SThree (STHR: LSE) issued a trading update today covering 1 December 2023 to 29 February 2023. Group net fees for the quarter are down 6% over the year in constant currency (CC) 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 the fastest growing segment, while demand for life sciences and technology roles continues to reflect ongoing market conditions and record comparatives for technology.

Chief executive Timo Lehne said, "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. 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 said, "We continue to make good progress with our technology improvement programme, 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."

Net fees

Regionally, the group saw strong growth in the Middle East and Asia, driven by exceptional 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 solid year-on-year growth due to strong engineering and resilient technology performances, while the USA 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-on-year, while group period-end headcount was flat versus FY23 Q4. Productivity remains above pre-pandemic levels achieved in FY19. SThree calculates productivity as net fees divided by total average headcount.

Looking ahead, performance for FY 2024 is currently expected to be in line with market expectations. The current consensus Profit Before Tax expectation is £71.9 million for FY24. 

Lehne said, "Whilst we look forward to the easing of the macro environment, 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."

The group will issue its trading update for the six months ended 31 May 2024 on 18 June 2024.

SThree shares last traded at £416.00, down 1.89% on the day and 7.96% below its 52-week high of £452.00, set on 20 March 2023. The company has a market cap of £571.86 million.