Sthree Plc · LSE:STEM
Sthree — H1 2017 Earnings Presentation
47 slides from Sthree's earnings presentation, Jul 24, 2017
Slide 1: Half Year Results Presentation 2017
HALF YEAR RESULTS PRESENTATION 2017 RESULTS FOR THEFULL YEARENDED SIX MONTHS RESULS 31 MAY 2017 PRESENTATION 2016 RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2016
Slide 2: 2017 Overview
2017 Overview • Encouraging first half performance with accelerated momentum in Q2 • Adjusted operating profit +26% to £19.3m (+5%* at constant currency and +8%* excluding innovation spend) • GP up 2%* YoY and up 12% on a reported basis • 80% of GP now generated outside UK&I (FY 2016: 75%) • Contrac
Slide 3: Financial Results
FINANCIAL RESULTS 3
Slide 4: Financial Highlights
FINANCIAL HIGHLIGHTS As Reported Adjusted As Reported Adjusted Adjusted HY 2017 HY 2016 HY 2016 Actual Growth CC Growth* Revenue £521.0m £443.5m £443.5m +17% +7% Contract gross profit £94.2m £79.7m £79.7m +18% +8% Permanent gross profit £40.2m £40.1m £40.1m - -10% Total gross profit £134.4m £119.8m
Slide 5: Balance Sheet
BALANCE SHEET 30 May 30 November 2017 2016 Robust Balance Sheet Intangible assets £11.6m £11.6m £50m revolving credit facility with HSBC and Citibank, which is committed to 2019 Property, plant & equipment £6.7m £7.1m Investments £0.7m £0.7m Deferred tax assets £2.7m £2.5m Net working capital £51.2m
Slide 6: Cash Flow Bridge
CASH FLOW BRIDGE £0.1m £1.4m (£0.1m) £19.3m £2.9m (£0.3m) (£3.4m) (£3.4m) (£3.6m) (£6.0m) £10.0m £5.2m (£11.7m) YE 2016 Net Operating Depn and Share Share Exceptional Foreign Treasury Capex & Taxes and Dividends Working HY 2017 net Cash profit amort awards transactions / adjusted exchange shares Pre
Slide 7: Earnings per Share and Dividends
EARNINGS PER SHARE AND DIVIDENDS As Reported Adjusted As Reported Adjusted As Reported HY 2017 HY 2016 HY 2016 Actual Growth Actual Growth Profit after tax £14.2m £11.0m £9.3m +29% +53% Weighted For basic EPS 128.7m 128.5m 128.5m - - average Dilutive impact of share plans 4.7m 5.0m 5.0m number of sh
Slide 8: Foreign Exchange Impact
FOREIGN EXCHANGE IMPACT Six months ended Six months ended YoY Exchange 31 May 2017 31 May 2016 Rate Movement Average Closing Average Closing Average Closing EUR € 1.18 1.15 1.32 1.31 +10.7% +12.8% USD $ 1.25 1.29 1.45 1.46 +13.4% +12.0% Six months ended Six months ended 31 May 2017 31 May 2016 Gross
Slide 9: Operating Review
OPERATING REVIEW 9
Slide 10: 2017 Priorities
2017 PRIORITIES Progress Strategic investment in • Record contract runners at half-year end Contract • Fourteenth consecutive quarter of GP growth • Contract now 70% of GP (FY 2016: 67%) • Contract represents 64% of sales headcount (FY 2016: 63%), our highest ever Drive recovery in Permanent • Succe
Slide 11: Business Profile
BUSINESS PROFILE DIVISION GEOGRAPHICAL SECTOR DIVERSIFICATION DIVERSIFICATION DIVERSIFICATION 2% 7% 20% 21% 30% 22% 44% HY 2017 HY 2017 HY 2017 9% 70% 9% 51% 15% Cont 1% 6% Perm 25% 21% 33% 20% 45% FY 2016 FY 2016 9% FY 2016 67% 8% 49% 16% Cont UK&I ICT Perm C Europe Banking & Finance USA Energy APA
