Sthree Plc · LSE:STEM
Sthree — H1 2018 Earnings Presentation
52 slides from Sthree's earnings presentation, May 31, 2018
Slide 1: Half Year Results Presentation 2018
HALF YEAR RESULTS PRESENTATION 2018 RESULTS FOR THE SIX MONTHS ENDED 31 MAY 2018
Slide 2: 2018 Overview
2018 Overview • Encouraging first half performance with accelerated momentum in Q2 • Adjusted operating profit +6% to £20.4m (+6%* at constant currency) • GP up 11%* YoY and up 10% on a reported basis • Growth in GP driven by Continental Europe (+18%*) and USA (+9%*) • 82% of GP now generated outsid
Slide 3: Financial Results
FINANCIAL RESULTS 3
Slide 4: Financial Highlights
FINANCIAL HIGHLIGHTS Adjusted As Reported As Reported Adjusted As Reported Adjusted HY 2018 HY 2018 HY 2017 Actual Growth Actual Growth CC Growth* Revenue £585.9m £585.9m £521.0m +12% +12% +14% Contract gross profit £106.7m £106.7m £94.2m +13% +13% +14% Permanent gross profit £41.7m £41.7m £40.2m +4
Slide 5: Balance Sheet
BALANCE SHEET 30 May 30 November 2018 2017 Intangible assets £10.5m £11.4m Property, plant & equipment £7.1m £6.7m Investments £1.9m £1.8m Investments Investments in external innovation start ups Deferred tax assets £3.6m £4.2m Net Working Capital Net working capital £71.9m £67.0m Increase due to gr
Slide 6: Cash Flow Bridge
CASH FLOW BRIDGE £1.6m £0.4m (£1.0m) (£2.1m) £3.5m (£3.1m) £20.4m (£6.0m) (£7.5m) (£18.0m) £5.6m (£6.2m) YE 2017 Net Adjusted Depn and Share Share option Treasury Exceptional Capex Dividends Taxes, Working HY 2018 net Cash Operating amort awards settlements shares items interest & FX capital debt pr
Slide 7: London Based Support Relocation
LONDON BASED SUPPORT RELOCATION c250 Roles* proposed for relocation Exceptional Charge £m’s People and other costs £13m - £14m Simple Payback of c3 years Property costs £1m Total £14m - £15m Less: Regional Development c£4m-£5m annualised benefit c.£2m Grant Total Exceptional Cost £12m - £13m Net Cas
Slide 8: Earnings Per Share and Dividends
EARNINGS PER SHARE AND DIVIDENDS Adjusted As Reported As Reported Adjusted As Reported HY 2018 HY 2018 HY 2017 Actual Growth Actual Growth Profit after tax £15.0m £13.0m £14.2m +5% -9% Weighted For basic EPS 128.7m 128.7m 128.7m average Dilutive impact of share plans 5.9m 5.9m 4.7m number of shares
Slide 9: Foreign Exchange Impact
FOREIGN EXCHANGE IMPACT Six months ended Six months ended YoY Exchange 31 May 2018 31 May 2017 Rate Movement Average Closing Average Closing Average Closing EUR € 1.14 1.14 1.18 1.15 +3.5% +0.7% USD $ 1.38 1.33 1.25 1.29 -9.9% -3.2% Six months ended Six months ended 31 May 2018 31 May 2017 Gross Ope
Slide 10: Operating Review
OPERATING REVIEW 10
Slide 11: Business Profile
BUSINESS PROFILE DIVISION GEOGRAPHICAL SECTOR DIVERSIFICATION DIVERSIFICATION DIVERSIFICATION 2% 6% 18% 28% 21% 20% 45% HY 2018 HY 2018 HY 2018 21% 10% 72% 9% 30% 5% 13% C Europe 56% 2% 7% 19% 29% 22% 22% 43% FY 2017 FY 2017 FY 2017 19% 9% 71% 9% 28% 5% 15% C Europe 52% Cont ICT Perm UK&I Benelux Ba
