20th Jun 2023 16:03
(Alliance News) - Half-year figures for SThree PLC showed decreased fees amid "tougher trading conditions", while analysis from Liberum was more optimistic than Jefferies about the likelihood of a comeback.
Shares in SThree were down 0.5% in London on Tuesday at 365.00 pence.
The staffing company said group net fees were down 2% on a constant currency basis for the half-year ended on May 31, against a "strong post-Covid performance" and macroeconomic headwinds. Permanent net fees decreased 16% to GBP38.6 million from GBP46.1 million, which SThree said reflected tough comparatives and market conditions.
However, SThree described its overall performance as "resilient". It also noted that contract net fees were up 8.3% year-on-year or 3% constant currency to GBP170.0 million from GBP157.0 million, with growth across the majority of regions. This represented 81% of net fees across the group, compared to 77% the prior year.
SThree also said it "retains a strong balance sheet" with GBP72 million in net cash at May 31 up from GBP48 million at the same time the previous year.
Jefferies' Kean Marden and Allen Wells said SThree's GBP106.0 million in group net fees for the second quarter was below the GBP114.8 million consensus. Net fees showed negative 7% organic growth in the same period which Jefferies said was "below our bottom-of-the-range forecast" of negative 1%, adding that "momentum deteriorated significantly during the quarter."
However Liberum's Sanjay Vidyarthi, Joe Brent and Alex O'Hanlon were more optimistic, saying that a "weak" Life Sciences business was counterbalanced by more robust Tech and Engineering performances and a strong cash position. Moreover, most regions saw growth in SThree's contract business. "The dynamic is as expected and as seen in previous quarters," Liberum said.
Going forward, Jefferies said: "Outlook comments don’t reference on...profit expectations, but consensus downgrades seem likely, [in part] given the revenue trajectory".
Jefferies rated SThree at 'hold', with a 390.00p per share target price.
Liberum also was cautious, reducing its financial 2023 end net fee income assumption by 7%. It forecast a net fee income decline of about 3%, which implies an NFI of around negative 8% in the second half of the year.
Liberum also said SThree's half year pretax profit to have fallen to GBP38 million from GBP44 million the year before.
"While it is disappointing to cut forecasts, it is understandable, given macro conditions," Liberum commented. It agreed that the results "demonstrate the resilience of the SThree model" and added: "The strong (and better than expected) net cash position means that SThree can weather the storm."
Liberum reduced its target price to 655p per share from 725p, but maintained its 'buy' rating.
By Emma Curzon, Alliance News reporter
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