FY15 Trading Update

RNS Number : 7283I

SThree plc

11 December 2015

 

11 December 2015

FY15 Trading Update

SThree plc ("SThree" or "the Group"), the international specialist staffing business, is today issuing a trading update for the financial year ended 30 November 2015.

Highlights

·     Profit before tax for the year expected to be in line with current market consensus1

·     Group gross profit ("GP") up 11%* YoY and ahead by 17%* excluding Energy

-     Continued strong growth across ICT (+19%* YoY) and Life Sciences (+20%* YoY)

-     Continued strong performance in the Americas (+26%* YoY), which now represents 19% of Group GP (2014: 15%)

-     Conditions in the Energy market remain challenging (-19%* YoY), with Q4 down 37%* YoY and down 8%* sequentially vs Q3

·     Contract GP up 17%* YoY and ahead by 21%* excluding Energy

-     Continued strong growth in Contract runners up 11% YoY

-     Contract now accounts for almost two thirds of Group GP

·     Permanent GP up 3%* YoY; with Permanent GP excluding Energy up 11%* YoY

·     Group year-end sales headcount up 8% YoY and average sales headcount up 6% YoY,  driven by increased Contract and reduced Permanent heads

·     Good progress on productivity per consultant, up 6%* YoY

·     Net cash of circa £6m, up £16m YoY (2014: net debt of £10m)

¹The range of market expectations for pre-tax profit for the year, including the impact of circa £3m of restructuring and impairment costs, is £36.9m to £38.4m, with a current consensus of £37.7m, up from £36.7m at 11 September 2015.

Gary Elden, Chief Executive Officer, commented: "We have delivered a strong full year performance as we continued to benefit from the geographic and sectoral diversity of our operations.  Performances from our ICT and Life Sciences businesses were particularly pleasing. Increased GP has been converted into excellent operating profit growth and we expect the result for the year to be in line with consensus market expectations. 

"Our Contract business performed strongly, with Contract GP increasing by 17%* year on year. The final quarter was the eighth consecutive quarter of double digit GP growth achieved by Contract since it was given greater strategic focus. Although comparatives for the final quarter were particularly strong, we exit the year in good shape with a record Contract book.

"Looking ahead to 2016, while the trading environment remains broadly positive in the majority of our territories, we note that global macro-economic uncertainties have increased somewhat during the fourth quarter, with increasing risks to global growth. We also expect challenging Energy market conditions and FX headwinds to persist.

"Prospects for our US business are exciting and we are continuing to invest for the future, both in headcount and in our office network, where we are adding further space in New York and new offices in Austin and Minneapolis during the first quarter.

"Against this backdrop, we will continue to invest selectively in our high performing teams around the world to grow our business and capitalise on market opportunities, especially in Contract, ICT, Life Sciences and the Americas.  The expanded Contract book, combined with increased investment in our Contract infrastructure and teams give us a strong base from which to grow in the coming years."

Key Metrics & Commentary

With effect from the beginning of the 2014/15 financial year, SThree began reporting on a calendar month basis, replacing the thirteen week quarter basis previously adopted. 

Financial Highlights -
Group Gross Profit
			FY 2015		Q4 2015	Q3 2015	Q2 2015	Q1 2015
Gross Profit	FY 2015	FY 2014	YoY % 1		YoY % 1	YoY % 1	YoY % 1	YoY % 1
Contract	£150.9m	£132.5m	+17%		+10%	+20%	+17%	+24%
Permanent	£84.7m	£85.7m	+3%		-3%	+1%	+4%	+6%
Group	£235.6m	£218.2m	+11%		+5%	+13%	+12%	+17%
UK&I	£69.5m	£66.3m	+5%		-6%	+5%	+9%	+13%
Continental Europe	£103.3m	£99.4m	+14%		+13%	+18%	+11%	+14%
Americas	£45.4m	£33.4m	+26%		+12%	+31%	+31%	+38%
Asia Pac & Middle East	£17.4m	£19.1m	-6%		-13%	-15%	-7%	+16%
Group	£235.6m	£218.2m	+11%		+5%	+13%	+12%	+17%
ICT	£97.3m	£86.1m	+19%		+15%	+21%	+17%	+22%
Life Science	£45.2m	£37.7m	+20%		+16%	+21%	+24%	+15%
Energy	£26.2m	£32.3m	-19%		-37%	-25%	-18%	+14%
Other Sectors 3	£66.9m	£62.1m	+11%		+6%	+18%	+12%	+8%
Group	£235.6m	£218.2m	+11%		+5%	+13%	+12%	+17%
Contract / Permanent Split
Contract	64%	61%
Permanent	36%	39%
	100%	100%
Geographical Split
UK&I	30%	30%
Continental Europe	44%	46%
Americas	19%	15%
Asia Pac & Middle East	7%	9%
	100%	100%
Sector Split
ICT	41%	40%
Life Science	19%	17%
Energy	11%	15%
Other Sectors 3	29%	28%
	100%	100%
			FY 2015		Q4 2015	Q3 2015	Q2 2015	Q1 2015
Operating Metrics	FY 2015	FY 2014	YoY % Var		YoY % Var	YoY % Var	YoY % Var	YoY % Var
Contract Runners 2
UK&I	2,881	2,970	-3%		-3%	-3%	+3%	+12%
Continental Europe	3,823	3,076	+24%		+24%	+29%	+29%	+27%
Americas	1,297	1,073	+21%		+21%	+36%	+44%	+73%
Asia Pac & Middle East	411	454	-9%		-9%	+0%	+8%	+53%
Group	8,412	7,573	+11%		+11%	+15%	+19%	+27%
Permanent Placements 4
UK&I	1,918	1,823	+5%		-15%	+10%	+18%	+17%
Continental Europe	2,783	2,658	+3%		+9%	+5%	-2%	+0%
Americas	803	871	-8%		-19%	-5%	-8%	+6%
Asia Pac & Middle East	904	1,204	-25%		-33%	-38%	-15%	-12%
Group	6,408	6,556	-3%		-9%	-4%	+0%	+3%
1 At constant currency
2 Period end number of contractors onsite with clients
3 Other Sectors include Banking & Finance and Engineering
4 Exclude Retainers

