SThree (STEM) H1 2024 earnings summary

Executive summary

• Delivered resilient H1 2024 results despite sector and macroeconomic challenges, with net fees of £188.7m down 7% year-over-year and profit before tax up 5% to £39.0m, supported by operational enhancements and digital platform rollout.

• Contract business now represents 84% of group net fees, providing resilience and profitability.

• Strong balance sheet with net cash at £90.0m, up 24% year-over-year, and robust liquidity including undrawn facilities.

• Strategic focus on STEM and flexible talent continues to differentiate and position for long-term growth.

• Technology Improvement Programme (TIP) rollout is on track, delivering early operational efficiencies and supporting future growth.

Financial highlights

• Revenue for H1 2024 was £763.4m, down 5% year-over-year; net fees £188.7m, down 7% year-over-year on a constant currency basis.

• Operating profit for the half was £37.7m, up 3% on a constant currency basis, with a sector-leading conversion ratio of 20%.

• Profit before tax rose 5% to £39.0m; basic EPS increased to 21.2p.

• Net cash increased to £90.0m, up from £72.4m a year earlier, reflecting strong cash generation.

• Interim dividend of 5.1p per share, up 2% year-over-year.

Outlook and guidance

• FY24 performance expected to be in line with market expectations, with consensus net fees at £397.9m and PBT at £69.2m.

• Margins expected to temper in H2 due to planned investments and TIP rollout, but full-year margin to remain ahead of sector.

• Continued investment in TIP and digital transformation to drive future margin growth.

• Contract extensions remain robust, but new business activity is subdued.

• Focus remains on STEM and Contract to provide resilience and visibility of repeatable fees.