Sthree Plc · LSE:STEM
Sthree — FY2021 Earnings Presentation
67 slides from Sthree's earnings presentation, Jan 31, 2022
Slide 1: Bringing Skilled People Together to Build the Future
BRINGING SKILLED PEOPLE TOGETHER TO BUILD THE FUTURE FULL YEAR RESULTS PRESENTATION FOR THE YEAR ENDED 30 NOVEMBER 2021
Slide 2: We Are the Only Global Pure-Play STEM Specialist
WE ARE THE ONLY GLOBAL PURE-PLAY STEM SPECIALIST WE ARE UNIQUE 2 2
Slide 3: 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 9% 25% work often required or desired 32% from STEM specialist workers 20% 47% Technology Life Sciences Employed Independent Permanent contractor contractor Engineering Other 24% 43% GLOBAL FOOTP
Slide 4: Record Performance
RECORD PERFORMANCE Strong growth vs 2020 and 2019 Revenue Net fees £1,331m up 14% vs 2020 £355.7m up 19% vs 2020 up 3% vs 2019 up 9% vs 2019 Adjusted Adjusted operating profit basic EPS £60.8m up 106% vs 2020 31.8p up 143% vs 2020 up 7% vs 2019 up 1% vs 2019 4 Note 1: Numbers presented on an adjuste
Slide 5: 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, technology
Slide 6: ESG: Empowering a Sustainable Future Through STEM
ESG: EMPOWERING A SUSTAINABLE FUTURE THROUGH STEM Group ambitions 2024 To positively impact Doubling the share Reduce our We aspire to 150,000 lives of our global absolute carbon increase gender renewables emissions by 20% representation at business leadership levels to 50/50 55,771 46% 71% 31% live
Slide 7: Our Purpose in Action
OUR PURPOSE IN ACTION SCHNEIDER ELECTRIC CONFIDENTIAL ENGIE Renewables and diversity Life Sciences Engineering SThree has placed eight people into The race to vaccinate the world began A global leader in sustainable energy roles in the firm’s engineering team in 2020 as the Covid-19 pandemic hit sol
Slide 8: Financial Review
es s|three® FINANCIAL REVIEW
Slide 9: Record Net Fees and Profits
RECORD NET FEES AND PROFITS Performance ahead of 2019 levels Net fees Quarterly YoY net fee growth +29% FY 21 £355.7m +25% +22% FY 20 £308.6m FY 19 £338.0m +1% +0% -1% Operating profit -7% FY 21 £60.8m -12% -14% FY 20 £31.3m Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2019 2020 2021 FY 19 £60.0m 1 3 June 2021 2 19 J
Slide 10: Return to Strong Trading
RETURN TO STRONG TRADING FY 2021 FY 2020 Actual movement LFL movement* vs 2019* Revenue £1,330.7m £1,202.6m +11% +14% +3% Total net fees £355.7m £308.6m +15% +19% +9% Operating profit £60.8m £31.3m +94% +106% +7% Conversion ratio 17.1% 10.1% +7.0%pts +7.0%pts -0.3%pts Profit before tax £60.0m £30.1m
Slide 11: Very Strong Net Fee Growth
VERY STRONG NET FEE GROWTH Growth vs 2020 and 2019 driven by market demand Net fees vs 2020 Net fees vs 2019 Contract +17 % +9% Permanent +24% +8% Total +19% +9% 11 Note 1: Movement is at constant currency on an adjusted basis
Slide 12: Continued Trend Towards Employed Contractors
CONTINUED TREND TOWARDS EMPLOYED CONTRACTORS ECM net fees grew 28% YOY and 41% vs 2019 2019 2020 2021 23% 24% 25% 26% 30% 32% 74% 76% 75% Contract Contract Contract 51% 46% 43% Employed Contractor (ECM) Independent Contractor Total Contract Permanent 12 Note 1: Employed contractor model (ECM) where
Slide 13: Regional and Sector Split
REGIONAL AND SECTOR SPLIT YoY growth achieved in every large market and sector Net fees by region 3% vs 2020 vs 2019 9% DACH +24% +20% 3% 10% 25% EMEA excl DACH +9% -9% 25% 36% 20% 34% USA +24% +26% 22% 45% 47% APAC +34% -1% Group +19% +9% 38% 23% Net fees by sector 24% vs 2020 vs 2019 36% Technolog
Slide 14: Strong Net Fee Margins Driving Performance
STRONG NET FEE MARGINS DRIVING PERFORMANCE Growth in margins compared to 2019 Contract net fee margin Permanent fee margin as % of Revenue as % of salary 21.5% 25.0% 2020: 20.7% 2020: 25.1% 2019: 20.3% 2019: 24.9% 14 Note 1: Contract net fee margin = Contract net fees as a % of Contract revenue Note
