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
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Disclaimer
SThree plc published this content on 27 January 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 January 2020 10:44:02 UTC