SThree (LSE:STEM) has raised its full-year profit guidance after reporting a 2% year-on-year decline in third-quarter net fees, with its contract business showing a smaller decline and the contractor order book increasing.
The STEM workforce consultancy now expects profit before tax of at least £12 million for FY26, ahead of its previous guidance. The revised outlook reflects working capital efficiencies and one-off benefits.
Third-quarter net fees declined 2% compared with the same period last year, marking the third consecutive quarter of sequential improvement. Contract net fees fell 1%, while permanent recruitment fees decreased 8%.
Contractor Order Book Increases to £148 Million
SThree reported new business growth in six of its 11 contract markets during the quarter, contributing to a 5% increase in its contractor order book to £148 million.
According to the company, the order book provides visibility over approximately five months of future net fees.
Contract recruitment continues to account for the majority of SThree’s net fees, with the group maintaining its focus on specialist placements across technology, engineering and life sciences.
The company said improving trends in its contract business contributed to its outlook, although trading conditions remained subdued in several markets.
US and Life Sciences Growth Offset Regional Declines
Performance varied across SThree’s geographical markets and specialist sectors during the third quarter.
The USA recorded double-digit growth, while the life sciences business returned to growth, with net fees increasing 8%.
These gains were offset by declines in Germany, the UK, Japan and parts of the Middle East and Asia.
The USA, Germany and the Netherlands remain SThree’s largest markets, with the group’s performance reflecting differences in recruitment demand across regions and sectors.
Net Cash Reaches £36 Million as Cost Programme Continues
SThree reported a net cash position of £36 million and continued its share buyback programme of up to £20 million.
The company is also implementing a cost-optimisation programme, which has reduced headcount by 7% since the end of the previous financial year.
Management attributed the increase in full-year profit expectations partly to working capital efficiencies and one-off benefits.
The group continues to invest in technology and data capabilities, including proprietary agentic artificial intelligence tools, which it expects to support productivity improvements.
FY26 Profit Guidance Raised
SThree now anticipates profit before tax of at least £12 million for FY26, exceeding its previous expectations.
The revised guidance follows three consecutive quarters of sequential improvement in net fee performance, alongside growth in the contractor order book.
Management expects its contract-focused business model and technology investments to support future growth, while acknowledging that recruitment conditions remain subdued in several European and Asian markets.
The company’s near-term performance will continue to reflect regional recruitment activity, contract demand and the contribution of its ongoing cost-optimisation programme.
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