Sthree Plc · LSE:STEM
Sthree — FY2014 Earnings Presentation
50 slides from Sthree's earnings presentation, January 2015
Slide 1: Full Year Results Presentation 2014
FULL YEAR RESULTS PRESENTATION 2014 RESULTS FOR YEAR ENDED 30 NOVEMBER 2014
Slide 2: FY 2014: A Strong Platform for Growth
FY 2014: A STRONG PLATFORM FOR GROWTH • Group result in line with expectations • Group GP up 18%* YoY, Q4 up 27%* YoY • Operating profit up 42% to £29.8m (FY 2013: £21.0m), despite FX headwinds of £1.8m • Contract GP up 27%* YoY, with Q4 up 36%* YoY and Contract now accounting for 61% of GP (FY 2013
Slide 3: Financial Results
FINANCIAL RESULTS 3
Slide 4: FY 2014: Financial Highlights
FY 2014: FINANCIAL HIGHLIGHTS 2014 2013 52 weeks 52 weeks Actual Growth CC Growth Revenue £746.9m £618.4m +20.8% +25.7% Contract Gross Profit £132.5m £107.6m +23.1% +27.4% Permanent Gross Profit £85.7m £85.2m +0.6% +6.3% Total Gross Profit £218.2m £192.8m +13.2% +18.1% Operating Profit Before Except
Slide 5: Historical Gross Profit & Gross Margin
HISTORICAL GROSS PROFIT & GROSS MARGIN Gross Profit Gross Margin £250m 40.0% £218.2m 34.1% 34.5% 35.3% 34.9% £213.6m 35.0% £199.5m £192.8m 30.8% £200m £189.5m 31.2% 30.0% 29.2% £167.8m £162.4m 117.4 50% 51% 113.9 25.0% 53% 52% £150m 102.4 102.2 101.2 62% 56% 76.2 20.0% 89.8 61% £100m 15.0% 10.0% 48%
Slide 6: Historical Operating Profit & Conversion Ratio
HISTORICAL OPERATING PROFIT & CONVERSION RATIO Operating Profit Before Exceptional Items Conversion Ratio Operating Profit Before Exceptional Items as a % of Gross Profit £60m £56.8m 30% £50m 25% 25.9% 23.8% £40m 32.4 20% £30.0m £29.8m £30m 15% 15.3% £25.1m 13.7% £21.2m £21.0m 12.8% 12.2% 12.2% 19.0
Slide 7: Restructuring – Improving Returns from Our Network
RESTRUCTURING – IMPROVING RETURNS FROM OUR NETWORK Restructuring Costs 2014 Property Rationalisation Headcount Rationalisation £m UK 3 UK 8 Aberdeen, Support x 2 People Costs 2.0 Property Costs 2.2 Overseas 6 Overseas 70 Australia (Perth), Brazil (Rio & Sao Paulo), Canada Other Costs 1.3 (Calgary),
Slide 8: Cash Flow
CASH FLOW 2014 2013 52 weeks 52 weeks £m £m Operating Profit Before Exceptional Items 29.8 21.0 Depreciation and Amortisation 5.2 5.8 • Receivables Share Awards Charge & Other Non Cash Items 2.3 1.1 Driven by increase in Contract revenue YoY and Increase in Receivables (44.6) (10.9) slightly higher
Slide 9: Cash Flow Bridge
CASH FLOW BRIDGE £60m £50m 0.8 7.5 0.4 £40m 29.8 £30m 17.2 £20m 5.9 8.7 9.9 £10m £0m 2013 Net Cash OP before Dep & Amort + Proceeds from Share Related Working Capex Taxes & Dividends Paid Other Exceptional 2014 Net Debt exceptional SBP Disposal of Transactions Capital Interest Paid 17.2 items items
Slide 10: Balance Sheet
BALANCE SHEET Balance sheet 30 November 1 December remains 2014 2013 robust £m £m Goodwill & Intangibles 11.1 12.0 Property, Plant & Equipment 4.2 4.0 Deferred Tax 3.4 3.5 Net Working Capital 54.3 37.0 • Net Working Capital Significant increase in working capital mainly due to Provisions (12.0) (12.
