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UK – Strong international profit growth boosts SThree

12 September 2014

International recruitment firm SThree (STHR: LSE) reported gross profit of £55.1 million during the third quarter ending 31 August 2014, an increase of +18% in constant currency compared with £49.8 million last year.

Gross profit derived from contract recruitment rose by +28% in constant currency from £27.9 million last year to £34.1 million this year. Permanent recruitment gross profit rose by +6% in constant currency to £21 million.

The company provided no information on revenue or operating profit in its interim management statement.

Gary Elden, CEO of SThree, commented: “Against a backdrop of a continued improvement in macroeconomic conditions in a number of our markets, we have had an encouraging third quarter. Contract had another strong quarter, driven by new high growth markets, particularly the USA, Energy and Life Sciences.  Contract gross profit increased by +28%, year-on-year, and now accounts for 62% of the Group total.”  

"Permanent was up +6%, year-on-year in Q3, a broadly stable performance versus Q2. The Permanent pre-deal pipeline is looking significantly stronger, pointing to an improving gross profit picture over the next 3-6 months.”   

"In line with our objective of improving returns from our international office network we took the opportunity to rationalise elements of our Banking & Finance business and exit certain sub-scale businesses during the period. Resources have been redeployed to our operations in the USA which continue to grow very strongly, with gross profit ahead by +75%, year-on-year, in Q3,” Mr Elden added.

Geographically, SThree reported gross profit growth across every region, in terms of constant currency, compared with Q3 2013. The company now generates 70% of gross profit from markets outside the UK & Ireland.

The strongest growth was reported across the Americas, with gross profit rising by +75% in constant currency to £9.4 million, up from £5.9 million a year ago. Following a review and rationalisation of a number of sub-scale operations, resources were redeployed and reprioritised to the USA, where the Group is doubling its office space in New York, Boston, Houston, and San Francisco. 

Gross profit from Continental Europe increased by +12% in constant currency to £23.8 million, up from £23.2 million last year. Gross profit from permanent recruitment remained flat compared with the same quarter last year.

SThree’s Asia Pacific & Middle East region reported gross profit growth of +11% in constant currency to £5.3 million.

In SThree’s home market, the UK & Ireland, the company achieved gross profit growth of +9% in constant currency, rising from £15.3 million in Q3 2013 to £16.6 million in Q3 2014. Gross profit from contract recruitment across the region more than offset a decline of -11%, in constant currency, in gross profit from permanent recruitment during the quarter.   

Looking forward, Mr Elden added: "The fourth quarter is traditionally our most significant trading period and this will be accentuated in the current year by the pattern of headcount investment. Looking further ahead, the strength of our Contract book and improving pre-deal trends for Permanent give us confidence for the business in the medium term."

In trading today, the company’s share price rose by +0.3% to £3.41, an increase of +1.4% compared with a year ago. Based on its current share price, the company has a market value of £430 million.