SThree has warned investors that new business activity will be ‘subdued for longer than expected’ as the STEM-specialist recruiter reported falling fee income.
The recruitment firm posted a net fee decline of 4 per cent on a like-for-like basis to £418.8million in the year ending November, following a record comparative performance the prior year.
In the group’s largest region, comprising Germany, Austria and Switzerland, fees fell by 3 per cent due to its high exposure to small and medium-sized companies, which are more likely to cut jobs during an economic downturn.
Results: Recruitment firm SThree revealed net fees declined by 4 per cent on a like-for-like basis to £418.8million in the year ending November
Across many territories, including the UK and the United States, trading was hit by much lower demand for new staff and reduced investment spending among life sciences businesses.
SThree’s results were cushioned by its transition towards contract employment in some markets, with part-time hiring levels holding up better than full-time demand amid the global economic slowdown.
Net fees from permanent hires plunged by 22 per cent to £75.3million, offsetting contract fees increasing by a modest amount to £343.5million.
The London-based group, a specialist in providing recruits to STEM-related positions, now derives over 80 per cent of total business from contract employment.
Pre-tax profits still rose to £77.9million, partly thanks to weaker-than-forecast bonus and commission payments and the timing of recognising costs from its technology upgrade scheme.
But SThree cautioned: ‘As we await an easing of the macro-economic backdrop, new business activity continues to be subdued for longer than expected.’
The last couple of years have been more challenging for recruiters as central banks have hiked interest rates.
This has pushed up costs for many companies that borrowed large sums of money at the height of the pandemic when interest rates were far lower.
Some businesses have reacted by slashing investment, implementing hiring freezes, or cutting their total headcount.
Technology firms have announced 452,700 job cuts since the beginning of 2022, according to layoffs.fyi, with Google, Facebook owner Meta, Microsoft and Amazon among those to wield the axe.
Prior to that, they embarked on an active recruitment spree as people spent more time online and working from home.
SThree shares were 2.4 per cent lower at 388.5p on late Tuesday afternoon, but have still grown by around a quarter over the last three years.
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