Sthree Plc · LSE:STEM
Sthree — FY2017 Earnings Presentation
54 slides from Sthree's earnings presentation, Jan 29, 2018
Slide 1: Full Year Results Presentation 2017
FULL YEAR RESULTS PRESENTATION 2017 RESULTS FOR YEAR ENDED 30 NOVEMBER 2017
Slide 2: 2017 Overview
2017 Overview • Encouraging full year performance with strong Q4 and exit rate into 2018 • Adjusted profit before tax up 9% to £44.5m • GP up 4%* YoY (up 11% on an as reported basis) and up 8%* YoY in Q4 • Growth in GP driven by USA (+18%*) and Continental Europe (+9%*), whilst UK&I remains challeng
Slide 3: Financial Results
FINANCIAL RESULTS 3
Slide 4: Financial Highlights
FINANCIAL HIGHLIGHTS Adjusted As Reported Adjusted As Reported Adjusted As Reported Adjusted FY 2017 FY 2017 FY 2016 FY 2016 Actual Growth Actual Growth CC Growth* Revenue £1,114.5m £1,114.5m £959.9m £959.9m +16% +16% +9% Contract gross profit £203.5m £203.5m £173.3m £173.3m +17% +17% +10% Permanent
Slide 5: Balance Sheet
BALANCE SHEET 30 November 30 November 2017 2016 Intangible assets £11.4m £11.6m Property, plant & equipment £6.7m £7.1m Investments £1.8m £0.7m Investments Investments in Innovation start ups and incubator Deferred tax assets £4.2m £2.5m Deferred tax assets Primarily due to increased provisions Net
Slide 6: Cash Flow Bridge
CASH FLOW BRIDGE £3.5m £6.1m (£0.6m) (£1.0m) £44.9m (£6.9m) (£7.8m) (£11.2m) (£13.4m) £10.0m £5.6m (£18.0m) YE 2016 Net Operating Depn and Share awards Foreign Restructuring Capex & Treasury Taxes and Working Dividends YE 2017 Net Cash profit amort + other non exchange + investments shares interest
Slide 7: London Based Support Relocation
LONDON BASED SUPPORT RELOCATION 250 Roles* proposed for relocation Exceptional Charge £m’s People costs £11m - £12m Simple Payback of c3 years Other Costs £3m - £4m Total £14m - £16m Less: Regional Development c£4m-£5m annualised benefit c.£2m Grant Total Exceptional Cost £12m - £14m Cash outflow of
Slide 8: Earnings per Share and Dividends
EARNINGS PER SHARE AND DIVIDENDS Adjusted As Reported Adjusted As Reported Adjusted As Reported FY 2017 FY 2017 FY 2016 FY 2016 Actual Growth Actual Growth Profit after tax £33.1m £27.6m £29.8m £27.2m +11% +2% Weighted For basic EPS 128.6m 128.6m 128.3m 128.3m +0% +0% average Dilutive impact of shar
Slide 9: Foreign Exchange Impact
FOREIGN EXCHANGE IMPACT Year Ended Year Ended YoY Exchange 30 November 2017 30 November 2016 Rate Movement Average Closing Average Closing Average Closing EUR € 1.15 1.14 1.25 1.18 (8.2%) (3.8%) USD $ 1.28 1.35 1.39 1.25 (7.6%) 8.2% Year Ended Year Ended 30 November 2017 30 November 2016 Operating O
Slide 10: Operating Review
OPERATING REVIEW 10
Slide 11: 2017 Progress
2017 PROGRESS Progress Strategic investment in • Record Contract Runners at year end Contract • Contract now 71% of GP (FY 2016: 67%) • Now represents 65% of sales headcount, our highest ever • 16th consecutive quarter of growth Drive recovery in Permanent • Productivity up 3%* YoY productivity • Se
