UK – SThree Q1 net fee growth driven by increase in contract business

21 March 2023

SThree (STHR: LSE) issued a trading update today covering the period from 1 December 2022 to 28 February 2023. Group net fees for the quarter are up 4% over the year in constant currency (CC), in line with expectations.

Contract net fees were up 8% (CC) with growth across all regions. Permanent net fees were down 12% (CC), reflecting market conditions, performance in USA and Life Sciences, and the planned transition from Permanent to Contract in several markets.

Timo Lehne, Chief Executive, said, “The group has delivered a robust net fee performance in the first quarter of FY23 with fees up 4% (CC) year-on-year, in line with expectations, and supported by the strength of our well-established strategy, focused on STEM and flexible talent.”

Net fees

The group changed its reporting structure and now reports net fees in DACH, Netherlands (including Spain, which is managed from the Netherlands), Rest of Europe, USA and Middle East & Asia.

All growth rates below are in constant currency unless otherwise noted.

In DACH, the group reported growth in Contract and Permanent which was up 6% and 11% annually, respectively. Germany, the largest country in the region, delivered net fee growth of 7% driven by Technology (up 11%) due to demand for roles within Cyber Security and Software Development. Engineering was up 21%, with higher demand for Construction roles.

The Netherlands saw net fee growth driven by Technology (up 6%) with increased demand for Project Managers, ERP Consultants, Data Engineers and Data Science roles. Engineering was up 2% due to demand for Process Engineers, Electrical Engineers and Health & Safety Advisors.

In Rest of Europe, Contract, which represents 94% of net fees for the region, grew 11%, which more than offset the 45% decrease in Permanent net fees, due to both market conditions and the transition towards Contract, particularly in the UK. The UK, the largest country in the region, saw net fee growth of 6%, driven by: Technology (up 7%), as demand increased for Software Engineers and roles within Digital Transformation.

The USA Contract business was up 4% YoY driven by: Engineering up 29%, with increased demand for roles within Project Management, Electrical and Mechanical Engineering.

Within Middle East and Asia, Japan, which represents 39% of the region, was up 7% over the year, driven by Life Sciences due to increased demand for roles within Pharmaceuticals & Biotechnology. The group also cited a strong performance in UAE with net fees up 67% driven by Engineering.

The group also reports net fees for its five key markets: Germany, Netherlands, USA, UK and Japan.

Lehne added, “We have continued to make progress against our clear strategy which is centred on an analytical and fact-based approach of knowing where to play and playing where we can win. Our targeted investment in talent and digital infrastructure is progressing as planned, positioning the group to scale with sustainable margins, in line with our 2024 ambitions.”

“Our long-term opportunity is unchanged, underpinned by structural megatrends which drive the acute need for scarce STEM talent,” Lehne said. “We are closely monitoring lead indicators across our markets as we navigate challenging macro conditions. Supported by a resilient business model and robust financial position, we remain well positioned to source and place the best STEM talent the world needs.”

SThree shares last traded at £433.50, up 0.23% on the day and 11.89% below its 52-week high of £492.00, set on 3 March 2023. The company has a market cap of £582.91 million.