Sthree Plc · LSE:STEM
Sthree — H1 2020 Earnings Presentation
41 slides from Sthree's earnings presentation, 2020
Slide 1: Bringing Skilled People Together to Build the Future
BRINGING SKILLED PEOPLE TOGETHER TO BUILD THE FUTURE HALF YEAR RESULTS PRESENTATION 2020 RESULTS FOR THE HALF YEAR ENDED 31 MAY 2020 1
Slide 2: We Bring Skilled People Together to Build the Future
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 Engineering Banking & Employed Freelance Permanent Finance contractor contractor GLOBAL FOOTPRINT UNIQUE OPPOR
Slide 3: We Are the Only Global Pure-Play STEM Specialist
WE ARE THE ONLY GLOBAL PURE-PLAY STEM SPECIALIST WE ARE UNIQUE 3
Slide 4: Resilient Performance Driven by Our Unique Focus on STEM and Flexible Working
RESILIENT PERFORMANCE DRIVEN BY OUR UNIQUE FOCUS ON STEM AND FLEXIBLE WORKING Operating Revenue Strong Net cash profit balance position sheet as at 31 May £13.3m £603m 2020 adjusted operating profit down 49% YoY down 7% YoY £31m 31 May 2019: net debt £8m Net fees Increase in Operating Contract cash
Slide 5: COVID-19
g|three® COVID-19
Slide 6: Our Initial Response
OUR INITIAL RESPONSE COST SAVING INITIATIVES 1. Ensure health & safety of all Hiring freeze – managing headcount where appropriate our colleagues, contractors, Discretionary costs postponed candidates and clients Non-essential CAPEX postponed Salaries of Board and senior executive team reduced by 20
Slide 7: Delivering on Our Purpose
DELIVERING ON OUR PURPOSE BRINGING SKILLED PEOPLE TOGETHER TO BUILD THE FUTURE Trends Types of projects undertaken • Management of a more flexible and resilient US business worked closely with major client delivering key workforce of the future medical devices including ventilators and protective •
Slide 8: Navigating Through and Beyond the Pandemic
NAVIGATING THROUGH AND BEYOND THE PANDEMIC Adapting to the continued volatile WHY WE ARE RESILIENT Experienced management team environment Centre of two long term secular trends • STEM Acceleration of trends • Flexible working – Contract Our business model Right strategy – investing in the future •
Slide 9: Performance
PERFORMANCE 9
Slide 10: A Tale of Two Quarters
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
Slide 11: Impact of COVID-19 in Q2 Impacts Overall Performance
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
Slide 12: Operating Profit Bridge
s|three® OPERATING PROFIT BRIDGE Operating profit Permanent Contract HY 2019 net fees net fees Net salaries Note 1: Presented on an adjusted basis (£1.9m) IT costs (£0.3m) Bad debt Nonssalary cost savings £13.3m Operating profit HY 2020
Slide 13: Robust Balance Sheet
ROBUST BALANCE SHEET 31 May 2020 30 Nov 2019 Net working capital Intangible assets £6.6m £8.0m Permanent £3.5m Property, plant & equipment £7.3m £6.8m Net working capital £88.3m £98.0m Contract £84.8m Net lease liabilities (£2.6m) £0.0m Provisions (£10.9m) (£9.7m) £88.3m Net tax assets £4.0m £3.1m N
Slide 14: Working Capital Unwind Drives Improved Free Cash Flow Conversion
WORKING CAPITAL UNWIND DRIVES IMPROVED FREE CASH FLOW CONVERSION Operating cash flow Free cash flow conversion conversion ratio ratio 14
Slide 15: Earnings Per Share
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% For basic EPS 132.0m 132.0m 129.9m 129.9m +2% +2% Weighted average Dilutive impact of share plans 3.3m 3.
