Investment banking business suffering at SThree

9th Sep 2011 08:13

International specialist staffing business SThree is experiencing year-on-year improvements across most markets, despite running up against strong comparatives, but is seeing a tailing off of demand from the lucrative Investment Banking market.Since the end of May the company has seen gross profit increase by 18% to £50.2m from £43.0m in the June-August quarter of last year. Gross profit was up 4% on the preceding quarter using constant exchange rates (CER).UK gross profit increased by 5% year-on-year (YOY) and by 8% on the preceding quarter (Q2). On a CER basis, non-UK gross profit increased by 26% YOY and by 1% on Q2 2011. Non-UK now represents 64% of gross profit, up from 60% a year earlier, while non-information and communications technology placements represent 39% of gross profit, unchanged from last year. During the period SThree made a total of 1,895 permanent placements, an increase of 12% versus the prior year, and up 3% on Q2 2011. In the period, permanent placements represented 52% of group gross profit, up from 49% in the third quarter of the previous financial year.Average permanent fees and gross profit per day rates (GPDR) both strengthened in the period to record levels, despite the relative weakness of the higher average fee investment banking market. Average permanent fees were up 9% YOY and GPDRs were up 4% YOY, both on a CER basis.Investment banking accounted for circa 12% of group transactions during the quarter, down from 17% in the third quarter of last year, and down on Q2 2011's level of 15%. Public sector remains stable at 5% of group transactions.At 28 August 2011, the number of permanent deals agreed in the period, with candidates due to start in the future, was up more than 15% year on year. The pipeline at the end of August had improved by 7% sequentially from the position at the end of May, which was up at that time by 22% YOY."Our current deal pipeline reflects a healthy level of demand in most of our markets but we remain mindful of the state of the broader economic backdrop as we enter our final and traditionally, most important quarter," said Russell Clements, SThree's Chief Executive Officer. The group had net cash of around £40m at the end of August, giving it scope for further opportunistic purchases of its own shares for cancellation."Our business remains highly cash generative, allowing us to continue to invest in the group's excellent medium term potential and to maintain our robust attitude towards dividends," Clements added. The shares fell 16.2p to 223.9p on the results. --jh