Slide 12: Key Performance Indicators: Contract
KEY PERFORMANCE INDICATORS: CONTRACT +1% vs FY17 CONTRACT RUNNERS +8% +9% +13% +31% +11% +8% +12% +11% vs vs vs vs vs vs vs vs FY10 FY11 FY12 FY13 FY14 FY15 FY16 HY17 Contract FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 HY18 margin % HY 2018 19.6% HY 2017 19.6% GROSS PROFIT PER DAY RATE +4%* -2%* -5%* 0
Slide 13: Contract Runners – Comparison to Prior Years
CONTRACT RUNNERS – COMPARISON TO PRIOR YEARS 115% 112% 111% 110% 108% 105% 101% 100% 95% 90% November December January February March April May June July August September October November 2015 2016 2017 2018 13
Slide 14: Key Performance Indicators: Permanent
KEY PERFORMANCE INDICATORS: PERMANENT PERMANENT PLACEMENT Placement +13% -1% -12% +3% -3% -11% -13% -3% VOLUMES vs vs vs vs vs vs vs vs volumes down FY10 FY11 FY12 FY13 FY14 FY15 FY16 HY17 3% YoY FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 HY18 Average fee PERMANENT up 5%* YoY AVERAGE FEE +6%* +4%* 0%*
Slide 15: Strategy & Outlook
STRATEGY & OUTLOOK 15
Slide 16: Our purpose
Our purpose: “We bring skilled people together to build the future” 16
Slide 17: Our vision
Our vision: To be the #1 STEM talent provider in the best STEM markets 17
Slide 18: Our operating principles
Our operating principles: 18
Slide 19: 5 year strategy to deliver our vision
5 year strategy to deliver our vision 19
Slide 20: 2018 Progress
2018 PROGRESS Progress against our strategic priorities Grow and extend regions, • Opened two new offices in Eindhoven (Netherlands) and Washington (USA) sectors and services • Group average sales headcount up 10% YoY Develop and sustain great • Rolling out our new contractor timesheet portal, Workf
Slide 21: Innovation
INNOVATION Customer proposition New revenue streams Core efficiency Risk management Buy Build Rent Contractor Timesheets Expect to spend £3m on “Build” innovation in operating expenses in 2018 (2017: £2m)
Slide 22: Outlook
OUTLOOK • Trading outlook remains encouraging as we enter the second half • Continued headcount investment, with particular focus on more resilient Contract market • Ongoing focus on productivity in Permanent • Continental Europe particularly well positioned for growth • On track with the delivery o
Slide 23: Financial Calendar
FINANCIAL CALENDAR 2018 14 September Q3 Trading Statement 1 November Ex-dividend date for 2018 interim dividend 30 November 2018 Financial Year end 7 December 2018 Interim dividend paid 14 December Trading update for the year ended 30 November 2018 2019 28 January Annual results for the year ended 3
Slide 24: Supplementary Material
SUPPLEMENTARY MATERIAL 24
Slide 25: Contract / Permanent Gross Profit Analysis
