TIDMSTEM
RNS Number : 0267H
SThree plc
25 July 2023
SThree plc
RESULTS FOR THE six monthsED 31 MAY 2023
Resilient performance in H1 driven by our contract business
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 announces its
financial results for the six months ended 31 May 2023.
FINANCIAL HIGHLIGHTS
HALF-YEAR HIGHLIGHTS
-- A resilient performance, with Group net fees down 2% YoY(3) on a constant
currency basis, against the strong post-Covid comparative period (H1
FY22 YoY growth: 25%) and backdrop of global macro-economic conditions.
o Across our three largest countries: Netherlands up 3%, Germany
down 1% and USA down 11%, together accounting for 73% of net fees.
o Growth seen across Technology, up 1% and Engineering, up 17%, while
Life Sciences was down 21% driven by global sector trends.
-- Reflecting both our strategic focus on flexible talent together with
global market conditions, Contract net fees were up 3%, supported
by strong extensions, robust pricing and increased contract lengths,
while Permanent was down 19%.
-- Contract net fees represented 81% of Group net fees (H1 FY22: 77%),
with the contractor order book(4) value of GBP190.3 million, which
is flat YoY, providing good visibility for the remainder of FY23.
-- Margin of 18.3% remains above FY22 levels delivering profit before
tax of GBP38.5 million, down 20% YoY (H1 FY22: GBP44.3 million), due
to the planned investment in the Technology Improvement Programme
and headcount.
-- Strong balance sheet, with GBP72.4 million in net cash as at 31 May
2023 (H1 FY22: GBP48.4 million).
-- Interim dividend approved at 5.0 pence per share (H1 FY22: 5.0 pence).
We intend to remain in line with our dividend policy of cover in the
range of 2.5x to 3.0x for the full year.
-- Technology Improvement Programme on track and on budget, with the
integrated platform passing through business user testing with excellent
feedback.
o Key to delivering a differentiated proposition within the market,
driving both scale and higher margins over the mid-to-long term.
o Phased geographical roll out on track to commence in H2 FY23, onto
which SThree's bespoke methodologies will be layered to systematise
best practice, improve data and workflows.
-- Sustainable business practice and ESG commitments demonstrated by:
o Over 17,375 lives positively impacted in H1 FY23 (H1 FY22: 16,540).
o SThree's renewables business up 29% versus H1 FY22 (H1 FY22: up
22% versus H1 FY21).
o 44% carbon reduction in FY22(5) in comparison to 2019, our baseline
year for our SBTi net zero target.
o 33% of women (H1 FY22: 30%) in leadership as we progress towards
achieving our ambition of 50/50 representation in leadership.
(1) Variance compares reported H1 FY23 against reported H1 FY22
on a constant currency basis, whereby the prior financial period
foreign exchange rates are applied to current and prior financial
period results to remove the impact of exchange rate
fluctuations.
(2) Net cash represents cash and cash equivalents less
borrowings and bank overdrafts and excluding leases.
(3) All YoY growth rates in this announcement are expressed at
constant currency.
(4) The contractor order book represents value of net fees until
contractual end dates, assuming all contractual hours are
worked.
(5) Target not measured at mid-year.
Timo Lehne, Chief Executive, commented:
"Our focus on STEM and flexible talent has delivered a resilient
performance in the first half of the year against strong
comparatives and macro-economic headwinds. This was underpinned by
the Group's strategic focus on Contract, which grew 3%, following
robust extensions and pricing as companies commit to holding on to
required skills in the face of ongoing acute shortages.
We have made excellent progress against the four pillars of our
strategy to ensure the business has the right people, structures
and processes to support the next phase of our growth. The rollout
of our Technology Improvement Programme is on track and on budget,
and will be a key enabler in us delivering a unique proposition
within the market, driving both scale and higher margins over the
mid-to-long term.
The macro-economic backdrop remains unpredictable in the
short-term, however our established leadership position and
progress with our Technology Improvement Programme leaves us more
confident than ever in our growth strategy."
Analyst conference call
SThree is hosting a webinar for analysts and investors today at
08:30 BST to present the Group's results for the six months ended
31 May 2023. If you would like to register for the conference call,
please contact SThree@almapr.co.uk .
SThree will issue its Q3 trading update on 19 September
2023.
Enquiries:
SThree plc
Timo Lehne, CEO via Alma
Andrew Beach, CFO
Alma PR +44 20 3405 0205
Hilary Buchanan Sthree@almapr.co.uk
Sam Modlin
Will Ellis Hancock
Notes to editors
SThree plc brings skilled people together to build the future.
We are the only global specialist talent partner focused on roles
in STEM, providing permanent and flexible contract talent to a
diverse base of over 8,200 clients across 14 countries. Our Group's
c.2,800 staff cover the Technology, Life Sciences and Engineering
sectors. SThree is part of the Industrial Services sector. We are
listed on the Premium Segment of the London Stock Exchange's Main
Market, trading with ticker code STEM.
Important notice
Certain statements in this announcement are forward looking
statements. By their nature, forward looking statements involve a
number of risks, uncertainties or assumptions that could cause
actual results or events to differ materially from those expressed
or implied by those statements. Forward looking statements
regarding past trends or activities should not be taken as
representation that such trends or activities will continue in the
future. Certain data from the announcement is sourced from
unaudited internal management information and is before any
exceptional items. Accordingly, undue reliance should not be placed
on forward looking statements.
Chief Executive Officer's STATEMENT
Resilient performance and strategic progress
The Group's resilient performance in the first half is
underpinned by our strategic and well executed focus on sourcing
and placing highly skilled, flexible STEM talent. With a backdrop
of macro-economic headwinds and an exceptional prior-year
performance, to have delivered the same scale of business well
above pre-pandemic levels whilst progressing our Technology
Improvement Programme in line with plan, on track and on budget, is
testament to the quality and commitment of our global teams.
Our specialism in both STEM skills and new ways of working
provides a differentiated proposition to clients and candidates and
a unique business model aligned to long-term structural
opportunities. With these complementary pillars as the Group's
bedrock, built over decades of industry experience, we have made
meaningful strides during the period in progressing our strategic
initiatives to build a more effective, customer-focussed,
responsible and purposeful business for long-term sustainable
growth.
Unique and robust business model through uncertain and volatile
markets
Through the first half of FY23, unprecedented market dynamics
that commenced at the end of the previous financial year, including
high inflation and rising costs of living coupled with low
unemployment, drove varying impacts across our global markets and
skill disciplines, resulting in an overall softer macro-economic
outcome. Whilst our clients paused to assess near-term outlook and
their own investment and expansion plans, which is reflected in our
lower new placement activity, Contract extensions remained robust,
including a 20% YoY increase in average contract length coupled
with steady pricing levels. This demonstrates clients' commitment
to retaining highly sought after skills in the face of supply
challenges and the quality of our business model.
Overall, the Group's net fee performance of GBP208.6 million
represents a 2% constant-currency decrease against peak prior year
levels (H1 FY22: 25% growth to GBP203.1m). The performance was
driven by our strategic focus on Contract, now representing 81% of
Group net fees, which increased 3% following growth across the
majority of our regions. Within this, our Employed Contractor Model
(ECM), whereby contractors are directly employed by SThree for the
duration of the contract, is an increasing trend and driver of our
performance, representing 45% of all Contract work undertaken by
the Group (H1 FY22: 43%). It continues to be the predominant model
in the US, and is fast-growing across Europe, which is why the
introduction of automation to ECM processes, enabling scale, is a
key aspect of the Technology Improvement Programme. This was offset
by our Permanent business, down 19% on a like-for-like basis,
reflecting global market conditions and the continuing strategic
investment into Contract in several markets.
Reported operating profit for the period was GBP38.1 million (H1
FY22: GBP44.6 million) driven by a resilient performance in net
fees but offset by higher operating expenses, up 8% YoY on a
reported basis, including the investment in the Technology
Improvement Programme (GBP2.6m expensed in the period) which
commenced in the second half of FY22. We continue to invest
modestly in headcount, up 5% YoY, targeted towards Contract in
specific niches, and the phased investment in our strategic
priorities is on track. We have seen some normalisation of
productivity from the exceptional levels experienced in H1 FY22 as
new hires come on board, however it remains 28% above pre-pandemic
levels achieved in H1 FY19, and once our Technology Improvement
Programme is rolled out across the whole organisation we expect
productivity to increase.
Building a world-class STEM talent partner through strategy and
execution
Our vision is unchanged: to be the #1 STEM talent partner in the
best STEM markets and in doing so, build a business with scale and
sustainable margins. The Group has achieved considerable success
toward this vision since its founding almost 40 years ago through
entrepreneurial drive and execution, helping candidates realise
their career ambitions and businesses succeed with access to the
skills they require.
Building on this heritage, we are now focused on preparing the
business with the right people, structures and processes to support
its next growth evolution. The strength of our business platform,
combining global scale with the flexibility of an agile business
able to deploy resources as appropriate, continues to provide
robust foundations from which we have advanced our disciplined and
focused strategy - centred on four strategic pillars: our Places,
our Platform, our People and our Position.
Following extensive assessment and planning in the prior year, I
am delighted with the progress we are making against all four as we
move through the execution phase. The opportunity to standardise
best practice, accelerate speed to productivity and drive
efficiencies through the organisation and work closer together as a
global team to the benefit of all our stakeholders is huge, and we
are excited about the prospects ahead.
Our Places - to be a leader in the markets we choose to
serve
With an overall strategy geared toward STEM and Contract, we
have a unique and targeted mix of skills and markets, which we
continuously assess through a data-driven approach. The markets and
disciplines we operate in are deliberate and strategic, and whilst
there may be variances across these over time as was the impact
from Life Science in this period offset by strong Engineering
performance, we have chosen our focus areas based on where we see
long-term structural opportunities. We concentrate efforts on those
niches with the highest demand for STEM specialists and limited
supply and where we can generate the highest returns.
We remain well-positioned in the world's top five STEM markets,
representing 74% of the GBP112 billion global opportunity, being
the USA, Germany, UK, Japan and Netherlands. In line with our
market investment model, we saw scope to make our operating
structure and regional presence less complex and more focussed in
those markets that offer the greatest growth opportunities for our
unique proposition. As part of this, we took the decision to
restructure our position in some markets, such as Singapore,
Ireland and Hong Kong, streamlining our focus further.
