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SThree plc (STHR)

  Print      Mail a friend       Annual reports

Monday 04 February, 2008

SThree plc

Final Results

SThree plc
04 February 2008

                                   SThree plc

                           ('SThree' or the 'Group')

             Preliminary Results for the year ended 2 December 2007

SThree, the international, multi-sector specialist staffing businesses, is today
announcing its unaudited preliminary results for the year ended 2 December 2007.

Financial Highlights

£m                                                                    2007          2006                Change

Revenue                                                            £522.7m       £393.3m               + 32.9%
Gross Profit (Fee Income)                                           £182.7       £135.5m               + 34.8%
Operating profit*                                                   £52.3m        £41.0m               + 27.6%
Profit before taxation*                                             £50.3m        £40.3m               + 24.8%
Basic earnings per share*                                            25.2p         22.4p               + 12.5%
Final dividend                                                        6.2p          4.8p               + 29.2%
Total dividend                                                        9.3p          7.2p               + 29.2%

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

*Prior year EPS and profit figures are shown pre-exceptional charges of £22.1m,
in respect of float-related share awards.

Operational Highlights

  • Continued strong growth with substantial volume increases achieved across
    all sectors whilst maintaining gross margins - gross profit increased by
    34.8% to £182.7m;

  • Both Contract and Permanent businesses delivered further strong growth:

     -    Permanent placements increased by 29.4% to 9,945 (2006: 7,685), with
          average fees increased by 9.9%;

     -    Contractors at period end increased by 20.8% to 5,700 (2006: 4,719),
          with average gross profit per day rates increased by 10.0%;

  • Continued roll-out of international office network resulted in a 62.2%
    growth in non-UK gross profit to £59.3m (2006: £36.6m):

     -    New offices opened in Hong Kong, Amsterdam (x2), Rotterdam and
          Brussels during the year with Dubai and Sydney added at start of 2008;

  • Excellent progress made with roll-out of new sector disciplines
    (accountancy, banking & finance, human resources, engineering, 
    pharmaceuticals and energy) resulting in non-ICT gross profit increasing by 
    33.3% to £32.5m (2006: £24.4m);

  • Total headcount increased by 37.4% to 2,035 (2006: 1,481) at year-end.
    Sales consultant headcount increased by 40.4% to 1,537 (2006: 1,095) with
    over three-quarters of new staff hired for new geographies and/or sectors;

  • Final dividend of 6.2p per share declared taking full year dividend to
    9.3p (2006: 7.2p), an increase of 29.2%;

  • Current trading in line with expectations with no material change in
    overall recruitment market conditions;

  • Close season share buy back of 3m shares for cancellation completed at
    total cost of £6.2m; Further market purchases anticipated.

Russell Clements, Chief Executive Officer, said: '2007 was another year of
significant growth for SThree and it is particularly encouraging to see the
excellent progress made with our ongoing strategy of geographical and sector
expansion. The success of this strategy is well illustrated by the fact that we
expect approximately half of gross profit in the current year to come from
non-ICT and non-UK sources.  It was also a year of unusually high levels of
investment to ensure that the Group has the best possible platform for
sustainable future growth. We are confident that we will see the returns on this
investment programme into 2008 and beyond.'

'Trading in the first two months of the current financial year has been in line
with our expectations and at this point we have no reason to assume that market
conditions in the coming year will be anything other than supportive of another
year of growth. However, SThree is an agile business with a seasoned management
team and is well positioned to respond quickly and effectively in the event of a
change in overall market sentiment.'

SThree plc                                              (04.02.08) 020 7638 9571
Russell Clements, Chief Executive Officer             (Thereafter) 020 7292 3838
David Tilston, Interim Chief Financial Officer

Citigate Dewe Rogerson                                             020 7638 9571
Kevin Smith / Nicola Smith

Notes to editors

SThree, founded in 1986, is an international specialist staffing business,
providing both permanent and contract staff to a diverse, client base of well
over 6,000 clients.  From its well-established position as a major player in the
information and communications technology ('ICT') sector the Group has broadened
the base of its operations by building fast-growing businesses serving the
banking and finance, accountancy, human resources, engineering, energy and
pharmaceuticals sectors.

Following the establishment of its first business, Computer Futures, in 1986,
the Group adopted a multi-brand strategy. SThree currently operates 12
separately managed brands, the four largest being Computer Futures, Huxley
Associates, Progressive and Pathway, and has 33 offices in the UK and 19
overseas offices, 15 elsewhere in Europe, the Netherlands, Belgium, France,
Germany and Ireland.  In 2006, the Group opened its first North American office,
in New York, and recently opened offices in Australia, Hong Kong and Dubai.

SThree has a selective approach to clients and focuses on high margin
opportunities, predominantly within the small to medium-sized enterprises 
('SMEs') market and, 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

                           ('SThree' or the 'Group')

             Preliminary Results for the year ended 2 December 2007

Operating Review

The 2007 financial year was one in which the Group made very substantial
investments in its future and implemented a major reorganisation of some of its
key business processes. In this context it is pleasing to be able to report that
once again the Group made noteworthy progress, posting substantial year on year
growth. We also took significant further steps towards our goal of becoming an
ever more international and broadly based specialist staffing business.

Notwithstanding the well-documented turmoil in the financial markets experienced
in the second half of the year, overall business sentiment remained supportive.
The only exceptions to this were those areas of the investment banking sector
particularly exposed to the credit and risk markets, a sub sector that
represented only a small percentage of Group revenue.