Slide 16: Foreign Exchange Impact
FOREIGN EXCHANGE IMPACT The Group’s net fees Half year ended Half year ended YoY exchange 31 May 2020 31 May 2019 rate movement and operating profit decreased by £977k Average Closing Average Closing Average Closing and £165k respectively, EUR € 1.16 1.11 1.15 1.13 -1.6% +1.5% due to a modest FX hea
Slide 17: Business Overview
g|three® BUSINESS OVERVIEW
Slide 18: Our Business Is Geographically Diverse
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
Slide 19: Group KPIs
GROUP KPIS -14% YoY Technology Banking & Finance Engineering Contract Life Sciences Permanent Other 19
Slide 20: DACH (33% of Group Net Fees)
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 Engineering Contract Life Sciences Permanent Other Note 1: All pie charts: Outside HY 2020; Inside HY 20
Slide 21: DACH (33% of Group Net Fees)
Austria Switzerland Germany DACH (33% OF GROUP NET FEES) Contractor Order Book -9% YoY • 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
Slide 22: EMEA excl DACH (40% of Group Net Fees)
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 Engineering Contract Life Sciences Permanent Other Note 1: All pie charts: Outside HY 2020;
Slide 23: EMEA excl DACH (40% of Group Net Fees)
Other Dubai Belgium Netherlands France EMEA EXCL DACH (40% OF GROUP NET FEES) UK Contractor Order Book -29% • Net fees down 12% with Contract down 9% YoY 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 coun
Slide 24: USA (24% of Group Net Fees)
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
Slide 25: USA (24% of Group Net Fees)
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
Slide 26: APAC (3% of Group Net Fees)
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
Slide 27: APAC (3% of Group Net Fees)
Singapore Japan APAC (3% OF GROUP NET FEES) Australia Contractor Order Book -38% • H1 net fees down 28% as the region is YoY impacted by the Australian wildfires and the earlier impact of Covid-19 • Japan, our largest country in the region, was down 24% due to this business being focused on Permanen
Slide 28: Strategy & Outlook
g|three® STRATEGY & OUTLOOK
Slide 29: Our Strategic Pillars
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 Utili
Slide 30: Despite Current Environment Still Making Progress Against Group Ambitions
DESPITE CURRENT ENVIRONMENT STILL MAKING PROGRESS AGAINST GROUP AMBITIONS 2024 • • • 30
Slide 31: The Market Outlook Driving Our Strategy
THE MARKET OUTLOOK DRIVING OUR STRATEGY Customer insights* Secular trends are accelerating – We have positioned ourselves to capitalise on the growing “We’ve seen a push to make sure our opportunity infrastructure team is properly staffed. It’s also pushed us to make a bigger push towards the cloud
Slide 32: Investing in Areas That Will Drive Growth
INVESTING IN AREAS THAT WILL DRIVE GROWTH People Digital enablement • Group average headcount up 2% YoY • Continuing our use of data and • DACH up 13% insights to drive the business • USA up 15% • Investing in the right tools and • Global Support up 9% technology • Digital learning platform Insights
Slide 33: Outlook - Our Focus Going Forward
OUTLOOK - OUR FOCUS GOING FORWARD Continuing to engage with Continued disciplined cost candidates and with clients to management understand trends that create products of the future Driving operational improvement within our core businesses Investing in the right markets 33
Slide 34: Financial Calendar
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
Slide 35: Appendix
s|three® APPENDIX
Slide 36: Historical Net Fees and Contract Margin
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
Slide 37: Historical Operating Profit and Conversion Ratio
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
Slide 38: Cost Base Analysis
s|three® COST BASE ANALYSIS Cost base rN =Payroll =Property = Advertising #=IT & Professional = Other Payroll costs m=, = Support services = Sales 38
Slide 39: Working Capital Actions
WORKING CAPITAL ACTIONS CASH COLLECTION D&B Risk • Headcount redeployment initiative - support pre collection Profile • Cash collection post Covid-19 robust – targets achieved consistently and DSO improved by 3 days CREDIT RISKS & DISPUTES • Credit risk reviews taking place in order of priority • Du
Slide 40: IFRS16 Impact on the Income Statement and Balance Sheet
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 40
Slide 41: 47 Offices in 16 Countries
s|three 47 OFFICES IN 16 COUNTRIES CONTINENTAL EUROPE ASIA PAC & MIDDLE EAST USA Austin UK BELGIUM Birmingham Antwerp posi Bristol Brussels Chicago Glasgow Minneapolis London NETHERLANDS New York leeds Amsterdam Se Manchester Eindhoven jan Diego lye San Francisco “< Oe rca Washington IRELAND recl Du