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SThree plc (STHR)

  Print      Mail a friend       Annual reports

Monday 01 February, 2010

SThree plc

Preliminary results

RNS Number : 4079G
SThree plc
01 February 2010
 



SThree plc

("SThree" or the "Group")


Preliminary results for the year ended 29 November 2009


SThree, the international specialist staffing business, is today announcing its final results for the year ended 29 November 2009.    


Financial Highlights


2009


2008

Change


Revenue

£519.4m

£631.5m

-17.8%

Gross Profit 

£171.2m

£218.9m

-21.8%

Operating profit*

£18.0m

£56.8m

-68.3%

Profit before taxation*

£18.0m

£56.0m

-67.9%

Statutory profit before taxation

£8.9m

£54.1m

-83.5%

Basic earnings per share*

9.5p

29.9p

-68.2%

Statutory basic earnings per share

4.0p

28.8p

-86.1%

Proposed dividend

8.0p

8.0p

-

Total dividend

12.0p

12.0p

-

*Current year operating profit, profit before taxation and EPS are shown before exceptional charges of £9.1m before tax, £6.5m after tax relating to a Group restructuring (2008: £2m before tax, £1.4m after tax, in respect of the early close out of foreign exchange derivative transactions, which were entered into in 2007).


Operational Highlights


  • very good performance given the highly challenging market conditions


  • Non-UK share of gross profit increased significantly to 55% (2008: 45%), with trend expected to continue as the Group becomes ever more international; 


  • New offices opened in DüsseldorfHamburgStuttgart, Marseille and Singapore and a second office added in Frankfurt, during 2009. Second Australian office (Perth) and additional offices in Munich and   Düsseldorf already opened in January 2010, with further openings in San Francisco and Delhi expected this year. Further international expansion in the pipeline;


  • Permanent placements decreased by 40.8% to 6,060 (2008:10,236), with average fees increased by 15.2% (+3.9% on a constant currency basis);


  • Number of active contractors at year end decreased by 27.6% to 4,157 (2008: 5,745), with average gross profit per day rates up by 8.1% (+1.4% on a constant currency basis);


  • Contract versus Permanent mix of gross profit now 58:42 in favour of Contract, providing the Group with an excellent ''cash hedge'' in challenging market conditions;


  • Continued sector diversificationwith non-ICT disciplines (principally Banking, Engineering, Finance and Accountancy, Oil & Gas and Pharmaceuticals) now representing 28.4% of total gross profit (2008: 23.1%);


  • 69.2% of gross profit now derived from outside of the UK ICT market (2008: 59.2%);


  • Total Group headcount at year end reduced by 29.8% to 1,597 (2008: 2,274) but up 6.0% from end third quarter as stabilising market conditions have supported selective hiring; 


  • Year end net cash and term investments of £48.5m (2008: £24.6m) reflecting continued strong cash generation with Days Sales Outstanding at 37 days (2008: 43 days);


  • Maintained total dividend for the year reflecting strong Group cash position and confidence in the strength of the SThree business model;


  • Entered 2010 with most markets now stable or modestly improving


Russell Clements, CEO, commented: "The Group now has a broader geographical base and addresses a more diverse range of sectors than ever before. Our seasoned management team has used the challenging circumstances to make positive changes in many areas of the business. Although by no means yet close to fully recovered, the market is showing some positive signs. As such we look forward to 2010 with a pragmatic but positive mindset."


SThree will host a live presentation and conference call for analysts at 9.30am today.  


The presentation will be held at Citigate Dewe Rogerson's offices.  


Conference call participant Telephone Numbers:

 

UK Freephone: 0800 028 1277 

USA Freephone: 1888 935 4577

International Local: +44 (0)20 7806 1956

 

Confirmation Code: 7694933


This event will also be simultaneously audio webcast, hosted on SThree's website at  http://www.thomson-webcast.net/uk/dispatching/?event_id=49238b39d1d324dc5b586138822d62db&portal_id=a98192164841f4a39f400936a24cde9cplease note that this is a listen only facility.  


An archive of the presentation will be available via the same link later today.  

 

SThree will be announcing its Q1 Interim Management Statement on Monday 8 March 2010.


Enquiries:


SThree plc

020 7292 3838

Russell Clements, Chief Executive Officer


Alex Smith, Chief Financial Officer


Sarah Anderson, Deputy Company Secretary/IR queries




Citigate Dewe Rogerson

020 7638 9571

Kevin Smith / Nicola Smith



Notes to editors


SThree, founded in 1986, is one of the leading international specialist staffing businesses, providing permanent and contract specialist staff to a diverse client base of well over 7,000 clients. From its well-established position as a major player in the information and communications technology ("ICT") sector the Group has further broadened the base of its operations by building fast-growing businesses serving the accountancy & finance, banking, engineering, oil & gas, pharmaceuticals, human resources, energy, legal and job board sectors.

  

Following the establishment of its first business, Computer Futures, in 1986, the Group has adopted a multi-brand strategy, establishing new operations to address growth opportunities. SThree operates through a number of brands, the largest of which are FS Group (Computer Futures/JP Gray), Huxley Associates and Progressive and has 1,600 employees in eleven countries.


SThree has a selective approach to clients and focuses on high margin opportunities, predominantly within the small to medium-sized enterprises ("SME") market. From its inception the Group has avoided the high volume/low margin business model in favour of a focus on high quality business.


