Business
FY24 Half Year Results
FY24 Half Year Results.
About this update from Sthree Plc
SThree plc RESULTS FOR THE six months ENDED 31 MAY 2024 Resilient performance in H1 driven by our contract business SThree plc ('SThree' or the 'Group'), the only global specialist talent partner focused on roles in Science, Technology, Engineering and Mathematics (STEM), today announces its financial results for the six months ended 31 May 2024. FINANCIAL HIGHLIGHTS Continuing operations H1 FY24 H1 FY23 Variance Reported Like-for-like (1) Revenue (£ million) 763.4 825.2 -7% -5% Net fees (£ million) 188.7 208.6 -10% -7% Operating profit (£ million) 37.7 38.1 -1% +3% Operating profit conversion ratio 20.0% 18.3% +1.7% pts +1.9% pts Profit before tax (£ million) 39.0 38.5 +1% +5% Basic earnings per share (pence) 21.2 21.0 +1% +5% Interim dividend per share (pence) 5.1 5.0 +2% +2% Net cash (£ million) (2) 90.0 72.4 +24% +24% HALF-YEAR HIGHLIGHTS · The Group delivered net fees of £188.7 million, down 7% YoY ( 3) , despite the ongoing challenging backdrop and against a strong prior year performance. o Within our core skill verticals Engineering was up 8% driven primarily by the Energy sector, whilst Technology was down 9% and Life Sciences was down 16% driven by global sector trends. o Net fees across our three largest countries, representing 72% of Group: Netherlands up 3%, Germany down 12% and USA down 13%. · Contract net fees, now representing 84% of Group net fees (H1 FY23: 81%), were down 4 % as the ongoing softness in new business activity continues to be partially offset by strong client extensions; a demonstration of our clients' need to retain critical STEM skills and flexible talent. · Contractor order book (4) of £182.1 million, down only 2% YoY despite a very strong prior year comparator, represents sector-leading visibility with the equivalent of circa four months' net fees. · Profit before tax of £39.0 million (up 5% YoY ( 3) ) due to lower average headcount for the half, tight cost control and the benefit of higher interest income. · Strong balance sheet, with £90.0 million net cash as at 31 May 2024 (H1 FY23: £72.4 million). · Interim dividend approved at 5.1 pence per share (H1 FY23: 5.0 pence). · The Technology Improvement Programme remains on track, with the US live and deployments well under way in both Germany and the UK. · Sustainable business practice and ESG commitments demonstrated by: o SThree's clean energy (renewables) business up 15% versus H1 FY23 (H1 FY23: up 29% versus H1 FY22). o 8% carbon reduction in absolute emissions in FY23 (5) in comparison to FY19, our baseline year. o 37% of women (H1 FY23: 33%) in leadership as we progress towards achieving 50/50 representation in leadership. OUTLOOK · Contract extensions remain strong whilst new business activity continues to be subdued. · Whilst market conditions have remained challenging for longer than anticipated, performance for FY24 currently expected to be in line with market expectations (6) . · Continued focus on investment and sequenced roll-out of the TIP across rest of the Group, strengthening the Group's position for long-term growth. (1) Variance compares reported H1 FY24 against reported H1 FY23 on a constant currency basis, whereby the prior financial period foreign exchange rates are applied to current and prior financial period results to remove the impact of exchange rate fluctuations. (2) Net cash represents cash and cash equivalents less borrowings and bank overdrafts and excluding leases. (3) All YoY growth rates in this announcement are expressed at constant currency. (4) The contractor order book represents value of net fees until contractual end dates, assuming all contractual hours are worked. (5) Target not measured at mid-year. (6) Current consensus PBT expectation is £69.2 million. Source: SThree compiled consensus. Timo Lehne, Chief Executive Officer, commented: "Given the challenges faced across the sector, our resilient performance in the first six months of the financial year has been pleasing. Strong Contract extensions have continued to underpin performance despite subdued new business activity. Our unique business model focused on specialist STEM skills and flexible talent solutions, continues to power our performance, supported by global megatrends driving long-term demand for the skills we place. We continue to progress with the Technology Improvement Programme, which overall remains on track and on budget, and we are delighted with the progress we have made so far with our phased roll out. Three of our largest markets are now transacting business through the platform and we are already starting to see early evidence of operational efficiencies, and we are excited by the additional scale benefits to be realised as we continue on our journey to becoming a digital-first innovator. As we enter the second half of the year, market sentiment remains largely unchanged. Contract extensions continue to be robust as clients seek to retain much-needed STEM expertise, and we are well covered in our focussed skills specialism and markets for when macroeconomic conditions ease. Through this, we remain laser focussed on executing our vision and we continue to be bold in our ambition. With our people, position and processes coming together in line with our digital-first vision, the long-term future is bright." Analyst conference call SThree is hosting a webinar for analysts and investors today at 08:30 BST to present the Group's results for the six months ended 31 May 2024. In addition, at 14:00 BST, the Group will host the third in its series of investor briefings. This virtual webinar will focus on the Employed Contractor Model. If you would like to register for these conference calls, please contact [email protected] . SThree will issue its Q3 trading update on 24 September 2024. The person responsible for this announcement is Kate Danson, Company Secretary. Enquiries: SThree plc Timo Lehne, CEO via Alma Andrew Beach, CFO Keren Oser, Investor Relations Director Alma PR +44 20 3405 0205 Rebecca Sanders-Hewett [email protected] Hilary Buchanan Sam Modlin Will Ellis Hancock Notes to editors SThree plc brings skilled people together to build the future. We are the only global specialist talent partner focused on roles in Science, Technology, Engineering and Mathematics (STEM), providing permanent and flexible contract talent to a diverse base of nearly 4,800 clients (with whom we worked in H1 FY24) across 11 countries. Our Group's circa 2,600 staff cover the Technology, Life Sciences and Engineering sectors. SThree is part of the Industrial Services sector. We are listed on the London Stock Exchange's Main Market, trading with ticker code STEM. Important notice Certain statements in this announcement are forward looking statements. By their nature, forward looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by those statements. Forward looking statements regarding past trends or activities should not be taken as representation that such trends or activities will continue in the future. Certain data from the announcement is sourced from unaudited internal management information and is before any exceptional items. Accordingly, undue reliance should not be placed on forward looking statements. Chief Executive Officer's STATEMENT Overview The Group's performance in the first half of the year has continued to demonstrate the strength of our unique operating model and proposition centred on sourcing STEM skills and flexible talent. Within the context of a persistent challenging market, which has weighed on the wider sector, the Group delivered net fees down 7% from record highs in the prior year and comfortably above pre-covid levels, underpinned by a robust Contract performance (down 4%). Alongside the resilient net fee performance, the Group delivered operating profit of £37.7 million, up 3% YoY, and ended the period with £90.0 million of net cash. Further to this we have started to see the early rewards of our efforts to move beyond the status quo and to do things differently. We took the bold decision two years ago to initiate our Technology Improvement Programme (TIP) to position SThree as a digital-first organisation, supercharging our teams through an end-to-end technology platform to drive efficiencies and scale. With three of our largest markets now transacting through early iterations of the platform, we are pleased to see the first stage of benefits starting to materialise in the form of operational efficiencies, and we look forward to the top line benefits that will come, as anticipated, as the roll-out progresses. Significant change programmes like this can be difficult for teams to adapt to. We're proud of how our teams have risen to the challenge and would like to take this opportunity to thank them for their commitment. The real-world impact of our work has meant we have been able to help over 6,198 