SThree : Half Year Results Presentation

BRINGING SKILLED PEOPLE TOGETHER TO BUILD THE FUTURE

HALF YEAR RESULTS PRESENTATION 2020 RESULTS FOR THE HALF YEAR ENDED

31 MAY 2020

1

WE BRING SKILLED PEOPLE TOGETHER TO BUILD THE FUTURE

STEM	FLEXIBLE WORKING
	The short-to-mid term project
	work often required or desired
	from STEM specialist workers

Technology			Life Sciences				Employed		Freelance		Permanent
Engineering		Banking &
			Finance				contractor		contractor

GLOBAL FOOTPRINT

UNIQUE OPPORTUNITY

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

a unique global footprint to maximise this opportunity

2

WE ARE THE ONLY GLOBAL PURE-PLAY STEM SPECIALIST

WE ARE UNIQUE

3

RESILIENT PERFORMANCE

DRIVEN BY OUR UNIQUE FOCUS ON STEM AND FLEXIBLE WORKING

Operating		Revenue
profit
£13.3m		£603m
adjusted operating		down 7% YoY
profit down 49% YoY
Net fees		Operating
		cash flow
£151m		321%
down 7% YoY		2019: 49%

Strong	Net cash
balance	position
sheet	as at 31 May
	2020
	£31m

31 May 2019: net debt £8m

Increase in

Contract

business

mix76%

HY 2019: 74%

Note 1: YoY movement is at constant currency

Net fees generated internationally 88%

HY 2019: 87%

International represents our businesses outside the UK

COVID-19

5

OUR INITIAL RESPONSE

1. Ensure health & safety of all our colleagues, contractors, candidates and clients
2. Maintain strong financial position
3. Be ready to build on our unique position as the only globalpure-play STEM specialist

Initial response

3 phases of response to the COVID-19 crisis by SThree

COST SAVING INITIATIVES

Hiring freeze - managing headcount where appropriate Discretionary costs postponed

Non-essential CAPEX postponed

Salaries of Board and senior executive team reduced by 20% Executive directors foregoing FY 2020 bonuses

Various government schemes adopted

LIQUIDITY PLANNING

£50m RCF fully drawn down £50m CCFF available

2019 final dividend withdrawn £5m overdraft facility

£20m accordion

Ongoing management

Recovery phase

6

DELIVERING ON OUR PURPOSE

BRINGING SKILLED PEOPLE TOGETHER TO BUILD THE FUTURE

Trends

• Management of a more flexible and resilient workforce of the future
• Re-buildingsupply chains with a focus on resilience and sustainability
• Digital transformation acceleration

What has been key in this time

• Local knowledge
• Niche STEM expertise
• Focused on helping customers achieve specific objectives

Types of projects undertaken

US business worked closely with major client delivering key medical devices including ventilators and protective equipment

DACH business placed candidates within Life Sciences who are leading the research and efforts to find a vaccine for COVID-19

Placed nearly 300 contractors with the NHS

7

NAVIGATING THROUGH AND BEYOND THE PANDEMIC

Adapting to the continued volatile environment

Acceleration of trends

Right strategy - investing in the future

WHY WE ARE RESILIENT

Experienced management team

Centre of two long term secular trends

• STEM
• Flexible working - Contract Our business model
• Contract focused business
• Counter cyclical cash dynamics Visibility of earnings
• Contractor order book, a function of our recurring

revenue business model

Geographically diversified

• Strong in our chosen regions Flexible cost base

8

PERFORMANCE

9

A TALE OF TWO QUARTERS

The Group's robust performance in Q1 was outweighed by the impact of the COVID-

19 pandemic in Q2 across all of our territories and sectors

Note 1: YoY movement is at constant currency

10

IMPACT OF COVID-19 IN Q2 IMPACTS OVERALL PERFORMANCE

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

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

Note 3: HY 2020 figures are adjusted for the impact of £0.4 million in net exceptional strategic restructuring income

Note 4: HY 2019 figures are adjusted for the impact of £1.3 million in net exceptional strategic restructuring costs and CEO change costs.

Note 5: 2020 adjusted ETR of 39.7%

11

OPERATING PROFIT BRIDGE

12

ROBUST BALANCE SHEET

	31 May 2020	30 Nov 2019
Intangible assets	£6.6m	£8.0m
Property, plant & equipment	£7.3m	£6.8m
Net working capital	£88.3m	£98.0m
Net lease liabilities	(£2.6m)	£0.0m
Provisions	(£10.9m)	(£9.7m)
Net tax assets	£4.0m	£3.1m
Net cash	£31.0m	£10.6m
Net assets	£123.7m	£116.8m

Net working capital

Permanent£3.5m

Contract£84.8m

£88.3m

£50m revolving credit facility with Citibank and HSBC, committed to May 2023, fully drawn down £50m Bank of England's COVID Corporate Financing Facility, not yet drawn down

