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SThree plc (STHR)

  Print      Mail a friend       Annual reports

Monday 23 July, 2007

SThree plc

Interim Results

SThree plc
23 July 2007


                                   SThree plc
                           ('SThree' or the 'Group')

           Interim Results for the six-month period ended 3 June 2007

SThree, the international specialist staffing business, is today announcing its
interim results for the six-month period ended 3 June 2007.

Financial Highlights - six-month period ended               3 June 2007        31 May 2006           % change
                                                                     £m                 £m

Revenue                                                           240.4              178.0              35.1%
Gross Profit                                                       82.5               59.2              39.5%
Operating profit*                                                  19.6               15.1              29.7%
Profit before taxation*                                            19.2               14.5              32.0%
Profit before taxation after exceptional items                     19.2               12.5              54.0%
Profit for the period*                                             13.2               10.3              27.7%
Basic earnings per share*                                          9.3p               8.1p              14.8%
Earnings per share after exceptional items                         9.3p               6.9p              34.8%
Interim dividend                                                   3.1p               2.4p              29.2%

*These 2006 figures are stated before the impact of exceptional items


Operational Highlights

•     Strong first-half performance, continuing the trend since IPO in 2005

•     Permanent placements increased by 31.8% to 4,580 in the first-half (2006:
      3,475), with average fees increased by 10.2%

•     Number of active contractors at period end increased by 14.7% to 4,974
      (2006: 4,335), with average gross profit per day rates increased by 19.3%

•     Information and Communications Technology ('ICT') business segment
      increased gross profit by 38.1% to £68.6m (2006: £49.7m)

•     Further growth in non-ICT, with banking and finance, accountancy, human
      resources, engineering, pharmaceuticals and job board businesses 
      increasing gross profit by 46.8% to £13.9m (2006: £9.5m)

•     Non-UK businesses continue to perform very strongly, with gross profit
      increased by 70.5% to £26.8m (2006: £15.7m). Longer-established UK 
      businesses also grew by 28.3%

•     Total headcount increased by 24.2% to 1,840 since year-end with sales
      consultant headcount up 17.6% to 1,051 over the same period

•     Further expansion of international network, with new offices opened in
      Rotterdam and Brussels in the first-half, and further openings in Hong 
      Kong and Dubai scheduled for the second half

•     Basic earnings per share before exceptional items increased by 14.8% to
      9.3p (2006: 8.1p)

•     Interim dividend of 3.1p (2006: 2.4p) per share declared, an increase of
      29.2%


Russell Clements, Chief Executive Officer, said: 'The first-half of 2007 has
seen the Group report a further strong set of results and it is particularly
pleasing to once again report growth across all sectors and geographies. During
the period we invested significantly in the future of the business in terms of
human capital, systems, infrastructure and in further enhancing our geographical
presence. These decisions were made to provide us with the foundations for a
future business which is ever more multi-dimensional and geographically diverse.
We feel that this broad-based performance further demonstrates the validity of
our strategy and the scalability of the SThree business model. We therefore
remain confident that the results achieved in the first half provide us with a
strong platform to make further progress in the remainder of the year and
beyond.'



Enquiries:

SThree plc                                                        020 7292 3838
Russell Clements, Chief Executive Officer
Michael Nelson, Chief Financial Officer

Citigate Dewe Rogerson                                            020 7638 9571
Kevin Smith / Nicola Smith



Notes to editors

SThree, founded in 1986, is one of the leading specialist staffing businesses in
the UK and Europe, providing permanent and contract specialist staff to a
diverse, international client base of well over 4,000 clients.  From its
well-established position as a major player in the information and
communications technology ('ICT') sector the Group is now broadening the base of
its operations by building fast-growing businesses serving the banking and
finance, accountancy, human resources, engineering and pharmaceuticals, energy
and job board 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 four largest
being Computer Futures, Huxley Associates, Progressive and Pathway, and has 33
offices in the UK and 15 offices internationally; 14 in Europe, in Belgium, The
Netherlands, France, Germany and Ireland, and one office in New York.

SThree has a selective approach to clients and focuses on high margin
opportunities, predominantly within the small to medium-sized enterprises ('SME
') market.  From its inception the Group has avoided the high volume/low margin
business model in favour of a focus on high quality business.

SThree plc is quoted on the Official List of the UK Listing Authority under the
ticker symbol STHR.  SThree also has a US level one ADR facility, symbol SERTY.



                                   SThree plc
                           ('SThree' or the 'Group')

           Interim Results for the Six Month Period Ended 3 June 2007


Operating Review

The Group achieved another strong set of results in the first half, continuing
the trends evidenced last year and in line with the Board's expectations at the
beginning of the financial year.

