SThree maintains expectations amid tough market conditions

24th Sep 2024 08:21

(Sharecast News) - STEM recruitment specialist SThree reported an 8% year-on-year decrease in net fees in a third-quarter update on Tuesday, primarily driven by an 8% decline in contract-related revenues, which now constituted 84% of total net fees.

The FTSE 250 company put the downturn down to ongoing difficulties within the market environment.

Despite the overall decline, SThree said its contractor order book remained robust, although it decreased by 6% year-on-year to £167m, representing about four months of net fees.

SThree maintained a strong balance sheet with net cash of £45m as of 31 August, down from £83m a year earlier due to the timing of specific client payments, with expectations that net cash levels would normalise in the coming months.

The company highlighted progress in its Technology Improvement Programme, noting that the US and UK operations were live, with deployment in Germany proceeding as planned.

Regional performance varied, with notable growth in the Middle East and Asia, particularly in Japan, where all major skill verticals performed impressively.

In contrast, within SThree's three largest markets, Germany saw a sequential improvement due to a slower decline in demand for technology skills.

However, the US experienced declines in both Life Sciences and Technology sectors, while the Netherlands faced reduced demand for Engineering and Technology skills compared to record levels in the previous year.

Sector-wise, Technology remained the largest vertical, experiencing a 7% year-on-year decline.

Engineering also saw a 7% drop, although it followed a record performance in the prior year.

The Life Sciences sector was the hardest hit, declining by 14% as global activity in this area remains subdued.

Looking ahead, SThree projected its full-year performance would align with market expectations, despite the challenging conditions.

The company said it was well-positioned to capitalise on market improvements, maintaining stable headcount levels since the end of the last financial year.

"Despite the challenging conditions in the market, which have extended beyond our industry's expectations, our strategic focus on Contract continues to underpin the group's competitive positioning," said chief executive officer Timo Lehne.

"The Contract order book, down 6%, reflects protracted soft new placement activity partially offset by ongoing strong Contract extensions.

"Supported by a robust financial position, we continue to invest for the future, with the phased implementation of our Technology Improvement Programme being a core element."

Lehne said the programme was progressing to plan, providing a pathway to significant operational enhancements over the mid-to-long term.

"We are ideally positioned at the heart of global STEM secular trends, and we have the right platform for when the market recovers to enable the delivery of long-term sustainable growth."

At 0847 BST, shares in SThree were down 1.52% at 389.5p.

Reporting by Josh White for Sharecast.com.