SThree : Full Year Results Presentation 2019

BRINGING SKILLED PEOPLE TOGETHER TO BUILD THE FUTURE

FULL YEAR RESULTS PRESENTATION 2019 RESULTS FOR YEAR ENDED

30 NOVEMBER 2019

ABOUT STHREE

STEM

Life Sciences, Technology,

Energy & Engineering,

Banking & Finance

33

Years of experience

3,196

Employees worldwide

*Excludes Ireland

Note 1: Presented on an adjusted basis

FY19

£1.35bn	£342m
Revenue	Net fees
£60m	91%
Operating	Operating
profit	cash flow

2013 - 2019 CAGR

10%	19%	24%
Net fees	OP	Basic
		EPS

FY19

Net fees generated internationally*

Contract

86%

74%

2

WE ARE THE ONLY GLOBAL, PURE-PLAY STEM SPECIALIST

WEARE UNIQUE

BRINGING SKILLED PEOPLE TOGETHER TO BUILD THE FUTURE

STEM

CONTRACT

Diversification

3%

Flexible working

by sector

The short-to-mid term project

20%

26%

23%

work often required or desired

Technology

Life Sciences

45%

from STEM specialist workers

Other

Employed

Freelance

Permanent

Energy &

Banking &

Engineering

Finance

21%

contractor

contractor

11%

51%

GLOBAL FOOTPRINT

UNIQUE OPPORTUNITY

SThree is at the centre of two long term secular trends with

a unique global footprint to maximise this opportunity

4

STRONG PERFORMANCE UNDERPINS RECORD PROFITS FOR THE GROUP

Record profits	All time record profit for
	the Group
	£60m
	Adjusted operating profit up 11%
	YoY, ahead of consensus
Net cash ahead of	Net cash position
consensus	as at 30 Nov 2019
	£11m

Net fees generated internationally*

86%

FY 2018: 83% *Excludes Ireland

Increase in dividendStrong performance underpins increase in final dividend

10.2p

2018: 9.8p

5

PERFORMANCE

STRONG TRACK RECORD WITH PROFITS TRIPLED SINCE 2013

NET FEES			OPERATING PROFIT		BASIC EPS
FY2019		£342m		FY2019		£60m		FY2019	33.2p
FY2018				FY2018				FY2018
FY2017				FY2017				FY2017
FY2016				FY2016				FY2016
FY2015				FY2015				FY2015
FY2014				FY2014				FY2014
FY2013	£193m			FY2013	£21m			FY2013	9.1p

10%19%24%

6 year CAGR

6 year CAGR

6 year CAGR

Note 1: Presented on an adjusted basis

7

A RECORD FINANCIAL PERFORMANCE

	Adjusted	Adjusted	Adjusted	Adjusted
	FY 2019	FY 2018	Actual Growth	LFL Growth*
Revenue	£1,345.0m	£1,258.2m	+7%	+6%
Contract net fees	£254.6m	£232.1m	+10%	+8%
Permanent net fees	£87.8m	£89.0m	-1%	-3%
Total net fees	£342.4m	£321.1m	+7%	+5%
Operating profit	£60.0m	£53.9m	+11%	+9%
Conversion ratio	17.5%	16.8%	+0.7%pts	+0.6%pts
Profit before tax	£59.1m	£53.4m	+11%	+9%
Taxation	(£15.9m)	(£13.9m)
Profit after tax	£43.2m	£39.5m	+9%

Note 1: *Growth is at constant currency, on an adjusted basis

Note 2: Conversion ratio = operating profit expressed as a % of net fees

Note 3: 2019 figures are adjusted for the impact of £2.3m of costs in relation to CEO change and senior leadership restructuring

Note 4: 2018 figures are adjusted for the impact of £6.4m of costs in relation to the strategic restructuring and relocation of UK central support functions

Note 5: 2019 adjusted ETR of 26.9%

8

ROBUST BALANCE SHEET

	30 Nov 2019	30 Nov 2018
Intangible assets	£8.0m	£11.6m
Property, plant & equipment	£6.8m	£6.9m
Net working capital	£98.0m	£93.9m
Provisions	(£9.7m)	(£11.2m)
Net tax assets	£3.1m	£4.6m
Net cash / (debt)	£10.6m	(£4.1m)
Net assets	£116.8m	£101.7m

