Sthree Plc · LSE:STEM
Sthree — H1 2019 Earnings Presentation
48 slides from Sthree's earnings presentation, July 2019
Slide 1: Half Year Results Presentation 2019
Half Year Results Presentation 2019 Results for Half Year Ended 31st May 2019
Slide 2: About SThree
About SThree Specialist recruiter Over 10,600 focusing on STEM skilled people were sectors (Science, placed across our Technology, diverse client base in Engineering & HY 2019 Mathematics) Over 3,100 staff across 16 countries in 45 offices 74% Contract 86% of net fees generated 26% Permanent from ou
Slide 3: Performance
PERFORMANCE
Slide 4: H1 2019 Overview
H1 2019 OVERVIEW Strong growth in net fees Double digit grow th in net Driving profitability fees across three of the Adjusted profit before tax Group’s four regions up 18% YoY to £24m (HY 86% of net fees are 2018: £20.3m) generated from our international business Investment in the Group Strategic f
Slide 5: Strong Track Record
STRONG TRACK RECORD Net fees Operating profit Basic EPS HY 2019 £163.0m £24.6m 13.5p HY 2018 HY 2017 HY 2016 HY 2015 HY 2014 £100.8m £8.4m 4.7p 5yr CAGR 5yr CAGR 5yr CAGR 10% 24% 24% 5
Slide 6: Financial Highlights
FINANCIAL HIGHLIGHTS Adjusted Adjusted Adjusted Adjusted HY 2019 HY 2018 Actual Growth LFL Growth* Revenue £653.3m £585.9m +12% +10% Contract net fees £121.1m £106.7m +13% +12% Permanent net fees £41.9m £41.7m - -1% Total net fees £163.0m £148.4m +10% +9% Operating profit £24.6m £20.4m +21% +18% Con
Slide 7: Balance Sheet
BALANCE SHEET 31 May 2019 30 Nov 2018 Intangible assets £9.6m £11.6m Net working capital Increase due to Property, plant & equipment £6.1m £6.9m seasonal phasing of receipts and Deferred tax assets £2.6m £2.8m payments, DSO improved by 1 day Net working capital £95.2m £93.9m vs YE 2018 Provisions (£
Slide 8: Cash Flow Bridge
CASH FLOW BRIDGE £0.5m (£0.9m ) £1.7m (£1.2m ) £3.0m (£1.6m ) (£6.1m ) £24.6m (£6.9m ) (£17.0m) (£4.1m ) (£8.0m ) YE 2018 Operating Depn and Share Foreign Treasury Capex Restructuring Dividends Taxes and Working HY 2019 net debt profit pre- amort awards & exchange shares interest capital net debt ex
Slide 9: London Based Support Relocation
LONDON BASED SUPPORT RELOCATION Nov 2017 CMD Delivery 250 roles for relocation 242 roles relocated The Glasgow-based Centre of Excellence Simple payback of circa Simple payback provides a sustainable support 2.5 – 3 years of circa 2 years function that will enable the Groupto deliver higher growth,
Slide 10: Earnings Per Share and Dividends
EARNINGS PER SHARE AND DIVIDENDS Adjusted As reported Adjusted As reported Adjusted As reported Actual Actual HY 2019 HY 2019 HY 2018 HY 2018 grow th grow th Profit after tax £17.5m £16.5m £15.0m £13.0m +17% +27% For basic EPS 129.9m 129.9m 128.7m 128.7m - - Weighted average number of Dilutive impac
