Unlocking our
unique potential
Annual Report and Accounts 2023
Strategic Report
Introduction | |
SThree at a glance | 2 |
Our market environment | 4 |
Review of the Year | |
Chair's statement | 6 |
Chief Executive Officer's statement | 8 |
Our business model | 12 |
Strategy overview | 18 |
Key performance indicators | 20 |
Strategic progress | 24 |
Our Performance | |
Chief Financial Officer's statement | 34 |
Business review | 38 |
Stakeholder engagement (including | |
section 172 statement) | 46 |
Our commitment to being a | |
responsible business (including TCFD) | 52 |
Our Principal Risks | |
Risk management | 76 |
Compliance information | 83 |
Governance Report | |
Board of Directors | 86 |
Chair's governance statement | 88 |
Our Board at a glance | 90 |
Board roles and responsibilities | 92 |
Our Board | 93 |
Employee Engagement | 96 |
Nomination Committee | 100 |
Audit & Risk Committee | 104 |
Directors' remuneration report | 112 |
Remuneration at a glance | 115 |
Remuneration policy | 116 |
Strategic Report
Governance
Financial Statements
SThree is the global talent partner which specialises in connecting highly sought-after STEM specialists with dynamic organisations across the world. Whilst supporting our clients in finding this STEM talent, and helping our candidates achieve their career goals, we remain committed to taking meaningful action to build a sustainable future for everyone.
Annual report on remuneration | 123 |
Directors' report | 135 |
Financial Statements | |
Independent auditors' report | 139 |
Consolidated Income Statement | 147 |
Consolidated Statement of | |
Comprehensive Income | 148 |
Statements of Financial Position | 149 |
Consolidated Statement of Changes in Equity | 150 |
Company Statement of Changes in Equity | 151 |
Consolidated Statement of Cash Flows | 152 |
Notes to the financial statements | 153 |
Five-year financial summary | 196 |
Other Information | |
Results announcement timetable | 197 |
Shareholder information | 198 |
Company information and corporate advisers | 199 |
More information
SThree's Annual Report and Accounts 2023 is our primary report to shareholders. It provides an overview of the performance of the Group for the year ended 30 November 2023, disclosures relating to our financial, operational, environmental and social performance,
and detail on our strategy. Supplementary information and disclosures are provided in the following documents and referenced in this report.
ESG Impact Report sthree-impact-report-2023.pdf
Climate Change Report
sthree-climate-change-2023.pdf
Summary of notices and policies
sthree-ar23-notices-and-policies.pdf
Online quick read
A concise summary of the SThree Annual Report, highlighting strategy, performance, sustainability information as well as examples of how we have engaged with our stakeholders can be found at: sthree.com/annual-report-2023
Online investor centre
All SThree corporate reports, including investor briefings, trading updates, share price information and analyst coverage can be found at: sthree.com/investor-centre
The Strategic Report from page 2 to page 85 was approved by the Board on 29 January
2024 and is signed on its behalf by:
Timo Lehne
Chief Executive Officer
Andrew Beach
Chief Financial Officer
Annual Report and Accounts 2023 01
SThree at a glance
Unlocking our purpose by
Strategic Report
Governance
Financial Statements
bringing skilled people together to build the future
Our purpose is focused on making the most of favourable market megatrends and investing in our platform for future operational excellence, to allow us to provide a quality service and deliver sustainable value to our stakeholders.
Our purpose is grounded in our ESG commitments, which are focused on encouraging diversity in STEM (Sciences, Technology, Engineering and Mathematics), reducing our own environmental impact and contributing to a net zero future by facilitating green careers1.
Our vision is to be the #1 STEM talent provider in the best STEM markets.
Highlights
A resilient performance against a record prior year and challenging
global macro-economic backdrop.
We deliver our purpose through four strategic pillars
We have led our industry for nearly 40 years, specialising in STEM before anyone else - we are proud pioneers. We accelerate careers, enrich lives and enable people to make a difference to the world around them - that goes for our own colleagues as well as our candidates.