Slide 12: Contract / Permanent Gross Profit Analysis
CONTRACT / PERMANENT GROSS PROFIT ANALYSIS DIVISION GEOGRAPHY SECTOR 8% 21% 26% 28% 30% 32% 36% 47% 45% 30% HY 2017 92% 79% 74% 72% 70% 68% 64% 70% 53% 55% UK&I C Europe USA APAC & ME ICT Banking & Energy Engineering Life Sciences Cont Finance Perm Cont Perm Cont Perm 8% 23% 27% 34% 33% 35% 40% 48%
Slide 13: Key Performance Indicators: Contract
KEY PERFORMANCE INDICATORS: CONTRACT 9,078 9,249 8,412 7,573 +2% 5,791 vs 4,692 5,122 FY16 4,157 4,359 CONTRACT RUNNERS +5% +8% +9% +13% +31% +11% +8% +12% vs vs vs vs vs vs vs vs FY09 FY10 FY11 FY12 FY13 FY14 FY15 HY16 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 HY17 Contract margin % HY 2017 19.6% HY
Slide 14: Contract Runners – Comparison to Prior Years
CONTRACT RUNNERS – COMPARISON TO PRIOR YEARS 135% 131% 130% 125% 120% 115% 112% 111% 110% 103% 108% 105% 100% 95% 90% November December January February March April May June July August September October November 2013 2014 2015 2016 2017 A record number of runners, with a strong seasonal recovery No
Slide 15: Key Performance Indicators: Permanent
KEY PERFORMANCE INDICATORS: PERMANENT 7,434 7,343 6,551 6,429 6,601 6,408 6,060 5,731 -16% vs HY16 PERMANENT PLACEMENT 2,443 +8% +13% -1% -12% +3% -3% -11% Placement VOLUMES vs vs vs vs vs vs vs FY09 FY10 FY11 FY12 FY13 FY14 FY15 volumes down 16% YoY FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 HY17 Aver
Slide 16: Geographical Gross Profit Analysis
GEOGRAPHICAL GROSS PROFIT ANALYSIS HY 2017 HY 2016 UK&I 22% GROSS PROFIT 16% 15% GROWTH / 12% Benelux 8% 7% 6% (DECLINE) BY 5% France REGION* Germany (4%) USA (5%) APAC & ME (15%) (16%) HY 2017 FY 2016 UK&I 7% 6% 20% 25% Benelux 20% 22% GEOGRAPHICAL France DIVERSIFICATION 19% Germany 17% USA 5% 27%
Slide 17: Sector Gross Profit Analysis
SECTOR GROSS PROFIT ANALYSIS HY 2017 HY 2016 ICT 18% GROSS PROFIT 9% 12% 11% 7% Banking & Finance 10% GROWTH / 6% (DECLINE) BY Energy SECTOR* 1% 1% (5%) Engineering Life Sciences (5%) Other (31%) HY 2017 FY 2016 2% 1% ICT 21% Banking & 21% SECTORAL Finance DIVERSIFICATION Energy 44% 45% 9% Engineeri
Slide 18: Innovation
INNOVATION • Helps to future-proof the company and generate new revenue streams • Innovation system & governance structure set up • Invested $2m in three third party start-ups: • Contractor platform targeting healthcare recruitment and other large vertical markets • Bot messaging platform • HR tech
Slide 19: Outlook
OUTLOOK • Encouraged by the improvement in momentum across the business in the period • Continuing to build further momentum in the more resilient Contract market • 70% of Group GP (2012: 50%) • 64% of sales headcount (2012: 44%) • 81% increase in Contract runners since 2012 • Ongoing focus on produ
Slide 20: Financial Calendar