Additionally, we continued to apply pricing discipline in our
markets while inflationary pressures remained, strengthening our
commercial discipline to ensure contractor rates are in line with
market rates. Our focus continues to be on improving the quality of
our market insights to support our decision-making.
Our Platform - create a world class operational platform through
data, technology and infrastructure
We continue to make great progress with the strategic investment
in our Technology Improvement Programme, where we saw significant
scope to re-engineer, simplify and automate some of our most manual
and complex processes. We believe these improvements, along with
implementing and systemising best practice across the Group, will
create a platform of operational excellence and an environment
which will ultimately improve the experience and outcomes for our
candidates and clients.
The programme has moved from detailed planning into execution
mode, and in line with our previously announced plans, is on track
with budget. During the first half, we engaged with leaders across
all sections of the business at our design conference in London,
following which we completed phase one development and progressed
through business user testing with strong positive feedback.
We are in the final stages of preparation for market rollout
starting later in FY23, commencing with the US followed by Germany,
with other markets scheduled for FY24. We are excited about the
future as a modern and innovative business, with the potential to
leverage new technologies as appropriate and put ourselves in a
unique position to win.
Our People - find, develop and retain great people
Our commitment to creating an environment to support our people
whereby they can fulfil their potential is fundamental to the
success of the business. Building on achievements last year,
including the launch of our leadership behaviour framework, we
continue to focus our efforts on initiatives that will unite our
global teams closer together and ensure our culture moves forward
with the evolution of the business.
Key areas of focus during the first half of the year included
the continued rollout of our 'Leading with Purpose' programme, with
the ambition to upskill all people managers across the Group on the
four essential roles of leadership; continued assessment and
refinement of our compensation framework and improved reward
communication; implementation of new succession planning and career
pathways processes; and employee engagement surveys which attracted
81% engagement across the Group. We also bolstered our leadership
team in this area with the appointment of a new CPO, ensuring we
have the support and bandwidth in place to deliver on this
mission.
As we look ahead, we will continue to invest in capabilities,
tools and initiatives to attract and retain the best talent, such
as supporting hybrid working through our Future Office property
redesign programme. In H2 we will be focusing on our Future Culture
programme with global workshop events across regions to co-design
the Company's values with employees.
Our Position - leveraging our position in STEM to deliver
sustainable value to our candidates and clients
SThree enjoys a strong and established position in our core
markets, serviced through our 'House of Brands' approach with high
brand value in the niches we operate. As we look to leverage this
position to grow share in our target markets, we have further
enhanced our efforts in elevating our leadership position, building
further on our refreshed brand identity launched in the prior
year.
Key developments in the period include new thought leadership
campaigns centred on the future of the world of STEM and how global
megatrends, including decarbonisation and digitalisation, are
shaping our future. Findings from our research conducted across our
extensive STEM talent network, 'How the STEM World Evolves',
provide insights on topics such as flexible working expectations,
job security and pay risk appetite, job priorities and career
ambitions, ensuring we remain well attuned to the evolving
sentiment within our target markets.
Other areas of focus include our Elevate Careers programme,
which sees us work alongside community partners, clients, internal
stakeholders, and leadership, to create immediate action that will
build a more diverse, inclusive, and sustainable future, for
historically underrepresented STEM talent communities. We also
continue to refresh and upgrade our digital assets in the markets
in which we operate to drive brand awareness, as well as work
towards the closer alignment of marketing and sales in our
regions.
Our established position at the centre of STEM has enabled us to
deliver excellent results for our clients. Examples of our work
include:
-- Staffing support for a global renewable construction company
to build a major wind farm in the US to remove nearly 2 million
tons of carbon dioxide emissions annually. SThree was able
to deploy the right skilled talent quickly, thanks to extensive
niche sector expertise, which made it easier for the project
owner to keep momentum going even through design revisions.
The wind farm became operational on schedule and as planned,
demonstrating SThree's dedication to helping renewable energy
companies rise above expectations and succeed through challenges.
-- Delivering customer staffing solutions for one of the world's
largest medical devices company. The customer required quality
candidates with a quick turnaround in a highly competitive
market, often with few briefing details on the type of candidate
required. The SThree team ensured they became experts across
the niche roles required, including clinical, finance and
accounting, regulatory and IT engineering, and, with the help
of leveraging qualitative data, have been able to fill 693
positions, with 1 out of 2 interviews leading to a filled
role. The longevity working with this client and SThree's
position as a market expert by providing invaluable data has
resulted in a trusting and long-lasting partnership.
We remain committed to continuously improving and evolving the
way we interact with our candidate and client communities, ensuring
we continue to serve our stakeholders as a trusted STEM talent
partner.
Creating a sustainable future for everyone
SThree brings STEM professionals together to build a sustainable
future. From placing engineers who build wind turbines to providing
skilled people to enhance medical research, STEM talent continues
to play a vital role in tackling the most complex issues facing our
world.
Our commitment to our ESG goals remains strong as we navigate
the complexity of the multiple challenges we now operate within. As
the world continues to shift and change in response to complex
global issues, we continue to remain focused on delivering value to
all stakeholders. With clear targets and metrics, we hold ourselves
accountable to deliver the right outcomes for everyone, mitigating
social and climate risks, delivering social value and contributing
to business performance.
We remain focused on addressing the STEM skills gap through
diversifying the talent pipeline and contributing to social
mobility and equity in the STEM industries we partner with. To
demonstrate our commitment to building a diverse STEM talent
pipeline we made a donation of GBP86,000 to Women Who Code and have
delivered three events with them in H1 FY23 to support women to
progress their career in tech. Our Elevate Careers programme
provided developing, coaching and mentoring support to 1,853
existing and aspiring STEM professionals in the first half of
FY23.
In our FY22 Impact Report we announced our Science Based Target
initiative (SBTi) validated near-term and long-term targets to
achieve net zero before 2050. In FY23 we continue to make progress
to deliver a robust transition plan for the business which will be
detailed in our Annual Report and Accounts for FY23.
Further details of our net zero targets and wider ESG
commitments can be found in our Impact Report on our website. Below
details the progress we have made against our stated ESG targets
during the first half of the current year (2019 baseline year):
To positively To double the To reduce our To increase
impact 150,000 share of our scope 1 and 2 representation
lives by 2024 global clean emissions by of women in
energy business 77% and reduce leadership
by 2024 scope 3 emissions to 50/50
by 50% by 2030
----------------- ------------------------ ------------------------ ------------------------ --------------------
Progress 106,116 lives 88% growth in -44% reduction 33% women currently
positively impacted clean energy in scope 1, 2 in leadership
by SThree since business as of and 3 CO(2) emissions* positions
1 Dec 2019. 2022, tracking in 2022 from
ahead of expectations. 2019 (baseline)
----------------- ------------------------ ------------------------ ------------------------ --------------------
FY23 half 17,375 lives positively 29% growth in Continued to Launched our
year activities impacted: our renewables develop our transition talent accelerator
7,897 accessed business net plan with key programme,
decent work through fees in H1 FY23 actions to green Identify, with
SThree placements YoY. our office portfolio, the third group
414 people at 132% growth in minimise emissions of aspiring
risk of unemployment our renewable from travel and women leaders.
accessed our Career business net engage suppliers
Support Initiatives. fees since 2019 in scope 3 reductions.
1,853 existing (baseline)
and aspiring STEM
professionals
accessed Elevate
Careers; a STEM
skills development
programme to build
a diverse talent
pipeline
----------------- ------------------------ ------------------------ ------------------------ --------------------
Alignment Our People Our Places Our Platform Our People
to strategic Our Position
pillars
----------------- ------------------------ ------------------------ ------------------------ --------------------
Relevant SDG 4. Quality SDG 7. Affordable SDG 13. Climate SDG 10. Reduced
UN Sustainable Education and clean energy action inequalities
Development SDG 8. Decent SDG 13. Climate
Goals Work and economic action
growth SDG 17. Partnerships
SDG 10. Reduced for the goals
inequalities
----------------- ------------------------ ------------------------ ------------------------ --------------------
* Full SECR reporting is available in our FY22 Annual Report and
Accounts.
Current trading and outlook: poised for the medium-term
opportunity
We look ahead to our mid-term opportunities with optimism and
believe our focus and strategy is right for long-term success. Our
specialism in scarce STEM talent and new ways of working provides a
differentiated proposition to clients and candidates and a unique
business model aligned to long-term structural drivers.
Macro conditions continue to be varied as we enter the second
half, however contract extensions remain strong as our customers
seek to retain scarce skills to ensure they do not jeopardise
future growth prospects. Furthermore, in June we saw a modest
improvement in new placement activity, which itself was slightly
ahead of the second quarter average. It is too early to know
whether this is an improving trend, but we will continue to monitor
and respond to activity levels over the coming months.
We are trading in line with market expectations for the full
year, supported by strong contract extensions and robust pricing,
leading to continued resilience of our contractor order book. We
expect to deliver sector leading operating margins, notwithstanding
investment in both infrastructure and strategic headcount to ensure
we remain well positioned for when market conditions improve.
Group OPERATIONAL REVIEW
Overview
The Group has delivered a resilient net fee performance in the
first half of FY23 with net fees down 2% YoY against the strong
post-Covid peak performance in H1 of FY22.
Our Contract business, which is our main strategic area, grew
net fees by 3% YoY and now represents 81% of the Group net fees.
The contractor order book is flat YoY as strong extensions
performance has continued to offset the new placement performance
in a more challenging macro-economic environment. Permanent net
fees were down 19% YoY reflecting both global market conditions and
tough comparatives, particularly in Life Sciences, together with
our targeted investment towards Contract in specific markets.
From a skills perspective, most notable during the first half
has been the impact of reduced expenditure in the Global Life
Sciences sector, which has affected the performance of most
markets, with the greatest exposure and impact on our USA business.
As a result, we saw a decline in Life Sciences net fees of 21%
across the Group, though this was mostly offset by increases in
Technology, up 1%, and Engineering, up 17%.
Overall, Group reported operating profit was GBP 38.1 million
(H1 FY22: GBP44.6 million), down 22% YoY as productivity levels
have normalised since H1 FY22, with average headcount up 5% YoY,
and we commenced the investment in our Technology Improvement
Programme from the second half of last year.
The 5% increase in our average headcount reflects a 9% increase
in Contract headcount, partly offset by a 10% decline in Permanent
headcount as we continue to invest strategically in specific
markets. Period-end headcount declined 9% compared to the end of
FY22, including the reductions related to the restructure of our
Singapore, Hong Kong and Ireland businesses. Excluding these
countries, period-end headcount declined by 7%.
