SThree: Final Results

SThree plc

('SThree' or the 'Group')

Final results forthe year ended 30 November 2018

SThree, the international specialist staffing business, is today announcing its final results forthe year ended 30 November 2018.

FINANCIAL HIGHLIGHTS

	2018		2017		Variance (3)
	Adjusted (1)	Reported	Adjusted (2)	Reported	Actual Movement	Constant Currency Movement
	£m	£m	£m	£m	%	%
Revenue	1,258.2	1,258.2	1,114.5	1,114.5	+13%	+13%
Contract gross profit	232.1	232.1	203.5	203.5	+14%	+14%
Permanent gross profit	89.0	89.0	84.2	84.2	+6%	+6%
Gross profit	321.1	321.1	287.7	287.7	+12%	+12%
Operating profit	53.9	47.5	44.9	38.2	+20%	+20%
Conversion ratio (%)	16.8%	14.8%	15.6%	13.3%	+1.2% pts	+1.2% pts
Profit before taxation	53.4	47.0	44.5	37.7	+20%	+20%
Basic earnings per share	30.7p	26.6p	25.7p	21.5p	+19%	+20%
Proposed final dividend	9.8p	9.8p	9.3p	9.3p	+5%	+5%
Total dividend (interim and final)per share	14.5p	14.5p	14.0p	14.0p	+4%	+4%
Net(debt)/cash	(4.1)	(4.1)	5.6	5.6	-	-

(1) 2018figures were adjusted for the impact of £6.4millionof net exceptional strategic restructuring costs.

(2) 2017 figures were adjusted for the impact of £6.7 million of exceptional strategic restructuring costs.

(3) All variances compare adjusted 2018against adjusted 2017to provide a like-for-like view.

OPERATIONAL HIGHLIGHTS

* Strong full year financial performance, ahead of expectations

* Growth in gross profit ('GP') driven by Continental Europe (up 20%*), USA (up 8%*), and APAC & ME (up 11%*)

* Restructured UK&I delivering in line with expectations, with GP down 5%* and productivity up 5%*

* 83% of GPnow generated outside UK&I (2017: 81%)

* Contract GP up 14%* YoY, with growth across all sectors

* Permanent GP up 6%* YoY, with Permanent productivity up 7%

* Contract accountedfor 72% of Group GP (2017: 71%)

* Successful relocation of circa 240 roles from London to Centre of Excellence in Glasgow

* Final dividend up 0.5p to 9.8p(2017: 9.3p), with cover now in target range of 2.0 to 2.5times

* Strong Q4 exit run rate underpins expectations heading into 2019

* Variances inconstant currency

Gary Elden, CEO, commented: 'The Group continued to make good progressthroughout 2018. This resulted in a strong financial performance which, demonstrating our resilience, wasdelivered despite the ongoing macro-economic and politicaluncertainties. Alongside the financial metrics, we delivered further structural and operational progress which will enable us to attain our vision of being the number one Science, Technology, Engineering and Mathematics ('STEM') recruiter in the best STEM markets. We are on track with the delivery of the five-year plan as set out at the November 2017 Capital Market Day.'

'Looking forward to the year ahead, our post-year end trading is in line with expectations and we remain well positioned to benefit from the growth opportunities in our chosen STEM markets.'

SThree will host a live presentation and conference call for analysts at 0930 GMT today. The conference call participant telephone details are as follows:

Dial in:	0800 358 9473
Call passcode:	21768800#

This event will also be simultaneously audio webcast, hosted on the SThree website atwww.sthree.com. Note that this is a listen only facility and an archive of the presentation will be available via the same link later.

SThree will be announcing its Q1 Trading Update on Friday 15March 2019.

Enquiries:

SThree plc	020 7268 6000
Gary Elden, Chief Executive Officer
Alex Smith, Chief Financial Officer
Kirsty Mulholland, Company Secretariat
Alma PR	020 3405 0205
Rebecca Sanders-Hewett Josh Royston Susie Hudson Sam Modlin	[e-mail]

Notes to editors

SThree is a leading international specialist recruitment business, providing Permanent and Contract specialist staff toa diverse client base of over 9,000 clients. From its well-established position as a major player in the Information & Communications Technology 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 Progressive, Computer Futures, Huxley Associates and Real Staffing Group. The Group has circa 3,000 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. Data from the announcement is sourced from unaudited internal management information. Accordingly, undue reliance should not be placed on forward looking statements.

CHIEF EXECUTIVE OFFICER'S REVIEW

Overview[1]

The Group continued to make good progress throughout 2018. This resulted in a strong financial performance which, demonstrating our resilience, was delivered despite the ongoing macro-economic and political uncertainties. Alongside the financial metrics, we delivered further structural and operational progress which will enable us to attain our visionof being the number one Science, Technology, Engineering and Mathematics ('STEM') recruiter in the best STEM markets. We are on track with the delivery of the five-year plan as set out at the November 2017 Capital Market Day.

At the start of 2018, I stated that after two years of political, market and economic pressure, we entered the year in good shape. That turbulence and pressure increased throughout the year and yet wedelivered a creditable performance. As we enter 2019, I believe that we are in even better shape.

The STEM markets in which we operate continue to be affected by the ongoing global shortage of skilled workers and the resulting supply and demand imbalances which underpin the need for our services.

Group gross profit ('GP') was up 12%* in the year. Thegrowth was largely delivered, as expected, through our key territories of Continental Europeand the USA; the former was driven byour market-leading businesses in Germany and the Netherlands which together saw growth of 20%*, whilst the latter was up 8%*. We also made improvements in our other target markets, including a stand-out performance from our growing team in Japan, up 85%*. From a sector point of view, we saw robust growth across the Group, with Information and Communication Technology ('ICT')up 12%*, Life Sciences up 8%*, Engineering up 16%* and Global Energy up 30%*.

Our specialistfocus on STEM and being in the right STEM markets is helping us to build a growing reputation, using a multi-brand approach where each brand is well regarded within itsown specialist field. This is a key differentiator for SThree. In technology, for example, where other companies position themselves as IT specialists, we are recognised as experts in specific fields such as JAVA, Salesforce or .Net. This approach is the same across all our markets, so clients know that we can access the very best people for highly skilled positions.

The Group is globally diversified, but at the same time specialises at a local level. We can source the right people for clients in multiple territories whilst also understanding the nuances and dynamics of each individual market. These include legislative requirements where our local knowledge can help us to advise clients on choosing the right contracts and also help successful candidates navigate the necessary requirements.

The Group's central purpose is 'Bringing skilled people together to build the future', and we have six core principles that will enable us to achieve this purpose and generate returns for all of our stakeholders. These are: grow and extend regions, sectors and services; develop and sustain great customer relationships; focus on Contract, drive Permanent profitability; generate incremental revenues through innovation and M&A; build infrastructure for leveraged growth;and find, retain and develop great people. We have made considerable progress against the majority of our strategic priorities. I will touch on two of them in more detail below with our Chief Sales Officer and Chief Operational Officer providing further detail on the other four aspects.

Find, retain and develop great people

One of the most pleasing aspects of theyear was the ongoing development of the Group's culture. Having collectively agreed on what kind of organisation we want to be and the principles to which we would hold ourselves,it has been particularly rewarding to see adoption across the Group and the benefits are already being seen. We have a vision that is shared across all of our operations and the mindset has noticeably changed from thinking as individuals to considering wider Group opportunities, shifting from a 'me' to a 'we' culture.

We have started to see the benefits of changes that we made about a year ago, including the appointments of Dave Rees as Chief Sales Officer and Justin Hughes as Chief Operating Officer. As anticipated, this has helped us to align our sales and operational strategies and ensure we have the right services, infrastructure and people to execute our global growth strategy and provide our customers with the best possible experience.

Pleasingly, theyear'sresults wereachieved despite the inevitable disruption caused by relocating our London-based support services to Glasgow where we have created a Centre of Excellence. All roles were fulfilled through our own recruitment teams and the project has delivered ahead of our expectations. Any disruption caused was addressed promptly and professionally and our customers experienced a smooth transition. We are delighted with the progress being made by the Glasgow team which will give us greater conversion margin and competitive advantage.