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. Accordingly, undue reliance should not be placed on forward looking statements.



SThree plc

("SThree" or the "Group")


Preliminary results for the year ended 29 November 2009


Overview

2009 was by any standards an extraordinary year and was without question one of the most difficult the Group has faced in its twenty three year history. The impact of the global crisis on demand for specialist staff was as tough, if not worse than the dot com crash - in itself a slow down of historical severity and certainly the sternest test the Group had faced up until that point. 


The slowdown evident in the UK and US by Q2 of 2008 was highly indicative that 2009 was likely to be a far more difficult market than the Group had to deal with in some years. Normal levels of expectation, either internal or external, had quite clearly been overtaken by external events.


Nonetheless the extent and rapidity of the further decline seen in the early part of 2009 was striking. In particular the Group's international businesses, which had very largely showed remarkable robustness throughout 2008, demonstrated that they were not immune to the impact of the global recession. For its part, the UK market demonstrated that although conditions were already bad, they had the capacity to get substantially worse. 


This then is the only context in which the Group's 2009 performance can be judged. And if we bear in mind these unprecedented headwinds, it is pleasing to say that the 2009 SThree results can be characterised as a very commendable outcome in exceptionally difficult circumstances. The fact that the Group adapted to the exceptional conditions with outstanding levels of grit and determination is what we would expect. The fact that we were also able to take further steps towards achieving our strategic goals gives a further perspective on what was achieved.


Financial outcome

Inevitably given the circumstances the Group saw a reduction in gross profit (GP). The 2009 GP figure of £171.2m was 21.8% down on the prior year (2008: £218.9m). This converted to a profit before tax (PBT) of £18.0m (2008: £56.0m) down 67.9% before exceptional items. Post exceptional items PBT was £8.9m (2008: £54.1m), down 83.5% on 2008. All exceptional items related to the restructuring exercise undertaken by the Group in Q2 2009.


During the year the Group continued to focus on maximising cash. At the end of 2009 net cash including term investments almost doubled to £48.5m (2008: £24.6m). Approximately £12.0m of the improvement was attributable to the unwinding of working capital associated with the reduction in contract runners. However, the net cash position also reflected strong cash management, with Days Sales Outstanding (DSO's) improving to 37 days (2008: 43 days).


The Group's strong and improving cash position combined with a high degree of confidence in the fundamental robustness of the Group's business model informed the decision to maintain the total 2009 dividend at 12.0p (2008: 12.0p). Although uncovered by earnings, the board took the view that this level of payment was prudent, being very comfortably covered by the level of cash available to the Group.


Notwithstanding the fact that the Group's finances strengthened during the year and the Group is cash rich and debt free, steps were also taken to ensure that the Group retains maximum financial flexibility. A new 30 month banking facility was negotiated in October 2009, providing £20m of committed funds at highly competitive rates. 


Restructuring

By Q1 of 2009 it had become evident that compared to Q4 2008, the market had taken a further step downwards. As a result, Group headcount was out of line with market demand and the business was running at an approximately break-even level. It was clear that the Group needed to urgently address its cost base and restructure the business in line with a substantially reduced market opportunity.


As a consequence Group headcount was reduced by approximately 25%. In addition the Group closed four offices and consolidated a number of others, resulting in it exiting a total of eleven leases. Together these actions incurred a one off exceptional charge of £9.1m which paid back within the financial year. Most significantly the actions taken successfully recalibrated the Group's overheads resulting in a commensurate and rapid return to profitability. 


Strategy "High margin, high value"

Although 2009 offered no shortage of short term challenges and tactical difficulties, the Group did not lose sight of its medium/long term priorities. A notable example of the latter is the Group's commitment to its "High margin, high value" model. Notwithstanding the fact that the market inevitably became more price sensitive during 2009, the Group successfully resisted any downward pricing pressure, which would otherwise have impacted the quality of the business executed.


As a result, the Group's overall contract margin actually improved to 22.1% (2008: 21.5%), a noteworthy result in the circumstances. In absolute terms the average gross profit per day rate (GPDR) increased to £84.69 (2008: £78.30). This represents an 8.1% year on year increase on an externally reported basis or a 1.4% improvement on a constant currency basis.  


A similar theme was seen in the Group's permanent business but with a still stronger value performance. The average permanent fee recorded in 2009 was £11,930 (2008: £10,355) up 15.2% on an unadjusted basis or 3.9% on a constant currency basis.


Geographical Expansion 

The Group continued its successful strategy of geographical expansion, opening six international offices during the year. In addition to a further office in Frankfurt, new offices were rolled out in Düsseldorf, Hamburg,    StuttgartMarseilles and Singapore


The strong German theme of 2009 office openings reflected the relative robustness of demand in the German specialist staffing market during the year which showed 28% growth. However, it is equally indicative of the outstanding long term growth potential of what is currently a very underdeveloped market. 


The Group ended the year with a total of 46 offices in 11 countries. In aggregate Group GP generated from outside of the UK was £94.2m (2008: £97.4m. Although down 3.2%, this contrasts starkly with the 64.1% year on year growth achieved in 2008. Nonetheless the non UK businesses still performed substantially better than the UK. In the absence of any structural growth to mitigate the wider economic situation, UK GP of £76.9m was down 36.7% (2008: £121.6m) 


As a consequence of the significant difference in relative performance, the overall UK/non UK business mix underwent a marked change. During 2009 the ratio was 55:45 in favour of non UK GP compared with 45:5in 2008. It is likely that this shift will prove permanent as the Group becomes ever more international. However, the fact remains that the UK has consistently showed itself to be capable of very robust growth in more typical market conditions. 


