International recruitment firm, SThree, gave us yet another clue that last year’s ‘recovery’ in the UK banking market was more of a catch-up than a sustained return to previous form. CEO Russell Clements alluded to a “softening of UK demand in recent weeks”, pointing his finger firmly at the Banking sector. However, IT and Oil & Gas sectors offered “strong” performance.
SThree advanced H1 revenues (to 29 May) by 15% yoy to £255m, while the all-important gross profit line rose by 21% (23% like for like), lifting gross margins by 170bps to 35.2%. Most of this flowed through to the operating margin, up 110bps to 4.3%. EPS soared by 54% to 6.0p. Investors get an 11p special dividend over and above the 4.7p interim hand-out, itself up 18% yoy.
Extending the move away from its ITSA (IT staff agency) roots, UK ICT recruitment now represents only 22% of group GP, compared to 25% a year earlier. Almost two-thirds (63%) of SThree’s group GP now derives from non-UK markets (60% at FYE), and it’s hard to imagine this trend slowing any time soon.
But we must come back to the main message. If the UK banking sector goes soft, so will the fortunes of the IT players serving it (i.e. all of them!). This makes us more cautious about market prospects for the rest of the year. But our best clues will come when the IT services players themselves reveal their half-time scores, with Logica, Atos, Steria and Capgemini all due to report in the next couple of weeks.