Cultural changes do not happen overnight and there is still plenty for us to do. Our Female Leadership Development Programme, IdentiFy, has been running throughoutthe year. It was introduced to help us identify and nurture top female staff and give them the tools and support that they need to thrive, as in the past we have seen female staff as a proportion of the total drop away when they reach management levels. It has already given us greater insight, with initial feedback suggesting that female candidates will put themselves forward for a role only where they feel comfortable in executing 80% of the tasks involved in that role, whereas the corresponding figure for male applicants is 20%. Through this level of understanding we can take initiatives to redress that balance and encourage females to stay with us longer and progress further. This mirrors many of the initiatives that we are conducting externally on behalf of our clients to ensure that female talent is able to thrive in all of the STEM industries. During the year we have seen 14 female promotions to management positions across the Group (out of 27 participants) with one to Director level.

We have made a great start in bringing our people together and encouraging them to behave in a way that is representative of our five Leadership Principles, Know Me, Focus Me, Develop Me, Care For Meand Include Me,providing the necessary coaching and training to help them succeed. As a result, I believe that we are becoming increasingly meritocratic and expect that trend to continue.

Generate incremental revenues through innovation and M&A

Ours remains a people business and one which thrives on the strength of its relationships. Our clients are looking for highly skilled workers and they choose us to source them because of our specialistsector focus and expertise in all aspects of our chosen markets. As such we believe that we are resilient to pure play technology competition that naturally suits more commoditised offerings.

At the same time, our extensive industry expertise means that we are able to develop tools that can help deliver different products for different markets, diversifying our business and opening up new revenue streams where clients and candidates are less focused on the service elements that are so important in our chosen STEM markets. During 2018,we made significant progress with both our HireFirst and Showcaser initiatives.

HireFirst is an easy to use platform that uses Artificial Intelligence ('AI') to offer candidates live matches to a diverse spectrum of roles and companies, whilst allowing companies the opportunity to market theiremployer brand and attract the best people. It was officially launched in beta testing in October in both Paris and London and I am pleased to say that the early results are encouraging.

Showcaser is a video platform which gives candidates the ability to highlight certain aspects of their CV, career to date or other areas that they may choose to differentiate themselves. Showcaser was exhibited at UNLEASH Amsterdam in November and, again, thefeedback has been encouraging.

We would not anticipate material revenue from HireFirst or Showcaser in 2019 but do believe they have the ability to generate strong returns on investment over the medium term.

Management succession

Having been with the Company for nearly 30 years and as CEO for the last six, I shall be stepping down before the Annual General Meeting of Shareholders being held on 24 April 2019. The process for finding my successor is well underway. I am very proud of everything that we have achieved as a business in that time and, as these results demonstrate, I will be handing over the reins ofa business that is in very good shape. I will be fully committed to the role until that time and will work with the Board and the leadership team to ensure a smooth handover to my successor.

Outlook

At the start of 2018, I stated that after two years of turbulent political markets and economic pressure we entered the year in good shape. Despite that turbulence and pressure increasingthroughout the year, we deliveredastrong set of results. Looking forward to the year ahead, our post-year end trading is in line with expectations and weremain well positioned to benefit from the growth opportunities in our chosen STEM markets.

CHIEF SALES OFFICER'S OPERATING REVIEW

Group[2]

Gross Profit	2018	2017	YoY Variance*
Contract	£232.1m	£203.5m	+14%
Permanent	£89.0m	£84.2m	+6%
Group	£321.1m	£287.7m	+12%

2018 was a year of strong growth across the Group, with both Contract and Permanent showing an increase in gross profit ('GP'). Permanent was up 6%*, with productivity in the division increasing by 7%. Reflecting the industry megatrends driving our markets, and the Group's focus, the Contract division grew more strongly, up 14%*. In line with our strategy, the mix of Contract GP increased slightly to represent 72% of total Group GP, up from 71% in 2017.

Regionally we saw stand out performances across the key regions of Germany, the Netherlands, and Japan. We also saw continued growth in the USA. These strong performances were driven by a mixture of structural growth in our markets, strong management execution and the benefits of our strategic business decisions becoming realised. We also saw growth in all but one of our sectors within STEM, with Information and Communication Technology ('ICT')up 12%*, Life Sciences up 8%*, Energy up 30%* and Engineering up 16%*. Banking & Finance was broadly level year on year.

Breakdown of GP	2018	2017
Contract/Permanent Split
Contract	72%	71%
Permanent	28%	29%
	100%	100%
Geographical Split
Continental Europe	57%	52%
USA	21%	22%
UK&I	17%	19%
Asia Pacific & Middle East	5%	7%
	100%	100%
Sector Split
ICT	44%	43%
Life Sciences	21%	22%
Banking & Finance	13%	15%
Energy	10%	9%
Engineering	10%	9%
Other	2%	2%
	100%	100%

Regions

Gross Profit	2018	2017	YoY Variance*
Continental Europe	£183.3m	£150.6m	+20%
USA	£66.7m	£64.4m	+8%
UK&I	£53.1m	£55.7m	-5%
Asia Pacific & Middle East	£18.0m	£17.0m	+11%
Group	£321.1m	£287.7m	+12%

SThree is a well-diversified business by geography, with non-UK GP now representing 83% of the Group's total GP. SThree is strategically located in regions where there are clear growth opportunities within STEM industries, andwe are pleased thatthis resulted in growth across the vast majority of ourbusinesses in the year.

SThree built upon its strong position in Continental Europe, with GP up 20%*, driven by strong growth in both DACH (up 21%*) and Benelux, France & Spain (together up 18%*). Our key aims in this region are to dominate the STEM space in both Germany and the Netherlands. We delivereda particularly strong performance in the Netherlands, which is a key business hub for many multi-national companies, with GP up 25%*. During the year,we opened a new location in Eindhoven, improving client proximity and reaffirmingour position as the market leader in STEM professional recruitment.In our largest country of operation, Germany, the team delivered another year of strong growth, with GP up 18%* year on year. Germany benefited from the expansion of its Contract service to include ECM, which we launched in 2017.[3]

The USA saw robust GP growth of 8%* year on year, as we expanded our office footprint with a new office in Washington DC, having previously serviced thismarket remotely from New York. This growth was pleasing given the organisational changes implemented in the region in Q1 2018, whichincludedthe move from a regional to brand management structure.

The increased economic uncertainty seen in the UK and Ireland continued to impact the region, causing overall GP to decline by 5%*. The UK is a mature recruitment market and is seeing slower industry growth than other geographies, although it remains a strategic priority for the Group. In the first half of 2018, we restructured parts of our Permanent business, consolidating into key hubs and implemented a change of management. These actions showedclear signs of delivery with Permanent productivity in the region upby 7%* on the prior year. As expected, the Contract business demonstrated its resilience, remaining broadly stable.

Our Asia Pacific & Middle East ('APAC & ME') businesses delivered growth of 11%*. This was driven largely by an excellent performance from the team in Japan, delivering GP up 85%* year on year. Japan is an important technical market, with an immature recruitment industry, and the Group has capitalised well on these opportunities. Japan now represents 29% of the APAC & ME GP, up from 17% in 2017. The Middle Eastern team also capitalised on its specialist knowledge, driving growth from Contract placements across the Energy and Banking & Finance sectors.

Sectors

Gross Profit	2018	2017	YoY Variance*
ICT	£142.0m	£124.7m	+12%
Life Sciences	£66.3m	£62.4m	+8%
Banking & Finance	£42.4m	£43.5m	-1%
Energy	£33.4m	£26.5m	+30%
Engineering	£30.6m	£25.9m	+16%
Other	£6.4m	£4.7m	+28%
Group	£321.1m	£287.7m	+12%

Our largest sector continues to be ICT and our strong technology capability across all verticals is becoming increasingly recognised across our key regions. ICT represented 44% of Group GP, driven by an increase in GP across Continental Europe of 22%*. In total, ICT GP increased by 12%*, with the year-end headcount up 7%.

