Group highlights
Our purpose is central to everything we do as a business and is why we exist, bringing skilled people together to build the future.
Item 1 of 6
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Group
highlights -
Our role in the Fourth
Industrial Revolution -
Chairman’s
statement -
CEO’s strategic review
& CFO's review -
Our business model
and strategy -
How we are building
the future
Annual Report 2019
OUR PURPOSE
Our purpose is central to everything we do as a business and is why we exist, “bringing skilled people together to build the future”. Our work is aimed at changing people’s lives for the better and this is something that is core to our strategy and long-term success. As market trends shift and STEM skills become ever more prevalent, we are helping to build communities of talent and to future-proof people’s careers while providing our customers with their most valuable asset.
OUR PURPOSE
Bringing skilled people together to build the future
We focus on STEM (Science, Technology, Engineering, and Mathematics) talent, but even more so on STEM niches, where we excel in finding scarce skills. SThree’s enhanced value experience is based on superior candidate quality enabled by our candidate communities, an exceptional level of customer service, market understanding and compliance capability.
OUR VISION
To be the number one STEM talent provider in the best STEM markets
This is the goal we are working towards. We are focused on setting the conditions for success in each geography, supported by operational improvement and our key principles, which guide our way of working. Our Operating Principles are based on research with our clients and candidates to identify what they most value in a recruitment partner:
- Build trust
- Care then act
- Be clear then aim high
2019 Financial highlights
Revenue
£1.35bn
(2018: £1.26bn)
Net fees
£342.4m
(2018: £321.1m)
Adjusted operating profit
£60.0m
(2018: £53.9m)
Reported profit before tax
£56.8m
(2018: £47.0m)
Basic earnings per share
31.8p
(2018: 26.6p)
Adjusted basic earnings per share
33.2p
(2018: 30.7p)
Progressive take care of all the administration work and they give me market information so I can fully focus on my own job. I expect to continue to work with Progressive because they have a broad network of clients and I trust them to keep my career secure in the future.
— Paul Schenk
Progressive (SThree) client
Annual Report 2019
the world’s number one pure play STEM recruiter
SThree has a unique position in the market as the only global pure play STEM specialist. We are proud to stand out, focusing on three core areas: STEM; Contract – or flexible working; and targeting the right global regions.
This both sets us apart from our competitors and positions us for future, long-term profitable growth. As we – and others – navigate through the Fourth Industrial Revolution, STEM is at the forefront of this exciting new world. Not only do these skill sets fund and drive an increasingly technical, interconnected and fast-paced way of life, they are also central to solving the problems we face and harnessing the power of technology to succeed when things go wrong.
Mark Dorman
Chief Executive Officer
Our role in the Fourth Industrial Revolution
The Fourth Industrial Revolution is upon us. Entire systems of production, management, and governance in almost every industry in every country are being transformed. The world of STEM is underpinning that revolution.
THE WORLD IS CHANGING AT A RAPID PACE,BREAKTHROUGHS IN FIELDS SUCH AS LIFE SCIENCES, AI, ROBOTICS, ENERGY STORAGE & QUANTUM COMPUTING ARE EMERGING AT AN UNPRECIDENTED RATE
This fast-paced change is throwing down challenges
Climate emergency, inequality, resource scarcity, urbanisation, access to education and energy – the fourth industrial revolution is responding to these challenges.
Societal challenges
2bn
people live without reliable electricity globally
Source: 2019 The Energy Progress Report, by World Bank, International Bank for Reconstruction and Development
4bn
people still remain offline and 1 billion of these are not covered by mobile broadband networks
Source: State of Mobile Internet Connectivity 2018 Report by GSMA
15yrs
In the US, men in the top one percent of the income distribution can now expect to live 15 years longer than those in the bottom one percent. For women, the difference is about ten years — an effect equivalent to that of a lifetime of smoking
Source: Health Policy Brief, Report by Health Affairs
1.7bn
About 1.7 billion adults remain unbanked
Source: World Bank
OUR STEM CLIENTS ARE UNDERPINNING THE RESPONSES
Our 9000+ clients work in the technology, life sciences, banking & finance, energy & engineering sectors - directly or indirectly, all tackling these issues.
