SThree H1 Earnings Call Highlights

Key Points

• SThree’s first-half results weakened as net fees fell 7% to about GBP 148 million and reported operating profit dropped sharply to GBP 3.4 million, hurt by soft market conditions in Europe and one-off cost optimization expenses. Management said underlying profit was steadier and trading momentum improved as the period progressed.
• U.S. growth helped offset European weakness, with engineering and life sciences showing signs of stabilization and the U.S. life sciences business returning to growth in the second quarter for the first time in four years. Contract business also improved, with the contractor order book up 3% year over year and margins edging higher.
• The company reiterated full-year guidance and maintained its dividend, citing benefits from cost actions that will be more visible in the second half and a cautiously optimistic outlook despite macro uncertainty. It also highlighted gains from its new technology platform, TIP, which is improving productivity and operational visibility across the group.

SThree LON: STEM reported lower first-half net fees and operating profit as soft market conditions, particularly in Europe, continued to weigh on performance, though the STEM-focused staffing group said trading momentum improved through the period and reiterated its full-year expectations.

At the company’s half-year results briefing, interim CFO Damian Fehrenberg said SThree generated about GBP 600 million of revenue from 6,000 clients during the first six months of FY 2026. Net fees were about GBP 148 million, down 7% from a year earlier. Reported operating profit fell 67% to GBP 3.4 million, representing a 2.3% conversion of net fees into operating profit.

Fehrenberg said the first half “was not a normal period,” citing both lower net fees and non-recurring costs tied to the company’s cost optimization program. On an underlying basis, operating profit was GBP 9.8 million, broadly in line with the GBP 10 million reported a year earlier, despite the decline in net fees. Reported profit included GBP 6.4 million of one-off costs, including spending related to centralizing operational activities into the company’s Glasgow Center of Excellence.

U.S. Growth Offsets European Weakness

SThree said the rate of decline in net fees moderated during the half, helped by strong growth in the U.S. and improving momentum in selected markets. Europe remained softer, with weakness in parts of the region continuing to pressure results.

By skill area, Fehrenberg said technology, the company’s largest category by net fees, declined 14% year over year. In DACH, SThree’s largest region for technology, software developer vacancies fell 22%, while client spending shifted toward the artificial intelligence value chain and cloud migration. Fehrenberg said enterprise resource planning is now a larger part of SThree’s technology offering than software development.

Engineering net fees were broadly stable, declining 1%. Fehrenberg pointed to the U.S. as the company’s largest engineering market, where electricity demand is driving work with power utilities on multi-year capital projects tied to grid hardening, grid expansion and power generation. Life sciences declined 8%, though the rate of decline eased during the half, with the U.S. life sciences business returning to growth in the second quarter for the first time in four years.

Contract Business Shows Signs of Stabilization

SThree’s contract business showed improving forward indicators. The contractor order book rose 3% year over year, marking its first period of growth since the first quarter of 2023. Fehrenberg said the order book provides “reliable forward visibility” equivalent to about five months of future net fees already booked.

New business activity in contract was stable year over year and improved sequentially, with six of 11 contract countries delivering growth. Extension rates remained resilient, supporting average contract lengths of 58 weeks. Contract margins increased slightly to 21.7%, which Fehrenberg attributed to disciplined pricing control, particularly on extensions.

The company also highlighted a continued shift toward employed contractors, who now generate 42% of group net fees. Fehrenberg said employed contractor margins are higher because SThree assumes additional risk and complexity for clients, including compliance and operational requirements.

Technology Platform Embedded Across the Group

Management said the first half was the first full reporting period in which SThree operated entirely on a single standardized end-to-end platform, known as TIP. The company said the platform is now embedded and is beginning to deliver measurable benefits, particularly in contract operations.

SThree said contract client meetings per consultant were up 69% compared with the first half of FY 2023, which it used as a baseline before the rollout. The company also said “A-grade” jobs per consultant rose 41%, time to placement improved by one day, and placements per consultant increased 6% across the group.

Matt McManus, chief commercial officer, said TIP had moved SThree from “multiple systems, fragmented data, and inconsistent workflows” to an integrated technology environment. He said dashboards now provide daily visibility into leading indicators, including the order book, jobs, interviews and client growth.

Daniel Goldhammer, head of sales DACH, said the platform had changed how teams research and develop customers, helping consultants identify higher-quality opportunities earlier. He also said AI integration is making candidate searches more accurate and efficient.

Karen Chalmers, director of global operations, said TIP supported the creation of the Glasgow Center of Excellence, where about 90 roles were mobilized across placement support, employed contractor payroll and service support. She said the company reduced its ServiceNow query service-level agreement from 141 hours to 54 hours since March 2026, a 60% improvement, while supporting 6,500 global placements.

Dividend Maintained, Guidance Reiterated

SThree ended the half with net cash of GBP 43 million after purchasing GBP 6 million of shares under its buyback program. Fehrenberg said the lower cash balance compared with year-end reflected reduced operating profit, increased working capital investment and typical outflows including tax, lease principal payments, capital expenditures, employee benefit trust share purchases and dividends.

The board declared an interim dividend of GBP 0.051 per share, unchanged from last year. Fehrenberg said maintaining the dividend represented another departure from the company’s stated dividend policy, but reflected the board’s assessment of trading performance, the outlook and balance sheet strength.

Management described the outlook as cautiously optimistic while acknowledging continued macroeconomic and geopolitical uncertainty, especially in Europe. The company said benefits from first-half cost optimization actions are weighted toward the second half and should provide additional support for meeting full-year guidance.

SThree also pointed to longer-term demand drivers in STEM, including AI adoption, data center investment, the energy transition, healthcare innovation and regulatory-driven infrastructure projects. The company said its strategy remains centered on STEM and flexible talent, with the U.S. and Japan identified as markets where targeted initiatives are delivering growth.

About SThree (LON:STEM)

SThree plc brings skilled people together to build the future. We are the global STEM workforce consultancy, placing highly skilled, STEM specialist workers in the industries where they are needed most. We advise businesses, build expert teams, and deliver project solutions for our clients. With 40 years of experience in pure-play STEM and a global team with local expertise across 11 countries, we cover high-demand skills across Engineering, Life Sciences and Technology roles. We provide permanent and flexible contract talent to a diverse base of around 6,000 clients.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.