SThree plc issued a trading update today covering its fiscal first quarter ended Feb. 29. Group net fees (gross profit) for the quarter are down 6% over the year in constant currency against a record prior year performance and a challenging backdrop.

The group said the 6% fall was driven by continued softness in new business across contract and permanent, offset by strong contract extensions.

Across contract and permanent, SThree saw continued strong demand for engineering roles, driven primarily by the energy sector, with renewables as the fastest-growing segment, while demand for life sciences and technology roles continues to reflect ongoing market conditions and record comparatives for technology.

“Once again, we have delivered a good performance against a strong comparative and within a market environment that remains difficult from a new business perspective,” said Chief Executive Timo Lehne in a press release. “While the sentiment we are reporting is much the same as the prior period, the strength of our contract extensions continues to be a particular highlight, demonstrating our clients' need to retain critical STEM skills and flexible talent.”

Lehne continued, “We continue to make good progress with our technology improvement program, with our new end-to-end integrated platform now fully deployed in the US and initiated in Germany, providing our teams with the digital tools which will be key to driving both scale and higher margins over the mid to long term.”

Regionally, the group saw growth in the Middle East and Asia, driven by performance in Japan across all three of SThree’s main skill verticals.

Within the group’s largest three markets, which represent 72% of net fees, the Netherlands achieved year-over-year growth due to strong engineering and resilient technology performances, while the US was down, driven by declines in life sciences and technology partially offset by improving engineering performance. Germany was also down despite growth in engineering and life sciences, as the decline in technology outweighed this performance.

Average headcount for the quarter was down 12% year over year, while the group period-end headcount was flat versus the prior quarter. Productivity remains above pre-pandemic levels achieved in fiscal year 2019. SThree calculates productivity as gross profit divided by total average headcount.

Looking ahead, performance for the present fiscal year is currently expected to be in line with market expectations.

“Whilst we look forward to the easing of the macro environment,” Lehne said, “our strategic focus, exposure to long-term megatrends, and progress to date delivering operational enhancements provide us with a resilient and financially robust foundation with the capacity and improved capabilities to deliver our ambitions and future growth.”

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Share price

Shares in SThree closed down 1.89% to £416.00 (US$) today in London. They were 7.96% below their 52-week high.