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21 Mar 2022
First Take: SThree - Q1/22 trading update
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First Take: SThree - Q1/22 trading update
SThree plc (STEM:LON) | 428 -8.6 (-0.5%) | Mkt Cap: 577.6m
- Published:
21 Mar 2022 -
Author:
Tom Callan | Tom Brookhouse -
Pages:
4
Growth across all geographies and regions
Today’s statement highlights Q1 net fees +c.29% LFL yoy to £93.8m, driven largely by the continuation of the Group’s “execution of strategy and reflecting the ongoing strength in new placement activity”; today’s growth rate marks the 4th consecutive quarter of LFL NFI growth in excess of 20% (however, Q1 was by-and-large unaffected by negative Ukraine sentiment). Encouragingly, given STEM’s NFI skew, Contract fees (c.77% of Group NFI) increased c.32% LFL, outperforming Perm (+c.18%), with the Group’s contractor order book +c.42% yoy, underpinning the “confident outlook”. Headcount increased c.8% yoy (+c.2% QoQ), which is congruent to the comments made by Management at the time of the FY21 results re an element of consultant hiring having shifted from FY21 into FY22. In terms of productivity (+c.19% yoy), as expected the Group has seen “some normalisation, as new hires come on board”, although as flagged, it remains well above historic levels. Period-end net cash of c.£41m, in our view, continues to provide the Group with a good capital buffer as the temp book continues to unwind, whilst also providing scope for increased/special dividend distributions and/or capital investment.
Within the mix…
STEM’s five core markets (Germany +c.24% / USA +c.27% / Netherlands +c.45% / UK +c.29% / Japan +c.78%) all delivered “very strong yoy growth”, with solid momentum across all “key sectors” also reported - Technology (+c.30%), Life Sciences (+c.23%) and Engineering (+c.31%). Unsurprisingly, DACH delivered strong growth (+c.26%), as a result of “outstanding” contract performance (+c.40%). The US (the world’s largest STEM staffing market) also saw robust net fee growth (+c.27%), whilst APAC increased +c.71%, with Japan - the largest country in the region - highlighted as the standout performer.
Forecasts / Recommendation / TP unchanged
No profit performance was disclosed in today’s statement (as usual), but the continued “strength in momentum throughout Q1, in-line with the Board’s expectations” and the “minimal direct exposure to the war in Ukraine” flagged in the outlook statement provides reassurance (tallying with the comments from wider sub-sector constituents (e.g. RWA / PAGE) that reported FY results recently). In light of the above, and the in-line sentiment of today’s outlook statement, we do not expect consensus to move materially today and therefore we elect to leave our forecasts / recommendation / TP unchanged at this time. Q2/H1 results slated for 20-Jun-22.