highly skilled STEM professionals successfully secure their next career role, connecting them with dynamic organisations in industries that are at the forefront of innovation and development. More broadly, in the first six months of the year, we have positively impacted 9,280 lives through our work and engagement with community initiatives, grown our clean energy business by double-digits, invested in our teams and continued to execute our ambitious growth strategy to ensure we are putting ourselves in the best position to win and grow shareholder value for the long-term. A business model positioned for a changing world Whilst in the short term wider markets continue to be characterised by uncertainty, causing many businesses to pause on new project spend and investment initiatives, the conviction that our Contract and STEM focus positions us at the centre of two long-term structural growth drivers is stronger than ever. All the evidence suggests that STEM skills are in short supply with many businesses in our key markets struggling to recruit the STEM skills they need 1 . The widening gap between demand and supply of STEM skills has been accelerated with the surge in adoption of generative-AI and machine learning technologies. As a McKinsey Global Survey reports, AI adoption worldwide has increased dramatically in the past year, with 72% of respondent organisations having adopted AI in at least one business function, up from a consistent c.50% over last six years 2 . However, it has been shown that to fully embed AI and achieve meaningful value from technology investment, organisations must invest twice as much in people as they do in technologies 3 . Businesses across all industries must find the expertise to fill new types of roles, such as data analytics and AI engineers, if they seek to harness the efficiency of modern technologies. We partner with diverse clients across sectors to connect them with communities of sought-after specialists through a full suite of services that meet both client and candidate needs, including Independent Contractors (IC), Employed Contractors (ECM) and Permanent placements. Our strategic focus on Contract, now representing 84% of Group total net fees, is a conscious effort to align our business to the changing dynamics in the work environment and the growing need for adaptability. Flexible talent encompasses contract workers, part-time specialists and project-based teams who can pivot and adapt to the fast-evolving requirements of the STEM industries. This approach allows us to offer solutions that are not only responsive to the immediate needs of businesses but also support the preference of our candidate community. This focus gives rise to our unique model that delivers quality earnings and sector-leading visibility through cycles. With continued strong Contract extensions from our clients during the period, the Contract Order Book was down only 2% YoY to £182.1 million, and represents the equivalent of circa four months of net fees, partially offsetting the soft new business environment. Strategy execution and focus We pursue our market opportunity with a highly disciplined approach to capital allocation and with a clear strategy centred on four strategic pillars. I am pleased to report that we continued to make meaningful progress against all four, moving us closer to our vision of being the #1 STEM talent partner in the best STEM markets, with scale and sustainable margins. As we drive best practice through the business, work closer together as a global team and challenge ourselves to do things better and more efficiently, our belief is that as these pillars come together, we can redefine our future business model and unlock further growth potential. Our Places - knowing where to play, play where we can win Our strict market investment model informs the regional and vertical mix we choose to operate in, with our active market coverage targeted to the 11 largest STEM markets worldwide. As we regularly assess and analyse our position within these markets, we are excited by the opportunities we see. Our average market share remains at a modest 3%, ranging from 0.1% in Japan to 6% in the Netherlands where we hold a market leading position. As such, this leaves exponential scope to leverage our position to grow both organically and, given the highly fragmented supplier landscape, through selective M&A. We are maintaining our disciplined and focused headcount investment in the market and skill verticals that provide the best long-term growth opportunities and where we see the potential for the strongest returns as the market recovers. To support our growth ambitions in the regions, we have continued to evolve our insights platform, and provide internal and external data to our consultants to go deeper in our skills specialisms. We have continued to align our consultants along very clear skills verticals by region, and bring further clarity to the skills that we recruit for. Our Platform - digital first The overall TIP continues to progress on track and on budget. The first iteration of our platform is deployed across our US business and is undergoing continuous improvement as more and more data flows through the platform, driving richer, bespoke insights. Our second major regional roll-out in Germany is well underway and we have now initiated our third regional roll-out in the UK. With each regional roll-out, we are absorbing new learnings and becoming increasingly efficient in our deployments. As at the end of H1, we had processed over 38,000 invoices, equating to nearly £160 million of revenue. As we have stated before, cost efficiencies will be the first benefit to materialise before we start to generate productivity proof points from our early deployments. We are pleased to share that in line with our expectations, in the US we have already seen material cost efficiencies with further savings expected as systems are fully bedded in. We are well on our journey to becoming a digital-first innovator and we continue to see this programme as a key ingredient to driving higher margin growth over the medium term. Our People - best employer, best people The resilient results we have delivered in the period reflect the talent and capabilities of our global teams, who strive to bring our clients innovative solutions to their unique needs, delivered with best-in-class customer service. During the period, we have made several enhancements to our employee value proposition, with a focus on employee engagement and inclusion, to ensure we continue to attract and retain the best talent. As part of this, we launched senior leadership development programmes in partnership with Deloitte and St Gallen Business School to support talent management and succession. We also witnessed the completion of the third cohort of our women in leadership talent accelerator programme. In addition, we dedicated particular focus in the period to our sales function, reviewing and enhancing processes to support retention and productivity and ensuring we have the right structures in place to support ambition. A core focus of our TIP has been engagement and collaboration with our global teams, ensuring everyone plays a role in our journey. We understand that technology is only as good as how it is utilised, and it is pleasing to see the excitement within the teams for the adoption of our new platform. New learnings are being embedded through the organisation everyday through our transformation learning programmes, and through this change, we are delighted to have achieved an eNPS of 45 for H1 (H1 FY23: 47), comfortably maintaining our position in the top quartile of professional services companies. Our Position - a winning brand with competitive and differentiated value propositions We capture our market opportunity through our 'house of brands' approach, leveraging the strong brand-value we have in our specialist vertical skills. During the period, we have taken this to the next level by investing in our brand websites and go-to-market channels, as well as enhanced our digital marketing capabilities to drive mass lead generation. Unchanged through the period is our reputation as a trusted partner, which remains core to our proposition. Our customer-centric focus means we work hard to understand and collaborate with our clients to address their needs quickly and effectively, reaffirming our leadership in the STEM talent staffing sector. Our focus as we look ahead into H2 is to further optimise our strong go-to-market brands by tying them closer to the Group, including the development of new, aligned visual identities, to leverage their collective brand value across our markets and skills. We will further reinforce our Group market position through new thought leadership initiatives, including our next STEM survey report launching in H2. Current trading and outlook As we enter the second half of the financial year, market sentiment remains largely unchanged. Commitment to new project expenditure is taking longer resulting in continued subdued new business activity, however Contract extensions remain robust as clients seek to retain much-needed STEM skills. As we look ahead to improving market conditions, we continue to tightly manage costs and remain highly focused in our targeted investments, ensuring we are well positioned to capitalise when the market returns. As a result, we currently expect FY24 performance to be in line with market expectations, and we remain well covered in our focussed skills specialism which are aligned to client requirements. We believe we are in the right sectors, the right markets, with the right teams, and we continue to be bold in our ambition. With our people, position and processes coming together in line with our digital-first vision, the long-term future is bright. 