In general, candidates continued to have the confidence to actively pursue new
opportunities and in the process generate vacancies as their employers looked to
replace them with similarly qualified specialist staff. In addition the Group
benefited from its ever-increasing exposure to territories with staffing markets
which have strong structural growth characteristics.

During the year the Group continued to roll out its well-proven business model
to drive expansion into new geographies and staffing sectors. A clear indication
of the robustness of this strategy is provided by the fact that over the year,
only a little over half (53%) of Group Gross Profit was derived from our UK ICT
franchise (2006: 58%).

As such, although the UK ICT business continues to deliver very healthy growth,
the particularly rapid expansion of our non ICT and non-UK businesses means we
expect to see an ongoing reduction in the proportion of overall Group business
derived from our UK ICT franchise.

The substantial increases in sales headcount that we made during the year
reflect this growth theme. Overall we grew the number of sales staff by
approximately 40% with over three-quarters of this increase accounted for by
teams servicing non-UK and/or non-ICT marketplaces.

Irrespective of sector or geography, the Group remained highly selective in
terms of the type of business it transacted, maintaining healthy margins by not
pursuing volume over value. This focus on quality, combined with a healthy level
of demand-driven wage inflation allowed us to post record fee levels in both the
permanent and contract markets.

During the year the Group invested particularly heavily to ensure that the rapid
growth of the business continues to be reflected in fit-for-purpose
infrastructure and support functions. In addition to a substantial increase in
office space (circa 40%) we also undertook a major programme of systems roll out
with large-scale ERP and CRM package implementations.

The impact of these factors was felt in terms of the Group's operating profit to
gross profit conversion ratio, which declined to 28.6% (2006: 30.3%). However,
given the unusually high level of investment and the one-off nature of some of
the more significant costs, we see this year as an exception. As such, we
anticipate a return to trend going forward.

Group gross profit for the year improved by 34.8% to £182.7m (2006: £135.5m)
with a corresponding increase in operating profit of 27.6% (2006: 39.3% before
exceptional items). Against a backdrop of a higher than anticipated cost base as
discussed above, we believe that this was an acceptable performance for a year
in which the Group undertook a step change in terms of investing for future


The Group continued to pursue its stated strategy of adding additional revenue
streams through expansion into newer geographies and staffing sectors, while at
the same time driving the continued growth of its longer established franchises.
Increasing the number of sales staff to ensure we were able to take full
advantage of available market opportunities remained a key element of our

We remained focused on high value markets in which the candidate supply and
demand dynamics were in our favour and hence supportive of our higher margin
model. The latter was once again reinforced by our preference for growing
through highly specialist niche-within-niche teams who are able to gain in-depth
understanding of their particular markets. This approach justifies a premium
pricing position relative to less specialised peers.

We continued to enjoy the benefits of a highly diversified client base with
relatively low exposure to any individual client or small group of clients. In
this respect, our strong SME franchise helps de-risk the business as a whole, as
well as mitigating the downward price pressure often associated with exposure to
a limited number of influential customers.

Our multi-brand approach remained a central element of our strategy. The brands
reinforce our niche specialisation, allowing us to further segment and subdivide
our markets. As always they also provided a vehicle to attract and retain
entrepreneurial talent who are strongly attracted to the potential of equity
participation through the Group's minority stakes model.

Once again our focus was on the extension of the existing brand portfolio into
newer sectors and geographies rather than the creation of entirely new brands.
Given the success of this approach we anticipate that this will remain our
strategy going forward.

Geographical Expansion

As at the end of the year the Group had a total of fifty offices in eight
countries. During the year we added five new international offices, two in
Amsterdam (Real Resourcing/ IT Job Board and SThree Group training) and one in
each of Rotterdam (Computer Futures), Brussels (Huxley) and Hong Kong (Huxley).
In addition in Q1 2008 we opened in Dubai (Pathway) and Sydney (Progressive)
which brings the overall total to fifty-two offices in ten countries.

For the first time the Group's physical presence outside the UK was extended
beyond the three largest brands to also include Pathway, Real Resourcing and
ITJB. The Group also extended its geographical reach significantly with its
first office in the Far East, a region with significant structural growth

Overall the Group grew its non-UK gross profit by 62.2% to £59.3m (2006:
£36.6m). Although non-ICT sector growth outside of the UK was a more significant
factor than in previous years, it is still true to say that the non-UK expansion
was heavily ICT orientated. This illustrates both the robustness of the ICT
market as well as the potential for further non-ICT growth as the Group rolls
out more of its non-ICT disciplines into a greater number of non-UK regions.

The roll out of newer sectors into the UK market is a more developed programme
and this played a part in this business achieving gross profits of £123.3m, a
year on year increase of 24.6% (2006: £98.9m). Given the relatively mature UK
specialist staffing market this is a strong performance particularly given that
we were able to achieve significant volume growth without compromising our

By the year-end the UK versus non-UK business mix had once again shifted towards
a greater percentage being attributable to teams outside of the UK. Total non-UK
gross profit represented 32.5% of the overall total compared to 27.0% in 2006.We
anticipate that this trend will continue going forward with 2008 expected to be
the first full year in which UK ICT will represent under half of our gross

Our further international growth will continue to benefit from the gradual
evolution in the political and legislative environment in Europe becoming more
sympathetic to the private staffing sector. Although jurisdictions such as
France and Germany have a long way to go before they compare positively with the
UK from a legislative standpoint, they are moving in the right direction, driven
by a need to support labour market flexibility.