GP for the year increased by 11%*, with GP increasing by 5%* YoY in Q4. While the Group result continued to be impacted by the ongoing weak activity in the Energy market, all other sectors performed strongly with GP excluding Energy up 17%* in the year and up 12%* in Q4.  Growth in operating profit has been driven by a combination of headcount and productivity growth along with savings from the closure of loss making offices in the current and prior years. Headcount build remained relatively low as we rightsized our Energy business, with average consultant headcount for the year up 5%.  We continue to experience foreign exchange headwinds, with Euro weakness only partially offset by a stronger US dollar.

Contract delivered another excellent performance, with GP up 17%* YoY (and up 21%* excluding Energy) and up 10%* YoY in Q4 (and up 16%* excluding Energy).  The contract book grew strongly across the year, with contract runners up 11% since the start of 2015. Average contractor gross profit per day rates were up 3%* YoY. Contract consultant average headcount for the year was up 15%. 

Permanent GP was up 3%* YoY, with Q4 down 3%* YoY but up 6%* sequentially versus Q3 2015. Excluding Energy, Permanent GP was up 11%* in the year (up 7%* in Q4). Average Permanent fees were up 3%* YoY. Permanent consultant average headcount for the year was down 5%.

Energy GP was down 19%* YoY (down 37%* in Q4), with Permanent GP down 44%* and Contract GP down 4%* YoY, broadly in line with headcount down 78% in Permanent and 13% in Contract since the start of the year. Sequentially, Energy GP was down 8%* Q4 vs Q3, with Permanent GP down 23%* and Contract GP down 4%*. During the year we reshaped and rightsized our Energy teams, reducing our exposure to the Upstream Permanent market in particular.  While overall conditions in the Energy market remain challenging, our Contract business is proving, as expected, to be more resilient.

Group sales headcount was up 8% YoY. Year on year, UK&I sales headcount was up 4%, Continental Europe was up 12%, Americas was up 35% and Asia Pacific & Middle East was down 28% reflecting headcount reductions in its Energy business. Consultant headcount continued to remix towards Contract during the year, with Contract consultant numbers up 16% and Permanent consultant headcount down 7% since the start of the year. At the end of the year, Contract consultant headcount represented 58% of total consultant headcount.

As reported in our Q3 update, restructuring costs of circa £3m (of which £1m were cash costs), relating to the rightsizing of the Energy business and the impairment of certain IT assets ahead of a forthcoming new system implementation, have been taken in the year.

SThree remains in a strong financial position. Robust working capital management has driven improved cash conversion with net cash of circa £6m, up £16m YoY, after share buy-backs of £1.2m. The Group has a £50m revolving credit facility ("RCF") with RBS and HSBC, which is committed to 2019.

* at constant currency and prior year restated to a calendar month basis

SThree is hosting an analyst conference call today at 0830 GMT. The details are as follows:

Telephone number: [phone]

For access to the call please quote passcode SThree

A replay facility will be available for seven days on [phone] / Access Pin: 1655645

The Group will issue its results for the financial year ended 30 November 2015 on 25 January 2016.

- Ends -

Enquiries:
SThree plc	020 7268 6000
Gary Elden, Chief Executive Officer
Alex Smith, Chief Financial Officer
Sarah Anderson, Deputy Company Secretary/IR Enquiries
Citigate Dewe Rogerson	020 7638 9571
Kevin Smith/Jos Bieneman

Notes to editors

SThree is a leading international specialist staffing business, providing permanent and contract specialist staff to a diverse client base of over 7,000 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 2,850 employees in fifteen countries.

SThree plc is quoted on the Official List of the UK Listing Authority under the ticker symbol STHR and also has a US level one ADR facility, symbol SERTY.

Important notice

Certain statements in this announcement are forward looking statements. By their nature, forward looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by those statements. Forward looking statements regarding past trends or activities should not be taken as representation that such trends or activities will continue in the future. 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.

 

END

 

 

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