Recruiter SThree flags improving US contract hiring, boosting shares

June 24 (Reuters) - Recruiter SThree STEMS.L said on Tuesday improving contractual hiring in the U.S. market, its second-biggest, helped it slow a decline in fee income and maintain its annual profit target, sending its shares up more than 10% in early trade.

SThree reported a 13% drop in net fees in the second quarter after a 15% decline in the first, and reaffirmed its pretax profit goal of 25 million pounds ($34 million) for the year to November.

While SThree is a niche player in the industry with its focus on hiring in the science, technology, engineering and mathematics sector, its positive update helped lift shares of bigger European rivals, including Hays HAYS.L, which warned last week of a drop in new job openings.

Shares of Hays, Page Group PAGE.L, Randstad RAND.AS and Adecco ADEN.S were up between 2.2% and 3.4% by 0730 GMT.

"Whilst market conditions remain challenging, the Group delivered a stable first half performance, with a modest sequential improvement quarter-on-quarter," SThree CEO Timo Lehne said in a statement.

"Strong contract extensions continue to underpin performance," he said.

The stock, which has fallen nearly a quarter since the start of the year, was the top gainer on the FTSE small cap .FTSC index and recorded its biggest one-day move since January 2022.

Recruiters globally have expressed caution this year, concerned that rising global political and trade tensions could spill over to the hiring market, hurting the confidence of employers and job seekers.

SThree's contracting and permanent hiring businesses have seen softness in new hiring, but contract extensions have remained strong.

Net fees in the first-half fell 14% to 159.1 million pounds ($215.80 million) compared with the same period of 2024, with SThree's largest market, Germany, recording a 14% drop. Meanwhile U.S. net fees saw a smaller fall of 5% in the same period.

Analysts expect SThree to report annual profit of 26.1 million pounds, based on a company-compiled consensus.

($1 = 0.7362 pounds)