20 June 2023
International recruitment firm, SThree (STEM: LSE) published a trading update today for the six months ended 31 May 2023.
Group net fees for H1 decreased by 2% in constant currency and fell by 7% in the second quarter.
Contract net fees were up 3% on a constant currency basis with growth across the majority of regions, and contract now representing 81% of group net fees (H1 FY22: 77%).
Permanent net fees fell 19% on a constant currency basis, reflecting both market conditions and tough comparatives, particularly in Life Sciences, together with the group’s targeted investment towards contract in specific markets.
Group net fees for Q2 were down 7% year-on-year against the strong post-Covid peak performance (Q2 FY22 annual growth: 23%), the group stated.
SThree said it delivered a resilient net fee performance in the first half of the year against the strong post-Covid peak performance in H1 of FY22. On a like for like basis (excluding the restructured businesses in Singapore, Hong Kong and Ireland) net fees were down 1% over the year.
| Net fees (£ millions) | H1 2023 | H1 2021 | Change in Constant Currency |
| Contract | 170.0 | 157.0 | 3% |
| Permanent | 38.6 | 46.1 | -19% |
| Total | 208.6 | 203.1 | -2% |
All year-on-year growth rates noted below are expressed at constant currency, unless otherwise noted.
Timo Lehne, Chief Executive, said “The macro-economic environment has remained uncertain with varied effects across our markets impacting new placements. However, a continued healthy extensions performance has seen our contract business (now representing 81% of group net fees) grow 3% as our clients remain committed to retaining highly sought after skills. This demonstrates the strength of our well-established strategy, focused on STEM and flexible talent.”
The Permanent business was down 19% (or down 16% on a like for like basis), reflecting global market conditions and the continuing strategic transition from Permanent to Contract in several markets.
Net fees by geography
| Net fees (£ millions) | H1 2023 | H1 2022 | H1 2023 % change (CC) |
| DACH | 74.5 | 70.5 | – |
| Netherlands (including Spain) | 39.4 | 35.9 | 5% |
| Rest of Europe | 53.2 | 35.4 | -2% |
| USA | 49.4 | 51.7 | -11% |
| Middle East and Asia | 10.1 | 9.6 | 6% |
| Group | 208.6 | 203.1 | -2% |
Within DACH, the group reported growth in contract, up 1% year-on-year and permanent down 3%. Germany, the largest country in the region, also saw net fees decline 1%.
The Netherlands, which represents 95% of the region, saw net fee growth of 3% driven by technology (up 3%) and engineering up 4% driven by increased demand for Process Engineers, Electrical Engineers and Health & Safety Advisors. Spai,n which is reported as part of the Netherlands division, saw strong growth of 63% in the first half driven by technology.
In the Rest of Europe, contract, which represents 94% of net fees for the region, grew 5%, with permanent net fees declining 48%, driven by both market conditions and the transition towards contract, particularly in the UK. The UK, the largest country in the region, saw net fees remain flat.
In the USA, contract, which represents 86% of net fees, was down 2%. Permanent, which represents 14% of net fees, declined 43%.
In the Middle East and Asia, net fees grew by 6% over the year. Japan, which represents 43% of the region, was up 2% over the year.
Group average headcount in the first half was up 5% year-on-year, with Contract up 9% and Permanent down 10%.
“We are delighted with the strategic progress we have made, centred on an analytical and fact-based approach of knowing where to play and playing where we can win,” Lehne said. “Our highly disciplined and targeted investment in talent acquisition within Contract remains a priority for the business. Our Technology Improvement Programme is on track and on budget and is key to delivering a differentiated proposition within the market, driving both scale and higher margins over the mid-to-long term.”
Lehne continued, “Our long-term opportunity is unchanged, underpinned by structural megatrends which drive the acute need for scarce STEM talent. In the short term we remain responsive to the macro backdrop and how that plays out on the mix of new placements and extensions, while tightly managing costs. Supported by a resilient business model and robust financial position, we remain well positioned to source and place the best STEM talent the world needs and will be in a position of strength once the macro-economic environment eases.”
SThree shares last traded at £365.30, down 0.46% on the day and 12.23% above the 52 week low of £325.50 set on 20 June 2022. The company has a market cap of £493.62 million.
