SThree: FY17 Trading Update

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 SThree (STHR) 
SThree: FY17 Trading Update 
 
15-Dec-2017 / 07:00 GMT/BST 
Dissemination of a Regulatory Announcement that contains inside information 
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group. 
The issuer is solely responsible for the content of this announcement. 
 
15 December 2017 
 
    FY17 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 2017. 
 
         Highlights 
 
  · Strong finish to the year with Group gross profit ("GP") up 8%* in Q4 
 
  · Excellent Q4 performance in Continental Europe up 16%*, including 
  Contract up 24%* 
 
  · Adjusted profit before tax for the year expected to be slightly ahead of 
  current market consensus 
 
  · Group GP up 4%* for FY17 
 
    · Strong growth in USA, up 18%*, with Permanent up 12%* and Contract up 
    21%* 
 
    · Robust growth in Continental Europe up 9%* driven by Netherlands up 
    20%* YoY 
 
    · Continued recovery in Energy up 25%* and solid growth in Life Sciences 
    up 7%* 
 
    · 80% of Group GP generated from markets outside the UK&I (2016: 75%) 
 
    · UK&I continued to be challenging, impacted by IR35 in the public 
    sector 
 
  · Contract GP up 10%* 
 
    · Growth across all sectors 
 
    · Continental Europe up 17%* and USA up 21%* 
 
    · Strong exit rate on Contract, with a new record number of runners at 
    year end, up 12% 
 
  · Permanent GP down 8%*, with average sales headcount down 10% 
 
  · Group period-end sales headcount up 10% YoY and up 7% sequentially vs Q3 
  2017 
 
  1 Market expectations for adjusted profit before tax for the year ended 30 
     November 2017 are in the range of GBP42.0m to GBP45.6m, with a consensus of 
          GBP43.8m 
 
   Gary Elden, Chief Executive, commented: "We have delivered an encouraging 
 overall result for the year, and now expect full year profit to be slightly 
  ahead of consensus. Strong performances in the USA and Continental Europe, 
    particularly from our market-leading business in the Netherlands and our 
  business in Germany, were key to the delivery of this result. Our Contract 
  business continued to perform robustly, with GP increasing by 10%* year on 
  year and with contract runners at the period end reaching in excess of ten 
         thousand, a milestone for the Group. 
 
       "Looking ahead to 2018, the momentum of our Contract business and the 
     strength of our performances in the USA and Continental Europe leave us 
         well-positioned for growth." 
 
Financial 
Highlights - 
Group Gross Profit 
                              FY     Q4   Q3   Q2   Q1 
                             2017   2017 2017 2017 2017 
Gross Profit FY 2017 FY 2016 YoY    YoY  YoY  YoY  YoY 
                             % 1    % 1  % 1  % 1  % 1 
 
Contract     GBP203.4m  GBP173.6m  +10%   +14% +9%  +9%  +7% 
Permanent    GBP84.2m   GBP85.1m   -8%    -5%  -6%  -6%  -14% 
Group        GBP287.6m  GBP258.7m  +4%    +8%  +5%  +4%   - 
 
UK&I         GBP55.6m   GBP64.0m   -14%   -12% -10% -14% -19% 
Continental  GBP150.6m  GBP127.6m  +9%    +16% +6%  +7%  +7% 
Europe 
USA          GBP64.4m   GBP50.7m   +18%   +17% +20% +20% +12% 
Asia Pac &   GBP17.0m   GBP16.4m   -4%    -7%  +1%  +5%  -14% 
Middle East 
Group        GBP287.6m  GBP258.7m  +4%    +8%  +5%  +4%   - 
 
ICT          GBP124.6m  GBP115.8m  +1%    +1%  +1%  +1%  +2% 
Banking &    GBP43.5m   GBP41.7m   -2%    -1%  +1%  -1%  -8% 
Finance 
Energy       GBP26.5m   GBP19.6m   +25%   +51% +35% +23% -8% 
Engineering  GBP25.9m   GBP23.3m   +5%    +11% +5%  +3%  -1% 
Life         GBP62.4m   GBP54.3m   +7%    +13% +3%  +7%  +4% 
Sciences 
Other3       GBP4.7m   GBP4.0m   +15%   +19% +24% +13% +4% 
Group        GBP287.6m  GBP258.7m  +4%    +8%  +5%  +4%   - 
 
