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UK – SThree revenue up but net income down

03 February 2014

The current reporting period for international staffing firm SThree’s (STHR: LSE) annual results comprises 53 weeks and includes both the costs of the mid-year restructuring of the business and the disposal of the IT Job Board business. However, the company also provides comparable 52 week results for 2012 and 2013.

SThree’s financial year ended 1 December 2013, however, for the comparable 52 week period, the company reported revenue of £618.4 million, an increase of +8.2% from £571.6 million, compared with the same 52 week period ending 25 November 2012. 

The company achieved a net income for the 53 week period of £6.5 million, a sharp decrease from a net income of £14 million for the 52 week period in 2012. The fall in profitability was blamed on a "challenging" trading environment, a temporary decline in consultant productivity, and investment costs.

Gary Elden, CEO of SThree, commented: “While the Group’s performance reflects the mixed market conditions, which we encountered during the year, it was also a period of significant strategic progress during which we laid the foundations for our future growth.”

“Contract gross profit grew robustly reflecting our recent investment in headcount. In permanent, which is now beginning to demonstrate the first sign of recovery, we have addressed the headcount shortfall that became evident in the first half and entered 2014 with the business appropriately resourced,” he added. 

The company’s gross profit for the period fell by -3.4% to £192.8 million, down from £199.5 million, year-on-year. Gross profit derived from contract recruitment increased organically by +4%, year-on-year, with international gross profit accounting for 69% of total Group gross profit. Contract recruitment now accounts for 56% of total company gross profit, while permanent recruitment accounts for 44%.

The restructuring of the Group’s cost base achieved savings of approximately £3.2 million during the second half of the year, and reduced annualised costs by an estimated £8.5 million per annum. During the year the company opened new offices in Calgary, Tokyo, and Berlin, bringing the Group’s total to 55 offices in 21 countries; 40 of which are outside the UK.

Looking forward, Mr Elden added: “The Group is well diversified, both geographically and by sector and, as a result, is trading in markets that are at different stages of the cycle - growing, stable or still in decline, as such, while improved sentiment is clearly evident in certain markets, on balance, it is still too early to call a broad-based recovery, while the specialist staffing market does not need high levels of GDP growth to perform robustly, a sustained and wide-ranging recovery in candidate and client confidence is key”

“As we look forward, the strength of our contract book and recent investment in permanent headcount point to a more encouraging picture, and the restructuring undertaken in the second half of last year provides the Group with a solid platform for growth in this new financial year. Our experienced management team and strong financial position give us confidence that we will make the best of the market opportunity in 2014,” he concluded.

In trading today, the company’s share price fell by -2.2% to £3.75, an increase of +15% compared with a year ago. Based on its current share price, the company has a market value of £463.7 million.  


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