Final Results

Hays plc Preliminary results for the year ended 30 June 2006 HAYS INTERNATIONAL EXPANSION CONTINUES Year ended 30 June 2006 2005 Actual Like-for- Â£ million growth Like1 Net Fees 538.2 470.6 +14% +13% Profit from continuing 193.0 166.2 +16% +15% operations Profit before tax 192.5 167.7 +15% Basic earnings per share 8.69p 6.82p +27% Dividend per share 4.35p2 3.40p +28% 1 Organic growth at constant currency 2 Including a proposed final dividend of 2.90 pence per share * Fee growth of 7% achieved in the United Kingdom & Ireland (6% like-for-like1) * Excellent fee growth in the International Division of 38% (35% like-for-like1) - now 30% of total business * Conversion rate improved by 60bps to 35.9% (H1: 36.3%, H2: 35.4%) * Expansion of the office network with 37 new offices opened during the year (8 via acquisition) * 27% increase in basic earnings per share to 8.69 pence * Full year dividend of 4.35 pence per share, an increase of 28% Commenting on these results, Denis Waxman, Chief Executive of Hays, said: "The Group has once again delivered a strong set of results producing sustained fee and profit growth. Overall net fee growth of 14% reflected excellent growth of 38% across our International Divisions and solid growth of 7% in the United Kingdom & Ireland. The business has continued to produce strong and consistent growth and over the last 3 years net fees have grown by 55% and profits by 69%. The newer activities in the United Kingdom & Ireland continued to grow strongly, but growth was more moderate within the UK major specialist activities. Excellent performances across the International Division particularly Australia and Germany, increased the International Division's contribution to 30% of total fees (2005 - 25%). We have continued to expand our international footprint by opening 19 new offices and entered Italy, the United Arab Emirates and China. In July and August the Group continued to generate strong like-for-like net fee growth of 13%. Growth was 6% in the United Kingdom & Ireland, 28% in Asia Pacific and 37% in Continental Europe & Canada. For the full year the Group expects some slight erosion in Group margins from that achieved in the second half of last year, arising from a modest margin reduction in the UK temporary business and the impact of investment for future growth. Our continued investment will allow the Group to take full advantage of its substantial growth opportunities". Enquiries: Denis Waxman Chief Executive Hays plc + 44 (0)20 7628 9999 Paul Venables Finance Director Richard Jackson Investor Relations Mike Smith Brunswick + 44 (0)20 7404 5959 Chairman's Statement Results summary Net fees for the Group increased by 14% to Â£538.2 million (2005 - Â£470.6 million) and profit before tax increased by 15% to Â£192.5 million (2005 - Â£ 167.7 million). We have seen contrasting performances between our businesses in the United Kingdom & Ireland and in the International Divisions. In the United Kingdom & Ireland net fees grew by 7% and operating profit grew by 6% with moderate performance in the major specialist activities. There remain attractive growth opportunities in our specialist activities in the United Kingdom & Ireland and we are now investing accordingly. The Group continues to focus on the significant growth opportunities in the international specialist recruitment markets. The International Division has produced an excellent performance with net fee growth of 38% and operating profit growth of 53%, and has contributed Â£55.5 million (2005 - Â£36.3 million) to Group profits. The performance highlights the growing strength of our International businesses and our ability to deliver the benefits from the structural growth opportunities. International now represents 30% (2005 - 25%) of Group net fees and further reduces our dependence on the United Kingdom & Ireland. We have been able to finalise one of the last remaining legacy issues, the historic investment in Albion, the chemicals business. We received at the end of June this year a final net cash inflow of Â£30.0 million after Albion was purchased by the German speciality chemicals business, Brenntag. Acquisitions Whilst the fundamental strategy of the Group is to create growth and value from organic development, geographic infill or the acquisition of specialist market sector knowledge