Chief Executive Officer’s statement

Strategic Report
Governance
Financial Statements

Unlocking our unique potential throughthe powerof talent
I am proud of the work we have achieved
over the past year. The Group has
performed well against a challenging
economic backdrop, demonstrating
the resilience of our business modeland strength of our strategy, with themegatrend of demand for flexible STEM
workers persisting across our core markets.
Through this, we have invested in ourpeople, infrastructure product offering andmade excellent progress in the positioningof SThree for sustainable long-term growth.
The strength of the Group derives from our clear purpose:bringing skilled people together to build the future. We firmly
believe that the future is flexible STEM talent. Underpinned bylong-term megatrends, the two growth drivers of STEM andflexible talent have proven resilient through cycles, providing
a unique business model that delivers quality of earnings andgood visibility.
Whilst this core purpose remains consistent, we must alsoevolve. As a business consciously aligned to megatrends, weare acutely aware of how these structural forces, such as digitaltransformation, changing patterns of work, and the opportunities
presented by artificial intelligence are affecting every industry.
We have established a position as a leading specialist talent
partner, built over decades through unrivalled STEM networks,
long-term client relationships and deep expertise, all of which
work together to create significant competitive differentiation.
From this, we are progressing to the next stage of our growthjourney as a digital-first organisation, with an integrated end-toend platform that will redefine our potential and support us inunleashing our vision.

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SThree plc

Our unique model and strategic focus
on STEM and flexible talent provide
us with a strong platform both now
and over the long term.”
Timo Lehne
Chief Executive Officer

At the same time, we continue to be guided by our disciplined
and focused approach to our investment decisions, supported bya robust business model. For FY23, the Group delivered net feesof £419 million, 4% down on the record prior year performance.
With ongoing exceptional levels of productivity combined withtight cost control, whilst also benefitting from spend recognition
timing on the Technology Improvement Programme (TIP)(without impacting delivery) we delivered operating profit of£76 million. This was delivered alongside a material increasein net cash balance to £83 million and a contractor order bookof £184 million. This provides us with the financial strength andflexibility to pursue our market opportunity and to deliver value
to shareholders.
Our approach: a platform of STEM resourcing solutions
supporting our customers’ business ambitions
The Group provides solutions to customers predominately
through the placement of specialist STEM Contract skills,representing 82% of total net fees, as this model is particularly
well aligned to employee and employer preferences in STEM
roles. Within this, we have also established a specific expertisein delivering ECM, whereby contractors are directly employed
by SThree and which is increasingly a source of growth for thebusiness, now comprising nearly 50% of the contractor orderbook. We also provide our clients with high-value Permanentskills in select, strategic markets. The Group’s STEM proficiency
across all three employment models, whether it be Contractors,
ECM or Permanent roles, allows us to offer the best solution tomeet our customers’ bespoke requirements.
We wrap this in a customer-centric service delivery approach,working collaboratively with our clients to source the scarceskills on which they depend, building enduring relationships
with our contractors who view SThree as a partner in theircareer development. We are a people business, and we aresuper-charging our teams through the implementation of a
sophisticated and integrated IT infrastructure. This is bringing
our organisation closer together to drive scale, efficiencies andproductivity, particularly in our growing ECM business which iscomplex and compliance heavy. We believe this will be a gamechanger in the industry.

The market: our model performing in a challenging
environment
Global macro-economic factors through the year, such as highinflation, market uncertainty and high interest rates weighing
on investment decisions, have created a challenging labour
market. Many organisations took stock of their previous
expansive hiring initiatives to reassess their footprint in lightof a weakening outlook.
The priority for organisations shifted to business-criticalrequirements, which for many is represented by STEM Contract
skills. Whether it be engineers, cyber security specialists ormedical scientists, organisations across sectors are dependent
to function effectively. We saw these market dynamics play out
during the year with robust extensions as clients sought to retain
critical STEM skills helping to somewhat offset weaker newplacement activity across the market.
Progressing our ESG commitments
As we navigate through periods of transient market conditions,
we do not lose sight of our ESG commitments. We know thata successful business is a responsible one, seeking to deliver a
positive outcome for all stakeholders. As such, we are pleased
to have not only made continued progress against the clear ESG
targets we have set ourselves, but to have also strengthened
our environmental ambitions during the year with a new sciencebased target (SBTi-verified) of net zero before FY50. This
complements the work we do every day promoting jobs that willbuild a sustainable future, and we are delighted to have achieved
our target of doubling the share of our global renewables
business ahead of the target date of FY24.
We continue to strive for social mobility and equity in STEM byencouraging diversity in our talent pipeline. We do this throughour Elevate Careers programme and our partnership with
Women Who Code where we have funded scholarships for
3,700 women. In FY23, we welcomed 47 women to our internaltalent programme, Identify. We can see how the programme isimproving retention and progression of our female employees,
but we recognise we need to do more to make progress towardsour ambition to have 50/50 women in leadership roles and thiswill continue to be a priority in FY24.

