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SThree (STHR)
SThree: Final results for the year ended 30 November 2017
29-Jan-2018 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information according to
REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
29 January 2018
SThree plc
("SThree" or the "Group")
Final results for the year ended 30 November 2017
SThree, the international specialist staffing business, is today announcing its final results for
the year ended 30 November 2017.
"Encouraging overall result for 2017, with Group business profile continuing to remix to Contract
and international markets. Entered 2018 in good shape and well-positioned for further growth."
FINANCIAL HIGHLIGHTS
2017 2016 Variance (3)
Adjusted Reported Adjusted Reported Actual Constant
(1) (2)
Movement Currency
Movement
GBPm GBPm GBPm GBPm % %
Revenue 1,114.5 1,114.5 959.9 959.9 +16% +9%
Contract 203.5 203.5 173.3 173.3 +17% +10%
gross
profit
Permanent 84.2 84.2 85.4 85.4 -1% -8%
gross
profit
Gross 287.7 287.7 258.7 258.7 +11% +4%
profit
Operating 44.9 38.2 41.3 37.8 +9% -3%
profit
Conversion 15.6% 13.3% 16.0% 14.6% -0.4% -1.2%
ratio pts pts
Profit 44.5 37.7 40.8 37.3 +9% -3%
before
taxation
Basic 25.7p 21.5p 23.2p 21.2p +11% -1%
earnings
per share
Proposed 9.3p 9.3p 9.3p 9.3p - -
final
dividend
Total 14.0p 14.0p 14.0p 14.0p - -
dividend
(interim
and final)
Net cash 5.6 5.6 10.0 10.0 - -
(1) 2017 figures were adjusted for the impact of GBP6.7 million of exceptional strategic
restructuring costs.
(2) 2016 figures were adjusted for the impact of GBP3.5 million of restructuring costs.
(3) All variances compare adjusted 2017 against adjusted 2016 to provide a like-for-like view.
(4) FX impacted positively on our results YoY on a reported basis
OPERATIONAL HIGHLIGHTS
* Encouraging full year performance with strong Q4 and exit rate into 2018
* Adjusted profit before tax up 9% to GBP44.5m
* GP up 4%* YoY (up 11% on an as reported basis) and up 8%* YoY in Q4
* Growth in GP driven by USA (up 18%*) and Continental Europe (up 9%*), whilst UK&I remains
challenging (-14%*)
* 81% of GP now generated outside UK&I (FY 2016: 75%)
* Contract GP up 10%* YoY, with growth across all sectors
* Contract now accounts for 71% of Group GP (FY 2016: 67%)
* Permanent GP down 8%* YoY but productivity improved by 3%* YoY
* Foreign exchange increased reported operating profit by circa GBP5.0m and GP by cGBP18.1m
* Move of London-based support functions to Glasgow underway
* Final dividend maintained
* Variances at constant currency
Gary Elden, CEO, commented: "We have delivered an encouraging overall result for the year, with a
strong finish in the final quarter. Pleasing performances in the USA and Continental Europe,
particularly from our market-leading businesses in the Netherlands and Germany, were key to this
result. With 81% of our business now generated outside the UK and 71% of our GP generated by our
more resilient Contract business, our business profile has changed significantly over recent
years. After two years of turbulent political, market and economic conditions, we enter 2018 in
good shape, with a clear vision to be the number one STEM talent provider in the best STEM
markets.
"Looking ahead to 2018, the momentum of our Contract business and the strength of our
performances in the USA and Continental Europe leave us well-positioned for further growth."
SThree will host a live presentation and conference call for analysts at 0900 GMT today. The
conference call participant telephone details are as follows:
Dial in: +44 (0) 20 3003 2666
Call passcode: SThree
This event will also be simultaneously audio webcast, hosted on the SThree website at
www.sthree.com [1]. Note that this is a listen only facility and an archive of the presentation
will be available via the same link later.
SThree will be announcing its Q1 Trading Update on Friday 16 March 2018.
Enquiries:
SThree plc 020 7268 6000
Gary Elden, Chief Executive Officer
Alex Smith, Chief Financial Officer
Sarah Anderson, Deputy Company Secretary/ Investor
Relations
Citigate Dewe Rogerson 020 7638 9571
Kevin Smith / Jos Bieneman
Notes to editors
SThree is a leading international specialist staffing business, providing permanent and contract
specialist staff to a diverse client base of over 9,000 clients. From its well-established
position as a major player in the Information & 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 c2,800 employees in sixteen 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. Data from the
announcement is sourced from unaudited internal management information. Accordingly, undue
reliance should not be placed on forward looking statements.
Chief Executive Officer's Review
********************************
We have delivered an encouraging overall result for the year, with a strong finish in the final
quarter. Pleasing performances in the USA and Continental Europe, particularly from our
market-leading businesses in the Netherlands and Germany, were key to this result. With 81% of
our business now generated outside the UK and 71% of our GP generated by our more resilient
Contract business, our business profile has changed significantly over recent years. After two
years of turbulent political, market and economic pressure, we enter 2018 in good shape, with a
clear vision to be the number one STEM talent provider in the best STEM markets.
This year we also made some changes to SThree's leadership model which will help us to work in a
more effective and agile way in the future. With the creation of the new senior management roles
of Chief Sales Officer and Chief Operations Officer, we will be in a better position to align our
sales and operational strategies and ensure we have the right services, infrastructure and people
to execute our global growth strategy and provide our customers with the best possible
experience.
Growing Contract, driving Permanent profitability
We invested for future growth, with year end sales headcount up 10% year on year and up 7%
sequentially vs Q3 2017. We continued to grow Contract headcount (+15%) faster than Permanent
headcount (+3%), in line with our plan. The shift in favour of Contract is creating a business
that is much more resilient in times of uncertainty, providing stronger and more sustainable
profits. While in 2012 our business was evenly split between Contract and Permanent, we now have
65% of our sales headcount working on Contract recruitment. We have also created separate
management structures for our Contract and Permanent business in almost all territories to drive
accountability and focus.
Growing Contract
As I have been able to report every year since taking over as CEO, we enter our next financial
year with a record Contract book, passing a key milestone of 10,000 Contract runners to reach
10,197 at the end of the year, up 12% from last year. Contract GP returned to double digit year
over year (YoY) growth of 10%*, with a strong final quarter up 14%*. Contract growth YoY was
across all sectors and driven by Continental Europe, which was up 17%* and by USA, up 21%*.
Continental Europe and USA combined now represent nearly 70% of our Contract runners, up from 65%
in 2016.
Our traditional Personal Service Company/freelance model ("PSC") continues to perform well and we
are also generating increased business through our Employed Contractor Model ("ECM"). ECM is
structured such that the Group employs individuals directly and contracts them to clients. ECM is
the established contracting model in a number of countries, including the USA. With governments
across the world examining new ways to raise tax revenues to address budget deficits, our
business model is expected to shift further towards ECM over time. A key focus for 2018 is the
expansion and strengthening of supporting processes of ECM within our Contract business to
increase its market opportunity.
Driving Permanent Profitability
Investment in Permanent continued to be made on a highly selective basis in the year as we
focused on improving the profitability of this division. Permanent GP was down 8%* YoY, with
average sales headcount down 10%, reflecting a 3%* improvement in Permanent productivity per head
over last year.
The USA posted a 12%* GP increase, driven by supportive Energy and Banking markets. This was
offset by declines in all other regions, with Continental Europe down 7%* and UK&I down 22%*.
Permanent recruitment is more sensitive to overall market sentiment and has been hit harder by
the political, market and economic uncertainty of recent years. In response, we have actively
reduced Permanent headcount in certain markets in order to improve overall profitability in our
Permanent business. Over the years, this has meant restructuring our UK, Benelux & France, USA,
APAC and Middle East (APAC & ME), Oil & Gas and Banking & Finance businesses. In markets with
significant Permanent opportunity such as the USA and Germany we continue to maintain a strong
Permanent offering.
Improving customer experience
Last year we rolled-out a major customer experience programme globally, using Net Promoter Score
(NPS) to capture our clients and candidates feedback at every stage of the customer journey.
Feedback has then been used to adapt our systems, processes and behaviours and we have already
seen significant improvements in our overall NPS results (+3.6% points) as well as in the volume
of data we capture.
From these findings, we have developed operating principles that place the customer at the heart
of everything we do - to build trust, to care and then act, to be clear and then to aim high. We
rolled these principles out across the business in the last quarter of 2017 and will continue to
reinforce them in 2018.
Investing in new systems, processes and infrastructure
Our processes, systems and infrastructure are crucial to the delivery of our sales strategy and
to providing the best customer experience. We are currently finalising a structure which will
provide us with a more holistic, strategic view of our global operational requirements and help
us to manage demand and resource for optimum delivery.
We have announced some significant changes this year, including the strategic restructuring and
relocation of our London-based support functions to a new office in Glasgow, which will provide a
more sustainable support structure as we continue to grow our business. We expect to
substantially complete the reorganisation and relocation during 2018, creating a centre of
excellence with a clear objective to reduce costs, while improving operational capability.
We have continued to transition our systems to a cloud-based marketing services structure and
have invested in new automation technology which gives us new and distinct ways to build a single
customer view and to communicate in a more personalised way.
We are also part way through a roll-out of a new customer/contractor portal and a new contract
management system. Both systems have been developed in response to contractor and customer
feedback.
Generating new revenue streams
Innovation and entrepreneurship are a key focus for the Group as we aspire to build a more
diverse portfolio of products and services.
