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SThree plc (STHR)

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Monday 31 January, 2011

SThree plc

Final Results

RNS Number : 3110A
SThree plc
31 January 2011
 



 

 

SThree plc

("SThree" or the "Group")

 

Preliminary Results for the year ended 28 November 2010

 

SThree, the international specialist staffing business, is today announcing its final results for the year ended 28 November 2010.

 

Financial Highlights


2010

2009

Change

Revenue

£474.5m

£519.4m

-8.6%

Gross Profit

£166.4m

£171.2m

-2.8%

Operating profit*

£21.2m

£18.0m

+17.8%

Profit before taxation*

£21.6m

£18.0m

+20.0%

Statutory profit before taxation

£21.6m

£8.9m

+142.7%

Basic earnings per share*

11.9p

9.5p

+25.3%

Statutory basic earnings per share

11.9p

4.0p

+197.5%

Proposed dividend

8.0p

8.0p

-

Total dividend

12.0p

12.0p

-

*Prior 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.

 

Operational Highlights

 

·     A strong performance given the changing market sentiment during the year;

 

·     Non-UK share of gross profit increased significantly to 60% (2009: 55%), with trend expected to continue as 
the Group becomes ever more international;

 

·     New offices opened in Perth, Delhi, Houston, San Francisco, Munich and Düsseldorf, bringing the total to 52. 
Doha, Sao Paulo, Antwerp and Abu Dhabi due to open in H1 2011;

 

·     Permanent placements increased by 8.1% to 6,551 (2009: 6,060), with average fees remaining strong;

 

·     Number of active contractors at year end increased by 4.9% to 4,359 (2009: 4,157), with average gross 
profit per day rates remaining strong;

 

·     Contract versus Permanent mix of gross profit 51:49 in favour of Contract (2009: 58:42);

 

·     Continued sector diversification, with non-ICT(1) disciplines now representing 38% of total gross profit 
(2009: 28%);

 

·     76% of gross profit now derived from outside of the UK ICT market (2009: 69%);

 

·     Total Group headcount at year end increased by 16.7% to 1,863 (2009: 1,597), with a significant further 
increase planned for 2011;

 

·     Year end net cash and term investments of £55.2m (2009: £48.5m) reflecting continued strong cash 
generation;

 

·     Entered 2011 with all markets in growth.

 

Russell Clements, CEO, commented: "SThree delivered a strong result in 2010 in a market which was still some way from fully recovered.  Sentiment improved steadily and we ended the year with all our markets and territories in growth. We were also pleased with the increasing momentum in our longer established businesses building towards the end of the year. Looking ahead, we remain well positioned to make further progress through a combination of expansion in existing markets and further investment in new geographies with their substantial structural growth potential."

 

(1)  Non ICT sectors primarily comprise Engineering & Energy, Banking, Accountancy & Finance and Pharmaceuticals & Biotechnology

 

SThree will host a live presentation and conference call for analysts at 9am today.

 

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

 

Conference Call participant Telephone Numbers:

 

Dial in: 0208 817 9301

Call reference: SThree Preliminary results presentation

 

This event will also be simultaneously audio webcast, hosted on SThree website at http://www.thomsonwebcast.net/uk/dispatching/?event_id=89741b0dc05c8f5496451613b28b1db5&portal_id=a98192164841f4a39f400936a24cde9c   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 Friday 4 March 2011.

 

Enquiries:

 

SThree plc

020 7268 6000

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 Swift


 

 

Notes to editors

 

SThree is a leading international specialist staffing businesses, providing permanent and contract specialist staff to a diverse client base of over 7,500 clients. From its well-established position as a major player in the information and communications technology ("ICT") sector the Group has broadened the base of its operations to include businesses serving the accountancy & finance, banking, engineering, oil & gas, pharmaceuticals, human resources, energy, legal and job board 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 circa 1,900 employees in twelve 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. Accordingly, undue reliance should not be placed on forward looking statements.

 

SThree plc

("SThree" or the "Group")

 

Preliminary results for the year ended 28 November 2010

 

 

Overview

2010 saw a substantially improved market when compared to the exceptionally challenging environment of 2009. That said, it would be misleading to suggest that the overall level of demand for our services during 2010 was universally consistent with a fully recovered marketplace. Whilst some parts of our business equalled or surpassed pre-downturn levels of performance and all our markets were in growth by the last quarter, most were yet to return to the very buoyant conditions that we would associate with "normality" in the specialist staffing market.

 

Given this specific context it is pleasing to report a strong 2010 performance. The Group delivered a substantial improvement in overall profitability and a further increase in our cash balances, whilst at the same time continuing to invest in the future of the business.