FINANCIAL CALENDAR 2017 15 September Q3 Interim Management Statement 2 November Ex-dividend date for 2017 interim dividend 15 November Capital markets day 30 November 2017 Financial Year end 8 December 2017 Interim dividend paid 15 December Trading update for the year ended 30 November 2017 2018 29
Slide 21: Supplementary Material
SUPPLEMENTARY MATERIAL 21
Slide 22: Gross Profit Performance by Region
GROSS PROFIT PERFORMANCE BY REGION GP Growth YoY YTD 17 Sales FTE HC (SL1-SL5) Growth YoY Cont Perm Total Cont / Perm Mix Cont Perm Total Perm Cont Q1 17 -13% -37% -19% 21% 79% Q1 17 -12% -27% -18% 20% of UK&I Q2 17 -14% -11% -14% Group Q2 17 -15% -22% -17% HY17 -14% -25% -16% HY17 -14% -24% -17% Pe
Slide 23: Gross Profit Performance by Sector
GROSS PROFIT PERFORMANCE BY SECTOR GP Growth YoY YTD 17 Sales FTE HC (SL1-SL5) Growth YoY Cont Perm Total Cont / Perm Mix Cont Perm Total Perm Cont Q1 17 +7% -10% +2% 26% 74% Q1 17 - -14% -5% 44% of ICT Q2 17 +3% -6% +1% Group Q2 17 - -14% -5% HY17 +5% -8% +1% HY17 +0% -14% -5% Perm Cont Q1 17 -5% -
Slide 24: Gross Profit Performance by Region 2016
GROSS PROFIT PERFORMANCE BY REGION 2016 GP Growth YoY YTD 16 Sales FTE HC (SL1-SL5) Growth YoY Cont Perm Total Cont / Perm Mix Cont Perm Total Perm Cont Q1 16 -1% +2% - 24% 76% Q1 16 +5% -10% -1% 27% of UK&I Q2 16 - -31% -9% Group Q2 16 +9% -15% - HY16 -1% -17% -5% HY16 +7% -12% -1% Perm Cont Q1 16
Slide 25: Gross Profit Performance by Sector 2016
GROSS PROFIT PERFORMANCE BY SECTOR 2016 GP Growth YoY YTD 16 Sales FTE HC (SL1-SL5) Growth YoY Cont Perm Total Cont / Perm Mix Cont Perm Total Perm Cont Q1 16 +21% +17% +20% 28% 72% Q1 16 +24% +13% +20% 45% of ICT Q2 16 +20% +6% +15% Group Q2 16 +23% +9% +18% HY16 +20% +11% +18% HY16 +24% +11% +19%
Slide 26: UK&I Trading Metrics
UK&I TRADING METRICS UK HY GROSS PROFIT GROWTH YoY OFFICES Q1 Q2 H1 MAY 17 8 20% of Irel and Contract -13% -14% -14% MAY 16 13 Group YoY -5 GP Permanent -37% -11% -25% NOV 16 10 Total -19% -14% -16% vs Year End -2 DIVISION MIX SECTOR MIX HY 2017 SECTOR MIX FY 2016 2% ICT 2% 21% Banking & 11% Finance
Slide 27: UK&I Trading Metrics
UK&I TRADING METRICS PERIOD END CONTRACT PERMANENT SALES HEADCOUNT RUNNERS PLACEMENTS* HY 336 17 2,515 HY 17 534 HY HY 17 159 16 2,680 HY 495 FY 16 751 16 2,663 Cont Perm Total Cont Perm Total YoY vs Year End YoY YoY -16% -19% -17% -6% -6% -29% vs Year End -8% -4% -7% AVERAGE CONTRACT GROSS PERMANEN
Slide 28: Benelux Trading Metrics
BENELUX TRADING METRICS Bel Lux Neth HY GROSS PROFIT GROWTH YoY OFFICES Q1 Q2 H1 MAY 17 6 19% of Contract +16% +19% +18% MAY 16 7 Group YoY -1 GP Permanent -18% -18% -18% NOV 16 6 Total +6% +10% +8% vs Year End 0 DIVISION MIX SECTOR MIX HY 2017 SECTOR MIX FY 2016 ICT 21% Banking & 8% 7% 7% Finance 6
Slide 29: Benelux Trading Metrics
BENELUX TRADING METRICS PERIOD END CONTRACT PERMANENT SALES HEADCOUNT RUNNERS PLACEMENTS* HY 298 17 2,084 HY 17 411 HY HY 17 99 16 1,657 HY 397 FY 16 526 16 1,970 Cont Perm Total Cont Perm Total YoY vs Year End YoY YoY +25% -23% +8% +26% +6% -22% vs Year End +16% -15% +6% AVERAGE CONTRACT GROSS PERM
