Sthree Plc · LSE:STEM
Sthree — H1 2013 Earnings Presentation
56 slides from Sthree's earnings presentation, July 2013
Slide 1: Half Year Results Presentation 2013
HALF YEAR RESULTS PRESENTATION 2013 RESULTS FOR SIX MONTHS ENDED 26 MAY 2013
Slide 2: SThree Profiles
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 STHREE PROFILES GARY ELDEN – CHIEF EXECUTIVE OFFICER Gary was appointed CEO on 1st Jan 2013, previously Deputy CEO. Gary joined Computer Futures in 1990, after starting his career in the finance and property sectors. He w
Slide 3: Introduction & Overview
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 INTRODUCTION & OVERVIEW www.sthree.com | SThree plc 3
Slide 4: Key Facts
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 KEY FACTS • Founded in 1986, floated in 2005 • Pure play specialist staffing – average perm salary £56k, contract pro rata £92k • 67 offices, 45 non UK, 68% of GP international • A balanced contract and permanent business
Slide 5: H1 2013: An Overview
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 H1 2013: AN OVERVIEW • A satisfactory performance, against a challenging macro economic backdrop in many geographies and sectors • Contract GP up 3%* year on year • Permanent GP down 15%* year on year in line with average
Slide 6: H1 2013: Financial Highlights
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 H1 2013: FINANCIAL HIGHLIGHTS H1 2013 H1 2012 Actual Growth LFL Growth Revenue £291.9m £278.4m +4.8% +4.5% Gross Profit £94.0m £99.9m -5.9% -6.2% Operating Profit £6.7m £9.1m -26.9% -27.7% Conversion ratio 7.1% 9.2% -2.1%
Slide 7: Strategy Evolution
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 STRATEGY EVOLUTION • Newer growth sectors – Energy & Engineering, Pharma & Biotech - dominated by large multi-national clients • Adapting our approach in these markets to maximise our opportunity • Focus on building long
Slide 8: H1 Strategic Priorities
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 H1 STRATEGIC PRIORITIES H1 2013 FY 2012 Contract 54% 46% 49% 51% Contract Perm Contract Headcount +12% since 2012 year end. Oil & Gas Contract Headcount +48%. Pharma & Biotech +13% H1 2013 FY 2012 22% Sector 23% Diversifi
Slide 9: Historical Operating Profit & Conversion Ratio
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 HISTORICAL OPERATING PROFIT & CONVERSION RATIO Operating Profit (£m) Conversion Ratio (operating profit as a % of gross profit) £12.0 14.0% 11.0 11.0 12.2% 11.8% £10.0 12.0% 9.1 10.0% 9.6% 9.2% £8.0 7.1 6.7 8.0% 7.1% £6.0
Slide 10: Key Performance Indicators: Permanent
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 KEY PERFORMANCE INDICATORS: PERMANENT Permanent Placement Volumes Permanent Average Fee (£) -1.2% 4,000 3,572 £14,000 12,795 12,668 12,637 3,450 3,500 3,302 -13.4% 12,065 3,093 £12,000 11,298 11,293 3,000 2,842 £10,000 2,
Slide 11: Key Performance Indicators: Contract
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 KEY PERFORMANCE INDICATORS: CONTRACT Contract Runners Gross Profit Per Day Rate (£) +8.7% 5,171 -6.4% 88 86 87 5,000 4,757 £90 83 82 4,494 81 4,381 £80 3,952 4,000 £70 £60 3,000 £50 £40 2,000 £30 1,000 £20 £10 0 £0 H1 200
Slide 12: Contract Runners – Comparison to Prior Years
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 CONTRACT RUNNERS – COMPARISON TO PRIOR YEARS Indexed Contract Runners – 6 Year Analysis (Annual Trend based on P12 Nov Year End Runners) 110% 104% 105% 104% 102% 101% 100% 97% 95% 90% 85% 80% 77% 75% 70% November December
Slide 13: Permanent/Contract Analysis
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 PERMANENT/CONTRACT ANALYSIS Gross Profit Growth in Permanent/Contract GP* H1 2013 £94.0m H1 2012 H1 2013 +14% +10% 46% 54% +3% Perm Contract H1 2012 £99.9m 49% 51% (15%) Perm Contract Gross Margin H1 2013 H1 2012 Perm Gro
Slide 14: Headcount
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 HEADCOUNT Period End 2,274 1,647 1,506 1,597 1,777 1,863 2,019 2,272 2,269 2,188 2,283 Total Heads Period End 1,684 1,206 1,087 1,148 1,279 1,308 1,460 1,714 1,676 1,616 1,679 Sales Heads* 714 Int’l Sales Heads 1,111 1,12