Slide 15: Significant Growth in Productivity
SIGNIFICANT GROWTH IN PRODUCTIVITY Productivity expected to ease back but remain above historic levels Productivity Growth driven by: • Unprecedent levels of demand • Increased contractor hours • Increased sales consultant hours despite lower +31.1% vs 2020 headcount • Shift towards Employed Contrac
Slide 16: Record Net Fee Performance Drives Operating Profit
RECORD NET FEE PERFORMANCE DRIVES OPERATING PROFIT £32.8m (£18.2m) £0.6m £60.8m £14.3m £31.3m Operating profit Permanent Contract People costs Other operating Operating profit FY 2020 net fees net fees costs FY 2021 Note 1: Numbers presented on an adjusted continuing operations basis excluding disco
Slide 17: 15% Cash Increase Despite Working Capital Impact
15% CASH INCREASE DESPITE WORKING CAPITAL IMPACT OF CONTRACTOR MODEL £20.3m (£26.3m) £60.5m (£16.7m) (£15.9m) (£14.3m) Increase in new contractors (c£20m) £57.5m £49.9m Increase in other receivables (c£43m) Increase in payables c£37m Bank interest / Lease principal Net cash Operating Non cash Workin
Slide 18: Full Year Dividend More Than Doubled
FULL YEAR DIVIDEND MORE THAN DOUBLED Consistent with previously signalled dividend cover in the range of 2.5x to 3.0x FY 2021 FY 2020 Movement Profit after tax £42.1m £18.4m +129% EPS Basic 31.8p 13.9p +129% DPS Interim 3.0p - - DPS Final 8.0p 5.0p +60% DPS Full year 11.0p 5.0p +120% Dividend cover
Slide 19: Growth in Contractor Order Book Underpins Positive Outlook
GROWTH IN CONTRACTOR ORDER BOOK UNDERPINS POSITIVE OUTLOOK Growth across both employed and independent contractors £152.7m £115.3m £117.3m +43% +30% £106.7m vs 2020 vs 2019 Nov 2018 Nov 2019 Nov 2020 Nov 2021 19 Note 1 Contractor order book represents value of net fees until contractual end dates, a
Slide 20: Planned Investments to Drive Towards FY24 Ambitions
PLANNED INVESTMENTS TO DRIVE TOWARDS FY24 AMBITIONS Delivering scalable growth through technology enhancements • Ambitions were supported by planned investments in systems including CRM Operating Conversion and ERP FY24 ambition • Original plan (pre Covid): multi-year implementation with smooth marg
Slide 21: Key Financial Takeaways
KEY FINANCIAL TAKEAWAYS Good Healthy A record Strong net visibility balance performance fee growth of future sheet net fees 21
Slide 22: Strategic Outlook
STRATEGIC OUTLOOK
Slide 23: Progress Against Ambitions Set in 2019
PROGRESS AGAINST AMBITIONS SET IN 2019 Market share of STEM Conversion ratio (CR%1) 50% 21-24% To grow Group market share by To 3% by 2024 2021: 17.1% Free cash flow (FCF) CR%2 People and society 75% To drive a free cash 2021: 2021: 2021: flow CR% of at least 5.5% +31% 44% To maintain Learning To gr
Slide 24: What Our Candidates Tell Us About the Future of Work
WHAT OUR CANDIDATES TELL US ABOUT THE FUTURE OF WORK We spoke to over 5000 SThree candidates globally in November 2021 STEM candidates in demand Women are underrepresented Greater use of contract as we build back better after in STEM and a major source of workers and hybrid the pandemic talent arran
Slide 25: Driving Towards Continued Growth
DRIVING TOWARDS CONTINUED GROWTH Investing to drive sustainable growth in future with a focus on Group-wide Secular trends of STEM and flexible CRM, ERP, ECM model and our working will remain prevalent across people programmes, including our markets retention and attraction Putting in place our poli
Slide 26: We Are the Only Global Pure-Play STEM Specialist
WE ARE THE ONLY GLOBAL PURE-PLAY STEM SPECIALIST WE ARE UNIQUE 26 26
Slide 27: Q&A
Q&A 27
Slide 28: Financial Calendar
