SThree expects in line profits despite increasingly difficult backdrop -UPDATE

30th Nov 2012 07:24

International specialist staffing business SThree on Wednesday morning emphasised the company's growing geographical diversification and that its succession plan for top management is running ahead of schedule.However, the group's Chief Executive, Russell Clements, commented: "The Group has traded satisfactorily during the year, against a macro economic backdrop that became increasingly difficult across the period (...)."Even so, full year profit before tax is expected to be £25m, in line with market consensus, according to the the firm. The Group's gross profit was up 8% year-on-year with contract gross profit up 11% and permanent gross profit up by another 6%. Rusell added that its Energy & Engineering and Pharmaceuticals & Biotechnology segments, which between them make up about one third of gross profits, continued to experience strong demand. These businesses are making an increasingly significant contribution both to Group performance and to our ongoing geographic diversification. Nearly two thirds of fee income now being generated outside the UK&Ireland, the company explained. Group sales headcount on November 25th was down 6% year-on-year. UK sales headcount was down 18%, while in Continental Europe headcount was down 5%, but in Rest of World headcount was up 18%. Average sales headcount for the year was up 10% year-on-year, but down 7% for the fourth quarter when compared to last year.Similarly, the permanent deal pipeline at the period end was 4% down year on year, with weakness in UK&Ireland, France and Benelux offsetting strong performance in Rest of World and Germany.On this point, analysts at Seymour Pierce comment that: "we remain cautious over the outlook: the permanent deal pipeline, a good forward indicator, was 4% down year on year at period end (perm accounts for 50% of the business). This said contract runners (i.e: period end number of contractors on site with clients and being billed) were up 9% at the year end."During the most recent period the Group opened new offices in Oslo, San Diego, Rio de Janeiro and Brisbane during the year.Lastly, SThree indicated that a number of key tasks related to the succession of its Chief Executive were completed ahead of schedule. In light of this excellent progress, Gary Elden will succeed Russell as CEO with effect from the next January 1st 2013 (that is earlier than the date of April 2013 which had previously been set out), at which point Russell will retire from the Board."The shares are trading on a prospective price-to-earnings multiple of 21.3 times 2012 fiscal year estimates and at a premium to the peer group average of 16.6 times. The yield is attractive at 5.2%. We reiterate our HOLD recommendation and 275p target price," Seymour Pierce adds.AB