Slide 30: Germany Trading Metrics
GERMANY TRADING METRICS Germany HY GROSS PROFIT GROWTH YoY OFFICES Q1 Q2 H1 MAY 17 8 27% of Contract +16% +10% +13% MAY 16 8 Group Switz YoY 0 GP Permanent -7% -5% -6% NOV 16 8 Total +6% +4% +5% vs Year End 0 DIVISION MIX SECTOR MIX HY 2017 SECTOR MIX FY 2016 ICT Banking & 20% Finance 23% 38% Energy
Slide 31: Germany Trading Metrics
GERMANY TRADING METRICS PERIOD END CONTRACT PERMANENT SALES HEADCOUNT RUNNERS PLACEMENTS* HY 330 17 1,974 HY 17 786 HY HY 17 255 16 1,755 HY 585 FY 16 869 16 1,971 Cont Perm Total Cont Perm Total YoY vs Year End YoY YoY +15% +3% +9% +12% +0% -10% vs Year End +6% +3% +5% AVERAGE CONTRACT GROSS PERMAN
Slide 32: France Trading Metrics
FRANCE TRADING METRICS France HY GROSS PROFIT GROWTH YoY OFFICES Q1 Q2 H1 MAY 17 2 5% of Contract +21% +20% +21% MAY 16 1 Group 1 GP YoY Permanent -16% +5% -7% NOV 16 1 Total +9% +16% +12% vs Year End 1 DIVISION MIX SECTOR MIX HY 2017 SECTOR MIX FY 2016 ICT Banking & 24% 17% 16% Finance 28% 4% Energ
Slide 33: France Trading Metrics
FRANCE TRADING METRICS PERIOD END CONTRACT PERMANENT SALES HEADCOUNT RUNNERS PLACEMENTS* HY 97 17 640 HY 17 91 HY HY 17 32 16 536 HY 129 FY 16 139 16 631 Cont Perm Total Cont Perm Total YoY vs Year End YoY YoY +45% -13% +25% +19% +1% -35% vs Year End +23% -9% +13% AVERAGE CONTRACT GROSS PERMANENT SA
Slide 34: USA Trading Metrics
USA TRADING METRICS USA HY GROSS PROFIT GROWTH YoY OFFICES Q1 Q2 H1 MAY 17 8 22% of Contract +11% +23% +17% MAY 16 8 Group YoY 0 GP Permanent +16% +13% +14% NOV 16 8 Total +12% +20% +16% vs Year End 0 DIVISION MIX SECTOR MIX HY 2017 SECTOR MIX FY 2016 ICT Banking & 15% 14% Finance 32% Energy 33% Con
Slide 35: USA Trading Metrics
USA TRADING METRICS PERIOD END CONTRACT PERMANENT SALES HEADCOUNT RUNNERS PLACEMENTS* HY 202 17 1,549 HY 17 392 HY HY 17 97 16 1,262 HY 299 FY 16 321 16 1,363 Cont Perm Total Cont Perm Total YoY vs Year End YoY YoY -15% -13% -14% +23% +14% +22% vs Year End -4% -1% -3% AVERAGE CONTRACT GROSS PERMANEN
Slide 36: Asia Pacific & Middle East Trading Metrics
ASIA PACIFIC & MIDDLE EAST TRADING METRICS Australia Singapore 2% Japan 1% Hong Kong HY GROSS PROFIT GROWTH YoY OFFICES 1% 1% Q1 Q2 H1 MAY 17 6 MENA 2% Contract +11% +54% +31% MAY 16 6 YoY 0 7% of Permanent -30% -22% -26% Group NOV 16 6 GP Total -14% +5% -4% vs Year End 0 DIVISION MIX SECTOR MIX HY
Slide 37: Asia Pacific & Middle East Trading Metrics
ASIA PACIFIC & MIDDLE EAST TRADING METRICS PERIOD END CONTRACT PERMANENT SALES HEADCOUNT RUNNERS PLACEMENTS* HY 62 17 487 HY 17 229 HY HY 17 99 16 391 HY 161 FY 16 305 16 480 Cont Perm Total Cont Perm Total YoY vs Year End YoY YoY -9% -21% -17% +25% +1% -25% vs Year End +5% -5% -1% AVERAGE CONTRACT
Slide 38: Sector Gross Profit Analysis
SECTOR GROSS PROFIT ANALYSIS ICT BY REGION BANKING & FINANCE BY REGION 4% 7% 15% 19% 27% GROUP BY SECTOR 6% 15% 23% 33% 32% 15% 35% 31% 14% 2% 33% 6% 19% 11% 6% 21% 7% 21% 6% 11% 21% 45% 44% 9% 9% ENGINEERING BY REGION LIFE SCIENCES BY REGION 8% 16% 9% 15% 2% 4% 10% ICT 28% 5% 12% 6% 27% 5% 4% Banki
