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SThree plc (STHR)

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Monday 24 July, 2006

SThree plc

Interim Results

SThree plc
24 July 2006



                                   SThree plc

                           ('SThree' or the 'Group')



              Interim Results for the Six Months Ended 31 May 2006



SThree, one of the UK's leading specialist staffing businesses, is today
announcing its interim results for the six months ended 31 May 2006.



Financial Highlights


£m                                                                 2006         2005                   Change
Turnover                                                        £178.0m      £143.5m                  + 24.0%
Gross Profit (Net fee Income)                                    £59.2m       £46.0m                  + 28.7%
Operating profit before exceptional items*                       £15.1m       £10.5m                  + 44.0%
Operating profit after exceptional items*                        £13.1m        £9.7m                  + 34.4%
Profit before tax and exceptional items*                         £14.5m        £9.7m                  + 49.2%
Profit before tax                                                £12.5m        £8.9m                  + 39.2%
Basic earnings per share before exceptional items (2005
comparatives adjusted to reflect new post IPO capital
structure*)                                                        8.1p         3.3p                 + 145.5%
Basic earnings per share before exceptional items*                 8.1p        11.0p
Basic earnings/(loss) per share                                    6.9p         9.5p
Interim dividend                                                   2.4p            -



The above results have been prepared under International Financial Reporting
Standards (IFRS)



* Exceptional items are detailed in Note 3



Operational Highlights



  • Strong first half performance, continuing the trend from 2005



  • Number of permanent placements increased by 32.0% to 3,475 in the first
    half (2005: 2,633), with average fees increased by 6.5%



  • Number of active contractors at period end increased by 14.8% to 4,335
    (2005: 3,777), with average gross profit per day rates increased by 2.3%



  • Information and Communications Technology ('ICT') business segment
    increased gross profit by 23.0% to £49.7m (2005: £40.4m)



  • Rapid growth in non-ICT - banking and finance, accountancy, human
    resources and engineering staffing businesses increased gross profit by
    70.4% to £9.5m (2005: £5.6m)



  • Non-UK businesses continuing to perform strongly - gross profits increased
    by 43.7% to £15.7m (2005: £10.9m)



  • Headcount increased by 12.8% to 1,210 since year end



  • Further expansion of international network - new office opened in Paris in
    the first half, with further openings in New York, Frankfurt and Munich
    scheduled for the second half



  • Maiden dividend of 2.4p per share declared



Russell Clements, Chief Executive Officer, said: 'The first half of 2006 has
seen the Group report a further strong set of results and it is particularly
pleasing to report growth across all sectors and geographies, a reflection of
the fact that trading conditions in the specialist recruitment markets we serve
remain positive. We remain confident that the first half positions us well to
make further progress for the year as a whole.'




SThree plc                                             (24.07.06) 020 7638 9571
Russell Clements, Chief Executive Officer            (Thereafter) 020 7292 3838
Michael Nelson, Chief Financial Officer

Citigate Dewe Rogerson                                            020 7638 9571
Kevin Smith / Seb Hoyle





Notes to editors



SThree, founded in 1986, is one of the leading specialist staffing businesses in
the UK.  The Group provides both permanent and contract specialist staffing
services in the UK and Europe, primarily in the information and communications
technology ('ICT') sector and, to an increasing extent, the banking and finance,
accountancy, human resources and engineering sectors.  Following the
establishment of its first business, Computer Futures, in 1986, the Group
adopted a multi-brand strategy, establishing new operations to address growth
opportunities.  SThree currently operates 12 brands, the 3 largest being
Computer Futures, Progressive and Huxley Associates, and has 30 offices in the
UK and 9 offices in mainland Europe, in Belgium, The Netherlands, France,
Germany and Ireland.



SThree has a selective approach to clients and focuses on high margin
opportunities, predominantly within the small to medium-sized enterprises ('SME
') market, which SThree defines as including autonomous divisions of large
corporates.  The Group does not pursue a high volume/low margin model.  SThree
has a diverse, international client list of over 4,000 clients.



UK

                                   SThree plc

                           ('SThree' or the 'Group')



              Interim Results for the Six Months Ended 31 May 2006



                                Operating Review



The Group achieved another strong set of results in the first half, continuing
the trends evidenced last year and ahead of market expectations at the beginning
of the financial year.



As a consequence of the strong growth in the share price since IPO, the Group
has recently joined the FTSE 250 index, a significant achievement so early in
our life as a public company.



These interim results are our first to be prepared under International Financial
Reporting Standards (IFRS).  While the application of IFRS has no significant
impact on the reported results for the Group, the results for 2005 have been
restated in accordance with IFRS.  A reconciliation of prior periods' results to
those restated under IFRS is shown in Note 12.



The Group's turnover for the six months ended 31 May 2006 increased by 24.0% to
£178.0m (2005: £143.5m).  Gross profit increased 28.7% to £59.2m (2005: £46.0m).
The inherent operational gearing of the Group's business model has resulted in
operating profit before exceptional items increasing by 44.0% to £15.1m (2005:
£10.5m).  The conversion ratio of operating profit (before exceptional items) to
gross profit also increased substantially in the first half to 25.6% (2005:
22.9%).  Operating profit after exceptional items increased by 34.4% to £13.1m
(2005: £(9.7)m). Profit before tax was £12.5m (2005: £8.9m).



In addition to our ongoing investment in human capital we have continued to
invest in our international office network and systems infrastructure.  At 31
May 2006 our staff numbers had increased to 1,210 (30 November 2005: 1,073)
operating from 39 offices in 6 countries.  During the period under review we
opened a new office for Progressive in Paris.  We continue to expand organically
and during the second half of 2006 are committed to opening offices in New York
and Frankfurt for Huxley Associates, in addition to a new office in Munich for
Computer Futures Solutions. These latter two openings will increase our presence
in the German market to four offices. We are also successfully progressing the
development of a new Enterprise Resource Planning system for the Group which we
expect to deliver considerable benefits in staffing efficiencies and other cost
savings.  The project is on budget and on schedule for implementation at the
start of 2007.



Gross profit from permanent placements continued to grow in the first half of
2006 at a faster rate (+40. 5%) than that from contract placements (+19.5%)
reflecting the upside gearing of the permanent business in a buoyant market.  As
a consequence, the ratio of gross profit between the contract and permanent
segments reached 52:48 (2005: 56:44).  The gross margin on contract placements
remained broadly constant at c.21%.  The number of active contractors at the
half-year end increased by 14.8% to 4,335, and we also saw an increase in the
average gross profit per day rates year on year of 2.3% to £59.70.  The number
of permanent placements increased by 32.0% to 3,475, with an increase in average
fees for the six months of 6.5% to £8,140 year on year.



United Kingdom vs Non-UK

Turnover from UK-based clients increased by 23.3% to £134.7m (2005: £109.2m) and
gross profit increased by 24.1% to £43.5m (2005: £35.0m).  Turnover from non-UK
based clients increased by 26.2% to £43.3m (2005: £34.3m) and gross profit
increased by 43.7% to £15.7m (2005: £10.9m).  The higher increase in gross
profit outside of the UK is partly related to the greater percentage of
permanent placements in the business mix.



ICT vs non-ICT

Turnover from our ICT business increased by 20.4% to £160.9m (2005: £133.6m) and
gross profit increased by 23.0% to £49.7m (2005: £40.4m).  Turnover from non-ICT
increased by 72.2% to £17.1m (2005: £9.9m) and gross profit increased by 70.4%
to £9.5m (2005: £5.6m). It is pleasing to note that our long established ICT
franchise posted further healthy growth whilst our newer non-ICT businesses, as
we would expect, continue to grow at a faster pace.