remains a part of our development strategy. During the year we acquired Recruitment Solutions Group for Â£20.6 million (including deferred consideration of Â£2.7 million) to enter the specialist healthcare and social care markets. In considering this acquisition, the Board was aware that the current market for healthcare professionals would be challenging due to constraints in National Health Service funding, but over the long term there are good opportunities for growth both in the specialist healthcare and social care markets. We also acquired for Â£7.8 million (including deferred consideration of Â£5.2 million), St. George's Harvey Nash, a small permanent recruitment business primarily based in China, but with complementary search activities in Hong Kong to those of our organic start-up. This business holds the appropriate licences to operate a recruitment business within China and hence provides us with a quality platform to exploit the longer term potential of the Chinese market. International financial reporting standards & foreign exchange These are the first full year's results we have prepared under International Financial Reporting Standards (IFRS) and the prior year comparatives have been restated accordingly. The impact of the adoption of IFRS which was described in detail in a press release on 8 February 2006, led to a reduction in operating profit from continuing operations before goodwill amortisation for the year to 30 June 2005 of Â£(0.9) million. The impact of movements in foreign exchange rates since last year has been favourable adding Â£3.2 million to net fees and Â£1.4 million to operating profit predominantly caused by the strengthening of the Australian dollar. Tax and discontinued operations Tax on continuing operations for the period was Â£60.1 million, an effective rate of 31.2% (2005 - 31.3%). This is slightly better than last year and we expect it to remain in the range 31.0% to 31.5% for the foreseeable future. Profits from discontinued operations after tax of Â£52.5 million (2005 - Â£30.7 million) comprise Â£30.0 million of profit on the final settlement of the historic investment in Albion, Â£4.3 million profit net of tax realised from the disposal of surplus properties and a tax credit of Â£18.2 million arising from previous disposals. Cash flow Group cash flow was strong during the period with net cash from operating activities of Â£136.4 million (2005 - Â£106.0 million) after investing Â£24.2 million in additional working capital, broadly commensurate with the growth of the business and tax paid of Â£46.7 million. Investing activities comprised Â£ 10.7 million of net capital expenditure, Â£20.2 million in respect of acquisitions made during the year and Â£8.2 million in respect of acquisitions made in previous years. We received net proceeds from discontinued activities of Â£20.4 million, primarily the proceeds from the Albion settlement net of continued payments on legacy surplus property leases. Â£56.7 million was paid out in dividends and Â£209.2 million was used to buy-back our own shares, leaving net debt of Â£77.0 million at the end of the period. Retirement benefits The Group's pension liability under IAS 19 at 30 June 2006 of Â£55.9 million (Â£ 39.1 million net of deferred tax) decreased by Â£13.8 million as compared to 30 June 2005 primarily due to a higher than expected return on scheme assets following a 15.9% rise in the benchmark FTSE All Share Index. During the year the Group contributed Â£5.1 million of cash into the main scheme and that is expected to increase to circa Â£7.0 million in 2007. There is a formal actuarial valuation of the Scheme as at 30 June 2006, the results of which will be known by the end of this calendar year. Capital structure and dividend The business continued to generate strong free cash flow during the year. The priorities for our free cash flow are to fund Group development particularly in the International Division, purchase of in-fill acquisitions as they arise, support a progressive dividend policy, and to buy-back shares as appropriate. The initial circa Â£300 million of the share buy-back programme was completed at the close of the first half this year. We have commenced the second stage of the share buy-back programme and during the second half of the year we have purchased 32.7 million shares at a total