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UK – SThree gross profit down but points to improving momentum

06 September 2013

International specialist staffing business SThree PLC (STHREE: LSE) announced in its third quarter trading update, for the period ending 25 August 2013, that gross profit has fallen by -2% compared with the same period last year. Profit for Q3 2013 was £49.8 million compared with £49.9 million a year ago.  

Gary Elden, Chief Executive, commented: "Our trading momentum was positive in the period, with a sequential improvement in our performance over the second quarter, led by Contract and our newer sector disciplines. Contract continued to benefit from a greater strategic focus and is beginning to see the results of our investment in headcount, with further strong growth in contract runners and gross profit, growing its share of the mix by five percentage points to 56%. Our newer Energy and Pharma & Biotech businesses also traded strongly, posting double digit growth as demand in both sectors remained robust.”

Mr Elden added: "Our Permanent business continued to feel the effects of the resourcing issues that we highlighted at the interims, although the rate of decline moderated from that seen in the second quarter. We began re-investing in Permanent headcount during the period and expect to see the return on this investment in the next financial year as these new consultants become productive.”

Profit from sales in the UK & Ireland fell -9% year-on-year, to £15.3 million from £16.7 million in Q3 2012. But outside the UK & Ireland profit grew by +1%, rising to £34.5 million from £33.2 million last year.

Gross profit for contract recruitment increased by +7% year-on-year, with profit rising from £25.6 million last year to £27.9 million this year. Contract recruitment performed well in the period with strong growth in gross profit in Europe of +8% and the Rest of the World of +42%. A small decline of -3% in the UK & Ireland partially offset the growth. The number of contract runners was up +5% compared with the start of 2013. Average contractor gross profit per day rates remained robust during the quarter, as a result of new margin controls and positive geographical and sector mix impacts, as newer sectors such as Energy and Pharma & Biotech grew.

Permanent recruitment profit for the period was £21.9 million, -11% below profit of £24.3 million in Q3 2012. Gross profit for permanent recruitment declined by -19% in the UK & Ireland compared with a year ago, with a -18% decline across Continental Europe. Gross profit increased by +6% in the Rest of the World.

The Group derives 56% of its gross profits from contract recruitment and 44% from permanent recruitment, compared with 51% and 49%, respectively, a year ago.  

"Overall, while we have seen some improvement in economic confidence in a number of our markets during the period, the picture remains mixed and it is too early to call a broadly-based recovery. As we enter our final and most significant trading quarter, we are continuing to take a balanced approach - investing selectively in our teams where there are opportunities for growth, focusing on improving productivity and controlling costs tightly where market conditions remain challenging. Our experienced management team and strong financial position give us confidence that we will make the best of the market opportunity in the remainder of the year, whilst managing the business prudently for the medium term," he concluded.

SThree, one of the largest staffing firms in the world, recorded a -2.33% fall in its share price following announcement of their results to £3.46, an increase of +33% compared with a year ago. Based on its current share price the company has a market value of £423.3 million.   

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