Update and evolution of 2024 ambitions
In line with our 2024 ambitions announced at our Capital Markets
Day in 2019 to deliver growth and value for our Group and all
stakeholders, we continue to make good progress in the period in
our journey to become the number one STEM talent provider in the
best global STEM markets. Our key achievements so far in this
financial period included:
-- We remain ahead of our peer group in all core geographies
on the net fee growth basis vs FY19.
-- Achieved an operating profit conversion ratio of 18.3% in
H1 FY23. Our underlying conversion ratio, both before and
after costs associated with the Technology Improvement Programme,
continues to considerably exceed our pre-Covid performance.
We remain committed to our ambition of achieving margins at
21% or higher in the mid to long term, however we expect current
macro-economic headwinds to dampen margin progression in the
short term.
-- Reduced our carbon emissions by 44% versus 2019.
-- Group-wide eNPS was 47 at H1 FY23; supported by DE&I networks
and the launch of the third cohort of the Identify leader
programme, our eNPS remains within the top 25% of a Professional
Services industry.
-- In the fight against climate change, we launched several actions
to educate and influence sustainable behaviours across the
business to ensure we make progress towards our SBTi net zero
targets which were announced in April 2023. We also grew our
renewables business by 29% YoY, to represent 9% of Group net
fees at H1 FY23.
-- Positively impacted over 17,375 lives through delivering recruitment
solutions and community programmes in H1 FY23 alone.
Variance
------------------------ ------------ ----------- ----------- ---------------------------
Reported Like-for-like
H1 FY23 H1 FY22 (1)
Group net fees % of Group (GBP'000) (GBP'000)
------------------------ ------------ ----------- ----------- ---------- ---------------
Geographical mix
(2)
DACH 36% 74,476 70,489 +6% -
USA 23% 49,364 51,683 -4% -11%
Netherlands (including
Spain) 19% 39,381 35,884 +10% +5%
Rest of Europe 17% 35,178 35,377 -1% -2%
Middle East & Asia 5% 10,192 9,620 6% +6%
------------------------ ------------ ----------- ----------- ---------- ---------------
Total 100% 208,591 203,053 +3% -2%
------------------------ ------------ ----------- ----------- ---------- ---------------
Skills mix
Technology 49% 101,712 96,339 +6% +1%
Engineering 24% 51,223 41,679 +23% +17%
Life Sciences 19% 38,958 46,293 -16% -21%
Other 8% 16,698 18,742 -11% -14%
------------------------ ------------ ----------- ----------- ---------- ---------------
Total 100% 208,591 203,053 +3% -2%
------------------------ ------------ ----------- ----------- ---------- ---------------
Service mix
Contract 81% 169,982 156,944 +8% +3%
Permanent 19% 38,609 46,109 -16% -19%
------------------------ ------------ ----------- ----------- ---------- ---------------
Total 100% 208,591 203,053 +3% -2%
------------------------ ------------ ----------- ----------- ---------- ---------------
(1) All YoY growth rates in this announcement are expressed at constant currency.
(2) In Q1 FY23, SThree has changed its reporting structure. The
new groupings are: DACH, Netherlands (including Spain, which is
managed from the Netherlands), Rest of Europe, USA and Middle East
& Asia.
Business mix
The Group is well diversified, both geographically and by the
skills we place across multiple sectors. Our top three countries
represent 73% of Group net fees, with Germany accounting for 31%,
USA 23% and the Netherlands 18% of Group net fees.
Our Contract business grew 3% YoY on a like-for-like basis, and
now represents 81% of Group Net Fees. Our Permanent business, which
now represents 19% of net fees, saw net fees decline 19% in the
period, reflecting market conditions across all regions, together
with the strategic transition from Permanent to Contract in some of
our key markets.
Technology, which represents 49% of net fees grew 1% YoY, while
Engineering (24% of net fees) grew 17%. These were offset by the
decline in Life Sciences of 21% due to reduced global expenditure
in that sector. Life Sciences now represents 19% of Group net
fees.
Operational review by reporting segment
DACH (36% of Group net fees)
Variance
-------- ---------------- -------------------------
Performance highlights H1 FY23 H1 FY22 Reported Like-for-like
------------------------------- -------- ---------------- --------- --------------
Revenue (GBP'000) 264,512 258,144 +2% -4%
Net fees (GBP'000) 74,476 70,489 +6% -
Average total headcount (FTE) 907 848 +7% n/a
NPS 58 57 +1pts n/a
------------------------------- -------- ---------------- --------- --------------
DACH is our largest region comprising businesses in Austria,
Germany and Switzerland, with Germany accounting for 88% of net
fees.
The region saw net fees remain flat YoY, with our Technology
business up 2% and Engineering business up 16% YoY. Technology was
driven by higher demand for roles within Cyber Security and
Software Development, while Engineering saw demand for Construction
Management.
DACH delivered growth in Contract net fees of 1% YoY, which was
broadly offset by Permanent net fees, which were down 3%.
Germany's net fees were down 1% YoY driven by Life Sciences
which was down 22% due to market conditions across that sector.
This performance was mostly offset by Technology, up 2% YoY, and
Engineering up 13%.
Switzerland saw net fees grow 10% and Austria net fees remained
flat.
Average headcount was up 7% YoY, with period-end headcount up
4%.
USA (23% of Group net fees)
Variance
-------- -------- -------------------------
Performance highlights H1 FY23 H1 FY22 Reported Like-for-like
------------------------------- -------- -------- --------- --------------
Revenue (GBP'000) 164,019 155,132 +6% -2%
Net fees (GBP'000) 49,364 51,683 -4% -11%
Average total headcount (FTE) 509 522 -3% n/a
NPS 51 55 -4pts n/a
------------------------------- -------- -------- --------- --------------
The USA is the world's largest specialist STEM staffing market
and our second-largest region on a net fee basis. It remains a key
area of focus for the Group, and we will continue to invest in the
region as we align our resources with the best long-term
opportunities.
USA saw net fees decline 11% YoY. Contract, which represents 86%
of net fees, was down 2% YoY driven by Life Sciences, down 16% YoY
in line with the market conditions for that sector. This was
partially offset by Engineering, up 23%, with increased demand for
roles within Project Management and Electrical Engineering.
Permanent, which represents 14% of net fees, declined 43% driven
by Life Sciences and due to the accelerated transition towards
Contract in FY22.
Average headcount was down 3% YoY, with period-end headcount
down 14%.
Netherlands (including Spain) (19% of Group net fees)
Variance
-------- -------- -------------------------
Performance highlights H1 FY23 H1 FY22 Reported Like-for-like
------------------------------- -------- -------- --------- --------------
Revenue (GBP'000) 177,497 150,711 +18% +13%
Net fees (GBP'000) 39,381 35,884 +10% +5%
Average total headcount (FTE) 436 365 +19% n/a
NPS 36 39 -3pts n/a
------------------------------- -------- -------- --------- --------------
Net fees for the region were up 5% YoY, with Contract up 7% and
Permanent down 19%.
The Netherlands, our largest country in the region which
accounts for 95% of net fees, saw net fees increase 3% YoY. Notable
performances were delivered in Engineering, up 4% YoY, with
increased demand for Process Engineers, Electrical Engineers and
Health and Safety advisors, as well as Technology up 3% YoY, with
higher demand for Project Managers, ERP Consultants, Data Engineers
and Data Sciences roles.
Spain saw strong growth of 63% in the first half driven by
Technology.
Average headcount for the region was up 19% YoY, with period-end
headcount up 11%.
Rest of Europe (17% of Group net fees)
Variance
-------- -------- -------------------------
Performance highlights H1 FY23 H1 FY22 Reported Like-for-like
------------------------------- -------- -------- --------- --------------
Revenue (GBP'000) 197,221 188,767 +4% +3%
Net fees (GBP'000) 35,178 35,377 -1% -2%
Average total headcount (FTE) 542 520 +4% n/a
NPS 53 55 -2pts n/a
------------------------------- -------- -------- --------- --------------
Rest of Europe comprises of businesses in the UK, Belgium,
France, Luxembourg and Ireland.
Net fees saw a decline of 2% YoY. Contract, which represents 94%
of net fees for the region, grew 5%, with Permanent declining 48%,
driven by both market conditions and the transition towards
Contract, particularly in the UK.
The UK, our largest country in the region, saw net fees remain
flat, driven by Engineering up 3%, as demand increased for roles
within Project and Construction Management, Electrical and
Mechanical Engineering.
Belgium saw net fees up 15%, France down 8% and Luxembourg down
35%.
Average headcount for the region was up 4% YoY, with period-end
headcount down 10%.
Middle East & Asia (5% of Group net fees)
Variance
-------- -------- -------------------------
Performance highlights H1 FY23 H1 FY22 Reported Like-for-like
------------------------------- -------- -------- --------- --------------
Revenue (GBP'000) 21,962 19,495 +13% +10%
Net fees (GBP'000) 10,192 9,620 +6% +6%
Average total headcount (FTE) 189 200 -6% n/a
NPS 24 29 -5pts n/a
------------------------------- -------- -------- --------- --------------
Our Middle East & Asia business principally includes Japan,
UAE and Singapore, and accounts for 5% of Group net fees.
Net fees were up 6% YoY, with Contract up 52% and Permanent down
10%. Japan, which represents 43% of the region, was up 2% YoY
driven by Engineering due to demand for roles within Renewable
Energy.
Strong performance in UAE with net fees up 46% driven by
Engineering.
Average headcount was down 6% YoY, with period-end headcount
down 6%.
Chief financial officer's REVIEW
The Group has delivered a resilient net fee performance in the
first half of FY23, despite the ongoing macro-economic
uncertainties and strong prior year comparatives. The performance
is supported by the strength of our well-established strategy,
focused on STEM and flexible talent .
Income statement
On a reported basis revenue for the half year was up 7% [1] to
GBP825.2 million (H1 FY22: reported GBP772.2 million) while net
fees increased by 3% to GBP208.6 million (H1 FY22 GBP203.1
million). The strengthening of our two main trading currencies, the
US Dollar and the Euro, against Sterling during the year, increased
the total net fees by GBP9.1 million. Therefore, when presented on
a constant currency basis, the net fees decreased by 2% YoY.