Slide 11: Foreign Exchange Impact
FOREIGN EXCHANGE IMPACT Exchange Rates Six m onths ended 31 May 2019 Six m onths ended 31 May 2018 YoY exchange rate m ovem ent Average Closing Average Closing Average Closing EUR € 1.15 1.13 1.14 1.14 -0.5% +1.1% USD $ 1.30 1.26 1.38 1.33 +5.9% +5.1% Impact of a 1% change per annum Six m onths ende
Slide 12: Contract
CONTRACT Contractors Contract +24% +20% +7% +12% +11% +4% 74% vs vs vs vs vs vs HY13 HY14 HY15 HY16 HY17 HY18 HY14 HY15 HY16 HY17 HY18 HY19 Net fees per day rate Contract m argin % HY 2019 19.8% HY 2018 19.6% 12%* -2%* +2%* -3%* +4%* +5%* vs vs vs vs vs vs HY13 HY14 HY15 HY16 HY17 HY18 HY14 HY15 HY1
Slide 13: Permanent
PERMANENT Perm anent placem ent volum es +3% v s -3% v s -11% v s -13% v s +1% v s Permanent FY13 FY14 FY15 FY16 FY17 26% +1% v s HY18 FY14 FY15 FY16 FY17 FY18 HY19 H1 H2 Perm anent average fee Placem ent volum es up 1% YoY Average fee up +1%* +3%* +1%* +3%* +4%* +1%* 1%* YoY vs vs vs vs vs vs FY13
Slide 14: Strategy & Business Overview
STRATEGY & BUSINESS OVERVIEW
Slide 15: Our Purpose, Our Vision
OUR PURPOSE OUR VISION Bringing skilled people To be the #1 STEM together to build the talent provider future in the best STEM markets 15
Slide 16: Why STEM?
WHY STEM? Fragmented Enormous The rise of the recruitment opportunity due to Rapid pace of Skill shortages gig economy & market offering supply / demand change demand increased changing nature higher grow th imbalance pay of w ork opportunities in key markets STEM occupations are expected More than
Slide 17: Why Focus on Contract?
WHY FOCUS ON CONTRACT? Economic case – More Particularly higher lif etime Resilient in uncertain Underpins robust predictable and High barriers Growth in new suited to STEM markets and strong commitment v alue and v isible earnings to entry business models staf fing market prof itability as markets
Slide 18: What Drives Growth?
WHAT DRIVES GROWTH? Contract focus STEM specialist Growing markets Management Portfolio discipline Platform scale & efficiency Purpose driven with operating & leadership principles 18
Slide 19: Well Diversified Business
WELL DIVERSIFIED BUSINESS 6% 3% 14% 26% 19% 22% Division Geography Sectors 45% 21% HY 2019 HY 2019 10% HY 2019 74% 5% 11% 32% 12% Contract UK&I BENELUX Technology Engineering Permanent FRANCE DACH Banking & Finance Life Sciences USA APAC & ME Energy Other 19
Slide 20: Progress Against Strategy
PROGRESS AGAINST STRATEGY Grow and extend regions, • Increased office capacity in DACH & Japan with further office openings in H2 • Period-end sales headcount up 12% YoY, average up 7% YoY sectors and services • Energy up 27%*, Engineering up 14%*, and Technology up 11%* YoY Develop and sustain grea
Slide 21: Outlook
OUTLOOK
Slide 22: SThree Resilience