Group financial highlights in FY232
Group operational highlights in FY23
Our Places
Our Platform | Our People | Our Position |
Net fees | Basic earnings |
£419m | per share |
42.4p | |
FY22: £431m | |
FY22: 41.0p |
eNPS | Engaging, | Taking action on climate |
43 | developing | 8% reduction in CO2* |
and empowering | ||
our people. | ||
FY22: 51 | (FY22: 44% reduction*) |
Our People | Science-based GHG reduction targets |
approved for scopes 1, 2 & 3, aligned | |
Pages 28-31 | |
to a 1.5°C scenario. | |
Lives positively impacted
25,725
(FY22: 32,970)
Through delivering recruitment solutions and community
To be a leader in markets we choose to serve
We focus our decision making on disciplined investments into target regions and STEM skill verticals. Our global house of
Create a world-class | Find, develop and retain | Leverage our position in STEM |
operational platform | great people | to deliver sustainable value to |
through data, technology | our candidates and clients | |
and infrastructure | ||
We accelerate digital | We create a high-performance, | Define what we want each of |
transformation to drive greater | inclusive culture. We invest | our brands to be famous for |
operational excellence, | in talent acquisition strategy, | and drive our reputation as the |
productivity and customer | best training and development | undeniable first choice for clients |
Operating profit | Net cash |
£76m | £83m |
FY22: £78m | FY22: £65m |
NPS | Delivering high- |
48 | quality customer |
service supported | |
by investment | |
FY22: 52 | in the right |
technology. |
Doubled the share of renewable business*
(FY22: 88% growth*)
Through delivering STEM skills required in the transition to a low-carbon economy.
* Since FY19
programmes in FY23.
well-respected brands provides us with deep STEM expertise and broad networks of clients and candidates.
Our FY24 goal
To grow Group market share faster than our peer group3 (on a net fee basis compared to FY19).
experience. Using innovative | initiatives, and offer competitive | and candidates within STEM. | ||
technology and insightful data, | reward and incentives to attract | |||
we enable knowledge-fuelled | the best talent in the best | |||
consultants to perform at | markets. | |||
their best. | ||||
Our FY24 goal | Our FY24 goal | Our FY24 goal | ||
In the short term, progression of | Achieve and maintain an upper | To positively impact 150,000 lives | ||
our conversion ratio4 is expected | quartile eNPS in the professional | since FY19. | ||
to be affected by current macro- | services sector/industry. | |||
economic headwinds. | ||||
In the mid to long term, we aim | ||||
to build a business that can |
Chief Financial Officer's statement Pages 34-37
Our Position | Our commitment to being a responsible | |
Pages 32-33 | business (including TCFD) Pages 52-75 | |
achieve its conversion ratio at |
21% or higher. |
1. Read more about how we apply our purpose | 2. The Group also uses alternative performance | 3. | Peer group reflects top two to four listed peers |
in day-to-day activities and what progress we | measures (APMs) to help explain its business | in each region. | |
are making towards achieving SThree's ESG | performance. Further information on APMs, | 4. | See 'Alternative performance measures' note |
commitments in the case studies that feature | including a reconciliation to the financial | for details on applied methodology, pages 193 | |
throughout this Annual Report. You can identify | statements (where appropriate), can be found | to 195. | |
these by looking for this QR code icon. | on pages 193 to 195. |
Further reading
Strategy overview, pages 18 to 19
02 SThree plc | Annual Report and Accounts 2023 03 |
Our market environment
Global labour market landscape5
Strategic Report
Governance
Financial Statements
The past few years have completely altered the shape of the labour market. From the large volume of job losses in 2020 to sharp rebounds in most economies leading to elevated wage growth, shortages of workers, high numbers of job openings and shifted working habits.
Through 2023, in the face of ongoing macro-economic and geopolitical uncertainties which accelerated a series of cascading and interconnected global crises in food, fuel and energy, major economies
We differentiate between five global megatrends which gained traction and draw in sought- after specialists in life sciences, technology and engineering.
Today, the global STEM talent market is valued at circa £112 billion in annual revenue6, of which the key driver is the net job-creation in roles related to technology, digitalisation and sustainability. Roles within AI and Machine Learning Specialists are top of the list, followed by Sustainability Specialists, Business Intelligence Analysts, Information Security Analysts, Renewable Energy Engineers, and Solar Energy Installation and System Engineers.
These roles are typical for STEM markets, within which we operate, and provide enormous opportunity for SThree.
such as the US narrowly avoided a recession and mild contractions in economic activity were recorded in the UK and some EU economies. Nevertheless, labour demand remained robust, mostly driven by the technological advances, widening digitalisation and the 'green transition'. Also, throughout the year a series of critical reviews led by the United Nations took place to assess international agreements on sustainable development, climate change, gender equity, financing, natural disasters and universal health coverage. It helped to build political momentum, articulate new commitments and inclusive coalitions to accelerate progress of green investments and businesses' decarbonisation. These developments contributed to the growth in demand for highly skilled talent and underpin our confidence in the resilience of our business model and strategy with strong focus on STEM jobs and skills.