Slide 12: Business Profile
BUSINESS PROFILE DIVISION GEOGRAPHICAL SECTOR DIVERSIFICATION DIVERSIFICATION DIVERSIFICATION 2% 7% 19% 29% 22% 22% 43% FY 2017 FY 2017 FY 2017 9% 71% 9% 52% 15% 1% Perm 6% 25% 21% 33% 20% 45% FY 2016 FY 2016 FY 2016 9% 67% 8% 49% 16% Cont UK&I ICT Perm C Europe Banking & Finance USA Energy APAC & M
Slide 13: Contract / Permanent Gross Profit Analysis
CONTRACT / PERMANENT GROSS PROFIT ANALYSIS DIVISION GEOGRAPHY SECTOR 7% 21% 29% 25% 31% 28% 36% 29% 49% 45% FY 2017 93% 79% 71% 75% 72% 69% 64% 71% 51% 55% UK&I C Europe USA APAC & ME ICT Banking & Energy Engineering Life Sciences Finance Contract Permanent 8% 23% 27% 34% 33% 35% 40% 48% 33% 61% FY
Slide 14: Key Performance Indicators: Contract
KEY PERFORMANCE INDICATORS: CONTRACT 10,197 9,078 8,412 7,573 5,791 4,692 5,122 CONTRACT 4,157 4,359 RUNNERS +5% +8% +9% +13% +31% +11% +8% +12% vs vs vs vs vs vs vs vs FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 Contract FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 margin % FY 2017 19.8% FY 2016 19.9%
Slide 15: Contract Runners – Comparison to Prior Years
CONTRACT RUNNERS – COMPARISON TO PRIOR YEARS 135% 131% 130% 125% 120% 115% 112% 112% 110% 111% 108% 105% 100% 95% 90% November December January February March April May June July August September October November 2013 2014 2015 2016 2017 15
Slide 16: Key Performance Indicators: Permanent
KEY PERFORMANCE INDICATORS: PERMANENT 7,434 7,343 6,551 6,429 6,601 6,408 6,060 5,731 4,972 PERMANENT PLACEMENT Placement +8% +13% -1% -12% +3% -3% -11% -13% VOLUMES vs vs vs vs vs vs vs vs volumes down FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 13% YoY FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Aver
Slide 17: Strategy & Outlook
STRATEGY & OUTLOOK 17
Slide 18: Our purpose
Our purpose: “We bring skilled people together to build the future” 18
Slide 19: Our vision
Our vision: To be the #1 STEM talent provider in the best STEM markets 19
Slide 20: Our operating principles
Our operating principles: 20
Slide 21: 5 year strategy to deliver our vision
5 year strategy to deliver our vision 21
Slide 22: Innovation
INNOVATION Innovative approach Minimise risk through Helps to future-proof Generate new to meet our governance and the company revenue streams customers evolving support structure demands BUY BUILD Talent Acquisition Platform Create and manage focused on cultural fit and Hybrid tech recruitment Inve
Slide 23: 2018 Priorities
2018 PRIORITIES Progress Grow and extend regions, • Invest and grow in key markets, particularly in USA and Germany sectors and services • Maximise opportunities in ICT, Life Sciences, Engineering & Energy • Further leverage our Employee Contractor Model to create new opportunities Develop and susta
Slide 24: Outlook
