Sthree Plc · LSE:STEM
Sthree — H1 2021 Earnings Presentation
39 slides from Sthree's earnings presentation, Jul 16, 2021
Slide 1: Bringing Skilled People Together to Build the Future
BRINGING SKILLED PEOPLE TOGETHER TO BUILD THE FUTURE HALF YEAR RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 MAY 2021
Slide 2: We Bring Skilled People Together to Build the Future
WE BRING SKILLED PEOPLE TOGETHER TO BUILD THE FUTURE STEM FLEXIBLE WORKING The short-to-mid term project work often required or desired from STEM specialist workers Technology Life Sciences Employed Freelance Permanent contractor contractor Engineering Banking & Other Finance GLOBAL FOOTPRINT UNIQUE
Slide 3: Strong Financial Performance
STRONG FINANCIAL PERFORMANCE Growth vs 2020 and 2019 Revenue Net fees £615.1m up 4% vs 2020 £164.3m up 10% vs 2020 down 3% vs 2019 up 3% vs 2019 Adjusted Adjusted basic EPS £28.1m 14.4p operating profit up 106% vs 2020 up 140% vs 2020 up 18% vs 2019 up 10% vs 2019 3 Note 1: Numbers presented on an a
Slide 4: Clear Strategic Progress
CLEAR STRATEGIC PROGRESS Executing well against an unprecedented backdrop Strong financial performance Delivering impactful work • Q2 net fees up 22% YoY & up 8% vs • Over 16,500 lives positively 2019 impacted, including placing • Operating profit up 106% YoY and over 10,300 new roles 18% vs 2019 Ex
Slide 5: Delivering Impactful Work
DELIVERING IMPACTFUL WORK Bringing skilled people together to build the future Building a sustainable world Meeting new regulatory requirements • Exclusive project staffing partner of our client, a major Dutch • Our client, a major US medical devices organisation, faced new construction yard legisla
Slide 6: Financial Review
cs s|three® FINANCIAL REVIEW 4)
Slide 7: Strong Profit Performance Despite Impact of Covid-19
STRONG PROFIT PERFORMANCE DESPITE IMPACT OF COVID-19 HY 2021 HY 2020 Actual movement LFL movement* vs 2019* Revenue £615.1m £596.0m +3% +4% -3% Contract net fees £121.9m £113.5m +7% +8% +3% Permanent net fees £42.4m £36.4m +16% +18% +4% Total net fees £164.3m £149.9m +10% +10% +3% Operating profit £
Slide 8: Half Year Profit Drivers
HALF YEAR PROFIT DRIVERS Strong market demand Benefits of continued trend Growth in productivity towards flexible working 1 2 3 • Increased demand for STEM skills • Growth of Employed Contractor • Driven by higher activity levels vs Model is a secular trend and ECM lower headcount • Improved staffin
Slide 9: Strong Market Demand in Q2
STRONG MARKET DEMAND IN Q2 Growth vs 2019 1 Q2 net fees vs 2019 Contractor Order Book +8% £136.1m Total £120.4m £108.2m £102.4m +13% +6% Permanent Contract HY 2018 HY 2019 HY 2020 HY2021 Very strong performance in Q2, driving significant growth Contractor order book up 33% YoY and also up 13% vs 201
Slide 10: Benefits of Continued Trend Towards Flexible Working
BENEFITS OF CONTINUED TREND TOWARDS FLEXIBLE WORKING ECM net fees grew 24% YOY and 38% vs 2019 2 2019 2020 2021 22% 24% 26% 26% 29% 31% 74% 76% 74% Contract Contract Contract 52% 47% 43% Employed Contractor ‘ECM’ Freelance Contractor • Employed contractor model ‘ECM’ has attractive margins, c40% hig
Slide 11: Benefits of Continued Trend Towards Flexible Working
BENEFITS OF CONTINUED TREND TOWARDS FLEXIBLE WORKING Strong net fee margins driving performance 2 Net fee Margin 26.7% up 1.5%pts YoY 2019: 25.0% 21.3% 25.2% Contract net Permanent fee margin fee margin up 1.0%pts YoY 2019: 19.9% 2019: 24.5% Employed contractor fee margin Freelance fee margin Perman
Slide 12: Growth in Productivity
GROWTH IN PRODUCTIVITY H2 investments expected to dilute productivity and conversion ratio 3 Productivity per head • Net fee growth in H1 +32.0% • Driven by improved net fee margins • Employed contractor model growth • Increased contractor hours vs 2020 • OP Conversion % growth Operating profit conv