We have created an internal system of Innovation which gives us greater ability to identify
promising new ideas and to test them quickly. We have invested c.GBP3.2 million in the year in a
number of external innovation start-ups (GBP1.2 million) and have created our own innovation
incubator (GBP2.0 million). We expect to increase the amount spent on our innovation incubator to
c.GBP3 million in 2018.
Key developments in 2017 included:
- Talent Deck, a new smart job board, focused on cultural fit and automated matching was launched
in the UK and has already attracted blue-chip technology brands. We expect to continue the
roll-out of Talent Deck and to win additional marquee clients in 2018.
- We prepared the ground for two other internally-developed initiatives to launch in 2018.
Showcaser allows a user to create and manage asynchronous video interviewsand is currently being
trialled with one of our brands. Hirestream combines a digital market platform with key
human-centred touch points. A pilot is planned in mid-2018.
In addition to unlocking internal ideas, we have also engaged with a number of start-ups in the
recruitment space, to identify whether we should make strategic investments or find other ways to
unlock the potential in these ideas. We made additional small investments totalling c.GBP1 million
in a number of HR technology start-ups:
- We supported the deployment of Right Staff by Ryalto Limited, a work scheduling app for
healthcare professionals in which we have invested, with a successful trial among shift workers
in the UK's National Health Service. This is currently being scaled up for a further roll-out.
- We signed a development agreement and invested in RoboRecruiter, a messaging bot specifically
designed for recruitment which engages with candidates without any human intervention.
- We invested in a HR vertical of The Sandpit Limited (HRecTech), an incubator with a successful
track record in marketing technology, which is now incubating HR technology businesses in the UK
and USA.
We will continue to look at potential additional investments where we see a good strategic fit.
Identifying and developing great talent
SThree's success depends on having highly skilled and motivated employees. We aim to find great
people and enable them to build meaningful careers inside the organisation.
We provide on-the-job learning programmes as well as online and classroom-based courses to
support our employee's careers at all stages. Our career management platform is leading edge and
helps our employees to develop their careers within the group.
This year saw the launch of our revised organisational purpose 'Bringing skilled people together
to build the future' and with it, support for our managers and leaders to bring to life the true
meaning of our work with our candidates and clients.
In 2017, we introduced our quarterly Employee Net Promoter Score (eNPS), replacing our annual
engagement survey, as a more dynamic way to capture regular feedback from our people. Over 70% of
our employees responded with feedback about their experience of working at SThree, as well as how
they view the services we offer our customers. eNPS will help us make the right changes based on
employee feedback and track what is working. Ultimately, it puts our people at the centre of
decisions that help to create a brilliant place to work.
As part of our ongoing commitment to creating an inclusive and diverse workforce, we have
introduced a new Female Leadership Development Programme: IdentiFy. Thirty high potential, future
female leaders from across the Group have been selected to participate in a 12-month development
programme. The programme is designed to support them to recognise and develop their leadership
strengths through facilitated learning, stretch assignments and executive sponsorship. Through
IdentiFy we hope to improve the gender balance at a senior level.
Operating Review
Group GP up 4%*, with a strong finish to the year with GP up 8%* in Q4.
The growth in GP was driven by Contract up 10%*, with growth across all sectors and strong
regional performances in Continental Europe up 17%* and USA up 21%*. Permanent GP was down 8%*,
with average sales headcount down 10%.
Breakdown of GP FY 2017 FY 2016
% %
Contract/Permanent Split
Contract 71% 67%
Permanent 29% 33%
100% 100%
Geographical Split
UK&I 19% 25%
Continental Europe 52% 49%
USA 22% 20%
Asia Pacific & Middle East 7% 6%
100% 100%
Sector Split
ICT 43% 45%
Banking & Finance 15% 16%
Energy 9% 8%
Engineering 9% 9%
Life Sciences 22% 21%
Other 2% 1%
100% 100%
GP Average Sales
Headcount
Growth YoY* FY 2017 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
GROUP FY +10% -8% +4% 71% 29% +5% -10% -1%
17
Regional Overview
Regionally, our GP growth was driven by a strong performance in the USA, up 18%*, and robust
growth in Continental Europe up 9%*, led by the Netherlands up 20%* YoY. The USA overtook the
UK&I (19% of Group GP) to become our second largest region (22% of Group GP) during the year
behind Continental Europe (52% of Group GP). Although the UK&I remains an important part of our
business, uncertainty created by the EU Referendum and the relative maturity of the recruitment
market have led us to focus on growth opportunities in other regions and to be cautious with our
investment in the UK&I business. As part of our regional market penetration plans, we expanded
our global footprint by opening four new offices in Continental Europe. However, as we reviewed
regional business performance, it became clear that our return on investment in certain other
regions was sub-optimal and we took action to restructure our Hong Kong office.
We have continued to roll out ECM through the year, introducing new offerings in Germany, and
improvements in our operating model globally. With governments turning to new means to address
their budget deficits, including the IR35 Intermediaries Legislation in the UK and the
Deregulering Beoordeling Arbeidsrelaties (DBA law) in the Netherlands, there is an increasing
risk to the traditional Personal Service Company contractor model. However, we are in a position
to provide service to clients that is highly compliant with the new legislation and we have a
growing footprint in the ECM market which offers a suitable alternative to our candidates and
clients. A key focus for 2018 is further growth in ECM and the further diversification of our
Contract services.
Continental Europe
GP Average Sales
Headcount
Growth YoY* FY 2017 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
CONTINENTAL FY +17% -7% +9% 71% 29% +21% -5% +10%
EUROPE 17
Performance in 2017
Continental Europe is our largest region representing 52% of Group GP. It is split into two
regions: Germany, Austria & Switzerland (DACH) which is 28% of Group GP, and Belgium,
Netherlands, Luxembourg, France and Spain (Benelux, France & Spain), which is 24% of Group GP.
Average headcount was up 10% in the year and period end headcount was up 18% as we continued to
invest for future growth in this market.
Overall, we delivered strong growth in GP, up 9%*, supported by strong labour markets, a shortage
of STEM candidates, low unemployment and rising incomes. SThree is the market leader in STEM
professional recruitment in the Netherlands and once again our Dutch business delivered an
excellent performance, with GP up 20%*.
Our performance across Continental Europe improved through the year with GP in the final quarter
up +16%* YoY.
Strong growth was achieved in Contract across the region with GP up 17%*. Contract in Continental
Europe provides a significant growth opportunity and average headcount was up 21% YoY. The region
had an excellent performance in the final quarter with Contract GP up 24%*. The Netherlands
Contract business grew GP by 27%* YoY, France by 16%* YoY and Germany by 12%* YoY. We ended 2017
with our Contract runners up 21%, our GP Day Rates ("GPDR") up 1%* and our sales headcount up 26%
YoY, providing a strong pipeline for growth in 2018.
Permanent declined by 7%*, with average sales headcount down 5% in the year. Average salaries
were up 1%* and fees were up 2%*. GP yields declined 2%*, however, improvements were noted in
Benelux & France where our Permanent businesses had been restructured in prior years. Period end
headcount was up 5% YoY as we invested selectively in opportunities in Germany where SThree is
the largest Permanent, professional services recruitment business.
We delivered GP growth across every sector in Continental Europe, with double digit growth in
Contract across the board. Contract ICT, our largest sector, grew 18%* YoY, Life Sciences 12%*,
Engineering 19%* and Banking & Finance 20%*.
We opened new offices in Toulouse, Lyon, Vienna and Barcelona in the year in order to better
service our client base.
Expectations for 2018
Continental Europe exited 2017 with a strong pipeline for growth in 2018, focused and capable
management and a highly engaged team with the lowest churn in the Group.
In line with our Group strategy, we will continue to invest in Contract throughout 2018 where we
see market opportunity. Labour laws create momentum for demand in the Contract business and our
increased offering of ECM services is expected to help drive further growth. Our ECM offering in
Germany has completed a pilot phase successfully with full roll out anticipated in 2018.
This year, we will focus on improving Permanent productivity, with selective headcount
investments, especially in Germany.
We expect to open new satellite offices in Lille and Eindhoven in 2018.
UK&I
GP Average Sales
Headcount
Growth YoY* FY 2017 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
UK&I FY -11% -22% -14% 79% 21% -10% -17% -12%
17
Performance in 2017
The UK&I business, which is 19% of Group GP, experienced a challenging year in 2017, in an
environment dominated by further uncertainty. The ongoing 'Brexit' negotiations and the UK's snap
general election affected market confidence leading to a decline in both our divisions. Average
headcount was down 12% YoY with a decline across both Contract and Permanent. Period end
headcount was down 3% YoY.
Contract GP in UK&I was down 11%* YoY. The Contract division is more resilient in tough market
conditions, but these were exacerbated by pricing pressures and IR35 Intermediaries Regulation in
the Public Sector in the year. We have successfully navigated these new regulations,
demonstrating our ability to provide a high quality and compliant service. Average headcount was
down 10% YoY, however, period end headcount was down 1%. Contract runners closed at 2,616, down
2% with our GPDR down 1%*. However, the Contract business showed signs of improvement with
runners and GPDR both growing sequentially in H2.
After a significant restructuring of the Permanent business in 2016, we expected GP to be down in
the year, but it fell further than anticipated as a result of the continuing political
uncertainty through the year and was down 22%* YoY. Average sales headcount was down 17% with
period end sales headcount down 9%. Whilst Permanent GP yields were down 6%* YoY, we have been
actively working to increase our focus on higher salary placements and our average fees and
average salaries were both up 4%* YoY.