cost of Â£47.1 million. The total number of shares purchased to date is 274.6 million at a total cost of Â£352.1 million representing 15.8% of the issued share capital. Basic Earnings Per Share from continuing operations for the year of 8.69 pence was 27% ahead of last year (2005 - 6.82 pence). The improvement in Earnings Per Share arises from the strong growth in post tax profits from continuing operations, 15% ahead of last year, combined with the favourable effects of the accretion from the share buy-back programme to date. The Board is aware of the importance of both sustainable and progressive dividend growth and therefore the Board is recommending a final dividend of 2.90 pence per share, which if approved at the Annual General Meeting will make a total of 4.35 pence per share for the full year. This represents a 28% increase on last year, with 15% of this increase attributable to the accretive effects of the share buy-back programme and 13% attributable to the underlying growth in the profitability of the business. The recommended dividend will be paid on the 21 November 2006 to shareholders on the register at 20 October 2006. People As I announced at the Interim results in February, John Martin our previous Group Finance Director left the Group in March to join Travelex plc. John played a pivotal role in the transformation and refocusing of Hays into a specialist recruitment group and we wish him every success in the further development of his career. In May, Paul Venables joined the Group as his replacement. Since joining, Paul's depth of experience in the multi-national service sector has already had a positive impact on the Group's activities. I, and the Board look forward to Paul having a long and fulfilling career with the Group. Our business has many opportunities for our people. In the United Kingdom the challenge is to capitalise on our market leading positions and to identify and exploit new opportunities, which can subsequently be developed internationally. For the International operations, the opportunity is to develop these markets for our business model and establish Hays in a market leadership position. Having visited many of our operations during the year, I am delighted to report to you the enthusiasm, commitment and professionalism of our teams in meeting these challenges. I do wish to thank each and every one of them for all their hard work and enthusiasm and look forward to them developing their careers and strengthening the business and its relationships with our clients and our candidates. Office of Fair Trading investigation As previously announced the Office of Fair Trading ("OFT") is conducting an investigation into a number of recruitment companies involved in the construction recruitment sector. Hays is one of the companies currently being investigated. The investigation relates to a small part of our Construction & Property business in the United Kingdom. As a Group we take this matter very seriously and are co-operating fully with the OFT in its investigation under its leniency programme, but at this stage we do not know when the OFT investigation will be completed. The Board believes that any financial impact of the matters under investigation will not be material to the Group. Current trading In July and August the Group continued to generate strong like-for-like net fee growth of 13%. Growth was 6% in the United Kingdom & Ireland, 28% in Asia Pacific and 37% in Continental Europe & Canada. For the full year the Group expects some slight erosion in Group margins from that achieved in the second half of last year, arising from a modest margin reduction in the UK temporary business and the impact of investment for future growth. Our continued investment will allow the Group to take full advantage of its substantial growth opportunities. Chief Executive - Operational Review Results overview Hays Specialist Recruitment produced another year of strong growth. Turnover grew by 11% to Â£1,826.6 million (2005 - Â£1,640.4 million). Net fees were 14% ahead of last year at Â£538.2 million (2005 - Â£470.6 million) and profit from operations was 16% ahead of last year at Â£193.0 million (2005 - Â£166.2 million). Across the Group, permanent fees continued to grow more strongly than temporary fees. The proportion of net fees arising from permanent recruitment