Group net fees up 4% in Q3 2019 for SThree
SThree plc has released a trading update covering the period from 1st June 2019 to date. Financial information relates to the quarter ended 31st August 2019.
Mark Dorman, chief executive, commented, "The Group's unique and specialised business model has continued to deliver year-on-year growth in the third quarter, driven by a strong performance across all of the Group's international markets which constitute the majority of the Group. On a like-for-like basis after adjusting for working days, this growth shows a 6% increase in Group net fees. Furthermore, our deliberate focus on contract, a natural function of our STEM specialism, continues to be a strong contributor to Group performance and remains a key strategic priority for the Group.
"We remain excited about the scale of the market opportunity in front of us. We continue to see strong demand across our key regions for STEM roles and remain committed to our vision of being the number one STEM talent provider in the best STEM markets.
"Our robust financial position, specialised STEM and Contract focus with international reach provides the Group with a well-established and resilient platform as we enter the final quarter of the year. Whilst we remain cognisant of significant macro market uncertainties, we remain confident that we have the right niche focus, vision and teams to deliver continued growth, and our expectations for the full year remain unchanged."
In the third quarter, group net fees adjusted for working days increased by 6% to £87.8m. Group net fees increased by 4% YoY, after one less working day across the Group and one additional public holiday in Continental Europe, compared with the prior year. Three of the Group's four regions, which account for 86% (2018: 84%) of net fees, delivered good growth in the quarter.
Performance was driven by Continental Europe, up 5% to £50.1m and the USA, up 5% to £20.4m. DACH continued to be the stand out performer within Continental Europe, with net fees in the quarter up 8% YoY. Asia Pac & Middle East delivered double digit growth of 14% to £5.2m driven by a strong performance in Japan. UK&I net fees were down 7% to £12.1m, against a more challenging macro-economic backdrop. Technology, life sciences, energy and engineering sectors delivered growth in the quarter.
Contract delivered a good performance with net fees up 7% to £66.0m. USA continues its strong performance with growth of 16%. Continental Europe delivered growth of 9% with DACH up 12%. Continental Europe and USA combined now represent 80% of contract net fees (Q3 2018: 79%).
Permanent net fees were down 5% in Q3 to £21.8m. Continental Europe net fees were down 4% in the quarter against strong prior year comparatives. DACH, SThree’s largest perm region was level YoY. USA net fees declined 20% YoY, reflecting previously reported leadership and strategic changes made in 2018. The company’s Japan permanent business continues to grow rapidly, up 84% YoY.
The Group continues to be highly cash generative. Net debt at 31st August 2019 decreased to circa £12m (31st August 2018: Net debt of circa £24m). The Group has a £50m revolving credit facility ("RCF") with Citibank and HSBC, which is committed to 2023.
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