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SThree confirms group gross profit up 18% YOY

&middot    Excellent performance in the Americas (up 73%* year on year), now representing 15% of Group gross profit

&middot    Continued strong performance from newer sector disciplines with Energy up 51%* year on year and Life Sciences up 42%* year on year

&middot    Group year end sales headcount up 12% year on year and average sales headcount up 15% year on year

&middot    Net debt of circa &pound10m at year end

Gary Elden, Chief Executive, commented: "We maintained our positive trading momentum in the final quarter, with Contract and Permanent both posting improved performances, to produce an encouraging overall result for the year.  Our investment in Contract and in rebuilding our Permanent capability is now coming through in our results as expected.  

"Contract had another very strong quarter, with gross profits up by 36%* year on year, and accounted for 61% of the Group total for the year. This strong trading performance was driven by newer high growth markets, particularly the USA and Germany, and the newer disciplines of Energy and Life Sciences.

"Permanent was up 16%* year on year in Q4, an improving trend on Q3 which was up 6%*.

"Looking ahead, the strength of the Contract book and improving Permanent performance gives us a strong base from which to grow the business.  While deteriorating economic conditions in the Eurozone and a significant reduction in global oil prices in recent weeks have added some caution to the outlook, our experienced management team and strong financial position give us the confidence that we will make the most of the market opportunity in 2015."

Key Metrics & Commentary

The prior period results comprised 53 weeks and for comparison purposes, 52 week data which excludes the final trading week of the 2013 financial year is disclosed where relevant. In addition, Q3 2014 was adjusted to reflect the timing of permanent placements in Germany on a like for like basis. All year-on-year growth data referred to below is on a like-for-like basis unless stated otherwise.

Financial highlights - Group Gross Profit

 

 

 

Group Gross Profit

 

 

 

 

FY 2014

FY 20145

FY 20131

FY 2014

Q4 2014

Q3 2014

Q2 2014

Q1 2014

Gross Profit

52 weeks

LFL

52 weeks

YoY %

YoY %

YoY %

YoY %

YoY %

 

 

 

 

 

Contract

&pound132.4m

&pound132.4m

&pound107.5m

27%

36%

28%

26%

18%

Permanent

&pound85.7m

&pound86.3m

&pound85.3m

6%

16%

6%

7%

-4%

Group

&pound218.2m

&pound218.8m

&pound192.8m

18%

27%

18%

18%

9%

 

 

 

 

 

UK&I

&pound66.3m

&pound66.3m

&pound59.8m

11%

23%

9%

10%

1%

Continental Europe

&pound99.4m

&pound99.9m

&pound92.9m

11%

18%

12%

12%

4%

Americas

&pound33.4m

&pound33.4m

&pound20.5m

73%

90%

75%

74%

49%

Asia Pac & Middle East

&pound19.1m

&pound19.1m

&pound19.5m

13%

12%

11%

12%

13%

Group

&pound218.2m

&pound218.8m

&pound192.8m

18%

27%

18%

18%

9%

 

 

 

 

 

ICT

&pound86.1m

&pound86.4m

&pound83.6m

8%

22%

8%

2%

-5%

Non ICT

&pound132.1m

&pound132.3m

&pound109.2m

26%

31%

26%

31%

20%

Group

&pound218.2m

&pound218.8m

&pound192.8m

18%

27%

18%

18%

9%

 

 

 

 

 

Contract / Permanent Split

 

 

 

 

Contract

61%

61%

56%

 

 

 

Permanent

39%

39%

44%

 

 

 

100%

100%

100%

 

 

 

 

 

 

 

 

Geographical Split

 

 

 

 

UK&I

30%

30%

31%

 

 

 

Continental Europe

46%

46%

48%

 

 

 

Americas

15%

15%

11%

 

 

 

Asia Pac & Middle East

9%

9%

10%

 

 

 

100%

100%

100%

 

 

 

 

 

 

 

 

Sector Split

 

 

 

 

ICT

39%

40%

43%

 

 

 

Non ICT

61%

60%

57%

 

 

 

100%

100%

100%

 

 

 

 

 

 

 

 

FY 2014

FY 20145

FY 20131

FY 2014

Q4 2014

Q3 2014

Q2 2014

Q1 2014

Operating Metrics

52 weeks

LFL

52  weeks

YoY % Var

YoY % Var

YoY % Var

YoY % Var

YoY % Var

 

 

 

 

 

Contract Runners 3

 

 

 

 

