Half-year results at staffer SThree (STHR) include a stunning decline in its banking and finance recruitment business.
Permanent hiring in finance at SThree’s slumped 24% in the three months to 31 May, according to a trading update.
‘Uncertainty in the global banking markets adversely impacted our Banking & Finance business in the first half, with gross profit down 5% year-on-year,’ says SThree’s trading statement.
‘Hiring freezes were put in place by a number of major banks and the industry is undergoing significant restructuring.
‘The UK banking market was also adversely impacted by uncertainty in the run-up to the EU Referendum in late June which caused managers to put hiring decisions on hold.
‘Our performance deteriorated in the second quarter.’
SThree’s update follows second quarter numbers from finance specialist Robert Walters (RWA:AIM), published on 7 July, which, despite reporting good performance overall, warned permanent placement commissions were coming under pressure in the UK.
The report could spell bad news for PageGroup (PAGE), due to report second quarter earnings tomorrow, which generates 80% of its net fee income (NFI) from finance and other white collar permanent placements in markets around the world.
SThree’s shares trade 6.6% lower at 227p as problems in banking and finance were compounded by further weakness in the energy sector and company-specific issues in its UK and US businesses.
The business makes most of its money from recruitment in information and communications technology markets.
‘We have a business which we can adjust to the circumstances and we’re comfortable we have the right mix across sectors whatever happens,’ said chief executive Gary Elden on a conference call.
Fees from temporary job placements, which tend to hold up better in a tough recruitment market than fees on permanent placements, are two-thirds of SThree’s business, Elden said.
‘The interim results held few surprises,’ writes analyst Rahim Karim at SThree’s house broker Liberum.
‘In terms of the outlook, management have indicated that it is too early to estimate the impact of the EU referendum.
‘We believe SThree is better placed that its peers to weather any uncertainties. We see its exposure to a more resilient contract business and attractive discipline exposure as particularly attractive.’
Before today’s update, consensus analyst forecasts for earnings per share at Sthree were 21p in the year to 30 November 2016, followed by 21.3p the year after.