13

WORKING CAPITAL UNWIND DRIVES IMPROVED FREE CASH FLOW CONVERSION

Operating cash flow	Free cash flow conversion
conversion ratio	ratio

14

EARNINGS PER SHARE

		Adjusted	As Reported	Adjusted	As Reported	Adjusted	As Reported
		HY 2020	HY 2020	HY 2019	HY 2019	Actual Growth	Actual Growth
Profit after tax	£7.5m	£7.8m	£17.5m	£16.5m	-57%	+53%
Weighted	For basic EPS	132.0m	132.0m	129.9m	129.9m	+2%	+2%
average	Dilutive impact of share plans	3.3m	3.3m	5.3m	5.3m	-38%	-38%
number of
shares	Fully diluted EPS	135.3m	135.3m	135.2m	135.2m	-	-
EPS	Basic	5.7p	5.9p	13.5p	12.7p	-58%	-54%
Diluted	5.5p	5.8p	13.0p	12.2p	-58%	+52%
DPS	Interim	-	-	5.1p	5.1p	-	-

15

FOREIGN EXCHANGE IMPACT

	Half year ended	Half year ended		YoY exchange
	31 May 2020	31 May 2019		rate movement
	Average	Closing	Average	Closing		Average	Closing
EUR €	1.16	1.11	1.15	1.13	-1.6%	+1.5%
USD $	1.29	1.23	1.30	1.26	+0.9%	+2.3%
	Half year ended	Half year ended
	31 May 2020	31 May 2019
	Net Fees	Operating profit	Net fees	Operating profit
EUR €	£863k	£204k	£940k	£276k		Impact of a 1%
USD $	£355k	£85k	£356k	£103k		change per annum

The Group's net fees and operating profit decreased by £977k and £165k respectively, due to a modest

FX headwind

16

BUSINESS OVERVIEW

17

OUR BUSINESS IS GEOGRAPHICALLY DIVERSE

		DACH		DACH
		EMEA excl DACH		EMEA excl DACH
		USA		USA
		APAC		APAC
Note 1: Business mix is based on % of net fees

18

GROUP KPIS

-14%

YoY

Technology

Banking & Finance

Contract

Engineering

Permanent

Life Sciences

Other

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Net fees (£m)

DACH(33% OF GROUP NET FEES)
	Revenue			Net fees			Average sales			NPS
							headcount
	£176.0			£50.1		829			51
	million	flat		million	- 1%	FTE	+12%		2019: 54
Division						Sector

			Technology
			Banking & Finance
	Contract		Engineering
		Life Sciences
	Permanent
		Other
Note 1: All pie charts: Outside HY 2020; Inside HY 2019
Note 2: All variances at constant currency unless otherwise stated

20

DACH(33% OF GROUP NET FEES)

Contractor Order Book	-9%
	YoY

Contractor order book down 9% in HY 2020

Austria

Switzerland

Germany

• HY net fees down 1% with Q1 up 9% and Q2 down 9% (Contract flat, Permanent down 1%)
• Technology up 1%, (Q1 up 11% and Q2 down 6%), driven by strong performance in Infrastructure and Software development
• Life Sciences up 4% with exceptional Q1 and
  Q2 (down 6%) impacted by some clients' ability to run clinical trials and manufacture drugs
• Average sales headcount up 12% as we continue to invest in the region across all sectors

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 HY 2020 average rates

21

Net fees (£m)

EMEA EXCL DACH(40% OF GROUP NET FEES)

	Revenue			Net fees			Average sales			NPS
							headcount
	£303.3		£60.5		1,015			43
	million	-10%		million	- 12%	FTE	-10%		2019: 39
Division						Sector

			Technology
			Banking & Finance
	Contract		Engineering
		Life Sciences
	Permanent
		Other
Note 1: All pie charts: Outside HY 2020; Inside HY 2019
Note 2: All variances at constant currency unless otherwise stated

22

EMEA EXCL DACH(40% OF GROUP NET FEES)

Contractor Order Book	-29%
	YoY

Contractor order book decline driven by UK&I and the Netherlands

Other

Dubai

BelgiumNetherlands

France

UK

• Net fees down 12% with Contract down 9% and Permanent down 22%
• Challenging performance in the UK with net fees down 14% (Q1 down 8% and Q2 down 19%)
• The Netherlands, our largest country in the region, delivered a resilient performance in H1 down 5%
• Life Sciences in the Netherlands was up 10% driven by increased placements across Quality Assurance and Medical Devices
• Average headcount down 10% with UK down 10% and the Netherlands down 11%

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 HY 2020 average rates

Note4: Other includes: Ireland 2%, Luxembourg 2%, Spain 1%

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Net fees (£m)

USA(24% OF GROUP NET FEES)
	Revenue			Net fees			Average sales			NPS
							headcount
	£109.5		£35.4		423			53
	million	-5%		million	- 1%	FTE	+15%		2019: 63
Division						Sector

		Technology
		Banking & Finance
		Engineering
Contract		Life Sciences
Permanent		Other

Note 1: All pie charts: Outside HY 2020; Inside HY 2019

Note 2: All variances at constant currency unless otherwise stated

24

USA(24% OF GROUP NET FEES)

