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SThree plc - Trading Update

SThree plc - Trading Update
SThree plc, the international specialist staffing business, has issued its normal update on financial and operating data for the six month period ended 30 May 2010, being the first half of the financial year ending 28 November 2010.
Key highlights:
Group Gross Profit up 8%* Q2 2010 vs Q1 2010, consistent with markets showing continuing signs of improvement
Headcount growth of 7.9% year on year, driven by market opportunity
Fees remain robust
Roll out of four additional international offices
Non-UK now circa 60% of Group gross profit
Non-ICT now circa 34% of Group gross profit
Group gross profit achieved in the period declined by circa 19%* year on year to circa 74m (2009: 93.3m). UK gross profit declined by circa 29% and non-UK gross profit declined by circa 11%*. Non-UK now represents 60% of gross profit (2009: 54%), non-ICT represents 34% of gross profit (2009: 25%).
At 30 May 2010 SThree had 3,952 contract runners, a decrease of 12.1% year on year, a first half seasonal decline of 4.9% on the year end number (29 November 2009: 4,157) and sequentially up 1.2% on Quarter 1 (28 February 2010: 3,906). Average contractor gross profit per day rates remained strong. During the period SThree made a total of 2,938 permanent placements, a reduction of 11.0% versus the prior year (2009: 3,302) and up 6.5% on the second half of 2009. Average placement fees have remained strong. In the period, permanent placements represented 46% of gross profit (2009: 42%).
At 30 May 2010 UK contract runners at 2,226 were down 21.8% year on year and 7.3% down versus the year end 2009 position (2009: 2,401). UK gross profit per day rates remained robust, being maintained versus the second half of 2009. During the period, UK permanent placements were down 14.9% year on year, but were up 7.4% on the second half of 2009. Average UK permanent placement fees were strong in the period, reflecting improved fees in Q2.
At 30 May 2010 non-UK contract runners grew by 4.8% year on year, with gross profit per day rates remaining broadly stable. During the period, non-UK permanent placements declined year on year by 8.6%, but were up 6.1% on the second half of 2009. Average fees remained robust.
The current deal pipeline indicates that the Group is experiencing improvements across most markets. At 30 May 2010, the number of permanent deals agreed in the period, with candidates due to start in the second half of 2010, were up more than 30% year on year.
Total Group headcount at 30 May 2010 of 1,777 was up 7.9% year on year (2009: 1,647) and up 11.3% on the year end 2009 headcount of 1,597. UK sales headcount was down 8.2% year on year, but up 3.4% on the year end 2009 position. Non-UK sales heads were up 18.4% year on year and up 17.5% on the year end 2009 position. We continue to hire sales consultants into teams where there is market-based evidence to support the investment. On this basis the Group had circa 100 live sales vacancies at the end of the period.
During the period, the Group continued its roll out of international offices, opening its second Australian office in Perth, adding to its German footprint with further openings in Munich and Dsseldorf and opening its first Indian office in Delhi, focusing on the financial market place. In the second half of 2010, the Group plans to open offices in San Francisco and Qatar.
The Group remains in a strong cash position, with net cash of circa 32m at 30 May 2010, after the payment of the second interim dividend of 8p per share on 31 March 2010. The Group has further committed facilities of 20m, which have not been utilised during the period.
Russell Clements, Chief Executive Officer, commented:"Our performance is consistent with a market showing some continuing signs of improvement during the period. That said, trading conditions still have some way to go before they can be regarded as normal and consultant productivity, whilst improved, is still somewhat below historical levels.
"Our most recent data is our current deal pipeline, which looks encouraging. This gives us the evidence to continue to selectively grow our sales teams to take advantage of improvements in market sentiment. At the same time the continued focus on sector diversification and the expansion of our international network reflects our commitment to building the longer term future of our business."


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