OUTLOOK • Encouraged by the improvement in momentum in Q4 • Continued headcount investment in more resilient Contract market • Contract runners nearly doubled since 2012 • Continued focus on productivity in Permanent with selective headcount investment • Sectorally and geographically diverse and agi
Slide 25: Financial Calendar
FINANCIAL CALENDAR 2018 29 January Annual results for the year ended 30 November 2017 16 March Q1 Trading Statement 26 April Annual General Meeting 15 June Trading update for the six months ended 31 May 2018 23 July Interim results for the six months ended 31 May 2018 14 September Q3 Trading Stateme
Slide 26: Notes
Notes eo s|three® 26
Slide 27: Supplementary Material
SUPPLEMENTARY MATERIAL 27
Slide 28: Geographical Gross Profit Analysis
GEOGRAPHICAL GROSS PROFIT ANALYSIS FY 2017 FY 2016 GROSS PROFIT 18% 17% GROWTH / 13% 9% 9% 10% (DECLINE) BY 6% REGION* - (4%) (8%) (14%) (15%) UK&I Benelux France Germany 7% USA 6% 19% 25% APAC & ME 20% 22% GEOGRAPHICAL DIVERSIFICATION 19% 17% 5% 27% 28% 5% Australia ASIA PACIFIC & 21% Asia 20% 34%
Slide 29: Sector Gross Profit Analysis
SECTOR GROSS PROFIT ANALYSIS FY 2017 FY 2016 25% GROSS PROFIT 15% 12% 9% 8% GROWTH / (DECLINE) BY 7% 1% SECTOR* 5% (9%) 1% (30%) (2%) 2% 1% SECTORAL 22% 21% DIVERSIFICATION 43% 45% 9% 9% 9% 8% 15% 16% * Growth is at constant currency 29
Slide 30: Gross Profit Performance by Region
GROSS PROFIT PERFORMANCE BY REGION GP Growth YoY FY 17 Average Sales Headcount YoY Cont Perm Total Cont / Perm Mix Cont Perm Total Perm Cont Q3 17 -10% -12% -10% 21% 79% Q3 17 -9% -9% -9% 19% of UK&I Q4 17 -9% -25% -13% Group Q4 17 -4% -6% -4% FY 17 -11% -22% -14% FY 17 -10% -17% -12% Perm Cont Q3 1
Slide 31: Gross Profit Performance by Region
GROSS PROFIT PERFORMANCE BY REGION GP Growth YoY HY 17 Average Sales Headcount 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% HY 17 -14% -25% -16% HY 17 -14% -24% -17% Perm Co
Slide 32: Gross Profit Performance by Sector
GROSS PROFIT PERFORMANCE BY SECTOR GP Growth YoY FY 17 Average Sales Headcount YoY Cont Perm Total Cont / Perm Mix Cont Perm Total Perm Cont Q3 17 +2% -3% +1% 25% 75% Q3 17 +6% -7% +2% 43% of ICT Q4 17 +4% -6% +1% Group Q4 17 +8% -3% +5% FY 17 +4% -6% +1% FY 17 +4% -10% -1% Perm Cont Q3 17 +8% -6% +
Slide 33: Gross Profit Performance by Sector
GROSS PROFIT PERFORMANCE BY SECTOR GP Growth YoY HY 17 Average Sales Headcount 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% HY 17 +5% -8% +1% HY 17 +0% -14% -5% Perm Cont Q1 17 -5% -12% -
Slide 34: UK&I Trading Metrics
UK&I TRADING METRICS UK FY GROSS PROFIT GROWTH YoY OFFICES Q1 Q2 Q3 Q4 FY NOV 17 8 19% of Ireland Contract -13% -14% -10% -9% -11% NOV 16 10 Group YoY -2 GP Permanent -37% -11% -12% -25% -22% Total -19% -14% -10% -13% -14% DIVISION MIX SECTOR MIX FY 2017 SECTOR MIX FY 2016 1% 2% ICT 21% 10% 12% Bank
Slide 35: UK&I Trading Metrics