Digitalisation | Decarbonisation | |
Digitalisation is transforming business models | A large scale global action towards a green | |
around the world, helping companies to make | energy transition is ongoing and is expected | |
huge leaps forward, enabling them to become | to accelerate over the next decade, partially | |
more sustainable and resilient. Businesses | thanks to the development and widespread | |
are adopting leaner ways of working, with | adoption and deployment of innovative | |
software-driven production, allowing more | technologies and engineering skills. | |
capacity for innovation and cost efficiencies. | According to the International Energy Agency, | |
Global direct investment in digital transformation | by 2030 14 million new jobs will be created in | |
is expected to reach $3.4 trillion by 2026 and | global energy supply, and a further 16 million | |
this rate of investment is accelerating. | in clean energy end-uses, such as more | |
Changing customer demands, increased | efficient appliances, electric and fuel cell | |
vehicles, building retrofits and energy-efficient | ||
technological complexity and innovative digital | ||
construction. In the next five years, this job | ||
technologies, including Artificial Intelligence | ||
growth will be driven through both public and | ||
(AI) and machine learning, are driving an | ||
private investments, driving an exponential | ||
explosion in demand for specialist technology | ||
growth in demand for engineering and 'green' | ||
skills. It is forecast that 69 million new digital | ||
tech talent. | ||
jobs will be needed by 2027. | ||
Global investment | New digital jobs | Global investment | New 'green' energy | ||
in digital | required globally | in the energy | jobs required | ||
transformation, | by 2027 | transition in 2022 | globally by 2030 | ||
by 2026 | 69m | >$1tr | +14m | ||
$3.4tr | |||||
Source: WEF Future of | Source: HSBC Global | Source: IEA Net Zero - | |||
Source: Statista | Jobs Report 2023 | Research, Nine key themes | clean energy jobs by 2030 | ||
to guide your outlook | |||||
Global annual | Growth in SThree | Growth in | |||
venture capital | technology-related | SThree net fees | |||
investment in | net fees since FY19 | in renewables | |||
quantum computing | * | since FY19 | |||
in 2021 | |||||
+36% | +142%* | ||||
$1bn | |||||
Source: HSBC Global | |||||
Research, Nine key themes | |||||
to guide your outlook |
Research-led healthcare
The pandemic has led to profound changes and developments that have significantly accelerated the pace at which the life sciences sector is evolving.
Ensuring that solutions and knowledge, including AI and reliable data, are developed in good time to address future healthcare priorities is the foundation of this megatrend. Research and development, technology, regulation, remote care and efficient manufacturing will be essential for the life sciences sector to reach its full potential in the coming years.
Companies at the forefront of these exciting areas will create ongoing demand for highly skilled specialists within quality assurance, clinical operations, regulatory affairs and other medical specialists.
Growth in global | Growth in SThree |
pharma R&D spend, | Life Sciences- |
2019-2026 | related net fees |
+24% | since FY19 |
+10%* | |
Source: Statista | |
Share of health and | |
healthcare firms | |
expect to be using | |
AI by 2025 | |
89% | |
Source: HSBC Global | |
Research, Nine key themes | |
to guide your outlook |
Generational shifts
The world is facing fast-ageing populations, lower birth rates and smaller households. By 2030, 1.4 billion7, or one in six people, in the world will be aged 60 years or over and this is expected to reach more than two billion people by 2050.
The proportion of people of working age globally is therefore shrinking, while the relative number of those retiring is expanding, driving acute labour shortages across every sector.
Changing demographics, including labour shortages post-pandemic, are one of the driving forces behind the research and development and encourage the adoption of automation technologies to boost productivity. This leads to a rise in demand for a highly skilled workforce, as well as increased rates of pay, especially in STEM fields.
Global shortage | US growth of | |
of skilled workers | STEM occupations | |
by 2030, with | between 2017-2029 | |
the largest gap in | 8.8% | |
technology and | ||
engineering | Source: Id Tech | |
85m | ||
Ageing and health (who.int) | ||
Source: German | ||
Economic Institute | Growth in SThree | |
STEM contractor | ||
order book since | ||
FY19 | ||
+51%* |
New working models
The pandemic has changed the way the world thinks about wellbeing, mobility, infrastructure and therefore work practices.
Driven by recent technological advances, many people are no longer constrained by traditional
9-5 working models. Furthermore, a shift towards remote working has seen businesses adapting existing infrastructure or making 'smart' urban developments, which in turn call for significant investment and highly skilled STEM professionals.
Greater work flexibility gives candidates the confidence to go from contract to contract, developing their career within their given sphere of expertise. This contributes to ongoing growth in the number of freelancers and independent contractors, which according to 62% of global executives polled by Ceridian will substantially replace full-time employees within the next four years.
Share of global | Share of executives | |
candidates stating | believe freelancers | |
flexible working as | likely to replace full- | |
a factor that will | time employees in | |
affect their career | next four years | |
63% | 62% | |
Source: SThree research | Source: SIA/Ceridian | |
'How the STEM world | 2021 survey | |
evolves' 2023 | ||
Growth in SThree | ||
contract net fees | ||
since FY19 | ||
+36%* |
* In constant currency.
