Trading Update

RNS Number : 7567R

SThree plc

11 March 2016

 

11 March 2016

Q1 Trading Update

SThree plc ("SThree" or the "Group"), the international specialist staffing business, is today issuing a trading update covering the period from 1 December 2015 to date; financial information relates to the quarter ended 29 February 2016.

Highlights

·     Group gross profit ("GP") up 10%* YoY and ahead by 17%* excluding Energy

o  Continued strong growth across ICT (+20%* YoY) and Life Sciences (+18%* YoY)

o  Fastest growth in Continental Europe (+20%* YoY)

o  Continued strong performance in the USA (+14%* YoY, +36%* excluding Energy), with Austin and Minneapolis offices opened during the quarter. The USA now represents 18% of Group GP (Q1 2015: 17%)

o  Conditions in the Energy market remain challenging down 34%* YoY (Q4 2015: down 37% YoY)

·     Contract GP up 11%* YoY and ahead by 15%* excluding Energy

o  Robust seasonal recovery in Contract runners

o  Contract now accounts for two thirds of Group GP

·     Permanent GP up 9%* YoY, despite a decrease in period end consultant headcount of 8%. Permanent GP excluding Energy up 21%* YoY

·     Group period-end sales headcount is in line with the 2015 year-end position and up 8% YoY, driven by investment in Contract

Gary Elden, Chief Executive, commented:  "Overall, we've made an encouraging start to the year in what is our seasonally least significant quarter. Our investment in Contract and our drive to rebuild productivity in Permanent is continuing to have a positive impact on the Group result.  Performances from our ICT and Life Sciences businesses and across Continental Europe and the USA were particularly pleasing.

"Our Contract business continues to perform well, with Contract GP increasing by 11%* year on year, reflecting our ongoing investment in sales headcount and further growth in the Contract book.

"Our Permanent business benefited from a further improvement in productivity in the quarter, driven by a particularly strong performance in Continental Europe, which was up 25% YoY.  Further productivity gains will remain the priority for our Permanent business in 2016.

"Looking ahead, the expanded Contract book and improved Permanent performance give us a solid base from which to grow.  While the macro economic outlook has become increasingly uncertain, with signs of slowing growth in our UK Permanent business in particular, we remain confident that there are good growth opportunities for us this year across the diverse geographies and sectors that we serve."

 

Key Metrics & Commentary

Financial Highlights - Group Gross Profit
			Q1 2016		Q4 2015	Q3 2015	Q2 2015	Q1 2015
Gross Profit	Q1 2016	Q1 2015	YoY % 1		YoY % 1	YoY % 1	YoY % 1	YoY % 1
Contract	£38.2m	£34.9m	+11%		+10%	+20%	+17%	+24%
Permanent	£19.8m	£18.6m	+9%		-3%	+1%	+4%	+6%
Group	£58.0m	£53.5m	+10%		+5%	+13%	+12%	+17%
UK&I	£16.0m	£15.9m	-		-6%	+5%	+9%	+13%
Continental Europe	£27.5m	£24.2m	+20%		+13%	+18%	+11%	+14%
USA	£10.7m	£9.0m	+14%		+12%	+31%	+31%	+38%
Asia Pac & Middle East	£3.8m	£4.4m	-13%		-13%	-15%	-7%	+16%
Group	£58.0m	£53.5m	+10%		+5%	+13%	+12%	+17%
ICT	£26.0m	£22.2m	+20%		+15%	+21%	+17%	+22%
Life Science	£11.5m	£9.7m	+18%		+16%	+21%	+24%	+15%
Energy	£4.8m	£7.3m	-34%		-37%	-25%	-18%	+14%
Other Sectors 3	£15.7m	£14.4m	+12%		+6%	+18%	+12%	+8%
Group	£58.0m	£53.5m	+10%		+5%	+13%	+12%	+17%
Contract / Perm Split
Contract	66%	65%
Permanent	34%	35%
	100%	100%
Geographical Split
UK&I	28%	30%
Continental Europe	47%	45%
USA	18%	17%
Asia Pac & Middle East	7%	8%
	100%	100%
Sector Split
ICT	45%	41%
Life Science	20%	18%
Energy	8%	14%
Other Sectors 3	27%	27%
	100%	100%
			Q1 2016		Q4 2015	Q3 2015	Q2 2015	Q1 2015
Operating Metrics	Q1 2016	Q1 2015	YoY %		YoY %	YoY %	YoY %	YoY %
Contract Runners 2
UK&I	2,795	2,893	-3%		-3%	-3%	+3%	+12%
Continental Europe	3,702	3,070	+21%		+24%	+29%	+29%	+27%
USA	1,241	1,049	+18%		+21%	+36%	+44%	+73%
Asia Pac & Middle East	422	397	+6%		-9%	+0%	+8%	+53%
Group	8,160	7,409	+10%		+11%	+15%	+19%	+27%
1 At constant currency
2 Period end number of contractors onsite with clients
3 Other Sectors include Banking & Finance and Engineering

Q1 Group gross profit ("GP") increased by 10%* YoY (Q4: +5%*). 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%*. Headcount build YoY remained relatively low as we continued to right size our Energy business, with period end sales headcount up 8% YoY and broadly in line with year-end.

Contract continues to deliver a strong performance, with GP up 11%* YoY (and up 15%* excluding Energy). A large proportion of this growth was driven by Continental Europe up 17%* and the USA up 20%*.

Permanent GP was up 9%* YoY and up 21%* excluding Energy, with particularly strong growth in DACH and Benelux, up 31%* and 15%* respectively. However, we expect the Group Permanent growth rate to moderate in Q2. Consistent with our strategic focus, Permanent productivity per sales head was up 16%* YoY in Q1, with average heads down 6%.

Average Group sales heads were up 6% YoY. UK&I sales headcount was down 1% YoY, Continental Europe was up 8%, USA was up 32% and Asia Pacific & Middle East was down 19% reflecting headcount reductions in its Energy business. Contract consultant headcount represented 59% of total consultant headcount at the end of the quarter (2015: 54%). 

The Group has a network of 43 offices in 15 countries, of which 31 are outside the UK. The Group generated 72% of Gross Profit for the period from markets outside the UK&I (2015: 70%).

SThree remains in a strong financial position. Net debt at 29 February 2016 was circa £11m (28 February 2015: £25m net debt). 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 (8314946)

A replay facility will be available for seven days on [phone] / Access Pin: 8314946

The Group will issue its trading update for the six months ended 31 May 2016 on 10 June 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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