SThree: Half Year Trading Update

20 June 2022

SThree plc

Half Year Trading Update

Double-digit net fee growth across all regions and sectors

Trading ahead of market expectations

SThree plc ("SThree" or the "Group"), the only global pure-play specialist staffing business focused on roles in Science, Technology, Engineering and Mathematics (STEM), is pleased to issue a trading update for the half year ended 31 May 2022.

Highlights                             

• Q2 net fees up 23% YoY(1) against a non-Covid impacted comparative period, demonstrating excellent new placement activity
• H1 highlights:
  • Group net fees up 25% YoY
  • Very strong YoY growth in our three largest markets: Germany up 22%, USA up 21%, Netherlands up 41%
  • Largest three countries represent 73% of Group net fees, with Germany representing 31%, USA 25% and Netherlands 17%
  • Strong double digit growth across all our key sectors: Technology up 30%, Life Sciences up 16% and Engineering up 27%
  • Contract and Permanent net fees for H1 up 30% and 11% respectively
  • Contractor order book(2) up 35% YoY, providing good visibility into H2 and underpinning continued confidence in the near term outlook
• Robust balance sheet with net cash at 31 May 2022 of £48m (31 May 2021: £48m)
• The Board now expects that profit before tax for the 12 months to 30 November 2022 will be at least 5% ahead of market consensus(3).

Timo Lehne, Chief Executive, commented:

Our Group has delivered another excellent quarter of growth, driven by successes across all key regions and STEM disciplines. As a result of this strong performance, we are now trading ahead of market expectations for the 2022 full year.

Our business had largely recovered from the pandemic in Q2 last year, so this is the first period in which we have been able to provide a true like-for-like comparison; net fee growth of 23% in Q2 is therefore a significant achievement. Our focus on flexible working, both independent and employed contractors, is delivering, and for the second consecutive quarter we are delighted to be able to report that all regions, including the UK, have demonstrated clear positive momentum.

Good progress has also been made in the execution of our strategy, with the planned investment in our people, talent acquisition and digital infrastructure moving forward as planned. This investment is designed to underpin our long-term success, with most of the cost in the current year falling in the second half of the year, as expected.

We are mindful of the macro-economic uncertainties which are currently being felt across our key regions and beyond, with all developments monitored closely, alongside lead indicators of the Groups performance. However, the demand from our clients for people with STEM skills, together with our strong contractor order book, underpins our confidence in the future.  

Business performance highlights

The Group delivered a very strong performance in the first half of the year with net fee growth of 25% YoY; growth of 29% in Q1 was followed by 23% growth in Q2. The performance in Q2 is particularly pleasing as it is against a tough comparative quarter in the prior year, the first true like-for-like, non-Covid impacted comparison we have been able to report for two years.

Contract

• Very strong net fee growth, up 30% YoY in the first half.

• Regionally, DACH was up 32% YoY, EMEA excl. DACH up 31%, USA up 28% and APAC up 28%.
• Strong growth across all key sectors with Technology up 35% YoY, Life Sciences up 25% and Engineering up 28%.

• The contractor order book was up 35% YoY (H1 2021: up 33%), reflecting the ongoing high demand for skilled contractors across our markets which underpins our positive outlook.

Permanent

• Permanent net fee income for the first half was up 11% YoY in the first half.
  • DACH delivered net fee growth of 8% YoY, EMEA excl. DACH reported strong growth of 11%, USA in line with the prior year, and APAC up 51%.
  • Growth was driven by Technology up 14% and Engineering up 17% YoY, whilst Life Sciences was down 6% versus very strong YoY comparators.

Headcount and productivity

• Group average headcount in the first half was up 10% YoY, with period-end headcount up 13% YoY.
• Sequentially, Group period-end headcount was up 2% vs Q1 2022 and up 4% vs the FY21 year-end position.
• We continue to invest in talent acquisition in line with our strategy, primarily hiring Contract consultants in specific niches within our chosen sectors and markets.
• Based on record net fee growth we have seen another strong period with productivity up 14% YoY. As previously guided, we expect productivity to remain above pre-pandemic levels, though it will reduce over time from the current exceptional levels, as the Groups headcount grows.