Net working capital

Permanent£5.8m

Contract£92.2m

£98.0m

£50m revolving credit facility with Citibank and HSBC, committed to May 2023

9

IMPROVED FREE CASH FLOW CONVERSION

FY 2019

Uses of free cash

£8.2m(£13.4m)

£60.0m

	£54.8m	(£12.9m)
				(£0.9m)	£41.0m
Operating profit Non-cash items Working capital Operating cash	Tax paid	InterestFree cash flow
	flow
91%2018: 75%		68%2018: 48%
						Free cash flow
	Operating cash flow
	conversion ratio					conversion ratio

Note 1: Presented on an adjusted basis

£4.6m

CAPEX

£1.7m

Restructuring

£1.6m

LTIPs/tracker shares

£19.0m

Dividends

£14.1m

Net increase in cash balance

10

STRONG EPS GROWTH AND A PROGRESSIVE DIVIDEND

		Adjusted	As Reported	Adjusted	As Reported	Adjusted	As Reported
		FY 2019	FY 2019	FY 2018	FY 2018	Actual Growth	Actual Growth
Profit after tax	£43.2m	£41.3m	£39.5m	£34.3m	+9%	+20%
Weighted	For basic EPS	129.9m	129.9m	128.7m	128.7m	+1%	+1%
average	Dilutive impact of share plans	3.7m	3.7m	4.4m	4.4m	-16%	-16%
number of
shares	Fully diluted EPS	133.6m	133.6m	133.1m	133.1m	-	-
	Basic	33.2p	31.8p	30.7p	26.6p	+8%	+19%
EPS
Diluted	32.3p	30.9p	29.7p	25.7p	+9%	+20%
	Interim	5.1p	5.1p	4.7p	4.7p	+9%	+9%
DPS	Final	10.2p	10.2p	9.8p	9.8p	+4%	+4%
	Full Year	15.3p	15.3p	14.5p	14.5p	+6%	+6%

11

FOREIGN EXCHANGE IMPACT

	Year ended	Year ended		YoY exchange
	30 November 2019	30 November 2018		rate movement
	Average	Closing	Average	Closing		Average	Closing
EUR €	1.13	1.17	1.13	1.13	-0.3%	-4.2%
USD $	1.27	1.29	1.34	1.28	+5.2%	-1.4%
	Year ended	Year ended
	30 November 2019	30 November 2018
	Net Fees	Operating profit	Net fees	Operating profit
EUR €	£1,963k	£595k	£1,843k	£549k		Impact of a 1%
USD $	£770k	£230k	£667k	£197k		change per annum

The Group's net fees and operating profit increased by £4.3m and £1.2m respectively, due to a modest

FX tailwind

12

CAPTURING THE OPPORTUNITY

SCALABLE PLATFORM BUSINESS

FOCUSED ON THE MOST ATTRACTIVE STEM STAFFING MARKETS

20,000+

new placements in 2019

6,000+

unique customers placed with in 2019

70+

jurisdictions we operate in

CA

US

NL

UK

FR DE

BE CH

IT

CN

INJP

ZA

AU

SThree

Non

SThree

Note 1: Size of bubble denotes the size of the staffing markets based on 2018 revenue (Source: SIA Global staffing Industry Market Estimates and Forecast - May 2019)

14

OUR OPPORTUNITY IS HUGE

SThree already has successful operations in the most important STEM markets

In highly fragmented markets SThree already has a platform foundation to support significant growth

Non-STEM staffing Market

STEM staffing Market1

SThree revenue

Notes: 1STEM staffing market excludes SThree proportion

Source: SThree Annual Report 2018; SIA; Emsi; Danish Technological Institute; National statistics agencies

SThree market share

£368.6bn	£24.2bn	£32.8bn	£18.8bn	£111bn	£48.7bn
£260.5bn	£18.0bn	£22.3bn	£15.2bn	£76.5bn	£40.7bn

£106.8bn			£10.2bn				£34.3bn
		£5.9bn
						£3.3bn				£8.0bn
£1.26bn	£0.31bn		£0.26bn		£0.24bn		£0.22bn		£0.01bn
GLOBAL	DE		UK		NL		US		JP
		5.0%	2.5%	6.8%	0.6%	0.1%

