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Hello. And welcome to the SThree Q1 Trading Update. [Operator Instructions] And just to remind you, this conference call is being recorded. Today, I'm pleased to present Mark Dorman, CEO. Please go ahead with your meeting.
Good morning, everyone. And welcome to SThree's Q1 Trading Update. And today, I'm joined with Alex Smith, our CFO. We'll do an update and then we'll do some questions at the end. First off, I should talk about novel coronavirus COVID-19. We'll talk more about this after Alex takes us through the numbers, but here are a few initial thoughts. First and foremost, this is a global public health crisis, and we should all remember that the human cost of this is the one that we should be primarily concerned about. As I'm sure you all have seen and experienced, this is a rapidly changing situation that varies widely across the globe and impacted directly by national government action. It will be difficult, therefore, to predict the impact on business. That being said, SThree is a resilient business. The fundamentals of our business model, our robust business continuity planning, our net cash position and significant banking facilities mean that we are well placed to deal with this crisis. Additionally, our unique position as the only global pure-play STEM staffing specialists positions us well as these roles remain critical at this time of stress. Moving on to our results. Our performance in Q1 was in line with management expectations despite significant global macroeconomic challenges throughout the quarter. Our net fees remained flat as expected in our seasonally quietest quarter. In our international market highlights, we had strong performance in Germany up 7%, continuing to outperform the market markedly, and the Netherlands had an impressive 3% growth performance. Additionally, we -- as you see, we have a strong balance sheet. And overall, our robust performance is demonstrating the strength of our strategy, focusing on flexible working in contract and our STEM roles, science, technology, engineering, mathematics, across diverse geographic markets. Whilst the current environment remains unpredictable, we place the people that are needed to solve today's problems, and we feel confident that we can manage through this cycle. With that, I'll pass to Alex, who will take us through the numbers.
Thank you, Mark. And good morning. And before I start, it's important to note that we have made changes to our reporting structure this period, which is in line with the strategy announced at the Capital Markets Day and reflects our updated internal management structures. This includes new groupings of DACH; EMEA, excluding DACH; U.S.A.; and APAC. We also provide net fees by our 5 key strategic markets: Germany, Netherlands, U.S., U.K. and Japan. There is a quarterly restatement reconciliation available on our website for this new reporting structure back to Q1 2016.Now on to the results. The figures I will comment on are for the period 1 December '19 to the quarter ending 29th February 2020 and reflect the new reporting structure. Group net fees for quarter 1 were flat on a constant currency basis. We delivered good international growth, which is 87% of group net fees, a more resilient contract business where net fees grew 2% now accounts for 75% of the group total. On a regional basis, DACH had a strong quarter with net fees up 9%, predominantly a result of the market-leading German performance, which was up 7%. EMEA, excluding DACH, declined 6%. The strong performance from the Netherlands, up 3%, was offset by U.K. performance, down 8%. As expected, we have begun to see the impact of IR35, which prompted changes in clients and candidate behavior. We've been proactively engaging with our clients and candidates on how best to manage this change. USA net fees were flat at GBP 16 million and short of management expectations. The Life Sciences and Engineering sectors continued to provide growth in the region, offset by decline in Banking & Finance, which is a trend not just isolated to the U.S. And despite strong growth from the tech sector in APAC, we saw a decline in the region of 15%, the impact of several factors, including the Australian wildfires and COVID-19. Roles in tech, Life Sciences and Engineering continued to be in demand, positioning us well globally. And while the macro uncertainties are increasingly apparent, during the quarter we continued to invest in the business with a particular focus on our U.S. and German businesses, in line with our targeted investment approach. Overall, investment has contributed to group average headcount increasing 5% year-on-year, with period end headcount up 3%. We maintain a strong balance sheet with net cash at 29th of Feb of circa GBP 9 million, along with unused committed facilities of GBP 50 million, and uncommitted accordion and overdraft facilities of a further GBP 25 million through to 2023. I'll now hand back to Mark to comment on the outlook.
