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SThree gross profit up 14% YoY

Gary Elden, chief executive, commented, "Overall, the Group had a pleasing first half, trading in line with our expectations.  In particular, we continued to see positive results from our investment in Contract and made further progress with our drive to rebuild productivity across Permanent and Contract.

"Contract GP increased by 20% year on year, as it continued to benefit from greater strategic focus. Contract now accounts for almost two thirds of Group GP. 

"Once again, the Americas business reported a strong performance, growing 34%* year on year driven by expansion of the ICT, Life Sciences and Banking & Finance sectors, in part offset by the weak Energy market. The USA represents one of our most exciting opportunities and we continue to expand and diversify our sector offering in the world's largest specialist STEM staffing market.

"Looking ahead, we believe the trading environment remains positive in the majority of our territories. While the outlook for Energy remains challenging and foreign exchange continues to be a headwind, the Group's strong performance overall demonstrates the inherent benefits of our well-diversified portfolio. The expanded Contract book and improving Permanent performance give us a strong base from which to grow in the seasonally more significant second half of the year."

"With effect from the beginning of the current financial year, SThree began reporting quarterly on a three month calendar basis, replacing the thirteen week quarter basis previously adopted.  This change was implemented to improve comparability of periods and to avoid the need for 53 week "rebasing" years such as 2013. 

Financial highlights - Group Gross Profit

Group Gross Profit

H1 2015

Q2 2015

Q1 2015

Gross Profit

H1 2015

H1 2014 1

YoY % 2

YoY % 2

YoY % 2

Contract

&pound70.6m

&pound60.8m

20%

17%

24%

Permanent

&pound40.0m

&pound40.1m

5%

4%

6%

Group

&pound110.5m

&pound100.9m

14%

12%

17%

UK&I

&pound33.5m

&pound30.5m

11%

9%

13%

Continental Europe

&pound48.4m

&pound47.9m

12%

11%

14%

Americas

&pound19.7m

&pound13.7m

34%

31%

38%

Asia Pac & Middle East

&pound8.9m

&pound8.8m

3%

-7%

16%

Group

&pound110.5m

&pound100.9m

14%

12%

17%

ICT

&pound45.3m

&pound40.3m

20%

17%

22%

Energy

&pound13.3m

&pound13.9m

-3%

-18%

14%

Other Sectors 5

&pound52.0m

&pound46.7m

14%

16%

11%

Group

&pound110.5m

&pound100.9m

14%

12%

17%

Contract / Permanent Split

Contract

64%

60%

Permanent

36%

40%

100%

100%

Geographical Split

UK&I

30%

30%

Continental Europe

44%

47%

Americas

18%

14%

Asia Pac & Middle East

8%

9%

100%

100%

Sector Split

ICT

41%

40%

Energy

12%

14%

Other Sectors 5

47%

46%

100%

100%

H1 2015

Q2 2015

Q1 2015

Operating Metrics

H1 2015

H1 2014 1

YoY % Var

YoY % Var

YoY % Var

Contract Runners 3

UK&I

2,836

2,745

3%

3%

12%

Continental Europe

3,333

2,586

29%

29%

27%

Americas

1,173

817

44%

44%

73%

Asia Pac & Middle East

373

345

8%

8%

53%

Group

7,715

6,493

19%

19%

27%

Permanent Placements 4

UK&I

948

801

17%

18%

17%

Continental Europe

1,268

1,303

-1%

-2%

0%

Americas

353

375

-2%

-8%

6%

Asia Pac & Middle East

497

578

-14%

-15%

-12%

Group

3,066

3,057

2%

0%

3%

"GP growth was strong in the first half up 14%* YoY, with Q2 GP up 12%*, versus growth of 17%* in Q1 2015. Q2 GP was impacted by the continuing weak activity in the Energy market, while all other sectors performed strongly with GP excluding Energy up 17%* YoY in Q1 and up 16%* in Q2.  Average consultant headcount for the half year was up 5% YoY.  We continue to experience foreign exchange headwinds, with Euro weakness only partially offset by a stronger US dollar.

"Contract continued to perform strongly in the first half, with GP up 20%* YoY for the half year and up 17%* in Q2.  Contract was up YoY in all regions and sectors for the half year, although in Q2 Energy was down 8%* YoY versus up 35%* in Q1. Despite the Energy impact, we saw strong growth in Contract runners, up 19% YoY at period end and up 2% since the November year end peak. Average contractor gross profit per day rates excluding Energy remained robust during the period. Contract consultant average headcount was up 14% YoY.

"Permanent GP was up 5%* YoY in the first half and up 4%* in Q2 YoY. In the quarter, the UK&I was up 14%*, Continental Europe up 2%*, Americas up 12%* and Asia Pacific & Middle East down 11%*, reflecting the greater Energy exposure in this region. Average permanent placement fees remained robust.Permanent consultant average headcount was down 4% YoY and up 1% YoY excluding Energy. The Permanent deal pipeline volume at the period end was down 1% YoY, although up 9% excluding Energy.

"Group sales headcount at the end of the first half was up 2% both versus the year end and YoY. Year on year UK&I sales headcount was up 2%, Continental Europe was up 2%, Americas was up 30% and Asia Pacific & Middle East was down 24% following a restructuring. Consultant headcount continued to remix towards Contract during the half year, with Contract consultant numbers up 5% and Permanent consultant headcount down 2% since the year end. At the end of the period, Contract consultant headcount represented 55% of total consultant headcount.

"SThree remains in a strong financial position. Net debt at the end of the first half was circa &pound10m. The Group has a &pound50m revolving credit facility ("RCF") with RBS and HSBC, which is committed to 2019."

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