 

In addition to increasing sales headcount substantially, we also opened a further six offices, bringing the overall total to 52, of which 30 are outside the UK. Given this strong trading platform, coupled with steadily improving market conditions, we believe we are in an excellent position to make 2011 another year of progress. On this basis the Group intends to further grow sales headcount and continue the international office roll out throughout 2011.

 

Financial Outcome

During the year the Group saw a modest reduction in Gross Profit (GP) with the 2010 figure of £166.4m down 2.8% (2009: £171.2m), largely due to the relative weakness of the contract marketplace during most of the year. However, this converted to a Profit Before Tax (PBT) of £21.6m, up some 20% before prior year exceptional items (2009: £18.0m), reflecting a continued tight control of costs.

 

Notwithstanding the fact that 2010 was a year of investment, the Group had another strong performance in terms of cash generation. At the end of 2010 net cash (including term investments) had increased to £55.2m (2009: £48.5m).

 

The strong cash performance, combined with steadily improving market conditions, support the Board's decision to maintain the total 2010 dividend at 12.0p (2009: 12.0p) which is comfortably underpinned by the cash available to the Group.

 

Geographical Expansion

The Group continued its well established strategy of geographical expansion opening six international offices in the year. In addition to further offices in Munich and Düsseldorf, we rolled out offices in Perth, Delhi, Houston and San Francisco, bringing the overall total to 52 offices in 12 countries.

 

In aggregate, Group GP generated from outside of the UK was £99.5m (2009: £94.2m), up 5.6%.  Given the more mature nature of the UK staffing market and in particular the continued relatively subdued demand for contract staff, UK GP of £66.8m was down 13.1% on the prior year (2009: £76.9m).

 

As a consequence of this difference in relative performance, the overall non UK/UK business mix underwent a marked change. For 2010 the ratio was 60:40 in favour of non UK GP compared with 55:45 in 2009. It is likely that this shift will represent an ongoing trend as the Group becomes ever more international. However, the fact remains that the UK has consistently demonstrated very robust growth in more typical market conditions and we are confident that the UK will show a significant bounce back as confidence levels build.

 

There is now ample evidence to indicate a rapidly growing opportunity to take the proven SThree model into an ever wider range of international markets, most of which are substantially less mature than the UK. In the first half of 2011 we expect to open offices in Doha, Sao Paulo, Abu Dhabi and Antwerp and it is likely that the total number of new offices opened during 2011 will be similar to the six that came on stream each year during 2010 and 2009. That being said, during 2011 we expect the large majority of our new hires to be into established SThree locations, thereby de-risking the expansion programme.

 

Sector Diversification

In parallel with its greater geographical diversity, in recent years the Group has made significant progress in developing markets outside of its historic ICT franchise. The ICT market has attractive characteristics, not least of all in terms of highly paid candidates and a structural skills shortage in most technical areas, albeit in some territories the ICT market is particularly competitive.

 

Over a period of years the Group has demonstrated its expertise in moving into adjacent specialist staffing sectors, many of which are both substantially less competitive than the ICT market and are also characterised by candidates who can command rates which are at least equal to and in many cases above those achieved in ICT.

 

The result of this sectoral diversification is that non ICT franchises accounted for 38.3% of total GP. This figure of £63.8m was up 31.5% on the previous year (2009: £48.5m). The major non ICT segments for the Group are Banking, Engineering & Energy, Accountancy & Finance and Pharmaceuticals; the Group also has (a relatively modest) presence in each of HR and Sales & Marketing.

 

The ICT franchise performed somewhat less robustly than the other sectors with 2010 GP of £102.6m (2009: £122.6m), down 16.3% on the prior year. The Group's ICT performance was impacted by a number of factors: the relatively subdued contract market which is disproportionately ICT based; the decline in public sector hiring - another ICT biased market; and the weakness of the Benelux territories, our largest ICT franchise outside the UK.

 

It is worth noting that the GP breakdowns given above are measured by the skill set of the candidate rather than the nature of the business of the client company. By the latter metric, rather than a 62% exposure to the ICT market, the Group has in fact only a 19% exposure (2009: 21%) to ICT customers per se and hence benefits from a broad client base in terms of industry sectors.

 

"High Margin High Value"

The Group has a stated strategy which is focused on the quality of the business transacted. We do not buy market share or swap value for volume as we believe both to be inappropriate given the highly fragmented nature of the specialist staffing market. We are highly selective in terms of the type of clients with which we engage and avoid the lower margin business which is often a condition of dealing with many larger employers in more mature markets.

 

In addition, we look to go "up the food chain" and place more highly remunerated candidates, either as a result of increasing the level of seniority of the placements we make, or by identifying more highly paid niche markets. The benefits of this approach can be seen in the robustness of our fees and contract rates, even in a market which remained somewhat more price sensitive than normal and which was not characterised by the level of wage inflation typical of a more normal market.