We remain convinced that a substantial opportunity exists to move the proven SThree model into an ever-wider range of international markets.


In early 2010 the Group launched its second Australian office in Perth and opened an additional office in Munich. In the second half of the year we expect to open in Düsseldorf and San Francisco and later in the year will open in Delhi. Additional international offices are in the pipeline subject to final approval and it is likely that the total for the year will be similar to the six that came on stream during 2009. 


Sector Diversification 

In parallel with its greater geographical diversity, in recent years the Group has made significant progress in developing a meaningful presence outside of its traditional Information Technology (IT) franchise. It is worth clarifying that this metric is measured by the skillsets of the candidates the Group places rather than the nature of the business of the client company. By the latter metric the Group has only a 21% exposure to the IT industry per se. 


The major non IT segments for the Group are Banking, Engineering, Finance and Accountancy, Oil & Gas and Pharmaceuticals; the Group also has a smaller presence in HR and Sales & Marketing. In aggregate these niches accounted for £48.5m of GP in 2009 (2008: £50.5m). Although this was modestly down by 3.8% on the prior year, the non IT franchises represented 28.4% of total Group GP compared to 23.1% in the previous year. The (generally more competitive) IT market performed less robustly with 2009 GP of £122.6m (2008: £168.5m) down 27.2%.


Although it showed definite signs of improvement in the latter part of 2009, the Banking market remained, by normal standards, very subdued and when taking the year as a whole was weak. Given that historically the Group's largest non IT sector has been Banking, the positive momentum seen more recently is an encouraging trend particularly given that the Group now has a presence in most of the world's major financial centres. 


Contract/Permanent Business Mix

It is an accepted feature of the specialist staffing market that temporary hiring tends to be more robust in a downturn. Therefore it is unsurprising that a shift in this direction that started in 2008 continued throughout 2009. During the year the Group made a total of 6,060 permanent placements (2008: 10,236) a reduction of 40.8%. It is pleasing to reiterate that this significant decline in volume was not accompanied by a commensurate decline in quality, but an improvement in the average placement fee achieved. 


The number of contract runners at the end of 2009 was 4,157 (2008: 5,745) representing a reduction of 27.6%, illustrating the relatively better health of the temporary sector. As with the permanent market, the average value of each contractor improved. The net effect of the above was that contract GP represented 58% of the Group's total in 2009 compared with 52% of GP for 2008. However, as market conditions improve and the recent trends favouring contract normalise, the Group's permanent GP will once again become an increasingly significant part of the mix. 


Headcount 

The Group ended 2009 with a total of 1,597 staff (2008: 2,274) a reduction of 29.8% on the prior year. Clearly the large part of this reduction was attributable to the rightsizing exercise undertaken in Q2 of 2009 which saw approximately 25% of the Group's staff exit the business.


In 2008, normal natural attrition aided by the Group's remuneration strategy was enough to ensure that the size of sales teams flexed in line with changes in market conditions. However, as discussed above, in the substantially worse market of early 2009 it was agreed necessary to take a more proactive approach.


Following this exercise the Group's approach was to broadly maintain the post-rightsizing staffing levels and little active hiring/replacement was undertaken until some signs of improvement in certain markets were detected later in the year. As a consequence of the latter the Q4 headcount was up sequentially on Q3 and the Group is now selectively growing headcount where appropriate.


It is worth noting that one of the key strengths of the Group is significant flexibility in terms of headcount. Staffing levels can be reduced aggressively if needed but by the same token can be rebuilt almost equally quickly. Indeed the level of staff reduction seen in 2009 is not unprecedented, being comparable in percentage terms to the 2002/03 downturn. As the market recovered the Group was able to rebuild its teams and took full advantage of the upturn. 


Outlook

The experience of 2009 clearly demonstrates the risk inherent in attempting to predict market trends. Although we began the last year with "our eyes open and mindful of the risks and challenges", the market we actually faced was of an order of magnitude more difficult still. 


Towards the end of the year there were signs that certain markets were improving and that others were at the least stable and, so far, this has continued into 2010. Compared with what the Group has been used to in recent times, this was a welcome positive trend which was reflected in the Group's return to headcount growth. Whilst there are indications that confidence is gradually returning to the market and this above all else is what is needed for a full recovery to gain traction, it remains true that in overall terms market conditions have yet to recover to anything close to normal.


Market conditions like those the Group faced in 2009 have a creative dimension. They force an in depth and uncompromising assessment of all aspects of the business. As a result changes are made, some of which are overdue and would be more difficult to envisage and execute in more benign times. Moreover, many individuals who have not previously been tested to the same degree mature as a result of their experiences. Given that the Group also has a broader geographical base and a more diverse range of sectors than ever before, we look forward to 2010 with a pragmatic but positive mindset.


