SThree PLC (LON:STHR) saw profits from its UK recruitment business drop due to Brexit worries and public sector reforms, but strong performances in the US and Europe helped overall gross profit edge higher.
In a trading update for the half year ended 31 May 2017, the small cap staffing firm said its overall gross profit was up 2% year-on-year in constant currency, with an acceleration seen in the second-quarter with growth of 4%.
The firm hailed a strong performance in the US, which saw gross profit jump by 16% year-on-year, and in Continental Europe, which was up 7%.
But in the UK and Ireland, SThree’s gross profit fell by 16% with its performance, as expected, adversely impacted by the decision of the Britain to leave the EU and Public Sector reforms.
80% of gross profit generated outside the UK
However, the group pointed out, 80% of its gross profit was generated outside the UK in the first-half of 2017, up from 73% at the same time a year earlier.
SThree said gross profit in its Contract business was up 8%, driven by strong growth across Engineering, up 17%, Life Sciences, up 15% and Energy, up 9%.
But its Permanent business saw gross profit fall by 10% year-on-year.
Gary Elden, SThree’s chief executive, said: "Looking ahead, the continued momentum of our Contract business and improved Permanent yields give us a solid base from which to grow in a macro-economic environment which remains uncertain."
In early morning trading, SThree shares were up 1.5%, or 4.5p at 308.0p
Risks to estimates “lie firmly to the upside”
Analysts at Liberum Capital repeated a ‘buy’ rating and 370p price target on SThree.
In a note to clients, they said: “With an encouraging outlook for both the US and Continental Europe in 2H17, it would appear that the risks to our FY17 estimates lie firmly to the upside.
“This potential momentum alongside the group's attractive geographic and discipline exposure and its contract bias leaves the company relatively well placed to navigate through these uncertain times.”