15

OUR BRANDS PROVIDE FOCUS ON SPECIFIC SKILLS OR SECTORS

Enabling us to build valuable communities and connect with customer needs

Our Candidate Communities

QUALITY ASSURANCE IN LIFE SCIENCES 10K+ global candidates

SALESFORCE.COM

Accounts for 15% of our US placements

Global ERP Implementation

Demand for experienced SAP Programme Leadership underpins strong growth

SOLAR TECHNICIANS WITHIN POWER Power in renewables, transmission & distribution

makes up 19% of US Net Fees in 2019

16

BUSINESS OVERVIEW

WE HAVE A WELL DIVERSIFIED BUSINESS

2019

6%

2018

5%

22%	21%
14%

17%

	31%
32%
	26%
	26%
Continental Europe			Continental Europe
58%	57%

18

GROUP KPI'S

Revenue

Net fees

£1,345 £342.4

million

+6%million

+5%

Contractor Order Book

15%

3 year CAGR

Note 1: All pie charts: Outside FY 2019; Inside FY 2018

Note 2: All variances at constant currency unless otherwise stated

Note 3: Contractor order book represents value of net fees until contractual end dates, assuming all contracted hours are worked

Note 4: Contractor order book restated at FY 2019 average rates

Net fees (£m)

FY19£342.4

FY18£321.1

FY17£287.7

Average sales headcount

NPS

2,423 44

FTE	+7%	2018: 42
Division			Sector

		Technology
		Banking & Finance
Contract		Energy & Engineering
Permanent		Life Sciences
		Other

19

Net fees (£m)

DACH(32% OF GROUP NET FEES)

FY19£109.3

FY18£99.4

FY17£80.8

Revenue

Net fees

Average sales headcount

NPS

£375.7

£109.3

778

51

million

+13%

million

+10%

FTE

+13%

2018: 52

Division

Sector

		Technology
		Banking & Finance
		Energy & Engineering
Contract		Life Sciences
Permanent		Other

Note 1: All pie charts: Outside FY 2019; Inside FY 2018

Note 2: All variances at constant currency unless otherwise stated

20

DACH(32% OF GROUP NET FEES)

Contractor Order Book	20%
	3 year CAGR

• Strong growth of 10% in net fees (Contract up 14%, Permanent up 5%)
• Standout performance from our largest sector, Technology, up 13%
• Two new offices opened in the year (Nuremburg and Hanover)
• Contract net fee per day rate up 3% with Contract margin increasing and above the Group average

Contractor order book points to good H1 growth

Note 1: All variances at constant currency unless otherwise stated

Note 2: Contractor order book represents value of net fees until contractual end dates, assuming all contracted hours are worked

Note 3: Contractor order book restated at FY 2019 average rates

21

Net fees (£m)

FY19

£87.3

FY18

£84.0

BENELUX & FRANCE(26% OF GROUP NET FEES)

FY17

£69.8

Revenue

Net fees

Average sales headcount

NPS

£420.7

£87.3

604

38

million

+7%

million

+4%

FTE

+2%

2018: 29

Division

Sector

		Technology
		Banking & Finance
		Energy & Engineering
Contract		Life Sciences
Permanent		Other

Note 1: All pie charts: Outside FY 2019; Inside FY 2018

Note 2: All variances at constant currency unless otherwise stated

22

BENELUX & FRANCE(26% OF GROUP NET FEES)

Contractor Order Book	17%
	3 year CAGR

• Full year net fee growth of 4% (Contract up 8%, Permanent down 13%)
• Netherlands up 8%, France up 3% and Belgium down 3%
• Our two largest sectors saw strong growth with:
• • Technology up 9%
  • Energy & Engineering up 10%
• A new office opened in Utrecht, The Netherlands

Contractor order book reflects declining market and more challenging growth prospects in H1

Note 1: All variances at constant currency unless otherwise stated

Note 2: Contractor order book represents value of net fees until contractual end dates, assuming all contracted hours are worked

Note 3: Contractor order book restated at FY 2019 average rates

23

Net fees (£m)

FY19

£76.7

FY18

£66.7

USA(22% OF GROUP NET FEES)

FY17

£64.4

Revenue

Net fees

Average sales headcount

NPS

£237.7

£76.7

393

42

million

+5%

million

+9%

FTE

+11%

2018: 53

Division

Sector

		Technology
		Banking & Finance
		Energy & Engineering
Contract		Life Sciences
Permanent		Other

Note 1: All pie charts: Outside FY 2019; Inside FY 2018

Note 2: All variances at constant currency unless otherwise stated

24

USA(22% OF GROUP NET FEES)