Revenue for the six-month period ended 3 June 2007 increased by 35.1% to £240.4m
(2006: £178.0m). Gross profit increased by 39.5% to £82.5m (2006: £59.2m).
Operating profit before exceptional items increased by 29.7% to £19.6m (2006:
£15.1m). As we indicated at the time of the full year results, the first half
has seen a significant further investment in upgrading offices within the
existing network as well as expanding into new geographical locations. In
addition we launched non-ICT divisions into a number of brands that had hitherto
solely addressed the ICT market and implemented the first stage of a major new
ERP system roll-out. As a result of these factors the conversion ratio of
operating profit (before exceptional items) to gross profit was 23.8% (2006:
25.6%). Profit before tax and exceptional items increased by 32.0% to £19.2m
(2006: £14.5m). After taking account of the prior-year exceptional items, profit
before tax grew by 54.0%.

In addition to our ongoing investment in human capital, we have continued to
invest in our international office network and systems infrastructure. At 3 June
2007, staff numbers had increased since year-end to 1,840 (30 November 2006:
1,481) operating from 48 offices in 7 countries. Sales headcount increased by
17.6% to 1,051 over the same period. During the period under review, we extended
our footprint in Benelux by opening new offices for Computer Futures in
Rotterdam and for Huxley in Brussels. We continue to expand organically and
during the second half of 2007 are planning to open offices in Hong Kong and
Dubai, both of which are markets we are already successfully servicing remotely
from London.

In early 2007 we implemented the first phase of a new Enterprise Resource
Planning (ERP) system for the Group. The new system replaced a number of
non-scaleable legacy applications with the aim of providing an integrated
platform to support our future international growth. As is common with systems
implementation on this scale, there was some short-term disruption in the period
immediately following its introduction, which mainly impacted cash collections.
However, as the system matures we expect to start to see the flow through of
additional benefits in terms of staffing efficiencies and other cost savings. In
parallel with the ERP system we have begun the phased rollout of Siebel CRM to
complement our proprietary front-office systems. This investment focuses on
optimising our client database to support our ongoing expansion into new sectors
and geographies.

Permanent/Contract Contribution

The rate of growth in total Group gross profit accelerated during the first-half
of 2007 to 39.5% (2006: 28.7%), with permanent and contract gross profit growing
by 45.2% (2006: 40.5%) and 34.2% (2006: 19.5%) respectively. The ratio of gross
profit between the contract and permanent segments reached 50:50 (2006: 52:48),
reflecting the strength of the permanent business and our increased exposure to
non-UK and non-ICT markets which tend to be more skewed towards permanent
placements. The gross margin on contract placements increased slightly to 20.8%
(2006: 20.6%). The number of active contractors at the half-year end increased
by 14.7% to 4,974, and we also saw a year-on-year increase in average gross
profit per day rates of 19.3% to £71.24. This was partly due to continued
flow-through of the management actions taken in the second half of 2006 to
improve both the level of seniority of contractors placed and the contractual
terms of the deals concluded. The number of permanent placements also increased
significantly by 31.8% to 4,580. This was enhanced by an increase in average
fees for the six-month period of 10.2% to £8,968. The latter is attributable to
a combination of healthy levels of wage inflation, coupled with our success in
attracting higher-calibre business and placing better-qualified candidates.

UK/Non-UK Contribution

Gross profit from UK-based clients continued to increase strongly, growing by
28.3% to £55.8m (2006: 24.1% to £43.5m). Gross profit from non-UK based clients
accelerated even more rapidly by 70.5% to £26.8m (2006: 43.7% to £15.7m),
reflecting our ongoing geographical expansion. Our non-UK business now
represents 32.4% of Group gross profit (2006: 26.5%).

ICT/Non-ICT Contribution

Gross profit from our ICT business increased rapidly by 38.1% to £68.6m (2006:
23.0% to £49.7m), reflecting the high level of non-UK growth which is currently
predominantly ICT-based. Gross profit from non-ICT (banking and finance,
accountancy, human resources, engineering, pharmaceuticals, energy and job board
businesses) increased by 46.8% to £13.9m (2006: 70.4% to £9.5m). This growth was
achieved against challenging comparatives and reflected our increased focus on
non-ICT revenue streams. We are also starting to see encouraging early returns
from a number of our recently-established teams.

