9 September 2016

Q3 Trading Update

SThree plc ('SThree' or the 'Group'), the international specialist staffing business, is today issuing a trading update covering the period from 1 June 2016 to date; financial information relates to the quarter ended 31 August 2016.

Highlights

- Group gross profit ('GP') down 2%* YoY and ahead by 2%* excluding Energy

- Robust growth across ICT (+8%* YoY) and Engineering (+9%* YoY)

- Strong growth in Continental Europe (+12%* YoY)

- USA GP up 14%* sequentially vs Q2, but down 10%* YoY (down 3%* excluding Energy), reflecting tough trading conditions in Energy and Banking & Finance and strong prior year comparatives

- UK market impacted by slowdown in Banking & Finance sector and EU referendum - GP down by 9%* YoY

- Conditions in the Energy market remain challenging - GP down 32%* YoY

- Contract GP up 6%* YoY and ahead by 9%* excluding Energy

- Permanent GP down 15%* YoY, broadly in line with average sales headcount down 12%. Permanent GP excluding Energy down 9%* YoY

- 76% of Gross Profit generated from markets outside of the UK & Ireland (2015: 72%).

- Group period-end sales headcount down 7% on the 2015 year-end position and down 3% YoY

- Management's expectations for the full year outcome are unchanged

Gary Elden, Chief Executive, commented: 'The mixed trading conditions we identified at the half-year stage continued in Q3. Our Contract business continued to perform well overall, with GP increasing by 6%* year on year. Continental Europe once again grew strongly, underpinned by a very pleasing performance in DACH, where GP was ahead by 17%* year on year. However, the uncertainty created by the EU Referendum impacted our UK business, and our USA growth rate reflects the ongoing weakness in the Energy and Banking & Finance markets.

'Looking ahead, the continued momentum of our Contract business, the strength of our performance in Continental Europe and the benefit of restructuring measures taken earlier in the year, leave us well-positioned for our seasonally most significant fourth quarter. Our expectations for the full year are unchanged.'

Group gross profit ('GP') was down 2%* YoY, (up 2%* in Q2), and sequentially up 4%* Q3 vs Q2. Q3 GP was impacted by the ongoing weak activity in the Energy market and a continuation of the more difficult market conditions in Banking & Finance that we identified in Q2. ICT performed robustly with GP up 8%* YoY. Sales headcount was down 3% YoY and down 7% on the year-end position, as we reacted to the changing market conditions.

Contract GP was up 6%* YoY, or up 9%* excluding Energy. A large proportion of this growth was driven by Continental Europe up 16%*, offsetting UK&I down by 4%*. USA Contract GP was up by 5%*, with ICT growth of 31%* and Life Sciences growth of 17%* offset by Energy down 26%* and Banking & Finance 6%* lower YoY. USA Contract GP grew by 17%* in Q3 sequentially vs Q2.

Permanent GP was down 15%* YoY (down 12%* in Q2). Although lower overall, Q3 saw robust growth in DACH and France, up 7%* and 3%* respectively, offsetting a weaker performance in the USA, where GP was down 30%* YoY but up sequentially by 8%* vs Q2. UK&I permanent GP was down 23%* reflecting our previous strategic decision to downsize UK permanent headcount and focus on productivity improvements. Permanent productivity improved in both the UK and Continental Europe during the period. Banking & Finance permanent GP was down 22%* YoY and Energy permanent GP was down 87%* YoY. Permanent productivity per sales head was down 4%* YoY in the quarter, with average heads down 12%.

Average Group sales heads were down 1% YoY. UK&I sales headcount was down 10% YoY, Continental Europe was up 6%, USA was down 2% and Asia Pacific & Middle East was down 5%. Contract sales headcount represented 62% of total sales headcount at the end of the quarter (2015: 57%), up 6% YoY.

The Group has a network of 43 offices in 15 countries, of which 31 are outside the UK. The Group generated 76% of Gross Profit for the period from markets outside the UK&I (2015: 72%).

SThree remains in a strong financial position. Net debt at 31 August 2016 was circa £14m (31 August 2015: £22m). The Group has a £50m revolving credit facility ('RCF') with RBS and HSBC, which is committed to 2019.

* at constant currency

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

Telephone number: +44 (0) 20 3043 2002

For access to the call please quote passcode SThree (6999722)

A replay facility will be available for seven days on +44 (0) 207 984 7568 or 0808 101 1153. Passcode: 6999722

The Group will issue a trading update for the year ended 30 November 2016 on 9 December 2016.

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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 fifteen 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.