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Highlights

  • STEM’s H1FY25 net fees declined 14% YoY, driven by weaker new business and market challenges.
  • The company maintains FY25 PBT guidance of GBP 25 million, citing operational savings and US recovery.
  • The Group contractor order book at GBP 164 million, representing five months’ visibility despite fee decline.

SThree plc (LSE: STEM), the global science, technology, engineering and mathematics (STEM) workforce consultancy, issued a trading update for the six months ended 31 May 2025, showing a 14% year-on-year decline in group net fees. The update comes ahead of the company’s half-year results, scheduled for release on 29 July 2025.

The fee contraction was attributed to continued softness in new business across both contract and permanent placements, which fell 14% and 13% year-on-year respectively. However, management highlighted a more stable second quarter performance, particularly in the United States, which helped ease the pace of decline.

Despite the drop in net fees, SThree reaffirmed its full-year 2025 adjusted profit before tax guidance at GBP 25 million. This projection factors in operational efficiencies and cost control measures. The company also reported that its contractor order book remained at GBP 164 million, down 8% YoY, but representing about five months' worth of fee visibility, which it noted is sector leading.

Cash generation improved over the period, with net cash increasing to GBP 48 million by the end of May 2025, compared to GBP 45 million at the end of February. Excluding the impact of a GBP 20 million share buyback programme completed on 15 May, net cash would have risen by GBP 15 million, supported by enhanced cash collections.

In terms of ongoing projects, SThree reported progress on its Technology Improvement Programme (TIP), which remains within budget. By the end of the second quarter, eight of its 11 markets were using the new platform, now representing more than 80% of group net fees. The platform rollout is designed to support process automation and incorporate AI-driven tools aimed at improving scalability and efficiency across recruitment operations.

Operational savings remain on track, with SThree targeting GBP 6 million in in-year net cost reductions. These savings, alongside cautious hiring practices and natural churn, contributed to a 10% decrease in group headcount compared to the end of the prior financial year.

Regionally, the macroeconomic environment weighed on performance across the company’s top three markets USA, Germany, and the Netherlands which together account for 72% of group net fees. Engineering net fees were down 9% from the previous year’s record levels, Life Sciences declined 15%, and Technology fell 18%. While demand in Germany and the Netherlands softened, the USA saw recovery in the second quarter, particularly in engineering roles.

SThree noted that the current environment continues to be shaped by reduced hiring activity, especially in technology roles, but contract extensions remain a stabilizing factor in its performance. Management stated that they are making selective hiring decisions and focusing on markets where demand is comparatively more resilient.

Looking ahead, the company anticipates an improvement in market conditions but continues to navigate the year with caution. The rollout of the TIP platform and further operational enhancements are expected to position the group for more agile responses to market changes. The full impact of these internal changes, however, is likely to materialize over the medium term.

STEM shares were trading 9.62 % higher at GBX 245.00 per share as of 24 June 2024