Contractor Order Book	21%
	3 year CAGR

• Strong growth of 9% in net fees (Contract up 17%, Permanent down 11%)
• Double digit growth in our two largest sectors
• • Life Sciences up 11%
  • Energy & Engineering up 38%
• Contract net fee per day rate saw strong growth of 19%
• Contract life time value has improved in the year, up 39%

Contractor order book points to good H1 growth

Note 1: All variances at constant currency unless otherwise stated

Note 2: Contractor order book represents value of net fees until contractual end dates, assuming all contracted hours are worked

Note 3: Contractor order book restated at FY 2019 average rates

25

Net fees (£m)

FY19

£48.2

FY18

£53.0

UK&I(14% OF GROUP NET FEES)

FY17

£55.7

Revenue

Net fees

Average sales headcount

NPS

£249.7

£48.2

466

55

million

-7%

million

FTE

flat

2018: 40

Division

Sector

		Technology
		Banking & Finance
		Energy & Engineering
Contract		Life Sciences
Permanent		Other

Note 1: All pie charts: Outside FY 2019; Inside FY 2018

Note 2: All variances at constant currency unless otherwise stated

26

UK&I(14% OF GROUP NET FEES)

Contractor Order Book	-5%
	3 year CAGR

• Management team restructured in Q4
• Net fees declined in the year, down 9% (Contract down 7%, Permanent down 18%)
• Robust growth in our Life Sciences sector with net fees up 4%

Contractor order book highlights challenging market conditions and early impact of IR35 changes

Note 1: All variances at constant currency unless otherwise stated

Note 2: Contractor order book represents value of net fees until contractual end dates, assuming all contracted hours are worked

Note 3: Contractor order book restated at FY 2019 average rates

27

Net fees (£m)

FY19

£20.9

FY18

£18.0

APAC & MENA(6% OF GROUP NET FEES)

FY17

£17.0

Revenue

Net fees

Average sales headcount

NPS

£61.2

£20.9

182

29

million

+1%

million

+12%

FTE

+12%

2018: 39

Division

Sector

		Technology
		Banking & Finance
		Energy & Engineering
Contract		Life Sciences
Permanent		Other

Note 1: All pie charts: Outside FY 2019; Inside FY 2018

Note 2: All variances at constant currency unless otherwise stated

28

APAC & MENA(6% OF GROUP NET FEES)

Contractor Order Book	1%
	3 year CAGR

• Total net fees up 12% (Contract up 6%, Permanent up 16%)
• Japan, our largest country in the region, saw net fee growth of 43%
• Dubai saw strong net fee growth of 15% with Contract up 19%
• Contract margin increased by 3%pts

Note 1: All variances at constant currency unless otherwise stated

Note 2: Contractor order book represents value of net fees until contractual end dates, assuming all contracted hours are worked

Note 3: Contractor order book restated at FY 2019 average rates

29

STRATEGY & OUTLOOK

2019 - A MILESTONE YEAR

	Bolstering our	Implementation of		Continued to build
Embedding our	teams and	strategic process	Focus on customer
our global
purpose	development of	and new strategic	centricity
infrastructure
	strategy	pillars

31

OUR STRATEGIC PILLARS

Leveraging our position at the centre of STEM to deliver sustainable value to our candidates and customers

Utilise unique position of being a pure play STEM talent recruiter to provide clients and candidates with insights into the changing nature of work

Create a world class operational platform through data, technology and infrastructure

Embrace new technologies to drive efficiencies and scale across our platform business

To be a leader in

markets we choose

to serve

Continuous improvement to strategic approach to deliver STEM talent in our chosen geographies

Find, develop, retain

great people

Engagement across the Group focusing on communication, employee value proposition and shaping culture

32

GROUP AMBITION

2024

Market share of	To grow Group
STEM	market share by
	50%
	To 3%1by 2024 (2018: 2%)
Free cash flow (FCF)	To drive a free cash flow
CR%3	CR% of at least
	75%
	2013 to 2018 - FCF CR%: 72%

Conversion ratio (CR%2)

Range of

21-24%

2018: 16.8%

People and society

• To maintain Learning & Development spend at 5% of operating profit
• To grow productivity4per head over the period by 1% - 2% pa
• To reduce our absolute CO2 emissions by 20%

Note 1: In 2018, the Group estimates that it had circa a 2% market share of the addressable STEM market in its core geographies of Germany, NL, USA, UK & Japan. Group turnover in 2018 was £1.3bn, with the core geographies representing circa 80% of Group revenue.