Sector Expansion

A major investment was made during the year to substantially increase sales head
count in newer sectors. In particular, a number of brands that had taken their
first, relatively minor steps in terms of sector diversification during 2006
accelerated this programme during 2007.This required teams in new disciplines to
be seeded through the movement of experienced sales consultants/management from
more established markets.

At the same time our non-UK ICT business expanded very rapidly. As such,
although by year-end ICT still represented 82% of the Group's business,
unchanged from the previous year, in absolute terms non-ICT gross profit
increased by 33.3% to £32.5m.  This compares to a 2006 growth of 49.8% achieved
off less challenging comparatives.

As the more recently established teams start to come fully on stream and as
non-ICT is rolled out outside of the UK to an ever greater extent, we would
expect the non-ICT business to represent an increasingly significant part of the
overall mix.

However, the Group's sector expansion should be viewed in terms of adding
valuable new revenue streams rather than as a defensive strategy. In our view
the ICT sector remains a robust market for our services. This is reflected in
the fact that during the year even in the relatively mature UK ICT market the
Group grew gross profit by 23.7%.

Staffing Levels

The Group expanded headcount significantly during the year by a total of 554 to
2,035 (2006: 1,481) of which a total of 442 were recruited as sales consultants.
The largest increases were in newer sectors and /or geographies which between
them accounted for 81% of the total new hires. This cohort included a
significant increase in the number of consultants addressing new sectors in new

This investment in sales headcount growth naturally necessitated a commensurate
expansion of the HR, Information Services and Training functions. In the case of
the Finance function, issues concerning the ERP implementation caused a
temporary spike in mid year headcount which had normalised by the end of the

Our strategy of hiring sales staff at a junior level from outside of the
staffing industry was maintained. Our in-house training and development
programme was enhanced to accommodate the higher percentage of non-UK hires.
This included the establishment of our first non-UK training facility in

The Group's remuneration strategy for its sales consultants remained strongly
biased towards variable over fixed remuneration. This ensures the focus is
towards encouraging higher individual performance and also provides the Group
with considerable flexibility with regard to its cost base. As such the business
has the potential to quickly respond to any change in market conditions.

Contract/Permanent Business Mix

The Group saw healthy increases in both volume and value in both the Permanent
and Contact sides of the business. During the course of the year we made a total
of 9,945 permanent placements, an increase of 29.4% on the previous year (2006:
7,685). By the end of the year our total of 5,700 contractors represented a 21%
increase on the previous year (2006: 4,719).

Once again, the increase in volume was not achieved at the expense of the
quality of business completed. The average value of each Permanent and Contract
placement also improved substantially. Over the period the Group's average
Permanent placement fee grew by 9.9% to £9,409 (2006: £8,563). Similarly, the
average Contract day rate achieved was a substantial 10% increase to £71.42
(2006: £64.91).

As in the previous year the element of Permanent business as a percentage of the
overall business mix increased marginally. This of course reflects the fact
that employers continued to have the confidence to make permanent hires. In
addition, the non-ICT sectors to which we are increasingly exposed are
structurally less geared towards contract hiring.

The impact of this change in the mix was further reinforced by the fact that the
contract market in some of our non-UK geographies is less established. The
overall impact was that the business was very slightly biased 51% to 49% in
favour of Permanent (2006: Contract 51% Permanent 49%).

Investments for the future

The Group has always been prepared to investment in its future. Nonetheless,
2007 was an exceptional year in this respect with a combination of headcount
growth, office roll-outs and systems implementations all playing their part in
accounting for a substantial increase in capital expenditure to £14.1m (2006:

The majority of the costs in question were expected and planned for accordingly.
In other cases future investments originally anticipated for 2008 were brought
forward for commercial reasons - for example the opening of our new European
training centre in Amsterdam. However, we were also impacted by approximately
£3m of unbudgeted additional costs associated with disruption caused by our
roll-out of a major ERP package and the associated business process

The impact of these items was also seen on the Group's conversion ratio of Gross
Profit to Operating Profit, which reduced to 28.6% (2007:30.3%).

We anticipate that 2008 will see a return to normalised levels of expenditure
with capital expenditure of approximately £7m and a commensurate recovery in our
conversion ratio.

Brand Analysis

The four largest brands in the Group, Computer Futures, Huxley, Progressive and
Pathway were responsible for 81.0% of the Group's gross profit during the year
compared with a total of 78.7% for the previous financial year. All four brands
posted significant growth.

Computer Futures was once again the largest brand by gross profit contribution,
achieving £53.9m (2006: £36.7m) and thus accelerating its year on year growth to
46.5% from 20% the previous year. This is a noteworthy achievement for the
Group's oldest business. During the year this brand took its first meaningful
steps to add new sectors alongside its ICT franchise, establishing teams in the
Accountancy and HR markets. During the year Computer Futures also added a new
office in Rotterdam.

Huxley remained the second largest business, posting a total of £50.7m of gross
profit (2006: £35.6m) representing an increase of 42.5%. Huxley benefited from
having the most developed programme of sector diversification, with newer
sectors increasingly being rolled out outside of the UK.  Huxley enjoyed another
strong year of growth despite being the brand most exposed to the investment
banking market. Huxley also opened new offices in Brussels and Hong Kong.

