SThree benefits from STEM

SThree is a specialist in recruitment for jobs related to science, technology, engineering and mathematics (STEM). Information and communications technology (ICT) makes up the largest part of its business, accounting for 43 per cent of overall gross profits last year, followed by life sciences with 22 per cent. Demand for quality candidates in these fields is strong. 

Tech jobs often operate with temporary and fixed-term contracts, and contract and temporary work is a growing share of the business, accounting for 71 per cent of gross profits last year. Contract recruitment can be a bigger drain on cash, though, as recruiters often have to pay out wages to the workers they place before money is received from clients and growth dented SThree’s cash conversion in the first half of this year.

A more substantive issue for SThree has been a slowdown in the UK jobs market in the wake of the Brexit vote. The UK & Ireland division suffered a 14 per cent drop in gross profits through 2017 and continued to fall, albeit at a slower rate, in the first half of this year. Management has acted quickly, though, reducing permanent average headcount by 37 per cent in the three months to August. It is in the process of moving support staff to Glasgow, which is expected to to yield a £4m-£5m annualised benefit, covering exceptional costs of £12m to £13m in around three years.

As the UK has struggled, growth has been robust elsewhere and now the UK accounts for a far smaller part of the business. The division contributed a little under 16 per cent of gross profits in the third quarter to the end of August, down from a quarter in the 2016 financial year. Continental Europe (57 per cent of gross profit) and the United States (22 per cent) have taken over as the engines of growth, growing 24 per cent and 8 per cent, respectively, in the three months.