Our Life Sciences sector is already a market leader across several of our regions, and we saw another robust performance delivered across the Group, with GP up 8%* year on year. This was driven by strong performances in both APAC up 29%* and Benelux, France & Spain up 15%*. Additionally, DACH and the USA delivered solid growth of 8% and 6% respectively.

Banking & Finance was down 1%* year on year, with Contract GP up 4%*, driven by a robust performance in Continental Europe, where average headcount was up 5% on the prior year. The decline in Permanent GP seen in the UK and the USA was partially offset by growth in APAC and ME, leaving Banking & Finance at 13% of the Group GP.

We saw strong growth across both our Engineering and Energy sectors in 2018, up 16%* and 30%* respectively,year on year. Within Engineering we pleasingly saw growth across all major regions with the UK up 7%*, DACH up 21%*, Benelux, France & Spain up 19%* and the USA up 29%*.

Within Energy, where 94% of GP is derived from Contract, we had very strong performances in both Continental Europe, up 25%*, and in the USA where our position in renewable energyhelpeddeliver 40%* growth in GP. At the year end, global headcount was up 20% on the prior year, with Continental Europe up 28% and the USA up 27%.

Focus on Contract, drive Permanent profitability

In 2018 we delivered on our stated strategy by further investing in Contract growth, and improving Permanent productivity.

At the year end, Contract headcount was up 8% year on year, and all regions excluding UK&I reported increased headcount and GP growth in Contract. Since 2012 we have doubled our runners, ending on 11,203 andfor the sixth consecutive yearare able to report an all-time high number of runners at our financial year end. Our increased weighting towards Contract is creating a business that is more resilient in times of uncertainty, as well as providing stronger and more sustainable profits. The introduction of a Contract-specific management team has worked to increase accountability and focus. Our freelancer model is continuing to perform well, and the focus on growing the Employed Contractor Model ('ECM') is also paying dividends, as this model continues to grow in popularity across our key territories. This was a key focus in 2018 and now accounts for 21% of our Contract runners, up from 19% in 2017.[4]

Permanent productivity per head was up 7%, achieved through our focus on the best Permanent markets, with average salaries up 1% and average fees up 4%. Over the year we focused on reallocating our headcount into our key growth markets, rather than focussing on net growth in our Permanent headcount. We know that Permanent recruitment is more sensitive to overall market sentiment and therefore we have a clear strategy to actively invest in Permanent headcount in our key markets of Japan, the Netherlands, Germany and the USA, so that we are best-positioned for the future. Maintaining a strong base of Permanent business in markets where there is space to grow continues to be important to the business. From a strategic viewpoint, Permanent is key in building client relationships, provides a Contractor development pipeline, and has strong cash generationcharacteristics.

	GP*			AverageHeadcount
GP	Contract	Permanent	Total	Contract	Permanent	Total
USA	+14%	-5%	+8%	+15%	+2%	+11%
APAC & ME	-2%	+24%	+11%	+13%	-3%	+3%
Continental Europe	+22%	+15%	+20%	+19%	+8%	+15%
UK&I	0%	-20%	-5%	-1%	-25%	-9%
Total	+14%	+6%	+12%	+13%	-1%	+8%

Develop and sustain great customer relationships

Throughout 2018 we evolved our client segmentation strategy, allowing us to more effectively categorise our client types to ensure we develop our relationshipswith them ina more tailored manner. Wedeveloped our first onshore delivery centre based in Glasgow, which allows for larger and more nimble and scalable delivery mechanisms for project recruitment.

We have fully integrated the Net Promoter Score ('NPS')metric into the organisation and it now feeds into the rewards process across the business.

NPS scores were broadly flat in 2018, reflecting the move of our London support services to Glasgow. Looking ahead, we are confident that we are well positioned to improve in 2019.

REGIONAL OVERVIEW

Continental Europe(57% of Group GP)

		GP					Average Sales Headcount
		Growth* YoY			FY 2018Mix		Growth YoY
		Cont	Perm	Total	Cont	Perm	Cont	Perm	Total
	2018	+22%	+15%	+20%	72%	28%	+19%	+8%	+15%

Performance in 2018

DACH

Germany, Austria and Switzerland ('DACH'), representing 31% of Group GP,had a strong year in 2018, building on our market-leading position in thisregion. Changes made to the management set-up delivered productivity gains as expected, and during the year, we rolled out a new employer proposition, which helps us to attract and retain talent. It also allowed us to deepen our customer relationships, and offer tailored solutions to major clients with complex needs. This is a barrier to entry to our competitors.

This translated into tangible benefits; in Germany our Permanent GP grew 16%*with just 4% additional headcount. ICTremains our largest sector.

Our Contract businessgrew by 22%*, with a 16% investment in headcount, and the dilutive effect on average tenure of our expansion was fully compensated by a more focused customer strategy.

The Employed Contractor Model ('ECM') has been steadily gaining ground and has been regionalised further across our existing office infrastructure.

We successfully completedan office launch in Austria, which has more than doubled its freelance business year on year, whilst its Permanent business has increased its headcount by 50% year on year.

Benelux, France & Spain[5]

Benelux, France & Spain is the second largest region after DACH, representing 26% of the Group GP. Benelux, France& SpainGP was up 18%* year on year.

Overall, we delivered strong growth in the region, supported by strong economic growth, tight labour markets and high quality execution from our team there.

The Netherlands was the stand-out performer with GP up 25%* year on year, which was an improvement on the 20% delivered in the prior year. Belgium grew GP by 16%* year on year,while France and Luxembourg showed more modest growth.

Strong growth was achieved in Contract across the region with GP up 21%* year on year. The Netherlands Contract business grew 27%* and Belgium Contract up 17%* year on year. We enter 2019 with a strong Contract runner book up 14% on prior year.

Permanent also showed GP growth of 5%* year on year, with average sales headcount up 5%.

ICT, our largest sector, grew 20%* and continues to be the strongest growth market in the region, with ICT Contract up 23%* and Permanent up 6% year on year*.

Our relativelynew offices in Barcelona, Eindhoven, Lille, Lyon and Toulouse, all of which have strong STEM opportunities, will enable us to more closely support our clientsin these locations.

Expectations for 2019

DACH

We exit the year with a strong Contract runner book, which combined across the DACH region is 25% bigger than in the prior year, a strong starter pipeline, and our largest ECM order book to date.

In line with our Group strategy, we will continue to invest in all divisions with particular focus on further strengthening our ECM throughout 2019.

Benelux, France & Spain

We exit the year with a strong Contract pipeline, Permanent starter pipeline and a highly focused management team with a clear strategy.

In line with our Group strategy, we will continue to invest in Contract throughout 2019, where we see market opportunity. We will focus on improving Permanent productivity, with selective headcount investments.

Our investment in the ECM in 2018 helped the region increase the number of Contractors. We expect to leverage this further in 2019 across the region.

We exit 2018 in good shape across our European business. Regional management objectives are fully aligned with our corporate vision and we start 2019 with strong pipelines in both Contract and Permanent, and our largest ECM order book to date. Despite ongoing macro-economic challenges, we remain optimistic in our growth potential for the year ahead.

USA (21% of Group GP)

		GP					Average Sales Headcount
		Growth* YoY			FY 2018Mix		Growth YoY
		Cont	Perm	Total	Cont	Perm	Cont	Perm	Total
	2018	+14%	-5%	+8%	73%	27%	+15%	+2%	+11%

Performance in 2018

The USA is our second largest region and represents 21% of Group GP.[6]

Contract continued to deliver a strong performance in 2018 with GP up 14%*, balanced by the decline of 5%* seen in Permanent, leaving the region having delivered overall GP growth of 8%*.

Growth in the region was across Energy, Life Sciences, ICT, and creative markets. Energy GP was up 40%* as we continued to build our customer portfolio, build on our strong position in renewable energy, and broaden our service offering. Life Sciences, our largest sector in the region grew by 6%*. ICT grew by 8%. We continue to see further opportunities for growth in all our markets.