1 Source : New survey of European companies highlights critical labour and skills shortages | BusinessEurope Source : Improving workforce development and STEM education to preserve America's innovation edge | Brookings 2 Source: The state of AI in early 2024: Gen AI adoption spikes and starts to generate value | McKinsey 3 Source: What will developers do with 40% more time? | SThree COMMITMENT TO BEING A RESPONSIBLE BUSINESS We continue to make steady progress towards our ESG targets during the first half of the current year (against an FY19 baseline year). Our organisational purpose is rooted in delivering sustainable outcomes and we have continued to enhance our local communities through access to decent work and tackling career inequalities. Despite a challenging market we have continued to invest in building a diverse talent pipeline for our clients whilst addressing barriers to STEM career paths for those underserved in the locations where we operate. During this period, we have also continued to see our clean energy business (renewables) grow at pace as the world continues to focus on decarbonisation, a megatrend underpinned by STEM skills. Whilst supporting our clients to decarbonise their value-chain, we have also spent the first half of this year strengthening our own net zero transition plans to ensure we make progress to achieve our science-based targets. Further details of our net zero targets and wider ESG commitments can be found in our Impact Report on our website. Progress within the first half of this financial year is detailed below: To positively impact 150,000 lives by FY24 To double the share of our global clean energy business by FY24 To reduce our scope 1 and 2 emissions by 77% and reduce scope 3 emissions by 50% by FY30* We aspire to increase the representation of women in leadership to 50/50 Progress 123,746 lives positively impacted by SThree since FY19 (baseline year). 173% growth in our clean energy business net fees since FY19 (baseline year). 31% increase in scope 1 & 2 and 12% reduction in scope 3 in FY23 from FY19 (baseline year). Totalling an 8% reduction in absolute emissions. 37% of leadership positions held by women. H1 FY24 half year activities 9,280 lives positively impacted: 6,198 accessed decent work through SThree placements. 829 accessed our career support programme. 2,015 lives impacted through community initiatives. 15% YoY growth in our clean energy business net fees in H1 FY24. Established our Net Zero working group and made progress towards developing a detailed Net Zero action plan. Completed our third cohort of our talent accelerator programme for women. Launched our global women's network. Alignment to strategic pillars People Position Places Platform People Relevant UN Sustainable Development Goals SDG 4. Quality Education SDG 8. Decent Work and economic growth SDG 10. Reduced inequalities SDG 7. Affordable and clean energy SDG 13. Climate action SDG 17. Partnerships for the goals SDG 13. Climate action SDG 10. Reduced inequalities * Full SECR reporting is available in our FY23 Annual Report and Accounts. Group OPERATIONAL REVIEW Overview The Group delivered a resilient net fee performance in the first half of FY24 with net fees down 7 % YoY despite the ongoing challenging market conditions and against the record prior year performance. Our Contract business, which is our main strategic area (representing 84% of Group), saw net fees decline b y 4 % YoY. Contract lengths increased 9% YoY to 51 weeks, while pricing remained robust. The contractor order book closed at £182.1 million which, whilst down only 2% YoY, continues to provide sector-leading visibility. Permanent net fees were down 18 % YoY reflecting both global market conditions together with our targeted investment towards Contract in specific markets. Average permanent headcount was down 13% YoY. From a skill verticals perspective, the Group saw continued strong demand for Engineering roles, up 8% YoY, driven primarily by the Energy sector, with clean energy (renewables) the fastest growing segment, while net fees for placements into Technology roles, our largest discipline, were down 9% Yo Y and Life Sciences declined 16% YoY primarily driven by the global market conditions in the sector, though still broadly in-line with pre-Covid levels. Overall, Group reported operating profit was £ 37.7 million (H1 FY23: £38.1 million), up 3% YoY on a like-for-like basis, driven primarily by lower personnel costs, with average headcount down 10% YoY, along with tight cost management. The operating profit conversion ratio for the half was 20.0%, which we expect to temper in the second half of the year due to planned investments together with additional license and amortisation costs as the Technology Improvement Programme (TIP) is rolled out across the Group. The Group period-end headcount declined marginally by 2% compared to the end of FY23, as we remain focused on managing our business prudently, whilst also ensuring we are ready to respond when the market improves. Productivity in the first half was up 4% YoY as the rate of net fee decline was lower than average headcount decline, reflecting careful management of natural churn. Update against our 2024 ambitions In line with our 2024 ambitions to deliver growth and value for our Group and all stakeholders, we continued to make good progress on our journey to become the number one STEM talent provider in the best global STEM markets. In the six months ended 31 May 2024, our key achievements included: · Market share: Our net fee growth vs FY19 remains ahead of our peer group in all core geographies. · Conversion ratio: Achieved an operating profit conversion ratio of 20% in H1 FY24. We remain committed to our ambition of achieving margins at 21% or higher in the mid to long-term, however as previously stated we expect current macro-economic headwinds to dampen margin progression in the short term. · People: Group-wide eNPS was 45 at H1 FY24, two points up since the year end. Our recognition schemes, goal setting, performance feedback and progress made in the roll-out of the TIP were identified as strengths which support the efforts in creating a high performance culture. Our eNPS remains within the top quartile of Professional Services industry. · Planet: Reduced our carbon emissions by 8% versus FY19 (the base year). To contribute towards the global fight against climate change, we launched several actions to educate and influence sustainable behaviours across the business to ensure we make progress towards our SBTi net zero targets which were announced in April 2023. We also grew our clean energy business net fees by 15% YoY, to represent 11% of Group net fees at H1 FY24. · Positively impacted over 9,280 lives through delivering recruitment solutions and community programmes in H1 FY24 alone. Group net fees % of Group H1 FY24 (£'000) H1 FY23 (£'000) Variance Reported Like-for-like (1) Geographical mix DACH 34% 64,197 74,476 -14% -12% USA 22% 41,841 49,364 -15% -13% Netherlands including Spain 22% 41,121 39,381 +4% +7% Rest of Europe 17% 31,311 35,178 -11% -10% Middle East & Asia 5% 10,273 10,192 +1% +11% Total 100% 188,743 208,591 -10% -7% Skills mix Technology 48% 90,153 101,712 -11% -9% Engineering 29% 53,956 51,223 +5% +8% Life Sciences 17% 31,618 38,958 -19% -16% Other 6% 13,016 16,698 -22% -20% Total 100% 188,743 208,591 -10% -7% Service mix Contract 84% 158,712 169,982 -7% -4% Permanent 16% 30,031 38,609 -22% -18% Total 100% 188,743 208,591 -10% -7% (1) All YoY growth rates in this announcement are expressed at constant currency. Business mix The Group is well diversified, both geographically and by the skills we place across multiple sectors. Our top three countries now represent 72% of Group net fees, with Germany accounting for 30%, USA 22% and the Netherlands 20% of Group net fees. Our Contract business declined by only 4% on a like-for-like basis against a record prior year performance and now represents 84% of the Group net