Slide 15: Geographical & Sectoral Analysis
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 GEOGRAPHICAL & SECTORAL ANALYSIS www.sthree.com | SThree plc 15
Slide 16: Geographic Analysis by Location of Client
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 GEOGRAPHIC ANALYSIS BY LOCATION OF CLIENT Gross Profit Growth / (decline) by Region* H1 2013 £94.0m H1 2013 H1 2012 +42% 19% 32% UK&I Benelux 25% France +13% Germany +10% 18% ROW 6% +2% H1 2012 £99.9m 16% 34% (7%) (12%) U
Slide 17: Sector Analysis by Candidate Skillset
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 SECTOR ANALYSIS BY CANDIDATE SKILLSET Gross Profit Growth / (decline) in ICT/Non ICT GP* H1 2013 £94.0m H1 2013 H1 2012 6% ICT 13% 54% Energy & 4% Engineering Banking +24% Pharma & 23% Biotech Other +4% H1 2012 £99.9m 7%
Slide 18: Business Breakdown by Client Industry Sector
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 BUSINESS BREAKDOWN BY CLIENT INDUSTRY SECTOR H1 2013 H1 2012 Financial Financial Other Other Serv ices 6% ICT 4% ICT Serv ices 6% 15% 18% 8% Natural Resources 12% Natural Resources Inv estment 13% Banking Retail & Inv est
Slide 19: Business Mix – A Transformation
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 BUSINESS MIX – A TRANSFORMATION FY 2008 FY 2012 H1 2013 7% 2% 22% 23% 11% 13% 64% 67% 91% Energy & Engineering Pharma & Biotech Other sectors Energy & Engineering and Pharma & Biotech represented 9% of total GP in 2008 an
Slide 20: Energy & Engineering and Pharma & Biotech Office Locations
ENERGY & ENGINEERING Manchester @ Glasgow @ Dusseldorf @ Stuttgart @ Birmingham @ ~— Edinburgh @ Frankfurt Amsterdam @@ AND PHARMA & BIOTECH Reading @ London @@ Hamburg @ Rotterdam @ OFFICE LOCATIONS Bristol @ Aberdeen @ Munich @ Oslo @ Dublin @ Calgary @ Chicago @ Moscow @ Boston @ Tokyo @ New York
Slide 21: Sales Headcount
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 SALES HEADCOUNT FY 2008 H1 2013 30% 42% 58% 70% UK International Geographical mix of sales heads in recent years radically altered from 2008 prior peak Notes: Includes IT Job Board www.sthree.com | SThree plc 21
Slide 22: Business Mix – Geographical & Sectoral
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 BUSINESS MIX – GEOGRAPHICAL & SECTORAL FY 2008 FY 2012 Indicative Future 4% 17% Mix 23% 30% 35% 41% 55% 48% 47% UK&I Europe ROW 2% 8% 7% 2% 14% 11% 6% 7% 7% 6% 49% 54% 22% 77% 28% ICT Energy & Engineering Banking Pharma&
Slide 23: Financial Results
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 FINANCIAL RESULTS www.sthree.com | SThree plc 23
Slide 24: Income Statement
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 INCOME STATEMENT H1 2013 H1 2012 Actual Growth LFL Growth* £m £m Revenue 291.9 278.4 +4.8% +4.5% Gross Profit 94.0 99.9 -5.9% -6.2% Operating Profit 6.7 9.1 -26.9% -27.7% Net finance income - 0.1 - - Profit before tax 6.7
Slide 25: Balance Sheet
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 BALANCE SHEET 26 May 2013 25 Nov 2012 £m Goodwill & intangibles 13.3 14.2 Property, plant & equipment 5.1 5.9 •Slowing of spend on PPE Deferred tax 4.9 4.9 Net working capital 16.9 14.7 •The Group is selling a small non c
Slide 26: Cash Flow
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 CASH FLOW H1 2013 H1 2012 £m £m Profit before tax 6.7 9.3 Depreciation and amortisation 3.1 3.6 Share awards charge & other non cash items 0.6 1.2 (Increase) in receivables (6.1) (2.0) (Decrease) in payables & provisions
Slide 27: Earnings Per Share
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 EARNINGS PER SHARE H1 2013 H1 2012 Change % Profit After Tax attributable to owners of the Company £4.5m £6.2m -27.2% for basic EPS 120.7m 119.6m 0.9% Weighted average number of shares for fully diluted EPS 132.6m 133.0m
Slide 28: Indicative Business Restructuring Exceptional Items
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 INDICATIVE BUSINESS RESTRUCTURING EXCEPTIONAL ITEMS Restructuring Costs Property Rationalisation £m People costs 3.7 UK 4 Property costs 3.0 Europe (inc 2 France) 3 Other costs 1.3 Total no. of leases exited 7 Total 8.0 H
