SThree reports 'resilient' result after tough first half

STEM-focussed staffing company SThree reported a ‘resilient’ first half on Tuesday, with revenue rising 6.9% year-on-year to £825.2m, or 2.4% on a like-for-like basis.

The FTSE 250 firm said net fees amounted to £208.6m in the six months ended 31 May, reflecting a 2.7% rise, but a 1.8% decline on a like-for-like basis, while operating profit decreased 14.6% to £38.1m, or 21.9% on a like-for-like basis.

Its operating profit conversion ratio was 18.3%, down by 3.7 percentage points, or 4.5 percentage points on a like-for-like basis, while profit before tax was £38.5m, a decrease of 13.1%, or 20.4% on a like-for-like comparison.

Basic earnings per share were reported at 21p, down by 13%, or 20.3% like-for-like.

The company’s interim dividend per share remained unchanged at 5p.

SThree's net cash position improved significantly, reaching £72.4m, making for a 49.6% increase compared to the prior year.

On the operational front, SThree said the performance across its three largest countries showed mixed results, with the Netherlands experiencing 3% growth in net fees, Germany reporting a 1% decline, and the US facing an 11% decrease.

Collectively, those three markets accounted for 73% of net fees.

The firm said the technology and engineering sectors saw growth, with technology net fees up 1% and engineering ahead 17%.

However, the life sciences sector experienced a downturn, with net fees down 21%, primarily driven by global sector trends.

Contract net fees continued to be a significant part of the business, representing 81% of group net fees, up from 77% in the first half of 2022.

The contractor order book value remained flat year-on-year at £190.3m, which the board said provided good visibility for the rest of the 2023 financial year.

Looking ahead, SThree said its technology improvement programme remained on track and on budget, with the integrated platform receiving positive feedback during business user testing.

The phased geographical rollout of the programme was set to begin in the second half, with the board adding that it was expected to drive scale and higher margins over the mid-to-long term.

“Our focus on STEM and flexible talent has delivered a resilient performance in the first half of the year against strong comparatives and macro-economic headwinds,” said chief executive officer Timo Lehne.

“This was underpinned by the group's strategic focus on contract, which grew 3%, following robust extensions and pricing as companies commit to holding on to required skills in the face of ongoing acute shortages.

“We have made excellent progress against the four pillars of our strategy to ensure the business has the right people, structures and processes to support the next phase of our growth.”

Lehne said the rollout of the company’s technology improvement programme was on track and on budget, adding that it would be a “key enabler” in it delivering a unique proposition within the market, driving both scale and higher margins over the mid-to-long term.

“The macro-economic backdrop remains unpredictable in the short-term, however our established leadership position and progress with our technology improvement programme leaves us more confident than ever in our growth strategy.”

Reporting by Josh White for Sharecast.com.