Brand Contribution

Gross profit from our four largest brands, Computer Futures, Huxley, Progressive
and Pathway increased by 36.4%, 48.0%, 27.3% and 26.1%, respectively (2006:
14.8%, 41.3%, 20.2% and 39.8%). It is pleasing that our longest-established
brands continue to post strong growth and have, in every case other than
Pathway, increased the rate of growth in fee income, compared to the same period
last year. Once again the exceptional performance of Huxley reflects not only
its established presence in ICT, but also particularly strong growth outside the
ICT sector, coupled with an increasing international presence such as its
recently-established New York office and its increased exposure to the Far East.

Our longest-established brand, Computer Futures, accelerated its growth
significantly, helped from an extremely strong performance from its non-UK
business. Here it is worth emphasising that virtually all of this growth came
from ICT as this brand's expansion into newer sectors is still at an embryonic
stage. A similar picture is seen at Progressive, our second longest-established
brand. Although this brand has modestly greater exposure to non-ICT than
Computer Futures, at this stage it is still largely delivering its impressive
growth from its well-established ICT franchise. Pathway continues to grow
healthily but in the face of tougher comparatives and is scheduled to begin its
overseas expansion through the opening of an office in Dubai. Gross profit from
our smaller brands also continued to increase strongly by 49.3% to £17.8m (2006:
42.9% to £11.9m). On a selective basis some of these brands have begun trading
with overseas clients from their UK offices and we see opportunities for these
revenue streams to develop further through future openings of international
offices. This initiative will see the IT Job Board and Real Resourcing open
offices in Amsterdam by the end of the year.

Taxation

The charge for taxation on profits before exceptional items amounted to £6.0m
(2006: £4.2m), an effective tax rate of 31.3% (2006: 29.0%). 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 award or
exercise. As a consequence, there is a cash benefit to the Group of such tax
deductions. Under IFRS this tax benefit is dealt with through equity. The total
Schedule 23 tax benefit amounts to £9.1m.

Earnings Per Share

Basic earnings per share before exceptional items increased by 14.8% to 9.3p
(2006: 8.1p). After taking account of the prior-year exceptional items, earnings
per share increased by 34.8%. Diluted earnings per share before exceptional
items increased by 13.9% to 9.0p (2006: 7.9p).

Cash Flow

At the start of 2007, the Group had net debt of £2.8m. This increased
significantly to £40.6m at the end of the first half. During the period, the
Group generated £21.0m of cash before changes in working capital. We invested
£5.8m in fixed and intangible assets mainly related to new office fit-out and
ongoing development of our ERP and CRM systems. Tax paid amounted to only £0.4m
due to the Schedule 23 benefits mentioned above and we paid dividends of £6.3m.
The principal cash flow movement was a £45.7m increase in working capital. This
was partly due to increased business activity, but in the main related to a
significant increase in debtor days from 54 to 80, following the implementation
of the new ERP system and the associated restructuring and relocation of the
relevant departments onto a single site. This combination of factors had a
significant short-term impact on cash collection activity in the immediate
post-implementation period.

We have proactively addressed these issues and as we work through the collection
backlog we are already starting to see a significant improvement in debtor days
and cash. As at 20 July 2007, net debt had reduced significantly from the
half-year position to approximately £19m. We are therefore confident that any
outstanding collection issues will be resolved by year-end, at which point we
expect debtor days to have improved substantially and for the Group to be
moderately cash positive.

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' dividend cover. The Board proposes to pay an interim dividend of
3.1p (2006: 2.4p) per share, an increase of 29.2%. The interim dividend will be
paid on 7 December 2007 to those shareholders on the register at 9 November
2007.

Current Trading and Future Prospects

The first half of 2007 has seen the Group report a further strong set of results
and it is particularly pleasing to once again report growth across all sectors
and geographies. This reflects the fact that trading conditions in the
specialist recruitment markets we service remain positive. During the period we
invested significantly in the future of the business in terms of human capital,
systems, infrastructure and in further enhancing our geographical presence.
These decisions were made to provide us with the foundations for a future
business which is ever more multi-dimensional and geographically diverse. Our UK
business continues to demonstrate its capacity to deliver robust growth and its
position will be strengthened further as we increasingly add new sector
disciplines alongside our core ICT franchise. Our non-UK business has performed
exceptionally well and it is encouraging to see that this applies both to
markets with substantial structural growth potential such as those of
continental Europe and the Far East, as well as more established markets such as
the U.S. Indeed, although still in its relatively early stages, the experience
of our US business suggests that the future potential of the American market
could be significantly greater than we first anticipated.

We feel that this broad-based performance further demonstrates the validity of
our strategy and the scalability of the SThree business model. We therefore
remain confident that the results achieved in the first half provide us with a
strong platform to make further progress in the remainder of the year and
beyond.


