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Solid Start For SThree

Solid Start For SThree

SThree plc is today issuing an Interim Management Statement covering the period from 26 November 2012 to date financial information relates to the quarter ended 24 February 2013.

Highlights:

&middot Group gross profit down 3%* year on year

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

&middot Strong seasonal recovery in contractor runners - up 13% year on year at the end of Q1 and only down 2% on 2012 year end peak

&middot Permanent gross profit down 12%* year on year with average permanent consultant headcount down 14% year on year

&middot Permanent deal pipeline volume down 13% year on year

&middot Good progress made against key strategic priorities - contract, international expansion and ongoing sector diversification

&middot Continued strong performance from newer sector disciplines - Energy & Engineering 16%* year on year, Pharmaceuticals & Biotechnology 21%* year on year

&middot 68% of Group gross profit now generated in markets outside UK&I (2012: 65%)

&middot Continued strong financial position with net cash of circa &pound20m

Financial Highlights - Group Gross profit

 

 

Q1

Q4

 

Q1

Q1

2013

2012

 

2013

2012

YoY % Var*

YoY % Var*

 

 

 

Permanent

&pound20.9m

&pound24.1m

(12%)

(6%)

Contract

&pound24.5m

&pound23.6m

6%

11%

Group

&pound45.5m

&pound47.7m

(3%)

2%

 

 

 

UK&I

&pound14.6m

&pound16.7m

(12%)

0%

Non UK&I

&pound30.9m

&pound31.0m

2%

3%

 

&pound45.5m

&pound47.7m

(3%)

2%

 

 

 

ICT

&pound24.4m

&pound27.0m

(8%)

(7%)

Non ICT

&pound21.1m

&pound20.7m

3%

14%

 

&pound45.5m

&pound47.7m

(3%)

2%

 

 

 

 

 

 

Contract / Permanent Split

 

 

Permanent

46%

51%

 

Contract

54%

49%

 

 

100%

100%

 

 

 

 

Geographical Split

 

 

UK&I

32%

35%

 

Non UK&I

68%

65%

 

 

100%

100%

 

 

 

 

ICT / Non ICT Split

 

 

ICT

54%

57%

 

Non ICT

46%

43%

 

 

100%

100%

 

 

 

 

 

 

 

Operating Metrics

 

 

Q1

Q4

 

Q1

Q1

2013

2012

 

2013

2012

YoY %

Var

YoY % Var

Permanent Placements **

 

 

UK&I

405

551

(26%)

(15%)

Non UK&I

1,088

1,123

(3%)

(3%)

Group

1,493

1,674

(11%)

(7%)

 

 

 

Contract Runners ***

 

 

UK&I

2,378

2,307

3%

2%

Non UK&I

2,658

2,154

23%

16%

Group

5,036

4,461

13%

9%

 

 

 

*At Constant Currency

** Excludes Retainers

*** Period end number of contractors onsite with clients and being billed

Group gross profit decreased by 3%* year on year in Q1 versus an increase of 2%* in Q4 2012.

Contract performed encouragingly in the period, despite the impact of New Year's day 2013 falling later in the working week than it did in the prior year, which led to substantially more contractor holiday days being taken year on year. Contract gross profit grew across all regions apart from UK&I, which decreased by 4% year on year. Continental Europe grew by 6%* year on year and Rest of World grew by 53%* year on year. Average contractor gross profit per day rates remained robust during the quarter.

Permanent gross profit reduced by 12%* year on year. This was driven by continued weakness in the UK&I (down 24%*), Benelux (down 26%*) and France (down 39%*), as these markets continued to slow. Rest of World permanent gross profit grew by 10%* in Q1, driven by strong performances from our Pharmaceuticals & Biotechnology teams. Average permanent placement fees remained robust during the quarter.

Group sales headcount at 24 February 2013 was broadly level versus the year end and down 5% year on year. Year on year, UK sales headcount was down 13%, Continental Europe headcount was down 7% and Rest of World headcount was up 15%. Consultant headcount remixed towards contract during Q1, with contract consultant numbers up 7% since the year end, offset by a 4% reduction in permanent consultants as the Group flexed headcount in line with the market opportunity. Average consultant headcount for the quarter was down 7% year on year, with contract average headcount up 6% and permanent headcount down 14%.

The Group opened a new office in Tokyo during the quarter, expanding the network to 65 offices in 19 countries, of which 43 are outside the UK. The group now generates 68% of gross profit from markets outside UK&I (2012: 65%).

The Group remains in a strong cash position with net cash of circa &pound20m at 24 February 2013, after payment of an interim dividend of &pound5.6m and share buy backs of circa &pound1m.

Gary Elden, Chief Executive, commented: "Against a backdrop of weaker macroeconomic conditions, we have made a solid start to the year, in what is, for seasonal reasons, always our least significant quarter.

"Our contract division, which comprised 54% of gross profits in the quarter, up from 49% in the prior year, benefited from a greater strategic focus and its performance was pleasing, with gross profit ahead by 6% year on year. Permanent had a more challenging quarter, as client and candidate confidence weakened from fourth quarter levels in a number of key markets.

"The success of the Group's diversification in recent years was again illustrated by the performance of Energy & Engineering and Pharmaceuticals & Biotechnology, which continued to experience strong demand and now represent 36% of GP (FY 2012: 33%). These businesses are continuing to make an increasingly significant contribution both to Group performance and to our ongoing geographic diversification, with 68% of gross profit now being generated outside of the UK&I.

"Our balanced business model and experienced management team give us confidence that we will make the best of the market opportunity in 2013, whilst managing the business prudently for the medium term."

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