UK&I TRADING METRICS PERIOD END CONTRACT PERMANENT SALES HEADCOUNT RUNNERS PLACEMENTS* 360 FY 17 2,616 FY 17 1,075 FY 17 151 511 FY 16 2,663 FY 16 1,455 Cont Perm Total Cont Perm Total YoY YoY YoY -1% -9% -3% -2% -26% AVERAGE CONTRACT GROSS PERMANENT SALES HEADCOUNT PROFIT PER DAY RATE1 PLACEMENT FE
Slide 36: Benelux Trading Metrics
BENELUX TRADING METRICS 5% 1% Bel Lux 13% FY GROSS PROFIT GROWTH YoY OFFICES Neth Q1 Q2 Q3 Q4 FY NOV 17 7 19% of Contract +16% +19% +21% +38% +24% NOV 16 6 Group YoY 1 GP Permanent -18% -18% -33% -3% -17% Total +6% +10% +8% +28% +13% DIVISION MIX SECTOR MIX FY 2017 SECTOR MIX FY 2016 ICT 19% 6% 8% B
Slide 37: Benelux Trading Metrics
BENELUX TRADING METRICS PERIOD END CONTRACT PERMANENT SALES HEADCOUNT RUNNERS PLACEMENTS* 315 FY 17 2,537 FY 17 794 FY 17 106 421 FY 16 1,970 FY 16 993 Cont Perm Total Cont Perm Total YoY YoY YoY +22% -9% +12% +29% -20% AVERAGE CONTRACT GROSS PERMANENT SALES HEADCOUNT PROFIT PER DAY RATE1 PLACEMENT
Slide 38: Germany Trading Metrics
GERMANY TRADING METRICS Germany FY GROSS PROFIT GROWTH YoY OFFICES Q1 Q2 Q3 Q4 FY NOV 17 8 28% of Contract +16% +10% +7% +15% +12% NOV 16 8 Group Switz YoY 0 GP Permanent -7% -5% +4% -1% -2% Total +6% +4% +5% +8% +6% DIVISION MIX SECTOR MIX FY 2017 SECTOR MIX FY 2016 ICT Banking & Finance 20% 23% 37
Slide 39: Germany Trading Metrics
GERMANY TRADING METRICS PERIOD END CONTRACT PERMANENT SALES HEADCOUNT RUNNERS PLACEMENTS* 401 FY 17 2,316 FY 17 1,619 FY 17 280 681 FY 16 1,971 FY 16 1,746 Cont Perm Total Cont Perm Total YoY YoY YoY +29% +14% +22% +18% -7% AVERAGE CONTRACT GROSS PERMANENT SALES HEADCOUNT PROFIT PER DAY RATE1 PLACEM
Slide 40: France Trading Metrics
FRANCE TRADING METRICS France FY GROSS PROFIT GROWTH YoY OFFICES Q1 Q2 Q3 Q4 FY NOV 17 3 Contract +21% +20% +9% +15% +16% NOV 16 1 5% of Group YoY 2 GP Permanent -16% +5% -32% +14% -8% Total +9% +16% -1% +14% +9% DIVISION MIX SECTOR MIX FY 2017 SECTOR MIX FY 2016 ICT 24% Banking & Finance 16% 18% 28
Slide 41: France Trading Metrics
FRANCE TRADING METRICS PERIOD END CONTRACT PERMANENT SALES HEADCOUNT RUNNERS PLACEMENTS* 97 FY FY 17 682 196 17 FY 17 33 FY 16 FY 130 631 16 256 Cont Perm Total Cont Perm Total YoY YoY YoY +24% -7% +15% +8% -23% AVERAGE CONTRACT GROSS PERMANENT SALES HEADCOUNT PROFIT PER DAY RATE1 PLACEMENT FEE*1 91
Slide 42: USA Trading Metrics
USA TRADING METRICS USA FY GROSS PROFIT GROWTH YoY OFFICES Q1 Q2 Q3 Q4 FY NOV 17 8 22% of Contract +11% +23% +24% +23% +21% NOV 16 8 Group YoY 0 GP Permanent +16% +13% +12% +6% +12% Total +12% +20% +20% +17% +18% DIVISION MIX SECTOR MIX FY 2017 SECTOR MIX FY 2016 ICT 15% 14% Banking & Finance 31% 33
Slide 43: USA Trading Metrics
USA TRADING METRICS PERIOD END CONTRACT PERMANENT SALES HEADCOUNT RUNNERS PLACEMENTS* 233 FY 17 1,552 FY 17 803 FY 17 120 353 FY 16 1,363 FY 16 680 Cont Perm Total Cont Perm Total YoY YoY YoY +11% +23% +15% +14% +18% AVERAGE CONTRACT GROSS PERMANENT SALES HEADCOUNT PROFIT PER DAY RATE1 PLACEMENT FEE
Slide 44: Asia Pacific & Middle East Trading Metrics