Our third largest brand, Progressive, achieved a 27.9% increase in gross profit
to a total of £31.7m (2006: £24.8m). In common with the other brands, it
enhanced its sector portfolio, making significant progress in the engineering
market in particular. Progressive also continued its programme of international
expansion by establishing a presence in Sydney, the office officially going live
in Q1 2008.

Pathway was the fourth largest Group brand once again, recording £11.6m of gross
profit, a year on year improvement of 22.5% (2006: £9.5m). During the year
Pathway established a team to address the Dubai market which operated out of
London before physically relocating to Dubai at the beginning of 2008.

In aggregate the other Group brands accounted for 19.0% of total gross profit
compared to 21.3% in 2006.  Of particular note was that two of these brands, the
IT Job Board and Real Resourcing, took their first steps in terms of
international expansion, both opening offices in Amsterdam. Similarly our
accountancy brand JP Gray started to roll out in Europe; in its early stages
this initiative will leverage the Computer Future's office network.


We enter 2008 in good shape to take full advantage of the investments made in

The Group's strong growth in Gross Profit of 34.8% (2006: 29.7%) reflects the
overall strength of the market for the Group's services. The second half
slowdown in certain niche areas of the banking sector did not have a meaningful
impact on the 2007 financial year. We do not anticipate this changing during
2008 despite the fact that we do not see these markets staging a full recovery
in the short term.

We base this assessment on a number of factors: First, the areas particularly
negatively impacted represent a small part of the Group's business; second other
areas of our market, even in mature geographies remained robust; and third the
Group's international and sector expansion increases our exposure to secular
growth opportunities. We believe that together these factors are capable of
offsetting the effects of less activity in certain areas of the banking market.

In terms of the wider economic backdrop, the history of the specialist staffing
market demonstrates that we do not need a particularly strong economic tailwind
to post substantial growth. As such, we are confident that the prospect of some
degree of slowdown during 2008 should not represent a significant obstacle to
the Group's continuing growth.

In the event of major economic recession the Group could not expect to be
unaffected. However our twenty-one year history encompasses all phases of the
economic cycle and the ability of the Group's management team to cope with
highly challenging market conditions has been thoroughly tested on a number of

In such circumstances the Group has proved to be an agile business, well capable
of responding quickly and decisively to macro-economic changes. We are helped by
the flexibility afforded by our sales consultants having relatively low fixed to
variable remuneration.

That said, based on 2007 and looking at the first two months trading for 2008 we
have no reason to assume that market conditions in the coming year will be
anything other than supportive of another year of growth for SThree. It is on
this basis that we have made plans to continue to roll out the SThree model to
an ever-increasing number of sectors and geographies.

In summary SThree looks forward to the new financial year with a realistic but
positive view. We understand that the economic picture is more uncertain than it
has been in recent years, but believe continued healthy growth for SThree
remains the most likely scenario given the available evidence.

Financial Review

Income Statement                                     2007 (Unaudited)                   2006 (Unaudited)

Revenue                                                         £'000                              £'000
Contract                                                      429,121                            327,459
Permanent                                                      93,577                             65,803

                                                              522,698                            393,262

Gross Profit ('Fee Income') for the year increased by 34.8% to £182.7m (2006:
£135.5m) representing an overall gross profit margin of 34.9% (2006: 34.5%). The
increase in margin is predominantly due to a higher proportion of permanent
revenue, which is at 100% gross margin. The permanent revenue ratio grew from
16.7% to 17.9% of total revenue. Contract gross profit margins at 20.8% were 0.5
percentage points lower than 2006; however absolute average gross profit per day
rates grew by 10%.

Administration expenses before exceptional items increased by 38.0% to £130.4m
(2006: £94.5m) principally due to increasing numbers of staff along with the
previously announced one-off systems related costs of approximately £3m. As a
result the Group's conversion ratio (operating profit divided by gross profit)
stood at 28.6% (2006: 30.3%). Operating profit nevertheless increased by 27.6%
to £52.3m (2006: £41.0m).

Headcount of the Group totalled 1,481 at 30 November 2006 and increased by 37.4%
to 2,035 by 2 December 2007. Sales consultant headcount increased by 40.4% to
1537 (2006: 1,095). Average total headcount for the year was 1,755 (2006:
1,288). Sales headcount year by year comparatives are not strictly like for like
as the Group took steps in the year to more accurately define its sales cohort,
resulting in some reclassification.

The net finance charges of £2.0m (2006: £0.8m) increased as a result of higher
borrowing requirements during the year following disruption to cash collections
during implementation of our ERP package. These issues have now been resolved
resulting in a significant improvement in DSO's compared to the half year.
During the year, the Group re-assessed the historical risk associated with its
Non-UK contract business and released provisions earlier set aside. This had a
positive impact on the years' results.

Profit before taxation and before exceptional items amounted to £50.3m (£40.3m),
an increase of 24.8%.

Taxation on profits was £16.5m (2006: £12.3m before exceptional items)
representing an effective tax rate of 32.8% (2006: 30.5% pre-exceptional). The
increase in the effective tax rate year on year was in part a reflection of the
2006 rate being positively impacted by one-off items. We anticipate that the
effective tax rate will fall going forwards, as the Group benefits from a
reduction of UK corporate tax rates, albeit this may be partially offset by an
increase in business in some territories with higher taxation regimes. The
Group's cash tax rate was 16.7% (2006: 6.5%), reflecting the Schedule 23 tax
benefit. However, we anticipate that this rate will gradually increase to a more
normalised effective rate in the future.