Financial Review


2009

2008


Revenue

Gross Profit

Revenue

Gross Profit

Contract

£447.0m

£98.8m

£525.5m

£113.1m

Permanent

£72.4m

£72.4m

£106.0m

£105.8m

Total

£519.4m

£171.2m

£631.5m

£218.9m


Revenue for the year decreased by 17.8% to £519.4m (2008: £631.5m). Gross profit for the year decreased by 21.8% to £171.2m (2008: £218.9m), representing a Group gross profit margin of 33.0% (2008: 34.7%). The Group gross profit margin reduced as a result of the remix in business from permanent, which represented 48% of gross profit in 2008, to 42% in 2009. Permanent revenues are accounted for at 100% gross margin, whereas contract gross profit is shown after the associated cost of sale. As the contract margin improved year on year to 22.1% from 21.5% in 2008, the reduction in Group gross margin is driven by a permanent/contract mix effect and not by a weakness in underlying margin discipline.


Administration expenses before exceptional items decreased by 5.5% to £153.2m (2008: £162.1m), primarily driven by the reduced number of staff, and savings on the exit of certain leases. On 15 April, the Group announced a restructuring of the business in line with the markedly reduced market opportunity, and an exceptional charge of £9.1m has been recognised. As a result, the Group's pre-exceptional conversion ratio (pre-exceptional operating profit divided by gross profit) fell to 10.5% (2008: 25.9%).


Group headcount was 1,597 at 29 November 2009, down 29.8% on the opening headcount at 1 December 2008 of 2,274. Average total headcount for the year was 1,841 (2008: 2,157), as a result of the restructuring and natural attrition in the year.


Profit before tax and exceptional items amounted to £18.0m (2008: £56.0m), a reduction of 67.9%, whilst profit before tax after exceptional items reduced by 83.5% to £8.9m (2008: £54.1m).


Taxation on profit before exceptional items was £5.5m (2008: £16.8m), representing an effective tax rate of 31% (2008: 30%). The slight increase in the effective tax rate was driven by a remix of the business towards jurisdictions with higher tax rates. Based on the current structure of the Group and existing local taxation rates and legislation, it is expected that the underlying effective tax rate will remain at around this level. The Group's effective cash tax rate was 25.0% (2008: 26.4%), reflecting the relatively higher Schedule 23 tax benefit (re share options) compared to the previous year.


Basic earnings per share before exceptional items were 9.5p (2008: 29.9p), down 68.2%. This was driven by a reduction in profit before taxation before exceptional items of 67.9%, the marginally higher effective tax rate of 31% (2008: 30%), a reduction in the minority charge to £1.2m (2008: £2.0m) and a reduction in the weighted average number of shares to 118.7m (2008: 124.7m). Fully diluted earnings per share before exceptional items were 9.2p (2008: 29.2p), down 68.5%. Basic earnings per share after exceptional items were 4.0p (2008: 28.8p), down 86.1%. Fully diluted earnings per share after exceptional items were 3.9p (2008: 28.1p), down 86.1%.


The Board previously declared an interim dividend of 4.0p per share (2008: 4.0p). The Board has declared a second interim dividend of 8.0p per share in place of the final dividend, bringing the total dividend for the year to 12.0p per share (2008: 12.0p). The second interim dividend will be paid on 31 March 2010 to those shareholders on the register as at 26 February 2010.


Balance Sheet

The Group had net assets of £84.8m at 29 November 2009 (2008: £90.6m). Net cash including term investments amounted to £48.5m (2008: £24.6m), the improvement in our cash position reflecting the net impact of the profitability of the Group, the improved management of working capital and the release of working capital as the number of contractors reduced during the year.


Tangible fixed asset capital expenditure amounted to £2.7m (2008: £2.3m), relating to a more normalised level of investment in IT hardware and fit out of new offices, as expected, following the high level of investment in 2007. Intangible asset additions, primarily relating to IT software purchases and development costs, reduced significantly to £2.1m (2008: £3.9m). Total capital expenditure is planned to grow slightly ahead of these levels in 2010, as the business accelerates its office opening programme.


Net trade debtors reduced by 42.7% to £58.3m (2008: £101.9m) representing DSO's of 37 days (2008: 43 days). Total trade and other payables reduced from £81.2m to £76.1m as the volumes of business reduced.


Cash Flow

At the start of the year the Group had net cash of £24.6m. During the year, the Group generated cash from operating activities of £63.7m (2008: £87.0m). The Group achieved a significant reduction in working capital of £45.3m through improved debtor management and a reduction in the working capital funding of the reduced contractor book. Income taxes paid increased to £18.3m (2008: £11.4m) as we settled overseas tax liabilities relating to prior years.


During the year, the Group repurchased certain minority stakes for £1.4m and paid dividends of £14.4m. The group also invested £3.2m in an A rated Euro bond with a maturity of less than 6 months.


At 29 November 2009 the Group had net cash of £45.3m.


In October 2009, the Group renewed a committed invoice discounting facility of £20m with Royal Bank of Scotland Invoice Finance ('RBS') for a 30 month term. The Group is not currently drawing down against this. 


Treasury Management and Currency Risk

The main functional currencies of the Group are Sterling and the Euro. The Group has significant operations outside the United Kingdom and as such is exposed to movements in exchange rates.


The Board has undertaken a review of its currency hedging strategy to ensure that it is appropriate and currently the Group does not actively manage its exposure to foreign exchange risk by the use of financial instruments. The impact of foreign exchange will become a more significant issue for the Group as we expect the business mix to move further towards International, with the International business accounting for 55% of gross profit in 2009 (2008: 45%). The Group will continue to monitor its policies in this area.