CONTRACT / PERMANENT GROSS PROFIT ANALYSIS DIVISION GEOGRAPHY SECTOR 6% 19% 25% 28% 28% 30% 35% 41% 28% 57% HY 2018 94% 81% 75% 72% 72% 70% 65% 72% 59% 43% UK&I C Europe USA APAC & ME ICT Banking & Energy Engineering Life Sciences Cont Finance Perm Cont Perm Cont Perm 7% 21% 29% 25% 28% 31% 36% 29%
Slide 26: Geographical Gross Profit Analysis
GEOGRAPHICAL GROSS PROFIT ANALYSIS HY 2018 HY 2017 GROSS PROFIT UK&I 22% 16% GROWTH / 18% Benelux 12% 8% (DECLINE) BY France 5% REGION* 9% 8% Germany 2% USA (4%) APAC & ME (2%) UK&I (16%) Benelux HY 2018 FY 2017 France Germany UK&I 6% 7% 18% USA 19% Benelux 20% APAC & ME 22% GEOGRAPHICAL France DIVE
Slide 27: Sector Gross Profit Analysis
SECTOR GROSS PROFIT ANALYSIS HY 2018 HY 2017 9% 31% 7% GROSS PROFIT 28% ICT 6% GROWTH / (DECLINE) BY Banking & Finance SECTOR* 17% Energy 1% 1% 11% Engineering 9% Life Sciences 1% Other (5%) HY 2018 FY 2017 2% 2% ICT 21% Banking & 22% SECTORAL Finance DIVERSIFICATION Energy 45% 43% 10% Engineering 9
Slide 28: Gross Profit Performance by Region
GROSS PROFIT PERFORMANCE BY REGION GP Growth YoY YTD 18 Sales FTE HC (SL1-SL5) Growth YoY Cont Perm Total Cont / Perm Mix Cont Perm Total Perm Cont Q1 18 -1% -11% -3% 19% 81% Q1 18 +1% -9% -2% 18% of UK&I Q2 18 +3% -17% -2% Group Q2 18 -1% -22% -8% HY18 +1% -15% -2% HY18 - -16% -5% Perm Cont Q1 18 +
Slide 29: Gross Profit Performance by Sector
GROSS PROFIT PERFORMANCE BY SECTOR GP Growth YoY YTD 18 Sales FTE HC (SL1-SL5) Growth YoY Cont Perm Total Cont / Perm Mix Cont Perm Total Perm Cont Q1 18 +6% -1% +5% 25% 75% Q1 18 +16% +2% +12% 45% of ICT Q2 18 +13% +11% +13% Group Q2 18 +11% +3% +9% HY18 +10% +5% +9% HY18 +14% +3% +10% Perm Cont Q1
Slide 30: UK&I Trading Metrics
UK&I TRADING METRICS UK HY GROSS PROFIT GROWTH YoY OFFICES 17% Q1 Q2 H1 MAY 18 8 Ireland 1% Contract -1% +3% +1% MAY 17 8 18% of Group YoY 0 GP Permanent -11% -17% -15% NOV 17 8 Total -3% -2% -2% vs Year End 0 DIVISION MIX SECTOR MIX HY 2018 SECTOR MIX FY 2017 1% ICT 1% 19% Banking & 13% Finance 12%
Slide 31: UK&I Trading Metrics
UK&I TRADING METRICS PERIOD END CONTRACT PERMANENT SALES HEADCOUNT RUNNERS PLACEMENTS* HY 331 18 HY 18 HY HY 18 111 17 HY FY 442 17 17 Cont Perm Total Cont Perm Total YoY vs Year End YoY YoY -2% -30% -11% -2% -6% -14% AVERAGE CONTRACT GROSS PERMANENT SALES HEADCOUNT PROFIT PER DAY RATE1 PLACEMENT FE
Slide 32: Benelux Trading Metrics
BENELUX TRADING METRICS 5% Bel Lux 1% 15% HY GROSS PROFIT GROWTH YoY OFFICES Neth Q1 Q2 H1 MAY 18 8 Contract +25% +28% +27% MAY 17 6 21% of Group YoY 2 GP Permanent -6% +16% +4% NOV 17 7 Total +18% +26% +22% vs Year End 1 DIVISION MIX SECTOR MIX HY 2018 SECTOR MIX FY 2017 ICT 18% Banking & 6% 7% 8%
Slide 33: Benelux Trading Metrics
BENELUX TRADING METRICS PERIOD END CONTRACT PERMANENT SALES HEADCOUNT RUNNERS PLACEMENTS* HY 356 18 HY 18 HY HY 18 106 17 HY FY 462 17 17 Cont Perm Total Cont Perm Total YoY vs Year End YoY YoY +19% +8% +17% +28% +5% -1% AVERAGE CONTRACT GROSS PERMANENT SALES HEADCOUNT PROFIT PER DAY RATE1 PLACEMENT
Slide 34: DACH Trading Metrics
