SThree (STEM) Q3 2024 TU earnings summary

Executive summary

• Delivered resilient performance near historic highs despite challenging market conditions, with group net fees and contract net fees both down 8% year-on-year, and contract business representing 84% of total net fees.

• Ongoing transformation to a digital-first approach through the Technology Improvement Programme, with positive early feedback from U.S. and U.K. rollouts and deployment underway in Germany and soon the Netherlands.

• Robust contract extensions and sector-leading trading performance, with continued investment in technology and operational improvements.

• Contractor order book decreased 6% year-on-year to £167 million, providing about four months of net fee visibility.

• Full-year FY24 performance is expected to be in line with market expectations.

Financial highlights

• Net fees for Q3 FY24 were £92.7m, down from £103.0m in Q3 FY23, an 8% year-on-year decline on a constant currency basis.

• Contract net fees were £78.1m (down 8% YoY); Permanent net fees were £14.6m (down 9% YoY), with perm showing sequential improvement.

• Contract order book at GBP 167 million, down 6% year-on-year.

• Net cash at 31 August 2024 was £45 million, down from £83 million a year earlier, due to timing of client payments, expected to normalize.

• Contract business accounted for 84% of net fees; Permanent for 16%.

Outlook and guidance

• FY24 performance is anticipated to meet current consensus expectations, with consensus PBT at £69.4m.

• Close to 90% visibility of full-year market consensus net fees when combining contract order book and year-to-date net fees.

• Net cash is expected to return to normalized levels in the coming months.

• Confident in emerging stronger post-transformation and market recovery.