fees. Our Permanent business, which now represents 16 % of the Group net fees, saw net fees decline 18% in the current financial period, with average Permanent headcount down 13% YoY. Our market invest model enables us to continually review our markets to prioritise investments where we see opportunities for growth and the strongest returns. Engineering, which represents 29% of the Group net fees, grew by 8% across most regions, driven primarily by the Energy sector. Clean energy business (renewables) remains the fastest growing segment, up 15% YoY. This was offset by the decline in Technology of 9% YoY, and in Life Sciences of 16% YoY due to reduced global expenditure in that sector. Technology and Life Sciences now represent 48% and 17% of the Group net fees respectively. Operational review by reporting segment DACH (34% of Group net fees) H1 FY24 H1 FY23 Variance Performance highlights Reported Like-for-like Revenue (£'000) 229,962 264,512 -13% -11% Net fees (£'000) 64,197 74,476 -14% -12% Average total headcount (FTE) 818 907 -10% n/a · DACH is our largest region comprising businesses in Austria, Germany and Switzerland, with Germany accounting for 87% of net fees. · The region saw net fees decline by 12% YoY, with our Technology business down 15%, but partially offset by Engineering business, up 4% YoY. · DACH Contract net fees were down 6% YoY and Permanent net fees were down 26%. · Germany's net fees were down 12% YoY driven by Technology which was down 16% due to market conditions across that sector. · Switzerland saw net fees decline 2% and Austria net fees declined 9%. USA (22% of Group net fees) H1 FY24 H1 FY23 Variance Performance highlights Reported Like-for-like Revenue (£'000) 154,463 164,019 -6% -3% Net fees (£'000) 41,841 49,364 -15% -13% Average total headcount (FTE) 412 509 -19% n/a · The USA is the world's largest specialist STEM staffing market and our second-largest region on a net fee basis. It remains a key area of focus for the Group, and we will continue to invest in the region as we align our resources with the best long-term opportunities. · USA saw net fees decline 13% YoY. Contract, which represents 91% of net fees, was down 8% YoY driven by Life Sciences, down 20% YoY and Technology, down 24% YoY, in line with the market conditions. Technology job posting volumes were down by 26% in the first half of the year with soft demand in the key areas of software development, infrastructure, and big data. Strong growth in Engineering, up 10%, helped to partially offset the declines in the other two skill verticals. · Permanent, which represents 9% of net fees, declined 40% driven by Life Sciences and due to the accelerated transition towards Contract. Netherlands including Spain (22% of Group net fees) H1 FY24 H1 FY23 Variance Performance highlights Reported Like-for-like Revenue (£'000) 175,913 177,497 -1% +1% Net fees (£'000) 41,121 39,381 +4% +7% Average total headcount (FTE) 415 436 -5% n/a · Net fees for the region were up 7% YoY, with Contract up 6% and Permanent up 20%. · The Netherlands, our largest country in the region which accounts for 91% of net fees, delivered robust net fee growth of 3% YoY. Contract was up 1% YoY and Permanent saw strong growth of 21% with overall performance supported by growth in Engineering, up 10%, partially offset by decline in Life Sciences and Technology, down 5% and 2% respectively. · Spain saw strong growth of 73% in the first half, driven by Technology and Engineering. Rest of Europe (17% of Group net fees) H1 FY24 H1 FY23 Variance Performance highlights Reported Like-for-like Revenue (£'000) 181,709 197,221 -8% -7% Net fees (£'000) 31,311 35,178 -11% -10% Average total headcount (FTE) 442 542 -18% n/a · Rest of Europe comprises of businesses in the UK, Belgium and France. · Net fees declined 10% YoY, which includes the impact of restructured markets. Excluding these, net fees for the region would have been down 7%. Contract, which represents 97% of net fees for the region, declined 7%, with Permanent declining 53%, driven by both market conditions and the transition towards Contract, particularly prominent in the UK. · The UK, our largest country in the region, saw net fees decline 9%, with growth in Engineering, up 18% YoY, outweighed by declines in Life Sciences and Technology, down 26% and 5% respectively. · Belgium saw net fees down 7% and France was up 2%. Middle East & Asia (5% of Group net fees) H1 FY24 H1 FY23 Variance Performance highlights Reported Like-for-like Revenue (£'000) 21,357 21,962 -3% +5% Net fees (£'000) 10,273 10,192 +1% +11% Average total headcount (FTE) 193 189 +3% n/a · Our Middle East & Asia business principally includes Japan, UAE and Singapore, and accounts for 5% of Group net fees. · Net fees were up 11% YoY (excluding the impact of the restructured markets, up 18%), with Contract down 13% and Permanent up 24%. Japan, which represents 47% of the region, delivered an exceptional performance for the first half, up 27% YoY, driven by Engineering due to demand for roles within clean energy business. · Strong performance in UAE with net fees growing 9% driven by roles in Finance and Life Sciences. Chief financial officer's REVIEW The Group has delivered a resilient net fee performance in the first half of FY24, with net fees down 7% YoY, against the backdrop of a strong prior-year performance and current macro-economic uncertainties . This is the third best H1 performance on record, up 18% on pre-Covid performance. The performance is supported by the strength of our well-established strategy, focused on STEM and flexible talent . Income statement On a reported basis revenue for the half year was down 7% to £763.4 million (H1 FY23: reported £825.2 million) while net fees decreased by 10% to £188.7 million (H1 FY23 £208.6 million). The weakening of our two main trading currencies, the US Dollar and the Euro, against Sterling during the year, decreased the total net fees by £5.0 million. Therefore, when presented on a constant currency basis, the net fees decreased by 7% YoY. Net fees in our Contract business, which represented 84% of the Group net fees for the half year (H1 FY23: 81%), declined by 4%, driven by the ongoing softness in new business but partially offset by continued strong contract extensions. Across our core regions, only the Netherlands saw growth in Contract net fee income, which was up 1%, thanks to strong demand for Engineering skills. In the US, Contract net fees, which now account for over 90% of the region total net fees, were down 8% YoY primarily due to its exposure to Life Sciences , while DACH was down 6%, reflecting softer demand for Technology skills . Rest of Europe Contract performance was down 7%, though excluding restructured markets would have been down 5% YoY . Middle East & Asia was down 13 %. Skills-wise Engineering was up 8% YoY, with Life Sciences down 16% and Technology down 9%, reflecting global market conditions. The Group Contract net fee margin, calculated as Contract net fees as a percentage of Contract revenue [1] remained flat YoY at 21.7% (H1 FY23: 21.7%). The contractor order book was down 2% YoY and continues to provide good visibility into the remainder of FY24. Under the Contractor model, net fees are earned on a month-by-month basis, with the contract order book reflecting the value of net fees under contract but yet to be recognised. During softer market conditions, this provides resilience with visibility over the recurring-like nature of monthly contract fees as contracts run their course (Contract 'finishers'). In a market recovery context, the Board would expect the contract order book to gradually increase as and when new placements outpace finishers over a sustained period through the year. Permanent net fee income was down 18% reflecting market conditions across all regions, together with our targeted investment towards Contract. Our largest Permanent market, DACH, reported a decline of 26%. Netherlands region was up 21 %, Rest of Europe down 53% , USA d own 40 %, and Middle East & Asia was up by 24%. Permanent average fees increased by 12% YoY in the period, with average permanent fee margin (net fees as a percentage of salary) now at 27.3% (H1 FY23: 26.6%). Operating expenses decreased by 11% YoY on a reported basis, amounting to £151.0 million (H1 FY23: £170.5 million). Overall, the reported operating profit was £37.7 million (H1 FY23: £38.1 million), up 3% YoY on a like-for-like basis, while the Group operating profit conversion ratio increased to 20.0% (H1 FY23: 18.3%). We expect the conversion ratio to temper in the second half of the year due to additional licensing and amortisation costs as we roll out the Technology Improvement Programme alongside planned investments to ensure the Group is well positioned for when market conditions improve. Productivity was up moderately YoY as average headcount was down resulting in personnel costs