Consolidated Income Statement - unaudited for the six months ended 3 June 2007

                             Six months ended 3          Six months ended 31 May             Year ended 30 November
                                      June 2007                             2006                               2006
                                       Ordinary     Ordinary Exceptional             Ordinary Exceptional
                                     activities   activities       items     Total activities       items     Total
                                Note      £'000        £'000       £'000     £'000      £'000       £'000     £'000
_____________________________
Revenue                            2    240,387      177,993           -   177,993    393,262           -   393,262
Cost of sales                          (157,875)    (118,829)          -  (118,829)  (257,742)          -  (257,742)
_____________________________
Gross profit                       2     82,512       59,164           -    59,164    135,520           -   135,520
Administrative expenses            3    (63,022)     (44,038)     (2,068)  (46,106)   (94,487)    (22,143) (116,630)
Other operating income                      132            -           -         -          -           -         -
_____________________________
Operating profit                         19,622       15,126      (2,068)   13,058     41,033     (22,143)   18,890
Finance income                                3           84           -        84        432           -       432
Finance cost                               (482)        (738)          -      (738)    (1,284)          -    (1,284)
Share of profit of joint venture             31           49           -        49         89           -        89
_____________________________
Profit before taxation                   19,174       14,521      (2,068)   12,453     40,270     (22,143)   18,127
Taxation                           4     (6,008)      (4,214)        621    (3,593)   (12,289)      6,242    (6,047)
_____________________________
Profit for the period                    13,166       10,307      (1,447)    8,860     27,981     (15,901)   12,080
_____________________________
Attributable to:                         12,053       10,173      (1,447)    8,726     27,70 3    (15,901)   11,802
Equity holders of the Company             1,113          134           -       134        278           -       278
Minority interest
_____________________________            13,166       10,307      (1,447)    8,860     27,981     (15,901)   12,080
_____________________________

Earnings per share                 6      pence        pence       pence     pence      pence       pence     pence
Basic                                       9.3          8.1        (1.2)      6.9       22.4       (12.9)      9.5
Diluted                                     9.0          7.9        (1.1)      6.8       21.4       (12.3)      9.1


All amounts relate to continuing operations



An interim dividend of 3.1 pence (2006: 2.4 pence) per Ordinary Share will be
paid on 7 December 2007 to shareholders on the register at the close of business
on 9 November 2007.

The second interim dividend of 4.8 pence (2006: Nil) per Ordinary Share was paid
on 4 June 2007.


Consolidated Statement of Changes in Equity - unaudited as at 3 June 2007

                                                                                       Attributable
                                                                    Currency                     to
                                          Share   Share Capital  translation Retained     Company's Minority    Total
                                        capital premium reserve      reserve earnings  shareholders Interest   Equity
                                          £'000   £'000   £'000        £'000    £'000         £'000    £'000    £'000
_____________________________________   _______ _______ _______    _________  _______       _______  _______  _______
Balance at 30 November 2005               1,380   2,925     878        (146)   24,050        29,087      171   29,258
Deferred tax on employee share options        -       -       -            -    2,337         2,337        -    2,337
Current tax on employee share awards          -       -       -            -    1,231         1,231        -    1,231
and share options
Currency translation differences              -       -       -           63        -            63        -       63
_____________________________________   _______ _______ _______    _________  _______       _______  _______  _______
Net income recognised in equity               -       -       -           63    3,568         3,631        -    3,631
Profit for the 6 months to 31 May 2006        -       -       -            -    8,726         8,726      134    8,860
_____________________________________   _______ _______ _______    _________  _______       _______  _______  _______
Total recognised income for the period        -       -       -           63   12,294        12,357      134   12,491
Employee share award and share option         -       -       -            -    1,874         1,874        -    1,874
credit
_____________________________________   _______ _______ _______    _________  _______       _______  _______  _______
Total movements in equity                     -       -       -           63   14,168        14,231      134   14,365
_____________________________________   _______ _______ _______    _________  _______       _______  _______  _______
Balance at 31 May 2006                    1,380   2,925     878         (83)   38,218        43,318      305   43,623
Currency translation differences              -       -       -        (165)        -         (165)        -    (165)
Deferred tax on employee share options        -       -       -            -    (283)         (283)        -    (283)
Current tax on employee share awards          -       -       -            -    3,185         3,185        -    3,185
and share options
_____________________________________   _______ _______ _______    _________  _______       _______  _______  _______
Net income/(expense) recognised               -       -       -        (165)    2,902         2,737        -    2,737
directly in equity
Profit for the six months to 30               -       -       -            -    3,076         3,076      144    3,220
November 2006
_____________________________________   _______ _______ _______    _________  _______       _______  _______  _______
Total recognised income and expense for       -       -       -        (165)    5,978         5,813      144    5,957
the period
Repurchase of minority interest               -       -       -            -        -             -     (36)     (36)
Dividends paid (note 5)                       -       -       -            -  (3,038)       (3,038)     (65)  (3,103)
Employee share award and share option         -       -       -            -   17,670        17,670        -   17,670
credit
_____________________________________   _______ _______ _______    _________  _______       _______  _______  _______
Total movements in equity                     -       -       -        (165)   20,610        20,445       43   20,488
_____________________________________   _______ _______ _______    _________  _______       _______  _______  _______
Balance at 30 November 2006               1,380   2,925     878        (248)   58,828        63,763      348   64,111
Currency translation differences              -       -       -           73        -            73        -       73
Deferred tax on employee share options        -       -       -            -      494           494        -      494
Current tax on employee share awards          -       -       -            -    9,136         9,136        -    9,136
and share options
_____________________________________   _______ _______ _______    _________  _______       _______  _______  _______
Net income recognised directly in             -       -       -           73    9,630         9,703        -    9,703
equity
Profit for the six months to 3 June           -       -       -            -   12,053        12,053    1,113   13,166
2007
_____________________________________   _______ _______ _______    _________  _______       _______  _______  _______
Total recognised income for the period        -       -       -           73   21,683        21,756    1,113   22,869
Dividends paid (note 5)                       -       -       -            -  (6,345)       (6,345)        -  (6,345)
New share issue                               1       -       -            -        -             1        -        1
Employee share award and share option         5       -       -            -      131           136        -      136
credit
_____________________________________   _______ _______ _______    _________  _______       _______  _______  _______
Total movements in equity                     6       -       -           73   15,469        15,548    1,113   16,661
_____________________________________   _______ _______ _______    _________  _______       _______  _______  _______
Balance at 3 June 2007                    1,386   2,925     878        (175)   74,297        79,311    1,461   80,772
_____________________________________   _______ _______ _______    _________  _______       _______  _______  _______