Slide 11: Earnings per Share and Dividends
EARNINGS PER SHARE AND DIVIDENDS 2014 2013 Change % Profit After Tax Before Exceptional Items £20.2m £11.1m +82% Exceptional Items After Tax £(4.3m) £(3.7m) Profit After Tax and Exceptional Items £15.9m £7.4m +115% For Basic EPS 123.7m 121.1m +2% Weighted Average Dilutive Impact of Share Plans 10.3m
Slide 12: Euro & USD/GBP Exchange Rate
EURO & USD/GBP EXCHANGE RATE 52 Week Period Ended 30 November 2014 52 Week Period Ended 30 November 2014 Average Closing Gross Profit Op Profit Impact of one percent change per annum £'000 EUR € 1.23 1.26 EUR € 990 278 USD $ 1.66 1.56 USD $ 325 106 53 Week Period Ended 1 December 2013 53 Week Period
Slide 13: Operating Review
OPERATING REVIEW 13
Slide 14: 2014 Highlights
2014 HIGHLIGHTS 2014 Priorities 2014 Progress Accelerate growth in Contract Very strong performance • GP +27%* FY14 and +36%* in Q4 • Contract runners +31% • Contract now 61% of GP (2013: 56%) • Now represents 53% of headcount, our highest ever Drive recovery in Permanent • Average perm heads +9% •
Slide 15: Business Development - Summary
BUSINESS DEVELOPMENT - SUMMARY 15% 9% 15% 30% 39% FY 2014 FY 2014 FY 2014 Contract % of GP % of GP 17% % of GP period end Contract / Sector Geographical headcount Perm 61% Diversification Diversification +19% YoY 68% 46% Energy UK&I C Europe Cont Perm Life Sciences Americas Other APAC & ME 12% 10% 1
Slide 16: Headcount
HEADCOUNT May 12 Nov 12 May 13 Nov 13 May 14 Nov 14 Period End Average sales heads up 2,195 2,116 2,220 2,327 2,579 2,578 Total Heads 15% YoY and period end sales heads up 12% YoY Period End 1,685 1,633 1,732 1,862 2,080 2,081 Average sales heads up Sales Heads* YoY: UK&I +14% Europe +12% 2,200 Amer
Slide 17: Permanent / Contract Analysis
PERMANENT / CONTRACT ANALYSIS Gross Profit Gross Profit Mix by Sector Gross Profit Mix by Region FY 2014 FY 2014 100% 100% 80% 31% 34% 28% 39% 42% 80% 39% 46% 55% 39% 60% 60% 70% FY 2014 40% 40% 72% % of GP 69% 61% 66% 58% 61% 61% 45% 54% 20% 20% 30% 0% 0% ICT Banking Energy Engineering Life Science
Slide 18: Key Performance Indicators: Contract
KEY PERFORMANCE INDICATORS: CONTRACT Contract Runners 7,573 5,745 5,791 Period end 5,122 4,692 Contract 4,157 4,359 runners up 31% YoY -28% +5% +8% +9% +13% +31% vs vs vs vs vs vs FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Contract Margin % FY 2014 FY 2013 Gro
Slide 19: Contract Runners – Comparison to Prior Years
CONTRACT RUNNERS – COMPARISON TO PRIOR YEARS 135% 131% 130% An improving trend, with a 125% strong exit rate 120% 115% 112% 110% 109% ` 108% 105% 105% 100% 97% 96% 95% 90% November December January February March April May June July August September October November 2010 2011 2012 2013 2014 2015 Not
Slide 20: Key Performance Indicators: Permanent
KEY PERFORMANCE INDICATORS: PERMANENT Permanent Placement Volumes 10,236 7,434 7,343 6,551 6,429 6,601* 6,060 Placement volumes -41% +8% +13% -1% -12% +3% increasing vs vs vs vs vs vs FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Permanent Average Fee Average +16
Slide 21: GP Business Mix – Geography