declining faster than net fees; this reflects careful management of natural churn. The net currency movements versus Sterling were unfavourable to the operating profit, reducing it by £1.5 million. Net finance income The Group received net finance income of £1.3 million as compared to net finance income of £0.4 million in the previous year. The YoY increase was driven by certain short-term investments into money market funds. Income tax The total tax charge for the half year on the Group's profit before tax was £ 10.9 million (H1 FY23: £10.8 million), representing an estimated full-year effective tax rate (ETR ) of 27.9% (H1 FY23: 28.1%). The Group's ETR varies depending on the mix of taxable profits by territory, non-deductibility of the accounting charge for LTIPs and other one-off tax items. Overall, the reported profit before tax was £39.0 million, up 5% YoY in constant currency and up 1% on a reported basis (H1 FY23: £38.5 million). The reported profit after tax was £28.1 million, up 5% YoY in constant currency and up 2% on a reported basis (H1 FY23: £27.7 million). Earnings per share (EPS) The reported EPS was 21.2 pence (H1 FY23: 21.0 pence). The YoY movement is attributable to the overall resilient trading performance, combined with lower average headcount, tight cost control and higher net interest in the first half, partially offset by an increase of 0.7 million in the weighted average number of shares. Reported diluted EPS was 20.8 pence (H1 FY23: 20.4 pence). Share dilution mainly results from various share options in place and expected future settlement of certain tracker shares. The dilutive effect on EPS from tracker shares will vary in future periods, depending on the profitability of the underlying tracker businesses and the settlement of vested arrangements. Dividends The Board monitors the appropriate level of dividend, taking into account achieved and expected trading of the Group, together with its balance sheet position. The Board aims to offer shareholders long-term ordinary dividend growth within a targeted dividend cover range of 2.5x to 3.0x through the cycle. The Board proposes to pay an interim dividend of 5.1 pence (H1 FY23: 5.0 pence), amounting to c.£6.8 million in total. This will be paid on 6 December 2024 to shareholders on record on 8 November 2024. The dividend will be paid from distributable reserves. Liquidity management In H1 FY24, cash generated from operations was £41.6 million (H1 FY23: £55.1 million). The decrease was primarily driven by the lower rate of new placement activity, partially offset by robust Contract extensions. Income tax paid decreased to £11.4 million (H1 FY23: £10.2 million) in line with the trading performance across our markets. Capital expenditure increased to £5.0 million (H1 FY23: £3.0 million), primarily driven by the continued development and roll-out of the Group-wide Technology Improvement Programme. The capital expenditure also included costs of leasehold improvements across our office portfolio. The Group paid £7.1 million in rent (principal and interest portion) (H1 FY23: £7.7 million). Net interest income (excluding interest on lease payments) w as £1.7 million (H1 FY 23: net interest income £0.6 million) during the period. The Group spent £ 10.0 million (H1 FY23: £10.0 million) on the purchase of its own shares to satisfy existing employee share incentive schemes . Cash inflows of £0.4 million (H1 FY23: £0.1 million) were generated from Save As You Earn employee scheme. Dividends payments were £0.5 million and included £0.3 million in payments to shareholders who claimed FY23 interim dividend post the year end, and £0.2 million in payments for unclaimed dividends due to shareholders from prior years (2019-2023). In the comparator period, H1 FY23, dividend payments amounted to £20.5 million, and comprised the FY22 interim dividend paid in December 2022 and the FY22 final dividend for which funds were transferred to the share administrator in May 2023. Foreign exchange had a negative impact of £2.9 million (H1 FY23: positive impact of £2.6 million). Overall, the underlying cash performance in the first half of FY24 was very strong, reflecting underlying profits for the half offset by share purchases for the Employee Benefit Trust and capital expenditure on TIP. We started the year with net cash of £83.2 million and closed the period with net cash of £90.0 million. Accessible funding The Group's capital allocation priorities are financed mainly by retained earnings, cash generated from operations, and a £50.0 million Revolving Credit Facility (RCF). This has remained undrawn during the period, but any funds borrowed under the RCF would bear a minimum annual interest rate of 1.2% above the benchmark Sterling Overnight Index Average (SONIA). The Group also maintains a £30.0 million accordion facility as well as a substantial working capital position reflecting net cash due to SThree for placements already undertaken. During the current period, the Group did not draw down any of the above credit facilities (H1 FY23: £nil). On 31 May 2024, the Group had total accessible liquidity of £ 145.0 million , made up of £90.0 million in net cash (H1 FY23: £72.4 million), the £50.0 million RCF and a £5.0 million overdraft facility (undrawn at the half-year end) . Capital allocation SThree remains disciplined in its approach to allocating capital, with the core objective at all times being to maximise shareholder value. The Group's capital allocation policy is reviewed periodically by the Board and was refreshed at the start of 2024: • Balance sheet - our intention is to maintain a strong balance sheet at all times to provide operational flexibility throughout the business cycle. • Dividend - we aim to pay a sustainable dividend, with a commitment to a through the cycle dividend cover range of 2.5x to 3.0x of EPS. • Deployment of capital prioritised in the order of: 1. Organic growth: Investing in our people and ensuring sufficient working capital on hand to fund growth in the contractor order book while developing new business opportunities. 2. Business improvement: Digitalising our business, putting in place the technology and tools that are key to driving both scale and higher margins. 3. Acquisitions: Strict inorganic growth discipline, with a focus on complementary and value enhancing acquisitions. 4. Capital return to shareholders: After all organic and inorganic opportunities within an appropriate time horizon have been assessed, further cash returns to shareholders may be considered. PRINCIPAL RISKS AND UNCERTAINTIES Risk management is a key part of our business, values and culture. Effective risk management enables us to both protect the value of our business and to proactively manage threats to the delivery of strategic and operational objectives, while enhancing the realisation of opportunities. Our approach to risk management is flexible to ensure that it remains relevant at all levels of the business, and dynamic to ensure we can be responsive to changing business/macro-economic conditions. During HY24, there continues to be focus on the principal risks with oversight of activities and controls to further mitigate these risks alongside monitoring of key risk indicators to ensure any negative changes are proactively addressed. We continue to make positive progress in risk mitigation activities and continue to monitor the ongoing broader macro-economic situation and assess the impact that this could have on principal risks for the Group. The principal risks and uncertainties that the Company expects to be exposed to in the second half of FY24 are substantially the same as those described in the 'Risk management' section of SThree plc Annual Report and Accounts FY23 (pages 78-82). The only principal risk which has changed from FY23 year-end is detailed below. All other principal risks for the Group: Future Growth; Macro-economic Environment; Strategic Change Management; Contractual Liability; People; Data Privacy; Cyber Security; Regulatory Compliance; and Health and Safety remain unchanged but with positive movement on mitigating activities. Risk Mitigation Change from FY23 year end Commercial relationship SThree may suffer financial loss through bad debt write off or working capital impairment due to inappropriate credit terms agreed when entering into commercial relationship/s with either direct customers or intermediaries if they are unable to fulfil their obligation. · Robust payment terms oversight through a credit risk dashboard. · Regular review of high-risk customers with risk mitigation steps being managed by our credit risk analysts. · Contract review and payment terms escalation process. Slight increase in gross and net risk due to external macro-economic factors and transitory impact of the transition to a new ERP system. The materialisation of our principal risks, either separately or in combination, could have an