Note 2: Ratio of operating profit to net fees

Note 3: Free cash flow CR% calculated as cash generated from operations less taxes paid and financing costs

Note 4: Productivity expressed as net fees / average total employees

33

OUTLOOK

Broader macro-economic and political uncertainties may well persist, and the

2020trading environment remains similar to Q4. We have the right strategy and our Contract focus will drive another year of progress towards our ambitions

Continued focus on execution in line with our strategy and ambitions as set out in the Capital Markets Day

Well positioned to deliver in our key		#1	Committed to our vision of being the
markets with our resilient and scalable		number one STEM talent provider in
platform business		the best STEM markets

34

FINANCIAL CALENDAR

2020

27 January	Annual results for the year ended 30 November 2019
16 March	Q1 Trading Statement
20 April	Annual General Meeting
15 June	Trading update for the six months ended 31 May 2020
20 July	Interim results for the six months ended 31 May 2020
14 September	Q3 Trading Statement
14 December	Trading update for the year ended 30 November 2020

2021

25 January	Annual results for the year ended 30 November 2020

35

APPENDIX

WORKING CAPITAL DISCIPLINE

A key driver of shareholder value

£1.6bn

£1.4bn

£1.2bn

£1.0bn

£0.8bn

£0.6bn

£0.4bn
5%	4%
£0.2bn	3%	2%	3%	3%
£0.0bn
2007	2008	2009	2010	2011	2012

Strategic focus on Contract	Net working capital
	(NWC) as a % of
	revenue has grown

at a slower rate than revenue

Revenue			NWC as % of revenue

37

HISTORICAL NET FEES AND CONTRACT MARGIN

Full

£192.8m

£218.2m

£235.7m

£258.7m

£287.7m

£321.1m

£342.4m

year

£172.7m

£179.4m

£153.3m

£138.9m

£117.4m

£125.2m

£101.2m

£91.6m

£100.8m

£110.5m

£119.8m

£134.4m

£148.4m

£163.0m

Net fees

2013

2014

2015

2016

2017

2018

2019

20.2%

20.0%

H1

H2

19.9%

20.3%

19.8%

19.9%

19.8%

Contract	2013	2014	2015	2016	2017	2018	2019
margin %

38

HISTORICAL OPERATING PROFIT AND CONVERSION RATIO

Full		£21.0m	£29.8m	£41.5m	£41.3m	£44.9m	£53.9m	£60.0m
year
										£33.5m	£35.4m
									£25.6m
				£27.4m	£26.0m
		£14.3m	£21.4m
								£19.3m	£20.4m	£24.6m
				£14.1m	£15.3m
			£8.4m
		£6.7m
Adjusted	2013	2014	2015	2016		2017	2018	2019
operating
profit						H1		H2

7.1%	10.9%	8.3%	13.7%	12.8%	17.6%	12.8%		16.0%	14.4%	15.6%	13.7%	16.8%	15.1%	17.5%
Adjusted	2013		2014		2015	2016				2017		2018		2019
Conversion
ratio %								HY		FY

39

COST BASE ANALYSIS

Cost base	Payroll costs
8%	86%
6%	14%
2%
6%
78%

				Support services	Sales
Payroll	Property	Advertising	IT & Professional	Other

40

47 OFFICES IN 16 COUNTRIES

USA

USA

Austin

Boston

Chicago

Houston

Minneapolis

New York

San Diego

San Francisco

Washington

UK & IRELAND		CONTINENTAL EUROPE		ASIA PAC & MIDDLE EAST
UK		BELGIUM	GERMANY		AUSTRALIA	SINGAPORE	UAE
Birmingham		Antwerp	Berlin		Melbourne	Singapore	Dubai
Bristol		Brussels	Düsseldorf		Sydney
Glasgow			Frankfurt			JAPAN
London		NETHERLANDS	Hamburg		HONG KONG	Tokyo
Leeds		Amsterdam	Hannover		Hong Kong
Manchester		Eindhoven	Munich
		Rotterdam	Nuremburg
IRELAND		Utrecht	Stuttgart
Dublin		LUXEMBOURG	SWITZERLAND
		Luxembourg	Zurich
		FRANCE	AUSTRIA
		Lille	Vienna
		Lyon
		Paris
		Toulouse
		SPAIN
		Barcelona

41