We continued to prioritise growth in Contract sales headcount, with an average increase of 15%* year on year.

Overall, average headcount across the region was up 11%* in 2018, period end sales headcount was up 5%.

In our Permanent division, we made critical leadership and strategic changes to create a platform for more consistent and balanced growth. The effect of these structural changes impacted performance in the year, as we expected. We are fully confident we have made the right strategic decisions and we expect the positive impact of these changes to be seen in performance during 2019 and beyond.

Expectations for 2019

With a stable exit rate in Contract runners, especially in Energy and ICT, we expect to continue our strong growth into 2019. We expect Permanent to return to growth in 2019.

We are confident that we have the right team and structure to deliver a high quality service to our clients and continue to penetrate the largest recruitment market in the world. We remain agile to cater for any risks or opportunities that are posed by the market.

UK&I(17% of Group GP)

		GP					Average Sales Headcount
		Growth* YoY			FY 2018Mix		Growth YoY
		Cont	Perm	Total	Cont	Perm	Cont	Perm	Total
	2018	0%	-20%	-5%	82%	18%	-1%	-25%	-9%

Performance in 2018

Despite the continued uncertainty around Brexit, we have made very good progress in laying the foundations to maximise our performance in the UK in 2019 through focusing on key strategic targets. We significantly reduced our headcount in our Permanent division during the year and moved to a specialist hub and onshore delivery model. This resulted in a strong productivity gain of 7%*. Permanent GP declined 20%* against a 25% reduction in headcount. Our increased productivity also resulted in a strong performance on profitability. Contract GP (flat* year on year) was largely due to a more cautious approach to headcount build in H1 which we ramped up in H2. Contract productivity was up 1%. The UK remains regionally well diversified with strongGP growth in Glasgow (up 12%*), Bristol (up 13%*), and Leeds (up 9%*). We also restructureda managementteam in Dublin (up 9%*) to better maximise the market opportunity.

SThree has a diversified sector offering in UK&I, with strong GP performances within Life Sciences (up 7%*), Engineering (up 7%*) and Energy (up 28%*). We have conversely seen greater challenges in some of the more competitive spaces such as ICT (down 10%*) and Banking & Finance (down 7%*). However, we believe that we are focussing on the right markets and customer segments to see this improve in 2019.

Expectations for 2019

We are well diversified both regionally and from a sector perspective within UK&I. We will continue to invest in headcount based on customer and sector needs, mindful of the broader economic and political backdrop. We have an agile model that allows us to meet a broad spectrum of our clients' demands.[7]

APAC & ME(5% of Group GP)

		GP					Average Sales Headcount
		Growth* YoY			FY 2018Mix		Growth YoY
		Cont	Perm	Total	Cont	Perm	Cont	Perm	Total
	2018	-2%	+24%	+11%	45%	55%	+13%	-3%	+3%

Performance in 2018

APAC & ME represented5% of Group GP, a reduction from the 7% contribution in 2017. Whilst the aim of the region is to outperform the Group average, 2018 wasa return to growth for APAC & ME after a period of recovery inEnergy and a realignment of market focus in other sectors. The region includes Australia, Singapore, Japan, Malaysia, Hong Kong and Dubai.

Our market exposure is broad with a balanced approach to all STEM markets and alignment to our Group strategic priorities. Our exposure to Energy and Banking & Finance was lower than in previous years. The bulk of our headcount investment was within ICT, Life Sciences and Engineering.

Our Japanese business delivered a stand-out performance this year, with Japan growing its GP by 85%*. We also saw a strong performance in ME Contract where GP grew by 48%*, driven by both the ICT and Energy sectors. We are confident in both businesses continuing that performance in 2019 and are investing in headcount and the correct infrastructure to provide a platform for further growth.

Expectations for 2019

We expect to maintain goodgrowth in 2019. We will continue to invest in our Japanese Permanent business where we expect to continue seeing strong future growth. We will also continue to invest in ME Contract across both Energy and ICT.

CHIEF FINANCIAL OFFICER'S REVIEW

In 2018, our improved operational performance delivered strong growth in gross profit and profit before tax, ahead of market expectations.

Income statement

Revenue for the year was up 13% on constant currency and reported bases to £1,258.2million(2017: £1,114.5 million). On constant currency and reported bases, gross profit ('GP') increased by 12% to £321.1 million (2017: £287.7 million). Growth in revenue exceeded the growth in GP as the business continued to remix towards Contract. Contract represented 72% of Group GP in the year (2017: 71%). This change in mix resulted in a slight decrease in the overall GP margin to 25.5% (2017: 25.8%) as Permanent revenue has no cost of sale, whereas the cost of paying the contractor is deducted to derive Contract GP. The Contract margin increased slightly to 19.9% (2017: 19.8%).

Reported profit before tax was up 25% at £47.0 million. The adjusted profit before tax ('PBT') was £53.4 million up 20% year on year (2017: adjusted £44.5 million and reported £37.7 million). The adjusted PBT excludes restructuring costs of £6.4 million that were incurred during the year in respect of the relocation of our support function to Glasgow (2017: £6.7 million). In 2018, this exceptional restructuring delivered savings which drove an increase in our operating profit conversion ratio of 1.2 percentage points to 16.8% on an adjusted basis and 1.5 percentage points to 14.8% on a reported basis (2017: adjusted 15.6% and reported 13.3%).

Restructuring costs ('adjusting items')

A strategic relocation of the majority of our central support functions away from our London headquarters to a new facility located within Glasgow was announced on 1 November 2017. The transition to the Glasgow Centre of Excellence is now substantially complete and we anticipate this restructuring will realise cost savingsahead of expectations, in excess of£5 million per annum. In line with the project implementation timescale, benefits started to be realised in the second half of the financial year and have led to the recognition of £2.6 million in savings in theyear. The trajectory of the realised savings is expected to result in additional support costs savings of £2.9 million in 2019.

We continue to anticipate that one-off restructuring costs willbe in the region of £14.0million, with circa £12.9million of operating expenses, including personnel costs and professional advisor fees, and circa £1.1 million of property related costs. The projectis beingpartially funded by a grant receivable from Scottish Enterprise of circa £2.1 million which is receivable and recognisable over several years, subject to the terms of the grant being met within a fixed timeframe.

Net exceptional costs of £6.4 million have been charged to the Consolidated Income Statement during the year, bringing the total costs recognised to date to £13.1 million. The exceptional charge in the year included personnel costs of £4.1 million and other costs of £2.7 million (primarily professional and property costs). During the year, the grant income of £0.4 million was recognised as an offset to the exceptional costs.

The strategic nature and material cost of the restructuring of support functions announced in 2017 continues to be of sufficient magnitude to warrant separate disclosure as an exceptional item on the face of the Consolidated Income Statement, in line with our accounting policies. The separate disclosure of the exceptional items helps readers understand the Group's underlying results for the year ('Adjusted'). The Group adjusted profit KPIs for the year are presented in various sections of this Annual Report.

A reconciliation of 'Adjusting items' is provided below:

£'million	2018	2017
Reported profit before tax after exceptional items	47.0	37.7
Exceptional strategic restructuring costs (net of government grant)	6.4	6.7
Reported profit before tax and exceptional items ('Adjusted')	53.4	44.5

Operating costs

Adjusted operating costs, excluding one-off net restructuring costs of £6.4 million (2017: £6.7 million), increased by 10% to £267.2 million (2017: £242.8 million). The increase was mainly driven by additional investment in headcount (8% increase year on year), 10% increase in personnel costs (£11.0million* increase in salaries; £3.5 million* increase in commissions and bonuses in line with the improved GP), and £0.9 million increase in property costs reflecting demand for new and modernised office space.[8]

Payroll costs represented79% of our cost base. Average total headcount was up by 10% at 2,926 (2017: 2,668), with average sales headcount up 8%. The increase in average sales headcount was in response to supportive market conditions across the majority of our geographies as well as improvements in consultant productivity, attributable primarily to Continental Europe (Benelux & France and DACH regions) and the USA, (headcount up 15% and 11% respectively). 2% of the average total headcount was attributable to the relocation of the support function to Glasgow. The year-end total headcount was up 4% at 2,979.