Brand Contribution

Gross profit from our four largest brands Computer Futures, Huxley, Progressive
and Pathway increased by 14.8%, 41.3%, 20.2% and 39.8% respectively.  We are
particularly pleased that our longest established brands continue to post strong
growth in fee income.  The performance of Huxley reflects not only its
established presence in ICT, but also particularly strong growth outside the ICT
sector and its increasing international presence.



Gross profit from our smaller UK-based brands, which are primarily ICT focused,
also continued to increase strongly by 42.9% to £11.9m (2005: £8.3m).



Exceptional Items

Certain employees received share options and awards at flotation and
subsequently under related arrangements. Under IFRS2, the charge to the income
statement is based on the fair value of the shares at the time of the award or
grant of the option. This amounted to £2.1m (2005:£0.8m). However, since these
options and awards relate to shares already in issue prior to flotation, the
only related cash cost to the Group is the employer's national insurance cost
(£0.2m).  The difference of £1.9m between the charge reported in the income
statement and the net cash cost is reported as a credit to equity.



Taxation

The charge for taxation on profits before exceptional items amounted to £4.2m
(2005: £3.3m), giving an effective tax rate of 29.0% (2005: 34.3%).



Under Schedule 23 of the Finance Act 2003, the Group obtains a corporation tax
deduction relating to the various share awards and options exercised.. The
amount of the tax deduction is calculated by reference to the share price at the
time of exercise. As a consequence the cash benefit to the Group of the tax
deduction is greater than the tax credit on the exceptional item reported in the
income statement. This difference under IFRS is dealt with through equity. The
total Schedule 23 tax benefit amounts to £1.8m, of which £0.6m appears in
exceptional items in the income statement, and the remaining £1.2m is therefore
a credit equity.



Earnings Per Share

Due to the complex nature of our capital structure before the flotation we have
presented an 'adjusted' earnings per share for the 2005 comparative period based
on the capital structure immediately post flotation, to enable the figures to be
compared meaningfully to earnings per share for the current period.  On this
basis, the basic earnings per share before exceptional items increased by 145.5%
to  8.1p (2005: 3.3p adjusted), with basic earnings per share after exceptional
items being 6.9p (2005: 2.8p adjusted).



On an unadjusted basis for 2005, basic earnings per share before exceptional
items were 8.1p (2005: 11.0p) and after exceptional items were 6.9p (2005:
9.5p). The diluted earnings per share before exceptional items were 7.9p (2005:
11.0p).



Cash Flow

At the start of 2006, the Group had net debt of £9.6m.  This number was
flattered to the tune of £10.0m of cash representing income tax and social
charge liabilities relating to the share awards made on IPO, which had been
collected from beneficiaries but was not liable to be paid over to the tax
authorities until shortly after year-end.  In the first half of 2006, the Group
used £0.2m of cash in operations, after funding a £16.7m increase in working
capital as a result of increased business activity and settlement of the
above-mentioned income tax liabilities.  Tax recovered, as a result of the
exceptional tax credit, amounted to £2.0m and net capital expenditure was £1.4m.
As at 31 May 2006, the Group had net debt of £9.8m.



Dividends

It is the Board's intention to pay dividends at a level that it believes is
sustainable throughout the economic cycle and is in line with comparable quoted
businesses.  The Board proposes to pay an interim dividend of 2.4p per share.
The interim dividend will be paid on 22 September 2006 to those shareholders on
the register at 25 August 2006.



Current Trading and Future Prospects

The first half of 2006 has seen the Group report a further strong set of results
and it is particularly pleasing to report growth across all sectors and
geographies, a reflection of the fact that trading conditions in the specialist
recruitment markets we serve remain positive. We remain confident that the first
half positions us well to make further progress for the year as a whole.

                                    - Ends -



Consolidated Income Statement - unaudited                                                                               
for the 6 months ended 31 May 2006                                                                                      

                                                                                                                        


 
                        Six months ended 31 May 2006    Six months ended 31 May 2005     Year ended 30 November 2005   
                        Ordinary Exceptional     Total   Ordinary Exceptional    Total   Ordinary Exceptional     Total
                      activities       items           activities       items          activities       items          
                                                         restated    restated restated   restated    restated  restated
                Note       £'000       £'000     £'000      £'000       £'000    £'000      £'000       £'000     £'000
                                                                                                                       
Revenue          2       177,993           -   177,993    143,546           -  143,546    315,087           -   315,087
Cost of sales          (118,829)           - (118,829)   (97,587)           - (97,587)  (210,606)           - (210,606)
Gross profit     2        59,164           -    59,164     45,959           -   45,959    104,481           -   104,481
Administrative   3      (44,038)     (2,068)  (46,106)   (35,456)       (788) (36,244)   (75,022)    (15,939)  (90,961)
expenses                                                                                                               
Operating                 15,126     (2,068)    13,058     10,503       (788)    9,715     29,459    (15,939)    13,520
profit                                                                                                                 
Finance Income                84           -        84        229                  229        482                   482
Finance cost               (738)           -     (738)      (999)           -    (999)    (1,973)           -   (1,973)
Share of                      49           -        49          -           -        -          -           -         -
profit of                                                                                                              
joint venture                                                                                                          
Profit before             14,521     (2,068)    12,453      9,733       (788)    8,945     27,968    (15,939)    12,029
taxation                                                                                                               
Taxation         4       (4,214)         621   (3,593)    (3,336)         236  (3,100)    (8,702)       4,759   (3,943)
Profit after              10,307     (1,447)     8,860      6,397       (552)    5,845     19,266    (11,180)     8,086
taxation                                                                                                               
Dividends -      5             -           -         -    (2,263)           -  (2,263)    (4,351)           -   (4,351)
non-equity                                                                                                             
Profit for the            10,307     (1,447)     8,860      4,134       (552)    3,582     14,915    (11,180)     3,735
period                                                                                                                 
                                                                                                                       
Attributable                                                                                                           
to:                                                                                                                    
Equity holders of the     10,173     (1,447)     8,726      4,076       (552)    3,524     14,780    (11,180)     3,600
Company                                                                                                                
Minority                     134           -       134         58           -       58        135           -       135
interest                                                                                                               
                          10,307     (1,447)     8,860      4,134       (552)    3,582     14,915    (11,180)     3,735
                                                                                                                       
Earnings per     6         pence       pence     pence      pence       pence    pence      pence       pence     pence
share                                                                                                                  
                                                                                                                       
Basic                        8.1       (1.2)       6.9       11.0       (1.5)      9.5       35.1      (26.6)       8.5
Diluted                      7.9       (1.1)       6.8       11.0       (1.5)      9.5       34.1      (25.8)       8.3
Adjusted -                   8.1       (1.2)       6.9        3.3       (0.5)      2.8       11.9       (9.0)       2.9
basic                                                                                                                  
Adjusted -                   7.9       (1.1)       6.8        3.3       (0.5)      2.8       11.5       (8.7)       2.8
diluted                                                                                                                
                                                                                                                       

 
All amounts relate to continuing                                                                                        
         
operations.                                                                                                             
         
                                                                                                                        
         
An interim dividend of 2.4 pence (2005: nil) per Ordinary Share will be paid on 22 September 2006 to shareholders on 
the          
register at the close of business on 25 August 2006.                                                                    
         
                                                                                                                        
         


 

 
Consolidated Statement of Changes in Equity - unaudited                                               
as at 31 May 2006                                                                                     
                                                                                                      
                                  Share      Share Shares to   Capital     Currency  Retained    Total
                                capital    premium be issued   reserve  translation  earnings   equity
                                                                            reserve                   
                                                                                                      