Contractor Order Book	+8%	•	Resilient performance across both quarters

YoY

with H1 down 1%

• Life Sciences up 13% driven by increased activity in Quality Assurance, as more new drugs were manufactured

• Technology up 4% with good growth in Tech skills that support digital transformation such as Mobile Applications and Software Development

• Key area of focus for the Group with average headcount up 15%

Contractor order book growth driven by increased average contractual length

• Contractor order book up 8% driven by increased activity and increased average contractual length

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 HY 2020 average rates

25

Net fees (£m)

APAC(3% OF GROUP NET FEES)

	Revenue			Net fees			Average sales			NPS
							headcount
	£13.8			£5.2		120			40
	million	-26%		million	- 28%	FTE	-20%		2019: 37
Division						Sector

		Technology
		Banking & Finance
Contract		Engineering
Permanent		Life Sciences
		Other

Note 1: All pie charts: Outside HY 2020; Inside HY 2019

Note 2: All variances at constant currency unless otherwise stated

26

APAC(3% OF GROUP NET FEES)

Contractor Order Book	-38%
	YoY

Contractor order book impacted by Covid-19, down 38%

Singapore

Japan

Australia

• H1 net fees down 28% as the region is impacted by the Australian wildfires and the earlier impact ofCovid-19
• Japan, our largest country in the region, was down 24% due to this business being focused on Permanent
• Average headcount was down 20% in the region with Japan headcount down 6%

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 HY 2020 average rates

27

STRATEGY & OUTLOOK

28

OUR STRATEGIC PILLARS

Leveraging our position at	Create a world class	To be a leader in markets	Find, develop, retain great
the centre of STEM to deliver	operational platform	we choose to serve	people
sustainable value to our	through data, technology
candidates and customers	and infrastructure

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

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

Continuous improvement to	Engagement across the
strategic approach to deliver	Group focusing on
STEM talent in our chosen	communication, employee
geographies	value proposition and shaping
	culture

29

DESPITE CURRENT ENVIRONMENT STILL MAKING PROGRESS AGAINST GROUP AMBITIONS

2024

•

•

•

30

THE MARKET OUTLOOK DRIVING OUR STRATEGY

Secular trends are accelerating - We have positioned ourselves to capitalise on the growing opportunity

Volatility will persist - we will adapt to whatever environment is presented

'Building back better' has never been more important

• our purpose aligns us with this sentiment

Customer insights*

"We've seen a push to make sure our infrastructure team is properly staffed. It's also pushed us to make a bigger push towards the cloud so have been hiring a lot in the transformation space."

"We need to digitalize our customer service effectively."

"…Clinical trials were paused, and we expect them to go live… and that will open up more

across the board in Quality, R&D, Project Management and Regulatory."

31

INVESTING IN AREAS THAT WILL DRIVE GROWTH

People

• Group average headcount up 2% YoY
• • DACH up 13%
  • USA up 15%
  • Global Support up 9%
• Digital learning platform

Technology

• Building IT infrastructure
• Microsoft Enterprise agreement
• Salesforce
• Virtual interview and placement solution

Digital enablement

• Continuing our use of data and insights to drive the business
• Investing in the right tools and technology

Insights

• Data
• STEM-series

Taking market share

• Customer and candidate acquisition
• Candidate communities

We came into this period selectively investing in the right markets and will continue to do so

to position us for the future.

32

OUTLOOK - OUR FOCUS GOING FORWARD

Continued disciplined cost management

Continuing to engage with candidates and with clients to understand trends that create products of the future

Driving operational improvement		Investing in the right markets
within our core businesses

33

FINANCIAL CALENDAR

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

34

APPENDIX

35

HISTORICAL NET FEES AND CONTRACT MARGIN

Full	£218.2m	£235.7m	£258.7m	£282.7m	£321.1m	£342.4m	£151.2m
year

Net fees

Contract margin %

36

HISTORICAL OPERATING PROFIT AND CONVERSION RATIO

Full	£29.8m	£41.5m	£41.3m	£44.9m	£53.9m	£60.0m	£13.3m
year

Adjusted operating profit

Adjusted Conversion ratio %

37

COST BASE ANALYSIS

38

WORKING CAPITAL ACTIONS

CASH COLLECTION

• Headcount redeployment initiative - support pre collection
• Cash collection postCovid-19 robust - targets achieved consistently and DSO improved by 3 days

CREDIT RISKS & DISPUTES

• Credit risk reviews taking place in order of priority
• Dun & Bradstreet risk ratings applied across global portfolio
• Dispute resolution task force mobilised - 29% of ringfenced dispute cases resolved to date - root cause data produced per region
• Exploring automation opportunities, process enhancements, policy changes

BAD DEBT / PROVISIONS

• Bad debt cost up £0.3m to £1.3m
• Provision increase of £1.0m to £5.0m (FY 2019: £4.0m)

D&B Risk Profile

39

IFRS16 IMPACT ON THE INCOME STATEMENT AND BALANCE SHEET

Adjusted

Marginal impact to operating profit of £0.9m and profit before tax of £0.5m

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47 OFFICES IN 16 COUNTRIES

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