Consolidated Balance Sheet - unaudited as at 3 June 2007


                                                                 3 June       31 May       30 November
                                                                   2007         2006              2006
                                                      Note        £'000        £'000             £'000
____________________________________________                   ________     ________      ____________
ASSETS
Non-current assets
Intangible assets - other                                         6,033           68             3,012
Intangible assets - goodwill                                        364            -               364
Property, plant and equipment                                     5,038        2,623             3,558
Assets under construction                                             -          790                 -
Investment in joint venture                                         120           49                89
Deferred tax asset                                               12,062       12,115            11,459
____________________________________________                   ________     ________      ____________
                                                                 23,617       15,645            18,482
____________________________________________                   ________     ________      ____________
Current assets
Trade and other receivables                                     148,339       83,761            92,585
Current tax debtor                                                3,981            -               533
Cash and cash equivalents                                             -        2,468             2,440
____________________________________________                   ________     ________      ____________
                                                                152,320       86,229            95,558
____________________________________________                   ________     ________      ____________
Total assets                                            2       175,937      101,874           114,040
____________________________________________                   ________     ________      ____________
LIABILITIES
Current liabilities
Provisions for liabilities and charges                            (345)        (484)             (188)
Trade and other payables                                       (48,010)     (38,342)          (39,024)
Financial liabilities - borrowings                             (40,545)     (12,250)           (5,281)
Current tax liabilities                                               -      (1,114)                 -
____________________________________________                   ________     ________      ____________
                                                               (88,900)     (52,190)          (44,493)
____________________________________________                   ________     ________      ____________
Non-current liabilities
Provisions for liabilities and charges                          (6,265)      (6,061)           (5,436)
____________________________________________                   ________     ________      ____________
                                                                (6,265)      (6,061)           (5,436)
____________________________________________                   ________     ________      ____________
Total liabilities                                              (95,165)     (58,251)          (49,929)
____________________________________________                   ________     ________      ____________
Net Assets                                                       80,772       43,623            64,111
____________________________________________                   ________     ________      ____________
EQUITY
Capital and reserves attributable to the Company's shareholders
Share capital                                                     1,386        1,380             1,380
Share premium                                                     2,925        2,925             2,925
Capital reserve                                                     878          878               878
Currency translation reserve                                      (175)         (83)             (248)
Retained earnings                                                74,297       38,218            58,828
____________________________________________                   ________     ________      ____________
                                                                 79,311       43,318            63,763
Minority interest                                                 1,461          305               348
____________________________________________                   ________     ________      ____________
Total equity                                                     80,772       43,623            64,111
____________________________________________                   ________     ________      ____________





