SThree shares plunge as recruiter says employers are still delaying hiring

The London-listed firm, which recruits for science, technology, engineering and maths roles, said it now thinks the challenges could persist into 2025

Recruitment specialist SThree has issued a profit warning, stating that employers across Europe are continuing to delay hiring, causing its share price to plummet.

The London-listed firm, which specialises in recruiting for science, technology, engineering and maths (STEM) roles, now believes these challenges could continue until 2025. The company reported that its net fees for the year ending in November totalled £369.1m, a 9% decrease from the previous year, with a more significant decline over the past three months. Fees within Germany, its largest market, were down 12% year-on-year, and declined 14% in the UK.

Shares in the business fell by more than a quarter on Thursday, reaching their lowest level in four years. This also affected shares in fellow recruiters Hays and PageGroup.

SThree stated that new business activity remained weak throughout the year due to ongoing challenging economic conditions. The last few months of the year were exacerbated by increased political and macroeconomic uncertainty, particularly in Europe, which further delayed firms' decision-making and pushed back expectations for when conditions will improve.

In recent months, the UK Government delivered its autumn Budget with tax measures set to raise an additional £40bn per year in revenue. France has also experienced significant political instability, with the recent resignation of its prime minister following a no-confidence vote plunging the country into deeper uncertainty.

Recruitment specialist SThree has revised its pre-tax profit expectations for the 2025 financial year to approximately £25m, a marked decrease from the £67m previously estimated by analysts. The company acknowledged that this new projection includes the effects of one-off costs up to £7m aimed at enhancing operational efficiency.

However, these measures are part of a strategic shift expected to generate annual savings of around £6m. Timo Lehne, chief executive of SThree, reflected on the past year's difficulties saying: "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.

"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 (the 2025 financial year)."

Speaking on customer relations, Lehne observed that the trend of clients renewing contracts highlights the importance they place on "critical STEM roles" in light of evolving technology and workplace practices altering the broader employment landscape.