increased to 44.0% (2005 - 42.1%) an increase of 1.9% against last year. Candidate salary inflation was in the range of 3.0 - 3.5% and the fee rates for permanent placements strengthened by circa 10%. The gross margin on temporary placements across the Group was broadly flat at 19.0%. We expanded the geographic reach of our network, particularly in our international markets and in total we added another 37 new offices - 19 in the International Division (including 4 from an acquisition) and 18 in the United Kingdom & Ireland (including 4 from an acquisition). The expansion of specialist activities across our network gathered pace and there was a 14% increase in the number of business units bringing the total number to 824. We enhanced the productive capacity of the International Division by increasing the number of recruitment consultants by 38% to 1,364 (2005 - 989). In the United Kingdom & Ireland the number of recruitment consultants remained flat at 2,698 (2005 - 2,694). There was an improvement in the overall efficiency of the business during the year. The conversion rate, which is the proportion of net fees converted into operating profit, improved to 35.9% (2005 - 35.3%) an increase of 60bps on the prior year. The first half conversion rate of 36.3% reduced to 35.4% in the second half as a result of the impact of seasonality, IFRS accounting changes, some modest margin reduction in the UK temporary business and the RSG acquisition. United Kingdom & Ireland In our largest market, net fees were 7% ahead of last year at Â£378.4 million (2005 - Â£354.7 million) and operating profit was up 6% to Â£137.5 million (2005 - Â£129.9 million). The performance of the business in the United Kingdom & Ireland has been moderate in the major specialist activities. A year ago we were uncertain about the outlook for the economy in the UK. As a consequence of our caution we decided not to invest last year in either additional recruitment consultants or significant new office openings. This decision impacted the growth levels within the major specialist activities. We are currently taking actions to improve the performance of these businesses, one of which is the creation of a new role, a UK Managing Director to maximise our opportunities in these markets. On the basis of current market conditions we are now selectively adding recruitment consultant headcount and new office and business unit openings within the UK business. Net fees in Accountancy & Finance were 6% ahead of last year at Â£158.0 million (2005 - Â£149.0 million). The overall performance of Accountancy & Finance was moderate and fee growth slowed from a combination of both weaker volumes and pricing pressure on the temporary margin as we reached the end of the year. There was strong growth in the Home Counties but this was off-set by weak performances elsewhere. Construction & Property, which serves both the construction and "built" environment sectors, generated net fees of Â£101.6 million (2005 - Â£97.0 million), 5% ahead of last year. There was strong growth in the North East, Scotland and Ireland but with weak performance in the South East. We have continued to see shortages of some skilled professionals and permanent fee growth has been strong which provides some evidence of client confidence in the longer term market. However we have experienced pricing pressure on the temporary margin in the second half of the year. Our Information Technology business produced net fees of Â£30.7 million (2005 - Â£29.3 million), 5% ahead of last year. Permanent fees continued to grow strongly but this was offset by flat temporary fees and contractor volumes. The business achieved improved operational efficiency increasing operating profit by 10% to Â£11.0 million (2005 - Â£10.0 million). Within our other specialist activities, net fees grew by 11% to Â£88.1 million (2005 - Â£79.4 million). The newer activities, Sales & Marketing, Purchasing and Executive grew strongly and we will continue to expand these specialist activities across our extensive network. Our larger businesses, Human Resources, Recruitment Management, Education and Legal all continued to generate good levels of fee growth. Hays Retail, our organic start-up, has performed strongly and we are encouraged by its level of growth. We have continued to see net fee growth from the public