Basic earnings per share were 25.2p (2005: 22.4p before exceptional items). This
reflects an increase in the weighted average number of shares for the year of
129.8m (2006: 123.9m) and the deduction of profits attributable to minority
interests of £1.2m (2006: £0.3m). The significant increase in the minority
charge reflected the fact that a number of minorities were included in the
calculation for the first time, resulting in an unusually large one-off year on
year increase. As the minority charge normalises, we would expect the charge to
grow from its current level slightly ahead of the overall percentage growth of
Group profits, reflecting the fast growing nature of these businesses.

The Board previously declared an interim dividend of 3.1p (2006: 2.4p). The
Board proposes to pay a final dividend of 6.2p per share (2006: 4.8p) bringing
the total dividend for the year to 9.3p per share (2006: 7.2p), an increase of
29.2%. The final dividend will be paid on 9 June 2008 to those shareholders on
the register at 2 May 2008.

Balance Sheet

The Group had net assets of £93.4m at 2 December 2007 (2006: £64.1m). Net cash
amounted to £3.5m (2006: net debt £2.8m), the improvement reflecting the net
impact of increased profitability, working capital growth and capital

Capital expenditure amounted to £5.2m (2006: £2.4m) predominantly related to
upgrades of IT hardware and fit-out of new offices across the Group in line with
its geographic expansion plans. In addition, expenditure of £8.9m (2006: £3.0m)
on new ERP and candidate/client management systems has been capitalised within
intangible assets. Total capital expenditure next year is expected to fall
significantly to around £7m now that this phase of investment in the core IT
infrastructure is largely complete.

Net trade debtors increased by 58.2% to £109.6m at 2 December 2007 (2006:
£69.3m) representing debtor days of 59 days (2006: 54 days). Total trade and
other payables increased from £39.0m to £73.2m as the Group sought to manage its
supply chain more effectively.

Cash Flow

At the start of the year the Group had net debt of £2.8m. During the year the
Group generated cash from operating activities of £29.3m (2006: £15.0m) being
£56.6m of operating cashflow before changes in working capital and provisions
(2006: £40.1m) and an increase in working capital requirements and provisions of
£27.3m (2006: £25.1m). At 2 December 2007 the Group had net cash of £3.5m.

In the first two months of the 2008 financial year the Group spent £6.2m
purchasing 3m of its own shares. This programme was financed utilising existing
facilities. However, we have an agreement in principle for an invoice
discounting facility to provide further funding flexibility of up to £50m.

Treasury Management and Currency Risk

The main functional currencies of the Group are Sterling and the Euro. The Group
does not have material transactional currency exposures although is exposed to
translation differences on the profits and cash flows generated by its overseas
operations. Some derivative transactions have been undertaken to mitigate these
exposures and the 2007 results include a £1.0m loss arising from these
investments. We expect to incur a further £1.9m loss in the first half of 2008
having closed these positions down. As a consequence, the Board is undertaking a
review of its currency hedging strategy to ensure that it is appropriate given
the Group's increasing international business.

SThree plc

Consolidated Income Statement - Unaudited
Year ended 02 December 2007
                                                        02 December                  30 November

                                                               2007                     2006
                                                              Total         Ordinary  Exceptional      Total
                                                                          activities        items

                                      Notes                   £'000            £'000        £'000      £'000

Revenue                                   1                 522,698          393,262            -    393,262
Cost of sales                                             (340,033)        (257,742)            -  (257,742)

Gross profit                              1                 182,665          135,520            -    135,520

Administrative                            2               (130,408)         (94,487)     (22,143)  (116,630)

Operating profit                                             52,257           41,033     (22,143)     18,890

Finance income                                                    6              432            -        432

Finance cost                                                (1,985)          (1,284)            -    (1,284)

Share of profit of joint                                         46               89            -         89

Profit before                                                50,324           40,270     (22,143)     18,127

Taxation                                  3                (16,509)         (12,289)        6,242    (6,047)

Profit for the year                                          33,815           27,981     (15,901)     12,080

Attributable to:
Equity holders of the Company                                32,648           27,703     (15,901)     11,802
Minority interest                                             1,167              278            -        278

                                                             33,815           27,981     (15,901)     12,080

Earnings per share                        5                   pence            pence        pence      pence

Basic                                                          25.2             22.4       (12.9)        9.5
Diluted                                                        24.1             21.4       (12.3)        9.1

All amounts relate to continuing

SThree plc

Consolidated Statement of Changes in Equity -
as at 02 December 2007
                                             Share    Share Capital    Currency Retained Attributable Minority   Total
                                           capital  premium reserve translation earnings   to Company interest  equity
                                                                        reserve          shareholders

                                             £'000    £'000   £'000       £'000    £'000        £'000    £'000   £'000

Balance at 01 December 2005                  1,380    2,925     878       (146)   24,050       29,087      171  29,258

Profit for the year to 30                        -        -       -           -   11,802       11,802      278  12,080
November 2006

Employee share award and share option            -        -       -           -   19,544       19,544        -  19,544
Deferred tax on employee share                   -        -       -           -    2,054        2,054        -   2,054
Current tax on employee share                    -        -       -           -    4,416        4,416        -   4,416
Repurchase of minority interest                  -        -       -           -        -            -     (36)    (36)
Dividends paid to equity holders                 -        -       -           -  (3,038)      (3,038)        - (3,038)
Dividends paid to minority                       -        -       -           -        -            -     (65)    (65)
Currency translation differences                 -        -       -       (102)        -        (102)        -   (102)