ICT, which includes Public Sector and represents 58% of GP, declined 18%* YoY, with Contract down
17%* and Permanent down 22%*. Banking & Finance, our second largest market in the region,
reported a decline of 22%* YoY. The Banking & Finance sector, which is 14% of UK&I, remains
subject to further uncertainty arising from the UK's negotiations with the EU. However, we saw
improvements in our Engineering GP which grew 8%*, with growth achieved in all four quarters of
the year. Performance in Engineering was driven by Contract up 12%*, in part as the sector
benefited from increased demand resulting from the depreciation of sterling. Life Sciences also
showed promise with growth from Q2 onwards and FY growth of 3%* YoY.
The UK&I business is focussed on maintaining profitability and measures were taken through the
year to streamline the business. We rationalised the management structure and increased the
relative number of candidate resourcing roles in our Glasgow Resource Centre, which benefits from
a lower cost base.
Expectations for 2018
In the UK, we enter 2018 against a background of continued uncertainty. Increasing inflation and
supressed GDP growth rates for the UK being in the forefront of our minds, we expect to hold UK&I
headcount broadly flat this year and to focus on maximising the profitability of the business.
We expect to retain a flexible approach to resource allocation to maximise the opportunities
available in certain sectors and to adapt to all legislative changes in the region as required,
including a proposed expansion of changes to the IR35 Intermediaries Legislation to the private
sector in 2019.
USA
GP Average Sales
Headcount
Growth YoY* FY 2017 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
USA FY +21% +12% +18% 69% 31% -8% -9% -8%
17
Performance in 2017
The USA is now our second largest region, representing 22% of Group GP. USA was our fastest
growing region in 2017, with GP up 18%*. Our strong performance in 2017 was across both Contract
up 21%* and Permanent up 12%*. This reflected a significant improvement in GP yields, primarily
driven by a recovery in the Energy and Banking markets from the weaker conditions experienced in
2016. Average headcount declined by 8% YoY with both Contract and Permanent headcount reducing
following a restructuring in 2016 and a pause on recruitment as potential impacts of the US
presidential election result were assessed. However, we made significant investment in headcount
in the second half of the year. Period end headcount was up 15% YoY with both Contract and
Permanent growing sequentially in Q3 and Q4.
Contract GP was up 21%* YoY with growth across all quarters. Average headcount declined by 8% and
as a result yields were up 31%*. An improved performance in Contract GP was evident across all
sectors with our largest sector, Life Sciences, which represents 45% of the division, up 18%*
YoY. Energy GP was up 68%* as we expanded our services to key clients. Contract runners were up
14% YoY with GPDR down 3%*, however, GPDR grew sequentially in Q3 and Q4. Average headcount was
down 8% YoY, however, period end headcount was up 11% YoY providing a solid platform for growth
in 2018.
Our Permanent division in the region performed well in the year, with GP up +12%* and excellent
yields, up +23%* YoY. Permanent growth was across all sectors, with strong growth in Banking &
Finance, up 9%*. Permanent Life Sciences was up 3%* YoY. Average Permanent fees and average
salaries declined YoY, down 7%* and 6%*, respectively, driven by Banking & Finance and Energy.
However, Life Sciences, our largest sector in the division, delivered an increase in both average
fees and average salaries. Average headcount was down 9% YoY, however with increased business
confidence in the region, headcount build resumed in the second half of the year. Period end
sales headcount was up 23% YoY.
Life Sciences which represents 46% of USA GP, grew 13%* YoY with growth across both Contract and
Permanent. Banking & Finance, the second largest sector in the region, grew 2%* YoY with strong
performance in Permanent, up 9%* YoY, offset by a decline in Contract, down 6%* YoY. The Energy
market in the region showed an encouraging recovery in the year, up 71%* YoY with growth across
both Contract and Permanent.
Expectations for 2018
With a good exit rate on Contract runners, up 14%, especially in Energy, and excellent permanent
yields, we expect to continue our strong growth into 2018. We will continue to invest in
headcount in high yielding markets as opportunities are identified. We opened a new office in
Washington D.C. in December 2017 to service the needs of our clients in this region.
In the USA, we are confident that we have the right team and structure to deliver a high quality
service to our clients and continue to penetrate the largest recruitment market in the world.
APAC & ME
GP Average Sales
Headcount
Growth YoY* FY 2017 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
APAC FY +24% -22% -4% 51% 49% -6% -17% -14%
& ME 17
Performance in 2017
APAC and Middle East (APAC & ME) is our smallest region representing 7% of Group GP. The business
is split into two regions: Australia, Japan, Hong Kong and Singapore (APAC) which represent 5% of
Group GP and Dubai (Middle East) which represents 2% of Group GP. The region has struggled since
the drop in the oil price in mid-2014. The upstream Energy business, which historically had been
the backbone of the operation, has not recovered due to the relatively high break-even price of
oil extraction in the region. This has been compounded by weak Banking & Finance markets in 2016
and a slow-down in the rate of growth in China, which has impacted much of APAC. In 2017, the
region reported an overall GP decline of 4%* YoY. Despite a significant improvement in Contract
GP, the Permanent business deteriorated through the year. Australia, our largest country in the
region representing 34% of GP, declined 2%*. In response to the continuing decline in the
performance of the region, we announced that the Hong Kong office would be downsized, reducing it
to a satellite office. Average headcount for the region was down 11% YoY and period end headcount
was down 1% YoY.
Contract GP grew by 24%* YoY, with average headcount down 6% YoY. Energy and Banking & Finance
Contract GP were up 22%* and 41%* YoY, respectively. The recovery in Contract was generated from
a strong pipeline at the start of the year across the region. The period end Contract runner book
at year end (up 3%) was supported by an increased focus on Contract in the Middle East. GPDR
declined 11%* YoY and was down across the region. Australia, which represents 53% of regional
Contract GP, saw good growth of 20%* YoY, driven by ICT and Banking & Finance. However, we note a
slowdown in our performance in the ICT market as we exit this year. Dubai, which is our second
largest Contract business in the region, saw a significant improvement, with Contract GP ahead by
49%* YoY. The growth in Dubai was largely due to the Energy market, where we focus on large
international service companies. Banking in Dubai also showed modest growth in the year.
2017 was a challenging year for Permanent with GP declining 22%* YoY. Average headcount for
Permanent was down 17% YoY with yields down 5%*. We increased our focus in the year on the
penetration of markets with higher fees and stronger structural growth opportunities, notably
Japan, the second largest recruitment market in the world. Our Japanese Permanent business
increased GP by 30%* YoY and now represents 32% of Permanent GP for the region. Average Permanent
fees for Japan were up 2%* YoY with average salaries also growing.
Banking & Finance, our largest sector for the region, remained relatively flat YoY. Energy saw
strong growth, up 10%* YoY, driven by Dubai Contract. Permanent GP was down across all sectors.
Expectations for 2018
Our Chief Operating Officer ("COO"), Justin Hughes, led APAC & ME from Hong Kong until September
2017 when he returned to London to take on the role of COO full time. Japan and Middle East
Contract are being managed for growth, while the rest of the region is being managed to maximise
profitability.
Sector Overview
On a sector basis, Group GP benefited from a continued recovery in Energy, up 25%*, and solid
growth in Life Sciences up 7%*. After a significant restructuring in 2016, Banking & Finance GP
was down 2%* with average headcount down 11% YoY. ICT and Engineering grew, with GP up 1%* and
5%*, respectively. ICT suffered from a weak UK&I performance.
ICT
GP Average Sales
Headcount
Growth YoY* FY 2017 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
ICT FY +4% -6% +1% 75% 25% +4% -10% -1%
17
ICT, which accounted for 43% of Group GP in 2017, continues to be our largest and most
established sector. GP in this sector showed YoY growth for the fifteenth consecutive quarter,
and provides opportunities across all regions. We saw modest growth in GP in the year of 1%*, but
against a strong comparative in 2016, when GP was up 12%* YoY. The rate of growth slowed in this
sector due to a deterioration in the performance of the UK&I. Although average headcount in this
sector was down 1% YoY, period end headcount was up 8%. The mix of headcount shifted further in
favour of Contract and Continental Europe.
Contract, which was 75% of ICT, was up 4%* YoY. Runners in the sector were up 6% YoY, with GPDR
growth of 2%* YoY. Permanent was down 6%* YoY, but saw a growth in average permanent fees, up
+2%* YoY and yields increased 4%*.
Continental Europe, which constitutes 63% of our ICT business, was up 12%* YoY, against a strong
prior year growth of 17%*. Contract GP in this region had an exceptional performance, up 18%*
YoY. Permanent, however, remained flat across the region. DACH, which is our largest Permanent
ICT business, saw growth of 7%* YoY and will remain a key area of investment in 2018.
UK&I, our second largest ICT region remained challenging. ICT in the UK&I includes Public Sector,
which was 33% of ICT GP in the region. Public Sector employment reforms and a general slowdown in
activity in the UK had an adverse impact which resulted in Contract being down 17%* YoY and
Permanent being down 22%* YoY.
Our USA business grew 12%* YoY. Although in 2017 USA is a small proportion of our total ICT
business, we are confident that our knowledge and expertise in this sector will enable us to
maximise the market opportunity in this region, the largest ICT market in the world, over time.
Banking & Finance
GP Average Sales
Headcount
Growth YoY* FY 2017 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
BANKING FY +6% -10% -2% 55% 45% -7% -15% -11%
& 17
FINANCE
Banking & Finance represented 15% of Group GP in 2017, making it the third largest sector for the
Group. We faced mixed trading conditions in this sector across our geographies, with GP declining
by 2%* YoY. Average headcount in this sector in the year declined by 11% following a
restructuring implemented in 2016 in response to difficult conditions in the global Banking
market. Period end headcount was down 5%.