UK&I

2,970

2,970

2,552

16%

16%

17%

14%

8%

Continental Europe

3,076

3,076

2,472

24%

24%

20%

17%

10%

Americas

1,073

1,073

544

97%

97%

110%

130%

96%

Asia Pac & Middle East

454

454

223

104%

104%

73%

64%

67%

Group

7,573

7,573

5,791

31%

31%

29%

26%

16%

 

 

 

 

 

Permanent Placements4

 

 

 

 

UK&I

1,823

1,823

1,835

-1%

25%

-11%

-4%

-15%

Continental Europe

2,658

2,703

2,917

-7%

4%

-11%

-12%

-13%

Americas

871

871

576

51%

60%

61%

67%

23%

Asia Pac & Middle East

1,204

1,204

1,101

9%

2%

-4%

17%

33%

Group

6,556

6,601

6,429

3%

15%

-2%

1%

-4%

 

 

 

 

 

 

 

 

 

 

1 Excluding IT Job Board

 

 

 

 

2 At constant currency and adjusted (see note 5)

 

 

 

 

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

 

 

 

4 Excludes Retainers

 

 

 

 

5 Q3 2014 has been adjusted to reflect the timing of permanent placements in Germany on a LFL basis

 

  The majority of placements in Germany start on the first day of a calendar month. Q3 2014 has two first days of a

  calendar month vs 3 first days of a calendar month in Q3 2013 and Q2 2014

  2014 will contain 11 first days of a calendar month vs 13 first days of a calendar month in 2013

Group gross profit ("GP") for the year increased by 18%*. Q4 Group GP increased by 27%* year on year in Q4 and by 12%* sequentially versus Q3.

Contract performed very pleasingly in the year, with GP up 27%* year on year, with Q4 up 36%* year on year and up 11%* sequentially versus Q3. The contract book grew strongly across the year with contract runners up 31% since the start of 2014. Average contractor gross profit per day rates remained robust during the period.

Permanent GP was up 6%* year on year, with Q4 up 16%* year on year and up 13%* sequentially versus Q3 2014. UK&I was up 3%* year on year (Q4 2014 up 30%* year on year), Continental Europe down 3%* year on year (Q4 2014 up 4%* year on year) and Rest of World grew by 23%* year on year (Q4 2014 up 26%* year on year), driven by strong performance in the Americas. Average permanent placement fees remained robust during the period. The Permanent deal pipeline at year-end was up 4% year on year, reflecting a reduction in the average deal to start time in Q4 and a reduction in Energy sector deal flow towards the end of the quarter.

Group sales headcount at 30 November 2014 was up 12% year on year. UK&I sales headcount was up 14% year on year, Continental Europe sales headcount was up 8%, Americas sales headcount was up 39% and Asia Pacific & Middle East sales headcount reduced by 1%. Consultant headcount continued to remix towards Contract during the quarter, with Contract consultant numbers up 19% and Permanent consultant headcount up 5% year on year. Average consultant headcount was up 16% year on year, with Contract consultant average headcount up 24% and Permanent consultant average headcount up 9%.

The rationalisation of sub-scale operations announced in Q3 is now substantially complete. As a result of these actions, an exceptional cost of circa &pound5m is expected to be taken in the Group results for the year. It is anticipated that these actions will largely pay back in 2015 and we intend to reinvest the savings in our businesses with strong medium term growth prospects.

The Group has a network of 46 offices in 19 countries, of which 34 are outside the UK. The Group generated 70% of gross profit for the year from markets outside UK&I (2013: 69%).

SThree remains in a strong financial position. Net debt at 30 November 2014 was circa &pound10m. The Group has a &pound50m revolving credit facility ("RCF") with RBS and HSBC, which is committed to 2019.

* at constant currency and like-for-like

Fiona Cincotta, senior market analyst at www.finspreads.com, has commented on the results, saying, "International staffing group SThree released an upbeat trading statement highlighting a positive end the year with trading momentum remaining strong into the final quarter. The group’s recent focus in increasing the contract and permanent area of the business appears to be paying off and is seeping through to the bottom line. Contracts had a particularly strong quarter accounting for 61% of the group’s gross profit for the year. S Three has done well to look outside of its traditional markets especially considering the ongoing problems with the Eurozone economy and the group is now reaping the rewards of focusing on new high growth markets such as the US. 

"SThree has shown itself to be versatile in these challenging times and continues to look to strengthen its core business whilst also identifying upcoming opportunities in the market. Full year profit before tax is expected to be in line with consensus of &pound29 million. Investors will be pleased with the update and have consequently brought into the stock which is trading 3.3% higher this morning, although the group still has some work to do to in order to pull the share price back up to levels seen at the beginning on the year."

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