The year-end sales headcount represented 78% of the total Group headcount.

The full benefits of the restructure of our UK support function on personnel and property costs are expected to be realised from the financial year 2019 onwards.

Investments

During the year, we continued to invest in in-house innovation initiatives, expensinga total of £2.4 million (2017: £2.0 million) across the year. Our intent is to build a more diverse portfolio of products and services so that we capture a greater share of total customer spend on employment matters and to ensure we are well positioned to benefit from potential disruption. The bulk of the investment was made in our HireFirst and Showcaser initiatives. HireFirst launched in October 2018 is atthe beta testing stage, and no profits were generated during the year. Showcaser is progressing well andit has received encouraging feedback from the prospective clients. We do not anticipate material revenue from HireFirst or Showcaser in 2019.

We continued to hold non-controlling shareholdings in three innovation start-ups. (i) Ryalto Limited which is designingand developinga mobile application for healthcare professionals. (ii) RoboRecruiter Inc. which is buildingautomated multichannel platforms connecting candidates with recruiters and employers in real time; and(iii) The Sandpit Limited, a privately owned group that specialises in developing early stage start-up companies within defined markets.

Taxation

The tax charge on pre-exceptional statutory profit before tax for the year was £13.9million (2017: £11.4 million), representing an effective tax rate ('ETR') of 25.9% (2017: 25.6%). The ETR on post-exceptional statutory profit before tax was 27.1% (2017: 26.7%).

The ETR primarily reflects our geographical mix of profits and a cautious approach to recognising deferred tax assets on tax losses. USA Tax Reform legislation passed in December 2017 saw a reduction in the federal corporate tax rate from 35% to 21%. As previously indicated, this had a minimal impact on the ETR because the tax credit associated with the current year profits was largely offset by the reduction in the deferred tax asset. Whilst the Group benefited from a reduction in the USA cash tax payable in 2018, the accounting ETR benefit of this change will occur in 2019 and beyond.

Other regulatory changes which may impact the Group in future years include:

(i) If the UK leavesthe European Union, the Group will no longer be able to benefit from provisions applying in certain tax treaties and in the EU Parent Subsidiary Directive. The Group is currently planning mitigating actions against this and hence we do not expect any material costs to arise.

(ii) In October 2017, the European Commission opened a state aid investigation into the Group Financing Exemption in controlled foreign company rules, introduced by the UK Government in 2013. The Group has historically relied on this exemption in certain jurisdictions and we are therefore monitoring the investigation. If the preliminary findings of the European Commission are upheld, we calculate our maximum potential liability to be £3.2 million. Our current assessment is that no provision is required in respect of this issue.

(iii) Increased transparency arising from the implementation of Country-By-Country reporting provisions in various OECD member states may result in more frequent tax audits, particularly in the area of transfer pricing. The Group is comfortable that its policies in this area are robust.

We will continue to monitor and assess the impact of any changes as they are implemented.

Earnings per share ('EPS')

On an adjusted basis, basic EPS was up by 5 pence, or 19%,at 30.7 pence (2017: adjusted 25.7 pence), due to an increase in the adjusted profit before tax, partially offset by a marginal increase in weighted average number of shares. On a reported basis, EPS increased to 26.6 pence, up 5.1 pence on the prior year (2017: 21.5 pence).The weighted average number of shares used for basic EPS remained stable at 128.7 million (2017: 128.6 million). Reported diluted EPS was 25.7 pence (2017: 20.8 pence), up 4.9 pence. Share dilution mainly results from various share options in place and expected future settlement of certain tracker shares. The dilutive effect on EPS from tracker shares will vary in future periods depending on the profitability of the underlying tracker businesses, the volume of new tracker arrangements created and the settlement of vested arrangements.

Dividends

The Board monitors the appropriate level of the dividend, taking into account, inter alia, achieved and expected trading of the Group, together with its balance sheet position. In line with the Board's strategy of targeting a dividend cover of between 2.0x and 2.5x, based on underlying EPS, over the short to medium term, the Board has proposed an increased final dividend of 9.8 pence per share (2017: 9.3 pence). Taken together with the interim dividend of 4.7 pence per share (2017: 4.7 pence), this brings the total dividend for the year to 14.5 pence per share (2017: 14.0 pence). This represents a 4% increase in dividend per share versus the prior year. This dividend increase reflects the Board's confidence in SThree's long-term strategy, with cover now in the target range of 2.0 to 2.5 times. The final dividend, which amounts to approximately £12.8 million, will be subject to shareholder approval at the 2019 Annual General Meeting. It will be paid on 7 June 2019 to shareholders on the register on 26 April 2019.

Share options and tracker share arrangements

We recognised a share-based payment charge of £4.7 million during the year (2017: £3.3 million) for the Group's various share-based incentive schemes. The greater charge in 2018 is primarily due to improved non-market vesting conditions, such as the adjusted earnings per share driven by increased profit before tax. A portion of the annual charge also reflects the accelerated cost for all 'good leavers' who left the Group as a result of restructuring and relocation of support functions away from London.

We also operate a tracker share model to help retain and motivate our entrepreneurial management within the business. The programme gives our most senior sales colleagues a chance to invest in a business they manage with the support and economies of scale that the Group can offer them. In 2018, 68 employees invested an equivalent of £0.6 million in 25 Group businesses.

We settled certain tracker shares during the year for a total consideration of £3.7million (2017: £3.2 million) which was determined using a formula in the Articles of Association underpinning the tracker share businesses. We settled the consideration in SThree plc shares either by issuing new shares (398,298 new shares were issued on settlement of vested tracker shares in 2018) or treasury shares (in total 700,200 were used in settlement of vested tracker shares in 2018). Consequently, the arrangement is deemed to be an equity-settled share-based payment arrangement under IFRS 2 'Share-based payments'. There is no charge to the income statement as initially the tracker shareholders subscribed to the tracker shares at their fair value. We expect future tracker share settlements to be between £5 million to £15 million per annum. These settlements may either dilute the earnings of SThree plc's existing ordinary shareholders if funded by new issue of shares or will result in a cash outflow if funded via treasury shares. This year we purchased 411,354 of SThree plc's ordinary shares for immediate cancellation to offset a negative impact on share dilution as a result of tracker arrangements being funded via a new issue of shares.

Note 1 to the financial statements provides further details about all Group-wide discretionary share plans, including the tracker share arrangements.

Balance sheet

At 30 November 2018, the Group's net assets increased to £101.7 million (2017: £80.7 million), mainly due to the excess of net profit over the dividend payments supported by a strengthening of the Euro vs Sterling, offset by share buy backs and share cancellations during the year.

The most significant item in our statement of financial position is trade receivables (including accrued income) which increased to £274.6million (2017: £217.7 million). The main drivers of this increase were an almost four day growth in Days Sales Outstanding ('DSOs') to 44.7 days (2017: 40.6 days), reflecting a short-term impact from the move of support functions to Glasgow, a 12% increase in Contract GP in Q4 year on year, and a £4.3 million increase due to movements in foreign exchange rates. We expect DSOs to improve during the course of 2019. Trade and other payables increased from £159.6 million to £191.7million, with £2.5 million due to movements in foreign exchange rates, and the remainder primarily due to an increase in Contract GP. Creditor days were 17 days (2017: 18 days). Provisions decreased by £3.3 million primarily due to a £5.3 million utilisation in a provision for the relocation of central support functions from London to Glasgow.

Investment in subsidiaries (Company only)

In the previous two years an impairment charge was recognised in respect of the Company's carrying value of investments in subsidiaries. This was primarily in respect of the Group's UK operations. In 2018, we considered whether there were new indicators of impairment and did not identify any circumstances or triggers which would require a formal impairment test to be performed. However, as set out in the Risk section, at the date of signing the financial statements, there is ongoing uncertainty surrounding the potential outcomes of Brexit. This is being monitored and there remains a risk that Brexit outcome could trigger an impairment risk in 2019 or future periods.

