SThree, the international specialist staffing business, has issued a trading update for the year end
SThree, the international specialist staffing business, has issued a trading update for the year ending 30 November 2008.
Another year of significant growth
Results in line with consensus market expectations
Year end net cash in excess of 24m (2007: 3.5m)
31.1m of shares bought back during the year (13.6% of issued share capital(1))
Greater geographical diversification, with Non UK share of gross profit ("GP") up to circa 45% (2007: 32%)
Improved debtor management - days sales outstanding reduced to 43 days (2007: 59 days)
The year to 30 November 2008 has been another year of significant growth. The Board anticipates gross profit for the Group being circa 220m for the year (2007: 182.7m), an annual increase of approximately 20%. This performance is expected to deliver a Profit Before Tax result in line with consensus market expectations.
During the year, SThree bought back 16.6m shares for 31.1m (average price of 187p per share), representing 13.6% of its issued share capital. This buyback was comfortably funded by operating cashflow, leaving year end cash balances in excess of 24m (2007: 3.5m). The Group also has a 20m committed debt facility through to 25th February 2010, and currently is not drawing down against this.
The Board is pleased to report continued improvement in debtor management in the year with a reduction in days sales outstanding to 43 days, compared to the closing position at 2 December 2007 (59 days), and a further improvement on the position at 1 June 2008 (51 days).
SThree made 10,236 permanent placements that started in the year, an increase of 7.0% (2007: 9,568). Average permanent placement fees for the year have also shown further increases to record levels.
SThree closed the year with 5,745 contractors, up 1.5% on last year (2007: 5,662) and broadly unchanged from the total at the end of the first half (1 June 2008: 5,743). As with permanent fees, average gross profit per day rates also showed further improvements to record levels.
The business of the Group has continued to become more diversified. For the full year, the Board estimates that non-UK GP now represents circa 45% of Group GP (2007: 32%).This compares to 41% at 1 June 2008, with an accelerating trend towards non-UK GP in the final quarter. The Board estimates that contract GP now represents circa 52% of Group GP (2007: 49%) and non ICT GP represents 23% of Group GP (2007: 18%). The Board believes that this mix in the Group's business positions it well for more challenging markets.
In line with the exceptional economic conditions seen during the final quarter of 2008, group trading was inevitably impacted, with a further year on year decline in UK volumes, and a modest slowing in the strong non-UK growth. UK volumes for permanent placements in the final quarter were down circa 25% year on year and UK contract runners were down circa 7% year on year. This was offset by non-UK volumes for permanent placements in the final quarter increasing by circa 29% year on year and non-UK contract runners ahead by circa 22% year on year. Fees have remained robust across permanent and contract in the final quarter, showing similar positive year on year growth in line with our third quarter performance.
SThree continues to demonstrate its flexible business model, adapting to the most challenging markets rapidly, with UK ICT permanent sales headcount down 19% year on year, ahead of the reduction in UK ICT permanent placements which fell 17% year on year. In more robust markets, the Group continued to grow sales headcount, resulting in overall sales headcount growth of 10% year on year.
Following an exceptional level of investment in 2007, capital expenditure in 2008 returned to more normalised levels of approximately 7m (2007: 14.1m). We estimate capital expenditure of circa 6m for 2009.
During 2008 SThree opened offices(2) in Sydney, Dubai, Paris and Amsterdam, bringing the total to 54 offices in 10 countries. At the start of 2009, we will open a new office in Singapore. During the forthcoming year, we anticipate further office openings in Europe (Germany and France), subject to market conditions.
Russell Clements, Chief Executive Officer, commented:
"It is pleasing to be able to report that, despite very difficult conditions in some of our markets, the group will once again demonstrate significant year on year growth. Our well established programme of rolling out into newer sectors and geographies sees the group more diversified and more international than at any other time in its history.
"We end 2008 with a very strong cash position, having funded a substantial share buyback and a growing contractor book during the year. Past experience shows that we remain highly cash generative throughout the economic cycle and this gives us confidence in our ability to continue to return a strong yield even in more difficult trading conditions.
"The forthcoming year is likely to be the toughest we have faced for some time. However, our twenty two year history of profitability, flexible business model, seasoned management team and robust balance sheet all position us well to meet the challenges that lie ahead."