The Fourth Industrial Revolution underpinned by STEM
115%
Job opportunities in Energy & Engineering sector are expected to grow by 115% in the next decade, with a focus on sustainable energy*
120%
Job opportunities in Technology sector are expected to grow by 120% in the next decade, with a focus on cloud computing, machine learning/A.I., big data*
121%
Job opportunities in Life Sciences sector are expected to grow by 121% in the next decade, with a focus on biotechnology, health data management, personalised health*
107%
Banking & Finance sector is expected to grow by 107% by 2026 with a focus on fintech, cryptocurrency*
* Source: https://www.cnbc.com/2018/10/16/top-10-industries-that-are-hiring-thriving-and-making-money.html
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Annual Report 2019
2019 Financial highlights
SThree delivered in 2019 a record performance in terms of revenue, profitability and market penetration as we focused more tightly on providing our customers with the best STEM talent, our candidates with the opportunity to fulfil their ambitions and potential, and our employees with engaging and rewarding work. This is all the more impressive given a complex and somewhat unpredictable macro-economic and political backdrop in some of our main markets.
We are focussed on the most attractive STEM staffing markets globally
Our purpose remains compelling and unchanged:
Bringing skilled people together to build the future. It is this purpose that governs our responsibility to all stakeholders.
We have spent considerable effort and attention during the year to ensure that we are closer to our customers and candidate communities, and this remains a key future priority of the Group, together with enhancing our offering to employees and communicating better with our investors. We are pleased about the role that our business plays in wider society and have re-energised our CSR (corporate social responsibility) activities and implemented new initiatives under our ESG (environmental, social, and governance) strategy.
CEO change
As signalled last year, Gary Elden stepped down as CEO in March after nearly 30 years in the business, the last six of them as CEO. Gary was responsible for setting a number of the business foundations we have in place today and which provide an enviable springboard for future growth.
We were pleased to welcome Mark Dorman as CEO in March, bringing to SThree a wealth of experience in scaling international business service operations, delivering compelling strategies and leading great teams. He has already shown himself to be an ambitious and insightful leader, and I look forward to continuing to work with him.
Our stakeholder engagement
In November we held our Capital Markets Day in London to update investors on our vision, strategic evolution and blueprint for success. Our huge market opportunity is also clear, and we are proud to have crystallised our strategy and pathway to sustainable future growth.
Our colleagues put in the tireless effort every day to make SThree a trusted partner to our many customers and candidates. It is their drive and dedication to our purpose that elevates SThree as a global leader and partner of choice.
The Board and individual Board members spent time visiting a number of our offices over the year, seeing the work being delivered across our platform, from our excellent operations and technology activities in Glasgow to the local market leadership we enjoy in Amsterdam.
Corporate governance remains a priority and focus of the business and we have set ourselves FTSE 250-appropriate targets and aspirations. We are also focused on initiatives to enhance diversity and inclusion across our organisation and remain committed to ensuring that all of our employees’ voices are heard at every level.
Outlook
A sense of excitement for the future is palpable across SThree. Our recently refined and newly articulated strategy provides us with confidence in our long-term success, supported by strong structural market drivers around STEM and flexible working, a great team and a corporate purpose that seems ever more relevant to meet many of the world’s future challenges and opportunities.
James Bilefield
Chairman
Annual Report 2019
CEO STATEMENT
As the only global pure-play STEM specialist, our knowledge of the STEM markets, the needs of businesses operating within them, and the niche, local talent we have built trusted relationships with, is unrivalled.
We have built a set of scalable service offerings, which are recurring in nature and which we deploy globally, allowing for long-term sustainable growth.
Our future success will be reliant on our ability to channel those ideas and ensure we choose the right opportunities to focus on.
Mark Dorman
Chief Executive Officer
UNDERSTANDING OUR MARKETS
We truly understand the dynamics of our markets, both as they are now and where they are headed.
STEM
The scale of the growth and change as a result of the need for STEM skills going forward should not be underestimated.
Addressing some of the biggest issues such as climate change and the huge demographic shifts is just the start. Skilled people are needed to solve these global challenges and drive the future. This creates a huge opportunity as many of those skills, while still in high demand, are also in short supply, irrespective of where we are in terms of economic cycle.
FLEXIBLE WORKING
Millennials and Generation Z, particularly those with STEM skills, see their career through the lens of the various projects that they work on rather than the companies they work for.