04 SThree plc
- Based on https://www3.weforum.org/docs/WEF_Future_of_Jobs_2023.pdf
- Based on our top five markets which together represent 74% of global STEM market by revenue. Source: SThree analysis, SIA data.
- Source: Ageing and health (who.int/news-room/fact-sheets/detail/ageing-and-health).
Annual Report and Accounts 2023 05
Chair's statement
Unlocking our unique potential by
Strategic Report
Governance
Financial Statements
delivering in line with our strategy
2023 has been another challenging year for many people around the globe. Heightened levels of geopolitical and macro-economic instability have impacted individuals, businesses, and governments creating
an increasingly complex commercial environment. Meanwhile, issues that were prevalent last year, including high inflation and interest rates, the rising cost of living and a global energy crisis have continued to have an impact on our lives.
Our teams, customers and key markets of operation have all been impacted differently by these issues, yet I am proud that SThree has still delivered a resilient performance this year, thanks to our strategic focus on sourcing and placing the best STEM talent. Our robust performance in Contract, supported by our unique Employed Contractor Model (ECM), underpins our confidence in the megatrend that is the demand for flexible workers in STEM. In the year we placed 15,292 skilled people and maintained a strong order book throughout. I would like to thank our clients and candidates for the trust they have placed in the Group this year. I would also like to thank every member of the SThree team for their efforts to support our customers. It is thanks to their skill and dedication that SThree finds itself in this position of strength today, with many exciting opportunities to be pursued in the near future.
Since Timo's appointment as Chief Executive Officer in April 2022 his energy and vision has spread across the business, with the whole team coming together to execute an exciting growth strategy. Our Technology Improvement Programme underpins a large part of this strategy and I am delighted to report that
it continues to roll out at pace, providing a market-leading platform for future growth and productivity that has been designed to provide us with the best opportunity to continue to seize market share in our target markets.
Following the resilient trading performance in the year, coupled with a healthy balance sheet position, the Board is proposing a final dividend at 11.6 pence per share, which taken together with the interim dividend of 5.0 pence per share, gives the total dividend for the year of 16.6 pence per share, an increase of
4% over the prior year. This is in line with the Board's policy to offer shareholders long-term ordinary dividend growth within a targeted cover range of 2.5x to 3.0x and forms part of our wider capital allocation policy.
Maximising shareholder value through a disciplined approach to investment to deliver growth in net fees and margin, whilst maintaining a strong balance sheet and sustainable through- the-cycle dividend, remains a priority for the Board. Following a periodic review, the Group's capital allocation policy has been refreshed to reflect investments in business improvement alongside organic and inorganic growth as a key aspect of our strategy.
Across the Group, we are clear on our ambitions and delivering our strategy. With the addition of Margot van Soest (Managing Director, Netherlands & Spain), Sarah Mason (Chief People Officer) and Matt McManus (Managing Director, US) to the Executive Committee, coupled with the appointment of Imogen Joss as Non-Executive Director early in the financial year, we have an enhanced, experienced executive leadership team and Board in place to drive the Group forward. I would like to thank both the executive team and Board for all their hard work this year, alongside those inside and working together with our business who have helped us achieve a resilient set of results.
I am especially proud of our promotion to the FTSE 250, after too many years of absence. This is a clear reflection of the progress we have made, and is another key milestone in SThree's ongoing journey.
We remain committed to reducing our impact on the planet, providing great opportunities for our people and ensuring we have the governance processes in place to protect each and every SThree stakeholder. We are proud to support the transition to a green economy by connecting engineering talent to the green energy projects where they are most needed, and we
are dedicated to making SThree an employer of choice for staff. I am delighted that, for the first time, through targeted ownership opportunities, over 50% of our employees are now shareholders in the business, something we see as the ultimate vote of confidence in our direction of travel, providing strong alignment with our wider shareholder base.
Looking ahead, while we remain conscious of the wider economic environment, I am confident that the Group will continue to deliver against our strategy. We have continued to invest across the business, enhancing and innovating how we operate so that as customer confidence strengthens and the market returns to growth, we are in the best position possible to seize the opportunity. With a market-leading technology suite underpinning our future operations and a talented and experienced team in place, we are confident in the Group's long-term prospect.
James Bilefield
Chair
29 January 2024
SThree finds itself in the position of strength today, with many exciting opportunities to be pursued in the near future."
James Bilefield
Chair
06 SThree plc | Annual Report and Accounts 2023 07 |
Chief Executive Officer's statement
Strategic Report
Governance
Financial Statements
Unlocking our unique potential through
the power of talent
Our unique model and strategic focus on STEM and flexible talent provide us with a strong platform both now and over the long term."