sector but at a rate lower than our overall net fee growth rate in the United Kingdom & Ireland. The proportion of net fees from the public sector as a total of the United Kingdom & Ireland business was 26%. The results of Recruitment Solutions Group are included within other specialist activities. Since its acquisition on the 2 February 2006 the business generated net fees of Â£2.3 million and an operating loss of Â£0.3 million. The results have been adversely affected by the impact of funding constraints in the National Health Service but we remain confident of the long term growth opportunities within the healthcare and social care specialist recruitment markets. The business is now fully integrated into the Hays operation in the United Kingdom with the resulting economies of scale. We are expanding the social care specialist activity into an initial nine offices within the Hays UK network. Asia Pacific The excellent growth that our business has produced during the year has further enhanced its market leading position in the region with net fees increasing by 37% to Â£85.7 million (2005 - Â£62.6 million). Operating profit increased by 50% to Â£41.7 million (2005 - Â£27.8 million). It has been another year of both outstanding fee and profit growth from our business in Australia & New Zealand. We have produced double-digit rates of growth from all of our specialist activities and across all states. The major specialist activities continued to grow rapidly and it has been very encouraging that our relatively young organic start-up activity, Resources & Mining, now generates 10% of net fees in the region and produced net fee growth of 87% during the year. The new niche activities, Legal, Sales & Marketing and Human Resources all continued to grow strongly and our strategy is to expand these specialist activities across our extensive office network in the region. The investment in recruitment consultants continued and was 38% ahead of last year at 707 (2005 - 513). There was strong growth in both permanent and temporary recruitment and the proportion of fees arising from permanent recruitment was 51%. The management team in Australia & New Zealand have built upon the impressive conversion rate achieved last year and have produced an improvement of 430 bps to 48.7% for this year (2005 - 44.4%). In May this year we completed the acquisition of St. George's Harvey Nash, a small specialist recruitment business based in Hong Kong and mainland China. The business has now been fully integrated into our operations in the Asia Pacific region and reports to our regional management team in Australia. I am pleased with the performance of the business since it joined Hays and we are excited by the growth opportunities in the region. Continental Europe & Canada Fee growth and profit generation have again both been excellent from our businesses in Continental Europe & Canada. Net fees of Â£74.1 million (2005 - Â£ 53.3 million) increased by 39% and operating profit increased by 62% to Â£13.8 million (2005 - Â£8.5 million). We continued to invest heavily in the region during the period and the number of recruitment consultants increased by 38% to 657 (2005 - 476). Our investment also included the establishment of new start-up operations in Italy and the United Arab Emirates. We are pleased with the early performance of these new operations and we will continue to invest for growth in each of these markets. Germany, our largest business in the region, produced excellent fee growth and strong profit conversion and has continued to gain market share in its core Information Technology business. We have increased the number of recruitment consultants by 33% and opened a new office in Berlin during the year. The business in France grew strongly and built on its growing market position. We have continued to invest, increasing the number of recruitment consultants by 54% and we opened a new office in Strasbourg and expanded the number of business units. The performance of our smaller operations in the region has also been excellent. Fees from operations in Iberia have grown in excess of 90% and we now have 81 recruitment consultants operating out of 5 offices. There was strong growth in Sweden, Poland, Benelux and Switzerland. Our Canadian business which operates from 6 offices, increased recruitment consultant