 

The Group's overall contract margin remained broadly flat at 21.6% (2009: 22.1%) despite a substantial reduction in the number of public sector contractors, which were typically higher than the average margin. Moreover, in absolute terms the average gross profit per day rate (GPDR) improved somewhat, up 1.1 % to £85.65 (2009: £84.69) on a constant currency basis. Pro rated to an annual permanent salary the GPDR is the equivalent of £90k (2009: £88k).

 

A similar but more pronounced value theme was seen in the Group's permanent business. The average fee recorded in 2010 was £12,340 (2009: £11,930) up 3.4% on a constant currency basis.

 

Contract/Permanent Business Mix

Unlike the early recovery phase of previous upturns, the contract market did not outperform the permanent market in 2010. On the contrary (and in common with the peer group), our permanent performance was markedly ahead of contract. During the year the Group made a total of 6,551 permanent placements (2009: 6,060) an increase of 8.1%. The number of contract runners at the end of 2010 had improved to 4,359 (2009: 4,157) representing an increase of 4.9%.

 

The relative weakness of the contract market was exacerbated by the fact that the market in Benelux was weak through most of the year and after the UK this territory is the Group's largest in terms of contract exposure. On a similar note GP derived from the Public Sector declined by around 50% during the year and this is largely a contract market. By contrast, some of the strongest performing markets (e.g. the Far East, Banking, Oil & Gas etc.) are for us, disproportionately permanent franchises.

 

The net effect of the above was that permanent GP represented 49% of the Group's total in 2010 compared with 42% of GP for 2009. Going forward into 2011 and beyond, we would expect a further increase in terms of the permanent share of GP as the economic cycle enters a more positive phase and the Group becomes increasingly exposed to territories and markets in which the prime opportunity is in permanent recruitment.

 

Headcount

The improved market conditions allowed us to continue with the sales headcount growth plan that we initiated in the second half of 2009. As a result the Group ended 2010 with a total of 1,863 staff (2009: 1,597) an increase of 16.7% on the prior year. The sales headcount growth was primarily focused on Rest of World, up 76%, and Europe, up 11%, with the UK up 6%.

 

Our 2010 closing headcount of 1,863 is still 18% below our previous peak of 2,274 heads in November 2008 and given our expansion plans for the year ahead it is likely that this historic peak will be surpassed during 2011.

 

Outlook

Ultimately, the global economic backdrop will to some extent influence the scale of our market opportunity in the coming year. However, it is worth remembering that the history of the Group specifically, and the specialist staffing market more generally, demonstrates that we do not need exceptionally strong economic tailwinds as a precondition for strong performance. Indeed, it is candidate confidence as much as any other major factor which drives demand and our experience shows that a healthy level of candidate confidence is not predicated on above-trend economic growth.

 

In addition, we are more exposed than ever before to markets with strong structural growth characteristics. Recent experience in territories such as Germany suggest that the underlying growth of the specialist staffing market can act as a powerful counter-balance even when economic conditions are dire. Given that the balance of opinion suggests at least a benign global economic scenario for 2011, markets such as these have particularly strong potential. At the same time our longer established franchises had all returned to growth by the end of 2010 and we have no reason to believe that this is a trend which will not continue.

 

Taking all the available indicators into consideration, we feel there are justifiable reasons to remain optimistic about the forthcoming year. As always, we take confidence that our twenty five year track record, seasoned management team and well established brands to provide us with an excellent platform to make the most of whatever the market has to offer us.

 

Financial Review


2010

2009


Revenue

Gross Profit

Revenue

Gross Profit

Contract

£392.8m

£85.0m

£447.0m

£98.8m

Permanent

£81.7m

£81.4m

£72.4m

£72.4m

Total

£474.5m

£166.4m

£519.4m

£171.2m

 

Revenue for the year decreased by 8.6% to £474.5m (2009: £519.4m). Gross profit for the year decreased by 2.8% to £166.4m (2009: £171.2m), representing a Group gross profit margin of 35.1% (2009: 33.0%). The Group gross profit margin increased as a result of the remix in business towards permanent, which represented 49% of gross profit in 2010, up from 42% in 2009. Permanent revenues are accounted for at 100% gross margin, whereas contract gross profit is shown after the associated cost of sale.

 

Administrative expenses before prior year exceptional items decreased by 5.2% to £145.2m (2009: £153.2m), as the Group benefitted from close monitoring of costs and made efficiency savings on advertising spend, professional fees, motor vehicle costs, bank charges and a number of other such costs. As a result, the Group's conversion ratio grew to 12.8% (2009: 10.5%).

 

Group headcount was 1,863 at 28 November 2010, up 16.7% on the opening headcount at 29 November 2009 of 1,597. Average total headcount for the year was 1,772 down 3.7% year on year (2009: 1,841).