Timo Lehne
Chief Executive Officer
I am proud of the work we have achieved over the past year. The Group has performed well against a challenging economic backdrop, demonstrating the resilience of our business model and strength of our strategy, with the megatrend of demand for flexible STEM workers persisting across our core markets. Through this, we have invested in our people, infrastructure product offering and made excellent progress in the positioning of SThree for sustainable long-term growth.
The strength of the Group derives from our clear purpose: bringing skilled people together to build the future. We firmly believe that the future is flexible STEM talent. Underpinned by long-term megatrends, the two growth drivers of STEM and flexible talent have proven resilient through cycles, providing a unique business model that delivers quality of earnings and good visibility.
Whilst this core purpose remains consistent, we must also evolve. As a business consciously aligned to megatrends, we are acutely aware of how these structural forces, such as digital transformation, changing patterns of work, and the opportunities presented by artificial intelligence are affecting every industry. We have established a position as a leading specialist talent partner, built over decades through unrivalled STEM networks, long-term client relationships and deep expertise, all of which work together to create significant competitive differentiation. From this, we are progressing to the next stage of our growth journey as a digital-first organisation, with an integrated end-to- end platform that will redefine our potential and support us in unleashing our vision.
At the same time, we continue to be guided by our disciplined and focused approach to our investment decisions, supported by a robust business model. For FY23, the Group delivered net fees of £419 million, 4% down on the record prior year performance. With ongoing exceptional levels of productivity combined with tight cost control, whilst also benefitting from spend recognition timing on the Technology Improvement Programme (TIP) (without impacting delivery) we delivered operating profit of £76 million. This was delivered alongside a material increase
in net cash balance to £83 million and a contractor order book of £184 million. This provides us with the financial strength and flexibility to pursue our market opportunity and to deliver value to shareholders.
Our approach: a platform of STEM resourcing solutions supporting our customers' business ambitions
The Group provides solutions to customers predominately through the placement of specialist STEM Contract skills, representing 82% of total net fees, as this model is particularly well aligned to employee and employer preferences in STEM roles. Within this, we have also established a specific expertise in delivering ECM, whereby contractors are directly employed by SThree and which is increasingly a source of growth for the business, now comprising nearly 50% of the contractor order book. We also provide our clients with high-value Permanent skills in select, strategic markets. The Group's STEM proficiency across all three employment models, whether it be Contractors, ECM or Permanent roles, allows us to offer the best solution to meet our customers' bespoke requirements.
We wrap this in a customer-centric service delivery approach, working collaboratively with our clients to source the scarce skills on which they depend, building enduring relationships with our contractors who view SThree as a partner in their career development. We are a people business, and we are super-charging our teams through the implementation of a sophisticated and integrated IT infrastructure. This is bringing our organisation closer together to drive scale, efficiencies and productivity, particularly in our growing ECM business which is complex and compliance heavy. We believe this will be a game- changer in the industry.
The market: our model performing in a challenging environment
Global macro-economic factors through the year, such as high inflation, market uncertainty and high interest rates weighing on investment decisions, have created a challenging labour market. Many organisations took stock of their previous expansive hiring initiatives to reassess their footprint in light of a weakening outlook.
The priority for organisations shifted to business-critical requirements, which for many is represented by STEM Contract skills. Whether it be engineers, cyber security specialists or medical scientists, organisations across sectors are dependent to function effectively. We saw these market dynamics play out during the year with robust extensions as clients sought to retain critical STEM skills helping to somewhat offset weaker new placement activity across the market.
Progressing our ESG commitments
As we navigate through periods of transient market conditions, we do not lose sight of our ESG commitments. We know that a successful business is a responsible one, seeking to deliver a positive outcome for all stakeholders. As such, we are pleased to have not only made continued progress against the clear ESG targets we have set ourselves, but to have also strengthened our environmental ambitions during the year with a new science- based target (SBTi-verified) of net zero before FY50. This complements the work we do every day promoting jobs that will build a sustainable future, and we are delighted to have achieved our target of doubling the share of our global renewables business ahead of the target date of FY24.
We continue to strive for social mobility and equity in STEM by encouraging diversity in our talent pipeline. We do this through our Elevate Careers programme and our partnership with Women Who Code where we have funded scholarships for 3,700 women. In FY23, we welcomed 47 women to our internal talent programme, Identify. We can see how the programme is improving retention and progression of our female employees, but we recognise we need to do more to make progress towards our ambition to have 50/50 women in leadership roles and this will continue to be a priority in FY24.
