SThree: Q1 Trading Update

21 March 2022

SThree plc

Q1 Trading Update

Very strong net fee performance with growth across all geographies and sectors

SThree plc ("SThree" or the "Group"), the only global pure-play specialist staffing business focused on roles in Science, Technology, Engineering and Mathematics ('STEM'), today issues a trading update covering the period 1 December 2021 to 28 February 2022.

Highlights

• Group net fees for the quarter up 29% YoY (1), driven by the continued execution of our strategy and reflecting ongoing strength in new placement activity
• Very strong YoY growth in all five core markets: Germany up 24%, USA up 27%, Netherlands up 45%, UK up 29% and Japan up 78%
• Momentum across all our key sectors: Technology up 30%, Life Sciences up 23% and Engineering up 31%
• Contract and Permanent YoY net fees up 32% and 18% respectively
• Contract represents 77% of Group net fees (FY 2021: 75%)
• Contractor order book (2) up 42% YoY (Q4 2021: up 43% YoY) underpinning our confident outlook
• Robust balance sheet, with £41 million net cash as at 28 February 2022 (28 February 2021: £57 million)

Following the record performance delivered in FY 2021, we are no longer presenting pre-pandemic comparisons.

Timo Lehne, Interim Chief Executive, commented:

"The strong momentum of FY 2021 has continued into the first quarter of FY 2022, in line with the Board's expectations, with robust performances across all our core markets and sectors. In addition, the previously guided investment in our people, talent acquisition and infrastructure to drive long-term sustainable growth is progressing and will gather pace through 2022.

Our well-established strategy, positioned at the centre of the secular trends of STEM and flexible working, continues to drive this encouraging performance. New placement activity, as well as the strength of the contractor order book, gives us confidence in the outlook as we build on the positive start to the year. Our rigorous focus on strategic execution has not wavered and we remain fully committed to driving returns for all of our stakeholders.

Whilst we are conscious of the broader uncertainties arising from the war in Ukraine and its potential macro-economic consequences, our direct exposure is minimal. We are encouraged by current trading and remain confident about our overall growth prospects as we continue to position ourselves as the leading STEM talent provider in the best global STEM markets."

Business performance highlights

The Group delivered a very strong performance in the quarter with net fees up 29% YoY, with our Contract and Permanent businesses up 32% and 18% YoY respectively.

Contract

• Momentum from the previous year continued into the first quarter, with net fee income up 32% YoY.

• Regionally, DACH was up 40% YoY, EMEA ex DACH up 31%, USA up 25% and APAC up 37%.
• Strong growth across all key sectors with Technology up 35% YoY, Life Sciences up 28% and Engineering up 30%.

• The contractor order book(2) was up 42% YoY (Q4 2021: up 43%), reflecting the ongoing high demand for skilled contractors across our markets which underpins our positive outlook.

Permanent

• Permanent net fee income for the first quarter was up 18% YoY.
  • Strong growth in USA up 31% YoY, EMEA ex DACH up 22% and APAC up 80%. DACH delivered more modest net fee growth of 2% YoY due to timing of net fee recognition.
  • Growth driven by Engineering up 39% YoY and Technology up 16% YoY, with Life Sciences up 7% YoY.

Headcount and productivity

• Group average headcount in the quarter was up 8% YoY, with period-end headcount up 9% YoY.
• Sequentially, Group period-end headcount was up 2% vs Q4 2021.
• We continue to invest in line with our previously stated strategy of focusing on specific niches within sectors and markets where we can gain valuable market share; investment in talent acquisition remains a priority for the business.
• As expected, we have seen some normalisation of productivity as new hires come on board although it remains well above historic levels, with Q1 productivity up 19% YoY (FY 2021: up 31%).

Regional highlights

DACH saw net fees grow 26% YoY

• Germany, our largest country in the region, delivered strong net fee growth of 24% driven by:
  • Technology up 30% due to demand for open-source software development and infrastructure roles.
  • Engineering up 32%, with higher demand for automation and construction management roles.
• Contract performance was outstanding, up 40% YoY.

EMEA ex DACH saw net fees grow 29% YoY

• The Netherlands, our largest country in the region, saw a very strong performance with net fees up 45%, driven by:
  • Technology, up 41%, driven in particular by demand for ERP consultants, front end developers, project managers and business analysts.
  • Engineering up 55% with increased demand for project managers, process engineers and health and safety advisors. 
• UK continued its trend of strengthening performance with net fees up 29% YoY, driven by Technology up 31%, as demand increased for software development and project management roles.

USA saw net fees grow 27% YoY

• Life Sciences, our largest sector in the USA, continued its momentum into the new financial year as net fees grew 29%, driven by demand for roles within clinical operations, medical writing and quality assurance.
• Engineering was up 26%, driven by increased demand for project and construction management roles.
• Technology was up 19% with a particular focus on roles within software development and mobile applications.

APAC saw net fees grow 71% YoY

• This performance was driven by Japan, our largest country in the region, where net fees grew by 78%.
• Growth was driven by Technology, up 81%, with demand increased for cyber security, IT consulting and technology sales roles. 

Balance sheet

SThree remains in a robust financial position, with net cash at 28 February 2022 of £41 million (28 February 2021: £57 million). The YoY decrease in cash is driven by growth in the number of contractors, together with timing of performance bonuses relating to the record performance and productivity levels achieved in FY 2021. As at 28 February 2022, the Group had total accessible liquidity of £96 million, comprising £41 million net cash, a £50 million revolving credit facility ('RCF') and a £5 million overdraft facility (RCF and overdraft both undrawn). In addition, SThree has a £20 million accordion facility, alongside its substantial working capital position, reflecting net cash due to the Group for placements already undertaken.

Analyst conference call

SThree is hosting a conference call for analysts and investors today at 8.30am to discuss the Q1 2022 trading update. If you would like to register for the conference call, please contact SThree@almapr.co.uk.

The Group will issue its trading update for the six months ending 31 May 2022 on 20 June 2022.

(1)  All growth rates in this announcement are expressed at constant currency.

(2) The contractor order book represents value of net fees until contractual end dates, assuming all contractual hours are worked.

(3) DACH - Germany, Austria and Switzerland.

(4) EMEA ex DACH - UK, Ireland, Belgium, Netherlands, Luxembourg, France, Spain and Dubai.

(5) ROW - All other countries we operate in excluding Germany, Netherlands, UK, USA and Japan.

- Ends -

Notes to editors

SThree plc brings skilled people together to build the future. We are the only global pure-play specialist staffing business focused on roles in Science, Technology, Engineering and Mathematics ('STEM'), providing permanent and flexible contract talent to a diverse base of over 8,000 clients across 14 countries. Our Group's c.2,700 staff cover the Technology, Life Sciences, Engineering and Banking & Finance sectors. SThree is part of the Industrial Services sector. We are listed on the Premium Segment of 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.