 

Profit Before Tax increased by 20.0% to £21.6m (2009: £18.0m) before prior year exceptional items are taken into account and by 142.7% to £21.6m (2009: £8.9m) after prior year exceptional items.

 

Taxation on profit before exceptional items was £7.4m (2009: £5.5m), representing an effective tax rate of 34% (2009: 31%). The 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.

 

Basic earnings per share before exceptional items were 11.9p (2009: 9.5p), up 25.3%. This was driven by an increase in profit before tax of 20.0%, partially offset by a higher effective tax rate of 34% (2009: 31%), and enhanced by a reduction in the profit attributable to non-controlling interest holders (minority interest participants) to £0.1m (2009: £1.2m), which is explained further below. The weighted average number of shares increased slightly to 119.9m (2009: 118.7m). Fully diluted earnings per share before prior year exceptional restructuring items were 11.5p (2009: 9.2p), up 25.0%. Basic earnings per share after prior year exceptional restructuring items were 11.9p (2009: 4.0p), up 197.5%. Fully diluted earnings per share after prior year exceptional restructuring items were 11.5p (2009: 3.9p), up 194.9%.

 

During the second half of the year, the Group migrated certain entity-based minority interests to tracker share arrangements, which fall within the scope of IFRS 2 'Share-based Payment'. Looking forwards, the profit attributable to non controlling interests (minority interest participants) will be nil, as all significant minority interest arrangements have moved to tracker arrangements. The subscription price methodology for tracker share arrangements is fair market value as determined by an independent valuation expert, and shares may be equity or cash settled.  As the participant subscribes at fair market value for the award, the fair value of the award is reduced to nil and therefore no IFRS 2 accounting charge arises.

 

The Board previously declared an interim dividend of 4.0p per share (2009: 4.0p). The Board has declared a final dividend of 8.0p per share, bringing the total dividend for the year to 12.0p per share (2009: 12.0p). The final dividend will be paid on 6 June 2011 to those shareholders on the register as at 6 May 2011.

 

Balance Sheet

The Group had net assets of £81.9m at 28 November 2010 (2009: £84.8m). Net cash including term investments amounted to £55.2m (2009: £48.5m), the improvement in our cash position reflecting the net impact of the profitability of the Group and the improved management of working capital during the year.

 

Tangible fixed asset capital expenditure amounted to £2.8m (2009: £2.7m), relating to investment in IT hardware and the fit out of new offices. Intangible asset additions, primarily relating to IT software purchases and development costs, increased to £2.9m (2009: £2.1m). Total capital expenditure is planned to be slightly ahead of these levels in 2011, as the business continues its office opening programme and invests further in establishing an infrastructure to support the globalising business.

 

As a result of the Group gross profit growing in H2 by 18.4% year on year to £92.2m (2009 H2: £77.9m), net trade debtors increased by £4.8m to £63.1m (2009: £58.3m) representing DSO's of 37 days (2009: 37 days) and total trade and other payables increased from £76.1m to £86.2m.

 

Cash Flow

At the start of the year the Group had net cash of £48.5m (including assets held to maturity of £3.2m). During the year, the Group generated cash from operating activities of £31.8m (2009: £63.7m). In 2009, the Group benefitted from a reduction in the working capital funding of the reduced contractor book. This is now partially reversing, as our contractor book grows. Income taxes paid reduced to £6.0m (2009: £18.3m).

 

During the year, the Group paid ordinary dividends of £14.4m (2009: £14.4m) and dividends to Minority Interest participants of £1.0m (2009: £0.1m). The Group also invested £3.5m in an A rated Unbreakable Enhanced Fixed Rate Deposit with a maturity of less than 6 months at year end.

 

At 28 November 2010 the Group had net cash of £55.2m (including assets held to maturity of £3.5m).

 

The Group has a committed invoice discounting facility of £20m with Royal Bank of Scotland Invoice Finance ("RBS") which expires in April 2012. The Group is not currently drawing down against this facility.

 

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 60% of gross profit in 2010 (2009: 55%). The Group will continue to monitor its policies in this area.

 

Other Principal Risks and Uncertainties affecting the Business

Other principal risks and uncertainties affecting the business activities of the Group are detailed within the Directors' Report section of the Annual Report for the year ended 28 November 2010, 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.

 

Our strong balance sheet and net cash give us the confidence to maximise the opportunities that lie ahead.

