Trading since the end of November has been strong at SThree, the international staffing firm, despite continuing weakness in global financial markets.
In the three months to February 27th, and using constant exchange rate for better comparison purposes, gross group profits were up 15% year-on-year, permanent gross profit was 16% higher, contract profit rose 13%, while seasonal recovery in contract runners was broadly in line with 2011.
Average placement fees for the quarter grew strongly year-on-year, despite continuing weakness in the global banking and finance market, with particularly strong performances from Energy and Pharmaceuticals & Biotechnology. Average contractor gross profit per day rates also strengthened year-on-year during the quarter.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The current permanent deal pipeline shows an increase of 11% year on year, versus a 1% increase at the year end.
The group had net cash of circa £30m at February 26th.
"There remain significant differences within both geographies and sectors in the demand for the group's services but, overall, market conditions remain in far better shape than we saw in the aftermath of the global financial crisis," claimed Chief Executive Russell Clements.
Broadly speaking, SThree made almost twice as much gross profit outside of the UK and Ireland in the reporting period than it did within it.
"We are a cash rich and agile business, with a twenty five year track record of profitability and a seasoned management team. As such, we are well placed to maximise the potential of whatever market conditions prevail in 2012," Clements claimed.
That may be the case, but Henry Carver at Pel Hunt thinks the share price rise has caught up with events and has switched his rating from "buy" to "hold", though he maintains that the stock "remains our favourite pick in the sub-sector".
"We like SThree for its balance of temp and perm business (c50/50) and the 5.5% yield backed by a strong balance sheet (£30m net cash) and we believe that it will outperform the peer group in the coming months. However, with the outlook still unclear, visibility low, and few positive catalysts anticipated (we're bearish on the sub-sector, with MPI [Michael Page], RWA [Robert Walters] and HAS [Hays] all rated sell) we are moving our recommendation back to Hold," Carver wrote.
The broker is leaving its full year forecasts unchanged, despite SThree's first quarter performance being better than it expected, as it is still early in the year and the first quarter is the least significant of the year for SThree.
Peel Hunt's target price of 265p has also been left unchanged.
The share price rose 1.58% to 290.00p by 12:21.
NR