Regional highlights

DACH saw net fees grow 24% YoY in the first half

• Germany, which accounts for 89% of DACH net fees, delivered strong net fee growth of 22% driven by:
  • Technology up 28% with higher demand for data scientists, open-source software development and leadership & strategic roles.
  • Engineering up 27%, due to demand for construction management and automation roles.
• Very strong growth in Contract up 32%.

EMEA excl. DACH saw net fees grow 28% YoY in the first half

• The Netherlands, our largest country in the region (46% of net fees), saw a very strong performance with net fees up 41%, driven by:
  • Engineering up 44% with increased demand for process engineers, electrical engineers and health and safety advisors.
  • Technology up 40%, driven by higher demand for project managers, front end developers, ERP consultants and business intelligence & data science roles.
• Following a strong start to the year, the UK continued its momentum by delivering net fee growth of 28% in the first half. This was driven by Technology up 38%, as demand increased for roles within IT leadership and strategy, development and testing, cloud and data & business intelligence.

USA saw net fees grow 21% YoY in the first half

• Strong growth in Contract, up 28%
• Engineering up 27%, with a particular focus on roles within project management.
• Technology up 25%, driven by increased demand for Adobe, mobile applications, software development and Salesforce.
• Life Sciences, our largest sector in the USA (46% of net fees), saw net fees grow 16%, driven by demand for roles within clinical operations, quality assurance and product development.

APAC saw net fees grow 47% YoY in the first half

• Japan, which accounts for 71% of APAC net fees, saw net fees grow by 44%.
• Growth was driven by Technology up 30%, driven by increased demand for technical sales roles and commercial candidates. 

Balance sheet

SThree has maintained its robust financial position, with net cash as at 31 May 2022 of £48m (31 May 2021: net cash £48m; 30 November 2021: net cash £58m).

As at 31 May 2022 the Group had total accessible liquidity of £103m. This is comprised of £48m net cash, a £50m revolving credit facility (RCF) and a £5m overdraft facility (RCF and overdraft not drawn down). In addition, SThree has a £20m accordion facility as well as a substantial working capital position, reflecting net cash due to SThree for placements already undertaken.

Analyst conference call

SThree is hosting a conference call for analysts and investors today at 8.30am to discuss the H1 2022 trading update. If you would like to register for the conference call, please contact SThree@almapr.co.uk.

The Group plans to issue its interim results for the six months ended 31 May 2022 on 25 July 2022.

(1)  All YoY growth rates in this announcement are expressed at constant currency

(2)  The contractor order book represents value of net fees until contractual end dates, assuming all contractual hours are worked

(3)  Current consensus PBT expectation is £66.2m for FY22. Source: SThree compiled consensus

(4)  DACH - Germany, Austria and Switzerland

(5)  EMEA excl. DACH - UK, Ireland, Belgium, Netherlands, Luxembourg, France, Spain and Dubai

(6)  ROW - All other countries we operate in excluding Germany, Netherlands, UK, USA and Japan

- Ends -

The information contained within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulation (Regulation (EU) No.596/2014) as it forms part of UK Domestic Law by virtue of the European Union (Withdrawal) Act 2018.
 

Notes to editors

SThree plc brings skilled people together to build the future. We are the only global pure-play specialist staffing business focused on roles in Science, Technology, Engineering and Mathematics (STEM), providing permanent and flexible contract talent to a diverse base of over 8,000 clients across 14 countries. Our Groups c.2,800 staff cover the Technology, Life Sciences and Engineering sectors. SThree is part of the Industrial Services sector. We are listed on the Premium Segment of the London Stock Exchanges Main Market, trading with ticker code STEM.

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.