ASIA PACIFIC & MIDDLE EAST TRADING METRICS APAC & MENA FY GROSS PROFIT GROWTH YoY OFFICES Q1 Q2 Q3 Q4 FY NOV 17 6 7% of Contract +11% +54% +32% +4% +24% NOV 16 6 Group YoY 0 GP Permanent -30% -22% -20% -14% -22% Total -14% +5% +1% -7% -4% DIVISION MIX SECTOR MIX FY 2017 SECTOR MIX FY 2016 ICT 14% Ba
Slide 45: Asia Pacific & Middle East Trading Metrics
ASIA PACIFIC & MIDDLE EAST TRADING METRICS PERIOD END CONTRACT PERMANENT SALES HEADCOUNT RUNNERS PLACEMENTS* 66 FY 17 494 FY 17 485 FY 17 95 161 FY 16 480 FY 16 601 Cont Perm Total Cont Perm Total YoY YoY YoY +12% -8% -1% +3% -19% AVERAGE CONTRACT GROSS PERMANENT SALES HEADCOUNT PROFIT PER DAY RATE1
Slide 46: Sector Gross Profit Analysis
SECTOR GROSS PROFIT ANALYSIS GROUP BY SECTOR ICT BY REGION BANKING & FINANCE BY REGION 2% 4% 7% 15% 18% 22% 26% 6% 15% 23% 21% 33% 45% 43% 9% 32% 16% 9% 31% 14% 36% 8% 32% 16% 6% 19% 21% 11% 6% 9% 7% 15% 6% 12% ENERGY BY REGION ENGINEERING BY REGION LIFE SCIENCES BY REGION 2% 4% 13% 6% 11% 27% 5% 7%
Slide 47: Cash Flow
CASH FLOW Adjusted As Reported Adjusted As Reported FY 2017 FY 2017 FY 2016 FY 2016 Commentary on Adjusted cash flow Operating profit before exceptional items £44.9m £38.2m £41.3m £37.8m Depreciation, amortisation and impairments £6.1m £6.1m £5.7m £5.7m Receivables & Payables Share awards charge and
Slide 48: 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 £287.7m £400m £300m GROSS £200m £138.9m £153.3m £113.9m £117.4m £125.2m PROFIT £76.2m £102.2m £102.4m £101.2m £100m £89.8m £99.7m £100.8m £110.5m £119.8m £134.4m £91.6m £72.5m £87.3m
Slide 49: Historical Operating Profit & Conversion Ratio
HISTORICAL OPERATING PROFIT & CONVERSION RATIO FY OP £56.8m £18.0m £21.2m £30.0m £25.1m £21.0m £29.8m £41.5m £41.3m £44.9m £60m ADJUSTED £50m OPERATING £40m £32.4m PROFIT £25.6m £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
Slide 50: Headcount
HEADCOUNT 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 Nov 17 Period End 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 2,866 Total Heads Period End 1,051 1,181 1,204 1,351 1,610 1,620
Slide 51: Sales Headcount
SALES HEADCOUNT 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 Nov 17 Period End 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 2,257 Sales Heads 785 915 843 740 764 949 927 1,006 903 84
Slide 52: Cost Base Analysis
COST BASE ANALYSIS 2% 8% 16% 5% 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 2017 52
Slide 53: Tracker Share Arrangements
TRACKER SHARE 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 selected individuals Ow
Slide 54: 40 Offices in 16 Countries
40 OFFICES IN 16 COUNTRIES UK & IRELAND UK Birmingham Bristol Glasgow London Leeds Manchester IRELAND Dublin CONTINENTAL EUROPE USA BELGIUM GERMANY Asia Pac & Middle East USA Antwerp Berlin Austin Brussels Düsseldorf Boston Frankfurt AUSTRALIA SINGAPORE UAE Chicago NETHERLANDS Hamburg Sydney Singapo