                                  £'000      £'000     £'000     £'000        £'000     £'000    £'000
                                                                                                      
Balance at 1 December 2004        2,214          -     6,035         -            -   (1,967)    6,282
(restated)                                                                                            
                                                                                                      
Profit for the 6 months to 31                                                           3,524    3,524
May 2005                                                                                              
Issue of share capital               14         74                                                  88
Deferred tax on employee share                                                          8,641    8,641
options                                                                                               
Currency translation                                                          (187)              (187)
differences                                                                                           
                                                                                                      
                                                                                                      
Balance at 31 May 2005            2,228         74     6,035         -        (187)    10,198   18,348
(restated)                                                                                            
                                                                                                      
Profit for the 6 months to 30                                                              76       76
November 2005                                                                                         
Employee share award and share                                                         11,966   11,966
option credit                                                                                         
Deferred tax on employee share                                                        (1,326)  (1,326)
options                                                                                               
Current tax on employee share                                                           3,136    3,136
options                                                                                               
Satisfaction of rights of            30      6,005   (6,035)                                         -
shares to be issued                                                                                   
Share issue costs charged to               (3,154)                                             (3,154)
share premium                                                                                         
Conversion of preference          (878)                            878                               -
shares                                                                                                
Currency translation                                                             41                 41
differences                                                                                           
                                                                                                      
                                                                                                      
Balance at 30 November 2005       1,380      2,925         -       878        (146)    24,050   29,087
(restated)                                                                                            
                                                                                                      
Profit for the 6 months to 31                                                           8,726    8,726
May 2006                                                                                              
Employee share award and share                                                          1,874    1,874
option credit                                                                                         
Deferred tax on employee share                                                          2,337    2,337
options                                                                                               
Current tax on employee share                                                           1,231    1,231
options                                                                                               
Currency translation                                                             63                 63
differences                                                                                           
                                                                                                      
Balance at 31 May 2006            1,380      2,925         -       878         (83)    38,218   43,318

 



 
                                                                                            
                                                                                            
                                                                                            
                                                                                            
Consolidated Balance Sheet - unaudited                                                      
as at 31 May 2006                                                                           
                                                         31 May     31 May       30 November
                                                           2006       2005              2005
                                                                  restated          restated
                                                                                            
                                              Note        £'000      £'000             £'000
ASSETS                                                                                      
Non-current assets                                                                          
Intangible assets                                            68         57                43
Property, plant and equipment                             2,623      2,579             2,815
Assets under construction                                   790          -                 -
Investment in joint venture                                  49                             
Deferred tax asset                                       12,115     10,374            10,014
                                                         15,645     13,010            12,872
                                                                                            
Current assets                                                                              
Trade and other receivables                              83,761     66,128            74,900
Current tax debtor                                            -          -             2,994
Cash and cash equivalents                      8          2,468     21,995             2,901
                                                         86,229     88,123            80,795
                                                                                            
Total assets                                   2        101,874    101,133            93,667
                                                                                            
LIABILITIES                                                                                 
Current liabilities                                                                         
Provisions for liabilities and charges                    (484)      (316)             (364)
Trade and other payables                               (38,342)   (36,560)          (46,141)
Financial liabilities - borrowings                     (12,250)   (39,900)          (12,451)
Current tax liabilities                                 (1,114)    (1,207)                 -
                                                       (52,190)   (77,983)          (58,956)
                                                                                            
Non-current liabilities                                                                     
Provisions for liabilities and charges                  (6,061)    (4,714)           (5,453)
                                                        (6,061)    (4,714)           (5,453)
                                                                                            
Total liabilities                                      (58,251)   (82,697)          (64,409)
                                                                                            
Net Assets                                               43,623     18,436            29,258
                                                                                            
EQUITY                                                                                      
Capital and reserves attributable to the Company's                                          
shareholders                                                                                
Share capital                                             1,380      2,228             1,380
Share premium                                             2,925         74             2,925
Shares to be issued                                           -      6,035                 -
Capital reserve                                             878          -               878
Currency translation reserve                               (83)      (187)             (146)
Retained earnings                                        38,218     10,198            24,050
                                                         43,318     18,348            29,087
Minority interest                                           305         88               171
                                                                                            
Total equity                                             43,623     18,436            29,258



 
Consolidated Cash Flow Statement                                                          
for the 6 months ended 31 May 2006                                                        
                                                                                          
                                                                                          
                                                          Six months ended      Year ended
                                                         31 May     31 May     30 November
                                                           2006       2005            2005
                                                                  restated        restated
                                                                                          
                                               Note       £'000      £'000           £'000
Cash flows from operating activities                                                      
Cash (used in)/generated from operating          7        (179)      6,192          24,954
activities                                                                                
Income tax received/(paid)                                1,978    (2,556)         (5,449)
                                                                                          
Net cash generated from operating activities              1,799      3,636          19,505
                                                                                          
Cash flows from investing activities                                                      
Purchase of fixed assets                                (1,446)    (1,327)        (2,702)-
Proceeds from disposal of fixed assets                       56          -               -
                                                                                          
Net cash used in investing activities                   (1,390)    (1,327)         (2,702)
                                                                                          
Cash flows from financing activities                                                      
Expenses paid in respect of share issue                       -          -         (1,008)
Drawdown on new loan facility                             3,250          -           9,000
Repayment of loan stock                                       -          -        (39,900)
Interest received                                            84        229             482
Interest paid                                             (738)      (999)         (1,973)
Proceeds from issue of ordinary shares                        -         85              88
Issue of share capital to minority interest                   -          -              30
Preference dividends paid                                     -    (4,525)         (8,876)
                                                                                          
Net cash generated from/(used in) financing               2,596    (5,210)        (42,157)
activities                                                                                
                                                                                          
Net increase/(decrease) in cash and cash                  3,005    (2,901)        (25,354)
equivalents                                                                               
                                                                                          
Cash and cash equivalents at beginning of                 (550)     24,956          24,956
the period                                                                                
Exchange gains/(losses) on cash and cash                     13       (60)           (152)
equivalents                                                                               
                                                                                          
Cash and cash equivalents at the end of the      8        2,468     21,995           (550)
period                                                                                    



 

 
Notes to the financial statements - unaudited                               
                                                                            
1 Accounting policies                                                       
The consolidated interim financial statements are for the six months ended  
31 May 2006. These financial statements have been prepared in accordance    
with accounting policies expected to be followed for the year ending 30     
November 2006 and the Listing Rules of the London Stock Exchange. European  
Union (EU) law requires that the consolidated financial statements for the  
year ending 30 November 2006 be prepared in accordance with IFRS adopted for
use in the EU. The interim financial statements are unaudited but have been 
reviewed by the auditors.                                                   
                                                                            
Following the implementation of IFRS, SThree plc's accounting policies, as  
set out below, have been consistently applied to all the periods presented  
unless otherwise stated.                                                    
                                                                            
Consolidation                                                               
The consolidated financial statements incorporate the financial statements  
of SThree plc and of its subsidiaries, together with the Group's share of   
the results of its joint ventures. Subsidiaries are all entities over which 
SThree plc has the power to govern the financial and operating policies,    
generally accompanying a shareholding of more than one half of the voting   
rights. Subsidiaries are fully consolidated from the date on which control  
is transferred to SThree plc; they are de-consolidated from the date that   
control ceases. Joint ventures are defined as where the Group has joint     
control and are accounted for using the equity method of accounting.        
                                                                            
Inter-company transactions, balances and unrealised gains on transactions   
between group companies are eliminated. Unrealised losses are also          
eliminated unless the transaction provides evidence of an impairment of the 
asset transferred.                                                          
                                                                            