During the year, the Group implemented a European cash pooling arrangement, with a target to invest at least 85% of the Group's cash, returning in excess of the 7 day LIBID rate on average.


Other Principal Risks and Uncertainties affecting the Business

Other principal risks and uncertainties affecting the business activities of the Group will be detailed within the Directors' Report section of the Annual Report for the year ended 29 November 2009, a copy of which will be made available on the Company's website at www.sthree.com. In terms of macro economic environment risks, as previously stated, our strategy is to continue to grow the size of our international business in both financial terms and geographic coverage in order to reduce the Group's exposure or dependence on any one specific economy, although a downturn in a particular market could adversely impact the Group's business. In the view of the Board, there is no material change expected to the Group's key risk factors in the foreseeable future.


Having been tested by extraordinary market conditions in 2009, the Group has been successful in strengthening its financial position. Our strong balance sheet and net cash give us the confidence to maximise the opportunities that lie ahead in an uncertain environment.





SThree plc














Consolidated Income Statement - Audited




Year ended 29 November 2009












29 November 2009

30 November 2008



 Before exceptional items 

 Exceptional items 

 Total 

 Before exceptional items

 Exceptional items 

 Total 


Note

 £'000 

 £'000 

 £'000 

 £'000 

 £'000 

 £'000 









Revenue

2

519,372

-

519,372

631,520

-

631,520

Cost of sales


(348,217)

-

(348,217)

(412,581)

-

(412,581)









Gross profit

2

171,155

-

171,155

218,939

-

218,939









Administrative expenses

3

(153,159)

(9,050)

(162,209)

(162,129)

(1,957)

(164,086)









Operating profit


17,996

(9,050)

8,946

56,810

(1,957)

54,853









Finance income


359

-

359

25

-

25









Finance cost


(378)

-

(378)

(827)

-

(827)

















Profit before taxation


17,977

(9,050)

8,927

56,008

(1,957)

54,051









Taxation

4

(5,539)

2,574

(2,965)

(16,809)

594

(16,215)









Profit for the year


12,438

(6,476)

5,962

39,199

(1,363)

37,836









Equity holders of the Company


11,274

(6,476)

4,798

37,241

(1,363)

35,878

Minority interest


1,164

-

1,164

1,958

-

1,958



12,438

(6,476)

5,962

39,199

(1,363)

37,836

Earnings per share

6

 pence 

 pence 

 pence 

 pence 

 pence 

 pence 

Basic


9.5

(5.5)

4.0

29.9

(1.1)

28.8

Diluted


9.2

(5.3)

3.9

29.2

(1.1)

28.1


























All amounts relate to continuing operations.



SThree plc






Consolidated Statement of Changes in Equity - Audited

Year ended 29 November 2009


Share capital

 Share premium

 Capital redemption reserve 

Capital reserve

 Currency translation reserve 

 Retained earnings 

 Attributable to Company equity shareholders 

 Minority interest 

 Total equity 


 £'000 

 £'000 

 £'000 

 £'000 

 £'000 

 £'000 

 £'000 

 £'000 

 £'000 


 

 

 


 

 

 



Balance at 2 December 2007

1,383

2,925

2

878

69

85,751

91,008

2,425












Profit for the year

 to 30 November 2008

-

-

-

-

-

35,878

35,878

1,958












Employee share

 award#and share

 option credit

-

-

-

-

-

658

658













Deferred tax on employee share options

-

-

-

-

-

(1,297)

(1,297)

-


Current tax on employee share options

-

-

-

-

-

1,043

1,043

-


Repurchase of share capital

(166)

-

166

-

-

(31,250)

(31,250)

-


Issue of share capital

1

-

-

-

-

-

1

-


Employee subscription for share awards

-

-

-

-

-

127

127

-


Repurchase of minority interest

-

-

-

-

-

-

-

(242)


Dividends paid to equity holders

-

-

-

-

-

(12,004)

(12,004)

-


Dividends paid to minority interest

-

-

-

-

-

-

-

(89)


Exchange differences on retranslation of foreign operations

-

-

-

-

2,262

-

2,262

95












Total movements in equity


(165)

-

166

-

2,262

(6,845)

(4,582)












Balance at 30 November 2008

1,218

2,925

168

878

2,331

78,906

86,426

4,147




 

 

 


 

 

 


Profit for the year to 29 November 2009

-

-

-

-

-

4,798

4,798

1,164












Employee share award and 

share option credit

-

-

-

-

-

1,448

1,448



Deferred tax on employee share options

-

-

-

-

-

620

620

-


Current tax on employee share options

-

-

-

-

-

1,042

1,042

-


Issue of share capital to minority interest


-

-

-

-

-

-

-


Employee subscription for share awards


-

-

-

-

-

182

182


Repurchase of minority interest


-

-

-

-

-

-

-


Dividends paid to equity holders


-

-

-

-

-

(14,434)

(14,434)


Dividends paid to minority interest


-

-

-

-

-

-

-


Exchange differences on retranslation of foreign operations

 

-

-

-

-

85

-

85












Total movements in equity



-

-

-

-

85

(6,344)

(6,259)