At the same time, more and more companies are looking for contingent workers and flexible workforces, whether on large scale capital projects in Engineering or Life Sciences, or whether they’re looking to upgrade their technology and their innovation sphere project by project.
These dynamics continue to drive the need for the right talent in a supply constrained environment.
A scalable platform business to drive further growth
We are experts in engaging with both the client and the candidate all the way through a project, standardising our processes across the globe and ensuring the client and candidate come to our teams for their solutions going forward, making it a truly repeatable process. Our scale allows us to deliver this offering across the globe, in an increasingly complex regulatory environment for our clients. Our scale, expertise and culture make us the partner of choice.
We have built a set of scalable service offerings, which are recurring in nature and which we deploy globally, allowing for long-term sustainable growth.
Our future success will be reliant on our ability to channel those ideas and ensure we choose the right opportunities to focus on.
As such, we have implemented a ‘managing for value’ programme process which assesses the economic value that would be created by each idea and allows us to rank them by the economic rate of return.
This allows us to create real structure to help us execute our strategy across five areas of focus – our current geographies and markets, investment in sales and marketing, the use of data to enhance our decision making, to help drive our business and innovation, while building on our operational capabilities.
We are also able to utilise valuable exhaust data from the activity across our business. We understand what is going on in the STEM markets through the work we do, and this knowledge enables us to have the right people in the right place to help our clients.
We maintain our focus on embracing new technologies and believe that this should be central to everything we do. This will drive efficiency across our scalable, platform business and support the delivery to our customers. We will continue to capitalise on trends to remain relevant to our customers in a new digital era, whether that being new ways of working or incremental improvements on an ongoing basis.
OUR STRATEGIC PILLARS
Our new strategic pillars are the guideposts of how the business will be driven going forward and reflect how SThree will build upon its unique position in the market.
- Leveraging our position at the centre of STEM to deliver sustainable value to our candidates and clients
- Create a world class operational platform through data, technology and infrastructure
- To be a leader in the markets we choose to serve
- Find, develop, and retain great people
OUTLOOK
Looking to the year ahead, we will continue to build our scalable platform. We will continue to invest in our people, data and technology as we execute against our focused strategy as outlined at our recent Capital Markets Day.
Whilst early in the year, we can see that broader macro-economic and political uncertainties may well persist, and the trading environment remains similar to Q4. We have the right strategy, are in the right sectors and geographies, and our Contract focus will allow us to drive another year of progress towards our ambitions.
CFO STATEMENT
The strength of our model has enabled us to deliver another year of strong performance in 2019.
Our continued focus on STEM, and our scale and global footprint in the right markets, combined with our ability to provide a full staffing solution for all our clients’ needs mean that we delivered an all-time record profit performance in 2019.
This performance is a result of the hard work delivered both strategically and operationally, and we continue to move closer to delivering on our vision of being the number one science, technology, engineering and mathematics (‘STEM’) recruiter in the best STEM markets.
Alex Smith
Chief Financial Officer
FINANCIAL HIGHLIGHTS 2019
Revenue
£1.35bn
Revenue for the year was up 6% to £1.35bn on a constant currency basis
Net fees
£342.4m
Net fees increased by 5% to £342.4m
Adjusted operating profit
£60.0m
Adjusted operating profit grew by 9% to £60m - a record level for the Group
Adjusted profit before tax
£59.1m
Adjusted profit before tax was up 11% YoY to £59.1m (2018: £53.4m)
Reported profit before tax
£56.8m
Adjusted profit before tax was up 11% YoY to £59.1m (2018: £53.4m)
Group net fees
86%
of Group net fees generated from international markets (2018: 83%) with strong growth in the USA, Continental Europe, and Asia Pacific & Middle East.
Technology
7%
growth in our Technology sector
Life Sciences
5%
growth in our Life Sciences sector
Energy & Engineering
14%
growth in our Energy & Engineering sector
One of the main reasons I chose to work with SThree was the endless number of opportunities they presented me with. One of those opportunities was to work at Children’s Aid, and I truly believe that opportunity has transformed my life.
— Alejandro Lopez
SThree candidate
Download the Report
Annual Report 2019
Global demand for STEM skills
The Fourth Industrial Revolution centred on technological solutions is set to continue, centred on the US and Europe, but spreading rapidly across the globe. The main source of global demand for, and spend on, STEM skills comes from technology-focused companies, which make up circa 50% of the market capitalisation of the world’s 30 largest companies.