 

 

 


SThree plc




 







 


Consolidated statement of comprehensive income



Year ended 28 November 2010
















28 November

29 November






2010

2009





Note

£'000

£'000










Revenue


2

         474,451

         519,372



Cost of sales



          (308,083)

      (348,217)










Gross profit


2

           166,368

         171,155










Administrative expenses


3

           (145,152)

       (162,209)










Operating profit



              21,216

        8,946










Finance income



                    451

                 359



Finance cost



(18)

             (378)










Profit before taxation



21,649

8,927










Analysed as:







Underlying profit before exceptional items


21,649

          17,977



One-off exceptional items



                      -

(9,050)






21,649

             8,927










Taxation


4

(7,366)

(2,965)










Profit for the year



               14,283

              5,962










Other comprehensive income






Exchange differences on retranslation of foreign operations


                (3,603)

                 243



Deferred tax on employee share options


                    258

                 620



Current tax on employee share options


                    155

              1,042



Employee share awards


1,347

1,630



Other comprehensive income for the period (net of tax)


                (1,843)

              3,535










Total comprehensive income for the period


                12,440

              9,497










Profit for the year attributable to:






Equity holders of the Company


                14,216

              4,798



Non-controlling interest



                      67

              1,164













                14,283

              5,962










Total comprehensive income attributable to:






Owners of the parent



                12,299

              9,339



Non-controlling interest



                    141

                 158













                12,440

              9,497










Earnings per share


6

 pence

 pence



Basic before exceptional items


                   11.9

                  9.5



Diluted before exceptional items


                   11.5

                  9.2










Basic after exceptional items


                   11.9

                  4.0



Diluted after exceptional items


                   11.5

                  3.9










All amounts relate to continuing operations.





 

 


SThree plc










Consolidated  statement of financial position



As at 28 November 2010















28 November

29 November




2010

2009



Note

£'000

£'000


Assets





Non-current assets





Property, plant and equipment


              5,447

              5,398


Intangible assets


             10,161

             10,899


Deferred tax assets


              8,670

              5,515




             24,278

             21,812







Current assets





Trade and other receivables


             97,935

             93,229


Current tax assets


                   -

              3,309


Cash and cash equivalents

7

             51,718

             45,272


Assets classified as held-to-maturity


              3,500

              3,203




           153,153

           145,013







Total assets


           177,431

           166,825







Equity and Liabilities





Equity attributable to the owners of the parent









Share capital


              1,218

              1,218


Share premium


              2,925

              2,925


Capital redemption reserve


                 168

                 168


Capital reserve


                 878

                 878


Currency translation reserve


             (1,328)

              2,416


Retained earnings


             78,057

             72,562




             81,918

             80,167


Non-controlling interest


                   -

              4,650







Total equity


             81,918

             84,817







Non-current liabilities





Provisions for liabilities and charges


              1,354

              2,889




              1,354

              2,889







Current liabilities





Provisions for liabilities and charges


              4,237

              3,063


Trade and other payables


             86,150

             76,056


Current tax liabilities


              3,772

                   -




             94,159

             79,119


Total liabilities


             95,513

             82,008







Total equity and liabilities


           177,431

           166,825

 

 


SThree plc






















Consolidated statement of changes in equity










Year ended 28 November 2010























 Share
capital

 Share
premium

 Capital
redemption
reserve

 Capital
reserve

 Currency
translation
reserve

 Retained
earnings

Attributable to owners of the parent

 Non-controlling interest

 Total
equity







£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000













Balance at 30 November 2008

        1,218

        2,925

           168

           878

        2,331

       78,906

        86,426

          4,147

          90,573


Exchange differences on retranslation of foreign operations

                 -

                 -

                 -

                 -

                85

                 -

                85

              158

              243


Deferred tax on employee share options

                 -

                 -

                 -

                 -

                 -

              620

              620

                 -

              620


Current tax on employee share options

                 -

                 -

                 -

                 -

                 -

            1,042

          1,042

                 -

            1,042













Net income recognised directly in equity

                 -

                 -

                 -

                 -

                85

            1,662

          1,747

              158

            1,905













Total comprehensive income for the year to 29 November 2009

                 -

                 -

                 -

                 -

                 -

            4,798

         4,798

          1,164

            5,962













Total recognised income and expense for the period

                 -

                 -

                 -

                 -

                85

            6,460

          6,545

          1,322

            7,867


Issue of share capital to non-controlling interest

                 -

                 -

                 -

                 -

                 -

                 -

                 -

              160

              160


Repurchase of non-controlling interest

                 -

                 -

                 -

                 -

                 -

                 -

                 -

           (898)

             (898)


Dividends paid to equity holders

                 -

                 -

                 -

                 -

                 -

         (14,434)

      (14,434)

                 -

         (14,434)


Dividends paid to non-controlling interest

                 -

                 -

                 -

                 -

                 -

                 -

                 -

             (81)

               (81)


Employee share award

                 -

                 -

                 -

                 -

                 -

            1,630

           1,630

                 -

            1,630


Total movements in equity

                 -

                 -

                 -

                 -

                85

           (6,344)