STHREE RESILIENCE Macro-economic Risks Brexit Our features Our Position Our features Our Position • Rapid pace of change ensures skill shortages, requiring specialist recruitment to fill positions Strong STEM • STEM occupations projected to grow by 10.8% in • Continental Europe a strength for SThree
Slide 23: Outlook
OUTLOOK “Well positioned to Expectations for the full year rem ain unchanged continue to benefit Continued focus on execution from the growth opportunities in our chosen STEM markets” Entering the second half in a Continued resilience through robust position, w hilst diversification by sector and m
Slide 24: Financial Calendar
FINANCIAL CALENDAR 2019 13 September Q3 Trading Statement 21 November Capital Market Day 13 December Trading update for the year ended 30 November 2019 2020 27 January Annual results for the year ended 30 November 2019 24
Slide 25: Supplementary Material
SUPPLEMENTARY MATERIAL
Slide 26: Net Fees by Region
NET FEES BY REGION Net Fees Growth YoY HY 19 Average Sales Headcount YoY Cont Perm Total Cont / Perm Mix Cont Perm Total Perm Cont Q1 19 -5% -16% -7% 16% Q1 19 - -29% -8% 84% 14% of UK&I Q2 19 -7% -32% -12% Group Q2 19 +12% -12% +5% HY 19 -6% -25% -9% HY 19 +6% -22% -2% Perm Cont Q1 19 +14% +6% +12%
Slide 27: Contract / Permanent Net Fees Analysis
CONTRACT / PERMANENT NET FEES ANALYSIS DIVISION GEOGRAPHY SECTOR 16% 22% 5% 26% 25% 22% 31% 26% 42% 57% HY 2019 95% 84% 78% 78% 74% 75% 69% 58% 74% 43% UK&I C Europe USA APAC & ME Technology Banking & Energy Engineering Life Sciences Finance 6% 18% 26% 28% 27% 29% 33% 41% 28% 55% FY 2018 94% 82% 74%
Slide 28: Geographical Net Fees Analysis
GEOGRAPHICAL NET FEES ANALYSIS HY 2019 HY 2018 15% 13% 22% NET FEES 13% 10% 11% 18% GROWTH / (DECLINE) BY 9% 8% REGION* 2% (9%) (2%) UK&I Benelux HY 2019 FY 2018 France Germany 6% 14% 5% USA 17% 22% APAC & ME 21% GEOGRAPHICAL 21% DIVERSIFICATION 21% 5% 32% 31% 5% Japan ASIA PACIFIC & 29% 36% 37% MEN
Slide 29: Sector Net Fees Analysis
SECTOR NET FEES ANALYSIS HY 2019 HY 2018 31% 27% NET FEES 17% GROWTH / 15% 14% 12% 11% 9% (DECLINE) BY 6% 5% SECTOR* 1% (9%) Technology Banking & Finance Energy Engineering HY 2019 Life Sciences FY 2018 3% Other 3% SECTORAL 19% 20% DIVERSIFICATION 45% 44% 10% 10% 11% 10% 12% 13% * Growth is at const
Slide 30: UK&I Trading Metrics
UK&I TRADING METRICS UK HY NET FEES GROWTH YoY OFFICES Irel and Q1 Q2 H1 MAY 19 8 Contract -5% -7% -6% NOV 18 8 YoY - Permanent -16% -32% -25% Total -7% -12% -9% DIVISION MIX SECTOR MIX HY 2019 SECTOR MIX FY 2018 1% Technology 16% 15% Banking & Finance 14% 18% Cont Energy 14% 14% Perm Engineering 54
Slide 31: UK&I Trading Metrics
UK&I TRADING METRICS PERIOD END CONTRACTORS PERMANENT SALES HEADCOUNT PLACEMENTS* HY 19 379 HY 19 HY 19 108 HY 18 HY 18 487 FY 18 Cont Perm Total Cont Perm Total YoY vs Year End YoY YoY +15% -2% +10% -4% -7% -22% AVERAGE CONTRACT NET PERMANENT SALES HEADCOUNT FEES PER DAY RATE1 PLACEMENT FEE*1 HY 19