Net fee growth in our Contract business was driven by continued
demand from clients for candidates with STEM skills across most of
regions, with net fee growth of 3%. This was led by the Netherlands
region, which was up 7%, Rest of Europe, up 5%, DACH, up 1%, Middle
East & Asia, up 52%, while USA was down 2%, primarily due to
its exposure to Life Sciences. The majority of the growth was seen
in Engineering, which was up 20% YoY, and Technology, up 3%, with
Life Sciences down 14% reflecting global sector conditions. Our ECM
proposition also continued to deliver encouraging performance and
was up by 6% YoY. Group Contract net fees as a percentage of
Contract revenue [2] remained flat YoY at 21.7% (H1 FY22: 21.7%),
and at the end of the year Contract represented 81% of the Group
net fees in the year (H1 FY22: 77%).
The contractor order book [3] remained flat YoY and continues to
provide good visibility into the remainder of FY23.
Permanent net fee income was down 19% reflecting market
conditions across all regions, together with the planned focus
towards Contract, particularly in the USA and UK. Our largest
Permanent market, DACH, reported a decline of 3%. Netherlands
region was down 19%, Rest of Europe down 48%, USA down 43%, and
Middle East & Asia was down by 10%. Permanent average fee
increased by 5% YoY in the period, with average permanent fee
margin (net fees as a percentage of salary) now at 26.6% (H1 FY22:
25.1%).
Operating expenses increased by 8% YoY on a reported basis,
amounting to GBP170.5 million (H1 FY22: GBP158.4 million),
resulting from increased personnel costs as average headcount grew
5% compared to H1 FY22, together with GBP2.6 million expensed
investment in the Technology Improvement Programme which commenced
in H2 FY22.
The reported operating profit was GBP38.1 million (H1 FY22:
GBP44.6 million), down 22% YoY in constant currency while the Group
operating profit conversion ratio reduced as expected, to 18.3% (H1
FY22: 22%), as productivity normalised from the exceptional levels
achieved in H1 FY22 and we commenced the investment in our
Technology Improvement Programme. Operating profit conversion ratio
would have been 19.5% were it not for amount expensed on the
programme as noted above. The net currency movements versus
Sterling were favourable to the operating profit, providing a
GBP3.3 million benefit.
Net finance income
The Group received net finance income of GBP0.4 million as
compared to net finance costs of GBP0.4 million in the previous
year. This was driven by significantly higher interest rates
applied to the Group's bank deposits.
Income tax
The total tax charge for the half year on the Group's profit
before tax was GBP10.8 million (H1 FY22: GBP12.3 million),
representing an estimated full-year effective tax rate (ETR) of
28.1% (H1 FY22: 27.8%). The tax rate is higher in the current
period mainly due to the increase in the UK tax rate to 25% from 1
April 2023. The Group's ETR varies depending on the mix of taxable
profits by territory, non-deductibility of the accounting charge
for LTIPs and other one-off tax items.
Overall, the reported profit before tax was GBP38.5 million,
down 20% YoY in constant currency and down 13% on a reported basis
(H1 FY22: GBP44.3 million).
The reported profit after tax was GBP27.7 million, down 21% YoY
in constant currency and down 13% on a reported basis (H1 FY22:
GBP32.0 million).
Earnings per share (EPS)
The reported EPS was 21.0 pence (H1 FY22: 24.1 pence). The YoY
movement is attributable to the slowdown in trading performance,
overall stable Group ETR, and partially offset by a decrease of 0.7
million in the weighted average number of shares. Reported diluted
EPS was 20.4 pence (H1 FY22: 23.4 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 and the
settlement of vested arrangements.
Dividends
The Board monitors the appropriate level of dividend, taking
into account achieved and expected trading of the Group, together
with its balance sheet position. The Board aims to offer
shareholders long-term ordinary dividend growth within a targeted
dividend cover range of 2.5x to 3.0x through the cycle.
The Board proposes to pay an interim dividend of 5.0 pence (H1
FY22: 5.0 pence), amounting to c.GBP6.6 million in total. This will
be paid on 8 December 2023 to shareholders on record on 10 November
2023. The dividend will be paid from distributable reserves.
Liquidity management
In H1 FY23, cash generated from operations was GBP55.1 million
(H1 FY22: GBP24.2 million). The increase was primarily driven by
GBP39.1 million release in working capital, as the rate of new
placement activity slowed but was partially offset by Contract
extensions, partially offset by GBP8.3 million reduction in EBITDA.
Income tax paid decreased to GBP10.2 million (H1 FY22: GBP15.1
million) in line with the trading performance across our
markets.
Capital expenditure increased to GBP3.0 million (H1 FY22: GBP1.9
million), primarily driven by the Group-wide digital transformation
programme and related IT hardware costs. The capital expenditure
also included costs of leasehold improvements and fitting out
certain of our office portfolio.
The Group paid GBP7.7 million in rent (principal and interest
portion) (H1 FY22: GBP7.0 million). Net interest income (excluding
interest on lease payments) was GBP0.6 million (H1 FY22: net
interest cost GBP0.1 million) during the period. The Group spent
GBP10.0 million (H1 FY22: GBP4.7 million) on the purchase of its
own shares to satisfy existing employee share incentive schemes.
Cash inflows of GBP0.1 million (H1 FY22: GBP0.3 million) were
generated from Save As You Earn employee scheme.
Dividends paid to equity holders were GBP6.6 million (H1 FY22:
GBP4.0 million). The final dividend of GBP13.9 million for the year
ended 30 November 2022 was paid subsequently to the half year, on 9
June 2023.
Foreign exchange had a positive impact of GBP2.6 million (H1
FY22: negative impact of GBP0.8 million).
Overall, the underlying cash performance in the first half of
FY23 was very strong, reflecting primarily improved working capital
partially offset by buyback spend. We started the year with net
cash of GBP65.4 million and closed the period with net cash of
GBP72.4 million.
Accessible funding
The Group's capital allocation priorities are financed mainly by
retained earnings, cash generated from operations, and a GBP50.0
million Revolving Credit Facility (RCF). This has remained undrawn
during the period, but any funds borrowed under the RCF would bear
a minimum annual interest rate of 1.2% above the benchmark Sterling
Overnight Index Average (SONIA). The Group also maintains a GBP30.0
million accordion facility as well as a substantial working capital
position reflecting net cash due to SThree for placements already
undertaken.
During the current period, the Group did not draw down any of
the above credit facilities (H1 FY22: GBPnil).
On 31 May 2022, the Group had total accessible liquidity of
GBP125.6 million, made up of GBP72.4 million in net cash (H1 FY22:
GBP48.4 million), the GBP50.0 million RCF (undrawn at the half
year), and a GBP5.0 million overdraft facility of which GBP1.8
million was in use at the half-year end.
PRINCIPAL RISKS AND UNCERTAINTIES
Risk management is a key part of our business, values and
culture. Effective risk management enables us to both protect the
value of our business and to proactively manage threats to the
delivery of strategic and operational objectives, while enhancing
the realisation of opportunities.
Our approach to risk management is flexible to ensure that it
remains relevant at all levels of the business, and dynamic to
ensure we can be responsive to changing business/macro-economic
conditions.
During FY23, there has been continued focus on the principal
risks with oversight of activities and controls to further mitigate
these risks. Key risk indicators, introduced in FY22, are monitored
to ensure any negative changes are proactively addressed. There
continues to be positive progress in risk mitigation activities. We
continue to monitor the ongoing broader macro-economic situation
and assess the impact that this could have on principal risks for
the group, for example:
-- Commercial relationship risk due to potential for increase
in payment terms and bad debt;
-- People retention risk as employees look for roles offering
higher salaries in reaction to cost of living;
-- Contractual liability risk as clients look to transfer financial
exposures to third parties.
Climate change remains an emerging risk for the Group, with an
updated assessment of materiality being undertaken during FY23.
Where climate change impacts or is impacted by a principal risk,
these considerations have been embedded into that risk, ensuring
continuous discussion and monitoring.
The Board has recently agreed that artificial intelligence, as
well as being an opportunity, should be monitored as an emerging
risk for the Group as the risk has the potential to impact across
different areas of the business, strategy and current principal
risks. A full assessment of this emerging risk will be completed
during FY23 and reported as part of full year risk review.
Other than the above, the principal risks and uncertainties that
the Company expects to be exposed to in the second half of FY23 are
substantially the same as those described in the 'Risk management'
section of SThree plc Annual Report and Accounts FY22 (pages
106-113). Those principal risks which have changed from FY22
year-end are detailed below. All other principal risks for the
Group: Future growth; Contractual liability; People; Talent
acquisition and retention; Data privacy; Cyber security; Regulatory
compliance, and Health and safety remain unchanged but with
positive movement on mitigating activities.
Risk Mitigation Change from FY22 year-end
Macro-economic environment Increase in net risk due
Rapid changes in the * Strategically diversified business - geographically, to external environment.
macro-economic environment by sector and by product.
could result in SThree
suffering financial
exposure and/or loss. * Strategic focus on STEM markets which are less
sensitive to economic cycles.
* Strategic focus on Contract market which is more
resilient in uncertain economic conditions than
Permanent and provides a counter-cyclical cash hedge
working capital release with each contract finisher.
* Regular cycle of review of Country business
performance, targets and macro-economic risks
------------------------------------------------------------ ---------------------------
Strategic change Decrease in net risk due
management * Priority of investment decisions and approval of to enhanced project
The inability to business cases through project governance structures. oversight structure and
effectively manage and governance to ensure
implement strategic continued visibility and
change, resulting in * Full Executive Committee and Board oversight of discussion of strategic
poorly implemented portfolio dashboard showing Red, Amber, Green (RAG) projects.
projects, could lead to status, timeline, spend and escalation of risks and
wasted resource and/or issues.
adverse financial impact
and ability to execute
strategy impacting future
growth or the Group.
------------------------------------------------------------ ---------------------------
Commercial relationship Increase in gross risk due
SThree may suffer * Robust payment terms oversight through a credit risk external macro-economic
financial loss through bad dashboard. environment.
debt write off or working
capital impairment
due to inappropriate * Regular review of high-risk customers with risk
credit terms agreed when mitigation steps being managed by our credit risk
entering into commercial analysts.
relationship/s with
either direct customers or
intermediaries if they are * Contact review and payment terms escalation process.
unable to fulfil their
obligation.
* Workshops with senior business leaders to embed
processes and responsibilities.