Cash Flow

On an adjusted basis, we generated net cash from operations of £40.6 million (2017: £41.1 million on an adjusted basis) due to continued growth of the Contract runner book increasing our working capital and an increase in DSOs. This resulted in a lower cash conversion ratio of 67% (2017: 79%) on an adjusted basis or 52% (2017: 90%) on a reported basis.

Capital expenditure (excluding £1.0million in exceptional capital expenditure) reduced to £4.2million (2017: £5.8 million), the majority of which was in relation to infrastructure investment in offices in the Netherlands, Germany and UK, and investment in the Contractor Timesheet Portal ('Workflow') of £0.6 million. We expect capital expenditure will increase year on year in 2019, to address security, out of supportsystems and a number of officemoves. Investments in available for sale financial assets were £nil (2017: £1.2 million) in the year.

During the year, SThree plc bought back shares for £1.5 million (2017: £7.8 million) to satisfy employee share schemes in future periods, and repurchased411,354 of its ordinary shares at an average price of 357 pence for immediate cancellation. Small cash inflows were generated from share based payment schemes.

Income tax payments increased to £14.4 million (2017: £10.9 million). Small cash outflows were made for interest payments.

Dividend payments were £18.0 million (2017: £18.0 million) and there was a small cash outflow of £0.1 million representing distributions to tracker shareholders.

We started the year with the net cash of £5.6 million and closed the financial year with the net debt of £4.1 million. The year-on-year decrease primarily reflected increased cash absorbed in working capital as the Contract business continued to grow, increased DSOs, and the £11.5 million cash cost of the restructuring of the support functions in the UK. We expect DSOs to improve in 2019 and the restructuring cash costs tobe significantly less in the first half of 2019, as the project is now substantially complete.

Treasury management

We finance the Group's operations through equity and bank borrowings. The Group's cash management policy is to minimise interest payments by closely managing Group cash balances and external borrowings. We intend to continue this strategy while maintaining a strong balance sheet position.

We maintain a committed Revolving Credit Facility ('RCF') of £50 million, along with an uncommitted £20 million accordion facility, with Citibank and HSBC, giving the Group an option to increase its total borrowings to £70 million for general corporate purposes. This facility was successfully renegotiated earlier in the year and extended to May 2023, on similar terms and conditions to the previous facility. We also have an uncommitted £5 million overdraft facility with NatWest and a £5 million overdraft facility with HSBC.

At the year end, the Group had drawn down £37.4 million (2017: £12.0 million) on these facilities.

The RCF is subject to financial covenants requiring the Group to maintain financial ratios over interest cover of at least 4.0, leverage of at least 3.0 and guarantor cover at 85% of EBITDA and gross assets. In 2018, we ended the year with significantheadroom on all our covenants.

The funds borrowed under this facility bear interest at a minimum annual rate of 1.3% above 3 month LIBOR, giving an average interest rate of 1.8% during the year (2017: 1.5%). The finance costs for the year amounted to £0.7 million (2017: £0.4 million).

The Group's UK-based treasury function manages the Group's treasury risks in accordance with policies and procedures set by the Board, and is responsible for day-to-day cash management; the arrangement of external borrowing facilities; the investment of surplus funds; and the management of the Group's interest rate and foreign exchange risks. The treasury function does not engage in speculative transactions or operate as a profit centre.

Foreign exchange

Foreign exchange volatility continues to be a significant factor in the reporting of the overall performance of the business with the main functional currencies of the Group entities being Sterling, the Euro and the US Dollar.

For 2018, movements in exchange rates between Sterling and the Euro and the US Dollar provided a moderate net headwind to the reported performance of the Group with the highest impact coming from the Euro and US Dollar. The exchange rate movements decreased our reported 2018 GP by approximately £0.7 million and operating profit by £0.1 million.

Our financial performance KPIs remain materially sensitive to exchange rate movements. By way of illustration, each one per cent movement in annual exchange rates of the Euro and US Dollar against Sterling impacted our 2018 GP by £1.8 million and £0.7 million, respectively, and operating profit by £0.5 million and £0.2 million, respectively.

The Board considers it appropriate in certain cases to use derivative financial instruments as part of its day-to-day cash management to provide the Group with protection against adverse movements in the Euro and US dollar during the settlement period. The Group does not use derivatives to hedge translational foreign exchange exposure in its balance sheet and income statement.

Principal Risks and Uncertainties

Connecting risk, opportunity and strategy

Principal risks and uncertainties affecting the business activities of the Group will be detailed within the Strategic Report section of the Group's 2018 Annual Report, a copy of which will be available on the Group's websitewww.sthree.com.

Delivering on our strategy requires all parts of our business to work together. In isolation risk mitigation helps SThree manage specific subjects and areas of the business. However, when brought into our day-to-day activities successful risk management has helped us to maximise our competitive advantage and deliver on our strategic priorities in 2018. Whilst the ultimate responsibility for risk management rests with the Board, the effective day-to-day management of risk is in the way we do business and our culture.

Aligning risks and strategy by using risk to help make the right strategic decisions - in order to deliver our strategy and competitive advantage throughout the business we must ensure that we maintain a balance between safeguarding against potential risks and taking advantage of all potential opportunities.

consolidated statement of cash flows
Fortheyear ended 30 November 2018
		2018	2017
	Note	£'000	£'000
Cash flows from operating activities
Profit before taxation after exceptional items		46,996	37,717
Adjustments for:
Depreciation and amortisation charge		6,145	5,744
Accelerated amortisation and impairment of intangible assets		709	309
Finance income		(75)	(124)
Finance cost		743	439
Loss on disposal of property, plant and equipment	4	8	110
(Gain on disposal)/Share of lossesof associate		(146)	147
Loss on disposal of subsidiaries		70	144
FX revaluation gain on other investments		(26)	-
Non-cash charge for share-based payments		4,697	3,256
Operating cash flows before changes in working capital and provisions
		59,121	47,742
Increase in receivables		(55,372)	(35,712)
Increase in payables		30,116	19,291
(Decrease)/increasein provisions		(3,796)	8,758
Cash generated from operations		30,069	40,079
Interest received		35	124
Income tax paid - net		(14,391)	(10,921)
Net cash generated from operating activities		15,713	29,282
Cash generated from operating activities before exceptional items		26,208	30,273
Net cash outflow from recognised exceptional items		(10,495)	(991)
Net cash generated from operating activities		15,713	29,282
Cash flows from investing activities
Purchase of property, plant and equipment		(3,161)	(2,374)
Purchase of intangible assets		(2,043)	(3,392)
Investments designated as available-for-sale		-	(383)
Investment in an associate		-	(802)
Net cash used in investing activities		(5,204)	(6,951)
Cash flows from financing activities
Proceeds from borrowings	9	25,428	12,000
Interest paid		(540)	(431)
Proceeds from exercise of share options		401	215
Employee subscription for tracker shares		644	98
Cancellation of share capital		(1,468)	-
Purchase of own shares		(1,484)	(7,797)
Dividends paid to equity holders	6	(18,007)	(17,994)
Distributions to tracker shareholders		(116)	(115)
Net cash generated from/(used in)financing activities		4,858	(14,024)
Net increase in cash and cash equivalents		15,367	8,307
Cash and cash equivalents at beginning of the year		17,621	10,022
Exchange gains/(losses) relating to cash and cash equivalents		335	(708)
Net cash and cash equivalents at end of the year	8	33,323	17,621

Notes to theFinancial Information

For the year ended 30 November2018

1. Accounting policies

Basis of preparation

The financial information in this preliminary announcement has been extracted from the Group audited financial statements forthe year ended 30 November 2018and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The Group financial statements and this preliminary announcement were approved by the Board of Directors on 25January 2019.

The auditors have reported on the Group's financial statements for the years ended 30 November 2018and 30 November 2017 under s495 of the Companies Act 2006. The auditors' reports are unqualified and do not contain a statement under section 498(2) or (3) of the Companies Act 2006. The Group's statutory financial statements for the year ended 30 November 2017have been filed with the Registrar of Companies and those forthe year ended 30 November 2018will be filed following the Company's Annual General Meeting.