Foreign currencies                                                          
Items included in the financial statements of each of SThree plc's          
subsidiaries are measured using the currency of the primary economic        
environment in which that subsidiary operates (its 'functional currency').  
The consolidated financial statements of SThree plc are presented in        
sterling which is SThree plc's functional and presentation currency. Foreign
currency transactions are translated into the functional currency using the 
exchange rates prevailing at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions and from
the translation at period-end exchange rates of monetary assets and         
liabilities denominated in foreign currencies are recognised in the income  
statement.                                                                  
                                                                            
The results and financial position of all of SThree plc's subsidiaries (none
of which has the currency of a hyper-inflationary economy) that have a      
functional currency different from SThree plc's presentation currency are   
translated into the presentation currency as follows:                       
                                                                            
- Assets and liabilities for each balance sheet presented are translated at 
the closing rate at the date of that balance sheet;                         
                                                                            
- Income and expenses for each income statement are translated at average   
exchange rates (unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the dates of the transactions);  
and                                                                         
                                                                            
- All resulting exchange differences are recognised as a separate component 
of equity.                                                                  
                                                                            
On consolidation, exchange differences arising from the translation of the  
net investment in foreign entities and of borrowings and other currency     
instruments designated as hedges of such investments, are taken to          
shareholders' equity. When a foreign operation is sold, such exchange       
differences are recognised in the income statement as part of the gain or   
loss on sale.                                                               
                                                                            
Intangible assets                                                           
    
Goodwill                                                                        
Goodwill represents the excess of the cost of an acquisition over the fair      
value of the company's share of the net identifiable assets of the acquired     
subsidiary at the date of acquisition. Goodwill is included in intangible       
assets and is tested annually for impairment. Any impairment is recognised      
immediately in the income statement and is not subsequently reversed.           
                                                                                
Computer software                                                               
Acquired computer software licenses are capitalised on the basis of the costs   
incurred to acquire and bring into use the specific software. These costs are   
amortised over their estimated useful lives.                                    
                                                                                
Costs that are directly associated with the production of identifiable and      
unique software products, controlled by SThree plc and that will probably       
generate economic benefits exceeding costs beyond one year, are recognised as   
intangible assets. Direct costs include the employee costs of the development   
team and an appropriate portion of relevant overheads.                          
                                                                                
Computer software development costs recognised as assets are amortised over     
their expected useful lives (not exceeding five years). Amortisation will       
commence once the computer software is fully implemented and put into use.      
                                                                                
Costs associated with maintaining computer software programmes are recognised   
as an expense when incurred.                                                    
                                                                                
Trademarks                                                                      
Trademarks are recognised at cost. They have a definite useful life and are     
carried at cost less accumulated amortisation. Amortisation is calculated       
using the straight-line method to allocate the cost of trademarks over their    
estimated useful lives.                                                         
                                                                                
Property plant and equipment                                                    
Property, plant and equipment is stated at historical cost less depreciation.   
Historical cost includes expenditure that is directly attributable to the       
acquisition of the items.                                                       
                                                                                
Depreciation is calculated using the straight line method to allocate the       
depreciable value of property, plant and equipment to the income statement      
over their useful economic lives as follows:                                    
                                                                                
Furniture, fittings and equipment                 20%                           
Computer equipment                                33.33%                        
Motor                                             33.33%                        
vehicles                                                                        
Leasehold improvements                            20%                           
                                                                                
Assets' residual values and useful lives are reviewed and adjusted, if          
appropriate, at each balance sheet date.                                        
                                                                                
Subsequent costs are included in the asset's carrying amount or recognised as   
a separate asset, as appropriate, only when it is probable that future          
economic benefits associated with the item will flow to SThree plc and the      
cost of the item can be measured reliably. All other repairs and maintenance    
are charged to the income statement during the financial period in which they   
are incurred.                                                                   
                                                                                
Gains and losses on disposals are determined by comparing proceeds with         
carrying amounts. These are included in the income statement.                   
                                                                                
Impairment of assets                                                            
Assets that have an indefinite life are not subject to amortisation and are     
tested annually for impairment.                                                 
                                                                                
Assets that are subject to amortisation are reviewed for impairment whenever    
events or changes in circumstances indicate that the carrying amount may not    
be recoverable. An impairment loss is recognised for the amount by which the    
asset's carrying amount exceeds its recoverable amount. The recoverable amount  
is the higher of an asset's fair value less costs to sell and value in use.     
For the purposes of assessing impairment, assets are grouped at the lowest      
levels for which there are separately identifiable cash flows (cash generating  
units).                                                                         
                                                                                
Trade receivables                                                                     
Trade receivables are measured at cost less any provision necessary when there  
is objective evidence that SThree plc will not be able to collect all amounts   
due.                                                                            
                                                                                
Cash and cash equivalents                                                       
Cash and cash equivalents include cash in hand, deposits held at call with      
banks, other short-term highly liquid investments with original maturities of   
three months or less and bank overdrafts. Bank overdrafts are shown within      
borrowings in current liabilities on the balance sheet.                         
                                                                                
Assets leased under an operating lease                                          
Leases where substantially all the risks and rewards of ownership of assets     
remain with the lessor are accounted for as operating leases. Payments made     
under operating leases net of any incentives received from the lessor are       
charged to the income statement on a straight line basis over the lease periods.
                                                                                
Provisions, contingent liabilities and contingent assets                        
Provisions for dilapidations, onerous leases and deemed employment exposures are
recognised when SThree plc has a legal or constructive obligation as a result of
past events, it is more likely than not that an outflow or resources will be    
required to settle the obligation and the amount has been reliably estimated.   
Provisions are not recognised for future operating losses.                      
                                                                                
Where there are a number of similar obligations, the likelihood that an outflow 
will be required in settlement is determined by considering the class of        
obligation as a whole. A provision may be recognised even if the likelihood of  
an outflow with respect to any one item included in the same class of           
obligations may be small.                                                       
                                                                                
Deferred tax                                                                    
Deferred income tax is provided in full, using the liability method, on         
temporary differences arising between the tax bases of assets and liabilities   
and their carrying amounts in the consolidated financial statements. Deferred   
income tax is determined using tax rates that have been enacted or substantially
enacted by the balance sheet date and are expected to apply when the related    
deferred income tax asset is realised or the deferred income tax liability is   
settled.                                                                        
                                                                                
Deferred income tax assets are recognised to the extent that it is probable that
future taxable profit will be available against which the temporary differences 
can be utilised.                                                                
                                                                                
Share                                                                           
capital                                                                         
Ordinary shares are classified as equity. Incremental costs directly            
attributable to the issue of new shares or options are shown in equity as a     
deduction, net of tax, from the proceeds.                                       
                                                                                
Employee benefits                                                               
                                                                                
                                                                                
- Pension obligations - SThree plc has defined contribution plans and pays      
contributions to privately administered pension plans on a mandatory,           
contractual or voluntary basis. SThree plc has no further payment obligations   
once the contributions have been paid.                                          
                                                                                
- Bonus plans - SThree recognises a liability and an expense for bonuses based  
on the Directors' best estimate of the amounts due. SThree plc recognises a     
provision where contractually obliged or where there is a past practice of      
payments that has created a constructive obligation.                            
                                                                                
- Termination benefits - Termination benefits are payable when employment is    
terminated before the normal retirement date, or whenever an employee accepts   
voluntary redundancy in exchange for those benefits. SThree plc recognises      
termination benefits when it is demonstrably committed to either terminating the
employment of current employees according to a detailed formal plan without     
possibility of withdrawal, or providing termination benefits as a result of an  
offer made to encourage voluntary redundancy. Benefits falling due more than 12 
months after the balance sheet date are discounted to present value.            
                                                                                
