Trading Update

RNS Number : 8977Y

SThree plc

05 December 2014

 



 5 December 2014

Trading Update

SThree plc ("SThree" or the "Group"), the international specialist staffing business, is today issuing a trading update for the financial year ending 30 November 2014.

Highlights

·     Successful finish to the year with Q4 performance in line with expectations

·     Full year profit before tax and exceptional items expected to be in line with consensus at circa £29m

·     Full year Group gross profit of circa £218m, up 18%* year on year with Q4 up 27%* year on year

·     Full year Contract gross profit up 27%* year on year with Q4 up 36%* year on year

·     Continued strong growth in contractor runners at year end to 7,573 - up 31% year on year and 9% sequentially ahead in the fourth quarter, establishing a strong platform for 2015

·     Full year Permanent gross profit up 6%* year on year with Q4 up 16%* year on year

·     Permanent deal pipeline volume up 4% year on year

·     Excellent performance in the Americas (up 73%* year on year), now representing 15% of Group gross profit

·     Continued strong performance from newer sector disciplines with Energy up 51%* year on year and Life Sciences up 42%* year on year

·     Group year end sales headcount up 12% year on year and average sales headcount up 15% year on year

·     Net debt of circa £10m at year end

Gary Elden, Chief Executive, commented: "We maintained our positive trading momentum in the final quarter, with Contract and Permanent both posting improved performances, to produce an encouraging overall result for the year.  Our investment in Contract and in rebuilding our Permanent capability is now coming through in our results as expected.  

"Contract had another very strong quarter, with gross profits up by 36%* year on year, and accounted for 61% of the Group total for the year. This strong trading performance was driven by newer high growth markets, particularly the USA and Germany, and the newer disciplines of Energy and Life Sciences.

"Permanent was up 16%* year on year in Q4, an improving trend on Q3 which was up 6%*.

"Looking ahead, the strength of the Contract book and improving Permanent performance gives us a strong base from which to grow the business.  While deteriorating economic conditions in the Eurozone and a significant reduction in global oil prices in recent weeks have added some caution to the outlook, our experienced management team and strong financial position give us the confidence that we will make the most of the market opportunity in 2015."

Key Metrics & Commentary

The prior period results comprised 53 weeks and for comparison purposes, 52 week data which excludes the final trading week of the 2013 financial year is disclosed where relevant. In addition, Q3 2014 was adjusted to reflect the timing of permanent placements in Germany on a like for like basis. All year-on-year growth data referred to below is on a like-for-like basis unless stated otherwise.