------------------------------------------------------------ ---------------------------
The materialisation of our principal risks, either separately or
in combination, could have an adverse effect on the implementation
of our strategic priorities, our business model, financial
performance, cash flows, liquidity, shareholder value and other key
stakeholders.
Please refer to our FY22 Annual Report and Accounts for further
detail on our risks, available at
www.sthree.com/en/investors/financial-results/ .
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge:
a) the Condensed Consolidated Interim Financial Statements of
the Group have been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted for use in the United Kingdom
and give a true and fair view of the assets, liabilities, financial
position and profit or loss of the undertakings included in
the consolidation as a whole for the period ended 31 May 2023
as required by the Disclosure Guidance and Transparency Rules
sourcebook of the UK FCA (DTR) 4.2.4R; and
b) the half-year results announcement includes a fair review of
the significant events during the six months ended 31 May 2023
and a description of the principal risks and uncertainties
for the remaining six months of the year ending 30 November
2023;
c) there have been no significant individual related party transactions
during the first six months of the financial year; and
d) there have been no significant changes in the Group's related
party relationships from those reported in the FY22 Annual
Report and Accounts for SThree plc and its subsidiaries for
the year ended 30 November 2022.
The Directors of SThree plc are listed in the SThree plc Annual
Report and Accounts for 30 November 2022. A list of the current
Directors is maintained on the Group's website www.sthree.com .
The Group's Condensed Consolidated Interim Financial Statements,
and related notes, were approved by the Board and authorised for
issue on 24 July 2023 and were signed on its behalf by:
Timo Lehne Andrew Beach
Chief Executive Officer Chief Financial Officer
24 July 2023
Condensed consolidated income statement
for the six months ended 31 May 2023
(Unaudited) (Unaudited)
Six months Six months
ended ended
GBP'000 Note 31 May 2023 31 May 2022
Continuing operations
Revenue 2 825,211 772,249
Cost of sales (616,620) (569,196)
------------------------------------------------- ----- ------------- -------------
Net fees 2 208,591 203,053
Administrative expenses 3 (168,232) (157,290)
Impairment losses on financial assets (2,238) (1,118)
------------------------------------------------- ----- ------------- -------------
Operating profit 38,121 44,645
Finance income 691 15
Finance costs (321) (366)
------------------------------------------------- ----- ------------- -------------
Profit before income tax 38,491 44,294
Income tax expense 4 (10,816) (12,314)
------------------------------------------------- ----- ------------- -------------
Profit for the period attributable to
the owners of the Company 27,675 31,980
------------------------------------------------- ----- ------------- -------------
Earnings per share attributable to shareholders
pence
------------------------------------------------- ----- ------------- -------------
Total Group
Basic 5 21.0 24.1
Diluted 5 20.4 23.4
------------------------------------------------- ----- ------------- -------------
The accompanying notes form an integral part of these Condensed
Consolidated Interim Financial Statements.
Condensed consolidated statement of comprehensive income
For the six months ended 31 May 2023
(Unaudited) (Unaudited)
Six months Six months
ended ended
GBP'000 31 May 2023 31 May 2022
----------------------------------------------- ------------ ---------------
Profit for the period 27,675 31,980
Other comprehensive (loss)/income:
Items that may be subsequently reclassified
to income statement
Exchange differences on retranslation
of foreign operations (2,117) 3,018
Other comprehensive (loss)/income for
the period (net of tax) (2,117) 3,018
------------------------------------------------ ------------ ---------------
Total comprehensive income for the period
attributable to owners of the Company 25,558 34,998
------------------------------------------------ ------------ ---------------
The accompanying notes form an integral part of these Condensed
Consolidated Interim Financial Statements.
Condensed consolidated statement of financial position
as at 31 May 2023
(Unaudited) (Audited)
As at As at
GBP'000 Note 31 May 2023 30 November 2022
------------------------------------------------------ ------- ------------- ----------------------
ASSETS
Non-current assets
Property, plant and equipment 30,593 35,249
Intangible assets 6 2,693 846
Deferred tax assets 4,955 4,616
Total non-current assets 38,241 40,711
------------------------------------------------------- ------- ------------- ----------------------
Current assets
Trade and other receivables 324,216 363,884
Cash and cash equivalents 7 74,186 65,809
Total current assets 398,402 429,693
------------------------------------------------------- ------- ------------- ----------------------
Total assets 436,643 470,404
------------------------------------------------------- ------- ------------- ----------------------
EQUITY AND LIABILITIES
Equity attributable to owners of the Company
Share capital 8 1,346 1,345
Share premium 8 38,354 38,239
Other reserves (8,337) (802)
Retained earnings 166,513 161,610
------------------------------------------------------- ------- ------------- ----------------------
Total equity 197,876 200,392
------------------------------------------------------- ------- ------------- ----------------------
Current liabilities
Bank overdraft 7, 10 1,775 423
Trade and other payables 191,374 216,842
Lease liabilities 9 9,463 11,102
Provisions 6,080 7,871
Current tax liabilities 8,123 7,391
------------------------------------------------------- ------- ------------- ----------------------
Total current liabilities 216,815 243,629
------------------------------------------------------- ------- ------------- ----------------------
Non- current liabilities
Lease liabilities 9 19,388 22,600
Provisions 2,564 3,783
------------------------------------------------------- ------- ------------- ----------------------
Total non-current liabilities 21,952 26,383
------------------------------------------------------- ------- ------------- ----------------------
Total liabilities 238,767 270,012
------------------------------------------------------- ------- ------------- ----------------------
Total equity and liabilities 436,643 470,404
------------------------------------------------------- ------- ------------- ----------------------
The accompanying notes form an integral part of these Condensed Consolidated Interim Financial
Statements.
Condensed consolidated statement of changes in equity
for the six months ended 31
May 2023
Total
equity
Fair value attributable
Capital Currency reserve to owners
Share Share redemption Capital Treasury translation of equity Retained of the
GBP'000 Notes capital premium reserve reserve reserve reserve investments earnings Company
--------------------- ------ ------------- ------------- ------------- ------------- ------------- ------------- ------------ ------------- ----------------
Balance as at 1
December 2021
(audited) 1,337 35,466 172 878 (3,367) (2,354) (12) 126,033 158,153
Profit for the
period - - - - - - - 31,980 31,980
Other comprehensive
loss for
the period - - - - - 3,018 - - 3,018
--------------------- ------ ------------- ------------- ------------- ------------- ------------- ------------- ------------ ------------- ----------------
Total comprehensive
income for
the period - - - - - 3,018 - 31,980 34,998
Dividends paid to
equity holders 11 - - - - - - - (3,965) (3,965)
Dividends payable to
equity holders 11 - - - - - - - (10,636) (10,636)
Distributions to
tracker
shareholders - - - - - - - (7) (7)
Settlement of vested
tracker
shares - - - - - - - 183 183
Settlement of
share-based
payments 8 1 293 - - 2,850 - - (2,850) 294
------------- ------------- ------------- ------------- ------------- ------------- ------------ ------------- ----------------
Purchase of shares
by Employee
Benefit Trust 8 - - - - (4,718) - - - (4,718)
------------- ------------- ------------- ------------- ------------- ------------- ------------ ------------- ----------------
Credit to equity for
equity-settled
share-based
payments - - - - - - - 2,236 2,236
--------------------- ------ ------------- ------------- ------------- ------------- ------------- ------------- ------------ ------------- ----------------
Total movements in
equity 1 293 - - (1,868) 3,018 - 16,941 18,385
--------------------- ------ ------------- ------------- ------------- ------------- ------------- ------------- ------------ ------------- ----------------
Balance as at 31 May
2022 (unaudited) 1,338 35,759 172 878 (5,235) 664 (12) 142,974 176,538
--------------------- ------ ------------- ------------- ------------- ------------- ------------- ------------- ------------ ------------- ----------------
Balance as at 1
December 2022
(audited) 1,345 38,239 172 878 (6,581) 4,742 (13) 161,610 200,392
--------------------- ------ ------------- ------------- ------------- ------------- ------------- ------------- ------------ ------------- ----------------
Profit for the
period - - - - - - - 27,675 27,675
Other comprehensive
loss for
the period - - - - - (2,117) - - (2,117)
--------------------- ------ ------------- ------------- ------------- ------------- ------------- ------------- ------------ ------------- ----------------
Total comprehensive
income for
the period - - - - - (2,117) - 27,675 25,558
Dividends paid to
equity holders 11 - - - - - - - (20,542) (20,542)
Settlement of vested
tracker
shares - - - - 30 - - (15) 15
Settlement of
share-based
payments 8 1 115 - - 4,552 - - (4,767) (99)
Purchase of shares
by Employee
Benefit Trust 8 - - - - (10,000) - - - (10,000)
Credit to equity for
equity-settled
share-based
payments - - - - - - - 2,552 2,552
--------------------- ------ ------------- ------------- ------------- ------------- ------------- ------------- ------------ ------------- ----------------
Total movements in
equity 1 115 - - (5,418) (2,117) - 4,903 (2,516)
--------------------- ------ ------------- ------------- ------------- ------------- ------------- ------------- ------------ ------------- ----------------
Balance as at 31 May
2023 (unaudited) 1,346 38,354 172 878 (11,999) 2,625 (13) 166,513 197,876
--------------------- ------ ------------- ------------- ------------- ------------- ------------- ------------- ------------ ------------- ----------------
The accompanying notes form an integral part of these Condensed Consolidated Interim Financial
Statements.
