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Q2 2004 Results - Acceleration across specialist sectors drives improvement

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Amsterdam, Thursday, July 29, 2004

Q2 2004 Results - Acceleration across specialist sectors drives improvement in sales and profitability

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Zach Miles, Vedior’s Chief Executive, said: “Vedior’s higher-margin specialist sectors have continued to gather momentum during the second quarter of 2004 which is encouraging for the second half of the year. IT and Accounting staffing sectors are now recovering strongly.

We have experienced stronger growth across most of our major regions including the UK and US. In France, Vedior increased sales and maintained profitability. In the Netherlands, we are seeing a turnaround in market conditions with a strong performance from our Vedior brand.

Our development programme continues with the announcement today of an acquisition in Mexico strengthening our presence in Latin America.”

HIGHLIGHTS FOR THE SECOND QUARTER

Sales up 9% at €1,624 million (organic growth of 8%))

Operating income up 26% at €54 million (organic growth of 24%)

Net income per share improved 45% to €0.16 (Q2 2003: €0.11)

Specialist staffing sales up 15% organically with strong growth in IT and Engineering

Permanent placement increased by 19% organically

Conversion ratio increased to 19.0% from 16.1% demonstrating strong improvement in operating efficiency

Vedior expands into Mexico (see separate media release)

HIGHLIGHTS FOR THE FIRST HALF YEAR

Sales up 8% at €3,100 million (organic growth of 6%)

Operating income up 27% at €95 million (organic growth of 17%)

Net income per share improved 59% to €0.27 (H1 2003: €0.17)

Net debt reduced by 10% to €629 million (H1 2003: €700 million)

N.B. Organic growth is measured by excluding the impact of currency effects and acquisitions. For the half year 2004, organic growth is adjusted for the number of business days in Q1. Operating income and Net income per share is before goodwill amortisation.

Q2 2004 Financial Performance

Sales have, once again, improved as a result of a generally more positive global operating environment and recovering specialist sectors. Within the quarter, both sales and gross margins showed a rising trend. At the same time, continuing tight cost control helped to deliver improved operating efficiency.

Sales

Sales increased 9% (organic increase: 8%) to €1,624 million from €1,491 million in the same quarter in 2003. Currency fluctuations had no material impact on sales. Permanent placement increased 19% organically to 2.1% of sales compared to 1.8% of sales in Q2 2003.

Gross Margin

Gross margin was 17.5% compared to 17.9% in the second quarter of 2003. Higher gross margins were achieved in Belgium and Germany. Gross margins in France, the Netherlands, UK and US declined reflecting changes in business mix, some pricing pressure and, in the case of the US, additional state unemployment insurance.

Operating Costs

Operating costs were 2% higher on an organic basis at €230 million, a very good result considering the 8% organic growth in sales. SG&A as a percentage of sales improved to 14.2% from 15.0% in Q2 2003.

Operating Income

Operating income (income before interest, tax and goodwill amortisation) was €54 million, a 26% increase (24% organic) from €43 million in Q2 2003. The conversion ratio (operating income divided by gross income) increased to 19.0% from 16.1% in Q2 2003 demonstrating a strong improvement in operating efficiency. Currency fluctuations increased operating income by 1%. Operating income as a percentage of sales was 3.3% compared to 2.9% in Q2 2003.

Net income and earnings per share

Net income (before goodwill amortisation) increased 42% to €27 million from €19 million in the second quarter of last year. Earnings per share (before goodwill amortisation) were €0.16, a 45% increase from €0.11 in Q2 2003.

Net Debt and Cash Flow

Net debt increased by €82 million during the quarter to €629 million as part of the normal seasonal pattern but decreased by €71 million compared to the second quarter of 2003. Debtor days reduced by one day compared to Q2 2003. Cash flow used in operating activities increased from €41 million in 2003 to €46 million in 2004 to accommodate the growth in sales.

For Vedior, the operating result before goodwill amortisation and net result before goodwill amortisation are the most relevant internal and external measures of operating performance. Vedior’s goodwill mainly relates to the acquisition of Select in 1999 which, in accordance with Dutch accounting standards, is being amortised over a period of seven years.

In 2005, Vedior will adopt International Financial Reporting Standards (IFRS) which require that goodwill is no longer amortised on a systematic basis and will be tested for impairment annually. The treatment of goodwill and a number of other issues relating to the adoption of IFRS have been identified and described in more detail under Appendix A of this media release. Had the Company adopted IFRS in 2004, there would have been no material adjustment for net income in the first half year other than the elimination of the charge for the amortisation of goodwill.