08 SThree plc | Annual Report and Accounts 2023 09 |
Chief Executive Officer's statement continued
Strategic Report
Governance
Financial Statements
Strategic execution
Our places - knowing where to play, play where we can win
Our analytical and data-driven approach informs the regional and vertical mix we choose to operate in. Over the year we forensically analysed and validated our footprint, reconfirming our confidence in our active market coverage of 11 countries strategically focused in the biggest STEM markets. With an average share of under 3%, we believe there is substantial scope to scale, both organically and, given the highly fragmented and niche landscape, through select acquisitions that align with the Board's strict criteria, and in doing so, realise the increasing benefits of economies of scale.
This analysis also brought greater clarity and insight into the strategic direction for our regions - understanding where our core opportunities lie to drive margin and higher value, versus those regions ripe for steady growth or fast scaling opportunities. Within this context we continue to refine to how we go to market. Within the US, we reinforced our presence by moving away from a brand-led management structure, to having strong fully integrated regional teams serving all of our brands, and across the organisation we introduced new tools and dashboards to bring greater performance insight.
Our platform - digital first
We have bold ambitions to be a digital-first innovator in a traditionally analogue industry, and we see huge scope to drive higher margin growth by leveraging the power of modern technology. The systematic roll out of our TIP continues to progress on track and on budget, with our first deployment successfully completed in the US. Whilst we continue to work on data quality testing, it is evident that the end-to-end platform is working. We have already onboarded over 2,000 contractors, using it to submit timesheets, while to date we have issued over 15,000 invoices reflecting around $70 million of revenue.
We have a talented team and are building a market-leading technology suite, to help us drive future growth for the Group."
Timo Lehne
Chief Executive Officer
We are seeing the early benefits from our first deployment, including the systemising of best practice and process efficiencies, helping to improve both employee and client experiences. Our disputed invoice volume has fallen considerably as a result of improved data collection, and our Contractor payment process, which previously required a high proportion of manual intervention due to its complexity, has been streamlined significantly, freeing teams up to be more productive. As we have said before, the wider benefits around efficiencies and scaling will become evident with time as the TIP progresses, and the platform develops richer functionality.
We look ahead to our next regional deployment in Germany, commencing in the first half of FY24. We have a great team in place and are confident in our approach as proven by deployment in the US.
Our people - best employer, best people
The engine of our business is our brilliant people, and as such, we are focused on making our business a destination employer, attracting and retaining the best talent, in order to support our collective push as one team to achieve our growth ambition. The key metric we monitor to assess our standing is our employee net promoter score, and we were pleased to have comfortably retained our position this year in the top quartile of professional services companies. We continue to see high engagement across our employee surveys, there is growing uptake across the organisation of our DE&I learnings initiative launched in the previous year, and the soft launch of our newly redefined values in H2 to our sales leadership team is helping shape our culture as we grow.
With relation to the TIP, whilst a great deal of focus is on IT migration and data management, key to our programme is our training and change management initiatives working to ensure our teams understand our new capabilities and have the skills to adopt new ways of working. We have also started some bigger programmatic work, taking the global best practices and looking to standardise excellence.
Building on this, we will look to embed our new values across the Group. Other priorities are centred on ensuring we have the right incentives and infrastructure to allow our people to thrive, including the continued optimisation of our office footprint
in line with current working model expectations, new talent management programmes to retain key talent and drive shorter time-to-productivity, and ongoing efforts to ensure an inclusive working environment that promotes best practice and ambition.
Our position - a winning brand with competitive and differentiated value propositions
We are committed to providing best-in-class STEM staffing services to our clients and candidates by leveraging our global network of specialised brands. Our approach ensures that every client receives tailored solutions, unparalleled expertise, and a pathway to reach their goals amid an ever-changing landscape whilst helping candidates realise their career ambitions. During the year, we reinforced our go-to-market brand position in specific vertical skills, elevated our thought-leadership through new research 'How the STEM world evolves', and established a Group Commercial function under a new Chief Commercial Officer position to coordinate our commercial strategy.
Outlook
As we look forward, Contract extensions remain strong and provide an ongoing source of resilience, although as we await an easing of the macro-economic backdrop, new business activity continues to be subdued for longer than expected. Our conversion ratio, whilst anticipated to temper from the exceptional FY23 levels as our staged investment programme progresses, is expected to remain sector leading. We have been consciously positioning the business for the future and whilst we continue to operate in a challenging market environment, this does not change our focus. We have a resilient business,
a talented team, great client and candidate partnerships, and we are building a market-leading technology suite. With our investments and innovations, we are confident that when the market returns to growth, we will be in a position of strength to source the best STEM talent the world needs.