headcount by 38% to 80 and continued to grow net fees strongly. We now have 824 business units operating from 348 offices in 20 countries. As we enter the new financial year we have continued our investment in recruitment consultants, new offices and the roll out of specialist activities across our network. Our continuing investment both in the UK and in our International Divisions should give a strong indication of our confidence in the future. CONSOLIDATED INCOME STATEMENT for the year ended 30 June (In Â£'s million) 2006 2005 Restated* TURNOVER Continuing operations 1,826.6 1,640.4 NET FEES Continuing operations 538.2 470.6 PROFIT FROM OPERATIONS Continuing operations 193.0 166.2 Finance income 4.7 6.4 Finance cost (5.2) (4.9) (0.5) 1.5 PROFIT BEFORE TAX 192.5 167.7 Tax (60.1) (52.5) PROFIT FROM CONTINUING OPERATIONS AFTER 132.4 115.2 TAX PROFIT FROM DISCONTINUED OPERATIONS 52.5 30.7 PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT 184.9 145.9 Earnings per share from continuing operations - Basic 8.69p 6.82p - Diluted 8.65p 6.75p Earnings per share from continuing and discontinued operations - Basic 12.14p 8.64p - Diluted 12.08p 8.55p *The comparative numbers shown above have been restated from those previously reported as the Group has adopted International Financial Reporting Standards (IFRS) for the first time this year and has restated comparatives accordingly. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE for the year ended 30 June (In Â£'s million) 2006 2005 Profit for the financial year 184.9 145.9 Currency translation adjustments taken to 0.3 2.8 equity Actuarial profits on defined benefit pension 15.8 4.6 scheme Tax on items taken directly to equity (4.8) (1.3) Net income recognised directly in equity 11.3 6.1 Total recognised income and expense for the 196.2 152.0 year Attributable to equity shareholders of the 196.2 152.0 parent CONSOLIDATED BALANCE SHEET At 30 June (In Â£'s million) 2006 2005 Restated NON-CURRENT ASSETS Goodwill 126.2 99.4 Other intangible assets 1.6 1.4 Property, plant and equipment 20.1 18.1 Deferred tax assets 22.2 27.1 170.1 146.0 CURRENT ASSETS Trade and other receivables 330.2 292.6 Cash and cash equivalents 52.8 71.2 383.0 363.8 Assets held for sale - 0.2 TOTAL ASSETS 553.1 510.0 CURRENT LIABILITIES Trade and other payables (208.9) (195.5) Current tax liabilities (49.4) (53.3) Obligations under finance leases - (0.1) (258.3) (248.9) NON-CURRENT LIABILITIES Bank loans and overdrafts (129.8) (6.8) Trade and other payables (7.9) - Retirement benefit obligations (55.9) (69.7) Deferred tax liabilities (0.9) (2.2) Provisions (57.0) (76.4) (251.5) (155.1) TOTAL LIABILITIES (509.8) (404.0) NET ASSETS 43.3 106.0 EQUITY Called up share capital 15.7 17.4 Share premium account 369.6 369.6 Capital redemption reserve 1.7 - Retained earnings (354.8) (278.8) Other reserves 11.1 (2.2) TOTAL SHAREHOLDERS' EQUITY 43.3 106.0 CONSOLIDATED CASH FLOW STATEMENT for the year ended 30 June (In Â£'s million) 2006 2005 OPERATING PROFIT FROM CONTINUING 193.0 166.2 OPERATIONS OPERATING PROFIT FROM DISCONTINUED - 8.4 OPERATIONS 193.0 174.6 Adjustments for: Depreciation of property, plant and 6.5 8.6 equipment Amortisation of intangible fixed assets 0.2 0.2 Net movement in provisions (0.2) (0.4) Movement in employee benefits and other 7.8 4.3 items 14.3 12.7 OPERATING CASH FLOW BEFORE MOVEMENT IN 207.3 187.3 WORKING CAPITAL Changes in working capital Increase in receivables (37.6) (26.0) Increase in share-based payments - 0.5 Increase in payables 13.4 (0.5) (24.2) (26.0) CASH GENERATED BY OPERATIONS 183.1 161.3 Income taxes paid (46.7) (55.3) NET CASH FROM OPERATING ACTIVITIES 136.4 106.0 INVESTING ACTIVITIES Purchases of property, plant and equipment (10.5) (10.0) Proceeds from sale of property, plant and 0.2 0.4 equipment Purchase of intangible assets (0.4) (0.5) Cash paid in respect of acquisitions made (8.2) - in previous years Acquisition of subsidiaries (20.2) - Sale of businesses & related assets 20.4 (6.8) Net repayment of DX Services loan notes - 68.1 Interest received 4.7 6.4 Net cash (used) / generated from investing (14.0) 57.6 activities FINANCING ACTIVITIES Interest paid (6.3) (3.0) Equity dividends paid (56.7) (53.4) Cash outflow in respect of share buy-back (209.2) (128.1) Disposal of own shares 8.7 6.9 Net proceeds from issue of ordinary share - 