14 June 2019
Half Year Trading Update
Encouraging first half performance with good momentum in Contract
SThree plc ("SThree" or the "Group"), the international STEM(1) specialist staffing business, is pleased to issue a trading update(2) for the half year ended 31st May 2019.
Mark Dorman, Chief Executive, commented:
"In what is my first trading update with the Group, I am pleased with the performance we are reporting today, delivered by a strong and talented team. The benefits of our model and the structural drivers in our markets are seen throughout our results with our key performance indicators demonstrating the continued success of our sector and regional strategic focus. We are particularly pleased to report double digit growth in net fees across three of our four regions and have plans in place to drive growth across them all.
"The scale of the STEM opportunity is both enormous and growing across our key regions and we are uniquely positioned to benefit from this. With this backdrop, the structural market drivers for STEM recruitment services remain very attractive and we continue to invest in high performing teams to drive growth, in line with our vision to be the number one STEM talent provider in the best STEM markets.
"Our deliberate focus on Contract, a natural function of our STEM specialism, and the continued strength of our performance across key regions and sectors in our well diversified portfolio, provides resilience in today's more uncertain market conditions, whilst also delivering strong growth over the medium term. Following the encouraging start to the year, expectations for the full year remain unchanged."
Group net fees increased by 9% YoY, consistent across both Q1 and Q2. Performance was driven by Continental Europe up 13% and USA up 13%. The growth in Continental Europe was driven by DACH(5) and the Netherlands up 15% and 11% respectively. All regions delivered double digit growth, with the exception of UK&I which, whilst net fees were down 9%, is stabilising. Our major sectors ICT, Life Sciences, Energy and Engineering delivered strong growth.
Contract continued to deliver a strong performance with net fees up 12% and Q2 up 13%. All regions outside of UK&I delivered double digit growth with Continental Europe up 16%, USA up 22% and APAC & MENA up 15%. Continental Europe and USA combined now represent 80% of Contract net fees (H1 2018: 76%) in line with our strategy to focus on the world's biggest STEM contract recruitment markets.
Permanent net fees were down 1% (Q2 down 2%) with UK&I net fees declining, reflecting the previously reported UK restructuring. The USA saw net fees decline by 10%, reflecting previously reported leadership and strategic changes made in H1 2018. We saw strong growth in DACH, our largest Permanent region, up 9% and in Japan, which continues to grow at a very fast rate, up 49% YoY.
Offices and People
The Group has a network of 45 offices in 16 countries, of which 38 are outside the UK. The Group generated 86% of net fees for the period from markets outside the UK&I (2018: 82%).
Average Group sales headcount was up 7% YoY with Continental Europe up 9%, USA up 8%, Japan up 62% and UK&I down 2%. Average Permanent headcount remained flat and average Contract headcount was up 11% in line with strategy. Period end sales headcount was up 12% YoY, with Permanent up 7% and Contract up 15%. Contract sales headcount represented 69% of total sales headcount at period end (2018: 68%).
Net debt at 31st May 2019 was £8.0m (31st May 2018: Net debt of £6.2m). The Group has a £50m revolving credit facility ("RCF") with Citibank and HSBC, which is committed to 2023.
Analyst conference call
SThree is hosting an analyst conference call today at 0830 GMT. The details are as follows:
Telephone number: 0800 358 9473
For access to the call please enter PIN: 55250260#
A replay facility will be available for 90 days on 0800 358 2049 Passcode: 301289947#
The Group will issue its interim results for the six months ended 31st May 2019 on 22nd July 2019.
(1) Science, Technology, Engineering & Mathematics
(2) All year on year financial growth %s in this announcement are expressed at constant currency
(3) Continental Europe benefitted from an extra working day in Q2/H1 2019, as the Whit Monday holiday fell in Q2 2018
(4) Other includes Creative, Procurement & Supply Chain and Sales & Marketing
(5) DACH - Germany, Austria and Switzerland
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Notes to editors
SThree is a leading international STEM specialist staffing business, providing permanent and contract specialist staff to a diverse client base of over 9,000 clients. From its well-established position as a major player in the information and communications technology ('ICT') sector the Group has broadened the base of its operations to include businesses serving the Banking & Finance, Energy, Engineering and Life Sciences sectors.
Since launching its original business, Computer Futures, in 1986, the Group has adopted a multi-brand strategy, establishing new operations to address growth opportunities. SThree brands include Computer Futures, Huxley Associates, Progressive and The Real Staffing Group. The Group has circa 3,100 employees in sixteen countries.
SThree plc is quoted on the Official List of the UK Listing Authority under the ticker symbol STHR and also has a US level one ADR facility, symbol SERTY.
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.
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