Slide 32: Benelux Trading Metrics
BENELUX TRADING METRICS Bel Lux & Spa in HY NET FEES GROWTH YoY OFFICES Neth Q1 Q2 H1 MAY 19 10 Contract +13% +12% +13% NOV 18 9 YoY +1 Permanent -2% -1% -1% Total +11% +10% +10% DIVISION MIX SECTOR MIX HY 2019 SECTOR MIX FY 2018 Technology 16% 9% Banking & Finance 7% 18% 7% 8% Cont Energy 12% 15% 5
Slide 33: Benelux Trading Metrics
BENELUX TRADING METRICS PERIOD END CONTRACTORS PERMANENT SALES HEADCOUNT PLACEMENTS* HY 19 414 HY 19 HY 19 92 HY 18 HY 18 506 FY 18 Cont Perm Total Cont Perm Total YoY vs Year End YoY YoY +16% -14% +9% +7% -2% -1% AVERAGE CONTRACT NET PERMANENT SALES HEADCOUNT FEES PER DAY RATE1 PLACEMENT FEE*1 HY 1
Slide 34: DACH Trading Metrics
DACH TRADING METRICS HY NET FEES GROWTH YoY OFFICES Germa ny Q1 Q2 H1 MAY 19 8 Contract +14% +22% +18% NOV 18 8 YoY - Swi tzerland Aus tri a Permanent +7% +10% +9% Total +12% +18% +15% DIVISION MIX SECTOR MIX HY 2019 SECTOR MIX FY 2018 1% 1% Technology Banking & Finance 16% 18% 35% 37% Cont Energy 1
Slide 35: DACH Trading Metrics
DACH TRADING METRICS PERIOD END CONTRACTORS PERMANENT SALES HEADCOUNT PLACEMENTS* HY 19 481 HY 19 HY 19 310 HY 18 HY 18 791 FY 18 Cont Perm Total Cont Perm Total YoY vs Year End YoY YoY +19% +15% +18% +17% -1% +18% AVERAGE CONTRACT NET PERMANENT SALES HEADCOUNT FEES PER DAY RATE1 PLACEMENT FEE*1 HY
Slide 36: France Trading Metrics
FRANCE TRADING METRICS France HY NET FEES GROWTH YoY OFFICES Q1 Q2 H1 MAY 19 4 Contract +16% +13% +14% NOV 18 4 YoY - Permanent +19% -34% -4% Total +17% +4% +11% DIVISION MIX SECTOR MIX HY 2019 SECTOR MIX FY 2018 1% Technology 17% 14% Banking & Finance 3% 18% 19% 3% Cont Energy 7% Perm Engineering 8
Slide 37: France Trading Metrics
FRANCE TRADING METRICS PERIOD END CONTRACTORS PERMANENT SALES HEADCOUNT PLACEMENTS* HY 19 91 HY 19 HY 19 21 HY 18 HY 18 112 FY 18 Cont Perm Total Cont Perm Total YoY vs Year End YoY YoY -8% -33% -14% +11% -1% -32% AVERAGE CONTRACT NET PERMANENT SALES HEADCOUNT FEES PER DAY RATE1 PLACEMENT FEE*1 HY 1
Slide 38: USA Trading Metrics
USA TRADING METRICS USA HY NET FEES GROWTH YoY OFFICES Q1 Q2 H1 MAY 19 9 Contract +24% +21% +22% NOV 18 9 YoY - Permanent -1% -15% -10% Total +17% +10% +13% DIVISION MIX SECTOR MIX HY 2019 SECTOR MIX FY 2018 Technology 4% 4% 22% 14% Banking & Finance 14% 27% Cont Energy 13% 40% 18% Perm Engineering
Slide 39: USA Trading Metrics
USA TRADING METRICS PERIOD END CONTRACTORS PERMANENT SALES HEADCOUNT PLACEMENTS* HY 19 265 HY 19 HY 19 114 HY 18 HY 18 379 FY 18 Cont Perm Total Cont Perm Total YoY vs Year End YoY YoY +16% +18% +17% -10% -9% -10% AVERAGE CONTRACT NET PERMANENT SALES HEADCOUNT FEES PER DAY RATE1 PLACEMENT FEE*1 HY 1
Slide 40: APAC & MENA Trading Metrics