0.2 capital Repayment of borrowings (0.1) (0.8) Issue of loan notes 0.4 - Increase in bank overdrafts 122.6 5.7 Net cash used in financing activities (140.6) (172.5) NET DECREASE IN CASH AND CASH EQUIVALENTS (18.2) (8.9) CASH AND CASH EQUIVALENTS AT BEGINNING OF 71.2 79.4 YEAR Effect of foreign exchange rate changes (0.2) 0.7 CASH AND CASH EQUIVALENTS AT END OF YEAR 52.8 71.2 SEGMENTAL INFORMATION TURNOVER AND PROFIT FROM OPERATIONS for the year ended 30 June 2006 (In Â£'s million) 2006 2005 TURNOVER Continuing operations United Kingdom & Ireland 1,266.9 1,223.4 Continental Europe & Canada 286.5 216.7 Asia Pacific 273.2 200.3 1,826.6 1,640.4 NET FEES Continuing operations United Kingdom & Ireland 378.4 354.7 Continental Europe & Canada 74.1 53.3 Asia Pacific 85.7 62.6 538.2 470.6 PROFIT FROM OPERATIONS Continuing operations United Kingdom & Ireland 137.5 129.9 Continental Europe & Canada 13.8 8.5 Asia Pacific 41.7 27.8 193.0 166.2 There is no material difference between the split of the Group's turnover by geographic origin and destination. Discontinued operations arose in the United Kingdom & Ireland. CONSOLIDATED BALANCE SHEET EXTRACTS at 30 June 2006 (In Â£'s million) United Continental Asia Corporate Group Kingdom Europe Pacific & Other & Ireland & Canada Goodwill & intangible 68.7 51.3 7.8 - 127.8 fixed assets Property, plant & 15.2 3.2 1.2 0.5 20.1 equipment Net working capital & 123.6 6.2 11.5 (56.0) 85.3 other Provisions for - (1.0) - (56.0) (57.0) liabilities & charges Retirement benefit - - - (55.9) (55.9) obligation 207.5 59.7 20.5 (167.4) 120.3 Net debt - - - (77.0) (77.0) Net assets / 207.5 59.7 20.5 (244.4) 43.3 (liabilities) at 30 June 2005 (In Â£'s million) United Continental Asia Corporate Group Kingdom Europe Pacific & Other & Ireland & Canada Goodwill & intangible 50.7 50.1 - - 100.8 fixed assets Property, plant & 13.0 1.8 0.8 2.5 18.1 equipment Net working capital & 97.2 6.4 9.4 (44.1) 68.9 other Provisions for - (0.7) - (75.7) (76.4) liabilities & charges Retirement benefit - - - (69.7) (69.7) obligation 160.9 57.6 10.2 (187.0) 41.7 Net cash - - - 64.3 64.3 Net assets / 160.9 57.6 10.2 (122.7) 106.0 (liabilities) Corporate & Other includes assets and liabilities relating to certain assets and liabilities that are managed at the Group level including cash and borrowings, Group pension and employee benefits, intercompany balances and corporate tax balances. SEGMENTAL INFORMATION (CONTINUED) CONSOLIDATED CASH FLOW STATEMENT EXTRACTS for the year ended 30 June 2006 (In Â£'s million) United Continental Asia Corporate Group Kingdom Europe Pacific & Other & & Canada Ireland Operating profit 137.5 13.8 41.7 - 193.0 Depreciation / 5.2 0.8 0.5 0.2 6.7 amortisation of tangible / intangible assets Movement in (26.4) 0.5 (2.1) 11.9 (16.1) working capital and other 116.3 15.1 40.1 12.1 183.6 Capital (7.3) (2.3) (1.1) (0.2) (10.9) expenditure for the year ended 30 June 2005 (In Â£'s million) United Continental Asia Corporate Group Kingdom Europe Pacific & Other & & Canada Ireland Operating profit 129.9 8.4 27.9 8.4 174.6 Depreciation / 5.4 0.8 0.4 2.2 8.8 amortisation of tangible / intangible assets Movement in (17.0) 1.9 (0.5) (10.4) (26.0) working capital and other 118.3 11.1 27.8 0.2 157.4 Capital (7.3) (0.9) (0.6) (1.7) (10.5) expenditure The results of the discontinued businesses which have been included in the consolidated income statement, were as follows: (In Â£'s millions) 2006 2005 Turnover - 42.6 Operating costs - (34.2) Operating profit - 8.4 Profit from disposal of business assets 6.0 24.4 Write back of amounts previously provided against 27.0 - fixed asset investments Interest 4.0 - Share of pre tax profit from associate - 0.8 Profit before tax 37.0 33.6 Tax 15.5 (2.9) Post tax profit from discontinued operations 52.5 30.7 All turnover and operating profit from discontinued operations was generated in the United Kingdom & Ireland. Tax on operating profit from discontinued activities was nil (2005 - Â£2.6 million). Profits from discontinued operations in the year were generated from surplus property disposals of Â£6.0 million (2005 - Â£1.8 million) and the receipt of Â£ 31.0 million as final settlement of amounts receivable from the acquirers of Hays Chemicals. The tax credit of Â£15.5 million in the current year is the result of a Â£18.2 million write-back of tax