Slide 13: Strong Net Fee Performance Drives Operating Profit Drop Through
STRONG NET FEE PERFORMANCE DRIVES OPERATING PROFIT DROP THROUGH £2.4m £8.4m £28.1m (£1.7m) (£0.9m) £6.0m £13.9m Operating profit Permanent Contract People costs IT costs Other operating Operating profit HY 2020 net fees net fees costs HY 2021 Note 1: Numbers presented on an adjusted continuing opera
Slide 14: Very Strong Balance Sheet
VERY STRONG BALANCE SHEET Backed by substantial undrawn debt facilities 31 May 2021 30 Nov 2020 Net working capital Intangible assets £3.7m £4.4m Permanent £3.2m Property, plant & equipment £6.9m £7.9m Contract £80.4m Net working capital £83.6m £79.5m £83.6m Net lease liabilities (£2.6m) (£2.6m) As
Slide 15: Free Cash Flow Conversion
FREE CASH FLOW CONVERSION Strong Contract growth and unwind of Covid tax deferrals reduces FCFCR % HY 2021 Uses of free £10.3m (£4.8m) 91% 31% cash Adjusted operating cash Adjusted free cash (£12.8m) flow conversion ratio flow conversion ratio £1.6m CAPEX £27.8m £20.5m (£9.7m) £4.6m LTIPs/tracker sh
Slide 16: Interim Dividend of 3.0p
INTERIM DIVIDEND OF 3.0P Consistent with dividend cover target for the year in the range of 2.5x to 3.0x Adjusted As Reported Adjusted As Reported Adjusted As Reported HY 2021 HY 2021 HY 2020 HY 2020 Actual Growth Actual Growth Profit after tax £19.1m £19.2m £8.1m £8.4m +136% +128% Weighted For basi
Slide 17: Business Overview
BUSINESS OVERVIEW
Slide 18: Group
GROUP Net fees up 3% vs 2019 driven by increased demand for STEM skills Revenue Net fees Average total headcount NPS Net fees (£m) £615.1 £164.3 2,544 FY19 HY21 FY18 £164.3 HY20 £149.9 HY19 £160.9 Contractor Order Book Geography Division Sector 3% 3% 24% 26% +13% 25% 74% 24% 24% 22% 33% 36% 76% 45%
Slide 19: DACH
DACH Strong net fee performance in first half up 15% vs 2019 Revenue Net fees Average total headcount NPS Net fees (£m) £204.5 £59.1 831 HY21 £59.1 HY20 £50.1 HY19 £51.2 Division Sector 18% Technology 17% 34% 66% Banking & 34% 66% Finance Engineering 13% 16% 59% Life Sciences 64% Other 7% 4% Contrac
Slide 20: DACH
DACH (36% of group net fees) Contractor Order Book • Strong performance in the Austria first half with net fees up Switzerland 16% YoY (Contract up 17% 4% and Permanent up 13%) 5% £48.6m • Life Sciences up 21% driven by increased demand in £36.5m Quality Assurance and £33.3m Clinical Research & £29.
Slide 21: EMEA excl DACH
EMEA EXCL DACH Robust performance in the Netherlands with net fees up 3% vs 2019 Revenue Net fees Average total headcount NPS Net fees (£m) £285.9 £59.9 897 48 HY21 £59.9 HY20 £60.5 HY19 £69.2 million million FTE Division Sector 2% 14% 14% 86% 2% 15% 12% 85% 51% 50% Technology 24% 24% Banking & Fina
Slide 22: EMEA excl DACH
EMEA EXCL DACH (36% of group net fees) Contractor Order Book • Net fees down 2% with Other Contract down 2% and Dubai Netherlands Permanent down 7% £55.6m £53.2m Belgium 4% 5% £49.2m • The Netherlands, our largest 9% country in the region, was up 8% with strong performances in £39.2m 43% Engineering
Slide 23: USA
USA High demand in key sectors drives net fee growth of 22% vs 2019 Revenue Net fees Average total headcount NPS Net fees (£m) £116.5 £40.9 456 54 HY21 £40.9 HY20 £35.4 HY19 £35.5 million million FTE Division Sector 3% 26% 16% 74% 1% 20% 15% 80% 7% 10% Technology 48% 45% Banking & Finance Engineerin
Slide 24: USA
USA (25% of group net fees) Contractor Order Book • USA demonstrated its strength with net fees up 24% in the period • Life Sciences, our largest sector in the USA, was up 30% driven by £37.4m robust demand in Clinical Operations, Quality Assurance and Product Development £29.1m • Engineering net fe
Slide 25: APAC