Contract, which was 55% of Banking & Finance, is more resilient and has had considerable success,
up 6%*, despite a 7% drop in headcount. Contract GP yields were up 13%*. Runners at the end of
the year were up 8%, with GPDR up 4%* YoY. Permanent GP declined, as expected, following a
significant reduction in headcount in 2016. GP was down 10%*, with headcount down 15%. Permanent
yields therefore improved 6%*. Average Permanent fees were down by 1%* YoY.
Continental Europe, which was our largest region in this sector was up 7%* YoY. The growth was
heavily supported by Contract, which was up 20%*, with DACH, Benelux & France all showing good
growth. Contract Runners for the region were up 25% YoY, which leaves us with a strong pipeline
for 2018. Permanent GP in the region, declined by 9%* YoY and there was a moderate decline in
Permanent average fee down 1%* YoY.
The UK&I business performance was hampered by uncertainty around the EU referendum leading to
cautious hiring decisions. The reduced market confidence was reflected in GP being down 22%*,
with Contract GP down 10%* YoY and Permanent GP down 45%*.
The USA, which was our second largest Banking & Finance market, saw growth of 2%* YoY, driven
mainly from Permanent which was up 9%* YoY. Contract in this region declined 6%* YoY, but was
showing signs of improvement as we exited the year.
While the Banking sector has remained subdued over the last few years, we will continue to
monitor performance in this sector and invest as opportunities arise. We see a strong opportunity
for Contract in Continental Europe and Permanent in the USA.
Global Energy
GP Average Sales
Headcount
Growth YoY* FY 2017 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
GLOBAL FY +26% +15% +25% 93% 7% +4% -19% +2%
ENERGY 17
Energy now represents 9% of Group GP. Overall conditions in the Oil & Gas market have stabilised
this year and this supported strong growth in GP, up 25%* YoY (2016: down 29%* YoY). Although, we
have seen growth in this sector in 2017, we remain significantly below our peak performance in
2014. Our average headcount in the sector was up 2%* YoY and with measured investment in Contract
through the year in key markets, our period end headcount was up 17% YoY.
Contract which is 93% of our Energy GP, was up 26%* YoY, with growth across all our geographies,
excluding UK&I. Average Contract headcount was up 4% YoY, with period end headcount up 19%.
Contract yields in the sector were up 21%* YoY, while GPDR remained flat* YoY. Contract Runners
at the end of the year were up 35%, providing a strong platform for 2018. Permanent, although a
small part of Energy GP, was up 15%* YoY, with yields up 43%* and average Permanent fees down
16%* YoY.
Continental Europe, which is 41% of Energy GP, was up 11%* YoY, with growth in both the Contract
and Permanent divisions, up 11%* and 8%* respectively. The growth in Contract was across all
countries in the region, whereas Permanent growth was concentrated on the Netherlands.
USA, which accounts for 41% of Energy GP, picked up significant upstream and power business
though the year. This lead to GP being up 71%* YoY, with Contract, which is the larger part of
Energy USA, up 68%* and Permanent up 117%* YoY.
UK&I, which is 6% of Energy GP, declined 22%* YoY. APAC & ME grew 10%* YoY.
We have noted significant YoY improvements in both Continental Europe and USA this year in both
Contract and Permanent. We will continue to remain agile, but cautious, with our future
investments in the Energy sector.
Life Sciences
GP Average Sales
Headcount
Growth YoY* FY 2017 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
LIFE FY +15% -4% +7% 64% 36% +9% -3% +3%
SCIE 17
NCES
We pride ourselves on being one of the largest global professional recruiters in the Life
Sciences market, with growth opportunities across all our geographies and both our divisions.
Life Sciences is now 22% of Group GP and was up 7%* YoY, with average headcount up 3%.
Contract, which represents 64% of Life Sciences GP, was up 15%* YoY, with growth across all
geographies. Contract Runners were up 16% YoY, but GPDR declined 5%*. Average headcount was up 9%
YoY with our two largest regions, Continental Europe and Americas growing 13% and 8%,
respectively. Permanent GP, was down 4%* YoY, with Permanent average fee up 4%* YoY and Permanent
yields down 1%* YoY. Permanent average headcount declined 3% YoY, however, period end headcount
grew 16%.
USA, our largest Life Sciences business, which accounts for 48% of GP, grew strongly, up 13%*
YoY. The growth was driven by a strong Contract performance, up 18%* YoY, while Permanent grew
3%* YoY. We continue to invest in Life Sciences in the USA, which is a key growth market for the
Group, Period end headcount was up 24% YoY.
Continental Europe accounts for 38% of Life Sciences GP. GP was up 4%* YoY, against tough
comparatives of 13%* in 2016. Contract GP in the region was up 12%* YoY, with excellent growth in
Benelux & France, up 59%* YoY. Permanent GP, was down 8%* YoY, against a tough prior year
comparative of an increase of 23%* YoY.
UK&I, which was 11% of our Life Sciences GP, recorded moderate growth of 3%*. The growth was
driven by Contract, which grew +8%* YoY, while Permanent declined by 7%* YoY.
Engineering
GP Average Sales
Headcount
Growth YoY* FY 2017 Mix Growth YoY
Cont Perm Total Cont Perm Cont Perm Total
ENGINEERING FY +17% -18% +5% 72% 28% +21% -11% +7%
17
Engineering, which was 9% of our Group GP, is primarily focused on Continental Europe and UK&I.
USA Permanent, a fairly new addition to our Engineering portfolio, has had some initial success,
with GP quadrupling YoY. Our average headcount in this sector was up 7% YoY, with most of the
headcount increase in Contract. Period end sales headcount was up 26% YoY. We expect further
opportunities in this sector as we enter 2018.
Contract, which represents 72% of Engineering GP, was up 17%* YoY with growth in both UK&I and
Continental Europe. Contract Runners are up 17% YoY with GPDR being flat*. In comparison,
Permanent GP was weaker, down 18%* YoY, with only USA seeing significant growth. Permanent
average fees and yields in the sector declined 2%* and 8%*, respectively.
Continental Europe, which represents 71% of Engineering GP, was up 2%* YoY with Contract up 19%*,
offset by a decline in Permanent down 25%* YoY. Contract Runners at year end were up 25%,
providing a strong pipeline for growth as we enter 2018.
Engineering in the UK&I was up 8%* YoY, with Contract up 12%* and Permanent down 5%* YoY.
OUTLOOK
Looking ahead to 2018, the momentum of our Contract business and the strength of our performances
in the USA and Continental Europe leave us well-positioned for further growth.
We have been encouraged by our performance in 2017, particularly in the last quarter, which has
provided us with a strong platform to deliver further growth in the coming year. We will continue
to focus our headcount investment to maximise our returns and to pay close attention to
productivity in Permanent and in the UK&I. The benefit of the restructuring and relocation of our
support service function in the UK is expected to be fully realised during 2019.
Our focus on customers, services and our people, underpinned by investment in technology and
innovation, gives us confidence that we are set up for success as we continue on our journey to
become the number one STEM talent provider in our markets.
*In constant currency
CHIEF FINANCIAL OFFICER'S REVIEW
********************************
In 2017, we delivered a robust financial performance ahead of market expectations. Our improved
operational performance was further supported by currency appreciation against the pound, which
enhanced growth in our Revenue, Gross Profit and Profit Before Tax.
Income statement
Revenue for the year was up 9% on a constant currency basis to GBP1.1 billion (2016: GBP959.9
million) and up 16% on a reported basis. On a constant currency basis, Gross Profit ('GP')
increased by 4%, and on a reported basis by 11% to GBP287.7 million (2016: GBP258.7 million)
supported by foreign exchange tailwinds of c.GBP18.1 million. Growth in revenue exceeded the growth
in GP as the business continued to remix towards Contract. Contract represented 71% of the Group
GP in the year (2016: 67%). This change in mix resulted in a decrease in the overall GP margin to
25.8% (2016: 26.9%) as Permanent revenue has no cost of sale, whereas the cost of paying the
contractor is deducted to derive Contract GP. The Contract margin remained robust at 19.8% (2016:
19.9%).
Reported profit before tax was broadly flat at GBP37.7 million. Restructuring costs have been
incurred in the current and prior year. We have reported certain KPIs on an "Adjusted" basis to
provide a more like-for-like view of performance. Adjusted profit before tax was up 9% at GBP44.5
million (2016: GBP40.8 million) supported by foreign exchange tailwinds of c.GBP5.0 million. On a
constant currency basis, our adjusted profit before tax was down 3%. This is reflected in a
decline in our operating profit conversion ratio of 0.4 percentage points to 15.6% (2016: 16.0%).
Our operating performance in the period has been strong with increased sales team yields driving
our GP growth, but our cost base has increased as we invest in innovation, to secure the future
of our business, and incurred other non-exceptional restructuring costs in the year.
Restructuring costs ('Adjusting items')
On 1 November 2017, as part of a strategic reassessment of our UK operations, we announced that
we were commencing a consultation with employees on the proposed relocation of support functions
away from our London headquarters to a new facility located in Glasgow, along with a
restructuring of the marketing department. The purpose of this strategic restructuring is to
realise cost savings of approximately GBP4 million - GBP5 million per annum.