Slide 29: Summary & 2013 Outlook
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 SUMMARY & 2013 OUTLOOK • Overall, markets remain challenging • Demand in certain sectors such as Energy & Engineering and Pharma & Biotech remains resilient • Balanced business mix between Contract and Permanent a strengt
Slide 30: Financial Calendar
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 FINANCIAL CALENDAR 6 September 2013 Q3 Interim Management Statement 6 December 2013 Trading update for the 53 week period ended 1 December 2013 3 February 2014 Annual results for the 53 week period ended 1 December 2013 E
Slide 31: Questions
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 QUESTIONS Thank you for listening, please feel free to ask any questions www.sthree.com | SThree plc 31
Slide 32: Regional Trading Metrics
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 REGIONAL TRADING METRICS www.sthree.com | SThree plc 32
Slide 33: UK&I Trading Metrics
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 UK&I TRADING METRICS Runners at Period End GPDR - Constant Currency ICT/Non ICT Split YTD 2013 7% 3,000 80 74.44 7% 68.67 2,346 2,401 2,500 60 21% 2,000 64% 1% 1,500 40 ICT Energy & Engineering Other Banking Pharma & Biot
Slide 34: Benelux Trading Metrics
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 BENELUX TRADING METRICS Runners at Period End GPDR - Constant Currency ICT/Non ICT Split YTD 2013 93.28 13% 1,200 100 87.55 1,008 7% 954 1,000 80 57% 800 21% 60 600 2% ICT Energy & Engineering Other 40 Banking Pharma & Bi
Slide 35: Germany Trading Metrics
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 GERMANY TRADING METRICS Runners at Period End GPDR - Constant Currency ICT/Non ICT Split YTD 2013 4% 900 832 120 105.11 22% 800 752 96.63 100 700 55% 600 80 500 16% 60 3% 400 ICT Energy & Engineering Other Banking Pharma
Slide 36: France Trading Metrics
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 FRANCE TRADING METRICS Runners at Period End GPDR - Constant Currency ICT/Non ICT Split YTD 2013** 11% 400 100 340 345 85.82 10% 350 77.93 5% 80 300 250 60 200 74% ICT Energy & Engineering Other 150 40 Banking Pharma & Bi
Slide 37: ROW Trading Metrics
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 ROW** TRADING METRICS Runners at Period End GPDR - Constant Currency ICT/Non ICT Split YTD 2013 2% 700 140 21% 27% 585 118.31 600 120 102.77 500 100 400 365 80 11% 39% 300 60 ICT Energy & Engineering Other Banking Pharma
Slide 38: USA Trading Metrics
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 USA TRADING METRICS Runners at Period End GPDR - Constant Currency ICT/Non ICT Split YTD 2013 140 28% 400 355 121.12 350 120 37% 101.69 300 100 250 8% 211 80 27% 200 60 ICT Energy & Engineering Other 150 Banking Pharma &
Slide 39: Supplementary Material
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 SUPPLEMENTARY MATERIAL www.sthree.com | SThree plc 39
Slide 40: 22 UK Offices
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 22 UK OFFICES • London • Birmingham - SThree HQ - Computer Futures - SThree Group Training - Progressive - SThree Group Finance - Huxley - SThree Group IS/Group HR - Real - Computer Futures - Real • Leeds - IT Job Board -
Slide 41: 26 European Offices
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 Existing Offices Norway France Oslo Paris - Progressive - Computer Futures (2003) - Progressive (2006)/Real (2009) Switzerland /SThree L&D (2010) Zurich - Huxley (2008) - Huxley/Real (2011) Marseille - Progressive
Slide 42: 19 ROW Offices
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 India Mumbai - Huxley (2011) GCC Dubai - Huxley (2008) Doha - Huxley (2011) Russia Moscow - Progressive (2011) Americas Boston - Huxley/ Real (2011) Existing Offices Chicago Australia - Huxley (2011)/Real (201
Slide 43: PBT Growth Post Dot Com Crash 3 – 2008
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 PBT GROWTH POST DOT COM CRASH 2003 – 2008 60 56.0 50.3 50 56% CAGR 2003 to 2008 40.3 40 34% CAGR PBT (£m) 2004 to 2008 29.5 30 20 17.3 10 6.1 0 2003 2004 2005 2006 2007 2008 Year Notes: Includes IT Job Board www.sthree.co
