Thank you for joining us today for our half-year results briefing. I'm joined by Andy Beach, our CFO.
Morning, everyone.
Together, we will be walking you through the half-year numbers, our strategic progress, and take a little on outlook. Let's get started. To give you a quick overview of the half, we have delivered what we believe is a strong performance, given the market context and the challenges experienced by the sector over the period. In addition, we have made significant operational enhancements, preparing us for next phase of growth. We now have three of our largest markets transacting through early iterations of our game-changing digital-first platform, and we're pleased to see the first stage of benefits starting to materialize. We currently expect our FY 2024 performance to be in line with market expectations. Lastly, we continue to be well-covered in our focused skilled specialisms, which are aligned to client requirements, positioning us well for when the market environment improves.
We believe we're in the right sectors, the right markets, with the right teams, and we continue to be bold in our ambition. As a reminder of who we are, we are the only global STEM specialist talent partner, which is a unique offering in the market. We're purely focused on STEM talent. This means we place people with skills in science, technology, engineering, or mathematics into roles across a diverse range of industries and geographies. We place people into STEM roles every day, including engineers, to build wind turbines, and data scientists to help businesses harness new technologies. As many of you know, the charts on this page show how our well-established strategy is positioned at the center of two long-term growth trends: STEM and flexible talent.
This is where we see our opportunity, fulfilling the structural demand for STEM, which is underpinned by mega trends and is particularly well-aligned to the contractor model. As a result of this focus, our contract business now represents 84% of group total, up from 81% a year ago. Our bias towards contract provides us with resilience, a more profitable revenue stream with better visibility, and is a powerful differentiator in the market. Before Andy talks through our performance in detail, I will cover some of the key points. Net fees were down 7% from record highs in the prior year and comfortably above pre-COVID levels, underpinned by robust contract performance. Our clients continue to retain scarce talent in the face of continued skills shortages, evidenced in our strong contract extension rates and robust pricing.
Our contractor order book of GBP 182 million, down only 2% year-on-year against a strong prior year comparator, represents sector-leading visibility with the equivalent of around four months net fees. Despite our investment in the TIP, we have delivered profit before tax of GBP 39 million, up 5% year-on-year due to lower average headcount for the half, tight cost control, and higher interest income. The underlying cash performance in the first half was strong. We started the year with net cash of GBP 83 million and closed the period with net cash of GBP 90 million. The progress we have made is a testament to the quality of our global teams. In the context of the wider market, while also undertaking a major change program, we are really pleased with this performance.
I would like to thank everyone for their hard work and commitment. I will now pass over to Andy to talk us through the finances.
Thank you very much, Timo. Despite market uncertainty continuing into FY 2024, we are pleased to have delivered a near-record H1 net fee and operating profit performance, up 18% and 67% respectively on our pre-COVID performance. It is worth noting that the first half of FY 2019, the last year before COVID, was, at the time, our record-ever net fee and operating profit performance. We also delivered an exceptional operating profit conversion ratio of 20% in the first half of this year due to tight cost control and the phasing of our strategic investments. We continue to index calendar quarter net fee performance since 2019, the last full year before the pandemic, to show more clearly our performance compared to other staffing businesses. As the chart shows, we are less cyclical, which we believe is due to our strategic focus on flexible talent and STEM.
We clearly outperformed the market through COVID, and over the last two years, we have sustained our outperformance, with the gap again beginning to widen. This shows that we are less volatile through periods of market disruption, with our contract order book providing a runway of contract net fees due to be recognized as they are earned on a month-by-month basis over the life of a contract. As we have seen historically, when markets recover and new placement activity increases, the recovery in net fees tends to be smoother and from a higher overall level, resulting in a more even through-the-cycle net fee profile compared to permanent dominant businesses, where net fees are recognized almost immediately. Overall, this demonstrates that we have the right strategy and that our business is high quality through the cycle.
Looking in more detail at the half-year FY 2024 performance, net fees are down 7% on a constant currency basis. Contract, which now represents 84% net fees, declined 4%, reflecting ongoing softness in new business, but partially offset by continued strong contract extensions. Permanent, which is the smaller part of our business, declined by 18% and continues to be impacted by tough market conditions and our targeted investment towards contract, with average permanent headcount down 13% year-on-year. Comps have started to soften, and we did therefore see a slowdown in the rate of decline between Q1 and Q2.
Operating profit for the half was GBP 37.7 million, which is up 3% on a constant currency basis, driven primarily by lower personnel costs, with average headcount down 10%, along with tight management of other costs, which helped to mitigate our lower net fees. This has enabled us to maintain a sector-leading conversion ratio, the ratio of operating profit to net fees of 20%. Now, we expect this to temper in the second half of the year due to planned investment, together with additional license and amortization costs as the TIP is rolled out across the group. We currently expect the full-year margin to remain in line with market expectations and significantly ahead of the sector. Profit before tax is GBP 39 million, up 5% year-over-year, reflecting the higher operating profit and the benefit from higher net interest income on our cash.