DACH TRADING METRICS Germany HY GROSS PROFIT GROWTH YoY OFFICES Q1 Q2 H1 MAY 18 8 30% of Contract +16% +23% +20% MAY 17 8 Group YoY 0 GP Switz Permanent +13% +16% +15% Austria NOV 17 8 Total +15% +21% +18% vs Year End 0 DIVISION MIX SECTOR MIX HY 2018 SECTOR MIX FY 2017 ICT Banking & 19% Finance 20%
Slide 35: DACH Trading Metrics
DACH TRADING METRICS PERIOD END CONTRACT PERMANENT SALES HEADCOUNT RUNNERS PLACEMENTS* HY 403 18 HY 18 HY HY 18 270 17 HY FY 673 17 17 Cont Perm Total Cont Perm Total YoY vs Year End YoY YoY +22% +6% +15% +24% +6% +6% AVERAGE CONTRACT GROSS PERMANENT SALES HEADCOUNT PROFIT PER DAY RATE1 PLACEMENT FE
Slide 36: France Trading Metrics
FRANCE TRADING METRICS France HY GROSS PROFIT GROWTH YoY OFFICES Q1 Q2 H1 MAY 18 4 5% of Contract +13% +3% +8% MAY 17 2 Group YoY 2 GP Permanent -12% -25% -18% NOV 17 3 Total +7% -3% +2% vs Year End 1 DIVISION MIX SECTOR MIX HY 2018 SECTOR MIX FY 2017 ICT 20% Banking & 18% Finance 18% 24% 2% Energy
Slide 37: France Trading Metrics
FRANCE TRADING METRICS PERIOD END CONTRACT PERMANENT SALES HEADCOUNT RUNNERS PLACEMENTS* HY 99 18 HY 18 HY HY 18 31 17 HY 130 FY 17 17 Cont Perm Total Cont Perm Total YoY vs Year End YoY YoY +3% -3% +1% +3% -3% -11% AVERAGE CONTRACT GROSS PERMANENT SALES HEADCOUNT PROFIT PER DAY RATE1 PLACEMENT FEE*
Slide 38: USA Trading Metrics
USA TRADING METRICS USA HY GROSS PROFIT GROWTH YoY OFFICES Q1 Q2 H1 MAY 18 9 20% of Contract +10% +21% +16% MAY 17 8 Group 1 YoY GP Permanent -18% +6% -5% NOV 17 8 Total +1% +16% +9% vs Year End 1 DIVISION MIX SECTOR MIX HY 2018 SECTOR MIX FY 2017 ICT Banking & 14% 28% 14% Finance Energy 31% Cont 46
Slide 39: USA Trading Metrics
USA TRADING METRICS PERIOD END CONTRACT PERMANENT SALES HEADCOUNT RUNNERS PLACEMENTS* HY 228 18 HY 18 HY HY 18 96 17 HY FY 324 17 17 Cont Perm Total Cont Perm Total YoY vs Year End YoY YoY +13% - +9% +1% +1% -19% AVERAGE CONTRACT GROSS PERMANENT SALES HEADCOUNT PROFIT PER DAY RATE1 PLACEMENT FEE*1 H
Slide 40: Asia Pacific & Middle East Trading Metrics
ASIA PACIFIC & MIDDLE EAST TRADING METRICS HY GROSS PROFIT GROWTH YoY OFFICES Q1 Q2 H1 MAY 18 6 Contract -12% -14% -13% MAY 17 6 YoY 0 6% of Permanent +44% +18% +30% Group NOV 17 6 GP Total +15% +1% +8% vs Year End 0 DIVISION MIX SECTOR MIX HY 2018 SECTOR MIX FY 2017 ICT Banking & 16% Finance 14% 28
Slide 41: Asia Pacific & Middle East Trading Metrics
ASIA PACIFIC & MIDDLE EAST TRADING METRICS PERIOD END CONTRACT PERMANENT SALES HEADCOUNT RUNNERS PLACEMENTS* HY 63 18 HY 18 HY HY 18 95 17 HY FY 158 17 17 Cont Perm Total Cont Perm Total YoY vs Year End YoY YoY +2% -4% -1% +2% +1% +23% AVERAGE CONTRACT GROSS PERMANENT SALES HEADCOUNT PROFIT PER DAY
Slide 42: Sector Gross Profit Analysis
SECTOR GROSS PROFIT ANALYSIS GROUP BY SECTOR ICT BY REGION BANKING & FINANCE BY REGION 2% 4% 6% 16% 17% 21% 22% 7% 15% 18% 22% 26% 43% 45% 16% 18% 10% 9% 38% 36% 27% 32% 9% 21% 7% 15% 6% 24% 12% 9% 7% 13% 6% 15% ICT Banking & Finance Energy Engineering Life Sciences Other ENERGY BY REGION ENGINEERIN