GP BUSINESS MIX – GEOGRAPHY 10% 9% 10% 24% 11% 31% 30% 15% 22% Future - FY 2013 FY 2014 FY 2018 % of GP % of GP % of GP 48% 46% 44% UK&I C Europe Americas APAC & ME An increasingly balanced portfolio UK&I Still down 50% from it’s peak headcount and GP Germany Immature market We have a strong regiona
Slide 22: Geographical Analysis
GEOGRAPHICAL ANALYSIS Gross Profit UK&I 9% 9% 30% Benelux 11% 31% 15% France FY 2014 25% FY 2013 % of GP Germany % of GP 9% 25% 11% 31% 6%18% 25% 16% Americas 18% 5% 6% APAC & ME Growth / (Decline) by Region FY 2014 FY 2013 73% 32% UK&I C Europe 11% 11% 14% Americas (4%) (7%) (11%) APAC & ME Asia Pa
Slide 23: Performance by Region
PERFORMANCE BY REGION FY GP Period End Consultants Growth YoY FY 2014 Growth YoY Cont Perm Total Cont / Perm Mix Cont Perm Total Perm Cont 28% 72% FY +14% +3% +11% UK&I +12% +13% +12% Q4 +20% +30% +23% Perm Cont 39% 61% FY +23% (3%) +11% C Europe +20% +1% +10% Q4 +29% +4% +18% Perm Cont 46% 54% FY +
Slide 24: Americas Trading Metrics
AMERICAS TRADING METRICS Cont GP Perm GP Total GP YoY growth +98% +52% +73% 15% of 5% Cont GP Perm GP Total GP Group GP Period End Consultant HC +44% +6% +23% 37% 30% FY Average Consultant HC +64% +23% +40% FY 2014 % of GP Period End YoY Perm YoY 28% Runners +97% Placements* +51% ICT 46% FY 2014 FY
Slide 25: GP Business Mix – Sector
GP BUSINESS MIX – SECTOR 0% 2% 1% 15% 17% 20% 32% 39% 12% 43% Future - FY 2013 9% FY 2014 FY 2018 10% % of GP % of GP % of GP 12% 15% 12% 25% 18% 18% ICT Banking & Finance Energy Engineering Life Sciences Other Non ICT now represents 61% of Gross Profit ICT Only 5% of our business is outside UK&I an
Slide 26: Performance by Sector
PERFORMANCE BY SECTOR FY GP Growth YoY FY 2014 Cont Perm Total Cont / Perm Mix Cont • Predominantly, UK&I and Perm 31% 69% Continental Europe FY +12% (1%) +8% • Exciting early results from ICT USA Q4 +26% +15% +22% • Well diversified Perm Cont geographically 55% 45% Banking & FY +31% +11% +19% • Str
Slide 27: Energy - Group
ENERGY - GROUP Energy 15% UK&I / Africa 19% 22% 26% Upstream C Europe FY 2014 FY 2014 FY 2014 % of % of % of Midstream Group Energy Americas Energy 18% 60% GP GP 26% GP 29% Downstream Asia Pac, Mid East & Russia Year End Consultant HC • Robust FY14 growth Cont Perm Total • Sector slowing and FY15 im
Slide 28: Outlook
OUTLOOK • Expect to see a broadly supportive market globally in 2015 • Americas continues to grow strongly • Life Sciences, IT, Banking & Finance are all showing good growth • Energy sector is slowing • Uncertain economic conditions in the Eurozone, including potential FX headwinds, and a weakened o
Slide 29: Supplementary Material
SUPPLEMENTARY MATERIAL 29
Slide 30: Headcount
HEADCOUNT Nov 08 May 09 Nov 09 May 10 Nov 10 May 11 Nov 11 May 12 Nov 12 May 13 Nov 13 May 14 Nov 14 Period End Total Heads 2,217 1,606 1,556 1,733 1,814 1,960 2,204 2,195 2,116 2,220 2,327 2,579 2,578 Period End Sales Heads* 1,643 1,176 1,116 1,246 1,269 1,416 1,675 1,685 1,633 1,732 1,862 2,080 2,
Slide 31: Consultant Headcount
CONSULTANT HEADCOUNT Nov 08 May 09 Nov 09 May 10 Nov 10 May 11 Nov 11 May 12 Nov 12 May 13 Nov 13 May 14 Nov 14 Period End Consultants 1,496 1,082 1,011 1,134 1,163 1,566 1,515 1,473 1,409 1,454 1,580 1,759 1,766 881 935 644 783 586 587 786 Contract 614 719 462 442 449 Permanent 419 852 929 886 878