Condensed consolidated statement of cash flows
for the six months ended 31 May 2023
---------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
Six months ended Six months ended
GBP'000 Note 31 May 2023 31 May 2022
------------------------------------------------------------------ ----- ----------------- -----------------
Cash flows from operating activities
Profit before tax 38,491 44,294
Adjustments for:
Depreciation and amortisation charge 8,001 8,468
Loss on disposal of property, plant and equipment 112 11
Impairment of intangible assets - 499
Loss on disposal of intangible assets - 1,206
Finance income (691) (15)
Finance costs 321 366
Non-cash charge for share-based payments 2,552 2,236
------------------------------------------------------------------ ----- ----------------- -----------------
Operating cash flows before changes in working capital and provisions 48,786 57,065
Decrease/(increase) in receivables 28,622 (37,514)
(Decrease)/increase in payables (19,603) 3,503
(Decrease)/increase in provisions (2,727) 1,184
------------------------------------------------------------------ ----- ----------------- -----------------
Cash generated from operations 55,078 24,238
Interest received 691 15
Income tax paid - net (10,230) (15,129)
------------------------------------------------------------------ ----- ----------------- -----------------
Net cash generated from operating activities 45,539 9,124
------------------------------------------------------------------------- ----------------- -----------------
Cash flows from investing activities
Purchase of property, plant and equipment (1,024) (1,873)
Purchase of intangible assets 6 (1,993) -
Net cash used in investing activities (3,017) (1,873)
------------------------------------------------------------------------- ----------------- -----------------
Cash flows from financing activities
Interest paid (321) (366)
Lease principal payments 9 (7,398) (6,722)
Proceeds from exercise of share options 8 116 294
Purchase of shares by Employee Benefit Trust 8 (10,000) (4,718)
Dividends paid to equity holders 11 ( 20,542 ) (3,965)
Net cash used in financing activities (38,145) (15,477)
------------------------------------------------------------------ ----- ----------------- -----------------
Net increase/(decrease) in cash and cash equivalents 4,377 (8,226)
Cash and cash equivalents at beginning of the period 65,386 57,502
Exchange gains/(losses) relating to cash and cash equivalents 2,648 (873)
------------------------------------------------------------------ ----- ----------------- -----------------
Net cash and cash equivalents at end of the period 7 72,411 48,403
------------------------------------------------------------------ ----- ----------------- -----------------
The accompanying notes form an integral part of these Condensed
Consolidated Interim Financial Statements.
Notes to the CONDENSED CONSOLIDATED Financial REPORT
for the six months ended 31 May 2023
1. basis of preparation and Accounting policies
Basis of preparation
SThree plc is a public limited company listed on the London
Stock Exchange and incorporated and domiciled in the United Kingdom
and registered in England and Wales. Its registered office is 1st
Floor, 75 King William Street, London, EC4N 7BE.
These Condensed Consolidated Financial Statements (Interim
Financial Report) as at and for the six months ended 31 May 2023
comprise SThree plc (the Company) and its subsidiaries (referred to
as the Group).
The Group's Interim Financial Report has been prepared in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting' as adopted for use in the United Kingdom (UK),
and the Disclosure Guidance and Transparency Rules sourcebook of
the UK's Financial Conduct Authority. It should be read in
conjunction with the SThree plc' Annual Report and Accounts FY22,
prepared in accordance with UK-adopted International Accounting
Standards and with the requirements of the Companies Act 2006 as
applicable to companies reporting under those standards.
The Interim Financial Report does not constitute statutory
accounts as defined by section 434 of the Companies Act 2006. A
copy of the statutory accounts for the year ended 30 November 2022
has been delivered to the Registrar of Companies. The auditors
reported on those accounts; their report was unqualified, did not
draw attention to any matters by way of emphasis and did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
The Interim Financial Report of the Group was approved by the
Board for issue on 21 July 2023.
Going concern
The financial information contained in this Interim Financial
Report has been prepared on a going concern basis.
The Directors have reviewed the Group's cash flow forecasts,
considered the assumptions contained in the reforecast, and
considered associated principal risks which may impact the Group's
performance in the 12 months from the date of approval of this
Interim Financial Report and in the period immediately
thereafter.
At 31 May 2023, the Group had no debt except for lease
liabilities of GBP28.9 million and bank overdraft. Credit
facilities relevant to the review period comprise a committed
GBP50.0 million RCF (with the expiry date of June 2026, with an
extension option to 2027) and an uncommitted GBP30.0 million
accordion facility, both jointly provided by HSBC and Citibank.
These facilities remained undrawn on 31 May 2023. A further
uncommitted GBP5.0 million bank overdraft facility is also held
with HSBC of which GBP1.8 million was used at the period end.
In addition, the Group has GBP72.4 million of net cash and cash
equivalents available to fund its short-term needs, as well as a
substantial working capital position, reflecting net cash due to
SThree for placements already undertaken.
Despite the macro-economic uncertainties that currently exist,
the Group has delivered a resilient net fee performance in the
first half of FY23, in line with expectations, and supported by the
strength of its well-established strategy. In addition, the Group's
targeted investment in talent and digital infrastructure is
progressing as planned, positioning the Group to scale with
sustainable margins, in line with the 2024 ambitions.
Based on the analysis performed, the Directors have formed a
judgement that at the time of approving the Interim Financial
Report, there are no plausible downside scenarios that would cause
an issue for the Group's going concern status. The Directors have
therefore concluded that the Group has adequate resources to
continue in operational existence for the period through to August
2024.
Accounting policies
The accounting policies used in the preparation of the Condensed
Consolidated Financial Statements are consistent with those applied
in the previous financial year and corresponding interim reporting
period, except for the adoption of new and amended standards
effective as of 1 December 2022 as set out below.
New and amended standards effective in FY23 and adopted by the
Group
The following amendment to the accounting standards, issued by
the IASB and endorsed by the UK and EU, have been adopted by the
Group which became applicable as of 1 December 2022. The Group did
not have to change its accounting policies or make retrospective
adjustments as a result of adopting these amended standards.
- Reference to the Conceptual Framework (amendments to IFRS
3)
- Property, plant and equipment - proceeds before intended use
(amendments to IAS 16).
- Onerous contracts - cost of fulfilling a contract (amendments
to IAS 37)
- Annual improvements to IFRS 2018-2020 (amendments to the
following standards: IFRS 1, IFRS 9, IFRS 16 and IAS 41).
New and amended standards that are applicable to the Group but
not yet effective
As at the date of authorisation of this Interim Financial
Report, the following amendments to existing standards were in
issue but not yet effective. Subject to the endorsement by the
UKEB, these changes are effective for the period beginning 1
January 2023. These amendments are not expected to have a material
impact on the Group in the current or future periods.
- Disclosure of Accounting Policies (Amendments to IAS 1
Presentation of Financial Statements and IFRS Practice Statement
2);
- Definition of Accounting Estimates (Amendments to IAS 8
Accounting policies, Changes in Accounting Estimates and Errors);
and
- Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12 Income Taxes).
- IFRS 17 Insurance contracts, a standard that is ultimately
intended to replace IFRS 4.
The Group has not early adopted any standard, interpretation or
amendment that has been issued but is not yet effective.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of the Interim Financial Report includes the use
of estimates and assumptions. Although the estimates used are based
on the management's best information about current circumstances
and future events and actions, actual results may differ from these
estimates.
In preparing this Interim Financial Report, the judgements made
by management in applying the Group's accounting policies and the
key sources of estimation uncertainty were the same as those
applied in the Group's FY22 Annual Report and Accounts.
Alternative Performance Measures
The Group presents certain measures of financial performance or
financial position in the Interim Financial Report that are not
defined or specified according to IFRS. These measures, referred to
as APMs, are defined and reconciled to IFRS in note 16 to the
Condensed Consolidated Financial Statements, and were prepared on a
consistent basis for all periods presented.
2. operating segments
The Group's operating segments are established on the basis of
those components of the Group that are regularly reviewed by the
Group's chief operating decision-making body, in deciding how to
allocate resources and in assessing performance. The Group's
business is considered primarily from a geographical
perspective.
The Directors have determined the chief operating
decision-making body to be the Executive Committee made up of the
Chief Executive Officer, the Chief Financial Officer, the Chief
Operating Officer and the Chief People Officer, with other senior
management attending via invitation.
In the current financial period, the Group has changed its
reporting segments to reflect a new management structure. Going
forward it will segment the business into the following five
reportable regions: DACH, Netherlands (including Spain, which is
managed from the Netherlands), Rest of Europe, USA and Middle East
& Asia. The comparative numbers have been restated in
accordance with this new reporting structure.
The Group will continue to present separately the net fees of
its five key markets: Germany, the Netherlands, USA, the UK and
Japan. In addition, what it was previously referred to sectors, has
now been renamed as 'skills mix'. Finally, Contract and Permanent
are from now on referred to as 'service mix'.
DACH region comprises Austria, Germany and Switzerland. Rest of
Europe comprises the UK, Belgium, France, Luxembourg and Ireland,
and Middle East & Asia includes Japan, UAE and Singapore.
Countries aggregated into DACH and separately into Rest of the
Europe have similar economic risks and prospects, i.e. they are
expected to generate similar long-term average gross margins over
the long-term, and are similar in each of the following areas:
- the nature of the services (recruitment/candidate
placement);
- the methods used in which they provide services to clients
(independent contractors, employed contractors and permanent
candidates); and
- the class of candidates (candidates who are placed with
SThree's clients, represent skill sets in Science, Technology,
Engineering and Mathematics disciplines).
The Group's management reporting and controlling systems use
accounting policies that are the same as those described in these
financial statements and in the Group's FY22 annual financial
statements.
Revenue and net fees by reportable segment
The Group assesses the performance of its operating segments
through a measure of segment profit or loss which is referred to as
'net fees' in the management reporting and controlling systems. Net
fees is the measure of segment profit comprising revenue less cost
of sales.
Revenue (unaudited) Net fees (unaudited)
Six months ended Six months ended
Restated Restated
GBP'000 31 May 2023 31 May 2022 31 May 2023 31 May 2022
------------------------ ------------ ------------ ------------ ------------
DACH 264,512 258,144 74,476 70,489
Rest of Europe 197,221 188,767 35,178 35,377
Netherlands (including
Spain) 177,497 150,711 39,381 35,884
USA 164,019 155,132 49,364 51,683
Middle East & Asia 21,962 19,495 10,192 9,620
------------------------ ------------ ------------ ------------ ------------
825,211 772,249 208,591 203,053
------------------------ ------------ ------------ ------------ ------------
Split of revenue from contracts with customers
The Group derives revenue from the transfer of services over
time and at a point in time in the following geographical
regions:
For the six months Netherlands Middle
ended 31 May 2023 Rest (including East &
GBP '000 DACH of Europe Spain) USA Asia Total
Timing of revenue
recognition
Over time 243,756 195,014 173,260 157,188 15,743 784,961
At a point in time 20,756 2,207 4,237 6,831 6,219 40,250
-------------------- -------- ----------- ------------ -------- -------- --------
264,512 197,221 177,497 164,019 21,962 825,211
-------------------- -------- ----------- ------------ -------- -------- --------
For the six months Netherlands
ended 31 May 2022 (including Middle
(restated) Rest Spain) East &
GBP '000 DACH of Europe USA Asia Total
-------------------- -------- ----------- ------------ -------- -------- --------
Timing of revenue
recognition
Over time 237,556 184,527 146,400 143,993 12,433 724,909
At a point in time 20,588 4,240 4,311 11,139 7,062 47,340
-------------------- -------- ----------- ------------ -------- -------- --------
258,144 188,767 150,711 155,132 19,495 772,249
-------------------- -------- ----------- ------------ -------- -------- --------
Major customers
In the six months ended 31 May 2023 (H1 FY22: none) no single
customer generated more than 10% of the Group's revenue.