Consolidated Cash Flow Statement - unaudited for the six months ended 3 June
2007


                                                                                6 months ended   Year ended
                                                                               3 June   31 May  30 November
                                                                                 2007     2006         2006
                                                                     Note       £'000    £'000        £'000
______________________________________________________                        _______   ______   __________
Cash flows from operating activities
Cash (used in)/generated from operating activities                     7     (24,679)    (179)       15,025
Income tax (paid)/received                                                      (429)    1,978        1,459
______________________________________________________                        _______   ______   __________
Net cash (used in)/generated from operating activities                       (25,108)    1,799       16,484
______________________________________________________                        _______   ______   __________
Cash flows from investing activities
Purchase of property, plant and equipment                                     (2,758)  (1,446)      (2,442)
Purchase of intangible assets                                                 (3,021)        -      (3,001)
Proceeds from disposal of property, plant and equipment                             -       56           56
______________________________________________________                        _______   ______   __________
Net cash used in investing activities                                         (5,779)  (1,390)      (5,387)
______________________________________________________                        _______   ______   __________
Cash flows from financing activities
Drawdown on loan facility                                                      39,000    3,250            -
Repayment of loan stock                                                             -        -      (8,000)
Foreign exchange from financing activities                                          -        -          265
Interest received                                                                   3       84          167
Interest paid                                                                   (482)    (738)      (1,284)
Purchase of minority interest                                                       -        -        (400)
Proceeds from issue of ordinary shares                                              6        -            -
Dividends paid                                                                (6,345)        -      (3,038)
Dividends paid to minority interest                                                 -        -         (65)
______________________________________________________                        _______   ______   __________
Net cash generated from/(used in) financing activities                         32,182    2,596     (12,355)
______________________________________________________                        _______   ______   __________
Net increase/(decrease) in cash and cash equivalents                            1,295    3,005      (1,258)
Cash and cash equivalents at beginning of the period                          (1,841)    (550)        (550)
Exchange gains/(losses) on cash and cash equivalents                                1       13         (33)
______________________________________________________                        _______   ______   __________
Cash and cash equivalents at the end of the period                     8        (545)    2,468      (1,841)
______________________________________________________                        _______   ______   __________







Notes to the Financial Statements - unaudited

1.   Accounting policies

The consolidated interim financial statements are for the six months ended 3
June 2007. These financial statements have been prepared in accordance with
accounting policies expected to be followed for the year ending 2 December 2007
and the Listing Rules of the London Stock Exchange. European Union (EU) law
requires that the consolidated financial statements for the year ending 2
December 2007 be prepared in accordance with International Financial Reporting
Standards (IFRSs) and International Financial Reporting Committee (IFRIC)
interpretations as adopted by the European Union in response to the IAS
regulation (EC 1606.2002), under the historic cost convention modified to
include revaluation of certain financial instruments. The interim financial
statements are unaudited but have been reviewed by the auditors and their report
is set out on page 20.

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 when 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 vehicles                                                             33.33%
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 profit and loss account 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 of resources will be
required to settle the obligation and the amount has been reliably estimated.
Provisions are recognised as the present value of the expenditures expected to
be required to settle the obligation. No provision is 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 plc 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.

Notes to the Financial Statements - unaudited

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     By location of operating
                                                                      client                      company
                                                Six months ended  Year ended Six months ended  Year ended
                                                  3 June  31 May 30 November  3 June  31 May  30 November
                                                    2007    2006        2006    2007    2006         2006
                                                   £'000   £'000       £'000   £'000   £'000        £'000
_____________________________________           ________ _______   _________ _______ _______    _________
Revenue
United Kingdom                                   171,557 134,676     295,666 222,889 168,750      372,563
Europe and rest of the world                      68,830  43,317      97,596  17,498   9,243       20,699
_____________________________________           ________ _______   _________ _______ _______    _________
                                                 240,387 177,993     393,262 240,387 177,993      393,262
_____________________________________           ________ _______   _________ _______ _______    _________
Gross profit
United Kingdom                                    55,750  43,469      98,937  66,815  51,663      118,612
Europe and rest of the world                      26,762  15,695      36,583  15,697   7,501       16,908
_____________________________________           ________ _______   _________ _______ _______    _________
                                                  82,512  59,164     135,520  82,512  59,164      135,520
_____________________________________           ________ _______   _________ _______ _______    _________
Operating profit
Operating profit before exceptional items
United Kingdom                                                                17,459  13,339       38,659
Europe and rest of the world                                                   2,163   1,787        2,374
_____________________________________           ________ _______   _________ _______ _______    _________
                                                                              19,622  15,126       41,033
Exceptional items:
United Kingdom                                                                     - (2,068)     (22,143)
_____________________________________           ________ _______   _________ _______ _______    _________
                                                                              19,622  13,058       18,890
_____________________________________           ________ _______   _________ _______ _______    _________
Total assets
United Kingdom                                                               145,688  96,140      106,193
Europe and rest of the world                                                  30,249   5,734        7,847
_____________________________________           ________ _______   _________ _______ _______    _________
                                                                             175,937 101,874      114,040
_____________________________________           ________ _______   _________ _______ _______    _________
Capital expenditure
United Kingdom                                                                 5,422   1,446        5,154
Europe and rest of the world                                                     357       -          289
_____________________________________           ________ _______   _________ _______ _______    _________
                                                                               5,779   1,446        5,443
_____________________________________           ________ _______   _________ _______ _______    _________