The restructuring is expected to result in certain material one-off costs totalling approximately
GBP14 million to GBP16 million, of which an estimated GBP15 million is operating expenses and
approximately GBP0.5 million is property fit out costs (to be capitalised), less approximately GBP2
million of grants receivable from Scottish Enterprise. The costs are mainly related to people,
property and professional advisor fees.
Exceptional costs of GBP6.7 million have been recognised and separately disclosed in the Income
Statement in 2017, including GBP1.1 million of restructuring costs incurred or accrued, mainly for
professional fees, and GBP5.6 million as a provision for redundancy costs. The additional
exceptional cost to set up a centre of excellence in Glasgow in 2018 is expected to be between GBP8
million and GBP9 million, with a grant of up to approximately GBP2 million potentially receivable
over several years.
In the prior year, we carried out a restructuring of certain sales businesses and central support
functions in response to the adverse market conditions in certain sectors and regions. These
actions resulted in one-off redundancy costs of GBP3.5 million.
Due to their nature and magnitude, the restructuring costs in the 2017 and 2016 financial years
have been separately highlighted to help readers understand the Group's underlying results for
the year ('Adjusted'). The Group's adjusted profit KPIs for the year are presented in various
sections of this Annual Report. The strategic nature and material cost of the restructuring of
support functions announced in 2017 is of sufficient magnitude to warrant separate disclosure as
an exceptional item on the face of the Consolidated Income Statement, in line with our accounting
policy.
A reconciliation of 'Adjusting items' is provided below:
GBP'million 2017 2016
Reported profit before tax after exceptional items 37.7 37.3
Exceptional strategic restructuring costs 6.7 -
Reported profit before tax and exceptional items 44.5 37.3
Non-exceptional restructuring costs(1) - 3.5
Adjusted profit before tax 44.5 40.8
(1) 2016 figures were adjusted for the restructuring of certain sales businesses and central
support functions.
Operating costs
Adjusted operating costs, excluding one-off restructuring costs of GBP6.7 million (2016: GBP3.5
million), increased by 12% to GBP242.8 million (2016: GBP217.4 million). The increase was mainly
driven by an adverse foreign exchange impact of c.GBP13 million, focused expenditure on innovation
(c.GBP2 million), management delayering (c.GBP1.2 million) and a restructure of our Hong Kong
business (c.GBP0.4 million).
Payroll costs represent 79% of our cost base. Average total headcount was flat at 2,668, with
total sales headcount down 1%. The drop in average sales headcount is attributable to a
restructuring of our Permanent business, in which headcount was significantly reduced in the
second half of 2016 in response to market conditions. Selective headcount build continued
throughout 2017. Improvements in consultant productivity and the strength of market activity
provided management with the confidence to invest in headcount in the USA and Continental Europe
in the second half of the year. Year-end headcount was up 11% at 2,866.
Year-end sales headcount represented 79% of the total Group headcount.
The full benefits of the restructure of our UK Support function on personnel and property costs
are expected to be realised from the financial year 2019 onwards.
Investments
During the year, we invested in a number of innovation start-ups (GBP1.2 million), created our own
innovation incubator (c.GBP2 million) and invested in new technology to serve the needs of our
customers (GBP3.4 million, of which GBP1.9 million in the year was spent on developing a new contract
management system and a contractor timesheet application).
Our most significant investment in innovation start-ups was a 30% non-controlling interest in the
share capital of HRecTech Sandpit Limited ('HRecTech') for a total consideration of GBP0.8 million.
The Sandpit Limited is a privately owned group that specialises in developing early stage
start-up companies within defined markets.
We continued to support Ryalto in which we have an 18% investment, purchasing convertible bonds
for a total consideration of $0.5 million (GBP0.4 million) in October 2017.
The bulk of our investment in our own innovation incubator was focused on Talent Deck, a
recruitment platform focused on cultural fit and automated matching that is now in the initial
stages of its roll-out. We expect to increase the amount spent on the creation of innovative
products to c.GBP3 million in the current financial year.
We expect to reduce our investment in non-innovation technology spend in the current financial
year as we relocate our IT function.
Impairment of investment in subsidiaries (Company only)
During the year, we reviewed the recoverable amount of the Company's own portfolio of
investments, including SThree UK Holdings, which in turn owns SThree Partnership LLP, and
determined that an impairment loss of GBP88 million needs to be recognised due to the significant
downturn in the trading performance and prospects of the UK business. This was the result of
several factors, including: the unfavourable impact of the ongoing political uncertainties
following the EU referendum on trading in the Permanent division and Banking sector; changes in
working practices in the Public Sector, namely IR35 and framework agreements, and reduced margins
impacting the profitability of the UK region. After booking this impairment, the distributable
retained earnings were GBP179.9 million (GBP2016: GBP267.3 million).
Taxation
The tax charge on pre-exceptional statutory profit before tax for the year was GBP11.4 million
(2016: GBP10.1 million), representing an effective tax rate ('ETR') of 25.6% (2016: 27.0%). The ETR
on post-exceptional statutory profit before tax was 26.7% (2016: 27.0%).
The ETR primarily reflects our geographical mix of profits and a cautious approach to recognising
assets on tax losses. The ETR will also be influenced by any changes to tax rates and
legislation, which may result in certain expenses not allowable for tax, non-taxable income or
enhanced tax deductions such as research and development tax credits.
US Tax Reform legislation passed on 20 December 2017 sees the reduction in the federal corporate
tax rate from 35% to 21%. This will have an overall positive impact on our business with an
estimated annual tax saving of GBP1 million at current levels of profitability. This is a
non-adjusting post balance sheet event. The full benefit of this will largely be offset in the
first year by the reduction in the deferred tax asset.
Other regulatory changes which may impact the group in future years include:
(i) The extent to which the OECD member countries continue to implement changes to domestic
legislation as a result of recommendations from the Base Erosion and Profit Shifting project.
(ii) The October 2017 announcement of the European Union Competition Commissioner's State Aid
investigation into the UK's Controlled Foreign Company legislation.
We will continue to monitor and assess the impact of any changes as they are implemented.
Earnings per share ('EPS')
On an adjusted basis, EPS was up by 2.5 pence at 25.7 pence (2016: adjusted 23.2 pence), due to
an increase in the adjusted profit before tax and a drop in the effective tax rate. On a reported
basis, EPS remained broadly flat at 21.5 pence, up 0.3 pence on the prior year (2016: 21.2
pence), attributable mainly to an increase in restructuring costs as explained above. The
weighted average number of shares used for basic EPS remained stable at 128.6 million (2016:
128.3 million). Reported diluted EPS was 20.8 pence (2016: 20.6 pence), up 0.2 pence. Share
dilution mainly results from various share options in place and expected future settlement of
certain tracker shares. The dilutive effect on EPS from tracker shares will vary in future
periods depending on the profitability of the underlying tracker businesses, the volume of new
tracker arrangements created and the settlement of vested arrangements.
Dividends
In line with the Group's strategy to operate a policy of financing the activities and development
of the Group from retained earnings and to maintain a strong balance sheet position, the Board
has proposed a maintained final dividend of 9.3 pence per share (2016: 9.3 pence). Taken together
with the interim dividend of 4.7 pence per share (2016: 4.7 pence), this brings the total
dividend for the year to 14.0 pence per share (2016: 14.0 pence). This represents a dividend
yield of 4% based on the average share price for the year (2016: 5%). The final dividend, which
amounts to c.GBP12.1 million, will be subject to shareholder approval at the 2018 Annual General
Meeting. It will be paid on 8 June 2018 to shareholders on the register on 27 April 2018.
Share options and tracker share arrangements
We recognised a share-based payment charge of GBP3.3 million during the year (2016: GBP2.9 million)
for the Group's various share-based incentive schemes. The greater charge in 2017 is primarily
due to an increase in the number of participants in the 2017 Long Term Incentive Plan ('LTIP'),
and an improvement in regional performance metrics for legacy LTIPs.
We also operate a tracker share model to help retain and motivate our entrepreneurial management
within the business. The programme gives our most senior front office sales colleagues a chance
to invest in a business they manage, with the support and economies of scale that the Group can
offer them. In 2017, 38 employees invested an equivalent of GBP0.4 million in 15 Group businesses.
We settled certain vested tracker shares during the year for a total consideration of GBP3.2
million (2016: GBP4.6 million) which was determined using a formula in the Articles of Association
underpinning the tracker share businesses. We settled the consideration in SThree plc shares
either by issuing new shares (393,910 new shares were issued on settlement of vested tracker
shares in 2017) or treasury shares (in total 647,507 were used in settlement of vested tracker
shares in 2017). Consequently, the arrangement is deemed to be an equity-settled share-based
payment arrangement under IFRS 2 'Share-based payments'. There is no charge to the income
statement as initially the tracker shareholders subscribed to the tracker shares at their fair
value. We expect future tracker share settlements to be between GBP5 million to GBP15 million per
annum. These settlements will either dilute the earnings of SThree plc's existing ordinary
shareholders if funded by new issue of shares or will result in a cash outflow if funded via
treasury shares.
Note 1 to the financial statements provides further details about all Group-wide discretionary
share plans, including the tracker share arrangements.
Balance sheet
At 30 November 2017, the Group's net assets increased to GBP80.7 million (2016: GBP75.7 million),
mainly due to the excess of net profit over the dividend payments and share buy backs during the
year supported by a strengthening of the Euro vs Sterling.
