Interim Management Statement

RNS Number : 8889Y

SThree plc

11 September 2009

 



SThree plc

Trading Update

SThree plc ('SThree' or the 'Group'), the international specialist staffing business, is today issuing an Interim Management Statement for the period since 31 May 2009. 

The financial and operational data relates to the three month period ended 30 August 2009, being the third quarter of the financial year ending 29 November 2009. 

During the period the Group continued to experience an overall decline in demand for its services, particularly for permanent placements, with contract hiring proving more resilient across all geographies.  Unadjusted Group gross profit in the period declined by circa 34% year on year to £37.6m (2008: £56.9m) and by 38% on a constant currency basis.  UK gross profit declined 46% and Non-UK gross profit declined by 29% on a constant currency basis. 

Compared to the same period last year, Contract gross profit declined by 28% and Permanent gross profit declined by 49% on a constant currency basis.  A significant decline in volume was somewhat offset by average permanent fees and gross profit per day rates which were moderately ahead on an unadjusted basis but with permanent fees decreasing slightly on a constant currency basis. 

Contract now represents 58% of gross profit (2008: 52%, 2009 half year: 58%) and non-UK represents 55% of gross profit (2008: 46%, 2009 half year: 54%).

At 30 August 2009 SThree had 4,190 contract runners, down 29.1% year on year. Since the half year, the Group's contract runners have decreased by 6.8%, an element of which is attributable to seasonal factors.  Average contractor gross profit per day rates were flat on a constant currency basis compared with both half year 2009 and the prior year.  During the period, SThree made a total of 1,395 permanent placements, a reduction of 45.3% over the previous year (2008: 2,552).  Average permanent placement fees were down by circa 3% year on year on a constant currency basis.

At 30 August 2009 UK contract runners were down 36.0% versus the equivalent period in 2008.  However the UK gross profit per day rate was down only slightly versus the previous year.  During the period, UK permanent placements were down 60.5%, reflecting a 70.4% reduction in UK ICT placements and a 36.0% reduction in UK non-ICT placements.  Average UK permanent placement fees were down 7.6% versus last year.

The Non-UK business slowed further in the period.  Contract runners reduced versus last year by 15.1%, with a modest decline in gross profit per day rates on a constant currency basis.  During the period, permanent placements declined by 27.8% with a modest decline in average fees.

The Group's cash position remained strong with net cash of circa £40m at 30 August 2009. SThree has no debt and does not currently utilise its existing facilities.  The Group is close to signing a new financing facility, which the Board expects to be concluded by the end of October 2009.  The cash position continues to be managed proactively with Days Sales Outstanding held at 39 days at the period end (31 May 2009: 39 days). 

Total Group headcount at 30 August 2009 of 1,506 was down 34.1% versus last year (2008: 2,287).  Since the half year 2009, Group headcount is down 8.6%, with UK headcount being down by circa 11% and non UK headcount down by circa 5%.  The third quarter reduction was a consequence of natural attrition and the Group believes that headcount remains at an appropriate overall level in the light of the current market conditions and opportunities.  However, the Group has begun to hire selectively for those markets where there is clear evidence that client demand will support increased headcount.

Russell Clements, CEO, commented: 'The third quarter of 2009 saw the continuation of challenging trading conditions and we are certainly not yet in a position to call a turning point in the market, particularly given that our Non-UK business continued to slow during the period.  However, there are some signs of stability in our UK business when we look at our more recent month on month performance rather than the more challenging year on year comparatives.

'Although we remain committed to ensuring that we remain fit for purpose in the short term, we also continue to manage our business with an eye to the inevitable recovery, whenever that materialises.  Our strong cash position gives us the capacity to make prudent investments for the future and our flexible business model allows for a rapid re-scaling of the Group as soon as market conditions allow.'   

SThree will issue a trading update for the year ended 29 November 2009 on Friday 4 December 2009.

SThree is hosting an analyst conference call today at 0830 BST. The dial in number is + 44 (0)20 3003 2666 and the password is SThree.

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Enquiries:

SThree plc	020 7292 3838
Russell Clements, Chief Executive Officer
Alex Smith, Chief Financial Officer
Citigate Dewe Rogerson	020 7638 9571
Kevin Smith/Nicola Smith

Notes to editors

SThree, founded in 1986, is one of the leading international specialist staffing businesses, providing permanent and contract specialist staff to a diverse client base of well over 7,000 clients. From its well-established position as a major player in the information and communications technology ('ICT') sector the Group has further broadened the base of its operations by building fast-growing businesses serving the accountancy & finance, banking, engineering, oil & gas, pharmaceuticals, human resources, energy, legal and job board sectors.

Following the establishment of its first business, Computer Futures, in 1986, the Group has adopted a multi-brand strategy, establishing new operations to address growth opportunities. SThree operates through brands including FS Group (Computer Futures/JP Gray), Huxley Associates, Progressive and RPMG (Real/Pathway) and has 1,500 employees in eleven countries.

SThree has a selective approach to clients and focuses on high margin opportunities, predominantly within the small to medium-sized enterprises ('SME') market. From its inception the Group has avoided the high volume/low margin business model in favour of a focus on high quality business.

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. Accordingly, undue reliance should not be placed on forward looking statements.

 

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