TIDMSTEM
RNS Number : 8330M
SThree plc
19 September 2023
19 September 2023
SThree plc
FY23 Q3 Trading Update
Resilient performance sustained, underpinned by Contract
SThree plc ("SThree" or the "Group"), the only global specialist
talent partner focused on roles in Science, Technology, Engineering
and Mathematics ('STEM'), today issues a trading update covering
the period 1 June 2023 to 31 August 2023.
Highlights
-- Resilient performance, with the movement in Group net fees
for Q3 in line with Q2, down 7% YoY (1) against a strong comparative
period(2) and ongoing global macro-economic weakness.
-- Excluding restructured businesses the movement in Group net
fees improved from -6% YoY in Q2 to -5% YoY in Q3 demonstrating
the value of a focused and disciplined market investment approach.
-- Contract net fees performance improved to flat YoY, now representing
84% of Group net fees (FY22 Q3: 77%).
-- Permanent net fees (representing 16% of Group) down 31% YoY,
reflecting both market conditions and our strategic investment
towards Contract in specific markets (average Permanent headcount
down 21%).
-- In our largest three markets, which represent 73% of net fees,
the Netherlands grew 5%, while Germany was down 6% and USA
was down 19%.
-- Engineering up 20%, with Technology down 6% and Life Sciences
down 24%.
-- Contractor order book(3) remained flat YoY, reflecting sequentially
improved new placement activity together with continued robust
extensions performance and providing good visibility for the
remainder of the year.
-- Strong balance sheet with net cash of GBP83 million at 31
August 2023 (31 August 2022: GBP57 million).
-- Technology Improvement Programme remains on track and on budget,
with first city, Houston, now live, and sequenced rollout
across the Group progressing in line with stated plans.
-- Trading in line with market expectations for full year(4)
.
Timo Lehne, Chief Executive, commented:
"We continue to deliver a resilient performance, underpinned by
the Group's strategic focus on Contract. While the wider
environment remains uncertain, we are encouraged by our
sequentially improving new placement performance and strong
Contract extensions, demonstrating our clients' sustained demand
for critical STEM skills.
Our Technology Improvement Programme, key to driving both scale
and higher margins over the mid-to-long term, and to delivering a
differentiated and higher value proposition within the market,
continues to progress on track and on budget. I am delighted that
the first phase of the rollout in Houston is now complete, which is
a significant milestone for the Group. We are incredibly excited
about the progress that has been made so far and continue to
believe that this will be a key strategic step forward for our
business.
Our long-term opportunity is clear, underpinned by structural
megatrends driving the acute need for scarce STEM talent. While w e
remain mindful of the macro-economic uncertainty across global
markets, with all lead indicators of the Group's performance
monitored closely, we look ahead to the opportunities facing us
with optimism. Our specialism in STEM skills and new ways of
working provides a unique offering to clients and candidates.
Supported by a resilient business model and strong financial
position, we are trading in line with market expectations for the
full year, and we remain well positioned to source and place the
best STEM talent the world needs."
Q3 Q3 Q3 2023 Q2 2023 Q1 2023
Net fees 2023 2022 YoY (1) YoY (1) YoY (1)
------------------------------- ---------- -------- -------- --------
Contract GBP86.2m GBP86.6m - -1% +8%
Permanent GBP16.8m GBP25.2m -31% -25% -12%
GROUP GBP103.0m GBP111.8m -7% -7% +4%
Regions
DACH (5) GBP36.6m GBP38.5m -6% -7% +8%
Netherlands (incl. Spain) (6) GBP21.5m GBP19.6m +9% +4% +6%
Rest of Europe (7) GBP17.8m GBP18.7m -5% -7% +4%
USA GBP22.6m GBP29.3m -19% -15% -6%
Middle East & Asia (8) GBP4.5m GBP5.7m -14% -5% +19%
GROUP GBP103.0m GBP111.8m -7% -7% +4%
Top five countries
Germany GBP32.2m GBP33.9m -6% -8% +7%
Netherlands GBP20.1m GBP18.9m +5% +1% +4%
UK GBP11.6m GBP12.2m -4% -6% +6%
USA GBP22.6m GBP29.3m -19% -15% -6%
Japan GBP2.1m GBP2.5m -4% -2% +7%
ROW (9) GBP14.3m GBP15.0m -5% -2% +12%
Group GBP103.0m GBP111.8m -7% -7% +4%
------------------------------- ---------- -------- -------- --------
Service mix Q3 2023 Q3 2022
----------
Contract 84% 77%
Permanent 16% 23%
----------
Skills mix Q3 2023 Q3 2022
----------
Technology 48% 47%
Life Sciences 17% 22%
Engineering 27% 21%
Other 7% 10%
---------- ----------
Business performance highlights
The Group continued to deliver a resilient performance in the
quarter with net fees down 7% YoY, with no further deterioration
from Q2 against an equally strong prior year comparative period. On
a like for like basis (excluding our restructured businesses in
Singapore, Hong Kong and Ireland) net fees were down 5% YoY, a
sequential improvement on the 6% YoY decline in Q2. Contract, our
strategic focus, was flat (or up 1% on a like for like basis
excluding our restructured businesses) and now represents 84% of
net fees. Our Permanent business was down 31% (or down 28% on a
like for like basis), reflecting global market conditions and the
strategic transition from Permanent to Contract in several markets,
with average Permanent headcount for the quarter down 21% YoY .