Looking at the regional and skill mix for the period, we have a well-balanced business, both geographically and by skill. The first chart shows the split by region, with DACH remaining the largest region in the group, representing 34% of net fees. Looking to the right, you can see that the growth achieved in the Netherlands region and Middle East and Asia was offset by lower net fees in DACH, rest of Europe, and the U.S.. The second ring chart shows our strong and unique position in providing STEM skills. Technology continues to be our largest skill, and it represents 48% of net fees. The strength of engineering means it is now the second largest skill, driven by energy and particularly our clean energy business, which was up 15% year-over-year.
The continued strong demand for engineering roles across most regions has helped to partially offset the weakness in demand for skills in technology and life sciences and demonstrates the diversity of the mix within our business. We continue to benefit from the ongoing trend towards flexible working. This slide looks at our net fees by service. Our contract business can be split between independent contractors and employed contractors. The most notable shift over the last few years has been the trend towards the Employed Contractor Model, or ECM, which has grown from 22% of net fees in H1 of FY 2019 to 38% of net fees in the first half of FY 2024. ECM will be the focus of our investor briefing scheduled for later today, and we're looking forward to sharing more insights with you on this part of our business.
Looking now at the future visibility of our contract business. The contract order book represents the value of contracts written up to the contractual end date, assuming that all contracted hours are worked. The book was down a modest 2% year-on-year, as a strong extensions performance was only able to partially offset the slowdown in new placements from the prolonged market uncertainty. However, even with the decline, the order book continues to provide us with sector-leading forward visibility compared to permanent-focused staffing businesses, with around 75% of consensus net fees for FY 2024 already recognized or booked. The strength of the contract order book demonstrates that while new placement activity continues to be soft this year, all other underlying metrics around our contract business are strong.
We've seen excellent extension rates in the half, and this has resulted in average contract lengths increasing by 9% compared to the prior year to 51 weeks. To sustain contract margins at 21.7%, we've managed tight pricing control, especially with extensions, and the average salary of the contract roles that we've placed is up 4% year-on-year, now reaching GBP 102,000. Productivity was up modestly year-on-year as average headcount declined a little faster than the rate of net fee decline, reflecting careful management of natural churn. Near term, we expect productivity to moderate until market conditions improve. But over the midterm, we do expect to deliver sustainable, increased levels of productivity as our strategic investments in digital infrastructure start to deliver benefits.
The TIP remains on budget, and the overall timeline remains on track, with the first iteration of the end-to-end platform now live across our U.S. and U.K. businesses, while our rollout in Germany is well underway. We expect total OpEx for the year to be in the range of GBP 2 million-GBP 4 million, weighted to the second half of this year based on the phasing of rollout activities with just under GBP 1 million incurred in H1. Total CapEx is expected to be around GBP 7 million-GBP 8 million, again, weighted to the second half with around GBP 3 million incurred in H1. We have further refined our forecast for delivery and brought additional functionality into the scope of the program, which means the phasing of OpEx and CapEx has pushed into FY 2025.
However, overall, we are very pleased to continue forecasting spend to be comfortably within the original GBP 30 million-GBP 35 million budget. Turning to the year-on-year operating profit bridge, you can see the decrease in both contract and permanent net fees is partially offset by people costs being down year-on-year. This is primarily due to the 10% average decrease in headcount compared to last year and lower bonus and commission costs due to the net fees being down year-on-year. Also included is the GBP 1.7 million year-on-year decline in OpEx for the TIP and GBP 5.3 million year-on-year decline of other operating costs due to tight cost control. This leaves profit for the half at GBP 37.7 million. Looking at our net cash position, we've benefited from strong cash generation from underlying operations.
After our usual outflows, a GBP 10 million share purchase for the employee benefit trust and GBP 12 million of leased principal payments and CapEx, including around GBP 3 million incurred on the TIP, we end the half with cash of GBP 90 million, up 8% since the year end. Before moving on to look at dividends, I wanted to share with you a brief reminder of our capital allocation policy. Our overarching intention is to always maximize value for our shareholders. We look to maintain a strong balance sheet to provide flexibility at all times, while also providing shareholders with a sustainable through-the-cycle dividend with long-term earnings growth. We then prioritize our deployment of capital in the order shown. To reflect our performance and confidence in the business, I'm pleased to confirm that we'll be paying an interim dividend of GBP 5.01 per share.
This is an increase of 2% versus the FY 2023 interim dividend and is in line with our dividend policy. So to sum up, we are reporting a resilient trading performance. Even with total net fees down 7%, this was still our third highest H1 net fee performance. Contract was down modestly, supported by strong extensions, and continues to demonstrate the benefit of our strategic focus on STEM and contract. Operating profit and the conversion ratio remains at near record highs, but margins are expected to temper in the second half of the year due to planned investments. The contract order book continues to give us good visibility of future net fees, and we have a strong balance sheet, which will fund our future ambitions. Thank you. I'll now hand back to Timo.