FINANCIAL CALENDAR 2022 21 March Q1 Trading Update 20 April Annual General Meeting 20 June HY22 Trading Update 25 July Interim results for the six months ended 31 May 2022 19 September Q3 Trading Update 14 December FY22 Trading Update 2023 30 January Annual results for the year ended 30 November 202
Slide 29: Appendix
APPENDIX 29
Slide 30: Business Overview
BUSINESS OVERVIEW
Slide 31: Group
GROUP Net fees up 9% vs 2019 driven by increased demand for STEM skills Revenue Net fees Average total headcount NPS Net fees (£m) £1,331 million £355.7 million 2,588 FTE 50 FY21 FY20 £308.6 £355.7 2020: +14% 2020: +19% 2020: -11% 2020: 52 FY19 £338.0 2019: +3% 2019: +9% 2019: -17% Contractor Order
Slide 32: DACH
DACH Strong performance with net fees up 20% vs 2019 Revenue Net fees Average total headcount NPS Net fees (£m) £452.5 million £129.4 million 823 FTE 56 FY21 FY20 £105.8 £129.4 2020: +25% 2020: +24% 2020: -8% 2020: 55 FY19 2019: -6% £109.3 2019: +23% 2019: +20% Division Sector 4% 68% 13% 6% 65% 35%
Slide 33: DACH
DACH 36% of group net fees Contractor Order Book • Strong performance in the Austria year with net fees up 24% Switzerland YoY (Contract up 28% and 4% Permanent up 17%) 5% £48.6m • Life Sciences was up 25%, with demand for laboratory staff and quality assurance £35.7m £36.3m roles continuing to incr
Slide 34: EMEA excl DACH
EMEA EXCL DACH Robust performance in the Netherlands with net fees up 7% vs 2019 Revenue Net fees Average total headcount NPS Net fees (£m) £606.3 million £127.2 million 899 FTE 46 FY21 FY20 £127.2 £117.6 2020: +6% 2020: +9% 2020: -19% 2020: 53 2019: -31% FY19 £141.2 2019: -11% 2019: -9% Division Se
Slide 35: EMEA excl DACH
EMEA EXCL DACH 36% of group net fees Contractor Order Book • Net fees grew 9% YoY, after a Other significant recovery in H2 with Dubai £58.9m Netherlands Contract up 10% and £56.3m Belgium 5% Permanent up 6% £51.7m 4% 8% • The Netherlands, our largest France country in the region, finished £40.8m st
Slide 36: USA
USA Very strong net fee growth up 26% vs 2019 Revenue Net fees Average total headcount NPS Net fees (£m) £254.3 million £89.3 million 472 FTE 53 FY21 FY20 £77.3 £89.3 2020: +19% 2020: +24% 2020: -6% 2020: 51 FY19 £76.7 2019: +15% 2019: +26% 2019: -5% Division Sector 10% 25% 16% 9% 15% 20% 26%29% 47%
Slide 37: USA
USA (25% of group net fees) Contractor Order Book • USA delivered an excellent net fee performance in the £44.1m year up 24% YoY • Life Sciences, our largest sector in the USA, saw a strong performance throughout the year with FY net fees up 25% with roles within clinical operations, biometrics and
Slide 38: APAC
APAC Japan net fees up 27% YoY Revenue Net fees Average total headcount NPS Net fees (£m) £17.7 million £9.8 million 111 FTE 31 FY21 FY20 £7.9 £9.8 2020: +31% 2020: +34% 2020: +8% 2020: 27 FY19 £10.8 2019: +4% 2019: -1% 2019: -12% Division Sector 17% 15% 20% 19% 54% 51% 26% 32% Technology 80% Note 1
Slide 39: APAC
APAC 3% of group net fees Contractor Order Book • Net fees up 34% YoY, with Contract up 19% and £1.2m Permanent up 37% Singapore • Japan, our largest country in the region, saw net fees grow 30% 27% driven by Technology (up £0.8m £0.8m 29%) and Life Sciences (up £0.8m +47% vs 2019 48%) • Singapore n
Slide 40: Historical Net Fees and Contract Margin
HISTORICAL NET FEES AND CONTRACT MARGIN £235.7m £258.7m £287.7m £321.1m £338.0m £308.6m £355.7m £86.6m £89.5m £89.0m £75.2m £84.2m £85.4m £84.7m £232.1m £251.4m £233.4m £266.2m £173.3m £203.5m £151.0m Net fees 2015 2016 2017 2018 2019 2020 2021 Contract Permanent 21.5% 20.7% 20.3% 19.8% 19.9% 19.8%
Slide 41: Historical Operating Profit and Conversion Ratio
HISTORICAL OPERATING PROFIT AND CONVERSION RATIO £35.2m £53.9m £60.0m £60.8m Adjusted £41.5m £41.3m £44.9m Operating £31.3m profit 2015 2016 2017 2018 2019 2020 2021 Adjusted 17.6% 16.0% 15.6% 16.8% 17.8% 17.1% Conversion 10.1% ratio % 2015 2016 2017 2018 2019 2020 2021 41 Note 1: 2019,2020 and 2021
