FY24 Q3 Trading Update
Q3 net fees down 8% YoY to £92.7m; contractor order book down 6% to £167m; FY24 performance expected in line with consensus.
vs expectations: in line with market expectations
- Group net fees £92.7m (prior £103.0m)
- Contract net fees £78.1m (prior £86.2m)
- Contractor order book £167m (prior £177.3m)
- Net cash £45m (prior £83m)
- Contract as % of net fees 84% (prior 84%)
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SThree plc ("SThree" or the "Group"), the only global specialist talent partner focused on roles in Science, Technology, Engineering and Mathematics ('STEM'), today issues a trading update covering the period 1 June 2024 to 31 August 2024.
Q3 Highlights
| · | Group net fees down 8% YoY (1) against the continuing backdrop of challenging market conditions, with Contract down 8%, representing 84% of net fees. |
| · | Contractor order book (2) down 6% YoY to £167 million, representing sector-leading visibility (c.4 months of net fees). |
| · | Robust balance sheet with net cash of £45 million at 31 August 2024 (31 August 2023: £83 million), reflective of the timing of certain client payments, with net cash expected to return towards normalised levels over the coming months. |
| · | Technology Improvement Programme remains on track, with the US and UK live and the deployment in Germany progressing as anticipated. |
| · | Performance for FY24 currently expected to be in line with market expectations (3) . |
Timo Lehne, Chief Executive, commented:
"Despite the challenging conditions in the market, which have extended beyond our industry's expectations, our strategic focus on Contract continues to underpin the Group's competitive positioning. The Contract order book, down 6%, reflects protracted soft new placement activity partially offset by ongoing strong Contract extensions.
Supported by a robust financial position, we continue to invest for the future, with the phased implementation of our Technology Improvement Programme being a core element. This is progressing to plan, providing a clear pathway to significant operational enhancements over the mid-to-long term and enabling us to lead the way in our industry.
We are ideally positioned at the heart of global STEM secular trends, and we have the right platform for when the market recovers to enable the delivery of long-term sustainable growth."
Business performance highlights
Against tough market conditions Group net fees were down 8% YoY reflecting the ongoing softness in new business across Contract and Permanent, partially offset by strong Contract extensions.
Technology, our largest skill vertical, delivered a sequential improvement in performance, down 7% YoY. Engineering was also down 7% against a record prior year performance, while Life Sciences declined 14% YoY as global activity in that sector remains subdued.
Regionally, the Group delivered strong net fee growth in the Middle East and Asia, underpinned by an impressive performance in Japan across all our main skill verticals. Within the Group's three largest markets, which now represent 72% of net fees, Germany delivered a sequential improvement benefitting from the lower rate of decline in demand for Technology skills. Our USA performance reflected declines in Life Sciences and Technology, whilst the Netherlands saw lower levels of demand for Engineering and Technology skills versus record levels in the prior year.
The Group remains well placed to respond when market conditions improve, with Group period-end headcount broadly unchanged from the end of the last financial year. The Group continues to maintain a robust balance sheet with net cash of £45 million at 31 August 2024, reflective of the timing of certain client payments, with net cash expected to return towards normalised levels over the coming months.
| Q3 | Q3 | Q3 2024 | Q2 2024 | Q1 2024 | |
|---|---|---|---|---|---|
| Net fees | 2024 | 2023 | YoY (1) | YoY (1) | YoY (1) |
| Contract | £78.1m | £86.2m | -8% | -6% | -2% |
| Permanent | £14.6m | £16.8m | -9% | -15% | -21% |
| GROUP | £92.7m | £103.0m | -8% | -8% | -6% |
| Regions | |||||
| DACH (4) | £33.4m | £36.6m | -8% | -10% | -13% |
| Netherlands (incl. Spain) (5) | £19.0m | £21.5m | -10% | +5% | +8% |
| Rest of Europe (6) | £15.3m | £17.8m | -13% | -10% | -10% |
| USA | £20.1m | £22.6m | -10% | -15% | -10% |
| Middle East & Asia (7) | £4.9m | £4.5m | +20% | +1% | +20% |
| GROUP | £92.7m | £103.0m | -8% | -8% | -6% |
| Top five countries | |||||
| Germany | £29.6m | £32.2m | -7% | -11% | -14% |
| Netherlands | £16.9m | £20.1m | -15% | - | +6% |
| UK | £9.6m | £11.6m | -17% | -11% | -7% |
| USA | £20.1m | £22.6m | -10% | -15% | -10% |
| Japan | £3.2m | £2.1m | +60% | +16% | +41% |
| ROW (8) | £13.3m | £14.3m | -6% | -2% | -4% |
| Group | £92.7m | £103.0m | -8% | -8% | -6% |
| Service mix | Q3 2024 | Q3 2023 | |||
| Contract | 84% | 84% | |||
| Permanent | 16% | 16% | |||
| Skills mix | Q3 2024 | Q3 2023 | |||
| Technology | 49% | 48% | |||
| Life Sciences | 16% | 17% | |||
| Engineering | 28% | 27% | |||
| Other | 7% | 7% | |||
- All YoY growth rates expressed at constant currency.
- Current consensus PBT expectation is £69.4m for FY24. Source: SThree compiled consensus.
- DACH - Germany, Austria and Switzerland.
- Netherlands (incl. Spain) - Netherlands and Spain, which is managed from the Netherlands.
- Rest of Europe - UK, Belgium, France.
- Middle East & Asia - Japan and UAE.
- ROW - All other countries we operate in.
Analyst conference call
Forward looking dates
The Group will issue its trading update for the year ending 30 November 2024 on 17 December 2024.
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