SThree PLC — Earnings Release 2015

Jun 12, 2015

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RNS Number : 9683P

SThree plc

12 June 2015

12 June 2015

Half Year Trading Update

SThree plc ("SThree" or the "Group"), the international specialist staffing business, is today issuing a trading update for the half year ended 31 May 2015.

Highlights

·     Gross profit ("GP") up 14%* year on year ("YoY")

‐      Strong growth across ICT (+20%*) and Life Sciences (+21%*) offset by weak performance of Energy (-3%*), which, as expected, saw a material decline through the period

‐      Another strong performance in the Americas (up 34%*), which now represents 18% of Group GP (H1 2014: 14%)

·     Good progress on productivity per consultant, up 9%* YoY

·     Contract GP delivered further strong growth up 20%* YoY and accounted for 64% of GP (H1 2014: 60%)

·     Permanent GP up 5%* YoY; with Permanent GP excluding Energy up 10%*

·     Period end sales headcount up 2% YoY and versus the year end

·     Net debt of circa £10m (YE 2014: £9.9m)

Gary Elden, Chief Executive, commented:

"Overall, the Group had a pleasing first half, trading in line with our expectations.  In particular, we continued to see positive results from our investment in Contract and made further progress with our drive to rebuild productivity across Permanent and Contract.

"Contract GP increased by 20%* year on year, as it continued to benefit from greater strategic focus. Contract now accounts for almost two thirds of Group GP. 

"Once again, the Americas business reported a strong performance, growing 34%* year on year driven by expansion of the ICT, Life Sciences and Banking & Finance sectors, in part offset by the weak Energy market. The USA represents one of our most exciting opportunities and we continue to expand and diversify our sector offering in the world's largest specialist STEM staffing market.

"Looking ahead, we believe the trading environment remains positive in the majority of our territories. While the outlook for Energy remains challenging and foreign exchange continues to be a headwind, the Group's strong performance overall demonstrates the inherent benefits of our well-diversified portfolio. The expanded Contract book and improving Permanent performance give us a strong base from which to grow in the seasonally more significant second half of the year."

Key Metrics & Commentary

With effect from the beginning of the current financial year, SThree began reporting quarterly on a three month calendar basis, replacing the thirteen week quarter basis previously adopted.  This change was implemented to improve comparability of periods and to avoid the need for 53 week "rebasing" years such as 2013. 

Financial highlights - Group Gross Profit
Group Gross Profit
			H1 2015		Q2 2015	Q1 2015
Gross Profit	H1 2015	H1 2014 1	YoY % 2		YoY % 2	YoY % 2
Contract	£70.6m	£60.8m	+20%		+17%	+24%
Permanent	£40.0m	£40.1m	+5%		+4%	+6%
Group	£110.5m	£100.9m	+14%		+12%	+17%
UK&I	£33.5m	£30.5m	+11%		+9%	+13%
Continental Europe	£48.4m	£47.9m	+12%		+11%	+14%
Americas	£19.7m	£13.7m	+34%		+31%	+38%
Asia Pac & Middle East	£8.9m	£8.8m	+3%		-7%	+16%
Group	£110.5m	£100.9m	+14%		+12%	+17%
ICT	£45.3m	£40.3m	+20%		+17%	+22%
Energy	£13.3m	£13.9m	-3%		-18%	+14%
Other Sectors 5	£52.0m	£46.7m	+14%		+16%	+11%
Group	£110.5m	£100.9m	+14%		+12%	+17%
Contract / Permanent Split
Contract	64%	60%
Permanent	36%	40%
	100%	100%
Geographical Split
UK&I	30%	30%
Continental Europe	44%	47%
Americas	18%	14%
Asia Pac & Middle East	8%	9%
	100%	100%
Sector Split
ICT	41%	40%
Energy	12%	14%
Other Sectors 5	47%	46%
	100%	100%
			H1 2015		Q2 2015	Q1 2015
Operating Metrics	H1 2015	H1 2014 1	YoY % Var		YoY % Var	YoY % Var
Contract Runners 3
UK&I	2,836	2,745	+3%		+3%	+12%
Continental Europe	3,333	2,586	+29%		+29%	+27%
Americas	1,173	817	+44%		+44%	+73%
Asia Pac & Middle East	373	345	+8%		+8%	+53%
Group	7,715	6,493	+19%		+19%	+27%
Permanent Placements 4
UK&I	948	801	+17%		+18%	+17%
Continental Europe	1,268	1,303	-1%		-2%	+0%
Americas	353	375	-2%		-8%	+6%
Asia Pac & Middle East	497	578	-14%		-15%	-12%
Group	3,066	3,057	+2%		+0%	+3%
1 Prior year numbers are on a 13 week quarter basis, variances at constant currency are calculated against restated numbers on a calendar month basis.
2 At constant currency
3 Period end number of contractors onsite with clients and being billed
4 Excludes Retainers
5 Other Sectors include Banking & Finance, Engineering and Life Sciences

GP growth was strong in the first half up 14%* YoY, with Q2 GP up 12%*, versus growth of 17%* in Q1 2015. Q2 GP was impacted by the continuing weak activity in the Energy market, while all other sectors performed strongly with GP excluding Energy up 17%* YoY in Q1 and up 16%* in Q2.  Average consultant headcount for the half year was up 5% YoY.  We continue to experience foreign exchange headwinds, with Euro weakness only partially offset by a stronger US dollar.

Contract continued to perform strongly in the first half, with GP up 20%* YoY for the half year and up 17%* in Q2.  Contract was up YoY in all regions and sectors for the half year, although in Q2 Energy was down 8%* YoY versus up 35%* in Q1. Despite the Energy impact, we saw strong growth in Contract runners, up 19% YoY at period end and up 2% since the November year end peak. Average contractor gross profit per day rates excluding Energy remained robust during the period. Contract consultant average headcount was up 14% YoY.

Permanent GP was up 5%* YoY in the first half and up 4%* in Q2 YoY. In the quarter, the UK&I was up 14%*, Continental Europe up 2%*, Americas up 12%* and Asia Pacific & Middle East down 11%*, reflecting the greater Energy exposure in this region. Average permanent placement fees remained robust. Permanent consultant average headcount was down 4% YoY and up 1% YoY excluding Energy. The Permanent deal pipeline volume at the period end was down 1% YoY, although up 9% excluding Energy.

Group sales headcount at the end of the first half was up 2% both versus the year end and YoY. Year on year UK&I sales headcount was up 2%, Continental Europe was up 2%, Americas was up 30% and Asia Pacific & Middle East was down 24% following a restructuring. Consultant headcount continued to remix towards Contract during the half year, with Contract consultant numbers up 5% and Permanent consultant headcount down 2% since the year end. At the end of the period, Contract consultant headcount represented 55% of total consultant headcount.

SThree remains in a strong financial position. Net debt at the end of the first half was circa £10m. The Group has a £50m revolving credit facility ("RCF") with RBS and HSBC, which is committed to 2019.

* at constant currency and prior year restated to a calendar month basis

SThree is hosting an analyst conference call today at 0830 BST. The details are as follows:

Telephone number:+44 (0) 20 3003 2666

For access to the call please quote passcode SThree

A replay facility will be available for seven days on +44 (0) 20 8196 1998 / Access Pin: 5561348#

The Group will issue its interim results for the six months ended 31 May 2015 on 13 July 2015.

- 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 across a network of 41 offices in 15 countries, of which 29 are outside the UK.

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.

This information is provided by RNS

The company news service from the London Stock Exchange

END

TSTLLFEERDILLIE