Slide 43: Cash Flow
CASH FLOW Adjusted As Reported As Reported HY 2018 HY 2018 HY 2017 Commentary on Adjusted cash flow Operating profit before exceptional items £20.4m £18.0m £19.3m Receivables & Payables Depreciation, amortisation and impairments £3.5m £3.5m £2.9m Working capital has increased due to growth in Share
Slide 44: Historical Gross Profit & Gross Margin
HISTORICAL GROSS PROFIT & GROSS MARGIN FY GP £167.8m £162.4m £189.5m £199.5m £192.8m £218.2m £235.7m £258.7m £287.7m £148.4m £400m £300m GROSS £200m £153.3m £125.2m £138.9m PROFIT £102.2m £102.4m £101.2m £117.4m £76.2m £89.8m £100m £119.8m £134.4m £148.4m £91.6m £87.3m £97.1m £91.6m £100.8m £110.5m
Slide 45: Historical Operating Profit & Conversion Ratio
HISTORICAL OPERATING PROFIT & CONVERSION RATIO FY OP £18.0m £21.2m £30.0m £25.1m £21.0m £29.8m £41.5m £41.3m £44.9m £20.4m £50m ADJUSTED £40m OPERATING £30m £25.6m PROFIT £27.4m £26.0m before £20m £19.0m £21.4m £16.0m exceptional £7.0m £14.1m £14.3m £10m £19.3m £20.4m items £11.0m £11.0m £14.1m £15.
Slide 46: Headcount
HEADCOUNT 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 May 18 Period End 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 2,805 Total Heads Period End 1,181 1,204 1,351 1,610 1,620 1,568
Slide 47: Sales Headcount
SALES HEADCOUNT 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 May 18 Period End 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 2,189 Sales Heads 785 710 915 843 740 764 949 927 1,006 90
Slide 48: Cost Base Analysis
COST BASE ANALYSIS 2% 8% 15% 5% 6% Cost Base Payroll Costs 79% 85% Payroll Property Advertising IT & Professional Other Support Services Sales The Group has maintained its flexible cost base Note 1: Based on costs for HY 2018 48
Slide 49: SThree Capital Markets Day November 2017
SThree Capital Markets Day 15 November 2017
Slide 50: 5-year plan to 2022
5-year plan to 2022 Notes • 2017 numbers are FY consensus • Nothing in this presentation should be construed as a profit forecast. There is no certainty over profitability or timing of achieving the above and they are dependent upon a variety of assumptions and factors 50 both SThree specific and ot
Slide 51: Key growth drivers
Key growth drivers os Consultant ? cermany ml PT usa & PF contract af ™@ = Headcount ft Experience Tt Fees ft Volumes we Consultant . . . Productivity ft Economic attractiveness ft Salaries Tt Fees fT Supply / Demand Imbalance Tt Salaries ft Fees A, Infrastructure EER Offices = IT platforms @) Suppo
Slide 52: 43 Offices in 16 Countries
43 OFFICES IN 16 COUNTRIES UK & IRELAND UK Birmingham Bristol Glasgow London Leeds Manchester IRELAND Dublin CONTINENTAL EUROPE USA BELGIUM GERMANY Antwerp Berlin Asia Pac & Middle East USA Brussels Düsseldorf Austin Frankfurt Boston NETHERLANDS Hamburg AUSTRALIA SINGAPORE UAE Chicago Amsterdam Muni