- Like-for-like growth 'a significant achievement'
- Contract staffing provides 'good visibility into second half'
- Full year earnings seen beating market expectations
Specialist recruitment firm SThree (STEM) posted a surprisingly sharp increase in first half net fee income and raised its full year earnings guidance, sending its shares up 8.6% to 346p in early trading.
The technology-focused staffing group said trading for the six months to May was ahead of market forecasts thanks to strong demand for contract staff in particular.
GROWING ORGANICALLY
The firm delivered what it called ‘a very strong performance’ in the first half with net fees rising by 25% on a like-for like basis.
New chief executive Timo Lehne described the second quarter increase of 23% as ‘a significant achievement’ given the period represented the first true like-for-like comparison with the previous year.
‘Our focus on flexible working, both independent and employed contractors, is delivering, and for the second consecutive quarter we are delighted to be able to report that all regions, including the UK, have demonstrated clear positive momentum’ said Lehne.
The company’s three largest markets, which make up almost three quarters of net fees, performed ahead of estimates with Germany up 22%, the USA up 21% and the Netherlands up 41%.
STEM FOCUS
The group’s focus on STEM disciplines (Science, Technology, Engineering and Mathematics) continues to generate market-beating growth.
The Technology business posted a rise of 30% in first half income, while Engineering registered a 27% increase and Life Sciences registered a 16% increase.
Contract fees were especially strong, up 30% in the half, while the contractor order book grew by 35%, ‘providing good visibility into the second half and underpinning continued confidence in the near-term outlook’ said Lehne.
RAISED GUIDANCE
Thanks to its ‘excellent’ growth in the second quarter, the firm lifted its outlook for pre-tax profits to ‘at least 5%’ above consensus expectations of £66.2 million for the full year.
Liberum analyst Sanjay Vidyarthi raised his earnings estimate by 9% and hiked his share price target from 635p to 675p.
‘We maintain our view that SThree’s STEM focus gives it exposure to long-term structural growth which is not reflected in the current valuation’, Vidyarthi added.
