UK's SThree sees steady FY performance despite hiring market woes

By Prerna Bedi

(Reuters) -British recruiter SThree Plc said on Tuesday it expects its annual performance to be in line with market expectations buoyed by contract hiring and cost controls, even as tough hiring market conditions prevail in the second half.

Shares in the firm, which hires employees for the finance, energy, banking, pharmaceutical, engineering and tech sectors, were up 3.2% at 431p as of 0807 GMT.

"As we enter the second half of the financial year, market sentiment remains largely unchanged," the recruiter said.

"Commitment to new project expenditure is taking longer resulting in continued subdued new business activity, however contract extensions remain robust as clients seek to retain much-needed STEM skills," it added.

Contract hiring, which accounts for about 84% of SThree's total net fee, has remained robust amid a wider economic downturn.

Recruiting firms globally have been under pressure in an uncertain macroeconomic environment, where both companies and job seekers have been low on confidence with elections in the UK and France adding to their worries.

"Whether it's in the UK or the U.S., many other territories, the current elections bring uncertainty specifically to the business environment," CEO Timo Lehne told Reuters in an interview

The world's largest employment agency Randstad reported quarterly core earnings slightly below expectations, as weak activity persisted in the hiring market across many of its geographies.

SThree reported a 7% fall in like-for-like net fees to 188.7 million pounds ($243.8 million) while its profit before tax was up 5% for the six months ended May 31

But the mid-cap recruiter added that while market conditions have remained challenging for longer than anticipated, its cost control measures, including a 10% drop in average headcount in the first-half will help its full-year results.

Recruiters adjust their headcount regularly in response to overall hiring demand to support their productivity levels.

Analysts on average expect SThree to report 397.9 million pounds in net fees for the year ending Nov. 30, per a company-compiled consensus, below 419 million pounds the firm logged last year.

($1 = 0.7739 pounds)

(Reporting by Prerna Bedi in Bengaluru; Editing by Rashmi Aich and Sharon Singleton)