Timo Lehne
Chief Executive Officer
29 January 2024
Basic earnings per share
42.4p
FY22: 41.0p
Total divided per share
16.6p
FY22: 16.0p
10 SThree plc | Annual Report and Accounts 2023 | 11 |
Our business model
Unlocking our unique potential by
giving customers access to a global network
Strategic Report
Governance
Financial Statements
A global network
Europe offices(Head office: London) | USA offices | ME & Asia offices | ||||
Amsterdam | Frankfurt | München | Austin | Dubai | ||
Antwerp | Glasgow | Nürnberg | Boston | Tokyo | ||
Barcelona | Hamburg | Paris | Chicago | |||
Berlin | Hannover | Rotterdam | Houston | |||
Birmingham | Leeds | Stuttgart | New York | |||
Bristol | London | Utrecht | San Diego | |||
Brussels | Madrid | Vienna | ||||
Düsseldorf | Manchester | Zurich | ||||
Eindhoven |
SThree is a multi-brand organisation, giving our customers access to a global network of dedicated STEM specialists. SThree employs circa 2,700 people across 33 offices in 118 countries, with key operations located in Europe, the USA, the Middle East and Japan.
Where we operate
Financial reporting segments
Since FY23, the Group's reportable segments are as follows:
Europe |
USA |
Reportable segment name
DACH
Netherlands including Spain
Rest of Europe
USA
Middle East & Asia
Countries included
Austria, Germany, Switzerland
Netherlands, Spain
Belgium, France, the UK
USA
Dubai, Japan
Net fees per reporting segment
As a proportion of FY23 total Group net fees
FY23
DACH36%
Netherlands incl. Spain | 19% |
Rest of Europe | 17% |
USA23%
Middle East & Asia | 5% |
Recruitment consultants per reporting segment
Based on FY23 average
FY23
DACH | 37% |
Netherlands incl. Spain | 18% |
Rest of Europe | 20% |
USA | 17% |
Middle East & Asia | 8% |
ME & Asia
8. Excluding Ireland, Luxembourg and Singapore, which
as of 30 November 2023 were no longer a going concern.
12 SThree plc | Annual Report and Accounts 2023 13 |
Our business model continued
Our key value drivers
We have long-standing relationships and strong internal resources which we use to do business and create and preserve value for our stakeholders and for wider society.
Strategic Report
Governance
Financial Statements
What we do
As the global STEM specialist talent partner we connect sought-after specialists in life sciences, technology, engineering and mathematics with dynamic organisations across the world.
Our relationships
Our people
with a broad range of skills, experience and values, are crucial to deliver our purpose and strategy.
Candidates
who depend on us to connect them with the right opportunities and dynamic organisations in need of highly specialist STEM talent.
Clients
for whom we adapt our business and strategy by investing in the right vertical niches, improving and developing our service proposition so it continues to be relevant to evolving client needs. And for whom we have become the go-to partner to find niche STEM skills.
Local communities
where we established long-standing partnerships with local authorities, non-governmental organisations and other institutions. Together we contribute to development of a more diverse and innovative STEM talent pipeline.
Group resources
SThree's culture
is open, cooperative and performance focused. It is underpinned by policies and business practices and a well-established corporate governance framework, all of which are designed to guide our behaviours and ways of working across SThree. Our culture demonstrates a commitment to treating all employees, candidates, clients and local communities with respect as critical partners in our business.
Financial position
we fund our business through a strong operating cash flow, supplemented by debt and equity when needed. An appropriate mix between the three provides us with strategic flexibility to pursue value- enhancing opportunities when they arise.
Geographic footprint
with a strong leading presence in key STEM markets where technological change is at full speed and demand for contract roles outstrips supply.
How we do it
1
Talent in demand
We build specialist STEM candidate communities via multi-channel campaigns: career development fairs, industry events, networking, thought leadership, digital marketing and other targeting techniques.
1
We source and help to nurture sought-after STEM talent
2 Agility
The way we serve our clients flexes locally, accommodating client preferences and complex regulatory landscapes across all regions.
2
We connect STEM specialists with dynamic organisations across the world
3
Recurring revenue generation
We earn fees mainly on a recurring basis. 82% of Group net fees are Contract fees, earned on an ongoing basis for the duration of the contract, with the Group paying contractors and retaining a portion of the amount charged to the client as a service fee. 18% are Permanent fees, charged as a percentage of a candidate's starting salary when the candidate is placed with a client.
3
We earn fees and grow free cash flow
Investors
with whom we engage to share our strategic priorities and performance.
4
We reinvest capital wisely to fund continued business
growth and fund
dividend
Investing for growth
We are a highly cash generative business. We invest free cash into growing our business and asset base and use it to fund a regular dividend stream. In time, we will consider the appropriateness of inorganic opportunities.
