14 December 2022

SThree plc

FY 2022 Trading Update

Record performance for the year with double-digit growth across all regions

SThree plc (‘SThree’ or the ‘Group’), the only global specialist talent partner focused on roles in Science, Technology, Engineering and Mathematics (‘STEM’), is pleased to issue a trading update for the financial year ended 30 November 2022.

Highlights

• Group net fees for the full year up 19% YoY(1), driven by the execution of our strategy and demand for STEM skills
• Our three largest countries represent 73% of Group net fees (FY 2021: 74%): Germany up 14%, USA up 13% and Netherlands up 34% YoY
• Strong growth across Technology, up 23% and Engineering, up 27%, with Life Sciences continuing to grow 6% against a very strong prior year comparator
• In line with our strategic focus on flexible talent, Contract net fees up 23%; Permanent net fees up 6%
• Contract net fees represent 78% of Group net fees (FY 2021: 75%)
• Strong contractor order book(2) up 19% YoY, providing strong visibility
• Productivity(3) up 7% YoY, reflecting continued strong net fee growth and the quality of our staff and internal recruitment strategy
• Robust balance sheet, with £65m net cash as at 30 November 2022 (30 November 2021: £58m)

 
Timo Lehne, Chief Executive, commented:

“We have delivered an exceptional performance throughout the period, materially ahead of initial expectations with full year net fee growth of 19% year on year. After my first year as CEO, it is clear that our well-established strategy, focused on STEM and flexible talent, puts us in a unique position to win.

“During the year we continued to make progress in the implementation of our strategy with targeted investment in our people, talent acquisition and digital infrastructure moving forward as planned. This investment is designed to reinforce our long-term sustainable growth, with most of the year’s costs incurred in the second half as planned.

“Towards the end of the year we started to see a softer trading environment, reflecting the uncertain macro-economic conditions, and we continue to monitor the trends across our regions. However, the strength of our contract order book, robust balance sheet and a diverse customer base underpins our business. Our well-established strategy focused on STEM skills and flexible talent is supported by global megatrends, reaffirming our belief that we have the right vision with a unique and resilient business model for the mid to long-term.”

Business performance highlights

The Group delivered a strong performance for FY 2022 with net fees up 19% YoY, driven by our Contract and Permanent businesses up 23% and 6% respectively.  Q4 year on year net fee increase of 9% reflects continued growth against a strong post-Covid comparator.

Contract

• 7th consecutive quarter of double-digit net fee growth, resulting in full year net fees up 23%.
  • Regionally, DACH was up 22% YoY, EMEA excl. DACH up 27%, USA up 19% and APAC up 27%.
  • Strong growth in Technology and Engineering, both up 27%, with Life Sciences up 13%.
• The contractor order book(2) closed at £186.0m, up 19% YoY (Q3 2022: up 24%), reflecting the high demand for skilled contractors across our markets and gives us good visibility going into FY23.

Permanent

• Permanent net fee income was up 6% YoY.
  • DACH, our largest Permanent market (45% of net fees), delivered net fee growth of 6% YoY. EMEA excl. DACH also reported growth of 6% YoY with USA down 8% following our strategic focus on Contract and strong prior year comparatives; APAC was up 45%.
  • Technology was up 10% with strong growth in Engineering up 24% YoY. Life Sciences was down 14% YoY reflecting very strong prior year comparatives through the pandemic, particularly in the US.

Headcount and productivity

• Group average headcount for the year was up 12% YoY, with year-end headcount up 14%. We continue to make highly targeted investments in the markets and skill verticals that provide the best growth opportunities and where we can drive the strongest returns.   
• As a result of this discipline and focus, headcount remains slightly below the pre-pandemic peak despite material net fee growth.
• FY22 productivity was exceptionally high, up 7% YoY, reflecting net fee growth that has outpaced the growth in headcount. As previously guided, we expect productivity to remain above pre-pandemic levels, although we expect it to reduce from these exceptional levels. 

Regional highlights

DACH delivered a strong performance in the year with net fees up 17% YoY.

• Germany, our largest country in the region (89% of net fees), delivered strong net fee growth of 14% driven by:
  • Technology up 18% with higher demand for roles within Infrastructure, Cyber Security, Open-Source Software Development and Leadership and Strategic positions.
  • Engineering up 27%, due to demand for Construction roles.
• Very strong growth in Austria up 51% and Switzerland up 37%.

EMEA excl. DACH saw very strong net fee growth up 24% YoY.

• The Netherlands, our largest country in the region (47% of net fees), delivered strong net fee growth up 34% YoY driven by:
  • Technology up 36% with increased demand for Project Managers, Front & Back End Developers, ERP Consultants and Business Intelligence & Data Science roles.
  • Engineering up 34% due to demand for Process Engineers, Electrical Engineers and Health & Safety Advisors.
• UK saw a strong performance in the year with net fees up 23% YoY. This was driven by Technology up 30% as demand increased for roles within IT Leadership and Strategy, Software Development and Testing, Cloud and Data & Business Intelligence.

USA saw net fee growth of 13% YoY.

• Strong growth in Contract, up 19%. Permanent was down 8% following our strategic focus on Contract and very strong prior year comparatives, when Life Sciences was the standout performer with high demand from Covid-19 related activity.
• Engineering up 32%, driven by demand for roles within Electrical Engineering and Project Management.
• Technology up 18%, with a particular focus on roles within Adobe, Software Developers, Mobile Applications and Salesforce.

APAC net fees were up 42% YoY.

• Japan, our largest country in the region (69% of net fees), saw net fees grow 47%.
• Technology was up 32% in Japan, driven by demand for Software Engineering roles.

Balance sheet

SThree remains in a robust financial position, with net cash at 30 November 2022 of £65m (30 November 2021: net cash £58m). Total accessible liquidity of £120m comprises £65m net cash, a £50m revolving credit facility (‘RCF’), which runs until 2025 (with options to extend it until 2027), and a £5m overdraft facility (RCF and overdraft fully undrawn). In addition, SThree has a £20m accordion facility as well as a substantial working capital position, reflecting net cash due to the Group for placements already undertaken.

Analyst conference call

SThree is hosting a conference call for analysts and investors today at 8.30am to discuss the FY 2022 trading update. If you would like to register for the conference call, please contact .

The Group plans to present its results for the financial year ended 30 November 2022 on 30 January 2023. In addition, the Group plans to host the second in its series of investor briefings at 13:00 GMT on 30 January 2023. This virtual webinar will cover the Group's technology investment programme.

(1)  All YoY growth rates in this announcement are expressed at constant currency.

(2) The contractor order book represents value of net fees until contractual end dates, assuming all contractual hours are worked.

(3) Productivity represents value of net fees divided by total headcount.

(4) DACH – Germany, Austria and Switzerland.

(5) EMEA excl. DACH – UK, Ireland, Belgium, Netherlands, Luxembourg, France, Spain and Dubai.

(6) ROW – All other countries we operate in.

- Ends -

The information contained within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulation (Regulation (EU) No.596/2014) as it forms part of UK Domestic Law by virtue of the European Union (Withdrawal) Act 2018.

Notes to editors

SThree plc brings skilled people together to build the future. We are the only global specialist talent partner focused on roles in Science, Technology, Engineering and Mathematics (‘STEM’), providing permanent and flexible contract talent to a diverse base of over 8,200 clients across 14 countries. Our Group’s c.3,100 staff cover the Technology, Life Sciences and Engineering sectors. SThree is part of the Industrial Services sector. We are listed on the Premium Segment of the London Stock Exchange’s Main Market, trading with ticker code STEM.

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.