Q2 2004 Operating Performance by Geography and Industry Sector

France

Organic sales increased by 2% compared to 2003.

Operating income improved by 10% on an organic basis helped by a reduction in accruals no longer required of €2.0 million.

Tertiary, high-skilled blue collar and construction segments continue to gain market share.

Specialist staffing up 11% compared to Q2 2003 with particular growth in IT and engineering.

United Kingdom

Sales improvement continues with 21% organic growth over Q2 2003.

IT sector particularly buoyant with sales up 42% organically.

Engineering, healthcare and teleservices staffing also grew strongly.

Education sales return to growth in May and June.

Traditional staffing sales up organically by 12%.

United States

Organic sales increase of 16%.

Operating profit up 34% organically driven by growth in both traditional and specialist sectors.

IT staffing organic sales growth of 17%.

Accounting staffing organic sales growth of 22%.

Traditional staffing sales grew organically by 32%.

Netherlands

Organic sales declined by 4%, a significant improvement from prior quarters.

Staffing market is now improving.

Operating profit maintained at same level as 2003.

Vedior brand continues to outperform the market and achieved traditional staffing organic sales growth of 14% in June.

Rest of Europe/Rest of World

Strong improvement in sales from both ‘Rest of Europe’ and ‘Rest of World’ regions.

Accelerating trend in most European markets, notably Germany, Belgium, Spain and Italy driving strong increase in profitability.

Continuing growth in Australia, particularly within the traditional staffing sector.

Organic sales growth of 70% in Latin America.

New acquisitions performing ahead of expectations.

Analysis by Industry Sector

Traditional staffing sales increased by 5% organically, outpaced by specialist organic sales growth of 15%.

Specialist staffing contributed 33% of Group sales and 53% of operating profit.

Engineering was the best sector compared to Q2 2003, achieving organic sales growth of 24%.

IT staffing sales up by 19% organically with positive growth in all major markets.

Accounting sales up by 16% organically.

Education in Australia achieves strong profitable growth.

Management Outlook

For the remainder of the year, sales trends will remain positive and operating efficiency will continue to improve.

We anticipate that the main driver of growth in our business for the second half of 2004 will be generated from a continuing pick-up in specialist businesses in North America and an improving Dutch market supported by continuing strong trading conditions in the UK, Southern Europe and Southern Hemisphere.

French economic forecasts have recently been revised upwards and we are confident that Vedior remains well-placed to capitalise on improving trends in this important market.

The acquisition of Top Personnel in Mexico adds to our network in Latin America which has been Vedior’s fastest growing region since 2001 (see separate media release). We continue to identify complementary and strategic acquisitions operating in attractive regions and industry sectors.

This media release includes forward-looking statements that reflect our intentions, beliefs or current expectations and projections about our future results of operations, financial condition, liquidity, performance, prospects, growth, strategies, opportunities and the industry in which we operate. Forward-looking statements include all matters that are not historical fact. We have tried to identify these forward-looking statements by using words including "may", "will", "should", "expect", "intend", "estimate", "project", "believe", "plan", "seek", "continue", "appears" and similar expressions or their negative.

These forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause our actual results of operations, financial condition, liquidity, performance, prospects or opportunities, as well as those of the markets we serve or intend to serve, to differ materially from those expressed in, or suggested by these forward-looking statements. Important factors that could cause those differences include, but are not limited to our financial position and our ability to implement our business strategy and plans and objectives of management for future operations, our ability to develop, balance and expand our business, our ability to implement our longterm growth strategy (including through organic growth and acquisitions), our ability to make improvements to our capital structure, industry and market trends and volumes, including the speed and strength at which the staffing services industry and the sectors in which we operate, rebound from economic slowdowns and recessions, the effects of regulation (including employment and tax regulations), our ability to improve the efficiency of our operations and to reduce expenses in our operating companies and their network of offices, litigation and our ability to take advantage of new technologies.

In light of these risks, uncertainties, assumptions and other factors, the forward-looking events described in this media release might not occur. Additional risks that we may deem immaterial or that are not presently known to us could also cause the forward-looking events discussed in this media release not to occur. Except as otherwise required by applicable law, we undertake no obligations to update publicly or revise publicly any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason after the date of this media release.

Notes to Editors:

Vedior is one of the world’s leading staffing companies. The Group operates in 36 countries with a network of 2,279 offices worldwide including Europe, North America, Australasia, South Africa, Latin America and Asia. Vedior provides a broad range of staffing services through distinct brand names targeting specific sectors including traditional administrative/light industrial sectors and specialist sectors such as information technology, healthcare, accounting, engineering and education. We offer temporary staffing, permanent placement and other employment-related services.