Slide 32: UK&I Trading Metrics
UK&I TRADING METRICS UK Cont GP Perm GP Total GP YoY growth +14% +3% +11% 30% of Group Nov 14 Nov 13 YoY GP Countries 2 2 - Ireland Offices 13 16 -3 # YoY YoY Cont Perm Total Cont Perm Total Cont Perm Total Period End Consultant Headcount 328 214 542 35 25 60 +12% +13% +12% Full Year Average Consult
Slide 33: UK&I Trading Metrics
UK&I TRADING METRICS SECTOR SPLITS Period End YoY 2% Runners +16% Gross Profit Per Day Rate Within Region 8% FY 2014 2,970 YoY 1% 12% FY 2013 2,552 FY 2014 Below Group average 9% 51% % of GP 0 1,000 2,000 3,000 4,000 18% 28% 30% ICT Banking & Finance Energy FY 2014 Cont GP FY 2013 Engineering Life S
Slide 34: Benelux Trading Metrics
BENELUX TRADING METRICS Belgium Lux Neth Cont GP Perm GP Total GP YoY growth +12% 0% +8% 16% of Group Nov 14 Nov 13 YoY GP Countries 3 3 - Offices 7 7 - # YoY YoY Cont Perm Total Cont Perm Total Cont Perm Total Period End Consultant Headcount 169 113 282 30 (8) 22 +22% -7% +8% Full Year Average Cons
Slide 35: Benelux Trading Metrics
BENELUX TRADING METRICS SECTOR SPLITS Period End YoY Runners +17% Gross Profit Per Day Rate 7% Within Region 7% FY 2014 1,314 YoY -3% 10% FY 2013 1,121 FY 2014 49% Above Group average % of GP 0 500 1,000 1,500 12% 15% ICT 32% 35% Banking & Finance Energy FY 2014 Cont GP FY 2013 Engineering Life Scie
Slide 36: Germany Trading Metrics
GERMANY TRADING METRICS Germany Cont GP Perm GP Total GP YoY growth +41% -1% +19% 25% of Switz Group GP Nov 14 Nov 13 YoY Countries 2 2 - Offices 9 10 -1 # YoY YoY Cont Perm Total Cont Perm Total Cont Perm Total Period End Consultant Headcount 224 221 445 42 1 43 +23% 0% +11% Full Year Average Consu
Slide 37: Germany Trading Metrics
GERMANY TRADING METRICS SECTOR SPLITS Period End YoY 0% Runners +40% Gross Profit Per Day Rate Within Region FY 2014 1,367 YoY - 26% FY 2013 975 FY 2014 49% Above Group average % of GP 0 500 1,000 1,500 11% 6% 8% ICT Banking & Finance Energy 44% FY 2014 Cont GP FY 2013 Engineering 47% Life Sciences
Slide 38: France Trading Metrics
FRANCE TRADING METRICS Cont GP Perm GP Total GP YoY growth +6% -15% -3% 5% of Group GP Nov 14 Nov 13 YoY Countries 1 1 - Offices 1 1 - # YoY YoY Cont Perm Total Cont Perm Total Cont Perm Total Period End Consultant Headcount 48 42 90 3 8 11 +7% +24% +14% Full Year Average Consultant Headcount 44 40
Slide 39: France Trading Metrics
FRANCE TRADING METRICS SECTOR SPLITS Period End YoY Runners +11% Gross Profit Per Day Rate Within Region 19% FY 2014 395 YoY 1% 3% FY 2013 357 FY 2014 Below Group average 9% 50% % of GP 0 200 400 600 19% ICT Banking & Finance 36% Energy 42% FY 2013 FY 2014 Cont GP Engineering Life Sciences % of GP P
Slide 40: Americas Trading Metrics
AMERICAS TRADING METRICS Cont GP Perm GP Total GP YoY growth +98% +52% +73% 15% of Group Nov 14 Nov 13 YoY GP Countries 1 3 -2 Offices 6 9 -3 # YoY YoY Cont Perm Total Cont Perm Total Cont Perm Total Period End Consultant Headcount 112 104 216 34 6 40 +44% +6% +23% Full Year Average Consultant Headc
Slide 41: Americas Trading Metrics