Notes to the Financial Statements - unaudited

2.   Segmental analysis (continued)

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
                                             3 June   31 May   30 November   3 June  31 May  30 November
                                               2007     2006          2006     2007    2006         2006
                                              £'000    £'000         £'000    £'000   £'000        £'000
_________________________________          ________ ________    __________  _______ _______   __________
Brand
Computer Futures Solutions                   68,748   51,492       113,391   23,111  16,948       36,749
Huxley Associates                            60,413   39,654        91,198   22,159  14,973       35,609
Progressive Computer Recruitment             44,254   36,375        77,288   14,087  11,070       24,777
Pathway                                      21,363   16,769        36,649    5,400   4,281        9,469
Others                                       45,609   33,703        74,736   17,755  11,892       28,916
_________________________________          ________ ________    __________  _______ _______   __________
                                            240,387  177,993       393,262   82,512  59,164      135,520
_________________________________          ________ ________    __________  _______ _______   __________
Recruitment classification
Contract                                    199,313  149,707       327,459   41,438  30,878       69,717
Permanent                                    41,074   28,286        65,803   41,074  28,286       65,803
_________________________________          ________ ________    __________  _______ _______   __________
                                            240,387  177,993       393,262   82,512  59,164      135,520
_________________________________          ________ ________    __________  _______ _______   __________
Discipline
Information & communication
technology                                  217,523  160,862       351,038   68,570  49,666      111,121
Other(1)                                     22,864   17,131        42,224   13,942   9,498       24,399
_________________________________          ________ ________    __________  _______ _______   __________
                                            240,387  177,993       393,262   82,512  59,164      135,520
_________________________________          ________ ________    __________  _______ _______   __________


(1) Including banking and finance, accountancy, human resources, engineering,
pharmaceuticals, energy and jobboard sectors.

3.   Administrative expenses - exceptional items

                                                                                      Six months        Year
                                                                                           ended       ended
                                                                                   3 June 31 May 30 November
                                                                                     2007   2006        2006
                                                                                    £'000  £'000       £'000
_________________________________________________________________                  ______ ______    ________
Employee share awards and share options                                                 -  1,874      19,544
Employer's National Insurance on share awards, share options and related costs          -    194       2,599
_________________________________________________________________                  ______ ______    ________
                                                                                        -  2,068      22,143
                                                                                   ______ ______    ________


Certain employees received share awards and share options 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.

4. Taxation
                                                                         Six months ended       Year ended
                                                                          3 June   31 May      30 November
                                                                            2007     2006             2006
                                                                           £'000    £'000            £'000
________________________________________                                ________  _______     ____________
Current tax            - United Kingdom                                    4,776    2,801            4,339
                       - Overseas                                          1,451      729            1,099
Deferred tax                                                               (219)       63              609
                                                                        ________  _______     ____________
                                                                           6,008    3,593            6,047
                                                                        ________  _______     ____________



The total tax charge is in line with the standard rate of corporation tax in the
UK (30%).

In the six months to 3 June 2007 a current tax credit of £9.1m (31 May 2006:
£1.2m; 30 November 2006: £4.4m) has been taken directly to equity under IFRS 2 '
Share-based Payment' and IAS 12 'Income Taxes'.

On 21 March 2007, the Chancellor of the Exchequer announced in his Budget
Statement that the rate of UK corporation tax is to be reduced from 30% to 28%
with effect from April 2008. As this change was announced after the balance
sheet date, it is a non-adjusting event and hence the amount recognised in
deferred tax as at 3 June 2007 has not been adjusted to reflect the new rate of
tax. If the new rate had been applied, the deferred tax asset would have been
reduced by £0.5m, of which £0.1m would have been taken through the Income
statement.

