Introduction

2007 saw the continuing successful implementation of the strategy that has returned the Group to sustainable growth and profitability. We have seen increases in revenue, net fee income and profitability driven by greater productivity, higher margin business and significantly greater efficiencies and automation in running our back office.

In July we successfully completed the acquisition of Glotel plc. This accelerated our strategy and has significantly enhanced our geographic spread, with businesses in Europe, eleven locations in North America and two in Australia. During the second half of 2007 we completed the integration of the businesses with the integration of the UK back office functions completed ahead of schedule in early October.

Since the acquisition of Glotel all parts of the acquired business have made a positive contribution to our results in the year and we anticipate further progress in 2008 together with a full year's benefit from the integration synergies arising from the combination of the two businesses.

Strategic Update

In line with our strategy the Group is now split into 3 clear business divisions; Managed Solutions, Professional Staffing and General Staffing, which also incorporates our engineering staffing business. These business units now all have strong leadership teams in place on a global basis.

Our plans to increase our permanent business have proved relatively successful with net fee income growing by £2 million to £12.3 million (2006: £10.3 million) representing approximately 22% of the Group's total net fee income. However, we are still predominantly a contract/temporary based organisation and this less volatile revenue stream puts us in good stead to withstand market turbulence throughout the economic cycle.

Geographically our business has also expanded rapidly and this overseas expansion into new markets, though requiring initial investment in 2007, is now generating a positive return for the Group. Our new US and Asia Pacific businesses which, with mainland Europe, now account for over 20% of our net fee income on a run rate basis. We have 4 offices in mainland Europe, Germany, Belgium and two in Italy with further overseas office openings planned in Singapore, Hong Kong and Delhi during 2008. We will of course continue to consider new office openings in existing territories where appropriate to continue to drive growth and gain market share.

During the course of 2007 we also grew our sales capacity, increasing the revenue generating headcount by more than 250 net staff. This was accomplished through the acquisition of Glotel and organically through our central recruiting and training functions. This central team will enable us to continue to invest in and expand our sales capacity further through 2008.

Operating Review

The results for 2007 show a strong improvement in each of the primary financial performance measures compared with 2006. The Group reversed the volume decline experienced in earlier years and recorded sequential quarter on quarter growth in revenue, net fee income and profit, throughout 2007. In the fourth quarter of 2007 revenues increased by 34% to £126.9 million, net fee income increased by 45% to £17.1 million and profit before tax improved by 49% to £2.7 million over the comparative fourth quarter of 2006.

Group Results

Professional Staffing

This division comprises the IT Contracting and Permanent Recruitment Services businesses within the Group as well as the Glotel business acquired in the second half of 2007.

The division reported a small increase in revenue from £226.5 million in 2006 to £227.4 million in 2007 with the corresponding operating profit improving from £5.6 million in 2006 to £6.0 million in 2007. The revenue movement is the net effect of the Glotel acquisition, the switch to lower revenue, higher margin accounts and investment in new brands, offset by the reduction in volumes as a consequence of the Group's decision to exit a small number of high volume but unprofitable accounts.

As with our other divisions, we have built a strong management team. A key focus has been the drive to increase sales headcount, with this division absorbing the majority of new sales hires as well as the business acquired from the Glotel acquisition. In 2007 we established new sales teams in both the contract and permanent recruitment divisions with each team specialising in a range of technical disciplines, which should facilitate a greater focus on improving further our gross margins.

During the year we have seen a significant increase in percentage margin and net fee income due to improvements in the quality of business being secured. As new sales staff recruited through 2007 become fully productive, coupled with increases in productivity in our existing businesses we expect to see this trend continue in 2008.

Managed Solutions

Our Managed Solutions division which consists of our Hyphen, RPO and IT Solutions businesses has proven to be robust through 2007. As a result of focusing on maximising revenues from those clients with whom we have some of our strongest relationships we grew revenues by 9.2% from £140.2 million in 2006 to £153.1 million in 2007. As the quality and terms of this business has improved so has operating profit improving by 22.2% from £2.7 million in 2006 to £3.3 million in 2007.

Investment has been made throughout 2007 in new corporate sales staff and account directors with the aim of improving service levels and winning new clients. Our resourcing capabilities have also become more effective and efficient with the creation of the central resourcing pool.

The long term customer contracts, and the predominance of contract staff should result in robust performance from this division throughout the economic cycle and we anticipate that growth levels should continue.

General Staffing

During 2007 we grew revenues in this business by 10.0% from £49.6 million in 2006 to £54.6 million in 2007 and turned a £0.1 million loss in 2006 into a £0.6 million profit in 2007, whilst making investments in new offices, people and brands.

This division has seen the opening of several new offices in 2007 to give greater market coverage in both the Spring Personnel and Elizabeth Hunt brands. Aligned to this has been a corresponding increase in headcount. Spring Direct has moved into the Engineering market with marked success and we will be investing further in this business throughout 2008.

I am confident that as offices and staff become fully productive that we will see further increases in revenue, net fee income and profit from this business in 2008.

Improved Business Efficiency

During the year we established centralised corporate sales and bid teams together with central resourcing units. These support the growth of our businesses and will allow us to maximise on sales opportunities and give customers both a high level of support as well as provide a central basis for efficient candidate supply.

In order to implement best practice and to get maximum economies of scale we have now completed the creation of our centralised Finance, Administration and IT functions. As well as the obvious symbiotic benefits this offers we have the capacity to absorb further volume in these functions with minimal increase in our operating costs. We have also centralised our HR and Marketing functions, which allows us to quickly support new brands in a co-ordinated corporate manner and also to integrate any acquired companies efficiently.

Through the course of 2007 we have used these efficiency savings in the support functions to help fund the investment in our front office sales capacity. By a combination of both organic growth and acquisition we will exit 2007 with a net increase of in excess of 250 additional sales staff worldwide compared to December 2006.

Outlook 2008

During 2007 we achieved a robust financial performance whilst putting in place both the strategy and management team required to deliver a sustainable improvement in performance.

With the Group increasingly diversified by both geography and market segment and a strong business in temporary/contract staffing, we believe that Spring is well placed with its healthy balance sheet and solid trading to enjoy further growth both organically and by acquisition.

2008 has started as 2007 finished with continuing improvement in key performance indicators for all of our businesses. With many of our new staff still to reach full productivity and with our ambitious growth plans, we are confident that we can continue to deliver sustainable, profitable growth.

Peter Searle
Chief Executive Officer

27 February 2008