- Strong demand for specialist staff
- Third increase in full year guidance
- Shares still down nearly 25% this year
Specialist recruitment firm SThree (STEM) posted a strong third quarter trading update and raised its earnings outlook to at least 7% above the current consensus.
The shares added 4.5% to 365p, although that still leaves them trading almost 25% lower than at the start of the year.
AHEAD OF FORECASTS
Despite facing a tough comparative period, the staffing company - which focuses on the STEM disciplines of science, technology, engineering and mathematics - delivered a 19% increase in net fee income for the three months from June to August.
Its three largest markets of Germany, the US and the Netherlands, which make up 73% of fee income, saw gains of 13%, 9% and 36% respectively.
In terms of business areas, technology and engineering fees grew 25% while life sciences fees rose 2% against ‘very strong’ prior year growth.
Chief executive Timo Lehne called it ‘another excellent quarter’ and said the firm was ‘again trading ahead of market expectations for the full year’.
As a result, the board now expects profit before tax for the year to November to be at least £76 million or 7% ahead of market estimates of around £71 million.
SUSTAINABLE GROWTH
This is the third increase in guidance this year, reflecting not just strong demand for the firm’s services but also the rationale of sticking to its core disciplines.
The company also eschews acquisitions, preferring to use its strong free cash flow generation to invest in new consultants and new niches.
Net cash at the end of August was £57 million against £51 million last year, on top of which the firm has ‘a substantial working capital position’ which reflects cash due to it for placements already undertaken.
Total liquidity was £112 million, comprised of the £57 million of net cash, a £50 million undrawn banking facility and a £5 million overdraft facility, also unused.
Despite a 9% increase in headcount during the quarter, productivity rose 5% and is at ‘exceptional’ levels according to the chief executive.
