- Contract fee income stalls
- No signs of improvement
- FY25 pre-tax forecast slashed
Specialist recruitment firm SThree (STEM) posted a downbeat full-year trading update and warned challenging trading conditions would persist through the current financial year.
The shares dropped as much as 140p or 39% to 221p before recovering to stand down 88p or 24% at 273p by mid-morning.
SUBSTANTIAL CUT TO GUIDANCE
The company, which specialises in filling roles involving science, technology, engineering and mathematics, reported a 9% fall in net fee income for the year to the end of November due to ‘ongoing challenging market conditions’.
Contract fees, which represent 84% of the group total, dropped 7% while the contractor order book declined 10% to £161 million as new business activity remained weak.
The firm said increased political and macro-economic uncertainty, particularly in Europe, impacted firms’ decision-making in terms of hiring during the year, and the board is now making the ‘prudent assumption’ the same challenges will persist through the current financial year.
As a result, pre-tax profit for the 12 months to November 2025 is expected to be in the region of £25 million against a consensus forecast of over £65 million.
ANALYST’S VIEW
Analyst James Bayliss at Berenberg believes that while the SThree share price has reacted ‘in accordance with this sizeable downgrade’, the group’s longer-term strategy and its focus on contract placements ‘remains compelling over the medium term’.
Given the firm’s operational gearing, just a 10% reduction in net fees for the 2025 financial year is enough to reduce pre-tax profit to around the £25 million level, says Bayliss, although he is waiting for the official 2024 results release before adjusting his model.