Employee Benefit Trusts                                                         
The Employee Benefit Trusts ('EBT') were funded by gifts from certain SThree plc
shareholders and Directors. The assets and liabilities of the EBT are           
consolidated into the SThree plc consolidated financial statements.             
                                                                                
The EBTs' only assets are the shares in SThree plc which were gifted and hence  
no cost is attributed to those shares and no amounts are shown in SThree plc's  
financial statements.                                                           
                                                                                
Share-based compensation                                                        
The shares in the EBT are held for awards and grants under the employee share   
award and share option schemes.                                                 
                                                                                
Where shares are awarded, the fair value of the shares on the date of the grant 
is charged to the income statement in the year of grant, or over the period to  
which any performance criteria relate until the vesting date. Corresponding     
adjustment is made to equity.                                                   
                                                                                
Where options are awarded, the fair value of the share options on the date of   
grant is charged to the income statement over the vesting period of the share   
option, based on the number of options which are expected to become exercisable.
A corresponding adjustment is made to equity. At each balance sheet date, SThree
revises its estimates of the number of options that are expected to become      
exercisable and recognises the impact of any revision of original estimates in  
the income statement.                                                           
                                                                                
Revenue                                                                         
Revenue represents sales to third parties for services provided during the      
period, excluding value added tax and other sales taxes outside the UK.         
                                                                                
Contract revenue for the supply of professional services is based on the number 
of hours worked by a contractor.                                                
                                                                                
Revenue for permanent placements is recognised when employment candidates       
commence employment.                                                            
                                                                                
Exceptional items                                                               
                                                                                
                                                                                
Items which are non-recurring and sufficiently material are presented separately
within their relevant consolidated income statement category. The separate      
reporting of such items helps provide a better indication of the Group's        
underlying business performance.                                                
                                                                                
2 Segmental analysis                                                                        
                                                                                
As the Group operates in one business segment, being that of recruitment        
services, no additional business                                                
                                                                                
segment information is required to be provided. The Group's secondary segment is
geographical and the segmental results by geographical area are shown below.    
                                                                                
                                                                                

 
                                 By location of client           By location of operating   
                                                                          company           
                                                                                            
                             Six months ended       Year ended  Six months ended  Year ended
                                                                                            
                            31 May 2006   31 May   30 November    31 May   31 May         30
                                            2005          2005      2006     2005   November
                                                                                        2005
                                        restated      restated           restated   restated
                                                                                            
                                  £'000    £'000         £'000     £'000    £'000      £'000
                                                                                            
Revenue                                                                                     
                                                                                            
United Kingdom                  134,676  109,228       243,602   168,750  136,075    299,019
Europe and rest                  43,317   34,318        71,485     9,243    7,471     16,068
of the world                                                                                
                                177,993  143,546       315,087   177,993  143,546    315,087
                                                                                            
Gross profit                                                                                
                                                                                            
United Kingdom                   43,469   35,038        79,501    51,663   40,348     92,147
Europe and rest                  15,695   10,921        24,980     7,501    5,611     12,334
of the world                                                                                
                                 59,164   45,959       104,481    59,164   45,959    104,481
                                                                                            
Operating profit                                                                            
                                                                                            
Operating profit before exceptional items                                                   
United Kingdom                                                    13,339   10,135     27,789
Europe and rest                                                                             
of the world                                                       1,787      368      1,670                         
                                                                   5,126   10,503     29,459
                                                                                            
Exceptional                                                                                 
items:                                                                                      
United Kingdom                                                   (2,068)    (788)   (15,939)
                                                                                            
                                                                  13,058    9,715     13,520
                                                                                            
Total assets                                                                                
                                                                                            
United Kingdom                                                    96,140   93,761     87,248
Europe and rest                                                    5,734    7,372      6,419
of the world                                                                                
                                                                 101,874  101,133     93,667
                                                                                            
Capital                                                                                     
expenditure                                                                                 
                                                                                            
United Kingdom                                                     1,446    1,327      2,548
Europe and rest                                                        -        -        154
of the world                                                                                
                                                                   1,446    1,327      2,702
                                                                                            
The following segmental analyses, by brand, by recruitment classification and by discipline,
have been included as additional disclosure over and above the requirements of IAS 14       
'Segment Reporting'.                                                                        
                                                                                            

 
                                                                                                 
                                          Revenue                          Gross profit          
                                                                                                 
                              Six months ended         Year ended   Six months ended   Year ended
                                                                                                 
                              31 May 2006    31 May   30 November 31 May 2006   31 May         30
                                               2005          2005                 2005   November
                                                                                             2005
                                           restated      restated             restated   restated
                                                                                                 
                                    £'000     £'000         £'000       £'000    £'000      £'000
                                                                                                 
Brand                                                                                            
                                                                                                 
Computer Futures                   51,492    46,654        96,223      16,948   14,765     30,620
Solutions                                                                                        
Huxley Associates                  39,654    28,581        64,971      14,973   10,595     24,911
Progressive                        36,375    30,797        66,728      11,070    9,212     19,750
Computer                                                                                         
Recruitment                                                                                      
Pathway                            16,769    12,531        27,586       4,261    3,063      6,979
Others                             33,703    24,983        59,579      11,892    8,324     22,221
                                  177,993   143,546       315,087      59,164   45,959    104,481
                                                                                                 
Recruitment classification                                                                       
                                                                                                 
Contract                          149,707   123,417       267,071      30,878   25,830     56,465
Permanent                          28,286    20,129        48,016      28,286   20,129     48,016
                                  177,993   143,546       315,087      59,164   45,959    104,481
                                                                                                 
Discipline                                                                                       
                                                                                                 
Information &                     160,862   133,599       285,388      49,666   40,386     88,190
communication                                                                                    
technology                                                                                       
Other(1)                           17,131     9,947        29,699       9,498    5,573     16,291
                                  177,993   143,546       315,087      59,164   45,959    104,481
                                                                                                 

 
(1) Including banking and finance, accountancy, human resources and engineering sectors.                      
                                                                                                              
3 Administrative expenses - exceptional items                                                                 
                                                                                                              
                                                                                  Six months ended  Year ended
                                                                                                              
                                                                                   31 May   31 May 30 November
                                                                                     2006     2005        2005
                                                                                                      restated
                                                                                                              
                                                                                    £'000    £'000       £'000
                                                                                                              
                                                                                                              
                                                                                                              
Employee share awards and share options                                             1,874        -      11,966
Employer's National Insurance on share awards and options, and related costs          194        -       2,529
Special management bonuses                                                              -      788       1,444
                                                                                    2,068      788      15,939
                                                                                                              
Certain employees received share options and awards at flotation and subsequently under related arrangements. 
In accordance with IFRS 2 'Share-based Payment', a charge has been reflected in the income statement, with a  
corresponding charge for Employer's National Insurance.                                                       
                                                                                                              
Special management bonuses related to amounts paid to certain Directors and senior Group management, in       
proportion to their interest in Zero coupon preference shares, for services provided, recognising the fact    
that these preference shares did not bear dividends. The Zero coupon preference shares ceased to exist after  
the flotation and the special management bonuses are no longer payable.                                       
                                                                                                              
4 Taxation                                                                                                    
                                                                                                              
                                                                                  Six months ended  Year ended
                                                                                                              
                                                                                   31 May   31 May 30 November
                                                                                     2006     2005        2005
                                                       Ordinary Exceptional items                             
                                                     activities                     Total restated    restated
                                                                                                              
                                                          £'000             £'000   £'000    £'000       £'000
                                                                                                              
Current    - United Kingdom                               3,422             (621)   2,801    2,574       4,318
tax                                                                                                           
           - Overseas                                       729                 -     729      450         495
Deferred                                                     63                 -      63       76       (870)
tax                                                                                                           
                                                          4,214             (621)   3,593    3,100       3,943
                                                                                                              