The Group's financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRSs') and IFRS Interpretations Committee ('IFRS IC') as adopted and endorsed by the European Union and have been prepared under the historical cost conventionwith the exception of certain financial instruments classified as available for sale.

The same accounting policies, presentation and computation methods are followed in this preliminary announcement as in the preparation of the Group financial statements. The accounting policies have been applied consistently by the Group.

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance, its financial position, cash flows, liquidity position and borrowing facilities are described in the strategic section of the Annual Report.In addition, notes to the Group financial statements include details of the Group's treasury activities, funding arrangements and objectives, policies and procedures for managing various risks including liquidity, capital management and credit risks.

The Directors have considered the Group's forecasts, including taking account of reasonably possible changes in trading performance, and the Group's available banking facilities. Based on this review and after making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors continue to adopt a going concern basis in preparing these financial statements and this preliminary announcement.

2. SEGMENTAL ANALYSIS

IFRS 8 'Segmental Reporting' requires operating segments to be identified on the basis of internal results about components of the Group that are regularly reviewed by the entity's chief operating decision maker to make strategic decisions and assess segment performance.

Management has determined the chief operating decision maker to be the Executive Committee made up of the Chief Executive Officer, the Chief Financial Officer, the Chief Operating Officer, the Chief People Officer and the Chief Sales Officer, with other senior management attending via invitation. Operating segments have been identified based on reports reviewed by the Executive Committee, which consider the business primarily from a geographical perspective. The Group segments the business into four regions: the United Kingdom & Ireland('UK&I'), Continental Europe, the USA and Asia Pacific & Middle East('APAC & ME').

The Group's management reporting and controlling systems use accounting policies that are the same as those described in note 1 to the Group financial statementsin the summary of significant accounting policies.

Revenue and Gross Profit by reportable segment

The Group measures the performance of its operating segments through a measure of segment profit or loss which is referred to as 'Gross Profit' in the management reporting and controlling systems. Gross profit is the measure of segment profit comprising revenue less cost of sales.

Intersegment revenue is recorded at values which approximate third party selling prices and is not significant.

			REVENUE		GROSS PROFIT
			2018	2017	2018	2017
			£'000	£'000	£'000	£'000
Continental Europe			716,058	576,018	183,367	150,636
UK&I			268,031	269,777	53,144	55,687
USA			215,099	212,737	66,654	64,369
APAC & ME			58,964	55,998	17,961	16,980
			1,258,152	1,114,530	321,126	287,672

Continental Europe primarily includes Austria, Belgium, France, Germany, Luxembourg, Netherlands, Spainand Switzerland.

APAC & MEmainly includes Australia, Dubai, Hong Kong, Japan, Malaysia and Singapore.

Other information

The Group's revenue from external customers, its gross profit and information about its segment assets (non-current assets excluding deferred tax assets) by key location are detailed below:

			REVENUE		GROSS PROFIT
			2018	2017	2018	2017
			£'000	£'000	£'000	£'000
Germany			310,399	256,825	93,701	78,021
UK			256,056	259,028	48,814	51,922
Netherlands			237,904	180,602	48,563	38,039
USA			215,099	212,737	66,654	64,369
Other			238,694	205,338	63,394	55,321
			1,258,152	1,114,530	321,126	287,672
					NON-CURRENT ASSETS
					30 November	30 November
					2018	2017
					£'000	£'000
UK					14,354	15,702
USA					1,136	1,608
Germany					1,060	1,132
Netherlands					803	431
Other					1,148	1,024
					18,501	19,897

The following segmental analysis by brands, recruitment classification and sectors(being the profession of candidates placed) have been included as additional disclosure to the requirements of IFRS 8.

			REVENUE		GROSS PROFIT
			2018	2017	2018	2017
			£'000	£'000	£'000	£'000
Brands
Progressive			401,959	344,537	92,064	77,105
Computer Futures			362,958	311,134	96,672	83,700
Huxley Associates			254,119	228,529	60,128	56,183
Real Staffing Group			239,116	230,330	72,263	70,684
			1,258,152	1,114,530	321,126	287,672

Other brands including Global Enterprise Partners, JP Gray, Madison Black, Newington International and Orgtel are rolled into the above brands.

Recruitment classification
Contract			1,169,141			1,030,359	232,115	203,501
Permanent			89,011			84,171	89,011	84,171
				1,258,152		1,114,530	321,126	287,672
Sectors
Information & Communication Technology					580,732	502,299	141,970	124,746
Life Sciences				195,102		176,870	66,250	62,351
Banking & Finance				180,122		181,007	42,454	43,502
Energy				169,018		142,822	33,452	26,494
Engineering				111,608		97,469	30,618	25,851
Other				21,570		14,063	6,382	4,728
			1,258,152			1,114,530	321,126	287,672

Other includesProcurement & Supply Chain and Sales & Marketing.

3. ADMINISTRATIVE EXPENSES - EXCEPTIONAL ITEMS

A strategic relocation of the majority of our central support functions away from our London headquarters to a new facility located within Glasgow was announced on 1 November 2017. The transition to the Glasgow Centre of Excellence is now substantially complete and we anticipate that this restructuring will realise cost savings ahead of expectations, in excess of £5 million per annum.

In line with the project implementation timescale, benefits started to be realised in the second half of thisfinancial year and led to the recognition of £2.6 million in savings in 2018. The trajectory of the realised savings is expected to result in additional savings of £2.9 million in support costs in 2019.

We continue to anticipate that one-off restructuring costs will be in the region of £14.0million, with circa £12.9million of operating expenses, including personnelcosts and professional advisor fees, and circa £1.1million of property related costs. The project is being partially funded by a grant receivable from Scottish Enterprise of circa £2.1 million which is receivable and recognisable over several years, subject to the terms of the grant being met within a fixed timeframe.

Net exceptional costs of £6.4 million have been charged to the Consolidated Income Statement during the year, bringing the total costs recognised to date to £13.1 million(2017: £6.7 million). The exceptional charge in the year included personnel costs of £4.1 million and other costs of £2.7 million (primarily professional and property costs). During the year, the grant income of £0.4 million was recognised as an offset to the exceptional costs of an agreed percentageof gross wagesfor each full time role created in the Centre of Excellence in the year.

A restructuring provision can only include the direct expenditure arising from the announced strategic restructuring, which are costs that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity. Restructuring items related to the transition, design and set up of the new support function for which there is no constructive obligation at period end have not been included within the restructuring provision and will be recognised as incurred. The remaining balance of the provision for redundancy costs for employees, who will leave the business post the year end date, amounted to £1.1 million (2017: £5.7 million).

Due to the material size and non-recurring nature of this strategic restructuring project, the associated costs have been separately disclosed as exceptional items in the Consolidated Income Statement in line with their treatment in2017. Disclosure of items as exceptional, highlights them and provides a clearer, comparable view of underlying earnings.

Items classified as exceptional were as follows:

					2018	2017
					£'000	£'000
Exceptional items - charged to operating profit
Staffcosts andredundancy					4,075	5,709
Professional advisor fees					1,050	1,017
Property costs					898	-
Travel					496	-
Recruitment					282	-
Other					14	15
Total exceptional costs					6,815	6,741
Grant income					(418)	-
Total net exceptional costs					6,397	6,741

4. OPERATING PROFIT

Operating profit is stated after charging/(crediting):

					2018	2017
					£'000	£'000
Depreciation					2,852	2,516
Amortisation					3,049	3,228
Accelerated depreciation					244	-
Accelerated amortisation and impairment of intangible assets					709	309
Foreign exchange gains					(644)	(345)
Staff costs					206,713	187,419
Movement in bad debt provision and debts directly written off					1,279	496
Loss on disposal of property, plant and equipment					8	110
Loss on disposal of intangible assets					62	66
Net exceptional restructuring costs					6,397	6,741
Net (gain)/loss on disposal of subsidiaries and associate (1)					(76)	144
Operating lease charges
- Motor vehicles					1,771	1,790
- Land and buildings					12,647	12,005

(1) The net gain on disposal of £76k comprises (i) £70k in the accumulated foreign exchange net loss reclassified from Currency Translation Reserve to the Consolidated Income Statement on liquidation of subsidiary companies; and (ii) £146kgain on disposal of associate.