adverse effect on the implementation of our strategic priorities, our business model, financial performance, cash flows, liquidity, shareholder value and other key stakeholders. Please refer to our FY23 Annual Report and Accounts for further detail on our risks, available at www.sthree.com/en/investors/financial-results/ . DIRECTORS' RESPONSIBILITY STATEMENT The Directors confirm that to the best of their knowledge: (a) the condensed consolidated interim financial statements of the Group have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted for use in the United Kingdom and give a true and fair view of the assets, liabilities, financial position and profit or loss of the undertakings included in the consolidation as a whole for the period ended 31 May 2024 as required by the Disclosure Guidance and Transparency Rules sourcebook of the UK FCA (DTR) 4.2.4R; and (b) the half-year results announcement includes a fair review of the significant events during the six months ended 31 May 2024 and a description of the principal risks and uncertainties for the remaining six months of the year ending 30 November 2024 in line with the requirements of UK FCA (DTR) 4.2.7R; (c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).The Directors of SThree plc are listed in the SThree plc Annual Report and Accounts for 30 November 2023. A list of the current Directors is maintained on the Group's website www.sthree.com . The Group's condensed consolidated interim financial statements, and related notes, were approved by the Board and authorised for issue on 23 July 2024 and were signed on its behalf by: Timo Lehne Andrew Beach Chief Executive Officer Chief Financial Officer 23 July 2024 Condensed consolidated income statement for the six months ended 31 May 2024 £'000 Note (Unaudited) Six months ended 31 May 2024 (Unaudited) Six months ended 31 May 2023 Continuing operations Revenue 2 763,404 825,211 Cost of sales (574,661) (616,620) Net fees 2 188,743 208,591 Administrative expenses 3 (150,055) (168,232) Impairment losses on financial assets (987) (2,238) Operating profit 37,701 38,121 Finance income 1,813 691 Finance costs (514) (321) Profit before income tax 39,000 38,491 Income tax expense 4 (10,892) (10,816) Profit for the period attributable to the owners of the Company 28,108 27,675 Earnings per share attributable to shareholders pence Total Group Basic 5 21.2 21.0 Diluted 5 20.8 20.4 The accompanying notes form an integral part of these condensed consolidated interim financial statements. Condensed consolidated statement of comprehensive income For the six months ended 31 May 2024 (Unaudited) (Unaudited) Six months ended Six months ended £'000 31 May 2024 31 May 2023 Profit for the period 28,108 27,675 Other comprehensi ve loss Items that may be subsequently reclassified to income statement Exchange differences on retranslation of foreign operations (2,136) (2,117) Other comprehensive loss for the period (net of tax) (2,136) (2,117) Total comprehensive income for the period attributable to owners of the Company 25,972 25,558 The accompanying notes form an integral part of these condensed consolidated interim financial statements. Condensed consolidated statement of financial position as at 31 May 2024 (Unaudited) As at 31 May 2024 (Audited) As at 30 November 2023 £'000 Note ASSETS Non-current assets Property, plant and equipment 31,097 31,116 Intangible assets 6 10,012 7,066 Deferred tax assets 5,805 5,799 Total non-current assets 46,914 43,981 Current assets Trade and other receivables 331,252 345,120 Cash and cash equivalents 7 90,047 83,202 Total current assets 421,299 428,322 Total assets 468,213 472,303 EQUITY AND LIABILITIES Equity attributable to owners of the Company Share capital 8 1,351 1,349 Share premium 8 40,111 39,700 Other reserves (8,602) (3,597) Retained earnings 193,934 185,432 Total equity 226,794 222,884 Current liabilities Trade and other payables 195,334 200,132 Lease liabilities 9 10,575 11,297 Provisions 6,653 7,373 Current tax liabilities 10,416 10,746 Total current liabilities 222,978 229,548 Non-current liabilities Lease liabilities 9 16,443 17,720 Provisions 1,998 2,151 Total non-current liabilities 18,441 19,871 Total liabilities 241,419 249,419 Total equity and liabilities 468,213 472,303 The accompanying notes form an integral part of these condensed consolidated interim financial statements . Condensed consolidated statement of changes in equity for the six months ended 31 May 2024 £'000 Notes Share capital Share premium Capital redemption reserve Capital reserve Treasury reserve Currency translation reserve Fair value reserve of equity investments Retained earnings Total equity attributable to owners of the Company Balance as at 1 December 2023 (audited) 1,349 39,700 172 878 (7,939) 3,305 (13) 185,432 222,884 Profit for the period - - - - - - - 28,108 28,108 Other comprehensive loss for the period - - - - - (2,136) - - (2,136) Total comprehensive income for the period - - - - - (2,136) - 28,108 25,972 Dividends paid to equity holders 11 - - - - - - - (494) (494) Dividends payable to equity holders 11 - - - - - - - (15,366) (15,366) Settlement of vested tracker shares - - - - 51 - - (27) 24 Settlement of share-based payments 8 2 411 - - 7,080 - - (7,250) 243 Purchase of shares by Employee Benefit Trust 8 - - - - (10,000) - - - (10,000) Credit to equity for equity-settled share-based payments - - - - - - - 3,531 3,531 Total movements in equity 2 411 - - (2,869) (2,136) - 8,502 3,910 Balance as at 31 May 2024 (unaudited) 1,351 40,111 172 878 (10,808) 1,169 (13) 193,934 226,794 Balance as at 1 December 2022 (audited) 1,345 38,239 172 878 (6,581) 4,742 (13) 161,610 200,392 Profit for the period - - - - - - - 27,675 27,675 Other comprehensive loss for the period - - - - - (2,117) - - (2,117) Total comprehensive income for the period - - - - - (2,117) - 27,675 25,558 Dividends paid to equity holders 11 - - - - - - - (20,542) (20,542) Settlement of vested tracker shares - - - - 30 - - (15) 15 Settlement of share-based payments 8 1 115 - - 4,552 - - (4,767) (99) Purchase of shares by Employee Benefit Trust 8 - - - - (10,000) - - - (10,000) Credit to equity for equity-settled share-based payments - - - - - - - 2,552 2,552 Total movements in equity 1 115 - - (5,418) (2,117) - 4,903 (2,516) Balance as at 31 May 2023 (unaudited) 1,346 38,354 172 878 (11,999) 2,625 (13) 166,513 197,876 The accompanying notes form an integral part of these condensed consolidated interim financial statements . Condensed consolidated statement of cash flows for the six months ended 31 May 2024 £'000 (Unaudited) Six months ended 31 May 2024 (Unaudited) Six months ended 31 May 2023 Note Cash flows from operating activities Profit before tax 39,000 38,491 Adjustments for: Depreciation and amortisation charge 7,157 8,001 Loss on disposal of property, plant and equipment 80 112 Finance income (1,813) (691) Finance costs 514 321 Non-cash charge for share-based payments 3,531 2,552 Operating cash flows before changes in working capital and provisions 48,469 48,786 Decrease in receivables 14,980 28,622 Decrease in payables (20,842) (19,603) Decrease in provisions (940) (2,727) Cash generated from operations 41,667 55,078 Interest received 1,813 691 Income tax paid - net (11,380) (10,230) Net cash generated from operating activities 32,100 45,539 Cash flows from investing activities Purchase of property, plant and equipment (2,355) (1,024) Purchase of intangible assets 6 (2,653) (1,993) Net cash used in investing activities (5,008) (3,017) Cash flows from financing activities Interest paid (514) (321) Lease principal payments 9 (6,749) (7,398) Proceeds from exercise of share options 8 412 116 Purchase of shares by Employee Benefit Trust 8 (10,000) (10,000) Dividends paid to equity holders 11 (494) (20,542) Net cash used in financing activities (17,345) (38,145) Net increase in cash and cash equivalents 9,747 4,377 Cash and cash equivalents at beginning of the period 83,202 65,386 Exchange (losses)/gains relating to cash and cash equivalents (2,902) 2,648 Net cash and cash equivalents at end of the period 7 90,047 72,411 The accompanying notes form an integral part of these condensed consolidated interim financial statements. Notes to the CONDENSED CONSOLIDATED Financial REPORT for the six months ended 31 May 2024 1. basis of preparation and Accounting policies Basis of preparation SThree plc is a public limited company listed on the London Stock Exchange, incorporated in the United Kingdom and domiciled in the United Kingdom, and registered in England and Wales. Its registered office is 1 st Floor, 75 King William Street, London, EC4N 7BE. These condensed consolidated interim financial statements (the 'Interim Financial Report') as at and for the six months ended 31 May 2024 comprise SThree plc (the 'Company') and its subsidiaries (referred to as the 'Group'). The Group's Interim Financial Report has