The total tax charge is in line with the standard rate of corporation tax in the UK (30%).                    
                                                                                                              
In the six months to 31 May 2006 a current tax credit of £1.2m (31 May 2005: nil; 30 November 2005: £3.1m))   
has been taken directly to equity under IFRS 2 'Share-based Payment' and IAS 12 'Income Taxes'.               
                                                                                                              
The tax charge does not include the anticipated Schedule 23 tax credit which would crystallise on share awards
that are expected to be granted during the second half of the financial year (no later than 9 months after the
date of flotation). Only the Schedule 23 tax credit on share awards and options actually granted during the   
six months to 31 May 2006 has been included.                                                                  
                                                                                                              

 
5 Dividends                                                                                                 
                                                          Six months ended     Year ended                   
                                                               31 May   31 May         30                   
                                                                                 November                   
                                                                 2006     2005       2005                   
                                                                      restated   restated                   
                                                                                                            
                                                                £'000    £'000      £'000                   
                                                                                                            
Amounts paid as distributions to non-equity holders in the period:                                          
Preference dividend payable of 5% (net) on Preference and           -    2,263      4,351                   
'A' Preference Shares                                                                                       
                                                                                                            
6 Earnings per share                                                                                        
                                                             Six months ended  Year ended                   
                                                               31 May   31 May         30                   
                                                                                 November                   
                                                                 2006     2005       2005                   
                                                                      restated   restated                   
                                                                                                            
                                                                £'000    £'000      £'000                   
                                                                                                            
Earnings                                                                                                    
Profit for the                                                  8,726    3,524      3,600                   
period                                                                                                      
Effect of exceptional items (net                                1,447      552     11,180                   
of tax)                                                                                                     
                                                                                                            
Profit for the period excluding                                10,173    4,076     14,780                   
exceptional items                                                                                           
                                                                                                            
                                                             millions millions   millions                   
Number of                                                                                                   
shares                                                                                                      
Weighted average number of shares used for                      125.9     37.1       42.2                   
basic EPS                                                                                                   
Dilution effect of                                                2.1        -        1.2                   
share plans                                                                                                 
                                                                                                            
Diluted weighted average number of shares used for diluted      128.0     37.1       43.4                   
EPS                                                                                                         
                                                                                                            
                                                                pence    pence      pence                   
                                                                                                            
Basic                                                                                                       
                                                                                                            
Basic earnings                                                    6.9      9.5        8.5                   
per share                                                                                                   
Basic earnings per share excluding                                8.1     11.0       35.1                   
exceptional items                                                                                           
                                                                                                            
Dilutive                                                                                                    
                                                                                                            
Diluted earnings per                                              6.8      9.5        8.3                   
share                                                                                                       
Diluted earnings per share excluding                              7.9     11.0       34.1                   
exceptional items                                                                                           
                                                                                                            
Additional disclosure                                                                                       
                                                                                                            
The earnings per share figures presented above have been prepared in accordance with                        
International Financial Reporting Standard 14 'Earnings per share'. Due to the flotation                    
and, consequently, the share capital conversion occurring late in the financial year, the                   
weighted average number of shares used in the above calculations is considerably lower                      
than the actual number of Ordinary Shares in issue at the end of the financial year.                        
Therefore, the Directors believe that an additional EPS figure as at 31 May 2005 and 30                     
November 2005 should be disclosed, based on the capital structure at the balance sheet                      
date. For this EPS figure the preference dividend is excluded from the calculation of                       
earnings as it would not have been paid had the capital structure as at the balance sheet                   
date been in place throughout the relevant period. The Directors believe that these                         
adjustments result in an EPS figure which is a better representation of the underlying                      
trend in Group performance. The following tables set out the number of shares and the                       
earnings used in the calculation of the adjusted earnings per share.                                        
                                                                                                            
                                                                                                            
Adjusted                                                                                                    
                                                             millions millions   millions                   
Adjusted basic number of ordinary                               125.9    124.3      124.3                   
shares                                                                                                      
Adjusted dilutive number of                                     128.0    124.3      128.0                   
ordinary shares                                                                                             
                                                                                                            
                                                                pence    pence      pence                   
                                                                                                            
Basic earnings                                                    6.9      2.8        2.9                   
per share                                                                                                   
Basic earnings per share excluding                                8.1      3.3       11.9                   
exceptional items                                                                                           
                                                                                                            
Diluted earnings per                                              6.8      2.8        2.8                   
share                                                                                                       
Diluted earnings per share excluding                              7.9      3.3       11.5                   
exceptional items                                                                                           
                                                                                                            
All earnings are derived from continuing operations                                                                     
                            
                                                                                                            
7 Cash flows from operating activities                                                                                  
               
                                                             Six months ended  Year ended                   
                                                               31 May   31 May         30                 
                                                                                 November                   
                                                                 2006     2005       2005                   
                                                                      restated   restated                   
                                                                                                            
                                                                £'000    £'000      £'000                   
                                                                                                            
Profit before                                                  12,453    8,945     12,029                   
taxation                                                                                                    
Adjustments                                                                                                 
for:                                                                                                        
Depreciation and                                                  708      570      1,442                   
amortisation                                                                                                
Loss on disposal of fixed                                          23        -        275                   
assets                                                                                                      
Non-cash element of the charge for share awards and options     1,874        -     11,966                   
Profit from partial deemed                                          -        -         24                   
disposal                                                                                                    
Interest                                                         (84)        -          -                   
receivable                                                                                                  
Interest                                                          738      770      1,491                   
payable                                                                                                     
Foreign                                                             -    (106)          -                   
exchange gain                                                                                               
                                                                                                            
                                                                                                            
Changes in working capital and                                                                              
provisions:                                                                                                 
Increase in                                                   (8,891)  (6,621)   (15,462)                   
debtors                                                                                                     
(Decrease)/increase in                                        (7,728)    2,921        500                   
creditors                                                                                                   
Increase/(decrease) in                                            728    (287)     12,689                   
provisions                                                                                                  
                                                                                                            
Cash (used in)/generated from                                   (179)    6,192     24,954                   
operations                                                                                                  
                                                                                                            
8 Cash and cash equivalents                                                                                 
                                                             Six months ended  Year ended                   
                                                               31 May   31 May         30                   
                                                                                 November                   
                                                                 2006     2005       2005                   
                                                                      restated   restated                   
                                                                                                            
                                                                £'000    £'000      £'000                   
Cash and cash equivalents include the following for the                                                     
purposes of the cash flow statement:                                                                        
Cash at bank                                                 2,468      21,995      2,901                   
and in hand                                                                                                 
Bank overdrafts                                                  -           -    (3,451)                   
                                                                                                            
                                                             2,468      21,995      (550)                   
                                                                                                            
9 Capital commitments                                                                                       
                                                                                                            
The Group had capital commitments of £5.8m (31 May 2005: nil; 30 November                                   
2005: £0.1m).                                                                                               
                                                                                                            