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Chief Executive Officer’s statement continued

Strategic Report
Governance
Financial Statements

We have a talented team and arebuilding a market-leading technology
suite, to help us drive future growth
for the Group.”
Timo Lehne
Chief Executive Officer

Strategic execution

Our places – knowing where to play, play where wecan win

Our analytical and data-driven approach informs the regionaland vertical mix we choose to operate in. Over the year weforensically analysed and validated our footprint, reconfirming
our confidence in our active market coverage of 11 countries
strategically focused in the biggest STEM markets. With anaverage share of under 3%, we believe there is substantial scope
to scale, both organically and, given the highly fragmented andniche landscape, through select acquisitions that align with theBoard’s strict criteria, and in doing so, realise the increasing
benefits of economies of scale.
This analysis also brought greater clarity and insight into thestrategic direction for our regions – understanding where
our core opportunities lie to drive margin and higher value,
versus those regions ripe for steady growth or fast scaling
opportunities. Within this context we continue to refine to how
we go to market. Within the US, we reinforced our presence bymoving away from a brand-led management structure, to having
strong fully integrated regional teams serving all of our brands,
and across the organisation we introduced new tools anddashboards to bring greater performance insight.

Our platform – digital first

We have bold ambitions to be a digital-first innovator in a
traditionally analogue industry, and we see huge scope todrive higher margin growth by leveraging the power of moderntechnology. The systematic roll out of our TIP continues toprogress on track and on budget, with our first deployment
successfully completed in the US. Whilst we continue to workon data quality testing, it is evident that the end-to-end platform
is working. We have already onboarded over 2,000 contractors,
using it to submit timesheets, while to date we have issued over15,000 invoices reflecting around $70 million of revenue.

We are seeing the early benefits from our first deployment,including the systemising of best practice and process
efficiencies, helping to improve both employee and client
experiences. Our disputed invoice volume has fallen
considerably as a result of improved data collection, and ourContractor payment process, which previously required a highproportion of manual intervention due to its complexity, hasbeen streamlined significantly, freeing teams up to be moreproductive. As we have said before, the wider benefits aroundefficiencies and scaling will become evident with time as the TIP
progresses, and the platform develops richer functionality.
We look ahead to our next regional deployment in Germany,
commencing in the first half of FY24. We have a great teamin place and are confident in our approach as proven by
deployment in the US.

Our people – best employer, best people

The engine of our business is our brilliant people, and as such,
we are focused on making our business a destination employer,
attracting and retaining the best talent, in order to support ourcollective push as one team to achieve our growth ambition.
The key metric we monitor to assess our standing is ouremployee net promoter score, and we were pleased to havecomfortably retained our position this year in the top quartileof professional services companies. We continue to see highengagement across our employee surveys, there is growing
uptake across the organisation of our DE&I learnings initiative
launched in the previous year, and the soft launch of our newly
redefined values in H2 to our sales leadership team is helping
shape our culture as we grow.
With relation to the TIP, whilst a great deal of focus is on IT
migration and data management, key to our programme is ourtraining and change management initiatives working to ensure
our teams understand our new capabilities and have the skills toadopt new ways of working. We have also started some bigger
programmatic work, taking the global best practices and looking
to standardise excellence.

Building on this, we will look to embed our new values acrossthe Group. Other priorities are centred on ensuring we have theright incentives and infrastructure to allow our people to thrive,
including the continued optimisation of our office footprint
in line with current working model expectations, new talentmanagement programmes to retain key talent and drive shortertime-to-productivity, and ongoing efforts to ensure an inclusive
working environment that promotes best practice and ambition.

Our position – a winning brand with competitive anddifferentiated value propositions

We are committed to providing best-in-class STEM staffing
services to our clients and candidates by leveraging our global
network of specialised brands. Our approach ensures that every
client receives tailored solutions, unparalleled expertise, and apathway to reach their goals amid an ever-changing landscapewhilst helping candidates realise their career ambitions. During
the year, we reinforced our go-to-market brand position in
specific vertical skills, elevated our thought-leadership throughnew research ‘How the STEM world evolves’, and establisheda Group Commercial function under a new Chief Commercial
Officer position to coordinate our commercial strategy.
OutlookAs we look forward, Contract extensions remain strong andprovide an ongoing source of resilience, although as we await
an easing of the macro-economic backdrop, new businessactivity continues to be subdued for longer than expected.
Our conversion ratio, whilst anticipated to temper from theexceptional FY23 levels as our staged investment programme
progresses, is expected to remain sector leading. We have been
consciously positioning the business for the future and whilst
we continue to operate in a challenging market environment,
this does not change our focus. We have a resilient business,a talented team, great client and candidate partnerships, andwe are building a market-leading technology suite. With ourinvestments and innovations, we are confident that when themarket returns to growth, we will be in a position of strength tosource the best STEM talent the world needs.

Basic earnings per share

42.4p
FY22: 41.0p

Total divided per share

16.6p
FY22: 16.0p

Timo Lehne
Chief Executive Officer

29 January 2024

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SThree plc

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