AMERICAS TRADING METRICS SECTOR SPLITS Period End YoY Runners +97% Gross Profit Per Day Rate Within Region 5% FY 2014 1,073 YoY -6% 37% 30% FY 2013 544 FY 2014 Above Group average % of GP 0 500 1,000 1,500 28% ICT Banking & Finance Energy 46% FY 2014 Cont GP FY 2013 Engineering 47% Life Sciences % o
Slide 42: Asia Pacific & Middle East Trading Metrics
ASIA PACIFIC & MIDDLE EAST TRADING METRICS Cont GP Perm GP Total GP YoY growth +62% +1% +14% 9% of Group Nov 14 Nov 13 YoY GP Countries 9 10 -1 Offices 9 12 -3 # YoY YoY Cont Perm Total Cont Perm Total Cont Perm Total Period End Consultant Headcount 54 137 191 6 4 10 +13% +3% +6% Full Year Average C
Slide 43: Asia Pacific & Middle East Trading Metrics
ASIA PACIFIC & MIDDLE EAST TRADING METRICS SECTOR SPLITS Period End YoY Runners +88% Gross Profit Per Day Rate Within Region 9% 14% FY 2014 454 YoY -10% 5% FY 2013 242 FY 2014 Below Group average % of GP 29% 0 200 400 600 43% 24% ICT 30% Banking & Finance Energy FY 2014 Cont GP FY 2013 Engineering L
Slide 44: Cost Base Analysis
COST BASE ANALYSIS The Group has a flexible cost base 9% 2% 18% 5% 7% Cost Base Payroll Costs 77% 82% Payroll Property Advertising IT & Professional Other Support Services Sales Related Costs Note 1: Based on costs for FY 2014 excluding exceptional items FULL YEAR RESULTS PRESENTATION 2014 | RESULTS
Slide 45: Restructuring Cost Bridge
RESTRUCTURING COST BRIDGE £195m £190m 189.3 (1) 2.4 0.4 £185m 0.3 186.2 £180m £175m £170m 2014 Pre-restructuring Cost Personnel Property Other 2014 Post-restructuring Cost Base Base Revised cost base after 2014 restructuring, including £0.9m savings realised in H2 2014 (1) Represents full year repor
Slide 46: Tracker Share Arrangements - How They Work
TRACKER SHARE ARRANGEMENTS Tracker Shares - how they work ≤ 22.5% Sold To Investor ≤ 22.5% Sold To Investor 5 YEARS ≥ 77.5% Owned by ≥ 77.5% Owned by SThree SThree Business valued at an early stage Exit Value 1/2 - 2/3 x PAT x PER • Strong governance via MI Steering Committee • 2014 buy backs £11m (
Slide 47: Tracker Share Arrangements (continued)
TRACKER SHARE ARRANGEMENTS (continued) Background • Circa 100 participants, across all geographies and sectors • An opportunity to buy into a new business at an early stage, to become a part owner • A key retention and attraction tool, a point of difference, given low barriers to entry Features • A
Slide 48: Multi Brand Approach
MULTI BRAND APPROACH Primary SThree brand for this sector Brand covers niches within this sector FULL YEAR RESULTS PRESENTATION 2014 | RESULTS FOR YEAR ENDED 30 NOVEMBER 2014 www.sthree.com | SThree plc 48
Slide 49: Offices in Countries
45 OFFICES IN 18 COUNTRIES BELGIUM LUXEMBOURG NETHERLANDS GERMANY RUSSIA UK SWITZERLAND IRELAND FRANCE JAPAN USA HONG KONG SINGAPORE INDIA DUBAI QATAR MALAYSIA AUSTRALIA FULL YEAR RESULTS PRESENTATION 2014 | RESULTS FOR YEAR ENDED 30 NOVEMBER 2014 www.sthree.com | SThree plc 49
Slide 50: Financial Calendar
FINANCIAL CALENDAR 13MARCH 23 APRIL 12JUNE 13 JULY Q1 Interim Annual General Trading update for the Interim results for the Management Meeting six months ended 31 six months ended 31 Statement May 2015 May 2015 11 SEPTEMBER 11 DECEMBER 25 JANUARY Q3 Interim Trading update for the Annual results for