10 Basis of preparation                                                                                                 
                                                                                                            
The interim financial information has been prepared on the assumption that all IFRS                         
statements, including International Accounting Standards (IAS's), Standing                                  
Interpretations Committee (SIC) interpretations and International Financial Reporting                       
Interpretations Committee (IFRIC) interpretations issued by the International Accounting                    
Standards Board (IASB) as effective for 2006 reporting will be endorsed by the European                     
Commission. These are subject to ongoing review and possible amendment by the IASB and                      
subsequent endorsement by the European Commission and therefore may change. Further                         
standards and interpretations may also be issued that will become applicable for the                        
Group's financial year ending 30 November 2006. In 2006 the Group has adopted IFRS for                      
the first time with the date of transition being 1 December 2004. The interim financial                     
information is covered by IFRS1 'First-time Apoption of International Financial                             
Statements', being part of the period covered by the Group's first IFRS financial                           
statements for the year ended 30 November 2006. IAS 34 'Interim Financial Reporting' has                    
not been applied to this interim financial information.                                                     
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            
The financial information does not constitute statutory accounts as defined in Section                      
240 of the Companies Act 1985. Statutory accounts for the year ended 30 November 2005,                      
which were prepared under accounting policies generally accepted in the UK, have been                       
filed with the Registrar of Companies. The auditors' report on those accounts was                           
unqualified and did not contain a statement made under Section 237(2) of Section 237(3)                     
of the Companies Act 1985.                                                                                  
                                                                                                            
11 Date of approval of interim statements                                                                               
                  
                                                                                                            
The interim announcement covers the period 1 December 2005 to 31 May 2006 and was                           
approved by the Board on 21 July 2006.                                                                      
                                                                                                            
The interim report will be sent to shareholders in due course. Further copies will be                       
available from the Company's registered office, 41-44 Great Windmill Street, London W1D                     
7NB, and can be accessed on the SThree website, www.sthree.com.                                             
                                                                                                            
                                                                                                            
12 Principal impact of IFRS                                                                                             
          
                                                                                                            
The key differences between UK GAAP and IFRS that will impact the SThree Group are set                      
out below.                                                                                                  
                                                                                                            
                                                                                                            
                                                                                                            
The Group has taken advantage of the exemption available under IFRS 1 where cumulative                      
translation differences for all foreign operations are deemed to be zero at the date of                     
transition. The Group has also taken the exemption not to apply IFRS 2 'Share-based                         
Payment' to share options granted before 7 November 2002. In addition, as permitted by                      
IFRS 1, the Group has adopted IAS 32 'Financial Instruments: disclosure and presentation'                   
and IAS 39 'Financial Instruments: recognition and measurement', prospectively from 1                       
December 2005.                                                                                              
                                                                                                            
Software development costs                                                                                  
                                                                                                            
Under UK GAAP, the costs of developing software were written off to the income statement                    
in the year in which they were incurred.                                                                    
                                                                                                            
Under IFRS, IAS 38 'Intangible assets', the company is required to capitalise the cost of                   
software development where certain recognition criteria are met, including technical                        
feasibility and probable future economic benefit. The capitalised cost is then amortised                    
over the expected future life of the developed software.                                                    
                                                                                                            
As a result of this change in accounting policy, SThree plc's net assets under IFRS have                    
increased by £67,000 as at 1 December 2004, £57,000 as at 31 May 2005 and £43,000 as at                     
30 November 2005, before the impact of deferred tax. Operating profit decreased for the                     
six month period ended 31 May 2005 by £10,000 and for the year to 30 November 2005 by                       
£24,000, represented by the capitalisation of costs previously written off under UK GAAP                    
of £7,000 and £14,000 respectively, offset by £17,000 and £38,000 of amortisation of                        
amounts capitalised.                                                                                        
                                                                                                            
                                                                                                            
                                                                                                            
Foreign exchange on inter-company loans                                                                     
                                                                                                            
Under UK GAAP, foreign exchange differences arising on inter-company financing loans were                   
recognised directly within reserves, where those loans were deemed to be permanent in                       
nature. For SThree plc, a number of these loans are between one subsidiary of SThree plc                    
and another subsidiary, rather than from the parent to a subsidiary.                                        
                                                                                                            
Under IFRS, IAS 21 'The effects of changes in foreign exchange rates' does allow foreign                    
exchange permanent differences arising on loans between fellow subsidiaries to be dealt                     
with in reserves when it is considered to be part of the net investment in a foreign                        
operations. Any temporary foreign exchange differences that do not form part of the net                     
investment in a foreign operation must be recognised within the income statement.                           
                                                                                                            
                                                                                                            
As a result of the application of IAS 21, SThree plc's reported profit for the six months                   
ended 31 May 2005 has increased by £106,000 and for the year ended 30 November 2005 has                     
decreased by £24,000, following the reclassification of a foreign exchange credit from                      
reserves into the IFRS income statement.                                                                    
                                                                                                            
Share-based payments                                                                                        
                                                                                                            
SThree plc operates a number of share-based incentive schemes (both awards of options and                   
awards of shares) that fall into the scope of IFRS 2 'Share-based payments'. Under UK                       
GAAP, SThree plc recognised a charge based on the intrinsic value of any such award at                      
the date of issue, where the intrinsic value is defined as being the difference between                     
the fair value of an SThree plc equity share at the date of issue of the award, and any                     
exercise price payable in respect of the award. In the past, the calculation of intrinsic                   
value has led to a minimal charge being recognised in the income statement.                                 
                                                                                                            
                                                                                                            
                                                                                                            
Under IFRS, IFRS 2 'Share-based payments' requires that a charge be recognised in respect                   
of all share-based payments based on the fair value of the options or shares at the date                    
of grant, where that fair value is calculated using an appropriate pricing model; the                       
charge is recognised over the vesting period of the award.                                                  
                                                                                                            
The application of IFRS 2 has not resulted in any material adjustment to SThree plc's                       
reported profits for the six months ended 31 May 2005 as SThree plc have concluded that                     
the fair value of SThree plc share awards at the date of their issue was not significant.                   
For the year ended 30 November 2005 the adjustment was £3.2m of which £3.1m was due to                      
the change in the treatment of current tax which has been taken directly to equity (IAS                     
12 'Income Taxes'). If further share options are issued in the future then the charge in                    
respect of any such share options could be significant.                                                     
                                                                                                            
                                                                                                            
                                                                                                            
Deferred tax                                                                                                
                                                                                                            
Under UK GAAP, deferred tax was recognised in respect of all timing differences that had                    
originated but not reversed at the balance sheet date where transactions or events had                      
occurred at that date that would result in an obligation to pay more, or a right to pay                     
less or to receive more tax.                                                                                
                                                                                                            
Under IFRS, IAS 12 'Income taxes' requires that deferred tax be recognised on all taxable                   
temporary differences between the tax base and the accounting base of the balance sheet                     
items included in the balance sheet of SThree plc, except to the extent that such                           
temporary differences arise on initial recognition of an asset or liability. This means                     
that deferred tax is recognised on certain temporary differences that would not have                        
given rise to deferred tax under UK GAAP. The most significant differences between UK                       
GAAP and IFRS in respect of deferred tax relate to the following:                                           
                                                                                                            
                                                                                                            
                                                                                                            
- under IFRS deferred tax is provided on the temporary difference arising between the tax                   
base of any share-based payments and the accounting base of those share based payments.                     
This gives rise to an additional deferred tax asset of £8.6 million as at 31 May 2005 and                   
£7.3 million at 30 November 2005.                                                                           
                                                                                                            
- under IFRS deferred tax is provided on temporary differences arising on investments in                    
subsidiaries (principally in respect of unremitted earnings), except where an entity can                    
control the timing of the reversal of the temporary difference and it is probable that                      
the temporary difference will not reverse in the foreseeable future. SThree plc has                         
decided that the remittance of earnings held by overseas subsidiaries is not probable and                   
that therefore no deferred tax liability is required.                                                       
                                                                                                            
In addition to these adjustments, the carrying values of deferred tax assets and                            
liabilities in the balance sheet have been adjusted to reflect the restatement of assets                    
and liabilities arising from the adoption of IFRS.                                                          
                                                                                                            
                                                                                                            
                                                                                                            

SThree plc                                                                                     
Reconciliation of Profit                                                                       
                                                                                               
