Group GP up 13% in Q3 2018 for SThree
SThree plc has issued a trading update covering the period from 1st June 2018 to date; financial information relates to the quarter ended 31st August 2018.
Group gross profit was up 13% YoY to £82.7m, continuing the growth from Q2 when GP was also ahead by 13%. Continental Europe was ahead by 24% YoY in Q3 to £47.0m, as its growth accelerated, driven by record performances in DACH and Benelux. USA posted a solid performance in the quarter up 8% YoY £18.2m against strong prior year comparatives. UK and Ireland gross profit was down 10% YoY to £13.0m.
Gary Elden (pictured), chief executive, commented, "We are pleased to have delivered another strong quarter, continuing the momentum of Q2, which was also up 13%*. The Group is benefiting both from the broad geographic reach of its operations, with 84% of GP now generated in international markets, and from its focus on the best STEM markets.
"Continental Europe, our largest region, continued to grow strongly, with both DACH and Benelux delivering record performances, and the USA posted a solid result against strong prior year comparatives. We are investing in growing our highest performing teams and remain on track with the delivery of our five-year growth strategy.
"Looking ahead, trading conditions in the majority of our markets are encouraging and we enter Q4, our most significant trading quarter, with confidence in our full year prospects."
Contract performed strongly, up 14% YoY to £60.4m with a large proportion of the growth coming from Continental Europe, which was ahead by 24%. USA was up 11% YoY, offset by a slight decline in the UK&I, down 3%. On a sector basis, the Group maintained strong growth across ICT up 12%, life sciences up 8%, energy up 30% and engineering up 21%. We continued to prioritise growth in contract sales headcount, with an average increase in the quarter of 11% YoY.
Permanent GP was up 8% YoY to £22.3m (Q2 growth of 7%). Permanent GP in Continental Europe grew 23% YoY, USA grew 1% YoY against tough comparatives and Japan more than doubled. This progress was offset by a decline in UK&I where GP was down by 33%, following the planned restructure of our UK permanent business in early Q2, which reduced UK permanent average sales headcount by 37% in Q3. This action is already having a positive impact on both UK and group permanent productivity, which improved by 5% and 11% respectively, in the third quarter.
Average group sales heads were up 7% YoY. Continental Europe was up 15%, USA was up 8% and Asia Pacific & Middle East was up 5%. UK&I sales headcount was down 12% YoY. Contract sales headcount represented 68% of total sales headcount at the end of the quarter (2017: 65%).
The Group has a network of 43 offices in 16 countries, of which 37 are outside the UK. The Group generated 84% of Gross Profit for the period from markets outside the UK&I (2017: 80%).
The Group’s move of its London-based support functions to Glasgow is progressing to plan.
SThree remains in a strong financial position. Net debt at 31st August 2018 was circa £24m (31st May 2018: £6.2m). The outflow in the quarter is as a result of the payment of the final dividend, planned exceptional cash costs relating to the Glasgow relocation and growth in working capital, in part due to the strong growth in our contract book. The Group has a £50m revolving credit facility ("RCF") with Citibank and HSBC, which is committed to 2023.