Total movements in                               -        -       -       (102)   34,778       34,676      177  34,853

Balance at 30 November 2006                  1,380    2,925     878       (248)   58,828       63,763      348  64,111

Profit for the year to 02                        -        -       -           -   32,648       32,648    1,167  33,815
December 2007

Employee share award and share option            5        -       -           -      347          352        -     352
Deferred tax on employee share                   -        -       -           -  (7,597)      (7,597)        - (7,597)
Current tax on employee share                    -        -       -           -    8,258        8,258        -   8,258
Repurchase of share capital                    (2)        -       2           -    (388)        (388)        -   (388)
Issue of share capital to                        -        -       -           -        -            -      990     990
minority interest
Repurchase of minority interest                  -        -       -           -        -            -     (10)    (10)
Dividends paid to equity holders                 -        -       -           -  (6,345)      (6,345)        - (6,345)
Dividends paid to minority                       -        -       -           -        -            -     (70)    (70)
Currency translation differences                 -        -       -         317        -          317        -     317

Total movements in                               3        -       2         317   26,923       27,245    2,077  29,322

Balance at 02 December 2007                  1,383    2,925     880          69   85,751       91,008    2,425  93,433

SThree plc

Consolidated Balance Sheet - Unaudited
as at 02 December 2007
                                                                02 December                 30 November
                                                                       2007                        2006
                                          Notes                       £'000                       £'000
Non-current assets
Property, plant and                                                   6,479                       3,558
Intangible assets -                                                  10,389                       3,012
Intangible assets -                                                     382                         364
Investment in joint                                                     135                          89
Deferred tax asset                                                    3,052                      11,459
                                                                     20,437                      18,482

Current assets
Trade and other receivables                                         151,085                      92,585
Current tax debtor                                                        -                         533
Cash and cash                                 7                       4,771                       2,440
                                                                    155,856                      95,558

Total assets                                                        176,293                     114,040

Provisions for liabilities and charges                                (250)                       (188)
Trade and other                                                    (73,180)                    (39,024)
Borrowings                                                          (1,267)                     (5,281)
Current tax liability                                               (4,911)                           -
                                                                   (79,608)                    (44,493)

Non-current liabilities
Provisions for liabilities and charges                              (3,252)                     (5,436)
                                                                    (3,252)                     (5,436)

Total liabilities                                                  (82,860)                    (49,929)

Net assets                                                           93,433                      64,111

Capital and reserves attributable to the
Company's equity holders
Share capital                                                         1,383                       1,380
Share premium                                                         2,925                       2,925
Capital reserve                                                         880                         878
Currency translation reserve                                             69                       (248)
Retained earnings                                                    85,751                      58,828
                                                                     91,008                      63,763
Minority interest                                                     2,425                         348

Total equity                                                         93,433                      64,111

SThree plc

Consolidated Cash Flow Statement - Unaudited
Year ended 02 December 2007

                                                                    02 December               30 November
                                                                           2007                      2006
                                                Notes                     £'000                     £'000

Cash flows from operating
Cash generated from operating                       6                    29,316                    15,025
Income tax (paid)/                                                      (2,113)                     1,459

Net cash generated from operating activities                             27,203                    16,484

Cash flows from investing
Purchase of property, plant and                                         (5,173)                   (2,442)
Purchase of intangible                                                  (8,901)                   (3,001)
Proceeds from sale of property, plant and equipment                          30                        56

Net cash used in investing                                             (14,044)                   (5,387)

Cash flows from financing
Repayment of loan                                                             -                   (8,000)
Foreign exchange from financing                                               -                       265
Finance income                                                                6                       167
Finance costs                                                           (1,985)                   (1,284)
Proceeds from issue of ordinary                                               5                         -
Issue of share capital to minority                                        1,845                         -
Repurchase of share                                                       (388)                         -
Purchase of minority                                                       (28)                     (400)
Dividends paid                                                          (6,345)                   (3,038)
Dividend paid to minority                                                  (70)                      (65)

Net cash used in financing                                              (6,960)                  (12,355)

Net increase/(decrease) in cash and cash equivalents                      6,199                   (1,258)

Cash and cash equivalents at beginning of the year                      (1,841)                     (550)
Exchange losses on cash and cash equivalents                                146                      (33)

Cash and cash equivalents at the end of the year                          4,504                   (1,841)

SThree plc

Notes to the Financial Statements
Year ended 02 December 2007

1. 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.

Geographic analysis
                                                             By location of         By location of operating
                                                                 client                     company
                                                       02 December     30 November  02 December   30 November

                                                              2007            2006         2007          2006
                                                             £'000           £'000        £'000         £'000

United Kingdom                                             369,735         295,666      479,521       372,563
Europe and Rest of World                                   152,963          97,596       43,177        20,699

                                                           522,698         393,262      522,698       393,262

Gross Profit
United Kingdom                                             123,321          98,937      147,459       118,612
Europe and Rest of World                                    59,344          36,583       35,206        16,908

                                                           182,665         135,520      182,665       135,520

Operating Profit
Operating profit before exceptional
United Kingdom                                                                           44,472        38,659
Europe and Rest of World                                                                  7,785         2,374
                                                                                         52,257        41,033
Exceptional items
United Kingdom                                                                                -      (22,143)

