18th Jun 2024 11:32
(Alliance News) - SThree PLC's trading performance was "solid" in what remain "difficult" markets, analysts on Tuesday said.
SThree PLC on Tuesday said net fees fell in the first half of the financial year, reflecting challenging market conditions and tough comparatives.
In a trading update for the half year that ended May 31, the London-based recruitment company said net fees were down 7% from a year prior. Contract fees, which now make up 84% of the total, fell 4%.
SThree said the contractor order book was down only 2% to GBP182 million from a year prior, which it called "sector-leading visibility", the equivalent of around four months of net fees.
SThree highlighted an uptick in net cash to GBP90 million at May 31 from GBP72 million a year before.
The recruiter said performance for the financial year is currently expected to be in line with market expectations.
Chief Executive Timo Lehne commented: "Against the challenges experienced by the sector, we are pleased with our trading performance over the past six months, with strong contract extensions partially offsetting continued soft new business activity."
"We are well placed to take full advantage when the market returns," he added.
Liberum said that, although the SThree results were weaker than expected in terms of year-on-year trends, there were signs of sequential improvement in new business wins, which is "encouraging".
"We see this as a solid performance in what remain difficult markets," the broker remarked.
Nonetheless, given the ongoing year-on-year weakness in net fee income, Liberum thinks a full-year decline of 2% is no longer realistic.
As a result, Liberum has cut its full-year NFI forecast by 4.8% to GBP390.0 million, giving a year-on-year decline of 6.9% and implying a 4.2% decline in the second half on-year.
Given management’s unchanged profit guidance, Liberum assumes that there is some scope for cost savings and efficiencies.
Liberum has trimmed its full-year pretax profit forecast for SThree by 2.1% to GBP69.0 million from its previous forecast of GBP70.5 million. The broker has nudged down forecasts for the following two years by 2.2% and 2.4% respectively. In financial 2023, SThree reported pretax profit of GBP77.9 million, up from GBP77.0 million in financial 2024.
Liberum reiterated a 'buy' rating on SThree.
Shares in SThree were down 0.5% to 419.88 pence in London on Tuesday.
By Jeremy Cutler, Alliance News reporter
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