Balance at 29 November 2009

1,218

2,925

168

878

2,416

72,562

80,167

4,650

84,817



SThree plc












Consolidated Balance Sheet - Audited



As at 29 November 2009












29 November

30 November





2009

2008




Note

 £'000 

 £'000 

ASSETS






Non-current assets






Property, plant and equipment


5,398

6,575

Intangible assets



10,899

12,262

Deferred tax assets




5,515

3,146











21,812

21,983







Current assets






Trade and other receivables


93,229

139,937

Current tax assets



3,309

-

Cash and cash equivalents


7

45,272

24,584

Assets classified as held-to-maturity


3,203

-











145,013

164,521







Total assets




166,825

186,504







LIABILITIES






Current liabilities






Provisions for liabilities and charges

(3,063)

(332)

Trade and other payables



(76,056)

(81,246)

Current tax liabilities


-

(10,818)











(79,119)

(92,396)







Non-current liabilities





Provisions for liabilities and charges

(2,889)

(3,535)











(2,889)

(3,535)







Total liabilities




(82,008)

(95,931)







Net assets




84,817

90,573













EQUITY






Capital and reserves attributable to the Company's equity holders



Share capital




1,218

1,218

Share premium




2,925

2,925

Capital redemption reserve


168

168

Capital reserve




878

878

Currency translation reserve


2,416

2,331

Retained earnings




72,562

78,906











80,167

86,426

Minority interest




4,650

4,147







Total equity




84,817

90,573




SThree plc














Consolidated Cash Flow Statement - Audited



Year ended 29 November 2009

















29 November

30 November






2009

2008






 £'000 

 £'000 








Cash flows from operating activities




Profit before taxation


8,927

54,051

Depreciation and amortisation charge


6,128

5,895

Goodwill recognised in the income statement


(237)

-

Loss on disposal of investments


478

-

Realised losses on financial instruments


-

1,957

Finance income


(359)

(25)

Finance cost


378

827

Loss on disposal of property, plant and equipment


1,107

-

Loss on disposal of intangible assets


355

-

Non-cash charge for employee share options and awards


1,448

658

Employee subscription for share awards


182

127

Operating cashflow before changes in 

working capital and provisions


18,407

63,490





Decrease/(increase) in receivables


50,952

16,455

(Decrease)/increase in payables


(7,704)

6,731

Increase in provisions


2,011

295





Cash generated from operating activities


63,666

86,971

Income tax paid




(18,267)

(11,449)








Net cash generated from operating activities

45,399

75,522








Cash flows from investing activities




Purchase of property, plant and equipment


(2,726)

(2,341)

Purchase of intangible assets




(2,128)

(3,861)

Purchase of held-to-maturity investment

(3,203)

-

Proceeds from disposal of investments

40

-








Net cash used in investing activities



(8,017)

(6,202)








Cash flows from financing activities




Repayment of loan facility




-

(1,000)

Cash loss on settlement of treasury investments


-

(2,956)

Finance income





359

25

Finance costs





(378)

(827)

Proceeds from issue of ordinary shares


-

1

Issue of share capital of subsidiary companies 

to minority interest


10

-

Repurchase of share capital




-

(31,250)

Repurchase of minority interest



(1,371)

(1,072)

Dividends paid to equity holders



(14,434)

(12,004)

Dividend paid to minority interest



(81)

(89)








Net cash used in financing activities



(15,895)

(49,172)








Net increase in cash and cash equivalents


21,487

20,148








Cash and cash equivalents at beginning of the year


24,584

4,504

Effect of exchange rate changes


(799)

(68)








Cash and cash equivalents at the end of the year

7

45,272

24,584

  

SThree plc
















Notes to the Financial Information






Year ended 29 November 2009














1. Basis of preparation












This financial information has been prepared in accordance with International Financial Reporting Standards ('IFRS') as issued by the International Accounting Standards Board ('IASB'), International Financial Reporting Interpretations Committee ('IFRIC') interpretations and Standing Interpretations Committee ('SIC') interpretations as adopted and endorsed by the European Union ('EU') and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. Therefore the Group financial statements comply with Article 4 of the EU International Accounting Standards Regulation. The consolidated financial information have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through the income statement.













2. Segmental analysis












As the Group operates in one business segment, being that of recruitment services, no additional business segment information is required to be provided. The Group's secondary segment is geographical and the segmental results by geographical area are shown below.









Geographic analysis







 

 

 

 

By location of client

By location of operating company





29 November

 2009

30 November

 2008

29 November

 2009

30 November

 2008

 

 

 

 

£'000

£'000

£'000

£'000









Revenue








United Kingdom




271,248

386,934

381,965

486,944

Europe and Rest of World

 

 

248,124

244,586

137,407

144,576









 

 

 

 

519,372

631,520

519,372

631,520









Gross Profit








United Kingdom




76,939

121,566

103,713

144,975

Europe and Rest of World

 

 

94,216

97,373

67,442

73,964









 

 

 

 

171,155

218,939

171,155

218,939





















Total assets

Capital expenditure





29 November

 2009

30 November

 2008

29 November

 2009

30 November

 2008

 

 

 

 

£'000

£'000

£'000

£'000









United Kingdom




130,518

124,817

3,411

4,806

Europe and Rest of World

 

 

36,307

61,687

1,443

1,396









 

 

 

 

166,825

186,504

4,854

6,202

 

The following supplemental segmental analyses have been included as additional disclosure over and above the requirements of IAS 14 'Segment Reporting'.