                                                                                         52,257        18,890

                                                            Total assets              Capital expenditure
                                                       02 December     30 November  02 December   30 November       

                                                              2007            2006         2007          2006
                                                             £'000           £'000        £'000         £'000

United Kingdom                                             155,898         106,193       12,811         5,154
Europe and Rest of World                                    20,395           7,847        1,263           289

                                                           176,293         114,040       14,074         5,443

1. Segmental analysis (continued)
The following segmental analyses by brand, recruitment classification and by
discipline (being the profession of candidates placed) have been included as
additional disclosure over and above the requirements of IAS14 'Segment

                                                                 Revenue                    Gross profit
                                                       02 December     30 November  02 December   30 November       

                                                              2007            2006         2007          2006
                                                             £'000           £'000        £'000         £'000

Computer Futures Solutions                                 148,096         113,391       53,850        36,749
Huxley Associates                                          134,374          91,198       50,746        35,609
Progressive Computer Recruitment                            95,067          77,288       31,688        24,777
Pathway                                                     45,279          36,649       11,595         9,469
Others                                                      99,882          74,736       34,786        28,916

                                                           522,698         393,262      182,665       135,520

Recruitment classification
Contract                                                   429,121         327,459       89,143        69,717
Permanent                                                   93,577          65,803       93,522        65,803

                                                           522,698         393,262      182,665       135,520

Information & communication technology                     469,883         351,038      150,139       111,121
Other(1)                                                    52,815          42,224       32,526        24,399

                                                           522,698         393,262      182,665       135,520

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

SThree plc

Notes to the Financial Statements
Year ended 02 December 2007

2. Administrative Expenses - Exceptional Items

Exceptional items are those items which, because of their size, incidence or
nature, are disclosed to give a proper understanding of the underlying results
for the period. Items classified as exceptional are as follows:

                                                                                02 December      30 November

                                                                                       2007             2006
                                                                                      £'000            £'000
Exceptional items - charged to operating profit
Employee share awards and share options charge                                            -           19,544
Employer's National Insurance on share awards and options, and related costs              -            2,599
Exceptional items - before taxation                                                       -           22,143

Certain current and former employees received share awards and share options
that were granted during the previous financial year but linked to arrangements
made at IPO.  In accordance with IFRS 2 'Share based payments' a charge was
reflected in last year's income statement.  This also resulted in a
corresponding charge for Employer's National Insurance contributions.  The Group
received tax relief in respect of these share awards and other options and will
receive tax relief in respect of options to be exercised in the future. These
credits were also classified as exceptional.

The charge in respect of the employee share awards and options is a non-cash
item.  The related Employer's National Insurance contributions were paid in

SThree plc

Notes to the Financial Statements
Year ended 02 December 2007

3. Taxation

(a) Analysis of tax charge for the
                                                     02 December                  30 November

                                                            2007                         2006
                                                           Total      Ordinary    Exceptional         Total
                                                                    activities          items
                                                           £'000         £'000          £'000         £'000
Current taxation
Corporation tax at 30% (2005: 30%) on profits for         12,646        11,155        (6,642)         4,513
the year
Adjustments in respect of prior                                -         (174)              -         (174)

Corporation tax on profits for the                         2,778         1,594              -         1,594
Adjustments in respect of prior                              278         (495)              -         (495)

Total current tax charge/(credit)                         15,702        12,080        (6,642)         5,438

Origination and reversal of temporary                        473           209              -           209
Adjustments in respect of prior periods                      571
Schedule 23 deferred tax (credit)/charge in                 (32)             -            400           400
respect of unexercised employee share awards and
Effects of change in future tax rate                       (205)             -              -             -

Total deferred tax charge                                    807           209            400           609

Total income tax expense in the income                    16,509        12,289        (6,242)         6,047

3. Taxation (continued)

(b) Reconciliation of the effective tax rate
The total tax charge for the year is higher than the standard rate of
corporation tax in the UK (30%). The differences are explained below:
                                                                           02 December           30 November

                                                                                  2007                  2006
                                                                                 £'000       %         £'000           %

Profit before taxation                                                          50,324                18,127

Profit before tax multiplied by standard rate of corporation tax in             15,097     30%         5,438         30%
the UK of 30%

Effects of:
Other expenses not deductible for tax purposes                                     679      1%           461          3%
Capital allowances in excess of depreciation and amortisation                        -      1%           153          1%
Other timing differences                                                             -      0%           384          2%
IFRS 2 charge in respect of share awards and                                       102      0%         5,863         32%
Schedule 23 tax credit in respect of employee share options and                   (32)      0%       (5,543)       (31%)
Lower tax rates on overseas earnings                                                19      0%         (149)        (1%)
Tax losses not utilised within the                                                   -      0%           109          1%
Adjustments to tax in respect of previous periods                                  571      1%         (174)        (1%)
current and deferred (UK)
Adjustments to tax in respect of previous periods                                  278      1%         (495)        (3%)
Effects of change in future tax rate                                             (205)      0%             -          0%

Tax expense and effective tax rate                                              16,509     33%         6,047         33%

                                                                                                 02 December 30 November

                                                                                                        2007        2006
(c) Current and deferred tax movement recognised directly in equity                                    £'000       £'000

Current tax
Equity settled employee share options                                                                  8,258       4,416

Deferred tax
Equity settled employee share options                                                                (7,597)       2,054

                                                                                                         661       6,470

Corporation tax deductions have arisen on the exercise of options granted to
certain current and former employees of the Group during the financial year. 
The corporation tax deduction amounted to £27.6m (2006: £33.2m) which reduces
the current year's taxable profits of the Group. The current tax effect of this
deduction amounted to £0.03m (2006: £5.6m) recognised in the income statement in
the current year.  This credit had been treated as exceptional in the prior year
financial statements due to its unusual nature and its materiality.  The current
tax recognised directly in equity amounted to £8.3m (2006: £4.4m).

