Half Year Trading Update

RNS Number : 5362J

SThree plc

13 June 2014

 



13 June 2014

Half Year Trading Update

SThree plc ("SThree" or the "Group"), the international specialist staffing business, is today issuing a trading update for the half year ended 1 June 2014.

Highlights

·     Group gross profit up 13%* year on year

·     Contract gross profit up 22%* year on year

·     Strong seasonal recovery in contractor runners - up 26% year on year at the end of H1 and 12% above 2013 year end peak

·     Permanent gross profit up 2%* year on year

·     Permanent deal pipeline volume up 5% year on year

·     Group sales headcount up 12% versus the year end position and up 20% year on year

·     Excellent performance in the Americas (up 62%* year on year), which now represents 14% of Group gross profit

·     Continued strong performance from newer global sectors - Energy up 52%* year on year, Life Sciences up 43%* year on year

·     Encouraging performance from Banking & Finance up 20%* year on year

·     70% of Group gross profit now generated in markets outside UK & Ireland (2013: 69%)

Gary Elden, Chief Executive, commented: "As expected, the Group performance improved during the second quarter, as the economic recovery gained momentum in a number of our markets.

"Against this backdrop, headcount growth was an important feature of the period as we moved to ensure Contract was adequately resourced to keep pace with its accelerating growth and as we continued to rebuild our teams in Permanent.  Group sales headcount was up 20% year on year which leaves us well positioned for the future. This investment will inevitably also mean we will be carrying additional costs for the remainder of the current year ahead of these new hires becoming fully productive. 

"Contract made further progress in all territories as it continued to benefit from a greater strategic focus and increasing exposure to new high growth markets, particularly Energy and Life Sciences.  Contract gross profit increased by 22%* year on year and now accounts for 60% of the Group total. 

"The Americas had a very strong first half, growing 62%* year on year and we are doubling our office space in San Francisco and Houston to accommodate our expansion plans.

"Permanent saw a modest pick-up in the period, albeit from a low base, and the pre-deal pipeline is beginning to suggest an increase in activity.  However, more work is required to return this business to the levels of productivity and performance we have seen in the past.

"During the second half, we will be focused on driving up the productivity of new hires, particularly in Permanent, with headcount growth easing somewhat.

"While, as always, we remain cautious about extrapolating the trend for the year from the seasonally less significant first half, the strength of our Contract book and the slowly improving outlook for Permanent underpins our confidence in the medium term prospects for the business."

Key Metrics & Commentary

	H1 2014	H1 2013 1	H1 2014 YoY% Var 2		Q2 2014 YoY% Var2	Q1 2014 YoY% Var2
Contract	£60.8m	£50.6m	+22%		+26%	+18%
Permanent	£40.1m	£41.0m	+2%		+7%	-4%
Group	£100.9m	£91.6m	+13%		+18%	+9%
UK&I	£30.5m	£28.8m	+6%		+10%	+1%
Continental Europe	£47.9m	£45.2m	+8%		+12%	+4%
Americas	£13.7m	£9.0m	+62%		+74%	+49%
Asia Pac & Middle East	£8.8m	£8.5m	+13%		+12%	+13%
Group	£100.9m	£91.6m	+13%		+18%	+9%
ICT	£40.3m	£41.4m	-1%		+2%	-5%
Non ICT	£60.6m	£50.2m	+25%		+31%	+20%
Group	£100.9m	£91.6m	13%		+18%	+9%
Contract / Permanent Split
Contract	60%	55%
Permanent	40%	45%
	100%	100%
Geographical Split
UK&I	30%	31%
Continental Europe	47%	49%
Americas	14%	10%
Asia Pac & Middle East	9%	10%
	100%	100%
Sector Split
ICT	40%	45%
Non ICT	60%	55%
	100%	100%

Operating Metrics

	H1 2014	H1 20131	Hi 2014 YoY % Var		Q2 2014 YoY% Var2	Q1 2014 YoY% Var2
Contract Runners 3
Uk&I	2,745	2,401	+14%		+14%	+8%
Continental Europe	2,586	2,204	+17%		+17%	+10%
Americas	817	355	+130%		+130%	+96%
Asia Pac & Middle East	345	211	+64%		+64%	+67%
Group	6,493	5,171	+26%		+26%	+16%
Permanent  Placements 4
Uk&I	801	881	-9%		-4%	-15%
Continental Europe	1,303	1,488	-12%		-12%	-13%
Americas	375	257	+46%		+67%	+23%
Asia Pac & Middle East	578	467	+24%		+17%	+33%
Group	3,057	3,093	-1%		+1%	-4%

_{1 Excluding IT Job Board}

_{2 At Constant Currency}

_{3 Period end number of contractors onsite with clients and being billed}

_{4 Excludes Retainers}

As expected, the Group's performance improved across the second quarter, with Group gross profit increasing by 18%* year on year, versus a growth of 9%* in Q1 2014.

Contract performed robustly in the period, with a strong growth in contract runners more than offsetting the normal seasonal weakness. Average contractor gross profit per day rates remained robust during the period.

Permanent gross profit grew by 7%* year on year in Q2, an improved performance on Q1 2014, which was down 4%*. UK&I was up 5%* (Q1 2014 down 12%), Continental Europe was down 6%* (Q1 2014 down 9%*) and Americas, Asia Pac and Middle East grew by 31%* (Q1 2014 up 15%*). Average permanent placement fees remained robust during the quarter.

Group sales headcount at 1 June 2014 was up 12% versus the year end and up 20% year on year. Year on year, UK&I sales headcount was up 19%, Continental Europe sales headcount was up 14% and Americas, Asia Pac and Middle East sales headcount was up 34%. Consultant headcount continued to remix slightly towards Contract during the half year, with contract consultant numbers up 12% and permanent consultant headcount up 10% since the year end. Average consultant headcount for the half year was up 17% year on year, with contract consultant average headcount up 25% and permanent consultant average headcount up 11%. At the end of the period, contract consultant headcount represented 50% of total consultant headcount.

The Group has a network of 52 offices in 21 countries, of which 38 are outside the UK. The Group now generates 70% of gross profit from markets outside UK&I (2013: 69%).

SThree remains in a strong financial position. Net debt at 1 June 2014 was circa £10m. The Group has a £50m revolving credit facility ("RCF") with RBS & HSBC, committed to 2019.

SThree is hosting an analyst conference call today at 0830 BST. 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: 7158399

The Group will be hosting a capital markets day for analysts and investors on 17 June 2014 and will issue its interim results for the six months ended 1 June 2014 on 14 July 2014.

* at constant currency

- 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 2,600 employees in twenty one 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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