Investment case
As a leading player in the field of specialist recruitment, SThree offers investors the opportunity to buy into a large-scale business with the following robust credentials:
25-year history of profitability
SThree has been profitable every year since our inception in 1986 and, for the overwhelming majority of the time, we have shown significant year-on-year profit growth. Indeed, the only two periods that were the exception to the rule were times of global recession in our markets. Our history shows we do not need strong economic tailwinds in order to perform strongly.
A homegrown business
We have always grown organically and none of our ambitious plans for the future require us to fundamentally change our approach. We prefer wherever possible to grow the business using management that we have developed ourselves - typically from early on in the individual’s career or straight from university. Well over 90% of the Group’s management have come up through the business.
Balanced Portfolio of Permanent & Contract Business
SThree has developed franchises in both permanent and contract staffing. These currently contribute on an approximately 50:50 basis. Traditionally, the permanent business outperforms in a buoyant market whereas contract is more resilient when conditions are more challenging.
Consistently cash generative
Permanent placement is very much a “cash cow”, whereas growing a portfolio of contractors tends to be cash consumptive, given the lag between paying contractors and receiving cash from clients. However, in strong market conditions, the cash generated by the permanent business more than compensates for this factor. In very poor conditions, contractor numbers reduce, releasing "trapped" cash.
Robust dividend track record
The cash generative nature of our business allows us to adopt a bullish attitude towards our dividend policy. Even during the worst of the recent global downturn we maintained our dividend at the pre-downturn level. More recently, we have increased the Ordinary Dividend significantly. In 2011 we also paid a Special Dividend which we expect to repeat on a periodic basis.
A sustainable business model
The service we offer covers the entire recruitment process end to end. We are involved at every stage from candidate and client matching to the start date and beyond. By contrast, job boards and social networking sites are primarily marketplaces that act as a means of introduction. Furthermore, we offer the sought-after candidate a "concierge" level service which is free to them and hence highly attractive compared to the alternatives.
Diverse sectors and countries
Having started in the UK we now generate around two thirds of our business from our international operations. We have a total of 60 offices in 17 countries and are adding around six new international offices each year with recent openings including Brazil, Russia and India. We operate across a range of industry sectors including ICT, Accountancy & Finance, Banking, Engineering & Energy, and Pharmaceuticals & Biotechnology.
High value, high margin specialist niches
In all the markets in which we operate we only place highly skilled, well-paid professionals. Our consultants focus on specialist niche areas, offering expert advice to candidates and clients. This approach has allowed us to post healthy increases in the average values of both our permanent and contract deals, even during the worst of the global downturn.
Increasingly exposed to markets with structural growth
Many of the territories in which we operate have relatively or very immature specialist staffing markets and our exposure to these countries is increasing on an ongoing basis. Some examples. such as the BRIC countries, may be obvious. However, some more developed economies also offer strong structural growth, Germany being the best example.
Focused on project-oriented markets
We play to our strengths in sectors such as ICT, engineering and energy which are, by their nature, project oriented and technology driven. This not only benefits our contract business as clients are often seeking temporary hires, but it also expedites natural churn on the permanent side to levels above that typically seen in other professional sectors. This enhances demand even in mature markets.
Leading edge systems as a platform for growth
We have always had a firm belief in the power of providing the right tools for the job. Our industry-leading systems have been developed with the aim of turning huge amounts of data into commercially useable information. Our candidate databases are accessible on a global basis and we run the business through bespoke sales management applications.
A highly entrepreneurial culture led by owner managers
We believe strongly in the importance of equity participation by our staff. Our CEO and many of our senior managers have significant holdings of SThree stock. We also operate a "Minority Interest" Scheme which allows selected management to buy a stake in the business for which they are responsible, making them part-owners rather than simply paid managers.
Excellent capital growth potential with reliable income
Given our track record, our well-established business model and our increasingly global exposure across a number of sectors, we believe we have excellent medium-term growth potential. We are also a cash generative business with no debt and an organic business model. This gives us a high degree of confidence in our ability to offer an attractive dividend across the economic cycle.
CEO'sView
In 2011, we substantially improved profitability whilst continuing to invest in the business. In 2012, our seasoned management team will drive the best results, whatever the market conditions.
Our Brands andSectors
SThree is the parent company for our organically grown recruitment brands, specialising in ICT, Engineering & Energy, Pharmaceuticals & Biotechnology, Banking and Accountancy & Finance.