related accruals that were established when the Group completed the disposal of non-core activities between March 2003 and November 2004 and in the light of subsequent events are no longer required, less Â£2.7 million of tax charge arising from the disposal of Albion and surplus properties. In the prior year, operating profit from discontinued operations was generated from the DX Services mail business which was demerged from the Group on 1 November 2004. DIVIDENDS The following dividends were paid by the Group and have been recognised as distributions to equity shareholders in the year. 2006 2005 pence per Â£ million pence per Â£ million share share Previous year final 2.27 35.6 2.00 34.4 dividend Current year interim 1.45 21.1 1.13 19.0 dividend The following dividends were proposed by the Group in respect of the accounting year presented: 2006 2005 pence per Â£ million pence per Â£ million share share Interim dividend 1.45 21.1 1.13 19.0 Final dividend 2.90 42.4 2.27 36.1 (proposed) 4.35 63.5 3.40 55.1 The proposed final dividend of 2.90p (Â£42.4 million) is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. MOVEMENT IN NET CASH / (DEBT) (In Â£'s million) 1 July Cash Exchange 30 June 2005 Flow movement 2006 Cash & cash equivalents 71.2 (18.2) (0.2) 52.8 Bank loans & overdrafts (6.8) (123.0) - (129.8) Finance leases (0.1) 0.1 - - 64.3 (141.1) (0.2) (77.0) The table above is presented as additional information to show movement in net cash / (debt), defined as cash and cash equivalents less overdraft and bank loans. CALLED UP SHARE CAPITAL Authorised share capital 2006 2006 2005 2005 Number Â£'s Number Â£'s 000's million 000's millon Ordinary shares of 8,890,894 88.9 8,890,894 88.9 1p each Called up, allotted and fully paid share capital Share capital Share number capital 000's Â£'s million At 1 July 2005 1,735,891 17.4 Cancellation of shares (171,794) (1.7) At 30 June 2006 1,564,097 15.7 SHARE PREMIUM (In Â£'s million) 2006 2005 At 1 July 369.6 369.4 New share capital issued - 0.2 At 30 June 369.6 369.6 CAPITAL REDEMPTION RESERVE (In Â£'s million) 2006 2005 At 1 July - - Cancellation of shares 1.7 - At 30 June 1.7 - RETAINED EARNINGS (In Â£'s million) 2006 2005 At 1 July (278.8) (328.8) Actuarial profits on defined benefits scheme 15.8 4.6 Tax on items taken directly to reserves (4.8) (1.3) Profit for the period 184.9 145.9 Dividends paid (56.7) (53.4) Dividend in specie - 82.3 Share buy-back (215.2) (128.1) At 30 June (354.8) (278.8) OTHER RESERVES (In Â£'s million) 2006 2005 Own shares (0.7) (9.4) Equity reserve 8.7 4.4 Cumulative translation 3.1 2.8 11.1 (2.2) a. Other reserves - own shares (In Â£'s million) 2006 2005 At 1 July (9.4) (16.3) Disposal of own shares 8.7 6.9 At 30 June (0.7) (9.4) b. Other reserves - equity reserve (In Â£'s million) 2006 2005 At 1 July 4.4 0.7 Share-based payments 4.3 3.7 At 30 June 8.7 4.4 c. Other reserves - cumulative translation reserve (In Â£'s million) 2006 2005 At 1 July 2.8 - Currency translation 0.3 2.8 adjustments At 30 June 3.1 2.8 Hays plc Statement under S240 - Publication of non-statutory accounts The financial information contained in this preliminary announcement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The financial information is based on the statutory accounts for the financial years ended 30 June 2006 and 30 June 2005. The financial statements for 30 June 2006, upon which the auditors issued an unqualified opinion, that did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985, have yet to be delivered to the Registrar of Companies. The financial statements for 30 June 2005 upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies. Basis of preparation Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Company expect to publish full financial statements that comply with IFRSs in October 2006. The disclosures concerning the transition from UK GAAP to IFRS, namely the reconciliations of the balance sheet at 1 July 2004 (the date of transition to IFRS), at 30 June 2005 (the date of the last UK GAAP financial statements) and at 31 December 2004 and the reconciliations of profit and cash flows for the year ended 30 June 2005, as required by IFRS 1, and for the six months ended 31 December 2004, were published on the Group's website www.haysplc.com on 8 February 2006.

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