been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as adopted for use in the United Kingdom (UK), and the Disclosure Guidance and Transparency Rules sourcebook of the UK's Financial Conduct Authority. It should be read in conjunction with the SThree plc Annual Report and Accounts FY23, prepared in accordance with UK-adopted International Accounting Standards and in conformity with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The Interim Financial Report does not constitute statutory accounts as defined by section 434 of the Companies Act 2006. A copy of the statutory accounts for the year ended 30 November 2023 has been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The Interim Financial Report is unaudited and has not been reviewed by the Group's external auditors. The Interim Financial Report of the Group was approved by the Board for issue on 22 July 2024. Going concern The financial information contained in this Interim Financial Report has been prepared on a going concern basis. The Directors have reviewed the Group's cash flow forecasts, considered the assumptions contained in the reforecast, and considered associated principal risks which may impact the Group's performance in the 12 months from the date of approval of this Interim Financial Report and in the period immediately thereafter. At 31 May 2024, the Group had no debt except for lease liabilities of £27.0 million. Credit facilities relevant to the review period comprise a committed £50.0 million RCF (with the expiry date of 26 July 2027) and an uncommitted £30.0 million accordion facility, both jointly provided by HSBC and Citibank. A further uncommitted £5.0 million bank overdraft facility is also held with HSBC. These facilities remained undrawn on 31 May 2024. In addition, the Group has £90.0 million of net cash and cash equivalents available to fund its short-term needs, as well as a substantial working capital position, reflecting net cash due to SThree for placements already undertaken. The Group delivered a good net fee performance in the first half of FY24 against the backdrop of a record prior year performance and tough market conditions. Across both Contract and Permanent, the Group saw continued strong demand for Engineering roles, driven primarily by the Energy sector with clean energy business as the fastest growing segment, while demand for Life Sciences and Technology roles continued to reflect ongoing market conditions and record comparatives for Technology. Regionally, the Group saw strong growth in the Middle East & Asia, driven by exceptional performance in Japan primarily within Engineering skill vertical. Within the Group's largest three markets, the Netherlands achieved stable YoY growth due to very strong Engineering performances, while the USA was down, driven by declines in Life Sciences and Technology partially offset by an improving Engineering performance, and Germany was also down in spite of Engineering and Life Sciences growth, as the decline in Technology outweighed this performance. Based on the analysis performed, the Directors have formed a judgement that at the time of approving the Interim Financial Report, there are no plausible downside scenarios that would cause an issue for the Group's going concern status. The Directors have therefore concluded that the Group has adequate resources to continue in operational existence for the period through to 31 August 2025. Accounting policies The accounting policies used in the preparation of the condensed consolidated financial statements are consistent with those applied in the previous financial year and corresponding interim reporting period, except for the adoption of new and amended standards effective as of 1 December 2023 as set out below. New and amended standards effective in FY24 and adopted by the Group The following amendments to the accounting standards, issued by the IASB and endorsed by the UK and EU, have been adopted by the Group which became applicable as of 1 December 2023. The Group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these amended standards. - Disclosure of Accounting Policies (Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 ). - Definition of Accounting Estimates (Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors ). - Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12 Income Taxes ). - IFRS 17 Insurance contracts, a standard that is ultimately intended to replace IFRS 4 Insurance Contracts . New and amended standards that are applicable to the Group but not yet effective As at the date of authorisation of this Interim Financial Report, the following amendments to existing standards were in issue but not yet effective. Subject to the endorsement by the UKEB, these changes are effective for the period beginning 1 January 2024. These amendments are not expected to have a material impact on the Group in the current or future periods. - New disclosure requirements for characteristics of supplier finance arrangements (Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures ). - New requirements for measuring lease liability arising in a sale and leaseback transaction (Amendments to IFRS 16 Leases ). - New classification requirements for liabilities as current or non-current (Amendments to IAS 1 Presentation of Financial Statements ). The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. Critical accounting judgements and key sources of estimation uncertainty The preparation of the Interim Financial Report includes the use of estimates and assumptions. Although the estimates used are based on the management's best information about current circumstances and future events and actions, actual results may differ from these estimates. In preparing this Interim Financial Report, the judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were materially the same as those applied in the Group's FY23 Annual Report and Accounts. Alternative Performance Measures (APMs) The Group presents certain measures of financial performance or financial position in the Interim Financial Report that are not defined or specified according to IFRS. These measures, referred to as APMs, are defined and reconciled to IFRS in note 16 to the condensed consolidated financial statements, and were prepared on a consistent basis for all periods presented. 2. operating segments The Group's operating segments are established on the basis of those components of the Group that are regularly reviewed by the Group's chief operating decision-making body (the 'CODM'), in deciding how to allocate resources and in assessing performance. The Group's business is considered primarily from a geographical perspective. The Directors have determined the CODM to be the Executive Committee made up of the Chief Executive Officer, the Chief Financial Officer, the Chief Operating Officer, the Chief Commercial Officer and the Chief People Officer, with other senior management attending via invitation. The Group also presents separately the net fees of its five key markets: Germany, the Netherlands, USA, the UK and Japan, as well as a breakdown of net fees per Contract and Permanent, referred to as 'service mix'. DACH region comprises Austria, Germany and Switzerland. Rest of Europe comprises the UK, Belgium and France, and Middle East & Asia includes Japan and UAE. Countries aggregated into DACH and separately into Rest of the Europe have similar economic risks and prospects, i.e. they are expected to generate similar average gross margins over the long term, and are similar in each of the following areas: - the nature of the services (recruitment/candidate placement); - the class of candidates (candidates, who we place with our clients, represent skill-sets in Science, Technology, Engineering and Mathematics disciplines); - the methods used in which they provide services to clients (independent contractors, employed contractors and permanent candidates); and - the class of candidates (candidates, who we place with our clients, represent skillsets in Science, Technology and Engineering disciplines). The Group's management reporting and controlling systems use accounting policies that are the same as those described in these financial statements and in the Group's FY23 annual financial statements. Revenue and net fees by reportable segment The Group assesses the performance of its operating segments through a measure of segment profit or loss which is referred to as 'net fees' in the management reporting and controlling systems. Net fees is the measure of segment profit comprising revenue less cost of sales. Revenue (unaudited) Net fees (unaudited) Six months ended Six months ended £'000 31 May 2024 31 May 2023 31 May 2024 31 May 2023 DACH 229,962 264,512 64,197 74,476 Rest of Europe 181,709 197,221 31,311 35,178 Netherlands including Spain 175,913 177,497 41,121 39,381 USA 154,463 164,019 41,841 49,364 Middle East & Asia 21,357 21,962 