APAC & MENA TRADING METRICS Japan MENA Other HY NET FEES GROWTH YoY OFFICES Q1 Q2 H1 MAY 19 6 Contract +16% +14% +15% NOV 18 6 YoY - Permanent -3% +26% +11% Total +5% +20% +13% DIVISION MIX SECTOR MIX HY 2019 SECTOR MIX FY 2018 Technology Banking & Finance 17% 18% 32% 28% Cont Energy 43% 45% 55% Per
Slide 41: APAC & MENA Trading Metrics
APAC & MENA TRADING METRICS PERIOD END CONTRACTORS PERMANENT SALES HEADCOUNT PLACEMENTS* HY 19 74 HY 19 HY 19 111 HY 18 HY 18 185 FY 18 Cont Perm Total Cont Perm Total YoY vs Year End YoY YoY +18% +17% +17% +4% -9% +15% AVERAGE CONTRACT NET PERMANENT SALES HEADCOUNT FEES PER DAY RATE1 PLACEMENT FEE*
Slide 42: Sector Net Fees Analysis
SECTOR NET FEES ANALYSIS GROUP BY SECTOR TECHNOLOGY BY REGION BANKING & FINANCE BY REGION 3% 4% 7% 18% 17% 15% 19% 6% 20% 15% 17% 20% 44% 45% 14% 18% 10% 10% 40% 24% 24% 28% 41% 25% 10% 13% 6% 15% 7% 9% 11% 6% 20% 12% ENERGY BY REGION ENGINEERING BY REGION LIFE SCIENCES BY REGION 1% 5% 10% 5% 11% 21
Slide 43: Sales Headcount
SALES HEADCOUNT May 11 Nov 11 May 12 Nov 12 May 13 Nov 13 May 14 Nov 14 May 15 Nov 15 May 16 Nov 16 May 17 Nov 17 May 18 Nov 18 May 19 Period End 1,351 1,610 1,620 1,568 1,667 1,797 2,015 2,016 2,051 2,185 2,142 2,044 2,064 2,257 2,189 2,332 2,460 Sales Heads 756 737 785 710 915 843 740 764 927 1,00
Slide 44: Operating Profit & Conversion Ratio
OPERATING PROFIT & CONVERSION RATIO FY OP £60m ADJUSTED £50m OPERATING £40m PROFIT £33.5m £30m £25.6m before £27.4m £26.0m £20m £19.0m £21.4m exceptional £7.0m £14.1m £16.0m £14.3m £10m £19.3m £20.4m £24.6m items £11.0m £11.0m £9.1m £14.1m £15.3m £7.1m £6.7m £8.4m £0m 2009 2010 2011 2012 2013 2014 2
Slide 45: Cost Base Analysis
COST BASE ANALYSIS 8% 14% 2% 7% 6% Cost Payroll Base Costs 77% 86% Payroll Property Advertising IT & Professional Other Support Services Sales Note 1: Based on costs for HY 2019 45
Slide 46: Financial Highlights
FINANCIAL HIGHLIGHTS Adjusted As Reported Adjusted As Reported Adjusted As Reported Adjusted HY 2019 HY 2019 HY 2018 HY 2018 Actual Growth Actual Growth LFL Growth* Revenue £653.3m £653.3m £585.9m £585.9m +12% +12% +10% Contract net fees £121.1m £121.1m £106.7m £106.7m +13% +13% +12% Permanent net f
Slide 47: Cashflow
CASHFLOW Adjusted As Reported Adjusted As Reported HY 2019 HY 2019 HY 2018 HY 2018 Operating profit before exceptionals £24.6m £23.3m £20.4m £18.0m Depreciation, amortisation and impairments £3.0m £3.0m £3.5m £3.5m Share awards charge and other non cash items £1.4m £1.7m £1.6m £1.6m Decrease/(Increa
Slide 48: 45 Offices in 16 Countries
45 OFFICES IN 16 COUNTRIES USA UK & IRELAND CONTINENTAL EUROPE Asia Pac & Middle East USA UK BELGIUM GERMANY AUSTRALIA SINGAPORE UAE Austin Birmingham Antwerp Berlin Sydney Singapore Dubai Boston Bristol Brussels Düsseldorf Melbourne Chicago Glasgow Frankfurt JAPAN Houston London NETHERLANDS Hamburg