Thank you, Andy. We will now turn to look at what we have achieved strategically throughout the half. Turning to our operational progress, we have our four strategic pillars, which we consistently report against, being our places, platform, people, and position. I will now touch on each pillar in turn. Our strict market investment model informs the regional and vertical mix we choose to operate in, with our active market coverage targeted to 11 of the largest STEM markets worldwide. As we regularly assess and analyze our position within these markets, we're excited by the opportunities we see. While we continue to take market share in line with our ambition, our average market share remains at a modest 3%, leaving exponential scope to leverage our position to grow both organically and, given the highly fragmented supply landscape, through selective M&A.
To support our growth ambitions in the regions, we have continued to evolve our insights platform and provide internal and external data to our consultants to go deeper in our skilled specialisms. We have continued to align our consultants along very clear skills verticals by region and bring further clarity to the skills that we recruit for. Turning to our platform, we continue to progress the phased rollout of our TIP, with the overall program on track and on budget. We are delighted with the progress we have made so far. The first iteration of our platform was deployed across our U.S. business last year and is now undergoing continuous improvement as new functionalities are added and more and more data flows through it, driving richer, bespoke insights.
Our second major regional rollout in Germany is well underway, with the transition of the independent contract and permanent businesses onto the platform completed and ECM to follow later in the plan. We have now also completed our third regional rollout in the U.K.. With each regional rollout, we are absorbing new learnings and becoming increasingly efficient in our deployments. To date, we have processed over 38,000 invoices, equating to nearly GBP 160 million of revenue. As we have stated before, cost efficiencies will be the first benefit to materialize before we start to generate productivity proof points from our early deployments. We are pleased to share that in line with our expectations, in the U.S., we have already seen material cost efficiencies, with further savings expected as systems are fully bedded in and as we layer in more and more functionality.
We are well on our journey to becoming a digital-first innovator. This program is more than simply upgrading our systems. Together with our partner, Microsoft, we are embedding advanced technology and AI deeply within SThree's framework to drive precision and pace within our operations. We continue to see this program as a key ingredient to driving sustainably higher margins over the medium term. Now, turning to our people pillar, the engine of our business. We are aware that the world of work is changing at a lightning speed, and that there has been a generational shift in what is expected of employers. As such, we have been doing a lot of analysis of how we evolve further to ensure that we are continuously improving our proposition to remain relevant for our people and ahead of our competitors.
During the period, we have made several enhancements to our employee value proposition, with a focus on employee engagement and inclusion, to ensure we continue to attract and retain the best talent. We have also dedicated particular focus to our sales function, reviewing and enhancing processes to support retention and productivity. The rollout of our TIP, of course, goes a long way to support this, putting the best tools at the fingertips of our teams and improving the productivity of our cohorts going forward. We are under no illusions that the implementation of our TIP is a big change for our people, and it takes time for people to get acquainted with a completely new end-to-end system. However, we are seeing a great attitude from our teams, approaching the new platform with interest and adapting to new ways of working.
This is reflected in our eNPS score of 35 in TIP-related questions, 22 points above benchmark, again, demonstrating the positive reception we are seeing. I'm so proud of our teams. In terms of our position, we capture our market opportunity through a house of brands approach, leveraging the strong brand value we have in our specialist vertical skills. During the period, we've taken this to the next level by investing in our brand websites and go-to-market channels, as well as enhancing our digital marketing capabilities to drive better lead generation. As we look ahead, the new technology and data we are bringing into the organization will enable us to inject more precision into our marketing function over the next 24 months.
We are doing a lot of this preparation work now, and as part of this, we plan to further optimize our strong go-to-market brands, including the development of new aligned visual identities. We continued to make steady progress towards our ESG targets during the first half of the year. Despite a challenging market, we've continued to invest in building a diverse talent pipeline for our clients, whilst addressing barriers to STEM career paths for those underserved in the locations where we operate. During this period, we have also continued to see our clean energy business grow at a pace as the world continues to focus on decarbonization and mega trend, underpinned by STEM skills. While supporting our clients to decarbonize their value chain, we've also spent the first half of this year strengthening our own net zero transitioning plan to ensure we make progress to achieve our Science Based Targets.
We have launched the first net zero office in Glasgow, and our new office footprint is centered around being more environmentally friendly while offering a state-of-the-art environment for our teams. So to sum up, our performance in the first half of the year has continued to demonstrate the strength of our unique operating model and proposition centered on sourcing STEM skills and flexible talent. Despite the challenging external environment, we have invested in our people, product offering, and made excellent progress in the positioning of our business for long-term growth. We have started to see the early rewards of our efforts to move beyond the status quo and to do things differently as we position SThree as a digital-first organization, supercharging our teams through an end-to-end technology platform to drive efficiencies and scale. As we enter the second half of the financial year, market sentiment remains largely unchanged.
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. We currently expect FY 2024 performance to be in line with market expectations, with latest consensus indicating that our profits for the current year are expected to be the second highest of all of the U.K. staffers. We remain well covered in our focused skilled specialism, which are aligned to client requirements. We continue to relentlessly execute against our strategy, which has resulted in a lot of positive advancements across our infrastructure, our teams, and our customer proposition. We are striving to be an employer of choice, providing our teams with the best environment, data, and technology to ensure that they all have the tools to perform at their best.
The long-term market opportunity is clear, and we are well on our way to pursuing our vision.