10,273 10,192 763,404 825,211 188,743 208,591 Timing of revenue recognition The Group derives revenue from the transfer of services over time and at a point in time in the following geographical regions: For the six months ended 31 May 2024 (unaudited) £ '000 DACH Rest of Europe Netherlands including Spain USA Middle East & Asia Total Timing of revenue recognition Over time 215,014 180,691 171,249 150,515 14,341 731,810 At a point in time 14,949 1,018 4,664 3,948 7,015 31,594 229,963 181,709 175,913 154,463 21,356 763,404 For the six months ended 31 May 2023 (unaudited) £ '000 DACH Rest of Europe Netherlands including Spain USA Middle East & Asia Total Timing of revenue recognition Over time 243,756 195,014 173,260 157,188 15,743 784,961 At a point in time 20,756 2,207 4,237 6,831 6,219 40,250 264,512 197,221 177,497 164,019 21,962 825,211 Major customers In the current and prior financial period, no single customer generated more than 10% of the Group's revenue. Other information The Group's revenue from external customers, its net fees and information about its segment assets (non-current assets excluding deferred tax assets) by key location are detailed below: Revenue (unaudited) Net fees (unaudited) Six months ended Six months ended £'000 31 May 2024 31 May 2023 31 May 2024 31 May 2023 Germany 197,779 229,247 55,976 65,740 Netherlands 164,176 170,103 37,489 37,252 USA 154,463 164,019 41,841 49,364 UK 118,145 128,305 19,977 21,938 Japan 6,184 4,989 4,849 4,380 RoW (1) 122,657 128,548 28,611 29,917 763,404 825,211 188,743 208,591 (Unaudited) (Audited) As at As at £'000 31 May 2024 30 November 2023 Non-current assets UK 14,435 11,458 Germany 12,232 11,891 Netherlands 5,097 5,678 USA 4,083 2,687 Japan 2,137 2,730 RoW (1) 3,125 3,738 41,109 38,182 (1) RoW (Rest of the World) includes all countries other than listed. Non-current assets do not include deferred tax assets as they are not reviewed by the CODM. The following segmental analysis by brands, recruitment classification and sectors (being the profession of candidates placed) have been included as additional disclosure to the requirements of IFRS 8. Revenue (unaudited) Net fees (unaudited) Six months ended Six months ended £'000 31 May 2024 31 May 2023 31 May 2024 31 May 2023 Brands Progressive 282,691 269,946 69,935 68,832 Computer Futures 233,412 273,869 59,321 69,924 Real Staffing Group 127,120 162,941 32,946 43,377 Huxley Associates 120,181 118,455 26,541 26,458 763,404 825,211 188,743 208,591 Other brands, including Global Enterprise Partners, JP Gray and Madison Black, are rolled into the above brands. Revenue (unaudited) Net fees (unaudited) Six months ended Six months ended £'000 31 May 2024 31 May 2023 31 May 2024 31 May 2023 Service mix Contract 731,810 784,961 158,712 169,982 Permanent 31,594 40,250 30,031 38,609 763,404 825,211 188,743 208,591 Revenue (unaudited) Net fees (unaudited) Six months ended Six months ended £'000 31 May 2024 31 May 2023 31 May 2024 31 May 2023 Skills mix Technology 379,894 423,393 90,153 101,712 Engineering 214,894 194,579 53,956 51,223 Life Sciences 116,067 139,210 31,618 38,958 Other 52,549 68,029 13,016 16,698 763,404 825,211 188,743 208,591 3. administrative expenses Operating profit is stated after charging: (Unaudited) (Unaudited) Six months ended Six months ended £'000 31 May 2024 31 May 2023 Staff costs 115,691 128,246 Depreciation 7,145 8,001 Amortisation 12 - Loss on disposal of property, plant and equipment 80 112 Impairment losses on financial assets 987 2,238 Service lease charges - Buildings 888 1,071 Service lease charges - Cars 407 306 Foreign exchange losses 539 1,286 The Group establishes an allowance for doubtful accounts that represents an estimate of an expected credit losses (ECLs) in respect of trade and other receivables. In the current financial period, management increased ECLs by a net amount of £1.0 million for certain debtors exposure due to the ongoing macro-economic challenges, which led to additional insolvencies across the Group's portfolio. 4. income tax expense Income tax for the half year is accrued based on the Directors' best estimate of the average annual effective tax rate (ETR) for the financial year. The tax charge for the half year amounted to £10.9 million (H1 FY23: £10.8 million) at an ETR of 27.9% (H1 FY23: 28.1%). The Group's ETR primarily varies with the mix of taxable profits by territory, non-deductibility of the accounting charge for LTIP's and other one-off tax items. A deferred tax asset of £5.8 million (as at 30 November 2023: £5.8 million) was recognised in the financial statements as at 31 May 2024. This comprised deferred tax assets of £5.8 million (as at 30 November 2023: £5.8 million) and deferred tax liabilities of £nil (as at 30 November 2023: £nil). The deferred tax assets arise on accelerated depreciation, share based payments and provisions. The movement in the period arises primarily on share based payments. At the reporting date, the Group had unused tax losses of £27.6 million (as at 30 November 2023: £27.3 million) available for offset against future profits. No deferred tax asset was recognised against these losses. On 17 November 2022, the UK Government confirmed its intention to implement the G20-OECD Inclusive Framework Pillar 2 rules in the UK, including a Qualified Domestic Minimum Top-Up Tax rule. This legislation, which was enacted on 11 July 2023, will seek to ensure that UK-headquartered multinational enterprises pay a minimum tax rate of 15% on UK and overseas profit for accounting periods commencing after 31 December 2023. As the UK rate of corporation tax in 2024 will be 25%, and the Group's business is primarily in the UK and other jurisdictions with a tax rate of 25% or above, the impact of these rules on the Group is not expected to be material. 5. Earnings per share Basic earnings per share (EPS) is calculated by dividing the profit for the year attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the period excluding shares held as treasury shares and those held in the Employee Benefit Trust, which for accounting purposes are treated in the same manner as shares held in the treasury reserve. Diluted EPS is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive ordinary shares arising from exercising employee stock options and tracker shares. The following tables reflect the income and share data used in the basic and diluted EPS calculations. (Unaudited) (Unaudited) Six months ended Six months ended £'000 31 May 2024 31 May 2023 Earnings Profit for the period attributable to the owners of the Company 28,108 27,675 (Unaudited) (Unaudited) Six months ended Six months ended millions 31 May 2024 31 May 2023 Number of shares Weighted average number of shares used for basic EPS 132.6 131.9 Dilutive effect of share plans 2.7 3.5 Diluted weighted average number of shares used for diluted EPS 135.3 135.4 (Unaudited) (Unaudited) Six months ended Six months ended pence 31 May 2024 31 May 2023 Basic EPS 21.2 21.0 Diluted EPS 20.8 20.4 6. Intangible assets Since the FY23 year end, the Group increased its intangible assets book value by £2.9 million to £10.0 million (FY23: £7.1 million) due to ongoing investment and gradual regional roll-out of the Technology Improvement Programme (TIP) cohorts. In the current period, the Group also incurred £0.9 million for costs which were not directly attributable to the assets developed under the Programme (such as project management and other administration-related tasks) and which were expensed immediately to the income statement. At the reporting date, all the costs capitalised in the statement of financial position were classified as assets under construction. The asset amortisation is expected to commence at the end of the current financial year at the earlier of (i) US and Germany deployment, including interim ECM solution, be fully completed, or (ii) US and Netherlands deployment be fully completed. Successful resolution of the challenges faced during these deployments will provide management with assurance that any possible insurmountable problems in all other regions will be overcome, and the programme implementation will ultimately succeed across the entire Group. 7. Cash and cash equivalents (Unaudited) (Audited) As at As at £'000 31 May 2024 30 November 2023 Cash at bank 90,047 83,202 Net cash and cash equivalents 90,047 83,202 Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less, net of outstanding bank overdrafts. The carrying amount of these assets approximate their fair values. All of these assets are categorised within level 1 of the fair value hierarchy. The Group has four cash pooling arrangements in place at HSBC US (USD), HSBC UK (GBP), NatWest (GBP) and Citibank (EUR). 8. SHARE CAPITAL During the current financial period, 157,416 (H1 FY23: 38,778) new ordinary shares were issued, resulting in a share premium of £0.4 million (H1 FY23: £0.1 million). These shares ...