial spirit. It is truly a pleasure to be working with a team that generates an abundance of new opportunities and good ideas. Our future success will be reliant on our ability to channel those ideas and ensure we choose the right opportunities to focus on. As such, we have implemented a 'managing for value' programme process which assesses the economic value that would be created by each idea, and allows us to rank them by the economic rate of return. This allows us to create real structure to help us execute our strategy across five areas of focus - our current geographies and markets, investment in sales and marketing, the use of data to enhance our decision making, to help drive our business and innovation, while building on our operational capabilities. Alongside the use of data to inform our business decisions we are also able to utilise valuable exhaust data from the activity across our business. We understand what is going on in the STEM markets through the work we do, and this knowledge enables us to have the right people in the right place to help our clients. An example of this is the use of data points, internal and external, in order to select the optimum industry/skill base to invest in. This allows us to maximise productivity of our consultants and scale appropriately within an industry/skill base. We maintain our focus on embracing new technologies and believe that this should be central to everything we do. This will drive efficiency across our scalable, platform business and support the delivery to our customers. We will continue to capitalise on trends to remain relevant to our customers in a new digital era, whether that being new ways of working or incremental improvements on an ongoing basis. Building on our operational capabilities will underpin our execution going forward. Our creation of the Centre of Excellence in Glasgow was a foundational step in building first class global operations to create operational scale and leverage. From that foundational step we'll continue to invest as we move forward, enhancing our platform for growth. Our six previous strategic pillars have been refined and we are now focused on executing across four key
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