Slide 42: Regional and Sector Split
REGIONAL AND SECTOR SPLIT YoY growth achieved in every large market and sector Net fees YoY Net fees vs 2019 Life Life Technology Engineering Other Total Technology Engineering Other Total Sciences Sciences DACH +34% +25% +2% -11% +24% DACH +34% +29% -12% -26% +20% EMEA excl EMEA excl +9% +18% +6% +
Slide 43: Cost Base Analysis
COST BASE ANALYSIS Cost base Payroll costs 6% 8% 18% 2% 5% 79% Payroll 82% Property Advertising IT & Professional Sales Other Other Business Functions 43
Slide 44: ETR Bridge
ETR BRIDGE (6%) (3%) 39% 30% ETR FY20 Transfer pricing Profit mix / ETR FY21 changes tax losses 44
Slide 45: EPS Bridge
EPS BRIDGE £60.8m 4.1p 31.8p 13.8p 13.9p EPS FY20 Increase in profits Change in ETR FY21 45
Slide 46: Very Strong Balance Sheet
VERY STRONG BALANCE SHEET Backed by substantial undrawn debt facilities 30 Nov 2021 30 Nov 2020 Net working capital Intangible assets £2.5m £4.4m Permanent £7.3m Property, plant & equipment £5.7m £7.9m Contract £94.6m Net working capital £101.9m £79.5m £101.9m Net lease liabilities (£2.8m) (£2.6m) A
Slide 47: Cashflow Statement
CASHFLOW STATEMENT 30 Nov 2021 30 Nov 2020 Operating profit £60.5m £29.5m Non cash items £20.3m £21.6m £60.8m Working capital (£26.3m) £25.8m Operating cash flow £54.5m £76.9m Tax (£16.7m) (£10.5m) Capex (£2.6m) (£5.3m) Bank interest / lease principal payments (£13.3m) (£14.0m) LTIPS / Tracker share
Slide 48: Free Cash Flow Conversion
FREE CASH FLOW CONVERSION Strong growth in Contract business impacts FCFCR % FY 2021 Uses of free £20.3m (£26.3m) cash £2.6m CAPEX £60.5m £54.5m £7.7m (£16.7m) LTIPs/tracker shares/ other £6.6m (£13.3m) Dividends £24.5m £7.6m Net increase in cash balance Operating profit Non-cash items Working capit
Slide 49: Foreign Exchange Impact
FOREIGN EXCHANGE IMPACT Year ended Year ended YoY exchange The Group’s net fees and operating 30 November 2021 30 November 2020 rate movement profit decreased by £11.3m and £3.6m respectively, due to an Average Closing Average Closing Average Closing FX headwind EUR € 1.16 1.17 1.14 1.12 -1.8% -5.0%
Slide 50: Banking Facility
BANKING FACILITY Net cash £58m as at 30 November 2021 Available facility £50m RCF + £5m overdraft + £20m accordion Drawn facility Nil Interest rate SONIA + 1.3%-2.0% Covenants: Interest cover 4:1 EBITDA / interest Covenants: Leverage ratio 3:1 Net debt / EBITDA Term £50m RCF expires May 2023 50
Slide 51: City Consensus
CITY CONSENSUS As at 28 January 2022 Consensus Low High FY21 £351.1m £342.9m £355.8m Net Fees FY22 £380.6m £361.6m £405.0m FY23 £411.9m £383.8m £451.1m FY21 £58.9m £57.7m £60.0m PBT FY22 £63.5m £60.0m £67.8m FY23 £70.3m £66.6m £77.7m FY21 30.4p 28.4p 31.4p EPS (adj basic) FY22 32.9p 30.0p 37.3p FY23
Slide 52: FY21 Performance vs Analysts
FY21 PERFORMANCE VS ANALYSTS As at 30 November 2021 Net fees FY21 Operating Profit FY21 £360.0m £66m £64m £355.0m £62m £350.0m £60m £345.0m £58m £340.0m £56m A B C D E F G H Consensus A B C D E F G H Consensus OP% FY21 EPS FY21 17.9% 34p 33p 32p 17.4% 31p 30p 16.9% 29p 28p 52 16.4% 27p A B C D E F G
Slide 53: Shareholder Analysis
SHAREHOLDER ANALYSIS As at 31 December 2021 Rank Fund Manager Holdings % 1 Kempen Capital Management 10,052,000 7.52% 2 JPMorgan Asset Management 7,931,962 5.94% 3 JO Hambro Capital Management 7,269,512 5.44% 4 BlackRock 6,719,856 5.03% 5 Littlejohn & Co 5,327,682 3.99% 6 Allianz Global Investors 4,
Slide 54: Capital Allocation Policy
CAPITAL ALLOCATION POLICY Disciplined approach with objective to maximise shareholder value Maintain a strong balance sheet 1. 2. 3. Invest in organic growth Complete value- Return excess cash to opportunities enhancing acquisitions shareholders Maintain a sustainable, through-the-cycle dividend pol
