SThree Shares Plunge: Navigates Macro Headwinds; FY26 Profitability Outlook Trimmed

SThree plc, the global STEM workforce consultancy, saw its share price plummet more than 22% on Tuesday after it released its Q3 trading update, revealing a modest sequential improvement but warning of persistent challenges impacting future profitability.

The company reiterated its FY25 profit before tax (PBT) guidance of £25 million, but cautioned that subdued new business activity is expected to continue into FY26, significantly impacting profit expectations.

Group net fees decreased by 12% year-over-year in Q3, although there was a slight improvement compared to the previous quarter, helped by a return to growth in the US market.

Contract revenue, which accounts for 83% of net fees, declined by 13% year-over-year, while permanent placements were down 5%.

The contractor order book stood at £156 million, down 6%, and represented approximately five months' worth of net fees, a sector-leading level of visibility. SThree maintains a robust balance sheet with net cash of £42 million as of August 31, 202. However, that is down from £48 million at the end of May 2025.

The Technology Improvement Programme (TIP) is nearing completion, with 10 of 11 markets actively using the platform. SThree anticipates £6 million in in-year net savings from operational efficiencies. Despite positive momentum in some markets and verticals, macroeconomic uncertainty continues to hamper new business activity.

The board is investing in next-generation AI and a further cost optimization program in FY26, building on the TIP foundations.

However, persistent softness in new business activity is expected to impact FY26 PBT consensus by approximately £20 million due to the company's operational gearing.

FY26 PBT is now expected to be around £10 million, factoring in investment initiatives funded through cost management in FY25.

The company intends to commence a further share buyback program in FY26, aligning with its capital allocation policy, with further details to be provided in early FY26.

CEO Timo Lehne commented, “Our Q3 performance demonstrates a continuation of the positive momentum as reported at the half year across certain segments and markets,” reinforcing the company’s focus on navigating challenging market conditions and investing in future growth.

However, he added that “new business remains challenging.”