The most significant item in our statement of financial position is trade receivables (including
accrued income) which increased to GBP217.7 million (2016: GBP182.6 million), with GBP2.3 million of
the increase due to a favourable change in foreign exchange rate. Other drivers of an increase in
receivables are a three day increase in Days Sales Outstanding to 40.6 days (2016: 37.5 days) and
a 14% increase in Contract GP in Q4 year-on-year. Trade and other payables increased from GBP138.9
million to GBP159.6 million, with GBP2.2 million due to movements in foreign exchange rates and the
remainder primarily due to an increase in Contract GP. Creditor days were 18 days (2016: 19
days). Provisions increased by GBP8.7 million primarily due to a GBP6.7 million increase in
restructuring provisions, including a provision for the relocation of central support functions
from London to Glasgow (GBP5.6 million).
Cash Flow
On an adjusted basis, we generated lower cash from operations of GBP41.1 million (2016: GBP46.9
million on an adjusted basis) due to continued growth of the contract runner book increasing our
working capital and an increase in Days Sales Outstanding. This resulted in a lower cash
conversion ratio of 78.6% (2016: 96%) on an adjusted basis or 90.2% (2016: 95.0%) on a reported
basis.
Capital expenditure reduced to GBP5.8 million (2016: GBP7.2 million), of which 33% was related to
investments in innovative technology to improve our customer experience. We expect capital
expenditure will further decline in 2018. Investments in associates and available for sale assets
of GBP1.2 million (2016: GBP0.7 million) were made in the year.
During the year, SThree plc bought back shares amounting to GBP7.8 million (2016: GBP6.8 million) to
satisfy employee share schemes in future periods. Small cash inflows were generated from share
based payment schemes.
Income tax payments increased to GBP10.9 million (2016: GBP8.5 million). The figures shown for 2016
reflected a lower than usual outflow due to advanced tax payments made in 2015. Small cash
outflows were made for interest payments.
Dividend payments were GBP18.0 million (2016: GBP18.0 million) and there was a small cash outflow
representing distributions to tracker shareholders.
We started the year with the net cash of GBP10.0 million and closed the financial year with a lower
but solid net cash balance of GBP5.6 million. The year-on-year decrease primarily reflected
increased cash absorbed in working capital.
Treasury management
We finance the Group's operations through equity and bank borrowings. The Group's cash management
policy is to minimise interest payments by closely managing Group cash balances and external
borrowings. We intend to continue this strategy while maintaining a strong balance sheet
position. In general, we do not keep excess cash in any of the countries in which we operate. We
have central cash pooling facilities in place for Euros and US Dollars.
We maintain a committed Revolving Credit Facility ('RCF') of GBP50 million, along with an
uncommitted GBP20 million accordion facility, with Citibank and HSBC, giving the Group an option to
increase its total borrowings to GBP70 million for general corporate purposes. We also have a
separate GBP5 million overdraft facility with RBS. At the year end the Group had drawn down GBP12
million (2016: GBPnil) on these facilities.
The RCF is subject to financial covenants whereby we need to maintain a ratio of net debt to
adjusted EBITDA of 2.0 times or lower, and maintain interest cover of at least 1.2. In 2017, we
ended the year with significant headroom on our covenants, with a net cash balance of GBP5.6
million and interest cover (including dividends) of 3:1. The funds borrowed under this facility
bear interest at an annual rate of 1.3% above 3 month LIBOR giving an average interest rate of
1.5% during the year (2016: 1.8%). The finance costs for the year amounted to GBP0.4 million (2016:
GBP0.5 million). The RCF expires in May 2019 and we will renew the facility in the first half of
2018.
The Group's UK-based treasury function manages the Group's treasury risks in accordance with
policies and procedures set by the Board, and is responsible for day-to-day cash management; the
arrangement of external borrowing facilities; the investment of surplus funds; and the management
of the Group's interest rate and foreign exchange risks. The treasury function does not engage in
speculative transactions or operate as a profit centre.
Foreign exchange
Foreign exchange volatility continues to be a significant factor in the reporting of the overall
performance of the business with the main functional currencies of the Group entities being
Sterling, the Euro and the US Dollar. For 2017, movements in exchange rates between Sterling and
the Euro and the US Dollar provided a strong tailwind to the reported performance of the Group
with the highest impact coming from Eurozone countries. Over the course of the year, the exchange
rate movements increased our reported 2017 GP and operating profit by c.GBP18.1 million and GBP5.0
million, respectively. Our financial performance KPIs remain materially sensitive to exchange
rate movements. By way of illustration, each one percent movement in annual exchange rates of the
Euro and the US Dollar against Sterling impacted our 2017 GP by GBP1.5 million and GBP0.6 million,
respectively, and operating profit by GBP0.5 million and GBP0.2 million, respectively.
The Board considers it appropriate in certain cases to use derivative financial instruments as
part of its day-to-day cash management to provide the Group with protection against adverse
movements in the Euro and the US dollar during the settlement period. The Group does not use
derivatives to hedge translational foreign exchange exposure in its balance sheet and income
statement.
Principal Risks and Uncertainties
Principal risks and uncertainties affecting the business activities of the Group are detailed
within the strategic section of the Annual Report.
In terms of macroeconomic environment risks, our strategy is to continue to grow the size of our
international business and newer sectors, in both financial terms and geographical coverage. This
will help reduce our exposure or reliance on any one specific economy, although a downturn in a
particular market could adversely affect the Group's key risk factors.
In the view of the Board, there is no material change expected to the Group's key risk factors in
the foreseeable future.
* Variances in constant currency
SThree plc
Consolidated income statement
For the year ended 30 November 2017
2017 2016
Before Exceptional Total
excepti items
onal
items
Note GBP'000 GBP'000 GBP'000 GBP'000
Continuing
operations
Revenue 2 1,114,5 - 1,114,5 959,86
30 30 1
Cost of sales (826,85 - (826,85 (701,1
8) 8) 80)
Gross profit 2 287,672 - 287,672 258,68
1
Administrative 3 (242,75 (6,741) (249,49 (220,9
expenses 2) 3) 13)
Operating 4 44,920 (6,741) 38,179 37,768
profit
Finance income 124 - 124 79
Finance costs (439) - (439) (549)
Share of (147) - (147) -
results of
associate
Profit before 44,458 (6,741) 37,717 37,298
taxation
Taxation 5 (11,392 1,303 (10,089 (10,05
) ) 6)
Profit for the year 33,066 (5,438) 27,628 27,242
attributable
to owners of the
Company
Earnings per share 7 pence pence pence pence
Basic 25.7 (4.2) 21.5 21.2
Diluted 24.9 (4.1) 20.8 20.6
SThree plc
Consolidated statement of comprehensive income
For the year ended 30 November 2017
2017 2016
GBP'000 GBP'000
Profit for the year 27,628 27,242
Other comprehensive (loss)/income:
Items that may be subsequently reclassified
to profit or loss:
Exchange differences on retranslation of (1,083) 10,774
foreign operations
Total other comprehensive (loss)/income for (1,083) 10,774
the year (net of tax)
Total comprehensive income for the year 26,545 38,016
attributable to owners of the Company
SThree plc
Consolidated statement of financial position
As at 30 November 2017
30 November 30 November
2017 2016
Note GBP'000 GBP'000
Assets
Non-current assets
Property, plant and 6,746 7,100
equipment
Intangible assets 11,386 11,597
Investment in 655 -
associate
Other investments 1,110 727
Deferred tax assets 4,199 2,501
24,096 21,925
Current assets
Trade and other 226,558 189,169
receivables
Current tax assets 1,534 4,650
Cash and cash 8 21,338 15,707
equivalents
249,430 209,526
Total assets 273,526 231,451
Equity and
Liabilities
Equity attributable to owners of the Company
Share capital 1,317 1,312
Share premium 28,806 27,406
Other reserves (8,556) (5,381)
Retained earnings 59,138 52,333
Total equity 80,705 75,670
Non-current
liabilities
Provisions for 2,172 907
liabilities and
charges
Current liabilities
Borrowings 9 12,000 -
Bank overdraft 8 3,717 5,685
Provisions for 12,352 4,953
liabilities and
charges
Trade and other 159,556 138,859
payables
Current tax 3,024 5,377
liabilities
190,649 154,874
Total liabilities 192,821 155,781
Total equity and 273,526 231,451
liabilities
SThree plc
Consolidated statement of
changes in equity
For the year ended 30
November 2017
Share Share Capital Capital Treasury Currency Retained Total
capital premium redemption reserve reserve translation earnings equit
reserve reserve y
attri
butab
le to
owner
s of
the
Compa
ny
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 30 1,295 23,140 168 878 (1,318) (10,758) 46,001 59,40
November 2015 6
Profit for - - - - - - 27,242 27,24
the year 2
Other - - - - - 10,774 - 10,77
comprehensive 4
loss for the
year
Total - - - - - 10,774 27,242 38,01
comprehensive 6
income for
the year
Dividends 6 - - - - - - (17,972) (17,9
paid to 72)
equity
holders
Distributions - - - - - - (149) (149)
to tracker
shareholders
Settlement of 14 3,706 - - - - (3,929) (209)
vested
tracker
shares
Settlement of 3 560 - - 1,720 - (1,671) 612
share-based
payments
Purchase of - - - - (6,845) - - (6,84
own shares 5)
Credit to - - - - - - 2,823 2,823
equity for
equity-settle
d share-based
payments
Current and 5 - - - - - - (12) (12)
deferred tax
on
share-based
payment
transactions
Total 17 4,266 - - (5,125) 10,774 6,332 16,26
movements in 4
equity
Balance at 30 1,312 27,406 168 878 (6,443) 16 52,333 75,67
November 2016 0
Profit for - - - - - - 27,628 27,62
the year 8
Other - - - - - (1,083) - (1,08
