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UK – SThree reports gross profit growth in Q1

14 March 2014

International recruitment firm SThree (STHR: LSE) in their first quarter interim management statement reported a +9% increase in gross profit in constant currency to £47.8 million, up from £44.3 million in Q1 2013. SThree’s Q1 2014 ran from 2 December 2013 to 2 March 2014.

Gross profit derived from contract recruitment rose by +18% in constant currency to £29 million compared with £24.5 million. In contrast, permanent recruitment reported a -4% drop in gross profit, in constant currency, to £18.8 million from £19.8 million last year.

Gary Elden, Chief Executive, commented: "Against a backdrop of improving macroeconomic conditions in a number of our markets, we have made a satisfactory start to the year, in what is, for seasonal reasons, always our least significant quarter.” 

"Our contract division made further progress as it continued to benefit from a greater strategic focus and increasing exposure to new high growth markets, particularly Energy and Life Sciences.  Contract gross profit increased [organically] by 18%, year-on-year and now accounts for 61% of the Group total. Permanent, whilst still negative, saw some improving trends and the pre-deal pipeline is beginning to suggest a pick-up in activity. We are continuing to invest in the future growth of both businesses to ensure they are appropriately resourced for the market opportunity,” he added.

Gross profit increased across all three of SThree’s geographic regions. In their home market of the UK & Ireland, which accounts for 30% of gross profit (Q1 2013: 32%), the company reported an organic increase of +1% to £14.2 million, up from £14 million a year ago.

The company’s largest region, Continental Europe, which accounts for 49% of group gross profit (Q1 2013: 50%) reported an organic increase of +4% in gross profit during the quarter to £23.3 million, up from £22.2 million last year.

The greatest year-on-year growth in gross profit was reported by SThree’s Rest of World region. Gross profit rose by +35% on an organic basis to £10.3 million, compared with £8.1 million in Q1 2013.

SThree has a network of 54 offices in 21 countries, of which 39 offices are outside the UK. The Group now generates 70% of its gross profit from markets outside the UK & Ireland (2013: 68%).

"While, as always, we remain cautious about extrapolating the trend for the year from the quieter first quarter, the strength of our contract book and improving outlook for permanent give us confidence for the year ahead," Mr Elden concluded.

In trading today, the company’s share price increased by +2.3% to £4.14, a rise of +21.6% compared with a year ago. Based on its current share price, the company has a market value of £511.4 million. 

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