Slide 55: Acquisition Target Financial Goals
ACQUISITION TARGET FINANCIAL GOALS A disciplined approach to doing value-enhancing deals while maintaining proper risk controls is critical Criteria Goal Commentary Earnings EPS accretive in first full year We seek deals that deliver earnings accretion quickly, given both our Enhancement strategic a
Slide 56: ESG: Empowering a Sustainable Future Through STEM
ESG: EMPOWERING A SUSTAINABLE FUTURE THROUGH STEM 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 50/50 Progress 55,771 lives positively impacted by 46%
Slide 57: Introduction to SThree
INTRODUCTION TO STHREE
Slide 58: 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 9% 25% work often required or desired 32% from STEM specialist workers 20% 47% Technology Life Sciences Employed Independent Permanent contractor contractor Engineering Other 24% 43% GLOBAL FOOTP
Slide 59: Record Performance
RECORD PERFORMANCE Strong growth vs 2020 and 2019 Revenue Net fees £1,331m up 14% vs 2020 £355.7m up 19% vs 2020 up 3% vs 2019 up 9% vs 2019 Adjusted Adjusted operating profit basic EPS £60.8m up 106% vs 2020 31.8p up 143% vs 2020 up 7% vs 2019 up 1% vs 2019 59 Note 1: Numbers presented on an adjust
Slide 60: Bringing Skilled People Together to Build the Future
BRINGING SKILLED PEOPLE TOGETHER TO BUILD THE FUTURE We are the only global pure-play STEM specialist Technology Engineering Mathematics Science Technology Vision To be the number one STEM talent provider in Engineering the best STEM markets Mathematics 60
Slide 61: We Are Global
WE ARE GLOBAL Delivering STEM talent in the most important STEM markets Global footprint Net fees mix 3% 25% 36% 36% USA DACH EMEA excluding DACH APAC (Focus on Life Sciences (Focus on Technology and (Focus on Technology and (Focus on Technology and DACH USA and Engineering) Life Sciences) Engineeri
Slide 62: Multi Brand Go To Market Approach
MULTI BRAND GO TO MARKET APPROACH We operate primarily through our four largest specialist brands • SThree operates a group of specialist recruitment brands focusing on STEM industries • All our brands are home grown One of the most dynamic and highly created within SThree’s Global leader in the pro
Slide 63: How We Operate
HOW WE OPERATE Our business model covers three revenue streams Three options to serve FY21 net fee mix Why we focus on Contract client needs • Particularly suited to STEM staffing Independent contractors market Self employed; invoices paid by Sthree 25% • 32% • Higher lifetime value and profitabilit
Slide 64: Ensuring Satisfied Clients and Candidates
ENSURING SATISFIED CLIENTS AND CANDIDATES Measure of our success seen in our Net promoter score Build Serve our Innovate for an Very high NPS candidate customers outstanding communities Source high volume and Develop direct relationships with clients, candidates and business customer experience 50 s
Slide 65: Investment Case
INVESTMENT CASE Focus on two long- Global reach, with Strong track record of Focused on having a Responsible business term secular trends significant market cash generation, best-in-class growth potential driving growth and operational underpinning capability dividend policy STEM skills are at the S
Slide 66: Business Model
BUSINESS MODEL 1. We build strong relationships with 4. We reinvest capital wisely to fund our candidates 3. continued business growth We earn fees and grow sustainable free cash flows 2. We understand and meet the changing 5. We build a sustainable future demands of through STEM our clients 66
Slide 67: Thank You
BRINGING SKILLED PEOPLE TOGETHER TO BUILD THE FUTURE THANK YOU ENQUIRIES: STHREE PLC: REBECCA MATTS, GROUP CORPORATE AFFAIRS DIRECTOR R.MATTS@STHREE.COM +44 7825 122 523 ALMA PR: SUSIE HUDSON STHREE@ALMAPR.CO.UK +44 20 3405 0205