comprehensive 3)
loss for the
year
Total - - - - - (1,083) 27,628 26,54
comprehensive 5
(loss)/income
for the year
Dividends 6 - - - - - - (17,994) (17,9
paid to 94)
equity
holders
Distributions - - - - - - (115) (115)
to tracker
shareholders
Settlement of 4 1,185 - - 2,746 - (3,060) 875
vested
tracker
shares
Settlement of 1 215 - - 2,959 - (2,972) 203
share-based
payments
Purchase of - - - - (4,618) - - (4,61
own shares 8)
Purchase of - - - - (3,179) - - (3,17
own shares by 9)
Employee
Benefit Trust
Credit to - - - - - - 3,256 3,256
equity for
equity-settle
d share-based
payments
Current and 5 - - - - - - 62 62
deferred tax
on
share-based
payment
transactions
Total 5 1,400 - - (2,092) (1,083) 6,805 5,035
movements in
equity
Balance at 30 1,317 28,806 168 878 (8,535) (1,067) 59,138 80,70
November 2017 5
SThree plc
Consolidated statement
of cash flow
For the year ended 30 November 2017
2017 2016
Note GBP'000 GBP'000
Cash flows from
operating activities
Profit before taxation 37,717 37,298
after exceptional items
Adjustments for:
Depreciation and 5,744 5,716
amortisation charge
Accelerated 309 -
amortisation and
impairment of
intangible assets
Finance income (124) (79)
Finance cost 439 549
Loss on disposal of 4 110 194
property, plant and
equipment
Share of results of 147 -
associate
Loss on disposal of 144 -
subsidiaries
Non-cash charge for 3,256 2,823
share-based payments
Operating cash flows before changes in
working capital and provisions
47,742 46,501
Increase in receivables (35,712) (9,404)
Increase in payables 19,291 5,731
Increase/(decrease) in 8,758 (632)
provisions
Cash generated from 40,079 42,196
operations
Finance income 124 79
Income tax paid - net (10,921) (8,477)
Net cash generated from operating 29,282 33,798
activities
Cash generated from operating activities 30,273 34,658
before exceptional items
Cash outflow from recognised exceptional (991) (860)
items
Net cash generated from operating 29,282 33,798
activities
Cash flows from
investing activities
Purchase of property, (2,374) (3,220)
plant and equipment
Purchase of intangible (3,392) (3,973)
assets
Investments designated (383) (727)
as available-for-sale
Investment in an (802) -
associate
Net cash used in investing activities (6,951) (7,920)
Cash flows from
financing activities
Proceeds from 9 12,000 -
borrowings
Finance cost (431) (549)
Employee subscription 98 192
for tracker shares
Proceeds from exercise 215 612
of share options
Purchase of own shares (7,797) (6,845)
Dividends paid to 6 (17,994) (17,972)
equity holders
Distributions to (115) (130)
tracker shareholders
Net cash used in (14,024) (24,692)
financing activities
Net increase in cash and cash equivalents 8,307 1,186
Cash and cash equivalents at beginning of 10,022 6,159
the year
Effect of exchange rate (708) 2,677
changes
Net cash and cash 8 17,621 10,022
equivalents at end of
the year
SThree plc
Notes to the financial statements
For the year ended 30 November 2017
1. Basis of preparation
The financial information in this preliminary announcement has been extracted from the Group
audited financial statements for the year ended 30 November 2017 and does not constitute
statutory accounts within the meaning of section 434 of the Companies Act 2006. The Group
financial statements and this preliminary announcement were approved by the Board of Directors on
29 January 2018.
The auditors have reported on the Group's financial statements for the years ended 30 November
2017 and 30 November 2016 under s495 of the Companies Act 2006. The auditors' reports are
unqualified and do not contain a statement under section 498(2) or (3) of the Companies Act 2006.
The Group's statutory financial statements for the year ended 30 November 2016 have been filed
with the Registrar of Companies and those for the year ended 30 November 2017 will be filed
following the Company's Annual General Meeting.
The Group's financial statements have been prepared in accordance with International Financial
Reporting Standards ('IFRSs') and IFRS Interpretations Committee ('IFRS IC') as adopted and
endorsed by the European Union and have been prepared under the historical cost convention with
the exception of certain financial instruments classified as available for sale.
The same accounting policies, presentation and computation methods are followed in this
preliminary announcement as in the preparation of the Group financial statements. The accounting
policies have been applied consistently by the Group.
Going concern
The Group's business activities, together with the factors likely to affect its future
development, performance, its financial position, cash flows, liquidity position and borrowing
facilities are described in the strategic section of the Annual Report. In addition, notes to the
Group financial statements include details of the Group's treasury activities, funding
arrangements and objectives, policies and procedures for managing various risks including
liquidity, capital management and credit risks.
The Directors have considered the Group's forecasts, including taking account of reasonably
possible changes in trading performance, and the Group's available banking facilities. Based on
this review and after making enquiries, the Directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence for the foreseeable future. For
this reason, the Directors continue to adopt a going concern basis in preparing these financial
statements and this preliminary announcement.
2. Segmental analysis
IFRS 8 'Segmental Reporting' requires operating segments to be identified on the basis of
internal results about components of the Group that are regularly reviewed by the entity's chief
operating decision maker to make strategic decisions and assess segment performance.
Management has determined the chief operating decision maker to be the Group Management Board
('GMB') made up of the Chief Executive Officer, the Chief Financial Officer, the Chief Operating
Officer, the Chief People Officer and the Chief Sales Officer, with other senior management
attending via invitation. Operating segments have been identified based on reports reviewed by
the GMB, which consider the business primarily from a geographical perspective. The Group
segments the business into four regions: the United Kingdom & Ireland ('UK&I'), Continental
Europe, the USA and Asia Pacific & Middle East ('APAC & ME').
The Group's management reporting and controlling systems use accounting policies that are the
same as those described in note 1 to the Group financial statements in the summary of significant
accounting policies.
Revenue and Gross Profit by reportable segment
The Group measures the performance of its operating segments through a measure of segment profit
or loss which is referred to as "Gross Profit" in the management reporting and controlling
systems. Gross profit is the measure of segment profit comprising revenue less cost of sales.
Intersegment revenue is recorded at values which approximate third party selling prices and is
not significant.
REVENUE GROSS PROFIT
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
UK&I 269,777 290,285 55,687 64,032
Continental 576,018 448,606 150,636 127,543
Europe
USA 212,737 171,313 64,369 50,682
APAC & ME 55,998 49,657 16,980 16,424
1,114,5 959,861 287,672 258,681
30
Continental Europe primarily includes Austria, Belgium, France, Germany, Luxembourg, Netherlands,
Spain and Switzerland.
APAC & ME mainly includes Australia, Dubai, Hong Kong, Japan, Malaysia and Singapore.
Other information
The Group's revenue from external customers, its gross profit and information about its segment
assets (non-current assets excluding deferred tax assets) by key location are detailed below:
REVENUE GROSS PROFIT
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
UK 259,028 275,839 51,922 58,828
Germany 256,825 206,130 78,021 67,739
USA 212,737 171,313 64,369 50,682
Netherlands 180,602 131,174 38,039 29,201
Other 205,338 175,405 55,321 52,231
1,114,530 959,861 287,672 258,681
NON-CURRENT ASSETS
30 November 30 November
2017 2016
GBP'000 GBP'000
UK 15,702 15,044
USA 1,608 2,481
Germany 1,132 589
Netherlands 431 165
Other 1,024 1,145
19,897 19,424
The following segmental analysis by brands, recruitment classification and sectors (being the
profession of candidates placed) have been included as additional disclosure to the requirements
of IFRS 8.
REVENUE GROSS PROFIT
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
Brands
Progressive 344,537 275,729 77,105 65,859
Computer Futures 311,134 265,751 83,700 75,231
Real Staffing Group 230,330 225,123 70,684 67,915
Huxley Associates 228,529 193,258 56,183 49,676
1,114,530 959,861 287,672 258,681
Other brands including Global Enterprise Partners, Hyden, JP Gray, Madison Black, Newington
International and Orgtel are rolled into the above brands.
Recruitment
classification
Contract 1,030,359 874 203 173
,44 ,50 ,26
0 1 0
Permanent 84,171 85, 84, 85,
421 171 421
1,114,530 959 287 258
,86 ,67 ,68
1 2 1
Sectors
Information & Communication Technology 502,299 447 124 115
,56 ,74 ,84
0 6 4
Banking & 181,007 168 43, 41,
Finance ,26 502 735
3
Life Sciences 176,870 147 62, 54,
,05 351 262
6
Energy 142,822 107 26, 19,
,88 494 595
9
Engineering 97,469 79, 25, 23,
016 851 253
Other 14,063 10, 4,7 3,9
077 28 92
1,114,530 959 287 258
,86 ,67 ,68
1 2 1
Other includes Procurement & Supply Chain and Sales & Marketing.
3. Administrative expenses - Exceptional items
On 1 November 2017, the Group communicated to the market that it was commencing a consultation
with employees on the proposed relocation of central support functions away from its London
headquarters to a new facility located within Glasgow and a restructuring of the marketing
department. The purpose of this strategic restructuring is to realise annualised cost savings of
approximately GBP4.0 million per annum.
The restructuring is expected to result in certain material one-off costs totalling approximately
GBP14 million to GBP16 million, of which an estimated GBP15 million is operating expenses and
approximately GBP0.5 million is property fit out costs (to be capitalised), less approximately GBP2
million of grant receivable from Scottish Enterprise. The costs are mainly related to people,
property and professional advisor fees.
