Shares in specialist recruitment firm SThree (STHR) climb 3% to 285p after the firm publishes a reassuring half-year update, putting it on track to meet its full year targets.

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Group net fee income, also referred to in the industry as gross profits, grew 9% in the second quarter and the first half driven by strong demand for contract staff in its specialty areas.

Group income hit £163m, of which £121m came from contract, an increase of 12%. Demand was strong in the US (up 22%), Continental Europe (up 16%) and Asia & the Middle East (up 15%).

Within Europe, demand for specialist staff in Germany remains high despite the slowing economy, while Austria, the Netherlands and Switzerland are also showing strong growth.

UK A FLY IN THE OINTMENT

The only region which is showing negative growth is the UK and Ireland, which is the result of two factors. First, SThree restructured its UK business which has meant a lower headcount and therefore lower fees. Second, like the overall economy, demand in the UK has historically been dominated by the finance sector, which is now in full retreat both on the high street and in the City.

In its core discipline of Information, Communications and Technology (ICT), net fees were up 11% in the first half and showed an accelerating trend in the second quarter. It’s the same story in Life Sciences where fee income grew by 6% with a big pick-up in growth in the second quarter.

Encouragingly, the Energy sector seems to have sprung into life with 27% growth in net fees in the half, more than making up for the decline in Banking & Finance.

As new chief executive Mark Dorman reiterates today, the opportunity for specialist recruiters in the science, technology, engineering and mathematics (STEM) fields is ‘both enormous and growing’ and SThree is uniquely positioned to benefit among the listed staffing firms.

Moreover the focus on Contract as opposed to Permanent staffing, which now makes up less than 20% of net fee income, means that SThree does well in cyclical upturns and is more resilient in downturns than less specialised firms.


Issue Date: 14 Jun 2019