Thanks, Alex. And so you'll see that our performance in Q1 is in line with our expectations. And while somewhat stating the obvious, our macroeconomic challenges globally have increased markedly, driven primarily by coronavirus and, as I've already stated, national government reaction to that. We continue to monitor various factors closely, and we have a crisis team that is focused on understanding the dynamics in the marketplace, and we will react accordingly. However, the structural shift in demand for STEM skills across our key markets is fundamental, and this crisis only serves to highlight this need of these critical roles as we move forward. We have absolute confidence that our purpose of bringing skilled people together to build the future serves us well as we continue to strive to be the #1 STEM talent provider. We'll now be happy to take your questions.
[Operator Instructions] Our first question comes from the line of Sanjay Vidyarthi from Liberum.
Sanjay at Liberum. Just kind of a big picture question. The conversations you're having with your clients and companies, how are they thinking about things right now? What are they saying? I know it's obviously all -- everything is up in the air, and it's very difficult. But what are they saying to you?
Thanks, Sanjay. So I'll take that. And I think the rather disappointing answer is going to be, it depends. I think you stated it well that everything is a little up in the air. There's widely different reactions and different parts of the market are in very different states. So if you think across from Japan to San Francisco and all the country, all the 16 countries we operate in between are all having very different phased approaches to that. I think what's clear is that all companies everywhere are assessing where they're going to operate. They're all looking at their business continuity planning. They're looking at their technology infrastructure and how they can support their employees. And then those companies that are directly involved in helping with the crisis, are looking to see how they can operate through this to make sure that they can solve the problem. So look, I don't have a magic bullet or some special lens into it so it really depends across which market and which sector you look in. And then, of course, the overlay to that is national government response and how they operate, has a material impact on various sectors that I'm sure you're seeing in many of the other companies that you follow.
And the next question comes from the line of Alex deGroote from Radnor Capital.
And can I ask 2 questions, please? So the first one relates to the current [ performance we're ] seeing in the U.S. in Q1. Could you talk a little bit about that? And the factors behind why you think it may have fallen short of expectations? Secondly, can you talk a little bit more about this crisis team that you mentioned on the call? What powers do they have? And a feel for their remits, please?
Yes. Alex, maybe I can answer the second question first, and then I just want to clarify the first question because you were cutting in and out. Was that a question about US Q1 performance?
Yes. You referenced the fact that the fees were flat in Q1, but you say short of your expectations. So could we have a tiny bit more color just around that please, Mark?
Sure. Yes. Look, so on the first question, so like every company, we have robust -- well, maybe not every company, but we certainly have robust business continuity planning. And so that team, obviously, is in place to make sure that we do 2 things. Number one, that we monitor the situation to keep our people and our candidate safe; and number two, that we keep our business operations running throughout. And it meets on a daily basis. I am involved in that, as is the rest of the senior management team and our functional heads to make sure that we drive the business forward through this. And on the second question, I'll just pass to Alex and you can just go through U.S.
Yes, no problem. Yes. So just to give a little bit more color on that. The Banking is challenging really for us in most geographies. It was particularly changing in the U.S. in the first quarter. So we saw the Banking sector declined by 38%, which was a greater rate of decline than the fourth quarter. We also had -- well, it was a creditable double-digit performance in terms of the Energy and Engineering performance. It was below our expectations as certain large infrastructure projects with purchase orders hadn't come through quick enough to impact our net fees in the quarter. So those are probably the 2 major factors that brought the growth below our expectations. We were looking for a sort of a mid-single-digit growth. So we were slightly disappointed by that.
[Operator Instructions] And we have one more question from the line of Adrian Kearsey from Panmure Gordon.
Headcount up in the period, with U.S. and Germany being the areas of focus, would you mind perhaps providing a bit more detail about which particular segments of the market you've been investing in?
Yes. So, I mean, thinking, first of all, about Germany. Germany saw a growth in the quarter across all of our principal sectors. So we actually even saw growth in Banking in Germany that was pleasing. But really, in Germany, it would have been focused on Tech, Engineering and Life Sciences, in particular. And within the U.S., the focus is primarily on Life Sciences, Engineering and Tech again, reducing our exposure in Banking.
And as there are no further questions, I'll hand it back to the speakers.
Okay. Well, thank you, everyone, for being on the call and joining us this morning. We look forward to updating you the next time at our H1 Trading Update, which will be on the 15th of June this year. Speak to you all soon.
This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.