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UK - SThree's profit surges

18 July 2011

Revenues were up by +15% from 221.7 million Pounds in H1 2010 to 254.9 million Pounds in H1 2011 at SThree Plc (STHR:LSE), the international specialist staffing firm.

Interim results for the six months ended 29 May 2011 reveal that gross profit was up by +21.1% from 74.3 million Pounds in H1 2010 to 90 million Pounds in H1 2011. Like-for-like gross profit was up by +23%.

Operating profit was up by +54.3% from 7.1 million Pounds in H1 2010 to 11 million Pounds in H1 2011. Profit before tax was up by +52% from 7.3 million Pounds in H1 2010 to 11.2 million Pounds in H1 2011.

Permanent placements were up by +21% to 3,450 (2010: 2,842). Average permanent placement fees were up by +8% like-for-like to 12,851 Pounds (2010: 11,861 Pounds).

The number of active contractors at period end was up by +11% year-on-year to 4,381 (2010: 3,952). Average gross profit per day rates increased by +6% like-for-like to 88.10 Pounds (2010: 83.24 Pounds). The average contract margin was 21.4% (2010: 21.4%).  

The contract versus permanent mix of gross profit is now 50:50 (full year 2010: 51:49 in favour of contract).

Sales headcount was up by +14% year-on-year and up by +12% versus year end 2010, as the group scales up its existing operations and opens into new sectors and geographies. SThree has increasingly sought to diversify over recent years from its roots as a UK ICT staffing specialist. In H1 2011, the non-ICT business segments grew by +42% like-for-like, and now represent 40% of total gross profit (full year 2010: 38%). The Company now has 33 overseas offices compared to 22 in the UK and generated 63% of gross profit from clients located outside the UK in H1 2011 (H1 2010: 40%).

The net cash position remains strong at 48.3 million Pounds (2010: 31.6 million Pounds).

UK gross profit at 32.9 million Pounds was up by +9% year-on-year (2010: 30.2 million Pounds) as the UK market continued to recover in most sectors. However, further improvement in the UK's performance was inhibited during the period by a lacklustre banking market, in contrast to the previous year.

Permanent placements were up by +6% and period end contractors were up by +5% year-on-year. In terms of value, permanent fees and Gross Profit day rates increased by +13% and +2% respectively. The strong permanent fee progression was achieved despite the relative volumetric weakness in banking, which will have had a dilutive impact on the UK average because of the higher absolute fees associated with the sector. The robustness of overall UK fees was helped by a strong performance from other sectors such as IT and Oil & Gas.

Mainland Europe gross profit of 46.2 million Pounds was up by +32% like-for-like (2010: 36.8 million Pounds). Market conditions in Benelux have finally turned positive, this region being the last into the downturn and the last into recovery. Gross profit for the region was up by 13% like-for-like. France, where the Company predominantly provides ICT staffing, performed strongly in the period with gross profit up by +37% like-for-like.

The well established teams in Germany continued to benefit from the much less mature German staffing market with gross profit up by +49% like-for-like.

Rest of the World (RoW) gross profit was up by +43% like-for-like, with strong performances in Australia (up by +104% like-for-like) driven by the new Perth operation (oil & gas and mining) and the diversification into banking in Sydney. USA was up by +53% like-for-like with notable contributions from the San Francisco (pharmaceuticals) and Houston (oil & gas) offices, offset by some weakness in the New York banking market, which in common with the City of London, was considerably quieter than in H1 2010.

New offices were opened in São Paulo, Doha and Antwerp during the first half with Zurich, Mumbai, Luxembourg and Chicago offices planned to open soon.

Russell Clements, CEO, commented "during the first half of the year the group benefited from a continued improvement in market conditions across all of our territories. The result was a performance which positions the group well for the remainder of the year. That said, given the strong seasonality of our business, we are targeting for the second half to be a very significant contributor to our results for 2011 as a whole, as has historically been the case."

"We have continued to invest in the group's future growth by scaling-up our capacity in established territories and markets, as well as opening new offices and addressing complementary specialist staffing segments. As a result the group is more diversified and international than at any other time in its history, with almost two thirds of the business coming from outside of the UK. We expect our long established international office roll out programme to continue, with a number of further new offices scheduled to open during the second half of the year."

"With recovery now evident across our markets, it is pleasing to be able to announce the intention to pay a special dividend in addition to our usual interim dividend. The strong cash generative nature of our business will, we believe, allow us to periodically review our capital requirements with a view to, where prudent, returning further value to our shareholders in this manner. We are confident that this can be achieved whilst continuing to invest appropriately to support the group's ambitious global growth plans."

"The group has entered the second half in good shape, notwithstanding some evidence of a softening of UK demand in recent weeks, and our expectations for the full year remain unchanged."

In early trading SThree's shares were down by -0.78% to 404.50 Pence.


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