APAC Q2 performance in Japan up 14% vs 2019 Revenue Net fees Average total headcount NPS Net fees (£m) £8.2 £4.4 97 31 HY21 £4.4 HY20 £3.9 HY19 £5.0 million million FTE Division Sector 17% 30% 19% 26% 52% Technology 55% Banking & Finance Engineering Contract 13% 20% 81% Life Sciences Permanent 83% O
Slide 26: APAC
APAC (3% of group net fees) Contractor Order Book • Net fees up 20% in the period, with Contract up 8% and Permanent up 22% Singapore £0.9m £0.9m £0.9m • Japan, our largest country in 25% the region, is predominantly £0.7m Permanent and saw Permanent net fees grow 24% +7% vs 2019 YoY, driven by Tech
Slide 27: Strategy & Outlook
STRATEGY & OUTLOOK
Slide 28: Progress Against Our Strategic Pillars
PROGRESS AGAINST OUR STRATEGIC PILLARS Our position Our platform Our markets Our people Leveraging our position at Create a world class To be a leader in Find, develop, retain the centre of STEM to operational platform markets we choose great people deliver sustainable value through data, to serve t
Slide 29: ESG: Empowering a Sustainable Future Through STEM
ESG: EMPOWERING A SUSTAINABLE FUTURE THROUGH STEM We have made good progress and are making an impact 2024 Positively impact 150,000 lives Double the share of our global Reduce our absolute carbon Increase gender representation Targets renewables business emissions by 20% at leadership levels to 50/
Slide 30: SThree's View
STHREE’S VIEW Management of a more Re-building supply chains with Digital transformation flexible and resilient workforce a focus on resilience and acceleration of the future sustainability • Hybrid working • Building back better – the • Digitisation of health green economy and • Mobile • No need fo
Slide 31: Making Progress Against Our 2024 Ambitions
MAKING PROGRESS AGAINST OUR 2024 AMBITIONS Market share of STEM 2021 Progress Conversion ratio (CR%1) 2021 Progress 50% 21-24% To grow Group market share by To 3% by 2024 2021: 17.1% (2020: 2%) Free cash flow (FCF) CR%2 2021 Progress People and society 2021 Progress 75% • To maintain Learning & Deve
Slide 32: Outlook – Tracking Ahead of FY21 Expectations
OUTLOOK – TRACKING AHEAD OF FY21 EXPECTATIONS Continue to drive the Group forward Secular trends of STEM and flexible towards our long term 2024 ambitions working will remain prevalent across our markets Putting in place our policy around Continue to deliver against our hybrid working, leading to gr
Slide 33: Q&A
Q&A 33
Slide 34: Financial Calendar
FINANCIAL CALENDAR 2021 2022 13 September Q3 Trading Statement 31 January Annual results for the year ended 30 November 2021 Trading update for the year ended 30 November 13 December 2021 34
Slide 35: Appendix
APPENDIX 35
Slide 36: Historical Net Fees and Contract Margin
HISTORICAL NET FEES AND CONTRACT MARGIN Full Year £235.7.2m £258.7m £287.7m £321.1m £338.0m £308.6m £164.3m £172.7m £177.1m £158.7m £153.3m £125.2m £138.9m £134.4m £148.4m £160.9m £149.9m £164.3m Net fees £110.5m £119.8m H1 H2 21.3% 20.7% 20.3% 20.0% 19.8% 19.9% 19.8% 19.8% 19.9% 19.9% 19.8% 19.9% 2
Slide 37: Historical Operating Profit and Conversion Ratio
HISTORICAL OPERATING PROFIT AND CONVERSION RATIO £41.5m £41.3m £44.9m £53.9m £60.0m £31.3m £28.1m Full Year £35.2m £35.2m £33.5m £26.0m £25.6m Adjusted £27.4m £17.4m Operating £24.8m £28.1m £15.3m £19.3m £20.4m profit £14.1m £13.9m 2015 2016 2017 2018 2019 2020 HY 2021 H1 H2 Adjusted 12.8% 17.6% 12.
Slide 38: Foreign Exchange Impact
FOREIGN EXCHANGE IMPACT Half Year ended Half Year ended YoY exchange The Group’s net fees and operating 31 May 2021 31 May 2020 rate movement profit decreased by £1.4m and £0.5m respectively, due to an Average Closing Average Closing Average Closing FX headwind EUR € 1.14 1.16 1.16 1.11 +1.9% -4.7%
Slide 39: Cost Base Analysis
COST BASE ANALYSIS Cost base Payroll costs Payroll Property Sales Other Business Functions Advertising IT & Professional Other 39