         (6,259)

            503

           (5,756)


Balance at 29 November 2009

         1,218

          2,925

              168

              878

          2,416

       72,562

        80,167

         4,650

        84,817


Exchange differences on retranslation of foreign operations

                 -

                 -

                 -

                 -

        (3,744)

                 -

         (3,744)

              141

           (3,603)


Deferred tax on employee share options

                 -

                 -

                 -

                 -

                 -

              258

              258

                 -

              258


Current tax on employee share options

                 -

                 -

                 -

                 -

                 -

              155

              155

                 -

              155













Net income recognised directly in equity

                 -  

                 -  

                 -  

                 -  

        (3,744)

           413

        (3,331)

              141

           (3,190)













Total comprehensive income for the year 28 November 2010

                 -

                 -

                 -

                 -

                 -

          14,216

        14,216

                67

          14,283













Total recognised income and expense for the period

                 -

                 -

                 -

                 -

        (3,744)

       14,629

       10,885

              208

          11,093


Dividends paid to equity holders

                 -

                 -

                 -

                 -

                 -

         (14,369)

      (14,369)

                 -

         (14,369)


Dividends paid to non-controlling interest

                 -

                 -

                 -

                 -

                 -

                 -

                 -

           (970)

             (970)


Employee share award

                 -

                 -

                 -

                 -

                 -

            1,347

1,347

                 -

1,347


Loss on disposal of non-controlling interest net assets

                 -

                 -

                 -

                 -

                 -

               (52)

             (52)

                52

                 -


Transfer to reserves non-controlling interest net assets

                 -

                 -

                 -

                 -

                 -

            3,940

         3,940

        (3,940)

                 -


Total movements in equity

                 -  

                 -  

                 -

                 -

        (3,744)

          5,495

         1,751

       (4,650)

     (2,899)


Balance at 28 November 2010

          1,218

         2,925

            168

            878

       (1,328)

          78,057

        81,918

                 -

       81,918

 

 


SThree plc










Consolidated Statement of cash flows





Year ended 28 November 2010
















28 November

29 November




2010

2009



Note

£'000

£'000







Profit before taxation


           21,649

             8,927


Depreciation and amortisation charge


            6,313

             6,128


Goodwill recognised in the statement of comprehensive income

                 -

               (237)


Loss on disposal of investments


                 -

                478


Finance income


              (451)

               (359)


Finance cost


                 18

                378


Loss on disposal of property, plant and equipment


               110

             1,107


Loss on disposal of intangible assets


                   1

                355


Non-cash charge for employee share options
and awards






            1,656

             1,448







Operating cashflow before changes in
working capital and provisions






           29,296

           18,225


(Increase)/decrease in receivables


           (3,652)

           50,952


Increase/(decrease) in payables


            9,746

            (7,704)


(Decrease)/increase in provisions


           (3,625)

             2,011


Cash flows from operating activities





Cash generated from operating activities


           31,765

           63,484


Income tax (paid)/received


           (5,958)

          (18,267)







Net cash generated from operating activities

           25,807

           45,217







Cash flows from investing activities





Purchase of property, plant and equipment


           (2,836)

            (2,726)


Purchase of intangible assets


           (2,922)

            (2,128)


Sale of held-to-maturity investment


            3,203

                  -


Purchase of held-to-maturity investment


           (3,500)

            (3,203)


Proceeds from disposal of investments


                 -

                  40







Net cash used in investing activities


           (6,055)

            (8,017)







Cash flows from financing activities





Finance income


               451

                359


Finance cost


                (18)

               (378)


Employee subscription for share awards


               435

                182


Issue of share capital of subsidiary companies to non-controlling interest


                 34

                  10


Repurchase of non controlling interest


                 -

            (1,371)


Dividends paid to equity holders


          (14,369)

          (14,434)


Dividends paid to non controlling interest


              (970)

                 (81)







Net cash used in financing activities


          (14,437)

          (15,713)







Net increase in cash and cash equivalents


            5,315

           21,487


Cash and cash equivalents at the beginning of the year


           45,272

           24,584


Effect of exchange rate changes


            1,131

               (799)







Cash and cash equivalents at the end of the year

7

           51,718

           45,272

 
 
SThree plc

 

Notes to the Financial Information

 

Year ended 28 November 2010

 
1.     Basis of preparation

 

These financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRSs') 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.

 

2.     Segmental analysis

 

IFRS 8 requires management to apply the 'management approach' to segmental reporting. This requires management to determine those segments whose operating results are reviewed regularly by the entity's chief operating decision maker to make strategic decisions and assess sector performance.

