UPDATE: SThree Sees Improving Mkt, 1H Profit Up As Costs Fall

19th Jul 2010 09:21

(Adds executive, analyst comment, share price) By Rachael Gormley Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Recruitment company SThree PLC (STHR.LN) said Monday the recruitment market is improving but isn't yet fully recovered after first-half pretax profit more than doubled on reduced staffing. "Things are meaningfully better but we're a way off what we would call a normal market," Chief Executive Russell Clements told Dow Jones Newswires. " We're in a kind of hinterland," he added. The company said that, compared with the extremely distressed market last year, the first half of fiscal 2010 saw more benign conditions. It added that it has had a strong start to second half with gross profit in June up 15% on year due to a significant increase in permanent recruitment. For the six months to May 30, SThree posted pretax profit of GBP7.3 compared with GBP2.7 million in the same period a year earlier. Revenue fell to GBP221.7 million from GBP280.6 million and the interim dividend was maintained at 4 pence a share. SThree said the year-on-year comparatives have been distorted because the average number of consultants in the first half was 24% lower on year following the restructuring it carried out in the second quarter of 2009. As a result gross profit fell to GBP74.3 million from GBP93.3 million. Gross profit from SThree's operations outside of the U.K. and Europe made up 10% of the total for the group, up from 3% this time last year, and Clements said he expects this to continue to rise as it expands its overseas business. "The rest of the world, which for us is everything outside of the U.K. and Europe, is a very, very strong market to be operating in," he said. Analysts at Seymour Pierce kept an "outperform" rating and a 350 pence target price following the update, saying the firm has the advantage of being a specialist staffing group, while KBC Peel Hunt and Panmure Gordon stuck with a "buy". Merchant Securities however kept a "sell" rating and reduced the target price to 250 pence from 300 pence. "In the short term we do not believe the group deserves to trade on the same multiple as the major staffing companies," analyst Ian Jermin said. At 0805 GMT, shares in SThree were down 12.2 pence, or 4.2%, at 280.8 pence, while the wider Dow Jones U.K. Smaller Companies Index was down 0.1%. -By Rachael Gormley, Dow Jones Newswires; 44-20-7842-9308; [email protected] (END) Dow Jones Newswires July 19, 2010 04:21 ET (08:21 GMT)