BRINGING SKILLED PEOPLE TOGETHER TO BUILD THE FUTURE
HALF YEAR RESULTS PRESENTATION 2020 RESULTS FOR THE HALF YEAR ENDED
31 MAY 2020
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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
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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
- Ensure health & safety of all our colleagues, contractors, candidates and clients
- Maintain strong financial position
- 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2019 final dividend withdrawn £5m overdraft facility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 |
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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
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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
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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
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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%
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OPERATING PROFIT BRIDGE
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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 |
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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 | - | - | |
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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
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BUSINESS OVERVIEW
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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 |
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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
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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 |
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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
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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
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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
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STRATEGY & OUTLOOK
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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 |
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DESPITE CURRENT ENVIRONMENT STILL MAKING PROGRESS AGAINST GROUP AMBITIONS
2024
•
•
•
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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."
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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.
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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 | ||
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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 |
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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 %
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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
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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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SThree plc published this content on 20 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 July 2020 09:00:10 UTC