 

Revenue and Gross Profit by reportable segment

 

Management has determined the chief operating decision maker to be the Executive Committee. Operating segments have been identified based on reports reviewed by the Executive Committee, which considers the business primarily from the geographic perspective.

 

The Group's management reporting and controlling systems use accounting polices that are the same as those described in note 1 in the summary of significant accounting policies under IFRS.

 

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 and reporting system. Gross Profit is the measure of segment profit/(loss) used in segment reporting and comprises revenue and cost of sales.

 

Intersegment revenue is recorded at values which approximate third party selling prices and is not significant.

 


United Kingdom












28 November

29 November







2010

2009







£'000

£'000










Revenue from external customers




224,337

271,248


Gross Profit




66,820

76,939


Total Assets




118,099

130,518


Total Liabilities




62,496

59,405


Capital Expenditure




4,751

3,411










Continental Europe












28 November

29 November







2010

2009







£'000

£'000










Revenue from external customers




226,694

239,406


Gross Profit




82,213

86,762


Total Assets




46,115

27,767


Total Liabilities




31,397

20,957


Capital Expenditure




611

918










Rest of the World












28 November

29 November







2010

2009







£'000

£'000










Revenue from external customers




23,420

8,718


Gross Profit




17,335

7,454


Total Assets




13,217

8,540


Total Liabilities




1,620

1,646


Capital Expenditure




396

525


















Group












28 November

29 November







2010

2009







£'000

£'000










Revenue from external customers




474,451

519,372


Gross Profit




166,368

171,155


Total Assets




177,431

166,825


Total Liabilities




95,513

82,008


Capital Expenditure




5,758

4,854










The following segmental analyses by brand, recruitment classification and discipline (being the profession of candidates placed) have been included as additional disclosure to the requirements of IFRS 8 'Operating Segments'.













Revenue

Gross profit





28 November

29 November

28 November

29 November





2010

2009

2010

2009





£'000

£'000

£'000

£'000










Brand
















Progressive


133,780

132,461

          45,416

                41,918


Huxley Associates


125,843

132,670

          44,892

                44,839


Computer Futures Solutions


111,875

149,247

          37,745

                51,526


Real Staffing Group


98,938

101,679

          34,300

                29,557


Others 


4,015

3,315

            4,015

                  3,315













474,451

           519,372

         166,368

              171,155










Recruitment classification















Contract


392,803

447,077

          84,954

                98,816


Permanent


81,648

72,295

          81,414

                72,339













474,451

           519,372

         166,368

              171,155










Discipline















Information & communication technology

341,484

411,761

         102,610

              122,612


Others(1)


132,967

107,611

          63,758

48,543













474,451

           519,372

         166,368

              171,155


















(1) Including engineering and energy, banking, accountancy and finance, pharmaceuticals and jobboard sectors.


 

 

3.     Administrative expenses

 

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:

 







28 November

29 November







2010

2009







£'000

£'000






Corporate and divisional restructuring



                   -

             (9,050)










Exceptional items - before taxation



                   -

             (9,050)










Corporate and divisional restructuring






During the prior period, 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, was considered exceptional by virtue of its size.  The Group charged the restructuring cost incurred in the prior period to the statement of comprehensive income.










 

4.     Taxation

 

(a) Analysis of tax charge for the year

 








28 November

29 November








2010

2009








£'000

£'000


Current taxation








UK









Corporation tax charged/(credited) at 28% (2009: 28%) on profits for the year












            9,195

            4,732


Adjustments in respect of prior periods





               583

           (1,447)


Overseas








Corporation tax charged/(credited) on profits for the year












            1,274

            1,725


Adjustments in respect of prior periods






              (768)

              (329)











Total current tax charge





          10,284

            4,681











Deferred taxation








Origination and reversal of temporary differences












           (3,862)

           (3,401)


Adjustments in respect of prior periods





               992

            2,079


Schedule 23 deferred tax credit in respect of unexercised employee share awards and options



















               (48)

              (394)











Total deferred tax (credit)/charge





           (2,918)

           (1,716)











Total income tax charge in the statement of comprehensive income












            7,366

            2,965










 


(b) Reconciliation of the effective tax rate















The Group's tax charge for the year ended 28 November 2010 exceeds the UK statutory rate and can be reconciled as follows:

 








 






28 November

29 November

 






2010

2009

 






£'000

%

£'000

%

 


Profit before taxation



   21,649


      8,927


 










 


Profit before tax multiplied by standard rate of corporation tax in the UK



            6,062

28%

   2,500

28%

 








 










 


Effects of:







 


Disallowable items and other timing differences



              80

-

            59

1%

 


Differing tax rates on overseas earnings



              376

2%

           103

1%

 


Adjustments to tax in respect of previous periods


               807

4%

303

3%

 


Adjustment due to UK tax rate change



                 41

-

               -

-

 










 


Tax expense and effective tax rate



            7,366

  34%

        2,965

 33%

 

 


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










28 November

29 November








2010

2009








£'000

£'000











Current tax








Equity settled employee share options





               155

            1,042











Deferred tax








Equity settled employee share options





               258

               620

















               413

            1,662











The Group expects 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 28 November 2010 a deferred tax asset of £2.1m (2009: £1.8m) has been recognised in respect of these options.