By location of

operating company







29 November

 2009

30 November

 2008







£'000

£'000









Operating Profit








Operating profit before exceptional items






United Kingdom






5,543

27,372

Europe and Rest of World

 

 

 

 

12,453

29,438















17,996

56,810

Exceptional items (note 3)







United Kingdom

 

 

 

 

 

(7,478)

(1,957)

Europe and Rest of World





(1,572)

-















(9,050)

(1,957)

Operating (loss)/profit after exceptional items







United Kingdom






(1,935)

25,415

 Europe and Rest of World 

 

 

 

 

10,881

29,438















8,946

54,853









The analysis of operating profit does not include inter-segment recharges






Revenue

Gross profit





29 November

 2009

30 November

 2008

29 November

 2009

30 November

 2008






(Restated)


(Restated)

 

 

 

 

£'000

£'000

£'000

£'000









Brand








Computer Futures 



149,247

180,295

51,526

65,345

Huxley




132,670

169,338

44,839

59,911

Progressive


132,461

150,811

41,918

50,099

RPMG




101,679

125,893

29,557

38,437

Others

 

 

 

3,315

5,183

3,315

5,147









 

 

 

 

519,372

631,520

171,155

218,939









Recruitment classification







Contract




447,077

525,531

98,816

113,098

Permanent

 

 

 

72,295

105,989

72,339

105,841









 

 

 

 

519,372

631,520

171,155

218,939









Discipline








Information & communication technology


411,761

535,164

122,612

168,465

Others(1)

 

 

 

107,611

96,356

48,543

50,474









 

 

 

 

519,372

631,520

171,155

218,939









During the year, the Group announced that the divisional management of the business segments would be combined. At the heart of this restructuring was a desire to eliminate duplication, save costs and better align the management teams to the businesses. As a result the Group now reports Pathway, Madison Black and JP Gray as part of the Real Staffing Group brand segment and Orgtel as part of the Progressive brand. The comparative analysis has been changed to reflect this structure.









(1) Including accountancy and finance, banking, engineering, oil and gas, pharmaceuticals, human resources, energy, jobboard and legal sectors.



3. Administrative Expenses - Exceptional Items








Exceptional items are those items which, because of their size, incidence or nature, are separately disclosed to give a proper understanding of the underlying results for the period. Items classified as exceptional are as follows:















29 November

 2009

30 November

 2008

 

 

 

 

 

 

£'000

£'000









Exceptional items - charged to operating profit





Corporate and divisional restructuring



(9,050)

-

Exchange loss on settlement of financial instruments



-

(1,957)






Exceptional items - before taxation

 

 

 

(9,050)

  (1,957)  









Corporate and divisional restructuring

On 15 April 2009, the Company announced a number of changes relating to corporate and divisional restructuring. The total cost of this restructuring including redundancy, relocation and consolidation of business, is considered exceptional by virtue of its size. The Group has charged the restructuring cost incurred in the current period to the income statement.


Exchange loss on settlement of financial instruments

During the prior period, some complex financial instruments transactions were undertaken to mitigate certain foreign currency exposures. These resulted in a £2.0m loss arising when a series of equal and opposite positions were taken during the previous financial year in order to reduce the Group's total exposure from these positions to a minimal level. The Board has undertaken a review of its currency hedging strategy to ensure that it is appropriate and currently the Group does not actively manage its exposure to foreign exchange risk by the use of financial instruments. The impact of foreign exchange will become a more significant issue for the Group as we expect the business mix to move further towards our international business. The Group will continue to monitor its policies in this area. As a result of earlier mitigation, the Group no longer has net exposure to complex derivative financial instruments, which the Board believes are not appropriate for the Group going forward.



4. Taxation



(a) Analysis of tax charge for the year









Before 

exceptional 

items

29 November

2009

Before exceptional items

30 November

2008



 Exceptional items 

 Total 

Exceptional items

 Total 

 

 

 

£'000

£'000

£'000

£'000

£'000

£'000










Current taxation



 

 





UK



 

 





Corporation tax charged/(credited) at

28% (2008: 28%) on profits for the year

6,834  

(2,102)

4,732

12,592  


(876)

11,716

Adjustments in respect of prior periods

(1,447)

-

(1,447)

33

-

33

Overseas



 

 





Corporation tax charged/(credited) on

profits for the year

2,197 

(472) 

1,725


5,857

-

5,857

Adjustments in respect of prior periods

(329)

-

(329) 

-

-

-




 

 





Total current tax charge/(credit)

7,255

(2,574)

4,681

18,482

(876)

17,606




 

 





Deferred taxation



 

 





Origination and reversal of temporary differences

(3,401)

-

(3,401)

(1,193)

282

(911)

Adjustments in respect of prior periods

2,079

-

2,079

(216)

-

(216)

Schedule 23 deferred tax credit in respect of

unexercised employee share awards and options

(394)

-

(394)

(264)

-

(264)




 

 





Total deferred tax (credit)/charge

(1,716)

-

(1,716)

(1,673)

282

(1,391)





 





Total income tax charge/(credit) in 

the income statement

5,539

(2,574)

2,965

16,809

(594)

16,215



(b) Reconciliation of the effective tax rate
















The Group's tax charge for the year ended 29 November 2009 exceeds the UK statutory rate and can be reconciled as follows:

















29 November 2009

30 November 2008

 

 

 

 

 

 

 

