Connecting to LinkedIn...

Blank

Satisfactory First Half For SThree

Satisfactory First Half For SThree

SThree plc has issued a trading update for the half year ended 26 May 2013.

Highlights:

&middot Group gross profit down 6%* year on year

&middot Contract gross profit up 3%* year on year

&middot Strong seasonal recovery in contractor runners - up 9% year on year and up 1% on 2012 year end peak

&middot Permanent gross profit down 15%* year on year with average permanent consultant headcount down 16% year on year

&middot Permanent deal pipeline volume down 15% year on year

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

&middot Resilient performance from newer sector disciplines

&middot The Board intends to declare a maintained interim dividend per share of 4.7p (H1 2012: 4.7p)

&middot Continued strong financial position with net cash of circa &pound16m

Financial highlights - Group Gross Profit

 

 

H1 2013

H1 2012

H1 2013

Q1 2013

Q2 2013

 

YoY % Var*

YoY % Var*

YoY % Var*

 

 

 

 

Permanent

&pound43.4m

&pound50.8m

-15%

-12%

-18%

Contract

&pound50.6m

&pound49.1m

3%

6%

1%

Group

&pound94.0m

&pound99.9m

-6%

-3%

-9%

 

 

 

 

UK&I

&pound30.5m

&pound34.8m

-12%

-12%

-13%

Non UK&I

&pound63.5m

&pound65.1m

-3%

2%

-6%

&pound94.0m

&pound99.9m

-6%

-3%

-9%

 

 

 

 

ICT

&pound50.4m

&pound55.5m

-10%

-8%

-11%

Non ICT

&pound43.6m

&pound44.4m

-2%

3%

-6%

&pound94.0m

&pound99.9m

-6%

-3%

-9%

 

 

 

 

 

 

 

 

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%

56%

 

 

Non ICT

46%

44%

 

 

100%

100%

 

 

 

 

 

 

 

 

 

 

Operating Metrics

H1 2013

H1 2012

H1 2013

Q1 2013

Q2 2013

 

YoY % Var

YoY % Var

YoY % Var

Permanent Placements **

 

 

 

UK&I

 

-24%

-26%

-22%

Non UK&I

 

-8%

-3%

-12%

Group

3,093

3,572

-13%

-11%

-16%

 

 

 

 

Contract Runners ***

 

 

 

UK&I

 

2%

3%

2%

Non UK&I

 

15%

23%

15%

Group

5,171

4,757

9%

13%

9%

 

 

 

 

 

 

 

 

*At Constant Currency

 

 

 

** Excludes Retainers

 

 

 

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

 

 

 

 

 

 

Group gross profit decreased by 6%* year on year in H1 2013, with Q1 gross profit down 3%* and Q2 down 9%* year on year.

Contract gross profit grew across all regions apart from UK&I, which decreased by 5% year on year. Continental Europe grew by 3%* year on year and Rest of World grew by 44%* year on year.

Average contractor gross profit per day rates declined by 6% during the half, the result of fee pressure in our more mature markets and certain sectors, notably banking. In addition, contract gross profit growth in Energy & Engineering and Pharmaceuticals & Biotechnology has typically been generated from larger multinational clients, where we have taken the strategic decision to prioritise contract lifetime values over upfront margin percentage and gross profit per day rates.

Permanent gross profit reduced by 15%* year on year, driven by continued weakness in the UK&I (down 24%*), Benelux (down 27%*) and France (down 41%*), as these markets continued to slow. Rest of World permanent gross profit declined by 2%* in H1, with Asia/Pacific down 25%*, offset by growth in Middle East up 19%* and the Americas up 16%*. Average permanent placement fees remained robust during the quarter.

Group sales headcount at 26 May 2013 was up 4% versus the year end and level year on year. Year on year, UK sales headcount was down 8%, Continental Europe headcount was up 1% and Rest of World headcount was up 12%. Consultant headcount remixed towards contract during H1, with contract consultant numbers up 13% since the year end, offset by a 7% reduction in permanent consultants as the Group flexed headcount in line with the market opportunity. Average consultant headcount for the half was down 6% year on year, with contract average headcount up 11% and permanent average headcount down 16%.

The Group opened new offices in Tokyo, Calgary and Berlin during the first half of the year, expanding the network to 67 offices in 20 countries, of which 45 are outside the UK. The group now generates 68% of gross profit from markets outside UK&I (2012: 65%).

The Group is currently completing a review of its property portfolio and support infrastructure. A number of opportunities for rationalisation of the cost base have already been identified and progress is being made in this regard. An update on this programme will be provided at the time of the interim results.

The Group remains in a strong cash position with net cash of circa &pound16m at 26 May 2013.

Gary Elden, Chief Executive, commented: "Against a backdrop of weaker macroeconomic conditions, we have had a satisfactory first half.

"Strategically, our focus remained on contract, international and sector diversification during the period. Our priority in the current trading environment has been the ongoing refocusing of elements of the business to ensure they are positioned to target growth markets more effectively.

"In particular, we are realigning the business model for that part of our contract business that focuses on larger blue chip clients in newer high growth sectors to an approach which prioritises lifetime contract value over upfront margin. We have made a good start with this initiative but as it takes longer for the contract book to build, it will be some time before the full impact of this change will be seen in the headline numbers.

"We have also continued to invest in sales headcount in growth markets, with a particular focus on contract heads in Energy, up 24%, and in Pharmaceuticals & Biotechnology, up 15%, since the start of the year. This investment should provide a further growth driver as these new hires become productive and build their contract books through the second half and into 2014.

"Our clear strategic focus and balanced business model between permanent and contract give us confidence that we will make the best of the market opportunity in the second half, whilst managing the business prudently for the medium term."

Tags:

Articles similar to

Articles similar to