SThree sees final quarter slowdown

SThree, the specialist recruitment business, has seen gross profits rise 17% in the 12 months to the end of November.

Profits were seen to be slowing in the final quarter, however, with Q4 up only 10% compared to the equivalent period of 2010.

Gross profits by the end of November were £195m versus a 2010 figure of £166.4m. In the UK profits for the year were up 3%, however Q4 again showed signs of weakness, with the last three months down 7% on the same period of 2010.

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The recruitment industry is a good barometer of economic conditions so this does not bode well.

Interestingly, the Non-UK division was up 26% during the last 12 months and the slowdown in the last quarter was not nearly as dramatic, with September to November still up 22% on the previous year. Non-UK represents about 65% of SThree's total profits.

Headcount at SThree itself stood at 2,272 by the year's end, up 22% on 2010, with this being a figure that investors will watch carefully as some may wonder if significantly increased employee numbers can be maintained in the face of very tough economic headwinds.

Nevertheless, SThree makes no apology for diversifying its geographic mix and boasts nine new offices opened during the year in Doha, Antwerp, Sao Paulo, Zurich, Luxembourg, Mumbai, Chicago, Boston and Moscow bringing the total to sixty offices operating in seventeen countries.

SThree has taken an aggressive view on its dividend policy and will today pay a special dividend of 11p per share, on top of its interim dividend of 4.7p. Today's update reveals the Board is considering a final dividend of 9.3p per share but will wait until the audited results are declared at the end of January before confirming.

SThree's Chief Executive, Russell Clements, says of the slowdown in Q4: "The well documented decline in global economic sentiment has in recent months weakened demand for the Group's services in a number of markets."

However, he goes on to argue: "...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."

Perhaps reflecting concerns over the final quarter slowdown SThree fell 12% in early trading this morning and is 26% down on the year.

BS