5
We build a sustainable future through STEM
Sustainability
Our commitment to run a responsible and sustainable business remains at the heart of everything we do. We work with clients who are at the forefront
of tackling climate challenges, whilst investing in our own renewable energy business and managing our own carbon footprint towards the net zero economy. We make DE&I development part of business as usual and launch new incentives
to support the wellbeing and health
of our people.
14 SThree plc | Annual Report and Accounts 2023 15 |
Our business model continued
What value we create for stakeholders
Our natural ability to bring people together sets us apart. By nurturing closer relationships with our employees, candidates and clients, we earn loyalty and inspire collaboration.
By combining it with responsible resource management, and close relationships with local communities, we create value for all our stakeholders.
Strategic Report
Governance
Financial Statements
Our key competitive advantages
We are where the world comes for scarce STEM talent. This is where we operate.
By successfully focusing on STEM and developing a deep knowledge of our candidate specialisms and our clients' needs, we are able to bring clients and candidate talent together. The ability to achieve a perfect fit is highly valued by both parties. That enables us to maintain our pricing, invest in enhancing our service, continue to take market share in a growing market and generate sustainable returns.
Examples of our value creation in FY23 | ||
Our people | Shareholders | Environment |
(our institutional and retail investors) | ||
7.1% | 11.6p | 8% |
of operating profit invested in learning and | recommended final dividend per share | reduction in CO2 emissions since FY19 base |
professional development programmes | year | |
41,264 | £27.4m | |
employee training hours | total dividends distributed to shareholders |
Focus on STEM
Significant market potential
SThree operates in the world's largest STEM markets: the USA, Germany, the Netherlands, the UK and Japan. Despite our strong market positions we have a relatively small market share (circa 2% of the potential STEM market in the top five markets). This offers us a significant opportunity for growth.
Driving sustainable value
Clear capital allocation policy
Our investment policy reflects a disciplined strategy of value creation. Funds are allocated across the business according to strategic value-enhancing priorities, sustainability-related matters and principal risks.
Cash generative business
Strong financial position
Recurring revenue dynamics of our Contract business drive sustainable free cash flows. Plus, we maintain a £50 million Revolving Credit Facility (RCF).
in FY23 |
c.2% | £30-35m £83m |
For our 2,654 people worldwide, we provide a great place to work and invest in ongoing learning and development, wellbeing and DE&I programmes, all in
We aim to pay a dividend that is sustainable through the cycle, and which will be driven by long-term earnings growth. In FY23, the Board recommended
We source the talent needed to build a sustainable future, partnering with clients to support the transition to a low-carbon economy. Our ambition is to be a net
Our share of STEM market in our top five | Current investment plan to increase our | Net cash |
countries | productivity |
support of creating an inclusive culture, winning our employees' engagement and empowering them to meet their goals.
a final dividend for the year of 11.6 pence per share.
zero company by FY50, with a near-term target of reducing scope 1 and 2 GHG emissions by 77%, and scope 3 GHG emissions by 50%, by FY30 versus the base year FY19.
Global house of STEM specialist recruitment brands
Each of our brands brings expertise in specific sought-after skills within
Well-considered ESG strategy
Long-term commitments to the environment and society aim to deliver
Regular dividend
We offer shareholders long-term dividend growth in line with our dividend cover
Candidates and clients
15,292
candidates placed in FY23
Local communities
431
people accessed career support programmes
Full details of our transition to net zero can be found on page 71
science, technology, engineering and mathematics. We understand them and know how to achieve the goals of STEM professionals and the organisations that need them across many sectors - for both permanent and contract work.
positive outcomes for all our stakeholders and contribute towards the UN Sustainable Development Goals (SDGs).
policy, which is currently within the range of 2.5x to 3.0x of our annual earnings.
>7,200
clients we worked with around the world in FY23
We use our deep knowledge and global network to understand the needs and career aspirations of the best STEM professionals and match them with the organisations that need them, in both permanent and contract roles. Their work helps our clients make new discoveries, increase the accuracy and availability of technologies and to realise the long-term potential of technology to address the world's challenges.
3,094
hours volunteered in local communities
We use our knowledge and experience to support local communities and initiatives to help eliminate barriers to employment and create more pathways into STEM careers.
1,833 | 114,466 | 16.6p | ||
Recruitment consultants | Number of lives positively impacted since FY19 | Total dividend per share | ||
See Strategic progress: Our Places, Our | See Our commitment to being a responsible | See Chief Financial Officer's statement | ||
Platform for more information on page 24 | business for more information on page 52 | for more information on page 34 |
16 SThree plc | Annual Report and Accounts 2023 17 |
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SThree plc published this content on 29 February 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 March 2024 12:21:05 UTC.