In addition to the tax deductions described above, the Directors expect to
receive additional tax deductions in respect of the share awards and share
options currently unexercised.  Under IFRS the Group is required to provide for
deferred tax on all unexercised share awards and options.  At 02 December 2007 a
deferred tax asset of £1.8m (2006: £9.4m) has been recognised in respect of

SThree plc

Notes to the Financial Statements
Year ended 02 December 2007

4. Dividends
                                                                                                 02 December 30 November

                                                                                                        2007        2006
                                                                                                       £'000       £'000
Amounts recognised and distributed to shareholders in the year
Dividend paid of 4.8p per Ordinary share (2006: 2.4p)                                                  6,345       3,038
Proposed interim dividend of 3.1p per Ordinary                                                         4,011           -
                                                                                                      10,356       3,038

Amounts proposed for approval at the AGM

Proposed final dividend for year end 02 December 2007: 6.2p (2006:                                     8,573       6,307

An interim dividend of 3.1p (2006: 2.4p) per Ordinary Share was 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.

The proposed final dividend had not been approved by the shareholders at 02
December 2007 and consequently has not been included as a liability within the
financial statements.

A proposed final dividend of 6.2p (2006: 4.8p) per Ordinary share will be paid
on 09 June 2008 to shareholders on the register at the close of business on 2
May 2008.

5. Earnings per share

The calculation of the basic and diluted earnings per share is based on the
following data. Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average number of Ordinary
shares in issue during the year, excluding those held in the EBT which are
treated as cancelled.

For diluted earnings per share, the weighted average number of Ordinary shares
in issue is adjusted to assume conversion of all dilutive potential Ordinary
                                                                                               02 December   30 November

                                                                                                      2007          2006
                                                                                                     £'000         £'000
Profit after taxation                                                                               33,815        12,080
Minority                                                                                           (1,167)         (278)
Basic Earnings                                                                                      32,648        11,802

Effect of exceptional items (net of                                                                      -        15,901

Profit for the year excluding exceptional                                                           32,648        27,703

5. Earnings per share (continued)
                                                                                                  millions      millions
Number of shares
Weighted average number of shares used for                                                           129.8         123.9
basic EPS
Dilution effect of share                                                                               5.9           5.8

Diluted weighted average number of shares used for diluted EPS                                       135.7         129.7

                                                                                                     pence         pence
Basic earnings per share                                                                              25.2           9.5
Basic earnings per share excluding exceptional                                                        25.2          22.4

Diluted earnings per                                                                                  24.1           9.1
Diluted earnings per share excluding                                                                  24.1          21.4
exceptional items

All earnings are derived from continuing

SThree plc

Notes to the Financial Statements
Year ended 02 December 2007

6. Cash flows from operating activities

                                                                                02 December    30 November

                                                                                       2007           2006
                                                                                      £'000          £'000

Profit before taxation                                                               50,324         18,127
Depreciation and amortisation                                                         3,761          1,556
Foreign exchange from financing activities                                                -          (265)
Unrealised losses on financial                                                          999              -
Finance income                                                                          (6)          (167)
Finance costs                                                                         1,985          1,284
Loss on disposal of property, plant and                                                  46            116
Profit attributable to joint                                                           (46)           (89)
Profit from partial deemed disposal of                                                (855)              -
Non-cash element of the charge for share options and awards.                            347         19,544

Operating cashflow before changes in working capital and provisions                  56,555         40,106

Increase in receivables                                                            (58,500)       (17,760)
Increase/(Decrease) in payables                                                      33,383        (7,128)
Decrease in provisions                                                              (2,122)          (193)

Net cash inflow from operating activities                                            29,316         15,025

7. Cash and cash equivalents

                                                                                02 December    30 November

                                                                                       2007           2006
                                                                                      £'000          £'000

Cash in hand and at bank                                                              4,771          2,440
Bank overdraft                                                                        (267)        (4,281)

                                                                                      4,504        (1,841)

SThree plc

Notes to the financial statements
Year ended 02 December 2007

8.                 Nature of financial information

The financial information is not audited and does not constitute statutory
accounts within the meaning of S240 of the Companies Act 1985. Group financial
statements for 2007 will be delivered to the Registrar of Companies in due
course.  The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS).  The accounting policies
(that comply with IFRS and IAS) adopted by SThree plc (the 'Group') are set out
in the 2007 Interim report.  Statutory accounts for the year ended 30 November
2006, which were prepared in accordance with IFRS as adopted by the European
Union, have been filed with the Registrar of Companies. The auditors' report on
those accounts was unqualified and did not contain a statement made under s237
(2) or (3) of the Companies Act 1985.

9.                 Annual Report and Accounts

The 2007 Annual Report and Accounts will be posted to shareholders in due
course.  Further copies will be available from the Company Secretary, 41-44
Great Windmill Street, London W1D 7NB.  Telephone No. 020 7292 3838.

10.               Annual General Meeting

The Annual General Meeting of SThree plc will be held on 24 April 2008.

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