SThree (STEM) H2 2024 earnings summary

Executive summary

• Delivered third highest net fee and operating profit on record, with Net Fees of £369.1m, down 9% year-on-year, and operating profit of £66.2m, down 13%, despite challenging macroeconomic conditions.

• Strategic focus on STEM and contract business, with contract now 84% of group total, providing more predictable revenue and resilience.

• Technology Improvement Program rollout reached 80% of business, driving digital transformation, operational efficiencies, and early productivity gains.

• Maintained robust balance sheet, sector-leading operating profit conversion ratio of 17.9%, and initiated a £20m share buyback with sustainable dividend policy.

• Enhanced employee retention, leadership development, and diversity initiatives, with 37% women in leadership roles.

Financial highlights

• Revenue: £1,492.9m, down 8% vs FY23; Net Fees: £369.1m, down 9% year-on-year on a constant currency basis.

• Operating profit: £66.2m, down 13% year-on-year; profit before tax: £67.6m, down 13%.

• EPS: 37.4p, down 12% from 42.4p in FY23; full-year dividend of 14.3p, down 14%.

• Net cash at year-end: £69.7m, down from £83.2m; free cash flow: £25.2m.

• Operating cash flow conversion: 90%; free cash flow conversion: 38%.

Outlook and guidance

• Challenging market conditions expected to persist through FY25, with FY25 profit before tax expected to be circa £25m, including up to £7m of one-off costs for operational efficiencies.

• FY25 consensus: Net Fees £333.2m–£337.7m, PBT £24.8m–£34.8m, EPS 13.2p–19.7p.

• New business activity remains soft, but robust contract extensions provide sector-leading visibility into FY25.

• Continued investment in technology and people to support long-term ambitions and market recovery.