5. TAXATION

(a) Analysis of tax charge for the year

				2018												2017
				Before exceptional items	Exceptional items		Total	Before exceptional items					Exceptional items				Total
				£'000	£'000		£'000	£'000					£'000				£'000
Current taxation
Corporation tax charged/(credited)on profits for the year				12,862	(1,127)	11,735					13,520			(946)				12,574
Adjustments in respect of prior periods				(541)	-	(541)				(758)					-				(758)
Total current tax charge/(credit)				12,321	(1,127)	11,194				12,762					(946)				11,816
Deferred taxation
Origination and reversal of temporary differences				2,308	-	(2,308)				(743)					(357)				(1,100)
Adjustments in respect of prior periods				(778)	-	(778)				(627)					-				(627)
Total deferred tax credit				1,530	-	1,530				(1,370)					(357)				(1.727)
Total income tax charge/(credit) in the income statement				13,851	(1,127)	12,724				11,392					(1,303)				10,089

(b) Reconciliation of the effective tax rate

The Group's tax charge for the year exceeds (2017: exceeds) the UK statutory rate and can be reconciled as follows:

				2018				2017
			Before exceptional items	Exceptional items	Total	Before exceptional items	Exceptional items	Total
			£'000	£'000	£'000	£'000	£'000	£'000
Profit before taxation			53,393	(6,397)	46,996	44,458	(6,741)	37,717
Profit before taxation multiplied by the standard rate of corporation tax in the UK at 19.00% (2017: 19.33%)
			10,144	(1,215)	8,929	8,594	(1,303)	7,291
Effects of:
Disallowable items			988	88	1,076	847	-	847
Differing tax rates on overseas earnings			3,029	-	3,029	2,725	-	2,725
Adjustments in respect of prior periods			(1,319)	-	(1,319)	(1,385)	-	(1,385)
Adjustment due to tax rate changes			816	-	816	33	-	33
Tax losses for which deferred tax asset was derecognised			193	-	193	578	-	578
Tax charge/(credit)for the year			13,851	(1,127)	12,724	11,392	(1,303)	10,089
Effective tax rate			25.9%	17.6%	27.1%	25.6%	19.3%	26.7%

(c) Current and deferred tax movement recognised directly in equity

				30 November	30 November
				2018	2017
				£'000	£'000
Equity-settled share-based payments
Current tax				(2)	-
Deferred tax				(19)	(62)
				(21)	(62)

The Group expects to receive additional tax deductions in respect of share options currently unexercised. Under IFRS, the Group is required to provide for deferred tax on all unexercised share options. Where the amount of the tax deduction (or estimated future tax deduction) exceeds the amount of the related cumulative remuneration expense, this indicates that the tax deduction relates not only to remuneration expense but also to an equity item. In this situation, the excess of the current or deferred tax should be recognised in equity. At 30 November 2018, a deferred tax asset of £0.9 million (2017: £1.0 million) has been recognised in respect of these options.

6. DIVIDENDS

				2018	2017
				£'000	£'000
Amounts recognised as distributions to equity holders in the year
Interim dividend of 4.7p (2017: 4.7p) per share (i)				6,041	6,052
Final dividend of 9.3p (2017: 9.3p) per share (ii)				11,966	11,942
				18,007	17,994
Amounts proposed as distributions to equity holders
Interim dividend of 4.7p (2017: 4.7p) per share(iii)				6,077	6,038
Final dividend of 9.8p (2017: 9.3p) per share (iv)				12,819	12,086

(i) 2017interim dividend of 4.7 pence (2016: 4.7 pence) per share was paid on 8December 2017to shareholders on record at 3November 2017.

(ii) 2017 final dividend of 9.3 pence (2016: 9.3 pence) per share was paid on 8 June 2018 to shareholders on record at 27 April 2018.

(iii) 2018interim dividend of 4.7 pence (2017: 4.7 pence) per share was paid on 7December 2018to shareholders on record at 2November 2018.

(iv) The Board has proposed a 2018final dividend of 9.8pence (2017: 9.3 pence) per share, to be paid on 7June 2019to shareholders on record at 26April2019. This proposed final dividend is subject to approval by shareholders at the Company's next Annual General Meeting on 24April 2019, and therefore, has not been included as a liability in these financial statements.

7. EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share ('EPS') is set out below:

Basic EPS is calculated by dividing the earnings attributable to owners of the Company by the weighted average number of shares in issue during the year excluding shares held as treasury shares and those held in the EBT which are treated as cancelled.

For diluted EPS, the weighted average number of shares in issue is adjusted to assume conversion of dilutive potential shares. Potential dilution resulting from tracker shares takes into account profitability of the underlying tracker businesses and SThree plc's earnings per share. Therefore, the dilutive effect on EPS will vary in future periods depending on any changes in these factors.

					30 November	30 November
					2018	2017
					£'000	£'000
Earnings
Profit for the year after tax before exceptional items					39,542	33,066
Exceptional items net of tax					(5,270)	(5,438)
Profit for the year attributable to owners of the Company					34,272	27,628
					million	million
Number of shares
Weighted average number of shares used for basic EPS					128.7	128.6
Dilutive effect of share plans					4.4	4.0
Diluted weighted average number of shares used for diluted EPS					133.1	132.6
					30 November	30 November
					2018	2017
					pence	pence
Basic
Basic EPS before exceptional items					30.7	25.7
Impact of exceptional items					(4.1)	(4.2)
Basic EPS afterexceptional items					26.6	21.5
Diluted
Diluted EPS before exceptional items					29.7	24.9
Impact of exceptional items					(4.0)	(4.1)
Diluted EPS afterexceptional items					25.7	20.8

8. CASH AND CASH EQUIVALENTS

					30 November	30 November
					2018	2017
					£'000	£'000
Cash at bank					50,844	21,338
Bank overdraft					(17,521)	(3,717)
Net cash and cash equivalents per the consolidated statement of cash flow					33,323	17,621

Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less, net of outstanding bank overdrafts. The carrying amount of these assets is approximately equal to their fair values.

The Group has cash pooling arrangements in place which allow any one account to be overdrawn up to £50 million, so long as the overall pool of accounts doesnot exceed a net overdrawn position of £5 million.

9. BORROWINGS

The Group has access to a committed RCF of £50 million along with an uncommitted £20 million accordion facility in place with HSBC and Citibank, giving the Group an option to increase its total borrowings under the facility to £70 million. The funds borrowed under the facility bear interest at a minimum annual rate of 1.3% (2017: 1.3%) above the appropriate Sterling LIBOR. The average interest rate paid on the RCF during the year was 1.8% (2017: 1.5%). The Group also has an uncommitted £5 million overdraft facility with NatWest and a £5 million overdraft facility with HSBC.

At the year end,the Group had drawn down £37.4million(2017: £12.0 million) on these facilities.

The RCF is subject to certain covenants requiring the Group to maintain financial ratios over interest cover, leverage and guarantorcover. The Group has been in compliance with these covenants throughout the year.

In May 2018, the Directors successfully renegotiated the RCF with its key terms and conditions (including the total amount available under the facility and interest margin) remaining unchanged and the term of the facility having been extended until 2023. Since there was no substantial modification to the underlying terms and conditions, the refinancing of the existing facility did not qualify for derecognition, hence no modification gain or loss was recognised in the consolidated income statement

10. ANNUAL REPORT AND ANNUAL GENERAL MEETING

The 2018 Annual Report and Notice of 2018Annual General Meeting will be posted to shareholders shortly. Copies will be available on the Company's website www.sthree.com or from the Company Secretary, 1stFloor, 75 King WilliamStreet, London, EC4N 7BE. The Annual General Meeting of SThree plc is to be held on 24 April 2019.