In 2017, restructuring costs of GBP6.7 million have been charged to the Consolidated Income
Statement, including GBP1.1 million of restructuring costs incurred or accrued, mainly for
professional advisor fees, and GBP5.6 million as a provision for redundancy costs. A restructuring
provision can only include the direct expenditure arising from the announced strategic
restructuring, which are costs that are both necessarily entailed by the restructuring and not
associated with the ongoing activities of the entity. Restructuring items related to the
transition, design and set up of the new support function or for which there is no constructive
obligation at year end have not been included within the 2017 restructuring provision and will be
recognised each year up to 2020.
Due to the material size and non-recurring nature of this strategic restructuring project, the
associated costs have been separately disclosed as exceptional items in the Consolidated Income
Statement. Disclosure of items as exceptional, highlights them and provides a clearer, comparable
view of underlying earnings.
Items classified as exceptional were as follows:
2017 2016
GBP'000 GBP'000
Exceptional items -
charged to operating
profit
Personnel costs - 5,709 -
redundancy
Professional advisor fees 1,017 -
Other 15 -
Total exceptional costs 6,741 -
4. Operating profit
Operating profit is stated after charging/(crediting):
2017 2016
GBP'000 GBP'000
Depreciation 2,516 2,276
Amortisation 3,228 3,440
Accelerated amortisation and 309 -
impairment of intangible
assets
Foreign exchange gains (345) (849)
Staff costs 187,4 168,9
19 71
Movement in bad debt provision and debts 496 573
directly written off
Loss on disposal of property, plant and 110 194
equipment
Loss on disposal of 66 44
intangible assets
Exceptional restructuring 6,741 -
costs
Loss on disposal of 144 -
subsidiaries(2)
Operating lease charges
- Motor 1,790 1,449
vehicles
- Land and 12,00 11,27
buildings 5 9
(1) The accumulated foreign exchange net loss reclassified from Currency Translation Reserve to
the Consolidated Income Statement on liquidation of subsidiary companies.
5. Taxation
(a) Analysis of tax charge for the year
2017 2016
Before Exceptional Total
except items
ional
items
GBP'000 GBP'000 GBP'000 GBP'000
Current taxation
Corporation tax charged on 13,520 (946) 12,57 9,349
profits for the year 4
Adjustments in respect of (758) - (758) 1,281
prior periods
Total current tax 12,762 (946) 11,81 10,63
charge/(credit) 6 0
Deferred taxation
Origination and (743) (357) (1,100) (768)
reversal of temporary
differences
Adjustments in (627) - (627) 194
respect of prior
periods
Total deferred tax (1,370 (357) (1,727) (574)
credit )
Total income tax 11,392 (1,303 10,089 10,05
charge/(credit) in ) 6
the income statement
(b) Reconciliation of the effective tax rate
The Group's tax charge for the year exceeds (2016: exceeds) the UK statutory rate and can be
reconciled as follows:
2017 2016
Before Exceptional Total
exceptional items
items
GBP'000 GBP'000 GBP'000 GBP'000
Profit before taxation 44,458 (6,741) 37,717 37,29
8
Profit before taxation
multiplied by the
standard rate of
corporation tax in the
UK at 19.33% (2016:
20%)
8,594 (1,303 7,291 7,460
)
Effects of:
Disallowable items 847 - 847 442
Differing tax rates on 2,725 - 2,725 1,588
overseas earnings
Adjustments in respect (1,385) - (1,385 1,475
of prior periods )
Adjustment due to tax 33 - 33 (41)
rate changes
Tax losses for which 578 - 578 (868)
deferred tax asset was
derecognised/(recognise
d)
Tax expense for the 11,392 (1,303) 10,089 10,05
year 6
Effective tax rate 25.6% 19.3% 26.7% 27.0%
(c) Current and deferred tax movement recognised directly in equity
30 30
November November
2017 2016
GBP'000 GBP'000
Equity-settled share-based payments
Current tax - (26)
Deferred tax (62) 38
(62) 12
The Group expects to receive additional tax deductions in respect of share options currently
unexercised. Under IFRS the Group is required to provide for deferred tax on all unexercised
share options. Where the amount of the tax deduction (or estimated future tax deduction) exceeds
the amount of the related cumulative remuneration expense, this indicates that the tax deduction
relates not only to remuneration expense but also to an equity item. In this situation, the
excess of the current or deferred tax should be recognised in equity. At 30 November 2017 a
deferred tax asset of GBP1.0 million (2016: GBP0.6 million) has been recognised in respect of these
options.
6. Dividends
2017 2016
GBP'000 GBP'000
Amounts recognised as distributions to equity
holders in the year
Interim dividend of 4.7p (2016: 6,052 6,049
4.7p) per share (i)
Final dividend of 9.3p (2016: 11,942 11,923
9.3p) per share (ii)
17,994 17,972
Amounts proposed as distributions to equity
holders
Interim dividend of 4.7p (2016: 6,038 6,052
4.7p) per share (iii)
Final dividend of 9.3p (2016: 12,086 12,002
9.3p) per share (iv)
(i) 2016 interim dividend of 4.7 pence (2015: 4.7 pence) per share was paid on 9 December 2016 to
shareholders on record at 4 November 2016.
(ii) 2016 final dividend of 9.3 pence (2015: 9.3 pence) per share, was paid on 9 June 2017 to
shareholders on record at 5 May 2017.
(iii) 2017 interim dividend of 4.7 pence (2015: 4.7 pence) per share was paid on 8 December 2017
to shareholders on record at 3 November 2017.
(iv) The Board has proposed a 2017 final dividend of 9.3 pence (2016: 9.3 pence) per share, to be
paid on 8 June 2018 to shareholders on record at 27 April 2018. This proposed final dividend is
subject to approval by shareholders at the Company's next Annual General Meeting on 26 April
2018, and therefore, has not been included as a liability in these financial statements.
7. Earnings per share
The calculation of the basic and diluted earnings per share ('EPS') is set out below:
Basic EPS is calculated by dividing the earnings attributable to owners of the Company by the
weighted average number of shares in issue during the year excluding shares held as treasury
shares and those held in the EBT which are treated as cancelled.
For diluted EPS, the weighted average number of shares in issue is adjusted to assume conversion
of dilutive potential shares. Potential dilution resulting from tracker shares takes into account
profitability of the underlying tracker businesses and SThree plc's earnings per share.
Therefore, the dilutive effect on EPS will vary in future periods depending on any changes in
these factors.
30 30
November November
2017 2016
GBP'000 GBP'000
Earnings
Profit for the year after tax before 33,066 27,242
exceptional items
Exceptional items net of tax (5,438) -
Profit for the year attributable to 27,628 27,242
owners of the Company
million million
Number of shares
Weighted average number of shares used 128.6 128.3
for basic EPS
Dilutive effect of share plans 4.0 3.8
Diluted weighted average number of 132.6 132.1
shares used for diluted EPS
30 30
November November
2017 2016
pence pence
Basic
Basic EPS before exceptional items 25.7 21.2
Impact of exceptional items (4.2) -
Basic EPS after exceptional items 21.5 21.2
Diluted
Diluted EPS before exceptional items 24.9 20.6
Impact of exceptional items (4.1) -
Diluted EPS after exceptional items 20.8 20.6
8. Cash and cash equivalents
30 30
Novemb Novemb
er er
2017 2016
GBP'000 GBP'000
Cash at bank 21,338 15,707
Bank overdraft (3,717 (5,685
) )
Net cash and cash equivalents per the 17,621 10,022
consolidated statement of cash flow
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of
three months or less, net of outstanding bank overdrafts. The carrying amount of these assets is
approximately equal to their fair values.
The Group has cash pooling arrangements with legally enforceable rights to set-off cash and
overdraft balances. Where there is an intention to settle on a net basis, cash and overdraft
balances relating to the cash pooling arrangements are reported on a net basis in the statement
of financial position. Other bank overdrafts are shown separately as above and in the statement
of financial position.
9. Borrowings
The Group has a committed RCF of GBP50 million along with an uncommitted GBP20 million accordion
feature in place with HSBC and Citibank, giving the Group an option to increase its total
borrowings under the facility up to GBP70 million. The RCF expires in May 2019. The funds borrowed
under the facility bear interest at an annual rate of 1.3% (2016: 1.3%) above 3 month LIBOR. The
average interest rate paid on the RCF during the year was 1.5% (2016: 1.8%). The Group also has
an uncommitted GBP5 million overdraft facility with RBS.
At the year end the Group had drawn down GBP12 million (2016: GBPnil) on these facilities.
The RCF is subject to certain covenants requiring the Group to maintain financial ratios over
interest cover, leverage and guarantor cover. The Group has been in compliance with these
covenants throughout the year.
10. Annual Report and Annual General Meeting
The 2017 Annual Report and Notice of 2017 Annual General Meeting will be posted to shareholders
shortly. Copies will be available on the Company's website www.sthree.com or from the Company
Secretary, 8th Floor, City Place House, 55 Basinghall Street, London, EC2V 5DX. The Annual
General Meeting of SThree plc is to be held on 26 April 2018.
ISIN: GB00B0KM9T71
Category Code: ACS
TIDM: STHR
LEI Code: 2138003NEBX5VRP3EX50
Sequence No.: 5145
End of Announcement EQS News Service
648919 29-Jan-2018
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(END) Dow Jones Newswires
January 29, 2018 02:05 ET (07:05 GMT)
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