5. Dividends
                                                                       Six months ended    Year ended
                                                                         3 June  31 May   30 November
                                                                           2007    2006          2006
                                                                          £'000   £'000         £'000
__________________________________________________________________      _______  ______    __________
Amounts paid as distributions to equity holders in the period:
Dividend paid of 4.8p (2006: 2.4p) per Ordinary Shares                    6,345       -         3,038
__________________________________________________________________      _______  ______    __________
Amounts proposed as distributions to equity holders in the period:
Proposed interim dividend for the six months ending 3 June 2007 
of 3.1p (2006: 2.4p) per Ordinary Share                                   4,011   3,038             -
______________________________________________________________          _______  ______    __________



An interim dividend of 3.1 pence (2006: 2.4 pence) per Ordinary Share will be
paid on 7 December 2007 to shareholders on the register at the close of business
on 9 November 2007.

The proposed interim dividend was approved by the Board on 20 July 2007.


6. Earnings per share
                                                                               Six months ended  Year ended
                                                                               3 June    31 May 30 November
                                                                                 2007      2006        2006
                                                                                £'000     £'000       £'000
___________________________________________________________                    ______    ______   _________
Earnings
Profit for the period                                                          12,053     8,726      11,802
Effect of exceptional items (net of tax)                                            -     1,447      15,901
___________________________________________________________                    ______    ______   _________
Profit for the period excluding exceptional items                              12,053    10,173      27,703
___________________________________________________________                    ______    ______   _________
                                                                             millions  millions    millions
Number of shares
Weighted average number of shares used for basic EPS                            129.3     125.9       123.9
Dilution effect of share plans                                                    5.1       2.1         5.8
___________________________________________________________                    ______    ______   _________
Diluted weighted average number of shares used for diluted EPS                  134.4     128.0       129.7
___________________________________________________________                    ______    ______   _________
                                                                                pence     pence       pence
Basic
Basic earnings per share                                                          9.3       6.9         9.5
Basic earnings per share excluding exceptional items                              9.3       8.1        22.4
Dilutive
Diluted earnings per share                                                        9.0       6.8         9.1
Diluted earnings per share excluding exceptional items                            9.0       7.9        21.4
All earnings are derived from continuing operations





Notes to the Financial Statements - unaudited
7. Cash flows from operating activities
                                                                                Six months ended   Year ended
                                                                                 3 June   31 May  30 November
                                                                                   2007     2006         2006
                                                                                  £'000    £'000        £'000
______________________________________________________________                 ________  _______     ________
Profit before taxation                                                           19,174   12,453       18,127
Adjustments for:
Depreciation and amortisation                                                     1,278      708        1,556
Loss on disposal of property, plant and equipment                                     -       23          116
Non-cash element of the charge for share awards and share options                   119    1,874       19,544
Profit attributable to the joint venture                                           (31)     (49)         (89)
Interest receivable                                                                 (3)     (84)        (167)
Interest payable                                                                    482      738        1,284
Foreign exchange from financing activities                                            -        -        (265)
______________________________________________________________                 ________  _______     ________
Operating cashflow before changes in working capital and provision               21,019   15,663       40,106

Changes in working capital and provisions:
Increase in debtors                                                            (55,670)  (8,842)     (17,760)
Increase/(decrease) in creditors                                                  8,986  (7,728)      (7,128)
Increase in provisions                                                              986      728        (193)
______________________________________________________________                 ________  _______     ________
Cash (used in)/generated from operations                                       (24,679)    (179)       15,025
______________________________________________________________                 ________  _______     ________


8. Cash and cash equivalents
                                                                               Six months ended   Year ended
                                                                                 3 June  31 May  30 November
                                                                                   2007    2006         2006
                                                                                  £'000   £'000        £'000
________________________________________________________________                 ______   _____     ________
Cash and cash equivalents include the following for the purposes 
of the cash flow statement:
Cash at bank and in hand                                                              -   2,468        2,440
Bank overdrafts                                                                   (545)       -      (4,281)
______________________________________________________________                   ______   _____     ________
                                                                                  (545)   2,468      (1,841)
                                                                                 ______   _____     ________

9.   Capital commitments

The Group had capital commitments of £1.5m (31 May 2006: £5.8m; 30 November
2006: £0.1m).

10. Basis of preparation

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 2006, 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) or Section 237(3) of the Companies Act 1985.

11. Date of approval of interim statements

The interim announcement covers the period 1 December 2006 to 3 June 2007 and
was approved by the Board on 20 July 2007.

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.

                                    - Ends -



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