Slide 39: Energy - Group
ENERGY - GROUP % of Group Gross Profit YoY Growth Contract Runners Cont Perm Total 9% Q1 17 -10% +1% -8% Q2 17 +29% -35% +23% 8% HY 17 +9% -15% +7% Average Sales Headcount YoY Growth 1,078 1,034 1,006 1,046 1,116 1,342 Cont Perm Total 920 964 Q1 17 -13% -48% -17% Q2 17 -6% +2% -6% Q3 Q4 Q1 Q2 Q3 Q4
Slide 40: Historical Gross Profit & Gross Margin
HISTORICAL GROSS PROFIT & GROSS MARGIN FY GP £213.6m £167.8m £162.4m £189.5m £199.5m £192.8m £218.2m £235.7m £258.7m £300m £250m £200m £138.9m GROSS £125.2m £150m £113.9m £102.4m £117.4m £76.2m £102.2m £101.2m PROFIT £89.8m £100m £110.5m £119.8m £134.4m £50m £99.7m £91.6m £87.3m £97.1m £91.6m £100.8
Slide 41: Historical Operating Profit & Conversion Ratio
HISTORICAL OPERATING PROFIT & CONVERSION RATIO £56.8m £18.0m £21.2m £30.0m £25.1m £21.0m £29.8m £41.5m £41.3m FY OP £60m ADJUSTED £50m OPERATING £40m £32.4m PROFIT £30m £27.4m £26.0m before £20m £19.0m £21.4m exceptional £7.0m £14.1m £16.0m £14.3m £10m £24.4m £19.3m items £11.0m £11.0m £9.1m £14.1m
Slide 42: Headcount
HEADCOUNT May 09 Nov 09 May 10 Nov 10 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 Period End 1,511 1,461 1,638 1,719 1,865 2,109 2,100 2,021 2,125 2,232 2,484 2,483 2,571 2,752 2,712 2,590 2,642 Total Heads Period End 1,111 1,051 1,181 1,204 1,351 1,610
Slide 43: Sales Headcount
SALES HEADCOUNT May 09 Nov 09 May 10 Nov 10 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 Period End 1,111 1,051 1,181 1,204 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 Sales Heads 915 843 740 764 927 1,006 949 903 843 98
Slide 44: Cash Flow
CASH FLOW As Reported Adjusted As Reported HY 2017 HY 2016 HY 2016 Operating profit before exceptional items £19.3m £15.3m £13.0m Depreciation, amortisation and impairments £2.9m £2.8m £2.8m Share awards charge and other non cash items £1.4m £1.7m £1.7m Increase in receivables (£2.7m) (£1.9m) (£1.9m
Slide 45: Cost Base Analysis
COST BASE ANALYSIS 2% 7% 6% 16% 6% Cost Payroll Base Costs 79% 84% Payroll Property Advertising IT & Professional Other Support Services Sales The Group has maintained its flexible cost base Note 1: Based on costs for FY 2016 45
Slide 46: Tracker Share (Minority Interest) Arrangements
TRACKER SHARE (MINORITY INTEREST) ARRANGEMENTS Low barriers to entry make it a challenge to retain senior Tracker shares – how they work staff – tracker shares < 22.5% mitigate this. Sold to < 22.5% Sold to SThree entrepreneurial staff at fair value The Tracker Share model 5 YEARS > 77.5% allows sel
Slide 47: 39 Offices in 16 Countries
39 OFFICES IN 16 COUNTRIES BELGIUM LUXEMOURG Antwerp Luxembourg City Brussels NETHERLANDS FRANCE Amsterdam Paris Rotterdam Lyon SWITZERLAND GERMANY Zurich Berlin Düsseldorf Frankfurt USA Munich Austin Hamburg Boston Stuttgart Chicago Houston AUSTRIA Minneapolis Vienna New York San Diego San Francisc