£'000

%

£'000

%












Profit before taxation

 

 

 

 

 

8,927

 

54,051













Profit before tax multiplied by standard rate of corporation tax

in the UK of 28% 

2,500

28%

15,134

28%












Effects of:











Disallowable items and other timing differences




59

1%

283

-

Higher tax rates on overseas earnings





103

1%

959

2%

Utilisation of tax losses brought forward




-

-

(235)

-

Unrelieved overseas losses net of deferred tax

-

-

(23)

-

Adjustment due to UK tax rate change





-

-

280

-

Adjustment to tax in respect of previous periods




303

3%

(183)

-












Tax expense and effective tax rate

 

 

 

 

2,965

33%

16,215

30%





















29 November

 2009

30 November

 2008

(c) Current and deferred tax movement recognised directly in equity 

 


£'000

£'000












Current tax











Equity settled employee share options







1,042

1,043












Deferred tax 











Equity settled employee share options







620

(1,297)

 

 

 

 

 

 

 

 


 

 

 

 

 

 

 

 

 

 


1,662

(254)












The Directors expect to receive additional tax deductions in respect of the share awards and share options currently unexercised. Under IFRS the Group is required to provide for deferred tax on all unexercised share awards and options. At 29 November 2009 a deferred tax asset of £1.8m (2008: £0.8m) has been recognised in respect of these options.



5. Dividends


















29 November

 2009

30 November

 2008

 

 

 

 

 

 

 

 

 

£'000

£'000












Amounts recognised and distributed to shareholders in the year




Equity











Interim dividend of 4.0p (2008: 3.1p) per ordinary share

4,738

4,101

Final dividend paid of 8.0p (2008: 6.2p) per ordinary share






9,696

7,903









 

 


 

 

 

 

 

 

14,434

  12,004












Amounts proposed



















Interim dividend for the period ended 31 May 2009: 4.0p (2008: 4.0p) per ordinary share


4,782

4,738

Second interim dividend of 8.0p (2008: nil) per ordinary share for the year ended 29 November 2009

9,544

-

Final dividend of p (2008: 8.0p) per ordinary share for the year ended 29 November 2009

-

9,280












An interim dividend of 4.0 pence (2008: 3.1 pence) per ordinary share for the six months ended 1 June 2008 was paid on 5 December 2008 to shareholders on record at 7 November 2008.


The final dividend of 8.0 pence (2008: 6.2 pence) per ordinary share for the year ended 30 November 2008 was paid on 8 June 2009 to shareholders on record at 1 May 2009.












An interim dividend of 4.0 pence (2008: 4.0 pence) per ordinary share for the six months ended 31 May 2009 was paid on 4 December 2009 to shareholders on record at 6 November 2009.










No final dividend is proposed for the year ended 29 November 2009 (2008: 8.0 pence). The Board propose a second interim dividend for the year ended 29 November 2009 of 8.0 pence per ordinary share to be paid on 31 March 2010 to shareholders on record at the close of business on 26 February 2010.



6. Earnings per share


















The calculation of the basic and diluted earnings per share ('EPS') is based on the following data.






Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year, excluding those held in the EBT which are treated as cancelled.


For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares.










29 November

 2009

30 November

 2008

 

 

 

 

 

 

 

 


£'000

£'000












Earnings











Profit after taxation excluding exceptional items






12,438

39,199

Minority interest









(1,164)

(1,958)

Adjusted profit for the year attributable to the equity holders of the Company excluding exceptional items




11,274

37,241












Effect of exceptional items (net of tax)

 

 

 

 

 


(6,476)

(1,363)












Profit after taxation attributable to equity holders of the Company

 

 


4,798

35,878



















 Millions 

 Millions 












Number of shares










Weighted average number of shares used for basic EPS






118.7

  124.7

Dilutive effect of share plans

 

 

 

 

 

 


3.8

3.0












Diluted weighted average number of shares used for diluted EPS

 

 


122.5

127.7





















Pence 

 Pence 












Basic











Basic earnings per share








4.0

28.8

Adjusted basic earnings per share excluding exceptional items




9.5

29.9












Diluted











Diluted earnings per share








3.9

28.1

Adjusted diluted earnings per share excluding exceptional items




9.2

29.2



7. Cash and cash equivalents









29 November

 2009

30 November

 2008

 

 

 

 

 

£'000

£'000








Cash in hand and at bank




45,272

24,584



8.    Financial information


The financial information in this preliminary announcement which comprises the Consolidated Income Statement, Consolidated Statement of Changes In EquityConsolidated Balance Sheet, Consolidated Cash Flow Statement and related Notes is derived from the full Group financial statements for the year ended 29 November 2009 and does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006.


The auditors have reported on the Group's statutory accounts for the year ended 29 November 2009 under s495 of the Companies Act 2006, which do not contain statements under s498(2) or s498(3) of the Companies Act 2006 and are unqualified. The Group's statutory accounts for the year ended 30 November 2008 have been delivered to the Registrar of Companies and the Group's statutory accounts for the year ended 29 November 2009 will be filed with the Registrar of Companies in due course.



9.    Annual Report and Accounts and Annual General Meeting


The 2009 Annual Report and Accounts and Notice of 2010 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, 41-44 Great Windmill StreetLondon W1D 7NB. The Annual General Meeting of SThree plc is to be held on 23 April 2010.



This information is provided by RNS
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