Sthree Plc · LSE:STEM
Sthree — FY2019 Earnings Presentation
41 slides from Sthree's earnings presentation, January 2020
Slide 1: Bringing Skilled People Together to Build the Future
BRINGING SKILLED PEOPLE TOGETHER TO BUILD THE FUTURE FULL YEAR RESULTS PRESENTATION 2019 RESULTS FOR YEAR ENDED 30 NOVEMBER 2019
Slide 2: About SThree
ABOUT STHREE STEM FY19 FY19 Life Sciences, Technology, £1.35bn £342m Net fees 86% Energy & Engineering, Revenue Net fees generated Banking & Finance internationally* £60m 91% 33 Operating profit Operating cash flow Years of 74% experience Contract 2013 – 2019 CAGR 3,196 Employees worldwide 10% 19% 2
Slide 3: We Are the Only Global, Pure-Play STEM Specialist
WE ARE THE ONLY GLOBAL, PURE-PLAY STEM SPECIALIST WE ARE UNIQUE
Slide 4: STEM Contract
BRINGING SKILLED PEOPLE TOGETHER TO BUILD THE FUTURE STEM CONTRACT Diversification Flexible working 3% by sector 23% The short-to-mid term project 20% 26% work often required or desired 45% from STEM specialist workers Technology Life Sciences Energy & Banking & Other Employed Freelance Permanent En
Slide 5: Strong Performance Underpins Record Profits for the Group
STRONG PERFORMANCE UNDERPINS RECORD PROFITS FOR THE GROUP Record profits All time record profit for Net fees generated the Group internationally* £60m 86% Adjusted operating profit up 11% FY 2018: 83% YoY, ahead of consensus *Excludes Ireland Net cash ahead of Net cash position Increase in dividend
Slide 6: Performance
PERFORMANCE
Slide 7: Strong Track Record with Profits Tripled Since 2013
STRONG TRACK RECORD WITH PROFITS TRIPLED SINCE 2013 NET FEES OPERATING PROFIT BASIC EPS FY2019 £342m FY2019 £60m FY2019 33.2p FY2018 FY2018 FY2018 FY2017 FY2017 FY2017 FY2016 FY2016 FY2016 FY2015 FY2015 FY2015 FY2014 FY2014 FY2014 FY2013 £193m FY2013 £21m FY2013 9.1p 10% 19% 24% 6 year CAGR 6 year C
Slide 8: A Record Financial Performance
A RECORD FINANCIAL PERFORMANCE Adjusted Adjusted Adjusted Adjusted FY 2019 FY 2018 Actual Growth LFL Growth* Revenue £1,345.0m £1,258.2m +7% +6% Contract net fees £254.6m £232.1m +10% +8% Permanent net fees £87.8m £89.0m -1% -3% Total net fees £342.4m £321.1m +7% +5% Operating profit £60.0m £53.9m +
Slide 9: Robust Balance Sheet
ROBUST BALANCE SHEET 30 Nov 2019 30 Nov 2018 Net working capital Intangible assets £8.0m £11.6m Permanent £5.8m Property, plant & equipment £6.8m £6.9m Net working capital £98.0m £93.9m Contract £92.2m Provisions (£9.7m) (£11.2m) £98.0m Net tax assets £3.1m £4.6m Net cash / (debt) £10.6m (£4.1m) Net
Slide 10: Improved Free Cash Flow Conversion
IMPROVED FREE CASH FLOW CONVERSION FY 2019 Uses of free cash £4.6m £8.2m (£13.4m) CAPEX £1.7m £60.0m Restructuring £54.8m (£12.9m) £1.6m LTIPs/tracker shares £19.0m Dividends (£0.9m) £41.0m Operating profit Non-cash items Working capital Operating cash Tax paid Interest Free cash flow flow £14.1m Ne
Slide 11: Strong EPS Growth and a Progressive Dividend
STRONG EPS GROWTH AND A PROGRESSIVE DIVIDEND Adjusted As Reported Adjusted As Reported Adjusted As Reported FY 2019 FY 2019 FY 2018 FY 2018 Actual Growth Actual Growth Profit after tax £43.2m £41.3m £39.5m £34.3m +9% +20% For basic EPS 129.9m 129.9m 128.7m 128.7m +1% +1% Weighted average Dilutive im
Slide 12: Foreign Exchange Impact
FOREIGN EXCHANGE IMPACT The Group’s net fees Year ended Year ended YoY exchange 30 November 2019 30 November 2018 rate movement and operating profit increased by £4.3m Average Closing Average Closing Average Closing and £1.2m respectively, EUR € 1.13 1.17 1.13 1.13 -0.3% -4.2% due to a modest FX tai
Slide 13: Capturing the Opportunity
g|three® CAPTURING THE OPPORTUNITY
Slide 14: Scalable Platform Business Focused on the Most Attractive STEM Staffing Markets
SCALABLE PLATFORM BUSINESS FOCUSED ON THE MOST ATTRACTIVE STEM STAFFING MARKETS 20,000+ NL UK CA new placements in FR DE 2019 BE CH US IT CN 6,000+ IN JP unique customers placed with in 2019 70+ ZA AU SThree jurisdictions we operate in Non SThree Note 1: Size of bubble denotes the size of the staffi
