30 November 2007
Embargoed until 0700 30 November 2007
Trading Update and Close Period Share Repurchase Programme
SThree, the international specialist staffing business, is today issuing a
trading update for the year ending 2 December 2007 and announcing that it will
undertake a share repurchase programme during its forthcoming close period.
The Group will report another year of significant growth. The Board anticipates
gross profit for the Group being not less than £178m for the year, an annual
increase of approximately 31% in line with consensus market expectations and
consistent with continuing strong demand for the Group's services.
SThree estimates it will have made approximately 9,800 permanent placements in
the year, an increase of 28% (2006: 7,685). Average permanent placement fees for
the period have also increased strongly to record levels.
SThree expects to close the year with not less than 5,700 contractors, an
increase of 21% on last year (2006: 4,719) and an increase of 15% on the total
at the end of the first half (3 June 2007: 4,974). As with permanent fees,
average gross profit per day rates also showed further improvements to record
As anticipated, the ERP-related cash collection issues identified at the
half-year have been fully resolved. During the second half of the year the
Group's net debt position continued to improve and as at close of business
today, 30 November, is expected to have been reduced to nil (3 June 2007: net
debt of £40.6m).
The Group undertook unusually high levels of investment during the year. In
addition the Group had one-off systems related costs (see below) of
approximately £3m. The Board anticipates that as a consequence of these items
the Group's overall conversion ratio will be slightly lower than anticipated,
with a current estimate of circa 29-30% (2006: 30.3%). As a result profit before
tax for the year will be approximately £3m (circa 5%) below consensus estimates.
As costs and investments have now returned to normalised levels the Board
expects the conversion ratio to recover fully in 2008 in line with recent trend
Investments for the future
2007 was an investment year, in line with our strategy of rolling-out our proven
business model into non-ICT disciplines and further expanding our geographic
footprint. During the second half we accelerated this roll-out and as a
consequence, premises and staff costs for the year (as mentioned above) will be
somewhat higher than anticipated. Some investments planned for early 2008 were
Total office space increased by approximately 40%. This investment involved both
relocating to larger premises in eight established locations as well as the
establishment of five entirely new offices in Amsterdam (2) Rotterdam, Brussels
and Hong Kong.1 In January 2008 the Group will open in Sydney and Dubai2
bringing the total to 52 offices in 10 countries.
The Group continued to invest substantially in increasing sales headcount. Sales
headcount in the UK increased by approximately 40% and outside of the UK by
approximately 80%. Approximately two thirds of the growth in sales headcount was
outside of the Group's UK ICT franchise reflecting the Group's rapid expansion
within newer geographies and sectors.
During the year the Group rolled out major ERP and CRM packages. The ERP
implementation caused some disruption most significantly in the area of cash
collections. In rectifying this situation the Group incurred some one-off costs
including the deployment of temporary finance and technical staff. Staff levels
in this area are now at normal levels.
As a result of the issues experienced with the ERP implementation, the decision
was made that the CRM roll-out should proceed at a slower pace than that
originally planned for. As mentioned above this had some additional one-off cost
implications including the deployment of temporary technical and training staff.
This programme is now complete and staff levels have reduced accordingly.
Total capital expenditure for the year will be approximately £12m (2006: £5.4m)
which the Board regards as not indicative of the level of investment required
for future years (2008 current estimate circa £6m).
Recent trading conditions have remained positive, with no overall change in
sentiment. In the last quarter the Group saw some softening in demand in certain
specialist areas directly related to the fixed income market. However, to date
there has been no evidence that this has impacted the wider specialist
The Group's total exposure to the financial services market (defined as
financial clients of all types - investment and retail banks, insurance, fund
managers' etc.) is approximately 15% of total permanent and contract gross
profit, with approximately half derived from placement of ICT staff within this
category of customers.
The Group has a wide range of clients within the financial services sector and
is consequently not reliant on a small number of key clients in this market. The
largest financial services customer accounts for approximately 1% of overall
Across all sectors and geographies the Group trades with approximately 7,000
The recent weakness in the Group's share price does not in the Board's view
reflect the underlying quality of SThree's business, particularly given the
Group's increasing exposure to markets with strong structural growth
As such it is the intention of the Board to undertake an irrevocable,
non-discretionary programme to purchase SThree shares, for cancellation, during
its forthcoming close period. This programme will commence on 30 November 2007
and run up to and including 1 February 2008. The programme will be executed by
Any acquisitions will be effected within certain pre-set parameters, and in
accordance with both SThree's general authority to repurchase shares and Chapter
12 of the Listing Rules which requires that the maximum price paid be limited to
no more than 105 per cent of the average middle market closing price of SThree's
shares for the five dealing days preceding the date of purchase.
SThree confirms that it currently has no unpublished price sensitive
Russell Clements, Chief Executive Officer, commented:
'Trading conditions across our markets have remained encouraging and we have not
seen any significant change in sentiment in recent months. Continuing positive
results from our expansion into new disciplines and geographies have reinforced
our confidence in the scale of these opportunities.
'We believe that growth prospects across our business are strong and consistent
with this we have invested very substantially this year across a wide range of
'We are very well aware of the current uncertainty in financial markets.
However, our exposure to this area is limited and there is nothing that we have
seen which suggests to us that this has prompted a paradigm-shift in overall
'The history of the specialist staffing market shows that we do not need a
particularly strong economic tailwind to post substantial growth and it is on
this basis that we look forward to 2008. That said, we are a particularly agile
business with the flexibility to respond quickly to changes in market
SThree is hosting an analyst conference call today at 0830 GMT. The dial in
number is + 44 (0)20 3003 2666 and the password is SThree.
SThree will be announcing its preliminary results for the year ended 2 December
2007 on Monday 4 February 2008.
1 Computer Futures Rotterdam, Huxley Associates Brussels, Huxley Associates Hong
Kong, Real Resourcing/ITJB Amsterdam, SThree Group European Training Amsterdam
2 Progressive Sydney, Pathway Dubai
- Ends -
SThree plc 020 7292 3838
Russell Clements, Chief Executive Officer
Michael Nelson, Chief Financial Officer
Citigate Dewe Rogerson 020 7638 9571
Kevin Smith / Nicola Smith
This information is provided by RNS
The company news service from the London Stock Exchange