- Contract order book of £156 million, down 6%
- Group net fees down 12% year-on-year
- Shares down 62% over the past year
Shares in SThree (STEM) plunged 20% in morning trading as the specialist recruitment firm warned of ‘subdued’ activity well into full year 2026.
The company said macro uncertainty had ‘persisted for longer than expected, impacting levels of new business activity.’
Its contract order book of £156 million was down 6% year-on-year and group net fees were down 12% year-on-year with a modest improvement quarter-on-quarter in the third quarter due to a return to growth in the US during the period.
The company however said its balance sheet was robust with net cash of £42 million as of 31 August and performance for full year 2025 is expected to be in line with previously announced £25 million pre-tax profit guidance.
SThree said it also continues to invest in the next generation of AI (artificial intelligence) ‘to capitalise on the new opportunities emerging’ in the industry.
The trading update for the period 1 June to 31 August was ill- timed given the release of the latest UK unemployment data from the Office of National Statistics for the three months to July, which held steady at 4.7%, but showed vacancy numbers continued to fall, albeit at a slower rate.
Shares in recruitment firms Pagegroup (PAGE) fell over 2% to 223p and Hays (HAS) shares dropped nearly 2% to 56p on the news.
WHAT DID THE CEO SAY?
Timo Lehne, CEO said: ‘More broadly, new business remains challenging, however, with a disciplined cost base reinforced by operational efficiencies, we remain confident in our ability to deliver on our full year 2025 pre-tax profit guidance.
‘As we look further ahead, we are encouraged by pockets of improving momentum, however we have not yet seen a broader market recovery and, prudently, do not think this will start to materialise near-term, albeit not worsen.’
AI HOPES
Analysts at Berenberg said: ‘While full year 2025 cost saving initiatives provide some offset against the underlying drop through, management has taken the decision to invest in further cost efficiencies in agentic AI which nets this off but still places SThree in a better position for when the markets turn.
For full year 2027, we forecast £25 million of adjusted pre-tax profit (down from £35 million) as the benefits of these efficiency measures are felt as well as the drop-through from a return to net fee growth (we forecast 3% year-on-year).’