Slide 15: Our Opportunity Is Huge
OUR OPPORTUNITY IS HUGE SThree already has successful operations in the most important STEM markets £368.6bn £24.2bn £32.8bn £18.8bn £111bn £48.7bn In highly fragmented markets SThree already has a £260.5bn £18.0bn £22.3bn £15.2bn £76.5bn £40.7bn platform foundation to support significant growth Non
Slide 16: Our Brands Provide Focus on Specific Skills or Sectors
OUR BRANDS PROVIDE FOCUS ON SPECIFIC SKILLS OR SECTORS Enabling us to build valuable communities and connect with customer needs Our Candidate Communities QUALITY ASSURANCE IN LIFE SCIENCES 10K+ global candidates SALESFORCE.COM Accounts for 15% of our US placements Global ERP Implementation Demand f
Slide 17: Business Overview
g|three® BUSINESS OVERVIEW
Slide 18: We Have a Well Diversified Business
WE HAVE A WELL DIVERSIFIED BUSINESS 2019 6% 2018 5% 22% 21% 14% 17% 31% 32% 26% 26% Continental Europe Continental Europe 58% 57% 18
Slide 19: Group KPIs
Net fees (£m) FY19 £342.4 FY18 £321.1 FY17 £287.7 GROUP KPI’S Revenue Net fees Average sales headcount NPS £1,345 £342.4 2,423 44 million +6% million +5% FTE +7% 2018: 42 Contractor Order Book 15% Division Sector 3 year CAGR Technology Banking & Finance Contract Energy & Engineering Note 1: All pie
Slide 20: DACH (32% of Group Net Fees)
Net fees (£m) FY19 £109.3 FY18 £99.4 FY17 £80.8 DACH (32% OF GROUP NET FEES) Revenue Net fees Average sales headcount NPS £375.7 £109.3 778 51 million +13% million +10% FTE +13% 2018: 52 Division Sector Technology Banking & Finance Energy & Engineering Contract Life Sciences Permanent Other Note 1:
Slide 21: DACH (32% of Group Net Fees)
DACH (32% OF GROUP NET FEES) Contractor Order Book 20% • Strong growth of 10% in net fees (Contract up 3 year CAGR 14%, Permanent up 5%) • Standout performance from our largest sector, Technology, up 13% • Two new offices opened in the year (Nuremburg and Hanover) • Contract net fee per day rate up
Slide 22: Benelux & France (26% of Group Net Fees)
Net fees (£m) FY19 £87.3 FY18 £84.0 FY17 £69.8 BENELUX & FRANCE (26% OF GROUP NET FEES) Revenue Net fees Average sales headcount NPS £420.7 £87.3 604 38 million +7% million +4% FTE +2% 2018: 29 Division Sector Technology Banking & Finance Energy & Engineering Contract Life Sciences Permanent Other N
Slide 23: Benelux & France (26% of Group Net Fees)
BENELUX & FRANCE (26% OF GROUP NET FEES) Contractor Order Book 17% • Full year net fee growth of 4% (Contract up 8%, 3 year CAGR Permanent down 13%) • Netherlands up 8%, France up 3% and Belgium down 3% • Our two largest sectors saw strong growth with: • Technology up 9% • Energy & Engineering up 10
Slide 24: USA (22% of Group Net Fees)
Net fees (£m) FY19 £76.7 FY18 £66.7 FY17 £64.4 USA (22% OF GROUP NET FEES) Revenue Net fees Average sales headcount NPS £237.7 £76.7 393 42 million +5% million +9% FTE +11% 2018: 53 Division Sector Technology Banking & Finance Energy & Engineering Contract Life Sciences Permanent Other Note 1: All p
Slide 25: USA (22% of Group Net Fees)
USA (22% OF GROUP NET FEES) Contractor Order Book 21% • Strong growth of 9% in net fees (Contract up 3 year CAGR 17%, Permanent down 11%) • Double digit growth in our two largest sectors • Life Sciences up 11% • Energy & Engineering up 38% • Contract net fee per day rate saw strong growth of 19% • C
Slide 26: UK&I (14% of Group Net Fees)
Net fees (£m) FY19 £48.2 FY18 £53.0 FY17 £55.7 UK&I (14% OF GROUP NET FEES) Revenue Net fees Average sales headcount NPS £249.7 £48.2 466 55 million -7% million -9% FTE flat 2018: 40 Division Sector Technology Banking & Finance Energy & Engineering Contract Life Sciences Permanent Other Note 1: All
Slide 27: UK&I (14% of Group Net Fees)
UK&I (14% OF GROUP NET FEES) Contractor Order Book -5% • Management team restructured in Q4 3 year CAGR • Net fees declined in the year, down 9% (Contract down 7%, Permanent down 18%) • Robust growth in our Life Sciences sector with net fees up 4% Contractor order book highlights challenging market
