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SThree plc Trading Update & Management Succession

SThree plc Trading Update & Management Succession

Highlights:

&middot Full year profit before tax expected to be &pound25m, in line with market consensus

&middot Group gross profit up 8%* year on year

&middot Contract gross profit up 11%* year on year

&middot Permanent gross profit up 6%* year on year

&middot Ongoing sector diversification driving growth - Energy & Engineering 48%* year on year, Pharmaceuticals & Biotechnology 39%* year on year

&middot Continued strong financial position net cash of circa &pound27m at period end, after buying back circa &pound7m of shares for treasury

&middot Handover of CEO responsibilities running ahead of schedule - Gary Elden to succeed Russell Clements as CEO with effect from 1 January 2013

Financial Highlights - Group Gross profit

 

FY 2012

FY 2011

YoY % Var*

Q4 2012 YoY %

Var*

Q3 2012 YoY % Var*

 

 

 

Group

&pound205.4m

&pound195.5m

8%

2%

6%

Permanent

&pound103.7m

&pound101.0m

6%

-5%

2%

Contract

&pound101.8m

&pound94.5m

11%

11%

10%

 

 

 

UK & I

&pound71.0m

&pound71.3m

-

1%

-6%

Non UK & I

&pound134.5m

&pound124.2m

13%

3%

13%

&pound205.4m

&pound195.5m

8%

2%

6%

 

 

 

ICT

&pound111.0m

&pound116.6m

-2%

-7%

-8%

Non ICT

&pound94.5m

&pound78.9m

23%

14%

27%

&pound205.4m

&pound195.5m

8%

2%

6%

 

 

 

Contract / Permanent Split

 

 

 

Permanent

50%

52%

 

 

Contract

50%

48%

 

 

100%

100%

 

 

 

 

 

Geographical Split

 

 

 

UK & I

35%

36%

 

 

Non UK & I

65%

64%

 

 

100%

100%

 

 

 

 

 

ICT / Non ICT Split

 

 

 

ICT

54%

60%

 

 

Non ICT

46%

40%

 

 

100%

100%

 

 

 

 

 

*At Constant Currency

 

 

 

 

Operating Metrics

 

 

 

FY 2012

FY 2011

YoY % Var

Q4 2012 YoY %

Var

Q3 2012 YoY % Var

Permanent Placements**

 

 

 

UK & I

2,369

2,612

-9%

-15%

-12%

Non UK & I

4,974

4,822

3%

-3%

2%

 

 

 

Group

7,343

7,434

-1%

-7%

-3%

 

 

 

Contract Runners***

 

 

 

UK & I

2,452

2,393

2%

2%

4%

Non UK & I

2,670

2,299

16%

16%

20%

 

 

 

Group

5,122

4,692

9%

9%

12%

 

 

 

** Excludes Retainers

*** Period end number of contractors on site with clients and being billed

Group gross profit in the year increased by 8%*. Q4 Group gross profit was up 2%* year on year and up 7%* sequentially versus Q3.

Contract performed encouragingly in the year, with growth in gross profit across all regions. UK&I grew by 3% year on year, Continental Europe by 9% year on year and Rest of World by 98% year on year. Average contractor gross profit per day rates remained strong during the year.

Permanent gross profit grew by 6%* year on year. Q4 was down 5%*, driven by continued weakness in the UK&I (down 9%*) and Benelux and France down (30%* and 9%*, respectively), as these markets slowed. Rest of World permanent gross profit grew by 16%* in Q4, driven by strong performances from our Energy & Engineering and Pharmaceuticals & Biotechnology teams. Average permanent placement fees for the year grew robustly year on year, despite continuing weakness in the global banking and finance market which typically generates higher than average fees.

Group sales headcount at 25 November 2012 was down 6% year on year. UK sales headcount was down 18% year on year, Continental Europe headcount was down 5% year on year and Rest of World headcount was up 18% year on year, as the Group flexed headcount in line with the market opportunity. Average sales headcount for the year was up 10% year on year, but down 7% year on year in Q4.

The permanent deal pipeline at the period end was 4% down year on year, with weakness in UK&I, France and Benelux offsetting strong performance in Rest of World and Germany.

The Group opened new offices in Oslo, San Diego, Rio de Janeiro and Brisbane during the year, expanding the network to 64 offices in 18 countries, of which 42 are outside the UK. Non UK&I now represents 65% of gross profit (2011: 64%).

Management Succession

In May, the Group announced that Gary Elden would succeed Russell Clements as CEO during 2013. Since that time Russell and Gary have been working closely together to ensure a smooth handover of responsibilities, with a number of key tasks being completed ahead of schedule. In light of this excellent progress, Gary will succeed Russell as CEO with effect from 1 January 2013, at which point Russell will retire from the Board.

Russell Clements, Chief Executive, commented: "The Group has traded satisfactorily during the year, against a macro economic backdrop that became increasingly difficult across the period and we are pleased to be expecting an outcome for the year in line with market consensus.

"In the more uncertain economic environment, the benefits of the Group's balance of Contract and Permanent business, and the success of its geographic and sector diversification in recent years, were clearly illustrated. Our contract division, which makes up half of gross profits, reported another resilient performance and remains a key area of strategic focus.

"Energy & Engineering and Pharmaceuticals & Biotechnology, which between them make up about one third of gross profits, continued to experience strong demand. These businesses are making an increasingly significant contribution both to Group performance and to our ongoing geographic diversification, with nearly two thirds of fee income now being generated outside the UK&I.

"As I leave the business after twenty six years, I believe SThree is in good shape, with a clear growth strategy and a strong financial position. As a committed long term shareholder, I look forward to seeing the Group continue to prosper under Gary's leadership and wish him every success in the CEO role."

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