Financial highlights - Group Gross Profit
Group Gross Profit
	FY 2014	FY 2014 5	FY 2013 1	FY 2014		Q4 2014	Q3 2014	Q2 2014	Q1 2014
Gross Profit	52 weeks	LFL	52 weeks	YoY %		YoY %	YoY %	YoY %	YoY %
Contract	£132.4m	£132.4m	£107.5m	+27%		+36%	+28%	+26%	+18%
Permanent	£85.7m	£86.3m	£85.3m	+6%		+16%	+6%	+7%	-4%
Group	£218.2m	£218.8m	£192.8m	+18%		+27%	+18%	+18%	+9%
UK&I	£66.3m	£66.3m	£59.8m	+11%		+23%	+9%	+10%	+1%
Continental Europe	£99.4m	£99.9m	£92.9m	+11%		+18%	+12%	+12%	+4%
Americas	£33.4m	£33.4m	£20.5m	+73%		+90%	+75%	+74%	+49%
Asia Pac & Middle East	£19.1m	£19.1m	£19.5m	+13%		+12%	+11%	+12%	+13%
Group	£218.2m	£218.8m	£192.8m	+18%		+27%	+18%	+18%	+9%
ICT	£86.1m	£86.4m	£83.6m	+8%		+22%	+8%	+2%	-5%
Non ICT	£132.1m	£132.3m	£109.2m	+26%		+31%	+26%	+31%	+20%
Group	£218.2m	£218.8m	£192.8m	+18%		+27%	+18%	+18%	+9%
Contract / Permanent Split
Contract	61%	61%	56%
Permanent	39%	39%	44%
	100%	100%	100%
Geographical Split
UK&I	30%	30%	31%
Continental Europe	46%	46%	48%
Americas	15%	15%	11%
Asia Pac & Middle East	9%	9%	10%
	100%	100%	100%
Sector Split
ICT	39%	40%	43%
Non ICT	61%	60%	57%
	100%	100%	100%
	FY 2014	FY 2014 5	FY 2013 1	FY 2014		Q4 2014	Q3 2014	Q2 2014	Q1 2014
Operating Metrics	52 weeks	LFL	52  weeks	YoY % Var		YoY % Var	YoY % Var	YoY % Var	YoY % Var
Contract Runners 3
UK&I	2,970	2,970	2,552	+16%		+16%	+17%	+14%	+8%
Continental Europe	3,076	3,076	2,472	+24%		+24%	+20%	+17%	+10%
Americas	1,073	1,073	544	+97%		+97%	+110%	+130%	+96%
Asia Pac & Middle East	454	454	223	+104%		+104%	+73%	+64%	+67%
Group	7,573	7,573	5,791	+31%		+31%	+29%	+26%	+16%
Permanent Placements 4
UK&I	1,823	1,823	1,835	-1%		+25%	-11%	-4%	-15%
Continental Europe	2,658	2,703	2,917	-7%		+4%	-11%	-12%	-13%
Americas	871	871	576	+51%		+60%	+61%	+67%	+23%
Asia Pac & Middle East	1,204	1,204	1,101	+9%		+2%	-4%	+17%	+33%
Group	6,556	6,601	6,429	+3%		+15%	-2%	+1%	-4%
1 Excluding IT Job Board
2 At constant currency and adjusted (see note 5)
3 Period end number of contractors onsite with clients and being billed
4 Excludes Retainers
5 Q3 2014 has been adjusted to reflect the timing of permanent placements in Germany on a LFL basis
The majority of placements in Germany start on the first day of a calendar month. Q3 2014 has two first days of a
calendar month vs 3 first days of a calendar month in Q3 2013 and Q2 2014
2014 will contain 11 first days of a calendar month vs 13 first days of a calendar month in 2013

Group gross profit ("GP") for the year increased by 18%*. Q4 Group GP increased by 27%* year on year in Q4 and by 12%* sequentially versus Q3.

Contract performed very pleasingly in the year, with GP up 27%* year on year, with Q4 up 36%* year on year and up 11%* sequentially versus Q3. The contract book grew strongly across the year with contract runners up 31% since the start of 2014. Average contractor gross profit per day rates remained robust during the period.

Permanent GP was up 6%* year on year, with Q4 up 16%* year on year and up 13%* sequentially versus Q3 2014. UK&I was up 3%* year on year (Q4 2014 up 30%* year on year), Continental Europe down 3%* year on year (Q4 2014 up 4%* year on year) and Rest of World grew by 23%* year on year (Q4 2014 up 26%* year on year), driven by strong performance in the Americas. Average permanent placement fees remained robust during the period. The Permanent deal pipeline at year-end was up 4% year on year, reflecting a reduction in the average deal to start time in Q4 and a reduction in Energy sector deal flow towards the end of the quarter.

Group sales headcount at 30 November 2014 was up 12% year on year. UK&I sales headcount was up 14% year on year, Continental Europe sales headcount was up 8%, Americas sales headcount was up 39% and Asia Pacific & Middle East sales headcount reduced by 1%. Consultant headcount continued to remix towards Contract during the quarter, with Contract consultant numbers up 19% and Permanent consultant headcount up 5% year on year. Average consultant headcount was up 16% year on year, with Contract consultant average headcount up 24% and Permanent consultant average headcount up 9%.

The rationalisation of sub-scale operations announced in Q3 is now substantially complete. As a result of these actions, an exceptional cost of circa £5m is expected to be taken in the Group results for the year. It is anticipated that these actions will largely pay back in 2015 and we intend to reinvest the savings in our businesses with strong medium term growth prospects.

The Group has a network of 46 offices in 19 countries, of which 34 are outside the UK. The Group generated 70% of gross profit for the year from markets outside UK&I (2013: 69%).

SThree remains in a strong financial position. Net debt at 30 November 2014 was circa £10m. The Group has a £50m revolving credit facility ("RCF") with RBS and HSBC, which is committed to 2019.

* at constant currency and like-for-like

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: 8875064

The Group will issue its results for the financial year ended 30 November 2014 on 26 January 2015.

- 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 nineteen 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

 

 

TSTLLFLEFELSIIS