Globally, the STEM staffing markets are influenced by the overall number of jobs, scarcity of skills, employee churn rates and the propensity of organisations to outsource recruitment. The demand for enhanced services is also a growing feature. Markets where demand for STEM skills continues to grow and outstrips supply are as follows.
Flexible working becoming the future of the workplace
The ‘job for life’ or multi-year employment with one organisation is becoming less prevalent in today’s world. People now often prefer to work short-term contracts otherwise known as ‘gigs’, or project freelance work. These types of roles allow for greater independence and flexibility in their careers, giving them control over how much and when they work. People are also attracted to gig work as they value the opportunity to develop new skills in a relatively short timeframe. The result of this is that those who work this way have a higher frequency of role changes than ever before
EMBRACING TECHNOLOGY IN RECRUITMENT
The face of traditional recruitment is experiencing a significant transformation at the moment. The abundance of disruptive and incremental technologies is powering the current trends in recruitment, and can act as a key differentiator in service and efficiency. The automation of core recruitment processes reduces operational costs and enables the business to be scalable.
Growth in new business models
The Employed Contractor Model (‘ECM’), where a skilled specialist is legally employed by SThree but works for the end client is already the model of choice in USA and becoming increasingly popular across Continental Europe.
What it means for SThree
Freelance contractor is our core Contract offering, a dominant model in USA and Continental Europe, where we experience high client demand for the ECM. Our scale provides coverage to our clients, who increasingly need our help to navigate through ever-increasing regulatory landscapes.
Continued macro-economic uncertainty
We are a globally diversified business. A key part of our strategy is our international business. We continued to invest in markets where we see the greatest growth, such as USA and Asia Pacific & Middle East while remaining mindful of the weaker macro-economic conditions seen in much of Continental Europe and UK&I. Notwithstanding the macro-economic uncertainty, demand for quality talent in STEM markets remains strong. This is due to ongoing demographic shifts, an ageing workforce and relatively high churn, as candidates move to update skills, all of which results in a shortage of specialist talent.
Our Business is resilient
Adjusted operating profit tripled over period, despite a number of shocks in key markets
OUR STRATEGY
From 2020 we will focus on executing across four new strategic pillars. They serve as guideposts of how the business will be driven forward, and reflect how we will build upon our unique position in the market.
01.
Leveraging our position at the centre of STEM to deliver sustainable value to our candidates and customers
02.
Create a world class operational platform through data, technology and infrastructure
03.
To be a leader in markets we choose to serve
04.
Find, develop, retain great people
Download the Report
Annual Report 2019
Key outcomes
Candidates
4m
STEM specialists in our database
1.7m
visits to our websites in the last 12 months
1.4m
new STEM candidate applications in the last 12 months
715K
new followers on LinkedIn
Clients
44
NPS score
20,000+
new placements in 2019 (through work of talent we recruit and place, we partner with our clients to build a better future)
Employees
38
eNPS score
- Employer of choice in Germany
- Well-equipped internal recruitment team to deliver required growth and quality service
- Ongoing improvements across business, to ensure a fair and inclusive environment 4% increase in female leadership since 2018
4%
increase in female leadership since 2018
Local communities
4,365
people engaged in STEM projects funded by the SThree Foundation
2,490
hours of volunteering in our local communities
£157k
raised for good causes that achieve the SDGs including our partner the African Science Academy
Environment
B
score in the Carbon Disclosure Project Finalist APSCO Awards for Excellence CSR Initiative of the Year 2019
Building the future through our culture and principles
Our key operating principles - build trust, care then act, and be clear then aim high - underpin our approach to working with customers, suppliers, investors and local communities, while capturing the behaviours we expect from our people.
- Build trust
- Care then act
- Be clear then aim high
Understanding our stakeholders
We focus on creating and nurturing a wide range of stakeholder relationships and we build responsible, sustainable and trustful business partnerships with client organisations, our employees and local communities.