Other information
The Group's revenue from external customers, its net fees and
information about its segment assets (non-current assets excluding
deferred tax assets) by key location are detailed below:
Revenue (unaudited) Net fees (unaudited)
Six months ended Six months ended
GBP'000 31 May 2023 31 May 2022 31 May 2023 31 May 2022
------------- ------------ ------------ ------------ ------------
Germany 229,247 225,859 65,740 62,838
Netherlands 170,103 146,137 37,252 34,620
USA 164,019 155,132 49,364 51,683
UK 128,305 123,818 21,938 22,185
Japan 4,989 5,130 4,380 4,475
RoW(1) 128,548 116,173 29,917 27,252
------------- ------------ ------------ ------------ ------------
825,211 772,249 208,591 203,053
------------- ------------ ------------ ------------ ------------
(1) RoW (Rest of the World) includes all countries other than
listed.
(Unaudited) (Audited)
As at As at
31 May 2023 30 November
GBP'000 2022
-------------------- ------------ ------------
Non-current assets
Germany 14,734 16,313
UK 5,995 5,374
Japan 3,455 4,144
USA 2,916 3,962
Netherlands 1,970 2,149
RoW 4,216 4,153
-------------------- ------------ ------------
33,286 36,095
-------------------- ------------ ------------
The following segmental analysis by brands, recruitment
classification and sectors (being the profession of candidates
placed) have been included as additional disclosure to the
requirements of IFRS 8.
Revenue (unaudited) Net fees (unaudited)
Six months ended Six months ended
31 May
GBP'000 31 May 2023 31 May 2022 2023 31 May 2022
--------------------- ------------ ------------ --------- ------------
Brands
Computer Futures 273,869 267,129 69,924 68,110
Progressive 269,946 215,725 68,832 56,687
Real Staffing Group 162,941 174,484 43,377 50,237
Huxley Associates 118,455 114,911 26,458 28,019
--------------------- ------------ ------------ --------- ------------
825,211 772,249 208,591 203,053
--------------------- ------------ ------------ --------- ------------
Other brands including Global Enterprise Partners, JP Gray,
Madison Black, Newington International and Orgtel are rolled into
the above brands.
Revenue (unaudited) Net fees (unaudited)
Six months ended Six months ended
GBP'000 31 May 2023 31 May 2022 31 May 31 May 2021
2023
---------------------------- ------------ ------------ --------- ------------
Recruitment classification
Contract 784,961 724,909 169,982 156,944
Permanent 40,250 47,340 38,609 46,109
---------------------------- ------------ ------------ --------- ------------
825,211 772,249 208,591 203,053
---------------------------- ------------ ------------ --------- ------------
Revenue (unaudited) Net fees (unaudited)
Six months ended Six months ended
GBP'000 31 May 2023 31 May 2022 31 May 31 May 2022
2023
--------------- ------------ ------------ --------- ------------
Skills mix
Technology 423,393 397,218 101,712 96,339
Engineering 194,579 155,816 51,223 41,679
Life Sciences 139,210 154,966 38,958 46,293
Other 68,029 64,249 16,698 18,742
--------------- ------------ ------------ --------- ------------
825,211 772,249 208,591 203,053
--------------- ------------ ------------ --------- ------------
3. administrative expenses
Operating profit is stated after charging:
(Unaudited) (Unaudited)
Six months ended Six months ended
GBP'000 31 May 2023 31 May 2022
------------------------------------------- ----------------- -----------------
Staff costs 128,246 121,298
Depreciation 8,001 8,250
Amortisation - 218
Loss on disposal of property, plant and
equipment 112 11
Impairment of intangible assets (see note
a) - 499
Loss on disposal of intangible assets
(see note a) - 1,206
Service lease charges
* Buildings 1,071 789
* Cars 306 147
Foreign exchange losses 1,286 284
------------------------------------------- ----------------- -----------------
Note a) Disposal of intangible assets
During the previous financial period, in light of the
commencement of the Group-wide digital transformation programme,
management reviewed the entire book of legacy development costs and
assets under construction capitalised in previous years. The
decision was taken to expense GBP1.7 million (including GBP0.5
million in accelerated amortisation) worth of the legacy intangible
assets immediately to the income statement in the prior period.
4. income tax expense
Income tax for the half year is accrued based on the Directors'
best estimate of the average annual effective tax rate (ETR) for
the financial year. The tax charge for the half year amounted to
GBP10.8 million (H1 FY22: GBP12.3 million) at an ETR of 28.1% (H1
FY22: 27.8%). The tax rate is higher in the current period mainly
due to the increase in the UK tax rate to 25% from 1 April 2023.
The Group's ETR primarily varies with the mix of taxable profits by
territory, non-deductibility of the accounting charge for LTIP's
and other one-off tax items.
A deferred tax asset of GBP5.0 million (as at 30 November 2022:
GBP4.6 million) was recognised in the financial statements for the
six months ended 31 May 2023. This comprised deferred tax assets of
GBP5.1 million (as at 30 November 2022: GBP4.7 million) and
deferred tax liabilities of GBP0.1 million (as at 30 November 2022:
GBP0.1 million). The deferred tax assets arise on accelerated
depreciation, share based payments and provisions. The movement in
the period arises primarily on share-based payments.
At the reporting date, the Group had unused tax losses of
GBP30.4 million (as at 30 November 2022: GBP30.3 million) available
for offset against future profits. No deferred tax asset was
recognised against these losses.
5. Earnings per share
Basic earnings per share (EPS) is calculated by dividing the
profit for the year attributable to owners of the Company by the
weighted average number of ordinary shares outstanding during the
period excluding shares held as treasury shares and those held in
the Employee Benefit Trust, which for accounting purposes are
treated in the same manner as shares held in the treasury
reserve.
Diluted EPS is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all
dilutive ordinary shares arising from exercising employee stock
options and tracker shares.
The following tables reflect the income and share data used in
the basic and diluted EPS calculations.
(Unaudited) (Unaudited)
Six months ended Six months ended
GBP'000 31 May 2023 31 May 2022
---------------------------------------------------------------- ----------------- -----------------
Earnings
Profit for the period attributable to the owners of the Company 27,675 31,980
-------------------------------------------------------------------- ----------------- -----------------
(Unaudited) (Unaudited)
Six months ended Six months ended
millions 31 May 2023 31 May 2022
---------------------------------------------------------------- ----------------- -----------------
Number of shares
Weighted average number of shares used for basic EPS 131.9 132.6
Dilutive effect of share plans 3.5 4.1
------------------------------------------------------------------- ----------------- -----------------
Diluted weighted average number of shares used for diluted EPS 135.4 136.7
-------------------------------------------------------------------- ----------------- -----------------
(Unaudited) (Unaudited)
Six months ended Six months ended
pence 31 May 2023 31 May 2022
---------------------------------------------------------------- ----------------- -----------------
Basic EPS 21.0 24.1
Diluted EPS 20.4 23.4
-------------------------------------------------------------------- ----------------- -----------------
6. Intangible assets
During the six months ended 31 May 2023, in line with management
expectations, the Group made good progress in achieving key
milestones of the technology improvement plan.
As a result, as of 31 May 2023 nearly GBP2.0 million in
development costs were capitalised in the statement of financial
position. At the reporting date, these assets have been classified
as under construction because due to the ongoing development
procedures they are not yet in the condition and location as
intended by management.
Subject to the successful roll out and completion of thorough
tests, the first developed assets are expected to be brought into
use in certain locations, primarily in the USA and Germany, in Q4
FY23 at the earliest. Accordingly, the asset amortisation is
expected to start in the second half of the current financial
year.
7. Cash and cash equivalents
(Unaudited) (Audited)
As at As at
GBP'000 30 November
31 May 2023 2022
------------------------------- ------------ ------------
Cash at bank 74,186 65,809
Bank overdraft (1,775) (423)
------------------------------- ------------ ------------
Net cash and cash equivalents 72,411 65,386
------------------------------- ------------ ------------
Cash and cash equivalents comprise cash and short-term bank
deposits with an original maturity of three months or less, net of
outstanding bank overdrafts. The carrying amount of these assets
approximate their fair values. All of these assets are categorised
within level 1 of the fair value hierarchy.
The Group has four cash pooling arrangements in place at HSBC US
(USD), HSBC UK (GBP), NatWest (GBP) and Citibank (EUR).
8. SHARE CAPITAL
During the period 38,778 (H1 FY22: 120,438) new ordinary shares
were issued, resulting in a share premium of GBP0.1 million (H1
FY22: GBP0.3 million). These shares were issued pursuant to the
exercise of share awards under the Save As You Earn scheme.
Treasury Reserve
Treasury reserve represent SThree plc shares repurchased and
available for specific and limited purposes.
In the six months ended 31 May 2023, no shares were purchased or
utilised from the treasury reserve. At the period end, 35,767 (H1
FY22: 35,767) shares were held in treasury.
Employee Benefit Trust
The Group holds shares in the Employee Benefit Trust (EBT). The
EBT is funded entirely by the Company and acquires shares in SThree
plc to satisfy future requirements of the employee share-based
payment schemes.
For accounting purposes shares held in the EBT are treated in
the same manner as shares held in the treasury reserve by the
Company and are, therefore, included in the financial statements as
part of the treasury reserve for the Group.
In the six months ended 31 May 2023, the EBT purchased 2,198,735
(H1 FY22: 1,189,306) of SThree plc shares. The average price paid
per share was 455 pence (H1 FY22: 397 pence). The total acquisition
cost of the purchased shares was GBP10.0 million (H1 FY22: GBP4.7
million), for which the treasury reserve was reduced. During the
period, the EBT utilised 1,101,288 (H1 FY22: 687,858) shares
primarily on settlement of Long-Term Incentive awards. At the
period end, the EBT held 2,868,593 (H1 FY22: 1,424,810) shares.
9. leases
The leases which are recorded on the Condensed Consolidated
Statement of Financial Position are principally in respect of
buildings and cars.