 

 

5.     Dividends

 








28 November

29 November








2010

2009








£'000

£'000


Amounts recognised and distributed to shareholders in the year





Equity








Interim dividend of 4.0p (2009: 4.0p) per ordinary share



            4,782

            4,738


Second interim dividend of 8.0p (2009: nil) per ordinary share


            9,587

                 -


Final dividend of nil (2009: 8.0p) per ordinary share




                 -

            9,696

















          14,369

          14,434











Amounts proposed








Interim dividend of 4.0p (2009: 4.0p) per ordinary share for the period ended 30 May 2010

            4,797

            4,782


Second interim dividend of nil (2009: 8.0p) per ordinary share for the year ended 28 November 2010

                 -

            9,544


Final dividend of 8.0p (2009: nil) per ordinary share for the year ended 28 November 2010

            9,594

                 -











An interim dividend of 4.0 pence (2009: 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.











For the year ended 29 November 2009, instead of a final dividend, a second interim dividend of 8.0 pence per ordinary share was paid on 31 March 2010, to shareholders on record at 26 February 2010.











An interim dividend of 4.0 pence (2009: 4.0 pence) per ordinary share for the six months ended 30 May 2010 was paid on 3 December 2010 to shareholders on record at 5 November 2010.











The Board propose a final dividend of 8.0 pence per ordinary share for the year ended 28 November 2010 (2009: nil), to be paid on 6 June 2011 to shareholders on record at 6 May 2011.

 

 

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 dilutive potential ordinary shares.

 







28 November

29 November






2010

2009







£'000

£'000










Earnings







Profit after taxation excluding exceptional items



             14,283

             12,438


Non controlling interest




                  (67)

             (1,164)










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

             14,216

             11,274


Effect of exceptional items (net of tax)



                   -

             (6,476)










Profit after taxation attributable to equity holders of the Company

             14,216

              4,798















millions 

millions


Number of shares







Weighted average number of shares used for basic EPS


119.9

              118.7


Dilutive effect of share plans




3.9

                  3.8










Diluted weighted average number of shares used for diluted EPS


              123.8

              122.5















pence 

 pence


Basic















Basic earnings per share




                11.9

                  4.0


Adjusted basic earnings per share excluding exceptional items


                11.9

                  9.5










Diluted















Diluted earnings per share




                11.5

                  3.9


Adjusted diluted earnings per share excluding exceptional items


                11.5

                  9.2

 

 

7.     Cash and cash equivalents

 






28 November

29 November






2010

2009






£'000 

£'000









Cash in hand and at bank



             51,718

            45,272













                51,718

45,272









Due to the Group pooling arrangement, an overdraft amount of £0.4m (2009: £nil) in SThree plc is netted out against cash balance in Group companies.










Included within cash and cash equivalents is £0.8m (2009: £0.4m) against which the Group has issued cash collaterised bank guarantees. This amount is not immediately available for use in the business.









 

 

8.     Group reorganisation

 

During the current year, the Group further rationalised its structure by undertaking mergers and other legal restructuring steps, some of which will not formally take effect until into 2011. This followed on from the reorganisation started in the prior year, where two new holding companies were incorporated, namely, SThree UK Holdings Limited and SThree Overseas Holdings Limited.  These holding companies either incorporated or purchased the share capital of a number of UK and overseas subsidiaries in a share for share exchange and this had no effect on the net assets of the Group. Non-controlling interests remain in respect of three companies at the year end. The aggregate profit and net assets attributable to these non-controlling interest holders has not been separately recognised in the financial statements on the basis of materiality.

 

 

9.     Financial in formation

 

The financial information in this preliminary announcement which comprises the Consolidated statement of comprehensive income, Consolidated statement of changes in equity, Consolidated statement of financial position, Consolidated statement of cash flows and related Notes is derived from the full Group financial statements for the year ended 28 November 2010 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 28 November 2010 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 29 November 2009 have been delivered to the Registrar of Companies and the Group's statutory accounts for the year ended 28 November 2010 will be filed with the Registrar of Companies in due course.

 

 

10.   Annual Report and Accounts and Annual General Meeting

 

The 2010 Annual Report and Accounts and Notice of 2011 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, 215 Great Portland Street, London, W1W 5PN. The Annual General Meeting of SThree plc is to be held on 21 April 2011.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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