Contract
-- Net fees flat YoY.
o Regionally, Netherlands (incl. Spain) was up 10% YoY
and Rest of Europe up 4%, while DACH was down 3%, USA
down 7% and Middle East & Asia was up 3%.
o Strong growth in Engineering, up 21% YoY, with Technology
down 1% and Life Sciences down 15%.
-- Contractor order book remained flat YoY, with continued strong
Contract extensions.
Permanent
-- Permanent net fees down 31% YoY, with challenging market conditions
across all regions, together with the planned transition from
Permanent to Contract , particularly in the USA and UK. Average
Permanent headcount was down 21% YoY for the quarter.
o In our major Permanent markets, DACH was down 13% YoY,
Netherlands down 9% and Japan down 6%.
o Modest growth in Engineering, up 13%, with Technology
down 22% and Life Sciences down 53%.
Headcount and productivity
-- For the quarter, average headcount was down 6% YoY, with average
headcount on a YTD basis up 2%.
-- Group period-end headcount was down 14% vs FY22 Q4, in part
impacted by the restructure of the Singapore, Hong Kong and
Ireland businesses. On a like-for-like basis, Group period-end
headcount was down 12% vs FY22 Q4.
-- Sequentially, period-end headcount was down 5% vs FY23 Q2.
-- While we are managing costs tightly, highly disciplined and
targeted investment in talent acquisition within Contract
remains a priority.
-- Productivity was down only 1% YoY in the quarter with the
impact of a strong prior year comparator offset by the 6%
reduction in average headcount. Productivity was 38% above
pre-pandemic levels achieved in FY19 Q3.
Regional highlights
DACH saw net fees decline 6% YoY.
-- Germany, our largest country in the region, saw Contract down
3% with overall net fees down 6%, driven by:
o Engineering up 22%, with increased demand for Construction
roles.
o Offset by Technology and Life Sciences, down 10% and
14% respectively.
Netherlands (incl. Spain) region saw net fees grow 9% YoY.
-- Strong growth in Contract up 10% YoY, partially offset by
Permanent down 9%.
-- The Netherlands, which represents 94% of the region, saw Contract
up 7% with overall net fee growth of 5% driven by:
o Engineering up 16% reflecting increased demand for roles
within Project Management, Process Engineering, Electrical
Engineering, and QHSE.
o Technology up 2% with higher demand for Project Managers,
Data Engineers and Data Science roles.
-- Spain saw strong growth of 107% in the quarter driven by Technology.
Rest of Europe saw net fees decline 5% YoY.
-- Contract, which represents 97% of net fees for the region,
grew 4%.
-- The UK, our largest country in the region, saw Contract up
1% with overall net fees down 4%, reflecting:
o Engineering up 17%, as demand increased for roles within
Project and Construction Management, and Mechanical Engineering.
o Offset by declines in both Technology, down 5% and Life
Sciences, down 26%.
USA saw net fees decline 19% YoY.
-- Strategic shift toward Contract in region, which now represents
91% of net fees, with Contract net fees down 7% YoY reflecting:
o Life Sciences, down 18% YoY in line with the market conditions
for that sector.
o This was partly offset by Engineering up 16%, with increased
demand for roles within Construction Management and Electrical
Engineering.
