SThree Cuts Staff By 25%
SThree Cuts Staff By 25%
SThree plc has issued an update on trading for the six month period ended 31 May 2009.
The financial and operational data relates to the six month period ended 31 May 2009, being the first half of the financial year ending 29 November 2009.
As expected, the Group experienced an overall decline in demand for its services during the period, particularly for permanent placements, with contract hiring proving somewhat more resilient in all territories. Group gross profit in the period declined by circa 9% year on year to 93m (2008: 102.5m). On a constant currency basis, Group gross profit declined by circa 15% and Non UK gross profit grew by circa 4% year on year. This result reflects a significant decline in volume being partially mitigated by further value improvement.
At 31 May 2009 SThree had 4,494 contract runners, a decrease of 21.8% on the year end number of 5,745 runners. Average contractor gross profit per day rates were up overall with continued strength in Non UK rates offset in part by a slight softening in rates in the UK ICT business. During the period, SThree made a total of 3,302 permanent placements, a reduction of 34.1% over the previous year (2008: 5,008). However, average permanent placement fees have continued to improve across all geographies versus last year.
At 31 May 2009 UK contract runners were down 28.2% versus the prior year. However the UK gross profit per day contract rate was down only slightly versus the previous year. During the period, UK permanent placements were down 54.2%, reflecting a 60.8% reduction in UK ICT placements and a 37.8% reduction in UK non-ICT placements. Average UK placement fees were up slightly versus last year.
The Non UK business slowed further in the period. Contract runners reduced versus last year by 7.4%, but this was offset by growth in gross profit per day rates. During the period, permanent placements declined by 7.5%, but again this was offset by strong growth in average fees.
The Group's strong cash position improved further during the period with net cash of circa 45m at 31 May 2009 (1 December 2008 24.6m). The Group has no debt. The cash position continues to be managed proactively with Days Sales Outstanding reducing to 39 days at the period end (1 December 2008: 43 days).
Given the very challenging conditions experienced during the period, the Group took steps to proactively manage its headcount. Total Group headcount over the period was reduced by circa 25%, with UK sales headcount being down by circa 33% and non UK sales headcount down by circa 17%. The Group believes that headcount is now at an appropriate level in light of the current market conditions and opportunities.
This action resulted in exceptional costs of circa 8m, comprising staff restructuring costs and the costs of an office network rationalisation. We expect pay back on these measures within the current financial year ending 29 November 2009.
SThree CEO Russell Clements commented: "The first half of 2009 has seen exceptionally challenging market conditions. By contrast, during the same period in 2008, all of our markets were still growing, making the year on year comparatives particularly tough.
"In response to the difficult trading environment we took decisive and proactive action during the second quarter to realign our headcount with prevailing market conditions and ensure that the business stayed fit for purpose in the short term. However we are equally committed to ensuring that we do not compromise the Group's capacity for a strong bounce back as markets recover.
"In this respect our exceptionally strong cash position gives us the capacity to make prudent investments for the future, whilst at the same time continuing to support our dividend."
SThree will be announcing its interim results for the six months ended 31 May 2009 on 20 July 2009.