SThree Regulatory News (STEM)

15 December 2017

FY17 Trading Update

SThree plc ("SThree" or the "Group"), the international specialist staffing business, is today issuing a trading update for the financial year ended 30 November 2017.

Highlights

1 Market expectations for adjusted profit before tax for the year ended 30 November 2017 are in the range of £42.0m to £45.6m, with a consensus of £43.8m

Gary Elden, Chief Executive, commented: "We have delivered an encouraging overall result for the year, and now expect full year profit to be slightly ahead of consensus. Strong performances in the USA and Continental Europe, particularly from our market-leading business in the Netherlands and our business in Germany, were key to the delivery of this result. Our Contract business continued to perform robustly, with GP increasing by 10%* year on year and with contract runners at the period end reaching in excess of ten thousand, a milestone for the Group.

"Looking ahead to 2018, the momentum of our Contract business and the strength of our performances in the USA and Continental Europe leave us well-positioned for growth."

Business performance

Group GP for the year was up 4%* as we experienced strong growth in Continental Europe and the USA, while UK&I and APAC & ME remained challenging.

Contract GP was up 10%*, with growth across all sectors. Contract growth was driven by Continental Europe, which was up 17%* and by USA up 21%*. Continental Europe and USA combined now represent 70% of our contract runners (2016: 65%).

Permanent GP was down 8%*, with average sales headcount down 10%.  USA posted a 12%* increase, driven by supportive Energy and Banking markets. This was offset by declines in all other regions, with Continental Europe down 7%* and UK&I down 22%*. Our Permanent productivity per head improved by 3%* over last year.

Group period end sales headcount was up 10% to 2,257, with Contract up 15% and Permanent up 3%. Contract represented 65% of total sales headcount at the period end. Sequentially vs Q3 2017, period end Group sales headcount was up 7%, with Continental Europe up 12%, USA up 4% and UK&I down 2%. Average Group sales heads for the year were down 1%.

Support functions relocation

A proposed relocation of our central support functions from London to Glasgow was announced in early November at an estimated total exceptional cost of £13m, with circa £7m recognised in 2017 as an exceptional item with most of the balance expected to be recognised in 2018. Annualised savings of £4-5m are anticipated from 2019.

Foreign exchange impact

The Group experienced a translational FX benefit of circa £19m on GP during the year, as a result of the strengthening of the euro and US dollar versus sterling.

Balance sheet

SThree remains in a strong financial position. Net cash at 30 November 2017 was circa £6m (30 November 2016: £10m). The Group has a £50m revolving credit facility ("RCF") with HSBC and Citibank, which is committed to 2019.

Office Network

The Group has a network of 40 offices in 16 countries, of which 32 are outside the UK. The Group generated 80% of GP for the period from markets outside the UK&I (2016: 75%).

 *at constant currency

SThree is hosting an analyst conference call today at 0830 GMT. The details are as follows:

Telephone number: +44 (0) 20 3003 2666

For access to the call please quote passcode SThree

A replay facility will be available for seven days on +44 (0) 208 196 1998 Passcode: 3205004#

The Group will issue its results for the financial year ended 30 November 2017 on 29 January 2018.

- Ends -

Notes to editors

SThree is a leading international specialist staffing business, providing permanent and contract specialist staff to a diverse client base of over 7,000 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 to include businesses serving the Banking & Finance, Energy, Engineering and Life Sciences sectors.

Since launching its original business, Computer Futures, in 1986, the Group has adopted a multi-brand strategy, establishing new operations to address growth opportunities. SThree brands include Computer Futures, Huxley Associates, Progressive and The Real Staffing Group. The Group has circa 2,700 employees in sixteen countries.

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

Important notice

Certain statements in this announcement are forward looking statements. By their nature, forward looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by those statements. Forward looking statements regarding past trends or activities should not be taken as representation that such trends or activities will continue in the future. Certain data from the announcement is sourced from unaudited internal management information and is before any exceptional items. Accordingly, undue reliance should not be placed on forward looking statements.