Engaging our stakeholders
Through our engagement with our stakeholders we identify the key issues that matter to them. These issues inform how we run our business on a day-to-day basis, and we develop strategies and initiatives to address them. Feedback we receive from our clients through our core services and community initiatives enables us to address societal challenges, such as the future talent pipeline needed to meet the skill gaps or business benefits of embracing diversity in employees and forming an inclusive work environment. We engage directly with candidates through a number of channels. We know that some groups of our candidates still face disproportionate barriers to work. Our teams actively support candidates to overcome these barriers through ensuring we have open, transparent and anonymous recruitment processes that alleviate unconscious bias. Our person-centred approach also means we work to negotiate the salary, working hours and benefits our candidates require to overcome any practical barriers to employment.
Investing in our people
We’ve created an inspiring and inclusive work environment where we invest in our people and their ability to establish strong relationships with customers and create shared value for communities. We provide various workshops, training and mentoring to people from diverse backgrounds to engage and inspire them into STEM careers, overcoming some of the perceived barriers within STEM industries.
During 2019 we collaborated on over ten projects to support those from diverse backgrounds into STEM careers and we delivered over 2,490 hours of volunteering to programmes that help raise aspirations.
Building a sustainable future
We recognise the importance of ensuring long-term sustainability through concerted climate and environmental action.
2019 highlights
Last year we set goals and took action on emissions and our carbon footprint. We established an ambitious emissions reduction target of 20% by 2024. We offset our 2018 global carbon footprint to achieve carbon neutrality. We reduced emissions by 12% as a result of staff engagement initiatives.
Growing a sustainable business
In 2019 we reduced our overall market-based greenhouse gas emissions by 12%, and by 17% on a per-employee basis. This indicates that whilst we grow our business, we are doing so in an increasingly sustainable manner. This has been driven by several targeted initiatives, such as our strategy to procure an increasing proportion of our electricity from renewable sources.
Reducing our environmental impact
As a global business, travel accounts for the majority of our carbon footprint. Launching on World Environment Day 2019, we undertook an eight-week campaign to raise awareness of the environmental impact of travel. The campaign encouraged colleagues to think about their business travel and as a result we have seen a 5% reduction in colleagues’ air miles.. In September we delivered a programme of activities to raise awareness of the climate emergency, including litter picks, webinars with external experts and learning workshops. Our colleagues contributed over 194 hours to volunteering for environmental projects during that month.
We have maintained carbon neutral status in 2019 by continuing to offset global emissions with ClimateCare. Since 2012 we have offset 23,693 tonnes of carbon.
Empowering sustainable communities
The SThree Foundation supports STEM focused community projects that bring people together to build the future. In 2019, we supported 10 projects across our key markets that inspired and engaged thousands of people in STEM and employment programmes.
Supporting life-changing programmes
In 2019, we supported 10 projects across our key markets that inspired and engaged 4,365 people in STEM and employment programmes. Empowering refugees to become STEM entrepreneurs in the Netherlands, education programmes that inspire a new generation of engineers in Chicago and STEM insight placements in New York, demonstrate some of the projects we funded and collaborated with in 2019.
Charity Partnership
We teamed-up with the African Science Academy to inspire a generation of changemakers. The girls we suppot will solve community challenges with STEM solutions that help transform Africa. SThree has raised over £145,000 and volunteered 88 hours to empower African Science Academy students to become the future STEM leaders who will build the future.
Volunteering
During the year, our people volunteered over 2,490 hours to help tackle social mobility and equality issues. Our people took part in 400 hours of employability and training support in collaboration with Joblinge to young people and refugees who are not in education, employment or training in Germany.
Our people also delivered 18 employability sessions helping people understand the employment market, their personal brand and how to source work. Through the SThree Foundation’s support, Joblinge also recently commenced informatics and mechanics workshops to support young people and refugees to pursue a career in STEM.
Aligning to the United Nations Sustainable Development Goals (SDGs)
In 2019, SThree contributed to 11 of the 17 SDGs. Our contribution will grow as we continue to align our business model to the realisation of the SDGs, focusing on the following key areas:
- Supporting social mobility and helping to reduce unemployment and underemployment, to alleviate poverty and decent work for all.
- Developing a diverse STEM talent pipeline for our clients whilst delivering social impact. This will be delivered through quality education, resulting in decent work, equality, the growth of industry and the continued development of sustainable communities.
- Empowering our people to have positive health and wellbeing through various programmes delivered across the business.
- Continuing to reduce our carbon footprint and committing to carbon offsetting, which together helps tackle climate action and results in affordable, clean energy and sustainable communities.
We will continue to work with partners to bring skilled people together to build the future our world needs.
