15 March 2021

SThree plc

Q1 Trading Update

Q1 performance ahead of management expectations, with net fees equalling Q1 2020

SThree plc ("SThree" or the "Group"), the only global pure-play specialist staffing business focused on roles in Science, Technology, Engineering and Mathematics ('STEM'), is pleased to issue a trading update(1) covering the period from 1 December 2020 to date; financial information relates to the quarter ending 28 February 2021.

Highlights

• Group net fees at the same level as Q1 2020, pre Covid-19, when adjusted for working days(2) (Q4 2020: -7%) reflecting SThree's resilient model and strategy
• Net fee momentum delivered by management focus and execution
• Growth in a number of regions and sectors despite the Covid-19 impact
  • Encouraging growth in DACH, with net fees up 3% 
  • Strong growth in USA with net fees up 19%
  • Net fees in Life Sciences up 14% and Technology up 1% across the Group
• Continued sequential improvement in underlying performance quarter-on-quarter
  • Contractor order book(3) up 1%, (Q4 2020: -9%)
  • Sustained improvements in the Contractor retention rate
• Both Contract and Permanent net fees flat YoY(2)
• Top five countries represent 85% of Group net fees, with Germany being 33% and USA 24%  
• Strong balance sheet with net cash at 28 February 2021 of circa £57m (28 Feb 2020: £9m)

Mark Dorman, Chief Executive, commented:

"I'm pleased to announce that we've seen improved underlying activity across each region of the Group during the first quarter. This follows the significant sequential quarterly improvement in the previous half. With Germany and the USA now in growth, and with a growing contractor order book at the Group level, we have demonstrated that our strategy of meeting sectoral demands for STEM skills, whatever the external market conditions, continues to deliver results.

Looking ahead, we continue to pursue strategic initiatives we believe will drive further success. We are investing in our platform and are further enhancing our go-to-market strategy to position ourselves for regional and sector-specific opportunities. We are committed to accelerating our approach in tackling important ESG issues for the benefit of all our stakeholders and are working hard to drive positive change throughout the business. While further volatility is likely as our markets emerge from the pandemic in different ways, our strategy and purpose means we are very well placed to provide a strong and stable platform for long-term growth."

Business performance

The Group delivered a strong performance in the quarter, ahead of management expectations, with net fees flat YoY on an adjusted working days basis. This was a strong result considering the comparative period in the prior year did not suffer from any Covid-19 impact. The sequential trend in Q1 2021 compared to Q4 2020 showed a continuing improvement in performance in net fees across the Group, as the underlying business activity strengthened.

Our Contract business showed strong sequential improvement with net fees flat on an adjusted working days basis (down by 2% YoY reported). The Contractor order book(3)  was up 1% YoY, demonstrating the resilience of our Contract focused business model.

Permanent net fees also displayed a robust performance, being flat in the quarter YoY, with strong performances in our two largest markets, Germany up 4% and USA up 37%.

Overall DACH saw a strong increase in net fees, up 3%, returning to growth despite the impact of Covid-19. Germany, which accounts for 92% of DACH, delivered a robust performance up 3%, driven by Technology up 14% and Life Sciences up 7%. Technology was driven by demand in Software Development, Cyber Security and Data Science skills. Life Sciences saw demand in Quality Assurance and Clinical Research & Development skills.

EMEA excluding DACH saw net fees declining 14%, reflecting the UK's performance, which was down 17% YoY. The Netherlands, our largest country in the region, saw a clear improvement in performance sequentially with net fees down 4% (Q4 FY20: -15%). Our Dutch Engineering business grew by 16% in the quarter driven by demand in Project Management, Construction and Maintenance, while Life Sciences grew by 2% driven by Clinical Research, Quality Assurance and Regulatory Affairs.

The USA is the world's largest STEM staffing market and our business there has demonstrated its strength with net fees up 19%. This has been driven by high demand for our key sectors in the region. Life Sciences, our largest sector in the USA, saw strong growth of 25%. We continue to see robust demand in Clinical Operations, Quality Assurance and Product Development. Net fees in Engineering saw a modest growth of 1% driven by Construction and Project management. Technology net fees grew by 43% in the quarter with increased demand in Mobile Applications & Software Development.

APAC net fees declined 14% in the quarter impacted by Japan which declined 21%. However, the team in Japan is encouraged by underlying new deal activity at the end of quarter which is up significantly.

Group period end and average headcount was down 17%. We will continue to invest in line with our previously stated strategy to focus on specific niches within sectors and markets where we can gain valuable market share and further strengthen our position.

Balance sheet

SThree remains in a strong financial position, with net cash at 28 February 2021 of circa £57m (29 February 2020: Net cash £9m).

As at 28 February 2021 the Group has total accessible liquidity of £112m (excluding the £50m CCFF). This is comprised of £57m net cash, a £50m revolving credit facility ("RCF") and a £5m overdraft facility (RCF and overdraft not drawn down). In addition, SThree has a £20m accordion facility as well as a substantial working capital position, reflecting net cash due to SThree for placements already undertaken. SThree has not drawn and does not intend to use the CCFF facility before it closes on 23 March 2021.

Analyst conference call

SThree is hosting a webinar for analysts and investors today at 0830am to discuss the Q1 Trading Update and to present the Group's recent market trends insights.

If you would like to register for the webinar please follow this link: http://bit.ly/STEM_Q1_update

The Group will issue its trading update for six months ended 31 May 2021 on 14 June 2021.

(1) All YoY growth rates in this announcement are expressed at constant currency and exclude Australia, which we exited in Q4 2020

(2) Q1 2021 has one less working day vs Q1 2020

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

(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 excluding Germany, Netherlands, UK, USA and Japan

- Ends -

Notes to editors

SThree plc brings skilled people together to build the future.  It is the only global pure-play specialist staffing business focused on roles in Science, Technology, Engineering and Mathematics ('STEM'), providing permanent and flexible contract talent to a diverse base of over 9,000 clients in 15 countries.

The Group's c.2,600 staff cover the Technology, Life Sciences, Engineering and Banking & Finance sectors.

SThree plc is quoted on the Premium Segment of the Official List of the Financial Conduct Authority under the ticker symbol STEM 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.