Contract / 
Perm Split 
Contract       71%     67% 
Permanent      29%     33% 
              100%    100% 
 
Geographical 
Split 
UK&I           20%     25% 
Continental    52%     49% 
Europe 
USA            22%     20% 
Asia Pac &     6%      6% 
Middle East 
              100%    100% 
 
Sector Split 
ICT            44%     45% 
Banking &      15%     16% 
Finance 
Energy         9%      8% 
Engineering    9%      9% 
Life Science   22%     21% 
Other          1%      1% 
              100%    100% 
 
                              FY     Q4   Q3   Q2   Q1 
                             2017   2017 2017 2017 2017 
Operating    FY 2017 FY 2016 YoY    YoY  YoY  YoY  YoY 
Metrics                       %      %    %    %    % 
 
Contract 
Runners2 
UK&I          2,616   2,663  -2%    -2%  -7%  -6%  -8% 
Continental   5,535   4,572  +21%   +21% +18% +19% +19% 
Europe 
USA           1,552   1,363  +14%   +14% +24% +23% +14% 
Asia Pac &     494     480   +3%    +3%  +19% +25% +19% 
Middle East 
Group        10,197   9,078  +12%   +12% +11% +12% +9% 
 
1 *At constant 
currency 
2 Period-end number of contractors 
onsite with clients 
3 Other includes Procurement & Supply 
Chain and Sales & Marketing 
 
         Business performance 
 
         Group GP for the year was up 4%* as we experienced strong growth in 
         Continental Europe and the USA, while UK&I and APAC & ME remained 
         challenging. 
 
Contract GP was up 10%*, with growth across all sectors. Contract growth was 
         driven by Continental Europe, which was up 17%* and by USA up 21%*. 
       Continental Europe and USA combined now represent 70% of our contract 
         runners (2016: 65%). 
 
Permanent GP was down 8%*, with average sales headcount down 10%. USA posted 
  a 12%* increase, driven by supportive Energy and Banking markets. This was 
   offset by declines in all other regions, with Continental Europe down 7%* 
and UK&I down 22%*. Our Permanent productivity per head improved by 3%* over 
         last year. 
 
  Group period end sales headcount was up 10% to 2,257, with Contract up 15% 
   and Permanent up 3%. Contract represented 65% of total sales headcount at 
   the period end. Sequentially vs Q3 2017, period end Group sales headcount 
      was up 7%, with Continental Europe up 12%, USA up 4% and UK&I down 2%. 
         Average Group sales heads for the year were down 1%. 
 
         Support functions relocation 
 
       A proposed relocation of our central support functions from London to 
   Glasgow was announced in early November at an estimated total exceptional 
 cost of GBP13m, with circa GBP7m recognised in 2017 as an exceptional item with 
most of the balance expected to be recognised in 2018. Annualised savings of 
          GBP4-5m are anticipated from 2019. 
 
         Foreign exchange impact 
 
 The Group experienced a translational FX benefit of circa GBP19m on GP during 
 the year, as a result of the strengthening of the euro and US dollar versus 
         sterling. 
 
         Balance sheet 
 
 SThree remains in a strong financial position. Net cash at 30 November 2017 
      was circa GBP6m (30 November 2016: GBP10m). The Group has a GBP50m revolving 
 credit facility ("RCF") with HSBC and Citibank, which is committed to 2019. 
 
         Office Network 
 
      The Group has a network of 40 offices in 16 countries, of which 32 are 
   outside the UK. The Group generated 80% of GP for the period from markets 
         outside the UK&I (2016: 75%). 
 
         *at constant currency 
 
 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] 
Passcode: 3205004# 
 
The Group will issue its results for the financial year ended 30 November 
2017 on 29 January 2018. 
 
    - 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 
2,700 employees in sixteen 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. 
 
ISIN:          GB00B0KM9T71 
Category Code: FR 
TIDM:          STHR 
LEI Code:      2138003NEBX5VRP3EX50 
Sequence No.:  5022 
 
End of Announcement EQS News Service 
 

639275 15-Dec-2017 
 
 

(END) Dow Jones Newswires

December 15, 2017 02:03 ET (07:03 GMT)