Half Year Report 2012

Adecco Group –
Operating and financial review and prospects
in millions, except share and per share information

1. Operational results

1.1 Overview

Statements throughout this discussion and analysis using the term “the Company” refer to the Adecco Group, which comprises Adecco S.A., a Swiss corporation, its consolidated subsidiaries, as well as variable interest entities for which Adecco is considered the primary beneficiary.

Revenues for the first six months of 2012 amounted to EUR 10,230. Compared to the same period last year, revenues increased by 1% or decreased by 1% in constant currency (decreased by 2% organically). This was mainly due to a decrease of 3% in the temporary staffing volume as temporary hours sold decreased to 597 million. Furthermore, in the first six months of 2012, permanent placement revenues totalled EUR 182, an increase of 4% (flat organically), and outplacement revenues amounted to EUR 136, an increase of 43% or a decrease of 1% organically.

Gross margin was 17.9%, up 70 basis points (“bps”) compared to the first six months of 2011. Excluding acquisitions and divestures, which had a positive impact of 40 bps, gross margin was up 30 bps.

Selling, general, and administrative expenses (“SG&A”) increased by 8% or by 4% in constant currency. SG&A as a percentage of revenues increased by 80 bps to 14.3% in the first six months of 2012. Included in the first six months of 2012 are restructuring expenses of EUR 15 mainly related to various European countries. Organically, SG&A increased by 1%. The branch network expanded by 1% and decreased by 1% organically, and full-time equivalent (“FTE”) employees increased by 2% or by 0% organically. As of the end of June 2012, the Company had approximately 33,000 FTE employees and operated a network of over 5,500 branches.

Amortisation of intangible assets amounted to EUR 27 in the first six months of 2012, unchanged from the same period in 2011.

Operating income. In the first six months of 2012, the operating income amounted to EUR 340 compared to EUR 344 in the same period of 2011. The operating income margin was 3.3% for the first six months of 2012, a decrease of 10 bps when compared to the same period of 2011.

Interest expense was EUR 37 compared to EUR 32 in the first six months of 2011. Other income/(expenses), net, amounted to a loss of EUR 11 in both the first six months of 2012 and the first six months of 2011. The 2012 loss includes the loss of EUR 15 on the sale of a business in North America at the end of June 2012. The 2011 loss was mainly due to the EUR 11 loss recognised in connection with the bond tender completed in April 2011.

In the first six months of 2012, the Company recorded an income tax expense of EUR 67 compared to EUR 59 in the same period of 2011. The effective tax rate in the first six months of 2012 was 23% compared to 20% in the same period of 2011. The income tax rate in the first six months of 2012 and in the first six months of 2011 includes the positive impact of EUR 26 and EUR 32, respectively from the successful resolution of prior years’ audits and tax disputes and the expiration of the statute of limitations in several jurisdictions.

Net income attributable to Adecco shareholders amounted to EUR 224 in the first six months of 2012, compared to EUR 241 in the same period of 2011. Basic earnings per share (“EPS”) was EUR 1.19 in the first six months of 2012 compared to EUR 1.26 in the first six months of 2011.