SThree Regulatory News (STEM)

16 June 2017

Half Year Trading Update

SThree plc ("SThree" or the "Group"), the international STEM specialist staffing business, is today issuing a trading update for the half year ended 31 May 2017.Highlights

- Group gross profit ("GP") up 2%* YoY with acceleration in Q2 when Group GP grew by 4%*

- Strong growth in USA up 16%* YoY

- Good performance in Continental Europe up 7%* YoY

- Continued robust growth in Life Sciences up 6%* YoY

- UK&I performance as expected adversely impacted by the decision of the UK to leave the EU and Public Sector reforms, with GP down 16%* YoY

- 80% of Group GP generated outside the UK (H1 2016: 73%)

- Contract GP up 8%* YoY, with strong growth across Engineering up 17%*, Life Sciences up 15%* and Energy up 9%*

- Permanent GP down 10%* YoY, with Permanent productivity up 8%*

- Group period-end sales headcount up 1% on the 2016 year-end position, but down 4% YoY.

*at constant currency 

Gary Elden, Chief Executive, commented:

"We are encouraged by the improvement in momentum across the business in the period, particularly the strong performances in Continental Europe and the USA, which is now our second largest region.

"Our Contract business continues to deliver good growth across almost all regions, with Continental Europe and the USA again being the highlights.

"'Our Permanent business benefited from a further improvement in productivity, driven by the particularly strong performance in USA. Further productivity gains remain the priority for our Permanent business in 2017.

"Looking ahead, the continued momentum of our Contract business and improved Permanent yields give us a solid base from which to grow in a macro-economic environment which remains uncertain."

Group gross profit ("GP") increased by 2%* YoY, with Q2 up 4%* after a flat performance in Q1.

US GP was ahead by 16%* in the first half, making it our second largest region for the first time, as the restructuring measures implemented in H2 2016 took effect. While the headline growth rate in H1 was boosted by a number of one-off factors, we are encouraged by the continued recovery in the region.

Contract continues to deliver a pleasing performance with GP up 8%* YoY and Q2 2017 up 9%* against a strong comparative of +10%* in Q2 2016. A large proportion of the growth in Contract at the half year was driven by Continental Europe, up 16%* and USA up 17%*.

Permanent GP was down 10%* YoY, with average sales headcount down 17%. At the half year, UK&I Permanent GP was down 25%*, Continental Europe was down 9%*, offset by USA strongly up 14%*. Permanent GP was down 6%* in Q2 with UK&I down 11%* and Continental Europe down 8%*, offset by strong performance in USA, up 13%*. Permanent productivity improved by 10%* YoY in Q2, driven by UK&I up 14%* and USA up 36%*.

Overall, period end sales headcount was down 4% YoY, with Permanent down 12% and Contract up 2%.

Average Group sales headcount is down 7% YoY. UK&I sales headcount was down 17%, Continental Europe was up 6% and USA down 20%. Contract sales headcount represented 64% of total sales headcount at period end (2016: 61%).

The Group has a network of 37 offices in 15 countries, of which 31 are outside the UK. The Group generated 80% of Gross Profit for the period from markets outside the UK&I (2016: 73%).

SThree remains in a strong financial position. Net Cash at 31 May 2017 was circa £5m (31 May 2016: Net Debt of £4.2m). The Group has a £50m revolving credit facility ("RCF") with RBS and HSBC, which is committed to 2019.

*at constant currency

SThree is hosting an analyst conference call today at 0830 BST. The details are as follows:Telephone number: +44 (0) 20 3003 2666 or 0808 109 0700For access to the call please quote passcode SThreeA replay facility will be available for seven days on +44 (0) 20 8196 1998 / Access Pin: 9192006#The Group will issue its interim results for the six months ended 31 May 2017 on 24 July 2017.

- Ends -

Notes to editors

SThree is a leading international specialist staffing business, providing permanent and contract specialist staff to a diverse client base of over 7,000 clients. From its well-established position as a major player in the information and communications technology ('ICT') sector the Group has broadened the base of its operations to include businesses serving the Banking & Finance, Energy, Engineering and Life Sciences sectors.

Since launching its original business, Computer Futures, in 1986, the Group has adopted a multi-brand strategy, establishing new operations to address growth opportunities. SThree brands include Computer Futures, Huxley Associates, Progressive and The Real Staffing Group. The Group has circa 2,600 employees in eighteen countries.

SThree plc is quoted on the Official List of the UK Listing Authority under the ticker symbol STHR and also has a US level one ADR facility, symbol SERTY. 

Important notice

Certain statements in this announcement are forward looking statements. By their nature, forward looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by those statements. Forward looking statements regarding past trends or activities should not be taken as representation that such trends or activities will continue in the future. Certain data from the announcement is sourced from unaudited internal management information and is before any exceptional items. Accordingly, undue reliance should not be placed on forward looking statements.