SThree plc (STEM: LSE) reported group net fees declined by 9% in constant currency year over year in its full fiscal year ended 30 November 2024.

Net fees fell against the backdrop of ongoing challenging market conditions, with contract net fees down 7% in constant currency, representing 84% of net fees.

CEO Timo Lehne said in a press release, “As has been widely reported across our industry, the past year has been characterised by protracted challenging market conditions which have impacted new business activity. Nonetheless, we continued to see robust contract extensions through the year, which demonstrates the value our customers place on the critical STEM roles we provide and the skills on which they rely to power their organisations. It is our specialism in STEM and contract, combined with careful cost management, that has delivered a resilient performance, with fiscal 2024 expected to be in line with market consensus.”

SThree expects fiscal 2025 profit before tax to be around £25 million, which includes up to £7 million of one-off costs to deliver the additional operational efficiencies. The 2025 forecast is well below market expectations of £66.6 million. However, SThree said the company’s performance for fiscal 2024 is expected to be in line with market expectations.

Net fees by geography

The group’s engineering net fees for the full year were down 1% in constant currency against a record prior year performance. Technology and life sciences performance reflected the tough market conditions throughout the year and declined by 10% and 17% in constant currency, respectively.

Outlook

While the group said it continues to expect robust contract extensions, new business activity remained weak throughout fiscal 2024, driven by the protracted challenging economic conditions, impacting fiscal 2025 performance.

The latter part of fiscal 2024 saw increased political and macroeconomic uncertainty, particularly in Europe, further delaying decision-making and the anticipated easing of market conditions, the group said.

The board is forecasting that these challenges will persist throughout fiscal 2025, impacting net fees. 

“Following early efficiencies from the TIP (Technology Improvement Programme) and insights into its full potential, we now have the confidence to accelerate the realisation of further operational efficiencies to reduce the financial implications of these challenges, which will drive in year net savings of circa £6 million,” the company said.

SThree also announced its intention to launch a share buyback programme of up to £20 million, to be completed over the next six months.

“In light of SThree’s cash generation and strong balance sheet, the Board considers it prudent to launch the buyback, in line with its stated capital allocation policy,” the company said.

Lehne added, “The nature of our business model has meant we have been able to withstand the external pressures until now. However, the anticipated easing of market conditions has not yet materialised, with delayed decision-making continuing to impact new placement activity whilst contract extensions remain robust.”

“With this dynamic expected to persist through next year, the Board has taken a prudent view of FY25. We nonetheless remain confident that we have the right strategy, an energised team and a robust technology platform which is becoming more powerful as we roll out additional functionality, leaving us well placed for when market conditions improve,” Lehne said.

Share Price

SThree shares set a new 52-week low during Thursday’s trading session when it reached £230.00. Over this period, the share price is down 35.60%. Shares last traded at £270.50, down 25.07% on the day. The company has a market cap of £489.41 million.