SThree plc (“SThree” or the “Group”), the international specialist staffing business, is today issuing an Interim Management Statement covering the period from 1 December 2008.

The financial and operational data relates to the three-month period ended 1 March 2009, being the first quarter of the financial year ending 29 November 2009.

As expected, the Group experienced an overall decline in demand for its services during the period, particularly for permanent placements, with contract hiring proving somewhat more resilient in all territories. Compared to the same period in 2008, Group Gross Profit increased as volume decline was offset by value improvement and favourable foreign exchange movements. However, the current deal pipeline indicates an overall deterioration in market conditions.

At the end of the first quarter SThree had 5,036 active contractors, a decrease of 9.8% on the same quarter in the prior year (2008: 5,581) and a decline of 12.3% on the year end number (30 November 2008: 5,745). Average contractor gross profit per day rates remained strong, increasing across all geographies. During the quarter SThree made a total of 1,728 permanent placements, a reduction of 24.5% over the prior year (2008: 2,289). However, average placement fees have continued to improve across all geographies.

The UK business slowed at an increasing rate during the quarter. At the end of the first quarter UK contract runners were down 17.3% year on year, reflecting a 23.6% reduction in UK ICT runners offset by a 10.9% increase in non-ICT runners. UK gross profit per day rates remained robust. During the quarter, UK permanent placements were down 47.5%, reflecting a 54.8% reduction in UK ICT placements and a 29.7% decrease in UK non-ICT placements. Average UK placement fees were up 3.3%.

The International business grew in the quarter, albeit at a reduced rate versus the strong 2008 performance. At the end of the first quarter International contract runners grew by 9.0%, with strong growth in gross profit per day rates. During the quarter, permanent placements grew by 3.1% with average fees up 37.9% or up circa 7% on a constant currency basis.

Group Gross Profit achieved in the first quarter grew by 7% year on year to circa £50m (2008: £46.5m) as strong growth in average permanent fees and contract gross profit per day rates offset volume reductions in the UK market. On a constant currency basis, Group Gross Profit in the first quarter fell by circa 2%. Current pipeline deals (business transacted where candidates have not yet started their placements) indicate declining demand across the Group. Broadly, the most significant reductions recorded are in those markets with mature staffing sectors and the greatest relative resilience has been seen in those that are less structurally developed.

SThree’s policy of maintaining a high degree of variable consultant remuneration and low base salaries ensures that a high percentage of the Group’s operating costs tend to flex in response to changing market conditions. In the current circumstances the Group is also taking further proactive steps to reduce its headcount.

The Group remains strongly cash generative with net cash of £33m at 1 March 2009. In addition to continued proactive cash management the cash balance is also a reflection of the unwinding of working capital as the volume of contact runners declines.

“Given the extremely weak economic backdrop, we anticipated that 2009 would be an exceptionally tough year and this assumption has been borne out in the first quarter particularly in the UK where demand is very weak. Our international business has fared relatively better but given the global nature of the current downturn it is inevitable that these markets have also been impacted.”

“SThree is a business with a highly seasoned management team who have a twenty two year track record of delivering profitability and cash generation throughout the economic cycle. Our international diversification, exceptionally strong cash position, significant contract exposure and inherently flexible business model position us better than most to cope with whatever challenges the market throws at us.”

“We will continue to manage the business consistent with the prevailing economic backdrop and will take whatever steps are necessary to ensure that we stay fit for purpose and capable of performing well in the short term. That said, we will not turn our backs on opportunities to make prudent investments to ensure that we have the best possible platform to take advantage of a positive change in market conditions whenever this materialises.”

SThree is hosting an analyst conference call today at 0830 GMT. The dial in number is + 44 (0)20 3003 2666 and the password is SThree.