SThree (STEM) Q4 2024 TU earnings summary

Executive summary

• FY24 performance remained resilient and met expectations despite challenging market conditions, with group net fees down 9% year-over-year and results expected to be in line with market consensus.

• Contract business, representing over 80% of group net fees, declined 7%, while permanent placements fell 18%.

• Robust contract extensions and a focus on STEM and contract specialism supported results.

• Technology Improvement Programme (TIP) is progressing as planned, with deployments in key markets.

• Intention to launch a share buyback programme of up to £20 million over the next six months.

Financial highlights

• Group net fees for FY24 were £369.1m, down from £418.8m in FY23, a 9% year-over-year decrease at constant currency.

• Contract business, over 80% of group net fees, declined 7%, while permanent net fees fell 18%.

• Contractor order book declined 10% year-over-year to £161 million, providing about four months of net fee visibility.

• Net cash position at year-end was £70 million, up from £30 million the previous year.

Outlook and guidance

• FY24 performance expected to be in line with market consensus; FY25 profit before tax forecasted at approximately £25 million, including up to £11 million in efficiency costs.

• Board assumes challenging conditions will persist through FY25, impacting net fees and overall performance.

• Contract extensions expected to remain robust, but new business activity remains soft, impacting FY25 net fee outlook.

• No change to disciplined sales headcount investment approach.

• Strategic focus on STEM and continued rollout of TIP expected to position the group for growth when markets recover.