Specialty recruitment firm SThree (STEM), which focuses on filling roles in science, technology, engineering and mathematics settings, posted a downbeat trading statement for the 12 months to November and drastically cut its forecast for earnings for the current year.

The shares, which were previously down just 11% for the year, slumped as much as 39% intraday before recovering and now stand 34% below their 1 January level.

The firm, which is heavily reliant on placing people on contracts, reported a 9% fall in net fee income for the last year due to ‘ongoing challenging market conditions’ and reduced its pre-tax profit guidance for this year to around £25 million against a consensus of around £65 million.

Analyst James Bayliss at Berenberg estimated that just a 10% reduction in net fees could reduce pre-tax earnings to the level put forward by the company, showing the high level of operational gearing among recruitment firms.

As a specialist, SThree had formerly been viewed as able to weather the poor trading conditions which have impacted larger rivals such as Hays (HAS) and PageGroup (PAGE), whose shares have fallen 27% and 25% respectively year-to-date. 

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