Slide 44: Historical Gross Profit & Gross Margin
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 HISTORICAL GROSS PROFIT & GROSS MARGIN Gross Profit (£m) Gross Margin (%) 250 40% 218.9 36.0% 35.6% 34.5% 34.9% 34.7% 35.1% 205.3 34.0% 195.5 35% 33.2% 33.0% 200 31.0% 31.3% 182.7 30.8% 171.2 30% 166.4 46% 49% 51% 48% 42%
Slide 45: Candidate Salary Positioning
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 CANDIDATE SALARY POSITIONING Permanent Salary Analysis H1 2013 FY 2012 £100k+ £100k+ £0-30k 5% £0-30k 5% £70-100k £70-100k 10% 16% 10% 11% £30-40k 27% £30-40k £50-70k 23% £50-70k 25% 23% £40-50k £40-50k 21% 24% £56k £56K
Slide 46: Cost Base Analysis
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 COST BASE ANALYSIS Cost Base Payroll Costs Central Other Support 9% Costs IT & 21% Professional 9% Advertising 2% Property 9% Payroll 71% Sales Related Costs 79% The Group operates a relatively low fixed salary and has a
Slide 47: Euro & USD/GBP Exchange Rate
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 EURO & USD/GBP EXCHANGE RATE Six Months Ended 26 May 2013 Six Months Ended 27 May 2012 Average Closing Average Closing EUR € 1.1893 1.1688 1.1926 1.2503 USD $ 1.5602 1.5117 1.5736 1.5659 Impact of one percent change per a
Slide 48: Tracker Shares (Minority Interest) Arrangements
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 TRACKER SHARES (MINORITY INTEREST) ARRANGEMENTS Background • Circa 100 participants, across newer geographies and sectors • An opportunity to buy into a new business at an early stage, to become a part owner • A key reten
Slide 49: SThree: Evolving the Multi Brand Model
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 STHREE: EVOLVING THE MULTI BRAND MODEL Niche Specialisations • ICT 25% • Energy & Engineering 33% • Banking 24% • Pharma & Biotech 18% SThree has grown 100% organically through niche brands Notes: Brand % of 2012 Group GP
Slide 50: Two Types of Specialist Staffing Market
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 TWO TYPES OF SPECIALIST STAFFING MARKET – DEFINED BY CANDIDATE MOBILITY PHARMACEUTICALS BANKING ICT OIL & GAS BANKING ACCOUNTANCY PHARMACEUTICALS & FINANCE OIL & GAS/MINING LOCAL GLOBAL Global candidates provide an abilit
Slide 51: Profile of International Growth
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 PROFILE OF INTERNATIONAL GROWTH THE GROUP’S EXPANSION HAS FOUR MAJOR DIMENSIONS: The majority of planned growth comes from additional heads in existing locations, in both existing and new sectors. Increase headcount in an
Slide 52: Sector Diversification Leads to Global Opportunities
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 SECTOR DIVERSIFICATION LEADS TO GLOBAL OPPORTUNITIES SINGAPORE The Glasgow/Singapore Example IT SCOTLAND SCOTLAND SE ASIA SE ASIA IT OIL & OIL & OIL & SINGAPORE Based Glasgow GAS GAS GAS MIDDLE OFFICE Based Glasgow Based
Slide 53: Indicative Office Rollout
Cologne Geneva Istanbul Nuremberg Stavanger St Petersburg Vienna INDICATIVE OFFICE ROLLOUT Toronto Austin Seoul Denver Shanghai Mexico City Beijing Bangkok Kuala Lumpur Jakarta Buenos Aires Bangalore Santiago : Lagos | Abu Dhabi Melbourne Johannesburg CURRENT LOCATIONS USA Canada Leeds Germany Franc
Slide 54: Apollo Integrator
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 APOLLO INTEGRATOR Our Business Intelligence Platform Integrating our systems with social networking and corporate data sources www.sthree.com | SThree plc 54
Slide 55: Contract Lifetime Value
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 CONTRACT LIFETIME VALUE Contract Lifetime Value differs from contract value as it takes into account the initial contract and all extensions and is measured once the contract, including all extensions, is concluded. INITI
Slide 56: Even when markets are mature, churn drives growth
INTERIM RESULTS PRESENTATION 2013 RESULTS FOR THE SIX MONTHS ENDED 26 MAY 2013 VACANCY VACANCY FILLED FILLED NEW JOB DONOR DONOR BUSINESS 3 3 1 BUSINESS 1 HAS VACANCY HAS VACANCY VACANCY FILLED VACANCY FILLED 2 DONOR BUSINESS 2 HAS VACANCY Even when markets are mature, churn drives growth www.sthree