Slide 28: APAC & MENA (6% of Group Net Fees)
Net fees (£m) FY19 £20.9 FY18 £18.0 FY17 £17.0 APAC & MENA (6% OF GROUP NET FEES) Revenue Net fees Average sales headcount NPS £61.2 £20.9 182 29 million +1% million +12% FTE +12% 2018: 39 Division Sector Technology Banking & Finance Energy & Engineering Contract Life Sciences Permanent Other Note 1
Slide 29: APAC & MENA (6% of Group Net Fees)
APAC & MENA (6% OF GROUP NET FEES) Contractor Order Book 1% • Total net fees up 12% (Contract up 6%, Permanent 3 year CAGR up 16%) • Japan, our largest country in the region, saw net fee growth of 43% • Dubai saw strong net fee growth of 15% with Contract up 19% • Contract margin increased by 3%pts
Slide 30: Strategy & Outlook
s|three® STRATEGY & OUTLOOK
Slide 31: 2019 – A Milestone Year
2019 – A MILESTONE YEAR Bolstering our Implementation of Continued to build Embedding our teams and strategic process Focus on customer our global purpose development of and new strategic centricity infrastructure strategy pillars 31
Slide 32: Our Strategic Pillars
OUR STRATEGIC PILLARS Leveraging our position Create a world class To be a leader in Find, develop, retain at the centre of STEM to operational platform markets we choose great people deliver sustainable value through data, to serve to our candidates and technology and customers infrastructure Utili
Slide 33: Group Ambition
GROUP AMBITION 2024 Market share of To grow Group Conversion ratio (CR%2) STEM market share by Range of 50% 21-24% To 3%1 by 2024 (2018: 2%) 2018: 16.8% Free cash flow (FCF) To drive a free cash flow People and society CR%3 CR% of at least • To maintain Learning & Development spend at 5% of operatin
Slide 34: Outlook
OUTLOOK Broader macro-economic and political uncertainties may well persist, and the Continued focus on execution in line with 2020 trading environment remains similar to Q4. We have the right strategy and our our strategy and ambitions as set out in the Capital Markets Day Contract focus will drive
Slide 35: Financial Calendar
FINANCIAL CALENDAR 2020 27 January Annual results for the year ended 30 November 2019 16 March Q1 Trading Statement 20 April Annual General Meeting 15 June Trading update for the six months ended 31 May 2020 20 July Interim results for the six months ended 31 May 2020 14 September Q3 Trading Stateme
Slide 36: Appendix
s|three® APPENDIX
Slide 37: Working Capital Discipline
WORKING CAPITAL DISCIPLINE A key driver of shareholder value Strategic focus on Contract Net working capital (NWC) as a % of revenue has grown £1.6bn 50% at a slower rate than 45% revenue £1.4bn 40% £1.2bn 35% £1.0bn 30% £0.8bn 25% 20% £0.6bn 15% £0.4bn 6% 7% 6% 7% 7% 10% 5% 4% 5% 5% £0.2bn 3% 3% 3%
Slide 38: Historical Net Fees and Contract Margin
HISTORICAL NET FEES AND CONTRACT MARGIN Full £192.8m £218.2m £235.7m £258.7m £287.7m £321.1m £342.4m year £179.4m £172.7m £153.3m £125.2m £138.9m £117.4m £101.2m £134.4m £148.4m £163.0m £91.6m £100.8m £110.5m £119.8m Net fees 2013 2014 2015 2016 2017 2018 2019 H1 H2 20.2% 20.0% 19.8% 19.9% 19.8% 19.
Slide 39: Historical Operating Profit and Conversion Ratio
HISTORICAL OPERATING PROFIT AND CONVERSION RATIO Full £21.0m £29.8m £41.5m £41.3m £44.9m £53.9m £60.0m year £35.4m £33.5m £25.6m £27.4m £26.0m £21.4m £14.3m £24.6m £15.3m £19.3m £20.4m £8.4m £14.1m £6.7m Adjusted 2013 2014 2015 2016 2017 2018 2019 operating profit H1 H2 15.1% 10.9% 13.7% 12.8% 17.6%
Slide 40: Cost Base Analysis
COST BASE ANALYSIS Cost base Payroll costs 8% 86% 6% 14% 2% 6% 78% Support services Sales Payroll Property Advertising IT & Professional Other 40
Slide 41: 47 Offices in 16 Countries
47 OFFICES IN 16 COUNTRIES USA UK & IRELAND CONTINENTAL EUROPE ASIA PAC & MIDDLE EAST USA UK BELGIUM GERMANY AUSTRALIA SINGAPORE UAE Austin Birmingham Antwerp Berlin Melbourne Singapore Dubai Boston Bristol Brussels Düsseldorf Sydney Chicago Glasgow Frankfurt JAPAN Houston London NETHERLANDS Hamburg