The Group's right-of-use assets and lease liabilities are
presented below:
(Unaudited) (Audited)
As at As at
GBP'000 30 November
31 May 2023 2022
------------------------------- ------------ ------------
Buildings 23,862 27,862
Cars 1,984 1,932
------------------------------- ------------ ------------
Total right of use assets 25,846 29,794
------------------------------- ------------ ------------
Current lease liabilities 9,463 11,102
Non-current lease liabilities 19,388 22,600
------------------------------- ------------ ------------
Total lease liabilities 28,851 33,702
------------------------------- ------------ ------------
The Condensed Consolidated Income Statement includes the
following amounts relating to depreciation of right-of-use
assets:
(Unaudited) (Unaudited)
Six months Six months
ended ended
GBP'000 31 May 2023 30 May 2022
-------------------------------------------------- ------------ ------------
Buildings 5,849 5,869
Cars 616 560
IT equipment - 35
-------------------------------------------------- ------------ ------------
Total depreciation charge of right-of-use assets 6,465 6,464
-------------------------------------------------- ------------ ------------
In the current period interest expense on leases amounted to
GBP0.3 million (H1 FY22: GBP0.3 million) and was recognised within
finance costs in the Condensed Consolidated Income Statement.
The total cash outflow for leases in six months ended 31 May
2023 was GBP7.7 million (H1 FY22: GBP7.0 million) and comprised the
principal and interest element of recognised lease liabilities.
10. other financial liabilities
As at 31 May 2023, the Group maintains a committed Revolving
Credit Facility (RCF) of GBP50.0 million along with an uncommitted
GBP30.0 million accordion facility, both jointly provided by HSBC
and Citibank, giving the Group an option to increase its total
borrowings under the facility to GBP80.0 million. During the
current and previous period, the Group did not draw down under
these facilities. The Group has also an uncommitted GBP5.0 million
overdraft facility with HSBC of which GBP1.8 million was used at
the current period end (as at 30 November 2022: GBP0.4
million).
Any funds borrowed under the facility bear a minimum annual
interest rate of 1.2% above the benchmark Sterling Overnight Index
Average (SONIA). In the six months ended 31 May 2023, the Group
incurred GBP0.3 million in finance costs (H1 FY22: GBP0.4 million)
which were mainly related to lease interest.
The RCF is subject to certain covenants requiring the Group to
maintain financial ratios over interest cover, leverage and
guarantor cover. The Group has complied with these covenants
throughout the current and prior period.
The Group's exposure to interest rates, liquidity, foreign
currency and capital management risks is disclosed in the Group's
FY22 annual financial statements.
11. Dividends
(Unaudited) (Unaudited)
Six months Six months
ended ended
GBP'000 31 May 2023 31 May 2022
------------------------------------------------- ------------ ------------
Amounts recognised as distributions to equity
holders in the period
Interim dividend of 5.0 pence (2021: 3.0 pence)
per share 6,605 3,965
Final dividend of 11.0 pence (2021: 8.0 pence)
per share 13,937 10,636
------------------------------------------------- ------------ ------------
20,542 14,601
------------------------------------------------- ------------ ------------
The interim dividend for the year ending 30 November 2022 of 5.0
pence (FY21: 3.0 pence) per share was paid on 2 December 2022 to
those shareholders on the register of SThree plc on 4 November
2022.
The final dividend for the year ending 30 November 2022 of 11.0
pence (FY21: 8.0 pence) per share was approved by shareholders at
the Annual General Meeting on 20 April 2023. The GBP13.9 million in
funds, required for settlement of final dividend, were first
transferred to the share administrator before 31 May 2023, and the
dividend was paid on 9 June 2023 to those shareholders on the
register of SThree plc on 12 May 2023.
12. Contingent liabilities
Legal
The Group is involved in various disputes and claims which arise
from time to time in the course of its business. These are reviewed
on a regular basis and, where possible, an estimate is made of the
potential financial impact on the Group. The Group has contingent
liabilities in respect of these claims. In appropriate cases a
provision is recognised based on advice, best estimates and
management judgement.
The Directors currently believe the likelihood of any material
liabilities to be low, and that such liabilities, if any, will not
have a material adverse effect on its financial position.
13. RELATED PARTY DISCLOSURES
The Group's significant related parties are as disclosed in the
Group's FY22 annual financial statements. There have been no
significant changes to the nature of its related party transactions
as disclosed in note 23 of the SThree plc's Annual Report and
Accounts FY22.
14. Shareholder communications
SThree plc has taken advantage of regulations which provide an
exemption from sending copies of its Interim Financial Report to
shareholders. Accordingly, the FY23 Interim Financial Report will
not be sent to shareholders but will be available on the Company's
website www.sthree.com or can be inspected at the registered office
of the Company.
15. Subsequent events
There were no subsequent events following 31 May 2023.
16. ALTERNATIVE PERFORMANCE MEASURES (APM s ): definitions and
reconciliations
In discussing the performance of the Group, comparable measures
are used.
The Group discloses comparable performance measures to enable
users to focus on the underlying performance of the business on a
basis which is common to both periods for which these measures are
presented. The reconciliation of comparable measures to the
directly related measures calculated in accordance with IFRS is as
follows.
APMs in constant currency
As the Group operates in 14 countries and with many different
currencies, it is affected by foreign exchange movements, and the
reported financial results reflect this. However, the Group
business is managed against targets which are set to be comparable
between years and within them, for otherwise foreign currency
movements would undermine the management ability to drive the
business forward and control it. Within this Interim Financial
Report, comparable results have been highlighted on a constant
currency basis as well as the results on a reported basis which
reflect the actual foreign currency effects experienced.
The Group evaluates its operating and financial performance on a
constant currency basis (i.e. without giving effect to the impact
of variation of foreign currency exchange rates from period to
period). Constant currency APMs are calculated by applying the
prior period foreign exchange rates to the current and prior
financial period results to remove the impact of exchange rate.
Measures on a constant currency basis enable users to focus on
the performance of the business on a basis which is not affected by
changes in foreign currency exchange rates applicable to the
Group's operating activities from period to period.
The calculations of the APMs on a constant currency basis and
the reconciliation to the most directly related measures calculated
in accordance with IFRS are as follows:
31 May 2023 (unaudited)
GBP'000, unless Operating profit
otherwise stated Revenue Net fees Operating profit conversion ratio* Profit before tax Basic EPS
Reported 825,211 208,591 38,121 18.3% 38,491 21.0p
Currency impact (34,734) (9,102) (3,254) (0.8%) (3,233) -1.8p
-------------------- --------- --------- ----------------- ------------------ ------------------ ----------
In constant currency 790,477 199,489 34,867 17.5% 35,258 19.2p
--------------------- --------- --------- ----------------- ------------------ ------------------ ----------
31 May 2022 (unaudited)
GBP'000, unless Operating profit
otherwise stated Revenue Net fees Operating profit conversion ratio* Profit before tax Basic EPS
Reported 772,249 203,053 44,645 22.0% 44,294 24.1p
Currency impact 11,331 2,482 919 0.2% 929 0.5p
--------------------- -------- --------- ----------------- ------------------ ------------------ ----------
In constant currency 783,580 205,535 45,564 22.2% 45,223 24.6p
---------------------- -------- --------- ----------------- ------------------ ------------------ ----------
*Operating profit conversion ratio represents operating profit
over net fees.
Other APMs
Net cash excluding lease liabilities
Net cash is an APM used by the Directors to evaluate the Group's
capital structure and leverage. Net cash is defined as cash and
cash equivalents less current and non-current borrowings excluding
lease liabilities, less bank overdraft, as illustrated below:
(Unaudited) (Audited)
As at As at
GBP'000 31 May 2023 30 November 2022
--------------------------- ------------ -----------------
Cash and cash equivalents 74,186 65,809
Bank overdraft (1,775) (423)
----------------------------- ------------ -----------------
Net cash 72,411 65,386
----------------------------- ------------ -----------------
EBITDA
In addition to measuring financial performance of the Group
based on operating profit, the Directors also measure performance
based on EBITDA. It is calculated by adding back to the reported
operating profit operating non-cash items such as the depreciation
of property, plant and equipment (PPE), the amortisation and
impairment of intangible assets, loss on disposal of PPE and
intangible assets, gain on lease modification and the employee
share options charge. Where relevant, the Group also uses EBITDA to
measure the level of financial leverage of the Group by comparing
EBITDA to net debt.
A reconciliation of reported operating profit for the period,
the most directly comparable IFRS measure, to EBITDA is set out
below.
(Unaudited) (Unaudited)
Six months Six months
ended ended
GBP'000 31 May 2023 31 May 2022
-------------------------------------------------- ------------ ------------
Reported operating profit for the period 38,121 44,645
Depreciation of PPE 8,001 8,250
Amortisation and impairment of intangible assets - 717
Loss on disposal of PPE and intangible assets 112 1,217
Employee share options charge 2,552 2,236
-------------------------------------------------- ------------ ------------
EBITDA 48,786 57,065
-------------------------------------------------- ------------ ------------
Contract margin
The Group uses Contract margin as an APM to evaluate Contract
business quality and the service offered to customers. Contract
margin is defined as Contract net fees as a percentage of Contract
revenue.
(Unaudited) (Unaudited)
Six months Six months
ended ended
GBP'000, unless otherwise stated 31 May 2023 31 May 2022
---------------------------------- ----------- ------------ ------------
Contract net fees A 169,982 156,944
Contract revenue B 784,961 724,909
---------------------------------- ----------- ------------ ------------
(A ÷
Contract margin B) 21.7% 21.7%
---------------------------------- ----------- ------------ ------------
Financial Calendar
19 September 2023 FY23 Q3 Trading Update
30 November 2023 2023 financial year end
14 December 2023 FY23 Trading Update
30 January 2024 FY23 Final Results
[1] Unless specifically stated, all growth rates in revenue and
net fees are expressed in constant currency.
[2] The Group has identified and defined certain alternative
performance measures (APMs). These are the key measures the
Directors use to assess the SThree's underlying operational and
financial performance. The APMs are fully explained and reconciled
to IFRS line items in note 16 to the Consolidated Financial
Statements.
[3] The contractor order book represents value of net fees until
contractual end dates, assuming all contractual hours are
worked.
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END
IR FLFVADDISFIV
(END) Dow Jones Newswires
July 25, 2023 02:00 ET (06:00 GMT)
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