Middle East and Asia saw net fees decline 14% YoY. On a like for
like basis (excluding our restructured businesses in Singapore and
Hong Kong) net fees were up 5% YoY.
-- Japan, which represents 48% of the region, was down 4% YoY
driven by Technology.
-- Solid performance in UAE with net fees up 18% driven by Engineering.
Balance sheet
SThree retains a strong balance sheet, with net cash at 31
August 2023 of GBP83m (31 August 2022: net cash GBP57m, 31 May
2023: net cash GBP72m), partly reflecting the working capital
release from the Group's contractor model. Total accessible
liquidity of GBP138m comprises GBP83m net cash, an undrawn GBP50m
revolving credit facility ('RCF'), which runs until 2025 (with
options to extend it until 2027), and a GBP5m overdraft facility.
In addition, SThree has an undrawn GBP30m accordion facility as
well as a substantial working capital position, reflecting net cash
due to the Group for placements already undertaken.
Analyst conference call
SThree is hosting a conference call for analysts and investors
today at 8.30am to discuss the FY23 Q3 Trading Update . If you
would like to register for the conference call, please contact
SThree@almapr.co.uk.
The Group will issue its trading update for the year ending 30
November 2023 on 14 December 2023.
(1) All YoY growth rates in this announcement are expressed at
constant currency.
(2) FY22 Q3 Group Net Fees up 19% YoY.
(3) The contractor order book represents value of net fees until
contractual end dates, assuming all contractual hours are
worked.
(4) Current consensus PBT expectation is GBP71.0m for FY23.
Source: SThree compiled consensus.
(5) DACH - Germany, Austria and Switzerland.
(6) Netherlands (incl. Spain) - Netherlands and Spain, which is
managed from the Netherlands.
(7) Rest of Europe - UK, Belgium, France, Luxembourg and
Ireland.
(8) Middle East & Asia - Japan, UAE & Singapore.
(9) ROW - All other countries we operate in.
The information contained within this announcement is deemed by
the Group to constitute inside information under the Market Abuse
Regulation (Regulation (EU) No.596/2014) as it forms part of UK
Domestic Law by virtue of the European Union (Withdrawal) Act
2018.
Enquiries:
SThree plc
Timo Lehne, CEO via Alma
Andrew Beach, CFO
Alma PR +44 20 3405 0205
Rebecca Sanders-Hewett SThree@almapr.co.uk
Hilary Buchanan
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 Science, Technology, Engineering and Mathematics ('STEM') ,
providing permanent and flexible contract talent to a diverse base
of over 8,200 clients across 14 countries. Our Group's c.2,700
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.
- Ends -
Appendix
Following the reporting structure change at the start of FY23
the table below provides the historical reporting structure.
Q3 Q3 Q3 2023 Q2 2023 Q1 2023
Net fees 2023 2022 YoY (1) YoY (1) YoY (1)
-------------------- ---------- --------- -------- --------
Contract GBP86.2m GBP86.6m - -1% +8%
Permanent GBP16.8m GBP25.2m -31% -25% -12%
GROUP GBP103.0m GBP111.8m -7% -7% +4%
Regions
DACH GBP36.6m GBP38.5m -6% -7% +8%
EMEA excl. DACH GBP41.6m GBP40.3m +3% - +8%
USA GBP22.6m GBP29.3m -19% -15% -6%
APAC GBP2.2m GBP3.7m -30% -22% -4%
GROUP GBP103.0m GBP111.8m -7% -7% +4%
Top five countries
Germany GBP32.2m GBP33.9m -6% -8% +7%
Netherlands GBP20.1m GBP18.9m +5% +1% +4%
UK GBP11.6m GBP12.2m -4% -6% +6%
USA GBP22.6m GBP29.3m -19% -15% -6%
Japan GBP2.1m GBP2.5m -4% -2% +7%
ROW GBP14.3m GBP15.0m -5% -2% +12%
GROUP GBP103.0m GBP111.8m -7% -7% +4%
-------------------- ---------- --------- -------- --------
Service mix Q3 2023 Q3 2022
----------
Contract 84% 77%
Permanent 16% 23%
----------
Skills mix Q3 2023 Q3 2022
----------
Technology 48% 47%
Life Sciences 17% 22%
Engineering 27% 21%
Other 7% 10%
---------- ----------
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END
TSTNKFBQFBKDQCD
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September 19, 2023 02:00 ET (06:00 GMT)
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