SThree ups full-year guidance on strong first half

SThree upped its guidance for the full year on Monday, after recruitment picked up in the first half, boosting both fee income and profits.

The recruiter, which specialises in science, technology, engineering and mathematics-focused roles, said revenues in the six months to 31 May were £615.1m, a 4% improvement on the same period a year earlier on a constant currency basis.

Net fees were ahead 10%, at £164.3m, while operating profits surged 106% to £28.2m, which SThree said was driven by “better market conditions, high demand for stem skills and elevated contractor working hours that improved productivity”.

Pre-tax profits rose 114% to £27.7m.

Mark Dorman, chief executive, said: “Our profit has grown substantially from the first half of 2020 and has surpassed the pre-pandemic levels of 2019, reflecting the strength of the business and our growth trajectory.

“The momentum built up across the first half has continued into current trading, with strong key performance indicators on new placement activity and contractor retention rates. Consequently, we now anticipate we will be ahead of current market consensus expectations for the 2021 full year.”

Against 2019, second quarter net fees rose 8% and adjusted operating profits were ahead 18%.

Numis, which has a ‘buy’ rating on the stock, said: “Despite an expected increase in headcount during the second half, we believe there is scope for a 5%-10% update to consensus expectation for the full year, with around a 5% increase for 2022. Prior to today, the shares are trading on a 2021 PE of 21x, at the lower end of a year-1 recovery multiple range of 20-25x, and we believe there is scope for a re-rating.”

Liberum, which also has a ‘buy’ rating on SThree, upped its target price to 580p to 570p and increased its full-year pre-tax profit forecasts by 8.3% to £50.0m.

Analyst Sanjay Vidyarthi said: “Our estimates remain cautiously set, allowing for contractors taking holidays as we emerge out of lockdown. There will also be investment in headcount and IT. If SThree’s 2024 full-year estimated market share and EBIT conversion ambitions were achieved, it would provide material upside to our estimate trajectory.”

As at 1130 BST, shares in SThree were off 3% at 456.15p.