Recruiter SThree (STHR) reported a glowing set of numbers. Gross profit at constant exchange rates rose 13 per cent year-on-year driven by a strong performance in contractor roles as business confidence picked up. SThree's diversification away from its UK and Ireland technology recruitment roots appears to be paying off in buckets. The newer specialisms of energy and life sciences grew gross profit by 52 and 43 per cent, respectively. Whilst gross profit from the Americas jumped 62 per cent.
According to analysts at Liberum, SThree boasts the best gross profit growth in the sector. Why then did the shares retreat? The issue is that growth can come at a cost. When the job market picks up, recruiters such as SThree have to move fast to capitalise on the opportunity. That means a rapid ramp up in headcount and how those extra costs are managed is a key sentiment issue for the shares. SThree had 11 per cent more staff at the end of June 2014 than a year earlier.
The second half should see a moderation in headcount growth with the focus turning to improving the productivity of recently hired recruitment consultants. Liberum expects full-year profit before tax of £29.8m, giving earnings per share of 15.2p (from £20.9m and 8.1p in 2012-13).
| STHREE (STHR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 392p | MARKET VALUE: | £488m | |
| TOUCH: | 380-394p | 12-MONTH HIGH: | 442p | LOW:297p |
| DIVIDEND YIELD: | 3.6% | PE RATIO: | 55 | |
| NET ASSET VALUE: | 33p* | NET DEBT: | 25% | |
| Half-year to 1 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 292 | 6.7 | 3.7 | 4.7 |
| 2014 | 342 | 8.2 | 4.7 | 4.7 |
| % change | +17 | +22 | +27 | |
Ex-div: 4 Nov Payment: 5 Dec *Includes intangible assets of £11.8m, or 9p a share | ||||
