International recruitment firm, SThree (STHR: LSE) reported revenue for the half year ending 31 May 2018 of £585.9 million, an increase of 14% in constant currency compared to last year.

The company said it was hit by exceptional strategic restructuring costs of £2.4 million. The restructuring costs were related to the move of London-based support functions to Glasgow which the company said was progressing to plan.

The group reported that growth in gross profit was driven by Continental Europe, which was up 18% in constant currency. SThree also reported strong performances in the DACH region (Germany, Switzerland and Austria) with gross profit up 18% (CC) and the Netherlands showed a strong increase of 25% (CC). The US reported an increase of 9% in growth profit, however UK & Ireland remained challenging (-2%, CC).

“The growing breadth and scale of our international operations, which now account for 82% of gross profit, underline how far the group has grown from its UK roots,” the group stated. “Market conditions are strong across our international business, especially the USA and Continental Europe, and we are maximising our opportunities with selective headcount growth in these markets. We continue to actively manage our business in the UK where Brexit continues to cast an uncertain political shadow.”

The group stated that its focus in H2 will be to prioritise investment in Contract business in its fastest growing markets.

SThree added that it expects to substantially complete the move of its London-based support functions to Glasgow, creating a new Centre of Excellence for the Group, with a clear objective of reducing costs, while improving operational capability.

Gross Profit was broken down as follows.

Gross Profit by region was broken down as follows.

In Continental Europe, the group reported growth across all main country markets.

The US is the group’s second largest region representing 20% of group gross profit. SThree stated that after a slow start to the year, the region showed strong recovery in Q2 against a backdrop of strong comparatives in the prior year.

The UK & Ireland is the group’s longest established region and the business is increasingly Contract focused as SThree stated that it continues to invest in opportunities in the STEM market. The group’s contract business saw an overall improvement in performance with gross profit up 1% in constant currency, year-on-year. The group reported growth in the Life Sciences, Engineering and Energy sectors, however this was offset by a decline in ICT (Information and Communications Technology), particularly driven by changes in the Public Sector that was impacted by IR35 and rate caps.

The group’s permanent segment in the UK & Ireland declined 15% in constant currency, year-on-year. In response the group restructured its UK & Ireland permanent business in the period to service its clients from hubs in Bristol, London, Birmingham and Dublin.

In the APAC and Middle East division, growth was reported across all sectors with Banking & Finance, the largest sector in the region, up 10% in constant currency, year-on-year. 

Among sectors, gross profit in the ICT sector, which represented 45% of group gross profit, was up 9%, in constant currency, year-on-year. The sector has reported 17 consecutive quarters of growth. The group said the rate of growth was impacted by the relatively soft performance of ICT in the UK&I, which includes its public sector businesses where changes to the IR35 tax legislation reduced gross profit.

In the Life Sciences sector, which represented 21% of Group gross profit and is the second largest sector after ICT, total gross profit grew by 11% (CC) and year-on-year with both divisions showing strong growth. Meanwhile, Banking & Finance, which represented 13% of group gross profit, reported growth of 1% (CC), year-on-year, which was driven by Contract (up 7% CC).

Engineering represented 10% of group gross profit and reported growth of 17% (CC), year-on-year. Meanwhile, Energy, which represented 9% of overall group gross profit reported growth of 31%, year-on-year.

Gary Elden, CEO of SThree, commented: "We have delivered an encouraging first half performance, driven by further strong growth in Contract, and our two biggest regions, Continental Europe and the USA.”

"To build on this growth, we are continuing to invest in our highest performing teams, consistent with our vision to be the number one STEM talent provider in the best STEM markets. The group is performing well and we are making good progress against our five-year growth plan,” Elden said.

"Trading in the weeks since the period end has continued the positive trend, leaving the group well-positioned as we enter our seasonally more significant second half,” Elden said.

As of last trade SThree traded at £351.20, up 1.06% on the day and 9.95% below its 52-week high of £390.00, set on 13 January 2018. Based on its current share price the company has a market value of £450.25 million.