                                  As at 31 May 2005               As at 30 November 2005       
                          (comparable interim period under  (end of last period presented under
                          UK GAAP)                                       UK GAAP)              
                           Under UK    Effect of Under IFRS   Under UK     Effect of Under IFRS
                               GAAP   transition                  GAAP transition to           
                                         to IFRS                                IFRS           
                                                                                               
                              £'000        £'000      £'000      £'000         £'000      £'000
                                                                                               
Turnover                    143,546            -    143,546    315,087             -    315,087
Cost of sales              (97,587)            -   (97,587)  (210,606)             -  (210,606)
                                                                                               
Gross profit                 45,959            -     45,959    104,481             -    104,481
                                                                                               
Administrative expenses    (36,340)           96   (36,244)   (90,838)         (123)   (90,961)
                                                                                               
Operating profit              9,619           96      9,715     13,643         (123)     13,520
                                                                                               
Net finance cost              (770)            -        770    (1,491)             -    (1,491)
                                                                                               
Profit before                 8,849           96      8,945     12,152         (123)     12,029
taxation                                                                                       
                                                                                               
Taxation                    (3,103)            3    (3,100)      (831)       (3,112)    (3,943)
                                                                                               
Profit after taxation         5,746           99      5,845     11,321       (3,235)      8,086
                                                                                               
Dividends -                 (2,263)            -    (2,263)    (4,351)             -    (4,351)
non-equity                                                                                     
                                                                                               
Profit for the period         3,483           99      3,582      6,970       (3,235)      3,735
                                                                                               
Attributable to:                                                                               
Equity holders of the         3,425           99      3,524      6,835       (3,235)      3,600
Company                                                                                        
Minority interest                58            -         58        135             -        135
                                                                                               
                              3,483           99      3,582      6,970       (3,235)      3,735
                                                                                               
Earnings per share            pence        pence      pence      pence         pence      pence
                                                                                               
Basic                           9.2          0.3        9.5       16.2         (7.7)        8.5
Diluted                         9.2          0.3        9.5       15.7         (7.4)        8.3
                                                                                               
                                             IAS      £'000                               £'000
                                                                                               
Profit under UK GAAP                                  3,483                               6,970
                                                                                               
Capitalisation of intangible assets           38          7                                  14
                                                                                               
Amortisation of intangible assets             36       (17)                                (38)
                                                                                               
IFRS 2 employee share awards                              -                                (75)
                                                                                               
Translation differences on                    21        106                                (24)
intercompany loans                                                                             
                                                                                               
Tax effect on IFRS adjustments                12          3                             (3,112)
                                                                                               
Profit under IFRS                                     3,582                               3,735

 


 

 
SThree plc                                                                                                       
Reconciliation of Equity                                                                                         

 
                                                                                                               
                           As at                     As at 31 May 2005             As at 30 November 2005      
                                                                                                               
                      01 December 2004                                                                         
                           (date of                     (Comparable                      (end of last          
                        transition)                         interim                            period          
                                                       period under                         presented          
                                                           UK GAAP)                    under UK GAAP)          
               Under UK   Effect of     Under Under UK    Effect of     Under Under UK      Effect of     Under
                   GAAP  transition      IFRS     GAAP   transition      IFRS     GAAP  transition to      IFRS
                            to IFRS                         to IFRS                              IFRS          
                                                                                                               
Non-current                                                                                                    
assets                                                                                                         
Intangible            -          67        67        -           57        57        -             43        43
assets                                                                                                         
Property,         1,833           -     1,833    2,579            -     2,579    2,815              -     2,815
plant and                                                                                                      
equipment                                                                                                      
Deferred tax          -       1,809     1,809        -       10,374    10,374        -         10,014    10,014
asset                                                                                                          
                  1,833       1,876     3,709    2,579       10,431    13,010    2,815         10,057    12,872
                                                                                                               
Current assets                                                                                                 
Trade and        61,336     (1,829)    59,507   67,878      (1,750)    66,128   80,589        (5,689)    74,900
other                                                                                                          
receivables                                                                                                    
Current tax           -           -         -        -            -         -        -          2,994     2,994
debtor                                                                                                         
Cash and cash    24,956           -    24,956   21,995            -    21,995    2,901              -     2,901
equivalents                                                                                                    
                 86,292     (1,829)    84,463   89,873      (1,750)    88,123   83,490        (2,695)    80,795
                                                                                                               
Total assets     88,125          47    88,172   92,452        8,681   101,133   86,305          7,362    93,667
                                                                                                               
Current                                                                                                        
liabilities                                                                                                    
Provisions for        -       (479)     (479)        -        (316)     (316)        -          (364)     (364)
liabilities                                                                                                    
and charges                                                                                                    
Trade and      (39,118)       3,214  (35,904) (77,667)       41,107  (36,560) (58,592)         12,451  (46,141)
other payables                                                                                                 
Financial             -     (2,475)   (2,475)        -     (39,900)  (39,900)        -       (12,451)  (12,451)
liabilities -                                                                                                  
borrowings                                                                                                     
Current tax           -       (739)     (739)        -      (1,207)   (1,207)        -              -         -
liabilities                                                                                                    
               (39,118)       (479)  (39,597) (77,667)        (316)  (77,983) (58,592)          (364)  (58,956)
                                                                                                               
Non-current                                                                                                    
liabilities                                                                                                    
Provisions for  (5,317)         479   (4,838)  (5,030)          316   (4,714)  (5,817)          364     (5,453)
liabilities                                                                                                    
and charges                                                                                                    
Financial      (37,425)           -  (37,425)        -            -         -        -            -           -
liabilities -                                                                                                  
borrowings                                                                                                     
               (42,742)         479  (42,263)  (5,030)          316   (4,714)  (5,817)          364     (5,453)
                                                                                                               
Total          (81,860)           -  (81,860) (82,697)            -  (82,697) (64,409)            -    (64,409)
liabilities                                                                                                    
                                                                                                               
Net assets        6,265          47     6,312    9,755        8,681    18,436   21,896        7,362      29,258
                                                                                                               
Equity                                                                                                         
Capital and                                                                                                    
reserves                                                                                                       
Share capital     2,214           -     2,214    2,228            -     2,228    1,380            -       1,380
Share premium         -           -         -       74            -        74    2,925            -       2,925
Shares to be      6,035           -     6,035    6,035            -     6,035        -            -           -
issued                                                                                                         
Capital               -           -         -        -            -         -      878            -         878
reserve                                                                                                        
Currency              -           -         -        -        (187)     (187)        -        (146)       (146)
translation                                                                                                    
reserve                                                                                                        
Retained        (2,014)          47   (1,967)    1,330        8,868    10,198   16,542        7,508      24,050
earnings                                                                                                       
Shareholders'     6,235          47     6,282    9,667        8,681    18,348   21,725        7,362      29,087
equity                                                                                                         
Minority             30           -        30       88            -        88      171            -         171
interest                                                                                                       
                                                                                                               
Total equity      6,265          47     6,312    9,755        8,681    18,436   21,896        7,362      29,258
                                                                                                               
Total equity                            6,265                           9,755                            21,896
under UK GAAP                                                                                                  
                                                                                                               
Capitalisation                            144                             151                               158
of intangible                                                                                                  
assets                                                                                                         
                                                                                                               
Amortisation                             (77)                            (94)                             (115)
of intangible                                                                                                  
assets                                                                                                         
                                                                                                               
Deferred tax                                -                           8,641                             7,315
on employee                                                                                                    
share options                                                                                                  
                                                                                                               
Tax effect on                            (20)                            (17)                                 4
IFRS                                                                                                           
adjustments                                                                                                    
Total equity                            6,312                          18,436                            29,258
under IFRS                                                                                                     








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