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Recruiter SThree posts higher gross profit as international growth offsets weak UK performance

SThree's UK and Ireland division saw gross profit fall 10% to £13mln in the quarter as employers continued to exercise caution amid Brexit uncertainty
SThree specialises in recruitment for STEM industries

Recruitment firm SThree PLC (LON:STHR) posted a 13% increase in quarterly gross profit as growth in international job markets mitigated a poor performance in Brexit-hit UK.

The company, which specialises in recruitment for the science, technology, engineering and mathematics (STEM) industries, said gross profit rose to £82.7mln in the third quarter ended August 31 from £73.7mln the same period a year ago.

Continental Europe was the key driver of growth with gross profit up 24% to £47mln while the US delivered an 8% increase in gross profit to £18.2mln and the Asia Pacific and the Middle East achieved a 16% gain to £4.5mln.

The UK and Ireland division, on the other hand, saw gross profit fall 10% to £13mln as employers continued to exercise caution amid Brexit uncertainty.

In terms of sectors, the company reported a higher gross profit in information and communication technology (ICT), energy, life sciences and engineering but a decline in the banking and finance industry.

READ: SThree delivers 'encouraging' first half supported by growth in US and Europe

Gross profit in contract job placements increased 14% to £60.4mln, outperforming permanent placements, which rose 8% to £22.3mln.

SThree 'confident' in its full year prospects

“We are pleased to have delivered another strong quarter, continuing the momentum of the second quarter, which was also up 13%,” said chief executive Gary Elden.

“The group is benefiting both from the broad geographic reach of its operations, with 84% of gross profit now generated in international markets, and from its focus on the best STEM markets.”

He added: "Looking ahead, trading conditions in the majority of our markets are encouraging and we enter the fourth quarter, our most significant trading quarter, with confidence in our full-year prospects."   

SThree ended the period with net debt of £24mln, up from £6.2mln in May, after paying a final dividend and incurring exceptional costs related to its relocation of support functions from London to Glasgow.   

Sales headcount for the group at the end of the quarter was up 7% on the previous year and up 3% versus the half year position.

Liberum raises target price, upgrades full-year estimates

Liberum maintained a 'buy' rating on the stock and raised its target price to 450p from 430p, saying the results were ahead of its expectations thanks to continued momentum in the US and EU businesses. 

"With an encouraging outlook for both these regions, combined with the potential for a sequential improvement in the UK, the company is well positioned going into 4Q18," the broker said. 

"We upgrade our FY18 PBT estimates by 5% and believe that this positive earnings momentum, alongside the group's attractive geographic and discipline exposure, should help support near-term share price performance."

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Sthree Timeline

June 08 2012

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